RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT, N-3 EL/A, 1996-10-31

RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
N-3 EL/A, 1996-10-31

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As Filed with the Securities and Exchange Commission on October 31, 1996.

Registration Nos. 333-03093
811-07615

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____________________

FORM N-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. 2

Post-Effective Amendment No. ___
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X

Amendment No. 2

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)

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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 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.

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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

PAGE
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N-3 Item of Part A Caption in Prospectus (Continued)

14. Legal Proceedings

15. Table of Contents of Statement of Additional
Information

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
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PART A

PROSPECTUS

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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 OCTOBER ___, 1996

Rydex Advisor Variable Annuity Account

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 a tactical asset allocation or market
timing investment strategy advised by professional money managers.
Tactical asset allocation involves moving assets among several or all of
the investment portfolios available for investment under the Contracts (the
Subaccounts ); market timing involves moving assets between the Nova and
Money Market Subaccounts. 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.

PAGE
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Accumulation of the Contract values may be on either a fixed or
variable basis, or on a combination fixed and variable basis. Accumulation
on a variable basis is provided by allocations to the Rydex Advisor
Variable Annuity Account (the "Separate Account"). Variable benefits are
n o t 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.

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.

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The Money Market Subaccounts To provide current income consistent
with stability of capital and
liquidity.

This Contract is designed to be used with tactical 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 as
well as the tax consequences related to such services (see "Tactical
Allocation Services" and Federal Income Taxes; Tactical Allocation Fees ).

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.

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-

TACTICAL ALLOCATION SERVICES I-

CHARGES AND DEDUCTIONS I-
Withdrawal Charge I-
Mortality and Expense Risk Charge I-
Tactical Allocation Fee I-
Administrative Fee I-

Page

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-
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-
Tactical Allocation Fees
General I-
Diversification I-
Multiple Contracts I-

Page

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-

SEPARATE ACCOUNT VOTING RIGHTS I-

REPORTS TO CONTRACT OWNER I-

PERFORMANCE INFORMATION I-

DISTRIBUTION OF CONTRACTS I-

STATE REGULATION I-

LEGAL PROCEEDINGS I-

EXPERTS I-

REGISTRATION STATEMENT I-

LEGAL MATTERS I-

PART II

THE SEPARATE ACCOUNT II-

INVESTMENT OBJECTIVES AND
POLICIES OF THE SUBACCOUNTS II-
General II-
The Nova Subaccount II-
The Ursa Subaccount II-

Page

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-

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 representation 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 annuity contract offered by this Prospectus.

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." A
Contract Owner may be a non-natural person (e.g., a corporation, trust, or
certain other entities). (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 tactical allocation or market-timing
investment 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.

Market Timing: An investment strategy involving potentially frequent
shifting of assets between investments in domestic equity securities (e.g.,
the Nova Subaccount) and investments in cash items (e.g., the Money Market
Subaccount).

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.

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 __.)

T a ctical Asset Allocation: An investment strategy involving
potentially frequent shifting of assets among a variety of investment
sectors (e.g., by transfers among the Subaccounts).

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.

<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%

Tactical Allocation Fee . . . . . . . . . . . . . . . 1.75%

</TABLE>

__________________________

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 a ruling is obtained from the Internal
Revenue Service to permit the deduction of the Tactical
Allocation 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 tactical allocation fee to your
Financial Advisor. Upon our receipt of the necessary
r e gulatory approvals, you will be notified of the
commencement of the deduction of this fee. (See Tactical
Allocation Fee at page ___.) The Tactical Allocation Fee
is not an expense of the Money Market II Subaccount.

<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% 0.25%
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% 1.75%
======= ====== ====== =======
_____________________

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 Jun 30,
1997, and until such later date as PADCO may determine.
Other Expenses are based on estimates.
</TABLE>

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 1 year 3 years
assets:
<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 $ 88 $108

</TABLE>

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 1 year 3 years
assets:
<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 $ 8 $ 54

</TABLE>

The purpose of the Fee Table is to assist you in understanding the
various costs and expenses that you will 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 Tactical Allocation 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 "Tactical
Allocation 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.

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 __.)

Tactical Allocation Fee. Upon receipt of a ruling from the Internal
Revenue Service, Great American Reserve will deduct a tactical allocation
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 tactical
allocation services. (See "Tactical Allocation Services" at page _____ and
Federal Income Taxes; Tactical Allocation Fees 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

tactical 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
__.)

Tactical Allocation Services

This Contract is sold only to Contract Owners who are provided
tactical allocation or market-timing services by investment advisers
registered, or excluded from registration, under the Investment Advisers
Act of 1940, to whom the tactical allocation fees are paid. Tactical
allocation 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 tactical allocation services. In this regard, you may redeem your
Contract in whole or in part, but only your Financial Advisor may contact
PADCO with allocation and transfer decisions. 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, nor does Great American Reserve,
PFS or PADCO provide tactical allocation advice 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 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 "Tactical Allocation
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 "Tactical Allocation Fee" on page __ for a description
of the applicable procedures when your Financial Advisor dies, resigns or
has been terminated, 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, 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.

Although liquidity risks are often inherent in market timing
a r rangements, the Subaccounts have procedures designed to maximize
liquidity of the Subaccounts. In particular, the Subaccounts use of
futures contracts and options on securities, stock indexes and futures
contracts offer a highly liquid, cost-effective method of investing in
securities and are an effective means by which to accommodate the massive
switching and high portfolio turnover rates that may result from tactical
allocation and market timing investment strategies. 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.

As of the date of this Prospectus, Great American Reserve has pending
a request for a letter ruling from the Internal Revenue Service that
tactical allocation 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
tactical allocation fee. Contract Owners should consult a competent tax
advisor as to the tax treatment of tactical allocation fees. The deduction
of tactical allocation 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
tactical allocation 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
r e l a t e d 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, 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 Securities and Exchange Commission (the "SEC") as a
d i versified 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 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 (the "S&P500
Index"), and the Nova Subaccount currently expects to provide investment
returns that correspond to 125% of the performance 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 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
a c hieved 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
s t o c k 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
c o rrespond to the performance of a benchmark for over-the-counter
securities selected from time to time by the Managers. 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 on the
N A S DAQ 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 the performance of 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 (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 to the performance of 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
e x p e rience substantial losses during periods of falling interest
rates/rising bond prices.

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 a tactical 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 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
s h ort 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.

TACTICAL ALLOCATION SERVICES

This Contract is designed for use with tactical allocation or
market-timing investment services provided by a Financial Advisor. Each
Financial Advisor represents that it is registered, or otherwise excluded
from registration, as an investment adviser under the Investment Advisers
Act of 1940, as amended, and is not subject to any federal or state
regulatory agency action that would prevent it from providing tactical
allocation services. You should carefully consider: (a) the nature and
quality of the tactical 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.

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
F i x e d Account and become subject to the Fixed Account transfer
restrictions, or (iii) surrender your Contract, subject to applicable
withdrawal charges and tax penalties.

Once the necessary regulatory approval has been obtained from the
Internal Revenue Service to permit the deduction of the tactical allocation
fee from your Contract, Great American Reserve's only responsibility with
respect to tactical allocation services will be to collect and remit this
fee to the Financial Advisor through PFS. See "Charges and Deductions;
Tactical Allocation 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 tactical
allocation 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 obtains any necessary approvals from the SEC and any other
applicable regulatory authorities.

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 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:

<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 tactical
allocation 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--Tactical Allocation
Fees" on page __.) In addition, with respect to any Contract which is
owned by a "charitable remainder unitrust" or a "charitable remainder
a n nuity 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 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 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.

Tactical Allocation Fee

This Contract is sold only to Contract Owners who are provided
tactical allocation or market-timing investment services by Financial
Advisors to whom a tactical allocation 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
tactical allocation 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
"Tactical Allocation 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.

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 tactical allocation administrative services, including,
among others, communications with Financial Advisors (including receipt of
and acting upon transfer requests), tactical 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 tactical allocation 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. 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 tactical allocation 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
"Tactical Allocation 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

F o r 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

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, tactical allocation 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 less any applicable withdrawals 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 "Tactical Allocation Services" on page _____.)
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 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 tactical allocation 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 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 a tactical allocation 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 "Tactical Allocation Fee" in the
"Federal Income Taxes" Section at page I-__).

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
p r i o r 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; Tactical Allocation 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 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" 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 tactical allocation 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

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).

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, 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 %
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.

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

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 CERTAIN
SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE
STATE OR OTHER TAX LAWS.

Tactical Allocation Fees

A tactical allocation fee is not commonly found in other variable
annuities, so the income tax treatment of the payment of the tactical
allocation 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 tactical allocation 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 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 tactical allocation fee.
Unless and until a favorable letter ruling is obtained, Great American
Reserve will be required to treat tactical allocation 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
tactical allocation fees.

General

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
T r easury 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 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 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, a
trust, 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. If the
Contract Owner is a charitable remainder trust (a CRT ), it is probable
that the CRT will not be treated as holding the Contract as an agent for a
natural person. A CRT is generally exempt from federal income tax, but the
provisions of Section 72(u) of the Code may affect the computation and
taxation of the distributions to the income beneficiary. 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 tactical
allocation fees are treated as distributions, but are not treated as
e l i gible 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) 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 tactical allocation 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
m a ndatory 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; (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

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
a r e not incorporated into Great American Reserve's administrative
p r o c edures. 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
s u ch items as transferability, distributions, nondiscrimination and
withdrawals. (See "Tax Treatment of Withdrawals-Qualified Contracts " and
"Tax Sheltered Annuities-Withdrawal Limitations" below.) Any employee
should 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
p e rmit 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

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; (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. 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.

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;
(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.

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 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. Past performance information is based on historical earnings and
is not intended to indicate future performance. 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.

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
R e serve'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 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.

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 a
tactical 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 the
performance of a benchmark for over-
the-counter securities.
The Precious Metals Subaccount To attempt to provide investment
results that correspond to the
performance of a benchmark primarily
for metals-related securities.

The U.S. Government Bond To provide investment results that
Subaccount correspond to the performance of 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 Subaccounts To provide current income consistent
with stability of capital and
liquidity.<PAGE>

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 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
a tactical 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 quantitative 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.

None of the Subaccounts will 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 to the extent that the benchmark index selected for a
particular Subaccount is concentrated in a particular industry, that
Subaccount will be concentrated in that industry, but will not otherwise be
concentrated.

The Managers may consider changing a Subaccount s benchmark (to the
e x t ent permitted) if, for example, the current benchmark becomes
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
s u f ficiently 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 returns that correspond to 125% of the performance 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

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 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
e x ceeds 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.

T h e 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
o p erating 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 the performance of 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 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
s e n s itivity 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 the performance of
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 (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.

M e tals-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,
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 the performance of 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 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 correlates 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 U.S. Treasury bonds rises when interest rates in general decrease and
falls when interest rates in general increase. Accordingly, if the Juno
S u baccount 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
o n e 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 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
c o m mercial 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 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 eleven 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.; Pegasus Gold Inc.; TVX Gold, Inc.; and Santa Fe Pacific
Gold Corp. 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 a
tactical 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 advantage of
a n ticipated 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, especially during the commencement of operations of a
Subaccount when the level of assets of the Subaccount may be relatively
small. 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 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.

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 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 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
i n s truments 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 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%
l i m i tation 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 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
c a sh, 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 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 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 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.

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.

S o m e 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
t h e 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 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. 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 or
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.

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 % 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; (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.

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
o p e r ational 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 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. 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.

The portfolio manager for the Nova Subaccount and the Juno 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 Ursa Subaccount, the Precious Metals
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, and
restrictions of the Separate Account, PADCO will manage the investment and
reinvestment of the assets of each of the Subaccounts and determine the
c o mposition 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,
tactical allocation administrative services, Financial Advisor
communications (including receipt of and acting upon transfer requests),
tactical 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 space, equipment, and
personnel; clerical and general back office services; tactical 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.

T h e 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,
w i t h out 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 and PADCO have advanced the organizational
expenses of the Separate Account. These costs, which are approximately
$5,000 per Money Market Subaccount and $95,180 per the remaining six
Subaccounts, 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.

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

PART B

STATEMENT OF ADDITIONAL INFORMATION

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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.

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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-

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 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.

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.

Repurchase Agreements

As discussed in the Separate Account's Prospectus, each of the
S u b a c counts 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,
w h ereas 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

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 a tactical allocation or
m a rket-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

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; and except, that to the extent that the
benchmark index selected for a particular Subaccount is
concentrated in a particular industry, that Subaccount will be
concentrated in that industry, but will not otherwise be
concentrated. 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:

A Subaccount shall not:

3. Lend any security or make any other loan if, as a result, more
than 33 % 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 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. B o r r ow 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
b o rrowed, 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
c o nnection 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
("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 % 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)
t h e Subaccount maintains a segregated account with the
S u b account's custodian to cover the short position in
accordance with the position of the SEC or (ii) the Subaccount
o w ns 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.

15. I s s u e 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,
c o n solidation, 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. T h e 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.

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
l i m i tation on the Subaccount's investment in illiquid
s e curities as required by the insurance laws of those
jurisdictions where Subaccount Accumulation Units are offered
for sale.

3. T o 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
restriction.

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; Chairman
of the Board of Trustees and President of Rydex Series Trust, a
registered investment company; Chairman of the Board, 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.

_________________________

* 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)

Treasurer and Vice President of the Separate Account; 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)

Secretary and Vice President of the Separate Account; Vice President
of PADCO; Secretary and Vice President 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 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 $1,500 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.

U n d e r an investment advisory agreement with PADCO, dated
___________________, 1996, PADCO serves as the investment adviser for each
Subaccount and provides investment advice to 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 0.25%

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 1.75% 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
S u b accounts, 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 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
o f 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
d e termine 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
b r okerage 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
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

T h e c urrent 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 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.

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

c a p i tal 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 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.

F o r 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 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 (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 (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 , and the NASDAQ Composite Index . 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 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 .
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
" B ond 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. 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 tactical 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 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 = d i vidends and interest earned during the
period;

b = e x penses 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 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 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. These 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 6.0% of purchase payments.

INDEPENDENT ACCOUNTANTS

The financial statements of Great American Reserve and the Statement
of Assets and Liabilities of the Separate Account included in the
Prospectus and the Statement of Additional Information have been examined
by Coopers & Lybrand LLP, independent accountants, for the periods indicated
in their reports as stated in their opinions, and have been so included in
reliance upon such opinion given upon the authority of that firm as experts
in accounting and auditing.

CUSTODY

Boston Safe Deposit and Trust Company, a Massachusetts trust company
with its principal place of business at One Boston Place, Boston,
Massachusetts 02108, 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.

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 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
d e p osit, 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.

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 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.

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.

FINANCIAL STATEMENTS OF

GREAT AMERICAN RESERVE INSURANCE COMPANY

PAGE
<PAGE>

Incorporated herein by reference to
Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-3
for The Rydex Advisor Variable Annuity Account,
filed on September 27, 1996

PAGE
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES OF
THE RYDEX ADVISOR VARIABLE ANNUITY
ACCOUNT, AS OF SEPTEMBER 25, 1996, AND
INDEPENDENT AUDITORS REPORT

PAGE
<PAGE>

Incorporated herein by reference
to Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-3
for The Rydex Advisor Variable Annuity Account,
filed on September 27, 1996

PAGE
<PAGE>

PART C

OTHER INFORMATION

PAGE
<PAGE>

PART C: OTHER INFORMATION

Item 28. Financial Statements and Exhibits

(a) Financial Statements:

(1) Statement of Assets and Liabilities of the Registrant,
Rydex Advisor Variable Annuity Account.2/

(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.2/

(3) Form of Custodian Agreement Between Rydex Advisor Variable
A n n uity Account and Boston Safe Deposit and Trust
Company.2/

(4) Form of Investment Advisory Agreement Between Rydex Advisor
Variable Annuity Account and PADCO Advisors II, Inc.2/
___________________________

1/ Incorporated herein by reference to initial Registration
Statement, filed on May 2, 1996 (CIK No. 0001013169;
Accession No. 0000906287-96-000070).
2/ Incorporated herein by reference to Pre-Effective Amendment
No. 1 to this Registration Statement, filed on September
27, 1996.
3/ Filed herewith.

Item 28. (Cont d)

(5)(a) Form of Underwriting Agreement Among Great American Reserve
Insurance Company, Rydex Advisor Variable Annuity Account,
and PADCO Financial Services, Inc.3/

(5)(b) Form of Group Selling Agreement Among Great American
Reserve Insurance Company, PADCO Financial Services, Inc.,
Broker, and Insurance Agent.3/

(6) Form of Variable Annuity Contract.1/

(7) Form of Application for Variable Annuity Contract.3/

(8) Certificate of Incorporation and Bylaws of Great American
Reserve Insurance Company.1/

(9) Not Applicable.

(10) Not Applicable.

(11)(a) Form of Subaccount Administration Agreement Between Rydex
Advisor Variable Annuity Account and PADCO Service Company,
Inc.2/

(11)(b) Form of Accounting Services Agreement Between Rydex Advisor
Variable Annuity Account and PADCO Service Company, Inc.2/

___________________________

Item 28. (Cont d)

(11)(c) Form of Fidelity Bond Allocation Agreement Among Rydex
Advisor Variable Annuity Account, PADCO Advisors II, Inc.,
Rydex Series Trust, PADCO Advisors, Inc., and PADCO Service
Company, Inc.2/

(11)(d) Form of Joint Account Agreement Between Rydex Advisor
Variable Annuity Account and PADCO Advisors II, Inc.2/

(12) O p inion of Great American Reserve Insurance Company
Counsel.2/

(13)(a) Opinion and Consent of Coopers & Lybrand LLP.3/

(13)(b) Consent of Jorden Burt Berenson & Johnson LLP.3/

(14) Not Applicable.

(15) Not Applicable.

(16) Not Applicable.

(17) Not Yet Applicable.

___________________________

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

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, Inc. (Massachusetts) (100%)
Marketing Distribution Systems, Inc. (Pennsylvania) (100%)
CIHC, Incorporated (Delaware) (100%)
NACT, Inc. (Texas) (100%)
Conseco Distribution Systems, L.L.C. (Indiana) (90%)
Life Partners Group, Inc. (Delaware) (100%)
Lamar Life International, Inc. (Delaware) (100%)
Whitehall Fund Managers, Inc. (Kentucky) (100%)
Partners Risk Management Company (Mississippi) (100%)
Eagles National Corporation (Kentucky) (100%)
Wabash Life Insurance Company (Kentucky) (100%)
Travel Partners Group, Inc. (Colorado) (100%)
Independent Processing Services, Inc. (Delaware) (100%)
Stratford Capital Group, Inc. (Texas) (100%)
M a s sachusetts General Life Insurance Company
(Massachusetts) (100%)
Philadelphia Life Insurance Company (Pennsylvania) (100%)
Philadelphia Life Asset Planning Company (Pennsylvania)
(100%)
Lamar Life Insurance Company (Mississippi) (100%)
Invest Co, Inc. (Mississippi) (100%)
Conseco L.L.C. (Delaware) (90%)
Conseco Services, L.L.C. (Indiana) (89%)
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 Holdings Group, Inc. (Delaware) (80%)
American Life Holding Company (Delaware) (100%)

American Life and Casualty Marketing Division Co. (Iowa)
(100%)
American Life and Casualty Insurance Company (Iowa)
(100%)
Vulcan Life Insurance Company (Alabama) (98%)

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 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.

I n sofar 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
t h e 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
P r esident, 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,
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 with
Name with Underwriter Registrant
--------------------- ----------------------- ----------------------
<C> <C> <C>

Albert P. Viragh, Jr. Director, President, Chairman of the Board of
and Treasurer 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 Compliance Officer

</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, 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.

(f) The Registrant hereby represents that the fees and charges
deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses to be incurred,
and the risks assumed by Great American Reserve Insurance
Company.

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 pre-effective amendment no.
2 to 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 28th day of October, 1996.

GREAT AMERICAN RESERVE
INSURANCE COMPANY

By: /s/ Donald F. Gongaware
Donald F. Gongaware, President
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
pre-effective amendment no. 2 to 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
28th day of October, 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

A s 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 28th day of October, 1996.

<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>

/s/ Albert P. Viragh, Jr. Chairman of the October 28, 1996
Albert P. Viragh, Jr. Board of Managers,
Principal Executive
Officer, and
President
Corey A. Colehour* Member of the Board October 28, 1996
Corey A. Colehour of Managers

J. Kenneth Dalton* Member of the Board October 28, 1996
J. Kenneth Dalton of Managers

Roger Somers* Member of the Board October 28, 1996
Roger Somers of Managers

/s/ L. Gregory Gloeckner Member of the Board October 28, 1996
L. Gregory Gloeckner of Managers

PAGE
<PAGE>

/s/ Timothy P. Hagan Vice President, October 28, 1996
Timothy P. Hagan Principal Financial
Officer, and
Principal Accounting
Officer
*By: /s/ Albert P. Viragh, Jr.
Albert P. Viragh, Jr.
Attorney-in-Fact

</TABLE>

PAGE
<PAGE>

EXHIBITS

PAGE
<PAGE>

EXHIBIT INDEX<PAGE>

Exhibit
Number Description of Exhibit

(5)(a) Form of Underwriting Agreement
A m ong Great American Reserve
Insurance Company, Rydex Advisor
Variable Annuity Account, and
PADCO Financial Services, Inc.

(5)(b) Form of Group Selling Agreement
A m ong Great American Reserve
I n s urance Company, PADCO
Financial Services, Inc., Broker,
and Insurance Agent

(7) Form of Application for Variable
Annuity Contract
(13)(a) Opinion and Consent of Coopers &
Lybrand LLP

(13)(b) Consent of Jorden Burt Berenson &
Johnson LLP

PAGE
<PAGE>

EXHIBIT 5(a)

Underwriting Agreement Among
Great American Reserve
Insurance Company, Rydex Advisor
Variable Annuity Account,
and PADCO Financial Services, Inc.

PAGE
<PAGE>

PRINCIPAL UNDERWRITING AGREEMENT
FOR THE CONTRACTS FUNDED BY
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT

AGREEMENT made this ____day of _____________, 1996, by
a n d among PADCO Financial Services, Inc., a Maryland
corporation ("PFS"), on its own behalf and on behalf of Rydex
I n s urance Agency, its insurance agency subsidiary
(collectively with PFS, PADCO ), Great American Reserve
Insurance Company, a stock company organized under the laws of
the State of Texas ( Great American Reserve ), and Rydex
Advisor Variable Annuity Account, a managed separate account
of Great American Reserve (the Annuity Account ).

WITNESSETH:

WHEREAS, Great American Reserve has established the
Annuity Account to segregate assets funding the variable
benefits provided by individual, flexible premium, deferred
annuity contracts (the Contracts ), as well as by other
contracts that may be offered by Great American Reserve in the
future;

WHEREAS, the Annuity Account is registered as an open-end
management investment company under the Investment Company Act
of 1940, as amended (the 1940 Act ), and currently consists
of eight separate subaccounts and may consist of additional
subaccounts in the future (collectively, the Subaccounts );

WHEREAS, Great American Reserve and the Annuity Account
have registered the Contracts under the Securities Act of
1933, as amended (the 1933 Act ), and desire to retain PADCO
t o distribute the Contracts, and PADCO is willing to
distribute the Contracts in the manner and on the terms set
forth herein;

WHEREAS, PFS is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the 1934 Act ),
and is a member of the National Association of Securities
Dealers, Inc. ( NASD );

WHEREAS, under the applicable insurance licensing laws
and other insurance-licensing requirements of certain states
and other jurisdictions in which Contracts may be offered and
sold, Contracts may be offered and sold only through persons
who are licensed to market the Contracts in these states or other
jurisdictions; and

PAGE
<PAGE>

WHEREAS, Great American Reserve is willing to compensate
PADCO for the services to be provided in the manner and on the
terms set forth herein.

NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, Great American Reserve, the
Annuity Account, and PADCO hereby agree as follows:

1. Distribution of the Contracts

(a) Great American Reserve and the Annuity Account
hereby grant to PADCO the exclusive right, subject to the
applicable requirements of the 1933 Act, the 1934 Act, the
1940 Act, state law, and the terms set forth herein, to
distribute the Contracts during the term of this Agreement.
PADCO agrees to use commercially reasonable efforts to
distribute the Contracts.

(b) To the extent necessary to offer and sell the
Contracts, PADCO shall be duly registered or otherwise
qualified under the securities and insurance laws of any state
or other jurisdiction in which the Contracts lawfully may be
sold and in which PADCO is licensed or otherwise authorized to
sell the Contracts. In addition, to the extent necessary,
e a c h of PADCO's agents or representatives soliciting
applications for Contracts also shall be duly licensed,
registered, or otherwise qualified for the offer and sale of
C o ntracts under the applicable insurance laws and any
a p p l i c able securities laws of each state or other
jurisdictions in which these agents or representatives are
soliciting applications for Contracts. PADCO shall be
responsible for the training, supervision, and control of its
registered representatives for the purpose of the NASD Rules
of Fair Practice and federal and state securities law
requirements applicable in connection with the distribution of
the Contracts. In this connection, PADCO shall maintain
written supervisory procedures in compliance with Article III,
Section 27, of the NASD Rules of Fair Practice.

(c) Unless otherwise permitted by applicable law, each
person engaged in the distribution of Contracts under this
Agreement shall be both an agent of Great American Reserve and
a person associated with a broker or dealer, within the
meaning attributed to that phrase under the 1934 Act (each
such person, an "Agent," and, collectively, "Agents"). With
respect to all Agents, PADCO or, in connection with the Sales
Agreements authorized under section 2 of this Agreement, the
broker-dealers which have agreed to participate in the
distribution of Contracts pursuant to said Sales Agreements
(the "Participating Broker-Dealers"), as appropriate, will be
responsible for the training, qualification, registration,
supervision, and control of the Agents in the manner and to

the extent required by the applicable rules of the Securities
and Exchange Commission (the "Commission") and the NASD and by
any applicable securities laws or rules of the various states
relating to the distribution of the Contracts.

(d) PADCO agrees to offer the Contracts for sale in
accordance with the then-current prospectus and statement of
additional information ( SAI ) therefor filed with the
Commission.

(e) Great American Reserve shall furnish PADCO with all
application materials and other documentation that Great
American Reserve requires applicants to complete in connection
with their purchase of Contracts. Great American Reserve also
shall furnish PADCO with copies of all financial statements
and other documents which PADCO reasonably requires for use in
connection with the distribution of the Contracts. PADCO will
be entitled to rely on all documentation and information
furnished to it by Great American Reserve s or the Annuity
Account s management. To the extent required by law, PADCO
shall file all marketing materials with the NASD, the
Commission, and other securities regulatory authorities, and
Great American Reserve shall file all marketing materials with
state insurance regulatory authorities, and PADCO and Great
American Reserve shall each exert commercially reasonable
efforts to obtain any necessary approvals of such marketing
materials from the respective regulatory authorities.

(f) Great American Reserve shall accept the initial
purchase payment under the Contract, which payment must be
paid in full to Great American Reserve and be accompanied by a
completed application and/or such other documentation or
information that Great American Reserve may require in
connection with the purchase of a Contract. Any check, draft,
or money order used by the applicant to cover the initial
purchase payment shall be made payable to "Great American
Reserve Insurance Company," and Great American Reserve shall
return to the applicant any check, draft, or money order made
payable to any person or entity other than Great American
Reserve. It is understood that Great American Reserve
reserves the right to reject any Contract application in its
sole discretion.

(g) PADCO shall not accept payments made by a Contract
owner, either initially or subsequent to the initial purchase
payment under the Contract, and PADCO shall remit to Great
American Reserve any such payments, as well as any application
materials, received by PADCO.

(h) P A D CO or the Participating Broker-Dealer, as
appropriate, shall take reasonable steps to ensure that the
Agents shall not make recommendations to an applicant to

purchase Contracts in the absence of reasonable grounds to
believe that the purchase of Contracts is suitable for such
a p p licant. While not limited to the following, the
determination by PADCO or the Participating Broker-Dealer, as
appropriate, of suitability shall be based on information
furnished to an Agent after reasonable inquiry concerning the
applicant s insurance and investment objectives and financial
situation and needs.

(i) PADCO shall have no authority to, and shall not: (i)
add, alter, waive or discharge any Contract or application
provision or prospectus provision or represent that such can
be done by Great American Reserve or PADCO; (ii) extend the
time of making any payments; (iii) alter or substitute Great
American Reserve's forms in any manner; (iv) give or offer to
give, on behalf of Great American Reserve, any tax or legal
advice related to the purchase of a Contract; (v) guarantee
the issuance of any Contract or the reinstatement of any
lapsed Contract; or (vi) exercise any authority on behalf of
Great American Reserve other than that expressly conferred on
PADCO by this Agreement.

(j) Except as may be necessary to comply with the
requirements of any applicable law or regulation, PADCO shall
not, absent Great American Reserve's consent, actively promote
the replacement of any Contract or the redirection of the cash
value of a Contract into any other product. "Actively
promote" shall include mailings specifically sent to or
conversations specifically held with Contract owners or
licensed agents of PADCO which induce or attempt to induce a
Contract owner to surrender the Contract and replace it with
another variable annuity product (other than a product offered
by Great American Reserve or its affiliates), or to direct
premiums, cash values or deposits from a Contract to any other
variable annuity product (other than a product offered by
Great American Reserve or its affiliates). Notwithstanding
the foregoing, in no event shall this provision prevent PADCO
from concurrently or subsequently offering and selling to a
Contract owner any non-variable annuity product, whether or
not offered by Great American Reserve or its affiliates. This
provision shall not be violated in connection with business
contacts by PADCO with, or investment decisions made by,
registered investment advisers performing tactical asset
allocation services with respect to the Contracts. This
provision shall survive this Agreement for (___) years
after its termination, and Great American Reserve shall have
the right to cease commission payments to PADCO in the event
of its violation.

2. Sales Agreements

(a) Great American Reserve and PADCO may, from time to
t i m e, enter into separate written agreements ( Sales
Agreements ), on such terms and conditions as Great American
Reserve and PADCO may determine not to be inconsistent with
this Agreement, with broker-dealers which agree to participate
in the distribution of Contracts. Such Participating Broker-
D e alers and their agents or representatives soliciting
applications for Contracts shall be duly licensed, registered,
or otherwise qualified for the offer and sale of Contracts
under the applicable insurance laws and any other applicable
laws of each state or other jurisdiction in which Great
American Reserve is licensed to sell the Contracts. Each such
Participating Broker-Dealer shall be both registered as a
broker-dealer under the 1934 Act and a member of the NASD, or,
if not so registered or not such a member, then the agents and
representatives of such organization soliciting applications
for Contracts shall be agents and registered representatives
of a registered broker-dealer and NASD member which is the
parent or other affiliate of such organization and which
maintains full responsibility for the training, supervision,
a n d control of the agents and representatives selling
Contracts. In addition, each such Participating Broker-Dealer
also shall be licensed to sell insurance policies and
contracts in each state or other jurisdiction in which the
Participating Broker-Dealer solicits sales of the Contracts.
Such Sales Agreements with Participating Broker-Dealers shall
be subject to approval by Great American Reserve.

(b) PADCO shall have the responsibility for training,
monitoring, and supervising all such Participating Broker-
Dealers involved in the offer and sale of the Contracts to the
extent required by applicable law. Application materials for
Contracts solicited by such Participating Broker-Dealers
through their agents or representatives shall be forwarded to
Great American Reserve. All initial purchase payments shall
be remitted promptly by such Participating Broker-Dealers
directly to Great American Reserve.

(c) All compensation payable for sales of Contracts by
such Participating Broker-Dealers involved in the offer and
sale of the Contracts shall be paid by Great American Reserve
to such Participating Broker-Dealers on behalf of PADCO in the
form of commissions and service fees pursuant to the terms and
conditions set forth in the applicable Sales Agreements.

3. State Insurance Agent Licensing Requirements

(a) As to any activities that would require either PADCO
or any of PADCO s Agents to be licensed as an insurance agent
in a particular state or jurisdiction, neither PADCO nor any
of PADCO s Agents (as the case may be) shall engage in such
activities until such persons are properly licensed in such

state or jurisdiction. As used herein, "properly licensed"
includes the filing of an appointment by Great American
Reserve when required by the laws or regulations of the
applicable state or jurisdiction.

(b) PADCO, from time to time, shall advise Great
American Reserve of the identity of all persons or entities
that PADCO desires Great American Reserve to appoint as Great
American Reserve insurance agents. In that connection, PADCO,
either on its own or in conjunction with the efforts of other
broker-dealers with whom PADCO has contracted to offer the
product, will ensure that, after careful investigation, the
insurance agents selected to engage in the sale of the
Contracts are trained and qualified to make such sales. PADCO
shall prepare and submit completed agent appointment forms for
Great American Reserve's approval, and Great American Reserve
shall forward all approved agent appointment forms in a timely
manner to the appropriate state insurance departments. PADCO
shall pay all required appointment fees.

(c) With respect to each agent appointment executed by
Great American Reserve, Great American Reserve shall take all
a c tion necessary to effect the renewals of the agent
appointments, however, PADCO shall be responsible for the
payment of all required renewal fees paid to state insurance
authorities.

4. Books and Records

(a) Great American Reserve, the Annuity Account, and
PADCO shall cause to be maintained and preserved all required
books of account and related financial records as each is
required to maintain and preserve under the 1934 Act, the
NASD, and any other applicable laws and regulations, including
state insurance laws and regulations.

(b) All the books and records (including completed
applications and/or such other documentation or information
that Great American Reserve may require in connection with the
purchase of a Contract) maintained by Great American Reserve
in connection with the offer and sale of the Contracts shall
b e m a intained and preserved in conformity with the
requirements of the 1934 Act, to the extent that such
requirements are applicable to the obligations imposed on the
parties under this Agreement. All such books and records
shall be maintained and held by Great American Reserve, whose
property these books and records are and shall remain. Such
books and records shall be at all times subject to inspection
by the Commission in accordance with Section 17(a) of the 1934
Act and shall be made accessible to PADCO.

(c) Great American Reserve shall have the responsibility
for maintaining the records of any sales commissions paid by
Great American Reserve on behalf of PADCO to broker-dealers
a n d /or sales representatives licensed, registered, and
otherwise qualified to sell the Contracts.

5. Reports

PADCO shall cause Great American Reserve and/or the
Annuity Account to be furnished with such reports as either or
both may reasonably request in connection with the offer and
sale of Contracts for the purpose of meeting reporting and
record keeping requirements under the insurance laws of the
S t a t e of Texas and any other applicable states or
jurisdictions. Likewise, Great American Reserve and/or the
Annuity Account shall cause PADCO to be furnished with such
reports as PADCO reasonably may request in connection with the
offer and sale of Contracts for the purpose of meeting
reporting and record keeping requirements under applicable
federal or state securities laws or regulations.

6. Compensation and Expenses

(a) In consideration of the services performed by PADCO
hereunder, Great American Reserve shall compensate PADCO
weekly (or, to the extent applicable law requires that such
compensation be paid to an Agent of PADCO, to such Agent).
The amount of this compensation shall be based on a percentage
of all premiums received by Great American Reserve and
allocated to the Annuity Account under the Contracts. The
current rate of compensation is shown on Schedule A, attached
hereto.

(b) The Annuity Account shall not be liable to PADCO (or
Great American Reserve) for any expense incurred for services
related to the distribution of the Contracts (except to the
extent that profits from the mortality and expense risk charge
paid to Great American Reserve were to be used by Great
American Reserve to cover a portion of Great American
Reserve's obligations to pay such distribution expenses).
PADCO shall be responsible for all expenses relating to the
distribution of the Contracts, including, but not limited to:

(i) t h e costs and expenses of providing the
n e c essary facilities, personnel, office equipment, and
supplies, telephone services, and other utility service
necessary to carry out PADCO s obligations hereunder;

(ii) charges and expenses of outside legal counsel
r e t a i ned with respect to activities related to the
distribution of the Contracts;

(iii) the costs and expenses of underwriting and
issuance of the Contracts;

(iv) the costs and expenses of printing definitive
p r ospectuses and SAIs and any supplements thereto for
prospective purchasers;

(v) expenses incurred in connection with PADCO s
registration as a broker or dealer or in the registration or
q u a l ification of PADCO's officers, directors, or
representatives under federal and state securities laws;

(vi) t h e costs of promotional, sales, and
advertising material; and

(vii) the costs of licensing PADCO and PADCO's
Agents pursuant to state insurance laws, as required under
section 3 of this Agreement; and

(viii) a n y expenses incurred by PADCO or its
representatives in connection with performing the obligations
of PADCO under this Agreement.

7. Non-Exclusivity

Great American Reserve and the Annuity Account agree that
the services to be provided by PADCO hereunder are not to be
deemed exclusive and PADCO is free to act as distributor or
underwriter of other variable insurance products, investment
company shares, or other securities or instruments issued by
entities other than Great American Reserve and the Annuity
Account. PADCO shall, for all purposes herein, be deemed to
be an independent contractor of Great American Reserve and the
Annuity Account. Neither PADCO nor Great American Reserve
shall exercise any authority on behalf of the other except to
the extent such authority is expressly conferred under this
Agreement, and, in connection therewith, PADCO shall have no
authority to act for or represent Great American Reserve or
the Annuity Account in any way or otherwise be deemed an agent
of Great American Reserve or the Annuity Account other than in
furtherance of PADCO s duties and responsibilities as set
forth in this Agreement.

8. Indemnification

(a) Great American Reserve agrees to indemnify and hold
harmless PADCO and its affiliates and each Agent, officer, and
director thereof, and each person, if any, who is associated
with PADCO within the meaning of the 1934 Act, and each person
who controls PADCO within the meaning of the 1933 Act or the
1934 Act (collectively, the "PADCO Indemnitees"), against any
losses, claims, damages, or liabilities, joint or several, to

which any of the PADCO Indemnitees may become subject, under
the 1933 Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged
untrue statement of a material fact, or omission or alleged
omission required to be stated therein or necessary to make
the statements therein not misleading, contained:

(i) in any registration statement, or prospectus,
or any amendment thereof, or

(ii) in any document executed by Great American
Reserve filed with any state insurance authority for the
purpose of qualifying the Contracts for sale under the
insurance laws of any jurisdiction, or

(iii) in any sales materials relating to the
Contracts prepared by Great American Reserve.

Great American Reserve will reimburse each of the PADCO
Indemnitees for any legal or other expenses reasonably
incurred by PADCO or such officer or director of PADCO in
connection with investigating or defending any such loss,
claim, damages, liability, or action; provided, that Great
American Reserve will not be liable in any such case to the
extent that such loss, claim, damage, or liability arises out
of, or is based upon, an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance
upon and in conformity with information (including, without
limitation, negative responses to inquiries) furnished to
Great American Reserve by or on behalf of PADCO specifically
for use in the preparation of any registration statement, or
prospectus, or any amendment thereof, or any submission to a
state insurance authority, or supplement thereto, or any sales
materials for use in connection with the Contracts. This
indemnity agreement will be in addition to any liability which
Great American Reserve may otherwise have.

(b) PADCO agrees to indemnify and hold harmless Great
American Reserve and its officers and directors and each
person, if any, who controls Great American Reserve within the
meaning of the 1933 Act or the 1934 Act (collectively, the
"Great American Reserve Indemnitees"), against any losses,
claims, damages, or liabilities, joint or several, to which
any of the Great American Reserve Indemnitees may become
subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon:

(i) A n y untrue statement or alleged untrue
statement of a material fact or omission or alleged omission
to state a material fact required to be stated therein or

necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
contained (a) in any registration statement, or prospectus, or
any amendments thereof, or (b) in any submission to a state
insurance authority, in each case to the extent, but only to
the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance
upon and in conformity with information (including, without
limitation, negative responses to inquiries) furnished to
Great American Reserve by PADCO specifically for use in the
preparation of any registration statement, or prospectus, or
any amendments thereof or any submission to a state insurance
authority or supplement thereto; or

(ii) Any unauthorized use of sales materials or
any verbal or written misrepresentations or any unlawful sales
practices concerning the Contracts by PADCO; or

(iii) C l aims by agents or representatives or
employees of PADCO for commissions, service fees, expense
allowances, or other compensation or remuneration of any type.

PADCO will reimburse each of the Great American Reserve
Indemnitees for any legal or other expenses reasonably
incurred by Great American Reserve, such director, officer, or
c o ntrolling person in connection with investigating or
defending any such loss, claim, damage, liability, or action.
This indemnity agreement will be in addition to any liability
which PADCO may otherwise have.

(c) Promptly after receipt by a party entitled to
indemnification ( indemnified party ) under this section 8 of
notice of the commencement of any action, if a claim in
respect thereof is to be made against any person obligated to
provide indemnification under this section 8 ( indemnifying
party ), the indemnified party will notify the indemnifying
party in writing of the commencement thereof, but the omission
to so notify the indemnifying party will not relieve the
indemnifying party from any liability under this section 8,
except to the extent that the omission results in a failure of
actual notice to the indemnifying party and the indemnifying
party is damaged solely as a result of the failure to give
such notice. In case any such action is brought against any
indemnified party, and the indemnified party notifies the
i n d e m nifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein,
and to the extent that the indemnifying party may wish, to
a s s u m e the defense thereof, within separate counsel
satisfactory to the indemnified party. Such participation
shall not relieve the indemnifying party of the obligation to
reimburse the indemnified party for reasonable legal and other
expenses incurred by the indemnifying party in defending

i t s e lf, except for such expenses incurred after the
indemnifying party has deposited funds sufficient to effect
the settlement, with prejudice, of the claim in respect of
which indemnity is sought. An indemnifying party shall not be
liable to an indemnified party on account of any settlement of
any claim or action effected without the consent of the
indemnifying party.

(d) The indemnity agreements contained in this section 8
s h all remain operative and in full force and effect,
regardless of:

(i) any investigation made by or on behalf of
PADCO or any officer or director thereof or by or on behalf of
Great American Reserve or any officer or director thereof;

(ii) d e livery of any Contracts and payments
therefore; and

(iii) any termination of this Agreement.

(e) A successor by law of PADCO or of any of the parties
to this Agreement, as the case may be, shall be entitled to
the benefits of the indemnity agreements contained in this
section 8.

9. Liability

(a) PADCO shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Annuity
Account in connection with the matters to which this Agreement
relates. Nothing herein contained shall be construed to
protect PADCO against any liability resulting from the willful
malfeasance, bad faith, or gross negligence of PADCO in the
performance of its obligations and duties or from reckless
disregard of its obligations and duties under this Agreement
or by virtue of violation of any applicable law.

(b) In no event shall any party under this Agreement be
liable for lost profits or for exemplary, special, or punitive
damages alleged to have been sustained by another party.

10. Regulation

(a) This Agreement shall be subject to the applicable
provisions of applicable state law and the 1940 Act, the 1934
Act, and the rules, regulations, and rulings thereunder, and
the rules, regulations, and rulings of the NASD, as in effect
from time to time, including such exemptions and other relief
as the Commission, its staff, or the NASD may grant, and the
terms hereof shall be interpreted and construed in accordance
therewith. Without limiting the generality of the foregoing,

the term assigned shall not include any transactions
exempted from Section 15(b)(2) of the 1940 Act.

(b) PADCO shall submit to all regulatory and
administrative bodies having jurisdiction over the present and
future operations of the Annuity Account, any information,
reports, or other material which any such body by reason of
this Agreement may request or require pursuant to applicable
laws or regulations. Without limiting the generality of the
foregoing, PADCO shall furnish the Commission, and/or the
S t a t e of Texas Superintendent of Insurance with any
information or reports which the Commission, and/or the
Superintendent of Insurance may request in order to ascertain
whether the operations of the Annuity Account are being
conducted in a manner consistent with the applicable laws or
regulations.

11. Investigations and Proceedings

(a) Great American Reserve, the Annuity Account, and
PADCO agree to cooperate fully in any insurance or securities
regulatory inspection, inquiry, investigation, or proceeding,
or any judicial proceeding with respect to Great American
Reserve, the Annuity Account, or PADCO, their affiliates and
their representatives, to the extent that the inspection,
inquiry, investigation, or proceeding is in connection with
the Contracts distributed under this Agreement.

(b) Great American Reserve, the Annuity Account, and
PADCO will cooperate in investigating customer complaints and
shall arrive at mutually satisfactory responses to such
complaints.

12. Confidentiality

S u bject to the requirements of legal process and
regulatory authority, each of the parties hereto shall treat
as confidential (a) the identity of existing or prospective
Contract owners, (b) any financial or other information
provided by existing or prospective Contract owners, and (c)
any other information reasonably identified as confidential in
writing by any other party hereto (collectively "confidential
information"). Except as permitted by this Agreement, none of
the parties hereto shall disclose, disseminate, or utilize any
confidential information without the express written consent
of the affected party until such time as such confidential
information may come into the public domain, except as
permitted by this Agreement or as otherwise necessary to
service the Contracts and/or to respond to appropriate
regulatory authorities. Each of the parties hereto shall take
a l l reasonable precautions to prevent the unauthorized
disclosure of any confidential information.

13. Licenses

(a) PADCO owns all rights, title, and interest in and to
the name, trademark, and service mark "PADCO," and such other
trade names, trademarks, and service marks identified in
Schedule B, attached hereto (the "PADCO licensed marks" or the
"licensor's licensed marks"). PADCO hereby grants to Great
American Reserve a non-exclusive license to use the PADCO
licensed marks in connection with Great American Reserve s
performance of the services contemplated under this Agreement,
subject to the terms and conditions set forth in this Section
13.

(b) Great American Reserve is the owner of all rights,
title, and interest in and to the trade name, trademarks, and
service mark "Great American Reserve Insurance Company," and
s u c h other trade names, trademarks and service marks
identified in Schedule C, attached hereto (the "Great American
Reserve licensed marks" or the "licensor's licensed marks").
Great American Reserve hereby grants to PADCO a non-exclusive
license to use the Great American Reserve licensed marks in
c o n n e ction with PADCO's performance of the services
contemplated by this Agreement, subject to the terms and
conditions set forth in this Section 13.

(c) The grant of license by PADCO and Great American
Reserve (each, a "licensor") to the other (the "licensee")
shall terminate upon termination of this Agreement and the
licensee shall cease to use the licenses granted hereunder,
except that Great American Reserve shall have the right to
administer any outstanding Contracts bearing any of the PADCO

licensed marks and in connection therewith to use the PADCO
licensed marks.

(d) Notwithstanding any provision in this Agreement to
the contrary, a licensee shall obtain the prior written
approval of the licensor for the public release by such
licensee of any materials bearing the licensor s licensed
marks. The licensor s approval shall not be unreasonably
withheld.

(e) E a ch licensee hereunder: (i) acknowledges and
stipulates that the licensor's licensed marks are valid and
enforceable trademarks and/or service marks and that such
licensee does not own the licensor s licensed marks and claims
no rights therein other than as a licensee under this
Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges
and agrees that the use of the licensor s licensed marks
pursuant to this grant of license shall inure to the benefit
of the licensor.

14. Injunctive Relief

Each of the parties hereto agrees that monetary damages
may be an inadequate remedy in the event of a breach or
threatened breach of any of the covenants contained in Section
12 or Section 13 of this Agreement, and the covenants
contained in such sections shall be specifically enforceable
by temporary, preliminary, and permanent injunctive relief in
addition to, and not in limitation of, any other rights or
remedies, whether at law or in equity, that the party seeking
such injunctive relief may have. If any court shall determine
that any covenant contained in said sections of this Agreement
is invalid in whole or in part as to time or location, or as
to both, it is the intention of the parties hereto that such
covenant shall not thereby be terminated but shall be deemed
amended to the minimum extent required to render such covenant
valid and enforceable.

15. Duration and Termination of the Agreement

(a) This Agreement shall become effective with respect
to the Contracts as of the date first written above. This
A g r eement shall become effective with respect to any
subsequently offered contract when the contract has been
approved by the Board of Managers of the Annuity Account
(including a majority of the members thereof who are not
parties to this Agreement nor interested persons of any such
parties) specifically for such contract. Subsequently
offered contract means a contract issued and funded by the
Annuity Account subsequent to the initial effective date of
this Agreement.

(b) This Agreement shall continue in effect for two
years from the date of its execution and thereafter from year
to year, but only so long as such continuance is specifically
approved at least annually by (i) the Board of Managers of the
Annuity Account, or by the vote of a majority of the
outstanding voting securities of the Annuity Account, and (ii)
a vote of a majority of those members of the Board of Managers
of the Annuity Account who are not parties to this Agreement
nor interested persons of any such parties, cast in person at
a meeting called for the purpose of voting on such approval.
This Agreement shall continue in effect with respect to each
subsequently created Subaccount so long as such continuance is
s p ecifically approved at least annually in the manner
described in (i) and (ii) above of this section 15(b).

(c) This Agreement may be terminated, without the
payment of any penalty, by Great American Reserve, the Annuity
Account, or PADCO on sixty (60) days written notice to the
other parties. This Agreement shall automatically terminate
in the event of its assignment.

(d) U p o n termination of this Agreement, all
authorizations, rights, and obligations shall cease except the
obligation to settle accounts hereunder and the agreements
contained in sections 8, 11, 12, 13, and 14 of this Agreement.

16. Amendments

This Agreement may be amended at any time by mutual
consent of the parties, provided that the consent of the
Annuity Account shall be given in the manner contemplated
under section 15(b)(i) and (ii) of this Agreement.

17. Definitions

The terms assignment, interested person, and
majority of the outstanding voting securities, when used in
this Agreement, shall have the respective meanings specified
under the 1940 Act and the rules thereunder.

18. Further Actions

Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate
the purposes hereof.

19. Governing Law

The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of
Maryland, as at the time in effect, and the applicable
provisions of the 1940 Act and rules thereunder or other

federal laws and regulations which may be applicable. To the
extent that the applicable law of the State of Maryland, or
any of the provisions herein, conflict with the applicable
provisions of the 1940 Act and rules thereunder or other
federal laws and regulations which may be applicable, the
latter shall control.

20. Counterparts

T h is Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and
all of which shall be deemed one instrument.

21. Notices

A l l notices and other communications provided for
hereunder shall be in writing and shall be delivered by hand
or mailed first class, postage prepaid, addressed as follows:

(a) If to Great American Reserve:

Great American Reserve Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
Attention: Office of the General Counsel

(b) If to the Annuity Account:

Great American Reserve Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032
Attention: Office of the General Counsel

With a copy to:

Rydex Advisor Variable Annuity Account
6116 Executive Boulevard
Suite 400
Rockville, Maryland 20852
Attention: President

PADCO Financial Services, Inc.
6116 Executive Boulevard
Suite 400
Rockville, Maryland 20852
Attention: President
or to such other address as Great American Reserve, the
Annuity Account, or PADCO shall designate by written notice to
the others.

22. Miscellaneous

Captions in this Agreement are included for convenience
or reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.

IN WITNESS WHEREOF, Great American Reserve, the Annuity
Account, and PADCO, have caused this Agreement to be executed
in their names and on their behalf by and through their duly
authorized officers on the day and year first above written.

ATTEST: GREAT AMERICAN RESERVE
INSURANCE COMPANY

By:________________________ _________________________
Name:______________________ L. Gregory Gloeckner
Title:_____________________ Vice President

ATTEST: RYDEX ADVISOR VARIABLE
ANNUITY ACCOUNT

By:________________________ _________________________
Name:______________________ Albert P. Viragh, Jr.
Title:_____________________ President

ATTEST: PADCO FINANCIAL
SERVICES, INC.
on its own behalf and on
behalf of its insurance
agency subsidiary

By:________________________ _________________________
Name:______________________ Robert M. Steele
Title:_____________________ Vice President

SCHEDULE A
TO
PRINCIPAL UNDERWRITING AGREEMENT
FOR THE CONTRACTS FUNDED BY
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT

CURRENT RATE OF COMPENSATION

The amount payable weekly by Great American Reserve to
PADCO in consideration of the services performed by PADCO
under this Agreement is six percent (6.0%) of the premiums (as
that term is used in section 6(a) of this Agreement) received
by Great American Reserve and allocated to the Separate
Account under the Contracts during each week.<PAGE>

SCHEDULE B
TO
PRINCIPAL UNDERWRITING AGREEMENT
FOR THE CONTRACTS FUNDED BY
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT

PADCO LICENSED MARKS

PADCO owns all rights, title, and interest in and to the
following names, trademarks, and service marks:

PADCO
Padco
Rydex<PAGE>

SCHEDULE C
TO
PRINCIPAL UNDERWRITING AGREEMENT
FOR THE CONTRACTS FUNDED BY
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT

GREAT AMERICAN RESERVE INSURANCE COMPANY
LICENSED MARKS

Great American Reserve owns all rights, title, and
interest in and to the following names, trademarks, and
service marks:

Great American Reserve Insurance Company
Great American Reserve
GARCO
Garco

<PAGE>

EXHIBIT 5(b)

Form of
Group Selling Agreement Among
Great American Reserve Insurance Company,
PADCO Financial Services, Inc.,
Broker, and Insurance Agent

PAGE
<PAGE>

SAMPLE

GREAT AMERICAN RESERVE INSURANCE COMPANY
PADCO FINANCIAL SERVICES, INC.
GROUP SELLING AGREEMENT

T h is Agreement is made between Great American Reserve
Insurance Company ("Company") with Administrative Offices in
Carmel, Indiana, PADCO Financial Services, Inc.
("Underwriter") with Administrative Offices in Rockville,
Maryland, the Broker-Dealer named herein ("Broker"), and the
Insurance Agent named herein ( Insurance Agent ). The parties
hereby agree as follows:

1. Authorization.

Broker, either an individual, partnership, limited liability
company, or corporation, is hereby authorized by Company and
Underwriter to solicit applications for variable annuity
policies ("Policies"), as set forth in the Compensation
Schedule which is made a part of the Group Selling Agreement,
to collect and remit initial required premiums to Company, and
to promptly deliver Policies issued by Company:

a. only in jurisdictions where Broker is duly licensed
and appointed by the appropriate regulatory agencies,
and;
b. only in states or territories in which Company is
admitted to do business and only for those Policies
offered by Company that have been approved by the
appropriate regulatory agencies.

Broker shall supply Company with copies of all certificates of
qualification or licenses required of Broker under this
Agreement.

1.1. Limitation of Authority, Relationship.

Neither Broker nor Insurance Agent has authority during the
time this Agreement is in effect, or after termination, to:

a. make or modify Policies on behalf of Company or waive
any of Company's rights or requirements;
b. collect the first premiums on such Policies other
than in the form of a check or money order made
payable to the Company.
c. endorse, cash or deposit any checks or drafts payable
to Company;
d. open any bank account or trust account on behalf of,
for the benefit of, or containing the name of,
Company;

PAGE
<PAGE>

PADCO Group Selling Agreement

e. advertise or publish any matter or thing, including
use of the names or logos of Company or those of its
subsidiaries or affiliates, concerning Company or its
Policies without prior written permission of Company;
f. directly or indirectly cause or endeavor to cause any
broker or agent of Company or registered
representatives of Underwriter to terminate or alter
its/his contract with Company, or induce or attempt
to induce any policyholder of Company to relinquish,
surrender, replace or lapse a Policy; or
g. incur any liability, indebtedness or expense on
behalf of the Company, make any purchases on behalf
of the Company, or otherwise obligate the Company
other than for commissions to be paid for sales of
Policies; or
h. institute, prosecute or maintain any legal proceeding
on behalf of the Company; or
i. do or perform any acts or things other than expressly
authorized herein.

T h i s Agreement shall not create an employer-employee
relationship. The relationship of Broker to Company shall be
that of independent contractor. Broker and Insurance Agent,
jointly and severely shall indemnify and hold harmless
Company, Underwriter, and any marketing agent of Company and
each of their affiliates and any officer, director, employee
or agent if the foregoing from any and all claims, demands,
penalties, suits, or actions, and from any and all losses,
c o s t s, expenses, damages and liability in connection
therewith, arising out of or resulting from the default in the
performance of, or in the negligent performance of, by Broker,
Insurance Agent, or their partners, directors, officers,
employees, representatives, or agents, the obligations of
Broker or Insurance Agent under this Agreement, including but
not limited to any payments made by Company or Underwriter to
any marketing agent pursuant to any obligation of Company or
Underwriter to indemnify or hold harmless such marketing agent
in connection with sales of the Policies by or through the
Broker. In addition, Broker or Insurance Agent agrees to
furnish and maintain a satisfactory bond of indemnity when
requested by Company, a copy of such bond to be submitted to
Company within 30 days of request. This indemnification is in
addition to any other liability which Broker and Insurance
Agent may have for any unauthorized acts by Broker or
Insurance Agent or their partners, directors, officers,
employees, representatives or agents. The provisions of this
paragraph shall survive the termination of this Agreement.

1.2. Representation and Service.

PADCO Group Selling Agreement

Broker and Insurance Agent agree:

a. to establish such rules and procedures as are
n e cessary to insure compliance with applicable
federal and state securities and insurance laws;
b. to observe the rules, procedures and other directives
established, and given by Underwriter relating to the
sale of the Policies. Broker will comply with the
rules and regulations of the Securities and Exchange
Commission ( SEC ) and the National Association of
Securities Dealers, Inc., ( NASD ) relating to the
sale and distribution of the Policies, maintain the
required registrations or licenses and will observe
all applicable federal and state laws relating to the
P o l icies. Insurance Agent will maintain all
necessary licenses for the sale of the Policies and
shall conduct its activities in compliance with all
applicable federal and state laws relating to the
Polices;
c. that all solicitations for Policies are accompanied
by the appropriate current prospectuses for the
Policies conforming to the requirements of the
Securities Act of 1933;
d. no registrations and licenses concerning the Policies
w i l l be made except those contained in the
appropriate current prospectuses and in information
supplemental to the prospectuses;
e. to become fully informed as to the provisions and
benefits of each Policy offered by Company for which
applications are solicited under this Agreement;
f. to represent such Policies accurately and fairly to
prospects;
g. to provide all usual and customary service to
policyholders and attempt to maintain in force any
business placed with Company;
h. to hold in a fiduciary capacity all premiums received
with any application for Policies solicited for the
Company; and
i. that they are in compliance with the terms and
conditions of letters issued by the Staff of the SEC
with respect to the non-registration as a
broker/dealer of an insurance agency associated with
a registered broker/dealer. Broker and Insurance
Agent shall notify Underwriter immediately In writing
if Broker and/or Insurance Agent fail to comply with
any such terms and conditions and shall take such
measures as may be necessary to comply with any such
terms and conditions.
j. to conduct activities in a professional manner.
Broker and Insurance Agent agree to comply and

PADCO Group Selling Agreement

cooperate with the Company in any investigations by
federal or state regulators, the NASD, or other self
regulatory organizations.
k. that the right to sell the Policies is subject to the
B r o k e r s or the representative s continued
registration and compliance with such Agreement and
the rules and procedures which may be established by
the Company and/or the Underwriter.

1.3. Broker's Agents.

B r o k e r will recruit, train and supervise registered
representatives ("Representatives") for the sale of the
Policies. Appointment of each Representative shall be subject
to Company's prior approval. Company may require termination
of any Representative's authority to sell the Policies. Broker
is responsible for the Representatives' compliance with the
t e r m s and conditions of this Agreement and for the
Representatives being duly licensed pursuant to applicable
state and federal laws. Broker acknowledges its responsibility
to Company for any unauthorized acts of Representatives.

All matters concerning the licensing of any of the Broker s
representatives under any applicable state insurance law shall
b e a matter handled directly by the Broker and the
representative involved; but the Company must be furnished
proof of licensing before any commission payments may be made
with respect to sales of policies by such representative or
before Company will designate such representative as an
authorized person to sell such policies.

1.4. Delivery of Policy.

Broker and/or Insurance Agent shall return promptly to the
Company all receipts for delivered Policies, all undelivered
Policies and all receipts for cancellation, in accordance with
the instructions from the Company. Upon issuance of a Policy
by the Company and delivery of such Policy to Broker and
Insurance Agent, Broker or Insurance Agent shall promptly
deliver such Policy to its purchaser. For purposes of this
provision promptly shall be deemed to mean not later than
five calendar days. The Company will assume that a Policy
will be delivered to the purchaser of such Policy within five
calendar days for purposes of determining when to transfer
premiums initially allocated to the Money Market Subaccount
available under such Policy to the particular investment
options specified by such purchaser. As a result, if
purchasers exercise the free look provisions under such
Policy, Broker and Insurance Agent shall indemnify the Company
for any loss incurred by the Company that results from

PADCO Group Selling Agreement

Broker s or Insurance Agent s failure to deliver such Policy
to the purchasers within the contemplated five calendar day
period.

1.5 Administrative Guidelines and Compliance.

Company's administrative guidelines, including bulletins,
product and procedure updates, any revisions, additions and
amendments thereto, from the time made by Company, shall be
for all purposes a part of this Agreement as fully as if set
out word for word herein and shall be complied with by Broker
and Insurance Agent. Broker and Insurance Agent agree to
comply fully with all applicable regulations, bulletins,
rulings, circular letters, proclamations and statutes, now or
hereafter in force, and to promptly notify Company in writing
of all contacts and/or correspondence received from insurance
regulatory or other governmental authorities, and to cooperate
fully with Company in making responses to those authorities.

Broker and Insurance Agent agree that all applications for
policies shall be remitted in full together with such
applications, signed by the applicants, directly to the
Company. Checks or money orders in payment thereof shall be
drawn to the order of Great American Reserve Insurance
Company . Payments shall not be considered as received until
the application has been accepted by the Company, except as
otherwise provided at the direction and risk of the Company.
After the initial purchase payment has been made and the
policy has been issued, the policyowner shall make all future
payments (if any are called for under the policy or otherwise
permitted by the Company) directly to the Company.

Sales Materials.

a. During the term of this Agreement, the Underwriter
and the Company will provide Broker and Insurance
Agent, without charge, with as many copies of
prospectuses (and any supplements thereto), current
fund prospectus(es) (and any supplements thereto),
and applications. The Broker and Insurance Agent
will promptly return to Underwriter any prospectuses,
applications, fund prospectuses, and other materials
and supplies furnished by Underwriter or the Company
to Broker or Insurance Agent or to the
Representatives.
b. During the term of this Agreement, Underwriter and
the Company will be responsible for providing and
approving all promotional, sales and advertising
material to be used by Broker, Insurance Agent and
the Representatives. Underwriter will file such

PADCO Group Selling Agreement

materials or will cause such materials to be filed
with the SEC, the NASD, and/or with any state
securities regulatory authorities, as appropriate.
c. Broker and Insurance Agent shall not use or implement
a n y promotional, sales or advertising material
relating to the Contracts without the prior written
approval of Underwriter and the Company.

PADCO Group Selling Agreement

1.6 Limitation of Liability.

The Broker understands and agrees that the Company and the
Underwriter may employ or may have employed a marketing agent
in order to market to the Broker the opportunity to enter into
this Agreement and sell the Policies. Broker agrees that such
marketing agent shall not be held liable by Broker for any
claim, liability, judgment or cost, including attorneys fee,
that may arise in respect of or relating to this Agreement.

2. Compensation.

All compensation payable for sales of the Policies shall be
paid by Company to Broker on behalf of Underwriter and nothing
contained herein shall create any right, title or interest in
Underwriter to such compensation nor any responsibility on the
part of Underwriter for payment of such compensation. Broker
and Insurance Agent agree that the Company will be discharged
from liability for such compensation payments upon payment of
any compensation due under this Agreement to Underwriter.
Company agrees to pay compensation in the form of commissions
and service fees as provided in the Compensation Schedule(s)
delivered to Broker by Company and incorporated herein by
reference, upon any cash premiums received by Company for
Policies issued on applications submitted by Broker. Such
compensation shall be payment in full for all services
performed and all expenses incurred by Broker and Insurance
Agent. Company reserves the right to accrue compensation
under this Agreement until a minimum of $25.00 has become due.

2.1. Compensation Schedule(s).

The Compensation Schedule(s) attached, or which may hereafter
be added, is incorporated herein and made a part of this
A g r eement. Company reserves the right to change such
Compensation Schedule(s) at any time upon written notice to
Broker. However, no such change shall be applicable to
Policies for which Company has accepted premiums prior to the
effective date of such change.

PADCO Group Selling Agreement

2.2. Accounting.

Company will give to Broker a weekly statement of all
compensation becoming due and payable since the date of the
previous weekly statement. Unless Company receives written
objection to such weekly statement from Broker, within 90 days
after the date this statement is mailed to Broker's last known
address or delivered to Broker in person, the same shall be
deemed final and binding upon Broker.

2.3. Exchanges.

If in the sole discretion of Company a new Policy is issued to
replace a terminated or in force policy of Company or its
affiliates or subsidiaries, the new Policy shall be regarded
as an exchanged Policy, and any compensation payable shall be
d e termined and adjusted by Company in accordance with
Company s then current exchange rules.

2.4 Return of Premium.

If no Policy is issued on an application, all moneys collected
by Broker or Insurance Agent will be immediately returned to
the applicant. If Company finds it necessary, for any reason,
to cancel a Policy and refund premiums, any compensation paid
to Broker on the amount refunded shall be repaid to Company,
or may be deducted from any compensation payable to Broker
under this Agreement.

2.5. Local Taxes.

Broker is responsible for any county or municipal occupational
or privilege fee, tax or license which may be required of
Broker, Insurance Agent or Representatives as a result of
business submitted hereunder.

3. Indebtedness.

Broker and Insurance Agent hereby authorize Underwriter and
the Company to set off from all amounts otherwise payable to
Broker and the Insurance Agent all liabilities of Broker or
Insurance Agent. Broker and Insurance Agent shall be jointly
and severally liable for the payment of all Moines due to
Underwriter and/or the Company which may arise out of this
Agreement or any other agreements between Broker, Insurance
Agent and Underwriter or the Company including, but not
limited to, any liability for any chargebacks or for any
amounts advanced by or otherwise due Underwriter or the
Company hereunder. Underwriter and the Company do not waive
a n y of its other rights to pursue collection of any

PADCO Group Selling Agreement

indebtedness owed by Broker or Insurance Agent to Underwriter
or the Company. In the event Underwriter or the Company
initiates legal action to collect any indebtedness of Broker
or Insurance Agent, Broker and Insurance Agent shall reimburse
Underwriter and the Company for reasonable attorney fees and
expenses in connection therewith.

Upon termination of this Agreement, any indebtedness by Broker
and Insurance Agent to the Company or Underwriter becomes
immediately due and payable.

4. Termination.

Termination of this Agreement is effected as follows:

a. Cause. This Agreement may be terminated for cause by
Company, immediately upon written notice to Broker and
Insurance Agent, when Broker or Insurance Agent or it's
partner, director, officer, employee or agent has, or is
reasonably believed to have: (i) misappropriated or
withheld funds from any policyowner or from Company; (ii)
induced or attempted to induce Brokers of Company or
registered representatives of Underwriter to terminate,
r e d uce, limit, or otherwise alter their services
performed for or relationships with the Company or
Underwriter, or policyowners of Company to terminate or
r e place their Policies; (iii) interfered with the
c o l l ection of renewal premiums; (iv) engaged in
fraudulent or dishonest acts; (v) been adjudged a
bankrupt or executed a general assignment for benefit of
creditors or committed an act of bankruptcy; or (vi)
otherwise acted to adversely affect the reputation, good
standing, or business of Company in breach of this
Agreement. If Company does not terminate this Agreement
for any such cause, a waiver shall not result and this
Agreement may be terminated under this subparagraph for
any subsequent cause.

b. Death or Dissolution. If Broker or Insurance Agent is not
a corporation or partnership, this Agreement will
terminate on the date of Broker's or Insurance Agent s
death. If broker or Insurance Agent is a corporation or
partnership, this Agreement will terminate on the date
that the corporation or partnership is dissolved or
otherwise determined by appropriate regulatory agencies
to no longer be a legal entity.

c. License Suspension or Revocation. This Agreement will
terminate immediately in the event of any order of

PADCO Group Selling Agreement

suspension, revocation or termination of Broker's or
Insurance Agent s license by any regulatory authority.

d. Breach. This Agreement will terminate immediately upon
notice in the event of:
1. breach of any of the terms or provisions of this
Agreement; or
2. Broker or Broker's associated person's failure to
timely and fully comply with Company supervisory
directives, rules, regulations or manuals.

e. Ownership Change. This Agreement will terminate if Broker
or Insurance Agent is not a natural person and in the
event of a significant change in Broker's or Insurance
Agent s ownership or management as determined by the
Underwriter or Company in their sole discretion, or in
the event of the execution of an agreement of sale,
transfer or merger of Broker or Insurance Agent, without
prior notice and written consent of Company.

f. Notice. This Agreement may be terminated by any party
without cause by giving the other parties at least 30
days advance written notice delivered personally or
mailed to the last known address of the other parties.

4.1. Vested Compensation.

a. Definition. Vested compensation is any compensation that
would become due under this Agreement for business
submitted prior to the effective date of termination,
subsequent to the termination of this Agreement, as
described within Compensation Schedule(s) attached to
t h i s Agreement. No compensation is vested unless
specifically described in the applicable Compensation
S c h edule. However, if this agreement were to be
terminated under the provisions of Paragraph 4.a.,
Cause , regardless of what the Compensation Schedule(s)
m i ght provide, no compensation of any kind shall
thereafter be payable.

b. Dissolution of Corporation or Partnership. Any vested
compensation shall be paid as directed by the Articles of
Dissolution, or by the Liquidation Agreement, or by the
courts, or in accordance with applicable statutes, as
appropriate.

c. Death. If termination is by reason of Broker's or
Insurance Agent s death, such vested compensation shall
b e paid to Broker's or Insurance Agent s lawful

PADCO Group Selling Agreement

w i dow(er), and, thereafter, lawful heirs or legal
representatives.

d. Earnings Requirement for Continued Vested Compensation.
In the event less than $600 is earned in any calendar
year after termination, no further compensation will ever
be paid regardless of the reason for termination.

e. Payment of vested compensation will be reduced by any
debt or liability of Broker or Insurance Agent due the
Company.

5. Previous Agreement.

By execution of this Agreement, any prior agreement between
the Company, Underwriter, Broker and Insurance Agent or
b e t w een Company and the signing principal(s) related
specifically to the business transacted under this Agreement
is terminated as of the effective date of this Agreement; but
while this Agreement remains in force, any rights of Broker
and Insurance Agent to receive compensation under the terms
and conditions of the prior agreement are continued hereunder,
and such earned compensation shall be payable at the rate, for
the remainder of the period, and on the basis applicable as if
that agreement remained in force.

PADCO Group Selling Agreement

6. Entire Agreement.

This Agreement, including any supplements and the Compensation
Schedule(s), is the entire Agreement between the parties for
all dealings after its effective date. Any understandings,
n e gotiations, representations, statements, promises, and
agreements, oral or otherwise, not included herein shall have
no force and effect in the instruction of the rights and
obligations of the parties hereto except as provided in this
Section 6. This Agreement shall not be assigned without the
prior written consent of Company. No amendment of this
Agreement shall be valid unless made in writing by an
authorized officer of the Company.

7. Waiver.

No waiver by Company of rights arising from wrongdoing or
failure by Broker or Insurance Agent shall occur by Company's
election not to enforce any provision of this Agreement, nor
reduce or affect Company's rights arising from subsequent
wrongdoing or failure by Broker or Insurance Agent.

8. Notice.

Any written notice given under any provision of this Agreement
shall be complete upon deposit, postage paid, in the U.S. Mail
addressed to Broker and Insurance Agent s at Broker's and
Insurance Agent s last known address according to Company's
records or to Company or Underwriter at its Administrative
Offices.

9. Legal Action.

If any legal action is filed or threatened against the
Company, Underwriter, Broker, or Insurance Agent pertaining to
the Company s business or Policies, the Underwriter, Broker,
or Insurance Agent shall notify the Company of such action
within twenty-four (24) hours of receipt of knowledge and
shall forward to the Company, by overnight delivery service,
copies of all documents served upon the Underwriter, Broker,
or Insurance Agent.

10. Construction.

THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
O F THE STATE OF INDIANA EXCLUSIVE OF CHOICE OF LAWS
PROVISIONS. Venue for any action between the parties arising

PADCO Group Selling Agreement

u n der this Agreement shall be in a Court located in
Noblesville, Hamilton County, Indiana.

The effective date of this Group Selling Agreement with Great
A m e r i c a n R eserve Insurance Company shall
b e : _ _ _ _ _ _ _ _ __________________ _________________,
__________________.
(Month) (Day)
(Year)

Contract Account Number (Assigned by Company)

Broker: Insurance Agent:

Check Type of Legal Entity: Check Type of Legal Entity:
Individual Partnership Individual Partnership
Corporation Corporation

-------------------------- --------------------------
Type or Print Name of Broker T y pe or Print Name of
Insurance Agent
(if different from Broker)

-------------------------- --------------------------
Signature of Broker Signature of Insurance
Agent
(if different from Broker)

--------------------------- ---------------------------
Social Security Number of Broker Social Security Number of
Insurance Agent
(if different from Broker)

--------------------------- ---------------------------
Taxpayer Identification Number T a x p a y e r
Identification
of Broker Number of Insurance Agent
(if different from Broker)

Great American Reserve Insurance PADCO Financial Services,
Inc.

PADCO Group Selling Agreement

Company

By:_____________________________ By:______________________
Authorized Signature Authorized Signature

____________________________ _________________________
Type or Print Name Date

EXHIBIT 7

Form of Application for
Variable Annuity Contract

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. ___-___-___

Marital Status __________

Annuitization Age ____________

Date of Birth ________ ________ _________
Month Day Year

Sex M______ F______

1.(b) JOINT OWNER (If Applicable)
(Spouse Only)

______________________________________________
(Print) Last First MI
______________________________________________
Address
______________________________________________
City State Zip

Soc. Sec. No./Tax I.D. ___-___-___

Date of Birth ________ ________ _________
Month Day Year
Sex M______ F______

2. ANNUITANT (Complete only if different from the contract
owner)

______________________________________________
(Print) Last First MI
______________________________________________
Address
______________________________________________

PAGE
<PAGE>

City State Zip

Soc. Sec. No./Tax I.D. ___-___-___

Date of Birth ________ ________ _________
Month Day Year

Marital Status __________

Sex M______ F______

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

______ Regular
______ 1035 Transfer

b. Qualified

______ IRA/SEP Transfer/Rollover
______ 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 __________
(Complete for IRA contributions)

6. P A Y M ENT 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 certifying 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 set forth under Financial
Advisor to be my advisor and attorney-in-fact, and in
such capacity to give instructions to PADCO Service Co.,
Inc. And its affiliates ( PADCO ) for transactions within
the Rydex Advisor Variable Annuity, including authorizing
telephone transfers 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
P A DCO and Great American Reserve their directors,
officers, and employees harmless from all liabilities and
costs, including attorney fees and expenses, which PADCO
and Great American Reserve may incur by relying upon the
representations of the Financial Advisor or upon this
authorization.

Contract Owner Signature X _________________________

Date _____________________

Joint Contract Owner Signature X ____________________
Date ______________________

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 direct the allocation and exchange
of funds invested within the Rydex Advisor Variable
Annuity Account. Pursuant to the Power of Attorney, I
a u t h orize 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 ________________

Name of Firm ________________________________________
Financial Advisor/Group Number __ __ __ __ __ __ __ __

11. SIGNATURE

All statements made in this application (including the reverse
side) are true to the best of my knowledge and belief, and I
agree to all terms and conditions as shown on the front and
back. I further agree that this application shall be part of
the annuity contract, and I verify my 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. I acknowledge receipt and
have read current prospectuses. Under penalty of perjury, I
certify that the Social Security (or Taxpayer identification)
number is correct as it appears in the application.

S i g ned 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 Contract Owners answers.
To the best of my knowledge, I have presented to Great
American Reserve all the pertinent facts. I further certify
that I am properly licensed to sell variable annuities in the
state in which the proposed Contract Owner resides and that no
sales material other than that approved by the Administrative
Office was used.

Signed at __________________ this ________ day of
_______________________, 19__________.

_________________________________
Agent s Number

_________________________________
Agent s License ID # (if required)

__________________________________
Registered Representative

__________________________________
2nd Agent s Number

__________________________________
Agent s License ID # (if required)

__________________________________
Other Registered Representative

__________________________________
Broker Dealer

__________________________________
Broker Dealer Phone Number

[ ] For Broker Dealer Use Only

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 the YES NO
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
tactical 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 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 Tactical Asset
A l l o cation 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 tactical 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:

PAGE
<PAGE>

Financial Advisor/Group Number:

EXHIBIT 13(a)

Opinion and Consent of Coopers & Lybrand LLP<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form N-
3 (File No. 333-03093), of our report dated March 20, 1996 on our audit of
the financial statements of Great American Reserve Insurance Company and
our report dated September 25, 1996 on our audit of the financial
statements of Rydex Advisor Variable Annuity Account. We also consent to
the reference to our firm under the caption Independent Accountants.

/S/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Indianapolis, Indiana
October 25, 1996

PAGE
<PAGE>

EXHIBIT 13(b)

Consent of Jorden Burt Berenson & Johnson LLP

PAGE
<PAGE>

JORDEN BURT BERENSON & JOHNSON LLP
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400-EAST
WASHINGTON, D.C. 20007-0805
(202) 965-8100

October 30, 1996

Rydex Advisor Variable Annuity Account
11815 North Pennsylvania Street
Carmel, Indiana 46032

Great American Reserve Insurance Company
11815 North Pennsylvania Street
Carmel, Indiana 46032

Ladies and Gentlemen:

We hereby consent to the reference to our name under the
caption "Legal Matters" in Part I of the Prospectus, contained
in Pre-Effective Amendment No. 2 to the Registration Statement
on Form N-3 (File No. 333-03093) filed on behalf of the Rydex
Advisor Variable Annuity Account by Great American Reserve
Insurance Company with the Securities and Exchange Commission
under the Securities Act of 1933 and the Investment Company
Act of 1940.

Very truly yours,

/s/ Jorden Burt Berenson & Johnson LLP
Jorden Burt Berenson & Johnson LLP

<PAGE>

Wdc #: 2925-1

PAGE
<PAGE>