EXHIBIT 11(a)
Subaccount Administration Agreement
Between Rydex Advisor Variable Annuity Account
and PADCO Service Company, Inc.
SUBACCOUNT ADMINISTRATION AGREEMENT
THIS SUBACCOUNT ADMINISTRATION AGREEMENT (the "Agreement"),
dated as of November 1, 1996, is entered into by and between THE
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT (the "Separate Account"),
a managed separate account of Great American Reserve Insurance
Company ("Great American Reserve") established under the laws of
the State of Texas on April 15, 1996, and PADCO SERVICE COMPANY,
INC. (the "Servicer"), a company incorporated under the laws of
the State of Maryland on October 6, 1993.
W I T N E S S E T H:
WHEREAS, the Separate Account is registered with the
Securities and Exchange Commission (the "Commission") as a
diversified open-end management investment company pursuant to
the provisions of the Investment Company Act of 1940, as amended
(the "1940 Act");
WHEREAS, the Servicer is registered with the Commission as a
transfer agent under the Securities Exchange Act of 1934, as
amended;
W H EREAS, the assets of the Separate Account may be
segregated by eligible investments, thus establishing a series of
eligible investment portfolios (or "Subaccounts") within the
Separate Account pursuant to the laws of the State of Texas and
the 1940 Act;
WHEREAS, the variable annuity contracts proposed to be sold
by Great American Reserve and to be funded by the Separate
Account (the "Contracts") are designed for use by purchasers of
the Contracts (the "Contract Owners") who intend to utilize an
asset allocation or market-timing investment strategy and are
advised by professional money managers ("Financial Advisors");
WHEREAS, the board of managers of the Separate Account (the
"Managers"), pursuant to Article III, Section 2.m., "Board of
Managers; Powers," of the rules and regulations of the Separate
Account, dated June 26, 1996, have created the following
Subaccounts of the Separate Account: The Nova Subaccount, The
U r sa Subaccount, The OTC Subaccount, The Precious Metals
Subaccount, The Juno Subaccount, The U.S. Government Bond
Subaccount, The Money Market I Subaccount, and The Money Market
II Subaccount (collectively, the "Subaccounts");
WHEREAS, the accounting unit of measure used to compute the
value of a Contract Owner's interest in a Subaccount is the
"Accumulation Unit," or "Unit," and the current market value of
the Accumulation Units of a Subaccount is the "Accumulation Unit
Value;"
WHEREAS, the Separate Account wishes to have the Servicer
p e r form certain asset allocation administrative services,
including, among others, communications with Financial Advisors
(including receipt of and acting upon transfer requests), asset
a l location bookkeeping, determination of Accumulation Unit
Values, Subaccount accounting and recordkeeping services, and
other services for the Subaccounts (other than the Money Market
II Subaccount), and Contract Owners, and to act in such capacity
in the manner set forth in this Agreement, and the Servicer is
willing to act in such capacity in accordance with the provisions
of this Agreement; and
WHEREAS, the Separate Account desires to appoint the
Servicer as the accounting services agent for the Subaccounts
(other than the Money Market II Subaccount): (i) to perform
certain accounting and recordkeeping functions required of a
d u l y-registered investment company; (ii) to file certain
financial reports; (iii) to maintain and preserve certain books,
accounts, and records as the basis for such reports; and (iv) to
perform certain daily functions in connection with such accounts
and records; and the Servicer is willing to perform such
functions upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, and for other good and
valuable consideration, the receipt, sufficiency, and adequacy of
which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree and promise as follows:
1. Services To Be Provided
In consideration of the compensation to be paid by the
Separate Account to the Servicer pursuant to Section 4 of this
Agreement and pursuant to Schedule I, Schedule II, and Schedule
III of this Agreement, attached hereto, as applicable, the
Servicer will:
a. Manage, supervise, and conduct the affairs and business
of the Subaccounts (other than the Money Market II Subaccount)
and matters incidental thereto. In the performance of its
duties, the Servicer will comply with the Separate Account's
Prospectus and Statement of Additional Information, as the same
may be amended from time to time, all as delivered to the
Servicer (collectively, the "Controlling Documents"). The
Servicer will also use its best efforts to safeguard and promote
the welfare of the Separate Account and to comply with other
policies which the Managers from time to time may specify. The
Servicer will furnish or provide to the Subaccounts (other than
t h e Money Market II Subaccount) general asset allocation
administrative services as the Subaccounts may reasonably require
in the conduct of their affairs and business, including, without
limitation, the services described on Schedule I attached hereto.
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b. Provide the Subaccounts (other than the Money Market II
Subaccount) with all required Contract Owner services, including,
without limitation, those services described on Schedule II,
attached hereto. The Servicer will maintain sufficient trained
personnel and equipment and supplies to perform such services in
c o nformity with the Controlling Documents and such other
reasonable standards of performance as said Subaccounts may from
time to time specify, and otherwise in an accurate, timely, and
efficient manner.
c. Provide the Subaccounts (other than the Money Market II
Subaccount) with all other required asset allocation
administration services, including, without limitation, those
services described on Schedule III attached hereto. The Servicer
will maintain sufficient trained personnel and equipment and
supplies to perform such services in conformity with the
Controlling Documents and such other reasonable standards of
performance as said Subaccounts may from time to time specify,
and otherwise in an accurate, timely, and efficient manner.
2. Obligations of the Separate Account
The Separate Account will have the following obligations
under this Agreement:
a. T h e S eparate Account shall keep the Servicer
continuously and fully informed as to the composition of the
investment portfolio of each Subaccount of the Separate Account
(other than the Money Market II Subaccount) and the nature of all
of the assets and liabilities of each Subaccount (other than the
Money Market II Subaccount), and shall cause the portfolio
investment managers of said Subaccounts to cooperate with the
Servicer in all matters so as to enable the Servicer to perform
the Servicer's functions under this Agreement.
b. The Separate Account shall furnish the Servicer with
any materials or information which the Servicer may reasonably
request to enable the Servicer to perform the Servicer's
functions under this Agreement. The Servicer shall be entitled
to rely exclusively on the completeness and correctness of the
materials and information furnished to the Servicer by the
Separate Account; provided, that such reliance is made in good
faith; and provided, further, that such materials and information
s h a ll belong to the Separate Account and be considered
confidential, and shall not be disclosed to other than Federal
and state regulators without permission from the Separate
Account.
3. Payment of Fees and Expenses
a. The Servicer shall pay all of the fees and expenses
incurred by the Servicer in providing each Subaccount (other than
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the Money Market II Subaccount) with the services and facilities
described in this Agreement, except as otherwise provided herein.
b. Notwithstanding any other provision of this Agreement,
each Subaccount (other than the Money Market II Subaccount) shall
pay, or reimburse the Servicer for the payment of, all fees and
expenses not directly related to the Servicer's providing each
such Subaccount with the services and facilities described in
this Agreement, including, but not limited to, the following
described fees and expenses of the Separate Account (hereinafter
called "Direct Expenses"), whether or not billed to the Separate
Account or said Subaccount, the Servicer, or any related entity:
(i) f e es and expenses relating to investment
advisory services;
(ii) fees and expenses of custodian and depositories
and banking services fees and costs;
(iii) fees and expenses of outside legal counsel and any
legal counsel directly employed by the Subaccounts
and the Separate Account;
(iv) fees and expenses of independent auditors and
income tax preparation and expenses of obtaining
quotations for the purpose of calculating the
value of the assets of the Subaccounts;
(v) fees and expenses of consultants;
(vi) interest charges;
(vii) all Federal, state, and local taxes (including,
w i t hout limitation, premium, stamp, excise,
income, and franchise taxes);
(viii) costs and expenses of issuing and surrendering
Units of the Separate Account;
(ix) costs incidental to or associated with meetings
of Contract Owners;
(x) fees and expenses of registering or qualifying
Contracts for sale under Federal securities laws
and state insurance laws;
(xi) costs (including postage) of printing and
m a iling prospectuses, confirmations, proxy
statements, and other reports and notices to
Contract Owners and to governmental agencies;
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(xii) the Separate Account portion of premiums on all
insurance and bonds and other expenses of fidelity
and liability insurance and bonding covering the
Separate Account;
(xiii) fees and expenses of the disinterested Managers
and expenses incidental to the meetings of the
Board;
(xiv) fees and expenses paid to any securities pricing
organization;
(xv) dues and expenses associated with membership in
any industry association;
(xvi) costs for incoming telephone WATS lines; and
(xvii) organizational costs.
4. Compensation
As consideration for the services provided hereunder, the
Subaccounts (other than the Money Market II Subaccount) shall
accrue daily and pay the Servicer monthly a fee not later than
the fifth (5th) business day of the month following the month for
which services have been provided, at the following annual rates
based on the average daily net assets (the "Assets") of each of
said Subaccounts for such month:
The Nova Subaccount
0.25% of Assets
The Ursa Subaccount
0.25% of Assets
The OTC Subaccount
0.20% of Assets
The Precious Metals Subaccount
0.20% of Assets
The U.S. Government Bond Subaccount
0.20% of Assets
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The Juno Subaccount
0.25% of Assets
The Money Market I Subaccount
0.20% of Assets
In the event that this Agreement commences on a date other
than on the beginning of any calendar month, or if this Agreement
terminates on a date other than the end of any calendar month,
t h e fees payable hereunder by said Subaccounts shall be
proportionately reduced according to the number of days during
such month that services were not rendered hereunder by the
Servicer.
5. Reports to the Board of Managers
The Servicer shall consult with the Managers at such times
as the Managers reasonably request with respect to the services
provided hereunder, and the Servicer shall cause its officers to
attend such meetings with the Managers, and to furnish such oral
or written reports to the Managers, as the Managers may
reasonably request. In addition, the Servicer agrees to provide
to the Managers such reports and other information as the
Managers may reasonably request in order to enable the Managers
to perform a review of the Servicer's performance under this
Agreement.
6. Term of Agreement
This Agreement is effective on the date hereof. This
Agreement shall remain in full force and effect until October 1,
1997, unless terminated earlier in accordance with its terms, and
thereafter from year to year; provided, that: (a) such
continuance is approved by (i) either a vote of the majority of
the Managers or a vote of a "majority of the outstanding voting
securities" (as defined at Section 2(a)(42) of the 0000 Xxx) of
the Separate Account and (ii) a majority of the Managers who are
not "interested persons" (as defined at Section 2(a)(19) of the
0000 Xxx); and (b) the following findings are made by a majority
of the Managers who are not "interested persons" (as defined at
Section 2(a)(19) of the 1940 Act): (i) that this Agreement is in
the best interests of the Separate Account; (ii) that the
services to be performed pursuant to this Agreement are services
required for the operation of the Separate Account; (iii) that
the Servicer can provide services the nature and quality of which
are at least equal to those provided by others offering the same
or similar services; and (iv) that the fees for such services are
fair and reasonable in light of the usual and customary charges
made by others for services of the same nature and quality.
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7. Termination
This Agreement may be terminated, without the payment of any
penalty, by either party hereto upon at least sixty (60) days'
written notice to the other party. Any termination by the
Separate Account will be pursuant to a vote of a majority of the
Managers.
8. Standard of Care
a. Except as provided by law, the Servicer shall have no
liability or be under any obligation to anyone with respect to
any failure on the part of the Managers or any portfolio
investment manager to perform any of their obligations under the
Controlling Documents, or for any error or omission whatsoever on
the part of the Managers or any portfolio investment manager.
b. The Servicer shall not be liable for any error of
judgment or mistake of law or for any loss caused by the Separate
Account in connection with the matters to which this Agreement
relates; provided, however, that the Servicer has acted in the
circumstances with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent man acting in
like capacity and familiar with such matters would use in the
conduct of any enterprise of a like character and with like aims,
and in accordance with such other requirements of law; provided,
further, however, that nothing in this Agreement will protect the
Servicer against any liability to the Separate Account to which
the Servicer would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of
the Servicer's duties hereunder or by reason of the Servicer's
reckless disregard of the Servicer's obligations and duties
hereunder.
9. Other Activities of the Servicer
Subject to the provisions of Section 5 of this Agreement,
with respect to advance notice of the Servicer's taking on of new
clients or ventures of material significance, nothing herein
contained will limit or restrict the right of the Servicer to
engage in any other business or to render services of any kind to
any other corporation, firm, individual, or association.
10. Scope of Authority
Neither the Servicer nor any of the Servicer's officers,
employees, agents, or assigns are authorized to make any
representations concerning the Separate Account or the Contracts,
except for those representations contained in the Controlling
Documents, copies of which will be supplied by the Separate
Account to the Servicer, or in such supplemental literature or
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advertising as may be authorized by the Separate Account in
writing.
11. Indemnification
a. The Separate Account shall indemnify the Servicer and
hold the Servicer harmless from and against all actions, suits,
and claims, whether groundless or otherwise, arising directly or
i n d irectly out of or in connection with the Servicer's
performance under this Agreement and from and against any and all
losses, damages, costs, charges, attorneys' and accountant's
fees, payments, expenses, and liabilities incurred by the
Servicer in connection with any such action, suit, or claim
unless caused by the Servicer's breach of this Agreement,
negligence, or willful misconduct. The Separate Account shall
not be liable under this indemnification provision with respect
to any claim made against the Servicer unless the Servicer shall
have notified the Separate Account in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon the Servicer (or after the Servicer shall have received
notice of such service on any designated agent), but failure to
notify the Separate Account of any such claim shall not relieve
the Separate Account from any liability which the Separate
Account may have to the Servicer against whom such action is
brought otherwise than on account of this indemnification
provision. In case any such action is brought against the
Servicer, the Separate Account shall be entitled to participate,
at its own expense, in the defense of such action. The Separate
Account also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action.
After notice from the Separate Account to such party of the
Separate Account's election to assume the defense thereof, the
Servicer shall bear the fees and expenses of any additional
counsel retained by the Servicer, and the Servicer will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs
of investigation. The Servicer will promptly notify the Separate
Account of the commencement of any litigation or proceedings
against the Servicer in connection with the Contracts or the
operations of the Subaccounts.
b. The Servicer shall indemnify the Separate Account and
hold the Separate Account harmless from all actions, suits,
damages, claims, demands, losses, and liabilities (including
r e asonable attorneys' and accountants' fees and expenses)
incurred or assessed against the Separate Account arising
directly or indirectly from the Servicer's negligence, wilful
misconduct, or breach of this Agreement. The Servicer shall not
be liable under this indemnification provision with respect to
any claim made against the Separate Account unless the Separate
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Account shall have notified the Servicer in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon the Separate Account (or after the Separate Account
shall have received notice of such service on any designated
agent), but failure to notify the Servicer of any such claim
shall not relieve the Servicer from any liability which it may
have to the Separate Account against whom such action is brought
otherwise than on account of this indemnification provision. In
case any such action is brought against the Separate Account, the
Servicer shall be entitled to participate, at its own expense, in
the defense of such action. The Servicer also shall be entitled
to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Servicer to
such party of the Servicer's election to assume the defense
thereof, the Separate Account shall bear the fees and expenses of
any additional counsel retained by the Separate Account, and the
Servicer will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other
than reasonable costs of investigation. The Separate Account
will promptly notify the Servicer of the commencement of any
litigation or proceedings against the Separate Account in
c o n nection with the Contracts or the operations of the
Subaccounts.
12. Notices
a. Communications to the Servicer shall be addressed to:
PADCO Service Company, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
b. C o mmunications to the Separate Account shall be
addressed to:
Rydex Advisor Variable Annuity Account
Great American Reserve Insurance Company
00000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Office of the General Counsel
With a copy to:
Rydex Advisor Variable Annuity Account
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
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c. In the event of a change of address, communications
will be addressed to such new address as designated in a written
notice from the Separate Account or the Servicer, as the case may
be. All communications addressed in the above manner and by
registered mail or delivered by hand will be sufficient under
this Agreement.
13. Governing Law
This Agreement is governed by the laws of the State of
Maryland (without reference to such state's conflict of law
rules).
14. Counterparts
This Agreement may be executed in counterparts, each of
which shall be deemed an original, but which together shall
constitute one and the same instrument.
15. Binding Effect and Assignment
This Agreement shall be binding upon the parties hereto and
their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Separate Account
without the written consent of the Servicer, or by the Servicer
without the written consent of the Separate Account, in each case
authorized or approved by a resolution of the Separate Account's
Managers.
16. Amendment, Modification, and Waiver.
No term or provision of this Agreement may be amended,
modified, or waived without the affirmative vote or action by
written consent of the Servicer and the Separate Account effected
in accordance with the provisions of the 1940 Act, and the rules
thereunder, and Section 6 of this Agreement.
IN WITNESS WHEREOF, the Servicer and the Separate Account
have executed this Agreement as of the date first written above.
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
By: /s/ L. Xxxxxxx Xxxxxxxxx
L. Xxxxxxx Xxxxxxxxx
Vice President
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PADCO SERVICE COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx, Xx.
President
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Schedule I
General Asset Allocation Administrative Services
The Servicer agrees to provide the Subaccounts (other than
t h e Money Market II Subaccount) with all required asset
a l l ocation administrative services, including, without
limitation, the following:
1. Office space, equipment, and personnel.
2. Clerical and general back office services.
3. Bookkeeping, internal accounting, secretarial, and
other general administrative services.
4. Preparation of all reports, prospectuses,
s t a tements of additional information, proxy
statements, and all other materials required to be
filed or furnished by the Separate Account under
Federal and state securities laws. [Confirm]
5. Maintaining ledgers and determining accumulation
unit values.
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Schedule II
Contract Owner Services
The Servicer agrees to provide the Subaccounts (except the
Money Market II Subaccount) and the Contract Owners with all
required Contract Owner services ("Services"), including, without
limitation, the following:
1. The Servicer shall provide the following Services to the
Contract Owners with respect to the Subaccounts (except for
the Money Market II Subaccount):
a. Aggregate and process purchases and transfer
r e quests for Subaccount Units from Contract
Owners.
b. Arrange for bank wires.
c. Respond to Contract Owner and/or Financial Advisor
inquiries relating to the services performed by
the Servicer.
d. Provide accounting with respect to Units owned by
Contract Owners.
e. A s required by law, forward Contract Owner
communications from the Separate Account (such as
proxies, Contract Owner reports, annual and semi-
annual financial statements, and disbursement and
tax notices) to Contract Owners. [Confirm]
f. P r ovide such other similar services as the
Subaccounts may reasonably request to the extent
t h e Servicer is permitted to do so under
applicable statues, rules, or regulations.
2. The Servicer shall also provide the following additional
Services:
a. Maintain all records required by law relating to
transactions in Units and, upon request by the
Separate Account, promptly make these records
available to the Separate Account as the Separate
Account may reasonably request in connection with
the operations of the Separate Account.
b. Promptly notify the Separate Account if the
Servicer experiences any difficulty in maintaining
the records described in this Schedule II to the
Agreement in an accurate and complete manner.
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c. Furnish the Separate Account or any designee of
the Separate Account ("Designee") with information
relating to the Servicer's performance under this
Agreement as the Separate Account or the Designee
may reasonably request (including, without
limitation, periodic certifications confirming the
provision to Contract Owners of the Services
described herein), and shall otherwise cooperate
w i th the Separate Account and the Separate
A c count's Designees (including, without
l i m itation, any auditors designated by the
S e p a rate Account), in connection with the
preparation of reports to the Managers concerning
this Agreement and the monies paid or payable by
the Separate Account pursuant hereto, as well as
any other reports or filings that may be required
by law.
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Schedule III
Asset Allocation Administration Services
The Servicer agrees to provide the Subaccounts (except for
t h e Money Market II Subaccount) with all required asset
a l l ocation administration services, including, without
limitation, the following:
1. R e c e ive Subaccount transfer requests from Financial
A d v i sors, and validate the authority of the party
originating the transaction.
2. Enforce transaction cut-off times as set forth in the
Controlling Documents.
3. Process and post all exchange transactions initiated by
Financial Advisors to the Contract Owner file, including:
4. A n s w er all service-related telephone inquiries from
Financial Advisors, including:
- General and policy inquiries (research and resolve
problems)
- Separate Account yield inquiries
- Submit pending requests to correspondence
- Monitor online statistical performance of Units
- Develop reports on telephone activity
- C o m m unicate by electronic data transmission to
Financial Advisors the activity of Contract Owners
III-1
