SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Year Ended Commission File Nos.
September 30, 1995 33-22548, 33-33686
- -------------------------- --------------------
THE GUARDIAN REAL ESTATE ACCOUNT
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
----------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-2656036
- ------------------------------- ---------------------
(State of incorporation) (IRS Employer
Identification No.)
201 Park Avenue South, New York, New York 10003
-----------------------------------------------
(Address of principal executive offices)
(212) 598-8000
-------------------------------
(Registrant's Telephone Number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
--- --
<PAGE>
THE GUARDIAN REAL ESTATE ACCOUNT
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Registrant)
INDEX TO
REPORT ON FORM 10-Q
-------------------
PART I - Financial Information Page
- ------------------------------ ----
Item 1. Financial Statements
Statements of Assets and Liabilities as of September 30, 1995
(Unaudited) and December 31, 1994 (Audited) .................. 3
Statements of Operations for the nine months ended
September 30, 1995, 1994 and 1993 and the three months
ended September 30, 1995 (Unaudited) ......................... 4
Statement of Changes in Net Assets for the
nine months ended September 30, 1995 (Unaudited)
and for the years ended December 31, 1994
and 1993 (Audited) ........................................... 5
Notes to Financial Statements (Unaudited) ...................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................ 12
PART II - Other Information
- ---------------------------
Item 1. Legal Proceedings .............................................. 14
Item 2. Changes in Securities .......................................... 14
Item 3. Defaults Upon Senior Securities ................................ 14
Item 4. Submission of Matter to a Vote
of Security Holders ........................................ 14
Item 5. Other Information .............................................. 14
Item 6. Exhibits and Reports on Form 8-K ............................... 14
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<PAGE>
THE GUARDIAN REAL ESTATE ACCOUNT
OF THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
ASSETS: (Unaudited) (Audited)
----------- ------------
<S> <C> <C>
Investment Properties at Fair Value
(Original cost: $22,271,625 and $22,405,832, respectively) $12,350,000 $12,350,000
Long-Term Investments at Fair Value
(Original cost: $2,469,483) 2,418,468 2,128,404
Cash 1,205 1,402
Short-Term Investments 1,015,000 905,000
Other Receivables 152,955 86,760
----------- -----------
TOTAL ASSETS $15,937,628 $15,471,566
=========== ===========
LIABILITIES:
Accrued Real Estate Expenses $ 65,287 $ 34,804
Accrued Operating Expenses and Taxes 49,185 111,489
Unearned Rent 0 149,457
Annuitant Mortality Fluctuation Fund 81,303 72,500
Other Liabilities 110,554 37,368
----------- -----------
TOTAL LIABILITIES 306,329 405,618
----------- -----------
NET ASSETS REPRESENTING
CONTRACTOWNERS' EQUITY:
Value Guard 4,571,737 4,623,454
Guardian Investor 4,900,469 4,812,744
ValuePlus 492,106 433,899
Guardian Insurance & Annuity Co., Inc. 5,666,987 5,195,851
----------- -----------
TOTAL NET ASSETS 15,631,299 15,065,948
----------- -----------
TOTAL LIABILITIES AND NET ASSETS $15,937,628 $15,471,566
=========== ===========
Number of Units Outstanding:
Variable Annuity Contractowners
Value Guard 496,550 542,296
Guardian Investor 589,502 624,615
ValuePlus Contractowners 51,685 49,518
The Guardian Insurance & Annuity Co., Inc. 568,614 568,614
Unit Value:
Variable Annuity Contractowners
Value Guard $9.2070 $8.5039
Guardian Investor $8.3129 $7.6880
ValuePlus Contractowners $9.5213 $8.7625
The Guardian Insurance & Annuity Co., Inc. $9.9663 $9.1377
</TABLE>
See Notes to the Financial Statements
-3-
<PAGE>
THE GUARDIAN REAL ESTATE ACCOUNT
OF THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1995, 1994, and 1993
and the Three Months Ended September 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months Nine Months Ended September 30,
Ended September 30, Ended September 30, -------------------------------
1995 1995 1994 1993
-------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Rental $ 1,567,253 $ 511,768 $ 1,415,018 $ 1,892,165
Interest 159,844 52,697 149,953 33,611
Other Income 0 0 0 983
----------- ----------- ----------- -----------
Total Income 1,727,097 564,465 1,564,971 1,926,759
----------- ----------- ----------- -----------
Expenses:
Real Estate Operating Expenses 356,297 120,572 291,315 326,073
Real Estate Taxes 198,705 65,960 199,768 203,324
Management Advisory Fees 104,316 35,951 104,540 109,134
Repairs and Maintenance 150,325 47,665 171,988 139,086
Administrative Expenses 87,811 28,673 84,771 91,833
Miscellaneous Expenses 0 0 0 11,726
----------- ----------- ----------- -----------
Total Expenses 897,454 298,821 852,382 881,176
----------- ----------- ----------- -----------
Net Investment Income Before Realized Gains
And Net Unrealized (Depreciation)/Appreciation $ 829,643 $ 266,644 $ 712,589 $ 1,045,583
Realized Gains -- -- -- --
Net Unrealized (Depreciation)/Appreciation in
Value of Investments 428,658 25,394 (881,952) (1,989,527)
----------- ----------- ----------- -----------
Net (Decrease)/Increase in Net Assets
Resulting from Operations $ 1,258,301 $ 292,038 ($ 169,363) ($ 943,944)
=========== =========== =========== ===========
</TABLE>
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<PAGE>
THE GUARDIAN REAL ESTATE ACCOUNT
OF THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Nine Months Ended September 30, 1995 (Unaudited) and the
Years Ended December 31, 1994, 1993 and 1992 (Audited)
<TABLE>
<CAPTION>
Contractowners The Guardian Insurance
----------------------------------------------------------- &
Value Guard Guardian Investor ValuePlus Annuity Company, Inc. Total
----------------------------------------------------------- --------------------- -----
Units Amount Units Amount Units Amount Units Amount
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1992 ......... 985,815 $11,690,726 470,360 $5,068,776 43,119 $519,279 283,185 $3,503,229 $20,782,010
Equity contributed/(withdrawn)
during 1992 ..................... (176,843) (2,100,387) 30,200 335,929 (2,703) (33,823) -- -- (1,798,281)
Net (Decrease)/Increase in Net
Assets .......................... -- (1,576,583) -- (906,488) -- (76,899) -- (547,722) (3,107,692)
-------- ----------- ------- ---------- ------ -------- ------- ---------- -----------
Balance - December 31, 1992 ....... 808,972 8,013,756 500,560 4,498,217 40,416 408,557 283,185 2,955,507 15,876,037
Equity contributed/(withdrawn)
during 1993 ..................... (136,902) (1,296,702) 100,358 872,515 42,729 408,675 181,774 1,800,000 1,784,488
Net (Decrease)/Increase in Net
Assets .......................... -- (895,504) -- (656,878) -- (78,712) -- (470,281) (2,101,375)
-------- ----------- ------- ---------- ------ -------- ------- ---------- -----------
Balance - December 31, 1993 ....... 672,070 5,821,550 600,918 4,713,854 83,145 738,520 464,959 4,285,226 15,559,150
Equity contributed/(withdrawn)
during 1994 ..................... (129,774) (1,108,091) 23,697 198,176 (33,627) (295,377) 103,655 950,000 (255,292)
Net (Decrease)/Increase in Net
Assets .......................... -- (90,005) -- (99,286) -- (9,244) -- (39,375) (237,910)
-------- ----------- ------- ---------- ------ -------- ------- ---------- -----------
Balance - December 31, 1994 ....... 542,296 $4,623,454 624,615 4,812,744 49,518 $433,899 568,614 $5,195,851 $15,065,948
-------- ----------- ------- ---------- ------ -------- ------- ---------- -----------
Equity contributed/(withdrawn)
during 1995 ..................... (45,746) (415,390) (35,113) (296,560) 2,167 20,699 -- -- (691,251)
Net (Decrease)/Increase in Net
Assets .......................... -- 363,673 -- 384,285 -- 37,508 -- 471,136 1,256,602
-------- ----------- ------- ---------- ------ -------- ------- ---------- -----------
Balance - September 30, 1995 ...... 496,550 $4,571,737 589,502 4,900,469 51,685 $492,106 568,614 $5,666,987 $15,631,299
======== ========== ======= ========= ====== ======== ======= ========== ===========
</TABLE>
See Notes to the Financial Statements
-5-
<PAGE>
THE GUARDIAN REAL ESTATE ACCOUNT
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
September 30 1995
(Unaudited)
Note 1 - Organization
Organization
The Guardian Real Estate Account (the "Account") of The Guardian Insurance
& Annuity Company, Inc. (GIAC) was established in 1987 under Delaware Insurance
Law as an insurance company separate account. Participating interests in the
Account are registered under the Securities Act of 1933 and are offered by GIAC
as an investment option under certain variable life insurance policies and
variable deferred annuity contracts (the "Contracts"). GIAC is a wholly owned
subsidiary of The Guardian Life Insurance Company of America ("The Guardian").
The obligations to Contractowners and beneficiaries arising under the
Contracts are general corporate obligations of GIAC. GIAC is the legal owner of
the assets in the Account. GIAC will at all times, however, maintain assets in
the Account with a total market value at least equal to the amounts credited
under each Contract which participates in the Account. These assets may not be
charged with liabilities which arise from any other business conducted by GIAC.
The Board of Directors of GIAC has authorized a total investment of up to
$25 million to enable the Account to acquire a portfolio of real estate-related
investments to meet its investment objectives and policies. Pursuant to this
authority, GIAC has contributed capital to the Account from time to time since
its inception to provide funds for acquisitions and to preserve liquidity. GIAC
has also withdrawn contributed funds when it has appeared that such withdrawals
would not adversely affect the interests of Contractowners and all legal
requirements have been met. GIAC's most recent contributions to the Account were
made on December 27, 1993, July 27,1994 and October 28, 1994, when $1,800,000,
$400,000 and $550,000 respectively were invested. At September 30, 1995, GIAC
maintained 35% ownership of the Account.
The Account is authorized to invest in income-producing real property,
participating mortgage loans, conventional mortgage loans, real property
purchase-leaseback transactions and in short-term or intermediate-term debt
instruments for liquidity purposes.
The Account owns three properties. Two of the three properties are office
buildings located in Glastonbury, Connecticut which were acquired for $7,921,854
and $7,644,386, respectively. The third property is an office/distribution
facility located in Kennesaw, Georgia which was acquired on October 1, 1991 for
$5,134,068, including acquisition fees.
-6-
<PAGE>
Note 2 - Summary of Significant Accounting Policies
Real Estate Investment Properties
Investments in real estate are stated at estimated fair value; accordingly
the Account does not record depreciation. Real estate assets owned by the
Account are initially valued at their respective purchase prices. Thereafter,
the values will ordinarily be based upon appraisal reports on the real estate-
related assets prepared by independent real estate appraisers. Independent
appraisals are typically performed on at least an annual basis. The Account
reserves the right, however, to prepare the annual appraisals internally. The
property valuations are also reviewed internally at least every three months and
adjusted if it is determined that there has been a change in the value of one or
more of the properties since the last valuation.
The purpose of an appraisal is to estimate the fair value of a property as
of a specific date. Fair value is defined as the most probable price for which
the appraised property will sell in a competitive market under all conditions
requisite to fair sale, with the buyer and seller each acting prudently,
knowledgeably, and for self interest, and assuming that neither is under undue
duress. This estimation of fair value through the appraisal process inherently
requires the exercise of subjective judgements. Capital improvements are
recognized only to the extent that the valuation process acknowledges a
corresponding increase in fair value.
Short-term Investments
The short-term investments held by the Account will consist of the types
and quality of investments authorized for purchase by the Account. These
instruments include: U.S. Government securities; securities issued or fully
guaranteed by U.S. Government agencies; repurchase agreements; certificates of
deposit; banker's acceptances; and commercial paper. Short-term investments are
valued at amortized cost which approximates market.
At September 30, 1995, the Account's short-term investments consisted of a
repurchase agreement with State Street Bank and Trust Co. which matures on
October 2, 1995. The collateral under the repurchase agreement consists of a
U.S. Treasury Note, held in safekeeping in the name of the Account at State
Street Bank and Trust Co., the Account's custodian (Note 9). Repurchase
agreements held by the Account are fully collateralized (including the interest
earned thereon) and marked to market daily during the entire term of such
agreements. If the value of the underlying collateral falls below the value of
the repurchase price plus accrued interest, the Account will require the seller
to deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults, the Account maintains
the right to sell the collateral and may claim any resulting loss against the
seller.
Long-term Investments
Long-term investments are carried at market value. Securities listed on
national securities exchanges are valued based upon closing prices on these
exchanges. Securities traded in the over-the-counter market and listed
securities for which there have been no trades for the day are valued at the
mean of the bid and asked prices.
Net realized gain or loss on sales of investments is determined on the
basis of identified cost. Interest income, including amortization of premium and
discount, is recorded when earned.
-7-
<PAGE>
Revenue Recognition
Income from properties and other investments, as well as expenses, are
recorded on the accrual basis.
Federal Income Taxes
The operations of the Account are part of the operations of GIAC and, as
such, are included in the combined tax return of GIAC. GIAC is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended.
Under tax law, no federal income taxes are payable by GIAC with respect to
the operations of the Account. However, GIAC reserves the right to charge taxes
attributable to the Account in the future.
Note 3 - Investment Advisory Agreements And Related Parties Transactions
The investment managers of the Account are O'Connor Realty Advisors
Incorporated ("O'Connor Realty") and Guardian Investor Services Corporation
("GISC"). O'Connor Realty, a wholly owned subsidiary of J.W. O'Connor & Co.,
Inc., provides various management services with respect to the real
estate-related investments of the Account. GISC, a wholly owned subsidiary of
GIAC, provides services with respect to the assets maintained in cash and
short-term and intermediate-term marketable debt instruments.
The Account is charged a daily fee to compensate O'Connor Realty for its
investment management services. This fee amounts to 1.0% per year of the average
daily assets of the Account managed by O'Connor Realty. The Account is also
charged a daily fee to compensate GISC for its investment management services.
This fee amounts to 0.50% per year of the average daily net assets of the
Account managed by GISC.
GIAC has been assuming certain operating expenses of the Account since the
Account's inception. The amount of this subsidy has declined from 100% of such
expenses to the present level of 25%. GIAC has agreed to continue its 25%
assumption of certain operating expenses of the Account during 1995. For the
nine months ended September 30, 1995, GIAC assumed expenses of $16,476 related
to the Account. Total expenses assumed by GIAC were $32,362 and $31,440 for the
years ended December 31, 1994 and 1993, respectively.
For the nine months ended September 30, 1995, investment management fees
earned by GISC totalled $12,174 and investment management fees earned by
O'Connor Realty totalled $92,142. For the year ended December 31, 1994,
investment management fees earned by GISC totalled $16,446 and investment
management fees earned by O'Connor Realty totalled $122,898. For the year ended
December 31, 1993, investment management fees earned by GISC totalled $1,817 and
investment management fees earned by O'Connor Realty totalled $136,972. No
portion of the expenses directly related to the operations of the real
estate-related investments or O'Connor Realty's investment management fee are
subsidized.
Note 4 - Real Estate-Related Expenses
In addition to investment management fees and expenses, certain other
expenses and charges attributable to the real estate-related operations of the
Account are also charged against the Account. All costs of acquisition,
administration and disposition of the real estate-related investments are
-8-
<PAGE>
charged to the account. These costs include brokerage fees, appraisal fees,
attorneys' fees, architects' fees, engineers' fees and accountants' fees
incurred in connection with the investment process. In addition, the Account
will incur recurring costs such as mortgage servicing fees, annual audit
charges, accounting and legal fees and various administrative expenses. Other
expenses, such as insurance costs, taxes, and property management fees, will
ordinarily be deducted from rental income, thereby reducing the gross income of
the Account.
Note 5 - Leases
The buildings in the Account are leased to corporate tenants under various
lease arrangements. The leases expire at various times through 2000 in the
Glastonbury, Connecticut buildings. Leases renewed during 1993 and 1994 provide
for rental payments which are generally lower than previous rental rates,
reflecting market declines. The lease for the Kennesaw, Georgia facility expires
in the third quarter of 2001. Aggregate minimum rentals for the three buildings
are as follows:
Fiscal Year Ending
December 31,
------------------
1995 $ 2,083,573
1996 2,113,057
1997 2,189,861
1998 1,817,825
1999 1,362,710
2000 699,897
2001 470,250
-----------
Total $10,737,173
===========
Certain leases provide for additional rents based upon operating costs in
excess of given base amounts. For the nine months ended September 30, 1995,
rental income included approximately $59,006 such additional rental income. For
the years ended December 31, 1994 and 1993, rental income included approximately
$86,757 and $243,000, respectively, of such additional rental income.
Note 6 - Annuitant Mortality Fluctuation Fund
The Annuitant Mortality Fluctuation Fund is a special fund established in
response to various regulatory requirements and provides for any possible
adverse experience inherent in the transaction of annuity business.
Note 7 - Other Charges
Included in the Account's total expenses are mortality and expense risk
charges which are calculated on a daily basis and applied to the Contracts and
thus to each Contractowner's interest by GIAC.
-9-
<PAGE>
NOTE 8
THE GUARDIAN REAL ESTATE ACCOUNT
OF THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
REAL ESTATE
September 30, 1995
<TABLE>
<CAPTION>
Costs
capitalized
subsequent Gross cost
Initial cost to cost at close
to Account acquisitions of period
---------------- ------------ --------------
Buildings Improvements Buildings
Encum- and and Carrying and Date of Date
Description brances Land Improvements Costs Land Improvements Total Construction Acquired
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Construction
45 Somerset Square completed in
Office Building - late 1988
Glastonbury, CT. ..... $0 $ 871,668 $ 7,050,186 $1,002,247 $ 871,668 $ 8,052,433 $ 8,924,101 and early 1989 6/12/89
Construction
115 Somerset Square completed in
Office Building - late 1988
Glastonbury, CT. ..... 0 843,441 6,800,945 569,070 843,441 7,370,015 8,213,456 and early 1989 6/12/89
955 Cobb Place Blvd.
Office Building Construction
Warehouse Facility - completed
Kennesaw, GA. ........ 0 751,187 4,382,881 0 751,187 4,382,887 5,134,068 in late 1991 10/01/91
------------------------------------------------------------------------------
Total .............. $0 $2,466,296 $18,234,012 $1,571,317 $2,466,296 $19,805,335 $22,271,625
==============================================================================
A) Reconciliation of investment property September 30, December 31,
owned: 1995 1994 1993 1992
--------------------------------------------------------
Real Estate at beginning of year ............. $22,405,832 $21,436,043 $20,713,469 $20,721,118
Net Acquisitions (dispositions) .............. 0 0 0 (20,811)
Capital Improvements and Carrying Costs ...... (134,207) 969,789 722,574 13,162
--------------------------------------------------------
Balance at the end of the period ............. $22,271,625 $22,405,832 $21,436,043 $20,713,469
========================================================
B) Total tax basis for properties based on
historical cost:
45 Somerset Square Office Building -
Glastonbury, CT. ........................... $ 7,638,633
115 Somerset Square Office Building -
Glastonbury, CT. ........................... $ 6,955,328
955 Cobb Place Blvd. Office Building Warehouse
Facility -
Kennesaw, GA. .............................. $ 4,700,623
</TABLE>
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<PAGE>
NOTE 9
THE GUARDIAN REAL ESTATE ACCOUNT
OF THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
MARKETABLE SECURITIES
For Nine Months Ended September 30, 1995
<TABLE>
<CAPTION>
Market Value Amount Carried
Description Par Value Cost 9/30/95 on Balance Sheet
----------- --------- ---- -------- ----------------
<S> <C> <C> <C> <C>
Marketable Securities:
Repurchase Agreement:
State Street Bank and Trust Company
repurchase agreement at 6.15% due
10/2/95, maturity value $1,015,520
(collateralized by $985,000 U.S. Treasury
Notes plus accrued interest, 6.625% due
3/31/97, market value at 9/29/95 was
$1,028,069) $1,015,000 $1,015,000 $1,015,000 $1,015,000
---------- ---------- ---------- ----------
Fixed Maturities:
Indianapolis Power & Light Company
7.375% due 8/01/07 1,000,000 1,068,011 1,041,330 1,041,330
GTE Southwest Inc.
6.54% due 12/01/05 1,400,000 1,401,472 1,377,138 1,377,138
---------- ---------- ---------- ----------
2,400,000 2,469,483 2,418,468 2,418,468
---------- ---------- ---------- ----------
Total Marketable Securities $3,415,000 $3,484,483 $3,433,468 $3,433,468
========== ========== ========== ==========
</TABLE>
See Notes to the Financial Statements
-11-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
As of September 30, 1995, the Account's net assets totalled $15,631,299.
Of this amount, $9,964,312 was attributable to Contractowner interests and
$5,666,987 was attributable to GIAC. At December 31, 1994, the Account's
net assets totalled $15,065,948. The Account's current source of funds is
primarily Contractowner contributions, although in December 1993, July
1994 and October 1994 GIAC contributed $1.8 million, $400,000, and
$550,000 respectively, to the Account to diversify its portfolio of
investments.
As of September 30, 1995, almost 80% of the Account's assets were invested
in real estate-related assets and the remainder was invested in permitted
fixed-income instruments. This ratio (i.e., approximately 80/20) of real
estate to liquid assets remained fairly steady throughout the last
eighteen months, and the Account remained able to meet its obligations
under GlAC's variable Contracts to pay benefits and effect transfers. GIAC
believes that the Account will continue to be sufficiently liquid to meet
Contract obligations. Furthermore, GIAC has indicated its willingness to
contribute to the Account in the future to permit the acquisition of
additional assets or to meet liquidity needs. However, there can be no
assurance that GIAC will make additional contributions to the Account.
Based on the conclusions of an internal appraisal, the building at 45
Glastonbury Boulevard has been valued at $3,550,000 and the building at
115 Glastonbury Boulevard has been valued at $3,700,000 as of September
30, 1995. These appraised values remained unchanged from the year-end 1994
values which were based on an independent external appraisal. Both
Glastonbury buildings have declined in value from their respective
acquisition costs. The persistent economic downturn in the Northeast
generally and Connecticut specifically have adversely affected these
buildings. Most of the leases for space within the buildings have been
renegotiated or renewed at lower rates than those which were in force when
the buildings were acquired. This has contributed to the decline in value
for both of the Glastonbury buildings.
The Account's real estate-related investment located in Kennesaw, Georgia
was also appraised by an internal appraiser as of September 30, 1995. The
appraised value remained unchanged from its year-end 1994 value of
$5,100,000. Thus, the current appraised value is slightly lower than its
acquisition cost of $5,131,350. This valuation does not reflect the
potential renewal of the current lease, nor any potential expansion of the
facility. Both are uncertain at this time, but could add to the property's
value if they were to occur.
Cash and liquid securities held by the Account increased during the nine
months ended September 30, 1995 by $109,803, mainly as a result of net
rental income.
Results of Operations
The Account's net assets increased as a result of operations for the
period ended September 30, 1995. For the nine months ended September 30,
1994, net assets decreased by $587,664. Total revenues for the same time
periods were $1,727,097 and $1,564,971. For the nine months ended
September 30, 1993, the increase in total revenues of the account was
$1,926,759.
The Account's expenses for the nine months ended September 30, 1995
totalled $897,454 as compared to $852,382 for the nine months ended
September 30, 1994 and $881,176 for the nine months ended September 30,
1993. The foregoing expense amounts include the effects of subsidization.
Since the Account's inception, GIAC has subsidized all or a portion of the
Account's operating expenses, and until January 1, 1993, GISC waived
portions of its management fee. The termination of GISC's fee waiver did
not result in a net increase in the Account's expenses, however, since
O'Connor Realty's management fee has declined in coordination with the
declines in the aggregate values of the Account's real estate-related
investments. If GIAC ceases to subsidize the Account's expenses, the
ultimate return realized by Contractowners who have interests in the
Account will decrease.
Finally, the Account has experienced net withdrawals of Contractowner
contributions for the nine months ended September 30, 1995, and the years
ended 1994 and 1993. While Contractowner withdrawals were significantly
offset by GIAC contributions for the years ended December 31, 1993 and
1994, the Account's inability to attract and retain Contractowner
contributions has hindered its efforts to expand its investment portfolio.
The Account is offered as one of several investment options under the
Contracts. When comparing the relative attractiveness of the investment
options and considering the recent economic and market climate,
Contractowners have generally elected to allocate their Contract values
among other investment options offered under the Contracts. Accordingly,
the Account has not flourished concomitantly with increases in premiums
received by GIAC for the Contracts which offer the Account as an
investment option.
-12-
<PAGE>
Item 3. Financial Statements and Supplementary Data
The financial statements and supplementary data listed in the accompanying
Index to Financial Statements and Supplementary Data are incorporated
herein by reference and filed as a part of this report.
Item 4. Disagreements on Accounting and Financial Disclosure
None.
-13-
<PAGE>
PART II
-------
Item 1. Legal Proceedings
- -------------------------
None.
Item 2. Changes in Securities
- -----------------------------
None.
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
Contractowners participating in the Account have no voting rights with
respects to the Account.
Item 5. Other Information
- -------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits to the Report
----------------------
There are no exhibits to this Report.
(b) Reports filed on Form 8-K
-------------------------
The Registrant did not file any reports on Form 8-K during the quarter
ended September 30, 1995.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Guardian Real Estate Account
of
The Guardian Insurance & Annuity
Company, Inc.
(Registrant)
By /s/ THOMAS R. HICKEY, JR. November 13, 1995
---------------------------------
Thomas R. Hickey, Jr.
Vice President
By /s/ FRANK L. PEPE November 13, 1995
---------------------------------
Frank L. Pepe
Vice President and Controller
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Sep-30-1995
<CASH> 1,205
<SECURITIES> 3,433,468
<RECEIVABLES> 152,955
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,587,628
<PP&E> 12,350,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,937,628
<CURRENT-LIABILITIES> 225,026
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 15,631,299
<TOTAL-LIABILITY-AND-EQUITY> 15,937,628
<SALES> 1,727,097
<TOTAL-REVENUES> 1,727,097
<CGS> 642,813
<TOTAL-COSTS> 642,813
<OTHER-EXPENSES> 254,641
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,258,301
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,258,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,258,301
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
</TABLE>
