Registration Nos. 333-35681
811-08357
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Post-Effective Amendment No. 2
to the
REGISTRATION STATEMENT
on
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
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THE GUARDIAN SEPARATE ACCOUNT M
(Exact Name of Trust)
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THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
7 Hanover Square, New York, New York 10004
(Complete Address of Principal Executive Offices)
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RICHARD T. POTTER, JR., ESQ.
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003
(Name and address of agent for service)
Copy to:
KIMBERLY SMITH, ESQ.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
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It is proposed that this filing will become effective (check appropriate
box):
|_| immediately upon filing pursuant to paragraph (b), or
|X| on May 1, 1999 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i), or
|_| on (date) pursuant to paragraph (a)(i) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for
a previously-filed post-effective amendment.
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The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The notice required by such rule for the Registrant's most recent
fiscal year was filed on March 26, 1999
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<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
N-8B-2 Item Heading in Prospectus
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1,2,3,51(a)..................... Cover Page; Summary
4............................... Distribution of the policy and other
contractual arrangements
5............................... Summary
6(a)............................ The vaiable investment options
6(b)............................ The vaiable investment options
7............................... Not Applicable
8............................... Financial Statements of the Guardian
Separate Account K
9............................... Legal proceedings
10(a),(b)....................... Partial withdrawals; your right to Cancel
your policy; Surrendering your policy
10(d)........................... Fixed-benefit insurance during the
first 24 months; Transfers between the
investment options; Dollar cost averaging
transfer option; Decreasing the face amount
10(e)........................... Premiums (Default; Grace Period;
Reinstating your policy)
10(f)........................... Voting rights
10(g),(h)....................... Rights Reserved by GIAC
10(i),44(a),51(g)............... Premiums; Benefits and policy values; Policy
proceeds
11.............................. The variable investment options
12.............................. The variable investment options
13(a),(b),(c),51(g)............. Premiums, deductions and charges
13(d),(g)....................... Not Applicable
13(e),(f)....................... Deductions and charges; Distribution of the
policy and other contractual arrangements
14.............................. Issuing the policy
15.............................. Premiums (How your premiums are allocated;
Crediting payments)
16.............................. Premiums (How your premiums are allocated;
Transfers between the investment options);
Dollar cost averaging transfer option;
Policy loans
17.............................. Surrendering your policy; Partial
withdrawals; Your right to cancel your
policy; Policy proceeds
18.............................. The variable investment options
19.............................. Communications from GIAC
20.............................. Not Applicable
21(a),(b)....................... Policy Loans; Premiums (Automatic Premium
Loan); Policy proceeds
21(c),22,23..................... Not Applicable
24.............................. Payment options; Limits to GIAC's Right to
Challenge a Policy; Other information
25,27,29,48..................... Summary
26.............................. Not Applicable
28.............................. GIAC's Management
30,31,32,33,34,35,36,37......... Not Applicable
38,39,41(a)..................... Distribution of the policy and other
contractual arrangements
40.............................. The variable investment options (The Funds'
Investment Advisers)
41(b),(c),42,43................. Not Applicable
44(a)........................... Premiums; Benefits and policy values
44(b)........................... Exhibits
44(c)........................... Premiums
45.............................. Not Applicable
46(a),47........................ Benefits and policy values (Amounts in the
Separate Account; Net investment factor);
Policy Proceeds
46(b)........................... Not Applicable
49,50........................... Not Applicable
51(b)........................... Cover Page
51(c),(d)....................... Death benefit options; Deductions and
charges; Cost of insurance charge;
Deductions from the Separate Account
51(e),(f)....................... The Policyowner; The Beneficiary
51(h),(i),(j)................... Not Applicable
52(a),(c)....................... Rights Reserved by GIAC
52(b),(d)....................... Not Applicable
53(a)........................... GIAC's Taxes
53(b),54,55,56,57,58............ Not Applicable
59.............................. Financial Statements of the Guardian
Separate Account M
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This page intentionally left blank
<PAGE>
May 1, 1999
PARK AVENUE VUL PROSPECTUS
PARK AVENUE VUL is a variable universal life insurance policy providing lifetime
insurance protection, with a guaranteed minimum death benefit until the policy
anniversary nearest the insured's 100th birthday that at least equals the
policy's face amount. It also offers flexibility in the timing and amount of the
premiums you pay, how your premiums are invested, and the amount of coverage you
have, but you bear the risk of investment losses for any premiums or cash values
allocated to the variable investment options.
A prospective purchaser should evaluate the need for life insurance and the
policy's long term investment potential before buying a policy. In addition, it
may not be advantageous to replace existing life insurance coverage by
purchasing a Park Avenue VUL policy. Variable life insurance is not a short-term
investment. The policy is issued by The Guardian Insurance & Annuity Company,
Inc. (GIAC), a wholly owned subsidiary of The Guardian Life Insurance Company of
America (Guardian Life) through its Separate Account M (Separate Account). Our
offices are located at 7 Hanover Square, Mail Station 215-B, New York, New York
10004.
This prospectus sets forth information that you should know about the policy
before investing, and you should retain it for future reference. It must be
accompanied by the current prospectuses for:
The Guardian Stock Fund, Inc.
The Guardian Bond Fund, Inc.
The Guardian Cash Fund, Inc.
GIAC Funds, Inc.
The Guardian Small Cap Stock Fund
Baillie Gifford International Fund
Baillie Gifford Emerging Markets Fund
Value Line Centurion Fund
Value Line Strategic Asset Management Trust
Gabelli Capital Series Fund, Inc.
Gabelli Capital Asset Fund
MFS(R) Variable Insurance Trust(SM)
MFS Emerging Growth Series
MFS Total Return Series
MFS Growth With Income Series
MFS Bond Series
American Century Variable Portfolios, Inc.
American Century VP Value Fund
American Century VP International Fund
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
Fidelity Variable Insurance Products Fund
(Fidelity VIP)
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Fidelity Variable Insurance Products Fund II
Fidelity VIP II Index 500 Portfolio
Fidelity Variable Insurance Products Fund III
Fidelity VIP III Growth Opportunities Portfolio
These funds correspond to the policy's variable investment options. You can also
allocate premiums to a fixed-rate option. Special limits apply to transfers out
of the fixed-rate option.
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These securities have not been approved or disapproved
by the Securities and Exchange Commission or any state securities commission nor
has the Commission or any state securities commission passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The policy is not a deposit or obligation of or guaranteed or endorsed by, any
bank or depository institution, is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency, and
involves investment risk, including possible loss of principal amount invested.
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<PAGE>
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CONTENTS
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Summary ......................................................... 1
About the Park Avenue VUL Policy ................................ 13
- Issuing the policy ........................................... 13
- The Policyowner .............................................. 14
- The Beneficiary .............................................. 14
Benefits and policy values ...................................... 15
- No Lapse Guarantee ........................................... 15
- Death benefit options ........................................ 15
- Changing your death benefit option ........................... 19
- Paying the death benefit ..................................... 19
- Policy values ................................................ 19
Premiums, deductions and charges ................................ 22
- Premiums ..................................................... 22
- Deductions and charges ....................................... 26
Your allocation options ......................................... 38
- The variable investment options .............................. 38
- The fixed-rate option ........................................ 46
Special features of your policy ................................. 47
- Policy loans ................................................. 47
- Decreasing the face amount ................................... 49
- Increasing the face amount ................................... 50
- Partial withdrawals .......................................... 52
- Surrendering your policy ..................................... 54
- Transfers between the investment options ..................... 55
- Transfers from the fixed-rate option ......................... 55
- Dollar cost averaging transfer option ........................ 56
- Policy proceeds .............................................. 57
- Fixed-benefit insurance during the first 24 months ........... 58
- Payment options .............................................. 59
Tax considerations .............................................. 61
- Tax status of the policy ..................................... 61
- Treatment of policy proceeds ................................. 62
- Exchanges .................................................... 63
- Policy changes ............................................... 63
- Estate and generation skipping transfer taxes ................ 64
- Possible tax law changes ..................................... 65
- GIAC's taxes ................................................. 65
- Income tax withholding ....................................... 65
<PAGE>
Rights and responsibilities ..................................... 66
- Assigning the rights to your policy .......................... 66
- Voting rights ................................................ 66
- Limits to GIAC's right to challenge a policy ................. 67
- Rights reserved by GIAC ...................................... 68
- Your right to cancel your policy ............................. 69
Other Information ............................................... 70
- Distribution of the policy and other contractual
arrangements ................................................. 70
- Communications we'll send you ................................ 71
- Special provisions for group or sponsored arrangements ....... 71
- Legal considerations for employers ........................... 72
- Advertising practices ........................................ 73
- Legal proceedings ............................................ 73
- Legal matters ................................................ 73
- Registration statement ....................................... 74
- Financial and actuarial experts .............................. 74
- Year 2000 compliance ......................................... 75
- GIAC's management ............................................ 76
Special terms used in this prospectus ........................... 78
Financial Statements
of The Guardian Separate Account M .............................. 80
- Statutory Basis Financial Statements of
The Guardian Insurance & Annuity Company, Inc. ............... 92
Appendices A to D ...............................................108
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The Park Avenue VUL policy 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 other than as contained in this prospectus or any supplement thereto
or in any supplemental sales material authorized by GIAC.
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<PAGE>
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SUMMARY
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THIS SUMMARY outlines the principal features of your Park Avenue VUL variable
universal life insurance policy. It is qualified by the detailed explanation
which follows and the terms of your VUL policy. We deliver this prospectus with
a copy of the prospectuses for each of the mutual funds corresponding to the
variable investment options in which you may invest your Park Avenue VUL
premiums.
Please read this prospectus and the fund prospectuses carefully before
investing.
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Terms we've used
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In this document, we, us, and our refer to The Guardian Insurance &
Annuity Company, Inc., and you and your refer to the policyowner. You can
find definitions of special terms used in this prospectus at the end of
this document. We've used italic script to highlight these terms the first
time they appear in the text.
WHAT IS VARIABLE LIFE INSURANCE AND HOW DOES IT WORK?
Variable life insurance is intended to provide two important benefits:
o a death benefit that is not taxable to your beneficiary
o a cash value that can grow, with taxes on the growth being deferred.
You allocate your net premium payments (the amount that remains after we deduct
premium charges from the premiums you pay) and cash value among the variable
investment options and the fixed-rate option. Most of these options provide
variable returns. That's why it's called variable life insurance. Under a
variable universal life insurance policy, you are also able to change:
o the death benefit option
o your policy's face amount, and
o the frequency and amounts of payments.
If the investment options that you choose perform well, the cash value of your
policy will increase, and the death benefit may also increase. As a variable
life insurance policy owner, however, you bear the risk of investment losses to
the extent that your cash values are invested in the variable options. Your
policy has no guaranteed cash value.
WHO CAN BUY A PARK AVENUE VUL POLICY?
You can buy a VUL policy if:
o you live in a state or jurisdiction where we offer the policy, and
o the person being insured is under age 80 and meets our insurance
requirements.
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P R O S P E C T U S 1
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<PAGE>
If you already own a fixed-benefit insurance policy from us or our parent
company, Guardian Life, you may be able to buy a Park Avenue VUL policy without
meeting our insurance requirements by exchanging your present policy. You may
also convert it to a Park Avenue VUL policy if your fixed-benefit policy
includes the appropriate riders. In this case you may have to meet minimal
insurance requirements.
Consult your legal or tax adviser about the consequences of exchanging your
existing policy for a Park Avenue VUL policy. See the sections in this
prospectus called Deductions and charges, Tax considerations, and Special
provisions for group or sponsored arrangements.
Benefits
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There are two types of insurance benefits available through this policy:
death benefits and rider benefits. We pay death benefits to the
beneficiary named in the policy when we receive proof that the insured has
died while the policy was in force. Rider benefits offer special optional
coverage in addition to the death benefit.
WHAT ARE THE BENEFITS UNDER YOUR POLICY?
There are two types of insurance benefits available through this policy: death
benefits and rider benefits. We pay death benefits to the beneficiary named in
the policy when we receive proof that the insured has died while the policy was
in force. Rider benefits offer special optional coverage in addition to the
death benefit. The rider benefits you choose will determine the additional
amount, if any, that's paid to the beneficiary.
Death benefits
You have a choice of two death benefit options with this policy:
o under Option 1, the death benefit is a fixed amount, your policy's face
amount, set when you purchase your policy.
o under Option 2, the death benefit is a variable amount, based on your
policy's face amount and the value of the investments held in your policy,
your policy account value. These values can change depending on the
performance of the investments held in your policy.
You may choose either of these options until the policy anniversary (the
anniversary each year of the date your policy was issued) closest to the
insured's 100th birthday. On or after this date, the death benefit will be the
policy account value.
You can change your policy's death benefit option at any time after your policy
has been in force for one year, and as long as the insured is still living. If
you are changing from Option 1 to Option 2, you will need to prove that the
insured meets our insurance requirements. For more information see Death benefit
options.
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2 P R O S P E C T U S
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<PAGE>
Rider benefits
Riders are a way to add to the coverage offered by your policy. The following
riders are offered under this policy. They are subject to GIAC's insurance and
policy issuing requirements, and all may not be available in all states:
o level target death benefit term rider
o accidental death benefit rider
o guaranteed insurability option rider
o guaranteed coverage rider
o waiver of monthly deductions rider
o disability benefit rider.
Depending on your individual circumstances, it may or may not be to your
advantage to add coverage to your policy through a rider. Some of these
circumstances include the premium you want to pay, the amount of coverage and
how long you want this additional coverage for, and the age, sex and risk
classification of the insured. Your GIAC representative can help you decide
whether adding rider benefits to your policy would be in your interest.
Premiums for any rider benefits you buy will be included in your monthly
deductions, which are withdrawn from your policy account value each month. They
are not allocated to the variable investment or fixed-rate options, and have no
cash value.
HOW MUCH DO WE PAY OUT IF THE INSURED DIES?
The amount we pay when the insured dies is:
o the proceeds of the death benefit option in place at the time of the
insured's death, minus
o any outstanding policy loans, plus accrued interest, and any monthly
deductions that are due, plus
o the extra insurance provided by any riders included in your policy.
We pay these benefits in a lump sum, or under one of the options described in
Payment options.
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P R O S P E C T U S 3
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<PAGE>
Paying premiums
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After you have paid the initial premium, you may pay premiums on your
policy at any time and in any amount during the lifetime of the insured.
HOW MUCH DO YOU HAVE TO PAY IN PREMIUMS?
Premiums are the payments you make to buy and keep your insurance in force.
There are several types of premiums associated with your Park Avenue VUL, which
together form your policy premium. They are:
o the initial premium, which you pay to begin your policy is at least
one-quarter of your minimum annual premium,
o the minimum annual premium, which is set out in your policy and is used to
calculate the amount of premium that must be paid as of the most recent
monthly date to satisfy the No Lapse Guarantee Premium Test during the
first three years of your policy,
o your planned premium, which is the monthly premium that you choose when
you apply for a policy. You do not have to pay your planned premium each
month,
o your target premium, which is based on the insured's age, sex (unless
gender-neutral rates are required by law) and underwriting class, is used
to determine premium charges and agent commissions. You have a separate
target premium for your policy and for each policy segment that you add to
your policy in order to increase its face amount,
o rider premiums for any additional coverage you have added to your policy
through a rider (other than the guaranteed coverage rider).
After you have paid the initial premium, you may pay premiums on your policy at
any time and in any amount during the lifetime of the insured. However, if the
cash value of your policy is not able to cover the monthly deductions from your
policy, your policy may lapse, unless the No Lapse Guarantee is in effect and
you have satisfied its requirements. We will warn you if your policy is in
danger of lapsing.
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4 P R O S P E C T U S
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<PAGE>
Allocation options
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You choose where your net premiums are invested. There are a number of
variable investment options and a fixed-rate option. Your premiums may be
allocated to a maximum of seven allocation options at one time.
WHAT ARE YOUR ALLOCATION OPTIONS?
You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your premiums may be allocated to a
maximum of seven allocation options at one time.
Each variable investment option invests in a series of a mutual fund. The value
of these options, and your policy account value in them, will vary depending on
the performance of the mutual funds corresponding to the options you choose.
There is no minimum guaranteed policy account value for amounts allocated to the
variable investment options.
The mutual funds that are currently available through the variable investment
options are:
The Guardian Stock
Fund, Inc.
The Guardian Bond
Fund, Inc.
The Guardian Cash
Fund, Inc.
GIAC Funds, Inc.
The Guardian Small Cap
Stock Fund
Baillie Gifford
International Fund
Baillie Gifford Emerging
Markets Fund
Value Line Centurion
Fund, Inc.
Value Line Strategic Asset
Management Trust
Gabelli Capital Series
Fund, Inc.
Gabelli Capital Asset Fund
MFS(R) Variable Insurance Trust(SM)
MFS Emerging Growth Series
MFS Total Return Series
MFS Growth With
Income Series
MFS Bond Series
American Century Variable
Portfolios, Inc.
American Century VP
Value Fund
American Century VP
International Fund
AIM Variable Insurance
Funds, Inc.
AIM V.I. Capital
Appreciation Fund
AIM V.I. Value Fund
Fidelity Variable Insurance
Products Fund
(Fidelity VIP)
Fidelity VIP Equity-Income
Portfolio
Fidelity VIP High Income
Portfolio
Fidelity Variable Insurance
Products Fund II
Fidelity VIP II Index 500
Portfolio
Fidelity Variable Insurance
Products Fund III
Fidelity VIP III Growth
Opportunities Portfolio
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S U M M A R Y P R O S P E C T U S 5
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<PAGE>
You will find the investment objectives, policies, risks, fees and expenses for
each of these funds listed in the accompanying prospectus for that fund. You
should read the corresponding fund prospectus carefully before investing in any
variable investment option. For a summary of this information see The variable
investment options.
The fixed-rate option earns a set rate of interest. The interest rate is
guaranteed from the time you allocate net premiums or transfer policy values to
the fixed-rate option until your next policy anniversary, when the rate is set
for the next year. You earn interest on the total that you have invested in the
fixed-rate option, including interest you have earned in previous years.
Interest accrues daily at a minimum annual interest rate of 4%. GIAC sets the
rate of interest for the fixed-rate option and guarantees your principal and
interest under this option.
CAN YOU TRANSFER THE MONEY IN YOUR POLICY AMONG DIFFERENT ALLOCATION OPTIONS?
Provided the money in your policy is not being held as collateral against a
loan, you can transfer it among the variable investment options, and into the
fixed-rate option, at any time. You may choose up to seven allocation options at
any time. We limit transfers out of the fixed-rate option. See The fixed-rate
option.
Withdrawing money
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After your policy has been in force for one year, you may, within limits,
make partial withdrawals of your policy's net cash surrender value. You
may also borrow up to 90% of your policy's cash surrender value. You may
at any time surrender your policy for the net cash surrender value.
DO YOU HAVE ACCESS TO THE MONEY YOU'VE INVESTED IN YOUR POLICY?
After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's net cash surrender value. The net cash
surrender value is your policy account value minus any surrender charges and
policy debt.
You may also borrow up to 90% of your policy's cash surrender value. The cash
surrender value is the policy account value minus any surrender charges. We will
charge you an annual interest rate of 8%, calculated daily, on all outstanding
loans that you have taken against your policy. This rate will decrease to 5%
after your policy's 20th anniversary, or after the insured reaches attained age
65.
You may at any time surrender your policy for the net cash surrender value.
After you surrender your policy, you no longer have insurance coverage and your
policy cannot be reinstated.
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6 P R O S P E C T U S
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<PAGE>
Tax on increases
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Increases in the value of your policy will not be taxed unless you make a
withdrawal (or, in some cases, take a loan) or surrender your policy
before the insured dies.
HOW IS YOUR POLICY AFFECTED BY TAXES?
Increases in the value of your policy and the death benefit
We believe that your Park Avenue VUL policy will receive the tax benefits
generally associated with life insurance contracts under existing federal tax
laws. This means that increases in the value of your policy will not be taxed
unless you make a withdrawal (or, in some cases, take a loan) or surrender your
policy before the insured dies. Partial withdrawals, surrenders and policy loans
all result in money being taken out of your policy before the insured dies. We
believe that the money the beneficiary receives when the insured dies is not
subject to federal income tax, but may be subject to federal estate taxes or
generation skipping transfer taxes. See Tax Considerations.
WHAT DEDUCTIONS AND CHARGES DO YOU HAVE TO PAY?
There are various deductions and charges associated with maintaining your Park
Avenue VUL policy. Each of these charges is outlined below and in detail in
Deductions and charges. Some of these charges can vary, depending on certain
circumstances, and there may be a guaranteed or maximum charge, and a current
charge. The guaranteed or maximum charge is the most that we can charge you for
a particular item. The current charge is what we are now charging for that item.
We have the right to increase the current charge up to the maximum charge. Where
the law requires, we will tell you if we increase these charges.
Charges deducted from your policy premiums
Premium charge: A charge of between 4% and 8.5% is deducted from each premium
you pay to cover premium taxes assessed against us by the jurisdictions where
the policy is issued, plus a portion of any federal income taxes and premium
sales charges.
Monthly deductions
We deduct these charges from your policy account value on the same date each
month. The monthly deductions are as follows:
Policy administration charge: This charge has two parts. The contract charge
equals $20 a month for the first year, and $6 a month thereafter. The coverage
charge equals $0.16 for every $1,000 of your policy's face amount for the first
year of coverage, and for one year after any increase in the face amount. The
per $1,000 charge is lower if the insured is under age 16 at issue.
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P R O S P E C T U S 7
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<PAGE>
Cost of insurance charge: This charge is based on our current cost of insurance
rates for those of the same age, sex and underwriting class as the insured under
your policy. The maximum that we can charge for each $1,000 of the net amount at
risk (the difference between your policy account value and your policy's death
benefit) is set out in your policy.
Charges for additional insurance benefits: If you buy additional insurance
coverage by adding one or more riders to your policy, the premiums will be
deducted monthly from your policy account value.
After the anniversary closest to the insured's 100th birthday we no longer
collect these monthly deductions.
Transaction deductions
We deduct these charges from the policy account value when you ask us to do
certain transactions. The charges are as follows:
Surrender charge: During the first 15 policy years, this charge applies if you
surrender your policy, let it lapse, or reduce the face amount either because
you ask us to, or as the result of a partial withdrawal. This charge is a flat
rate for every $1,000 of your policy's face amount, and is outlined in your
policy. It declines proportionally each year until it is zero after 15 years,
and varies depending on the insured's age when the policy was issued, sex and
premium class.
Partial withdrawal charge: If you make a partial withdrawal from your policy, a
surrender charge will only be triggered if the withdrawal is more than you are
allowed under the free partial withdrawal outlined in your policy.
Transfer charge: After you make twelve transfers of policy account value among
the allocation options within a policy year, we may charge you $25 for each
additional transfer. We don't currently impose this charge.
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8 P R O S P E C T U S
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<PAGE>
Deductions associated with the Separate Account
We deduct a daily charge, based on an annual rate of 0.90%, from the variable
investment options to cover the mortality and expense risks that we assume for
Park Avenue VUL policies. This charge will be reduced to an annual rate of 0.60%
after your policy's 20th anniversary.
We also have the right to charge the Separate Account to cover any taxes that
are applicable to the Separate Account or the policies. We don't currently
impose this charge.
Deductions associated with the mutual funds
Daily deductions are made from the value of the mutual funds in which you invest
through the Separate Account, to cover advisory fees and other expenses. As a
result, you pay these fees and expenses indirectly. The fees and expenses vary
for each mutual fund and are described in more detail in the fund prospectuses.
Policy changes
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With certain restrictions, you may:
o request an increase or decrease in the face amount of your policy
o exchange your Park Avenue VUL Policy for a fixed benefit life
insurance policy
o cancel your policy after it has been issued.
See accompanying text for details.
WHAT CHANGES CAN YOU MAKE TO YOUR POLICY?
Decreasing the face amount of the policy
After your policy has been in force for one year, you may request a decrease in
the face amount. The decrease must be at least $5,000, and the insured must be
alive when we receive your request. If you ask us to reduce the face amount in
the first 15 years of your policy, you will pay a surrender charge. The new face
amount cannot be lower than GIAC's current minimum face amount.
If a decrease is caused by a partial withdrawal, either in the first 15 years of
your policy or within 15 years of increasing the face amount, and you withdraw
more than the free withdrawal amount allowed under your policy, we will charge
you a surrender charge. See Decreasing the face amount.
Increasing the face amount of the policy
On your first policy anniversary, and on each anniversary until the insured's
70th birthday, you may request an increase in your policy's face amount. The
increase must be for at least $10,000. The amount of each increase will be
treated as a separate policy segment, with its own underwriting class, cost of
insurance rates, surrender charges, policy administration charges and target
premium.
After you increase the face amount, your new premiums will be applied first to
the premium on your original policy, and then to the additional coverage
provided by any policy segments, in the order that you bought them. See
Increasing the face amount.
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P R O S P E C T U S 9
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<PAGE>
Exchanging your Park Avenue VUL policy for a fixed-benefit life insurance policy
You may exchange your Park Avenue VUL policy for a fixed-benefit whole life
insurance policy issued by GIAC or one of our affiliates within two years of the
issue date of your policy. If you do this, you don't have to prove that the
person being insured meets our insurance requirements for issuing a policy.
Depending on the amount applied to the new policy, there may be a credit or a
cost to be paid.
Canceling your policy after it has been issued
You may cancel your policy by returning it with a written cancellation notice to
either our executive office or the agent from whom you bought the policy. You
must do this within:
o 10 days after you receive your policy, or
o 45 days after you sign Part 1 of the completed application for your
policy.
Longer periods may apply in some states. Once we receive your notice, we will
refund all of the premiums you paid, and your policy will be considered void
from the beginning. See Your right to cancel your policy.
Could your policy lapse?
- --------------------------------------------------------------------------------
Your policy may lapse if you don't pay a policy premium within 31 days of
the due date or if you have excess policy debt.
COULD YOUR POLICY LAPSE?
Your policy may lapse if its net cash surrender value is less than zero after
deducting the monthly deductions in a given month, and you do not make a premium
payment to correct this imbalance within 61 days of the time the monthly
deductions are due.
For the first three years of your policy the No Lapse Guarantee ensures that it
will not lapse, even if high surrender charges or poor investment performance
results in the net cash surrender value of your policy being insufficient to pay
the policy's monthly deductions in a given month, so long as the No Lapse
Guarantee Premium Test is met. See Premiums and No Lapse Guarantee.
Your policy may also lapse if you have not made a loan repayment 61 days after
the monthly date on which the amount of any unpaid loans or interest exceeds
your policy's cash surrender value.
We will warn you at least 30 days in advance if we see that your policy is in
danger of lapsing. We will tell you the premium or the portion of your loan that
you must pay in order to keep your policy in force, and will keep your policy in
force if we receive the required payment when requested. See Grace Period and
Reinstatement.
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10 P R O S P E C T U S
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<PAGE>
HOW CAN YOU COMMUNICATE WITH US?
We cannot act on any request (except for proper telephone transfer requests)
unless it is received in writing at our executive office, in a form acceptable
to us. Your request must include:
o your policy number
o the full name of all policyowners
o the full name of the insured, and
o your current address.
Our address for regular mail is:
The Guardian Insurance & Annuity Company, Inc.
7 Hanover Square
Mail Station 215-B
New York, New York 10004
Our address for registered, certified or express mail is:
The Guardian Insurance & Annuity Company, Inc.
215 Park Avenue South
18th floor
New York, New York 10003
If you need information on the value of your policy, you may call us at
1-800-935-4128 between 9 a.m. and 4 p.m. New York time.
WHO ISSUES YOUR PARK AVENUE VUL POLICY?
Your Park Avenue VUL policy is issued, through its Separate Account M, by The
Guardian Insurance & Annuity Company, Inc. (GIAC), a Delaware stock insurance
company formed in 1970. GIAC is licensed to sell life insurance in all 50 states
of the United States of America and the District of Columbia. As of December 31,
1998, our total assets (statutory basis) exceeded $9 billion.
We are wholly owned by The Guardian Life Insurance Company of America (Guardian
Life). The offices of both Guardian Life and GIAC are located at 7 Hanover
Square, New York, New York 10004.
Both Guardian Life and GIAC have consistently received exemplary ratings from
Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff & Phelps
and A.M. Best. These ratings may change at any time, and only reflect GIAC's
ability to meet its insurance-related obligations and the guaranteed return on
the fixed-rate option. These ratings do not apply to the variable investment
options, which are subject to the risks of investing in any securities. Guardian
Life does not issue the Park Avenue VUL policies, and does not guarantee the
benefits provided by the policy.
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P R O S P E C T U S 11
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<PAGE>
The Park Avenue VUL policy diagram(1)
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Less
POLICY PREMIUMS ------------> Premium charge
POLICY ACCOUNT VALUE
THE SEPARATE ACCOUNT
THE MUTUAL FUNDS Less
(including any investment -------------> Advisory fees and
return): other expenses
Guardian Investor Services Corporation
The Guardian Stock Fund
The Guardian Small Cap Stock Fund
The Guardian Bond Fund
The Guardian Cash Fund
Guardian Baillie Gifford Limited Less
Baillie Gifford International Fund -------------> Mortality and expense
Baillie Gifford Emerging Markets Fund risk charge
Value Line, Inc.
Value Line Centurion Fund
Value Line Strategic Asset Management Trust
Gabelli Funds, Inc.
Gabelli Capital Asset Fund Less
------------> Monthly deductions:
Massachusetts Financial Services Company o Policy administration
MFS Emerging Growth Series charge
MFS Total Return Series o Charge for the cost
MFS Growth With Income Series of insurance
MFS Bond Series o Charge for additional
insurance benefits
American Century Investment Management, Inc.
American Century VP Value Fund
American Century VP International Fund
A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
Fidelity Management & Research Company
Fidelity VIP III Growth Opportunities
Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Fidelity VIP II Index 500 Portfolio
FIXED-RATE OPTION LOAN COLLATERAL ACCOUNT
(plus interest credited) (plus interest credited)
Less
-------------------------> Transaction deductions:
o Surrender charge
==================================
CASH SURRENDER VALUE
==================================
Less
-------------------------> Policy debt
==================================
NET CASH SURRENDER VALUE
==================================
(1) This diagram excludes the Transfer charge which is not being imposed
currently. Interest on policy debt and repayments of policy debt are also
not reflected in the diagram.
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12 P R O S P E C T U S
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<PAGE>
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ABOUT THE PARK AVENUE VUL POLICY
- --------------------------------------------------------------------------------
THIS SECTION provides detailed information about your policy. It explains your
rights and responsibilities under the policy, and those of GIAC. Because the
laws and regulations that govern the policy vary among the jurisdictions where
the policy is sold, some of the policy's terms will vary depending on where you
live. These will be outlined in the policy we send you.
- --------------------------------------------------------------------------------
Issuing the policy
- --------------------------------------------------------------------------------
A Park Avenue VUL insurance policy must have a face amount of at least
$100,000.
ISSUING THE POLICY
A Park Avenue VUL insurance policy must have a face amount of at least $100,000.
To issue a policy:
o the insured must be age 80 or under and meet our insurance requirements,
and
o you must live in a state or jurisdiction in which we offer the policy.
If you already own certain fixed-benefit life insurance policies issued by us or
by Guardian Life, you may be able to buy a Park Avenue VUL policy without having
to meet our insurance requirements again. You can do this by exchanging your
current policy for a Park Avenue VUL policy or if your fixed-benefit policy
contains a rider to permit you to purchase a Park Avenue VUL policy. You may
also be able to convert to a Park Avenue VUL policy if your existing policy
contains appropriate riders. In this case you may have to meet minimal insurance
requirements.
If you have a convertible term policy, or a whole life policy with a convertible
term rider, you may receive a credit of up to one minimum annual premium if you
convert it to a Park Avenue VUL policy.
If you are interested in exchanging an existing policy for a Park Avenue VUL
policy, we recommend that you speak with your lawyer or tax adviser first.
Replacing your existing policy may not be advantageous.
Backdating your policy
Under certain circumstances we will backdate your policy if you ask us to,
giving you a policy date up to six months before the application was actually
signed. Backdating your policy may be beneficial if, for example, it would allow
you to qualify for a lower premium because the insured was younger on the policy
date. We deduct the monthly deductions due from the backdated policy date to the
issue date on the date the policy is actually issued.
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P R O S P E C T U S 13
-----------------------
<PAGE>
The Policyowner
- --------------------------------------------------------------------------------
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A
policyowner does not have to be the insured.
THE POLICYOWNER
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured. While the insured is living, only the
policyowner named in our records has the right to exercise rights granted by the
policy unless ownership of the policy has been assigned to someone else. Except
for transfers, all of the policy's joint owners must approve policy transactions
or changes in writing, including assigning ownership of the policy to someone
else. When a joint policyowner dies, we will divide his or her share of the
policy equally among the other policyowners, unless the deceased policyowner has
indicated otherwise.
If you want to change the policyowner, you must request it in writing in a form
acceptable to us. Your request must be signed and dated by all of the
policyowners. The change will be made effective on the date your request was
signed, but will not apply to any payments or actions taken before we receive
your request.
If you are not the insured and die before the insured, your estate (or if there
had been joint owners, the estate of the last surviving joint owner) becomes the
policyowner, unless you have named someone to take over ownership of the policy
(a successor owner). If you are both the policyowner and the insured, a
successor owner may not be named, because the policy ends when you die.
The Beneficiary
- --------------------------------------------------------------------------------
The beneficiary is the person you name to receive the proceeds when the
insured dies.
THE BENEFICIARY
The beneficiary is the person you name to receive the proceeds when the insured
dies. You can change the beneficiary until the insured dies. Also, you may name
a `contingent' beneficiary, who will receive the proceeds if the first
beneficiary dies before the insured, or a second or `concurrent' beneficiary,
who will receive a portion of the proceeds when the insured dies. The
beneficiary must live longer than the insured to qualify as a beneficiary, and
has no rights under the policy until the insured dies. If the insured outlives
all of the beneficiaries named in the policy, then the policyowner or the
policyowner's estate becomes the beneficiary.
If you want to change the beneficiary, you must give us your instructions in
writing in a form acceptable to us. Your request must be signed and dated by all
of the policyowners listed in our records. The change is made effective on the
date your request was signed, but will not apply to any payments or actions
taken before we receive your request.
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14 P R O S P E C T U S
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<PAGE>
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BENEFITS AND POLICY VALUES
- --------------------------------------------------------------------------------
NO LAPSE GUARANTEE
The No Lapse Guarantee ensures that your policy will not lapse, even if high
surrender charges or poor investment performance means that the net cash
surrender value of your policy is not enough to pay the policy's monthly
deductions in a given month. This guarantee is in effect for the first three
years of your policy so long as the No Lapse Guarantee Premium Test is met.
This test states that, as of the most recent monthly date, you must have paid at
least as much into your policy (minus any withdrawals, surrender charges, or
policy debt) as the minimum annual premiums up to this date, as stated on page 3
of your policy. To calculate your minimum annual premium for the current policy
year, divide the number of days since your policy anniversary by 365, then
multiply your minimum annual premium by this figure.
If you change the face amount of your policy after the first policy year, your
minimum annual premium will change, which in turn changes the amount that you
must contribute in order to meet the No Lapse Guarantee Premium Test. As of the
most recent monthly date, you must have paid at least as much into your policy
(minus any withdrawals, surrender charges, or policy debt) as the original
minimum annual premium for the period up to the increase or decrease, plus the
new minimum annual premium for the period after the increase or decrease in your
policy's face amount, multiplied by the ratio obtained by dividing the number of
days since the increase or decrease by 365.
If your policy does not meet the No Lapse Guarantee Premium Test, you will have
a 61-day grace period from the date of default to make a required premium
payment or loan repayment if there is outstanding policy debt. If you do not
make the required payment, the policy will lapse. Then, if the policy is
reinstated, the No Lapse Guarantee will not be reinstated. Once this guarantee
has been terminated, it cannot be reinstated.
Death benefit options
- --------------------------------------------------------------------------------
You have a choice of two death benefit options with this policy. If a
fixed amount of insurance coverage and potentially lower monthly
deductions best fits your needs you should choose Option 1. If you want
the potential to increase the amount of your insurance coverage beyond
your policy's face amount you should choose Option 2. See accompanying
text for details.
DEATH BENEFIT OPTIONS
You have a choice of two death benefit options with this policy. You should
choose the death benefit option that best meets your insurance needs and
investment objectives. If a fixed amount of insurance coverage and potentially
lower monthly deductions best fit your needs you should choose Option 1. If you
want the potential to increase the amount of your insurance coverage beyond your
policy's face amount you should choose Option 2.
Option 1
Under Option 1, your death benefit is the greater of:
o the face amount on the date of the insured person's death
-----------------------
P R O S P E C T U S 15
-----------------------
<PAGE>
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code on the monthly date before the insured's death. Under this
option, if your investments perform well or you contribute more than the
minimum annual premium and the policy account value increases by a
sufficient amount, then the net amount at risk will be lower. When this
happens, the amount that we deduct for the cost of insurance charges each
month may also go down.
Option 2
Under Option 2, your death benefit is the greater of:
o the face amount on the date of the insured person's death, plus the policy
amount value as of the monthly date before the insured's death, or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code on the monthly date before the insured's death.
Under this option, if your investments perform well or you contribute more than
the minimum annual premium, your policy account value may increase enough to
increase your death benefit. If your investments perform poorly, your death
benefit could be lower, but it will never be lower than the face amount. The net
amount at risk will not change unless we have to increase the death benefit to
comply with Section 7702 of the Internal Revenue Code.
Regardless of which option you choose, after the policy anniversary closest to
the insured's 100th birthday the death benefit is the policy account value. The
tax consequences of continuing the policy beyond the insured's 100th birthday
are unclear. You should consult a tax adviser for more information.
If you make a partial withdrawal from your policy between the most recent
monthly date and the death of the insured, the death benefit under both options
will be reduced by the amount of your withdrawal plus any applicable charges.
To qualify as insurance under the Internal Revenue Code, both Option 1 and
Option 2 must pay at least the minimum death benefit required under Section
7702. We calculate this minimum using one of two methods: the Cash Value
Accumulation Test (Cash Value Test) or the Guideline Premium and Cash Value
Corridor Test (Guideline Premium Test). You decide which method you want used
when you complete your application. Once you've made your choice, you cannot
change it.
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16 P R O S P E C T U S
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<PAGE>
Both tests are explained below. Here are some guidelines for choosing between
the Cash Value Test and the Guideline Premium Test:
Test Advantages
- --------------------------------------------------------------------------------
Cash Value Test Guideline Premium Test
- --------------------------------------------------------------------------------
o allows you to make more o allows later death benefit
premium payments than the increases than the
Guideline Premium Test Cash Value Test
- --------------------------------------------------------------------------------
o increases the death benefit earlier o develops larger policy
than the Guideline Premium Test account values
- --------------------------------------------------------------------------------
Cash Value Test
To satisfy this test, the death benefit must be at least equal to the policy
account value divided by the net single premium (the premium which would be
needed to pay for future benefits under the policy). A table of net single
premiums appears in your policy.
Guideline Premium Test
The Guideline Premium Test consists of two parts: the Guideline Premium Test and
the Cash Value Corridor Test.
To satisfy the Guideline Premium Test the total of all premiums you pay must not
exceed certain maximums. The total of premiums paid, minus partial withdrawals,
must not be greater than the larger of the following:
o the guideline single premium on the date the calculation is done, or
o the sum of the guideline annual premiums to the date the calculation is
done.
For the purposes of this test, the guideline single premium is the premium that
would be necessary to pay for future benefits under the policy as calculated at
the time the policy is issued. It's based on the mortality charges stated in the
policy, other current charges specified in the policy and an effective annual
interest rate of 6%.
The guideline annual premium is the level annual premium payable at least until
the insured reaches age 95. It's based on mortality charges and other current
charges specified in the policy and an effective annual interest rate of 4%.
Annual premiums paid may exceed the Guideline Premium Test if those premiums are
necessary to keep the policy in force.
-----------------------
P R O S P E C T U S 17
-----------------------
<PAGE>
To satisfy the Cash Value Corridor Test, the death benefit must at least equal
the percentage of the policy account value shown in the following table:
Percentage of policy
Attained age account value *
- --------------------------------------------------------------------------------
0-40 250%
- --------------------------------------------------------------------------------
40-45 250% - 215%
- --------------------------------------------------------------------------------
45-50 215% - 185%
- --------------------------------------------------------------------------------
50-55 185% - 150%
- --------------------------------------------------------------------------------
55-60 150% - 130%
- --------------------------------------------------------------------------------
60-65 130% - 120%
- --------------------------------------------------------------------------------
65-70 120% - 115%
- --------------------------------------------------------------------------------
70-75 115% - 105%
- --------------------------------------------------------------------------------
75-90 105%
- --------------------------------------------------------------------------------
90-95 105% - 100%
- --------------------------------------------------------------------------------
95+ 100%
- --------------------------------------------------------------------------------
* The percentage decreases uniformly as attained age increases within the
age ranges.
The minimum death benefit required on any monthly date is as follows:
o Under the Cash Value Test: One thousand times the policy account value on
the monthly date, divided by the net single premium per $1,000 for the
insured's attained age, sex (unless the law requires the same rate for
both sexes) and underwriting class. The net single premium is adjusted to
the monthly date immediately before the date of death. See the table of
net single premiums in your policy.
o Under the Guideline Premium Test: The policy account value on the monthly
date immediately before the insured's death, multiplied by the factor
shown in the Table of Death Benefit Factors in your policy.
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18 P R O S P E C T U S
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<PAGE>
CHANGING YOUR DEATH BENEFIT OPTION
After the first anniversary of your policy you may change your death benefit
option once each policy year, as long as the insured is alive when we make the
change. You must send us your instructions in writing at our executive offices.
Such changes take effect on the business day that we approve them. Changing the
death benefit option may have adverse tax consequences. You should consult a tax
adviser before doing so.
If you change the death benefit option, we will change the policy's face amount
to keep the death benefit the same immediately before and after the change. If
you're changing from Option 1 to Option 2, the face amount will decrease by the
amount of the policy account value on the date the change takes effect. If
you're changing from Option 2 to Option 1, the face amount will increase by the
amount of the policy account value.
If you are changing from Option 1 to Option 2 you must prove that the insured
meets our insurance requirements. We won't approve any request to change the
option if monthly deductions are being waived under the waiver of monthly
deductions rider. We won't deduct a surrender charge or impose new surrender
charges in connection with changes in the death benefit option.
- --------------------------------------------------------------------------------
Minimum death benefit
The minimum death benefit required under Section 7702 of the Internal Revenue
Code on any monthly date is $1,000 multiplied by the policy account value, then
divided by the net single premium per $1,000 for the insured's attained age,
sex, and underwriting class. The net single premium on any monthly date is
determined by interpolation between the net single premiums for the policy
anniversaries immediately before and after that monthly date. The net single
premium is adjusted to the monthly date immediately before the insured's death.
You will find a table of net single premiums in your policy.
- --------------------------------------------------------------------------------
PAYING THE DEATH BENEFIT
We will pay a death benefit to the beneficiaries named in your policy when we
receive proof that the insured has died while the policy was in effect. If there
is reason to dispute the policy, then we may delay the payment of death
benefits. See Limits to GIAC's right to challenge a policy.
POLICY VALUES
The following is a detailed breakdown of how we calculate the different values
associated with your policy.
Amounts in the Separate Account
Any net premiums that you allocate or transfer to a variable investment option
are used to buy shares in the mutual fund corresponding to the variable
investment option, according to your instructions. We will sell these shares
when you make a withdrawal, transfer or take a policy loan, or when we withdraw
your monthly deductions, or make dollar cost averaging transfers. Based on the
value of each share on the transaction date, we will sell the number of shares
needed to cover the cost of that transaction.
-----------------------
P R O S P E C T U S 19
-----------------------
<PAGE>
Each of the variable investment options has two unit values. The first applies
until the 20th policy anniversary, when your policy's mortality and expense risk
charge is .90%. After the 20th policy anniversary this charge falls to .60%. To
make this change on your 20th policy anniversary, we will sell all of your units
for which the .90% charge applies, and buy new units which use a .60% charge
with the proceeds.
To calculate the value of your investment in a particular variable investment
option, multiply the unit value of the option by the number of units you own.
Unit values change based on the investment performance of mutual fund shares and
the daily deductions that are made to cover our mortality and expense risks. We
calculate the unit value for each variable investment option at the end of each
day. Note that you bear all risks associated with the investments in the
Separate Account.
Policy account value
This is the total value of the investments held in your policy. This includes
the value of your allocations to the fixed-rate and variable investment options,
and any policy values that may be in the Loan Collateral Account as collateral
for a policy loan. It is calculated as:
o net premiums that you contribute to your policy; plus or minus
o any profit or loss generated by your policy account value in the variable
investment options; plus
o any interest you earn on allocations to the fixed-rate option or interest
we credit on the Loan Collateral Account; minus
o your total monthly deductions; minus
o any partial withdrawals you've made, minus
o any surrender, partial withdrawal or transfer charges.
Cash surrender value and net cash surrender value
- --------------------------------------------------------------------------------
Cash surrender value is the policy account value minus any surrender
charges. There are no surrender charges after your policy has been in
effect for 15 years. Net cash surrender value is the amount you would
actually receive if you surrendered your life insurance policy.
Cash surrender value and net cash surrender value
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy has been in effect for 15
years, and for the first 15 years of each additional policy segment created by
increasing the face amount. Net cash surrender value is the amount you would
actually receive if you surrendered your life insurance policy. It is your
policy account value minus any surrender charges and policy debt.
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20 P R O S P E C T U S
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<PAGE>
The value of any investments in the variable investment options may increase or
decrease daily depending on how well the investments perform. A combination of
partial withdrawals, policy loans, unfavorable investment performance and
ongoing monthly deductions can cause a policy's net cash surrender value to drop
below zero. Even if this happens, the policy will not lapse during the first
three policy years if the No Lapse Guarantee is in effect and the No Lapse
Guarantee Test is satisfied. See No Lapse Guarantee. Certain rider benefits
available under the policy may also prevent your policy from lapsing. See
Appendix C.
Net investment factor
We calculate the unit value of each variable investment option by multiplying
the option's immediately preceding unit value by the net investment factor for
that day. We use two unit values for each of the variable investment options,
one that applies before your 20th policy anniversary, and one that applies
after. We calculate the net investment factor as follows on each business day:
o the net asset value of one share of the mutual fund corresponding to the
variable investment option at the close of the current business day, plus
o the amount per share of any dividends or capital gains distributed by the
fund on the current business day, divided by
o the net asset value of one share of the same mutual fund at the close of
the previous business day, minus
o the total daily charges we deduct from the variable investment option to
cover mortality and expense risks, which will not exceed .00002477% per
day or 0.90% annually until the 20th policy anniversary, and .00001649%
per day or 0.60% annually thereafter, as well as any federal, state or
local taxes.
On a day that is not a business day, the net investment factor is calculated by
subtracting the total daily charges deducted from the variable investment option
to cover mortality and expense risks, as well as any taxes, from 1.0.
Currently we do not make daily deductions from the Separate Account to cover
income taxes. The accompanying prospectuses for each fund describe how they
calculate the net asset values of their mutual fund shares.
-----------------------
P R O S P E C T U S 21
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
PREMIUMS, DEDUCTIONS AND CHARGES
- --------------------------------------------------------------------------------
PREMIUMS
Your policy will take effect once you have paid your initial premium, but not
before your policy's issue date. Once it has taken effect you decide the amount
of your premium payments and when you want to make them. However, your premiums
must meet certain requirements for your policy to remain in force.
Your initial premium must equal at least one quarter of your minimum annual
premium. The minimum annual premium is outlined in your policy, and is used to
calculate your initial premium and compliance with the No Lapse Guarantee
Premium Test.
When you set up your policy, you must choose a planned premium. This is the
premium that you intend to pay periodically. We will send you a reminder when
your planned premium is due, unless you are paying your premiums through a
pre-authorized checking plan. You are under no obligation to pay this premium.
All premiums must be paid to GIAC's executive office. Each premium you pay must
be at least $100, unless you are paying through a pre-authorized checking plan,
in which case each premium must be at least $25. No premiums may be paid after
the policy anniversary closest to the insured's 100th birthday.
We may limit the amount that you can pay into your policy, including refusing or
refunding premiums you pay, to ensure that your policy is considered life
insurance under federal tax laws. We have the right to refuse or refund any
premium that increases your death benefit because of the requirements of Section
7702 of the Internal Revenue Code, but we will accept such a premium if:
o it does not increase your policy's death benefit as a result of Section
7702, or
o the sum of the policy premiums you have paid during the current policy
year does not exceed 150% of your policy's target premium, or
o the sum of the policy premiums you have paid during the current policy
year does not exceed 400% of the target premium and 125% of your largest
premium payment during the past three policy years, or
o you have chosen the Guideline Premium Test to calculate your policy's
minimum death benefit.
If none of these conditions exist, we may still accept your premium payment if
you prove that the insured meets our insurance requirements.
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22 P R O S P E C T U S
- -----------------------
<PAGE>
Crediting payments
When you make a payment towards your policy, we will credit it according to your
instructions. If you do not provide specific instructions, we will use the
payment:
o first to pay any policy debt
o then, as a premium payment.
We normally credit your payment and allocate the net premium as of the business
day we receive it, so long as we receive it at our executive office by the close
of the business day, which is 4:00 p.m. New York time. However, any payments
that we receive before your policy has been issued will be held and credited on
the policy issue date, and any payments that we receive after your policy has
been issued that require additional underwriting will be held and credited as of
the date the underwriting process is complete.
See How your premiums are allocated and Policy loans for specific information on
how your payments are distributed among the fixed-rate and variable investment
options.
Investing net premiums
- --------------------------------------------------------------------------------
When you make a payment towards your policy, the amount that remains after
we deduct the premium charge is the net premium. We invest your net
premiums according to your instructions. When net premiums have been
invested, they become part of your policy account value.
How your premiums are allocated
When you make a payment towards your policy, the amount that remains after we
deduct the premium charge (see Deductions and charges) is the net premium. We
invest your net premiums in the fixed-rate and/or variable investment options
according to your instructions. When net premiums have been invested they become
part of your policy account value.
As part of your initial application, you tell us how you would like your net
premiums distributed among the various allocation options. The percentage you
choose for each allocation option must be in whole numbers, and the total must
equal 100%. You may change how your net premiums are invested at any time by
telling us in writing. The change will be effective on and after the date we
receive your instructions at our executive office, but will not affect any
existing policy values. To change the allocation of these amounts, you must
effect a transfer. See Transfers between the investment options.
Currently you may invest your net premiums and policy account value in up to 7
different allocation options, although we reserve the right to change this
number from time to time.
-----------------------
P R O S P E C T U S 23
-----------------------
<PAGE>
If you pay policy premiums i) within 45 days of signing Part 1 of your
application or ii) within 15 days of the date your policy was issued, whichever
is later, only $100,000 may be invested in the variable investment options.
Anything over this amount will be treated as an "excess net premium" and
invested in The Guardian Cash Fund. This amount and any earnings from this money
will be reallocated based on your investment instructions at the end of the
later of (i) or (ii). Any amounts you have allocated to the fixed-rate option or
The Guardian Cash Fund will not be counted towards the $100,000 limit and will
be allocated to those options as of the business day we receive them.
Default
During the first three years of your policy, it is protected from lapsing by the
No Lapse Guarantee. This guarantees that your policy will not lapse, even if its
net cash surrender value is not enough to pay your policy's monthly deductions
in a given month. This guarantee remains in effect as long as the No Lapse
Guarantee Premium Test is met. See No Lapse Guarantee.
If your policy does not meet this test, you will have a 61-day grace period from
the date of default to make a required payment. We will tell you that your
policy is in danger of lapsing, and the premium or loan repayment you must pay
to keep it from lapsing, at least 30 days before the end of this grace period.
If you do not have any outstanding policy debt, the premium required will be the
amount necessary for your policy to meet the No Lapse Guarantee Premium Test,
plus one quarter of your policy's minimum annual premium. If we do not receive
the requested payment by the end of the 61-day grace period, the policy will
lapse.
After the No Lapse Guarantee has ended, your policy will go into default if its
net cash surrender value is less than the monthly deductions that are due at
each monthly date. We will give you a 61-day grace period from the date of
default to make a required payment. We will tell you that your policy is in
danger of lapsing, and the premium or loan repayment you must pay to keep it
from lapsing, at least 30 days before the end of this grace period. The required
premium will be calculated as follows:
o if your policy's net cash surrender value is less than zero (before taking
into account the monthly deductions due), the premium will be the amount
needed to bring the net cash surrender value up to zero, plus an amount
equal to four times your policy's current monthly deductions
o if your policy's net cash surrender value is greater than zero but less
than the monthly deductions due, the premium will be an amount equal to
the difference between the monthly deductions due and the net cash
surrender value plus three times your policy's current monthly deductions
or,
- -----------------------
24 P R O S P E C T U S
- -----------------------
<PAGE>
o if you have outstanding policy debt, the required loan repayment due is
equal to the difference between the policy debt and the cash surrender
value, plus 10% of the cash surrender value.
If we do not receive the required payment by the end of the 61-day grace period,
your policy will lapse without value.
Your policy will also go into default if the amount of any unpaid policy loans
and interest, which is your policy debt, exceeds the value of the investments in
your policy, minus any surrender charges, we will tell you that a loan repayment
is required. Your policy will lapse 61 days from the default date if you do not
make the required loan repayment. If the insured person dies after we have
mailed our notice that a loan repayment is due, but before the 61-day grace
period is up, we will pay the beneficiary the policy's death proceeds minus the
unpaid policy debt.
Reinstating your policy
- --------------------------------------------------------------------------------
If your policy has lapsed, you may reinstate it up to three months after
you defaulted, subject to certain conditions described in the text.
Reinstating your policy
If your policy has lapsed (and you have not surrendered it for its net cash
surrender value) you may reinstate it up to three months after you defaulted. To
reinstate your policy:
o we must receive your request for reinstatement in writing at our executive
office
o the insured must be alive
o you must show that the insured meets our insurance requirements
o you must repay or reinstate any outstanding policy debt with interest.
Interest will be charged from the date of default to the date your policy
is reinstated, at the rate that is in effect when you make your request
o you must pay any monthly deductions that were due on the date of default,
with 6% interest charged from the date of default to the date your policy
is reinstated
o you must pay us the greater of three monthly deductions, or an amount that
would give your policy a positive net cash surrender value.
Your reinstated policy will have the same policy date, face amount and death
benefit option as the policy that lapsed. The surrender charges on the date your
policy is reinstated will not be higher than on the date of default. The No
Lapse Guarantee will not be reinstated.
-----------------------
P R O S P E C T U S 25
-----------------------
<PAGE>
DEDUCTIONS AND CHARGES
There are various deductions and charges required to maintain your Park Avenue
VUL Policy. The amount of a charge does not necessarily correspond to our costs
in providing the service or benefits associated with a particular policy. For
example, the sales portion of the premium charge and the surrender charge may
not cover all of our actual sales expenses for the policies, and proceeds from
other charges, including the mortality and expense risk charge and cost of
insurance charges, may be used in part to cover sales expenses. Once deductions
and charges are taken from your policy they do not contribute to the value of
your policy.
All of the deductions and charges are summarized and explained below.
Premium charge
A charge of 8.5% is deducted from each premium you pay, until your premiums
equal the amount of 10 target premiums for your policy. Once this amount has
been reached, the charge will fall to 6%. It will fall again to 4% when your
premiums equal the amount of 15 target premiums for your policy.
The premium charge covers a portion of our sales and promotional expenses,
commissions, and local, state and federal taxes. You may not claim the portion
of these charges used to pay taxes as a federal income tax deduction.
Your policy has a separate target premium for the initial face amount and for
any additional coverage you have added through policy segments. The premium
charge will be applied in the order that these were issued. In order to
calculate your premium charge, we will allocate each premium you pay as follows:
o first to your policy's initial face amount, up to the target premium for
that amount
o then to any policy segments that are in force, in the order that they were
purchased, up to the target premium for each segment
o then proportionately, based on the target premium, among the initial face
amount and any policy segments that are in force.
- -----------------------
26 P R O S P E C T U S
- -----------------------
<PAGE>
Example
- --------------------------------------------------------------------------------
A 45 year-old male (Preferred Plus underwriting class) buys a policy with a face
amount of $250,000 on January 1, 1998. Three years later, on January 1, 2001,
the same male, now age 48 (Preferred Plus underwriting class), requests an
increase in the face amount of $100,000. The initial target premium is $3,185,
and the target premium for the increase is $1,470. Assume he pays $4,000 per
year for 10 years and $5,000 per year for the next 10. The following chart shows
the allocation of premiums and calculation of premium charges.
- --------------------------------------------------------------------------------
Premium Allocation
Initial Face Amount First Face Amount Increase
------------------------------- -------------------------------
Cumulative Premium Cumulative Premium
Date Premium Allocation Charge Premium Allocation Charge
- ---- ------- ---------- ------- ------- ---------- -------
1998 $4,000 $4,000 $340 $0 $0 $0
- ---- ------- ---------- ------- ------- ---------- -------
1999 4,000 8,000 340 0 0 0
- ---- ------- ---------- ------- ------- ---------- -------
2000 4,000 12,000 340 0 0 0
- ---- ------- ---------- ------- ------- ---------- -------
2001 3,185 15,185 271 815 815 69
- ---- ------- ---------- ------- ------- ---------- -------
2002 3,185 18,370 271 815 1,630 69
- ---- ------- ---------- ------- ------- ---------- -------
2003 3,185 21,555 271 815 2,445 69
- ---- ------- ---------- ------- ------- ---------- -------
2004 3,185 24,740 271 815 3,260 69
- ---- ------- ---------- ------- ------- ---------- -------
2005 3,185 27,925 271 815 4,075 69
- ---- ------- ---------- ------- ------- ---------- -------
2006 3,185 31,110 271 815 4,890 69
- ---- ------- ---------- ------- ------- ---------- -------
2007 3,185 34,295 210 815 5,705 69
- ---- ------- ---------- ------- ------- ---------- -------
2008 3,421 37,716 205 1,579 7,284 134
- ---- ------- ---------- ------- ------- ---------- -------
2009 3,421 41,137 205 1,579 8,863 134
- ---- ------- ---------- ------- ------- ---------- -------
2010 3,421 44,558 205 1,579 10,442 134
- ---- ------- ---------- ------- ------- ---------- -------
2011 3,421 47,979 201 1,579 12,021 134
- ---- ------- ---------- ------- ------- ---------- -------
2012 3,421 51,400 137 1,579 13,600 134
- ---- ------- ---------- ------- ------- ---------- -------
2013 3,421 54,821 137 1,579 15,179 122
- ---- ------- ---------- ------- ------- ---------- -------
2014 3,421 58,242 137 1,579 16,758 95
- ---- ------- ---------- ------- ------- ---------- -------
2015 3,421 61,663 137 1,579 18,337 95
- ---- ------- ---------- ------- ------- ---------- -------
2016 3,421 65,084 137 1,579 19,916 95
- ---- ------- ---------- ------- ------- ---------- -------
2017 3,421 68,505 137 1,579 21,495 95
- --------------------------------------------------------------------------------
-----------------------
P R O S P E C T U S 27
-----------------------
<PAGE>
Monthly deductions
- --------------------------------------------------------------------------------
We deduct from the policy account value, on the same date each month, an
amount to cover administration costs and the cost of insuring the insured.
These deductions are made proportionately from your investments in the
fixed-rate and variable investment options.
Monthly deductions from the policy account value
We deduct from the policy account value, on the same date each month, an amount
to cover administration costs and the cost of insuring the insured. These
deductions are made proportionately from your policy account value in the
fixed-rate and variable investment options. We do not make these monthly
deductions after the policy anniversary closest to the insured's 100th birthday.
Policy and administration charges
On each monthly date, we deduct a contract charge of $20 a month until the first
anniversary of your policy, then $6 a month after that.
We also deduct a coverage charge. The amount of the coverage charge depends on
your age when the policy is issued. For issue ages 16 and above, we deduct the
coverage charge at the rate of 16 cents per $1,000 of face amount until the
first anniversary of the policy. There's also a coverage charge of 16 cents per
$1,000 of any increase in the face amount until the first anniversary of the
increase.
The coverage charge is lower if the insured is under 16 years of age. At age 15,
we deduct the coverage charge at the rate of $0.1525 per $1,000 of face amount
until the first anniversary of the policy. There's also a charge of $0.1525 per
$1,000 of any face amount increase until the first anniversary of the increase.
Below age 15, the rate decreases by $0.0075 for each year in age, down to the
minimum of $0.04 per $1,000 at age 0.
The policy administration charge helps compensate us for the cost of
underwriting and issuing your policy and for the costs of maintaining the
policy. These costs include preparing and sending premium billing notices,
reports and statements to policyholders, communications with insurance agents,
and other overhead costs related to policies.
Cost of insurance charge
Cost of insurance charges enable us to pay death benefits, especially in the
early policy years when the policy account value is far below the death benefit
we pay if the insured dies. This charge is based on our cost of insurance rates
for insured people of the same age, sex, face amount and underwriting class. Any
additional rating charges which are applied to the insured because he or she
does not satisfy our insurance requirements for standard insurance are added to
the cost of insurance charge. The maximum that we can charge for each $1,000 of
net amount at risk is set out in your policy and is based on the 1980
Commissioners' Standard Ordinary Mortality Tables
- -----------------------
28 P R O S P E C T U S
- -----------------------
<PAGE>
published by the National Association of Insurance Commissioners. The cost of
insurance rate generally increases as the insured gets older. Rates are lower
for policies with an initial face amount at least equal to $500,000 or where
there has been a face amount increase of at least $500,000. If the policy is
eligible for the lower rates, they will apply to the initial face amount and all
policy segments. Our current cost of insurance rates are lower than the
guaranteed maximum.
Cost of insurance charge
- --------------------------------------------------------------------------------
This charge allows us to pay death benefits, especially in the early
policy years when the policy account value is far below the death benefit
we pay if the insured dies.
We calculate the cost of insurance charge by multiplying your policy's net
amount at risk each month by the current cost of insurance rate that applies to
the insured, and dividing the result by $1,000. Your net amount at risk is
determined after all other monthly deductions have been withdrawn from your
policy account.
We may change the cost of insurance rates prospectively, at our discretion, up
to the guaranteed maximum rate listed in your policy. Changes in the health of
the insured will not cause your cost of insurance charge to increase. Increases
in the cost of insurance rates are not made to an individual policy, but are
made equally to all policies where the insured people are of the same attained
age, sex and premium class. We will increase this charge when we expect:
o a higher number of deaths among people in a certain group
o higher expenses or federal income taxes
o a higher number of policies that are allowed to lapse by their
policyowners
o changes in our federal income tax costs imposed on us by Section 848 of
the Internal Revenue Code
o changes in the premium taxes that we pay, or
o lower earnings in our general account.
Generally, reducing the net amount at risk results in lower charges for cost of
insurance. Decreasing the net amount at risk partly depends on the death benefit
option you choose. The two options are explained under Death benefit options. If
you choose Option 1, in which the death benefit is the face amount of your
policy, you reduce the net amount at risk when you pay premiums. That's because
premiums increase the policy account value. If you choose Option 2, in which the
death benefit can increase to more than the face amount, paying premiums will
not affect the net amount at risk.
-----------------------
P R O S P E C T U S 29
-----------------------
<PAGE>
The net amount at risk can increase, for example, when we increase a policy's
death benefit to meet the requirements of the Internal Revenue Code. See Death
benefit options. Having a higher net amount at risk results in higher deductions
for cost of insurance.
There may be different cost of insurance rates for the initial face amount of
your policy and for each subsequent increase in the face amount. As a result, we
calculate the net amount at risk separately for each level of insurance.
Your policy account value is allocated first to your policy's initial face
amount, then to each policy segment in the order that they were acquired. The
maximum amount of your policy account value that will be allocated to any one
policy segment or to the initial face amount is the amount that the policy
segment or initial face amount provides as a death benefit, divided by
1.0032737. For the purposes of determining the net amount at risk, any increase
in your policy's death benefit that is caused by Section 7702 of the Internal
Revenue Code will be allocated to the initial face amount.
Charges for additional insurance benefits
If you acquire additional insurance benefits by buying one or more riders to the
policy, you must pay rider premiums. We deduct these from the policy account
value monthly.
Transaction deductions from the policy account value
When you ask us to make certain transactions, we will take a transaction
deduction from your policy account value. Except as described differently below,
we will make these deductions from your policy account value invested in the
variable investment options, until these are exhausted, and then from your
fixed-rate option.
Surrender charge
During the first 15 years of the initial face amount and each policy segment,
you pay a surrender charge if you:
o surrender your policy
o reduce your policy's face amount either by asking us to reduce it or
through a partial withdrawal
o let your policy go into default, or
o let your policy lapse.
- -----------------------
30 P R O S P E C T U S
- -----------------------
<PAGE>
We will not deduct a surrender charge if your policy's face amount is reduced
because you change the death benefit option, or if you reduce or eliminate your
coverage under a term rider.
This charge is a flat rate for every $1,000 of your policy's face amount. The
rate declines proportionally each year until it is zero after 15 years, and
varies from $4.50 to $54.95 per $1,000, depending on the insured's age when the
policy started, sex and underwriting class. A separate surrender charge is also
calculated for each new policy segment, based on the coverage it provides and
the insured's age when it was added to your policy. This means that the total
surrender charges under your policy will be the sum of the different surrender
charges for your initial face amount and each policy segment. The surrender
charge compensates us for administrative and sales-related expenses. Surrender
charges for specific ages, sex and underwriting classes are set out in Appendix
D of this prospectus.
We prorate the surrender charges in connection with a face amount decrease by
multiplying the surrender charges by the following fraction to reduce the
charges payable:
amount of decrease
--------------------------------
face amount just before decrease
We deduct the adjusted surrender charge from the unloaned policy account value,
which is your policy account value minus any policy debt. After we deduct any
applicable surrender charge, a policy's net cash surrender value may be zero,
particularly in the early policy years.
-----------------------
P R O S P E C T U S 31
-----------------------
<PAGE>
Surrender charges
- --------------------------------------------------------------------------------
EXAMPLE (Policy with initial face amount only)
The example on the right shows how the surrender charge declines over a fifteen
year period so that in year 16 it equals $0.
- --------------------------------------------------------------------------------
Male Insured, Age 45
- --------------------------------------------------------------------------------
Preferred Plus Underwriting Class, Nonsmoker
- --------------------------------------------------------------------------------
Face Amount: $250,000
- --------------------------------------------------------------------------------
Surrender Charge per $1000 of Face Amount in
policy year one (from Appendix D): $22.49
- --------------------------------------------------------------------------------
Surrender charge in policy year one is:
The surrender charge per $1000
multiplied by $250,000 or ($22.49 x $250,000),
divided by 1000 = $5622.50.
Proportional reduction in surrender charge
over 15 year period:
$22.49 divided by 15 or $1.499333 per year.
($1.499333 is rounded to $1.50)
All figures in the table following are rounded to the nearest $ .01.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Surrender
charge per Actual
$1000 of face surrender
Policy amount charge
year ($) ($)
- --------------------------------------------------------------------------------
1 22.49 5,622.50
- --------------------------------------------------------------------------------
2 20.99 5,247.50
- --------------------------------------------------------------------------------
3 19.49 4,872.50
- --------------------------------------------------------------------------------
4 17.99 4,497.50
- --------------------------------------------------------------------------------
5 16.49 4,122.50
- --------------------------------------------------------------------------------
6 14.99 3,747.50
- --------------------------------------------------------------------------------
7 13.49 3,372.50
- --------------------------------------------------------------------------------
8 11.99 2,997.50
- --------------------------------------------------------------------------------
9 10.50 2,625.00
- --------------------------------------------------------------------------------
10 9.00 2,250.00
- --------------------------------------------------------------------------------
11 7.50 1,875.00
- --------------------------------------------------------------------------------
12 6.00 1,500.00
- --------------------------------------------------------------------------------
13 4.50 1,125.00
- --------------------------------------------------------------------------------
14 3.00 750.00
- --------------------------------------------------------------------------------
15 1.50 375.00
- --------------------------------------------------------------------------------
16 0.00 0.00
- --------------------------------------------------------------------------------
Assume in the above example the insured effects a face amount increase of
$200,000 at the beginning of policy year 6 (attained age 50) and another face
amount increase of $100,000 at the beginning of policy year 8 (attained age 52).
At the time of the first increase, the insured is again classified in the
Preferred Plus underwriting class, but at the time of the second increase he is
classified in the Preferred underwriting class.
For the purposes of calculating the applicable surrender charges, each face
amount increase is treated separately based on the insured's attained age and
underwriting class at the time of the increase. Therefore, for each increase the
policy will incur a new set of surrender charges. Surrender charges are
calculated as if the policyowner has purchased a policy with the amount of the
increase being the face amount; in other words, they are calculated just as in
the first example. The total surrender charge for a particular policy year
equals the sum of the surrender charge for the initial face amount and the
applicable surrender charge for each policy segment.
<TABLE>
<CAPTION>
First year Annual
Age at Policy face surrender charge surrender
Beginning beginning amount rate per $1000 charge
of year of year ($) ($) decrease
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Initial face amount 1 45 250,000 22.49 1.4993333
- ----------------------------------------------------------------------------------------------
1st increase 6 50 200,000 23.66 1.5773333
- ----------------------------------------------------------------------------------------------
2nd increase 8 52 100,000 29.63 1.9753333
- ----------------------------------------------------------------------------------------------
</TABLE>
- -----------------------
32 P R O S P E C T U S
- -----------------------
<PAGE>
The following is a calculation of the surrender charge for this example. Note
that the surrender charges are shown for policy years 1 though 30 only as, after
the 30th policy year, surrender charges equal zero for the initial face amount
as well as for the two face amount increases.
<TABLE>
<CAPTION>
Per $1,000 surrender charge rates x face amount
Surrender charge per $1,000 of face amount (actual surrender charge)
- -------------------------------------------- ----------------------------------------------------
Total policy
Initial First Second Initial First Second surrender
Policy coverage increase increase coverage increase increase charge
year ($) ($) ($) ($) ($) ($) ($)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 22.49 N/A N/A 5,622.50 N/A N/A 5,622.50
- -------------------------------------------------------------------------------------------------------
2 20.99 N/A N/A 5,247.50 N/A N/A 5,247.50
- -------------------------------------------------------------------------------------------------------
3 19.49 N/A N/A 4,872.50 N/A N/A 4,872.50
- -------------------------------------------------------------------------------------------------------
4 17.99 N/A N/A 4,497.50 N/A N/A 4,497.50
- -------------------------------------------------------------------------------------------------------
5 16.49 N/A N/A 4,122.50 N/A N/A 4,122.50
- -------------------------------------------------------------------------------------------------------
6 14.99 23.66 N/A 3,747.50 4,732.00 N/A 8,479.50
- -------------------------------------------------------------------------------------------------------
7 13.49 22.08 N/A 3,372.50 4,416.00 N/A 7,788.50
- -------------------------------------------------------------------------------------------------------
8 11.99 20.51 29.63 2,997.50 4,102.00 2,963.00 10,062.50
- -------------------------------------------------------------------------------------------------------
9 10.50 18.93 27.65 2,625.00 3,786.00 2,765.00 9,176.00
- -------------------------------------------------------------------------------------------------------
10 9.00 17.35 25.68 2,250.00 3,470.00 2,568.00 8,288.00
- -------------------------------------------------------------------------------------------------------
11 7.50 15.77 23.70 1,875.00 3,154.00 2,370.00 7,399.00
- -------------------------------------------------------------------------------------------------------
12 6.00 14.20 21.73 1,500.00 2,840.00 2,173.00 6,513.00
- -------------------------------------------------------------------------------------------------------
13 4.50 12.62 19.75 1,125.00 2,524.00 1,975.00 5,624.00
- -------------------------------------------------------------------------------------------------------p
14 3.00 11.04 17.78 750.00 2,208.00 1,778.00 4,736.00
- -------------------------------------------------------------------------------------------------------
15 1.50 9.46 15.80 375.00 1,892.00 1,580.00 3,847.00
- -------------------------------------------------------------------------------------------------------
16 0.00 7.89 13.83 0.00 1,578.00 1,383.00 2,961.00
- -------------------------------------------------------------------------------------------------------
17 0.00 6.31 11.85 0.00 1,262.00 1,185.00 2,447.00
- -------------------------------------------------------------------------------------------------------
18 0.00 4.73 9.88 0.00 946.00 988.00 1,934.00
- -------------------------------------------------------------------------------------------------------
19 0.00 3.15 7.90 0.00 630.00 790.00 1,420.00
- -------------------------------------------------------------------------------------------------------
20 0.00 1.58 5.93 0.00 316.00 593.00 909.00
- -------------------------------------------------------------------------------------------------------
21 0.00 0.00 3.95 0.00 0.00 395.00 395.00
- -------------------------------------------------------------------------------------------------------
22 0.00 0.00 1.98 0.00 0.00 198.00 198.00
- -------------------------------------------------------------------------------------------------------
23 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------
24 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------
25 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------
26 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------
27 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------
28 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------
29 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------
30 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------
</TABLE>
-----------------------
P R O S P E C T U S 33
-----------------------
<PAGE>
Transfer charge
You may transfer your policy account value among the allocation options. If you
make more than 12 transfers within a policy year, we reserve the right to charge
you $25 for each additional transfer. We will deduct the transfer charge from
the allocation options from which you are making the transfer, and will use this
amount to cover our processing costs.
We will not deduct a transfer charge when:
o we transfer any excess net premiums and related earnings out of The
Guardian Cash Fund (see How your premiums are allocated)
o you make multiple transfers under your policy's dollar cost averaging
feature
o you transfer amounts as part of taking or repaying a policy loan, or
o you transfer amounts out of a variable investment option because the
investment policies of the corresponding mutual fund have materially
changed.
We do not currently deduct transfer charges.
Deductions from the Separate Account
Mortality and expense risk charge
We will deduct a daily charge, based on an annual rate of 0.90% of the average
daily net assets of the variable investment options, to cover the mortality and
expense risks that we assume for Park Avenue VUL policies. This charge will fall
to 0.60% after the 20th policy anniversary. It covers the risk that those
insured under Park Avenue VUL policies may not live as long as we estimated when
we issued the policy, and that our administrative expenses may also be higher
than we estimated. We will continue to deduct this charge after the policy
anniversary closest to the insured's 100th birthday.
Income tax charge
We have the right to charge the Separate Account, the account through which we
invest your premiums in the variable investment option, for any federal, state
or local income taxes relating to the Separate Account. We also have the right
to impose additional charges if there is a change in our tax status, if the
income tax treatment of variable life insurance changes for insurance companies,
or for any other tax-related charges associated with the Separate Account or the
policies. We don't currently charge for taxes attributable to the Separate
Account.
Deductions from mutual funds
Daily deductions are made from the assets of the mutual funds to cover advisory
fees and other expenses. As a result, you pay these fees and expenses
indirectly. These expenses vary from year to year. Except as noted below, the
following chart shows the actual fees and expenses for each fund for the year
ended December 31, 1998 as a percentage of the fund's average daily net assets.
- -----------------------
34 P R O S P E C T U S
- -----------------------
<PAGE>
Fees and expenses for mutual funds
<TABLE>
<CAPTION>
Other Total
expenses expenses
(after any (after any
applicable waivers applicable waivers
Advisory and expense and expense
Fund name fee reimbursements) reimbursements)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guardian Stock Fund 0.50% 0.02% 0.52%
- -------------------------------------------------------------------------------------------------
Guardian Small Cap Stock Fund 0.75% 0.14% 0.89%
- -------------------------------------------------------------------------------------------------
Guardian Bond Fund 0.50% 0.05% 0.55%
- -------------------------------------------------------------------------------------------------
Guardian Cash Fund 0.50% 0.03% 0.53%
- -------------------------------------------------------------------------------------------------
Baillie Gifford International Fund 0.80% 0.18% 0.98%
- -------------------------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund 1.00% 0.49% 1.49%
- -------------------------------------------------------------------------------------------------
Value Line Centurion Fund(1) 0.50% 0.09% 0.59%
- -------------------------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust(1) 0.50% 0.08% 0.58%
- -------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund 1.00% 0.12% 1.12%
- -------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 0.75% 0.10% 0.85%
- -------------------------------------------------------------------------------------------------
MFS Total Return Series(1) 0.75% 0.25% 1.00%
- -------------------------------------------------------------------------------------------------
MFS Growth With Income Series(1) 0.75% 0.20% 0.95%
- -------------------------------------------------------------------------------------------------
MFS Bond Series(1) 0.60% 0.40% 1.02%
- -------------------------------------------------------------------------------------------------
American Century VP Value Fund(1) 1.00% -- 1.00%
- -------------------------------------------------------------------------------------------------
American Century VP
International Fund(1) 1.47% -- 1.47%
- -------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62% 0.05% 0.67%
- -------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% 0.05% 0.66%
- -------------------------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio(1) 0.59% 0.11% 0.70%
- -------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income
Portfolio(1) 0.49% 0.08% 0.57%
- -------------------------------------------------------------------------------------------------
Fidelity VIP High Income
Portfolio(1) 0.58% 0.12% 0.70%
- -------------------------------------------------------------------------------------------------
Fidelity VIP II Index
500 Portfolio(1) 0.24% 0.04% 0.28%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) See Notes to fees and expense table
-----------------------
P R O S P E C T U S 35
-----------------------
<PAGE>
Notes to fees and expense table
The expenses for MFS Growth With Income Series, MFS Total Return Series, and MFS
Bond Series reflect an agreement with the adviser to these series that the
adviser will bear the expenses of the series, exclusive of the advisory fee and
subject to reimbursement, so that operational expenses will not exceed 0.25% of
the average daily net assets of the Growth With Income Series and Total Return
Series, and 0.40% of the average daily net assets of the Bond Series for the
fiscal year ended December 31, 1998. These agreements are also in effect for the
current fiscal year. Without these agreements, total expenses for the year ended
December 31, 1998 would be i) 0.88% for the MFS Growth With Income Series and
0.91% for the MFS Total Return Series, because of reimbursement to the adviser
of previous years' expense payments, and ii) 1.23% for the MFS Bond Series. An
agreement to limit the Emerging Growth Series' operational expenses to 0.25% of
the average daily net assets of the Fund is also in effect.
Although the MFS Bond Series has an expense offset arrangement which reduces its
custodian fee based upon the amount of cash maintained by the Series with its
custodian, the Series' expenses are calculated without reduction for this
expense offset arrangement pursuant to SEC requirements. Thus the total expenses
for the Bond Series are shown as 1.02%.
The percentages for the Fidelity VIP II Index 500 Portfolio reflect the
voluntary agreement by the portfolio's adviser to bear expenses for the
portfolio, subject to reimbursement, so that the portfolio's total expenses will
not exceed 0.28%. Without this agreement, the total expenses for the portfolio
would have been 0.35%. The Fidelity VIP III Growth Opportunities, Fidelity VIP
Equity-Income and Fidelity VIP High Income Portfolios have entered into varying
arrangements with third parties who either paid or reduced a portion of the
expenses. The Fidelity management fees for the Growth Opportunities,
Equity-Income and High Income Portfolios consist of a group fee rate and an
individual fee rate. The fee shown here adds these components and multiplies the
result by the portfolio's average net assets. Please see the Fidelity
prospectuses for a complete explanation of the applicable portfolio management
fees and expenses.
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36 P R O S P E C T U S
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<PAGE>
The operational expenses for Value Line Strategic Asset Management Trust and
Value Line Centurion Fund reflect expense reimbursements paid by those funds to
us for certain administrative and shareholder servicing expenses that we incur
on their behalf. For the year ended December 31, 1998, we were reimbursed
$713,798 by Value Line Strategic Asset Management Trust, and $502,625 by Value
Line Centurion Fund.
We have also entered into agreements with certain fund advisers under which we
will be reimbursed for certain administrative, distribution or other expenses
that we incur as a result of offering certain funds, including the MFS and
American Century funds, to our policyowners. The amount of compensation may be
based on assets of the fund attributable to policies we issue and may vary from
adviser to adviser.
-----------------------
P R O S P E C T U S 37
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
YOUR ALLOCATION OPTIONS
- --------------------------------------------------------------------------------
AS PART OF YOUR POLICY you are able to direct where a portion of your premiums
are allocated. There are several variable investment options and a fixed-rate
option. You may choose up to seven allocation options at any time.
- --------------------------------------------------------------------------------
THE VARIABLE INVESTMENT OPTIONS
The variable investment options give you the opportunity to invest a portion of
your net premiums, indirectly, in a series of mutual funds offering variable
rates of return. The value of your investments will vary depending on the
performance of the mutual funds. There is no minimum guaranteed policy account
value for the portion of your policy that is held in the variable investment
options.
The Separate Account
The Separate Account is the account through which we invest your net premiums in
the variable investment options. We are the record owner of the assets in the
Separate Account, and use them exclusively to support the variable life
insurance policies issued through the Separate Account. The Separate Account
consists of 21 investment divisions, each corresponding to a mutual fund in
which the Separate Account invests. The Separate Account was established by
GIAC's Board of Directors on February 27, 1997 under the insurance law of the
state of Delaware, and meets the definition of a separate account under the
federal securities laws. Our Separate Account is registered with the SEC as a
unit investment trust - a type of investment company under the Investment
Company Act of 1940 (the 1940 Act). Registration under the 1940 Act does not
involve any supervision by the SEC of the investment management or programs of
the Separate Account or GIAC. However, both GIAC and the Separate Account are
subject to regulation under Delaware law. GIAC is also subject to the insurance
laws and regulations of all states and jurisdictions where the company is
authorized to do business.
GIAC owns the assets held in the Separate Account. The assets equal to the
reserves and other liabilities of the Separate Account are used only to support
the variable life insurance policies issued through the Separate Account.
Delaware insurance law provides that these assets may not be used to satisfy
liabilities arising from any other business that GIAC may conduct. This means
that the assets supporting policy account values maintained in the variable
investment options are not available to meet the claims of GIAC's general
creditors. GIAC may also retain in the Separate Account assets that exceed the
reserves and other liabilities of the Separate Account. Such assets can include
GIAC's direct contributions to the Account, accumulated charges for mortality
and expense risks or the investment results attributable to GIAC's retained
assets. Because such retained assets do not support policy account values, GIAC
may transfer them from the Separate Account to its general account.
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38 P R O S P E C T U S
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<PAGE>
Each mutual fund is described briefly below. Complete information can be found
in the accompanying fund prospectuses.
The Funds
Each of the funds corresponding to a variable investment option is either an
open-end diversified management company or a series of an open-end diversified
management company registered with the Securities and Exchange Commission. The
funds don't charge us for buying or selling their shares, allowing us to buy and
sell them at their net asset value in response to your instructions and other
policy-related transactions.
Currently, other investment products that we and other insurers offer are also
able to invest in certain of the mutual funds through the Separate Account.
While the Board of Directors of each fund monitors activities in an effort to
avoid or correct any material irreconcilable conflicts arising out of this
arrangement, we may also take actions to protect the interests of our
policyowners. For more information see Rights reserved by GIAC, and the
prospectuses for the individual mutual funds.
Investment objectives and policies of the funds
Each fund has a different investment objective that it tries to achieve by
following certain investment policies. These objectives affect the potential
risks and returns for each fund, and there is no guarantee that a fund will be
able to meet its investment objectives fully. Some funds have similar investment
objectives and policies to other funds managed by the same adviser. The
investment results of the funds, however, may be higher or lower than the
adviser's other funds. There is no assurance, and we make no representation,
that the performance of any fund will be comparable to the performance results
of any other fund.
The table below summarizes each fund's investment objective, along with the
typical investments that make up that fund.
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A L L O C A T I O N O P T I O N S P R O S P E C T U S 39
-----------------------
<PAGE>
Summary of fund objectives and policies
Fund Investment objective Typical investments
- --------------------------------------------------------------------------------
Guardian Stock Fund Long-term growth of capital U.S. common stocks
- --------------------------------------------------------------------------------
Guardian Small Cap Long-term growth of capital U.S.common stocks of
Stock Fund companies with small
market capitalization
- --------------------------------------------------------------------------------
Guardian Bond Fund Maximum income without Investment grade debt
undue risk of principal obligations
- --------------------------------------------------------------------------------
Guardian Cash Fund High level of current income; Money market instruments
preservation of capital
- --------------------------------------------------------------------------------
Baillie Gifford Long-term capital Common stocks and
International Fund appreciation convertible securities
issued by foreign
companies
- --------------------------------------------------------------------------------
Baillie Gifford Long-term capital Common stocks and
Emerging Markets appreciation convertible securities of
Fund emerging market companies
- --------------------------------------------------------------------------------
Value Line Centurion Long-term growth of capital U.S. common stocks (with
Fund selections based on
rankings by the Value
Line ranking system)
- --------------------------------------------------------------------------------
Value Line Strategic High total investment return U.S. common stocks (with
Asset Management consistent with reasonable elections on rankings by
Trust risk the Value Line ranking
system), bonds and money
market instruments
- --------------------------------------------------------------------------------
Gabelli Capital Asset Growth of capital; current U.S. common stocks and
Fund income as a secondary convertible securities
objective
- --------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital U.S. common stocks of
Series emerging growth companies
- --------------------------------------------------------------------------------
MFS Total Return Above-average income Equity securities and
Series (compared to a portfolio non-convertible fixed
invested entirely in income securities
equity securities)
consistent with prudent
employment of capital,
and secondarily to
provide a reasonable
opportunity for growth of
capital and income
- --------------------------------------------------------------------------------
MFS Growth With Income Reasonable current income Equity securities issued
Series and long-term growth of by U.S. and foreign
capital and income companies
- --------------------------------------------------------------------------------
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40 P R O S P E C T U S
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<PAGE>
Fund Investment objective Typical investments
- --------------------------------------------------------------------------------
MFS Bond Series As high a level of Convertible and
current income as is non-convertible debt
believed consistent with securities and preferred
prudent investment risk stocks; U.S. government
and secondarily to securities; commercial
protect shareholders' paper; repurchase
capital agreements, cash or cash
equivalents
- --------------------------------------------------------------------------------
American Century VP Long-term capital growth Equity securities of
Value Fund with income as a well-established
secondary objective intermediate-to-large
companies whose
securities are believed
to be undervalued
- --------------------------------------------------------------------------------
American Century VP Capital growth International common
International Fund stocks with potential
for appreciation
- --------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital through Common stocks of medium
Appreciation Fund investments in common and small-sized growth
stocks, with emphasis on companies
medium and small-sized
growth companies
- --------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of Equity securities judged
capital by investing by the fund's adviser to
primarily in under- be undervalued
valued equity securities
with income as a
secondary objective
- --------------------------------------------------------------------------------
Fidelity VIP III Capital growth Common stocks
Growth Opportunities
Portfolio
- --------------------------------------------------------------------------------
Fidelity VIP Equity- Reasonable income with Income-producing equity
Income Portfolio capital appreciation as a securities
secondary objective
- --------------------------------------------------------------------------------
Fidelity VIP High High level of current High-yielding debt
Income Portfolio income securities with an
emphasis on lower-quality
securities
- --------------------------------------------------------------------------------
Fidelity VIP II Total return that Equity securities of
Index 500 Portfolio corresponds to that of companies that compose
the Standard & Poor's 500 the Standard & Poor's 500
Index and in other instruments
that are based on the
value of the Index
- --------------------------------------------------------------------------------
-----------------------
P R O S P E C T U S 41
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
Total returns do not reflect deductions
These total returns are for the funds only and do not reflect the effects
of deductions from policy premiums, monthly deductions, transaction
deductions or deductions from the Separate Account. Including the effects
of these deductions reduces returns. See Special terms used in this
prospectus and Deductions and charges for additional information.
- --------------------------------------------------------------------------------
Investment performance of the Funds
The table below shows the average annual total returns for the mutual funds for
years ended December 31, 1998. The performance figures reflect the deduction of
fund investment advisory fees and operating expenses, and assume that any
dividends and capital gains are reinvested in the fund. These figures do not
reflect how the funds' investment performance will affect the value of your
policy, because they do not take into account the insurance and other charges we
deduct from your policy. If these charges were taken into account, total returns
for each fund would be lower Also, past returns should not be used to predict
future performance. Total returns for The Guardian Cash Fund are not presented
here.
Years ended December 31, 1998
----------------------------------
Fund name Since
and inception date 1 Year 5 Years 10 Years inception
- -------------------------------------------------------------------------------
Guardian Stock Fund (1)
(4/13/83) 19.86% 22.35% 19.32% 17.99%
- -------------------------------------------------------------------------------
Guardian Small Cap
Stock Fund (1)
(7/16/97) (5.75%) N/A N/A 7.20%
- -------------------------------------------------------------------------------
Guardian Bond Fund (1)
(5/1/83) 8.10% 6.59% 8.77% 9.29%
- -------------------------------------------------------------------------------
Baillie Gifford
International Fund
(2/8/91) 21.17% 11.90% N/A 13.36%
- -------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund
(10/17/94) (26.77%) N/A N/A (4.78%)
- -------------------------------------------------------------------------------
Value Line Centurion Fund
(11/15/83) 27.47% 19.99% 19.78% 14.96%
- -------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
(10/1/87) 27.45% 15.87% 17.05% 15.48%
- -------------------------------------------------------------------------------
Gabelli Capital Asset Fund (2)
(5/1/95) 11.67% N/A N/A 19.40%
- -------------------------------------------------------------------------------
MFS Emerging Growth Series (3)
(7/24/95) 34.16% N/A N/A 26.55%
- -------------------------------------------------------------------------------
MFS Total Return Series (3)
(1/2/95) 12.33% N/A N/A 18.73%
- -------------------------------------------------------------------------------
MFS Growth With
Income Series (3)
(10/9/95) 22.32% N/A N/A 25.98%
- -------------------------------------------------------------------------------
MFS Bond Series (3)
(10/24/95) 6.79% N/A N/A 6.90%
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42 P R O S P E C T U S
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<PAGE>
Years ended December 31, 1998
----------------------------------
Fund name Since
and inception date 1 Year 5 Years 10 Years inception
- --------------------------------------------------------------------------------
American Century VP
Value Fund
(5/1/96) 4.81% N/A N/A 15.94%
- --------------------------------------------------------------------------------
American Century VP
International Fund
(5/1/94) 18.76% N/A N/A 12.30%
- --------------------------------------------------------------------------------
AIM V.I. Value Fund (4)
(5/5/93) 32.41% 21.70% N/A 21.90%
- --------------------------------------------------------------------------------
AIM V.I. Capital
Appreciation Fund (4)
(5/5/93) 19.30% 17.23% N/A 18.77%
- --------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio (5)
(1/3/95) 24.61% N/A N/A 26.26%
- --------------------------------------------------------------------------------
Fidelity VIP Equity-
Income Portfolio (5)
(10/9/96) 11.63% 18.77% 15.62% 14.41%
- --------------------------------------------------------------------------------
Fidelity VIP High Income
Portfolio (5) (9/19/85) (4.33%) 8.80% 11.08% 11.09%
- --------------------------------------------------------------------------------
Fidelity VIP II Index
500 Portfolio (5)
(8/27/92) 28.31% 23.72% N/A 21.16%
- --------------------------------------------------------------------------------
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, transaction deductions or
deductions from the Separate Account. Including the effects of these deductions
reduces returns. See Special terms used in this prospectus and Deductions and
charges for additional information.
1 Results for The Guardian Bond Fund and The Guardian Stock Fund reflect
effects of expense reimbursements that occurred during the years ended
December 31, 1984 and 1985. Without these expense reimbursements, results
for these funds would be lower. The inception date for The Guardian Small
Cap Stock Fund is the date of commencement of the public offering of the
fund.
2 For the period from May 1, 1995 through December 31, 1995, the Manager and
the Adviser of Gabelli Capital Asset Fund absorbed a portion of the fund's
operating expenses. Total returns for this period would have been lower if
these expenses had not been absorbed.
3 Total returns for the MFS Growth With Income Series, Emerging Growth
Series, Bond Series and Total Return Series reflect the agreement by the
series' Adviser to bear expenses for the series, subject to reimbursement
by the series, such that the operational expenses shall not exceed, for
the Growth With Income, Emerging Growth, and Total Return Series, 0.25%,
and for the Bond Series, 0.40% of the average daily net assets of the
series for each fiscal year since inception. In the absence of this
agreement, except where a series is reimbursing its adviser for previous
years' expense payments on its behalf, total returns would be lower.
4 Total returns for AIM V.I. Value Fund and AIM V.I. Capital Appreciation
Fund reflect the effects of fee waivers and/or expense offset
arrangements. In the absence of such arrangements total returns would have
been lower.
5 Total returns for the Fidelity VIP III Growth Opportunities, Fidelity VIP
Equity-Income, Fidelity VIP High Income and Fidelity VIP II Index 500
Portfolios reflect the reimbursement of certain fund expenses by the
Adviser during certain periods and/or the effects of varying arrangements
with third parties who either paid or reimbursed a portion of the fund's
expenses. In the absence of these arrangements total returns would have
been lower.
-----------------------
A L L O C A T I O N O P T I O N S P R O S P E C T U S 43
-----------------------
<PAGE>
The funds' investment advisers
All of the funds' investment advisers are registered as investment advisers
under the Investment Advisers Act of 1940 (Advisers Act).
Guardian Investor Services Corporation
The Guardian Stock Fund, The Guardian Small Cap Stock Fund, The Guardian Bond
Fund and The Guardian Cash Fund (the Guardian funds) are advised by Guardian
Investor Services Corporation (GISC), 7 Hanover Square, New York, New York,
10004. GISC is wholly owned by GIAC.
Guardian Baillie Gifford Limited
Baillie Gifford International Fund and Baillie Gifford Emerging Markets Fund are
advised by Guardian Baillie Gifford Limited (GBG), 1 Rutland Court, Edinburgh,
EH3 8EY, Scotland. GBG is a member of Great Britain's Investment Management
Regulatory Organization Limited (IMRO). GBG was incorporated in Scotland by GIAC
and Baillie Gifford Overseas Limited (BG Overseas) in November 1990. BG Overseas
is wholly owned by Baillie Gifford & Co., which is currently one of the largest
investment management partnerships in the United Kingdom.
Baillie Gifford Overseas Limited
GBG has appointed BG Overseas to serve as sub-investment adviser to Baillie
Gifford International Fund and Baillie Gifford Emerging Markets Fund. Like GBG,
BG Overseas is located at 1 Rutland Court, Edinburgh, EH3 8EY, Scotland. BG
Overseas is also a member of IMRO. No separate or additional fee is paid by the
fund to BG Overseas.
Value Line, Inc.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund are
advised by Value Line, Inc., 220 East 42nd Street, New York, New York 10017.
Gabelli Funds, Inc.
Gabelli Capital Asset Fund is managed by GISC, which has appointed Gabelli
Funds, Inc. (GFI) as the investment adviser to the Fund. GFI has its principal
offices at One Corporate Center, Rye, New York 10580. No separate or additional
fee is paid by the Fund to GFI.
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44 P R O S P E C T U S
- -----------------------
<PAGE>
Massachusetts Financial Services Company
MFS Growth With Income Series, MFS Emerging Growth Series, MFS Bond Series and
MFS Total Return Series are advised by Massachusetts Financial Services Company
(MFS), 500 Boylston Street, Boston, MA. MFS is a subsidiary of Sun Life of
Canada (U.S.) Financial Services Holdings, Inc. which is itself an indirect
wholly owned subsidiary of Sun Life Assurance Company of Canada.
American Century Investment Management, Inc.
The American Century VP Value Fund and the American Century VP International
Fund are advised by American Century Investment Management, Inc., American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
A I M Advisors, Inc.
AIM V.I. Value Fund and AIM V.I. Capital Appreciation Fund are advised by A I M
Advisors, Inc. (AIM), 11 Greenway Plaza, Suite 100, Houston, Texas 77046.
Fidelity Management & Research Company
The Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP High Income Portfolio, and Fidelity VIP II Index 500
Portfolio are advised by Fidelity Management & Research Company (FMR), 82
Devonshire Street, Boston, Massachusetts 02109.
On behalf of the Fidelity VIP High Income and Fidelity VIP III Growth
Opportunities Portfolios, FMR has sub-advisory agreements with two affiliates,
FMR U.K. and FMR Far East. No separate or additional fee is paid by the
portfolios to the sub-adviser.
Bankers Trust Company (BT) has been appointed sub-adviser to the Fidelity VIP II
Index 500 Portfolio. BT, a New York Banking Corporation with principal offices
at 130 Liberty Street, New York, New York 10006, is a wholly owned subsidiary of
Bankers Trust New York Corporation. No separate or additional fee is paid by the
Portfolio to BT.
-----------------------
A L L O C A T I O N O P T I O N S P R O S P E C T U S 45
-----------------------
<PAGE>
Fixed-rate option
- --------------------------------------------------------------------------------
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. Your policy account value in the fixed-rate option is backed by
GIAC's general account.
THE FIXED-RATE OPTION
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. You may allocate some or all of your net premiums to the fixed-rate
option, and may transfer some or all of your investments in the variable
investment options into the fixed-rate option. There are restrictions on making
transfers out of the fixed-rate option. See Transfers between the investment
options. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
We have not registered the fixed-rate option or our general account as
investment companies, and interests in the fixed-rate option are not registered
under the Securities Act of 1933. The SEC staff does not review the prospectus
disclosure about the fixed-rate option or the general account, but the
information we present may be subject to certain generally applicable provisions
of the federal securities laws regarding the accuracy and completeness of
information appearing in a prospectus.
Amounts in the fixed-rate option
The total amount that you have invested in the fixed-rate option consists of:
o the portion of your net premiums and any loan repayments that you have
allocated to this option, plus
o any amounts that you have transferred to this option from the variable
investment options, plus
o the interest paid on your policy account value in this option, minus
o any deductions or withdrawals from the fixed-rate option, including
applicable charges.
You earn interest at a guaranteed rate, from the date of transfer or allocation
until your next policy anniversary, at which time the interest rate for the
total amount you have invested in the fixed-rate option is set for the coming
year. Because different interest rates may be in effect as you make transfers
and contributions throughout the year, your effective interest rate for that
year may be a weighted average of the different rates which apply to the
portions of your policy account value in the fixed-rate option. Interest accrues
daily on the total that you have invested in the fixed-rate option, including
interest you have earned in previous years. The minimum annual interest rate for
the fixed-rate option is 4%. We will tell you of any changes in the current
interest rate for the fixed-rate option as they occur. We are not obliged to pay
more than 4% in interest, although we may choose to do so.
- -----------------------
46 P R O S P E C T U S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL FEATURES OF YOUR POLICY
- --------------------------------------------------------------------------------
Policy loans
- --------------------------------------------------------------------------------
While the insured is alive, you may borrow all or a portion of the loan
value of your policy, by assigning your policy to us as collateral for
your loan.
POLICY LOANS
While the insured is alive, you may borrow all or a portion of the loan value of
your policy, by assigning your policy to us as collateral for your loan. Your
policy's loan value is:
o 90% of the cash surrender value of your policy on the date we receive your
written request, minus
o the amount of any outstanding policy debt.
The minimum loan amount is $500, or the total net cash surrender value of your
policy, whichever is less. Generally, we will pay loan proceeds to you within
seven days of receiving your request (see Policy proceeds for exceptions to this
general rule).
We will transfer the amount of your loan first proportionately from your policy
account value in the variable investment options, and if this is insufficient,
from your policy account value in the fixed-rate option, into our Loan
Collateral Account.
When taking out a policy loan, you should consider:
o amounts transferred out of the variable and fixed-rate options and into
our Loan Collateral Account are no longer affected by the investment
experience, positive or negative, of those allocation options
o as a result, taking a policy loan will have a permanent effect on your
policy account value, even once the loan is repaid in full
o the amount of your policy that is available for withdrawal or surrender,
and your policy's death benefit proceeds, will also be reduced
dollar-for-dollar by the amount of any policy debt
o if your policy is considered to be a modified endowment contract under the
Internal Revenue Code, there may be tax consequences associated with
taking a policy loan. See Tax considerations for a discussion of modified
endowment contracts and the effects on policy loans
Interest on your policy loan
We charge interest at an annual rate of 8% on all outstanding policy debt,
payable in arrears, until either the 20th anniversary of your policy or the
insured's attained age 65, whichever is later. After this point the annual rate
falls to 5% for all existing and new policy loans. Interest accrues daily and is
due on each policy anniversary. If you do not pay the interest on your loan when
it is due, we will transfer the interest that you owe first proportionately from
your policy account value in the variable investment options, and if this is
insufficient, from the fixed-rate option, into our Loan Collateral Account, and
add that interest to your policy debt.
-----------------------
P R O S P E C T U S 47
-----------------------
<PAGE>
Interest on policy loans
- --------------------------------------------------------------------------------
We charge interest at an annual rate of 8% on all outstanding policy debt,
payable in arrears, until either the 20th anniversary of your policy or
the insured's attained age 65, whichever is later. After this point the
annual rate falls to 5% for all existing and new policy loans.
The investments in the Loan Collateral Account will earn interest at a minimum
annual rate of 2% below the current loan interest rate. Although this means that
you are effectively paying a maximum of 2% interest on your policy loans, you
are expected to pay the loan interest charged, when it is due.
Repaying your policy loan
You may repay all or part of any outstanding policy debt at any time while the
insured is alive and the policy is in force. The minimum loan repayment amount
is $100 or the outstanding balance of your policy debt, whichever is lower.
If the insured has died and the death benefit proceeds have not been paid,
either in cash or under a payment option, you have 60 days after his or her
death to repay any policy debt. We will then increase the amount payable to the
beneficiary by the amount of your repayment.
When you make a loan repayment, we transfer out of the Loan Collateral Account
the amount of your repayment, minus a proportional amount of any accrued
interest owing, plus a proportional amount of any accrued interest we owe you on
the amount that was being held in the Loan Collateral Account. Your repayment
will be credited first to the fixed-rate option, up to the amount that was
deducted for your loan, then into the variable investment options according to
your current allocation instructions. The amount credited to the fixed-rate
option will earn the interest rate in effect at that time until the next policy
anniversary.
Transfers under your policy that are made in connection with policy loans are
not subject to transfer charges. Also, loan repayments are not subject to
premium charges, so it may be to your advantage, if you have outstanding loans
or interest, to make loan repayments rather than premium payments.
If, on any monthly date, you owe more in loans and interest than your cash
surrender value, we will notify you that a loan repayment is required for your
policy to remain in force. Your policy will lapse without value 61 days after
the default date set out in our notice if we do not receive:
o the amount by which your policy debt exceeds the cash surrender value on
the monthly date in question, plus
o 10% of the cash surrender value on that monthly date.
If the insured dies after we have sent this notice, but before the 61 days are
up, we will pay the beneficiary the death benefit proceeds, minus any policy
debt and unpaid interest. There may be adverse tax consequences if your policy
lapses and you have outstanding policy debt.
- -----------------------
48 P R O S P E C T U S
- -----------------------
<PAGE>
Decreasing the face amount
- --------------------------------------------------------------------------------
After the first year of your policy, you may request a reduction in its
face amount, which is the guaranteed minimum amount your policy will pay
at death or maturity.
DECREASING THE FACE AMOUNT
After the first year of your policy, you may request a reduction in its face
amount, which is the guaranteed minimum amount your policy will pay at death or
maturity. To do this we require that:
o you make your request in writing and we receive it at our executive office
o the insured is alive when we receive your request
o the reduction is at least $5,000 unless it is caused by a partial
withdrawal, in which case the partial withdrawal rules apply
o the new face amount is not lower than our minimum face amount, currently
$100,000, and
o the monthly deductions are not currently being waived under a waiver of
monthly deductions rider.
We reduce your face amount on the monthly date coinciding with or next following
the date we approve your request. If you reduce the face amount in the first 15
years of your policy, or within 15 years of increasing the face amount, we will
deduct a surrender charge from your policy account value. To calculate the
surrender charge for this transaction, we add the surrender charge associated
with the initial face amount and the surrender charges for any policy segments
that are being decreased.
Your death benefit option will determine how your policy is affected by a
reduction in the face amount due to a partial withdrawal:
o under Option 1, a partial withdrawal will typically cause an immediate
reduction in your policy's face amount
o under Option 2, a partial withdrawal will not reduce your policy's face
amount. However, the amount of your death benefit will decline with each
partial withdrawal.
If you have made one or more increases to the initial face amount by adding
policy segments and then request a face amount decrease, we will apply the
decrease to your policy segments first. We start with the most recent policy
segment, followed by the next most recent and so on and finally against the
initial face amount.
-----------------------
P R O S P E C T U S 49
-----------------------
<PAGE>
When you reduce your policy's face amount, we reduce the premiums, benefits and
certain charges that are calculated using the face amount. These include:
o your minimum annual premium
o surrender charges
o policy account value
o your monthly deductions
o your target premiums, and
o any additional rider coverage.
We will send you new policy pages reflecting the changes resulting from your
reduction in the face amount.
Reducing the face amount of your policy may cause it to be considered a modified
endowment contract under the Internal Revenue Code. See Tax considerations. If
you reduce the face amount, we'll monitor premium payments to make sure they
conform to the requirements of Section 7702 of the Code.
You can also reduce or cancel coverage provided by the level target death
benefit term rider. This does not affect the face amount of your policy.
Likewise, you can decrease the face amount of your policy without reducing the
coverage of your term rider.
There is no surrender charge if you reduce your coverage under the term rider.
That could make it a cheaper option than decreasing the face amount of your
policy. On the other hand, decreasing the face amount of your policy could
result in lower cost of insurance charges. Consult your sales representative for
advice on which option may be best for you. See Appendix C for more information
on the level target death benefit term rider.
INCREASING THE FACE AMOUNT
On each policy anniversary you may ask us to increase your policy's face amount,
up to the anniversary closest to the insured's 70th birthday. To do this we
require that:
o you make your request in writing and we receive it at our executive office
at least 30 days before your policy anniversary
o you prove that the insured meets our insurance requirements
o the increase be for at least $10,000, and
o the monthly deductions are not currently being waived under a waiver of
monthly deductions rider.
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50 P R O S P E C T U S
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<PAGE>
If we approve the increase, it will take effect on the policy anniversary after
we receive the request, provided the insured is alive on that date. We'll send
you revised policy pages reflecting the changes to your policy.
We'll issue the increase in the form of a separate policy segment. Each policy
segment has its own underwriting class, rate for cost of insurance, surrender
charges, policy administration charge, premium charge and target premium.
After an increase in the face amount takes effect, we will allocate premium
payments first to the initial face amount and then to each policy segment,
starting with the oldest policy segment and ending with the most recent one.
We'll allocate premiums in such a way that they won't exceed the annual target
premium for the initial face amount or for each policy segment. When the sum of
the premiums paid during a policy year exceed the target premium for the initial
face amount, we will allocate the excess to the first policy segment. If the
premiums you pay during a policy year exceed the target premiums for all the
policy segments and the initial face amount, we'll allocate the excess
proportionately among the target premium for the initial face amount and each
policy segment.
If you increase the face amount of your policy, it will be subject to new
surrender charges. We'll calculate the surrender charges as if you had bought a
new policy for the increase in the face amount. A new 15-year surrender charge
will apply to the policy segment that increased the face amount. We'll notify
you about the new surrender charge after any increase in the face amount.
As with buying a policy, you have a right to cancel any increase in the face
amount within certain limitations. See Right to cancel.
You don't have to pay an additional premium to increase the face amount.
However, you may have to make a premium payment to prevent the policy from going
into default. That's because the new surrender charges triggered by an increase
in the face amount would automatically reduce the net cash surrender value of
the policy. Depending on your circumstances, a premium payment may be necessary
to keep the net cash surrender value above zero.
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P R O S P E C T U S 51
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Partial withdrawals
- --------------------------------------------------------------------------------
After the first year of your policy, you may withdraw part of your
policy's net cash surrender value. The minimum net partial withdrawal is
$500.
PARTIAL WITHDRAWALS
After the first year of your policy, you may withdraw part of your policy's net
cash surrender value. You must make your request for withdrawal in writing, and
the insured must be alive when you make the withdrawal. The minimum net partial
withdrawal is $500. We have the right to limit the number of partial withdrawals
you make in a policy year to 12.
If we approve your request, it will be effective as of the business day we
receive it at our executive office. The proceeds will normally be paid within
seven days of the time we receive your request. For exceptions to this general
rule see Policy proceeds. We will not approve or process a partial withdrawal
if, after all related charges:
o your remaining net cash surrender value would be insufficient to cover
three monthly deductions, or
o if you have chosen death benefit option 1, the partial withdrawal would
cause your policy's face amount to fall below our minimum face amount.
We will tell you if these conditions apply.
We will deduct a surrender charge if your partial withdrawal causes
a reduction in the initial face amount, or the face amount of any policy
segment, during the first 15 years. See Transaction deductions from the policy
account value and Reducing the face amount. The face amount will be reduced by
the amount of any partial withdrawal that exceeds your policy's free withdrawal
amount, plus any applicable surrender charge. If you have increased your
policy's face amount by adding policy segments, we will reduce the face amount
starting with the most recent policy segment, and ending with your initial face
amount.
We will calculate the amount that is eligible for a free partial withdrawal on
the date we receive your request. This amount will be affected by whether you
chose the Cash Value Test or the Guideline Premium Test to calculate your
minimum death benefit when you began your policy.
If you chose the Cash Value Test to calculate your minimum death benefit the
amount of your free partial withdrawal will be calculated as any positive amount
resulting from:
o your policy account value, minus
o your policy's face amount multiplied by the net single premium outlined in
your policy. If your request is not made on a policy anniversary, we will
calculate your net single premium by comparing the net single premiums on
your last and upcoming policy anniversaries, and adjusting for the number
of days that your request is between these two dates.
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52 P R O S P E C T U S
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If you chose the Guideline Premium Test the amount of your free partial
withdrawal will be calculated as any positive amount resulting from:
o your policy account value, minus
o your policy's face amount divided by the death benefit factor outlined in
your policy.
We will deduct the amount of your withdrawal and any charges as follows:
o first, from the variable investment options that you specify
o if this amount is insufficient to meet your withdrawal request plus
applicable charges, or you have not specified a particular variable
investment option, then proportionately from the other variable investment
options in which your policy is invested
o if these amounts are still insufficient to meet your withdrawal request,
the remainder of the withdrawal will be deducted from your policy account
value in the fixed-rate option.
In addition to reducing your net cash surrender value, partial withdrawals
reduce the amount of your policy's death benefit on a dollar-for-dollar basis,
as follows:
o under Option 1, each partial withdrawal will typically cause an immediate
equal reduction in the face amount
o under Option 2, the reduction in your death benefit will generally be the
same as the reduction in your policy's net cash surrender value.
The tax consequences of making partial withdrawals are discussed under Tax
considerations.
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P R O S P E C T U S 53
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Surrendering your policy
- --------------------------------------------------------------------------------
You may surrender your policy for its net cash surrender value while the
insured is alive. Your policy's net cash surrender value will normally be
paid within seven days of the time we receive your request.
SURRENDERING YOUR POLICY
You may surrender your policy for its net cash surrender value while the insured
is alive. We will calculate your policy's net cash surrender value on the
business day we receive your written request, which must include your policy, or
an acceptable affidavit confirming that you've lost your policy, at our
executive office. Your policy's net cash surrender value will normally be paid
within seven days of the time we receive your request. Your policy's net cash
surrender value will be calculated as follows:
o your policy account value, including any amount held in the Loan
Collateral Account, minus
o any surrender charge, minus
o any outstanding policy debt.
Your total surrender charges will be the total of the surrender charges for the
initial face amount, and for any policy segments. See Deductions and charges. A
surrender is not eligible for the free partial withdrawal benefit described
above.
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EXAMPLE
Surrender in policy year 5
- --------------------------------------------------------------------------------
Male insured, Age 35
- --------------------------------------------------------------------------------
Preferred Plus Underwriting Class
- --------------------------------------------------------------------------------
Face Amount $250,000
- --------------------------------------------------------------------------------
Annual Policy Premium $2,007.50
- --------------------------------------------------------------------------------
Assuming 6% hypothetical gross return: (4.29% net return)
(See Appendix A)
- --------------------------------------------------------------------------------
Policy Account Value $8,217.54
- ----------------------------------------------- -----------------------------
Surrender Charge (2,750)
- ----------------------------------------------- -----------------------------
Policy Debt 0
- ----------------------------------------------- =============================
Net Cash Surrender Value $5,467.54
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All insurance coverage will end on the day we calculate your policy's net cash
surrender value. For a discussion of the tax consequences of surrendering your
policy, see Tax considerations.
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54 P R O S P E C T U S S P E C I A L F E A T U R E S
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Transfers
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You may ask us to transfer your policy account value in and out of the
variable investment options, or into the fixed-rate option, at any time.
Each transfer must be for a minimum of $500, or the total amount you have
invested in the option you are transferring funds out of, whichever is
lower.
TRANSFERS BETWEEN THE INVESTMENT OPTIONS
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. We will make
transfers based on the unit values at the end of the business day on which we
receive your instructions, either in writing or by telephone. You can request a
transfer by writing to our executive office or by calling 1-800-935-4128.
Written requests that are received after 4:00 p.m. New York time will be
effective on the next business day. Before you can request transfers over the
telephone, you must first send us a written authorization form.
Your policy account value may not be invested in more than seven of our
allocation options at any one time. Each transfer must be for a minimum of $500,
or the total amount you have invested in the option you are transferring funds
out of, whichever is lower. If you make more than twelve transfers within a
policy year, we reserve the right to charge you $25 for each additional
transfer. We also reserve the right to limit you to one transfer every 30 days.
We do not currently charge for additional transfers. There are also restrictions
on making transfers out of the fixed-rate option, which are outlined below.
We will accept transfer instructions by telephone between 9:00 a.m. and 3:30
p.m. New York time on each business day. We will ask callers to provide
identification and a personal security code for the policy, and will accept the
instructions of anyone who can provide this information. We may also record
telephone transfer requests without notifying the caller. If we reasonably
believe that telephone instructions are genuine, we are not liable for any
losses, damages or costs resulting from a transaction. As a result, you bear the
risk of any losses caused by unauthorized or fraudulent telephone transactions.
The rules for telephone transfers are subject to change, and we reserve the
right to suspend or withdraw this service without notice. During periods of
financial market or economic volatility, it may be difficult to contact us in
order to make a transfer by telephone. If this happens, you should send your
request to us in writing.
TRANSFERS FROM THE FIXED-RATE OPTION
You may only transfer your policy account value out of the fixed-rate option
once each policy year. We must receive your request within 30 days of your
policy anniversary. If we receive your request in the 30 days before your policy
anniversary, we will make the transfer on your policy anniversary. If we receive
your request in the 30 day period after your policy anniversary, we will make
the transfer on the business day we receive your request. We will not honor
requests to transfer investments out of the fixed-rate option that we receive at
any other time of the year.
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S P E C I A L F E A T U R E S P R O S P E C T U S 55
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Dollar cost averaging
- --------------------------------------------------------------------------------
Under this option, you transfer the same dollar amount from The Guardian
Cash Fund to a particular variable investment option or options each
month, over a period of time. Dollar cost averaging may reduce the impact
of price fluctuations on unit values of the variable investment options
over the period that automatic transfers are made. However, this strategy
cannot guarantee an increase in the overall value of your investments or
offer protection against losses in a declining market.
When you request a transfer from the fixed-rate option, the amounts that you
have held in the fixed-rate option longest will be withdrawn first.
The maximum that you may transfer out of the fixed-rate option each policy year
is either 33 1/3% of your allocation in the fixed-rate option on the policy
anniversary on or immediately preceding the date of transfer, or $2,500,
whichever is higher. If you have less than $2,500 in the fixed-rate option, you
may transfer the entire amount.
DOLLAR COST AVERAGING TRANSFER OPTION
Under this option, you transfer the same dollar amount from The Guardian Cash
Fund to a particular variable investment option or options each month, over a
period of time. Using dollar cost averaging, you purchase more units in the
variable investment options when their share prices are low, and fewer units
when prices are higher. In this way, dollar cost averaging may reduce the impact
of price fluctuations on unit values of the variable investment options over the
period that automatic transfers are made. However, this strategy cannot
guarantee an increase in the overall value of your investments or offer
protection against losses in a declining market.
The amount of your monthly transfer under this option must be at least $100 for
each variable investment option you wish to invest in, and it must remain in
effect for at least 12 months. Amounts will be transferred automatically on each
monthly date from The Guardian Cash Fund into the variable investment options
you have chosen.
Before the program can begin, you must submit an authorization form. Your policy
account value in The Guardian Cash Fund must also equal your monthly transfer
amount multiplied by the number of months you have chosen (for example, $100 per
month x 12 months = $1,200). We will tell you if you have not met this
requirement, and will not begin the program until you have. You can extend the
dollar cost averaging program beyond the initial number of months chosen by
adding to your policy account value in The Guardian Cash Fund.
We will stop your dollar cost averaging program when:
o the period of time listed on your dollar cost averaging authorization form
ends
o your policy account value in The Guardian Cash Fund is insufficient to
cover your monthly investment in the variable investment options you have
chosen. If this happens we will divide what you do have in The Guardian
Cash Fund among the variable investment options you have chosen, leaving a
balance of zero in The Guardian Cash Fund
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56 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
o you tell us in writing to end the program, and we receive this notice at
least three days before the next monthly date
o your policy lapses or you surrender it, or
o a policy value option takes effect.
You may change your transfer instructions or reinstate the dollar cost averaging
program, subject to the rules above, if we receive a new authorization form at
least three days before your policy's next monthly date.
POLICY PROCEEDS
The amount that your beneficiaries will receive upon the death of the insured is
determined as explained under Death benefit options, and is payable when we
receive proof that the insured has died while the policy was in effect. It will
include:
o the death proceeds based on the death benefit option you have chosen, plus
o the proceeds of any coverage you have added to your policy through riders,
minus
o any outstanding policy debt or monthly deductions.
We may adjust the death proceeds paid to the beneficiaries if:
o the age or sex listed on the policy application is incorrect
o the insured commits suicide within two years of the policy issue date, a
change in the face amount, or the date a change in the death benefit from
Option 1 to Option 2 takes effect (but only for any increase in the death
benefit over your policy's face amount that was a result of the change)
o there are limits imposed by riders to the policy.
If the insured has reached the attained age of 100 or older, the death proceeds
will be the policy account value minus any policy debt as of the date of their
death.
The amount of all other transactions will be calculated at the end of the
business day on which we receive the necessary instructions, information or
documentation at our executive office.
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S P E C I A L F E A T U R E S P R O S P E C T U S 57
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<PAGE>
Exchanging a policy
- --------------------------------------------------------------------------------
During the first 24 policy months, you may exchange your Park Avenue VUL
policy for a fixed-benefit whole life policy issued by us or one of our
affiliates, without having to prove that the insured meets our insurance
requirements.
If the proceeds are being taken from your policy account value in the variable
investment options, we will normally pay proceeds within seven days of receiving
the necessary information. However, we may delay any transfers, loans or other
payments made from the variable investment options when:
o the New York Stock Exchange is closed, except for weekends or holidays, or
when trading has been restricted
o the Securities and Exchange Commission determines that a state of
emergency exists, making policy transactions impracticable, or
o when one or more of the mutual funds corresponding to the variable
investment options legally suspends payment or redemption of their shares.
We will pay interest on the death proceeds from the variable investment options,
from the date of the insured's death until the proceeds are paid, either in a
lump sum or through a payment option.
If the proceeds are from your policy account value in the fixed-rate option,
they will normally be paid promptly once we have received the necessary
information. However, we may delay any transfers, loans or other payments made
from the fixed-rate option for up to six months from the date of your request.
If we do this, we will pay interest of at least 3% per year on payments that we
delay for 30 days or more. Please note that requests for transfers from the
fixed-rate option may only be made during certain periods. See Transfers from
the fixed-rate option.
FIXED-BENEFIT INSURANCE DURING THE FIRST 24 MONTHS
During the first 24 policy months, you may exchange your Park Avenue VUL policy
for a fixed-benefit whole life policy issued by us or one of our affiliates,
without having to prove that the insured meets our insurance requirements. Under
the new policy, your policy value will be held in the issuer's general account.
Your face amount will be the same as under your Park Avenue VUL policy on the
date you make the exchange. The insured's age when the Park Avenue VUL policy
took effect will also be carried over. Before you can make any exchange,
however, you must repay any outstanding policy debt on your Park Avenue VUL
policy.
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58 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
Depending on the amount being applied to the new policy, there may be a cost or
a credit to be paid. The amount being applied to the new policy is calculated as
the greater of:
o the cumulative premiums for your new policy with interest at 6% minus the
cumulative policy premiums for your Park Avenue VUL policy with interest
at 6%, or
o the guaranteed cash value of the new policy, minus the cash surrender
value of your Park Avenue VUL policy on the exchange date. The cash value
of your new policy will depend on its face amount, premium class, the
insured's sex and his or her age on the original policy date.
If the greater of these two amounts is less than zero, the issuer of the new
policy will pay you an exchange credit. If it is greater than zero, you will
have to pay the issuer of your new policy the exchange cost.
The new policy will be issued and effective either on the business day that we
receive your written exchange request at our executive office along with your
policy, or on the date that any exchange cost owing is received by the issuer of
your new policy, whichever is later.
Additional rider benefits are available only with the consent of the issuer of
your new policy.
You should consult with legal and tax advisers before exchanging your policy.
Payment options
- --------------------------------------------------------------------------------
You have several payment options for the death or surrender proceeds from
your policy. These proceeds can either be paid in a single lump sum, or
under one or more of the payment options specified in the accompanying
text.
PAYMENT OPTIONS
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options listed below. You may select a payment option while
the insured is living. If the insured has died and you have not chosen a payment
option, the beneficiaries may choose the payment options, up to one year after
the insured's death. If you are surrendering your policy, you have 60 days after
the proceeds of your policy become payable within which to choose a payment
option. You, or the beneficiaries, may choose to distribute the proceeds under
more than one payment option at a time, but you must distribute at least $5,000
through each option selected. Monthly payments under each option must be at
least $50.
The proceeds of your policy must be paid to a 'natural person'. Payments will
not be made to his or her estate if he or she dies before the proceeds have been
fully paid. You may name a second person to receive any remaining payments if
this happens.
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P R O S P E C T U S 59
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<PAGE>
The proceeds that we hold in order to make payments under the payment options do
not share in the income, gains or losses of the variable investment options, nor
do they earn interest in the same way or amount as funds in the fixed-rate
option.
Under Option 1, we will hold the proceeds and make monthly interest payments at
a guaranteed annual rate of 3%.
Under Option 2, we will make monthly payments of a specified amount until the
proceeds and interest are fully paid. At least 10% of the original proceeds must
be paid each year. Guaranteed interest of 3% will be added to the proceeds each
year.
Under Option 3, we will make monthly payments for a specified number of years.
The amount of the payments will include interest at 3% per year.
Under Option 4, we will make monthly payments for the longer of the life of the
payee or 10 years. The minimum amount of each payment will include interest at
3% per year.
Under Option 5, we will make monthly payments until the amount paid equals the
proceeds settled, and for the remaining life of the payee. The minimum amount of
each payment will include interest at 3% per year.
Under Option 6, we will make monthly payments for 10 years and for the remaining
life of the last surviving of two payees. The minimum amount of each payment
will include interest at 3% per year.
Payment option tables for Options 4, 5 and 6 are based on the Annuity 2000
Mortality Tables (male and female) projected 20 years to the year 2020 by 100%
of the male scale G Factors (for males) and 50% of the female scale G Factors
(for females).
Your policy lists the monthly payment for every $1,000 of proceeds that the
payee applies under Options 3 to 6, as well as the amount we pay if the payee
cancels a payment option.
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60 P R O S P E C T U S S P E C I A L F E A T U R E S
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- --------------------------------------------------------------------------------
TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
Tax status
- --------------------------------------------------------------------------------
To qualify as a life insurance contract and to receive the tax treatment
normally accorded life insurance contracts under federal tax law, a life
insurance policy must satisfy certain requirements which are set forth in
the Internal Revenue Code. For example, the underlying investments must be
"adequately diversified" in order for the policy to be treated as a life
insurance contract for Federal income tax purposes. It is intended that
the investment divisions of the Separate Account, through the mutual
funds, will satisfy these diversification requirements.
THIS DISCUSSION of tax considerations for your Park Avenue VUL policy is general
in nature, does not purport to be complete or to cover all tax situations, and
should not be considered as tax advice. It is based on our understanding of
federal income tax laws as they are currently being interpreted. We cannot
guarantee that these laws will not change while this prospectus is in use, or
while your policy is in force. You should consult a lawyer or tax adviser
regarding your individual situation.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for federal income tax purposes
and to receive the tax treatment normally accorded life insurance contracts
under federal tax law, a life insurance policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe it is
reasonable to conclude that your policy should satisfy the applicable
requirements. If it is subsequently determined that a policy does not satisfy
the applicable requirements, we may take appropriate steps to bring the policy
into compliance with such requirements and we reserve the right to modify the
policy as necessary in order to do so.
In certain circumstances, owners of variable life insurance policies have been
considered for federal income tax purposes to be the owners of the assets of the
separate account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the policyowners
have been currently taxed on income and gains attributable to separate account
assets. There is little guidance in this area, and some features of the Park
Avenue VUL policy, such as your flexibility to allocate premiums and the policy
account value, have not been explicitly addressed in published rulings. While we
believe that the policy does not give policyowners investment control over the
Separate Account's assets, we reserve the right to modify the policy as
necessary to prevent the policyowner from being treated as the owner of the
Separate Account assets supporting the policy.
In addition, the Code requires that the investments of the investment divisions
of our Separate Account be "adequately diversified" in order for the policy to
be treated as a life insurance contract for federal income tax purposes. It is
intended that the investment divisions of the Separate Account, through the
mutual funds, will satisfy these diversification requirements.
The following discussion assumes that the policy will qualify as a life
insurance contract for federal income tax purposes.
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P R O S P E C T U S 61
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Treatment of policy proceeds
- --------------------------------------------------------------------------------
We believe that the death benefits under your policy should be excludable
from the gross income of the beneficiary. Generally, under the existing
federal tax laws, increases in the value of your policy will not be taxed
federally unless you make a withdrawal before the insured dies.
TREATMENT OF POLICY PROCEEDS
We believe that the death benefits under your policy should be excludable from
the gross income of the beneficiary. Generally, under the existing federal tax
laws, increases in the value of your policy will not be taxed federally unless
you make a withdrawal before the insured dies. The money that you receive when
the insured dies is not subject to federal income tax, but may be subject to
federal estate taxes or generation skipping taxes.
Partial withdrawals, surrenders and policy loans all result in money being taken
out of your policy before the insured dies. How this money is taxed depends on
whether your policy is classified as a modified endowment contract.
Under the Internal Revenue Code, certain life insurance contracts are classified
as "modified endowment contracts," with less favorable tax treatment than other
life insurance contracts. Due to the flexibility of the policy as to premiums
and benefits, the individual circumstances of each policy will determine whether
it is classified as a modified endowment contract. The rules are too complex to
be summarized here, but generally depend on the amount of premium payments made
during the first seven policy years. Certain changes in a policy after it is
issued could also cause it to be classified as a modified endowment contract.
You should consult with a competent tax adviser to determine whether a policy
transaction will cause your policy to be classified as a modified endowment
contract.
If your policy is not considered a modified endowment contract:
o money that you withdraw from your policy will generally be taxed only if
the total that you withdraw exceeds your "basis" in the policy - the total
amount that you have paid in premiums. The difference between what you
have put in and what you take out will be taxed as ordinary income. When
you withdraw money from your policy, your basis is reduced by any amount
withdrawn that is not taxed
o if you surrender your policy, you will generally be taxed only on the
amount by which the value of your policy, including any policy debt, is
greater than your basis in the policy. The tax consequences of
surrendering your policy may vary if you receive the proceeds under one of
the payment plans. Losses are generally not tax deductible
o policy loans are generally not taxable because they must be paid back to
your policy. The interest you pay on these loans is generally not tax
deductible. However, if your policy lapses while you have an outstanding
policy loan, you may have to pay tax on the amount that you still owe to
your policy. The tax consequences of a policy loan are unclear if the
difference between the rate we charge on the loan and the interest rate
earned on the loan is very small. You should consult a tax adviser
regarding these consequences.
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62 P R O S P E C T U S T A X C O N S I D E R A T I O N S
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<PAGE>
If your policy is considered a modified endowment contract:
o all distributions including partial withdrawals, surrenders, assignments
and policy loans will be taxed as ordinary income
o all modified endowment contracts issued by GIAC or its affiliates during
any calendar year will be treated as one modified endowment contract to
determine the taxable portion of any distribution
o a 10% penalty tax will also apply to any taxable distribution unless it is
made to a taxpayer who is 59 1/2 years of age or older; is attributable to
a disability; or is received as substantially equal periodic payments made
over the life of the taxpayer, or the life of the taxpayer and a
beneficiary.
EXCHANGES
Generally, there are no tax consequences when you exchange one life insurance
policy for another, as long as the same person is being insured. Paying
additional premiums under the new policy may cause it to be treated as a
modified endowment contract. Your policy may also lose any "grandfathering"
privilege, where you would be exempt from certain legislative or regulatory
changes made after your original policy was issued, if you exchange your policy.
You should consult with a tax adviser if you are considering exchanging any life
insurance policy.
POLICY CHANGES
We will make changes to policies and their riders where necessary to ensure that
they continue to qualify as life insurance under the Internal Revenue Code, and
policyowners are not considered the direct owners of the mutual funds held in
the Separate Account. Any changes will be made uniformly to all policies
affected. We will provide advance notice in writing of these changes when
required by state insurance regulators.
Federal, state and local governments may, from time to time, introduce new
legislation concerning the taxation of life insurance policies. They can also
change or adopt new interpretations of existing laws and regulations without
notice. If you have questions about the tax consequences of your Park Avenue VUL
policy, please consult a legal or tax adviser.
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T A X C O N S I D E R A T I O N S P R O S P E C T U S 63
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<PAGE>
Transfer taxes
- --------------------------------------------------------------------------------
If you are both the policyowner and the insured, the death benefit under
your Park Avenue VUL policy will generally be included in the value of
your gross estate for federal estate tax purposes. If the beneficiary of
the policy is someone who is two or more generations younger than the
policyowner, the generation-skipping transfer (GST) tax may be imposed.
ESTATE AND GENERATION SKIPPING
TRANSFER TAXES
If you are both the policyowner and the insured, the death benefit under your
Park Avenue VUL policy will generally be included in the value of your gross
estate for federal estate tax purposes. If you are not the insured, the policy
will be included in your gross estate.
Also, if the beneficiary of the policy is someone who is two or more generations
younger than the policyowner, the generation-skipping transfer (GST) tax may be
imposed.
The individual situation of a policyowner or beneficiary will determine how the
ownership of a policy or the receipt of policy proceeds will affect their tax
situation. Because the rules are complex, a legal or tax adviser should be
consulted for specific information.
Other tax consequences
Park Avenue VUL policies can be used in various ways, including:
o as non-qualified deferred compensation or salary continuance plans
o in split-dollar insurance plans, and
o as part of executive bonus plans, retiree medical benefits plans, or other
similar plans.
The tax consequences of these plans will vary depending on individual
arrangements and circumstances. We recommend that anyone considering buying a
Park Avenue VUL policy with the expectation of favorable tax consequences should
consult with a qualified tax adviser before investing.
In addition, new rules have recently been passed by Congress relating to life
insurance owned by businesses. Any business should consult with a qualified tax
adviser before buying a policy, and before making any changes or transactions
under the policy.
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64 P R O S P E C T U S
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<PAGE>
Possible tax law changes
- --------------------------------------------------------------------------------
Although the likelihood of legislative change is uncertain, there is
always the possibility that the tax treatment of the policy could change
by legislation or otherwise. You should consult a tax adviser with respect
to legislative developments and their effect on the policy.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
GIAC'S TAXES
Based on current life insurance tax regulations, GIAC does not pay tax on
investment income or capital gains from the assets held in the Separate Account.
The operations of the Separate Account are reported on our federal income tax
return, which is then consolidated with that of our parent company, Guardian
Life.
We may pay taxes at the state and local level, as well as premium taxes, but at
present these are not substantial. If they increase, we reserve the right to
recover these costs by charging the Separate Account or the policy.
INCOME TAX WITHHOLDING
We are generally required to withhold money for income taxes when you make a
transaction on which you will have to pay tax. You can request in writing that
we not withhold any amount for income tax purposes. If we do not, or if we fail
to withhold enough to cover the taxes that are due, you could be penalized. You
would also be responsible for any unpaid taxes when you file your regular income
tax return. We may similarly withhold generation skipping transfer taxes unless
you tell us in writing that these taxes are not required.
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T A X C O N S I D E R A T I O N S P R O S P E C T U S 65
------------------------
<PAGE>
- --------------------------------------------------------------------------------
RIGHTS AND RESPONSIBILITIES
- --------------------------------------------------------------------------------
Assigning policy rights
- --------------------------------------------------------------------------------
You may assign the rights under your Park Avenue VUL policy to another
person or business, subject to certain restrictions discussed in the
accompanying text.
ASSIGNING THE RIGHTS TO YOUR POLICY
You may assign the rights under your Park Avenue VUL policy to another person or
business. This is often done, for example, to secure a loan. We will only be
bound by such an agreement when we have received a copy of the assignment
papers, signed by you, as well as the business or person to whom you are
assigning your rights, and your policy's beneficiaries, if applicable.
Assignments are subject to all payments made or actions we have taken on or
before the date we receive the assignment papers. We are not responsible for
determining whether the transfer of your policy's rights is legally valid.
The entity or person to whom you assign your rights may exercise all rights
granted under the policy except the right to:
o change the policyowner or beneficiary
o change a payment option, and
o direct where your net premiums will be invested or make transfers among
the fixed-rate and variable investment options.
VOTING RIGHTS
As explained in The variable investment options, we are the owner of the fund
shares held in the Separate Account. As a result, we have the right to vote at
any meeting of the funds' shareholders.
Where we are required to by law, we will vote fund shares based on the
instructions we receive from Park Avenue VUL policyowners. If we do not receive
instructions from some policyowners, we will vote fund shares attributable to
their policies, and any shares we own in our own right, in the same proportion
as the shares attributable to the policyowners from whom we do receive
instructions. This proportion could include policyowners and contract owners
from other separate accounts.
If changes in the law or its interpretation allow us to make voting decisions in
our own right, or to restrict the voting of policyowners, we reserve the right
to do so. We will ask you for your voting instructions if, on the record date
set by the fund's directors, part of your policy account value is invested in
the variable investment option of the Separate Account that corresponds to the
mutual fund holding a shareholders' meeting.
The number of votes that you have will be based on the number of shares that you
hold. We will calculate the number of shares, or fraction of a share, that you
hold on the record date by dividing the dollar value of your investment in the
division of the Separate Account corresponding to the mutual fund, by the net
asset value of the variable investment option's shares on that date.
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66 P R O S P E C T U S T A X C O N S I D E R A T I O N S
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<PAGE>
If, after careful examination, we reasonably disapprove of a proposed change to
a mutual fund's investment adviser, its advisory contract, or its investment
objectives or policies, we may disregard policyowners' voting instructions, if
the law allows us to do so. If the change affects the investment adviser or
investment policy, we will only exercise this right if we determine in good
faith that the proposed change is contrary to state law or is inappropriate in
view of the fund's investment objective and purpose. If we exercise this right,
we will provide a detailed explanation of our actions in the next semi-annual
report to policyowners.
Certain activities related to the operation of the Separate Account may require
the approval of policyowners. See Rights reserved by GIAC. If a vote is
required, you will be given one vote for every $100 of your policy that is held
in the variable investment options. For any investments that we hold on our own
behalf, we will vote in the same proportion as our policyowners.
You do not have the right to vote on the operations of the fixed-rate option.
Incontestability
- --------------------------------------------------------------------------------
Generally, we cannot challenge your policy once it is in force, or has
been reinstated, for two years.
LIMITS TO GIAC'S RIGHT TO CHALLENGE A POLICY
Incontestability
Generally, we cannot challenge your policy once it is in force, or has been
reinstated, for two years, provided you have paid your premiums when they are
due. If you change your policy's death benefit from Option 1 to Option 2, we
have two years to challenge any increase in the death benefit that results from
this change. If we are successful in our challenge, your death benefit will
revert to what it would have been under Option 1.
Misstatement of age or sex
If we find that the information in the application regarding the age or sex of
the insured is wrong, we will adjust the death benefit to that which would have
been purchased by the most recent deduction for cost of insurance under the
policy and any rider costs using the correct age or sex. Some jurisdictions do
not allow insurance companies to provide different benefits based on the sex of
the insured. For these jurisdictions we offer a version of the Park Avenue VUL
policy with the same benefits for men and women.
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T A X C O N S I D E R A T I O N S P R O S P E C T U S 67
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<PAGE>
Suicide exclusion
If the insured commits suicide within two years of the policy's issue date,
regardless of whether he or she is considered sane at the time, the amount that
we must pay in death benefits will be limited to the greater of i) the net cash
surrender value as of the date of death, or ii)
o the policy premiums paid, minus
o any policy debt, minus
o any partial withdrawals and any related charges.
If the insured commits suicide within two years of an increase in your policy's
death benefit due to a change from Option 1 to Option 2, the death benefit will
be limited to the original death benefit under Option 1, plus the additional
cost of insurance charges paid for the increased death benefit.
RIGHTS RESERVED BY GIAC
We reserve the right to make changes or take actions that we feel are in the
best interests of Park Avenue VUL policyowners and their beneficiaries, or are
appropriate for the policy. We will follow applicable laws and regulations in
exercising our rights, and will seek the approval of policyowners or regulators
when necessary. Some of the changes or actions we may take include:
o operating the Separate Account in any form permitted by law
o taking any action that will allow the Separate Account either to comply
with or be exempt from sections of the 1940 Act
o de-registering the Separate Account under the 1940 Act
o transferring the assets from one division of the Separate Account into
other divisions, or to one or more Separate Accounts, or to our general
account, and adding, combining, or removing investment divisions in the
Separate Account
o substituting the shares of one mutual fund held through the Separate
Account for shares of a different class in the same mutual fund, shares of
a different mutual fund, or any other investment allowed by law
o adding to, suspending or eliminating your ability to direct how your net
premiums are invested, or to transfer your investments among the variable
investment options or the fixed-rate option
o changing the way we make deductions or collect charges, consistent with
the limits outlined in the policy
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68 P R O S P E C T U S
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<PAGE>
o changing the policy as required to ensure that it continues to qualify as
life insurance under the Internal Revenue Code, or to preserve favorable
tax treatment for your benefits under the policy, or
o making any changes necessary to the policy so that it conforms with any
action we are permitted to take.
We will inform you if we make a change that affects the basic nature of the
investments in any of the variable investment options. If this occurs, you will
have 60 days from the postmark on our notice to transfer your investments out of
this option and into one of the other investment options, without charge. See
Transfers between the investment options.
YOUR RIGHT TO CANCEL YOUR POLICY
You may cancel your policy by returning it with a written cancellation notice to
either our executive office or the agent from whom you bought the policy. You
must do this within the later of:
o 10 days of receiving your policy, or
o 45 days of signing Part 1 of your completed policy application.
Longer periods may apply in some states. If a cancellation notice is sent by
mail, it will be effective on the date of the postmark. Once we receive your
notice, we will refund all of the premiums you have made towards your policy,
and it will be considered void from the beginning. We may delay refunding any
payments you made by check until your check has cleared.
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P R O S P E C T U S 69
------------------------
<PAGE>
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OTHER INFORMATION
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICY AND OTHER CONTRACTUAL ARRANGEMENTS
We have an agreement with Guardian Investor Services Corporation (GISC) for GISC
to act as the principal underwriter of Park Avenue VUL policies, as well as the
other variable life insurance policies and variable annuity contracts that we
offer. GISC is a broker-dealer registered under the Securities and Exchange Act
of 1934, and a member of the National Association of Securities Dealers. Under
this agreement GISC was paid or accrued a total of $1,851,468 in 1996, and
$1,979,926 in 1997, and $1,946,477 in 1998.
GISC is a New York corporation.
Agents and commissions
GIAC agents who are licensed by state insurance authorities to sell variable
life insurance policies must also be registered representatives of GISC, or of
broker-dealer firms which have entered into agreements with GIAC and GISC to
sell Park Avenue VUL policies. Our agents receive a maximum sales commission of:
o 45% of the policy premium paid for the first policy year up to one target
premium, and 3% of any policy premiums in excess of one target premium,
then
o 3% of the policy premiums paid for policy years two through ten up to nine
target premiums, and 3% of any policy premiums in excess of nine target
premiums, and
o 2% of the policy premiums paid after policy year 10.
We may also compensate our agents in the form of commission overrides, expense
allowances, bonuses, wholesaler fees and training allowances. In addition,
agents may qualify for non-cash compensation such as expense-paid trips or
educational seminars.
If you return your policy under the right to cancel provisions, the agent may
have to return some or all of any commissions we have paid.
Administrative services
Through an agreement with our parent company, Guardian Life, to carry out the
administration of Park Avenue VUL policies, we are billed quarterly for the time
that their staff spends on GIAC business, and for the use of their centralized
services and sales force.
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70 P R O S P E C T U S O T H E R I N F O R M A T I O N
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<PAGE>
Other agreements
We have entered into several other agreements, including:
o an agreement with Value Line, Inc. under which we are compensated for
marketing the Value Line Centurion Fund and the Value Line Strategic Asset
Management Trust to our policyowners, and
o an agreement with MFS and American Century under which we are compensated
for certain administrative costs and expenses connected to the offering
and sale of their funds to our policyholders. The amount we receive is
based on a percentage of assets under management.
SPECIAL PROVISIONS FOR GROUP OR SPONSORED ARRANGEMENTS
Where state insurance laws allow us to, we may sell Park Avenue VUL policies
under a group or sponsored arrangement.
A group arrangement is one in which a group of individuals is covered under a
single policy. This might be arranged, for example, by an employer, a trade
union, or a professional association.
A sponsored arrangement is one in which we are allowed to offer members of a
group, such as employees of a company or members of an association, insurance
policies on an individual basis.
- --------------------------------------------------------------------------------
Communications we'll send you
Shortly after your policy anniversary each year, we will send you an updated
statement showing the following information:
o the amount of your current death benefit
o the instructions we have on file regarding where to invest your net
premiums, and how much you have invested in each of the investment options
o your policy account value, cash surrender value and net cash surrender
value, and benchmark value
o the amount you have paid in policy premiums and the charges that we have
deducted, since the last anniversary of your policy
o a summary of any transfers or partial withdrawals, loans or loan
repayments that you have made since your last annual statement
o the total of any outstanding policy debt that you owe us, and
o the interest rate for investments held in the fixed-rate option.
Twice a year we will also send you reports containing the financial statements
of the mutual funds and the Separated Account through which you invest in these
funds. Of these reports, the annual reports will contain audited financial
statements.
We will confirm in writing receipt of your policy premiums and any transfers or
other transactions. We will also write you to request a premium or loan
repayment to keep your policy from lapsing.
- --------------------------------------------------------------------------------
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P R O S P E C T U S 71
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<PAGE>
We may reduce or eliminate certain deductions and charges outlined in this
prospectus for policies bought under group or sponsored arrangements. We may,
for instance, sell policies without surrender charges and/or with reduced or
eliminated fees and charges to employees, officers, directors and agents of
Guardian Life and its subsidiaries and their immediate family members. We may
reduce or waive policy charges and deductions in accordance with the rules in
effect as of the date an application for a policy is approved. In addition, GIAC
may permit groups and persons purchasing under a sponsored arrangement to apply
for simplified issue and multi-life underwriting. To qualify for a reduction in
the policy's charges or deductions certain criteria must be met. These may
include:
o the size of the group
o the expected number of participants
o the expected amount of premium payments.
The amount of any reduction in charges or deductions and the criteria to qualify
for a reduction will reflect our reduced cost of selling and/or maintaining the
policies in group or sponsored arrangements.
From time to time we may change the amount of any reduction in charges or
deductions, or the criteria that a group must meet to qualify for these
reductions. Any change will be made on a non-discriminatory basis.
LEGAL CONSIDERATIONS FOR EMPLOYERS
The Park Avenue VUL policy estimates different risks for men and women in
establishing a policy's premiums, benefits and deductions, except in states
where gender-neutral standards must be used. In 1983, the United States Supreme
Court held that optional annuity benefits offered under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Anyone interested in buying Park
Avenue VUL policies in connection with insurance or benefits programs should
consult with their legal advisers to determine if the policy is appropriate for
this purpose.
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72 P R O S P E C T U S O T H E R I N F O R M A T I O N
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<PAGE>
ADVERTISING PRACTICES
In our advertisements and sales materials for Park Avenue VUL policies we may
include:
o articles or reports on variable life insurance in general, or Park Avenue
VUL specifically, and any other information published in business or
general information publications.
o relevant indices or rankings of investment securities or similar groups of
funds
o comparisons of the variable investment options with the mutual funds
offered through the separate accounts of other insurance companies, or
those with similar investment objectives and policies, and
o comparisons with other investments, including those guaranteed by various
governments.
We may use the past performance of the variable investment options and funds to
promote the policies. This data is not indicative of the performance of the
funds or the policies in the future or the investment experience of individual
policyowners.
We may feature individual funds and their managers, and describe the asset
levels and sales volumes of GIAC, GISC and others in the investment industry. We
may also refer to past, current, or prospective economic trends and investment
performance, and any other information that may be of interest.
LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings that would threaten our
financial position or that of the Separate Account.
LEGAL MATTERS
The legal validity of the Park Avenue VUL policy, as described in this
prospectus, has been confirmed by Richard T. Potter, Jr., Vice President and
Counsel of GIAC.
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O T H E R I N F O R M A T I O N P R O S P E C T U S 73
------------------------
<PAGE>
REGISTRATION STATEMENT
We have omitted some information from this prospectus, which is contained in our
registration with the Securities and Exchange Commission (SEC), relating to the
Separate Account and the Park Avenue VUL policy. You can obtain this information
by contacting the SEC's main office in Washington, DC, and paying the required
fee.
FINANCIAL AND ACTUARIAL EXPERTS
The following items are included in this prospectus:
o financial statements of the Separate Account as of December 31, 1998
o statutory basis balance sheets of GIAC as of December 31, 1998 and
December 31, 1997
o related statutory basis statements of operations, changes in common stock,
surplus, and cash flow of GIAC for the three years ended December 31,
1998.
These items have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants of the Separate Account and
GIAC, whose reports thereon appear herein, given on their authority as experts
in accounting and auditing. PricewaterhouseCoopers LLP is located at 1177 Avenue
of the Americas, New York, New York 10036.
The GIAC statutory basis financial statements contained in this prospectus
should only be used to determine our ability to meet our obligations under the
Park Avenue VUL policies, and not as an indication of the investment experience
of the Separate Account.
The actuarial matters contained in this prospectus have been examined by Charles
G. Fisher, FSA, Vice President and Actuary of GIAC. His opinion on actuarial
matters is filed as an exhibit to the registration statement filed with the
Securities and Exchange Commission.
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74 P R O S P E C T U S O T H E R I N F O R M A T I O N
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<PAGE>
- --------------------------------------------------------------------------------
Year 2000 compliance
Many computer systems are unable to distinguish between the years 1900 and 2000
when they are making date-related calculations, because of the way that date
information is stored in these machines. Like businesses around the world that
rely on computerized systems for their day-to-day functioning, we may be
adversely affected if our computer systems, or the computer systems of companies
that we do business with, cannot address this problem by January 1, 2000. We are
working to address this issue, and expect that our computer systems will be able
to correctly interpret the year 2000 when that date arrives, but we cannot
guarantee that our preparations will be successful.
In conjunction with our parent company, Guardian Life, we are directing
significant portions of our internal information technology efforts and
contracting, as needed, with outside consultants to help update our systems to
accommodate the year 2000. We have also initiated discussions with other
critical parties whose systems impact our own to determine the progress they are
making toward addressing year 2000 issues.
Everyone involved is making substantial efforts to address their systems and the
systems with which they interface, but it is not possible to provide assurance
that operational problems will not occur. We believe that, with the modification
of existing computer systems, updates by vendors and conversion to new software
and hardware, we are well positioned to mitigate the year 2000 issue and that
policyowners will not experience negative effects with respect to their policies
as a result of the year 2000 issue. However, the year 2000 issue, by its very
nature contains inherent uncertainties, including the uncertainty of year 2000
readiness of third parties. As a result, we are unable to determine at this time
whether the consequences of year 2000 failures will have a material adverse
effect on our results of operations, liquidity or financial position.
We are also incorporating potential issues surrounding year 2000 into our
contingency planning process, in the event that, despite our substantial efforts
and those of other critical parties, there may still remain unresolved year 2000
problems.
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P R O S P E C T U S 75
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<PAGE>
GIAC'S MANAGEMENT
The directors and officers of GIAC are named below together with information
about their principal occupations and affiliations during the past five years.
The business address of each director and officer is 7 Hanover Square, New York,
New York 10004. The "Guardian Fund Complex" referred to in the biographical
information is comprised of (1) The Guardian Stock Fund (2) The Guardian Bond
Fund, (3) The Guardian Cash Fund, (4) The Park Avenue Portfolio (a series trust
that issues its shares in ten series) and (5) GIAC Funds, Inc. (a series fund
that issues its shares in three series).
<TABLE>
<CAPTION>
Name Title Business History
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph A. Caruso Vice President Vice President and Corporate Secretary, The Guardian Life Insurance Company
and Secretary of America 3/96 - present; Second Vice President and Corporate Secretary
1/95 - 2/96; Corporate Secretary 10/92 - 12/94; Vice President and Secretary,
Guardian Investor Services Corporation, Secretary, Guardian Asset Management
Corporation, Guardian Baillie Gifford Limited and various mutual funds within
the Guardian Fund Complex.
- ------------------------------------------------------------------------------------------------------------------------------------
Philip H. Dutter Director Management Consultant (self-employed). Director of The Guardian Life Insurance
Company of America 3/88 - present. Director of Guardian Investor Services
Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Earl C. Harry Treasurer Treasurer, The Guardian Life Insurance Company of America 11/96 -
present. Assistant Treasurer prior thereto. Treasurer of Guardian Investor Services
Corporation and Guardian Asset Management Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Arthur V. Ferrara Director Retired. Former Chairman of the Board and Chief Executive Officer,
The Guardian Life Insurance Company of America 1/93 - 12/95;
Director 1/81 - present. Director (Trustee) of Guardian Investor Services
Corporation, Guardian Asset Management Corporation, Gabelli Capital Asset Fund
and various mutual funds within the Guardian Fund Complex.
- ------------------------------------------------------------------------------------------------------------------------------------
Charles G. Fisher Vice President Second Vice President and Actuary, The Guardian Life Insurance
and Actuary Company of America.
- ------------------------------------------------------------------------------------------------------------------------------------
Leo R. Futia Director Retired. Former Chairman of the Board and Chief Executive Officer,
The Guardian Life Insurance Company of America; Director 5/70 - present. Director
(Trustee) of Guardian Investor Services Corporation and various mutual funds within
the Guardian Fund Complex. Director (Trustee) of various mutual funds sponsored by
Value Line, Inc..
- ------------------------------------------------------------------------------------------------------------------------------------
Peter L. Hutchings Director Executive Vice President and Chief Financial Officer, The Guardian Life
Insurance Company of America 5/87 - present. Director of Guardian Investor Services
Corporation and Guardian Asset Management Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Ryan W. Johnson Vice President, Vice President, Equity Marketing and Sales, 3/98 - present; Second Vice
Equity Sales President, Equity Sales, The Guardian Life Insurance Company of America
3/95 - 3/98; Regional Sales Director for Equity Products, Western Division,
prior thereto; Senior Vice President of Guardian Investor Services Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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76 P R O S P E C T U S O T H E R I N F O R M A T I O N
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<PAGE>
<TABLE>
<CAPTION>
Name Title Business History
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frank J. Jones Executive, Executive Vice President and Chief Investment Officer, The Guardian Life
Chief Investment Insurance Company of America, Director, Guardian Investor Services Corporation,
Officer, and Guardian Baillie Gifford Limited, Director and President Guardian Asset
Director Management Corporation. Executive Vice President, GIAC Funds, Inc. Officer of various
mutual funds within the Guardian Fund Complex.
- ------------------------------------------------------------------------------------------------------------------------------------
Edward K. Kane Executive Executive Vice President, The Guardian Life Insurance Company of America
Vice President 1/97 - present; Senior Vice President and General Counsel prior thereto; 11/88 -
and Director present. Director, Guardian Asset Management Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Frank L. Pepe Vice President Vice President and Controller, Equity Products, The Guardian Life Insurance
and Controller Company of America 1/96 - present; Second Vice President and Controller, Equity
Products prior thereto. Vice President and Controller of Guardian Investor Services
Corporation. Vice President and Treasurer, GIAC Funds, Inc.. Officer of various mutual
funds within the Guardian Fund Complex.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard T. Potter, Vice President Vice President and Equity Counsel, The Guardian Life Insurance
Jr. and Counsel Company of America 1/96 - present; Second Vice President and Equity Counsel
prior thereto. Vice President and Counsel of Guardian Investor Services
Corporation. Counsel of Guardian Asset Management Corporation and various mutual
funds within the Guardian Fund Complex.
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph D. Sargent President, President, Chief Executive Officer and Director The Guardian Life Insurance
Chief Executive Company of America 1/96 - present; President prior thereto; Director 1/93 -
Officer and present. Chairman of the Board of Guardian Investor Services Corporation and
Director Guardian Asset Management Corporation and various mutual funds within the Guardian
Fund Complex. Director of Guardian Baillie Gifford Limited.
- ------------------------------------------------------------------------------------------------------------------------------------
John M. Smith Executive Executive Vice President, The Guardian Life Insurance Company of
Vice President America 1/95 - present; Senior Vice President, Equity Products prior thereto.
and Director President and Director, Guardian Investor Services Corporation. President, GIAC Funds,
Inc.. Director, Guardian Baillie Gifford Limited. Director, Guardian Asset Management
Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
William C. Warren Director Retired. Dean Emeritus, Columbia Law School. Former Chairman of the Board,
Sandoz, Inc.; Director of The Guardian Life Insurance Company of America since
1/57 and Director of Guardian Investor Services Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
No officer or director of GIAC receives any compensation from the Separate
Account. No separately allocable compensation has been paid by GIAC, or any of
its affiliates, to any person listed above for services rendered to the Separate
Account.
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O T H E R I N F O R M A T I O N P R O S P E C T U S 77
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<PAGE>
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SPECIAL TERMS USED IN THIS PROSPECTUS
- --------------------------------------------------------------------------------
Some of the special terms used in this prospectus are defined below.
Age
The insured's age on his or her birthday closest to the date the policy takes
effect.
Attained age
The insured's current Age plus the number of policy years completed since the
policy date.
Business day
A day on which the New York Stock Exchange or its successor is open for trading
and GIAC is open for business. GIAC's close of business is 4 p.m. New York time.
Face amount
The initial face amount plus any policy segments in force at the time. The
minimum face amount is currently $100,000.
Initial face amount
The amount your policy will pay when the insured dies, as determined on the
policy issue date. This amount may be affected by decreases in the face amount,
or changes in your death benefit option. The minimum initial face amount is
currently $100,000.
Internal Revenue Code
The Internal Revenue Code of 1986, as amended, and its related rules and
regulations.
Issue date
The date your policy is issued at GIAC's Executive Office.
Minimum annual premium
An amount used to determine whether your policy meets the No Lapse Guarantee
Premium Test, and in setting your policy's initial premium. It is the sum of the
target premiums for the policy and any riders you have added.
Monthly date
The same date in each month as the policy date, or the last day of a month if
that is earlier.
Net amount at risk
The difference between the policy account value and the amount that you would be
paid under the policy's death benefit.
No Lapse Guarantee
For the first three years of your policy the No Lapse Guarantee ensures that it
will not lapse, even if poor investment performance means that the cash value of
your policy is not enough to pay the policy's monthly deductions in a given
month, so long as the No Lapse Guarantee Premium Test is met.
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78 P R O S P E C T U S S P E C I A L T E R M S
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<PAGE>
No Lapse Guarantee Premium Test
This test is used to determine whether your policy qualifies for the No Lapse
Guarantee. It states that, as of the most recent monthly date, you must have
paid at least as much into your policy (minus any withdrawals, surrender
charges, or policy debt) as the minimum annual premiums up to this date, as
outlined in your policy. To calculate your minimum annual premium for the
current policy year, divide the number of days since your policy anniversary by
365, then multiply your premium by this figure.
Policy anniversary
The same date each year as the policy date.
Policy date
The date your policy comes into effect. This date is used to measure policy
months, policy years, policy anniversaries, and monthly dates.
Policy debt
All unpaid policy loans, plus the accumulated and unpaid interest on those
loans.
Policy review date
The monthly date before your policy anniversary.
Target premium
A measure of premium used to determine your policy's premium charges and agent
commissions. Your policy's initial face amount and any policy segments you buy
each have their own target premium. The target premium associated with the
initial face amount is based on the insured's age, underwriting class and sex
(unless gender-neutral rates are required by law). The target premium associated
with any policy segments is based on the insured's attained age and the
underwriting class for each policy segment. The target premium is based on a
rate per $1,000, which would provide a cash surrender value equal to the face
amount of the policy on the policy anniversary nearest the insured's 100th
birthday. This is based on:
o the policy's currenty charges
o a face amount of $250,000, and
o net interest on the policy account value at an annual rate of 4.5%
The target premium for any rider, except the guaranteed coverage rider, is 12
times the monthly deduction for that rider during the first policy year.
------------------------
S P E C I A L T E R M S P R O S P E C T U S 79
------------------------
<PAGE>
The Guardian Separate Account M
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
Baillie
Gabelli Baillie Gifford
Guardian Guardian Guardian Capital Gifford Emerging
Stock Bond Cash Asset International Markets
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FIFO cost ................................ $ 1,237,440 $ 28,197 $ 547,465 $ 74,208 $ 51,115 $ 3,100
------------ ---------- ---------- ---------- ---------- ----------
Assets:
Shares owned in underlying fund --
Note 1 ............................... 25,802 2,228 54,746 4,600 2,475 424
Net asset value per share (NAV) ........ 49.08 12.23 10.00 16.20 20.92 7.39
------------ ---------- ---------- ---------- ---------- ----------
Total Assets (Shares x NAV) .......... $ 1,266,381 $ 27,242 $ 547,465 $ 74,522 $ 51,787 $ 3,131
Liabilities:
Due to The Guardian Insurance &
Annuity Company, Inc. ................ 2,990 39 1,184 88 73 8
------------ ---------- ---------- ---------- ---------- ----------
Net Assets -- Note 4 ................. $ 1,263,39 $ 27,203 $ 546,281 $ 74,434 $ 51,714 $ 3,123
------------ ---------- ---------- ---------- ---------- ----------
Number of units outstanding ............ 108,361.376 2,566.380 52,667.498 6,862.440 4,556.866 409.182
Unit value ............................. 11.66 10.60 10.37 10.85 11.35 7.63
============ ========== ========== ========== ========== ==========
<CAPTION>
Value Line
Guardian Strategic MFS
Small Cap Value Line Asset MFS Growth Emerging
Stock Centurion Management with Income Growth
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
FIFO cost ..................................... $ 110,035 $ 55,138 $ 131,232 $ 86,522 $ 44,480
---------- ---------- ---------- ---------- ----------
Assets:
Shares owned in underlying fund --
Note 1 .................................... 9,151 2,043 5,548 4,591 2,193
Net asset value per share (NAV) ............. 12.74 30.44 25.22 20.11 21.47
---------- ---------- ---------- ---------- ----------
Total Assets (Shares x NAV) ............... $ 116,586 $ 62,186 $ 139,913 $ 92,319 $ 47,084
Liabilities:
Due to The Guardian Insurance &
Annuity Company, Inc. ....................... 411 88 138 129 29
---------- ---------- ---------- ---------- ----------
Net Assets -- Note 4 ...................... $ 116,175 $ 62,098 $ 139,775 $ 92,190 $ 47,055
---------- ---------- ---------- ---------- ----------
Number of units outstanding ................. 12,865.155 5,069.167 11,440.774 7,870.675 3,820,751
Unit value .................................. 9.03 12.25 12.22 11.71 12.32
========== ========== ========== ========== ==========
</TABLE>
STATEMENT OF OPERATIONS
December 31, 1998
<TABLE>
<CAPTION>
Baillie
Gabelli Baillie Gifford
Guardian Guardian Guardian Capital Gifford Emerging
Stock Bond Cash Asset International Markets
--------- --------- --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends .............................. $ 6,267 $ 811 $ 6,307 $ 122 $ 100 $ --
Expenses -- Note 3:
Mortality and expense risk charges .............. 2,990 39 1,184 88 73 8
--------- --------- --------- --------- --------- ---------
Net investment income/(expense) ................... 3,277 772 5,123 34 27 (8)
--------- --------- --------- --------- --------- ---------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments (9,204) 108 -- (289) 873 (14)
Reinvested realized gain distributions .......... 96,129 346 -- 3,683 2,197 --
--------- --------- --------- --------- --------- ---------
Net realized gain/(loss) on investments ........... 86,925 454 -- 3,394 3,070 (14)
Net change in unrealized appreciation/
(depreciation) of investments ................... 28,942 (954) -- 313 673 31
--------- --------- --------- --------- --------- ---------
Net realized and unrealized gain/(loss)
from investments .................................. 115,867 (500) -- 3,707 3,743 17
--------- --------- --------- --------- --------- ---------
Net Increase/(Decrease) in Net Assets Resulting
from Operations ................................... $ 119,144 $ 272 $ 5,123 $ 3,741 $ 3,770 $ 9
========= ========= ========= ========= ========= =========
<CAPTION>
Value Line
Guardian Strategic MFS
Small Cap Value Line Asset MFS Growth Emerging
Stock Centurion Management with Income Growth
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends .............................. $ 96 $ 2 $ 87 $ -- $ --
Expenses -- Note 3:
Mortality and expense risk charges .............. 411 88 138 129 29
--------- --------- --------- --------- ---------
Net investment income/(expense) ................... (315) (86) (51) (129) (29)
--------- --------- --------- --------- ---------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments (10,314) 1,739 3,383 776 (28)
Reinvested realized gain distributions .......... 310 24 252 -- --
--------- --------- --------- --------- ---------
Net realized gain/(loss) on investments ........... (10,004) 1,763 3,635 776 (28)
Net change in unrealized appreciation/
(depreciation) of investments ................... 6,550 7,047 8,681 5,797 2,604
--------- --------- --------- --------- ---------
Net realized and unrealized gain/(loss)
from investments .................................. (3,454) 8,810 12,316 6,573 2,576
--------- --------- --------- --------- ---------
Net Increase/(Decrease) in Net Assets Resulting
from Operations ................................... $ (3,769) $ 8,724 $ 12,265 $ 6,444 $ 2,547
========= ========= ========= ========= =========
</TABLE>
See notes to statutory basis financial statements.
----------------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 80 & 81
----------------------------
<PAGE>
The Guardian Separate Account M
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
AIM V.I. American
MFS MFS Capital AIM V.I. Century VP
Total Return Bond Appreciation Value Value
------------ -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
FIFO cost ............................... $ 8,783 $ 13 $ 51,680 $ 62,695 $ 15,135
Assets:
Shares owned in underlying fund --
Note 1 .............................. 504 1 2,157 2,541 2,261
Net asset value per share (NAV) ....... 18.12 11.36 25.20 26.25 6.73
-------- -------- ---------- ---------- ----------
Total Assets (Shares x NAV) ......... $ 9,133 $ 13 $ 54,359 $ 66,697 $ 15,218
Liabilities:
Due to The Guardian Insurance & Annuity
Company, Inc. ....................... 12 -- 34 84 24
-------- -------- ---------- ---------- ----------
Net Assets -- Note 4 .................. $ 9,121 $ 13 $ 54,325 $ 66,613 $ 15,194
-------- -------- ---------- ---------- ----------
Number of units outstanding ........... 833.376 1.261 4,696.294 5,242.471 1,597.781
Unit value ............................ 10.95 10.52 11.57 12.71 9.51
======== ======== ========== ========== ==========
<CAPTION>
Fidelity
American VIP III Fidelity Fidelity Fidelity
Century VP Growth VIP Equity- VIP High VIP II
International Opportunities Income Income Index 500
------------- ------------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
FIFO cost ............................... $ 39,234 $ 28,318 $ 17,817 $ 4,269 $ 152,702
Assets:
Shares owned in underlying fund --
Note 1 .............................. 5,222 1,356 743 378 1,170
Net asset value per share (NAV) ....... 7.62 22.88 25.42 11.53 141.25
---------- ---------- ---------- -------- -----------
Total Assets (Shares x NAV) ......... $ 39,788 $ 31,029 $ 18,889 $ 4,362 $ 165,269
Liabilities:
Due to The Guardian Insurance & Annuity
Company, Inc. ....................... 11 54 24 15 225
---------- ---------- ---------- -------- -----------
Net Assets -- Note 4 .................. $ 39,777 $ 30,975 $ 18,865 $ 4,347 $ 165,044
---------- ---------- ---------- -------- -----------
Number of units outstanding ........... 3,799.683 2,590.506 1,751.528 470.553 13,542.012
Unit value ............................ 10.47 11.96 10.77 9.24 12.19
========== ========== ========== ======== ===========
</TABLE>
STATEMENT OF OPERATIONS
December 31, 1998
<TABLE>
<CAPTION>
AIM V.I. American
MFS MFS Capital AIM V.I. Century VP
Total Return Bond Appreciation Value Value
------------ -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ................................. $ -- $ -- $ 39 $ 220 $ --
Expenses -- Note 3:
Mortality and expense risk charges ................... 12 -- 34 84 24
-------- -------- -------- -------- --------
Net investment income/(expense) ........................ (12) -- 5 136 (24)
-------- -------- -------- -------- --------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments .... 38 -- 414 769 26
Reinvested realized gain distributions ............... -- -- 697 1,946 --
-------- -------- -------- -------- --------
Net realized gain/(loss) on investments ................ 38 -- 1,111 2,715 26
Net change in unrealized appreciation/(depreciation)
of investments ....................................... 350 -- 2,679 4,002 83
-------- -------- -------- -------- --------
Net realized and unrealized gain/(loss) from investments 388 -- 3,790 6,717 109
-------- -------- -------- -------- --------
Net Increase/(Decrease) in Net Assets Resulting
from Operations ...................................... $ 376 $-- $ 3,795 $ 6,853 $ 85
======== ======== ======== ======== ========
<CAPTION>
Fidelity
American VIP III Fidelity Fidelity Fidelity
Century VP Growth VIP Equity- VIP High VIP II
International Opportunities Income Income Index 500
------------- ------------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ................................. $ -- $ -- $ -- $ -- $ --
Expenses -- Note 3:
Mortality and expense risk charges ................... 11 54 24 15 225
-------- -------- -------- -------- --------
Net investment income/(expense) ........................ (11) (54) (24) (15) (225)
-------- -------- -------- -------- --------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments .... 13 71 (41) (34) 863
Reinvested realized gain distributions ............... -- -- -- -- --
-------- -------- -------- -------- --------
Net realized gain/(loss) on investments ................ 13 71 (41) (34) 863
Net change in unrealized appreciation/(depreciation)
of investments ....................................... 554 2,712 1,073 94 12,566
-------- -------- -------- -------- --------
Net realized and unrealized gain/(loss) from investments 567 2,783 1,032 60 13,429
-------- -------- -------- -------- --------
Net Increase/(Decrease) in Net Assets Resulting
from Operations ...................................... $ 556 $ 2,729 $ 1,008 $ 45 $ 13,204
======== ======== ======== ======== ========
</TABLE>
See notes to statutory basis financial statements.
----------------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 82 & 83
----------------------------
<PAGE>
The Guardian Separate Account M
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998 Increase/(Decrease) from Operations
Net investment income/(expense) ................. $ 3,277 $ 772 $ 5,123 $ 34
Net realized gain/(loss) from sale of investments (9,204) 108 -- (289)
Reinvested realized gain distributions .......... 96,129 346 -- 3,683
Change in unrealized appreciation/(depreciation)
of investments ................................ 28,942 (954) -- 313
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations 119,144 272 5,123 3,741
----------- ----------- ----------- -----------
1998 Policy Transactions
Net policy purchase payments .................... 1,436,958 43,732 733,372 78,911
Transfer on account of other terminations ....... (209) -- -- --
Transfer of policy loans ........................ (10,000) -- -- --
Transfer of cost of insurance and
policy fees -- Note 3 ......................... (192,811) (5,140) (66,868) (9,285)
Transfer between investment divisions ........... (83,905) (11,601) (125,550) 485
Transfers -- other .............................. (5,786) (60) 204 582
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions 1,144,247 26,931 541,158 70,693
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets ........... 1,263,391 27,203 546,281 74,434
Net Assets at December 31, 1997 ................. -- -- -- --
----------- ----------- ----------- -----------
Net Assets at December 31, 1998 ................. $ 1,263,391 $ 27,203 $ 546,281 $ 74,434
=========== =========== =========== ===========
<CAPTION>
Baillie
Baillie Gifford Guardian
Gifford Emerging Small Cap Value Line
International Markets Stock Centurion
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1998 Increase/(Decrease) from Operations
Net investment income/(expense) ................. $ 27 $ (8) $ (315) $ (86)
Net realized gain/(loss) from sale of investments 873 (14) (10,314) 1,739
Reinvested realized gain distributions .......... 2,197 -- 310 24
Change in unrealized appreciation/(depreciation)
of investments ................................ 673 31 6,550 7,047
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations 3,770 9 (3,769) 8,724
----------- ----------- ----------- -----------
1998 Policy Transactions
Net policy purchase payments .................... 52,569 1,770 136,122 50,783
Transfer on account of other terminations ....... -- -- (75) --
Transfer of policy loans ........................ -- -- -- --
Transfer of cost of insurance and
policy fees -- Note 3 ......................... (7,591) (287) (28,776) (6,570)
Transfer between investment divisions ........... 3,203 1,639 13,651 8,525
Transfers -- other .............................. (237) (8) (978) 636
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions 47,944 3,114 119,944 53,374
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets ........... 51,714 3,123 116,175 62,098
Net Assets at December 31, 1997 ................. -- -- -- --
----------- ----------- ----------- -----------
Net Assets at December 31, 1998 ................. $ 51,714 $ 3,123 $ 116,175 $ 62,098
=========== =========== =========== ===========
<CAPTION>
Value Line
Strategic MFS
Asset MFS Growth Emerging
Management with Income Growth
----------- ----------- -----------
<S> <C> <C> <C>
1998 Increase/(Decrease) from Operations
Net investment income/(expense) ................. $ (51) $ (129) $ (29)
Net realized gain/(loss) from sale of investments 3,383 776 (28)
Reinvested realized gain distributions .......... 252 -- --
Change in unrealized appreciation/(depreciation)
of investments ................................ 8,681 5,797 2,604
----------- ----------- -----------
Net increase/(decrease) resulting from operations 12,265 6,444 2,547
----------- ----------- -----------
1998 Policy Transactions
Net policy purchase payments .................... 127,748 82,155 45,426
Transfer on account of other terminations ....... -- (160) --
Transfer of policy loans ........................ -- -- --
Transfer of cost of insurance and
policy fees -- Note 3 ......................... (12,956) (11,738) (2,806)
Transfer between investment divisions ........... 12,142 15,099 1,639
Transfers -- other .............................. 576 390 249
----------- ----------- -----------
Net increase/(decrease) from policy transactions 127,510 85,746 44,508
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets ........... 139,775 92,190 47,055
Net Assets at December 31, 1997 ................. -- -- --
----------- ----------- -----------
Net Assets at December 31, 1998 ................. $ 139,775 $ 92,190 $ 47,055
=========== =========== ===========
</TABLE>
See notes to statutory basis financial statements.
----------------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 84 & 85
----------------------------
<PAGE>
The Guardian Separate Account M
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1998
<TABLE>
<CAPTION>
AIM V.I. American
MFS MFS Capital AIM V.I. Century VP
Total Return Bond Appreciation Value Value
------------ --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
1998 Increase/(Decrease) from Operations
Net investment income/(expense) ....................... $ (12) $ -- $ 5 $ 136 $ (24)
Net realized gain/(loss) from sale of investments ..... 38 -- 414 769 26
Reinvested realized gain distributions ................ -- -- 697 1,946 --
Change in unrealized appreciation/(depreciation)
of investments ...................................... 350 -- 2,679 4,002 83
--------- --------- --------- --------- ---------
Net increase/(decrease) resulting from operations ..... 376 -- 3,795 6,853 85
--------- --------- --------- --------- ---------
1998 Policy Transactions
Net policy purchase payments .......................... 9,837 45 43,683 57,521 10,883
Transfer on account of other terminations ............. -- -- -- -- --
Transfer of policy loans -- ........................... -- -- -- -- --
Transfer of cost of insurance and policy fees -- Note 3 (1,099) (32) (1,644) (6,161) (997)
Transfer between investment divisions ................. -- -- 8,524 8,524 4,899
Transfers -- other .................................... 7 -- (33) (124) 324
--------- --------- --------- --------- ---------
Net increase/(decrease) from policy transactions ...... 8,745 13 50,530 59,760 15,109
--------- --------- --------- --------- ---------
Total Increase/(Decrease) in Net Assets ................. 9,121 13 54,325 66,613 15,194
Net Assets at December 31, 1997 ....................... -- -- -- -- --
--------- --------- --------- --------- ---------
Net Assets at December 31, 1998 ....................... $ 9,121 $ 13 $ 54,325 $ 66,613 $ 15,194
========= ========= ========= ========= =========
<CAPTION>
Fidelity
American VIP III Fidelity Fidelity Fidelity
Century VP Growth VIP Equity- VIP High VIP II
International Opportunities Income Income Index 500
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998 Increase/(Decrease) from Operations
Net investment income/(expense) ....................... $ (11) $ (54) $ (24) $ (15) $ (225)
Net realized gain/(loss) from sale of investments ..... 13 71 (41) (34) 863
Reinvested realized gain distributions ................ -- -- -- -- --
Change in unrealized appreciation/(depreciation)
of investments ...................................... 554 2,712 1,073 94 12,566
--------- --------- --------- --------- ---------
Net increase/(decrease) resulting from operations ..... 556 2,729 1,008 45 13,204
--------- --------- --------- --------- ---------
1998 Policy Transactions
Net policy purchase payments .......................... 40,265 35,356 22,483 4,695 117,173
Transfer on account of other terminations ............. -- -- -- -- (64)
Transfer of policy loans -- ........................... -- -- -- -- --
Transfer of cost of insurance and policy fees -- Note 3 (1,071) (7,278) (4,679) (396) (14,226)
Transfer between investment divisions ................. -- -- (37) -- 45,095
Transfers -- other .................................... 27 168 90 3 3,862
--------- --------- --------- --------- ---------
Net increase/(decrease) from policy transactions ...... 39,221 28,246 17,857 4,302 151,840
--------- --------- --------- --------- ---------
Total Increase/(Decrease) in Net Assets ................. 39,777 30,975 18,865 4,347 165,044
Net Assets at December 31, 1997 ....................... -- -- -- -- --
--------- --------- --------- --------- ---------
Net Assets at December 31, 1998 ....................... $ 39,777 $ 30,975 $ 18,865 $ 4,347 $ 165,044
========= ========= ========= ========= =========
</TABLE>
See notes to statutory basis financial statements.
----------------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 86 & 87
----------------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OF THE GUARDIAN SEPARATE ACCOUNT M
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
The Guardian Separate Account M (the Account), a unit investment trust
registered under the Investment Company Act of 1940, as amended, was established
by The Guardian Insurance & Annuity Company, Inc. (GIAC) on January 29, 1998 and
commenced operations on February 6, 1998. GIAC is a wholly owned subsidiary of
The Guardian Life Insurance Company of America (Guardian). GIAC issues the
flexible premium variable universal life insurance policies offered through the
Account. GIAC provides for variable accumulations and benefits under the
policies by crediting the net premium payments to one or more investment
divisions established within the Account, or to the Fixed Rate Option (FRO), as
selected by the policyowner. Amounts allocated to the FRO are maintained by GIAC
in its general account. The policyowner also has the ability to transfer his or
her policy value among the investment divisions within the Account.
The Account currently comprises twenty one investment divisions which
invest in shares of the following mutual funds: The Guardian Stock Fund, Inc.
(GSF), The Guardian Bond Fund, Inc. (GBF), The Guardian Cash Fund, Inc. (GCF),
Gabelli Capital Asset Fund, Baillie Gifford International Fund (BGIF), Baillie
Gifford Emerging Markets Fund (BGEMF), The Guardian Small Cap Stock Fund (GSCF),
Value Line Centurion Fund, Inc., Value Line Strategic Asset Management Trust,
MFS Growth with Income Series, MFS Emerging Growth Series, MFS Total Return
Series, MFS Bond Series, AIM V.I. Capital Appreciation Fund, AIM V.I. Value
Fund, American Century VP Value Fund, American Century VP International Fund,
Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP High Income Portfolio, and Fidelity VIP II Index 500
Portfolio (collectively, the Funds and individually, a Fund). However, a
policyowner may only invest in up to seven investment divisions, including the
FRO.
GSF, GBF, GCF and GSCF each has an investment advisory agreement with
Guardian Investor Services Corporation, a wholly owned subsidiary of GIAC. BGIF
and BGEMF are managed by Guardian Baillie Gifford Ltd., a joint venture company
formed by GIAC and Baillie Gifford Overseas Ltd.
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 benefit 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 may
not be less than the amount required under state insurance laws to provide for
death benefits (without regard to the minimum death benefit guarantee) and other
policy benefits. Additional assets are held in GIAC's general account to cover
the contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies of the
Account.
Investments
(a) Net proceeds from the sale of flexible premium variable life insurance
policies are invested by the Account's investment divisions in shares of the
corresponding Funds at the net asset value of each Fund's shares. All
distributions made by a Fund are reinvested in shares of the same Fund.
(b) 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.
(c) Investment transactions are accounted for on the trade date and income
is recorded on the ex-dividend date.
(d) The cost of investments sold is determined on a first in, first out
(FIFO) basis.
Federal Income Taxes
The operations of the Account are part of the operations of GIAC and, as
such, are included in the combined tax return of GIAC. GIAC is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended.
Under current tax law, no federal taxes are payable by GIAC with respect
to the operations of the Account.
- -----------------------
88 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 3 -- ADMINISTRATIVE AND MORTALITY
AND EXPENSE RISK CHARGES
GIAC assumes mortality and expense risk related to the operations of the
Account. To cover these risks, GIAC deducts a daily charge from the net assets
of the contractholder's account which, on an annual basis, is equal to a rate of
.90% of the policy account value. This charge is reduced to .60% of the policy
account value after the twentieth policy anniversary. For the year ended
December 31, 1998 mortality and expense risk deductions amounted to $5,660.
Under the terms of the policy, GIAC also deducts certain charges from the
policy account value. These other contractual charges are deducted by redeeming
units of the investment divisions and consist of:
a) a monthly charge for the cost of life insurance, based on the face
value of the policyowner's insurance inforce, as compensation for the
anticipated cost of paying death benefits. For the year ended December 31, 1998,
deductions for cost of life insurance amounted to $214,586.
b) policy and administrative fees which vary with the face amount, age of
the insured or the duration of the contract. For the year ended December 31,
1998 these fees amounted to $191,687.
c) an annual state premium tax charge as a percentage of the basic
premium. This rate varies by state of jurisdiction. The annual state premium tax
charge for the year December 31, 1998 was $287,325.
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.
Under current laws, GIAC may incur state and local taxes in several
states. At present, these taxes are not significant. In the event of a material
change in applicable state or local tax laws, GIAC reserves the right to charge
the Account for such taxes, if any, which are attributable to the Account.
NOTE 4 -- NET ASSETS, DECEMBER 31, 1998
At December 31, 1998, net assets of the Account were as follows:
Accumulation of Variable Universal Life
Insurance Policyowners' Accounts $881,508
Owned by GIAC 1,946,205
----------
$2,827,713
==========
The amount retained by GIAC in the Account is comprised of amounts
accruing to GIAC from the operations of the Account and retained therein.
Amounts retained by GIAC in the Account may be transferred by GIAC to its
general account.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 89
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 5 -- PURCHASES AND SALES
During the year ended December 31, 1998, purchases and sales of shares of
the Funds were as follows:
Purchases Sales
December 31, December 31,
1998 1998
------------ ------------
The Guardian Stock Fund, Inc. .................... $1,545,772 $ 299,129
The Guardian Bond Fund, Inc. ..................... 65,669 37,580
The Guardian Cash Fund, Inc. ..................... 848,249 300,783
Gabelli Capital Asset Fund ....................... 78,882 4,384
Baillie Gifford International Fund ............... 67,965 17,724
Baillie Gifford Emerging Markets Fund ............ 3,420 306
The Guardian Small Cap Stock Fund ................ 150,394 30,044
Value Line Centurion Fund, Inc. .................. 81,511 28,112
Value Line Strategic Asset Management Trust ...... 193,630 65,780
MFS Growth with Income Series .................... 99,728 13,982
MFS Emerging Growth Series ....................... 48,857 4,349
MFS Total Return Series .......................... 9,451 706
MFS Bond Series .................................. 23 11
AIM V.I. Capital Appreciation Fund ............... 60,558 9,292
AIM V.I. Value Fund .............................. 72,356 10,430
American Century VP Value Fund ................... 15,897 788
American Century VP International Fund ........... 40,356 1,135
Fidelity VIP III Growth Opportunities Portfolio .. 30,623 2,376
Fidelity VIP Equity-Income Portfolio ............. 19,924 2,067
Fidelity VIP High Income Portfolio ............... 4,638 336
Fidelity VIP II Index 500 Portfolio .............. 174,718 22,878
---------- ----------
Total ........................................ $3,612,621 $ 852,192
========== ==========
In some instances the calculation of total assets may not agree due to rounding.
- -----------------------
90 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
OF THE GUARDIAN SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
and the Policyowners of The Guardian Separate
Account M, "Park Avenue Variable Universal Life"
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
Bond, Guardian Cash, Gabelli Capital Asset, Baillie Gifford International,
Baillie Gifford Emerging Markets, Guardian Small Cap Stock, Value Line Strategic
Asset Management, MFS Growth with Income, MFS Emerging Growth, MFS Total Return,
MFS Bond, AIM V.I. Capital Appreciation, AIM V.I. Value, American Century VP
Value, American Century VP International, Fidelity VIP III Growth Opportunities,
Fidelity VIP Equity-Income, Fidelity VIP High Income, and Fidelity VIP II Index
500 investment divisions (constituting The Guardian Separate Account M, "Park
Avenue Variable Universal Life") at December 31, 1998, and the results of each
of their operations and changes in each of their net assets for the period from
February 6, 1998 (commencement of operations) to December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the management of The Guardian Insurance &
Annuity Company, Inc.; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards 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 audit, which included
confirmation of shares owned at December 31, 1998 by correspondence with the
transfer agents of the underlying funds, provides a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 25, 1999
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 91
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN INSURANCE
& ANNUITY COMPANY, INC.
- --------------------------------------------------------------------------------
The Guardian Insurance & Annuity Company, Inc.
STATUTORY BASIS BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
-------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Admitted Assets
Investments:
Fixed maturities, principally at amortized cost
(market: 1998 - $547,051,594; 1997 - $492,052,307) ...... $ 536,554,920 $ 484,747,832
Affiliated mutual funds, at market .......................... 29,096,730 30,551,186
Investment in subsidiary .................................... 16,915,998 12,073,143
Policy loans - variable life insurance ...................... 72,861,940 72,737,781
Cash and short-term investments ............................. 9,006,075 23,602,410
Investment in joint venture ................................. 347,338 345,492
Other Invested Assets ....................................... 96,910 95,710
Accrued investment income receivable ........................... 17,378,196 13,303,271
Due from parent and affiliates ................................. 15,296,679 7,573,304
Other assets ................................................... 10,565,481 12,461,722
Receivable from separate accounts .............................. 34,565,822 30,203,923
Variable annuity and EISP/CIP separate account assets .......... 8,338,242,774 6,810,882,719
Variable life separate account assets .......................... 502,222,315 414,699,239
-------------- --------------
Total admitted assets ................................... $9,583,151,178 $7,913,277,732
============== ==============
Liabilities
Policy liabilities and accruals:
Fixed deferred reserves ..................................... $ 344,614,116 $ 339,797,646
Fixed immediate reserves .................................... 10,576,555 7,397,461
Life reserves ............................................... 74,101,150 67,799,492
Minimum death benefit guarantees ............................ 1,447,553 1,117,645
Policy loan collateral fund reserve ......................... 71,009,047 70,734,812
Accrued expenses, taxes, & commissions ...................... 1,507,045 1,592,997
Due to parent and affiliates ................................ 25,040,196 20,408,087
Federal income taxes payable ................................ 16,932,639 10,939,640
Other liabilities ........................................... 16,127,345 20,540,325
Asset valuation reserve ..................................... 29,566,970 26,305,528
Variable annuity and EISP/CIP separate account liabilities .. 8,263,551,697 6,750,575,077
Variable life separate account liabilities .................. 501,289,827 413,364,790
-------------- --------------
Total liabilities ....................................... 9,355,764,140 7,730,573,500
Common stock and surplus
Common Stock, $100 par value, 20,000 shares authorized,
issued and outstanding .................................. 2,000,000 2,000,000
Additional paid-in surplus .................................. 137,398,292 137,398,292
Assigned and unassigned surplus ............................. 87,988,746 43,305,940
-------------- --------------
Total Common Stock and Surplus .......................... 227,387,038 182,704,232
-------------- --------------
Total liabilities, common stock and surplus ............. $9,583,151,178 $7,913,277,732
============== ==============
</TABLE>
See notes to statutory basis financial statements.
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92 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
STATUTORY BASIS STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Premiums and annuity considerations:
Variable annuity considerations ................... $ 1,266,800,186 $ 995,209,301 $ 731,792,764
Life insurance premiums and fixed
annuity considerations .......................... 69,728,716 68,222,360 44,874,269
Net investment income ............................. 54,235,472 47,993,754 42,366,902
Amortization of IMR ............................... 266,599 111,783 333,219
Net gain from operations of separate accounts ..... 2,619,113 5,780,327 8,860,462
Service fees ...................................... 94,170,552 76,350,291 58,774,486
Variable life -- cost of insurance ................ 16,844,679 11,205,120 4,844,028
Reserve adjustments on reinsurance ceded .......... 34,449,189 7,885,341 30,636,445
Commission and expense allowances ................. 29,942,869 16,268,128 14,508,840
Other income ...................................... 9,570,705 5,178,266 2,535,356
--------------- --------------- ---------------
1,578,628,080 1,234,204,671 939,526,771
--------------- --------------- ---------------
Benefits and expenses:
Benefits:
Death benefits ........................................ 6,461,543 5,340,675 6,785,456
Annuity benefits .................................. 1,041,372,277 687,719,014 426,072,773
Surrender benefits ................................ 25,260,734 17,620,583 17,459,706
Increase in reserves .............................. 14,594,471 18,291,585 82,891,516
Net transfers to (from) separate accounts:
Variable annuity and EISP/CIP ..................... 291,988,248 359,468,681 323,093,897
Variable Life ..................................... 7,484,413 (630,102) (10,417,095)
Commissions ........................................... 50,875,519 43,352,989 39,233,431
General insurance expenses ............................ 79,386,352 59,476,685 42,523,892
Taxes, licenses and fees .............................. 6,289,814 3,743,414 3,723,858
Reinsurance terminations .............................. 40,482 182,535 (15,470,015)
--------------- --------------- ---------------
1,523,753,853 1,194,566,059 915,897,419
--------------- --------------- ---------------
Income before income taxes and realized
gains from investments ............................ 54,874,227 39,638,612 23,629,352
Federal income taxes .................................. 14,505,552 12,073,500 3,941,460
--------------- --------------- ---------------
Income from operations, net of federal income taxes,
and before net realized gains ..................... 40,368,675 27,565,112 19,687,892
Realized gains from investments, net of federal
income taxes, net of transfer to IMR .............. 92,355 472,127 7,540
--------------- --------------- ---------------
Net income ............................................ $ 40,461,030 $ 28,037,239 $ 19,695,432
=============== =============== ===============
</TABLE>
See notes to statutory basis financial statements.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 93
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
STATUTORY BASIS STATEMENTS OF CHANGES IN COMMON STOCK AND SURPLUS
<TABLE>
<CAPTION>
Assigned and Total
Additional unassigned common
Common paid-in surplus stock and
stock surplus (Deficit) surplus
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balances at December 31, 1995 ...................... $ 2,000,000 $ 137,398,292 $ 2,479,635 $ 141,877,927
------------- ------------- ------------- -------------
Net income from operations ......................... 19,695,433 19,695,433
Tax on prior years separate account seed
investment unrealized gains .................... (104,732) (104,732)
Increase in unrealized appreciation of Company's
investment in joint venture .................... 241,456 241,456
Increase in unrealized appreciation of Company's
investment in subsidiary ....................... 142,201 142,201
Decrease in unrealized appreciation of Company's
investment in other assets ..................... (9,384) (9,384)
Increase in non-admitted assets .................... (80,815) (80,815)
Disallowed interest maintenance reserve ............ (128,107) (128,107)
Surplus changes resulting from reinsurance ......... (2,073,155) (2,073,155)
Net increase in asset valuation reserve ............ (5,779,916) (5,779,916)
------------- ------------- ------------- -------------
Balances at December 31, 1996 ...................... $ 2,000,000 $ 137,398,292 $ 14,382,616 $ 153,780,908
============= ============= ============= =============
Net income from operations ......................... 28,037,239 28,037,239
Increase in unrealized appreciation of Company's
investment in joint venture .................... 42,908 42,908
Increase in unrealized appreciation of Company's
investment in subsidiary ....................... 4,326,500 4,326,500
Increase in unrealized appreciation of Company's
investment in other assets ..................... 9,384 9,384
Increase in unrealized appreciation of Company's
investment in an affiliated mutual fund ........ 7,271,233 7,271,233
Decrease in non-admitted assets .................... 83,011 83,011
Disallowed interest maintenance reserve ............ (197,600) (197,600)
Surplus changes resulting from reinsurance ......... 534,908 534,908
Net increase in asset valuation reserve ............ (11,184,259) (11,184,259)
------------- ------------- ------------- -------------
Balances at December 31, 1997 ...................... $ 2,000,000 $ 137,398,292 $ 43,305,940 $ 182,704,232
============= ============= ============= =============
Net income from operations ......................... 40,461,030 40,461,030
Increase in unrealized appreciation of Company's
investment in joint venture .................... 1,846 1,846
Increase in unrealized appreciation of Company's
investment in subsidiary ....................... 4,542,855 4,542,855
Decrease in unrealized appreciation of Company's
investment in an affiliated mutual fund ........ (1,831,189) (1,831,189)
Increase in unrealized appreciation of Company's
seed investment in separate accounts ........... 3,690,295 3,690,295
Decrease in non-admitted assets .................... 57,886 57,886
Disallowed interest maintenance reserve ............ 1,090,623 1,090,623
Surplus changes resulting from reinsurance ......... (69,098) (69,098)
Net increase in asset valuation reserve ............ (3,261,442) (3,261,442)
------------- ------------- ------------- -------------
Balances at December 31, 1998 ...................... $ 2,000,000 $ 137,398,292 $ 87,988,746 $ 227,387,038
============= ============= ============= =============
</TABLE>
See notes to statutory basis financial statements.
- -----------------------
94 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
STATUTORY BASIS STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from insurance activities:
Premiums, annuity considerations and
deposit funds ........................ $ 1,341,389,534 $ 1,065,244,583 $ 780,710,735
Investment income ....................... 51,241,553 46,412,248 42,413,736
Commissions and expense allowances on
reinsurance ceded .................... 57,916,363 22,679,622 37,315,301
Other income ............................ 102,437,913 67,084,996 47,357,962
Death benefits .......................... (7,112,859) (5,492,854) (6,900,438)
Surrender benefits ...................... (25,806,851) (17,780,564) (2,774,865)
Annuity benefits ........................ (1,040,119,415) (689,207,046) (424,511,908)
Commissions, other expenses
and taxes (excluding FIT) ............ (133,189,119) (101,213,566) (78,968,214)
Net transfers to separate accounts ...... (298,118,417) (356,017,200) (307,856,562)
Federal income taxes (excluding tax on
capital gains) ....................... (8,930,569) (5,094,779) 682,025
Increase in policy loans ................ (124,158) (4,594,714) (4,300,868)
Other operating expenses and sources .... (2,618,322) (140,580) 2,077,342
--------------- --------------- ---------------
Net cash provided by insurance activities ... 36,965,653 21,880,146 85,244,246
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from dispositions of
investment securities ................ 280,921,058 315,404,430 224,692,954
Purchases of investment securities ...... (332,368,788) (331,151,548) (309,590,319)
Federal income tax on capital gains ..... (114,258) (355,657) (505,496)
--------------- --------------- ---------------
Net cash used in investing activities ....... (51,561,988) (16,102,775) (85,402,861)
--------------- --------------- ---------------
Net increase (decrease) in cash ......... (14,596,335) 5,777,371 (158,615)
Cash and short-term investments,
beginning of year .................... 23,602,410 17,825,039 17,983,654
--------------- --------------- ---------------
Cash and short-term investments,
end of year .......................... $ 9,006,075 $ 23,602,410 $ 17,825,039
=============== =============== ===============
</TABLE>
See notes to statutory basis financial statements.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 95
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO STATUTORY BASIS
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
The Guardian Insurance & Annuity Company, Inc. (GIAC or the Company) is a
wholly-owned subsidiary of The Guardian Life Insurance Company of America (The
Guardian). The Company, domiciled in the state of Delaware, is licensed to
conduct life and health insurance business in all fifty states and the District
of Columbia. The Company's primary business is the sale of variable deferred
annuity contracts and variable and term life insurance policies. For variable
products other than 401(k) products, contracts are sold by insurance agents who
are licensed by GIAC and are either Registered Representatives of Guardian
Investor Services Corporation (GISC) or of other broker dealer firms that have
entered into sales agreements with GIAC and GISC. The Company's general agency
distribution system is used for the sale of other products and policies.
GISC, a wholly owned subsidiary of the Company, is a registered broker
dealer under the Securities Exchange Act of 1934 and is a registered investment
advisor under the Investment Adviser's Act of 1940. GISC is the distributor and
underwriter for GIAC's variable products, and the investment advisor to certain
mutual funds sponsored by GIAC, which are investment options for the variable
products.
Insurance Separate Accounts: The Company has established fourteen
insurance separate accounts primarily to support the variable annuity and life
insurance products it offers. The majority of the separate accounts are unit
investment trusts registered under the Investment Company Act of 1940. Proceeds
from the sale of variable products are invested through these separate accounts
in certain mutual funds specified by the contractholders. Of these separate
accounts the Company maintains two separate accounts whose sole purpose is to
fund certain employee benefit plans of The Guardian.
The assets and liabilities of the separate accounts are clearly identified
and distinct from the other assets and liabilities of the Company. The assets of
the separate accounts will not be charged with any liabilities arising out of
any other business of the Company. However, the obligations of the separate
accounts, including the promise to make annuity and death benefit payments,
remain obligations of the Company. Assets and liabilities of the separate
accounts are stated primarily at the market value of the underlying investments
and corresponding contractholders obligations. The amounts provided by the
Company to establish separate account investment portfolios (seed money) are not
included in separate account liabilities.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation of financial statements: The financial statements
have been prepared on a statutory basis of accounting that is prescribed or
permitted by the Insurance Department of the State of Delaware which is a
comprehensive basis of accounting other than generally accepted accounting
principles (GAAP).
Financial statements prepared on a statutory basis vary from financial
statements prepared on a GAAP basis because: (1) the costs relating to acquiring
business, principally commissions and certain policy issue expenses, are charged
to income in the year incurred, whereas on a GAAP basis they would be recorded
as assets and amortized over the future periods to be benefited; (2) life
insurance and annuity reserves are based on statutory mortality and interest
requirements, without consideration of withdrawals, whereas on GAAP basis they
are based on anticipated Company experience for lapses, mortality and investment
yield; (3) life insurance enterprises are required to establish a formula-based
asset valuation reserve (AVR) by a direct charge to surplus to offset potential
investment losses; under GAAP, provisions for investments are established as
needed through a charge to income; (4) realized gains and losses resulting from
changes in interest rates on fixed income investments are deferred in the
interest maintenance reserve (IMR) and amortized into investment income over the
remaining life of the investment sold; for GAAP, such gains and losses are
recognized in income at the time of sale; (5) bonds are carried principally at
amortized cost for statutory reporting and at market value for GAAP; (6) annuity
and certain insurance premiums are recognized as premium income, whereas for
GAAP they are recognized as deposits; (7) deferred federal income taxes are not
provided for temporary differences between tax and book assets and liabilities
as they are under GAAP; (8) certain reinsurance transactions are accounted for
as reinsurance for statutory purposes and as financing transactions under GAAP,
and assets and liabilities are reported net of reinsurance for statutory
purposes and gross of reinsurance for GAAP.
- ----------------------
96 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- ----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
Use of Estimates: The preparation of financial statements of insurance
enterprises requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements. As a provider of life insurance and annuity products, GIAC's
operating results in any given period depend on estimates of policy reserves
required to provide for future policyholder benefits. The development of policy
reserves for insurance and investment contracts requires management to make
estimates and assumptions regarding mortality, lapse, expense and investment
experience. Such estimates are primarily based on historical experience and, in
many cases, state insurance laws that require specific mortality, morbidity, and
investment assumptions to be used by the Company. Actual results could differ
from those estimates. Management monitors actual experience, and where
circumstances warrant, revises its assumptions and the related reserve
estimates.
Valuation of investments: Investments in securities are recorded in
accordance with valuation procedures established by the National Association of
Insurance Commissioners (NAIC). Unrealized gains and losses on investments
carried at market are recorded directly to unassigned surplus. Realized gains
and losses on disposition of investments are determined by the specific
identification method. The Company has recorded in accordance with NAIC
requirements, the net gain from the operations of the separate accounts in the
operations of the general account instead of in surplus.
Bonds: Bonds are valued principally at amortized cost. Mortgage backed
bonds are carried at amortized cost using the interest method considering
anticipated prepayments at the date of purchase. Significant changes in future
anticipated cash flows from the original purchase assumptions are accounted for
using the retrospective adjustment method with PSA standard prepayment rates.
Investment in subsidiary: GIAC's investment in GISC is carried at equity
in GIAC's underlying net assets. Undistributed earnings or losses are reflected
as unrealized capital gains and losses directly in unassigned surplus. Dividends
received from GISC are recorded as investment income and amounted to $14,000,000
in 1998, $10,000,000 in 1997 and $9,500,000 in 1996.
Short-Term Investments: Short-term investments are stated at amortized
cost and consist primarily of investments having maturities at the date of
purchase of six months or less. Market values for such investments approximate
carrying value.
Loans on Policies: Loans on policies are stated at unpaid principal
balance. The carrying amount approximates fair value since loans on policies
have no defined maturity date and reduce the amount payable at death or at
surrender of the contract.
Investment Reserves: In compliance with regulatory requirements, the
Company maintains the Asset Valuation Reserve (AVR) and the Interest Maintenance
Reserve (IMR). The AVR is intended to stabilize surplus against market
fluctuations in the value of equities and credit related declines in the value
of bonds. Changes in the AVR are recorded directly to unassigned surplus. The
IMR captures net after-tax realized capital gains which result from changes in
the overall level of interest rates for fixed income investments and amortizes
these net capital gains into income over the remaining stated life of the
investments sold. The Company uses the group method of calculating the IMR,
consistent with prior years. Any net negative IMR amounts are treated as a
non-admitted asset.
Contract and Policy Reserves: Fixed deferred reserves represent the fund
balance left to accumulate at interest under fixed annuity contracts that were
offered directly by the Company, a fixed rate option that is offered to variable
annuity contractowners and a single premium deferred annuity that is offered by
the Company. The Company no longer offers the fixed annuity contracts.
The estimated fair value of contractholder account balances within the
fixed deferred reserves has been determined to be equivalent to carrying value
as the current offering and renewal rates are set in response to current market
conditions and are only guaranteed for one year.
The interest rate credited on fixed annuity contracts included in fixed
deferred reserves for 1998 was 5.75%. The interest rate credited on the fixed
rate option that is offered to certain variable annuity contractowners ranged
from 5.25% to 5.50% during 1998. For the fixed rate option currently issued, the
issue and renewal interest rates credited vary from month to month and ranged
from 5.00% to 5.40% in 1998. For single premium deferred annuities the rates
ranged from 5.00% to 6.00% in 1998. Fixed immediate reserves are a liability
within the general account for those annuitants that have elected a fixed
annuity payout option. The immediate contract reserve is computed using the 1971
IAM Table and the 1983 IAM Table and a 4% discount rate.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 97
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
The loan collateral fund reserve is the cash value of loaned variable life
policyowner account values. The reserve is credited with interest at 4% per
annum for single premium variable life policyowners, 6.5% for annual pay
variable life and group universal life policyowners and 7% for other variable
life policyowners.
Non-admitted Assets: Certain assets designated as "non-admitted assets" in
accordance with rules and regulations of the Department of Insurance of the
State of Delaware are charged directly to unassigned surplus. At December 31,
1998 and 1997 non-admitted assets consisted of agents' balances and
miscellaneous receivables in the amounts of $24,493 and $82,380, respectively.
Acquisition Costs: Commissions and other costs incurred in acquiring new
business are charged to operations as incurred.
Premiums and Other Revenues: Premiums and annuity considerations are
recognized for funds received on variable life insurance and annuity products.
Corresponding transfers to/from separate accounts are included in the expenses.
Revenue also includes service fees from the separate accounts consisting
of mortality and expense charges, annual administration fees, charges for the
cost of term insurance related to variable life policies and penalties for early
withdrawals. Services fees were not charged on separate account assets of
$239,935,035 and $162,522,811 at December 31, 1998 and 1997, respectively, which
represent investments in The Guardian's employee benefit plans.
Federal Income Taxes: The provision for federal income taxes is based on
income from operations currently taxable, as well as accrued market discount on
bonds. Realized gains and losses are reported after adjustment for the
applicable federal income taxes. The taxable portion of unrealized appreciation
of the Company's separate account investments is included in operations for 1997
and 1996.
Other: Certain reclassifications have been made in the amounts presented
for prior periods to conform those periods to the 1998 presentation.
NOTE 3 -- FEDERAL INCOME TAXES
The Company's federal income tax return is consolidated with its parent,
The Guardian. The consolidated income tax liability is allocated among the
members of the group according to a tax sharing agreement. In accordance with
the tax sharing agreement between and among the parent and participating
subsidiaries, each member of the group computes its tax provision and liability
on a separate return basis, but may, where applicable, recognize benefits of net
operating losses and capital losses utilized in the consolidated group.
Estimated payments are made between the members of the group during the year.
A reconciliation of federal income tax expense, based on the prevailing
corporate income tax rate of 35% for 1998, 1997 and 1996 to the federal income
tax expense reflected in the accompanying financial statements is as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Income tax at prevailing corporate income tax rates
applied to pretax statutory income ............. $ 19,205,980 $ 13,873,514 $ 8,270,274
Add (deduct) tax effect of:
Adjustment for annuity and other reserves ...... (669,996) (291,470) (1,478,476)
DAC Tax ........................................ 1,179,820 1,712,811 867,731
Dividend from subsidiary ....................... (4,900,000) (3,500,000) (3,325,000)
Other -- net ................................... (310,282) 278,645 (393,069)
------------ ------------ ------------
Federal income taxes .............................. $ 14,505,522 $ 12,073,500 $ 3,941,460
============ ============ ============
</TABLE>
The provision for federal income taxes includes deferred taxes in 1998,
1997 and 1996 of $140,153, $181,145 and $353,051, respectively, applicable to
the difference between the tax basis and the financial statement basis of
recording investment income relating to accrued market discount.
- -----------------------
98 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
NOTE 4 -- INVESTMENTS
The major categories of net investment income are summarized as follows:
For the years ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
Fixed maturities ................ $33,923,167 $31,806,228 $28,234,145
Affiliated money market funds ... 376,734 524,277 121,733
Subsidiary ...................... 14,000,000 10,000,000 9,500,000
Policy loans .................... 3,489,135 3,386,194 3,089,114
Short-term investments .......... 2,320,305 2,280,599 1,204,805
Joint venture dividend .......... 1,254,010 1,047,525 623,160
Other ........................... 58,069 59,779 55,301
----------- ----------- -----------
55,421,420 49,104,602 42,828,258
Less: Investment expenses ....... 1,185,948 1,110,848 461,356
----------- ----------- -----------
Net investment income ........... $54,235,472 $47,993,754 $42,366,902
=========== =========== ===========
Gross realized gains and losses, less applicable federal income taxes and
transfer to IMR, are summarized as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Realized gains from dispositions:
U.S. Government bonds ........................ $ 1,195,870 $ 722,440 $ 1,014,811
Corporate debt securities .................... 997,008 413,022 1,014,562
Common stocks ................................ -- 174 --
Seed investment redeemed ..................... -- -- --
Foreign exchange ............................. 13,301 2,791 11,599
Realized losses from dispositions:
U.S. Government bonds ........................ 65,414 744,168 181,025
Corporate debt securities .................... 39,431 399,618 617,325
Foreign exchange ............................. 10,413 5,773 --
Short term investments ....................... -- 1,218 191
----------- ----------- -----------
Net realized capital gains (losses) .......... 2,090,921 (12,350) 1,242,431
----------- ----------- -----------
Federal income tax expense (benefit):
Current ...................................... 889,995 (269,216) 829,609
Deferred ..................................... (248,651) (209,059) (394,759)
----------- ----------- -----------
Total federal income tax expense (benefit) ... 641,344 (478,275) 434,850
----------- ----------- -----------
Transfer to IMR ................................. 1,357,222 (6,202) 800,041
----------- ----------- -----------
Net realized gains (losses) ..................... $ 92,355 $ 472,127 $ 7,540
=========== =========== ===========
</TABLE>
The market values of bonds are based on quoted prices as available. For
certain private placement debt securities where quoted market prices are not
available, fair value is estimated by management using adjusted market prices
for like securities.
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 99
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
The cost and estimated market values of investments by major investment
category at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations
of U.S. government corporations
and agencies ............................. $ 28,358,300 $ 1,523,421 $ 16,958 $ 29,864,763
Obligations of states and political
subdivisions ............................. 60,246,691 1,424,844 3,176 61,668,359
Debt securities issued by foreign
governments .............................. 7,997,622 91,952 27,557 8,062,017
Corporate debt securities ................... 439,952,307 10,035,537 2,531,389 447,456,455
Common stock of subsidiary .................. 9,698,292 7,217,706 -- 16,915,998
Affiliated mutual funds ..................... 23,656,682 5,440,048 -- 29,096,730
------------ ------------ ------------ ------------
$569,909,894 $ 25,733,508 $ 2,579,080 $593,064,322
============ ============ ============ ============
<CAPTION>
December 31, 1997
---------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Market
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations
of U.S. government corporations
and agencies ............................. $ 65,358,213 $ 1,550,649 $ 16,198 $ 66,892,664
Obligations of states and political
subdivisions ............................. 71,909,687 795,387 41,850 72,663,224
Debt securities issued by foreign
governments .............................. 7,062,711 -- 115,745 6,946,966
Corporate debt securities ................... 340,417,221 6,143,061 1,010,829 345,549,453
Common stock of subsidiary .................. 9,398,292 2,674,851 -- 12,073,143
Affiliated mutual funds ..................... 23,279,949 7,271,237 -- 30,551,186
------------ ------------ ------------ ------------
$517,426,073 $ 18,435,185 $ 1,184,622 $534,676,636
============ ============ ============ ============
</TABLE>
- -----------------------
100 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
The amortized cost and estimated market value of debt securities at
December 31, 1998 and 1997, by contractual maturity, is shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations.
<TABLE>
<CAPTION>
As of December 31, 1998
---------------------------
Estimated
Amortized Market
Cost Value
------------ ------------
<S> <C> <C>
Due in one year or less ................................ $ 45,493,721 $ 45,752,348
Due after one year through five years .................. 249,871,238 253,196,904
Due after five years through ten years ................. 102,513,130 107,752,117
Due after ten years .................................... 67,626,976 68,332,574
------------ ------------
465,505,065 475,033,943
Sinking fund bonds
(including collateralized mortgage obligations) .. 71,049,855 72,017,651
------------ ------------
$536,554,920 $547,051,594
============ ============
<CAPTION>
As of December 31, 1998
---------------------------
Estimated
Amortized Market
Cost Value
------------ ------------
<S> <C> <C>
Due in one year or less ................................ $ 59,694,316 $ 59,737,770
Due after one year through five years .................. 234,805,896 236,867,373
Due after five years through ten years ................. 103,002,869 106,604,446
Due after ten years .................................... 21,552,124 22,383,887
------------ ------------
419,055,205 425,593,476
Sinking fund bonds
(including collateralized mortgage obligations) .. 65,692,627 66,458,831
------------ ------------
$484,747,832 $492,052,307
============ ============
</TABLE>
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 101
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
NOTE 5 -- REINSURANCE CEDED
The Company enters into coinsurance, modified coinsurance and yearly
renewable term agreements with affiliated companies and outside parties to
provide for reinsurance of selected variable annuity contracts and group life
and individual life policies. Under the terms of the modified coinsurance
agreements, reserves related to the reinsurance business and corresponding
assets are held by the Company. Accordingly, policy reserves include
$125,849,752 and $76,669,184 at December 31, 1998 and 1997, respectively,
applicable to policies reinsured under modified coinsurance agreements. The
reinsurance contracts do not relieve the Company of its primary obligation for
policyowner benefits. Failure of reinsurers to honor their obligations could
result in losses to the Company.
The effect of these agreements on the components of the Company's gain
from operations in the accompanying statements of operations are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Premiums and deposits ...................... $(65,505,954) $(43,873,731) $(83,250,212)
Net investment income ...................... -- -- (61,779)
Commission and expense allowances .......... 34,449,189 7,885,341 14,508,839
Reserve adjustments ........................ 29,942,869 16,268,128 30,636,445
Other income ............................... 2,447,454 1,875,163 (25,000)
------------ ------------ ------------
Revenues ................................. 1,333,558 (17,845,099) (38,191,707)
Policyholder benefits ...................... (7,606,157) (10,975,075) (26,873,945)
Increase in aggregate reserves ............. (35,020) 22,859,719 (5,658,260)
Reinsurance terminations ................... -- (27,421,066) (15,470,015)
General expenses and other taxes ........... (337,215) (40,452) (81,667)
------------ ------------ ------------
Deductions ............................... (7,978,392) (15,576,874) (48,083,887)
------------ ------------ ------------
Net income (loss) from reinsurance ceded ... $ 9,311,950 $ (2,268,225) $ 9,892,180
============ ============ ============
</TABLE>
- -----------------------
102 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
NOTE 6 -- REINSURANCE ASSUMED
The Company has entered into various coinsurance agreements with
non-affiliated and affiliated companies. The Company assumes certain life and
disability income policies.
The effect of these agreements on the components of the Company's gain
from operations in the accompanying statements of operations are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Premiums and deposits ....................... $ 1,336,343 $ (389,221) $ 41,133,358
Net investment income ....................... 45,349 45,288 94,657
Other income ................................ -- (62,752) 375,404
------------ ------------ ------------
Revenues .................................. 1,381,692 (406,685) 41,603,419
Policyholder benefits ....................... 3,022,842 3,967,619 8,076,053
Increase in aggregate reserves .............. (1,387,716) (31,677,857) 31,556,908
Reinsurance expenses ........................ -- 27,603,602 (452,476)
Other expenses .............................. 382,249 1,885,300 551,319
------------ ------------ ------------
Deductions ................................ 2,017,375 1,778,664 39,731,804
------------ ------------ ------------
Net (loss) income from reinsurance assumed .. $ (635,683) $ (2,185,349) $ 1,871,615
============ ============ ============
</TABLE>
NOTE 7 -- RELATED PARTY TRANSACTIONS
Registered representatives of the Guardian Investor Services Corporation
produce a major portion of the Company's business. During 1998, 1997 and 1996,
premium and annuity considerations produced by GISC amounted to $554,895,420,
$564,519,265 and $528,353,595, respectively. The related commissions paid to
GISC amounted to $1,946,477, $1,979,926 and $1,851,468 for 1998, 1997 and 1996,
respectively.
The Company is billed by The Guardian for all compensation and related
employee benefits for those employees of The Guardian who are engaged in the
Company's business and for the Company's use of The Guardian's centralized
services and agency force. The amounts charged for these services amounted to
$83,611,701 in 1998, $60,009,449 in 1997 and $41,129,644 in 1996, and, in the
opinion of management, were considered appropriate for the services rendered.
The company had an investment in the Guardian Real Estate Account (GREA),
which was established in 1987 under Delaware insurance law as an insurance
company separate account. GIAC had contributed capital to GREA since it was
established to provide for funds and to preserve liquidity. Effective December
19, 1997, GREA was liquidated and, as a result, $6,746,290 was returned to GIAC
in the form of capital and there was a realized gain recorded of $969,045
included in the net gain from operations of separate accounts.
A significant portion of the Company's separate account assets is invested
in affiliated mutual funds. Each of these funds has an investment advisory
agreement with GISC, except for The Baillie Gifford International Fund, The
Baillie Gifford Emerging Markets Fund, The Guardian Baillie Gifford
International Fund and The Guardian Baillie Gifford Emerging Markets Fund. The
investments as of December 31, 1998 and 1997 are as follows:
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 103
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
The Guardian Park Avenue Fund ....................... $ 511,588,454 $ 371,662,107
The Guardian Stock Fund ............................. 3,664,861,157 3,222,051,866
The Guardian Small Cap Stock Fund ................... 109,166,077 60,104,422
The Guardian Park Avenue Small Cap Fund ............. 13,183,737 --
The Guardian Bond Fund .............................. 381,492,004 355,417,535
The Baillie Gifford International Fund .............. 526,434,528 442,651,457
The Baillie Gifford Emerging Markets Fund ........... 34,599,571 65,038,546
The Guardian Baillie Gifford International Fund ..... 9,066,433 3,378,730
The Guardian Baillie Gifford Emerging Markets Fund .. 817,757 --
The Guardian Asset Allocation Fund .................. 39,803,636 14,910,420
The Guardian Investment Quality Bond Fund ........... 9,350,331 1,546,854
The Guardian Cash Management Fund ................... 57,953,144 22,250,501
The Guardian Cash Fund .............................. 419,482,654 368,122,449
-------------- --------------
$5,777,799,483 $4,927,134,887
============== ==============
</TABLE>
The Company, in agreement with Baillie Gifford Overseas Ltd., has a joint
venture company -- Guardian Baillie Gifford Ltd. (GBG) -- that is organized as a
corporation in Scotland. GBG is registered in both the United Kingdom and the
United States to act as an investment advisor for the Baillie Gifford
International Fund (BGIF), the Baillie Gifford Emerging Markets Fund (BGEMF),
The Guardian Baillie Gifford International Fund (GBGIF) and The Guardian Baillie
Gifford Emerging Markets Fund (GBGEMF). The Funds are offered in the U.S. as
investment options under certain variable annuity contracts and variable life
policies.
The Company maintains an investment in an affiliated money market mutual
fund, The Guardian Cash Management Fund. At December 31, 1998 and 1997 this
amounted to $3,025,669 and $2,888,149, respectively. The Company also maintains
an investment in an affiliated small cap stock mutual fund, The Guardian Small
Cap Stock Fund. At December 31, 1998 and 1997 this amounted to $26,071,061 and
$27,663,037, respectively.
NOTE 8 -- SEPARATE ACCOUNTS
The following represents a reconciliation of net transfers from GIAC to
the separate accounts. Transfers are reported in the Summary of Operations of
the Separate Account Annual Statement:
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Transfers to separate accounts ........................ $ 1,358,239,902 $ 1,054,380,697 $ 767,741,428
Transfers from separate accounts ...................... (1,168,640,854) (782,891,638) (518,683,141)
--------------- --------------- ---------------
Net transfers to separate accounts .................. 189,599,048 271,489,059 249,058,287
--------------- --------------- ---------------
Reconciling Adjustments:
Mortality & expense guarantees -- variable annuity .... 85,937,882 70,027,514 53,219,656
Mortality & expense guarantees -- variable life ....... 2,387,487 2,021,656 1,687,711
Administrative fees -- variable annuity ............... 4,703,565 4,095,230 3,867,120
Cost of insurance -- variable life .................... 16,844,679 11,205,120 4,844,028
--------------- --------------- ---------------
Total adjustments ................................... 109,873,613 87,349,520 63,618,515
--------------- --------------- ---------------
Transfers as reported in the Statement of
Operations of GIAC .................................. $ 299,472,661 $ 358,838,579 $ 312,676,802
=============== =============== ===============
</TABLE>
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104 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
NOTE 9 -- ANNUITY ACTUARIAL RESERVES AND DEPOSIT LIABILITIES
The following describes withdrawal characteristics of annuity actuarial
reserves and deposit liabilities:
<TABLE>
<CAPTION>
For the Year Ending 1998 For the Year Ending 1997
------------------------ ------------------------
Amount % Amount %
------------ ------ ------------ ------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal
with market value adjustment ....... $ 52,174,391 10.91% $ 46,276,766 10.19%
------------ ------ ------------ ------
total with adjustment or at
market value ..................... 52,174,391 10.91 46,276,766 10.19
at book value without adjustment
(minimal or no charge or
adjustment) ...................... 312,963,860 65.44 313,725,462 69.05
Not subject to discretionary
withdrawal ......................... 113,088,817 23.65 94,338,339 20.76
------------ ------ ------------ ------
Total (gross) ........................ 478,227,068 100.00 454,340,567 100.00
Reinsurance ceded .................... -- -- -- --
------------ ------ ------------ ------
Total ................................ $478,227,068 100.00% $454,340,567 100.00%
============ ====== ============ ======
</TABLE>
This does not include $8,132,854,608 and $6,647,606,347 of non-guaranteed
annuity reserves held in separate accounts, and $2,618,241 and $3,572,284 at
December 31, 1998 and 1997, respectively, in annuity reserves being held as a
loan collateral fund for loans on certain annuity contracts.
NOTE 10 -- STATUTORY FINANCIAL INFORMATION
The following reconciles the statutory net income of the Company as
reported to the regulatory authorities to consolidated GAAP net income:
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Statutory net income ........................... $ 40,461,030 $ 28,037,239 $ 19,695,432
Adjustments to restate to the basis of GAAP:
Net income of subsidiaries ................... 4,542,855 4,326,500 142,201
Change in deferred policy acquisition costs .. 43,181,782 41,883,919 42,525,493
Deferred premiums ............................ (1,497,411) (5,542,795) 3,238,115
Re-estimation of future policy benefits ...... (9,649,126) (3,353,249) 26,953,558
Reinsurance .................................. 4,088,420 12,372,471 (36,353,822)
Deferred federal income tax expense .......... (11,950,565) (16,212,244) (13,074,280)
Elimination of interest maintenance reserve .. (266,599) (111,783) (333,219)
Other, net ................................... 427,287 201,840 (2,444,872)
------------ ------------ ------------
Consolidated GAAP net income ................... $ 69,337,673 $ 61,601,898 $ 40,348,606
============ ============ ============
</TABLE>
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 105
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
December 31, 1998
The following reconciles the statutory capital and surplus of the Company
as reported to the regulatory authorities to consolidated GAAP stockholder's
equity:
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Statutory capital and surplus .................... $ 227,387,038 $ 182,704,232 $ 153,780,908
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs ............. 313,617,745 267,369,685 221,475,216
Elimination of asset valuation reserve ........ 29,566,970 26,305,528 15,121,269
Re-estimation of future policy benefits ....... 46,905,628 41,283,947 31,167,840
Establishment of deferred federal income tax .. (98,820,880) (84,703,745) (65,164,526)
Unrealized gains on investments ............... 11,711,227 7,852,564 2,313,203
Other liabilities ............................. (48,126,550) (33,486,652) (32,389,767)
Deferred premiums ............................. (7,848,934) (7,024,891) (1,482,096)
Other, net .................................... (5,026,655) (3,468,519) (2,215,098)
------------- ------------- -------------
Consolidated GAAP stockholder's equity ...... $ 469,365,589 $ 396,832,149 $ 322,606,949
============= ============= =============
</TABLE>
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106 P R O S P E C T U S F I N A N C I A L S T A T E M E N T S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
We have audited the accompanying statutory basis balance sheets of The Guardian
Insurance & Annuity Company, Inc. as of December 31, 1998 and 1997, and the
related statutory basis statements of operations, of changes in common stock and
surplus and of cash flows for the three years in the period ended December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial presentation. We believe
that our audits provide a reasonable basis for our opinion.
As described in Note 2, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by insurance regulatory
authorities (statutory basis of accounting), which is a comprehensive basis of
accounting other than generally accepted accounting principles. Accordingly, the
financial statements are not intended to represent a presentation in accordance
with generally accepted accounting principles. The effects on the financial
statements of the variances between such practices and generally accepted
accounting principles are material and are described in Note 2.
In our opinion, the financial statements referred to above (1) do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of The Guardian Insurance & Annuity Company, Inc. at December
31, 1998 and 1997, or the results of its operations or its cash flows for the
three years ended in the period ended December 31, 1998, because of the effects
of the variances between the statutory basis of accounting and generally
accepted accounting principles, and (2) present fairly, in all material
respects, its financial position and the results of its operations and its cash
flows, in conformity with accounting practices prescribed or permitted by
insurance regulatory authorities.
PricewaterhouseCoopers LLP
February 25, 1999
-----------------------
F I N A N C I A L S T A T E M E N T S P R O S P E C T U S 107
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS, POLICY ACCOUNT VALUES,
NET CASH SURRENDER VALUES AND ACCUMULATED POLICY PREMIUMS
The following tables illustrate how the policies operate. Specifically,
they show how the death benefit, net cash surrender value and policy account
value can vary over an extended period of time assuming hypothetical gross rates
of return (i.e., investment income and capital gains and losses, realized or
unrealized) for the Separate Account that are equal to constant after tax annual
rates of 0%, 6% and 12%. The tables are based on policies with face amounts of
$250,000 for a male insured Age 40. The insured is assumed to be in the
preferred plus classification for the first 8 illustrations and the preferred
classification for the next 8 illustrations. Values are first given based on
current charges and then based on the policy's higher guaranteed charges. Each
illustration is given first for a policy with an Option 1 death benefit and then
for a policy with an Option 2 death benefit. In addition, the first 8
illustrations will show values based on the cash value test and the next 8
illustrations will show values based on the guideline premium test. These
illustrations may assist in the comparison of death benefits, net cash surrender
values and policy account values for Park Avenue VUL policies with those under
other variable life insurance policies that may be issued by GIAC or other
companies. Prospective policyowners are advised, however, that it may not be
advantageous to replace existing life insurance coverage by purchasing a Park
Avenue VUL policy, particularly if the decision to replace existing coverage is
based primarily on a comparison of policy illustrations.
Death benefits, net cash surrender values and policy account values will
be different from the amounts shown if: (1) the actual gross rates of return
average 0%, 6% or 12%, but vary above and below the average over the period; and
(2) premiums are paid at other than annual intervals. Benefits and values will
also be affected by the policyowner's allocation of the unloaned policy account
value among the variable investment options and the fixed-rate option. If the
actual gross rate of return for all options averages 0%, 6% or 12%, but varies
above or below that average for individual options, allocation and transfer
decisions can have a significant impact on a policy's performance. Policy loans
and other policy transactions, such as partial withdrawals, will also affect
results, as will the insured's sex, smoker status and underwriting class.
Death benefits, net cash surrender values and policy account values shown
in the tables reflect the fact that: (1) deductions have been made from premiums
for premium charges; and (2) monthly deductions are deducted from the policy
account value on each monthly date. The net cash surrender values shown in the
tables reflect the fact that a surrender charge is deducted upon surrender, face
amount reduction or lapse during the first 15 policy years. The death benefits,
net cash surrender values and policy account values also reflect a daily charge
assessed against the Separate Account for mortality and expense risks equivalent
to an annual charge of .90% of the average daily value of the assets in the
Separate Account attributable to the policies for the first 20 policy years and
.60% thereafter. See "Deductions and charges." The amounts shown in the
illustrations also reflect an average of the investment advisory fees and
operating expenses incurred by the mutual funds, at an annual rate of 0.81% of
the average daily net assets of such funds. The average is based upon actual
expenses incurred during 1998 for all funds without regard for reimbursements
made by the funds for previous years' expense payments.
The operating expenses for the MFS Bond Series were capped at 0.40% of the
average daily net assets of the series pursuant to agreement with the adviser.
The operating expense figures used for the Fidelity VIP III Growth
Opportunities, Fidelity VIP Equity-Income and Fidelity VIP High Income
Portfolios reflect the effects of expense reduction arrangements with third
parties which occured during the year ended December 31, 1998.
The operating expense figures used for the Fidelity Fidelity VIP II Index
500 Portfolio reflect the effects of expense reimbursement of certain fund
expenses which occured during the year ended December 31, 1998.
The operating expense figures used for the American Century V.P.
International Fund reflect the waiver by the adviser of a portion of its
management fee.
In the absence of these arrangements, operating expenses of the affected
funds, and the average investment advisory fees and expenses used in the
following illustrations would have been higher. For an explanation of the
expenses see the accompanying fund prospectuses.
Taking account of the charges for mortality and expense risks in the
Separate Account and the average investment
- -----------------------
108 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
advisory fee and operating expenses of the mutual funds, the gross annual rates
of return of 0%, 6% and 12% correspond to net investment experience at -1.70%,
4.24% and 10.19%, respectively, based on a mortality and expense risks charge of
.90% for the first 20 policy years and -1.41%, 4.56% and 10.52%, respectively,
based on a mortality and expense risks charge of .60% thereafter. See "Net
investment factor."
The hypothetical rates of return shown in the tables do not reflect any
tax charges attributable to the Separate Account since no charges are currently
made. If any such charges are imposed in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the death benefits, net cash surrender values
and policy account values illustrated. See "GIAC's taxes."
The fourth column of each table shows the amount which would accumulate if
an amount equal to the target premium was invested to earn interest, after
taxes, of 5% per year, compounded annually. There can be no assurance that a
prospective policyowner would be able to earn this return.
GIAC will furnish upon request an illustration reflecting the proposed
insured's Age, sex, underwriting class and the face amount requested, but a
premium-based illustration must reflect GIAC's current minimum face amount
requirement for Park Avenue VUL -- which is $100,000.
These illustrations will refer to "net outlay" as the cash flow into or
out of the policy. It is equal to the sum of all premiums and accrued loan
interest paid in cash and reduced by the proceeds of any policy loan or partial
withdrawal received in cash. For purposes of these illustrations "net outlay"
will be equal to target premium.
From time to time, advertisements or sales literature for Park Avenue VUL
may quote historical performance data of one or more of the underlying funds,
and may include cash surrender values and death benefit figures computed using
the same methodology as that used in the following illustrations, but with
historical average annual total returns of the underlying funds for which
performance data is shown in the advertisement or sales literature replacing the
hypothetical rates of return shown in the following tables. This information may
be shown in the form of graphs, charts, tables, and examples. Any such
information is intended to show the policy's investment experience based on the
historical experience of the underlying funds and is not intended to represent
what may happen in the future.
GIAC began to offer Park Avenue VUL on February 2, 1998. As such the
policies may not have been available when the funds commenced their operations.
However, illustrations may be based on the actual investment experience of the
funds since their respective inception dates (See "Investment Performance of the
Funds"). The results for any period prior to the policies' being offered would
be calculated as if the policies had been offered during that period of time,
with all charges assumed to be those applicable to the policies. Thus the
illustrations will reflect deductions for each fund's expenses, as well as the
Separate Account's charge for mortality and expense risks, and the charges
deducted from premiums, Monthly Deductions and any transaction deductions
associated with the policy in question.
-----------------------
A P P E N D I C E S P R O S P E C T U S 109
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
Target Premium = $2,517.50
These values reflect CURRENT cost of insurance and other charges
using the Cash Value Accumulation Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,518 2,643 1,327 0 250,000 1,433 0 250,000 1,541 0 250,000
2 41 2,518 5,419 3,252 0 250,000 3,569 0 250,000 3,900 0 250,000
3 42 2,518 8,333 5,125 1,158 250,000 5,776 1,808 250,000 6,479 2,512 250,000
4 43 2,518 11,393 6,940 3,277 250,000 8,049 4,386 250,000 9,294 5,631 250,000
5 44 2,518 14,606 8,690 5,332 250,000 10,385 7,027 250,000 12,362 9,004 250,000
6 45 2,518 17,980 10,377 7,324 250,000 12,787 9,734 250,000 15,710 12,657 250,000
7 46 2,518 21,522 12,000 9,253 250,000 15,256 12,508 250,000 19,366 16,618 250,000
8 47 2,518 25,242 13,555 11,113 250,000 17,791 15,348 250,000 23,357 20,914 250,000
9 48 2,518 29,147 15,042 12,907 250,000 20,392 18,257 250,000 27,717 25,582 250,000
10 49 2,518 33,248 16,460 14,630 250,000 23,063 21,233 250,000 32,485 30,655 250,000
15 54 2,518 57,040 22,780 22,475 250,000 37,877 37,572 250,000 64,523 64,218 250,000
20 59 2,518 87,406 27,214 27,214 250,000 54,906 54,906 250,000 116,070 116,070 250,000
25 64 2,518 126,161 28,896 28,896 250,000 74,665 74,665 250,000 201,500 201,500 342,950
30 69 2,518 175,623 25,563 25,563 250,000 96,079 96,079 250,000 336,513 336,513 509,320
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
110 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
Target Premium = $2,517.50
These values reflect GUARANTEED cost of insurance and other charges
using the Cash Value Accumulation Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,518 2,643 1,327 0 250,000 1,433 0 250,000 1,541 0 250,000
2 41 2,518 5,419 2,895 0 250,000 3,201 0 250,000 3,520 0 250,000
3 42 2,518 8,333 4,397 430 250,000 5,003 1,036 250,000 5,661 1,694 250,000
4 43 2,518 11,393 5,827 2,164 250,000 6,835 3,172 250,000 7,973 4,310 250,000
5 44 2,518 14,606 7,186 3,828 250,000 8,698 5,340 250,000 10,474 7,116 250,000
6 45 2,518 17,980 8,466 5,414 250,000 10,585 7,532 250,000 13,176 10,124 250,000
7 46 2,518 21,522 9,665 6,917 250,000 12,493 9,745 250,000 16,097 13,350 250,000
8 47 2,518 25,242 10,779 8,336 250,000 14,419 11,977 250,000 19,257 16,815 250,000
9 48 2,518 29,147 11,805 9,670 250,000 16,362 14,227 250,000 22,678 20,543 250,000
10 49 2,518 33,248 12,737 10,907 250,000 18,312 16,482 250,000 26,380 24,550 250,000
15 54 2,518 57,040 15,943 15,638 250,000 28,212 27,907 250,000 50,442 50,137 250,000
20 59 2,518 87,406 15,098 15,098 250,000 36,664 36,664 250,000 86,810 86,810 250,000
25 64 2,518 126,161 7,426 7,426 250,000 41,129 41,129 250,000 145,739 145,739 250,000
30 69 2,518 175,623 0 0 0 34,502 34,502 250,000 237,654 237,654 359,695
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 111
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
Target Premium = $2,517.50
These values reflect CURRENT cost of insurance and other charges
using the Cash Value Accumulation Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,518 2,643 1,325 0 251,325 1,432 0 251,432 1,539 0 251,539
2 41 2,518 5,419 3,247 0 253,247 3,564 0 253,564 3,894 0 253,894
3 42 2,518 8,333 5,115 1,147 255,115 5,764 1,796 255,764 6,465 2,498 256,465
4 43 2,518 11,393 6,921 3,258 256,921 8,026 4,364 258,026 9,267 5,604 259,267
5 44 2,518 14,606 8,659 5,301 258,659 10,346 6,989 260,346 12,315 8,957 262,315
6 45 2,518 17,980 10,330 7,278 260,330 12,727 9,675 262,727 15,634 12,582 265,634
7 46 2,518 21,522 11,934 9,186 261,934 15,168 12,420 265,168 19,250 16,502 269,250
8 47 2,518 25,242 13,465 11,022 263,465 17,665 15,223 267,665 23,185 20,743 273,185
9 48 2,518 29,147 14,922 12,787 264,922 20,219 18,084 270,219 27,471 25,336 277,471
10 49 2,518 33,248 16,304 14,474 266,304 22,830 21,000 272,830 32,140 30,310 282,140
15 54 2,518 57,040 22,337 22,032 272,337 37,076 36,771 287,076 63,065 62,760 313,065
20 59 2,518 87,406 26,231 26,231 276,231 52,733 52,733 302,733 111,157 111,157 361,157
25 64 2,518 126,161 26,943 26,943 276,943 69,290 69,290 319,290 187,789 187,789 437,789
30 69 2,518 175,623 22,093 22,093 272,093 83,668 83,668 333,668 306,965 306,965 556,965
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
112 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
Target Premium = $2,517.50
These values reflect GUARANTEED cost of insurance and other charges
using the Cash Value Accumulation Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,518 2,643 1,325 0 251,325 1,432 0 251,432 1,539 0 251,539
2 41 2,518 5,419 2,886 0 252,886 3,190 0 253,190 3,509 0 253,509
3 42 2,518 8,333 4,375 407 254,375 4,978 1,010 254,978 5,632 1,665 255,632
4 43 2,518 11,393 5,787 2,125 255,787 6,787 3,125 256,787 7,917 4,254 257,917
5 44 2,518 14,606 7,124 3,766 257,124 8,621 5,263 258,621 10,379 7,022 260,379
6 45 2,518 17,980 8,376 5,323 258,376 10,468 7,415 260,468 13,027 9,974 263,027
7 46 2,518 21,522 9,539 6,792 259,539 12,324 9,577 262,324 15,873 13,125 265,873
8 47 2,518 25,242 10,612 8,169 260,612 14,186 11,743 264,186 18,933 16,491 268,933
9 48 2,518 29,147 11,590 9,455 261,590 16,047 13,912 266,047 22,224 20,089 272,224
10 49 2,518 33,248 12,464 10,634 262,464 17,899 16,069 267,899 25,758 23,928 275,758
15 54 2,518 57,040 15,238 14,933 265,238 26,896 26,591 276,896 47,980 47,675 297,980
20 59 2,518 87,406 13,663 13,663 263,663 33,248 33,248 283,248 78,676 78,676 328,676
25 64 2,518 126,161 5,105 5,105 255,105 33,317 33,317 283,317 120,903 120,903 370,903
30 69 2,518 175,623 0 0 0 18,894 18,894 268,894 173,916 173,916 423,916
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 113
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
Target Premium = $3,060.00
These values reflect CURRENT cost of insurance and other charges
using the Cash Value Accumulation Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 3,060 3,213 1,731 0 250,000 1,864 0 250,000 1,998 0 250,000
2 41 3,060 6,587 4,044 0 250,000 4,439 0 250,000 4,852 0 250,000
3 42 3,060 10,129 6,284 1,467 250,000 7,090 2,273 250,000 7,962 3,145 250,000
4 43 3,060 13,848 8,451 4,006 250,000 9,818 5,373 250,000 11,353 6,908 250,000
5 44 3,060 17,754 10,538 6,463 250,000 12,618 8,543 250,000 15,048 10,973 250,000
6 45 3,060 21,855 12,534 8,829 250,000 15,482 11,777 250,000 19,065 15,360 250,000
7 46 3,060 26,160 14,444 11,109 250,000 18,417 15,082 250,000 23,443 20,108 250,000
8 47 3,060 30,681 16,269 13,304 250,000 21,426 18,461 250,000 28,221 25,256 250,000
9 48 3,060 35,428 18,006 15,413 250,000 24,509 21,916 250,000 33,437 30,845 250,000
10 49 3,060 40,413 19,642 17,419 250,000 27,656 25,433 250,000 39,127 36,904 250,000
15 54 3,060 69,332 26,715 26,345 250,000 44,937 44,567 250,000 77,289 76,919 250,000
20 59 3,060 106,241 30,891 30,891 250,000 64,236 64,236 250,000 138,594 138,594 269,293
25 64 3,060 153,347 30,535 30,535 250,000 85,721 85,721 250,000 237,262 237,262 403,816
30 69 3,060 213,468 22,145 22,145 250,000 107,839 107,839 250,000 388,971 388,971 588,717
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
114 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
Target Premium = $3,060.00
These values reflect GUARANTEED cost of insurance and other charges
using the Cash Value Accumulation Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 3,060 3,213 1,731 0 250,000 1,864 0 250,000 1,998 0 250,000
2 41 3,060 6,587 3,782 0 250,000 4,170 0 250,000 4,574 0 250,000
3 42 3,060 10,129 5,761 943 250,000 6,535 1,717 250,000 7,374 2,556 250,000
4 43 3,060 13,848 7,660 3,215 250,000 8,955 4,510 250,000 10,414 5,969 250,000
5 44 3,060 17,754 9,483 5,408 250,000 11,433 7,358 250,000 13,721 9,646 250,000
6 45 3,060 21,855 11,222 7,517 250,000 13,965 10,260 250,000 17,315 13,610 250,000
7 46 3,060 26,160 12,873 9,538 250,000 16,549 13,214 250,000 21,223 17,888 250,000
8 47 3,060 30,681 14,434 11,469 250,000 19,183 16,218 250,000 25,476 22,511 250,000
9 48 3,060 35,428 15,904 13,311 250,000 21,868 19,276 250,000 30,108 27,516 250,000
10 49 3,060 40,413 17,274 15,051 250,000 24,598 22,375 250,000 35,155 32,932 250,000
15 54 3,060 69,332 22,700 22,330 250,000 39,132 38,762 250,000 68,637 68,267 250,000
20 59 3,060 106,241 24,154 24,154 250,000 53,815 53,815 250,000 121,448 121,448 250,000
25 64 3,060 153,347 19,173 19,173 250,000 67,446 67,446 250,000 206,788 206,788 351,950
30 69 3,060 213,468 1,722 1,722 250,000 75,223 75,223 250,000 334,207 334,207 505,830
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 115
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
Target Premium = $3,060.00
These values reflect CURRENT cost of insurance and other charges
using the Cash Value Accumulation Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 3,060 3,213 1,728 0 251,728 1,861 0 251,861 1,995 0 251,995
2 41 3,060 6,587 4,035 0 254,035 4,430 0 254,430 4,841 0 254,841
3 42 3,060 10,129 6,266 1,448 256,266 7,069 2,251 257,069 7,938 3,120 257,938
4 43 3,060 13,848 8,418 3,973 258,418 9,778 5,333 259,778 11,307 6,862 261,307
5 44 3,060 17,754 10,485 6,410 260,485 12,553 8,478 262,553 14,968 10,893 264,968
6 45 3,060 21,855 12,454 8,749 262,454 15,380 11,675 265,380 18,935 15,230 268,935
7 46 3,060 26,160 14,331 10,996 264,331 18,266 14,931 268,266 23,243 19,980 273,243
8 47 3,060 30,681 16,113 13,148 266,113 21,211 18,246 271,211 27,925 24,960 277,925
9 48 3,060 35,428 17,799 15,207 267,799 24,212 21,619 274,212 33,012 30,420 283,012
10 49 3,060 40,413 19,373 17,151 269,373 27,255 25,032 277,255 38,530 36,308 288,530
15 54 3,060 69,332 25,951 25,581 275,951 43,547 43,177 293,547 74,744 74,374 324,744
20 59 3,060 106,241 29,169 29,169 279,169 60,384 60,384 310,384 129,905 129,905 379,905
25 64 3,060 153,347 27,123 27,123 277,123 76,039 76,039 326,039 215,624 215,624 465,624
30 69 3,060 213,468 16,390 16,390 266,390 85,471 85,471 335,471 345,413 345,413 595,413
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
116 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
Target Premium = $3,060.00
These values reflect GUARANTEED cost of insurance and other charges
using the Cash Value Accumulation Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 3,060 3,213 1,728 0 251,728 1,861 0 251,861 1,995 0 251,995
2 41 3,060 6,587 3,769 0 253,769 4,156 0 254,156 4,559 0 254,559
3 42 3,060 10,129 5,732 914 255,732 6,501 1,684 256,501 7,336 2,519 257,336
4 43 3,060 13,848 7,609 3,164 257,609 8,893 4,448 258,893 10,341 5,896 260,341
5 44 3,060 17,754 9,402 5,327 259,402 11,333 7,258 261,333 13,598 9,523 263,598
6 45 3,060 21,855 11,103 7,398 261,103 13,813 10,108 263,813 17,120 13,415 267,120
7 46 3,060 26,160 12,709 9,374 262,709 16,329 12,994 266,329 20,931 17,596 270,931
8 47 3,060 30,681 14,215 11,250 264,215 18,878 15,913 268,878 25,053 22,088 275,053
9 48 3,060 35,428 15,619 13,027 265,619 21,456 18,864 271,456 29,515 26,922 279,515
10 49 3,060 40,413 16,913 14,691 266,913 24,054 21,832 274,054 34,339 32,116 284,339
15 54 3,060 69,332 21,744 21,374 271,744 37,368 36,998 287,368 65,364 64,994 315,364
20 59 3,060 106,241 22,109 22,109 272,109 49,096 49,096 299,096 110,437 110,437 360,437
25 64 3,060 153,347 15,472 15,472 265,472 56,110 56,110 306,110 176,847 176,847 426,847
30 69 3,060 213,468 0 0 0 50,374 50,374 300,374 269,768 269,768 519,768
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 117
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
Target Premium = $2,517.50
These values reflect CURRENT cost ofV insurance and other charges
using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,518 2,643 1,327 0 250,000 1,433 0 250,000 1,541 0 250,000
2 41 2,518 5,419 3,252 0 250,000 3,569 0 250,000 3,900 0 250,000
3 42 2,518 8,333 5,125 1,158 250,000 5,776 1,808 250,000 6,479 2,512 250,000
4 43 2,518 11,393 6,940 3,277 250,000 8,049 4,386 250,000 9,294 5,631 250,000
5 44 2,518 14,606 8,690 5,332 250,000 10,385 7,027 250,000 12,362 9,004 250,000
6 45 2,518 17,980 10,377 7,324 250,000 12,787 9,734 250,000 15,710 12,657 250,000
7 46 2,518 21,522 12,000 9,253 250,000 15,256 12,508 250,000 19,366 16,618 250,000
8 47 2,518 25,242 13,555 11,113 250,000 17,791 15,348 250,000 23,357 20,914 250,000
9 48 2,518 29,147 15,042 12,907 250,000 20,392 18,257 250,000 27,717 25,582 250,000
10 49 2,518 33,248 16,460 14,630 250,000 23,063 21,233 250,000 32,485 30,655 250,000
15 54 2,518 57,040 22,780 22,475 250,000 37,877 37,572 250,000 64,523 64,218 250,000
20 59 2,518 87,406 27,214 27,214 250,000 54,906 54,906 250,000 116,070 116,070 250,000
25 64 2,518 126,161 28,896 28,896 250,000 74,665 74,665 250,000 203,102 203,102 250,000
30 69 2,518 175,623 25,563 25,563 250,000 96,079 96,079 250,000 347,415 347,415 403,002
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
118 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
Target Premium = $2,517.50
These values reflect GUARANTEED cost of insurance and other charges
using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,518 2,643 1,327 0 250,000 1,433 0 250,000 1,541 0 250,000
2 41 2,518 5,419 2,895 0 250,000 3,201 0 250,000 3,520 0 250,000
3 42 2,518 8,333 4,397 430 250,000 5,003 1,036 250,000 5,661 1,694 250,000
4 43 2,518 11,393 5,827 2,164 250,000 6,835 3,172 250,000 7,973 4,310 250,000
5 44 2,518 14,606 7,186 3,828 250,000 8,698 5,340 250,000 10,474 7,116 250,000
6 45 2,518 17,980 8,466 5,414 250,000 10,585 7,532 250,000 13,176 10,124 250,000
7 46 2,518 21,522 9,665 6,917 250,000 12,493 9,745 250,000 16,097 13,350 250,000
8 47 2,518 25,242 10,779 8,336 250,000 14,419 11,977 250,000 19,257 16,815 250,000
9 48 2,518 29,147 11,805 9,670 250,000 16,362 14,227 250,000 22,678 20,543 250,000
10 49 2,518 33,248 12,737 10,907 250,000 18,312 16,482 250,000 26,380 24,550 250,000
15 54 2,518 57,040 15,943 15,638 250,000 28,212 27,907 250,000 50,442 50,137 250,000
20 59 2,518 87,406 15,098 15,098 250,000 36,664 36,664 250,000 86,810 86,810 250,000
25 64 2,518 126,161 7,426 7,426 250,000 41,129 41,129 250,000 145,739 145,739 250,000
30 69 2,518 175,623 0 0 0 34,502 34,502 250,000 246,000 246,000 285,360
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 119
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
Target Premium = $2,517.50
These values reflect CURRENT cost of insurance and other charges
using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,518 2,643 1,325 0 251,325 1,432 0 251,432 1,539 0 251,539
2 41 2,518 5,419 3,247 0 253,247 3,564 0 253,564 3,894 0 253,894
3 42 2,518 8,333 5,115 1,147 255,115 5,764 1,796 255,764 6,465 2,498 256,465
4 43 2,518 11,393 6,921 3,258 256,921 8,026 4,364 258,026 9,267 5,604 259,267
5 44 2,518 14,606 8,659 5,301 258,659 10,346 6,989 260,346 12,315 8,957 262,315
6 45 2,518 17,980 10,330 7,278 260,330 12,727 9,675 262,727 15,634 12,582 265,634
7 46 2,518 21,522 11,934 9,186 261,934 15,168 12,420 265,168 19,250 16,502 269,250
8 47 2,518 25,242 13,465 11,022 263,465 17,665 15,223 267,665 23,185 20,743 273,185
9 48 2,518 29,147 14,922 12,787 264,922 20,219 18,084 270,219 27,471 25,336 277,471
10 49 2,518 33,248 16,304 14,474 266,304 22,830 21,000 272,830 32,140 30,310 282,140
15 54 2,518 57,040 22,337 22,032 272,337 37,076 36,771 287,076 63,065 62,760 313,065
20 59 2,518 87,406 26,231 26,231 276,231 52,733 52,733 302,733 111,157 111,157 361,157
25 64 2,518 126,161 26,943 26,943 276,943 69,290 69,290 319,290 187,789 187,789 437,789
30 69 2,518 175,623 22,093 22,093 272,093 83,668 83,668 333,668 306,965 306,965 556,965
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
120 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Plus Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
Target Premium = $2,517.50
These values reflect GUARANTEED cost of insurance and other charges
using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,518 2,643 1,325 0 251,325 1,432 0 251,432 1,539 0 251,539
2 41 2,518 5,419 2,886 0 252,886 3,190 0 253,190 3,509 0 253,509
3 42 2,518 8,333 4,375 407 254,375 4,978 1,010 254,978 5,632 1,665 255,632
4 43 2,518 11,393 5,787 2,125 255,787 6,787 3,125 256,787 7,917 4,254 257,917
5 44 2,518 14,606 7,124 3,766 257,124 8,621 5,263 258,621 10,379 7,022 260,379
6 45 2,518 17,980 8,376 5,323 258,376 10,468 7,415 260,468 13,027 9,974 263,027
7 46 2,518 21,522 9,539 6,792 259,539 12,324 9,577 262,324 15,873 13,125 265,873
8 47 2,518 25,242 10,612 8,169 260,612 14,186 11,743 264,186 18,933 16,491 268,933
9 48 2,518 29,147 11,590 9,455 261,590 16,047 13,912 266,047 22,224 20,089 272,224
10 49 2,518 33,248 12,464 10,634 262,464 17,899 16,069 267,899 25,758 23,928 275,758
15 54 2,518 57,040 15,238 14,933 265,238 26,896 26,591 276,896 47,980 47,675 297,980
20 59 2,518 87,406 13,663 13,663 263,663 33,248 33,248 283,248 78,676 78,676 328,676
25 64 2,518 126,161 5,105 5,105 255,105 33,317 33,317 283,317 120,903 120,903 370,903
30 69 2,518 175,623 0 0 0 18,894 18,894 268,894 173,916 173,916 423,916
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 121
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
Target Premium = $3,060.00
These values reflect CURRENT cost of insurance and other charges
using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 3,060 3,213 1,731 0 250,000 1,864 0 250,000 1,998 0 250,000
2 41 3,060 6,587 4,044 0 250,000 4,439 0 250,000 4,852 0 250,000
3 42 3,060 10,129 6,284 1,467 250,000 7,090 2,273 250,000 7,962 3,145 250,000
4 43 3,060 13,848 8,451 4,006 250,000 9,818 5,373 250,000 11,353 6,908 250,000
5 44 3,060 17,754 10,538 6,463 250,000 12,618 8,543 250,000 15,048 10,973 250,000
6 45 3,060 21,855 12,534 8,829 250,000 15,482 11,777 250,000 19,065 15,360 250,000
7 46 3,060 26,160 14,444 11,109 250,000 18,417 15,082 250,000 23,433 20,108 250,000
8 47 3,060 30,681 16,269 13,304 250,000 21,426 18,461 250,000 28,221 25,256 250,000
9 48 3,060 35,428 18,006 15,413 250,000 24,509 21,916 250,000 33,437 30,845 250,000
10 49 3,060 40,413 19,642 17,419 250,000 27,656 25,433 250,000 39,127 36,904 250,000
15 54 3,060 69,332 26,715 26,345 250,000 44,937 44,567 250,000 77,289 76,919 250,000
20 59 3,060 106,241 30,891 30,891 250,000 64,236 64,236 250,000 138,687 138,687 250,000
25 64 3,060 153,347 30,535 30,535 250,000 85,721 85,721 250,000 243,175 243,175 296,674
30 69 3,060 213,468 22,145 22,145 250,000 107,839 107,839 250,000 413,888 413,888 480,110
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
122 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
Target Premium = $3,060.00
These values reflect GUARANTEED cost of insurance and other charges
using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 3,060 3,213 1,731 0 250,000 1,874 0 250,000 1,998 0 250,000
2 41 3,060 6,587 3,782 0 250,000 4,170 0 250,000 4,574 0 250,000
3 42 3,060 10,129 5,761 943 250,000 6,535 1,717 250,000 7,374 2,556 250,000
4 43 3,060 13,848 7,660 3,215 250,000 8,955 4,510 250,000 10,414 5,969 250,000
5 44 3,060 17,754 9,483 5,408 250,000 11,433 7,358 250,000 13,721 9,646 250,000
6 45 3,060 21,855 11,222 7,517 250,000 13,965 10,260 250,000 17,315 13,610 250,000
7 46 3,060 26,160 12,873 9,538 250,000 16,549 13,214 250,000 21,223 17,888 250,000
8 47 3,060 30,681 14,434 11,469 250,000 19,183 16,218 250,000 25,476 22,511 250,000
9 48 3,060 35,428 15,904 13,311 250,000 21,868 19,276 250,000 30,108 27,516 250,000
10 49 3,060 40,413 17,274 15,051 250,000 24,598 22,375 250,000 35,155 32,932 250,000
15 54 3,060 69,332 22,700 22,330 250,000 39,132 38,762 250,000 68,637 68,267 250,000
20 59 3,060 106,241 24,154 24,154 250,000 53,815 53,815 250,000 121,448 121,448 250,000
25 64 3,060 153,347 19,173 19,173 250,000 67,446 67,446 250,000 211,237 211,237 257,709
30 69 3,060 213,468 1,722 1,722 250,000 75,223 75,223 250,000 359,800 359,800 417,368
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 123
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
Target Premium = $3,060.00
These values reflect CURRENT cost of insurance and other charges
using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 3,060 3,213 1,728 0 251,728 1,861 0 251,861 1,995 0 251,995
2 41 3,060 6,587 4,035 0 254,035 4,430 0 254,430 4,841 0 254,841
3 42 3,060 10,129 6,266 1,448 256,266 7,069 2,251 257,069 7,938 3,120 257,938
4 43 3,060 13,848 8,418 3,973 258,418 9,778 5,333 259,778 11,307 6,862 261,307
5 44 3,060 17,754 10,485 6,410 260,485 12,553 8,478 262,553 14,968 10,893 264,968
6 45 3,060 21,855 12,454 8,749 262,454 15,380 11,675 265,380 18,935 15,230 268,935
7 46 3,060 26,160 14,331 10,996 264,331 18,266 14,931 268,266 23,243 19,908 273,243
8 47 3,060 30,681 16,113 13,148 266,113 21,211 18,246 271,211 27,925 24,960 277,925
9 48 3,060 35,428 17,799 15,207 267,799 24,212 21,619 274,212 33,012 30,420 283,012
10 49 3,060 40,413 19,373 17,151 269,373 27,255 25,032 277,255 38,530 36,308 288,530
15 54 3,060 69,332 25,951 25,581 275,951 43,547 43,177 293,547 74,744 74,374 324,744
20 59 3,060 106,241 29,169 29,169 279,169 60,384 60,384 310,384 129,905 129,905 379,905
25 64 3,060 153,347 27,123 27,123 277,123 76,039 76,039 326,039 215,624 215,624 465,324
30 69 3,060 213,468 16,390 16,390 266,930 85,471 85,471 335,471 345,413 345,413 595,413
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
- -----------------------
124 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
Target Premium = $3,060.00
These values reflect GUARANTEED cost of insurance and other charges
using the Guideline Premium Test as defined under Section 7702
of the Internal Revenue Code.
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Premiums Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
------------------------------ ----------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 3,060 3,213 1,728 0 251,728 1,861 0 251,861 1,995 0 251,995
2 41 3,060 6,587 3,769 0 253,769 4,156 0 254,156 4,559 0 254,559
3 42 3,060 10,129 5,732 914 255,732 6,501 1,684 256,501 7,336 2,519 257,336
4 43 3,060 13,848 7,609 3,164 257,609 8,893 4,448 258,893 10,341 5,896 260,341
5 44 3,060 17,754 9,402 5,327 259,402 11,333 7,258 261,333 13,598 9,523 263,598
6 45 3,060 21,855 11,103 7,398 261,103 13,813 10,108 263,813 17,120 13,415 267,120
7 46 3,060 26,160 12,709 9,374 262,709 16,329 12,994 266,329 20,931 17,596 270,931
8 47 3,060 30,681 14,215 11,250 264,215 18,878 15,913 268,878 25,053 22,088 275,053
9 48 3,060 35,428 15,619 13,027 265,619 21,456 18,864 271,456 29,515 26,922 279,515
10 49 3,060 40,413 16,913 14,691 266,913 24,054 21,832 274,054 34,339 32,116 284,339
15 54 3,060 69,332 21,744 21,374 271,744 37,368 36,998 287,368 65,364 64,994 315,364
20 59 3,060 106,241 22,109 22,109 272,109 49,096 49,096 299,096 110,437 110,437 360,437
25 64 3,060 153,347 15,472 15,472 265,472 56,110 56,110 306,110 176,847 176,847 426,847
30 69 3,060 213,468 0 0 0 50,374 50,374 300,374 269,768 269,768 519,768
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS MADE BY
A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
-----------------------
A P P E N D I C E S P R O S P E C T U S 125
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
USES OF LIFE INSURANCE
- --------------------------------------------------------------------------------
The following are examples of ways in which the policy can be used
to address certain financial objectives, bearing in mind that variable life
insurance is not a short-term investment and that its primary purpose is to
provide benefits upon the death of the insured.
Family Income Protection
Life insurance may be purchased on the lives of a family's income earners to
provide a death benefit to cover final expenses, and continue the current income
to the family. The amount of insurance purchase should be an amount which will
provide a death benefit that when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the insured's income.
Estate Protection
Life insurance may be purchased by a trust on the life of a person whose estate
will incur federal estate taxes upon his or her death. The amount of insurance
purchased should equal the amount of the estimated estate tax liability. Upon
the insured's death, the trustee could make the death proceeds available to the
estate for the payment of estate taxes.
Education Funding
Life insurance may be purchased on the life of the parent(s) or primary person
funding an education. The amount of insurance purchased should equal the total
education cost projected at a reasonable inflation rate.
In the event of the insured's death, the guaranteed death benefit is available
to help pay the education costs. If the insured lives through the education
years, the cash value accumulations may be accessed to help offset the remaining
education costs. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Mortgage Protection
Life insurance may be purchased on the life of the person(s) responsible for
making mortgage payments. The amount of insurance purchased should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to offset the remaining mortgage balance.
During the insured's lifetime, the cash value accumulations may be accessed late
in the mortgage term to help make the remaining mortgage payments. Any policy
loans or partial withdrawals will reduce the policy's death benefit and may have
tax consequences.
Key Person Protection
Life insurance may be purchased by a business on the life of a key person in an
amount equal to a key person's value, considering salary, benefits, and
contribution to business profits. Upon the key person's death, the business can
use the death benefit to ease the interruption of business operations and/or to
provide a replacement fund for hiring a new executive.
Business Continuation Protection
Life insurance may be purchased on the life of each business owner in an amount
equal to the value of each owner's business interest. In the event of death, the
guaranteed death benefit may provide the funds needed to carry out the purchase
of the deceased's business interest by the business, or surviving owners, from
the deceased owner's heirs.
Retirement Income
Life insurance may be purchased on the life of a family income earner during his
or her working life. If the insured lives to retirement, the cash value
accumulations may be accessed to provide retirement payments. In the event of
the insured's death, the proceeds may be used to provide retirement income to
his or her spouse. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Deferred Compensation Plans
Life insurance may be purchased to fund a Deferred Compensation Plan, or
Selective Incentive Plan, for key employees. A Deferred Compensation Plan, or
Selective Incentive Plan, is a written agreement between an employer and an
executive. The employer makes an unsecured promise to make future benefit
payments to a key executive if the executive meets certain stated requirements.
Under this type of plan, a company purchases a cash value life insurance policy
insuring an executive's life to (1)
- -----------------------
126 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
APPENDIX B
USES OF LIFE INSURANCE
informally fund the promised benefits and (2) recover its plan costs at the
death of the executive. The policy cash values may be used to help pay the
promised benefits to the executive. In the event that the executive dies prior
to retirement, the policy death benefits can be used to fund survivor benefits.
Split Dollar Plans
Life insurance may be purchased by an employer on the life of an employee under
a Split Dollar Plan. In a Split Dollar Plan, the employer advances the executive
the premium on a life insurance policy. Both the employer and the executive
share the cash value and death benefit under the policy. Generally, the employer
has rights to the cash value and death benefit equal to its advances. The
balance of the cash value and death benefit belong to the executive.
The executive receives an economic benefit for which he or she must contribute
into the plan or pay income tax. The economic benefit is equal to the term value
of the death benefit assuming taxation under IRS Revenue Rulings and IRC Section
72. Different results are possible if these or other code sections are applied
or amended.
Executive Bonus Plans
Life Insurance may be purchased by an employee with funds provided by his or her
employer for that purpose. An Executive Bonus plan involves an employer
providing an executive with additional compensation to enable the executive to
pay premiums on a life insurance policy. The bonus is tax deductible by the
employer and received as taxable income by the executive.
* * * *
Because the policy provides a death benefit and cash surrender value, the policy
can be used for various individual and business planning purposes. Purchasing
the policy in part for such purposes entails certain risks, particularly if the
policy's cash surrender value, as opposed to its death benefit, will be the
principal policy feature used for such planning purposes. If Policy Premiums are
not paid, the investment performance of the Variable Investment Options to which
Policy Account Value is allocated is poorer than anticipated, or insufficient
cash surrender value is maintained, then the policy may lapse or may not
accumulate sufficient values to fund the purpose for which the policy was
purchased. Because the policy is designed to provide benefits on a long-term
basis, before purchasing a policy for a specialized purpose, a purchaser should
consider whether the long-term nature of the policy is consistent with the
purpose for which it is being considered.
Policyowners are urged to consult competent tax advisors about the possible tax
consequences of pre-death distributions from any life insurance policy,
including Park Avenue Life.
-----------------------
A P P E N D I C E S P R O S P E C T U S 127
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
ADDITIONAL BENEFITS BY RIDER
- --------------------------------------------------------------------------------
Additional benefits are available by riders to the policy. Riders are issued
subject to GIAC's standards for classifying risks. GIAC charges premiums for
additional benefit riders. These premium amounts are included in the policy
premium charged to a Park Avenue Life policyowner, but rider premiums are not
allocated to the variable investment options or fixed-rate option under the
policy. The benefits provided by the riders are fully described in the riders
and summarized here.
Waiver of Premium -- This rider provides for the waiver of Policy Premiums
while the insured is totally disabled.
Accidental Death Benefit -- This rider provides additional insurance
coverage if the insured's death results from accidental bodily injury.
Guaranteed Purchase Option -- This rider provides the policyowner the
right to purchase additional insurance policies on the insured's life
without evidence of insurability on the policy anniversaries nearest
certain birthdays of the insured (the "Option Dates") or within specified
time periods of qualifying life events ("Alternate Option Dates") provided
(i) all policy premiums are paid to the applicable Option Date or
Alternate Option Date, (ii) written application and evidence of
insurability satisfactory to the issuer and the first premium for the new
policy are received as set forth in the rider, (iii) if applicable,
satisfactory evidence of the qualifying life event accompanies the
application.
Simplified Insurability Option -- This rider allows the policyowner to
purchase additional policies on certain policy anniversaries ("Option
Dates") provided: (i) all policy premiums are paid to the applicable
Option Date, (ii) written application and evidence of insurability
satisfactory to the issuer are received as set forth in the rider, and
(iii) policy premiums are not being waived under a waiver of premium
rider.
Adjustable Renewable Term (ART) Insurance -- This rider provides term
insurance for one year periods.
By adding an ART rider to a Park Avenue Life policy, a policyowner can increase
the insurance coverage provided by the entire contract. Generally, term
insurance is intended to fill a temporary insurance need, and permanent (whole
life) insurance is intended to fill long-term insurance needs. Term insurance is
generally more economical for short periods, while permanent insurance is
generally more economical over longer periods. If a policyowner has a short-term
need for more insurance protection, it may be in his or her interest to
supplement a Park Avenue Life policy with an ART rider. When the need abates,
the rider can be terminated without triggering surrender charges, which are
imposed when the policy's coverage is reduced during the first 12 policy years.
See "Decreasing the Face Amount" and "Deductions and Charges."
GIAC may from time to time discontinue the availability of one or more of these
riders, or make other riders available. GIAC agents can provide information
about the current availablity of particular riders.
- -----------------------
128 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX D
- --------------------------------------------------------------------------------
First Year Surrender Charge Rates per $1,000 of Face Amount
<TABLE>
<CAPTION>
Male Female Unisex
--------------------------------- --------------------------------- --------------------------------
Preferred Preferred Preferred
Age Plus Preferred Standard Plus Preferred Standard Plus Preferred Standard
----- --------- --------- -------- --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 6.00 4.65 6.00
1 4.50 4.50 4.50
2 4.50 4.50 4.50
3 4.50 4.50 4.50
4 4.50 4.50 4.50
5 4.59 4.50 4.50
6 4.76 4.50 4.62
7 4.94 4.50 4.79
8 5.12 4.50 4.97
9 5.31 4.50 5.16
10 5.52 4.50 5.36
11 5.73 4.52 5.57
12 5.96 4.68 5.78
13 6.20 4.86 6.00
14 6.44 5.04 6.24
15 6.68 5.22 6.48
16 6.93 5.42 6.72
17 7.19 5.61 6.96
18 7.44 5.84 7.22
19 7.70 6.05 7.47
20 6.66 7.97 10.76 5.40 6.29 8.31 6.48 7.73 10.49
21 6.90 8.25 11.15 5.61 6.53 8.64 6.72 8.01 10.80
22 7.17 8.57 11.57 5.84 6.80 8.99 6.98 8.31 11.21
23 7.44 8.90 11.99 6.06 7.07 9.36 7.25 8.64 11.63
24 7.73 9.24 12.45 6.32 7.37 9.75 7.52 8.97 12.08
25 8.03 9.60 12.93 6.57 7.67 10.17 7.82 9.33 12.56
26 8.53 10.22 13.75 7.00 8.18 10.85 8.32 9.93 13.35
27 9.09 10.88 14.65 7.46 8.71 11.59 8.85 10.58 14.22
28 9.66 11.59 15.60 7.94 9.29 12.36 9.42 11.27 15.15
29 10.30 12.35 16.61 8.46 9.92 13.20 10.04 12.00 16.15
30 10.95 13.15 17.70 9.01 10.57 14.09 10.69 12.80 17.22
31 11.66 14.02 18.90 9.61 11.27 15.05 11.37 13.63 18.37
32 12.42 14.94 20.15 10.23 12.01 16.05 12.11 14.54 19.60
33 13.23 15.93 21.50 10.89 12.80 17.14 12.91 15.49 20.92
34 14.08 16.97 22.96 11.60 13.65 18.30 13.74 16.52 22.34
35 15.00 18.11 24.53 12.34 14.54 19.54 14.63 17.61 23.85
36 15.60 18.84 25.58 12.82 15.11 20.35 15.22 18.33 24.88
37 16.23 19.62 26.68 13.32 15.72 21.21 15.81 19.09 25.87
38 16.89 20.44 27.80 13.85 16.36 22.11 16.45 19.87 26.78
39 17.58 21.32 28.81 14.41 17.01 23.04 17.12 20.71 27.67
40 18.31 22.23 29.87 14.98 17.71 24.03 17.82 21.60 28.75
</TABLE>
-----------------------
A P P E N D I C E S P R O S P E C T U S 129
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
First Year Surrender Charge Rates per $1,000 of Face Amount
<TABLE>
<CAPTION>
Male Female Unisex
--------------------------------- --------------------------------- --------------------------------
Preferred Preferred Preferred
Age Plus Preferred Standard Plus Preferred Standard Plus Preferred Standard
----- --------- --------- -------- --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
41 19.06 23.18 31.06 15.57 18.44 25.06 18.56 22.52 29.79
42 19.85 24.19 32.13 16.18 19.19 26.06 19.33 23.50 30.89
43 20.69 25.24 33.45 16.83 19.97 26.88 20.14 24.51 32.12
44 21.56 26.36 34.81 17.51 20.79 27.84 21.00 25.57 33.33
45 22.49 27.53 36.26 18.22 21.65 28.78 21.88 26.69 34.61
46 22.76 27.90 37.65 18.40 21.90 29.68 22.14 27.06 36.03
47 23.03 28.28 39.23 18.58 22.14 30.40 22.40 27.42 37.38
48 23.27 28.62 40.22 18.73 22.34 30.74 22.62 27.73 38.92
49 23.48 28.93 40.82 18.88 22.53 31.06 22.82 28.03 39.47
50 23.66 29.20 41.37 18.98 22.69 31.35 23.00 28.28 39.98
51 23.81 29.44 41.87 19.07 22.82 31.59 23.14 28.50 40.45
52 23.93 29.63 42.32 19.14 22.93 31.80 23.25 28.67 40.86
53 24.02 29.78 42.71 19.16 22.99 31.95 23.32 28.82 41.21
54 24.04 29.87 43.04 19.15 23.00 32.04 23.34 28.89 41.50
55 24.04 29.91 43.29 19.10 22.98 32.07 23.32 28.92 41.71
56 24.96 31.11 45.23 19.79 23.84 33.36 24.21 30.07 43.56
57 25.92 32.37 47.28 20.52 24.73 34.69 25.14 31.27 45.49
58 26.93 33.68 49.42 21.27 25.66 36.07 26.11 32.52 47.53
59 27.99 35.05 51.68 22.06 26.64 37.52 27.13 33.84 49.66
60 29.10 36.50 54.03 22.90 27.66 39.02 28.20 35.22 51.89
61 30.25 37.99 54.09 23.77 28.73 40.60 29.31 36.64 51.91
62 31.46 39.55 54.24 24.67 29.85 42.24 30.47 38.14 52.01
63 32.73 41.18 54.21 25.64 31.01 43.95 31.69 39.70 51.96
64 34.06 42.88 53.98 26.65 32.26 45.76 32.98 41.33 51.71
65 35.47 44.67 53.85 27.74 33.56 47.64 34.33 43.04 51.56
66 36.19 45.59 54.21 28.29 34.23 48.61 35.02 43.92 51.88
67 37.09 46.73 54.43 29.01 35.08 49.84 35.89 45.02 52.07
68 37.79 47.62 54.48 29.57 35.76 50.82 36.57 45.86 52.12
69 38.44 48.43 54.32 30.12 36.43 51.78 37.21 46.65 51.96
70 39.30 49.50 53.94 30.85 37.30 53.04 38.05 47.69 51.59
71 39.89 50.19 54.23 31.39 37.94 53.96 38.62 48.37 51.89
72 40.42 50.82 54.37 31.91 38.56 54.86 39.15 48.99 52.05
73 41.17 51.71 54.35 32.62 39.42 54.95 39.89 49.88 52.05
74 41.59 52.19 54.14 33.09 39.98 54.79 40.31 50.37 51.89
75 41.91 52.55 53.73 33.50 40.49 54.52 40.65 50.75 51.53
76 42.48 53.21 53.08 34.13 41.24 54.46 41.23 51.42 50.95
77 42.64 53.33 52.15 34.44 41.59 54.15 41.41 51.58 50.10
78 42.65 53.28 50.90 34.65 41.82 54.38 41.45 51.56 48.95
79 42.92 53.53 49.28 35.07 42.30 54.26 41.75 51.85 47.44
80 42.67 53.08 47.27 35.08 42.24 54.18 41.53 51.46 45.55
</TABLE>
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130 P R O S P E C T U S P A R K A V E N U E L I F E
- -----------------------
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING PURSUANT TO RULE 484
Under Article VIII of GIAC's By-Laws, as supplemented by Section 3.2 of
GIAC's Certificate of Incorporation, any past or present director or officer of
GIAC (including persons who serve at GIAC's request or for its benefit as
directors or officers of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise [hereinafter referred to
as a "Covered Person"]) is indemnified to the fullest extent permitted by law
against liability and all expenses reasonably incurred by such Covered Person in
connection with any action, suit or proceeding to which such Covered Person may
be a party or otherwise involved by reason of being or having been a Covered
Person. However, this provision does not protect a Covered Person against any
liability to either GIAC or its stockholder to which such Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Covered Person's office. This provision does protect a director of GIAC against
any liability to GIAC or its stockholder for monetary damages or for breach of
fiduciary duty as a director of GIAC, except for liability (i) for any breach of
the director's duty of loyalty to GIAC or its stockholder, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26
GIAC hereby presents that the fees and charges deducted under the contract, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by GIAC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The representation pursuant to Section 26 of The Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Richard T. Potter, Jr., Esq.
Charles G. Fisher
PricewaterhouseCoopers LLP
II-1
<PAGE>
The following exhibits:
1.A (1) Resolution of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. establishing The
Guardian Separate Account M.*
(2) Not Applicable.
(3)(a), (b)
and (c) Form of Distribution Agreements.**
(4) Not Applicable.
(5) Specimen of the Flexible Premium Adjustable Variable Whole
Life Insurance Policy.***
(6)(a) Certificate of Incorporation of The Guardian Insurance &
Annuity Company, Inc.*
(6)(b) By-laws of The Guardian Insurance & Annuity Company, Inc.*
(7) Not Applicable.
(8) Amended and Restated Agreement for Services and
Reimbursement Therefor between The Guardian Life Insurance
Company of America and The Guardian Insurance & Annuity
Company, Inc.*
(9) Not Applicable.
(10) Form of Application for the Flexible Premium Adjustable
Variable Whole Life Policy.*
(11)(a) Memorandum on the Policy's Issuance, Transfer and
Redemption Procedures and on the Method of Computing Cash
Adjustments upon Exchange of the Policy.***
2. See Exhibit 1.A(5).
3. (a)Opinion of Richard T. Potter, Jr., Esq.**
3. (b)Consent of Richard T. Potter, Jr., Esq.
4. None.
5. Not Applicable.
6. Opinion and Consent of Charles G. Fisher, F.S.A.
7. Consent of PriceWaterhouseCoopers LLP
8. Powers of Attorney executed by a majority of the Board of Directors
and certain principal officers of The Guardian Insurance & Annuity
Company, Inc.*
- ----------
* Incorporated by reference to the Registration Statement on Form S-6 filed
by the Registrant on September 16, 1997 (Registration No. 333-35681)
** Incorporated by reference to Post-Effective Amendment No. 1 on Form S-6
filed by the Registrant on April 28, 1998 (Registration No. 333-35681)
*** Incorporated by reference to Pre-effective Amendment No. 1 to Form S-6
filed by the Registrant on January 21, 1998 (Registration No. 333-35681).
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, The
Guardian Separate Account M, certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York, on the 28th day of April, 1999.
THE GUARDIAN SEPARATE ACCOUNT M
(Name of Registrant)
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
By: s/ John M. Smith
-------------------------------------
JOHN M. SMITH
EXECUTIVE VICE PRESIDENT
Attest: /s/ Sheri L. Kocen
---------------------------------
SHERI L. KOCEN
COUNSEL
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following directors and
principal officers of The Guardian Insurance & Annuity Company, Inc. in the
capacities and on the date indicated.
s/ Joseph D. Sargent* President, Chief Executive Officer
- ----------------------------------- and Director
Joseph D. Sargent
(Principal Executive Officer)
s/ Frank J. Jones* Executive Vice President, Chief Investment
- ----------------------------------- Officer and Director
Frank J. Jones
(Principal Financial Officer)
s/ Edward K. Kane* Executive Vice President,
- ----------------------------------- and Director
Edward K. Kane
s/ Frank L. Pepe Vice President and Controller
- -----------------------------------
Frank L. Pepe
(Principal Accounting Officer)
s/ John M. Smith Executive Vice President and Director
- -----------------------------------
John M. Smith
s/ Philip H. Dutter* Director
- -----------------------------------
Philip H. Dutter
s/ Arthur V. Ferrara* Director
- -----------------------------------
Arthur V. Ferrara
s/ Leo R. Futia* Director
- -----------------------------------
Leo R. Futia
s/ Peter L. Hutchings* Director
- -----------------------------------
Peter L. Hutchings
s/ William C. Warren* Director
- -----------------------------------
William C. Warren
*By: s/ John M. Smith Date: April 28, 1999
---------------------------------
John M. Smith
Executive Vice President
Pursuant to Power of Attorney
II-4
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT M
EXHIBIT INDEX
Exhibit
Number Description Page*
3.(b) Consent of Richard T. Potter, Esq.
6. Opinion and Consent of Charles G. Fisher, F.S.A.
7. Consent of PricewaterhouseCoopers LLP
EX-3.(b)
CONSENT OF COUNSEL
I hereby consent to the reference to my name under the heading "Legal
Opinion" in the Post-Effective Amendment No. 2 to the Registration Statement on
Form S-6 for The Guardian Separate Account M and to the filing of this consent
as an exhibit thereto.
By /s/ Richard T. Potter, Jr.
----------------------------------
Richard T. Potter, Jr.
Vice President and Equity Counsel
New York, New York
April 28, 1999
EXHIBIT 6
April 28, 1999
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003
Gentlemen:
In my capacity as Vice President and Actuary of The Guardian Insurance & Annuity
Company, Inc. ("GIAC"), I have participated in the development of the Park
Avenue VUL insurance policy (the "Policy") and the preparation of the Policy
form. The Policy has been registered under the Securities Act of 1933. It is
described in Registration Statement No. 333-35681 on Form S-6. I am familiar
with the Registration Statement and its Exhibits.
In my opinion, the illustrations of death benefits, Policy Account Values, Net
Cash Surrender Values and Accumulated Policy Premiums included in Appendix A of
the prospectus, based on the assumptions stated in the illustrations, are
consistent with the provisions of the form of the Policy. Further, the rate
structure of the Policy has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Policy at age 40 than to prospective
purchasers of the Policy at other Ages.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 2 to the Registration Statement.
Very truly yours,
Charles G. Fisher, FSA
Vice President and Actuary
CONSULTING ACTUARY: _______________________
Alan M. Emmer, FSA
EXHIBIT 7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 2 to the Separate Account M registration statement
on Form S-6 (the "Registration Statement") of our report dated February 25,
1999, relating to the financial statements of the Guardian Separate Account M,
and our report dated February 25, 1999 relating to the statutory basis financial
statements of The Guardian Insurance & Annuity Company, Inc., which appear in
such Registration Statement. We also consent to the reference to us under the
heading "Financial and actuarial experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
-------------------------------
PRICEWATERHOUSECOOPERS LLP
New York, New York
April 28, 1999
