Post-Effective Amendment No. 28
As filed with the Securities and Exchange Commission on April 30, 1998
Registration Nos. 2-74906
811-3323
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
POST-EFFECTIVE AMENDMENT No. 28 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
AMENDMENT No. 17 |X|
(Check appropriate box or boxes)
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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)
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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, 1998 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 March 25, 1998.
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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
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
May 1, 1998
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 ten mutual fund
investment divisions of The Guardian Separate Account A (the "Separate 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, Inc., The Guardian Bond Fund, Inc., The Guardian Cash
Fund, Inc., The Guardian Small Cap Stock Fund, Baillie Gifford International
Fund, Baillie Gifford Emerging Markets Fund, Value Line Strategic Asset
Management Trust, Value Line Centurion Fund, Inc., Gabelli Capital Asset Fund
and MFS Growth With Income Series (collectively referred to as the "Funds").
Contract values allocated to any of the Investment Divisions (referred to as the
"Variable Investment Options") will vary to reflect the investment performance
of such divisions. Net Premium Payments allocated to the Fixed-Rate Option will
accumulate on a fixed basis, with principal and minimum interest guaranteed by
GIAC.
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.
(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, THE GUARDIAN SMALL CAP STOCK 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 MFS GROWTH WITH INCOME SERIES.
Please Read This Prospectus And Keep It For Future Reference.
1
<PAGE>
(continued from previous page)
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, 1998, 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.
CONTENTS OF PROSPECTUS
Page
----
Glossary of Special Terms Used in This Prospectus.................. 3
Summary of the Contracts........................................... 5
Expense Table...................................................... 7
Condensed Financial Information.................................... 10
Descriptions of GIAC and the Separate Account...................... 14
Descriptions of the Variable Investment Options.................... 15
Description of the Fixed-Rate Option............................... 18
Descriptions of the Contracts...................................... 19
Individual Contracts......................................... 19
Group Contract............................................... 19
Method of Purchase........................................... 19
Charges and Deductions....................................... 20
Pre-Retirement Death Benefit................................. 22
Optional Enhanced Death Benefit.............................. 22
Accumulation Period.......................................... 23
Annuity Period............................................... 23
Transfers of Contract Values................................. 25
Surrenders and Partial Withdrawals........................... 26
Other Important Contract Information......................... 27
Federal Tax Matters................................................ 28
General Information.......................................... 28
Non-Qualified Contracts...................................... 28
Qualified Contracts ......................................... 30
Other Tax Considerations..................................... 33
Voting Rights...................................................... 34
Distribution of the Contracts...................................... 34
Right to Cancel the Contract....................................... 35
Year 2000 Compliance............................................... 35
Legal Proceedings.................................................. 35
Additional Information............................................. 35
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.
2
<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 ten 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, The Guardian Small Cap Stock 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 MFS Growth With Income Series.
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 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.
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.
3
<PAGE>
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 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
24.) 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 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
15.) 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 18.) 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 23 and "Annuity Period," page
23.) 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 Fixed-Rate Option. (See "Transfers of Contract
Values," page 25.)
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 20, "Surrenders and Partial
Withdrawals," page 26 and "Federal Tax Matters," page 28.
(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 31, for information about the circumstances
under which withdrawals may be made from such Contracts.)
5
<PAGE>
(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 20.) In addition,
the Funds impose certain charges against their respective assets. (See the
applicable Fund 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 35.) 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 or Section 408A 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 28.)
6
<PAGE>
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EXPENSE TABLE
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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 Contracts, 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
For Contracts For Contracts
without Enhanced with Enhanced
Death Benefit Death Benefit
------------- -------------
Separate Account Level Annual Expenses:
(as a percentage of daily net asset value):
Mortality and Expense Risk Charge ......... 1.00% 1.00%
Account Fees and Expenses ................. 0% 0%
Enhanced Death Benefit Charge ............. 0% .30%
------ ------
Total Separate Account Annual Expenses.... 1.0% 1.30%
- --------------------------------------------------------------------------------
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% .04% .54%
The Guardian Bond Fund......................... .50% .05% .55%
The Guardian Stock Fund........................ .50% .02% .52%
The Guardian Small Cap Stock Fund .75% .21% .96%
Baillie Gifford International Fund............. .80% .17% .97%
Baillie Gifford Emerging Markets Fund.......... 1.00% .40% 1.40%
Value Line Centurion Fund...................... .50% .10% .60%
Value Line Strategic Asset Management Trust.... .50% .09% .59%
Gabelli Capital Asset Fund..................... 1.00% .17% 1.17%
MFS Growth With Income Series+................. .75% .25% 1.00%
- --------------------------------------------------------------------------------
* 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, 1997, except that the percentages
for the Small Cap Stock Fund are annualized, since the Fund commenced
operations on April 2, 1997. 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.
+ The Adviser of MFS Growth With Income Series has agreed to bear expenses
for the Series, subject to reimbursement by the Series, such that the
Series' "Other Expenses" shall not exceed 0.25% of the average daily net
assets of the Series during the current fiscal year. Otherwise, "Other
Expenses" and "Total Operating Expenses" for the Series would be .35% and
1.10%, respectively.
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7
<PAGE>
The following tables are 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.)
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*
BASIC CONTRACT
<TABLE>
<CAPTION>
=================================================================================================================================
If you surrender your contract at If you do not surrender or you
the end of the applicable time period: annuitize at the end of the
You would pay the following expenses on a applicable time period:
$1,000 investment, assuming a 5% annual You would pay the following expenses on
return on assets: a $1,000 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 $91 SP $108 SP $192 SP $17 SP $51 SP $88 SP $192 SP
$67 FP $102 FP $139 FP $194 FP $17 FP $52 FP $89 FP $194 FP
- ---------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN BOND FUND $67 SP $92 SP $109 SP $193 SP $17 SP $52 SP $89 SP $193 SP
$67 FP $102 FP $139 FP $195 FP $17 FP $52 FP $89 FP $195 FP
- ---------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN STOCK FUND $66 SP $91 SP $107 SP $190 SP $16 SP $51 SP $87 SP $190 SP
$66 FP $101 FP $138 FP $191 FP $16 FP $51 FP $88 FP $191 FP
- ---------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN SMALL CAP $71 SP $104 SP $130 SP $238 SP $21 SP $64 SP $110 SP $238 SP
STOCK FUND $71 FP $115 FP $161 FP $239 FP $21 FP $65 FP $111 FP $239 FP
- ---------------------------------------------------------------------------------------------------------------------------------
BAILLIE GIFFORD $71 SP $105 SP $131 SP $239 SP $21 SP $65 SP $111 SP $239 SP
INTERNATIONAL FUND $71 FP $115 FP $161 FP $240 FP $21 FP $65 FP $111 FP $240 FP
- ---------------------------------------------------------------------------------------------------------------------------------
BAILLIE GIFFORD EMERGING $75 SP $118 SP $153 SP $283 SP $25 SP $78 SP $133 SP $283 SP
MARKETS FUND $75 FP $128 FP $184 FP $285 FP $25 FP $78 FP $134 FP $285 FP
- ---------------------------------------------------------------------------------------------------------------------------------
VALUE LINE CENTURION FUND $67 SP $93 SP $111 SP $199 SP $17 SP $53 SP $91 SP $199 SP
$67 FP $103 FP $142 FP $200 FP $17 FP $53 FP $92 FP $200 FP
- ---------------------------------------------------------------------------------------------------------------------------------
VALUE LINE STRATEGIC ASSET $67 SP $93 SP $111 SP $198 SP $17 SP $53 SP $91 SP $198 SP
MANAGEMENT TRUST $67 FP $103 FP $142 FP $199 FP $17 FP $53 FP $92 FP $199 FP
- ---------------------------------------------------------------------------------------------------------------------------------
GABELLI CAPITAL ASSET FUND $73 SP $111 SP $141 SP $260 SP $23 SP $71 SP $121 SP $260 SP
$73 FP $121 FP $172 FP $261 FP $23 FP $71 FP $122 FP $261 FP
- ---------------------------------------------------------------------------------------------------------------------------------
MFS GROWTH WITH INCOME $71 SP $106 SP $132 SP $242 SP $21 SP $66 SP $112 SP $242 SP
SERIES $71 FP $116 FP $163 FP $243 FP $21 FP $66 FP $113 FP $243 FP
=================================================================================================================================
</TABLE>
*Flexible Premium Payment Contracts include Group Contracts.
8
<PAGE>
<TABLE>
<CAPTION>
CONTRACT WITH ENHANCED DEATH BENEFIT
=================================================================================================================================
If you surrender your contract at If you do not surrender or you
the end of the applicable time period: annuitize at the end of the
You would pay the following expenses on a applicable time period:
$1,000 investment, assuming a 5% annual You would pay the following expenses on
return on assets: a $1,000 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 $70 SP $101 SP $124 SP $225 SP $20 SP $61 SP $104 SP $225 SP
$70 FP $111 FP $155 FP $226 FP $20 FP $61 FP $105 FP $226 FP
- ---------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN BOND FUND $70 SP $101 SP $125 SP $226 SP $20 SP $61 SP $105 SP $226 SP
$70 FP $111 FP $155 FP $227 FP $20 FP $61 FP $105 FP $227 FP
- ---------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN STOCK FUND $69 SP $100 SP $123 SP $223 SP $19 SP $60 SP $103 SP $223 SP
$70 FP $110 FP $154 FP $224 FP $20 FP $60 FP $104 FP $224 FP
- ---------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN SMALL CAP $74 SP $114 SP $146 SP $269 SP $24 SP $74 SP $126 SP $269 SP
STOCK FUND $74 FP $124 FP $176 FP $270 FP $24 FP $74 FP $126 FP $270 FP
- ---------------------------------------------------------------------------------------------------------------------------------
BAILLIE GIFFORD $74 SP $114 SP $146 SP $270 SP $24 SP $74 SP $126 SP $270 SP
INTERNATIONAL FUND $74 FP $124 FP $177 FP $271 FP $24 FP $74 FP $127 FP $271 FP
- ---------------------------------------------------------------------------------------------------------------------------------
BAILLIE GIFFORD EMERGING $78 SP $127 SP $168 SP $313 SP $28 SP $87 SP $148 SP $313 SP
MARKETS FUND $79 FP $137 FP $199 FP $314 FP $29 FP $87 FP $149 FP $314 FP
- ---------------------------------------------------------------------------------------------------------------------------------
VALUE LINE CENTURION FUND $70 SP $102 SP $127 SP $231 SP $20 SP $62 SP $107 SP $231 SP
$70 FP $113 FP $158 FP $233 FP $20 FP $63 FP $108 FP $233 FP
- ---------------------------------------------------------------------------------------------------------------------------------
VALUE LINE STRATEGIC ASSET $70 SP $102 SP $127 SP $230 SP $20 SP $62 SP $107 SP $230 SP
MANAGEMENT TRUST $70 FP $112 FP $157 FP $232 FP $20 FP $62 FP $107 FP $232 FP
- ---------------------------------------------------------------------------------------------------------------------------------
GABELLI CAPITAL ASSET FUND $76 SP $120 SP $157 SP $290 SP $26 SP $80 SP $137 SP $290 SP
$76 FP $130 FP $187 FP $292 FP $26 FP $80 FP $137 FP $292 FP
- ---------------------------------------------------------------------------------------------------------------------------------
MFS GROWTH WITH INCOME $74 SP $115 SP $148 SP $273 SP $24 SP $75 SP $128 SP $273 SP
SERIES $74 FP $125 FP $179 FP $274 FP $24 FP $75 FP $129 FP $274 FP
=================================================================================================================================
</TABLE>
This expense comparison, and the expense comparison on the previous page,
assume that the expenses reported in the table on page 7 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, 1997 by the total
average net assets for such year; (2) adding this percentage to annual expenses;
and (3) calculating the dollar amounts.
9
<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, 1992
through 1997, 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 1997 Annual
Report to Contractowners and incorporated by reference into the Statement of
Additional Information. A copy of the 1997 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
second page of this Prospectus.
Selected data for Accumulation Units of the Separate Account outstanding
at the end of each period:
BASIC CONTRACT
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Cash Fund ...... $ 23.050 $ 22.172 $ 21.217 $ 20.639 $ 20.307 $ 19.869 $ 19.003 $ 17.767
The Guardian Stock Fund ..... 72.788 57.929 43.446 44.443 37.415 31.469 23.376 26.755
The Guardian Bond Fund ...... 29.924 29.376 25.230 26.391 24.262 22.750 19.774 18.565
The Guardian Small Cap
Stock Fund ................ 10.00** -- -- -- -- -- -- --
Gabelli Capital Asset Fund .. 11.832 10.763 10.000++ -- -- -- -- --
Baillie Gifford International
Fund ...................... 16.175 14.154 12.851 12.866 9.694 10.756 10.000* --
Baillie Gifford Emerging
Markets Fund .............. 10.667 8.647 8.785 10.000+ -- -- -- --
Value Line Centurion Fund ... 46.920 40.383 29.115 30.069 27.807 26.511 17.593 16.831
Value Line Strategic Asset
Management Trust .......... 31.261 27.247 21.408 22.729 20.521 18.013 12.691 12.836
MFS Growth With Income
Series .................... 10.00** -- -- -- -- -- -- --
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 23.999 $ 23.050 $ 22.172 $ 21.217 $ 20.639 $ 20.307 $ 19.869 $ 19.003
The Guardian Stock Fund ..... 97.721 72.788 57.929 43.446 44.443 37.415 31.469 23.376
The Guardian Bond Fund ...... 32.294 29.924 29.376 25.230 26.391 24.262 22.750 19.774
The Guardian Small Cap
Stock Fund ................ 11.323 -- -- -- -- -- -- --
Gabelli Capital Asset Fund .. 16.705 11.832 10.763 -- -- -- -- --
Baillie Gifford International
Fund ...................... 17.928 16.175 14.154 12.851 12.866 9.694 10.756 --
Baillie Gifford Emerging
Markets Fund ................ 10.770 10.667 8.647 8.785 -- -- -- --
Value Line Centurion Fund ... 56.396 46.920 40.383 29.115 30.069 27.807 26.511 17.593
Value Line Strategic Asset
Management Trust .......... 35.801 31.261 27.247 21.408 22.729 20.521 18.013 12.691
MFS Growth With Income
Series .................... 10.403 -- -- -- -- -- -- --
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 1,396,650 1,935,600 2,089,104 2,648,986 2,942,235 3,921,593 4,692,570 5,608,349
The Guardian Stock Fund ..... 3,059,495 3,375,757 3,704,798 3,886,496 3,963,403 3,886,689 3,902,601 3,934,473
The Guardian Bond Fund ...... 1,059,043 1,300,339 1,628,230 1,823,384 2,142,451 2,477,490 2,576,627 2,486,450
The Guardian Small Cap
Stock Fund ................ 332,654 -- -- -- -- -- -- --
Gabelli Capital Asset Fund .. 175,061 109,717 66,391 -- -- -- -- --
Baillie Gifford International 772,873 951,281 1,077,612 1,368,576 923,046 459,629 361,003 --
Fund
Baillie Gifford Emerging
Markets Fund .............. 273,288 209,419 101,949 55,254 -- -- -- --
Value Line Centurion Fund ... 1,949,959 2,247,319 2,390,917 2,541,147 2,829,258 3,180,170 3,316,085 3,320,186
Value Line Strategic Asset
Management Trust .......... 2,402,758 2,736,789 3,010,346 3,271,469 3,653,393 3,472,787 3,106,929 2,800,772
MFS Growth With Income
Series .................... 48,791 -- -- -- -- -- -- --
Year Ended December 31,
------------------------
1989 1988
----------- -----------
TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Cash Fund ...... $ 16.456 $ 15.484
The Guardian Stock Fund ..... 21.890 18.367
The Guardian Bond Fund ...... 16.464 15.157
The Guardian Small Cap Stock
Fund ...................... -- --
Gabelli Capital Asset Fund .. -- --
Baillie Gifford International
Fund ...................... -- --
Baillie Gifford Emerging
Markets Fund .............. -- --
Value Line Centurion Fund ... 12.926 12.134
Value Line Strategic Asset
Management Trust .......... 10.325 9.453
MFS Growth With Income
Series................... -- --
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 17.767 $ 16.456
The Guardian Stock Fund ..... 26.755 21.890
The Guardian Bond Fund ...... 18.565 16.464
The Guardian Small Cap Stock
Fund ...................... -- --
Gabelli Capital Asset Fund .. -- --
Baillie Gifford International
Fund ...................... -- --
Baillie Gifford Emerging
Markets Fund ................ -- --
Value Line Centurion Fund ... 16.831 12.926
Value Line Strategic Asset
Management Trust .......... 12.836 10.325
MFS Growth With Income
Series................... -- --
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 5,016,347 4,082,938
The Guardian Stock Fund ..... 3,528,351 2,517,696
The Guardian Bond Fund ...... 2,472,842 1,746,189
The Guardian Small Cap Stock
Fund ...................... -- --
Gabelli Capital Asset Fund .. -- --
Baillie Gifford International -- --
Fund
Baillie Gifford Emerging
Markets Fund .............. -- --
Value Line Centurion Fund ... 3,313,530 3,946,617
Value Line Strategic Asset
Management Trust .......... 2,274,974 1,608,257
MFS Growth With Income
Series................... -- --
- ------------
* Commencing February 8, 1991.
+ Commencing October 17, 1994.
++ Commencing May 1, 1995.
** Commencing July 16, 1997.
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NON-TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Cash Fund ...... $ 23.050 $ 22.172 $ 21.217 $ 20.639 $ 20.307 $ 19.869 $ 19.003 $ 17.767
The Guardian Stock Fund ..... 72.788 57.929 43.446 44.443 37.415 31.469 23.376 26.755
The Guardian Bond Fund ...... 29.924 29.376 25.230 26.391 24.262 22.750 19.774 18.565
The Guardian Small Cap
Stock Fund ................ 10.00** -- -- -- -- -- -- --
Gabelli Capital Asset Fund .. 11.832 10.763 10.000++ -- -- -- -- --
Baillie Gifford International
Fund ...................... 16.175 14.154 12.851 12.866 9.694 10.756 10.000* --
Baillie Gifford Emerging
Markets Fund .............. 10.667 8.647 8.785 10.000+ -- -- -- --
Value Line Centurion Fund ... 46.920 40.383 29.115 30.069 27.807 26.511 17.593 16.831
Value Line Strategic Asset
Management Trust .......... 31.261 27.247 21.408 22.729 20.521 18.013 12.691 12.836
MFS Growth With Income
Series .................... 10.00** -- -- -- -- -- -- --
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 23.999 $ 23.050 $ 22.172 $ 21.217 $ 20.639 $ 20.307 $ 19.869 $ 19.003
The Guardian Stock Fund ..... 97.721 72.788 57.929 43.446 44.443 37.415 31.469 23.376
The Guardian Bond Fund ...... 32.294 29.924 29.376 25.230 26.391 24.262 22.750 19.774
The Guardian Small Cap
Stock Fund ................ 11.323 -- -- -- -- -- -- --
Gabelli Capital Asset Fund .. 16.705 11.832 10.763 -- -- -- -- --
Baillie Gifford International
Fund ...................... 17.928 16.175 14.154 12.851 12.866 9.694 10.756 --
Baillie Gifford Emerging
Markets Fund .............. 10.770 10.667 8.647 8.785 -- -- -- --
Value Line Centurion Fund ... 56.396 46.920 40.383 29.115 30.069 27.807 26.511 17.593
Value Line Strategic Asset
Management Trust .......... 35.801 31.261 27.247 21.408 22.729 20.521 18.013 12.691
MFS Growth With Income
Series .................... 10.403 -- -- -- -- -- -- --
</TABLE>
Year Ended December 31,
------------------------
1989 1988
----------- -----------
NON-TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Cash Fund ...... $ 16.456 $ 15.484
The Guardian Stock Fund ..... 21.890 18.367
The Guardian Bond Fund ...... 16.464 15.157
The Guardian Small Cap Stock
Fund ...................... -- --
Gabelli Capital Asset Fund .. -- --
Baillie Gifford International
Fund ...................... -- --
Baillie Gifford Emerging
Markets Fund .............. -- --
Value Line Centurion Fund ... 12.926 12.134
Value Line Strategic Asset
Management Trust .......... 10.325 9.453
MFS Growth With Income
Series................... -- --
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 17.767 $ 16.456
The Guardian Stock Fund ..... 26.755 21.890
The Guardian Bond Fund ...... 18.565 16.464
The Guardian Small Cap Stock
Fund ...................... -- --
Gabelli Capital Asset Fund .. -- --
Baillie Gifford International
Fund ...................... -- --
Baillie Gifford Emerging
Markets Fund .............. -- --
Value Line Centurion Fund ... 16.831 12.926
Value Line Strategic Asset
Management Trust .......... 12.836 10.325
MFS Growth With Income
Series................... -- --
11
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NON-TAX QUALIFIED
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 2,102,771 2,573,440 2,583,393 3,789,032 3,646,983 4,269,426 5,128,078 6,662,947
The Guardian Stock Fund ..... 2,531,378 2,700,571 2,999,011 2,965,690 3,187,728 3,363,467 3,417,909 3,398,120
The Guardian Bond Fund ...... 1,155,350 1,316,331 1,794,933 1,973,991 2,482,373 2,996,262 3,328,076 3,476,609
The Guardian Small Cap
Stock Fund ................ 319,313 -- -- -- -- -- -- --
Gabelli Capital Asset Fund .. 214,453 123,171 115,452 -- -- -- -- --
Baillie Gifford
International Fund ........ 870,182 1,105,132 1,315,858 1,688,165 1,690,547 656,189 452,249 --
Baillie Gifford Emerging
Markets Fund .............. 285,820 338,849 281,304 92,831 -- -- -- --
Value Line Centurion Fund ... 1,670,517 1,954,824 2,179,325 2,249,421 2,641,534 3,189,835 3,609,755 3,506,781
Value Line Strategic Asset
Management Trust .......... 1,507,406 1,681,531 1,833,099 2,041,394 2,380,606 2,305,769 2,214,243 2,037,985
MFS Growth With Income
Series .................... 24,241 -- -- -- -- -- -- --
</TABLE>
Year Ended December 31,
------------------------
1989 1988
----------- -----------
NON-TAX QUALIFIED
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 6,380,840 6,085,799
The Guardian Stock Fund ..... 3,680,472 2,431,214
The Guardian Bond Fund ...... 3,702,891 3,121,908
The Guardian Small Cap Stock
Fund ...................... -- --
Gabelli Capital Asset Fund .. -- --
Baillie Gifford
International Fund ........ -- --
Baillie Gifford Emerging
Markets Fund .............. -- --
Value Line Centurion Fund ... 3,435,285 4,114,152
Value Line Strategic Asset
Management Trust .......... 1,970,805 1,542,803
MFS Growth With Income
Series................... -- --
- ------------
* Commencing February 8, 1991.
+ Commencing October 17, 1994.
++ Commencing May 1, 1995.
** Commencing July 16, 1997.
CONTRACT WITH ENCHANCED DEATH BENEFIT RIDER
Year Ended December 31,
-----------------------
1997
-----------
TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period*:
The Guardian Cash Fund ...... $ 10.00
The Guardian Stock Fund ..... 10.00
The Guardian Bond Fund ...... 10.00
The Guardian Small Cap
Stock Fund ................ 10.00
Gabelli Capital Asset Fund .. 10.00
Baillie Gifford International
Fund ...................... 10.00
Baillie Gifford Emerging
Markets Fund .............. 10.00
Value Line Centurion Fund ... 10.00
Value Line Strategic Asset
Management Trust .......... 10.00
MFS Growth With Income
Series .................... 10.00
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 10.502
The Guardian Stock Fund ..... 10.564
The Guardian Bond Fund ...... 10.112
The Guardian Small Cap
Stock Fund ................ 10.145
Gabelli Capital Asset Fund .. 10.641
Baillie Gifford International
Fund ...................... 10.559
Baillie Gifford Emerging
Markets Fund ................ 10.895
Value Line Centurion Fund ... 10.211
Value Line Strategic Asset
Management Trust .......... 10.261
MFS Growth With Income
Series 10.657
12
<PAGE>
Number of Accumulation Units
Outstanding at End of Period:
Year Ended December 31,
-----------------------
1997
-----------
The Guardian Cash Fund ...... 17,819
The Guardian Stock Fund ..... 345,196
The Guardian Bond Fund ...... 24,024
The Guardian Small Cap
Stock Fund ................ 14,315
Gabelli Capital Asset Fund .. 1,407
Baillie Gifford International
Fund ..................... 22,395
Baillie Gifford Emerging
Markets Fund .............. 2,519
Value Line Centurion Fund ... 61,394
Value Line Strategic Asset
Management Trust .......... 57,828
MFS Growth With Income
Series .................... --
- ------------
* The Enhanced Death Benefit Rider was available under this Contract
commencing November 12, 1997.
Year Ended December 31,
-----------------------
1997
-----------
NON-TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period*:
The Guardian Cash Fund ...... $ 10.00
The Guardian Stock Fund ..... 10.00
The Guardian Bond Fund ...... 10.00
The Guardian Small Cap
Stock Fund ................ 10.00
Gabelli Capital Asset Fund .. 10.00
Baillie Gifford International
Fund ...................... 10.00
Baillie Gifford Emerging
Markets Fund .............. 10.00
Value Line Centurion Fund ... 10.00
Value Line Strategic Asset
Management Trust .......... 10.00
MFS Growth With Income
Series .................... 10.00
Accumulation Unit Value at End
of Period:
The Guardian Cash Fund ...... $ 10.502
The Guardian Stock Fund ..... 10.564
The Guardian Bond Fund ...... 10.112
The Guardian Small Cap
Stock Fund ................ 10.145
Gabelli Capital Asset Fund .. 10.641
Baillie Gifford International
Fund ...................... 10.559
Baillie Gifford Emerging
Markets Fund ................ 10.895
Value Line Centurion Fund ... 10.211
Value Line Strategic Asset
Management Trust .......... 10.261
MFS Growth With Income
Series 10.657
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Cash Fund ...... 107,441
The Guardian Stock Fund ..... 389,083
The Guardian Bond Fund ...... 16,455
The Guardian Small Cap
Stock Fund ................ 20,643
Gabelli Capital Asset Fund .. 2,908
Baillie Gifford International
Fund ..................... 63,583
Baillie Gifford Emerging
Markets Fund .............. 18,078
Value Line Centurion Fund ... 130,283
Value Line Strategic Asset
Management Trust .......... 120,131
MFS Growth With Income
Series .................... 15
- ------------
* The Enhanced Death Benefit Rider was available under this Contract
commencing November 12, 1997.
13
<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 (statutory basis) of over $7.9 billion as of
December 31, 1997. 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, 1997, Guardian Life had total assets (statutory
basis) in excess of $14.0 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 statutory basis 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 ten Investment Divisions (which correspond to the ten 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 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.
14
<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 Small Cap Stock Fund Long-term growth of capital Common stocks and convertible securities issued
by companies with small market capitalization
- ----------------------------------------------------------------------------------------------------------------------------------
The Guardian Bond Fund Maximum income without undue risk Investment grade debt obligations and U.S.
of principal; capital appreciation government securities, including mortgage-
as a secondary objective backed securities
- ----------------------------------------------------------------------------------------------------------------------------------
The Guardian Cash Fund High level of current income Money market instruments
consistent with liquidity and
preservation of capital
- ----------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford International Fund Long-term capital appreciation Common stocks and convertible securities issued
by foreign companies
- ----------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund Long-term capital appreciation Common stocks and convertible securities 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 Management Trust High total investment return U.S. common stocks ranked 1 or 2 by the Value
(current income and capital Line Ranking System,* bonds and money market
appreciation) consistent with instruments
reasonable risk
- ----------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund Growth of capital; current income U.S. common stocks and convertible securities
as a secondary objective
- ----------------------------------------------------------------------------------------------------------------------------------
MFS Growth With Income Series Long-term growth of capital Common stocks and convertible securities issued
and income by U.S. and foreign companies
==================================================================================================================================
</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).
15
<PAGE>
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 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, The Guardian Cash Fund
and The Guardian Small Cap Stock Fund (the "Small Cap 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, except the Small Cap
Fund, 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. The Small Cap Fund pays GISC an investment advisory fee at an annual
rate of 0.75% of the Fund's average daily net assets. GISC also serves as the
manager of Gabelli Capital Asset Fund and as the investment adviser of eight of
the ten series comprising The Park Avenue Portfolio, a family of mutual funds.
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%). GBG also serves as the investment adviser of two of the ten 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 are
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.
16
<PAGE>
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 separate or
additional fee is paid by the Fund to GFI. GFI also serves as investment adviser
to various other open-end mutual funds and closed-end mutual funds.
MFS Growth With Income Series is advised by Massachusetts Financial
Services Company ("MFS"), 500 Boylston St., Boston, MA. MFS is registered as an
investment adviser under the Investment Advisers Act of 1940 (the "Advisers
Act") and is a subsidiary of Sun Life of Canada (U.S.), which is itself an
indirect wholly owned subsidiary of Sun Life Assurance Company of Canada. MFS
provides advisory services to other open- and closed-end registered investment
companies, as well as private and institutional investors. As compensation for
its services to the Series, MFS receives a fee, payable monthly, at an annual
rate of .75% of the Series' average daily net assets.
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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").
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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.
The variable annuity payments provided by the Contracts are funded through
investments in the Separate Account. Information regarding the Separate 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.
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
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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.
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 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. In the event the
Contractowner has purchased the Enhanced Death Benefit Rider and for so long as
the Enhanced Death Benefit Rider remains in effect, GIAC will assess an
additional daily charge against the net assets of each Variable Investment
Option in an amount equal to .30% on an annual basis for expenses related to the
Enhanced Death Benefit. 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: The net asset value per share of
each of the Funds reflects investment management fees and certain general
operating expenses paid by the Funds. With the exception of the Small Cap Fund,
the International Fund, the Emerging Markets Fund, Gabelli Capital Asset Fund
and the MFS Growth With Income Series 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 Small Cap Fund and the MFS Growth With
Income Series each pay its manager an annual management fee of 0.75% of each
Fund's average daily net assets. The annual investment management
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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. (See "The Funds".) The management fees and other expenses incurred
by the Funds are more fully described in the accompanying prospectuses for the
Funds.
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
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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.
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.
OPTIONAL ENHANCED DEATH BENEFIT
In addition to the pre-retirement death benefit provided under the
Contract, Contractowners may elect to purchase an optional Enhanced Death
Benefit Rider, which may provide greater death benefit proceeds than the
proceeds payable under the basic Contract. The Enhanced Death Benefit Rider is
available under current Contracts that have Annuitants who are under age 75 at
the time the Rider is issued. GIAC reserves the right to discontinue the offer
of the Enhanced Death Benefit Rider at any time without prior notice. Any Rider
purchased and issued prior to the date of such discontinuance will not be
affected by such event. Although not currently anticipated, GIAC may offer the
Rider from time to time in the future.
If the Annuitant dies before the Retirement Date and the Rider is in
force, upon receipt of proof of death, GIAC will pay the Beneficiary a death
benefit equal to the greater of (1) the death benefit described in the basic
Contract or (2) the Enhanced Death Benefit. The Enhanced Death Benefit is equal
to the Accumulation Value of the Contract as of the end of the reset date
immediately preceding the Annuitant's date of death, plus any premiums paid
subsequent to such reset date, less any partial withdrawals subsequent to such
date, any applicable contingent deferred sales charges and any applicable
premium taxes.
The first reset date occurs on the issue date of the Rider. Thereafter,
each reset date occurs on each subsequent seventh Rider anniversary. For so long
as the Enhanced Death Benefit Rider remains in effect, GIAC will assess an
additional daily charge against the net assets of each Variable Investment
Option equal to .30% on an annual basis for expenses related to the Enhanced
Death Benefit.
The Enhanced Death Benefit Rider terminates on the earliest of (1) the
date the Enhanced Death Benefit is paid; (2) the date the Contract terminates;
(3) the date of the Annuitant's 85th birthday; (4) the Retirement Date; or (5)
the date GIAC receives the Contractowner's proper written request for
termination. Once the Enhanced Death Benefit is terminated, it may not be
reinstated.
The Rider may not be available in all states.
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ACCUMULATION PERIOD
Allocation of Net Premium Payment: The initial Net Premium Payment is used
to purchase Accumulation Units in the Investment Divisions or the Fixed-Rate
Option (available to Single Premium Payment Contracts only), 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.
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.
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 as determined at the
end of such Valuation Period to the per share amount of any dividend and
other distribution made by the Fund during the period, and
(2) Dividing by the net asset value of the particular Fund share
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
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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 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
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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, 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.
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. No transfers into or out of the Fixed-Rate Option are
currently permitted following the Retirement Date.
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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.
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.
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
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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 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. 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 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.
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FEDERAL TAX MATTERS
GENERAL INFORMATION
The operations of the Separate Account form a part of, and are taxed with
GIAC's operations under the Code. Investment income and realized net capital
gains on the assets of the Separate account are reinvested and taken into
account in determining the Accumulation and Annuity Unit values. Thus,
investment income and realized net capital gains are automatically applied to
increase reserves under the Contract. GIAC believes that investment income and
capital gains attributable to the Separate Account are taxed under existing
Federal income tax law but are offset by deductible reserve increases.
Accordingly, GIAC does not anticipate that it will incur any Federal income tax
liability attributable to the Separate Account and, therefore, GIAC does not
currently make provisions for any such taxes. However, if changes in the Federal
tax laws, or interpretations thereof, result in GIAC incurring a tax liability
on income or gains attributable to the Separate Account or certain types of
variable annuity contracts, then GIAC may impose a charge against the Separate
Account (with respect to some or all Contracts) to pay such taxes.
NON-QUALIFIED CONTRACTS
Diversification: Section 817(h) of the Code provides that variable annuity
contracts 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 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. GIAC intends that the Funds underlying the Contracts will be
managed by the applicable investment managers so as to comply with these
diversification requirements. If the diversification requirements are not met by
each and every Variable Investment Option, the Contract could lose its overall
tax status as an annuity, resulting in current taxation of the excess of
Contract value over the "investment in the Contract." A Contractowner's
"investment in the Contract" generally equals: (1) the aggregate amount of
premium payments or other consideration paid for the Contract minus (2) the
aggregate amount received under the Contract, to the extent such amount was not
excluded from gross income.
Owner Control: In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate accounts used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includable in the variable contractowner's gross income. The IRS has stated that
a variable contractowner will be considered the owner of separate account assets
if the contractowner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. To date, no
regulations or rulings have been issued regarding the circumstances under which
a contractowner's ability to control investments through premium allocation and
transfer privileges would cause him or her to be treated as the owner of the
assets in an insurance company's separate account. GIAC does not know what
standards will be set forth, if any, in the regulations or rulings which the
Treasury Department has stated it expects to issue to provide guidance in this
area. Accordingly, GIAC reserves the right to modify the Contract as necessary
to attempt to prevent the Contractowner from being considered the owner of the
assets of the Separate Account or otherwise to maintain favorable tax treatment
of the Contracts.
Distribution of Benefits: Non-qualified Contracts will not be treated as
annuity contracts for purposes of Section 72 of the Code unless the Contract
provides that: (1) if any 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 when the Contractowner died; and
(2) if any Contractowner dies prior to the Retirement Date, the entire interest
will be distributed within five years of the Contractowner's death.
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These requirements will be considered satisfied if that portion of the
Contractowner's interest which is payable to or for the benefit of a "designated
beneficiary," will be distributed over the life or life expectancy of any new
owner and such distributions begin within one year of the Contractowner's death.
The Contract's "new owner" is the person designated by the Contractowner as
Beneficiary and to whom ownership of the Contract passes by reason of death. For
this purpose, the Beneficiary must be a natural person. If the Beneficiary is
the Contractowner's surviving spouse, the Contract may be continued with the
surviving spouse as the new Contractowner. Non-qualified Contracts contain
provisions intended to comply with Section 72(s) of the Code. However,
regulations interpreting these requirements of the Code have not yet been
issued. Accordingly, the provisions contained in such Contracts will be reviewed
and may be modified to assure compliance with the Code's requirements when
clarified by regulations or otherwise.
Note: The remaining discussion concerning non-qualified Contracts assumes
that the Contracts will be treated as annuities under Section 72 of the Code,
that the underlying investments of the Contracts are "adequately diversified"
under Section 817(h) of the Code, and that the Contract is not issued in
connection with a retirement plan qualifying for favorable tax treatment under
the Code.
A Contractowner who is a natural person is generally not taxes on
increases in the value of a Contract until distribution, either as a lump sum
payment received by surrender or partial withdrawal, or as annuity payments. The
assignment or pledge of any portion of the Contract value may be treated as a
distribution. The taxed portion of a distribution (whether in the form of a lump
sum payment or an annuity) is taxed as ordinary income.
Contractowners who are not natural persons generally must include in
income any increase in the excess of the Contract's Accumulation Value over the
"investment in the Contract" during the taxable year, whether or not such
increase is distributed. There are some exceptions to this rule and a
prospective owner that is not a natural person may wish to discuss these with a
competent tax adviser.
The following discussion applies to Contracts owned by natural persons.
Generally, amounts received by surrender or partial withdrawal are first
treated as taxable income to the extent that the Contract's Accumulation Value
immediately before the surrender/withdrawal exceeds the "investment in the
contract." Any additional amount withdrawn is not taxable.
Although the tax consequences may vary depending on the form of Annuity
Payment Option selected, the recipient of an Annuity Payment 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. The entire distribution will be
fully taxable once the recipient has recovered the dollar amount of the
"investment in the contract."
A penalty tax on surrenders or withdrawals equal to 10% of the amount
treated as taxable income may be imposed unless such surrender or withdrawal is:
(1) made on or after age 59 1/2; (2) made as a result of death or disability;
or (3) received in substantially equal installments as a life annuity (subject
to special "recapture" rules if the series of payments is subsequently
modified).
Annuity 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 generally
may elect not to have tax withheld from distributions. Redemption requests that
do not indicate a preference regarding withholding will be delayed in processing
until a preference form has been properly completed and received at GIAC's
Customer Service Office. Withholding on taxable distributions is generally
required if the recipient fails to provide GIAC with his or her correct Social
Security number or if the recipient is a U.S. citizen or expatriate living
abroad.
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Amounts may be distributed from a Contract because of the death of a
Contractowner or the Annuitant. Generally, such amounts are includable in the
income of the recipient as follows: (1) if distributed in a lump sum they are
taxed in the same manner as a full surrender of the Contract as described above;
or (2) 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). Potential 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.
Transferring the ownership of a Contract, or designating an Annuitant,
payee 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 such
transfer, designation, selection, assignment or exchange of a Contract should
contact a competent tax adviser about the potential tax effects of such a
transaction.
Possible Tax Changes: Although the likelihood of legislative change is
uncertain, there is always the possibility that the tax treatment of the
Contracts could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted, would
adversely modify the federal taxation of the Contracts. It is also possible that
any change could be retroactive (that is, effective prior to the date of the
change). A tax adviser should be consulted with respect to legislative
developments and their effect on the Contract.
QUALIFIED CONTRACTS
Generally, increases in the value of amounts under a Contract purchased in
connection with a retirement plan qualifying for favorable tax treatment under
the Code 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, this Prospectus
does not attempt to provide more than general information about the use of the
Contracts with these various types of plans. Contractowners, Annuitants, and
Beneficiaries under qualified plans should be aware that the rights of any
person to any benefits under such plans may be subject to the terms and
conditions of the plans, regardless of the terms and conditions of the Contracts
issued in connection with such plans. Some retirement plans are subject to
distribution and other requirements that are not incorporated into GIAC's
Contract administration procedures. Contractowners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Contracts comply with 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; 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.
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For qualified plans under Section 401(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the
Contractowner (or plan participant) (i) reaches age 70 1/2 or (ii) retires, and
must be made in a specified form or manner. If the plan participant is a "5
percent owner" (as defined in the Code), distributions generally must begin no
later than April 1 of the calendar year following the calendar year in which the
Contractowner (or plan participant) reaches age 70 1/2. For IRAs described in
Section 408, distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the
Contractowner (or plan participant) reaches age 70 1/2. Roth IRAs under Section
408A do not require distributions at any time prior to the Contractowner's
death.
Following are brief descriptions of the various types of plans with which
the Contracts described in the Prospectus may be used:
Section 403(b) Plans: The Code permits public schools and employers
specified in Section 501(c)(3) of the Code to purchase annuity contracts under
Section 403(b)(1) and mutual fund shares through a Section 403(b)(7) custodial
account on behalf of their employees. Subject to certain limitations, the
purchase payments for such contracts or mutual fund shares are 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."
Distributions from tax-sheltered annuities are restricted unless the
employee is age 59 1/2, separates from service, dies, becomes disabled, or
incurs a hardship. Before one of these events occurs, the employee may not
surrender amounts attributable to either: (1) salary reduction contributions
made in years beginning after December 31, 1988; (2) income attributable to
salary reduction contributions made in years beginning after December 31, 1988
on salary reduction accumulations held as of December 31, 1988. Hardship
withdrawals are further limited to salary reduction contributions only, and may
not include income earned thereon. Hardship withdrawals are generally subject to
tax penalties and contingent deferred sales charges.
If a Contract is purchased as a tax-sheltered annuity under Section 403(b)
of the Code, it is subject to the restrictions on redemption 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 Securities and
Exchange Commission.
The Contract includes a death benefit that in some cases may exceed the
greater of the Purchase Payments or the Contract Value. The death benefit could
be characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity under section 403(b).
Prospective purchasers of the Contracts as tax-sheltered annuities should
seek advice from legal or tax counsel about their eligibility to purchase a
tax-sheltered annuity, limitations on permissible amounts of purchase payments,
distribution restrictions, the Contract's death benefit provision and tax
consequences of distribution.
Individual Retirement Accounts: Sections 219 and 408 of the Code permit
individuals to contribute to an individual retirement program known as an
"Individual Retirement Account" or "IRA." IRA contributions are generally
limited each year to the lesser of $2,000 or 100% of the Contractowner's
adjusted gross income and may be deductible in whole or in part depending on the
individual's income. Distributions from certain other types of qualified plans,
however, may be "rolled over" on a tax-deferred basis into an IRA without regard
to this limit. Earnings in an IRA are not taxed while held in the IRA. All
amounts in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. Distributions prior to age 59 1/2 (unless
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certain exceptions apply) are also subject to a 10% penalty tax. Individuals who
purchase Contracts for use with an IRA will receive, in addition to this
Prospectus and a copy of the Contract, a brochure containing information about
eligibility, contribution limits, tax consequences and other particulars
concerning IRAs. The Internal Revenue Service has not reviewed the Contract for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in the
Contract comports with IRA qualification requirements.
Simplified Employee Pension (SEP) IRAs: Employers may establish Simplified
Employee Pension (SEP) IRAs under Code section 408(k) to provide IRA
contributions on behalf of their employees. In addition to all of the general
Code rules governing IRAs, such plans are subject to certain Code requirements
regarding participation and amounts of contributions.
Roth IRAs: Section 408A of the Code permits certain eligible individuals
to contribute to a Roth IRA. Contributions to a Roth IRA, which are subject to
certain limitations, are not deductible and must be made in cash or as a
rollover or transfer from another Roth IRA or other IRA. A rollover from or
conversion of an IRA to a Roth IRA may be subject to tax and other special rules
may apply. You should consult a tax adviser before combining any converted
amounts with any other Roth IRA contributions, including any other conversion
amounts from other tax years. Distributions from a Roth IRA generally are not
taxed, except that, once aggregate distributions exceed contributions to the
Roth IRA, income tax and a 10% penalty tax may apply to distributions made (1)
before age 59 1/2 (subject to certain exceptions) or (2) during the five taxable
years starting with the year in which the first contribution is made to the Roth
IRA.
Corporate Pension and Profit-Sharing Plans: Section 401(a) of the Code
permits corporate employers to establish various types of retirement plans for
employees, and self-employed individuals to establish qualified plans for
themselves and their employees. These retirement plans may permit the purchase
of the Contracts to accumulate retirement savings under the plans. Adverse tax
or other legal consequences to the plan, to the participant or to both may
result if this Contract is assigned or transferrred to any individual as a means
to provide benefit payments, unless the plan complies with all legal
requirements applicable to such benefits prior to transfer of the Contract. The
Contract includes a death benefit that in some cases may exceed the greater of
the Purchase Payments or the Contract Value. The death benefit could be
characterized as an incidental benefit, the amount of which is limited in any
pension or profit-sharing plan. Because the death benefit may exceed this
limitation, employers using the Contract in connection with such plans should
consult their tax adviser.
Deferred Compensation Plans: Section 457 of the Code provides for certain
deferred compensation plans with respect to service for state governments, local
governments, rural electric cooperatives, political subdivisions, agencies,
instrumentalities, certain affiliates of such entities and other tax-exempt
employers. Amounts contributed by employers through such plans are taxed to
employees when paid or made available for withdrawal. Under such plans, a
participant may specify the form of investment in which his or her contributions
will be made. In general, all such investments are owned by, and are subject to
the claims of the general creditors of, the sponsoring employers and, 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. In
certain governmental plans, however, deferred amounts must be held in trust for
the exclusive benefit of plan participants.
The following rules generally apply to distributions from Contracts
purchased in connection with the plans (other than Section 457 plans) discussed
above:
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That portion of any contribution under a Contract made by or on behalf of
an individual (typically an employee) which is not excluded or deductible from
his or her gross income (generally, the individual's own nondeductible
contribution) constitutes his or her "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 the Annuitant's
life expectancy (or other period for which annuity payments are expected to be
made) constitutes a tax-free return of capital each year. The entire
distribution will be fully taxable once the Annuitant (or other appropriate
payee) is deemed to have recovered the dollar amount of the 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 upon the nature and
structure of the arrangement in connection with which a Contract is issued, an
individual's investment in the Contract can be zero.
If a surrender of or partial withdrawal from a Contract held in connection
with a Section 401(a) plan is effected and a distribution is made in a single
payment, the proceeds 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 partial withdrawal) will generally be taxed as
ordinary income in the year of receipt, unless it is validly "rolled over" into
an IRA or another qualified plan.
A penalty tax of 10% will be imposed on the taxable portion of surrenders
or partial withdrawals from all qualified Contracts, except under circumstances
similar to those relating to non-qualified Contracts (see above). Other adverse
tax consequences may result if distributions do not conform to specified
commencement and minimum distribution rules, and in other circumstances.
The taxation of benefits payable upon an employee's death to his or her
Beneficiary generally follow these same principles, subject to a variety of
special rules. In particular, the tax on death benefits to be paid as a lump sum
under a non-qualified contract may be deferred if, within 60 days after the lump
sum becomes payable, the Beneficiary instead elects to receive annuity payments.
Distributions from Contracts generally are subject to withholding for the
Contractowner's federal income tax liability. The withholding rate varies
according to the type of distribution and the Contractowner's tax status. The
Contractowner will be provided the opportunity to elect not to have tax withheld
from distributions. "Eligible rollover distributions" from section 401(a) plans
and section 403(b) tax-sheltered annuities are subject to a mandatory federal
income tax withholding of 20%. An eligible rollover distribution is the taxable
portion of any distribution from such a plan, except certain distributions such
as distributions required by the Code or distributions in a specified annuity
form. The 20% withholding does not apply, however, if the Contractowner chooses
a "direct rollover" from the plan to another tax-qualified plan or IRA.
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
Presently, GIAC makes no charge to the Separate Account for any Federal,
state or local taxes (other than state premium taxes) that it incurs which may
be attributable to the Separate Account or to the Contracts. GIAC, however,
reserves the right to make a charge for any such taxes or other economic burden
which may result from the application of the tax laws and that GIAC determines
to be attributable to the Separate Account or to the Contracts. If any tax
charges are made in the future, they will be accumualted daily and transferred
from the Separate Account to the GIAC's general account.
Because of the complexity of the Federal tax law, and the fact that tax
results will vary according to the factual status of the entity or individual
involved, tax advice may be needed by anyone
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contemplating the purchase of a Contract or the exercise of the various
elections under the Contract. It should be understood that this Prospectus'
discussion of the Federal income tax consequences of owning a Contract is 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 the current Federal tax laws or interpretations thereof by the
Internal Revenue Service. No attempt has been made to consider any applicable
state, local 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 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 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 of up to .45% of the value of the
Contract annually while a Contract is in force based on the value of the
Contract and the riders selected by the Contractowner. The principal underwriter
of the Contracts is GISC, located at 201 Park Avenue South, New York, New York
10003.
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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 and the Fixed-Rate Option under the Contract, and (ii) the surrender
value of the Contract.
YEAR 2000 COMPLIANCE
Like other financial and business organizations around the world, GIAC
could be adversely affected if the computer systems it uses internally, the
systems of its service providers, and related computer systems do not properly
process and calculate date-related information and data beginning on January 1,
2000. Many computer systems today cannot distinguish the year 2000 from the year
1900 because of the way dates were encoded and calculated in these systems. GIAC
has been actively working to deal with this problem, and expects that its
systems and others upon which it is reliant will be adapted before January 1,
2000. However, there can be no assurance that these preparations will be
successful.
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
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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
35
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT A
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
--------------
Statement of Additional Information dated May 1, 1998
--------------
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, 1998.
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 ("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 1997, 1996 and 1995, GISC received underwriting
commissions from GIAC with respect to the sales of the Contracts in the amount
of $1,979,926, $1,851,468 and $1,409,708, 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, 1997 were 5.24% and 5.38%, 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, Inc., Morningstar, and Variable Annuity Research & Data
Service,
B-3
<PAGE>
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,
1997 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants. The statutory basis balance sheets of GIAC as of
December 31, 1997 and 1996 and the related statutory basis statements of
operations, of changes in common stock and surplus and of cash flow for each of
the three years in the period ended December 31, 1997 appearing in this
Statement of Additional Information have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants. Such financial
statements have been included herein or incorporated herein by reference in
reliance upon such reports given upon the authority of said firm as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The statutory basis financial statements of GIAC which are set forth
herein beginning on page B-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 1997 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 1997 Annual Report
to Contractowners accompanies this Statement of Additional Information.
B-4
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATUTORY BASIS BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
As of
December 31,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
ADMITTED ASSETS
Investments:
Fixed maturities, principally at amortized cost
(market: 1997 - $492,052,307; 1996 - $491,271,164) ............. $ 484,747,832 $ 490,445,948
Affiliated mutual funds, at market ............................... 30,551,186 2,755,672
Investment in subsidiary ......................................... 12,073,143 7,746,643
Policy loans - variable life insurance ........................... 72,737,781 68,143,068
Cash and short-term investments .................................. 23,602,410 17,825,039
Investment in joint venture ...................................... 345,492 285,874
Accrued investment income receivable ................................ 13,303,271 10,553,405
Due from parent and affiliates ...................................... 7,573,304 6,507,913
Other assets ........................................................ 12,557,432 12,173,268
Receivable from separate accounts ................................... 30,203,923 11,606,587
Variable annuity and EISP/CIP separate account assets ............... 6,810,882,719 5,248,159,777
Variable life separate account assets ............................... 414,699,239 342,921,803
-------------- --------------
TOTAL ADMITTED ASSETS .......................................... $7,913,277,732 $6,219,124,997
============== ==============
LIABILITIES
Policy liabilities and accruals:
Fixed deferred reserves .......................................... $ 339,797,646 $ 329,681,355
Fixed immediate reserves ......................................... 7,397,461 5,874,894
Life reserves .................................................... 67,799,492 65,462,693
Minimum death benefit guarantees ................................. 1,117,645 1,257,777
Policy loan collateral fund reserve .............................. 70,734,812 65,762,820
Accrued expenses, taxes, & commissions ........................... 1,592,997 2,712,360
Due to parent and affiliates ..................................... 20,408,087 15,304,638
Federal income taxes payable ..................................... 10,939,640 4,743,447
Other liabilities ................................................ 20,540,325 30,079,434
Asset valuation reserve .......................................... 26,305,528 15,121,269
Variable annuity and EISP/CIP separate account liabilities ....... 6,750,575,077 5,193,574,218
Variable life separate account liabilities ....................... 413,364,790 335,769,184
-------------- --------------
TOTAL LIABILITIES .............................................. $7,730,573,500 $6,065,344,089
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 .................................. 43,305,940 14,382,616
-------------- --------------
Total Common Stock and Surplus ................................. 182,704,232 153,780,908
-------------- --------------
TOTAL LIABILITIES, COMMON STOCK AND SURPLUS .................... $7,913,277,732 $6,219,124,997
============== ==============
</TABLE>
See notes to statutory basis financial statements.
B-5
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATUTORY BASIS STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Premiums and annuity considerations:
Variable annuity considerations ............. $ 995,209,301 $ 731,792,764 $ 537,841,762
Life insurance premiums and fixed
annuity considerations .................... 68,222,360 44,874,269 73,938,212
Net investment income ......................... 47,993,754 42,366,902 36,293,598
Amortization of IMR ........................... 111,783 333,219 257,380
Net gain from operations of separate accounts . 5,780,327 8,860,462 --
Service fees .................................. 76,350,291 58,774,486 46,560,286
Variable life -- cost of insurance ............ 11,205,120 4,844,028 4,232,564
Reserve adjustments on reinsurance ceded ...... 7,885,341 30,636,445 (32,192,749)
Commission and expense allowances ............. 16,268,128 14,508,840 10,057,974
Other income .................................. 5,178,266 2,535,356 1,127,526
--------------- --------------- ---------------
1,234,204,671 939,526,771 678,116,553
--------------- --------------- ---------------
Benefits and expenses:
Benefits:
Death benefits .............................. 5,340,675 6,785,456 4,774,584
Annuity benefits ............................ 687,719,014 426,072,773 276,568,762
Surrender benefits .......................... 17,620,583 17,459,706 17,660,413
Increase in reserves ........................ 18,291,585 82,891,516 65,349,399
Net transfers to (from) separate accounts:
Variable annuity and EISP/CIP ............... 359,468,681 323,093,897 252,772,988
Variable Life ............................... (630,102) (10,417,095) (17,796,371)
Commissions ................................... 43,352,989 39,233,431 34,364,742
General insurance expenses .................... 59,476,685 42,523,892 25,888,456
Taxes, licenses and fees ...................... 3,743,414 3,723,858 2,477,492
Reinsurance terminations ...................... 182,535 (15,470,015) 11,002,701
--------------- --------------- ---------------
1,194,566,059 915,897,419 673,063,166
--------------- --------------- ---------------
Income before income taxes and realized
gains from investments ...................... 39,638,612 23,629,352 5,053,387
Federal income taxes .......................... 12,073,500 3,941,460 439,667
--------------- --------------- ---------------
Income from operations, net of federal
income taxes, and before net realized
gains ....................................... 27,565,112 19,687,892 4,613,720
Realized gains from investments, net of federal
income taxes, net of transfer to IMR ........ 472,127 7,540 342,455
--------------- --------------- ---------------
Net income .................................... $ 28,037,239 $ 19,695,432 $ 4,956,175
=============== =============== ===============
</TABLE>
See notes to statutory basis financial statements.
B-6
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATUTORY BASIS STATEMENTS OF CHANGES IN COMMON STOCK AND SURPLUS
================================================================================
<TABLE>
<CAPTION>
Assigned and
Additional Unassigned Total
Common Paid-in Surplus Common Stock
Stock Surplus (Deficit) and Surplus
------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
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
Decrease 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
Increase in non-admitted assets .................. (7,078) (7,078)
Disallowed interest maintenance reserve .......... 143,080 143,080
Net increase 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
---------- ------------ ----------- ------------
Net income from operations ....................... 19,695,433 19,695,433
Tax on prior years separate account seed
investment unrealized gains ................... (104,732) (104,732)
Increase in unrealized appreciation of Company's
investment in joint venture ................... 241,456 241,456
Increase in unrealized appreciation of Company's
investment in subsidiary ...................... 142,201 142,201
Decrease in unrealized appreciation of Company's
investment in other assets .................... (9,384) (9,384)
Increase in non-admitted assets .................. (80,815) (80,815)
Disallowed interest maintenance reserve .......... (128,107) (128,107)
Surplus changes resulting from reinsurance ....... (2,073,155) (2,073,155)
Net increase in asset valuation reserve .......... (5,779,916) (5,779,916)
---------- ------------ ----------- ------------
Balances at December 31, 1996 .................... 2,000,000 137,398,292 14,382,616 153,780,908
========== ============ =========== ============
Net income from operations ....................... 28,037,239 28,037,239
Increase in unrealized appreciation of Company's
investment in joint venture ................... 42,908 42,908
Increase in unrealized appreciation of Company's
investment in subsidiary ...................... 4,326,500 4,326,500
Increase in unrealized appreciation of Company's
investment in other assets .................... 9,384 9,384
Increase in unrealized appreciation of Company's
investment in an affiliated mutual fund ....... 7,271,233 7,271,233
Decrease in non-admitted assets .................. 83,011 83,011
Disallowed interest maintenance reserve .......... (197,600) (197,600)
Surplus changes resulting from reinsurance ....... 534,908 534,908
Net increase in asset valuation reserve .......... (11,184,259) (11,184,259)
---------- ------------ ----------- ------------
Balances at December 31, 1997 .................... $2,000,000 $137,398,292 $43,305,940 $182,704,232
========== ============ =========== ============
</TABLE>
See notes to statutory basis financial statements.
B-7
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATUTORY BASIS STATEMENTS OF CASH FLOW
================================================================================
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from insurance activities:
Premiums, annuity considerations and
deposit funds ................................... $ 1,065,244,583 $ 780,710,735 $ 611,169,979
Investment income ................................. 46,412,248 42,413,736 36,912,131
Commissions and expense allowances on
reinsurance ceded ............................... 22,679,622 37,315,301 (22,118,484)
Other income ...................................... 67,084,996 47,357,962 44,220,753
Death benefits .................................... (5,492,854) (6,900,438) (4,420,866)
Surrender benefits ................................ (17,780,564) (2,774,865) (17,660,413)
Annuity benefits .................................. (689,207,046) (424,511,908) (276,163,436)
Commissions, other expenses
and taxes (excluding FIT) ....................... (101,213,566) (78,968,214) (57,714,112)
Net transfers to separate accounts ................ (356,017,200) (307,856,562) (231,230,812)
Federal income taxes (excluding tax on
capital gains) .................................. (5,094,779) 682,025 (1,557,444)
Increase in policy loans .......................... (4,594,714) (4,300,868) (4,522,280)
Other operating expenses and sources .............. (140,580) 2,077,342 (8,945,084)
--------------- --------------- ---------------
Net cash provided by insurance activities ............ 21,880,146 85,244,246 67,969,932
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from dispositions of investment securities 315,404,430 224,692,954 63,122,215
Purchases of investment securities ................ (331,151,548) (309,590,319) (118,543,796)
Federal income tax on capital gains ............... (355,657) (505,496) 992,810
--------------- --------------- ---------------
Net cash used in investing activities ................ (16,102,775) (85,402,861) (54,428,771)
--------------- --------------- ---------------
Net increase (decrease) in cash ................. 5,777,371 (158,615) 13,541,161
Cash and short-term investments,
beginning of year ............................. 17,825,039 17,983,654 4,442,493
--------------- --------------- ---------------
Cash and short-term investments, end of year .... $ 23,602,410 $ 17,825,039 $ 17,983,654
=============== =============== ===============
</TABLE>
See notes to statutory basis financial statements.
B-8
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
Note 1 -- Organization
The Guardian Insurance & Annuity Company, Inc. (GIAC or the Company) is a
wholly-owned subsidiary of The Guardian Life Insurance Company of America (The
Guardian). The Company, domiciled in the state of Delaware, 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 other broker dealer firms that 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.
GISC, a wholly owned subsidiary of the Company, is a registered broker
dealer under the Securities Exchange Act of 1934 and is a registered investment
advisor under the Investment Adviser's Act of 1940. GISC is the distributor and
underwriter for GIAC's variable products, and the investment advisor to certain
mutual funds sponsored by GIAC, which are investment options for the variable
products.
Insurance Separate Accounts: The Company has established fourteen
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. Of these separate
accounts the Company maintains two separate accounts whose sole purpose is to
fund certain employee benefit plans of The Guardian.
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. The amounts provided by the
Company to establish separate account investment portfolios (seed money) are not
included in separate account liabilities.
Note 2 -- Summary of Significant Accounting Policies
Basis of presentation of financial statements: The financial statements
have been prepared on a statutory basis of accounting that is prescribed or
permitted by the Insurance Department of the State of Delaware which is a
comprehensive basis of accounting other than generally accepted accounting
principles (GAAP).
Financial statements prepared on a statutory basis vary from financial
statements prepared on a GAAP basis because: (1) the costs relating to acquiring
business, principally commissions and certain policy issue expenses, are charged
to income in the year incurred, whereas on a GAAP basis they would be recorded
as assets and amortized over the future periods to be benefited; (2) life
insurance and annuity reserves are based on statutory mortality and interest
requirements, without consideration of withdrawals, whereas on GAAP basis they
are on anticipated Company experience for lapses, mortality and investment
yield; (3) life insurance enterprises are required to establish a formula-based
asset valuation reserve (AVR) by a direct charge to surplus to offset potential
investment losses; under GAAP, provisions for investments are established as
needed through a charge to income; (4) realized gains and losses resulting from
changes in interest rates on fixed income investments are deferred in the
interest maintenance reserve (IMR) and amortized into investment income over the
remaining life of the investment sold; for GAAP, such gains and losses are
recognized in income at the time of sale; (5) bonds are carried principally at
amortized cost for statutory reporting and at market value for GAAP; (6) annuity
and certain insurance premiums are recognized as premium income, whereas for
GAAP they are recognized as deposits; (7) deferred federal income taxes are not
provided for temporary differences between tax and book assets and liabilities
as they are under GAAP; (8) certain reinsurance transactions are accounted for
as reinsurance for statutory purposes and as financing transactions under GAAP,
and assets and liabilities are reported net of reinsurance for statutory
purposes and gross of reinsurance for GAAP.
Use of Estimates: The preparation of financial statements of insurance
enterprises requires management to
B-9
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. As a provider of life
insurance and annuity products, GIAC's operating results in any given period
depend on estimates of policy reserves required to provide for future
policyholder benefits. The development of policy reserves for insurance and
investment contracts requires management to make estimates and assumptions
regarding mortality, lapse, expense and investment experience. Such estimates
are primarily based on historical experience and, in many cases, state insurance
laws that require specific mortality, morbidity, and investment assumptions to
be used by the Company. Actual results could differ from those estimates.
Management monitors actual experience, and where circumstances warrant, revises
its assumptions and the related reserve estimates.
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. The Company has recorded in accordance with NAIC
requirements, the net gain from the operations of the separate accounts in the
operations of the general account in 1997 and 1996 instead of in surplus.
Bonds: Bonds are valued principally at amortized cost. Mortgage backed
bonds are carried at amortized cost using the interest method considering
anticipated prepayments at the date of purchase. Significant changes in future
anticipated cash flows from the original purchase assumptions are accounted for
using the retrospective adjustment method with PSA standard prepayment rates.
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 $10,000,000
in 1997, $9,500,000 in 1996 and 6,700,000 in 1995.
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: In compliance with regulatory requirements, the
Company maintains the Asset Valuation Reserve (AVR) and the Interest Maintenance
Reserve (IMR). The AVR is intended to stabilize surplus against market
fluctuations in the value of equities and credit related declines in the value
of bonds. Changes in the AVR are recorded directly to unassigned surplus. The
IMR captures net after-tax realized capital gains which result from changes in
the overall level of interest rates for fixed income investments and amortizes
these net capital gains into income over the remaining stated life of the
investments sold. The Company uses the group method of calculating the IMR,
consistent with prior years. Any net negative IMR amounts are treated as a
non-admitted asset.
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, a fixed rate option that is offered to variable
annuity contractowners and a single premium deferred annuity that is offered by
the Company. The Company no longer offers the fixed annuity contracts.
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 1997 and 1996 was 5.75%. The interest rate credited on the
fixed rate option that is offered to certain variable annuity contractowners was
5.50% during 1997. For the fixed rate option currently issued, the issue and
renewal interest
B-10
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
rates credited varies from month to month and ranged from 5.25% to 5.40% in
1997. For single premium deferred annuities the rates ranged from 5.00% to 6.00%
in 1997. Fixed immediate reserves are a liability within the general account for
those annuitants that have elected a fixed annuity payout option. The immediate
contract reserve is computed using the 1971 IAM Table and the 1983 IAM Table and
a 4% discount rate.
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, 6.5% for annual pay
variable life policyowners and 7% for other variable life policyowners.
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,
1997 and 1996 non-admitted assets consisted of agents' balances and
miscellaneous receivables in the amounts of $82,380 and $123,785, 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. Services fees were not charged on separate account assets of
$162,522,811 and $142,722,353 at December 31, 1997 and 1996, respectively, which
represent investments in The Guardian'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 included in operations for 1997
and 1996, and in surplus in 1995.
Other: Certain reclassifications have been made in the amounts presented
for prior periods to conform those periods with the 1997 presentation.
Note 3 -- Federal Income Taxes
The Company's federal income tax return is consolidated with its parent,
The Guardian. The consolidated income tax liability is allocated among the
members of the group according to a tax sharing agreement. In 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.
A reconciliation of federal income tax expense, based on the prevailing
corporate income tax rate of 35% for 1997, 1996 and 1995 to the federal income
tax expense reflected in the accompanying financial statements is as follows:
<TABLE>
<CAPTION>
For the
Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income tax at prevailing corporate income tax rates
applied to pretax statutory income ............. $ 13,873,514 $ 8,270,274 $ 1,768,688
Add (deduct) tax effect of:
Adjustment for annuity and other reserves ...... (291,470) (1,478,476) 337,668
DAC Tax ........................................ 1,712,811 867,731 666,260
Dividend from subsidiary ....................... (3,500,000) (3,325,000) (2,345,000)
Other-- net .................................... 278,645 (393,069) 12,051)
------------ ------------ ------------
Federal income taxes .............................. $ 12,073,500 $ 3,941,460 $ 439,667
============ ============ ============
</TABLE>
B-11
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
The provision for federal income taxes includes deferred taxes in 1997,
1996 and 1995 of $181,145, $353,051 and $304,923, respectively, 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:
For the Year Ended December 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
Fixed maturities .................. $31,806,228 $28,234,145 $25,795,915
Affiliated money market funds ..... 524,277 121,733 130,729
Subsidiary ........................ 10,000,000 9,500,000 6,700,000
Policy loans ...................... 3,386,194 3,089,114 2,847,532
Short-term investments ............ 2,280,599 1,204,805 1,166,264
Joint venture dividend ............ 1,047,525 623,160 684,306
Other ............................. 59,779 55,301 14,951
----------- ----------- -----------
49,104,602 42,828,258 37,339,697
Less: Investment expenses ......... 1,110,848 461,356 1,046,099
----------- ----------- -----------
Net investment income ............. $47,993,754 $42,366,902 $36,293,598
=========== =========== ===========
Gross realized gains and losses, less applicable federal income taxes and
transfer to IMR, are summarized as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Realized gains from dispositions:
U.S. Government bonds .................... $ 722,440 $ 1,014,811 $ 438,127
Corporate debt securities ................ 413,022 1,014,562 555,817
Common stocks ............................ 174 -- --
Seed investment redeemed ................. -- -- 717,499
Foreign exchange ......................... 2,791 11,599 --
Realized losses from dispositions:
U.S. Government bonds .................... 744,168 181,025 7,498
Corporate debt securities ................ 399,618 617,325 370,353
Foreign exchange ......................... 5,773 -- 10,145
Short term investments ................... 1,218 191 --
----------- ----------- -----------
Net realized capital gains (losses) ...... (12,350) 1,242,431 1,323,447
----------- ----------- -----------
Federal income tax expense (benefit):
Current .................................. (269,216) 829,609 622,821
Deferred ................................. (209,059) (394,759) (42,290)
----------- ----------- -----------
Total federal income tax expense (benefit) (478,275) 434,850 580,531
----------- ----------- -----------
Transfer to IMR ............................. (6,202) 800,041 400,461
----------- ----------- -----------
Net realized gains (losses) ................. $ 472,127 $ 7,540 $ 342,455
=========== =========== ===========
</TABLE>
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, 1997 and 1996 are as follows:
B-12
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations
of U.S. government corporations
and agencies ....................... $ 65,358,213 $ 1,550,649 $ 16,198 $ 66,892,664
Obligations of states and political
subdivisions ....................... 71,909,687 795,387 41,850 72,663,224
Debt securities issued by foreign
governments ........................ 7,062,711 -- 115,745 6,946,966
Corporate debt securities ............. 340,417,221 6,143,061 1,010,829 345,549,453
Common stock of subsidiary ............ 9,398,292 2,674,851 -- 12,073,143
Affiliated mutual funds ............... 23,279,949 7,271,237 -- 30,551,186
------------ ------------ ------------ ------------
$517,426,073 $ 18,435,185 $ 1,184,622 $534,676,636
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations
of U.S. government corporations
and agencies ....................... $133,436,167 $ 761,811 $ 435,887 $133,762,091
Obligations of states and political
subdivisions ....................... 40,444,325 148,692 70,771 40,522,246
Debt securities issued by foreign
governments ........................ 3,491,091 -- 65,431 3,425,660
Corporate debt securities ............. 313,074,365 2,279,414 1,792,612 313,561,167
Common stock of subsidiary ............ 9,398,292 -- 1,651,649 7,746,643
Affiliated mutual funds ............... 2,755,672 -- -- 2,755,672
------------ ------------ ------------ ------------
$502,599,912 $ 3,189,917 $ 4,016,350 $501,773,479
============ ============ ============ ============
</TABLE>
The amortized cost and estimated market value of debt securities at
December 31, 1997 and 1996, by contractual maturity, is shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations.
As of December 31, 1997
---------------------------
Estimated
Amortized Market
Cost Value
------------ ------------
Due in one year or less .......................... $ 59,694,316 $ 59,737,770
Due after one year through five years ............ 234,805,896 236,867,373
Due after five years through ten years ........... 103,002,869 106,604,446
Due after ten years .............................. 21,552,124 22,383,887
------------ ------------
419,055,205 425,593,476
Sinking fund bonds
(including collateralized mortgage obligations) 65,692,627 66,458,831
------------ ------------
$484,747,832 $492,052,307
============ ============
B-13
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
As of December 31, 1996
---------------------------
Estimated
Amortized Market
Cost Value
------------ ------------
Due in one year or less .......................... $ 64,861,358 $ 65,045,326
Due after one year through five years ............ 286,602,923 287,118,976
Due after five years through ten years ........... 74,354,923 74,503,267
Due after ten years .............................. 25,247,736 25,461,329
------------ ------------
451,066,940 452,128,898
Sinking fund bonds
(including collateralized mortgage obligations) 39,379,008 39,142,266
------------ ------------
$490,445,948 $491,271,164
============ ============
Note 5 -- Reinsurance Ceded
The Company enters into coinsurance, modified coinsurance and yearly
renewable term agreements with affiliated companies and outside parties to
provide for reinsurance of selected variable annuity contracts and group life
and individual life policies. Under the terms of the modified coinsurance
agreements, reserves related to the reinsurance business and corresponding
assets are held by the Company. Accordingly, policy reserves include $76,669,184
and $447,494,766 at December 31, 1997 and 1996, respectively, applicable to
policies reinsured under modified coinsurance agreements. The reinsurance
contracts do not relieve the Company of its primary obligation for policyowner
benefits. Failure of reinsurers to honor their obligations could result in
losses to the Company.
The effect of these agreements on the components of the Company's gain
from operations in the accompanying statements of operations are as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Premiums and deposits .................. $(43,873,731) $(83,250,212) $(41,212,253)
Net investment income .................. -- (61,779) --
Commission and expense allowances ...... 7,885,341 14,508,839 10,057,974
Reserve adjustments .................... 16,268,128 30,636,445 (32,192,749)
Other income ........................... 1,875,163 (25,000) --
------------ ------------ ------------
Revenues ............................. (17,845,099) (38,191,707) (63,347,028)
Policyholder benefits .................. (10,975,075) (26,873,945) (57,577,405)
Increase in aggregate reserves ......... 22,859,719 (5,658,260) (11,909,990)
Reinsurance terminations ............... (27,421,066) (15,470,015) 11,002,701
General expenses ....................... (40,452) (81,667) (48,640)
------------ ------------ ------------
Deductions ........................... (15,576,874) (48,083,887) (58,533,334)
------------ ------------ ------------
Net income (loss) from reinsurance ceded $ (2,268,225) $ 9,892,180 $ (4,813,694)
============ ============ ============
</TABLE>
Note 6 -- Reinsurance Assumed
The Company has entered into various coinsurance agreements with
non-affiliated and affiliated companies. The Company assumes certain life and
disability income policies.
The effect of these agreements on the components of the Company's gain
from operations in the accompanying statements of operations are as follows:
B-14
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Premiums and deposits ................... $ (389,221) $ 41,133,358 $ 7,153,623
Net investment income ................... 45,288 94,657 62,847
Other income ............................ (62,752) 375,404 32,528
------------ ------------ ------------
Revenues .............................. (406,685) 41,603,419 7,248,998
Policyholder benefits ................... 3,967,619 8,076,053 5,086,702
Increase in aggregate reserves .......... (31,677,857) 31,556,908 (357,463)
Reinsurance expenses .................... 27,603,602 (452,476) 1,451,058
Other expenses .......................... 1,885,300 551,319 54,043
------------ ------------ ------------
Deductions ............................ 1,778,664 39,731,804 6,234,340
------------ ------------ ------------
Net income (loss)from reinsurance assumed $ (2,185,349) $ 1,871,615 $ 1,014,658
============ ============ ============
</TABLE>
The Company terminated, during 1997, an assumption agreement with an
unaffiliated company. Under this agreement, included in the consolidated
statements of income are $(2.3) million, $20.2 million and $7.2 million of
premiums at December 31, 1997, 1996 and 1995, respectively.
Note 7 -- Related Party Transactions
Registered representatives of the Guardian Investor Services Corporation
produce a major portion of the Company's business. During 1997, 1996 and 1995,
premium and annuity considerations produced by GISC amounted to $564,519,265,
$528,353,595 and $400,148,692, respectively. The related commissions paid to
GISC amounted to $1,979,926, $1,851,468 and $1,409,708 for 1997, 1996 and 1995,
respectively.
The Company is billed by The Guardian for all compensation and related
employee benefits for those employees of The Guardian who are engaged in the
Company's business and for the Company's use of The Guardian's centralized
services and agency force. The amounts charged for these services amounted to
$60,009,449 in 1997, $41,129,644 in 1996 and $24,989,111 in 1995, and, in the
opinion of management, were considered appropriate for the services rendered.
The company had 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 had contributed capital to GREA since it was
established to provide for funds and to preserve liquidity. Effective December
19, 1997, GREA was liquidated and, as a result, $6,746,290 was returned to GIAC
in the form of capital and there was a realized gain recorded of $969,045
included in the net gain from operations of separate accounts.
A significant portion of the Company's separate account assets is invested
in affiliated mutual funds. These funds consist of The Guardian Park Avenue
Fund, The Guardian Stock Fund, The Guardian Small Cap Stock Fund, The Guardian
Bond Fund, The Baillie Gifford International Fund, The Baillie Gifford Emerging
Markets Fund, The Guardian Baillie Gifford International Fund, The Guardian
Asset Allocation Fund, The Guardian Investment Quality Bond Fund, The Guardian
Cash Management Fund and The Guardian Cash Fund. Each of these funds has an
investment advisory agreement with GISC, except for The Baillie Gifford
International Fund, The Baillie Gifford Emerging Markets Fund and The Guardian
Baillie Gifford International Fund. The investments as of December 31, 1997 and
1996 are as follows:
B-15
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
1997 1996
-------------- --------------
The Guardian Park Avenue Fund ................ $ 371,662,107 $ 251,812,050
The Guardian Stock Fund ...................... 3,222,051,866 2,226,887,181
The Guardian Small Cap Stock Fund ............ 60,104,422 --
The Guardian Bond Fund ....................... 355,417,535 354,316,320
The Baillie Gifford International Fund ....... 442,651,457 400,894,824
The Baillie Gifford Emerging
Markets Fund ............................... 65,038,546 45,571,916
TheGuardian Baillie Gifford International Fund 3,378,730 19,720
The Guardian Asset Allocation Fund ........... 14,910,420 46,623
The Guardian Investment Quality Bond Fund .... 1,546,854 9,385
The Guardian Cash Management Fund ............ 22,250,501 3,113,523
The Guardian Cash Fund ....................... 368,122,449 378,321,710
-------------- --------------
$4,927,134,887 $3,660,993,252
============== ==============
The Company, in agreement with Baillie Gifford Overseas Ltd., has a joint
venture company - Guardian Baillie Gifford Ltd. (GBG) - that is organized as a
corporation in Scotland. GBG is registered in both the United Kingdom and the
United States to act as an investment advisor for the Baillie Gifford
International Fund (BGIF), the Baillie Gifford Emerging Markets Fund (BGEMF),
The Guardian Baillie Gifford International Fund (GBGIF) and The Guardian Baillie
Gifford Emerging Markets Fund (GBGEMF). The Funds, except for The Guardian
Baillie Gifford Emerging Markets Fund, are offered in the U.S. as investment
options under certain variable annuity contracts and variable life policies.
The Company maintains an investment in an affiliated money market mutual
fund, The Guardian Cash Management Fund. At December 31, 1997 and 1996 this
amounted to $2,888,149 and $2,755,672, respectively. The Company also made an
investment in an affiliated small cap stock mutual fund during 1997, The
Guardian Small Cap Stock Fund. At December 31, 1997 this investment amounted to
$27,663,037.
Note 8 -- Separate Accounts
The following represents a reconciliation of net transfers from GIAC to
the separate accounts. Transfers are reported in the Summary of Operations of
the Separate Account Annual Statement:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Transfers to separate accounts .................. $ 1,054,380,697 $ 767,741,428 $ 582,715,569
Transfers from separate accounts ................ (782,891,638) (518,683,141) (398,531,802)
--------------- --------------- ---------------
Net transfers to separate accounts ............ 271,489,059 249,058,287 184,183,767
--------------- --------------- ---------------
Reconciling Adjustments:
Mortality & expense guarantees-- variable annuity 70,027,514 53,219,656 41,474,872
Mortality & expense guarantees-- variable life .. 2,021,656 1,687,711 1,571,955
Administrative fees-- variable annuity .......... 4,095,230 3,867,120 3,513,459
Cost of insurance-- variable life ............... 11,205,120 4,844,028 4,232,564
--------------- --------------- ---------------
Total adjustments ............................. 87,349,520 63,618,515 50,792,850
--------------- --------------- ---------------
Transfers as reported in the Statement of
Operations of GIAC ............................ $ 358,838,579 $ 312,676,802 $ 234,976,617
=============== =============== ===============
</TABLE>
B-16
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
Note 9 -- Annuity Actuarial Reserves and Deposit Liabilities
The following describes withdrawal characteristics of annuity actuarial
reserves and deposit liabilities:
<TABLE>
<CAPTION>
For the Year Ending 1997 For the Year Ending 1996
------------------------ ------------------------
Amount % Amount %
------------ ------ ------------ ------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal
with market value adjustment ....... $ 46,276,766 10.19% $ 44,480,214 10.22%
------------ ------ ------------ ------
Total with adjustment or at
market value ..................... 46,276,766 10.19 44,480,214 10.22
at book value without adjustment
(minimal or no charge or
adjustment) ...................... 313,725,462 69.05 302,433,090 69.45
Not subject to discretionary withdrawal 94,338,339 20.76 88,546,538 20.33
------------ ------ ------------ ------
Total (gross) ......................... 454,340,567 100.00 435,459,842 100.00
Reinsurance ceded ..................... -- -- 4,879 --
------------ ------ ------------ ------
Total ................................. $454,340,567 100.00% $435,454,963 100.00%
============ ====== ============ ======
</TABLE>
This does not include $6,647,606,347 and $5,098,658,097 of non-guaranteed
annuity reserves held in separate accounts, and $3,572,284 and $2,927,130 at
December 31, 1997 and 1996, respectively, in annuity reserves being held as a
loan collateral fund for loans on certain annuity contracts.
Note 10 - Statutory Financial Information
The following reconciles the statutory net income of the Company as
reported to the regulatory authorities to consolidated GAAP net income:
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Statutory net income ......................... $ 28,037,239 $ 19,695,432 $ 4,956,175
Adjustments to restate to the basis of GAAP:
Net income of subsidiaries ................ 4,326,500 142,201 298,534
Change in deferred policy acquisition costs 41,883,919 42,525,493 31,247,939
Deferred premiums ......................... (5,542,795) 3,238,115 (1,643,253)
Re-estimation of future policy benefits ... (3,353,249) 26,953,558 297,442
Reinsurance ............................... 12,372,471 (36,353,822) 15,465,956
Deferred federal income tax expense ....... (16,212,244) (13,074,280) (15,681,250)
Elimination of interest maintenance reserve (111,783) (333,219) (257,381)
Other, net ................................ 201,840 (2,444,872) 2,598,780
------------ ------------ ------------
Consolidated GAAP net income ................. $ 61,601,898 $ 40,348,606 $ 37,282,942
============ ============ ============
</TABLE>
B-17
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
The following reconciles the statutory capital and surplus of the Company
as reported to the regulatory authorities to consolidated GAAP stockholder's
equity:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Statutory capital and surplus ................. $ 182,704,232 $ 153,780,908 $ 141,877,927
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs .......... 267,369,685 221,475,216 178,010,226
Elimination of asset valuation reserve ..... 26,305,528 15,121,269 9,341,353
Re-estimation of future policy benefits .... 41,283,947 31,167,840 4,214,282
Establishment of deferred federal income tax (84,703,745) (65,164,526) (53,962,281)
Unrealized gains on investments ............ 7,852,564 2,313,203 10,655,552
Other liabilities .......................... (33,486,652) (32,389,767) 1,811,239
Deferred premiums .......................... (7,024,891) (1,482,096) (4,720,211)
Other, net ................................. (3,468,519) (2,215,098) (1,276,761)
------------- ------------- -------------
Consolidated GAAP stockholder's equity ... $ 396,832,149 $ 322,606,949 $ 285,951,326
============= ============= =============
</TABLE>
B-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 10, 1998
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
We have audited the accompanying statutory basis balance sheets of The
Guardian Insurance & Annuity Company, Inc. as of December 31, 1997 and 1996, and
the related statutory basis statements of operations, of changes in common stock
and surplus and of cash flows for the three years in the period ended December
31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 2, these financial statements were prepared in
conformity with accounting practices prescribed or permitted by insurance
regulatory authorities (statutory basis of accounting), which is a comprehensive
basis of accounting other than generally accepted accounting principles.
Accordingly, the financial statements are not intended to represent a
presentation in accordance with generally accepted accounting principles. The
effects on the financial statements of the variances between such practices and
generally accepted accounting principles are material and are described in Note
2.
In our report dated February 9, 1996, we expressed an opinion that the
1995 financial statements, prepared using accounting practices prescribed or
permitted by insurance regulatory authorities, were presented fairly, in all
material respects, in conformity with generally accepted accounting principles.
As described in Note 2 to these financial statements, pursuant to pronouncements
of the Financial Accounting Standards Board, financial statements of mutual life
insurance companies and their wholly owned stock insurance company subsidiaries
are no longer considered presentations in conformity with generally accepted
accounting principles. Accordingly, our present opinion on the presentation of
the 1995 financial statements, as presented herein, is different from that
expressed in our report dated February 9, 1996.
In our opinion, the financial statements referred to above (1) do not
present fairly, in conformity with generally accepted accounting principles, the
financial position of The Guardian Insurance & Annuity Company, Inc. at December
31, 1997 and 1996, or the results of its operations or its cash flows for the
three years in the period ended December 31, 1997, because of the effects of the
variances between the statutory basis of accounting and generally accepted
accounting principles, and (2) present fairly, in all material respects, its
financial position and the results of its operations and its cash flows, in
conformity with accounting practices prescribed or permitted by insurance
regulatory authorities.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
New York, New York
B-19
<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, 1997
Statement of Operations for the Year Ended December 31, 1997
Statements of Changes in Net Assets for the Two Years Ended
December 31, 1997 and 1996
Notes to Financial Statements
Report of Price Waterhouse LLP, Independent Accountants
(2) The Guardian Insurance & Annuity Company, Inc. (included in
Part B):
Statutory Basis Balance Sheets as of December 31, 1997 and
1996
Statutory Basis Statements of Operations for the Three Years
Ended December 31, 1997, 1996 and 1995
Statutory Basis Statements of Changes in Common Stock and
Surplus for the Three Years Ended December 31, 1997, 1996 and
1995
Statutory Basis Statements of Cash Flow for the Three Years
Ended December 31, 1997, 1996 and 1995
Notes to Statutory Basis Financial Statements
Report of Price Waterhouse LLP, Independent Accountants
(b) Exhibits
Number Description
1 Resolutions of the Board of Directors of The
Guardian Insurance & Annuity Company, Inc.
establishing Separate Account
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
(b) Form of Broker-Dealer Supervisory and Service
Agreement
4 Specimen of Variable Annuity Contract
5 Form of Application for Variable Annuity
Contract
6 (a) Certificate of Incorporation of The Guardian
Insurance & Annuity Company, Inc.
(b) By-laws of The Guardian Insurance & Annuity
Company, Inc.
C-1
<PAGE>
7 Automatic Indemnity Reinsurance Agreement between
The Guardian Insurance & Annuity Company, Inc. and
The Guardian Life Insurance Company of America
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.
9 Opinion and Consent of Counsel
10 (a) Consent of Price Waterhouse LLP
11 Not Applicable
12 Agreement with Respect to Providing the Initial
Capital for Separate Account A(1)
13 Powers of Attorney executed by a majority of the
Board of Directors and principal officers of The
Guardian Insurance & Annuity Company, Inc.
27 Financial Data Schedule
- ----------
(1) Incorporated by reference to the Registration Statement on Form N-4 (Reg.
No. 2-74906), as previously filed.
C-2
<PAGE>
Item 25. Directors and Officers of the Depositor
The following is a list of directors and officers of The Guardian
Insurance & Annuity Company, Inc. ("GIAC"), the depositor of the Registrant. The
principal business address of each director and officer is 201 Park Avenue
South, New York, New York 10003.
Name Office/Title
Joseph D. Sargent President, Chief Executive Officer
& Director
John M. Smith Executive Vice President & Director
Frank J. Jones Executive Vice President, Chief
Investment Officer & Director
Edward K. Kane Executive Vice President & Director
Philip H. Dutter Director
Arthur v. Ferrara Director
Leo R. Futia Director
Peter L. Hutchings Director
William C. Warren Director
Eileen McDonnell Vice President, Group Pensions
Ryan W. Johnson Vice President, Equity Sales
Thomas R. Hickey, Jr. Vice President, Operations
John M. Fagan Vice President
Thomas G. Sorrell Vice President
Frank L. Pepe Vice President & Controller
Charles G. Fisher Vice President & Actuary
William C. Frentz Vice President, Real Estate
Michele S. Babakian Vice President
Donald P. Sullivan, Jr. Vice President
Richard T. Potter, Jr. Vice President & Counsel
Raymond J. Henry Second Vice President
Paul Iannelli Second Vice President
Alexander M. Grant, Jr. Second Vice President
Ann T. Kearney Second Vice President
Peggy L. Coppola Second Vice President
Joseph A. Caruso Vice President & Secretary
Earl Harry Treasurer
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"), as of February 28,
1998:
State of Percent of
Incorporation Voting Securities
Name of Entity or Organization Owned
------------- ------------- --------------
The Guardian Insurance & Delaware 100%
Annuity Company, Inc.
Guardian Asset Management Delaware 100%
Corporation
Park Avenue Life Insurance Delaware 100%
Company
Guardian Reinsurance Services, Inc. Connecticut 100%
Physicians Health Services, Inc. Delaware 14%
Private Healthcare Systems, Inc. Delaware 14%
Managed Dental Care, Inc. California 100%
The Guardian Baillie Gifford Massachusetts 25.5%
International Fund
The Guardian Investment Quality Massachusetts 44.7%
Bond Fund
Baillie Gifford International Fund Maryland 18.1%
Baillie Gifford Emerging Markets Fund Maryland 26.3%
The Guardian Tax-Exempt Bond Fund Massachusetts 87.4%
The Guardian Asset Allocation Fund Massachusetts 12.7%
The Guardian Park Avenue Small Cap
Fund Massachusetts 21.4%
The Guardian Baillie Gifford Emerging
Markets Fund Massachusetts 78.4%
The following list sets forth the persons directly controlled by GIAC or
other affiliates of Guardian Life, and thereby indirectly controlled by Guardian
Life, as of April 1, 1998:
Approximate
Percentage of Voting
Place of Securities Owned
Incorporation by Guardian Life
Name of Entity 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%
GIAC Funds, Inc. Maryland 100%
C-4
<PAGE>
Item 27. Number of Contractowners
Type of Contract Number as of April 1, 1998
---------------- --------------------------
Non-Qualified (Individual) ............. 7,163
Qualified (Individual) ................. 9,738
Qualified (Group) ...................... 307
------
Total ......................... 17,208
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 Park Avenue Small Cap Fund,
The Guardian Park Avenue Tax-Efficient Fund, The Guardian Investment Quality
Bond Fund, The Guardian High Yield Bond Fund, The Guardian Tax-Exempt Fund, The
Guardian Asset Allocation Fund, The Guardian Baillie Gifford International Fund
and The Guardian Baillie Gifford Emerging Markets Fund and GIAC Funds, Inc. a
series fund consisting of Baillie Gifford International Fund, Baillie Gifford
Emerging Markets Fund and The Guardian Small Cap Stock Fund. All of the
aforementioned funds and the series trust are registered with the SEC as
open-end management investment companies under the Investment Company Act of
1940, as amended ("1940 Act"). In addition, GISC is the distributor of variable
annuity and variable life insurance contracts currently offered by GIAC through
its separate accounts, The Guardian/Value Line Separate Account, The Guardian
Separate Account A, The Guardian Separate Account B, The Guardian Separate
Account C, The Guardian Separate Account D, The Guardian Separate Account E and
The Guardian Separate Account K, which are all registered as unit investment
trusts under the 1940 Act.
(b) The following is a list of directors and officers of GISC.
The principal business address of each person is 201 Park Avenue South, New
York, New York 10003.
Name Office/Title
---- ------------
John M. Smith President & Director
Arthur v. Ferrara Director
Leo R. Futia Director
Peter L. Hutchings Director
Philip H. Dutter Director
Joseph D. Sargent Director
William C. Warren Director
Frank J. Jones Director
John M. Fagan Vice President
Ryan W. Johnson Senior Vice President & National
Sales Director
Frank L. Pepe Vice President & Controller
Thomas R. Hickey, Jr. Senior Vice President, Operations
Donald P. Sullivan, Jr. Vice President
Richard T. Potter, Jr. Vice President & Counsel
C-5
<PAGE>
Name Office/Title
---- ------------
Ann T. Kearney Second Vice President
Alexander M. Grant, Jr. Second Vice President
Kevin S. Alter Second Vice President
Peggy L. Coppola Second Vice President
Joseph A. Caruso Vice President & Secretary
Earl C. Harry Treasurer
Item 30. Location of Accounts and Records
Most of the Registrant's accounts, books and other documents
required to be maintained by Section 31(a) of the 1940 Act and the rules
promulgated thereunder are maintained by GIAC, the depositor, at its Customer
Service Office, 3900 Burgess Place, Bethlehem, Pennsylvania 18017. Documents
constituting the Registrant's corporate records are also maintained by GIAC but
are located at its Executive Office, 201 Park Avenue South, New York, New York
10003.
Item 31. Management Services
None.
Item 32. Undertakings
The Depositor, GIAC, hereby undertakes and represents that the fees
and charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred and the
risks assumed by GIAC.
C-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 30th day
of April, 1998.
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/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* Executive Vice President
- --------------------------------- and Director
Edward K. Kane
s/LEO R. FUTIA* Director
- ---------------------------------
Leo R. Futia
s/PHILIP H. DUTTER* Director
- ---------------------------------
Philip H. Dutter
s/PETER L. HUTCHINGS* Director
- ---------------------------------
Peter L. Hutchings
By s/ THOMAS R. HICKEY, JR. Date: April 30, 1998
------------------------------
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
- ------ -----------
1 Board Resolutions
3(a) Distribution and Service Agreement
3(b) Form of Broker-Dealer Agreement
4 Specimen of Variable Annuity Contract
5 Form of Application
6(a) Certificate of Incorporation
6(b) By-Laws
7 Automatic Indemnity Reinsurance Agreement
8 Agreement for Services
9 Opinion and Consent of Counsel
10(a) Consent of Price Waterhouse LLP
13 Powers of Attorney
27 Financial Data Schedule
C-9
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC. 236.
Board of Directors resolution by written consent of all of the Directors
pursuant to Article III, Section 11 of the By-Laws:
BE IT RESOLVED: That the officers of the company are authorized to
establish a separate account in connection with certain variable annuity
contracts pursuant to the insurance laws of the State of Delaware and the
variable contract regulations issued by the Insurance Commissioner of
Delaware, such account to be known as The Guardian Separate Account A;
That such separate account be registered as a unit investment trust under
the Investment Company Act of 1940, as amended, and that application be
made for such exemptions from that Act as may be desirable;
That there be filed with the Securities and Exchange Commission in
accordance with the provisions of the Securities Act of 1933, as amended,
registration statements and any amendments thereto relating to the
variable annuity contracts which are to be registered pursuant to that
Act; and
That the officers of the company be, and they are, hereby authorized to
prepare agreements of custodianship respecting such separate account and
take such further action as may be necessary or desirable to implement the
foregoing resolutions and as may be appropriate to enable the company to
transact the business of issuing and selling such variable annuity
contracts.
/s/ George T. Conklin, Jr.
------------------------------
George T. Conklin, Jr.
/s/ Leo R. Futia
------------------------------
Leo R. Futia
/s/ John C. Angle
------------------------------
John C. Angle
/s/ Arthur V. Ferrarra
------------------------------
Arthur V. Ferrarra
October 30, 1981
DISTRIBUTION AND SERVICE AGREEMENT
BETWEEN
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
AND
GUARDIAN INVESTOR SERVICES CORPORATION
AGREEMENT, made this 23rd day of August, 1985 by and between The Guardian
Insurance & Annuity Company, Inc. ("GIAC"), a Delaware corporation, and Guardian
Investor Services Corporation (the "Distributor"), a New York corporation, both
corporations being wholly-owned subsidiaries of The Guardian Life Insurance
Company of America and each corporation having its principal office located at
201 Park Avenue South, New York, New York 10003.
WHEREAS, GIAC is engaged in, among other things, the issuance and sale of
variable contracts (the "Contracts") which are funded by separate accounts
organized by GIAC and registered with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933 and the Investment Company Act of 1940;
WHEREAS, Distributor is duly registered with the SEC as a broker-dealer
under the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, the Contracts may be sold to the public only by persons who are
insurance agents duly licensed by GIAC and one or more states of the United
States and the District of Columbia and who are also registered representatives
of the Distributor or of certain designated persons, as more fully described
herein;
<PAGE>
WHEREAS, GIAC and the Distributor desire to enter into an agreement,
pursuant to which the Distributor will distribute and act as the principal
underwriter for the sale of the Contracts and will select, train, license and
supervise the activities of all persons associated with it, all as more
particularly described herein.
NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:
1. GIAC hereby appoints the Distributor and the Distributor agrees to act
as the distributor and as the principal underwriter for the sale of the
Contracts which may be sold to the public only by persons who are licensed
insurance agents of GIAC and registered representatives of the Distributor or
certain designated persons as set forth in paragraph 5 herein.
2. Applications for the Contracts shall be solicited only by
representatives duly and appropriately licensed or otherwise qualified for the
sale of such Contracts in each state or other jurisdiction. GIAC shall undertake
to appoint Distributor's qualified representatives as life insurance agents of
GIAC. Completed applications for Contracts shall be transmitted directly to GIAC
for acceptance or rejection in accordance with underwriting rules established by
GIAC. Initial premium payments under the Contracts shall be made by check
payable to GIAC and shall be held at all times by Distributor or its
representatives in a fiduciary capacity and remitted promptly to GIAC. Anything
in this Agreement to the
-2-
<PAGE>
contrary notwithstanding, GIAC retains the ultimate right to control the sale of
the Contracts and to appoint and discharge life insurance agents of GIAC. The
Distributor shall be held to the exercise of reasonable care in carrying out the
provisions of this Agreement.
3. Upon request, Distributor will furnish GIAC, in writing, a list of those
agents who have become so qualified and the dates of such qualifications as well
as a list of those agents who are not selected or who have failed to qualify.
Notwithstanding the ultimate right of GIAC to appoint and discharge agents, in
the event an agent who has qualified fails or refuses to submit to the
supervision of the Distributor in accordance with this Agreement, or otherwise
fails to comply with the rules and standards imposed by the Distributor on its
registered representatives, the Distributor will certify such fact to GIAC and
will immediately notify the agent that such agent is no longer authorized to
sell the Contracts and the Distributor and GIAC will take whatever additional
action may be necessary to terminate the sales activities of the agent relating
to the Contracts.
4. Prior to permitting any agent to sell the Contracts, GIAC, the
Distributor and the agent will enter into an agreement pursuant to which the
agent will acknowledge that he will be a registered representative of the
Distributor in connection with the agent's securities activities with respect to
the Contracts, that such activities would be under the supervision of the
Distributor
-3-
<PAGE>
and any supervisor designated by the Distributor, and that the agent's right to
continue to sell the Contracts is subject to his continued compliance with such
agreement and the rules and procedures established by the Distributor for
compliance with applicable federal, state and NASD requirements.
5. Distributor is authorized to enter into separate written agreements, on
such terms and conditions not inconsistent with this Agreement, with one or more
organizations which agree to participate in the distribution of the Contracts.
Such organization (hereafter "Broker") shall be both registered as a
broker-dealer under the Securities Exchange Act of 1934 and a member of the
NASD. Broker and its agents or representatives soliciting applications for
Contracts shall be duly and appropriately licensed, registered or otherwise
qualified for the sale of such Contracts under the insurance laws and any
applicable blue-sky laws of each state or other jurisdiction in which GIAC is
licensed to sell the Contracts.
6. Applications for Contracts solicited by such Broker through its agents
or representatives shall be transmitted directly to GIAC, and if received by
Distributor, shall be forwarded to GIAC. All payments under the Contracts shall
be made by check to GIAC and, if received by Distributor, shall be held at all
times in a fiduciary capacity and remitted promptly to GIAC. All such payments
will be the property of GIAC.
-4-
<PAGE>
7. GIAC wishes to ensure that Contracts sold by Distributor will be issued
to purchasers for whom the Contracts will be suitable. Distributor shall take
reasonable steps to ensure that the various representatives appointed by it
shall not make recommendations to an applicant to purchase a Contract in the
absence of reasonable grounds to believe that the purchase of the Contract is
suitable for such applicant. While not limited to the following, a determination
of suitability shall be based on information furnished to a representative after
reasonable inquiry of such applicant concerning the applicant's insurance and
investment objectives, financial situation and needs, and the likelihood that
the applicant will continue to make any premium payments contemplated by the
Contracts.
8. GIAC shall have the responsibility for furnishing to Distributor and its
representatives sales promotion materials and individual sales proposals related
to the sale of the Contracts. Distributor shall not use any such materials that
have not been approved by GIAC.
9. GIAC shall arrange for the payment of commissions directly to those
registered representatives of Distributor who are entitled thereto in connection
with the sale of the Contracts on behalf of Distributor, in the amounts and on
such terms and conditions as GIAC and Distributor shall determine; provided that
such terms, conditions and commissions shall be as are set forth in or
-5-
<PAGE>
as are not inconsistent with the Prospectus included as part of the Registration
Statement for the Contracts and effective under the Securities Act of 1933.
10. GIAC shall arrange for the payment of commissions directly to those
Brokers who sell Contracts under agreements entered into pursuant to paragraph 5
hereof, in amounts as may be agreed to by GIAC and specified in such written
agreements.
11. GIAC shall pay to Distributor underwriting income amounting to 0.35% of
variable annuity sales and 1.00% of single premium variable life sales made by
registered representatives of the Distributor as reimbursement for the costs and
expenses incurred by Distributor in furnishing or obtaining the services,
materials and supplies required by the terms of this Agreement in the initial
sales efforts and the continuing obligations hereunder.
12. Distributor assumes full responsibility for the securities activities
of all persons associated with it relating to the offer and sale of the
Contracts.
13. Distributor shall have the responsibility for maintaining the records
of its representatives licensed, registered and otherwise qualified to sell the
Contracts. Distributor shall maintain such other records as are required of it
by applicable laws and regulations. The books, accounts and records of GIAC, the
Account and
-6-
<PAGE>
Distributor shall be maintained so as to clearly and accurately disclose the
nature and details of the transactions. All records maintained by GIAC in
connection with this Agreement shall be maintained and held by GIAC on behalf
of, and as agent for, the Distributor and such books and records will at all
times be subject to inspection by authorized representatives of the SEC and
NASD. The Distributor shall keep confidential any information obtained pursuant
to this Agreement and shall disclose such information only if GIAC has
authorized such disclosure or if such disclosure is expressly required by
applicable federal or state regulatory authorities.
14. This Agreement may not be assigned by GIAC or the Distributor except by
prior written consent of the parties and shall continue from year to year,
subject to termination by either party on 60 days' written notice to the other
party, except that in the event Distributor shall cease to be a registered
broker-dealer under the Securities Exchange Act of 1934, this Agreement shall
terminate immediately.
15. This Agreement shall be subject to the provisions of the Investment
Company Act of 1940 and the Securities Exchange Act of 1934 and to the rules and
regulations promulgated thereunder and to the applicable rules and regulations
of the NASD, and the terms hereof shall be interpreted and construed in
accordance therewith.
16. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or
-7-
<PAGE>
otherwise, the remainder of this Agreement shall not be affected thereby.
17. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
18. This Agreement supersedes in all respects any other agreements between
the parties hereto relating to the distribution and service of the Contracts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
THE GUARDIAN INSURANCE &
ANNUITY COMPANY, INC.
Attest /s/ Thomas R. Hickey, Jr. By /s/ John C. Angle
-------------------------- -------------------------
GUARDIAN INVESTOR SERVICES
CORPORATION
Attest /s/ Thomas R. Hickey, Jr. By /s/ John M. Smith
-------------------------- -------------------------
-8-
<PAGE>
AMENDMENT NO. 1
Dated as of January 11, 1989
to the
Distribution and Service Agreement
between
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
and
GUARDIAN INVESTOR SERVICES CORPORATION
* * * * *
The Guardian Insurance & Annuity Company, Inc. ("GIAC") and Guardian Investor
Services Corporation ("Distributor") hereby mutually agree to amend the
Distribution and Service Agreement ("Agreement"), dated August 23, 1985, between
GIAC and the Distributor, in the manner herein set forth:
Paragraph 11 of the Agreement is deleted, and new Paragraph 11 is
substituted therefor, in the form set forth immediately hereunder, with the
same force and effect as if such paragraph had appeared in the Agreement as
originally executed:
"11. GIAC shall pay to Distributor underwriting income amounting to
(a) 0.35% of gross premiums paid on sales of GIAC's variable annuity
contracts, (b) 1.00% of gross premiums paid on sales of GIAC's single
premium variable life contracts, and (c) (i) 0.50% of the first $10
million of gross first year premiums and (ii) 0.25% of gross first
year premiums in excess of $10 million paid on sales of GIAC's annual
premium variable life contracts and which are attributable to sales of
such contracts made by registered representatives of the Distributor
as reimbursement for the costs and expenses incurred by Distributor in
furnishing or obtaining the services, materials and supplies required
by the terms of this Agreement in the initial sales efforts and the
continuing obligations hereunder."
Except to the extent specifically provided herein, the Agreement shall remain in
full force and effect in accordance with its terms. This amendment shall become
effective as of the date hereof.
Attest: THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
/s/ Thomas R. Hickey, Jr. By /s/ John M. Smith
- -------------------------- ---------------------------
John M. Smith
Executive Vice President
Attest: GUARDIAN INVESTOR SERVICES
CORPORATION
/s/ Thomas R. Hickey, Jr. By /s/ John M. Fagan
- -------------------------- ---------------------------
John M. Fagan
Vice President
Exhibit 99.3(b)
THE GUARDIAN INSURANCE & ANNUITY COMPANY
BROKER-DEALER SUPERVISORY AND SERVICE
AGREEMENT
Agreement by and between The Guardian Insurance & Annuity Company, Inc.
("GIAC"), a Delaware corporation, Guardian Investor Services Corporation
("GISC"), a registered broker-dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers Inc. ("NASD"), and
- --------------------------------------------------------------------------------
("Broker-Dealer") also a registered broker-dealer with the SEC under the
Securities Exchange Act of 1934 and a member of the NASD.
- --------------------------------------------------------------------------------
I. WITNESSETH
- --------------------------------------------------------------------------------
Whereas, GIAC proposes to have Broker-Dealer's registered representatives
("Representatives") who are also insurance agents solicit and sell certain
Insurance and Annuity Contracts (the "Plans") more particularly described in
this Agreement and which are deemed to be securities under the Securities Act of
1933; and
Whereas, GIAC has appointed GISC as the Distributor of the Plans and has agreed
with GISC that GISC shall be responsible for the training and supervision of
such Representatives, with respect to the solicitation and offer or sale of any
of the Plans, and also for the training and supervision of any other "persons
associated" with Broker-Dealer who are engaged directly or indirectly therewith;
and GISC proposes to delegate, to the extent legally permitted, said supervisory
duties to Broker-Dealer; and
Whereas, GIAC and GISC propose to have Broker-Dealer provide certain
administrative services to facilitate solicitation for and sales of the Plans.
Now therefore, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
- --------------------------------------------------------------------------------
II. APPOINTMENT OF BROKER-DEALER
- --------------------------------------------------------------------------------
GIAC and GISC hereby appoint Broker-Dealer to supervise solicitations for and
sales of the Plans and to provide certain administrative services to facilitate
solicitations for and sales of the Plans.
<PAGE>
- --------------------------------------------------------------------------------
III. AUTHORITIES AND DUTIES OF BROKER-DEALER
- --------------------------------------------------------------------------------
A. PLANS
The Plans issued by GIAC to which this Agreement applies are listed in Exhibit
A. These Plans may be amended from time to time by GIAC. GIAC, in its sole
discretion and without notice to Broker-Dealer, may suspend sales of any Plans
or may amend any policies or contract evidencing such Plans.
B. LICENSING
Broker-Dealer shall, at all times when performing its functions under this
agreement, be registered as a securities broker with the SEC and NASD and
licensed or registered as a securities broker-dealer in the states and other
local jurisdictions that require such licensing or registration in connection
with variable annuity sales activities or the supervision of Registered
Representatives who perform such activities in the respective location.
Broker-Dealer shall assist GISC in the appointment of Representatives under the
applicable insurance laws to sell the Plans. Broker-Dealer shall fulfill all
requirements set forth in the General Letter of Recommendation, attached as
Exhibit B, in conjunction with the submission of licensing/appointment papers
for all applicants as insurance agents of GIAC. All such licensing/appointment
papers should be submitted to GISC by Broker-Dealer.
C. SECURING APPLICATIONS
All applications for Plans shall be made on application forms supplied by GIAC
and all payments collected by Broker-Dealer or any Representative of
Broker-Dealer shall be remitted promptly in full, together with such
applications, forms and any other required documentation, directly to GIAC at
the address indicated on such application or to such other address as GIAC may,
from time to time, designate in writing. Broker-Dealer shall review all such
applications for completeness. Checks or money orders in payment on any such
Plan shall be drawn to the order of "The Guardian Insurance & Annuity Company."
All applications are subject to acceptance or rejection by GIAC at its sole
discretion.
D. MONEY RECEIVED BY BROKER-DEALER
All money payable in connection with any of the Plans, whether as premium,
purchase payment or otherwise, and whether paid by or on behalf of any
policyholder, contract owner or certificate holder or anyone else having an
interest in the Plans, is the property of GIAC, and shall be transmitted
immediately in accordance with the administrative procedures of GIAC without any
deduction or offset for any reason, including by example, but not limitation,
any deduction or offset for compensation claimed by Broker-Dealer.
<PAGE>
E. SUPERVISION OF REPRESENTATIVES
Broker-Dealer shall have full responsibility for the training and supervision of
all Representatives associated with Broker-Dealer who are engaged directly or
indirectly in the offer or sale of the Plans, and all such persons shall be
subject to the control of Broker-Dealer with respect to such persons'
securities-regulated activities in connection with the Plans. Broker-Dealer will
cause the Representatives to be trained in the sale of the Plans: will use its
best efforts to cause such Representatives to qualify under applicable federal
and state laws to engage in the sale of the Plans; and will cause such
Representatives to be registered representatives of Broker-Dealer before such
Representatives engage in the solicitation of applications for the Plans; and
will cause such Representatives to limit solicitation of applications for the
Plans to jurisdictions where GIAC has authorized such solicitation.
Broker-Dealer shall cause such Representatives' qualifications to be certified
to the satisfaction of GISC and shall notify GISC if any Representative ceases
to be a registered representative of Broker-Dealer.
F. REPRESENTATIVES AGREEMENT
Broker-Dealer shall cause each such Representative to execute a Registered
Representative's Agent Agreement with GIAC before a Representative shall be
permitted to solicit applications for the sale of the Plans. GISC shall furnish
Broker-Dealer with copies of Registered Representative's Agent Agreements for
execution by the Representatives.
G. COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE SECURITY
LAWS
Broker-Dealer shall fully comply with the requirements of the NASD and of the
Securities Exchange Act of 1934 and all other applicable federal or state laws
and will establish such rules and procedures as may be necessary to cause
diligent supervision of the securities activities of the Representatives. Upon
request by GISC, Broker-Dealer shall furnish such appropriate records as may be
necessary to establish such diligent supervision.
H. NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE
In the event a Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and standards imposed by
Broker-Dealer on its Representatives, Broker-Dealer shall certify such fact to
GIAC and shall immediately notify such Representative that he or she is no
longer authorized to sell the Plans, and Broker-Dealer shall take whatever
additional action may be necessary to terminate the sales activities of such
Representative relating to the Plans.
I. PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING
Broker-Dealer shall be provided, without any expense to Broker-Dealer, with
prospectuses relating to the Plans and such other material as GISC determines
to
be necessary or desirable for use in connection with sales of the Plans. No
sales promotion materials or any advertising relating
<PAGE>
to the Plans shall be used by Broker-Dealer unless the specific item has been
approved in writing by GISC.
J. RIGHT OF REJECTION
Broker-Dealer and/or GIAC, each at their sole discretion, may reject any
applications or payments remitted by Representative through the Broker-Dealer
and may refund an applicant's payments to the applicant. In the event such
refunds are made, and if Representative has received compensation based on an
applicant's Payment that is refunded, Representative shall promptly repay such
compensation to the Broker-Dealer. If repayment is not promptly made, the
Broker-Dealer may, at its sole option, deduct any amounts due it from
Representative from future commissions otherwise payable to Representative.
K. ASSIGNMENT
Neither this Agreement nor any of its benefits may be assigned by Representative
without the written consent of GIAC and GISC, and any assignment of this
agreement, compensation or other benefits or obligations hereunder shall not be
valid if made without such consent.
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IV. COMPENSATION
- --------------------------------------------------------------------------------
A. SUPERVISORY FEES, SERVICE FEES AND COMMISSIONS
Supervisory and service fees payable to Broker-Dealer and commissions payable to
Representatives in connection with the Plans shall be paid by GIAC to the
person(s) entitled thereto through Broker-Dealer or as otherwise required by
law. GISC will provide Broker-Dealer with a copy of GIAC's current Dealer
Concession and Commissions Schedule. These fees and commissions will be paid as
a percentage of premiums or purchase payments (premiums and purchase payments
are hereinafter referred to collectively as "Payments") received in cash or
other legal tender and accepted by GIAC on applications obtained by the various
Representatives of the Broker-Dealer. Upon termination of this Agreement, all
compensation to the Broker-Dealer hereunder shall cease; however, Broker-Dealer
shall continue to be liable for any chargebacks pursuant to the provisions of
said Dealer Concession and Commissions Schedule or for any other amounts
advanced by or otherwise due GIAC hereunder.
B. TIME OF PAYMENT
GIAC shall pay any compensation due Broker-Dealer and Representatives of
Broker-Dealer within fifteen (15) days after the end of the calendar month in
which Payments upon which such compensation is based are accepted by GIAC.
C. AMENDMENT OF SCHEDULES
GIAC may, upon at least ten (10) days prior written notice to Broker-Dealer
change the Dealer Concession and Commissions Schedule. Any such change shall be
by written amendment of the
<PAGE>
particular schedule or schedules and shall apply to compensation due on
applications received by GIAC after the effective date of such notice.
D. PROHIBITION AGAINST REBATES
If Broker-Dealer or any Representative of Broker-Dealer shall rebate or offer to
rebate all or any part of a Payment on a policy or contract or certificate
issued by GIAC, or if Broker-Dealer or any Representative of Broker-Dealer shall
withhold any Payment on any policy or contract or certificate issued by GIAC,
the same may be grounds for termination of this Agreement by GIAC. If
Broker-Dealer or any Representative of Broker-Dealer shall at any time induce or
endeavor to induce any owner of any policy or contract issued hereunder or any
certificate holder to discontinue Payments or to relinquish any such policy or
contract or certificate except under circumstances where there is reasonable
grounds for believing the policy, contract or certificate is not suitable for
such person, any and all compensation due Broker-Dealer hereunder shall cease
and terminate.
E. INDEBTEDNESS
Nothing in this Agreement shall be construed as giving Broker-Dealer the right
to incur any indebtedness on behalf of GIAC. Broker-Dealer hereby authorizes
GIAC to set off liabilities of Broker-Dealer to GIAC against any and all amounts
otherwise payable to Broker-Dealer by GIAC.
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V. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
A. WAIVER
Failure of any party to insist upon strict compliance with any of the conditions
of this Agreement shall not be construed as a waiver of any of the conditions,
but the same shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver.
B. INDEPENDENT CONTRACTORS
GIAC and GISC are independent contractors with respect to Broker-Dealer and to
Representatives.
C. LIMITATIONS
No party other than GIAC shall have the authority on behalf of GIAC to make,
after, or discharge any policy or contract or certificate issued by GIAC, to
waive any forfeiture or to grant, permit, nor to extend the time of making any
Payments, nor to guarantee dividends, nor to alter the forms which GIAC may
prescribe or substitute other forms in place of those prescribed by GIAC, nor to
<PAGE>
enter into any proceeding in a court of law or before a regulatory agency in
the
name of or on behalf of GIAC.
D. FIDELITY BOND
Broker-Dealer represents that all directors, officers, employees and
Representatives of Broker-Dealer who are licensed pursuant to this Agreement as
GIAC agents for state insurance law purposes or who have access to funds of
GIAC, including but not limited to funds submitted with applications for the
Plans or funds being returned to owners or certificate holders, are and shall be
covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall be
maintained by Broker-Dealer at Broker-Dealer's expense. Such bond shall be, at
least, of the form, type and amount required under the NASD Rules of Fair
Practice. GIAC may require evidence, satisfactory to it, that such coverage is
in force and Broker-Dealer shall give prompt, written notice to GIAC of any
notice of cancellation or change of coverage.
Broker-Dealer assigns any proceeds received from the fidelity bonding company to
GIAC to the extent of GIAC's loss due to activities covered by the bond. If
there is any deficiency amount, whether due to a deductible or otherwise,
Broker-Dealer shall promptly pay GIAC such amount on demand and Broker-Dealer
hereby indemnities and holds harmless GIAC from any such deficiency and from the
costs of collection thereof (including reasonable attorneys' fees).
E. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of the parties
to it and their respective successors and assigns provided that Broker-Dealer
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of GIAC.
F. REGULATIONS
All parties agree to observe and comply with the existing The Guardian In laws
and rules or regulations of applicable local, state, or federal regulatory
authorities and with those which may be enacted or adopted during the term of
this Agreement regulating the business contemplated hereby in any jurisdiction
in which the business described herein is to be transacted.
G. NOTICES
All notices or communications shall be sent to the address shown in sub
paragraph L of Section V of this Agreement or to such other address as the party
may request by giving written notice to the other parties.
H. GOVERNING LAW
This Agreement shall be construed in accordance with governed by the laws of the
state of New York.
<PAGE>
I. AMENDMENT OF AGREEMENT
GIAC reserves the right to amend this Agreement at any time and the submission
of an application by a Representative of a Broker-Dealer after notice of any
such amendment has been sent to the other parties shall constitute the other
parties' agreement to any such amendment.
J. SALES PROMOTION MATERIALS AND ADVERTISING
Broker-Dealer shall not print, publish or distribute any advertisement, circular
or any document relating to the Plans or relating to GIAC unless such
advertisement, circular or document shall have been approved in writing by GIAC
or by GISC; and in the case of items within the scope of Section 111,
sub-Paragraph 1, approved in writing by GISC, provided, however, that nothing
herein shall prohibit Broker-Dealer from advertising life insurance and
annuities in general or on a generic basis.
K. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days prior written notice; and may be terminated, for cause, by any party
immediately; and shall be terminated if GISC or Broker-Dealer shall cease to be
registered Broker-Dealers under the Securities Exchange Act of 1934 and members
of the NASD.
L. ADDRESS FOR NOTICES
The Guardian Insurance & Annuity Company
3900 Burgess Place
Bethlehem, PA 18017
The Guardian Insurance & Annuity Company, Inc.
By: /s/ Joseph A. Caruso
-------------------------------
Joseph A Caruso, Secretary
For Broker-Dealer
- -----------------------------------
Firm Name
- -----------------------------------
Address
- -----------------------------------
City, State, Zip
- -----------------------------------
Corporate Federal Tax ID#
- -----------------------------------
Print Name
<PAGE>
- -----------------------------------
Signature Title
Guardian Investor Services Corporation
By
--------------------------------
John M. Smith, President
- -----------------------------------
Date
EB-72 5/93
The Guardian Insurance & Annuity Company, Inc.
(A Stock Company Incorporated in the State of Delaware)
Home Office: 100 West 10th Street, Wilmington, Delaware 19801
Executive Office: 201 Park Avenue South, New York, New York 10003
Annuitant
Contract Number
Date of Issue
Age at Issue
The Guardian Insurance & Annuity Company, Inc. (herein called the Company) will
pay the benefits provided by this contract according to its provisions.
Checked by /s/ Leo R. Futia
President
Individual Deferred Variable Annuity Contract - Flexible Premiums.
Benefits depend, among other things, on the number and value of Accumulation
Units, the Annuity Payout Option selected, and the age and sex of the Annuitant.
Not eligible for dividends.
See Table of Contents on back cover.
PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT ARE VARIABLE, MAY INCREASE OR
DECREASE, AND ARE NOT GUARANTEED AS TO AMOUNT
<PAGE>
(THIS PAGE LEFT BLANK FOR ENDORSEMENTS)
2
<PAGE>
1. General Definitions--As used in this Contract, the term:
(a) "Accumulation Value" means the value of all the Accumulation Units
credited to this contract;
(b) "Accumulation Unit" means a unit of measurement used to determine
the value of the Owner's interest under the contract before annuity
payments begin;
(c) "Annuity Unit" means a unit used to determine the amount of each
variable annuity payment after the first;
(d) "Contract Year" means the twelve month period starting with the date
of contract issue or each succeeding twelve month period thereafter;
(e) "Fund(s)" means mutual fund(s) available under this contract for
selection by the Owner to be the underlying Separate Account
investment medium upon which the value of the contract and the
amount of variable annuity payments thereunder are determined;
(f) "Premium" means an amount paid to the Company under this contract as
a consideration for the benefits described herein;
(g) "Net Premium" means the gross amount of a Premium less any
applicable premium taxes;
(h) "Retirement Date" is the date shown on page 3 or any other date
chosen in accordance with Section 10;
(i) "Separate Account" means a segregated investment account entitled
"The Guardian Separate Account A", established by the Company
pursuant to applicable law and registered as a unit investment trust
under the Investment Company Act of 1940, as amended;
(j) "Separate Account Division" means a Division of the Separate
Account, the assets of which consist of shares of a specified Fund.
Each of the Separate Account Divisions contains two subdivisions for
measuring the funding results of contract accumulations and annuity
payments. One subdivision is for contracts issued under tax
qualified plans and the other for contracts issued under non-tax
qualified plans. Each of the subdivisions will have its own
identified values;
(k) "Valuation Date" means the date on which the accumulation unit value
and annuity unit value of the Separate Account Divisions (and
subdivisions) are determined (valuations are made daily);
(l) "Valuation Period" means the period between two Valuation Dates;
(m) "Variable Annuity" means a contract under which the Company promises
to pay to the Annuitant or other properly designated payee one or
more payments which vary in amount in accordance with the net
investment experience of the applicable subdivision(s) of the
Separate Account Division selected by the Contract Owner to measure
the value of the contract.
2. Separate Account and Funds--The net premium accepted by the Company
hereunder will be allocated to the subdivision(s) of the Separate Account
Division(s) which has been selected in writing by the Owner to measure the
value of this contract. The applicable subdivision will be determined by
the Federal tax status of the retirement plan under which the contract has
been issued. The net premium will be used by the Company to purchase Fund
shares applicable to the selected Separate Account Division at their net
asset value. The Company shall be the owner of all Fund shares purchased
with the net premium. No person having the right to receive any payments
hereunder shall be entitled to receive the Fund shares allocated to any
Separate Account Division. All Fund shares purchased by the Company and
allocated to the Separate Account Divisions will be held for the exclusive
benefit of persons entitled to receive benefits under variable annuity
contracts, the owners of which have selected such Separate Account
Division to measure the contract value. The income, if any, and gains or
losses, realized or unrealized, on the amounts invested in the Fund shares
are allocated to the specified Division for such Fund and will be credited
to or charged against the amounts so allocated to such Division without
regard to the other income, gains or losses on the assets allocated to any
other Separate Account Division. No Separate Account Division shall be
chargeable with the liabilities arising out of the business conducted by
any other Separate Account Division; nor, shall the Separate Account as a
whole be chargeable with the liabilities arising out of any other business
that the Company may conduct. All dividends and capital gains
distributions received from a Fund by the Company are reinvested in such
Fund shares at their net asset value and allocated to the appropriate
subdivision of the applicable Separate Account Division.
Voting Rights and Reports--Fund shares held in a Separate Account Division
which are attributable to either Accumulation Units or Annuity Units
maintained under this contract shall be voted at meetings of the Fund
pursuant to instructions received from the person having the voting
interest in such shares. The number of Fund shares attributable to this
Contract will be determined by the Company as of a date not more than 90
days prior to the meeting of the Fund and voting instructions will be
solicited by written communication at least ten days prior to such
meeting.
(a) For Accumulation Units maintained under this contract, the number of
Fund shares attributable thereto is determined by dividing the
Accumulation Value by the net asset value of one Fund share. The
person having the voting interest therein shall be the Owner.
(b) For Annuity Units maintained under this contract, the number of Fund
shares attributable thereto is determined by dividing the reserve
for such Annuity Units, as determined by the Company, by the net
asset value of one Fund share. The person having the voting interest
therein shall be the Owner.
All Fund proxy material will be mailed to the last known address of
each such person having a voting interest together with an appropriate
form which may be used to give voting instructions with respect to the
number of Fund shares he or she is entitled to vote.
Fund shares held in a Separate Account Division under this contract
as to which no timely voting instructions are received will be voted in
proportion to the instructions received from all persons having an
interest in such Separate Account Division pursuant to a Company issued
variable annuity contract who do furnish timely instructions to the
Company.
Substituted Securities--If shares of a Fund(s) should not be available or
if, in the judgment of the Company, further investment in such shares is
no longer appropriate in view of the purposes of the Separate Account,
there may be substituted therefor, subject to the approval of the
Securities and Exchange Commission, shares of other registered open end
investment companies, or
5
<PAGE>
amounts credited to the Separate Account after a date specified by the
Company may be applied to the purchase of shares of other registered open
end investment companies in lieu of shares of the Fund(s).
3. Payments To The Company--The Premium shown on page 3 is payable on or
prior to the date of issue and only at the Company's Executive Office.
Additional Premiums--In addition to the payment specified on page 3,
the Company will accept at any time after the date of issue, but not later
than the Retirement Date, additional premiums, provided each such premium
is not less than $100. However, if the contracts are purchased by or in
connection with an employer sponsored plan or through employee payroll
deductions, the minimum amount the Company will accept as a purchase
payment is $50. The aggregate of such additional premiums in any Contract
year after the first may not exceed ten (10) times the amount of the
aggregate payments made in the first contract year or $100,000, whichever
is less, except with the specific consent of the Company.
Net Premiums--The Company will apply Net Premiums in accordance with
the designated percentage allocation specified in the Application or
subsequent written notice filed with the Company to provide Accumulation
Units of one or more subdivisions of Separate Account Division(s). The
number of Accumulation Units for each subdivision of a Separate Account
Division will be determined by multiplying a Net Premium by the percentage
thereof to be allocated to the specified subdivision and then dividing the
amount by the dollar value of one Accumulation Unit of the specified
subdivision as of the Valuation Period during which the Premium is
received at the Company's Executive Office. The dollar value of each
Accumulation Unit may vary from one Valuation Period to the next Valuation
Period and will depend on the investment experience of the selected
subdivision of the Separate Account Division.
4. Accumulation Unit Value--The value of the Accumulation Unit for each
subdivision of a Separate Account Division was established at $10.00 as of
the date on which the first Fund shares were purchased by the Company for
that subdivision. For any particular Valuation Period thereafter, the
Accumulation Unit Value is redetermined and is equal to the Accumulation
Unit Value for the immediately preceding Valuation Period multiplied by
the Net Investment Factor for the current Valuation Period.
5. Net Investment Factor--The Company assesses a daily charge of .000027 of
the value of the assets allocated to each subdivision of the Separate
Account Divisions (.01 on an annual basis which is approximately .0065 for
mortality risk and .0035 for expense risk) for its assumption of mortality
and expense risks under the contract. (See Section 16 for an explanation
of these guarantees.) The mechanism whereby this deduction is made is
described as follows: for each subdivision of a Separate Account
Division, the Net Investment Factor is determined by dividing the sum of:
(a) the net asset value of a Fund share determined as of the end of the
current Valuation Period, and
(b) the per-share amount of any dividend and other distribution made by
the Fund during the current Valuation Period.
by the net asset value of a Fund share determined as of the end of the
immediately preceding Valuation Period, and subtracting from this result
(i) any applicable taxes, and (ii) a mortality and expense risk charge at
the effective annual rate of 1%. Such charge is made in return for the
Company's assumption of the risk that annuity payments may continue for a
longer period than anticipated and that charges for sales and
administration expenses may not be sufficient to cover the actual cost of
these items. The net asset value of a Fund share is determined by the Fund
or its agent and, as calculated, is reported to the Company. Since the Net
Investment Factor is related to the investment experience of a Fund and
this in turn is determined by changes in value of securities owned by a
Fund, it may be less than 1.00 and, therefore, the value of an
accumulation unit may decrease.
6. Change of Separate Account Division--The Owner may elect to transfer all
or any portion of the Accumulation Units credited under the contract (if
the election takes place prior to the Retirement Date), or all or any
portion of his or her Annuity Units credited under the Contract (should
the election take place after the Retirement Date), from an existing
subdivision of a Separate Account Division to one or more of the other
Separate Account Divisions subdivision(s). A transfer after the Retirement
Date can be made only as of December 31st of any year and no further
transfer(s) can be made until the next following December 31st. If the
transfer is made before the Retirement Date, the number of Accumulation
Units credited under this Contract in the newly elected subdivision(s)
will be equal to the dollar value of the amount transferred divided by the
current value of one Accumulation Unit in the newly elected
subdivision(s). If the transfer is made after the Retirement Date, the
number of new Annuity Units credited in the newly elected subdivision is
determined by first calculating the product obtained by multiplying the
number of Annuity Units for each subdivision prior to the transfer by the
value of one such Unit per subdivision, then dividing such product by the
value of one Annuity Unit in the newly elected subdivision(s).
The Company reserves the right to limit the transfer of Accumulation
Units to once per month.
7. Nonforfeiture Provision--Prior to the Retirement Date, the Owner may
withdraw all or part of the Accumulation Value of this Contract. No
partial withdrawal may be made which reduces the remaining Accumulation
Value of the Contract to under $250. If such withdrawal reduces the
Accumulation Value to under $250, the total balance of the Contract
withdrawal value will be paid to the Owner and the Contract will be
cancelled. The amount of any withdrawal payment will be reduced by any
applicable premium taxes and surrender charges. All withdrawal payments
will be made by the Company within seven days after the date that a
written request in a form satisfactory to the Company is received by the
Company at its Executive Office, except to the extent that the Company is
permitted to defer the date of payment in accordance with applicable
provisions of the Investment Company Act of 1940, as amended. The
withdrawal value will be determined as of the Valuation Date coincident
with or next following the date that the proper written request therefor
is received by the Company.
6
<PAGE>
8. Surrender Charges--Certain amounts withdrawn from the Contract will be
subject to a surrender charge. Such charge will be the lesser of (a) 5% of
the total premiums paid during the 72 months immediately preceding the
date of withdrawal, or (b) 5% of the amount being withdrawn. However, in
any contract year after the first 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 Surrender charges during the 72 months
immediately preceding the date of withdrawal will never exceed 5% of the
total premiums paid during such period.
9. Administration Expense--On each anniversary of the Date of Issue of this
Contract which is prior to the Retirement Date, the Company will deduct an
administrative charge of $35.00 from the value of the Accumulation Units
allocated to the contract. If the allocation is made to more than one
subdivision of a Separate Account Division, the deduction will be made
proportionately. The deduction is made upon surrender of the Contract
prior to the anniversary date.
10. Retirement Options
Change of Retirement Date--Upon written request by the Owner received by
the Company at least 60 days prior to the Retirement Date, the Retirement
Date may be changed to any date which is not later than the Annuitant's
85th birthday, unless a different time is agreed to by the Company in
writing.
Change of Retirement Annuity Form--During the Annuitant's lifetime,
and prior to the time annuity payments begin, the Owner may change the
form of the Retirement Annuity otherwise provided in the contract to one
of the different Retirement Annuity Payout Option(s) described in Section
12 by filing written notice of the change with the Company at least 60
days before the Retirement Date. The amount which will be applied to
provide the selected Retirement Annuity Payout Option will be the
Accumulation Value less any applicable premium taxes and prior
withdrawals. The payee under any selected Retirement Option shall be the
Owner or any other payee designated by the Owner during the Annuitant's
lifetime in writing and received by the Company. The Owner may, by written
notice received by the Company during the Annuitant's lifetime, change a
previously designated payee to another payee.
11. Payments after the Annuitant's Death--In the event of the Annuitant's
death on or before the Retirement Date, the Company, promptly after
receipt in writing at its Executive Office of due proof of such death,
will pay to the Beneficiary (or will apply under an Annuity Settlement
Option as stated in Section 12 if the Beneficiary is a natural person) a
death payment. If such death occurs prior to the Annuitant's attainment of
age 65 and before the Retirement Date, the death payment will be equal to
the Accumulation Value of the Contract (the value of all the Accumulation
Units credited to this Contract excluding the value of any Accumulation
Units previously withdrawn) or the premiums paid (reduced by any prior
withdrawals) made to the Company under this Contract, whichever is
greater. If such death occurs after the Annuitant's attainment of age 65
and before the Retirement Date, the death payment will be equal to the
Accumulation Value. In all cases the Accumulation Value is determined as
of the Valuation Period by the end of which the Company shall have
received due proof of death.
If an election of an Annuity Payout Option with respect to the death
payment is in effect at the time of the Annuitant's death, such death
payment will be applied under such Option, after deducting an amount
determined by the Company to be the appropriate charge for any applicable
taxes on annuity considerations, to the extent not previously deducted by
the Company in determining Net Premiums under this Contract.
12. Annuity Payout Options (Retirement or Settlement)--The Annuity Payout
Options are available under this Contract as Retirement Options or as
Settlement Options. In addition to the following specified options of this
Contract, the Owner (or the Beneficiary, if applicable) may also choose
from any other options available from the Company at the time benefit
payments are to begin. If an Annuity Payout Option is elected as a
Retirement Option, then the "Annuitant" referred to in such Option is the
person named as such on the Specifications Page of this Contract. If an
Annuity Payout Option is elected as a Settlement Option, then the
"Annuitant" referred to under the Annuity Payout Option is the Beneficiary
or Beneficiaries in accordance with the provisions of Section 11. If
Option 3 is chosen, the Owner, during the Annuitant's lifetime, (or the
Beneficiary, if applicable) must also select a Joint Annuitant. The
Annuity Payout Options are:
Option 1--Life Annuity with No Refund--A monthly annuity payable
throughout the lifetime of the Annuitant ceasing with the last installment
prior to the death of the Annuitant.
Option 2--Life Annuity with 120 Monthly Payments Certain--An annuity
payable 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 as elected, annuity payments will be continued during the
remainder of such period to the Beneficiary designated by the Owner. 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 commuted value of the current dollar amount of the
remaining number of certain annuity payments, if any, shall be paid in one
sum to the estate of the Beneficiary.
Option 3--Joint and Two-Thirds Survivor Annuity--A monthly annuity
payable throughout the joint lifetime of the Annuitant and the Joint
Annuitant with two-thirds of the number of Annuity Units in effect during
such joint lifetime continuing for life to the survivor upon the death of
either Annuitant.
The amount of the first installment for Options 1 through 3 above
will be determined in accordance with Section 15 and the subsequent
installments shall be determined in accordance with Section 16.
General Provisions--The minimum amount of proceeds which may be applied
under any Annuity Payout Option for any payee shall be $2,000; proceeds of
a smaller amount due any Annuitant will be paid in one sum. If at any time
the
7
<PAGE>
installment payments to any Annuitant under an Annuity Payout Option are
or become less than $20 each, the Company shall have the right to change
the frequency of payment to such intervals as will result in payments of
at least $20.
Annuity Payout Options are based on the sex and age nearest birthday
of the Annuitant(s) as of the date such benefits are to start.
Satisfactory proof of the age and sex of such Annuitant(s) is required.
Except with the consent of the Company, these Annuity Payout Options
shall not be available with respect to any part of the proceeds payable to
an assignee or to other than a natural person entitled to receive proceeds
in his or her own right.
Neither the Owner nor any other person receiving payments under this
contract, whether under an Annuity Payout Option or otherwise, shall have
the right to assign, encumber or alienate any of the payments under an
Annuity Payout Option. The Annuitant may make no change in the manner of
payout except as provided in the election.
To the extent permitted by law, neither the proceeds nor the
payments under any Annuity Payout Option shall be subject to encumbrance
and, to the extent permitted by law, shall not be subject to claims of
creditors or legal process.
At the time of the Annuitant's death after payments have commenced
under an Annuity Payout Option, and if no Beneficiary has been previously
designated, the then present value of the current dollar amount of any
unpaid installments certain then due under Option 2 shall be paid in one
sum to the executors or administrators of the estate of the Annuitant
unless other provisions shall have been specified in the Annuity Payout
election and approved by the Company. Present values will be based on a
net investment rate of 4% per annum.
13. Change of Beneficiary or Frequency of Payment of Proceeds--While this
Contract is in force the Owner, subject to the terms of any existing
assignment, may change the previously designated Beneficiary or
Beneficiaries or may change the frequency of the annuity payments being
made under the Contract to any different annuity payment frequency upon
which the Owner and the Company may agree, by filing; at the Executive
Office of the Company a written request therefor which is satisfactory to
the Company. Such change, either in Beneficiary(ies) or in the frequency
of annuity payments, shall take effect when so filed. If any designated
Beneficiary predeceases the Annuitant, the interest of that Beneficiary
shall pass to the designated surviving Beneficiary or, if more than one
Beneficiary survives the Annuitant, such interest shall pass to such
surviving Beneficiaries in proportion to their respective interests,
unless otherwise previously specified by the Owner. If no designated
Beneficiary survives the Annuitant and no other designation is provided,
the proceeds of this Contract shall be payable in one sum to the Owner, if
he or she survives the Annuitant; otherwise, to the executors or
administrators of the Owner's estate.
14. Annuity Unit Values--The value of an annuity unit is determined
independently for each subdivision of a Separate Account Division. With
respect to a particular subdivision, the value of an annuity unit was
established at $1.00 as of the date Fund shares were first purchased for
the Separate Account Division. For any valuation period thereafter the
value of an annuity unit is recalculated and is equal to the value for the
immediately preceding valuation period multiplied by the annuity change
factor for the current valuation period. The annuity unit value for a
valuation period is the value determined as of the end of such period. The
annuity change factor is equal to the net investment factor for the same
valuation period adjusted to neutralize the assumed investment return used
in determining the amounts of annuity payable. The assumed investment
return is 4% per year. The dollar amount of any monthly payment due after
the first monthly payment under a variable 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 days prior to the
valuation period in which the monthly payment is due.
The valuation of all assets in the Separate Account shall be
determined in accordance with the provisions of applicable laws, rules and
regulations. The method of determination by the Company of the value of an
Annuity Unit and of an Accumulation Unit will be conclusive upon the
Owner, any assignee, the Annuitant and any Beneficiary.
15. Determination of the First Annuity Payment--At the time annuity payments
begin, the value of the Owners account is determined by multiplying the
accumulation unit value on the valuation date 10 days before the date the
first annuity payment is due by the number of accumulation units credited
to the Owner's account as of the date the first annuity payment is due,
less applicable premium taxes not previously deducted.
The Tables below indicate 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 Annuity Payout Option, the sex and
the nearest age of the Annuitant on the date the first annuity payment is
due. Amounts shown in the Tables are based on the Sex Distinct 1971
Individual Annuity Mortality Table, set back 5 years for males and 7 years
for females, with interest at the rate of 4% per annum. The first annuity
payment is determined by multiplying the applicable benefit per $1,000 of
value shown in the Tables by the number of thousands of dollars of value
accumulated under the Contract. The amount of the first monthly payment
for ages or combination of ages not shown and for other options will be
quoted upon request.
16. Determination of the Amount of Annuity Payments After the First--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 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 Change of Separate
Account Division is made. The Company guarantees that the dollar amount of
each installment after the first shall not be adversely affected by the
actual expenses which it incurs for administration of the contract or by
variations in mortality experience from the mortality assumptions on which
the first installment is based.
8
<PAGE>
DOLLAR AMOUNT OF THE FIRST MONTHLY ANNUITY PAYMENT WHICH IS PURCHASED
WITH EACH $1,000 OF PROCEEDS APPLIED
<TABLE>
<CAPTION>
Options 1 & 2--Life Income Option 3--Joint and 2/3rds Survivor Life Income
Male and Female Annuitants
- --------------------------------------------------------------------------------------------
Nearest Nearest Nearest Age of Female Annuitant
Age of Option Option Age of at Date of First Payment
Annuitant 1 2 Male
At Date Of No Period 10 Years Annuitant -----------------------------------
First Payment Certain Certain At Date Age Age Age
--------------------------- Of First 10 Years 5 Years Same 5 Years
MALE FEMALE MALE FEMALE Payment Less Less Age Older
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 $4.17 $3.90 $4.15 $3.89 40 $3.81 $3.86 $3.93 $4.01
45 4.40 4.06 4.38 4.05 45 3.94 4.01 4.10 4.20
50 4.70 4.26 4.66 4.25 50 4.10 4.20 4.31 4.45
51 4.77 4.31 4.72 4.29 51 4.14 4.24 4.36 4.50
52 4.85 4.36 4.79 4.34 52 4.18 4.29 4.42 4.56
53 4.92 4.41 4.86 4.39 53 4.22 4.34 4.47 4.63
54 5.00 4.46 4.93 4.44 54 4.27 4.39 4.53 4.70
55 5.09 4.52 5.01 4.50 55 4.31 4.44 4.59 4.77
56 5.17 4.59 5.08 4.56 56 4.36 4.49 4.65 4.84
57 5.27 4.65 5.17 4.62 57 4.41 4.55 4.72 4.92
58 5.36 4.72 5.25 4.69 58 4.46 4.61 4.79 5.00
59 5.47 4.80 5.34 4.76 59 4.52 4.68 4.87 5.09
60 5.57 4.87 5.43 4.83 60 4.57 4.74 4.95 5.18
61 5.68 4.96 5.53 4.91 61 4.63 4.82 5.03 5.28
62 5.80 5.05 5.63 4.99 62 4.70 4.89 5.12 5.38
63 5.93 5.14 5.73 5.07 63 4.77 4.97 5.21 5.49
64 6.06 5.24 5.84 5.16 64 4.84 5.06 5.31 5.61
65 6.20 5.34 5.96 5.25 65 4.91 5.14 5.42 5.73
66 6.35 5.45 6.08 5.35 66 4.99 5.24 5.53 5.87
67 6.51 5.56 6.21 5.45 67 5.08 5.34 5.65 6.01
68 6.69 5.69 6.34 5.56 68 5.16 5.45 5.77 6.16
69 6.87 5.82 6.48 5.68 69 5.26 5.56 5.91 6.33
70 7.07 5.96 6.62 5.80 70 5.36 5.68 6.05 6.51
71 7.28 6.11 6.77 5.93 71 5.47 5.81 6.21 6.70
72 7.51 6.27 6.93 6.07 72 5.58 5.94 6.38 6.91
73 7.75 6.45 7.09 6.22 73 5.70 6.09 6.56 7.13
74 8.01 6.64 7.26 6.37 74 5.83 6.24 6.75 7.38
75 8.30 6.85 7.43 6.54 75 5.96 6.41 6.96 7.64
76 8.60 7.08 7.60 6.71 76 6.11 6.58 7.19 7.92
77 8.93 7.33 7.78 6.89 77 6.26 6.78 7.44 8.23
78 9.28 7.60 7.96 7.08 78 6.42 6.98 7.70 8.57
79 9.67 7.90 8.14 7.28 79 6.60 7.21 7.99 8.93
80 10.08 8.22 8.32 7.48 80 6.78 7.45 8.31 9.32
81 10.53 8.57 8.50 7.68 81 6.98 7.72 8.65 9.75
82 11.02 8.95 8.67 7.89 82 7.20 8.00 9.02 10.22
83 11.54 9.37 8.84 8.10 83 7.43 8.31 9.42 10.72
84 12.12 9.82 9.01 8.30 84 7.68 8.65 9.86 11.27
85 12.74 10.32 9.16 8.50 85 7.96 9.01 10.34 11.87
</TABLE>
9
<PAGE>
17. The Contract--This Contract and the Application therefor constitutes the
entire Contract. All statements made by the Owner or Annuitant or on his
or her behalf shall be deemed representations and not warranties, and no
such statement shall be used in defense of a claim under this Contract
unless it is contained in the Application and a copy of the Application is
attached to this document when issued.
18. Control--The Owner may, during the lifetime of the Annuitant and without
the consent of any Contingent Owner or Beneficiary, assign or surrender
this Contract, amend or modify it with the written consent of the Company,
and exercise, receive and enjoy every other right benefit and privilege
contained in this Contract.
19. Modification of Contract--Only the President, a Vice President or a
Secretary of the Company has power on behalf of the Company to change,
modify or waive any provisions of this Contract. Any such action must be
in writing. The Company shall not be bound by any promise or
representation heretofore or hereafter made by or to any agent or person
other than as specified above. The Company may at any time make any change
in this Contract to the extent that such change is required in order to
make this Contract conform with any law or any regulation issued by any
governmental agency to which the Company is subject.
20. Incontestability--This Contract will be incontestable from the Date of
Issue.
21. Misstatement of Age or Sex--If the age or sex of the Annuitant has been
misstated, any amount payable shall be that which the premiums paid would
have purchased at the correct age and sex. Overpayments by the Company
because of such misstatement, with interest at 6% a year, compounded
annually, will be charged against benefits falling due after the
adjustment. Underpayment by the Company because of such misstatement with
interest at 6% a year, compounded annually, will be paid by the Company
immediately.
22. Assignment--No assignment of this Contract shall be binding on the Company
unless it is in writing and until it is filed with the Company at its
Executive Office. The Company will assume no responsibility for the
validity or sufficiency of any assignment. Unless otherwise provided in
the assignment, the interest of any revocable Beneficiary shall be
subordinate to the interest of any assignee, whether the assignment was
made before or after the designation of Beneficiary, and the assignee
shall receive any sum payable to the extent of his interest.
23. Settlement--Any payment by the Company under this Contract is payable at
its Executive Office. The Company reserves the right to require surrender
of the Contract prior to payment of death proceeds or amounts withdrawn.
24. Proof of Age and Survival--The Company has the right to require
satisfactory proof of age of the payee or payees and that a payee is
living when a payment is contingent upon the payee's survival.
25. Nonparticipating--This Contract is not eligible for dividends and will not
share in the surplus earnings of the Company.
26. Ownership of the Assets--The Company shall have exclusive and absolute
ownership and control of its assets, including all assets allocated to the
Separate Account.
27. Nontransferability of Ownership--Provided this Contract is issued in
conjunction with a retirement plan qualified under the Internal Revenue
Code, and notwithstanding any other provisions of this Contract, the Owner
may not change the ownership of this Contract nor may this 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 the Company, unless the Owner is the trustee of an employee trust
qualified under the Internal Revenue Code, the custodian of a custodial
account treated as such or the employer under a qualified nontrusteed
pension plan.
28. Communications--All reports, notices and elections which are to be
furnished to the Company pursuant to the terms of this Contract shall be
given in writing and shall be filed with the Company at its Executive
Office. The Company shall not be affected by any report, election or
notice or be deemed to have received any premium payment until such
report, election, notice or premium payment is received at the Executive
Office and shall not be prejudiced by any payments made by it on the basis
of a prior report or notice prior to the date which is seven days after
receipt of the subsequent report or notice.
29. Reports to Owner--The Company will send to the Owner at least annually
statements which will include, as of a date not more than two months prior
to the date of the statement, the Accumulation Value of this contract. No
statements will be sent after the commencement of annuity payments.
Appropriate statements will also be sent at least semi-annually
containing such information as may be required by applicable laws, rules,
and regulations.
10
<PAGE>
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11
<PAGE>
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12
<PAGE>
(THIS PAGE LEFT BLANK INTENTIONALLY)
13
<PAGE>
NOTICE
Please read your Contract, including the copy of the application which is
attached, promptly upon its receipt
Do not fail to notify the Company when there is any change in your address. When
writing to the Company, give the Contract Number and state clearly Name,
Residence, City, and State.
The Guardian Insurance & Annuity Company Inc.
Home Office: 100 West 10th Street, Wilmington, Delaware 19801
Executive Office: 201 Park Avenue South, New York, New York 10003
TABLE OF CONTENTS
Page
Contract Specifications 3
1. General Definitions 5
2. Separate Account and Funds 5
Voting Rights and Reports 5
Substituted Securities 5
3. Payments to the Company 6
Additional Premiums 6
Net Premiums 6
4. Accumulation Unit Value 6
5. Net Investment Factor 6
6. Change of Separate Account Division 6
7. Nonforfeiture Provision 6
8. Surrender Charges 7
9. Administration Expense 7
10. Retirement Options 7
11. Payments After the Annuitant's Death 7
12. Annuity Payout Options (Retirement or Settlement) 7
General Provisions 7
13. Change of Beneficiary or Frequency of Payment of Proceeds 8
14. Annuity Unit Values 8
15. Determination of the First Annuity Payment 8
16. Determination of die Amount of Annuity Payments After the First 8
17. The Contract 10
18. Control 10
19. Modification of Contract 10
20. Incontestability 10
21. Misstatement of Age or Sex 10
22. Assignment 10
23. Settlement 10
24. Proof of Age and Survival 10
25. Nonparticipating 10
26. Ownership of the Assets 10
27. Nontransferability of Ownership 10
28. Communications 10
29. Reports to Owner 10
Individual Deferred Variable Annuity Contract--Flexible Premiums
Benefits depend, among other things, on the number and value of
Accumulation Units, the Annuity Payout Option selected, and the age
and sex of the Annuitant.
Not eligible for dividends.
PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT ARE VARIABLE, MAY
INCREASE OR DECREASE, AND ARE NOT GUARANTEED AS TO AMOUNT.
14
Application for a Variable Annuity Contract (PLEASE PRINT)
- --------------------------------------------------------------------------------
[LOGO] Value Guard II The Guardian Insurance & Annuity Company, Inc.
(The Company)
201 Park Avenue South, New York, N.Y. 10003
- --------------------------------------------------------------------------------
AGENT: Please make check payable to GIAC or Value Guard II and forward with
application to your general agent/dealer as listed below.
================================================================================
1. Proposed Annuitant
Full M | |
name: | | | | | | | | ____________________ F | | Soc.Sec.No. | |-| |-| |
Mr. Mrs. Ms. Miss
Birth date_______________Place_______Age (last birthday)__Telephone( )_________
Month Day Year Area Code
Address___________________________City_____________State__________Zip___________
(Correspondence will be sent to this address unless Item 6 is completed or other
directions are given).
================================================================================
2. Retirement Date
First day of (month and year) ____________
For non-tax qualified contracts, this date cannot be later than the 85th
birthday of the proposed annuitant.
For most qualified contracts, this date cannot be later than April 1 of the year
following the annuitant's attaining age 70 1/2.
================================================================================
3. Optional Income Plan at Maturity
Standard Annuity:
Life Annuity with 120 monthly payments guaranteed.
Other:____________________
================================================================================
4. Contract Type (select one)
| | Single Payment: $_________________ (Minimum $3,000)
| | Flexible Payments:
Initial Payment $____________________ (Minimum $500)
Subsequent Payments of $____________ (Minimum $100)
are intended to be made | | Monthly | | Quarterly
| | Semi-annually | | Annually | | Bank Draft
(If payments will be remitted by an employer in connection with payroll
deductions or similar collection arrangements, the minimum payment (initial and
subsequent) is $50.)
================================================================================
5. Payment Allocation (maximum of four, must total 100%)
__% Value Line Centurion Fund Code (25, 26)
__% Value Line Strategic Asset Mgt. Trust (27, 28)
__% The Guardian Cash Fund (17, 18)
__% The Guardian Stock Fund (21, 22)
__% The Guardian Bond Fund (23, 24)
__% Fixed-Rate Option (55, 56)
(Not available for Flexible Payment Contracts)
================================================================================
6. Proposed Contract Owner (if other than Proposed Annuitant)
Full name _________________________________
Social Security No. or IRS Acct. No. | |-| |-| |
Address______________________
City__________________State__________Zip________
================================================================================
7. Beneficiary
Primary____________________________________________
Relationship to Annuitant____________________
Contingent_________________________________________
Relationship to Annuitant____________________
If no designated Beneficiary is living at the Annuitants death, death benefits
are to be paid to | | Annuitant's estate | | Owner.
(Joint Beneficiaries will receive equally or survivor, unless otherwise
specified.)
================================================================================
8. Tax Status (check appropriate box below)
| | a) The Payor is an organization described in the Federal Internal Revenue
Code, Section 5O1(c)(3), as exempt from tax under Section 501(a), or is a
public educational system.
(Note: If this box is checked the Payor represents that the Proposed
Annuitant is an employee of the Payor and that the annuity consideration
(stipulated payment) is within the exclusion allowance of the Code,
Section 403(b).)
| | b) The contract is being applied for under the Self-Employed Individuals
Tax Retirement Act (H.R.10).
| | c) The contract is being applied for under a qualified Pension or
Profit-Sharing Plan.
| | d) This contract is being applied for as an Individual Retirement Annuity.
(Check here if SEP IRA | |)
| | e) This is not a tax-qualified annuity.
================================================================================
9. Will the Annuity Contract applied for replace any other insurance or annuity?
| |Yes | |No (If "Yes," explain)
================================================================================
10. Please check box to receive the Statement of Additional Information | |
================================================================================
11. Corrections and amendments (For Executive Office Use Only)
================================================================================
IT IS REPRESENTED THAT all statements and answers made in this application
are full, complete and true to the best knowledge and belief of the Applicant(s)
and IT IS AGREED THAT all such statements and answers are adopted by and are
binding on the Applicant(s) and shall form the basis for any annuity contract
issued by the Company. IT IS AGREED THAT the annuity contract applied for shall
not take effect until the later of the date of issue of the contract and receipt
by the Company of the payment required thereon.
IT IS UNDERSTOOD AND AGREED THAT no person, except the President, a Vice
President or Secretary of the Company, has authority to determine whether any
contract shall be issued on the basis of the application, to waive or modify any
of the provisions of the application or any of the Company's requirements, to
bind the Company by any statement or promise pertaining to any contract issued
or to be issued on the basis of the application, or to accept any information or
representation not contained in the written application.
IT IS FURTHER UNDERSTOOD AND AGREED THAT annuity payments, cash values and
surrender values under any contract issued pursuant to this Application are
based upon assets allocated to THE GUARDIAN SEPARATE ACCOUNT A and are variable
in nature; thus, they are not guaranteed as to their dollar amount. Receipt of a
current variable annuity and applicable mutual funds prospectus is hereby
acknowledged.
Under penalties of perjury, I certify that (a) the number shown on this
form in Item 1 or 6 above is my correct taxpayer identification number and (b)
that I am not subject to backup withholding either because I have not been
notified that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or the Internal Revenue Service has notified
me that I am no longer subject to backup withholding.
Dated at____________this___day of_______19__ __________________________________
(City/State) Signature of Proposed Annuitant
____________________________________________ __________________________________
Signature of Agent Signature of Proposed Owner (if
other than Proposed Annuitant) or
Payor
Payments and values provided by this contract are variable, may increase or
decrease, and are not guaranteed as to amount.
================================================================================
AGENT: Do you have reason to believe that the contract applied for involves
replacement of any existing insurance or annuity contract?
| | Yes | | No (If "Yes," furnish full detail)
================================================================================
G.A./DEALER: Mail Variable Annuity application and check to:
The Guardian Insurance & Annuity Company, Variable Annuity Administration, 3900
Burgess Place, Bethlehem, PA 18017
================================================================================
FOR GENERAL AGENT/DEALER ONLY
G.A./Dealer Name__________________________________
Dealer Branch Office______________________________
City/State__________________Telephone( )_________
Area Code
Dealer Authorized Signature_______________________
Agent's Name Agent's
(as above)___________________________ Number______
(Last) Please Print (First)
Form No.IVA 1003 (6/88)
<PAGE>
NOTE: FOR GUARDIAN AGENCY USE ONLY.
Section B
- --------------------------------------------------------------------------------
Underwriting Information
(to be furnished by Soliciting Agent)
1. Information Relating to the Proposed Owner (not necessary if owner is a
corporation/institution)
a. Dependants_______________________
Spouse | | Yes | | No
Number of children under age 21 ____________
Other ___________________________________________
b. Occupation ______________________________________
c. U.S. Citizen | | Yes | | No
d. Annual Income (approx.) $__________
e. Personal Insurance in force (if with The Guardian, indicate)
Life--Individual $______________
Group $______________
Health--Disability Income (monthly) $______________
Hospital $______________
Major Medical $______________
Annuities--Variable $______________
Fixed $______________
f. Other Assets
Home $______________
Securities $______________
Other $______________
2. Other Pertinent Information
3. Were the terms and conditions of this contract thoroughly explained to the
applicant? | | Yes | | No
The Soliciting Agent represents that, to the best of his knowledge, the purchase
of this annuity contract does | | (attach explanation) does not | | involve
replacement of any existing insurance or annuity contract.
____________________________
Soliciting Agent's Signature
================================================================================
Use this space to imprint Agency (or Broker-Dealer) and Agent codes in lieu of
filling in information in box at right.
Agency and Agent
================================================================================
Commissions and production credit for this application are as follows:
(Please PRINT names in full.)
Agent__________________Code No.______
Agent__________________Code No.______
Agency (Broker-Dealer)_________ Code No._______
This application was actually solicited and written within my territory by a
duly authorized and licensed agent or broker of my Agency. (If otherwise, please
explain fully.)
___________________
Manager's Signature
================================================================================
(FOR EXECUTIVE USE ONLY)
Signature and Approval of Approver____________________________
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
****
The Guardian Insurance & Annuity Company, Inc. a corporation organized and
existing under and by virtue of the General Corporation Law or the State or
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting or the Board or Directors or The Guardian
Insurance & Annuity Company, Inc. (the "Corporation") resolutions were duly
adopted setting forth a proposed amendment of the certificate of Incorporation
of the Corporation, declaring said amendment to be advisable and calling a
meeting of the stockholders of the Corporation for consideration thereof. The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that the certificate of Incorporation of the Corporation be
amended by changing the Article thereof numbered "III" and Section thereof
numbered "3.2" so that, as amended, said Article and Section shall be and
read as follows:
"Management and other Contracts. The Corporation may enter into a
management, supervisory or investment advisory contract and other contracts
with, and may otherwise do business with, any firm or organization
notwithstanding that the directors or officers of the Corporation may be
employees, directors or officers of such firms or organizations, and in the
absence of fraud the Corporation and such firms or organizations may deal
freely with each other, and such contracts or any other contract or
transaction between the Corporation and such firms or organizations shall
not be invalidated or in any wise affected thereby, nor shall any director
or officer of the Corporation be liable to the Corporation or to any
stockholder or creditor thereof or to any other person for any loss
incurred by it or him under or by reason of any such contracts or
transactions; provided that nothing herein shall protect any director or
officer of the Corporation against any liability to the Corporation or to
its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office; and provided always that
such contracts or transactions shall have been fair as to the Corporation
as of
<PAGE>
the time it was authorized, approved or ratified by the Board of Directors,
a committee thereof, or the stockholders. No director of the Corporation
shall be liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section
174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit."
SECOND: that thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, The Guardian Insurance & Annuity Company, Inc. has
caused its corporate seal to be hereunto affixed and this certificate to be
signed by Arthur V. Ferrara, its President, and Herbert N. Grolnick,
its Secretary, this 29th day of August, 1986.
By /s/ Arthur V. Ferrara
-----------------------------------
Arthur V. Ferrara, President
Attest:
By /s/ Herbert N. Grolnick
-----------------------------------
(CORPORATE SEAL) Herbert N. Grolnick, Secretary
BY-LAWS
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
---ooOoo---
ARTICLE I
OFFICES
Section 1. The registered office shall be in Wilmington, Delaware.
Section 2. The corporation may have offices also at such other places
within and without the State of Delaware as the board of directors may from time
to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of the stockholders for the election of directors shall
be held in New York, New York at such place as may be fixed from time to time by
the board of directors. Meetings of stockholders for any other purpose may be
held at such time and place,
<PAGE>
2.
within or without the State of Delaware, as shall be stated in the notice of the
meeting.*
Section 3. In order that the corporation may determine the stockholders
entitled to notice of or to, vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than fifty nor less than ten days before the date of
such meeting, nor more than fifty days prior to any other action. A
determination of stockholders shall apply to any adjournment
- ----------
* Section 2 amended on 11-30-89 to read as follows: "Unless otherwise
provided by the board of directors, the annual meeting of stockholders
shall be held not less than thirty (30) and not more than one hundred
twenty (120) days after the end of the corporation's last preceding fiscal
year, and at such meeting the stockholders shall elect, by a plurality
vote, a board of directors, and shall transact such other business as may
properly be brought before the meeting.
<PAGE>
3.
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
Section 4. Written notice of the annual meeting, and any special meeting
stating the place, date and hour thereof, shall be given to each stockholder
entitled to vote thereat not less than ten nor more than fifty days before the
date of the meeting.
Section 5. The officer who has charge of the stock ledger of the
corporation shall prepare, and produce a complete list of the stockholders
entitled to vote at said meeting in accordance with Section 219(a) Title 8 of
the Delaware Code.
Section 6. Special meetings of the stockholders may be called by the
president and shall be called by the president or secretary by resolution of the
board of directors or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such resolution or request shall state the
purpose or purposes of the proposed meeting.
<PAGE>
4.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, so long as the adjournment is not for more than thirty days and a new
record date is not fixed for the adjourned meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the
<PAGE>
5.
stock having voting power present in person or represented by proxy shall decide
any question brought before such meeting, unless the question is one upon which
by express provision of the statutes or of the certificate of incorporation a
different vote is required in which case such express provision shall govern and
control the decision of such question.
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer
period.
No proxy or power of attorney to vote shall be used to vote at a meeting of the
stockholders unless it shall have been filed with the secretary of the meeting
when required by the inspectors of election. All questions regarding the
qualification of voters, the validity of proxies and the acceptance or rejection
of votes shall be decided by two inspectors of election who shall be appointed
by the board of directors, or if not so appointed, then by the presiding officer
of the meeting.
<PAGE>
6.
Section 11. Whenever stockholders are required or permitted to take any
action by vote, such action may be taken without a meeting on written consent,
setting forth the action so taken, signed by the holders of all outstanding
stock entitled to vote thereon, all in accordance with Section 228, Title 8 of
the Delaware Code.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be five.* By amendment of this by-law the number may be increased or
decreased from time to time by the board of directors within the limits
permitted by law, but no decrease in the number of directors shall change the
term of any director in office at the time thereof. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this article, and each director shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Directors
need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number
- ----------
* Amended by board of directors on 11/20/86 to delete the number "five" and
insert in its place "at least seven."
<PAGE>
7.
of directors may be filled by a majority of the directors then in office, though
less than a quorum, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected, unless sooner
displaced.
Section 3. The business of the corporation shall be managed by its board of
directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors shall
be held immediately following the adjournment of the meeting of stockholders and
at the place thereof. No notice of such meeting shall be necessary to the
directors in order legally to constitute the meeting, provided a quorum be
present. In the event such meeting is not so held, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors.
<PAGE>
8.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board of directors.
Section 7. Special meetings of the board of directors may be called by the
president and shall be called by the secretary on the written request of two
directors. Notice of special meetings of the board of directors shall be given
to each director at least three days before the meeting if by mail or at least
24 hours before the meeting if given in person or by telephone or by telegraph.
The notice need not specify the business to be transacted.
Section 8. At meetings of the board of directors, one-third of the
directors at the time in office but in no event less than two* directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors. If a quorum shall not be present at any meeting of
the board of directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
- ----------
* Amended by board of directors on 11/20/86 to delete the phrase "one-third
of the directors at the time in office but in no event less than two" and
insert in its place the word "five."
<PAGE>
9.
Section 9. The board of directors may, by resolution adopted by a majority
of the whole board, designate one or more committees, each committee to consist
of two or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors. The board may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
or in any written consent of the committee. The member or members of any such
committee present at any meeting and not disqualified from voting may, whether
or not he or they constitute a quorum, unanimously appoint another member of the
board of directors to act at the meeting in the place of any absent or
disqualified member.
Section 10. The committees shall keep regular minutes of their proceedings
and report the same to the board of directors.
<PAGE>
10.
Section 11. Any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the board or committee.
Section 12. The directors may be paid their expenses of attendance at each
meeting of the board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders mailed to them at their
addresses appearing on the books of the corporation shall be deemed to be
given at the time when deposited in the United States mail.
<PAGE>
11.
Section 2. Whenever any notice is required to be given a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent of notice.
Attendance of a person at a meeting of stockholders or of directors shall
constitute a waiver of notice of such meeting except when the stockholder or
director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors at its first meeting after each annual meeting of stockholders and
shall be a president, who shall be a director, and a vice president, a
secretary, a treasurer and such other officers and agents as the board desires
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the board or as
set forth in these by-laws. Any number of offices may be held by the same
person.
<PAGE>
12.
Section 2. The salaries of all officers of the corporation shall be fixed
by the board of directors.
Section 3. Any officer may be removed at any time by the board of directors
with or without cause. Any vacancy occurring in any office of the corporation by
death, resignation, removal or otherwise shall be filled by the board of
directors if the office is not discontinued.
*Section 4. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and shall have
general and active management of the business of the corporation and shall see
that all orders and resolutions of the board of directors are carried into
effect. He shall execute on behalf of the corporation and may affix or cause the
seal to be affixed to all instruments requiring such execution except to the
extent the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation or as
provided herein.
Section 5. The vice presidents shall act under the direction of the
president and in the absence or disability of the president, in the order of
seniority spe-
- ----------
* Amended by board of directors 6/3/82 to read: "Unless the board of
directors shall elect a chairman as chief executive officer, the president
shall be the chief executive officer of the corporation...."
<PAGE>
13.
cified by the board, they shall perform the duties and exercise the powers of
the president. They shall perform such other duties and have such other powers
as the president or the board of directors may from time to time prescribe.
Section 6. The secretary shall act under the direction of the president.
Subject to the direction of the president he shall attend all meetings of the
board of directors and all meetings of the stockholders and record the
proceedings. He shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the president or the board of
directors. He shall keep in safe custody the seal of the corporation and cause
it to be affixed to any instrument requiring it.
Section 7. The treasurer shall act under the direction of the president.
Subject to the direction of the president he shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging
<PAGE>
14.
to the corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the corporation in such depositories as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the president or the board of directors, taking
proper vouchers for such disbursements, and shall render to the president and
the board of directors, at its regular meetings, or when the board of directors
so requires, an account of all his transactions as treasurer and of the
financial condition of the corporation. He may affix or cause to be affixed the
seal of the corporation to any instrument requiring it.
Section 8. On behalf of the corporation any officer may execute and affix
the corporate seal to documents necessary in the management of the affairs of
the corporation. Where two signatures are required, any two officers may execute
such documents.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a
<PAGE>
15.
vice president and the treasurer or the secretary of the corporation, certifying
the number of shares owned by him in the corporation.
Section 2. The board of directors may direct a new certificate of stock to
be issued in place of any certificate theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the board of directors may, in its discretion as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 3. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it
<PAGE>
16.
shall be the duty of the corporation, if it is satisfied that all provisions of
the certificate of the incorporation and these by-laws regarding transfer of
shares and restrictions on such transfers have been complied with, to issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 4. The corporation shall be entitled to recognize the person
registered on its books as the owner of shares to be the exclusive owner for all
purposes including voting and dividends, and the corporation shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
MISCELLANEOUS
Section 1. Dividends upon the shares of the capital stock of the
corporation may be declared and paid by the board of directors from the funds
legally available. Dividends may be paid in cash, in property,
<PAGE>
17.
or in shares of the capital stock of the corporation.
Section 2. Before the payment of any dividends there may be set aside, out
of any funds of the corporation available for dividends, such sum or sums as the
board of directors from time to time in its absolute discretion may think
proper, as a reserve or reserves to meet contingencies or for any other purpose
the directors shall think conducive to the interest of the corporation. The
board of directors may modify or abolish any such reserve.
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
Section 4. The fiscal year of the corporation shall be the calendar year
unless changed by the board of directors.
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a
<PAGE>
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE VIII
INDEMNIFICATION
Every person who was or is a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
and pursuant to any procedure specified in the General Corporation Law of the
State of Delaware from time to time against all expenses, liability and loss
(including attorneys' fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by him in connection therewith. Such
right of indemnification
<PAGE>
19.
shall not be exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any by-law, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
The board of directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The board of directors may from time to time adopt further by-laws with
respect to indemnification and may amend these and such by-laws to provide at
all times the fullest indemnification permitted by the General Corporation Law
of the State of Delaware.
<PAGE>
20.
ARTICLE IX
AMENDMENTS
Section 1. The by-laws may be amended by a majority vote of all the stock
issued and outstanding and entitled to vote at any annual or special meeting of
the stockholders, provided notice of intention to amend shall have been
contained in the notice of the meeting.
Section 2. The board of directors by a majority vote of the whole board at
any meeting may amend these by-laws, including by-laws adopted by the
stockholders, but the stockholders may from time to time specify particular
provisions of the by-laws which shall not be amended by the board of
directors.
AUTOMATIC INDEMNITY REINSURANCE AGREEMENT
Between
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INC.
of Delaware
hereinafter referred to as the "COMPANY" and
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
of New York
hereinafter referred to as the "REINSURER"
giacagre.93a page #1
<PAGE>
A. GENERAL PROVISIONS
1. The COMPANY agrees to cede, and the REINSURER agrees to assume, the
business defined in EXHIBIT A.
2. This AGREEMENT is effective JANUARY 1, 1993, and shall remain in force as
long as any of the annuity contracts specified above remain in force,
unless recaptured by the Company. Either party may cancel for new business
upon 30 days advanced written notice.
3. On each contract ceded to the REINSURER, the liability of the REINSURER
shall commence simultaneously with that of the COMPANY, and the COMPANY
shall have the right to maintain the reinsurance in force as long as the
COMPANY remains liable under any contract reinsured.
4. The reinsurance hereunder shall be on the modified coinsurance (or calendar
year renewable term) basis. The terms "Reserves" and "Mod Co Reserves" are
defined in Exhibit F. The mod co reserves shall be maintained by the
Company.
5. The reinsurance shall be subject to the same terms and conditions as the
contracts issued by the COMPANY.
6. If the COMPANY'S liability under any of the contracts reinsured under this
Agreement is changed because of a misstatement of age or sex, the REINSURER
will share in the change proportionately to the amount reinsured hereunder.
7. If a contract that had been reduced, terminated, or lapsed is reinstated by
the COMPANY, the appropriate amount of reinsurance for such contract
hereunder will be reinstated automatically. The COMPANY will pay the
REINSURER the proportionate share of all amounts received by the COMPANY in
connection with such reinstatement.
8. The COMPANY must provide written notification to the REINSURER of any
change in the terms or conditions of any contract reinsured hereunder or in
the calculation of the Reserves within fifteen (15) days after the change
is initiated. If the REINSURER accepts any such change, the COMPANY and the
REINSURER shall share proportionately in any increase or decrease in the
COMPANY's liability which results from such change. If the change is
voluntary on the part of the COMPANY and if the REINSURER does not accept
such change, or does not respond to the COMPANY, the REINSURER's liability
under this Agreement shall be determined as if no such change occurred. If
the change is not voluntary on the part of the COMPANY, the REINSURER shall
participate in such change.
9. It is expressly understood by the parties that the policies reinsured
hereunder are nonparticipating. The expense allowances include provision
for premium taxes, which
giacagre.93a page #2
<PAGE>
shall not be separately reimbursed by the REINSURER.
10. Reinsurance transactions shall be accounted for in accordance with the
procedure set forth in Exhibit G.
11. Recapture shall be available under the terms set forth in Exhibit E.
12. Should the COMPANY fail to cede reinsurance that should have been ceded in
accordance with the provisions of this Agreement, or fail to comply with
any of the other terms of this Agreement, and if this is shown to be
unintentional and the result of a misunderstanding, oversight or clerical
error on the part of either the COMPANY or the REINSURER, then this
Agreement shall not be deemed abrogated thereby, but both companies shall
be restored to the position they would have occupied had no such oversight,
misunderstanding, or clerical error occurred.
13. At any reasonable time, each party or its designated representative may
inspect, during normal business hours, at the offices where such records
are located, the papers and any and all other books or documents of the
other relating to reinsurance under this Agreement. The information
obtained shall be used only for reinsurance purposes and shall be kept
confidential except to the extent disclosure is required by law. The
REINSURER'S rights under this paragraph shall survive termination of this
Agreement.
14. This Agreement shall constitute the entire agreement between the parties
with respect to the business reinsured hereunder. There are no
understandings between the parties other than as expressed in this
Agreement and any change or modification of this Agreement shall be null
and void unless made by amendment to the Agreement and signed by both
parties.
15. This is an Agreement solely between the COMPANY and the REINSURER. The
acceptance of reinsurance hereunder shall not create any right or legal
relation whatever between the REINSURER and the insured or the beneficiary
under any policies of the COMPANY which may be reinsured hereunder.
16. The REINSURER does not indemnify and shall not be liable for any of the
COMPANY'S extracontractual damages, including but not limited to actual
punitive, exemplary or compensatory damages; excluded damages include but
are not limited to damages or liability of any kind whatsoever resulting
from, but not limited to: negligent, reckless or intentional wrongs, fraud,
oppression, bad faith, or strict liability, arising from claims related to
breach of contract or any form of tortious conduct. If the COMPANY is
ordered by a court to make refunds to policyholders on any contract, the
contract shall be considered a recaptured contract, and subject to the
provisions of Exhibit E.
17. Should the payment due either the REINSURER or the COMPANY be delayed
beyond
giacagre.93a page #3
<PAGE>
30 days delayed payment shall accrue interest as specified in the
computation of the Experience Account Asset.
B. PREMIUMS and BENEFITS
1. Insuring Clause. The obligation of either party to the other is to pay the
"Net Amount Due," which is the algebraic excess of the "Reinsurance
Premium" over the "Reinsurance Benefits" as defined herein. The COMPANY
shall pay the REINSURER the "Net Amount Due" if such is positive, and the
REINSURER shall pay the ceding company the "Net Amount Due" if such is
negative.
2. The "Reinsurance Premium" is the net of (a)-(b)-(c)-(d)-(e):
(a) Policy Premiums are the reinsured portions of the premiums paid by the
policyholders, unreduced for any premium taxes.
(b) Allowances are as defined in Exhibit C.
(c) The Mod Co Reserve Adjustment for each accounting period equals V1 - VO - I
where
VO = Reserve at the beginning of the Accounting Period,
V1 = Reserve at the end of the Accounting Period,
I = Interest added to the reserve for all variable annuity contracts, plus
all mortality and expense charges, during the Accounting Period. For any
fixed annuities I shall be computed as the fixed annuity reserve at the
beginning of the period times the rate as specified in EXHIBIT B.
For the first accounting period, VO shall be zero. The "Reserves" shall
equal the full account value, unreduced for any surrender charges.
(d) Surrender Payments shall equal the reinsured portions of the surrender
value paid to policyholders.
(e) Experience Refunds are defined in Exhibit D.
3. The "Reinsurance Benefits" shall equal the reinsured portion of the annuity
income benefits (including commuted value benefits), and death benefits on
the reinsured portions of the contracts, corresponding to the benefits paid
by the Company.
In the event that annuitization is made at rates more favorable to the
annuitant than those guaranteed in the contract reinsured, such
annuitization may be considered by the
giacagre.93a page #4
<PAGE>
REINSURER to be a surrender, in which case the REINSURER shall pay the full
withdrawal value without reduction for any surrender charge.
4. The "Accounting Period" shall be the calendar quarter, with the first
accounting period running from the effective date to the end of the
calendar quarter, and the last accounting period running from the beginning
of a calendar quarter to the termination date.
5. It is expressly understood that the "Reinsurance Premium" is an indivisible
amount and not to be divided into component parts.
C. INSOLVENCY
1. In the event of the insolvency of the COMPANY, all reinsurance made, ceded,
renewed or otherwise becoming effective under this Agreement shall be
payable by the REINSURER directly to the COMPANY or to its liquidator,
receiver, or statutory successor on the basis of the liability of the
COMPANY under the contract or contracts reinsured without diminution
because of the insolvency of the COMPANY. It is understood, however, that
in the event of the insolvency of the COMPANY the liquidator or receiver or
statutory successor of the insolvent COMPANY shall give written notice of
the pendency of a claim against the insolvent COMPANY on the policy
reinsured within a reasonable time after such claim is filed in the
insolvency proceeding and that during the pendency of such claim the
REINSURER may investigate such claim and interpose, at its own expense, in
the proceeding where such claim is to be adjudicated any defense or
defenses which it may deem available to the COMPANY or its liquidator or
receiver or statutory successor.
It is further understood that the expense thus incurred by the REINSURER
shall be chargeable, subject to court approval, against the insolvent
COMPANY as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the COMPANY solely
as a result of the defense undertaken by the REINSURER. Where two or more
assuming insurers are involved in the same claim and a majority in interest
elect to interpose defense to such claim, the expense shall be apportioned
in accordance with the terms of the Reinsurance Agreement as though such
expense had been incurred by the COMPANY.
2. "Insolvent" means the insurer is subject to a rehabilitation or liquidation
proceeding in any state in which it is licensed.
3. If the COMPANY shall become insolvent and this contract is assigned by a
rehabilitator or liquidator of the insolvent company, and if the assignee
shall become insolvent, then this agreement may, at the REINSURER'S option
be considered ipso facto terminated without any further payment due the
COMPANY.
giacagre.93a page #5
<PAGE>
D. ARBITRATION and CHOICE of LAW
1. In the event of any dispute relating to or arising under this Agreement,
the dispute shall be referred to three arbitrators who must be current or
former officers of insurance or reinsurance companies (either life/health
or property and casualty) other than the two parties to this Agreement or
their affiliates. Each of the contracting companies to appoint one of the
arbitrators and such two arbitrators to select the third. Should the two
arbitrators not be able to agree on the choice of the third, then the
appointment shall be left to the American Arbitration Association.
The arbitrators so chosen shall consider this Reinsurance Agreement not
merely as a legal document but also as a gentlemen's agreement. The
arbitrators shall consider the customary and standard practices of the
reinsurance business. They shall not be bound by any rules of law. They
shall decide by a majority of votes and from their written decision there
shall be no appeal. The cost of arbitration, including the fees of the
arbitrators, shall be borne equally by the REINSURER and the COMPANY. This
article shall survive the termination of this Agreement.
2. In all arbitrations and legal disputes (whether decided by arbitration or
otherwise) the choice of law shall be New York.
3. The arbitration or legal proceeding shall be held in New York.
E. OFFSET, RECOUPMENT, EXECUTORY CONTRACT
1. All amounts due either party shall be netted, dollar for dollar, regardless
of the solvency of either party.
2. If one party gives notice to the other that it does not intend to pay the
Net Amount Due as defined in this agreement, or if after 45 days written
notice refuses to pay the Net Amount Due, then the other party is entitled
to breach damages and may cancel for non payment, and if it chooses, not to
pay any further amounts.
3. Nothing in this agreement shall be construed to eliminate the defense of
equitable recoupment.
4. It is expressly understood that as long as payments are due both parties
that this contract is an Executory Contract. Upon the insolvency of either
party, the rehabilitator or liquidator of the insolvent party may affirm or
disavow the contract within 90 days of the date the insolvency petition is
filed with the appropriate court (hereinafter the "petition date"), unless
the court having jurisdiction expressly extends such time limit. If
affirmed it is expressly understood, by the parties, that the payments
under this contract shall be entitled to the administrative expense
priority, and if disavowed it is expressly understood
giacagre.93a page #6
<PAGE>
that the other party shall be entitled to breach damages and be freed from
future performance. It is expressly understood that payments within a gap
period, between the "petition date" and the date the contract is expressly
affirmed or disavowed shall be entitled to an administrative expense
priority.
F. TAX ELECTIONS
The Company and the Reinsurer agree to make the election to ignore the
General Deductions Limitation in Computing the net consideration between
the parties.
The Company agrees to reimburse the Reinsurer for the Internal Revenue
Code, Section 848 Capitalized Policy Acquisition Expenses if the Section
848 premium is positive (i.e. paid to the Reinsurer) and the Reinsurer
agrees to reimburse the Company if the Section 848 premium is negative. The
reimbursement will equal 10% of the capitalized amount. The 10% is based on
34% corporate rate, 1.75% capitalization rate, 10 year amortization with a
half-year convention and will be adjusted if such factors change.
The Company and the Reinsurer hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulation issued December 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended. This
election shall be effective for 1992 and for all subsequent taxable years
for which this Agreement remains in effect.
The term "party" will refer to either the Company or the Reinsurer as
appropriate.
The terms used in this Article are defined by reference to Regulation
1.848-2 in effect December 1992.
The party with the net positive consideration for this Agreement for each
taxable year will capitalize specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions
limitation of Section 848(c)(1).
Both parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency or as
otherwise required by the Internal Revenue Service.
The Reinsurer will submit a schedule to the Company by June 1, of each year
of its calculation of the net consideration for the preceding calendar
year. This schedule of calculations will be accompanied by a statement
stating that the Reinsurer will report such net consideration in its tax
return for the preceding calendar year.
The Company may contest such calculation by providing an alternative
calculation to the Reinsurer by July 15th of the year following the end of
the taxable year. If the Company does not notify the Reinsurer by July
15th, the net considerations reported in the
giacagre.93a page #7
<PAGE>
respective tax returns will be the value as submitted to by the Reinsurer
in the previous paragraph.
If the Company contests the Reinsurer's calculation of the net
consideration, the parties will act in good faith to reach an agreement on
the correct amount within thirty (30) days of the date the Company submits
its alternative calculation. If the Company and the Reinsurer reach
agreement on an amount of the net consideration, each party shall report
such amount in their respective tax returns for the previous calendar year.
giacagre.93a page #8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
by their duly authorized representatives.
In New York, New York, this 30 day of Sept, 1993.
ATTEST THE GUARDIAN INSURANCE AND ANNUITY
COMPANY, INC.
/s/ Frank L. Pepe /s/ Charles G. Fisher
- --------------------------- -------------------------------
Frank L. Pepe Charles G. Fisher
- --------------------------- -------------------------------
Print name Print name and title
And in New York, New York, this 30 day of Sept, 1993.
ATTEST: THE GUARDIAN LIFE INSURANCE COMPANY
OF AMERICA
/s/ Annette Pacheco /s/ Peter Hutchings
- --------------------------- -------------------------------
Annette Pacheco Peter Hutchings
- --------------------------- -------------------------------
Print name Print name and title
giacagre.93a page #9
<PAGE>
EXHIBIT A - BUSINESS REINSURED
The business reinsured hereunder shall be a FIFTY PERCENT quota share of the
risk on the variable annuity contracts issued by the COMPANY comprising Guardian
Investor variable annuity contracts issued after January 1, 1993. The reinsured
business will include the reserves on the "fixed" option.
EXHIBIT B - MOD CO INTEREST and INTEREST RATES.
1. The Interest added to the variable contract reserves is the aggregate
interest, derived from all of the Net Investment Factors applicable to such
class of contracts during such settlement period.
2. The mortality and expense charge shall be equal to the mortality and
expense charges issued by the company. For 1993 issues the charge will be
estimated as 28.75 basis points per quarter times the "accumulation value"
at the beginning of the quarter.
3. On fixed account annuities the mod co interest shall equal the "Exhibit 2
plus 4 rate" times the sum of the mod co reserve at the beginning of the
quarter plus one half the algebraic excess of the reinsurance premium over
reinsurance benefits during the quarter.
4. The "Exhibit 2 + 4 rate" equals I/{.5 * (A + B - I)}
Where
I = Net investment income plus realized capital gains less losses
B = Current year invested assets
A = Prior year invested assets
Note: 1992 Annual statement references.
I is computed as follows:
Gross Investment Income (Exhibit 2, line 10, column 7)
Less Investment Expenses (Exhibit 2, line 15, column 7)
Less Gain on Seed Investment Redeemed (Exhibit 4, line 9.201)
Less Dividends on Common Stocks of Affiliates (Exhibit 2, line 2.21,
column 7)
Less Interest on Policy loans on life insurance policies (Exhibit 2,
line 5, column 7, in part)
Plus Net realized capital gains (Page 4, line 4a, column 1 plus Page
4, line 32, column 1)
giacagre.93a page #10
<PAGE>
B =
Cash and invested assets (Page 2, line 10a, column 1)
Plus investment income due and accrued (Page 2, line 16, column 1)
Less policy loans (Page 2, line 5, column 1)
Less policy loans due and accrued on life products (Exhibit 2, line 5,
columns 3 & 4, in part)
Plus amount due from broker (Page 2, line 2103, column 1)
Less borrowed money (Page 3, line 22, column 1)
Less amounts due brokers (Page 3, line 2501, column 1)
A is computed like B, but for the previous year.
The rate for the current calendar year will be based on the most recently filed
annual statement, and will be trued up (without interest) when the current year
statement is filed.
EXHIBIT C - ALLOWANCES and EXPERIENCE ACCOUNT
1. The REINSURER shall pay the COMPANY the following allowances:
Single premiums 5.25%
Initial flexible premiums 5.25%
Additional flexible premiums 5.25%
In addition, the Reinsurer shall pay the COMPANY a renewal allowance of
$5.00 per quarter per policy, and aggregating all policies issued to the
same insured in the same year.
2. The experience account asset (EA) at the inception of this treaty, before
any amounts have been paid by either party shall be zero. Thereafter the EA
at the end of any period shall be equal to the quantity (EA'), defined
below, less any experience refund. The quantity (EM) equals:
(a)+(b)-(c)-(d)+(e), where
(a) EA at the beginning of the period
(b) Cash Flow during the period, where the Cash flow is the algebraic
excess of Reinsurance Premiums over Reinsurance Benefits
(c) DAC charge (positive if 848 premiums are paid to the REINSURER)
(d) Interest on the EA, at the Exhibit 2 plus 4 rate, (except that
negative interest rates will be ignored for purposes of computing
the EA).
(Assuming the Reinsurance Premium less Reinsurance Benefits is negative,
the EA will be negative, and the interest on the EA will be negative.)
The DAC charge shall be equal to 10% of the capitalized amount as defined
in Section
giacagre.93a page #11
<PAGE>
848 of the Internal Revenue Code. The 10% shall be based on 10-year
amortization with the half year convention, with 1.75% capitalization rate,
and with a 35% corporate income tax rate, and shall be changed is such
factors change.
The interest on the EA shall be the "Exhibit 2 plus 4 rate" as defined in
Exhibit B
EXHIBIT D - EXPERIENCE REFUNDS
1. The experience refund is calculated on an yearly basis, but estimates may
be paid at the REINSURER'S discretion on a quarterly basis. The experience
is one-half of the quantity (EA'), defined in Exhibit C, if (EA') is
positive as of the end of each settlement period. The experience refund
equals zero if (EA') is negative.
2. On recapture a "terminal experience refund" will be paid, equal to 100% of
the EA (before allowance for experience refund) if such is positive.
EXHIBIT E - RECAPTURE
1. Two (2) years after the effective date The COMPANY may recapture the
reinsurance ceded hereunder as of the end of any settlement period upon
thirty days notice provided the "terminal experience refund" calculation
produces a non-negative value of ER defined in Exhibit C subject to the
conditions specified in this Exhibit D.
2. In the final modified coinsurance reserve adjustment, the ending reserve
"V1" is zero.
3. The REINSURER shall pay the COMPANY the full withdrawal values without
surrender charges on the contracts being recaptured. The amount thereof
shall be included with contract benefits in the final experience refund
calculation.
EXHIBIT F - DEFINITIONS
1. The term "Mod Co Reserve" shall mean the policy accumulation value,
unreduced by any surrender charge.
2. The term "Reserve" shall mean the statutory reserves computed using the
methodology the COMPANY used on its 12/31/92 annual statement for similar
policies. It is expressly understood by the parties that "Reserves" are
policy accumulation values, unreduced by any surrender charges.
giacagre.93a page #12
<PAGE>
Exhibit G - REINSURANCE REPORTS
The COMPANY shall supply the REINSURER with quarterly reports as described
below:
A. Quarterly Report
1. "Reinsurance Premium"
a. Policy Premium
b. Expense Allowance
c. Mod Co Reserve Adjustment
(A) Reserves at beg. of period
(B) Reserves at end of period
(C) Interest added to reserves
(D) Mod Co interest = (C) + .002875(A)
NET = (B)-(A)-(D)
d. Surrender Payments
e. Experience Refunds
2. "Reinsurance Benefits"
a. Death Benefits
b. Annuitization Benefits
3. "Net Amount Due" (Due Reinsurer if positive) = (1)-(2)
4. Experience Account
a. Experience Account beginning of period
b. Interest on experience account as defined in
c. Cash Flow (Reinsurance Premium less Reinsurance Benefits)
d. Risk Charges
e. DAC charges
e. Experience Account end of period
5. Due and Unpaid Amounts
a. Policy Premiums
b. Surrender Payments
c. Annuity Benefits
giacagre.93a page #13
<PAGE>
6. General Information - Inforce
a. Policies Inforce beginning of period
b. Termination by death
c. Termination by lapse
d. Policies Inforce end of period
7. General Information - Reserve
a. Reserve beginning of period
b. Reserve end of period
c. Reserve released on termination
d. Net investment addition to beginning reserve
B. Annual Report
1. Analysis of Increase in Reserve for the policies ceded (Page 7 of the
1992 Annual Statement).
2. Exhibit of Numbers for the policies ceded (Page 25 of the 1992 Annual
Statement)
C. Annual Tax Data.
1. Section 848 Premiums, including a split of the section 848 premiums
into "pension" and "non pension" portions.
2. Tax reserves on any coinsured business.
giacagre.93a page #14
<PAGE>
EXHIBIT H - Reinsurance Questionnaire For Federal Income Tax
Determinations
The purpose of this questionnaire is to secure sufficient information to allow
Guardian Life Insurance Company of America to account properly under the federal
income tax rules for the reinsurance agreement we have with you.
Answer the following questions:
(1). Are you either
(a) A company that is subject to U.S. taxation directly under the
provisions of subchapter L of chapter 1 of the Internal Revenue Code
(i.e., is an insurance company liable for filing Form 1120L or
Form-PC), or
(b) A company that is subject indirectly to U.S. taxation under the
provisions of subpart F of subchapter N of chapter 1 of the Internal
Revenue Code (i.e., is a "controlled foreign corporation" within the
meaning of Internal Revenue Code ss.957)?
Answer: ___ Yes ___ No
(2) If your answer to 1 is no, have you entered into a closing agreement with
the Internal Revenue Service to be subject to U.S. taxation with respect to
reinsurance income pursuant to Treasury Regulation ss.1.848-2(h)(ii)(B)?
Answer: ___ Yes ___ No
(If your answer is yes, please provide a copy of the closing agreement.)
Company Name: The Guardian Insurance and Annuity Company, Incorporated
Signed by: ________________________ Title:________________________
Print Name: ____________________________
Date: ______________________
giacagre.93a page #15
<PAGE>
19___ NET CONSIDERATIONS
COMPANY NAME _________________________________________________________
19___ CONSIDERATIONS UNDER CONTRACTS DATED PRIOR TO 11-15-91:
$_______________________________
19___ CONSIDERATIONS UNDER CONTRACTS DATED 11-15-91 AND AFTER:
$_______________________________
AGREE _____________
DISAGREE _____________
If you disagree with the above figures, please attach supporting data with your
calculations.
VERIFIED BY:____________________________________________________________________
DATED:__________________________________________________________________________
Please return this form by July 15th to:
Ms. Cheryl Crawford Jackson, Director
Federal Income Tax Department
The Guardian Life Insurance Company of America
201 Park Avenue South
New York, New York 10003
giacagre.93a page #16
<PAGE>
AMENDMENT I
to the Automatic Indemnity Reinsurance Agreement between
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
of
Delaware,
hereinafter referred to as the "COMPANY"
and
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
of New York
hereinafter referred to as the "REINSURER
1. This amendment is effective January 1, 1994.
2. The COMPANY agrees to cede, and the REINSURER agrees to assume, a twenty
percent quota share of the risk on Guardian Investor variable annuity
contracts issued on or after January 1, 1994 by the COMPANY.
It is expressly understood and agreed that the provisions of this amendment
shall be subject to all the terms and conditions of the reinsurance agreement of
which this amendment is a part which do not conflict with the terms hereof.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this amendment to be executed
in duplicate on the dates shown below.
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
By /s/ Charles G. Fisher By /s/ Frank L. Pepe
----------------------------- ------------------------------
Date December 30, 1994 Date December 30, 1994
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By /s/ Peter Hutchings By /s/ [ILLEGIBLE]
----------------------------- ------------------------------
Date Dec 30, 1994 Date Dec. 30, 1994
<PAGE>
AMENDMENT II
to the Automatic Indemnity Reinsurance Agreement between
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
of
Delaware,
hereinafter referred to as the "COMPANY"
and
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
of New York
hereinafter referred to as the "REINSURER"
1. This amendment is effective January 1, 1995.
2. The agreement is closed for new business as of January 1, 1995.
It is expressly understood and agreed that the provisions of this amendment
shall be subject to all the terms and conditions of the reinsurance agreement of
which this amendment is a part which do not conflict with the terms hereof.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this amendment to be executed
in duplicate on the dates shown below.
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
By /s/ Charles G. Fisher By /s/ Frank L. Pepe
----------------------------- ------------------------------
Date February 8, 1995 Date February 8, 1995
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By /s/ Peter Hutchings By /s/ [ILLEGIBLE]
----------------------------- ------------------------------
Date 2-8-95 Date 2-10-95
<PAGE>
AMENDMENT NO. III
To The Automatic Indemnity Reinsurance Agreement
Between
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
of
Delaware
(hereinafter referred to as the "Company")
and
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
New York, New York
(hereinafter referred to as the "Reinsurer")
1. This Amendment is effective March 30, 1995
2. As of the effective date of this Amendment, the Company shall recapture the
Guardian Investor 1994 issues.
3. There shall be a terminal accounting for recaptured business. Such
calculation shall be conclusive for all purposes without exception and
neither party shall owe any further obligations to the other party (with
respect to the recaptured business only) subsequent to the Termination
Date.
<PAGE>
IN WITNESS WHEREOF, the Company and the Reinsurer have caused their names to be
subscribed and duly attested hereunder by their respective Authorized Officers.
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED (the Company)
By: /s/ Charles G. Fisher
-------------------------------
Title: V.P. & Actuary
Date: March 30, 1995
ATTEST:
By: /s/ Frank L. Pepe
-------------------------------
Title: V.P. & Controller
Date: March 30, 1995
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA (the Reinsurer)
By: /s/ Peter Hutchings
-------------------------------
Title: EVP & CFO
Date: 3-30-95
ATTEST:
By: /s/ [ILLEGIBLE]
-------------------------------
Title: AVP
Date: 3-30-95
AMENDED AND RESTATED
AGREEMENT FOR SERVICES AND REIMBURSEMENT THEREFOR
This Agreement, dated the 18th of November, 1994, amends and restates the
Agreement for Services and Reimbursement Therefor, dated June 22, 1970, between
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a New York Corporation having
its principal place of business at 201 Park Avenue South, New York, New York
10003 (hereinafter called "GUARDIAN") and THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC., a Delaware Corporation having its principal place of business at
201 Park Avenue South, New York, New York 10003 (hereinafter called the
"SUBSIDIARY").
WHEREAS, THE SUBSIDIARY is an insurance company wholly owned by GUARDIAN,
and
WHEREAS, THE SUBSIDIARY was organized for the purpose among others of
distributing variable insurance and annuity products which are subject to the
regulation of the Securities and Exchange Commission and whose benefits are
dependent upon the performance of a portfolio of common stocks and other
investments, and
WHEREAS, the net profit or net loss of THE SUBSIDIARY will ultimately
belong to GUARDIAN as the sole owner of the stock;
NOW, THEREFORE, in consideration of the mutual advantages which will accrue
to each of the parties, it is hereby convenanted and agreed as follows;
1. THE SUBSIDIARY will develop and qualify its various products for sale to
the public through those members of the Guardian Field Force and others as may
became eligible to do so.
2. THE SUBSIDIARY will account for and administer its own activities as an
Insurance Company in accordance with the laws of the several states and the
federal laws and regulations of the Securities and Exchange Commission where
applicable.
3. THE SUBSIDIARY undertakes to follow standards set by GUARDIAN in its
operations.
4. As consideration for this Agreement and in connection with carrying out
the provisions hereof, GUARDIAN agrees to provide office space, furniture,
equipment, heat and light and clerical staff. It is further agreed that GUARDIAN
will pay salaries and provide pension benefits and other employee services
including health care
<PAGE>
benefits on the same basis for THE SUDSIDIARY'S officers and staff as for
regular full-time GUARDIAN employees. In the case of those individuals not fully
occupied in work for THE SUBSIDIARY, the proportion of salaries and other costs
attributable to the individual which should be charged to THE SUBSIDIARY will be
determined by time analysis methods. The total of such costs incurred and paid
by GUARDIAN on behalf of THE SUBSIDIARY will be repaid by THE SUBSIDIARY to
GUARDIAN at quarterly intervals upon demand accompanied by a detailed statement
substantiating the amount claimed. Such costs will be allocated by GUARDIAN to
THE SUBSIDIARY using GUARDIAN's cost accounting system. Costs will be allocated
to THE SUBSIDIARY based upon services provided by various Departments of
GUARDIAN as determined by either the Department's supervising officer or manager
or through an allocation developed by GUARDIAN's Cost Accounting Department
utilizing asset information, head count or overhead information.
THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
/s/ Frank L. Pepe By /s/ John M. Smith
- ---------------------------- --------------------------------------
Witness
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
/s/ Frank L. Pepe By /s/ Peter L. Hutchings
- ---------------------------- --------------------------------------
Witness
[THE GUARDIAN LETTERHEAD]
April 29, 1992 Richard T. Potter Jr.
Counsel
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003
Sir or Madam:
In my capacity as Counsel of The Guardian Insurance & Annuity Company, Inc.
("GIAC"), I am familiar with the legal affairs of GIAC and of The Guardian
Separate Account A (the "Account"), which is a separate account established by
the Board of Directors of GIAC on October 31, 1981, pursuant to the provisions
of Section 2932 of the Delaware Insurance Code. I have participated in the
preparation and review of the Registration Statement and Post-Effective
Amendment No. 21 to the Registration Statement (the "Registration Statement") on
Form N-4 filed by GIAC, on behalf of the Account, with the Securities and
Exchange Commission under the Securities Act of 1933 and the Investment Company
Act of 1940 for the registration of individual and group variable annuity
contracts issued by GIAC (the "Contracts").
I have made such examination of law and examined such documents as in my
judgment are necessary and appropriate to enable me to express the following
opinion. I am of the opinion that:
(1) GIAC has been duly organized and is a validly existing corporation
under the laws of the State of Delaware.
(2) The Account has been duly created and is validly existing as a
separate account of GIAC under the laws of the State of Delaware.
(3) The portion of the assets that is held in the Account equal to the
reserves and other liabilities for variable benefits under the
Contracts is not chargeable with liabilities arising out of any
other business GIAC may conduct.
(4) The Contracts when offered, sold and issued in accordance with the
Prospectus contained in the aforesaid Registration Statement and,
upon compliance with applicable local law, will be legally issued
and will represent binding obligations of GIAC in accordance with
their terms.
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
April 29, 1992
Page 2
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Richard T. Potter, Jr.
Richard T. Potter, Jr.
Counsel
RTP/md
EX-99.10(a)
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. 28 to the registration statement on Form N-4 (the "Registration
Statement") of our report dated February 13, 1998, relating to the financial
statements appearing in the December 31, 1997 Annual Report to Contractowners of
The Guardian Separate Account A, which are also incorporated by reference into
the Registration Statement. We also consent to use in the Statement of
Additional Information of our report dated February 10, 1998, relating to the
statutory basis 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. However, it should be noted that Price Waterhouse LLP
has not prepared or certified such "Condensed Financial Information."
/s/PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
April 28, 1998
Exhibit 99.13
Powers of Attorney
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Joseph D. Sargent, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Joseph D. Sargent
----------------------------
Joseph D. Sargent
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Arthur V. Ferrara, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Arthur V. Ferrara
----------------------------
Arthur V. Ferrara
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Frank J. Jones, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Frank J. Jones
----------------------------
Frank J. Jones
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Edward K. Kane, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Edward K. Kane
----------------------------
Edward K. Kane
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John M. Smith, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ John M. Smith
----------------------------
John M. Smith
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Philip H. Dutter, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Philip H. Dutter
----------------------------
Philip H. Dutter
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Leo R. Futia, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Leo R. Futia
----------------------------
Leo R. Futia
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Peter L. Hutchings, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Peter L. Hutchings
----------------------------
Peter L. Hutchings
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that William C. Warren, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ William C. Warren
----------------------------
William C. Warren
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000356385
<NAME> Separate Account A - Value Guard II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 866,232,289
<INVESTMENTS-AT-VALUE> 1,145,002,952
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,145,002,952
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,766,769
<TOTAL-LIABILITIES> 11,766,769
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
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<ACCUMULATED-NII-CURRENT> 9,089,068
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 205,553,856
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 278,770,663
<NET-ASSETS> 1,133,236,183
<DIVIDEND-INCOME> 20,532,033
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 11,442,965
<NET-INVESTMENT-INCOME> 9,089,068
<REALIZED-GAINS-CURRENT> 205,553,856
<APPREC-INCREASE-CURRENT> 4,338,935
<NET-CHANGE-FROM-OPS> 218,981,859
<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> 11,442,965
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,442,965
<AVERAGE-NET-ASSETS> 1,076,189,874
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 209,892,791
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .010
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
