ThZeal - The Zeal

497 1 file001.txt PROSPECTUS AND SAI THE VALUE GUARD II PROSPECTUS May 1, 2004 INDIVIDUAL AND GROUP DEFERRED VARIABLE ANNUITY CONTRACTS PROSPECTUS This prospectus describes both Individual Deferred Variable Annuity Contracts and Group Deferred Variable Annuity Contracts. It contains important information that you should know before investing in the contracts. Please read this prospectus carefully, along with the accompanying fund prospectuses, and keep them for future reference. -------------------------------------------------------------------------------- The contracts are issued by The Guardian Insurance & Annuity Company, Inc. (GIAC) through its Separate Account A. They are designed to provide tax deferred annuity benefits under retirement programs which qualify for Federal income tax benefits, either for individual purchasers or group pension or profit sharing plans. Individual contracts can also be purchased through deferred compensation plans and other retirement plans which do not qualify for Federal income tax benefits under the Internal Revenue Code. There are two types of individual contracts. The Single Premium Payment Contract requires a single payment of at least $3,000. The Flexible Premium Payment Contract requires an initial premium payment of at least $500, and regular premium payments throughout the accumulation period of the contract. The group contract is designed to be used with various types of tax-qualified plans, and other plans that receive favorable Federal tax treatment. These include retirement plans established by corporate employers under Section 401 of the Internal Revenue Code, and certain deferred compensation plans under Section 457. Group contracts require a minimum payment of $5,000. Your premiums may be invested in up to 20 variable investment options or, if you have bought an Individual Single Premium Payment Contract, you may also choose to invest in 19 variable investment options and the fixed-rate option. Special limits apply to transfers from the fixed-rate option. The contracts will pay a death benefit if the annuitant dies before annuity payments begin. The variable investment options invest in the mutual funds listed below. The prospectuses for these Funds accompany this prospectus. Some of these Funds may not be available in your state. o The Guardian Variable Contract Funds, Inc. -- The Guardian Stock Fund -- The Guardian VC 500 Index Fund -- The Guardian VC Asset Allocation Fund -- The Guardian VC High Yield Bond Fund -- The Guardian VC Low Duration Bond Fund -- The Guardian UBS VC Large Cap Value Fund -- The Guardian UBS VC Small Cap Value Fund o The Guardian Bond Fund, Inc. o The Guardian Cash Fund, Inc. o GIAC Funds, Inc. -- The Guardian Small Cap Stock Fund -- Baillie Gifford International Growth Fund (formerly Baillie Gifford International Fund) -- Baillie Gifford Emerging Markets Fund o Value Line Centurion Fund o Value Line Strategic Asset Management Trust o Gabelli Capital Series Fund, Inc. -- Gabelli Capital Asset Fund o Alliance Variable Products Series Fund -- AllianceBernstein Growth & Income Portfolio (Class B) -- AllianceBernstein Premier Growth Portfolio (Class B) -- AllianceBernstein Technology Portfolio (Class B) -- AllianceBernstein Value Portfolio (Class B) o MFS(R) Variable Insurance Trustsm (Initial Class) -- MFS Investors Trust Series -- MFS Emerging Growth Series -- MFS New Discovery Series -- MFS Research Series -- MFS Total Return Series o AIM Variable Insurance Funds (Series I Shares) -- AIM V.I. Capital Appreciation Fund -- INVESCO VIF-Utilities Fund (AIM V.I. Global Utilities Fund was merged into the INVESCO VIF-Utilities Fund on April 30, 2004) -- AIM V.I. Premier Equity Fund o Davis Variable Account Fund -- Davis Financial Portfolio -- Davis Real Estate Portfolio -- Davis Value Portfolio o Fidelity Variable Insurance Products Fund (Service Class) -- Fidelity VIP Growth Opportunities Portfolio -- Fidelity VIP Equity-Income Portfolio -- Fidelity VIP Contrafund(R) Portfolio -- Fidelity VIP Mid Cap Portfolio o Franklin Templeton Variable Insurance Products Trust -- Templeton Growth Securities Fund (Class 2) o Janus Aspen Series (Institutional Shares) -- Janus Aspen Mid Cap Growth Portfolio -- Janus Aspen Capital Appreciation Portfolio -- Janus Aspen Growth Portfolio -- Janus Aspen Worldwide Growth Portfolio o Van Kampen Life Investment Trust (Class II shares) -- Van Kampen Life Investment Trust Government Portfolio -- Van Kampen Life Investment Trust Growth and Income Portfolio A Statement of Additional Information about the contracts and the Separate Account is available free of charge by writing to GIAC at its Customer Service Office, P.O. Box 26210, Lehigh Valley, Pennsylvania 18002, or by calling 1-800-221-3253. Its contents are noted on page 40 of this prospectus. The Statement of Additional Information, which is also dated May 1, 2004, is incorporated by reference into this prospectus. -------------------------------------------------------------------------------- The Securities and Exchange Commission has a web site (http://www.sec.gov) which you may visit to view this Prospectus, Statement of Additional Information and other information. These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission, nor has the Commission or any state securities commission passed upon the accuracy or adequacy of this prospectus. The contracts are not a deposit or obligation of or guaranteed or endorsed by, any bank or depository institution, and the contracts are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency, and involve investment risk, including possible loss of the principal amount invested. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CONTENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This variable annuity contract may not be available in all states or jurisdictions. This prospectus does not constitute an offering in any state or jurisdiction in which such offering may not lawfully be made. GIAC does not authorize any information or representations regarding the offering described in this prospectus or any supplement thereto or in any supplemental sales material authorized by GIAC. This prospectus is not valid without the prospectuses for the Funds. -------------------------------------------------------------------------------- Summary ................................................................... 1 -- What is a variable annuity contract and how does it work? .............. 1 -- How a variable annuity works ........................................... 1 -- The annuity period ..................................................... 1 -- Other contract features ................................................ 1 -- Expenses ............................................................... 2 -- Deciding to purchase a contract ........................................ 2 Expense Tables ............................................................ 3 The Guardian Insurance & Annuity Company, Inc. ............................ 6 Buying a contract ......................................................... 6 -- The application form ................................................... 7 -- Payments ............................................................... 7 The accumulation period ................................................... 8 -- How we allocate your premium payments .................................. 8 -- The Separate Account ................................................... 9 -- Variable investment options ............................................ 9 -- Fixed-rate option ...................................................... 16 -- Transfers .............................................................. 17 -- Surrenders and partial withdrawals ..................................... 18 The annuity period ........................................................ 20 -- When annuity payments begin ............................................ 20 -- How your annuity payments are calculated ............................... 20 -- Annuity payout options ................................................. 21 Other contract features ................................................... 22 -- Death benefits ......................................................... 22 -- Enhanced death benefits ................................................ 23 Financial information ..................................................... 25 -- How we calculate unit values ........................................... 25 -- Contract costs and expenses ............................................ 26 -- Federal tax matters .................................................... 28 -- Performance results .................................................... 34 Your rights and responsibilities .......................................... 36 -- Voting rights .......................................................... 36 -- Telephone and Electronic Services ...................................... 36 -- Your right to cancel the contract ...................................... 37 -- Distribution of the contract ........................................... 37 Special terms used in this prospectus ..................................... 39 Other information ......................................................... 40 -- Legal proceedings ...................................................... 40 -- Where to get more information .......................................... 40 Appendix A--Summary Financial Information ................................. 41 -------------------------------------------------------------------------------- SUMMARY -------------------------------------------------------------------------------- WHAT IS A VARIABLE ANNUITY CONTRACT? A variable annuity contract allows you to accumulate tax-deferred savings which are invested in options that you choose. This is the accumulation period of the contract. On an agreed date, the annuitant will start receiving regular payments from the amount you have saved and any investment earnings. This is the annuity period. The amount of the annuity payments will depend on earnings during the accumulation period, and afterward if you select a variable annuity option. That's why this product is called a variable annuity. HOW A VARIABLE ANNUITY WORKS During the accumulation period, these contracts allow you to allocate your net premium payments and accumulation value to as many as twenty variable investment options, or if you have bought an Individual Single Premium Payment Contract, you may also choose to invest in nineteen variable investment options and the fixed-rate option. When you allocate your premiums to the variable investment options, you bear the risk of any investment losses. No assurance can be given that the value of the contracts during the accumulation period, or the total amount of annuity payments made under the contracts, will equal or exceed the net premium payments allocated to the variable investment options. When you allocate your net premium payments to the fixed-rate option, the contracts guarantee that they will earn a minimum rate of interest and the investment risk is borne by GIAC. GIAC has established The Guardian Separate Account A to hold the variable investments in its annuity contracts. The Separate Account has 41 investment divisions, corresponding to 41 variable investment options, each of which invests in a mutual fund. Your net premiums are used to buy accumulation units in the investment divisions you have chosen, or are allocated to the fixed-rate option. The total value of your contract's investment in the investment divisions and in the fixed-rate option is known as the accumulation value. It's determined by multiplying the number of variable accumulation units credited to your account in each investment division by the current value of the division's units, and adding your value in the fixed-rate option. The value of units in a variable investment division reflects the investment experience within the division. The value of units in the fixed-rate option reflects interest accrued at a rate not less than the guaranteed minimum specified in the contract. For a complete explanation, please see Financial information: How we calculate unit values. THE ANNUITY PERIOD Payments to the annuitant under these contracts must begin no later than his or her 85th birthday. Distributions under the contract are taxable, and if you take money out of the contract before age 59 1/2, you may also incur a 10% federal tax penalty on your earnings. You may select one or a combination of three annuity payout options under the contract: o Life annuity without a guaranteed period o Life annuity with a 10-year guaranteed period o Joint and survivor annuity These payout options are described in more detail in the section titled The annuity period. OTHER CONTRACT FEATURES Transfers among investment options You can make transfers among the variable investment options at any time. Transfers from the fixed-rate option are only permitted during the accumulation period. Certain restrictions apply to transfers out of the fixed-rate option. Transfers must also comply with the rules of any retirement plan that apply. Please see The accumulation period: Transfers. Death benefits If the annuitant should die before annuity payments begin, then we pay a death benefit to the beneficiary. The contract also gives you the option of purchasing a rider that may provide a greater death benefit. Please see Other contract features: Death benefits. ------------- SUMMARY PROSPECTUS 1 ------------- Surrenders and partial withdrawals Depending on the retirement plan under which you bought your contract, you may withdraw some or all of the amount you have saved in the contract during the accumulation period. Taking out all you have saved is known as a surrender; taking out part of your savings is a partial withdrawal. These options are not available once annuity payments begin. Please see The accumulation period: Surrenders and partial withdrawals. EXPENSES The following are expenses that you will incur as a contract owner: o Operating expenses for mutual Funds comprising the variable investment options Management fees, 12b-1 fees, and other expenses associated with the Funds ranged from 0.40% to 1.82% in 2003. Actual charges will depend on the variable investment options you select. o Mortality and expense risk charges 1.0% annually of the net asset value of your variable investment options. o Administrative expenses A $30 annual contract administration fee will be deducted from the accumulation value of Single Premium Payment Contracts. The fee is $35 for Flexible Premium Payment Contracts. The following are expenses that you may incur as a contract owner: o Contingent deferred sales charges A charge of 1% to 5% against any amount that you withdraw that has been in your contract for less than seven years. The actual amount will depend on the number of years the amount has been invested. o Enhanced death benefit rider charge If you choose this benefit, the annual charge is up to .30% of your net assets invested in the variable investment options, depending on the rider chosen. o Annuity taxes A tax on premiums or annuity payments, applicable in some states and municipalities only, that currently range up to 3.5% of premiums paid to the contract. DECIDING TO PURCHASE A CONTRACT You should consider purchasing a variable annuity contract if your objective is to invest over a long period of time and to accumulate assets on a tax-deferred basis, generally for retirement. A tax-deferred accrual feature is provided by any tax-qualified arrangement. Therefore, you should have reasons other than tax deferral for purchasing the contract to fund a tax-qualified arrangement. You have the right to examine the contract and return it for cancellation within 10 days of receiving it. This is known as the free-look period. The period may be longer than 10 days in some states. Because the laws and regulations that govern the contract vary among the jurisdictions, some of the contract's terms will vary depending on where you live. For information about the compensation we pay, see Distribution of the contract. Please see Appendix A: Summary financial information for more information about Separate Account A and accumulation unit values. Please see Special terms used in this prospectus for definitions of key terms. ------------- 2 PROSPECTUS SUMMARY ------------- -------------------------------------------------------------------------------- EXPENSE TABLES -------------------------------------------------------------------------------- The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the contract. The first table describes the fees and expenses that you will pay at the time that you buy the contract, surrender the contract, or transfer cash value among investment options. State premium taxes may also be deducted. -------------------------------------------------------------------------------- Expenses -------------------------------------------------------------------------------- The tables will assist you in understanding the various costs and expenses of the Separate Account and its underlying Funds that you will bear directly or indirectly. See Financial Information - Contract costs and expenses and the accompanying Fund prospectuses for a more complete description of the various costs and expenses. Premium taxes may apply. CONTRACT OWNER TRANSACTION EXPENSES -------------------------------------------------------------------------------- Sales Charge Imposed on Purchases: None -------------------------------------------------------------------------------- Contingent Deferred Sales Charge 5% see Note (1) -------------------------------------------------------------------------------- Transfer Fee: Currently, none (may charge $25 for each transfer) -------------------------------------------------------------------------------- Note: (1) For Single Premium Payment Contracts, the following contingent deferred sales charges will be assessed upon amounts withdrawn during the first seven contract years: Contingent Number of contract years completed deferred sales charge from date of the premium payment percentage -------------------------------------------------------------------------------- 1 5% -------------------------------------------------------------------------------- 2 5% -------------------------------------------------------------------------------- 3 4% -------------------------------------------------------------------------------- 4 3% -------------------------------------------------------------------------------- 5 2% -------------------------------------------------------------------------------- 6 1% -------------------------------------------------------------------------------- 7+ 0% -------------------------------------------------------------------------------- After the first contract year, you may withdraw 10% of the amount of the single premium payment. This charge will not exceed 5% of the total premiums paid in the 72 months preceding the date of your withdrawal. For Flexible Premium Payment Contracts, the contingent deferred sales charges will be the lesser of: o 5% of the total payments made during the 72 months immediately preceding the date of withdrawal, or o 5% of the total amount being withdrawn. After the first contract year, you may withdraw 10% of the total premiums paid under the contract in the 72 months immediately preceding the date of your withdrawal in each contract year without a deferred sales charge. This charge will not exceed 5% of the total premiums paid in the 72 months preceding the date of your withdrawal. ------------- PROSPECTUS 3 ------------- The next table describes the fees and expenses that you will pay periodically during the time that you own the contract, not including the fees and expenses of the underlying mutual funds associated with the variable investment options. -------------------------------------------------------------------------------- Annual Contract Fee (Single Premium Payment Contract): $30.00* -------------------------------------------------------------------------------- Annual Contract Fee (Flexible Premium Payment Contract): $35.00* -------------------------------------------------------------------------------- *The annual contract fee may be lower where required by state law. SEPARATE ACCOUNT LEVEL ANNUAL EXPENSES (as a percentage of daily net asset value)

The next item shows the minimum and maximum total operating expenses charged by the mutual fund companies that you may pay periodically during the time that you own the contract. More detail concerning fees and expenses is contained in the prospectus for each underlying mutual fund. TOTAL ANNUAL UNDERLYING MUTUAL FUND OPERATING EXPENSES (expenses that are deducted from the assets of the underlying mutual funds including management fees, distribution [and/or service] (12b-1) fees, and other expenses) Minimum Maximum Total Annual Underlying Mutual Fund Operating Expenses (before applicable waivers and reimbursements)** 0.40% 1.82% The fee and expense information regarding the underlying mutual funds was provided by those mutual funds. ** "Total Annual Underlying Mutual Fund Operating Expenses" are expenses for the fiscal year ended December 31, 2003. ------------- 4 PROSPECTUS ------------- Expense Examples These Examples are intended to help you compare the cost of investing in the contract with the cost of investing in other variable annuity contracts. These costs include the contract owner transaction expenses, contract fees, separate account annual expenses and underlying mutual fund fees and expenses. The Examples assume that you invest $10,000 in the contract for the time periods indicated. The Examples also assume that your investment has a 5% return each year and assume: a) maximum and (b) minimum fees and expenses of any of the underlying mutual funds. Although your actual costs may be higher or lower, based on those assumptions, your costs would be: Chart 1. Chart 1 assumes you select the Flexible Premium Payment Contract with the 7 Year Enhanced Death Benefit Rider, which is the most expensive way to purchase the contract. In this example, you surrender your contract at the end of the applicable time period: Time Periods 1 year 3 years 5 years 10 years -------------------------------------------------------------------------------- (a) $858 (a) $1,587 (a) $2,335 (a) $3,796 (b) $709 (b) $1,141 (b) $1,596 (b) $2,340 Chart 2. Chart 2 assumes you select the Flexible Premium Payment Contract with the 7 Year Enhanced Death Benefit Rider, which is the most expensive way to purchase the contract. In this example, you annuitize your contract or you do not surrender your contract at the end of the applicable time period: Time Periods 1 year 3 years 5 years 10 years -------------------------------------------------------------------------------- (a) $358 (a) $1,087 (a) $1,835 (a) $3,796 (b) $209 (b) $ 641 (b) $1,096 (b) $2,340 Chart 3. Chart 3 assumes you select the Single Premium Payment Contract without any Riders, which is the least expensive way to purchase the contract. In this example, you surrender your contract at the end of the applicable time period: Time Periods 1 year 3 years 5 years 10 years -------------------------------------------------------------------------------- (a) $826 (a) $1,394 (a) $1,883 (a) $3,506 (b) $677 (b) $ 945 (b) $1,134 (b) $2,005 Chart 4. Chart 4 assumes you select the Single Premium Payment Contract without any Riders, which is the least expensive way to purchase the contract. In this example, you annuitize your contract or you do not surrender your contract at the end of the applicable time period: Time Periods 1 year 3 years 5 years 10 years -------------------------------------------------------------------------------- (a) $326 (a) $994 (a) $1,683 (a) $3,506 (b) $177 (b) $545 (b) $ 934 (b) $2,005 ------------- PROSPECTUS 5 ------------- -------------------------------------------------------------------------------- THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC. -------------------------------------------------------------------------------- The Guardian Insurance & Annuity Company, Inc. (GIAC) is a stock life insurance company incorporated in the state of Delaware in 1970. GIAC, which issues the contracts offered with this prospectus, is licensed to conduct an insurance business in all 50 states of the United States and the District of Columbia. The company had total assets (GAAP basis) of over $10 billion as of December 31, 2003. Its financial statements appear in the Statement of Additional Information. GIAC's executive office is located at 7 Hanover Square, New York, New York 10004. The mailing address of the GIAC Customer Service Office, which administers 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, 2003, Guardian Life had total assets (GAAP basis) in excess of $37 billion. Guardian Life does not issue the contracts offered under this prospectus and does not guarantee the benefits they provide. -------------------------------------------------------------------------------- BUYING A CONTRACT -------------------------------------------------------------------------------- There are two types of individual annuity contracts, and one type of group contract. Individual annuity contracts may be bought as either a Flexible Premium Payment Contract, where you make regular payments throughout the accumulation period, or as a Single Premium Payment Contract, where you make a single payment when you buy the contract. The individual contracts can be purchased as "qualified contracts" which means they qualify for special federal income tax treatment or as "non-qualified contracts" which means they do not qualify for such treatment. Group annuity contracts are generally bought through retirement plans set up by your employer under Sections 401 or 457 of the Internal Revenue Code, and are available as a Flexible Premium Payment Contract. Both individual and group contracts allow you to direct where your net premium payments are invested. ------------- 6 PROSPECTUS BUYING A CONTRACT ------------- THE APPLICATION FORM If you would like to buy a contract, you must complete and sign the application form. You or your agent then must send it, along with your initial premium payment, by regular U.S. mail to the following address: The Guardian Insurance & Annuity Company, Inc. Customer Service Office P.O. Box 26210 Lehigh Valley, Pennsylvania 18002 If you wish to send your application and payment by certified, registered or express mail, please address it to: The Guardian Insurance & Annuity Company, Inc. Customer Service Office 3900 Burgess Place Bethlehem, Pennsylvania 18017 Our decision to accept or reject your application is based on administrative rules such as whether you have completed the form completely and accurately. We have the right to reject any application or initial premium payment for any reason. If we accept your application as received, we will credit your net premium payment to your new contract within two business days. If your application is not complete within five business days of our receiving it, we will return it to you along with your payment. PAYMENTS For individual contracts we require a minimum initial premium payment of $3,000 for Single Premium Payment Contracts, and $500 for Flexible Premium Payment Contracts. Thereafter, the minimum additional flexible payment is $100. However, if you purchase a Flexible Premium Payment Contract through an employer payroll deduction plan, the minimum payment will be $50. The total amount paid in flexible premium payments in any contract year after the first may not exceed, without our written consent, the lesser of 10 times the total amount you paid in premium payments in the first contract year, or $100,000. For group contracts we require a minimum initial premium payment of $5,000, with additional payments of at least $500. Thereafter, any payments in excess of $100,000 in any contract year may only be made with our written consent. ------------- BUYING A CONTRACT PROSPECTUS 7 ------------- -------------------------------------------------------------------------------- THE ACCUMULATION PERIOD -------------------------------------------------------------------------------- HOW WE ALLOCATE YOUR PREMIUM PAYMENTS After we receive your initial premium payment and issue a contract to you, we will normally credit subsequent net premium payments to your contract on the same day we receive them, provided we receive them prior to the close of our regular business day. If we receive your payment on a non-business day, or after our close, we will normally credit it on the next business day. If required in your state or municipality, premium taxes are deducted from your payment before we credit it to your contract. We call the amount remaining after this deduction the net premium payment. We use your net premium payments to purchase accumulation units in the variable investment options you have chosen, or in the fixed-rate option if you have an Individual Single Premium Payment contract and have chosen this option, according to your instructions in the application or as later changed. The prices of accumulation units are set daily because they change along with the share values of the Funds you invest in. The amount you pay for each unit will be the next price calculated after we receive and accept your payment. The value of accumulation units will vary as you earn interest in the fixed-rate option or as the value of investments rises and falls in the variable investment options. You can change your investment option selections by notifying us in writing. We will apply your new instructions to subsequent net premium payments after we receive and accept them. Please remember that you cannot invest in more than twenty variable investment options, or nineteen variable investment options and the fixed-rate option if your contract allows you to invest in this option, at any given time. AUTOMATED PURCHASE PAYMENTS You may elect to participate in our automated payment program by authorizing your bank to deduct money from your checking account to make monthly purchase payments. We will debit your checking account on the 15th of each month or the next business day if the 15th is not a business day. You tell us the amount of the monthly purchase payment and specify the effective date on our authorization form. You may request to participate, change the amount of your purchase payments, change bank accounts or terminate the program at any time prior to the first of the month for your requested transaction to be processed for that month. For IRAs, the maximum monthly purchase payment is 1/12th of your allowable annual contribution. ------------- 8 PROSPECTUS THE ACCUMULATION PERIOD ------------- THE SEPARATE ACCOUNT GIAC has established The Guardian Separate Account A to receive and invest your premium payments in the variable investment options. The Separate Account has 41 investment divisions, corresponding to the 41 Funds available to you. Each division is divided into two sub-divisions, one for allocations made under tax qualified contracts, the other for allocations made under non-qualified contracts. The performance of each division is based on the Fund in which it invests. The Separate Account was established in 1981. It is registered as a unit investment trust under the Investment Company Act of 1940 (the 1940 Act) and meets the definition of a separate account under federal securities laws. State insurance law provides that the assets of the Separate Account equal to its reserves and other liabilities are not chargeable with GIAC's obligations except those under annuity contracts issued through the Separate Account. Income, gains and losses of the Separate Account are kept separate from other income, gains or losses of the contract owner. Each investment subdivision 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 subdivision are credited to or charged against the assets held in that subdivision according to the terms of each contract, without regard to other income, capital gains or capital losses of the other investment subdivisions or of GIAC. Contract obligations are GIAC's responsibility. According to Delaware insurance law, the assets of the Separate Account are not chargeable with liabilities arising out of any other business GIAC may conduct. Please see Financial Information: Federal tax matters. We have the right to make changes to the Separate Account, to the investment divisions within it, and to the fund shares they hold. We may make these changes for some or all contracts. These changes must be made in a manner that is consistent with laws and regulations. When necessary, we'll use this right to serve your best interests and to carry out the purposes of the contract. An example of such a change includes eliminating of the availability of the shares of any of the Funds and substituting shares of another appropriate Fund (which may have different fees and expenses or may be available/closed to certain purchases). VARIABLE INVESTMENT OPTIONS You may choose to invest in a maximum of 20 of the 41 variable investment options, or 19 variable investment options and the fixed-rate option, at any time. Each Fund is an open-end management investment company, registered with the Securities and Exchange Commission under the 1940 Act. The Funds have different investment objectives which influence their risk and return. The table below summarizes their main characteristics. ------------- THE ACCUMULATION PERIOD PROSPECTUS 9 ------------- Some Funds have similar investment objectives and policies to other funds managed by the same adviser. However, the investment returns of the Funds may be higher or lower than those of similar funds managed by the same adviser. There is no assurance, and we make no representation, that the performance of any Fund will be comparable to the performance of any other fund. All of the funds are available for investment through other variable annuity contracts funded by the Separate Account. Some of these Funds are also available under other separate accounts supporting variable annuity contracts and variable life insurance policies of GIAC and other companies. We do not anticipate any inherent conflicts with these arrangements. However, it is possible that conflicts of interest may arise in connection with the use of the same Funds under both variable life insurance policies and variable annuity contracts, or issued by different companies. While the Board of Directors of each Fund monitors activities in an effort to avoid or correct any material irreconcilable conflicts of interest arising out of this arrangement, we may also take actions to protect the interests of our contract owners. See the accompanying Fund prospectuses for more information about possible conflicts of interest. Investment advisers (or their affiliates) pay us compensation for administration, distribution or other expenses. Currently, these advisers include Value Line, Inc., MFSInvestment Management, AIM Advisors, Inc., Janus Capital Management LLC, Fidelity Management & Research Company, Davis Selected Advisers, LP, Gabelli Funds, LLC, Alliance Capital Management LP, Van Kampen Asset Management Inc., and Templeton Global Advisors Limited. This compensation ranges from .15% to .25% of the average daily net assets that are invested in the variable investment options available through the Separate Account. We also receive 12b-1 fees from some Funds. Those Funds include funds from AllianceBernstein, Fidelity, Franklin Templeton, Value Line and Van Kampen. Currently, the amount of 12b-1 fees ranges from .08% to .40% ------------- 10 PROSPECTUS THE ACCUMULATION PERIOD ------------- Variable investment options

* Effective April 30, 2004, pursuant to shareholder approval, the AIM V.I. Global Utilities Fund was merged into the INVESCO VIF-Utilities Fund. As a result of this merger the AIM V.I. Global Utilities Fund is no longer being offered as a variable investment option under this contract. ------------- THE ACCUMULATION PERIOD PROSPECTUS 11 ------------- Variable investment options

------------- 12 PROSPECTUS THE ACCUMULATION PERIOD ------------- Variable investment options

Some of these Funds may not be available in your State. Some Funds have similar investment objectives and policies to other funds managed by the same adviser. The Funds may also have the same or similar names to publicly available mutual funds. The Funds are not the same funds. As a result, the investment returns of the Funds may be higher or lower than these similar funds managed by the same adviser. There is no assurance, and we make no representation, that the performance of any Fund will be comparable to the performance of any other fund. ------------- THE ACCUMULATION PERIOD PROSPECTUS 13 ------------- -------------------------------------------------------------------------------- Before investing, please read the accompanying Fund prospectuses carefully. They contain important information on the investment objectives, policies, charges and expenses of the Funds. The Funds' investment advisers and their principal business addresses are shown in the table below.

------------- 14 PROSPECTUS THE ACCUMULATION PERIOD -------------

------------- THE ACCUMULATION PERIOD PROSPECTUS 15 ------------- FIXED-RATE OPTION The fixed-rate option is only available to those who have bought an Individual Single Premium Payment Contract, though it may not be available for allocation in all states in which the contracts are available. It is not registered under the Securities Act of 1933 or as an investment company under the 1940 Act, and is therefore not subject to the provisions or restrictions of these Acts. 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. In the fixed-rate option, we guarantee that the net premium payments you invest will earn daily interest at a minimum annual rate of 3%. You can allocate all of your net premium payments to this option, or you may choose it as one of your twenty investment selections. The value of your net premiums invested in the fixed-rate option does not vary with the investment experience of any Fund. The money that you put into your fixed-rate option becomes part of GIAC's general assets. At certain times we may choose to pay interest at a rate higher than 3%, but we aren't obliged to do so. Higher interest rates are determined at our discretion and we can change them prospectively without notice. We don't use a specific formula to determine interest rates; rather we consider such factors as general economic trends, current rates of return on our general account investments, regulatory and tax requirements, and competitive factors. The rate of interest we pay hasn't been limited by our Board of Directors. Here are some of the important conditions that apply when we pay interest on your investments in the fixed-rate option: o The initial interest rate that we credit to your premiums or transfers will be whatever rate is in effect on the date the amounts are allocated to the fixed-rate option. o This interest rate will continue until the next contract anniversary date. o At that time, all payments and transfers allocated to the fixed-rate option during the previous year, together with interest earned, will be credited with the rate of interest in effect on the renewal date, known as the renewal rate. o The renewal rate will be guaranteed until the next contract anniversary date. ------------- 16 PROSPECTUS THE ACCUMULATION PERIOD ------------- When you buy a contract, please note -------------------------------------------------------------------------------- o You can choose up to twenty investment options at any one time. o If your contract allows you to and you select the fixed-rate option, you are limited to an additional nineteen variable options. o There are no initial sales charges on the premium payments that you allocate to the variable investment options. However, there may be premium tax charges. o All of the dividends and capital gains distributions that are payable to variable investment options are reinvested in shares of the applicable Fund at the current net asset value. o When the annuity period of the contract begins, we will apply your accumulation value to a payment option in order to make annuity payments to you. o You can arrange to transfer your investments among the divisions by notifying us in writing or by telephone. Currently, there is no fee for this, but we reserve the right to charge a fee and to limit the number of transactions. o You can change beneficiaries as long as the annuitant is living. TRANSFERS You can transfer money among variable investment options or change your future allocations to options both before and after the date annuity payments begin. You can also transfer part of your accumulation value from the fixed-rate option, but only before the date annuity payments begin. Transfers are subject to certain conditions, which are described below. If you are considering a transfer or change in your allocations, be sure to look into each option carefully and make sure your decisions will help you to achieve your long-term investment goals. During the accumulation period and up to 30 days before the date annuity payments are scheduled to begin, you can transfer all or part of your accumulation value among the variable investment options. These transfers are subject to the following rules: o We permit transfers from the fixed-rate option to any variable investment options only once each contract year, during the 30 days beginning on the contract anniversary date. Amounts that have been on deposit in the fixed-rate option longest will be transferred out first. You may not make transfers into the fixed-rate option. The maximum yearly transfer from the fixed-rate option is the greater of the following: -- 25% of the amount in the fixed-rate option on the applicable contract anniversary date or -- $2,500. o Each transfer involving the variable investment options will be based on the accumulation unit value that is next calculated after we have received proper transfer instructions from you. We will implement a transfer or changes to your allocations upon receiving your written, telephone or electronic instructions in good order. If we receive your transfer request on a business day before 4:00 p.m. New York City time, you will receive that day's unit value. Your telephone transfer instructions will be considered received before 4:00 p.m. if the telephone call is completed no later than 4:00 p.m. Currently, we do not limit the number of transfers you may make. However, the contract is not designed for market timing activity such as frequent transfers or rebalancing activity. We may limit your right to make transfers or allocation changes if we determine that your transfers would have an adverse effect on other contract owners. We make this determination by monitoring trading activity among the variable investment options based upon established parameters that are applied consistently. If your trading activity violates thes parameters, we will apply restrictions that we reasonably believe will prevent any disadvantage to other contract owners. We will not grant waivers to any ------------- THE ACCUMULATION PERIOD PROSPECTUS 17 ------------- contract owners who violate these parameters. Restrictions may be imposed without prior notice and may include without limitation: o limiting the frequency of transfers to not more than once every 30 days; o imposing a fee of up to $25 per transfer; o requiring you to make your transfer requests through the U.S. Postal Service or otherwise restricting electronic or telephonic transaction privileges; o refusing to act on instructions of an agent acting under a power of attorney on your behalf; o refusing or otherwise restricting any transaction request we believe alone or with a group of transaction requests may have a detrimental effect on the Separate Account or the underlying Funds, or we are informed by any of the Funds that the purchase or redemption of shares would have a detrimental effect on the applicable Funds. After the date annuity payments begin, if you have a variable annuity payout option you can transfer all or part of the value of your annuity among the variable investment options only once each calendar year. We will adjust the number of annuity units, which are used to determine your annuity payments, to reflect the annuity unit values of the new Funds you have chosen. No fixed-rate option transfers are permitted. Personal Security -------------------------------------------------------------------------------- When you call us, we will require identification of your contract as well as your personal security code. We may accept transfer or changes to future allocations instructions from anyone who can provide us with this information. Neither GIAC, Guardian Investor Services LLC, nor the Funds will be liable for any loss, damage, cost or expense resulting from a telephone or electronic request we reasonably believe to be genuine. As a result, you assume the risk of unauthorized or fraudulent telephone or electronic transfers. We may record telephone conversations regarding transfers without disclosure to the caller. See Telephone and Electronic Services. SURRENDERS AND PARTIAL WITHDRAWALS During the accumulation period and while the annuitant and all contract owners are living, you can redeem your contract in whole. This is known as surrendering the contract. If you redeem part of the contract, it's called a partial withdrawal. We will not accept requests for surrenders or partial withdrawals after the date annuity payments begin. Also, surrenders and partial withdrawals may be limited by the rules of your retirement plan. Your request for surrenders and partial withdrawals must be received in good order. If you wish to surrender your contract, you must send us the contract or we will not process the request. If you have lost the contract, we will require an acceptable affidavit of loss. Surrendering your contract or making a partial withdrawal in the first six years of your contract may trigger the contingent deferred sales charge. See Contract costs and expenses. To process a partial withdrawal, we will redeem enough accumulation units to equal the dollar value of your request. When you surrender your contract, we redeem all the units. For both transactions we use the unit value next calculated after we receive a proper request from you. We will deduct any applicable contract charges, deferred sales charges and annuity taxes from the proceeds of a surrender. In the case of a partial withdrawal, we will cash additional units to cover these charges. See Contract Costs and Expenses - Contingent Deferred Sales Charges. If you have less than $500 left in your Single Premium Payment Contract after a partial withdrawal, $250 left in your Flexible Premium Payment ------------- 18 PROSPECTUS THE ACCUMULATION PERIOD ------------- Payments -------------------------------------------------------------------------------- For all transactions, we can delay payment if the contract is being contested. We may postpone any calculation or payment from the variable investment options if: o the New York Stock Exchange is closed for trading or trading has been suspended, or o the Securities and Exchange Commission restricts trading or determines that a state of emergency exists which may make payment or transfer impracticable Assigning contract interests If the contract is part of a Keogh plan, or a corporate or individual plan under Sections 401(a), 403(b) or 408 of the Internal Revenue Code, the contract owner's interest in the contract cannot be assigned, unless the contract owner is not the annuitant or the annuitant's employer. Assigned contract interests may be treated as a taxable distribution to the contract owner. See Federal tax matters for more information. Reports At least twice each year, we send a report to each contract owner that contains financial information about the underlying Funds, according to applicable laws, rules and regulations. In addition, at least once each year, we send a statement to each contract owner that reports the number of accumulation units and their value under the contract. If several members of the same household own a contract, we may send only one such report or prospectus to that address, unless you instruct us otherwise. You may receive additional copies by calling or writing our Customer Service Office. Contract, or $1,000 in your Group Contract, we will cancel the contract and pay you the balance of the proceeds. This is called an involuntary surrender and it may be subject to any applicable contract charges, a deferred sales charge and annuity taxes. Please see Financial information: Federal tax matters. You may request a schedule of systematic partial withdrawals. Under such a program, you may select to receive withdrawal proceeds on a monthly, quarterly, semi-annual or annual basis. Redemptions from the contract will be effective on the 21st of the month or the next following business day preceding the payment date. Withdrawals under this program are not the same as annuity payments you would receive from a payout option. Your contract value will be reduced by the amount of any withdrawals, applicable contract charges, deferred sales charges and annuity taxes. Such systematic withdrawals may be used to satisfy special tax rules related to substantially equal periodic payments or other needs you may have. We are not responsible for the accuracy of the calculations for distributed amounts and compliance with tax provisions. Please see Financial Information: Federal tax matters. Surrenders and partial withdrawals are subject to tax, and may be subject to penalty taxes and mandatory Federal income tax withholding. After the first contract year, you are allowed to make an annual withdrawal of the following amounts from the contract without paying a deferred sales charge: For Single Premium Payment Contracts o 10% of the amount of your single premium payment. For Flexible Premium Payment and Group Contracts o 10% of the total premiums paid during the 72 months immediately preceding the date of your withdrawal. We will cash accumulation units in the following order: o all variable accumulation units attributable to the investment divisions; this will be done on a pro-rata basis unless you instruct us differently, then o all fixed accumulation units attributable to the fixed-rate option. We will send you your payment within seven days of receiving a request from you in good order. Please see Payments later in this section. Please note that withdrawals are restricted for qualified contracts issued in connection with Section 403(b) of the Internal Revenue Code. If you have a question about surrenders or withdrawals, please call us toll free at 1-800-221-3253. ------------- THE ACCUMULATION PERIOD PROSPECTUS 19 ------------- -------------------------------------------------------------------------------- THE ANNUITY PERIOD -------------------------------------------------------------------------------- WHEN ANNUITY PAYMENTS BEGIN You choose the month and year in which we will begin paying annuity benefits. The first payment is made on the first day of the month. The date you choose can't be later than the annuitant's 85th birthday, unless we have agreed. Please note that this date may be determined by the retirement plan under which your annuity contract was issued. HOW YOUR ANNUITY PAYMENTS ARE CALCULATED Your annuity payments will be variable. We use the following information to determine the annuity purchase rate when applying your accumulation value to an annuity payout option: o the table in your contract reflecting the gender and nearest age and the sex of the annuitant o the annuity payout option you choose, and o the investment returns of the variable investment options you choose. Certain guaranteed annuity purchase rates appear in a table in your contract. Currently, we are using annuity purchase rates that are more favorable to you than those in your contract. We may change these rates from time to time but the rate will never be less favorable to you than those guaranteed in your contract. The appropriate annuity purchase rate is then used to calculate the number of annuity units attributable to your selected investment options. You will be credited with these annuity units based on the amount applied to the payout option (your accumulation value less any applicable annuity taxes) on the processing date for your first annuity payment. The number of annuity units credited to you is fixed for the duration of the annuity period unless you reallocate among the investment options. Each of your variable annuity payments is determined by multiplying the number of annuity units for each investment option by the annuity unit value for the appropriate investment option on the payment processing date. Your annuity payment will be the sum of these amounts. The number and amount of your annuity payments won't be affected by the longevity of annuitants as a group. Nor will they be affected by an increase in our expenses over the amount we have charged in your contract. We will make annuity payments once a month, except as follows: o Proceeds of less than $2,000 will be delivered in a single payment. o We may change the schedule of installment payments to avoid payments of less than $20. The payout options currently offered are discussed below. You can choose to have annuity payments made under any one of the options that are available. You can make your choice at any time before your annuity payments begin. At any time, we may discontinue any of these options or make additional options available. ------------- 20 PROSPECTUS THE ANNUITY PERIOD ------------- The assumed investment return is a critical assumption for calculating variable annuity payments. The first variable payment will be based on the assumed investment return of 4%. Subsequent payments will fluctuate based on the performance of the variable investment options you have chosen as compared to the assumed investment return. For each such subsequent payment: o If the actual net annual return on investment equals 4% - the amount of your variable annuity payment will not change. o If the actual net annual return on investment is greater than 4% - the amount of your variable annuity payments will increase. o If the actual net annual return on investment is less than 4% - the amount of your variable annuity payments will decrease. ANNUITY PAYOUT OPTIONS There are a variety of payout options for you to choose from that we've described below. If you do not make a choice, we will automatically select Option 2. You may change options if you wish, provided you do so before we begin processing your first annuity payment. Option 1 -- Life Annuity Payments We make a payment once a month during the annuitant's lifetime, ending with the payment preceding the annuitant's death. This option allows for the maximum monthly payment because there is neither a guaranteed minimum number of payments nor a provision for a death benefit for beneficiaries. It is possible that an annuitant could receive only one payment, if he or she dies before the date of the second payment. Option 2 -- Life Annuity with 120 Monthly Payments Certain We make a payment once a month during the annuitant's lifetime, but if the annuitant dies before receiving 10 years' worth of payments (120), the remaining payments will be made to the beneficiary. The beneficiary can then choose to take all or part of the remaining payments in a lump sum at their current dollar value. If the beneficiary dies while receiving the payments, the balance will be paid in one sum at its current dollar value to the beneficiary's estate. Option 3 -- Joint and Two-Thirds Survivor Annuity We make a payment once a month during the joint lifetimes of the annuitant and a designated second person, the joint annuitant. If one dies, payments will continue during the survivor's lifetime, but the amount of the payment will be based on two-thirds of the number of annuity units when both parties were alive. It is possible that the joint annuitants could receive only one payment if they both die before the date of the second payment. ------------- THE ANNUITY PERIOD PROSPECTUS 21 ------------- -------------------------------------------------------------------------------- OTHER CONTRACT FEATURES -------------------------------------------------------------------------------- DEATH BENEFITS If the annuitant you have named dies before the date annuity payments begin, we pay a death benefit. In addition, you have the option of buying an enhanced death benefit rider which may provide a higher death benefit. Depending on your age at the time the contract was issued and state regulatory approval, the regular death benefit is the greatest of: o the accumulation value of the contract at the end of the valuation period during which we receive proof of death minus any applicable annuity taxes; o the total of all premiums paid, minus any partial withdrawals, any deferred sales charges previously paid on any withdrawals and annuity taxes; or o the accumulation value of your contract as of the first contract anniversary date following the date the Department of Insurance in your state approves this contract feature, plus any premiums paid on or after this anniversary, less any withdrawals and contingent deferred sales charges made after this anniversary and any annuity taxes. Depending on the terms of your contract, the death benefit will be the accumulation value at the end of the valuation period during which we receive proof of death, in good order if the annuitant has reached a certain age. We normally pay the death benefit within seven days of receiving proof of death in good order. However, we have the right to defer the payment of other contract benefits under certain circumstances. These are described under Surrenders and partial withdrawals. Generally, your beneficiaries will be taxed on the gain in your annuity contract. Consult your tax adviser about the estate tax and income tax consequences of your particular situation. If the annuitant is not the contract owner and dies on or before the date that annuity payments begin, we will pay the death benefits to the beneficiary. If the beneficiary has also died, we will pay the benefits to the contingent beneficiary. If a contingent beneficiary has not been named, then we will pay the benefits to you, the contract owner, unless you previously designated the annuitant's estate to receive the death benefits. However, if you are no longer living, we will pay the benefits to your estate. If you are both the annuitant and the owner of the contract, and you die before the date annuity payments begin, we will pay the death benefit to your beneficiary, as described above. However, we must distribute your interest according to the Special requirements outlined below. In this situation, your beneficiary will become the new contract owner. We will pay the death benefit in a lump sum unless: o You have chosen a different annuity payout option for the death benefit. We must receive notification of your choice at least three business days before we pay out the proceeds. ------------- 22 PROSPECTUS OTHER CONTRACT FEATURES ------------- o You, the contract owner, have not chosen a payout option and the beneficiary has. Again, we must receive the beneficiary's request at least three business days before we pay out the proceeds, and within a year of the annuitant's death. If the death benefit proceeds will not be paid in one lump sum and the death benefit proceeds exceed the accumulation value of the contract as of the end of the valuation period during which we received proof of death in good order, GIAC will credit to the contract an amount equal to the difference between the death benefit proceeds and the accumulation value of the contract. Such amount will be credited to The Guardian Cash Fund investment option. If you are a contract owner but not the annuitant, and you die before the date annuity payments begin, then any joint contract owner will become the new contract owner. You may only name your spouse as a joint contract owner. If you have not named your spouse as joint contract owner, then your beneficiary will become the new contract owner. In the event of any contract owner's death, we must distribute all of the owner's interest in the contract according to the Special requirements outlined below. -------------------------------------------------------------------------------- Primary annuitant Please note that the primary annuitant is determined in accordance with Section 72(s) of the Internal Revenue Code, which states that he or she is the person the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the contract. -------------------------------------------------------------------------------- Special requirements If the contract owner dies, the following rules apply. If the beneficiary is not your spouse, and you die before the date annuity payments begin, then we must distribute all of your interest in the contract within five years of your death. These distribution requirements will be satisfied if any portion of the deceased contract owner's interest: o is payable to, or for the benefit of, any new contract owner, and o will be distributed over the new contract owner's life, or over a period not extending beyond the life expectancy of any new contract owner. Under the above conditions, distributions must begin within one year of your death. If the beneficiary (or sole surviving joint contract owner) is your spouse, he or she can continue the contract, assuming the role of contract owner. If the owner of the contract is not an individual, then the primary annuitant will be treated as the contract owner. In this situation, any change in the annuitant will be treated as the death of the contract owner. Enhanced death benefits The enhanced death benefit riders are available at certain times through special programs for contracts that have annuitants who are under age 75 at the time the rider is issued. If a death benefit is payable and one of these ------------- OTHER CONTRACT FEATURES PROSPECTUS 23 ------------- options is in force, the beneficiary will receive either the death benefit described above or the enhanced death benefit, whichever is greater. Two riders are offered: o the 7 Year Enhanced Death Benefit Rider which has a daily charge based on an annual rate of 0.30% of the net assets of your variable investment options. o the Contract Anniversary Enhanced Death Benefit Rider, which has a daily charge based on an annual rate of 0.25% of the net assets of your variable investment options. These riders are available only in states where they have been approved. 7 Year Enhanced Death Benefit Rider The enhanced death benefit under this rider is calculated as follows: o The accumulation value of the contract at the end of the reset date immediately preceding the annuitant's death: -- plus any premiums paid after the reset date -- minus any partial withdrawals after the reset date -- minus any deferred sales charges applicable to withdrawals after the reset date and annuity taxes. The first reset date is on the issue date of the rider. After this, each reset date will be each seventh rider anniversary date after that (i.e., the 7th, 14th, 21st and 28th rider anniversaries, and so on). Contract Anniversary Enhanced Death Benefit Rider The enhanced death benefit under this rider is calculated as follows: o the highest accumulation value of the contract on any anniversary of the issue date of the rider anniversary before the annuitant's 85th birthday: -- plus any premiums paid after that rider anniversary -- minus any partial withdrawals after that rider anniversary -- minus any deferred sales charges and annuity taxes applicable to such withdrawals. We will terminate either enhanced death benefit rider on the earliest of the following dates: o the date the enhanced death benefit is paid out o the date the contract terminates o the date of the annuitant's 85th birthday o the date annuity payments begin o the date we receive a written termination request from you. Once a death benefit rider is terminated, it cannot be reinstated. The death benefit reverts to the basic death benefit and no further charges will be deducted for this benefit. We reserve the right to offer or discontinue offering of either enhanced death benefit rider at any time, without prior notice. ------------- 24 PROSPECTUS OTHER CONTRACT FEATURES ------------- -------------------------------------------------------------------------------- FINANCIAL INFORMATION -------------------------------------------------------------------------------- HOW WE CALCULATE UNIT VALUES When you choose a variable investment option, you accumulate variable accumulation units. With the fixed-rate option, you accumulate fixed accumulation units. To calculate the number of accumulation units you buy with each payment, we divide the amount you invest in each option by the value of units in the option. We use the unit value next calculated after we have received and accepted your payment. We calculate unit values at the close of business of the New York Stock Exchange, usually at 4:00 p.m. New York City time, each day the Exchange is open for trading and GIAC is open for business. To determine the value of your account, we multiply the number of accumulation units in each option by the current unit value for the option. We determine the value of a fixed accumulation unit by adding together its value at the end of the preceding valuation period and any interest credited to the unit since the end of that period. We determine the value of a variable accumulation unit by multiplying its value at the end of the preceding valuation period by the net investment factor for the current valuation period. The net investment factor is a measure of the investment experience of each variable investment option. We determine the net investment factor for a given valuation period as follows: o At the end of the valuation period we add together the net asset value of a Fund share and its portion of dividends and distributions made by the Fund during the period o We divide this total by the net asset value of the particular Fund share calculated at the end of the preceding valuation period o Finally, we add up the daily charges (mortality and expense risks, administrative expenses, and any premium taxes) and subtract them from the above total. ------------- FINANCIAL INFORMATION PROSPECTUS 25 ------------- CONTRACT COSTS AND EXPENSES The amount of a charge may not strictly correspond to the costs of providing the services or benefits indicated by the name of the charge or related to a particular contract, and we may profit from charges. For example, the contingent deferred sales charge may not fully cover all of the sales and distribution expenses actually incurred by GIAC, and proceeds from other charges, including the mortality and expense risk charge, may be used in part to cover these expenses. No sales charges are deducted from your premium payments when you make them. However, the following charges do apply: Expenses of the Funds The Funds you choose through your variable investment options have their own management fees, 12b-1 fees, and general operating expenses. The deduction of these fees and expenses is reflected in the per-share value of the Funds. They are fully described in the Funds' prospectuses. Mortality and expense risk charge You will pay a daily charge based on an annual rate of 1.0% of the net assets of your variable investment options to cover our mortality and expense risks. (Approximately 0.65% covers mortality risks, while the remaining 0.35% covers expense risks.) Mortality risks arise from our promise to pay death benefits and make annuity payments to each annuitant for life. Expense risks arise from the possibility that the amounts we deduct to cover sales and administrative expenses may not be sufficient. Administrative expenses We deduct an annual fee of $30 for Single Premium Payment Contracts, and $35 for Flexible Premium Payment and Group Contracts, on each anniversary date of your contract during the accumulation period. To pay this charge, we will cancel the number of accumulation units that is equal in value to the fee. We cancel accumulation units in the same proportion as the percentage of the contract's accumulation value attributable to each variable investment option and the fixed-rate option. If you surrender your contract before the contract anniversary date, we will still deduct the contract fee for that year. In addition, the following charges may apply: Contingent deferred sales charge For single premium payment contracts, if you make a partial withdrawal from your account or surrender your contract, you will pay a deferred sales charge on any premium payment amount withdrawn during the first seven contract years measured from the date of issue. This charge compensates us for expenses related to the sale of contracts. These include commissions to registered representatives, as well as promotional expenses. The total deferred sales charges are guaranteed never to exceed 9% of the premiums you have paid. ------------- 26 PROSPECTUS FINANCIAL INFORMATION ------------- When we calculate the deferred sales charge, all amounts taken out are assumed to come from the oldest premium. We do this to minimize the amount you owe. The amount of the charge and the time period used to calculate it depend on the type of contract you have. The deferred sales charge associated with single premium payment contracts are listed in the table below. ----------------------------------------------------- Number of Contract Years Contingent Completed from Deferred Date of Premium Sales Charge Payment Percentage ----------------------------------------------------- 1 5% ----------------------------------------------------- 2 5% ----------------------------------------------------- 3 4% ----------------------------------------------------- 4 3% ----------------------------------------------------- 5 2% ----------------------------------------------------- 6 1% ----------------------------------------------------- 7+ 0% ----------------------------------------------------- The deferred sales charge associated with flexible premium payment contracts and group contracts is calculated as the lesser of: o 5% of the premium payments you have made within six contract years (72 months) before the date of your request for the withdrawal or surrender; or o 5% of the amount withdrawn or surrendered. Enhanced death benefit expenses If you choose one of the enhanced death benefit riders and it is in effect, you will pay a daily charge based on an annual rate of up to 0.30% of the net assets of your variable investment options depending on the option chosen. Annuity taxes Some states and municipalities may charge annuity taxes when premium payments are made or when you begin to receive annuity payments. These taxes currently range up to 3.5% of your premium payments. We may deduct the premium tax either from your premium payment when made, or from the annuity payments on the date annuity payments begin, depending on state laws. In jurisdictions where the annuity tax is incurred when a premium payment is made, we deduct the amount from your premium payment at the time it is made. We reserve the right to pay the annuity tax on your behalf and then deduct the same amount from the value of your contract when you surrender it, or on your death, or it is applied under a payout option, whichever is first. We will do this only if permitted by applicable law. ------------- FINANCIAL INFORMATION PROSPECTUS 27 ------------- Transfer charge Currently, we do not charge for transfers. However, we reserve the right to charge up to $25 for each transfer. We will deduct this charge on a proportional basis from the options from which amounts are transferred. FEDERAL TAX MATTERS The following summary provides a general description of the Federal income tax considerations associated with the contract. It is not intended to be complete or to cover all tax situations or address state taxation issues. This summary is not intended as tax advice. You should consult a tax adviser for more complete information about your circumstances, any recent tax developments, and the impact of state tax laws. This summary is based on our understanding of the present Federal income tax laws. We make no representation as to the likelihood of continuation of the present Federal income tax laws or as to how they may be interpreted by the Internal Revenue Service (IRS). We believe that our contracts will qualify as annuity contracts for Federal income tax purposes and the following summary assumes so. Further details are available in the Statement of Additional Information, under the heading Tax Status of the Contracts. When you invest in an annuity contract, you usually don't pay taxes on your investment gains until you withdraw the money -- generally for retirement purposes. In this way, annuity contracts have been recognized by the tax authorities as a legitimate means of deferring tax on investment income. We believe that if you are a natural person you won't be taxed on increases in the accumulation value of a contract until a distribution occurs or until annuity payments begin. For these purposes, the agreement to assign or pledge any portion of a contract's accumulation value and, in the case of a qualified contract (described below), any portion of an interest in the qualified plan generally will be treated as a distribution. When annuity payments begin, you generally will be taxed only on the investment gains you have earned and not on the payments you made to purchase the contract. Generally, withdrawals from your annuity should only be made once you reach age 59 1/2, die or are disabled, otherwise a 10% tax penalty may be applied against any amounts included in income. Additional exceptions may apply to distributions from a qualified contract. You should consult a tax adviser with regard to exceptions from the penalty tax. If you invest in a variable annuity as part of an individual retirement plan, a pension plan or employer-sponsored retirement program, your contract is called a qualified contract. If your annuity is independent of any formal retirement or pension plan, it is termed a non-qualified contract. ------------- 28 PROSPECTUS FINANCIAL INFORMATION ------------- Taxation of non-qualified contracts Non-natural person If a non-natural person owns a non-qualified annuity contract, the owner generally must include in income any increase in the excess of the accumulation value over the investment in the contract (generally, the premiums or other consideration paid for the contract) during the taxable year. There are some exceptions to this rule and a prospective owner that is not a natural person should discuss these with a tax adviser. This following summary generally applies to contracts owned by natural persons. Withdrawals before the annuity commencement date When a withdrawal from a non-qualified contract occurs, the amount received will be treated as ordinary income subject to tax up to an amount equal to any excess of the accumulation value immediately before the distribution that exceeds the owner's investment in the contract. Generally, the owner's investment in the contract is the amount equal to the premiums or other consideration paid for the contract, reduced by any amounts previously distributed from the contract that were not subject to tax at that time. In the case of a surrender under a non-qualified contract, the amount received generally will be taxable only to the extent it exceeds the owner's investment in the contract. It is possible that the IRS may decide to consider the charges you may choose to pay for certain optional benefits offered through the contract to be taxable distributions to you which may also be subject to tax penalties if you are under age 59 1/2. You should consult your tax adviser before selecting any of the optional benefits available under this contract. Penalty tax on certain withdrawals In the case of a distribution from a non-qualified contract, a federal tax penalty may be imposed equal to 10% of the amount treated as income. However, there is generally no penalty on distributions that are: o made on or after the taxpayer reaches age 59 1/2, o made from an immediate annuity contract, o made on or after the death of an owner, o attributable to the taxpayer's becoming disabled, or o made as part of a series of substantially equal periodic payments for the life - or life expectancy - of the taxpayer. If you receive systematic payments that you intend to qualify for the substantially equal periodic payment exception, changes to your systematic payments before you reach age 59 1/2 or within five years (whichever is later) after beginning your systematic payments will result in the retroactive imposition of the 10% tax penalty with interest. In addition, you should note that distributions made before you reach age 59 1/2 under any option that provides for a period certain annuity in connection with a deferred annuity contract may be subject to the 10% tax penalty. Other exceptions may apply under certain circumstances. Special rules may also apply to the exceptions noted above. You should consult a tax adviser with regard to exceptions from the penalty tax. ------------- FINANCIAL INFORMATION PROSPECTUS 29 ------------- Annuity payments Although tax consequences may vary depending on the payout option elected under an annuity contract, a portion of each annuity payment is generally not taxed and the remainder is taxed as ordinary income. The non-taxable portion of an annuity payment is generally determined so that you recover your investment in the contract ratably on a tax-free basis over the expected stream of annuity payments, as determined when annuity payments begin. However, once your investment in the contract has been fully recovered, the full amount of each annuity payment is subject to tax as ordinary income. Taxation of death benefits Amounts may be distributed from a contract because of your death or the death of the annuitant. Generally, such amounts are included in the income of the recipient as follows: o if distributed in a lump sum, they are taxed in the same manner as a surrender of the contract o if distributed under a payout option, they are taxed in the same way as annuity payments. Transfers, assignments and contract exchanges Transferring or assigning ownership of a contract, designating an annuitant, selecting certain maturity dates or exchanging a contract may result in certain tax consequences to you that are not outlined here. For example, such transactions may result in Federal gift taxes for you and Federal and state income taxes for the new owner, annuitant or payee. If you are considering any such transaction, you should consult a professional tax adviser. Withholding tax Annuity distributions are generally subject to withholding for the recipient's federal income tax liability. However, recipients can generally choose not to have tax withheld from distributions. Separate account charges It is possible that the IRS may take the position that fees deducted for certain optional benefits are deemed to be taxable distributions to you. In particular, the IRS may treat fees deducted for the optional benefits as taxable withdrawals, which might also be subject to a tax penalty if such withdrawals occur prior to age 59 1/2. Although we do not believe that the fees associated or any optional benefit provided under the contract should be treated as taxable withdrawals, you should consult your tax advisor prior to selecting any optional benefit under the contract. Multiple contracts All non-qualified deferred annuity contracts issued by GIAC or its affiliates to the same owner during any calendar year are treated as one annuity contract for purposes of determining the amount included in the contract owner's income when a taxable distribution occurs. ------------- 30 PROSPECTUS FINANCIAL INFORMATION ------------- Taxation of qualified contracts Qualified arrangements receive tax deferred treatment as a formal retirement or pension plan through provisions of the Internal Revenue Code. There is no added tax benefit of funding such qualified arrangements with tax deferred annuities. While the contract will not provide additional tax benefits, it does provide other features and benefits such as death benefit protection and the possibility for income guaranteed for life. Your rights under a qualified contract may be subject to the terms of the retirement plan itself, regardless of the terms of the qualified contract. Adverse tax consequences may result if you do not ensure that contributions, distributions and other transactions with respect to the contract comply with the law. Individual Retirement Accounts (IRAs) As defined in Sections 219 and 408 of the Internal Revenue Code, individuals are allowed to make annual contributions to an IRA of up to the lesser of the specified annual amount or 100% of the compensation includable in their gross income. All or a portion of these contributions may be deductible, depending on the person's income. Distributions from certain retirement plans may be rolled over into an IRA on a tax-deferred basis without regard to these limits. Roth IRAs under Section 408A may also be used in connection with variable annuity contracts. Contributions to Roth IRAs are not tax-deductible, and contributions must be made in cash or as a rollover or transfer from another Roth IRA or IRA. You may wish to consult a tax adviser before combining any converted amounts with any other Roth IRA contributions, including any other conversion amounts from other tax years. A rollover or conversion of an IRA to a Roth IRA may be subject to tax. Distributions from Roth IRAs are generally not taxed. In addition to the income tax and 10% penalty which generally applies to distributions of earnings made before age 59 1/2, income tax and a 10% penalty will be imposed for any distribution of earnings made from a Roth IRA during the five taxable years starting after you first contribute to any Roth IRA. A 10% penalty tax may apply to amounts attributable to a conversion from an IRA if they are distributed during the five taxable years beginning with the year in which the conversion was made. Simplified Employee Pension (SEP) IRAs Under Section 408(k) of the Internal Revenue Code, employers are allowed to provide IRA contributions on behalf of their employees. In addition to the general rules governing IRAs, SEP IRAs are subject to certain requirements regarding participation and the amounts of contributions. Employers using this contract in connection with SEP IRAs should consult their tax adviser. Corporate pension and profit-sharing plans Under Section 401(a) of the Internal Revenue Code, corporate employers are allowed to establish various types of retirement plans for employees, and self-employed individuals are allowed to establish qualified plans for themselves and their employees. ------------- FINANCIAL INFORMATION PROSPECTUS 31 ------------- Adverse tax consequences to the retirement plan, the participant or both may result if the contract is transferred to any individual as a means of providing benefit payments, unless the plan complies with all applicable requirements before transferring the contract. Deferred compensation plans Under Section 457 of the Internal Revenue Code, certain tax-exempt employers, such as state and local governments, or other agencies are allowed to establish various types of deferred compensation plans for their employees. Contributions to these plans are generally taxed when the money is withdrawn or payments begin. In non-governmental plans, the employers are considered the owner of the contract and may draw on its value for purposes unrelated to the compensation plan for which it was purchased. In governmental plans, these amounts must be held in trust for the exclusive use of the employees participating in the plan. Tax-sheltered annuities Under Section 403(b) of the Internal Revenue Code, public schools and other eligible employers are allowed to purchase annuity contracts and mutual fund shares through custodial accounts on behalf of employees. Generally, these purchase payments are excluded for tax purposes from employee gross incomes. However, these payments may be subject to FICA (Social Security) taxes. Distributions of salary reduction contributions and earnings (other than your salary reduction accumulation as of December 31, 1988) are not allowed before age 59 1/2, severance from employment, death or disability. Salary reduction contributions may also be distributed upon hardship, but would generally be subject to penalties. Penalty tax on certain withdrawals - Distributions from certain qualified contracts may be subject to ordinary income taxes and a 10% Federal tax penalty on the amount treated as income. However, there is generally no penalty on distributions that are: o made on or after the taxpayer reaches 59 1/2 o made on or after the death of an owner o attributable to the taxpayer's becoming disabled o made to pay deductible medical expenses o made to pay medical insurance premiums if you are unemployed o made to pay for qualified higher education expenses o made for a qualified first time home purchase up to $10,000 o for IRS levies, or o made as part of a series of substantially equal periodic payments for the life or life expectancy of the taxpayer. If you receive systematic payments that you intend to qualify for the substantially equal periodic payment exception, changes to your systematic payments before you reach age 59 1/2 or within five years (whichever is later) after beginning your systematic payments will result in the retroactive imposition of the 10% tax penalty with interest. In addition, you should note that distributions made before you reach age ------------- 32 PROSPECTUS FINANCIAL INFORMATION ------------- 59 1/2 under any option that provides for a period certain annuity may fail to satisfy this exception and may be subject to the 10% tax penalty. Other exceptions may apply under certain circumstances, and certain exceptions may not be applicable to all types of plans. Special rules may also apply to the exceptions noted above. You should consult a tax adviser with regard to exceptions from the tax penalty. Other tax issues You should note that the annuity 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 viewed as an incidental benefit, the amount of which is limited in any 401(a) or 403(b) plan. Because the death benefit may exceed this limitation, employers using the contract in connection with corporate pension and profit-sharing plans, or tax-sheltered annuities, should consult their tax adviser. The IRS 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 those available under this contract comport with IRA qualification requirements. In the case of a withdrawal under a qualified contract, a ratable portion of the amount received is taxable, generally based on the ratio of the "investment in the contract" to the individual's total account balance or accrued benefit under the retirement plan. The "investment in the contract" generally equals the amount of any non-deductible purchase payments paid by or on behalf of any individual. In may cases, the "invesment in the contract" under a qualified contract can be zero. Qualified contracts other than Roth IRA have minimum distribution rules that govern the timing and amount of distributions. You should refer to your retirement plan, adoption agreement or consult a tax adviser for more information about these distribution rules. Pension and annuity distributions generally are subject to withholding for the recipient's Federal income tax liability at rates that vary according to the type of distribution and the recipient's tax status. Recipients generally are provided the opportunity to elect not to have tax withheld from distributions. Taxable "eligible rollover distributions" from section 401(a), 403(a), 403(b), and governmental 457 plans are subject to a mandatory Federal income tax withholding of 20%. An eligible rollover distribution is any distribution to an employee (or the employee's surviving spouse in the case of the employee's death, or to the employee's former spouse in the case of an alternate payee under a qualified domestic relations order) from such a plan, except certain distributions such as distributions required by the Internal Revenue Code, hardship distributions, or distributions in a specified annuity form. The 20% withholding does not apply, however, if the employee chooses a direct rollover from the plan to a tax-qualified plan, 403(b) plan, IRA or governmental section 457(b) plan that separately accounts for rollover amounts. ------------- FINANCIAL INFORMATION PROSPECTUS 33 ------------- Our income taxes At the present time, we make no charge for any Federal, state or local taxes other than the charge for state and local annuity taxes that we incur -- that may be attributable to the investment divisions of the Separate Account or to the contracts. We do have the right in the future to make additional charges for any such tax or other economic burden resulting from the application of the tax laws that we determine is attributable to the investment divisions of the Separate Account or the contracts. Under current laws in several states, we may incur state and local taxes in addition to annuity taxes. These taxes are not now significant and we are not currently charging for them. If they increase, we may deduct charges for such taxes. Possible tax law changes Although the likelihood of legislative change is uncertain, there is always the possibility that the tax treatment of the contract could change by legislation or otherwise. You should consult a tax adviser with respect to legislative developments and their effect on the contract. We have the right to modify the contract in response to legislative changes that could otherwise diminish the favorable tax treatment annuity contract owners currently receive. We make no guarantee regarding the tax status of any contract and do not intend this summary as tax advice. PERFORMANCE RESULTS From time to time, we may show performance information for the Separate Account's investment divisions in advertisements, sales literature or other materials provided to existing or prospective contract owners. These materials are based upon historical information and are not necessarily representative of future performance. More detail about historical performance appears in the Statement of Additional Information. When we show performance, we'll always include SEC standard performance, which reflects all fees and charges for specified periods. We may also show non-standard performance, for example, without showing the effect of certain charges such as deferred sales charges. Among the key performance measures we use are total returns and yields. Total returns include: average annual total return, total return, and change in accumulation unit value -- all of which reflect the change in the value of an investment in an investment division of the Separate Account over a specified period, assuming the reinvestment of all income dividends and capital gains distributions. Yield figures may be quoted for investments in shares of The Guardian Cash Fund and other investment divisions. Current yield is a measure of the income earned on a hypothetical investment over a specified base period of seven days for The Guardian Cash Fund investment division, and 30 days (or one month) for other investment divisions. Effective yield is another measure which may be quoted by The Guardian Cash Fund investment division, which assumes that the net investment ------------- 34 PROSPECTUS FINANCIAL INFORMATION ------------- income earned during a base period will be earned and reinvested for a year. Yields are expressed as a percentage of the value of an accumulation unit at the beginning of the base period. Yields are annualized, which assumes that an investment division will generate the same level of net investment income over a one-year period. However, yields fluctuate daily. Advertisements and sales literature for the Separate Account's investment divisions may compare a Fund's performance to that of investments offered through the separate accounts of other insurance companies that have similar investment objectives or programs. Promotional material 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. Performance comparisons may be illustrated by tables, graphs or charts. Additionally, promotional material may refer to: o the types and characteristics of certain securities o features of a Fund's portfolio o financial markets o historical, current or perceived economic trends, and o topics of general investor interest, such as personal financial planning. In addition, advertisements and sales literature may refer to or reprint all or portions of articles, reports or independent rankings or ratings which relate specifically to the investment divisions or to other comparable investments. However, such material will not be used to indicate future performance. Advertisements and sales literature about the variable annuity contracts and the Separate Account may also refer to ratings given to GIAC by insurance company rating organizations such as: o Moody's Investors Service, Inc. o Standard & Poor's Ratings Group o A.M. Best & Co. o Duff & Phelps. These ratings relate only to GIAC's ability to meet its obligations under the contracts' fixed-rate option and to pay death benefits provided under the contracts, not to the performance of the variable investment options. Further information about the performance of each investment division is contained in their respective annual reports, which may be obtained from GIS free of charge. ------------- FINANCIAL INFORMATION PROSPECTUS 35 ------------- -------------------------------------------------------------------------------- YOUR RIGHTS AND RESPONSIBILITIES -------------------------------------------------------------------------------- VOTING RIGHTS We own the Fund's shares, but you may have voting rights in the various Funds. To the extent that we are required by law, we will cast our votes according to the instructions of those contract owners who have an interest in variable investment options investing in Funds holding a shareholder vote, as of the shareholder meeting record date. Those votes for which we receive no instructions will be voted in the same proportion as those we have received instructions for. We'll solicit instructions when the Funds hold shareholder votes. We have the right to restrict contract owner voting instructions if the laws change to allow us to do so. The owner of the contract has voting rights until the date annuity payments begin. After that date, rights switch to the annuitant. Voting rights diminish with the reduction of your contract value. The fixed-rate option has no voting rights. TELEPHONE AND ELECTRONIC SERVICES We will process certain transactions by telephone if you have authorized us to do so. We currently take fund transfer requests and changes in future allocations over the phone. If you would like this privilege, please complete an authorization form, or complete the appropriate section of your application. Once we have your authorization on file, you can authorize permitted transactions over the telephone by calling 1-800-533-0099 between 9:00 a.m. and 4:00 p.m. New York City time on any day we are open for business. In addition to telephone services, in the future we anticipate offering you the ability to use your personal computer to receive documents electronically, review your account information and to perform other specified transactions. We will notify you as these electronic services become available. At that time, if you want to participate in any or all of our electronic programs, we will ask that you visit our website for information and registration. You may also be able to register by other forms of communication. If you choose to participate in the electronic document delivery program, you will receive financial reports, prospectuses, confirmations and other information via the Internet. You will not receive paper copies. Generally, you are automatically eligible to use these services when they are available. You must notify us if you do not want to participate in any or all of these programs. You may reinstate these services at any time. You bear the risk of possible loss if someone gives us unauthorized or fraudulent registration or instructions for your account so long as we believe the registration or instructions to be genuine and we have followed reasonable procedures to confirm that the registration or instructions communicated by telephone or electronically are genuine. If we do not follow reasonable procedures to confirm that the registration or instructions communicated by telephone or electronically are genuine, we may be liable for any losses. Please take precautions to protect yourself from fraud. Keep your account information and PINnumber private and immediately review your statements and confirmations. Contact us immediately about any transactions you believe to be unauthorized. ------------- 36 PROSPECTUS YOUR RIGHTS AND RESPONSIBILITIES ------------- We may change, suspend or eliminate telephone or Internet privileges at any time, without prior notice. We reserve the right to refuse any transaction request that we believe would be disruptive to contract administration or is not in the best interests of the contractowners or the Separate Account. Telephone and Internet services may be interrupted or response times slow if we are experiencing physical or technical difficulties, or economic or market emergency conditions. While we are experiencing such difficulties we ask you to send your request by regular or express mail and we will process it using the accumulation unit value first calculated after we receive the request. We will not be responsible or liable for: any inaccuracy, error or delay in or omission of any information you transmit or deliver to us; any loss or damage you may incur because of such inaccuracy, error, delay, omission or non-performance; or any interruption resulting from emergency circumstances. YOUR RIGHT TO CANCEL THE CONTRACT During the 10-day period after receiving your contract, the free-look period, you have the right to examine your contract and return it for cancellation if you change your mind about buying it. Longer periods may apply in some states. Upon cancellation, we'll refund to you either: o the total amount you paid for the contract; or o the sum of the surrender value of the contract, plus the difference between the premiums you paid (including any contract fees or other charges) and the amounts allocated to the variable and fixed-rate investment options under the contract. DISTRIBUTION OF THE CONTRACT The variable annuity contracts are sold by insurance agents who are licensed by GIAC and who are either registered representatives of GIS or of broker-dealer firms which have entered into sales agreements with GIS and GIAC. GIS and such other broker-dealers (including Park Avenue Securities LLC, a wholly owned subsidiary of GIAC) are members of the National Association of Securities Dealers, Inc. GIAC will generally pay commissions to these individuals or broker-dealer firms for the sale of contracts. When we compensate a firm, the representative responsible for the sale of the contract will receive a portion of the compensation based on the practice of the firm. Commissions may vary, but will not exceed the limits of applicable laws and regulations. ------------- YOUR RIGHTS AND RESPONSIBILITIES PROSPECTUS 37 ------------- There may be several compensation programs from which these individuals or firms may choose. One compensation program is based on a percentage of each contract premium payment not expected to exceed 4.5%. Other compensation programs may provide a lower initial commission on each premium payment but allow for ongoing annual compensation based on a percentage of the contract value. Typically, the additional annual compensation begins only after the completion of a certain number of contract years. Also, additional annual compensation may be payable while certain contract riders are in effect. The maximum annual compensation possible based on contract value is 1%. We reserve the right to pay any compensation permissible under applicable state law and regulations, including for example, additional sales or service compensation while a contract is in force or additional amounts paid in connection with special promotional incentives. In addition, we may compensate certain individuals or firms for the sale of contracts in the form of commission overrides, expense allowances, bonuses, wholesaler fees and training allowances. Individuals may also qualify for non-cash compensation such as expense-paid trips and educational seminars. If you return your contract under the right to cancel provisions, the representative may have to return some or all of any commissions we have paid. The fees and charges imposed under the contract defray the costs of commissions and other sales expenses. You are not charged directly for commissions or other compensation paid for the sale of contracts. The principal underwriter of the contracts is GIS, located at 7 Hanover Square, New York, New York 10004. ------------- 38 PROSPECTUS YOUR RIGHTS AND RESPONSIBILITIES ------------- -------------------------------------------------------------------------------- SPECIAL TERMS USED IN THIS PROSPECTUS -------------------------------------------------------------------------------- Accumulation Period: The period between the issue date of the contract and the retirement date. Accumulation Unit: A measure used to determine the value of a contract owner's interest under the contract before annuity payments begin. The contract has variable accumulation units and fixed accumulation units. Accumulation Value: The value of all the accumulation units in the variable investment options and/or the fixed-rate option credited to a contract. Annuitant: The person on whose life the annuity payments are based and on whose death, prior to the retirement date, benefits under the contract are paid. Annuity Payments: Periodic payments, either variable or fixed in nature, made by GIAC to the contract owner at monthly intervals after the retirement date. Annuity Unit: A measure used to determine the amount of any variable annuity payment. Business day: Each day the New York Stock Exchange is open for trading and GIAC is open for business. Beneficiary: The person named in the contract to receive the death benefit if the contract owner or the annuitant dies. Contract Anniversary Date: The annual anniversary measured from the issue date of the contract. Contract owner: You (or your); the person(s) or entity designated as the owner in the contract. Funds: The open-end management investment companies, each corresponding to a variable investment option. The Funds are listed on the front cover of this prospectus. Good Order: Notice from any party authorized to initiate a transaction under this contract, received in a format satisfactory to GIAC at its customer service office, that contains all information required by GIAC to process that transaction. For telephone transfer instructions, good order also means that the telephone call must be received on a business day and completed no later than 4:00 p.m. New York City time on that day in order to receive that day's unit values. Retirement Date: The date on which annuity payments under the contract begin. Valuation Period: The time period from the determination of one accumulation unit and annuity unit value to the next. Variable Investment Options: The Funds underlying the contract are the variable investment options - as distinguished from the fixed-rate option - available for allocations of net premium payments and accumulation values. ------------- SPECIAL TERMS USED IN THIS PROSPECTUS PROSPECTUS 39 ------------- -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- LEGAL PROCEEDINGS Neither the Separate Account nor GIAC is a party to any pending material legal proceeding. WHERE TO GET MORE INFORMATION Our Statement of Additional Information (SAI) has more details about the contracts described in this prospectus. If you would like a free copy, please call us toll-free at 1-800-221-3253, or write to us at the following address: The Guardian Insurance & Annuity Company, Inc. Customer Service Office Box 26210 Lehigh Valley, Pennsylvania 18002 The SAI contains the following information: o Services to the Separate Account o Annuity payments o Tax status of the contracts o Calculation of Yield Quotations for The Guardian Cash Fund o Valuation of assets of the Separate Account o Transferability restrictions o Experts ------------- 40 PROSPECTUS OTHER INFORMATION ------------- -------------------------------------------------------------------------------- APPENDIX A SUMMARY FINANCIAL INFORMATION -------------------------------------------------------------------------------- The following two charts containing accumulation unit information for the time periods indicated are derived from the financial statements of Separate Account A, which were audited by PricewaterhouseCoopers LLP, independents accountants, for the year ending December 31, 2003. The data in the charts should be read in conjunction with the financial statements, related notes and other financial information for Separate Account D which are included in the Statement of Additional Information. The Separate Account commenced operations on January 18, 1982. All accumulation unit values when they first became available began at an accumulation unit value of $10.00. If no data appears for a particular accumulation unit value or rider, then that funding option or rider was not available at that time or there were no outstanding accumulation units. The accumulation unit value as indicated for the end of one year is also the accumulation unit value at the beginning of the next year. Variable accumulation unit value for an accumulation unit value outstanding throughout the period:

------------- APPENDIX PROSPECTUS 41 -------------

------------- 42 PROSPECTUS APPENDIX -------------

------------- APPENDIX PROSPECTUS 43 -------------

Number of accumulation units outstanding at the end of the indicated period:

------------- 44 PROSPECTUS APPENDIX -------------

------------- APPENDIX PROSPECTUS 45 -------------

------------- 46 PROSPECTUS APPENDIX -------------

------------- APPENDIX PROSPECTUS 47 ------------- VALUEGUARDII THE GUARDIAN SEPARATE ACCOUNT A OF THE GUARDIAN INSURANCE & Annuity Company, Inc. Statement of Additional Information dated May 1, 2004 This Statement of Additional Information is not a prospectus but should be read in conjunction with the current Prospectus for The Guardian Separate Account A (marketed under the name "Value Guard II") dated May 1, 2004. 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 Tax Status of the Contracts .................................. B-3 Calculation of Yield Quotations for The Guardian Cash Fund ... B-3 Valuation of Assets of the Separate Account .................. B-4 Transferability Restrictions ................................. B-4 Experts ...................................................... B-4 EB-013288 5/03 --- STATEMENT OF ADDITIONAL INFORMATION B-1 --- SERVICES TO THE SEPARATE ACCOUNT The Guardian Insurance & Annuity Company, Inc. ("GIAC") maintains the books and records of The Guardian Separate Account A (the "Separate Account"). GIAC, a wholly owned subsidiary of The Guardian Life Insurance Company of America, acts as custodian of the assets of the Separate Account. GIAC bears all expenses incurred in the operations of the Separate Account, except the mortality and expense risk charge and the annual contract administration fee (as described in the Prospectus), which are borne by the contract owners. Guardian Investor Services LLC ("GIS"), a wholly owned subsidiary of GIAC, serves as principal underwriter for the Separate Account pursuant to a distribution and service agreement between GIAC and GIS. The contracts are offered continuously and are sold by GIAC insurance agents who are registered representatives of either Park Avenue Securities, LLC ("PAS") or of other broker-dealers which have selling agreements with GIS and GIAC. In the years 2003, 2002, and 2001, GIAC paid commissions through GIS and PAS with respect to the sales of variable annuity contracts in the amount of $43,478,315, $39,993,217, and $33,476,514, respectively. ANNUITY PAYMENTS Determination of the first monthly annuity payment: At the time annuity payments begin, the value of the contract owner's account (or if a group contract, the amount applied for a participant as stated by the contract owner) is determined by multiplying the appropriate accumulation unit value on the valuation date ten (10) days before the date the first annuity payment is due by the corresponding number of accumulation units credited to the contract owner's account (or if a group contract, the amount applied for a participant as stated by the contract owner) as of the date the first annuity payment is due, less any applicable premium taxes not previously deducted. The contracts contain tables reflecting the dollar amount of the first monthly payment which can be purchased with each $1,000 of value accumulated under the contract. The amount depends on the form of annuity, the sex (except in those states which require "unisex" rates) and the nearest age of the annuitant(s). The first annuity payment is determined by multiplying the benefit per $1,000 of value shown in the contract tables by the number of thousands of dollars of value accumulated under the contract (or if a group contract, the amount applied for a participant as stated by the contract owner). Currently, we are using annuity purchase rates we believe to be more favorable to you than those in your contract. We may change these rates from time to time, but the rate will never be less favorable than those guaranteed in your contract. Value of an Annuity Unit: The value of an annuity unit is determined independently for each of the variable investment options. For any valuation period, the value of an annuity unit is equal to the value for the immediately preceding valuation period multiplied by the annuity change factor for the current valuation period. The annuity unit value for a valuation period is the value determined as of the end of such period. The annuity change factor is equal to the net investment factor for the same valuation period adjusted to neutralize the assumed 4% investment return used in determining the amounts of annuity payable. The net investment factor is reduced by the amount of the mortality and expense risk charge on an annual basis during the life of the contract. The dollar amount of any monthly payment due after the first monthly payment under an annuity option will be determined by multiplying the number of annuity units by the value of an annuity unit for the valuation period ending ten (10) days prior to the valuation period in which the monthly payment is due. Determination of the second and subsequent monthly annuity payments: The amount of the second and subsequent annuity payments is determined by multiplying the number of annuity units by the appropriate annuity unit value as of the valuation date 10 days prior to the day such payment is due. The number of annuity units under a contract is determined by dividing the first monthly payment by the value of the appropriate annuity unit on the date of such payment. This number of annuity units remains fixed during the annuity payment period, provided no transfers among the variable investment options are made. The assumed investment return of 4% under the contract is the measuring point for subsequent annuity payments. If the actual net investment return (on an annual basis) remains constant at 4%, the annuity payments will remain constant. If the actual net investment rate exceeds 4%, the payment will increase at a return equal to the amount of such excess. Conversely, if the actual return is less than 4%, annuity payments will decrease. --- B-2 THE GUARDIAN SEPARATE ACCOUNT A --- The second and subsequent monthly payments made under the fixed-rate option will be equal to the amount of the first monthly fixed annuity payment. TAX STATUS OF THE CONTRACTS Tax law imposes several requirements that variable annuities must satisfy in order to receive the tax treatment normally accorded to annuity contracts. Diversification Requirements. The Internal Revenue Code of 1986, as amended ("Code") requires that the investments of each investment division of the separate account underlying the contracts be "adequately diversified" in order for the contracts to be treated as annuity contracts for Federal income tax purposes. It is intended that each investment division, through the fund in which it invests, will satisfy these diversification requirements. Owner Control. In some circumstances, owners of variable contracts who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets and may be subject to tax on income produced by those assets. Although published guidance in this area does not address certain aspects of the contracts, we believe that the owner of a contract should not be treated as the owner of the separate account assets. We reserve the right to modify the contracts to bring them into conformity with applicable standards should such modification be necessary to prevent owners of the contracts from being treated as the owners of the underlying separate account assets. Required Distributions. In order to be treated as an annuity contract for Federal income tax purposes, section 72(s) of the Code requires any non-qualified contract to contain certain provisions specifying how your interest in the contract will be distributed in the event of the death of a holder of the contract. Specifically, section 72(s) requires that (a) if any holder dies on or after the annuity starting date, but prior to the time the entire interest in the contract has been distributed, the entire interest in the contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such holder's death; and (b) if any holder dies prior to the annuity starting date, the entire interest in the contract will be distributed within five years after the date of such holder's death. These requirements will be considered satisfied as to any portion of a holder's interest which is payable to or for the benefit of a designated beneficiary and which is distributed over the life of such designated beneficiary or over a period not extending beyond the life expectancy of that beneficiary, provided that such distributions begin within one year of the holder's death. The designated beneficiary refers to a natural person designated by the holder as a beneficiary and to whom ownership of the contract passes by reason of death. However, if the designated beneficiary is the surviving spouse of the deceased holder, the contract may be continued with the surviving spouse as the new holder. The non-qualified contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued. We intend to review such provisions and modify them if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise. Other rules may apply to qualified contracts. CALCULATION OF YIELD QUOTATIONS FOR THE GUARDIAN CASH FUND The yield of the Investment Division of the Separate Account investing in The Guardian Cash Fund represents the net change, exclusive of gains and losses realized by the Investment Division or The Guardian Cash Fund and unrealized appreciation and depreciation with respect to the portfolio securities of The Guardian Cash Fund, in the value of a hypothetical pre-existing contract that is credited with one accumulation unit at the beginning of the period for which yield is determined (the "base period"). The base period generally will be a seven-day period. The current yield for a base period is calculated by dividing (i) the net change in the value of the contract for the base period (see "Accumulation Period" in the Prospectus) by (ii) the value of the contract at the beginning of the base period and multiplying the result by 365/7. Deductions from purchase payments (for example, any applicable annuity taxes) and any applicable contingent deferred sales charge assessed at the time of withdrawal or annuitization are not reflected in the computation of current yield of the investment division. The determination of net change in contract value does reflect all deductions that are charged to a contract owner, in proportion to the length of the base period and the investment division's average contract size. --- STATEMENT OF ADDITIONAL INFORMATION B-3 --- Yield also may be calculated on an effective or compound basis, which assumes continual reinvestment by the Investment Division throughout an entire year of net income earned by the Investment Division at the same rate as net income is earned in the base period. The effective or compound yield for a base period is calculated by (A) dividing (i) the net change in the value of the contract for the base period by (ii) the value of the contract as of the beginning of the base period, (B) adding 1 to the result, (C) raising the sum to a power equal to 365 divided by the number of days in the base period, and (D) subtracting 1 from the result. The yield of The Guardian Cash Fund Investment Division will vary depending on prevailing interest rates, the operating expenses and the quality, maturity and type of instruments held in the portfolio of The Guardian Cash Fund. Consequently, no yield quotation should be considered as representative of what the yield of the subdivision may be for any specified period in the future. The Guardian Cash Fund Investment Division's respective yields are not guaranteed. The current and effective annualized yields for the Investment Division investing in The Guardian Cash Fund for the seven-day period ending December 31, 2003 were 0.56% and 0.56%, respectively, calculated as described above. VALUATION OF ASSETS OF THE SEPARATE ACCOUNT The value of Fund shares held in each Separate Account Investment Division at the time of each valuation is the redemption value of such shares at such time. If the right to redeem shares of a Fund has been suspended, or payment of redemption value has been postponed for the sole purpose of computing annuity payments, the shares held in the Separate Account (and annuity units) may be valued at fair value as determined in good faith by the Board of Directors of GIAC. TRANSFERABILITY RESTRICTIONS Where a contract is owned in conjunction with a retirement plan qualified under the Internal Revenue Code, a tax-sheltered annuity program or individual retirement account, and notwithstanding any other provisions of the contract, the contract owner 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 contract owner is the trustee of an employee trust qualified under the Internal Revenue Code of 1986, the custodian of a custodial account treated as such, or the employer under a qualified non-trustee pension plan. EXPERTS The consolidated financial statements of GIAC as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003 and the financial statements of the Separate Account as of and for the year ended December 31, 2003 and for each of the two years in the period then ended, included in this Statement of Additional Information have been so included in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. --- B-4 THE GUARDIAN SEPARATE ACCOUNT A --- This page intentionally left blank -------------------------------------------------------------------------------- FINANCIAL STATEMENTS OF THE GUARDIAN SEPARATE ACCOUNT A -------------------------------------------------------------------------------- The Guardian Separate Account A STATEMENT OF ASSETS AND LIABILITIES December 31, 2003

See notes to financial statements. B-6 & B-7 The Guardian Separate Account A STATEMENT OF ASSETS AND LIABILITIES December 31, 2003

See notes to financial statements. B-8 & B-9 The Guardian Separate Account A STATEMENT OF ASSETS AND LIABILITIES December 31, 2003

See notes to financial statements. B-10 & B-11 The Guardian Separate Account A STATEMENT OF ASSETS AND LIABILITIES December 31, 2003

See notes to financial statements. B-12 & B-13 The Guardian Separate Account A STATEMENT OF OPERATIONS Year Ended December 31, 2003

See notes to financial statements. B-14 & B-15 The Guardian Separate Account A STATEMENT OF OPERATIONS Year Ended December 31, 2003 (continued)

See notes to financial statements. B-16 & B-17 The Guardian Separate Account A STATEMENT OF OPERATIONS Year Ended December 31, 2003 (continued)

See notes to financial statements. B-18 & B-19 The Guardian Separate Account A STATEMENT OF OPERATIONS Year Ended December 31, 2003 (continued)

See notes to financial statements. B-20 & B-21 The Guardian Separate Account A STATEMENT OF CHANGES IN NET ASSETS Years Ended December 31, 2002 and 2003

See notes to financial statements. B-22 & B-23 The Guardian Separate Account A STATEMENT OF CHANGES IN NET ASSETS Years Ended December 31, 2002 and 2003 (continued)

See notes to financial statements. B-24 & B-25 The Guardian Separate Account A STATEMENT OF CHANGES IN NET ASSETS Years Ended December 31, 2002 and 2003 (continued)

See notes to financial statements. B-26 & B-27 The Guardian Separate Account A STATEMENT OF CHANGES IN NET ASSETS Years Ended December 31, 2002 and 2003 (continued)

See notes to financial statements. B-28 & B-29 -------------------------------------------------------------------------------- THE GUARDIAN SEPARATE ACCOUNT A NOTES TO FINANCIAL STATEMENTS (DECEMBER 31, 2003) -------------------------------------------------------------------------------- NOTE 1 -- ORGANIZATION The Guardian Separate Account A (the Account), a unit investment trust registered under the Investment Company Act of 1940, as amended, was organized by The Guardian Insurance & Annuity Company, Inc. (GIAC) on October 31, 1981. GIAC is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). GIAC issues the individual and group deferred variable annuity contracts offered through the Account. GIAC provides for accumulations and benefits under the contracts by crediting the net premium purchase payments to one or more investment divisions established within the Account, or to the Fixed Rate Option (FRO), as selected by the contractowner. Amounts allocated to the FRO are maintained by GIAC in its general account. The contractowner may transfer his or her contract value among the thirty eight investment options within the Account, or the FRO. However, a contractowner may only invest in up to twenty investment divisions, including the FRO, at any time. Contractowners who qualify may also purchase either a seven year or contract anniversary Enhanced Death Benefit Rider, which may provide greater death benefits than the proceeds payable under the basic contract. The thirty eight investment options of the Account correspond to the following underlying mutual funds and class of shares in which the investment option invests (collectively, the Funds and individually, a Fund): The Guardian Stock Fund (GSF) The Guardian VC 500 Index Fund The Guardian VC Asset Allocation Fund The Guardian VC High Yield Bond Fund (GHYBF) The Guardian Bond Fund, Inc. (GBF) The Guardian Cash Fund, Inc. (GCF) Gabelli Capital Asset Fund (GCAF) Baillie Gifford International Fund (BGIF) Baillie Gifford Emerging Markets Fund (BGEMF) The Guardian Small Cap Stock Fund (GSCSF) Value Line Centurion Fund Value Line Strategic Asset Management Trust AIM V.I. Capital Appreciation Fund Series I AIM V.I. Global Utilities Fund Series I AIM V.I. Premier Equity Fund Series I AllianceBernstein Growth & Income Portfolio Class B AllianceBernstein Premier Growth Portfolio Class B AllianceBernstein Technology Portfolio Class B AllianceBernstein Value Portfolio Class B Davis Financial Portfolio Davis Real Estate Portfolio Davis Value Portfolio Fidelity VIP Contrafund Portfolio Service Class Fidelity VIP Equity-Income Portfolio Service Class Fidelity VIP Growth Opportunities Portfolio Service Class Fidelity VIP Mid Cap Portfolio Service Class Templeton Growth Securities Fund Class 2 Janus Aspen Mid Cap Growth Portfolio Institutional Shares (formerly Janus Aspen Aggressive Growth Portfolio) Janus Aspen Capital Appreciation Portfolio Institutional Shares Janus Aspen Growth Portfolio Institutional Shares Janus Aspen Worldwide Growth Portfolio Institutional Shares MFS Emerging Growth Series Initial Class MFS Investors Trust Series Initial Class MFS New Discovery Series Initial Class MFS Research Series Initial Class MFS Total Return Series Initial Class Van Kampen Life Investment Trust Growth & Income Portfolio Class II Van Kampen Life Investment Trust Government Portfolio Class II A tax-qualified and a non-tax-qualified investment division have been established within each investment option available in the Account. Under applicable insurance law, the assets and liabilities of the Account are clearly identified and distinguished from the other assets and liabilities of GIAC. The assets of the Account will not be charged with any liabilities arising out of any other business conducted by GIAC, but the obligations of the Account, including the promise to make annuity payments, are obligations of GIAC. The changes in net assets maintained in the Account provide the basis for the periodic determination of benefits under the policies. The net assets are sufficient to fund the amount required under the state insurance law to provide for death benefits (without regard to the policy's minimum death benefit guarantee) and other policy benefits. Additional assets are held in GIAC's general account to cover the contingency that a policy's guaranteed minimum death benefit might exceed the death benefit which would have been payable in the absence of such guarantee. ---- B-30 FINANCIAL STATEMENTS ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued) NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The following is a summary of significant accounting policies of the Account: Investments (a) The market value of the investments in the Funds is based on the net asset value of the respective Funds as of their close of business on the valuation date. (b) Investment transactions are accounted for on the trade date and income is recorded on the ex-dividend date. Realized gains and losses are determined based on the identified cost of securities sold. (c) The cost of investments sold is determined on a first in, first out (FIFO) basis. Individual Mortality Table Used and the Assumed Investment Return Net assets allocated to contracts in the payout period are computed according to the 1971, 1983 and 2000 Individual Annuity Mortality Tables. The assumed investment return is 4.0% unless the annuitant elects otherwise, in which case the rate may vary, as regulated by the laws of respective states. Federal Income Taxes The operations of the Account are part of the operations of GIAC and, as such, are included in the consolidated tax return of Guardian. GIAC is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended. Under tax law, no federal income taxes are payable by GIAC with respect to the operations of the Account. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Annuity Mortality Fluctuation Fund (AMFF) Pursuant to agreement with the New York State Insurance Department, GIAC maintains assets in each of its separate accounts for the mortality risk associated with contracts in the annuity payout phase. Such amounts are referred to as the Annuity Mortality Fluctuation Fund (AMFF), and are invested in the GCF subdivision of each separate account. At December 31, 2003, the AMFF balance in the GCF subdivision of Separate Account A was $8,193,817. ---- FINANCIAL STATEMENTS B-31 ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued) NOTE 3 -- PURCHASES AND SALES OF INVESTMENTS The cost of purchases and proceeds from sales of investments for the year ended December 31, 2003 were as follows:

---- B-32 FINANCIAL STATEMENTS ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2004 (continued) NOTE 4 -- EXPENSES AND RELATED PARTY TRANSACTIONS GIAC deducts certain charges from the contract. Contractual charges paid to GIAC include: Contract Charges A fixed annual contract fee of $30 for single payment contracts and $35 for flexible payment contracts is deducted on each contract anniversary date before annuitization and upon surrender prior to annuitization to cover GIAC's administrative expenses. These charges are assessed through a redemption of units. For the years ended December 31, 2002 and 2003, contract fees amounted to $413,002 and $379,650 respectively. Expense Charges (1) A charge for mortality and expense risk, through a reduction of the unit value, is computed daily and is equal to an annual rate of 1.0% of the average daily net assets applicable to the Account. There are additional charges applicable to each rider option, calculated as a percentage of average daily net asset value of the applicable contracts as follows: a) 7 Year Enhanced Death Benefit Rider, with an annual rate of .30%; b) Contract Anniversary Enhanced Death Benefit Rider, with an annual rate of .25%. There were no sales in 2003. (2) A charge for premium taxes deducted from either the contract payment or upon annuitization, as determined in accordance with applicable state law. Currently, GIAC makes no charge against the Account for GIAC's federal income taxes. However, GIAC reserves the right to charge taxes attributable to the Account in the future. GSF, The Guardian VC 500 Index Fund, The Guardian VC Asset Allocation Fund, The Guardian VC High Yield Bond Fund, GBF, GCF and GSCSF each has an investment advisory agreement with Guardian Investor Services LLC (GIS), formerly Guardian Investor Services Corporation, a wholly owned subsidiary of GIAC. Fees earned by GIS from this agreement range from .25% to .75% of the average daily net assets. GCAF has a management agreement with GIS and earns fees of .40% of the average daily net assets. BGIF and BGEMF each have an investment advisory agreement with Guardian Baillie Gifford Ltd. (GBG), a joint venture company formed by GIAC and Baillie Gifford Overseas Ltd. Fees earned by GBG from this agreement range from .80% to 1.00% of the average daily net assets. GIAC has administrative service fee agreements with AIM Advisors, Inc., Alliance Capital Management LP, Davis Selected Advisers LP, Fidelity Management & Research Company, Templeton Global Advisors Limited, Janus Capital Corporation, MFS Investment Management and Van Kampen Asset Management, Inc., which compensate GIAC for administrative services provided. These fees range from .05% to 1.00% of the average daily net assets. Sales Charges Contingent deferred sales charges are assessed on certain partial or total surrenders. These charges are assessed through a redemption in units and paid to GIAC during the first six contract years for a Single Purchase Payment Contract. For a Flexible Purchase Payment Contract, each payment is subject to a contingent deferred sales charge for six years. Number of Contract Contingent Deferred Years Completed Sales Charge Percentage ------------------ ----------------------- 1 5% 2 5% 3 4% 4 3% 5 2% 6 1% 7+ 0% For the years ended December 31, 2002 and 2003, contingent deferred sales charges were $317,691 and $166,759, respectively. ---- FINANCIAL STATEMENTS B-33 ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued) NOTE 5 -- CHANGES IN UNITS OUTSTANDING The changes in units outstanding for the years ended December 31, 2003 and 2002 were as follows:

---- B-34 FINANCIAL STATEMENTS ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued) NOTE 6 -- UNIT VALUES The following represent amounts for the years ended December 31, excluding the effect of the expenses of the underlying fund portfolios and charges made directly to contractholders' accounts through redemption of units:

---- FINANCIAL STATEMENTS B-35 ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

---- B-36 FINANCIAL STATEMENTS ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

---- FINANCIAL STATEMENTS B-37 ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

---- B-38 FINANCIAL STATEMENTS ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

---- FINANCIAL STATEMENTS B-39 ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

---- B-40 FINANCIAL STATEMENTS ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

---- FINANCIAL STATEMENTS B-41 ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

---- B-42 FINANCIAL STATEMENTS ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

---- FINANCIAL STATEMENTS B-43 ---- The Guardian Separate Account A NOTES TO FINANCIAL STATEMENTS December 31, 2003 (continued)

(1) These amounts represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. These ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contractowner accounts through the redemption of units and expenses of the underlying fund have been excluded. (2) Total returns are not annualized for periods less than a year. These amounts represent the total return for the periods indicated, including charges in the value of the underlying fund, and expenses assessed through the reduction of unit values. These ratios do not include any reporting period. (3) These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against contractowner accounts either through reductions in the unit values or the redemption of units. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccount invests. The investment income ratio is annualized for a product designed in the initial year units were purchased. (4) Portfolio commenced operations on June 1, 2000. (5) Portfolio commenced operations on May 1, 2002. (6) No contracts with this rider investing in this investment division. ---- B-44 FINANCIAL STATEMENTS ---- -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS OF THE GUARDIAN SEPARATE ACCOUNT A -------------------------------------------------------------------------------- To the Board of Directors of Guardian Insurance & Annuity Company, Inc. and the Contract Owners of The Guardian Separate Account A In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of the Guardian Stock, Guardian VC 500 Index, Guardian VC Asset Allocation, Guardian VC High Yield Bond, Guardian Bond, Guardian Cash, Gabelli Capital Asset, Baillie Gifford International, Baillie Gifford Emerging Markets, Guardian Small Cap Stock, Value Line Centurion, Value Line Strategic Asset Management, AIM V.I. Capital Appreciation Series I, AIM V.I. Global Utilities Series I, AIM V.I. Premier Equity Series I, AllianceBernstein Growth & Income Class B, AllianceBernstein Premier Growth Class B, AllianceBernstein Technology Class B, AllianceBernstein Value Class B, Davis Financial, Davis Real Estate, Davis Value, Fidelity VIP Contrafund Service Class, Fidelity VIP Equity-Income Service Class, Fidelity VIP Growth Opportunities Service Class, Fidelity VIP Mid Cap Service Class, Templeton Growth Securities Class 2, Janus Aspen Mid Cap Growth Institutional, Janus Aspen Capital Appreciation Institutional, Janus Aspen Growth Institutional, Janus Aspen Worldwide Growth Institutional, MFS Emerging Growth Initial Class, MFS Investors Trust Initial Class, MFS New Discovery Initial Class, MFS Research Initial Class, MFS Total Return Initial Class, Van Kampen Life Investment Trust Growth & Income Class II and Van Kampen Life Investment Trust Government Class II investment divisions (constituting The Guardian Separate Account A) at December 31, 2003, the results of each of their operations for the year then ended and the changes in each of their net assets for the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of The Guardian Insurance & Annuity Company, Inc. management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of the underlying funds owned at December 31, 2003 by correspondence with the transfer agents of the investee mutual funds, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP March 26, 2004 C-9