As filed with the Securities and Exchange Commission on February 17, 1999
Registration Nos. 333-21975
811-08057
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
POST-EFFECTIVE AMENDMENT No. 2 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
POST-EFFECTIVE AMENDMENT No. 2 |X|
(Check appropriate box or boxes)
--------------------
THE GUARDIAN SEPARATE ACCOUNT E
(Exact Name of Registrant as Specified in Charter)
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
201 Park Avenue South, New York, New York 10003
(Address of Principal Executive Offices)
Depositor's Telephone Number: (212) 598-8259
RICHARD T. POTTER, JR., Vice President and Counsel
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003
(Name and address of agent for service)
Copy to:
KIMBERLY J. SMITH, ESQ.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
--------------------
------------
It is proposed that this filing will be effective (check appropriate box):
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|_| on May 1, 1999 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|X| on February 17, 1999 pursuant to paragraph (a)(1) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(2) of Rule 485
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
------------------------
The Registrant has registered an indefinite number of its securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The notice required by such rule for the Registrant's most recent
fiscal year was filed on _____________, 1999.
------------
================================================================================
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT E
Cross Reference Sheet to Items In
Registration Statement on Form N-4
<TABLE>
<CAPTION>
Form N-4 Item No. Location
<S> <C> <C>
Part A
Item 1. Cover Page............................................................. Cover
Item 2. Definitions............................................................ Special Terms Used in this
Prospectus
Item 3. Synopsis............................................................... Summary: What is a variable annuity
contract and how does it work?;
Costs and Expenses
Item 4. Condensed Financial Information........................................ Summary Financial Information About
the Separate Account; Performance
Results
Item 5. General Description of Registrant, Depositor and Portfolio
Companies ........................................................... The Guardian Insurance & Annuity
Company, Inc.; Variable Investment
Options; Fixed-Rate Investment Options;
Voting Rights
Item 6. Deductions............................................................. Expenses; Costs and Expenses;
Distribution of the Contracts
Item 7. General Description of Variable Annuity Contracts...................... Summary: What is a variable annuity
contract and how does it work?
Item 8. Annuity Period......................................................... The Annuity Period
Item 9. Death Benefit.......................................................... Death Benefits; Enhanced Death Benefits
Item 10. Purchases and Contract Value........................................... Buying a Contract; the Acccumulation
Period
Item 11. Redemptions............................................................ Surrenders and Partial Withdrawals
Item 12. Taxes.................................................................. Federal Tax Matters
Item 13. Legal Proceedings...................................................... Legal Proceedings
Item 14. Table of Contents of the Statement of Additional Information........... Where to get more Information
Part B
Item 15. Cover Page............................................................. Cover Page
Item 16. Table of Contents...................................................... Table of Contents
Item 17. General Information and History........................................ Not Applicable
Item 18. Services............................................................... Services to the Separate Account
Item 19. Purchase of Securities Being Offered................................... Valuation of Assets of the Separate
Account; Transferability Restrictions
Item 20. Underwriters........................................................... Services to the Separate Account
Item 21. Calculation of Performance Data........................................ Performance Data
Item 22. Annuity Payments....................................................... Annuity Payments
Item 23. Financial Statements................................................... Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
The Guardian Investor Retirement Asset Manager
Variable Annuity Prospectus
dated May 1, 1999
Draft #4 -- February 10, 1999
This prospectus describes an individual Flexible Premium Deferred Variable
Annuity Contract. It contains important information that you should know before
investing in the contract. Please read this prospectus carefully, along with the
accompanying Fund prospectuses, and keep them for future reference.
The contract is issued by The Guardian Insurance & Annuity Company, Inc. (GIAC)
through its Separate Account E (the Separate Account). The contract is designed
to provide tax deferred annuity benefits under retirement programs. It will also
pay a death benefit if the owner or annuitant dies before annuity payments
begin.
The minimum initial premium payment is $500. Your premiums may be invested in up
to six variable investment options or five variable investment options and a
fixed-rate option. Special limits apply to transfers out of the fixed-rate
option. The variable investment options invest in the mutual Funds listed below.
The prospectuses for these Funds are attached.
o The Guardian Stock Fund, Inc.
o The Guardian Bond Fund, Inc.
o The Guardian Cash Fund, Inc.
o GIAC Funds, Inc.
- Baillie Gifford International Fund
- Baillie Gifford Emerging Markets Fund
- The Guardian Small Cap Stock Fund
o Value Line Strategic Asset Management Trust
o Value Line Centurion Fund
o Gabelli Capital Series Funds, Inc.
- Gabelli Capital Asset Fund
o MFS Variable Insurance Trust
- MFS Growth With Income Series
A Statement of Additional Information about the contract and the Separate
Account is available free of charge by writing to GIAC at its Customer Service
Office, P.O. Box 26210, Lehigh Valley, Pennsylvania 18002, or by calling
1-800-221-3253. Its contents are noted on the last page of this prospectus.
The Statement of Additional Information, which is also dated May 1, 1999, is
incorporated by reference into this prospectus.
These Securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor has the Commission
or any state securities commission passed upon the accuracy or adequacy of this
prospectus.
- --------------------------------------------------------------------------------
Page 1 of 44
<PAGE>
The contract is not a deposit or obligation of or guaranteed or endorsed by, any
bank or depository institution, and the contract is not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency, and involves investment risk, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------
Page 2 of 44
<PAGE>
Contents
Summary:
What is a variable annuity contract and how does it work?
o The accumulation period
o The annuity period
o Other contract features
o Expenses
o Deciding to purchase a contract
Expense table
The Guardian Insurance & Annuity Company, Inc.
Buying a contract
o The application form
o Payments
The accumulation period
o How we allocate your premium payments
o The Separate Account
o Variable investment options
o Fixed-rate option
o Transfers
o Surrenders and partial withdrawals
o Managing your annuity
The annuity period
o When annuity payments begin
o How your annuity payments are calculated
o Variable annuity payout options
o Fixed-rate annuity payout options
Other contract features
o Death benefits
o Enhanced death benefits
- --------------------------------------------------------------------------------
Page 3 of 44
<PAGE>
Financial information
o How we calculate unit values
o Summary financial information about the Separate Account
o Contract costs and expenses
o Federal tax matters
o Performance results
Your rights and responsibilities
o Voting rights
o Your right to cancel the contract
o Distribution of the contract
Special terms used in this prospectus
Other information
o Year 2000 compliance
o Legal Proceedings
o Where to get more information
- --------------------------------------------------------------------------------
Page 4 of 44
<PAGE>
Summary:
What is a variable annuity contract and how does it work?
A variable annuity contract allows you to accumulate tax-deferred savings which
are invested in options that you choose. This is the accumulation period of the
contract.
On an agreed date, you or someone else you have named as the annuitant will
start receiving regular payments from the amount you have saved and any
investment earnings. This is the annuity period.
The amount of the annuity payments will depend on earnings during the
accumulation period, and afterward if you select a variable annuity option.
That's why this product is called a variable annuity.
The accumulation period
During the accumulation period, this contract allows you to allocate your net
premium payments and accumulation value to as many as six variable investment
options, or five variable investment options and a fixed-rate option.
When you allocate your premiums to the variable investment options, you bear the
risk of any investment losses. No assurance can be given that the value of the
contract during the accumulation period, or the total amount of annuity payments
made under the contract, will equal or exceed the net premium payments allocated
to the variable investment options. When you allocate your net premium payments
to the fixed-rate option, the contract guarantees that they will earn a minimum
rate of interest and the investment risk is borne by GIAC.
GIAC has established a Separate Account to hold the variable investments in its
annuity contracts. The Separate Account has 10 investment divisions,
corresponding to 10 variable investment options, each of which invests in a
mutual fund. Your net premiums are used to buy accumulation units in the
investment divisions you have chosen, or are allocated to the fixed-rate option.
The total value of your contract's investment in the investment divisions and in
the fixed-rate option is known as the accumulation value. It's determined by
multiplying the number of variable accumulation units credited to your account
in each investment division by the current value of the division's units, and
adding your value in the fixed-rate option.
The value of units in a variable investment division reflects the investment
experience within the division. The value of units in the fixed-rate option
reflects interest accrued at a rate not less than the guaranteed minimum
specified in the contract. For a complete explanation, please see Financial
information: How we calculate unit values.
- --------------------------------------------------------------------------------
Page 5 of 44
<PAGE>
The annuity period
Payments to the annuitant under this contract must begin no later than his or
her 90th birthday. Distributions under the contract are taxable, and if you take
money out of the contract before age 591/2, you may also incur a 10% federal tax
penalty on your earnings.
You may select one or a combination of three annuity payout options under the
contract:
o Life annuity without a guaranteed period
o Life annuity with a 10-year guaranteed period
o Joint and survivor annuity
These payout options are available on either a variable or fixed-rate basis.
They're described in more detail in the section titled The annuity period.
Other contract features
Transfers among investment options
You can make transfers among the variable investment options at any time.
Transfers to and from the fixed-rate option are only permitted during the
accumulation period. Certain restrictions apply to transfers out of the
fixed-rate option. Transfers must also comply with the rules of any retirement
plan that apply. Please see The accumulation period: Transfers.
Death benefits
If you, or another person named as the annuitant, should die before annuity
payments begin, then we pay a death benefit to the beneficiary. The contract
also gives you the option of purchasing a rider that may provide a greater death
benefit. Please see Other contract features: Death benefits.
Surrenders and partial withdrawals
At any time during the accumulation period, you may withdraw some or all of the
amount you have saved in the contract. Taking out all you have saved is known as
a surrender; taking out part of your savings is a partial withdrawal. These
options are not available once annuity payments begin. Please see The
accumulation period: Surrenders and partial withdrawals.
Expenses
The following are expenses that you will incur as a contract owner:
o Operating expenses for mutual Funds comprising the variable investment
options
Management fees and other expenses associated with the Funds ranged from
x.xx% to x.xx% in 1998. Actual charges will depend on the variable
investment options you select.
o Mortality and expense risk charges
1.05% annually of the net asset value of your variable investment options.
- --------------------------------------------------------------------------------
Page 6 of 44
<PAGE>
o Administrative expenses
0.20% annually of the net asset value of your variable investment options.
o Contract fee
An annual fee of $35, if the accumulation value in your contract is less
than $100,000 on your contract's anniversary date.
The following are expenses that you may incur as a contract owner:
o Contingent deferred sales charges
A charge of 1% to 7% against any amount that you withdraw that has been in
your contract for less than seven years. The actual amount will depend on
the number of years the amount has been invested.
o Enhanced death benefit expense
If you choose this benefit, the annual expense is 0.20% of the net asset
value of your variable investment options.
o Annuity taxes
A tax on premiums or annuity payments, applicable in some states and
municipalities only, that varies from 0.5% to 3.5% of premiums paid to the
contract.
Deciding to purchase a contract
You should consider purchasing a variable annuity contract if your objective is
to invest over a long period of time and to accumulate assets on a tax-deferred
basis, generally for retirement. You have the right to examine the contract and
return it for cancellation within 10 days of receiving it. This is known as the
free look period. The period may be longer than 10 days in some states.
Please see Financial information: Summary of financial information about the
Separate Account for more information about Separate Account E and unit values.
Please see Special terms used in this prospectus for definitions of key terms.
- --------------------------------------------------------------------------------
Page 7 of 44
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases: None
Transfer Fee: Currently, none (may charge $25 for each transfer)
Contingent Deferred Sales Charge:
The following charges will be assessed on premiums withdrawn that have been in
the contract for less than 7 contract years.
Number of Contract Years Contingent
Completed from Date of Deferred Sales Charge
the Premium Payment Percentage*
0 .................................................. 7%
1 .................................................. 6%
2 .................................................. 5%
3 .................................................. 4%
4 .................................................. 3%
5 .................................................. 2%
6 .................................................. 1%
7+.................................................. 0%
The maximum contingent sales charge will be equal to 7% of the lesser of (1) the
total of all premium-payments made within 7 contract years (84 months) prior to
the date of request for withdrawal or surrender; or (2) the amount withdrawn or
surrendered.
Annual Contract Fee: $35.00**
Contracts Contracts
without with
Separate Account Level Annual Enhanced Enhanced
Expenses (as a percentage of Death Death
daily net asset value): Benefit Benefit
Mortality & Expense Risk Charge 1.05% 1.05%
Administrative Charge .20% .20%
Enhanced Death Benefit Charge 0% .20%
Total Separate Account Annual Expenses 1.25% 1.45%
- --------------------------------------------------------------------------------
Annual Expenses of the Funds:+
(as a percentage of average net assets after expense reimbursements)
Management Other Total Operating
Fees Expenses Fund Expenses
------------------------------------
The Guardian Cash Fund .50%
The Guardian Bond Fund .50%
The Guardian Stock Fund .50%
The Guardian Small Cap Stock Fund .75%
Baillie Gifford International Fund .80%
Baillie Gifford Emerging Markets Fund 1.00%
Value Line Centurion Fund .50%
Value Line Strategic Asset Management Trust .50%
Gabelli Capital Asset Fund 1.00%
MFS Growth With Income Series++ .75%
- --------------------------------------------------------------------------------
* After the first contract year, you may withdraw in each contract year, without
a deferred sales charge, the greater of: (i) the excess of the accumulation
value on the date of withdrawal over the aggregate net premium payments that
have not been previously withdrawn, or (ii) 10% of the total premium payments
made, minus the aggregate amount of all prior partial withdrawals made in such
contract year. For contracts issued in Section 1035 exchanges,
trustee-to-trustee transfers, in certain IRA transfers or rollovers, or to
Charitable Remainder Trusts, this privilege may also be exercised in the first
contract year.
** Where required by state law, this fee may be lower.
+ These percentages reflect the actual fees and expenses incurred by each Fund
during the year ended December 31, 1998. The percentages for Value Line
Centurion Fund and Value Line Strategic Asset Management Trust reflect (as part
of "Other Expenses" and "Total Fund Operating Expenses") the effects of expense
reimbursement arrangements pursuant to which each of these Funds reimburses GIAC
for certain administrative and shareholder servicing expenses incurred by GIAC
on their behalf.
++ The Adviser of MFS Growth With Income Series has agreed to bear expenses for
the Series, subject to reimbursement by the Series, such that the Series "Other
Expenses" shall not exceed 0.25% of the average daily net assets of the Series
during the current fiscal year. Otherwise, "Other Expenses" and "Total Fund
Operating Expenses" for the Series would be ____ and _____, respectively.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 8 of 44
<PAGE>
The table on the preceding page will assist you in understanding the various
costs and expenses of the Separate Account and its underlying Funds. The
accompanying Fund prospectuses provide a more complete description of the
various costs and expenses.
Comparison of Contract Expenses Among Underlying Funds
(BC=Basic Contract/EDB=With Enhanced Death Benefit)
- --------------------------------------------------------------------------------
If you surrender your contract at the end of the
applicable time period:
----------------------------------------------------
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
----------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
BC EDB BC EDB BC EDB BC EDB
- --------------------------------------------------------------------------------
The Guardian Cash Fund
- --------------------------------------------------------------------------------
The Guardian Bond Fund
- --------------------------------------------------------------------------------
The Guardian Stock Fund
- --------------------------------------------------------------------------------
The Guardian Small Cap
Stock Fund
- --------------------------------------------------------------------------------
Baillie Gifford
International Fund
- --------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund
- --------------------------------------------------------------------------------
Value Line Centurion Fund
- --------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
MFS Growth With Income
Series
- --------------------------------------------------------------------------------
Page 9 of 44
<PAGE>
Comparison of Contract Expenses Among Underlying Funds
(BC=Basic Contract/EDB=With Enhanced Death Benefit)
- --------------------------------------------------------------------------------
If you do not surrender your contract at the end of
the applicable time period:
----------------------------------------------------
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets:
----------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
BC EDB BC EDB BC EDB BC EDB
- --------------------------------------------------------------------------------
The Guardian Cash Fund
- --------------------------------------------------------------------------------
The Guardian Bond Fund
- --------------------------------------------------------------------------------
The Guardian Stock Fund
- --------------------------------------------------------------------------------
The Guardian Small Cap
Stock Fund
- --------------------------------------------------------------------------------
Baillie Gifford
International Fund
- --------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund
- --------------------------------------------------------------------------------
Value Line Centurion Fund
- --------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
MFS Growth With Income
Series
- --------------------------------------------------------------------------------
The comparison above assumes that the expenses incurred during the periods shown
will be the same as those reported in the Expense Table above. The comparison
does not represent past or future expenses. Actual expenses may be higher or
lower than those shown. The effect of the annual contract administration fee was
calculated by: (1) dividing the total contract administration fees for the year
ended December 31, 1998 by total average net assets for the year; (2) adding
this percentage to annual expenses; and (3) calculating the dollar amounts. In
addition, annuity taxes currently imposed by certain states and municipalities
on premium payments will reduce the amount of each premium payment available for
allocation under the contract.
- --------------------------------------------------------------------------------
Page 10 of 44
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
The Guardian Insurance & Annuity Company, Inc. (GIAC) is a stock life insurance
company incorporated in the state of Delaware in 1970. GIAC, which issues the
contracts offered with this prospectus, is licensed to conduct an insurance
business in all 50 states of the United States and the District of Columbia. The
company had total assets of over $x.x billion as of December 31, 1998. Its
financial statements appear in the Statement of Additional Information.
GIAC's executive office is located at 201 Park Avenue South, New York, New York
10003. The mailing address of the GIAC Customer Service Office, which
administers these contracts, is P.O. Box 26210, Lehigh Valley, Pennsylvania
18002.
GIAC is wholly owned by The Guardian Life Insurance Company of America (Guardian
Life), a mutual life insurance company organized in the State of New York in
1860. As of December 31, 1998, Guardian Life had total assets in excess of
$xx.xx billion. Guardian Life does not issue the contracts offered under this
prospectus and does not guarantee the benefits they provide.
- --------------------------------------------------------------------------------
Page 11 of 44
<PAGE>
Buying a contract
The application form
If you would like to buy a contract, you must complete and sign the application
form. You or your agent then must send it, along with your initial premium
payment, by regular U.S. mail to the following address:
The Guardian Insurance & Annuity Company, Inc.
Customer Service Office
P.O. Box 26210
Lehigh Valley, Pennsylvania 18002
If you wish to send your application and payment by certified, registered or
express mail, please address it to:
The Guardian Insurance & Annuity Company, Inc.
Customer Service Office
3900 Burgess Place
Bethlehem, Pennsylvania 18017
Our decision to accept or reject your application is based on administrative
rules such as whether you have completed the form completely and accurately. We
have the right to reject any application or initial premium payment for any
reason.
If we accept your application as received, we will credit your net premium
payment to your new contract within two business days. If your application is
not complete within five business days of our receiving it, we will return it to
you along with your payment.
Payments
We require a minimum initial premium payment of $500. Thereafter, the minimum
additional payment is $100. However, if you purchase a contract through an
employer payroll deduction plan, we will accept purchase payments below $100. We
will not accept an initial premium payment greater than $2,000,000 without prior
permission from an authorized officer of GIAC. Without our written consent,
total flexible premium payments made in any contract year after the first may
not exceed $1,000,000.
- --------------------------------------------------------------------------------
Page 12 of 44
<PAGE>
The accumulation period
How we allocate your premium payments
After we receive your initial premium payment and issue a contract to you, we
will normally credit subsequent net premium payments to your contract on the
same day we receive them, provided we receive them prior to the close of our
regular business day.
If we receive your payment on a non-business day, or after our close, we will
normally credit it on the next business day. If required in your state or
municipality, annuity taxes are deducted from your payment before we credit it
to your contract. We call the amount remaining after this deduction the net
premium payment.
We use your net premium payments to purchase accumulation units in the variable
investment options you have chosen or in the fixed-rate option, according to
your instructions in the application or as later changed. The prices of
accumulation units are set daily because they change along with the share values
of the Funds you invest in. The amount you pay for each unit will be the next
price calculated after we receive and accept your payment.
The value of accumulation units will vary as you earn interest in the fixed-rate
option or as the value of investments rises and falls in the variable investment
options.
You can change your investment option selections by notifying us in writing. We
will apply your new instructions to subsequent net premium payments after we
receive and accept them. Please remember that you cannot invest in more than six
variable investment options, or five variable investment options and the
fixed-rate option at any given time.
The Separate Account
GIAC has established a Separate Account, known as Separate Account E, to receive
and invest your premium payments in the variable investment options. The
Separate Account has 10 investment divisions, corresponding to the 10 Funds
available to you. The performance of each division is based on the Fund in which
it invests.
The Separate Account was established by GIAC on September 26, 1996. It is
registered as a unit investment trust under the Investment Company Act of 1940
(the 1940 Act) and meets the definition of a separate account under federal
securities laws. State insurance law provides that the assets of the Separate
Account equal to its reserves and other liabilities are not chargeable with
GIAC's obligations except those under annuity contracts issued through the
Separate Account. Income, gains and losses of the Separate Account are kept
separate from other income, gains or losses of the contract owner.
- --------------------------------------------------------------------------------
Page 13 of 44
<PAGE>
Each investment division is administered and accounted for as part of the
general business of GIAC. Under Delaware law, the income and capital gains or
capital losses of each investment division, whether realized or unrealized, are
credited to or charged against the assets held in that division according to the
terms of each contract, without regard to other income, capital gains or capital
losses of the other investment divisions or of GIAC. Contract obligations are
GIAC's responsibility. According to Delaware insurance law, the assets of the
Separate Account are not chargeable with liabilities arising out of any other
business GIAC may conduct. Please see Financial Information: Federal tax
matters.
We have the right to make changes to the Separate Account, to the investment
divisions within it, and to the fund shares they hold. These changes must be
made in a manner that is consistent with laws and regulations. When necessary,
we'll use this right to serve your best interests and to carry out the purposes
of the contract. Possible changes to the Separate Account and the investment
divisions include:
o deregistering the Separate Account under the 1940 Act
o operating the Separate Account as a management investment company, or in
another permissible form
o combining two or more Separate Accounts or investment divisions
o transferring assets between investment divisions, or into another Separate
Account, or into GIAC's general account
o modifying the contracts where necessary to preserve the favorable tax
treatment that owners of variable annuities currently receive under the
Internal Revenue Code
o eliminating the shares of any of the Funds and substituting shares of
another appropriate Fund
o adding to or suspending your ability to make allocations or transfers into
any variable investment option or the fixed-rate option.
Variable investment options
You may choose to invest in a maximum of six of the 10 variable investment
options at any time. Each Fund is an open-end diversified management investment
company, registered with the Securities and Exchange Commission under the 1940
Act.
The Funds have different investment objectives which influence their risk and
return. The table below summarizes their main characteristics.
Some Funds have similar investment objectives and policies to other Funds
managed by the same adviser. However, the investment returns of the Funds may be
higher or lower than those of similar funds managed by the same adviser. There
is no assurance, and we make no representation, that the performance of any Fund
will be comparable to the performance of any other fund.
Some of these Funds are available under other separate accounts supporting
variable annuity contracts and variable life insurance policies of GIAC and
other companies. We do not anticipate
- --------------------------------------------------------------------------------
Page 14 of 44
<PAGE>
any inherent conflicts with these arrangements. However, it is possible that
conflicts of interest may arise in connection with the use of the same Funds
under both variable life insurance policies and variable annuity contracts, or
issued by different companies. While the Board of Directors of each Fund
monitors activities in an effort to avoid or correct any material irreconcilable
conflicts of interest arising out of this arrangement, we may also take actions
to protect the interests of our contract owners. See the accompanying Fund
prospectuses for more information about possible conflicts of interest.
- --------------------------------------------------------------------------------
Fund Investment objective(s) Typical investments
- --------------------------------------------------------------------------------
The Guardian Stock Long-term growth of U.S. common stocks
Fund capital
- --------------------------------------------------------------------------------
The Guardian Small Long-term growth of U.S. common stocks of
Cap Stock Fund capital companies with small
market capitalization
- --------------------------------------------------------------------------------
The Guardian Bond Maximum income without Investment grade debt
Fund undue risk of principal; obligations
capital appreciation as a
secondary objective
- --------------------------------------------------------------------------------
The Guardian Cash High level of current Money market instruments
Fund income consistent with
liquidity and
preservation of capital
- --------------------------------------------------------------------------------
Baillie Gifford Long-term capital Common stocks and
International Fund appreciation convertible securities
issued by foreign companies
- --------------------------------------------------------------------------------
Baillie Gifford Long-term capital Common stocks and
Emerging Markets Fund appreciation convertible securities of
emerging market companies
- --------------------------------------------------------------------------------
Value Line Centurion Long-term growth of U.S. common stocks with
Fund capital selections based on
rankings of the Value Line
Ranking System
- --------------------------------------------------------------------------------
Value Line Strategic High total investment U.S. common stocks with
Asset Management return (current income selections based on
Trust and capital appreciation) rankings of the Value Line
consistent with Ranking System, bonds and
reasonable risk money market instruments
- --------------------------------------------------------------------------------
Gabelli Capital Growth of capital; U.S. common stocks and
Asset Fund current income as a convertible securities
secondary objective
- --------------------------------------------------------------------------------
MFS Growth With Reasonable current income Equity securities issued
Income Series and long-term growth of by U.S. and foreign
capital and income companies
- --------------------------------------------------------------------------------
Some of these Funds may not be available in your state.
- --------------------------------------------------------------------------------
Page 15 of 44
<PAGE>
The Funds' investment advisers and their principal business addresses are shown
in the table below.
- --------------------------------------------------------------------------------
Fund Investment Adviser
and Principal Business Address
- --------------------------------------------------------------------------------
The Guardian Stock Fund Guardian Investor Services
The Guardian Small Cap Stock Fund Corporation
The Guardian Bond Fund 201 Park Avenue South
The Guardian Cash Fund New York, New York 10003
- --------------------------------------------------------------------------------
Baillie Gifford International Fund Guardian Baillie Gifford Limited
Baillie Gifford Emerging Markets Fund (Adviser)
Baillie Gifford Overseas Limited
(Sub-adviser)
1 Rutland Court
Edinburgh, Scotland
EH3 8EY
- --------------------------------------------------------------------------------
Value Line Centurion Fund Value Line, Inc.
Value Line Strategic Asset Management Trust 220 East 42nd Street
New York, New York 10017
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580
- --------------------------------------------------------------------------------
MFS Growth With Income Series Massachusetts Financial Services
Company
500 Boylston Street
Boston, MA 02116
- --------------------------------------------------------------------------------
Before investing, please read the accompanying Fund prospectuses carefully. They
contain important information on the investment objectives, policies, charges
and expenses of the Funds.
Fixed-rate option
The fixed-rate option is not registered under the Securities Act of 1933 or as
an investment company under the 1940 Act, and is therefore not subject to the
provisions or restrictions of these Acts. However, the following disclosure
about the fixed-rate option may be subject to certain generally applicable
provisions of the federal securities laws regarding the accuracy and
completeness of statements not in prospectuses. The fixed-rate option may not be
available for allocation in all states in which the contracts are available.
- --------------------------------------------------------------------------------
Page 16 of 44
<PAGE>
In the fixed-rate option, we guarantee that the net premium payments you invest
will earn daily interest at a minimum annual rate of 3%. You can allocate all of
your net premium payments to this option, or you may choose it as one of your
six investment selections. The value of your net premiums invested in the
fixed-rate option does not vary with the investment experience of any Fund. The
money that you put into your fixed-rate option becomes part of GIAC's general
assets.
At certain times we may choose to pay interest at a rate higher than 3%, but we
aren't obliged to do so. Higher interest rates are determined at our discretion
and we can change them prospectively without notice. We don't use a specific
formula to determine interest rates; rather we consider such factors as general
economic trends, current rates of return on our general account investments,
regulatory and tax requirements, and competitive factors. The rate of interest
we pay hasn't been limited by our Board of Directors.
Here are some of the important conditions that apply when we pay interest on
your investments in the fixed-rate option:
o The initial interest rate that we credit to your premiums or transfers
will be whatever rate is in effect on the date the amounts are allocated
to the fixed-rate option.
o This interest rate will continue until the next contract anniversary date.
o At that time, all payments and transfers allocated to the fixed-rate
option during the previous year, together with interest earned, will be
credited with the rate of interest in effect on the renewal date, known as
the renewal rate.
o The renewal rate will be guaranteed until the next contract anniversary
date.
If your state's insurance department permits, your contract may have what's
known as a bailout rate. If the renewal rate set on any contract anniversary
date is less than the bailout rate, you can withdraw all or part of the money
you have invested in the fixed-rate option for one year or more from the
contract without incurring a deferred sales charge.
Sidebar:
- --------------------------------------------------------------------------------
When you buy a contract, please note:
o You can choose up to six investment options at any one time.
o If you select the fixed-rate option, you are limited to an additional five
variable options.
o There are no initial sales charges on the premium payments that you
allocate to the variable investment options. However, there may be premium
tax charges.
o All of the dividends and capital gains distributions that are payable to
variable investment options are reinvested in shares of the applicable
Fund at the current net asset value.
o When the annuity period of the contract begins, we will apply your
accumulation value to a payment option in order to make annuity payments
to you.
o You can arrange to transfer your investments among the divisions by
notifying us in writing or by telephone. Currently, there is no fee for
this, but we reserve the right to charge a fee and to limit the number of
transactions.
o You can change beneficiaries as long as the annuitant is living.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 17 of 44
<PAGE>
Transfers
You can transfer money between variable investment options both before and after
the date annuity payments begin. You can also transfer to and from the
fixed-rate option, but only before the date annuity payments begin. Transfers
are subject to certain conditions, which are described below.
If you are considering a transfer, be sure to look into each option carefully
and make sure your decisions will help you to achieve your long-term investment
goals.
During the accumulation period and up to 30 days before the date annuity
payments are scheduled to begin, you can transfer all or part of your
accumulation value among the contract options. These transfers are subject to
the following rules:
o We permit transfers from the fixed-rate option to any variable investment
option only once each contract year, during the 30 days beginning on the
contract anniversary date. There is an exception for the dollar cost
averaging feature: amounts that have been on deposit in the fixed-rate
option longest will be transferred out first. The maximum yearly transfer
from the fixed-rate option is the greater of the following:
- 33 1/3% of the amount in the fixed-rate option on the applicable
contract anniversary date or
- $10,000, or
- the total dollar amount transferred from the fixed-rate option in
the previous contract year multiplied by 1.15
o Each transfer involving the variable investment options will be based on
the accumulation unit value that is next calculated after we have received
proper transfer instructions from you.
We will implement a transfer upon receiving your written or telephone
instructions in good order. If your request reaches our customer service office
before 3:30 p.m. Eastern time on a business day, we will normally implement it
that same day.
We have the right to limit the frequency of transfers to not more than once
every 30 days.
At this time, we do not charge for transfers; however, we do have the right to
impose a fee of up to $25 per transfer. We will deduct any transfer charges on a
pro-rata basis from the options you transfer from.
We require proper authorization to honor telephone transfer instructions. If you
would like this privilege, please complete a transfer authorization form, or
give us authorization on your application. Once we have your authorization on
file, you can carry out a telephone transfer by calling 1-800-533-0099 between
9:00 a.m. and 3:30 p.m. Eastern time on any business day when we are open.
- --------------------------------------------------------------------------------
Page 18 of 44
<PAGE>
During periods of drastic economic or market changes it may be difficult to
contact us to request a telephone transfer. At such times, please send your
transfer request by regular or express mail and we will process it using the
accumulation unit value first calculated after we receive the request. We have
the right to modify, suspend or discontinue telephone transfer privileges at any
time without prior notice.
Sidebar:
- --------------------------------------------------------------------------------
Note: When you call us, we will require identification of your contract as well
as your personal security code. We may accept transfer instructions from anyone
who can provide us with this information. Neither GIAC, Guardian Investor
Services Corporation, nor the Funds will be liable for any loss, damage, cost or
expense resulting from a telephone transfer we reasonably believe to be genuine.
As a result, you assume the risk of unauthorized or fraudulent telephone
transfers. We may record telephone conversations regarding transfers without
disclosure to the caller.
- --------------------------------------------------------------------------------
After the date annuity payments begin, if you have a variable annuity option you
can transfer all or part of the value of your annuity among the variable
investment options only once each calendar year. No fixed-rate option transfers
are permitted.
Surrenders and partial withdrawals
During the accumulation period and while the annuitant and all contract owners
are living, you can redeem your contract in whole. This is known as surrendering
the contract. If you redeem part of the contract, it's called a partial
withdrawal. We will not accept requests for surrenders or partial withdrawals
after the date annuity payments begin.
Your request for surrenders and partial withdrawals must be received in good
order. If you wish to surrender your contract, you must send us the contract or
we will not process the request. If you have lost the contract, we will require
an acceptable affidavit of loss.
To process a partial withdrawal, we will redeem enough accumulation units to
equal the dollar value of your request. When you surrender your contract, we
redeem all the units. For both transactions we use the unit value next
calculated after we receive a proper request from you. We will deduct any
applicable contract charges and deferred sales charges from the proceeds of a
surrender. In the case of a partial withdrawal, we will cash additional units to
cover these charges. If you have less than $500 left in your contract after a
partial withdrawal, we have the right to cancel the contract and pay you the
balance of the proceeds. This is called an involuntary surrender and it may be
subject to any applicable contract charges and a deferred sales charge. Please
see Financial information: Federal tax matters.
Surrenders and partial withdrawals are subject to tax, and may be subject to
penalty taxes and mandatory federal income tax withholding. After the first
contract year, you are allowed to make an annual withdrawal from the contract
without paying a deferred sales charge in the following circumstances:
- --------------------------------------------------------------------------------
Page 19 of 44
<PAGE>
o If, on the date of withdrawal, the accumulation value is greater than the
total of the net premium payments that you have made (and not withdrawn),
you may withdraw the excess, or if greater,
o You may withdraw 10% of the total premium payments you have made, minus
the total of all the withdrawals you already made during that contract
year.
This withdrawal privilege can be exercised in the first contract year of the
following contracts:
o trustee-to-trustee transfers
o Section 1035 exchanges
o IRA transfers
o rollovers from annuity contracts
o Charitable Remainder Trusts.
Unless you are making a withdrawal directly from the fixed-rate option in
accordance with the bailout provisions, we will cash accumulation units in the
following order:
o all variable accumulation units attributable to the investment divisions;
this will be done on a pro-rata basis unless you instruct us differently,
then
o all fixed accumulation units attributable to the fixed-rate option.
We will send you your payment within seven days of receiving a request from you
in good order. Please see the margin note Payments later in this section.
Sidebar:
- --------------------------------------------------------------------------------
Note: There are special restrictions on withdrawals from contracts issued in
connection with Section 403(b) qualified plans. Please see Financial
information: Federal tax matters for details about how withdrawals can be made
from these contracts.
- --------------------------------------------------------------------------------
If you have a question about surrenders or withdrawals, please call us toll free
at 1-800-221-3253.
Managing your annuity
You may wish to take advantage of one of the programs we offer to help you build
a stronger annuity. These include dollar cost averaging and portfolio
rebalancing.
There is no fee for dollar cost averaging or portfolio rebalancing, but we have
the right to introduce one. We also have the right to modify or discontinue
these programs. We'll give you written notice if we do so.
- --------------------------------------------------------------------------------
Page 20 of 44
<PAGE>
Dollar Cost Averaging
You can transfer specific amounts of money from one investment option to another
on a monthly basis, as opposed to investing the total amount at one time. This
approach may help lower your average dollar cost of investing over time.
However, there is no guarantee that dollar cost averaging will result in profits
or prevent losses.
If you wish to take advantage of this program, you must designate a dollar
amount to be transferred automatically out of either the Cash Fund investment
division or the fixed-rate option, but not from both. The money can go into one
or more of the other variable investment options or the fixed-rate option. The
rule still applies that you can invest in a maximum of only six options at one
time (this includes the required Cash Fund or fixed-rate option).
You can begin dollar cost averaging when you buy your contract or at any time
afterwards, until annuity payments begin, by completing the dollar cost
averaging election form and returning it to us. We must receive it in good order
at least three business days before the monthly anniversary date of when you
wish the transfers to begin.
You may select dollar cost averaging from the Cash Fund investment division for
periods of 12, 24 or 36 months. Dollar cost averaging from the fixed-rate option
may only be selected for a 36 month period. Your total accumulation value at the
time must be at least $10,000 for transfers over a 12-month period, and $20,000
for transfers over a 24 to 36 month period. Transfers will be made in the
amounts you designate and must be at least $100 per receiving contract
investment option.
Portfolio Rebalancing
Over time, you may find that the investment performance of certain Funds results
in a shift in your holdings beyond the percentage you originally allocated. If
this occurs, you may wish to use our portfolio rebalancing program to maintain a
desired asset allocation mix. If you choose, we will automatically transfer
amounts among your variable investment options to return them to the designated
percentages. We will process these transfers quarterly. To participate in this
program you must have an accumulation value of at least $10,000.
- --------------------------------------------------------------------------------
Page 21 of 44
<PAGE>
Sidebar:
- --------------------------------------------------------------------------------
Payments
For all transactions, we can delay payment if the contract is being contested.
We may postpone any calculation or payment based on investment performance in
the investment divisions if:
o the New York Stock Exchange is closed for trading or trading has been
suspended, or
o the Securities and Exchange Commission restricts trading or determines
that a state of emergency exists which may make payment or transfer
impracticable
Assigning contract interests
If the contract is part of a corporate retirement plan or an individual plan
under sections 401(a), 403(b) or 408 of the Internal Revenue Code, the contract
owner's interest in the contract cannot be assigned, unless the contract owner
is not the annuitant or the annuitant's employer. Assigned contract interests
may be treated as a taxable distribution to the contract owner. See Federal tax
matters for more information.
Reports
At least twice each year, we send a report to each contract owner that contains
financial information about the Separate Account, according to applicable laws,
rules and regulations. Additionally, at least once each year, we send a
statement to each contract owner that reports the number of accumulation units
and their value under the contract.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 22 of 44
<PAGE>
The annuity period
When annuity payments begin
You choose the month and year in which we will begin paying annuity benefits.
The first payment is made on the first day of the month. The date you choose
can't be later than the annuitant's 90th birthday, unless we have agreed. Please
note that this date may be determined by the retirement plan under which your
annuity contract was issued.
How your annuity payments are calculated
Your annuity payments will be fixed, variable or a combination of both,
depending on whether you have chosen a fixed-rate or a variable rate payment
option. Your payments are determined by the following:
o the table in your contract reflecting the nearest age of the annuitant
o the annuity payout option you choose
o the investment returns of the variable investment options you choose, if
you choose a variable payment option.
The number and amount of your annuity payments won't be affected by the
longevity of annuitants as a group. Nor will they be affected by an increase in
our expenses over the amount we have charged in your contract.
We will make annuity payments once a month, except as follows:
o Proceeds of less than $2,000 will be delivered in a single payment.
o We may change the schedule of installment payments to avoid payments of
less than $20.
If you choose a variable annuity payment, or a combination of variable and fixed
payments, variable annuity payments assume a 4% annual investment return. We
compare the assumed rate of 4% to the actual returns of the variable investment
options you have chosen:
o if the actual net annual return on investment equals 4% -- the amount of
your variable annuity payments will not change
o if the actual net annual return on investment is greater than 4% -- the
amount of your variable annuity payments will increase
o if the actual net annual return on investment is less than 4% -- the
amount of your variable annuity payments will decrease.
- --------------------------------------------------------------------------------
Page 23 of 44
<PAGE>
Variable annuity payout options
The payout options currently offered are discussed below. You can choose to have
annuity payments made under any one or a combination of the variable or
fixed-rate annuity payout options that are available. You can make your choice
at any time before your annuity payments begin. At any time, we may discontinue
any of these options or make additional options available.
All variable annuity payout options are designated with the letter "V." After
the first payment, the amount of variable annuity payments will increase or
decrease to reflect the value of your variable annuity units. The value of the
units will reflect the performance of the variable investment options chosen.
This is why the amount of each payment will vary.
There are a variety of payout options for you to choose from that we've
described below. If you do not make a choice, we will automatically select
Option V-2. You may change options if you wish, provided you do so before
payments begin.
Option V-1 - Life Annuity without Guaranteed Period
We make a payment once a month during the annuitant's lifetime, ending with the
payment preceding the annuitant's death. This option allows for the maximum
variable monthly payment because there is neither a guaranteed minimum number of
payments nor a provision for a death benefit for beneficiaries. It is possible
that an annuitant could receive only one payment, if he or she dies before the
date of the second payment.
Option V-2 - Life Annuity with 10-Year Guaranteed Period
We make a payment once a month during the annuitant's lifetime, but if the
annuitant dies before receiving 10 years worth of payments (120), the remaining
payments will be made to the beneficiary. The beneficiary can then choose to
take all or part of the remaining payments in a lump sum at their current dollar
value. If the beneficiary dies while receiving the payments, the balance will be
paid in one sum at its current dollar value to the beneficiary's estate.
Option V-3 - Joint and Survivor Annuity
We make a payment once a month during the joint lifetimes of the annuitant and a
designated second person, the joint annuitant. If one dies, payments will
continue during the survivor's lifetime, but the amount of the payment will then
be reduced to two-thirds of the number of units paid out each month when both
parties were alive. It is possible that the joint annuitants could receive only
one payment if they both die before the date of the second payment.
Fixed-rate annuity payout options
All Fixed Annuity Payout Options are designated by the letter "F."
Option F-1 - Life Annuity without Guaranteed Period
We make a fixed payment once a month during the annuitant's lifetime, ending
with the payment preceding the annuitant's death. This option offers the maximum
fixed payment because there is
- --------------------------------------------------------------------------------
Page 24 of 44
<PAGE>
neither a guaranteed minimum number of fixed monthly payments nor a provision
for a death benefit for beneficiaries. It is possible that the annuitant could
receive only one payment if he or she dies before the date of the second
payment.
Option F-2 - Life Annuity with 10-Year Guaranteed Period
We make a fixed payment once a month during the annuitant's lifetime, but if the
annuitant dies before receiving 10 years worth of payments (120), the remaining
payments will be made to the beneficiary. The beneficiary can then choose to
take all or part of the remaining payments in a lump sum at their current dollar
value. If the beneficiary dies while receiving the payments, the balance will be
paid in one sum at its current dollar value to the beneficiary's estate.
Option F-3 - Joint and Survivor Annuity
We make a fixed payment once a month during the joint lifetimes of the annuitant
and a designated second person, the joint annuitant. If one dies, payments will
continue during the survivor's lifetime, but the amount of the payment will then
be reduced to two-thirds of the number of units paid out each month when both
parties were alive. It is possible that the joint annuitants could receive only
one payment if they both die before the date of the second payment.
Other contract features
Death benefits
If you, or the annuitant you have named, dies before the date annuity payments
begin, we pay a death benefit. In addition, you have the option of buying an
enhanced death benefit rider which may provide a higher death benefit.
The regular death benefit is the greater of:
o The accumulation value of the contract at the end of the valuation period
during which we receive proof of death, minus any annuity taxes; or
o The total of all premiums paid, minus any partial withdrawals, any
deferred sales charges paid on any withdrawals and any annuity taxes.
For annuitants aged 75 or older on the contract's issue date, the death benefit
will be the accumulation value at the end of the valuation period during which
we receive proof of death, minus any annuity taxes.
We normally pay the death benefit within seven days of receiving in good order
proof of death. However, we have the right to defer the payment of other
contract benefits under certain circumstances. These are described under
Surrenders and partial withdrawals.
If the annuitant is not the contract owner and dies on or before the date that
annuity payments begin, we will pay the death benefits to the beneficiary. If
the beneficiary has also died, we will pay the benefits to the contingent
beneficiary. If a contingent beneficiary hasn't been named, then
- --------------------------------------------------------------------------------
Page 25 of 44
<PAGE>
we will pay the benefits to you, the contract owner. However, if you are no
longer living, we will pay the benefits to your estate.
If you are both the annuitant and the owner of the contract, and you die before
the date annuity payments begin, we will pay the death benefit to your
beneficiary, as described above. However, we must distribute your interest
according to the Special requirements outlined below. In this situation, your
beneficiary will become the new owner of the contract.
We will pay the death benefit in a lump sum unless:
o You have chosen a different annuity payout option for the death benefit.
We must receive notification of your choice at least three business days
before we pay out the proceeds.
o You, the contract owner, have not chosen a payout option and the
beneficiary has. Again, we must receive the beneficiary's request at least
three business days before we pay out the proceeds, and within a year of
the annuitant's death.
If you are a contract owner but not the annuitant, and you die before the date
annuity payments begin, then any joint contract owner will become the new owner
of the contract. If you haven't named a joint contract owner, then your
beneficiary will become the new owner of the contract. In the event of any
contract owner's death, we must distribute all of the owner's interest in the
contract according to the Special requirements outlined below.
Special requirements
If the contract owner dies, the following rules apply.
If the beneficiary (or the sole surviving joint contract owner) is not your
spouse, and you die before the date annuity payments begin, then we must
distribute all of your interest in the contract within five years of your death.
These distribution requirements will be satisfied if any portion of the deceased
contract owner's interest:
o is payable to, or for the benefit of, any new contract owner, and
o will be distributed over the new contract owner's life, or over a period
not extending beyond the life expectancy of any new contract owner.
Under the above conditions, distributions must begin within one year of your
death.
If the beneficiary (or sole surviving joint contract owner) is your spouse, he
or she can continue the contract, assuming the role of contract owner.
If the owner of the contract is not an individual, then the primary annuitant
will be treated as the owner of the contract. In this situation, any change in
the annuitant will be treated as the death of the contract owner.
- --------------------------------------------------------------------------------
Page 26 of 44
<PAGE>
Sidebar:
- --------------------------------------------------------------------------------
Please note that the primary annuitant is determined in accordance with Section
72(s) of the Internal Revenue Code, which states that he or she is the person
the events in the life of whom are of primary importance in affecting the timing
or amount of the payout under the contract.
- --------------------------------------------------------------------------------
Enhanced death benefits
When you buy your contract, you can choose to buy an enhanced death benefit
rider. You will pay a daily charge for this rider based on an annual rate of
0.20% of the net assets of your variable net investment options. We may offer
this rider to existing contract owners in the future.
If a death benefit is payable under this option, the beneficiary will either
receive the death benefit described above or the enhanced death benefit,
whichever is greater.
The enhanced death benefit is calculated as follows:
o The accumulation value of the contract at the end of the reset date*
immediately preceding the annuitant's death:
- Plus any premiums paid after the reset date
- Minus any partial withdrawals after the reset date
- Minus any deferred sales charges and annuity taxes.
* The first reset date is on the seventh contract anniversary date. After
this, each reset date will be each seventh contract anniversary date after
that (i.e., the 14th, 21st and 28th contract anniversaries, and so on.)
We will terminate the enhanced death benefit rider on the earliest of the
following dates:
o the date the enhanced death benefit is paid out
o the date the contract terminates
o the date of the annuitant's 85th birthday
o the date annuity payments begin
o the date we receive a written termination request from you.
Once the rider is terminated, it cannot be reinstated.
- --------------------------------------------------------------------------------
Page 27 of 44
<PAGE>
Financial information
How we calculate unit values
When you choose a variable investment option, you accumulate variable
accumulation units. With the fixed-rate option, you accumulate fixed
accumulation units. To calculate the number of accumulation units you buy with
each payment, we divide the amount you invest in each option by the value of
units in the option. We use the unit value next calculated after we have
received and accepted your payment. We calculate unit values at the close of
business of the New York Stock Exchange, usually at 4:00 p.m. Eastern time, each
day the Exchange is open for trading and GIAC is open for business.
To determine the value of your account, we multiply the number of accumulation
units in each option by the current unit value for the option.
We determine the value of a fixed accumulation unit by adding together its value
at the end of the preceding valuation period and any interest credited to the
unit since the end of that period.
We determine the value of a variable accumulation unit by multiplying its value
at the end of the preceding valuation period by the net investment factor for
the current valuation period.
The net investment factor is a measure of the investment experience of each
variable investment option. We determine the net investment factor for a given
valuation period as follows:
o At the end of the valuation period we add together the net asset value of
a Fund share and its portion of dividends and distributions made by the
Fund during the period
o We divide this total by the net asset value of the particular Fund share
calculated at the end of the preceding valuation period
o Finally we add up the daily charges (mortality and expense risks,
administrative expenses, any annuity taxes, and the enhanced death benefit
rider where applicable) and subtract them from the above total.
Summary financial information about the Separate Account
The following condensed financial information is derived from the financial
statements of Separate Account E, which were audited by PricewaterhouseCoopers
LLP, independent accountants, for the year ended December 31, 1998. The data
should be read in conjunction with the financial statements, related notes and
other financial information from the Separate Account's 1998 Annual Report to
contract owners which are incorporated by reference into the Statement of
Additional Information. A copy of the 1998 Annual Report to contract owners and
the Statement of Additional Information may be obtained by calling or writing
GIAC's Customer Service Office. The address and phone number appear on the cover
of this Prospectus.
- --------------------------------------------------------------------------------
Page 28 of 44
<PAGE>
Summary financial information about the Separate Account
Selected data for accumulation units of the Separate Account outstanding at the
end of each period.
Tax qualified and non-tax qualified: Basic contract
<TABLE>
<CAPTION>
Period from:
Year ended September 15, 1997*
Variable accumulation unit value at beginning of period ($): December 31, 1998 to December 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Guardian Cash Fund 10.00
The Guardian Stock Fund 10.00
The Guardian Bond Fund 10.00
The Guardian Small Cap Stock Fund 10.00
Gabelli Capital Asset Fund 10.00
Baillie Gifford International Fund 10.00
Baillie Gifford Emerging Markets Fund 10.00
Value Line Centurion Fund 10.00
Value Line Strategic Asset Management Trust 10.00
MFS Growth With Income Series 10.00
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Period from:
Year ended September 15, 1997*
Variable accumulation unit value at end of period ($): December 31, 1998 to December 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Guardian Cash Fund 10.12
The Guardian Stock Fund 10.43
The Guardian Bond Fund 10.29
The Guardian Small Cap Stock Fund 10.32
Gabelli Capital Asset Fund 11.00
Baillie Gifford International Fund 9.68
Baillie Gifford Emerging Markets Fund 8.43
Value Line Centurion Fund 9.68
Value Line Strategic Asset Management Trust 10.25
MFS Growth With Income Series 10.55
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations of the Separate Account.
- --------------------------------------------------------------------------------
Page 29 of 44
<PAGE>
Tax-qualified
<TABLE>
<CAPTION>
Period from:
Number of variable accumulation units outstanding at Year ended September 15, 1997*
end of period (tax qualified): December 31, 1998 to December 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Guardian Cash Fund 117,109
The Guardian Stock Fund 510,354
The Guardian Bond Fund 31,534
The Guardian Small Cap Stock Fund 107,489
Gabelli Capital Asset Fund 36,094
Baillie Gifford International Fund 2,078
Baillie Gifford Emerging Markets Fund 9,425
Value Line Centurion Fund 26,187
Value Line Strategic Asset Management Trust 113,253
MFS Growth With Income Series 54,050
- ---------------------------------------------------------------------------------------------------------
Non-tax qualified
<CAPTION>
Period from:
Number of variable accumulation units outstanding at Year ended September 15, 1997*
end of period (non-tax qualified): December 31, 1998 to December 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Guardian Cash Fund 119,085
The Guardian Stock Fund 630,297
The Guardian Bond Fund 49,464
The Guardian Small Cap Stock Fund 122,412
Gabelli Capital Asset Fund 24,087
Baillie Gifford International Fund 30,500
Baillie Gifford Emerging Markets Fund 22,501
Value Line Centurion Fund 38,898
Value Line Strategic Asset Management Trust 127,877
MFS Growth With Income Series 62,952
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations of the Separate Account.
- --------------------------------------------------------------------------------
Page 30 of 44
<PAGE>
Tax qualified and non-tax qualified: Contract with enhanced death benefit
<TABLE>
<CAPTION>
Period from:
Year ended September 15, 1997*
Variable accumulation unit value at beginning of period ($): December 31, 1998 to December 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Guardian Cash Fund 10.00
The Guardian Stock Fund 10.00
The Guardian Bond Fund 10.00
The Guardian Small Cap Stock Fund 10.00
Gabelli Capital Asset Fund 10.00
Baillie Gifford International Fund 10.00
Baillie Gifford Emerging Markets Fund 10.00
Value Line Centurion Fund 10.00
Value Line Strategic Asset Management Trust 10.00
MFS Growth With Income Series 10.00
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
7
Period from:
Year ended September 15, 1997*
Variable accumulation unit value at end of period ($): December 31, 1998 to December 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Guardian Cash Fund 10.11
The Guardian Stock Fund 10.43
The Guardian Bond Fund 10.29
The Guardian Small Cap Stock Fund 10.31
Gabelli Capital Asset Fund 10.99
Baillie Gifford International Fund 9.68
Baillie Gifford Emerging Markets Fund 8.42
Value Line Centurion Fund 9.67
Value Line Strategic Asset Management Trust 10.24
MFS Growth With Income Series 10.55
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations of the Separate Account.
- --------------------------------------------------------------------------------
Page 31 of 44
<PAGE>
Tax qualified
<TABLE>
<CAPTION>
Period from:
Number of variable accumulation units Year ended September 15, 1997*
Outstanding at end of period: December 31, 1998 to December 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Guardian Cash Fund 158,925
The Guardian Stock Fund 701,284
The Guardian Bond Fund 31,666
The Guardian Small Cap Stock Fund 153,256
Gabelli Capital Asset Fund 60,886
Baillie Gifford International Fund 54,339
Baillie Gifford Emerging Markets Fund 40,867
Value Line Centurion Fund 38,125
Value Line Strategic Asset Management Trust 155,638
MFS Growth With Income Series 23,702
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Period from:
Number of variable accumulation units Year ended September 15, 1997*
Outstanding at end of period: December 31, 1998 to December 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C>
The Guardian Cash Fund 92,588
The Guardian Stock Fund 334,605
The Guardian Bond Fund 13,542
The Guardian Small Cap Stock Fund 82,383
Gabelli Capital Asset Fund 9,072
Baillie Gifford International Fund 18,732
Baillie Gifford Emerging Markets Fund 6,163
Value Line Centurion Fund 7,955
Value Line Strategic Asset Management Trust 62,852
MFS Growth With Income Series 53,104
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations of the Separate Account.
- --------------------------------------------------------------------------------
Page 32 of 44
<PAGE>
Contract costs and expenses
The amount of a charge may not strictly correspond to the costs of providing the
services or benefits indicated by the name of the charge or related to a
particular contract. For example, the contingent deferred sales charge may not
fully cover all of the sales and distribution expenses actually incurred by
GIAC, and proceeds from other charges, including the mortality and expense risk
charge, may be used in part to cover these expenses.
No sales charges are deducted from your premium payments when you make them.
However, the following charges do apply:
Expenses of the Funds
The Funds you choose through your variable investment options have their own
management fees and general operating expenses. The deduction of these fees and
expenses is reflected in the per-share value of the Funds. They are fully
described in the Funds' prospectuses.
Mortality and expense risk charge
You will pay a daily charge based on an annual rate of 1.05% of the net assets
of your variable investment options to cover our mortality and expense risks.
Mortality risks arise from our promise to pay death benefits and make annuity
payments to each annuitant for life. Expense risks arise from the possibility
that the amounts we deduct to cover sales and administrative expenses may not be
sufficient.
Administrative expenses
You will also pay a daily charge based on an annual rate of 0.20% of the net
assets of your variable investment options for our administrative expenses.
Contract fee
We deduct a yearly fee of $35 on each anniversary date of your contract. To pay
this charge, we will cancel the number of accumulation units that is equal in
value to the fee. We cancel accumulation units in the same proportion as the
percentage of the contract's accumulation value attributable to each variable
investment option and the fixed-rate option. If you surrender your contract
before the contract anniversary date, we will still deduct the contract fee for
that year. We will waive the contract fee if the accumulation value is $100,000
or more on the anniversary date of your contract.
In addition, the following charges may apply:
Contingent deferred sales charge
If you make a partial withdrawal from your account or surrender your contract,
you will pay a deferred sales charge on any amount that has been in your
contract for less than seven contract years. This charge compensates us for
expenses related to the sale of contracts. These include commissions to
registered representatives, as well as promotional expenses.
- --------------------------------------------------------------------------------
Page 33 of 44
<PAGE>
When we calculate the deferred sales charge, all amounts taken out are assumed
to come from the oldest premium. We do this to minimize the amount you owe.
Deferred sales charges are listed in the table below.
Number of contract years completed Deferred
from the date of premium payment sales charge (%)
0....................................... 7
1....................................... 6
2....................................... 5
3....................................... 4
4....................................... 3
5....................................... 2
6....................................... 1
7+...................................... 0
The deferred sales charge percentage is applied to the lesser of:
o the premium payments you have made within seven contract years (84 months)
before the date of your request for the withdrawal or surrender; or
o the amount withdrawn or surrendered.
We don't impose deferred sales charges on contracts bought by:
o Guardian Life, its subsidiaries or any of their separate accounts
o present or retired directors, officers, employees, general agents, or
field representatives of Guardian Life or its subsidiaries
o present or retired directors or officers of any of the Funds present and
retired directors, trustees, officers, partners, registered
representatives and employees of broker-dealer firms that have written
sales agreements with Guardian Investor Services Corporation
o immediate family members of the individuals named above, based on their
status at the time the contract was purchased, limited to their:
- spouses
- children and grandchildren
- parents and grandparents
- brothers and sisters
o trustees or custodians of any employee benefit plan, IRA, Keogh plan or
trust established for the benefit of persons named in the second and third
bullets above
o clients of broker-dealers, financial institutions and registered
investment advisers that have entered into an agreement with GIAC to
participate in fee-based wrap accounts or similar programs to purchase
contracts.
- --------------------------------------------------------------------------------
Page 34 of 44
<PAGE>
Enhanced death benefit expenses
If you choose the enhanced death benefit and it is in effect, you will pay a
daily charge based on an annual rate of 0.20% of the net assets of your variable
investment options.
Annuity taxes
Some states and municipalities may charge annuity taxes when premium payments
are made or when you begin to receive annuity payments. These taxes range from
about 0.5% to 3.5% of your premium payments. We may deduct the annuity tax
either from your premium payment when made, or from the annuity payments on the
date annuity payments begin, depending on state laws.
In jurisdictions where the annuity tax is incurred when a premium payment is
made, we reserve the right to pay the annuity tax on your behalf and then deduct
the same amount from the value of your contract when you surrender it, or on
your death, or on the date annuity payments begin, whichever is first. We will
do this only if permitted by applicable law.
Transfer charge
Currently, we do not charge for transfers. However, we reserve the right to
charge up to $25 for each transfer. We will deduct this charge on a proportional
basis from the options from which amounts are transferred.
Federal tax matters
The following summary provides a general description of the Federal income tax
considerations associated with the contract. It is not intended to be complete
or to cover all tax situations. This summary is not intended as tax advice. You
should consult a tax adviser for more complete information. This summary is
based on our understanding of the present Federal income tax laws. We make no
representation as to the likelihood of continuation of the present Federal
income tax laws or as to how they may be interpreted by the Internal Revenue
Service (IRS).
We believe that our contracts will qualify as annuity contracts for Federal
income tax purposes and the following summary assumes so. Further details are
available in the Statement of Additional Information, under the heading Tax
Status of the Contracts.
When you invest in an annuity contract, you usually don't pay taxes on your
investment gains until you withdraw the money -- generally for retirement
purposes. In this way, annuity contracts have been recognized by the tax
authorities as a legitimate means of deferring tax on investment income.
We believe that if your are a natural person you won't be taxed on increases in
the accumulation value of a contract until a distribution occurs or until
annuity payments begin. For these purposes, the agreement to assign or pledge
any portion of a contact's accumulation value and, in the case of a qualified
contract (described below) any portion of an interest in the qualified plan
generally will be treated as a distribution.
- --------------------------------------------------------------------------------
Page 35 of 44
<PAGE>
When annuity payments begin, you will be taxed only on the investment gains you
have earned and not on the payments you made to purchase the contract.
Generally, withdrawals from your annuity should only be made once the annuitant
reaches age 591/2, dies or is disabled, otherwise a 10% tax penalty is applied
against any amounts included in income.
If you invest in a variable annuity as part of a pension plan or
employer-sponsored retirement program, your contract is called a qualified
contract. If your annuity is independent of any formal retirement or pension
plan, it is termed a non-qualified contract.
Taxation of non-qualified contracts
Non-natural person - If a non-natural person owns a non-qualified annuity
contract, the owner generally must include in income any increase in the excess
of the accumulation value over the investment in the contract (generally, the
premiums or other consideration paid for the contract) during the taxable year.
There are some exceptions to this rule and a prospective owner that is not a
natural person should discuss these with a tax adviser.
This following summary generally applies to contracts owned by natural persons.
Withdrawals - When a withdrawal from a non-qualified contract occurs, the amount
received will be treated as ordinary income subject to tax up to an amount equal
to any excess of the accumulation value immediately before the distribution that
exceeds the owner's investment in the contract. Generally, the owner's
investment in the contract is the amount equal to the premiums or other
consideration paid for the contract, reduced by any amounts previously
distributed from the contract that were not subject to tax at that time. In the
case of a surrender under a non-qualified contract, the amount received
generally will be taxable only to the extent it exceeds the owner's investment
in the contract.
Penalty tax on certain withdrawals - In the case of a distribution from a
non-qualified contract, a federal tax penalty may be imposed equal to 10% of the
amount treated as income. However, there is generally no penalty on
distributions that are:
o made on or after the taxpayer reaches age 591/2
o made on or after the death of an owner
o attributable to the taxpayer's becoming disabled, or
o made as part of a series of substantially equal periodic payments for the
life - or life expectancy - of the taxpayer.
Other exceptions may apply under certain circumstances. Special rules may also
apply to the exceptions noted above. You should consult a tax adviser with
regard to exceptions from the penalty tax.
Annuity payments - Although tax consequences may vary depending on the payout
option elected under an annuity contract, a portion of each annuity payment is
generally not taxed and the remainder is taxed as ordinary income. The
non-taxable portion of an annuity payment is generally
- --------------------------------------------------------------------------------
Page 36 of 44
<PAGE>
determined so that you recover your investment in the contract ratably on a
tax-free basis over the expected stream of annuity payments, as determined when
annuity payments begin. However, once your investment in the contract has been
fully recovered, the full amount of each annuity payment is subject to tax as
ordinary income.
Taxation of death benefits - Amounts may be distributed from a contract because
of your death or the death of the annuitant. Generally, such amounts are
included in the income of the recipient as follows:
o if distributed in a lump sum, they are taxed in the same manner as a
surrender of the contract
o if distributed under a payout option, they are taxed in the same way as
annuity payments.
Transfers, assignments and contract exchanges - Transferring or assigning
ownership of a contract, designating an annuitant, selecting certain maturity
dates or exchanging a contract may result in certain tax consequences to you
that are not outlined here. If you are considering any such transaction, you
should consult a professional tax adviser.
Withholding tax - Annuity distributions are generally subject to withholding for
the recipient's federal income tax liability. However, recipients can generally
choose not to have tax withheld from distributions.
Multiple contracts - All annuity contracts issued by GIAC or its affiliates to
the same owner during any calendar year are treated as one annuity contract for
purposes of determining the amount included in the contract owner's income when
a taxable distribution occurs.
Taxation of qualified contracts
Your rights under a qualified contract may be subject to the terms of the
retirement plan itself, regardless of the terms of the qualified contract.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions with respect to the contract comply with
the law.
Individual Retirement Accounts (IRAs) - As defined in Sections 219 and 408 of
the Internal Revenue Code, individuals are allowed to make annual contributions
to an IRA of up to the lesser of $2,000 or 100% of their adjusted gross income.
All or a portion of these contributions may be deductible, depending on the
person's income.
Distributions from certain pension plans may be rolled over into an IRA on a
tax-deferred basis without regard to these limits. So-called SIMPLE IRAs under
Section 408 (p) of the Internal Revenue Code and Roth IRAs under Section 408A,
may also be used in connection with variable annuity contracts.
SIMPLE IRAs allow employees to defer a percentage of annual compensation up to
$6,000 to a retirement plan, if the sponsoring employer makes matching or
non-elective contributions. The
- --------------------------------------------------------------------------------
Page 37 of 44
<PAGE>
penalty for a distribution from a SIMPLE IRA that occurs within the first two
years after the employee begins to participate in the plan is 25%, instead of
the usual 10%.
Contributions to Roth IRAs are not tax-deductible and contributions must be made
in cash or as a rollover or transfer from another Roth IRA or IRA. A rollover or
conversion of an IRA to a Roth IRA may be subject to tax.
Distributions from Roth IRAs are generally not taxed. In addition to the 10%
penalty which generally applies to distributions made before age 591/2, a 10%
penalty will be imposed for any distribution made from a Roth IRA during the
five taxable years starting after you first contribute to any Roth IRA.
Corporate pension and profit-sharing plans - Under Section 401(a) of the
Internal Revenue Code, corporate employers are allowed to establish various
types of retirement plans for employees, and self-employed individuals are
allowed to establish qualified plans for themselves and their employees.
Adverse tax consequences to the retirement plan, the participant or both may
result if the contract is transferred to any individual as a means of providing
benefit payments, unless the plan complies with all applicable requirements
before transferring the contract.
Tax-sheltered annuities - Under Section 403(b) of the Internal Revenue Code,
public schools and other eligible employers are allowed to purchase annuity
contracts and mutual fund shares through custodial accounts on behalf of
employees. Generally, these purchase payments are excluded for tax purposes from
employee gross incomes. However, these payments may be subject to Social
Security taxes.
Distributions of salary reduction contributions and earnings (other than your
salary reduction accumulation as of December 31, 1988) are not allowed before
age 591/2, separation from service, death or disability. Salary reduction
contributions may also be distributed upon hardship, but would generally be
subject to penalties.
Other tax issues - You should note that the annuity contract includes a death
benefit that in some cases may exceed the greater of the purchase payments or
the contract value. The death benefit could be viewed as an incidental benefit,
the amount of which is limited in any 401(a) or 403(b) plan. Because the death
benefit may exceed this limitation, employers using the contract in connection
with corporate pension and profit-sharing plans, or tax-sheltered annuities,
should consult their tax adviser.
Qualified contracts other than Roth IRAs have minimum distribution rules that
govern the timing and amount of distributions. You should refer to your
retirement plan, adoption agreement or consult a tax adviser for more
information about these distribution rules.
- --------------------------------------------------------------------------------
Page 38 of 44
<PAGE>
Our income taxes
At the present time, we make no charge for any Federal, state or local taxes -
other than the charge for state and local premium taxes that we incur that may
be attributable to the investment divisions of the Separate Account or to the
contracts. We do have the right in the future to make additional charges for any
such tax or other economic burden resulting from the application of the tax laws
that we determine is attributable to the investment divisions of the Separate
Account or the contracts.
Under current laws in several states, we may incur state and local taxes in
addition to premium taxes. These taxes are not now significant and we are not
currently charging for them. If they increase, we may deduct charges for such
taxes.
Possible tax law changes
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the contract could change by legislation
or otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the contract.
We have the right to modify the contract in response to legislative changes that
could otherwise diminish the favorable tax treatment annuity contract owners
currently receive. We make no guarantee regarding the tax status of any contract
and do not intend this summary as tax advice.
Sidebar:
- --------------------------------------------------------------------------------
As a result of a U.S. Supreme Court ruling, employer-related plans must use rate
tables that are gender-neutral to calculate annuity purchase rates. We have
revised our tables for employer-related plans and filed them in the states where
we do business. We will continue to use our gender-distinct tables in all other
contracts, unless it is prohibited by state law. In those cases our
gender-neutral tables will be used.
- --------------------------------------------------------------------------------
Performance results
From time to time, we may show performance information for the Separate
Account's investment divisions in advertisements, sales literature or other
materials provided to existing or prospective contract owners. These materials
are based upon historical information and are not necessarily representative of
future performance. More detail about historical performance appears in the
Statement of Additional Information. When we show performance, we'll always
include SEC standard performance, which reflects all fees and charges for
specified periods. We may also show non-standard performance, for example,
without showing the effect of certain charges such as deferred sales charges.
Among the key performance measures we use are total returns and yields.
- --------------------------------------------------------------------------------
Page 39 of 44
<PAGE>
Total returns include: average annual total return, total return, and change in
accumulation unit value - all of which reflect the change in the value of an
investment in an investment division of the Separate Account over a specified
period, assuming the reinvestment of all income dividends and capital gains
distributions.
Yield figures may be quoted for investments in shares of the Cash Fund and the
Bond Fund. Current yield is a measure of the income earned on a hypothetical
investment over a specified base period of seven days for the Cash Fund
investment division, and 30 days (or one month) for the Bond Fund investment
division. Effective yield is another measure which may be quoted by the Cash
Fund investment division, which assumes that the net investment income earned
during a base period will be earned and reinvested for a year. Yields are
expressed as a percentage of the value of an accumulation unit at the beginning
of the base period. Yields are annualized, which assumes that an investment
division will generate the same level of net investment income over a one-year
period. However, yields fluctuate daily.
Advertisements and sales literature for the Separate Account's investment
divisions may compare a Fund's performance to that of investments offered
through the separate accounts of other insurance companies that have similar
investment objectives or programs. Promotional material may also compare a
Fund's performance to one or more indices of the types of securities which the
Fund buys and sells for its portfolio. Performance comparisons may be
illustrated by tables, graphs or charts. Additionally, promotional material may
refer to:
o the types and characteristics of certain securities
o features of a Fund's portfolio
o financial markets
o historical, current or perceived economic trends, and
o topics of general investor interest, such as personal financial planning.
In addition, advertisements and sales literature may refer to or reprint all or
portions of articles, reports or independent rankings or ratings which relate
specifically to the investment divisions or to other comparable investments.
However, such material will not be used to indicate future performance.
Advertisements and sales literature about the variable annuity contract and the
Separate Account may also refer to ratings given to GIAC by insurance company
rating organizations such as:
o Moody's Investors Service, Inc.
o Standard & Poor's Ratings Group
o A.M. Best & Co.
o Duff & Phelps.
These ratings relate only to GIAC's ability to meet its obligations under the
contract's fixed-rate option and to pay death benefits provided under the
contract, not to the performance of the variable investment options.
- --------------------------------------------------------------------------------
Page 40 of 44
<PAGE>
Further information about the performance of each investment division is
contained in their respective annual reports, which may be obtained from GISC
free of charge.
Your rights and responsibilities
Voting rights
We own the Fund's shares, but you may have voting rights in the various Funds.
To the extent that we are required by law, we will cast our votes according to
the instructions of those contract owners who have an interest in variable
investment options investing in Funds holding a shareholder vote, as of the
shareholder meeting record date. Those votes for which we receive no
instructions will be voted in the same proportion as those we have received
instructions for. We'll solicit instructions when the Funds hold shareholder
votes. We have the right to restrict contract owner voting instructions if the
laws change to allow us to do so.
The owner of the contract has voting rights until the date annuity payments
begin. After that date, rights switch to the annuitant. Voting rights diminish
with the reduction of your contract value. The fixed-rate option has no voting
rights.
Your right to cancel the contract
During the 10-day period after receiving your contract, the free look period,
you have the right to examine your contract and return it for cancellation if
you change your mind about buying it. Longer periods may apply in some states.
In order to cancel your contract, we must receive both the contract and your
cancellation notice in good order. You can forward these documents to GIAC's
customer service office or to the registered representative who sold you the
contract. If you mail the notice, we consider it received on the postmark date,
provided it has been properly addressed and the full postage has been paid.
Upon cancellation, we'll refund to you:
o the difference between the gross premiums you paid (including contract
fees, annuity taxes and other charges) and the amounts we allocated to the
variable investment and fixed-rate options you chose; and
o the accumulation value of the contract on the date we receive your
cancellation.
If state law requires, you will receive the total premium you paid for the
contract instead.
Distribution of the contract
The variable annuity contract is sold by insurance agents who are licensed by
GIAC and who are either registered representatives of GISC or of broker-dealer
firms which have entered into sales agreements with GISC and GIAC. GISC and such
other broker-dealers are members of the National Association of Securities
Dealers, Inc. GIAC will generally pay commissions to these
- --------------------------------------------------------------------------------
Page 41 of 44
<PAGE>
individuals or entities for the sale of contracts. These commissions may vary,
but in total are not expected to exceed 7% of each contract premium payment. We
also reserve the right to pay additional annual sales compensation of up to .13%
of the value of contracts with an enhanced death benefit rider in force. Where
permitted by state law, we reserve the right to pay additional sales or service
compensation while a contract is in force, based on the value of a contract.
Additional amounts may also be paid in connection with special promotional
incentives. The principal underwriter of the contracts is GISC, located at 201
Park Avenue South, New York, New York 10003.
- --------------------------------------------------------------------------------
Page 42 of 44
<PAGE>
Special terms used in this prospectus
Accumulation Period: The period between the issue date of the contract and the
annuity commencement date.
Accumulation Unit: A measure used to determine the value of a contractowner's
interest under the contract before annuity payments begin. The contract has
variable accumulation units and fixed accumulation units.
Accumulation Value: The value of all the accumulation units in the variable
investment options and/or the fixed-rate option credited to a contract.
Annuitant: The person on whose life the annuity payments are based and on whose
death, prior to the annuity commencement date, benefits under the contract are
paid.
Annuity Commencement Date: The date on which annuity payments under the contact
begin.
Annuity Payments: Periodic payments, either variable or fixed in nature, made by
GIAC to the contract owner at monthly intervals after the annuity commencement
date.
Annuity Unit: A measure used to determine the amount of any variable annuity
payment.
Business day: Each day the New York Stock Exchange is open for trading and GIAC
is open for business.
Contract Anniversary Date: The annual anniversary measured from the issue date
of the contract.
Contract owner: You (or your); the person(s) or entity designated as the owner
in the contract.
Funds: The diversified open-end management investment companies, each
corresponding to a variable investment option. The Funds are listed on the front
cover of this prospectus.
Good Order: Notice from any party authorized to initiate a transaction under
this contract, received in a format satisfactory to GIAC at its customer service
office, that contains all information required by GIAC to process that
transaction.
Valuation Period: The time period from the determination of one accumulation
unit and annuity unit value to the next.
Variable Investment Options: The Funds underlying the contract are the variable
investment options - as distinguished from the fixed-rate option - available for
allocations of net premium payments and accumulation values.
- --------------------------------------------------------------------------------
Page 43 of 44
<PAGE>
Other information
Year 2000 compliance
Like other financial and business organizations around the world, we could be
adversely affected if our computer systems or those of our advisers or other
service providers fail to process data properly as of January 1, 2000. Many
computer systems today cannot distinguish the year 2000 from the year 1900
because of the way dates were encoded and calculated in these systems. Like our
advisers and service providers, we are changing our systems where necessary to
address this problem. We fully expect that all relevant systems will be adapted
before January 1, 2000, and our service providers assure us that they are doing
the same. However, we cannot guarantee that our preparations will be successful.
Legal Proceedings
Neither the Separate Account nor GIAC is a party to any pending material legal
proceeding.
Where to get more information
Our Statement of Additional Information (SAI) has more details about the
contract described in this prospectus. If you would like a free copy, please
call us toll-free at 1-800-221-3253, or write to us at the following address:
Guardian Insurance & Annuity Corporation
Customer Service Office
Box 26210
Lehigh Valley, Pennsylvania 18002
The SAI contains the following information:
o Services to the Separate Account
o Annuity payments
o Tax status of the contracts
o Performance data
o Valuation of assets of the Separate Account
o Transferability restrictions
o Experts
o Financial statements
- --------------------------------------------------------------------------------
Page 44 of 44
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Issued Through
THE GUARDIAN SEPARATE ACCOUNT E
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the current Prospectus for The Guardian Separate
Account E (marketed under the name "The Guardian Investor Retirement Asset
Manager") dated May 1, 1999.
A free Prospectus is available upon request by writing or calling:
The Guardian Insurance & Annuity Company, Inc.
Customer Service Office
P.O. Box 26210 Lehigh Valley, Pennsylvania 18002
1-800-221-3253
Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the Prospectus.
TABLE OF CONTENTS
Page
Services to the Separate Account B-2
Annuity Payments B-2
Tax Status of the Contracts B-3
Performance Data B-3
Valuation of Assets of the Separate Account B-7
Transferability Restrictions B-8
Experts B-8
Financial Statements B-8
B-1
<PAGE>
SERVICES TO THE SEPARATE ACCOUNT
The Guardian Insurance & Annuity Company, Inc. ("GIAC") maintains the books
and records of The Guardian Separate Account E (the "Separate Account"). GIAC, a
wholly owned subsidiary of The Guardian Life Insurance Company of America, acts
as custodian of the assets of the Separate Account. GIAC bears all expenses
incurred in the operations of the Separate Account, except the mortality and
expense risk charge and the administrative charge (as described in the
Prospectus), which are borne by the Contractowner.
The firm of Price Waterhouse LLP, 1177 Avenue of the Americas, New York,
New York 10036 currently serves as independent accountants for GIAC and the
Separate Account.
Guardian Investor Services Corporation ("GISC"), a wholly owned subsidiary
of GIAC, serves as principal underwriter for the Separate Account pursuant to a
distribution and service agreement between GIAC and GISC. The Contracts are
offered continuously and are sold by GIAC insurance agents who are registered
representatives of either GISC or of other broker-dealers which have selling
agreements with GISC and GIAC. In the years 1998, 1997 and 1996, GISC received
underwriting commissions from GIAC with respect to the sales of variable annuity
contracts in the amount of $__________, $1,979,926 and $1,851,468, respectively.
ANNUITY PAYMENTS
The objective of the Contracts is to provide benefit payments which will
increase at a rate sufficient to maintain purchasing power at a constant level.
For this to occur, the actual net investment rate must exceed the assumed
investment rate of 4% by an amount equal to the rate of inflation. Of course, no
assurance can be made that this objective will be met. If the assumed interest
rate were to be increased, benefit payments would start at a higher level but
would increase more slowly or decrease more rapidly. Likewise, a lower assumed
interest rate would provide a lower initial payment with greater increases or
lesser decreases in subsequent Annuity Payments.
Value of an Annuity Unit: The value of an Annuity Unit is determined
independently for each of the Variable Investment Options. For any Valuation
Period, the value of an Annuity Unit is equal to the value for the immediately
preceding Valuation Period multiplied by the annuity change factor for the
current Valuation Period. The Annuity Unit value for a Valuation Period is the
value determined as of the end of such period. The annuity change factor is
equal to the net investment factor for the same Valuation Period adjusted to
neutralize the assumed investment return used in determining the Annuity
Payments. The net investment factor is reduced by (a) the mortality and expense
risk charges, (b) administrative expenses and (c) if applicable, the Enhanced
Death Benefit Rider charge on an annual basis during the life of the Contract.
The dollar amount of any monthly payment due after the first monthly payment
under a Variable Investment Option will be determined by multiplying the number
of Annuity Units by the value of an Annuity Unit for the Valuation Period ending
ten (10) days prior to the Valuation Period in which the monthly payment is due.
Determination of the First Monthly Annuity Payment: At the time Annuity
Payments begin, the value of the Contractowner's account is determined by
multiplying the appropriate Variable or Fixed Accumulation Unit Value on the
Valuation Period ten (10) days before the date the first variable or fixed
Annuity Payment is due by the corresponding number of Variable or Fixed
Accumulation Units credited to the Contractowner's account as of the date the
first Annuity Payment is due, less any applicable premium taxes not previously
deducted.
The Contracts contain tables reflecting the dollar amount of the first
monthly payment which can be purchased with each $1,000 of value accumulated
under the Contract. The amounts depend on the variable or fixed Annuity Payout
Option selected, the mortality table used under the Contract (the 1983
Individual Mortality Table a projected using Scale G) and the nearest age of the
Annuitant. The first
B-2
<PAGE>
Annuity Payment is determined by multiplying the benefit per $1,000 of value
shown in the Contract tables by the number of thousands of dollars of value
accumulated under the Contract.
Determination of the Second and Subsequent Monthly Variable Annuity
Payments: The amount of the second and subsequent variable Annuity Payments is
determined by multiplying the number of Annuity Units by the appropriate Annuity
Unit Value as of the valuation period ten (10) days prior to the day such
payment is due. The number of Annuity Units under a Contract is determined by
dividing the first monthly variable Annuity Payment by the value of the
appropriate Annuity Unit on the date of such payment. This number of Annuity
Units remains fixed during the variable Annuity Payment period, provided no
transfers among the Variable Investment Options are made. If a transfer among
the Variable Investment Options is made, the number of Annuity Units will be
adjusted accordingly.
The assumed investment return of 4% under the Contract is the measuring
point for subsequent variable Annuity Payments. If the actual net investment
rate (on an annual basis) remains constant at 4%, the variable Annuity Payments
will remain constant. If the actual net investment rate exceeds 4%, the variable
Annuity Payment will increase at a rate equal to the amount of such excess.
Conversely, if the actual rate is less than 4%, variable Annuity Payments will
decrease.
The second and subsequent monthly payments made under a Fixed Annuity
Payout Option will be equal to the amount of the first monthly fixed Annuity
Payment (described above).
TAX STATUS OF THE CONTRACTS
Tax law imposes several requirements that variable annuities must satisfy
in order to receive the tax treatment normally accorded to annuity contracts.
Diversification Requirements. The Code requires that the investments of
each investment division of the separate account underlying the contracts be
"adequately diversified" in order for the contracts to be treated as annuity
contracts for Federal income tax purposes. It is intended that each investment
division, through the fund in which it invests, will satisfy these
diversification requirements.
Owner Control. In certain circumstances, owners of variable annuity
contracts have been considered for Federal income tax purposes to be the owners
of the assets of the separate account supporting their contracts due to their
ability to exercise investment control over those assets. When this is the case,
the contract owners have been currently taxed on income and gains attributable
to the variable account assets. There is little guidance in this area, and some
features of our contracts, such as the flexibility of an owner to allocate
premium payments and transfer amounts among the investment divisions of the
separate account, have not been explicitly addressed in published rulings. While
we believe that the contracts do not give owners investment control over
separate account assets, we reserve the right to modify the contracts as
necessary to prevent an owner from being treated as the owner of the separate
account assets supporting the contract.
Required Distributions. In order to be treated as an annuity contract for
Federal income tax purposes, section 72(s) of the Internal Revenue Code requires
any non-qualified contract to contain certain provisions specifying how your
interest in the contract will be distributed in the event of the death of a
holder of the contract. Specifically, section 72(s) requires that (a) if any
holder dies on or after the annuity starting date, but prior to the time the
entire interest in the contract has been distributed, the entire interest in the
contract will be distributed at least as rapidly as under the method of
distribution being used as of the date of such holders death; and (b) if any
holder dies prior to the annuity starting date, the entire interest in the
contract will be distributed within five years after the date of such holder's
death. These requirements will be considered satisfied as to any portion of a
holder's interest which is payable to or for the benefit of a designated
beneficiary and which is distributed over the life of such designated
beneficiary or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of the
holder's death. The designated beneficiary refers to a natural person designated
by the holder as a beneficiary and to whom ownership of the contract passes by
reason of death. However, if the designated beneficiary is the surviving spouse
of the deceased holder, the contract may be continued with the surviving spouse
as the new holder.
The non-qualified contracts contain provisions that are intended to comply
with these Code requirements, although no regulations interpreting these
requirements have yet been issued. We intend to review such provisions and
modify them if necessary to assure that they comply with the applicable
requirements when such requirements are clarified by regulation or otherwise.
Other rules may apply to qualified contracts.
PERFORMANCE DATA
The tables below provide performance results for each of the Separate
Account's Investment Divisions through December 31, 1998. The results shown in
this section are not an estimate or guarantee of future investment performance,
and do not represent the actual experience of amounts invested by a particular
Contractowner. Moreover, the performance information for each Investment
Division reflects the investment experience of its underlying Funds for periods
prior to the commencement of operations of the Separate Account (September 15,
1997) if the Funds existed prior to such date. Such results were calculated by
applying all Contract and Separate Account level charges to the historical Fund
performance results for such prior periods. During such prior periods, the Funds
were utilized as the underlying Funds for other separate accounts of GIAC which
were established in connection with the issuance of other variable contracts.
Average Annual Total Return Calculations
The first section of the following table was calculated using the
standardized method prescribed by the Securities and Exchange Commission. It
illustrates each Investment Division's average annual total return over the
periods shown. The average annual total return for an Investment Division for a
specified period is determined by reference to a hypothetical $1,000 investment
that includes capital appreciation and depreciation for the stated period,
according to the following formula:
P(1 + T)n = ERV
Where: P = A hypothetical purchase of $1,000 from which no sales
load is deducted.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of the hypothetical $1,000
purchase at the end of the period.
Each calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period, that
no transfers or additional purchase payments were made and
B-3
<PAGE>
the surrender of the Contract at the end of each period. The Investment
Division's average annual total return is the annual rate that would be
necessary to achieve the ending value of an investment kept in the Investment
Division for the period specified. The rate of return reflects all charges
assessed against a Contract and at the Separate Account level except for any
annuity taxes that may be payable. The charges reflected include any applicable
contingent deferred sales charge; the mortality and expense risk charge; and a
pro-rated portion of the contract administration fee. See the Prospectus for a
detailed description of such charges.
The second section of the table was calculated in the same manner as the
first except that no contingent deferred sales charge was deducted since it is
assumed that the Contract continues through the end of each period.
<TABLE>
<CAPTION>
Average Annual Total Return for a
Contract Surrendered on 12/31/98 Average Annual Total Return on 12/31/98
(EDB= Enhanced Death Benefit/ BC= Basic Contract) Assuming Contract Continues
------------------------------------------------- --------------------------------------
Length of Investment Period Length of Investment Period
------------------------------------------------- --------------------------------------
Ten Years (or Ten Years (or
Since Fund Since Fund
Investment Division Date of Fund Inception, Inception,
Corresponding To Inception One Year Five Years If Less) One Year Five Years If Less)
<S> <C> <C> <C> <C> <C> <C> <C>
EDB EDB EDB EDB EDB EDB
The Guardian Cash BC BC BC BC BC BC
Fund 1/7/82
The Guardian Bond
Fund 5/1/83
The Guardian Stock
Fund 4/13/83
The Guardian Small
Cap Stock Fund* 5/1/97
Gabelli Capital
Asset Fund 5/1/95
Baillie Gifford
International Fund 2/8/91
Baillie Gifford
Emerging Markets
Fund 10/17/94
Value Line Centurion
Fund ("VLCF") 11/15/83
Value Line Strategic
Asset Management
Trust ("VLSAM") 10/1/87
MFS Growth With
Income Series 10/9/95
</TABLE>
* Figures reflect actual total return from inception to December 31, 1997.
B-4
<PAGE>
7
Change in Accumulation Unit Value
The following performance information illustrates the cumulative change and
the actual annual change in Accumulation Unit values for the periods specified
for each Investment Division and is computed differently than the standardized
average annual total return information.
An Investment Division's cumulative change in Accumulation Unit values is
the rate at which the value of an Accumulation Unit changed over the time period
illustrated. The actual annual change in Accumulation Unit values is the rate at
which the value of an Accumulation Unit changed over each 12-month period
illustrated. The rates of change in Accumulation Unit values quoted in the
tables reflect a deduction for the mortality and expense risk charge,
administrative charge, and when applicable, the Enhanced Death Benefit charge.
They do not reflect deductions for any contingent deferred sales charge,
contract administration fee or annuity taxes. The rates of change would be lower
if these charges were included.
BASIC CONTRACT
<TABLE>
<CAPTION>
Cumulative Change in Accumulation Unit Value
for Period Ended December 31, 1998
-----------------------------------------------------------------
Ten Years (or
Since Fund
Investment Division Inception, Date of Fund
Corresponding To One Year Five Years If Less) Inception
<S> <C> <C> <C> <C>
The Guardian Cash Fund 1/7/82
The Guardian Bond Fund 5/1/83
The Guardian Stock Fund 4/13/83
The Guardian Small Cap Stock Fund 5/1/97
Gabelli Capital Asset Fund 5/1/95
Baillie Gifford International Fund 2/8/91
Baillie Gifford Emerging Markets Fund 10/17/94
Value Line Centurion Fund 11/15/83
Value Line Strategic Asset Management Trust 10/1/87
MFS Growth With Income Series 10/9/95
</TABLE>
CONTRACT WITH ENHANCED DEATH BENEFIT
<TABLE>
<CAPTION>
Cumulative Change in Accumulation Unit Value
for Period Ended December 31, 1998
-----------------------------------------------------------------
Ten Years (or
Since Fund
Investment Division Inception, Date of Fund
Corresponding To One Year Five Years If Less) Inception
<S> <C> <C> <C> <C>
The Guardian Cash Fund 1/7/82
The Guardian Bond Fund 5/1/83
The Guardian Stock Fund 4/13/83
The Guardian Small Cap Stock Fund 5/1/97
Gabelli Capital Asset Fund 5/1/95
Baillie Gifford International Fund 2/8/91
Baillie Gifford Emerging Markets Fund 10/17/94
Value Line Centurion Fund 11/15/83
Value Line Strategic Asset Management Trust 10/1/87
MFS Growth With Income Series 10/9/95
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
Change in Accumulation Unit Value for 12-Month Period ended December 31,
(For Basic Contract)
Investment Division
Corresponding To 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Guardian Cash Fund 5.06 5.03 5.99 7.68 6.66 4.27 1.93 1.36 2.52 4.22 3.67
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Bond Fund 13.41 -0.93 8.33 12.46 6.22 14.74 6.35 8.48 -4.66 16.12 1.58
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Stock Fund 15.64 0.59 18.86 21.89 -12.87 34.26 18.57 18.46 -2.51 32.98 25.30
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Small Cap
Stock Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund 9.62*
- -----------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford International
Fund -10.05* 32.36 -0.39 9.84 13.96
- -----------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund -1.84* 23.02
- -----------------------------------------------------------------------------------------------------------------------------------
Value Line Centurion Fund
("VLCF") 15.41 -4.07 6.24 29.85 4.24 50.28 4.60 7.84 -3.43 38.33 15.86
- -----------------------------------------------------------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
("VLSAM") 8.81 23.99 -1.40 41.55 13.61 10.46 -6.07 26.93 14.41
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Growth With
Income Series 22.89*
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment Division
Corresponding To 1997 1998
- ------------------------------------------------
The Guardian Cash Fund 3.83
- ------------------------------------------------
The Guardian Bond Fund 7.63
- ------------------------------------------------
The Guardian Stock Fund 33.89
- ------------------------------------------------
The Guardian Small Cap
Stock Fund 3.20*
- ------------------------------------------------
Gabelli Capital Asset Fund 40.81
- ------------------------------------------------
Baillie Gifford International
Fund 10.53
- ------------------------------------------------
Baillie Gifford Emerging
Markets Fund 0.70
- ------------------------------------------------
Value Line Centurion Fund
("VLCF") 19.87
- ------------------------------------------------
Value Line Strategic Asset
Management Trust
("VLSAM") 14.21
- ------------------------------------------------
MFS Growth With
Income Series 28.16
- ------------------------------------------------
Change in Accumulation Unit Value for 12-Month Period ended December 31,
(For Contract with Enhanced Death Benefit)
<TABLE>
<CAPTION>
Investment Division
Corresponding To 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Guardian Cash Fund 4.85 4.82 5.77 7.46 6.45 4.07 1.72 1.16 2.32 4.01 3.47
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Bond Fund 13.18 -1.13 8.11 12.23 6.00 14.51 6.14 8.26 -4.85 15.89 1.38
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Stock Fund 15.41 0.39 18.63 21.65 -13.05 33.99 18.33 18.22 -2.70 32.71 25.05
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Small Cap
Stock Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund 9.40*
- -----------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford International
Fund -10.22* 32.10 -0.58 9.62 13.74
- -----------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund -2.04* 22.77
- -----------------------------------------------------------------------------------------------------------------------------------
Value Line Centurion Fund
("VLCF") 15.18 -4.26 6.03 29.59 4.03 49.98 4.39 7.63 -3.63 38.05 15.63
- -----------------------------------------------------------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
("VLSAM") 8.59* 23.74 -1.60 41.26 13.39 10.24 -6.25 26.68 14.18
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Growth With
Income Series 22.64*
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment Division
Corresponding To 1997 1998
- -------------------------------------------------
The Guardian Cash Fund 3.63
- -------------------------------------------------
The Guardian Bond Fund 7.41
- -------------------------------------------------
The Guardian Stock Fund 33.62
- -------------------------------------------------
The Guardian Small Cap
Stock Fund 3.11*
- -------------------------------------------------
Gabelli Capital Asset Fund 40.53
- -------------------------------------------------
Baillie Gifford International
Fund 10.31
- -------------------------------------------------
Baillie Gifford Emerging
Markets Fund 0.49
- -------------------------------------------------
Value Line Centurion Fund
("VLCF") 19.63
- -------------------------------------------------
Value Line Strategic Asset
Management Trust
("VLSAM") 13.98
- -------------------------------------------------
MFS Growth With
Income 27.91
- -------------------------------------------------
* From date of commencement of public offering of Fund's shares through
December 31.
B-6
<PAGE>
Calculation of Yield Quotations for the Cash Fund Investment Division
The yield of the Investment Division of the Separate Account investing in
the Cash Fund represents the net change, exclusive of gains and losses realized
by the Investment Division or the Cash Fund and unrealized appreciation and
depreciation with respect to the Cash Fund's portfolio of securities, in the
value of a hypothetical pre-existing Contract that is credited with one
Accumulation Unit at the beginning of the period for which yield is determined
(the "base period"). The base period generally will be a seven-day period. The
current yield for a base period is calculated by dividing (1) the net change in
the value of the Contract for the base period (see "Accumulation Period" in the
Prospectus) by (2) the value of the Contract at the beginning of the base period
and multiplying the result by 365/7. Deductions from purchase payments (for
example, any applicable premium taxes) and any applicable contingent deferred
sales charge assessed at the time of withdrawal or annuitization are not
reflected in the computation of current yield of the Investment Division. The
determination of net change in Contract value reflects all deductions that are
charged to a Contractowner, in proportion to the length of the base period and
the Investment Division's average Contract size. The current annualized yield of
the Cash Fund Investment Division for the 7-day period ended December 31, 1998
was ____%.
Yield also may be calculated on an effective or compound basis, which
assumes continual reinvestment by the Investment Division throughout an entire
year of net income earned by the Investment Division at the same rate as net
income is earned in the base period. The effective or compound yield for a base
period is calculated by (1) dividing (i) the net change in the value of the
Contract for the base period by (ii) the value of the Contract as of the
beginning of the base period, (2) adding 1 to the result, (3) raising the sum to
a power equal to 365 divided by the number of days in the base period, and (4)
subtracting 1 from the result. The effective annualized yield of the Cash Fund
Investment Division for the 7-day period ended December 31, 1998 was ____%.
The current and effective yields of the Cash Fund Investment Division will
vary depending on prevailing interest rates, the operating expenses and the
quality, maturity and type of instruments held in the Cash Fund's portfolio.
Consequently, no yield quotation should be considered as representative of what
the yield of the Investment Division may be for any specified period in the
future. The yield is subject to fluctuation and is not guaranteed.
Performance Comparisons
Advertisements and sales literature for the Separate Account's Investment
Divisions and their underlying Funds may compare their performance to other
investment vehicles and the separate accounts of other insurance companies as
reflected in independent performance data furnished by sources such as Lipper
Analytical Services, Inc., Morningstar, and Variable Annuity Research & Data
Service, all of which are independent services which monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis. The performance analyses
prepared by such services rank issuers on the basis of total return, assuming
reinvestment of distributions, but may not take sales charges, redemption fees,
or certain expense deductions into consideration.
VALUATION OF ASSETS OF THE SEPARATE ACCOUNT
The value of Fund shares held in each Investment Division at the time of
each valuation is the redemption value of such shares at such time. If the right
to redeem shares of a Fund has been suspended, or payment of redemption value
has been postponed for the sole purpose of computing Annuity Payments, the
shares held in the Separate Account (and corresponding Annuity Units) may be
valued at fair value as determined in good faith by GIAC's Board of Directors.
B-7
<PAGE>
TRANSFERABILITY RESTRICTIONS
Where a Contract is owned in conjunction with a retirement plan qualified
under the Internal Revenue Code of 1986, as amended ("Code"), a tax-sheltered
annuity program or individual retirement account, and notwithstanding any other
provisions ofthe Contract, the Contractowner may not change the ownership of the
Contract nor may the Contract be sold, assigned or pledged as collateral for a
loan or as security for the performance of an obligation or for any other
purpose to any person other than GIAC unless the Contractowner is the trustee of
an employee trust qualified under the Code, the custodian of a custodial account
treated as such, or the employer under a qualified non-trusteed pension plan.
EXPERTS
The financial statements of the Separate Account incorporated in this
Statement of Additional Information and in the Registration Statement by
reference to the Annual Report to Contractowners for the year ended December 31,
1997 have been so incorporated in reliance on the report of
PricewaterhouseCooper LLP, independent accountants. The statutory basis balance
sheets of GIAC as of December 31, 1998 and 1997 and the related statutory basis
statements of operations, of changes in common stock and surplus and cash flow
for each of the three years in the period ended December 31, 1998 appearing in
this Statement of Additional Information have been so included in reliance on
the report of Price Waterhouse LLP, independent accountants. Such financial
statements have been included herein or incorporated herein by reference in
reliance upon such reports given upon the authority of said firm as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The statutory basis financial statements of GIAC which are set forth herein
beginning on page B-9 should be considered only as bearing upon the ability of
GIAC to meet its obligations under the Contracts.
The financial statements of the Separate Account are incorporated herein
by reference to the Separate Account's 1998 Annual Report to Contractowners.
Such financial statements, the notes thereto and the report of independent
accountants thereon are incorporated herein by reference or are included
elsewhere in this Registration Statement. A free copy of the 1998 Annual Report
to Contractowners accompanies this Statement of Additional Information.
B-8
<PAGE>
[Financial Statements to be filed by amendment]
<PAGE>
The Guardian Separate Account E
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements have been incorporated by reference
or are included in Part B:
(1) The Guardian Separate Account E (incorporated by reference into
Part B):
Statement of Assets and Liabilities as of December 31, 1998
Statement of Operations for the Year Ended December 31, 1998
Statements of Changes in Net Assets for the Two Years Ended
December 31, 1998 and 1997
Notes to Financial Statements
Report of PricewaterhouseCoopers LLP, Independent Accountants
(2) The Guardian Insurance & Annuity Company, Inc. (included in Part
B):
Statutory Basis Balance Sheets as of December 31, 1998 and 1997
Statutory Basis Statements of Operations for the Three Years
Ended December 31, 1998, 1997 and 1996
Statutory Basis Statements of Changes in Common Stock and Surplus
for the Three Years Ended December 31, 1998, 1997 and 1996
Statutory Basis Statements of Cash Flow for the Three Years
Ended December 31, 1998, 1997 and 1996
Notes to Statutory Basis Financial Statements
Report of PricewaterhouseCoopers LLP, Independent Accountants
(b) Exhibits
Number Description
------ -----------
1 Resolutions of the Board of Directors of The
Guardian Insurance & Annuity Company, Inc.
establishing Separate Account E(1)
2 Not Applicable
3 Underwriting and Distribution Contracts:
(a) Distribution and Service Agreement
between The Guardian Insurance &
Annuity Company, Inc. and Guardian
Investor Services Corporation, as
amended(1)
(b) Form of Broker-Dealer Supervisory and
Service Agreement(2)
4 Specimen of Variable Annuity Contract(1)
5 Form of Application for Variable Annuity
Contract(2)
6 (a) Certificate of Incorporation of The
Guardian Insurance & Annuity Company,
Inc.(1)
(b) By-laws of The Guardian Insurance &
Annuity Company, Inc(1)
7 Not Applicable
8 Amended and Restated Agreement for Services
and Reimbursement Therefor, between The
Guardian Life Insurance Company of America
and The Guardian Insurance & Annuity
Company, Inc.(2)
9 Opinion and Consent of Counsel(1)
10 (a) Consent of PricewaterhouseCoopers LLP(3)
11 Not Applicable
12 Not Applicable
13 (a) Powers of Attorney executed by a
majority of the Board of Directors and
certain principal officers of The
Guardian Insurance & Annuity Company,
Inc.(1)
(c) Schedule for Computation of Performance
Quotations(2)
- -------------------
(1) Incorporated by reference to the Registration Statement on Form N-4, (Reg.
No. 333-21975), as initially filed on February 18, 1997.
(2) Incorporated by reference to the Registration Statement on Form N-4, (Reg.
No. 333-21975), as previously filed on August 1, 1997.
(3) To be filed by amendment
C-1
<PAGE>
Item 25. Directors and Officers of the Depositor
The following is a list of directors and officers of The Guardian
Insurance & Annuity Company, Inc. ("GIAC"), the depositor of the Registrant. The
principal business address of each director and officer is 201 Park Avenue
South, New York, New York 10003.
Name Positions with GIAC
---- -------------------
Joseph D. Sargent President, Chief Executive Officer
& Director
John M. Smith Executive Vice President & Director
Edward K. Kane Executive Vice President & Director
Frank J. Jones Executive Vice President, Chief
Investment Officer & Director
Philip H. Dutter Director
Arthur V. Ferrara Director
Leo R. Futia Director
Peter L. Hutchings Director
William C. Warren Director
Charles G. Fisher Vice President & Actuary
Ryan W. Johnson Vice President, Equity Sales
Frank L. Pepe Vice President & Controller
Richard T. Potter, Jr. Vice President and Counsel
Joseph A. Caruso Vice President & Secretary
Earl Harry Treasurer
C-2
<PAGE>
Item 26. Persons Controlled by or under Common Control with Registrant
The following list sets forth the persons directly controlled by The
Guardian Life Insurance Company of America ("Guardian Life"), the parent company
of GIAC, the Registrant's depositor, as of February __, 1999:
State of Percent of
Incorporation Voting Securities
Name or Organization Owned
---- --------------- -----------------
The Guardian Insurance & Delaware
Annuity Company, Inc.
Guardian Asset Management Delaware
Corporation
Guardian Reinsurance Services, Inc. Connecticut
Park Avenue Life Insurance Company Delaware
Managed Dental Care, Inc. California
Physicians Health Services Inc. Delaware
Private Healthcare Systems, Inc. Delaware
The Guardian Tax-Exempt Bond Fund Massachusetts
The Guardian Baillie Gifford Massachusetts
International Fund
The Guardian Investment Quality Massachusetts
Bond Fund
The Guardian Asset Allocation Fund Massachusetts
Baillie Gifford Emerging Markets Fund Maryland
Baillie Gifford International Fund Maryland
The Guardian Park Avenue Small Cap Fund Massachusetts
The Guardian Baillie Gifford Massachusetts
Emerging Markets Fund
The following list sets forth the persons directly controlled by GIAC
or other affiliates of Guardian Life and, thus, indirectly controlled by
Guardian Life, as of February __, 1999:
Approximate
Percentage of Voting
Place of Securities Owned
Incorporation by Guardian Life
Name or Organization Affiliates
---- --------------- -------------------
Guardian Investor Services
Corporation New York
Guardian Baillie Gifford Ltd. Scotland
The Guardian Cash Fund, Inc. Maryland
The Guardian Bond Fund, Inc. Maryland
The Guardian Stock Fund, Inc. Maryland
GIAC Funds, Inc. Maryland
Item 27. Number of Contractowners
Type of Contract As of February __, 1999
---------------- -----------------------
Non-Qualified ..............
Qualified ..................
Total ..............
C-3
<PAGE>
Item 28. Indemnification
The By-Laws of The Guardian Insurance & Annuity Company, Inc. provide that
the Company shall, to the fullest extent legally permissible under the General
Corporation Law of the State of Delaware, indemnify and hold harmless officers
and directors of the Corporation for certain liabilities reasonably incurred in
connection with such person's capacity as an officer or director.
The Certificate of Incorporation of the Corporation includes the following
provision:
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; (iii) under Section 164 of the Delaware General
Corporation Law, or (iv) for any transaction for which the director derived an
improper personal benefit.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters
(a) Guardian Investor Services Corporation ("GISC") is the
principal underwriter of the Registrant's variable annuity contracts and it is
also the principal underwriter of shares of The Guardian Bond Fund, Inc.; The
Guardian Stock Fund, Inc.; The Guardian Cash Fund, Inc.; The Park Avenue
Portfolio, a series trust consisting of the following ten series: The Guardian
Cash Management Fund, The Guardian Park Avenue Fund, The Guardian Investment
Quality Bond Fund, The Guardian High Yield Bond Fund, The Guardian Tax-Exempt
Fund, The Guardian Asset Allocation Fund, The Guardian Park Avenue Small Cap
Fund, The Guardian Park Avenue Tax-Efficient Fund, The Guardian Baillie Gifford
International Fund and The Guardian Baillie Gifford Emerging Markets Fund and
GIAC Funds, Inc. a series fund consisting of Baillie Gifford International Fund,
Baillie Gifford Emerging Markets Fund and The Guardian Small Cap Stock Fund. All
of the aforementioned funds and the series trust are registered with the SEC as
open-end management investment companies under the Investment Company Act of
1940, as amended ("1940 Act"). In addition, GISC is the distributor of variable
annuity and variable life insurance contracts currently offered by GIAC through
its separate accounts, The Guardian/Value Line Separate Account, The Guardian
Separate Account A, The Guardian Separate Account B, The Guardian Separate
Account C, The Guardian Separate Account D, The Guardian Separate Account E and
The Guardian Separate Account K, which are all registered as unit investment
trusts under the 1940 Act.
(b) The following is a list of each director and officer of
GISC. The principal business address of each person is 201 Park Avenue South,
New York, New York 10003.
Name Position(s) with GISC
---- ---------------------
John M. Smith President & Director
Arthur V. Ferrara Director
Leo R. Futia Director
Peter L. Hutchings Director
Philip H. Dutter Director
Joseph D. Sargent Director
William C. Warren Director
Frank J. Jones Director
John M. Fagan Vice President
Ryan W. Johnson Senior Vice President
& National Sales Director
Frank L. Pepe Vice President & Controller
Richard T. Potter, Jr. Vice President and Counsel
C-4
<PAGE>
Name Position(s) with GISC
---- ---------------------
Joseph A. Caruso Vice President & Secretary
Earl C. Harry Treasurer
Item 30. Location of Accounts and Records
Most of the Registrant's accounts, books and other documents
required to be maintained by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained by GIAC, the depositor, at its Customer
Service Office, 3900 Burgess Place, Bethlehem, Pennsylvania 18017. Documents
constituting the Registrant's corporate records are also maintained by GIAC but
are located at its Executive Office, 201 Park Avenue South, New York, New York
10003.
Item 31. Management Services
None.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration statement are
never more than 16 months old for so long as payment under the variable
annuity contracts may be accepted.
(b) The Registrant hereby undertakes to include, as part of any application
to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information.
(c) The Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
(d) The Depositor, GIAC, hereby undertakes and represents that the fees and
charges deducted under the contract, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by GIAC.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, The Guardian Separate Account E
has duly caused this Post-Effective Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and the State of New York on the 17th day of February, 1999.
The Guardian Separate Account E
(Registrant)
By: THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
(Depositor)
By: /s/ John M. Smith
--------------------------------
John M. Smith
Executive Vice President
C-6
<PAGE>
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following directors and principal officers of The
Guardian Insurance & Annuity Company, Inc. in the capacities and on the date
indicated.
/s/ Joseph D. Sargent* President, Chief Executive
- ----------------------------------- Officer and Director
Joseph D. Sargent
(Principal Executive Officer)
/s/ Frank J. Jones* Executive Vice President, Chief
- ----------------------------------- Investment Officer and Director
Frank J. Jones
(Principal Financial Officer)
/s/ Frank L. Pepe* Vice President and Controller
- -----------------------------------
Frank L. Pepe
(Principal Accounting Officer)
/s/ John M. Smith Executive Vice President
- ----------------------------------- and Director
John M. Smith
/s/ Arthur V. Ferrara* Director
- -----------------------------------
Arthur V. Ferrara
/s/ William C. Warren* Director
- -----------------------------------
William C. Warren
/s/ Edward K. Kane* Executive Vice President
- ----------------------------------- and Director
Edward K. Kane
/s/ Leo R. Futia* Director
- -----------------------------------
Leo R. Futia
/s/ Philip H. Dutter* Director
- -----------------------------------
Philip H. Dutter
/s/ Peter L. Hutchings* Director
- -----------------------------------
Peter L. Hutchings
By /s/ John M. Smith Date: February 17, 1999
--------------------------------
John M. Smith
Executive Vice President
* Pursuant to a Power of Attorney
C-7
<PAGE>
Exhibit Index
Number Description
C-8
