As filed with the Securities and Exchange Commission on February 26, 1999
Registration Nos. 2-81150
811-3634
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
POST-EFFECTIVE AMENDMENT No. 18 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
AMENDMENT No. 19 |X|
(Check appropriate box or boxes)
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THE GUARDIAN BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
201 Park Avenue South, New York, New York 10003
(Address of Principal Executive Offices)
Registrant's Telephone Number: (212) 598-8359
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Copy to:
Richard T. Potter, Jr., Esq. Cathy G. O'Kelly, Esq.
c/o The Guardian Insurance & Vedder, Price, Kaufman & Kammholz
Annuity Company, Inc 222 North LaSalle Street
201 Park Avenue South Chicago, Illinois 60601
New York, New York 10003
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective (check appropriate
box):
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|_| on May 1, 1999 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|X| on May 1, 1999 pursuant to paragraph (a)(1) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(2) of Rule 485
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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<PAGE>
GUARDIAN BOND FUND, INC.
CROSS REFERENCE SHEET
(as required by Rule 495)
Form N-1A Item No.
Part A
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<S> <C> <C>
Item 1. Front and Back Cover Pages ..................................... Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments, Risks, and Performance ....... Investment Objective; The Fund's principal
investment strategies; The principal risks of
investing in the Fund; How the Fund has performed
Item 3. Risk/Return Summary: Fee Table ................................. Fund Management
Item 4. Investment Objectives, Principal Investment Strategies, and Investment Objective; The Fund's principal investment
Related Risks ................................................ strategies; The principal risks of investing in the
Fund; Risks and special investment techniques
Item 5. Management's Discussion of Fund Performance ................ ... How the fund has performed
Item 6. Management, Organization, and Capital Structure ................ Fund Management
Item 7. Shareholder Information ........................................ Buying and Selling Fund shares
Item 8. Distribution Arrangements ...................................... Buying and Seeling Fund shares
Item 9. Financial Highlights Information ............................... Financial Highlights
Part B
Item 10. Cover Page and Table of Contents ............................... Cover Page and Table Of Contents
Item 11. Fund History ................................................... Not Applicable
Item 12. Description of the Fund and Its Investments and Risks .......... Investment Restrictions; Special Investment Techniques
Item 13. Management of the Fund ......................................... Fund Management
Item 14. Control Persons and Principal Holders of Securities ............ Guardian Life and Other Affiliates
</TABLE>
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<TABLE>
<S> <C> <C>
Item 15. Investment Advisory and Other Services ......................... Investment Adviser; Custodian and Transfer Agent;
Independent Auditors
Item 16. Brokerage Allocation and Other Practices ....................... Brokerage Allocation
Item 17. Capital Stock and Other Securities ............................. Capital Stock
Item 18. Purchase, Redemption and Pricing of Shares ..................... Not Applicable
Item 19. Taxation of the Fund ........................................... Not Applicable
Item 20. Underwriters ................................................... Not Applicable
Item 21. Calculations of Performance Data ............................... Performance Data
Item 22. 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>
(Front cover page)
The Guardian Bond Fund
Prospectus
May 1, 1999
Investment objective
The Guardian Bond Fund's primary investment objective is to secure maximum
current income without undue risk to principal. Capital appreciation is a
secondary objective.
Offering of shares
Shares of the Fund are offered to the public only through ownership of variable
annuity contracts and variable life insurance policies issued by The Guardian
Insurance & Annuity Company, Inc.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor has the Commission
or any state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or depositary institution, are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency,
and involve investment risk, including possible loss of the principal amount
invested.
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The Guardian Bond Fund
The Fund's principal investment strategies
At least 80% of the value of the Fund's total assets is usually invested in
different kinds of investment grade debt obligations, such as corporate bonds,
mortgage-backed and asset-backed securities, and obligations of the U.S.
government and its agencies.
Debt obligations are written promises by the issuer to pay interest for a
specified period and to repay the debt on a specified date. Interest can be
payable at a fixed, variable, or floating rate or, as in the case of zero coupon
bonds, the obligation can be purchased at a discount from its face value in
place of interest.
Most of the debt obligations in the Fund are rated investment grade. This means
they are secured or unsecured obligations rated in one of the four highest
categories by a nationally recognized statistical ratings organization such as
Moody's Investors Service, Inc. or Standard & Poor's Ratings Group. If the
securities are unrated they must be deemed to be of comparable quality by
Guardian Investor Services Corporation (GISC), the Fund's investment adviser.
Some of the Fund's assets may have lower ratings, usually because they were
downgraded after the Fund acquired them. Debt securities rated below investment
grade are commonly known as junk bonds, and are described in the section called
Risks and special investment techniques. Normally, less than 10% of the Fund's
assets will be invested in lower-rated securities.
The Fund may invest in mortgage-backed securities. These securities represent
interests in pools of commercial or residential mortgages. The Fund may also
invest in collateralized mortgage obligations, or CMOs, which are backed by
pooled mortgage loans that may be issued or guaranteed by a bank, the U.S.
government or a U.S. government agency. Mortgage-backed securities may be issued
by U.S. government
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agencies or by private entities. Some mortgage-backed securities may be backed
by the U.S. government.
The Bond Fund may also invest in asset-backed securities. These are similar in
structure to mortgage-backed securities but represent interests in pools of
loans, leases or other receivables in place of mortgages. The principal
differences between asset-backed and mortgage-backed securities are that
asset-backed securities generally do not have the benefit of a first priority
security interest in the underlying collateral, and all asset-backed securities
are issued by non-government entities.
The Bond Fund may invest in so-called Yankee Securities. These are described in
Risks and special investment techniques. Additionally, from time to time, the
Bond Fund may invest up to 10% of the value of its total net assets in other
foreign securities denominated in U.S. dollars.
The Fund also invests in Treasury bills, notes and bonds, which are backed by
the U.S. government. Available cash may be invested in repurchase agreements,
which are described in Risks and special investment techniques; commercial paper
issued in reliance on an exemption from registration under federal securities
laws and other money market instruments.
The Bond Fund may engage in dollar roll and reverse repurchase agreement
transactions when the adviser believes it would be advantageous, as well as
financial futures contracts and options. For more information, see the section
called Risks and special investment techniques.
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To earn additional income, the Fund may lend its portfolio securities to
securities dealers, banks and other institutional investors. See Risks and
special investment techniques for more information on securities lending.
GISC reserves the right to evaluate new financial instruments as they are
developed and become actively traded. Subject to any applicable investment
restrictions, the Fund may invest in any such investment products that GISC
believes will further the Fund's investment objective.
The principal risks of investing in the Fund
An investment in the Fund exposes you to the general risks of investing in debt
markets. These include interest rate risk (the risk that a debt obligation's
price will be adversely affected by changes in interest rates), credit risk (the
risk that the issuer of the debt obligation will fail to repay principal and
interest), and prepayment risk (the risk that debt obligations will be prepaid
when interest rates are lower). Because the Fund may invest up to 10% of its
total net assets in U.S. dollar denominated securities that are issued and
settled overseas, you face additional risks. See the section called Risks and
special investment techniques for a discussion of the debt market and foreign
market risks of investing in this Fund.
Bonds in the Fund's portfolio which are downgraded present extra risks because
the issuer is less likely to repay the interest and principal than issuers of
higher-quality bonds. Lower quality debt securities can be more sensitive to
adverse economic conditions, including the issuer's financial condition or
stresses in its industry. While the Fund does not expect to have a significant
portion of its assets in lower-quality debt, you
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should review the risks of lower-quality debt investments in the section called
Risks and special investment techniques.
The Fund may invest in zero coupon securities. Since these securities do not pay
interest, they fluctuate more in value than other interest-bearing securities.
For more information, see Risks and special investment techniques.
The Fund may experience a relatively high portfolio turnover, resulting in
greater transaction costs, as well as increased short-term capital gains or
losses. This is primarily attributable to GISC's continuing asset allocation
efforts among various sectors of the bond markets.
How the Fund has performed
The bar chart below provides some indication of the risks of investing in the
Fund by showing how its performance has varied from year to year for the last 10
years. The performance figures shown assume that all dividends and distributions
are reinvested in the Fund. Past results do not necessarily indicate how the
Fund will perform in the future.
Year-by-year returns
BAR CHART:
Total returns for years ended December 31
1998: --%
1997: --%
1996: --%
1995: --%
1994: --%
1993: --%
1992: --%
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1991: --%
1990: --%
1989: --%
During the period shown in the bar chart, the highest and lowest returns,
respectively, for a quarter were:
Best quarter: --% for the quarter ended Month 00
Worst quarter: --% for the quarter ended Month 00
Average annual total returns
This table shows the Fund's average annual total returns for the periods ending
December 31, 1998. It compares the Fund's performance with the Lehman Aggregate
Bond Index, an index that is generally considered to be representative of U.S.
bond market activity. Past results do not necessarily indicate how the Fund will
perform in the future.
- --------------------------------------------------------------------------------
1 year 5 years 10 years
- --------------------------------------------------------------------------------
Guardian Bond Fund --% --% --%
- --------------------------------------------------------------------------------
Lehman Aggregate Bond Index --% --% --%
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Risks and special investment techniques
We've already briefly described the principal risks of investing in the Fund. In
this section of the prospectus, we also describe the risks in more detail, as
well as some of the special investment techniques the Fund's adviser expects to
use.
Principal risks to investors
Debt risks
You could lose money in connection with the Fund's debt investments, or the
Fund's performance could fall below that of other possible investments for the
following reasons.
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Interest rate risk
The value of the debt obligations in the Fund may vary according to changes in
interest rates. When interest rates rise, bond prices generally fall, and when
interest rates fall, bond prices generally rise. Usually the price of bonds that
must be repaid over longer time periods fluctuate more than shorter-term bonds.
Some debt securities, such as zero coupon bonds and mortgage-backed and
asset-backed securities, may be more sensitive to interest rate changes than
other bonds. If an instrument has a variable rate of interest and a change in
the market rate occurs, there may be a delay before the coupon rate is affected,
and this could adversely affect the Fund's performance.
Credit risk
Investors face the risk that the issuer of debt cannot pay interest or principal
on the money owed. U.S. government securities are substantially protected from
financial or credit risk. However, certain agency obligations, while of the
highest credit quality, do not have this guarantee.
Prepayment and extension risk
There is also the possibility that a debt security may be prepaid or "called"
before the money is due, and that the proceeds could be invested at lower
interest rates. Intermediate-term and long-term bonds are protected against this
possibility, but mortgage-backed and asset-backed securities are not.
Mortgage-backed and asset-backed securities are more sensitive to the risks of
prepayment because they can be prepaid whenever their underlying collateral is
prepaid. Conversely, extension risk is the
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possibility that in an environment of rising interest rates, expected
prepayments will not be made, with the result that the security's life will
become longer than anticipated. Typically, the security's value will drop when
this occurs.
Manager's selection risk
The investment adviser's judgment about the value or potential appreciation of a
particular bond proves to be incorrect.
Junk bond risk
Junk bonds are below investment grade bonds rated as Ba or BB and lower, and are
also known as high-yield bonds. They may be issued by companies without a long
track record of sales and earnings, or those with questionable credit strength.
The market prices of these securities may fluctuate more than higher-quality
securities and may decline significantly in periods of general or regional
economic difficulty. Lower-quality debt obligations are particularly susceptible
to the risk of default or price changes because of changes in the issuer's
creditworthiness. These securities may also be less liquid, making it more
difficult for the Fund to dispose of them.
Lower-quality debt can be particularly sensitive to changes in the economy, the
financial situation of the issuer, or trouble in the issuer's industry. If the
issuer defaults on the loan, the investor could face the additional cost of the
effort to recover some or all of the money. When the economy is uncertain, the
price of these securities could fluctuate more dramatically than the price of
higher-rated debt. It may also be difficult for the Fund to sell these
securities at the time it sees fit.
Foreign market risks
Investing in foreign securities involves additional risks. Foreign securities
may be affected by political, social and economic developments abroad. Financial
markets in foreign countries may be less liquid or more volatile than U.S.
markets. Less information may be available about foreign company operations, and
foreign countries may impose
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withholding taxes on interest and dividend income. Government regulations and
accounting standards may be less stringent as well. Brokerage commissions and
custodial fees for foreign investments are often higher than those for
investments in U.S. securities. Exchange rates can adversely affect the value of
foreign securities and their dividends or earnings, irrespective of the
underlying performance.
Diversification risk
In order to meet the Fund's investment objectives, the investment adviser must
try to determine the proper mix of securities that will maximize the Fund's
return. It may not properly ascertain the appropriate mix of securities for any
particular economic cycle. Also, the timing of movements from one type of
security to another could have a negative effect on the Fund's overall
objective.
Portfolio turnover
Portfolio turnover refers to the rate at which the securities held by the Fund
are replaced. The higher the rate, the higher the transactional and brokerage
costs associated with the turnover, unless the securities traded can be bought
and sold without corresponding commission costs. Active trading of securities
may also increase the Fund's realized capital gains or losses, which may affect
the taxes you pay as a Fund shareholder.
Special investment techniques
Borrowing
The Fund may borrow money for temporary emergency purposes. When the Fund
borrows for any purpose, it will maintain assets in a segregated account to
cover its repayment obligation. The Securities and Exchange Commission limits
borrowings to 33 1/3% of a mutual fund's total assets. The Fund may commit this
or a lesser amount to borrowings, as set forth in the Statement of Additional
Information.
Dollar roll and reverse repurchase transactions
In a dollar roll transaction, the Fund sells mortgage-backed securities for
delivery to the buyer in the current month and simultaneously contracts to
purchase similar securities on
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a specified future date from the same party. The securities to be purchased will
be of the same type and have the same interest rate as the sold securities, but
will be supported by different mortgage pools. In a reverse repurchase agreement
transaction, the Fund sells securities to a bank or securities dealer and agrees
to repurchase them at an agreed time and price. Whenever the Fund enters into a
dollar roll or reverse repurchase transaction, it maintains segregated assets -
typically U.S. government securities or liquid, unencumbered securities - whose
value equals or exceeds the value of the forward commitment or repurchase
obligation on a daily basis.
Although dollar rolls and reverse repurchase agreements are considered leveraged
transactions by the Securities and Exchange Commission, GISC believes that they
do not present the risks associated with other types of leveraged transactions.
The Securities and Exchange Commission also has taken the position that these
transactions are borrowings within the meaning of the Investment Company Act of
1940 (the 1940 Act.) (See Borrowing, above.)
Illiquid securities and exempt commercial paper
Illiquid securities are either not readily marketable at their approximate value
within seven days, are not registered under the federal securities laws (unless
they are exempt from registration, as noted in the following paragraph), or are
otherwise viewed as illiquid by the Securities and Exchange Commission.
Repurchase agreements that mature in more than seven days, certain variable rate
master demand notes, and over-the-counter options are treated as illiquid
securities. The absence of trading can make it difficult to value or dispose of
illiquid securities. It can also adversely affect the Fund's ability to
calculate its net asset value or manage its portfolio. The Statement of
Additional Information sets out the upper limits for the Fund's investments in
illiquid securities.
Securities which qualify under an exemption from registration under federal
securities laws for resales to institutional investors may be treated by the
Fund as liquid. If the Fund's adviser determines that these securities are
liquid under guidelines adopted by the Board of Directors, they may be purchased
without regard to the illiquidity limits in the
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Statement of Additional Information. Similarly, the Fund typically treats
commercial paper issued in reliance on an exemption from registration under
federal securities laws as liquid.
Investment grade securities
Investment grade securities are secured or unsecured debt obligations that
nationally recognized statistical ratings organizations, such as Moody's
Investors Service, Inc. and Standard & Poor's Ratings Group, rate as Aaa or AAA
(the highest quality) to Baa or BBB.
Money market instruments
From time to time, the Fund may invest a portion of its assets in money market
instruments. These are short-term debt instruments, which are written promises
to repay debt within a year. They include Treasury bills and certificates of
deposit, and they are characterized by safety and liquidity, which means they
are easily convertible into cash. Money market instruments may be used by the
Fund for cash management or temporary defensive purposes.
Repurchase agreements
In a repurchase agreement transaction, the Fund purchases a debt security and
obtains a simultaneous commitment from the selling bank or securities dealer to
repurchase that debt security at an agreed time and price, reflecting a market
rate of interest. Repurchase agreements are fully collateralized by U.S.
government securities, bank obligations and cash or cash equivalents. Costs,
delays or losses could result if the seller became bankrupt or was otherwise
unable to complete the repurchase agreement. To minimize this risk, the
investment adviser evaluates the creditworthiness of potential repurchase
agreement counterparties using guidelines adopted by the Board of Directors.
Securities lending
The Fund may lend its portfolio securities to securities dealers, banks and
other institutional investors to earn additional income. These transactions must
be continuously
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secured by collateral, and the securities loaned must be marked-to-market daily.
The Fund generally continues to receive all interest earned or dividends paid
on the loaned securities, although lending fees may be paid to the borrower. The
lending of portfolio securities is limited to 33 1/3% of the value of the Fund's
total net assets.
When-issued or delayed-delivery transactions
The Fund may commit to purchase or sell particular securities, with payment and
delivery to take place at a future date. These are known as when-issued or
delayed-delivery transactions. If the counterparty fails to deliver a security
the Fund has purchased on a when-issued or delayed-delivery basis, there could
be a loss as well as a missed opportunity to make an alternative investment. The
Fund engages in these transactions to acquire securities that are appropriate
for its portfolio at favorable prices or yields. It does not engage in these
transactions to speculate on interest rate changes.
Yankee securities
The Fund may invest in so-called Yankee securities. These are debt securities
issued by non-U.S corporate or government entities, but are denominated in U.S.
dollars. Yankee securities trade and may be settled in U.S. markets.
Zero coupon bonds
The Fund may invest in zero coupon bonds. These bonds do not pay interest but
instead are sold at a deep discount relative to their face value, and become due
only on maturity. Because zero coupon securities do not pay interest, they
fluctuate in value more than other interest-bearing securities. When interest
rates rise, the values of zero coupons fall more rapidly than securities paying
interest on a current basis, because the zero coupons are locked in to rates of
reinvestment that become less attractive the further rates rise. The converse is
true when interest rates fall.
Other
New financial products and risk management techniques continue to be developed.
The Fund may use these instruments and techniques to the extent and when
consistent with its investment objectives or regulatory and federal tax
considerations.
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Fund Management
The management and affairs of the Fund are supervised by its Board of Directors.
The Fund's investment adviser
Guardian Investor Services Corporation (GISC) is the adviser for the Fund. GISC
is wholly owned by The Guardian Life Insurance Company of America (Guardian
Life), a New York mutual insurance company. GISC is located at 201 Park Avenue
South, New York, New York 10003. GISC buys and sells securities, selects brokers
to effect transactions, and negotiates brokerage fees. GISC is the adviser to
several other mutual funds sponsored by Guardian Life, and it is the underwriter
and distributor of the Fund's shares and of variable annuity and variable life
insurance contracts issued by The Guardian Insurance & Annuity Company, Inc.
(GIAC).
The adviser is entitled to a management fee for its services. In the most recent
year, the Fund paid GISC a fee at the annual rate of 0.50% of average net
assets.
Portfolio managers
Thomas Sorell, CFA, and Howard Chin have managed the portfolio since January,
1998. Mr. Sorell has served as sole or co-portfolio manager of the Bond Fund's
assets since January 1997. He been a vice-president of Guardian Life since 1994
and manages part of the fixed income assets of Guardian Life. He also manages
fixed income assets for other Guardian subsidiaries.
Mr. Chin has been a vice-president of Guardian Life since 1997. He also manages
part of the fixed income assets of Guardian Life and one of its subsidiaries.
Before joining the company, he worked as senior mortgage strategist at Goldman
Sachs & Co. since 1993.
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Frank J. Jones, Ph.D., is responsible for the allocation of assets among the
various sectors of fixed-income securities selected by the portfolio managers.
Dr. Jones has been Executive Vice President and Chief Investment Officer of
Guardian Life since January 1994.
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Year 2000 considerations
Like other mutual fund companies and financial and business organizations around
the world, the Fund could be adversely affected if our computers or those of our
advisers or other service providers fail to process data properly as of January
1, 2000. Many computer systems today cannot distinguish the year 2000 from the
year 1900 because of the way dates were encoded and calculated in these systems.
Like our advisers and service providers, we are changing our systems where
necessary to address this problem. We fully expect that all relevant systems
will be adapted before January 1, 2000, and our service providers assure us that
they are doing the same. As of the date of this prospectus, we do not anticipate
that shareholders will experience negative effects on their investments or on
the services provided in connection with our Year 2000 conversion. However, we
cannot guarantee that our preparations will be successful.
It is possible that the markets for securities in which the Fund invests may be
detrimentally affected by computer failures throughout the financial industry
beginning January 1, 2000 if systems should cease to function at that time. This
may result in trade settlement problems and liquidity issues. Corporate and
governmental data processing errors may result in production problems for
individual companies and overall economic uncertainties. Earnings of individual
issuers may be affected by remediation costs. In addition, it has been reported
that foreign institutions have made less progress in addressing the Year 2000
problem than major U.S. entities, which could make certain Fund investments more
sensitive to these risks.
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Buying and selling Fund shares
You can buy this Fund only if you're a contractowner of a GIAC variable annuity
contract or variable life insurance policy that offers the Fund as an investment
option. GIAC buys and sells Fund shares based on premium allocation, transfer,
withdrawal and surrender instructions made by GIAC contractowners.
The Fund will ordinarily make payment for redeemed shares within three business
days after it receives an order from GIAC. The redemption price will be the net
asset value next determined after GIAC receives the contractowner's instructions
or request in proper form. The Fund may refuse to redeem shares or postpone
payment of proceeds during any period when:
o trading on the New York Stock Exchange (NYSE) is restricted
o the NYSE is closed for other than weekends and holidays
o an emergency makes it not reasonably practicable for the Fund to dispose
of assets or calculate its net asset value (NAV); or
o as permitted by the Securities and Exchange Commission.
See the prospectus for your GIAC variable annuity contract or variable life
insurance policy for more details about the allocation, transfer and withdrawal
provisions of your annuity or policy.
Share price
The share price of the Fund is calculated each day that the NYSE is open. The
price is set at the close of trading on the NYSE or 4 p.m. Eastern time,
whichever is earlier. The price is based on the Fund's current NAV.
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NAV is the value of everything a Fund owns, minus everything it owes, divided by
the number of shares investors hold.
The Fund values its assets at current market prices when market prices are
readily available. If market value cannot be established, assets are valued at
fair value as determined in good faith by, or under the direction, of the Board
of Directors. Short-term securities that mature in 60 days or less are valued by
using the amortized cost method, unless the Board determines that this does not
represent fair value.
Dividends, Distribution and Taxes
Net investment income and net capital gains that are distributed to GIAC's
separate account by the Fund are reinvested by GIAC in additional shares of the
Fund at NAV. The Fund typically distributes any net investment income twice each
year and any net capital gains once each year. The Fund's Board of Directors can
change this policy. GIAC contractowners will be notified when these
distributions are made.
Other information about the Fund
The Fund does not currently foresee any disadvantages to contractowners arising
from the fact that it offers shares to both variable annuity and variable life
insurance policy separate accounts. The Board monitors events to ensure there
are no material irreconcilable differences between or among contractowners. If
such a conflict should arise, one or more GIAC separate accounts may withdraw
their investment in the Fund. This could possibly force the Fund to sell
portfolio securities at disadvantageous prices.
If circumstances make it necessary to create separate portfolios for variable
annuity and variable life insurance separate accounts, GIAC will bear the
expenses involved in setting up the new portfolios. However, the ongoing
expenses contractowners ultimately pay would likely increase because of the loss
of economies of scale provided by the current arrangement.
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Financial highlights
The financial highlights table is intended to help you understand the financial
performance for the Fund over the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions.) This
information has been audited by Ernst & Young LLP, whose report, along with the
Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
For the year ended December 31
-----------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period
Income from Investment Operations
Net Investment Income
Net Gains or Losses on Securities
(both realized and unrealized)
Total from Investment Operations
Less Distributions
Dividends (from Net Investment
Income)
Distributions in excess of Net
Investment Income
Distributions (from Capital Gains)
Total Distributions
Net Asset Value, End of Period
Total Return
Ratios/Supplemental Data
Net Assets, End of Period
Ratio of Expenses to Average
Net Assets
Ratio of Net Investment Income
(Loss) to Average Net Assets
Portfolio Turnover Rate
</TABLE>
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For more detailed information
Additional information about the Fund is available in the annual and semi-annual
reports to shareholders. In the Fund's annual report, you will find a discussion
of the market conditions and investment strategies that significantly affected
the Fund's performance during the past fiscal year.
The Fund's Statement of Additional Information contains additional information
about the Fund and has been filed with the SEC and is incorporated in this
prospectus by reference. A free copy of the Fund's Statement of Additional
Information and most recent annual report and semi-annual report may be
obtained, and further inquiries can be made, by calling 1-800-221-3253 or by
writing Guardian Investor Services Corporation at 201 Park Avenue South, New
York, New York 10003.
Information about the Fund (including the Statement of Additional Information)
can be reviewed and copied at the SEC's Public Reference Room in Washington D.C.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund
are available on the SEC's Internet site at Error! Bookmark not defined. and
copies of this information may be obtained, upon payment of a duplicating fee,
by writing the Public Reference Section of the SEC, Washington D.C. 20549-6009.
Custodian, Transfer Agent and Dividend Paying Agent
State Street Bank and Trust Company, Custody Division, 1776 Heritage Drive,
North Quincy, Massachusetts 02171, is the Fund's custodian, transfer agent and
dividend paying agent.
1940 Act File No. 811-3634
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THE GUARDIAN BOND FUND, INC.
201 Park Avenue South, New York, New York 10003
-------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
-------------------------------------------------
This Statement of Additional Information is not a prospectus, but should
be read in conjunction with the Prospectus of The Guardian Bond Fund, Inc. (the
"Fund") dated May 1, 1999. A free copy of the Prospectus may be obtained by
writing to Guardian Investor Services Corporation(R), 201 Park Avenue South, New
York, New York 10003 or by telephoning 1-800-221-3253. Please retain this
document for future reference.
TABLE OF CONTENTS
Page
----
Investment Strategies and Risk Considerations..........................
Ratings of Debt Obligations............................................
Investment Restrictions................................................
Temporary Defensive Positions..........................................
Portfolio Turnover ....................................................
Fund Management........................................................
Guardian Life and Other Fund Affiliates................................
Investment Adviser.....................................................
Performance Data.......................................................
Calculation of Net Asset Value.........................................
Securities Valuations .................................................
Custodian and Transfer Agent...........................................
Portfolio Transactions and Brokerage...................................
Legal Opinions.........................................................
Capital Stock .........................................................
Independent Auditors and Financial Statements..........................
Appendix...............................................................
<PAGE>
The Fund is registered with the SEC as an open-end, diversified,
management investment company. It is incorporated in Maryland and commenced its
operations in March 1983.
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS
Mortgage-Backed Securities.
The Bond Fund may purchase mortgage-backed securities, such as
collateralized mortgage obligations ("CMOs") and mortgage pass-throughs.
A mortgage pass-through is collateralized by a pool of mortgages that have
a common coupon rate (i.e., interest rate) and maturity. The holders of a
particular mortgage pass-through share the rights to receive interest and
principal payments from the underlying pool of mortgages, net of servicing fees,
as payment for debt service on the pass-through. CMOs are collateralized by
pooled mortgage loans that may not share coupon rate and maturity
characteristics, so they are multi-class bonds. CMO classes typically have
different interests in the stream of interest and principal payments from an
underlying pool of mortgages. Hence, the classes are paid sequentially according
to the payment structure of the CMO. Mortgage pass-throughs and CMO's may be
issued or guaranteed by the U.S. government and its agencies or
instrumentalities, or by private entities.
Mortgage-backed securities issued by the Government National Mortgage
Association ("GNMA") are backed by the full faith and credit of the U.S.
government. Privately owned, government sponsored agencies like the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC") issue their own guarantees for interest and principal
payments on the mortgage-backed securities and other obligations they issue.
These guarantees are supported only by the issuer's credit or the issuer's right
to borrow from the U.S. Treasury. Accordingly, such investments may involve a
greater risk of loss of principal and interest than other U.S. government
securities since the Fund must look principally or solely to the issuing or
guaranteeing agency or instrumentality for repayment.
Privately issued mortgage-backed securities purchased by the Fund must be
fully collateralized by GNMA certificates, other government mortgage-backed
securities, or by whole loan securities. Whole loan securities are securitized
mortgage pools backed by fixed or adjustable rate mortgages originated by
private institutions.
Mortgage-backed securities may be more sensitive to interest rate changes
than conventional bonds, which can result in greater price volatility. Because
the collateral underlying mortgage-backed securities may be prepaid at any time,
mortgage-backed securities are also subject to greater prepayment risks than
conventional bonds. Accelerated prepayments of mortgage-backed securities
purchased at a premium impose a risk of loss of principal because the premium
may not have been fully amortized when the principal is repaid. Prepayments tend
to accelerate when interest rates decline, so the proceeds from prepaid
mortgage-backed securities are then likely to be reinvested at lower interest
rates.
Payments of principal and interest on the mortgage obligations underlying
mortgage-backed securities are not passed through directly to the holders,
rather they are made to independent trustees created specifically to allocate
such interest and principal payments among the holders of the mortgage-backed
securities. In the event that the mortgages or mortgage pools which
collateralize mortgage-backed securities are prepaid, the mortgage-backed
securities will also be prepaid. For CMO classes which are designed to be
retired sequentially, the class next scheduled to mature generally will be paid
down first.
Many factors affect the frequency of unscheduled prepayments or
refinancings of the mortgages that collateralize mortgage-backed securities,
including interest rates, economic conditions, the ages of the mortgages and
locations of the mortgaged properties. Prepayments tend to occur more rapidly
after interest rates generally have declined. The return provided to the Fund
will be lower if the proceeds of prepaid mortgage-backed securities are
reinvested in securities with lower yields. In addition, the Fund may suffer
losses on prepaid obligations which were acquired at a premium.
When interest rates are rising, mortgage-backed securities may suffer
price declines, particularly if their durations extend due to slower than
expected mortgage prepayments. Securities that have lost value while held by the
Fund will have an adverse impact on the Fund's total return.
Stripped mortgage securities are another type of mortgage-backed security.
Stripped mortgage securities are created by separating the interest and
principal payments generated by a pool of mortgage-backed bonds to create two
classes of securities. Generally, one class receives only interest payments
("IOs") and one class receives only principal payments ("POs"). IOs and POs are
acutely sensitive to interest rate changes and to the rate of principal
prepayments. They are very volatile in price and may have lower liquidity than
most mortgage-backed securities. Certain CMOs may also exhibit these qualities,
especially those which pay variable rates of interest which adjust inversely
with and more rapidly than short-term interest rates. The Fund's Board of
Directors has adopted procedures for the use of its investment adviser, Guardian
Investor Services Corporation ("GISC"), when ascertaining the liquidity and fair
value of its investments, including its mortgage-backed securities holdings.
There is no guarantee that the Fund's investments in mortgage-backed securities
will be successful, and the Fund's total return could be adversely affected as a
result.
2
<PAGE>
Asset-Backed Securities
Asset-backed securities, which are structured similarly to mortgage-backed
securities, are collateralized by interests in pools of loans, receivables or
other obligations originated by single or multiple lenders and may use similar
credit enhancements. The underlying assets, which include motor vehicle
installment purchase contracts, home equity loans, credit card receivables and
other credit arrangements, are securitized in pass-through structures similar to
mortgage pass-throughs or in pay-through structures similar to CMO's. The Fund
may invest in these and other types of asset-backed securities that may be
developed in the future.
One of the principal characteristics which distinguishes asset-backed
securities from mortgage-backed securities is that asset-backed securities
generally do not have the benefit of first lien security interests in the
related collateral. Certain receivables such as credit card receivables are
generally unsecured, and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, certain of which may hinder the right
to receive full payment. Also, the security interests in the underlying
collateral may not be properly transferred when the pool is created, resulting
in the possibility that the collateral may be resold. Some asset-backed
securities may also have prepayment risk due to refinancing of their
receivables. Generally, these types of loans are of shorter average life than
mortgages but may have average lives up to 10 years. These securities, all of
which are issued by non-governmental entities, carry no direct or indirect
governmental guarantees.
Trust Preferred Securities
The Fund may also invest in trust-preferred (or capital) securities. These
securities, which are issued by entities such as special purpose bank
subsidiaries, currently are permitted to treat the interest payments as a
tax-deductible cost. Capital securities, which have no voting rights, have a
final stated maturity date and a fixed schedule for periodic payments. In
addition, capital securities have provisions which afford preference over common
and preferred stock upon liquidation, although the securities are subordinated
to other, more senior debt securities of the same issuer. The issuers of these
securities have the right to defer interest payments for a period of up to five
years, although interest continues to accrue cumulatively. The deferral of
payments may not exceed the stated maturity date of the securities themselves.
The non-payment of deferred interest at the end of the permissible period will
be treated as an event of default.
At the present time, the Internal Revenue Service treats capital
securities as debt. Proposed tax legislation may cause this tax treatment to be
modified in the future. In the event that the tax treatment of interest payments
of these types of securities is modified, the Fund will reconsider the
appropriateness of continued investment in these securities.
Some of the Fund's investments may have variable interest rates. When an
instrument provides for periodic adjustments to its interest rate, fluctuations
in principal value may be minimized. However, changes in the coupon rate can lag
behind changes in market rates, which may adversely affect the Fund's
performance.
Securities Lending
The Fund may lend its portfolio securities to securities dealers, banks or other
institutional investors as a way to earn additional income. Such loans must be
continuously secured by collateral, and the loaned securities must be
marked-to-market daily. The Fund will generally continue to be entitled to all
interest earned or dividends paid on the loaned securities, though lending fees
may be paid to the borrower from such interest or dividends. The Fund can
increase its income through securities lending by investing the cash collateral
deposited by the borrower in short-term interest-bearing obligations that meet
the Fund's credit quality requirements and investment policies. As with any
extension of credit, however, there are risks of delay in recovery of the loaned
securities and collateral if a borrower should fail financially.
The Fund will cease to lend securities if, as a result, the aggregate value of
securities then on load would exceed 33 1/3% of its total net assets. A
significant portion of the Fund's loan transactions may be with only one or a
few institutions at any given time. This practice can increase the risk to the
Fund should a borrower fail. Apart from lending its securities, and acquiring
debt securities, the Fund will not make loans to other persons.
The Fund will typically receive commitment fees from the borrower which are
normally payable upon the expiration of the loan transactions. If the Fund calls
the loaned securities prior to the expiration date of the loan transactions, the
Fund may not be entitled to receive the entire commitment fee. The Fund does not
expect to call loaned securities prior to the loan expiration date unless the
current market value of the loaned securities exceeds the expected return of the
loan, including the entire commitment fee. Loan transactions can be structured
to permit similar, but not necessarily identical, securities to be returned to
the Fund upon the expiration of a loan.
Since there are risks of delays in recovery or even loss of rights in the
collateral related to all types of secured credit, the loans will be made only
to borrowers deemed by GISC to be creditworthy and will not be made unless, in
GISC's judgement, the income that can be earned justifies the risk. Any such
loans entered into by the Fund will create leverage for the Fund, as lender.
This leverage results from the expectation that the income and gains on the
securities acquired by the Fund with the loan collateral provided by the
borrower will exceed the cost of the loan transaction. Accordingly, the Fund
will only enter into a loan transaction if its earnings or net asset value are
expected to increase faster than otherwise would be the case. However, should
the income and gains earned on the securities acquired with the loan collateral
fail to exceed the cost of the loan, the Fund's earnings or net asset value will
decline faster than otherwise would be the case.
3
<PAGE>
In the event a borrower is unable to complete a loan transaction, or in
the event of any default or insolvency of a borrower, the Fund will retain the
collateral it received in connection with the loan transaction. In the event
that the borrower defaults on its obligation to return the loaned securities,
the Fund could suffer a loss to the extent that the market value of the
collateral falls below that of the loaned securities. If the collateral is
insufficient to fully satisfy its rights under the loan agreement, the Fund will
take whatever steps it deems advisable to satisfy its claim.
The Fund may pay reasonable custodian and administrative fees in
connection with the loans.
Dollar Roll and Reverse Repurchase Agreements
The Fund may engage in dollar roll and reverse repurchase agreement
transactions when the adviser believes it would be advantageous to do so. In a
dollar roll transaction, the Fund sells mortgage-backed securities for delivery
in the current month and simultaneously contracts to purchase substantially
similar securities on a specified future date from the same party. In a dollar
roll, the securities that are to be purchased will be of the same type and have
the same interest rate as the sold securities, but will be supported by
different pools of mortgages. A fund that engages in a dollar roll forgoes
principal and interest paid on the sold securities during the roll period, but
is compensated by the difference between the current sales price and the lower
forward price for the future purchase. In addition, the Fund earns interest by
investing the transaction proceeds during the roll period.
In a reverse repurchase agreement transaction, the Fund sells securities
to a bank or securities dealer and agrees to repurchase them at an agreed time
and price. During the period between the sale and the forward purchase, the Fund
will continue to receive principal and interest payments on the securities sold.
The Fund may also receive interest income similar to that received in the case
of dollar rolls.
The Fund will normally use the proceeds of dollar roll and reverse
repurchase agreement transactions to maintain offsetting positions in securities
or repurchase agreements that mature on or before the settlement date for the
related dollar roll or reverse repurchase agreement. The market value of
securities sold under a reverse repurchase agreement or dollar roll is typically
greater than the amount to be paid for the related forward commitment. Reverse
repurchase agreements and dollar rolls involve the risk that the buyer of the
sold securities might be unable to deliver them when the Fund seeks to
repurchase the securities. If the buyer files for bankruptcy or becomes
insolvent, such buyer or its representative may ask for and receive an extension
of time to decide whether to enforce the Fund's repurchase obligation. The
Fund's use of the transaction proceeds may be restricted pending such decision.
Whenever the Fund enters into a dollar roll or reverse repurchase
agreement transaction, it will maintain cash, U.S. Government securities or
liquid, unencumbered securities that are marked-to-market daily in a segregated
account with the Fund's custodian. The value of such segregated assets must be
at least equal to the value of the forward commitment or repurchase obligation
(principal plus accrued interest), as applicable. Segregating assets may limit
the Fund's ability to pursue other investment opportunities.
Since the Fund will receive interest on the securities or repurchase
agreements in which it invests the transaction proceeds, dollar rolls and
reverse repurchase agreements will involve leverage. However, since the acquired
securities or repurchase agreements must satisfy the Fund's credit quality
requirements and mature on or before the settlement date for the related dollar
roll or reverse repurchase agreement, and because the Fund will segregate assets
as described above, GISC believes that these transactions do not present the
risks associated with other types of leverage. The Fund does not intend to enter
into dollar roll or reverse repurchase agreement transactions other than in such
circumstances or for temporary or emergency purposes. In addition, the staff of
the Securities and Exchange Commission has taken the position that dollar roll
and reverse repurchase agreement transactions are deemed to be borrowings within
the meaning of the 1940 Act. Although the Fund intends to engage in such
transactions only in the limited circumstances described above, the use of such
transactions will be subject to the Fund's investment limitation on borrowings,
which limits the aggregate borrowings of the Fund to no more than 33 1/3% of the
value of the Fund's total assets.
Repurchase Agreements
In a repurchase agreement transaction, the Fund purchases a debt security
and obtains a simultaneous commitment from the seller (i.e., a bank or
securities dealer) to repurchase the debt security at an agreed time and price,
reflecting a market rate of interest. Repurchase agreements are fully
collateralized (including the interest earned thereon) by U.S. government
securities, bank obligations, cash or cash equivalents, and are marked-to-market
daily during their respective terms. Costs, delays or losses could result if the
seller becomes bankrupt or is otherwise unable to repurchase a security that is
subject to a repurchase agreement. To attempt to minimize this risk, the Fund's
Board of Directors periodically receives and reviews information about the
creditworthiness of securities dealers and banks which enter into repurchase
agreements with the Fund. The Fund will not enter into a repurchase agreement
which matures in more than seven days, if, as a result, more than 10% of its net
assets would be invested in illiquid securities.
When-Issued or Delayed Delivery Transactions
In when-issued or delayed-delivery transactions, the Fund commits to purchase or
sell particular securities, with payment and delivery to take place at a future
date. Although the Fund does not pay for the securities or start earning
interest on them until they are delivered, it immediately assumes the risk of
ownership, including the risk of price fluctuation. If the Fund's counterparty
fails to deliver a security purchased on a when-issued or delayed-delivery
basis, there may be a loss, and the Fund may have missed an opportunity to make
an alternative investment.
The Fund engages in these transactions to acquire securities that are
appropriate for its portfolio while securing prices or yields that appear
attractive when the transactions occur. The Fund does not engage in these
transactions to speculate on interest rate changes. However, the Fund reserves
the right to sell securities acquired on a when-issued or delayed-delivery basis
before settlement.
Prior to settlement of these transactions, the value of the subject securities
will fluctuate, reflecting interest rate changes. Accordingly, when the Fund
commits to buy particular securities and make payment in the future, it must set
aside, in a segregate account with the custodian, cash or liquid high grade
securities at least equal in value to its commitments, marked-to-market daily.
In the case of a sale of securities on a delayed-delivery basis, the Fund will
instruct the custodian to hold the subject portfolio securities in a segregated
account while the commitment is outstanding. These obligations to segregate cash
or securities will limit the investment advider's ability to pursue other
investment opportunities.
RATINGS OF DEBT OBLIGATIONS
Nationally recognized statistical ratings organizations ("NRSROs") are
private services that rate the credit quality of corporate debt obligations. A
description of the range of ratings assigned to such obligations by two leading
NRSROs (i.e., Moody's and Standard & Poor's) is included in the Appendix to this
Statement of Additional Information.
The Fund primarily purchases "investment grade" debt securities, or those
which are rated in one of the top four rating categories established by NRSROs.
However, as noted in the Prospectus, a small portion of the Fund's assets may be
invested in securities rated lower than "investment grade." Such holdings
typically result when securities that were acquired by the Fund as "investment
grade" securities are subsequently downgraded.
Lower rated debt securities may be subject to certain risks not typically
associated with "investment grade" debt securities, such as the following: (1)
reliable and objective information about the value of lower rated obligations
may be difficult to obtain because the market for such securities may be thinner
and less active than that for investment grade obligations; (2) adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of lower rated obligations, and,
in turn, adversely affect their marketability; (3) companies that issue lower
rated obligations may be in the growth stage of their development, or may be
financially troubled or highly leveraged, so they may not have more traditional
methods of financing available to them; (4) when other institutional investors
dispose of their holdings of lower rated debt securities, the general market and
the prices for such securities could be adversely affected; and (5) the market
for lower rated securities could be impaired if legislative proposals to limit
their use in connection with corporate reorganizations or to limit their tax and
other advantages are enacted.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions that cannot be
changed without the approval of the holders of a majority of the outstanding
shares of the Fund. As defined by the Investment Company Act of 1940, as amended
(the "1940 Act"), the vote of a majority of the outstanding voting securities of
the Fund means the lesser of the vote of (a) 67 percent of the shares of the
Fund at a meeting where more than 50 percent of the outstanding voting shares
are present in person or by proxy, or (b) more than 50 percent of the
outstanding voting shares of the Fund. All percentage restrictions on
investments apply when an investment is made. A later increase or decrease
beyond a specified limit that results from a change in value or net assets shall
not constitute a violation of the applicable restriction. The following
investment restrictions provide that the Fund may not:
1. Purchase any security other than those discussed under "Investment
Objectives and Policies," as set forth in the Prospectus;
2. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than
three years of continuous operation. This restriction does not apply
to any obligation issued or guaranteed by the United States
Government, its agencies or instrumentalities;
3. Borrow money, except that the Fund may (i) borrow up to 5% of its
total assets (not including the amount borrowed) for temporary or
emergency purposes; and (ii) engage in reverse repurchase
agreements, dollar rolls or other transactions which may involve a
borrowing from banks or other persons, provided that the aggregate
amount involved in all such transactions shall not exceed 33 1/3%
of the value of the Fund's total assets (including the amount
borrowed) less liabilities (other than borrowings) or such other
percentage permitted by law;
4. Mortgage, pledge or hypothecate more than 5% of the value of its
total assets, and then only to secure temporary or emergency
borrowings effected within the above restriction. For purposes of
this restriction, collateral arrangements which may be required in
connection with securities transactions by the Investment Company
Act of 1940 are not considered a pledge of assets;
5. Make loans of money, except through the purchase of debt obligations
and repurchase agreements in which the Fund may invest, consistent
with its investment objectives and policies, provided that
repurchase agreements maturing in more than seven days, when taken
together and at current value, may not exceed 10% of the Fund's net
assets;
6. Purchase any securities other than the obligations of the U.S.
Government, or its agencies or instrumentalities, if, immediately
after such purchase, 25% or more of the value of the Fund's total
assets would be invested in the securities of issuers in the same
industry. (There is no limitation as to investments in obligations
issued or guaranteed by the United States Government or its agencies
or instrumentalities.) For the purpose of this restriction, gas,
electric, water and telephone utilities will each be treated as a
separate industry;
7. Invest more than 5% of the value of its total assets in the
securities of any one issuer or purchase more than 10% of the
outstanding voting securities, or any other class of securities, of
any one issuer. For purposes of this restriction, all outstanding
debt securities of an issuer are considered as one class, and all
preferred stock of an issuer is considered as one class. This
restriction does not apply to obligations issued or guaranteed by
the United States Government, its agencies or instrumentalities;
8. Invest more than 5% of the value of its total assets in warrants or
more than 2% of such value in warrants which are not listed on the
New York or American Stock Exchanges, except that warrants attached
to other securities are not subject to these limitations;
9. Invest more than 10% of the value of its total assets in securities
that are not readily marketable or which are restricted as to
disposition under the federal securities laws or otherwise. This
restriction will apply to repurchase agreements maturing in more
than seven days. This restriction will also apply to securities
received as a result of a corporate reorganization or similar
transaction affecting readily-marketable securities already held in
the portfolio of the Fund. To the extent that securities received
under these circumstances, together with other unmarketable
securities, exceed 10% of the value of the Fund's total assets, the
Fund will attempt to dispose of them in an orderly fashion in order
to reduce its holdings in such securities to less than 10%;
10. Engage in the underwriting of the securities of other issuers,
except to the extent that the Fund may be deemed to be an
underwriter under the Securities Act of 1933 in selling portfolio
securities;
11. Purchase securities issued by any other investment company;
12. Purchase securities on margin or sell securities short, or
participate on a joint or a joint and several basis in any trading
account in securities;
13. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof;
14. Purchase or sell commodities or commodity contracts;
15. Purchase or sell real estate (although it may purchase securities of
issuers that engage in real estate operations), securities that are
secured by interests in real estate, or securities that represent
interests in real estate, including real estate investment trusts;
16. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the
Fund may invest in the securities of companies which invest in or
sponsor such programs;
17. Purchase or retain the securities of any issuer if, to the knowledge
of the Fund, the officers, directors and employees of the Fund or of
the Adviser who individually own more than 1/2 of 1% of the
outstanding securities of such issuer together own more than 5% of
the securities of such issuer;
18. Purchase securities for the purpose of exercising control over
another company; and
19. Issue any senior securities (except for borrowing subject to the
restrictions set forth under Investment Restriction 3, above).
TEMPORARY DEFENSIVE POSITIONS
The Fund may alter its investment practices on a temporary or emergency
basis when the Fund's investment adviser believes that it is appropriate due to
political, economic or other circumstances. The Fund may invest in cash or cash
equivalents and repurchase agreements in these circumstances.
PORTFOLIO TURNOVER
The Fund's annual portfolio turnover rate may vary greatly from year to
year, and it will not be a limiting factor when GISC deems portfolio changes
appropriate. For the years ended December 31, 1996, 1997 and 1998, the Fund's
annual portfolio turnover rates were 188%, 340% and ____% respectively. An
explanation of the Fund's portfolio turnover rate appears in the Prospectus.
FUND MANAGEMENT
The directors and officers of the Fund are named below. Information about
their principal occupations during the past five years and certain other current
affiliations is also provided. The business address of each director and officer
is 201 Park Avenue South, New York, New York 10003 unless otherwise noted. The
"Guardian Fund Complex" referred to in this biographical information is
comprised of (1) the Fund, (2) The Guardian Stock Fund, Inc., (3) The Guardian
Cash Fund, Inc., (4) The Park Avenue Portfolio (a series trust that issues its
shares in ten series) and (5) GIAC Funds, Inc. (formerly GBG Funds, Inc.) (a
series fund that issues its shares in three series).
4
<PAGE>
The Fund pays Directors who are not "interested persons" directors' fees
of $350 per meeting and an annual retainer of $500. Directors who are
"interested persons," except Mr. Sargent, receive the same fees, but they are
paid by GISC. Mr. Sargent receives no compensation for his services as a Fund
Director. All officers of the Fund are employees of Guardian Life; they receive
no compensation from the Fund.
Each Fund Director is also a director of The Guardian Stock Fund, Inc.,
The Guardian Cash Fund, Inc. and GIAC Funds, Inc. (formerly GBG Funds, Inc.), a
series fund consisting of Baillie Gifford International Fund, Baillie Gifford
Emerging Markets Fund and The Guardian Small Cap Stock Fund, and a trustee of
The Park Avenue Portfolio, a series trust consisting of 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 Cash Management
Fund, The Guardian Baillie Gifford International Fund, The Guardian Baillie
Gifford Emerging Markets Fund and The Guardian Asset Allocation Fund. The Fund
and the other funds named in this paragraph are a "Fund Complex" for purposes of
the federal securities laws. The following table provides information about the
compensation paid by the Fund and the Fund Complex to the Fund's Directors for
the year ended December 31, 1998.
Compensation Table*
<TABLE>
<CAPTION>
Total Compensation
Aggregate Accrued Pension or Estimated from the Fund and
Compensation Retirement Benefits Annual Benefits Other Members of
Name and Title from the Fund** Paid by the Fund Upon Retirement the Fund Complex**
- -------------- --------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C>
Frank J. Fabozzi
Director N/A N/A
William W. Hewitt, Jr.
Director N/A N/A
Sidney I. Lirtzman
Director N/A N/A
Carl W. Schafer
Director N/A N/A
Robert G. Smith
Director N/A N/A
</TABLE>
* Directors who are "interested persons" of the Fund are not compensated by
the Fund, so information about their compensation is not included in this
table.
** Includes compensation paid to attend meetings of the Board's Audit
Committee.
The Fund's officers and directors had an aggregate interest of less than
1% in the Fund's outstanding shares as of .
Set forth below is information about the officers and Directors of the
Fund, including their principal business affiliations for the past five years.
<TABLE>
<CAPTION>
Name, Address and Age Title Business History
--------------------- ----- ----------------
<S> <C> <C>
JOHN C. ANGLE* (76) Director Retired. Former Chairman of the Board and Chief
3800 South 42nd Street Executive Officer, The Guardian Life Insurance Company
Lincoln, Nebraska 68506 of America; Director 1/78-12/98. Director (Trustee) of
Guardian Investor Services Corporation from 6/82-2/98
and The Guardian Insurance & Annuity Company, Inc. from
6/82-12/98 Director (Trustee) of various mutual funds
within the Guardian Fund Complex.
JOSEPH A. CARUSO (47) Secretary Vice President and Corporate Secretary, The Guardian Life
Insurance Company of America 3/96-present; Second Vice
President and Corporate Secretary 1/95-2/96; Corporate
Secretary prior thereto. Secretary, The Guardian
Insurance & Annuity Company, Inc., Guardian Investor
Services Corporation, Park Avenue Life Insurance Company,
Guardian Asset Management Corporation, Guardian Baillie
Gifford Limited and various mutual funds within the
Guardian Fund Complex.
HOWARD W. CHIN (46) Vice President Vice President, Investments, The Guardian Life Insurance
Company of America, since September 1997. Vice President,
Fixed Income Research and Fixed Income Sales, Goldman Sachs
& Co. 5/93-9/97. Prior thereto, Head of Fixed Income
Strategies, Prudential Securities Incorporated. Officer of
various mutual funds within the Guardian Fund Complex.
</TABLE>
- ----------
* Director who is deemed to be an "interested person" under the 1940 Act.
5
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Age Title Business History
--------------------- ----- ----------------
<S> <C> <C>
FRANK J. FABOZZI, PH.D. (56) Director Adjunct Professor of Finance, School of Management --
858 Tower View Circle Yale University 2/94-present; Visiting Professor of
New Hope, Pennsylvania 18938 Finance and Accounting, Sloan School of Management --
Massachusetts Institute of Technology prior thereto.
Editor, Journal of Portfolio Management. Director
(Trustee) of five mutual funds within the Guardian Fund
Complex. Director (Trustee) of various closed-end
investment companies sponsored by Blackstone Financial
Management.
ARTHUR V. FERRARA* (68) Director Retired. Chairman of the Board and Chief Executive
Officer, The Guardian Life Insurance Company of America
prior thereto; Director 1/81-present. Director
(Trustee) of Guardian Investor Services Corporation,
Guardian Asset Management Corporation, The Guardian
Insurance & Annuity Company, Inc. and various mutual
funds within the Guardian Fund Complex.
LEO R. FUTIA* (79) Director Retired. Former Chairman of the Board and Chief
18 Interlaken Road Executive Officer, The Guardian Life Insurance Company
Greenwich, Connecticut 06830 of America; Director 5/70-present. Director (Trustee) of
The Guardian Insurance & Annuity Company, Inc., Guardian
Investor Services Corporation, and various mutual funds
within the Guardian Fund Complex. Director (Trustee) of
various mutual funds sponsored by Value Line, Inc.
ALEXANDER M. GRANT, JR. (49) Treasurer Second Vice President, Investments, The Guardian Life
Insurance Company of America 1/97-present; Assistant
Vice President, Investments 9/93-12/96; Investment
Officer prior thereto. Officer of various mutual funds
within the Guardian Fund Complex.
WILLIAM W. HEWITT, JR. (70) Director Retired. Former Executive Vice President, Shearson
P.O. Box 2359 Lehman Brothers, Inc. Director (Trustee) of various
Princeton, New Jersey 08543 mutual funds within the Guardian Fund Complex. Director
(Trustee) of various mutual funds sponsored by Mitchell
Hutchins Asset Management, Inc. and PaineWebber, Inc.
FRANK J. JONES (60) President Executive Vice President and Chief Investment Officer,
The Guardian Life Insurance Company of America
1/94-present; Senior Vice President and Chief Investment
Officer 8/91-12/93. First Vice President, Director of
Global Fixed Income Research and Economics, Merrill
Lynch & Co. prior thereto. Senior Vice President and
Chief Investment Officer and Director, The Guardian
Insurance & Annuity Company, Inc. Director, Guardian
Investor Services Corporation. Officer of various mutual
funds within the Guardian Fund Complex.
ANN T. KEARNEY (47) Controller Second Vice President, Group Pensions, The Guardian Life
Insurance Company of America 1/95 to present; Assistant
Vice President and Equity Controller 6/94-12/94;
Assistant Controller prior thereto. Second Vice
President of The Guardian Insurance & Annuity Company,
Inc. and Guardian Investor Services Corporation.
Controller of various mutual funds within the Guardian
Fund Complex.
SIDNEY I. LIRTZMAN, PH.D. (67) Director Professor of Management 9/67-present and Acting Dean of
38 West 26th Street the School of Business Management 2/95-present, City
New York, New York 10010 University of New York -- Baruch College. President,
Fairfield Consulting Associates, Inc. Director (Trustee)
of various mutual funds within the Guardian Fund
Complex.
</TABLE>
- ----------
* Director who is deemed to be an "interested person" under the 1940 Act.
6
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Age Title Business History
--------------------- ----- ----------------
<S> <C> <C>
FRANK L. PEPE (56) Vice President Vice President and Equity Controller, The Guardian Life
Insurance Company of America 1/96-present; Second Vice
President and Equity Controller prior thereto. Vice
President and Controller, The Guardian Insurance &
Annuity Company, Inc. and Guardian Investor Services
Corporation. Controller, Guardian Asset Management
Corporation. Officer of various mutual funds within the
Guardian Fund Complex.
RICHARD T. POTTER, JR. (44) Counsel Vice President and Equity Counsel, The Guardian Life
Insurance Company of America 1/96-present; Second Vice
President and Equity Counsel prior thereto. Counsel, The
Guardian Insurance & Annuity Company, Inc., Guardian
Investor Services Corporation, Guardian Asset Management
Corporation and various mutual funds within the Guardian
Fund Complex.
JOSEPH D. SARGENT* (61) Director Chief Executive Officer, The Guardian Life Insurance
Company of America, 1/96-present. President and Director
1/93-present. Director, President and Chief Executive
Officer of The Guardian Insurance & Annuity Company,
Inc., Guardian Asset Management Corporation and Park
Avenue Life Insurance Company. Director (Trustee) of
Guardian Investor Services Corporation and various mutual
funds within the Guardian Fund Complex.
CARL W. SCHAFER (63) Director President, Atlantic Foundation (charitable foundation
P.O. Box 1164 supporting mainly oceanographic exploration and
Princeton, New Jersey 08542 research). Director of Roadway Express (trucking), Evans
Systems, Inc. (a motor fuels, convenience store and
diversified company), Hidden Lake Gold Mines Ltd. (gold
mining), Electronic Clearing House, Inc. (financial
transactions processing), Wainoco Oil Corporation and
Nutraceutrix Inc. (biotechnology). Chairman of the
Investment Advisory Committee of the Howard Hughes
Medical Institute 1985-1992. Director (Trustee) of
various mutual funds within the Guardian Fund Complex.
Director (Trustee) of various mutual funds sponsored by
Mitchell Hutchins Asset Management, Inc. and
PaineWebber, Inc.
ROBERT G. SMITH, PH.D. (66) Director President, Smith Affiliated Capital Corp. Director
132 East 72nd Street (Trustee) of various mutual funds within the Guardian
New York, New York 10028 Fund Complex.
THOMAS G. SORRELL (44) Vice President Vice President, The Guardian Life Insurance Company of
America 7/94-present; Director of Fixed Income, White
River Corporation, 12/93-7/94. Director of Fixed Income,
Fund American Enterprises, prior thereto. Vice President,
Guardian Asset Management Corporation, and various
mutual funds within the Guardian Fund Complex.
</TABLE>
- ----------
* Director who is deemed to be an "interested person" under the 1940 Act.
GUARDIAN LIFE AND OTHER FUND AFFILIATES
As of January 30, 1999, The Guardian Insurance & Annuity Company, Inc.
("GIAC") a Delaware corporation, owned 100% of the Fund's outstanding shares.
Such shares were allocated among separate accounts established by GIAC. GIAC is
a wholly owned subsidiary of Guardian Life. The executive offices of GIAC and
Guardian Life are located at 201 Park Avenue South, New York, New York 10003.
INVESTMENT ADVISER
Under the investment advisory agreement between the Fund and GISC, GISC
furnishes investment advice and provides or pays for certain of the Fund's
administrative costs. Among other things, GISC pays the fees and expenses of the
Fund Directors who are interested persons under the 1940 Act. GISC has also
agreed to assume those operating expenses of the Fund (excluding interest
charges and income, franchise and other taxes) which exceed one percent (1%) of
the Fund's average daily net assets for any fiscal year. For the year ended
December 31, 1998, the ratio of operating expenses to average daily net assets
of the Fund did not exceed 1%, so GISC was not obligated to assume any such
expenses. From time to time, GISC may, at its discretion, assume certain of the
Fund's ordinary operating expenses when they are less than 1% of average daily
net assets.
7
<PAGE>
For the years ended December 31, 1996, 1997 and 1998, the Fund paid GISC
$1,799,649, $1,730,953 and $___________ respectively, under the investment
advisory agreement.
The investment advisory agreement between the Fund and GISC will continue
in full force and effect from year to year so long as its continuance is
specifically approved at least annually by vote of a majority of the Fund's
outstanding voting shares, or by vote of the Fund's Board of Directors,
including a majority of the Directors who are not parties to the agreement or
"interested persons" of the Fund or of GISC, cast in person at a meeting called
for that purpose. The agreement will terminate automatically upon its
assignment, and may be terminated without penalty at any time by either party
upon 60 days' written notice.
If the investment advisory agreement is terminated and it is not replaced
by an agreement with another affiliate of Guardian Life, the Fund's continued
use of the name "The Guardian Bond Fund, Inc." is subject to the approval of
Guardian Life, because Guardian Life maintains the exclusive ownership interest
of the service mark "The Guardian Bond Fund, Inc."
A service agreement between GISC and Guardian Life provides that Guardian
Life will furnish the office space, clerical staff, services and facilities
which GISC needs to perform under the investment advisory agreement. GISC's
officers are salaried employees of Guardian Life; they receive no compensation
from GISC. GISC reimburses Guardian Life for its expenses under the service
agreement.
PERFORMANCE DATA
The Fund may, from time to time, provide performance information in
advertisements, sales literature or other materials furnished to existing or
prospective owners of GIAC's variable contracts. When performance information is
provided in advertisements, it will include the effect of all charges deducted
under the terms of the specified contract, as well as all recurring and
non-recurring charges incurred by the Fund. All performance results are
historical and are not representative of future results.
Total return and average annual total return reflect the change in value
of an investment in the Fund over a specified period, assuming the reinvestment
of all capital gains distributions and income dividends. Average annual total
returns show the average change in value for each annual period within a
specified period. Total returns, which are not annualized, show the total
percentage or dollar change in value over a specified period. Promotional
materials relating to the Fund's performance will always at least provide
average annual total returns for each of a short (one to four years), medium
(five to nine years) and long (ten years or more) period of time.
Yield is a measure of the net investment income earned on a hypothetical
investment over a specified base period of one month or 30 days. Yield is
expressed as a percentage of the value of a share at the beginning of the base
period. Yields are annualized, which means that they assume that the Fund will
generate the same level of net investment income over a one year period.
However, the Fund's yield will actually fluctuate daily. On occasion, the Fund
may also quote its historical or annualized distribution rates. A distribution
rate is simply a measure of the level of income dividends and short-term capital
gain dividends distributed for a specified period. A distribution rate is not a
complete measure of performance, and may be higher than yield for certain
periods. The Fund uses the following SEC standardized formula to compute its
yields. This standardized formula is not necessarily consistent with generally
accepted accounting principles:
YIELD = 2 [(a - b + 1)^6 - 1]
-----
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period.
d = the net asset value per share on the last day of the
period.
The Fund's yield for the month ended December 31, 1998 was %.
Average annual total returns and cumulative total returns measure both net
investment income and realized and unrealized appreciation or depreciation for a
specified period, assuming reinvestment of capital gains distributions and
income dividends. Average annual total returns are annualized, so they show the
average annual percentage change over the specified period. Cumulative total
returns are not annualized, so they show the aggregate percentage or dollar
value change over the specified period. The tables below show the Fund's returns
for the periods indicated. These figures reflect the reinvestment of all capital
gains distributions and income dividends paid by the Fund, and the deduction of
all Fund expenses. The actual returns for owners of GIAC's variable annuities or
variable life insurance policies will be lower to reflect the effects of charges
deducted under the terms of the specific contracts.
Annual
Year Ended Dec. 31 Total Return
------------------ ------------
1984................................................ 13.04%
1985................................................ 22.36%
1986................................................ 14.84
1987................................................ 0.32%
1988................................................ 9.70%
1989................................................ 13.88%
1990................................................ 7.57%
1991................................................ 16.19%
1992................................................ 7.70%
1993................................................ 9.85%
1994................................................ (3.45)%
1995................................................ 17.59%
1996................................................ 2.88%
1997................................................ 8.99%
1998................................................ %
8
<PAGE>
Cumulative and
Average Annual
Period Ended December 31, 1998 Total Returns
- ------------------------------ -------------
Lifetime Total Return of the Fund*........................
Average Annual Lifetime Total Return of the Fund*.......
Ten-Year Total Return.....................................
Average Annual Ten-Year Total Return....................
Five-Year Total Return....................................
Average Annual Five-Year Total Return...................
One-Year Total Return.....................................
- ----------
* Beginning May 1, 1983 (commencement of the Fund's investment operations).
Bond prices fluctuated during the periods covered by the tables and the
results illustrated above are not representative of future performance.
The Fund uses the following standardized formula prescribed by the SEC to
compute its average annual total return.
P (1 + T)^n = ERV
Where: P = a hypothetical initial purchase order of $1,000 (No
sales load is deducted as Fund shares are sold at net
asset value).
T = average annual total return.
n = number of years.
ERV = ending redeemable value of the hypothetical $1,000
purchase at the end of the period.
Total return is calculated in a similar manner, except that the results
are not annualized.
The following example shows the average annual total return performance of
the Fund for the periods indicated by showing the average annual percentage
change for each period and the ending redeemable value of a $1,000 investment.
The example takes into account all Fund expenses and assumes reinvestment of all
capital gains distributions and income dividends, but does not take into account
charges deducted under the terms of GIAC's variable contracts or Federal income
taxes and tax penalties that may be incurred when distributions are made from
such variable contracts.
% Change
For the year ended December 31, 1998 ..................... %
For the 5 years ended December 31, 1998 .................. %
For the 10 years ended December 31, 1998 ................. %
For the life of the Fund through December 31, 1998 ....... %
As stated in the Prospectus, the Fund may also advertise "distribution
rates." Historical distribution rates are calculated by taking the sum of the
income and short-term capital gain dividends per share for a 12 month period and
dividing the result by the Fund's net asset value per share on the last day of
the calculation period. Annualized distribution rates are calculated by
multiplying the income and short-term capital gain dividends per share for the
last month by 12 and then dividing the result by the Fund's net asset value per
share as of the end of such month.
The distribution rate is simply a measure of the level of income dividends
and short-term capital gain dividends distributed for a specified period. It is
not a complete measure of performance, and may be greater than yield since, for
instance, it includes non-recurring short-term gains. The distribution rate may
not include the effects of amortizing bond premiums.
The Fund may compare its performance to that of other mutual funds with
similar investment objectives or programs, and may quote information from
financial, industry or general interest publications in its promotional
materials. Additionally, its materials may contain references to types and
characteristics of certain securities; features of its portfolio; financial
markets; or historical, current or prospective economic trends. Topics of
general interest, such as personal financial planning, may also be discussed.
Performance calculations contained in reports by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Morningstar, The WM Company,
Variable Annuity & Research Data Service or industry or financial publications
of general interest such as Business Week, Financial World, Forbes, Financial
Times, The Wall Street Journal, The New York Times, Barron's and Money which may
be quoted by the Fund are often based upon changes in net asset value with all
dividends reinvested and may not reflect the imposition of charges deducted
under the terms of GIAC's variable contracts.
The Fund's performance figures are based upon historical results and do
not represent future performance. Returns on net asset value will fluctuate.
Factors affecting the Fund performance include general market conditions,
operating expenses and
9
<PAGE>
investment management. Shares of the Fund are redeemable by GIAC on behalf of
GIAC contractowners at net asset value, which may be more or less than original
cost.
CALCULATION OF NET ASSET VALUE
The Fund's net asset per share is determined as of the earlier of 4:00
p.m. Eastern time or the close of trading on the NYSE on each day on which the
NYSE is open for business. The net asset value per share is calculated by adding
the value of all securities, cash or other assets, subtracting liabilities,
dividing the remainder by the number of shares outstanding and adjusting the
results to the nearest full cent per share.
The calculation of the Fund's net asset value may not occur
contemporaneously with the determination of the value of any foreign securities
included in such calculation because trading on foreign exchanges may not take
place every day the NYSE is open and the NYSE may be closed when foreign
exchanges are open for business.
SECURITIES VALUATIONS
Securities which are listed or traded on any securities exchange or on the
NASDAQ National Market System are valued at the last sale price or, if there
have been no sales during the day, on the closing bid price. Securities traded
on more than one exchange shall be valued on the exchange where the security is
principally traded, and the last sale price of the security on other exchanges
shall be used only if there were no trades on the principal exchange on that
date. Securities traded both on an exchange and in the over-the-counter market
are valued according to the broadest and most representative market. Certain
debt securities may be valued each business day by an independent pricing
service ("Service"). Debt securities for which quoted bid prices, in the
judgment of the Service, are readily available and are representative of the bid
side of the market are valued at the quoted bid price (as obtained by the
Service from dealers in such securities). Other debt securities that are valued
by the Service are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices for securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. Certain debt securities, including
securities for which market quotations are not readily available, such as
illiquid securities, are valued at fair value as determined in good faith by or
under the direction of the Fund's Board of Directors. Repurchase agreements are
carried at cost which approximates market value.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street Bank"), Custody
Division, 1776 Heritage Drive, North Quincy, Massachusetts 02171, is the
custodian of the Fund's assets. Portfolio securities purchased for the Fund
outside of the U.S. are cleared through foreign depositories and are maintained
in the custody of foreign banks and trust companies which are members of State
Street Bank's Global Custody Network. State Street Bank and each of the foreign
custodial institutions holding portfolio securities of the Fund have been
approved by the Board in accordance with regulations under the 1940 Act.
To the extent required by the SEC, the Board will review, at least
annually, whether it is in the best interest of the Fund and its shareholders to
maintain Fund assets in each foreign custodial institution. However, there can
be no assurance that the Fund will not be adversely affected by any
non-investment risks associated with holding assets abroad. Such risks may be
greater than those associated with holding assets in the U.S.
State Street Bank is also the Fund's transfer agent and dividend paying
agent. As such, State Street Bank issues and redeems shares of the Fund and
distributes dividends to the GIAC separate accounts which invest in the Fund's
shares on behalf of GIAC's variable contractowners.
State Street Bank plays no part in formulating the investment policies of
the Fund or in determining which portfolio securities are to be purchased or
sold by the Fund.
BROKERAGE ALLOCATION
GISC currently serves as investment adviser to several other
Guardian-sponsored mutual funds and may act as investment adviser to others in
the future. GISC allocates purchase and sale transactions among the Fund and its
other mutual fund clients as it deems equitable. GISC is also registered with
the Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers, Inc. as a broker-dealer. GISC has no formula for the
distribution of brokerage business when it places orders to buy and sell
approved investments. For over-the-counter transactions, GISC will attempt to
deal with a primary market maker unless better prices and execution are
available elsewhere. In allocating portfolio transactions to different brokers,
GISC gives consideration to brokers whom it believes can obtain the best price
and execution of orders, and to brokers who furnish statistical data, research
and other factual information. GISC is authorized to pay a commission in excess
of that which another broker may charge for effecting the same transaction if
GISC considers that the commissions it pays for brokerage, research services and
other statistical data are appropriate and reasonable for the services rendered.
The research services and statistical data which GISC receives in connection
with the Fund's portfolio transactions may be used by GISC to benefit its other
clients and will not necessarily be used in connection with the Fund.
GISC does not participate in commissions paid by the Fund to other brokers
or dealers and does not knowingly receive any reciprocal business directly or
indirectly as a result of paying commissions to other brokers or dealers. Since
it is expected that most purchases made by the Fund will be principal
transactions at net prices, the Fund will incur little or no brokerage costs.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Fund paid no
brokerage commissions.
LEGAL OPINIONS
The legality of the Fund shares described in the Prospectus has been
passed upon by Richard T. Potter, Jr., Esq., Vice President and Equity Counsel,
The Guardian Life Insurance Company of America, who is also Counsel of the Fund.
Federal securities law matters relating to the Fund have been passed upon by the
law firm of Vedder, Price, Kaufman & Kammholz of Chicago, Illinois.
CAPITAL STOCK
Voting Rights. Through its separate accounts, GIAC is the Fund's sole
shareholder of record, so, under the 1940 Act, GIAC is deemed to be in control
of the Fund. Nevertheless, when a shareholders' meeting occurs, GIAC solicits
and accepts voting instructions from its contractowners who have allocated or
transferred monies for an investment in the Fund as of the record date for the
meeting. GIAC then votes the Fund's shares that are attributable to its
contractowners' interests in the Fund in accordance with their instructions.
GIAC will vote shares for which no instructions are received in the same
proportion as it votes shares for which it does receive instructions. GIAC will
vote any shares that it is entitled to vote directly due to amounts it has
contributed or accumulated in its separate accounts in the manner described in
the prospectuses for its variable annuities and variable life insurance
policies.
Each share of the Fund is entitled to one vote, and fractional shares are
entitled to fractional votes. Fund shares have non-cumulative voting rights, so
the vote of more than 50% of the shares can elect 100% of the directors.
The Fund is not required to hold annual shareholder meetings, but special
meetings may be called to elect or remove directors, change fundamental policies
or approve an investment advisory agreement, among other things.
INDEPENDENT AUDITORS
AND FINANCIAL STATEMENTS
The independent auditors of the Fund are Ernst & Young LLP, 787 Seventh
Avenue, New York, New York 10019. Ernst & Young LLP audits and reports on the
financial statements of the Fund which appear in the Fund's Annual Report to
Shareholders for the year ended December 31, 1998. That Annual Report is
incorporated by reference in this Statement of Additional Information.
10
<PAGE>
APPENDIX
DESCRIPTIONS OF TYPES OF DEBT OBLIGATIONS
U.S. Government Agency and Instrumentality Securities: U.S. government
agency securities are debt obligations issued by agencies or authorities
controlled by and acting as instrumentalities of the U.S. government established
under authority granted by Congress. U.S. government agency obligations include,
but are not limited to, those issued by the Bank for Co-operatives, Federal Home
Loan Banks, Federal Intermediate Credit Banks, and the Federal National Mortgage
Association. U.S. government instrumentality obligations include, but are not
limited to, those issued by the Export-Import Bank and Farmers Home
Administration. Some obligations issued or guaranteed by U.S. government
agencies and instrumentalities are supported by the full faith and credit of the
U.S. Treasury; others, by the right of the issuer to borrow from the Treasury;
others, by discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and others, only by the credit of
the agency or instrumentality. No assurance can be given that the U.S.
government will provide financial support to such U.S. government sponsored
agencies or instrumentalities in the future, since it is not obligated to do so
by law. The Fund will invest in such securities only when the Board of Directors
of the Fund is satisfied that the credit risk with respect to the issuer is
minimal.
U.S. Treasury Securities: U.S. Treasury securities consist of Treasury
Bills, Treasury Notes and Treasury Bonds. These securities are each backed by
the full faith and credit of the U.S. government and differ in their interest
rates, maturities, and dates of issuance. U.S. Treasury Bills are issued with
maturities of up to one year. Three month bills are currently offered by the
Treasury on a 13-week cycle and are auctioned each week by the Treasury. U.S.
Treasury Notes may be issued with an original maturity of not less than one year
and not more than 10 years. U.S. Treasury Bonds may be issued with any maturity,
but generally have original maturities of over 10 years.
Commercial Paper: Commercial paper is generally defined as unsecured
short-term notes issued in bearer form by large, well-known corporations and
finance companies. Maturities on commercial paper range from a few days to nine
months. Commercial paper is also sold on a discount basis.
Repurchase Agreements: Repurchase agreements are instruments under which
the Fund purchases a debt security and obtains a simultaneous commitment from
the seller (a bank or broker-dealer) to repurchase the debt security at an
agreed time and price. The resale price is in excess of the purchase price and
reflects an agreed upon market rate unrelated to the coupon rate on the
purchased security. Such transactions afford an opportunity for the Fund to
invest temporarily available cash and earn a return that is insulated from
market fluctuations during the term of the agreement. Repurchase agreements are
fully collateralized (including the interest earned thereon) by U.S. government
securities, bank obligations, cash or cash equivalents and are marked-to-market
daily during their entire terms. The risk to the Fund is limited to the risk
that the seller will be unable to pay the agreed upon sum upon the delivery
date. In the event of default, the Fund is entitled to sell the underlying
collateral. Any loss to the Fund will be the difference between the proceeds
from the sale of the collateral and the repurchase price. If bankruptcy
proceedings are commenced against the seller, disposition of the collateral by
the Fund may be delayed or limited. To minimize this risk, the Board of
Directors will periodically evaluate the creditworthiness of broker-dealers and
banks which enter into repurchase agreements with the Fund.
Corporate Obligations: Corporate obligations include bonds and notes
issued by corporations in order to finance longer term credit needs. The Fund
will normally invest in corporate obligations which are rated in one of the four
highest rating categories established by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group, or, if not rated, are of equivalent quality as
determined by the Fund's investment adviser.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S ("MOODY'S") LONG TERM DEBT
RATINGS
Aaa. Bonds which are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa. Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risk appear somewhat greater than the "Aaa"
securities.
11
<PAGE>
A. Bonds which are rated "A" possess many favorable investment attributes
and are considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa. Bonds which are rated "Baa" are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba. Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B. Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from "Aa" through "B" in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S ("STANDARD & POOR'S") CORPORATE
DEBT RATINGS
AAA. Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated "AA" has a very strong capacity to pay interest and repay
principal, and differs from the highest rated issues only in small degree.
A. Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB. Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB and B. Debt rated "BB" or "B" is regarded, on balance, as predominantly
speculative with respect to the capacity to pay interest and repay principal in
accordance with the terms of the obligation. "BB" indicates a lower degree of
speculation than "B." While such debt will likely have some quality and
protective characteristics, those characteristics can be outweighed by large
uncertainties or major exposures to adverse conditions.
Note: Standard & Poor's ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major categories.
USING THE RATINGS
These ratings represent Moody's and Standard & Poor's opinions as to the
quality of the securities that they undertake to rate. It should be emphasized
that ratings are general and are not absolute standards of quality.
Consequently, securities with the same maturity, interest rate and rating may
have different market prices. Subsequent to its purchase by the Fund, an issue
of securities may cease to be rated or its rating may be reduced. GISC will
consider such an event in determining whether the Fund should continue to hold
the obligation.
12
<PAGE>
THE GUARDIAN BOND FUND, INC.
PART C. OTHER INFORMATION
Item 23. Exhibits
Number Description
-------- -----------
(a) -- Articles of Incorporation(3)
(b) -- By-Laws(3)
(c) -- Not Applicable
(d) -- Investment Advisory Agreement(3)
(e)(i) -- Selected Dealers Agreement(1)
(e)(ii) -- Distribution Agreement(1)
(f) -- Not Applicable
(g) -- Custodian Agreement and Amendment
to Custodian Agreement(3)
(h) -- Transfer Agency Agreement(3)
(i) -- Opinion and Consent of Counsel(3)
(j)(i) -- Consent of Counsel*
(j)(ii) -- Consent of Ernst & Young LLP*
(j)(iii) -- Consent of Vedder, Price, Kaufman & Kammholz*
(k) -- Not Applicable
(l) -- Letter from The Guardian Insurance & Annuity
Company, Inc. with respect to providing the
initial capital for the Registrant(1)
(m) -- Not Applicable
(n) -- Financial Data Schedule*
(o) -- Not Applicable
(p) -- Miscellaneous
(p)(i) -- Powers of Attorney executed by a majority of the Board
of Directors and certain principal officers of the
Fund(3)
(p)(ii) -- Power of Attorney executed by Frank J. Fabozzi(2)
(p)(iii) -- Power of Attorney executed by Joseph D. Sargent(2)
(p)(iv) -- Power of Attorney executed by Carl W. Schafer(2)
- ----------
(1) Incorporated by reference to Registrant's filing (Reg. No. 2-81150) of
March 29, 1983.
(2) Incorporated by reference to Post-Effective Amendment No. 16 to the
Registrant's registration statement on Form N-1A (Reg. No. 2-81150), filed
via EDGAR on April 23, 1997.
(3) Incorporated by reference to Post-Effective Amendment No. 17 to the
Registrant's registration statement on Form N-1A (Reg. No. 2-81150), filed
via EDGAR on April 28, 1998.
* To be filed by amendment.
C-1
<PAGE>
Item 24. 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 __________,
1999:
Percentage of
State 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 Connecticut 100%
Inc.
Physicians Health Services, Inc. Delaware 14%
Private Healthcare Systems, Inc. Delaware 14%
Managed Dental Care, Inc. California 100%
The Guardian Baillie Gifford
International Fund Massachusetts 30%
The Guardian Investment Quality Bond Fund Massachusetts 52%
Baillie Gifford International Fund Maryland 15%
Baillie Gifford Emerging Markets Fund Maryland 23%
The Guardian Tax-Exempt Fund Massachusetts 86%
The Guardian Asset Allocation Fund Massachusetts 17%
The Guardian Park Avenue Small Cap Fund Massachusetts 57%
The following list sets forth the persons directly controlled by
affiliates of Guardian Life, and thereby indirectly controlled by Guardian Life,
as of __________, 1999:
Approximate
Percentage of Voting
Securities Owned
Place of Incorporation by Guardian Life
Name of Entity or Organization Affiliates
-------------- ---------------------- --------------------
Guardian Investor Services New York 100%
Corporation
Guardian Baillie Gifford Limited 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%
Item 25. Indemnification
Reference is made to Registrant's Articles of Incorporation which have
been filed as Exhibit Number 1 to Post-Effective Amendment No. 17 to the
Registration Statement on April 28, 1998 and are incorporated herein by
reference.
C-2
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
Guardian Investor Services Corporation ("GISC") acts as the sole
investment adviser for The Guardian Stock Fund, Inc., The Guardian Cash Fund,
Inc., The Guardian Bond Fund, Inc., and six of the eight operational series
funds comprising The Park Avenue Portfolio, namely: The Guardian Cash Management
Fund, The Guardian Park Avenue Fund, The Guardian Park Avenue Small Cap Fund,
The Guardian Investment Quality Bond Fund, The Guardian Tax-Exempt Fund and The
Guardian Asset Allocation Fund and one of the three series funds comprising GIAC
Funds, Inc. namely The Guardian Small Cap Stock Fund. GISC is also the manager
of Gabelli Capital Asset Fund. GISC's principal business address is 201 Park
Avenue South, New York, New York 10003. GISC is also the underwriter of the Park
Avenue Portfolio and GIAC Funds, Inc. In addition, GISC is the distributor of
The Park Avenue Portfolio and variable annuities and variable life insurance
policies offered by The Guardian Insurance & Annuity Company, Inc. ("GIAC")
through its separate accounts. These 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, The Guardian Separate Account K and The Guardian
Separate Account M, are all unit investment trusts registered under the
Investment Company Act of 1940, as amended.
A list of GISC's officers and directors is set forth below, indicating the
business, profession, vocation or employment of a substantial nature in which
each person has been engaged during the past two fiscal years for his or her own
account or in the capacity of director, officer, partner, or trustee, aside from
any affiliation with the Registrant. Except where otherwise noted, the principal
business address of each company is 201 Park Avenue South, New York, New York
10003.
<TABLE>
<CAPTION>
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
<S> <C> <C>
Philip H. Dutter Director Independent Consultant (self-employed).
Director: The Guardian Life Insurance Company of America.
Director: The Guardian Insurance & Annuity Company, Inc.
William C. Warren Director Retired. Director: The Guardian Life Insurance Company of
America.
Director: The Guardian Insurance & Annuity Company, Inc.
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
<S> <C> <C>
Arthur V. Ferrara Director Retired. Chairman of the Board and Chief Executive Officer:
The Guardian Life Insurance Company of America until 12/95.
Director (Trustee) of The Guardian Insurance & Annuity
Company, Inc., Guardian Asset Management Corporation, and
various Guardian-sponsored mutual funds.
John M. Smith President & Executive Vice President: The
Director Guardian Life Insurance Company of America. Executive Vice
President and Director: The Guardian Insurance & Annuity
Company, Inc. Director: Guardian Baillie Gifford Ltd.*
Guardian Asset Management Corporation. President: GIAC Funds,
Inc.
Leo R. Futia Director Director: The Guardian Life Insurance Company of America.
Director: The Guardian Insurance & Annuity Company, Inc.
Director/Trustee of Various Guardian-sponsored mutual funds.
Director/Trustee of various mutual funds sponsored by Value
Line, Inc.**
Ryan W. Johnson Senior Vice President Vice President, Equity Sales, The Guardian Life Insurance
and National Sales Company of America since 2/98; Second Vice President, Equity
Director Sales, prior thereto.
Frank J. Jones Director Executive Vice President and Chief Investment Officer: The
Guardian Life Insurance Company of America. Director,
Executive Vice President and Chief Investment Officer: The
Guardian Insurance & Annuity Company, Inc. Director:
Guardian Asset Management Corporation. Officer of various
Guardian-sponsored mutual funds.
</TABLE>
- --------------------------------------------------------------------------------
* Principal business address:1 Rutland Court, Edinburgh EH#3 8EY, Scotland.
** Principal business address:711 Third Avenue, New York, NY10017.
C-4
<PAGE>
<TABLE>
<CAPTION>
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
<S> <C> <C>
Joseph D. Sargent Director President and Chief Executive Officer: The Guardian Life
Insurance Company, since 1/96; President and Director prior
thereto. President, Chief Executive Officer and Director: The
Guardian Insurance & Annuity Company, Inc. and Park Avenue
Life Insurance Company. Director: Guardian Asset Management
Corporation. Director: Guardian Baillie Gifford, Ltd.*
Frank L. Pepe Vice President & Vice President and Equity
Controller Controller, Equity Products: The Guardian Life Insurance
Company of America. Vice President and Controller: The
Guardian Insurance & Annuity Company, Inc. Controller:
Guardian Asset Management Corporation. Officer of various
Guardian-sponsored mutual funds.
Richard T. Potter, Jr. Vice President and Vice President and Equity Counsel: The Guardian Life
Counsel Insurance Company of America. Counsel: The Guardian Insurance
& Annuity Company, Inc., Guardian Asset Management
Corporation and various Guardian-sponsored mutual funds.
Donald P. Sullivan, Jr. Vice President Second Vice President: The Guardian
Life Insurance Company of America since 1/95; Assistant Vice
President prior thereto. Vice President: The Guardian
Insurance & Annuity Company, Inc.
Kevin S. Alter Second Director, Broker-Dealer Operations: The
Vice President Guardian Life Insurance Company of America.
Peggy L. Coppola Second Assistant Vice President, Equity Sales Support,
Vice President The Guardian Life Insurance Company of America. Second Vice
President, The Guardian Insurance & Annuity Company Inc.
Ann T. Kearney Second Vice Second Vice President: Group Pensions:
President The Guardian Life Insurance Company of America. Second Vice
President: The Guardian Insurance & Annuity Company, Inc.
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
<S> <C> <C>
Alexander M. Grant, Jr. Second Vice Second Vice President: Investments: The Guardian Life Insurance
President Company of America since 1/97; Assistant Vice President prior
thereto. Officer of various Guardian-sponsored mutual funds.
Earl C. Harry Treasurer Treasurer: The Guardian Life Insurance Company of America
since 7/96, Assistant Treasurer prior thereto. Treasurer,
The Guardian Insurance & Annuity Company.
Joseph A. Caruso Vice President and Vice President and Secretary, The Guardian Life
Secretary Insurance Company of America. Vice President and Secretary:
The Guardian Insurance & Annuity Company, Inc., Secretary:
Park Avenue Life Insurance Company, Guardian Asset Management
Corporation and various Guardian-sponsored mutual funds.
</TABLE>
Item 27. Principal Underwriters
(a) GISC is the principal underwriter and distributor of the ten series
funds (eight of which are currently offered) comprising The Park Avenue
Portfolio, namely: The Guardian Park Avenue Fund, The Guardian Park Avenue Small
Cap Fund, The Guardian Park Avenue Tax-Efficient Fund, The Guardian Cash
Management Fund, The Guardian Investment Quality Bond Fund, The Guardian High
Yield Bond Fund, The Guardian Tax-Exempt Fund, The Guardian Baillie Gifford
International Fund, The Guardian Baillie Gifford Emerging Markets Fund and The
Guardian Asset Allocation Fund. In addition, GISC is the distributor of variable
annuities and variable life insurance policies offered by GIAC through GIAC's
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, and The Guardian Separate Account M, which are
all registered as unit investment trusts under the Investment Company Act of
1940, as amended. These latter separate accounts buy and sell shares of The
Guardian Stock Fund, Inc., The Guardian Bond Fund, Inc., The Guardian Cash Fund,
Inc. and GIAC Funds, Inc. on behalf of GIAC's variable contractowners.
C-6
<PAGE>
(b) The principal business address of the officers and directors of GISC
listed below is 201 Park Avenue South, New York, New York 10003.
Position(s) Position(s)
Name with Underwriter with Registrant
---- ---------------- ---------------
John M. Smith President & Director None
Arthur V. Ferrara Director Director
Leo R. Futia Director Director
Peter L. Hutchings Director None
Philip H. Dutter Director None
William C. Warren Director None
Joseph D. Sargent Director Chairman
Frank J. Jones Director President
Ryan W. Johnson Senior Vice President and None
National Sales Director
Frank L. Pepe Vice President & Controller Vice President
Richard T. Potter, Jr. Counsel Counsel
Donald P. Sullivan, Jr. Vice President None
Ann T. Kearney Second Vice President Controller
Alexander M. Grant, Jr. Second Vice President Treasurer
Kevin S. Alter Second Vice President None
Peggy L. Coppola Second Vice President None
Earl C. Harry Treasurer None
Joseph A. Caruso Secretary Secretary
(c) Not Applicable.
Item 28. 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 Investment Company Act of 1940 and the
rules promulgated thereunder are maintained by the custodian and the transfer
agent for the Registrant, the State Street Bank and Trust Company, 1776 Heritage
Drive, North Quincy, Massachusetts 02171. The Registrant's corporate records are
maintained by the Registrant at 201 Park Avenue South, New York, New York 10003.
Item 29. Management Services
None.
Item 30. Undertakings
Not applicable.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, the Registrant, The Guardian Bond Fund, Inc. has duly
caused this Post-Effective Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York and the State of New York on the 26th day of February, 1999.
THE GUARDIAN BOND FUND, INC.
By /s/ FRANK J. JONES
---------------------------------
Frank J. Jones
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
/s/FRANK J. JONES President
- --------------------------------- (Principal Executive Officer)
Frank J. Jones
/s/ALEXANDER M. GRANT* Treasurer
- --------------------------------- (Principal Financial Officer)
Alexander M. Grant
/s/FRANK L. PEPE* Controller
- --------------------------------- (Principal Accounting Officer)
Frank L. Pepe
/s/JOHN C. ANGLE* Director
- ---------------------------------
John C. Angle
Director
- ---------------------------------
Frank J. Fabozzi
/s/ARTHUR V. FERRARA* Director
- ---------------------------------
Arthur V. Ferrara
/s/LEO R. FUTIA* Director
- ---------------------------------
Leo R. Futia
/s/WILLIAM W. HEWITT, JR.* Director
- ---------------------------------
William W. Hewitt, Jr.
/s/SIDNEY I. LIRTZMAN* Director
- ---------------------------------
Sidney I. Lirtzman
Director
- ---------------------------------
Joseph D. Sargent
Director
- ---------------------------------
Carl W. Schafer
/s/ROBERT G. SMITH* Director
- ---------------------------------
Robert G. Smith
*By /s/ JOHN M. SMITH Date: February 26, 1999
- ---------------------------------
John M. Smith
Pursuant to a Power of Attorney
