EXHIBIT 11(c)
Fidelity Bond Allocation Agreement
Among Rydex Advisor Variable Annuity Account,
PADCO Advisors II, Inc., Rydex Series Trust,
PADCO Advisors, Inc., and PADCO Service Company, Inc.
AMENDED AND RESTATED
ALLOCATION AGREEMENT
THIS ALLOCATION AGREEMENT (the "Agreement"), is made as of
this 23rd day of June, 1997, by and among:
R Y D EX SERIES TRUST (the "Trust"), a registered
investment company organized as a Delaware business
trust on March 9, 1993, with its principal place of
business at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxxx 00000, on behalf of the Trust and
the Trust's series of THE NOVA FUND, THE URSA FUND, THE
RYDEX OTC FUND, THE RYDEX PRECIOUS METALS FUND, THE
RYDEX U.S. GOVERNMENT BOND FUND, THE JUNO FUND, THE
RYDEX U.S. GOVERNMENT MONEY MARKET FUND, THE RYDEX
INSTITUTIONAL MONEY MARKET FUND, and THE RYDEX HIGH
YIELD FUND, and all future registered investment
companies which are named insureds under a joint
fidelity bond, as described below, and for which PADCO
Advisors, Inc. acts as investment adviser and for which
PADCO Service Company, Inc. acts as transfer agent and
s h areholder servicing agent (the above-referenced
entities hereinafter are collectively referred to as
the "Rydex Funds");
P A D CO ADVISORS, INC. ("PADCO I"), a registered
investment adviser incorporated under the laws of the
State of Maryland on February 5, 1993, with its
p r i n cipal place of business at 0000 Xxxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000;
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT (the "Separate
Account"), a registered investment company established
as a managed separate account of Great American Reserve
Insurance Company ("Great American Reserve") under the
laws of the State of Texas on April 15, 1996, with its
principal place of business at 00000 Xxxxx Xxxxxxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxx 00000, and with offices at 0000
Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, on
behalf of the Separate Account and the Separate
Account's subaccounts of THE NOVA SUBACCOUNT, THE URSA
SUBACCOUNT, THE OTC SUBACCOUNT, THE PRECIOUS METALS
SUBACCOUNT, THE U.S. GOVERNMENT BOND SUBACCOUNT, THE
JUNO SUBACCOUNT, THE MONEY MARKET I SUBACCOUNT, and THE
MONEY MARKET II SUBACCOUNT, and all future registered
investment companies which are named insureds under a
joint fidelity bond as described below and for which
PADCO Advisors II, Inc. acts as investment adviser and
f o r which PADCO Service Company, Inc. acts as
subaccount asset allocation administration servicer
(the above-referenced subaccounts of the Separate
Account hereinafter are collectively referred to as the
"Rydex Subaccounts");
PADCO ADVISORS II, INC. ("PADCO II"), a registered
investment adviser incorporated under the laws of the
State of Maryland on July 5, 1994, with its principal
p l a ce of business at 0000 Xxxxxxxxx Xxxxxxxxx,
Xxxxxxxxx, Xxxxxxxx 00000;
P A DCO SERVICE COMPANY, INC. (the "Servicer"), a
registered transfer agent incorporated under the laws
of the State of Maryland on October 6, 1993, with its
p r i n cipal place of business at 0000 Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxx 00000; and
PADCO 401(k) & PROFIT SHARING PLAN (the "PADCO Plan"),
an employee benefit welfare or pension benefit plan
established effective January 1, 1994, subject to the
supervision of the rules and regulations promulgated by
the Secretary of the Department of Labor, that: (i) is
a "qualified" retirement plan, under the provisions of
the U.S. Internal Revenue Code of 1986, as amended;
(ii) is designed to reward eligible employees of PADCO
I, PADCO II, the Servicer, and PADCO Financial Services
Company, Inc., with retirement benefits and to serve as
a funding medium for the accumulation of assets; (iii)
is administered by PADCO I; and (iv) has designated
Xxxxxx X. Xxxxxx, Xx., as the PADCO Plan trustee.
This Agreement is entered into by the aforementioned parties
( c o llectively, the "Joint Insureds") under the following
circumstances:
W I T N E S S E T H
WHEREAS, Section 17(g), "Transactions of Certain Affiliated
Persons and Underwriters," of the Investment Company Act of 1940,
as amended (the "1940 Act"), provides that the Securities and
Exchange Commission (the "Commission") is authorized to require
that officers and employees of registered investment companies be
bonded against larceny and embezzlement, and the Commission,
u n der Rule 17g-1, "Bonding of Officers and Employees of
Registered Management Investment Companies," under the 1940 Act,
has promulgated rules and regulations dealing with this subject;
WHEREAS, the Trust, the Rydex Funds, PADCO I, the Separate
Account, the Rydex Subaccounts, PADCO II, the Servicer, and the
PADCO Plan are named or will be named as joint insureds under the
terms of a certain bond or policy of insurance which insures
against larceny and embezzlement of officers and employees (the
"Fidelity Bond"), a copy of which Fidelity Bond is attached
hereto as Exhibit A;
WHEREAS, the trustees of the Trust (the "Trustees"),
including each of the Trustees who is not an "interested person"
of the Trust, as that term is defined in Section 2(a)(19) of the
1940 Act (the "Independent Trustees"), and the managers of the
Separate Account (the "Managers"), including each of the Managers
who is not an "interested person" of the Separate Account (the
"Independent Managers"), as that term is defined in Section
2(a)(19) of the 1940 Act, have considered all relevant factors,
including, but not limited to, the number of the parties named as
"joint insureds" under the joint Fidelity Bond, the nature of the
business activities of such Joint Insureds, the amount of the
joint insured bond, the amount of the premium for such bond, and
the ratable allocation of the premium among all parties named as
insureds under the joint Fidelity Bond, and have determined that
the share of the premium allocated to each of the Rydex Funds and
to each of the Rydex Subaccounts is less than the premium each
such Rydex Fund and each such Rydex Subaccount, respectively,
would have had to pay if each such Rydex Fund and each such Rydex
Subaccount had provided and maintained a single insured bond, as
required pursuant to paragraph (e) of Rule 17g-1, and also have
determined that it would be in the best interests of (i) the
Trust and the Rydex Funds and (ii) the Separate Account and the
Rydex Subaccounts for (i) the Trust and the Rydex Funds and (ii)
the Separate Account and the Rydex Subaccounts, respectively, to
be included as covered joint insureds under the joint insured
Fidelity Bond, pursuant to the requirements of Rule 17g-1 under
the 1940 Act;
WHEREAS, the Trustees of the Trust, including each of the
Independent Trustees, and the Managers, including each of the
Independent Managers, has given due consideration to all factors
relevant to the form, amount, and apportionment of premiums and
recoveries on such joint insured Fidelity Bond and such Managers
have approved the term and amount of the Fidelity Bond, the
portions of the premium payable by each of the Rydex Funds, the
Rydex Subaccounts, PADCO I, PADCO II, the Servicer, and the PADCO
Plan, and the manner in which recovery of said Fidelity Bond, if
any, shall be shared by and among the parties hereto as set
forth; and
WHEREAS, the Trust, the Rydex Funds, PADCO I, the Separate
Account, the Rydex Subaccounts, PADCO II, the Servicer, and the
PADCO Plan now desire to enter into the agreement required by
Rule 17g-l(f) under the 1940 Act to establish the manner in which
recovery on said Fidelity Bond, if any, shall be shared.
NOW, THEREFORE, IT IS HEREBY AGREED by and among the parties
as follows:
1. Payment of Premiums
PADCO I shall pay twelve percent (12%), PADCO II shall pay
three percent (3%), the Servicer shall pay three percent (3%),
and the Rydex Funds and the Rydex Subaccounts shall pay eighty
percent (80%) of the premium payable under the Fidelity Bond; and
PADCO I also shall pay an additional two percent (2%) of the
premium payable under the Fidelity Bond, which portion of this
premium is attributable to the PADCO Plan, which is administered
by PADCO I. Each of the Rydex Funds and the Rydex Subaccounts
shall pay that percentage of said amount of the premium due under
the Fidelity Bond which is derived by a fraction, (i) the
denominator of which is the total net assets of all the Rydex
Funds and Rydex Subaccounts combined, and (ii) the numerator of
which is the total net assets of each such Rydex Fund or each
such Rydex Subaccount individually.
Each of the Rydex Funds, PADCO I, each of the Rydex
Subaccounts, PADCO II, the Servicer, and the PADCO Plan, agree
that the appropriateness of the allocation of said premium will
be determined jointly by PADCO I and PADCO II (collectively, the
"Advisors") on a monthly basis, subject to approval by both the
Trustees and the Managers of both the Fidelity Bond and this
Allocation Agreement no less often than annually.
2. Allocation of Recoveries
(a) If more than one of the parties hereto is damaged in a
single loss for which recovery is received under the Fidelity
Bond, each such party shall receive that portion of the recovery
which represents the loss sustained by that party, unless the
recovery is inadequate to indemnify fully such party sustaining a
loss.
(b) If the recovery is inadequate to indemnify fully each
such party sustaining a loss, then the recovery shall be
allocated among such parties as follows:
(i) Each such party sustaining a loss shall be
allocated an amount equal to the lesser of that party's actual
loss or the minimum amount of bond which would be required to be
maintained by such party under a single insured bond (determined
as of the time of the loss) in accordance with the provisions of
Rule 17g-l(d)(1) under the 1940 Act.
(ii) The remaining portion of the proceeds shall be
allocated to each such party sustaining a loss not fully covered
by the allocation under subparagraph 2(b)(i), above, in the
proportion that each such party's last payment of premium bears
to the sum of the last such premium payments of all such parties.
If such allocation would result in any party which had sustained
a loss receiving a portion of the recovery in excess of the loss
actually sustained, such excess portion shall be allocated among
the other parties whose losses would not be fully indemnified.
The allocation shall bear the same proportion as each such
party's last payment of premium bears to the sum of the last
premium payments of all parties entitled to receive a share of
the excess. Any allocation in excess of a loss actually
sustained by any such party shall be reallocated in the same
manner.
3. Obligation to Maintain Minimum Coverage
(a) Each of the Rydex Funds and each of the Rydex
Subaccounts represents and warrants to each of the other parties
hereto that the minimum amount of coverage required of each such
Rydex Fund and each such Rydex Subaccount, respectively, shall be
determined as of the date hereof pursuant to the schedule set
forth in paragraph (d)(1) of Rule 17g-1 under the 1940 Act. The
parties hereto agree that the Advisors will determine jointly, no
less than at the end of each calendar quarter, the minimum amount
of coverage which would be required of each of the Rydex Funds
and each of the Rydex Subaccounts by Rule 17g-1(d)(1) if a
determination with respect to the adequacy of the coverage were
currently being made.
(b) In the event that the total amount of the minimum
coverages thus determined exceeds the amount of coverage of the
then-effective Fidelity Bond, the Trustees and the Managers will
be notified and will determine whether it is necessary or
appropriate to increase the total amount of coverage of the
Fidelity Bond to an amount not less than the total amount of such
minimums, or to secure such excess coverage for one or more of
the parties hereto, which, when added to the total coverage of
the Fidelity Bond, will equal an amount of such minimums.
(c) Unless either or both the Trust and the Separate
Account elects to terminate this Agreement (pursuant to Paragraph
4, below) and the Trust's and the Separate Account's respective
participation in a joint-insured bond, each Rydex Fund and each
Rydex Subaccount agrees to pay the Rydex Fund's and the Rydex
Subaccount's respective fair portion of the new or additional
p r e m i um (taking into account all of the then-existing
circumstances).
4. Prior Agreements; Termination
This Agreement shall supersede all prior agreements relating
to an allocation of premium on any joint insured bond and shall
apply to the present Fidelity Bond coverage and any renewal or
replacement thereof. This Agreement shall continue until
terminated by any party hereto upon the giving of not less than
sixty (60) days notice to the other parties hereto in writing.
5. Law Governing
This Agreement is governed by the laws of the State of
Maryland (without reference to such state's conflict of law
rules).
6. 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.
7. 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 each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be duly executed by their duly-authorized officers as
of the date first above written.
ATTEST: RYDEX SERIES TRUST
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx, Xx.
Vice President President
ATTEST: RYDEX SERIES TRUST on behalf of
the RYDEX FUNDS of RYDEX SERIES
TRUST
By: /s/ Xxxxxx X. Xxxxxx By: /s/Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx, Xx.
Vice President President
ATTEST: PADCO ADVISORS, INC.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx, Xx.
Secretary President
ATTEST: RYDEX ADVISOR VARIABLE
ANNUITY ACCOUNT
By : /s/ Xxxxxx X. Xxxxxx By: /s/ L. Xxxxxxx Xxxxxxxxx
Xxxxxx X. Xxxxxx L. Xxxxxxx Xxxxxxxxx
Vice President Vice President
ATTEST: RYDEX ADVISOR VARIABLE ANNUITY
ACCOUNT on behalf of the
RYDEX SUBACCOUNTS of RYDEX
ADVISOR VARIABLE ANNUITY
ACCOUNT
By: /s/ Xxxxxx X. Xxxxxx By: /s/ L. Xxxxxxx Xxxxxxxxx
Xxxxxx X. Xxxxxx L. Xxxxxxx Xxxxxxxxx
Vice President Vice President
ATTEST: PADCO ADVISORS II, INC.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx, Xx.
Secretary President
ATTEST: PADCO SERVICE COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx, Xx.
Secretary President
ATTEST: PADCO 401(k) & PROFIT
SHARING PLAN
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx, Xx.
Vice President PADCO Plan Trustee
PADCO Advisors, Inc.
PADCO Plan Administrator
