<PAGE>
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
The Rydex Advisor Variable Annuity Account
- --------------------------------------------------------------------------------
(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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<PAGE>
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
OF
GREAT AMERICAN RESERVE INSURANCE COMPANY
--------------------------------------------------
IMPORTANT CONTRACT OWNER INFORMATION
--------------------------------------------------
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.
--------------------------------------------------
<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,
----------------------------------------
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 Wednesday, September
30, 1998 are entitled to notice of and to vote at the Meeting or any adjournment
thereof.
BY ORDER OF THE BOARD OF MANAGERS
<PAGE>
ROBERT M. STEELE, SECRETARY
October 2, 1998
ii
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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.
<PAGE>
PROPOSAL CONTRACT OWNERS ENTITLED TO VOTE
- --------------------------------------------------------------------------------
Proposal 1: APPROVE THE PROPOSED All Contract Owners
AGREEMENT AND PLAN OF RESTRUCTURING
AMONG GREAT AMERICAN RESERVE, THE
SEPARATE ACCOUNT AND RYDEX VARIABLE
TRUST.
- --------------------------------------------------------------------------------
Proposal 2: APPROVE THE ELIMINATION OF Contract Owners participating in the
A FUNDAMENTAL INVESTMENT POLICY Nova , Ursa , OTC, U.S. Government
APPLICABLE TO THE NOVA SUBACCOUNT, URSA Bond and Juno Subaccounts
SUBACCOUNT, OTC SUBACCOUNT, U.S.
GOVERNMENT BOND SUBACCOUNT, AND JUNO
SUBACCOUNT.
- --------------------------------------------------------------------------------
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
Ursa Subaccount
OTC Subaccount
Precious Metals Subaccount
U.S. Government Bond Subaccount
Juno Subaccount
Money Market Subaccount
</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.
INTRODUCTION
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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"). First, all Contract Owners will be asked to
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 of the Separate Account is recommending that Contract Owners
participating in the Subaccounts approve the Agreement. 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 Subaccounts 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 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
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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.
4
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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. The numbers of shares of a Fund held in a
Subaccount with respect to which a Contract Owner will be entitled to give
voting instructions, will be determined by dividing the number of dollars and
fractions of dollars credited to the Contract and allocated to the Subaccount by
the net asset value of a share of the Fund held in the Subaccount. 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 October 1, 1998, the
Advisor and its affiliates had discretionary management authority with respect
to approximately $_____ 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
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PADCO and the Separate Account, dated November 1, 1996 (the "Advisory
Agreement"). 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.
PROPOSAL 1:
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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 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
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<PAGE>
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
gain or loss 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 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,
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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, the 1940 Act requires
that Contract Owners be entitled to instruct Great American Reserve as to the
voting of shares of the Trust on the same matters, in accordance with the 1940
Act. 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 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%
- --------------------------------------------------------------------------------
<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%
- --------------------------------------------------------------------------------
</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>
- --------------------------------------------------------------------------------
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%
- --------------------------------------------------------------------------------
<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%
- --------------------------------------------------------------------------------
</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>
- --------------------------------------------------------------------------------
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 an insurance 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 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.
12
<PAGE>
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 gain or loss by Great American Reserve, the Subaccounts,
the Funds or the Contract Owners.
A copy of the Form of Agreement and Plan of Restructuring is on file with
the Securities and Exchange Commission.
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 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
13
<PAGE>
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.
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 Mangers
believes that classifying the Subaccounts as non-diversified is
14
<PAGE>
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:
<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>
15
<PAGE>
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
Ursa Subaccount
OTC Subaccount
Precious Metals Subaccount
U.S. Government
Bond Subaccount
Juno Subaccount
Money Market Subaccount
</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 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
16
<PAGE>
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.
17
<PAGE>
FORM OF AGREEMENT AND PLAN
OF RESTRUCTURING
AGREEMENT AND PLAN OF RESTRUCTURING dated as of _________________, 1998
(the "Agreement"),among GREAT AMERICAN RESERVE INSURANCE COMPANY ("Great
American Reserve"), a Texas corporation, RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
(the "Separate Account"), a separate account of Great American Reserve, and
RYDEX VARIABLE TRUST, a Delaware business trust (the "Trust").
WHEREAS, the Separate Account is a segregated asset account of Great
American Reserve under the insurance code of the State of Texas, and the
Separate Account is divided into subaccounts known as The Nova Subaccount, The
Ursa Subaccount, The OTC Subaccount, The Precious Metals Subaccount, The U.S.
Government Subaccount, The Juno Subaccount and The Money Market Subaccount (the
"Subaccounts");
WHEREAS, the Trust is a business trust under Delaware law and is authorized
to issue separate series of beneficial interests ("Shares") in investment funds
known as the Nova Fund, Ursa Fund, OTC Fund, Precious Metals Fund, U.S.
Government Bond Fund, Juno Fund, and U.S. Government Money Market Fund (the
"Funds");
WHEREAS, the parties desire to restructure the Separate Account by
providing that Great American Reserve and the Separate Account will transfer the
assets and certain liabilities of each of the Subaccounts to corresponding Funds
of the Trust in exchange for issuance of Shares of the Funds to the
corresponding Subaccounts.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
Great American Reserve and the Separate Account agree to the transfer of all of
the assets of The Nova, Ursa, OTC, Precious Metals, U.S. Government , Juno and
Money Market Subaccounts to the Nova, Ursa, OTC, Precious Metals, U.S.
Government Bond, Juno, and U.S. Government Money Market Funds, respectively,
solely in exchange for issuance by the Trust of Shares of the Funds to the
corresponding Subaccounts and for the assumption by each of the Funds of all or
substantially all of the liabilities of the corresponding Subaccounts, on the
terms and conditions hereinafter set forth:
1. PLAN OF RESTRUCTURING. At the Effective Time (as defined in Section
8 of this Agreement), Great American Reserve and the Separate Account will
assign, deliver and otherwise transfer all of the assets of each of the
Subaccounts, and good and marketable title thereto, to the corresponding Funds
free and clear of all liens, encumbrances and adverse claims, except as provided
in this Agreement, in exchange for a number of Shares of each corresponding Fund
(both full and fractional) equivalent in value to the accumulation units of each
Subaccount, outstanding immediately prior to the Effective Time and the
assumption by the corresponding Funds of all or substantially all of the
liabilities of each of the Subaccounts,
-1-
<PAGE>
as set forth in a statement of assets and responsibilities for the Subaccounts
("Statement of Assets and Liabilities"), to be prepared as of the Effective
Time. The assets and liabilities of the Subaccounts, as set forth in the
Statement of Assets and Liabilities, shall be exclusively assigned to and
assumed by the Funds. All debts, liabilities, obligations and duties of the
Subaccounts, to the extent that they exist at or after the Effective Time and
are stated in the Statement of Assets and Liabilities, shall after the Effective
Time attach to the Funds and may be enforced against the Funds to the same
extent as if the same had been incurred by the corresponding Funds.
2. TRANSFER OF ASSETS. The assets of the Subaccounts to be acquired by
the corresponding Funds and allocated thereto shall include, without limitation,
all cash, cash equivalents, securities, receivables (including interest and
dividends receivable) as set forth in the Statement of Assets and Liabilities,
as well as any claims or rights of action or rights to register shares under
applicable securities laws, any books or records of the investments of the
Subaccounts and other property owned by the Subaccounts at the Effective Time.
3. REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust, on behalf
of the Funds, represents and warrant to the Great American Reserve and the
Separate Account as follows:
(a) ORGANIZATION, EXISTENCE, ETC. The Trust is a business trust duly
organized and validly existing under the laws of the State of Delaware, has
authorized capital consisting of an unlimited number of units of beneficial
interest with no par value and is authorized to issue separate series of
Shares.
(b) REGISTRATION AS INVESTMENT COMPANY. The Trust is duly registered as
an open-end management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"), and is authorized to engage in
business as a registered investment company under applicable laws and
regulations.
(c) FINANCIAL STATEMENTS. The unaudited financial statements, if any,
of the Trust relating to the Funds dated as of _________, 1998 (the "Trust
Financial Statements"), which will, if available, be delivered to Great
American Reserve and the Separate Account as of the Effective Time, will
fairly present the financial position of the Funds as of the date thereof.
(d) SHARES TO BE ISSUED UPON RESTRUCTURING. The Shares of the Funds to
be issued in connection with the Restructuring have been duly authorized
and upon consummation of the Restructuring will be validly issued, fully
paid and nonassessable. Prior to the Effective Time, there shall be no
issued and outstanding Shares of the Funds or any other securities issued
by the Funds.
-2-
<PAGE>
(e) AUTHORITY. The Trust, on behalf of the Funds, has the power to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement, and the consummation
of the transactions contemplated hereby, have been duly authorized by the
Board of Trustees of the Trust, and no other proceedings by the Trust are
necessary to authorize its officers to effectuate this Agreement and the
transactions contemplated hereby. The Trust is not a party to or obligated
under any charter, by-law, indenture or contract provision or any other
commitment or obligation, or subject to any order or decree, which would be
violated by its executing and carrying out this Agreement.
(f) LIABILITIES. There are no liabilities of the Funds, whether or not
determined or determinable, other than liabilities disclosed or provided
for in the Trust's Financial Statements and liabilities incurred in the
ordinary course of business subsequent to the date of the Trust's Financial
Statements and up to the Effective Time or otherwise previously disclosed
to Great American Reserve and the Separate Account, none of which has been
materially adverse to the business, assets or results of operations of the
Funds. To the knowledge of the Trust, the Trust's Registration Statement
for registration of Shares of the Fund with the U.S. Securities and
Exchange Commission (the "SEC"), which is on file with the SEC, does not
contain an untrue statement of a material fact, or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
(g) LITIGATION. Except as previously disclosed to Great American
Reserve and the Separate Account, there are no claims, actions, suits or
proceedings pending or, to the actual knowledge of the Trust, threatened
which would materially adversely affect the Trust or the Funds or their
assets or business or which would prevent or hinder in any material respect
consummation of the transactions contemplated hereby.
(h) CONTRACTS. Except for contracts and agreements disclosed to Great
American Reserve and the Separate Account, under which no default exists,
the Trust and the Funds are not a party to or subject to any material
contract, debt instrument, plan, lease, franchise, license or permit of any
kind or nature whatsoever.
(i) TAXES. As of the Effective Time, all federal and other tax returns
and reports of the Funds required by law to have been filed will have been
filed, and all other taxes will have been paid so far as due, or provision
will have been made for the payment thereof, and to the best of the Trust's
knowledge, no such income tax return is currently under audit and no
assessment has been asserted with respect to any of such returns.
4. REPRESENTATIONS AND WARRANTIES OF GREAT AMERICAN RESERVE AND THE
SEPARATE ACCOUNT. Great American Reserve and the Separate Account represent and
warrant to the Funds as follows:
-3-
<PAGE>
(a) ORGANIZATION, EXISTENCE, ETC. The Separate Account was established
by Great American Reserve as a separate account pursuant to the insurance
code of the State of Texas, and is a separate account under the provisions
of the insurance code.
(b) FINANCIAL STATEMENTS. The audited financial statements of the
Subaccounts for the fiscal year ended __________, 1998, and the unaudited
financial statements of the Subaccounts dated as of __________, 1998 (the
"Subaccount's Financial Statements"), as delivered to the Trust, fairly
present the financial position of the Subaccounts as of the dates thereof,
and the results of their operations and changes in its net assets for the
periods indicated.
(c) MARKETABLE TITLE TO ASSETS. Each of the Subaccounts will have, at
the Effective Time, good and marketable title to, and full right, power and
authority to sell, assign, transfer and deliver the assets to be
transferred to the Trust on behalf of Funds. Upon delivery and payment for
such assets, the Trust, on behalf of each of the Funds, will have good and
marketable title to such assets without restriction on the transfer
thereof, free and clear of all liens, encumbrances and adverse claims.
(d) AUTHORITY. Great American Reserve and the Separate Account have the
power to enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, have been duly
authorized by Great American Reserve and the Board of Managers of the
Separate Account ("Board of Managers") and, except for approval by variable
annuity contract owners participating in the Subaccounts, no other
proceedings by Great American Reserve and the Separate Accounts, are
necessary to authorize its officers to effectuate this Agreement and the
transactions contemplated hereby. Great American Reserve and the Separate
Account are not a party to or obligated under any charter, by-law,
indenture or contract provision or any other commitment or obligation, or
subject to any order or decree, which would be violated by its executing
and carrying out this Agreement.
(e) LIABILITIES. There are no liabilities of the Subaccounts, whether
or not determined or determinable, other than liabilities disclosed or
provided for in the Subaccounts' Financial Statements and liabilities
incurred in the ordinary course of business subsequent to the date of the
Subaccount's Financial Statement _____________, 1998, or otherwise
previously disclosed to the Trust, none of which has been materially
adverse to the business, assets or results of operations of the
Subaccounts. To the knowledge of Great American Reserve and the Board of
Managers, the Separate Account's Registration Statement, for registration
of variable annuity contracts with the SEC, which is on file with the SEC,
does not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
-4-
<PAGE>
(f) LITIGATION. Except as previously disclosed to the Trust, there are
no claims, actions, suits or proceedings pending or, to the knowledge of
Great American Reserve or the Board of Managers, threatened which would
materially adversely affect the Subaccounts or their assets or business or
which would prevent or hinder in any material respect consummation of the
transactions contemplated hereby.
(g) CONTRACTS. Except for contracts and agreements disclosed to the
Trust, under which no default exists, Great American Reserve, the Separate
Account and each of the Subaccounts, at the Effective Time, is not a party
to or subject to any material contract, debt instrument, plan, lease,
franchise, license or permit of any kind or nature whatsoever.
(h) TAXES. As of the Effective Time, all federal and other tax returns
and reports of the Subaccounts required by law to have been filed will have
been filed, and all other taxes will have been paid so far as due, or
provision will have been made for the payment thereof, and to the best of
Great American Reserve's and the Separate Account's knowledge, no such
return is currently under audit and no assessment has been asserted with
respect to any of such returns.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST.
(a) All representations and warranties of the Great American Reserve and
of the Separate Account contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as they
may be affected by the transactions contemplated by this Agreement, as of
the Effective Time, with the same force and effect as if made on and as of
the Effective Time.
(b) The Trust, on behalf of the Funds, shall have received an opinion of
counsel for Great American Reserve and the Separate Account, dated as of
the Effective Time, addressed to, and 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 and Subaccounts are duly
organized and validly existing under the insurance code of the State of
Texas; (iii) the Separate Account is an insurance separate account
registered under the 1940 Act; (iv) this Agreement and the Restructuring
provided for herein and the execution of this Agreement have been duly
authorized and approved by all requisite action of Great American Reserve
and the Board of Managers of the Separate Account, and this 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 Account to
enter into this Agreement on behalf of the Subaccounts or carry out its
terms that
-5-
<PAGE>
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
this Agreement, the Trust, on behalf of the Funds will have acquired all of
the Subaccounts' assets listed in the Statement of Assets and Liabilities,
free and clear of all liens encumbrances or adverse claims.
(c) Great American Reserve, on behalf of the Separate Account and the
Subaccounts will have delivered to the Trust at the Effective Time the
Subaccounts' Statement of Assets and Liabilities, prepared in accordance
with generally accepted accounting principles consistently applied,
together with a certificate of the Treasurer or Assistant Treasurer of
Great American Reserve as to the aggregate asset value of the Subaccounts'
portfolio securities.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF GREAT AMERICAN RESERVE AND
THE SEPARATE ACCOUNT.
(a) All representations and warranties of the Trust contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Effective Time, with the same force and effect
as if made on and as of the Effective Time.
(b) Great American Reserve, on behalf of the Separate Account and the
Subaccounts, will have received an opinion of counsel for the Trust, dated
as of the Effective Time, addressed to, and in form and substance
satisfactory to, counsel for the 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) this Agreement and
the Restructuring provided for herein and the execution of this Agreement
have been duly authorized and approved by all requisite corporate action of
the Trust, and this 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 this 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 this Agreement will be validly issued, fully paid and
nonassessable.
7. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF GREAT AMERICAN
RESERVE, THE SEPARATE ACCOUNT AND THE TRUST. The obligations of Great American
Reserve, the Separate Account and the Trust to effectuate this Agreement are
subject to the satisfaction of each of the following conditions:
-6-
<PAGE>
(a) Such authority from the SEC, state insurance departments and state
securities commissions as may be necessary to permit the parties to carry
out the transactions contemplated by this Agreement shall have been
received.
(b) With respect to the Subaccounts, Great American Reserve and the
Separate Account will call a meeting of variable annuity contract owners
who participate in the Separate Account to consider and act upon this
Agreement and to take all other actions reasonably necessary to obtain
variable annuity contract owner approval of this Agreement and the
transactions contemplated herein, including the Restructuring if the
Restructuring is consummated. Great American Reserve and the Separate
Account have prepared or will prepare the notice of meeting, form of proxy
and proxy statement (collectively, "Proxy Materials") to be used in
connection with such meeting, provided that the Trust has furnished or will
furnish a current, effective Prospectus relating to the Funds Shares for
incorporation within and/or distribution with the Proxy Materials, and with
such other information relating to the Funds as is reasonably necessary for
the preparation of the Proxy Materials.
(c) The Registration Statement on Form N-1A of the Trust will be
effective under the Securities Act of 1933 (the "1933 Act") and, to the
best knowledge of the Trust, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
(d) Great American Reserve, the Separate Account and the Trust will have
received on or before the Effective Time an opinion of counsel satisfactory
to them, substantially to the effect that for federal income tax purposes:
(1) No gain or loss will be recognized to Great American
Reserve or the Subaccounts upon the transfer of its assets in
exchange solely for the Funds Shares and the assumption by the
Funds of the Subaccounts' stated liabilities;
(2) No gain or loss will be recognized to the Funds on its
receipt of the Subaccounts' assets in exchange for the Funds
Shares and the assumption by the Trust on behalf of each Fund
of the corresponding Subaccount's liabilities;
(3) The basis of Subaccount's assets in the corresponding
Fund's hands will be the same as the basis of those assets in
the Subaccount's hands immediately before the conversion; and
(4) The Funds' holding period for the assets transferred to
the Funds by Great American Reserve and the Separate Account,
on behalf of the Subaccounts, will include the holding period
of those assets in the corresponding Subaccount's hands
immediately before the conversion.
-7-
<PAGE>
(e) A vote approving this Agreement and the Restructuring contemplated
hereby will have been approved by variable annuity contract owners who
participate in the Subaccounts, holding at least a majority in interest in
the Subaccounts, at a special meeting called for that purpose.
(f) The Board of Trustees of the Trust, at a meeting duly called for
such purpose, shall have authorized the issuance of Shares in each Fund at
the Effective Time in exchange for the assets of the corresponding
Subaccounts pursuant to the terms and provisions of this Agreement.
8. EFFECTIVE TIME OF THE RESTRUCTURING. The exchange of the
Subaccounts's assets for Funds Shares shall be effective as of close of business
on _______________, 1998, or at such other time and date as fixed by the mutual
consent of the parties (the "Effective Time").
9. TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated and abandoned without penalty by resolution of the
Board of Managers or by a resolution of the Board of Trustees of the Trust, at
any time prior to the Effective Time, if circumstances should develop that, in
the opinion of the respective Boards, make proceeding with the Agreement
inadvisable.
10. AMENDMENT. This Agreement may be amended, modified or supplemented
in such manner as may be mutually agreed upon in writing by the parties;
provided, however, that following the meeting of variable annuity contract
owners participating in the Subaccounts called in accordance with Section 7 of
this Agreement, no such amendment may have the effect of changing the provisions
for determining the number or value of Funds Shares to be issued to the
Subaccounts under this Agreement to the detriment of variable annuity contract
owners who participate in the Subaccounts without their further approval.
11. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
12. NOTICES. Any notice, report, statement or demand required or
permitted by and provision of this Agreement shall be in writing and shall be
given by prepaid telegraph, telecopy, certified mail or overnight express
courier addressed as follows:
If to Great American Reserve and the Separate Account:
Albert P. Viragh
PADCO Financial Services, Inc.
6116 Executive Blvd.
Suite 400
Rockville, MD 20852
-8-
<PAGE>
with a copy to:
John H. Grady, Jr., Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
If to the Trust:
Albert P. Viragh
PADCO Financial Services, Inc.
6116 Executive Blvd.
Suite 400
Rockville, MD 20852
with a copy to:
John H. Grady, Jr., Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103-6993
13. FEES AND EXPENSES.
(a) Great American Reserve, the Separate Account and the Trust represent
and warrant to the other that there are no brokers or finders entitled to
receive any payments in connection with the transactions provided for
herein.
(b) Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by each of the
Subaccounts and the Funds will be borne by PADCO Financial Services, Inc.
pursuant to a separate agreement. Such expenses include, without
limitation, (i) expenses incurred in connection with the entering into and
the carrying out of the provisions of this Agreement; (ii) expenses
associated with the preparation and filing of the Proxy Statement under the
Securities Exchange Act of 1934; (iii) postage; (iv) printing; (v)
accounting fees; (vi) legal fees; and (vii) solicitation costs of the
transaction. Notwithstanding the foregoing, the Trust shall pay its own
federal and state registration fees.
14. HEADINGS, COUNTERPARTS, ASSIGNMENT.
(a) The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
-9-
<PAGE>
(b) This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
(c) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation other than the parties
hereto and their respective successors and assigns any rights or remedies
under or by reason of this Agreement.
15. ENTIRE AGREEMENT. Great American Reserve, the Separate Account and
the Trust agree that they have made no representation, warranty or covenant not
set forth herein and that this Agreement constitutes the entire agreement
between the parties. The representations, warranties and covenants contained
herein or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
16. FURTHER ASSURANCES. Great American Reserve, the Separate Account and
the Trust shall take such further action as may be necessary or desirable and
proper to consummate the transactions contemplated hereby.
17. BINDING NATURE OF AGREEMENT. As provided in the Declaration of
Trust of the Trust on file with the Secretary of State of the State of Delaware
and in the By-Laws of Great American Reserve, and pursuant to the certain
responsibilities and powers conferred upon the Board of Managers by Great
American Reserve, this Agreement was executed by the undersigned officers of
Great American Reserve, the Separate Account and the Trust, on behalf of each of
the Funds and the Subaccounts, respectively, as officers and not individually,
and the obligations of this Agreement are not binding upon the undersigned
officers, nor are they binding upon Great American Reserve's or the Separate
Account's other officers or the Trust's other Trustees, individually, but are
binding only upon the assets and property of the Subaccounts and the Trust.
Moreover, no Fund of the Trust shall be liable for the obligations of any other
Fund of the Trust.
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<PAGE>
Attest: GREAT AMERICAN RESERVE INSURANCE COMPANY
By:
- ------------------------- ------------------------------------------
Attest: RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT on
behalf of its series, The Nova Subaccount,
The Ursa Subaccount, The OTC Subaccount, The
Precious Metals Subaccount, The U.S.
Government Bond Subaccount, The Juno
Subaccount, and The Money Market Subaccount.
By:
- ------------------------- ------------------------------------------
Attest: RYDEX VARIABLE TRUST, on behalf of its
series, the Nova Fund, Ursa Fund, OTC Fund,
Precious Metals Fund, U.S. Government Bond
Fund, Juno Fund, and U.S. Government Money
Market Fund.
By:
- ------------------------- ------------------------------------------
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<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 )
FOR AGAINST ABSTAIN
--- ------- -------
/ / / / / /
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)
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
--- ------- -------
/ / / / / /
PLEASE SIGN ON THE REVERSE SIDE
