As filed with the Securities and Exchange Commission on April 26, 1996
Registration Nos. 2-74906
811-3323
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
POST-EFFECTIVE AMENDMENT No. 25 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
AMENDMENT No. 15 |X|
(Check appropriate box or boxes)
--------------------
THE GUARDIAN SEPARATE ACCOUNT A
(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)
--------------------
It is proposed that this filing will be effective (check appropriate box):
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 1, 1996 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|_| on (date) 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 fiscal year
was filed on February 28, 1996.
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<PAGE>
THE GUARDIAN SEPARATE ACCOUNT A
Registration Statement on Form N-4
<TABLE>
<CAPTION>
Form N-4 Item No. Location
Part A
<S> <C> <C>
Item 1. Cover Page............................................................ Cover
Item 2. Definitions........................................................... Glossary of Special Terms Used in This
Prospectus
Item 3. Synopsis.............................................................. Summary of the Contracts; Expense Table
Item 4. Condensed Financial Information....................................... Condensed Financial Information
Item 5. General Description of Registrant, Depositor and Portfolio Companies.. Descriptions of GIAC and the Separate
Account; Descriptions of the Variable Investment
Options; Description of the Fixed-Rate Option;
Voting Rights
Item 6. Deductions............................................................ Charges and Deductions; Distribution of
the Contracts
Item 7. General Description of Variable Annuity Contracts..................... Descriptions of the Contracts
Item 8. Annuity Period........................................................ Annuity Period
Item 9. Death Benefit......................................................... Pre-Retirement Death Benefit;
Accumulation Period; Annuity Period
Item 10. Purchases and Contract Value.......................................... Descriptions of the Contracts
Item 11. Redemptions........................................................... Surrenders and Partial Withdrawals; Right
to Cancel the Contract
Item 12. Taxes................................................................. Federal Tax Matters
Item 13. Legal Proceedings..................................................... Legal Proceedings
Item 14. Table of Contents of the Statement of Additional Information.......... Additional 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 Separate Account
Item 19. Purchase of Securities Being Offered.................................. Valuation of Assets of the Separate
Account; Transferability Restrictions
Item 20. Underwriters.......................................................... Services to Separate Account
Item 21. Calculation of Performance Data....................................... Calculation of Yield Quotations for The
Guardian Cash Fund
Item 22. Annuity Payments...................................................... Annuity Payments
Item 23. Financial Statements.................................................. Financial Statements
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.
</TABLE>
<PAGE>
PROSPECTUS
May 1, 1996
INDIVIDUAL AND GROUP VARIABLE ANNUITY CONTRACTS
Offered by
The Guardian Insurance & Annuity Company, Inc.
The Individual Deferred Variable Annuity Contracts ("Individual
Contracts") and Group Deferred Variable Annuity Contract (the "Group Contract")
(collectively, the "Contracts") described in this Prospectus are offered and
issued by The Guardian Insurance & Annuity Company, Inc. ("GIAC") and are
designed to provide annuity benefits under retirement programs entitled to
Federal income tax benefits for individual purchasers and for group pension or
profit sharing plans and under deferred compensation plans and other retirement
plans which do not qualify for Federal tax benefits under the Internal Revenue
Code of 1986, as amended (the "Code").
Net Premium Payments for the Contracts may be allocated in up to six of
the Contract's allocation options under which Contract values accumulate on
either a variable or fixed basis. These options consist of the eight mutual fund
investment divisions of The Guardian Separate Account A (the "Separate
Account"), The Guardian Real Estate Account (the "Real Estate Account") and the
Fixed-Rate Option (available only to purchasers of a Single Premium Payment
Contract). Contractowner allocations to the divisions of the Separate Account
will be invested in the shares of the following underlying mutual funds: The
Guardian Stock Fund, The Guardian Bond Fund, The Guardian Cash Fund, Baillie
Gifford International Fund, Baillie Gifford Emerging Markets Fund, Value Line
Strategic Asset Management Trust, Value Line Centurion Fund and Gabelli Capital
Asset Fund (collectively referred to as the "Funds"). The Real Estate Account
invests Contractowner allocations principally in income-producing real estate,
mortgage loans and purchase-leaseback transactions. Contract values allocated to
any of the Investment Divisions or to the Real Estate Account (collectively
referred to as the "Variable Investment Options") will vary to reflect the
investment performance of such divisions or Real Estate Account. Net Premium
Payments allocated to the Fixed-Rate Option will accumulate on a fixed basis,
with principal and minimum interest guaranteed by GIAC.
(continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
EACH OF THE FOLLOWING VARIABLE INVESTMENT OPTIONS: THE GUARDIAN STOCK FUND, THE
GUARDIAN BOND FUND, THE GUARDIAN CASH FUND, BAILLIE GIFFORD INTERNATIONAL FUND,
BAILLIE GIFFORD EMERGING MARKETS FUND, VALUE LINE STRATEGIC ASSET MANAGEMENT
TRUST, VALUE LINE CENTURION FUND, GABELLI CAPITAL ASSET FUND AND THE GUARDIAN
REAL ESTATE ACCOUNT.
Please Read This Prospectus And Keep It For Future Reference.
<PAGE>
(continued from previous page)
Two types of Individual Contracts are described in this Prospectus: (1) a
Single Premium Payment Contract (minimum purchase of $3,000) and (2) a Flexible
Premium Payment Contract (minimum initial purchase of $500). The Individual
Contracts may be issued under certain retirement plans which qualify for Federal
tax benefits under Sections 401, 403 or 408 of the Code. Following the date
pre-selected by the Contractowner for the payments to begin, these payments may
commence under one of the annuity options provided in the Contracts. The
Individual Contracts provide for a minimum pre-retirement death benefit.
The Group Contract is designed for use with several types of tax-qualified
plans and other plans receiving favorable Federal tax treatment, including
retirement plans established by corporate employers under Section 401 of the
Code and certain deferred compensation plans under Section 457 of the Code and
may be purchased for a minimum of $5,000. The Group Contract also provides for
annuities to begin at selected future dates on a basis as elected by the
Contractowner in accordance with a plan or trust.
This Prospectus sets forth the information that a prospective investor
should know before investing. A Statement of Additional Information concerning
the Contracts and the Separate Account is available for free by writing to GIAC
at its Customer Service Office, P.O. Box 26210, Lehigh Valley, Pennsylvania
18002 or by calling 1-800-221-3253. The Statement of Additional Information,
which is also dated May 1, 1996, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The table of contents for
the Statement of Additional Information is included at the end of this
Prospectus.
The Contracts are not available in all states.
2
<PAGE>
CONTENTS OF PROSPECTUS
Page
----
Glossary of Special Terms Used in This Prospectus ......................... 4
Summary of the Contracts .................................................. 5
Expense Table ............................................................. 6
Condensed Financial Information ........................................... 8
Descriptions of GIAC and the Separate Account ............................. 10
Descriptions of the Variable Investment Options ........................... 11
Description of the Fixed-Rate Option ...................................... 14
Descriptions of the Contracts ............................................. 14
Individual Contracts .............................................. 15
Group Contract .................................................... 15
Method of Purchase ................................................ 15
Charges and Deductions ............................................ 16
Pre-Retirement Death Benefit ...................................... 18
Accumulation Period ............................................... 18
Annuity Period .................................................... 19
Transfers of Contract Values ...................................... 20
Surrenders and Partial Withdrawals ................................ 22
Other Important Contract Information .............................. 23
Federal Tax Matters ....................................................... 23
General Information ............................................... 23
Non-Qualified Contracts ........................................... 23
Qualified Contracts ............................................... 26
Other Tax Considerations .......................................... 28
Voting Rights ............................................................. 28
Distribution of the Contracts ............................................. 28
Right to Cancel the Contract .............................................. 29
Legal Proceedings ......................................................... 29
Additional Information .................................................... 29
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE
ACCOMPANYING PROSPECTUSES FOR THE VARIABLE INVESTMENT OPTIONS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL.
3
<PAGE>
GLOSSARY OF SPECIAL TERMS USED IN THIS PROSPECTUS
Accumulation Period: The period between the initial purchase date of the
Contract and the Retirement Date.
Accumulation Unit: A unit of measure used to determine the value of a
Contractowner's interest under the Contract before the Retirement Date. The
Contract has two types of Accumulation Units: Variable Accumulation Units and
Fixed Accumulation Units.
Accumulation Value: The value of the Variable Accumulation Units plus any
Fixed Accumulation Units under the Contract.
Annuitant: The person upon whose life annuity payments are based (normally
the recipient of annuity payments) and upon whose death, prior to the Retirement
Date, benefits under the Contract are paid.
Annuity: A series of periodic payments made for the lifetime of the
Annuitant with or without payments certain for a fixed period or for the joint
lifetimes of the Annuitant and another person and thereafter during the lifetime
of the survivor.
Annuity Payments: Periodic payments made by GIAC to the Contractowner at
regular intervals after the Retirement Date.
Annuity Unit: A unit of measure used to determine the amount of the
variable Annuity Payments.
Beneficiary: The person to whom benefits may be paid upon the
Contractowner's or the Annuitant's death. In the event a beneficiary is not
designated, the Contractowner or the estate of the Contractowner is the
beneficiary.
Contract Anniversary Date: The annual anniversary measured from the issue
date of the Contract.
Contractowner: The person or entity designated as the owner in the
Contract.
Fixed-Rate Option: A deposit option to which owners of Single Premium
Payment Contracts may allocate Net Premium Payments for investment in the
general account of GIAC and under which GIAC guarantees that the amount
deposited will not decline in value and that interest will be added at a rate
declared periodically in advance.
Funds: The eight diversified open-end management investment companies or
series thereof underlying the Contracts. Contractowners may allocate Net Premium
Payments and Accumulation Values to the Funds through the corresponding
Investment Divisions of the Separate Account. The Funds currently available
under the Contracts are: The Guardian Stock Fund, The Guardian Bond Fund, The
Guardian Cash Fund, Baillie Gifford International Fund, Baillie Gifford Emerging
Markets Fund, Value Line Strategic Asset Management Trust, Value Line Centurion
Fund and Gabelli Capital Asset Fund.
Investment Division: A division of the Separate Account, the assets of
which consist solely of shares of one of the Funds underlying the Contract.
Net Premium Payments: A purchase payment or premium paid by the
Contractowner to GIAC in accordance with the Contract, less any applicable
premium taxes. Net Premium Payments are credited to Investment Divisions of the
Separate Account, the Real Estate Account or the Fixed-Rate Option.
Participant: An eligible employee who participates in a group pension,
profit sharing or other retirement plan which qualifies for Federal tax benefits
under the Code.
Real Estate Account: A separate account of GIAC to which Contractowners may
allocate Net Premium Payments and Accumulation Values.
Retirement Date: The date on which Annuity Payments under the Contract
commence.
Surrender Value: The amount payable to the Contractowner or other payee
upon termination of the Contract, other than by the Annuitant's or
Contractowner's death.
Valuation Period: The period of time from one determination of Accumulation
Unit and Annuity Unit values to the next subsequent determination of these
values.
Variable Annuity: An annuity providing for payments varying in amount to
reflect the investment experience of the applicable Variable Investment Options
selected by the Contractowner.
Variable Investment Options: The Funds and the Real Estate Account
constitute the Variable Investment Options (as distinguished from the Fixed-Rate
Option) available under the Contract for allocations of Net Premium Payments and
Accumulation Values.
4
<PAGE>
SUMMARY OF THE CONTRACTS
The Contracts described in this Prospectus are designed to provide annuity
benefits in accordance with the Annuity Payout Option selected and the
retirement plan, if any, under which a Contract has been issued. The Contracts
provide several underlying allocation options through which the Contractowner
may pursue his or her investment objectives. If the Contractowner selects the
Annuity Payout Option that provides for monthly payments during the lifetime of
the Annuitant, GIAC promises to make Annuity Payments continuously for the life
of the Annuitant under the Contract even if such Annuitant outlives the life
expectancy used in computing the Annuity. While GIAC is obligated to make such
Annuity Payments regardless of the longevity of the Annuitant, the amount of
variable annuity payments is not guaranteed. (See "Annuity Payout Options," page
19.) With respect to amounts attributable to the Variable Investment Options, no
assurance can be given that the value of the Contracts during the Accumulation
Period, or the aggregate amount of Annuity Payments made under the Contracts,
will equal or exceed the Net Premium Payments made to such Variable Investment
Options.
GIAC provides for variable accumulations and benefits under the Contracts
by crediting Net Premium Payments to one or more of the Investment Divisions of
the Separate Account or to the Real Estate Account as selected by the
Contractowner. The Investment Divisions of the Separate Account correspond to
the Funds offered under the Contracts. A Contractowner may select up to six of
the Variable Investment Options or, if available to the Contractowner, the
Fixed-Rate Option and five Variable Investment Options. (See "Descriptions of
the Variable Investment Options," page 11.) To the extent Net Premium Payments
from a Single Premium Payment Contract are credited to the Fixed-Rate Option,
GIAC provides for fixed accumulations and benefits. (See "Description of the
Fixed-Rate Option," page 14.) The value of the Contract prior to the Retirement
Date and the amount accumulated to provide Annuity Payments will depend upon the
investment performance of the Variable Investment Options selected by the
Contractowner during the Accumulation Period, except for amounts allocated to
the Fixed-Rate Option. These latter amounts will accrue interest at a rate not
less than the minimum interest rate specified in the Contract. (See
"Accumulation Period," page 18 and "Annuity Period," page 19.) The investment
risk under the Contract is borne by the Contractowner except to the extent that
Net Premium Payments are allocated to the Fixed-Rate Option where the investment
risk is borne by GIAC.
Transfers among the Investment Divisions of the Separate Account are
permitted before and after the Retirement Date, subject to certain conditions
and in accordance with any applicable retirement plan. Certain restrictions
apply to transfers to or from the Real Estate Account and the Fixed-Rate Option.
(See "Transfers of Contract Values," page 20.)
The Contracts contain the following additional features which are described
in more detail in this Prospectus
(1) No sales charges are deducted from Contract payments. However, if
part or all of the Accumulation Value is withdrawn during certain
periods of time following the payment of premiums, GIAC will deduct from
such Accumulation Value a contingent deferred sales charge ranging from
1.0% to 5.0%. The percentage amount and the length of time for which
this charge is applicable depends upon the particular Contract
purchased. A federal income tax penalty may be imposed on surrenders or
partial withdrawals. (See "Charges and Deductions," page 16, "Surrenders
and Partial Withdrawals," page 22 and "Federal Tax Matters," page 23.
(2) Withdrawals from Contracts issued in connection with Section
403(b) qualified plans are restricted under the Code. (See "Qualified
Contracts -- Section 403(b) Plans," page 26, for information about the
circumstances under which withdrawals may be made from such Contracts.)
(3) Charges for the assumption by GIAC of the mortality and expense
risks under the Contracts, the administrative expenses incurred by GIAC
and state premium taxes, if any, are deducted from the Accumulation
Value of the Contracts. (See "Charges and Deductions," page 16.) In
addition, the Funds and the Real Estate Account impose certain charges
against their respective assets. (See the applicable Fund prospectus or
the Real Estate Account prospectus for information about these charges.)
(4) In certain states, the Contractowner may cancel an individual
Contract no later than ten (10) days (twenty (20) days in a limited
number of states) after receiving it by returning the Contract along
with a written notice of cancellation to GIAC. (See "Right to Cancel the
Contract," page 29.)
5
<PAGE>
Certain Federal income tax advantages are currently available to retirement
plans which qualify either under Sections 401 or 403 of the Code or as
individual retirement account plans established under Section 408 of the Code.
Individual Contracts are also available in connection with state and municipal
deferred compensation plans under Section 457 of the Code and under other
deferred compensation arrangements, and are also offered under other retirement
plans which may not qualify for similar tax advantages. (See "Federal Tax
Matters," page 23.)
- --------------------------------------------------------------------------------
EXPENSE TABLE
- --------------------------------------------------------------------------------
CONTRACTOWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases:...................... None
Exchange Fee:........................................... None
Contingent Deferred Sales Charge:
(1) Single Premium Payment Contracts:*
In connection with Single Premium Payment Contracts, the following charges
will be assessed upon amounts withdrawn during the first seven Contract
years measured from the date of issue.
Contract Year Charge*
1 ............................. 5%
2 ............................. 5%
3 ............................. 4%
4 ............................. 3%
5 ............................. 2%
6 ............................. 1%
7 and thereafter.................. 0%
(2) Flexible Premium Payment Contracts:**
In connection with Flexible Premium Payment Con-tracts, this charge will be
the lesser of:
(a) 5% of the total payments made during the 72 months immediately
preceding the date of withdrawal, or
(b) 5% of the amount being withdrawn.
Annual Contract Administration Fee:
Single Premium Payment Contract .............. $30.00
Flexible Premium Payment Contract ............ $35.00
Separate Account Level Annual Expenses:
(as a percentage of daily net asset value):
Mortality and Expense Risk Charge ............ 1.0%
Account Fees and Expenses .................... 0%
----
Total Separate Account Annual Expenses .... 1.0%
- --------------------------------------------------------------------------------
Investment Division Level Annual Expenses:***
(as a percentage of average net assets)
Total Fund
Management Other Operating
Fees Expenses Expenses
---------- -------- ---------
The Guardian Cash Fund....................... .50% .03% .53%
The Guardian Bond Fund....................... .50% .04% .54%
The Guardian Stock Fund...................... .50% .03% .53%
Baillie Gifford International Fund........... .80% .19% .99%
Baillie Gifford Emerging Markets Fund........ 1.00% .67% 1.67%
Value Line Centurion Fund.................... .50% .12% .62%
Value Line Strategic Asset Management Trust.. .50% .10% .60%
Gabelli Capital Asset Fund................... 1.00% .78% 1.78%
- --------------------------------------------------------------------------------
* In any Contract year after the first and when such charge is applicable,
10% of the amount of the single premium payment can be withdrawn without
application of the charge. The maximum amount to which this charge may be
applied cannot exceed the single premium payment.
** In any Contract year after the first and when such charge is applicable,
10% of the total premiums paid under the Contract in the last 72 months
immediately preceding the date of withdrawal can be withdrawn without
application of the charge. The maximum amount of this charge during the 72
months immediately preceding the date of withdrawal will never exceed 5% of
the total of premiums paid during such period.
*** These percentages reflect the actual fees and expenses incurred by each
Fund during the year ended December 31, 1995 except for the percentages for
Gabelli Capital Asset Fund, which reflect the period between May 1, 1995
(commencement of operations) and December 31, 1995 and are annualized. 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 annual 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.
6
<PAGE>
The preceding table is designed to assist the Contractowner in
understanding the various costs and expenses of the Separate Account and its
underlying Funds. (See "Charges and Deductions," and see the accompanying Fund
prospectuses for a more complete description of the various costs and expenses.)
The table does not reflect costs and expenses of the Real Estate Account.
Premium taxes ranging from approximately 0.5% to 3.5% are currently imposed by
certain states and municipalities on payments made under the Contracts. GIAC
will deduct the applicable premium tax from premium payments made by
Contractowners in those states, counties and municipalities where such taxes are
imposed on GIAC. Where applicable, such taxes will decrease the amount of each
premium payment available for allocation.
Comparison of Contract Expenses Among Underlying Funds
For Single Premium (SP) and Flexible Premium (FP) Payment Contracts*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract at the end of the If you do not surrender or you annuitize at the
applicable time period: end of the applicable time period:
You would pay the following expenses on a $1,000 You would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets: investment, assuming a 5% annual return on assets:
Single Premium and Flexible Single Premium and Flexible
Premium Contracts Premium Contracts
-------------------------------------------------- -------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THE GUARDIAN CASH FUND $67 SP $92 SP $110 SP $197 SP $17 SP $52 SP $90 SP $197 SP
$67 FP $103 FP $141 FP $198 FP $17 FP $53 FP $91 FP $198 FP
- ------------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN BOND FUND $67 SP $93 SP $111 SP $198 SP $17 SP $53 SP $91 SP $198 SP
$67 FP $103 FP $142 FP $199 FP $17 FP $53 FP $92 FP $199 FP
- ------------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN STOCK FUND $67 SP $93 SP $110 SP $197 SP $17 SP $52 SP $90 SP $197 SP
$67 FP $103 FP $141 FP $198 FP $17 FP $53 FP $91 FP $198 FP
- ------------------------------------------------------------------------------------------------------------------------------------
BAILLIE GIFFORD $72 SP $108 SP $137 SP $252 SP $22 SP $68 SP $117 SP $252 SP
INTERNATIONAL FUND $72 FP $119 FP $168 FP $253 FP $22 FP $69 FP $118 FP $253 FP
- ------------------------------------------------------------------------------------------------------------------------------------
BAILLIE GIFFORD EMERGING $79 SP $129 SP $171 SP $318 SP $29 SP $89 SP $151 SP $318 SP
MARKETS FUND $79 FP $139 FP $201 FP $318 FP $29 FP $89 FP $151 FP $319 FP
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE LINE CENTURION FUND $68 SP $95 SP $115 SP $207 SP $18 SP $55 SP $95 SP $207 SP
$68 FP $106 FP $146 FP $208 FP $18 FP $56 FP $96 FP $208 FP
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE LINE STRATEGIC ASSET $68 SP $95 SP $114 SP $205 SP $18 SP $55 SP $94 SP $205 SP
MANAGEMENT TRUST $68 FP $105 FP $145 FP $206 FP $18 FP $55 FP $95 FP $206 FP
- ------------------------------------------------------------------------------------------------------------------------------------
GABELLI CAPITAL ASSET FUND $80 SP $132 SP $176 SP $329 SP $30 SP $92 SP $156 SP $329 SP
$80 FP $142 FP $207 FP $330 FP $30 FP $92 FP $157 FP $330 FP
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Flexible Premium Payment Contracts include Group Contracts.
This expense comparison assumes that the expenses reported in the table on
the foregoing page will be the expenses incurred during the periods shown above.
This comparison is not a representation of past or future expenses. Actual
expenses may be higher or lower than those shown. The effect of the annual
contract fee was calculated by: (1) dividing the total amount of such fees for
the year ended December 31, 1995 by the total average net assets for such year;
(2) adding this percentage to annual expenses; and (3) calculating the dollar
amounts.
7
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the financial
statements of the Separate Account which were audited by Price Waterhouse LLP,
independent accountants, for the years ended December 31, 1995, 1994 and 1993,
and by other independent auditors for the prior periods listed. The data should
be read in conjunction with the financial statements, related notes and other
financial information from the Separate Account's 1995 Annual Report to
Contractowners and incorporated by reference into the Statement of Additional
Information. A copy of the 1995 Annual Report to Contractowners and the
Statement of Additional Information may be obtained by calling or writing to
GIAC's Customer Service Office. The address and phone number appear on the first
page of this Prospectus.
Selected data for Accumulation Units of the Separate Account outstanding at
the end of each period:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Cash Fund ...... $ 21.217 $ 20.639 $ 20.307 $ 19.869 $ 19.003 $ 17.767 $ 16.456
The Guardian Stock Fund ..... 43.446 44.443 37.415 31.469 23.376 26.755 21.890
The Guardian Bond Fund ...... 25.230 26.391 24.262 22.750 19.774 18.565 16.464
Gabelli Capital Asset Fund .. 10.000++ -- -- -- -- -- --
Baillie Gifford International
Fund ...................... 12.851 12.866 9.694 10.756 10.000* -- --
Baillie Gifford Emerging
Markets Fund .............. 8.785 10.000+ -- -- -- -- --
Value Line Centurion Fund ... 29.115 30.069 27.807 26.511 17.593 16.831 12.926
Value Line Strategic Asset
Management Trust .......... 21.408 22.729 20.521 18.013 12.691 12.836 10.325
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 22.172 $ 21.217 $ 20.639 $ 20.307 $ 19.869 $ 19.003 $ 17.767
The Guardian Stock Fund ..... 57.929 43.446 44.443 37.415 31.469 23.376 26.755
The Guardian Bond Fund ...... 29.376 25.230 26.391 24.262 22.750 19.774 18.565
Gabelli Capital Asset Fund .. 10.763 -- -- -- -- -- --
Baillie Gifford International
Fund ...................... 14.154 12.851 12.866 9.694 10.756 -- --
Baillie Gifford Emerging
Markets Fund ................ 8.647 8.785+ -- -- -- -- --
Value Line Centurion Fund ... 40.383 29.115 30.069 27.807 26.511 17.593 16.831
Value Line Strategic Asset
Management Trust .......... 27.247 21.408 22.729 20.521 18.013 12.691 12.836
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 2,089,104 2,648,986 2,942,235 3,921,593 4,692,570 5,608,349 5,016,347
The Guardian Stock Fund ..... 3,704,798 3,886,496 3,963,403 3,886,689 3,902,601 3,934,473 3,528,351
The Guardian Bond Fund ...... 1,628,230 1,823,384 2,142,451 2,477,490 2,576,627 2,486,450 2,472,842
Gabelli Capital Asset Fund .. 66,391 -- -- -- -- -- --
Baillie Gifford International
Fund ...................... 1,077,612 1,368,576 923,046 459,629 361,003 -- --
Baillie Gifford Emerging
Markets Fund .............. 101,949 55,254+ -- -- -- -- --
Value Line Centurion Fund ... 2,390,917 2,541,147 2,829,258 3,180,170 3,316,085 3,320,186 3,313,530
Value Line Strategic Asset
Management Trust .......... 3,010,346 3,271,469 3,653,393 3,472,787 3,106,929 2,800,772 2,274,974
</TABLE>
Year Ended December 31,
-----------------------------------
1988 1987 1986
--------- --------- ---------
TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Cash Fund ...... $ 15.484 $ 14.703 $ 13.957
The Guardian Stock Fund ..... 18.367 18.209 15.703
The Guardian Bond Fund ...... 15.157 15.258 13.418
Gabelli Capital Asset Fund .. -- -- --
Baillie Gifford International
Fund ...................... -- -- --
Baillie Gifford Emerging
Markets Fund .............. -- -- --
Value Line Centurion Fund ... 12.134 12.615 10.901
Value Line Strategic Asset
Management Trust .......... 9.453 10.000** --
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 16.456 $ 15.484 $ 14.703
The Guardian Stock Fund ..... 21.890 18.367 18.209
The Guardian Bond Fund ...... 16.464 15.157 15.258
Gabelli Capital Asset Fund .. -- -- --
Baillie Gifford International
Fund ...................... -- -- --
Baillie Gifford Emerging
Markets Fund ................ -- -- --
Value Line Centurion Fund ... 12.926 12.134 12.615
Value Line Strategic Asset
Management Trust .......... 10.325 9.453 --
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 4,082,938 3,135,907 1,747,546
The Guardian Stock Fund ..... 2,517,696 2,287,756 1,279,316
The Guardian Bond Fund ...... 1,746,189 1,556,621 1,354,674
Gabelli Capital Asset Fund .. -- -- --
Baillie Gifford International
Fund ...................... -- -- --
Baillie Gifford Emerging
Markets Fund .............. -- -- --
Value Line Centurion Fund ... 3,946,617 5,342,529 4,923,894
Value Line Strategic Asset
Management Trust .......... 1,608,257 363,868 --
- ------------
* Commencing February 8, 1991.
** Commencing September 15, 1987.
+ Commencing October 17, 1994.
++ Commencing May 1, 1995.
8
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NON-TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Cash Fund ...... $ 21.217 $ 20.639 $ 20.307 $ 19.869 $ 19.003 $ 17.767 $ 16.456
The Guardian Stock Fund ..... 43.446 44.443 37.415 31.469 23.376 26.755 21.890
The Guardian Bond Fund ...... 25.230 26.391 24.262 22.750 19.774 18.565 16.464
Gabelli Capital Asset Fund .. 10.000++ -- -- -- -- -- --
Baillie Gifford International
Fund ...................... 12.851 12.866 9.694 10.756 10.000* -- --
Baillie Gifford Emerging
Markets Fund .............. 8.785 10.000+ -- -- -- -- --
Value Line Centurion Fund ... 29.115 30.069 27.807 26.511 17.593 16.831 12.926
Value Line Strategic Asset
Management Trust .......... 21.408 22.729 20.521 18.013 12.691 12.836 10.325
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 22.172 $ 21.217 $ 20.639 $ 20.307 $ 19.869 $ 19.003 $ 17.767
The Guardian Stock Fund ..... 57.929 43.446 44.443 37.415 31.469 23.376 26.755
The Guardian Bond Fund ...... 29.376 25.230 26.391 24.262 22.750 19.774 18.565
Gabelli Capital Asset Fund .. 10.763++ -- -- -- -- -- --
Baillie Gifford International
Fund ...................... 14.154 12.851 12.866 9.694 10.756 -- --
Baillie Gifford Emerging
Markets Fund .............. 8.647 8.785+ -- -- -- -- --
Value Line Centurion Fund ... 40.383 29.115 30.069 27.807 26.511 17.593 16.831
Value Line Strategic Asset
Management Trust .......... 27.247 21.408 22.729 20.521 18.013 12.691 12.836
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 2,583,393 3,789,032 3,646,983 4,269,426 5,128,078 6,662,947 6,380,840
The Guardian Stock Fund ..... 2,999,011 2,965,690 3,187,728 3,363,467 3,417,909 3,398,120 3,680,472
The Guardian Bond Fund ...... 1,794,933 1,973,991 2,482,373 2,996,262 3,328,076 3,476,609 3,702,891
Gabelli Capital Asset Fund .. 115,452 -- -- -- -- -- --
Baillie Gifford
International Fund ........ 1,315,858 1,688,165 1,690,547 656,189 452,249 -- --
Baillie Gifford Emerging
Markets Fund .............. 281,304 92,831+ -- -- -- -- --
Value Line Centurion Fund ... 2,179,325 2,249,421 2,641,534 3,189,835 3,609,755 3,506,781 3,435,285
Value Line Strategic Asset
Management Trust .......... 1,833,099 2,041,394 2,380,606 2,305,769 2,214,243 2,037,985 1,970,805
</TABLE>
Year Ended December 31,
-----------------------------------
1988 1987 1986
--------- --------- ---------
NON-TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Cash Fund ...... $ 15.484 $ 14.703 $ 13.957
The Guardian Stock Fund ..... 18,367 18.209 15.703
The Guardian Bond Fund ...... 15.157 15.258 13.418
Gabelli Capital Asset Fund .. -- -- --
Baillie Gifford International
Fund ...................... -- -- --
Baillie Gifford Emerging
Markets Fund .............. -- -- --
Value Line Centurion Fund ... 12.134 12.615 10.901
Value Line Strategic Asset
Management Trust .......... 9.453 10.000** --
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 16.456 $ 15.484 $ 14.703
The Guardian Stock Fund ..... 21.890 18.367 18.209
The Guardian Bond Fund ...... 16.464 15.157 15.258
Gabelli Capital Asset Fund .. -- -- --
Baillie Gifford International
Fund ...................... -- -- --
Baillie Gifford Emerging
Markets Fund .............. -- -- --
Value Line Centurion Fund ... 12.926 12.134 12.615
Value Line Strategic Asset
Management Trust .......... 10.325 9.453 --
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 6,085,799 4,840,753 3,092,037
The Guardian Stock Fund ..... 2,431,214 2,315,585 1,497,664
The Guardian Bond Fund ...... 3,121,908 2,979,134 2,391,745
Gabelli Capital Asset Fund .. -- -- --
Baillie Gifford
International Fund ........ -- -- --
Baillie Gifford Emerging
Markets Fund .............. -- -- --
Value Line Centurion Fund ... 4,114,152 6,069,897 5,913,352
Value Line Strategic Asset
Management Trust .......... 1,542,803 635,921 --
- ------------
* Commencing February 8, 1991.
** Commencing September 15, 1987.
+ Commencing October 17, 1994.
++ Commencing May 1, 1995.
9
<PAGE>
DESCRIPTIONS OF GIAC AND THE SEPARATE ACCOUNT
GIAC
The Guardian Insurance & Annuity Company, Inc. ("GIAC"), a stock life
insurance company incorporated in the state of Delaware in 1970, is the issuer
of the Contracts offered by this Prospectus. GIAC is licensed to conduct an
insurance business in all 50 states of the United States and the District of
Columbia and had total assets of over $5.0 billion as of December 31, 1995.
GIAC's executive office is located at 201 Park Avenue South, New York, New York
10003, and the address of its Customer Service Office for 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, 1995, Guardian Life had total assets in excess
of $10.9 billion. Guardian Life is licensed to conduct an insurance business in
all 50 states and the District of Columbia. Guardian Life is not the issuer of
the Contracts offered under this Prospectus and does not guarantee the benefits
provided therein.
GIAC's financial statements appear in the Statement of Additional
Information.
THE SEPARATE ACCOUNT
GIAC established The Guardian Separate Account A (the "Separate Account")
in 1981 pursuant to the provisions of the Delaware Insurance Code. The Separate
Account is registered as a unit investment trust under the Investment Company
Act of 1940, as amended (the "1940 Act") and meets the definition of "Separate
Account" under the Federal securities laws.
There are eight Investment Divisions (which correspond to the eight Funds)
available for allocations of Net Premium Payments and Accumulation Values. Each
Investment Division invests in a specific underlying Fund and thereby reflects
that Fund's investment performance. Each such Division is divided into two
subdivisions, one for allocations under a tax qualified retirement plan and the
other for non-tax qualified plans, depending upon the plan under which the
Contract is issued. GIAC owns all of the Fund shares allocated to each
Investment Division but passes through to the Contractowners the voting rights
in such shares.
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 Division's subdivision are credited to or charged against
the assets held in that subdivision in accordance with the terms of each
Contract, without regard to other income, capital gains or capital losses of the
other subdivisions. Delaware insurance law provides that the assets of the
Separate Account are not chargeable with liabilities arising out of any other
business GIAC may conduct. (See "Federal Tax Matters.")
Assets of the Separate Account attributable to a Contract are invested in
shares of up to six of the Funds as selected by the Contractowner or, if
permitted by an applicable retirement plan, the Participant. Selecting the
Fixed-Rate Option or the Real Estate Account reduces the number of Funds which
may be selected for allocation. No sales charges are assessed against premium
payments invested in the Funds under the Contracts. Transfers among the
Investment Divisions may currently be effected without fee, penalty or other
charge through proper transfer requests to GIAC's Customer Service Office in
writing or by telephone. (See "Transfers of Contract Values.")
All dividends and capital gains distributions received from a Fund are
reinvested in such Fund shares at net asset value and retained as assets of the
Separate Account through allocation to the applicable Investment Division. Fund
shares will be redeemed by GIAC at their net asset value to the extent necessary
to make annuity or other payments under the Contract.
10
<PAGE>
DESCRIPTIONS OF THE VARIABLE INVESTMENT OPTIONS
The Funds
Each Fund has a different investment objective which it tries to achieve by
following specified investment policies. The objective and policies of each Fund
will affect its potential returns and its risks. There is no guarantee that a
Fund will achieve its investment objective. The following chart states the
investment objective and lists typical portfolio investments of each Fund
currently available through the Separate Account.
Each of the Funds is an open-end diversified management investment company
or a series thereof, and is registered with the SEC under the 1940 Act. Such
registration does not involve any supervision by the SEC of the investment
management or policies of the Funds. The Funds do not impose a sales charge or
"load" for buying and selling their shares, so GIAC buys and sells shares at net
asset value in response to Contractowner-requested and other Contract
transactions.
All of the Funds are also available under other variable annuity contracts
funded by the Separate Account. Certain of the Funds are available under other
separate accounts supporting certain GIAC variable annuity contracts and
variable life insurance policies. Although GIAC does not anticipate any inherent
difficulties in offering these Funds to more than one separate account, it is
possible that certain conflicts of interest may arise in connection with the use
of the same Funds under both variable life insurance policies and variable
annuity contracts. While each Fund's Board of Directors intends to monitor
events in order to identify and, if deemed necessary, act upon any material
irreconcilable conflicts that may possibly arise, GIAC may also take action to
protect Contractowners. See the accompanying prospectuses for the Funds for more
information regarding such possible conflicts of interest.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE(S) TYPICAL INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Guardian Stock Fund Long-term growth of capital U.S. common stocks and convertible
securities
- ------------------------------------------------------------------------------------------------------------------------------------
The Guardian Bond Fund Maximum income without undue risk of principal Investment grade debt obligations and U.S.
capital appreciation as a secondary objective government securities, including mortgage-
backed securities
- ------------------------------------------------------------------------------------------------------------------------------------
The Guardian Cash Fund High level of current income consistent with Money market instruments
liquidity and preservation of capital
- ------------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford International Long-term capital appreciation Common stocks and convertible securities
Fund issued by foreign companies
- ------------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Long-term capital appreciation Common stocks and convertible securities
Fund issued by companies that are organized in,
generally operate in, or which principally
sell their securities in emerging market
countries
- ------------------------------------------------------------------------------------------------------------------------------------
Value Line Centurion Fund Long-term growth of capital U.S. common stocks ranked 1 or 2 by the
Value Line Ranking System*
- ------------------------------------------------------------------------------------------------------------------------------------
Value Line Strategic Asset Trust High total investment return (current U.S. common stocks ranked 1 or 2 by the
Management income and capital appreciation) consistent Value Line Ranking System,* bonds and money
with reasonable risk market instruments
- ------------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund Growth of capital; current income as a secondary U.S. common stocks and convertible
objective securities
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain of the Funds may not be available in all States.
- --------------------
* The Value Line Ranking System has been used substantially in its present form
since 1965. The System ranks stocks on a scale of 1 (highest) to 5 (lowest)
for year-ahead relative performance (timeliness).
GIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Fund shares held by any Investment
Division. GIAC reserves the right to eliminate the shares of any of the Funds
and to substitute shares of another Fund, or of another registered open-end
management investment company or series thereof or other appropriate investment
vehicle, if: (1) the shares of the Fund are no longer
11
<PAGE>
available for investment; or (2) in GIAC's view it has become inappropriate to
continue investing in the Fund's shares. To the extent required by the 1940 Act,
substitutions of shares attributable to a Contractowner's interest in an
Investment Division will not be made until the Contractowner has been notified
of the change.
A more detailed description of the investment objectives, policies,
charges, and expenses of the Funds may be found in the accompanying prospectuses
for the Funds. Read the prospectuses carefully before investing.
The Funds' Investment Advisers
The Guardian Stock Fund, The Guardian Bond Fund and The Guardian Cash Fund
are advised by GISC, 201 Park Avenue South, New York, New York 10003. GISC is
registered as an investment adviser under the Investment Advisers Act of 1940
(the "Advisers Act"). GISC is wholly owned by GIAC. Each of these Funds pays
GISC an investment advisory fee at an annual rate of 0.50% of the Fund's average
daily net assets for the services and facilities GISC provides to the Fund. GISC
also serves as the manager of Gabelli Capital Asset Fund, as the investment
adviser of five of the six series comprising The Park Avenue Portfolio, a family
of mutual funds, and as co-adviser of the Real Estate Account.
The Baillie Gifford International Fund (the "International Fund") and
Baillie Gifford Emerging Markets Fund (the "Emerging Markets Fund") are advised
by Guardian Baillie Gifford Limited ("GBG"), 1 Rutland Court, Edinburgh, EH3
8EY, Scotland. GBG is registered as an investment adviser under the Advisers Act
and is a member of Great Britain's Investment Management Regulatory Organization
Limited ("IMRO"). GBG was incorporated in Scotland in November 1990 and is
wholly owned by GIAC (51%) and Baillie Gifford Overseas Limited ("BG Overseas")
(49%). Since February 1993, GBG has also served as the investment adviser of one
of the six series comprising The Park Avenue Portfolio. GBG receives an
investment advisory fee at an annual rate of 0.80% of the average daily net
assets of the International Fund and 1.00% of the average daily net assets of
the Emerging Markets Fund for the services and facilities GBG provides to the
Funds.
GBG has appointed BG Overseas to serve as sub-investment adviser to the
International Fund and the Emerging Markets Fund. Like GBG, BG Overseas is
located at 1 Rutland Court, Edinburgh, EH3 8EY, Scotland. BG Overseas is also
registered under the Advisers Act and is a member of IMRO. BG Overseas is wholly
owned by Baillie Gifford & Co., which is currently one of the largest investment
management partnerships in the United Kingdom. BG Overseas advises several
institutional clients situated outside of the United Kingdom, and is also the
sub-investment adviser to the series of The Park Avenue Portfolio that is
advised by GBG. One half of the investment advisory fee paid by the Funds to GBG
is payable by GBG to BG Overseas for its services as these Funds' sub-investment
adviser. No separate or additional fee is paid by these Funds to BG Overseas.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund
are advised by Value Line, Inc. ("Value Line"), 220 East 42nd Street, New York,
New York 10017. Value Line is registered as an investment adviser under the
Advisers Act. Each of the Value Line Funds pays Value Line an investment
advisory fee at an annual rate of 0.50% of the Fund's average daily net assets
for the services and facilities Value Line provides to these Funds. Each of the
Value Line Funds reimburses GIAC for certain administrative and shareholder
servicing expenses incurred by GIAC on their behalf. Value Line also serves as
the investment adviser to its own family of mutual funds and publishes The Value
Line Investment Survey and The Value Line Mutual Fund Survey.
Gabelli Capital Asset Fund is managed by GISC, which has appointed Gabelli
Funds, Inc. ("GFI") as the investment adviser to the Fund. GFI is located at One
Corporate Center, Rye, New York 10580, and is registered as an investment
adviser under the Advisers Act. The Fund pays GISC a management fee at an annual
rate of 1.00% of its average daily net assets for services and facilities which
GISC provides to the Fund. For its services as investment adviser, GISC pays GFI
.75% of the management fee which GISC receives from the Fund. No
12
<PAGE>
separate or additional fee is paid by the Fund to GFI. GFI also serves as
investment adviser to 12 other open-end mutual funds and 2 closed-end mutual
funds.
THE GUARDIAN REAL ESTATE ACCOUNT
The Guardian Real Estate Account ("Real Estate Account") is a separate
account of GIAC that pursues its objective by investing primarily in commercial
real estate (such as office buildings, shopping centers or industrial
properties), mortgage loans and other real estate-related investments, including
purchase-leaseback transactions. The Real Estate Account seeks to: (1) preserve
and protect its capital; (2) provide for the compounding of income by
reinvesting cash flow from investments; and (3) provide for increases over time
in the amount of such income through appreciation in the value of its assets.
There is no assurance that sufficient suitable investments will be found for the
Real Estate Account or that the Real Estate Account's objectives will be
attained.
The real estate-related investments of the Real Estate Account are primarily
managed on behalf of GIAC by O'Connor Realty Advisors Incorporated ("O'Connor
Realty"), a wholly owned subsidiary of J.W. O'Connor & Co., Inc. Pursuant to an
investment management agreement, O'Connor Realty receives an investment
management fee at an annual rate of 1.0% of the average daily value of the real
estate-related assets which O'Connor manages.
GISC manages the Real Estate Account's investment in short- and medium-term
debt instruments. The Real Estate Account pays GISC an investment management fee
at an annual rate of 0.5% per year of the average daily value of these liquid
assets. (See the accompanying prospectus for the Real Estate Account.)
Investment in the Real Estate Account involves significant risks. These
include the risk of fluctuating real estate values, the risk that the Real
Estate Account will not achieve sufficient geographic and functional
diversification to protect it against possible adverse performance by certain of
its real estate-related investments, and the risk that the appraised or
estimated values of the Real Estate Account's real estate-related investments
will not be realized upon their disposition. Presently, the Real Estate Account
owns real properties in a limited number of geographic locations, which places
it at a greater risk of being adversely affected by fluctuating property values
than an account which has acquired properties in a greater number of geographic
locations. The Real Estate Account's real estate-related investments will
generally not be quickly convertible into cash on commercially reasonable terms.
Accordingly, the Real Estate Account should be viewed only as a long-term
allocation option. GIAC has also generally reserved the right to defer payment,
for a period of up to six months, of any Contract benefits (other than the
minimum death benefit guarantee) which are funded by the Real Estate Account. In
addition, there are certain limitations on Contractowner transfers of the
Accumulation or Annuity Value out of the Real Estate Account. (See "Descriptions
of the Contracts -- Transfers of Contract Values.")
The Real Estate Account is also available for investment under certain
other variable annuity and variable life insurance contracts issued by GIAC.
The accompanying prospectus for the Real Estate Account includes its
financial statements and provides more complete information about its investment
objectives, policies and restrictions. The Real Estate Account is not subject to
the requirements of the 1940 Act and may not be available for allocation in all
states in which the Contracts are offered. Read the prospectus carefully before
investing.
13
<PAGE>
DESCRIPTION OF THE FIXED-RATE OPTION
That portion of the Single Premium Payment Contract relating to the
Fixed-Rate Option, described below, is not registered under the Securities Act
of 1933 ("1933 Act") and the Fixed-Rate Option is not registered as an
investment company under the 1940 Act. Accordingly, neither the Fixed-Rate
Option nor any interests therein are subject to the provisions or restrictions
of the 1933 Act or the 1940 Act. 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 Single Premium Payment Contracts are
offered.
The purchaser of a Single Premium Payment Contract may allocate all or part
of the Net Premium Payment for his or her Contract to the Fixed-Rate Option.
GIAC guarantees that amounts invested under the Fixed-Rate Option will accrue
interest daily at an effective annual rate of at least 3% (the "guaranteed
minimum interest rate"). GIAC may also credit interest at a rate in excess of 3%
(the "excess interest rate") but is under no obligation to do so. Any excess
interest rate will be determined in the sole discretion of GIAC and may be
changed by GIAC from time to time and without notice. The Contractowner assumes
the risk that interest credited on the portion of the accumulation value in the
Fixed-Rate Option may not exceed the guaranteed minimum interest rate (3%) for
any given year.
There is no specific formula for the determination of whether to credit
excess interest or the rate thereof. Some of the factors that GIAC may consider
are general economic trends, rates of return currently available and anticipated
on GIAC's general account investments, regulatory and tax requirements and
competitive factors. GIAC is aware of no statutory limitations on the maximum
amount of interest it may credit, and the Board of Directors of GIAC has set no
limitations.
The amounts credited to the Fixed-Rate Option become part of the general
assets of GIAC and are segregated from those allocated to any separate account
of GIAC. GIAC invests the assets of the Fixed-Rate Option in those assets chosen
by GIAC and allowed by applicable law. The allocation of any payment to the
Fixed-Rate Option does not entitle a Contractowner to share in the investment
experience of those assets.
The interest rate initially credited to the Net Premium Payment allocated
to the Fixed-Rate Option will be the rate in effect on the date the Contract is
issued. Any excess interest rate credited to the amount allocated to the
Fixed-Rate Option will be guaranteed until the next Contract Anniversary Date.
GIAC may change the excess interest rate credited to a particular Contract on
each subsequent Contract Anniversary Date and each such subsequent interest rate
will also be guaranteed for one Contract year until the following Contract
Anniversary Date.
The Fixed-Rate Option will not be maintained after the Contractowner's
Retirement Date. Any accumulation value in the Fixed-Rate Option on the
Retirement Date will be applied to the Annuity Payout Option elected by the
Contractowner. Certain restrictions apply to transfers to and from the
Fixed-Rate Option (see "Transfers of Contract Values").
DESCRIPTIONS OF THE CONTRACTS
This section of the Prospectus highlights the more significant provisions
of the Contracts. The information included in this section generally describes,
among other things, the benefits, charges, rights and privileges under the
Contracts. These descriptions are qualified by reference to specimen Contracts
which have been filed as exhibits to the registration statement for the Separate
Account. The provisions of the Contracts may vary slightly from state to state
due to variations in state regulatory requirements.
14
<PAGE>
The variable annuity payments provided by the Contracts are funded through
investments in the Separate Account and the Real Estate Account. Information
regarding the Separate Account and the Real Estate Account is contained in the
sections entitled "Descriptions of GIAC and the Separate Account," "Descriptions
of the Variable Investment Options," and in the current prospectus for each of
the Variable Investment Options.
INDIVIDUAL CONTRACTS
The Individual Contracts are only offered on the lives of individual
Annuitants. Two types of Individual Contracts are available: (1) a Single
Premium Payment Contract and (2) a Flexible Premium Payment Contract. Each of
these types of Individual Contracts are further subdivided into those which
qualify for special Federal income tax treatment ("Qualified Contracts") and
those which do not qualify for such treatment ("Non-Qualified Contracts"). (See
"Federal Tax Matters.")
A minimum purchase payment of $3,000 is required under Single Premium
Payment Contracts. A minimum initial purchase payment of $500 is required under
Flexible Premium Payment Contracts. Thereafter, the minimum additional flexible
payment is $100. However, if a Flexible Premium Payment Contract is purchased
by, or in connection with, an employer payroll deduction plan, the minimum
amount GIAC will accept as a premium payment is $50 per Contract. The aggregate
of flexible premium payments made in any Contract year after the first may not
exceed ten (10) times the amount of the premium payments made in the first
Contract year or $100,000, whichever is less, without the written consent of
GIAC.
GIAC reserves the right to defer payment of any Contract benefits (other
than guaranteed death benefits) funded by the Real Estate Account (see
"Surrenders and Partial Withdrawals").
GROUP CONTRACT
The Group Contract offered by this Prospectus is a Flexible Premium Payment
Contract under which Annuity Payments to plan Participants will begin at
selected future dates on a basis which is elected by the Contractowner in
accordance with a plan or trust.
The Contract is designed for use with several types of tax qualified plans
and other plans receiving favorable tax treatment, including retirement plans
established by corporate employers under Section 401 and public employee
deferred compensation plans under Section 457 of the Code. As such, the
provisions of the plan or trust should be referred to in connection with the
description of the Group Contract contained in this Prospectus.
A minimum initial purchase payment of $5,000 is required, with additional
payments of at least $500 accepted. Subsequent payments in excess of $100,000 in
any one Contract year are acceptable only with the written consent of GIAC.
METHOD OF PURCHASE
To purchase a Contract a complete application and initial premium payment
must be sent to The Guardian Insurance & Annuity Company, Inc., Customer Service
Office, P.O. Box 26210, Lehigh Valley, Pennsylvania 18002. Registered, certified
and express mail should be sent to such office at 3900 Burgess Place, Bethlehem,
Pennsylvania 18017. If the application is acceptable to GIAC in the form
received, the initial purchase payment will be credited within two (2) business
days after receipt. If the initial purchase payment cannot be credited within
five (5) business days after receipt by GIAC because the application is
incomplete, GIAC will promptly return the payment and application to the
applicant. Acceptance is subject to GIAC's rules and GIAC reserves the right to
reject any application or initial purchase payment.
15
<PAGE>
After issuance of the Contract, net premium payments received by GIAC at
its Customer Service Office prior to the close of GIAC's business day will
normally be credited to the Contract on that day. Net premium payments received
on a non-business day or after the close of GIAC's business day will normally be
credited at the next accumulation unit value calculated on the first business
day following receipt.
CHARGES AND DEDUCTIONS
Charges and deductions under the Contracts are made for GIAC's assumption
of mortality and expense risk and administrative expenses, for any applicable
premium taxes and, where applicable, charges (or credits) to the non-tax
qualified subdivisions of the Separate Account or Real Estate Account for
Federal income taxes, if any. Although no sales charges are deducted from
premium payments when made, a contingent deferred sales charge will be assessed
upon certain Contract surrenders or withdrawals. The amount of this latter
charge is based on the type of Contract involved. The following describes each
charge and deduction made under the Contracts:
Mortality and Expense Risk Deduction: The mortality risk assumed by GIAC
arises from its promise to pay death benefit proceeds and from its contractual
obligation to make Annuity Payments to each Annuitant regardless of how long he
or she lives and regardless of how long all Annuitants as a group live. This
assures each Annuitant that neither his or her own longevity nor an improvement
in life expectancy generally will have an adverse effect on the Annuity Payments
he or she will receive under a Contract and relieves the Annuitant from the risk
that he or she will outlive the amounts actually accumulated for retirement. The
expense risk assumed by GIAC arises from the possibility that the amounts
deducted for sales and administrative expenses may be insufficient to cover the
actual cost of such items.
GIAC makes a daily charge of .000027 of the value of the net assets of each
Variable Investment Option (1.0% on an annual basis consisting of approximately
.65% for mortality risks and approximately .35% for expense risks) to compensate
it for the assumption of these risks. If this charge is insufficient to cover
the actual cost of these risks, the loss will fall on GIAC. Conversely, if the
charge proves more than sufficient, any excess may be retained by GIAC for
profit or use by it to meet any operational expense, including that of
distribution of the Contracts.
Variable annuity payments reflect the investment performance of the
Variable Investment Options but are not affected by changes in actual mortality
experience or by expenses incurred by GIAC in excess of the expense deductions
provided for in each Contract.
Other Charges Applicable to the Funds and the Real Estate Account: The net
asset value per share of each of the Funds and of the Real Estate Account's unit
value reflect investment management fees and certain general operating expenses
paid by the Funds and the Real Estate Account. With the exception of the
International Fund, the Emerging Markets Fund and Gabelli Capital Asset Fund,
each of the Funds pays an annual investment management fee to its investment
adviser that equals 0.50% of such Fund's average daily net assets. The annual
investment management fee paid to the adviser of the International Fund and the
Emerging Markets Fund is 0.80% of the International Fund's average daily net
assets and 1.00% of the Emerging Markets Fund's average daily net assets.
Gabelli Capital Asset Fund pays its manager an annual management fee of 1.00% of
its average daily net assets. No separate fee is payable to the respective
sub-investment advisers of these Funds. The Real Estate Account pays an annual
investment management fee of up to 1.00% based on a weighted average of (1) an
annual fee of 1.00% on the average daily value of the real estate-related assets
maintained in the Real Estate Account and (2) an annual fee of 0.50% on the
average daily value of the non-real estate-related assets maintained in the Real
Estate Account. (See "The Funds" and "The Guardian Real Estate Account".) The
management fees and other expenses incurred by the Funds and the Real Estate
Account are more fully described in the accompanying prospectuses for the Funds
and the Real Estate Account.
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Annual Contract Administration Fee: On each Contract Anniversary Date on or
before the Retirement Date, GIAC deducts a Contract administration fee of $30
from Individual Single Premium Payment Contracts and $35 from Individual
Flexible Premium Payment Contracts or Group Contracts by cancelling Accumulation
Units which are equal in value to the fee. This fee is deducted from the
Variable Investment Options and the Fixed-Rate Option on a pro-rata basis in the
same proportion as the percentage of the Contract's Accumulation Value
attributable to each Variable Investment Option and the Fixed-Rate Option. GIAC
deducts the Contract administration fee if a Contract is surrendered before the
Contract Anniversary Date. This fee is designed to reimburse GIAC for its actual
expenses incurred in administering the Contracts and it is not expected to
result in a profit. GIAC will not increase the Contract administration fee.
Premium Taxes: Certain states and municipalities impose premium taxes when
premium payments are made or when annuity payments begin. Premium taxes range
from approximately 0.5% to 3.5% on premium payments made under the Contracts.
For those Contracts subject to a premium tax, GIAC deducts premium taxes either
from Contract premium payments when made or on the Retirement Date, as
determined in accordance with applicable law.
Contingent Deferred Sales Charge: GIAC makes no separate sales charge
assessment in connection with the purchase of a Contract or subsequent premium
payments under a Flexible Premium Payment or Group Contract. However, a
contingent deferred sales charge ("CDSC") is imposed by GIAC on certain
surrenders or partial withdrawals to cover certain expenses incurred in the sale
of the Contracts, including commissions to registered representatives and
various promotional expenses. The CDSC and the time periods for which it applies
differ depending upon the type of Contract purchased. In no event, however, will
the CDSC ever exceed, in the aggregate, 9% of the premium payments.
In connection with Individual Single Premium Payment Contracts, the
following charges will be assessed upon amounts withdrawn during the first six
Contract years measured from the date of issue:
Contract Year Charge
------------ ------
1............................................... 5%
2............................................... 5%
3............................................... 4%
4............................................... 3%
5............................................... 2%
6............................................... 1%
7 and thereafter................................ 0%
However, in any Contract year after the first and when a CDSC is
applicable, 10% of the amount of the single premium payment can be withdrawn
annually by the Contractowner without application of the CDSC. Such withdrawals
may, however, be subject to penalty taxes and/or mandatory federal income tax
withholding. (See "Federal Tax Matters.") The maximum amount to which the CDSC
may be applied cannot exceed the single premium payment.
In connection with Individual Flexible Premium Payment Contracts and Group
Contracts, the CDSC will be the lesser of (a) 5% of the total premiums paid
during the 72 months immediately preceding the date of withdrawal annually, or
(b) 5% of the amount being withdrawn. However, in any Contract year after the
first and when a CDSC is applicable, 10% of the total premiums paid under the
Contract in the last 72 months immediately preceding the date of withdrawal can
be withdrawn without application of the CDSC. Such withdrawals may, however, be
subject to penalty taxes and/or mandatory federal income tax withholding. (See
"Federal Tax Matters.") The maximum amount of the CDSC during the 72 months
immediately preceding the date of withdrawal will never exceed 5% of the total
of premiums paid during such period.
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PRE-RETIREMENT DEATH BENEFIT
Upon the death of the Annuitant (or the death of the Contractowner for
non-qualified Contracts) prior to the Retirement Date, an amount equal to the
Accumulation Value of the Contract (the current value of Accumulation Units
credited) as of the end of the Valuation Period during which GIAC receives due
proof of death, will be available for payment to the Beneficiary promptly after
proof of death is received by GIAC. (Under certain circumstances, the
Beneficiary may also choose to receive payments pursuant to one of the payout
options described under "Annuity Payout Options.") However, if death occurs
before the Annuitant reaches age 75 and before the Retirement Date, the death
benefit cannot be less than the total of all payments made under such Contract,
less a reduction for any prior redemptions and any charges assessed in
connection with those transactions. The Contractowner may designate a
Beneficiary and may change such designation at any time before Annuity Payments
begin.
ACCUMULATION PERIOD
Allocation of Net Premium Payment: The initial Net Premium Payment is used
to purchase Accumulation Units in the Investment Divisions, the Fixed-Rate
Option (available to Single Premium Payment Contracts only), or the Real Estate
Account, as selected by the Contractowner, at the unit values next computed
following GIAC's decision to issue the Contract. Subsequent Net Premium Payments
under Flexible or Group Contracts will be allocated among the underlying
Contract options as initially selected for allocation or pursuant to new
allocation instructions which have been submitted in writing to GIAC at its
Customer Service Office. New allocation instructions will be implemented by GIAC
following their receipt. However, the Contractowner may not be invested in more
than six allocation options at any given time. GIAC reserves the right, under
certain limited circumstances, to restrict the allocation of Contractowners' Net
Premium Payments to the Real Estate Account. (See the section entitled
"Restrictions on Contractowners' Investment in the Account" in the prospectus
for the Real Estate Account.)
Crediting Accumulation Units Under the Contract: Variable Accumulation
Units represent the interests in the Variable Investment Options and Fixed
Accumulation Units represent the interests in the Fixed-Rate Option. The total
number of Accumulation Units to be credited to a Contractowner's account is the
sum of the portion of the Net Premium Payment allocated to each option divided
by the Accumulation Unit value of each such option as next computed following
receipt of the payment by GIAC. The number of Accumulation Units will not change
because of a subsequent change in the value of the unit, but the dollar value of
Accumulation Units will vary based upon the investment experience of the
Variable Investment Options and interest credited to the Fixed-Rate Option.
Accumulation Value: The value of the Contractowner's account within any
particular Variable Investment Option or the Fixed-Rate Option is determined by
multiplying the number of Accumulation Units of that particular option credited
to the account by the applicable current Accumulation Unit value.
Value of an Accumulation Unit: The value of an Accumulation Unit is
determined by using one of two methods, depending upon whether it relates to a
Variable Investment Option or the Fixed-Rate Option. With respect to a Variable
Investment Option, the value of a Variable Accumulation Unit is determined by
multiplying the value of such Variable Accumulation Unit as of the end of the
immediately preceding Valuation Period by the net investment factor (described
below) for the current Valuation Period. With respect to the Fixed-Rate Option,
the value of a Fixed Accumulation Unit is determined by adding the interest
credited on such Fixed Accumulation Unit since the end of the immediately
preceding Valuation Period to the value of such unit as of the end of such
Valuation Period.
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Net Investment Factor: The net investment factor is a measure of the
investment performance of each Variable Investment Option. For any particular
Valuation Period, the net investment factor is determined by:
(1) Adding the net asset value of a Fund share or an interest in the
Real Estate Account as determined at the end of such Valuation Period to the
per share or per interest amount of any dividend and other distribution made
by the Fund or the Real Estate Account, respectively, during the period, and
(2) Dividing by the net asset value of the particular Fund share or
interest in the Real Estate Account calculated as of the end of the
immediately preceding Valuation Period, and
(3) Subtracting from the above result any applicable taxes and the
mortality and expense risk charge.
ANNUITY PERIOD
Retirement Date: Annuity payments under the Contracts will begin on the
Retirement Date, which is the first day of the calendar month and year selected
by the Contractowner. This date cannot be later than the Annuitant's 85th
birthday, except where otherwise agreed to by GIAC. The Retirement Date may also
be determined by the retirement plan under which the Contract is issued.
Annuity Payments: Annuity Payments will be determined on the basis of (a)
the table specified in the Contract which reflects the nearest age and sex of
the Annuitant(s), (b) the Annuity Payout Option selected, and (c) the
performance of the Variable Investment Options selected. The amount of Annuity
Payments will not be affected by the longevity of Annuitants generally or any
increase in the expenses of GIAC in excess of the charges specified in the
Contract. The Annuitant receives the value of a fixed number of Annuity Units
each month. For the Variable Investment Options, the value of an Annuity Unit
will reflect the investment experience of the amounts allocated to the Variable
Investment Options, and the amount of each Annuity Payment will vary
accordingly.
The decision of the U.S. Supreme Court in Arizona Governing Committee v.
Norris can be interpreted to require all "employer-related plans" to use annuity
rate tables that are gender-neutral in calculating annuity purchase rates. In
order to accommodate employer-related plans funded by the Contracts,
gender-neutral annuity rate tables have been developed. Contracts that are not
purchased in connection with employer-related plans use gender-distinct annuity
rate tables except where prohibited by state law. Contracts offered by this
Prospectus to residents of such states will have Contract benefits which are
based on gender-neutral annuity rate tables.
Annuity Payout Options: The Contractowner and, under certain circumstances,
the Beneficiary, may elect to have Annuity Payments made under any one of the
Annuity Payout Options specified in the Contracts and described below. For Group
Contracts, GIAC will issue a certificate to the Contractowner for delivery to
each Participant when an Annuity is provided for that Participant. Each such
certificate will set forth in substance the amount and terms of the Annuity
Payments and any other benefits the Participant may be entitled to under the
Contract. A change of Annuity Payout Option is only permitted prior to the
Retirement Date. In the absence of an election, Annuity Payments will be made in
accordance with the annuity form known as "Option 2 -- Life Annuity with 120
Monthly Payments Certain" (see below). Annuity Payments will be made monthly
except that (a) proceeds of less than $2,000 will be paid in a single sum and
(b) the schedule of monthly installment payments may be changed to avoid
payments of less than $20. The Annuity Payout Options currently available under
the Contracts are as follows:
Option 1 -- Life Annuity Payments: An Annuity Payment made monthly
during the lifetime of the Annuitant which terminates with the last monthly
payment preceding the death of the Annuitant. Option 1 offers the maximum
level of monthly payments, since there is no guarantee of a minimum number
of payments or provision for a death benefit for Beneficiaries. It would be
possible under Option 1 for the Annuitant to receive only one Annuity
Payment if
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he or she died before the due date of the second Annuity Payment, two such
payments if he or she died before the third Annuity Payment date, and so on.
Option 2 -- Life Annuity with 120 Monthly Payments Certain: An Annuity
Payment made monthly during the lifetime of the Annuitant with the provision
that if, at the death of the Annuitant, payments have been made for less
than 120 months, Annuity Payments will be continued during the remainder of
such period to the Beneficiary designated by the Contractowner. The
Beneficiary at any time may elect to redeem in whole or in part the commuted
value of the current dollar amount of the then remaining number of certain
Annuity Payments. If the Beneficiary dies while receiving Annuity Payments,
the present value of the current dollar amount of the remaining number of
certain Annuity Payments shall be paid in one sum to the estate of the
Beneficiary.
Option 3 -- Joint and Two-Thirds Survivor Annuity Payments: An annuity
payment made monthly during the joint lifetimes of the Annuitant and a
designated second person and continuing during the lifetime of the survivor
in a reduced amount which reflects two-thirds of the number of Annuity Units
in effect when both persons were alive. It would be possible under Option 3
for the Annuitant and the designated second person to receive only one
Annuity Payment if both died before the date of the second Annuity Payment,
two such payments if both died before the third Annuity Payment date, and so
on.
TRANSFERS OF CONTRACT VALUES
Subject to the conditions described below and to the terms of any
applicable retirement plan, transfers among the Contract's Variable Investment
Options are permitted both before and after the Retirement Date. No charge is
presently made by GIAC for implementing any transfer. Nevertheless,
Contractowners who contemplate requesting a transfer should carefully consider
their annuity objectives and the investment objectives of the Funds involved in
the proposed transfer before choosing to request a transfer. Frequent transfers
may be inconsistent with the long-term objectives of the Contracts.
GIAC will implement transfers pursuant to proper written or telephone
instructions which specify in detail the requested changes. Proper transfer
requests received by GIAC at its Customer Service Office prior to 3:30 p.m.
Eastern time on a business day will normally be effected as of the end of that
day. GIAC reserves the right to limit the frequency of transfers to not more
than once every 30 days. Contractowners may be invested in a maximum of six
Variable Investment Options or the Fixed-Rate Option and five Variable
Investment Options under the Contract at any given time.
Before telephone transfer instructions will be honored by GIAC, a telephone
authorization form, properly completed by the Contractowner, must be on file at
GIAC's Customer Service Office. If the proper authorization is on file at GIAC's
Customer Service Office, telephone transfer instructions may be made by calling
toll-free 1-800-533-0099 between 9:00 a.m. and 3:30 p.m. (Eastern time) on days
when GIAC is open for business. Each telephone transfer request must include a
precise identification of the Contract and the Contractowner's Personal Security
Code. GIAC may accept telephone transfer instructions from any caller who
properly identifies the Contract number and Personal Security Code. The Funds,
the Real Estate Account, GISC and GIAC shall not be liable for any loss, damage,
cost or expense resulting from following telephone transfer instructions which
any of them reasonably believed to be genuine. Contractowners risk possible loss
of principal, interest and capital appreciation in the event of an unauthorized
or fraudulent telephone transfer. All or part of any telephone conversation
relating to transfer instructions may be recorded by GIAC without prior
disclosure to the caller.
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Telephone instructions apply only to previously invested monies and do not
change the allocation instructions for any future Net Premium Payments under the
Contract. Allocations of future Net Premium Payments can only be changed by
proper written request.
During periods of drastic economic or market changes, it may be difficult
to contact GIAC to request a telephone transfer. At such times, requests may be
made by regular or express mail and will be processed at the Accumulation Unit
Value on the date of receipt pursuant to the terms and restrictions described in
this "Transfers of Contract Values" section. GIAC reserves the right to modify,
suspend or discontinue the telephone transfer privilege at any time and without
prior notice.
Up until 30 days before the Retirement Date, the Contractowner may transfer
all or part of the value of his or her Variable Investment Options to another or
other Variable Investment Options.
After the Retirement Date, a Contractowner may also transfer all or a part
of the Annuity value from one or more Variable Investment Options to another or
other Variable Investment Options. However, such transfers may be made only once
per Contract year. Any such transfer will be effected at the next Annuity Unit
value calculated after receipt of proper transfer instructions by GIAC at its
Customer Service Office. The restrictions pertaining to transfers out of the
Real Estate Account, as set forth below, also apply to post-Retirement Date
transfers. No transfers into or out of the Fixed-Rate Option are currently
permitted following the Retirement Date.
Prior to the Retirement Date, each transfer between the Contract's Variable
Investment Options will be based upon the appropriate Accumulation Unit values
as of the valuation date coincident with or next following the date the transfer
instructions are received by GIAC at its Customer Service Office. Where such
transfer is requested after the Retirement Date, the number of old Annuity Units
will be changed to reflect the new number of Annuity Units based upon their
respective values on December 31st next following the receipt of instructions by
GIAC.
Transfers from the Real Estate Account to any Investment Division are
permitted only during the 30-day period beginning on the Contract Anniversary
Date. The maximum amount that may be transferred out of the Real Estate Account
each year is the greater of: (a) 33 1/3% of the amount invested in the Real
Estate Account as of the applicable Contract anniversary or (b) $10,000.
Transfer requests received within the 30-day period beginning on the Contract
Anniversary Date will normally be effected as of the end of the business day on
which the request is received. These limits are subject to change in the future.
A Contractowner may transfer amounts from the Fixed-Rate Option to any
Variable Investment Option once each Contract year and only during the 30-day
period beginning on the Contract Anniversary Date. If any Accumulation Value
remains in the Fixed-Rate Option, amounts may be transferred to no more than
three Variable Investment Options. The maximum amount which may currently be
transferred out of the Fixed-Rate Option each year is the greater of: (a) 25% of
the amount invested in the Fixed-Rate Option as of the applicable Contract
Anniversary Date or (b) $2,500. Transfer requests received within the 30-day
period beginning on the Contract Anniversary Date will normally be effected as
of the end of the business day on which the request is received. These limits
are subject to change in the future.
A Contractowner may not currently transfer any portion of the Accumulation
Value from a Variable Investment Option to the Fixed-Rate Option. An owner may
only allocate part or all of a single Net Premium Payment directly into the
Fixed-Rate Option.
GIAC may postpone requested transfers of all or part of the Contract values
under certain circumstances. See "Surrenders and Partial Withdrawals," below.
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SURRENDERS AND PARTIAL WITHDRAWALS
During the Accumulation Period, the Contractowner may redeem the Contract
in whole (known as a "surrender") or in part (know as a "partial withdrawal").
Surrenders and partial withdrawals must be requested in writing in a form
acceptable to GIAC. If the request is for surrender of the Contract, said
request must be accompanied by the Contract (or an acceptable affidavit of loss)
in order to be deemed a proper written request. GIAC will not process a request
for a surrender prior to the receipt of the Contract (or an acceptable affidavit
of loss) at its Customer Service Office. GIAC will not honor a request for
surrender or partial withdrawal after the Retirement Date.
If a surrender or partial withdrawal is made in the first six (6) Contract
years, the contingent deferred sales charge may be imposed (see "Contingent
Deferred Sales Charge"). After the first Contract year, 10% of the amount of the
single premium payment with respect to Single Premium Payment Contracts and 10%
of the total premiums paid in the last 72 months immediately preceding the date
of withdrawal with respect to Flexible Premium Payment Contracts, can be
withdrawn without application of the contingent deferred sales charge.
Surrenders or partial withdrawals may also be subject to penalty taxes (see
"Federal Tax Matters").
The Accumulation Value on a given day is equal to the sum of the value of
the Variable Accumulation Units and any Fixed Accumulation Units under the
Contract. A surrender or partial withdrawal is effected by cancelling
Accumulation Units which have an aggregate value equal to the dollar amount of
the requested surrender or partial withdrawal as of the Valuation Period on or
next following the date proper written request for surrender or partial
withdrawal is received by GIAC at its Customer Service Office. If applicable,
the annual Contract administration fee and any contingent deferred sales charges
will be deducted from the surrender proceeds or the remaining Accumulation Value
by the cancellation of additional Accumulation Units.
In connection with a surrender or partial withdrawal, Accumulation Units
will be cancelled in the following order: First, GIAC will cancel all the
Variable Accumulation Units attributable to the Investment Divisions.
Cancellation of the Variable Accumulation Units attributable to the Investment
Divisions will be on a pro rata basis reflecting the existing distribution of
the Variable Accumulation Units unless instructed to the contrary by the
Contractowner. Second, GIAC will cancel all Variable Accumulation Units
attributable to the Real Estate Account. Third, GIAC will cancel all Fixed
Accumulation Units attributable to the Fixed-Rate Option.
Payment of a surrender or partial withdrawal will ordinarily be made within
seven days after the date a proper written request is received by GIAC at its
Customer Service Office. GIAC can delay the payment if the Contract is being
contested and may postpone the calculation or payment of any Contract benefit or
transfer of amounts based on investment performance of the Investment Divisions
if: (a) the New York Stock Exchange is closed for trading or trading has been
suspended; or (b) the Securities and Exchange Commission ("SEC") restricts
trading or determines that a state of emergency exists which may make payment or
transfer impracticable. Moreover, GIAC reserves the right to defer payment of
any Contract benefits (other than guaranteed death benefits) funded by the Real
Estate Account (such as surrenders and partial withdrawals under a Contract) for
up to six months if there appears to be insufficient cash available to meet
requests for payments and prompt disposition of the Real Estate Account's
investments to meet such requests cannot be made on commercially reasonable
terms. GIAC also reserves the right to defer the payment of amounts withdrawn
from the Fixed-Rate Option for a period not to exceed six months from the date
proper request for such withdrawal is received by GIAC.
The Contractowner may request a partial withdrawal of the Contract value
provided such partial withdrawal does not result in reducing the Contract value
to less than (a) $500 on the date of redemption for an Individual Single Premium
Payment Contract, (b) $250 on the date of the partial withdrawal for an
Individual Flexible Premium Payment Contract, or (c) $1,000 on the date of the
partial withdrawal for a Group Contract. If a partial withdrawal request would
result in any such reduction, GIAC will redeem the total Accumulation Value and
pay
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the remaining balance to the Contractowner. Such involuntary surrender would be
subject to the contingent deferred sales charge if surrender of the Contract
occurred within the time period for which this charge applied. (See "Contingent
Deferred Sales Charges.")
NOTE: Withdrawals from Contracts issued in connection with Section 403(b)
qualified plans are restricted under the Internal Revenue Code. See "Qualified
Contracts -- Section 403(b) Plans," for information regarding the circumstances
under which withdrawals may be made from such Contracts.
OTHER IMPORTANT CONTRACT INFORMATION
Assignment: Assignment of interests under the Contracts is prohibited when
the Contracts are used in connection with Keogh plans, any retirement plans
contemplated by Sections 403(b) or 408 of the Code and any corporate retirement
plan unless the Contractowner is not the Annuitant or the Annuitant's employer.
An assignment of the Contract may be treated as a taxable distribution to the
Contractowner. (See "Federal Tax Matters," below.)
Reports: GIAC will send to each Contractowner, at least semi-annually, a
report containing such information as may be required by applicable laws, rules
and regulations. In addition, a statement will be provided at least annually as
to the number of Accumulation Units and the value of such Accumulation Units
under the Contract.
Contractowner Inquiries: A Contractowner may direct inquiries to the
individual who sold him or her the Contract or may call 1-800-221-3253 or write
directly to: The Guardian Insurance & Annuity Company, Inc., Customer Service
Office, P.O. Box 26210, Lehigh Valley, Pennsylvania 18002.
FEDERAL TAX MATTERS
GENERAL INFORMATION
The operations of the Separate Account and the Real Estate Account form a
part of, and are taxed with, the operations of GIAC under the Code. Investment
income and realized net capital gains on the assets of the Separate Account and
the Real Estate Account are reinvested and taken into account in determining the
Accumulation and Annuity Unit values. As a result, such investment income and
realized net capital gains are automatically applied to increase reserves under
the Contract. Under existing Federal income tax law, GIAC believes that
investment income and capital gains attributable to the Separate Account and the
Real Estate Account are not taxed to the extent they are applied to increase
reserves under a Contract issued in connection with the Separate Account.
Accordingly, GIAC does not anticipate that it will incur any Federal income tax
liability attributable to the Separate Account or the Real Estate Account and,
therefore, GIAC does not make provisions for any such taxes. However, if changes
in the Federal tax laws or interpretations thereof result in GIAC being taxed on
income or gains attributable to the Separate Account or the Real Estate Account
or certain types of variable annuity contracts, then GIAC may impose a charge
against the Separate Account and the Real Estate Account (with respect to some
or all Contracts) in order to make provision for payment of such taxes.
NON-QUALIFIED CONTRACTS
While Section 72 of the Code governs the taxation of annuities in general,
Section 817(h) of the Code provides that variable annuity contracts, such as
those described in this Prospectus, will not be treated as annuities unless the
underlying investments are "adequately diversified" in accordance with
regulations prescribed by the Secretary of the Treasury. Such regulations
require, among other things, that the Funds and the Real Estate Account invest
no more than 55% of the value of their respective assets in one investment; 70%
in two investments; 80% in three investments; and 90% in four investments. If
the above diversification requirements are
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not met by each and every underlying Variable Investment Option, the Contract
could lose its overall tax status as an annuity, resulting in current taxation
of the excess of cash value over the "investment in the contract" to the
Contractowner. The "investment in a contract" generally equals (a) the portion,
if any, of any premium paid by or on behalf of an individual under a contract
which is included in the individual's gross income plus (b) the amount of any
loan from, or secured by, a contract to the extent such amount was included in
the individual's gross income. GIAC has reviewed the diversification regulations
and believes that the Contracts are in compliance with these regulations and
that there is no threat to their current favorable tax status as annuities.
Furthermore, GIAC intends to make whatever changes are necessary and appropriate
to these Contracts in the future in order to maintain their continued favorable
tax treatment.
To date, no regulations or rulings have been issued to provide guidance
regarding the circumstances under which a variable annuity contractowner's
ability to exercise premium allocation and transfer privileges would cause him
or her to be treated as the owner of a pro-rata portion of the assets in an
insurance company's separate account. If a Contractowner was considered the
owner of assets in the Separate Account or the Real Estate Account, the income
and gains attributable to his or her Contract would be included in his or her
gross income. GIAC currently believes that it, and not its Contractowners, is
considered to own the Separate Account's and the Real Estate Account's assets.
However, GIAC cannot predict when the IRS will issue guidance regarding the
extent to which variable annuity contractowners may control their investments,
nor the nature of such guidance. To assure that the Contractowner will not be
treated as the owner of either Account's assets, GIAC may, to the extent it
deems necessary, make changes to the Contract.
Non-qualified Contracts issued after January 18, 1985 will not be treated
as annuity contracts for purposes of Section 72 of the Code unless the Contract
provides that (a) if the Contractowner dies on or after the Retirement Date, but
prior to the time the entire interest in the Contract has been distributed, the
remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution in effect at the time of the Contractowner's
death; and (b) if the Contractowner dies prior to the Retirement Date, the
entire interest will be distributed within five years after the death of the
Contractowner. These requirements will be considered satisfied with respect to
that portion of the Contractowner's interest which is payable to or for the
benefit of a "designated beneficiary," if such portion will be distributed over
the life of such designated beneficiary (or over a period that does not extend
beyond the life expectancy of a designated beneficiary) and such distributions
began within one year of the Contractowner's death. (The Contractowner's
designated beneficiary is the person designated by the Contractowner as
beneficiary and to whom ownership of the Contract passes by reason of death and
must be a natural person.) If the designated beneficiary is the Contractowner's
surviving spouse, the Contract may be continued with the surviving spouse as the
new Contractowner. Non-qualified contracts issued after January 18, 1985 contain
provisions intended to comply with Section 72(s) of the Code, although no
regulations interpreting these requirements of the Code have yet been issued.
Accordingly, the provisions contained in such Contracts will be reviewed and
modified, if necessary, to assure compliance with the Code requirements when
clarified by regulations or otherwise. Other rules may apply to Qualified
Contracts.
NOTE: The remaining discussion concerning the non-qualified Contracts
assumes that such Contracts will be treated as annuities under Section 72 of the
Code, that the underlying investments of such Contracts are "adequately
diversified" under Section 817(h) of the Code and that such Contracts are not
issued in connection with a retirement plan qualifying for favorable tax
treatment under the Code.
A Contractowner generally is not taxed on increases in the value of a
Contract until distribution occurs, either as a lump sum payment received by
withdrawing all or part of the Accumulation Value or as Annuity Payments under
the annuity option elected. For this purpose, the assignment or pledge of any
portion of the value of a Contract may be treated as a distribution. The taxed
portion of a distribution (in the form of a lump sum payment or an annuity) is
taxed as ordinary income.
24
<PAGE>
Generally, amounts received in connection with the surrender of or
withdrawal from a non-qualified Contract are first treated as taxable income to
the extent that the Accumulation Value of the Contract immediately before the
transaction exceeds the "investment in the contract" at that time. Any
additional amount withdrawn is not taxable. However, in the case of a surrender
or withdrawal under a Contract issued before August 14, 1982 and allocable to an
"investment in the contract" made before that date, amounts received are treated
as taxable income only to the extent that they exceed the "investment in the
contract."
Although the tax consequences may vary depending on the Annuity Payout
Option selected under the Contract, the recipient of an annuity payment under a
Contract generally is taxed on the portion of such payment that exceeds the
"investment in the contract." For variable annuity payments, the taxable portion
is determined by a formula that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
"investment in the contract" by the total number of expected periodic payments.
However, for individuals whose annuity starting date is after December 31, 1986,
the entire distribution will be fully taxable once the recipient has recovered
the dollar amount of his or her "investment in the contract."
A penalty tax on distributions equal to 10% of the amount treated as
taxable income may be imposed unless such distribution is: (a) made on or after
age 59 1/2; (b) made as a result of death or disability; (c) received in
substantially equal installments as a life annuity (subject to special
"recapture" rules if the series of payments is subsequently modified); or (d)
allocable to the "investment in the contract" before August 14, 1982.
Distributions are generally subject to withholding for the recipient's
income tax liability. The withholding rates vary according to the type of the
distribution and the recipient's tax status. Recipients, however, generally are
provided the opportunity to elect not to have tax withheld from distributions.
The processing of redemption requests that do not indicate the owner's
preference regarding withholding will be delayed until such written preference
has been properly completed and received from the owner at GIAC's Customer
Service Office. Withholding on taxable distributions is generally required if
the Contractowner fails to provide GIAC with his or her correct Social Security
number or, if the Contractowner is a U.S. citizen or expatriate living abroad.
Amounts may be distributed from a Contract because of the death of the
Contractowner or the Annuitant. Generally, such amounts are includable in the
income of the recipient as follows: (a) if distributed in a lump sum they are
taxed in the same manner as a full surrender of the Contract as described above;
or (b) if distributed under an annuity option, they are taxed in the same manner
as annuity payments as described above. For these purposes, the investment in
the Contract is not affected by the Contractowner's or Annuitant's death. That
is, the investment in the Contract remains the amount of any purchase payments
paid which were not excluded from gross income.
All non-qualified deferred annuity contracts that are issued by GIAC or its
affiliates to the same Contractowner during any calendar year are to be
aggregated for purposes of determining the amount includable in the
Contractowner's gross income under Section 72(e) of the Code. Thus, the proceeds
of a partial withdrawal, surrender or assignment of one or more non-qualified
deferred annuity contracts entered into during the same calendar year will be
includable in the Contractowner's income to the extent of the aggregate excess
of the accumulation values over the investment in all such contracts
("investment in the contract" is defined above). Purchasers of more than one
non-qualified annuity contract should seek advice from legal or tax counsel as
to the possible implications of these rules on the contracts they intend to
purchase.
A transfer of ownership of a Contract, or designation of an Annuitant or
other Beneficiary who is not also the Contractowner, the selection of certain
retirement dates, or the assignment or exchange of a Contract, may result in
certain income or gift tax consequences to the Contractowner that are beyond the
scope of this discussion. A Contractowner contemplating any transfer or
assignment of a Contract should contact a competent tax adviser with respect to
the potential tax effects of such transaction.
25
<PAGE>
From time to time the United States Congress considers legislation that, if
enacted, could change the tax treatment of annuities prospectively or even
retroactively. In addition, the Treasury Department and Internal Revenue Service
may amend existing regulations, issue new regulations, or adopt new
interpretations of existing laws or regulations. Also, state or local tax laws
which relate to owning or benefiting from a Contract can be changed from time to
time without notice. It is impossible to predict whether, when or how any such
change would be adopted. Anyone with questions about such matters should consult
a legal or tax adviser.
QUALIFIED CONTRACTS
Generally, increases in the value of an individual's account under a
Contract purchased in connection with a retirement plan qualifying for favorable
tax treatment under the Code (commonly referred to as a "qualified plan") are
not taxable until benefits are received. However, the rules governing the tax
treatment of contributions and distributions under qualified plans, as set forth
in the Code and applicable rulings and regulations, are complex and subject to
change. These rules also vary according to the type of plan and the terms and
conditions of the plan itself. Therefore, no attempt is made herein to provide
more than general information about the use of the Contracts with these various
types of plans. The terms and conditions of particular plans are not
incorporated into GIAC's Contract administration procedures. Contractowners,
participants and beneficiaries are therefore responsible for determining whether
contributions, distributions or other Contract transactions comply with plan
provisions and applicable law. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; aggregate distributions in excess
of a specified annual amount; and in other specified circumstances. Purchasers
of Contracts for use with any retirement plan should consult their legal counsel
and tax adviser regarding the suitability of the Contract.
The following are brief descriptions of the various types of plans with
which the Contracts described in this Prospectus may be used:
Section 403(b) Plans: Section 403(b) of the Code permits employers of
public school employees and certain types of charitable, educational and
scientific organizations specified in Section 501(c)(3) of the Code to purchase
annuity contracts and mutual fund shares through a Section 403(b)(7) custodial
account on behalf of their employees and, subject to certain limitations, have
the amount of purchase payments excluded from the employees' gross income for
tax purposes. However, these payments may be subject to FICA (Social Security)
taxes. These annuity contracts are commonly referred to as "tax-sheltered
annuities."
The Federal tax laws impose restrictions on distributions from
tax-sheltered annuities. Specifically, Section 403(b)(11) of the Code requires
that unless the purchaser reaches age 59 1/2, separates from service, dies,
becomes disabled, or incurs a hardship, the purchaser may not withdraw amounts
attributable to (a) salary reduction contributions made or income attributable
to any salary reduction accumulations earned in years beginning after December
31, 1988 or (b) income in years beginning after December 31, 1988 on salary
reduction accumulations held as of the last year beginning before January 1,
1989. Hardship withdrawals are limited to salary reduction contributions and may
not include income. Hardship withdrawals are generally subject to tax penalties
and Contract surrender charges.
If the Contract offered by this Prospectus is purchased as a tax-sheltered
annuity under Section 403(b) of the Code, it is subject to the restrictions on
redemption as described above. These restrictions on redemption are imposed by
the Separate Account and GIAC in full compliance with and in reliance upon the
terms and conditions of a no-action letter on this subject issued by the staff
of the SEC.
Purchasers of the Contracts should seek advice from legal or tax counsel as
to their eligibility to purchase a tax-sheltered annuity, limitations on
permissible amounts of purchase payments, and tax consequences on distribution.
26
<PAGE>
Individual Retirement Accounts: Sections 219 and 408 of the Code permit
individuals or their employers to contribute to an individual retirement program
known as an "Individual Retirement Account" or "IRA." IRAs are subject to
limitations on the amount which may be contributed and deducted, and the time
when distributions may commence. In addition, distributions from certain other
types of qualified plans may be placed into an IRA on a tax-deferred basis.
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans: Sections
401(a) and 401(k) of the Code permit corporate employers to establish various
types of retirement plans for employees, and self-employed individuals to
establish qualified plans for themselves and their employees. Such retirement
plans may permit the purchase of the Contracts to provide benefits under the
plans.
Deferred Compensation Plans: Section 457 of the Code, while not actually
providing for a qualified plan as that term is normally used, provides for
certain deferred compensation plans with respect to service for state
governments, local governments, rural electric cooperatives, political
subdivisions, agencies, instruments and certain affiliates of such entities
which enjoy special treatment, and, effective January 1, 1987, other tax-exempt
employers. Amounts contributed by employers through such plans are taxed to
employees when paid or made available for withdrawal. The Contracts can be used
with such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. All such investments,
however, are owned by, and are subject to, the claims of the general creditors
of the sponsoring employer. For Contracts issued in connection with qualified
plans, the investment in the Contract can be zero.
The following rules generally apply to distributions from Contracts
purchased in connection with the plans (other than Section 457 plans) discussed
above.
The portion, if any, of any contribution under a Contract made by or on
behalf of an individual which is not excluded from gross income (generally, any
nondeductible contributions) constitutes the "investment in the contract." If a
distribution is made in the form of annuity payments, the "investment in the
contract" (adjusted for certain refund provisions) divided by life expectancy
(or other period for which annuity payments are expected to be made) constitutes
a tax-free return of capital each year. However, for an individual whose annuity
starting date is after December 31, 1986, the entire distribution will be fully
taxable once the recipient is deemed to have recovered the dollar amount of his
or her "investment in the contract." The dollar amount of annuity payments
received in any year in excess of such return is taxable as ordinary income.
Depending on the terms of the particular plan, the employer may be entitled to
draw on deferred amounts for purposes unrelated to its Section 457 plan
obligations.
A single payment distribution from a Contract issued in connection with a
Section 401(a) plan may qualify for special "lump-sum distribution" treatment.
Otherwise, the amount by which the payment exceeds the "investment in the
contract" (adjusted for any prior distribution) will generally be taxed as
ordinary income in the year of receipt, unless it is validly "rolled over" into
an individual retirement account or another qualified plan.
A penalty tax of 10% will be imposed on the taxable portion of
distributions from all qualified Contracts except under circumstances similar to
those relating to non-qualified Contracts as set forth above. Other adverse tax
consequences may result from distributions that do not conform to specified
commencement and minimum distribution rules, aggregate distributions in excess
of a specified annual amount, and in other circumstances.
The taxation of benefits payable upon an employee's death to his
beneficiary generally follows these same principles, subject to a variety of
special rules. In particular, tax on death benefits to be paid as a lump-sum may
be deferred if, within 60 days after the lump-sum becomes payable, the
beneficiary instead elects to receive annuity payments.
Distributions from qualified plans are generally subject to the same
withholding rules as distributions from
27
<PAGE>
non-qualified Contracts. Effective January 1, 1993, certain distributions from
qualified plans are subject to mandatory federal income tax withholding.
Restrictions under Qualified Contracts: Other restrictions with respect to
the election, commencement, or distribution of benefits may apply under
Qualified Contracts or under the terms of the plans in respect of which
Qualified Contracts are issued.
OTHER TAX CONSIDERATIONS
Because of the complexity of the Federal tax law, and the fact that tax
results will vary according to the factual status of the individual involved,
tax advice may be needed by a person contemplating the purchase of a Contract or
the exercise of the various elections under the Contract. It should be
understood that the above discussion concerning the Federal income tax
consequences of owning a Contract are not an exhaustive discussion of all tax
questions that might arise under the Contracts and that special rules exist in
the Code with respect to situations not discussed here. No representation is
made regarding the likelihood of the continuation of current Federal tax laws or
interpretations thereof by the Internal Revenue Service. No attempt has been
made to consider any applicable state or other tax laws except with respect to
the imposition of any premium taxes.
GIAC does not make any guarantee regarding the tax status of any Contract
and the above tax discussion is not intended as tax advice.
VOTING RIGHTS
To the extent required by applicable law, GIAC will vote the Fund shares
that it owns through the Separate Account according to instructions received
from Contractowners having an interest in such Fund's shares. GIAC will vote
shares for which no instructions are received in the same proportion as it votes
shares for which it has received instructions. GIAC will typically vote any Fund
shares that it is entitled to vote directly due to amounts it has contributed or
accumulated in the applicable Investment Division FOR proposals presented by
Fund Management. If the applicable law of interpretations thereof change so as
to permit GIAC to vote a Fund's shares in GIAC's own right or to restrict
Contractowner voting, GIAC reserves the right to do so.
GIAC will seek voting instructions from Contractowners for the number of
shares attributable to their Contracts. Contractowners are entitled to provide
instructions if, on the applicable record date, they have allocated values to
the Investment Division which corresponds to the Fund for which a shareholder
meeting is called.
Prior to the Retirement Date, the person having the voting interest under a
Contract shall be the Contractowner. The number of shares held in the Investment
Division which are attributable to a Contract is determined by dividing the
Contractowner's interest in each subdivision by the net asset value per share of
the applicable Fund.
After the Retirement Date, the person having the voting interest shall be
the person then entitled to receive Annuity Payments. This voting interest will
generally decrease with the gradual reduction of the Contract value during the
annuity payout period. The number of shares held in the Investment Divisions
which are attributable to each Contract is determined by dividing the reserve
for such Contract by the net asset value per share of the applicable Fund.
Contractowners have no voting rights with respect to the Real Estate
Account or the Fixed-Rate Option.
DISTRIBUTION OF THE CONTRACTS
The Contracts are 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
28
<PAGE>
GIAC. GISC and such other broker-dealers are members of the National Association
of Securities Dealers, Inc. In connection with the sale of the Contracts, GIAC
will generally pay sales commissions to these individuals or entities which may
vary but, in the aggregate, are not anticipated to exceed an amount equal to
4.5% of a Contract premium payment. Where permitted by state law, GIAC reserves
the right to pay additional sales or service compensation while a Contract is in
force based on the value of the Contract. The principal underwriter of the
Contracts is GISC, located at 201 Park Avenue South, New York, New York 10003.
RIGHT TO CANCEL THE CONTRACT
Where required by state law or regulation, the Individual Contract will
contain a provision which permits cancellation by returning the Contract to
GIAC, or to the registered representative through whom it was purchased, within
10 days (20 days in a limited number of states) of delivery of the Contract. The
Contractowner will then receive from GIAC, as and when required by state law or
regulation, either (a) the total amount paid for the Contract or (b) an amount
equal to the sum of (i) the difference between the premiums paid (including any
Contract fees or other charges) and the amounts allocated to any Investment
Divisions, the Real Estate Account and the Fixed-Rate Option under the Contract,
and (ii) the surrender value of the Contract.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate
Account or GIAC is a party.
ADDITIONAL INFORMATION
A Statement of Additional Information is available (in accordance with the
directions on page 2 of this Prospectus) which contains more details regarding
the Contracts discussed herein. The following identifies the contents of that
document:
Statement of Additional Information
Table of Contents
Page
----
Services to the Separate Account ......................................... B-2
Annuity Payments ......................................................... B-2
Calculation of Yield Quotations for The Guardian Cash Fund ............... B-3
Performance Comparisons .................................................. B-3
Valuation of Assets of the Separate Account .............................. B-4
Transferability Restrictions ............................................. B-4
Experts .................................................................. B-4
Financial Statements ..................................................... B-4
29
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT A
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
--------------
Statement of Additional Information dated May 1, 1996
--------------
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the current Prospectus for The Guardian Separate
Account A (marketed under the name "Value Guard II") dated May 1, 1996.
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
Calculation of Yield Quotations for Value Line Cash Fund ................. B-3
Performance Comparisons .................................................. B-3
Valuation of Assets of the Separate Account .............................. B-4
Transferability Restrictions ............................................. B-4
Experts .................................................................. B-4
Financial Statements ..................................................... B-4
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 A (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 annual contract administration fee (as described in
the Prospectus), which are borne by the Contractowners.
The firm of Price Waterhouse LLP, 1177 Avenue of the Americas, New York,
New York 10036 currently serves as independent accountants for the Separate
Account and GIAC.
Guardian Investor Services Corporation(R) ("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 GISC or of other broker-dealers which have selling
agreements with GISC and GIAC. In the years 1995, 1994 and 1993, GISC received
underwriting commissions from GIAC with respect to the sales of the Contracts in
the amount of $64,106, $73,914 and $37,534, respectively.
ANNUITY PAYMENTS
Determination of the First Monthly Annuity Payment: At the time Annuity
Payments begin, the value of the Contractowner's account (or if a Group
Contract, the amount applied for a participant as stated by the Contractowner)
is determined by multiplying the appropriate Accumulation Unit value on the
valuation date ten (10) days before the date the first Annuity Payment is due by
the corresponding number of Accumulation Units credited to the Contractowner's
account (or if a Group Contract, the amount applied for a participant as stated
by the Contractowner) 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 amount depends on the form of Annuity, the sex (except
in those states which require "unisex" rates) and the nearest age of the
annuitant(s). The first 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 (or if a Group Contract, the
amount applied for a Participant as stated by the Contractowner).
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 4% investment return used in determining the amounts of
annuity payable. The net investment factor is reduced by the amount of the
mortality and expense risk 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 an annuity 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 Second and Subsequent Monthly Annuity Payments: The
amount of the second and subsequent Annuity Payments is determined by
multiplying the number of Annuity Units by the appropriate Annuity Unit value as
of the valuation date 10 days prior to the day such payment is due. The number
of Annuity
B-2
<PAGE>
Units under a Contract is determined by dividing the first monthly payment by
the value of the appropriate Annuity Unit on the date of such payment. This
number of Annuity Units remains fixed during the Annuity Payment period,
provided no transfers among the Variable Investment Options are made.
The assumed investment return of 4% under the Contract is the measuring
point for subsequent Annuity Payments. If the actual net investment rate (on an
annual basis) remains constant at 4%, the Annuity Payments will remain constant.
If the actual net investment rate exceeds 4%, the payment will increase at a
rate equal to the amount of such excess. Conversely, if the actual rate is less
than 4%, Annuity Payments will decrease.
The second and subsequent monthly payments made under the Fixed-Rate Option
will be equal to the amount of the first monthly fixed annuity payment.
CALCULATION OF YIELD QUOTATIONS FOR THE GUARDIAN CASH FUND
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 Cash Fund and unrealized appreciation and depreciation with respect to
the portfolio securities of the Cash Fund, 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 (i) the net change in the value of the Contract
for the base period (see "Accumulation Period" in the Prospectus) by (ii) the
value of the Contract at the beginning of the base period and multiplying the
result by 365/7.
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 (A) 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, (B) adding 1 to the result, (C) raising the sum to
a power equal to 365 divided by the number of days in the base period, and (D)
subtracting 1 from the result.
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 does reflect 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 yield 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 portfolio of the Cash Fund. Consequently, no
yield quotation should be considered as representative of what the yield of the
subdivision may be for any specified period in the future. The Cash Fund
Investment Division's respective yields are not guaranteed.
The current and effective annualized yields for the Investment Division
investing in the Cash Fund Investment Division for the seven-day period ending
December 31, 1995 were 5.26% and 5.40%, respectively, calculated as described
above.
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,
B-3
<PAGE>
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 Separate Account 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 Annuity Units) may be
valued at fair value as determined in good faith by the Board of Directors of
GIAC.
TRANSFERABILITY RESTRICTIONS
Where a Contract is owned in conjunction with a retirement plan qualified
under the Internal Revenue Code, a tax-sheltered annuity program or individual
retirement account, and notwithstanding any other provisions of the 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 Internal Revenue Code of 1986, 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,
1995 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants. The financial statements of GIAC as of December
31, 1995 and 1994 and for each of the three years in the period ended December
31, 1995 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
such firms as experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of GIAC which are set forth herein beginning on
page B-5 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 1995 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 1995 Annual Report
to Contractowners accompanies this Statement of Additional Information.
B-4
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1995 1994
---- ----
<S> <C> <C>
ADMITTED ASSETS
Investments:
Fixed maturities, principally at amortized cost
(market: 1995-- $415,119,363; 1994-- $332,580,514) ......................... $ 405,213,799 $ 349,574,401
Affiliated money market fund, at market, which approximates cost .............. 2,633,939 2,492,635
Investment in subsidiary ...................................................... 7,604,442 7,305,908
Policy loans-- variable life insurance ........................................ 63,842,200 59,319,920
Investment in joint venture ................................................... 44,418 51,221
Cash and short-term investments ............................................... 17,983,654 4,442,493
Accrued investment income receivable .......................................... 9,771,251 8,339,330
Due from parent and affiliates ................................................ 2,982,854 1,989,409
Other assets .................................................................. 9,932,726 7,591,680
Receivable from separate accounts ............................................. 3,543,010 4,359,809
Variable annuity and EISP/CIP separate account assets ......................... 4,174,493,377 3,132,332,691
Variable life separate account assets ......................................... 311,173,536 269,585,495
--------------- ---------------
TOTAL ADMITTED ASSETS ...................................................... $ 5,009,219,206 $ 3,847,384,992
=============== ===============
LIABILITIES
Policy liabilities and accruals:
Fixed deferred reserves .................................................... $ 300,059,252 $ 239,394,355
Fixed immediate reserves ................................................... 4,966,569 5,627,157
Life reserves .............................................................. 22,502,664 21,353,994
Minimum death benefit guarantees ........................................... 1,171,951 1,549,213
Policy loan collateral fund reserve ........................................ 61,798,105 57,224,423
Accrued expenses, taxes & commissions ............................................. 1,250,797 867,435
Due to parent and affiliates ...................................................... 16,288,804 11,781,592
Other liabilities (including deferred tax) ........................................ 13,715,162 9,187,431
Asset valuation reserve ........................................................... 9,341,353 5,229,909
Variable annuity and EISP/CIP separate account liabilities ........................ 4,129,376,222 3,094,929,496
Variable life separate account liabilities ........................................ 306,870,400 262,659,454
--------------- ---------------
TOTAL LIABILITIES .......................................................... 4,867,341,279 3,709,804,459
=============== ===============
COMMON STOCK AND SURPLUS
Common Stock, $100 par value, 20,000 shares authorized, issued and
outstanding ................................................................... 2,000,000 2,000,000
Additional paid-in surplus ........................................................ 137,398,292 137,398,292
Assigned and unassigned surplus ................................................... 2,479,635 (1,817,759)
--------------- ---------------
141,877,927 137,580,533
--------------- ---------------
TOTAL LIABILITIES, COMMON STOCK AND SURPLUS ................................ $ 5,009,219,206 $ 3,847,384,992
=============== ===============
</TABLE>
See notes to financial statements.
B-5
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Premiums and annuity considerations:
Variable annuity ................................................ $ 566,644,345 $ 668,146,802 $ 709,523,708
Life-- variable and level term .................................. 12,647,143 29,135,648 4,789,739
Fixed annuity ................................................... 63,455,538 58,851,539 55,272,748
Net investment income .............................................. 36,293,598 27,909,606 22,726,013
Amortization of IMR ................................................ 257,380 542,157 378,621
Service fees ....................................................... 50,593,228 38,805,312 30,388,678
Variable life-- cost of insurance .................................. 4,232,564 3,828,702 3,628,039
Net benefit of reinsurance ceded ................................... (18,138,690) 2,448,774 7,650,605
Other income ....................................................... 8,187,301 7,200,339 4,762,342
------------- ------------- -------------
724,172,407 836,868,879 839,120,493
------------- ------------- -------------
BENEFITS AND EXPENSES:
Benefits:
Death benefits .................................................. 7,671,355 3,727,449 2,667,399
Annuity benefits ................................................ 330,248,710 233,591,876 196,231,910
Surrender benefits .............................................. 18,434,505 9,882,392 8,188,767
Increase in reserves ............................................ 65,017,032 82,752,551 50,659,936
Net transfers to (from) separate accounts:
Variable annuity and EISP/CIP ................................... 252,764,129 448,425,833 531,986,941
Variable life ................................................... (17,784,281) (8,822,426) (8,746,188)
Commissions ........................................................ 34,364,742 45,602,891 38,089,532
General insurance expenses ......................................... 25,925,336 15,096,689 14,702,540
Taxes, licenses and fees ........................................... 2,477,492 2,731,840 1,510,060
------------- ------------- -------------
719,119,020 832,989,095 835,290,897
------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME
TAXES AND REALIZED GAINS
FROM INVESTMENTS ........................................... 5,053,387 3,879,784 3,829,596
Provision for federal income taxes (benefits) ...................... 439,667 601,468 1,889,716
------------- ------------- -------------
INCOME (LOSS) BEFORE REALIZED
GAINS FROM INVESTMENTS ..................................... 4,613,720 3,278,316 1,939,880
Realized gains from investments, net of federal income
taxes, net of transfer to IMR .................................... 342,455 (2,232) 131,711
------------- ------------- -------------
NET INCOME ................................................... $ 4,956,175 $ 3,276,084 $ 2,071,591
============= ============= =============
</TABLE>
See notes to financial statements.
B-6
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENTS OF CHANGES IN COMMON STOCK AND SURPLUS
================================================================================
<TABLE>
<CAPTION>
Special and
Additional Unassigned Total
Common Paid-in Surplus Common Stock
Stock Surplus (Deficit) and Surplus
------ -------- -------- ------------
<S> <C> <C> <C> <C>
Balances at December 31, 1992 ........................... $ 2,000,000 $ 137,398,292 $ (6,407,408) $ 132,990,884
------------- ------------- ------------- -------------
Net income from operations .............................. 2,071,591 2,071,591
Increase in unrealized appreciation of Company's
investment in separate accounts, net of
applicable taxes .................................... 3,164,752 3,164,752
Increase in unrealized appreciation of
Company's investment in joint venture ............... 178,539 178,539
Increase in unrealized appreciation of
Company's investment in subsidiary .................. 56,002 56,002
Decrease in non-admitted assets ......................... 53,396 53,396
Net increase in asset valuation reserve ................. (8,291) (8,291)
Provision for Guaranty Association
Assessments ......................................... (92,211) (92,211)
------------- ------------- ------------- -------------
Balances at December 31, 1993 ........................... 2,000,000 137,398,292 (983,630) 138,414,662
============= ============= ============= =============
Net income from operations .............................. 3,276,084 3,276,084
Increase in unrealized appreciation of
Company's investment in separate accounts,
net of applicable taxes ............................. (527,471) (527,471)
Increase in unrealized appreciation of
Company's investment in joint venture ............... (255,163) (255,163)
Increase in unrealized appreciation of
Company's investment in subsidiary .................. 24,034 24,034
Disallowed interest maintenance reserve ................. (1,124,268) (1,124,268)
Decrease in non-admitted assets ......................... 5,818 5,818
Net decrease in asset valuation reserve ................. (2,233,163) (2,233,163)
------------- ------------- ------------- -------------
Balances at December 31, 1994 ........................... 2,000,000 137,398,292 (1,817,759) 137,580,533
------------- ------------- ------------- -------------
Net income from operations .............................. 4,956,175 4,956,175
Increase in unrealized appreciation of Company's
investment in separate accounts, net of
applicable taxes .................................... 3,024,930 3,024,930
Increase in unrealized appreciation of
Company's investment in joint venture ............... (6,803) (6,803)
Increase in unrealized appreciation of
Company's investment in subsidiary .................. 298,534 298,534
Disallowed interest maintenance reserve ................. 143,080 143,080
Increase in non-admitted assets ......................... (7,078) (7,078)
Net decrease in asset valuation reserve ................. (4,111,444) (4,111,444)
------------- ------------- ------------- -------------
Balances at December 31, 1995 ........................... $ 2,000,000 $ 137,398,292 $ 2,479,635 $ 141,877,927
============= ============= ============= =============
</TABLE>
See notes to financial statements.
B-7
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENTS OF CASH FLOW
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1995 1994 1993
---- ---- ----
Cash flows from insurance activities:
<S> <C> <C> <C>
Premium and annuity considerations .......................................... $ 634,983,490 $ 732,848,313 $ 770,326,214
Investment income ........................................................... 35,916,075 26,625,996 24,134,387
Service fees ................................................................ 47,345,894 35,502,165 26,155,952
Variable life cost of insurance ............................................. 4,196,060 3,825,865 3,612,218
Net benefit of reinsurance ceded ............................................ (16,860,850) 15,996,575 4,068,302
Claims and annuity benefits ................................................. (351,544,810) (247,055,539) (206,970,151)
Commissions ................................................................. (32,903,591) (37,186,792) (38,002,664)
General insurance expenses .................................................. (21,641,468) (15,895,233) (13,863,833)
Taxes, licences and fees .................................................... (1,883,881) (2,896,965) (1,028,249)
Net transfers to separate accounts .......................................... (227,981,221) (436,829,701) (521,601,186)
Federal income tax (excluding tax on capital gains) ......................... (1,737,654) (1,217,735) 1,372,898
Increase in policy loans .................................................... (4,522,280) (6,527,387) (4,691,084)
Other sources (applications) ................................................ 8,193,634 10,477,284 6,381,750
------------- ------------- -------------
NET CASH PROVIDED BY INSURANCE
ACTIVITIES .......................................................... 71,559,398 77,666,846 49,894,554
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from dispositions of investment securities ......................... 62,404,716 150,649,968 107,412,956
Purchases of investment securities .......................................... (118,543,796) (231,132,415) (153,772,748)
Net proceeds from short-term investments .................................... -- -- 2,459,000
Investment in joint venture ................................................. -- -- --
(Increase) decrease in investments in separate account ...................... (100,000) (950,000) (1,800,000)
Federal income tax on capital gains ......................................... 1,173,020 (1,538,101) (846,813)
Amount due to/(from) broker ................................................. (2,952,177) (1,926,825) 4,590,573
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES ................................. (58,018,237) (84,897,373) (41,957,032)
------------- ------------- -------------
Cash flows from financing activities:
Capital contributed by parent ............................................... -- -- --
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES ............................................................... -- -- --
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH .......................................... 13,541,161 (7,230,527) 7,937,522
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF YEAR ..................................................... 4,442,493 11,673,020 3,735,499
------------- ------------- -------------
CASH AND SHORT-TERM INVESTMENTS
AT ENDOFPERIOD ........................................................... $ 17,983,654 $ 4,442,493 $ 11,673,021
============= ============= =============
</TABLE>
See notes to financial statements.
B-8
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
Note 1 -- Organization
Organization: The Guardian Insurance & Annuity Company, Inc. (GIAC or the
Company) is a wholly owned subsidiary of The Guardian Life Insurance Company of
America (Guardian Life). The Company is licensed to conduct life and health
insurance business in all fifty states and the District of Columbia. The
Company's primary business is the sale of variable deferred annuity contracts
and variable and term life insurance policies. For variable products other than
401(k) products contracts are sold by insurance agents who are licensed by GIAC
and are either Registered Representatives of Guardian Investor Services
Corporation (GISC) or of broker dealer firms which have entered into sales
agreements with GIAC and GISC. The Company's general agency distribution system
is used for the sale of other products and policies.
Guardian Investor Services Corporation is a wholly owned subsidiary of the
Company. GISC is a registered broker-dealer under the Securities Exchange Act of
1934 and is a registered investment adviser under the Investment Adviser's Act
of 1940. GISC is the distributor and underwriter for GIAC's variable products,
and is the investment adviser to certain mutual funds sponsored by GIAC which
are investment options for the variable products.
Insurance Separate Accounts: The Company has established eleven insurance
separate accounts primarily to support the variable annuity and life insurance
products it offers. The majority of the separate accounts are unit investment
trusts registered under the Investment Company Act of 1940. Proceeds from the
sale of variable products are invested through these separate accounts in
certain mutual funds specified by the contractholders. In addition, certain
variable annuity and variable life insurance contractholders may invest in The
Guardian Real Estate Account. Participating interests in the real estate account
are registered under the Securities Act of 1933. Of these separate accounts the
Company maintains two separate accounts whose sole purpose is to fund certain
employee benefits plans of Guardian Life.
The assets and liabilities of the separate accounts are clearly identified
and distinct from the other assets and liabilities of the Company. The assets of
the separate accounts will not be charged with any liabilities arising out of
any other business of the Company. However, the obligations of the separate
accounts, including the promise to make annuity and death benefit payments,
remain obligations of the Company. Assets and liabilities of the separate
accounts are stated primarily at the market value of the underlying investments
and corresponding contractholders obligations.
Note 2 -- Summary of Significant Accounting Policies
Basis of presentation of financial statements: The financial statements
have been prepared on the basis of accounting practices prescribed or permitted
by the Insurance Department of the State of Delaware. Such practices are
considered generally accepted accounting principles for mutual life insurance
companies and their wholly owned stock life insurance subsidiaries domiciled in
Delaware.
In 1993, the Financial Accounting Standards Board issued Interpretation No.
40, "Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises," which establishes a different definition of
generally accepted accounting principles for mutual life insurance companies.
Under the Interpretation, financial statements of mutual life insurance
companies for periods beginning after December 15, 1995, which are prepared on
the basis of statutory accounting, will no longer be characterized as in
conformity with generally accepted accounting principles. At that time,
financial statements of mutual life insurance
B-9
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
companies would have to apply all applicable authoritative GAAP accounting
pronouncements in order to describe the financial statements as prepared in
"conformity with generally accepted accounting principles."
Management has not yet finalized the effect on its December 31, 1995
financial statements of applying the new Interpretation nor whether it will
continue to present its general purpose financial statements in conformity with
the statutory basis of accounting or adopt the accounting changes required in
order to present its financial statements in conformity with generally accepted
accounting principles. However, management believes that adopting the accounting
changes required to present its financial statements in accordance with
generally accepted accounting principles would result in higher reported equity.
The effect of the changes would be reported retroactively through restatement of
all previously issued financial statements beginning with the earliest year
presented.
Valuation of investments: Investments in securities are recorded in
accordance with valuation procedures established by the National Association of
Insurance Commissioners (NAIC). Unrealized gains and losses on investments
carried at market are recorded directly to unassigned surplus. Realized gains
and losses on disposition of investments are determined by the specific
identification method.
Bonds: Bonds are valued principally at amortized cost.
Investment in subsidiary: GIAC's investment in GISC is carried at equity in
GIAC's underlying net assets. Undistributed earnings or losses are reflected as
unrealized capital gains and losses directly in unassigned surplus. Dividends
received from GISC are recorded as investment income and amounted to $6,700,000
in 1995 and $4,900,000 in 1994.
Short-Term Investments: Short-term investments are stated at amortized cost
and consist primarily of investments having maturities at the date of purchase
of six months or less. Market values for such investments approximate carrying
value.
Loans on Policies: Loans on policies are stated at unpaid principal
balance. The carrying amount approximates fair value since loans on policies
have no defined maturity date and reduce the amount payable at death or at
surrender of the contract.
Investment Reserves: The NAIC requires adoption of an asset valuation
reserve (AVR) and interest maintenance reserve (IMR). The AVR establishes
reserves for certain categories of invested assets. The purpose of this reserve
is to stabilize policyholders' surplus from credit related gains and losses on
investments. Changes in AVR are recorded directly to unassigned surplus. The IMR
applies to fixed income investments and establishes a reserve for realized
capital gains and losses, net of tax, which result from changes in interest
rates. Such net realized gains and losses are deferred and amortized into
investment income over the life of the investments sold. When, in aggregate,
realized losses exceed realized gains, the net realized loss is reclassified as
a non-admitted asset with a corresponding charge to surplus.
Contract and Policy Reserves: Fixed deferred reserves represent the Fund
balance left to accumulate at interest under fixed annuity contracts that were
offered directly by the Company and a fixed rate option that is offered to
variable annuity contractowners. The fixed annuity contracts are no longer
offered by the Company. The estimated fair value of contractholder account
balances within the fixed deferred reserves has been determined to be equivalent
to carrying value as the current offering and renewal rates are set in response
to current market conditions and are only guaranteed for one year. The interest
rate credited on fixed annuity contracts included in fixed deferred reserves for
1995 and 1994 was 5.75% and 5.75%, respectively. The interest rates credited on
the
B-10
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
fixed rate option offered to certain variable annuity contractowners ranged from
5.00% to 5.25% during 1995. For the fixed rate option currently issued, the
issue and renewal interest rates credited varies from month to month and ranged
from 5.50% to 5.20% in 1995. Fixed immediate reserves are a liability within the
general account for those annuitants who have elected a fixed annuity payout
option. The immediate contract reserve is computed using the 1971 IAM Table and
a 4% discount rate.
Minimum death benefits guarantees represent a reserve for term insurance to
support guaranteed insurance amounts on variable life policies in the event of
possible declines in separate account assets, assuming a 4% discount rate and
mortality consistent with the 1958 or 1980 CSO Table applicable in the pricing
of each policy.
The loan collateral fund reserve is the cash value of loaned variable life
policyowner account values. The reserve is credited with interest at 4% per
annum for single premium variable life policyowners and 6.5% for annual pay
variable life policyowners.
The preparation of financial statements in conformity with statutory
accounting practices requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Non-admitted Assets: Certain assets designated as "non-admitted assets" in
accordance with rules and regulations of the Department of Insurance of the
State of Delaware are charged directly to unassigned surplus. At December 31,
1995 and 1994 non-admitted assets consisted of agents' balances and
miscellaneous receivables in the amounts of $84,575 and $77,498, respectively.
Acquisition Costs: Commissions and other costs incurred in acquiring new
business are charged to operations as incurred.
Premiums and Other Revenues: Premiums and annuity considerations are
recognized for funds received on variable life insurance and annuity products.
Corresponding transfers to/from separate accounts are included in the expenses.
Revenue also includes service fees from the separate accounts consisting of
mortality and expense charges, annual administration fees, charges for the cost
of term insurance related to variable life policies and penalties for early
withdrawals. Service fees were not charged on separate account assets of $117.7
million and $105.5 million at December 31, 1995 and 1994, respectively, which
represent investments in Guardian Life's employee benefit plans.
Federal Income Taxes: The provision for federal income taxes is based on
income from operations currently taxable, as well as accrued market discount on
bonds. Realized gains and losses are reported after adjustment for the
applicable federal income taxes. The taxable portion of unrealized appreciation
of the Company's separate account investments is also recorded.
Other: Certain reclassifications have been made in the amounts presented
for prior periods to conform those periods with the 1995 presentation.
Note 3 -- Federal Income Taxes
The Company's federal income tax return is consolidated with its parent,
Guardian Life. The consolidated income tax liability is allocated among the
members of the group according to a tax sharing agreement. In
B-11
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
accordance with the tax sharing agreement between and among the parent and
participating subsidiaries, each member of the group computes its tax provision
and liability on a separate return basis, but may, where applicable, recognize
benefits of net operating losses and capital losses utilized in the consolidated
group. Estimated payments are made between the members of the group during the
year.
The Company records directly to unassigned surplus federal income taxes
attributable to the taxable portion of unrealized appreciation on its seed
capital in the separate accounts. These income taxes will be recognized in
operations upon withdrawal of these capital contributions. The taxable portion
of unrealized appreciation amounted to $1,209,000, $590,000 and $871,000 at
December 31, 1995, 1994 and 1993, respectively.
A reconciliation of federal income tax expense, based on the prevailing
corporate income tax rate of 35% for 1995, 1994 and 1993 to the federal income
tax expense reflected in the accompanying financial statements is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income tax at prevailing corporate income tax rates
applied to pretax statutory income .............................. $ 1,768,688 $ 1,357,924 $ 1,340,359
Add (deduct) tax effect of:
Adjustment for annuity and other reserves ....................... 337,668 141,295 (277,137)
DAC Tax ......................................................... 666,260 1,575,953 1,819,878
Dividend from subsidiary ........................................ (2,345,000) (1,715,000) (1,015,000)
Other-- net ..................................................... 12,051 (758,704) 21,616
----------- ----------- -----------
Provision for Federal Income Taxes (Benefits) ....................... $ 439,667 $ 601,468 $ 1,889,716
=========== =========== ===========
</TABLE>
The provision for federal income taxes includes deferred taxes of $304,923
in 1995, $99,120 in 1994 and $283,571 in 1993 applicable to the difference
between the tax basis and the financial statement basis of recording investment
income relating to accrued market discount.
Note 4 -- Investments
The major categories of net investment income are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fixed maturities ........................................ $25,795,915 $19,949,553 $18,104,573
Affiliated money market funds ........................... 130,729 84,083 51,072
Subsidiary .............................................. 6,700,000 4,900,000 2,900,000
Policy loans ............................................ 2,847,532 2,547,670 2,296,794
Short-term investments .................................. 1,181,215 622,391 269,175
Joint venture dividend .................................. 684,306 789,867 --
----------- ----------- -----------
37,339,697 28,893,564 23,621,614
Less investment expenses ................................ 1,046,099 983,959 895,601
----------- ----------- -----------
Net Investment Income ................................... $36,293,598 $27,909,605 $22,726,013
=========== =========== ===========
</TABLE>
B-12
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
Net realized gains, less applicable federal income taxes and transfer to
IMR, are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Realized capital gains (losses) .............................. $ 1,323,447 $(3,994,716) $ 3,170,154
----------- ----------- -----------
Federal income tax expense (benefit):
Current ...................................................... 622,821 (1,110,135) 1,253,371
Deferred ..................................................... (42,290) (248,068) (123,690)
----------- ----------- -----------
Total Federal income tax expense (benefit) ................... 580,531 (1,358,203) 1,129,681
----------- ----------- -----------
Transfer to IMR .................................................. 400,461 (2,634,280) 1,908,762
----------- ----------- -----------
Net Realized Gains (Losses) ...................................... $ 342,455 $ (2,233) $ 131,711
=========== =========== ===========
</TABLE>
The increase in unrealized appreciation (depreciation) on fixed maturity
securities was $17,129,267, $(23,246,030) and $120,062 for the years ended
December 31, 1995, 1994 and 1993, respectively.
The market values of bonds are based on quoted prices as available. For
certain private placement debt securities where quoted market prices are not
available, fair value is estimated by management using adjusted market prices
for like securities.
The cost and estimated market values of investments by major investment
category at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
December 31, 1995
---------------------------------------------------------------------
Estimated
Unrealized Unrealized Market
Cost Gain Loss Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations of
U.S. government corporations and
agencies ........................................... $ 86,663,351 $ 2,599,555 $ -- $ 89,262,906
Obligations of states and political
subdivisions ....................................... 6,086,127 108,215 1,599 6,192,743
Debt securities issued by foreign
governments ........................................ 8,061,711 537,479 -- 8,599,190
Corporate debt securities .............................. 304,402,610 7,379,556 717,644 311,064,522
Common stocks .......................................... 12,032,231 -- 1,793,850 10,238,381
------------ ------------ ------------ ------------
$417,246,030 $ 10,624,805 $ 2,513,093 $425,357,742
============ ============ ============ ============
</TABLE>
B-13
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
<TABLE>
<CAPTION>
December 31, 1994
---------------------------------------------------------------------
Estimated
Unrealized Unrealized Market
Cost Gain Loss Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations of
U.S. government corporations and
agencies ........................................... $ 45,385,889 $ 140,979 $ 2,176,046 $ 43,350,822
Obligations of states and political
subdivisions ....................................... 15,383,160 37,245 241,430 15,178,975
Debt securities issued by foreign
governments ........................................ 8,100,499 -- 503,504 7,596,995
Corporate debt securities .............................. 280,704,853 44,168 14,295,299 266,453,722
Common stocks .......................................... 11,890,926 -- 2,092,384 9,798,542
------------ ------------ ------------ ------------
$361,465,327 $ 222,392 $ 19,308,663 $342,379,056
============ ============ ============ ============
</TABLE>
At December 31, 1995, the amortized cost and estimated market value of debt
securities, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations.
Estimated
Amortized Market
Cost Value
------------ ------------
Due in one year or less ...................... $ 56,986,877 $ 57,324,698
Due after one year through five years ........ 238,553,324 242,364,605
Due after five years through ten years ....... 41,900,535 44,642,381
Due after ten years .......................... 34,405,999 36,306,163
------------ ------------
371,846,735 380,637,847
Sinking fund bonds
(including Collateralized
Mortgage Obligations) .................... 33,367,064 34,481,514
------------ ------------
$405,213,799 $415,119,361
============ ============
During 1995, proceeds from sales of investments in debt securities were
$62,404,716 and gross gains of $993,944 and losses of $377,851 were realized on
these sales.
Note 5 -- Reinsurance Ceded
The Company enters into coinsurance, modified coinsurance and yearly
renewable term agreements with Guardian Life and outside parties to provide for
reinsurance of selected variable annuity contracts and group life and individual
life policies. Under the terms of these agreements, reserves related to the
reinsured business and corresponding assets are held by the Company.
The effect of these agreements on the components of the gain from
operations have been combined in the accompanying statements of operations. The
components of this benefit (loss) are as follows:
B-14
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
<TABLE>
<CAPTION>
Year Ended December 31
(Amounts in 000's)
-------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums and annuity considerations .................................... $ (37,789) $(147,055) $(286,831)
Deposit - type funds ................................................... (3,423) (10,577) (15,966)
Commissions and reinsurance expense allowances ......................... 10,058 19,542 19,885
Policy and contract claims ............................................. 55,109 60,720 52,753
Surrender benefits and other fund withdrawals .......................... 774 -- --
Reserve adjustments on reinsurance ceded ............................... (32,193) 84,062 241,226
Increase in aggregate reserve for life and accident
and health policies .................................................. 11,914 16,350 --
--------- --------- ---------
Net income from reinsurance ceded ........................ $ 4,450 $ 23,042 $ 11,067
========= ========= =========
</TABLE>
The Company has entered into a modified coinsurance agreement with Guardian
Life. The net benefit (loss) of reinsurance ceded to Guardian Life under this
agreement totaled ($18,138,690), $2,448,774 and $7,650,605 in 1995, 1994 and
1993 respectively.
The reinsurance contracts do not relieve the Company of its primary
obligation for policyowner benefits.
NOTE 6 -- Reinsurance Assumed
The Company entered into a coinsurance agreement with a non-affiliated
underwriter. The Company assumed 100% of certain life and disability income
policies. Premiums include $7,153,623 and $21,545,974 in 1995 and 1994,
respectively, related to policies covered under this agreement.
NOTE 7 -- Related Party Transactions
A portion of the Company's business is produced by the registered
representatives of the Guardian Investor Services Corporation (GISC), a wholly
owned subsidiary of the Company. During 1995, 1994 and 1993, premium and annuity
considerations produced by GISC amounted to $400,148,692, $482,872,000 and
$494,873,000, respectively. The related commissions paid to GISC amounted to
$1,409,708, $1,709,799 and $1,738,613 for 1995, 1994 and 1993, respectively.
The Company has an investment in the Guardian Real Estate Account (GREA),
which was established in 1987 under Delaware Insurance law as an insurance
company separate account. GIAC has contributed capital to GREA from time to time
to provide funds for acquisitions and to preserve liquidity. The Company's most
recent contributions to GREA were made in December 1993, July 1994 and October
1994 when $1,800,000, $400,000 and $550,000 respectively were invested. At
December 31, 1995 GIAC maintained 37% ownership of GREA.
A portion of the Company's separate account assets are invested in
affiliated mutual funds. These funds consist of The Guardian Park Avenue Fund,
The Guardian Bond Fund, The Guardian Stock Fund, and The Guardian Cash Fund.
Each of these funds has an investment advisory agreement with GISC. The
investments as of December 31, 1995 and 1994 are as follows:
B-15
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
1995 1994
---- ----
The Guardian Park Avenue Fund .......... $ 214,919,292 $ 174,246,222
The Guardian Bond Fund ................. 374,461,581 308,983,625
The Guardian Stock Fund ................ 1,615,270,799 1,038,929,284
The Guardian Cash Fund ................. 356,820,089 386,985,749
-------------- --------------
$2,561,471,761 $1,909,144,880
============== ==============
During November 1990, the Company entered into an agreement with Baillie
Gifford Overseas Ltd. to form a joint venture company -- Guardian Baillie
Gifford Ltd. (GBG) -- which is organized as a corporation in Scotland. GBG is
registered in both the United Kingdom and the United States to act as an
investment adviser for the Baillie Gifford International Fund (the International
Fund) and the Baillie Gifford Emerging Markets Fund (the Emerging Markets Fund).
The Funds are offered in the U.S. as investment options under certain variable
annuity contracts and variable life policies. The amount of the Company's
separate account assets invested in the Funds was $334,281,959 and $309,678,696
as of December 31, 1995 and 1994, respectively.
The Company maintains an investment in an affiliated money market mutual
fund, The Guardian Cash Management Fund. At December 31, 1995 and 1994 this
amounted to $2,633,939 and $2,492,635, respectively.
The Company is billed quarterly by Guardian Life for all compensation and
related employee benefits for those employees of Guardian Life who are engaged
in the Company's business and for the Company's use of Guardian Life's
centralized services and agency force. The amounts charged for these services
amounted to $23,613,359 in 1995, $13,225,062 in 1994 and $12,702,470 in 1993,
and, in the opinion of management, were considered appropriate for the services
rendered.
NOTE 8 -- Separate Accounts
The following represents a reconciliation of net transfers from GIAC to the
separate accounts:
Transfers as reported in the Summary of Operations of the Separate Account
Statement:
1995 1994
---- ----
Transfers to separate accounts ........... $ 582,715,569 $ 688,657,147
Transfers from separate accounts ......... (398,346,503) (288,606,548)
------------- -------------
Net transfers to (from) separate accounts 184,369,066 400,050,599
------------- -------------
Reconciling Adjustments:
Mortality & expense guarantees-- Annuity . 41,474,872 31,629,838
Mortality & expense guarantees-- VLI ..... 1,571,955 1,341,318
Administrative fees-- VA only ............ 3,331,391 2,752,950
Cost of collection-- VLI ................. 4,232,564 3,828,702
------------- -------------
Total adjustments ........................ 50,610,782 39,552,808
------------- -------------
Transfers as reported in the Summary of
Operations of GIAC ..................... $ 234,979,848 $ 439,603,407
============= =============
B-16
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
NOTE 9-- Annuity Actuarial Reserves and Deposit Liabilities
The following describes withdrawal characteristics of annuity actuarial
reserves and deposit liabilities:
<TABLE>
<CAPTION>
Year Ending 1995 Year Ending 1994
--------------------- ---------------------
Amount % Amount %
------------ ------ ------------ ------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal
with market value adjustment ....... -- --
at book value less current surrender
charge of 5% or more ............. -- --
at market value .................... -- --
total with adjustment or at
market value ..................... -- --
at book value without adjustment
(minimal or no charge or
adjustment) .......................... $300,107,673 78.08 $239,437,798 74.56
Not subject to discretionary withdrawal 84,263,477 21.92 81,703,584 25.44
------------ ------ ------------ ------
Total (gross) .......................... 384,371,150 100.00 321,141,382 100.00
Reinsurance ceded ...................... -- --
------------ ------ ------------ ------
Total .................................. $384,371,150 100.00% $321,141,382 100.00%
============ ====== ============ ======
</TABLE>
This does not include $4,046,768,087 of non-guaranteed annuity reserves
held in separate accounts, and $1,500,869 in annuity reserves being held as a
loan collateral fund for loans on certain annuity contracts.
B-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 9, 1996
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
In our opinion, the accompanying balance sheets and related statements of
operations, of changes in common stock and surplus and of cash flows present
fairly, in all material respects, the financial position of The Guardian
Insurance & Annuity Company, Inc. at December 31, 1995 and 1994, and the results
of its operations and its cash flows for the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles
(practices prescribed or permitted by insurance regulatory authorities, see Note
2). These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
B-18
<PAGE>
The Guardian Separate Account A
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 A (incorporated by reference into
Part B):
Statement of Assets and Liabilities as of December 31, 1995
Combined Statement of Operations for the Year Ended
December 31, 1995
Combined Statements of Changes in Net Assets for the Two
Years Ended December 31, 1995 and 1994
Notes to Financial Statements
Report of Price Waterhouse LLP, Independent Accountants
(2) The Guardian Insurance & Annuity Company, Inc. (included in Part
B):
Balance Sheets as of December 31, 1995 and 1994
Statements of Operations for the Three Years Ended
December 31, 1995, 1994 and 1993
Statements of Changes in Capital Stock and Surplus for the
Three Years Ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the Three Years Ended
December 31, 1995, 1994 and 1993
Notes to Financial Statements
Report of Price Waterhouse LLP, Independent Accountants
(b) Exhibits
Number Description
------ -----------
1 Resolution of the Board of Directors of The
Guardian Insurance & Annuity Company, Inc.
establishing Separate Account A(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(2)
(b) Form of Broker-Dealer Supervisory and Service
Agreement(3)
4 Variable Annuity Contracts
(a) Specimen of Single Purchase Payment Variable
Annuity Contract(1)
(b) Specimen of Flexible Purchase Payment Variable
Annuity Contract(1)
(c) Form of Endorsement Rider regarding the
Fixed-Rate Option(4)
(d) Form of Endorsement Rider regarding The
Guardian Real Estate Account(4)
5 Form of Application for Variable Annuity Contract1
6 (a) Certificate of Incorporation of The Guardian
Insurance & Annuity Company, Inc.(3)
(b) By-laws of The Guardian Insurance & Annuity
Company, Inc.(3)
C-1
<PAGE>
7 Automatic Indemnity Reinsurance Agreement between
The Guardian Insurance & Annuity Company, Inc. and
The Guardian Life Insurance Company of America3
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.8
9 Opinion and Consent of Counsel6
10 (a) Consent of Price Waterhouse LLP
11 Not Applicable
12 Agreement with Respect Respect to Providing the
Initial Capital for Separate Account A1
13(a) Powers of Attorney executed by a majority of the
Board of Directors and principal officers of The
Guardian Insurance & Annuity Company, Inc.5
13(b) Power of Attorney executed by a principal officer
of The Guardian Insurance & Annuity Company, Inc.7
27 Financial Data Schedule
- --------------
(1) Incorporated by reference to the Registration Statement on Form N-4 (Reg.
No.2-74906), as previously filed.
(2) Incorporated by reference to Post-Effective Amendment No. 19 to the
Registration Statement on Form N-4 (Reg. No. 2-74906), as filed on April
26, 1990.
(3) Incorporated by reference to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-4 (Reg. No. 2-74906), as filed on February
27, 1987.
(4) Incorporated by reference to Post Effective Amendment No. 17 to the
Registration Statement on Form N-4 (Reg. No. 2-74906), as filed on
September 23, 1988.
(5) Incorporated by reference to Post-Effective Amendment No. 20 to the
Registration Statement on Form N-4 (Reg. No. 2-74906), as filed on April
24, 1991.
(6) Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement on Form N-4 (Reg. No. 2-74906), as filed on April
30, 1992.
(7) Incorporated by reference to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-4 (Reg. No. 2-74906), as filed on April
29, 1993.
(8) Incorporated by reference to Post-Effective Amendment No. 24 to the
Registration Statement on Form N-4 (Reg. No. 2-74906), as filed on April
28, 1995.
C-2
<PAGE>
Item 25. Directors and Officers of the Depositor
The following is a list of each director and officer 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
John M. Smith Executive Vice President & Director
Edward K. Kane Senior Vice President, General
Counsel & 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 E. Albers Vice President, Equity Securities
Michele S. Babakian Vice President
John M. Fagan Vice President
Charles G. Fisher Vice President & Actuary
William C. Frentz Vice President, Real Estate
Thomas R. Hickey, Jr. Vice President, Operations
Ryan W. Johnson Vice President, Equity Sales
Gary B. Lenderink Vice President, Group Pensions
Frank L. Pepe Vice President & Controller
Richard T. Potter, Jr. Vice President and Counsel
Donald P. Sullivan, Jr. Vice President
Joseph A. Caruso Secretary
Karen Dickinson Assistant Secretary
John M. Emanuele Treasurer
Rodolfo E. Fidelino Chief Medical Director
Ann T. Kearney Second Vice President
Alexander M. Grant, Jr. Second Vice President
Raymond J. Henry Second Vice President
Theresa Kaminski Second Vice President, Group Pensions
Administration
Paul Iannelli Assistant Vice President
Paul Parenteau Assistant Vice President
Peggy L. Coppola Assistant Vice President
Richard A. Cumiskey Assistant Vice President
& Compliance Officer
C-3
<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 April 1, 1996:
State of Percent of
Incorporation Voting Securities
Name or Organization Owned
---- --------------- -----
The Guardian Insurance & Delaware 100%
Annuity Company, Inc.
Guardian Asset Management Delaware 100%
Corporation
Guardian Reinsurance Services, Inc. Connecticut 100%
Health Care-Guard, Inc. New York 100%
The Guardian Tax-Exempt Fund Massachusetts 64%
The Guardian Baillie Gifford Massachusetts 30%
International Fund
The Guardian Investment Quality Massachusetts 42%
Bond Fund
Baillie Gifford Emerging Markets Fund Maryland 44%
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 April 1, 1996:
Approximate
Percentage of Voting
Place of Securities Owned
Incorporation by Guardian Life
Name or Organization Affiliates
---- --------------- ----------
Guardian Investor Services Corporation New York 100%
Guardian Baillie Gifford Ltd. Scotland 51%
The Guardian Cash Fund, Inc. Maryland 100%
The Guardian Bond Fund, Inc. Maryland 100%
The Guardian Stock Fund, Inc. Maryland 100%
GBG Funds, Inc. Maryland 100%
Item 27. Number of Contractowners
Type of Contract Number as of April 1, 1996
---------------- --------------------------
Non-Qualified (Individual)........ 8,524
Qualified (Individual)............ 11,505
Qualified (Group) ................ 429
------
Total .................... 20,458
C-4
<PAGE>
Item 28. Indemnification
Reference is made to Article VIII of GIAC's By-Laws, as supplemented by
Section 3.2 of the Certificate of Incorporation of GIAC, filed as Exhibits 6(b)
and 6(a), respectively, to this Registration Statement and incorporated herein
by reference.
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 series: The Guardian Cash Management
Fund, The Guardian Park Avenue Fund, The Guardian Investment Quality Bond Fund,
The Guardian Tax-Exempt Fund, The Guardian Asset Allocation Fund and The
Guardian Baillie Gifford International Fund, and GBG Funds, Inc. a series fund
consisting of Baillie Gifford International Fund and Baillie Gifford Emerging
Markets 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 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
Edward K. Kane Senior Vice President, General
Counsel & Director
Philip H. Dutter Director
Joseph D. Sargent Director
William C. Warren Director
Frank J. Jones Director
Charles E. Albers Executive Vice President
Michele S. Babakian Vice President
Nikolaos D. Monoyios Vice President
John M. Fagan Vice President
Ryan W. Johnson Vice President & National
Sales Director
Thomas R. Hickey, Jr. Vice President, Operations
Frank L. Pepe Vice President & Controller
Richard T. Potter, Jr. Vice President and Counsel
Donald P. Sullivan, Jr. Vice President
C-5
<PAGE>
Name Position(s) with GISC
---- ---------------------
Kevin S. Alter Second Vice President
Alexander M. Grant, Jr. Second Vice President
Ann T. Kearney Second Vice President
Peggy L. Coppola Assistant Vice President
Richard A. Cumiskey Assistant Vice President, &
Compliance Officer
John M. Emanuele Treasurer
Joseph A. Caruso Secretary
Karen Dickinson Assistant Secretary
Paul Iannelli Assistant Controller
Carol M. Cramer Director, Administrative
Support
Scott E. Horowitz Director, Systems Support
Georgia Gaidula Director, Broker-Dealer
Operations
Grace Nunez Director, Agency Sales Support
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
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-6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, The Guardian Separate Account A certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and 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 26th day of
April, 1996.
The Guardian Separate Account A
(Registrant)
By: THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
(Depositor)
By: /s/THOMAS R. HICKEY, JR.
--------------------------------
Thomas R. Hickey, Jr.
Vice President, Operations
C-7
<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/CHARLES E. ALBERS* Vice President, Equity Securities
- ----------------------------------
Charles E. Albers
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 D. FERRARA * Director
- ----------------------------------
Arthur D. Ferrara
s/WILLIAM C. WARREN* Director
- ----------------------------------
William C. Warren
s/EDWARD K. KANE* Senior Vice President,
- ---------------------------------- General Counsel and Director
Edward K. Kane
s/LEO R. FUTIA* Director
- ----------------------------------
Leo R. Futia
s/PHILIP H. DUTTER* Director
- ----------------------------------
Philip H. Dutter
__________________________ Director
Peter L. Hutchings
*By s/ THOMAS R. HICKEY, JR.* Date: April 26, 1996
--------------------------
Thomas R. Hickey, Jr.
Vice President, Operations
Pursuant to a Power of Attorney
C-8
<PAGE>
The Guardian Separate Account A
Exhibit Index
Number Description
------ -----------
10(a) Consent of Price Waterhouse LLP
27 Financial Data Schedule
C-9
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 25 to the registration statement on Form N-4 (the "Registration
Statement") of our report dated February 9, 1996, relating to the financial
statements appearing in the December 31, 1995 Annual Report to Contractowners of
The Guardian Separate Account A, which are also incorporated by reference into
the Registration Statement. We also consent to the use in the Statement of
Additional Information of our report dated February 9, 1996, relating to the
financial statements of The Guardian Insurance & Annuity Company, Inc., which
appears in such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus. We also consent to the references
to us under the heading "Condensed Financial Information" in the Prospectus and
under the heading "Experts" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
New York, NY
April 26, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the "Annual Report to Shareholders" dated December 31, 1995
and is qualified in it's entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> The Separate Account A - Value Guard II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 676,942,350
<INVESTMENTS-AT-VALUE> 970,236,433
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 970,236,433
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,901,836
<TOTAL-LIABILITIES> 7,901,836
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 11,201,682
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 86,149,525
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 293,294,083
<NET-ASSETS> 962,334,597
<DIVIDEND-INCOME> 20,843,161
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 9,641,479
<NET-INVESTMENT-INCOME> 11,201,682
<REALIZED-GAINS-CURRENT> 86,149,525
<APPREC-INCREASE-CURRENT> 110,832,165
<NET-CHANGE-FROM-OPS> 208,183,373
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,641,479
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,641,479
<AVERAGE-NET-ASSETS> 898,430,837
<PER-SHARE-NAV-BEGIN> 0.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.000
<EXPENSE-RATIO> 0.011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
