The
Guardian(R)
Prospectus for:
Gabelli
Capital
Asset
Fund
May 1, 1999
This Prospectus contains important information about the Fund. Please read it
before investing and keep it for future reference.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A
CRIMINAL OFFENSE TO STATE OTHERWISE.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
TABLE OF CONTENTS
Page
INVESTMENT AND PERFORMANCE SUMMARY.............................................................................1
INVESTMENT AND RISK INFORMATION................................................................................3
MANAGEMENT OF THE FUND.........................................................................................5
PURCHASE AND REDEMPTION OF SHARES..............................................................................6
PRICING OF FUND SHARES.........................................................................................7
DIVIDENDS, DISTRIBUTIONS AND TAXES.............................................................................7
SPECIAL INFORMATION ABOUT THE FUND.............................................................................8
FINANCIAL HIGHLIGHTS...........................................................................................9
</TABLE>
<PAGE>
2
2
INVESTMENT AND PERFORMANCE SUMMARY
Investment Objectives:
The Fund's primary goal is to seek growth of capital. Capital is the
amount of money you invest in the Fund. The Fund's secondary goal is to produce
current income.
Principal Investment Strategies:
The Fund invests primarily in equity securities of companies that are
selling in the public market at a significant discount to their "private market
value." Private market value is the value which the Fund's adviser, Gabelli
Funds, LLC (the "Adviser"), believes informed investors would be willing to pay
for a company. The Adviser considers factors such as price, earnings
expectations, earnings and price histories, balance sheet characteristics and
perceived management skills. The Adviser also considers changes in economic and
political outlooks as well as individual corporate developments. The Fund may
also invest in companies that are involved in corporate reorganizations.
Additionally, the Fund may invest in foreign securities. The Adviser will sell
any Fund investments which lose their perceived value when compared to other
investment alternatives.
Principal Risks:
The Fund's share price will fluctuate with changes in the market value
of the Fund's portfolio securities. Stocks are subject to market, economic and
business risks that cause their prices to fluctuate. Corporate reorganizations
involve the risk that the anticipated transactions may not be completed within
the anticipated time or upon the expected terms, in which case the Fund may
suffer a loss on its investments. Investments in foreign securities involve
risks related to political, social and economic developments abroad, as well as
risks resulting from the differences between the regulations to which U.S. and
foreign issuers and markets are subject. When you sell Fund shares, they may be
worth less than what you paid for them. Consequently, you can lose money by
investing in the Fund. The Fund is also subject to the risk that the portfolio
securities' private market values may never be realized by the market, or their
prices may go down.
Who May Want to Invest:
The Fund is available to the public only through the purchase of
certain variable annuity and variable life insurance contracts issued by The
Guardian Insurance & Annuity Company, Inc.
The Fund may appeal to you if:
you are a long-term investor or saver.
you seek both growth of capital and some income.
you believe that the market will favor value over growth
stocks over the long term. you wish to include a value
strategy as a portion of your overall investments.
<PAGE>
You may not want to invest in the Fund if:
you are seeking a high level of current income.
you are conservative in your investment approach.
you seek to maintain the value of your original investment
more than potential growth of capital.
An investment in the Fund is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Performance:
The bar chart and table shown below provide an indication of the risks
of investing in the Fund by showing changes in the Fund's performance from year
to year (since commencement of operations), and by showing how the Fund's
average annual returns for one year and the life of the Fund compare to those of
the S&P(R) 500 Stock Index. As with all mutual funds, the Fund's past
performance does not predict how the Fund will perform in the future. Both the
chart and the table assume reinvestment of dividends and distributions.
BAR CHART (Graphic Omitted)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Calendar Year Total Returns
1996 11.0%
1997 42.6%
1998 11.67%
Performance information does not reflect separate accounts or variable
insurance contract fees and charges. If such fees and charges were reflected,
the Fund's returns would be less than those shown. During the period shown in
the bar chart, the highest return for a quarter was 18.10% (quarter ended June
30, 1997) and the lowest return for a quarter was (14.90)% (quarter ended
September 30, 1998).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------ ----------------------------- --------------------------------
Average Annual Total Returns Past One Year Since May 1, 1995*
(for the periods ended December 31, 1998)
- ------------------------------------------------------ ----------------------------- --------------------------------
- ------------------------------------------------------ ----------------------------- --------------------------------
The Gabelli Capital Asset Fund 11.67% 19.40%
- ------------------------------------------------------ ----------------------------- --------------------------------
- ------------------------------------------------------ ----------------------------- --------------------------------
S&P(R)500 Stock Index** 28.58% 29.29%
- ------------------------------------------------------ ----------------------------- --------------------------------
* From May 1, 1995, the date that the Fund began operations.
** The S&P(R) 500 Composite Stock Price Index is a widely recognized,
unmanaged index of common stock prices. The performance of the Index
does not include expenses or fees.
</TABLE>
<PAGE>
INVESTMENT AND RISK INFORMATION
The primary investment objective of the Fund is growth of capital, and
current income is a secondary objective. The investment objectives of the Fund
may not be changed without shareholder approval.
The Fund's assets will be invested primarily in a broad range of
readily marketable equity securities consisting of: common stock, preferred
stock and securities which may be converted at a later time into common stock.
Many of the common stocks the Fund will buy will not pay dividends; instead,
stocks will be bought for the potential that their prices will increase,
providing capital appreciation for the Fund. The value of equity securities will
fluctuate due to many factors, including the past and predicted earnings of the
issuer, the quality of the issuer's management, general market conditions, the
forecasts for the issuer's industry and the value of the issuer's assets.
Holders of equity securities only have rights to value in the company after all
debts have been paid, and they could lose their entire investment in a company
that encounters financial difficulty. Warrants are rights to purchase securities
at a specified time at a specified price.
The Fund may also use the following investment techniques:
Defensive Investments. When opportunities for capital growth do not
appear attractive or when adverse market or economic conditions occur,
the Fund may invest temporarily all or a portion of its assets in
defensive investments. These include high grade debt securities,
obligations of the U.S. Government and its agencies and
instrumentalities and short-term money market instruments maturing in
less than one year, including commercial paper rated A-1 or better by
Standard & Poor's Rating Service, a division of McGraw-Hill Companies,
Inc., or P-1 or better by Moody's Investors Service, Inc. When
following a defensive strategy, the Fund will be less likely to achieve
its investment goals.
Corporate Reorganizations. Subject to the diversification requirements
of its investment restrictions, the Fund may invest up to 35% of its
total assets in securities for which a tender or exchange offer has
been made or announced and in the securities of companies for which a
merger, consolidation, liquidation or similar reorganization proposal
has been announced. The Adviser will only invest in such securities if
it is likely that the amount of capital appreciation will be
significantly greater than the added expenses of buying and selling
short-term securities. The 35% limitation does not apply to the
securities of companies which may be involved in simply consummating an
approved or agreed upon merger, acquisition, consolidation, liquidation
or reorganization.
Foreign Securities. The Fund may invest up to 25% of its total assets in
the securities of non-U.S. issuers.
The Fund may also engage to a limited extent in other investment
practices in order to achieve its investment goal.
Investing in the Fund involves the following risks, listed in the order
of importance:
Market Risk. The principal risk of investing in the Fund is market
risk. Market risk is the risk that the prices of the securities held by
the Fund will change due to general market and economic conditions,
perceptions regarding the industries in which the companies issuing the
securities participate and the issuer company's particular
circumstances. These fluctuations may cause a security to be worth less
than it was worth at an earlier time.
Fund and Management Risk. The Fund invests in stocks believed by the
Adviser to be trading at a discount to their private market value
(value stocks). The Fund's price may decline because the market favors
other stocks or small capitalization stocks over stocks of larger
companies. If the Adviser is incorrect in its assessment of the private
market values of the companies it holds, then the value of the Fund's
shares may decline. There is also the risk that the Fund has valued
certain of its securities at a higher price than it can sell them for.
Risks of Focusing on Corporate Reorganizations. The Fund may invest a
portion of its assets in securities of companies that are involved or
may become involved in corporate transactions such as tender offers and
corporate reorganizations. The principal risk of this type of investing
is that the anticipated transactions may not be completed within the
anticipated time or upon the expected terms, in which case the Fund may
suffer a loss on its investments. In addition, many companies in the
past several years have adopted so-called "poison pill" and other
defensive measures. This may limit tender offers or other
non-negotiated offers for a company and/or prevent competing offers.
Such measures may also limit the amount of securities in any one issuer
that the Fund may buy.
Foreign Risk. Investments in foreign securities involve risks relating to
political, social and economic developments abroad, as well as risks resulting
from the differences between the regulations to which U.S. and foreign issuers
and markets are subject:
These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer of
portfolio assets, and political or social instability.
Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
Foreign companies may not be subject to accounting standards
or governmental supervision comparable to U.S. companies, and
there may be less public information about their operations.
Foreign markets may be less liquid and more volatile than U.S. markets.
Foreign securities often trade in currencies other than the
U.S. dollar, and the Fund may directly hold foreign currencies
and purchase and sell foreign currencies. Changes in currency
exchange rates will affect the Fund's net asset value, the
value of dividends and interest earned, and gains and losses
realized on the sale of securities. An increase in the strength
of the U.S. dollar relative to these other currencies may cause
the value of the Fund to decline. Certain foreign currencies
may be particularly volatile, and foreign governments may
intervene in the currency markets, causing a decline in value
or liquidity of the Fund's foreign currency holdings.
Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than
those involved in domestic transactions.
There is the risk that some countries may restrict the Fund's
access to investments or offer terms that are less advantageous
than those for local investors. This could limit the attractive
investment opportunities available to the Fund.
MANAGEMENT OF THE FUND
The Manager. Guardian Investor Services Corporation (the "Manager"),
located at 201 Park Avenue South, New York, New York 10003, supervises the
performance of administrative and professional services provided to the Fund by
others, including the Adviser and First Data Investor Services Group, Inc., the
sub-administrator of the Fund (the "Sub-Administrator"). The Manager also pays
the fees of the Adviser. The Manager serves as investment adviser to eleven
funds with aggregate assets of over $8.9 billion as of March 31, 1999. As
compensation for its services and the related expenses borne by the Manager, for
the fiscal year ended December 31, 1998, the Fund paid the Manager a fee equal
to 1.00% of the value of the Fund's average daily net assets.
The Company, the Manager, The Guardian Insurance & Annuity Company,
Inc. ("GIAC"), the Adviser and the Fund's distributor have entered into a
Participation Agreement regarding the offering of the Fund's shares as an
investment option for variable annuity and variable life contracts issued by
GIAC.
The Adviser. Pursuant to an Investment Advisory Agreement among the
Fund, the Manager and the Adviser, the Adviser, with principal offices located
at One Corporate Center, Rye, New York 10580-1434, manages the Fund's assets in
accordance with the Fund's investment objectives and policies. As successor to
Gabelli Funds, Inc., the Fund's previous adviser, the Adviser makes investment
decisions for the Fund, places purchase and sale orders on behalf of the Fund
and provides investment research. The Adviser also supervises the performance of
administrative and professional services provided by others and pays the
compensation of the Sub-Administrator and all officers and directors of the Fund
who are its affiliates. As compensation for its services and the related
expenses borne by the Adviser, for the fiscal year ended December 31, 1998, the
Manager paid the Adviser an annual fee equal to 0.75% of the value of the Fund's
average daily net assets.
The Adviser and its affiliates manage several other open-end and
closed-end investment companies in the Gabelli family of funds. The Adviser is a
New York limited liability company organized in 1999 as successor to Gabelli
Funds, Inc., a New York corporation organized in 1980. The Adviser is a
wholly-owned subsidiary of Gabelli Asset Management Inc. ("GAMI"), a publicly
held company listed on the New York Stock Exchange, Inc.
("NYSE").
The Portfolio Manager. Mario J. Gabelli, CFA, is responsible for the
day-to-day management of the Fund. Mr. Gabelli has been Chairman, Chief
Executive Officer and Chief Investment Officer of the Adviser and its
predecessor since inception in 1980 and of its parent company, GAMI, since 1999.
Mr. Gabelli also acts as Chief Executive Officer and Chief Investment Officer of
GAMCO Investors, Inc., a wholly-owned subsidiary of GAMI, and is an officer or
director of various other companies affiliated with GAMI. The Adviser relies to
a considerable extent on the expertise of Mr. Gabelli, who may be difficult to
replace in the event of his death, disability or resignation.
Year 2000. As the year 2000 approaches, an issue has emerged regarding
how the software used by the Fund's service providers can accommodate the date
"2000." Failure to adequately address this issue could result in major systems
or process failures which could disrupt the Fund's operations. The Manager and
the Adviser are in the process of working with the Fund's service providers to
prepare for the year 2000. Based on information currently available, the Manager
and the Adviser do not expect that the Fund will incur significant operating
expenses or be required to incur material costs to be year 2000 compliant. The
Fund cannot guarantee, however, that all year 2000 issues will be identified and
corrected by January 1, 2000, and any noncompliant computer systems could hurt
key Fund operations, such as shareholder servicing, pricing and trading. The
Year 2000 issue also affects companies and governmental entities in which the
Fund invests. To the extent that the impact on a Fund holding is negative, it
could seriously affect the Fund's performance. In addition, the Year 2000
problem may adversely affect the companies in which the Fund invests,
particularly companies in foreign countries. For example, these companies may
incur substantial costs to correct the problem.
PURCHASE AND REDEMPTION OF SHARES
You may invest in the Fund only by purchasing certain variable annuity
and variable insurance contracts ("Contracts") issued by GIAC. The Fund
continuously offers its shares to GIAC's separate accounts at the net asset
value per share next determined after a proper purchase request has been
received by GIAC. GIAC then offers to owners of the Contracts ("Contractowners")
units in its separate accounts which directly correspond to shares in the Fund.
GIAC submits purchase and redemption orders to the Fund based on allocation
instructions for premium payments, transfer instructions and surrender or
partial withdrawal requests which are furnished to GIAC by such Contractowners.
The Fund redeems shares from GIAC's separate accounts at the net asset value per
share next determined after receipt of a redemption order from GIAC.
The accompanying prospectus for a GIAC variable annuity or variable
life insurance policy describes the allocation, transfer and withdrawal
provisions of such annuity or policy.
<PAGE>
PRICING OF FUND SHARES
The Fund's net asset value per share is calculated on each day, Monday
through Friday, except days on which the NYSE is closed. The NYSE is currently
scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day and on the preceding Friday or subsequent
Monday when a holiday falls on a Saturday or Sunday, respectively.
The Fund's net asset value is determined as of the close of regular
trading on the NYSE, normally 4:00 p.m. New York time. It is computed by
dividing the value of the Fund's net assets (i.e. the value of its securities
and other assets less its liabilities, including expenses payable or accrued but
excluding capital stock and surplus) by the total number of its shares
outstanding at the time the determination is made. The Fund uses market
quotations in valuing its portfolio securities. Securities traded primarily on
foreign exchanges are valued at the closing price on such exchange immediately
prior to the close of the NYSE. Short-term investments that mature in 60 days or
less are valued at amortized cost. If market quotations are not readily
available, portfolio securities are valued at their fair value as determined in
good faith under procedures established by the Fund's Board of Directors.
The Fund may from time to time hold securities that are primarily
listed on foreign exchanges. Such securities may trade on days when the Fund
does not price its shares. Therefore, the Fund's net asset value may change on
days when you are not able to purchase or redeem the Fund's shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
GIAC's separate accounts automatically reinvest, at net asset value,
any dividends and capital gains distributions paid by the Fund in additional
shares of the Fund. There is no fixed dividend rate, and there can be no
assurance that the Fund will pay any dividends or realize any capital gains.
However, the Fund currently intends to pay dividends and capital gains
distributions, if any, on an annual basis. Such dividends and capital gains
distributions may be taxable at different rates depending on the length of time
the Fund holds its assets. Contractowners who own units in a separate account
corresponding to shares in the Fund will be notified when distributions are
made.
The Fund will be treated as a separate entity for federal income tax
purposes. The Fund has qualified and intends to continue to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended, in order to be relieved of federal income tax on that part of its net
investment income and realized capital gains which it distributes to GIAC's
separate accounts. To qualify, the Fund must meet certain relatively complex
income and diversification tests. The loss of such status would result in the
Fund being subject to federal income tax on its taxable income and gains.
Federal tax regulations require that mutual funds that are offered
through insurance company separate accounts must meet certain diversification
requirements to preserve the tax-deferral benefits provided by the variable
contracts which are offered in connection with such separate accounts. The
Adviser intends to diversify the Fund's investments in accordance with those
requirements. The prospectuses for GIAC's variable annuities and variable life
insurance policies describe the federal income tax treatment of distributions
from such contracts to Contractowners.
This is only a summary of important federal tax law provisions that can
affect the Fund. Other federal, state, or local tax law provisions may also
affect the Fund and its operations. Anyone who is considering allocating,
transferring or withdrawing monies held under a GIAC variable contract to or
from the Fund should consult a qualified tax adviser.
SPECIAL INFORMATION ABOUT THE FUND
The Fund offers its shares to both variable annuity and variable life
insurance policy separate accounts. The Fund does not anticipate that this
arrangement will disadvantage any Contractowners. The Fund's Board of Directors
monitors events for the existence of any material irreconcilable conflict
between or among Contractowners. If a material irreconcilable conflict arises,
one or more separate accounts may withdraw their investments in the Fund. This
could possibly force the Fund to sell portfolio securities at unfavorable
prices. GIAC will bear the expenses of establishing separate portfolios for
variable annuity and variable life insurance separate accounts if such action
becomes necessary; however, ongoing expenses that are ultimately borne by
Contractowners will likely increase due to the loss of the economies of scale
benefits that can be provided to mutual funds with substantial assets.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance since its inception. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund. This information has been audited by Ernst & Young LLP, independent
auditors, whose report along with the Fund's financial statements and related
notes are included in the Fund's annual report, which is available upon request.
Per share amounts for a Fund share outstanding throughout each
period/year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year Year Year Period
Ended Ended Ended Ended
12/31/98 12/31/97 12/31/96 12/31/95*
Operating performance
Net asset value, beginning of period................ $15.31 $11.55 $10.70 $10.00
------ ------ ------ ------
Net investment income............................... 0.03 0.02 0.02 0.03(a)
Net realized and unrealized gain on investments..... 1.74 4.88 1.16 0.80
---- ---- ---- ----
Total from investment operations.................... 1.77 4.90 1.18 0.83
==== ==== ==== ====
Distributions to shareholders from:
Net investment income.......................... (0.03) (0.02) (0.02) (0.03)
Net realized gains............................. (0.78) (1.12) (0.31) (0.09)
Distributions in excess of net realized gains.. (0.07) (0.00)(c) -------- (0.01)
------ ------ -------- ------
Total Distributions................................. (0.88) (1.14) (0.33) (0.13)
------ ------ ------ ------
Net asset value, end of period...................... $16.20 $15.31 $11.55 $10.70
====== ====== ====== ======
Total return**...................................... 11.7% 42.6% 11.0% 8.4%
===== ===== ===== ====
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................ $155,361 $105,350 $51,462 $26,364
-------- -------- ------- -------
Ratio of net investment income to
average net assets 0.19% 0.17% 0.21% 0.75%+
Ratio of operating expenses to
average net assets........................ 1.12% 1.17% 1.31% 1.78%(b)+
Portfolio turnover rate............................. 43% 65.5% 53.2% 81.4%
* The Fund commenced operations on May 1, 1995.
** Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. Total return for the period
of less than one year is not annualized.
+ Annualized.
(a) Net investment income before expenses assumed by the Manager and Adviser was
$0.03 per share. (b) Operating expense ratio before expenses assumed by the
Manager and Adviser was 1.92%.
(c) Amount represents less than $0.005 per share.
</TABLE>
<PAGE>
THE GABELLI CAPITAL ASSET FUND
A Statement of Additional Information dated May 1, 1999 (the
"SAI") includes additional information about the Fund. The SAI is incorporated
by reference into this Prospectus and, therefore, is legally a part of this
Prospectus.
Information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during its fiscal
year.
You may make inquiries about the Fund, or obtain a copy of the
SAI or of the annual or semi-annual reports without charge, by calling
1-800-GABELLI (1-800-422-3554).
You can review and copy information about the Fund (including
the SAI) at the SEC Public Reference Room in Washington, DC (for information
call 1-800-SEC-0330). Such information is also available on the SEC's Internet
site at http://www.sec.gov. You may request documents by mail from the SEC, upon
payment of a duplicating fee, by writing to the Securities and Exchange
Commission, Public Reference Section, Washington, DC 20549-6009.
Investment Company Act File Number: 811-07644
<PAGE>
