Post-Effective Amendment No. 8
As filed with the Securities and Exchange Commission on April 30, 1998
Registration Nos. 33-35696
811-5880
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
POST-EFFECTIVE AMENDMENT NO. 8
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT No. 12
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THE GUARDIAN SEPARATE ACCOUNT D
(Exact name of trust)
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THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
201 Park Avenue South, New York, New York 10003
(Complete Address of Principal Executive Offices)
Depositor's Telephone Number: (212) 598-8259
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RICHARD T. POTTER, JR., ESQ.
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003
(Name and address of agent for service)
Copy to:
STEPHEN E. ROTH, ESQ.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
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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
|X| on May 1, 1998 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|_| on (date) pursuant to paragraph (a)(1) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(2) of Rule 485
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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The Registrant has registered an indefinite number of its securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. The notice required by such rule for the Registrant's most fiscal
year was filed on March 26, 1998.
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<PAGE>
THE GUARDIAN SEPARATE ACCOUNT D
Registration Statement on Form N-4
Location in Registration
Form N-4 Item No. Statement
Part A
Item 1. Cover Page............................ Cover
Item 2. Definitions........................... Glossary of Special Terms
Used in This Prospectus
Item 3. Synopsis.............................. Summary of the Contracts;
Expense Table
Item 4. Condensed Financial Information....... Condensed Financial
Information
Item 5. General Description of Registrant,
Depositor and Portfolio Companies .... Descriptions of GIAC and the
Separate Account;
Descriptions of the Variable
Investment Options;
Description of the
Fixed-Rate Option; Voting
Rights
Item 6. Deductions............................ Charges and Deductions;
Distribution of the
Contracts
Item 7. General Description of Variable
Annuity Contracts..................... Descriptions of the Contracts
Item 8. Annuity Period........................ Annuity Period
Item 9. Death Benefit......................... Pre-Retirement Death
Benefit; Accumulation
Period; Annuity Period
Item 10. Purchases and Contract Value.......... Descriptions of the Contracts
Item 11. Redemptions........................... Surrenders and Partial
Withdrawals; Right to Cancel
the Contract
Item 12. Taxes................................. Federal Tax Matters
Item 13. Legal Proceedings..................... Legal Proceedings
Item 14. Table of Contents of the Statement
of Additional Information............. Additional Information
Part B
Item 15. Cover Page............................ Cover Page
Item 16. Table of Contents..................... Table of Contents
Item 17. General Information and History....... Not Applicable
Item 18. Services.............................. Services to Separate Account
Item 19. Purchase of Securities Being Offered.. Valuation of Assets of the
Separate Account;
Transferability Restrictions
Item 20. Underwriters.......................... Services to Separate Account
Item 21. Calculation of Performance Data....... Performance Data
Item 22. Annuity Payments...................... Annuity Payments
Item 23. Financial Statements.................. Financial Statements
Part C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
May 1, 1998
GROUP UNALLOCATED DEFERRED VARIABLE ANNUITY CONTRACT
Offered by
The Guardian Insurance & Annuity Company, Inc.
The Group Unallocated Deferred Variable Annuity Contract ("Contract")
described in this Prospectus is issued by The Guardian Insurance & Annuity
Company, Inc. ("GIAC"), and is designed to provide annuity benefits under group
pension and profit sharing plans entitled to favorable federal income tax
treatment under the Internal Revenue Code of 1986 ("Code"), as amended
("qualified retirement plans"), and certain other retirement plans which are not
entitled to such federal income tax benefits ("non-qualified retirement plans")
(collectively referred to as the "Plans"). Generally, for federal income tax
purposes, earnings credited to Contracts issued in connection with non-qualified
retirement plans will be taxed on an annual basis.
The Contract described in this Prospectus is a Flexible Premium Payment
Contract. A minimum initial premium payment of $5,000 is required and the
minimum for subsequent premium payments is $500. The premium payment less any
state or local premium taxes constitute the Net Premium Payment. Net Premium
Payments for the Contract may be allocated in up to six of the allocation
options underlying the Contract. Contract values will accumulate on either a
variable or fixed basis, depending on the options selected. These options
currently consist of the following: (1) shares of The Guardian Stock Fund, Inc.,
The Guardian Bond Fund, Inc., The Guardian Cash Fund, Inc., The Guardian Small
Cap Stock Fund, Baillie Gifford International Fund, Baillie Gifford
Emerging Markets Fund, Value Line Strategic Asset Management Trust, Value
Line Centurion Fund, Inc., Gabelli Capital Asset Fund and MFS Growth With Income
Series (collectively referred to as the "Funds"); and (2) allocations to the
Fixed-Rate Option. Net Premium Payments and Contract values allocated to any of
the Funds will vary in accordance with the investment performance of such Funds.
Net Premium Payments and Contract values allocated to the Fixed-Rate Option will
accumulate on a fixed basis. The Contractowner bears the investment risk of
growth or loss under the Contract, except to the extent that amounts are
allocated to the Fixed-Rate Option.
This Prospectus sets forth the information that a prospective
Contractowner should know before investing. A Statement of Additional
Information concerning the Contracts and The Guardian Separate Account D (The
"Separate Account") is available for free by writing to GIAC at its Customer
Service Office, P.O. Box 26210, Lehigh Valley, Pennsylvania 18002 or by calling
1-800-221-3253. The Statement of Additional Information, which is also dated May
1, 1998, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The table of contents for the Statement of
Additional Information appears at the end of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
EACH OF THE FOLLOWING VARIABLE INVESTMENT OPTIONS: THE GUARDIAN STOCK FUND, THE
GUARDIAN BOND FUND, THE GUARDIAN CASH FUND, THE GUARDIAN SMALL CAP STOCK FUND,
BAILLIE GIFFORD INTERNATIONAL FUND, BAILLIE GIFFORD EMERGING MARKETS FUND, VALUE
LINE STRATEGIC ASSET MANAGEMENT TRUST, VALUE LINE CENTURION FUND, GABELLI
CAPITAL ASSET FUND AND MFS GROWTH WITH INCOME SERIES.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS OF PROSPECTUS
Page
----
Glossary of Special Terms Used in this Prospectus............... 3
Summary of the Contract......................................... 5
Expense Table................................................... 7
Condensed Financial Information................................. 9
Descriptions of GIAC and the Separate Account................... 11
Descriptions of the Variable Investment Options................. 13
Description of the Fixed-Rate Option............................ 16
Description of the Contract..................................... 17
General Information....................................... 17
Purchasing a Contract..................................... 17
Charges and Deductions.................................... 18
Accumulation Period....................................... 19
Annuity Period............................................ 20
Transfers of Contract Values.............................. 22
Surrenders and Partial Withdrawals........................ 23
Other Important Contract Information...................... 24
Performance Results............................................. 26
Federal Tax Matters............................................. 28
Voting Rights................................................... 34
Distribution of the Contract.................................... 34
Right to Cancel the Contract.................................... 34
Year 2000 Compliance ........................................... 35
Legal Proceedings............................................... 35
Additional Information.......................................... 35
The Contract may not be available in all states.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUSES
FOR THE VARIABLE INVESTMENT OPTIONS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
2
<PAGE>
GLOSSARY OF SPECIAL TERMS USED IN THIS PROSPECTUS
Accumulation Period: The period between the issue date of the Contract and the
Annuity Commencement Date of the last annuitizing Participant.
Accumulation Unit: A unit of measure used to determine the value of a
Contractowner's interest under the Contract. The Contract has two types of
Accumulation Units: Variable Accumulation Units and Fixed Accumulation Units.
Accumulation Value: The value of the Contractowner's interest under the Contract
during the Accumulation Period. As each Participant reaches his or her Annuity
Commencement Date, the Accumulation Value is reduced by the value of the
Accumulation Units used by the Contractowner to purchase an Annuity for such
Participant.
Annuitant: The person upon whose life annuity payments are based (normally the
recipient of annuity payments). The Annuitant may also be referred to as the
"Plan Participant" or, simply, the "Participant."
Annuity: A series of periodic payments made during the lifetime of the
Annuitant, with or without payments certain for a fixed period, or for the joint
lifetimes of the Annuitant and another person and thereafter during the lifetime
of the survivor.
Annuity Commencement Date: The date on which Annuity Payments to a Participant
begin pursuant to the terms of the Plan.
Annuity Payments: Periodic payments, either variable or fixed in nature, made by
GIAC to Annuitants at regular intervals following each Annuitant's Annuity
Commencement Date.
Annuity Period: The period during which an Annuitant receives Annuity Payments.
Annuity Unit: A unit of measure used to determine the amount of any variable
Annuity Payments.
Beneficiary: The person to whom benefits may be paid upon the Annuitant's death.
In the event a Beneficiary is not designated, the estate of the Annuitant is the
Beneficiary.
Certificate: A document issued to each Participant upon his or her Annuity
Commencement Date which sets forth the terms of the Annuity Payments and any
other benefits to which the Participant is entitled under the Contract.
Contract Anniversary Date: The annual anniversary measured from the issue date
of the Contract.
Contractowner: The entity designated as the owner in the Contract.
Fixed-Rate Option: A deposit option to which the Contractowner may allocate Net
Premium Payments and Accumulation Values for investment in the general account
of GIAC. GIAC guarantees that the amount deposited will not decline in value and
that interest will be added at a guaranteed rate declared periodically in
advance.
Funds: The ten diversified open-end management investment companies or series
thereof underlying the Contract. Contractowners may allocate Net Premium
Payments and Accumulation Values to the Funds through the corresponding
Investment Divisions of the Separate Account. The Funds are: The Guardian Stock
Fund, The Guardian Bond Fund, The Guardian Cash Fund, The Guardian Small Cap
Stock Fund, Baillie Gifford International Fund, Baillie Gifford Emerging Markets
Fund, Value Line Strategic Asset Management Trust, Value Line Centurion Fund,
Gabelli Capital Asset Fund and MFS Growth With Income Series.
Investment Division: A division of the Separate Account, the assets of which
consist solely of shares of the corresponding Fund.
3
<PAGE>
Net Premium Payment: A purchase payment or premium paid by the Contractowner to
GIAC in accordance with the Contract, less any applicable premium taxes. The Net
Premium Payment is credited to the Investment Divisions of the Separate Account
and/or the Fixed-Rate Option.
Participant: An eligible employee pursuant to the terms of the Plan under which
the Contract is issued. A Participant may also be referred to as a "Plan
Participant" or "Annuitant."
Plan: The group pension, profit sharing or other group employer sponsored
retirement plan under which the Contract is issued. The Plan may or may not
qualify for Federal tax benefits under the Internal Revenue Code. Any reference
to a Plan includes any Trust established by a Contractowner as a group employer
sponsored retirement plan.
Surrender Value: The amount payable to the Contractowner upon termination of the
Contract.
Valuation Period: The period of time from one determination of Accumulation Unit
and Annuity Unit values to the next subsequent determination of these values.
Variable Annuity: An annuity providing for payments that vary in amount to
reflect the investment experience of the Variable Investment Options.
Variable Investment Options: The Funds constitute the Variable Investment
Options (as distinguished from the Fixed-Rate Option) available under the
Contract for allocations of Net Premium Payments, Accumulation Values and
Annuity Unit values.
4
<PAGE>
SUMMARY OF THE CONTRACT
The Contract described in this Prospectus is designed to provide annuity
benefits for the lives of the Participants (Annuitants) pursuant to the Annuity
Payout Option selected and the Plan under which the Contract has been issued.
The Contract provides several underlying allocation options among which the
Contractowner may select to pursue its investment objectives. If an Annuity
Payout Option is selected that provides for monthly payments during the lifetime
of the Annuitant, GIAC promises to make Annuity Payments continuously for the
life of each Annuitant under the Contract even if such Annuitant outlives the
life expectancy used in computing his or her Annuity. While GIAC is obligated to
make Annuity Payments regardless of the longevity of the Annuitants under the
Plan, the amount of variable Annuity Payments is not guaranteed. With respect to
amounts attributable to the Variable Investment Options, no assurance can be
given that the value of the Contract, or the aggregate value of the Accumulation
Units used to purchase Annuities on behalf of Plan Participants under the
Contract, will equal or exceed the payments allocated to such Variable
Investment Options.
GIAC provides for variable and fixed accumulations and benefits under the
Contract by crediting the Net Premium Payments to as many as six of the Variable
Investment Options or five Variable Investment Options and the Fixed-Rate
Option, as selected by the Contractowner. (See "Descriptions of the Variable
Investment Options," page 13, and "Description of the Fixed-Rate Option," page
16.) To the extent the Contractowner has allocated values to one or more of the
Variable Investment Options, the Contract value and the amount accumulated to
purchase Annuities on behalf of Plan Participants will depend upon the
investment performance of the Variable Investment Options. Amounts allocated to
the Fixed-Rate Option will accrue interest at a rate not less than the
guaranteed minimum interest rate specified in the Contract. (See "Accumulation
Period," page 19, and "Annuity Period," page 20.) The investment risk under the
Contract is borne by the Contractowner during the Accumulation Period except to
the extent that Accumulation Values are allocated to the Fixed-Rate Option where
the investment risk is borne by GIAC. The investment risk of gain or loss under
the Contract is borne by the Annuitant during the Annuity Period if values are
then allocated to the Variable Investment Options.
Contract values may be transferred among the Investment Divisions of the
Separate Account by the Contractowner with respect to the Accumulation Value
under the Contract and by each Annuitant with respect to amounts held under a
Certificate, subject to certain terms and conditions and in accordance with the
Plan. Certain restrictions apply to transfers to or from the Fixed-Rate Option.
(See "Transfers of Contract Values," page 22.)
If permitted by the Plan, a Participant may elect to have Annuity Payments
made under any one of the variable and/or fixed Annuity Payout Options specified
in the Contract. If the Plan does not permit the Participant to select an
Annuity Payout Option, Annuity Payments will be made pursuant to the option
known as "Life Annuity with 10-year Guaranteed Period." (See "Annuity Payout
Options," page 20.)
The Contract contains the following additional features which are
described in more detail in this Prospectus:
(1) No sales charges are deducted from Contract payments. However,
if part or all of the Accumulation Value is withdrawn during certain
periods of time following the payment of premiums, GIAC will deduct from
such Accumulation Value a contingent deferred sales charge of 6.0%. A
penalty tax may be imposed on all or a portion of such withdrawals. (See
"Charges and Deductions," page 18, "Surrenders and Partial Withdrawals,"
page 23, and "Federal Tax Matters," page 28.)
(2) Charges for the assumption by GIAC of the mortality and expense
risks under the Contract, the administrative expenses incurred by GIAC and
state premium taxes, if any, are deducted from the Accumulation Value.
(See "Charges and Deductions," page 18.) In addition, the Funds impose
certain
5
<PAGE>
charges against their respective assets. (See the applicable Fund
prospectus for information about these charges.)
(3) In certain states, the Contractowner may cancel a Contract no
later than ten (10) days after receiving it by returning the Contract
along with written notice of cancellation to GIAC. Longer periods may
apply in some states. (See "Right to Cancel the Contract," page 34.)
Certain federal income tax advantages are currently available for a
Contract issued in connection with a retirement Plan which qualifies under
Section 401 of the Code. The Contract is also available in connection with
deferred compensation plans of state and municipal governments and of tax-exempt
employers under Section 457 of the Code. The Contract is offered in connection
with other deferred compensation arrangements under which the Contract may not
qualify as an annuity for Federal income tax purposes. (See "Federal Tax
Matters," page 28.)
6
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE TABLE
- --------------------------------------------------------------------------------
CONTRACTOWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases:.......................... None
Exchange Fee:............................................... None
Contingent Deferred Sales Charge:
This charge will be the lesser of:*
(a) 6% of the total payments made during the 84 months
immediately preceding the date of withdrawal, or
(b) 6% of the amount being withdrawn.
Annual Contract Administration Fee.......................... $35.00
Separate Account Level Annual Expenses
(as a percentage of daily net asset value):
Mortality and Expense Risk Charge........................ 1.15%
Account Fees and Expenses................................ 0%
Total Separate Account Annual Expenses............... 1.15%
Investment Division Level Annual Expenses**
(as a percentage of average net assets)
Total Fund
Management Other Operating
Fees Expenses Expenses
---------- -------- -----------
The Guardian Cash Fund....................... .50% .04% .54%
The Guardian Bond Fund....................... .50% .05% .55%
The Guardian Stock Fund...................... .50% .02% .52%
The Guardian Small Cap Stock Fund ........... .75% .21% .96%
Baillie Gifford International Fund........... .80% .17% .97%
Baillie Gifford Emerging Markets Fund........ 1.00% .40% 1.40%
Value Line Centurion Fund.................... .50% .10% .60%
Value Line Strategic Asset Management Trust.. .50% .09% .59%
Gabelli Capital Asset Fund................... 1.00% .17% 1.17%
MFS Growth With Income Series+ .............. .75% .25% 1.00%
- --------------------------------------------------------------------------------
* After the first Contract year, 10% of the Accumulation Value as of the
first withdrawal in a Contract year or 10% of the total premium paid under
the Contract in the last 84 months immediately preceding the date of
withdrawal, whichever is greater, can be withdrawn annually without
charge. The maximum amount of this charge during the 84 months immediately
preceding the date of withdrawal will not exceed 6% of the total of
payments made during such period.
** These percentages reflect the actual fees and expenses incurred by each
Fund during the year ended December 31, 1997, except that the percentages
for The Small Cap Stock Fund are annualized, since the Fund commenced
operations on April 2, 1997. The percentages for Value Line Centurion Fund
and Value Line Strategic Asset Management Trust reflect (as part of "Other
Expenses" and "Total Fund Operating Expenses") the effects of expense
reimbursement arrangements pursuant to which each of these Funds
reimburses GIAC for certain administrative and shareholder servicing
expenses incurred by GIAC on their behalf.
+ The Adviser of MFS Growth With Income Series has agreed to bear expenses
for the Series, subject to reimbursement by the Series, such that the
Series' "Other Expenses" shall not exceed 0.25% of the average daily net
assets of the Series during the current fiscal year. Otherwise, "Other
Expenses" and "Total Operating Expenses" for the Series would be .35% and
1.10%, respectively.
- --------------------------------------------------------------------------------
7
<PAGE>
The following table is designed to assist the Contractowner in
understanding the various costs and expenses of the Separate Account and its
underlying Funds. (See "Charges and Deductions," and see the accompanying Fund
prospectuses for a more complete description of the various costs and expenses.)
Comparison of Contract Expenses Among Underlying Funds
<TABLE>
<CAPTION>
Hypotheticals
- ----------------------------------------------------------------------------------------------------------
If the Contractowner surrenders the
Contract at the end of If the Contractowner does not
the applicable time period: surrender the contract:
The following expenses would The following expenses would
be imposed on a $1,000 be imposed on a $1,000
investment, assuming a 5% investment, assuming a 5%
annual return on assets: annual return on assets:
----------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
THE GUARDIAN CASH FUND $78 $114 $153 $203 $18 $54 $93 $203
- ----------------------------------------------------------------------------------------------------------
THE GUARDIAN BOND FUND $78 $115 $154 $204 $18 $55 $94 $204
- ----------------------------------------------------------------------------------------------------------
THE GUARDIAN STOCK FUND $77 $114 $152 $201 $17 $54 $92 $201
- ----------------------------------------------------------------------------------------------------------
THE GUARDIAN SMALL CAP
STOCK FUND $82 $127 $175 $248 $22 $67 $115 $248
- ----------------------------------------------------------------------------------------------------------
BAILLIE GIFFORD
INTERNATIONAL FUND $82 $128 $176 $249 $22 $68 $116 $249
- ----------------------------------------------------------------------------------------------------------
BAILLIE GIFFORD EMERGING
MARKETS FUND $86 $141 $198 $293 $26 $81 $138 $293
- ----------------------------------------------------------------------------------------------------------
VALUE LINE CENTURION FUND $78 $116 $157 $209 $18 $56 $97 $209
- ----------------------------------------------------------------------------------------------------------
VALUE LINE STRATEGIC ASSET
MANAGEMENT TRUST $78 $116 $156 $208 $18 $56 $96 $208
- ----------------------------------------------------------------------------------------------------------
GABELLI CAPITAL ASSET FUND $84 $134 $186 $270 $24 $74 $126 $270
- ----------------------------------------------------------------------------------------------------------
MFS GROWTH WITH INCOME SERIES $82 $129 $177 $252 $22 $69 $117 $252
- ----------------------------------------------------------------------------------------------------------
</TABLE>
This expense comparison assumes that the expenses reported in the expense
table on the foregoing page will be the expenses incurred during the periods
shown above. This comparison is not a representation of past or future expenses.
Actual expenses may be higher or lower than those shown. The effect of the
annual contract fee was calculated by: (1) dividing the total amount of such
fees for the year ended December 31, 1997 by the total average net assets for
such year; (2) adding this percentage to annual expenses; and (3) calculating
the dollar amounts. Premium taxes ranging from approximately 0.50% to 3.5% are
currently imposed by certain states, counties and municipalities on premium
payments made under the Contracts. When applicable, such taxes reduce the amount
of each premium payment available for allocation under the Contracts. See
"Charges and Deductions -- Premium Taxes."
8
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the
financial statements of the Separate Account, which were audited by Price
Waterhouse LLP, independent accountants, for the years ended December 31, 1992
through 1997, and by other independent auditors for the prior periods. The data
should be read in conjunction with the financial statements, related notes and
other financial information from the Separate Account's 1997 Annual Report to
Contractowners which are incorporated by reference into the Statement of
Additional Information. A copy of the 1997 Annual Report to Contractowners and
the Statement of Additional Information may be obtained by calling or writing
GIAC's Customer Service Office. The address and phone number appear on the cover
of this Prospectus.
Selected data for accumulation units of the Separate Account outstanding
at the end of each period:
TAX QUALIFIED AND NON-TAX QUALIFIED
<TABLE>
<CAPTION>
Variable Accumulation Unit Year Ended December 31,
Value at Beginning of Period: 1997 1996 1995 1994 1993 1992 1991
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
The Guardian Cash Fund ............... $12.785111 $12.319068 $11.808794 $11.506661 $11.340994 $11.115363 $10.648908
The Guardian Stock Fund .............. 27.313449 21.774794 16.358812 16.762756 14.136306 11.910247 8.862117
The Guardian Bond Fund ............... 15.960396 15.694939 13.502913 14.148558 13.029142 12.238317 10.655367
The Guardian Small Cap Stock Fund .... 10.00** N/A N/A N/A N/A N/A N/A
Gabelli Capital Asset Fund ........... 11.797549 10.750707 10.00++ N/A N/A N/A N/A
Baillie Gifford International Fund ... 16.012486 14.035634 12.765807 12.802570 9.662405 10.739267 10.00*
Baillie Gifford Emerging Markets Fund 10.626424 8.628815 8.782325 10.00+ N/A N/A N/A
Value Line Centurion Fund ............ 28.096610 24.224164 17.494618 18.098849 16.765815 16.012030 10.643745
Value Line Strategic Asset Management
Trust .............................. 24.854247 21.700306 17.078883 18.163921 16.427405 14.444559 10.194445
MFS Growth With Income Series ........ 10.00** N/A N/A N/A N/A N/A N/A
Variable Accumulation Unit
Value at End of Period:
- --------------------------------------
The Guardian Cash Fund ............... $13.288611 $12.785111 $12.319068 $11.808794 $11.506661 $11.340994 $11.115363
The Guardian Stock Fund .............. 36.606672 27.313449 21.774794 16.358812 16.762756 14.136306 11.910247
The Guardian Bond Fund ............... 17.194958 15.960396 15.694939 13.502913 14.148558 13.029142 12.238317
The Guardian Small Cap Stock Fund .... 11.314256 N/A N/A N/A N/A N/A N/A
Gabelli Capital Asset Fund ........... 16.628626 11.797549 10.750707 N/A N/A N/A N/A
Baillie Gifford International Fund ... 17.717096 16.012486 14.035634 12.765807 12.802570 9.662405 10.739267
Baillie Gifford Emerging Markets Fund 10.711125 10.626424 8.628815 8.782325 N/A N/A N/A
Value Line Centurion Fund ............ 33.713529 28.096610 24.224164 17.494618 18.098849 16.765815 16.012030
Value Line Strategic Asset Management
Trust .............................. 28.414943 24.854247 21.700306 17.078883 18.163921 16.427405 14.444559
MFS Growth With Income Series ........ 10.394790 N/A N/A N/A N/A N/A N/A
Period from
January 16, 1990***
Variable Accumulation Unit to December 31,
Value at Beginning of Period: 1990
- -------------------------------------- ---------------
The Guardian Cash Fund ............... $10.00
The Guardian Stock Fund .............. 10.00
The Guardian Bond Fund ............... 10.00
The Guardian Small Cap Stock Fund .... N/A
Gabelli Capital Asset Fund ........... N/A
Baillie Gifford International Fund ... N/A
Baillie Gifford Emerging Markets Fund N/A
Value Line Centurion Fund ............ 10.00
Value Line Strategic Asset Management
Trust .............................. 10.00
MFS Growth With Income Series ........ N/A
Variable Accumulation Unit
Value at End of Period:
- --------------------------------------
The Guardian Cash Fund ............... $10.648908
The Guardian Stock Fund .............. 8.862117
The Guardian Bond Fund ............... 10.655367
The Guardian Small Cap Stock Fund .... N/A
Gabelli Capital Asset Fund ........... N/A
Baillie Gifford International Fund ... N/A
Baillie Gifford Emerging Markets Fund N/A
Value Line Centurion Fund ............ 10.643745
Value Line Strategic Asset Management
Trust .............................. 10.194445
MFS Growth With Income Series ........ N/A
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
TAX QUALIFIED
Number of Variable Accumulation Year Ended December 31,
Units Outstanding at End of Period: 1997 1996 1995 1994 1993 1992 1991
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
The Guardian Cash Fund ............... 6,727,794 7,321,876 6,926,901 6,899,486 4,605,152 4,598,975 3,653,165
The Guardian Stock Fund .............. 30,904,192 27,746,820 23,534,061 18,824,239 12,501,820 6,559,579 3,290,347
The Guardian Bond Fund ............... 6,393,335 6,810,309 7,014,567 6,312,515 6,016,214 4,175,926 2,017,037
The Guardian Small Cap Stock Fund .... 2,107,128 N/A N/A N/A N/A N/A N/A
Gabelli Capital Asset Fund ........... 2,663,507 1,933,134 991,190 N/A N/A N/A N/A
Baillie Gifford International Fund ... 8,104,837 8,047,579 7,289,479 7,632,246 3,944,746 1,571,181 732,319
Baillie Gifford Emerging Markets Fund 2,175,481 1,522,784 749,143 248,098 N/A N/A N/A
Value Line Centurion Fund ............ 5,678,747 5,667,373 4,771,855 4,045,695 3,406,565 2,515,056 1,302,089
Value Line Strategic Asset Management
Trust .............................. 17,793,318 18,177,711 16,584,130 15,618,595 12,594,766 7,568,013 3,081,311
MFS Growth With Income Series ........ 199,543 N/A N/A N/A N/A N/A N/A
Period from
January 16, 1990***
Number of Variable Accumulation to December 31,
Units Outstanding at End of Period: 1990
- -------------------------------------- ---------------
The Guardian Cash Fund ............... 1,700,209
The Guardian Stock Fund .............. 1,187,543
The Guardian Bond Fund ............... 577,640
The Guardian Small Cap Stock Fund .... N/A
Gabelli Capital Asset Fund ........... N/A
Baillie Gifford International Fund ... N/A
Baillie Gifford Emerging Markets Fund N/A
Value Line Centurion Fund ............ 222,225
Value Line Strategic Asset Management
Trust .............................. 800,545
MFS Growth With Income Series ........ N/A
<CAPTION>
NON-TAX QUALIFIED
Number of Variable Accumulation Year Ended December 31,
Units Outstanding at End of Period: 1997 1996 1995 1994 1993 1992 1991
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
The Guardian Cash Fund ............... 7,181,851 7,380,883 7,241,159 8,107,403 5,394,541 3,895,295 3,061,803
The Guardian Stock Fund .............. 24,675,427 22,529,110 19,937,985 16,594,903 12,589,044 6,112,466 3,294,032
The Guardian Bond Fund ............... 5,641,462 5,852,776 6,096,789 5,358,555 5,776,313 4,257,072 2,194,420
The Guardian Small Cap Stock Fund .... 1,574,232 N/A N/A N/A N/A N/A N/A
Gabelli Capital Asset Fund ........... 2,309,346 1,814,916 1,157,178 N/A N/A N/A N/A
Baillie Gifford International Fund ... 6,351,899 7,047,241 6,575,473 7,442,570 4,620,707 1,499,668 582,292
Baillie Gifford Emerging Markets Fund 2,246,907 1,848,596 691,090 358,340 N/A N/A N/A
Value Line Centurion Fund ............ 4,796,414 5,376,867 4,892,644 4,263,710 4,010,263 3,147,495 1,948,573
Value Line Strategic Asset Management
Trust .............................. 12,587,806 13,034,700 12,026,703 11,773,225 10,438,598 5,611,106 2,135,711
MFS Growth With Income Series ........ 246,298 N/A N/A N/A N/A N/A N/A
Period from
January 16, 1990***
Number of Variable Accumulation to December 31,
Units Outstanding at End of Period: 1990
- -------------------------------------- ---------------
The Guardian Cash Fund ............... 1,672,889
The Guardian Stock Fund .............. 1,399,202
The Guardian Bond Fund ............... 711,186
The Guardian Small Cap Stock Fund .... N/A
Gabelli Capital Asset Fund ........... N/A
Baillie Gifford International Fund ... N/A
Baillie Gifford Emerging Markets Fund N/A
Value Line Centurion Fund ............ 284,113
Value Line Strategic Asset Management
Trust .............................. 413,038
MFS Growth With Income Series ........ N/A
</TABLE>
- ----------
* Commencing February 8, 1991.
+ Commencing October 17, 1994.
++ Commencing May 1, 1995.
** Commencing July 16, 1997.
*** Commencement of operations.
10
<PAGE>
DESCRIPTIONS OF GIAC AND THE SEPARATE ACCOUNT
GIAC
The Guardian Insurance & Annuity Company, Inc. ("GIAC") is a stock life
insurance company incorporated in the State of Delaware in 1970. GIAC is the
issuer of the Contract offered under this Prospectus. GIAC is licensed to
conduct an insurance business in all 50 states and the District of Columbia and
had total assets (statutory basis) of over $7.9 billion as of December 31, 1997.
GIAC's Executive Office is located at 201 Park Avenue South, New York, New York
10003. The address of GIAC's Customer Service Office for these Contracts is P.O.
Box 26210, Lehigh Valley, Pennsylvania 18002.
GIAC is wholly owned by The Guardian Life Insurance Company of America
("Guardian Life"), a mutual life insurance company organized in the State of New
York in 1860. As of December 31, 1997, Guardian Life had total assets (statutory
basis) in excess of $14.0 billion. Guardian Life is not the issuer of the
Contracts offered under this Prospectus and does not guarantee the benefits
provided therein.
GIAC's statutory basis financial statements appear in the Statement of
Additional Information.
The Separate Account
GIAC established the Separate Account in August 1989. The Separate Account
is registered as a unit investment trust under the Investment Company Act of
1940, as amended (the "1940 Act"), and meets the definition of "separate
account" under the Federal securities laws. The Separate Account receives and
invests payments from Contractowners and owners of certain individual deferred
variable annuity contracts issued by GIAC. In addition, the Separate Account may
receive and invest payments for other variable annuity contracts offered by
GIAC.
There are ten Investment Divisions (which correspond to the ten Funds)
available for allocations of Net Premium Payments and Accumulation Values under
the Contracts. Each Investment Division invests in a specific underlying Fund
and thus reflects that Fund's investment performance. Each such Investment
Division is available for allocations under tax qualified or non-tax qualified
Plans. GIAC is the record owner of all of the Fund shares held by each
Investment Division but passes through the voting rights in such shares. (See
"Voting Rights.")
Each Investment Division is administered and accounted for as part of the
general business of GIAC. Under Delaware law, the income and capital gains or
capital losses of each Investment Division are credited to or charged against
the assets held in that Division in accordance with the terms of each Contract,
without regard to other income, capital gains or capital losses of the other
Investment Divisions. The obligations arising under the Contracts are
obligations of GIAC. Delaware insurance law provides that the assets of the
Separate Account are not chargeable with liabilities arising out of any other
business GIAC may conduct. (See "Federal Tax Matters.")
Assets of the Separate Account attributable to a Contract are invested in
shares of up to six of the Funds as selected by the Contractowner or Annuitant.
Selecting the Fixed-Rate Option reduces the number of Funds which may be
selected for allocation of Net Premium Payments and Accumulation Values. No
sales charges are assessed against premium payments invested in the Funds under
the Contract. Transfers among the Investment Divisions may currently be effected
without fee, penalty or other charge by notifying GIAC's Customer Service Office
in writing or by telephone. (See "Transfers of Contract Values.")
All dividends and capital gains distributions received from a Fund are
reinvested in such Fund's shares at net asset value and retained as assets of
the Separate Account through allocation to the applicable
11
<PAGE>
Investment Division. Fund shares will be redeemed by GIAC at their net asset
value to the extent necessary to purchase Annuities or to make other payments
under the Contract.
GIAC retains the right, subject to applicable law, to (1) deregister the
Separate Account under the 1940 Act; (2) operate the Separate Account as a
management investment company or any other form permitted by law; (3) combine
any two or more separate accounts or Investment Divisions; (4) transfer the
assets of the Separate Account to another separate account; and (5) modify the
Contracts as necessary to preserve the favorable tax treatment accorded to them
under the Code, including modifications designed to prevent the Contractowner
from being considered the owner of the assets of the Separate Account or the
Fixed-Rate Option and, consequently, to be subject to taxation.
12
<PAGE>
DESCRIPTIONS OF THE VARIABLE INVESTMENT OPTIONS
The Funds
Each Fund has a different investment objective which it tries to achieve
by following specified investment policies. The objective and policies of each
Fund will affect its potential returns and its risks. There is no guarantee that
a Fund will achieve its investment objective. The following chart states the
investment objective and lists typical portfolio investments of each Fund
currently available through the Separate Account.
Each of the Funds is an open-end diversified management investment company
or series thereof, and is registered with the SEC under the 1940 Act. Such
registration does not involve any supervision by the SEC of the investment
management or policies of the Funds. The Funds do not impose a sales charge or
"load" for buying and selling their shares, so GIAC buys and sells shares at net
asset value in response to Contractowner-requested and other Contract
transactions.
All of the Funds are also available under other variable annuity contracts
funded by the Separate Account. Certain of the Funds are available under other
separate accounts supporting certain GIAC variable annuity contracts and
variable life insurance policies. Although GIAC does not anticipate any inherent
difficulties in offering these Funds to more than one separate account, it is
possible that certain conflicts of interest may arise in connection with the use
of the same Funds under both variable life insurance policies and variable
annuity contracts. While each Fund's Board of Directors intends to monitor
events in order to identify and, if deemed necessary, act upon any material
irreconcilable conflicts that may possibly arise, GIAC may also take action to
protect Contractowners. See the accompanying prospectuses for the Funds for more
information regarding such possible conflicts of interest.
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE(S) TYPICAL INVESTMENTS
===================================================================================================================================
<S> <C> <C>
The Guardian Stock Fund Long-term growth of capital U.S. common stocks and convertible securities
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Small Cap Stock Long-term growth of capital Common stocks and convertible securities issued
Fund by companies with small market capitalization
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Bond Fund Maximum income without undue risk of principal; Investment grade debt obligations and U.S.
capital appreciation as a secondary objective government securities, including mortgage-backed
securities
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian Cash Fund High level of current income consistent with Money market instruments
liquidity and preservation of capital
- -----------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford International Long-term capital appreciation Common stocks and convertible securities
Fund issued by foreign companies
- -----------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford Emerging Long-term capital appreciation Common stocks and convertible securities issued
Markets Fund by companies that are organized in, generally
operate in or which principally sell their
securities in emerging market countries
- -----------------------------------------------------------------------------------------------------------------------------------
Value Line Centurion Fund Long-term growth of capital U.S. common stocks ranked 1 or 2 by the Value
Line Ranking System*
- -----------------------------------------------------------------------------------------------------------------------------------
Value Line Strategic Asset High total investment return (current income and U.S. common stocks ranked 1 or 2 by the Value
Management Trust capital appreciation) consistent with reasonable Line Ranking System,* bonds and money market
risk instruments
- -----------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund Growth of capital; current income as a secondary U.S. common stocks and convertible securities
objective
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Growth With Income Series Long-term growth of capital and income Common stocks and convertible securities issued
by U.S. and foreign companies.
===================================================================================================================================
</TABLE>
Certain of the Funds may not be available in all States.
- ----------
* The Value Line Ranking System has been used substantially in its present form
since 1965. The System ranks stocks on a scale of 1 (highest) to 5 (lowest)
for year-ahead relative performance (timeliness).
13
<PAGE>
GIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Fund shares held by any Investment
Division. GIAC reserves the right to eliminate the shares of any of the Funds
and to substitute shares of another Fund, or of another registered open-end
management investment company or series thereof or other appropriate investment
vehicle, if: (1) the shares of the Fund are no longer available for investment;
(2) in GIAC's view it has become inappropriate to continue investing in the
Fund's shares. To the extent required by the 1940 Act, substitutions of shares
attributable to a Contractowner's interest in an Investment Division will not be
made until the Contractowner has been notified of the change.
A more detailed description of the investment objectives, policies,
charges, and expenses of the Funds may be found in the accompanying prospectuses
for the Funds. Read the prospectuses carefully before investing.
The Funds' Investment Advisers
The Guardian Stock Fund, The Guardian Bond Fund, The Guardian Cash Fund
and The Guardian Small Cap Stock Fund (the "Small Cap Fund") are advised by
Guardian Investor Services ("GISC"), 201 Park Avenue South, New York, New York
10003. GISC is registered as an investment adviser under the Investment Advisers
Act of 1940 (the "Advisers Act"). GISC is wholly owned by GIAC. Each of these
Funds, except the Small Cap Fund, pays GISC an investment advisory fee at an
annual rate of 0.50% of the Fund's average daily net assets for the services and
facilities GISC provides to the Fund. The Small Cap Fund pays GISC an investment
advisory fee at an annual rate of 0.75% of the Fund's average daily net assets.
GISC also serves as the manager of Gabelli Capital Asset Fund and as the
investment adviser of eight of the ten series comprising The Park Avenue
Portfolio, a family of mutual funds.
The Baillie Gifford International Fund (the "International Fund") and
Baillie Gifford Emerging Markets Fund (the "Emerging Markets Fund") are advised
by Guardian Baillie Gifford Limited ("GBG"), 1 Rutland Court, Edinburgh, EH3
8EY, Scotland. GBG is registered as an investment adviser under the Advisers Act
and is a member of Great Britain's Investment Management Regulatory Organization
Limited ("IMRO"). GBG was incorporated in Scotland in November 1990 and is
wholly owned by GIAC (51%) and Baillie Gifford Overseas Limited ("BG Overseas")
(49%). GBG also serves as the investment adviser of two of the ten series
comprising The Park Avenue Portfolio. GBG receives an investment advisory fee at
an annual rate of 0.80% of the average daily net assets of the International
Fund and 1.00% of the average daily net assets of the Emerging Markets Fund for
the services and facilities GBG provides to the Funds.
GBG has appointed BG Overseas to serve as sub-investment adviser to the
International Fund and the Emerging Markets Fund. Like GBG, BG Overseas is
located at 1 Rutland Court, Edinburgh, EH3 8EY, Scotland. BG Overseas is also
registered under the Advisers Act and is a member of IMRO. BG Overseas is wholly
owned by Baillie Gifford & Co., which is currently one of the largest investment
management partnerships in the United Kingdom. BG Overseas advises several
institutional clients situated outside of the United Kingdom, and is also the
sub-investment adviser to the series of The Park Avenue Portfolio that are
advised by GBG. One half of the investment advisory fee paid by the Funds to GBG
is payable by GBG to BG Overseas for its services as these Funds' sub-investment
adviser. No separate or additional fee is paid by these Funds to BG Overseas.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund
are advised by Value Line, Inc. ("Value Line"), 220 East 42nd Street, New York,
New York 10017. Value Line is registered as an investment adviser under the
Advisers Act. Each of the Value Line Funds pays Value Line an investment
advisory fee at an annual rate of 0.50% of the Fund's average daily net assets
for the services and facilities Value Line provides to these Funds. Each of the
Value Line Funds reimburses GIAC for certain administrative and shareholder
servicing expenses incurred by GIAC on their behalf.
14
<PAGE>
Value Line also serves as the investment adviser to its own family of mutual
funds and publishes The Value Line Investment Survey and The Value Line Mutual
Fund Survey.
Gabelli Capital Asset Fund is managed by GISC, which has appointed Gabelli
Funds, Inc. ("GFI") as the investment adviser to the Fund. GFI is located at One
Corporate Center, Rye, New York 10580, and is registered as an investment
adviser under the Advisers Act. The Fund pays GISC a management fee at an annual
rate of 1.00% of its average daily net assets for services and facilities which
GISC provides to the Fund. For its services as investment adviser, GISC pays GFI
.75% of the management fee which GISC receives from the Fund. No separate or
additional fee is paid by the Fund to GFI. GFI also serves as investment adviser
to various other open-end mutual funds and closed-end mutual funds.
MFS Growth With Income Series is advised by Massachusetts Financial
Services Company ("MFS"), 500 Boylston St., Boston, MA. MFS is registered as an
investment adviser under the Investment Advisers Act of 1940 (the "Advisers
Act") and is a subsidiary of Sun Life of Canada (U.S.), which is itself an
indirect wholly owned subsidiary of Sun Life Assurance Company of Canada. MFS
provides advisory services to other open- and closed-end registered investment
companies, as well as private and institutional investors. As compensation for
its services to the Series, MFS receives a fee, payable monthly, at an annual
rate of .75% of the Series' average daily net assets.
15
<PAGE>
DESCRIPTION OF THE FIXED-RATE OPTION
That portion of each Contract relating to the Fixed-Rate Option is not
registered under the Securities Act of 1933 ("1933 Act") and the Fixed-Rate
Option is not registered as an investment company under the 1940 Act.
Accordingly, neither the Fixed-Rate Option nor any interests therein are subject
to the provisions or restrictions of the 1933 Act or the 1940 Act. However, the
following disclosure about the Fixed-Rate Option may be subject to certain
generally applicable provisions of the federal securities laws regarding the
accuracy and completeness of statements not in prospectuses. The Fixed-Rate
Option may not be available for allocation in all states in which the Contract
is available.
General Information
The Contract permits the Contractowner to allocate all or a portion of any
Net Premium Payment and to transfer all or a portion of the Accumulation Value
under the Contract to the Fixed-Rate Option. An Annuitant may not allocate
amounts held under a Certificate to the Fixed-Rate Option. GIAC guarantees that
amounts invested under the Fixed-Rate Option will accrue interest daily at an
effective annual rate of at least 3.5% (the "guaranteed minimum interest rate").
GIAC may also credit interest at a rate in excess of 3.5% (the "excess interest
rate"), but is under no obligation to do so. Any excess interest rate will be
determined at the sole discretion of GIAC and may be changed by GIAC from time
to time and without notice. The Contractowner assumes the risk that interest
credited on any portion of the Accumulation Value in the Fixed-Rate Option may
not exceed the guaranteed minimum interest rate (3.5%) for any given year.
There is no specific formula for the determination of whether to credit
excess interest or the rate thereof. However, some of the factors that GIAC may
consider are general economic trends, rates of return currently available and
anticipated on GIAC's general account investments, regulatory and tax
requirements and competitive factors. GIAC is aware of no statutory limitations
on the maximum amount of interest it may credit, and the Board of Directors of
GIAC has set no limitations.
The amounts credited to the Fixed-Rate Option become part of the general
assets of GIAC and are segregated from those allocated to any separate account
of GIAC. GIAC invests the assets of the Fixed-Rate Option in those assets chosen
by GIAC and allowed by applicable law. The allocation of any amounts to the
Fixed-Rate Option does not entitle a Contractowner to share in the investment
experience of those assets.
The interest rate initially credited to Contract payments or transfers by
the Contractowner to the Fixed-Rate Option will be the rate in effect on the
date such amounts are so allocated. Each such payment or transfer will continue
to receive the rate of interest initially credited until the next Contract
Anniversary Date.
For a description of certain restrictions which apply to transfers to and
from the Fixed-Rate Option, see "Description of the Contract -- Transfers of
Contract Values."
Renewal Rate and Bailout Provision
On the Contract Anniversary Date, all payments and transfers allocated to
the Fixed-Rate Option during the prior Contract year, together with all interest
earnings and amounts previously allocated by the Contractowner to the Fixed-Rate
Option, will be credited with the rate of interest in effect on that date (the
"renewal rate"). Such renewal rate will be guaranteed with respect to these
amounts until the next Contract Anniversary Date. If the renewal rate (a) is
more than three (3) percentage points below the interest rate credited for the
immediately preceding Contract year, or (b) falls below the minimum bailout rate
specified in the Contract (where approved by the applicable state insurance
departments), a Contractowner may withdraw all or a portion of the amount which
has been held in the Fixed-Rate Option for one year or more without imposition
of a contingent deferred sales charge. Such withdrawal request must be in
writing and received by GIAC at its Customer Service Office within 60 days of
the Contract Anniversary Date. (See "Surrenders and Partial Withdrawals.")
16
<PAGE>
DESCRIPTION OF THE CONTRACT
This section of the Prospectus highlights the more significant provisions
of the Contract. The information included in this section generally describes,
among other things, the benefits, charges, rights and privileges under the
Contract. These descriptions are qualified by reference to a specimen of the
Contract which has been filed as an exhibit to the registration statement for
the Separate Account. The provisions of the Contract may vary slightly from
state to state due to variations in state regulatory requirements.
General Information
The Contract is designed to enable a Contractowner to purchase an Annuity
on behalf of Plan Participants who will be entitled to receive payments on a
fixed and/or variable basis, at some later date, pursuant to the terms of the
Plan. The Contract is primarily designed for use with several types of tax
qualified plans, including private retirement plans established by corporate
employers under Section 401 and public employee deferred compensation plans
under Section 457 of the Code as well as other plans which do not receive
favorable tax treatment. The provisions of the Plan should be referred to in
connection with the description of the Contract contained in this Prospectus.
The Contract offered by this Prospectus is a Flexible Premium Payment
Contract under which Annuity Payments to Plan Participants will begin at
selected future dates on a basis which is elected by the Contractowner in
accordance with the Plan. A minimum premium payment of $5,000 is required with
additional payments of at least $500 accepted. The aggregate of premium payments
made in any Contract year may not exceed $100,000 without GIAC's written
consent. Subject to these restrictions, the amount and frequency of the premium
payments made by the Contractowner may vary pursuant to the terms of the
applicable Plan.
The variable annuity payments provided by the Contract are funded through
investments in the Separate Account. Information regarding the Investment
Divisions of the Separate Account is contained in the sections entitled
"Descriptions of GIAC and the Separate Account," and "Descriptions of the
Variable Investment Options."
Purchasing a Contract
Entities wishing to purchase a Contract must complete an application and
send it with an initial premium payment to The Guardian Insurance & Annuity
Company, Inc., Customer Service Office, P.O. Box 26210, Lehigh Valley,
Pennsylvania 18002. Certified, registered or express mail deliveries must be
addressed to: The Guardian Insurance & Annuity Company, Inc., Customer Service
Office, 3900 Burgess Place, Bethlehem, Pennsylvania 18017.
If the application is acceptable to GIAC in the form received, the initial
Net Premium Payment will be credited within two (2) business days after receipt.
Acceptance is subject to GIAC's rules and GIAC reserves the right to reject any
application or initial premium payment. If the initial Net Premium Payment
cannot be credited within five (5) business days after receipt by GIAC because
the application is incomplete, GIAC will promptly return the premium payment and
application to the applicant.
After issuance of the Contract, net premium payments received by GIAC at
its Customer Service Office prior to the close of GIAC's business day will
normally be credited to the Contract on that day. Net premium payments received
on a non-business day or following the close of GIAC's business day will be
credited at the next accumulation unit value calculated on the first business
day following receipt.
17
<PAGE>
Charges and Deductions
Charges and deductions under the Contract are made for GIAC's assumption
of mortality and expense risks, administrative expenses, any applicable state
premium taxes, and, where applicable, charges (or credits) to the non-tax
qualified allocations to the Variable Investment Options for any Federal income
taxes. The Separate Account does not incur any operating expenses or account
fees and expenses. Although no sales charges are deducted from premium payments
when made, a contingent deferred sales charge will be assessed upon certain
Contract surrenders or withdrawals. Each charge and deduction under the Contract
is described below:
Contingent Deferred Sales Charge: GIAC does not deduct a separate sales
charge in connection with premium payments. However, a contingent deferred sales
charge ("CDSC") is imposed by GIAC on certain surrenders or partial withdrawals
to cover certain expenses incurred in the sale of the Contracts, including
commissions to registered representatives and various promotional expenses.
The CDSC will be the lesser of: (1) 6% of the total payments made during
the 84 months immediately preceding the date of withdrawal annually; or (2) 6%
of the amount being withdrawn. However, after the first Contract year, 10% of
the Accumulation Value as of the first withdrawal in a Contract year or 10% of
the total premium paid under the Contract in the 84 months immediately preceding
the date of withdrawal, whichever is greater, can be withdrawn by the
Contractowner without application of the CDSC. The maximum amount of the CDSC
during the 84 months immediately preceding the date of withdrawal will not
exceed 6% of the total of payments made during such period. Such withdrawals
may, however, be subject to penalty taxes and/or mandatory federal income tax
withholding. (See "Federal Tax Matters".) The CDSC is not charged against
withdrawals of amounts that have been on deposit for more than 84 months.
To minimize the amount of the CDSC charged in any particular situation,
withdrawals from any Variable Investment Option or the Fixed-Rate Option will be
made in the same order in which amounts were allocated to that Option, subject
to the cancellation ordering rules set forth in "Surrenders and Partial
Withdrawals."
No CDSC is imposed on Accumulation Units redeemed by the Contractowner to
purchase Annuities for Plan Participants.
Administrative Expenses: Prior to the Annuity Commencement Date of the
last annuitizing Participant, GIAC deducts a contract administration fee of $35
from the Accumulation Value on the Anniversary Date of each Contract by
cancelling the number of Accumulation Units equal in value to the fee. This
administrative fee is deducted from the Variable Investment Options and the
Fixed-Rate Option on a pro-rata basis in the same proportion as the percentage
of the Contract's Accumulation Value attributable to each Variable Investment
Option and the Fixed-Rate Option. GIAC will not increase the deduction for
administrative expenses above $35 per year. GIAC will deduct the contract
administration fee upon any surrender of a Contract which occurs before the
Contract Anniversary Date. The deduction for administrative expenses is designed
to reimburse GIAC for its actual expenses incurred in administering the
Contracts and it is not expected to result in a profit.
Premium Taxes: Certain states and municipalities impose premium taxes when
premium payments are made or when annuity payments begin. These taxes ranging
from approximately 0.50% to 3.5% of premium payments made for the Contracts. For
those Contracts subject to premium tax, GIAC deducts premium tax either from
premium payments when made or upon each annuitization, as determined in
accordance with applicable law. However, in those jurisdictions where the
premium tax is required to be deducted at the time of premium payment, GIAC
reserves the right, if permitted by applicable law and with the consent of the
Contractowner, to pay the premium tax on behalf of the Contractowner and deduct
the amount paid from the Contract Value at the first to occur of surrender,
death or the Retirement Date.
18
<PAGE>
Mortality and Expense Risk Charge: The mortality risk assumed by GIAC
arises from its contractual obligation to continue to make Annuity Payments
(determined in accordance with the annuity tables and other provisions of the
Contract) to each Annuitant regardless of how long he or she lives and
regardless of how long all Annuitants as a group live. This assures each
Annuitant that neither his or her own longevity nor an improvement in general
life expectancy will adversely affect the Annuity Payments he or she will
receive under a Plan, and relieves the Annuitant from the risk that he or she
will outlive the amounts actually accumulated for retirement. The expense risk
assumed by GIAC arises from the possibility that the amounts deducted for sales
and administrative expenses may be insufficient to cover the actual cost of such
items.
GIAC makes a daily charge against the net assets of each Variable
Investment Option in an amount equal to 1.15% on an annual basis (consisting of
approximately .70% for mortality risks and approximately .45% for expense risks)
to compensate it for the assumption of mortality and expense risks. If this
charge is insufficient to cover the actual cost of these risks, the loss will
fall on GIAC. Conversely, if the charge proves more than sufficient, any excess
may be retained by GIAC for profit or used by it to meet any operational
expenses, including those relating to distribution of the Contracts.
Variable Annuity Payments reflect the investment performance of the
Variable Investment Options but are not affected by changes in actual mortality
experience or by expenses incurred by GIAC in excess of the expense deductions
provided for in each Contract.
Other Charges Applicable to the Funds: The net asset value per share of
each of the Funds reflects investment management fees and certain general
operating expenses paid by the Funds. With the exception of the Small Cap Fund,
the International Fund, the Emerging Markets Fund, Gabelli Capital Asset Fund
and the MFS Growth With Income Series, each of the Funds pays an annual
investment management fee to its investment adviser that equals 0.50% of each
such Fund's average daily net assets. The Small Cap Fund and the MFS Growth With
Income Series each pay its manager an annual management fee of 0.75% of each
Fund's average daily net assets. The annual investment management fee paid to
the adviser of the International Fund and Emerging Markets Fund equals 0.80% of
the International Fund's average daily net assets and 1.00% of the Emerging
Markets Fund's average daily net assets. Gabelli Capital Asset Fund pays its
manager an annual management fee of 1.00% of that Fund's average daily net
assets. No separate fees are payable to the respective sub-investment advisers
of these Funds. (See "The Funds".) The management fees and other expenses
incurred by the Funds are more fully described in the accompanying prospectuses
for the Funds.
Accumulation Period
Allocation of Net Premium Payment: The initial Net Premium Payment will be
used to purchase Accumulation Units in the Investment Divisions or the
Fixed-Rate Option as selected by the Contractowner at the unit values next
computed following receipt and acceptance of the payment by GIAC. Subsequent Net
Premium Payments will be allocated among the underlying Contract options as
initially selected for allocation or pursuant to new allocation instructions
requested by the Contractowner in writing. New allocation instructions will be
implemented by GIAC following their receipt at its Customer Service Office.
However, the Contractowner may not be invested in more than six allocation
options at any given time.
Crediting Accumulation Units under the Contract: Variable Accumulation
Units represent the interests in the Variable Investment Options and Fixed
Accumulation Units represent the interests in the Fixed-Rate Option. The total
number of Accumulation Units to be credited to a Contractowner's account is the
sum of the portion of the Net Premium Payment allocated to each option divided
by the Accumulation Unit value of each such option as next computed following
receipt and acceptance of the payment by GIAC. The number of Accumulation Units
will not change because of a subsequent change
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in the value of the unit, but the dollar value of Accumulation Units will vary
based upon the investment experience of the Variable Investment Options and
interest credited to the Fixed-Rate Option.
Accumulation Value: The value of the Contractowner's account within any
particular Variable Investment Option or the Fixed-Rate Option is determined by
multiplying the number of Accumulation Units of that particular option credited
to the account by the applicable current Accumulation Unit value.
Value of an Accumulation Unit: With respect to a Variable Investment
Option, the value of a Variable Accumulation Unit is determined by multiplying
the value of such Variable Accumulation Unit as of the end of the immediately
preceding Valuation Period by the net investment factor (described below) for
the current Valuation Period. With respect to the Fixed-Rate Option, the value
of a Fixed Accumulation Unit is determined by adding the interest credited on
such Fixed Accumulation Unit since the end of the immediately preceding
Valuation Period to the value of such unit as of the end of such Valuation
Period.
Net Investment Factor: The net investment factor is a measure of the
investment experience of each Variable Investment Option. For any particular
Valuation Period, the net investment factor is determined by:
(1) Adding the net asset value of a Fund share as determined at the
end of such Valuation Period to the per share amount of any dividend and
other distribution made by the Fund during the period, and
(2) Dividing by the net asset value of the particular Fund share
calculated as of the end of the immediately preceding Valuation Period,
and
(3) Subtracting from the above result any applicable taxes and the
mortality and expense risk charge.
Annuity Period
Annuity Commencement Date: Annuity Payments made to an Annuitant will
begin on his or her Annuity Commencement Date, which is the first day of the
calendar month and year determined under the Plan. This date cannot be later
than the Annuitant's 85th birthday except when otherwise provided for by the
Plan. Following the Annuity Commencement Date, a Participant is referred to as
an Annuitant for purposes of the Contract.
Annuity Payments: Annuity Payments are available on a fixed or variable
basis or a combination of both. Such payments will be determined on the basis
of: (1) the table specified in the Contract which reflects the nearest age of
the Annuitant; (2) the Annuity Payout Option(s) selected; and (3) the investment
experience of any Variable Investment Options selected. The number and amount of
Annuity Payments will not be affected by the longevity of Annuitants generally
or any increase in the expenses of GIAC in excess of the charges specified in
the Contract. The Annuitant receives the value of a fixed number of Variable
and/or Fixed Annuity Units each month. For the Variable Investment Options, the
value of an Annuity Unit will reflect the investment experience of the amounts
allocated to the Variable Investment Options, and the amount of each Annuity
Payment will vary accordingly.
Annuity Payout Options: GIAC will issue a Certificate to the Contractowner
for delivery to each Annuitant upon his or her Annuity Commencement Date. Each
Certificate will set forth in substance the amount and terms of the Annuity
Payments and any other benefits the Annuitant may be entitled to under the
Contract. Annuity Payments will be made in accordance with the Annuity Payout
Option known as "Option V-2 -- Life Annuity with 10-Year Guaranteed Period" (see
below), or, if permitted by the Plan, the Annuitant may elect to have Annuity
Payments made under any one of the other variable and/or fixed Annuity Payout
Options specified in the Contract and described below.
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Annuity Payments will be made monthly except that: (1) proceeds of less than
$2,000 on behalf of any Annuitant will be paid in a single sum to that
Annuitant; and (2) GIAC may change the schedule of monthly installment payments
to avoid payments of less than $20 to an Annuitant. An Annuitant may not change
the Payout Option election following receipt of the first Annuity Payment.
The Annuity Payout Options currently available for both variable and fixed
Annuity Payments under the Contract are as follows (options designated with the
letter "V" are variable options, those designated with the letter "F" are fixed
options):
Option V-1 -- Life Annuity without Guaranteed Period: Under this
option, a Variable Annuity Payment will be made monthly during the
lifetime of the Annuitant ending with the payment preceding the
Annuitant's death. Option V-1 offers the maximum level of variable monthly
payments, since there is no guarantee of a minimum number of variable
payments or provision for a death benefit for Beneficiaries. It would be
possible under Option V-1 for the Annuitant to receive only one Variable
Annuity Payment if he or she died before the date of the second Variable
Annuity Payment, two such payments if he or she died before the date of
the third Variable Annuity Payment, and so on.
Option V-2 -- Life Annuity with 10-Year Guaranteed Period: Under
this option, a Variable Annuity Payment will be made monthly during the
lifetime of the Annuitant with the provision that if, at the Annuitant's
death, such payments have been made for less than 10 years (120 months),
Variable Annuity Payments will be continued during the remainder of such
period to the Beneficiary. The Beneficiary at any time may elect to redeem
in whole or in part the commuted value of the current dollar amount of the
then remaining number of Variable Annuity Payments. If the Beneficiary
dies while receiving Variable Annuity Payments, the commuted value of the
current dollar amount of the remaining number of Variable Annuity Payments
shall be paid in one sum to the estate of the Beneficiary. While the
Annuitant is living, he or she may change the Beneficiary at anytime
provided such change is in writing in a form satisfactory to GIAC.
Option V-3 -- Joint and Survivor Annuity: Under this option, a
Variable Annuity Payment will be made monthly during the joint lifetimes
of the Annuitant and a designated second person (joint annuitant) and will
continue during the lifetime of the survivor in a reduced amount which
reflects two-thirds of the number of Variable Annuity Units in effect
while both persons were living. It would be possible under Option V-3 for
the joint Annuitants to receive only one Variable Annuity Payment if both
died before the date of the second Variable Annuity Payment, two such
payments if both died before the date of the third Variable Annuity
Payment, and so on.
Option F-1 -- Life Annuity without Guaranteed Period: Under this
option, a Fixed Annuity Payment will be made monthly during the lifetime
of the Annuitant ending with the payment preceding the Annuitant's death.
Option F-1 offers the maximum level of fixed monthly payments, since there
is no guarantee of a minimum number of fixed monthly payments or provision
for a death benefit for Beneficiaries. It would be possible under Option
F-1 for the Annuitant to receive only one Fixed Annuity Payment if he or
she died before the date of the second Fixed Annuity Payment, two such
payments if he or she died before the date of the third Fixed Annuity
Payment, and so on.
Option F-2 -- Life Annuity with 10-Year Guaranteed Period: Under
this option, a Fixed Annuity Payment will be made monthly during the
lifetime of the Annuitant with the provision that if, at the Annuitant's
death, such payments have been made for less than 10 years (120 months),
Fixed Annuity Payments will be continued during the remainder of such
period to the Beneficiary. The Beneficiary at any time may elect to redeem
in whole or in part the commuted value of the current dollar amount of the
then remaining number of Fixed Annuity Payments. If the
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Beneficiary dies while receiving Fixed Annuity Payments, the commuted
value of the current dollar amount of the remaining number of Fixed
Annuity Payments shall be paid in one sum to the estate of the
Beneficiary. While the Annuitant is living he or she may change the
Beneficiary at any time provided such change is in writing in a form
satisfactory to GIAC.
Option F-3 -- Joint and Survivor Annuity: Under this option, a Fixed
Annuity Payment will be made monthly during the joint lifetimes of the
Annuitant and a designated second person (joint annuitant) and will
continue during the lifetime of the survivor in a reduced amount which
reflects two-thirds of the number of Fixed Annuity Units in effect while
both persons were living. It would be possible under Option F-3 for the
joint Annuitants to receive only one Fixed Annuity Payment if both died
before the date of the second Fixed Annuity Payment, two such payments if
both died before the date of the third Fixed Annuity Payment, and so on.
Transfers of Contract Values
General Information: Subject to the conditions described below and to the
terms of any applicable retirement plan, transfers among the Contract's Variable
Investment Options are permitted during both the Accumulation and Annuity
Periods. During the Accumulation Period, the Contractowner may transfer all or a
portion of the Accumulation Units under the Contract among each of the Variable
Investment Options and the Fixed-Rate Option. During the Annuity Period, an
Annuitant receiving payments pursuant to a Variable Annuity Payout Option may
transfer all or a portion of the amounts held under the Certificate among the
Variable Investment Options. Allocations to the Fixed-Rate Option are not
permitted by an Annuitant during the Annuity Period. Contractowners may be
invested in a maximum of six Variable Investment Options or in the Fixed-Rate
Option and five Variable Investment Options under the Contract at any given
time. Annuitants receiving payments pursuant to a Variable Payout Option may be
invested in a maximum of six Variable Investment Options at any given time.
Contractowners and Annuitants who contemplate requesting a transfer should
carefully consider their own objectives and the investment objectives, risks and
restrictions pertaining to each Variable Investment Option and the Fixed-Rate
Option involved in the proposed transfer before making the request. Frequent
transfers may be inconsistent with the long-term objectives of the Contract.
GIAC will implement transfers pursuant to proper written or telephone
instructions received at its Customer Service Office. Requests received by GIAC
at its Customer Service Office prior to 3:30 p.m. (Eastern time) on a given
business day will normally be implemented as of the end of that day. GIAC
reserves the right to limit the frequency of transfers to not more than once
every 30 days. Currently, no charge is made by GIAC for effecting any transfer.
GIAC reserves the right, however, to impose such a charge in the future.
Telephone Transfers: Contractowners may effect telephone transfers of the
Accumulation Value under a Contract pursuant to certain terms and conditions.
Telephone transfers of amounts held under a Certificate are not available to
Annuitants. GIAC will not honor telephone transfer instructions unless proper
authorization has been properly provided either in the completed application for
the Contract or in GIAC's telephone transfer authorization form.
If the proper authorization is on file at GIAC's Customer Service office,
telephone transfer instructions may be given by calling 1-800-533-0099 between
9:00 a.m. and 3:30 p.m. (Eastern time) on days when GIAC is open for business.
Each telephone transfer instruction must include a precise identification of the
Contract and the Contractowner's Personal Security Code. GIAC may accept
telephone transfer instructions from any person who properly identifies the
correct Contract number and Personal Security Code. GIAC, GISC and the Funds
shall not be liable for any loss, damage, cost or expense resulting from
following telephone transfer instructions which any of them reasonably believed
to be genuine. Thus, Contractowners risk possible loss of interest, capital
appreciation and principal in the
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event of an unauthorized or fraudulent telephone transfer. All or part of any
telephone conversation relating to transfer instructions may be recorded by GIAC
without prior disclosure to the caller.
Telephone transfer instructions apply only to allocations of previously
invested monies. Such instructions may not be used to change the allocation
instructions for any future premiums paid under the Contract. (See "Allocation
of Net Premium Payment" for information about changing allocation instructions
for future premiums.)
During periods of drastic economic or market changes, it may be difficult
to contact GIAC to request a telephone transfer. At such times, transfer
requests may be made by regular or express mail and will be processed at the
next Accumulation Unit value calculated after their receipt pursuant to the
terms and restrictions described in this "Transfers of Contract Values" section.
GIAC reserves the right to modify, suspend or discontinue the telephone transfer
privilege at any time and without prior notice.
Transfers from the Fixed-Rate Option to any Variable Investment Option are
permitted only once per Contract year during the 30-day period beginning on the
Contract Anniversary Date. Amounts will be transferred from the Fixed-Rate
Option to any Variable Investment Option in the same order such amounts were
allocated to the Fixed-Rate Option. This means that amounts on deposit in the
Fixed-Rate Option for the longest period of time will be the first amounts so
transferred. The maximum amount which may currently be transferred out of the
Fixed-Rate Option each year is the greater of: (1) 33 1/3% of the amount in
the Fixed-Rate Option as of the applicable Contract Anniversary Date; or (2)
$2,500.
Each transfer involving the Contract's Variable Investment Options will be
based upon the next Accumulation Unit value calculated after proper transfer
instructions are received by GIAC at its Customer Service Office.
Transfers of Amounts Held Under a Certificate by an Annuitant: During the
Annuity Period, an Annuitant may transfer all or a portion of the amounts
allocated to a Variable Payout Option among the Variable Investment Options.
However, such transfers may be made only once per year. Any such transfer will
be effected at the next Annuity Unit Value calculated after receipt of proper
transfer instructions by GIAC at its Customer Service Office. An Annuitant may
not transfer into or out of the Fixed-Rate Option.
Surrenders and Partial Withdrawals
The Contractowner may redeem the Contract in whole (known as a
"surrender") or in part (known as a "partial withdrawal"). Surrenders and
partial withdrawals must be requested in writing in a form acceptable to GIAC. A
surrender request must be accompanied by the Contract (or an acceptable
affidavit of loss) to be deemed a proper written request. GIAC will not process
a surrender request prior to receipt of the Contract (or an acceptable affidavit
of loss) at its Customer Service Office.
A contingent deferred sales charge may be imposed upon certain surrenders
or partial withdrawals. (See "Charges and Deductions -- Contingent Deferred
Sales Charge.")
A surrender or partial withdrawal is effected by cancelling Accumulation
Units which have an aggregate value equal to the dollar amount of the requested
surrender or partial withdrawal as next calculated following receipt by GIAC at
its Customer Service Office of a proper written request for the surrender or
partial withdrawal. If applicable, any Contract charges and any contingent
deferred sales charge will be deducted from the surrender proceeds or, in the
case of a partial withdrawal, from the remaining Accumulation Value by the
cancellation of additional Accumulation Units. If the Accumulation Value
remaining after a partial withdrawal is less than $1,000, GIAC will redeem the
total Accumulation Value and pay it to the Contractowner in cancellation of the
Contract. Such an involuntary surrender
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may be subject to any then applicable Contract administrative charge or
contingent deferred sales charge. (See "Charges and Deductions -- Contingent
Deferred Sales Charge.")
Except as noted below, Accumulation Units will be cancelled in the
following order: First, GIAC will cancel all the Variable Accumulation Units
attributable to the Investment Divisions. Cancellation of the Variable
Accumulation Units attributable to the Investment Divisions will be on a pro
rata basis, reflecting the existing distribution of the Variable Accumulation
Units unless the Contractowner instructs otherwise. Second, GIAC will cancel all
Fixed Accumulation Units attributable to the Fixed-Rate Option. Thus, GIAC will
have cancelled all the Variable Accumulation Units attributable to the
Investment Divisions before cancelling Accumulation Units attributable to the
Fixed-Rate Option. Accumulation Units used by a Contractowner to purchase
Annuities for Plan Participants will be cancelled in the same order as those in
connection with a surrender or partial withdrawal.
No contingent deferred sales charge will be imposed and the above ordering
rules will not apply if amounts are withdrawn directly from the Fixed-Rate
Option in accordance with the bailout provision described in the section
entitled "Description of the Fixed-Rate Option."
Payment of a surrender or partial withdrawal will ordinarily be made
within seven (7) days after the date GIAC receives the proper written request at
its Customer Service Office. GIAC can delay the payment if the Contract is being
contested and may postpone the calculation or payment of any Contract benefit or
transfer of amounts based on investment performance of the Investment Divisions
if: (1) the New York Stock Exchange is closed for trading or trading has been
suspended; or (2) the Securities and Exchange Commission restricts trading or
determines that a state of emergency exists which may make payment or transfer
impracticable.
An Annuitant may not request a surrender or partial withdrawal following
the receipt of the first Annuity Payment.
Questions regarding GIAC's surrender or withdrawal procedures should be
directed to a customer service representative by calling toll-free
1-800-221-3253.
Other Important Contract Information
Dollar Cost Averaging: Contractowners may elect to systematically, on a
long term basis if desired, transfer specified level dollar amounts from the
Cash Fund Investment Division to other Variable Investment Options and/or the
Fixed-Rate Option at regular intervals. By transferring specific amounts on a
regularly scheduled basis, as opposed to allocating the total amount at one
particular time, the Accumulation Value may be less susceptible to the impact of
market fluctuations. There is no guarantee, however, that such an investment
method will result in profits or prevent losses.
To take advantage of this program, a Contractowner predesignates a dollar
amount to be automatically transferred from the Cash Fund Investment Division to
one or more of the other Variable Investment Options and/or the Fixed-Rate
Option, provided that Accumulation Values may only be allocated among a maximum
of four Contract options, including the Cash Fund Investment Division, at any
given time. A Contractowner may elect this program when the Contract is
purchased or anytime thereafter by properly completing the Contract application
or Dollar Cost Averaging election form and returning it to GIAC at its Customer
Service Office at least three (3) business days prior to the Monthly Anniversary
Date (the monthly anniversary measured from the issue date of the Contract or
the last day of that calendar month, if earlier) on which the first transfer
will be made. Transfers will then be made monthly for the period elected by the
Contractowner.
Dollar Cost Averaging may be selected for 12, 24 or 36 month periods. The
total Accumulation Value at the time it is elected must be at least $10,000 for
transfers over a 12 month period and $20,000 for transfers over a 24 or 36 month
period. Transfers will be made in the amounts designated by the
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Contractowner and must be at least $100 per receiving Contract option. When a
Contractowner elects to participate in this program, the Accumulation Value
attributable to the Cash Fund Investment Division must be at least equal to the
amount designated to be transferred on each Monthly Anniversary Date multiplied
by the duration selected.
Dollar Cost Averaging will terminate when any one of the following events
occurs: (1) the number of designated monthly transfers has been completed; (2)
the Accumulation Value attributable to the Cash Fund Investment Division is
insufficient to complete the next transfer; (3) the Contractowner requests
termination in a writing received by GIAC at its Customer Service Office at
least three (3) business days prior to the next Monthly Anniversary Date; or (4)
the Contract is surrendered.
A Contractowner may reinstate Dollar Cost Averaging or change existing
Dollar Cost Averaging terms by properly completing a new election form. Such
requests received by GIAC at its Customer Service Office at least three (3)
business days prior to the next Monthly Anniversary Date will be effective for
such Monthly Anniversary Date.
When utilizing Dollar Cost Averaging, a Contractowner must be invested in
the Cash Fund Investment Division and may be invested in either (i) a maximum of
five other Variable Investment Options or (ii) in the Fixed-Rate Option and a
maximum of four other Variable Investment Options. The Dollar Cost Averaging
program may not be elected by an Annuitant.
Assignment: Assignment of an interest in the Contract is generally
prohibited when the Contract is used in connection with any retirement plans
contemplated by Section 401 of the Code and any corporate retirement plan. An
assignment of the Contract may be treated as a taxable distribution to the
Contractowner. (See "Federal Tax Matters.")
Reports: GIAC will send to each Contractowner, at least semi-annually, a
report containing such financial information pertaining to the Separate Account
as may be required by applicable laws, rules and regulations. In addition, a
statement will be provided to each Contractowner at least annually which reports
the number of Contract Accumulation Units and the value of such Accumulation
Units under the Contract.
Contractowner Inquiries: A Contractowner may direct inquiries to the
individual from whom the Contract was purchased or may call GIAC at
1-800-221-3253 or write directly to: The Guardian Insurance & Annuity Company,
Inc., Customer Service Office, P.O. Box 26210, Lehigh Valley, Pennsylvania
18002.
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PERFORMANCE RESULTS
From time to time, performance information for the Account's Investment
Divisions maybe provided in advertisements, sales literature or materials
furnished to existing or prospective Contractowners. All such information is
based upon historical information and is not necessarily representative of
future performance. More detailed information about the calculation of such
historical performance information appears in the Statement of Additional
Information.
Total Returns: "Average annual total return," "total return" and "change
in Accumulation Unit value" all reflect the change in the value of an investment
in an Investment Division over a specified period, assuming the reinvestment of
all income dividends and capital gains distributions. Average annual total
returns show the average annual percentage change in value over a specified
period. Total returns and changes in Accumulation Unit values, which are not
annualized, show the total percentage change in value over a specified period.
Promotional materials relating to an Investment Division's investment
performance will always at least provide the 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 for the Division's corresponding Fund. Such
required average annual total returns will reflect the effects of all charges,
both recurring and non-recurring, incurred by the Fund, as well as all charges
deducted under the terms of the Contracts. However, promotional materials may
also show average annual total returns which assume that a Contract continues in
force after the end of the specified period. Such returns will not reflect the
effects of the Contract's contingent deferred sales charge. Total returns and
changes in Accumulation Unit values may not reflect certain specified charges
deducted under the terms of the Contracts.
Yields: "Yield" figures may be quoted for the Investment Divisions which
invest in shares of the Cash Fund and the Bond Fund. Current yield is a measure
of the net investment income earned on a hypothetical investment over a
specified base period of seven days for the Cash Fund Investment Division and 30
days (or one month) for the Bond Fund Investment Division. Yield is expressed as
a percentage of the value of an Accumulation Unit at the beginning of the base
period. Yields are annualized, which means that they assume that an Investment
Division will generate the same level of net investment income over a one-year
period. However, yields actually fluctuate daily.
The Cash Fund Investment Division may also quote its "effective yield,"
which assumes that the net investment income earned during a base period will be
earned and reinvested for a year. The effective yield will be slightly higher
than the Cash Fund Investment Division's current yield due to the compounding
effect created by assuming reinvestment of the Division's net investment income.
Distribution Rates: On occasion, the Bond Fund Investment Division may
quote historical or annualized distribution rates. A distribution rate is simply
a measure of the level of income dividends and short-term capital gains
distributed for a specified period. A distribution rate is not a complete
measure of performance and may be higher than yield for certain periods.
Comparative and Other Information: Advertisements and sales literature for
the Separate Account's Investment Divisions may compare a Fund's performance to
that of other investment vehicles or other mutual funds having similar
objectives or programs which are offered through the separate accounts of other
insurance companies. Promotional materials may also compare a Fund's performance
to one or more indices of the types of securities which the Fund buys and sells
for its portfolio, and be illustrated by tables, graphs or charts. Promotional
materials may additionally contain references to types and characteristics of
certain securities; features of a Fund's portfolio; financial markets; or
historical, current or perceived economic trends within the United States or
overseas. Topics of general investor interest, such as personal financial
planning, may also be discussed.
In addition, advertisements and sales literature may refer to or reprint
all or portions of articles, reports,
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or independent rankings or ratings which relate to the Investment Division
specifically, or to other comparable mutual funds or investment vehicles. None
of the contents of such materials will be used to indicate future performance.
Further information about each Investment Division's performance is
contained in their respective Annual Report, which may be obtained from GISC
free of charge.
Advertisements and sales literature about the Contracts and the Separate
Account may also refer to ratings given to GIAC by insurance company rating
organizations, such as Moody's Investors Service, Inc., Standard & Poor's
Ratings Group, A.M. Best & Co. and Duff & Phelps. Such ratings relate only to
GIAC's ability to meet its obligations under the Contract's Fixed-Rate Option.
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FEDERAL TAX MATTERS
General Information
The operations of the Separate Account form a part of, and are taxed with
GIAC's operations under the Code. Investment income and realized net capital
gains on the assets of the Separate Account are reinvested and taken into
account in determining the Accumulation and Annuity Unit values. Thus,
investment income and realized net capital gains are automatically applied to
increase reserves under the Contract. GIAC believes that investment income and
capital gains attributable to the Separate Account are taxed under existing
Federal income tax law but are offset by deductible reserve increases.
Accordingly, GIAC does not anticipate that it will incur any Federal income tax
liability attributable to the Separate Account and, therefore, GIAC does not
currently make provisions for any such taxes. However, if changes in the Federal
tax laws, or interpretations thereof, result in GIAC incurring a tax liability
on income or gains attributable to the Separate Account or certain types of
variable annuity contracts, then GIAC may impose a charge against the Separate
Account (with respect to some or all Contracts) to pay such taxes.
Non-Qualified Contracts
Diversification: Section 817(h) of the Code provides that variable annuity
contracts will not be treated as annuities unless the underlying investments are
"adequately diversified" in accordance with regulations prescribed by the
Secretary of the Treasury. Such regulations require, among other things, that
the Funds invest no more than 55% of the value of their respective assets in one
investment; 70% in two investments; 80% in three investments; and 90% in four
investments. GIAC intends that the Funds underlying the Contracts will be
managed by the applicable investment managers so as to comply with these
diversification requirements. If the diversification requirements are not met by
each and every Variable Investment Option, the Contract could lose its overall
tax status as an annuity, resulting in current taxation of the excess of
Contract value over the "investment in the Contract." A Contractowner's
"investment in the Contract" generally equals: (1) the aggregate amount of
premium payments or other consideration paid for the Contract minus (2) the
aggregate amount received under the Contract, to the extent such amount was not
excluded from gross income.
Owner Control: In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate accounts used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includable in the variable contractowner's gross income. The IRS has stated that
a variable contractowner will be considered the owner of separate account assets
if the contractowner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. To date, no
regulations or rulings have been issued regarding the circumstances under which
a contractowner's ability to control investments through premium allocation and
transfer privileges would cause him or her to be treated as the owner of the
assets in an insurance company's separate account. GIAC does not know what
standards will be set forth, if any, in the regulations or rulings which the
Treasury Department has stated it expects to issue to provide guidance in this
area. Accordingly, GIAC reserves the right to modify the Contract as necessary
to attempt to prevent the Contractowner from being considered the owner of the
assets of the Separate Acount or otherwise to maintain favorable tax treatment
of the Contracts.
Distribution of Benefits: Non-qualified Contracts will not be treated as
annuity contracts for purposes of Section 72 of the Code unless the Contract
provides that: (1) if any Contractowner dies on or after the Annuity
Commencement Date, but prior to the time the entire interest in the Contract has
been distributed, the remaining portion of such interest will be distributed at
least as rapidly as under the method of distribution in effect when the
Contractowner died; and (2) if any
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Contractowner dies prior to the Annuity Commencement Date, the entire interest
will be distributed within five years of the Contractowner's death. These
requirements will be considered satisfied if that portion of the Contractowner's
interest which is payable to or for the benefit of a "designated beneficiary,"
will be distributed over the life or life expectancy of any new owner and such
distributions begin within one year of the Contractowner's death. The Contract's
"new owner" is the person designated by the Contractowner as Beneficiary and to
whom ownership of the Contract passes by reason of death. For this purpose, the
Beneficiary must be a natural person. If the Beneficiary is the Contractowner's
surviving spouse, the Contract may be continued with the surviving spouse as the
new Contractowner. Non-qualified Contracts contain provisions intended to comply
with Section 72(s) of the Code. However, regulations interpreting these
requirements of the Code have not yet been issued. Accordingly, the provisions
contained in such Contracts will be reviewed and may be modified to assure
compliance with the Code's requirements when clarified by regulations or
otherwise.
Note: The remaining discussion concerning non-qualified Contracts assumes
that the Contracts will be treated as annuities under Section 72 of the Code,
that the underlying investments of the Contracts are "adequately diversified"
under Section 817(h) of the Code, and that the Contract is not issued in
connection with a retirement plan qualifying for favorable tax treatment under
the Code.
A Contractowner who is a natural person is generally not taxed on
increases in the value of a Contract until distribution, either as a lump sum
payment received by surrender or partial withdrawal, or as annuity payments. The
assignment or pledge of any portion of the Contract value may be treated as a
distribution. The taxed portion of a distribution (whether in the form of a lump
sum payment or an annuity) is taxed as ordinary income.
Contractowners who are not natural persons generally must include in
income any increase in the excess of the Contract's Accumulation Value over the
"investment in the Contract" during the taxable year, whether or not such
increase is distributed. There are some exceptions to this rule and a
prospective owner that is not a natural person may wish to discuss these with a
competent tax adviser.
The following discussion applies to Contracts owned by natural persons.
Generally, accounts received by surrender or partial withdrawal are first
treated as taxable income to the extent that the Contract's Accumulation Value
immediately before the surrender/withdrawal exceeds the "investment in the
contract." Any additional amount withdrawn is not taxable.
Although the tax consequences may vary depending on the form of Annuity
Payout Option selected, the recipient of an Annuity Payment generally is taxed
on the portion of such payment that exceeds the "investment in the contract."
For variable annuity payments, the taxable portion is determined by a formula
that establishes a specific dollar amount of each payment that is not taxed. The
dollar amount is determined by dividing the "investment in the contract" by the
total number of expected periodic payments. The entire distribution will be
fully taxable once the recipient has recovered the dollar amount of the
"investment in the contract."
A penalty tax on surrenders or withdrawals equal to 10% of the amount
treated as taxable income may be imposed unless such surrender or withdrawal is:
(1) made on or after age 59 1/2; (2) made as a result of death or disability;
or (3) received in substantially equal installments as a life annuity (subject
to special "recapture" rules if the series of payments is subsequently
modified).
Annuity distributions are generally subject to withholding for the
recipient's income tax liability. The withholding rates vary according to the
type of the distribution and the recipient's tax status. Recipients generally
may elect not to have tax withheld from distributions. Redemption requests that
do not indicate a preference regarding withholding will be delayed in processing
until a preference form has been properly completed and received at GIAC's
Customer Service Office. Withholding on
29
<PAGE>
taxable distributions is generally required if the recipient fails to provide
GIAC with his or her correct Social Security number or if the recipient is a
U.S. citizen or expatriate living abroad.
Amounts may be distributed from a Contract because of the death of a
Contractowner or the Annuitant. Generally, such amounts are includable in the
income of the recipient as follows: (1) if distributed in a lump sum they are
taxed in the same manner as a full surrender of the Contract as described above;
or (2) if distributed under an annuity option, they are taxed in the same manner
as annuity payments as described above. For these purposes, the investment in
the contract is not affected by the Contractowner's or Annuitant's death. That
is, the investment in the contract remains the amount of any purchase payments
paid which were not excluded from gross income.
All non-qualified deferred annuity contracts that are issued by GIAC or
its affiliates to the same Contractowner during any calendar year are to be
aggregated for purposes of determining the amount includable in the
Contractowner's gross income under Section 72(e) of the Code. Thus, the proceeds
of a partial withdrawal, surrender or assignment of one or more non-qualified
deferred annuity contracts entered into during the same calendar year will be
includable in the Contractowner's income to the extent of the aggregate excess
of the accumulation values over the investment in all such contracts
("investment in the contract" is defined above). Potential purchasers of more
than one non-qualified annuity contract should seek advice from legal or tax
counsel as to the possible implications of these rules on the contracts they
intend to purchase.
Transferring the ownership of a Contract, or designating an Annuitant,
payee or other Beneficiary who is not also the Contractowner, the selection of
certain Annuity Commencement Dates, or the assignment or exchange of a Contract,
may result in certain income or gift tax consequences to the Contractowner that
are beyond the scope of this discussion. A Contractowner contemplating any such
transfer, designation, selection, assignment or exchange of a Contract should
contact a competent tax adviser about the potential tax effects of such a
transaction.
Possible Tax Changes: Although the likelihood of legislative change is
uncertain, there is always the possibility that the tax treatment of the
Contracts could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted, would
adversely modify the federal taxation of the Contracts. It is also possible that
any change could be retroactive (that is, effective prior to the date of the
change). A tax adviser should be consulted with respect to legislative
developments and their effect on the Contract.
Qualified Contracts
Generally, increases in the value of amounts under a Contract purchased in
connection with a retirement plan qualifying for favorable tax treatment under
the Code are not taxable until benefits are received. However, the rules
governing the tax treatment of contributions and distributions under qualified
plans, as set forth in the Code and applicable rulings and regulations, are
complex and subject to change. These rules also vary according to the type of
plan and the terms and conditions of the plan itself. Therefore, this Prospectus
does not attempt to provide more than general information about the use of the
Contracts with these various types of plans. Contractowners, Annuitants, and
Beneficiaries under qualified plans should be aware that the rights of any
person to any benefits under such plans may be subject to the terms and
conditions of the plans, regardless of the terms and conditions of the Contracts
issued in connection with such plans. Some retirement plans are subject to
distribution and other requirements that are not incorporated into GIAC's
Contract administration procedures. Contractowners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Contracts comply with applicable law.
Adverse tax consequences may result from contributions in excess of specified
limits; distributions prior to age 59 1/2 (subject to certain exceptions);
distributions that do not conform to specified commencement and minimum
distribution rules; and in other specified circumstances. Purchasers of
Contracts for use
30
<PAGE>
with any retirement plan should consult their legal counsel and tax adviser
regarding the suitability of the Contract.
For qualified plans under Section 401(a), 403(a), 403(b), and 457, the
Code requires that distributions generally must commence no later than the later
of April 1 of the calendar year following the calendar year in which the
Contractowner (or plan participant) (i) reaches age 70 1/2 or (ii) retires, and
must be made in a specified form or manner. If the plan participant is a "5
percent owner" (as defined in the Code), distributions generally must begin no
later than April 1 of the calendar year following the calendar year in which the
Contractowner (or plan participant) reaches age 70 1/2. For IRAs described in
Section 408, distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the
Contractowner (or plan participant) reaches age 70 1/2.
Following are brief descriptions of the various types of plans with which
the Contracts described in this Prospectus may be used:
Section 403(b) Plans: The Code permits public schools and employers
specified in Section 501(c)(3) of the Code to purchase annuity contracts
under section 403(b) and mutual fund shares through a Section 403(b)(7)
custodial account on behalf of their employees. Subject to certain
limitations, the purchase payments for such contracts or mutual fund
shares are excluded from the employees' gross income for tax purposes.
However, these payments may be subject to FICA (Social Security) taxes.
These annuity contracts are commonly referred to as "tax-sheltered
annuities."
Distributions from tax-sheltered annuities are restricted unless the
employee is age 59 1/2, separates from service, dies, becomes disabled, or
incurs a hardship. Before one of these events occurs, the employee may not
surrender amounts attributable to either: (1) salary reduction
contributions made in years beginning after December 31, 1988; (2) income
attributable to salary reduction contributions made in years beginning
after December 31, 1988; or (3) income in years beginning after December
31, 1988 on salary reduction accumulations held as of December 31, 1988.
Hardship withdrawals are further limited to salary reduction contributions
only, and may not include income earned thereon. Hardship withdrawals are
generally subject to tax penalties and contingent deferred sales charges.
If a Contract is purchased as a tax-sheltered annuity under Section
403(b) of the Code, it is subject to the restrictions on redemption
described above. These restrictions on redemption are imposed by the
Separate Account and GIAC in full compliance with and in reliance upon the
terms and conditions of a no-action letter on this subject issued by the
staff of the Securities and Exchange Commission.
The Contract includes a death benefit that in some cases may exceed
the greater of the Purchase Payments or the Contract Value. The death
benefit could be characterized as an incidental benefit, the amount of
which is limited in any tax-sheltered annuity under section 403(b).
Prospective purchasers of the Contracts as tax-sheltered annuities
should seek advice from legal or tax counsel about their eligibility to
purchase a tax-sheltered annuity, limitations on permissible amounts of
purchase payments, distribution restrictions, the Contract's death benefit
provision and tax consequences of distribution.
Individual Retirement Accounts: Sections 219 and 408 of the Code
permit individuals to contribute to an individual retirement program known
as an "Individual Retirement Account" or "IRA." IRA contributions are
generally limited each year to the lesser of $2,000 or 100% of the
Contractowner's adjusted gross income and may be deductible in whole or in
part depending on the individual's income. Distributions from certain
other types of qualified plans, however, may be
31
<PAGE>
"rolled over" on a tax-deferred basis into an IRA without regard to this
limit. Earnings in an IRA are not taxed while held in the IRA. All amounts
in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. Distributions prior to age 59 1/2 (unless
certain exceptions apply) are also subject to a 10% penalty tax.
Individuals who purchase Contracts for use with an IRA will receive, in
addition to this Prospectus and a copy of the Contract, a brochure
containing information about eligibility, contribution limits, tax
consequences and other particulars concerning IRAs. The Internal Revenue
Service has not reviewed the Contract for qualification as an IRA, and has
not addressed in a ruling of general applicability whether a death benefit
provision such as the provision in the Contract comports with IRA
qualification requirements.
Corporate Pension and Profit-Sharing Plans: Section 401(a) of the
Code permits corporate employers to establish various types of retirement
plans for employees, and self-employed individuals to establish qualified
plans for themselves and their employees. These retirement plans may
permit the purchase of the Contracts to accumulate retirement savings
under the plans. Adverse tax or other legal consequences to the plan, to
the participant or to both may result if this Contract is assigned or
transferred to any individual as a means to provide benefit payments,
unless the plan complies with all legal requirements applicable to such
benefits prior to transfer of the Contract. The Contract includes a death
benefit that in some cases may exceed the greater of the Purchase Payments
or the Contract Value. The death benefit could be characterized as an
incidental benefit, the amount of which is limited in any pension or
profit-sharing plan. Because the death benefit may exceed this limitation,
employers using the Contract in connection with such plans should consult
their tax adviser.
Deferred Compensation Plans: Section 457 of the Code provides for
certain deferred compensation plans with respect to service for state
governments, local governments, rural electric cooperatives, political
subdivisions, agencies, instrumentalities, certain affiliates of such
entities and other tax-exempt employers. Amounts contributed by employers
through such plans are taxed to employees when paid or made available for
withdrawal. Under such plans, a participant may specify the form of
investment in which his or her contributions will be made. In general, all
such investments are owned by, and are subject to the claims of the
general creditors of, the sponsoring employer and, depending on the terms
of the particular plan, the employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 plan obligations. In
certain governmental plans, however, deferred amounts must be held in
trust for the exclusive benefit of plan participants.
The following rules generally apply to distributions from Contracts
purchased in connection with the plans (other than Section 457 plans) discussed
above:
That portion of any contribution under a Contract made by or on behalf of
an individual (typically an employee) which is not excluded or deductible from
his or her gross income (generally, the individual's own nondeductible
contribution) constitutes his or her "investment in the contract." If a
distribution is made in the form of annuity payments, the investment in the
contract (adjusted for certain refund provisions) divided by the Annuitant's
life expectancy (or other period for which annuity payments are expected to be
made) constitutes a tax-free return of capital each year. The entire
distribution will be fully taxable once the Annuitant (or other appropriate
payee) is deemed to have recovered the dollar amount of the investment in the
Contract. The dollar amount of annuity payments received in any year in excess
of such return is taxable as ordinary income. Depending upon the nature and
structure of the arrangement in connection with which a Contract is issued, an
individual's investment in the Contract can be zero.
If a surrender of or partial withdrawal from a Contract held in connection
with a Section 401(a) plan is effected and a distribution is made in a single
payment, the proceeds may qualify for special "lump-
32
<PAGE>
sum distribution" treatment. Otherwise, the amount by which the payment exceeds
the "investment in the contract" (adjusted for any prior partial withdrawal)
will generally be taxed as ordinary income in the year of receipt, unless it is
validly "rolled over" into an IRA or another qualified plan.
A penalty tax of 10% will be imposed on the taxable portion of surrenders
or partial withdrawals from all qualified Contracts, except under circumstances
similar to those relating to non-qualified Contracts (see above). Other adverse
tax consequences may result if distributions do not conform to specified
commencement and minimum distribution rules, and in other circumstances.
The taxation of benefits payable upon an employee's death to his or her
Beneficiary generally follows these same principles, subject to a variety of
special rules. In particular, tax on death benefits to be paid as a lump sum
under a non-qualified contract may be deferred if, within 60 days after the lump
sum becomes payable, the Beneficiary instead elects to receive annuity payments.
Distributions from Contracts generally are subject to withholding for the
Contractowner's federal income tax liability. The withholding rate varies
according to the type of distribution and the Contractowner's tax status. The
Contractowner will be provided the opportunity to elect not to have tax withheld
from distributions. "Eligible rollover distributions" from section 401(a) plans
and section 403(b) tax-sheltered annuities are subject to a mandatory federal
income tax withholding of 20%. An eligible rollover distribution is the taxable
portion of any distribution from such a plan, except certain distributions such
as distributions required by the Code or distributions in a specified annuity
form. The 20% withholding does not apply, however, if the Contractowner chooses
a "direct rollover" from the plan to another tax-qualified plan or IRA.
Restrictions under Qualified Contracts: Other restrictions with respect to
the election, commencement, or distribution of benefits may apply under
Qualified Contracts or under the terms of the plans in respect of which
Qualified Contracts are issued.
Other Considerations
Presently, GIAC makes no charge to the Separate Account for any Federal,
state or local taxes (other than state premium taxes) that it incurs which may
be attributable to the Separate Account or to the Contracts. GIAC, however,
reserves the right to make a charge for any such taxes or other economic burden
which may result from the application of the tax laws and that GIAC determines
to be attributable to the Separate Account or to the Contracts. If any tax
charges are made in the future, they will be accumulated daily and transferred
from the Separate Account to GIAC's general account.
Because of the complexity of the Federal tax law, and the fact that tax
results will vary according to the factual status of the entity or individual
involved, tax advice may be needed by anyone contemplating the purchase of a
Contract or the exercise of the various elections under the Contract. It should
be understood that this Prospectus' discussion of the Federal income tax
consequences of owning a Contract is not an exhaustive discussion of all tax
questions that might arise under the Contracts and that special rules exist in
the Code with respect to situations not discussed here. No representation is
made regarding the likelihood of the continuation of current Federal tax laws or
interpretations thereof by the Internal Revenue Service. No attempt has been
made to consider any applicable state, local or other tax laws, except with
respect to the imposition of any premium taxes.
GIAC does not make any guarantee regarding the tax status of any Contract
and the above tax discussion is not intended as tax advice.
33
<PAGE>
VOTING RIGHTS
To the extent required by applicable law, GIAC will vote the Fund shares
that it owns through the Separate Account according to instructions received
from Contractowners having an interest in such Fund's shares. GIAC will vote
shares for which no instructions are received in the same proportion as it votes
shares for which it has received instructions. GIAC will vote any Fund shares
that it is entitled to vote directly due to amounts it has contributed or
accumulated in the applicable Investment Division for proposals presented by
Fund Management. If the applicable law or interpretations thereof change so as
to permit GIAC to vote a Fund's shares in GIAC's own right or to restrict
Contractowner voting, GIAC reserves the right to do so.
GIAC will seek voting instructions from Contractowners for the number of
shares attributable to their Contracts. Contractowners are entitled to provide
instructions if, on the applicable record date, they have allocated values to
the Investment Division which corresponds to the Fund for which a shareholder
meeting is called.
The Contractowner will have the voting interest for the Accumulation Value
under the Contract. The number of shares held in an Investment Division for
which a Contractowner will be entitled to provide voting instructions is
determined by dividing the Contractowner's Accumulation Value in that Investment
Division by the net asset value per share of the applicable Fund.
Each Annuitant will be entitled to the voting interest attributable to the
amounts held under his or her Certificate. The number of shares held in an
Investment Division which are attributable to each Annuitant is determined by
dividing the amounts held under a Certificate on behalf of such Annuitant by the
net asset value per share of the applicable Fund. The voting interest
attributable to each Annuitant will generally decrease with the gradual
reduction of the amounts held under the Certificate during the Annuity Payout
Period.
There are no voting rights with respect to the Fixed-Rate Option.
DISTRIBUTION OF THE CONTRACT
The Contract is sold by insurance agents who are licensed by GIAC and who
are either registered representatives of GISC or of broker-dealer firms which
have entered into sales agreements with GISC and GIAC. GISC and such other
broker-dealers are members of the National Association of Securities Dealers,
Inc. In connection with the sale of the Contract, GIAC will generally pay sales
commissions to these individuals or entities which may vary but, in the
aggregate, are not anticipated to exceed an amount equal to 5.25% of each
Contract premium payment. Where permitted by state law, GIAC reserves the right
to pay additional sales or service compensation while a contract is in force
based on the value of the contract. Additional amounts may also be paid in
connection with special promotional incentives. The principal underwriter of the
Contract is GISC, located at 201 Park Avenue South, New York, New York 10003.
RIGHT TO CANCEL THE CONTRACT
Where required by state law or regulation, the Contract will contain a
provision which permits cancellation by returning the Contract to GIAC, or to
the registered representative through whom it was purchased, within 10 days of
delivery of the Contract. Longer periods may apply in some states. The
Contractowner will then receive from GIAC, as and when required by state law or
regulation, either: (1) the total amount paid for the Contract; or (2) an amount
equal to the sum of (i) the difference between the premiums paid (including any
Contract fees or other charges) and the amounts allocated to any Investment
Divisions and the Fixed-Rate Option under the Contract, and (ii) the Surrender
Value of the Contract.
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<PAGE>
YEAR 2000 COMPLIANCE
Like other financial and business organizations around the world, GIAC
could be adversely affected if the computer systems it uses internally, the
systems of its service providers, and related computer systems do not properly
process and calculate date-related information and data beginning on January 1,
2000. Many computer systems today cannot distinguish the year 2000 from the year
1900 because of the way dates were encoded and calculated in these systems. GIAC
has been actively working to deal with this problem, and expects that its
systems and others upon which it is reliant will be adapted before January 1,
2000. However, there can be no assurance that these preparations will be
successful.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate
Account or GIAC is a party.
ADDITIONAL INFORMATION
The Statement of Additional Information contains more details about the
Contract described by this Prospectus and is available in accordance with the
directions on page one of this Prospectus. The contents of that document are
detailed below.
Statement of Additional Information
Table of Contents
Page
----
Services to the Separate Account............................. B-2
Annuity Payments............................................. B-2
Performance Data............................................. B-3
Valuation of Assets of the Separate Account.................. B-7
Transferability Restrictions................................. B-8
Experts...................................................... B-8
Financial Statements......................................... B-8
35
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36
<PAGE>
THE GUARDIAN INVESTOR(R)
GROUP UNALLOCATED DEFERRED VARIABLE ANNUITY CONTRACT
Issued Through
THE GUARDIAN SEPARATE ACCOUNT D
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
--------------
Statement of Additional Information dated May 1, 1998
--------------
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the current Prospectus for The Group Unallocated
Deferred Variable Annuity Contract (marketed under the name "The Guardian
Investor" Group Program) dated May 1, 1998.
A free Prospectus is available upon request by writing or calling:
The Guardian Insurance & Annuity Company, Inc.
Customer Service Office
P.O. Box 26210
Lehigh Valley, Pennsylvania 18002
1-800-221-3253
Read the Prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the Prospectus.
TABLE OF CONTENTS
Page
----
Services to the Separate Account.................................. B-2
Annuity Payments.................................................. B-2
Performance Data.................................................. B-3
Performance Comparisons........................................... B-7
Valuation of Assets of the Separate Account....................... B-7
Transferability Restrictions...................................... B-8
Experts........................................................... B-8
Financial Statements.............................................. B-8
B-1
<PAGE>
SERVICES TO THE SEPARATE ACCOUNT
The Guardian Insurance & Annuity Company, Inc. ("GIAC") maintains the
books and records of The Guardian Separate Account D (the "Separate Account").
GIAC, a wholly owned subsidiary of The Guardian Life Insurance Company of
America, acts as custodian of the assets of the Separate Account. GIAC bears all
expenses incurred in the operations of the Separate Account, except the
mortality and expense risk charge and the administrative charge (as described in
the Prospectus), which are borne by the Contractowner.
The firm of Price Waterhouse LLP, 1177 Avenue of the Americas, New York,
New York 10036 currently serves as independent accountants for GIAC and the
Separate Account.
Guardian Investor Services Corporation ("GISC"), a wholly owned subsidiary
of GIAC, serves as principal underwriter for the Separate Account pursuant to a
distribution and service agreement between GIAC and GISC. The Contract is
offered continuously and is sold by GIAC insurance agents who are registered
representatives of either GISC or of other broker-dealers which have selling
agreements with GISC and GIAC. In the years 1997, 1996 and 1995, GISC received
underwriting commissions from GIAC with respect to the sales of variable annuity
contracts through the Separate Account in the amount of $1,979,926, $1,851,468
and $1,409,708, respectively.
ANNUITY PAYMENTS
The objective of the Contract is to provide benefit payments which will
increase at a rate sufficient to maintain purchasing power at a constant level.
For this to occur, the actual net investment rate must exceed the assumed
investment rate of 4% by an amount equal to the rate of inflation. Of course, no
assurance can be made that this objective will be met. If the assumed interest
rate were to be increased, benefit payments would start at a higher level but
would increase more slowly or decrease more rapidly. Likewise, a lower assumed
interest rate would provide a lower initial payment with greater increases or
lesser decreases in subsequent Annuity Payments.
Value of an Annuity Unit: The value of an Annuity Unit is determined
independently for each of the Variable Investment Options. For any Valuation
Period, the value of an Annuity Unit is equal to the value for the immediately
preceding Valuation Period multiplied by the annuity change factor for the
current Valuation Period. The Annuity Unit value for a Valuation Period is the
value determined as of the end of such period. The annuity change factor is
equal to the net investment factor for the same Valuation Period adjusted to
neutralize the assumed investment return used in determining the Annuity
Payments. The net investment factor is reduced by the amount of the mortality
and expense risk charge on an annual basis during the life of the Contract. The
dollar amount of any monthly payment due to an Annuitant after the first monthly
payment under a Variable Investment Option will be determined by multiplying the
number of Annuity Units attributable to such Annuitant by the value of an
Annuity Unit for the Valuation Period ending ten (10) days prior to the
Valuation Period in which the monthly payment is due.
Determination of the First Monthly Annuity Payment: At the time Annuity
Payments begin, the amount indicated by the Contractowner to purchase an Annuity
for a Plan Participant is determined by multiplying the appropriate Variable or
Fixed Accumulation Unit Value on the Valuation Period ten (10) days before the
date the first variable or fixed Annuity Payment is due by the number of
Accumulation Units cancelled pursuant to the order specified in the Prospectus
as of the date the first Annuity Payment is due, less any applicable premium
taxes not previously deducted.
The Contract contains tables reflecting the dollar amount of the first
monthly payment which can be purchased with each $1,000 of value accumulated
under the Contract. The amounts depend on the variable or fixed Annuity Payout
Option selected, the mortality table used under the Contract (the 1983
Individual Mortality Table a projected using Scale G) and the nearest age of the
Annuitant. The first Annuity Payment is determined by multiplying the benefit
per $1,000 of value shown in the Contract
B-2
<PAGE>
tables by the number of thousands of dollars of value accumulated under the
Contract for the Annuitant.
Determination of the Second and Subsequent Monthly Variable Annuity
Payments: The amount of the second and subsequent variable Annuity Payments is
determined by multiplying the number of Annuity Units attributable to an
Annuitant by the appropriate Annuity Unit Value as of the valuation period ten
(10) days prior to the day such payment is due. The number of Annuity Units
attributable to a particular Annuitant is determined by dividing the first
monthly variable Annuity Payment to that Annuitant by the value of the
appropriate Annuity Unit on the date of such payment. This number of Annuity
Units remains fixed during the variable Annuity Payment period, provided no
transfers among the Variable Investment Options are made. If a transfer among
the Variable Investment Options is made, the number of Annuity Units will be
adjusted accordingly.
The assumed investment return of 4% under the Contract is the measuring
point for subsequent variable Annuity Payments. If the actual net investment
rate (on an annual basis) remains constant at 4%, the variable Annuity Payments
will remain constant. If the actual net investment rate exceeds 4%, the variable
Annuity Payment will increase at a rate equal to the amount of such excess.
Conversely, if the actual rate is less than 4%, variable Annuity Payments will
decrease.
The second and subsequent monthly payments made under a Fixed Annuity
Payout Option will be equal to the amount of the first monthly fixed Annuity
Payment (described above).
PERFORMANCE DATA
The tables below provide performance results for each of the Separate
Account's Investment Divisions through December 31, 1997. The results shown in
this section are not an estimate or guarantee of future investment performance,
and do not represent the actual experience of amounts invested by a particular
Contractowner. Moreover, the performance information for each Investment
Division reflects the investment experience of its underlying Funds for periods
prior to the commencement of operations of the Separate Account (January 16,
1990) if the Funds existed prior to such date. Such results were calculated by
applying all Contract and Separate Account level charges to the historical Fund
performance results for such prior periods. During such prior periods, the Funds
were utilized as the underlying Funds for other separate accounts of GIAC which
were established in connection with the issuance of other variable contracts.
Average Annual Total Return Calculations
The first section of the following table was calculated using the
standardized method prescribed by the Securities and Exchange Commission. It
illustrates each Investment Division's average annual total return over the
periods shown. The average annual total return for an Investment Division for a
specified period is determined by reference to a hypothetical $1,000 investment
that includes capital appreciation and depreciation for the stated period,
according to the following formula:
P(1 + T)^n = ERV
Where: P = A hypothetical purchase of $1,000 from which no sales
load is deducted.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of the hypothetical $1,000
purchase at the end of the period.
Each calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period, that
no transfers or additional purchase payments were made and
B-3
<PAGE>
the surrender of the Contract at the end of each period. The Investment
Division's average annual total return is the annual rate that would be
necessary to achieve the ending value of an investment kept in the Investment
Division for the period specified. The rate of return reflects all charges
assessed against a Contract and at the Separate Account level except for any
premium taxes that may be payable. The charges reflected include any applicable
contingent deferred sales charge; the mortality and expense risk charge; and a
pro-rated portion of the contract administration fee. See the Prospectus for a
detailed description of such charges.
The second section of the table was calculated in the same manner as the
first except that no contingent deferred sales charge was deducted since it is
assumed that the Contract continues through the end of each period.
<TABLE>
<CAPTION>
Average Annual Total Return for a Average Annual Total Return on
Contract Surrendered on 12/31/97 12/31/97 Assuming Contract Continues
(Hypothetical $1,000 Purchase Payment) (Hypothetical $1,000 Purchase Payment)
-------------------------------------- --------------------------------------
Length of Investment Period Length of Investment Period
-------------------------------------- --------------------------------------
Ten Years (or Ten Years (or
Date of Since Fund Since Fund
Investment Division Fund Inception, Inception,
Corresponding To Inception One Year Five Years If Less) One Year Five Years If Less)
- -------------------- --------- -------- ---------- ------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Guardian Cash
Fund.................. 1/7/82 -2.08% 2.12% 4.28% 3.92% 3.20% 4.28%
The Guardian Bond
Fund.................. 5/1/83 1.72% 4.71% 7.65% 7.72% 5.69% 7.65%
The Guardian Stock
Fund.................. 4/13/83 28.00% 20.37% 17.97% 34.00% 20.94% 17.97%
The Guardian Small Cap
Stock Fund*........... 5/1/97 N/A N/A 7.13% N/A N/A 13.13%
Baillie Gifford Interna-
tional Fund........... 2/8/91 4.63% 12.12 8.10% 10.63% 12.87% 8.64%
Baillie Gifford Emerg-
ing Markets Fund...... 10/17/94 -5.22% N/A 0.33% 0.78% N/A 2.15%
Value Line Centurion
Fund ("VLCF")......... 11/15/83 13.97% 14.28% 16.39% 19.97% 14.97% 16.39%
Value Line Strategic
Asset Management
Trust ("VLSAM")....... 10/1/87 8.31% 10.78% 14.01% 14.31% 11.56% 14.01%
Gabelli Capital Asset
Fund.................. 5/1/95 34.93% N/A 19.35% 40.93% N/A 21.01%
MFS Growth With Income
Series................ 10/9/95 22.29% N/A 24.10% 28.29% N/A 26.14%
* Figures reflect actual total return from inception to December 31, 1997.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Change in Accumulation Unit Value
The following performance information illustrates the cumulative change
and the actual annual change in Accumulation Unit values for the periods
specified for each Investment Division and is computed differently than the
standardized average annual total return information.
An Investment Division's cumulative change in Accumulation Unit values is
the rate at which the value
B-4
<PAGE>
of an Accumulation Unit changes over the time period illustrated. The actual
annual change in Accumulation Unit values is the rate at which the value of an
Accumulation Unit changes over each 12-month period illustrated. The rates of
change in Accumulation Unit values quoted in the table reflect a deduction for
the Contract's mortality and expense risk charge. They do not reflect deductions
for any contingent deferred sales charge, contract administration fee or premium
taxes. The rates of change would be lower if these charges were included.
<TABLE>
<CAPTION>
Cumulative Change in Accumulation
Unit Value for Period Ended
December 31, 1997
------------------------------------------
Ten Years (or
Since Fund
Investment Division Inception, Date of Fund
Corresponding To One Year Five Years If Less) Inception
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Guardian Cash Fund...................... 3.94% 17.17% 52.33% 1/7/82
The Guardian Bond Fund...................... 7.74% 31.97% 109.42% 5/1/83
The Guardian Stock Fund..................... 34.02% 158.96% 422.95% 4/13/83
The Guardian Small Cap Stock Fund........... N/A N/A 13.14% 5/1/97
Gabelli Capital Asset Fund.................. 40.95% N/A 66.31% 5/1/95
Baillie Gifford International Fund.......... 10.65% 83.36% 77.33% 2/8/91
Baillie Gifford Emerging Markets Fund....... 0.80% N/A 7.11% 10/17/94
Value Line Centurion Fund................... 19.99% 101.08% 356.81% 11/15/83
Value Line Strategic Asset Management Trust. 14.33% 72.97% 271.84% 10/1/87
MFS Growth With Income Series............... 28.29% N/A 67.87% 10/9/95
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
Change in Accumulation Unit Value for 12-Month Period ended December 31,
---------------------------------------------------------------------------------------------------------
Investment Division
Corresponding To 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ---------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Guardian Cash Fund ... 6.66% 5.17% 5.13% 6.09% 7.79% 6.75% 4.38% 2.03% 1.46% 2.63% 4.32% 3.78% 3.94%
The Guardian Bond Fund ... 20.96% 13.52% -0.83% 8.44% 12.57% 6.31% 14.86% 6.46% 8.59% -4.56% 16.24% 1.68% 7.74%
The Guardian Stock Fund .. 30.50% 15.76% 0.69% 18.98% 22.02% -12.80% 34.40% 18.69% 18.58% -2.41% 33.11% 25.43% 34.02%
The Guardian Small Cap
Stock Fund.............. N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 13.14%*
Baillie Gifford Interna-
tional Fund............. N/A N/A N/A N/A N/A N/A 7.40%* -9.95% 32.50% -0.28% 9.95% 14.08% 10.65%
Baillie Gifford Emerging
Markets Fund............ N/A N/A N/A N/A N/A N/A N/A N/A N/A -12.17%* -1.74% 23.14% 0.80%
Value Line Centurion Fund
("VLCF")................ 30.42% 15.52% -3.97% 6.35% 29.99% 4.33% 50.44% 4.71% 7.95% -3.34% 38.47% 15.98% 19.99%
Value Line Strategic Asset
Management Trust
("VLSAM")............... N/A N/A -5.41%* 8.92% 24.11% -1.32% 41.69% 13.73% 10.57% -5.97% 27.06% 14.53% 14.33%
Gabelli Capital Asset Fund N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 7.53%* 9.73% 40.95%
MFS Growth With Income
Series.................. N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 6.37%* 23.01% 28.29%
</TABLE>
* From date of Fund inception through December 31.
B-6
<PAGE>
Calculation of Yield Quotations for the Cash Fund Investment Division
The yield of the Investment Division of the Separate Account investing in
the Cash Fund represents the net change, exclusive of gains and losses realized
by the Investment Division or the Cash Fund and unrealized appreciation and
depreciation with respect to the Cash Fund's portfolio of securities, in the
value of a hypothetical pre-existing Contract that is credited with one
Accumulation Unit at the beginning of the period for which yield is determined
(the "base period"). The base period generally will be a seven-day period. The
current yield for a base period is calculated by dividing (1) the net change in
the value of the Contract for the base period (see "Accumulation Period" in the
Prospectus) by (2) the value of the Contract at the beginning of the base period
and multiplying by 365/7. Deductions from purchase payments (for example, any
applicable premium taxes) and any applicable contingent deferred sales charge
assessed at the time of withdrawal or annuitization are not reflected in the
computation of current yield of the Investment Division. The determination of
net change in Contract value reflects all deductions that are charged to a
Contractowner, in proportion to the length of the base period and the Investment
Division's average Contract size. The current annualized yield of the Cash Fund
Investment Division for the 7-day period ended December 31, 1997 was 5.24%.
Yield also may be calculated on an effective or compound basis, which
assumes continual reinvestment by the Investment Division throughout an entire
year of net income earned by the Investment Division at the same rate as net
income is earned in the base period. The effective or compound yield for a base
period is calculated by (1) dividing (i) the net change in the value of the
Contract for the base period by (ii) the value of the Contract as of the
beginning of the base period, (2) adding 1 to the result, (3) raising the sum to
a power equal to 365 divided by the number of days in the base period, and (4)
subtracting 1 from the result. The effective annualized yield of the Cash Fund
Investment Division for the 7-day period ended December 31, 1997 was 5.38%.
The current and effective yields of the Cash Fund Investment Division will
vary depending on prevailing interest rates, the operating expenses and the
quality, maturity and type of instruments held in the Cash Fund's portfolio.
Consequently, no yield quotation should be considered as representative of what
the yield of the Investment Division may be for any specified period in the
future. The yield is subject to fluctuation and is not guaranteed.
Performance Comparisons
Advertisements and sales literature for the Separate Account's Investment
Divisions and their underlying Funds may compare their performance to other
investment vehicles and the separate accounts of other insurance companies as
reflected in performance data furnished by sources such as Lipper Analytical
Services, Inc., Morningstar, and Variable Annuity Research & Data Service, all
of which are independent services which monitor and rank the performance of
variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis. The performance analyses prepared by such
services rank issuers on the basis of total return, assuming reinvestment of
distributions, but may not take sales charges, redemption fees, or certain
expense deductions at the separate account level into consideration.
VALUATION OF ASSETS OF THE SEPARATE ACCOUNT
The value of Fund shares held in each Investment Division at the time of
each valuation is the redemption value of such shares at such time. If the right
to redeem shares of a Fund has been suspended, or payment of redemption value
has been postponed for the sole purpose of computing Annuity Payments, the
shares held in the Separate Account (and corresponding Annuity Units) may be
valued at fair value as determined in good faith by GIAC's Board of Directors.
B-7
<PAGE>
TRANSFERABILITY RESTRICTIONS
Where a Contract is owned in conjunction with a retirement plan qualified
under the Internal Revenue Code of 1986, as amended ("Code") or a tax-sheltered
annuity program, and notwithstanding any other provisions of the Contract, the
Contractowner may not change the ownership of the Contract nor may the Contract
be sold, assigned or pledged as collateral for a loan or as security for the
performance of an obligation or for any other purpose to any person other than
GIAC unless the Contractowner is the trustee of an employee trust qualified
under the Code, the custodian of a custodial account treated as such, or the
employer under a qualified nontrusteed pension plan.
EXPERTS
The financial statements of the Separate Account incorporated by reference
in this Statement of Additional Information and in the Registration Statement by
reference to the Annual Report to Contractowners for the year ended December 31,
1996 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants. The statutory basis balance sheets of GIAC as of
December 31, 1997 and 1996 and the related statutory basis statements of
operations, of changes in common stock and surplus and of cash flow for each of
the three years in the period ended December 31, 1997 appearing in this
Statement of Additional Information have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants. Such financial
statements have been included herein or incorporated herein by reference in
reliance upon such reports given upon the authority of said firms as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The statutory basis financial statements of GIAC which are set forth
herein beginning on page B-9 should be considered only as bearing upon the
ability of GIAC to meet its obligations under the Contracts.
The financial statements of the Separate Account are incorporated herein
by reference to the Separate Account's 1997 Annual Report to Contractowners.
Such financial statements, the notes thereto and the reports of the independent
accountants thereon are incorporated herein by reference or are included
elsewhere in this Registration Statement. A free copy of the 1997 Annual Report
to Contractowners accompanies this Statement of Additional Information.
B-8
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATUTORY BASIS BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
As of December 31,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
ADMITTED ASSETS
Investments:
Fixed maturities, principally at amortized cost
(market: 1997 - $492,052,307; 1996 - $491,271,164) ............. $ 484,747,832 $ 490,445,948
Affiliated mutual funds, at market ............................... 30,551,186 2,755,672
Investment in subsidiary ......................................... 12,073,143 7,746,643
Policy loans - variable life insurance ........................... 72,737,781 68,143,068
Cash and short-term investments .................................. 23,602,410 17,825,039
Investment in joint venture ...................................... 345,492 285,874
Accrued investment income receivable ................................ 13,303,271 10,553,405
Due from parent and affiliates ...................................... 7,573,304 6,507,913
Other assets ........................................................ 12,557,432 12,173,268
Receivable from separate accounts ................................... 30,203,923 11,606,587
Variable annuity and EISP/CIP separate account assets ............... 6,810,882,719 5,248,159,777
Variable life separate account assets ............................... 414,699,239 342,921,803
-------------- --------------
TOTAL ADMITTED ASSETS .......................................... $7,913,277,732 $6,219,124,997
============== ==============
LIABILITIES
Policy liabilities and accruals:
Fixed deferred reserves .......................................... $ 339,797,646 $ 329,681,355
Fixed immediate reserves ......................................... 7,397,461 5,874,894
Life reserves .................................................... 67,799,492 65,462,693
Minimum death benefit guarantees ................................. 1,117,645 1,257,777
Policy loan collateral fund reserve .............................. 70,734,812 65,762,820
Accrued expenses, taxes, & commissions ........................... 1,592,997 2,712,360
Due to parent and affiliates ..................................... 20,408,087 15,304,638
Federal income taxes payable ..................................... 10,939,640 4,743,447
Other liabilities ................................................ 20,540,325 30,079,434
Asset valuation reserve .......................................... 26,305,528 15,121,269
Variable annuity and EISP/CIP separate account liabilities ....... 6,750,575,077 5,193,574,218
Variable life separate account liabilities ....................... 413,364,790 335,769,184
-------------- --------------
TOTAL LIABILITIES .............................................. $7,730,573,500 $6,065,344,089
COMMON STOCK AND SURPLUS
Common Stock, $100 par value, 20,000 shares authorized, issued and
outstanding .................................................... 2,000,000 2,000,000
Additional paid-in surplus ....................................... 137,398,292 137,398,292
Assigned and unassigned surplus .................................. 43,305,940 14,382,616
-------------- --------------
Total Common Stock and Surplus ................................. 182,704,232 153,780,908
-------------- --------------
TOTAL LIABILITIES, COMMON STOCK AND SURPLUS .................... $7,913,277,732 $6,219,124,997
============== ==============
</TABLE>
See notes to statutory basis financial statements.
B-9
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATUTORY BASIS STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Premiums and annuity considerations:
Variable annuity considerations ............. $ 995,209,301 $ 731,792,764 $ 537,841,762
Life insurance premiums and fixed
annuity considerations .................... 68,222,360 44,874,269 73,938,212
Net investment income ......................... 47,993,754 42,366,902 36,293,598
Amortization of IMR ........................... 111,783 333,219 257,380
Net gain from operations of separate accounts . 5,780,327 8,860,462 --
Service fees .................................. 76,350,291 58,774,486 46,560,286
Variable life -- cost of insurance ............ 11,205,120 4,844,028 4,232,564
Reserve adjustments on reinsurance ceded ...... 7,885,341 30,636,445 (32,192,749)
Commission and expense allowances ............. 16,268,128 14,508,840 10,057,974
Other income .................................. 5,178,266 2,535,356 1,127,526
--------------- --------------- ---------------
1,234,204,671 939,526,771 678,116,553
--------------- --------------- ---------------
Benefits and expenses:
Benefits:
Death benefits .............................. 5,340,675 6,785,456 4,774,584
Annuity benefits ............................ 687,719,014 426,072,773 276,568,762
Surrender benefits .......................... 17,620,583 17,459,706 17,660,413
Increase in reserves ........................ 18,291,585 82,891,516 65,349,399
Net transfers to (from) separate accounts:
Variable annuity and EISP/CIP ............... 359,468,681 323,093,897 252,772,988
Variable Life ............................... (630,102) (10,417,095) (17,796,371)
Commissions ................................... 43,352,989 39,233,431 34,364,742
General insurance expenses .................... 59,476,685 42,523,892 25,888,456
Taxes, licenses and fees ...................... 3,743,414 3,723,858 2,477,492
Reinsurance terminations ...................... 182,535 (15,470,015) 11,002,701
--------------- --------------- ---------------
1,194,566,059 915,897,419 673,063,166
--------------- --------------- ---------------
Income before income taxes and realized
gains from investments ...................... 39,638,612 23,629,352 5,053,387
Federal income taxes .......................... 12,073,500 3,941,460 439,667
--------------- --------------- ---------------
Income from operations, net of federal
income taxes, and before net realized
gains ....................................... 27,565,112 19,687,892 4,613,720
Realized gains from investments, net of federal
income taxes, net of transfer to IMR ........ 472,127 7,540 342,455
--------------- --------------- ---------------
Net income .................................... $ 28,037,239 $ 19,695,432 $ 4,956,175
=============== =============== ===============
</TABLE>
See notes to statutory basis financial statements.
B-10
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATUTORY BASIS STATEMENTS OF CHANGES IN COMMON STOCK AND SURPLUS
================================================================================
<TABLE>
<CAPTION>
Assigned and
Additional Unassigned Total
Common Paid-in Surplus Common Stock
Stock Surplus (Deficit) and Surplus
------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Balances at December 31, 1994 .................... $2,000,000 $137,398,292 $(1,817,759) $137,580,533
---------- ------------ ----------- ------------
Net income from operations ....................... 4,956,175 4,956,175
Increase in unrealized appreciation of Company's
investment in separate accounts, net of
applicable taxes .............................. 3,024,930 3,024,930
Decrease in unrealized appreciation of Company's
investment in joint venture ................... (6,803) (6,803)
Increase in unrealized appreciation of Company's
investment in subsidiary ...................... 298,534 298,534
Increase in non-admitted assets .................. (7,078) (7,078)
Disallowed interest maintenance reserve .......... 143,080 143,080
Net increase in asset valuation reserve .......... (4,111,444) (4,111,444)
---------- ------------ ----------- ------------
Balances at December 31, 1995 .................... 2,000,000 137,398,292 2,479,635 141,877,927
---------- ------------ ----------- ------------
Net income from operations ....................... 19,695,433 19,695,433
Tax on prior years separate account seed
investment unrealized gains ................... (104,732) (104,732)
Increase in unrealized appreciation of Company's
investment in joint venture ................... 241,456 241,456
Increase in unrealized appreciation of Company's
investment in subsidiary ...................... 142,201 142,201
Decrease in unrealized appreciation of Company's
investment in other assets .................... (9,384) (9,384)
Increase in non-admitted assets .................. (80,815) (80,815)
Disallowed interest maintenance reserve .......... (128,107) (128,107)
Surplus changes resulting from reinsurance ....... (2,073,155) (2,073,155)
Net increase in asset valuation reserve .......... (5,779,916) (5,779,916)
---------- ------------ ----------- ------------
Balances at December 31, 1996 .................... 2,000,000 137,398,292 14,382,616 153,780,908
========== ============ =========== ============
Net income from operations ....................... 28,037,239 28,037,239
Increase in unrealized appreciation of Company's
investment in joint venture ................... 42,908 42,908
Increase in unrealized appreciation of Company's
investment in subsidiary ...................... 4,326,500 4,326,500
Increase in unrealized appreciation of Company's
investment in other assets .................... 9,384 9,384
Increase in unrealized appreciation of Company's
investment in an affiliated mutual fund ....... 7,271,233 7,271,233
Decrease in non-admitted assets .................. 83,011 83,011
Disallowed interest maintenance reserve .......... (197,600) (197,600)
Surplus changes resulting from reinsurance ....... 534,908 534,908
Net increase in asset valuation reserve .......... (11,184,259) (11,184,259)
---------- ------------ ----------- ------------
Balances at December 31, 1997 .................... $2,000,000 $137,398,292 $43,305,940 $182,704,232
========== ============ =========== ============
</TABLE>
See notes to statutory basis financial statements.
B-11
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATUTORY BASIS STATEMENTS OF CASH FLOW
================================================================================
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from insurance activities:
Premiums, annuity considerations and
deposit funds ................................... $ 1,065,244,583 $ 780,710,735 $ 611,169,979
Investment income ................................. 46,412,248 42,413,736 36,912,131
Commissions and expense allowances on
reinsurance ceded ............................... 22,679,622 37,315,301 (22,118,484)
Other income ...................................... 67,084,996 47,357,962 44,220,753
Death benefits .................................... (5,492,854) (6,900,438) (4,420,866)
Surrender benefits ................................ (17,780,564) (2,774,865) (17,660,413)
Annuity benefits .................................. (689,207,046) (424,511,908) (276,163,436)
Commissions, other expenses
and taxes (excluding FIT) ....................... (101,213,566) (78,968,214) (57,714,112)
Net transfers to separate accounts ................ (356,017,200) (307,856,562) (231,230,812)
Federal income taxes (excluding tax on
capital gains) .................................. (5,094,779) 682,025 (1,557,444)
Increase in policy loans .......................... (4,594,714) (4,300,868) (4,522,280)
Other operating expenses and sources .............. (140,580) 2,077,342 (8,945,084)
--------------- --------------- ---------------
Net cash provided by insurance activities ............ 21,880,146 85,244,246 67,969,932
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from dispositions of investment securities 315,404,430 224,692,954 63,122,215
Purchases of investment securities ................ (331,151,548) (309,590,319) (118,543,796)
Federal income tax on capital gains ............... (355,657) (505,496) 992,810
--------------- --------------- ---------------
Net cash used in investing activities ................ (16,102,775) (85,402,861) (54,428,771)
--------------- --------------- ---------------
Net increase (decrease) in cash ................. 5,777,371 (158,615) 13,541,161
Cash and short-term investments,
beginning of year ............................. 17,825,039 17,983,654 4,442,493
--------------- --------------- ---------------
Cash and short-term investments, end of year .... $ 23,602,410 $ 17,825,039 $ 17,983,654
=============== =============== ===============
</TABLE>
See notes to statutory basis financial statements.
B-12
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
Note 1 -- Organization
The Guardian Insurance & Annuity Company, Inc. (GIAC or the Company) is a
wholly-owned subsidiary of The Guardian Life Insurance Company of America (The
Guardian). The Company, domiciled in the state of Delaware, is licensed to
conduct life and health insurance business in all fifty states and the District
of Columbia. The Company's primary business is the sale of variable deferred
annuity contracts and variable and term life insurance policies. For variable
products other than 401(k) products, contracts are sold by insurance agents who
are licensed by GIAC and are either Registered Representatives of Guardian
Investor Services Corporation (GISC) or of other broker dealer firms that have
entered into sales agreements with GIAC and GISC. The Company's general agency
distribution system is used for the sale of other products and policies.
GISC, a wholly owned subsidiary of the Company, is a registered broker
dealer under the Securities Exchange Act of 1934 and is a registered investment
advisor under the Investment Adviser's Act of 1940. GISC is the distributor and
underwriter for GIAC's variable products, and the investment advisor to certain
mutual funds sponsored by GIAC, which are investment options for the variable
products.
Insurance Separate Accounts: The Company has established fourteen
insurance separate accounts primarily to support the variable annuity and life
insurance products it offers. The majority of the separate accounts are unit
investment trusts registered under the Investment Company Act of 1940. Proceeds
from the sale of variable products are invested through these separate accounts
in certain mutual funds specified by the contractholders. Of these separate
accounts the Company maintains two separate accounts whose sole purpose is to
fund certain employee benefit plans of The Guardian.
The assets and liabilities of the separate accounts are clearly identified
and distinct from the other assets and liabilities of the Company. The assets of
the separate accounts will not be charged with any liabilities arising out of
any other business of the Company. However, the obligations of the separate
accounts, including the promise to make annuity and death benefit payments,
remain obligations of the Company. Assets and liabilities of the separate
accounts are stated primarily at the market value of the underlying investments
and corresponding contractholders obligations. The amounts provided by the
Company to establish separate account investment portfolios (seed money) are not
included in separate account liabilities.
Note 2 -- Summary of Significant Accounting Policies
Basis of presentation of financial statements: The financial statements
have been prepared on a statutory basis of accounting that is prescribed or
permitted by the Insurance Department of the State of Delaware which is a
comprehensive basis of accounting other than generally accepted accounting
principles (GAAP).
Financial statements prepared on a statutory basis vary from financial
statements prepared on a GAAP basis because: (1) the costs relating to acquiring
business, principally commissions and certain policy issue expenses, are charged
to income in the year incurred, whereas on a GAAP basis they would be recorded
as assets and amortized over the future periods to be benefited; (2) life
insurance and annuity reserves are based on statutory mortality and interest
requirements, without consideration of withdrawals, whereas on GAAP basis they
are on anticipated Company experience for lapses, mortality and investment
yield; (3) life insurance enterprises are required to establish a formula-based
asset valuation reserve (AVR) by a direct charge to surplus to offset potential
investment losses; under GAAP, provisions for investments are established as
needed through a charge to income; (4) realized gains and losses resulting from
changes in interest rates on fixed income investments are deferred in the
interest maintenance reserve (IMR) and amortized into investment income over the
remaining life of the investment sold; for GAAP, such gains and losses are
recognized in income at the time of sale; (5) bonds are carried principally at
amortized cost for statutory reporting and at market value for GAAP; (6) annuity
and certain insurance premiums are recognized as premium income, whereas for
GAAP they are recognized as deposits; (7) deferred federal income taxes are not
provided for temporary differences between tax and book assets and liabilities
as they are under GAAP; (8) certain reinsurance transactions are accounted for
as reinsurance for statutory purposes and as financing transactions under GAAP,
and assets and liabilities are reported net of reinsurance for statutory
purposes and gross of reinsurance for GAAP.
Use of Estimates: The preparation of financial statements of insurance
enterprises requires management to
B-13
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements. As a provider of life
insurance and annuity products, GIAC's operating results in any given period
depend on estimates of policy reserves required to provide for future
policyholder benefits. The development of policy reserves for insurance and
investment contracts requires management to make estimates and assumptions
regarding mortality, lapse, expense and investment experience. Such estimates
are primarily based on historical experience and, in many cases, state insurance
laws that require specific mortality, morbidity, and investment assumptions to
be used by the Company. Actual results could differ from those estimates.
Management monitors actual experience, and where circumstances warrant, revises
its assumptions and the related reserve estimates.
Valuation of investments: Investments in securities are recorded in
accordance with valuation procedures established by the National Association of
Insurance Commissioners (NAIC). Unrealized gains and losses on investments
carried at market are recorded directly to unassigned surplus. Realized gains
and losses on disposition of investments are determined by the specific
identification method. The Company has recorded in accordance with NAIC
requirements, the net gain from the operations of the separate accounts in the
operations of the general account in 1997 and 1996 instead of in surplus.
Bonds: Bonds are valued principally at amortized cost. Mortgage backed
bonds are carried at amortized cost using the interest method considering
anticipated prepayments at the date of purchase. Significant changes in future
anticipated cash flows from the original purchase assumptions are accounted for
using the retrospective adjustment method with PSA standard prepayment rates.
Investment in subsidiary: GIAC's investment in GISC is carried at equity
in GIAC's underlying net assets. Undistributed earnings or losses are reflected
as unrealized capital gains and losses directly in unassigned surplus. Dividends
received from GISC are recorded as investment income and amounted to $10,000,000
in 1997, $9,500,000 in 1996 and 6,700,000 in 1995.
Short-Term Investments: Short-term investments are stated at amortized
cost and consist primarily of investments having maturities at the date of
purchase of six months or less. Market values for such investments approximate
carrying value.
Loans on Policies: Loans on policies are stated at unpaid principal
balance. The carrying amount approximates fair value since loans on policies
have no defined maturity date and reduce the amount payable at death or at
surrender of the contract.
Investment Reserves: In compliance with regulatory requirements, the
Company maintains the Asset Valuation Reserve (AVR) and the Interest Maintenance
Reserve (IMR). The AVR is intended to stabilize surplus against market
fluctuations in the value of equities and credit related declines in the value
of bonds. Changes in the AVR are recorded directly to unassigned surplus. The
IMR captures net after-tax realized capital gains which result from changes in
the overall level of interest rates for fixed income investments and amortizes
these net capital gains into income over the remaining stated life of the
investments sold. The Company uses the group method of calculating the IMR,
consistent with prior years. Any net negative IMR amounts are treated as a
non-admitted asset.
Contract and Policy Reserves: Fixed deferred reserves represent the fund
balance left to accumulate at interest under fixed annuity contracts that were
offered directly by the Company, a fixed rate option that is offered to variable
annuity contractowners and a single premium deferred annuity that is offered by
the Company. The Company no longer offers the fixed annuity contracts.
The estimated fair value of contractholder account balances within the
fixed deferred reserves has been determined to be equivalent to carrying value
as the current offering and renewal rates are set in response to current market
conditions and are only guaranteed for one year.
The interest rate credited on fixed annuity contracts included in fixed
deferred reserves for 1997 and 1996 was 5.75%. The interest rate credited on the
fixed rate option that is offered to certain variable annuity contractowners was
5.50% during 1997. For the fixed rate option currently issued, the issue and
renewal interest
B-14
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
rates credited varies from month to month and ranged from 5.25% to 5.40% in
1997. For single premium deferred annuities the rates ranged from 5.00% to 6.00%
in 1997. Fixed immediate reserves are a liability within the general account for
those annuitants that have elected a fixed annuity payout option. The immediate
contract reserve is computed using the 1971 IAM Table and the 1983 IAM Table and
a 4% discount rate.
The loan collateral fund reserve is the cash value of loaned variable life
policyowner account values. The reserve is credited with interest at 4% per
annum for single premium variable life policyowners, 6.5% for annual pay
variable life policyowners and 7% for other variable life policyowners.
Non-admitted Assets: Certain assets designated as "non-admitted assets" in
accordance with rules and regulations of the Department of Insurance of the
State of Delaware are charged directly to unassigned surplus. At December 31,
1997 and 1996 non-admitted assets consisted of agents' balances and
miscellaneous receivables in the amounts of $82,380 and $123,785, respectively.
Acquisition Costs: Commissions and other costs incurred in acquiring new
business are charged to operations as incurred.
Premiums and Other Revenues: Premiums and annuity considerations are
recognized for funds received on variable life insurance and annuity products.
Corresponding transfers to/from separate accounts are included in the expenses.
Revenue also includes service fees from the separate accounts consisting
of mortality and expense charges, annual administration fees, charges for the
cost of term insurance related to variable life policies and penalties for early
withdrawals. Services fees were not charged on separate account assets of
$162,522,811 and $142,722,353 at December 31, 1997 and 1996, respectively, which
represent investments in The Guardian's employee benefit plans.
Federal Income Taxes: The provision for federal income taxes is based on
income from operations currently taxable, as well as accrued market discount on
bonds. Realized gains and losses are reported after adjustment for the
applicable federal income taxes. The taxable portion of unrealized appreciation
of the Company's separate account investments is included in operations for 1997
and 1996, and in surplus in 1995.
Other: Certain reclassifications have been made in the amounts presented
for prior periods to conform those periods with the 1997 presentation.
Note 3 -- Federal Income Taxes
The Company's federal income tax return is consolidated with its parent,
The Guardian. The consolidated income tax liability is allocated among the
members of the group according to a tax sharing agreement. In accordance with
the tax sharing agreement between and among the parent and participating
subsidiaries, each member of the group computes its tax provision and liability
on a separate return basis, but may, where applicable, recognize benefits of net
operating losses and capital losses utilized in the consolidated group.
Estimated payments are made between the members of the group during the year.
A reconciliation of federal income tax expense, based on the prevailing
corporate income tax rate of 35% for 1997, 1996 and 1995 to the federal income
tax expense reflected in the accompanying financial statements is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income tax at prevailing corporate income tax rates
applied to pretax statutory income ............. $ 13,873,514 $ 8,270,274 $ 1,768,688
Add (deduct) tax effect of:
Adjustment for annuity and other reserves ...... (291,470) (1,478,476) 337,668
DAC Tax ........................................ 1,712,811 867,731 666,260
Dividend from subsidiary ....................... (3,500,000) (3,325,000) (2,345,000)
Other-- net .................................... 278,645 (393,069) 12,051
------------ ------------ ------------
Federal income taxes .............................. $ 12,073,500 $ 3,941,460 $ 439,667
============ ============ ============
</TABLE>
B-15
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
The provision for federal income taxes includes deferred taxes in 1997,
1996 and 1995 of $181,145, $353,051 and $304,923, respectively, applicable to
the difference between the tax basis and the financial statement basis of
recording investment income relating to accrued market discount.
Note 4 -- Investments
The major categories of net investment income are summarized as follows:
For the Year Ended December 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
Fixed maturities .................. $31,806,228 $28,234,145 $25,795,915
Affiliated money market funds ..... 524,277 121,733 130,729
Subsidiary ........................ 10,000,000 9,500,000 6,700,000
Policy loans ...................... 3,386,194 3,089,114 2,847,532
Short-term investments ............ 2,280,599 1,204,805 1,166,264
Joint venture dividend ............ 1,047,525 623,160 684,306
Other ............................. 59,779 55,301 14,951
----------- ----------- -----------
49,104,602 42,828,258 37,339,697
Less: Investment expenses ......... 1,110,848 461,356 1,046,099
----------- ----------- -----------
Net investment income ............. $47,993,754 $42,366,902 $36,293,598
=========== =========== ===========
Gross realized gains and losses, less applicable federal income taxes and
transfer to IMR, are summarized as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Realized gains from dispositions:
U.S. Government bonds .................... $ 722,440 $ 1,014,811 $ 438,127
Corporate debt securities ................ 413,022 1,014,562 555,817
Common stocks ............................ 174 -- --
Seed investment redeemed ................. -- -- 717,499
Foreign exchange ......................... 2,791 11,599 --
Realized losses from dispositions:
U.S. Government bonds .................... 744,168 181,025 7,498
Corporate debt securities ................ 399,618 617,325 370,353
Foreign exchange ......................... 5,773 -- 10,145
Short term investments ................... 1,218 191 --
----------- ----------- -----------
Net realized capital gains (losses) ...... (12,350) 1,242,431 1,323,447
----------- ----------- -----------
Federal income tax expense (benefit):
Current .................................. (269,216) 829,609 622,821
Deferred ................................. (209,059) (394,759) (42,290)
----------- ----------- -----------
Total federal income tax expense (benefit) (478,275) 434,850 580,531
----------- ----------- -----------
Transfer to IMR ............................. (6,202) 800,041 400,461
----------- ----------- -----------
Net realized gains (losses) ................. $ 472,127 $ 7,540 $ 342,455
=========== =========== ===========
</TABLE>
The market values of bonds are based on quoted prices as available. For
certain private placement debt securities where quoted market prices are not
available, fair value is estimated by management using adjusted market prices
for like securities.
The cost and estimated market values of investments by major investment
category at December 31, 1997 and 1996 are as follows:
B-16
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations
of U.S. government corporations
and agencies ....................... $ 65,358,213 $ 1,550,649 $ 16,198 $ 66,892,664
Obligations of states and political
subdivisions ....................... 71,909,687 795,387 41,850 72,663,224
Debt securities issued by foreign
governments ........................ 7,062,711 -- 115,745 6,946,966
Corporate debt securities ............. 340,417,221 6,143,061 1,010,829 345,549,453
Common stock of subsidiary ............ 9,398,292 2,674,851 -- 12,073,143
Affiliated mutual funds ............... 23,279,949 7,271,237 -- 30,551,186
------------ ------------ ------------ ------------
$517,426,073 $ 18,435,185 $ 1,184,622 $534,676,636
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations
of U.S. government corporations
and agencies ....................... $133,436,167 $ 761,811 $ 435,887 $133,762,091
Obligations of states and political
subdivisions ....................... 40,444,325 148,692 70,771 40,522,246
Debt securities issued by foreign
governments ........................ 3,491,091 -- 65,431 3,425,660
Corporate debt securities ............. 313,074,365 2,279,414 1,792,612 313,561,167
Common stock of subsidiary ............ 9,398,292 -- 1,651,649 7,746,643
Affiliated mutual funds ............... 2,755,672 -- -- 2,755,672
------------ ------------ ------------ ------------
$502,599,912 $ 3,189,917 $ 4,016,350 $501,773,479
============ ============ ============ ============
</TABLE>
The amortized cost and estimated market value of debt securities at
December 31, 1997 and 1996, by contractual maturity, is shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations.
As of December 31, 1997
---------------------------
Estimated
Amortized Market
Cost Value
------------ ------------
Due in one year or less .......................... $ 59,694,316 $ 59,737,770
Due after one year through five years ............ 234,805,896 236,867,373
Due after five years through ten years ........... 103,002,869 106,604,446
Due after ten years .............................. 21,552,124 22,383,887
------------ ------------
419,055,205 425,593,476
Sinking fund bonds
(including collateralized mortgage obligations) 65,692,627 66,458,831
------------ ------------
$484,747,832 $492,052,307
============ ============
B-17
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
As of December 31, 1996
---------------------------
Estimated
Amortized Market
Cost Value
------------ ------------
Due in one year or less .......................... $ 64,861,358 $ 65,045,326
Due after one year through five years ............ 286,602,923 287,118,976
Due after five years through ten years ........... 74,354,923 74,503,267
Due after ten years .............................. 25,247,736 25,461,329
------------ ------------
451,066,940 452,128,898
Sinking fund bonds
(including collateralized mortgage obligations) 39,379,008 39,142,266
------------ ------------
$490,445,948 $491,271,164
============ ============
Note 5 -- Reinsurance Ceded
The Company enters into coinsurance, modified coinsurance and yearly
renewable term agreements with affiliated companies and outside parties to
provide for reinsurance of selected variable annuity contracts and group life
and individual life policies. Under the terms of the modified coinsurance
agreements, reserves related to the reinsurance business and corresponding
assets are held by the Company. Accordingly, policy reserves include $76,669,184
and $447,494,766 at December 31, 1997 and 1996, respectively, applicable to
policies reinsured under modified coinsurance agreements. The reinsurance
contracts do not relieve the Company of its primary obligation for policyowner
benefits. Failure of reinsurers to honor their obligations could result in
losses to the Company.
The effect of these agreements on the components of the Company's gain
from operations in the accompanying statements of operations are as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Premiums and deposits .................. $(43,873,731) $(83,250,212) $(41,212,253)
Net investment income .................. -- (61,779) --
Commission and expense allowances ...... 7,885,341 14,508,839 10,057,974
Reserve adjustments .................... 16,268,128 30,636,445 (32,192,749)
Other income ........................... 1,875,163 (25,000) --
------------ ------------ ------------
Revenues ............................. (17,845,099) (38,191,707) (63,347,028)
Policyholder benefits .................. (10,975,075) (26,873,945) (57,577,405)
Increase in aggregate reserves ......... 22,859,719 (5,658,260) (11,909,990)
Reinsurance terminations ............... (27,421,066) (15,470,015) 11,002,701
General expenses ....................... (40,452) (81,667) (48,640)
------------ ------------ ------------
Deductions ........................... (15,576,874) (48,083,887) (58,533,334)
------------ ------------ ------------
Net income (loss) from reinsurance ceded $ (2,268,225) $ 9,892,180 $ (4,813,694)
============ ============ ============
</TABLE>
Note 6 -- Reinsurance Assumed
The Company has entered into various coinsurance agreements with
non-affiliated and affiliated companies. The Company assumes certain life and
disability income policies.
The effect of these agreements on the components of the Company's gain
from operations in the accompanying statements of operations are as follows:
B-18
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Premiums and deposits ................... $ (389,221) $ 41,133,358 $ 7,153,623
Net investment income ................... 45,288 94,657 62,847
Other income ............................ (62,752) 375,404 32,528
------------ ------------ ------------
Revenues .............................. (406,685) 41,603,419 7,248,998
Policyholder benefits ................... 3,967,619 8,076,053 5,086,702
Increase in aggregate reserves .......... (31,677,857) 31,556,908 (357,463)
Reinsurance expenses .................... 27,603,602 (452,476) 1,451,058
Other expenses .......................... 1,885,300 551,319 54,043
------------ ------------ ------------
Deductions ............................ 1,778,664 39,731,804 6,234,340
------------ ------------ ------------
Net income (loss)from reinsurance assumed $ (2,185,349) $ 1,871,615 $ 1,014,658
============ ============ ============
</TABLE>
The Company terminated, during 1997, an assumption agreement with an
unaffiliated company. Under this agreement, included in the consolidated
statements of income are $(2.3) million, $20.2 million and $7.2 million of
premiums at December 31, 1997, 1996 and 1995, respectively.
Note 7 -- Related Party Transactions
Registered representatives of the Guardian Investor Services Corporation
produce a major portion of the Company's business. During 1997, 1996 and 1995,
premium and annuity considerations produced by GISC amounted to $564,519,265,
$528,353,595 and $400,148,692, respectively. The related commissions paid to
GISC amounted to $1,979,926, $1,851,468 and $1,409,708 for 1997, 1996 and 1995,
respectively.
The Company is billed by The Guardian for all compensation and related
employee benefits for those employees of The Guardian who are engaged in the
Company's business and for the Company's use of The Guardian's centralized
services and agency force. The amounts charged for these services amounted to
$60,009,449 in 1997, $41,129,644 in 1996 and $24,989,111 in 1995, and, in the
opinion of management, were considered appropriate for the services rendered.
The company had an investment in the Guardian Real Estate Account (GREA),
which was established in 1987 under Delaware insurance law as an insurance
company separate account. GIAC had contributed capital to GREA since it was
established to provide for funds and to preserve liquidity. Effective December
19, 1997, GREA was liquidated and, as a result, $6,746,290 was returned to GIAC
in the form of capital and there was a realized gain recorded of $969,045
included in the net gain from operations of separate accounts.
A significant portion of the Company's separate account assets is invested
in affiliated mutual funds. These funds consist of The Guardian Park Avenue
Fund, The Guardian Stock Fund, The Guardian Small Cap Stock Fund, The Guardian
Bond Fund, The Baillie Gifford International Fund, The Baillie Gifford Emerging
Markets Fund, The Guardian Baillie Gifford International Fund, The Guardian
Asset Allocation Fund, The Guardian Investment Quality Bond Fund, The Guardian
Cash Management Fund and The Guardian Cash Fund. Each of these funds has an
investment advisory agreement with GISC, except for The Baillie Gifford
International Fund, The Baillie Gifford Emerging Markets Fund and The Guardian
Baillie Gifford International Fund. The investments as of December 31, 1997 and
1996 are as follows:
B-19
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
1997 1996
-------------- --------------
The Guardian Park Avenue Fund ................ $ 371,662,107 $ 251,812,050
The Guardian Stock Fund ...................... 3,222,051,866 2,226,887,181
The Guardian Small Cap Stock Fund ............ 60,104,422 --
The Guardian Bond Fund ....................... 355,417,535 354,316,320
The Baillie Gifford International Fund ....... 442,651,457 400,894,824
The Baillie Gifford Emerging
Markets Fund ............................... 65,038,546 45,571,916
TheGuardian Baillie Gifford International Fund 3,378,730 19,720
The Guardian Asset Allocation Fund ........... 14,910,420 46,623
The Guardian Investment Quality Bond Fund .... 1,546,854 9,385
The Guardian Cash Management Fund ............ 22,250,501 3,113,523
The Guardian Cash Fund ....................... 368,122,449 378,321,710
-------------- --------------
$4,927,134,887 $3,660,993,252
============== ==============
The Company, in agreement with Baillie Gifford Overseas Ltd., has a joint
venture company - Guardian Baillie Gifford Ltd. (GBG) - that is organized as a
corporation in Scotland. GBG is registered in both the United Kingdom and the
United States to act as an investment advisor for the Baillie Gifford
International Fund (BGIF), the Baillie Gifford Emerging Markets Fund (BGEMF),
The Guardian Baillie Gifford International Fund (GBGIF) and The Guardian Baillie
Gifford Emerging Markets Fund (GBGEMF). The Funds, except for The Guardian
Baillie Gifford Emerging Markets Fund, are offered in the U.S. as investment
options under certain variable annuity contracts and variable life policies.
The Company maintains an investment in an affiliated money market mutual
fund, The Guardian Cash Management Fund. At December 31, 1997 and 1996 this
amounted to $2,888,149 and $2,755,672, respectively. The Company also made an
investment in an affiliated small cap stock mutual fund during 1997, The
Guardian Small Cap Stock Fund. At December 31, 1997 this investment amounted to
$27,663,037.
Note 8 -- Separate Accounts
The following represents a reconciliation of net transfers from GIAC to
the separate accounts. Transfers are reported in the Summary of Operations of
the Separate Account Annual Statement:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Transfers to separate accounts .................. $ 1,054,380,697 $ 767,741,428 $ 582,715,569
Transfers from separate accounts ................ (782,891,638) (518,683,141) (398,531,802)
--------------- --------------- ---------------
Net transfers to separate accounts ............ 271,489,059 249,058,287 184,183,767
--------------- --------------- ---------------
Reconciling Adjustments:
Mortality & expense guarantees-- variable annuity 70,027,514 53,219,656 41,474,872
Mortality & expense guarantees-- variable life .. 2,021,656 1,687,711 1,571,955
Administrative fees-- variable annuity .......... 4,095,230 3,867,120 3,513,459
Cost of insurance-- variable life ............... 11,205,120 4,844,028 4,232,564
--------------- --------------- ---------------
Total adjustments ............................. 87,349,520 63,618,515 50,792,850
--------------- --------------- ---------------
Transfers as reported in the Statement of
Operations of GIAC ............................ $ 358,838,579 $ 312,676,802 $ 234,976,617
=============== =============== ===============
</TABLE>
B-20
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
Note 9 -- Annuity Actuarial Reserves and Deposit Liabilities
The following describes withdrawal characteristics of annuity actuarial
reserves and deposit liabilities:
<TABLE>
<CAPTION>
For the Year Ending 1997 For the Year Ending 1996
------------------------ ------------------------
Amount % Amount %
------------ ------ ------------ ------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal
with market value adjustment ....... $ 46,276,766 10.19% $ 44,480,214 10.22%
------------ ------ ------------ ------
Total with adjustment or at
market value ..................... 46,276,766 10.19 44,480,214 10.22
at book value without adjustment
(minimal or no charge or
adjustment) ...................... 313,725,462 69.05 302,433,090 69.45
Not subject to discretionary withdrawal 94,338,339 20.76 88,546,538 20.33
------------ ------ ------------ ------
Total (gross) ......................... 454,340,567 100.00 435,459,842 100.00
Reinsurance ceded ..................... -- -- 4,879 --
------------ ------ ------------ ------
Total ................................. $454,340,567 100.00% $435,454,963 100.00%
============ ====== ============ ======
</TABLE>
This does not include $6,647,606,347 and $5,098,658,097 of non-guaranteed
annuity reserves held in separate accounts, and $3,572,284 and $2,927,130 at
December 31, 1997 and 1996, respectively, in annuity reserves being held as a
loan collateral fund for loans on certain annuity contracts.
Note 10 - Statutory Financial Information
The following reconciles the statutory net income of the Company as
reported to the regulatory authorities to consolidated GAAP net income:
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Statutory net income ......................... $ 28,037,239 $ 19,695,432 $ 4,956,175
Adjustments to restate to the basis of GAAP:
Net income of subsidiaries ................ 4,326,500 142,201 298,534
Change in deferred policy acquisition costs 41,883,919 42,525,493 31,247,939
Deferred premiums ......................... (5,542,795) 3,238,115 (1,643,253)
Re-estimation of future policy benefits ... (3,353,249) 26,953,558 297,442
Reinsurance ............................... 12,372,471 (36,353,822) 15,465,956)
Deferred federal income tax expense ....... (16,212,244) (13,074,280) (15,681,250)
Elimination of interest maintenance reserve (111,783) (333,219) (257,381)
Other, net ................................ 201,840 (2,444,872) 2,598,780
------------ ------------ ------------
Consolidated GAAP net income ................. $ 61,601,898 $ 40,348,606 $ 37,282,942
============ ============ ============
</TABLE>
B-21
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1997
The following reconciles the statutory capital and surplus of the Company
as reported to the regulatory authorities to consolidated GAAP stockholder's
equity:
<TABLE>
<CAPTION>
December 31
-----------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Statutory capital and surplus ................. $ 182,704,232 $ 153,780,908 $ 141,877,927
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs .......... 267,369,685 221,475,216 178,010,226
Elimination of asset valuation reserve ..... 26,305,528 15,121,269 9,341,353
Re-estimation of future policy benefits .... 41,283,947 31,167,840 4,214,282
Establishment of deferred federal income tax (84,703,745) (65,164,526) (53,962,281)
Unrealized gains on investments ............ 7,852,564 2,313,203 10,655,552
Other liabilities .......................... (33,486,652) (32,389,767) 1,811,239
Deferred premiums .......................... (7,024,891) (1,482,096) (4,720,211)
Other, net ................................. (3,468,519) (2,215,098) (1,276,761)
------------- ------------- -------------
Consolidated GAAP stockholder's equity ... $ 396,832,149 $ 322,606,949 $ 285,951,326
============= ============= =============
</TABLE>
B-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 10, 1998
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
We have audited the accompanying statutory basis balance sheets of The
Guardian Insurance & Annuity Company, Inc. as of December 31, 1997 and 1996, and
the related statutory basis statements of operations, of changes in common stock
and surplus and of cash flows for the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 2, these financial statements were prepared in
conformity with accounting practices prescribed or permitted by insurance
regulatory authorities (statutory basis of accounting), which is a comprehensive
basis of accounting other than generally accepted accounting principles.
Accordingly, the financial statements are not intended to represent a
presentation in accordance with generally accepted accounting principles. The
effects on the financial statements of the variances between such practices and
generally accepted accounting principles are material and are described in Note
2.
In our report dated February 9, 1996, we expressed an opinion that the
1995 financial statements, prepared using accounting practices prescribed or
permitted by insurance regulatory authorities, were presented fairly, in all
material respects, in conformity with generally accepted accounting principles.
As described in Note 2 to these financial statements, pursuant to pronouncements
of the Financial Accounting Standards Board, financial statements of mutual life
insurance companies and their wholly owned stock insurance company subsidiaries
are no longer considered presentations in conformity with generally accepted
accounting principles. Accordingly, our present opinion on the presentation of
the 1995 financial statements, as presented herein, is different from that
expressed in our report dated February 9, 1996.
In our opinion, the financial statements referred to above (1) do not
present fairly, in conformity with generally accepted accounting principles, the
financial position of The Guardian Insurance & Annuity Company, Inc. at December
31, 1997 and 1996, or the results of its operations or its cash flows for the
three years in the period ended December 31, 1997, because of the effects of the
variances between the statutory basis of accounting and generally accepted
accounting principles, and (2) present fairly, in all material respects, its
financial position and the results of its operations and its cash flows, in
conformity with accounting practices prescribed or permitted by insurance
regulatory authorities.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
New York, New York
B-23
<PAGE>
The Guardian Separate Account D
(Group)
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements have been incorporated by reference
or are included in Part B:
(1) The Guardian Separate Account D (incorporated by reference
into Part B):
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the Year Ended December 31, 1997
Statements of Changes in Net Assets for the Two Years Ended
December 31, 1997 and 1996
Notes to Financial Statements
Report of Price Waterhouse LLP, Independent Accountants
(2) The Guardian Insurance & Annuity Company, Inc. (included in
Part B):
Statutory Basis Balance Sheets as of December 31, 1997 and
1996
Statutory Basis Statements of Operations for the Three Years
Ended December 31, 1997, 1996 and 1995
Statutory Basis Statements of Changes in Common Stock and
Surplus for the Three Years Ended December 31, 1997, 1996 and
1995
Statutory Basis Statements of Cash Flow for the Three Years
Ended December 31, 1997, 1996 and 1995
Notes to Statutory Basis Financial Statements
Report of Price Waterhouse LLP, Independent Accountants
(b) Exhibits
Number Description
------ -----------
1 Resolutions of the Board of Directors of The
Guardian Insurance & Annuity Company, Inc.
establishing Separate Account D
2 Not Applicable
3 Underwriting and Distribution Contracts:
(a) Distribution and Service Agreement between
The Guardian Insurance & Annuity Company,
Inc. and Guardian Investor Services
Corporation, as amended
(b) Form of Broker-Dealer Supervisory and Service
Agreement
4 Specimen of Variable Annuity Contract
5 Form of Application for Variable Annuity Contract
6 (a) Certificate of Incorporation of The Guardian
Insurance & Annuity Company, Inc.
(b) By-laws of The Guardian Insurance & Annuity
Company, Inc.
7 Automatic Indemnity Reinsurance Agreement between
The Guardian Insurance & Annuity Company, Inc. and
The Guardian Life Insurance Company of America, as
amended
<PAGE>
8 Amended and Restated Agreement for Services and
Reimbursement Therefor, between The Guardian Life
Insurance Company of America and The Guardian
Insurance & Annuity Company, Inc.
9 Opinion and Consent of Counsel
10 (a) Consent of Price Waterhouse LLP
11 Not Applicable
12 Not Applicable
13 Powers of Attorney executed by a majority of the
Board of Directors and principal officers of The
Guardian Insurance & Annuity Company, Inc.
27 Financial Data Schedule
C-2
<PAGE>
Item 25. Directors and Officers of the Depositor
The following is a list of directors and officers of The Guardian Insurance
& Annuity Company, Inc. ("GIAC"), the depositor of the Registrant. The principal
business address of each director and officer is 201 Park Avenue South, New
York, New York 10003.
Name Office/Title
- ---- ------------
Joseph D. Sargent President, Chief Executive Officer & Director
John M. Smith Executive Vice President & Director
Frank J. Jones Executive Vice President, Chief Investment Officer
& Director
Edward K. Kane Executive Vice President & Director
Philip H. Dutter Director
Arthur V. Ferrara Director
Leo R. Futia Director
Peter L. Hutchings Director
William C. Warren Director
Eileen McDonnell Vice President, Group Pensions
Ryan W. Johnson Vice President, Equity Sales
Thomas R. Hickey, Jr. Vice President, Operations
John M. Fagan Vice President
Thomas G. Sorrell Vice President
Frank L. Pepe Vice President & Controller
Charles G. Fisher Vice President & Actuary
William C. Frentz Vice President, Real Estate
Donald P. Sullivan, Jr. Vice President
Richard T. Potter, Jr. Vice President & Counsel
Raymond J. Henry Second Vice President
Paul Iannelli Second Vice President
Alexander M. Grant, Jr. Second Vice President
Ann T. Kearney Second Vice President
Peggy Coppola Second Vice President
Joseph A. Caruso Vice President & Secretary
Earl Harry Treasurer
C-3
<PAGE>
Item 26. Persons Controlled by or under Common Control with Registrant
The following list sets forth the persons directly controlled by The
Guardian Life Insurance Company of America ("Guardian Life") as of February 28,
1998:
State of Percent of
Incorporation Voting Securities
Name of Entity or Organization Owned
------------- ------------- --------------
The Guardian Insurance & Delaware 100%
Annuity Company, Inc.
Guardian Asset Management Delaware 100%
Corporation
Park Avenue Life Insurance Company Delaware 100%
Guardian Reinsurance Services, Inc. Connecticut 100%
Physicians Health Services, Inc. Delaware 14%
Private Healthcare Systems, Inc. Delaware 14%
Managed Dental Care, Inc. California 100%
The Guardian Baillie Gifford Massachusetts 25.5%
International Fund
The Guardian Investment Quality Massachusetts 44.7%
Bond Fund
Baillie Gifford International Fund Maryland 18.1%
Baillie Gifford Emerging Markets Fund Maryland 26.3%
The Guardian Tax-Exempt Bond Fund Massachusetts 87.4%
The Guardian Asset Allocation Fund Massachusetts 12.7%
The Guardian Park Avenue Small
Cap Fund Massachusetts 21.4%
The Guardian Baillie Gifford
Emerging Markets Fund Massachusetts 78.4%
The following list sets forth the persons directly controlled by GIAC or
other affiliates of Guardian Life and, thus, indirectly controlled by Guardian
Life, as of April 1, 1998:
Approximate
Percentage of Voting
Place of Securities Owned
Incorporation by Guardian Life
Name of Entity or Organization Affiliates
------------- ------------- -----------------
Guardian Investor Services Corporation New York 100%
Guardian Baillie Gifford 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 27. Number of Contractowners
Type of Contract Number as of April 1, 1998
---------------- --------------------------
Individual (Non-Qualified)......... 31,162
Individual (Qualified)............. 55,355
Group (Qualified).................. 808
------
Total.................... 87,325
C-4
<PAGE>
Item 28. Indemnification
Reference is made to Article VIII of GIAC's By-Laws, as supplemented by
Section 3.2 of the Certificate of Incorporation of GIAC, filed as Exhibits 6(b)
and 6(a), respectively, to this Registration Statement and incorporated herein
by reference.
Item 29. Principal Underwriters
(a) Guardian Investor Services Corporation ("GISC") is the principal
underwriter of the Registrant's variable annuity contracts and it is also the
principal underwriter of shares of The Guardian Bond Fund, Inc.; The Guardian
Stock Fund, Inc.; The Guardian Cash Fund, Inc.; The Park Avenue Portfolio, a
series trust consisting of the following series: The Guardian Cash Management
Fund, The Guardian Park Avenue Fund, The Guardian Park Avenue Tax-Efficient
Fund, The Guardian Investment Quality Bond Fund, The Guardian High Yield Bond
Fund, The Guardian Tax-Exempt Fund, The Guardian Asset Allocation Fund and The
Guardian Baillie Gifford International Fund, and GIAC Funds, Inc. a series fund
consisting of Baillie Gifford International Fund, Baillie Gifford Emerging
Markets Fund and The Guardian Small Cap Stock Fund. All of the aforementioned
funds and the series trust are registered with the SEC as open-end management
investment companies under the Investment Company Act of 1940, as amended ("1940
Act"). In addition, GISC is the distributor of variable annuity and variable
life insurance contracts currently offered by GIAC through its separate
accounts, The Guardian/Value Line Separate Account, The Guardian Separate
Account A, The Guardian Separate Account B, The Guardian Separate Account C, The
Guardian Separate Account D, The Guardian Separate Account E and The Guardian
Separate Account K, which are all registered as unit investment trusts under the
1940 Act.
(b) The following is a list of directors and officers of GISC. The
principal business address of each person is 201 Park Avenue South, New York,
New York 10003.
<TABLE>
<CAPTION>
Name Office/Title
---- ------------
<S> <C>
John M. Smith President & Director
Arthur V. Ferrara Director
Leo R. Futia Director
Peter L. Hutchings Director
Philip H. Dutter Director
Joseph D. Sargent Director
William C. Warren Director
Frank J. Jones Director
John M. Fagan Vice President
Ryan W. Johnson Senior Vice President & National Sales Director
Frank L. Pepe Vice President & Controller
Thomas R. Hickey, Jr. Senior Vice President, Operations
Donald P. Sullivan, Jr. Vice President
Richard T. Potter, Jr. Vice President & Counsel
Ann T. Kearney Second Vice President
Alexander M. Grant, Jr. Second Vice President
Kevin S. Alter Second Vice President
Peggy L. Coppola Second Vice President
Joseph A. Caruso Vice President & Secretary
Earl C. Harry Treasurer
</TABLE>
C-5
<PAGE>
Item 30. Location of Accounts and Records
Most of the Registrant's accounts, books and other documents required to
be maintained by Section 31(a) of the 1940 Act and the rules promulgated
thereunder are maintained by GIAC, the depositor, at its Customer Service
Office, 3900 Burgess Place, Bethlehem, Pennsylvania 18017. Documents
constituting the Registrant's corporate records are also maintained by GIAC but
are located at its Executive Office, 201 Park Avenue South, New York, New York
10003.
Item 31. Management Services
None.
Item 32. Undertakings
The Depositor, GIAC, hereby undertakes and represents that the fees and
charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred and the
risks assumed by GIAC.
C-6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, The Guardian Separate Account D certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and the State of New York on the 30th day of
April, 1998.
The Guardian Separate Account D
(Registrant)
By: THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
(Depositor)
By: /s/ Thomas R. Hickey, Jr.
----------------------------
Thomas R. Hickey, Jr.
Vice President, Operations
C-7
<PAGE>
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following directors and principal officers of The Guardian
Insurance & Annuity Company, Inc. in the capacities and on the date indicated.
s/JOSEPH D. SARGENT * President, Chief Executive
- --------------------------------- Officer and Director
Joseph D. Sargent
(Principal Executive Officer)
s/FRANK J. JONES* Executive Vice President, Chief
- --------------------------------- Investment Officer and Director
Frank J. Jones
(Principal Financial Officer)
s/FRANK L. PEPE* Vice President and Controller
- ---------------------------------
Frank L. Pepe
(Principal Accounting Officer)
s/JOHN M. SMITH* Executive Vice President
- --------------------------------- and Director
John M. Smith
s/ARTHUR D. FERRARA* Director
- ---------------------------------
Arthur D. Ferrara
s/WILLIAM C. WARREN* Director
- ---------------------------------
William C. Warren
s/EDWARD K. KANE* Executive Vice President
- --------------------------------- and Director
Edward K. Kane
s/LEO R. FUTIA* Director
- ---------------------------------
Leo R. Futia
s/PHILIP H. DUTTER* Director
- ---------------------------------
Philip H. Dutter
s/PETER L. HUTCHINGS*
- --------------------------------- Director
Peter L. Hutchings
By s/ THOMAS R. HICKEY, JR. Date: April 30, 1998
- ---------------------------------
Thomas R. Hickey, Jr.
Vice President, Operations
* Pursuant to a Power of Attorney
C-8
<PAGE>
The Guardian Separate Account D
(Group)
Exhibit Index
-------------
Number Description
- ------ -----------
1 Board Resolutions
3(a) Distribution and Service Agreement
3(b) Form of Broker Dealer Agreement
4 Specimen Variable Annuity Contract
5 Form of Application
6(a) Certificate of Incorporation
6(b) By-Laws
7 Automatic Indemnity Reinsurance Agreement
8 Agreement for Services
9 Opinion and Consent of Counsel
10(a) Consent of Price Waterhouse LLP
13 Powers of Attorney
27 Financial Data Schedule
CERTIFIED EXTRACT FROM MINUTES OF
QUARTERLY MEETING OF THE BOARD OF DIRECTORS OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
Held on August 23, 1989
* * * * * *
Upon motion duly made and seconded, it was unanimously voted that the following
resolutions be adopted.
1. RESOLVED, that the Board of Directors of GIAC hereby establishes,
pursuant to Section 2932 of the Delaware Insurance Code, a separate
account to be designated THE GUARDIAN SEPARATE ACCOUNT D (hereinafter
in these resolutions referred to as the "Account") to serve as a
segregated asset account to receive, hold and invest amounts arising
from (a) premiums paid for the variable annuity contracts issued by
GIAC through the Account (the "Contracts"); and (b) such assets of
GIAC as the proper officers of GIAC may deem prudent and appropriate
to have invested in the same manner as the assets applicable to its
reserve liability under the Contracts and lodged in the Account, and
such amounts, together with the dividends, interest and gains produced
thereby shall be invested and reinvested, subject to the rights of the
holders of such Contracts, in units of the Account at the value of
such units at the time of acquisition.
2. RESOLVED, that the Board of Directors hereby approves of the
offering of five mutual funds - The Guardian Bond Fund, The Guardian
Cash Fund, The Guardian Stock Fund, Value Line Centurion Fund and
Value Line Strategic Asset Management Trust - together with The
Guardian Real Estate Account and a Fixed-Rate Option to owners of the
Contracts.
3. RESOLVED, that in recognition of the fact that the aforementioned
mutual funds are also currently offered to different variable life
insurance and variable annuity contracts issued by GIAC, the Board of
Directors hereby agrees to abide by the conditions for offering such
funds under multiple contracts as imposed by the Securities and
Exchange Commission ("SEC") and previously agreed to by GIAC as set
forth in Investment Company Act Release Number 14685 (August 20,
1985).
4. RESOLVED, that the Board of Directors of GIAC authorizes $100,000
in the aggregate be deposited into the Account as "seed capital" to
commence its operations and that the officers of GIAC are given
discretion as to the timing of such deposit of seed capital.
<PAGE>
5. RESOLVED, that the Account shall be registered as a unit investment
trust under the Investment Company Act of 1940 and Securities Act of
1933 ("the 1933 Act"), and that the officers of GIAC be and they
hereby are authorized to sign and file with the SEC, or cause to be
signed and filed with the SEC, a registration statement on behalf of
the Account, as registrant, under the 1933 Act ("1933 Act
Registration") together with any exemptive applications, no-action
requests or other documents as they may deem necessary to effectuate
registration of the units of the Account.
6. RESOLVED, that the officers of GIAC are authorized and directed to
sign and file with the SEC, or cause to be signed and filed with the
SEC, amendments of such 1933 Act Registration or other documents as
they may deem necessary or advisable from time to time respecting the
Account.
7. RESOLVED, that the signature of any director or officer of GIAC
required by law to affix his signature to such 1933 Act Registration,
or to any amendment thereof, may be affixed by said director or
officer personally, or by an attorney-in-fact duly constituted in
writing by said director or officer to sign his name thereto in the
form of power of attorney attached hereto as Exhibit A.
8. RESOLVED, that the officers of GIAC are authorized and directed to
employ Guardian Investor Services Corporation ("GISC") to serve as
distributor of the Contracts and to prepare any and all agreements
necessary for GISC to provide such services to the Account, subject to
final approval by the Board of Directors of GIAC or by the Investment
Committee of the Board.
9. RESOLVED, that the officers of GIAC are authorized and directed to
sign and file with the SEC, or cause to be signed and filed with the
SEC, such periodic reports under the Investment Company Act of 1940
respecting the Account as they may deem necessary or advisable from
time to time.
10. RESOLVED, that the officers of GIAC be and they hereby are
authorized to take whatever steps that may be necessary or desirable
to comply with such laws and regulations of the several states as may
be applicable to the establishment of the Account and the sale of the
Contracts.
<PAGE>
11. RESOLVED, that the officers of GIAC be and they hereby are
authorized in the name and on behalf of GIAC, to execute and deliver
such corporate documents and certificates and to take such further
action as may be necessary or desirable in order to effectuate the
purposes of the foregoing resolutions.
I, Herbert N. Grolnick, Secretary of The Guardian Insurance & Annuity Company,
Inc., do hereby certify that the above is a correct and true extract from the
minutes of the quarterly meeting of the Board of Directors held on the date set
forth above.
IN TESTIMONY WHEREOF, I have hereunto affixed my official signature in the City
of New York on this 20th day of October, 1989.
/s/ Herbert N. Grolnick
-----------------------
Secretary
DISTRIBUTION AND SERVICE AGREEMENT
BETWEEN
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
AND
GUARDIAN INVESTOR SERVICES CORPORATION
AGREEMENT, made this 23rd day of August, 1985 by and between The Guardian
Insurance & Annuity Company, Inc. ("GIAC"), a Delaware corporation, and Guardian
Investor Services Corporation (the "Distributor"), a New York corporation, both
corporations being wholly-owned subsidiaries of The Guardian Life Insurance
Company of America and each corporation having its principal office located at
201 Park Avenue South, New York, New York 10003.
WHEREAS, GIAC is engaged in, among other things, the issuance and sale of
variable contracts (the "Contracts") which are funded by separate accounts
organized by GIAC and registered with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933 and the Investment Company Act of 1940;
WHEREAS, Distributor is duly registered with the SEC as a broker-dealer
under the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, the Contracts may be sold to the public only by persons who are
insurance agents duly licensed by GIAC and one or more states of the United
States and the District of Columbia and who are also registered representatives
of the Distributor or of certain designated persons, as more fully described
herein;
<PAGE>
WHEREAS, GIAC and the Distributor desire to enter into an agreement,
pursuant to which the Distributor will distribute and act as the principal
underwriter for the sale of the Contracts and will select, train, license and
supervise the activities of all persons associated with it, all as more
particularly described herein.
NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:
1. GIAC hereby appoints the Distributor and the Distributor agrees to act
as the distributor and as the principal underwriter for the sale of the
Contracts which may be sold to the public only by persons who are licensed
insurance agents of GIAC and registered representatives of the Distributor or
certain designated persons as set forth in paragraph 5 herein.
2. Applications for the Contracts shall be solicited only by
representatives duly and appropriately licensed or otherwise qualified for the
sale of such Contracts in each state or other jurisdiction. GIAC shall undertake
to appoint Distributor's qualified representatives as life insurance agents of
GIAC. Completed applications for Contracts shall be transmitted directly to GIAC
for acceptance or rejection in accordance with underwriting rules established by
GIAC. Initial premium payments under the Contracts shall be made by check
payable to GIAC and shall be held at all times by Distributor or its
representatives in a fiduciary capacity and remitted promptly to GIAC. Anything
in this Agreement to the
-2-
<PAGE>
contrary notwithstanding, GIAC retains the ultimate right to control the sale of
the Contracts and to appoint and discharge life insurance agents of GIAC. The
Distributor shall be held to the exercise of reasonable care in carrying out the
provisions of this Agreement.
3. Upon request, Distributor will furnish GIAC, in writing, a list of those
agents who have become so qualified and the dates of such qualifications as well
as a list of those agents who are not selected or who have failed to qualify.
Notwithstanding the ultimate right of GIAC to appoint and discharge agents, in
the event an agent who has qualified fails or refuses to submit to the
supervision of the Distributor in accordance with this Agreement, or otherwise
fails to comply with the rules and standards imposed by the Distributor on its
registered representatives, the Distributor will certify such fact to GIAC and
will immediately notify the agent that such agent is no longer authorized to
sell the Contracts and the Distributor and GIAC will take whatever additional
action may be necessary to terminate the sales activities of the agent relating
to the Contracts.
4. Prior to permitting any agent to sell the Contracts, GIAC, the
Distributor and the agent will enter into an agreement pursuant to which the
agent will acknowledge that he will be a registered representative of the
Distributor in connection with the agent's securities activities with respect to
the Contracts, that such activities would be under the supervision of the
Distributor
-3-
<PAGE>
and any supervisor designated by the Distributor, and that the agent's right to
continue to sell the Contracts is subject to his continued compliance with such
agreement and the rules and procedures established by the Distributor for
compliance with applicable federal, state and NASD requirements.
5. Distributor is authorized to enter into separate written agreements, on
such terms and conditions not inconsistent with this Agreement, with one or more
organizations which agree to participate in the distribution of the Contracts.
Such organization (hereafter "Broker") shall be both registered as a
broker-dealer under the Securities Exchange Act of 1934 and a member of the
NASD. Broker and its agents or representatives soliciting applications for
Contracts shall be duly and appropriately licensed, registered or otherwise
qualified for the sale of such Contracts under the insurance laws and any
applicable blue-sky laws of each state or other jurisdiction in which GIAC is
licensed to sell the Contracts.
6. Applications for Contracts solicited by such Broker through its agents
or representatives shall be transmitted directly to GIAC, and if received by
Distributor, shall be forwarded to GIAC. All payments under the Contracts shall
be made by check to GIAC and, if received by Distributor, shall be held at all
times in a fiduciary capacity and remitted promptly to GIAC. All such payments
will be the property of GIAC.
-4-
<PAGE>
7. GIAC wishes to ensure that Contracts sold by Distributor will be issued
to purchasers for whom the Contracts will be suitable. Distributor shall take
reasonable steps to ensure that the various representatives appointed by it
shall not make recommendations to an applicant to purchase a Contract in the
absence of reasonable grounds to believe that the purchase of the Contract is
suitable for such applicant. While not limited to the following, a determination
of suitability shall be based on information furnished to a representative after
reasonable inquiry of such applicant concerning the applicant's insurance and
investment objectives, financial situation and needs, and the likelihood that
the applicant will continue to make any premium payments contemplated by the
Contracts.
8. GIAC shall have the responsibility for furnishing to Distributor and its
representatives sales promotion materials and individual sales proposals related
to the sale of the Contracts. Distributor shall not use any such materials that
have not been approved by GIAC.
9. GIAC shall arrange for the payment of commissions directly to those
registered representatives of Distributor who are entitled thereto in connection
with the sale of the Contracts on behalf of Distributor, in the amounts and on
such terms and conditions as GIAC and Distributor shall determine; provided that
such terms, conditions and commissions shall be as are set forth in or
-5-
<PAGE>
as are not inconsistent with the Prospectus included as part of the Registration
Statement for the Contracts and effective under the Securities Act of 1933.
10. GIAC shall arrange for the payment of commissions directly to those
Brokers who sell Contracts under agreements entered into pursuant to paragraph 5
hereof, in amounts as may be agreed to by GIAC and specified in such written
agreements.
11. GIAC shall pay to Distributor underwriting income amounting to 0.35% of
variable annuity sales and 1.00% of single premium variable life sales made by
registered representatives of the Distributor as reimbursement for the costs and
expenses incurred by Distributor in furnishing or obtaining the services,
materials and supplies required by the terms of this Agreement in the initial
sales efforts and the continuing obligations hereunder.
12. Distributor assumes full responsibility for the securities activities
of all persons associated with it relating to the offer and sale of the
Contracts.
13. Distributor shall have the responsibility for maintaining the records
of its representatives licensed, registered and otherwise qualified to sell the
Contracts. Distributor shall maintain such other records as are required of it
by applicable laws and regulations. The books, accounts and records of GIAC, the
Account and
-6-
<PAGE>
Distributor shall be maintained so as to clearly and accurately disclose the
nature and details of the transactions. All records maintained by GIAC in
connection with this Agreement shall be maintained and held by GIAC on behalf
of, and as agent for, the Distributor and such books and records will at all
times be subject to inspection by authorized representatives of the SEC and
NASD. The Distributor shall keep confidential any information obtained pursuant
to this Agreement and shall disclose such information only if GIAC has
authorized such disclosure or if such disclosure is expressly required by
applicable federal or state regulatory authorities.
14. This Agreement may not be assigned by GIAC or the Distributor except by
prior written consent of the parties and shall continue from year to year,
subject to termination by either party on 60 days' written notice to the other
party, except that in the event Distributor shall cease to be a registered
broker-dealer under the Securities Exchange Act of 1934, this Agreement shall
terminate immediately.
15. This Agreement shall be subject to the provisions of the Investment
Company Act of 1940 and the Securities Exchange Act of 1934 and to the rules and
regulations promulgated thereunder and to the applicable rules and regulations
of the NASD, and the terms hereof shall be interpreted and construed in
accordance therewith.
16. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or
-7-
<PAGE>
otherwise, the remainder of this Agreement shall not be affected thereby.
17. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
18. This Agreement supersedes in all respects any other agreements between
the parties hereto relating to the distribution and service of the Contracts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
THE GUARDIAN INSURANCE &
ANNUITY COMPANY, INC.
Attest /s/ Thomas R. Hickey, Jr. By /s/ John C. Angle
-------------------------- -------------------------
GUARDIAN INVESTOR SERVICES
CORPORATION
Attest /s/ Thomas R. Hickey, Jr. By /s/ John M. Smith
-------------------------- -------------------------
-8-
<PAGE>
AMENDMENT NO. 1
Dated as of January 11, 1989
to the
Distribution and Service Agreement
between
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
and
GUARDIAN INVESTOR SERVICES CORPORATION
* * * * *
The Guardian Insurance & Annuity Company, Inc. ("GIAC") and Guardian Investor
Services Corporation ("Distributor") hereby mutually agree to amend the
Distribution and Service Agreement ("Agreement"), dated August 23, 1985, between
GIAC and the Distributor, in the manner herein set forth:
Paragraph 11 of the Agreement is deleted, and new Paragraph 11 is
substituted therefor, in the form set forth immediately hereunder, with the
same force and effect as if such paragraph had appeared in the Agreement as
originally executed:
"11. GIAC shall pay to Distributor underwriting income amounting to
(a) 0.35% of gross premiums paid on sales of GIAC's variable annuity
contracts, (b) 1.00% of gross premiums paid on sales of GIAC's single
premium variable life contracts, and (c) (i) 0.50% of the first $10
million of gross first year premiums and (ii) 0.25% of gross first
year premiums in excess of $10 million paid on sales of GIAC's annual
premium variable life contracts and which are attributable to sales of
such contracts made by registered representatives of the Distributor
as reimbursement for the costs and expenses incurred by Distributor in
furnishing or obtaining the services, materials and supplies required
by the terms of this Agreement in the initial sales efforts and the
continuing obligations hereunder."
Except to the extent specifically provided herein, the Agreement shall remain in
full force and effect in accordance with its terms. This amendment shall become
effective as of the date hereof.
Attest: THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
/s/ Thomas R. Hickey, Jr. By /s/ John M. Smith
- -------------------------- ---------------------------
John M. Smith
Executive Vice President
Attest: GUARDIAN INVESTOR SERVICES
CORPORATION
/s/ Thomas R. Hickey, Jr. By /s/ John M. Fagan
- -------------------------- ---------------------------
John M. Fagan
Vice President
Exhibit 99.3
THE GUARDIAN INSURANCE & ANNUITY COMPANY
BROKER-DEALER SUPERVISORY AND SERVICE
AGREEMENT
Agreement by and between The Guardian Insurance & Annuity Company, Inc.
("GIAC"), a Delaware corporation, Guardian Investor Services Corporation
("GISC"), a registered broker-dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers Inc. ("NASD"), and
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("Broker-Dealer") also a registered broker-dealer with the SEC under the
Securities Exchange Act of 1934 and a member of the NASD.
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I. WITNESSETH
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Whereas, GIAC proposes to have Broker-Dealer's registered representatives
("Representatives") who are also insurance agents solicit and sell certain
Insurance and Annuity Contracts (the "Plans") more particularly described in
this Agreement and which are deemed to be securities under the Securities Act of
1933; and
Whereas, GIAC has appointed GISC as the Distributor of the Plans and has agreed
with GISC that GISC shall be responsible for the training and supervision of
such Representatives, with respect to the solicitation and offer or sale of any
of the Plans, and also for the training and supervision of any other "persons
associated" with Broker-Dealer who are engaged directly or indirectly therewith;
and GISC proposes to delegate, to the extent legally permitted, said supervisory
duties to Broker-Dealer; and
Whereas, GIAC and GISC propose to have Broker-Dealer provide certain
administrative services to facilitate solicitation for and sales of the Plans.
Now therefore, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
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II. APPOINTMENT OF BROKER-DEALER
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GIAC and GISC hereby appoint Broker-Dealer to supervise solicitations for and
sales of the Plans and to provide certain administrative services to facilitate
solicitations for and sales of the Plans.
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III. AUTHORITIES AND DUTIES OF BROKER-DEALER
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A. PLANS
The Plans issued by GIAC to which this Agreement applies are listed in Exhibit
A. These Plans may be amended from time to time by GIAC. GIAC, in its sole
discretion and without notice to Broker-Dealer, may suspend sales of any Plans
or may amend any policies or contract evidencing such Plans.
B. LICENSING
Broker-Dealer shall, at all times when performing its functions under this
agreement, be registered as a securities broker with the SEC and NASD and
licensed or registered as a securities broker-dealer in the states and other
local jurisdictions that require such licensing or registration in connection
with variable annuity sales activities or the supervision of Registered
Representatives who perform such activities in the respective location.
Broker-Dealer shall assist GISC in the appointment of Representatives under the
applicable insurance laws to sell the Plans. Broker-Dealer shall fulfill all
requirements set forth in the General Letter of Recommendation, attached as
Exhibit B, in conjunction with the submission of licensing/appointment papers
for all applicants as insurance agents of GIAC. All such licensing/appointment
papers should be submitted to GISC by Broker-Dealer.
C. SECURING APPLICATIONS
All applications for Plans shall be made on application forms supplied by GIAC
and all payments collected by Broker-Dealer or any Representative of
Broker-Dealer shall be remitted promptly in full, together with such
applications, forms and any other required documentation, directly to GIAC at
the address indicated on such application or to such other address as GIAC may,
from time to time, designate in writing. Broker-Dealer shall review all such
applications for completeness. Checks or money orders in payment on any such
Plan shall be drawn to the order of "The Guardian Insurance & Annuity Company."
All applications are subject to acceptance or rejection by GIAC at its sole
discretion.
D. MONEY RECEIVED BY BROKER-DEALER
All money payable in connection with any of the Plans, whether as premium,
purchase payment or otherwise, and whether paid by or on behalf of any
policyholder, contract owner or certificate holder or anyone else having an
interest in the Plans, is the property of GIAC, and shall be transmitted
immediately in accordance with the administrative procedures of GIAC without any
deduction or offset for any reason, including by example, but not limitation,
any deduction or offset for compensation claimed by Broker-Dealer.
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E. SUPERVISION OF REPRESENTATIVES
Broker-Dealer shall have full responsibility for the training and supervision of
all Representatives associated with Broker-Dealer who are engaged directly or
indirectly in the offer or sale of the Plans, and all such persons shall be
subject to the control of Broker-Dealer with respect to such persons'
securities-regulated activities in connection with the Plans. Broker-Dealer will
cause the Representatives to be trained in the sale of the Plans: will use its
best efforts to cause such Representatives to qualify under applicable federal
and state laws to engage in the sale of the Plans; and will cause such
Representatives to be registered representatives of Broker-Dealer before such
Representatives engage in the solicitation of applications for the Plans; and
will cause such Representatives to limit solicitation of applications for the
Plans to jurisdictions where GIAC has authorized such solicitation.
Broker-Dealer shall cause such Representatives' qualifications to be certified
to the satisfaction of GISC and shall notify GISC if any Representative ceases
to be a registered representative of Broker-Dealer.
F. REPRESENTATIVES AGREEMENT
Broker-Dealer shall cause each such Representative to execute a Registered
Representative's Agent Agreement with GIAC before a Representative shall be
permitted to solicit applications for the sale of the Plans. GISC shall furnish
Broker-Dealer with copies of Registered Representative's Agent Agreements for
execution by the Representatives.
G. COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE SECURITY
LAWS
Broker-Dealer shall fully comply with the requirements of the NASD and of the
Securities Exchange Act of 1934 and all other applicable federal or state laws
and will establish such rules and procedures as may be necessary to cause
diligent supervision of the securities activities of the Representatives. Upon
request by GISC, Broker-Dealer shall furnish such appropriate records as may be
necessary to establish such diligent supervision.
H. NOTICE OF REPRESENTATIVE'S NONCOMPLIANCE
In the event a Representative fails or refuses to submit to supervision of
Broker-Dealer or otherwise fails to meet the rules and standards imposed by
Broker-Dealer on its Representatives, Broker-Dealer shall certify such fact to
GIAC and shall immediately notify such Representative that he or she is no
longer authorized to sell the Plans, and Broker-Dealer shall take whatever
additional action may be necessary to terminate the sales activities of such
Representative relating to the Plans.
I. PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING
Broker-Dealer shall be provided, without any expense to Broker-Dealer, with
prospectuses relating to the Plans and such other material as GISC determines
to
be necessary or desirable for use in connection with sales of the Plans. No
sales promotion materials or any advertising relating
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to the Plans shall be used by Broker-Dealer unless the specific item has been
approved in writing by GISC.
J. RIGHT OF REJECTION
Broker-Dealer and/or GIAC, each at their sole discretion, may reject any
applications or payments remitted by Representative through the Broker-Dealer
and may refund an applicant's payments to the applicant. In the event such
refunds are made, and if Representative has received compensation based on an
applicant's Payment that is refunded, Representative shall promptly repay such
compensation to the Broker-Dealer. If repayment is not promptly made, the
Broker-Dealer may, at its sole option, deduct any amounts due it from
Representative from future commissions otherwise payable to Representative.
K. ASSIGNMENT
Neither this Agreement nor any of its benefits may be assigned by Representative
without the written consent of GIAC and GISC, and any assignment of this
agreement, compensation or other benefits or obligations hereunder shall not be
valid if made without such consent.
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IV. COMPENSATION
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A. SUPERVISORY FEES, SERVICE FEES AND COMMISSIONS
Supervisory and service fees payable to Broker-Dealer and commissions payable to
Representatives in connection with the Plans shall be paid by GIAC to the
person(s) entitled thereto through Broker-Dealer or as otherwise required by
law. GISC will provide Broker-Dealer with a copy of GIAC's current Dealer
Concession and Commissions Schedule. These fees and commissions will be paid as
a percentage of premiums or purchase payments (premiums and purchase payments
are hereinafter referred to collectively as "Payments") received in cash or
other legal tender and accepted by GIAC on applications obtained by the various
Representatives of the Broker-Dealer. Upon termination of this Agreement, all
compensation to the Broker-Dealer hereunder shall cease; however, Broker-Dealer
shall continue to be liable for any chargebacks pursuant to the provisions of
said Dealer Concession and Commissions Schedule or for any other amounts
advanced by or otherwise due GIAC hereunder.
B. TIME OF PAYMENT
GIAC shall pay any compensation due Broker-Dealer and Representatives of
Broker-Dealer within fifteen (15) days after the end of the calendar month in
which Payments upon which such compensation is based are accepted by GIAC.
C. AMENDMENT OF SCHEDULES
GIAC may, upon at least ten (10) days prior written notice to Broker-Dealer
change the Dealer Concession and Commissions Schedule. Any such change shall be
by written amendment of the
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particular schedule or schedules and shall apply to compensation due on
applications received by GIAC after the effective date of such notice.
D. PROHIBITION AGAINST REBATES
If Broker-Dealer or any Representative of Broker-Dealer shall rebate or offer to
rebate all or any part of a Payment on a policy or contract or certificate
issued by GIAC, or if Broker-Dealer or any Representative of Broker-Dealer shall
withhold any Payment on any policy or contract or certificate issued by GIAC,
the same may be grounds for termination of this Agreement by GIAC. If
Broker-Dealer or any Representative of Broker-Dealer shall at any time induce or
endeavor to induce any owner of any policy or contract issued hereunder or any
certificate holder to discontinue Payments or to relinquish any such policy or
contract or certificate except under circumstances where there is reasonable
grounds for believing the policy, contract or certificate is not suitable for
such person, any and all compensation due Broker-Dealer hereunder shall cease
and terminate.
E. INDEBTEDNESS
Nothing in this Agreement shall be construed as giving Broker-Dealer the right
to incur any indebtedness on behalf of GIAC. Broker-Dealer hereby authorizes
GIAC to set off liabilities of Broker-Dealer to GIAC against any and all amounts
otherwise payable to Broker-Dealer by GIAC.
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V. GENERAL PROVISIONS
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A. WAIVER
Failure of any party to insist upon strict compliance with any of the conditions
of this Agreement shall not be construed as a waiver of any of the conditions,
but the same shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver.
B. INDEPENDENT CONTRACTORS
GIAC and GISC are independent contractors with respect to Broker-Dealer and to
Representatives.
C. LIMITATIONS
No party other than GIAC shall have the authority on behalf of GIAC to make,
after, or discharge any policy or contract or certificate issued by GIAC, to
waive any forfeiture or to grant, permit, nor to extend the time of making any
Payments, nor to guarantee dividends, nor to alter the forms which GIAC may
prescribe or substitute other forms in place of those prescribed by GIAC, nor to
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enter into any proceeding in a court of law or before a regulatory agency in
the
name of or on behalf of GIAC.
D. FIDELITY BOND
Broker-Dealer represents that all directors, officers, employees and
Representatives of Broker-Dealer who are licensed pursuant to this Agreement as
GIAC agents for state insurance law purposes or who have access to funds of
GIAC, including but not limited to funds submitted with applications for the
Plans or funds being returned to owners or certificate holders, are and shall be
covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall be
maintained by Broker-Dealer at Broker-Dealer's expense. Such bond shall be, at
least, of the form, type and amount required under the NASD Rules of Fair
Practice. GIAC may require evidence, satisfactory to it, that such coverage is
in force and Broker-Dealer shall give prompt, written notice to GIAC of any
notice of cancellation or change of coverage.
Broker-Dealer assigns any proceeds received from the fidelity bonding company to
GIAC to the extent of GIAC's loss due to activities covered by the bond. If
there is any deficiency amount, whether due to a deductible or otherwise,
Broker-Dealer shall promptly pay GIAC such amount on demand and Broker-Dealer
hereby indemnities and holds harmless GIAC from any such deficiency and from the
costs of collection thereof (including reasonable attorneys' fees).
E. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of the parties
to it and their respective successors and assigns provided that Broker-Dealer
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of GIAC.
F. REGULATIONS
All parties agree to observe and comply with the existing The Guardian In laws
and rules or regulations of applicable local, state, or federal regulatory
authorities and with those which may be enacted or adopted during the term of
this Agreement regulating the business contemplated hereby in any jurisdiction
in which the business described herein is to be transacted.
G. NOTICES
All notices or communications shall be sent to the address shown in sub
paragraph L of Section V of this Agreement or to such other address as the party
may request by giving written notice to the other parties.
H. GOVERNING LAW
This Agreement shall be construed in accordance with governed by the laws of the
state of New York.
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I. AMENDMENT OF AGREEMENT
GIAC reserves the right to amend this Agreement at any time and the submission
of an application by a Representative of a Broker-Dealer after notice of any
such amendment has been sent to the other parties shall constitute the other
parties' agreement to any such amendment.
J. SALES PROMOTION MATERIALS AND ADVERTISING
Broker-Dealer shall not print, publish or distribute any advertisement, circular
or any document relating to the Plans or relating to GIAC unless such
advertisement, circular or document shall have been approved in writing by GIAC
or by GISC; and in the case of items within the scope of Section 111,
sub-Paragraph 1, approved in writing by GISC, provided, however, that nothing
herein shall prohibit Broker-Dealer from advertising life insurance and
annuities in general or on a generic basis.
K. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty (30)
days prior written notice; and may be terminated, for cause, by any party
immediately; and shall be terminated if GISC or Broker-Dealer shall cease to be
registered Broker-Dealers under the Securities Exchange Act of 1934 and members
of the NASD.
L. ADDRESS FOR NOTICES
The Guardian Insurance & Annuity Company
3900 Burgess Place
Bethlehem, PA 18017
The Guardian Insurance & Annuity Company, Inc.
By: /s/ Joseph A. Caruso
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Joseph A Caruso, Secretary
For Broker-Dealer
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Firm Name
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Address
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City, State, Zip
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Corporate Federal Tax ID#
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Print Name
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Signature Title
Guardian Investor Services Corporation
By
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John M. Smith, President
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Date
EB-72 5/93
[LOGO] The Guardian(R) The Guardian A Stock Company
Insurance & Annuity Incorporated in the
Company, Inc. State of Delaware
Customer Service Office: Executive Office:
P.O. Box 8833 201 Park Avenue South
Lehigh Valley, PA 18001 New York, NY 10003
The Guardian Insurance & Annuity Company, Inc. (the Company) will pay the
benefits provided by this contract in accordance with its provisions. All of the
provisions on this and the following pages are part of this contract. This
contract is issued by the Company at its Customer Service Office on the issue
date.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
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Secretary President
Checked by
Under this contract, flexible premium payments may be made following the initial
premium payment. Benefits depend, among other things, on the number and value of
accumulation units and the annuity payout option elected.
ALL VALUES PROVIDED BY THIS CONTRACT WHICH ARE BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT ARE VARIABLE, MAY INCREASE OR DECREASE, AND ARE
NOT GUARANTEED. SEE THE "ACCUMULATION VALUE" SECTION ON PAGES 6 AND 7 AND THE
"PAYMENT OF CONTRACT PROCEEDS" SECTION ON PAGES 8 AND 9 FOR AN EXPLANATION OF
THE VARIABLE VALUES AND PAYMENTS PROVIDED UNDER THIS CONTRACT.
Flexible Payment Deferred Combination Variable and Fixed Group Annuity
Contract
o Benefits based on the investment experience of a Separate Account are
variable and are not guaranteed
o Non-participating--No dividends payable
Owner :
Issue Date :
Contract Number:
Plan :
[SPECIMEN]
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Page 2
GUIDE TO CONTRACT PROVISIONS
1. Annuity Benefit
2. Owner
3. Premium Payments
4. Separate Accounts
5. Fixed Rate Option
6. Transfers
7. Accumulation Value
8. Surrenders and Withdrawals
9. Payment of Contract Proceeds
10. General Provisions
Followed by any Endorsements.
An alphabetical index appears on the inside of the back cover.
<PAGE>
1. ANNUITY BENEFIT
Under certain conditions, the owner may direct the Company to apply a portion of
this contract's accumulation value to provide monthly annuity payments for a
plan participant. (See page 11 for the definitions of the terms "plan" and
"participant.") Annuity payments for a participant will begin on the annuity
commencement date for such participant as stated by the owner, if:
o this contract is in force on that date; and
o the participant is living and is between the ages of 50 and 85 (unless the
Company agrees otherwise) on that date.
At the time annuity payments begin, the Company will determine the amount of
each monthly annuity payment. This amount will be calculated by applying the
amount applied for a participant as stated by the owner, less any applicable
state premium taxes, under Option V-2 of Variable Annuity Payout Options, unless
another option is elected. The amounts of the payments will vary according to
the annuitant's age. Under Option V-2, payments are guaranteed for a period of
10 years. See the "Payment of Contract Proceeds" section for an explanation of
how annuity payments are determined.
The Company will issue a certificate to the owner for delivery to each
participant when an annuity is provided for such participant. Each such
certificate will set forth the amount and terms of the annuity payments and any
other benefits to which the participant may be entitled under this contract.
2. OWNER
Owner
The owner is named in the application. The owner alone has the right to receive
all benefits and exercise all rights this contract grants or the Company allows.
Nontransferability of Ownership
If this contract is issued in conjunction with a retirement plan qualified under
the Internal Revenue Code, the owner may not:
o change the ownership;
o sell or assign this contract;
o pledge this contract as collateral for a loan or as security for the
performance of an obligation or for any other purpose to any person other
than the Company, unless the owner is:
o the trustee of an employee trust qualified under the Internal
Revenue Code;
o the custodian of a custodial account treated as such; or
o the employer under a qualified nontrusteed pension plan.
Assignment
No assignment will bind the Company unless the original, or a copy in a form
satisfactory to the Company, is filed at the Customer Service Office. Afterward,
the rights of any owner will be subject to the assignment. The entire contract
will be subject to the assignment. The Company will rely solely on the
assignee's statement as to the amount of the assignee's interest. The Company
will not be responsible for the validity of any assignment. Unless otherwise
provided, the assignee may exercise all rights this contract grants except:
o the right to change the beneficiary; and
o the right to elect an annuity payout option.
3. PREMIUM PAYMENTS
Under this contract, the owner may make flexible premium payments to the Company
in accordance with the provisions of the plan. All premium payments are payable
at the Company's Customer Service Office.
The minimum amount of the initial premium payment is $5,000. While this contract
is in force, the Company will accept additional flexible premium payments of at
least $500. Subsequent payments in excess of $100,000 in any one contract year
are acceptable only with the written consent of the Company.
Allocation of Net Premiums
A net premium is equal to the premium paid less any applicable state premium
taxes. Subject to the conditions described below, the Company will allocate the
net premiums to the contract's allocation options, which consist of the Fixed
Rate Option and the following variable investment options:
o the investment divisions of The Guardian Separate Account D (as described
below); and
o The Guardian Real Estate Account (as described below).
Such allocation will be based on the allocation percentages designated in the
application, or as subsequently changed by the owner in a written notice
acceptable to the Company and received by the Company at its Customer Service
Office prior to the date of the allocation. The value of the contract and any
net premiums paid may not be invested in more than four allocation options at
any time; that is, such value or net premiums may not be transferred or
allocated to more than four variable investment options or three variable
investment options and the Fixed Rate Option at any time.
Net premiums will be applied to provide accumulation units (see "Accumulation
Units" provision).
Page 3
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Page 4
4. SEPARATE ACCOUNTS
The Guardian Separate Account D and The Guardian Real Estate Account
This contract is funded by two separate investment accounts established by the
Company under the laws of the state of Delaware. These separate accounts are
subject to the laws of the jurisdiction in which this contract is delivered.
These separate accounts are:
o The Guardian Separate Account D (Account D); and
o The Guardian Real Estate Account (the RE Account).
Account D is registered as a unit investment trust with the Securities and
Exchange Commission (SEC) under the Investment Company Act of 1940, and its
units are registered under the Securities Act of 1933 (1933 Act). The RE Account
itself is not an investment company, but its interests are registered with the
SEC under the 1933 Act. Each separate account is treated as a division of the
Company. Account D is used to provide values and benefits for variable annuities
only. The Company owns the assets in both separate accounts. The assets in
Account D and the RE Account are kept separate from:
o each other;
o the Company's general investment account; and
o the Company's other separate accounts.
Assets equal to the reserves and liabilities of Account D or the RE Account will
not be charged with liabilities that arise from any other business the Company
may conduct. The Company may transfer assets in excess of the reserves and
liabilities of Account D or the RE Account to the general investment account.
Income and realized and unrealized gains and losses from assets in Account D or
the RE Account are credited to or charged against the applicable separate
account without regard to income, gain, or loss in the Company's other
investment accounts.
Investment Divisions
Account D consists of several investment divisions. Each investment division of
Account D invests in shares of a mutual fund. Each mutual fund is managed by an
investment adviser registered under the Investment Advisers Act of 1940.
The investment divisions available on the issue date are listed in the then
current prospectus for Account D as it relates to this contract. Each mutual
fund is more fully described in a separate prospectus for each fund.
Rights Reserved by the Company
The Company reserves the right to take certain actions deemed to be in the
best interest of the owner and when permitted by applicable law. These
actions are:
o to deregister Account D under the Investment Company Act of 1940;
o to operate Account D as a management investment company or any other form
permitted by law;
o to combine any two or more separate accounts or investment divisions
within Account D;
o to transfer assets determined by the Company to be assigned to the class
of contracts to which the contracts belong from Account D or the RE
Account to another separate account by withdrawing the same percentage of
each investment in Account D or the RE Account with appropriate
adjustments to avoid odd lots and fractions;
o to substitute shares of any fund offered under this contract with shares
of another fund offered under this contract if, in the judgment of the
Company, further investment in such shares is no longer appropriate. Such
change may be subject to the approval of the SEC, the Delaware Insurance
Department and other state or federal regulatory authorities;
o to add to, eliminate, or suspend the owner's ability to allocate premium
payments or transfer amounts to any investment division within Account D
and/or the Real Estate Account; and
o to modify this contract as necessary to prevent the owner from being
considered the owner of the assets of Account D, the RE Account, or the
Fixed Rate Option, and thereby subject to federal or state income taxation
on gains under the contract.
Change in Investment Objective or Policy
The Company will notify the owner of any material change in an investment policy
or objective of any mutual fund invested in by an investment division to which
part of this contract's accumulation value is allocated. Details of any such
change will be filed with any regulatory authority where required and will be
subject to any required approval.
5. THE FIXED RATE OPTION
The owner may allocate all or part of any net premiums to the Fixed Rate Option.
The Company will credit interest on the portion of net premiums applied to and
any amounts transferred to the Fixed Rate Option. Interest will accrue daily at
a minimum guaranteed annual rate of 3.5%. At the discretion of the Company, an
interest rate in excess of the minimum guaranteed rate may be credited. The
Company will provide notice of the applicable interest rates in the annual
report to the owner and upon request.
Any portion of a net premium allocated to the Fixed Rate Option on the issue
date will earn interest at the then current rate as set by the Company. This
interest rate will be guaranteed until the next contract anniversary.
After the issue date, any portion of net premiums applied to and any amounts
transferred into the Fixed Rate Option will earn interest at the then current
rate set by the Company. This rate will be guaranteed for the remainder of the
contract year, until the next contract anniversary.
[SPECIMEN]
<PAGE>
THE FIXED RATE OPTION--cont'd.
On the contract anniversary, any portion of the accumulation value attributed to
the Fixed Rate Option will earn interest at the then current rate set by the
Company. This rate will be guaranteed until the next contract anniversary.
If, on any contract anniversary the interest rate the Company sets for the Fixed
Rate Option is more than 3 percentage points lower than the rate set for the
immediately preceding contract year, the owner may withdraw all or a portion of
the accumulation value held in the Fixed Rate Option for at least one contract
year without that amount being subject to a contingent deferred sales charge.
The Company must receive proper written request for such withdrawal at its
Customer Service Office within 60 days of such contract anniversary.
6. TRANSFERS
Transfers of Accumulation Value by the Owner
The owner may transfer all or a portion of the accumulation units credited under
this contract among the investment divisions of Account D, the RE Account, and
the Fixed Rate Option, subject to the following conditions:
o Proper written request for transfer must be received by the Company at its
Customer Service Office. Other transfer procedures permitted by the
Company, if any, must be followed as set out in the prospectus for this
contract.
o Accumulation units may not be credited to or transferred into more than
four variable investment options or to three variable investment options
and the Fixed Rate Option at any time.
o The transfer of accumulation units from the RE Account to a subdivision of
Account D or to the Fixed Rate Option may only be made once each year on
or within 30 days after a contract anniversary. The maximum amount that
may be transferred from the RE Account each contract year is the greater
of:
o 33 1/3% of the accumulation value attributable to the RE Account as
of the contract anniversary; or
o $10,000.
o The transfer of accumulation units from the Fixed Rate Option to an
investment division of Account D or to the RE Account may only be made
once each year on or within 30 days after a contract anniversary.
Transfers out of the Fixed Rate Option will be made in the same order as
such amounts were allocated to the Fixed Rate Option. The maximum amount
that may be transferred from the Fixed Rate Option each contract year is
the greater of:
o 33 1/3% of the portion of the accumulation value attributable to the
Fixed Rate Option as of the contract anniversary; or
o $2,500.
The number of additional accumulation units credited under this contract in the
newly elected Fixed Rate Option or variable investment option(s) will be equal
to (a) divided by (b) where:
o (a) is the value of the amount transferred; and
o (b) is the value of an accumulation unit in the newly elected investment
option(s) as of the end of the valuation date on which the proper written
request for transfer is received by the Company at its Customer Service
Office.
The Company reserves the right to limit the frequency of transfers of
accumulation units under the contract to once every 30 days and to charge for
such transfers in the future.
Transfers By An Annuitant Following His/Her Annuity Commencement Date
An annuitant receiving annuity payments under a variable annuity payout option
may transfer all or a portion of his/her annuity units (as defined in the
"Annuity Unit Values" provision) among the variable investment options. The
conditions applicable to transfers of accumulation units, as described above,
also apply to transfers made after an annuity commencement date.
However, any transfers after an annuity commencement date can be made only once
each year. Any such transfer will take effect upon the next calculation of
annuity unit values after the Company receives proper transfer instructions at
its Customer Service Office.
For transfers made after an annuity commencement date, the number of additional
annuity units credited under the newly elected variable investment option(s)
will be equal to (a) divided by (b), where:
o (a) is the amount of the monthly variable annuity payment that is to be
transferred as of December 31st of that year; and
o (b) is the value of one annuity unit in the newly elected investment
option(s) as of December 31st of that year.
After an annuity commencement date, the annuitant receiving annuity payments
under a fixed annuity payout option may not transfer into the RE Account or the
investment divisions of Account D.
Dollar Cost Averaging Transfer Option
If part of the contract's accumulation value is allocated to the investment
division investing in The Guardian Cash Fund, the owner may choose to make
monthly transfers under the Dollar Cost Averaging Transfer Option, subject to
the conditions described below.
Under this option, an amount specified by the owner will be automatically
transferred out of The Guardian Cash Fund and into the Fixed Rate Option or the
variable investment option(s)
Page 5
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Page 6
TRANSFERS--cont'd.
elected by the owner on a monthly basis. The owner may choose to have monthly
transfers made for durations of 12, 24, or 36 months.
The following conditions apply to the Dollar Cost Averaging Transfer Option:
o An owner may elect this option on the issue date only if the initial
premium is at least:
o $10,000 and the owner chooses to make monthly transfers for a 12
month period; or
o $20,000 and the owner chooses to make monthly transfers for a 24
month or 36 month period.
o An owner may elect this option after the issue date only if the contract
has a minimum accumulation value at the time the option is elected:
o If the owner chooses to make monthly transfers for a 12 month
period, the contract's accumulation value must be at least $10,000.
o If the owner chooses to make monthly transfers for a 24 month or 36
month period, the contract's accumulation value must be at least
$20,000.
o The minimum amount which may be transferred into the Fixed Rate Option
and/or each variable investment option is $100.
o Money may not be transferred into more than three other variable
investment options or two other variable investment options and the Fixed
Rate Option at any time.
The transfer amount(s) selected by the owner multiplied by the duration selected
may not exceed the accumulation value of The Guardian Cash Fund at the time the
option is exercised. Transfers will be made on each monthly anniversary, or on
the next business day if such anniversary is on a weekend or holiday.
The Dollar Cost Averaging Transfer Option will terminate if:
o this contract is surrendered;
o the requested number of transfers has been made;
o the accumulation value in The Guardian Cash Fund is insufficient to make a
monthly transfer; or
o the Company receives proper written request from the owner to cancel the
option. Such request must be received at the Company's Customer Service
Office at least 3 business days before the next monthly anniversary in
order to cancel the transfer scheduled to take effect on such anniversary.
After the issue date, in order to initiate or effect any change under the Dollar
Cost Averaging Transfer Option, or to reinstate such option if it has
terminated, the owner must properly complete an enrollment form and submit it to
the Company's Customer Service Office. Such form must be received by the Company
at least 3 business days before the monthly anniversary on which such first
transfer will be made.
7. ACCUMULATION VALUE
Accumulation Units
An accumulation unit is a measurement used to determine the value of the owner's
interest under this contract while the contract is in force. As each participant
reaches his/her annuity commencement date, the accumulation value under the
contract is reduced by the value of the accumulation units used by the owner to
purchase an annuity for such participant. The number of accumulation units
purchased in each designated variable investment option or the Fixed Rate Option
will be determined by multiplying (a) by (b), then dividing the result by (c),
where:
o (a) is the net premium;
o (b) is the percentage to be allocated to the specified variable investment
option or the Fixed Rate Option; and
o (c) is the value of an accumulation unit for the specified variable
investment option or the Fixed Rate Option as of the valuation period
during which the premium is received at the Company's Customer Service
Office.
The value of each variable accumulation unit will depend on the investment
experience of the variable investment options selected. Thus this value may
increase or decrease and may vary from one valuation period to the next.
Accumulation Unit Value for Account D and the RE Account
The value of a variable accumulation unit for each investment division of
Account D and for the RE Account was established at $10.00 as of the date
operations began for that division or began for the RE Account. The accumulation
unit value for any valuation period thereafter is (a) multiplied by (b), where:
o (a)is the variable accumulation unit value for the immediately preceding
valuation period; and
o (b) is the net investment factor, as described below, for the current
valuation period.
Accumulation Unit Value for the Fixed Rate Option
The value of accumulation units for the Fixed Rate Option was established at
$10.00 as of the date operations began for that option. Thereafter, it will
increase daily at a rate of interest to be determined from time to time by the
Company, but which is guaranteed to be no less than 3.5% annually.
Net Investment Factor
The Company assesses a daily charge of .00003169 of the value of the assets
allocated to each of the investment divisions of Account D and to the RE Account
for its assumption of mortality and expense risks. This mortality and expense
charge is used in determining the net investment factor for each investment
division of Account D and for the RE Account. On an annual basis, the charge is
equal to 1.15% of the value of the assets allocated to these variable investment
options.
[SPECIMEN]
<PAGE>
ACCUMULATION VALUE - cont'd.
The net investment factor is used to calculate the value of an accumulation unit
in an investment division of Account D or in the RE Account for a valuation
period. The net investment factor is determined by dividing the sum of (a) and
(b) by (c), and subtracting (d) from the result, where:
o (a) is the net asset value of a fund share held in Account D for the
applicable investment division or any interest held in the RE
Account, determined as of the end of the then current valuation
period;
o (b) is the per share or per interest amount of any dividend and
other distributions made by the fund or the RE Account during the
current valuation period;
o (c) is the net asset value of the particular fund share or interest
in the RE Account determined as of the end of the immediately
preceding valuation period;
o (d) is any applicable state premium taxes and the mortality and
expense charge.
The net investment factor may be less than 1.00 since it is related to the
investment experience of a separate account.
Accumulation Value
The value of all the accumulation units credited to this contract is the
accumulation value. The accumulation value within any particular variable
investment option or the Fixed Rate Option is determined by multiplying (a) by
(b), where:
o (a) is the number of accumulation units credited to the contract for
that particular variable investment option or the Fixed Rate Option;
and
o (b) is the applicable current accumulation unit value.
On each participant's annuity commencement date, the accumulation value of this
contract will be reduced by that portion of the accumulation value applied by
the owner to purchase an annuity for the participant.
8. SURRENDERS AND WITHDRAWALS
The owner may withdraw all or part of the accumulation value of this contract.
Surrender of Contract
The owner may surrender this contract for its then current accumulation value;
the contract will then terminate. This contract must be sent to the Company's
Customer Service Office for cancellation.
Partial Withdrawals
Any partial withdrawals first will be taken from the investment divisions of
Account D in proportion to each investment division's accumulation value on the
date of the withdrawal. Partial withdrawals in excess of the amount taken from
the investment divisions of Account D will then be withdrawn from the RE
Account. Any remaining excess will be withdrawn from the Fixed Rate Option.
Amounts withdrawn from any variable investment option or the Fixed Rate Option
will be made in the same order in which such amounts were allocated to that
variable investment option or the Fixed Rate Option.
The total accumulation value remaining after a partial withdrawal must be at
least $1,000. If a partial withdrawal results in the total accumulation value
falling below $1,000, then the balance will be paid to the owner and the
contract will be cancelled.
The following conditions apply for both partial withdrawals and surrenders:
o Written request satisfactory to the Company must be received at its
Customer Service Office prior to any surrender or withdrawal.
o Any withdrawal payment or surrender will be reduced by any
applicable state premium taxes and contingent deferred sales charges
(as described below).
o The amount of any withdrawal payment will be determined as of the
valuation date on or next following the date the Company receives
the owner's proper written request for surrender or withdrawal.
Contingent Deferred Sales Charges
A contingent deferred sales charge may be imposed on partial withdrawals or on
the surrender of the contract. The amount of any contingent deferred sales
charge will be the lesser of:
o 6% of the total premiums paid in the 84 month period preceding the
date of withdrawal or surrender; or
o 6% of the amount withdrawn or surrendered.
However, in any contract year after the first, the owner may make withdrawals,
without incurring any contingent deferred sales charge, of up to 10% of the
greater of:
o the amount of total premiums paid during the 84 months preceding the
date of withdrawal; or
o the accumulation value as of the date of the first withdrawal in
that contract year.
The maximum amount of contingent deferred sales charges applied during the 84
months immediately preceding the date of withdrawal will never exceed 6% of the
total premiums paid during such period.
Administration Fee
On each contract anniversary the Company will deduct an administration fee of
$35 from the accumulation value of this contract. This fee will be deducted from
each investment division of Account D, from the RE Account and from the Fixed
Rate Option in proportion to the percentage of the accumulation value in Account
D, the RE Account, and the Fixed Rate Option on that date. If this contract is
surrendered on a date other than on a contract anniversary, the Company will
deduct the administration fee on the date of surrender.
Page 7
<PAGE>
Page 8
9. PAYMENT OF CONTRACT PROCEEDS
Following his/her annuity commencement date, each participant under this
contract will be referred to as an "annuitant".
Payment
When directed by the owner, the Company will make monthly variable annuity
payments to the annuitant under Variable Annuity Payout Option V-2, as stated in
the "Annuity Benefit" provision or, if elected, one of the other annuity payout
options. Payment of any annuity benefit may be made under either a fixed or
variable annuity payout option or a combination of both. If annuity payout
option F-3 or V-3 is chosen, the annuitant must also select a joint annuitant.
o The amount of the first annuity payment will be based on the table for the
annuity payout option elected.
o The amount of any fixed annuity payments will not be less than the
corresponding minimum amount based on the tables for the fixed annuity
payout options, with interest compounded each year at 4%.
o The amount of any variable annuity payments after the first will increase
or decrease according to the value of the variable annuity units, which
reflect the investment experience of the variable investment option(s)
elected. Any such payments will be based on an assumed investment return
of 4% per year.
o All monthly annuity payments are based on:
o the age of the annuitant at the birthday nearest the date payments
are to begin; and
o the annuity payout option elected.
The annuity payout option tables are based on the blended 1983 Individual
Annuity Mortality Table a projected under Scale G factors.
Change of Beneficiary
The annuitant may changes beneficiary designated to receive benefits under
annuity payout options V-2 and F-2. Any request for change must be in a written
form satisfactory to the Company. The change will take effect on the date the
request is signed, whether or not the annuitant is living when the Company
receives the request at its Customer Service Office. However, the change will
not apply to any payments made or actions taken by the Company before the
request is received.
Contingent Beneficiary
A numbered sequence may be used to name contingent beneficiaries for annuity
payout options V-2 and F-2. The beneficiary is the living person(s) designated
by the lowest number in the sequence.
Variable Annuity Payout Options Available
Option V.1 - Life Annuity without Guaranteed Period
The Company will make monthly variable annuity payments for the lifetime of the
annuitant. The amount of the first monthly payment will be based on the Option
V-1 table.
Option V-2 - Life Annuity with 10 Year Guaranteed Period
The Company will make monthly variable annuity payments during the lifetime of
the annuitant. The amount of the first monthly payment will be based on the
Option V2 table.
Payments are guaranteed for a period of 10 years. If the annuitant dies sooner,
payments will be made during the remaining period to the beneficiary designated
by the owner. The beneficiary may elect to be paid the commuted value of the
current dollar amount of the then remaining number of variable annuity payments.
If the beneficiary dies while receiving such payments, the commuted value of the
current dollar amount of the remaining number of variable annuity payments will
be paid in one sum to the beneficiary's estate.
If any designated beneficiary dies before the annuitant, the interest of that
beneficiary shall pass to the designated surviving beneficiary. If more than one
beneficiary survives the annuitant, such interest shall pass to the surviving
beneficiaries in proportion to their respective interest, unless otherwise
previously specified by the owner. If no designated beneficiary survives the
annuitant, and no other designation is provided, the benefit provided under this
annuity payout option shall be paid in one sum to the annuitant's estate.
Option V-3 - Joint and Survivor Annuity
The Company will make monthly variable annuity payments while the annuitant and
the joint annuitant are living. When an annuitant dies, two-thirds of the number
of annuity units in effect while both were living will continue for the lifetime
of the survivor. The amount of the first variable annuity payment will be based
on the Option V-3 table.
Fixed Annuity Payout Options Available
Option F-1 - Life Annuity without Guaranteed Period
The Company will make monthly fixed annuity payments for the lifetime of the
annuitant.
Option F-2 - Life Annuity with 10 Year Guaranteed Annuity Period
The Company will make monthly fixed annuity payments during the lifetime of the
annuitant. Payments are guaranteed for a period of 10 years. If the annuitant
dies sooner, payments will be made during the remaining period to the
beneficiary designated by the owner. The beneficiary may elect to be paid the
present value of the current dollar amount of the then remaining number of fixed
annuity payments. If the beneficiary dies while receiving such payments, the
present value of the current dollar amount of the remaining number of fixed
annuity payments will be paid in one sum to the beneficiary's estate.
<PAGE>
PAYMENT OF CONTRACT PROCEEDS - cont'd.
If any designated beneficiary dies before the annuitant, the interest of that
beneficiary shall pass to the designated surviving beneficiary. If more than one
beneficiary survives the annuitant, such interest shall pass to the surviving
beneficiaries in proportion to their respective interest, unless otherwise
previously specified by the owner. If no designated beneficiary survives the
annuitant, and no other designation is provided, the benefit provided under this
annuity payout option shall be paid in one sum to the annuitant's estate.
Option F-3 - Joint and Survivor Annuity
The Company will make monthly fixed payments while the annuitant and the joint
annuitant are living. When an annuitant dies, the Company will continue to pay,
for the lifetime of the survivor, two-thirds of the amount of the payment in
effect while both were living.
Determination of First Annuity Payment
The tables below indicate the dollar amount of the first monthly annuity payment
which can be purchased with each $1,000 of the portion of the accumulation value
applied by the owner to purchase an annuity for a participant. The first annuity
payment is determined by multiplying (a) by (b), where:
o (a) is the amount shown in the applicable table for the annuitant's
age; and
o (b) is the number of thousands of dollars of accumulation value.
The dollar amount of the first monthly annuity payment purchased for ages not
shown in the tables are available upon request.
Annuity Unit Values
For variable annuity payout options, the portion of the accumulation value
stated by the owner will be applied to purchase annuity units. Annuity units are
used to determine the amount of each variable annuity payment after the first.
The value of an annuity unit is determined independently for each investment
division of Account D and for the RE Account The dollar value of variable
annuity units may increase or decrease depending upon the investment experience
of the investment option(s) elected.
The value of an annuity unit in each investment division of Account D and in the
RE Account was established at $1.00 on the date operations began for each such
variable investment option. The value of an annuity unit at the end of any
subsequent valuation period is equal to (a) multiplied by (b), where:
o (a) is the annuity unit value on the immediately preceding valuation
period; and
o (b) is the annuity change factor for the current valuation period.
The annuity change factor is equal to the net investment factor (as described in
the "Net Investment Factor" provision) for the same valuation period adjusted to
recognize the assumed investment return of 4% per year used in determining the
amounts of variable annuity payments.
The valuation of all assets in Account D and the RE Account will be determined
in accordance with all applicable laws and regulations.
Determination of Variable Annuity Payments After the First
The amounts of variable annuity payments made after the first are determined by
multiplying (a) by (b), where:
o (a) is the number of annuity units in each investment division of
Account D and in the RE Account; and
o (b) is the appropriate annuity unit value as of the valuation date
10 days prior to the date the variable annuity payment is due.
The number of annuity units under this contract is determined by dividing (a) by
(b), where:
o (a) is the amount of the first monthly variable annuity payment for
each investment division of Account D and for the RE Account; and
o (b) is the value of the appropriate annuity unit on the date the
first variable annuity payment is made.
The number of annuity units remains fixed during the annuity payment period,
provided no transfers among variable investment options are made.
The Company guarantees that the dollar amount of each variable annuity payment
after the first will not be adversely affected by:
o the actual administration expenses it incurs; or
o variations in mortality experience from the mortality assumptions
upon which the first payment is based.
Annuity Payout Options: General Provisions
o At least $2,000 must be applied under an annuity payout option for
any annuitant. Proceeds of a smaller amount will be paid in one sum.
o If monthly annuity payments are or become $20 or less, the Company
reserves the right to change the frequency of payment.
o While an annuitant is receiving annuity payments and subject to the
Company's consent, the annuitant may change the frequency of the
annuity payments being made. A written request for such change, in a
form satisfactory to the Company, must be received at the Customer
Service Office. The change will take effect upon receipt of the
written request.
o The Company requires satisfactory proof of the age of the annuitant
on the date annuity payments begin.
o Except with the consent of the Company, the annuity payout options
will not be available with respect to any part of the proceeds
payable to an assignee or to other than a natural person entitled to
receive proceeds.
o The annuitant does not have the right to advance or assign payments
made under an annuity payout option.
o The annuitant cannot make any change in the manner of payout, except
as provided in the election.
o To the extent permitted by law, the payments made under an annuity
payout option will not be subject to encumbrance, or to the claims
of creditors or legal process.
Page 9
<PAGE>
Page 10
ANNUITY PAYOUT OPTION TABLES
DOLLAR AMOUNT OF THE FIRST MONTHLY ANNUITY PAYMENT PURCHASED
WITH EACH $1,000 OF PROCEEDS APPLIED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Options F-1, F-2, V-1 and V-2 - Life Annuity Options F-3 and V-3 - Joint and Survivor Annuity
- ----------------------------------------------------------------------------------------------------
Nearest Age of Younger Annuitant
Nearest at Date of First Payment
Nearest Age Options Options Age of --------------------------------
of Annuitant F-1 and V-1 F-2 and V-2 Older Annuitant Age Age
At Date of No Period 10 Years At Date of 10 Years 5 Years Same
First Payment Certain Certain First Payment Less Less Age
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
40 $4.01 $4.00 40 $3.80 $3.85 $3.92
41 4.04 4.04 41 3.82 3.88 3.95
42 4.08 4.07 42 3.84 3.91 3.98
43 4.12 4.11 43 3.87 3.94 4.02
44 4.16 4.15 44 3.90 3.97 4.05
45 4.20 4.19 45 3.92 4.00 4.09
46 4.24 4.23 46 3.95 4.04 4.13
47 4.29 4.27 47 3.99 4.07 4.17
48 4.34 4.32 48 4.02 4.11 4.21
49 4.39 4.37 49 4.05 4.15 4.26
50 4.44 4.42 50 4.09 4.19 4.30
51 4.50 4.48 51 4.13 4.23 4.35
52 4.56 4.53 52 4.17 4.28 4.41
53 4.62 4.59 53 4.21 4.33 4.46
54 4.69 4.65 54 4.26 4.38 4.52
55 4.76 4.72 55 4.30 4.43 4.58
56 4.83 4.79 56 4.35 4.49 4.65
57 4.91 4.87 57 4.41 4.55 4.72
58 5.00 4.94 58 4.46 4.61 4.79
59 5.08 5.03 59 4.52 4.68 4.87
60 5.18 5.11 60 4.58 4.75 4.95
61 5.28 5.21 61 4.64 4.83 5.04
62 5.39 5.30 62 4.71 4.91 5.14
63 5.50 5.40 63 4.79 4.99 5.24
64 5.63 5.51 64 4.86 5.09 5.34
65 5.76 5.63 65 4.95 5.18 5.46
66 5.90 5.75 66 5.03 5.29 5.58
67 6.05 5.87 67 5.13 5.40 5.71
68 6.21 6.00 68 5.22 5.51 5.85
69 6.39 6.14 69 5.33 5.64 6.00
70 6.57 6.28 70 5.44 5.77 6.16
71 6.76 6.43 71 5.56 5.92 6.33
72 6.97 6.58 72 5.68 6.07 6.51
73 7.19 6.74 73 5.82 6.23 6.70
74 7.43 6.90 74 5.96 6.40 6.91
75 7.69 7.07 75 6.11 6.59 7.13
76 7.96 7.24 76 6.28 6.79 7.37
77 8.25 7.42 77 6.45 7.00 7.62
78 8.56 7.59 78 6.64 7.22 7.89
79 8.90 7.78 79 6.83 7.46 8.18
80 9.26 7.98 80 7.05 7.72 8.50
81 9.65 8.14 81 7.27 8.00 8.84
82 10.07 8.32 82 7.52 8.30 9.20
83 10.53 8.50 83 7.77 8.62 9.60
84 11.02 8.68 84 8.05 8.97 10.02
85 11.55 8.85 85 8.35 9.35 10.49
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
10. GENERAL PROVISIONS
The Contract
The entire contract consists of this contract, any attached endorsements, and
the attached copy of the application. The Company relied upon the application in
issuing this contract. All statements in the application are assumed to be true
to the best knowledge and belief of the person(s) making them. These statements
are representations and not warranties. No statement will be used to contest
this contract unless contained in the application.
Only the President, a Vice President, or the Secretary of the Company may make
or modify this contract, and then only in writing. No agent is authorized to
change this contract or to waive any of the Company's requirements; no agent may
waive an answer to any question in the application. The Company will not be
bound by any promise or statement made by any agent or other person except as
stated above.
The Company may at any time make any change in this contract to the extent that
such change is required in order to make this contract conform with any law or
any regulation issued by any governmental authority to which the Company is
subject.
Age
If the age of the annuitant has been misstated, any benefit payable under this
contract will be that which the premium(s) would have purchased at the correct
age. Overpayments made by the Company because of such misstatement, with
interest at 6% a year, compounded annually, will be charged against benefits
falling due after the adjustment. If underpayments are made by the Company
because of such misstatement, the Company will pay the balance immediately, with
6% interest, compounded annually.
Plan
The plan is specified on the front cover of this contract. The plan may be
either a pension or profit-sharing plan qualified for special tax treatment
under Section 401(a) of the Internal Revenue Code or other group
employer-sponsored retirement plans.
Participant
A participant is an eligible employee (as defined in the plan) who participates
in the plan. A participant is the annuitant who receives an annuity benefit
under the terms of this contract.
Proof of Age and Survival
The Company has the right to require satisfactory proof:
o of the age of any annuitant or annuitants; and
o that an annuitant is living when a payment is contingent upon the
annuitant's survival.
Issue Date
The issue date is stated on page 3. This is the date this contract is issued at
the Customer Service Office.
Annuity Commencement Date
An annuity commencement date is the date on which monthly annuity payments to a
participant begin, in accordance with the terms of the plan. This date may be
the first day of any calendar month following a participant's 50th birthday, but
may not be later than the participant's 85th birthday, unless the Company agrees
otherwise.
Contract Anniversary
Contract anniversaries are measured from the issue date.
Monthly Anniversary
The monthly anniversary for each contract month is the same day of the month as
the issue date or the last day of that calendar month, if earlier.
Incontestability
This contract will be incontestable after it has been in force during the
annuitant's lifetime for 2 years from its issue date.
Payments by the Company
Any payment by the Company under this contract is payable at its Customer
Service Office. The Company reserves the right to require surrender of this
contract prior to payment of any amounts withdrawn.
Nonparticipating
This contract is not eligible for dividends and will not share in the surplus
earnings of the Company.
Ownership of Assets
The Company shall have ownership and control of its assets, including all assets
allocated to Account D, the RE Account, and the Fixed Rate Option.
Valuation Date
A valuation date is the date on which the accumulation unit values and the
annuity unit value of the variable investment options are determined. Valuations
are made daily.
Valuation Period
A valuation period is the period between two valuation dates.
Deferment
The Company will ordinarily pay any partial withdrawals or surrender proceeds
within 7 days after the date proper written request for withdrawal or surrender
is received by the Company's Customer Service Office. However, when permitted by
law, the Company may defer payment of any partial withdrawals or surrender
proceeds for up to 6 months after proper written request for such withdrawal or
surrender is received.
The amount payable will be determined as of the date proper written request is
received. Interest at the rate of 3% will be paid on any amount deferred 30 days
or more.
The Company may defer calculation or payment of any partial withdrawals or
surrender proceeds or the transfer of amounts based on separate account
performance if:
o the New York Stock Exchange is closed for trading or trading has
been suspended; or
Page 11
<PAGE>
Page 12
GENERAL PROVISIONS - cont'd.
o the Securities and Exchange Commission restricts trading or
determines that a state of emergency exists which may make such
calculation, payment, or transfer impracticable.
The Company may also defer for up to 6 months any calculation, payment or
transfer of amounts attributable to the RE Account if there appears to be
insufficient cash available to meet such payment or transfer requests and prompt
disposition of the RE Account's investments to meet such requests could not be
made on commercially reasonable terms.
Reports to the Owner
The Company will provide a written report to the owner at least once a year
while this contract has an accumulation value. The Company will send the report
to the owner soon after each contract anniversary. The report will show the
accumulation value of this contract, as of a date not more than 2 months prior
to the date of the report.
The Company will also send appropriate statements containing such information as
may be required by applicable laws, rules, and regulations.
<PAGE>
ENDORSEMENTS
[SPECIMEN]
Page 13
<PAGE>
AMENDMENT OF CONTRACT PROVISIONS
This rider is attached to and made part of the Contract. This rider is subject
to all of the applicable provisions of the Contract.
The Fixed Rate Option
Subject to the conditions stated in this rider, the Owner may allocate all or
part of any net premium(s) to the Fixed Rate Option. If this Contract is a
single premium payment Contract, then any instructions to allocate the net
premium to the Fixed Rate Option must be made on or before the issue date of
this Contract. If any part of a net premium is allocated to the Fixed Rate
Option, the balance may be allocated to no more than three Separate Account
Divisions.
The Fixed Rate Option will not be maintained after the retirement date. Any
portion of the accumulation value in the Fixed Rate Option on the retirement
date will be applied to the annuity payout option elected.
The Company will credit interest on the portion of net premium(s) applied to and
any amounts transferred to the Fixed Rate Option. Interest will accrue daily at
a minimum guaranteed annual rate of 3.5%. At the discretion of the Company an
interest rate in excess of the minimum guaranteed rate may be credited. The
Company will provide notice of the applicable interest rates in the annual
report to the Owner and upon request.
Any portion of a net premium allocated to the Fixed Rate Option on the issue
date will earn interest at the then current rate as set by the Company. This
interest rate will be guaranteed until the next contract anniversary.
After the issue date, any portion of net premium(s) applied to and any amounts
transferred into the Fixed Rate Option will earn interest at the then current
rate set by the Company. This rate will be guaranteed for the remainder of the
contract year, until the next contract anniversary.
On the contract anniversary, any portion of the accumulation value attributed to
the Fixed Rate Option will earn interest at the then current rate set by the
Company. This rate will be guaranteed until the next contract anniversary.
If, on any contract anniversary the interest rate the Company sets for the Fixed
Rate Option is more than 3 percentage points lower than the rate set for the
immediately preceding contract year, the Owner may withdraw all or a portion of
the accumulation value held in the Fixed Rate Option for at least one contract
year without that amount being subject to a surrender charge. The Company must
receive proper written request for such withdrawal at its Customer Service
Office within 60 days of such contract anniversary.
During the period up to 30 days before the retirement date the Owner may
transfer all or a portion of the accumulation units credited under this contract
among the Separate Account Divisions and the Fixed Rate Option, subject to the
following conditions:
o Proper written request for transfer must be received by the Company
at its Customer Service Office. Other transfer procedures permitted
by the Company, if any, must be followed as set out in the
prospectus for this contract.
o Accumulation units may not be credited to or transferred into more
than four Separate Account Divisions or to three Separate Account
Divisions and the Fixed Rate Option at any time.
o The transfer of accumulation units from the Fixed Rate Option to a
Separate Account Division may only be made once each year on or
within 30 days after a contract anniversary. Transfers out of the
Fixed Rate Option will be made in the same order as such amounts
were allocated to the Fixed Rate Option. The maximum amount that may
be transferred from the Fixed Rate Option each contract year is the
greater of:
o 33 1/3% of the portion of the accumulation value attributable to the
Fixed Rate Option as of the contract anniversary; or
o $2,500.
<PAGE>
The number of additional accumulation units credited under this contract in the
newly elected Fixed Rate Option will be equal to (a) divided by (b), where:
o (a) is the value of the amount transferred; and
o (b) is the value of an accumulation unit in the Fixed Rate Option as
of the end of the valuation date on which the proper written request
for transfer is received by the Company at its Customer Service
Office.
The Company reserves the right to limit the frequency of transfers of
accumulation units under the contract to once every 30 days and to charge for
such transfers in the future. Transfers into or out of the Fixed Rate Option are
not permitted after the retirement date.
Any partial withdrawals will first be allocated among the Separate Account
Divisions in the same proportion as the accumulation value in each Separate
Account Division bears to the total accumulation value then credited to the
separate account on the date of the withdrawal. Partial withdrawals in excess of
the amount allocated among the Separate Account Divisions will be allocated to
the Fixed Rate Option.
The Company reserves the right to defer the payment of amounts withdrawn from
the Fixed Rate Option for a period not to exceed six months from the date proper
request for such withdrawal is received by the Company. Benefits and values
provided under this rider equal or exceed those required by any state statute
where the contract is delivered.
Attached on the issue date of the Contract.
The Guardian Insurance & Annuity Company, Inc.
/s/ Herbert N. Grolnick
Secretary
<PAGE>
AMENDMENT OF CONTRACT PROVISIONS
This rider is attached to and made part of the Contract. This rider is subject
to all of the applicable provisions of the Contract.
The Real Estate Option
This rider provides for a Real Estate Option (the RE Option). The RE Option is
supported by a separate investment account established by the Company under the
laws of the state of Delaware. This account is subject to the laws of the
jurisdiction in which this Contract is delivered.
Allocation of Premiums and Transfer of Accumulation or Annuity Units
The owner may allocate all or part of a premium to the RE Option.
The owner may transfer all or a portion of the accumulation units or annuity
units from one or more Separate Account Divisions or from the Fixed Rate Option
to the RE Option and from the RE Option to one or more Separate Account
Divisions, subject to the following conditions:
o if any part of the accumulation value is allocated to the RE Option,
the remaining portion of the accumulation value may be allocated to
no more than three Separate Account Divisions or two Separate
Account Divisions and the Fixed Rate Option at any time.
o Proper written request for transfer must be sent to the Executive
Office. Other transfer procedures permitted by the Company, if any,
must be followed as set out in the prospectus for the Contract.
o Prior to the Retirement Date, the transfer of accumulation units
from the RE Option to a Separate Account Division may only be made
on or within 30 days after a Contract Anniversary. Transfer requests
received within the 30 day period after a Contract Anniversary will
take effect at the end of the business day on which the request is
received.
o Any transfers of annuity units after the Retirement Date can be made
only as of December 31st of any year.
o The maximum amount that may be transferred is the greater of:
o 33 1/3% of the amount invested in the RE Option as of the
Contract Anniversary; or
o $10,000.
Accumulation Value
The Contract's accumulation value will vary daily with the performance of any
amount allocated to the RE Option. The accumulation value at any time will
reflect any transfers between the RE Option and any Separate Account Division or
Fixed Rate Option. On any day, any amount allocated to the RE Option will be
used to compute the Contract's accumulation value, accumulation units, and
annuity units in accordance with the methods set forth in the Contract.
Redemptions (Withdrawals)
Upon receipt of a proper request for partial or total redemption of the
Contract, the Company will cancel accumulation units with an aggregate value
equal to the dollar amount of the requested redemption plus, if applicable, any
Contract charges and withdrawal charges. The Company will cancel all
accumulation units attributable to the Contract's allocation to the Separate
Account Divisions before cancelling any units attributable to any allocation to
the RE Option. In addition, the Company will cancel all accumulation units
attributable to the Contract's allocation to the RE Option before cancelling any
units attributable to any allocation to the Fixed-Rate Option.
Voting Rights
Contract owners have no voting rights with respect to the RE Option.
Deferment
The Company reserves the right to defer payment of any Contract benefits (other
than guaranteed death benefits) funded by the RE Option (such as cash surrenders
and partial withdrawals under the Contracts) and transfers of Contract values
from the RE Option to the Separate Account Divisions for up to 6 months if there
appears to be insufficient cash available to meet such payment or transfer
requests and prompt disposition of the RE Option's investments to meet such
requests could not be made on commercially reasonable terms.
Issue Date
The issue date of this rider is the issue date of the Contractor the date of
attachment if later.
The Guardian Insurance & Annuity Company, Inc.
/s/ Herbert N. Grolnick
Secretary
<PAGE>
Page 14
ALPHABETICAL INDEX
Subject Page
Accumulation Units ........................................................ 6
Accumulation Unit Value for Account D and the RE Account .................. 6
Accumulation Unit Value for the Fixed Rate Option ......................... 6
Accumulation Value ........................................................ 7
Administration Fee ........................................................ 7
Age ....................................................................... 11
Allocation of Net Premiums ................................................ 3
Annuity Benefit ........................................................... 3
Annuity Commencement Date ................................................. 11
Annuity Payout Option Tables .............................................. 10
Annuity Unit Values ....................................................... 9
Assignment ................................................................ 3
Change in Investment Objective or Policy .................................. 4
Change of Beneficiary ..................................................... 8
Contingent Beneficiary .................................................... 8
Contingent Deferred Sales Charges ......................................... 7
Contract Anniversary ...................................................... 11
Contract, The ............................................................. 11
Deferment ................................................................. 11
Determination of First Annuity Payment .................................... 9
Determination of Variable Annuity Payments After the First ................ 9
Dollar Cost Averaging Transfer Option ..................................... 6
Fixed Annuity Payout Options Available .................................... 8
Fixed Rate Option ......................................................... 4
Guardian Separate Account D and the Guardian Real Estate Account .......... 4
Incontestability .......................................................... 11
Investment Divisions ...................................................... 4
Issue Date ................................................................ 11
Monthly Anniversary ....................................................... 11
Net Investment Factor ..................................................... 6
Nonparticipating .......................................................... 11
Nontransferabiity of Ownership ............................................ 3
Owner ..................................................................... 3
Ownership of Assets ....................................................... 11
Partial Withdrawals ....................................................... 7
Participant ............................................................... 11
Payments by the Company ................................................... 11
Payment of Contract Proceeds .............................................. 8
Plan ...................................................................... 11
Premium Payments .......................................................... 3
Proof of Age and Survival ................................................. 11
Reports to Owner .......................................................... 12
Rights Reserved by the Company ............................................ 4
Surrender of Contract ..................................................... 7
Transfers After an Annuity Commencement Date .............................. 5
Valuation Date ............................................................ 11
Valuation Period .......................................................... 11
Variable Annuity Payout Options Available ................................. 8
[SPECIMEN]
<PAGE>
Flexible Payment Deferred Combination Variable and Fixed Group Annuity
Contract
o Benefits based on the investment experience of a Separate Account
are variable and are not guaranteed
o Non-participating--No dividends payable
[Logo] The Guardian(R) The Guardian
Insurance & Annuity
Company, Inc.
Customer Service Office: Executive Office:
P.O. Box 8833 201 Park Avenue South
Lehigh Valley, PA 18001 New York, NY 10003
The Guardian Investor(R)
Group Program Variable Annuity Application
<TABLE>
<CAPTION>
====================================================================================================================================
INSTRUCTIONS: Please type or print in black ink.
====================================================================================================================================
<S> <C>
1. Contract Plan Name __________________________________________________________________
Owner Address_____________________________________________________________________
City__________________________ State__________________________ Zip__________
Tax I.D. Number ________________________ Telephone(___)_____________________
|_| Plan Document or Letter of Determination enclosed.
(If not, please explain below in Section 10, "Special Information.")
====================================================================================================================================
2. Purchase
Payment An initial payment of $________________ is attached.
Minimum initial: $5,000 Periodic payments of $________________ will be made on the following schedule:
|_| Monthly |_| Quarterly |_| Semi-annually |_| Annually |_| By bank draft (monthly only)
Minimum subsequent: $500
====================================================================================================================================
3. Payment _______% Guardian Stock Fund
Allocation _______% Guardian Small Cap Stock Fund
_______% Guardian Bond Fund
Choose a maximum _______% Guardian Cash Fund
of six. _______% Baillie Gifford International Fund
_______% Baillie Gifford Emerging Markets Fund
Whole percentages _______% Value Line Centurion Fund
only. _______% Value Line Strategic Asset Management Trust
_______% Gabelli Capital Asset Fund
_______% MFS Growth with Income Series
_______% Fixed-Rate Option
100%
- ------------------------------------------------------------------------------------------------------------------------------------
Options-Sections 4-6
- ------------------------------------------------------------------------------------------------------------------------------------
4. Dollar Cost Each month, please dollar cost average from The Guardian Cash Fund the following amounts over the
Averaging period indicated below:
$______ into Guardian Stock Fund
$______ into Guardian Small Cap Stock Fund |_| 12 months ($10,000 min. purchase payment)
Minimum transfer $______ into Guardian Bond Fund |_| 24 months ($20,000 min. purchase payment)
per fund, per $______ into Baillie Gifford International Fund |_| 36 months ($20,000 min. purchase payment)
month: $100 $______ into Baillie Gifford Emerging Markets Fund
$______ into Value Line Centurion Fund See prospectus for additional details.
Note: To establish $______ into Value Line Strategic Asset Management Trust
dollar cost averaging $______ into Gabelli Capital Asset Fund
you must have $______ into MFS Growth with Income Series
allocated sufficient $______ into Fixed-Rate Option
funds to The Guardian
Cash Fund. (See #3.)
====================================================================================================================================
5. Telephone In accordance with the rules and procedures set forth in the prospectus, I hereby authorize and direct The
Transfer Guardian Insurance & Annuity Company (GIAC) to accept telephone fund transfer instructions from any person who
can furnish proper identification including my Personal Security Code. I (we) agree to hold harmless and
indemnify GIAC and its affiliates and any mutual fund managed by such affiliates and their directors, officers,
employees and agents for any losses arising from such instructions.
Personal Security Code _______________ (Any 5-digit number)
====================================================================================================================================
6. Please check box if you wish to receive a copy of the Statement of Additional Information. |_|
====================================================================================================================================
</TABLE>
EB-010999 10/94 REV. 7/97
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
7. Replacement Will the proposed contract replace any existing annuity or life insurance contract? No |_| Yes |_|
(if "Yes," explain)
====================================================================================================================================
8. Signatures All statements made in this application are true to the best of our knowledge and belief, and we agree that
they are adopted by and are binding on us and shall form the basis for any annuity contract issued by The
Guardian Insurance & Annuity Company (GIAC). We understand that the contract applied for shall not take effect
until the later of, (1) the issuance of the contract, and (2) receipt by GIAC of the first required contract
payment. No investment dealer or agent can make or change a contract, or waive any of GIAC's rights or
requirements. GIAC has the unilateral right, (1) to determine whether any contract shall be issued on the basis
of this application, and (2) to waive or modify any terms or conditions of this application or any of GIAC's
requirements. We further agree that this application shall be affixed to and become part of the annuity
contract and verify our understanding that all payments and values provided by this contract, when based on the
investment experience of a mutual fund or separate account, are variable and not guaranteed as to dollar
amount. We acknowledge receipt of current prospectuses for The Guardian Investor Group Program and its
underlying investment options. Under penalty of perjury, the contract owner certifies that the taxpayer
identification number is correct as it appears in this application and that the plan is not subject to backup
withholding.
_______________________________________________________ __________________________ _______________________
Signed at City State Date
_______________________________________________________ ____________________________________________________
Signature of Trustee Name of Dealer or Agent (please print or type)
_______________________________________________________ ____________________________________________________
Signature of Alternate Trustee (if any) State License ID No.
The agent hereby certifies he/she witnessed the
_______________________________________________________ signature(s) above and that all information
Signature of Agent contained in this application is true to the best of
his/her knowledge and belief.
====================================================================================================================================
9. Dealer Dealer Sales Guardian Sales
Information
____________________________________________________ ____________________________________________________
Dealer Name Guardian Agency Name
____________________________________________________ ____________________________________________________
Dealer Branch Office Address Agent's Last Name First Middle Initial
( )
____________________________________________________ ____________________________________________________
City State Zip GIAC Agency/Agent Code Phone
( )
____________________________________________________
Branch No. R.R. No. Phone This application was actually solicited and written
within my territory by a duly authorized and
____________________________________________________ licensed agent or broker of my Agency. (If
Representative's Last Name First Middle Initial otherwise, explain.)
____________________________________________________ ____________________________________________________
Authorized Dealer Signature General Agent's Signature
====================================================================================================================================
AGENT: Will the proposed contract replace any existing annuity or life insurance contract? |_| Yes |_| No
(If "Yes," explain in the Special Information Section below.)
====================================================================================================================================
10. Special
Information
====================================================================================================================================
Agent: Send completed application-with check made out to The Guardian Insurance & Annuity Co. or to The Guardian Investor-to your
general agent or dealer.
GA/Dealer: Send application and check to: Regular Mail Express Mail
The Guardian Insurance & Annuity Co. The Guardian Insurance & Annuity Co.
Variable Annuity Administration Variable Annuity Administration
P.O. Box 26210 3900 Burgess Place
Lehigh Valley, PA 18002-6210 Bethlehem, PA 18017
====================================================================================================================================
</TABLE>
EB-010999 10/94 REV. 7/97
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
****
The Guardian Insurance & Annuity Company, Inc. a corporation organized and
existing under and by virtue of the General Corporation Law or the State or
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting or the Board or Directors or The Guardian
Insurance & Annuity Company, Inc. (the "Corporation") resolutions were duly
adopted setting forth a proposed amendment of the certificate of Incorporation
of the Corporation, declaring said amendment to be advisable and calling a
meeting of the stockholders of the Corporation for consideration thereof. The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that the certificate of Incorporation of the Corporation be
amended by changing the Article thereof numbered "III" and Section thereof
numbered "3.2" so that, as amended, said Article and Section shall be and
read as follows:
"Management and other Contracts. The Corporation may enter into a
management, supervisory or investment advisory contract and other contracts
with, and may otherwise do business with, any firm or organization
notwithstanding that the directors or officers of the Corporation may be
employees, directors or officers of such firms or organizations, and in the
absence of fraud the Corporation and such firms or organizations may deal
freely with each other, and such contracts or any other contract or
transaction between the Corporation and such firms or organizations shall
not be invalidated or in any wise affected thereby, nor shall any director
or officer of the Corporation be liable to the Corporation or to any
stockholder or creditor thereof or to any other person for any loss
incurred by it or him under or by reason of any such contracts or
transactions; provided that nothing herein shall protect any director or
officer of the Corporation against any liability to the Corporation or to
its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office; and provided always that
such contracts or transactions shall have been fair as to the Corporation
as of
<PAGE>
the time it was authorized, approved or ratified by the Board of Directors,
a committee thereof, or the stockholders. No director of the Corporation
shall be liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section
174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit."
SECOND: that thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, The Guardian Insurance & Annuity Company, Inc. has
caused its corporate seal to be hereunto affixed and this certificate to be
signed by Arthur V. Ferrara, its President, and Herbert N. Grolnick,
its Secretary, this 29th day of August, 1986.
By /s/ Arthur V. Ferrara
-----------------------------------
Arthur V. Ferrara, President
Attest:
By /s/ Herbert N. Grolnick
-----------------------------------
(CORPORATE SEAL) Herbert N. Grolnick, Secretary
BY-LAWS
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
---ooOoo---
ARTICLE I
OFFICES
Section 1. The registered office shall be in Wilmington, Delaware.
Section 2. The corporation may have offices also at such other places
within and without the State of Delaware as the board of directors may from time
to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of the stockholders for the election of directors shall
be held in New York, New York at such place as may be fixed from time to time by
the board of directors. Meetings of stockholders for any other purpose may be
held at such time and place,
<PAGE>
2.
within or without the State of Delaware, as shall be stated in the notice of the
meeting.*
Section 3. In order that the corporation may determine the stockholders
entitled to notice of or to, vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than fifty nor less than ten days before the date of
such meeting, nor more than fifty days prior to any other action. A
determination of stockholders shall apply to any adjournment
- ----------
* Section 2 amended on 11-30-89 to read as follows: "Unless otherwise
provided by the board of directors, the annual meeting of stockholders
shall be held not less than thirty (30) and not more than one hundred
twenty (120) days after the end of the corporation's last preceding fiscal
year, and at such meeting the stockholders shall elect, by a plurality
vote, a board of directors, and shall transact such other business as may
properly be brought before the meeting.
<PAGE>
3.
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
Section 4. Written notice of the annual meeting, and any special meeting
stating the place, date and hour thereof, shall be given to each stockholder
entitled to vote thereat not less than ten nor more than fifty days before the
date of the meeting.
Section 5. The officer who has charge of the stock ledger of the
corporation shall prepare, and produce a complete list of the stockholders
entitled to vote at said meeting in accordance with Section 219(a) Title 8 of
the Delaware Code.
Section 6. Special meetings of the stockholders may be called by the
president and shall be called by the president or secretary by resolution of the
board of directors or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such resolution or request shall state the
purpose or purposes of the proposed meeting.
<PAGE>
4.
Section 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, so long as the adjournment is not for more than thirty days and a new
record date is not fixed for the adjourned meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the
<PAGE>
5.
stock having voting power present in person or represented by proxy shall decide
any question brought before such meeting, unless the question is one upon which
by express provision of the statutes or of the certificate of incorporation a
different vote is required in which case such express provision shall govern and
control the decision of such question.
Section 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer
period.
No proxy or power of attorney to vote shall be used to vote at a meeting of the
stockholders unless it shall have been filed with the secretary of the meeting
when required by the inspectors of election. All questions regarding the
qualification of voters, the validity of proxies and the acceptance or rejection
of votes shall be decided by two inspectors of election who shall be appointed
by the board of directors, or if not so appointed, then by the presiding officer
of the meeting.
<PAGE>
6.
Section 11. Whenever stockholders are required or permitted to take any
action by vote, such action may be taken without a meeting on written consent,
setting forth the action so taken, signed by the holders of all outstanding
stock entitled to vote thereon, all in accordance with Section 228, Title 8 of
the Delaware Code.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be five.* By amendment of this by-law the number may be increased or
decreased from time to time by the board of directors within the limits
permitted by law, but no decrease in the number of directors shall change the
term of any director in office at the time thereof. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this article, and each director shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Directors
need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number
- ----------
* Amended by board of directors on 11/20/86 to delete the number "five" and
insert in its place "at least seven."
<PAGE>
7.
of directors may be filled by a majority of the directors then in office, though
less than a quorum, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected, unless sooner
displaced.
Section 3. The business of the corporation shall be managed by its board of
directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors shall
be held immediately following the adjournment of the meeting of stockholders and
at the place thereof. No notice of such meeting shall be necessary to the
directors in order legally to constitute the meeting, provided a quorum be
present. In the event such meeting is not so held, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors.
<PAGE>
8.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board of directors.
Section 7. Special meetings of the board of directors may be called by the
president and shall be called by the secretary on the written request of two
directors. Notice of special meetings of the board of directors shall be given
to each director at least three days before the meeting if by mail or at least
24 hours before the meeting if given in person or by telephone or by telegraph.
The notice need not specify the business to be transacted.
Section 8. At meetings of the board of directors, one-third of the
directors at the time in office but in no event less than two* directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors. If a quorum shall not be present at any meeting of
the board of directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
- ----------
* Amended by board of directors on 11/20/86 to delete the phrase "one-third
of the directors at the time in office but in no event less than two" and
insert in its place the word "five."
<PAGE>
9.
Section 9. The board of directors may, by resolution adopted by a majority
of the whole board, designate one or more committees, each committee to consist
of two or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors. The board may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
or in any written consent of the committee. The member or members of any such
committee present at any meeting and not disqualified from voting may, whether
or not he or they constitute a quorum, unanimously appoint another member of the
board of directors to act at the meeting in the place of any absent or
disqualified member.
Section 10. The committees shall keep regular minutes of their proceedings
and report the same to the board of directors.
<PAGE>
10.
Section 11. Any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the board or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the board or committee.
Section 12. The directors may be paid their expenses of attendance at each
meeting of the board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders mailed to them at their
addresses appearing on the books of the corporation shall be deemed to be
given at the time when deposited in the United States mail.
<PAGE>
11.
Section 2. Whenever any notice is required to be given a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent of notice.
Attendance of a person at a meeting of stockholders or of directors shall
constitute a waiver of notice of such meeting except when the stockholder or
director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors at its first meeting after each annual meeting of stockholders and
shall be a president, who shall be a director, and a vice president, a
secretary, a treasurer and such other officers and agents as the board desires
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the board or as
set forth in these by-laws. Any number of offices may be held by the same
person.
<PAGE>
12.
Section 2. The salaries of all officers of the corporation shall be fixed
by the board of directors.
Section 3. Any officer may be removed at any time by the board of directors
with or without cause. Any vacancy occurring in any office of the corporation by
death, resignation, removal or otherwise shall be filled by the board of
directors if the office is not discontinued.
*Section 4. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and shall have
general and active management of the business of the corporation and shall see
that all orders and resolutions of the board of directors are carried into
effect. He shall execute on behalf of the corporation and may affix or cause the
seal to be affixed to all instruments requiring such execution except to the
extent the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation or as
provided herein.
Section 5. The vice presidents shall act under the direction of the
president and in the absence or disability of the president, in the order of
seniority spe-
- ----------
* Amended by board of directors 6/3/82 to read: "Unless the board of
directors shall elect a chairman as chief executive officer, the president
shall be the chief executive officer of the corporation...."
<PAGE>
13.
cified by the board, they shall perform the duties and exercise the powers of
the president. They shall perform such other duties and have such other powers
as the president or the board of directors may from time to time prescribe.
Section 6. The secretary shall act under the direction of the president.
Subject to the direction of the president he shall attend all meetings of the
board of directors and all meetings of the stockholders and record the
proceedings. He shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the president or the board of
directors. He shall keep in safe custody the seal of the corporation and cause
it to be affixed to any instrument requiring it.
Section 7. The treasurer shall act under the direction of the president.
Subject to the direction of the president he shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging
<PAGE>
14.
to the corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the corporation in such depositories as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the president or the board of directors, taking
proper vouchers for such disbursements, and shall render to the president and
the board of directors, at its regular meetings, or when the board of directors
so requires, an account of all his transactions as treasurer and of the
financial condition of the corporation. He may affix or cause to be affixed the
seal of the corporation to any instrument requiring it.
Section 8. On behalf of the corporation any officer may execute and affix
the corporate seal to documents necessary in the management of the affairs of
the corporation. Where two signatures are required, any two officers may execute
such documents.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or a
<PAGE>
15.
vice president and the treasurer or the secretary of the corporation, certifying
the number of shares owned by him in the corporation.
Section 2. The board of directors may direct a new certificate of stock to
be issued in place of any certificate theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the board of directors may, in its discretion as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 3. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it
<PAGE>
16.
shall be the duty of the corporation, if it is satisfied that all provisions of
the certificate of the incorporation and these by-laws regarding transfer of
shares and restrictions on such transfers have been complied with, to issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 4. The corporation shall be entitled to recognize the person
registered on its books as the owner of shares to be the exclusive owner for all
purposes including voting and dividends, and the corporation shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
MISCELLANEOUS
Section 1. Dividends upon the shares of the capital stock of the
corporation may be declared and paid by the board of directors from the funds
legally available. Dividends may be paid in cash, in property,
<PAGE>
17.
or in shares of the capital stock of the corporation.
Section 2. Before the payment of any dividends there may be set aside, out
of any funds of the corporation available for dividends, such sum or sums as the
board of directors from time to time in its absolute discretion may think
proper, as a reserve or reserves to meet contingencies or for any other purpose
the directors shall think conducive to the interest of the corporation. The
board of directors may modify or abolish any such reserve.
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
Section 4. The fiscal year of the corporation shall be the calendar year
unless changed by the board of directors.
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a
<PAGE>
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE VIII
INDEMNIFICATION
Every person who was or is a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
and pursuant to any procedure specified in the General Corporation Law of the
State of Delaware from time to time against all expenses, liability and loss
(including attorneys' fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by him in connection therewith. Such
right of indemnification
<PAGE>
19.
shall not be exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any by-law, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
The board of directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The board of directors may from time to time adopt further by-laws with
respect to indemnification and may amend these and such by-laws to provide at
all times the fullest indemnification permitted by the General Corporation Law
of the State of Delaware.
<PAGE>
20.
ARTICLE IX
AMENDMENTS
Section 1. The by-laws may be amended by a majority vote of all the stock
issued and outstanding and entitled to vote at any annual or special meeting of
the stockholders, provided notice of intention to amend shall have been
contained in the notice of the meeting.
Section 2. The board of directors by a majority vote of the whole board at
any meeting may amend these by-laws, including by-laws adopted by the
stockholders, but the stockholders may from time to time specify particular
provisions of the by-laws which shall not be amended by the board of
directors.
AUTOMATIC INDEMNITY REINSURANCE AGREEMENT
Between
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INC.
of Delaware
hereinafter referred to as the "COMPANY" and
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
of New York
hereinafter referred to as the "REINSURER"
giacagre.93a page #1
<PAGE>
A. GENERAL PROVISIONS
1. The COMPANY agrees to cede, and the REINSURER agrees to assume, the
business defined in EXHIBIT A.
2. This AGREEMENT is effective JANUARY 1, 1993, and shall remain in force as
long as any of the annuity contracts specified above remain in force,
unless recaptured by the Company. Either party may cancel for new business
upon 30 days advanced written notice.
3. On each contract ceded to the REINSURER, the liability of the REINSURER
shall commence simultaneously with that of the COMPANY, and the COMPANY
shall have the right to maintain the reinsurance in force as long as the
COMPANY remains liable under any contract reinsured.
4. The reinsurance hereunder shall be on the modified coinsurance (or calendar
year renewable term) basis. The terms "Reserves" and "Mod Co Reserves" are
defined in Exhibit F. The mod co reserves shall be maintained by the
Company.
5. The reinsurance shall be subject to the same terms and conditions as the
contracts issued by the COMPANY.
6. If the COMPANY'S liability under any of the contracts reinsured under this
Agreement is changed because of a misstatement of age or sex, the REINSURER
will share in the change proportionately to the amount reinsured hereunder.
7. If a contract that had been reduced, terminated, or lapsed is reinstated by
the COMPANY, the appropriate amount of reinsurance for such contract
hereunder will be reinstated automatically. The COMPANY will pay the
REINSURER the proportionate share of all amounts received by the COMPANY in
connection with such reinstatement.
8. The COMPANY must provide written notification to the REINSURER of any
change in the terms or conditions of any contract reinsured hereunder or in
the calculation of the Reserves within fifteen (15) days after the change
is initiated. If the REINSURER accepts any such change, the COMPANY and the
REINSURER shall share proportionately in any increase or decrease in the
COMPANY's liability which results from such change. If the change is
voluntary on the part of the COMPANY and if the REINSURER does not accept
such change, or does not respond to the COMPANY, the REINSURER's liability
under this Agreement shall be determined as if no such change occurred. If
the change is not voluntary on the part of the COMPANY, the REINSURER shall
participate in such change.
9. It is expressly understood by the parties that the policies reinsured
hereunder are nonparticipating. The expense allowances include provision
for premium taxes, which
giacagre.93a page #2
<PAGE>
shall not be separately reimbursed by the REINSURER.
10. Reinsurance transactions shall be accounted for in accordance with the
procedure set forth in Exhibit G.
11. Recapture shall be available under the terms set forth in Exhibit E.
12. Should the COMPANY fail to cede reinsurance that should have been ceded in
accordance with the provisions of this Agreement, or fail to comply with
any of the other terms of this Agreement, and if this is shown to be
unintentional and the result of a misunderstanding, oversight or clerical
error on the part of either the COMPANY or the REINSURER, then this
Agreement shall not be deemed abrogated thereby, but both companies shall
be restored to the position they would have occupied had no such oversight,
misunderstanding, or clerical error occurred.
13. At any reasonable time, each party or its designated representative may
inspect, during normal business hours, at the offices where such records
are located, the papers and any and all other books or documents of the
other relating to reinsurance under this Agreement. The information
obtained shall be used only for reinsurance purposes and shall be kept
confidential except to the extent disclosure is required by law. The
REINSURER'S rights under this paragraph shall survive termination of this
Agreement.
14. This Agreement shall constitute the entire agreement between the parties
with respect to the business reinsured hereunder. There are no
understandings between the parties other than as expressed in this
Agreement and any change or modification of this Agreement shall be null
and void unless made by amendment to the Agreement and signed by both
parties.
15. This is an Agreement solely between the COMPANY and the REINSURER. The
acceptance of reinsurance hereunder shall not create any right or legal
relation whatever between the REINSURER and the insured or the beneficiary
under any policies of the COMPANY which may be reinsured hereunder.
16. The REINSURER does not indemnify and shall not be liable for any of the
COMPANY'S extracontractual damages, including but not limited to actual
punitive, exemplary or compensatory damages; excluded damages include but
are not limited to damages or liability of any kind whatsoever resulting
from, but not limited to: negligent, reckless or intentional wrongs, fraud,
oppression, bad faith, or strict liability, arising from claims related to
breach of contract or any form of tortious conduct. If the COMPANY is
ordered by a court to make refunds to policyholders on any contract, the
contract shall be considered a recaptured contract, and subject to the
provisions of Exhibit E.
17. Should the payment due either the REINSURER or the COMPANY be delayed
beyond
giacagre.93a page #3
<PAGE>
30 days delayed payment shall accrue interest as specified in the
computation of the Experience Account Asset.
B. PREMIUMS and BENEFITS
1. Insuring Clause. The obligation of either party to the other is to pay the
"Net Amount Due," which is the algebraic excess of the "Reinsurance
Premium" over the "Reinsurance Benefits" as defined herein. The COMPANY
shall pay the REINSURER the "Net Amount Due" if such is positive, and the
REINSURER shall pay the ceding company the "Net Amount Due" if such is
negative.
2. The "Reinsurance Premium" is the net of (a)-(b)-(c)-(d)-(e):
(a) Policy Premiums are the reinsured portions of the premiums paid by the
policyholders, unreduced for any premium taxes.
(b) Allowances are as defined in Exhibit C.
(c) The Mod Co Reserve Adjustment for each accounting period equals V1 - VO - I
where
VO = Reserve at the beginning of the Accounting Period,
V1 = Reserve at the end of the Accounting Period,
I = Interest added to the reserve for all variable annuity contracts, plus
all mortality and expense charges, during the Accounting Period. For any
fixed annuities I shall be computed as the fixed annuity reserve at the
beginning of the period times the rate as specified in EXHIBIT B.
For the first accounting period, VO shall be zero. The "Reserves" shall
equal the full account value, unreduced for any surrender charges.
(d) Surrender Payments shall equal the reinsured portions of the surrender
value paid to policyholders.
(e) Experience Refunds are defined in Exhibit D.
3. The "Reinsurance Benefits" shall equal the reinsured portion of the annuity
income benefits (including commuted value benefits), and death benefits on
the reinsured portions of the contracts, corresponding to the benefits paid
by the Company.
In the event that annuitization is made at rates more favorable to the
annuitant than those guaranteed in the contract reinsured, such
annuitization may be considered by the
giacagre.93a page #4
<PAGE>
REINSURER to be a surrender, in which case the REINSURER shall pay the full
withdrawal value without reduction for any surrender charge.
4. The "Accounting Period" shall be the calendar quarter, with the first
accounting period running from the effective date to the end of the
calendar quarter, and the last accounting period running from the beginning
of a calendar quarter to the termination date.
5. It is expressly understood that the "Reinsurance Premium" is an indivisible
amount and not to be divided into component parts.
C. INSOLVENCY
1. In the event of the insolvency of the COMPANY, all reinsurance made, ceded,
renewed or otherwise becoming effective under this Agreement shall be
payable by the REINSURER directly to the COMPANY or to its liquidator,
receiver, or statutory successor on the basis of the liability of the
COMPANY under the contract or contracts reinsured without diminution
because of the insolvency of the COMPANY. It is understood, however, that
in the event of the insolvency of the COMPANY the liquidator or receiver or
statutory successor of the insolvent COMPANY shall give written notice of
the pendency of a claim against the insolvent COMPANY on the policy
reinsured within a reasonable time after such claim is filed in the
insolvency proceeding and that during the pendency of such claim the
REINSURER may investigate such claim and interpose, at its own expense, in
the proceeding where such claim is to be adjudicated any defense or
defenses which it may deem available to the COMPANY or its liquidator or
receiver or statutory successor.
It is further understood that the expense thus incurred by the REINSURER
shall be chargeable, subject to court approval, against the insolvent
COMPANY as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the COMPANY solely
as a result of the defense undertaken by the REINSURER. Where two or more
assuming insurers are involved in the same claim and a majority in interest
elect to interpose defense to such claim, the expense shall be apportioned
in accordance with the terms of the Reinsurance Agreement as though such
expense had been incurred by the COMPANY.
2. "Insolvent" means the insurer is subject to a rehabilitation or liquidation
proceeding in any state in which it is licensed.
3. If the COMPANY shall become insolvent and this contract is assigned by a
rehabilitator or liquidator of the insolvent company, and if the assignee
shall become insolvent, then this agreement may, at the REINSURER'S option
be considered ipso facto terminated without any further payment due the
COMPANY.
giacagre.93a page #5
<PAGE>
D. ARBITRATION and CHOICE of LAW
1. In the event of any dispute relating to or arising under this Agreement,
the dispute shall be referred to three arbitrators who must be current or
former officers of insurance or reinsurance companies (either life/health
or property and casualty) other than the two parties to this Agreement or
their affiliates. Each of the contracting companies to appoint one of the
arbitrators and such two arbitrators to select the third. Should the two
arbitrators not be able to agree on the choice of the third, then the
appointment shall be left to the American Arbitration Association.
The arbitrators so chosen shall consider this Reinsurance Agreement not
merely as a legal document but also as a gentlemen's agreement. The
arbitrators shall consider the customary and standard practices of the
reinsurance business. They shall not be bound by any rules of law. They
shall decide by a majority of votes and from their written decision there
shall be no appeal. The cost of arbitration, including the fees of the
arbitrators, shall be borne equally by the REINSURER and the COMPANY. This
article shall survive the termination of this Agreement.
2. In all arbitrations and legal disputes (whether decided by arbitration or
otherwise) the choice of law shall be New York.
3. The arbitration or legal proceeding shall be held in New York.
E. OFFSET, RECOUPMENT, EXECUTORY CONTRACT
1. All amounts due either party shall be netted, dollar for dollar, regardless
of the solvency of either party.
2. If one party gives notice to the other that it does not intend to pay the
Net Amount Due as defined in this agreement, or if after 45 days written
notice refuses to pay the Net Amount Due, then the other party is entitled
to breach damages and may cancel for non payment, and if it chooses, not to
pay any further amounts.
3. Nothing in this agreement shall be construed to eliminate the defense of
equitable recoupment.
4. It is expressly understood that as long as payments are due both parties
that this contract is an Executory Contract. Upon the insolvency of either
party, the rehabilitator or liquidator of the insolvent party may affirm or
disavow the contract within 90 days of the date the insolvency petition is
filed with the appropriate court (hereinafter the "petition date"), unless
the court having jurisdiction expressly extends such time limit. If
affirmed it is expressly understood, by the parties, that the payments
under this contract shall be entitled to the administrative expense
priority, and if disavowed it is expressly understood
giacagre.93a page #6
<PAGE>
that the other party shall be entitled to breach damages and be freed from
future performance. It is expressly understood that payments within a gap
period, between the "petition date" and the date the contract is expressly
affirmed or disavowed shall be entitled to an administrative expense
priority.
F. TAX ELECTIONS
The Company and the Reinsurer agree to make the election to ignore the
General Deductions Limitation in Computing the net consideration between
the parties.
The Company agrees to reimburse the Reinsurer for the Internal Revenue
Code, Section 848 Capitalized Policy Acquisition Expenses if the Section
848 premium is positive (i.e. paid to the Reinsurer) and the Reinsurer
agrees to reimburse the Company if the Section 848 premium is negative. The
reimbursement will equal 10% of the capitalized amount. The 10% is based on
34% corporate rate, 1.75% capitalization rate, 10 year amortization with a
half-year convention and will be adjusted if such factors change.
The Company and the Reinsurer hereby agree to the following pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulation issued December 1992,
under Section 848 of the Internal Revenue Code of 1986, as amended. This
election shall be effective for 1992 and for all subsequent taxable years
for which this Agreement remains in effect.
The term "party" will refer to either the Company or the Reinsurer as
appropriate.
The terms used in this Article are defined by reference to Regulation
1.848-2 in effect December 1992.
The party with the net positive consideration for this Agreement for each
taxable year will capitalize specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions
limitation of Section 848(c)(1).
Both parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency or as
otherwise required by the Internal Revenue Service.
The Reinsurer will submit a schedule to the Company by June 1, of each year
of its calculation of the net consideration for the preceding calendar
year. This schedule of calculations will be accompanied by a statement
stating that the Reinsurer will report such net consideration in its tax
return for the preceding calendar year.
The Company may contest such calculation by providing an alternative
calculation to the Reinsurer by July 15th of the year following the end of
the taxable year. If the Company does not notify the Reinsurer by July
15th, the net considerations reported in the
giacagre.93a page #7
<PAGE>
respective tax returns will be the value as submitted to by the Reinsurer
in the previous paragraph.
If the Company contests the Reinsurer's calculation of the net
consideration, the parties will act in good faith to reach an agreement on
the correct amount within thirty (30) days of the date the Company submits
its alternative calculation. If the Company and the Reinsurer reach
agreement on an amount of the net consideration, each party shall report
such amount in their respective tax returns for the previous calendar year.
giacagre.93a page #8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
by their duly authorized representatives.
In New York, New York, this 30 day of Sept, 1993.
ATTEST THE GUARDIAN INSURANCE AND ANNUITY
COMPANY, INC.
/s/ Frank L. Pepe /s/ Charles G. Fisher
- --------------------------- -------------------------------
Frank L. Pepe Charles G. Fisher
- --------------------------- -------------------------------
Print name Print name and title
And in New York, New York, this 30 day of Sept, 1993.
ATTEST: THE GUARDIAN LIFE INSURANCE COMPANY
OF AMERICA
/s/ Annette Pacheco /s/ Peter Hutchings
- --------------------------- -------------------------------
Annette Pacheco Peter Hutchings
- --------------------------- -------------------------------
Print name Print name and title
giacagre.93a page #9
<PAGE>
EXHIBIT A - BUSINESS REINSURED
The business reinsured hereunder shall be a FIFTY PERCENT quota share of the
risk on the variable annuity contracts issued by the COMPANY comprising Guardian
Investor variable annuity contracts issued after January 1, 1993. The reinsured
business will include the reserves on the "fixed" option.
EXHIBIT B - MOD CO INTEREST and INTEREST RATES.
1. The Interest added to the variable contract reserves is the aggregate
interest, derived from all of the Net Investment Factors applicable to such
class of contracts during such settlement period.
2. The mortality and expense charge shall be equal to the mortality and
expense charges issued by the company. For 1993 issues the charge will be
estimated as 28.75 basis points per quarter times the "accumulation value"
at the beginning of the quarter.
3. On fixed account annuities the mod co interest shall equal the "Exhibit 2
plus 4 rate" times the sum of the mod co reserve at the beginning of the
quarter plus one half the algebraic excess of the reinsurance premium over
reinsurance benefits during the quarter.
4. The "Exhibit 2 + 4 rate" equals I/{.5 * (A + B - I)}
Where
I = Net investment income plus realized capital gains less losses
B = Current year invested assets
A = Prior year invested assets
Note: 1992 Annual statement references.
I is computed as follows:
Gross Investment Income (Exhibit 2, line 10, column 7)
Less Investment Expenses (Exhibit 2, line 15, column 7)
Less Gain on Seed Investment Redeemed (Exhibit 4, line 9.201)
Less Dividends on Common Stocks of Affiliates (Exhibit 2, line 2.21,
column 7)
Less Interest on Policy loans on life insurance policies (Exhibit 2,
line 5, column 7, in part)
Plus Net realized capital gains (Page 4, line 4a, column 1 plus Page
4, line 32, column 1)
giacagre.93a page #10
<PAGE>
B =
Cash and invested assets (Page 2, line 10a, column 1)
Plus investment income due and accrued (Page 2, line 16, column 1)
Less policy loans (Page 2, line 5, column 1)
Less policy loans due and accrued on life products (Exhibit 2, line 5,
columns 3 & 4, in part)
Plus amount due from broker (Page 2, line 2103, column 1)
Less borrowed money (Page 3, line 22, column 1)
Less amounts due brokers (Page 3, line 2501, column 1)
A is computed like B, but for the previous year.
The rate for the current calendar year will be based on the most recently filed
annual statement, and will be trued up (without interest) when the current year
statement is filed.
EXHIBIT C - ALLOWANCES and EXPERIENCE ACCOUNT
1. The REINSURER shall pay the COMPANY the following allowances:
Single premiums 5.25%
Initial flexible premiums 5.25%
Additional flexible premiums 5.25%
In addition, the Reinsurer shall pay the COMPANY a renewal allowance of
$5.00 per quarter per policy, and aggregating all policies issued to the
same insured in the same year.
2. The experience account asset (EA) at the inception of this treaty, before
any amounts have been paid by either party shall be zero. Thereafter the EA
at the end of any period shall be equal to the quantity (EA'), defined
below, less any experience refund. The quantity (EM) equals:
(a)+(b)-(c)-(d)+(e), where
(a) EA at the beginning of the period
(b) Cash Flow during the period, where the Cash flow is the algebraic
excess of Reinsurance Premiums over Reinsurance Benefits
(c) DAC charge (positive if 848 premiums are paid to the REINSURER)
(d) Interest on the EA, at the Exhibit 2 plus 4 rate, (except that
negative interest rates will be ignored for purposes of computing
the EA).
(Assuming the Reinsurance Premium less Reinsurance Benefits is negative,
the EA will be negative, and the interest on the EA will be negative.)
The DAC charge shall be equal to 10% of the capitalized amount as defined
in Section
giacagre.93a page #11
<PAGE>
848 of the Internal Revenue Code. The 10% shall be based on 10-year
amortization with the half year convention, with 1.75% capitalization rate,
and with a 35% corporate income tax rate, and shall be changed is such
factors change.
The interest on the EA shall be the "Exhibit 2 plus 4 rate" as defined in
Exhibit B
EXHIBIT D - EXPERIENCE REFUNDS
1. The experience refund is calculated on an yearly basis, but estimates may
be paid at the REINSURER'S discretion on a quarterly basis. The experience
is one-half of the quantity (EA'), defined in Exhibit C, if (EA') is
positive as of the end of each settlement period. The experience refund
equals zero if (EA') is negative.
2. On recapture a "terminal experience refund" will be paid, equal to 100% of
the EA (before allowance for experience refund) if such is positive.
EXHIBIT E - RECAPTURE
1. Two (2) years after the effective date The COMPANY may recapture the
reinsurance ceded hereunder as of the end of any settlement period upon
thirty days notice provided the "terminal experience refund" calculation
produces a non-negative value of ER defined in Exhibit C subject to the
conditions specified in this Exhibit D.
2. In the final modified coinsurance reserve adjustment, the ending reserve
"V1" is zero.
3. The REINSURER shall pay the COMPANY the full withdrawal values without
surrender charges on the contracts being recaptured. The amount thereof
shall be included with contract benefits in the final experience refund
calculation.
EXHIBIT F - DEFINITIONS
1. The term "Mod Co Reserve" shall mean the policy accumulation value,
unreduced by any surrender charge.
2. The term "Reserve" shall mean the statutory reserves computed using the
methodology the COMPANY used on its 12/31/92 annual statement for similar
policies. It is expressly understood by the parties that "Reserves" are
policy accumulation values, unreduced by any surrender charges.
giacagre.93a page #12
<PAGE>
Exhibit G - REINSURANCE REPORTS
The COMPANY shall supply the REINSURER with quarterly reports as described
below:
A. Quarterly Report
1. "Reinsurance Premium"
a. Policy Premium
b. Expense Allowance
c. Mod Co Reserve Adjustment
(A) Reserves at beg. of period
(B) Reserves at end of period
(C) Interest added to reserves
(D) Mod Co interest = (C) + .002875(A)
NET = (B)-(A)-(D)
d. Surrender Payments
e. Experience Refunds
2. "Reinsurance Benefits"
a. Death Benefits
b. Annuitization Benefits
3. "Net Amount Due" (Due Reinsurer if positive) = (1)-(2)
4. Experience Account
a. Experience Account beginning of period
b. Interest on experience account as defined in
c. Cash Flow (Reinsurance Premium less Reinsurance Benefits)
d. Risk Charges
e. DAC charges
e. Experience Account end of period
5. Due and Unpaid Amounts
a. Policy Premiums
b. Surrender Payments
c. Annuity Benefits
giacagre.93a page #13
<PAGE>
6. General Information - Inforce
a. Policies Inforce beginning of period
b. Termination by death
c. Termination by lapse
d. Policies Inforce end of period
7. General Information - Reserve
a. Reserve beginning of period
b. Reserve end of period
c. Reserve released on termination
d. Net investment addition to beginning reserve
B. Annual Report
1. Analysis of Increase in Reserve for the policies ceded (Page 7 of the
1992 Annual Statement).
2. Exhibit of Numbers for the policies ceded (Page 25 of the 1992 Annual
Statement)
C. Annual Tax Data.
1. Section 848 Premiums, including a split of the section 848 premiums
into "pension" and "non pension" portions.
2. Tax reserves on any coinsured business.
giacagre.93a page #14
<PAGE>
EXHIBIT H - Reinsurance Questionnaire For Federal Income Tax
Determinations
The purpose of this questionnaire is to secure sufficient information to allow
Guardian Life Insurance Company of America to account properly under the federal
income tax rules for the reinsurance agreement we have with you.
Answer the following questions:
(1). Are you either
(a) A company that is subject to U.S. taxation directly under the
provisions of subchapter L of chapter 1 of the Internal Revenue Code
(i.e., is an insurance company liable for filing Form 1120L or
Form-PC), or
(b) A company that is subject indirectly to U.S. taxation under the
provisions of subpart F of subchapter N of chapter 1 of the Internal
Revenue Code (i.e., is a "controlled foreign corporation" within the
meaning of Internal Revenue Code ss.957)?
Answer: ___ Yes ___ No
(2) If your answer to 1 is no, have you entered into a closing agreement with
the Internal Revenue Service to be subject to U.S. taxation with respect to
reinsurance income pursuant to Treasury Regulation ss.1.848-2(h)(ii)(B)?
Answer: ___ Yes ___ No
(If your answer is yes, please provide a copy of the closing agreement.)
Company Name: The Guardian Insurance and Annuity Company, Incorporated
Signed by: ________________________ Title:________________________
Print Name: ____________________________
Date: ______________________
giacagre.93a page #15
<PAGE>
19___ NET CONSIDERATIONS
COMPANY NAME _________________________________________________________
19___ CONSIDERATIONS UNDER CONTRACTS DATED PRIOR TO 11-15-91:
$_______________________________
19___ CONSIDERATIONS UNDER CONTRACTS DATED 11-15-91 AND AFTER:
$_______________________________
AGREE _____________
DISAGREE _____________
If you disagree with the above figures, please attach supporting data with your
calculations.
VERIFIED BY:____________________________________________________________________
DATED:__________________________________________________________________________
Please return this form by July 15th to:
Ms. Cheryl Crawford Jackson, Director
Federal Income Tax Department
The Guardian Life Insurance Company of America
201 Park Avenue South
New York, New York 10003
giacagre.93a page #16
<PAGE>
AMENDMENT I
to the Automatic Indemnity Reinsurance Agreement between
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
of
Delaware,
hereinafter referred to as the "COMPANY"
and
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
of New York
hereinafter referred to as the "REINSURER
1. This amendment is effective January 1, 1994.
2. The COMPANY agrees to cede, and the REINSURER agrees to assume, a twenty
percent quota share of the risk on Guardian Investor variable annuity
contracts issued on or after January 1, 1994 by the COMPANY.
It is expressly understood and agreed that the provisions of this amendment
shall be subject to all the terms and conditions of the reinsurance agreement of
which this amendment is a part which do not conflict with the terms hereof.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this amendment to be executed
in duplicate on the dates shown below.
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
By /s/ Charles G. Fisher By /s/ Frank L. Pepe
----------------------------- ------------------------------
Date December 30, 1994 Date December 30, 1994
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By /s/ Peter Hutchings By /s/ [ILLEGIBLE]
----------------------------- ------------------------------
Date Dec 30, 1994 Date Dec. 30, 1994
<PAGE>
AMENDMENT II
to the Automatic Indemnity Reinsurance Agreement between
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
of
Delaware,
hereinafter referred to as the "COMPANY"
and
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
of New York
hereinafter referred to as the "REINSURER"
1. This amendment is effective January 1, 1995.
2. The agreement is closed for new business as of January 1, 1995.
It is expressly understood and agreed that the provisions of this amendment
shall be subject to all the terms and conditions of the reinsurance agreement of
which this amendment is a part which do not conflict with the terms hereof.
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this amendment to be executed
in duplicate on the dates shown below.
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
By /s/ Charles G. Fisher By /s/ Frank L. Pepe
----------------------------- ------------------------------
Date February 8, 1995 Date February 8, 1995
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
By /s/ Peter Hutchings By /s/ [ILLEGIBLE]
----------------------------- ------------------------------
Date 2-8-95 Date 2-10-95
<PAGE>
AMENDMENT NO. III
To The Automatic Indemnity Reinsurance Agreement
Between
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED
of
Delaware
(hereinafter referred to as the "Company")
and
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
New York, New York
(hereinafter referred to as the "Reinsurer")
1. This Amendment is effective March 30, 1995
2. As of the effective date of this Amendment, the Company shall recapture the
Guardian Investor 1994 issues.
3. There shall be a terminal accounting for recaptured business. Such
calculation shall be conclusive for all purposes without exception and
neither party shall owe any further obligations to the other party (with
respect to the recaptured business only) subsequent to the Termination
Date.
<PAGE>
IN WITNESS WHEREOF, the Company and the Reinsurer have caused their names to be
subscribed and duly attested hereunder by their respective Authorized Officers.
THE GUARDIAN INSURANCE AND ANNUITY COMPANY, INCORPORATED (the Company)
By: /s/ Charles G. Fisher
-------------------------------
Title: V.P. & Actuary
Date: March 30, 1995
ATTEST:
By: /s/ Frank L. Pepe
-------------------------------
Title: V.P. & Controller
Date: March 30, 1995
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA (the Reinsurer)
By: /s/ Peter Hutchings
-------------------------------
Title: EVP & CFO
Date: 3-30-95
ATTEST:
By: /s/ [ILLEGIBLE]
-------------------------------
Title: AVP
Date: 3-30-95
AMENDED AND RESTATED
AGREEMENT FOR SERVICES AND REIMBURSEMENT THEREFOR
This Agreement, dated the 18th of November, 1994, amends and restates the
Agreement for Services and Reimbursement Therefor, dated June 22, 1970, between
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a New York Corporation having
its principal place of business at 201 Park Avenue South, New York, New York
10003 (hereinafter called "GUARDIAN") and THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC., a Delaware Corporation having its principal place of business at
201 Park Avenue South, New York, New York 10003 (hereinafter called the
"SUBSIDIARY").
WHEREAS, THE SUBSIDIARY is an insurance company wholly owned by GUARDIAN,
and
WHEREAS, THE SUBSIDIARY was organized for the purpose among others of
distributing variable insurance and annuity products which are subject to the
regulation of the Securities and Exchange Commission and whose benefits are
dependent upon the performance of a portfolio of common stocks and other
investments, and
WHEREAS, the net profit or net loss of THE SUBSIDIARY will ultimately
belong to GUARDIAN as the sole owner of the stock;
NOW, THEREFORE, in consideration of the mutual advantages which will accrue
to each of the parties, it is hereby convenanted and agreed as follows;
1. THE SUBSIDIARY will develop and qualify its various products for sale to
the public through those members of the Guardian Field Force and others as may
became eligible to do so.
2. THE SUBSIDIARY will account for and administer its own activities as an
Insurance Company in accordance with the laws of the several states and the
federal laws and regulations of the Securities and Exchange Commission where
applicable.
3. THE SUBSIDIARY undertakes to follow standards set by GUARDIAN in its
operations.
4. As consideration for this Agreement and in connection with carrying out
the provisions hereof, GUARDIAN agrees to provide office space, furniture,
equipment, heat and light and clerical staff. It is further agreed that GUARDIAN
will pay salaries and provide pension benefits and other employee services
including health care
<PAGE>
benefits on the same basis for THE SUDSIDIARY'S officers and staff as for
regular full-time GUARDIAN employees. In the case of those individuals not fully
occupied in work for THE SUBSIDIARY, the proportion of salaries and other costs
attributable to the individual which should be charged to THE SUBSIDIARY will be
determined by time analysis methods. The total of such costs incurred and paid
by GUARDIAN on behalf of THE SUBSIDIARY will be repaid by THE SUBSIDIARY to
GUARDIAN at quarterly intervals upon demand accompanied by a detailed statement
substantiating the amount claimed. Such costs will be allocated by GUARDIAN to
THE SUBSIDIARY using GUARDIAN's cost accounting system. Costs will be allocated
to THE SUBSIDIARY based upon services provided by various Departments of
GUARDIAN as determined by either the Department's supervising officer or manager
or through an allocation developed by GUARDIAN's Cost Accounting Department
utilizing asset information, head count or overhead information.
THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
/s/ Frank L. Pepe By /s/ John M. Smith
- ---------------------------- --------------------------------------
Witness
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
/s/ Frank L. Pepe By /s/ Peter L. Hutchings
- ---------------------------- --------------------------------------
Witness
[LETTERHEAD OF THE GUARDIAN]
April 29, 1992 Richard T. Potter, Jr.
Counsel
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003
Sir or Madam:
In my capacity as Counsel of The Guardian Insurance & Annuity Company, Inc.
("GIAC"), I am familiar with the legal affairs of GIAC and of The Guardian
Separate Account D (the "Account"), which is a separate account established by
the Board of Directors of GIAC on August 23, 1989, pursuant to the provisions of
Section 2932 of the Delaware Insurance Code. I have participated in the
preparation and review of the Registration Statement and Post-Effective
Amendment No. 3 to the Registration Statement (the "Registration Statement") on
Form N-4 filed by GIAC, on behalf of the Account, with the Securities and
Exchange Commission under the Securities Act of 1933 and the Investment Company
Act of 1940 for the registration of individual deferred variable annuity
contracts issued by GIAC (the "Contracts").
I have made such examination of law and examined such documents as in my
judgment are necessary and appropriate to enable me to express the following
opinion. I am of the opinion that:
(1) GIAC has been duly organized and is a validly existing corporation
under the laws of the State of Delaware.
(2) The Account has been duly created and is validly existing as a
separate account of GIAC under the laws of the State of Delaware.
(3) The portion of the assets that is held in the Account equal to the
reserves and other liabilities for variable benefits under the
Contracts is not chargeable with liabilities arising out of any other
business GIAC may conduct.
(4) The Contracts, when offered, sold and issued in accordance with the
Prospectus contained in the aforesaid Registration Statement and, upon
compliance with applicable local law, will be legally issued and will
represent binding obligations of GIAC in accordance with their terms.
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
April 29, 1992
Page 2
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Richard T. Potter, Jr.
Richard T. Potter, Jr.
Counsel
RTP/md
EX-99.10(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 8 to the registration statement on Form N-4 (the "Registration
Statement") of our report dated February 13, 1998, relating to the financial
statements appearing in the December 31, 1997 Annual Report to Contractowners of
The Guardian Separate Account D, which is also incorporated by reference into
the Registration Statement. We also consent to use in the Statement of
Additional Information of our report dated February 10, 1998, relating to the
statutory basis financial statements of The Guardian Insurance & Annuity
Company, Inc. which appears in such Statement of Additional Information, and the
incorporation by reference of our report into the Prospectus. We also consent to
the references to us under the heading "Condensed Financial Information" in the
Prospectus and under the heading "Experts" in the Statement of Additional
Information. However, it should be noted the Price Waterhouse LLP has not
prepared or certified such "Condensed Financial Information."
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
New York, New York
April 28, 1998
Exhibit 99.13
Powers of Attorney
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Joseph D. Sargent, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Joseph D. Sargent
----------------------------
Joseph D. Sargent
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Arthur V. Ferrara, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Arthur V. Ferrara
----------------------------
Arthur V. Ferrara
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Frank J. Jones, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Frank J. Jones
----------------------------
Frank J. Jones
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Edward K. Kane, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Edward K. Kane
----------------------------
Edward K. Kane
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John M. Smith, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ John M. Smith
----------------------------
John M. Smith
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Philip H. Dutter, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Philip H. Dutter
----------------------------
Philip H. Dutter
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Leo R. Futia, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Leo R. Futia
----------------------------
Leo R. Futia
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Peter L. Hutchings, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ Peter L. Hutchings
----------------------------
Peter L. Hutchings
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that William C. Warren, whose
signature appears below, constitutes and appoints John M. Smith, Thomas R.
Hickey, Jr., Richard T. Potter, Jr. and Vickie Riccardo and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for any and all separate accounts established by The Guardian
Insurance & Annuity Company, Inc. which are currently in existance or which may
be established in the future and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitutes, may do or cause to be done by
virtue hereof.
Dated July 29, 1994
/s/ William C. Warren
----------------------------
William C. Warren
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1997 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000856943
<NAME> Separate Account D - Guardian Investor
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,505,003,336
<INVESTMENTS-AT-VALUE> 4,215,012,069
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,215,012,069
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,244,799
<TOTAL-LIABILITIES> 23,244,799
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 24,403,220
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 483,022,451
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 710,008,733
<NET-ASSETS> 4,191,767,270
<DIVIDEND-INCOME> 69,468,255
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 45,065,035
<NET-INVESTMENT-INCOME> 24,403,220
<REALIZED-GAINS-CURRENT> 483,022,451
<APPREC-INCREASE-CURRENT> 234,897,939
<NET-CHANGE-FROM-OPS> 742,323,610
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 45,065,035
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 45,065,035
<AVERAGE-NET-ASSETS> 3,693,257,067
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 717,920,390
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
