<PAGE>
<PAGE>
As Filed with the Securities and Exchange Commission on May 2,
1996.
Registration No. 33-_________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ___
Post-Effective Amendment No. ___
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. ___
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
GREAT AMERICAN RESERVE INSURANCE COMPANY
(Name of Insurance Company)
11815 North Pennsylvania Street, Carmel, Indiana 46032
(Address of Insurance Company's Principal
Executive Offices) (Zip Code)
Karl W. Kindig, Esq.
Great American Reserve Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
(Name and Address of Agent for Service)
Copies to:
Michael Berenson, Esq.
Ann B. Furman, Esq.
Jorden Burt Berenson & Johnson LLP
Suite 400 East
1025 Thomas Jefferson Street, N.W.
Washington, D. C. 20007-0805
Approximate Date of Proposed Public Offering: As soon as
practicable after the effective date of this Registration
Statement.
Pursuant to Rule 24f-2 under the Investment Company Act
of 1940, the Registrant declares that an indefinite amount of
<PAGE>
<PAGE>
individual variable annuity contracts is being registered
under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement
on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as
the Commission acting pursuant to said Section 8(a) shall
determine.
<PAGE>
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
CROSS REFERENCE TO ITEMS
REQUIRED BY RULE 495(a)
N-3 Item of Part A Caption in Prospectus
1. Cover Page
2. Definitions
3. Summary; Fee Table
4. Financial Statements
5. Great American Reserve Insurance
Company; The Separate Account;
Investment Objectives and Policies;
Investment Restrictions
6. Management
7. Charges and Deductions; Management
8. Description of the Contract; Separate
Account Voting Rights
9. Description of the Contract -- Annuity
Period
10. Description of the Contract -- Payment
on Death
11. Description of the Contract -- Purchase
Payments, Accumulation Provisions;
Distribution of Contracts
12. Description of the Contract --
Withdrawals, Suspension of Payments, Ten
Day Right to Review
13. Federal Income Taxes
14. Legal Proceedings
15. Table of Contents of Statement of
Additional Information
<PAGE>
<PAGE>
Caption in Statement of
N-3 Item of Part B Additional Information
16. Cover Page
17. Table of Contents
18. General Information and History
19. Investment Policies and Techniques of
the Subaccounts; Investment Restrictions
of the Subaccounts
20. Board of Managers and Officers of the
Separate Account
21. Board of Managers and Officers of the
Separate Account; Custody
22. Portfolio Transactions and Brokerage
23. Determination of Accumulation Unit Value
24. Underwriter of the Contracts
25. Performance Information
26. Not Applicable
27. Financial Statements
<PAGE>
<PAGE>
PART A
PROSPECTUS
<PAGE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS
TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 2, 1996
Rydex Advisor Variable Annuity Account
of
Great American Reserve Insurance Company
Administrative Office: 11815 North Pennsylvania Street,
Carmel, Indiana 46032
Phone: (317) 817-3700
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
FLEXIBLE PREMIUMS - NONPARTICIPATING
Offered through
PADCO Financial Services, Inc.
6116 Executive Boulevard, Rockville, Maryland 20852
Phone: (800) 820-0888
The variable annuity contract described in this
Prospectus (the "Contract") is designed to provide retirement
benefits for certain types of purchasers. This Contract is
intended for use by Contract Owners who intend to invest as
part of an asset allocation or market-timing investment
strategy advised by professional money managers. The
investment options available under the Contract involve
certain aggressive investment techniques, which may include
engaging in short sales and transactions in futures contracts
and options on securities, stock indexes, and futures
contracts. As discussed more fully below, these techniques
are specialized and involve risks that are not traditionally
associated with otherwise similar contracts.
Accumulation of the Contract values may be on either a
fixed or variable basis, or on a combination fixed and
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<PAGE>
variable basis. Accumulation on a variable basis is provided
by allocations to the Rydex Advisor Variable Annuity Account
(the "Separate Account"). Variable benefits are not
guaranteed and will vary according to investment performance.
Accumulation on a fixed basis is provided by allocations to
the General Account of Great American Reserve Insurance
Company. (See "The Fixed Account" on page __.) Annuity
payments are only available on a fixed basis. This Prospectus
describes only the Separate Account features of the Contract
except where specific reference is made to the Fixed Account.
The Separate Account is a segregated investment account
of Great American Reserve Insurance Company ("Great American
Reserve"), and is comprised of eight investment portfolios
each of which is managed by PADCO Advisors II, Inc. ("PADCO").
Allocations to the Separate Account will be invested in the
separate investment portfolios ("Subaccounts") selected. You
bear the full investment risk with respect to the Separate
Account. Eight Subaccounts are currently available under the
Contract (one of which is available only under certain
circumstances, described below) with the following investment
objectives:
Subaccount Investment Objective
The Nova Subaccount To provide investment returns that
correspond to a specified percentage
of the performance of a benchmark for
common stock securities.
The Ursa Subaccount To provide investment results that
will inversely correlate to the
performance of a benchmark for common
stock securities.
The OTC Subaccount To attempt to provide investment
results that correspond to a
benchmark for over-the-counter
securities.
The Precious Metals To attempt to provide investment
Subaccount results that correspond to a
benchmark primarily for metals-
related securities.
<PAGE> ii
<PAGE>
Subaccount Investment Objective
The U.S. Government Bond To provide investment results that
Subaccount correspond to a benchmark for U.S.
Government securities.
The Juno Subaccount To provide total return before
expenses and costs that inversely
correlates to the price movements of
a benchmark for U.S. Treasury debt
instruments or futures contracts on a
specified debt instrument.
The Money Market To provide current income consistent
Subaccounts with stability of capital and
liquidity.
This Contract is designed to be used with asset
allocation advisory or market-timing investment services.
Providers of such services are engaged by you to make
allocation and transfer decisions on your behalf. A charge is
deducted for these services. You should consider whether this
Contract with such services is appropriate for your needs (see
"Asset Allocation Advisory Services").
Investments in the Money Market Subaccounts are neither
insured nor guaranteed by the U.S. Government.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus contains information about the Contract
and the Separate Account that a prospective Contract Owner
should know before investing. It should be read and retained
for future reference. Additional information about the
Contract and the Separate Account is contained in a Statement
of Additional Information, dated ______________, 1996, which
has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of
Additional Information is available without charge upon
request by writing to or calling PADCO Financial Services,
Inc. ("PFS"), at the above address or number. The table of
contents for the Statement of Additional Information is
included on page __ of this Prospectus.
The date of this Prospectus is _______________, 1996.
<PAGE> iii
<PAGE>
TABLE OF CONTENTS
Page
PART I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . I-
FEE TABLE . . . . . . . . . . . . . . . . . . . . . . . . . I-
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . I-
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . I-
GREAT AMERICAN RESERVE INSURANCE COMPANY . . . . . . . . . I-
THE SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . I-
INVESTMENTS OF THE SUBACCOUNTS . . . . . . . . . . . . . . I-
Eligible Investments . . . . . . . . . . . . . . . . . I-
Investment Objectives . . . . . . . . . . . . . . . . I-
The Nova Subaccount . . . . . . . . . . . . . . . I-
The Ursa Subaccount . . . . . . . . . . . . . . . I-
The OTC Subaccount . . . . . . . . . . . . . . . I-
The Precious Metals Subaccount . . . . . . . . . I-
The U.S. Government Bond Subaccount . . . . . . . I-
The Juno Subaccount . . . . . . . . . . . . . . . I-
The Money Market Subaccounts . . . . . . . . . . I-
Special Risk Considerations . . . . . . . . . . . . . I-
Addition or Deletion of Subaccounts . . . . . . . . . I-
ASSET ALLOCATION ADVISORY SERVICES . . . . . . . . . . . . I-
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . I-
Withdrawal Charge . . . . . . . . . . . . . . . . . . . . . I-
Mortality and Expense Risk Charge . . . . . . . . . . . . . I-
Asset Allocation Advisory Fee . . . . . . . . . . . . . . . I-
Administrative Fee . . . . . . . . . . . . . . . . . . . . I-
Investment Advisory Fee and Other Expenses . . . . . . . . I-
Subaccount Administration Fee . . . . . . . . . . . . . . . I-
Payments of Certain Charges and Deductions . . . . . . . . I-
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . I-
DESCRIPTION OF THE CONTRACT . . . . . . . . . . . . . . . . I-
Purchase Payments . . . . . . . . . . . . . . . . . . . . . I-
Changing Financial Advisors . . . . . . . . . . . . . . . . I-
Accumulation Provisions . . . . . . . . . . . . . . . . . . I-
Accumulation Units . . . . . . . . . . . . . . . . . . I-
Value of an Accumulation Unit . . . . . . . . . . . . I-
Valuation Periods . . . . . . . . . . . . . . . . . . I-
The Fixed Account . . . . . . . . . . . . . . . . . . . . . I-
Payment on Death . . . . . . . . . . . . . . . . . . . . . I-
Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . I-
<PAGE> iv
<PAGE>
Page
Ownership . . . . . . . . . . . . . . . . . . . . . . . . . I-
Account Transfers . . . . . . . . . . . . . . . . . . . . . I-
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . I-
Suspension or Deferral of Payments . . . . . . . . . . . . I-
Annuity Provisions . . . . . . . . . . . . . . . . . . . . I-
General . . . . . . . . . . . . . . . . . . . . . . . I-
Selection of Annuity Date and Annuity Options . . . . I-
Change of Annuity Date or Annuity Option . . . . . . . I-
Annuity Options . . . . . . . . . . . . . . . . . . . I-
Minimum Annuity Payments . . . . . . . . . . . . . . I-
Proof of Age, Sex, and Survival . . . . . . . . . . . I-
Notices and Elections . . . . . . . . . . . . . . . . . . . I-
Amendment of Contract . . . . . . . . . . . . . . . . . . . I-
Ten-Day Right to Review . . . . . . . . . . . . . . . . . . I-
FEDERAL INCOME TAXES . . . . . . . . . . . . . . . . . . . I-
General . . . . . . . . . . . . . . . . . . . . . . . . . . I-
Diversification . . . . . . . . . . . . . . . . . . . . . . I-
Multiple Contracts . . . . . . . . . . . . . . . . . . . . I-
Contracts Owned by Non-Natural Persons . . . . . . . . . . I-
Tax Treatment of Assignments . . . . . . . . . . . . . . . I-
Income Tax Withholding . . . . . . . . . . . . . . . . . . I-
Tax Treatment of Withdrawals -- Non-Qualified Contracts . . I-
Qualified Plans . . . . . . . . . . . . . . . . . . . . . . I-
Tax Treatment of Withdrawals -- Qualified Contracts . . . . I-
Tax-Sheltered Annuities -- Withdrawal Limitations . . . . . I-
Asset Allocation Advisory Fees . . . . . . . . . . . . . . I-
SEPARATE ACCOUNT VOTING RIGHTS . . . . . . . . . . . . . . I-
REPORTS TO CONTRACT OWNERS . . . . . . . . . . . . . . . . I-
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . I-
DISTRIBUTION OF CONTRACTS . . . . . . . . . . . . . . . . . I-
STATE REGULATION . . . . . . . . . . . . . . . . . . . . . I-
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . I-
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . I-
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . I-
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . I-
<PAGE> v
<PAGE>
PART II Page
THE SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . II-
INVESTMENT OBJECTIVES AND POLICIES OF THE SUBACCOUNTS . . II-
General . . . . . . . . . . . . . . . . . . . . . . II-
The Nova Subaccount . . . . . . . . . . . . . . . . II-
The Ursa Subaccount . . . . . . . . . . . . . . . . II-
The OTC Subaccount . . . . . . . . . . . . . . . . . II-
The Precious Metals Subaccount . . . . . . . . . . . II-
The U.S. Government Bond Subaccount . . . . . . . . II-
The Juno Subaccount . . . . . . . . . . . . . . . . II-
The Money Market Subaccounts . . . . . . . . . . . . II-
The Benchmarks . . . . . . . . . . . . . . . . . . . II-
SPECIAL RISK CONSIDERATIONS . . . . . . . . . . . . . . . II-
Portfolio Turnover . . . . . . . . . . . . . . . . . II-
Tracking Error . . . . . . . . . . . . . . . . . . . II-
Aggressive Investment Techniques . . . . . . . . . . II-
INVESTMENT TECHNIQUES AND OTHER INVESTMENT POLICIES . . . II-
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . II-
MANAGEMENT OF THE SEPARATE ACCOUNT . . . . . . . . . . . II-
Board of Managers . . . . . . . . . . . . . . . . . II-
PADCO . . . . . . . . . . . . . . . . . . . . . . . II-
PADCO Service Company, Inc. . . . . . . . . . . . . II-
Costs and Expenses . . . . . . . . . . . . . . . . . II-
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION II-
<PAGE> vi
<PAGE>
PART I
No person has been authorized to give any information or
to make any representations other than those contained in this
Prospectus in connection with the offer contained in this
Prospectus and, if given or made, such information or repre-
sentation must not be relied upon as having been authorized.
This Prospectus does not constitute an offer of, or
solicitation of an offer to acquire, any variable annuity
contracts offered by this Prospectus in any jurisdiction to
anyone to whom it is unlawful to make such an offer or
solicitation in such jurisdiction.
DEFINITIONS
Accumulation Unit: An accounting unit of measure used to
compute the value of your interest in a Subaccount prior to
the Annuity Date. (See page __.)
Accumulation Unit Value: For any Valuation Period, the
current market value of the total assets of a Subaccount, less
liabilities, divided by the number of units of that Subaccount
outstanding.
Administrative Office: The office indicated on the cover
page of this Prospectus to which notices and purchase payments
must be sent. All sums payable to Great American Reserve
under the Contract are payable at the Administrative Office or
an address designated by Great American Reserve.
Age: The age of any Contract Owner or Annuitant on his
or her last birthday. For Joint Contract Owners, all
provisions which are based on age are based on the age of the
older of the Joint Contract Owners.
Annuitant: The named individual on whose continuation of
life under the Contract annuity payments may depend.
Annuity: A series of payments for life; or for life with
guaranteed periods; or for the installment refund period; or
for a certain period; or to a joint and surviving annuitant.
Annuity Date: The date on which annuity payments of the
Contract begin. (See page __.)
Beneficiary: The persons to whom payment is to be made
on the death of the Contract Owner.
Code: The Internal Revenue Code of 1986, as amended.
Contract: The annuitycontract offered by this Prospectus.
<PAGE> I-1
<PAGE>
Contract Date: The date a Contract is issued to a
Contract Owner.
Contract Owner: The person entitled to exercise all
rights under a Contract. This person is also referred to in
this Prospectus as "you." (See page __.)
Contract Value: The sum of the amounts allocated to the
Fixed Account and the amounts allocated to the Separate
Account. (See page __.)
Financial Advisor: A registered investment adviser, or
an investment adviser who is excluded from registration with
the Securities and Exchange Commission, selected to provide
your asset allocation or market-timing investment advisory
services.
Fixed Account: The general account of Great American
Reserve which provides guaranteed values and periodically
adjusted interest rates.
Fixed Account Value: The value of the portion of your
Contract Value allocated to the Fixed Account.
Fixed Annuity: A series of periodic payments of
predetermined amounts beginning with the Annuity Date that do
not vary with investment experience.
General Account: The assets of Great American Reserve
with the exception of the Separate Account and other
segregated asset accounts.
Great American Reserve: Great American Reserve Insurance
Company.
Joint Contract Owner: If named, a person entitled to
exercise all rights under a Contract along with the Contract
Owner. Any Joint Contract Owner must be the spouse of the
Contract Owner.
Money Market Subaccounts: The Money Market I Subaccount
and the Money Market II Subaccount.
Nonqualified Contract: A Contract issued under a
nonqualified plan, which is not a Qualified Contract.
PADCO: PADCO Advisors II, Inc.
PFS: PADCO Financial Services, Inc.
Purchase Payments: Premium payments made to Great
American Reserve under the terms of the Contract.
<PAGE> I-2
<PAGE>
Qualified Contract: A Contract issued under a retirement
plan which receives favorable tax treatment under Sections
401(a), 403(a) and (b), 408, or 457, or any similar provision
of the Internal Revenue Code where pre-tax contributions are
accepted. (See page __.)
Separate Account: The segregated asset account that
Great American Reserve has established pursuant to the
provisions of the insurance code of the State of Texas, and
identified as the Rydex Advisor Variable Annuity Account.
Separate Account Value: The value of the portion of your
Contract Value allocated to the Separate Account.
Servicer: PADCO Service Company, Inc.
Subaccount: A segment of the Rydex Advisor Variable
Annuity Account consisting of a portfolio of investment
securities. (See page __.)
Transaction Cut-Off Time: The cut-off time on each
valuation day for all Separate Account trading activity,
including transfers and withdrawals. With respect to all
purchases and withdrawals, this time is 2:30 P.M., Eastern
Time. With respect to transfers for the Nova, Ursa, and OTC
Subaccounts, this time is 3:30 P.M., Eastern Time; for the
Precious Metals Subaccount, this time is 3:15 P.M., Eastern
Time; for the Bond and Juno Subaccounts, this time is 2:30
P.M., Eastern Time; and for the Money Market Subaccounts and
the Fixed Account, this time is 4:00 P.M., Eastern Time. For
transfers involving different transaction end times, the
earlier of the times indicated above applies. (See page __.)
Valuation Date: Each day the New York Stock Exchange
(the "NYSE") is open for business.
Valuation Period: The interval from one valuation day of
any Subaccount to the next valuation day, measured from the
time each day the Subaccount is valued. (See page __.)
Written Request: A request in writing, in a form
satisfactory to Great American Reserve.
<PAGE> I-3
<PAGE>
<TABLE>
<CAPTION>
FEE TABLE
<S> <C>
Contract Owner Transaction Expenses1/
Sales Load Imposed on Purchases . . . . . . . . . . . None
Withdrawal Charge (as a percentage of purchase payments)
First and Second Years Since Payment . . . . . . . . . 7%
Third Year Since Payment . . . . . . . . . . . . . . . 6%
Fourth Year Since Payment . . . . . . . . . . . . . . 5%
Fifth Year Since Payment . . . . . . . . . . . . . . . 4%
Sixth Year Since Payment . . . . . . . . . . . . . . . 3%
Seventh Year Since Payment . . . . . . . . . . . . . . 2%
Eighth Year or More Since Payment . . . . . . . . . . 0%
Surrender Fee . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . None
Annual Contract Fee . . . . . . . . . . . . . . . . . None
Separate Account Annual Expenses (as a percentage of average
daily net assets in each Subaccount)
Mortality and Expenses Risk Charge . . . . . . . . . 1.25%
Administrative Fee . . . . . . . . . . . . . . . . . 0.15%
Asset Allocation Advisory Fee 2/ . . . . . . . . . . . 1.75%
1/ Premium taxes are not shown. Any premium tax due will be
deducted from purchase payments or from Contract Values
at a later date. Currently, state premium taxes range
from 0% to 3.5%.
2/ Unless and until the necessary regulatory approvals and
exemptive relief are obtained from the Internal Revenue
Service and the Securities and Exchange Commission to
permit the deduction of the Asset Allocation Advisory Fee
from your Contract, this fee will not be deducted as a
percentage of average daily net assets in each Subaccount
and you will be solely responsible for the payment of the
applicable asset allocation advisory fee to your
Financial Advisor. Upon our receipt of the necessary
regulatory approvals and exemptive relief, you will be
notified of the commencement of the deduction of this
fee. (See "Asset Allocation Advisory Fee" at page __.)
The Asset Allocation Advisory Fee is not an expense of
the Money Market II Subaccount.
<PAGE> I-4
<PAGE>
</TABLE>
<PAGE> I-5
<PAGE>
<TABLE>
<CAPTION>
Subaccount Annual Expenses
Precious
Nova Ursa OTC Metals
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Advisory Fees 0.75% 0.90% 0.75% 0.75%
Subaccount
Administration Fees 0.25% 0.25% 0.20% 0.20%
Other Expenses (after
(reimbursement)3/ 0.40% 0.35% 0.45% 0.45%
------- ------- ------- -------
Total Separate Account
Annual Expenses (after
(reimbursement)3/ 4.55% 4.65% 4.55% 4.55%
======== ======= ======= =======
Money Money
Bond Juno Market I Market II
-------- ------- --------- ---------
<S> <C> <C> <C> <C>
Advisory Fees 0.50% 0.90% 0.50% 0.50%
Subaccount
Administration Fees 0.20% 0.25% 0.20% 0
Other Expenses (after
(reimbursement)3/ 0.30% 0.35% 0.10% 0.10%
------- ------ ------- --------
Total Separate Account
Annual Expenses (after
(reimbursement)3/ 4.15% 4.65% 3.95% 2.00%
======= ====== ====== =======
</TABLE>
3/ PADCO has voluntarily agreed to reimburse each Subaccount
for Other Expenses in excess of those shown (up to the
amount of the applicable Advisory Fee) through June 30,
1997, and until such later date as PADCO may determine.
Other Expenses are based on estimates.
<PAGE> I-6
<PAGE>
Examples
1. If you surrender your Contract, or if you annuitize, at
the end of the applicable period:
<TABLE>
<CAPTION>
You would pay the following
expenses on a $1,000
investment, assuming 5% annual
return on assets: 1 year 3 years
---------- ---------
<S> <C> <C>
The Nova Subaccount $116 $191
The Ursa Subaccount $117 $194
The OTC Subaccount $116 $191
The Precious Metals Subaccount $116 $191
The Bond Subaccount $112 $179
The Juno Subaccount $117 $194
The Money Market I Subaccount $110 $174
The Money Market II Subaccount $ 90 $115
2. If you do not surrender at the end of the applicable
period:
You would pay the following
expenses on a $1,000
investment, assuming 5% annual
return on assets: 1 year 3 years
-------- --------
<S> <C> <C>
The Nova Subaccount $46 $137
The Ursa Subaccount $47 $140
The OTC Subaccount $46 $137
The Precious Metals Subaccount $46 $137
The Bond Subaccount $42 $126
The Juno Subaccount $47 $140
The Money Market I Subaccount $40 $120
The Money Market II Subaccount $20 $ 62
</TABLE>
The purpose of the Fee Table is to assist you in
understanding the various costs and expenses that you will
<PAGE> I-7
<PAGE>
bear directly or indirectly. The Examples should not be
considered a representation of future expenses and charges.
Actual expenses may be greater or less than those shown.
Similarly, the assumed 5% annual rate of return is not an
estimate or a guarantee of future investment performance. The
Examples include, as an expense, the asset allocation advisory
fee of 1.75%. However, deduction of this fee will not be
implemented unless and until the necessary regulatory
approvals are obtained. See "Charges and Deductions" at page
___.
FINANCIAL STATEMENTS
Financial statements for Great American Reserve can be
found in the Statement of Additional Information, copies of
which are available upon request and without charge. This
information may be obtained by writing or calling PFS at the
address or telephone number set forth on the cover page of
this Prospectus. No financial statements for the Separate
Account are included in the Statement of Additional
Information because the Separate Account had not commenced
operations at the date of this Prospectus.
SUMMARY
"You" refers to the Contract Owner. "We," "us," or
"Great American Reserve" refers to Great American Reserve
Insurance Company.
The Separate Account
The Separate Account is currently divided into eight
Subaccounts in which purchase payments under this Contract may
be invested. Initial purchase payments allocable to the
Separate Account will first be allocated to the Money Market I
Subaccount. During the first 14 days following the date of
issue of the Contract (the "Contract Date"), no transfers will
be allowed. Subsequently, transfers may only be made by your
Financial Advisor. Your Contract Value will reflect the
investment performance of your Subaccounts. (See "The
Separate Account" on page __, "Investments of the Subaccounts"
on page __, "Account Transfers" on page __ and "Asset
Allocation Advisory Services" on page __.)
The eight Subaccounts, including the Money Market
Subaccounts, are managed by PADCO. (See "PADCO" in Part II of
this Prospectus.) The Money Market II Subaccount is
available only upon the death, resignation, or termination of
your Financial Advisor.
<PAGE> I-8
<PAGE>
Retirement Plans
The Contract may currently be issued pursuant to
nonqualified retirement plans, individual retirement annuities
("IRAs"), or Section 403(b) Annuities ("TSAs").
Purchase Payments
The full amount of your purchase payments, less
applicable premium tax due, if any, will be invested.
However, certain charges and deductions will be made from your
Contract Value. (See "Charges and Deductions" on page __.)
The Contract permits purchase payments to be paid on a
flexible basis at any time in any amount meeting specified
minimum requirements. The minimum initial purchase payment
Great American Reserve will accept is $25,000. The minimum
subsequent purchase payment is $1,000. (See "Purchase
Payments" on page __.)
Charges and Deductions
Withdrawal Charge. A withdrawal charge is deducted in
the event of withdrawal of Contract Values, subject to certain
exceptions. If the withdrawal charge applies, it will equal a
specified percentage of each purchase payment paid under the
Contract within seven complete years prior to the date of
withdrawal. This charge permits Great American Reserve to
recover a portion of the sales expenses that it has incurred.
(See "Withdrawal Charge" on page __.)
Administrative Fee. Great American Reserve will deduct a
daily administrative fee equal to an annual rate of 0.15% of
the average daily net assets of each Subaccount. This charge
is made to reimburse Great American Reserve for expenses
related to administration of the Contracts. (See
"Administrative Fee" on page __.)
Mortality and Expense Risk Charge. Great American
Reserve will deduct a daily mortality and expense risk charge
equal to an annual rate of 1.25% of the average daily net
assets of each Subaccount. This charge is made to compensate
Great American Reserve for the risk of guaranteeing not to
increase the administrative fee regardless of actual
administrative costs and for the mortality guarantees Great
American Reserve makes under the Contract. (See "Mortality
and Expense Risk Charge" on page __.)
Asset Allocation Advisory Fee. Upon receipt of necessary
regulatory approval and exemption from the Securities and
Exchange Commission (the "SEC") and a ruling from the Internal
Revenue Service, Great American Reserve will deduct an asset
<PAGE> I-9
<PAGE>
allocation advisory fee equal to an annual rate of 1.75% of
the average daily net assets of each Subaccount other than the
Money Market II Subaccount (which Subaccount is only available
if no Financial Advisor is performing services in relation to
your Contract). This fee will be deducted on a daily basis
and paid quarterly to the Financial Advisor who provides you
with asset allocation advisory services. (See "Asset
Allocation Advisory Services" at page _____.)
Subaccount Administration Fee. Various Subaccount
administration fees, with maximum annual rates ranging from
0.20% to 0.25% of a Subaccount's average daily net assets,
also are payable by the Subaccounts (other than the Money
Market II Subaccount, which does not pay this fee) to PADCO
Service Company, Inc. (the "Servicer"), for expenses related
to asset allocation administrative services provided by the
Servicer under the Contracts. (See "Subaccount Administration
Fee" on page __.)
Investment Advisory Fee. Various investment advisory
fees, with maximum annual rates ranging from 0.25% to 0.90% of
the average daily net assets of the Subaccounts, are payable
by the Subaccounts to PADCO. The Subaccounts also bear
certain of the expenses incurred in their operations. (See
"Investment Advisory Fee and Other Expenses" on page __.)
Premium Taxes. Premium taxes or similar assessments
payable to any government entity may be deducted from purchase
payments or from Contract Values when paid by Great American
Reserve or at a later date. Currently, state premium taxes
range from 0% to 3.5%. (See "Premium Taxes" on page __.)
Asset Allocation Advisory Services
This Contract is sold only to Contract Owners who are
provided asset allocation or market-timing services by
investment advisers registered, or excluded from registration,
under the Investment Advisers Act of 1940, to whom the asset
allocation advisory fees are paid. Asset allocation advisory
services consist of making allocation and transfer decisions.
You are responsible for selecting and supervising your
Financial Advisor and must execute a power of attorney
authorizing your Financial Advisor to provide asset allocation
advisory services. PADCO or Great American Reserve must be
provided with a copy of a written power of attorney from each
Contract Owner for whom the Financial Advisor has been granted
the power to direct the allocation and transfer of funds under
the Contract. Neither Great American Reserve, PFS, nor PADCO
selects, supervises, or recommends any Financial Advisor to
you. Accordingly, neither Great American Reserve, PFS, nor
PADCO is responsible for any advice provided by any Financial
Advisor. There can be no assurance that any Financial Advisor
<PAGE> I-10
<PAGE>
will be able to predict market moves successfully. The Board
of Managers of the Separate Account (the "Managers") has not
reviewed the qualifications of any Financial Advisor and has
not considered payments to Financial Advisors in connection
with its review of investment advisory contracts for the
Separate Account. (See "Asset Allocation Advisory Services"
at page __.)
Upon notification to PADCO of the death, termination, or
resignation of your Financial Advisor, your Separate Account
Value will immediately be transferred into the Money Market II
Subaccount. Great American Reserve will send you a notice not
more than five business days after receipt of information from
PADCO that no Financial Advisor is serving in relation to your
Contract. (See "Asset Allocation Advisory Fee" on page __ and
"Changing Financial Advisors" on page __.)
Annuity Payments
Monthly annuity payments will start on the Annuity Date.
You may select the Annuity Date. You may also select an
annuity payment option. You may change your selections later.
(See "Change of Annuity Date or Annuity Option" on page __.)
If the net Contract Value at the Annuity Date is less
than $10,000 ($3,500 for Qualified Contracts), Great American
Reserve reserves the right to pay the Contract Value in a lump
sum in lieu of annuity payments. For further information
regarding the tax consequences of a lump sum payment, see
"Taxation of Distributions" on page __. If any annuity
payment would be less than $50, Great American Reserve may
change the frequency of payments to intervals that will result
in payments of at least $50. (See "Minimum Annuity Payments"
on page __.)
Account Transfers
All or part of your Contract Value may be transferred
among the Subaccounts (except the Money Market II Subaccount)
at any time and without charge prior to the Annuity Date.
Transfers to the Money Market II Subaccount are made only upon
notification to PADCO of the death, resignation, or
termination of your Financial Advisor. Transfers out of the
Money Market II Subaccount are subject to certain limitations.
Transfers to and from the Fixed Account are also permitted,
but are subject to certain limitations. (See "Account
Transfers" on page ___.)
Payment on Death
If the Contract Owner dies prior to the Annuity Date and
(i) the age of the Contract Owner at death is less than 76,
<PAGE> I-11
<PAGE>
Great American Reserve will pay the greater of purchase
payments (less withdrawals) or Contract Value, or (ii) the age
of the Contract Owner at death is 76 or greater, Great
American Reserve will pay the Contract Value less any
applicable withdrawal charges. (See "Payment on Death" on
page __.)
Withdrawals
You may withdraw all or part of your accumulated Contract
Value prior to the Annuity Date. The amount withdrawn must be
at least $500. If your Contract is to continue in force, the
remaining Contract Value must be at least $10,000. A
withdrawal charge may be imposed. (See "Withdrawals" on page
__.) Withdrawals may be subject to a 10% penalty tax under
the Code (See "Taxation of Distributions" on page __).
Ten-Day Review Period
Within 10 days of your receipt of an issued Contract you
may return it to Great American Reserve for cancellation.
This period may be longer in certain states. (See "Ten Day
Right to Review" on page __.)
Special Risks
The strategies employed by a Contract Owner's Financial
Advisor may result in considerable assets moving in and out of
each Subaccount (except the Money Market II Subaccount).
Consequently, PADCO expects that each Subaccount will
generally experience significant portfolio turnover, which
will likely result in higher expenses, transaction costs, and
additional costs and may also adversely affect the ability of
the Subaccount to meet its investment objective. Each
Subaccount's investments will be managed without regard to
portfolio turnover rates. The Subaccounts (other than the
Money Market Subaccounts) also may engage in certain
aggressive investment techniques, which may include engaging
in short sales and transactions in futures contracts and
options on securities, stock indexes, and futures contracts.
A discussion of the special risks associated with the
investment in the Subaccounts is provided under "Special Risk
Considerations" under "Investments of the Subaccounts" in Part
I and in Part II of this Prospectus. For further information
concerning the investment policies and strategies of the
Subaccounts, see "Investments of the Subaccounts" in Part I
and "Investment Objectives and Policies" and "Investment
Techniques and Other Policies" in Part II of this Prospectus
and "Investment Policies and Techniques of the Subaccounts" in
the Statement of Additional Information.
<PAGE> I-12
<PAGE>
As of the date of this Prospectus, Great American Reserve
has pending a request for a letter ruling from the Internal
Revenue Service that asset allocation advisory fee payments to
Financial Advisors need not be treated as distributions to
Contract Owners subject to tax. There is no assurance that
such a ruling will be issued. Unless and until a letter
ruling is obtained, Great American Reserve would be required
to treat these payments as taxable distributions, which
amounts may be subject to adverse tax consequences, including
a 10% penalty tax on the taxable portion withdrawn if you are
under 59-1/2 years old. In addition, even if such a ruling is
issued, it is likely that you will have a taxable distribution
if your Financial Advisor credits back to you or anyone else
any portion of the asset allocation advisory fee. Contract
Owners should consult a competent tax advisor as to the tax
treatment of asset allocation advisory fees. The deduction of
asset allocation advisory fees, as a percentage of average
daily net assets in each Subaccount, will not be implemented
unless and until a favorable letter ruling is obtained from
the Internal Revenue Service. However, pending receipt of a
favorable letter ruling from the Internal Revenue Service,
Contract Owners (other than owners of annuities held under
retirement plans qualified under Section 401 or owners of
Section 403(b) tax sheltered annuities) may authorize Great
American Reserve to withdraw amounts from his or her Contract
Value for the purpose of remitting the asset allocation
advisory fee (1.75%) to his or her Financial Advisor.
GREAT AMERICAN RESERVE INSURANCE COMPANY
Great American Reserve, originally organized in 1937, is
principally engaged in the life insurance business in 47
states and the District of Columbia. Great American Reserve
is a stock company organized under the laws of the State of
Texas and a wholly-owned subsidiary of Conseco, Inc.
("Conseco"). The operations of Great American Reserve are
handled by Conseco. Conseco is a publicly-owned financial
services holding company, the principal operations of which
are the development, marketing and administration of
specialized annuity and life insurance products. Conseco is
located at 11825 N. Pennsylvania Street, Carmel, Indiana
46032.
All inquiries regarding the Separate Account, the
Contracts, or any related matter should be directed to Great
American Reserve's Administrative Office at the address and
telephone number shown on the cover page of this Prospectus.
The financial statements of Great American Reserve included in
the Statement of Additional Information should be considered
only as bearing upon the ability of Great American Reserve to
meet the obligations under the Contracts. Furthermore,
<PAGE> I-13
<PAGE>
neither the assets of Conseco nor those of any company in the
Conseco group of companies other than Great American Reserve
support these obligations. As of December 31, 1995, Great
American Reserve had total assets of $2.8 billion and total
shareholder's equity of $442.6 million.
THE SEPARATE ACCOUNT
Great American Reserve established the Separate Account
on April 15, 1996, as a separate account under Texas law.
The Separate Account is registered with the SEC (the "SEC") as
a diversified open-end management investment company pursuant
to the provisions of the Investment Company Act of 1940, as
amended (the "1940 Act"), and meets the definition of
"separate account" set forth in the 1940 Act. The Separate
Account's registration under the 1940 Act does not involve any
supervision by the SEC of the investment practices or policies
of any of the Subaccounts of the Separate Account. The
Managers are responsible for the general supervision of the
Separate Account's business. While the assets of the
Subaccounts are Great American Reserve's property, the
Subaccounts, as segregated investment accounts of the Separate
Account, are not chargeable with liabilities arising out of
any other business that Great American Reserve may conduct.
Obligations of the Subaccounts, however, are obligations of
Great American Reserve. Income, gains, or losses, whether or
not realized, from assets allocated to each of the
Subaccounts, in accordance with the Contracts, are credited to
or charged against that Subaccount without regard to other
income, gains, or losses of Great American Reserve or any
other Subaccount. Great American Reserve does not guarantee
the investment performance of any Subaccount. The Separate
Account has eight separate Subaccounts. Each Subaccount has
its own distinct investment objective. There is, of course,
no assurance that any Subaccount will achieve its investment
objective. A discussion of each Subaccount s investment
objective and policies is provided below under "Investment
Objectives and Policies of the Subaccounts" and "Investment
Techniques and Other Investment Policies." The Contract Value
prior to the Annuity Date will vary with the performance of
the Subaccounts your Financial Advisor selects.
INVESTMENTS OF THE SUBACCOUNTS
Eligible Investments
Each Subaccount is a separate investment portfolio of the
Separate Account. Purchase payments allocated to a Subaccount
<PAGE> I-14
<PAGE>
will be added to the assets of that Subaccount at Accumulation
Unit Value (without any fee or charge) and will be invested as
determined by PADCO.
All of your purchase payments allocable to the Separate
Account will first be allocated to the Money Market
Subaccounts. No transfers will be allowed for the first 14
days following the Contract Date. After this 14-day period,
transfers may only be made by your Financial Advisor. All or
part of your Contract Value may be transferred from one
Subaccount to another (except the Money Market II Subaccount)
at any time and without charge after the first 14 days
following the Contract Date. (See "Account Transfers" at page
___.)
A summary of the investment objectives of each Subaccount
follows. More detailed information, including risks of
investing in and deductions from and expenses paid out of the
assets of the Separate Account and of the Subaccounts, may be
found in Part II of this Prospectus. Part II of this
Prospectus should be read in full for a complete evaluation of
the Contract and related investment risks.
Investment Objectives
Each Subaccount has its own distinct investment
objective. There is, of course, no guarantee that any
Subaccount will achieve its investment objective. The
investment objectives of the Subaccounts and certain
investment restrictions are fundamental policies and may not
be changed without the affirmative vote of the majority of the
Contract Owners of that Subaccount. The investment objectives
of the Subaccounts are as follows:
The Nova Subaccount. The Nova Subaccount s investment
objective is to provide investment returns that correspond to
a specified percentage of the performance of a benchmark for
common stock securities selected from time to time by the
Managers. The Nova Subaccount's current benchmark is the
Standard & Poor s 500 Composite Stock Price Index/TM (the
"S&P500 Index"), and the Nova Subaccount currently expects to
provide investment return that corresponds to 120% of the
S&P500 Index. In attempting to achieve its objective, the
Nova Subaccount expects that a substantial portion of its
assets usually will be devoted to investment techniques
including certain transactions in stock index futures
contracts, options on stock index futures contracts, and
options on securities and stock indexes. In contrast to
returns on a mutual fund that seeks to approximate the return
of the S&P500 Index, the Nova Subaccount should increase gains
to Contract Owners during periods when the prices of the
securities in the S&P500 Index are rising and increase losses
<PAGE> I-15
<PAGE>
to Contract Owners during periods when such prices are
declining. Contract Owners in the Nova Subaccount could
experience substantial losses during sustained periods of
falling equity prices. The S&P500 Index is an unmanaged index
of common stocks comprised of 500 industrial, financial,
utility, and transportation companies. "Standard &
Poor's(R)," "S&P(R)," "S&P500(R)," "Standard & Poor's 500(R),"
and "500" are trademarks of McGraw-Hill, Inc. The Nova
Subaccount is not sponsored, endorsed, sold, or promoted by
Standard & Poor's Corporation and Standard & Poor's
Corporation makes no representation regarding the advisability
of investing in the Nova Subaccount through the Contract or
otherwise.
The Ursa Subaccount. The Ursa Subaccount s investment
objective is to provide investment results that will inversely
correlate to the performance of a benchmark for common stock
securities selected from time to time by the Managers. The
Ursa Subaccount's current benchmark is the S&P500 Index. The
Ursa Subaccount seeks to achieve this inverse correlation
result on each trading day. While a close correlation can be
achieved on any single trading day, the combined effects of
the reinvestment of the receipt of investment income and of
the compounding of successive changes in Accumulation Unit
Value can cause the percentage increase or decrease in the
Accumulation Unit Value of the Ursa Subaccount to diverge
significantly from the current inverse percentage decrease or
increase in the S&P500 Index. If the Ursa Fund achieved a
perfect inverse correlation for any single trading day, the
Accumulation Unit Value of the Ursa Subaccount would increase
for that day in direct proportion to any decrease in the level
of the S&P500 Index. Conversely, the Accumulation Unit Value
of the Ursa Subaccount would decrease for that day in direct
proportion to any increase in the level of the S&P500 Index
for that day. In seeking to achieve its objective, the Ursa
Subaccount primarily engages in short sales and certain
transactions in stock index futures contracts, options on
stock index futures contracts, and option on securities and
stock indexes. The Ursa Subaccount involves special risks not
traditionally associated with annuity contracts. Contract
Owners in the Ursa Subaccount may experience substantial
losses during sustained periods of rising equity prices. The
Ursa Subaccount is not sponsored, endorsed, sold, or promoted
by Standard & Poor's Corporation and Standard & Poor's
Corporation makes no representation regarding the advisability
of investing in the Ursa Subaccount through the Contract or
otherwise.
The OTC Subaccount. The investment objective of the OTC
Subaccount (the "OTC Subaccount") is to attempt to provide
investment results that correspond to a benchmark for over-
the-counter securities selected from time to time by the
<PAGE> I-16
<PAGE>
Managers. The OTC Subaccount s current benchmark is the
NASDAQ 100 Index/TM. The OTC Subaccount does not aim to hold
all of the 100 securities included on the NASDAQ 100 Index.
Instead, the OTC Subaccount intends to hold representative
securities included in the NASDAQ 100 Index or other
instruments which are expected to provide returns that
correspond to those of the NASDAQ 100 Index. The OTC
Subaccount may engage in transactions on stock index futures
contracts, options on stock index futures contracts, and
options on securities and stock indexes. The NASDAQ 100 Index
is a capitalization-weighted index composed of 100 of the
largest non-financial securities listed on the National
Association of Securities Dealers Automated Quotations
("NASDAQ") Stock Market. "NASDAQ(SM)," "NASDAQ 100(R)," and
"NASD(R)" are servicemarks and trademarks of the National
Association of Securities Dealers, Inc. ("NASD"). The OTC
Subaccount is not sponsored, endorsed, sold, or promoted by
the NASD and the NASD makes no representation regarding the
advisability of investing in the OTC Subaccount through the
Contract or otherwise.
The Precious Metals Subaccount. The investment objective
of the Precious Metals Subaccount (the "Metals Subaccount") is
to attempt to provide investment results that correspond to a
benchmark primarily for metals-related securities selected
from time to time by the Managers. The Precious Metals
Subaccount s current benchmark is the Philadelphia Stock
Exchange Gold/Silver Index/TM (the "XAU Index"). To achieve
its objective, the Precious Metals Subaccount invests in
securities included in the XAU Index. In addition, the
Precious Metals Subaccount may invest in other securities that
are expected to perform in a manner that will permit the
Precious Metals Subaccount s performance to track closely the
XAU Index. The Precious Metals Subaccount may invest in
securities of foreign issuers. These securities present
certain risks not present in domestic investments and expose
the investor to general market conditions which differ
significantly from those in the United States. The XAU Index
is a capitalization-weighted index featuring nine widely-held
securities in the gold and silver mining and production
industry or companies investing in such mining and production
companies. "Philadelphia Stock Exchange(R)" and "PHLX(R)" are
trademarks of the Philadelphia Stock Exchange. The Precious
Metals Subaccount is not sponsored, endorsed, sold, or
promoted by the Philadelphia Stock Exchange and the
Philadelphia Stock Exchange makes no representation regarding
the advisability of investing in the Precious Metals
Subaccount through the Contract or otherwise.
The U.S. Government Bond Subaccount. The investment
objective of the U.S. Government Bond Subaccount (the "Bond
Subaccount") is to provide investment results that correspond
<PAGE> I-17
<PAGE>
to a benchmark for U.S. Government securities (selected from
time to time by the Managers. The Bond Subaccount s current
benchmark is 120% of the price movement of the Current Long
Treasury Bond (the "Long Bond"), without consideration of
interest paid. In attempting to achieve its objective, the
Bond Subaccount invests primarily in obligations of the U.S.
Treasury or obligations either issued or guaranteed, as to
principal and interest, by agencies or instrumentalities of
the U.S. Government ("U.S. Government Securities"). The Bond
Subaccount may engage in transactions in futures contracts and
options on futures contracts on U.S. Treasury bonds. The Bond
Subaccount also may invest in U.S. Treasury zero coupon bonds.
The Juno Subaccount. The Juno Subaccount s investment
objective is to provide total return before expenses and costs
that inversely correlate to the price movements of a benchmark
for U.S. Treasury debt instruments or futures contracts on a
specified debt instrument selected from time to time by the
Managers. The Long Bond is the Juno Subaccount s current
benchmark. In seeking its objective, the Juno Subaccount will
employ certain investment techniques including engaging in
short sales and transactions in futures contracts and options
thereon. If the Juno Subaccount is successful in meeting its
objective, its total return before expenses and costs will
increase proportionally to any decreases in the price of the
Long Bond. Conversely, its total return before expenses and
cost will decrease proportionally to any increases in the
price of the Long Bond. Contract Owners with Contract Value
allocated to the Juno Subaccount may experience substantial
losses during periods of falling interest rates.
The Money Market Subaccounts. The investment objective
of each of the Money Market Subaccounts is to seek current
income consistent with stability of capital and liquidity. To
achieve its objective, each Money Market Subaccount invests
primarily in money market instruments which are issued or
guaranteed, as to principal and interest, by the U.S.
Government, its agencies or instrumentalities, as well as in
repurchase agreements collateralized fully by U.S. Government
Securities, and in bank money market instruments and
commercial paper.
Special Risk Considerations
The assets of the Subaccounts will be derived from
Contract Owners who use the Subaccounts as part of an asset
allocation or market-timing investment strategy pursuant to
advice received from professional money managers. In that
circumstance, Subaccount values may be transferred frequently
to take advantage of anticipated changes in market conditions.
The strategies employed by a Contract Owner's Financial
Advisor may result in considerable assets moving in and out of
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<PAGE>
the Subaccounts (except the Money Market II Subaccount).
Consequently, PADCO expects that the Subaccounts will
generally experience significant portfolio turnover, which
will likely cause higher expenses and additional costs and may
also adversely affect the ability of the Subaccount to meet
its investment objective. For further information concerning
the portfolio turnover of the Subaccounts, see "Special Risk
Considerations" in Part II of this Prospectus, and "Investment
Policies and Techniques of the Subaccounts" in the Statement
of Additional Information.
While PADCO does not expect that the returns over a year
will deviate adversely from the Subaccounts' respective
current benchmarks by more than ten percent, certain factors
may affect the ability to achieve this correlation. See
"Investment Objectives and Policies" and "Special Risk
Considerations" in Part II of this Prospectus for a discussion
of these factors.
The Subaccounts (other than the Money Market Subaccounts)
may engage in certain aggressive investment techniques, which
may include engaging in short sales and transactions in
futures contracts and options on securities, stock indexes,
and futures contracts. As discussed more fully under
"Investment Objectives and Policies," "Special Risk
Considerations," and "Investment Techniques and Other
Investment Policies" in Part II of this Prospectus, these
techniques are specialized and involve risks that are not
traditionally associated with similar contracts.
Addition or Deletion of Subaccounts
Great American Reserve may, at its discretion, no longer
make available any of the Subaccounts shown on the Contract
Schedule. Great American Reserve may also offer additional
new Subaccounts.
ASSET ALLOCATION ADVISORY SERVICES
This Contract is designed for use with asset allocation
or market-timing investment advisory services provided by a
Financial Advisor. You should carefully consider: (a) the
nature and quality of the asset allocation services or any
other services proposed to be rendered by your Financial
Advisor or a prospective Financial Advisor; (b) the business
relationships of your Financial Advisor or affiliates of that
Financial Advisor with any entity that may be authorized to
offer Contracts or services on Great American Reserve's behalf
or on behalf of any of its affiliates or of PADCO or its
affiliates; and (c) the effects on your Contract at any time
your Financial Advisor dies, resigns, or is terminated.
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<PAGE>
Once the necessary regulatory approvals and exemptive
relief have been obtained from the Internal Revenue Service
and the SEC to permit the deduction of the asset allocation
advisory fee from your Contract, Great American Reserve's only
responsibility with respect to asset allocation services will
be to collect and remit this fee to the Financial Advisor
through PFS. See "Charges and Deductions; Asset Allocation
Advisory Fee" on page __. Neither Great American Reserve,
PFS, nor PADCO bears responsibility for, or liability in
relation to, the activities of any Financial Advisor. The
payment of the asset allocation advisory fee does not imply an
endorsement of any particular Financial Advisor by Great
American Reserve, PFS, or PADCO. Great American Reserve will
not knowingly pay a fee to a Financial Advisor that is an
affiliate of Great American Reserve or an affiliate of PADCO
unless and until Great American Reserve receives permission to
do so from the SEC and any other applicable regulatory
authorities.
PADCO will transfer your Separate Account Value into the
Money Market II Subaccount when PADCO receives notice of the
death of your Financial Advisor, when PADCO receives notice
from you or your Financial Advisor terminating the
relationship, or when PADCO receives notice from either a
court of competent jurisdiction or an applicable regulatory
authority terminating such relationship. Great American
Reserve will send you a notice not more than five business
days after receipt of information from PADCO that no Financial
Advisor is serving in relation to your Contract. This notice
will include a reminder that you will be required to notify
PADCO of the name of your new Financial Advisor and that until
you designate a new Financial Advisor, you may (i) keep your
Separate Account Value in the Money Market II Subaccount until
you appoint a new Financial Advisor, (ii) transfer all or part
of your Separate Account Value to the Fixed Account and become
subject to the Fixed Account transfer restrictions, or (iii)
surrender your Contract, subject to applicable withdrawal
charges and tax penalties.
CHARGES AND DEDUCTIONS
Withdrawal Charge
The withdrawal charge, when applicable, permits Great
American Reserve to recover a portion of its expenses relating
to the sale of the Contract. Great American Reserve may
assess a withdrawal charge against the purchase payments when
the payments are withdrawn. Subject to certain state
variations, the withdrawal charge will be a specified
percentage of the sum of the purchase payments paid within
seven years prior to the date of withdrawal, adjusted for any
<PAGE> I-20
<PAGE>
prior withdrawals. There is no charge on withdrawals of (a)
purchase payments that have been in the Contract more than
seven complete Contract years or (b) free withdrawal amounts
described below. The length of time from receipt of a
purchase payment to the time of withdrawal determines the
withdrawal charge. For the purpose of calculating the
withdrawal charge, withdrawals will be deemed made first from
purchase payments on a first-in, first-out basis and then from
any gain.
No withdrawal charge is applicable in the event of the
death of the Contract Owner (if the age of the Contract Owner
at death is less than 76) or if payments are made under an
annuity option provided for under the Contract that begins at
least five years after the effective date of the Contract and
is paid under any life annuity option, or any option with
payments for a minimum of five years. The withdrawal charge
equals:
<PAGE> I-21
<PAGE>
<TABLE>
<CAPTION>
Complete Years
Withdrawal Charge Since Receipt of Payment
------------------ ------------------------
<S> <C>
7% 0
7% 1
6% 2
5% 3
4% 4
3% 5
2% 6
0% 7 and thereafter
</TABLE>
In addition, in certain states the following
circumstances further limit or reduce withdrawal charges: for
issue ages up to 56, there is no withdrawal charge made after
you attain age 67 and later; for issue ages 57 and later, any
otherwise applicable withdrawal charge will be multiplied by a
factor ranging from 0.9 to 0 for Contract years one through
10.
A Contract Owner may make one free withdrawal per
contract year from Contract Value of an amount up to 10% of
the Contract Value (as determined on the date of receipt of
the withdrawal request). Additional withdrawals in excess of
that amount in any Contract year during the period when any
withdrawal charge is applicable will be subject to the
appropriate charge as set forth above.
Withdrawals which are authorized by you to remit the
asset allocation advisory fee to your Financial Advisor are
treated as free withdrawals, and are not counted toward the
10% limit, however, there may be certain adverse tax
consequences. (See "Federal Income Taxes--Asset Allocation
Advisory Fees" on page __.) In addition, with respect to any
Contract which is owned by a "charitable remainder unitrust"
or a "charitable remainder annuity trust" within the meaning
of Section 664(d) of the Code ("Charitable Remainder Trust"),
Great American Reserve may, in its discretion, permit an
additional free withdrawal necessary to fund required
distributions by the Charitable Remainder Trust in any
contract year. In order for a Charitable Remainder Trust to
qualify for such an increase, the trustee or trustees of the
Charitable Remainder Trust will be required to certify: (i)
that such trust is a bona fide "charitable remainder unitrust"
or a "charitable remainder annuity trust" within the meaning
<PAGE> I-22
<PAGE>
of Section 664 of the Code, and that all amounts proposed to
be withdrawn will be used to make distributions required under
Section 664 of the Code for the year in which such amounts are
withdrawn or for a prior year; (ii) that the required
distribution exceeds the one free withdrawal of 10% of the
Contract Value which is permitted without a withdrawal charge;
and (iii) that the funds necessary to make the required
distribution could not otherwise be made available without
hardship to the trust or its beneficiaries. (See
"Withdrawals" on page __.)
Great American Reserve also reserves the right to reduce
the withdrawal charge under certain circumstances when sales
of Contracts are made to a trustee, employer, or similar party
pursuant to a retirement plan or similar arrangement for sales
of Contracts to a group of individuals if the program results
in a savings of sales expenses. The amount of reduction will
depend on such factors as the size of the group, the total
amount of purchase payments, and other factors that might tend
to reduce expenses incurred in connection with such sales.
This reduction will not be unfairly discriminatory to any
Contract Owner. For issue ages 76 or younger, no charge will
be imposed on any payment made due to death of the Contract
Owner. (See "Payment on Death" on page __.)
Great American Reserve's sales expenses relating to the
Contracts initially will be provided for out of its surplus.
Withdrawal charges imposed on withdrawals from Contracts are
expected to recover only a portion of the sales expenses
relating to the Contract. Sales expenses not recovered
through the withdrawal charge will be recovered from Great
American Reserve's surplus.
Mortality and Expense Risk Charge
Great American Reserve assumes a mortality risk by virtue
of annuity rates in the Contract that cannot be changed.
Great American Reserve guarantees a minimum payment on the
death of the Contract Owner prior to the Annuity Date. (See
"Payment on Death" on page __.)
The expense risk Great American Reserve incurs is the
risk that the administrative fee, which is guaranteed not to
increase over the life of the Contract, will be insufficient
to cover Great American Reserve's actual expenses.
The mortality and expense risk charge, which is computed
and deducted on a daily basis from each Subaccount, is equal
to an annual rate of 1.25% of the daily net assets of each
Subaccount. If that amount is insufficient to cover the
actual cost of the mortality and expense risks, Great American
Reserve bears the loss. Conversely, if the amount proves more
<PAGE> I-23
<PAGE>
than sufficient, the excess will be part of Great American
Reserve's surplus and can be used for any purpose including
payment of sales expenses not recovered through the withdrawal
charge.
Asset Allocation Advisory Fee
This Contract is sold only to Contract Owners who are
provided asset allocation or market-timing investment advisory
services by Financial Advisors to whom an asset allocation
advisory fee is paid equal to an annual rate of 1.75% of the
daily net assets of each Subaccount (except the Money Market
II Subaccount, which Subaccount is only available if no
Financial Advisor is performing services in relation to your
Contract). Upon receipt of a favorable ruling from the
Internal Revenue Service, Great American will deduct this fee
daily and remit quarterly to your Financial Advisor. If you
decide to change your Financial Advisor, you may select a new
Financial Advisor by executing a new power of attorney or
select one of the options discussed below. After PADCO
receives notification from you, your Financial Advisor, or a
court of competent jurisdiction or an applicable regulatory
authority of the death, resignation, or termination of your
Financial Advisor, it will (unless it concurrently receives
the name of your new Financial Advisor), transfer all of your
Separate Account Value into the Money Market II Subaccount
where you will not be charged the asset allocation advisory
fee. Until you designate a new Financial Advisor, you may (i)
keep your Separate Account Value in the Money Market II
Subaccount, (ii) transfer all or part of your Separate Account
Value to the Fixed Account and become subject to Fixed Account
transfer restrictions (a maximum of 20% of the Fixed Account
Value may be transferred once in any six-month period), or
(iii) surrender your Contract, subject to applicable
withdrawal charges and tax penalties. PADCO maintains a list
of Financial Advisors, but does not recommend any particular
Financial Advisor. (See "Asset Allocation Advisory Fee" in
the "Federal Income Taxes" Section at page I-__).
Administrative Fee
Great American Reserve deducts an administrative fee from
each Subaccount to reimburse Great American Reserve for
administrative expenses. This charge is equal to an annual
rate of 0.15% of the daily net assets of each Subaccount. The
fee reimburses Great American Reserve for, among other
expenses, preparation of the Contracts, confirmations, annual
reports and statements, maintenance of Contract Owner records
and other Contract Owner servicing. This administrative fee
will not be deducted from the Fixed Account.
<PAGE> I-24
<PAGE>
Investment Advisory Fee and Other Expenses
Each Subaccount pays investment advisory fees to PADCO.
Pursuant to an investment advisory agreement between the
Separate Account and PADCO, the Subaccounts pay PADCO fees at
an annual rate applied to the daily net assets of each
Subaccount. The Separate Account and the Subaccounts also
bear certain expenses incurred in their operations.
Information on the investment advisory fees and other expenses
payable by the Separate Account is set forth under "Management
of the Separate Account" in Part II of this Prospectus and
"Board of Managers of the Separate Account" in the Statement
of Additional Information.
Subaccount Administration Fee
The Subaccounts (other than the Money Market II
Subaccount) also pay Subaccount administration fees to the
Servicer. Pursuant to a subaccount administration agreement
between the Separate Account and the Servicer, the Subaccounts
pay Subaccount administration fees at an annual rate applied
to the daily net assets of each Subaccount. The Servicer
provides the Subaccounts with asset allocation administrative
services, including, among others, communications with
Financial Advisors (including receipt of and acting upon
transfer requests), asset allocation bookkeeping,
determination of Accumulation Unit Values, and Subaccount
accounting services. Information on the Subaccount
administration fee payable by the Subaccounts is set forth
under "Management of the Separate Account" in Part II of this
Prospectus and "Board of Managers of the Separate Account" in
the Statement of Additional Information. The Money Market II
Subaccount does not pay any Subaccount administration fees.
Payments of Certain Charges and Deductions
The mortality and expense risk charge, the administrative
fee, the investment advisory fees, the asset allocation
advisory fee, and the Subaccount administration fee will be
computed for each day prior to the Annuity Date the Contract
is in force. The withdrawal charge will be deducted, when
applicable, from the Fixed Account and/or from each Subaccount
from which amounts are withdrawn.
Premium Taxes
Some states and municipalities impose a premium tax on
annuity purchase payments received by insurance companies.
<PAGE> I-25
<PAGE>
These taxes may be deducted by Great American Reserve when
paid by Great American Reserve or at a later date. It is
currently Great American Reserve's practice to deduct premium
taxes at the time annuity payments begin or when amounts are
withdrawn. State premium taxes currently range from 0% to
3.5%.
Premium tax rates are subject to change by law,
administrative interpretations, or court decisions. Premium
tax amounts will depend on, among other things, your state of
residence, Great American Reserve's status within your state,
and the premium tax laws of your state.
DESCRIPTION OF THE CONTRACT
Purchase Payments
The minimum initial purchase payment for a Contract is
$25,000. The minimum subsequent purchase payment is $1,000.
Subsequent purchase payments may be paid at any time to the
Administrative Office. The maximum deposit without prior
approval from Great American Reserve is $500,000.
Application for a Contract or acceptance of the first
purchase payment is subject to Great American Reserve's
underwriting rules for such transactions. Great American
Reserve reserves the right to reject any application. A
properly-completed application that is accompanied by the
initial purchase payment and all information necessary for the
processing of the application will be accepted within two
business days of Great American Reserve's receipt of the
properly- completed application (i.e., information sufficient
to permit Great American Reserve to determine to issue a
Contract). Great American Reserve may retain an initial
purchase payment for up to five business days while attempting
to obtain information sufficient to issue the Contract. If an
application is not completed properly and cannot be processed
and necessary information obtained within five business days,
Great American Reserve will inform you of the reasons for the
delay and offer to return your purchase payment unless you
consent to Great American Reserve retaining the initial
purchase payment until we have received the information we
require.
Changing Financial Advisors
You may change your Financial Advisor. However, prior to
a change taking effect the new Financial Advisor must satisfy
Great American Reserve and PADCO's requirements as set forth
in the Contract application and you must execute a new power
of attorney authorizing a Financial Advisor to provide asset
<PAGE> I-26
<PAGE>
allocation advisory services with respect to your Contract.
Great American Reserve will notify you upon receipt of
notification from PADCO that PADCO has received notice
terminating the relationship, or if PADCO receives notice from
either a court of competent jurisdiction or the applicable
regulatory authority terminating such relationship. (See
"Asset Allocation Advisory Fee" on page _____.)
Accumulation Provisions
Accumulation Units
Purchase payments may be allocated to the Fixed Account
or the Separate Account. Initial purchase payments allocated
to the Separate Account will first be deposited in the Money
Market I Subaccount. During the first 14 days following the
Contract Date, no transfers are allowed. (See discussion
under "Eligible Investments" on page __.) After this 14-day
period, the Separate Account Value may be transferred to the
Subaccounts selected pursuant to instructions from the
Financial Advisor. Upon allocation, purchase payments are
converted into Accumulation Units for that Subaccount. The
number of Accumulation Units is determined by dividing the
amount allocated to the Subaccount by the dollar value of an
Accumulation Unit for that Subaccount for the Valuation Period
in which the purchase payment is received at Great American
Reserve's Administrative Office or, in the case of the initial
purchase payment in accordance with the procedures described
above under "Purchase Payments." The number of Accumulation
Units will not change as a result of investment experience.
Value of an Accumulation Unit
For each Subaccount, the value of an Accumulation Unit
was arbitrarily set at $10 when the Subaccount was
established. The value of an Accumulation Unit may increase
or decrease from one Valuation Period to the next. The value
for any Valuation Period is determined by dividing the current
market value of total Subaccount assets, less liabilities, by
the total number of units of that Subaccount outstanding.
Valuation Periods
A Valuation Period is the interval from one valuation day
of any Subaccount to the next valuation day, measured from the
time each day the Subaccount is valued.
The Fixed Account
<PAGE> I-27
<PAGE>
In addition to providing for the allocation of purchase
payments to the Separate Account, the Contract also provides
for allocation of purchase payments and transfer of Contract
Values to the Fixed Account, which accumulate at a guaranteed
interest rate and become part of Great American Reserve's
General Account. Fixed Annuity Cash Values increase based on
interest rates that may change from time to time. Great
American Reserve guarantees that it will credit daily interest
of at least 3% on an annual basis, compounded annually.
Purchase payments and transfers to the Fixed Account become
part of the general account of Great American Reserve. The
gains achieved or losses suffered by the Subaccounts have no
effect on the Fixed Account. The mortality and expense risk
charge, administrative fee, investment advisory fees, asset
allocation advisory fee, and the Subaccount administration
fee, discussed above are not deducted from the Fixed Account.
The interests of Contract Owners arising from the allocation
of purchase payments or the transfer of Contract Values to the
Fixed Account are not registered under the Securities Act of
1933. Great American Reserve's general account is not
registered as an investment company under the Investment
Company Act of 1940. Accordingly, the Fixed Account values
are not subject to the provisions that would apply if
registration under those acts were required.
Great American Reserve has been advised that the staff of
the SEC has not reviewed the disclosures in this Prospectus
that relate to the Fixed Account. Disclosures regarding the
Fixed Account and Great American Reserve's general account,
however, may be subject to certain generally applicable
provisions of the Federal securities laws relating to the
accuracy and completeness of statements made in the
Prospectus.
Payment on Death
If a Contract Owner, or any Joint Contract Owner, dies
prior to the Annuity Date, Great American Reserve will pay to
the Beneficiary, upon receipt of due proof of death, the death
benefit representing the Contract Owner's interest in the
Contract. Upon the death of any Joint Contract Owner, the
surviving Joint Contract Owner, if any, will be treated as the
Beneficiary. The death benefit is the greater of the Contract
Value or the Purchase Payments on the date due proof of death
(as specified in your Contract) is received at Great American
Reserve's Administrative Office (minus any applicable
withdrawal charge if the age of the Contract Owner at death is
76 or greater). Upon Great American Reserve's receipt of
notification of a Contract Owner's death, the Separate Account
Value under the Contract will be transferred to the Money
Market II Subaccount. (See "Asset Allocation Advisory
Services" on page _____.) Payment will be in a lump sum
<PAGE> I-28
<PAGE>
unless an annuity option is chosen. A Beneficiary other than
the surviving spouse of the deceased Contract Owner may choose
only an annuity option providing for full payout within five
years of death, or for the life or within the life expectancy
of the Beneficiary. The life or life expectancy option
generally must be chosen within one year of the Contract
Owner's death. If the surviving spouse of a deceased Contract
Owner is the beneficiary, he or she may choose to continue the
Contract in force after the Contract Owner's death. If so,
the surviving spouse must execute a new power of attorney in
order to appoint a Financial Advisor to provide asset
allocation advisory services. (For information regarding the
tax consequences of a lump sum annuity payment, see "Taxation
of Distributions" on page __.)
If the Contract Owner, or any Joint Contract Owner, who
is not the Annuitant, dies after the Annuity Date, any
remaining payments under the Annuity Option elected will
continue at least as rapidly as under the method of
distribution in effect at such Contract Owner's or Joint
Contract Owner's death. Upon the death of any Contract Owner
during the Annuity Period, the Beneficiary becomes the
Contract Owner. Upon the death of any Joint Contract Owner
during the Annuity Period, the surviving Joint Contract Owner,
if any, will be treated as the Primary Beneficiary. Any other
Beneficiary designation on record at the time of death will be
treated as a Contingent Beneficiary.
If the Contract Owner is not the Annuitant and the
Annuitant dies prior to the Annuity Date, the Contract will
continue in force on the same terms and the Contract Owner
shall thereafter be the Annuitant, unless another person is
designated by the Contract Owner to Great American Reserve's
Administrative Office within 30 days. If the Contract Owner
is not an individual, this paragraph shall not apply and the
first paragraph of this section shall apply as if the
Annuitant were the Contract Owner.
If the Annuitant dies after the Annuity Date, any
guaranteed amounts remaining unpaid will continue to be paid
pursuant to the annuity option in force at the date of death,
unless the Beneficiary chooses to receive the present value of
the remaining guaranteed payments in a lump sum. (See
"Annuity Provisions" on page __.)
Beneficiary
The Beneficiary and any Contingent Beneficiary are named
in the application. Unless the Beneficiary has been
irrevocably designated, the Beneficiary may be changed upon
written request to Great American Reserve's Administrative
Office. If acceptable to Great American Reserve, a change of
<PAGE> I-29
<PAGE>
Beneficiary will take effect as of the date signed, unless
Great American Reserve has already acted in reliance on the
prior status. The estate or heirs of a Beneficiary who dies
before the annuity payment is due have no rights under the
Contract. If no Beneficiary survives when the annuity payment
is due, payment will be made to the Contract Owner's estate.
Ownership
The Contract Owner is the person entitled to all rights
under the Contract. The Annuitant is the Contract Owner
unless otherwise designated in the application or by
endorsement. No contingent owner may be named. Ownership of
the Contract may be transferred to a new Contract Owner. A
transfer of ownership must be in writing and a new power of
attorney to appoint a Financial Advisor must be executed.
These documents must be received by Great American Reserve's
Administrative Office before the transfer of ownership becomes
effective. Such a transfer of ownership does not affect a
designation of Beneficiary. Contracts may not be assigned,
pledged, or transferred, unless permitted by law. A
collateral assignment does not change contract ownership. The
rights of a collateral assignee have priority over the rights
of a Beneficiary. Any assignment may have adverse tax
consequences. You should consult a competent tax adviser
before making any such designations, transfers, or
assignments.
Account Transfers
Before the Annuity Date, Separate Account Value may be
transferred from one Subaccount (except the Money Market II
Subaccount) to another Subaccount (except the Money Market II
Subaccount) and/or to the Fixed Account. The Contract allows
an unlimited number of Subaccount transfers so long as a
Financial Advisor is performing services under the Contract.
Without the services of a Financial Advisor, your Separate
Account Value will be automatically transferred into the Money
Market II Subaccount, where you will not be charged an asset
allocation advisory fee. Until you designate a new Financial
Advisor, you may (i) keep your Separate Account Value in the
Money Market II Subaccount, (ii) transfer all or part of your
Separate Account Value to the Fixed Account and become subject
to Fixed Account transfer restrictions (a maximum of 20% of
the Fixed Account Value may be transferred once in any six-
month period), or (iii) surrender your Contract, subject to
applicable withdrawal charges and tax penalties. PADCO
maintains a list of Financial Advisors, but does not recommend
any particular Financial Advisor. (See "Asset Allocation
Advisory Fee" in the "Federal Income Taxes" Section at page I-
__).
<PAGE> I-30
<PAGE>
Transfers may be made in writing or by telephone only
from your Financial Advisor directed to PADCO. By authorizing
PADCO to accept telephone transfer instructions, a Contract
Owner agrees to accept and be bound by the conditions and
procedures established by PADCO from time to time. PADCO has
instituted reasonable procedures to confirm that any
instructions communicated by telephone are genuine. All
telephone calls will be recorded, and the caller will be asked
to produce personalized data prior to PADCO's initiating any
transfer requests by telephone. Additionally, as with other
transactions, you will receive a written confirmation of your
transfer. If reasonable procedures are employed, neither
Great American Reserve, PFS, nor PADCO will be liable for
following telephone instructions which it reasonably believes
to be genuine. Transfer requests must be made by your
Financial Advisor acting pursuant to a power-of-attorney.
Transfer requests received by PADCO before 2:30 P.M.,
Eastern Time, with respect to the Bond and Juno Subaccounts,
before 3:15 P.M., Eastern Time, with respect to the Precious
Metals Subaccount, before 3:30 P.M., Eastern Time, with
respect to the Nova, Ursa, and OTC Subaccounts, and before
4:00 P.M., Eastern Time, with respect to the Money Market
Subaccounts and the Fixed Account will be initiated at the
close of business that day. For transfers involving different
transaction cut-off times, the earlier of these times applies.
Any request received later than these times will be initiated
at the close of business on the next business day.
Withdrawals
Prior to the earlier of the Annuity Date or the death of
the Annuitant, you may withdraw all or part of your Contract
Value upon written request, less any charges. You may make
one free withdrawal per Contract year from Contract Value of
an amount up to 10% of the Contract Value (as determined on
the date of receipt of the requested withdrawal). There is no
charge on withdrawals of (a) purchase payments that have been
in the Contract more than seven complete Contract years or (b)
free withdrawal amounts described above. (See "Charges and
Deductions; Withdrawal Charge" and "Charges and Deductions;
Asset Allocation Advisory Fee.") A Contract Owner's election
to withdraw must be in writing. The election must be received
by Great American Reserve prior to the Annuity Date. Under
certain Qualified Plans, withdrawals by Contract Owners prior
to age 59-1/2 may be restricted and the consent of your spouse
may be required.
On receipt of a Contract Owner's election, Great American
Reserve will cancel the number of Accumulation Units necessary
to equal the dollar amount of the withdrawal plus any
applicable withdrawal charge. (See "Charges and Deductions"
<PAGE> I-31
<PAGE>
on page __.) When making a partial withdrawal, the Contract
Owner must specify the Subaccounts from which the withdrawal
is to be made. Any withdrawals to remit the asset allocation
advisory fee to your Financial Advisor, if permitted, will be
deducted from the Subaccount with the largest balance.
Withdrawals and related charges will be based on values for
the Valuation Period in which the election (and the Contract,
if required) are received by written request at Great American
Reserve's Administrative Office. Withdrawal elections
received before 2:30 P.M., Eastern Time, will be initiated at
the close of business that day. The amount requested from a
Subaccount may not exceed the value of that Subaccount less
any applicable withdrawal charge.
A partial withdrawal must be at least $500, and the
remaining Contract Value must be at least $10,000 ($3,500 for
Qualified Contracts); otherwise Great American Reserve
reserves the right to treat the partial withdrawal as a total
withdrawal of the Contract Value. Payment of withdrawals may
be deferred (see "Suspension of Payments" below and "Federal
Income Taxes" on page __).
Suspension of or Deferral of Payments
Payment of withdrawals will normally be made within seven
days of Great American Reserve's receipt of a written request
for withdrawal. However, Great American Reserve reserves the
right to suspend or defer any withdrawal payment or transfer
of values if: (a) the NYSE, the Chicago Board of Trade (the
"CBOT"), or the Chicago Mercantile Exchange (the "CME"), as
appropriate, is closed (other than customary weekend and
holiday closings); (b) trading on the NYSE, the CBOT, or the
CME, as appropriate, is restricted; (c) an emergency
(including severe weather conditions) exists such that it is
not reasonably practical to dispose of securities held in the
Subaccounts or to determine the value of their assets; or (d)
the SEC by order so permits for the protection of security
holders. Conditions described in events (b) and (c) generally
will be decided by, or in accordance with, rules of the SEC.
Annuity Provisions
General
Annuity payments will be made to the Annuitant unless you
specify otherwise in writing. The Contract Owner may or may
not be the Annuitant. The choice is made by the Contract
Owner in the application.
Selection of Annuity Date and Annuity Options
<PAGE> I-32
<PAGE>
You may select the Annuity Date and an annuity option in
the application. The Annuity Date may not be later than the
first day of the next month after the Annuitant's 90th
birthday or the maximum date permitted under state law. If
the issue age is 85 or greater, the Annuity Date may not be
later than the fifth Contract year. If no Annuity Date is
selected, then the latest possible Annuity Date will be
assumed. (For Qualified Contracts, the Annuity Date generally
may not be later than April 1 of the year after the year in
which the Annuitant attains age 70-1/2).
Change of Annuity Date or Annuity Option
You may change the Annuity Date or the annuity option
upon written notice received at Great American Reserve's
Administrative Office at least 30 days prior to the current
Annuity Date.
Annuity Options
You may select any one of the following annuity options
which currently are available on a fixed basis only or any
other option satisfactory to you and Great American Reserve.
First Option--Life Annuity. An Annuity payable monthly
during the lifetime of the Annuitant and ceasing with the last
monthly payment due prior to the death of the Annuitant. This
option offers a greater level of monthly payments than the
second option, since there is no minimum number of payments
guaranteed (nor a provision for a death benefit payable to a
Beneficiary). It would be possible under this option to
receive only one annuity payment if the Annuitant died prior
to the due date of the second annuity payment. This option is
generally not available for Contract Owners annuitizing over
the age of 85.
Second Option--Life Annuity With Guaranteed Periods. An
Annuity payable monthly during the lifetime of the Annuitant
with the guarantee that if, at the death of the Annuitant,
payments have been made for less than 5, 10 or 20 years, as
elected, annuity payments will be continued during the
remainder of such period to the Beneficiary designated by the
Contract Owner. If no Beneficiary is designated, Great
American Reserve will, in accordance with the Contract
provisions, pay in a lump sum to the Annuitant's estate the
present value, as of the date of death, of the number of
guaranteed annuity payments remaining after that date,
<PAGE> I-33
<PAGE>
computed on the basis of the assumed net investment rate used
in determining the first monthly payment. See "Determination
of Amount of the First Monthly Variable Annuity Payment"
below.
Because it provides a specified minimum number of annuity
payments, this option results in somewhat lower payments per
month than the First Option.
Third Option--Installment Refund Life Annuity. Payments
are made for the installment refund period, which is the time
required for the sum of the payments to equal the amount
applied, and thereafter for the life of the payee.
Fourth Option--Payments for a Fixed Period. Payments are
made for the number of years selected, which may be from three
through 20. Should the Annuitant die before the specified
number of monthly payments is made, the remaining payments
will be commuted and paid to the designated Beneficiary in a
lump sum payment.
Fifth Option--Joint and Survivor Annuity. Great American
Reserve will make monthly payments during the joint lifetime
of the Annuitant and a joint Annuitant. Payments will
continue during the lifetime of the surviving Annuitant and
will be computed on the basis of 100%, 50%, or 66-2/3% of the
Annuity payment (or limits) in effect during the joint
lifetime.
Minimum Annuity Payments
Annuity payments will be made monthly. However, if any
payment would be less than $50, Great American Reserve may
change the frequency so payments are at least $50 each. If
the net Contract Value to be applied at the Annuity Date is
less than $10,000 ($3,500 for Qualified Contracts), Great
American Reserve reserves the right to pay such amount in a
lump sum. For information regarding the tax consequences of a
lump sum payment, see "Taxation of Distributions" on page __.
Proof of Age, Sex, and Survival
Great American Reserve may require proof of age, sex, or
survival of any person upon whose continuation of life annuity
payments depend.
<PAGE> I-34
<PAGE>
Notices and Elections
All notices and elections under the Contract must be in
writing, signed by the proper party, and be received at Great
American Reserve's Administrative Office to be effective,
except that account transfers may be made by telephone
pursuant to procedures specified above (see "Account
Transfers" at page __). Great American Reserve is not
responsible for the validity of any notices or elections. If
acceptable to Great American Reserve, notices or elections
relating to beneficiaries and ownership will take effect as of
the date signed unless Great American Reserve has already
acted in reliance on the prior status.
Amendment of Contract
At any time, Great American Reserve may amend the
Contract as required to make it conform with any law,
regulation, or ruling issued by any government agency to which
the Contract is subject.
Ten-Day Right to Review
Within 10 days of your receipt of an issued Contract you
may cancel the Contract by returning it to Great American
Reserve for cancellation. Great American Reserve deems this
period as ending 14 days after the Contract Date. This period
may be longer in certain states, as required. If the Contract
is returned under the terms of the Ten Day Right to Review,
Great American Reserve will refund either the Contract Value
or all your purchase payments within seven days in compliance
with State requirements, if any. Any amounts refunded in
excess of your Contract Value will be at Great American
Reserve's expense, not the expense of the Subaccounts.
FEDERAL INCOME TAXES
General
THE FOLLOWING DESCRIPTION IS BASED UPON GREAT AMERICAN
RESERVE'S UNDERSTANDING OF CURRENT FEDERAL INCOME TAX LAW
APPLICABLE TO ANNUITIES IN GENERAL. GREAT AMERICAN RESERVE
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS
WILL BE MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX
ADVICE REGARDING THE TAXATION OF THE CONTRACTS. GREAT
AMERICAN RESERVE 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 IN THIS PROSPECTUS MAY BE APPLICABLE IN
<PAGE> I-35
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CERTAIN SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO
CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs the taxation of annuities
in general. A Contract 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 Contract Owner's
"investment in the Contract." For Non-Qualified Contracts,
the investment in the Contract is generally the Purchase
Payments, while for Qualified Contracts the investment in the
Contract may be zero. 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
investment in the Contract (adjusted for any period certain or
refund feature) bears to the expected return under the
Contract. Payments received after the investment in the
Contract has been recovered (i.e., when the total of the
excludible amounts equals the investment in the Contract) are
fully taxable. The taxable portion is taxed at ordinary
income tax rates. Contract Owners, Annuitants and
Beneficiaries under the Contracts should seek competent
financial advice about the tax consequences of any
distributions.
Great American Reserve is taxed as a life insurance
company under the Code. For federal income tax purposes, the
Separate Account is not a separate entity from Great American
Reserve and its operations form a part of Great American
Reserve.
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 on the Contract Owner with respect to any 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 Contracts
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<PAGE>
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. PADCO intends to manage
each of the Subaccounts in a manner that ensures that the
underlying investments of each Subaccount will remain
"adequately diversified" in accordance with the
diversification requirements of Section 817(h) of the Code.
On March 2, 1989, the Treasury Department issued
Regulations (Treas. Reg. Section 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
adequately diversified if: (1) no more than 55% of the value
of the total assets of the subaccount is represented by any
one investment; (2) no more than 70% of the value of the total
assets of the subaccount is represented by any two
investments; (3) no more than 80% of the value of the total
assets of the subaccount is represented by any three
investments; and (4) no more than 90% of the value of the
total assets of the subaccount 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 Treasury Department has indicated that guidelines may
be issued concerning the extent to which variable annuity
contract owners may direct their investments to particular
divisions of a separate account. It is possible that if and
when such guidelines are issued, the Contract may need to be
modified to comply with such guidelines. For these reasons,
Great American Reserves the right to modify the Contract as
necessary to prevent the Contract Owner from being considered
the owner of the assets of the Separate Account.
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
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in adverse tax consequences including more rapid taxation of
the distributed amounts from such combination of contracts.
Contract Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any
calendar year.
Contracts Owned by Non-Natural Persons
Under Section 72(u) of the Code, the investment earnings
on premiums paid for the Contracts generally will be taxed
currently to the Contract Owner if the Contract 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 Contracts which are held by (a) a
trust or other entity as agent for a natural person; (b)
Qualified Plans; or (c) the estate of a decedent by reason of
the death of the decedent. Additionally, this treatment is
not applied to a Contract which is a qualified funding asset
for a structured settlement under Section 130(d) of the Code.
Purchasers should consult their own tax counsel or other
adviser before purchasing a Contract to be owned by a non-
natural person.
Tax Treatment of Assignments
An assignment or pledge of all or any portion of a
Contract may be treated as a taxable event. Any gain in the
Contract subsequent to the assignment may also be treated as
taxable income in the year in which it is earned. Contract
Owners should therefore consult competent tax advisers should
they wish to assign or pledge their Contracts.
Income Tax Withholding
Section 3405(a) of the Code generally requires the payor
of certain "designated distributions" from (i) any pension,
profit-sharing, stock bonus, or other deferred compensation
plan, (ii) IRA, or (iii) annuity contract to withhold certain
taxes from its payments. Generally, amounts are withheld from
periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. If the payment of asset
allocation advisory fees are treated as distributions, but are
not treated as eligible rollover distributions, then such
distributions would be considered non-periodic payments and
subject to withholding at a rate of 10%. Subject to certain
exceptions, some of which are discussed immediately below,
Contract Owners may elect not to have such withholding apply
to designated distributions.
Effective January 1, 1993, certain distributions from
retirement plans qualified under Section 401 and 403(b)
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<PAGE>
annuity contracts which are not directly rolled over to
another eligible retirement plan or individual retirement
account or individual retirement annuity, are subject to a
mandatory 20% withholding for Federal income tax. The 20%
withholding requirement generally does not apply to: a) a
series of substantially equal payments made at least annually
for the life or life expectancy of the participant or joint
and last survivor expectancy of the participant and a
designated beneficiary or for a specified period of 10 years
or more; or b) distributions which are required minimum
distributions; or c) the portion of the distributions not
includible in gross income (i.e., return of after-tax
contributions).
If the payment of asset allocation advisory fees from
retirement plans qualified under Section 401 and Section
403(b) annuity contracts are treated as distributions, then
Great American Reserve believes that the payment of such fees
will be treated as "eligible rollover distributions," which
are subject to mandatory 20% withholding.
Furthermore, payments from Section 457 plans are wages
subject to mandatory regular income tax withholding, rather
than the pension withholding rules described above.
Participants should consult their own tax counsel or
other tax advisor regarding withholding requirements.
Tax Treatment of Withdrawals -- Non-Qualified Contracts
Section 72 of the Code governs treatment of distributions
from annuity contracts. It generally 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 generally will apply to the income
portion of any distribution. However, the penalty is not
imposed on amounts received: (a) on or after the taxpayer
reaches age 59-1/2; (b) after the death of the Contract Owner;
(c) if the taxpayer is totally disabled (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; or (e) which are allocable to purchase
payments made prior to August 14, 1982.
Qualified Plans
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<PAGE>
The Contracts offered by this Prospectus are designed to
be suitable for use under various types of qualified plans.
Generally, participants in a qualified plan are not taxed on
increases to the value of the contributions to the plan until
a distribution occurs, regardless of whether the plan assets
are held under an annuity contract. Taxation of the
participants in each qualified plan varies with the type of
plan and the terms and conditions of each specific plan.
Contract Owners, Annuitants and Beneficiaries are cautioned
that benefits under a qualified plan may be subject to the
terms and conditions of the plan regardless of the terms and
conditions of the Contract issued pursuant to the plan. Some
retirement plans are subject to distribution and other
requirements that are not incorporated into Great American
Reserve's administrative procedures. Contract Owners,
participants and Beneficiaries are responsible for determining
that contributions, distributions and other transactions with
respect to the Contract comply with applicable law. Following
are general descriptions of the types of qualified plans,
although, at the present time, the Contract only is issued to
Tax-Sheltered Annuities and Individual Retirement Accounts.
The tax rules presented here are not exhaustive and are for
general informational purposes only. The tax rules regarding
qualified plans are very complex and will have differing
applications depending on individual facts and circumstances.
Each purchaser should obtain competent tax advice prior to
purchasing a Contract issued under a qualified plan.
Generally, Contracts issued pursuant to qualified plans
are not transferable except upon surrender or annuitization.
Various penalty and excise taxes may apply to contributions or
distributions made in violation of applicable limitations.
Furthermore, certain withdrawal penalties and restrictions may
apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts ".)
A. Tax-Sheltered Annuities. Section 403(b) of the Code
permits the purchase of "tax-sheltered annuities" by public
schools and certain charitable, educational scientific
organizations described in Section 501(c)(3) of the Code.
These qualifying employers may make contributions to the
Contracts for the benefit of their employees. Such
contributions are not includible in the gross income of the
employees until the employees receive distributions from the
Contracts. The amount of contributions to the tax-sheltered
annuity is limited to certain maximums imposed by the Code.
Furthermore, the Code sets forth additional restrictions
governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of
Withdrawals-Qualified Contracts " and "Tax Sheltered
Annuities-Withdrawal Limitations" below.) Any employee should
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<PAGE>
obtain competent tax advice as to the suitability of such an
investment.
B. Individual Retirement Annuities. Section 408(b) of
the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual
Retirement Annuity" ("IRA"). Under applicable limitations,
certain amounts may be contributed to an IRA which will be
deductible from the individual's gross 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
suitability of such an investment.
C. Qualified Pension and Profit-Sharing Plans for
Corporations and Self-Employed Individuals. Sections 401(a)
and 403(a) of the Code permit employers to establish various
types of retirement plans for employees, and permit self-
employed individuals to establish retirement plans for
themselves and their employees which qualify for special
federal income tax treatment. These retirement plans may
permit the purchase of the Qualified Contracts to provide
benefits under the plans. The Code sets forth restrictions on
contributions and distributions which depend on the design of
the specific plan. Any purchaser should obtain competent tax
advice as to the suitability of such an investment.
D. Section 457 Plans. Section 457 of the Code provides
for certain deferred compensation plans which qualify for
special federal income tax treatment and which may be offered
with respect to service for state governments, local
governments, political subdivisions, agencies,
instrumentalities, certain affiliates of such entities, and
tax exempt organizations. The plans may permit participants
to specify the form of investment for their deferred
compensation account. All investments are owned by the
sponsoring employer and are subject to the claims of the
general creditors of the employer. The Code sets forth
restrictions on contributions and distributions which depend
on the design of the specific plan. Any purchaser should
obtain competent tax advice as to the suitability of such an
investment.
Tax Treatment of Withdrawals -- Qualified Contracts
<PAGE> I-41
<PAGE>
In the case of a withdrawal under a Qualified Contract
other than a Section 457 Plan, a ratable portion of the amount
received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued
benefit under the retirement plan. Special tax rules may be
available for certain distributions from a Qualified Contract.
Section 72(t) of the Code imposes a 10% penalty tax on the
taxable portion of any distribution from qualified plans,
including Contracts issued and qualified under Code Sections
403(b) (Tax-Sheltered Annuities) and 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 any distribution is made
on or after the date on which the Contract Owner or Annuitant
(as applicable) reaches age 59-1/2; (b) distributions
following the death or disability of the Contract Owner or
Annuitant (as applicable) (for this purpose disability is as
defined in Section 72(m)(7) of the Code); (c) after separation
from service, distributions that are part of substantially
equal periodic payments made not less frequently than annually
for the life (or life expectancy) of the Contract Owner or
Annuitant (as applicable) or the joint lives (or joint life
expectancies) of such Contract Owner or Annuitant (as
applicable) and his or her designated Beneficiary; (d)
distributions to an Contract Owner or Annuitant (as
applicable) who has separated from service after he or she has
attained age 55; (e) distributions made to the Contract 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 Contract Owner or Annuitant (as applicable)
for amounts paid during the taxable year for medical care; and
(f) distributions made to an alternate payee pursuant to a
qualified domestic relations order. The exceptions stated in
(d), (e) and (f) above do not apply in the case of an
Individual Retirement Annuity. The exception stated in (c)
above applies to an Individual Retirement Annuity without the
requirement that there be a separation from service.
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 made 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. In addition, distributions in excess of $150,000
per year may be subject to an additional 15% excise tax unless
an exemption applies.
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Tax-Sheltered Annuities -- Withdrawal Limitations
Section 403(b)(11) of the Code limits the withdrawal of
amounts attributable to contributions made pursuant to a
salary reduction agreement to circumstances only on or after
the Contract Owner: (1) attains age 59-1/2; (2) separates
from service; (3) dies; (4) becomes disabled (within the
meaning of Section 72(m)(7) of the Code); or (5) in the case
of hardship. However, withdrawals for hardship are restricted
to the portion of the Contract Owner's Contract Value which
represents contributions made by the Contract Owner and does
not include any investment results. The limitations on
withdrawals became effective on January 1, 1989 and apply only
to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to
income attributable to amounts held as of December 31, 1988.
The limitations on withdrawals do not affect transfers between
certain qualified plans. Contract Owners should consult their
own tax counsel or other tax adviser regarding any
distributions.
Asset Allocation Advisory Fees
An asset allocation advisory fee is not commonly found in
other variable annuities, so the income tax treatment of the
payment of the asset allocation advisory fee to a Financial
Advisor is not based on long-standing practice, but rather on
Great American Reserve's understanding of the law. The
Internal Revenue Service has previously issued favorable
letter rulings only with respect to certain contracts that
were being used in conjunction with Section 403(b) annuities.
Moreover, the Internal Revenue Service is not required to
treat the asset allocation advisory fee in the same way it has
treated other investment advisory fees in similar letter
rulings.
Pre-retirement distributions can disqualify a pension
plan, because such distributions are inconsistent with the
purpose of such a plan which is to provide a retirement
income, or a Section 403(b) tax-sheltered annuity, because
Section 403(b)(11) of the Code prohibits distributions from
such annuities under the circumstances described above. You
should consult with a competent tax counselor regarding the
use of the Contract in relation to such retirement plans.
Great American Reserve cannot take any responsibility for the
tax consequences resulting from additional or alternative
payment arrangements that may be made in relation to a
Contract used in or used in connection with such retirement
plans.
As of the date of this Prospectus, Great American Reserve
is requesting a letter ruling from the Internal Revenue
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<PAGE>
Service that payments to Financial Advisors need not be
treated as distributions to Contract Owners subject to tax.
There is no assurance that such a ruling will be issued. In
addition, even if such a ruling is issued, it is likely that
you will have a taxable distribution if your Financial Advisor
credits back to you or a related person any portion of the
asset allocation advisory fee. Unless and until a favorable
letter ruling is obtained, Great American Reserve will be
required to treat asset allocation advisory fees paid from the
Contract as taxable distributions to the Contract Owner
subject to the 10% penalty tax if applicable. Great American
Reserve will take all steps which it believes are required in
relation to the reporting and withholding requirements under
the Code in connection with such payments. Contract Owners
should consult a competent tax adviser as to the tax treatment
of asset allocation advisory fees.
SEPARATE ACCOUNT VOTING RIGHTS
Prior to the Annuity Date, Contract Owners participating
in the Separate Account will have certain voting rights with
respect to (i) the election of the Managers, (ii) the removal
of such members and of officers of the Separate Account
elected or appointed by the Managers, (iii) the ratification
of the selection by the Managers of independent public
accountants for the Separate Account and the termination of
the employment of such accountants, (iv) the adoption,
amendment, termination, or continuation of any agreement
providing for investment advisory services to the Separate
Account, (v) the change in the fundamental investment policies
of a Subaccount, (vi) the alteration, amendment, or repeal of
the rules and regulations adopted for the Separate Account,
and (vii) the approval of any acts, transactions, or other
agreements that may be submitted to a Contract Owner vote by
the Managers. Such voting rights are provided for in the rules
and regulations adopted by the Managers and are subject to
alteration or elimination by the Managers or by vote of the
Contract Owners, if permitted by applicable law.
The person having the voting interest under a Contract is
the Contract Owner. The number of votes entitled to be cast
by a Contract Owner having an interest in the Separate Account
is equal to the number of Accumulation Units credited to his
or her Contract. The number of Accumulation Units for which
voting instructions may be given will be determined as of a
date chosen by Great American Reserve, not more than 90 days
prior to the meeting of the Contract Owners of the Separate
Account, as applicable.
Each person having a voting interest in a Subaccount will
receive periodic reports relating to the Subaccounts in which
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he or she has an interest, including proxy materials and a
form with which to give voting instructions.
REPORTS TO CONTRACT OWNERS
Great American Reserve will mail you at least annually
prior to the Annuity Date a report containing any information
that may be required by any applicable law or regulation and a
statement showing your current number of Accumulation Units,
the value per Accumulation Unit, and your total Contract
Value. You will also receive annual and semi-annual reports
of the Separate Account.
PERFORMANCE INFORMATION
Performance information for the Subaccounts may appear
from time to time in advertisements or sales literature.
Performance information reflects only the performance of a
hypothetical investment in the Subaccounts during the
particular time period on which the calculations are based.
Performance information will include yield, effective yield,
and average annual total return quotations reflecting the
deduction of all applicable charges for recent one-year and,
when applicable, five- and 10-year periods and, where less
than 10 years, for the period subsequent to the date each
Subaccount first became available for investment. Additional
total return quotations may be made that do not reflect a
surrender charge deduction (assuming no surrender at the end
of the illustrated period). Performance information may be
shown by means of schedules, charts, or graphs. See
"Performance Information," "Calculation of Return Quotations,"
and "Information on Computation of Yield" in the Statement of
Additional Information for a description of the methods used
to determine total return and yield information for the
Subaccounts.
DISTRIBUTION OF CONTRACTS
PFS, 6116 Executive Boulevard, Rockville, Maryland 20852,
is the principal underwriter of the Contracts. PFS is a
broker-dealer registered under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and a member of the
National Association of Securities Dealers, Inc. Sales of the
Contracts will be made by authorized broker-dealers and their
registered representatives, including registered
representatives of PFS. These registered representatives are
also Great American Reserve's licensed insurance agents. See
"Underwriter of the Contracts" in the Statement of Additional
Information for more information.
<PAGE> I-45
<PAGE>
STATE REGULATION
Great American Reserve is subject to the laws of the
State of Texas governing insurance companies and to the
regulations of the Texas Insurance Department (the "Insurance
Department"). An annual statement in the prescribed form is
filed with the Insurance Department each year covering Great
American Reserve's operation for the preceding year and its
financial condition as of the end of such year. Regulation by
the Insurance Department includes periodic examination to
determine Great American Reserve's contract liabilities and
reserves so that the Insurance Department may certify that
these items are correct. Great American Reserve's books and
accounts are subject to review by the Insurance Department at
all times. A full examination of Great American Reserve's
operations is conducted periodically by the National
Association of Insurance Commissioners. Such regulation does
not, however, involve any supervision of management or Great
American Reserve's investment practices or policies. In
addition, Great American Reserve is subject to regulation
under the insurance laws of other jurisdictions in which it
operates.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate
Account is a party or to which the assets of the Separate
Account is subject. Neither Great American Reserve, PADCO nor
PFS is involved in any litigation that is of material
importance in relation to their total assets or that relates
to the Separate Account.
EXPERTS
The financial statements of Great American Reserve
Insurance Company included in the Statement of Additional
Information have been audited by Coopers & Lybrand LLP,
Indianapolis, Indiana, independent certified public
accountants, whose reports thereon appear elsewhere therein,
and have been included in reliance on the reports of Coopers &
Lybrand LLP, given upon their authority as experts in
accounting and auditing. No financial statements for the
Separate Account are included in the Statement of Additional
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<PAGE>
Information because the Separate Account had not commenced
operations at the date of this Prospectus.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC
under the Securities Act of 1933, as amended, with respect to
the variable portion of the Contracts. This Prospectus does
not contain all information set forth in the registration
statement, its amendments, and exhibits, to all of which
reference is made for further information concerning the
Separate Account, Great American Reserve, and the Contract.
Statements contained in this Prospectus as to the content of
the Contract and other legal instruments are summaries. For a
complete statement of the terms thereof, reference is made to
such instruments as filed.
LEGAL MATTERS
Legal matters involving the applicability of the Federal
securities laws have been reviewed by Jorden Burt Berenson &
Johnson LLP, Suite 400 East, 1025 Thomas Jefferson Street,
N.W., Washington, D. C. 20007, and, the validity of the
Contracts under state law has been passed upon by Karl W.
Kindig, Esquire, Great American Reserve Insurance Company,
11815 North Pennsylvania Street, Carmel, Indiana 46032.
<PAGE> I-47
<PAGE>
PART II
THE SEPARATE ACCOUNT
The Separate Account is an open-end management investment
company with eight diversified separate Subaccounts. The
Subaccounts are designed for Contract Owners who intend to
invest in the Subaccounts as part of an asset allocation or
market-timing investment strategy. Except for the Money
Market Subaccounts, each Subaccount is intended to provide
investment exposure with respect to a particular segment of
the securities markets. Each of these Subaccounts seeks
investment results that correspond over time to a specified
benchmark. The Subaccounts may be used independently or in
combination with each other as part of an overall investment
strategy. Additional Subaccounts may be created from time to
time.
The following are the Subaccounts and their investment
objectives:
Subaccount Investment Objective
The Nova Subaccount To provide investment returns that
correspond to a specified percentage
of the performance of a benchmark for
common stock securities.
The Ursa Subaccount To provide investment results that
will inversely correlate to the
performance of a benchmark for common
stock securities.
The OTC Subaccount To attempt to provide investment
results that correspond to a
benchmark for over-the-counter
securities.
The Precious Metals To attempt to provide investment
Subaccount results that correspond to a
benchmark primarily for metals-
related securities.
The U.S. Government Bond To provide investment results that
Subaccount correspond to a benchmark for U.S.
Government securities.
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<PAGE>
Subaccount Investment Objective
The Juno Subaccount To provide total return before
expenses and costs that inversely
correlates to the price movements of
a benchmark for U.S. Treasury debt
instruments or futures contracts on a
specified debt instrument.
The Money Market To provide current income consistent
Subaccounts with stability of capital and
liquidity.
The Subaccounts (other than the Money Market Subaccounts)
may engage in certain aggressive investment techniques, which
include short sales and transactions in options and futures
contracts. Contract Owners invested in the Nova Subaccount
may experience substantial losses during sustained periods of
falling equity prices, while Contract Owners invested in the
Ursa Subaccount and the Juno Subaccount may experience
substantial losses during sustained periods of rising equity
prices and declining interest rates respectively. Because of
the inherent risks in any investment, there can be no
assurance that any Subaccount s investment objective will be
achieved. See "Investment Objectives and Policies" at page
___.
None of the Subaccounts alone constitutes a balanced
investment plan, and certain of the Subaccounts involve
special risks not traditionally associated with variable
annuity contracts. The nature of the Subaccounts generally
will result in significant portfolio turnover which would
likely cause higher expenses and additional costs. The
Separate Account is not intended for Contract Owners whose
principal objective is current income or preservation of
capital and may not be a suitable investment for persons who
intend to follow an "invest and hold" strategy. See "Special
Risk Considerations" at page ___.
PADCO, headquartered at 6116 Executive Boulevard,
Rockville, Maryland 20852, provides the Subaccounts with
investment advisory services pursuant to an investment
advisory agreement, dated ______________, 1996. PADCO was
incorporated in the State of Maryland on July 5, 1994, and has
not previously served as an investment adviser to a registered
investment company. An investment adviser affiliated with
PADCO currently provides investment advisory services to an
open-end management investment company (the "Rydex Series
Trust") that consists of seven publicly-available no-load
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mutual funds having, as of April 1, 1996, aggregate net assets
in excess of $750 million.
This Part II of the Prospectus sets forth information
relating to the Separate Account, particularly information on
the investment objectives, policies, and restrictions of the
Subaccounts and on PADCO. Additional information concerning
the Separate Account and the Subaccounts is also contained in
the Statement of Additional Information.
INVESTMENT OBJECTIVES AND POLICIES
OF THE SUBACCOUNTS
General
The Subaccounts are designed for Contract Owners who
intend to follow an asset allocation or market-timing
investment strategy. Except for the Money Market Subaccounts,
each Subaccount is intended to provide investment exposure
with respect to a particular segment of the securities
markets. These Subaccounts seek investment results that
correspond over time to a specified "benchmark." The
Subaccounts may be used independently or in combination with
each other as part of an overall investment strategy.
Additional Subaccounts may be created from time to time.
Fundamental securities analysis is not generally used by
PADCO in seeking to correlate with the respective benchmarks.
Rather, PADCO primarily uses statistical and technical
analysis to determine the investments the Subaccount makes and
techniques it employs. While PADCO attempts to minimize any
"tracking error" (that statistical measure of the difference
between the investment results of a Subaccount and the
performance of its benchmark), certain factors will tend to
cause the Subaccount's investment results to vary from a
perfect correlation to its benchmark. PADCO does not expect
that the Subaccounts' total returns will vary adversely from
their respective current benchmarks by more than ten percent
over a year. See "Special Risk Considerations." It is the
policy of these Subaccounts to pursue their investment
objectives regardless of market conditions, to remain nearly
fully invested, and not to take defensive positions.
The investment objectives and certain investment
restrictions of the Subaccounts are fundamental policies and
may not be changed without the affirmative vote of the
majority of the Contract Owners of that Subaccount. All other
investment policies of the Subaccounts not specified as
fundamental (including the benchmarks of the Subaccounts) may
be changed by the Managers of the Separate Account without the
approval of Contract Owners.
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<PAGE>
The Managers may consider changing a Subaccount s
benchmark (to the extent permitted) if, for example, the
current benchmark is unavailable; the Managers believe the
current benchmark no longer serves the investment needs of a
majority of Contract Owners or another benchmark better serves
their needs; or the financial or economic environment makes it
difficult for the Subaccount s investment results to
correspond sufficiently to the Subaccount's current benchmark.
If believed appropriate, the Managers may specify a benchmark
for a Subaccount that is "leveraged" or proprietary. Of
course, there can be no assurance that a Subaccount will
achieve its objective.
The Nova Subaccount
The investment objective of the Nova Subaccount is to
provide investment returns that correspond to a specified
percentage of the performance of a benchmark for common stock
securities selected from time to time by the Managers. The
Nova Subaccount's current benchmark is the S&P500 Index, and
the Nova Subaccount currently expects to provide investment
return that corresponds to 120% of the S&P500 Index. In
attempting to achieve its objective, the Nova Subaccount
expects that a substantial portion of its assets usually will
be devoted to employing certain investment techniques. These
techniques include engaging in certain transactions in stock
index futures contracts, options on stock index futures
contracts, and options on securities and stock indexes. Under
the techniques in which the Nova Subaccount engages, the Nova
Subaccount will generally incur a loss if the price of the
underlying security or index decreases between the date of the
employment of the technique and the date on which the Nova
Subaccount terminates the position. The amount of any gain or
loss on an investment technique may be affected by any
purchase payment or amounts in lieu of dividends or interest
income the Nova Subaccount pays or receives as the result of
the transaction. The Nova Subaccount may also invest in shares
of individual securities which are expected to track the Nova
Fund s benchmark.
In contrast to returns on a mutual fund that seeks to
approximate the return of the S&P500 Index, the Nova
Subaccount should increase gains to Contract Owners invested
in the Nova Fund during periods when the prices of the
securities in the S&P500 Index are rising and increase losses
to Contract Owners invested in the Nova Fund during periods
when they are declining. Contract Owners invested in the Nova
Subaccount could experience substantial losses during
sustained periods of falling equity prices.
The Ursa Subaccount
<PAGE> II-4
<PAGE>
The Ursa Subaccount's investment objective is to provide
investment results that will inversely correlate to the
performance of a benchmark for common stock securities
selected from time to time by the Managers. The S&P500 Index
is the Ursa Subaccount's current benchmark. The Ursa
Subaccount seeks to achieve this inverse correlation result on
each trading day. While a close correlation can be achieved
on any single trading day, the combined effects of the
reinvestment of the receipt of investment income and of the
compounding of successive changes in Accumulation Unit Value
can cause the percentage increase or decrease in the
Accumulation Unit Value of the Ursa Subaccount to diverge
significantly from the concurrent inverse percentage decrease
or increase in the S&P500 Index.
If the Ursa Subaccount achieved a perfect inverse
correlation for any single trading day, the Accumulation Unit
Value of the Ursa Subaccount would increase for that day in
direct proportion to any decrease in the level of the S&P500
Index. Conversely, the Accumulation Unit Value of the Ursa
Subaccount would decrease for that day in direct proportion to
any increase in the level of the S&P500 Index for that day.
For example, if the S&P500 Index were to increase by 1% by the
close of business on a particular trading day, Contract Owners
invested in the Ursa Subaccount would experience a loss in
Accumulation Unit Value of approximately 1% for that day.
Conversely, if the S&P500 Index were to decrease by 1% by the
close of business on a particular trading day, Contract Owners
invested in the Ursa Subaccount would experience a gain in
Accumulation Unit Value of approximately 1% for that day.
Even if there is a perfect inverse correlation between
the Ursa Subaccount and the S&P500 Index, however, the
symmetry between the changes in the S&P500 Index and the
changes in the Accumulation Unit Value in the Ursa Subaccount
can be significantly altered over time by a compounding
effect. Thus, if the Ursa Subaccount achieved a perfect
inverse correlation with the S&P500 Index on every trading day
over an extended period, and if there were a significant
decrease in the level of the S&P500 Index during that period,
there would be a compounding effect with the result that the
Accumulation Unit Value of the Ursa Subaccount for that period
should generally increase by a percentage that is slightly
greater than the percentage of decrease in the level of the
S&P500 Index. Conversely, if a perfect inverse correlation
were maintained over an extended period and if there were a
significant increase in the level of the S&P500 Index over
that period, then there would be a compounding effect with the
result that the percentage decrease in the Accumulation Unit
Value of the Ursa Subaccount for that period should generally
decrease by a percentage that is slightly less than the
<PAGE> II-5
<PAGE>
percentage increase in the level of the S&P500 Index for that
period.
The compounding effect discussed above will be reinforced
to the extent that the reinvested net investment income of the
Ursa Subaccount exceeds the reinvested dividend income taken
into account in the computation of the S&P500 Index.
Conversely, if the reinvested income taken into account in the
computation of the S&P500 Index exceeds the Ursa Subaccount's
investment income, that excess will partially offset the
effect of the compounding factor.
The Ursa Subaccount involves special risks not
traditionally associated with annuity contracts, and intends
to pursue its investment objective regardless of market
conditions and does not intend to take defensive positions in
anticipation of rising equity prices. Consequently, Contract
Owners invested in the Ursa Subaccount may experience
substantial losses during sustained periods of rising equity
prices.
In pursuing its investment objective, the Ursa Subaccount
generally does not invest in traditional securities, such as
common stock of operating companies. Rather, the Ursa
Subaccount employs certain investment techniques, including
engaging in short sales and in certain transactions in stock
index futures contracts, options on stock index futures
contracts, and options on securities and stock indexes. Under
these techniques, the Ursa Subaccount will generally incur a
loss if the price of the underlying security or index
increases between the date of the employment of the technique
and the date on which the Ursa Subaccount terminates the
position. The Ursa Subaccount will generally realize a gain
if the underlying security or index declines in price between
those dates. The amount of any gain or loss on an investment
technique may be affected by any purchase payment or amounts
in lieu of dividends or interest the Ursa Subaccount pays or
receives as the result of the transaction.
The OTC Subaccount
The investment objective of the OTC Subaccount is to
attempt to provide investment results that correspond to a
benchmark for over-the-counter securities. The OTC
Subaccount's current benchmark is the NASDAQ 100 Index. The
OTC Subaccount does not aim to hold all of the 100 securities
included in the NASDAQ 100 Index. Instead, the OTC Subaccount
intends to hold representative securities included in the
NASDAQ 100 Index or other instruments which PADCO believes
will provide returns that correspond to those of the NASDAQ
100 Index. The OTC Subaccount may engage in transactions on
<PAGE> II-6
<PAGE>
stock index futures contracts, options on stock index futures
contracts, and options on securities and stock indexes.
Companies whose securities are traded on the over-the-
counter ("OTC") markets generally are smaller market-
capitalization or newer companies than those listed on the New
York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX"). OTC companies often have limited
product lines, or relatively new products or services, and may
lack established markets, depth of experienced management, or
financial resources and the ability to generate funds. The
securities of these companies may have limited marketability
and may be more volatile in price than securities of larger-
capitalized or more well-known companies. Among the reasons
for the greater price volatility of securities of certain
smaller OTC companies are the less certain growth prospects of
comparably smaller firms, the lower degree of liquidity in the
OTC markets for such securities, and the greater sensitivity
of smaller-capitalized companies to changing economic
conditions than larger-capitalized, exchange-traded
securities. Conversely, because many of these OTC securities
may be overlooked by investors and undervalued in the
marketplace, there is potential for significant capital
appreciation.
The Precious Metals Subaccount
The investment objective of the Precious Metals
Subaccount is to attempt to provide investment results that
correspond to a benchmark primarily for metals-related
securities selected from time to time by the Managers. The
Precious Metals Subaccount s current benchmark is the
Philadelphia Stock Exchange Gold/Silver Index/TM (the "XAU
Index"). To achieve its objective, the Precious Metals
Subaccount invests in securities included in the XAU Index.
In addition, the Precious Metals Subaccount may invest in
other securities that are expected to perform in a manner that
will assist the Precious Metals Subaccount s performance to
track closely the XAU Index.
Metals-related investments are considered speculative and
are influenced by a host of world-wide economic, financial,
and political factors. Historically, the prices of gold and
precious metals have been subject to wide price movements
caused by political as well as economic factors, and,
accordingly, prices of equity securities of companies involved
in the precious metals-related industry have been volatile.
Such fluctuation and volatility may be due to changes in
inflation or in expectations regarding inflation in various
countries, the availability of supplies of such precious
metals and minerals, changes in industrial and commercial
demand, metal and mineral sales by governments, central banks,
<PAGE> II-7
<PAGE>
or international agencies, investment speculation, monetary
and other economic policies of various governments, and
governmental restrictions on the private ownership of certain
precious metals and minerals. Such price volatility in
precious metals prices will have a similar effect on the
Precious Metals Subaccount's Accumulation Unit prices. The
Precious Metals Subaccount may invest in other securities that
are expected to perform in a manner that will assist the
Precious Metals Subaccount s performance to closely track the
XAU Index.
The Precious Metals Subaccount may invest up to 5% of its
assets in securities of foreign issuers other than American
Depository Receipts traded in U.S. dollars on United States
exchanges. These securities present certain risks not present
in domestic investments and expose the investor to general
market conditions which differ significantly from those in the
United States. Securities of foreign issuers may be affected
by the strength of foreign currencies relative to the U.S.
dollar or by political or economic developments in foreign
countries. Foreign companies may not be subject to accounting
standards or governmental regulations comparable to those that
affect United States companies, and there may be less public
information about the operations of foreign companies.
Foreign securities also may be subject to foreign government
taxes that could reduce the yield on such securities.
The U.S. Government Bond Subaccount
The investment objective of the Bond Subaccount is to
provide investment results that correspond to a benchmark for
U.S. Government Securities selected from time to time by the
Managers. The Bond Subaccount s current benchmark is 120% of
the price movement of the Current Long Treasury Bond (the
"Long Bond"), without consideration of interest paid. In
attempting to achieve this objective, the Bond Subaccount
invests primarily in obligations of the U.S. Treasury or
obligations either issued or guaranteed, as to principal and
interest, by agencies or instrumentalities of the U.S.
Government ("U.S. Government Securities"). U.S. Government
Securities are obligations of the U.S. Treasury or obligations
either issued or guaranteed, as to principal and interest, by
agencies or instrumentalities of the U.S. Government.
The Bond Subaccount also may engage in transactions in
futures contracts and options on futures contracts on U.S.
Treasury bonds. The Bond Subaccount also may invest in U.S.
Treasury zero coupon bonds. While U.S. Government Securities
provide substantial protection against credit risk, investment
in those securities do not protect against price changes due
to changing interest rate levels and, as such, the unit price
of the Bond Subaccount is not guaranteed and will fluctuate
<PAGE> II-8
<PAGE>
over time. Accordingly, the return of the Bond Subaccount
should move inversely with movements in prevailing interest
rates on the Long Bond. The Subaccount intends to adjust its
portfolio each time the Long Bond is issued (currently twice
yearly) in an attempt to track the price movement of the
newly-issued Long Bond. See "The Benchmarks."
The Juno Subaccount
The Juno Subaccount s investment objective is to provide
total return before expenses and costs that inversely
correlate to the price movements of a benchmark debt
instrument or futures contract on a specified debt instrument
selected from time to time by the Managers. The Long Bond has
been designated as the Juno Subaccount s current benchmark.
In attempting to achieve its objective, the Subaccount intends
to devote its assets primarily to employing certain investment
techniques, including engaging in short sales on U.S. Treasury
bonds and engaging in transactions in futures contracts on
U.S. Treasury bonds and options on such contracts to produce
synthetic short positions. These techniques are highly
specialized and involve certain risks not traditionally
associated with variable annuity contracts. Under these
techniques, the Subaccount will generally incur a loss if the
price of the underlying security or futures contract increases
between the date of the employment of the technique and the
date on which the Subaccount terminates the position. The
Subaccount will generally realize a gain if the underlying
security or futures contract declines in price between those
dates.
If the Juno Subaccount is successful in meeting its
objective, the Juno Subaccount s total return before expenses
and costs will increase proportionally to any decreases in the
price of the Long Bond. Conversely, the Juno Subaccount s
total return before expenses and costs will decrease
proportionally to any increases in the price of the Long Bond.
For this purpose, costs include the Subaccount s "carrying
cost" in maintaining short positions. When entering an actual
or synthetic short position on the Long bond, the Subaccount
must effectively pay interest equal to interest accrued on the
underlying U.S. Treasury bond. The difference, if any,
between the interest effectively paid by the Subaccount on its
short positions and any interest earned by the Subaccount on
its assets is the Subaccount s carrying cost.
The interest rate on a U.S. Treasury bond is set at the
time the particular bond is issued and does not change for the
maturity of the bond so that the interest paid on the bond is
constant throughout the life of the bond. The price at which
a previously-issued U.S. Treasury bond can be bought and sold
in the open market, however, does change. The market value of
<PAGE> II-9
<PAGE>
U.S. Treasury bonds rises when interest rates in general
decrease and falls when interest rates in general increase.
Accordingly, if the Juno Subaccount is successful in meeting
its investment objective, the Subaccount s total return should
rise with increases in interest rates and fall with decreases
in interest rates. Contract Owners invested in the Juno
Subaccount may experience substantial losses during periods of
falling interest rates.
The Money Market Subaccounts
The investment objective of each of the Money Market
Subaccounts is to seek to provide current income consistent
with stability of capital and liquidity. Each Money Market
Subaccount seeks to achieve its objectives by investing in
U.S. Government Securities, including money market instruments
which are issued or guaranteed, as to principal and interest,
by the U.S. Government, its agencies or instrumentalities, as
well as in repurchase agreements collateralized fully by U.S.
Government Securities. An investment in a Money Market
Subaccount is neither insured nor guaranteed by the U.S.
Government.
Each Money Market Subaccount may invest in securities
that take the form of participation interests in, and may be
evidenced by deposit or safekeeping receipts for, any of the
foregoing securities. Participation interests are pro rata
interests in U.S. Government Securities; and instruments
evidencing deposit or safekeeping are documentary receipts for
such original securities held in custody by others.
Each Money Market Subaccount also may purchase bank money
market instruments, including certificates of deposit, time
deposits, bankers' acceptances, and other short-term
obligations issued by United States banks which are members of
the Federal Reserve System. Certificates of deposit are
negotiable certificates evidencing the obligation of a bank to
repay funds deposited with the bank for a specified period of
time. Time deposits are non-negotiable deposits maintained in
a banking institution for a specified period of time (in no
event longer than seven days) at a stated interest rate. Time
deposits which may be held by a Money Market Subaccount will
not benefit from insurance from the Bank Insurance Fund or the
Savings Association Insurance Fund administered by the Federal
Deposit Insurance Corporation. Investments in time deposits
and certificates of deposits are limited to domestic banks
that have total assets in excess of one billion dollars.
Bankers' acceptances are credit instruments evidencing the
obligation of a bank to a draft drawn on the bank by a
customer of the bank. These credit instruments reflect the
obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank
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<PAGE>
obligations in which a Money Market Subaccount may invest
include uninsured, direct obligations of a bank that bear
fixed, floating, or variable interest rates.
Each Money Market Subaccount also may invest in
commercial paper, including corporate notes. These
instruments are short-term obligations issued by banks and
corporations that have maturities ranging from two to 270
days. Each commercial paper instrument may be backed only by
the credit of the issuer or may be backed by some form of
credit enhancement, typically in the form of a guarantee by a
commercial bank. Investments in commercial paper and other
short-term promissory notes issued by corporations (including
variable and floating rate instruments) must be rated at the
time of purchase "A-2" or better by Standard & Poor's Ratings
Group, "Prime-2" or better by Moody's Investors Service, Inc.
("Moody's"), "F-2" or better by Fitch Investors Service, Inc.
("Fitch"), "Duff 2" or better by Duff & Phelps Credit Rating
Co. ("Duff"), or "A2" or better by IBCA, Inc., or, if not
rated by Standard & Poor's Ratings Group, Moody's, Fitch,
Duff, or IBCA, Inc., must be determined by PADCO Advisors II,
Inc. ("PADCO"), the Separate Account's investment adviser, to
be of comparable quality pursuant to guidelines approved by
the managers of the Separate Account (the "Managers"). Please
refer to Appendix A to the Statement of Additional Information
for more detailed information concerning commercial paper
ratings.
Each Money Market Subaccount also may make limited
investments in guaranteed investment contracts ("GICs") issued
by United States insurance companies. A Money Market
Subaccount will purchase a GIC only when PADCO has determined,
under guidelines established by the Managers of the Separate
Account, that the GIC presents minimal credit risks to the
Money Market Subaccount and is of comparable quality to
instruments that are rated "high quality" by certain
nationally-recognized statistical rating organizations.
Money market instruments are generally described as
short-term debt obligations having maturities of 13 months or
less. Yields on such instruments are very sensitive to short-
term lending conditions. The principal value of such
instruments tends to decline as interest rates rise and
conversely tends to rise as interest rates decline. In
addition, there is an element of risk in money market
instruments that the issuer may become insolvent and may not
make timely payment of interest and principal obligations.
The Benchmarks
The S&P500 Index. Standard & Poor's Corporation chooses
the 500 stocks comprising the S&P500 Index on the basis of
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<PAGE>
market values and industry diversification. Most of the
stocks in the S&P500 Index are issued by the 500 largest
companies, in terms of the aggregate market value of their
outstanding stock, and such companies are generally listed on
the NYSE. Additional stocks that are not among the 500
largest market value stocks are included in the S&P500 Index
for diversification purposes. Standard & Poor's Corporation
will not be a sponsor of, or in any other way affiliated
with, the Subaccounts.
The NASDAQ 100 Index. The NASDAQ 100 Index is a
capitalization-weighted index composed of 100 of the largest
non-financial securities listed on the NASDAQ Stock Market.
The index was created in 1985.
The XAU Index. The XAU Index is a capitalization-
weighted index featuring nine widely-held securities in the
gold and silver mining and production industry or companies
investing in such mining and production companies. The XAU
Index was set to an initial value of 100 in January 1979. The
following issuers are currently included in the XAU Index:
Barrick Gold Corp.; ASA Limited; Battle Mountain Gold Co.;
Echo Bay Mines Limited; Hecla Mining Co.; Homestake Mining
Co.; Newmont Mining Corp.; Placer Dome Inc.; and Pegasus Gold
Inc. While the majority of these companies are based in North
America, these companies generally also have operations in
countries based outside North America.
The Long Bond. The Long Bond is the U.S. Treasury bond
with the longest maturity. Currently, the longest maturity of
a U.S. Treasury bond is 30 years. At this time, the 30-year
U.S. Treasury bond is issued twice yearly. In the future, the
U.S. Treasury may change the number of times each year that
the Long Bond is issued.
SPECIAL RISK CONSIDERATIONS
Contract Owners should consider the special factors
discussed below that are associated with the investment
policies of the Subaccounts in determining the appropriateness
of investing in the Subaccounts.
Portfolio Turnover
PADCO expects that the assets of the Subaccounts will be
derived from Contract Owners who intend to invest in the
Subaccounts as part of an asset allocation investment
strategy. These Contract Owners are likely to exchange their
Accumulation Units of a particular Subaccount for Accumulation
Units in other Subaccounts frequently pursuant to the exchange
policy of the Separate Account, in order to attempt to take
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<PAGE>
advantage of anticipated changes in market conditions (see
"Investments of the Subaccounts; Addition and Deletion of
Subaccounts" in Part I of this Prospectus). The strategies
employed by Contract Owners invested in the Subaccounts may
result in considerable assets moving in and out of the
Subaccounts. Consequently, PADCO expects that the Subaccounts
will generally experience significant portfolio turnover,
which will likely cause higher expenses and additional costs
and may also adversely affect the ability of a Subaccount to
meet its investment objective. Because each Subaccount's
portfolio turnover rate to a great extent will depend on the
purchase, redemption, and exchange activity of the
Subaccount's Contract Owners, it is very difficult to estimate
what the Subaccount's actual turnover rate generally will be.
Pursuant to the formula prescribed by the SEC, the portfolio
turnover rate for each Subaccount is calculated without regard
to securities, including options and futures contracts, having
a maturity of less than one year. The Nova Subaccount, the
Ursa Subaccount, and the Juno Subaccount typically hold most
of their investments in short-term options and futures
contracts, which, therefore, are excluded for purposes of
computing portfolio turnover.
A higher portfolio turnover rate would likely involve
correspondingly greater brokerage commissions and other
expenses which would be borne by a Subaccount, and would
directly reduce the return to a Contract Owner from an
investment in the Subaccount. Furthermore, a Subaccount's
portfolio turnover level may adversely affect the ability of
the Subaccount to achieve its investment objective. For
further information concerning the portfolio turnover of the
Subaccounts, see "Investment Policies and Techniques" in the
Statement of Additional Information.
Tracking Error
While PADCO does not expect that the Subaccounts' returns
over a year will deviate adversely from their respective
benchmarks by more than ten percent, several factors may
affect their ability to achieve this correlation. Among these
factors are: (1) Subaccount expenses, including brokerage
(which may be increased by high portfolio turnover); (2) less
than all of the securities in the benchmark being held by a
Subaccount and securities not included in the benchmark being
held by a Subaccount; (3) an imperfect correlation between the
performance of instruments held by a Subaccount, such as
futures contracts and options, and the performance of the
underlying securities in the cash market; (4) bid-ask spreads
(the effect of which may be increased by portfolio turnover);
(5) holding instruments traded in a market that has become
illiquid or disrupted; (6) Subaccount Accumulation Unit prices
being rounded to the nearest cent; (7) changes to the
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<PAGE>
benchmark index that are not disseminated in advance; or (8)
the need to conform a Subaccount s portfolio holdings to
comply with investment restrictions or policies or regulatory
or tax law requirements.
Aggressive Investment Techniques
Each of the Subaccounts (other than the Money Market
Subaccounts) may engage in certain aggressive investment
techniques which may include engaging in short sales and
transactions in futures contracts and options on securities,
securities indexes, and futures contracts. These techniques
are specialized and involve risks that are not traditionally
associated with variable annuity contracts. The Separate
Account expects that the Nova Subaccount, the Ursa Subaccount,
and the Juno Subaccount will primarily use these techniques in
seeking to achieve their objectives and that a significant
portion (up to 100%) of the assets of these Subaccounts will
be held in high-grade liquid debt in a segregated account by
these Subaccounts as "cover" for these investment techniques.
Participation in the options or futures markets by a
Subaccount involves investment risks and transaction costs to
which the Subaccount would not be subject absent the use of
these strategies. Risks inherent in the use of options,
futures contracts, and options on futures contracts include:
(1) adverse changes in the value of such instruments; (2)
imperfect correlation between the price of options and futures
contracts and options thereon and movements in the price of
the underlying securities, index, or futures contracts; (3)
the fact that the skills needed to use these strategies are
different from those needed to select portfolio securities;
and (4) the possible absence of a liquid secondary market for
any particular instrument at any time. For further
information regarding these investment techniques, see
"Investment Techniques and Other Investment Policies" in this
Part II of the Prospectus.
INVESTMENT TECHNIQUES AND OTHER
INVESTMENT POLICIES
Futures Contracts and Options Thereupon
The Nova Subaccount and the OTC Subaccount may purchase
stock index futures contracts as a substitute for a comparable
market position in the underlying securities. The Ursa
Subaccount may sell stock index futures contracts. The Bond
Subaccount may purchase futures contracts on U.S. Government
Securities as a substitute for a comparable market position in
the cash market. The Juno Subaccount may sell futures
contracts on U.S. Government Securities.
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<PAGE>
A futures contract obligates the seller to deliver (and
the purchaser to take delivery of) the specified commodity on
the expiration date of the contract. A stock index futures
contract obligates the seller to deliver (and the purchaser to
take) an amount of cash equal to a specific dollar amount
times the difference between the value of a specific stock
index at the close of the last trading day of the contract and
the price at which the agreement is made. No physical
delivery of the underlying stocks in the index is made. It is
the practice of holders of other futures contracts to close
out their positions on or before the expiration date by use of
offsetting contract positions and physical delivery is thereby
avoided.
The Nova Subaccount and the OTC Subaccount may purchase
call options and write (sell) put options, and the Ursa
Subaccount may purchase put options and write call options, on
stock index futures contracts. The Bond Subaccount may
purchase call options and write put options on U.S. Government
Securities futures contracts and the Juno Subaccount may write
call options and purchase put options on futures contracts on
U.S. Government Securities.
When a Subaccount purchases a put or call option on a
futures contract, the Subaccount pays a purchase payment for
the right to sell or purchase the underlying futures contract
for a specified price upon exercise at any time during the
option period. By writing a put or call option on a futures
contract, a Subaccount receives a purchase payment in return
for granting to the purchaser of the option the right to sell
to or buy from the Subaccount the underlying futures contract
for a specified price upon exercise at any time during the
option period.
Whether a Subaccount realizes a gain or loss from futures
activities depends generally upon movements in the underlying
commodity. The extent of the Subaccount s loss from an
unhedged short position in futures contracts or from writing
call options on futures contracts is potentially unlimited.
The Subaccounts may engage in related closing transactions
with respect to options on futures contracts. The Subaccounts
will only engage in transactions in futures contracts and
options thereupon that are traded on a United States exchange
or board of trade. In addition to the uses set forth
hereunder, each Subaccount may also engage in futures and
futures options transactions in order to hedge or limit the
exposure of its position to create a synthetic money market
position.
The Subaccounts may purchase and sell futures contracts,
index futures contracts, and options thereon only to the
extent that such activities would be consistent with the
<PAGE> II-15
<PAGE>
requirements of Section 4.5 of the regulations under the
Commodity Exchange Act promulgated by the Commodity Futures
Trading Commission (the "CFTC Regulations"), under which each
of these Subaccounts would be excluded from the definition of
a "commodity pool operator." Under Section 4.5 of the CFTC
Regulations, a Subaccount may engage in futures transactions,
either for "bona fide hedging" purposes, as this term is
defined in the CFTC Regulations, or for non-hedging purposes
to the extent that the aggregate initial margins and purchase
payments required to establish such non-hedging positions do
not exceed 5% of the liquidation value of the Subaccount s
portfolio. In the case of an option on futures contracts that
is "in-the-money" at the time of purchase (i.e., the amount by
which the exercise price of the put option exceeds the current
market value of the underlying security or the amount by which
the current market value of the underlying security exceeds
the exercise price of the call option), the in-the-money
amount may be excluded in calculating this 5% limitation.
When a Subaccount purchases or sells a stock index
futures contract, or sells an option thereon, the Subaccount
"covers" its position. To cover its position, a Subaccount
may maintain with its custodian bank (and mark to market on a
daily basis) a segregated account consisting of cash or high-
quality liquid debt instruments, including U.S. Government
Securities or repurchase agreements secured by U.S. Government
Securities, that, when added to any amounts deposited with a
futures commission merchant as margin, are equal to the market
value of the futures contract or otherwise "cover" its
position. If the Subaccount continues to engage in the
described securities trading practices and properly segregates
assets, the segregated account will function as a practical
limit on the amount of leverage which the Subaccount may
undertake and on the potential increase in the speculative
character of the Subaccount s outstanding portfolio
securities. Additionally, such segregated accounts will
generally assure the availability of adequate funds to meet
the obligations of the Subaccount arising from such investment
activities.
A Subaccount may cover its long position in a futures
contract by purchasing a put option on the same futures
contract with a strike price (i.e., an exercise price) as high
or higher than the price of the futures contract, or, if the
strike price of the put is less than the price of the futures
contract, the Subaccount will maintain in a segregated account
cash or high-grade liquid debt securities equal in value to
the difference between the strike price of the put and the
price of the future. A Subaccount may also cover its long
position in a futures contract by taking a short position in
the instruments underlying the futures contract, or by taking
positions in instruments the prices of which are expected to
<PAGE> II-16
<PAGE>
move relatively consistently with the futures contract. A
Subaccount may cover its short position in a futures contract
by taking a long position in the instruments underlying the
futures contract, or by taking positions in instruments the
prices of which are expected to move relatively consistently
with the futures contract.
A Subaccount may cover its sale of a call option on a
futures contract by taking a long position in the underlying
futures contract at a price less than or equal to the strike
price of the call option, or, if the long position in the
underlying futures contract is established at a price greater
than the strike price of the written call, the Subaccount will
maintain in a segregated account cash or high-grade liquid
debt securities equal in value to the difference between the
strike price of the call and the price of the future. A
Subaccount may also cover its sale of a call option by taking
positions in instruments the prices of which are expected to
move relatively consistently with the call option. A
Subaccount may cover its sale of a put option on a futures
contract by taking a short position in the underlying futures
contract at a price greater than or equal to the strike price
of the put option, or, if the short position in the underlying
futures contract is established at a price less than the
strike price of the written put, the Subaccount will maintain
in a segregated account cash or high-grade liquid debt
securities equal in value to the difference between the strike
price of the put and the price of the future. A Subaccount
may also cover its sale of a put option by taking positions in
instruments the prices of which are expected to move
relatively consistently with the put option.
Although the Subaccounts intend to sell futures contracts
only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any
particular contract at any particular time. Many futures
exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading
day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond
that limit or trading may be suspended for specified periods
during the day. Futures contract prices could move to the
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting a Subaccount to
substantial losses. If trading is not possible, or a
Subaccount determines not to close a futures position in
anticipation of adverse price movements, the Subaccount will
be required to make daily cash payments of variation margin.
The risk that the Subaccount will be unable to close out a
futures position will be minimized by entering into such
<PAGE> II-17
<PAGE>
transactions on a national exchange with an active and liquid
secondary market.
Index Options Transactions
The Nova Subaccount, the OTC Subaccount, and the Precious
Metals Subaccount may purchase call options and write (sell)
put options, and the Ursa Subaccount may purchase put options
and write call options, on stock indexes. All of the
Subaccounts may write and purchase put and call options on
stock indexes in order to hedge or limit the exposure of their
positions.
A stock index fluctuates with changes in the market
values of the stocks included in the index. Options on stock
indexes give the holder the right to receive an amount of cash
upon exercise of the option. Receipt of this cash amount will
depend upon the closing level of the stock index upon which
the option is based being greater than (in the case of a call)
or less than (in the case of a put) the exercise price of the
option. The amount of cash received, if any, will be the
difference between the closing price of the index and the
exercise price of the option, multiplied by a specified dollar
multiple. The writer (seller) of the option is obligated, in
return for the purchase payments received from the purchaser
of the option, to make delivery of this amount to the
purchaser. Unlike the options on securities discussed below,
all settlements of index options transactions are in cash.
Some stock index options are based on a broad market
index such as the S&P500 Index, the NYSE Composite Index, or
the AMEX Major Market Index, or on a narrower index such as
the Philadelphia Stock Exchange Over-the-Counter Index.
Options currently are traded on the Chicago Board Options
Exchange (the "CBOE"), the AMEX, and other exchanges
(collectively, the "Exchanges"). Purchased over-the-counter
options and the cover for written over-the-counter options
will be subject to the respective Subaccount s 15% limitation
on investment in illiquid securities. See "Illiquid
Securities," below.
Each of the Exchanges has established limitations
governing the maximum number of call or put options on the
same index which may be bought or written (sold) by a single
investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or
different Exchanges or are held or written on one or more
accounts or through one or more brokers). Under these
limitations, option positions of all investment companies
advised by the same investment adviser are combined for
purposes of these limits. Pursuant to these limitations, an
Exchange may order the liquidation of positions and may impose
<PAGE> II-18
<PAGE>
other sanctions or restrictions. These position limits may
restrict the number of listed options which a Subaccount may
buy or sell.
Index options are subject to substantial risks, including
the risk of imperfect correlation between the option price and
the value of the underlying securities comprising the stock
index selected and the risk that there might not be a liquid
secondary market for the option. Because the value of an index
option depends upon movements in the level of the index rather
than the price of a particular stock, whether a Subaccount
will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of
stock prices in the stock market generally or, in the case of
certain indexes, in an industry or market segment, rather than
upon movements in the price of a particular stock. Whether a
Subaccount will realize a profit or loss by the use of options
on stock indexes will depend on movements in the direction of
the stock market generally or of a particular industry or
market segment. This requires different skills and techniques
than are required for predicting changes in the price of
individual stocks. A Subaccount will not enter into an option
position that exposes the Subaccount to an obligation to
another party, unless the Subaccount either (i) owns an
offsetting position in securities or other options and/or (ii)
maintains with the Subaccount s custodian bank (and marks-to-
market on a daily basis) a segregated account consisting of
cash, U.S. Government Securities, or other liquid high-grade
debt securities that, when added to the purchase payments
deposited with respect to the option, are equal to the market
value of the underlying stock index not otherwise covered.
Options on Securities
The Nova Subaccount, the OTC Subaccount, and Precious
Metals Subaccount may buy call options and write (sell) put
options on securities, and the Ursa Subaccount may buy put
options and write call options on securities. By buying a
call option, a Subaccount has the right, in return for a
purchase payment paid during the term of the option, to buy
the securities underlying the option at the exercise price.
By writing a call option and receiving a purchase payment, a
Subaccount becomes obligated during the term of the option to
deliver the securities underlying the option at the exercise
price if the option is exercised. By buying a put option, a
Subaccount has the right, in return for a purchase payment
paid during the term of the option, to sell the securities
<PAGE> II-19
<PAGE>
underlying the option at the exercise price. By writing a put
option, a Subaccount becomes obligated during the term of the
option to purchase the securities underlying the option at the
exercise price. The Subaccounts will only write options that
are traded on recognized securities exchanges.
When writing call options on securities, a Subaccount may
cover its position by owning the underlying security on which
the option is written. Alternatively, the Subaccount may
cover its position by owning a call option on the underlying
security, on a unit for unit basis, which is deliverable under
the option contract at a price no higher than the exercise
price of the call option written by the Subaccount or, if
higher, by owning such call option and depositing and
maintaining in a segregated account cash or liquid high-grade
debt securities equal in value to the difference between the
two exercise prices. In addition, a Subaccount may cover its
position by depositing and maintaining in a segregated account
cash or liquid high-grade debt securities equal in value to
the exercise price of the call option written by the
Subaccount. When a Subaccount writes a put option, the
Subaccount will have and maintain on deposit with its
custodian bank cash or liquid high-grade debt securities
having a value equal to the exercise value of the option. The
principal reason for a Subaccount to write call options on
stocks held by the Subaccount is to attempt to realize,
through the receipt of purchase payments, a greater return
than would be realized on the underlying securities alone.
If a Subaccount that writes an option wishes to terminate
the Subaccount s obligation, the Subaccount may effect a
"closing purchase transaction." The Subaccount accomplishes
this by buying an option of the same series as the option
previously written by the Subaccount. The effect of the
purchase is that the writer s position will be canceled by the
Options Clearing Corporation. However, a writer may not
effect a closing purchase transaction after the writer has
been notified of the exercise of an option. Likewise, a
Subaccount which is the holder of an option may liquidate its
position by effecting a "closing sale transaction." The
Subaccount accomplishes this by selling an option of the same
series as the option previously purchased by the Subaccount.
There is no guarantee that either a closing purchase or a
closing sale transaction can be effected. If any call or put
option is not exercised or sold, the option will become
worthless on its expiration date.
A Subaccount will realize a gain (or a loss) on a closing
purchase transaction with respect to a call or a put option
previously written by the Subaccount if the purchase payment,
plus commission costs, paid by the Subaccount to purchase the
call or put option to close the transaction is less (or
<PAGE> II-20
<PAGE>
greater) than the purchase payment, less commission costs,
received by the Subaccount on the sale of the call or the put
option. The Subaccount also will realize a gain if a call or
put option which the Subaccount has written lapses
unexercised, because the Subaccount would retain the purchase
payment.
A Subaccount will realize a gain (or a loss) on a closing
sale transaction with respect to a call or a put option
previously purchased by the Subaccount if the purchase
payment, less commission costs, received by the Subaccount on
the sale of the call or the put option to close the
transaction is greater (or less) than the purchase payment,
plus commission costs, paid by the Subaccount to purchase the
call or the put option. If a put or a call option which the
Subaccount has purchased expires out-of-the-money, the option
will become worthless on the expiration date, and the
Subaccount will realize a loss in the amount of the purchase
payment paid, plus commission costs.
Although certain securities exchanges attempt to provide
continuously liquid markets in which holders and writers of
options can close out their positions at any time prior to the
expiration of the option, no assurance can be given that a
market will exist at all times for all outstanding options
purchased or sold by a Subaccount. If an options market were
to become unavailable, the Subaccount would be unable to
realize its profits or limit its losses until the Subaccount
could exercise options it holds, and the Subaccount would
remain obligated until options it wrote were exercised or
expired.
Because option purchase payments paid or received by a
Subaccount are small in relation to the market value of the
investments underlying the options, buying and selling put and
call options can be more speculative than investing directly
in common stocks.
Short Sales
The Ursa Subaccount and the Juno Subaccount also may
engage in short sales transactions under which the Subaccount
sells a security it does not own. To complete such a
transaction, the Subaccount must borrow the security to make
delivery to the buyer. The Subaccount then is obligated to
replace the security borrowed by purchasing the security at
the market price at the time of replacement. The price at
that time may be more or less than the price at which the
<PAGE> II-21
<PAGE>
security was sold by the Subaccount. Until the security is
replaced, the Subaccount is required to pay to the lender
amounts equal to any dividends or interest which accrue during
the period of the loan. To borrow the security, the
Subaccount also may be required to pay a purchase payment,
which would increase the cost of the security sold. The
proceeds of the short sale will be retained by the broker, to
the extent necessary to meet the margin requirements, until
the short position is closed out.
Until the Ursa Subaccount or Juno Subaccount closes its
short position or replaces the borrowed security, the
Subaccount will: (a) maintain a segregated account containing
cash or liquid high grade debt securities at such a level that
the amount deposited in the account plus the amount deposited
with the broker as collateral will equal the current value of
the security sold short, or (b) otherwise cover the
Subaccount s short position.
U.S. Government Securities
The Bond Subaccount and the Money Market Subaccounts may
invest in U.S. Government Securities in pursuit of their
investment objectives, while all of the Subaccounts, except
for the Money Market Subaccounts, may invest in U.S.
Government Securities as "cover" for the investment techniques
these Subaccounts employ as part of a cash reserve or for
liquidity purposes.
U.S. Treasury securities are backed by the full faith and
credit of the U.S. Treasury. U.S. Treasury securities differ
only in their interest rates, maturities, and dates of
issuance. Treasury Bills have maturities of one year or less.
Treasury Notes have maturities of one to ten years, and
Treasury Bonds generally have maturities of greater than ten
years at the date of issuance. Yields on short-,
intermediate-, and long-term U.S. Government Securities are
dependent on a variety of factors, including the general
conditions of the money and bond markets, the size of a
particular offering, and the maturity of the obligation. Debt
securities with longer maturities tend to produce higher
yields and are generally subject to potentially greater
capital appreciation and depreciation than obligations with
shorter maturities and lower yields. The market value of U.S.
Government Securities generally varies inversely with changes
in market interest rates. An increase in interest rates,
therefore, would generally reduce the market value of a
Subaccount s portfolio investments in U.S. Government
Securities, while a decline in interest rates would generally
increase the market value of a Subaccount s portfolio
investments in these securities.
<PAGE> II-22
<PAGE>
Certain U.S. Government Securities are issued or
guaranteed by agencies or instrumentalities of the U.S.
Government including, but not limited to, obligations of U.S.
Government agencies or instrumentalities such as the Federal
National Mortgage Association, the Government National
Mortgage Association, the Small Business Administration, the
Export-Import Bank, the Federal Farm Credit Administration,
the Federal Home Loan Banks, Banks for Cooperatives (including
the Central Bank for Cooperatives), the Federal Land Banks,
the Federal Intermediate Credit Banks, the Tennessee Valley
Authority, the Export-Import Bank of the United States, the
Commodity Credit Corporation, the Federal Financing Bank, the
Student Loan Marketing Association, and the National Credit
Union Administration.
Some obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government are backed by the
full faith and credit of the U.S. Treasury. Such agencies and
instrumentalities may borrow funds from the U.S. Treasury.
However, no assurances can be given that the U.S. Government
will provide such financial support to the obligations of the
other U.S. Government agencies or instrumentalities in which a
Subaccount invests, since the U.S. Government is not obligated
to do so. These other agencies and instrumentalities are
supported by either the issuer s right to borrow, under
certain circumstances, an amount limited to a specific line of
credit from the U.S. Treasury, the discretionary authority of
the U.S. Government to purchase certain obligations of an
agency or instrumentality, or the credit of the agency or
instrumentality itself.
U.S. Government Securities may be purchased at a
discount. Such securities, when held to maturity or retired,
may include an element of capital gain.
Repurchase Agreements
U.S. Government Securities include repurchase agreements
secured by U.S. Government Securities. Under a repurchase
agreement, a Subaccount purchases a debt security and
simultaneously agrees to sell the security back to the seller
at a mutually agreed-upon future price and date, normally one
day or a few days later. The resale price is greater than the
purchase price, reflecting an agreed-upon market interest rate
during the purchaser s holding period. While the maturities
of the underlying securities in repurchase transactions may be
more than one year, the term of each repurchase agreement will
always be less than one year. A Subaccount will enter into
repurchase agreements only with member banks of the Federal
Reserve System or primary dealers of U.S. Government
Securities. PADCO will monitor the creditworthiness of each
of the firms which is a party to a repurchase agreement with
<PAGE> II-23
<PAGE>
any of the Subaccounts. In the event of a default or
bankruptcy by the seller, the Subaccount will liquidate those
securities (whose market value, including accrued interest,
must be at least equal to 100% of the dollar amount invested
by the Subaccount in each repurchase agreement) held under the
applicable repurchase agreement, which securities constitute
collateral for the seller s obligation to pay. However,
liquidation could involve costs or delays and, to the extent
proceeds from the sales of these securities were less than the
agreed-upon repurchase price, the Subaccount would suffer a
loss. A Subaccount also may experience difficulties and incur
certain costs in exercising its rights to the collateral and
may lose the interest the Subaccount expected to receive under
the repurchase agreement. Repurchase agreements usually are
for short periods, such as one week or less, but may be
longer. It is the current policy of the Subaccounts to treat
repurchase agreements that do not mature within seven days as
illiquid for the purposes of their investment policies.
Zero Coupon Bonds
The Bond and Juno Subaccounts may invest in U.S. Treasury
zero coupon securities. Unlike regular U.S. Treasury bonds
which pay semi-annual interest, U.S. Treasury zero coupon
bonds do not generate semi-annual coupon payments. Instead,
zero coupon bonds are purchased at a substantial discount from
the maturity value of such securities, and this discount is
amortized as interest income over the life of the security.
Zero coupon U.S. Treasury issues originally were created by
government bond dealers who bought U.S. Treasury bonds and
issued receipts representing an ownership interest in the
interest coupons or in the principal portion of the bonds.
Subsequently, the U.S. Treasury began directly issuing zero
coupon bonds with the introduction of "Separate Trading of
Registered Interest and Principal of Securities" (or
"STRIPS"). While zero coupon bonds eliminate the reinvestment
risk of regular coupon issues, that is, the risk of
subsequently investing the periodic interest payments at a
lower rate than that of the security held, zero coupon bonds
fluctuate much more sharply than regular coupon-bearing bonds.
Thus, when interest rates rise, the value of zero coupon bonds
will decrease to a greater extent than will the value of
regular bonds having the same interest rate.
Reverse Repurchase Agreements
The Ursa Subaccount, the Juno Subaccount, and the Money
Market Subaccounts each may also use reverse repurchase
agreements as part of the Subaccount s investment strategy.
<PAGE> II-24
<PAGE>
Reverse repurchase agreements involve sales by the Subaccount
of portfolio assets concurrently with an agreement by the
Subaccount to repurchase the same assets at a later date at a
fixed price. Generally, the effect of such a transaction is
that the Subaccount can recover all or most of the cash
invested in the portfolio securities involved during the term
of the reverse repurchase agreement, while the Subaccount will
be able to keep the interest income associated with those
portfolio securities. Such transactions are advantageous only
if the interest cost to the Subaccount of the reverse
repurchase transaction is less than the cost of obtaining the
cash otherwise. Opportunities to achieve this advantage may
not always be available, and the Subaccounts intend to use the
reverse repurchase technique only when it will be to the
Subaccount s advantage to do so. Each Subaccount will
establish a segregated account with the Separate Account s
custodian bank in which the Subaccount will maintain cash or
cash equivalents or other portfolio securities equal in value
to the Subaccount s obligations in respect of reverse
repurchase agreements.
Borrowing
Each Subaccount may borrow money to facilitate management
of the Subaccount s portfolio by enabling the Subaccount to
meet transfer of withdrawal requests when the liquidation of
portfolio instruments would be inconvenient or
disadvantageous. Such borrowing is not for investment
purposes and will be repaid by the borrowing Subaccount
promptly.
As required by the 1940 Act, a Subaccount must maintain
continuous asset coverage (total assets, including assets
acquired with borrowed funds, less liabilities exclusive of
borrowings) of 300% of all amounts borrowed. If, at any time,
the value of the Subaccount s assets should fail to meet this
300% coverage test, the Subaccount, within three days (not
including Sundays and holidays), will reduce the amount of the
Subaccount s borrowings to the extent necessary to meet this
300% coverage. Maintenance of this percentage limitation may
result in the sale of portfolio securities at a time when
investment considerations otherwise indicate that it would be
disadvantageous to do so.
In addition to the foregoing, the Subaccounts are
authorized to borrow money from a bank as a temporary measure
for extraordinary or emergency purposes in amounts not in
excess of 5% of the value of the Subaccount s total assets.
This borrowing is not subject to the foregoing 300% asset
coverage requirement. The Subaccounts are authorized to
pledge portfolio securities as PADCO deems appropriate in
connection with any borrowings.
<PAGE> II-25
<PAGE>
When-Issued and Delayed-Delivery Securities
The Subaccounts may purchase securities on an when-issued
or delayed-delivery basis (i.e., delivery and payment can take
place a month or more after the date of the transaction).
These securities are subject to market fluctuation and no
interest accrues to the purchaser during this period. At the
time a Subaccount makes the commitment to purchase securities
on a when-issued or delayed-delivery basis, the Subaccount
will record the transaction and thereafter reflect the value,
each day, of that security in determining the Subaccount's
Accumulation Unit Value. A Subaccount will not purchase
securities on a when-issued or delayed-delivery basis if, as a
result, more than 15% (10% with respect to each of the Money
Market Subaccounts) of the Subaccount s net assets would be so
invested.
Lending of Portfolio Securities
The Subaccounts may lend portfolio securities to brokers,
dealers, and financial institutions, provided that cash equal
to at least 100% of the market value of the securities loaned
is deposited by the borrower with the lending Subaccount and
is maintained each business day in a segregated account
pursuant to applicable regulations. While such securities are
on loan, the borrower will pay the lending Subaccount any
income accruing thereon, and the Subaccount may invest the
cash collateral in portfolio securities, thereby earning
additional income. A Subaccount will not lend its portfolio
securities if such loans are not permitted by the laws or
regulations of any state in which the Contracts are sold and
will not lend more than 33-1/3% of the value of the
Subaccount s total assets, except that each of the Money
Market Subaccounts will not lend more than 10% of its total
assets. Loans of portfolio securities are subject to
termination by the lending Subaccount on four business days'
notice, or by the borrower on one day's notice. Borrowed
securities must be returned when the loan is terminated. Any
gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the lending
Subaccount. A lending Subaccount may pay reasonable finders,
borrowers, administrative, and custodial fees in connection
with a loan.
Investments in Other Investment Companies
The Subaccounts (other than the Bond Subaccount and the
Money Market Subaccounts) may invest in the securities of
another investment company (the "acquired company") provided
that the Subaccount, immediately after such purchase or
acquisition, does not own in the aggregate: (i) more than 3%
of the total outstanding voting stock of the acquired company;
<PAGE> II-26
<PAGE>
(ii) securities issued by the acquired company having an
aggregate value in excess of 5% of the value of the total
assets of the Subaccount; or (iii) securities issued by the
acquired company and all other investment companies (other
than Treasury stock of the Subaccount) having an aggregate
value in excess of 10% of the value of the total assets of the
Subaccount. The Bond Subaccount and the Money Market
Subaccounts may invest in the securities of other investment
companies only as part of a merger, reorganization, or
acquisition, subject to the requirements of the 1940 Act.
If a Subaccount invests in, and, thus, is a shareholder
of, another investment company, the Subaccount s Contract
Owners will indirectly bear the Subaccount s proportionate
share of the fees and expenses paid by such other investment
company, including advisory fees, in addition to both the
advisory fees payable directly by the Subaccount to PADCO and
the other expenses that the Subaccount bears directly in
connection with the Subaccount s own operations.
Illiquid Securities
While none of the Subaccounts anticipates doing so, each
Subaccount may purchase illiquid securities, including
securities that are not readily marketable. A Subaccount will
not invest more than 15% (10% with respect to each of the
Money Market Subaccounts) of the Subaccount s net assets in
illiquid securities. Each Subaccount will adhere to a more
restrictive limitation on the Subaccount s investment in
illiquid securities as required by the insurance laws of those
jurisdictions where Contracts are sold. The term "illiquid
securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of
business at approximately the amount at which the Subaccount
has valued the securities. Under the current guidelines of
the SEC staff, illiquid securities also are considered to
include, among other securities, purchased over-the-counter
options, certain cover for over-the-counter options,
repurchase agreements with maturities in excess of seven days,
and certain securities whose disposition is restricted under
the Federal securities laws. The Subaccount may not be able
to sell illiquid securities when PADCO considers it desirable
to do so or may have to sell such securities at a price that
is lower than the price that could be obtained if the
securities were more liquid. In addition, the sale of
illiquid securities also may require more time and may result
in higher dealer discounts and other selling expenses than
does the sale of securities that are not illiquid. Illiquid
securities also may be more difficult to value due to the
unavailability of reliable market quotations for such
securities, and investment in illiquid securities may have an
adverse impact on Accumulation Unit Value.
<PAGE> II-27
<PAGE>
Cash Reserve
As a cash reserve or for liquidity purposes, each
Subaccount may temporarily invest all or part of its assets in
cash or cash equivalents, which include, but are not limited
to, short-term money market instruments, U.S. Government
Securities, certificates of deposit, banker s acceptances, or
repurchase agreements secured by U.S. Government Securities.
PORTFOLIO TRANSACTIONS AND
BROKERAGE
Subject to policies established by the Managers, PADCO
determines which securities to purchase and sell for each
Subaccount, selects brokers and dealers to effect the
transactions, and negotiates commissions. PADCO expects that
the Subaccounts may execute brokerage or other agency
transactions through registered broker-dealers, for a
commission, in conformity with the 1940 Act, the Securities
Exchange Act of 1934, as amended, and the rules and
regulations thereunder. In placing orders for portfolio
transactions, PADCO's policy is to obtain the most favorable
price and efficient execution available. Brokerage
commissions are normally paid on exchange-traded securities
transactions and on options and futures transactions, as well
as on common stock transactions. In order to obtain the
brokerage and research services described below, a higher
commission may sometimes be paid.
When selecting broker-dealers to execute portfolio
transactions, PADCO considers many factors, including the rate
of commission or size of the broker-dealer s "spread," the
size and difficulty of the order, the nature of the market for
the security, the willingness of the broker-dealer to
position, the reliability, financial condition, general
execution and operational capabilities of the broker-dealer,
and the research, statistical and economic data furnished by
the broker-dealer to PADCO. Conversely, broker-dealers which
supply research may be selected for execution of transactions
for such other accounts, while the data may be used by PADCO
in providing investment advisory services to the Subaccounts.
MANAGEMENT OF THE SEPARATE ACCOUNT
Board of Managers
Although the assets of the Separate Account are the
property of Great American Reserve, certain responsibilities
and powers with respect to the Separate Account have been
<PAGE> II-28
<PAGE>
conferred upon the Managers of the Separate Account in order
to comply with applicable provisions of the 1940 Act. Those
responsibilities and powers are: (i) to approve the Separate
Account's investment advisory agreement and its continuance;
(ii) to select the Separate Account's independent public
accountants; (iii) to recommend changes in the fundamental
investment policies of the Subaccount for approval by Contract
Owners and to make changes in non-fundamental investment
policies of the Subaccounts; (iv) to review periodically the
investment portfolios of the Subaccounts to ascertain that the
Subaccounts are being managed in accordance with the
investment objectives and policies of the Subaccounts; (v) to
make findings or determinations contemplated for an investment
company's board of directors by the 1940 Act or rules or
interpretations thereunder; and (vi) to approve agreements,
acts, or transactions respecting the Separate Account that are
submitted to the Separate Account by Great American Reserve.
The identity and principal occupations of the initial members
of the Managers appointed by Great American Reserve and
certain officers of the Separate Account elected or appointed
by the Managers are set forth in the Statement of Additional
Information.
PADCO
As discussed above, PADCO provides the Subaccounts in the
Separate Account investment advice. PADCO is a Maryland
corporation with offices at 6116 Executive Boulevard, Suite
400, Rockville, Maryland 20852. PADCO was incorporated in the
State of Maryland on July 5, 1994. Albert P. Viragh, Jr., the
Chairman of the Board and the President of PADCO, owns a
controlling interest in PADCO and in PADCO Advisors, Inc.
("PADCO I"), an affiliated person of PADCO that serves as the
investment adviser to Rydex Series Trust, a registered
investment company. Mr. Viragh is the portfolio manager of
the Ursa Subaccount. From 1985 until the incorporation of
PADCO I, Mr. Viragh was a Vice President of Money Management
Associates ("MMA"), a Maryland-based registered investment
adviser. From 1992 to June 1993, Mr. Viragh was the portfolio
manager of The Rushmore Nova Portfolio, a series of The
Rushmore Fund, Inc., an investment company managed by MMA.
From 1989 to 1992, Mr. Viragh was the Vice President of Sales
and Marketing for The Rushmore Fund, Inc. Since 1993, Mr.
Viragh has served as the Chairman of the Board and the
President of PADCO I, a Maryland corporation with offices at
6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852. Since January 1994, Mr. Viragh has served as the
portfolio manager for the Ursa Fund, a series of Rydex Series
Trust. Mr. Viragh received his bachelor s degree in Business
Administration from Spring Hill College, of Mobile, Alabama,
in 1964.
<PAGE> II-29
<PAGE>
The portfolio manager for the Nova Subaccount is Thomas
Michael, who joined PADCO in March 1994. Since March 1994,
Mr. Michael has served as the portfolio manager for the Nova
Fund, a series of Rydex Series Trust. From 1992 to February
1994, Mr. Michael was a financial markets analyst at Cedar
Street Investment Management Co., of Chicago, Illinois, an
institutional consulting firm specializing in developing
hedging and speculative strategies in stock index futures
contracts and U.S. Treasury bond futures contracts. From 1989
to 1991, Mr. Michael was the Director of Research for
Chronometrics, Inc., of Chicago, Illinois, a registered
commodity trading adviser and was responsible for managing the
firm s proprietary, on-line trading model for twelve financial
futures contracts. Mr. Michael received his bachelor of arts
degree in Geology from Colgate University, of Hamilton, New
York, in 1974.
The portfolio manager for the OTC Subaccount and the Bond
Subaccount is Terry Apple, who joined PADCO in January 1994.
Since January 1994, Mr. Apple has served as the portfolio
manager for the Rydex OTC Fund and the Rydex U.S. Government
Bond Fund, each a series of Rydex Series Trust. From 1992 to
December 1993, Mr. Apple was employed by MMA and was the
Director of Investments for The Rushmore Fund, Inc. From 1985
to 1991, Mr. Apple was a Vice President and the Director of
Technical Research for Cale Futures, Inc. ("Cale"), of Hilton
Head, South Carolina, a registered commodity trading adviser,
and managed Multitech Partners, a commodity pool advised by
Cale. Mr. Apple received his bachelor s degree in Business
Administration from Baylor University, of Waco, Texas, in
1964.
The portfolio manager of the Precious Metals Subaccount,
the Juno Subaccount, and the Money Market Subaccounts is
Michael P. Byrum. Mr. Byrum has served as the portfolio
manager for the Rydex Precious Metals Fund since December
1993, the Juno Fund since March 1995, and the Rydex U.S.
Government Money Market Fund since December 1993 (each of
these mutual funds is a series of Rydex Series Trust). Prior
to July 1993, Mr. Byrum worked for one year as an investor
representative with MMA. Mr. Byrum s responsibilities at MMA
included brokerage solicitation and investor relations. Mr.
Byrum received his bachelor s degree in Business
Administration from Miami University, of Oxford, Ohio, in
1992.
Pursuant to an investment advisory agreement between the
Separate Account and PADCO, dated __________________, 1996
(the "PADCO Advisory Agreement"), subject to the general
supervision and control of the Separate Account's Board of
Managers and the officers of the Separate Account, and in
conformity with the stated investment objectives, policies,
<PAGE> II-30
<PAGE>
and restrictions of the Separate Account, PADCO will manage
the investment and reinvestment of the assets of each of the
Subaccounts and determine the composition of assets of each
Subaccount, including the purchase, retention, and disposition
of securities and other investments. Under the PADCO Advisory
Agreement, the Subaccounts each pay PADCO a fee at an
annualized rate, based on the average daily net assets of each
respective Subaccount, of 0.75% for the Nova Subaccount, the
OTC Subaccount, and the Precious Metals Subaccount, 0.90% for
the Ursa Subaccount and the Juno Subaccount, 0.50% for the
Bond Subaccount and the Money Market I Subaccount, and 0.25%
for the Money Market II Subaccount. The advisory fee paid by
each of the Nova Subaccount, the OTC Subaccount, the Precious
Metals Subaccount, the Juno Subaccount, and the Ursa
Subaccount, is higher than the advisory fee paid by most other
investment companies.
PADCO bears all costs associated with providing these
advisory services to the Subaccounts and the expenses of the
Managers who are affiliated persons of PADCO. Additional
information concerning the PADCO Advisory Agreement and PADCO
is set forth in the Statement of Additional Information.
PADCO Service Company, Inc.
As discussed above, the Subaccounts (other than the Money
Market II Subaccount) are provided Contract Owner services,
including, among others, asset allocation administrative
services, Financial Advisor communications (including receipt
of and acting upon transfer requests), asset allocation
bookkeeping, determination of Accumulation Unit Values, and
portfolio accounting services, by PADCO Service Company, Inc.
(the "Servicer"), a Maryland corporation with offices at 6116
Executive Boulevard, Suite 400, Rockville, Maryland 20852,
subject to the general supervision and control of the Managers
and the officers of the Separate Account, and pursuant to a
Subaccount administration agreement between the Separate
Account and the Servicer, dated _______________, 1996. The
Servicer is wholly-owned by Albert P. Viragh, Jr., who is the
Chairman of the Board of Managers and the President of the
Separate Account and the sole controlling person and majority
owner of PADCO. The Servicer was incorporated in the State of
Maryland on October 6, 1993.
Pursuant to the Subaccount Administration Agreement, each
Subaccount (other than the Money Market II Subaccount) pays
the Servicer a fee at an annualized rate, based on the average
daily net assets for that Subaccount, of 0.25% for the Nova,
Ursa, and Juno Subaccounts, and 0.20% for the OTC, Precious
Metals, Bond, and Money Market I Subaccounts. The Servicer
provides these Subaccounts with all required Subaccount
administrative services, including, without limitation, office
<PAGE> II-31
<PAGE>
space, equipment, and personnel; clerical and general back
office services; asset allocation bookkeeping, internal
accounting, and secretarial services; and the determination of
Accumulation Unit Values. The Servicer pays all fees and
expenses that are directly related to the services provided by
the Servicer to these Subaccounts; each Subaccount reimburses
the Servicer for all fees and expenses incurred by the
Servicer which are not directly related to the services the
Servicer provides to the Subaccount under the Subaccount
Administration Agreement. Additional information concerning
the Subaccount Administration Agreement and the Servicer is
set forth in the Statement of Additional Information.
The Money Market II Subaccount does not pay any
Subaccount administration fee.
Costs and Expenses
Each Subaccount bears all expenses of its operations
other than those assumed by PADCO or the Servicer. Subaccount
expenses include: the advisory fee; the Subaccount
administration fee; custodian and accounting fees and
expenses; legal and auditing fees; securities valuation
expenses; fidelity bonds and other insurance premiums;
expenses of preparing and printing prospectuses,
confirmations, proxy statements, and Contract Owner reports
and notices; registration fees and expenses; proxy and annual
meeting expenses, if any; all Federal, state, and local taxes
(including, without limitation, stamp, excise, income, and
franchise taxes); organizational costs; and non-interested
Managers fees and expenses; the costs and expenses of
surrendering Accumulation Units of a Subaccount; fees and
expenses paid to any securities pricing organization; dues and
expenses associated with membership in any mutual fund or
insurance organization; and costs for incoming telephone WATTS
lines. In addition, each of the eight Subaccounts pays an
equal portion of the fees and expenses for attendance at
Manager meetings to the Managers who are not affiliated with
or interested persons of PADCO or Great American Reserve.
Great American Reserve has advanced the organizational
expenses of the Separate Account. These costs, which are
approximately $________________ per Subaccount, will be
reimbursed by each Subaccount, and each Subaccount will
amortize these costs over a five year period from the date the
Subaccount commences operations.
<PAGE> II-32
<PAGE>
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION
Page
GENERAL INFORMATION AND HISTORY . . . . . . . . . . . . . . .
INVESTMENT POLICIES AND TECHNIQUES OF THE SUBACCOUNTS . . . .
General . . . . . . . . . . . . . . . . . . . . . . . .
Options Transactions . . . . . . . . . . . . . . . . . .
Foreign Securities . . . . . . . . . . . . . . . . . . .
Repurchase Agreements . . . . . . . . . . . . . . . . .
Borrowing . . . . . . . . . . . . . . . . . . . . . . .
When-Issued and Delayed-Delivery Securities . . . . . .
Portfolio Turnover . . . . . . . . . . . . . . . . . . .
INVESTMENT RESTRICTIONS OF THE SUBACCOUNTS . . . . . . . . .
BOARD OF MANAGERS OF THE SEPARATE ACCOUNT . . . . . . . . . .
Managers . . . . . . . . . . . . . . . . . . . . . . . .
Other Officers of PADCO . . . . . . . . . . . . . . . .
PADCO . . . . . . . . . . . . . . . . . . . . . . . . .
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . .
DETERMINATION OF ACCUMULATION UNIT VALUES . . . . . . . . . .
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . .
UNDERWRITER OF THE CONTRACTS . . . . . . . . . . . . . . . .
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . .
CUSTODY . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . .
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE> II-33
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
, 1996
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
of
GREAT AMERICAN RESERVE INSURANCE COMPANY
Administrative Office Address: 11815 North Pennsylvania
Street, Carmel, Indiana 46032
Phone: (800) 888-4918
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
FLEXIBLE PREMIUMS -- NONPARTICIPATING
Offered through
PADCO Financial Services, Inc.
Address: 6116 Executive Boulevard, Rockville, Maryland 20852
Phone: (800) 820-0888
Purchase payments for the variable annuity contract
described in the Prospectus (the "Contract") will be allocated
to the Rydex Advisor Variable Annuity Account (the "Separate
Account"), a segregated investment account of Great American
Reserve Insurance Company ("Great American Reserve"), unless
allocation to Great American Reserve's Fixed Account is
selected. Initial purchase payments allocated to the Separate
Account will first be placed in the Money Market I Subaccount
for the 14 days following the date of issue (the "Contract
Date"). You bear the full investment risk with respect to the
Separate Account.
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the
Prospectus of the Separate Account, dated , 1996.
The Prospectus may be obtained without charge by writing or
calling PADCO Financial Services, Inc., at the addresses or
phone numbers set forth above.
<PAGE>
<PAGE>
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION
Page
GENERAL INFORMATION AND HISTORY . . . . . . . . . . . . . . B-
INVESTMENT POLICIES AND TECHNIQUES OF THE SUBACCOUNTS . . . B-
General . . . . . . . . . . . . . . . . . . . . . . . B-
Options Transactions . . . . . . . . . . . . . . . . . B-
Foreign Securities . . . . . . . . . . . . . . . . . . B-
Repurchase Agreements . . . . . . . . . . . . . . . . B-
Borrowing . . . . . . . . . . . . . . . . . . . . . . B-
When-Issued and Delayed-Delivery Securities . . . . . B-
Portfolio Turnover . . . . . . . . . . . . . . . . . . B-
INVESTMENT RESTRICTIONS OF THE SUBACCOUNTS . . . . . . . . B-
BOARD OF MANAGERS OF THE SEPARATE ACCOUNT . . . . . . . . . B-
Managers . . . . . . . . . . . . . . . . . . . . . . . B-
Other Officers of PADCO . . . . . . . . . . . . . . . B-
PADCO . . . . . . . . . . . . . . . . . . . . . . . . B-
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . B-
DETERMINATION OF ACCUMULATION UNIT VALUES . . . . . . . . . B-
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . B-
UNDERWRITER OF THE CONTRACTS . . . . . . . . . . . . . . . B-
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . B-
CUSTODY . . . . . . . . . . . . . . . . . . . . . . . . . . B-
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . B-
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . B-
<PAGE> B-2
<PAGE>
GENERAL INFORMATION AND HISTORY
Great American Reserve, originally organized in 1937, is
principally engaged in the life insurance business in 47
states and the District of Columbia. Great American Reserve
is a stock company organized under the laws of the State of
Texas and a wholly-owned subsidiary of Conseco, Inc.
("Conseco"). The operations of Great American Reserve are
handled by Conseco. Conseco is a publicly-owned financial
services holding company, the principal operations of which
are in the development, marketing, and administration of
specialized annuity and life insurance products. Conseco is
located at 11825 N. Pennsylvania Street, Carmel, Indiana
46032.
The Separate Account was established by Great American
Reserve.
INVESTMENT POLICIES AND TECHNIQUES
OF THE SUBACCOUNTS
The following discussion supplements the discussion under
"Investment Objectives and Policies of the Subaccounts" and
"Investment Techniques and Other Investment Policies" in Part
II of the Prospectus.
General
Set forth below is further information relating to the
Subaccounts. Portfolio investment advice is provided to each
Subaccount by PADCO Advisors II, Inc. ("PADCO"), a Maryland
corporation with offices at 6116 Executive Boulevard, Suite
400, Rockville, Maryland 20852. The investment strategies of
the Subaccounts discussed below, and as discussed in the
Separate Account's Prospectus, may be used by a Subaccount if,
in the opinion of PADCO, these strategies will be advantageous
to the Subaccount. A Subaccount is free to reduce or
eliminate the Subaccount's activity in any of those areas
without changing the Subaccount's fundamental investment
policies. There is no assurance that any of these strategies
or any other strategies and methods of investment available to
a Subaccount will result in the achievement of the
Subaccount's objectives.
Options Transactions
The Nova Subaccount, The OTC Subaccount, and the Precious
Metals Subaccount may buy call options and write (sell) put
options on securities, and the Ursa Subaccount may buy put
options and write call options on securities for the purpose
of realizing the Subaccount's investment objective. By
<PAGE> B-3
<PAGE>
writing a call option on securities, a Subaccount becomes
obligated during the term of the option to sell the securities
underlying the option at the exercise price if the option is
exercised. By writing a put option, a Subaccount becomes
obligated during the term of the option to purchase the
securities underlying the option at the exercise price if the
option is exercised.
During the term of the option, the writer may be assigned
an exercise notice by the broker-dealer through whom the
option was sold. The exercise notice would require the writer
to deliver, in the case of a call, or take delivery of, in the
case of a put, the underlying security against payment of the
exercise price. This obligation terminates upon expiration of
the option, or at such earlier time that the writer effects a
closing purchase transaction by purchasing an option covering
the same underlying security and having the same exercise
price and expiration date as the one previously sold. Once an
option has been exercised, the writer may not execute a
closing purchase transaction. To secure the obligation to
deliver the underlying security in the case of a call option,
the writer of a call option is required to deposit in escrow
the underlying security or other assets in accordance with the
rules of the Options Clearing Corporation (the "OCC"), an
institution created to interpose itself between buyers and
sellers of options. The OCC assumes the other side of every
purchase and sale transaction on an exchange and, by doing so,
gives its guarantee to the transaction.
Foreign Securities
The Precious Metals Subaccount may invest in issuers
located outside the United States. These purchases may be
made by purchasing American Depository Receipts ("ADRs"),
"ordinary shares," or "New York shares" in the United States.
ADRs are dollar-denominated receipts representing interests in
the securities of a foreign issuer, which securities may not
necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are
receipts typically issued by United States banks and trust
companies which evidence ownership of underlying securities
issued by a foreign corporation. Generally, ADRs in registered
form are designed for use in domestic securities markets and
are traded on exchanges or over-the-counter in the United
States. Ordinary shares are shares of foreign issuers that
are traded abroad and on a United States exchange. New York
shares are shares that a foreign issuer has allocated for
trading in the United States. ADRs, ordinary shares, and New
York shares all may be purchased with and sold for U.S.
dollars, which protects the Precious Metals Subaccount from
the foreign settlement risks described below.
<PAGE> B-4
<PAGE>
Investing in foreign companies may involve risks not
typically associated with investing in United States
companies. The value of securities denominated in foreign
currencies, and of dividends from such securities, can change
significantly when foreign currencies strengthen or weaken
relative to the U.S. dollar. Foreign securities markets
generally have less trading volume and less liquidity than
United States markets, and prices in some foreign markets can
be very volatile. Many foreign countries lack uniform
accounting and disclosure standards comparable to those that
apply to United States companies, and it may be more difficult
to obtain reliable information regarding a foreign issuer's
financial condition and operations. In addition, the costs of
foreign investing, including withholding taxes, brokerage
commissions, and custodial fees, generally are higher than for
United States investments.
Investing in companies located abroad carries political
and economic risks distinct from those associated with
investing in the United States. Foreign investments may be
affected by actions of foreign governments adverse to the
interests of United States Contract Owners, including the
possibility of expropriation or nationalization of assets,
confiscatory taxation, restrictions on United States
investment, or on the ability to repatriate assets or to
convert currency into U.S. dollars. There may be a greater
possibility of default by foreign governments or foreign-
government sponsored enterprises. Investments in foreign
countries also involve a risk of local political, economic, or
social instability, military action or unrest, or adverse
diplomatic developments.
At the present time, there are five major producers and
processors of gold bullion and other precious metals and
minerals. In order of magnitude, these producers and
processors are: the Republic of South Africa, the former
republics of the former Soviet Union, Canada, the United
States, and Australia. Political and economic conditions in
several of these countries may have a direct effect on the
mining, distribution, and price of precious metals and
minerals, and on the sales of central bank gold holdings,
particularly in the case of South Africa and the former
republics of the former Soviet Union. South African mining
stocks represent a special risk in view of the history of
political unrest in that country. Besides that factor,
various government bodies such as the South African Ministry
of Mines and the Reserve Bank of South Africa exercise
regulatory authority over mining activity and the sale of
gold. The policies of these South African government bodies
in the future could be detrimental to the Precious Metals
Subaccount's objectives.
<PAGE> B-5
<PAGE>
Repurchase Agreements
As discussed in the Separate Account's Prospectus, each
of the Subaccounts may enter into repurchase agreements with
financial institutions. The Subaccounts each follow certain
procedures designed to minimize the risks inherent in such
agreements. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-
established financial institutions whose condition will be
continually monitored by PADCO. In addition, the value of the
collateral underlying the repurchase agreement will always be
at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of
a default or bankruptcy by a selling financial institution, a
Subaccount will seek to liquidate such collateral. However,
the exercising of each Subaccount's right to liquidate such
collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the
obligation to repurchase were less than the repurchase price,
the Subaccount could suffer a loss. The investments of each
of the Subaccounts in repurchase agreements, at times, may be
substantial when, in the view of the appropriate Subaccount
Advisor, liquidity or other considerations so warrant.
Borrowing
The Nova Subaccount and the Bond Subaccount do not
presently, but may in the future, borrow money, including
borrowing for investment purposes. Borrowing for investment
is known as leveraging. Leveraging investments, by purchasing
securities with borrowed money, is a speculative technique
which increases investment risk, but also increases investment
opportunity. Since substantially all of a Subaccount s assets
will fluctuate in value, whereas the interest obligations on
borrowings may be fixed, the Accumulation Unit Value of the
Subaccount will increase more when the Subaccount s portfolio
assets increase in value and decrease more when the
Subaccount s portfolio assets decrease in value than would
otherwise be the case. Moreover, interest costs on borrowings
may fluctuate with changing market rates of interest and may
partially offset or exceed the returns on the borrowed funds.
Under adverse conditions, the Nova Subaccount and the Bond
Subaccount might have to sell portfolio securities to meet
interest or principal payments at a time investment
considerations would not favor such sales. The Nova
Subaccount and the Bond Subaccount intend to use leverage
during periods when PADCO believes that the respective
Subaccount s investment objective would be furthered.
When-Issued and Delayed-Delivery Securities
<PAGE> B-6
<PAGE>
As discussed in the Separate Account's Prospectus, each
Subaccount, from time to time, in the ordinary course of
business, may purchase securities on a when-issued or delayed-
delivery basis, (i.e., delivery and payment can take place
between a month and 120 days after the date of the
transaction). At the time of delivery of the securities, the
value of the securities may be more or less than the purchase
price. The Subaccount will also establish a segregated
account with the Subaccount's custodian bank in which the
Subaccount will maintain cash or cash equivalents or other
portfolio securities equal in value to commitments for such
when-issued or delayed-delivery securities.
Portfolio Turnover
As discussed in the Separate Account's prospectus, PADCO
anticipates that owners of the Contract ("Contract Owners")
whose purchase payments are being allocated to the
Subaccounts, as part of an asset allocation or market-timing
investment strategy, will frequently transfer amounts
allocated under the Contract ("Contract Values") among the
Subaccounts (other than the Money Market II Subaccount).
Because each Subaccount's portfolio turnover rate to a great
extent will depend on the purchase, withdrawal, and exchange
activity of the Subaccount's Contract Owners, it is very
difficult to estimate what the Subaccount's actual turnover
rate will be in the future.
"Portfolio Turnover Rate" is defined under the rules of
the Securities and Exchange Commission (the "SEC") as the
value of the securities purchased or securities sold,
excluding all securities whose maturities at time of
acquisition were one year or less, divided by the average
monthly value of such securities owned during the year. Based
on this definition, instruments with remaining maturities of
less than one year are excluded from the calculation of
portfolio turnover rate. Instruments excluded from the
calculation of portfolio turnover generally would include the
futures contracts and option contracts in which the
Subaccounts invest since such contracts generally have a
remaining maturity of less than one year. All instruments
held by a Subaccount during a specified period may have a
remaining maturity of less than one year in which case the
portfolio turnover rate for that period, under the definition,
would be equal to zero. However, because of the nature of the
Subaccounts, as described above, it is anticipated that their
portfolio turnover will be unusually high.
INVESTMENT RESTRICTIONS OF THE
SUBACCOUNTS
<PAGE> B-7
<PAGE>
As described in the section of the Prospectus entitled
"Investment Objectives and Policies," each of the Subaccounts
has adopted certain investment restrictions as fundamental
policies which cannot be changed without the approval of the
holders of a "majority" of the outstanding units of interest
in the Subaccount ("Accumulation Units"), as defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
As relevant, the term "majority" is defined in the 1940 Act as
the lesser of: (i) 67% or more of Subaccount Accumulation
Units present at a meeting of Contract Owners, if the holders
of more than 50% of the outstanding Accumulation Units of the
Subaccount are present or represented by proxy; or (ii) more
than 50% of the outstanding Subaccount Accumulation Units.
For purposes of the following limitations, all percentage
limitations apply immediately after a purchase or initial
investment. Any subsequent change in a particular percentage
resulting from fluctuations in value does not require the
elimination of any security from a Subaccount's portfolio.
Policies 1 to 19 below are fundamental investment policies of
each affected Subaccount and may not be changed without a vote
of the Contract Owners with Contract Value allocated to the
Subaccount.
The following restriction is applicable to all
Subaccounts:
A Subaccount shall not:
1. Purchase the securities of any issuer if the
purchase would cause more than 5% of the value of
the Subaccount's total assets to be invested in the
securities of any one issuer (excluding U.S.
Government Securities) or cause more than 10% of the
voting securities of the issuer to be held by the
Subaccount, except that up to 25% of the value of
each Subaccount's total assets may be invested
without regard to these restrictions.
2. Invest 25% or more of the value of the Subaccount's
total assets in the securities of one or more
issuers conducting their principal business
activities in the same industry; except that the
Precious Metals Subaccount will invest 25% or more
of the value of the Precious Metals Subaccount's
total assets in the securities in the metals-related
and minerals-related industries. This limitation
does not apply to investments or obligations of the
U.S. Government or any of its agencies or
instrumentalities.
The following restrictions are applicable to all
Subaccounts other than the Money Market Subaccounts:
<PAGE> B-8
<PAGE>
A Subaccount shall not:
3. Lend any security or make any other loan if, as a
result, more than 33-1/3% of the value of the
Subaccount's total assets would be lent to other
parties, except (i) through the purchase of a
portion of an issue of debt securities in accordance
with the Subaccount's investment objective,
policies, and limitations, or (ii) by engaging in
repurchase agreements with respect to portfolio
securities, or (iii) through the loans of portfolio
securities provided the borrower maintains
collateral equal to at least 100% of the value of
the borrowed security and marked-to-market daily.
4. Underwrite securities of any other issuer.
5. Purchase, hold, or deal in real estate or oil and
gas interests, although the Subaccount may purchase
and sell securities that are secured by real estate
or interests therein and may purchase mortgage-
related securities and may hold and sell real estate
acquired for the Subaccount as a result of the
ownership of securities.
6. Issue any senior security (as such term is defined
in Section 18(f) of the 1940 Act) (including the
amount of senior securities issued but excluding
liabilities and indebtedness not constituting senior
securities), except that the Subaccount may issue
senior securities in connection with transactions in
options, futures, options on futures, and other
similar investments, and except as otherwise
permitted herein and in Investment Restriction Nos.
6, 8, 9, 10, 11, and 12, as applicable to the
Subaccount.
7. Pledge, mortgage, or hypothecate the Subaccount's
assets, except to the extent necessary to secure
permitted borrowings and to the extent related to
the deposit of assets in escrow in connection with
(i) the writing of covered put and call options,
(ii) the purchase of securities on a forward-
commitment or delayed-delivery basis, and (iii)
collateral and initial or variation margin
arrangements with respect to currency transactions,
options, futures contracts, including those relating
to indexes, and options on futures contracts or
indexes.
8. Invest in commodities except that (i) the Subaccount
may purchase and sell futures contracts, including
<PAGE> B-9
<PAGE>
those relating to securities, currencies, indexes,
and options on futures contracts or indexes and
currencies underlying or related to any such futures
contracts, and purchase and sell currencies (and
options thereon) or securities on a forward-
commitment or delayed-delivery basis, and (ii) the
Precious Metals Subaccount may invest in precious
metals and precious minerals.
The following restriction is applicable to the Ursa
Subaccount, the OTC Subaccount, the Precious Metals
Subaccount, the Juno Subaccount, and the Money Market
Subaccounts:
A Subaccount shall not:
9. Borrow money, except (i) as a temporary measure for
extraordinary or emergency purposes and then only in
amounts not in excess of 5% of the value of the
Subaccount's total assets from a bank or (ii) in an
amount up to one-third of the value of the
Subaccount's total assets, including the amount
borrowed, in order to meet redemption requests
without immediately selling portfolio instruments.
This provision is not for investment leverage but
solely to facilitate management of the portfolio by
enabling the Subaccount to meet redemption requests
when the liquidation of portfolio instruments would
be inconvenient or disadvantageous. The Juno
Subaccount shall not make purchases while borrowing
in excess of 5% of the value of its total assets.
For purposes of this limitation, Subaccount assets
invested in reverse repurchase agreements are
included in the amounts borrowed.
The following restriction is applicable to the Nova
Subaccount, the OTC Subaccount, the Precious Metals
Subaccount, and the Bond Subaccount:
A Subaccount shall not:
10. Make short sales of portfolio securities or purchase
any portfolio securities on margin, except for
short-term credits necessary for the clearance of
transactions. The deposit or payment by the
Subaccount of initial or variation margin in
connection with futures or options transactions is
not considered to be a securities purchase on
margin. The Subaccount may engage in short sales
if, at the time of the short sale, the Subaccount
owns or has the right to acquire an equal amount of
the security being sold at no additional cost
<PAGE> B-10
<PAGE>
("selling against the box"); except that the Bond
Subaccount may not engage in short sales against the
box.
The following restriction is applicable to the Nova
Subaccount and the Bond Subaccount:
A Subaccount shall not:
11. Borrow money, except the Subaccount may borrow money
(i) from a bank in an amount not in excess of 33-
1/3% of the total value of the Subaccount's assets
(including the amount borrowed) less the
Subaccount's liabilities (not including the
Subaccount's borrowings), and (ii) for temporary
purposes in an amount not in excess of 5% of the
total value of the Subaccount's assets.
The following restriction is applicable to the Ursa
Subaccount and the Juno Subaccount:
A Subaccount shall not:
12. Make short sales of portfolio securities or maintain
a short position unless at all times when a short
position is open (i) the Subaccount maintains a
segregated account with the Subaccount's custodian
to cover the short position in accordance with the
position of the SEC or (ii) the Subaccount owns an
equal amount of such securities or securities
convertible into or exchangeable, without payment of
any further consideration, for securities of the
same issue as, and equal in amount to, the
securities sold short.
The following restrictions are applicable to the Money
Market Subaccounts:
A Subaccount shall not:
13. Make loans to others except through the purchase of
qualified debt obligations, loans of portfolio
securities and entry into repurchase agreements.
14. Lend the Subaccount's portfolio securities in excess
of 15% of the Subaccount's total assets. Any loans
of the Subaccount's portfolio securities will be
made according to guidelines established by the
Board of Managers of the Separate Account, including
maintenance of cash collateral of the borrower equal
at all times to the current market value of the
securities loaned.
<PAGE> B-11
<PAGE>
15. Issue senior securities, except as permitted by the
Subaccount's investment objectives and policies.
16. Write or purchase put or call options.
17. Invest in securities of other investment companies,
except as these securities may be acquired as part
of a merger, consolidation, acquisition of assets,
or plan of reorganization.
18. Mortgage, pledge, or hypothecate the Subaccount's
assets except to secure permitted borrowings. In
those cases, the Subaccount may mortgage, pledge, or
hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed
or 10% of the value of total assets of the
Subaccount at the time of the borrowing.
19. Make short sales of portfolio securities or purchase
any portfolio securities on margin, except for
short-term credits necessary for the clearance of
transactions.
The Managers have adopted additional investment
restrictions for each Subaccount. These restrictions are not
fundamental investment policies, but rather are operating
policies of each Subaccount, as indicated, and may be changed
by the Managers without Contract Owner approval. With respect
to each of the Subaccounts, except as otherwise indicated,
these additional investment restrictions adopted by the
Managers, to date, are as follows:
1. The Subaccount will not invest in warrants.
2. The Subaccount will not invest in real estate
limited partnerships.
3. The Subaccount will not invest in mineral leases;
except that the Precious Metals Subaccount may
invest in mineral leases although the Precious
Metals Subaccount does not presently intend to
invest in such leases.
In addition, none of the Subaccounts presently intends:
1. To enter into currency transactions; except that the
Precious Metals Subaccount may enter into currency
transactions although the Precious Metals Subaccount
does not presently intend to enter into such
transactions.
<PAGE> B-12
<PAGE>
2. To purchase illiquid securities. If in the future,
a Subaccount does purchase illiquid securities, the
Subaccount will not invest more than 15% of its
assets in illiquid securities; except that each of
the Money Market Subaccounts will not invest more
than 10% of its assets in illiquid securities. Each
Subaccount will adhere to a more restrictive
limitation on the Subaccount's investment in
illiquid securities as required by the insurance
laws of those jurisdictions where Subaccount
Accumulation Units are offered for sale.
3. To purchase and sell real property (including
limited partnership interests), to purchase and sell
securities that are secured by real estate or
interests therein, to purchase mortgage-related
securities, or to hold and sell real estate acquired
for the Subaccount as a result of the ownership of
securities.
If a percentage restriction is adhered to at the time of
an investment, a later increase or decrease in the
investment's percentage of the value of the Subaccount's total
assets resulting from a change in such values or assets will
not constitute a violation of the percentage.
BOARD OF MANAGERS
OF THE SEPARATE ACCOUNT
The Board of Managers of the Separate Account (the
"Managers") are responsible for the general supervision of the
Separate Account's business. The day-to-day operations of the
Separate Account are the responsibilities of the Separate
Account's officers. The names, addresses, and ages of the
Managers of the Separate Account and the officers of PADCO,
together with information as to their principal business
occupations during the past five years, are set forth below.
Fees and expenses for non-interested Managers will be paid by
the Separate Account.
Managers
Albert P. Viragh, Jr. (54)*
Chairman of the Board of Managers of the Separate
Account; Chairman of the Board, President, and Treasurer
of PADCO Advisors II, Inc., investment adviser to the
Separate Account, 1996 to present; portfolio manager of
the Ursa Subaccount, 1996 to present; Chairman of the
Board of Trustees and President of Rydex Series Trust, a
registered investment company; Chairman of the Board,
<PAGE> B-13
<PAGE>
President, and Treasurer of PADCO Advisors, Inc.,
investment adviser to Rydex Series Trust, 1993 to
present; portfolio manager of the Ursa Fund, a series of
Rydex Series Trust, 1994 to present; Chairman of the
Board, President, and Treasurer of PADCO Service Company,
Inc., shareholder and transfer agent servicer to the
Separate Account, 1993 to present; Chairman of the Board,
President, and Treasurer of PADCO Financial Services,
Inc., a registered broker-dealer firm, and the Separate
Account's principal underwriter, 1996 to present; Vice
President of Rushmore Investment Advisors Ltd., a
registered investment adviser, 1985 to 1993. Address:
6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852.
Corey A. Colehour (50)
Manager of the Separate Account; Trustee of Rydex Series
Trust, 1993 to present; Senior Vice President of
Marketing of Schield Management Company, a registered
investment adviser, 1985 to present. Address: 6116
Executive Boulevard, Suite 400, Rockville, Maryland
20852.
J. Kenneth Dalton (54)
Manager of the Separate Account; Trustee of Rydex Series
Trust, 1995 to present; Mortgage Banking Consultant and
Investor, The Dalton Group, April 1995 to present;
President, CRAM Mortgage Group, Inc. 1966 to April 1995.
Address: 6116 Executive Boulevard, Suite 400, Rockville,
Maryland 20852.
Roger Somers (51)
Manager of the Separate Account; Trustee of Rydex Series
Trust, 1993 to present; President, Arrow Limousine, 1963
to present. Address: 6116 Executive Boulevard, Suite
400, Rockville, Maryland 20852.
L. Gregory Gloeckner (42)
Manager of the Separate Account; Senior Vice President,
Conseco, Inc., October 1994 to present; Vice President,
Continuum, August to October 1994; Vice President,
Variable Product Administration, Monarch Life Insurance
Company and First Variable Life Company, 1993 to 1994;
self-employed consultant from 1991 to 1993; and Vice
President, Beneficial Standard Life Insurance Company,
1989 to 1991. Address: 11815 North Pennsylvania Street,
Carmel, Indiana 46032.
<PAGE> B-14
<PAGE>
_________________________
* This Manager is deemed to be an "interested person" of
the Separate Account, within the meaning of Section
2(a)(19) of the 1940 Act, because this person is
affiliated with PADCO, as described herein.
Other Officers of PADCO
Timothy P. Hagan (52)
Vice President of PADCO; Treasurer and Vice President of
Rydex Series Trust, 1993 to present; Employee of PADCO
Service Company, Inc., 1993 to present; President and
Director of Rushmore Services, Inc., a registered
transfer agent, 1981 to 1993. Address: 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.
Robert M. Steele (37)
Vice President of PADCO; Secretary of Rydex Series Trust,
1995 to present; Vice President of PADCO Advisors, Inc.,
1994 to present; Vice President of The Boston Company,
Inc., an institutional money management firm, 1987 to
1994. Address: 6116 Executive Boulevard, Suite 400,
Rockville, Maryland 20852.
Messrs. Colehour, Dalton, and Somers, and _________
comprise the Audit Committee of the Managers. The Audit
Committee reviews, and reports to the Managers on the scope
and results of, the Separate Account's audits and related
matters.
The Separate Account pays each Manager who is not an
interested person of the Separate Account and Great American
Reserve a fee of $__________ per year plus $_______ per
meeting attended and reimbursement for actual out-of-pocket
expenses relating to attendance at meetings.
PADCO
PADCO, which has its office at 6116 Executive Boulevard,
Suite 400, Rockville, Maryland 20852, provides the
Subaccounts with investment advisory services. PADCO was
incorporated in the State of Maryland on July 5, 1994. Albert
P. Viragh, Jr., the Chairman of the Board of Managers of the
Separate Account and the President of PADCO, owns a
controlling interest in PADCO.
Under an investment advisory agreement with PADCO, dated
___________________, 1996, PADCO serves as the investment
adviser for each Subaccount and provides investment advice to
<PAGE> B-15
<PAGE>
the Subaccounts and oversees the day-to-day operations of the
Subaccounts, subject to direction and control by the Managers.
Pursuant to the advisory agreement with PADCO, the Subaccounts
pay PADCO the following fees at an annual rate based on the
average daily Accumulation Units for each respective
Subaccount, as set forth below:
Nova Subaccount 0.75%
Ursa Subaccount 0.90%
OTC Subaccount 0.75%
Precious Metals Subaccount 0.75%
Bond Subaccount 0.50%
Juno Subaccount 0.90%
Money Market I Subaccount 0.50%
Money Market II Subaccount 0.50%
PADCO manages the investment and the reinvestment of the
assets of each of the Subaccounts, in accordance with the
investment objectives, policies, and limitations of the
Subaccount, subject to the general supervision and control of
the Managers. PADCO bears all costs associated with providing
these advisory services and the expenses of the Managers of
the Separate Account who are affiliated with or interested
persons of PADCO. In addition, PADCO has voluntarily agreed
to reimburse each Subaccount (up to the amount of the
applicable advisory fee) through June 30, 1997, and until such
later date as PADCO may determine, for other expenses incurred
by the Subaccount so that the total annual expenses, including
advisory fees, for the respective Subaccounts do not exceed
4.55% for the Nova Subaccount, 4.65% for the Ursa Subaccount,
4.55% for the OTC Subaccount, 4.55% for the Precious Metals
Subaccount, 4.15% for the Bond Subaccount, 4.65% for the Juno
Subaccount, 3.95% for the Money Market I Subaccount, and 2.00%
for the Money Market II Subaccount.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the general supervision by the Managers, PADCO
is responsible for decisions to buy and sell securities for
each of the Subaccounts, the selection of brokers and dealers
to effect the transactions, and the negotiation of brokerage
commissions, if any. PADCO expects that the Subaccounts may
execute brokerage or other agency transactions through
registered broker-dealers, for a commission, in conformity
with the 1940 Act, the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
PADCO, and its affiliates (collectively, the "PADCO
Advisors") may serve as investment managers to a number of
clients, including other investment companies. It is the
practice of the PADCO Advisors to cause purchase and sale
<PAGE> B-16
<PAGE>
transactions to be allocated among the Subaccounts and others
whose assets the PADCO Advisors manage as the PADCO Advisors
deem equitable. The main factors considered by the PADCO
Advisors in making such allocations among the Subaccounts and
other client accounts of the PADCO Advisors are the respective
investment objectives, the relative size of portfolio holdings
of the same or comparable securities, the availability of cash
for investment, the size of investment commitments generally
held, and the opinions of the person(s) responsible, if any,
for managing the portfolios of the Subaccounts and the other
client accounts.
The policy of each Subaccount regarding purchases and
sales of securities for the Subaccount's portfolio is that
primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions.
Consistent with this policy, when securities transactions are
effected on a stock exchange, each Subaccount's policy is to
pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible
commissions are paid in all circumstances. Each Subaccount
believes that a requirement always to seek the lowest possible
commission cost could impede effective portfolio management
and preclude the Subaccount and the PADCO Advisors from
obtaining a high quality of brokerage and research services.
In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the PADCO Advisors rely
upon their experience and knowledge regarding commissions
generally charged by various brokers and on their judgment in
evaluating the brokerage and research services received from
the broker effecting the transaction. Such determinations are
necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.
Purchases and sales of obligations of the U.S. Treasury,
or obligations either issued or guaranteed, as to principal
and interest, by agencies or instrumentalities of the U.S.
Government ("U.S. Government Securities"), are normally
transacted through issuers, underwriters, or major dealers in
U.S. Government Securities acting as principals. Such
transactions are made on a net basis and do not involve
payment of brokerage commissions. The cost of securities
purchased from an underwriter usually includes a commission
paid by the issuer to the underwriters; transactions with
dealers normally reflect the spread between bid and asked
prices.
In seeking to implement a Subaccount's policies, the
PADCO Advisors effect transactions with those brokers and
dealers whom the PADCO Advisors believe provide the most
favorable prices and are capable of providing efficient
executions. If the PADCO Advisors believe such prices and
<PAGE> B-17
<PAGE>
executions are obtainable from more than one broker or dealer,
the PADCO Advisors may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish
research and other services to the Subaccount or the PADCO
Advisors. Such services may include, but are not limited to,
any one or more of the following: information as to the
availability of securities for purchase or sale; statistical
or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio
securities.
If the broker-dealer providing these additional services
is acting as a principal for its own account, no commissions
would be payable. If the broker-dealer is not a principal, a
higher commission may be justified, at the determination of
the PADCO Advisors, for the additional services.
The information and services received by the PADCO
Advisors from brokers and dealers may be of benefit to the
PADCO Advisors in the management of accounts of some of the
PADCO Advisors' other clients and may not in all cases benefit
a Subaccount directly. While the receipt of such information
and services is useful in varying degrees and would generally
reduce the amount of research or services otherwise performed
by the PADCO Advisors and thereby reduce the PADCO Advisors'
expenses, this information and these services are of
indeterminable value and the advisory fees paid to the PADCO
Advisors are not reduced by any amount that may be
attributable to the value of such information and services.
DETERMINATION OF ACCUMULATION UNIT VALUES
The current market values of the Accumulation Units (the
"Accumulation Unit Values") for each of the Subaccounts are
determined each day on which the New York Stock Exchange (the
"NYSE") is open for business. Currently, the NYSE is closed
on weekends and on the following holidays: (i) New Year s Day,
President s Day, Good Friday, Memorial Day, July Fourth, Labor
Day, Thanksgiving Day, and Christmas Day; and (ii) the
preceding Friday when any one of those holidays falls on a
Saturday or the subsequent Monday when any one of those
holidays falls on a Sunday. Accumulation Unit Values will be
determined at 4:00 P.M. Eastern Time for the Nova, Ursa,
Precious Metals, OTC and each of the Money Market Subaccounts
and at 3:00 P.M. Eastern Time for the Bond and Juno
Subaccounts.
For purposes of determining the Accumulation Unit Value
of a Subaccount, options and futures contracts will be valued
15 minutes after the 4:00 P.M., Eastern Time, close of trading
on the NYSE, except that U.S. Treasury bond options and
<PAGE> B-18
<PAGE>
futures contracts traded on the CBOT will be valued at 3:00
P.M., Eastern Time, the close of trading of that exchange.
Options on securities and indices purchased by a Subaccount
generally are valued at their last bid price in the case of
exchange-traded options or, in the case of options traded in
the OTC market, the average of the last bid price as obtained
from two or more dealers unless there is only one dealer, in
which case that dealer s price is used. The value of a
futures contract equals the unrealized gain or loss on the
contract that is determined by marking the contract to the
current settlement price for a like contract acquired on the
day on which the futures contract is being valued. The value
of options on futures contracts is determined based upon the
current settlement price for a like option acquired on the day
on which the option is being valued. A settlement price may
not be used for the foregoing purposes if the market makes a
limit move with respect to a particular commodity.
OTC securities held by a Subaccount shall be valued at
the last sales price or, if no sales price is reported, the
mean of the last bid and asked price is used. The portfolio
securities of a Subaccount that are listed on a national
exchange or foreign stock exchange are taken at the last sales
price of such securities on that exchange; if no sales price
is reported, the mean of the last bid and asked price is used.
For valuation purposes, all assets and liabilities initially
expressed in foreign currency values will be converted into
U.S. dollar values at the mean between the bid and the offered
quotations of such currencies against U.S. dollars as last
quoted by any recognized dealer. If such quotations are not
available, the rate of exchange will be determined in good
faith by the Managers. Dividend income and other
distributions are recorded on the ex-dividend date, except for
certain dividends from foreign securities which are recorded
as soon as the Separate Account is informed after the ex-
dividend date.
Illiquid securities, securities for which reliable
quotations or pricing services are not readily available, and
all other assets will be valued at their respective fair value
as determined in good faith by, or under procedures
established by, the Managers, which procedures may include the
delegation of certain responsibilities regarding valuation to
PADCO or the officers of the Separate Account. PADCO and
officers of the Separate Account report, as necessary, to the
Managers regarding portfolio valuation determination. The
Managers, from time to time, will review these methods of
valuation and will recommend changes which may be necessary to
assure that the investments of the Subaccounts are valued at
fair value.
<PAGE> B-19
<PAGE>
PERFORMANCE INFORMATION
Total Return Calculations
From time to time, each of the Subaccounts (other than
the Money Market Subaccounts) may include its total return for
prior periods in advertisements or reports to Contract Owners
or prospective Contract Owners. Quotations of average annual
total return for a Subaccount will be expressed in terms of
the average annual compounded rate of return on a hypothetical
investment in the Subaccount over a period of at least 1, 5,
and 10 years (up to the life of the Subaccount) (the ending
date of the period will be stated), or for the life of the
Subaccount. Other total return quotations, aggregate over
other time periods for the Subaccount, also may be included.
Total return of a Subaccount is calculated from two factors:
the amount of dividends earned by each Subaccount unit and by
the increase or decrease in value of the Subaccount's unit
value.
The total return of a Subaccount for a particular period
represents the increase (or decrease) in the value of a
hypothetical investment in the Subaccount from the beginning
to the end of the period. Total return is calculated by
subtracting the value of the initial investment from the
ending value and showing the difference as a percentage of the
initial investment; this calculation assumes that the initial
investment is made at the current Accumulation Unit Value and
that all income dividends or capital gains distributions
during the period are reinvested in Accumulation Units of the
Subaccount at Accumulation Unit Value. Total return is based
on historical earnings and asset value fluctuations and is not
intended to indicate future performance.
Average annual total return quotations for various
periods are computed by finding the average annual compounded
rate of return over the period that would equal the initial
amount invested to the ending contract value available for
withdrawal. A more-detailed description of the method by
which the total return of a Subaccount is calculated is
contained in this Statement of Additional Information under
"Calculation of Return Quotations."
Yield Calculations
In addition to total return information, the Bond
Subaccount may also advertise its current "yield." Yield
figures are based on historical earnings and are not intended
to indicate future performance. Yield is determined by
analyzing the Bond Subaccount s net income per unit for a
thirty-day (or one-month) period (which period will be stated
in the advertisement), and dividing by the maximum offering
<PAGE> B-20
<PAGE>
price per unit on the last day of the period. Calculation of
yield does not include any applicable withdrawal charges. A
"bond equivalent" annualization method is used to reflect a
semi-annual compounding.
For purposes of calculating yield quotations, net income
is determined by a standard formula prescribed by the SEC to
facilitate comparison with yields quoted by other investment
companies. Net income computed for this formula differs from
net income reported by the Bond Subaccount in accordance with
generally accepted accounting principles and from net income
computed for Federal income tax reporting purposes. Thus, the
yield computed for a period may be greater or less than the
Bond Subaccount s then-current dividend rate.
The Bond Subaccount s yield is not fixed and will
fluctuate in response to prevailing interest rates and the
market value of portfolio securities, and as a function of the
type of securities owned by the Bond Subaccount, portfolio
maturity, and the Bond Subaccount s expenses.
Yield quotations should be considered relative to changes
in the Accumulation Unit Value of the Bond Subaccount, the
Bond Subaccount s investment policies, and the risks of
investing in Bond Subaccount units. The investment return and
principal value of an investment in the Bond Subaccount will
fluctuate so that a Contract Owner's Accumulation Units, when
redeemed, may be worth more or less than their original cost.
From time to time, each of the Money Market Subaccounts
advertise their "yield" and "effective yield." Both yield
figures are based on historical earnings and are not intended
to indicate future performance. The "yield" of a Money Market
Subaccount refers to the income generated by an investment in
the Money Market Subaccount over a seven-day period (which
period will be stated in the advertisement). This income is
then "annualized." That is, the amount of income generated by
the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage
of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an
investment in a Money Market Subaccount is assumed to be
reinvested. The "effective yield" will be slightly higher
than the "yield" because of the compounding effect of this
assumed reinvestment. A description of the respective methods
by which the yield of the Bond Subaccount and the current and
effective yields of the Money Market Subaccounts are
calculated is contained in this Statement of Additional
Information under "Information on Computation of Yield."
Since yield fluctuates, yield data cannot necessarily be
used to compare an investment in units of the Bond Subaccount
<PAGE> B-21
<PAGE>
or the Money Market Subaccounts with bank deposits, savings
accounts, and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated
period of time. Contract Owners of the Bond Subaccount and
Money Market Subaccounts should remember that yield generally
is a function of the kind and quality of the instrument held
in portfolio, portfolio maturity, operating expenses, and
market conditions.
Comparisons of Investment Performance
Performance information for each of the Subaccounts
contained in reports to Contract Owners or prospective
Contract Owners, advertisements, and other promotional
literature may be compared to the record of various unmanaged
indexes for the same period. In conjunction with performance
reports, promotional literature, and/or analyses of Contract
Owner service for a Subaccount, comparisons of the performance
information of the Subaccount for a given period to the
performance of recognized, unmanaged indexes for the same
period may be made. Such indexes include, but are not limited
to, ones provided by Dow Jones & Company, Standard & Poor s
Corporation, Lipper Analytical Services, Inc., Shearson Lehman
Brothers, National Association of Securities Dealers, Inc.,
The Frank Russell Company, Value Line Investment Survey, the
American Stock Exchange, the Philadelphia Stock Exchange,
Morgan Stanley Capital International, Wilshire Associates, the
Financial Times-Stock Exchange, and the Nikkei Stock Average
and Deutcher Aktienindex, all of which are unmanaged market
indicators. Such comparisons can be a useful measure of the
quality of a Subaccount s investment performance.
In particular, performance information for the Nova
Subaccount, the Ursa Subaccount, and the Precious Metals
Subaccount may be compared to various unmanaged indexes,
including, but not limited to, the Standard & Poor's 500
Composite Stock Price Index/TM (the "S&P500 Index") or the Dow
Jones Industrial Average. Performance information for the
Precious Metals Subaccount also may be compared to its current
benchmark, the Philadelphia Stock Exchange Gold/Silver
Index/TM (the "XAU Index"). Performance information for the
OTC Subaccount may be compared to various unmanaged indexes,
including, but not limited to, its current benchmark, the
NASDAQ 100 Index/TM, and the NASDAQ Composite Index/TM. The
NASDAQ Composite Index comparison may be provided to show how
the OTC Subaccount's total return compares to the record of a
broad average of over-the-counter stock prices over the same
period. The OTC Subaccount has the ability to invest in
securities not included in the NASDAQ 100 Index or the NASDAQ
Composite Index, and the OTC Subaccount's investment portfolio
may or may not be similar in composition to NASDAQ 100 Index
or the NASDAQ Composite Index. The NASDAQ Composite Index is
<PAGE> B-22
<PAGE>
based on the prices of an unmanaged group of stocks and,
unlike the OTC Subaccount's returns, the returns of the NASDAQ
Composite Index, and such other unmanaged indexes, may assume
the reinvestment of dividends, but generally do not reflect
payments of brokerage commissions or deductions for operating
costs and other expenses of investing. Performance
information for the Bond Subaccount and the Juno Subaccount
may be compared to the price movement of the Current Long
Treasury Bond (the "Long Bond") and to various unmanaged
indexes, including, but not limited to, the Shearson Lehman
Government (LT) Index/TM. Such unmanaged indexes may assume
the reinvestment of dividends, but generally do not reflect
deductions for operating costs and expenses.
In addition, rankings, ratings, and comparisons of
investment performance and/or assessments of the quality of
Contract Owner service appearing in publications such as
Money, Forbes, Kiplinger s Magazine, Personal Investor,
Morningstar, Inc., the Morningstar Variable Annuity/Life
Reporter, VARDS, and similar sources which utilize information
compiled (i) internally, (ii) by Lipper Analytical Services,
Inc. ("Lipper"), or (iii) by other recognized analytical
services, may be used in sales literature. The Morningstar
Variable Annuity/Life Reporter consists of nearly 700 variable
life and annuity funds, all of which report their data net of
investment advisory fees, direct operating expenses, and
separate account charges. VARDS is a monthly reporting
service that monitors approximately 760 variable life and
variable annuity funds on performance and account information.
The total return of each Subaccount (other than the Money
Market Subaccounts) may be compared to the performance of
broad groups of comparable subaccounts or mutual funds with
similar investment goals, as such performance is tracked and
published by such independent organizations as Lipper, and CDA
Investment Technologies, Inc., among others. When Lipper's
tracking results are used, the Subaccount will be compared to
Lipper's appropriate fund category, that is, by fund objective
and portfolio holdings. Accordingly, the Lipper ranking and
comparison, which may be used by the Separate Account in
performance reports, will be drawn from the "Capital
Appreciation Subaccounts" grouping for each of the Nova
Subaccount and the Ursa Subaccount, from the "Small Company
Growth Subaccounts" grouping for the OTC Subaccount, from the
"Precious Metals Subaccounts" grouping for the Precious Metals
Subaccount, and from the "Bond Subaccounts" grouping for the
Bond Subaccount and the Juno Subaccount. In addition, the
broad-based Lipper groupings may be used for comparison to any
of the Subaccounts. Rankings may be listed among one or more
of the asset-size classes as determined by Lipper. Since the
assets in all Subaccounts are always changing, a Subaccount
may be ranked within one Lipper asset-size class at one time
and in another Lipper asset-size class at some other time.
<PAGE> B-23
<PAGE>
Footnotes in advertisements and other marketing literature
will include the time period and Lipper asset-size class, as
applicable, for the ranking in question. Performance figures
are based on historical results and are not intended to
indicate future performance.
Calculation of Return Quotations
For purposes of quoting and comparing the performance of
a Subaccount (other than a Money Market Subaccount) to that of
relevant market indexes in advertisements or in reports to
Contract Owners, performance for the Subaccount may be stated
in terms of average annual total return. Total return is
calculated according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years (1, 5, or 10); and
ERV = ending Contract Value available for
withdrawal of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year
periods at the end of the 1, 5, or 10 year
periods (or fractional portion thereof).
Under the foregoing formula, the time periods used in
advertising will be based on rolling calendar quarters,
updated to the last day of the most recent quarter prior to
submission of the advertising for publication, and will cover
1, 5, and 10 year periods or a shorter period dating from the
effectiveness of the Registration Statement of the Separate
Account. In calculating the ending redeemable value, all
dividends and distributions by a Subaccount are assumed to
have been reinvested. Total return, or "T" in the formula
above, is computed by finding the average annual compounded
rates of return over the 1, 5, and 10 year periods (or
fractional portion thereof) that would equate the initial
amount invested to the ending redeemable value. The deduction
for the asset allocation on advisory fee will be included in
the determination of standard total return in any performance
advertising for the Subaccounts.
From time to time, each Subaccount also may include in
such advertising an aggregate total return figure calculated
by assuming the allocation of $10,000 to the Subaccount and
assuming reinvestment of each dividend or other distribution.
Percentage increases are determined by subtracting the initial
value of the investment from the ending value and by dividing
<PAGE> B-24
<PAGE>
the remainder by the beginning value. Each Subaccount may
show non-standardized total returns and average annual total
returns that do not include sales loads, which, if included,
would reduce the percentages reported.
Information on Computation of Yield
The Bond Subaccount. In addition to the total return
quotations discussed above, the Bond Subaccount also may
advertise its yield based on a thirty-day (or one month)
period ended on the date of the most recent balance sheet
included in the Separate Account's Registration Statement,
computed by dividing the net investment income per Bond
Subaccount unit earned during the period by the maximum
offering price per Bond Subaccount unit on the last day of the
period, according to the following formula:
YIELD = 2[( a-b +1)6-1]
cd
Where: a = dividends and interest earned
during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of units
outstanding during the period that were
entitled to receive dividends; and
d = the maximum offering price per unit on
the last day of the period.
Under this formula, interest earned on debt obligations, for
purposes of "a" above, is calculated by (i) computing the
yield to maturity of each obligation held by the Bond
Subaccount based on the market value of the obligation
(including actual accrued interest) at the close of business
on the last day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual
accrued interest), (ii) dividing that figure by 360 and
multiplying the quotient by the market value of the obligation
(including actual accrued interest as referred to above) to
determine the interest income on the obligation that is in the
Bond Subaccount's portfolio (assuming a month of thirty days),
and (iii) computing the total of the interest earned on all
debt obligations and all dividends accrued on all equity
securities during the thirty-day or one month period. In
computing dividends accrued, dividend income is recognized by
accruing 1/360 of the stated dividend rate of a security each
day that the security is in the Bond Subaccount's portfolio.
Undeclared earned income, computed in accordance with
<PAGE> B-25
<PAGE>
generally accepted accounting principles, may be subtracted
from the maximum offering price calculation required pursuant
to "d" above.
The Bond Subaccount from time to time may also advertise
its yield based on a thirty-day period ending on a date other
than the most recent balance sheet included in the Separate
Account's Registration Statement, computed in accordance with
the yield formula described above, as adjusted to conform with
the differing period for which the yield computation is based.
Any quotation of performance stated in terms of yield
(whether based on a thirty-day or one month period) will be
given no greater prominence than the information prescribed
under SEC Rules. In addition, all advertisements containing
performance data of any kind will include a legend disclosing
that such performance data represents past performance and
that the investment return and principal value of an
investment will fluctuate so that a Contract Owner's units,
when redeemed, may be worth more or less than their original
value.
The Money Market Subaccounts. Each of the Money Market
Subaccounts' annualized current yield, as may be quoted from
time to time in advertisements and other communications to
Contract Owners and potential Contract Owners, is computed by
determining, for a stated seven-day period, the net change,
exclusive of capital changes and including the value of
additional Accumulation Units purchased with dividends and any
dividends declared therefrom (which reflect deductions of all
expenses of the Money Market Subaccount such as advisory
fees), in the value of a hypothetical pre-existing account
having a balance of one Accumulation Unit at the beginning of
the period, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by
(365/7).
Each of the Money Market Subaccounts' respective
annualized effective yield, as may be quoted from time to time
in advertisements and other communications to Contract Owners
and potential Contract Owners, is computed by determining (for
the same stated seven-day period as the current yield) the net
change, exclusive of capital changes and including the value
of additional Accumulation Units purchased with dividends and
any dividends declared therefrom (which reflect deductions of
all expenses of the Money Market Subaccount, as appropriate,
such as advisory fees), in the value of a hypothetical pre-
existing account having a balance of one Accumulation Unit at
the beginning of the period, and dividing the difference by
the value of the account at the beginning of the base period
to obtain the base period return, and then compounding the
<PAGE> B-26
<PAGE>
base period return by adding 1, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result.
The yields quoted in any advertisement or other
communication should not be considered a representation of the
yields of either of the Money Market Subaccounts in the future
since the yield is not fixed. Actual yields will depend not
only on the type, quality, and maturities of the investments
held by the Money Market Subaccount and changes in interest
rates on such investments, but also on changes in the Money
Market Subaccount's expenses during the period.
Yield information may be useful in reviewing the
performance of the Money Market Subaccounts and for providing
a basis for comparison with other investment alternatives.
However, unlike bank deposits or other investments, which
typically pay a fixed yield for a stated period of time, the
yields of the Money Market Subaccounts fluctuate.
UNDERWRITER OF THE CONTRACTS
PADCO Financial Services, Inc. ("PFS"), is the principal
underwriter of the Contracts. The offering of the Contracts
is continuous, although Great American Reserve has reserved
the right to suspend the offer and sale of the Contracts
whenever, in its opinion, market or other conditions make a
suspension appropriate. The Contracts are sold by authorized
broker-dealers, including registered representatives of PFS.
There registered representatives are also Great American
Reserve's licensed insurance agents. Great American Reserve,
from its general account, pays commissions to PFS not to
exceed 5.50% of purchase payments.
INDEPENDENT ACCOUNTANTS
The financial statements of Great American Reserve
included in the Prospectus and the Statement of Additional
Information have been examined by Coopers & Lybrand LLP,
Indianapolis, Indiana, independent accountants, for the
periods indicated in their reports as stated in their opinion,
and have been so included in reliance upon such opinion given
upon the authority of that firm as experts in accounting and
auditing.
<PAGE> B-27
<PAGE>
CUSTODY
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ,
____________________________, acts as the Custodian bank for
the Separate Account and each of the Subaccounts. The
securities of the Subaccount are held by the Custodian in the
Federal book-entry system pursuant to a custodial agreement.
FINANCIAL STATEMENTS
Financial statements of the Great American Reserve
included herein should be considered only as bearing on the
ability of Great American Reserve to meet its obligations
under the Contract. No financial statements for the Separate
Account are included herein, because the Separate Account had
not commenced operations as of the date of this Statement of
Additional Information.
<PAGE> B-28
<PAGE>
APPENDIX A
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.
Commercial paper rated "Prime" by Moody's Investors
Service, Inc. ("Moody's"), is based upon Moody's evaluation of
many factors including: (1) the management of the issuer; (2)
the issuer's industry or industries and the speculative-type
risks which may be inherent in certain areas; (3) the issuer's
products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6)
trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist
with the issue; and (8) recognition by the management of
obligations which may be present or may arise as a result of
public interest questions and preparations to meet such
obligations. Relative differences in these factors determine
whether the issuer's commercial paper is rated "Prime-1,"
"Prime-2," or "Prime-3" by Moody's.
"Prime-1" indicates a superior capacity for repayment of
short-term promissory obligations. Prime-1 repayment capacity
will normally be evidenced by the following characteristics:
(1) leading market positions in well-established industries;
(2) high rates of return on funds employed; (3) conservative
capitalization structures with moderate reliance on debt and
ample asset protection; (4) broad margins in earnings coverage
of fixed financial charges and high internal cash generation;
and (5) well-established access to a range of financial
markets and assured sources of alternative liquidity.
"Prime-2" indicates a strong capacity for repayment of
short-term promissory obligations. This repayment capacity
normally will be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternative liquidity is maintained.
Standard & Poor's Rating Group
Commercial paper rated by Standard & Poor's Rating Group
has the following characteristics: (1) liquidity ratios
adequate to meet cash requirements; (2) long-term senior debt
is rated "A" or better; (3) the issuer has access to at least
two additional channels of borrowing; (4) basic earnings and
cash flow have an upward trend with allowance made for unusual
circumstances; (5) typically, the issuer's industry is well-
established and the issuer has a strong position within the
<PAGE> B-29
<PAGE>
industry; and (6) the reliability and quality of management
are unquestioned. The relative strength or weakness of the
above factors determine whether the issuer's commercial paper
is rated "A-1," "A-2," or "A-3."
A-1 -- This designation rating indicates that the degree
of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus (+) sign
designation.
A-2 -- The capacity for timely payment on issues with
this designation rating is strong; however, the relative
degree of safety is not as high as for issues designated "A-
1."
Fitch Investors Service, Inc.
Commercial paper rated by Fitch Investors Service, Inc.
("Fitch"), reflects Fitch's current appraisal of the degree of
assurance of timely payment of such debt. An appraisal
results in the rating of an issuer's paper as "F-1," "F-2,"
"F-3," or "F-4."
F-1 -- This designation rating indicates that the
commercial paper is regarded as having the strongest degree of
assurance for timely payment.
F-2 -- Commercial paper issues assigned this designation
rating reflect an assurance of timely payment only slightly
less in degree than those issues rated "F-1."
Duff and Phelps Credit Rating Co.
Short-term ratings by Duff & Phelps Credit Rating Co.
("Duff") are consistent with the rating criteria utilized by
money market participants. The ratings apply to all
obligations with maturities of under one year, including
commercial paper, the uninsured portion of certificates of
deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-backed commercial paper
is also rated according to this scale.
An emphasis of Duff's short-term ratings is placed on
"liquidity," which is defined as not only cash from
operations, but also access to alternative sources of funds
including trade credit, bank lines, and the capital markets.
An important consideration is the level of an obligor's
reliance on short-term funds on an ongoing basis.
<PAGE> B-30
<PAGE>
The distinguishing feature of Duff's short-term ratings
is the refinement of the traditional "1" category. The
majority of short-term debt issuers carry the highest rating,
yet quality differences exist within that tier. As a
consequence, Duff has incorporated gradations of "1+" (one
plus) and "1-" (one minus) to assist investors in recognizing
those differences.
Duff 1+ -- This designation rating indicates the highest
certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
Duff 1 -- This designation rating indicates a very high
certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk
factors are minor.
Duff 1- -- This designation rating indicates a high
certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk
factors are very small.
Good Grade
Duff 2 -- This designation rating indicates a good
certainty of timely payment. Liquidity factors and company
fundamental are sound. Although ongoing funding needs may
enlarge total financing requirements, access capital markets
is good. Risk factors are small.
IBCA, Inc.
In addition to conducting a careful review of an
institution's reports and published figures, IBCA's analysts
regularly visit the companies for discussions with senior
management. These meetings are fundamental to the preparation
of individual reports and ratings. To keep abreast of any
changes that may affect assessments, analysts maintain contact
throughout the year with the management of the companies that
the analysts cover.
IBCA's analysts speak the languages of the countries that
the analysts cover, which is essential to maximize the value
of their meetings with management and to analyze properly a
company's written materials. IBCA's analysts also have a
thorough knowledge of the laws and accounting practices that
govern the operations and reporting of companies within the
various countries.
<PAGE> B-31
<PAGE>
Often, in order to ensure a full understanding of their
position, companies entrust IBCA with confidential data.
While these data cannot be disclosed in reports, these data
are taken into account by IBCA when assigning IBCA's ratings.
Before dispatch to subscribers, a draft of the report is
submitted to each company to permit the correction of any
factual errors and to enable the clarification of issues
raised.
IBCA's Rating Committees meet at regular intervals to
review all ratings and to ensure that individual ratings are
assigned consistently for institutions in all the countries
covered. Following these committee meetings, IBCA ratings are
issued directly to subscribers. At the same time, the company
is informed of the ratings as a matter of courtesy, but not
for discussion.
A1+ -- This designation rating indicates obligations
supported by the highest capacity for timely repayment.
A1 -- This designation rating indicates obligations
supported by a very strong capacity for timely repayment.
A2 -- This designation rating indicates obligations
supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in
business, economic, or financial conditions.
<PAGE> B-32
<PAGE>
FINANCIAL STATEMENTS OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
(to be filed by amendment)
<PAGE>
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
<PAGE>
PART C: OTHER INFORMATION
Item 28. Financial Statements and Exhibits
(a) Financial Statements:
(1) Financial statements of the Registrant, Rydex
Advisor Variable Annuity Account.3/
(2) Financial statements of the Insurance Company, Great
American Reserve Insurance Company. 2/
(b) Exhibits:
(1) Resolutions of the Executive Committee of the
Board of Directors of Great American Reserve
Insurance Company.1/
(2) Separate Account Rules for Rydex Advisor Variable
Annuity Account.1/
(3) Custodian Agreement Between Rydex Advisor
Variable Annuity Account and
_____________________.2/
(4) Investment Advisory Agreement Between Rydex
Advisor Variable Annuity Account and PADCO
Advisors II, Inc.2/
(5) Underwriting Agreement Among Great American
Reserve Insurance Company, Rydex Advisor Variable
Annuity Account, and PADCO Financial Services,
Inc.2/
(6) Form of Variable Annuity Contract.1/
(7) Form of Application for Variable Annuity
Contract.1/
(8) Certificate of Incorporation and Bylaws of Great
American Reserve Insurance Company.1/
(9) Not Applicable.
1/ Filed herewith.
2/ To be filed by amendment.
3/ None.
<PAGE> C-1
<PAGE>
Item 28. (Cont'd)
(10) Not Applicable.
(11) Subaccount Administration Agreement Between Rydex
Advisor Variable Annuity Account and PADCO
Service Company, Inc.2/
(12) Opinion of Great American Reserve Insurance
Company Counsel.2/
(13)(a) Consent of Coopers & Lybrand LLP.2/
(13)(b) Consent of Jorden Burt Berenson & Johnson LLP.2/
(14) Not Applicable.
(15) Not Applicable.
(16) Not Applicable.
(17) Financial Data Schedule.2/
1/ Filed herewith.
2/ To be filed by amendment.
3/ None.
Item 29. Directors and Officers of the Insurance Company
The following table sets forth certain information
regarding the executive officers of Great American Reserve who
are engaged directly or indirectly in activities relating to
the Separate Account or the Contracts. Their principal
business address is 11815 N. Pennsylvania Street, Carmel,
Indiana 46032.
Positions and Offices with
Name Great American Reserve
Stephen C. Hilbert Chief Executive Officer and
Director
Lynn C. Tyson President and Director
Donald F. Gongaware Chief Operations Officer and
Director
Rollin M. Dick Chief Financial Officer and
Director
<PAGE> C-2
<PAGE>
Lawrence W. Inlow Secretary, General Counsel
and Director
Ngaire E. Cuneo Director
Item 30. Persons Controlled by or Under Common Control with
the
Insurance Company or Registrant
The following information concerns those companies that
may be deemed to be controlled by or under common control with
Great American Reserve Insurance Company:
Conseco, Inc. (Indiana) (publicly traded)
Conseco Capital Management, Inc. (Delaware) (100%)
Conseco Private Capital Group, Inc. (Indiana) (100%)
Conseco Global Investments, Inc. (Delaware) (100%)
Conseco Risk Management, Inc. (Indiana) (100%)
Wells & Company, Inc. (Indiana) (100%)
CRM Acquisition Company (Indiana) (100%)
Wellsco, Inc. (Indiana) (100%)
Conseco Mortgage Capital, Inc. (Delaware) (100%)
Lincoln American Life Insurance Company (Tennessee)
(100%)
Marketing Distribution Systems Consulting Group, Inc.
Delaware) (100%)
MDS Securities Incorporated (Delaware) (100%)
BankMark School of Business (Delaware) (100%)
CBC Insurance Agency Services, Inc. (Delaware)
(100%)
Bankmark, Inc. (Maine) (100%)
Community Insurance Agency, Inc. (New Hampshire)
(100%)
InveStar Insurance Agency, Inc. (Indiana) (100%)
InveStar Insurance Agency, Inc. (Ohio) (100%)
MDS of New Jersey, Inc. (New Jersey) (100%)
Investment & Insurance Services, Inc.
(Connecticut) (100%)
Marketing Distribution Systems Insurance Agency of
Massachusetts (Massachusetts) (100%)
Marketing Distribution Systems, Inc.
(Pennsylvania) (100%)
CIHC, Incorporated (Delaware) (100%)
Conseco L.L.C. (Delaware) (90%)
Conseco Services, L.L.C. (Indiana) (90%)
<PAGE> C-3
<PAGE>
Bankers National Life Insurance Company (Texas)
(100%)
National Fidelity Life Insurance Company
(Missouri) (100%)
Bankers Life Holding Corporation (Delaware)
(publicly traded)
K.F. Agency Inc. (Illinois) (100%)
Bankers Life Insurance Company of Illinois
(Illinois) (100%)
Bankers Life and Casualty Company (Illinois)
(100%)
Certified Life Insurance Company (California)
(100%)
Jefferson National Life Insurance Company of Texas
(Texas) (100%)
Beneficial Standard Life Insurance Company
(California) (100%)
Great American Reserve Insurance Company (Texas)
(100%)
GARCO Equity Sales, Inc. (Texas) (100%)
CNC Real Estate, Inc. (Delaware) (100%)
Conseco Entertainment, Inc. (Indiana) (100%)
Conseco Entertainment, L.L.C. (Indiana) (99%)
Conseco HPLP, L.L.C. (Indiana) (1%)
Conseco Partnership Management, Inc. (Indiana) (100%)
Conseco Capital Partners II, L.P. (Delaware) (2%)
American Life Group, Inc. (Delaware) (80%)
American Life Holding Company (Delaware) (100%)
American Life Casualty Marketing Division Co.
(Iowa) (100%)
American Life Casualty Insurance Company (Iowa)
(100%)
Vulcan Life Insurance Company (Alabama) (98%)
LPG Acquisition Company (Delaware) (100%)
Item 31. Number of Contract Owners
None.
Item 32. Indemnification
The Board of Managers of the Separate Account is
indemnified by Great American Reserve against claims and
liabilities to which such person may become subject by reason
of having been a member of such Board or by reason of any
action alleged to have been taken or omitted by him as such
member, and the member shall be indemnified for all legal and
<PAGE> C-4
<PAGE>
other expenses reasonably incurred by him in connection with
any such claim or liability; however, no indemnification shall
be made in connection with any claim or liability unless such
person (i) conducted himself in good faith, (ii) in the case
of conduct in his official capacity as a member of the Board
of Directors, reasonably believed that his conduct was at
least not opposed to the best interests of the Separate
Account, and (iii) in the case of any criminal proceeding, had
no reasonable cause to believe that his conduct was unlawful.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to members of the
Board of Managers, officers, and controlling persons of the
Registrant pursuant to the provisions described under
"Indemnification" or otherwise, the Registrant 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 is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses
incurred or paid by a member of the Board of Managers,
officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such member of the Board of Managers, officer, or
controlling person in connection with the securities being
registered, the Registrant 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 33. Business and Other Connections of Investment
Advisers
Each of the directors of the Rydex Advisor Variable
Annuity Account's investment adviser, PADCO Advisors II, Inc.
("PADCO"), Albert P. Viragh, Jr., the Chairman of the Board of
Directors, President, and Treasurer of PADCO, and Amanda C.
Viragh, the Secretary of PADCO, is an employee of PADCO at
6116 Executive Boulevard, Suite 400, Rockville, Maryland
20852. Albert P. Viragh, Jr. also has served (and continues
to serve) as: (i) the Chairman of the Board of Managers and
the President of the Rydex Advisor Variable Annuity Account
since the Rydex Advisor Variable Annuity Account's
establishment as a separate account of Great American Reserve
Insurance Company on April 15, 1996; (ii) the Chairman of the
Board of Directors, the President, and the Treasurer of PADCO
Service Company, Inc. (the "Servicer"), the Rydex Advisor
Variable Annuity Account's registered transfer agent, since
the incorporation of the Servicer in the State of Maryland on
October 6, 1993; (iii) the Chairman of the Board of Directors,
<PAGE> C-5
<PAGE>
the President, and the Treasurer of PADCO Advisors, Inc.
("PADCO I"), a registered investment adviser, since the
incorporation of PADCO I in the State of Maryland on February
5, 1993; and (iv) the Chairman of the Board of Directors, the
President, and the Treasurer of PADCO Financial Services, Inc.
(the "Distributor"), the Rydex Advisor Variable Annuity
Account's principal underwriter, since the incorporation of
the Distributor in the State of Maryland on March 22, 1996.
Item 34. Principal Underwriters
(a) PADCO Financial Services, Inc. acts as principal
underwriter only for the Rydex Advisor Variable
Annuity Account and the Rydex Institutional Money
Market Fund, a series of Rydex Series Trust, a
registered investment adviser advised by PADCO I.
(b) The following table sets forth certain information
regarding directors and officers of PADCO Financial
Services, Inc. The principal business address of
these directors and officers is 6116 Executive
Boulevard, Suite 400, Rockville, Maryland 20852.
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
--------------------- ----------------------- ----------------------
<C> <C> <C>
Albert P. Viragh, Jr. Director, President, Chairman of the Board
and Treasurer of Managers
Amanda C. Viragh Director none
Victor J. Edgar Chief Operating Officer none
and Chief Financial
Officer
Michael P. Byrum Secretary none
Sothara Chin Compliance Officer none
</TABLE>
Item 35. Location of Accounts and Records
The accounts, books, or other documents required to be
maintained by the Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and the rules promulgated
thereunder are in the possession of Great American Reserve
Insurance Company, 11815 North Pennsylvania Street, Carmel,
<PAGE> C-6
<PAGE>
Indiana 46032, or PADCO Advisors II, Inc., 6116 Executive
Boulevard, Rockville, Maryland 20852.
Item 36. Management Services
Not Applicable.
Item 37. Undertakings
(a) The Registrant hereby undertakes to file a post-
effective amendment, using financial statements of
the Registrant which need not be certified, within
four to six months from the effective date of the
Registrant's Securities Act of 1933 registration
statement.
(b) The 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 16 months old for so
long as payments under the Contracts may be
accepted.
(c) The Registrant hereby undertakes to include, as
part of any application to purchase a Contract, a
space that an applicant can check to request a
Statement of Additional Information.
(d) The Registrant hereby undertakes to deliver any
Statement of Additional Information and any
financial statements required to be made available
under this Form promptly upon written or oral
request.
(e) The Registrant is relying on a no-action letter
issued to the American Council of Life Insurance,
published November 28, 1988, relating to Section
403(b)(11) of the Internal Revenue Code and
Sections 22(e), 27(c)(1), and 27(d) of the
Investment Company Act of 1940. The Registrant
hereby represents that it has complied with the
provisions of paragraphs (1) through (4) of said
no-action letter.
<PAGE> C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant's
sponsor, GREAT AMERICAN RESERVE INSURANCE COMPANY, has duly
caused this registration statement to be signed on its behalf
by the undersigned thereunto duly authorized, and the seal of
the sponsor to be hereunto affixed and attested, all in the
City of Carmel, State of Indiana, on the 30th day of April,
1996.
GREAT AMERICAN RESERVE
INSURANCE COMPANY
By: /s/ Lynn C. Tyson
Lynn C. Tyson, President and
Chief Executive Officer,
Great American Reserve
Insurance Company
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT, has duly caused this
registration statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of
Rockville, State of Maryland, on the 30th day of April, 1996.
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
/s/ Albert P. Viragh, Jr.
Albert P. Viragh, Jr., Chairman of
the Board of Managers,
Rydex Advisor Variable Annuity Account
As required by the Securities Act of 1933, this
Registration Statement has been signed by the following
persons in the capacities with the Registrant and on the dates
indicated on this 30th day of April, 1996.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Albert P. Viragh, Jr. Chairman of the Board April 30, 1996
Albert P. Viragh, Jr. of Managers, Principal
Executive Officer, and
President
Member of the Board of _____ __, 1996
Corey A. Colehour Managers
Member of the Board of _____ __, 1996
J. Kenneth Dalton Managers
Member of the Board of _____ __, 1996
Roger Somers Managers
Member of the Board of _____ __, 1996
L. Gregory Gloeckner Managers
/s/ Timothy P. Hagan Vice President, April 30, 1996
Timothy P. Hagan Principal Financial
Officer, and Principal
Accounting Officer
</TABLE>
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT, has duly caused this
registration statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of
Rockville, State of Maryland, on the ___ day of __________,
1996.
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
Albert P. Viragh, Jr., Chairman of
the Board of Managers,
Rydex Advisor Variable Annuity Account
As required by the Securities Act of 1933, this
Registration Statement has been signed by the following
persons in the capacities with the Registrant and on the dates
indicated on this 30th day of April, 1996.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman of the Board _____ __, 1996
Albert P. Viragh, Jr. of Managers, Principal
Executive Officer, and
President
Member of the Board of _____ __, 1996
Corey A. Colehour Managers
Member of the Board of _____ __, 1996
J. Kenneth Dalton Managers
/s/ Roger Somers Member of the Board of April 30, 1996
Roger Somers Managers
Member of the Board of _____ __, 1996
L. Gregory Gloeckner Managers
Vice President, _____ __, 1996
Timothy P. Hagan Principal Financial
Officer, and Principal
Accounting Officer
</TABLE>
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT, has duly caused this
registration statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of
Rockville, State of Maryland, on the ___ day of __________,
1996.
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
Albert P. Viragh, Jr., Chairman of
the Board of Managers,
Rydex Advisor Variable Annuity Account
As required by the Securities Act of 1933, this
Registration Statement has been signed by the following
persons in the capacities with the Registrant and on the dates
indicated on this 30th day of April, 1996.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman of the Board _____ __, 1996
Albert P. Viragh, Jr. of Managers, Principal
Executive Officer, and
President
Member of the Board of _____ __, 1996
Corey A. Colehour Managers
/s/ J. Kenneth Dalton Member of the Board of April 30, 1996
J. Kenneth Dalton Managers
Member of the Board of _____ __, 1996
Roger Somers Managers
Member of the Board of _____ __, 1996
L. Gregory Gloeckner Managers
Vice President, _____ __, 1996
Timothy P. Hagan Principal Financial
Officer, and Principal
Accounting Officer
</TABLE>
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT, has duly caused this
registration statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of
Rockville, State of Maryland, on the __ day of __________,
1996.
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
Albert P. Viragh, Jr., Chairman of
the Board of Managers,
Rydex Advisor Variable Annuity Account
As required by the Securities Act of 1933, this
Registration Statement has been signed by the following
persons in the capacities with the Registrant and on the dates
indicated on this 30th day of April, 1996.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman of the Board _____ __, 1996
Albert P. Viragh, Jr. of Managers, Principal
Executive Officer, and
President
/s/ Corey A. Colehour Member of the Board of April 30, 1996
Corey A. Colehour Managers
Member of the Board of _____ __, 1996
J. Kenneth Dalton Managers
Member of the Board of _____ __, 1996
Roger Somers Managers
Member of the Board of _____ __, 1996
L. Gregory Gloeckner Managers
Vice President, ____ __, 1996
Timothy P. Hagan Principal Financial
Officer, and Principal
Accounting Officer
</TABLE>
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT, has duly caused this
registration statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of
Rockville, State of Maryland, on the ___ day of __________,
1996.
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
Albert P. Viragh, Jr., Chairman of
the Board of Managers,
Rydex Advisor Variable Annuity Account
As required by the Securities Act of 1933, this
Registration Statement has been signed by the following
persons in the capacities with the Registrant and on the dates
indicated on this 30th day of April, 1996.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman of the Board _____ __, 1996
Albert P. Viragh, Jr. of Managers, Principal
Executive Officer, and
President
Member of the Board of _____ __, 1996
Corey A. Colehour Managers
Member of the Board of _____ __, 1996
J. Kenneth Dalton Managers
Member of the Board of _____ __, 1996
Roger Somers Managers
/s/ L. Gregory Gloeckner Member of the Board of April 30, 1996
L. Gregory Gloeckner Managers
Vice President, _____ __, 1996
Timothy P. Hagan Principal Financial
Officer, and Principal
Accounting Officer
</TABLE>
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Albert P. Viragh, Jr., and Timothy P.
Hagan, and each of them, jointly and severally, his or her
true and lawful attorney-in-fact and agent, each with full
power of substitution and resubstitution, for him or her and
in his or her name, place, and stead, in and all of his or her
capacities as a Manager of the Rydex Advisor Variable Annuity
Account (the "Separate Account"), a segregated investment
account of the Great American Reserve Insurance Company, a
stock company organized under the laws of the State of Texas,
to sign on his or her behalf any and all Registration
Statements (including any post-effective amendments to
Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as
amended, filed by the Separate Account and any amendments and
supplements thereto, and other documents in connection
therewith, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises,
as fully as to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, and each of them, may
lawfully do or cause to be done by virtue hereof. This power
of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 30th day of April, 1996.
/s/ Roger Somers
Roger Somers
Member of the Board of Managers
Rydex Advisor Variable Annuity
Account
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Albert P. Viragh, Jr., and Timothy P.
Hagan, and each of them, jointly and severally, his or her
true and lawful attorney-in-fact and agent, each with full
power of substitution and resubstitution, for him or her and
in his or her name, place, and stead, in and all of his or her
capacities as a Manager of the Rydex Advisor Variable Annuity
Account (the "Separate Account"), a segregated investment
account of the Great American Reserve Insurance Company, a
stock company organized under the laws of the State of Texas,
to sign on his or her behalf any and all Registration
Statements (including any post-effective amendments to
Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as
amended, filed by the Separate Account and any amendments and
supplements thereto, and other documents in connection
therewith, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises,
as fully as to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, and each of them, may
lawfully do or cause to be done by virtue hereof. This power
of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 30th day of April, 1996.
/s/ Corey A. Colehour
Corey A. Colehour
Member of the Board of Managers
Rydex Advisor Variable Annuity
Account
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Albert P. Viragh, Jr., and Timothy P.
Hagan, and each of them, jointly and severally, his or her
true and lawful attorney-in-fact and agent, each with full
power of substitution and resubstitution, for him or her and
in his or her name, place, and stead, in and all of his or her
capacities as a Manager of the Rydex Advisor Variable Annuity
Account (the "Separate Account"), a segregated investment
account of the Great American Reserve Insurance Company, a
stock company organized under the laws of the State of Texas,
to sign on his or her behalf any and all Registration
Statements (including any post-effective amendments to
Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as
amended, filed by the Separate Account and any amendments and
supplements thereto, and other documents in connection
therewith, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises,
as fully as to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, and each of them, may
lawfully do or cause to be done by virtue hereof. This power
of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 30th day of April, 1996.
/s/ J. Kenneth Dalton
J. Kenneth Dalton
Member of the Board of Managers
Rydex Advisor Variable Annuity
Account
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints William P. Latimer and Karl W.
Kindig, and each of them, jointly and severally, his or her
true and lawful attorney-in-fact and agent, each with full
power of substitution and resubstitution, for him or her and
in his or her name, place, and stead, in and all of his or her
capacities as a Manager of the Rydex Advisor Variable Annuity
Account (the "Separate Account"), a segregated investment
account of the Great American Reserve Insurance Company, a
stock company organized under the laws of the State of Texas,
to sign on his or her behalf any and all Registration
Statements (including any post-effective amendments to
Registration Statements) under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, as
amended, filed by the Separate Account and any amendments and
supplements thereto, and other documents in connection
therewith, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises,
as fully as to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, and each of them, may
lawfully do or cause to be done by virtue hereof. This power
of attorney hereby revokes any and all powers of attorney
previously granted by the undersigned in connection with the
aforementioned matters.
DATED this 25th day of April, 1996.
/s/ L. Gregory Gloeckner
L. Gregory Gloeckner
Member of the Board of Managers
Rydex Advisor Variable Annuity
Account
<PAGE>
<PAGE>
EXHIBITS
<PAGE>
<PAGE>
EXHIBIT INDEX
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-------- -----------------------
<S> <C>
(1) Resolutions of Executive
Committee of Board of Directors
of Great American Reserve
Insurance Company
(2) Separate Account Rules for Rydex
Advisor Variable Annuity Account
(6) Form of Variable Annuity Contract
(7) Form of Application for Variable
Annuity Contract
(8) Certificate of Incorporation and
Bylaws of Great American Reserve
Insurance Company
<PAGE>
<PAGE>
</TABLE>
<PAGE>
<PAGE>
WRITTEN CONSENT TO RESOLUTIONS
OF THE BOARD OF DIRECTORS OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
The undersigned, being all of the members of the Board of
Directors of Great American Reserve Insurance Company (the
"Company") hereby unanimously consent to the adoption of the
following resolutions without a meeting of the Board of
Directors of the Company;
RESOLVED, that the Company develop and implement a
program for the offer and sale of individual fixed and
variable annuity contracts (the "Contracts") with a fixed
account option, to be issued by the Company; and
RESOLVED, that the Company establish a separate account
pursuant to the Texas Insurance Code being designated "Rydex
Variable Annuity Account" (the "Variable Account"); and
RESOLVED, that the Contracts issued pursuant to these
resolutions from the Variable Account shall provide that the
assets of the Variable Account, equal to the reserves and
other contract liabilities with respect to the Variable
Account, are not chargeable with liabilities out of any other
business the Company may conduct; and
RESOLVED, that the filing with the U.S. Securities and
Exchange Commission pursuant to Section 5 of the Securities
Act of 1933 of a Form N-3 registration statement for the
Variable Account and Contracts, including the filing of any
amendments thereto and all matters properly incident thereto,
is hereby authorized and approved; and
RESOLVED, that the filing with the U.S. Securities and
Exchange Commission pursuant to Section 8 of the Investment
Company Act of 1940 ("1940 Act"), registering the Variable
Account as a management investment company under said Act,
including the filing of any amendments thereto and all matters
properly incident thereto, is hereby authorized and approved;
and
RESOLVED, that the filing with the U.S. Securities and
Exchange Commission of applications, and amendments thereto,
for exemptions from the provisions of the Investment Company
Act of 1940 and the rules and regulations thereunder as may be
necessary or appropriate to effectuate the purposes of these
resolutions, are hereby authorized and approved; and
RESOLVED, that the officers of the Company be, and each
of them hereby is, authorized to make all actions necessary to
maintain the registration of the Variable Account as a
management investment company under the 1940 Act, and to take
<PAGE>
<PAGE>
such related actions as they deem necessary or appropriate to
carry out the foregoing, including, without limitation, the
following: establishing one or more sub-accounts of the
Variable Account to which payments under the Contracts will be
allocated in accordance with orders received from Contract
owners or Participants; reserving to the officers the
authority to increase or decrease the number of sub-accounts
in the Variable Account as they deem necessary or appropriate;
initially establishing the fundamental and non-fundamental
investment policies and investment restrictions of each of the
sub-accounts of the Variable Account as the officers may
direct consistent with provisions of the Contracts issued by
the Company; and
RESOLVED, that in connection with the Variable Account
and the offer and sale of Contracts, the officers of the
Company be, and each of them hereby is, authorized to execute
and file with such authorities of the states of the United
States of America, and to take such related actions as they
deem necessary or appropriate to carry out the foregoing,
including, without limitation, the following: such
applications, notices, certificates, affidavits, powers of
attorney, consents of service of process, covenants of an
issuer, bonds, escrow and impending agreements, and other
writing and instruments as may be necessary or appropriate in
order to render permissible the offering and sale of Contracts
in any jurisdiction within the United States of America; the
forms of any resolutions required by any state authority to be
filed in connection with any of the documents or instruments
referred to above be, and the same hereby are, adopted by this
Board of Directors as if such resolutions were fully set forth
herein if (i) in the opinion of the officers of the Company,
the adoption of such resolutions is necessary or advisable,
and (ii) the Secretary or any Assistant Secretary of the
Company evidences the adoption of any such resolution by
filing a copy of such resolution with this Written Consent;
and
RESOLVED, that the officers of the Company be and hereby
are authorized to take such further action and to execute such
additional documents as they deem necessary or appropriate to
effectuate the purposes of the foregoing resolutions.
The resolutions adopted pursuant to this Written Consent
shall be effective as of April 15, 1996.
/s/Ngaire E. Cuneo /s/ Stephen C. Hilbert
Ngaire E. Cuneo Stephen C. Hilbert
/s/ Rollin M. Dick /s/ Lawrence W. Inlow
Rollin M. Dick Lawrence W. Inlow
<PAGE> 2
<PAGE>
/s/ Donald F. Gongaware /s/ Lynn C. Tyson
Donald F. Gongaware Lynn C. Tyson
<PAGE> 3
<PAGE>
<PAGE>
<PAGE>
GREAT AMERICAN RESERVE INSURANCE COMPANY
INDIVIDUAL AND GROUP VARIABLE DEFERRED ANNUITY CONTRACTS
OF VARIABLE ANNUITY SEPARATE ACCOUNTS C, E and G
and RYDEX ADVISOR VARIABLE ANNUITY SEPARATE ACCOUNT
SUMMARY OF RULES AND ADMINISTRATIVE POLICIES
ARTICLE I
GENERAL
Section 1. Names. These separate accounts are the Great
American Reserve Insurance Company Variable Annuity Account C,
Account E and Account G and Rydex Advisor Variable Annuity
Account (collectively, called the "Separate Accounts").
Section 2. Offices. The administration office of the
Separate Accounts is at 11815 N. Pennsylvania Street, Carmel,
Indiana.
Section 3. Purposes. The purposes of the Separate
Accounts are to provide, in accordance with the provisions of
Texas Insurance Code, Article 3.75, separate accounts for the
assets set aside separate and apart for the sole benefit of
the Individual and Group Variable Deferred Annuity Contracts
("Contracts") issued by Great American Reserve Insurance
Company ("Company") in connection with retirement plans, both
those which quality for special tax treatment under the
federal Internal Revenue Code and those that do not.
<PAGE>
<PAGE>
ARTICLE II
MANAGEMENT OF THE SEPARATE ACCOUNTS
The Company is the sole owner of the assets of the
Separate Accounts. The Company may take any action which, in
its judgment, is necessary or desirable for carrying out its
duties in connection with management of the Separate Accounts,
and has, at a minimum, the following rights and obligations:
(a) the Company invests all contributions made by the
Contractholder in accordance with the terms and
provisions of the Contracts;
(b) the Company keeps the assets in the Separate
Accounts fully invested at all times; and
(c) the Company mails the Contractholder, first class,
United States mail, at least once in every Contract Year,
addressed to the last active address known to the
Company, a statement reporting the investments held in
the respective Separate Account, the total value of the
Contractholder's proportionate share of the respective
Separate Account, and a report of any amounts held in the
General Account to the order of the Contractholder.
ARTICLE III
ADMINISTRATION OF THE SEPARATE ACCOUNTS
Section 1. Separate Account Administration. The
Separate Accounts are administered in accordance with the
terms of the Contracts, the Investment Policy of the
<PAGE> - 2 -
<PAGE>
respective Separate Accounts, and any necessary or appropriate
administrative or other policies and procedures established
from time to time by the officers of the Company.
Section 2. Investment Policy. The Investment Policy of
the Separate Accounts (except the Rydex Account) is that the
assets of each Separate Account is invested in mutual funds or
the portfolios of series mutual funds which, in the Company's
judgment, fit the purposes of the respective Separate Account
and are described in the current prospectus of the respective
Separate Account. The Rydex Advisors Variable Annuity Account
is invested in such securities and other investments, pursuant
to the supervision of its Board of Managers, by selected
investment advisers in accordance with the Investment Policy
set forth in the current prospectus of the Account.
ARTICLE IV
VALUE OF THE SEPARATE ACCOUNTS
The value of the assets of each Separate Account (the
"Separate Account Value") on any date is equal to the value of
the security interests held by it as determined in accordance
with the respective Contract and the respective prospectus of
such Separate Account.
ARTICLE V
CHARGES AGAINST THE SEPARATE ACCOUNTS
Charges consist of:
<PAGE> - 3 -
<PAGE>
(a) Contract expense charges shown in the Contracts
assessed by the Company; and
(b) any premium taxes incurred by the Company as a
result of the receipt of contributions by the Company
and/or the allocation of the contributions to the
respective Separate Account.
At the Company's option, all or any portion of the
charges described above shall be deductible from a
Contractholder's proportionate share of distributions, if any,
or any amounts credited to the General Account, as set forth
in the respective Contract and prospectus. In the case of the
Rydex Advisor Variable Annuity Account, management fees and
other operating expenses are charged to the Account, and other
charges are made to each Contractholder's account as set forth
in its Contract and prospectus.
ARTICLE VI
AMENDMENTS AND INTERPRETATIONS
Section 1. Amendments. The Summary of Rules and
Administrative Policies, subject to applicable law, may be
altered, amended or repealed by the executive officers of the
Company as is necessary or appropriate to carry out the
purposes of the Separate Accounts.
Section 2. Interpretations. All questions of
interpretation of these Rules and Policies and their
applicability shall be determined by the officers of the
Company.
<PAGE> - 4 -
<PAGE>
<PAGE>
<PAGE>
GREAT AMERICAN RESERVE INSURANCE COMPANY
Administrative Office
11815 N. Pennsylvania Street, Carmel, Indiana 46032-4572
Telephone: (317) 817-3700
A Stock Company
GREAT AMERICAN RESERVE INSURANCE COMPANY ("Great American
Reserve") agrees with the Contract Owner to provide benefits
to the Contract Owner, subject to the provisions set forth in
this Contract and in consideration of the application and
Purchase Payments received from the Contract Owner.
RIGHT TO EXAMINE CONTRACT: Within 10 days of the date of
receipt of this Contract by a Contract Owner, it may be
returned by delivering or mailing it to Great American
Reserve's Administrative Office. When we receive the
Contract, it will be voided as if it had never been in force
and any premiums paid will be refunded.
READ YOUR CONTRACT CAREFULLY
This is a legal Contract between the Contract Owner and Great
American Reserve Insurance Company.
Signed as of the Contract date at Great American Reserve's
Administrative Office.
SecretaryPresident
INDIVIDUAL DEFERREDVARIABLE ANNUITY CONTRACTFLEXIBLE PREMIUMS
Non-participating
ANNUITY PAYMENTS AND WITHDRAWAL VALUES PROVIDED BY THIS
CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
CONTRACT SCHEDULE
CONTRACT NUMBER: [SPECIMEN]CONTRACT DATE: [__________,1996]
CONTRACT OWNER: [NAME]ANNUITANT: [NAME]
JOINT CONTRACT OWNER: [NAME]ANNUITY DATE: [_____]
PURCHASE PAYMENTS UNDER THE CONTRACT:
INITIAL PURCHASE PAYMENT: [$________________]
MINIMUM SUBSEQUENT PURCHASE PAYMENT: [$1,000]
MAXIMUM PURCHASE PAYMENT: [$500,000 without Great American
Reserve's prior approval]
SEPARATE ACCOUNT: Rydex Advisor Variable Annuity Account.
<PAGE>
<PAGE>
[Eligible Subaccounts:
The Nova Subaccount
The Ursa Subaccount
The OTC Subaccount
The Precious Metals Subaccount
The Bond Subaccount
The Juno Subaccount
The Money Market I Subaccount
The Money Market II Subaccount]
ALLOCATION GUIDELINES:
If the Purchase Payments and forms required to issue a
Contract are in good order, the initial Purchase Payments will
be credited to the Money Market I Subaccount and/or the Fixed
Account after receipt at the Administrative Office .
Additional Purchase Payments will be credited initially to the
Money Market Subaccounts and/or the Fixed Account when they
are received.
Fourteen days after the Contract Date, the Contract Owner
(through his or her Financial Advisor) may transfer to any
investment option, including all Subaccounts (except Money
Market II) and the Fixed Account. Great American Reserve
reserves the right to add or delete Subaccounts in the future.
Allocation percentages must be in whole numbers.
Upon Great American Reserve's notification of death,
resignation, or termination of a Financial Advisor, all
amounts allocated to the Separate Account will be reallocated
to the Money Market II Subaccount, until a new Financial
Advisor is appointed, or the Contract Owner transfers Separate
Account Value to the Fixed Account, or surrenders the
Contract.
WITHDRAWALS:
WITHDRAWAL CHARGE (as a percentage of Purchase Payments):
Withdrawal Charge7%7%6%5%4%3%2%0%
Year Since Payment 12345678th and thereafter
MINIMUM PARTIAL WITHDRAWAL: $500
MINIMUM CONTRACT VALUE WHICH MUST REMAIN IN CONTRACT AFTER A
PARTIAL WITHDRAWAL: $10,000 ($3,500 for Qualified Contracts).
If a partial withdrawal plus any applicable withdrawal charge
would reduce the Contract Value to less than $10,000 ($3,500
for Qualified Contracts), Great American Reserve reserves the
right to treat the partial withdrawal as a total withdrawal of
Contract Value. Great American Reserve reserves the right to
increase or decrease this amount.
<PAGE> - 2 -
<PAGE>
FREE WITHDRAWAL AMOUNT: [Up to 10% of the Contract Value once
per contract year and withdrawals authorized by the Contract
Owner to pay the Financial Advisor to deduct the asset
allocation advisory fee.]
FIXED ACCOUNT MINIMUM INTEREST RATE GUARANTEE: 3% per year.
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of the
average daily net assets of each Subaccount):
Mortality and Expense Risk Charge: 1.25% as a percentage of a
Subaccount's average daily net assets
Administrative Fee: 0.15% as a percentage of a Subaccount's
average daily net assets
Asset Allocation Advisory Fee: [1.75% as a percentage of a
Subaccount's average daily net assets from all Subaccounts
except Money Market II. Unless and until the necessary
regulatory approvals are obtained from the Internal Revenue
Service and the Securities Exchange Commission to permit the
deduction of this fee, this fee will not be deducted as a
percentage of a Subaccount's average daily net assets. The
Contract Owner will be solely responsible for payment of the
applicable fee to his or her Financial Advisor.]
Subaccount Administration Fee paid to the Servicer, [PADCO
Service Company, Inc.] (as a percentage of a Subaccount's
average daily net assets):
[The Nova Subaccount 0.25%
The Ursa Subaccount 0.25%
The OTC Subaccount 0.20%
The Precious Metals Subaccount 0.20%
The U.S. Government Bond Subaccount 0.20%
The Juno Subaccount 0.25%
The Market I Subaccount 0.20%
The Money Market II Subaccount] 0.00%
TRANSFERS:
NUMBER OF TRANSFERS PERMITTED: There are currently no limits
on the number of transfers that may be made during the
Accumulation Period, except for limitations applicable to the
Fixed Account.
TRANSFER FEE: Great American Reserve does not assess a
transfer fee on transfers during the Accumulation Period.
MINIMUM AMOUNT TO BE TRANSFERRED: $500 (from any Subaccount)
or the Contract Owner's entire interest in any Subaccount or
the Fixed Account, if less.
<PAGE> - 3 -
<PAGE>
MINIMUM AMOUNT WHICH MUST REMAIN IN EACH SUBACCOUNT AFTER A
TRANSFER: No limit, however, Great American Reserve reserves
the right to set limits in the future.
MAXIMUM AMOUNT WHICH MAY BE TRANSFERRED FROM THE FIXED ACCOUNT
TO THE SEPARATE ACCOUNT: Limited to a maximum of 20% of a
Contract Owner's Fixed Account Value once in any six-month
period.
ENDORSEMENTS:
Individual Retirement Annuity (IRA)Section 403(b) Annuity
(TSA)
ADMINISTRATIVE OFFICE:
Great American Reserve Insurance Company
Administrative Office
11815 N. Pennsylvania Street
Carmel, Indiana 46032
(800) 824-2726
(317) 817-3700
<PAGE> - 4 -
<PAGE>
TABLE OF CONTENTS
CONTRACT SCHEDULE . . . . . . . . . . . . . . . . . . . . . 2
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 6
SEPARATE ACCOUNT . . . . . . . . . . . . . . . . . . . . . 7
GENERAL DESCRIPTION . . . . . . . . . . . . . . . . . . . . 7
ASSET ALLOCATION ADVISORY SERVICES . . . . . . . . . . . . 7
VALUATION OF ASSETS . . . . . . . . . . . . . . . . . . . . 7
ACCUMULATION UNITS . . . . . . . . . . . . . . . . . . . . 7
ACCUMULATION UNIT VALUE . . . . . . . . . . . . . . . . . . 7
VALUATION PERIODS . . . . . . . . . . . . . . . . . . . . . 7
MORTALITY AND EXPENSE RISK CHARGE . . . . . . . . . . . . . 7
ADMINISTRATIVE FEE . . . . . . . . . . . . . . . . . . . . 7
ASSET ALLOCATION ADVISORY FEE . . . . . . . . . . . . . . . 8
SUBACCOUNT ADMINISTRATION FEE . . . . . . . . . . . . . . . 8
TRANSFER RIGHTS . . . . . . . . . . . . . . . . . . . . . . 8
TERMINATION OF THE FINANCIAL ADVISOR . . . . . . . . . . . 8
FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . 8
GENERAL DESCRIPTION . . . . . . . . . . . . . . . . . . . . 8
FIXED ACCOUNT VALUE . . . . . . . . . . . . . . . . . . . . 8
INTEREST TO BE CREDITED . . . . . . . . . . . . . . . . . . 8
TRANSFER RIGHTS . . . . . . . . . . . . . . . . . . . . . . 8
PURCHASE PAYMENTS . . . . . . . . . . . . . . . . . . . . . 8
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ALLOCATION OF PURCHASE PAYMENTS . . . . . . . . . . . . . . 8
CONTRACT VALUE . . . . . . . . . . . . . . . . . . . . . . 9
TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . 9
WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . 9
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 9
WITHDRAWAL CHARGE . . . . . . . . . . . . . . . . . . . . . 9
FREE WITHDRAWAL AMOUNT . . . . . . . . . . . . . . . . . . 9
PAYMENT ON DEATH . . . . . . . . . . . . . . . . . . . . . 9
DEATH OF CONTRACT OWNER DURING THE ACCUMULATION PERIOD . . 9
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD . . . . 9
DEATH OF CONTRACT OWNER AFTER THE ANNUITY DATE . . . . . . 10
DEATH OF ANNUITANT . . . . . . . . . . . . . . . . . . . . 10
PAYMENT OF DEATH BENEFIT . . . . . . . . . . . . . . . . . 10
BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . . 10
CHANGE OF BENEFICIARY . . . . . . . . . . . . . . . . . . . 10
SUSPENSION OR DEFERRAL OF PAYMENTS . . . . . . . . . . . . 10
CONTRACT OWNER, ANNUITANT, OWNERSHIP, ASSIGNMENT . . . . . 10
CONTRACT OWNER . . . . . . . . . . . . . . . . . . . . . . 10
JOINT CONTRACT OWNER . . . . . . . . . . . . . . . . . . . 11
ANNUITANT . . . . . . . . . . . . . . . . . . . . . . . . . 11
ASSIGNMENT OF A CONTRACT . . . . . . . . . . . . . . . . . 11
ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . 11
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ANNUITY DATE . . . . . . . . . . . . . . . . . . . . . . . 11
SELECTION OF AN ANNUITY OPTION . . . . . . . . . . . . . . 11
ANNUITY OPTIONS . . . . . . . . . . . . . . . . . . . . . . 11
OPTION 1. LIFE ANNUITY . . . . . . . . . . . . . . . . . . 11
OPTION 2. LIFE ANNUITY WITH GUARANTEED PERIODS . . . . . . 11
<PAGE> - 5 -
<PAGE>
OPTION 3. INSTALLMENT REFUND LIFE ANNUITY . . . . . . . . . 11
OPTION 4. PAYMENT FOR A FIXED PERIOD . . . . . . . . . . . 11
OPTION 5. JOINT AND SURVIVOR ANNUITY . . . . . . . . . . . 11
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS . . . . . . . . . 12
FIXED ANNUITY . . . . . . . . . . . . . . . . . . . . . . . 12
MORTALITY TABLES . . . . . . . . . . . . . . . . . . . . . 12
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 12
THE CONTRACT . . . . . . . . . . . . . . . . . . . . . . . 12
MISSTATEMENT OF AGE . . . . . . . . . . . . . . . . . . . . 12
INCONTESTABILITY . . . . . . . . . . . . . . . . . . . . . 12
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . 12
NON-PARTICIPATING . . . . . . . . . . . . . . . . . . . . . 12
EVIDENCE OF SURVIVAL . . . . . . . . . . . . . . . . . . . 12
PREMIUM TAXES AND OTHER TAXES . . . . . . . . . . . . . . . 12
PROOF OF AGE AND SEX . . . . . . . . . . . . . . . . . . . 12
PROTECTION OF PROCEEDS . . . . . . . . . . . . . . . . . . 12
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
REGULATORY REQUIREMENTS . . . . . . . . . . . . . . . . . . 13
SETTLEMENT OPTION TABLES . . . . . . . . . . . . . . . . . 14
ACCUMULATION TABLE . . . . . . . . . . . . . . . . . . . . 16
<PAGE> - 6 -
<PAGE>
DEFINITIONS
ACCUMULATION UNIT:
An accounting unit of measure used to compute the value of a
Contract Owner's interest in a Subaccount prior to the Annuity
Date.
ADMINISTRATIVE OFFICE:
The office indicated on the Contract Schedule of this Contract
to which notices and Purchase Payments must be sent. All sums
payable to Great American Reserve under this Contract are
payable only at the Administrative Office or an address
designated by Great American Reserve.
AGE:
The age of any Contract Owner or Annuitant on his or her last
birthday. For Joint Contract Owners, all provisions which are
based on age are based on the age of the older of the Joint
Contract Owners.
ANNUITANT:
The named individual on whose continuation of life annuity
payments may depend.
ANNUITY:
A series of payments for life; or for life with guaranteed
periods; or for the installment refund period; or for a
certain period; or to a joint and surviving Annuitant.
ANNUITY DATE:
The date on which annuity payments begin. The Annuity Date
is shown on the Contract Schedule.
BENEFICIARY:
The persons to whom payment is to be made on the death of the
Contract Owner.
CODE:
The Internal Revenue Code of 1986, as amended.
CONTRACT DATE:
The date a Contract is issued to a Contract Owner. The
Contract takes effect on the Contract Date as shown on the
Contract Schedule.
CONTRACT OWNER:
The person entitled to exercise all rights under this
Contract.
CONTRACT VALUE:
The sum of the amounts allocated to the Fixed Account and
amounts allocated to the Separate Account.
FINANCIAL ADVISOR:
A registered investment adviser or an investment adviser who
is exempt from registration with the Securities and Exchange
Commission selected to provide a Contract Owner's asset
allocation or market timing investment advisory services.
<PAGE> - 7 -
<PAGE>
FIXED ACCOUNT:
The general account of Great American Reserve which provides
guaranteed values and periodically adjusted interest rates.
FIXED ANNUITY:
A series of periodic payments of predetermined amounts made
after the Annuity Date that do not vary with investment
experience.
GENERAL ACCOUNT:
The assets of Great American Reserve with the exception of
the Separate Account and other segregated asset accounts.
JOINT CONTRACT OWNER:
If named, a person entitled to exercise all rights under the
Contract along with the Contract Owner. Any Joint Contract
Owner must be the spouse of the Contract Owner.
PURCHASE PAYMENTS:
Premium payments made by a Contract Owner to Great American
Reserve under the terms of this Contract.
SEPARATE ACCOUNT:
The segregated asset account that Great American Reserve has
established pursuant to the provisions of the insurance code
of the State of Texas, and identified as the Rydex Advisor
Variable Annuity Account.
SEPARATE ACCOUNT VALUE:
The value of the portion of a Contract Owner's Contract Value
allocated to the Separate Account.
SUBACCOUNT:
A segment of the Separate Account consisting of a portfolio
of investment securities.
TRANSACTION CUT-OFF TIME:
The cut-off time on each valuation day for all Subaccounts
trading activity, including transfers and withdrawals. With
respect to all purchases and withdrawals, this time is 2:30
P.M. Eastern Time. With respect to transfers for the Nova,
Ursa and OTC Subaccounts, this time is 3:30 P.M. Eastern Time;
for the Precious Metals Subaccount, this time is 3:15 P.M.
Eastern Time; for the Bond and Juno Subaccounts, this time is
2:30 P.M. Eastern Time; and for the Money Market I and Money
Market II Subaccounts (the "Money Market Subaccounts"), and
the Fixed Account, this time is 4:00 P.M. Eastern Time. For
transfers involving different transaction end times, the
earlier of the times indicated above applies.
VALUATION DATE:
Each day the New York Stock Exchange is open for business.
VALUATION PERIOD:
The interval from one Valuation Date of any Subaccount to the
next Valuation Date, measured from the time each day the
Subaccount is valued.
WRITTEN REQUEST:
A request in writing, in a form satisfactory to Great
American Reserve.
SEPARATE ACCOUNT
<PAGE> - 8 -
<PAGE>
GENERAL DESCRIPTION:
The Separate Account is designated on the Contract Schedule
and consists of assets set aside by Great American Reserve,
which are kept separate from that of the general assets and
all other separate account assets of Great American Reserve.
The assets of the Separate Account equal to reserves and other
liabilities will not be charged with liabilities arising out
of any other business Great American Reserve may conduct.
Separate Account assets are divided into Subaccounts. The
Subaccounts which are available under this Contract are listed
on the Contract Schedule. Great American Reserve may, from
time to time, add to or delete from the Subaccounts shown on
the Contract Schedule.
ASSET ALLOCATION ADVISORY SERVICES:
This Contract is sold only to Contract Owners who are
provided asset allocation or market timing services by
investment advisors registered, or excluded from registration,
under the Investment Advisers Act of 1940, to whom the asset
allocation advisory fees are paid. Asset allocation services
consist of making allocation and transfer decisions with
respect to your Contract Value. You are responsible for
selecting and supervising your Financial Advisor and must
execute a power of attorney authorizing your Financial Advisor
to provide asset allocation services on your behalf.
VALUATION OF ASSETS:
The assets of the Separate Account (except for the Money
Market Subaccounts) are valued at their fair market value in
accordance with procedures of Great American Reserve. The
Money Market Subaccounts utilize the amortized cost method of
valuing their portfolio securities.
ACCUMULATION UNITS:
Accumulation Units shall be used to account for all amounts
allocated to or withdrawn from the Subaccounts as a result of
Purchase Payments, withdrawals, transfers, or fees and
charges. Great American Reserve will determine the number of
Accumulation Units of a Subaccount purchased or canceled.
This will be done by dividing the amount allocated to the
Subaccount by the dollar value of one Accumulation Unit for
that Subaccount for the Valuation Period when the Subaccount
was established.
ACCUMULATION UNIT VALUE:
The Accumulation Unit Value for each Subaccount was
arbitrarily set at $10 when the Subaccount was established.
The value of an Accumulation Unit may increase or decrease
from one Valuation Period to the next. The value for any
Valuation Period is determined by dividing the current market
value of total Subaccount assets, less liabilities, by the
total number of units of that Subaccount outstanding.
VALUATION PERIODS:
The valuation period is the interval from one valuation day
of any Subaccount to the next valuation day, measured from the
time each day the Subaccount is valued.
<PAGE> - 9 -
<PAGE>
MORTALITY AND EXPENSE RISK CHARGE:
Great American Reserve deducts a daily mortality and expense
risk charge from each Subaccount which is equal, on an annual
basis, to the amount shown on the Contract Schedule. The
mortality and expense risk charge compensates Great American
Reserve for the risk of guaranteeing not to increase the
administrative fee regardless of actual administrative costs
and for the mortality guarantees we make under the Contract.
ADMINISTRATIVE FEE:
Great American Reserve deducts a daily administrative fee
from each Subaccount which is equal, on an annual basis, to
the amount shown on the Contract Schedule. The administrative
fee compensates Great American Reserve for the expenses
related to the administration of this Contract.
ASSET ALLOCATION ADVISORY FEE:
Asset allocation advisory services are provided by Financial
Advisors to whom an asset allocation advisory fee is paid
equal to an annual rate applied to the daily net assets of
each Subaccount (except Money Market II) as shown on the
Contract Schedule.
SUBACCOUNT ADMINISTRATION FEE:
Each Subaccount (except Money Market II) pays a daily
Subaccount administration fee to the Servicer, which is equal
on an annual basis to rates shown on the Contract Schedule.
The Subaccount administration fee compensates the Servicer for
expenses related to providing asset allocation administrative
services to the Subaccounts (except Money Market II).
TRANSFER RIGHTS:
A Contract Owner, through asset allocation advisory services,
may transfer Separate Account Value among the Subaccounts
(except Money Market II) and to the Fixed Account subject to
the conditions as shown on the Contract Schedule.
TERMINATION OF THE FINANCIAL ADVISOR:
If a Contract Owner decides to change his or her Financial
Advisor, he or she may select, by Written Request, a new
Financial Advisor concurrently with the termination of the
current Financial Advisor. After Great American Reserve
receives notification of the death, resignation or termination
of a Contract Owner's Financial Advisor, it will (unless it
concurrently receives the Written Request naming the new
Financial Advisor), transfer all of the Contract Owner's
Separate Account Value into Money Market II where the Contract
Owner will not be charged the asset allocation advisory fee.
Money Market II is available only during the period after the
death, termination or resignation of the Contract Owner's
Financial Advisor until the appointment of a replacement
Financial Advisor. Until a Contract Owner appoints a new
Financial Advisor, he or she may (i) keep his or her Separate
Account Value in Money Market II, (ii) transfer all or part of
his or her Separate Account Value to the Fixed Account and
become subject to Fixed Account transfer restrictions as shown
<PAGE> - 10 -
<PAGE>
on the Contract Schedule, or (iii) surrender his or her
Contract, which surrender may subject a Contract Owner to any
applicable withdrawal charge and tax penalty.
FIXED ACCOUNT
GENERAL DESCRIPTION:
The Fixed Account consists of all Great American Reserve's
assets other than those assets in the Separate Account or
other separate investment accounts. Subject to applicable
law, Great American Reserve has sole discretion over the
investment of the assets of the Fixed Account. Benefits
payable from the Fixed Account will not be less than the
minimum values required by any law of the jurisdiction where
the Contract was delivered.
FIXED ACCOUNT VALUE:
The Fixed Account value at any time is equal to:
All Premium Payments allocated to the Fixed Account; plus
any Separate Account Value transferred to the Fixed Account;
less
any prior partial withdrawals from the Fixed Account; less
any Fixed Account value transferred to the Separate Account;
less
any premium taxes; plus
interest earned.
INTEREST TO BE CREDITED:
Great American Reserve guarantees that the interest to be
credited to the Fixed Account will not be less than the
minimum guaranteed interest rate shown on the Contract
Schedule. Great American Reserve may credit additional
interest at its sole discretion for the Fixed Account option.
TRANSFER RIGHTS:
A Contract Owner may transfer Fixed Account value to one or
more Subaccounts (except Money Market II) subject to the
following:
the transfer must be by written authorization before the
Annuity Date;
a Financial Advisor provides asset allocation advice with
respect to the Contract Owner's Contract (if no Financial
Advisor is appointed, a Contract owner may only transfer to
Money Market II); and
the transfer may not exceed 20% of the Fixed Account value
once in any six month period.
PURCHASE PAYMENTS
GENERAL:
The full amount of a Contract Owner's Purchase Payments, less
applicable premium tax due, if any, will be invested. Subject
to the maximum and minimum amounts shown on the Contract
Schedule, the Contract Owner may make subsequent Purchase
Payments. Great American Reserve reserves the right to reject
any application or Purchase Payment.
ALLOCATION OF PURCHASE PAYMENTS:
<PAGE> - 11 -
<PAGE>
Purchase Payments are first allocated to the Money Market
Subaccounts and/or the Fixed Account. Allocations of the
Purchase Payments are subject to the Allocation Guidelines
shown on the Contract Schedule.
CONTRACT VALUE
The Contract Value for any Valuation Period is the sum of the
Contract Value in each of the Subaccounts of the Separate
Account plus the Fixed Account Value.
The Contract Value in any Subaccount is determined by
multiplying the number of Accumulation Units allocated to that
Subaccount by the Accumulation Unit Value of that Subaccount.
Withdrawals will result in the cancellation of Accumulation
Units in a Subaccount or a reduction in the Contract Value in
the Fixed Account, as applicable.
TRANSFERS
As specified on the Contract Schedule, the Separate Account
Value may be transferred among the Subaccounts (except Money
Market II) at any time before the Annuity Date. An unlimited
number of Subaccount transfers are allowed without charge.
Subject to any limitation imposed by Great American Reserve on
the amount of transfers from the Fixed Account during the
Accumulation Period shown on the Contract Schedule, a Contract
Owner may transfer part of his or her Contract Value in the
Fixed Account. All transfers are subject to the conditions as
shown on the Contract Schedule.
Great American Reserve will not be liable for transfers made
in accordance with the Financial Advisor's instructions. All
amounts and Accumulation Units will be determined as of the
end of the Valuation Period during which the request for
transfer is received at the Administrative Office.
WITHDRAWALS
GENERAL:
Prior to the earlier of the Annuity Date or the death of the
Annuitant, the Contract Owner may, upon Written Request, make
a total or partial withdrawal of the Contract Value, less any
charges as shown on the Contract Schedule. For a full
withdrawal, the election should be accompanied by the
Contract.
The Contract Owner must specify, by Written Request, which
Subaccounts or Fixed Account, as applicable, is the source of
the partial withdrawal. Great American Reserve will pay the
amount of any withdrawal within seven (7) days of receipt of a
Written Request in good order unless the Suspension or
Deferral of Payments Provision is in effect.
Each partial withdrawal must be for an amount which is not
less than the amount shown on the Contract Schedule. The
minimum Contract Value which must remain in the Contract after
a partial withdrawal is shown on the Contract Schedule.
WITHDRAWAL CHARGE:
Upon a withdrawal of Contract Value, a withdrawal charge as
set forth on the Contract Schedule may be assessed. Great
<PAGE> - 12 -
<PAGE>
American Reserve reserves the right to reduce the withdrawal
charge under certain circumstances when sales of Contracts are
made to a trustee, employer or similar party pursuant to a
retirement plan or similar arrangement for sales of Contracts
to a group of individuals if the program results in a savings
of sales expenses. The amount of reduction will depend on
such factors as the size of the group, the total amount of
Purchase Payments and other factors that might tend to reduce
expenses incurred in connection with such sales.
FREE WITHDRAWAL AMOUNT:
A Contract Owner may make free withdrawals as set forth on
the Contract Schedule (as determined on the date of receipt of
the Written Request).
PAYMENT ON DEATH
DEATH OF CONTRACT OWNER DURING THE ACCUMULATION PERIOD:
Upon the death of the Contract Owner, or any Joint Contract
Owner, during the Accumulation Period, upon receipt of due
proof of death, the death benefit representing the Contract
Owner's interest in the Contract will be paid to the
Beneficiary(ies) designated by the Contract Owner. Upon the
death of any Joint Contract Owner, the surviving Joint
Contract Owner, if any, will be treated as the Primary
Beneficiary. Any other Beneficiary designation on record at
the time of death will be treated as a contingent Beneficiary.
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD:
The death benefit is the greater of the Contract Value or the
Purchase Payments on the date due proof of death is received
at Great American Reserve's Administrative Office (minus any
applicable withdrawal charge if the age of the Contract Owner
at death is 76 or greater). Upon Great American Reserve's
receipt of notification of death, the Separate Account Value
under the Contract will be transferred to the Money Market II
Subaccount. Payment will be in a lump sum unless an annuity
option is chosen. A Beneficiary other than the surviving
spouse of the deceased Contract Owner may choose only an
annuity option providing for full payout within five years of
the death or for the life or within the life expectancy of the
beneficiary. The life or life expectancy option must begin
payments within one year of the Contract Owner's death. If
the surviving spouse of a deceased Contract Owner is the
Beneficiary, he or she may choose to continue the Contract in
force after the Contract Owner's death.
DEATH OF CONTRACT OWNER AFTER THE ANNUITY DATE:
If the Contract Owner, or any Joint Contract Owner, who is
not the Annuitant, dies during the Annuity Period, any
remaining payments under the Annuity Option elected will
continue at least as rapidly as under the method of
distribution in effect at such Contract Owner's or Joint
Contract Owner's death. Upon the death of any Contract Owner
during the Annuity Period, the Beneficiary becomes the
Contract Owner. Upon the death of any Joint Contract Owner
during the Annuity Period, the surviving Joint Contract Owner,
<PAGE> - 13 -
<PAGE>
if any, will be treated as the Primary Beneficiary. Any other
Beneficiary designation on record at the time of death will be
treated as a Contingent Beneficiary.
DEATH OF ANNUITANT:
Upon the death of an Annuitant, who is not the Contract
Owner, during the Accumulation Period, the Contract Owner will
become the new Annuitant, however, the Contract Owner may
designate a new Annuitant subject to Great American Reserve's
underwriting rules then in effect. If the Contract Owner is a
non-natural person, the death of the Annuitant will be treated
as the death of the Contract Owner and a new Annuitant may not
be designated.
Upon the death of the Annuitant after the Annuity Date, the
death benefit, if any, will be as specified in the Annuity
Option elected. Death benefits will be paid at least as
rapidly as under the method of distribution in effect at the
Annuitant's death, unless the Beneficiary chooses to receive
the present value of the remaining guaranteed payments in a
lump sum.
PAYMENT OF DEATH BENEFIT:
Great American Reserve will require due proof of death before
any death benefit is paid. Due proof of death will be:
a certified death certificate; or
a certified decree of a court of competent jurisdiction as to
the finding of death; or
any other proof satisfactory to Great American Reserve.
All death benefits will be paid in accordance with applicable
law or regulations governing death benefit payments.
BENEFICIARY:
The Beneficiary designation in effect on the Contract Date
will remain in effect until changed by Written Request to
Great American Reserve. The Beneficiary is entitled to
receive the benefits to be paid at the death of the Contract
Owner. The estate or heirs of a Beneficiary who dies before
payment is due have no rights under the Contract. If no
Beneficiary survives when payment is due, payment will be made
to the Contract Owner's estate.
CHANGE OF BENEFICIARY:
Subject to the rights of any irrevocable Beneficiary(ies),
the Contract Owner may change the Primary Beneficiary(ies) or
Contingent Beneficiary(ies). A change may be made by Written
Request. The change will take effect as of the date the
Written Request is signed. Great American Reserve will not be
liable for any payment made or action taken before it records
the change.
SUSPENSION OR DEFERRAL OF PAYMENTS
Great American Reserve reserves the right to suspend or defer
payments from the Separate Account for a withdrawal or
transfer for any period when:
the New York Stock Exchange, the Chicago Board of Trade, or
the Chicago Mercantile Exchange, as appropriate, is closed
(other than customary weekend and holiday closings);
<PAGE> - 14 -
<PAGE>
trading on the New York Stock Exchange, the Chicago Board of
Trade, or the Chicago Mercantile Exchange, is restricted;
an emergency (including severe weather conditions) exists such
that it is not reasonably practical to dispose of securities
held in the Subaccounts or to determine the value of their
assets; or
during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of
Contract Owners;
provided that applicable rules and regulations of the
Securities and Exchange Commission will govern as to whether
the conditions described in (2) and (3) exist.
CONTRACT OWNER, ANNUITANT, OWNERSHIP, ASSIGNMENT
CONTRACT OWNER:
The Contract Owner is entitled to all rights under the
Contract. The Contract Owner is the person designated as such
on the Contract Date, unless changed.
The designated owner of the Contract may be changed at any
time by the Contract Owner's Written Request. A change of
Contract Owner will automatically revoke any prior designation
of Contract Owner. The change will become effective as of the
date the Written Request is signed. Great American Reserve
will not be liable for any payment made or action taken before
it records the change.
JOINT CONTRACT OWNER:
A Contract may be owned by a Joint Contract Owner. Any named
Joint Contract Owner must be the spouse of the other Contract
Owner. Upon the death of either Contract Owner, the surviving
spouse will be the Primary Beneficiary. Any other Beneficiary
designation will be treated as a Contingent Beneficiary unless
otherwise indicated in a Written Request.
ANNUITANT:
The Annuitant is the person on whose life annuity payments
are based. The Annuitant is the person designated by the
Contract Owner at the Contract Date.
ASSIGNMENT OF A CONTRACT:
Prior to the Annuity Date, a Written Request specifying the
terms of an assignment of a Contract must be provided to the
Administrative Office. Great American Reserve will not be
liable for any payment made or action taken before it records
the assignment.
Great American Reserve will not be responsible for the
validity or tax consequences of any assignment. Any
assignment made after the death benefit has become payable
will be valid only with Great American Reserve's consent.
A collateral assignment does not change Contract ownership.
The rights of a collateral assignee have priority over the
rights of a Beneficiary.
ANNUITY PROVISIONS
GENERAL:
<PAGE> - 15 -
<PAGE>
On the Annuity Date, Contract Value will be applied to
provide a Fixed Annuity under the Annuity Option selected by
the Contract Owner.
ANNUITY DATE:
The Annuity Date is selected by the Contract Owner at the
Contract Date. The Annuity Date may not be later than the
first Contract Year after the Annuitant's 90th birthday or the
maximum date permitted under state law. If the issue age is 85
or greater, the Annuity Date may not be later than the fifth
Contract Year. If no Annuity Date is selected, then the latest
possible Annuity Date will be assumed.Prior to the Annuity
Date, the Contract Owner may change the Annuity Date by
Written Request. Any change must be received at Great
American Reserve's Administrative Office at least thirty (30)
days prior to the current Annuity Date.
SELECTION OF AN ANNUITY OPTION:
An Annuity Option may be selected by Written Request of the
Contract Owner. Prior to the Annuity Date, the Contract Owner
may change the Annuity Option selected by Written Request.
Any change must be received at Great American Reserve's
Administrative Office at least thirty (30) days prior to the
Annuity Date.
ANNUITY OPTIONS:
The following Annuity Options (which are available on a fixed
basis only) or any other annuity option acceptable to the
Contract Owner and Great American Reserve may be selected:
OPTION 1. LIFE ANNUITY: An Annuity payable monthly during the
lifetime of the Annuitant and ceasing with the last monthly
payment due prior to the death of the Annuitant. This option
offers a greater level of monthly payments than the second
option, since there is no minimum number of payments
guaranteed (nor a provision for a death benefit payable to a
Beneficiary). If this option is elected, it is understood and
agreed that payments shall cease immediately upon the death of
the payee and the annuity will terminate without further
value. This option is generally not available for Contract
Owners annuitizing over the age of 85.
OPTION 2. LIFE ANNUITY WITH GUARANTEED PERIODS: An Annuity
payable monthly during the lifetime of the Annuitant with the
guarantee that if, at the death of the Annuitant, payments
have been made for less than 5, 10 or 20 years, as elected,
annuity payments will be continued during the remainder of
such period to the Beneficiary designated by the Contract
Owner. If no Beneficiary is designated, Great American
Reserve will pay in a lump sum to the Annuitant's estate the
present value, as of the date of death, of the number of
guaranteed annuity payments remaining after that date,
computed on the basis of the assumed net investment rate used
in determining the first monthly payment.
OPTION 3. INSTALLMENT REFUND LIFE ANNUITY: Payments are made
for the installment refund period, which is the time required
<PAGE> - 16 -
<PAGE>
for the sum of the payments to equal the amount applied, and
thereafter for the life of the payee.
OPTION 4. PAYMENT FOR A FIXED PERIOD: Payments are made for
the number of years selected, which may be from three through
20. Should the Annuitant die before the specified number of
monthly payments is made, the remaining payments will be
commuted and paid to the designated Beneficiary in a lump sum
payment.
OPTION 5. JOINT AND SURVIVOR ANNUITY: Great American Reserve
will make monthly payments during the joint life time of the
Annuitant or a Joint Annuitant. Payments will continue during
the lifetime of the surviving Annuitant and will be computed
on the basis of 100%, 50% or 66 2/3% of the Annuity Payment
(or limits) in effect during the joint lifetime.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS:
Annuity payments are paid in monthly installments. Great
American Reserve reserves the right to make a lump sum payment
in lieu of annuity payments. If the Annuity Payment would be
or become less than $50, Great American Reserve reserves the
right to reduce the frequency of payments to an interval which
will result in each payment being at least $50. If the net
Contract Value to be applied at the Annuity Date is less than
the amounts specified on the Contract Schedule, Great American
Reserve may elect to pay such amount in a lump sum.
FIXED ANNUITY:
Annuity payments are only available on a fixed basis. Under
a Fixed Annuity, the Contract Value less applicable Withdrawal
Charges, is allocated to the General Account and the annuity
is paid as a Fixed Annuity. No withdrawal charge is applicable
if the payments made under the annuity begin at least five
years after the effective date of the Contract and is paid
under any life annuity option, or any option with payments for
a minimum of five years. Unless the Contract Owner specifies
otherwise, the payee of the Annuity Payments shall be the
Annuitant. The Contract Value will be applied to the
applicable Annuity Table contained in the Contract based upon
the Annuity Option selected by the Contract Owner. The dollar
amount of each Fixed Annuity Payment shall be determined in
accordance with Annuity Tables contained in this Contract
which are based on the minimum guaranteed interest rate shown
on the Contract Schedule.
MORTALITY TABLES:
The mortality table used in establishing the Annuity Table is
1983 Individual Annuity Mortality, (IAM) Table, Unisex.
The dollar amount of an Annuity Payment for any age or
combination of ages not shown in the Tables or for any other
form of Annuity Option agreed to by Great American Reserve
will be provided by Great American Reserve upon request.
GENERAL PROVISIONS
THE CONTRACT:
<PAGE> - 17 -
<PAGE>
The entire Contract consists of this Contract, the
Application, and any riders, endorsements, or authorizations
attached to this Contract.
MISSTATEMENT OF AGE:
If the age of any Annuitant has been misstated, any Annuity
benefits payable will be the Annuity benefits provided by the
correct age. After Annuity Payments have begun, any
underpayments by Great American Reserve, with compound
interest at 6% per year, will be made up in one sum with the
next Annuity Payment. Any overpayments by Great American
Reserve, with compound interest at no more than 6% per year,
shall be deducted from the first Annuity Payments due after
correction.
INCONTESTABILITY:
This Contract will not be contestable after the Contract
Date.
AMENDMENTS:
Great American Reserve may amend this Contract at any time as
required to make it conform with any applicable law,
regulation or ruling issued by any government agency to which
the Contract is subject. This Contract may be changed or
altered only by the President or Vice President and the
Secretary of Great American Reserve. A change or alteration
must be made in writing.
NON-PARTICIPATING:
This Contract does not pay dividends. It will not share in
the profits or surplus of Great American Reserve.
EVIDENCE OF SURVIVAL:
Great American Reserve may require satisfactory evidence of
the continued survival of any person(s) on whose continuation
of life annuity payments depend.
PREMIUM TAXES AND OTHER TAXES:
Any taxes paid to any governmental entity relating to the
Contract may be deducted from the Purchase Payment or Contract
Value. Great American Reserve may, in its sole discretion, pay
taxes when due and deduct that amount from the Contract Value
at a later date. Payment at an earlier date does not waive any
right Great American Reserve may have to deduct amounts at a
later date.
Great American Reserve reserves the right to establish a
provision for federal income taxes if it determines, in its
sole discretion, that it will incur a tax as a result of the
operation of the Separate Account. Great American Reserve
will deduct for any income taxes incurred by it as a result of
the operation of the Separate Account whether or not there was
a provision for taxes and whether or not it was sufficient.
Great American Reserve will deduct any withholding taxes
required by applicable law.
PROOF OF AGE AND SEX:
Great American Reserve may require evidence of age or sex of
any Annuitant and any Contract Owner.
PROTECTION OF PROCEEDS:
<PAGE> - 18 -
<PAGE>
To the extent permitted by law, death benefits and Annuity
Payments shall be free from legal process and the claim of any
creditor other than the person entitled to them under any
Contract. No payment and no amount under any Contract can be
taken or assigned in advance of its payment date unless Great
American Reserve receives the Contract Owner's written
consent.
REPORTS:
At least once each calendar year, Great American Reserve will
furnish each Contract Owner with a report containing any
information that may be required by any applicable law or
regulation and a statement showing the Contract Value. Great
American Reserve will also furnish annual and semi-annual
reports of the Separate Account.
REGULATORY REQUIREMENTS:
All values payable under any Contract will not be less than
the minimum benefits required by the laws and regulations of
the states in which the Contract is delivered.
The following Tables show the monthly income payable for each
$1,000 applied under Option 1, 2, 3, 4, or 5.Values shown are
based on 3% interest for all options.
OPTION 4 TABLE, OPTION 1,, 2 AND 3 TABLES,
No. ofYearsPayable, MonthlyInstallments, MALE and FEMALE,
Attained Ageof PayeeWhen FirstInstallmentis Payable
Monthly Installments for Lifewith Guaranteed Period,
LifetimeOnly, InstallmentRefund, 10YearsCertain,
15YearsCertain, 20YearsCertain,
345, 28.9922.0617.91, $3.903.974.034.104.18,
$3.803.863.913.974.03, $3.893.954.014.084.15,
$3.863.923.984.044.11, $3.823.883.933.994.04, 5051525354
678910, 15.1413.1611.6810.539.61, 4.254.344.424.524.61,
4.104.174.244.314.39, 4.224.304.384.474.56,
4.184.254.324.404.48, 4.114.174.234.304.37, 5556575859
1112131415, 8.868.247.717.266.87, 4.724.834.955.075.21,
4.484.564.664.754.86, 4.664.764.864.985.10,
4.574.664.754.854.95, 4.444.514.584.654.72, 6061626364
1617181920, 6.536.235.965.735.51, 5.355.515.675.856.04,
4.975.085.205.335.47, 5.225.365.505.655.80,
5.055.165.265.375.49, 4.794.864.935.005.06, 6566676869
6.256.476.716.977.267.56, 5.615.765.936.106.286.48,
5.966.146.316.506.696.89, 5.605.715.835.946.046.14,
5.125.185.235.285.325.35, 707172737475
OPTION 5JOINT AND 100% SURVIVOR ANNUITY,
Age of, Age of Surviving Annuitant,
Annuitant, 55, 60, 65, 70, 75
5560657075, 3.773.904.014.104.16, 3.904.104.284.424.54,
4.014.284.544.794.99, 4.104.424.795.165.51,
4.164.544.995.516.06
<PAGE> - 19 -
<PAGE>
OPTION 5JOINT AND 66 2/3% SURVIVOR ANNUITY,
Age of, Age of Surviving Annuitant,
Annuitant, 55, 60, 65, 70, 75
5560657075, 4.084.274.474.694.94, 4.274.494.745.025.31,
4.474.745.055.405.78, 4.695.025.405.846.33,
4.945.315.786.336.98
OPTION 5JOINT AND 50% SURVIVOR ANNUITY, +, +, +, +, +
Age of, Age of Surviving Annuitant, +, +, +, +
Annuitant, 55, 60, 65, 70, 75
5560657075, 4.254.475.745.065.45, 4.474.725.025.385.81,
5.745.025.355.776.27, 5.065.385.776.256.84,
5.455.816.276.847.56
GREAT AMERICAN RESERVE INSURANCE COMPANY
FIXED FUNDACCUMULATION TABLE FOR FLEXIBLE PREMIUM DEFERRED
ANNUITY$1,000 For First Five Years
Guaranteed Surrender Value*
End ofPolicyYear, AccumulatedValueIncrease, AccumulatedValue,
SurrenderValue
12345, 1,030.001,060.901,092.731,125.511,159.27,
1,030.002,090.903,183.634,309.145,468.41,
967.211,965.543,002.734,080.685,200.28
678910, 164.05168.97174.04179.26184.64,
5,632.465,801.445,975.486,154.746,339.39,
5,399.365,613.045,835.486,064.746,289.39
1112131415, 190.18195.89201.76207.82214.05,
6,529.576,725.456,927.227,135.037,349.09,
6,509.576,725.456,927.227,135.037,349.09
1617181920, 220.47227.09233.90240.92248.14,
7,569.567,796.648,030.548,271.468,519.60,
7,569.567,796.648,030.548,271.468,519.60
2122232425, 255.59263.26271.15279.29287.67,
8,775.199,038.459,309.609,588.899,876.56,
8,775.199,038.459,309.609,588.899,876.56
2627282930, 296.30305.19314.34323.77333.48,
10,172.8510,478.0410,792.3811,116.1511,449.64,
10,172.8510,478.0410,792.3811,116.1511,449.64
3132333435, 343.49353.79364.41375.34386.60,
11,793.1312,146.9212,511.3312,886.6713,273.27,
11,793.1312,146.9212,511.3312,886.6713,273.27
3637383940, 398.20410.14422.45435.12448.18,
13,671.4614,081.6114,504.0614,939.1815,387.35,
13,671.4614,081.6114,504.0614,939.1815,387.35
* Values Shown are Based on an Interest Rate of 3% for All
Years.
GREAT AMERICAN RESERVE INSURANCE COMPANY
Administrative Office11815 N. Pennsylvania Street, Carmel,
Indiana 46032-4572Telephone: (317) 817-3700
A Stock Company
INDIVIDUAL DEFERREDVARIABLE ANNUITY CONTRACTFLEXIBLE PREMIUMS
<PAGE> - 20 -
<PAGE>
Non-participating
ANNUITY PAYMENTS AND WITHDRAWAL VALUES PROVIDED BY THIS
CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
<PAGE> - 21 -
<PAGE>
<PAGE>
<PAGE>
GREAT AMERICAN RESERVE INSURANCE COMPANY
Administrative Office: 11815 N. Pennsylvania Street
P.O. Box 1911, Carmel, Indiana 46032-4911
RYDEX ADVISOR
VARIABLE ANNUITY ACCOUNT
APPLICATION
1. CONTRACT OWNER(S)
If no annuitant is specified in section 2, the contract owner
will be the annuitant.
_____________________________________________________________
(Print) Last First MI
_____________________________________________________________
Address
_____________________________________________________________
City State Zip
Soc. Sec. No./Tax I.D.____-____-____ Sex___M
___F
Date of Birth ________ ____ _____ Annuitization Date:_______
Month Day Year
(If Applicable ___ Joint Owner
(Spouse Only)
_____________________________________________________________
(Print)Last First MI
_____________________________________________________________
Address
_____________________________________________________________
City State Zip
Soc. Sec. No./Tax I.D.____-____-____ Sex___M
___F
Date of Birth ________ _____ ______
Month Day Year
<PAGE>
<PAGE>
2. ANNUITANT (Complete only if different from the contract
owner)
_____________________________________________________________
(Print)Last First MI
_____________________________________________________________
Address
_____________________________________________________________
City State Zip
Soc. Sec. No./Tax I.D.____-____-____ Sex___M
___F
Date of Birth ________ _____ ______
Month Day Year
3. BENEFICIARY
Primary
_____________________________________________________________
(Print)Last First MI
_____________________________________________________________
Relationship To Owner(s)
Contingent
_____________________________________________________________
(Print)Last First MI
_____________________________________________________________
Relationship To Owner(s)
4. TYPE OF PLAN
a. Nonqualified b. Qualified
____ Regular ____ IRA/SEP Transfer/Rollover
____ 1035 Transfer ____ 403(b) Transfer/Rollover
5. INVESTMENT INFORMATION
Minimum Initial Purchase Payment: $25,000.00
Minimum Subsequent Purchase Payment: $1,000.00
a. An initial purchase payment $_________ is attached.
b. Allocated to year _________
(COMPLETED FOR IRA CONTRIBUTIONS)
<PAGE> 2
<PAGE>
6. PAYMENT ALLOCATION
(Use whole percentages. The percentages for all allocations
must equal 100%)
______ A. Separate Account Money Market I Subaccount
______ B. Fixed Account (Subject to transfer restrictions)
7. REPLACEMENT
Will the proposed contract replace any existing annuity
or insurance contract?
___No ___Yes If Yes, list company name, plan and
year of issue ______________________
If Yes, replacement requirements must be completed.
_______ Agent's initials certifies any replacement
criteria required in this state have been met.
In accordance with TEFRA (August 14, 1982), please
provide the cost basis of the contract.
Pre-TEFRA $________ Post-TEFRA $_________
8. SPECIAL REQUESTS
9. LIMITED POWER OF ATTORNEY
I hereby authorize the person named "Financial Advisor" to be
my agent and attorney-in-fact, and in such capacity to give
instructions to Padco Advisors II, Inc. and its affiliates,
"Padco" for transactions within the Rydex Advisor Variable
Annuity, and to take all other actions necessary or incidental
thereto. Padco may rely on such instructions without
obtaining my approval, counter-signature, or co-signature. I
will indemnify and hold Padco and Great American Reserve,
"Great American Reserve", their directors, officers, and
employees harmless from all liabilities and costs, including
attorney fees, which Padco and Great American Reserve may
incur by relying upon the representations of the Agent or upon
this authorization.
Contract Owner's Signature X_____________________ Date_______
Joint Contract Owner's Signature X_______________ Date_______
<PAGE> 3
<PAGE>
10. FINANCIAL ADVISOR/TELEPHONE TRANSFER AUTHORIZATION
I, the Financial Advisor, have received a written power of
attorney from each Contract Owner for whom I have been granted
the power to dispose of or to direct the disposition of funds
invested within the Rydex Advisor Variable Annuity Account.
Pursuant to the Power of Attorney, I authorize and direct
Padco to act on telephone instructions, when proper
identification is furnished, to exchange units from any
subaccount or the fixed account to any other subaccount or the
fixed account subject to any limitations set forth in the
Contract. I agree that neither Padco nor Great American
Reserve will be liable for any loss arising from the exchange
by acting in accordance with these telephone instructions.
Financial Advisor Signature X__________________ Date_______
___ ___ ___ ___ ___ ___ ___
Financial Advisor/Group Number
Name of Firm __________________________
All statements made in this application (including the reverse
side) are true to the best of our knowledge and belief, and we
agree to all terms and conditions as shown on the front and
back. We further agree that this application shall be part of
the annuity contract, and we verify our understanding that all
payments and values provided by the contract, when based on
investment experience of subaccounts, are variable and not
guaranteed as to dollar amount. We acknowledge receipt and
have read current prospectuses. Under penalty of perjury, the
contract owner certifies that the Social Security (or Taxpayer
identification) number is correct as it appears in the
application.
Signed at_______________ this ______ day of _________, 19____
_____________________________________
Signature of Contract Owner/Applicant
_______________________________________________
Signature of Joint Contract Owner (Spouse Only)
REGISTERED REPRESENTATIVE CERTIFICATION
I certify that I have asked all questions in the application
and correctly recorded the proposed Annuitant's answers. To
the best of my knowledge, I have presented to Great American
Reserve Insurance Company all the pertinent facts, and I know
nothing unfavorable about the proposed Annuitant that is not
stated in the application or accompanying letter.
<PAGE> 4
<PAGE>
I further certify that I am properly licensed to sell variable
annuities in the state in which the proposed Applicant resides
and that no sales material other than that approved by the
Home Office was used.
Signed at_____________ this ______ day of ____________, 19___
_________________ _________________ _____________________
Agent's Number Agent's License Registered
ID# (if required) Representative
_________________ _________________ _____________________
2nd Agent's Agent's License Other Registered
Number ID# (if required) Representative
________________________ ____________________________
Broker Dealer Broker Dealer Phone Number
_______ For Broker Dealer Use Only
<PAGE> 5
<PAGE>
FINANCIAL ADVISOR REPRESENTATIONS
TO
GREAT AMERICAN RESERVE INSURANCE COMPANY
AND
PADCO ADVISORS II, INC.
In connection with the variable annuity contracts issued
by the Rydex Advisor Variable Annuity Account of the Great
American Reserve Insurance Company (the "Contracts") to
persons who are clients of mine ("Contract Owners"), I, the
Financial Advisor, hereby represent to Great American Reserve
Insurance Company and PADCO Advisors II, Inc., and their
affiliates, that:
1. I have filed, and amended as necessary, YES NO
my investment adviser registration
application on Form ADV with the ____ ____
Securities and Exchange Commission.
2. I am excluded from registration with YES NO
the Securities and Exchange Commission
as an investment adviser under the ____ ____
Investment Advisers Act of 1940.
3. No federal or state regulatory agency has ever taken
any action which would prevent me from providing asset
allocation advisory services or other advisory
services to my client Contract Owner(s).
4. I agree that I will not make payments to or otherwise
credit the account of the my client Contract Owner(s),
and will not provide additional services or property
to the Contract Owner(s) at a discount, on account of,
or in exchange for all or part of the Asset Allocation
Advisory Fees I receive under the Contracts.
5. I agree that I will not require my client Contract
Owner(s) to pay any compensation for the market timing
or asset allocation advisory services that I provide
to my client Contract Owner(s) under the Contracts,
and that the Contracts are solely liable for the
payment of such compensation.
Financial Advisor Signature: ___________________________
Date: ___________________________
Name of Firm: __________________________
Financial Advisor/Group Number: __________________________
<PAGE>
<PAGE>
ARTICLES OF INCORPORATION OF THE COMPANY
EXHIBIT 99.B6(i)
COPY OF ARTICLES OF INCORPORATION OF THE COMPANY
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act and Article 3.05 of the Insurance Code of Texas, Great
American Reserve Insurance Company (herein after referred to as the
"Corporation") adopts the following Articles of Amendment to its Articles of
Incorporation:
ARTICLE ONE
The name of the corporation is Great American Reserve Insurance Company.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the sole shareholder of the Corporation pursuant to a written consent dated
June 27, 1990:
RESOLVED, that Article II of the Articles of Incorporation of the
Corporation be amended to read as follows:
"ARTICLE II
The location of its home office shall be Amarillo, Potter County, Texas."
ARTICLE THREE
The following amendment to the Articles of Incorporation was adopted by
the sole shareholder of the Corporation pursuant to a written consent dated
June 27, 1990:
RESOLVED, that Article VI of the Articles of Incorporation of the
Corporation be amended to read as follows:
"ARTICLE VI
The corporation shall have a Board of Directors of not less than five (5)
nor more than fifteen (15), which shall manage the affairs and property of the
<PAGE>
corporation. The By-Laws shall specify the number of directors within the
limits herein specified, and such number may be increased or decreased from
time to time by amendment to the By-Laws of the corporation, but shall never
be decreased to less than five (5) in number. The directors shall be elected
annually or as provided by law and shall hold office until their successors
are elected and qualify. The initial Board of Directors shall consist of
seven (7) directors."
ARTICLE FOUR
The total number of shares of the Corporation outstanding at the time of
such adoption was one million fifty-three thousand five hundred sixty-five
(1,053,565) and the number of shares entitled to vote thereon was one million
forty-three thousand five hundred sixty-five (1,043,565).
ARTICLE FIVE
The holder of all of the one million forty-three thousand five hundred
sixty-five (1,043,565) shares outstanding and entitled to vote on said
amendment has signed a consent in writing voting for said amendment. No votes
were cast against said amendment.
IN WITNESS WHEREOF, the undersigned officer executes these Articles of
Amendment to the Articles of Incorporation of Great American Reserve Insurance
Company, this 28th day of September, 1990.
GREAT AMERICAN RESERVE INSURANCE
COMPANY
/s/DONALD F. GONGAWARE
____________________________
Donald F. Gongaware, President
Attest:
/s/ ERIC S. TOOKER
________________________________
Eric S. Tooker, Assistant
Secretary
STATE OF INDIANA )
)
COUNTY OF HAMILTON )
Before me, a Notary Public in and for said County and State personally
appeared Donald F. Gongaware, President, and Eric S. Tooker, Assistant
Secretary, of Great American Reserve Insurance Company who acknowledged the
execution of the foregoing instrument, and who, having been duly sworn, stated
that any representations contained therein are true.
Witness my hand and Notarial Seal this 28th day of September, 1990.
<PAGE>
/s/DEBORAH A. NEAL
_____________________________
Deborah A. Neal, Notary Public
Residing in Clinton County, IN
Commission Expires 8/4/94
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act and Article 3.05 of the Insurance Code of Texas, the
undersigned corporation adopts the following Articles of Amendment to the
Articles of Incorporation of GREAT AMERICAN RESERVE INSURANCE COMPANY, which
amendment has the effect of eliminating the personal liability of a director
of the corporation to the corporation or its stockholders for monetary damages
for an act or omission in the director's capacity as a director as authorized
by Article 13.02-7.06, Texas Miscellaneous Corporation Laws Act.
ARTICLE ONE
The name of the corporation is GREAT AMERICAN RESERVE INSURANCE COMPANY.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the Corporation on the 17th day of December, 1987. The
Amendment, Article VII, is an addition to the Articles of Incorporation as
amended and the full text of the provision added is as follows:
"ARTICLE VII
A director of the corporation shall not be liable to the corporation or
its shareholders for monetary damages for an act or omission in the director's
capacity as a director, except that this Article does not eliminate or limit
the liability of a director for:
(1) a breach of a director's duty of loyalty to the corporation or its
shareholders;
(2) an act or omission not in good faith or that involves intentional
misconduct or a knowing violation of the law;
(3) a transaction from which a director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of
the director's office;
(4) an act or omission for which the liability of a director is expressly
<PAGE>
provided for by statute; or
(5) an act related to an unlawful stock repurchase or payment of a
dividend.
No repeal or modification of this Article VII by the shareholders of the
corporation shall adversely affect any right or protection of a director
existing at the time of such repeal or modification with respect to events or
circumstances occurring or existing prior to such time.
ARTICLE THREE
The total number of shares of the corporation outstanding at the time of
such adoption was one million fifty-three thousand five hundred sixty-five
(1,053,565) and the number of shares entitled to vote thereon was one million
forty-three thousand five hundred sixty-five (1,043,565).
ARTICLE FOUR
The holder of all of the one million forty-three thousand five hundred
sixty-five (1,043,565) shares outstanding and entitled to vote on said
amendment has signed a consent in writing voting for said amendment. No votes
were cast against said amendment.
Date: December 17, 1987 GREAT AMERICAN RESERVE INSURANCE
COMPANY
By: /s/ THOMAS C. HARDY
_____________________________
THOMAS C. HARDY, President
By: /s/ J. RALPH WOOD, JR.
______________________________
J. RALPH WOOD, JR., SECRETARY
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, a Notary Public on this 17th day of December, 1987, personally
appeared Thomas C. Hardy, known to me to be the person whose name is
subscribed to the foregoing document, and being by me first duly sworn,
declared that the statements therein contained are true and correct.
Given under my hand and seal of office, this day of December 17, 1987.
(Notary Seal) /s/ ISABEL WOODFORD
_______________________
Notary Public in and for
the State of Texas
My commission expires:
<PAGE>
3-23-91
_______
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act and Article 3.05 of the Insurance Code of Texas, the
undersigned corporation adopts the following Articles of Amendment to the
Articles of Incorporation of GREAT AMERICAN RESERVE INSURANCE COMPANY, which
amendment has the effect of increasing the authorized capital stock from
$5,112,000.00 to $9,112,000.00 by creating a new class of preferred stock of
40,000 shares of the par value of $100.00 each so that the capital stock of
the corporation shall be $9,112,000.00 divided into 1,065,000 shares of common
stock of the par value of $4.80 each and 40,000 shares of preferred stock of
the par value of $100.00 each.
ARTICLE ONE
The name of the corporation is GREAT AMERICAN RESERVE INSURANCE COMPANY.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders on the 28th day of May, 1985.
"Article IV of the Article of Incorporation of GREAT AMERICAN RESERVE
INSURANCE COMPANY is hereby amended so as to hereafter read as follows:
"ARTICLE IV
"The aggregate amount of the authorized capital stock of this corporation
shall be $9,112,000.00, divided into: (1) 1,065,000 shares of common stock,
each of the par value of $4.80; and (2) 40,000 shares of preferred stock, each
of the par value of $100.00.
"The preferred stock may be issued in one or more series. The
designations, preferences and other special rights, of the preferred stock of
each series shall be such as are stated and expressed herein and, to the
extent not stated and expressed herein, shall be such as may be fixed by the
Board of Directors (authority so to do being hereby expressly granted) and
stated and expressed in a resolution of resolutions adopted by the Board of
Directors providing for the issue of preferred stock of such series. Such
resolution or resolutions shall (a) specify the series to which the preferred
stock shall belong, (b) state whether a dividend shall be payable in cash,
stock or otherwise, whether such dividend shall be cumulative or
non-cumulative and whether the preferred stock of such series shall rank on
parity with any other series of preferred stock as to dividend and fix the
<PAGE>
dividend rate therefor (or the manner of computing the rate of such dividends
thereon), (c) fix the amount which the holders of the preferred stock of such
series shall be entitled to be paid in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the corporation, (d) state whether
or not the preferred stock of such series shall be redeemable and at what
times and under what conditions and the amount or amounts payable thereon in
the event of redemption; and may provide for a sinking fund for the purchase
or redemption; or a purchase fund for the purchase of shares of such series
and the terms and provisions governing the operation of any such fund and the
status as to reissuance of shares of preferred stock purchased or otherwise
reacquired or redeemed or retired through operation thereof, and that so long
as the corporation is in default as to such sinking or purchase fund the
corporation shall not (with such exceptions, if any, as may be provided) pay
any dividends upon or purchase or redeem shares of capital common stock with
respect to dividends or distribution of assets upon liquidation; and grant
such other special rights to the holders of shares of such series as the Board
of Directors may determine and as shall not be inconsistent with the
provisions of this Article."
ARTICLE THREE
The total number of shares of the corporation outstanding at the time of
such adoption was one million forty-three thousand five hundred sixty-five
(1,043,565) and the number of shares entitled to vote thereon was one million
forty-three thousand five hundred sixty-five (1,043,565).
ARTICLE FOUR
The holder of all of the one million forty three thousand five hundred
sixty-five (1,043,565) shares outstanding and entitled to vote on said
amendment has signed a consent in writing voting for said amendment. No votes
were cast against said amendment.
ARTICLE FIVE
The amendment does not provide for any exchange, reclassification or
cancellation of issued shares. The amendment does not change the amount of
stated capital, but creates a new class of shares, same being forty thousand
(40,000) preferred shares of $100.00 par value, with all the rights and
privileges specified in Article Two hereof, which will be authorized but
unissued. If any of such preferred shares are issued, the amount of stated
capital will be increased by a sum equal to the par value of those shares
issued.
DATED: May 28, 1985. GREAT AMERICAN RESERVE INSURANCE
COMPANY
By: /s/ THOMAS C. HARDY
_____________________________
THOMAS C. HARDY, President
<PAGE>
By: /s/ J. RALPH WOOD, JR.
_______________________________
J. RALPH WOOD, JR., SECRETARY
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
I, Wanda Lee, a Notary Public, do hereby certify that on this the 28th
day of May, 1985, personally appeared before me Thomas C. Hardy, who declared
that he is President of the corporation executing the foregoing instrument,
and being by me first duly sworn, acknowledged that he signed the foregoing
document in the capacity therein set forth and declared that the statements
therein contained are true.
IN WITNESS WHEREOF, I hereunto set my hand and seal of office, the date
and year before written.
(Notary Seal) /s/ WANDA LEE
_______________________
Notary Public in and for
the State of Texas
My commission expires:
November 30, 1988 WANDA LEE
_________________ _______________________
(Printed Name of Notary)
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
I, Wanda Lee, a Notary Public, do hereby certify that on this the 28th
day of May, 1985, personally appeared before me J. Ralph Wood, Jr., who
declared that he is Secretary of the corporation executing the foregoing
instrument, and being by me first duly sworn, acknowledged that he signed the
foregoing document in the capacity therein set forth and declared that the
statements therein contained are true.
IN WITNESS WHEREOF, I hereunto set my hand and seal of office, the date
and year before written.
(Notary Seal) /s/ WANDA LEE
_______________________
Notary Public in and for
the State of Texas
My commission expires:
November 30, 1988 WANDA LEE
_________________ ________________________
(Printed Name of Notary)
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act and Article 3.05 of the Insurance Code of Texas, the
undersigned corporation adopts the following Articles of Amendment to the
Articles of Incorporation of GREAT AMERICAN RESERVE INSURANCE COMPANY, which
amendment has the effect of increasing the authorized capital stock from
$2,130,000.00 to $5,112,000.00 by increasing the par value of the shares of
common stock from Two and No/100 Dollars ($2.00) par value to Four and 80/100
Dollars ($4.80) par value; the number of authorized shares remains unchanged.
ARTICLE ONE
The name of the corporation is GREAT AMERICAN RESERVE INSURANCE COMPANY.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders on the 8th day of November, 1984.
"Article IV of the Articles of Incorporation of GREAT AMERICAN RESERVE
INSURANCE COMPANY is hereby amended so as to hereafter read as follows:
"ARTICLE IV.
"The amount of the authorized capital stock of this corporation shall be
$5,112,000.00, divided into 1,063,000 shares of common stock of the par value
of $4.80 each."
ARTICLE THREE
The total number of shares of the corporation outstanding at the time of
such adoption was one million forty-three thousand five hundred sixty-five
(1,043,565) and the number of shares entitled to vote thereon was one million
forty-three thousand five hundred sixty-five (1,043,565).
ARTICLE FOUR
The holder of all of the shares outstanding and entitled to vote on said
amendment has signed a consent in writing adopting said amendment.
ARTICLE FIVE
The amendment does not provide for any reclassification or cancellation
of issued shares; present shares of $2.00 par value will be exchanged for
shares of $4.80 par value.
ARTICLE SIX
<PAGE>
The manner in which such amendments effect a change in the amount of the
stated capital, and the amount of stated capital as changed by such amendment,
are as follows: The amount of stated capital is increased from Two Million
Eighty-seven Thousand One Hundred Thirty and No/100 Dollars ($2,087,130.00) to
Five Million Nine Thousand One Hundred Twelve and No/100 Dollars
(5,009,112.00), and the number of authorized shares representing such capital
shall remain the same but the par value of each share shall be increased from
Two and No/100 Dollars ($2.00) to Four and 80/100 Dollars ($4.80). Such
increase in stated capital will be effected by a transfer of Two Million Nine
Hundred Twenty-One Thousand Nine Hundred Eighty-two and No/100 Dollars
($2,921,982.00) from contributed surplus of the corporation to its capital
account. Present outstanding shares of $2.00 par value common stock shall be
exchanged share for share for $4.80 par value common stock.
DATED: November 8, 1984.
GREAT AMERICAN RESERVE INSURANCE
COMPANY
By: /s/ THOMAS C. HARDY
_____________________________
Thomas C. Hardy, President
and
By: /s/ TERRENCE L. WHITWORTH
_____________________________
Terrence L. Whitworth, SECRETARY
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
I, Nancy L. Casper, a Notary Public, do hereby certify that on this the
8th day of November, 1984, personally appeared before me Tom Hardy, who
declared that he is President of the corporation executing the foregoing
instrument, and being by me first duly sworn, acknowledged that he signed the
foregoing document in the capacity therein set forth and declared that the
statements therein contained are true.
IN WITNESS WHEREOF, I hereunder set my hand and seal of office, the date
and year before written.
(Notary Seal) /s/ NANCY L. CASPER
_______________________
Notary Public in and for
the State of Texas
<PAGE>
My commission expires:
May 24, 1988 Nancy L. Casper
_________________ ________________________
(Printed Name of Notary)
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
I, Nancy L. Casper, a Notary Public, do hereby certify that on this the
8th day of November, 1984, personally appeared before me Terrence L.
Whitworth, who declared that he is Secretary of the corporation executing the
foregoing instrument, and being by me first duly sworn, acknowledged that he
signed the foregoing document in the capacity therein set forth and declared
that the statements therein contained are true.
IN WITNESS WHEREOF, I hereunder set my hand and seal of office, the date
and year before written.
(Notary Seal) /s/ NANCY L. CASPER
_______________________
Notary Public in and for
the State of Texas
My commission expires:
May 24, 1988 NANCY L. CASPER
_________________ ____________________________
(Printed Name of Notary)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act and the provisions of Chapter 3 of the Insurance Code of
Texas, the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
ARTICLE ONE. The name of the corporation is GREAT AMERICAN RESERVE
INSURANCE COMPANY.
ARTICLE TWO. The following amendment to the Articles of Incorporation
was adopted by the shareholders of the corporation on April 28, 1965. Article
IV of the Articles of Incorporation was amended to increase the capital stock
of the corporation from $2,100,000.00, divided into 1,050,000 shares of common
stock of the par value of $2.00 each to $2,130,000.00 by increasing the number
of shares to 1,065,000 of the common stock of the par value of $2.00 each.
The amendment changes Article IV of the Articles of Incorporation, and
<PAGE>
said Article IV is hereby amended to read as follows:
"ARTICLE IV.
"The amount of the authorized capital stock of this corporation shall be
$2,130,000.00 divided into 1,065,000 shares of common stock of the par value
of $2.00 each."
ARTICLE THREE. The number of shares outstanding at the time of the
adoption of such amendment was 1,050,000 of common stock, all of the same
class and all entitled to vote.
ARTICLE FOUR. The number of shares voting for such amendment was
959,014 and the number of shares voting against such amendment was none.
ARTICLE FIVE. The manner in which the amendment shall be effected is
as follows:
14,900 shares will be issued to the stockholders of Hub Insurance Company
pursuant to Articles of Merger filed contemporaneously herewith.
ARTICLE SIX. The manner in which such amendment effects a change in
the amount of stated capital, and the amount of stated capital as changed by
the amendment, are as follows:
The amount of stated capital is increased from $2,100,000.00 to
$2,129,800.00. Said increase results from the application to capital of
$29,800.00 of earned surplus of the Company. The remaining 100 shares have
not been issued or paid for, and shall not constitute capital or stock or
capital stock of this company.
Dated this 3rd day of May, 1965.
GREAT AMERICAN RESERVE INSURANCE COMPANY
By /s/ C. D. SCOTT
___________________________________
Its President
And /s/ C. ROBERT HALL, JR.
____________________________________
Its Secretary
THE STATE OF TEXAS )
COUNTY OF DALLAS )
I, Peggy L. Edwards, a Notary Public, do hereby certify that on the 3rd
day of May, 1965, personally appeared before me C. D. SCOTT and C. ROBERT
HALL, JR., who declared to me that they are President and Secretary,
<PAGE>
respectively, of the corporation executing the foregoing document, and being
first duly sworn, each acknowledged that they signed the foregoing document in
the capacities therein set forth and declared that the said statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
/s/ PEGGY L. EDWARDS
____________________________________
Notary Public, Dallas County, Texas
My Commission Expires:
June 1, 1968
ARTICLES OF MERGER
OF DOMESTIC CORPORATIONS
Pursuant to the provisions of Article 5.07 of the Texas Business
Corporation Act, the undersigned domestic corporations adopt the following
Articles of Merger for the purpose of merging them into one of such
corporations:
1. The names of the undersigned corporations of the State of Texas are:
GREAT AMERICAN RESERVE INSURANCE COMPANY
HUB INSURANCE COMPANY
2. The name of the surviving corporation is GREAT AMERICAN RESERVE
INSURANCE COMPANY.
3. There is attached hereto a copy of the Plan of Merger.
4. The Plan of Merger hereto attached was approved by the shareholders
of the undersigned corporations in the manner prescribed by the Texas Business
Corporation Act.
5. As to each of the undersigned corporations, only stock of one class
is outstanding; and the number of shares outstanding, the number entitled to
vote, and the total voted for or against are shown in the following
tabulation, to-wit:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name of Corporation Outstanding Entitled to Vote Voted for Voted
Against
- ------------------- ----------- ---------------- --------- -------------
Great American Reserve
Insurance Company 1,050,000 1,050,000 959,014 None
Hub Insurance Company 150,000 150,000 150,000 None
</TABLE>
Dated May 3rd, 1965.
GREAT AMERICAN RESERVE INSURANCE COMPANY
By /s/ C. D. SCOTT
______________________________________
Its President
And /s/ C. ROBERT HALL, JR.
_______________________________________
Its Secretary
HUB INSURANCE COMPANY
By /s/ E. C. PANNELL
______________________________________
Its President
And
______________________________
Its Secretary
THE STATE OF TEXAS )
OF DALLAS )
I, Peggy L. Edwards, a Notary Public, do hereby certify that on this 30th
day of April, 1965, personally appeared before me C. D. SCOTT, who, being by
me first duly sworn, declared that he is President of Great American Reserve
Insurance Company, that he signed the foregoing document as President of the
corporation, and that the statements therein contained are true.
/s/ PEGGY L. EDWARDS
____________________________________
Notary Public, Dallas County, Texas
<PAGE>
THE STATE OF TEXAS )
COUNTY OF DALLAS )
I, Bernice L. Stedwick, a Notary Public, do hereby certify that on this
5th day of May, 1965, personally appeared before me E. C. PANNELL, who, being
by me first duly sworn, declared that he is President of Hub Insurance
Company, that he signed the foregoing document as President of the
corporation, and that the statements therein contained are true.
/s/ BERNICE L. STEDWICK
____________________________________
Notary Public, Dallas County, Texas
GREAT AMERICAN RESERVE INSURANCE COMPANY
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act and the provisions of Chapter 3 of the Insurance Code of
Texas, the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
ARTICLE ONE. The name of the corporation is GREAT AMERICAN RESERVE
INSURANCE COMPANY.
ARTICLE TWO. The following amendment to the Articles of Incorporation
was adopted by the shareholders of the corporation on March 10, 1964. Article
IV of the Articles of Incorporation was amended to increase the capital stock
of the corporation from $1,545,000.00 to $2,100,000.00, reducing the par value
of shares from $3.00 to $2.00 per share, and thus increasing the number of
shares from 515,000 of common stock of the par value of $3.00 per share to
1,050,000 shares of common stock of the par value of $2.00 per share.
The amendment changes Article IV of the Articles of Incorporation, and
said Article IV is hereby amended to read as follows:
"ARTICLE IV.
"The amount of the capital stock of this corporation shall be
$2,100,000.00, divided into 1,050,000 shares of common stock of the par value
of $2.00 each."
ARTICLE THREE. The number of shares outstanding at the time of the
adoption of such amendment was 515,000 of common stock, all of the same class
<PAGE>
and all entitled to vote.
ARTICLE FOUR. The number of shares voting for such amendment was
428,690 and the number voting against such amendment was none.
ARTICLE FIVE. The manner in which the amendment shall be effected is
as follows:
To accomplish the net result of the reduction in par value and the stock
dividend, one additional share will be issued for each outstanding share.
ARTICLE SIX. The manner in which such amendment effects a change in
the amount of stated capital, and the amount of stated capital as changed by
the amendment, are as follows:
The amount of stated capital is increased from $1,545,000.00 to
$2,060,000.00. Said increase results from the application to capital of
$515,000.00 of surplus of the Company, for which a stock dividend of 257,500
shares of the par value of $2.00 each has been declared pro rata to all
stockholders of record as of March 6, 1964. The remaining 20,000 shares have
not been issued or paid for, and shall not constitute capital or stock or
capital stock of this Company.
Dated this 10th day of March, 1964.
GREAT AMERICAN RESERVE INSURANCE COMPANY
By /s/ C. D. SCOTT
___________________________________
Its President
And /s/ C. ROBERT HALL, JR.
____________________________________
Its Secretary
THE STATE OF TEXAS )
COUNTY OF DALLAS )
I, Doris L. Pockmann, a Notary Public, do hereby certify that on the 12th
day of March, 1964, personally appeared before me C. D. SCOTT and C. ROBERT
HALL, JR., who, declared to me that they are President and Secretary,
respectively, of the corporation executing the foregoing document, and being
first duly sworn, each acknowledged that they signed the foregoing document in
the capacities therein set forth and declared that the said statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
/s/ DORIS L. POCKMANN
____________________________________
Notary Public, Dallas County, Texas
<PAGE>
My Commission Expires
June 1, 1965
THE STATE OF TEXAS )
) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS )
That we, C.V. Compton, T. W. Reagan, William Crawford III, T. V. Meyer
and Julia Shapard, all residents of the City and County of Dallas and citizens
of the State of Texas, under and by virtue of the laws of this State, do
hereby form and organize a body corporate for the purpose of transacting a
health, life and accident insurance business, and to that end we do hereby
adopt and subscribe the following Charter and Articles of Incorporation:
ARTICLE I.
The name of this company shall be ALL AMERICAN ASSURANCE COMPANY.
ARTICLE II.
The principal business office of said company shall be located at the
City of Dallas, County of Dallas, State of Texas.
ARTICLE III.
The purpose for which this corporation is formed is to engage in the
life, health and accident insurance business, and it shall have power only to
transact business within this State, and to write insurance only on the weekly
or monthly premium plan, and to issue no policy promising to pay more than one
thousand dollars in the event of death of the insured from natural causes, nor
more than two thousand dollars in the event of death of any person from
accidental causes, and it may issue, combined or separately, life, accident or
health insurance policies; all of which business may be conducted in one
department, and to do and perform all other kinds and character of business,
as such limited capital stock, life, health and accident insurance company,
permitted or authorized by the laws of the State of Texas.
ARTICLE IV.
The amount of its capital stock shall be $25,000.00, divided into 2,500
shares of $10.00 each. The entire amount of said capital has been subscribed
and paid in and is possessed by said company in money and the same is the bona
fide property of the said company.
ARTICLE V.
The period of time for which this company shall exist shall be 100 years.
ARTICLE VI.
The business and affairs of this corporation shall be supervised, managed
and controlled by a Board of Directors, the number of which is fixed at this
time at seven.
<PAGE>
IN TESTIMONY WHEREOF, we hereunto subscribe our names this 8th day of
February, A. D. 1937.
NAME ADDRESS
/s/ C.V. COMPTON Dallas, Texas
________________________ _________________
/s/ T. W. REAGAN Dallas, Texas
________________________ _________________
/s/ WILLIAM CRAWFORD III Dallas, Texas
________________________ _________________
/s/ T. V. MEYER Dallas, Texas
________________________ _________________
/s/ JULIA SHAPARD Dallas, Texas
________________________ _________________
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, a Notary Public, in and for the
County of Dallas, State of Texas, on this day personally appeared C.V.
Compton, T. W. Reagan, William Crawford III, T. V. Meyer and Julia Shapard, of
Dallas County, Texas, who being by me duly sworn do jointly and severally
depose and say:
That all of the material allegations and facts set forth and contained in
the annexed and foregoing Charter and Articles of Incorporation are to us as
therein stated, and we are and each of us is personally cognizant of all of
said facts.
That the $27,500.00 in cash representing the present capital stock of
said company and $2,500.00 surplus is now actually on deposit with the First
National Bank in Dallas, Texas, to the credit of said insurance company and
subject to the check of said company, and that the entire amount thereof has
been paid in and is possessed by said company in money and that the same is
the bona fide property of said insurance company.
WITNESS our hands this the 9th day of February, A. D. 1937.
/s/ C.V. Compton
________________________
/s/ T. W. Reagan
________________________
/s/ William Crawford III
________________________
/s/ T. V. Meyer
________________________
<PAGE>
/s/ Julia Shapard
________________________
SWORN TO AND SUBSCRIBED BEFORE ME, by C.V. Compton, T. W. Reagan, William
Crawford III, T. V. Meyer and Julia Shapard, this the 9th day of February A.
D. 1937.
/s/ FAE WELLS
___________________________________
Notary Public, Dallas County, Texas
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, within and for the County of
Dallas, State of Texas, on this day personally appeared C.B. Parrott, who
being duly sworn, says on oath:
I am Active Vice President of the First National Bank in Dallas, of
Dallas, Texas, and am duly authorized to make this affidavit.
That All American Assurance Company, of Dallas, Texas, now in process of
being chartered, has now in the said First National Bank in Dallas, of Dallas,
Texas, to its credit, subject to its draft when organized, in actual cash,
$27,500.00, the amount of its capital stock and surplus; that said funds
belong to and are the property of the said proposed corporation and that said
funds are absolutely and unconditionally the property of the said corporation.
WITNESS MY HAND at Dallas, Texas, this the 9th day of February, A. D.
1937.
/s/ C. B. PARROTT
______________________________
SUBSCRIBED AND SWORN TO BEFORE ME, this the 9th day of February, A. D.
1937.
/s/ JACK C. BURBRON
______________________________
Notary Public, Dallas County, Texas
AMENDMENT TO THE ARTICLES OF INCORPORATION
OF GREAT AMERICAN RESERVE INSURANCE COMPANY
INCREASING ITS CAPITAL STOCK
TO $1,545,000.00
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at the regular meeting of the stockholders of Great American
<PAGE>
Reserve Insurance Company, a corporation heretofore duly organized and
chartered under the laws of the State of Texas, held at the office of the
company in the City of Dallas, Dallas County, Texas, on the 8th day of March,
1960, in conformity with the laws of this State and the By-Laws of said
corporation, a majority of the stockholders of said corporation voted to
increase the authorized capital of said corporation from $1,030,000.00 to
$1,545,000.00, by increasing the number of shares to 515,000 and reducing the
par value of all shares to $3.00 per share; and
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company held on the 8th day of March, 1960 in the City of
Dallas, Texas, a quorum of said Board of Directors being present, pursuant to
the action and vote of the stockholders of said corporation above referred to,
said Board of Directors did unanimously vote to amend the Charter and Articles
of Incorporation of said Great American Reserve Insurance Company by
increasing the capital stock of said corporation from the present authorized
capital of $1,030,000.00 to the amount of $1,545,000.00, by increasing the
number of shares to 515,000 and reducing the par value of all shares to $3.00
per share; and
WHEREAS, pursuant to Resolutions of the stockholders and Board of
Directors, $515,000.00 of the increase in capital stock has been paid in by
application of earned surplus to capital and a stock dividend has been
declared, authorizing the issuance of an additional 171,666-2/3 shares of
common stock of the par value of $3.00 each, all as reflected in the certified
copy of the Resolutions and the affidavits of the officers of said corporation
hereto attached and accompanying this amendment, and the said amount of
$515,000.00 being now in possession of the company and credited to capital:
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, being a majority of the Board of Directors of
said Great American Reserve Insurance Company, and also being stockholders of
said corporation, by virtue of the laws of the State of Texas and the
authority vested in us by the action of the stockholders and the Board of
Directors of said corporation above referenced to, do hereby amend Article IV
of the Articles of Incorporation of said Great American Reserve Insurance
Company now on file with the State Board of Insurance of Texas, by changing
and increasing the amount of authorized capital stock of said corporation from
$1,030,000.00 to $1,545,000.00, divided into 515,000 shares of the par value
of $3.00 each, so that said Article IV shall hereafter read as follows:
"ARTICLE IV.
"The amount of the capital stock of this corporation shall be
$1,545,000.00, divided into 515,000 shares of common stock of the par value of
$3.00 each."
And we do hereby adopt, authenticate and certify this amendment to the
State Board of Insurance of Texas for the purpose and to the end that this
amendment when approved and filed, together with the original Charter and
Articles of Incorporation and all prior amendments thereto filed with said
State Board of Insurance of Texas, shall constitute the amended Articles of
Incorporation and Charter of said Great American Reserve Insurance Company.
<PAGE>
IN WITNESS WHEREOF, we have hereunto subscribed our names this the 15th
day of March, 1960.
/s/ EARLE E. BAILEY
_______________________________
Earle E. Bailey
/s/ E. E. COMBEST
_______________________________
E. E. Combest
/s/ JEROME K. CROSSMAN
_______________________________
Jerome K. Crossman
/s/ L. E. ELLIOTT
_______________________________
L. E. Elliott
/s/ RICHARD J. HAMBLETON
_______________________________
Richard J. Hambleton
/s/ ORLO L. KARSTEN
_______________________________
Orlo L. Karsten
/s/ BLAGDEN MANNING
_______________________________
Blagden Manning
/s/ AVERY MAYS
_______________________________
Avery Mays
/s/ HENRY NEUHOFF, JR.
_______________________________
Henry Neuhoff, Jr.
/s/ W. H. PIERCE
_______________________________
W. H. Pierce
/s/ CHARLES D. SCOTT
_______________________________
Charles D. Scott
/s/ GLEN WALLACE
_______________________________
Glen Wallace
/s/ TRAVIS T. WALLACE
_______________________________
<PAGE>
Travis T. Wallace
/s/ JOHN W. CROMWELL
_______________________________
John W. Cromwell
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Earle E. Bailey, E. E. Combest, John W. Cromwell, Jerome K. Crossman, L. E.
Elliott, Richard J. Hambleton, Orlo L. Karsten, Blagden Manning, Avery Mays,
Henry Neuhoff, Jr., W. H. Pierce, Charles D. Scott, Glen Wallace and Travis T.
Wallace, known to me to be the persons whose names are subscribed to the
foregoing instrument (Amendment to the Charter and Articles of Incorporation
of Great American Reserve Insurance Company) and severally acknowledged to me
that they each executed the same for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 15th day of March, 1960.
/s/ PAT HOFFMAN
____________________________________
Notary Public, Dallas County, Texas
My commission expires June 1, 1961
AMENDMENT TO THE CHARTER
OF GREAT AMERICAN RESERVE INSURANCE COMPANY
INCREASING ITS CAPITAL STOCK
TO $1,030,000.00
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at the regular annual meeting of the Stockholders of Great
American Reserve Insurance Company held at the office of said company in the
City of Dallas, Dallas County, Texas, on the 8th day of March, 1955, in
conformity with the laws of this State and the By-Laws of said corporation,
the Stockholders of said corporation by a vote of more than a majority of all
the stock of said company, voted to increase the authorized capital of said
corporation; and
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company held on the 8th day of March, 1955 at the office of
said company in the City of Dallas, Texas, a quorum of said Board of Directors
<PAGE>
being present, pursuant to the action and vote of the Stockholders of said
corporation above referred to, said Board of Directors did unanimously vote to
amend the Charter of said Great American Reserve Insurance Company by
increasing the capital stock of said corporation from the present authorized
capital of $400,000.00 to the amount of $1,030,000.00, said total capital of
said $1,030,000.00 to be divided into 103,000 shares of the par value of
$10.00 each; and
WHEREAS, pursuant to Resolutions of the Stockholders and Board of
Directors, $600,000.00 of the increase in capital stock has been paid in by
application of earned surplus to capital and a stock dividend has been
declared, authorizing the issuance of an additional 60,000 shares of common
stock of the par value of $10.00 each, all as reflected in the certified copy
of the Resolutions and the affidavits of the officers of said corporation
hereto attached and accompanying this amendment, and the said amount of
$600,000.00 is now in possession of the company and credited to capital; and
WHEREAS, the remaining 3,000 shares of the increase of capital was
subscribed by Travis T. Wallace, as Trustee, and paid in cash and is now in
possession of the company; NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS:
That we, Travis T. Wallace and John W. Cromwell, being the President and
Secretary respectively of said Great American Reserve Insurance Company, and
also being Stockholders and Directors of said corporation, by virtue of the
laws of the State of Texas and the authority vested in us by the action of the
Stockholders and the Board of Directors of said corporation above referred to,
do hereby amend Article IV of the Charter of said Great American Reserve
Insurance Company now on file with the Board of Insurance Commissioners of the
State of Texas, by changing and increasing the amount of authorized capital
stock of said corporation from $4,000,000.00 to $1,030,000.00 divided into
103,000 shares of the par value of $10.00 each, and we do hereby adopt,
authenticate and certify this amendment to the Board of Insurance
Commissioners of the State of Texas for action thereon as required by law,
for the purpose and to the end that this amendment when approved and filed,
together with the original Charter and all prior amendments thereto filed with
the Board of Insurance Commissioners of the State of Texas, shall constitute
the amended Charter of said Great American Reserve Insurance Company.
IN WITNESS WHEREOF, we have hereunto subscribed our names this the 23rd
day of March, 1955.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ JOHN W. CROMWELL
____________________________________
Secretary
THE STATE OF TEXAS )
<PAGE>
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Travis T. Wallace and John W. Cromwell, President and Secretary respectively
of Great American Reserve Insurance Company, known to me to be the persons
whose names are subscribed to the foregoing instrument (Amendment to the
Charter of Great American Reserve Insurance Company), and severally
acknowledged to me that they each executed the same for the purposes and
consideration therein expressed, and in the capacities therein stated.
GIVEN under my hand and seal of office this 23rd day of March, 1955.
/s/ RUTH WYLIE
____________________________________
Notary Public, Dallas County, Texas.
AMENDMENT TO THE CHARTER
OF GREAT AMERICAN RESERVE INSURANCE COMPANY
INCREASING ITS CAPITAL STOCK
TO $1,030,000.00
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at the regular annual meeting of the Stockholders of Great
American Reserve Insurance Company held at the office of said company in the
City of Dallas, Dallas County, Texas, on the 8th day of March, 1955, in
conformity with the laws of this State and the By-Laws of said corporation,
the Stockholders of said corporation by a vote of more than a majority of all
the stock of said company, voted to increase the authorized capital of said
corporation; and
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company held on the 8th day of March, 1955, at the office of
said company in the City of Dallas, Texas, a quorum of said Board of Directors
being present, pursuant to the action and vote of the Stockholders of said
corporation above referred to, said Board of Directors did unanimously vote to
amend the Charter of said Great American Reserve Insurance Company by
increasing the capital stock of said corporation from the present authorized
capital of $400,000.00 to the amount of $1,030,000.00, said total capital of
said $1,030,000.00 to be divided into 103,000 shares of the par value of
$10.00 each; and
WHEREAS, pursuant to Resolutions of the Stockholders and Board of
Directors, $600,000.00 of the increase in capital stock has been paid in by
application of earned surplus to capital and a stock dividend has been
declared, authorizing the issuance of an additional 60,000 shares of common
<PAGE>
stock of the par value of $10.00 each, all as reflected in the certified copy
of the Resolutions and the affidavits of the officers of said corporation
hereto attached and accompanying this amendment, and the said amount of
$600,000.00 is now in possession of the company and credited to capital; and
WHEREAS, the remaining 3,000 shares of the increase of capital was
subscribed by Travis T. Wallace, as Trustee, and paid in in cash and is now in
possession of the company; NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, being a majority of the Board of Directors of
said Great American Reserve Insurance Company, and also being Stockholders of
said corporation, by virtue of the laws of the State of Texas and the
authority vested in us by the action of the Stockholders and the Board of
Directors of said corporation above referred to, do hereby amend Article IV of
the Charter of said Great American Reserve Insurance Company now on file with
the Board of Insurance Commissioners of the State of Texas, by changing and
increasing the amount of authorized capital stock of said corporation from
$400,000.00 to $1,030,000.00 divided into 103,000 shares of the par value of
$10.00 each; and we do hereby adopt, authenticate and certify this amendment
to the Board of Insurance Commissioners of the State of Texas for the purpose
and to the end that this amendment when approved and filed, together with the
original Charter and all prior amendments thereto filed with the Board of
Insurance Commissioners of the State of Texas, shall constitute the amended
Charter of said Great American Reserve Insurance Company.
IN WITNESS WHEREOF, we have hereunto subscribed our names this the 8th
day of April, 1955.
/s/ TRAVIS T. WALLACE
____________________________________
/s/ C. O. HAMBLETON
____________________________________
/s/ EARLE E. BAILEY
____________________________________
/s/ E. E. COMBEST
____________________________________
/s/ CHARLES D. SCOTT
____________________________________
/s/ CECIL H. JONES
____________________________________
/s/ JOHN W. CROMWELL
____________________________________
/s/ L. E. ELLIOTT
____________________________________
<PAGE>
/s/ C. C. MARTIN, SR.
____________________________________
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Travis T. Wallace, C. O. Hambleton, Earle E. Bailey, E. E. Combest, Charles D.
Scott, Cecil H. Jones, John W. Cromwell, L. E. Elliott and C. C. Martin, Sr.,
known to me to be the persons whose names are subscribed to the foregoing
instrument (Amendment to the Charter of Great American Reserve Insurance
Company), and severally acknowledged to me that they each executed the same
for the purposes and consideration therein expressed, and in the capacities
therein stated.
GIVEN under my hand and seal of office this 8th day of April, 1955.
/s/ SALLY JONES
____________________________________
Notary Public, Dallas County, Texas.
AMENDMENT TO THE CHARTER
OF GREAT AMERICAN RESERVE INSURANCE COMPANY
INCREASING ITS CAPITAL STOCK
TO $400,000.00
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at the regular annual meeting of the Stockholders of Great
American Reserve Insurance Company held at the office of said company in the
City of Dallas, Dallas County, Texas, on the 8th day of March, 1949, in
conformity with the laws of this State and the By-Laws of said corporation,
the Stockholders of said corporation by a vote of more than two-thirds of all
of the stock of said company, voted to increase the authorized capital of said
corporation; and
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company held on the 8th day of March, 1949, at the office of
said company in the City of Dallas, Texas, a quorum of said Board of Directors
being present, pursuant to the action and vote of the Stockholders of said
corporation above referred to, said Board of Directors did unanimously vote to
amend the Charter of said Great American Reserve Insurance Company by
increasing the capital stock of said corporation from the present authorized
capital of $250,000.00 to the amount of $400,000.00, said total capital of
said $400,000.00 to be divided into 40,000 shares of the par value of $10.00
each, and did furthermore authorize and direct said corporation to take all
<PAGE>
necessary and proper legal steps to certify the Amendment to the Charter and
the increase in the capital of said corporation to the Board of Insurance
Commissions of the State of Texas for the purpose and to the end that said
amendment and the original Charter now on file with the said Board of
Insurance Commissioners, together with all amendments thereto heretofore made,
shall constitute the amended Charter of said corporation; and
WHEREAS, the said Stockholders and Board of Directors did by Resolution
duly adopted, authorize and declare a stock dividend of $150,000.00, by
increasing the 10,000 shares of the par value of $25.00 each to 40,000 shares
of the par value of $10.00 each: NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS: that
We, Travis T. Wallace and Cecil H. Jones, being the President and
Secretary respectively of said Great American Reserve Insurance Company, and
also being Stockholders and Directors of said corporation, by virtue of the
laws of the State of Texas and the authority vested in us by the action of the
Stockholders and the Board of Directors of said corporation above referred to,
do hereby amend Article IV of the original Charter of said Great American
Reserve Insurance Company now on file with the Board of Insurance
Commissioners of the State of Texas, by changing and increasing the amount of
authorized capital stock of said corporation from $250,000.00 to $400,000.00
divided into 40,000 shares of $10.00 each; and we do hereby adopt,
authenticate and certify this amendment to the Board of Insurance
Commissioners of the State of Texas for action thereon as required by law, for
the purpose and to the end that this amendment when approved and filed,
together with the original Charter and all prior amendments thereto filed with
the Board of Insurance Commissioners of the State of Texas, shall constitute
the amended Charter of said Great American Reserve Insurance Company.
IN WITNESS WHEREOF, we have hereunto subscribed our names this the 8th
day of March, 1949.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ CECIL H. JONES
____________________________________
Secretary
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Travis T. Wallace and Cecil H. Jones, President and Secretary respectively of
Great American Reserve Insurance Company, known to me to be the persons whose
names are subscribed to the foregoing instrument (Amendment to the Charter of
<PAGE>
Great American Reserve Insurance Company), and severally acknowledged to me
that they each executed the same for the purposes and consideration therein
expressed, and in the capacities therein stated.
GIVEN under my hand and seal of office this 8th day of March, 1949.
/s/ RUTH WYLIE
___________________________________
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
We, Travis T. Wallace and Cecil H. Jones, President and Secretary
respectively of Great American Reserve Insurance Company of Dallas, Texas,
being duly sworn, do jointly and severally depose and say:
That all of the material allegations and facts set forth and contained in
the annexed and foregoing Amendment to the Charter of Great American Reserve
Insurance Company of Dallas, Texas, are true as therein stated, and that they
are personally cognizant of all of said facts.
That the earned surplus of said corporation is in excess of said sum of
$150,000.00; that the Great American Reserve Insurance Company actually has on
hand on this date, in cash and other admissible property and securities under
the laws of the State of Texas, surplus in excess of said $150,000.00; that
the same is the bona fide property of said Great American Reserve Insurance
Company, and that there are no liens or claims of any kind against the same,
and it is available for transfer to the capital of said corporation as of this
date.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ CECIL H. JONES
____________________________________
Secretary
SUBSCRIBED and sworn to before me by Travis T. Wallace and Cecil H. Jones
this the 8th day of March, 1949.
/s/ RUTH WYLIE
___________________________________
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
<PAGE>
We, Travis T. Wallace, President and Cecil H. Jones, Secretary of Great
American Reserve Insurance Company, being duly sworn, do jointly and severally
depose and say:
That the above and foregoing is a true and correct statement of the
financial condition of Great American Reserve Insurance Company as of December
31, 1948, and shows an earned surplus in excess of $150,000.00, which said
surplus is possessed by Great American Reserve Insurance Company in cash and
other admitted assets, and that the amount of said earned surplus of said
corporation on March 8, 1949, is equal to or in excess of the surplus shown by
said statement as of December 31, 1948.
That the cash balances in bank, as shown by the attached and foregoing
statement, do not to any extent, directly or indirectly, represent borrowed
money; that the company is not indebted to said banks or to any of them, or to
any one else for the whole or any part of the funds represented by such bank
balances; that the same are unconditionally the property of the company, and
that there are no collateral agreements by which such funds or any part
thereof are withdrawable by any one except by the company for its own proper
uses, and as its unconditional assets; that the cash, securities and other
property of the company are unconditionally the assets of the company, and
sufficient in amount and value to provide the payment of the increased capital
stock of $150,000.00 in full, with surplus in addition thereto of
approximately $400,000.00.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ CECIL H. JONES
____________________________________
Secretary
SUBSCRIBED and sworn to before me by Travis T. Wallace and Cecil H. Jones
this the 8th day of March, 1949.
/s/ RUTH WYLIE
___________________________________
Notary Public, Dallas County, Texas
AMENDMENT OF CHARTER
OF GREAT AMERICAN RESERVE INSURANCE COMPANY
INCREASING ITS CAPITAL STOCK
TO $250,000.00
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at a Special Meeting of the stockholders of Great American
<PAGE>
Reserve Insurance Company held at the office of said company in the City of
Dallas, Dallas County, Texas, on the 30th day of December, A.D., 1946, in
conformity with the laws of this state and the By-Laws of said Corporation,
the stockholders of said Corporation by a vote of more than two-thirds of all
the stock of said company, voted to increase the authorized capital of said
Corporation; and
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company held on the 30th day of December, 1946, in the
office of said company in the City of Dallas, Dallas County, Texas, a quorum
of said Board of Directors being present, pursuant to the action and vote of
the stockholders of said Corporation above referred to, said Board of
Directors did unanimously vote to amend the Charter of said Great American
Reserve Insurance Company by increasing the capital stock of said Corporation
from the present authorized capital of $100,000.00 to the amount of
$250,000.00, said total capital of said $250,000.00 to be divided into 10,000
shares of the par value of $25.00 each, and did furthermore authorize and
direct said Corporation to take all necessary and proper legal steps to
certify the amendment to the Charter and the increase in the capital of said
Corporation to the Board of Insurance Commissioners of the State of Texas for
the purpose and to the end that said amendment and original Charter now on
file with the said Board of Insurance Commissioners, together with all
amendments thereto heretofore made, shall constitute the amended charter of
said Corporation; and,
WHEREAS, the said stockholders and Board of Directors did by Resolutions
duly adopted, authorize and declare a stock dividend of 150% by increasing the
par value of each share issued and outstanding stock of said Corporation from
its present par value to the par value of $25.00:
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS: that we, Travis T.
Wallace and Earle E. Bailey, being the President and Secretary, respectively,
of said Great American Reserve Insurance Company, and also being stockholders
and directors of said Corporation, by virtue of the laws of the State of Texas
and the authority vested in us by action of the stockholders and Board of
Directors of said Corporation above referred to, do hereby amend Article IV of
the Original Charter of the said Great American Reserve Insurance Company now
on file with the Board of Insurance Commissioners of the State of Texas, by
changing and increasing the amount of authorized capital stock of said
Corporation from $100,000.00 to $250,000.00, divided into 10,000 shares of
$25.00 each, and we do hereby adopt, authenticate and certify this amendment
to the Board of Insurance Commissioners of the State of Texas for action
thereon as required by law, for the purpose and to the end that this
amendment, when approved and filed, together with the original Charter and all
prior amendments thereto filed with the Board of Insurance Commissioners of
the State of Texas shall constitute the Amended Charter of said Great American
Reserve Insurance Company.
IN WITNESS WHEREOF, we have hereunto subscribed our names this the 30th
day of December, 1946.
/s/ TRAVIS T. WALLACE
<PAGE>
____________________________________
President
/s/ EARLE E. BAILEY
____________________________________
Secretary
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
TRAVIS T. WALLACE and EARLE E. BAILEY, known to me to be the persons whose
names are subscribed to the foregoing instrument (Amendment to the Charter of
Great American Reserve Insurance Company), and severally acknowledged to me
that they each executed the same for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 30th day of December,
1946.
/s/ SALLY JONES
___________________________________
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
COUNTY OF DALLAS )
We, Travis T. Wallace and Earle E. Bailey, President and Secretary,
respectively, of the Great American Reserve Insurance Company, of Dallas,
Texas, being duly sworn, do jointly and severally depose and say:
That all of the material allegations and facts set forth and contained in
the annexed and foregoing amendment to the Charter of the Great American
Reserve Insurance Company of Dallas, Texas, are true, as therein stated, and
that they are personally cognizant of all the said facts.
That the earned surplus of said Corporation is in excess of the said sum
of $150,000.00. That the Great American Reserve Insurance Company actually
has on hand on this date in cash and other admissible property and securities,
under the laws of the State of Texas, surplus in excess of said amount of
$150,000.00; that the same is the bona fide property of said Great American
Reserve Insurance Company.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ EARLE E. BAILEY
____________________________________
<PAGE>
Secretary
SUBSCRIBED AND SWORN TO before me by Travis T. Wallace and Earle E.
Bailey this the 30th day of December, 1946.
/s/ SALLY JONES
___________________________________
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at a meeting of the stockholders of Great American Reserve
Insurance Company, held at the offices of said company in the City of Dallas,
Dallas County, Texas, on the 14th day of March, A.D. 1944, in conformity with
the laws of this State and the By-Laws of said corporation, the stockholders
of said corporation, by a vote of a majority of all of the stockholders of
said company, voted to change, amend and modify the purpose clause of said
corporation; and,
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company, held on the 14th day of March, A.D. 1944, at the
offices of said company in the City of Dallas, Dallas County, Texas, a quorum
of said Board of Directors being present, pursuant to the action and vote of
the stockholders of said corporation above referred to, did vote to amend
Article III of the Charter of said corporation, changing, amending and
modifying the purpose clause of the Charter of said corporation; and did
further authorize and direct the President and Secretary of said corporation
to take all necessary, and proper legal steps to certify the said amendment to
the charter of said corporation to the Board of Insurance Commissioners of the
State of Texas:
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, That we, Travis T.
Wallace and Earle E. Bailey, being the President and Secretary respectively of
said Great American Reserve Insurance Company, by virtue of the laws of the
State of Texas and the authority vested in us by the action of the
stockholders and the Board of Directors of said corporation above referred to;
DO HEREBY CERTIFY that Article III of the Charter of this corporation has
been, and is hereby amended to read as follows:
"ARTICLE III. The purpose for which this corporation is formed is to
engage in the life, health and accident insurance business, in accordance with
and as defined by Chapter 3 of Title 78 of the Revised Statutes of the State
of Texas, and to do and perform all other kinds and character of business, as
such life, health and accident insurance company is permitted or authorized to
do by the laws of the State of Texas."
AND WE DO HEREBY ADOPT, AUTHENTICATE AND CERTIFY this Amendment to the
Board of Insurance Commissioners of the State of Texas for action thereon as
required by law, for the purpose and to the end that this Amendment, when
<PAGE>
approved and filed by said Board, together with the original Charter and
former amendments now on file with said Board of Insurance Commissioners,
shall constitute the amended charter of said Great American Reserve Insurance
Company.
IN WITNESS WHEREOF, we hereunto subscribe our names this the 15th day of
March, A.D. 1944.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ EARLE E. BAILEY
____________________________________
Secretary
STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, THE UNDERSIGNED AUTHORITY, on this day personally appeared
Travis T. Wallace and Earle E. Bailey, known to me to be the persons whose
names are subscribed to the foregoing instrument, (amendment to the charter of
Great American Reserve Insurance Company) and severally, as President and
Secretary, respectively, of the Great American Reserve Insurance Company,
acknowledged to me that they each executed the same for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 16th day of March, A. D.
1944.
/s/ H. WALLACE
___________________________________
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
COUNTY OF DALLAS )
We, Travis T. Wallace, President, and Earle E. Bailey, Secretary,
respectively, of the Great American Reserve Insurance Company, being duly
sworn, do jointly and severally depose and say:
That all of the material allegations of fact set forth and contained in
the annexed and foregoing amendment to the Charter of Great American Reserve
Insurance Company of Dallas, Texas, are true as therein stated, and that we
are personally cognizant of all of said facts.
/s/ TRAVIS T. WALLACE
____________________________________
President
<PAGE>
/s/ EARLE E. BAILEY
____________________________________
Secretary
SUBSCRIBED AND SWORN to before me by Travis T. Wallace and Earle E.
Bailey this the 16th day of March, A. D. 1944.
/s/ H. WALLACE
___________________________________
Notary Public, Dallas County, Texas.
AMENDMENT TO THE CHARTER
OF GREAT AMERICAN RESERVE INSURANCE COMPANY
INCREASING ITS CAPITAL STOCK TO $100,000.00
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at the annual meeting of the stockholders of Great American
Reserve Insurance Company held at the office of said Company in the City of
Dallas, Dallas County, Texas, on the 9th day of March, A. D. 1943, in
conformity with the laws of this State, and the By-Laws of said corporation,
the stockholders of said corporation by a vote of more than two-thirds of all
of the stock of said Company, voted to increase the authorized capital of said
corporation; and
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company held on the 9th day of March, A. D. 1943 at the
offices of said Company in the City of Dallas, Dallas County, Texas, a quorum
of said Board of Directors being present, pursuant to the action and vote of
the stockholders of said corporation above referred to, said Board of
Directors did unanimously vote to amend the Charter of the said Great American
Reserve Insurance Company by increasing the capital stock of said corporation
from the present authorized capital of $33,330.00 to the amount of
$100,000.00, said total capital of said $100,000.00 to be divided into 10,000
shares of the par value of $10.00 each, and did furthermore authorize and
direct the President and Secretary of said corporation to take all necessary
and proper legal steps to certify the amendment to the Charter and the
increase in the capital of said corporation to the Board of Insurance
Commissioners of the State of Texas, for the purpose and to the end that said
amendment and the original Charter now on file with said Board of Insurance
Commissioners, together with all amendments thereto heretofore made, shall
constitute the amended Charter of said corporation; and,
WHEREAS, the said stockholders and Board of Directors did, by Resolution
duly adopted, authorize and declare a stock dividend of two hundred per cent
(200%), being 6,666 shares of said increased capital stock to be issued to the
present stockholders of said corporation; and,
<PAGE>
WHEREAS, the full amount of the balance of said increased capital, namely
$10.00, has been in good faith subscribed and paid in, and is possessed by
said Company in money, all of the aforesaid authorizations, actions and
proceedings of the stockholders and directors of said corporation, and the
subscriptions and payment to capital being reflected and set forth in the
certified copy of Resolution and the affidavit of the officers of said
corporation hereto attached, and accompanying this amendment:
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, That we, Travis T.
Wallace and C. O. Hambleton, being the President and Secretary, respectively,
of said Great American Reserve Insurance Company, and also being stockholders
and directors of said corporation, by virtue of the laws of the State of Texas
and the authority vested in us by the action of the stockholders and Board of
Directors of said corporation above referred to, do hereby amend Article IV,
of the original Charter of said Great American Reserve Insurance Company, now
on file with the Board of Insurance Commissioners of the State of Texas, by
changing and increasing the amount of authorized capital stock of said
corporation from $33,330.00 to $100,000.00 to be divided into 10,000 shares of
$10.00 each, and do hereby adopt, authenticate and certify this amendment to
the Board of Insurance Commissioners of the State of Texas for action thereon
as required by law, for the purpose and to the end that this amendment, when
approved and filed, together with the original Charter and all amendments
thereon filed with the Board of Insurance Commissioners of the State of Texas,
shall constitute the amended Charter of said Great American Reserve Insurance
Company.
IN WITNESS WHEREOF, we hereunto subscribe our names, this the 9th day of
March, A.D. 1943.
/s/ TRAVIS T. WALLACE
____________________________________
/s/ C. O. HAMBLETON
____________________________________
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, THE UNDERSIGNED AUTHORITY, on this day personally appeared
Travis T. Wallace and C. O. Hambleton, known to me to be the persons whose
names are subscribed to the foregoing instrument (amendment to the Charter of
Great American Reserve Insurance Company) and severally acknowledged to me
that they each executed the same for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 9th day of March, A. D.
1943.
<PAGE>
/s/ E. ACHILLES
___________________________________
E. ACHILLES, Notary Public, Dallas County, Texas
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
COUNTY OF DALLAS )
We, Travis T. Wallace and C. O. Hambleton, President and Secretary,
respectively, of the Great American Reserve Insurance Company, of Dallas,
Texas, being duly sworn, do jointly and severally depose and say:
That all of the material allegations and facts set forth and contained in
the annexed and foregoing amendment to the Charter of the Great American
Reserve Insurance Company of Dallas, Texas, are true, as therein stated, and
that we are personally cognizant of all of said facts.
That the sum of $20.00 in cash representing one (1) share of the
increased capital stock of said Great American Reserve Insurance Company, and
an increase in the surplus of said Company of a like amount, has been
actually deposited by Travis T. Wallace to the credit of Great American
Reserve Insurance Company in the Texas Bank & Trust Company of Dallas, Texas,
and is possessed by said Company, and that the same is the bona fide property
of the said Great American Reserve Insurance Company. That the Great American
Reserve Insurance Company actually has on hand on this date, in cash and other
admissible property and securities, under the laws of the State of Texas,
surplus in the amount of $66,660.00; that the same is the bona fide property
of said Great American Reserve Insurance Company.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ C. O. HAMBLETON
____________________________________
Secretary
SWORN TO AND SUBSCRIBED before me, by Travis T. Wallace and C. O.
Hambleton, this the 9th day of March, A. D. 1943.
/s/ E. ACHILLES
____________________________________
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
COUNTY OF DALLAS )
<PAGE>
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared E. O. Terry, President of Texas Bank & Trust Company, of
Dallas, Texas, who, after being by me duly sworn, deposes and says: That he is
President of the Texas Bank & Trust Company, of Dallas. That the Great
American Reserve Insurance Company has on deposit in said Bank on this date
the sum of $53,958.77, and that said funds are free of all claims of any kind
or character insofar as said bank is concerned, and is the bona fide property
of the said Great American Reserve Insurance Company insofar as affiant has
any knowledge of.
Affiant further says that he is cognizant of the facts herein stated, and
makes this affidavit for the purpose of assisting the Great American Reserve
Insurance Company in securing an amendment to its charter, by which the
capital stock of said Company is increased from $33,330.00 to $100,000.00, one
(1) share of which has been paid by the deposit of Travis T. Wallace in this
bank to the credit of said corporation this date in the sum of $20.00.
/s/ E. O. TERRY
_____________________________
President, Texas Bank & Trust
Company of Dallas, Texas.
SUBSCRIBED AND SWORN TO BEFORE ME this the 9th day of March, A. D. 1943.
/s/ E. ACHIILLES
______________________________
Notary Public, Dallas County,
Texas
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at a meeting of the stockholders of Great American Reserve
Insurance Company, held at the Home Office of said corporation in the City of
Dallas, Dallas County, Texas, on the 10th day of March, A.D. 1942, in
conformity with the laws of this State and the by-laws of said corporation,
the stockholders of said corporation by a vote of more than two-thirds of all
of the stock of said company voted to increase the authorized capital stock of
said corporation; and
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company, held on the 10th day of March, A.D. 1942, at the
offices of said company in the City of Dallas, Dallas County, Texas, a quorum
of said Board of Directors being present, pursuant to the action and vote of
the stockholders of said corporation above referred to, said Board of
Directors did unanimously vote to amend the charter of said Great American
Reserve Insurance Company by increasing the capital stock of said corporation
from $31,000.00 to $33,330.00, said total capital stock of $33,330.00 to be
divided into 3,333 shares of the par value of $10.00 each; and did furthermore
authorize and direct the President and Secretary of corporation to take all
<PAGE>
necessary and proper legal steps to certify the amendment to its charter
and the increase in the capital stock of said corporation to the Board of
Insurance Commissioners of the State of Texas, for the purpose and to the end
that said amendment and the original charter now on file with said Board of
Insurance Commissioners, together with such other amendments as have
heretofore been approved, shall constitute the amended charter of said
corporation; and
WHEREAS, said increased capital to the number of 233 shares has been in
good faith subscribed, and the sum of $2,330.00 is possessed by said company
in money, and in addition thereto the sum of $1165.00. has been in good faith
subscribed and paid in cash to the surplus of said corporation; and
WHEREAS, the stockholders and directors of said corporation have voted to
issue 233 shares of stock as set out and reflected in the certified copy of
resolution and the affidavit of the officers of said corporation hereto
attached and accompanying this amendment; NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS, That we, Travis T. Wallace, President,
and C. O. Hambleton, Secretary, of said Great American Reserve Insurance
Company, by virtue of the laws of the State of Texas and the authority vested
in us by the action of the stockholders and the Board of Directors of said
corporation, above referred to, do hereby amend Article V of the original
charter of said Great American Reserve Insurance Company, now on file with the
Board of Insurance Commissioners of the State of Texas, by changing and
increasing the amount of the authorized capital of said corporation from
$31,000.00 to $33,330.00 to be divided into 3,333 shares of $10.00 each, and
we do hereby adopt, authenticate and certify this amendment to the Board of
Insurance Commissioners of the State of Texas for action thereon as required
by law, for the purpose and to the end that this amendment, when approved and
filed by them, together with the original charter and prior amendment now on
file with said Board of Insurance Commissioners, shall constitute the amended
charter of said Great American Reserve Insurance Company.
IN WITNESS WHEREOF, we hereunto subscribe our names, this 10th day of
March, A.D. 1942.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ C. O. HAMBLETON
____________________________________
Secretary
THE STATE OF TEXAS )
COUNTY OF DALLAS )
<PAGE>
Before me, the undersigned authority, on this day personally appeared
Travis T. Wallace and C. O. Hambleton, known to me to be the persons whose
names are subscribed to the foregoing instrument (amendment to charter of
Great American Reserve Insurance Company), and severally acknowledged to me
that they each executed the same for the purposes and consideration therein
expressed and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 10th day of March, A. D.
1942.
/s/ H. JOHNSEY
___________________________________
Notary Public, Dallas County, Texas
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
We, Travis T. Wallace, President, and C. O. Hambleton, Secretary,
respectively, of the Great American Reserve Insurance Company of Dallas,
Texas, being duly sworn, do jointly and severally depose and say:
That all of the material allegations and facts set forth and contained in
the annexed and foregoing amendment to the charter of Great American Reserve
Insurance Company are true as therein stated, and that we are personally
cognizant of all of said facts.
That the sum of $2,330.00 in cash, representing the full amount of
subscription for 233 shares of increased capital stock of the Great American
Reserve Insurance Company, and $1165.00 in cash, representing the increase in
surplus of said company, is now on deposit in the Texas Bank & Trust Company
of Dallas, Texas, to the credit of said Great American Reserve Insurance
Company and subject to the check of said company; that said amount of said
capital and surplus has been paid in and is possessed by said company in
money, and that the same is the bona fide property of the said Great American
Reserve Insurance Company. The certificate of the said Texas Bank & Trust
Company is hereto attached and made a part hereof showing such cash to be so
deposited and held by said bank.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ C. O. HAMBLETON
____________________________________
Secretary
SWORN TO AND SUBSCRIBED BEFORE ME by Travis T. Wallace and C. O.
Hambleton, this 10th day of March, A. D. 1942.
/s/ H. JOHNSEY
<PAGE>
___________________________________
Notary Public, Dallas County, Texas
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at a meeting of the stockholders of Great American Reserve
Insurance Company, held at the Home Office of said corporation in the City of
Dallas, Dallas County, Texas, on the 12th day of March, A. D. 1940, in
conformity with the laws of this State and the by-laws of said corporation,
the stockholders of said corporation by a vote of more than two-thirds of all
of the stock of said company voted to increase the authorized capital stock of
said corporation; and,
WHEREAS, at a meeting of the Board of Directors of said Great American
Reserve Insurance Company, held on the 12th day of March, A. D. 1940, at the
offices of said company in the City of Dallas, Dallas County, Texas, a quorum
of said Board of Directors being present, pursuant to the action and vote of
the stockholders of said corporation above referred to, said Board of
Directors did unanimously vote to amend the charter of the said Great American
Reserve Insurance Company by increasing the capital stock of said corporation
from $25,000.00 to $31,000.00, said total capital of $31,000.00 to be divided
into 3,100 shares of the par value of $10.00 each; and did furthermore
authorize and direct the President and Secretary of said corporation to take
all necessary and proper legal steps to certify the amendment to its charter
and the increase in the capital of said corporation to the Board of Insurance
Commissioners of the State of Texas, for the purpose and to the end that said
amendment and the original charter now on file with said Board of Insurance
Commissioners, together with such other amendments as have heretofore been
approved, shall constitute the amended charter of said corporation; and,
WHEREAS, said increased capital to the number of 600 shares, has been in
good faith subscribed, and the sum of $6,000.00 is possessed by said company
in money, and in addition thereto the sum of $3,000.00 has been in good faith
subscribed and paid in cash to the surplus of said corporation; and,
WHEREAS, the stockholders and directors of said corporation have voted to
issue 600 shares of stock as set out and reflected in the certified copy of
resolution and the affidavit of the officers of said corporation hereto
attached and accompanying this amendment; NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS, That we, Travis T. Wallace, President,
and C. O. Hambleton, Secretary, of the said Great American Reserve Insurance
Company, by virtue of the laws of the State of Texas and the authority vested
in us by the action of the stockholders and Board of Directors of said
corporation, above referred to, do hereby amend Article V of the original
charter of said Great American Reserve Insurance Company, now on file with the
Board of Insurance Commissioners of the State of Texas, by changing and
increasing the amount of the authorized capital stock of said corporation from
$25,000.00 to $31,000.00, to be divided into 3,100 shares of $10.00 each, and
we do hereby adopt, authenticate and certify this amendment to the Board of
Insurance Commissioners of the State of Texas for action thereon as required
<PAGE>
by law, for the purpose and to the end that this amendment, when approved and
filed by them, together with the original charter and prior amendment now on
file with said Board of Insurance Commissioners, shall constitute the amended
charter of said Great American Reserve Insurance Company.
IN WITNESS WHEREOF, we hereunto subscribe our names, this 12th day of
March, A.D. 1940.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ C. O. HAMBLETON
____________________________________
Secretary
THE STATE OF TEXAS )
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared
Travis T. Wallace and C. O. Hambleton, known to me to be the persons whose
names are subscribed to the foregoing instrument (amendment to charter of
Great American Reserve Insurance Company), and severally acknowledged to me
that they each executed the same for the purposes and consideration therein
expressed and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 14th day of March, A. D.
1940.
/s/ H. JOHNSEY
___________________________________
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
COUNTY OF DALLAS )
We, Travis T. Wallace, President, and C. O. Hambleton, Secretary,
respectively, of the Great American Reserve Insurance Company of Dallas,
Texas, being duly sworn, do jointly and severally depose and say:
That all of the material allegations and facts set forth and contained in
the annexed and foregoing amendment to the charter of the Great American
Reserve Insurance Company are true as therein stated, and that we are
personally cognizant of all of said facts.
That the sum of $6,000.00 in cash, representing the full amount of
subscriptions for 600 shares of increased capital stock of the Great American
Reserve Insurance Company, and $3,000.00 in cash, representing the increase
in surplus of said company, is now on deposit in the Texas Bank & Trust
Company of Dallas, Texas, to the credit of said Great American Reserve
<PAGE>
Insurance Company and subject to the check of said company; that said amount
of said capital and surplus has been paid in and is possessed by said company
in money, and that the same is the bona fide property of said Great American
Reserve Insurance Company. The certificate of said Texas Bank & Trust Company
is hereto attached and made a part hereof showing such cash to be so deposited
and held by said bank.
/s/ TRAVIS T. WALLACE
____________________________________
President
/s/ C. O. HAMBLETON
____________________________________
Secretary
SWORN TO AND SUBSCRIBED BEFORE ME by Travis T. Wallace and C. O.
Hambleton this 14th day of March, A. D. 1940.
/s/ H. JOHNSEY
___________________________________
Notary Public, Dallas County, Texas.
THE STATE OF TEXAS )
COUNTY OF DALLAS )
WHEREAS, at a special meeting of the Stockholders of All American
Assurance Company, held at the office of said Company, in the City of Dallas,
Dallas County, Texas, on the 16th day of July, A. D. 1937, in conformity with
the laws of the State and by-laws of said corporation, the stockholders of
said corporation by a vote of more than two-thirds of all of the stock of said
company voted to change the name of said corporation; and,
WHEREAS, at a meeting of the Board of Directors of said All American
Assurance Company, held on the 16th day of July, A.D. 1937, at the office of
the Company, in the City of Dallas, Dallas County, Texas, a quorum of said
Board of Directors being present, pursuant to the action and vote of the
stockholders of said corporation above referred to, the said Board of
Directors did unanimously vote to amend Article I of the Charter of said
corporation by changing the name of said corporation; and did further
authorize and direct the President and Assistant Secretary of said corporation
to take all necessary and proper legal steps to certify the aforesaid
amendment to the Charter of said corporation to the Board of Insurance
Commissioners of the State of Texas, for the purpose and to the end that said
amendment and the original Charter now on file with said Board of Insurance
Commissioners shall constitute the amended Charter of said corporation; and,
WHEREAS, all the aforesaid authorizations, actions and proceedings of the
stockholders and directors of said corporation are reflected and set forth in
certified copies of the resolutions hereto attached and accompanying this
amendment.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, That we, C.V. Compton,
<PAGE>
President, and T. V. Meyer, Assistant Secretary, of said All American
Assurance Company, by virtue of the laws of the State of Texas and the
authority vested in us by the action of the stockholders and Board of
Directors of said corporation above referred to,
DO HEREBY CERTIFY that Article I of the Charter of this corporation has
been and is hereby amended to read as follows:
"ARTICLE I.
"The name of this corporation shall be GREAT AMERICAN RESERVE INSURANCE
COMPANY."
And we do hereby adopt, authenticate and certify this amendment to the
Board of Insurance Commissioners of the State of Texas for action on as
required by law, for the purpose and to the end that this amendment when
approved and filed by said Board, together with the original Charter now on
file with said Board of Insurance Commissioners, shall constitute the amended
charter of said All American Assurance Company.
IN WITNESS WHEREOF we hereunto subscribe our names, this 16th day of
July, A. D. 1937.
/s/ C.V. COMPTON
____________________
President
/s/ T. V. MEYER
____________________
Assistant Secretary
THE STATE OF TEXAS )
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared C.
V. Compton and T. V. Meyer, known to me to be the persons whose names are
subscribed to the foregoing instrument ( amendment to the charter of All
American Assurance Company), and severally, as President and Assistant
Secretary, respectively, of the All American Assurance Company, acknowledged
to me that they executed the same for the purposes and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 16th day of July, A. D.
1937.
/s/ O. D. BROWDRIDGE
___________________________________
Notary Public, Dallas County, Texas.
<PAGE>
BY-LAWS OF THE COMPANY
Amended and Restated
BY-LAWS
_______
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
_______________________________________
June 8, 1993
TABLE OF CONTENTS
_________________
Page
____
ARTICLE I Identification
Section 1. Name
Section 2. Registered Office and Registered Agent
Section 3. Principal Office
Section 4. Other Offices
Section 5. Seal
Section 6. Fiscal Year
ARTICLE II Shareholders
Section 1. Place of Meeting
Section 2. Annual Meetings
Section 3. Special Meetings
Section 4. Notice of Meeting
Section 5. Waiver of Notice
Section 6. Voting at Meetings
(a) Voting Rights
(b) Record Date
(c) Proxies
(d) Quorum
(e) Adjournments
Section 7. List of Shareholders
<PAGE>
Section 8. Action by Written Consent
Section 9. Meeting by Telephone or Similar Communications Equipment
ARTICLE III Directors
Section 1. Duties
Section 2. Number of Directors
Section 3. Election and Term
Section 4. Resignation
Section 5. Vacancies
Section 6. Annual Meetings
Section 7. Regular Meetings
Section 8. Special Meetings
Section 9. Notice
Section 10. Waiver of Notice
Section 11. Business to be Transacted
Section 12. Quorum - Adjournment if Ouorum is Not Present
Section 13. Presumption of Assent
Section 14. Action by Written Consent
Section 15. Committees
Section 16. Meeting by Telephone or Similar Communication Equipment
ARTICLE IV Officers
Section 1. Principal Officers
Section 2. Election and Terms
Section 3. Resignation and Removal
Section 4. Vacancies
Section 5. Powers and Duties of Officers
Section 6. Chairman of the Board
Section 7. President
<PAGE>
Section 8. Vice Presidents
Section 9. Secretary
Section 10. Treasurer
Section 11. Assistant Secretaries
Section 12. Assistant Treasurers
Section 13. Delegation of Authority
Section 14. Securities of Other Corporations
ARTICLE V Directors' Services, Limitation of Liability and Reliance on
Corporate Records, and Interest of Directors in Contracts
Section 1. Services
Section 2. General Limitation of Liability
Section 3. Reliance on Corporate Records and Other Information
Section 4. Interest of Directors in Contracts
ARTICLE VI Indemnification
Section 1. Indemnification Against Underlying Liability
Section 2. Successful Defense
Section 3. Determination of Conduct
Section 4. Payment of Expenses in Advance
Section 5. Indemnity Not Exclusive
Section 6. Insurance Indemnification
Section 7. Employee Benefit Plans
Section 8. Application of Indemnification and Advancement of Expenses
Section 9. Indemnification Payments
ARTICLE VII Shares
Section 1. Share Certificates
Section 2. Transfer of Shares
Section 3. Registered Holders
Section 4. Lost, Destroyed and Mutilated Certificates
<PAGE>
Section 5. Consideration for Shares
Section 6. Payment for Shares
Section 7. Distributions to Shareholders
Section 8. Regulations
ARTICLE VIII Corporate Books and Reports
Section 1. Place of Keeping Corporate Books and Records
Section 2. Place of Keeping Certain Corporate Books and Records
Section 3. Permanent Records
Section 4. Shareholder Records
Section 5. Shareholder Rights of Inspection
Section 6. Additional Rights of Inspection
ARTICLE IX Miscellaneous
Section 1. Notice and Waiver of Notice
Section 2. Depositories
Section 3. Signing of Checks, Notes, etc.
Section 4. Gender and Number
Section 5. Laws
Section 6. Headings
ARTICLE X Amendments
ARTICLE XI The Texas Business Corporation Act
BY-LAWS
_______
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
________________________________________
ARTICLE I
_________
Identification
_______________
<PAGE>
Section 1. Name. The name of the Corporation is Great American
Reserve Insurance Company (hereinafter referred to as the "Corporation").
Section 2. Registered Office and Registered Agent. The street
address of the Registered Office of the Corporation is 205 E. 10th Street,
Amarillo, Texas 79105; and the name of its Registered Agent located at such
office is William O. Daniel, Jr.
Section 3. Principal Office. The address of the Principal
Office of the Corporation is 11815 North Pennsylvania Street, Carmel, Indiana
46032. The Principal Office of the Corporation shall be the principal
executive and administrative offices of the Corporation, and such Principal
Office may be changed from time to time by the Board of Directors in the
manner provided by law and need not be the same as the Registered Office of
the Corporation.
Section 4. Other Offices. The Corporation may also have offices
at such other places or locations, within or without the State of Texas, as
the Board of Directors may determine or the business of the Corporation may
require.
Section 5. Seal. The Corporation need not use a seal. If one
is used, it shall be circular in form and mounted upon a metal die suitable
for impressing the same upon paper. About the upper periphery of the seal
shall appear the words "Great American Reserve Insurance Company" and about
the lower periphery thereof the word "Texas". In the center of the seal shall
appear the word "Seal". The seal may be altered by the Board of Directors at
its pleasure and may be used by causing it or a facsimile thereof to be
impressed, affixed, printed or otherwise reproduced.
Section 6. Fiscal Year. The fiscal year of the Corporation
shall begin at the beginning of the first day of January in each year and end
at the close of the last day of December next succeeding.
ARTICLE II
__________
Shareholders
____________
Section 1. Place of Meeting. All meetings of shareholders of
the Corporation shall be held at such place, within or without the State of
Texas, as may be determined by the President or Board of Directors and
specified in the notices or waivers of notice thereof or proxies to represent
shareholders at such meetings.
Section 2. Annual Meetings. An annual meeting of shareholders
shall be held each year on such date and at such time as may be determined by
the President or Board of Directors. The failure to hold an annual meeting at
the designated time shall not affect the validity of any corporate action. Any
and all business of any nature or character may be transacted, and action may
be taken thereon, at any annual meeting, except as otherwise provided by law
or by these By-laws.
<PAGE>
Section 3. Special Meetings. A special meeting of shareholders
shall be held: (a) on call of the Board of Directors or the President; or (b)
if the holders of at least twenty-five percent (25%) of all the votes entitled
to be cast on any issue proposed to be considered at the proposed special
meeting sign, date and deliver to the Secretary one (1) or more written
demands for the meeting describing the purpose or purposes for which it is to
be held. At any special meeting of the shareholders, only business within the
purpose or purposes described in the notice of the meeting may be conducted.
Section 4. Notice of Meeting. Written or printed notice stating
the date, time and place of a meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary, or by the officers or persons calling the meeting, to
each shareholder of record of the Corporation entitled to vote at the meeting,
at such address as appears upon the records of the Corporation, no fewer than
ten (10) days nor more than sixty (60) days, before the meeting date. If
mailed, such notice shall be effective when mailed if correctly addressed to
the shareholder's address shown in the Corporation's current record of
shareholders.
Section 5. Waiver of Notice. A shareholder may waive any notice
required by law, the Articles of Incorporation or these By-laws before or
after the date and time stated in the notice. The waiver by the shareholder
entitled to the notice must be in writing and be delivered to the Corporation
for inclusion in the minutes or filing with the corporate records. A
shareholder's attendance at a meeting, in person or by proxy: (a) waives
objection to lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting; and (b) waives objection to consideration
of a particular matter at the meeting that is not within the purpose or
purposes described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
Section 6. Voting at Meetings.
(a) Voting Rights. At each meeting of the shareholders, each
outstanding share, regardless of class, is entitled to one (1) vote on each
matter voted on at such meeting, except to the extent cumulative voting is
allowed by the Articles of Incorporation. Only shares are entitled to vote.
(b) Record Date. The record date for purposes of determining
shareholders entitled to vote at any meeting shall be ten (10) days prior to
the date of such meeting or such different date not more than seventy (70)
days prior to such meeting as may be fixed by the Board of Directors.
(c) Proxies.
(1) A shareholder may vote the shareholder's shares in person or by proxy.
(2) A shareholder may appoint a proxy to vote or otherwise act for the
shareholder by executing in writing an appointment form, either personally or
by the shareholder's attorney-in-fact. For purposes of this Section, a proxy
appointed by telegram, telex, telecopy or other document transmitted
electronically for or by a shareholder shall be deemed "executed in writing"
<PAGE>
by the shareholder.
(3) An appointment of a proxy is effective when received by the Secretary or
other officer or agent authorized to tabulate votes. An appointment is valid
for eleven (11) months, unless a longer period is expressly provided in the
appointment form.
(4) An appointment of a proxy is revocable by the shareholder, unless the
appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest.
(d) Quorum. At all meetings of shareholders, a majority of the
votes entitled to be cast on a particular matter constitutes a quorum on that
matter. If a quorum exists, action on a matter (other than the election of
directors) is approved if the votes cast favoring the action exceed the votes
cast opposing the action, unless the Articles of Incorporation or law require
a greater number of affirmative votes.
(e) Adjournments. Any meeting of shareholders, including both
annual and special meetings and any adjournments thereof, may be adjourned to
a different date, time or place. Notice need not be given of the new date,
time or place if the new date, time or place is announced at the meeting
before adjournment, even though less than a quorum is present. At any such
adjourned meeting at which a quorum is present, in person or by proxy, any
business may be transacted which might have been transacted at the meeting as
originally notified or called.
Section 7. List of Shareholders.
(a) After a record date has been fixed for a meeting of shareholders,
the Secretary shall prepare or cause to be prepared an alphabetical list of
the names of the shareholders of the Corporation who are entitled to vote at
such meeting. The list shall show the address of and number of shares held by
each shareholder.
(b) The shareholders' list must be available for inspection by any
shareholder entitled to vote at the meeting, beginning five (5) business days
before the date of the meeting for which the list was prepared and continuing
through the meeting, at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held.
Subject to the restrictions of applicable law, a shareholder, or the
shareholder's agent or attorney authorized in writing, is entitled on written
demand to inspect and to copy the list, during regular business hours and at
the shareholder's expense, during the period it is available for inspection.
(c) The Corporation shall make the shareholders' list available at the
meeting, and any shareholder, or the shareholder's agent or attorney
authorized in writing, is entitled to inspect the list at any time during the
meeting or any adjournment.
Section 8. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the shareholders may be taken without
a meeting if the action is taken by all the shareholders entitled to vote on
<PAGE>
the action.
The action must be evidenced by one or more written consents describing the
action taken, signed by all the shareholders entitled to vote on the action,
and delivered to the Corporation for inclusion in the minutes or filing with
the corporate records. Such action is effective when the last shareholder
signs the consent, unless the consent specifies a different prior or
subsequent effective date. Such consent shall have the same force and effect
as a unanimous vote at a meeting of the shareholders, and may be described as
such in any document or instrument.
Section 9. Meeting by Telephone or Similar Communications
Equipment. Any or all shareholders may participate in and hold a meeting of
shareholders by, or through the use of, any means of conference telephone or
other similar communications equipment by which all persons participating in
the meeting may simultaneously hear each other during the meeting.
Participation in a meeting pursuant to this Section shall constitute presence
in person at such meeting, except where a person participates in the meeting
for the express purposes of: (a) objecting to holding the meeting or
transacting business at the meeting on the ground that the meeting is not
lawfully called or convened; or (b) objecting to the consideration of a
particular matter that is not within the purpose or purposes described in the
meeting notice.
ARTICLE III
Directors
Section 1. Duties. The business, property and affairs of the
Corporation shall be managed and controlled by the Board of Directors and,
subject to such restrictions, if any, as may be imposed by law, the Articles
of Incorporation or by these By-laws, the Board of Directors may, and are
fully authorized to, do all such lawful acts and things as may be done by the
Corporation which are not directed or required to be exercised or done by the
shareholders. Directors need not be residents of the State of Texas or
shareholders of the Corporation.
Section 2. Number of Directors. The Board of Directors shall
consist of at least five (5) and not more than fifteen (15) directors. A Board
of Directors shall be chosen annually by the shareholders at their annual
meeting, except as hereinafter provided. Subject to Article VI of the Articles
of Incorporation, the number of directors may be increased or decreased from
time to time by amendment to these By-Laws, but no decrease shall have the
effect of shortening the term of any incumbent director. A person need not be
a shareholder of the Corporation to serve as a Director. The Directors' terms
of office shall be for one year, or until their successors are elected and
have qualified.
Section 3. Election and Term. Except as otherwise provided in
Section 5 of this Article, the directors shall be elected each year at the
annual meeting of the shareholders, or at any special meeting of the
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shareholders. Each such director shall hold office, unless he is removed in
accordance with the provisions of these By-laws or he resigns or dies or
becomes so incapacitated he can no longer perform any of his duties as a
director, for the term for which he is elected and until his successor shall
have been elected and qualified. Each director shall qualify by accepting his
election to office either expressly or by acting as a director. The
shareholders or directors may remove any director, with or without cause, and
elect a successor at a meeting called expressly for such purpose.
Section 4. Resignation. Any director may resign at any time by
delivering written notice to the Board of Directors, the President, or the
Secretary of the Corporation. A resignation is effective when the notice is
delivered unless the notice specifies a later effective date. The acceptance
of a resignation shall not be necessary to make it effective, unless expressly
so provided in the resignation.
Section 5. Vacancies. Vacancies occurring in the membership of
the Board of Directors caused by resignation, death or other incapacity, or
increase in the number of directors shall be filled by a majority vote of the
remaining members of the Board, and each director so elected shall serve until
the next meeting of the shareholders, or until a successor shall have been
duly elected and qualified.
Section 6. Annual Meetings. The Board of Directors shall meet
annually, without notice, immediately following, and at the same place as, the
annual meeting of the shareholders.
Section 7. Regular Meetings. Regular meetings shall be held at
such times and places, either within or without the State of Texas, as may be
determined by the President or the Board of Directors.
Section 8. Special Meetings. Special meetings of the Board of
Directors may be called by the President or by two (2) or more members of the
Board of Directors, at any place within or without the State of Texas, upon
twenty-four (24) hours' notice, specifying the time, place and general
purposes of the meeting, given to each director personally, by telephone,
telegraph, teletype, or other form of wire or wireless communication; or
notice may be given by mail if mailed at least three (3) days before such
meeting.
Section 9. Notice. The Secretary or an Assistant Secretary
shall give notice of each special meeting, and of the date time and place of
the particular meeting, in person or by mail, or by telephone, telegraph,
teletype, or other form of wire or wireless communication, and in the event of
the absence of the Secretary or an Assistant Secretary or the failure,
inability, refusal or omission on the part of the Secretary or an Assistant
Secretary so to do, any other officer of the Corporation may give said notice.
Section 10. Waiver of Notice. A director may waive any notice
required by law, the Articles of Incorporation, or these By-laws before or
after the date and time stated in the notice. Except as otherwise provided in
this Section, the waiver by the director must be in writing, signed by the
director entitled to the notice, and included in the minutes or filed with the
<PAGE>
corporate records. A director's attendance at or participation in a meeting
waives any required notice to the director of the meeting unless the director
at the beginning of the meeting (or promptly upon the director's arrival)
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
Section 11. Business to be Transacted. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or any waiver of notice of
such meeting. Any and all business of any nature or character whatsoever may
be transacted and action may be taken thereon at any meeting, regular or
special, of the Board of Directors.
Section 12. Quorum - Adjournment if Quorum is Not Present. A
majority of the number of directors fixed by, or in the manner provided in,
the Articles of Incorporation or these By-laws shall constitute a quorum for
the transaction of any and all business, unless a greater number is required
by law or Articles of Incorporation or these By-laws. At any meeting, regular
or special, of the Board of Directors, if there be less than a quorum present,
a majority of those present, or if only one director be present, then such
director, may adjourn the meeting from time to time without notice until the
transaction of any and all business submitted or proposed to be submitted to
such meeting or any adjournment thereof shall have been completed. In the
event of such adjournment, written, telegraphic or telephonic announcement of
the time and place at which the meeting will reconvene must be provided to all
directors. The act of the majority of the directors present at any meeting of
the Board of Directors at which a quorum is present shall constitute the act
of the Board of Directors, unless the act of a greater number is required by
law or the Articles of Incorporation or these By-laws.
Section 13. Presumption of Assent. A director of the
Corporation who is present at a meeting of the Board of Directors at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless his dissent or abstention shall be entered in the
minutes of the meeting or unless he shall file his written dissent or
abstention to such action with the presiding officer of the meeting before the
adjournment thereof or to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent or abstain shall not
apply to a director who voted in favor of such action.
Section 14. Action by Written Consent. Any action required or
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if the action is taken by all the
members of the Board of Directors or committee, as the case may be. The action
must be evidenced by one or more written consents describing the action taken,
signed by each director or committee member, and included in the minutes or
filed with the corporate records reflecting the action taken. Such action is
effective when the last director or committee member signs the consent, unless
the consent specifies a different prior or subsequent effective date. Such
consent shall have the same force and effect as a unanimous vote at a meeting,
and may be described as such in any document or instrument.
Section 15. Committees. The Board of Directors, by resolution
adopted by a majority of the Board of Directors, may designate from among its
<PAGE>
members an executive committee and one or more other committees, each of
which, to the extent provided in such resolution or in the Articles of
Incorporation or in these By-laws of the Corporation, shall have and may
exercise such authority of the Board of Directors as shall be expressly
delegated by the Board from time to time; except that no such committee shall
have the authority of the Board of Directors in reference to (a) amending the
Articles of Incorporation; (b) approving a plan of merger even if the plan
does not require shareholder approval; (c) authorizing dividends or
distributions, except a committee may authorize or approve a reacquisition of
shares, if done according to a formula or method prescribed by the Board of
Directors; (d) approving or proposing to shareholders action that requires
shareholder approval; (e) amending, altering or repealing the By-laws of the
Corporation or adopting new By-laws for the Corporation; (f) filling vacancies
in the Board of Directors or in any of its committees; or (g) electing or
removing officers or members of any such committee. A majority of all the
members of any such committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
The Board of Directors shall have power at any time to change the number and
members of any such committee, to fill vacancies and to discharge any such
committee. The designation of such committee and the delegation thereto of
authority shall not alone constitute compliance by the Board of Directors, or
any member thereof, with the standard of conduct imposed upon it or him by the
Texas Business Corporation Act, as the same may, from time to time, be
amended.
Section 16. Meeting by Telephone or Similar Communication
Equipment. Any or all directors may participate in and hold a regular or
special meeting of the Board of Directors or any committee thereof by, or
through the use of, any means of conference telephone or other similar
communications equipment by which all directors participating in the meeting
may simultaneously hear each other during the meeting. Participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting, except where a director participates in the meeting for the express
purpose of objecting to holding the meeting or transacting business at the
meeting on the ground that the meeting is not lawfully called or convened.
ARTICLE IV
Officers
Section 1. Principal Officers. The officers of the Corporation
shall be chosen by the Board of Directors and shall consist of a Chairman of
the Board, a President, a Treasurer and a Secretary. There may also be one or
more Vice Presidents and such other officers or assistant officers as the
Board shall from time to time create and so elect. Any two (2) or more offices
may be held by the same person.
Section 2. Election and Terms. Each officer shall be elected by
the Board of Directors at the annual meeting thereof and shall hold office
until the next annual meeting of the Board or until his or her successor shall
have been elected and qualified or until his or her death, resignation or
removal. The election of an officer shall not of itself create contract
rights.
<PAGE>
Section 3. Resignation and Removal. An officer may resign at
any time by delivering notice to the Board of Directors, its President or the
Secretary of the Corporation. A resignation is effective when the notice is
delivered unless the notice specifies a later effective date. If an officer's
resignation is made effective at a later date and the Corporation accepts the
future effective date, the Board of Directors may fill the pending vacancy
before the effective date, if the Board of Directors provides that the
successor does not take office until the effective date. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly
provided in the resignation. An officer's resignation does not affect the
Corporation's contract rights, if any, with the officer. Any officer may be
removed at any time, with or without cause, by vote of a majority of the whole
Board. Such removal shall not affect the contract rights, if any, of the
officer so removed.
Section 4. Vacancies. Whenever any vacancy shall occur in any
office by death, resignation, increase in the number of officers of the
Corporation, or otherwise, the same shall be filled by the Board of Directors,
and the officer so elected shall hold office until the next annual meeting of
the Board or until his or her successor shall have been elected and qualified.
Section 5. Powers and Duties of Officers. The officers so
chosen shall perform the duties and exercise the powers expressly conferred or
provided for in these By-laws, as well as the usual duties and powers incident
to such office, respectively, and such other duties and powers as may be
assigned to them by the Board of Directors or by the President.
Section 6. Chairman of the Board. The Chairman of the Board
shall be the Chief Executive Officer of the Corporation and shall have general
charge of, and supervision and authority over, all of the affairs and business
of the Corporation. He shall have general supervision of and direct all
officers, agents and employees of the Corporation; shall see that all orders
and resolutions of the Board are carried into effect; and in general, shall
exercise all powers and perform all duties incident to his office and such
other powers and duties as may from time to time be assigned to him by the
Board.
Section 7. President. The President shall be the Chief
Marketing Officer of the Corporation. He shall have the authority to sign,
with the Secretary or an Assistant Secretary, any and all certificates for
shares of the capital stock of the Corporation, and shall have the authority
to sign singly deeds, bonds, mortgages, contracts, or other instruments to
which the Corporation is a party (except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by these
By-laws, or by law to some other officer or agent of the Corporation); and, in
the absence, disability or refusal to act of the Chairman of the Board, shall
preside at meetings of the shareholders and of the Board of Directors and
shall possess all of the powers and perform all of the duties of the Chairman
of the Board. He shall also serve the Corporation in such other capacities and
perform such other duties and have such additional authority and powers as are
incident to his office or as may be defined in these By-laws or delegated to
him from time to time by the Board of Directors or by the Chairman of the
Board.
<PAGE>
Section 8. Vice Presidents. The Vice Presidents shall assist
the President and shall perform such duties as may be assigned to them by the
Board of Directors or the President. Unless otherwise provided by the Board,
in the absence or disability of the President, the Vice President (or, if
there be more than one, the Vice President first named as such by the Board of
Directors at its most recent meeting at which Vice Presidents were elected)
shall execute the powers and perform the duties of the President. Any action
taken by a Vice President in the performance of the duties of the President
shall be conclusive evidence of the absence or inability to act of the
President at the time such action was taken.
Section 9. Secretary. The Secretary (a) shall keep the minutes
of all meetings of the Board of Directors and the minutes of all meetings of
the shareholders in books provided for that purpose; (b) shall attend to the
giving and serving of all notices; (c) when required, may sign with the
President or a Vice President in the name of the Corporation, and may attest
the signature of any other officers of the Corporation to all contracts,
conveyances, transfers, assignments, encumbrances, authorizations and all
other instruments, documents and papers, of any and every description
whatsoever, of or executed for or on behalf of the Corporation and affix the
seal of the Corporation thereto; (d) may sign with the President or a Vice
President all certificates for shares of the capital stock of the Corporation
and affix the corporate seal of the Corporation thereto; (e) shall have charge
of and maintain and keep or supervise and control the maintenance and keeping
of the stock certificate books, transfer books and stock ledgers and such
other books and papers as the Board of Directors may authorize, direct or
provide for, all of which shall at all reasonable times be open to the
inspection of any director, upon request, at the office of the Corporation
during business hours; (f) shall, in general, perform all the duties incident
to the office of Secretary; and (g) shall have such other powers and duties as
may be conferred upon or assigned to him by the Board of Directors.
Section 10. Treasurer. The Treasurer shall have custody of all
the funds and securities of the Corporation which come into his hands. When
necessary or proper, he may endorse on behalf of the Corporation, for
collection, checks, notes and other obligations, and shall deposit the same to
the credit of the Corporation in such banks or depositories as shall be
selected or designated by or in the manner prescribed by the Board of
Directors. He may sign all receipts and vouchers for payments made to the
Corporation, either alone or jointly with such officer as may be designated by
the Board of Directors. Whenever required by the Board of Directors, he shall
render a statement of his cash account. He shall enter or cause to be entered,
punctually and regularly, on the books of the Corporation, to be kept by him
or under his supervision or direction for that purpose, full and accurate
accounts of all moneys received and paid out by, for or on account of the
Corporation. He shall at all reasonable times exhibit his books and accounts
and other financial records to any director of the Corporation during business
hours. He shall have such other powers and duties as may be conferred upon or
assigned to him by the Board of Directors. The Treasurer shall perform all
acts incident to the position of Treasurer, subject always to the control of
the Board of Directors. He shall, if required by the Board of Directors, give
such bond for the faithful discharge of his duties in such form and amount as
the Board of Directors may require.
<PAGE>
Section 11. Assistant Secretaries. The Assistant Secretaries
shall assist the Secretary in the performance of his or her duties. In the
absence of the Secretary, any Assistant Secretary shall exercise the powers
and perform the duties of the Secretary. The Assistant Secretaries shall
exercise such other powers and perform such other duties as may from time to
time be assigned to them by the Board, the President, or the Secretary.
Section 12. Assistant Treasurers. The Assistant Treasurers
shall assist the Treasurer in the performance of his or her duties. Any
Assistant Treasurer shall, in the absence or disability of the Treasurer,
exercise the powers and perform the duties of the Treasurer. The Assistant
Treasurers shall exercise such other duties as may from time to time be
assigned to them by the Board, the President, or the Treasurer.
Section 13. Delegation of Authority. In case of the absence of
any officer of the Corporation, or for any reason that the Board may deem
sufficient, a majority of the entire Board may transfer or delegate the powers
or duties of any officer to any other officer or officers for such length of
time as the Board may determine.
Section 14. Securities of Other Corporations. The President or
any Vice President or Secretary or Treasurer of the Corporation shall have
power and authority to transfer, endorse for transfer, vote, consent or take
any other action with respect to any securities of another issuer which may be
held or owned by the Corporation and to make, execute and deliver any waiver,
proxy or consent with respect to any such securities.
ARTICLE V
Directors' Services, Limitation of Liability
and Reliance on Corporate Records, and
Interest of Directors in Contracts
Section 1. Services. No director of this Corporation who is not
an officer or employee of this Corporation shall be required to devote his
time or any particular portion of his time or render services or any
particular services exclusively to this Corporation. Every director of this
Corporation shall be entirely free to engage, participate and invest in any
and all such businesses, enterprises and activities, either similar or
dissimilar to the business, enterprise and activities of this Corporation,
without breach of duty to this Corporation or to its shareholders and without
accountability or liability to this Corporation or to its shareholders.
Every director of this Corporation shall be entirely free to act for,
serve and represent any other corporation, any entity or any person, in any
capacity, and be or become a director or officer, or both, of any other
corporation or any entity, irrespective of whether or not the business,
purposes, enterprises and activities, or any of them thereof, be similar or
dissimilar to the business, purposes, enterprises and activities, or any of
them, of this Corporation, without breach of duty to this Corporation or to
its shareholders and without accountability or liability of any character or
description to this Corporation or to its shareholders.
Section 2. General Limitation of Liability. A director shall,
<PAGE>
based on facts then known to the director, discharge the duties as a director,
including the director's duties as a member of a committee, in good faith,
with the care an ordinarily prudent person in a like position would exercise
under similar circumstances, and in a manner the director reasonably believes
to be in the best interests of the Corporation. A director is not liable to
the Corporation for any action taken as a director, or any failure to take any
action, unless: (a) the director has breached or failed to perform the duties
of the director's office in accordance with the standard of care set forth
above; and (b) the breach or failure to perform constitutes willful misconduct
or recklessness.
Section 3. Reliance on Corporate Records and Other Information.
Any person acting as a director of the Corporation shall be fully protected,
and shall be deemed to have complied with the standard of care set forth in
Section 2 of this Article, in relying in good faith upon any information,
opinions, reports or statements, including financial statements and other
financial data, if prepared or presented by (a) one or more officers or
employees of the Corporation whom such person reasonably believes to be
reliable and competent in the matters presented; (b) legal counsel, public
accountants, or other persons as to matters such person reasonably believes
are within the person's professional or expert competence; or (c) a committee
of the Board of Directors of which such person is not a member, if such person
reasonably believes the committee merits confidence; provided, however, that
such person shall not be considered to be acting in good faith if such person
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted.
Section 4. Interest of Directors in Contracts. Any contract or
other transaction between the Corporation and (a) any director, or (b) any
corporation, unincorporated association, business trust, estate, partnership,
trust, joint venture, individual or other legal entity (1) in which any
director has a material financial interest or is a general partner, or (2) of
which any director is a director, officer, or trustee, shall be valid for all
purposes, if the material facts of the contract or transaction and the
director's interest were disclosed or known to the Board of Directors, a
committee of the Board of Directors with authority to act thereon, or the
shareholders entitled to vote thereon, and the Board of Directors, such
committee or such shareholders authorized, approved or ratified the contract
or transaction. Such a contract or transaction is authorized, approved or
ratified: (i) by the Board of Directors or such committee, if it receives the
affirmative vote of a majority of the directors who have no interest in the
contract or transaction, notwithstanding the fact that such majority may not
constitute a quorum or a majority of the directors present at the meeting, and
notwithstanding the presence or vote of any director who does have such an
interest; provided, however, that no such contract or transaction may be
authorized, approved or ratified by a single director; and (ii) by such
shareholders, if it receives the vote of a majority of the shares entitled to
be counted, in which vote shares owned by or voted under the control of any
director who, or of any corporation, unincorporated association, business
trust, estate, partnership, trust, joint venture, individual or other legal
entity that, has an interest in the contract or transaction may be counted;
provided, however, that a majority of such shares, whether or not present,
shall constitute a quorum for the purpose of authorizing, approving or
ratifying such a contract or transaction. This Section shall not be construed
<PAGE>
to require authorization, ratification or approval by the shareholder of any
such contract or transaction, or to invalidate any such contract or
transaction that is fair to the Corporation or would otherwise be valid under
the common and statutory law applicable thereto.
ARTICLE VI
Indemnification
Section 1. Indemnification Against Underlying Liability. The
Corporation shall indemnify any person who was or is a party, or is threatened
to be made a party, to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative, by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (collectively, "Agent") against expenses (including
attorneys' fees), judgments, fines, penalties, court costs and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement (whether with or
without court approval), conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Agent did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. If several claims, issues or matters are involved, an
Agent may be entitled to indemnification as to some matters even though he is
not entitled as to other matters. Any director or officer of the Corporation
serving in any capacity of another corporation, of which a majority of the
shares entitled to vote in the election of its directors is held, directly or
indirectly, by the Corporation, shall be deemed to be doing so at the request
of the Corporation.
Section 2. Successful Defense. To the extent that an Agent of
the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Section 1 of this Article, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection therewith.
Section 3. Determination of Conduct. Subject to any rights
under any contract between the Corporation and any Agent, any indemnification
against underlying liability provided for in Section 1 of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the Agent is proper
in the circumstances because he has met the applicable standard of conduct set
forth in said Section. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of directors not at the
time parties to the proceeding; (b) if such an independent quorum is not
obtainable, by majority vote of a committee duly designated by the full Board
<PAGE>
of Directors (in which designation directors who are parties may participate),
consisting solely of one or more directors not at the time parties to the
proceeding; (c) by special legal counsel (1) selected by the independent
quorum of the Board of Directors (or the independent committee thereof if no
such quorum can be obtained), or (2) if no such independent quorum or
committee thereof can be obtained, selected by majority vote of the full Board
of Directors (in which selection directors who are parties may participate);
or (d) by the shareholders, but shares owned by or voted under the control of
directors who are at the time parties to the proceeding may not be voted on
the determination. Notwithstanding the foregoing, an Agent shall be able to
contest any determination that the Agent has not met the applicable standard
of conduct by petitioning a court of appropriate jurisdiction.
Section 4. Payment of Expenses in Advance. Expenses incurred in
defending or settling a civil, criminal, administrative or investigative
action, suit or proceeding by an Agent who may be entitled to indemnification
pursuant to Section 1 of this Article shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of a written affirmation by the Agent of his good faith belief that he
has met the applicable standard of conduct set forth in Section 1 of this
Article and a written undertaking by or on behalf of the Agent to repay such
amount if it is ultimately determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article. Notwithstanding
the foregoing, such expenses shall not be advanced if the Corporation conducts
the determination of conduct procedure referred to in Section 3 of this
Article and it is determined from the facts then known that the Agent will be
precluded from indemnification against underlying liability because he has
failed to meet the applicable standard of conduct set forth in Section 1 of
this Article. The full Board of Directors (including directors who are
parties) may authorize the Corporation to implement the determination of
conduct procedure, but such procedure is not required for the advancement of
expenses. The full Board of Directors (including directors who are parties)
may authorize the Corporation to assume the Agent's defense where appropriate
rather than to advance expenses for such defense.
Section 5. Indemnity Not Exclusive. The indemnification against
underlying liability, and advancement of expenses provided by, or granted
pursuant to, this Article shall not be deemed exclusive of, and shall be
subject to, any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 6. Insurance Indemnification. The Corporation shall
have the power to purchase and maintain insurance on behalf of any person who
is or was an Agent of the Corporation, or is or was serving at the request of
the Corporation as an Agent against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
Section 7. Employee Benefit Plans. For purposes of this
Article, references to "other enterprises" shall include employee benefit
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plans; references to "fines" shall include any excise taxes assessed on a
person with respect to any employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries. A person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the Corporation" as referred to in this Article.
Section 8. Application of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, be applicable to claims, actions, suits or proceedings
made or commenced after the adoption thereof, whether arising from acts or
omissions to act during, before or after the adoption hereof, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. The right of any person to indemnification
and advancement of expenses shall vest at the time of occurrence or
performance of any event, act or omission giving rise to any action, suit or
proceeding of the nature referred to in Section 1 of this Article and, once
vested, shall not later be impaired as a result of any amendment, repeal,
alteration or other modification of any or all of these provisions.
Section 9. Indemnification Payments. Any payments made to any
indemnified party under this Article or under any other right to
indemnification shall be deemed to be an ordinary and necessary business
expense of the Corporation, and payment thereof shall not subject any person
responsible for the payment, or the Board of Directors, to any action for
corporate waste or to any similar action. Such payments shall be reported to
the shareholders of the Corporation before or with the notice of the next
shareholders' meeting.
ARTICLE VII
Shares
Section 1. Share Certificates. The certificate for shares of
the Corporation shall be in such form as shall be approved by the Board of
Directors. Each share certificate shall state on its face the name and state
of organization of the Corporation, the name of the person to whom the
certificate is issued, and the number and class of shares the certificate
represents. Share certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued. Every certificate
for shares of the Corporation shall be signed (either manually or in
facsimile) by, or in the name of, the Corporation by the Chairman of the
Board, President or a Vice President and either the Secretary or an Assistant
Secretary of the Corporation, with the seal of the Corporation, if any, or a
facsimile thereof impressed or printed thereon. If the person who signed
(either manually or in facsimile) a share certificate no longer holds office
when the certificate is issued, the certificate is nevertheless valid.
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Section 2. Transfer of Shares. Except as otherwise provided by
law, transfers of shares of the capital stock of the Corporation, whether part
paid or fully paid, shall be made only on the books of the Corporation by the
owner thereof in person or by duly authorized attorney, on payment of all
taxes thereon and surrender for cancellation of the certificate or
certificates for such shares (except as hereinafter provided in the case of
loss, destruction or mutilation of certificate) properly endorsed by the
holder thereof or accompanied by the proper evidence of succession, assignment
or authority to transfer, and delivered to the Secretary or an Assistant
Secretary.
Section 3. Registered Holders. The Corporation shall be
entitled to treat the person in whose name any share of stock or any warrant,
right or option is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in,
such share, warrant, right or option on the part of any other person, whether
or not the Corporation shall have notice thereof, save as may be expressly
provided otherwise by the laws of the State of Texas, the Articles of
Incorporation of the Corporation or these By-laws. In no event shall any
transferee of shares of the Corporation become a shareholder of the
Corporation until express notice of the transfer shall have been received by
the Corporation.
Section 4. Lost, Destroyed and Mutilated Certificates. The
holder of any share certificate of the Corporation shall immediately notify
the Corporation of any loss, destruction or mutilation of the certificate, and
the Board may, in its discretion, cause to be issued to such holder of shares
a new certificate or certificates of shares of capital stock, upon the
surrender of the mutilated certificate, or, in case of loss or destruction,
upon the furnishing of an affidavit or satisfactory proof of such loss or
destruction. The Board may, in its discretion, require the owner of the lost
or destroyed certificate or such owner's legal representative to give the
Corporation a bond in such sum and in such form, and with such surety or
sureties as it may direct, to indemnify the Corporation, its transfer agents
and registrars, if any, against any claim that may be made against them or any
of them with respect to the certificate or certificates alleged to have been
lost or destroyed, but the Board may, in its discretion, refuse to issue a new
certificate or new certificates, save upon the order of a court having
jurisdiction in such matters.
Section 5. Consideration for Shares. The Corporation may issue
shares for such consideration received or to be received as the Board of
Directors determines to be adequate. That determination by the Board of
Directors is conclusive insofar as the adequacy of consideration for the
issuance of shares relates to whether the shares are validly issued, fully
paid and nonassessable. When the Corporation receives the consideration for
which the Board of Directors authorized the issuance of shares, the shares
issued therefor are fully paid and nonassessable.
Section 6. Payment for Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible or
intangible property or benefit to the Corporation, including cash, promissory
notes, services performed, contracts for services to be performed, or other
securities of the Corporation. If shares are authorized to be issued for
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promissory notes or for promises to render services in the future, the
Corporation must report in writing to the shareholders the number of shares
authorized to be so issued before or with the notice of the next shareholders'
meeting.
Section 7. Distributions to Shareholders. The Board of
Directors may authorize and the Corporation may make distributions to the
shareholders subject to any restrictions set forth in the Articles of
Incorporation of the Corporation and any limitations in the Texas Business
Corporation Act, as amended.
Section 8. Regulations. The Board of Directors shall have power
and authority to make all such rules and regulations as they may deem
expedient concerning the issue, transfer and registration or the replacement
of certificates for shares of the Corporation.
ARTICLE VIII
Corporate Books and Reports
Section 1. Place of Keeping Corporate Books and Records. Except
as expressly provided otherwise in this Article, the books of account,
records, documents and papers of the Corporation shall be kept at any place or
places, within or without the State of Texas, as directed by the Board of
Directors. In the absence of a direction, the books of account, records,
documents and papers shall be kept at the principal office of the Corporation.
Section 2. Place of Keeping Certain Corporate Books and Records.
The Corporation shall keep a copy of the following records at its principal
office:
(1) Its Articles or restated Articles of Incorporation and all amendments
to them currently in effect;
(2) Its By-laws or restated By-laws and all amendments to them currently
in effect;
(3) Resolutions adopted by the Board of Directors with respect to one or
more classes or series of shares and fixing their relative rights, preferences
and limitations, if shares issued pursuant to those resolutions are
outstanding;
(4) The minutes of all shareholders' meetings and records of all action
taken by shareholders without a meeting for the past three (3) years;
(5) All written communications to shareholders generally within the past
three (3) years, including financial statements furnished to shareholders:
(6) A list of the names and business addresses of its current directors
and officers; and
(7) The Corporation's most recent annual report.
Section 3. Permanent Records. The Corporation shall keep as
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permanent records minutes of all meetings of its shareholders and Board of
Directors, a record of all actions taken by the shareholders or Board of
Directors without a meeting, and a record of all actions taken by a committee
of the Board of Directors in place of the Board of Directors on behalf of the
Corporation. The Corporation shall also maintain appropriate accounting
records.
Section 4. Shareholder Records. The Corporation shall maintain
a record of its shareholders, in a form that permits preparation of a list of
the names and addresses of all shareholders, in alphabetical order by class of
shares showing the number and class of shares held by each.
Section 5. Shareholder Rights of Inspection. The records
designated in Section 2 of this Article may be inspected and copied by
shareholders of record, during regular business hours at the Corporation's
principal office, provided that the shareholder gives the Corporation written
notice of the shareholder's demand at least five (5) business days before the
date on which the shareholder wishes to inspect and copy. A shareholder's
agent or attorney, if authorized in writing, has the same inspection and
copying rights as the shareholder represented. The Corporation may impose a
reasonable charge, covering the costs of labor and material, for copies of any
documents provided to the shareholder.
Section 6. Additional Rights of Inspection. Shareholder rights
enumerated in Section 5 of this Article may also apply to the following
corporate records, provided that the notice requirements of Section 5 are met,
the shareholder's demand is made in good faith and for a proper purpose, the
shareholder describes with reasonable particularity the shareholder's purpose
and the records the shareholder desires to inspect, and the records are
directly connected with the shareholder's purpose: excerpts from minutes of
any meeting of the Board of Directors, records of any action of a committee of
the Board of Directors while acting in place of the Board of Directors on
behalf of the Corporation, minutes of any meeting of the shareholders, and
records of action taken by the shareholders or Board of Directors without a
meeting, to the extent not subject to inspection under Section 5 of this
Article, as well as accounting records of the Corporation and the record of
shareholders. Such inspection and copying is to be done during regular
business hours at a reasonable location specified by the Corporation. The
Corporation may impose a reasonable charge, covering the costs of labor and
material, for copies of any documents provided to the shareholder.
ARTICLE IX
Miscellaneous
Section 1. Notice and Waiver of Notice. Subject to the specific
and express notice requirements set forth in other provisions of these
By-laws, the Articles of Incorporation, and the Texas Business Corporation
Act, as the same may, from time to time, be amended, notice may be
communicated to any shareholder or director in person, by telephone,
telegraph, teletype, or other form of wire or wireless communication, or by
mail. If the foregoing forms of personal notice are deemed to be
<PAGE>
impracticable, notice may be communicated in a newspaper of general
circulation in the area where published or by radio, television, or other form
of public broadcast communication. Subject to Section 4 of ARTICLE II of these
By-laws, written notice is effective at the earliest of the following: (a)
when received; (b) if correctly addressed to the address listed in the most
current records of the Corporation, five days after its mailing, as evidenced
by the postmark or private carrier receipt; or (c) if sent by registered or
certified United States mail, return receipt requested, on the date shown on
the return receipt which is signed by or on behalf of the addressee. Oral
notice is effective when communicated. A written waiver of notice, signed by
the person or persons entitled to such notice, whether before or after the
time stated therein, shall be equivalent to the giving of such notice.
Section 2. Depositories. Funds of the Corporation not otherwise
employed shall be deposited in such banks or other depositories as the Board
of Directors, the President or the Treasurer may select or approve.
Section 3. Signing of Checks, Notes, etc. In addition to and
cumulative of, but in no way limiting or restricting, any other provision of
these By-laws which confers any authority relative thereto, all checks, drafts
and other orders for the payment of money out of funds of the Corporation and
all notes and other evidence of indebtedness of the Corporation may be signed
on behalf of the Corporation, in such manner, and by such officer or person as
shall be determined or designated by the Board of Directors; provided,
however, that if, when, after and as authorized or provided for by the Board
of Directors, the signature of any such officer or person may be a facsimile
or engraved or printed, and shall have the same force and effect and bind the
Corporation as though such officer or person had signed the same personally;
and, in the event of the death, disability, removal or resignation of any such
officer or person, if the Board of Directors shall so determine or provide, as
though and with the same effect as if such death, disability, removal or
resignation had not occurred.
Section 4. Gender and Number. Wherever used or appearing in
these By-laws, pronouns of the masculine gender shall include the female
gender and the neuter gender, and the singular shall include the plural
wherever appropriate.
Section 5. Laws. Wherever used or appearing in these By-laws,
the words "law" or "laws" shall mean and refer to laws of the State of Texas,
to the extent only that such are expressly applicable, except where otherwise
expressly stated or the context requires that such words not be so limited.
Section 6. Headings. The headings of the Certificate and
Sections of these By-laws are inserted for convenience of reference only and
shall not be deemed to be a part thereof or used in the construction or
interpretation thereof.
ARTICLE X
Amendments
These By-laws may, from time to time, be added to, changed, altered,
amended or repealed or new By-laws may be made or adopted by a majority vote
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of the whole Board of Directors at any meeting of the Board of Directors, if
the notice or waiver of notice of such meeting shall have stated that the
By-laws are to be amended, altered or repealed at such meeting, or if all
directors at the time are present at such meeting, have waived notice of such
meeting, or have consented to such action in writing.
ARTICLE XI
The Texas Business Corporation Act
The provisions of the Texas Business Corporation Act, as the same may,
from time to time, be amended, applicable to any of the matters not herein
specifically covered by these By-laws, are hereby incorporated by reference in
and made a part of these By-laws.
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