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. 3
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.
7 Hanover Square
New York, New York 10004
(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, 2000 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 24, 2000
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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, 2000
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 Variable Contract Funds, Inc.
The Guardian Stock Fund
The Guardian VC Asset Asset Allocation Fund
The Guardian VC 500 Index Fund
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
MFS New Discovery Series
MFS Research 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. Global Utilities
AIM V.I. Value Fund
Fidelity Variable Insurance Products Fund
(Fidelity VIP)
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Fidelity VIP Contrafund (R) 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
Janus Aspen Series
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
All funds may not be available in your state. Ask your registered representative
for further information about availability.
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
- Exchanging a policy .......................................... 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 Statements.......................................... 73
- Financial and actuarial experts .............................. 74
- GIAC's management ............................................ 76
Special terms used in this prospectus ........................... 78
Financial Statements
of The Guardian Separate Account M .............................. 80
Consolidated 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, and
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 policyowner, 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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S U M M A R Y 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.
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 S U M M A R Y
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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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S U M M A R Y 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. It 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;
however, we will send you reminder notices for them,
o your target premium, which is based on the insured's age, sex (unless
gender-neutral rates are required by law) and underwriting class. It 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 S U M M A R Y
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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. 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 Variable Contract
Funds, Inc.
The Guardian Stock
Fund
The Guardian VC Asset
Allocation Fund
The Guardian VC 500
Index Fund
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
MFS New Discovery Series
MFS Research 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. Global Utilities Fund
AIM V.I. Value Fund
Fidelity Variable Insurance
Products Fund
(Fidelity VIP)
Fidelity VIP Equity-Income
Portfolio
Fidelity VIP High Income
Portfolio
Fidelity VIP Contrafund(R)
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
Janus Aspen Series
Janus Aspen Aggressive Growth
Portfolio
Janus Aspen Capital Appreciation
Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth
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 S U M M A R Y
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<PAGE>
Tax on increases
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Increases in the value of your policy should 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 it is reasonable to conclude 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 should 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 generally should not be 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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S U M M A R Y 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 charges 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 S U M M A R Y
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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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S U M M A R Y 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 S U M M A R Y
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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,
1999, our total assets (GAAP basis) exceeded $12 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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S U M M A R Y P R O S P E C T U S 11
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<PAGE>
The Park Avenue VUL policy diagram(1)
- --------------------------------------------------------------------------------
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 VC Asset Allocation Fund
The Guardian VC 500 Index 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, LLC
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
MFS New Discovery Series insurance benefits
MFS Research Series
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. Capital Global Utilities 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 Contrafund(R) Portfolio
Fidelity VIP II Index 500 Portfolio
Janus Capital Corporation
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth 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 S U M M A R Y
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<PAGE>
- --------------------------------------------------------------------------------
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.
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A B O U T T H E P O L I C Y 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 A B O U T T H E P O L I C Y
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<PAGE>
- --------------------------------------------------------------------------------
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
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B E N E F I T S A N D P O L I C Y V A L U E S 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 B E N E F I T S A N D P O L I C Y V A L U E 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 the nontaxable
portion of 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 level 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 level 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.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S 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 B E N E F I T S A N D P O L I C Y V A L U E 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.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S 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
Policy account value 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
This 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 B E N E F I T S A N D P O L I C Y V A L U E 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.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S 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.
- ---------------------- P R E M I U M S, D E D U C T I O N S
22 P R O S P E C T U S A N D C H A R G E 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:
o first, pay any policy debt
o then, apply 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 E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S 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,
- ---------------------- P R E M I U M S, D E D U C T I O N S
24 P R O S P E C T U S A N D C H A R G E 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 then 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 E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S 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.
- ---------------------- P R E M I U M S, D E D U C T I O N S
26 P R O S P E C T U S A N D C H A R G E 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 E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S 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
- ---------------------- P R E M I U M S, D E D U C T I O N S
28 P R O S P E C T U S A N D C H A R G E 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 E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S 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.
- ---------------------- P R E M I U M S, D E D U C T I O N S
30 P R O S P E C T U S A N D C H A R G E 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 E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S 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>
- ---------------------- P R E M I U M S, D E D U C T I O N S
32 P R O S P E C T U S A N D C H A R G E 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 E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S 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, 1999 as a percentage of the fund's average daily net assets.
- ---------------------- P R E M I U M S, D E D U C T I O N S
34 P R O S P E C T U S A N D C H A R G E 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% 0.08% 0.83%
- -------------------------------------------------------------------------------------------------
Guardian Bond Fund 0.50% 0.05% 0.55%
- -------------------------------------------------------------------------------------------------
Guardian Cash Fund 0.50% 0.03% 0.53%
- -------------------------------------------------------------------------------------------------
Guardian VC 500 Index Fund(1) 0.25% 0.03% 0.28%
- -------------------------------------------------------------------------------------------------
Guardian VC Asset Allocation Fund(1) 0.50% 0.17% 0.67%
- -------------------------------------------------------------------------------------------------
Baillie Gifford International Fund 0.80% 0.16% 0.96%
- -------------------------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund 1.00% 0.44% 1.44%
- -------------------------------------------------------------------------------------------------
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% 0.08% 1.08%
- -------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 0.75% 0.09% 0.84%
- -------------------------------------------------------------------------------------------------
MFS Total Return Series(1) 0.75% 0.15% 0.90%
- -------------------------------------------------------------------------------------------------
MFS Growth With Income Series(1) 0.75% 0.13% 0.88%
- -------------------------------------------------------------------------------------------------
MFS Bond Series(1) 0.60% 0.40% 1.01%
- -------------------------------------------------------------------------------------------------
MFS New Discovery Series(1) 0.90% 0.27% 1.17%
- -------------------------------------------------------------------------------------------------
MFS Research Series(1) 0.75% 0.11% 0.86%
- -------------------------------------------------------------------------------------------------
American Century VP Value Fund(1) 1.00% -- 1.00%
- -------------------------------------------------------------------------------------------------
American Century VP
International Fund(1) 1.34% -- 1.34%
- -------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62% 0.11% 0.73%
- -------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund 0.65% 0.49% 1.14%
- -------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% 0.15% 0.76%
- -------------------------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio(1) 0.58% 0.10% 0.68%
- -------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income
Portfolio(1) 0.48% 0.08% 0.56%
- -------------------------------------------------------------------------------------------------
Fidelity VIP High Income
Portfolio(1) 0.58% 0.11% 0.69%
- -------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund (R)
Portfolio 0.58% 0.07% 0.65%
- -------------------------------------------------------------------------------------------------
Fidelity VIP II Index
500 Portfolio(1) 0.24% 0.04% 0.28%
- -------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth
Portfolio(1) 0.65% 0.02% 0.67%
- -------------------------------------------------------------------------------------------------
Janus Aspen Capital Appreciation
Portfolio(1) 0.65% 0.04% 0.69%
- -------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio(1) 0.65% 0.02% 0.67%
- -------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth
Portfolio(1) 0.65% 0.05% 0.70%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) See Notes to fees and expense table
P R E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S P R O S P E C T U S 35
-----------------------
<PAGE>
Notes to fees and expense table
Guardian VC Asset Allocation Fund. Expenses do not include expenses of the
underlying funds in which the Asset Allocation Fund invests its assets.
Including the expense of the underlying funds, the Fund's total expenses would
be 0.98%.
The Guardian Bond Fund, Inc. Expenses do not include interest expense. If
interest expense were included, total expenses would be 0.57%.
The Guardian VC 500 Index Fund. Expenses are based upon expenses for the fiscal
year ended December 31, 1999, restated to reflect a reduction in the management
fee for the Fund. Expenses for the year ended December 31, 1999 were 0.29% after
applicable waivers and expense reimbursements, and 0.36% before applicable
waivers and expense reimbursements.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund. Total
expenses have been grossed up to include custody credit arrangements. However,
the credit received does not affect the funds' total expenses.
MFS Emerging Growth Series, MFS Total Return Series, MFS New Discovery Series,
MFS Research Series and MFS Bond Series and MFS Growth With Income Series. All
of the MFS funds have expense offset arrangements which reduce their custodian
fees based upon the amount of cash maintained by each fund with its custodian.
The "Tota1 expenses" in the table do not take into account this expense
reduction and are therefore higher than the actual expenses of each fund.
The expenses shown for MFS New Discovery Series reflect an agreement by the
Fund's adviser to bear expenses, subject to reimbursement by the Fund, such that
the Fund's "Other expenses" will not exceed 0.25% of the Fund's average daily
net assets during 1999. Reimbursement by the Fund will be accomplished by the
payment of an expense reimbursement fee by the Fund to the adviser, subject to
the maximum 0.25% described above. Effective May 1, 2000, the adviser has
contractually agreed, subject to reimbursement, to bear expenses for the New
Dicovery Series such that the New Discovery Series' "Other expenses" (after
taking into effect expense offset arrangements referred to above) will not
exceed 0.15%. This arrangement will continue until at least May 1, 2001, unless
changed with the consent of the board of trustees which oversees the Series.
Subject to reimbursement by the Series, the adviser has voluntarily agreed,
under a temporary expense reimbursement agreement, to pay all of its operating
expenses exclusive of the management fee. In consideration, the Series pays the
adviser a fee not greater than 0.40% of average daily net assets. To the extent
that actual expenses were over this limitation the total expenses for the year
ended December 31, 1999 would have been 1.06% for the Bond Series. 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 expense for the Bond
Series are shown as 1.01%.
Effective May 1, 2000, the advisor has contractually agreed, subject to
reimbursement, to bear expenses for the Bond Series such that the Bond Series'
"Other expenses" (after taking into effect expense offset arrangements referred
to above) will not exceed 0.15%. This arangement will continue until at least
May 1, 2001, unless changed with the consent of the board of trustees which
oversees the Series.
Please see the Fund's prospectus for a complete explanation of the Fund's fees
and expenses.
Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP II Index 500 Portfolio, and Fidelity VIP II Contrafund
Portfolio. A portion of the brokerage commissions that certain funds pay was
used to reduce fund expenses. In addition, through arrangements with certain
funds, or FMR on behalf of certain funds, custodian credits realized as a
result of uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. Without these reductions, the total operating
expenses presented in the table would have been 0.57% for Equity-Income
Portfolio, 0.67% for Contrafund Portfolio, and 0.69% for Growth Opportunities
Portfolio.
FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during the
period. Without this reimbursement, the Portfolios' management fee, other
expenses and total expenses would have been 0.24%, 0.10%, 0.34%.
Janus Aspen Aggressive Growth Portfolio, Janus Aspen Capital Appreciation
Portfolio, Janus Aspen Growth Portfolio, and Janus Aspen Worldwide Growth
Portfolio. Expenses are based upon expenses for the fiscal year ended December
31, 1999, restated to reflect a reduction in the management fee for these
Portfolios. All expenses are shown without the effect of expense offset
arrangements.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund. 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, 1999, we were reimbursed $857,868 by
Value Line Strategic Asset Management Trust, and $586,401 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, AIM,
Fidelity and Janus 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 E M I U M S, D E D U C T I O N S
36 P R O S P E C T U S A N D C H A R G E S
- ----------------------
<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 31 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.
P R E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S P R O S P E C T U S 37
-----------------------
<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.
- ----------------------
38 P R O S P E C T U S A L L O C A T I O N O P T I O N S
- ----------------------
<PAGE>
Summary of fund objectives and policies
Fund Investment objective Typical investments
- --------------------------------------------------------------------------------
Guardian Stock Fund Long-term growth of capital U.S. common stocks
- --------------------------------------------------------------------------------
The Guardian VC Long-term total investment Shares of the Guardian
Asset Allocation Fund return consistent with Stock Fund, The Guardian
moderate investment risk Bond Fund, and The
Guardian Cash Fund
- --------------------------------------------------------------------------------
The Guardian VC 500 Seeks to match the Common Stocks of companies
Index Fund investment performance of in the S&P Index, which
the Standard & Poor's 500 emphasizes large U.S.
Corporate Stock Price Index Companies
("the S&P Index")
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
-----------------------
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>
Fund Investment objective Typical investments
- --------------------------------------------------------------------------------
MFS New Discovery To seek capital appreciation Equity securities of
Series companies that offer
superior prospects for
growth, both U.S. and
foreign
- --------------------------------------------------------------------------------
MFS Research Series Long-term growth of capital Equity securities of
and future income companies that offer
believed to possess better
than average prospects for
long-term growth
- --------------------------------------------------------------------------------
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; mortgage-
protect shareholders' backed and asset-backed
capital securities; commercial
paper; repurchase
agreements; derivative
securities; foreign
securities; 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. Global High current income; growth Common and preferred
Utilities Fund of capital as a secondary stocks of domestic or
objective foreign public utilities
- --------------------------------------------------------------------------------
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 II Long-term capital U.S. and foreign common
Contrafund Portfolio appreciation stocks of companies
believed to be undervalued
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Janus Aspen Aggressive Long-term growth of capital Equity securities of
Growth Portfolio medium-sized companies
- --------------------------------------------------------------------------------
Janus Aspen Capital Long-term growth of capital Equity securities of
Appreciation companies of any size
Portfolio
- --------------------------------------------------------------------------------
Janus Aspen Growth Long-term growth of capital Common stocks of issuers of
Portfolio in a manner consistent with any size
preservation of capital
- --------------------------------------------------------------------------------
Janus Aspen Worldwide Long-term growth of capital Common stocks of foreign
Growth Portfolio in a manner consistent with and U.S. issuers; usually
preservation of capital invests in at least five
countries, including the
U.S.
- --------------------------------------------------------------------------------
- ----------------------
40 P R O S P E C T U S A L L O C A T I O N O P T I O N S
- ----------------------
<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 under the policy. 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, 1999. 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, 1999
----------------------------------
10 Years or
Fund name since inception,
and inception date 1 Year 5 Years if less
- -------------------------------------------------------------------------------
The Guardian Stock Fund (1)
(4/13/83) 31.17% 29.48% 20.04%
- -------------------------------------------------------------------------------
The Guardian VC 500 Index Fund
9/13/99 N/A N/A 6.38% *
- -------------------------------------------------------------------------------
The Guardian Small Cap
Stock Fund
(7/16/97) 35.04% N/A 16.25% *
- -------------------------------------------------------------------------------
The Guardian Bond Fund (1)
(5/1/83) -0.84% 7.16% 7.27%
- -------------------------------------------------------------------------------
The Guardian VC Asset Allocation Fund
(9/13/99) N/A N/A 8.67% *
- -------------------------------------------------------------------------------
Baillie Gifford
International Fund
(2/8/91) 39.11% 19.35% 16.01% *
- -------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund
(10/17/94) 72.30% 9.76% 6.71% *
- -------------------------------------------------------------------------------
Value Line Centurion Fund
(11/15/83) 28.23% 26.67% 19.48%
- -------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
(10/1/87) 24.32% 22.24% 16.94%
- -------------------------------------------------------------------------------
Gabelli Capital Asset Fund (2)
(5/1/95) 19.81% N/A 19.49% *
- -------------------------------------------------------------------------------
AIM V.I. Capital
Appreciation Fund (3)
(5/5/93) 44.61% 25.59% 22.33% *
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund (3)
(5/2/94) 33.56% 21.87% 18.45% *
- -------------------------------------------------------------------------------
AIM V.I. Value Fund (3)
(5/5/93) 29.90% 27.23% 23.07% *
- --------------------------------------------------------------------------------
-----------------------
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 41
-----------------------
<PAGE>
Years ended December 31, 1999
----------------------------------
10 Years or
Fund name since inception,
and inception date 1 Year 5 Years if less
- -------------------------------------------------------------------------------
Fidelity VIP High Income
Portfolio (4) (9/19/85) 8.25% 10.90% 12.44%
- --------------------------------------------------------------------------------
Fidelity VIP II Index
500 Portfolio (4)
(8/27/92) 20.52% 28.16% 21.07% *
- --------------------------------------------------------------------------------
Fidelity VIP II Contrafund
Portfolio (4)
(1/3/95) 24.25% N/A 27.73% *
- --------------------------------------------------------------------------------
Fidelity VIP Equity-
Income Portfolio (4)
(10/9/86) 6.33% 18.61% 14.49%
- --------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio (4)
(1/3/95) 4.27% N/A 21.51% *
- --------------------------------------------------------------------------------
American Century VP
Value Fund
(5/1/96) -0.85% N/A 11.10% *
- --------------------------------------------------------------------------------
American Century
VP International Fund
(5/1/94) 64.04% 24.28% 20.07% *
- --------------------------------------------------------------------------------
Janus Aspen Aggressive Growth
Portfolio (5)
(9/13/93) 125.40% 36.23% 34.42% *
- --------------------------------------------------------------------------------
Janus Aspen Capital Appreciation
Portfolio (5)
(5/1/97) 67.00% N/A 57.18% *
- --------------------------------------------------------------------------------
Janus Aspen Growth Portfolio (5)
(9/13/93) 43.98% 29.89% 24.28% *
- --------------------------------------------------------------------------------
Janus Aspen Worldwide Growth
Portfolio (5)
(9/13/93) 64.45% 33.60% 29.71% *
- --------------------------------------------------------------------------------
MFS Emerging Growth Series (6)
(7/24/95) 76.71% N/A 36.44% *
- -------------------------------------------------------------------------------
MFS Growth With Income Series (6)
(10/9/95) 6.69% N/A 21.12% *
- -------------------------------------------------------------------------------
MFS New Discovery Series (6)
(5/1/98) 73.41% N/A 40.91% *
- -------------------------------------------------------------------------------
MFS Bond Series (6)
(10/24/95) -1.56% N/A 4.82% *
- -------------------------------------------------------------------------------
MFS Research Series (6)
(7/26/95) 24.05% N/A 22.86% *
- -------------------------------------------------------------------------------
MFS Total Return Series (6)
(1/3/95) 3.08% N/A 15.42% *
- -------------------------------------------------------------------------------
* since inception
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, transaction deductions or
any deductions from the Separate Account. Including the effects of these
deductions reduces returns under the policy. 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 AIM V.I. Value Fund, AIM V.I. Capital Appreciation
Fund and AIM V.I. Global Utilities Fund reflect the effects of fee waivers
and/or expense offset arrangements. In the absence of such arrangements
total returns would have been lower.
(4) Total returns for the Fidelity VIP III Growth Opportunities, Fidelity VIP
Equity-Income, Fidelity VIP II Contrafund, 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.
(5) Total returns for Janus Aspen Aggressive Growth, Janus Aspen Capital
Appreciation, Janus Aspen Growth and Janus Aspen Worldwide Growth
Portfolios reflect the effects of fee waivers and/or expense offset
arrangements. In the absence of such arrangements total returns would have
been lower.
(6) Total returns for the MFS Growth With Income Series, Emerging Growth
Series, New Discovery Series, Research 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,
New Discovery Series, Research Series, 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.
- ----------------------
42 P R O S P E C T U S A L L O C A T I O N O P T I O N S
- ----------------------
<PAGE>
The funds' investment advisers
All of the funds' investment advisers are registered with the SEC 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, The Guardian Cash Fund, The Guardian VC 500 Index Fund and The Guardian VC
Asset Allocation 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, LLC
Gabelli Capital Asset Fund is managed by GISC, which has appointed Gabelli
Funds, LLC as the investment adviser to the Fund. The adviser has its principal
offices at One Corporate Center, Rye, New York 10580. No separate or additional
fee is paid by the Fund to the adviser.
-----------------------
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>
Massachusetts Financial Services Company
MFS Growth With Income Series, MFS Emerging Growth Series, MFS Bond Series, MFS
New Discovery Series, MFS Researh 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, AIM V.I. Global Utilities 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, Fidelity VIP II Contrafund
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.
Janus Capital Corporation
Janus Aspen Growth Portfolio, Janus Aspen Aggressive Growth Portfolio, Janus
Aspen Capital Appreciation Portfolio and Janus Aspen Worldwide Growth Portfolio
are advised by Janus Capital Corporation, 100 Fillmore Street, Denver, Colorado
80206.
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44 P R O S P E C T U S A L L O C A T I O N O P T I O N S
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Fixed-rate option
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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.
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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 45
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SPECIAL FEATURES OF YOUR POLICY
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Policy loans
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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.
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46 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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Interest on policy loans
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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.
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.
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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 47
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Decreasing the face amount
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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 reduce the
initial face amount.
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48 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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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 have tax consequences including
possibly causing 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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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 49
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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, to calculate premium charges
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 exceeds 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 according to 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.
Increasing the face amount of your policy may have tax consequences, including
possibly causing your policy to be considered a modified endowment contract.
The tax consequences associated with your policy being classified as a modified
endowment contract are discussed in Tax considerations.
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50 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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Partial withdrawals
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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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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 51
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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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52 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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Surrendering your policy
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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
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Male insured, Age 35
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Preferred Plus Underwriting Class
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Face Amount $250,000
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Annual Policy Premium $2,007.50
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Assuming 6% hypothetical gross return: (4.29% net return)
(See Appendix A)
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Policy Account Value $8,217.54
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Surrender Charge (2,750)
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Policy Debt 0
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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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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 53
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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. 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.
Written requests that are received after 4:00 p.m. New York time will be
effective on the next business day. 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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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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Dollar cost averaging
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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, but 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, or
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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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),
or
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 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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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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Exchanging a policy
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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.
EXCHANGING A POLICY
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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<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.
FIXED BENEFIT PAID-UP INSURANCE OPTION (Available in New York only)
On any policy anniversary, you may elect the Fixed Benefit Paid-Up Insurance
Option. To be eligible for this option we must receive your written request to
elect this option at our executive office on or within 30 days prior to a
policy anniversary, the insured must be living, and the policy must have a cash
surrender value.
If you elect this option, we will transfer your policy account value to the
general account. If any policy debt is outstanding, you may apply a portion of
the policy account value to repay the policy debt. Any policy debt still
outstanding on the date this option takes effect will contiune as policy debt
under this option with the same rate of interest. You may not make further
premium payments under this option and any riders attached to the policy will be
cancelled.
This option provides a level death benefit. The death benefit will be the amount
the net cash surrender value, if policy debt is being repaid, otherwise the cash
surrender value, will purchase as a net single premium at the insured's attained
age, sex and underwriting class.
The Fixed Benefit Paid-Up Insurance Option will have a cash value and a policy
loan value. We will send you policy pages reflecting the table of guaranteed
values. The death benefit under this option will be reduced by the amount of any
outstanding policy debt. The cash value and the death benefit will be reduced by
the amount of any outstanding policy debt. The cash value and the death benefit
will be reduced after a partial withdrawal. The new death benefit will be the
current death benefit multiplied by the ratio of the cash value after the
partial withdrawal to the cash value before the partial withdrawal. No monthly
administration charges will be deducted when this option is in effect. We will
send you policy pages reflecting the new values.
Payment options
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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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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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TAX CONSIDERATIONS
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Tax status
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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
section 7702 of 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 the
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. If you are interested in purchasing a policy,
taking a policy loan or effecting policy transactions, you should consult a
legal or tax adviser regarding your particular circumstances.
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 Section 7702 of the Internal Revenue Code. Guidance as to
how these requirements are to be applied is limited. Accordingly, there is some
uncertainty about the application of Section 7702 to a policy, particularly so
with respect to policies issued on an insured who does not meet our standard
insurance requirements. 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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Treatment of policy proceeds
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We believe that the death benefits under your policy should generally 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 generally 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 - which is
generally equal to 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. 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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If your policy is considered a modified endowment contract:
o all distributions other than death benefits including partial withdrawals,
surrenders, assignments and policy loans, will be treated first as
distributions of gain taxable as ordinary income; and as a tax free
recovery of basis only after all the gain in the contract has been
distributed
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 attempt 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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Transfer taxes
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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 value of
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 on the death benefit.
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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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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Possible tax law changes
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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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RIGHTS AND RESPONSIBILITIES
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Assigning policy rights
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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, or
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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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
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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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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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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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OTHER INFORMATION
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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 we paid through GISC a total of $270,841 in 1998 and $614,766 in
1999 for the sale of products issued by the Separate Account. 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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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, AIM, American Century and Janus 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.
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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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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>
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.
------------------------
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 71
------------------------
<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.
We are a member of the Insurance Marketplace Standards Association ("IMSA"), and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards for sales and service of individually sold life insurance and
annuities.
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.
- -----------------------
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
- -----------------------
<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 STATEMENTS
The GIAC 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.
FINANCIAL AND ACTUARIAL EXPERTS
The consolidated financial statements of GIAC as of December 31, 1999 and
December 31, 1998 and for each of the three years in the period ended 1999 and
financial statements of the Separate Account as of December 31, 1999 and for the
period ended December 31, 1999 and 1998 included in this prospectus have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing. PricewaterhouseCoopers LLP is located at 1177 Avenue of the Americas,
New York, New York 10036.
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.
------------------------
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>
- -----------------------
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
- -----------------------
<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 Variable Contract Funds, Inc. (2)
The Guardian Bond Fund, (3) The Guardian Cash Fund, (4) The Park Avenue
Portfolio (a series trust that issues its shares in nine 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; Vice President and Secretary, Guardian Investor Services Corporation,
Secretary, Guardian Asset Management Corporation, Guardian Baillie Gifford Limited,
Park Avenue Securities LLC 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, Park Avenue Securities LLC 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,
Park Avenue Securities LLC 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, Park Avenue Securities LLC
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, Park Avenue Securities LLC and Guardian Asset Management Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------
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 75
------------------------
<PAGE>
<TABLE>
<CAPTION>
Name Title Business History
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frank J. Jones Executive, Vice Executive Vice President and Chief Investment Officer, The Guardian Life
President, Chief Insurance Company of America; Director, Guardian Investor Services Corporation,
Investment Guardian Baillie Gifford Limited, Park Avenue Securities LLC; Director and President
Officer, and Guardian Asset Management Corporation. Executive Vice President, GIAC Funds, Inc. Officer
Director 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.
and Director Director, Guardian Asset Management Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce C. Long Director and Senior Vice President, The Guardian Life Insurance Company of America, 9/99 - present;
Executive Vice President, New England Annuities, 2/94 - 6/99. Director and President, Guardian Investor
President, Services Corporation; Director, Guardian Baillie Gifford Limited.
Equity
Securities
- ------------------------------------------------------------------------------------------------------------------------------------
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, Park Avenue Securities LLC,
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 and Park Avenue Securities LLC.
- ------------------------------------------------------------------------------------------------------------------------------------
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; Director of Park Avenue Securities LLC, 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.
- -----------------------
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
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
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 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 the amount of any policy segments in force at the
time of determination. 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.
------------------------
S P E C I A L T E R M S P R O S P E C T U S 77
------------------------
<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 current 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.
- -----------------------
78 P R O S P E C T U S S P E C I A L T E R M S
- -----------------------
<PAGE>
Guardian Separate Account M
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
----------------------------------------------------------
INVESTMENT DIVISIONS
----------------------------------------------------------
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
----------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ......................... 95,770 8,368 64,105 16,514
Net asset value per share (NAV) ................................... 55.20 11.41 10.00 17.48
----------- ----------- ----------- -----------
Total Assets (Shares x NAV) .................................... $ 5,286,515 $ 95,480 $ 641,051 $ 288,672
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ............ 25,969 708 5,158 1,539
----------- ----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ........................................... $ 5,260,546 $ 94,772 $ 635,893 $ 287,133
- -----------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
Number of units outstanding ......................................... 347,119 9,099 59,044 22,296
Unit value .......................................................... 15.15 10.42 10.77 12.88
FIFO Cost ........................................................... $ 4,914,230 $ 100,978 $ 641,051 $ 293,725
<CAPTION>
-------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------
Baillie
Baillie Gifford Guardian
Gifford Emerging Small Cap
International Markets Stock
-------------------------------------------
<S> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ......................... 13,848 1,848 14,842
Net asset value per share (NAV) ................................... 26.78 12.73 17.18
----------- ----------- -----------
Total Assets (Shares x NAV) .................................... $ 370,846 $ 23,529 $ 254,993
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ............ 1,856 157 2,524
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ........................................... $ 368,990 $ 23,372 $ 252,469
- ---------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
Number of units outstanding ......................................... 23,585 1,794 20,891
Unit value .......................................................... 15.65 13.03 12.09
FIFO Cost ........................................................... $ 309,766 $ 17,106 $ 183,570
<CAPTION>
-------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------
Value Line
Strategic
Value Line Asset MFS Growth
Centurion Management with Income
-------------------------------------------
<S> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ......................... 13,498 30,902 19,637
Net asset value per share (NAV) ................................... 36.09 29.39 21.31
----------- ----------- -----------
Total Assets (Shares x NAV) .................................... $ 487,133 $ 908,217 $ 418,474
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ............ 1,890 3,679 2,557
----------- ----------- -----------
- -------------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ........................................... $ 485,243 $ 904,538 $ 415,917
- -------------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
Number of units outstanding ......................................... 31,172 60,096 33,583
Unit value .......................................................... 15.57 15.05 12.38
FIFO Cost ........................................................... $ 426,574 $ 832,052 $ 396,565
</TABLE>
- --------------------------------------------------------------------------------
THE GUARDIAN SEPARATE ACCOUNT M
- -------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<CAPTION>
----------------------------------------------------------
INVESTMENT DIVISIONS
----------------------------------------------------------
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
----------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ........................................... $ 14,868 $ 5,047 $ 19,982 $ 290
Expenses -- Note 3:
Mortality and expense risk charges ............................. 27,978 668 3,974 1,452
----------- ----------- ----------- -----------
Net investment income/(expense) ................................... (13,110) 4,379 16,008 (1,162)
----------- ----------- ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments .............. 83,399 (968) -- 8,574
Reinvested realized gain distributions ......................... 643,844 217 -- 23,440
----------- ----------- ----------- -----------
Net realized gain/(loss) on investments ........................... 727,243 (751) -- 32,014
Net change in unrealized appreciation/(depreciation) of investments 343,343 (4,543) -- (5,366)
----------- ----------- ----------- -----------
Net realized and unrealized gain/(loss) from investments ............ 1,070,586 (5,294) -- 26,648
----------- ----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations ..... $ 1,057,476 $ (915) $ 16,008 $ 25,486
- -----------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
--------------------------------------------
INVESTMENT DIVISIONS
--------------------------------------------
Baillie
Baillie Gifford Guardian
Gifford Emerging Small Cap
International Markets Stock
--------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ........................................... $ 983 $ -- $ 329
Expenses -- Note 3:
Mortality and expense risk charges ............................. 1,783 149 2,114
------------ ----------- -----------
Net investment income/(expense) ................................... (800) (149) (1,785)
------------ ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments .............. 3,333 1,551 5,236
Reinvested realized gain distributions ......................... 24,062 -- --
------------ ----------- -----------
Net realized gain/(loss) on investments ........................... 27,395 1,551 5,236
Net change in unrealized appreciation/(depreciation) of investments 60,408 6,392 64,873
------------ ----------- -----------
Net realized and unrealized gain/(loss) from investments ............ 87,803 7,943 70,109
------------ ----------- -----------
- -------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations ..... $ 87,003 $ 7,794 $ 68,324
- -------------------------------------------------------------------------------------------------------------------------
============ =========== ===========
<CAPTION>
-------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------
Value Line
Strategic
Value Line Asset MFS Growth
Centurion Management with Income
-------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ........................................... $ 402 $ 3,407 $ 690
Expenses -- Note 3:
Mortality and expense risk charges ............................. 1,803 3,540 2,427
----------- ----------- -----------
Net investment income/(expense) ................................... (1,401) (133) (1,737)
----------- ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments .............. 7,366 11,855 6,419
Reinvested realized gain distributions ......................... 10,812 17,574 829
----------- ----------- -----------
Net realized gain/(loss) on investments ........................... 18,178 29,429 7,248
Net change in unrealized appreciation/(depreciation) of investments 53,512 67,484 16,112
----------- ----------- -----------
Net realized and unrealized gain/(loss) from investments ............ 71,690 96,913 23,360
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations ..... $ 70,289 $ 96,780 $ 21,623
- ---------------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
</TABLE>
See notes to 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 79 & 80
----------------------------
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Separate Account M
- -------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------
INVESTMENT DIVISIONS
-----------------------------------------------------------
MFS American
Emerging MFS MFS Century VP
Growth Total Return Bond Value
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 .................. 12,554 4,638 306 5,073
Net asset value per share (NAV) ............................ 37.94 17.75 10.92 5.95
----------- ----------- ----------- -----------
Total Assets (Shares x NAV) .............................. $ 476,316 $ 82,328 $ 3,340 $ 30,185
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ...... 1,952 323 20 204
----------- ----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ..................................... $ 474,364 $ 82,005 $ 3,320 $ 29,981
- ------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
Number of units outstanding ................................... 21,994 7,334 323 3,209
Unit value .................................................... 21.57 11.18 10.28 9.34
FIFO cost ..................................................... $ 338,230 $ 82,421 $ 3,391 $ 32,351
<CAPTION>
-----------------------------------------------------------
INVESTMENT DIVISIONS
-----------------------------------------------------------
Fidelity
American VIP III Fidelity Fidelity
Century VP Growth VIP Equity- VIP High
International Opportunities Income Income
------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 .................. 12,284 16,427 4,714 4,704
Net asset value per share (NAV) ............................ 12.50 23.15 25.71 11.31
----------- ----------- ----------- -----------
Total Assets (Shares x NAV) .............................. $ 153,549 $ 380,288 $ 121,202 $ 53,200
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ...... 770 1,483 508 261
----------- ----------- ----------- -----------
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ..................................... $ 152,779 $ 378,805 $ 120,694 $ 52,939
- ----------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
Number of units outstanding ................................... 8,977 30,658 10,634 5,347
Unit value .................................................... 17.02 12.36 11.35 9.90
FIFO cost ..................................................... $ 110,983 $ 372,598 $ 121,087 $ 52,402
<CAPTION>
-------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------
Fidelity AIM V.I.
VIP II Capital AIM V.I.
Index 500 Appreciation Value
-------------------------------------------
<S> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 .................. 10,275 3,903 23,424
Net asset value per share (NAV) ............................ 167.41 35.58 33.50
----------- ----------- -----------
Total Assets (Shares x NAV) .............................. $ 1,720,059 $ 138,858 $ 784,704
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ...... 8,357 987 2,539
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ..................................... $ 1,711,702 $ 137,871 $ 782,165
- ---------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
Number of units outstanding ................................... 117,602 8,317 47,819
Unit value .................................................... 14.56 16.58 16.36
FIFO cost ..................................................... $ 1,554,022 $ 101,701 $ 702,293
</TABLE>
- --------------------------------------------------------------------------------
The Guardian Separate Account M
- -------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------
INVESTMENT DIVISIONS
-----------------------------------------------------------
MFS American
Emerging MFS MFS Century VP
Growth Total Return Bond Value
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ..................................... $ -- $ 423 $ 48 $ 158
Expenses -- Note 3:
Mortality and expense risk charges ....................... 1,922 310 20 181
----------- ----------- ----------- -----------
Net investment income/(expense) ............................ (1,922) 113 28 (23)
----------- ----------- ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ........ 5,800 196 (41) (796)
Reinvested realized gain distributions ................... -- 785 3 1,495
----------- ----------- ----------- -----------
Net realized gain/(loss) on investments .................... 5,800 981 (38) 699
Net change in unrealized appreciation/(depreciation)
of investments ........................................... 135,482 (443) (50) (2,249)
----------- ----------- ----------- -----------
Net realized and unrealized gain/(loss) from investments ...... 141,282 538 (88) (1,550)
----------- ----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 139,360 $ 651 $ (60) $ (1,573)
- ------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
------------------------------------------------------------
INVESTMENT DIVISIONS
------------------------------------------------------------
Fidelity
American VIP III Fidelity Fidelity
Century VP Growth VIP Equity- VIP High
International Opportunities Income Income
------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ..................................... $ -- $ 529 $ 386 $ 418
Expenses -- Note 3:
Mortality and expense risk charges ....................... 759 1,430 483 247
----------- ----------- ----------- -----------
Net investment income/(expense) ............................ (759) (901) (97) 171
----------- ----------- ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ........ 1,299 2,491 1,218 (60)
Reinvested realized gain distributions ................... -- 988 853 15
----------- ----------- ----------- -----------
Net realized gain/(loss) on investments .................... 1,299 3,479 2,071 (45)
Net change in unrealized appreciation/(depreciation)
of investments ........................................... 42,012 4,979 (957) 706
----------- ----------- ----------- -----------
Net realized and unrealized gain/(loss) from investments ...... 43,311 8,458 1,114 661
----------- ----------- ----------- -----------
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 42,552 $ 7,557 $ 1,017 $ 832
- ----------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
-------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------
Fidelity AIM V.I.
VIP II Capital AIM V.I.
Index 500 Appreciation Value
-------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ..................................... $ 1,721 $ 88 $ 1,769
Expenses -- Note 3:
Mortality and expense risk charges ....................... 8,131 953 2,454
----------- ----------- -----------
Net investment income/(expense) ............................ (6,410) (865) (685)
----------- ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ........ 19,823 2,298 12,426
Reinvested realized gain distributions ................... 1,168 2,732 9,250
----------- ----------- -----------
Net realized gain/(loss) on investments .................... 20,991 5,030 21,676
Net change in unrealized appreciation/(depreciation)
of investments ........................................... 153,470 34,478 78,409
----------- ----------- -----------
Net realized and unrealized gain/(loss) from investments ...... 174,461 39,508 100,085
----------- ----------- -----------
- --------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 168,051 $ 38,643 $ 99,400
- --------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
</TABLE>
See notes to financial statements
- --------------------------------------------------------------------------------
- ----------------------------
81 & 82 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 Separate Account M
- -------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
---------------------------------------------------------
INVESTMENT DIVISIONS
---------------------------------------------------------
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
---------------------------------------------------------
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
<S> <C> <C> <C> <C>
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
Net 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
- ------------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (13,110) $ 4,379 $ 16,008 $ (1,162)
Net realized gain/(loss) from sale of investments ................. 83,399 (968) -- 8,574
Reinvested realized gain distributions ............................ 643,844 217 -- 23,440
Change in unrealized appreciation/(depreciation) of investments ... 343,343 (4,543) -- (5,366)
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 1,057,476 (915) 16,008 25,486
----------- ----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 3,508,724 149,934 1,429,632 223,295
Transfer on account of other terminations ......................... (15,032) (218) -- (2,706)
Transfer of policy loans .......................................... (5,097) -- -- --
Transfer of cost of insurance and policy fees -- Note 3 ........... (795,328) (15,974) (109,372) (44,004)
Transfer between investment divisions ............................. 238,234 (64,902) (1,244,315) 9,896
Transfers -- other ................................................ 8,178 (356) (2,341) 732
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 2,939,679 68,484 73,604 187,213
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 3,997,155 67,569 89,612 212,699
Net Assets at December 31, 1998 ................................... 1,263,391 27,203 546,281 74,434
----------- ----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ......................... $ 5,260,546 $ 94,772 $ 635,893 $ 287,133
- ------------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
--------------------------------------------
INVESTMENT DIVISIONS
--------------------------------------------
Baillie
Baillie Gifford Guardian
Gifford Emerging Small Cap
International Markets Stock
--------------------------------------------
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
<S> <C> <C> <C>
Net investment income/(expense) ................................... $ 27 $ (8) $ (315)
Net realized gain/(loss) from sale of investments ................. 873 (14) (10,314)
Reinvested realized gain distributions ............................ 2,197 -- 310
Net change in unrealized appreciation/(depreciation) of investments 673 31 6,550
----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 3,770 9 (3,769)
----------- ----------- -----------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 52,569 1,770 136,122
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)
Transfer between investment divisions ............................. 3,203 1,639 13,651
Transfers -- other ................................................ (237) (8) (978)
----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 47,944 3,114 119,944
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 51,714 3,123 116,175
Net Assets at December 31, 1997 ................................... -- -- --
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 51,714 $ 3,123 $ 116,175
- ---------------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (800) $ (149) $ (1,785)
Net realized gain/(loss) from sale of investments ................. 3,333 1,551 5,236
Reinvested realized gain distributions ............................ 24,062 -- --
Change in unrealized appreciation/(depreciation) of investments ... 60,408 6,392 64,873
----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 87,003 7,794 68,324
----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 260,696 16,035 171,897
Transfer on account of other terminations ......................... (445) (60) (1,204)
Transfer of policy loans .......................................... -- -- --
Transfer of cost of insurance and policy fees -- Note 3 ........... (50,164) (3,999) (51,238)
Transfer between investment divisions ............................. 18,717 86 (51,809)
Transfers -- other ................................................ 1,469 393 324
----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 230,273 12,455 67,970
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 317,276 20,249 136,294
Net Assets at December 31, 1998 ................................... 51,714 3,123 116,175
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ......................... $ 368,990 $ 23,372 $ 252,469
- ---------------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
<CAPTION>
-------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------
Value Line
Strategic
Value Line Asset MFS Growth
Centurion Management with Income
-------------------------------------------
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
<S> <C> <C> <C>
Net investment income/(expense) ................................... $ (86) $ (51) $ (129)
Net realized gain/(loss) from sale of investments ................. 1,739 3,383 776
Reinvested realized gain distributions ............................ 24 252 --
Net change in unrealized appreciation/(depreciation) of investments 7,047 8,681 5,797
----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 8,724 12,265 6,444
----------- ----------- -----------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 50,783 127,748 82,155
Transfer on account of other terminations ......................... -- -- (160)
Transfer of policy loans .......................................... -- -- --
Transfer of cost of insurance and policy fees -- Note 3 ........... (6,570) (12,956) (11,738)
Transfer between investment divisions ............................. 8,525 12,142 15,099
Transfers -- other ................................................ 636 576 390
----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 53,374 127,510 85,746
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 62,098 139,775 92,190
Net Assets at December 31, 1997 ................................... -- -- --
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 62,098 $ 139,775 $ 92,190
- ---------------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (1,401) $ (133) $ (1,737)
Net realized gain/(loss) from sale of investments ................. 7,366 11,855 6,419
Reinvested realized gain distributions ............................ 10,812 17,574 829
Change in unrealized appreciation/(depreciation) of investments ... 53,512 67,484 16,112
----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 70,289 96,780 21,623
----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 346,483 653,118 337,239
Transfer on account of other terminations ......................... (114) (1,006) (1,117)
Transfer of policy loans .......................................... -- -- --
Transfer of cost of insurance and policy fees -- Note 3 ........... (64,283) (101,528) (85,058)
Transfer between investment divisions ............................. 71,591 119,679 48,057
Transfers -- other ................................................ (821) (2,280) 2,983
----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 352,856 667,983 302,104
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 423,145 764,763 323,727
Net Assets at December 31, 1998 ................................... 62,098 139,775 92,190
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ......................... $ 485,243 $ 904,538 $ 415,917
- ---------------------------------------------------------------------------------------------------------------------------
=========== =========== ===========
</TABLE>
See notes to financial statements
- --------------------------------------------------------------------------------
----------------------------
F I N A N C I A L S T A T E M E N T S 83 & 84 P R O S P E C T U S
----------------------------
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Separate Account M
- -------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------
INVESTMENT DIVISIONS
-----------------------------------------------------------
MFS American
Emerging MFS MFS Century VP
Growth Total Return Bond Value
-----------------------------------------------------------
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
<S> <C> <C> <C> <C>
Net investment income/(expense) ....................... $ (29) $ (12) $ -- $ (24)
Net realized gain/(loss) from sale of investments ..... (28) 38 -- 26
Reinvested realized gain distributions ................ -- -- -- --
Net change in unrealized appreciation/(depreciation)
of investments ...................................... 2,604 350 -- 83
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ..... 2,547 376 -- 85
----------- ----------- ----------- -----------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments .......................... 45,426 9,837 45 10,883
Transfer on account of other terminations ............. -- -- -- --
Transfer of policy loans .............................. -- -- -- --
Transfer of cost of insurance and policy fees -- Note 3 (2,806) (1,099) (32) (997)
Transfer between investment divisions ................. 1,639 -- -- 4,899
Transfers -- other .................................... 249 7 -- 324
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions ...... 44,508 8,745 13 15,109
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .................. 47,055 9,121 13 15,194
Net Assets at December 31, 1997 ....................... -- -- -- --
----------- ----------- ----------- -----------
- -------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ....................... $ 47,055 $ 9,121 $ 13 $ 15,194
- -------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ....................... $ (1,922) $ 113 $ 28 $ (23)
Net realized gain/(loss) from sale of investments ..... 5,800 196 (41) (796)
Reinvested realized gain distributions ................ -- 785 3 1,495
Change in unrealized appreciation/(depreciation
of investments ...................................... 135,482 (443) (50) (2,249)
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ..... 139,360 651 (60) (1,573)
----------- ----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments .......................... 248,229 66,482 3,396 23,819
Transfer on account of other terminations ............. -- -- -- --
Transfer of policy loans .............................. -- -- -- --
Transfer of cost of insurance and policy fees -- Note 3 (41,283) (7,778) (1,499) (7,567)
Transfer between investment divisions ................. 77,623 13,268 1,471 (119)
Transfers -- other .................................... 3,380 261 (1) 227
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions ...... 287,949 72,233 3,367 16,360
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .................. 427,309 72,884 3,307 14,787
Net Assets at December 31, 1998 ....................... 47,055 9,121 13 15,194
----------- ----------- ----------- -----------
- -------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ............. $ 474,364 $ 82,005 $ 3,320 $ 29,981
- -------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
------------------------------------------------------------
INVESTMENT DIVISIONS
------------------------------------------------------------
Fidelity
American VIP III Fidelity Fidelity
Century VP Growth VIP Equity- VIP High
International Opportunities Income Income
------------------------------------------------------------
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
<S> <C> <C> <C> <C>
Net investment income/(expense) ....................... $ (11) $ (54) $ (24) $ (15)
Net realized gain/(loss) from sale of investments ..... 13 71 (41) (34)
Reinvested realized gain distributions ................ -- -- -- --
Net change in unrealized appreciation/(depreciation)
of investments ...................................... 554 2,712 1,073 94
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ..... 556 2,729 1,008 45
----------- ----------- ----------- -----------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments .......................... 40,265 35,356 22,483 4,695
Transfer on account of other terminations ............. -- -- -- --
Transfer of policy loans .............................. -- -- -- --
Transfer of cost of insurance and policy fees -- Note 3 (1,071) (7,278) (4,679) (396)
Transfer between investment divisions ................. -- -- (37) --
Transfers -- other .................................... 27 168 90 3
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions ...... 39,221 28,246 17,857 4,302
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .................. 39,777 30,975 18,865 4,347
Net Assets at December 31, 1997 ....................... -- -- -- --
----------- ----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ....................... $ 39,777 $ 30,975 $ 18,865 $ 4,347
- ------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ....................... $ (759) $ (901) $ (97) $ 171
Net realized gain/(loss) from sale of investments ..... 1,299 2,491 1,218 (60)
Reinvested realized gain distributions ................ -- 988 853 15
Change in unrealized appreciation/(depreciation
of investments ...................................... 42,012 4,979 (957) 706
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ..... 42,552 7,557 1,017 832
----------- ----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments .......................... 51,005 388,558 105,932 39,098
Transfer on account of other terminations ............. -- (1,265) -- --
Transfer of policy loans .............................. -- -- -- --
Transfer of cost of insurance and policy fees -- Note 3 (11,422) (65,770) (18,791) (5,830)
Transfer between investment divisions ................. 29,683 17,609 13,828 14,144
Transfers -- other .................................... 1,184 1,141 (157) 348
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions ...... 70,450 340,273 100,812 47,760
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .................. 113,002 347,830 101,829 48,592
Net Assets at December 31, 1998 ....................... 39,777 30,975 18,865 4,347
----------- ----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ............. $ 152,779 $ 378,805 $ 120,694 $ 52,939
- ------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
-------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------
Fidelity AIM V.I.
VIP II Capital AIM V.I.
Index 500 Appreciation Value
-------------------------------------------
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
<S> <C> <C> <C>
Net investment income/(expense) ....................... $ (225) $ 5 $ 136
Net realized gain/(loss) from sale of investments ..... 863 414 769
Reinvested realized gain distributions ................ -- 697 1,946
Net change in unrealized appreciation/(depreciation)
of investments ...................................... 12,566 2,679 4,002
----------- ----------- -----------
Net increase/(decrease) resulting from operations ..... 13,204 3,795 6,853
----------- ----------- -----------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments .......................... 117,173 43,683 57,521
Transfer on account of other terminations ............. (64) -- --
Transfer of policy loans .............................. -- -- --
Transfer of cost of insurance and policy fees -- Note 3 (14,226) (1,644) (6,161)
Transfer between investment divisions ................. 45,095 8,524 8,524
Transfers -- other .................................... 3,862 (33) (124)
----------- ----------- -----------
Net increase/(decrease) from policy transactions ...... 151,840 50,530 59,760
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .................. 165,044 54,325 66,613
Net Assets at December 31, 1997 ....................... -- -- --
----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ....................... $ 165,044 $ 54,325 $ 66,613
- ------------------------------------------------------------------------------------------------------------
=========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ....................... $ (6,410) $ (865) $ (685)
Net realized gain/(loss) from sale of investments ..... 19,823 2,298 12,426
Reinvested realized gain distributions ................ 1,168 2,732 9,250
Change in unrealized appreciation/(depreciation
of investments ...................................... 153,470 34,478 78,409
----------- ----------- -----------
Net increase/(decrease) resulting from operations ..... 168,051 38,643 99,400
----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments .......................... 1,100,448 46,237 542,294
Transfer on account of other terminations ............. (2,384) -- --
Transfer of policy loans .............................. -- -- --
Transfer of cost of insurance and policy fees -- Note 3 (249,134) (14,664) (74,573)
Transfer between investment divisions ................. 522,634 13,550 151,091
Transfers -- other .................................... 7,043 (220) (2,660)
----------- ----------- -----------
Net increase/(decrease) from policy transactions ...... 1,378,607 44,903 616,152
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .................. 1,546,658 83,546 715,552
Net Assets at December 31, 1998 ....................... 165,044 54,325 66,613
----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ............. $ 1,711,702 $ 137,871 $ 782,165
- ------------------------------------------------------------------------------------------------------------
=========== =========== ===========
</TABLE>
See notes to financial statements
- --------------------------------------------------------------------------------
- ----------------------------
85 & 86 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 Separate Account M
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- ----------------------
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 (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, 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, Fidelity VIP II
Index 500 Portfolio, AIM V.I. Capital Appreciation Fund, and AIM V.I. Value Fund
(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 universal 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.
- --------------------------------------------------------------------------------
-----------------------
F I N A N C I A L S T A T E M E N T S 87 P R O S P E C T U S
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 (Continued)
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.
- ---------------------------------------------------------------
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 policyowner'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, 1999 mortality and expense risk deductions amounted to $62,784.
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 years ended December 31, 1999
and December 31, 1998, deductions for cost of life insurance amounted to
$968,350 and $214,586, respectively.
b) policy and administrative fees which vary with the face amount, age of
the insured or the duration of the con tract. For the years ended December 31,
1999 and December 31, 1998, these fees amounted to $850,909 and $191,687,
respectively.
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 ended December 31, 1999 was $892,074.
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, 1999
- ---------------------------------------
At December 31, 1999, net assets of the Account were as follows:
Accumulation of
Variable Universal Life Insurance
Policyowners' Accounts $ 5,980,658
Owned by GIAC 6,674,839
-----------
$12,655,497
===========
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.
- --------------------------------------------------------------------------------
- -----------------------
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 Separate Account M
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 (Continued)
- -----------------------------
Note 5 -- Purchases and Sales
- -----------------------------
During the years ended December 31, 1999 and December 31, 1998,
purchases and sales of shares of the Funds were as follows:
<TABLE>
<CAPTION>
Purchases Purchases Sales Sales
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
The Guardian Stock Fund ....................... $ 4,416,713 $ 1,545,772 $ 823,321 $ 299,129
The Guardian Bond Fund, Inc. .................. 158,341 65,669 84,592 37,580
The Guardian Cash Fund, Inc. .................. 1,882,963 848,249 1,789,376 300,783
Gabelli Capital Asset Fund .................... 278,403 78,882 67,462 4,384
Baillie Gifford International Fund ............ 302,225 67,965 46,907 17,724
Baillie Gifford Emerging Markets Fund ......... 25,459 3,420 13,003 306
The Guardian Small Cap Stock Fund ............. 171,947 150,394 103,648 30,044
Value Line Centurion Fund, Inc. ............... 404,237 81,511 40,167 28,112
Value Line Strategic Asset Management Trust ... 785,612 193,630 96,648 65,780
MFS Growth with Income Series ................. 375,074 99,728 71,450 13,982
MFS Emerging Growth Series .................... 309,251 48,857 21,302 4,349
MFS Total Return Series ....................... 80,865 9,451 7,423 706
MFS Bond Series ............................... 5,004 23 1,585 11
American Century VP Value Fund ................ 29,132 15,897 11,119 788
American Century VP International Fund ........ 86,234 40,356 15,784 1,135
Fidelity VIP III Growth Opportunities Portfolio 384,338 30,623 42,549 2,376
Fidelity VIP Equity-Income Portfolio .......... 117,810 19,924 15,758 2,067
Fidelity VIP High Income Portfolio ............ 52,383 4,638 4,190 336
Fidelity VIP II Index 500 Portfolio ........... 1,498,930 174,718 117,434 22,878
AIM V.I. Capital Appreciation Fund ............ 63,123 60,558 15,399 9,292
AIM V.I. Value Fund ........................... 699,989 72,356 72,817 10,430
----------- ----------- ----------- -----------
Total ....................................... $12,128,033 $ 3,612,621 $ 3,461,934 $ 852,192
=========== =========== =========== ===========
</TABLE>
In some instances the calculation of total assets may not agree due to
rounding.
- --------------------------------------------------------------------------------
-----------------------
F I N A N C I A L S T A T E M E N T S 89 P R O S P E C T U S
-----------------------
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
and the Contract Owners 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 Centurion, Value Line Strategic Asset Management, MFS Growth with Income,
MFS Emerging Growth, MFS Total Return, MFS Bond, American Century VP Value,
American Century VP International, Fidelity VIP III Growth Opportunities,
Fidelity VIP Equity-Income, Fidelity VIP High Income, Fidelity VIP II Index 500,
AIM V.I. Capital Appreciation and AIM V.I. Value investment divisions
(constituting The Guardian Separate Account M, "Park Avenue Variable Universal
Life") at December 31, 1999, and the results of each of their operations for the
year then ended and the changes in each of their net assets for each of the two
years then ended, in conformity with accounting principles generally accepted in
the United States. 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 audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of shares owned at December
31, 1999 by correspondence with the transfer agents of the underlying funds,
provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 20, 2000
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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>
- --------------------------------------------------------------------------------
THE GUARDIAN INSURANCE
& ANNUITY COMPANY, INC.
- --------------------------------------------------------------------------------
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
---------------------
1999 1998
-------- --------
(In millions)
<S> <C> <C>
Assets:
Bonds, available for sale at fair
value (cost $572.7 million; $538.6 million, respectively) ....... $ 554.8 $ 549.0
Affiliated mutual funds ............................................ 78.0 42.9
Joint ventures ..................................................... 0.5 0.4
Policy loans ....................................................... 80.1 72.9
Short-term investments ............................................. 7.1 --
--------- ---------
Total invested assets .............................................. 720.5 665.2
--------- ---------
Cash and cash equivalents .......................................... 63.6 18.5
Deferred acquisition costs ......................................... 357.5 313.6
Deferred software costs ............................................ 11.6 --
Uncollected and unpaid premiums .................................... 3.4 2.1
Amounts receivable from reinsurers ................................. 46.5 42.5
Investment income due and accrued .................................. 9.9 9.4
Other assets ....................................................... 5.1 3.3
Accounts receivable ................................................ 37.5 22.2
Separate account assets ............................................ 11,063.8 8,841.7
--------- ---------
Total Assets ....................................................... $12,319.4 $ 9,918.5
========= =========
Liabilities:
Future policy benefits and other policyholder liabilities .......... $ 547.9 $ 480.0
Due to parent and mutual fund affiliates ........................... 69.6 32.2
Current federal income taxes ....................................... 18.2 25.8
Deferred federal income taxes ...................................... 102.8 98.8
Accrued expenses and other liabilities ............................. 110.0 47.5
Separate account liabilities ....................................... 10,970.4 8,764.8
--------- ---------
Total Liabilities .................................................. 11,818.9 9,449.1
--------- ---------
Stockholder's equity:
Common stock, 1999 - $100 par value, 25,000 shares authorized,
issued and outstanding; 1998 - $100 par value, 20,000 shares
authorized, issued and oustanding ............................... 2.5 2.0
Additional paid-in capital ......................................... 136.9 137.4
Retained earnings .................................................. 347.9 310.6
Accumulated other comprehensive income ............................. 13.2 19.4
--------- ---------
Stockholder's equity ............................................... 500.5 469.4
--------- ---------
Total Liabilities & Stockholder's Equity ........................... $12,319.4 $ 9,918.5
========= =========
</TABLE>
See notes to consolidated financial statements.
-----------------------
F I N A N C I A L S T A T E M E N T S 91 P R O S P E C T U S
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
Revenues:
<S> <C> <C> <C>
Premiums ............................................... $ 12.0 $ 9.1 $ 3.7
Net investment income .................................. 45.4 41.4 38.7
Realized capital (losses) gains on investments ......... (1.7) 2.1 0.9
Income from brokerage operations ....................... 67.1 39.7 31.1
Administrative service fees ............................ 217.1 173.6 130.5
Other income ........................................... 17.5 24.0 20.3
------ ------ ------
Total revenues ......................................... 357.4 289.9 225.2
------ ------ ------
Benefits and other deductions:
Policyholder benefits .................................. 21.2 23.7 20.3
Amortization of deferred policy acquisition costs ...... 67.1 55.3 36.6
Amortization of deferred software costs ................ 1.8 -- --
Other operating costs and expenses ..................... 165.6 105.1 73.3
------ ------ ------
Total benefits and other deductions .................... 255.7 184.1 130.2
------ ------ ------
Income before income taxes ............................. 101.7 105.8 95.0
Federal income taxes:
Current expense ........................................ 12.1 24.4 17.2
Deferred expense ....................................... 12.3 12.0 16.2
------ ------ ------
Total federal income taxes ............................. 24.4 36.4 33.4
------ ------ ------
Net income ............................................. 77.3 69.4 61.6
Other comprehensive income, net of income tax:
Change in unrealized investment (losses) gains ......... (6.2) 3.2 12.6
------ ------ ------
Comprehensive income ................................... $ 71.1 $ 72.6 $ 74.2
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
- -----------------------
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.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Common stock at par value, beginning of year ........... $ 2.0 $ 2.0 $ 2.0
Increase in par value .................................. 0.5 -- --
------ ------ ------
Common stock at par value, end of year ................. 2.5 2.0 2.0
------ ------ ------
Capital in excess of par value, beginning of year ...... 137.4 137.4 137.4
(Decrease) in capital .................................. (0.5) -- --
------ ------ ------
Capital in excess of par value, end of year ............ 136.9 137.4 137.4
------ ------ ------
Retained earnings, beginning of year ................... 310.6 241.2 179.6
Net income ............................................. 77.3 69.4 61.6
Dividends to parent .................................... (40.0) -- --
------ ------ ------
Retained earnings, end of year ......................... 347.9 310.6 241.2
------ ------ ------
Accumulated comprehensive income,
net of deferred taxes, beginning of year ............ 19.4 16.2 3.6
Change in unrealized investment (losses) gains,
net of deferred taxes ............................... (6.2) 3.2 12.6
------ ------ ------
Accumulated comprehensive income,
net of deferred taxes, end of year .................. 13.2 19.4 16.2
------ ------ ------
Total stockholder's equity, end of year ................ $500.5 $469.4 $396.8
====== ====== ======
</TABLE>
See notes to consolidated financial statements
-----------------------
F I N A N C I A L S T A T E M E N T S 93 P R O S P E C T U S
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Operating activities
Net income .............................................. $ 77.3 $ 69.4 $ 61.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in
Deferred policy acquisition costs .................... (43.9) (46.2) (45.9)
Deferred software costs .............................. (11.6) -- --
Uncollected premiums ................................. (1.3) 2.4 0.5
Amounts receivable from reinsurers ................... (4.0) (13.4) 24.9
Investment income due and accrued .................... (0.5) (0.5) (0.3)
Other assets ......................................... (1.8) 0.1 0.6
Accounts receivable .................................. (15.3) 8.6 (10.4)
Separate accounts, net ............................... (16.5) (14.8) (5.1)
Future policy benefits and policyholder liabilities .. 20.9 21.9 (17.0)
Payable to parent .................................... 10.7 5.7 8.9
Federal income taxes:
Current ............................................ (7.6) 9.1 6.9
Deferred ........................................... 4.0 14.1 19.2
Accrued expenses and other liabilities ............... 62.5 (1.5) (14.0)
Realized losses(gains) on investments ................ 1.7 (2.1) (0.9)
Other, net ........................................... (0.7) 1.0 (3.8)
------ ------ ------
Net cash provided by operating activities .......... 73.9 53.8 25.2
------ ------ ------
Investment activities
Proceeds from investments sold
Bonds ................................................ 142.2 280.9 315.4
Other items, net ..................................... -- -- (1.3)
Investments purchased
Bonds ................................................ (180.1) (331.7) (310.5)
Affiliated mutual funds .............................. (24.6) (3.3) (20.5)
------ ------ ------
Net cash used by investing activities .............. (62.5) (54.1) (16.9)
------ ------ ------
Financing activities
Additions to policyholder contract deposits ............. 107.7 54.8 61.7
Withdrawals from policyholder contract deposits ......... (60.7) (64.4) (61.8)
Dividend to parent ...................................... (13.3) -- --
------ ------ ------
Net cash provided (used) by financing activities ... 33.7 (9.6) (0.1)
------ ------ ------
(Decrease) Increase in cash ................................ 45.1 (9.9) 8.2
Cash and cash equivalents, at beginning of year ............ 18.5 28.4 20.2
------ ------ ------
Cash and cash equivalents, at end of year .................. $ 63.6 $ 18.5 $ 28.4
====== ====== ======
Supplemental disclosure:
Federal income taxes paid ............................... $ 19.7 $ 15.4 $ 10.2
====== ====== ======
</TABLE>
See notes to consolidated 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>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED
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 Park Avenue
Securities, LLP (PAS) or of broker dealer firms that have entered into sales
agreements with GIAC. The Company's general agency distribution system is used
for the sale of other products and policies.
PAS, a wholly owned subsidiary of the Company, is a registered broker
dealer under the Securities Exchange Act of 1934. PAS was established as a
broker dealer during 1999 and has assumed the registered representatives
formally affiliated with Guardian Investor Services Corporation (GISC).
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 is the investment advisor to
certain mutual funds sponsored by GIAC which are investment options for the
variable products.
The Company has established fourteen insurance separate accounts primarily
to support the variable annuity, universal variable life and variable 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 benefits plans of The Guardian.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Company's consolidated financial statements are
prepared in accordance with accounting principles generally accepted in the
United States (GAAP). All significant intercompany balances and transactions
have been eliminated.
Accounting Changes: In March 1998, the American Institute of Certified
Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", which requires capitalization of external and certain internal
costs incurred to obtain or develop internal-use computer software during the
application development stage. The Company applied the provisions of SOP 98-1
prospectively effective January 1, 1999. The adoption of SOP 98-1 resulted in
$14.9 million of software costs being capitalized. Capitalized internal use
software is amortized on a straight-line basis over the estimated useful life of
the software.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES:
Bonds and common stocks are classified as available for sale and carried
at estimated fair value, with unrealized appreciation or depreciation recorded
net of applicable deferred taxes are included in a separate component of equity,
"Accumulated other comprehensive income". The investment portfolio is reviewed
for investments that may have experienced a decline in value considered to be
other than temporary.
Joint ventures are carried on the equity basis of accounting.
Policy loans 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 surrender of the contract.
-----------------------
F I N A N C I A L S T A T E M E N T S 95 P R O S P E C T U S
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Securities purchase under agreements to resell and securities sold under
agreements to repurchase are treated as financing arrangements and are carried
at the amounts at which the securities will be subsequently resold or
reacquired, including accrued interest, as specified in the respective
agreements. The Company's policy is to take possession of securities purchased
under agreements to resell. The market value of securities to be repurchased or
resold is monitored, and additional collateral is requested, where appropriate,
to protect against credit exposure.
Securities repurchase and resale agreements and securities borrowed and
loaned transactions are used to generate net investment income and facilitate
trading activity. These instruments are short-term in nature (usually 30 days or
less) and are collateralized principally by U.S. Government and mortgage-backed
securities. The carrying amounts of these instruments approximate fair value
because of the relatively short period of time between the origination of the
instruments and their expected realization.
Realized investment gains, net are computed using the specific
identification method. Costs of bonds and stocks are adjusted for impairments
considered other than temporary. Allowances for losses on mortgage loans and
real estate are netted against asset categories to which they apply and
provisions for losses on investments are included in "Realized investment gains,
net." Decreases in lower of depreciated cost or fair value less selling costs of
investment real estate held for sale are recorded in "Realized investment gains,
net."
Short-term investments are stated at amortized cost and consist primarily
of investments with maturities as of purchase date of six months or less. Market
values for such investments approximate carrying value.
Cash and cash equivalents include cash on hand and highly liquid debt
instruments purchased with an original maturity of three months or less.
Deferred Policy Acquisition Costs are costs of acquiring new business,
principally commissions, underwriting, agency and policy issue expenses, all of
which vary with and are primarily related to the production of new business, are
deferred. Deferred policy acquisition costs are subject to recoverability
testing at the time of policy issue and loss recognition testing at the end of
each accounting period.
For investment-type products, deferred policy acquisition costs are
amortized over the shorter of the expected average life of the contracts or
thirty years, as a constant percentage of estimated gross profits arising
principally from investment results, mortality and expense margins and surrender
charges based on actual results and anticipated future experience, updated at
the end of each accounting period. The effect on the amortization of deferred
policy acquisition costs of revisions to estimated gross profits is reflected in
earnings in the period such estimated gross profits are revised.
For life insurance products, deferred policy acquisition costs are
amortized in proportion to anticipated premiums. Assumptions as to anticipated
premiums are estimated at the date of policy issue and are consistently applied
during the life of the contracts. Deviations from estimated experience are
reflected in earnings in the period such deviations occur. For these contracts,
the amortization periods generally are for the estimated life of the policy.
Separate account assets and liabilities are reported at market value, and
represent policyholder funds maintained in accounts having specific investment
objectives. The assets of each account are legally segregated and are not
subject to claims that arise out of any other business of the Company.
Investment risks associated with market value changes are generally borne by the
customers, except to the extent of minimum guarantees made by the Company with
respect to certain amounts. The investment results of separate accounts are
reflected in separate account liabilities. The amounts provided by the Company
to establish separate account investment portfolios (seed money) are included in
separate account assets.
Insurance Revenue and Expense Recognition consists of premiums and
benefits. Premiums for term life and certain annuity insurance products are
recognized as revenue when due and collected. The reserve for future policy
benefits has been provided on a net-level premium method based upon estimated
investment yields, mortality, and other assumptions which were appropriate at
the time the policies were issued. Benefits and expenses are associated with
earned premiums so as to result in recognition of profits over the life of the
contract. This association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition costs.
Revenues for variable life and for individual and group variable annuity
products consist of net investment income and cost of insurance, policy
administration and surrender charges that have been earned and assessed against
policyholder account balances during the period. Policy benefits and claims that
are charged to expense include benefits and
- -----------------------
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 CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
claims incurred in the period in excess of related policy account balances,
maintenance costs and interest credited to policyholder account balances. The
policyholder account values represent an accumulation of gross premium payments
plus credited interest less expense and mortality charges and withdrawals.
Income Taxes for the Guardian and its life insurance and non-life
insurance subsidiaries file a consolidated federal income tax return. Current
federal taxes are charged or credited to operations based on amounts estimated
to be payable or recoverable as a result of taxable operations for the current
year. Deferred income tax assets and liabilities are recognized based on the
difference between financial statement carrying amounts and income tax basis of
assets and liabilities using enacted income tax rates and laws.
Reclassifications of certain amounts in prior years have been adjusted to
conform to current year presentation.
NOTE 3 - INVESTMENT SECURITIES
Market values of bonds and common stocks are based on quoted prices as
available. For certain private placement debt securities where quoted market
prices are not available, management estimates fair market value by using
adjusted market prices for like securities.
The cost and estimated market values of investments by major investment
category as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31, 1999
(In millions)
-------------------------------------------------
Gross Gross Estimated
Cost Unrealized Unrealized Market
Basis Gains Losses Value
------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations of U.S. ....
government corporations and agencies ............ $ 24.5 $ 0.2 $ 0.7 $ 24.0
Obligations of states and political subdivisions .. 30.7 0.1 0.5 30.3
Debt securities issued by foreign governments ..... 3.8 -- 0.1 3.7
Corporate debt securities ......................... 513.7 0.5 17.4 496.8
------- ------- ------- -------
Subtotal ........................................ 572.7 0.8 18.7 554.8
Affiliated mutual funds ........................... 61.0 17.2 0.2 78.0
------- ------- ------- -------
$ 633.7 $ 18.0 $ 18.9 $ 632.8
======= ======= ======= =======
(In millions)
-------------------------------------------------
Gross Gross Estimated
Cost Unrealized Unrealized Market
Basis Gains Losses Value
------- ---------- ---------- ---------
U.S. Treasury securities & obligations of U.S. ....
government corporations and agencies ............ $ 28.4 $ 1.5 $ -- $ 29.9
Obligations of states and political subdivisions .. 60.2 1.4 -- 61.6
Debt securities issued by foreign governments ..... 8.0 0.1 -- 8.1
Corporate debt securities ......................... 442.0 10.0 2.6 449.4
------- ------- ------- -------
Subtotal ........................................ 538.6 13.0 2.6 549.0
Affiliated mutual funds ........................... 36.9 6.6 0.6 42.9
------- ------- ------- -------
$ 575.5 $ 19.6 $ 3.2 $ 591.9
======= ======= ======= =======
</TABLE>
The amortized cost and estimated market value of bonds as of December 31,
1999 and 1998 by contractual maturity is shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations.
-----------------------
F I N A N C I A L S T A T E M E N T S 97 P R O S P E C T U S
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
<TABLE>
<CAPTION>
As of December 31, 1999
(In millions)
-----------------------
Estimated
Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less ............................................ $ 61.4 $ 61.2
Due after one year through five years .............................. 296.4 290.0
Due after five years through ten years ............................. 100.1 95.5
Due after ten years ................................................ 51.7 46.7
Sinking fund bonds (including collateralized mortgage obligations) . 63.1 61.4
--------- ---------
$ 572.7 $ 554.8
========= =========
As of December 31, 1998
(In millions)
-----------------------
Estimated
Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less ............................................ $ 47.5 $ 47.7
Due after one year through five years .............................. 250.0 253.2
Due after five years through ten years ............................. 102.5 107.8
Due after ten years ................................................ 67.6 68.3
Sinking fund bonds (including collateralized mortgage obligations) . 71.0 72.0
--------- ---------
$ 538.6 $ 549.0
========= =========
</TABLE>
The major categories of net investment income are summarized as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Fixed maturities ....................................... $ 37.2 $ 33.9 $ 31.8
Affiliated mutual funds ................................ 1.6 1.5 1.1
Policy loans ........................................... 3.7 3.5 3.4
Short-term investment .................................. 2.9 2.3 2.4
Joint venture dividend ................................. 1.3 1.3 1.1
------ ------ ------
46.7 42.5 39.8
Less: Investment expenses .............................. 1.3 1.1 1.1
------ ------ ------
Net investment income .................................. $ 45.4 $ 41.4 $ 38.7
====== ====== ======
</TABLE>
Realized gains and losses are based upon specific identification of the
investments. The components of gross realized gains and losses for the year
ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Realized gains from dispositions:
Bonds ................................................ $ 0.6 $ 2.2 $ 1.1
Separate account seed ................................ 0.9 -- 0.9
Realized losses from dispositions:
Bonds ................................................ (3.1) (0.1) (1.1)
Affiliated mutual funds .............................. (0.1) -- --
------ ------ ------
Realized gains ......................................... $ (1.7) $ 2.1 $ 0.9
====== ====== ======
</TABLE>
- -----------------------
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 CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The net unrealized holding gains and losses, included in the consolidated
balance sheets as a component of comprehensive income and the changes for the
corresponding years are summarized as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Balance, beginning of year ............................. $ 19.4 $ 16.2 $ 3.6
Changes in unrealized investment gains (losses),
net of deferred taxes, attributable to:
Bonds .............................................. (20.4) 2.6 4.6
Affiliated mutual funds ............................ 9.1 (1.8) 7.3
Separate account seed .............................. 5.1 2.4 1.7
Other .............................................. -- -- (1.0)
------ ------ ------
Balance, end of year ................................... $ 13.2 $ 19.4 $ 16.2
====== ====== ======
</TABLE>
Currently, comprehensive income for the Company consists of net income and
the change in unrealized gains and losses on securities. As of December 31,
1999, 1998 and 1997, the change in unrealized gains and losses before tax was
$(12.9), $7.4 and $15.6 and after tax was $(6.2), $3.2 and $12.6, respectively.
Reclassification adjustments for the period, which include gains on
investment securities that were realized and included in net income of the
current period that also had been included in other comprehensive income as
unrealized holding gains in the period in which they arose, are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Unrealized holding (losses) gains ...................... $(14.5) $ 5.7 $ 15.6
Less: Reclassification adjustments ..................... 1.6 1.7 --
------ ------ ------
Change in unrealized holding (losses) gains ............ $(12.9) $ 7.4 $ 15.6
====== ====== ======
</TABLE>
Special Deposit assets of $3.7 million and $4.1 million at December 31,
1999 and 1998, respectively, were on deposit with governmental authorities or
trustees as required by certain insurance laws.
NOTE 4 - DEFERRED POLICY ACQUISITION COSTS
The balances of and changes in deferred policy acquisition costs as of and
for the years ended December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
As of December 31,
(In millions)
-----------------------
1999 1998
<S> <C> <C>
Balance, beginning of year ......................................... $ 313.6 $ 267.4
Capitalization of deferrable expenses .............................. 93.8 77.0
Amortization of recoverable DAC balances ........................... (67.1) (55.3)
Interest on DAC .................................................... 21.7 24.2
Retrospectively applied adjustments ................................ (4.5) 0.3
--------- ---------
Balance, end of year ............................................... $ 357.5 $ 313.6
========= =========
</TABLE>
-----------------------
F I N A N C I A L S T A T E M E N T S 99 P R O S P E C T U S
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 5 - POLICYHOLDERS' ACCOUNT BALANCES
The balances of policyholders' account balances as of and for the years
ended December 31, 1999 and 1998 are summarized as follows:
As of December 31,
(In millions)
-----------------------
1999 1998
---------- ---------
Individual annuities ................................ $ 7,617.9 $ 6,492.8
Group annuities ..................................... 3,105.7 2,104.3
Variable life ....................................... 713.7 569.6
Interest-sensitive life contracts ................... 4.2 4.5
---------- ---------
Policyholders' account balances ..................... $ 11,441.5 $ 9,171.2
========== =========
Policyholders' account balances for investment-type contracts represent an
accumulation of gross premium payments plus credited interest less withdrawals,
expenses and mortality charges.
NOTE 6 - FEDERAL INCOME TAXES
The federal income tax expense in the consolidated statements of earnings
is summarized as follows:
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
Federal Income Tax expense:
Current ................................... $ 12.1 $ 24.4 $ 17.2
Deferred .................................. 12.3 12.0 16.2
------ ------ ------
Total ....................................... $ 24.4 $ 36.4 $ 33.4
====== ====== ======
The federal income taxes attributable to consolidated operations in
certain circumstances can be different from the amounts determined by
multiplying the earnings from operations before federal income taxes by the
expected federal income tax rate of 35%. The sources of the difference and the
tax effects of each source are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Expected taxes on pre-tax income ....................... $ 35.6 $ 37.5 $ 33.3
Permanent adjustments:
Dividends received deduction on separate accounts .... (13.1) -- --
Reserve on overpayment of 1998 taxes in 1999 ........... 1.3 -- --
True-up of tax basis reserves .......................... 1.3 -- --
State and local taxes .................................. -- (0.5) 0.1
Foreign tax credit ..................................... (0.3) (0.3) --
Other .................................................. (0.4) (0.3) --
------ ------ ------
Total tax expense ...................................... $ 24.4 $ 36.4 $ 33.4
====== ====== ======
</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 CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The tax effect of temporary differences which give rise to deferred
federal income tax assets and liabilities as of December 31, 1999 and 1998, are
as follows:
As of December 31,
(In millions)
-----------------------
1999 1998
--------- ---------
Deferred tax assets:
Other liabilities ................................... $ 19.5 $ 15.7
DAC Proxy ........................................... 13.7 11.1
Amounts receivable from reinsurer ................... 0.3 0.9
Other ............................................... 3.9 1.4
--------- ---------
Total deferred tax assets ........................... 37.4 29.1
Deferred tax liabilities:
Deferred acquisition costs .......................... $ 125.1 $ 109.8
Capitalized software costs .......................... 4.1 --
Reserves ............................................ 7.7 6.0
Investments ......................................... 3.3 10.3
Other ............................................... -- 1.8
--------- ---------
Total deferred tax liabilities ...................... 140.2 127.9
--------- ---------
Net deferred tax liability .......................... $ 102.8 $ 98.8
========= =========
Management has concluded that the deferred income tax assets are more
likely than not to be realized. Therefore, no valuation allowance has been
provided.
NOTE 7 - REINSURANCE
The Company has entered into cession and assumption agreements on a
coinsurance, modified coinsurance and yearly renewable term basis with
affiliated and non-affiliated companies. Ceding reinsurance is used by the
Company to limit its risk from large exposures and to permit recovery of a
portion of direct losses, although ceded reinsurance does not relieve the
originating insurer of liability.
The Company has assumed and ceded coinsurance and modified coinsurance
agreements with affiliated companies. Under these agreements, included in the
consolidated statements of income are $0.9 million, $0.9 million and $1.0
million of assumed premiums at December 31, 1999, 1998 and 1997, and $83.1
million, $65.2 million and $43.6 million of ceded premiums at December 31, 1999,
1998 and 1997, respectively.
The Company terminated, during 1997, an assumption agreement with an
unaffiliated company. Under this agreement, included in the consolidated
statements of income are $(2.3) million of premiums at December 31, 1997.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair values for fixed maturities and equity securities, other
than private placement securities, are based on quoted market prices or
estimates from independent pricing services. Fair values for private placement
securities are estimated using a discounted cash flow model which considers the
current market spreads between the U.S. Treasury yield curve and corporate bond
yield curve, adjusted for the type of issue, its current credit quality and its
remaining average life. The fair value of certain non-performing private
placement securities is based on amounts estimated by management.
-----------------------
F I N A N C I A L S T A T E M E N T S 101 P R O S P E C T U S
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 9 - RELATED PARTY TRANSACTIONS
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
$141.0 million in 1999, $100.8 million in 1998 and $72.2 million in 1997, 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 to provide for
funds and to preserve liquidity. Effective December 19, 1997 GREA was liquidated
and, as a result, $6.7 million was returned to GIAC in the form of capital and
there was a realized gain recorded of $1.0 million.
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 the Company, 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 separate account assets invested in affiliated mutual funds as of
December 31, 1999 and 1998 are as follows (in millions):
1999 1998
--------- ---------
The Guardian Stock Fund .............................. $ 4,153.9 $ 3,664.9
The Guardian VC 500 Index Fund ....................... 1.8 --
The Guardian VC Allocation Fund ...................... 0.8 --
The Guardian High Yield Bond Fund .................... 0.2 --
The Guardian Bond Fund ............................... 320.0 381.5
The Guardian Cash Fund ............................... 484.1 419.5
The Baillie Gifford International Fund ............... 662.3 526.4
The Baillie Gifford Emerging Markets Fund ............ 64.6 34.6
The Guardian Small Cap Stock Fund .................... 130.6 109.2
The Guardian Park Avenue Fund ........................ 621.3 511.6
The Guardian Park Avenue Small Cap Fund .............. 22.8 13.2
The Guardian Asset Allocation Fund ................... 46.0 39.8
The Guardian Baillie Gifford International Fund ...... 15.5 9.1
The Guardian Baillie Gifford Emerging Markets Fund ... 6.8 0.8
The Guardian Investment Quality Bond Fund ............ 12.7 9.3
The Guardian High Yield Bond Fund .................... 0.8 --
The Guardian Cash Management Fund .................... 126.4 57.9
--------- ---------
$ 6,670.6 $ 5,777.8
========= =========
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.
- -----------------------
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 CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The Company maintains investments in affiliated mutual funds. These
investments as of December 31, 1999 and 1998 are as follows (in millions):
1999 1998
--------- ---------
The Guardian Park Avenue Fund ........................ $ 0.1 $ 0.1
The Guardian Park Avenue Small Cap Fund .............. 2.5 1.8
The Guardian Small Cap Stock Fund .................... 35.2 26.1
The Guardian Asset Allocation Fund ................... 2.8 2.5
The Guardian Baillie Gifford International Fund ...... 2.9 2.1
The Guardian Baillie Gifford Emerging Markets Fund ... 1.5 0.9
The Guardian Investment Quality Bond Fund ............ 1.6 1.6
The Guardian High Yield Bond Fund .................... 1.6 1.6
The Guardian Cash Management Fund .................... 29.8 6.2
--------- ---------
$ 78.0 $ 42.9
========= =========
NOTE 10 - STATUTORY EQUITY AND INCOME
Applicable insurance department regulations require that the Company
prepare statutory financial statements in accordance with statutory accounting
practices prescribed or permitted by the New York Department of Insurance.
Statutory accounting practices primarily differ from GAAP by charging policy
acquisition costs to expense as incurred, establishing future policy benefits
reserves using different actuarial and interest assumptions, not providing for
deferred taxes, and valuing securities on a different basis.
The following reconciles the consolidated GAAP net income of the Company
to statutory net income as reported to the regulatory authorities:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Consolidated GAAP net income ........................... $ 77.3 $ 69.4 $ 61.6
Adjustments to restate to statutory basis:
Statutory net income of subsidiaries ................. 3.3 (4.5) (4.3)
Change in deferred policy acquisition costs .......... (45.2) (43.2) (41.9)
Change in deferred software costs .................... (8.8) -- --
Deferred premiums .................................... 0.3 1.5 5.6
Re-estimation of future policy benefits .............. 13.1 9.7 3.3
Reinsurance .......................................... (3.8) (4.1) (12.4)
Deferred federal income tax expense .................. 11.2 11.9 16.2
Amortization of interest maintenance reserve ......... 0.4 0.3 0.1
Transfer to interest maintenance reserve ............. 2.4 (1.4) --
Other, net ........................................... 2.8 0.9 (0.2)
------ ------ ------
Statutory net income ................................... $ 53.0 $ 40.5 $ 28.0
====== ====== ======
</TABLE>
-----------------------
F I N A N C I A L S T A T E M E N T S 103 P R O S P E C T U S
-----------------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The following reconciles the consolidated GAAP stockholder's equity of the
Company to statutory capital and surplus as reported to the regulatory
authorities:
<TABLE>
<CAPTION>
As of December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Consolidated GAAP stockholder's equity ................. $500.5 $469.4 $396.8
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs .................... (357.5) (313.6) (267.4)
Deferred software costs .............................. (11.6) -- --
Elimination of asset valuation reserve ............... (42.7) (29.6) (26.3)
Re-estimation of future policy benefits .............. (53.4) (46.9) (41.3)
Establishment of deferred income tax liability ....... 102.8 98.8 84.7
Unrealized gains on investments ...................... 19.8 (11.7) (7.9)
Other liabilities .................................... 66.7 48.1 33.5
Deferred premiums .................................... 8.2 7.8 7.0
Other, net ........................................... 5.4 5.1 3.6
------ ------ ------
Statutory capital and surplus .......................... $238.2 $227.4 $182.7
====== ====== ======
</TABLE>
- -----------------------
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>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive income, of changes in equity
and of cash flows present fairly, in all material respects, the financial
position of The Guardian Insurance & Annuity Company, Inc. and its subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
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 of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for costs of computer software developed or
obtained for internal use in 1999.
/s/ Pricewaterhouse Coopers LLP
February 14, 2000
-----------------------
F I N A N C I A L S T A T E M E N T S 105 P R O S P E C T U S
-----------------------
<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 0.77% of
the average daily net assets of such funds. The average is based upon actual
expenses, after applicable expense reimbursements and fee waivers, incurred
during 1999 for all funds except Guardian VC 500 Index, Janus Aspen Series, MFS
Bond Series and MFS New Discovery Series, the expenses of which have been
restated to reflect a reduction in the management fees.
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
- -----------------------
106 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<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 -1.66%,
4.28% and 10.23%, respectively, based on a mortality and expense risks charge of
.90% for the first 20 policy years and -1.37%, 4.60% and 10.56%, 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 107
-----------------------
<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 Guideline Premium Test as defined under Section 7702 of the Internal
Revenue Code.
<TABLE>
<CAPTION>
Assuming Current Charges Assuming Current Charges Assuming Current Charges
and 0 % Gross and 6% Gross and 12 % Gross
Return Return Return
Premiums ---------------------------- ---------------------------- ----------------------------
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 1,434 0 250,000 1,541 0 250,000
2 41 2,518 5,419 3,254 0 250,000 3,572 0 250,000 3,902 0 250,000
3 42 2,518 8,333 5,130 1,162 250,000 5,780 1,813 250,000 6,484 2,517 250,000
4 43 2,518 11,393 6,947 3,284 250,000 8,057 4,394 250,000 9,303 5,640 250,000
5 44 2,518 14,606 8,700 5,343 250,000 10,397 7,039 250,000 12,376 9,019 250,000
6 45 2,518 17,980 10,391 7,339 250,000 12,804 9,752 250,000 15,731 12,679 250,000
7 46 2,518 21,522 12,019 9,272 250,000 15,280 12,533 250,000 19,397 16,649 250,000
8 47 2,518 25,242 13,580 11,138 250,000 17,823 15,380 250,000 23,399 20,957 250,000
9 48 2,518 29,147 15,073 12,938 250,000 20,434 18,299 250,000 27,774 25,639 250,000
10 49 2,518 33,248 16,497 14,667 250,000 23,115 21,285 250,000 32,560 30,730 250,000
15 54 2,518 57,040 22,855 22,550 250,000 38,009 37,704 250,000 64,757 64,452 250,000
20 59 2,518 87,406 27,336 27,336 250,000 55,174 55,174 250,000 116,663 116,663 250,000
25 64 2,518 126,161 29,073 29,073 250,000 75,155 75,155 250,000 204,485 204,485 250,000
30 69 2,518 175,623 25,796 25,796 250,000 96,919 96,919 250,000 350,294 350,294 403,030
</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.
- -----------------------
108 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<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
Charges and 0 % Gross Charges and 6% Gross Charges and 12 % Gross
Return Return Return
Premiums ---------------------------- ---------------------------- ----------------------------
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 2,643 990 0 250,000 1,086 0 250,000 1,182 0 250,000
2 41 2,518 5,419 2,564 0 250,000 2,839 0 250,000 3,126 0 250,000
3 42 2,518 8,333 4,073 105 250,000 4,626 659 250,000 5,227 1,260 250,000
4 43 2,518 11,393 5,510 1,847 250,000 6,443 2,781 250,000 7,496 3,833 250,000
5 44 2,518 14,606 6,876 3,518 250,000 8,292 4,934 250,000 9,951 6,593 250,000
6 45 2,518 17,980 8,164 5,112 250,000 10,164 7,112 250,000 12,603 9,550 250,000
7 46 2,518 21,522 9,371 6,623 250,000 12,058 9,310 250,000 15,469 12,721 250,000
8 47 2,518 25,242 10,493 8,051 250,000 13,970 11,527 250,000 18,569 16,126 250,000
9 48 2,518 29,147 11,528 9,393 250,000 15,897 13,762 250,000 21,924 19,789 250,000
10 49 2,518 33,248 12,468 10,638 250,000 17,832 16,002 250,000 25,555 23,725 250,000
15 54 2,518 57,040 15,719 15,414 250,000 27,655 27,350 250,000 49,147 48,842 250,000
20 59 2,518 87,406 14,917 14,917 250,000 36,017 36,017 250,000 84,760 84,760 250,000
25 64 2,518 126,161 7,269 7,269 250,000 40,342 40,342 250,000 142,351 142,351 250,000
30 69 2,518 175,623 0 0 0 33,471 33,471 250,000 240,345 240,345 276,590
</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 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 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 Current Assuming Current Assuming Current
Charges and 0 % Gross Charges and 6% Gross Charges and 12 % Gross
Return Return Return
Premiums --------------------------- ----------------------------- ---------------------------
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 1,326 0 251,347 1,432 0 251,446 1,539 0 251,546
2 41 2,518 5,419 3,249 0 253,275 3,566 0 253,574 3,896 0 253,885
3 42 2,518 8,333 5,119 1,151 255,149 5,768 1,801 255,771 6,470 2,502 256,440
4 43 2,518 11,393 6,928 3,265 256,962 8,034 4,371 258,031 9,276 5,613 259,226
5 44 2,518 14,606 8,669 5,312 258,710 10,359 7,001 260,351 12,329 8,972 262,258
6 45 2,518 17,980 10,345 7,292 260,391 12,745 9,692 262,732 15,655 12,603 265,560
7 46 2,518 21,522 11,953 9,206 262,005 15,192 12,445 265,174 19,280 16,533 269,159
8 47 2,518 25,242 13,489 11,047 263,547 17,697 15,255 267,674 23,227 20,785 273,078
9 48 2,518 29,147 14,952 12,817 265,015 20,261 18,126 270,233 27,527 25,392 277,347
10 49 2,518 33,248 16,340 14,510 266,410 22,882 21,052 272,849 32,213 30,383 282,000
15 54 2,518 57,040 22,411 22,106 272,514 37,204 36,899 287,147 63,292 62,987 312,852
20 59 2,518 87,406 26,348 26,348 276,496 52,988 52,988 302,915 111,723 111,723 360,931
25 64 2,518 126,161 27,107 27,107 277,316 69,742 69,742 319,659 189,062 189,062 437,665
30 69 2,518 175,623 22,297 22,297 272,621 84,399 84,399 334,382 309,628 309,628 557,345
</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 A P P E N D I C E S
- -----------------------
<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 Charges Assuming Guaranteed Assuming Guaranteed
and 0 % Gross Charges and 6% Gross Charges and 12 % Gross
Return Return Return
Premiums --------------------------- --------------------------- -----------------------------
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 2,643 986 0 251,035 1,082 0 251,126 1,178 0 251,216
2 41 2,518 5,419 2,554 0 252,608 2,827 0 252,868 3,112 0 253,139
3 42 2,518 8,333 4,050 83 254,111 4,601 633 254,640 5,198 1,230 255,211
4 43 2,518 11,393 5,471 1,808 255,538 6,397 2,734 256,434 7,441 3,778 257,440
5 44 2,518 14,606 6,815 3,458 256,889 8,217 4,859 258,252 9,858 6,501 259,842
6 45 2,518 17,980 8,076 5,023 258,156 10,051 6,998 260,085 12,457 9,405 262,425
7 46 2,518 21,522 9,249 6,501 259,336 11,894 9,147 261,927 15,251 12,504 265,202
8 47 2,518 25,242 10,331 7,888 260,426 13,743 11,301 263,776 18,255 15,812 268,188
9 48 2,518 29,147 11,318 9,183 261,421 15,592 13,457 265,625 21,484 19,349 271,397
10 49 2,518 33,248 12,202 10,372 262,313 17,431 15,601 267,464 24,952 23,122 274,844
15 54 2,518 57,040 15,027 14,722 265,195 26,368 26,063 276,423 46,753 46,448 296,523
20 59 2,518 87,406 13,499 13,499 263,757 32,664 32,664 282,788 76,824 76,824 326,441
25 64 2,518 126,161 4,974 4,974 255,375 32,660 32,660 282,933 118,072 118,072 367,483
30 69 2,518 175,623 0 0 0 18,133 18,133 268,719 169,575 169,575 418,814
</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>
- --------------------------------------------------------------------------------
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)
- -----------------------
124 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<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 125
-----------------------
<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 deducted monthly from
Policy Account Value. The benefits provided by the riders are fully described in
the riders and summarized here. These riders may not be available in all states.
Level Target Death Benefit term rider-this rider provides term insurance
coverage to the insured's Age 100 (Age 80 in New Jersey and New York). Coverage
under this rider generally has a lower cost of insurance, but has no cash value
associated with it.
By adding a Level Target Death Benefit term rider to a Park Avenue VUL policy, a
policyowner can increase the insurance coverage provided by the entire contract.
Generally term insurance is intended to fill a temporary insurance need. 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 VUL policy with a Level Target Death
Benefit term 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 15 policy years. See "Reducing the Face Amount" and
"Deductions and Charges."
Waiver of Monthly Deductions rider - this rider provides for the waiver of the
Monthly Deductions while the insured is totally disabled as defined in the
rider. Age limits apply to this rider.
Guaranteed Coverage rider ("GCR") - this rider, available with Death Benefit
Option I only, guarantees that the policy will remain in force even if Net Cash
Surrender Value is less than current Monthly Deductions, provided the GCR
requirement, as described in the rider, is met.
Disability Benefit rider - this rider provides for crediting the Policy Account
Value with an amount equal to the Specified Premium, as defined in the rider
while the insured is totally disabled, as defined in the rider.
Accidental Death Benefit rider - this rider provides additional insurance
coverage if the insured's death results from accidental bodily injury on or
before his or her 75th birthday. The maximum coverage under this rider is
$500,000.
Guaranteed Insurability Option rider - this rider provides the policyowner the
right to increase the Face Amount of insurance coverage 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") subject to the conditions
in the rider.
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 availability of particular riders.
- -----------------------
126 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<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 127
-----------------------
<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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128 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<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 20th day of April, 2000.
THE GUARDIAN SEPARATE ACCOUNT M
(Name of Registrant)
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
By: s/ Richard T. Potter, Jr.
-------------------------------------
RICHARD T. POTTER, JR.
VICE PRESIDENT AND COUNSEL
Attest: /s/ Sheri L. Kocen
---------------------------------
SHERI L. KOCEN
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/ Bruce C. Long* Executive Vice President, Equity Products,
- ----------------------------------- and Director
Bruce C. Long
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/ Richard T. Potter, Jr. Date: April 20, 2000
---------------------------------
Richard T. Potter, Jr.
Vice President and Counsel
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
8. Powers of Attorney
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. 3 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 Counsel
New York, New York
April 20, 2000
EXHIBIT 6
April 20, 2000
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. 3 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. 3 to the Guardian Separate Account M registration
statement on Form S-6 (the "Registration Statement") of our report dated
February 20, 2000, relating to the financial statements of the Guardian Separate
Account M, and our report dated February 14, 2000 relating to the consolidated
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 20, 2000
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that William C. Warren, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ William C. Warren
----------------------------
William C. Warren
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Joseph D. Sargent, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Joseph D. Sargent
----------------------------
Joseph D. Sargent
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Arthur V. Ferrara, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Arthur V. Ferrara
----------------------------
Arthur V. Ferrara
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Frank J. Jones, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Frank J. Jones
----------------------------
Frank J. Jones
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Edward K. Kane, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Edward K. Kane
----------------------------
Edward K. Kane
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Philip H. Dutter, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Philip H. Dutter
----------------------------
Philip H. Dutter
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Leo R. Futia, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Leo R. Futia
----------------------------
Leo R. Futia
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Peter L. Hutchings, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Peter L. Hutchings
----------------------------
Peter L. Hutchings
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Bruce C. Long, whose
signature appears below, constitutes and appoints Frank L. Pepe and Richard T.
Potter, Jr. each of them, his attorney-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any registration
statements and amendments to registration statements for any and all separate
accounts established by The Guardian Insurance & Annuity Company, Inc. which are
currently in existance or which may be established in the future and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitutes, may do or cause to be
done by virtue hereof.
Dated April 7, 2000
/s/ Bruce C. Long
----------------------------
Bruce C. Long
