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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
The Rydex Advisor Variable Annuity Account
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(Name of Registrant as Specified In Its Charter)
same
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11(1).
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
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IMPORTANT CONTRACT OWNER INFORMATION
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THE DOCUMENT YOU HOLD IN YOUR HANDS CONTAINS YOUR PROXY
STATEMENT AND PROXY CARD. A PROXY CARD IS, IN ESSENCE, A
BALLOT. WHEN YOU VOTE YOUR PROXY CARD, IT TELLS US HOW TO
VOTE ON YOUR BEHALF ON IMPORTANT ISSUES RELATING TO THE
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT. IF YOU SIMPLY SIGN
THE PROXY CARD WITHOUT SPECIFYING A VOTE, YOUR VOTE WILL BE
CAST IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
MANAGERS.
WE URGE YOU TO SPEND A FEW MINUTES WITH THE PROXY STATEMENT,
FILL OUT YOUR PROXY CARD, AND RETURN IT TO US. VOTING YOUR
PROXY, AND DOING SO PROMPTLY, ENSURES THAT THERE WILL BE NO
NEED TO CONDUCT ADDITIONAL MAILINGS.
PLEASE TAKE A FEW MOMENTS TO EXERCISE YOUR RIGHT TO VOTE.
THANK YOU.
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<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
11815 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
Dear Contract Owner:
A Special Meeting of Contract Owners participating in the Nova Subaccount,
Ursa Subaccount, OTC Subaccount, Precious Metals Subaccount, U.S. Government
Bond Subaccount, Juno Subaccount, and Money Market Subaccount (each a
"Subaccount" and, together, the "Subaccounts") of the Rydex Advisor Variable
Annuity Account (the "Separate Account") of Great American Reserve Insurance
Company ("Great American Reserve") has been scheduled for Monday,
October 26, 1998. If you are a Contract Owner of record as of the close of
business on Friday, August 28, 1998, you are entitled to vote at the meeting and
for any adjournment of the meeting.
The attached Proxy Statement is designed to give you information relating
to the following proposals upon which you will be asked to vote:
1. To approve or disapprove an Agreement and Plan of Restructuring among Great
American Reserve, the Separate Account and Rydex Variable Trust providing
for the transfer of the assets of each Subaccount into a corresponding
portfolio (each, a "Fund") of Rydex Variable Trust (the "Trust") in
exchange for shares of each Fund which will be transferred into its
corresponding Subaccount.
2. To approve or disapprove the elimination of a fundamental investment policy
that restricts the ability of the Nova Subaccount, Ursa Subaccount, OTC
Subaccount, U.S. Government Bond Subaccount, and Juno Subaccount to invest
in a small number of issuers.
3. To transact such other business as may properly come before the meeting.
We encourage you to review each of these items thoroughly. While you are,
of course, welcome to join us at the meeting, most Contract Owners will cast
their votes by filling out and signing the enclosed Proxy Card. Whether or not
you plan to attend the meeting, your vote is important to us. Please mark,
sign, and date the enclosed Proxy Card and return it promptly in the enclosed,
postage-paid envelope so that the maximum number of votes will be received.
Your vote is important to us. Please do not hesitate to call
1-888-667-4936 if you have any questions about the proposals under
consideration. Thank you for taking the time to consider these important
proposals and for your investment in the Subaccounts.
Sincerely,
/s/ Albert P. Viragh
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Albert P. Viragh, Jr., Chairman
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
11815 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
NOTICE OF SPECIAL MEETING OF CONTRACT OWNERS
OCTOBER 26, 1998
Notice is hereby given that a Special Meeting of Contract Owners (the
"Meeting") that participate in the Nova Subaccount, Ursa Subaccount, OTC
Subaccount, Precious Metals Subaccount, U.S. Government Bond Subaccount, Juno
Subaccount, and Money Market Subaccount (each a "Subaccount" and, together, the
"Subaccounts") of Rydex Advisor Variable Annuity Account (the "Separate
Account") of Great American Reserve Insurance Company ("Great American
Reserve"), will be held at the offices of PADCO Financial Services, Inc., 6116
Executive Boulevard, Suite 400, Rockville, Maryland, 20852 on Monday, October
26, 1998 at 9:00 a.m. Eastern Time. At the Meeting, you will be asked to
consider and act upon the following:
1. To approve or disapprove an Agreement and Plan of Restructuring among Great
American Reserve, the Separate Account and Rydex Variable Trust providing
for the transfer of the assets of each Subaccount into a corresponding
portfolio (each, a "Fund") of Rydex Variable Trust (the "Trust") in
exchange for shares of each Fund which will be transferred into its
corresponding Subaccount.
2. To approve or disapprove the elimination of a fundamental investment policy
that restricts the ability of the Nova Subaccount, Ursa Subaccount, OTC
Subaccount, U.S. Government Bond Subaccount, and Juno Subaccount to invest
in a small number of issuers.
3. To transact such other business as may properly come before the meeting.
The persons named as proxies are authorized to vote on such other business
as may properly come before the Meeting in accordance with their own discretion.
Contract Owners of record at the close of business on Friday, August 28,
1998 are entitled to notice of and to vote at the Meeting or any adjournment
thereof.
BY ORDER OF THE BOARD OF MANAGERS
ROBERT M. STEELE, SECRETARY
October 8, 1998
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RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
11815 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Managers of Rydex Advisor Variable Annuity Account (the
"Separate Account") of Great American Reserve Insurance Company ("Great American
Reserve") for use at a Special Meeting of Contract Owners to be held on Monday,
October 26, 1998 at 9:00 a.m. Eastern Time at the offices of PADCO Financial
Services, Inc. ("PFS"), 6116 Executive Boulevard, Suite 400, Rockville, MD
20852, and at any adjourned session thereof (such meeting and any adjournments
thereof are hereinafter referred to as the "Meeting").
The primary purpose of the meeting is to ask contract owners that
participate in any of the subaccounts of the Separate Account ("Contract
Owners") to approve an Agreement and Plan of Restructuring relating to the
restructuring of the Separate Account into a unit investment trust and
transferring the assets of the Separate Account into a newly formed investment
company in exchange for shares of that investment company. Contract Owners are
also being asked to approve eliminating a fundamental investment policy of the
Nova, Ursa, OTC, U.S. Government Bond and Juno Subaccounts that restricts the
ability of each subaccount to invest in a limited number of issuers.
Contract Owners participating in the Nova Subaccount, Ursa Subaccount, OTC
Subaccount, Precious Metals Subaccount, U.S. Government Bond Subaccount, Juno
Subaccount, and/or Money Market Subaccount (each a "Subaccount" and, together,
the "Subaccounts") of the Separate Account at the close of business on Friday,
August 28, 1998, are entitled to vote on Proposal 1 at the Meeting. In
addition, Contract Owners participating in the Nova Subaccount, Ursa Subaccount,
OTC Subaccount, U.S. Government Bond Subaccount and Juno Subaccount
(collectively, the "Diversified Subaccounts") of the Separate Account at the
close of business on Friday, August 28, 1998, are also entitled to vote on
Proposal 2 at the Meeting.
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PROPOSAL CONTRACT OWNERS ENTITLED TO VOTE
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Proposal 1: APPROVE THE PROPOSED All Contract Owners
AGREEMENT AND PLAN OF RESTRUCTURING
AMONG GREAT AMERICAN RESERVE, THE
SEPARATE ACCOUNT AND RYDEX VARIABLE
TRUST.
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Proposal 2: APPROVE THE ELIMINATION Contract Owners participating in the
OF A FUNDAMENTAL INVESTMENT POLICY Nova, Ursa, OTC, U.S. Government Bond
APPLICABLE TO THE NOVA SUBACCOUNT, and Juno Subaccounts
URSA SUBACCOUNT, OTC SUBACCOUNT,
U.S. GOVERNMENT BOND SUBACCOUNT, AND
JUNO SUBACCOUNT.
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Contract Owners may cast a number of votes and fractions of votes equal to
the number of dollars and fractions of dollars credited to each Contract Owner
as of August 28, 1998 (the "Record Date"). As of the Record Date, the value (in
dollars) credited to Contracts outstanding, with respect to each of the
Subaccounts, is set forth below:
<TABLE>
<CAPTION>
SUBACCOUNTS DOLLARS
- ----------- -------
<S> <C>
Nova Subaccount $3,646,657
Ursa Subaccount $6,200,600
OTC Subaccount $7,838,146
Precious Metals Subaccount $80,577
U.S. Government Bond Subaccount $1,724,218
Juno Subaccount $27,253
Money Market Subaccount $48,071,107
</TABLE>
In addition to the solicitation of proxies by mail, the Board of Managers
of the Separate Account and/or their designees, and officers and employees of
PFS and PADCO Advisors II, Inc. ("PADCO"), may solicit proxies in person or by
telephone. Employees of PFS and PADCO will not be compensated by the Separate
Account for their solicitation activities. The cost of the solicitation will be
borne by PADCO. The proxy card(s) and this Proxy Statement are being mailed to
Contract Owners on or about Tuesday, October 6, 1998.
The votes of Contract Owners represented by duly executed proxies will be
voted in accordance with the instructions given. Proxies may be revoked at any
time before they are exercised by a written revocation received by the Secretary
of the Separate Account, c/o PADCO Financial Services, Inc., 6116 Executive
Boulevard, Suite 400, Rockville, MD 20852, by properly executing a later-dated
proxy, or by attending the Meeting and voting in person.
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INTRODUCTION
The Meeting is being called in order to permit Contract Owners
participating in the Subaccounts of the Separate Account, to consider and
vote on two proposals (the "Proposals"). The Board of Managers is
recommending that Contract Owners that participate in the investment results
of the Subaccounts approve a proposed Agreement and Plan of Restructuring
(the "Agreement") among Great American Reserve, the Separate Account and
Rydex Variable Trust (the "Trust"). If the Agreement is approved by the
Contract Owners, the assets and liabilities of each Subaccount (other than
liabilities relating to insurance obligations) will be transferred, free and
clear of all liens and encumbrances, to one of seven corresponding "shell"
series of the Trust, the Nova Fund, Ursa Fund, OTC Fund, Precious Metals
Fund, U.S. Government Bond Fund, Juno Fund, and U.S. Government Money Market
Fund (each a "Fund" and, together, the "Funds"), in exchange for shares of
such Fund equivalent in value to the value of the assets received, less the
liabilities assumed (the "Restructuring"). The Board of Managers anticipates
that, if approved by Contract Owners, the Restructuring will occur on about
November 2, 1998.
The Board of Managers is also recommending that Contract Owners
participating in the Diversified Subaccounts approve the elimination of a
fundamental investment policy that restricts these Subaccounts' ability to
invest in a limited number of issuers. The purpose of the proposal is to permit
a Diversified Subaccount to invest assets in the securities of a smaller number
of issuers. The Board of Managers believe that this additional investment
flexibility would help each Diversified Subaccount meet its investment
objective. Nonetheless, to the extent that a Diversified Subaccount would
invest a significant portion of its assets in a limited number of issuers, that
Subaccount would be more susceptible to a single adverse economic event.
DESCRIPTION OF GREAT AMERICAN RESERVE AND THE SEPARATE ACCOUNT
Great American Reserve, originally organized in 1937, is principally
engaged in the life insurance business in 49 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.
The Separate Account was organized as a segregated asset account of Great
American Reserve under the insurance code of the State of Texas on April 15,
1996, and is divided into Subaccounts for separate investment portfolios. The
Separate Account is registered with the Securities and Exchange Commission (the
"SEC") as an open-end management investment company pursuant to the provisions
of the Investment Company Act of 1940 (the "1940 Act"), and meets the definition
of "separate account" set forth in the 1940 Act. Registration of the Separate
Account under the 1940 Act does not involve any supervision by the SEC of the
investment practices or
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policies of any of the Subaccounts of the Separate Account. While the assets
held in the Separate Account are Great American Reserve's property, they are not
chargeable with liabilities arising out of any other business that Great
American Reserve may conduct. Obligations of the Separate Account, however, are
obligations of Great American Reserve. Income, gains, or losses, whether or not
realized, from assets allocated to the Separate Account, in accordance with the
Contracts, are credited to or charged against the Separate Account without
regard to other income, gains, or losses of Great American Reserve or any other
Separate Account. Great American Reserve does not guarantee the investment
performance of the Separate Account. The Separate Account is divided into seven
separate Subaccounts (the "Subaccounts"), which are modeled after seven existing
funds (the "Rydex Funds") of Rydex Series Trust (the "Trust"), an investment
company managed by an affiliate of PADCO.
Each Subaccount has its own distinct investment objective:
- - The Nova Subaccount seeks to provide investment returns that correspond to
the performance of a benchmark for common stock securities;
- - The Ursa Subaccount seeks to provide investment results that will inversely
correlate to the performance of a benchmark for common stock securities;
- - The OTC Subaccount seeks to provide investment results that correspond to
the performance of a benchmark for over-the-counter securities;
- - The Precious Metals Subaccount seeks to provide investment results that
correspond to the performance of a benchmark primarily for metals-related
securities;
- - The U.S. Government Bond Subaccount seeks to provide investment results
that correspond to the performance of a benchmark for U.S. Government
securities;
- - The Juno Subaccount seeks to provide investment results that inversely
correlate to the performance of a benchmark for U.S. Government securities;
and
- - The Money Market Subaccount seeks to provide current income consistent
with stability of capital and liquidity.
The Board of Managers of the Separate Account is responsible for the
general supervision of the investments and assets held in the Subaccounts.
Contract Owners are entitled to vote for the election and removal of members of
the Board of Managers and to vote on certain other matters affecting the
Separate Account as mandated by the 1940 Act, including the proposal to approve
the Restructuring described in this Proxy Statement.
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DESCRIPTION OF THE TRUST AND THE FUNDS
The Trust was organized under Delaware law as a business trust pursuant to
an Agreement and Declaration of Trust dated June 11, 1998. The Trust is
registered as an open-end management investment company under the 1940 Act and
has authorized capital consisting of an unlimited number of units of beneficial
interest, each with no par value. The Nova Fund, Ursa Fund, OTC Fund, Precious
Metals Fund, U.S. Government Bond Fund, Juno Fund, and U.S. Government Money
Market Fund are each duly organized and validly existing series of the Trust.
Each of these Funds, will have the same investment objective and policies as its
respective subaccount. The Nova, Ursa, OTC, U.S. Government Bond, and Juno
Funds will be "non-diversified," within the meaning of the 1940 Act, if Proposal
2 is approved for each respective Subaccount. If Proposal 2 is not approved for
any Subaccount, its respective Fund will be classified as "diversified," within
the meaning of the 1940 Act. The Trust will commence operations on the
effective date of the Restructuring.
The Board of Trustees of the Trust is responsible for the general
supervision of the Trust's business. Shareholders are entitled to vote for
the election and removal of the members of the Board of Trustees and to vote
on certain other matters as mandated by the 1940 Act. Following the
Restructuring, when matters are submitted by the Trust to a vote of
shareholders, Great American Reserve will provide Contract Owners with the
opportunity to instruct Great American Reserve as to how to vote the shares
of the Trust held in Subaccounts of the Separate Account, to the extent
required under applicable law. Fund shares which may not be attributable to
Contracts or for which no timely instructions are received by Great American
Reserve will be voted in the same proportions as shares that are voted
pursuant to voting instructions.
PADCO currently serves as the investment adviser to each Subaccount.
Following the Restructuring, PADCO will serve as investment adviser to each Fund
of the Trust. The investment advisory agreement between PADCO and the Trust is
in all material respects identical to the advisory agreement that exists between
PADCO and the Separate Account, on behalf of the Subaccounts. Both investment
advisory agreements provide for the same fees, duties, and standards of care.
DESCRIPTION OF PADCO ADVISORS II, INC.
PADCO Advisors II, Inc. ("PADCO" or the "Advisor") is a professional
investment management firm founded in 1994 by Albert P. Viragh, Jr., the
Chairman of the Board and President of PADCO. As of September 30, 1998, the
Advisor and its affiliates had discretionary management authority with respect
to approximately $3.25 billion of assets. The principal business address of the
Advisor is 6116 Executive Boulevard, Suite 400, Rockville, Maryland 20852.
PADCO serves as investment adviser to each Subaccount pursuant to an
investment advisory agreement between PADCO and the Separate Account, dated
November 1, 1996 (the "Advisory Agreement").
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Subject to the general supervision and control of the Separate Account's Board
of Managers, and in conformity with the stated investment objectives,
policies, and restrictions of the Separate Account, PADCO manages the
investment and reinvestment of the assets of each of the Subaccounts and
determines the composition of assets of each Subaccount, including the purchase,
retention, and disposition of securities and other investments.
The portfolio manager of the Ursa Subaccount and OTC Subaccount is Michael
P. Byrum, who is the Advisor's senior portfolio manager. Prior to joining the
Advisor as a portfolio manager in July 1993, Mr. Byrum worked as an investor
representative with Money Management Associates.
The portfolio manager of the Nova Subaccount and the Juno Subaccount is
Thomas Michael, who joined the Advisor as a portfolio manager in March 1994.
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.
The portfolio manager of the Precious Metals Subaccount is T. Daniel
Gillespie, who joined the Advisor as a portfolio manager in January 1997. From
July 1994 to January 1997, Mr. Gillespie was a portfolio manager for GIT
Investment Funds, a registered investment company in Arlington, Virginia, where
Mr. Gillespie managed over $160 million in equity, bond, and money market mutual
fund assets. From 1991 to 1994, Mr. Gillespie worked as a portfolio manager to
The Rushmore Funds, Inc., a registered investment company in Bethesda,
Maryland, where Mr. Gillespie managed over $900 million in mutual fund assets.
The portfolio manager of the U.S. Government Bond Subaccount and Money
Market Subaccount is Anne H. Ruff, who joined the Advisor as a portfolio manager
in August 1996. From 1989 to 1995, Ms. Ruff worked as a portfolio manager for
United Services Life Insurance Company in Arlington, Virginia, where Ms. Ruff
managed $2.5 billion in fixed-income portfolios.
PADCO and PADCO Service Company, Inc. (the "Servicer") voluntarily agreed
to waive their respective fees and to bear any Subaccount expenses which would
cause the ratios of expenses (including insurance charges of 1.40% of average
daily net assets) to average net assets for the Subaccounts to exceed certain
expense limits. During the period from October 24, 1997 to October 24, 1999,
fees waived or expenses paid or assumed by PADCO and the Servicer under these
voluntary agreements are subject to reimbursements whenever a Subaccount expense
ratio (including insurance charges) is below its expense limit. No
reimbursement of previously waived fees will be made by a Subaccount after
October 24, 1999.
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PROPOSAL 1:
APPROVE THE PROPOSED AGREEMENT AND PLAN OF RESTRUCTURING AMONG GREAT
AMERICAN RESERVE, THE SEPARATE ACCOUNT AND RYDEX VARIABLE TRUST.
SUMMARY OF THE RESTRUCTURING
To effectuate the Restructuring of the Separate Account, in addition to
this proxy solicitation, the following steps have or will be taken: (i) a
registration statement was filed to register the Trust as an open-end management
investment company and to register shares of the Trust to be issued after the
Restructuring; and (ii) an amendment to the current registration statement of
the Separate Account was filed to change the classification of the Separate
Account from a management investment company to a unit investment trust.
Immediately before the Restructuring, the investments of the Separate
Account will be direct investments in stocks, bonds and other securities held in
seven portfolios of securities. Immediately after the Restructuring, the
investments of the Separate Account will be investments in shares of the Trust
that invests directly in the same seven portfolios of securities.
REASONS FOR THE RESTRUCTURING
PADCO has served as investment adviser to each of the Subaccounts since its
inception. Each Subaccount is a separate subaccount of the Separate Account, a
segregated asset account of Great American Reserve under the insurance code of
the State of Texas. In the interests of obtaining increased flexibility
respecting investment management and operational issues, PADCO determined to
propose to the Board of Managers of the Separate Account and to Contract Owners
participating in the Separate Account, the transfer of the assets of each of the
Subaccounts of the Separate Account to series (I.E., the Funds) of the
newly-organized Trust, in exchange for shares of the Funds. It is believed that
the transfer of investment operations from the Separate Account to a separate
investment company will enable the Separate Account and the Contract Owners to
benefit from economies of scale. Shares of the Trust may in the future be made
available to Great American Reserve to fund other variable insurance products.
Further, shares of the Trust may in the future be made available to other
insurance companies not affiliated with Great American Reserve, to fund their
variable insurance products. Economies are expected to be achieved through
asset growth made possible by the proposed new structure. Asset growth and the
economies inherent in larger asset bases should substantially assist PADCO in
its efforts to achieve the Trust's investment objectives for Contract Owners
participating in the Separate Account.
COMPARISON OF THE INVESTMENT OBJECTIVES AND POLICIES OF THE SUBACCOUNTS AND THE
FUNDS
SUBACCOUNT AND FUND SIMILARITIES. Great American Reserve and the Board of
Managers of the Separate Account believe that the Restructuring will have no
material impact on the rights or
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economic interests of the Contract Owners. Under state law, the Separate
Account continues as the same legal entity before and after the
Restructuring. The number and value of accumulation units will not change.
No new securities will be issued from the Separate Account in connection with
the Restructuring. There will be no change in the variable annuity contracts
or in the rights of the Contract Owners under those contracts. The
Restructuring will not change the value of Contract Owners' interests in the
Separate Account. Expenses borne by Contract Owners under their contracts,
either directly or indirectly will be the same as prior to the Restructuring.
Contract Owners will still have an interest in a diverse group of stock,
bond or money market investments, as the case may be, and will be permitted
to allocate future purchase payments and accumulation values among
Subaccounts to the same extent as they can now. As stated above, the same
investment adviser that currently manages the Subaccounts will manage the
Funds. The same advisory personnel will formulate and implement all
investment decisions for the Funds. Except for the entity being advised and
the date, the advisory agreement for the Trust is in all material respects
the same as the current advisory agreement for the Subaccounts. The
custodian, transfer agent, independent public accountant, legal counsel and
fiscal year will remain unchanged. The members of the Board of Trustees of
the Trust will be the same as the members of the Board of Managers of the
Separate Account. Finally, Contract Owners will not recognize any income or
gain for federal income tax purposes as a result of the Restructuring.
MONEY MARKET SUBACCOUNT. The Money Market Subaccount currently has a variable
accumulation unit value and will continue to have a variable accumulation unit
value following the Restructuring. The accumulation unit is variable because of
the nature of variable annuity contracts and insurance company separate
accounts. The Money Market Subaccount receives dollars but does not make
payments to Contract Owners until a future date. Therefore, the accumulation
unit value necessarily varies from day to day because the Money Market
Subaccount earns income and makes deductions for insurance charges, but does not
declare dividends on a daily basis. Following the Restructuring, the Money
Market Subaccount will hold shares of the U.S. Government Money Market Fund. As
is customary with money market funds, the net asset value of a share of the Fund
will be maintained at one dollar by the Fund declaring dividends on a daily
basis. The dividends will be received by the Money Market Subaccount in the
form of additional shares of the Fund. After the Restructuring, the Money
Market Subaccount will have the same variable accumulation unit value because it
will receive income in the form of Fund shares and will continue to make the
same deductions for insurance charges.
SUBACCOUNT AND FUND DIFFERENCES. There will, of course, be some changes as a
result of the Restructuring. Generally, the changes involve the manner in which
the Separate Account invests in each of the seven investment portfolios and the
classification of the Separate Account as an investment company under the 1940
Act. First, the investments of the Separate Account (as distinguished from the
Contract Owners) will change from direct investments in seven investment
portfolios to indirect investments in the same portfolios of securities.
Contract Owners will continue to have the same participation, in the same
proportion, in the same securities after the Restructuring. Second, the 1940
Act classification of the Separate Account as a management investment company
will change to a unit investment trust ("UIT"). Third, while the 1940 Act
subclassification of the
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Nova, Ursa, OTC, U.S. Government Bond and Juno Subaccounts is "diversified,"
upon approval by Contract Owners participating in the Diversified Subaccounts of
Proposal 2, these Subaccounts' and, as a result, their respective Funds, will be
"non-diversified" consistent with the Subaccounts' and the respective Funds'
objectives of tracking benchmarks. Finally, the variable annuity contracts
funded by the Separate Account will no longer be distributed by the same entity.
The Board of Managers does not believe that these changes will have any material
adverse impact on Contract Owners, the Subaccounts or the Funds.
TWO-TIERED STRUCTURE. With the change in classification to a UIT, the
Separate Account will no longer have a Board of Managers. This is not a
significant change since, as stated above, the Trust will have a Board of
Trustees with the same members as the Board of Managers of the Separate
Account. With respect to Contract Owner voting rights, Contract Owners
currently have the right to vote directly on various matters in accordance
with the 1940 Act, including the election and dismissal of members of the
Board of Managers and approval of advisory agreements. After the
Restructuring, Contract Owners will be entitled to instruct Great American
Reserve as to the voting of shares of the Trust on the same matters, to the
extent required under applicable law. This ensures that Contract Owners will
have the same voting rights as they previously had prior to the Restructuring
or would have as direct shareholders of the Trust.
DISTRIBUTION OF CONTRACTS. PADCO Financial Services, Inc. ("PFS"), 6116
Executive Boulevard, Suite 400, Rockville, Maryland 20852, is presently the
principal underwriter of the Contracts. PFS is a broker-dealer registered under
the Securities Exchange Act of 1934 (the "1934 Act"), and a member of the
National Association of Securities Dealers, Inc. ("NASD"). Following the
Restructuring, Conseco Equity Sales, Inc. ("CES"), 11825 N. Pennsylvania Street,
Carmel, Indiana 46032, an affiliate of Great American Reserve, will be the
principal underwriter of the Contracts. CES is a broker-dealer registered under
the 1934 Act, and a member of the NASD. Sales of the Contracts are made by
authorized broker-dealers and their registered representatives, including
registered representatives of PFS and, following the Restructuring, of CES.
These registered representatives are also Great American Reserves's licensed
insurance agents. This change in the distribution of the Contracts will have no
material impact on Contract Owners.
DESPITE THE DIFFERENCES DISCUSSED ABOVE, THE INVESTMENT OBJECTIVES,
POLICIES AND RESTRICTIONS OF THE FUNDS WILL NOT BE MATERIALLY DIFFERENT THAN
THOSE PADCO HAS EMPLOYED FOR THE SUBACCOUNTS.
COMPARISON OF THE FEES AND EXPENSES OF THE SEPARATE ACCOUNT, SUBACCOUNTS AND THE
FUNDS
Presently, the Separate Account bears all fees and expenses. Following the
Restructuring, insurance charges paid to Great American Reserve, in the form of
Mortality and Expense Risk Charges and Administration Fees, will continue to be
borne by the Separate Account. Advisory Fees and other expenses related to
managing a portfolio of securities will be subsequently borne by each respective
Fund. Total fees and expenses, however, will remain unchanged. The same
voluntary fee waiver and reimbursement agreements currently in place for the
Subaccounts, with respect to expenses other than insurance charges, will
continue for the Funds.
9
<PAGE>
THE FOLLOWING TABLE SETS FORTH THE COMPARATIVE EXPENSE INFORMATION WITH
RESPECT TO INSURANCE CHARGES FOR THE SEPARATE ACCOUNT AS A MANAGED INVESTMENT
COMPANY AND AS A UNIT INVESTMENT TRUST:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Separate Account as a Separate Account as a
Managed Investment Unit Investment Trust
Company
- --------------------------------------------------------------------------------
<S> <C> <C>
Mortality and Expense 1.25% 1.25%
Risk Charge
- --------------------------------------------------------------------------------
Administration Fee 0.15% 0.15%
- --------------------------------------------------------------------------------
Total Insurance Charges 1.40%+ 1.40%
- --------------------------------------------------------------------------------
</TABLE>
+ Total Insurance Charges does not include those expenses related to managing
a portfolio of securities, including investment advisory fees,
administration fees and other operating expenses.
THE FOLLOWING TABLES SET FORTH COMPARATIVE FEE AND EXPENSE INFORMATION FOR
THE SUBACCOUNTS (EXCLUSIVE OF INSURANCE CHARGES AND AFTER FEE WAIVERS AND
EXPENSE REIMBURSEMENTS) AND FOR THE FUNDS:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Nova Subaccount Nova Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees 0.75% 0.75%
- --------------------------------------------------------------------------------
Administration Fees 0.25% 0.25%
- --------------------------------------------------------------------------------
Other Expenses 1.20% 1.20%
- --------------------------------------------------------------------------------
Total Operating Expenses 2.20%* 2.20%
- --------------------------------------------------------------------------------
</TABLE>
* Total Operating Expenses of the Subaccounts do not include the
insurance-related fees of Great American Reserve (the mortality and expense
risk charge of 1.25% and the administrative fee of 0.15% of average daily
net assets of the Subaccount).
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Ursa Subaccount Ursa Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees 0.90% 0.90%
- --------------------------------------------------------------------------------
Administration Fees 0.25% 0.25%
- --------------------------------------------------------------------------------
Other Expenses 1.15% 1.15%
- --------------------------------------------------------------------------------
Total Operating Expenses 2.30%* 2.30%
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
OTC Subaccount OTC Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees 0.75% 0.75%
- --------------------------------------------------------------------------------
Administration Fees 0.20% 0.20%
- --------------------------------------------------------------------------------
Other Expenses 1.25% 1.25%
- --------------------------------------------------------------------------------
Total Operating Expenses 2.20%* 2.20%
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
Precious Metals Precious Metals Fund
Subaccount
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees 0.75% 0.75%
- --------------------------------------------------------------------------------
Administration Fees 0.20% 0.20%
- --------------------------------------------------------------------------------
Other Expenses 1.25% 1.25%
- --------------------------------------------------------------------------------
Total Operating Expenses 2.20%* 2.20%
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
U.S. Government Bond U.S. Government Bond
Subaccount Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees 0.50% 0.50%
- --------------------------------------------------------------------------------
Administration Fees 0.20% 0.20%
- --------------------------------------------------------------------------------
Other Expenses 1.10% 1.10%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.80%* 1.80%
- --------------------------------------------------------------------------------
</TABLE>
* Total Operating Expenses of the Subaccounts do not include the
insurance-related fees of Great American Reserve (the mortality and expense
risk charge of 1.25% and the administrative fee of 0.15% of average daily
net assets of the Subaccount).
11
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Juno Subaccount Juno Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees 0.90% 0.90%
- --------------------------------------------------------------------------------
Administration Fees 0.25% 0.25%
- --------------------------------------------------------------------------------
Other Expenses 1.15% 1.15%
- --------------------------------------------------------------------------------
Total Operating Expenses 2.30%* 2.30%
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
Money Market Subaccount U.S. Government Money
Market Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees 0.50% 0.50%
- --------------------------------------------------------------------------------
Administration Fees 0.20% 0.20%
- --------------------------------------------------------------------------------
Other Expenses 0.90% 0.90%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.60%* 1.60%
- --------------------------------------------------------------------------------
</TABLE>
* Total Operating Expenses of the Subaccounts do not include the
insurance-related fees of Great American Reserve (the mortality and expense
risk charge of 1.25% and the administrative fee of 0.15% of average daily
net assets of the Subaccount).
SUMMARY OF MATERIAL FEATURES OF THE AGREEMENT AND PLAN OF RESTRUCTURING
The Agreement provides for the transfer of the assets and liabilities
(other than liabilities related to insurance obligations) of each Subaccount
to its respective Fund in exchange for shares of that Fund equal in value to
the value of the assets, less the liabilities, transferred. The Agreement
provides that the Trust, on behalf of the Funds, will receive an opinion of
counsel from Great American Reserve, on behalf of the Separate Account and
the Subaccounts, in form and substance satisfactory to counsel for the Trust,
to the effect that: (i) Great American Reserve is a corporation duly
organized and validly existing under the laws of the State of Texas; (ii) the
Separate Account, is duly organized and validly existing under the insurance
code of the State of Texas; (iii) the Separate Account is a separate account
registered under the 1940 Act; (iv) the Agreement and execution thereof has
been duly authorized and approved by all requisite action of Great American
Reserve and the Board of Managers of the Separate Account, and the Agreement
has been duly executed and delivered by Great American Reserve and the
Separate Account on behalf of the Subaccounts and is a valid and binding
obligation of Great American Reserve, subject to applicable bankruptcy,
insolvency, fraudulent conveyance and similar laws or court decisions
regarding enforcement of creditors' rights generally; (v) to the best of
counsel's knowledge after reasonable inquiry, no consent, approval, order or
other authorization of any federal or state court or administrative or
regulatory agency is required for Great American Reserve and the Separate
12
<PAGE>
Account to enter into the Agreement on behalf of the Subaccounts or carry out
its terms that has not been obtained other than where the failure to obtain any
such consent, approval, order or authorization would not have a material adverse
effect on the operations of the Subaccounts; and (vi) upon consummation of the
Agreement, the Trust, on behalf of the Funds, will have acquired all of the
Subaccounts' assets and liabilities (other than liabilities related to insurance
obligations) listed in the Statement of Assets and Liabilities, free and clear
of all liens, encumbrances or adverse claims.
The Agreement also provides that Great American Reserve, on behalf of the
Separate Account and the Subaccounts, will receive an opinion of counsel from
the Trust, in form and substance satisfactory to counsel for Great American
Reserve, to the effect that: (i) the Trust is duly organized under the laws of
the State of Delaware and each of the series of beneficial interests in each of
the Funds is validly existing; (ii) the Trust is an open-end management
investment company registered under the 1940 Act; (iii) the Agreement and
execution thereof has been duly authorized and approved by all requisite
corporate action of the Trust, and the Agreement has been duly executed and
delivered by the Trust and is a valid and binding obligation of the Trust,
subject to applicable bankruptcy, insolvency, fraudulent conveyance and similar
laws or court decisions regarding enforcement of creditors' rights generally;
(iv) to the best of counsel's knowledge after reasonable inquiry, no consent,
approval, order or other authorization of any federal or state court or
administrative or regulatory agency is required for the Trust to enter into the
Agreement or carry out its terms that has not already been obtained, other than
where the failure to obtain any such consent, approval, order or authorization
would not have a material adverse effect on the operations of the Funds; and
(v) the Shares of the Fund to be issued in the Restructuring have been duly
authorized and upon issuance thereof in accordance with the Agreement will be
validly issued, fully paid and nonassessable.
At the time of the closing, Great American Reserve, the Separate Account
and the Trust will have received an opinion of counsel substantially to the
effect that for federal income tax purposes the Restructuring will not result
in the recognition of any net income or net gain by Great American Reserve,
the Separate Account, the Subaccounts, the Funds or the Contract Owners.
The Separate Account will furnish, without charge, a copy of the
Agreement and Plan of Restructuring to Contract Owners on request. Requests
should be directed to the Separate Account at 6116 Executive Boulevard, Suite
400, Rockville, Maryland, 20852, or by calling 1-888-667-4936.
CONSIDERATIONS OF THE BOARD OF MANAGERS OF THE SEPARATE ACCOUNT
At a Meeting held on June 16, 1998, the Board of Managers of the Separate
Account reviewed the Agreement and determined that the Restructuring is in the
best interests of the Contract Owners, and that the interests of the Contract
Owners will not be diluted as a result of the Restructuring.
In making this determination, the Board of Managers carefully reviewed the
terms and provisions of the Agreement, the substantial similarity of the
objectives, policies and restrictions of
13
<PAGE>
the Subaccounts and the corresponding Funds, the tax consequences of the
Restructuring to Great American Reserve, the Separate Account, the Subaccounts
and the Contract Owners, and the estimated expense ratios of the Funds and the
Subaccounts. In addition, the Board of Managers considered the performance of
the Subaccounts since their inception, the nature and quality of the services
expected to be rendered to the Funds by PADCO, as well as the services provided
by PADCO to the Separate Account, the fact that the compensation payable to
PADCO and the total operating expenses are estimated to be the same for the
Funds as for the Subaccounts, the history, reputation, financial conditions,
qualification and background of PADCO and its affiliates, and its personnel, and
the benefits expected to be realized by the Contract Owners of the Subaccounts
as a result of the Restructuring.
After careful review and consideration, the Board of Managers recommend
that the Contract Owners approve the Agreement and the Restructuring
transaction. If Proposal 1 is not approved by Contract Owners, the
Restructuring will not occur and the Subaccounts will continue to operate in the
same manner as prior to the proposed Restructuring, until such time that the
Board of Managers may consider calling a meeting of Contract Owners to
reconsider the Proposal.
THE BOARD OF MANAGERS RECOMMENDS THAT:
THE CONTRACT OWNERS PARTICIPATING IN THE SEPARATE ACCOUNT VOTE FOR THE
PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF RESTRUCTURING.
PROPOSAL 2:
APPROVE THE ELIMINATION OF A FUNDAMENTAL INVESTMENT POLICY APPLICABLE TO
THE NOVA SUBACCOUNT, URSA SUBACCOUNT, OTC SUBACCOUNT, U.S. GOVERNMENT BOND
SUBACCOUNT, AND JUNO SUBACCOUNT (COLLECTIVELY, THE "DIVERSIFIED
SUBACCOUNTS").
Diversified Subaccount Contract Owners will be asked to approve the
elimination of the following fundamental investment policy applicable to the
Diversified Subaccounts:
A Diversified Subaccount shall not:
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.
14
<PAGE>
REASONS FOR THE ELIMINATION OF THE FUNDAMENTAL INVESTMENT POLICY
The Diversified Subaccounts are presently classified as "diversified" for
purposes of the 1940 Act. Following the approval by Contract Owners
participating in the Diversified Subaccounts to eliminate the fundamental
investment policy that restricts these Subaccounts' ability to invest in a
limited number of issuers, the Subaccounts will be classified as
"non-diversified." Similarly, if both Proposal 1 and this Proposal 2 are
approved by Contract Owners, after the Restructuring the Nova, Ursa, OTC, U.S.
Government Bond and Juno Funds will be classified as non-diversified. The
investment objectives of each Subaccount, and following the Restructuring its
corresponding Fund, is to attempt to track its respective benchmark. Even
though the investment objectives will remain unchanged, the Board of Managers
believes that classifying the Subaccounts as non-diversified is more appropriate
since the Subaccounts will always follow their underlying benchmark which may at
times be non-diversified. This is not, for all intents and purposes, a change
in investment objective or policies for any Subaccount.
CONSIDERATIONS OF THE BOARD OF MANAGERS OF THE SEPARATE ACCOUNT
The Board of Managers reviewed the proposed elimination of the fundamental
investment policy from the Diversified Subaccounts in their consideration of the
Restructuring (Proposal 1). The Board of Managers believe that this additional
investment flexibility would help these Subaccounts meet their investment
objectives. Nonetheless, to the extent that a Diversified Subaccount would
invest a significant portion of its assets in a limited number of issuers, that
Subaccount would be more susceptible to a single adverse economic event.
The Board of Managers recommend that Contract Owners participating in the
Diversified Subaccounts approve the elimination of the fundamental investment
policy that restricts the Diversified Subaccounts' ability to invest in a
limited number of issuers. If Proposal 2 is not approved by Contract Owners of
any Diversified Subaccount, such Subaccount (and following the Restructuring its
respective Fund) will continue to operate with the same fundamental investment
policy, until such time that the Board of Managers may consider calling a
meeting of Contract Owners to reconsider the Proposal.
THE BOARD OF MANAGERS RECOMMENDS THAT:
THE CONTRACT OWNERS PARTICIPATING IN THE DIVERSIFIED SUBACCOUNTS VOTE FOR
THE PROPOSAL TO ELIMINATE THE FUNDAMENTAL INVESTMENT POLICY.
GENERAL INFORMATION ABOUT THE SEPARATE ACCOUNT AND OTHER MATTERS
SUBACCOUNT TRANSACTIONS. For the Separate Account's fiscal year ended
December 31, 1997, the Subaccounts paid the following amounts in brokerage
commissions:
15
<PAGE>
<TABLE>
<CAPTION>
Total Amount Paid to % Paid to
Brokerage Affiliated Affiliated
Subaccount Commissions Broker Broker
- ---------- ----------- ------ ------
<S> <C> <C> <C>
Nova Subaccount $6,295 $0 0%
Ursa Subaccount $6,504 $0 0%
OTC Subaccount $1,024 $0 0%
Precious Metals Subaccount $19,733 $0 0%
U.S. Government
Bond Subaccount $228 $0 0%
Juno Subaccount $1,430 $0 0%
Money Market Subaccount $0 $0 0%
</TABLE>
5% OWNERS. As of August 28, 1998, the following persons were the only persons
who were, to the knowledge of the Separate Account, beneficial owners of 5% or
more of the total interest in the Subaccounts:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF
SUBACCOUNT OF BENEFICIAL OWNER DOLLAR VALUE SUBACCOUNT
- ---------- ------------------- ------------ ----------
<S> <C> <C> <C>
NOVA SUBACCOUNT Arthur J. Boyle $1,732,497 47.51%
P.O. Box 400
Laughlington, PA 15655
Clyde R. Jones $1,914,159 52.49%
1359 Swede Lane
Monte Vista, CO 81144
URSA SUBACCOUNT Vincent A. Liberto $547,022 8.82%
541 Central Ave., Suite B
Laurel, MS 39440
Jeffery Doremus $342,055 5.52%
P.O. Box 136
Westhampton Beach, NY
11942
Cynthia S. Stibolt $312,715 5.04%
2 Calle El Gancho
Santa Fe, NM 87501
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE OF
SUBACCOUNT OF BENEFICIAL OWNER DOLLAR VALUE SUBACCOUNT
- ---------- ------------------- ------------ ----------
<S> <C> <C> <C>
OTC SUBACCOUNT Arthur J. Boyle $1,751,249 22.34%
Clyde R. Jones $1,934,877 24.68%
Betty A. Landman $416,632 5.32%
1355 Portofino Drive
#502
Sarasota, FL 34242
PRECIOUS METALS
SUBACCOUNT Arthur Hurvitz $69,192 85.87%
15 Abbottsford Court
Providence, RI 02906
Joseph W. Lanni $7,907 9.81%
61 Rollingwood Drive
Johnston, RI 02919
U.S. GOVERNMENT
BOND SUBACCOUNT Vincent A. Liberto $553,956 32.13%
JUNO SUBACCOUNT Florida Produce Brokers
Defined Benefit
Pension Plan $27,253 100%
3000 N. Ocean Drive
Apt. 11-C
Singer Island, FL 33404
</TABLE>
The Separate Account's Board of Managers and officers beneficially own less than
1% of the total interest in the Separate Account.
REQUIRED VOTE. For Proposal 1, pursuant to the Rydex Advisor Variable Annuity
Account Rules and Regulations, the presence at the Meeting, in person or by
proxy, of Contract Owners holding one-quarter of the votes entitled to be cast
at the Meeting shall constitute a quorum. The approval of Proposal 1 requires
those Contract Owners present at the Meeting voting a majority of the votes, in
the aggregate, of all seven Subaccounts.
For Proposal 2, pursuant to the 1940 Act, the presence at the Meeting, in
person or by proxy, of Contract Owners participating in the Diversified
Subaccounts holding one-half of the votes entitled to be cast at the Meeting
shall constitute a quorum. The approval of Proposal 2 requires the separate
vote of a majority of the votes entitled to be cast for each Diversified
Subaccount. "A majority of the votes entitled to be cast" by the Contract
Owners means: (a) sixty-seven percent (67%) or more of the votes present at the
Meeting if the holders of Contracts entitled to more than
17
<PAGE>
fifty percent (50%) of the outstanding votes are present or represented by
proxy; or (b) more than fifty percent (50%) of the outstanding votes of the
Separate Account, whichever is less.
Abstentions will not be counted for or against the Proposals, but will be
counted for purposes of determining whether a quorum is present. However,
because abstentions will be counted as votes present at the Meeting, they will
have the effect of counting against the Proposals.
ADJOURNMENT. If a quorum is not present, Contract Owners present in person or by
proxy and entitled to vote at the Meeting, or, if no such Contract Owners are
present, any person entitled to preside at or act as Secretary of the Meeting,
may adjourn the Meeting. At the adjourned Meeting, if a quorum is present, any
business may be transacted that might have been transacted at the Meeting as
originally called. Except as otherwise provided by law, no notice need be
given of the adjourned Meeting other than by announcement at the Meeting at
which the adjournment is taken, unless after the adjournment is taken the Board
fixes a new record date for the adjourned Meeting.
CONTRACT OWNER PROPOSALS. The Separate Account does not hold annual Contract
Owner Meetings. Contract Owners wishing to submit proposals for inclusion in a
proxy statement for a subsequent meeting should send their written proposals to
the Separate Account c/o PADCO Financial Services, Inc., 6116 Executive
Boulevard, Suite 400, Rockville, Maryland, 20852.
REPORTS TO CONTRACT OWNERS. The Separate Account will furnish, without charge,
a copy of the most recent Annual Report to Contract Owners of the Separate
Account and the most recent Semi-Annual Report succeeding such Annual Report, if
any, on request. Requests should be directed to the Separate Account at 6116
Executive Boulevard, Suite 400, Rockville, Maryland, 20852, or by calling
1-888-667-4936.
OTHER MATTERS. The Board of Managers know of no other business to be brought
before the Meeting. However, if any other matters properly come before the
Meeting, it is their intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
----------------------------
CONTRACT OWNERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY.
18
<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
11825 NORTH PENNSYLVANIA STREET
CARMEL, INDIANA 46032
PROXY SOLICITED BY THE BOARD OF MANAGERS
By my signature below, I appoint Albert P. Viragh, Jr. and Carl G. Verboncoeur,
individually and together, with full power of substitution, my proxy to vote the
number of votes and fractions of votes equal to the number of dollars and
fractions of dollars credited to me as of the record date of August 28, 1998, at
the Special Meeting (the "Meeting") of variable annuity contract owners to be
held on Monday, October 26, 1998 at 9:00 A.M. Eastern Time at the offices of
PADCO Financial Services, Inc., 6116 Executive Boulevard, Suite 400, Rockville,
Maryland 20852, and at any adjournments of the meeting. I instruct Messrs.
Viragh and Verboncoeur to vote on my behalf as specified on the reverse side,
and I revoke any previous proxies that I have executed. I acknowledge receipt
of the Notice of Special Meeting and Proxy Statement that accompanied this form
of Proxy.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED CONTRACT OWNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSALS.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Board of Managers recommend a vote
FOR the Proposals.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
[Identifying Number]
Date
----------------------------------------
NOTE: Please sign exactly as your name
appears on this proxy. For joint accounts,
each joint owner must sign. When signing in
a fiduciary capacity, such as executor,
[NAME AND ADDRESS] administrator, trustee, attorney, guardian,
etc., please so indicate. Corporate and
partnership proxies should be signed by an
authorized person indicating the person's
title.
----------------------------------------------
----------------------------------------------
Signature
CONTINUED ON REVERSE SIDE
<PAGE>
[RESERVE SIDE OF PROXY FORM]
THE FOLLOWING PROPOSAL SHOULD BE VOTED ON BY ALL CONTRACT OWNERS:
PROPOSAL 1: APPROVE THE PROPOSED AGREEMENT AND PLAN OF RESTRUCTURING AMONG
GREAT AMERICAN RESERVE, THE SEPARATE ACCOUNT AND RYDEX VARIABLE TRUST.
( /X/ Please mark your choices like this on the Proposal )
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
</TABLE>
THE FOLLOWING PROPOSAL SHOULD BE VOTED ON ONLY BY THOSE CONTRACT OWNERS
PARTICIPATING IN THE NOVA SUBACCOUNT, URSA SUBACCOUNT, OTC SUBACCOUNT, U.S.
GOVERNMENT BOND SUBACCOUNT, AND JUNO SUBACCOUNT:
PROPOSAL 2: APPROVE THE ELIMINATION OF A FUNDAMENTAL INVESTMENT POLICY
APPLICABLE TO THE NOVA SUBACCOUNT, URSA SUBACCOUNT, OTC SUBACCOUNT, U.S.
GOVERNMENT BOND SUBACCOUNT, AND JUNO SUBACCOUNT.
( /X/ Please mark your choices like this on the Proposal ONLY for the
Subaccount(s) in which you participate)
<TABLE>
<S> <C> <C> <C>
Nova Subaccount FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
Ursa Subaccount FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
OTC Subaccount FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
U.S. Government Bond FOR AGAINST ABSTAIN
--- ------- -------
Subaccount / / / / / /
Juno Subaccount FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
</TABLE>
PLEASE SIGN ON THE REVERSE SIDE
