EXHIBIT 11(b)
Accounting Services Agreement
Between Rydex Advisor Variable Annuity Account
and PADCO Service Company, Inc.
ACCOUNTING SERVICES AGREEMENT
between
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT
and
PADCO SERVICE COMPANY, INC.
This Agreement, dated the 1st day of November, 1996, made by
and between the RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT (the
"Separate Account"), a managed separate account of the Great
American Reserve Insurance Company ("Great American Reserve")
established under the laws of the State of Texas on April 15,
1996, and organized as an open-end management investment company,
and PADCO Service Company, Inc. (the "Agent"), 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 Agent 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 (the "Separate Account Rules"), have
created the following Subaccounts of the Separate Account: The
Nova Subaccount, The Ursa 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 desires to appoint the Agent
as the Separate Account's Accounting Services Agent and as the
Accounting Services Agent for each of the Subaccounts other than
the Money Market II Subaccount, and desires to have the Agent, as
said Accounting Services Agent, to perform certain accounting and
recordkeeping functions required of a duly-registered investment
company; to file certain financial reports; to maintain and
preserve certain books, accounts, and records as the basis for
s u ch reports; and to perform certain daily functions in
connection with such accounts and records; and
WHEREAS, the Agent 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. Accounts and Records of the Separate Account
a. The Separate Account shall provide to the Agent the
necessary and appropriate documents, information, instructions,
accounts, and records maintained or to be maintained by or for
the Separate Account. The Agent shall be entitled to rely
exclusively on the completeness and correctness of the accounts
and records provided to the Agent by the Separate Account;
provided, that such reliance is made in good faith, and the
Separate Account shall indemnify and hold the Agent harmless of
and from any and all expenses (including, without limitation,
attorneys' and accountants fees), damages, claims, suits,
liabilities, actions, demands, and losses whatsoever arising out
of or in connection with any error, omission, inaccuracy, or
other deficiency of such accounts and records or in connection
with the failure of the Separate Account to provide any portion
of such accounts and records or to provide any information to the
Agent necessary or appropriate to perform the Agent's functions
hereunder.
b. Accounts, records, and other information shall belong
to the Separate Account and shall be considered confidential.
Accounts, records, and other information will not be disclosed to
other than Federal and state regulators without permission from
the Separate Account.
2. Maintenance of Accounts and Records of the Separate Account
a. The Agent shall examine and review the Separate
Account's existing accounts, records, pertinent documents, and
systems in order to determine or recommend how such accounts,
records, documents, and systems shall be maintained.
b. Upon receipt of necessary and appropriate information,
instructions, accounts, records, and documents from the Separate
Account, the Agent shall maintain and keep current and accurate
the following books, accounts, records, journals, or other
records of original entry, relating to the business of the
Separate Account and each of the Subaccounts other than the Money
Market II Subaccount, and necessary or appropriate for compliance
with applicable regulations, including Rule 31a-1 and Rule 31a-2
of the 1940 Act, and as may be mutually agreed to between the
Separate Account and the Agent:
(1) Cash Receipts
(2) Cash Disbursements
(3) Dividend Record
(4) Purchase and Sales of Portfolio Securities
(5) Subscription and Redemption Journals
(6) Security Ledger
(7) Broker Ledger
(8) General Ledger
(9) Daily Expense Accruals
(10) Daily Interest Accruals
(11) Securities and Monies borrowed or loaned and collateral
therefor
(12) Trial Balances
c. Unless appropriate information necessary to perform the
above functions is furnished to the Agent in a timely manner, the
Agent shall incur no liability to the Separate Account or any
other person. The Agent shall promptly notify the Separate
Account in writing of any discrepancy, error or non-compliance in
items (1) through (12) in Section 2(b), above, of which the Agent
has knowledge.
d. It shall be the responsibility of the Separate Account
promptly to furnish the Agent with the declaration, record, and
payment dates and amounts of any dividends or income and any
other special actions taken concerning the portfolio securities
of each of the Subaccounts other than the Money Market II
Subaccount.
e. The Agent shall maintain all accounts and records
mentioned above as required by regulation and as agreed upon
between the Separate Account and the Agent.
3. Accounting Entries and Confirmations
Upon receipt by the Agent of written or oral instructions
from the Separate Account, the Agent shall make proper accounting
e n t xxxx in accordance with Generally Accepted Accounting
Principles and regulations of the Commission. The Separate
Account shall direct that each broker-dealer, or other person
t h r o ugh whom a transaction has occurred, shall send a
confirmation thereof to the Agent. The Agent shall verify this
confirmation against the written or oral instructions when
received from the Separate Account and forward the confirmation
to the Separate Account's custodian (the "Custodian"). The Agent
shall promptly notify the Separate Account of any discrepancy
between the confirmation and the Separate Account's written
instructions when received from the Separate Account but shall
incur no responsibility or liability for such discrepancy. The
Separate Account shall cause any necessary corrections to be made
and shall advise the Agent and the Custodian accordingly.
4. Calculation of Accumulation Unit Value
a. The Agent shall calculate the Accumulation Unit Value
for each of the Subaccounts other than the Money Market II
Subaccount, in accordance with the Separate Account's currently-
effective prospectus, once daily.
b. The Agent shall prepare and maintain a daily evaluation
of securities for which market quotations are available by the
Agent's use of Bloomberg and ILX quotation services; all other
securities shall be evaluated in accordance with the Separate
Account's written instructions, and the Agent shall have no
responsibility or liability for the accuracy of the information
supplied by the Separate Account or provided in the written
instructions.
c. The Separate Account assumes all responsibility for
computation of "amortized cost," valuation of securities, and all
valuations not ascertainable solely by mechanical procedures.
5. Statements From Custodian
At the end of each month, the Agent shall obtain from the
Custodian a monthly statement of cash and portfolio transactions,
which shall be reconciled with the Agent's accounts and records
maintained for the Separate Account. The Agent shall report any
discrepancies to the Custodian, and shall report any unreconciled
items to the Separate Account.
6. Daily and Periodic Reports
The Agent shall supply daily and periodic reports to the
Separate Account, as required by law or regulation, and as
requested by the Separate Account and agreed upon by the Agent.
7. Reports and Confirmations to Subaccount Administration Agent
a. The Separate Account shall report and confirm to the
Separate Account's Subaccount administration agent the (the
"Servicer") all Unit purchases and redemptions for each of the
Subaccounts, other than the Money Market II Subaccount, of which
the Separate Account is aware. The Agent shall obtain from the
Servicer daily reports of Unit purchases, redemptions, and total
Units outstanding for each of the Subaccounts, other than the
Money Market II Subaccount.
b. The Agent shall reconcile outstanding Units for each of
the Subaccounts, other than the Money Market II Subaccount, with
the Servicer periodically and certify at least monthly to the
Separate Account the reconciled Unit balance outstanding for each
of the Subaccounts, other than the Money Market II Subaccount.
8. Review of Accounts and Records of the Separate Account
The accounts and records of the Separate Account maintained
by the Agent shall be the property of the Separate Account, and
shall be made available to the Separate Account, within a
reasonable period of time, upon demand. The Agent shall assist
the Separate Account's independent auditors, and, upon approval
of the Separate Account, or upon demand by any governmental or
q u asi-governmental entity, assist any such entity in any
requested review of the Separate Account's accounts and records,
but shall be reimbursed for all expenses and employee time
invested in any such review outside of routine and normal
periodic reviews. Upon receipt from the Separate Account of the
necessary information, the Agent shall supply the necessary data
for the Separate Account's completion of any necessary tax
returns, questionnaires, periodic reports to unit holders, and
such other reports and information requests as the Separate
Account and the Agent shall agree upon from time to time.
9. Uniform Procedures
The Agent and the Separate Account, from time to time, may
a d opt uniform or standard procedures, and the Agent may
conclusively assume that any procedure approved by the Separate
Account, or directed by the Separate Account, does not conflict
with or violate any requirements of the Separate Account's
prospectus, the Separate Account Rules, or other governing
documents, or any rule or regulation of any regulatory body or
governmental agency. The Separate Account shall be responsible
to notify the Agent of any changes in the Separate Account Rules
which might necessitate changes in the Agent's procedures.
10. Reliance
The Agent may rely upon the advice of the Separate Account
and upon statements of the Separate Account's accountants and
other persons believed by the Agent in good faith to be expert in
matters upon which such persons are consulted, and the Agent
shall not be liable for any actions taken in good faith upon such
statements.
11. Indemnification and Liability
a. The Agent shall not be liable for any action taken in
good faith reliance upon any authorized oral instructions, any
written instructions, any certified copy of any resolution of the
M a nagers of the Separate Account, or any other document
reasonably believed by the Agent to be genuine and to have been
executed or signed by the proper person or persons. The Separate
A c c o unt will send written instructions to confirm oral
instructions, and the Agent will compare the written instructions
against the oral instructions previously furnished. The Agent
w i l l inform the Separate Account promptly of any noted
discrepancy.
b. The Agent shall not be held to have notice of any
change or lack of authority of any officer, employee, or agent of
the Separate Account until receipt of written notification
thereof by the Separate Account.
c. The Separate Account shall indemnify the Agent and hold
the Agent harmless from and against all actions, suits, and
claims, whether groundless or otherwise, arising directly or
indirectly out of or in connection with the Agent'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 Agent in
connection with any such action, suit, or claim unless caused by
the Agent'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 Agent unless the Agent 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 Agent (or after the Agent
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 Agent against whom
such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Agent, 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 Agent shall bear the fees and expenses of any additional
counsel retained by the Agent, and the Agent 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 Agent will promptly notify the Separate
Account of the commencement of any litigation or proceedings
against the Agent in connection with the Contracts or the
operations of the Subaccounts.
d. The Agent shall indemnify the Separate Account and hold
the Separate Account harmless from all actions, suits, damages,
claims, demands, losses, and liabilities (including reasonable
attorneys' and accountants' fees and expenses) incurred or
assessed against the Separate Account arising directly or
indirectly from the Agent's negligence, willful misconduct, or
breach of this Agreement. The Agent shall not be liable under
this indemnification provision with respect to any claim made
against the Separate Account unless the Separate Account shall
have notified the Agent 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 Agent of any such claim shall not relieve the Agent 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 Agent shall be entitled to
participate, at its own expense, in the defense of such action.
The Agent also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action.
After notice from the Agent to such party of the Agent'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 Agent 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 Agent of the
commencement of any litigation or proceedings against the
Separate Account in connection with the Contracts or the
operations of the Subaccounts.
e. The unit holders, Managers, officers, employees, and
agents of the Separate Account shall not be personally bound by
or liable hereunder, nor shall resort be had to such person's
private property for the satisfaction of any obligation or claim
hereunder as provided for in the Separate Account Rules.
12. Compensation
The Separate Account agrees to pay the Agent compensation
for its services and to reimburse the Agent for expenses, as set
forth in Schedule A attached hereto, or as shall be set forth in
amendments to such Schedule approved by the Separate Account and
the Agent.
13. Days of Business
Nothing contained in this Agreement is intended to or shall
require the Agent, in any capacity hereunder, to perform any
functions or duties on any holiday or other day of special
observance on which the New York Stock Exchange is closed.
Functions or duties normally scheduled to be performed on such
days shall be performed on, and as of, the next business day on
which the New York Stock Exchange is open for business.
14. Term of Agreement
This Agreement is effective on the date hereof. This
Agreement shall remain in full force and effect until November 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 Agent 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.
15. Termination
This Agreement may be terminated, without the payment of any
penalty, by either party hereto upon at least ninety (90) 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.
16. Notices
a. Communications to the Agent 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
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 Agent, 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.
17. Governing Law
This Agreement is governed by the laws of the State of
Maryland (without reference to such state's conflict of law
rules).
18. 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.
19. 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 Agent, or by the Agent without
the written consent of the Separate Account, in each case
authorized or approved by a resolution of the Separate Account's
Managers.
20. 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 Agent and the Separate Account effected in
accordance with the provisions of the 1940 Act, and the rules
thereunder, and Section 14 of this Agreement.
IN WITNESS WHEREOF, the Agent 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
PADCO SERVICE COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx, Xx.
President
SCHEDULE A
PADCO SERVICE COMPANY, INC.
FEE SCHEDULE FOR ACCOUNTING SERVICES
RYDEX ADVISOR VARIABLE ANNUITY ACCOUNT - Each Separate Subaccount
A. MINIMUM ANNUAL FEE - (Based upon average net assets -
payable monthly) shall be the greater of:
First Year - $7,500
Second Year - $15,000
Third and Subsequent Years - $20,000
or
Basis Point Fee
10 Basis Points on first $30 million of assets
5 Basis Points on next $20 million of assets
3 Basis Points on next $50 million of assets
2 Basis Points on assets over $100 million
B. In addition, all out-of-pocket expenses shall be separately
charged, shall include but not be limited to: printed
forms, postage, overnight mail and telephone expense.
C. PADCO Service Company, Inc. warrants that the above rates of
compensation are guaranteed for a two-year period. At that
time, the Separate Account acknowledges that the Agent has
the right to revise the Agent's compensation schedule.
