As filed with the Securities and Exchange Commission on April 28, 1995
Registration No. 2-70132
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT No. 17 /x/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT No. 11 /x/
(Check appropriate box or boxes)
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THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
(Exact Name of Registrant as Specified in Charter)
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
201 Park Avenue South, New York, New York 10003
(Address of Principal Executive Offices)
Depositor's Telephone Number: (212) 598-8259
RICHARD T. POTTER, JR., Counsel
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003
(Name and address of agent for service)
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It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/x/ on May 1, 1995 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(ii) of Rule 485
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485.
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The Registrant has registered an indefinite number of its securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. The notice required by such rule for the Registrant's most fiscal
year was filed on February 24, 1995.
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<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
Registration Statement on Form N-4
<TABLE>
<CAPTION>
Form N-4 Item No. Location
Part A
<S> <C> <C>
Item 1. Cover Page .................................................... Cover
Item 2. Definitions ................................................... Glossary of Special Terms Used in This
Prospectus
Item 3. Synopsis ...................................................... Summary of the Contracts; Expense Table
Item 4. Condensed Financial Information ............................... Condensed Financial Information
Item 5. General Description of Registrant, Depositor
and Portfolio Companies ..................................... Descriptions of GIAC and the Separate
Account; Descriptions of the Variable
Investment Options; Description of the
Fixed-Rate Option; Voting Rights
Item 6. Deductions .................................................... Charges and Deductions; Distribution of
the Contracts
Item 7. General Description of Variable Annuity Contracts ............. Descriptions of the Contracts
Item 8. Annuity Period ................................................ Annuity Period
Item 9. Death Benefit ................................................. Pre-Retirement Death Benefit; Accumulation
Period; Annuity Period
Item 10. Purchases and Contract Value .................................. Descriptions of the Contracts
Item 11. Redemptions ................................................... Surrenders and Partial Withdrawals; Right
to Cancel the Contract
Item 12. Taxes ......................................................... Federal Tax Matters
Item 13. Legal Proceedings ............................................. Legal Proceedings
Item 14. Table of Contents of the Statement of Additional Information .. Additional Information
Part B
Item 15. Cover Page .................................................... Cover Page
Item 16. Table of Contents ............................................. Table of Contents
Item 17. General Information and History ............................... Not Applicable
Item 18. Services ...................................................... Services to Separate Account
Item 19. Purchase of Securities Being Offered .......................... Valuation of Assets of the Separate
Account; Transferability Restrictions
Item 20. Underwriters .................................................. Services to Separate Account
Item 21. Calculation of Performance Data ............................... Calculation of Yield Quotations for Value
Line Cash Fund
Item 22. Annuity Payments .............................................. Annuity Payment
Item 23. Financial Statements .......................................... Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
Prospectus dated May 1, 1995
The Guardian
Insurance & Annuity
Company, Inc.
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
The Individual Deferred Variable Annuity Contracts (individually, a
"Contract," and collectively, the "Contracts") described in this Prospectus are
designed to provide annuity benefits under retirement programs for individual
purchasers which are tax qualified under the Internal Revenue Code of 1986, as
amended ("Code"). The Contracts provide for an annuity to begin at a future
pre-selected date and also provide for a pre-retirement death benefit. Two
different Contracts are offered as described in this Prospectus: (1) a Single
Premium Payment Contract and (2) a Flexible Premium Payment Contract. The
Contracts are only offered to retirement plans which qualify for Federal tax
benefits under Section 401 or 408 of the Code.
The Contracts are offered and issued by The Guardian Insurance & Annuity
Company, Inc. ("GIAC") through The Guardian/Value Line Separate Account (the
"Separate Account"). Net Premium Payments under the Contracts may currently be
allocated to the following divisions of the Separate Account which invest in the
shares of these underlying mutual funds: The Guardian Park Avenue Fund(R), Value
Line Fund, Value Line Income Fund, Value Line Leveraged Growth Investors, Value
Line Cash Fund and Value Line U.S. Government Securities Fund (collectively
referred to as the "Funds"). GIAC also provides for fixed accumulations and
benefits under the Contracts to the extent Net Premium Payments are credited to
the Fixed-Rate Option. The value of a Contract will vary in accordance with the
investment performance of the underlying Funds but will not vary to the extent
Contract values are allocated to the Fixed-Rate Option.
This Prospectus sets forth the information that a prospective investor
should know before investing. A Statement of Additional Information concerning
the Contracts and the Separate Account is available for free by writing to GIAC
at its Customer Service Office, P.O. Box 26210, Lehigh Valley, Pennsylvania
18002 or by calling 1-800-221-3253. The Statement of Additional Information,
which is also dated May 1, 1995, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The table of contents of the
Statement of Additional Information is included at the end of this Prospectus.
Please Read This Prospectus And Keep It For Future Reference.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
EACH OF THE FOLLOWING VARIABLE INVESTMENT OPTIONS: THE GUARDIAN PARK AVENUE
FUND, VALUE LINE FUND, VALUE LINE INCOME FUND, VALUE LINE LEVERAGED GROWTH
INVESTORS, VALUE LINE CASH FUND, AND VALUE LINE U.S. GOVERNMENT SECURITIES FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
CONTENTS OF PROSPECTUS
Page
----
Glossary of Special Terms Used in This Prospectus ......................... 3
Summary of the Contracts .................................................. 4
Expense Table ............................................................. 5
Condensed Financial Information ........................................... 7
Descriptions of GIAC and the Separate Account ............................. 9
Descriptions of the Variable Investment Options ........................... 10
Description of the Fixed-Rate Option ...................................... 12
Descriptions of the Contracts ............................................. 13
General Information ................................................... 13
Method of Purchase .................................................... 14
Charges and Deductions ................................................ 14
Pre-Retirement Death Benefit .......................................... 16
Accumulation Period ................................................... 16
Annuity Period ........................................................ 17
Surrenders and Partial Withdrawals .................................... 18
Transfers of Contract Information ..................................... 19
Other Important Contract Information .................................. 21
Federal Tax Matters ....................................................... 21
Voting Rights ............................................................. 23
Distribution of the Contracts ............................................. 23
Right to Cancel the Contracts ............................................. 24
Legal Proceedings ......................................................... 24
Additional Information .................................................... 24
The Contracts are not available in all states.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE
ACCOMPANYING PROSPECTUSES FOR THE VARIABLE INVESTMENT OPTIONS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL.
2
<PAGE>
GLOSSARY OF SPECIAL TERMS USED IN THIS PROSPECTUS
Accumulation Period: The period between the initial purchase date of the
Contract and the Retirement Date.
Accumulation Unit: A unit of measure used to determine the value of a
Contractowner's interest under the Contract before the Retirement Date. The
Contract has two types of Accumulation Units: Variable Accumulation Units and
Fixed Accumulation Units.
Accumulation Value: The value of the Variable Accumulation Units plus any
Fixed Accumulation Units under the Contract.
Annuitant: The person upon whose life Annuity Payments are based (normally
the recipient of annuity payments) and upon whose death, prior to the Retirement
Date, benefits under the Contract are paid.
Annuity: A series of periodic payments made for the lifetime of the
Annuitant with or without payments certain for a fixed period or for the joint
lifetimes of the Annuitant and another person and thereafter during the lifetime
of the survivor.
Annuity Payments: Periodic payments made by GIAC to the Contractowner at
regular intervals after the Retirement Date.
Annuity Unit: A unit of measure used to determine the amount of the
variable Annuity Payments.
Beneficiary: The person to whom benefits may be paid upon the
Contractowner's or the Annuitant's death. In the event a beneficiary is not
designated, the Contractowner or the estate of the Contractowner is the
beneficiary.
Contract Anniversary Date: The annual anniversary measured from the issue
date of the Contract.
Contractowner: The person or entity designated as the owner in the
Contract.
Fixed-Rate Option: A deposit option to which owners of Contracts may
allocate Net Premium Payments and Accumulation Values for investment in the
general account of GIAC and under which GIAC guarantees that the amount
deposited will not decline in value and that interest will be added at a rate
declared periodically in advance.
Funds: The six diversified open-end management investment companies
underlying the Contracts. Contractowners may allocate Net Premium Payments and
Accumulation Values to the Funds through the corresponding Investment Divisions
of the Separate Account. The Funds currently available under the Contracts are:
The Guardian Park Avenue Fund, Value Line Fund, Value Line Income Fund, Value
Line Leveraged Growth Investors, Value Line Cash Fund, and Value Line U.S.
Government Securities Fund. (Only Contractowners who purchased a Contract prior
to December 1, 1988 may continue to allocate premium payments or contract values
to a seventh Investment Division corresponding to the Value Line Special
Situations Fund.)
Investment Division: A division of the Separate Account, the assets of
which consist solely of shares of one of the Funds underlying the Contract.
Net Premium Payments: A purchase payment or premium paid by the
Contractowner to GIAC in accordance with the Contract, less any applicable
premium taxes. Net Premium Payments are credited to Investment Divisions of the
Separate Account or the Fixed-Rate Option.
Participant: An eligible employee who participates in a group pension,
profit sharing or other retirement plan which qualifies for Federal tax benefits
under the Code.
Retirement Date: The date on which Annuity Payments under the Contract
commence.
Surrender Value: The amount payable to the Contractowner or other payee
upon termination of the Contract, other than by the Annuitant's or
Contractowner's death.
Valuation Period: The period of time from one determination of Accumulation
Unit and Annuity Unit values to the next subsequent determination of these
values.
Variable Annuity: An annuity providing for payments varying in amount to
reflect the investment experience of the applicable Variable Investment Options
selected by the Contractowner.
Variable Investment Options: The Funds constitute the Variable Investment
Options (as distinguished from the Fixed-Rate Option) available under the
Contract for allocations of Net Premium Payments and Accumulation Values.
3
<PAGE>
SUMMARY OF THE CONTRACTS
The Contracts described in this Prospectus are designed to provide annuity
benefits in accordance with the Annuity Payout Option selected and the
retirement plan, if any, under which a Contract has been issued. The Contracts
provide several underlying allocation options through which the Contractowner
may pursue his or her investment objectives. The Contracts are only offered to
retirement plans which qualify for Federal income tax advantages under Section
401 of the Code or as individual retirement account plans established under
Section 408 of the Code. (See "Federal Tax Matters," page 21.) If the
Contractowner selects the Annuity Payout Option that provides for monthly
payments during the lifetime of the Annuitant, GIAC promises to make Annuity
Payments continuously for the life of the Annuitant under the Contract even if
such Annuitant outlives the life expectancy used in computing the Annuity. While
GIAC is obligated to make such Annuity Payments regardless of the longevity of
the Annuitant, the amount of variable Annuity Payments is not guaranteed. (See
"Annuity Payout Options," page 17.) With respect to amounts attributable to the
Variable Investment Options, no assurance can be given that the value of the
Contracts during the Accumulation Period, or the aggregate amount of Annuity
Payments made under the Contracts, will equal or exceed the Net Premium Payments
made to such Variable Investment Options.
GIAC provides for variable accumulations and benefits under the Contracts
by crediting Net Premium Payments to one or more of the Investment Divisions of
the Separate Account as selected by the Contractowner. The Investment Divisions
of the Separate Account correspond to the Funds offered under the Contracts. A
Contractowner may select up to four of the Variable Investment Options or, if
available to the Contractowner, the Fixed-Rate Option and three Variable
Investment Options. (See "Descriptions of the Variable Investment Options," page
10.) To the extent Net Premium Payments are credited to the Fixed-Rate Option,
GIAC also provides for fixed accumulations and benefits. (See "Description of
the Fixed-Rate Option," page 12.) The value of the Contract prior to the
Retirement Date and the amount accumulated to provide Annuity Payments will
depend upon the investment performance of the Variable Investment Options
selected by the Contractowner during the Accumulation Period, except for amounts
allocated to the Fixed-Rate Option. These latter amounts will accrue interest at
a rate not less than the minimum interest rate specified in the Contract. (See
"Accumulation Period," page 16 and "Annuity Period," page 17.) The investment
risk under the Contract is borne by the Contractowner except to the extent that
Accumulation Values are allocated to the Fixed- Rate Option where the investment
risk is borne by GIAC.
Transfers among the Investment Divisions of the Separate Account are
permitted before and after the Retirement Date, subject to certain conditions
and in accordance with any retirement plan. Certain restrictions apply to
transfers to or from the Fixed-Rate Option. (See "Transfers of Contract Values,"
page 19.)
The Contracts contain the following additional features which are described
in more detail in this Prospectus:
(1) No sales charges are deducted from Contract payments. However, if
part or all of the Accumulation Value is redeemed during certain periods of
time following the payment of premiums, GIAC will deduct from such
Accumulation Value a contingent deferred sales charge ranging from 1.0% to
5.0%. The percentage amount and the length of time for which this charge is
applicable depends upon the particular Contract purchased. A federal income
tax penalty may be imposed on surrenders or partial withdrawals. (See
"Charges and Deductions," page 14, "Surrenders and Partial Withdrawals,"
page 18 and "Federal Tax Matters," page 21.)
(2) Charges for the assumption by GIAC of the mortality and expense
risks under the Contracts, the administrative expenses incurred by GIAC and
state premium taxes, if any, are deducted from the Accumulation Value of
the Contracts. (See "Charges and Deductions," page 14.) In addition, each
Fund imposes certain charges against its assets. (See the applicable Fund
prospectus for information about these charges.)
(3) In certain states, the Contractowner may cancel the Contract no
later than ten (10) days (twenty (20) days in a limited number of states)
after receiving it by returning the Contract along with a written notice of
cancellation to GIAC. (See "Right to Cancel the Contracts," page 24.)
4
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE TABLE
- --------------------------------------------------------------------------------
CONTRACTOWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchases ............................... None
Exchange Fee ................................................... None
Contingent Deferred Sales Charge:
(1) Single Premium Payment Contracts*:
- --------------------------------------
In connection with Single Premium Payment Contracts, the following charges will
be assessed upon amounts withdrawn during the first seven Contract years
measured from the date of issue.
Contract Year Charge*
1 ...................................... 5%
2 ...................................... 5%
3 ...................................... 4%
4 ...................................... 3%
5 ...................................... 2%
6 ...................................... 1%
7 and thereafter ....................... 0%
(2) Flexible Premium Payment Contracts**:
- -----------------------------------------
In connection with Flexible Premium Payment Contracts, this charge will be the
lesser of:
(a) 5% of the total premiums paid during the 72 months immediately
preceding the date of withdrawal, or
(b) 5% of the amount being withdrawn.
Annual Contract Administration Fee:
Single Premium Payment Contract ............................. $30.00
Flexible Premium Payment Contract ........................... $35.00
Separate Account Level Annual Expenses
(as a percentage of daily net asset value):
Mortality and Expense Risk Charge ..................................... 1.0%
Account Fees and Expenses .............................................. 0%
---
Total Separate Account Annual Expenses ................................. 1.0%
Investment Division Level Annual Expenses
(as a percentage of average net assets):
The Guardian Park Avenue Fund
Management Fees .............................................. .50%
Other Expenses ................................................ .34%
---
Total Annual Expenses ....................................... .84%
Value Line Fund
Management Fees .............................................. .66%
Other Expenses ................................................ .16%
---
Total Annual Expenses ....................................... .82%
Value Line Income Fund
Management Fees ............................................... .68%
Other Expenses ................................................ .22%
---
Total Annual Expenses ....................................... .90%
Value Line Leveraged Growth Investors
Management Fees ............................................... .75%
Other Expenses ................................................ .14%
---
Total Annual Expenses ....................................... .89%
Value Line Cash Fund
Management Fees ............................................... .40%
Other Expenses ................................................ .21%
---
Total Annual Expenses ....................................... .61%
Value Line U.S. Government Securities Fund+
Management Fees ............................................... .50%
Other Expenses ................................................ .13%
---
Total Annual Expenses ....................................... .63%
Value Line Special Situations Fund++
Management Fees ............................................... .75%
Other Expenses ................................................ .35%
---
Total Annual Expenses ....................................... 1.10%
- --------------------------------------------------------------------------------
* In any Contract year after the first and when such charge is
applicable, 10% of the amount of the single premium payment can be
withdrawn without application of the charge. The maximum amount to
which this charge may be applied cannot exceed the single premium
payment.
** In any Contract year after the first and when such charge is
applicable, 10% of the total premiums paid under the Contract in the
last 72 months immediately preceding the date of withdrawal, can be
withdrawn without application of the charge. The maximum amount of
this charge during the 72 months immediately preceding the date of
withdrawal will not exceed 5% of the total premiums paid during such
period.
+ Value Line U.S. Government Securities Fund's fiscal year runs from
September 1 through August 31.
++ Value Line Special Situations Fund is only available to Contractowners
who purchased a Contract prior to December 1, 1988.
- --------------------------------------------------------------------------------
The table above is designed to assist the Contractowner in understanding
the various costs and expenses of the Separate Account and its underlying Funds.
(See "Charges and Deductions," page 14, and see the accompanying Fund
prospectuses for a more complete description of the various costs and expenses.)
Premium taxes ranging from approximately 0.5% to 3.5% are currently imposed by
certain states and municipalities on payments made under the Contracts. GIAC
will deduct the applicable premium tax from premium payments made by
Contractowners in those states, counties and municipalities where such taxes are
imposed on GIAC. Where applicable, such taxes will decrease the amount of each
premium payment available for allocation.
5
<PAGE>
<TABLE>
<CAPTION>
Comparison of Contract Expenses Among Underlying Funds
For Single Premium (SP) and Flexible Premium (FP) Payment Contracts
- ------------------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN
PARK AVENUE FUND VALUE LINE FUND
---------------------------------------------------------------------------
Hypotheticals 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
If you surrender your Contract at the end of
the applicable time period: $70 SP $103 SP $128 SP $233 SP $70 SP $102 SP $127 SP $231 SP
You would pay the following expenses on a
$1,000 investment, assuming 5% annual
return on assets: $71 FP $113 FP $159 FP $235 FP $70 FP $113 FP $158 FP $233 FP
- ------------------------------------------------------------------------------------------------------------------------------------
If you do not surrender or you annuitize your
Contract: $20 SP $63 SP $105 SP $233 SP $20 SP $62 SP $107 SP $231 SP
You would pay the following expenses on a
$1,000 investment, assuming 5% annual
return on assets: $21 FP $63 FP $109 FP $235 FP $20 FP $63 FP $108 FP $233 FP
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE LINE
VALUE LINE INCOME FUND LEVERAGED GROWTH INVESTORS
---------------------------------------------------------------------------
Hypotheticals 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract at the end of
the applicable time period: $71 SP $105 SP $131 SP $240 SP $71 SP $105 SP $131 SP $239 SP
You would pay the following expenses on a
$1,000 investment, assuming 5% annual
return on assets: $71 FP $115 FP $162 FP $241 FP $71 FP $115 FP $162 FP $240 FP
- ------------------------------------------------------------------------------------------------------------------------------------
If you do not surrender or you annuitize your
Contract: $21 SP $65 SP $111 SP $240 SP $21 SP $65 SP $111 SP $239 SP
You would pay the following expenses on a
$1,000 investment, assuming 5% annual
return on assets: $21 FP $65 FP $112 FP $241 FP $21 FP $65 FP $112 FP $240 FP
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE LINE
VALUE LINE VALUE LINE U.S. GOV'T SPECIAL SITUATIONS
CASH FUND SECURITIES FUND FUND*
-----------------------------------------------------------------------------------------------------------------
Hypotheticals 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
If you surrender
your Contract at
the end of the
applicable
time period: $68 SP $96 SP $116 SP $208 SP $68 SP $96 SP $117 SP $210 SP $73 SP $111 SP $142 SP $261 SP
You would pay
the following
expenses on a
$1,000
investment,
assuming 5%
annual return
on assets: $68 FP $106 FP $147 FP $210 FP $68 FP $107 FP $148 FP $212 FP $73 FP $122 FP $173 FP $263 FP
- ------------------------------------------------------------------------------------------------------------------------------------
If you do not
surrender or
you annuitize
your Contract: $18 SP $56 SP $96 SP $208 SP $18 SP $56 SP $97 SP $210 SP $23 SP $71 SP $122 SP $261 SP
You would pay
the following
expenses on a
$1,000
investment,
assuming 5%
annual return
on assets: $18 FP $56 FP $97 FP $210 FP $18 FP $57 FP $98 FP $212 FP $23 FP $72 FP $123 FP $263 FP
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This expense comparison assumes that the expenses reported in the expense table
on the foregoing page will be the expenses incurred during the periods shown in
the comparison. It should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown above. The
effect of the annual contract administration fee was calculated by: (a) dividing
the total amount of such fees for the year ended December 31, 1994 by the total
average net assets for such year; (b) adding this percentage to annual expenses;
and (c) calculating the dollar amounts.
* Value Line Special Situations Fund is only available for allocation to
Contractowners who purchased a Contract prior to December 1, 1988.
6
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the financial
statements of the Separate Account, which were audited by Price Waterhouse LLP,
independent accountants, for the years ended December 31, 1994, 1993 and 1992,
and by other independent auditors for the prior periods listed. The data should
be read in conjunction with the financial statements, related notes and other
financial information from the Separate Account's 1994 Annual Report to
Contractowners which are incorporated by reference into the Statement of
Additional Information. A copy of the 1994 Annual Report to Contractowners and
the Statement of Additional Information may be obtained by calling or writing to
GIAC's Customer Service Office. The address and phone number appear on the first
page of this Prospectus.
Selected data for Accumulation Units of the Separate Account outstanding at
end of each period:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TAX QUALIFIED
Accumulation Unit
Value at Beginning
of Period:
The Guardian Park
Avenue Fund ........ $ 65.821 $ 55.266 $ 46.328 $ 34.615 $ 39.820 $ 32.519 $ 27.192 $ 26.672 $ 22.754 $ 17.279 $ 15.490
Value Line Fund ..... 36.013 34.048 32.846 22.284 22.678 17.426 16.045 15.402 13.342 10.013 11.861
Value Line Income
Fund ............... 38.201 35.635 35.371 27.799 27.525 22.686 20.422 21.124 18.268 14.895 14.654
Value Line Special
Situations Fund .... 18.562 16.591 17.355 12.830 13.560 11.251 10.995 12.214 11.735 9.788 13.276
Value Line
Leveraged Growth
Investors .......... 43.393 37.713 39.049 26.946 27.669 21.119 20.041 19.679 16.148 12.830 14.220
Value Line US
Gov't. Securities
Fund ............... 39.653 36.473 34.650 30.060 27.520 24.822 23.222 22.668 20.684 17.200 15.235
Value Line Cash
Fund ............... 23.320 22.851 22.246 21.216 19.855 18.388 17.297 16.409 15.556 14.557 13.311
Accumulation Unit
Value at End of
Period:
The Guardian Park
Avenue Fund ........ 64.239 $ 65.821 $ 55.266 $ 46.328 $ 34.615 $ 39.820 $ 32.519 $ 27.192 $ 26.672 $ 22.754 $17,279
Value Line Fund ..... 34.066 36.013 34.048 32.846 22.284 22.678 17.426 16.045 15.402 13.342 10.013
Value Line Income
Fund ............... 36.178 38.201 35.635 35.371 27.799 27.525 22.686 20.422 21.124 18.268 14.899
Value Line Special
Situations Fund .... 18.570 18.562 16.591 17.355 12.830 13.560 11.251 10.995 12.214 11.735 9.788
Value Line
Leveraged Growth
Investors .......... 41.374 43.393 37.713 39.049 26.946 27.669 21.119 20.041 19.679 16.148 12.830
Value Line US
Gov't. Securities
Fund ............... 35.074 39.653 36.473 34.650 30.060 27.520 24.822 23.222 22.668 20.664 17.200
Value Line Cash
Fund ............... 23.942 23.320 22.851 22.246 21.216 19.855 18.388 17.297 16.409 15.556 14.557
Number of
Accumulation
Units
Outstanding at End
of Period:
The Guardian Park
Avenue Fund ........ 2,011,941 2,042,159 2,012,445 2,024,689 2,004,863 2,024,327 1,978,171 2,086,407 1,795,194 1,316,496 912,054
Value Line Fund ..... 217,631 238,775 288,819 264,572 303,209 286,760 318,843 407,628 421,450 422,157 469,457
Value Line Income
Fund ............... 169,481 185,808 204,834 189,490 200,570 208,745 204,012 222,681 199,881 176,782 190,718
Value Line Special
Situations Fund .... 45,690 45,135 49,554 72,962 50,596 40,606 59,787 100,367 110,236 132,751 159,291
Value Line
Leveraged Growth
Investors .......... 90,681 100,563 97,359 111,823 121,135 114,132 134,771 169,850 148,654 142,215 173,585
Value Line US
Gov't. Securities
Fund ............... 466,099 624,392 692,476 740,018 657,866 652,888 606,594 482,033 522,565 397,260 263,185
Value Line Cash
Fund ............... 980,422 1,089,853 1,538,970 1,896,733 2,281,121 2,517,433 2,711,586 2,558,838 1,861,243 2,107,106 2,298,103
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-TAX QUALIFIED
Accumulation Unit
Value at Beginning
of Period:
The Guardian Park
Avenue Fund ........ $ 60.071 $ 50.438 $ 42.281 $ 31.591 $ 36.342 $ 29.679 $ 24.817 $ 24.342 $ 20.766 $ 15.770 $ 14.137
Value Line Fund ..... 31.012 29.320 28.285 19.189 19.528 15.006 13.817 13.263 11.490 8.623 10.214
Value Line Income
Fund ............... 35.980 33.563 33.314 26.182 25.924 21.367 19.234 19.896 17.206 14.029 13.802
Value Line Special
Situations Fund .... 18.472 16.511 17.271 12.767 13.494 11.197 10.942 12.155 11.679 9.741 13.212
Value Line Leveraged
Growth Investors ... 43.332 37.660 38.995 26.908 27.630 21.090 20.013 19.651 16.125 12.812 14.200
Value Line US Gov't . 39.655 36.474 34.651 30.061 27.521 24.823 23.223 22.669 20.665 17.201 15.236
Securities Fund
Value Line Cash Fund 23.320 22.851 22.246 21.216 19.855 18.388 17.297 16.409 15.556 14.557 13.311
Accumulation Unit
Value at End
of Period:
The Guardian Park
Avenue Fund ........ $ 58.628 $ 60.071 $ 50.438 $ 42.281 $ 31.591 $ 36.342 $ 29.679 $ 24.817 $ 24.342 $ 20.766 $ 15.770
Value Line Fund ..... 29.335 31.012 29.320 28.285 19.189 19.528 15.006 13.817 13.263 11.490 8.623
Value Line Income
Fund ............... 34.074 35.980 33.563 33.314 26.182 25.924 21.367 19.234 19.896 17.206 14.029
Value Line Special
Situations Fund .... 18.480 18.472 16.511 17.271 12.767 13.494 11.197 10.942 12.155 11.679 9.741
Value Line Leveraged
Growth Investors ... 41.316 43.332 37.660 38.995 26.908 27.630 21.090 20.013 19.651 16.125 12.812
Value Line US Gov't .
Securities Fund .... 35.075 39.655 36.474 34.651 30.061 27.521 24.823 23.223 22.669 20.665 17.201
Value Line Cash Fund 23.942 23.320 22.851 22.246 21.216 19.855 18.388 17.297 16.409 15.556 14.557
Number of Accumulation
Units Outstanding at
End of Period:
The Guardian Park
Avenue Fund ........ 1,094 954 1,695 3,522 3,961 3,508 3,704 4,931 6,004 6,702 8,584
Value Line Fund ..... 2,469 2,471 3,216 4,013 4,010 4,016 4,214 3,828 4,314 4,982 4,978
Value Line Income
Fund ............... 897 1,043 1,044 2,541 1,212 1,336 1,175 1,535 1,264 1,065 1,198
Value Line Special
Situations Fund .... 519 519 519 988 991 994 1,012 1,079 1,482 2,373 2,973
Value Line Leveraged
Growth Investors ... 251 251 252 962 2,003 1,904 2,071 2,076 1,619 1,430 1,273
Value Line US Gov't .
Securities Fund .... 549 1,050 1,051 2,678 2,563 3,159 2,645 2,218 1,816 1,648 711
Value Line Cash Fund 6,884 7,530 8,932 10,943 14,981 18,633 19,822 20,797 24,838 33,502 35,153
</TABLE>
The non-tax qualified Contracts have not been offered since 1981. The
information furnished above relates to the units attributable to such Contracts
sold prior to that date.
8
<PAGE>
DESCRIPTIONS OF GIAC AND
THE SEPARATE ACCOUNT
GIAC
The Guardian Insurance & Annuity Company, Inc. ("GIAC"), a stock life
insurance company incorporated in the state of Delaware in 1970, is the issuer
of the Contracts offered by this Prospectus. GIAC is licensed to conduct an
insurance business in all 50 states of the United States and the District of
Columbia and had total assets of over $3.8 billion as of December 31, 1994.
GIAC's executive office is located at 201 Park Avenue South, New York, New York
10003, and the address of its Customer Service Office for these Contracts is
P.O. Box 26210, Lehigh Valley, Pennsylvania 18002.
GIAC is wholly owned by The Guardian Life Insurance Company of America
("Guardian Life"), a mutual life insurance company organized in the State of New
York in 1860. As of December 31, 1994, Guardian Life had total assets in excess
of $9.8 billion. Guardian Life is not the issuer of the Contracts offered by
this Prospectus and does not guarantee the benefits payable under the Contracts.
GIAC's financial statements appear in the Statement of Additional
Information.
THE SEPARATE ACCOUNT
GIAC established the The Guardian/Value Line Separate Account (the
"Separate Account") in 1980 pursuant to the provisions of the Delaware Insurance
Code. The Separate Account is registered as a unit investment trust under the
Investment Company Act of 1940, as amended (the "1940 Act") and meets the
definition of "Separate Account" under the Federal securities laws.
The Separate Account has six Investment Divisions (which correspond to the
six Funds) currently available for allocations of Net Premium Payments and
Accumulation Values. A seventh Investment Division corresponds to the Value Line
Special Situations Fund, which is only available for Net Premium Payments or
Accumulation Value allocations by Contractowners who purchased a Contract prior
to December 1, 1988. Each Investment Division invests in, and thereby reflects
the investment performance of, a specific underlying Fund. GIAC owns all of the
Fund shares allocated to each Investment Division but passes through to the
Contractowners the voting rights in such shares.
Each Investment Division is administered and accounted for as part of the
general business of GIAC. Under Delaware law, the income and capital gains or
capital losses of each Division's subdivision are credited to or charged against
the assets held in that subdivision in accordance with the terms of each
Contract, without regard to other income, capital gains or capital losses of the
other subdivisions. The assets of the Separate Account are not chargeable with
liabilities arising out of any other business GIAC may conduct. (See "Federal
Tax Matters," page 21.)
Assets of the Separate Account attributable to the Contracts are invested
in shares of one or more (up to a maximum of four or a maximum of three in
addition to the Fixed-Rate Option) of the Funds selected by the Contractowner.
The Funds do not assess any sales charge against premium payments invested under
the Contracts. Transfers among the Investment Divisions may currently be
effected without fee, penalty or other charge through proper transfer requests
to GIAC's Customer Service Office in writing or by telephone. (See "Transfers of
Contract Values," page 19.)
9
<PAGE>
All dividends and capital gains distributions received from a Fund are
reinvested in such Fund shares at net asset value and retained as assets of the
Separate Account through allocation to the applicable Investment Division. Fund
shares will be redeemed by GIAC at their net asset value to the extent necessary
to make annuity or other payments under the Contract.
DESCRIPTIONS OF THE VARIABLE INVESTMENT OPTIONS
The following Funds are currently available through the Separate Account:
o The Guardian Park Avenue Fund ("GPAF")
The principal investment objective of GPAF is long-term growth of
capital. GPAF attempts to achieve this goal by investing in a diversified
portfolio of common stocks or securities convertible into, or which carry
the right to buy, common stocks. Income is not a specific objective,
although it is anticipated that long-term growth of capital will be
accompanied by growth of income.
o Value Line Fund ("VLF")
The primary investment objective of VLF is long-term growth of
capital. Current income is a secondary objective. VLF invests substantially
all of its assets in common stocks or securities convertible into common
stock. In addition, interim investments in short-term debt securities may
be made so as to receive a return on idle cash. It is the policy of VLF to
purchase and hold securities which are believed to have potential for
long-term capital appreciation.
o Value Line Income Fund ("VLIF")
The primary investment objective of VLIF is income, as high and
dependable as is consistent with reasonable risk. Capital growth to
increase total return is a secondary objective. VLIF invests substantially
all of its assets in common stocks or securities convertible into common
stock. VLIF purchases and holds securities which are believed to have
potential for high income yield with capital growth. VLIF strives to earn a
total return (net investment income plus capital appreciation) rather than
income alone.
o Value Line Leveraged Growth Investors ("VLLGI")
Capital growth, to the extent attainable, is VLLGI's sole investment
objective. No consideration is given to current income in the choice of
investments. In pursuit of this objective, VLLGI will invest substantially
all of its assets in common stocks or securities convertible into common
stocks in any proportion deemed appropriate by VLLGI subject to certain
restrictions. It is the policy of VLLGI to purchase and hold securities
which are believed to have potential for long-term capital appreciation.
o Value Line Cash Fund ("VLCF")
VLCF's investment objective is to seek as high a level of income as is
consistent with preservation of capital and liquidity. VLCF invests only in
high-quality, short-term money market instruments (those with remaining
10
<PAGE>
maturities of 13 months or less) and concentrates its investments in U.S.
Government securities, bank obligations and commercial paper. To minimize
the effect of changing interest rates on the net asset value of its shares,
VLCF intends to keep the average maturity of its holdings to less than 90
days.
o Value Line U.S. Government Securities Fund ("VLUSGSF")
The primary objective of VLUSGSF is to obtain maximum income without
undue risk of principal. Capital preservation and possible capital
appreciation are secondary objectives. To attain its primary objective,
VLUSGSF will invest at least 80% of the value of its net assets in issues
of the U.S. Government and its agencies and instrumentalities. While
emphasis is on income, careful consideration is given to security of
principal, marketability and diversification.
The Value Line Special Situations Fund ("VLSSF") is only available for Net
Premium Payments and Contract value allocations by those who purchased a
Contract prior to December 1, 1988. The primary investment objective of VLSSF is
long-term growth of capital. No consideration is given to current income in the
choice of investments. VLSSF invests substantially all of its assets in common
stocks or securities convertible into common stocks. Interim investments in
short-term debt securities may be made. VLSSF purchases and holds securities
which are believed to have potential for long-term capital appreciation. With
broad diversification, careful analysis and continuing supervision of the
portfolio, VLSSF believes that "special situations" investing can be rewarding
to those who can afford the risk of wider than average price fluctuations and
are able to hold for a period of years without substantial current income from
their investment.
The investment manager and principal underwriter of GPAF is Guardian
Investor Services Corporation(R), a wholly owned subsidiary of GIAC. The
investment manager of VLF, VLIF, VLSSF, VLLGI, VLCF and VLUSGSF is Value Line,
Inc., and their principal underwriter, Value Line Securities, Inc., is an
affiliate of Value Line, Inc.
GIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Fund shares held by any Separate
Account Investment Division. GIAC reserves the right to eliminate the shares of
any of the Funds and to substitute shares of another Fund, subject to the
approval of the Securities and Exchange Commission, or of another registered
open-end management investment company, if the shares of a Fund are no longer
available for investment, or, if in GIAC's judgment, it has become inappropriate
to continue investing in such Fund's shares. To the extent required by the 1940
Act, substitutions of shares attributable to a Contractowner's interest in a
Separate Account Investment Division will not be made until the Contractowner
has been notified of the change.
The investments of each Fund are subject to the risks of changing economic
conditions and the ability of the Fund's management to anticipate such changes.
There can be no assurance that any of the Funds' investment objectives will be
achieved. All dividends and capital gain distributions from the Funds are
automatically reinvested in shares of the distributing Fund at their net asset
value. A more detailed description of each Fund, its investment objectives,
policies and asset charges may be found in the accompanying prospectus of the
particular Fund. Read each prospectus carefully before investing.
11
<PAGE>
DESCRIPTION OF THE FIXED-RATE OPTION
That portion of each Contract which relates to the Fixed-Rate Option,
described below, is not registered under the Securities Act of 1933 ("1933 Act")
and the Fixed-Rate Option is not registered as an investment company under the
1940 Act. Accordingly, neither the Fixed-Rate Option nor any interests therein
are subject to the provisions or restrictions of the 1933 Act or the 1940 Act.
However, the following disclosure about the Fixed-Rate Option may be subject to
certain generally applicable provisions of the federal securities laws regarding
the accuracy and completeness of statements not in prospectuses. The Fixed- Rate
Option may not be available for allocation in all states in which the Contracts
are offered.
Each Contract permits the Contractowner to direct all or part of any Net
Premium Payment for his or her Contract to the Fixed-Rate Option. GIAC
guarantees that amounts invested under the Fixed-Rate Option will accrue
interest daily at an effective annual rate of at least 3.5% (the "guaranteed
minimum interest rate"). GIAC may also credit interest at a rate in excess of
3.5% (the "excess interest rate") but is under no obligation to do so. Any
excess interest rate will be determined in the sole discretion of GIAC and may
be changed by GIAC from time to time and without notice. The Contractowner
assumes the risk that interest credited on the portion of the accumulation value
in the Fixed-Rate Option may not exceed the guaranteed minimum interest rate
(3.5%) for any given year.
There is no specific formula for the determination of an excess interest
rate. Some of the factors that GIAC may consider in determining whether to
credit excess interest to amounts allocated to the Fixed-Rate Option, and in
determining the rate of such excess interest, are general economic trends, rates
of return currently available and anticipated on GIAC's general account
investments, regulatory and tax requirements and competitive factors. GIAC is
aware of no statutory limitations on the maximum amount of interest it may
credit, and the Board of Directors of GIAC has set no limitations.
The amounts credited to the Fixed-Rate Option become part of the general
assets of GIAC and are segregated from those allocated to any separate account
of GIAC. GIAC invests the assets of the Fixed-Rate Option in those assets chosen
by GIAC and allowed by applicable law. The allocation of any amounts to the
Fixed-Rate Option does not entitle a Contractowner to share in the investment
experience of those assets.
The interest rate initially credited to Contract payments or transfers
allocated to the Fixed-Rate Option will be the rate in effect on the date such
amounts are so allocated. Each such payment or transfer will continue to receive
the rate of interest initially credited until the next Contract Anniversary
Date. On the Contract Anniversary Date, all payments and transfers allocated to
the Fixed-Rate Option during the prior Contract year together with all interest
earnings and amounts previously allocated by the Contractowner to the Fixed-Rate
Option will be credited with the rate of interest in effect on that date (the
"renewal rate"). Such renewal rate will be guaranteed with respect to these
amounts until the next Contract Anniversary Date.
If the renewal rate credited to amounts held in the Fixed-Rate Option on
any Contract Anniversary Date (a) is more than three (3) percentage points below
the interest rate credited for the immediately preceding Contract year, or (b)
falls below the minimum "bailout rate" specified in the Contract (where approved
by the applicable state insurance departments), the Contractowner may withdraw
all or a portion of the amount which has been held in the Fixed-Rate Option for
one year or more without the imposition of a contingent deferred sales charge
and without the application of the usual ordering rules pertaining to surrenders
and partial withdrawals whereby all Variable Accumulation Units are cancelled
prior to the cancellation of any Fixed Accumulation Units. If the new interest
rate credited under the Contract does fall more than three (3) percentage points
below the immediately preceding rate, a Contractowner may withdraw such amounts
12
<PAGE>
from the Fixed-Rate Option by submitting a written request for such withdrawal
to GIAC at its Customer Service Office. Such written request must be received by
GIAC within 60 days of the Contract Anniversary Date in order to obtain a
withdrawal under the terms described in this paragraph. (See "Federal Tax
Matters," page 21.)
During the period up to 30 days prior to the Retirement Date, the
Contractowner may transfer all or part of the Contract value of his or her
Contract attributable to any Investment Division to another Investment Division
or to the Fixed-Rate Option subject to any applicable restrictions as set forth
under "Transfers of Contract Values" on page 19 of the Prospectus.
The Fixed-Rate Option will not be maintained after the Contractowner's
Retirement Date. Any accumulation value in the Fixed-Rate Option on the
Retirement Date will be applied to the annuity payout option elected by the
Contractowner. Certain restrictions apply to transfers out of the Fixed-Rate
Option (see "Transfers of Contract Values," page 19).
DESCRIPTIONS OF THE CONTRACTS
This section of the Prospectus is intended to provide an overview of the
more significant provisions of the Contracts. The information included in this
section generally describes, among other things, the benefits, charges, rights
and privileges under the Contracts. These descriptions are qualified by
reference to a specimen of the Contracts which has been filed as an exhibit to
the registration statement for the Separate Account. The provisions of the
Contracts may vary slightly from state to state due to variations in state
regulatory requirements.
The variable annuity payments provided by the Contracts are funded through
investments in the Separate Account. Information regarding the Separate Account
and its Investment Divisions is contained in the sections entitled "Descriptions
of GIAC and the Separate Account," page 9, "Descriptions of the Variable
Investment Options," page 10 and in the current prospectuses for each of the
Variable Investment Options.
GENERAL INFORMATION
The Contracts are only offered on the lives of individual annuitants. Two
types of Contracts are currently available: a Single Premium Payment Contract
and a Flexible Premium Payment Contract. These Contracts are only available for
purchase under retirement plans which qualify for special Federal income tax
treatment ("qualified Contracts"). These Contracts have not been offered under
circumstances that do not qualify for special Federal income tax treatment
("non-qualified Contracts") since September 25, 1981. (See "Federal Tax
Matters," page 21.)
A minimum premium payment of $3,000 is required under Single Premium
Payment Contracts. A minimum initial purchase payment of $500 is required under
Flexible Premium Payment Contracts with additional payments of at least $100
accepted. However, if the Flexible Premium Payment Contract is purchased by, or
in connection with, an employer payroll deduction plan, the minimum amount GIAC
will accept as a premium payment is $50 per Contract. The aggregate of flexible
premium payments made in any Contract year after the first may not exceed ten
(10) times the amount of the premium payments made in the first Contract year or
$100,000, whichever is less, without the written consent of GIAC.
13
<PAGE>
METHOD OF PURCHASE
To purchase a Contract a complete application and initial premium payment
must be sent to The Guardian Insurance & Annuity Company, Inc., Customer Service
Office, P.O. Box 26210, Lehigh Valley, Pennsylvania 18002. Registered, certified
or express mail should be sent to such office at 3900 Burgess Place, Bethlehem,
Pennsylvania 18017. If the application is acceptable to GIAC in the form
received, the initial purchase payment will be credited within two (2) business
days after receipt. If the initial purchase payment cannot be credited within
five (5) business days after receipt by GIAC because the application is
incomplete, GIAC will promptly return the payment and application to the
applicant. Acceptance is subject to GIAC's rules and GIAC reserves the right to
reject any application or initial purchase payment.
After issuance of the Contract, premium payments received by GIAC at its
Customer Service Office prior to the close of GIAC's business day will normally
be credited to the Contract on that day. Premium payments received on a
non-business day or after the close of GIAC's business day will normally be
credited on the first business day following receipt.
CHARGES AND DEDUCTIONS
Charges and deductions under the Contracts are made for GIAC's assumption
of mortality and expense risk and adminisrative expenses, for any applicable
premium taxes and, where applicable, charges (or credits) to the non-tax
qualified subdivisions of the Separate Account for Federal income taxes, if any.
Although no deduction for a sales charge is made from premium payments, a
contingent deferred sales charge will be assessed upon certain Contract
surrenders or partial withdrawals. The amount of this latter charge is based on
the type of Contract involved. The following describes each charge and deduction
made under the Contracts:
Mortality and Expense Risk Deduction: The mortality risk assumed by GIAC
arises from its promise to pay death benefit proceeds and from its contractual
obligation to make Annuity Payments to each Annuitant regardless of how long he
or she lives and regardless of how long all Annuitants as a group live. This
assures each Annuitant that neither his or her own longevity nor an improvement
in life expectancy generally will have an adverse effect on the Annuity Payments
he or she will receive under a Contract and relieves the Annuitant from the risk
that he or she will outlive the amounts actually accumulated for retirement. The
expense risk assumed by GIAC arises from the possibility that the amounts
deducted for sales and administrative expenses may be insufficient to cover the
actual cost of such items.
GIAC makes a daily charge of .000027 of the value of the assets of each
subdivision of the Separate Account (1.0% on an annual basis consisting of
approximately .65% for mortality risks and approximately .35% for expense risks)
to compensate it for the assumption of these risks. If this charge is
insufficient to cover the actual cost of these risks, the loss will fall on
GIAC. Conversely, if the charge proves more than sufficient, any excess may be
retained by GIAC for profit or use by it to meet any operational expense,
including that of distribution of the Contracts.
Variable annuity payments reflect the investment performance of the
underlying Funds but are not affected by changes in actual mortality experience
or by expenses incurred by GIAC in excess of the expense deductions provided for
in each Contract.
Other Charges Applicable to the Funds: The net asset value per share of
each of the Funds reflects investment advisory fees and certain general
operating expenses paid by the Funds. In 1994 each of the Funds paid the
following annual investment advisory fee to its respective investment adviser as
a percentage of each such Fund's average daily net assets: Guardian Park Avenue
Fund 0.50%; Value Line Fund 0.66%; Value Line Income Fund 0.68%; Value Line
14
<PAGE>
Leveraged Growth Investors 0.75%; Value Line Cash Fund 0.40%; Value Line U.S.
Government Securities Fund 0.50%; and Value Line Special Situations Fund 0.75%.
Annual Contract Administration Fee: On each Contract Anniversary Date on or
before the Retirement Date, GIAC deducts a Contract administration fee of $30
from Single Premium Payment Contracts and $35 from Flexible Premium Payment
Contracts by cancelling Accumulation Units which are equal in value to the fee.
This fee is deducted from the Variable Investment Options and the Fixed-Rate
Option on a pro-rata basis in the same proportion as the percentage of the
Contract's Accumulation Value attributable to each Variable Investment Option
and the Fixed-Rate Option. GIAC deducts the Contract administration fee if a
Contract is surrendered before the Contract Anniversary Date. This fee is
designed to reimburse GIAC for its actual expenses incurred in administering the
Contracts and it is not expected to result in a profit. GIAC will not increase
the Contract administration fee.
Premium Taxes: Premium taxes ranging from approximately 0.5% to 3.5% are
currently imposed by certain states and municipalities on payments made under
the Contracts. For those Contracts subject to a premium tax, the tax will be
deducted either from Contract premium payments or on the Retirement Date, as
determined in accordance with applicable law.
Contingent Deferred Sales Charge: GIAC makes no separate sales charge
assessment in connection with the purchase of a Contract or subsequent premium
payments under a Flexible Premium Payment Contract. However, a contingent
deferred sales charge ("CDSC") is imposed on certain surrenders or partial
withdrawals to cover certain expenses incurred in the sale of the Contracts,
including commissions to registered representatives and various promotional
expenses. The CDSC and the time periods for which it applies differ depending
upon the type of Contract purchased. In no event, however, will the CDSC ever
exceed, in the aggregate, 9% of the premium payments.
In connection with Single Premium Payment Contracts, the following charges
will be assessed upon amounts withdrawn during the first six Contract years
measured from the date of issue:
Contract Year Charge
1 ....................................... 5%
2 ....................................... 5%
3 ....................................... 4%
4 ....................................... 3%
5 ....................................... 2%
6 ....................................... 1%
7 and thereafter ........................ 0%
However, in any Contract year after the first and when a CDSC is applicable, 10%
of the amount of the single premium payment can be withdrawn without application
of the CDSC. Such withdrawals may, however, be subject to penalty taxes and/or
mandatory federal income tax withholding. (See "Federal Tax Matters," page 21.)
The maximum amount to which this charge may be applied cannot exceed the single
premium payment.
In connection with Flexible Premium Payment Contracts, the CDSC will be the
lesser of (a) 5% of the total premiums paid during the 72 months immediately
preceding the date of withdrawal, or (b) 5% of the amount being withdrawn.
However, in any Contract year after the first and when a CDSC is applicable, 10%
of the total premiums paid under the Contract in the last 72 months immediately
preceding the date of withdrawal can be withdrawn without application of the
15
<PAGE>
CDSC. Such withdrawals may, however, be subject to penalty taxes and/or
mandatory federal income tax withholding. (See "Federal Tax Matters," page 21.)
The maximum amount of the CDSC during the 72 months immediately preceding the
date of withdrawal will never exceed 5% of the total of premiums paid during
such period.
PRE-RETIREMENT DEATH BENEFIT
Upon the death of the Annuitant on or before the Retirement Date an amount
equal to the Accumulation Value of the Contract (the current value of
Accumulation Units credited) as of the end of the Valuation Period during which
GIAC receives due proof of the death will be available for payment to the
Beneficiary promptly after proof of death is received by GIAC. (Under certain
circumstances, the Beneficiary may also choose to receive payments pursuant to
one of the payout options described under "Annuity Payout Options," page 17.)
However, if death occurs before the Annuitant reaches age 75 and before the
Retirement Date, the death benefit cannot be less than the total of all payments
made under such Contract, less a reduction for any prior redemptions and any
charges assessed in connection with those transactions. The Contractowner may
designate a Beneficiary and may change such designation at any time before
Annuity Payments begin.
ACCUMULATION PERIOD
Allocation of Net Premium Payment: The initial Net Premium Payment is used
to purchase Accumulation Units in the Investment Divisions or the Fixed-Rate
Option, as selected by the Contractowner, at the unit values next computed
following GIAC's decision to issue the Contract. Any subsequent payments will be
allocated among the underlying Contract options initially selected, or pursuant
to new allocation instructions which have been submitted in writing to GIAC at
its Customer Service Office. A Contractowner may allocate Net Premium Payments
among up to four of the Variable Investment Options or, if available to the
Contractowner, the Fixed- Rate Option and three Variable Investment Options.
Crediting Accumulation Units Under the Contract: Variable Accumulation
Units represent the interests in the Variable Investment Options and Fixed
Accumulation Units represent the interests in the Fixed-Rate Option. The total
number of Accumulation Units to be credited to a Contractowner's account is the
sum of the portion of the Net Premium Payment allocated to each option divided
by the Accumulation Unit value of each such option as next computed following
receipt of the payment by GIAC. The number of Accumulation Units will not change
because of a subsequent change in the value of the unit, but the dollar value of
Accumulation Units will vary to reflect the investment experience of the
Variable Investment Options and interest credited to the Fixed-Rate Option.
Accumulation Value: The value of the Contractowner's account within any
particular Variable Investment Option or the Fixed-Rate Option is determined by
multiplying the number of Accumulation Units credited to the account by the
applicable current Accumulation Unit value.
Value of an Accumulation Unit: The value of an Accumulation Unit is
determined by using one of two methods, depending upon whether it relates to a
Variable Investment Option or the Fixed-Rate Option. With respect to a Variable
Investment Option, the value of a Variable Accumulation Unit is determined by
multiplying the value of such Variable Accumulation Unit as of the end of the
immediately preceding Valuation Period by the net investment factor (described
below) for the current Valuation Period. With respect to the Fixed-Rate Option,
the value of a Fixed Accumulation Unit is determined by adding the interest
credited on such Fixed Accumulation Unit since the end of the immediately
preceding Valuation Period to the value of such unit as of the end of such
Valuation Period.
16
<PAGE>
Net Investment Factor: The net investment factor is a measure of the
investment performance of each Variable Investment Option. For any particular
Valuation Period, the net investment factor is determined by:
(1) Adding the net asset value of a Fund share as determined at the
end of such Valuation Period to the per share amount of any dividend and
other distribution made by the Fund during the period, and
(2) Dividing by the net asset value of the particular Fund share
calculated as of the end of the immediately preceding valuation period, and
(3) Subtracting from the above result any applicable taxes and the
mortality and expense risk charge.
ANNUITY PERIOD
Retirement Date: Annuity Payments under the Contracts will begin on the
Retirement Date, which is the first day of the calendar month and year selected
by the Contractowner. This date cannot be later than the Annuitant's 85th
birthday, except where otherwise agreed to by GIAC. The Retirement Date may also
be determined by the retirement plan under which the Contract is issued.
Annuity Payments: Annuity Payments will be determined on the basis of (a)
the table specified in the Contract which reflects the nearest age and sex of
the Annuitant(s), (b) the Annuity Payout Option selected, and (c) the
performance of the Variable Investment Options selected. The amount of Annuity
Payments will not be affected by the longevity of Annuitants generally or any
increase in the expenses of GIAC in excess of the charges specified in the
Contract. The Annuitant receives the value of a fixed number of Annuity Units
each month. For the Variable Investment Options, the value of an Annuity Unit
will reflect the investment experience of the amounts allocated to the Variable
Investment Options, and the amount of each Annuity Payment will vary
accordingly.
The decision of the U.S. Supreme Court in Arizona Governing Committee v.
Norris can be interpreted to require all employer-related plans to use
sex-neutral annuity rate tables in calculating annuity purchase rates. In order
to accomodate employer-related plans funded by the Contracts, sex-neutral
annuity rate tables have been developed. Contracts that are not purchased in
connection with employer-related plans use sex-distinct annuity rate tables
except where prohibited by state law. Contracts offered by this Prospectus to
residents of such states will have Contract benefits which are based on
sex-neutral annuity rate tables.
Annuity Payout Options: The Contractowner and, under certain circumstances,
the Beneficiary, may elect to have Annuity Payments made under any one of the
Annuity Payout Options specified in the Contracts and described below. A change
of Annuity Payout Option is only permitted prior to the Retirement Date. In the
absence of an election, Annuity Payments will be made in accordance with the
annuity form known as "Option 2 -- Life Annuity with 120 Monthly Payments
Certain" (see below). Annuity Payments will be made monthly except that (a)
proceeds of less than $2,000 will be paid in a single sum and (b) the schedule
of monthly installment payments may be changed to avoid payments of less than
$20. The Annuity Payout Options currently available under the Contracts are as
follows:
Option 1 -- Life Annuity Payments: An Annuity Payment made monthly
during the lifetime of the Annuitant which terminates with the last monthly
payment preceding the death of the Annuitant. Option 1 offers the maximum
level of monthly payments, since there is no guarantee of a minimum number
of payments or provision for a death benefit for Beneficiaries. It would be
possible under Option 1 for the Annuitant to receive only one Annuity
Payment if he or she died before the due date of the second Annuity
Payment, two such payments if he or she died before the third Annuity
Payment date, and so on.
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Option 2 -- Life Annuity with 120 Monthly Payments Certain: An Annuity
Payment made monthly during the lifetime of the Annuitant with the
provision that if, at the death of the Annuitant, payments have been made
for less than 120 months, Annuity Payments will be continued during the
remainder of such period to the Beneficiary designated by the
Contractowner. The Beneficiary at any time may elect to redeem in whole or
in part the commuted value of the current dollar amount of the then
remaining number of certain Annuity Payments. If the Beneficiary dies while
receiving Annuity Payments, the present value of the current dollar amount
of the remaining number of certain Annuity Payments shall be paid in one
sum to the estate of the Beneficiary.
Option 3 -- Joint and Two-Thirds Survivor Annuity Payments: An Annuity
Payment made monthly during the joint lifetimes of the Annuitant and a
designated second person and continuing during the lifetime of the survivor
in a reduced amount which reflects two-thirds of the number of Annuity
Units in effect when both persons were alive. It would be possible under
Option 3 for the Annuitant and the designated second person to receive only
one Annuity Payment if both died before the date of the second Annuity
Payment, two such payments if both died before the third annuity payment
date, and so on.
SURRENDERS AND PARTIAL WITHDRAWALS
During the Accumulation Period, the Contractowner may redeem the Contract
in whole (known as a surrender) or in part (known as a partial withdrawal).
Surrenders and partial withdrawals must be requested in writing in a form
acceptable to GIAC. If the request is for surrender of the Contract, said
request must be accompanied by the Contract (or an acceptable affidavit of loss)
in order to be deemed a proper written request. GIAC will not process a request
for a surrender prior to the receipt of the Contract (or an acceptable affidavit
of loss) at its Customer Service Office. GIAC will not honor a request for a
surrender or partial withdrawal after the Retirement Date.
If a surrender or partial withdrawal is made in the first six (6) Contract
years, the contingent deferred sales charge may be imposed (see "Contingent
Deferred Sales Charge," page 15). Surrenders or partial withdrawals may also be
subject to penalty taxes (see "Federal Tax Matters," page 21). No contingent
deferred sales charge will be imposed and the ordering rules will not apply if
amounts are withdrawn directly from the Fixed-Rate Option in accordance with the
bailout provision described in the section entitled "Description of the
Fixed-Rate Option" on page 12 because the renewal rate credited on the Contract
Anniversary Date is set at a rate more than three (3) percentage points below
the interest rate credited for the immediately preceding Contract year. In
addition, after the first Contract year, 10% of the amount of the single premium
payment with respect to Single Premium Payment Contracts, and 10% of the total
premiums paid in the last 72 months immediately preceding the date of withdrawal
with respect to Flexible Premium Payment Contracts, can be withdrawn without
application of the contingent deferred sales charge.
The Accumulation Value on a given day is equal to the sum of the value of
the Variable Accumulation Units and any Fixed Accumulation Units under the
Contract. A surrender or partial withdrawal is effected by cancelling
Accumulation Units which have an aggregate value equal to the dollar amount of
the requested surrender or partial withdrawal as of the Valuation Period on or
next following the date a proper written request for surrender or partial
withdrawal is received by GIAC at its Customer Service Office. If applicable,
the annual Contract administration fee and any contingent deferred sales charge
will be deducted from the surrender proceeds or the remaining Accumulation Value
by the cancellation of additional Accumulation Units.
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In connection with a surrender or partial withdrawal, GIAC will cancel all
Variable Accumulation Units before it cancels any Fixed Accumulation Units (see
"The Fixed-Rate Option," page 12). Cancellation of the Variable Accumulation
Units will be on a pro rata basis reflecting the existing distribution of the
Variable Accumulation Units, unless instructed to the contrary by the
Contractowner.
Payment of a surrender or partial withdrawal will ordinarily be made within
seven (7) days after the date a proper written request is received by GIAC at
its Customer Service Office. When permitted by law, GIAC may delay the payment
of any surrender or partial withdrawal for up to six (6) months after receipt of
such request. GIAC can also delay the payment if the Contract is being contested
and may postpone the calculation or payment of any Contract benefit or transfer
of amounts based on investment performance of the Investment Divisions if: (a)
the New York Stock Exchange is closed for trading or trading has been suspended:
or (b) the Securities and Exchange Commission ("SEC") restricts trading or
determines that a state of emergency exists which may make payment or transfer
impracticable. GIAC also reserves the right to defer the payment of amounts
withdrawn from the Fixed-Rate Option for a period not to exceed six (6) months
from the date proper request for such withdrawal is received by GIAC.
The Contractowner may request a partial withdrawal of the Contract value
provided such partial withdrawal does not result in reducing the Contract value
to less than $500 on the date of the partial withdrawal for an Individual Single
Premium Payment Contract or $250 on the date of the partial withdrawal for an
Individual Flexible Premium Payment Contract. If a partial withdrawal request
would result in any such reduction, GIAC will redeem the total Accumulation
Value and pay the remaining balance to the Contractowner. Such involuntary
surrender would be subject to the contingent deferred sales charge if surrender
of the Contract occurred within the time period for which this charge applied.
(See "Contingent Deferred Sales Charge," page 15.)
TRANSFERS OF CONTRACT VALUES
Subject to the conditions described below and to the terms of any
applicable retirement plan, transfers among the Contract's Variable Investment
Options are permitted both before and after the Retirement Date. No charge is
presently made by GIAC for implementing any transfer. Nevertheless,
Contractowners who contemplate requesting a transfer should carefully consider
their annuity objectives and the investment objectives of the Funds involved in
the proposed transfer before choosing to request a transfer. Frequent transfers
may be inconsistent with the long-term objectives of the Contracts.
GIAC will implement transfers pursuant to proper written or telephone
instructions which specify in sufficient detail the requested changes. Proper
transfer requests received by GIAC at its Customer Service Office prior to 3:30
p.m. Eastern time on a business day will normally be effected as of the end of
that day. GIAC reserves the right to limit the frequency of transfers to not
more than once every 30 days. Contractowners may be invested in a maximum of
four Variable Investment Options or in the Fixed-Rate Option and any three
Variable Investment Options under the Contract at any given time.
A telephone authorization form, properly completed by the Contractowner,
must be on file at GIAC's Customer Service Office before telephone transfer
instructions will be honored by GIAC. If the proper authorization is on file at
GIAC's Customer Service Office, telephone transfer instructions may be made by
calling toll-free 1-800-533-0099 between 9:00 a.m. and 3:30 p.m. (Eastern time)
on days when GIAC is open for business. Each telephone transfer request must
include a precise identification of the Contract and the Contractowner's
Personal Security Code. GIAC may accept telephone transfer requests from any
caller who properly identifies the Contract number and Personal Security Code.
The Funds, GISC, and GIAC shall not be liable for any loss, damage, cost or
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<PAGE>
expense resulting from following telephone transfer instructions reasonably
believed by such parties to be genuine. Contractowners risk possible loss of
principal, interest and capital appreciation in the event of fraudulent
telephone transfers. All or part of any telephone conversation relating to
transfer instructions may be recorded by GIAC without prior disclosure.
Telephone instructions apply only to previously invested monies and do not
change the allocation instructions for any future Net Premiums paid under the
Contract. Allocations of future Net Premium Payments can only be changed by
proper written request.
During periods of drastic economic or market changes, it may be difficult
to contact GIAC to request a telephone transfer. At such times, requests may be
made by regular or express mail and will be processed at the Accumulation Unit
Value on the date of receipt pursuant to the terms and restrictions described in
this "Transfers of Contract Values" section.
GIAC reserves the right to modify, suspend or discontinue the telephone
transfer privilege at any time and without prior notice.
Up until 30 days before the Retirement Date, the Contractowner may transfer
all or part of the value of his or her Variable Investment Options to another or
other Variable Investment Options or to the Fixed-Rate Option.
After the Retirement Date, a Contractowner may also transfer all or a part
of the Annuity value from one or more Variable Investment Options to another or
other Variable Investment Options. However, such transfers may be made only once
per Contract year. Any such transfer will be effected at the next Annuity Unit
value calculated after receipt of proper transfer instructions by GIAC at its
Customer Service Office. No transfers into or out of the Fixed-Rate Option are
permitted following the Retirement Date.
Prior to the Retirement Date, each transfer between the Contract's Variable
Investment Options will be based upon the appropriate Accumulation Unit values
as of the valuation date coincident with or next following the date proper
transfer instructions are received by GIAC at its Customer Service Office. Where
such transfer is requested after the Retirement Date, the number of old Annuity
Units will be changed to reflect the new number of Annuity Units based upon
their respective values on December 31st next following the receipt of proper
instructions by GIAC.
During the period up to 30 days prior to the Retirement Date, the
Contractowner may transfer all or a portion of the Accumulation Units credited
under the Contract among the Variable Investment Options and the Fixed-Rate
Option, subject to certain conditions set forth below. A Contractowner may
transfer amounts from the Fixed-Rate Option to any Variable Investment Option
once each Contract year and only during the 30-day period beginning on the
Contract Anniversary Date. If any accumulation value remains in the Fixed-Rate
Option, amounts may be transferred to no more than three Variable Investment
Options. The maximum amount which may currently be transferred out of the
Fixed-Rate Option each year is the greater of: (a) 33 1/3% of the amount in the
Fixed-Rate Option as of the applicable Contract Anniversary Date or (b) $2,500.
Transfer requests received within the 30-day period beginning on the Contract
Anniversary Date will be effected as of the end of the business day on which the
request is received. These limits are subject to change in the future.
GIAC may postpone requested transfers of all or part of the Contract value
under certain circumstances. See "Surrenders and Partial Withdrawals," page 18.
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OTHER IMPORTANT CONTRACT INFORMATION
Assignment: Assignment of interest under the Contracts is prohibited when
the Contracts are used in connection with Keogh plans, any retirement plans
contemplated by Section 408 of the Code and any corporate retirement plan unless
the Contractowner is not the Annuitant or the Annuitant's employer. An
assignment of the Contract may be treated as a taxable distribution to the
Contractowner. (See "Federal Tax Matters," below.)
Reports: GIAC will send to each Contractowner, at least semi-annually, a
report containing such information as may be required by applicable laws, rules
and regulations. In addition, a statement will be provided at least annually as
to the number of Accumulation Units and the value of such Accumulation Units
under the Contract.
Contractowner Inquiries: A Contractowner may direct inquiries to the
individual who sold him or her the Contract or may call 1-800-221-3253 or write
directly to: The Guardian Insurance & Annuity Company, Inc., P.O. Box 26210,
Lehigh Valley, Pennsylvania 18002.
FEDERAL TAX MATTERS
GENERAL INFORMATION
The operations of the Separate Account form a part of, and are taxed with,
the operations of GIAC under the Code. Investment income and realized net
capital gains on the assets of the Separate Account are reinvested and taken
into account in determining the Accumulation and Annuity Unit values. As a
result, such investment income and realized net capital gains are automatically
applied to increase reserves under the Contract. Under existing Federal income
tax law, GIAC believes that Separate Account investment income and capital gains
on qualified contracts are not taxed to the extent they are applied to increase
reserves under a contract issued in connection with the Separate Account.
Accordingly, GIAC does not anticipate that it will incur any Federal income tax
liability attributable to the Separate Account and, therefore, GIAC does not
make provisions for any such taxes. However, if changes in the Federal tax laws
or interpretations thereof result in GIAC being taxed on income or gains
attributable to the Separate Account or certain types of variable annuity
contracts, then GIAC may impose a charge against the Separate Account (with
respect to some or all Contracts) in order to make provision for payment of such
taxes.
Since September 25, 1981, the Contracts described in this Prospectus have
only been offered under certain retirement plans which qualify for Federal
income tax benefits under the Code. On that date, GIAC ceased offering these
Contracts to purchasers as non-tax qualified variable annuities in light of
Revenue Ruling 81-225 issued by the Internal Revenue Service ("IRS"). That IRS
Ruling described situations in which certain Contractowners of annuities
invested in mutual fund shares would be considered the owners of the shares and
any earnings and gains from the shares would be required to be currently
included in the gross income of such Contractowners. Under the principles of
Revenue Ruling 81-225, each Contractowner of a non-qualified Contract described
in this Prospectus would be treated as the owner of the Fund shares that are the
underlying investment for his or her interest in the Separate Account. All of
the Funds' investment earnings and realized long-term capital gains that are
received by GIAC would be considered to be taxable earnings of the individual
Contractowners. GIAC would not be liable for any income taxes on these
investment earnings and long-term capital gains. GIAC would also be required to
report to both the Contractowner and the IRS those portions of dividend and
capital gains income that are to be reported by such Contractowner in his or her
annual income tax return. The dividend and capital gains income would, for tax
purposes, be reinvested in the Separate Account and considered part of the
Contractowner's cost basis.
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QUALIFIED CONTRACTS
Generally, increases in the value of an individual's account under a
Contract purchased in connection with a retirement plan eligible for favorable
tax treatment under the Code are not taxable until benefits are received.
However, the rules governing the tax treatment of contributions and
distributions under such plans, as set forth in the Code and applicable rulings
and regulations, are complex and subject to change. These rules also vary
according to the type of plan and the terms and conditions of the plan itself.
Therefore, no attempt is made herein to provide more than general information
about the use of the Contracts with these various types of plans. The terms and
conditions of particular plans are not incorporated into GIAC's Contract
administration procedures. Contractowners, participants and beneficiaries are
therefore responsible for determining whether contributions, distributions or
other Contract transactions comply with plan provisions and applicable law.
The following are brief descriptions of the various types of qualified
plans with which the Contracts described in this Prospectus may be used:
Individual Retirement Accounts: Sections 219 and 408 of the Code permit
individuals or their employers to contribute to an individual retirement program
known as an "Individual Retirement Account" or "IRA." IRAs are subject to
limitations on the amount which may be contributed and deducted, and the time
when distributions may commence. In addition, distributions from certain other
types of qualified plans may be placed into an IRA on a tax-deferred basis.
Corporate Pension and Profit-Sharing and H.R. 10 Plans: Sections 401(a) of
the Code permit corporate employers to establish various types of retirement
plans for employees, and self-employed individuals to establish qualified plans
for themselves and their employees. Such retirement plans may permit the
purchase of the Contracts to provide benefits under the plans.
The following rules generally apply to distributions from Contracts
purchased in connection with the plans discussed above:
The portion, if any, of any contribution under a Contract made by or on
behalf of an individual which is not excluded from gross income (generally, any
nondeductible contributions) constitutes the "investment in the contract." If a
distribution is made in the form of annuity payments, the investment in the
contract (adjusted for certain refund provisions) divided by life expectancy (or
other period for which annuity payments are expected to be made) constitutes a
tax-free return of capital each year. However, for an individual whose annuity
starting date is after December 31, 1986, the entire distribution will be fully
taxable once the recipient is deemed to have recovered the dollar amount of his
or her investment in the contract. The dollar amount of annuity payments
received in any year in excess of such return is taxable as ordinary income.
A single payment distribution from a Contract held in connection with a
Section 401(a) plan may qualify for special "lump-sum distribution" treatment.
Otherwise, the amount by which the payment exceeds the "investment in the
contract" (adjusted for any prior distribution) will generally be taxed as
ordinary income in the year of receipt, unless it is validly "rolled over" into
an individual retirement account or another qualified plan.
A penalty tax of 10% may be imposed on the taxable portion of a
distribution from any qualified Contract unless such distribution is: (a) made
on or after age 59 1/2; (b) made as a result of death or disability; (c)
received in substantially equal installments as a life annuity (subject to
special "recapture" rules if the series of payments is subsequently modified);
or (d) allocable to the "investment in the contract" before August 14, 1982.
Other adverse tax consequences may result from distributions that do not conform
to specified commencement and minimum distribution rules, aggregate
distributions in excess of a specified annual amount, and in other
circumstances.
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The taxation of benefits payable upon an employee's death to his or her
beneficiary generally follows these same principles, subject to a variety of
special rules. In particular, tax on death benefits to be paid as a lump-sum may
be deferred if, within 60 days after the lump-sum becomes payable, the
beneficiary instead elects to receive annuity payments.
Distributions from qualified plans are generally subject to income tax
withholding. Effective January 1, 1993, certain distributions from qualified
plans are subject to mandatory federal income tax withholding.
OTHER TAX CONSIDERATIONS
Because of the complexity of the Federal tax law, and the fact that tax
results will vary according to the factual status of the individual involved,
tax advice may be needed by a person contemplating the purchase of a Contract or
the exercise of the various elections under the Contract. It should be
understood that the above discussion concerning the Federal income tax
consequences of owning a Contract are not an exhaustive discussion of all tax
questions that might arise under the Contracts and that special rules exist in
the Code with respect to situations not discussed here. No representation is
made regarding the likelihood of the continuation of current Federal tax laws or
interpretations thereof by the IRS. No attempt has been made to consider any
applicable state or other tax laws except with respect to the imposition of any
premium taxes.
GIAC does not make any guarantee regarding the tax status of any Contract
and the above tax discussion is not intended as tax advice.
VOTING RIGHTS
Proxy materials in connection with any shareholder meeting of a particular
Fund will be delivered to each Contractowner who has allocated Contract values
to that Fund through the corresponding Investment Division as of the record date
for voting at such meeting. Such proxy materials will include an appropriate
form which may be used to give voting instructions. GIAC will vote Fund shares
held in the applicable Investment Division in accordance with instructions
received from Contractowners having an interest in such Fund shares. Fund shares
attributable to Contractowner interests as to which no timely voting
instructions are received will be voted by GIAC in proportion to the voting
instructions received from all persons in a timely manner.
Prior to the Retirement Date, the person having the voting interest under a
Contract shall be the Contractowner. The number of shares held in the Investment
Division which are attributable to a Contract is determined by dividing the
Contractowner's interest in each subdivision by the net asset value per share of
the applicable Fund.
After the Retirement Date, the person having the voting interest shall be
the person then entitled to receive Annuity Payments. This voting interest will
generally decrease with the gradual reduction of the Contract value during the
annuity payout period. The number of shares held in the Investment Divisions
which are attributable to each Contract is determined by dividing the reserve
for such Contract by the net asset value per share of the applicable Fund.
Contractowners have no voting rights with respect to the Fixed-Rate Option.
DISTRIBUTION OF THE CONTRACTS
The Contracts are sold by insurance agents who are licensed by GIAC and who
are either registered representatives of GISC or of broker-dealer firms which
have entered into sales agreements with GISC and GIAC. GISC and such other
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broker-dealers are members of the National Association of Securities Dealers,
Inc. In connection with the sale of the Contracts, GIAC will pay sales
commissions to these individuals or entities which may vary but, in the
aggregate, are not anticipated to exceed an amount equal to 4.5% of a Contract
premium payment. The principal underwriter of the Contracts is GISC, located at
201 Park Avenue South, New York, New York 10003.
RIGHT TO CANCEL THE CONTRACTS
Where required by state law or regulation, the Contract will contain a
provision which permits cancellation by returning the Contract to GIAC, or to
the registered representative through whom it was purchased, within 10 days (20
days in a limited number of states) of delivery of the Contract. The
Contractowner will then receive from GIAC, as and when required by state law or
regulation, either (a) the premiums paid for the Contract or (b) the sum of (i)
the difference between the premiums paid (including any Contract fees or other
charges) and the amounts, if any, allocated to any Investment Divisions and the
Fixed-Rate Option under the Contract, and (ii) the surrender value of the
Contract.
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Separate
Account or GIAC is a party.
ADDITIONAL INFORMATION
A Statement of Additional Information is available (in accordance with the
directions on page 1 of this Prospectus) which contains more details regarding
the Contracts discussed herein. The following identifies the contents of that
document:
Statement of Additional Information
Table of Contents
Services to the Separate Account ......................................... B-2
Annuity Payments ......................................................... B-2
Calculation of Yield Quotations for Value Line Cash Fund ................. B-3
Performance Comparisons .................................................. B-3
Valuation of Assets of the Separate Account .............................. B-3
Transferability Restrictions ............................................. B-3
Experts .................................................................. B-4
Financial Statements ..................................................... B-4
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THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
-------------
Statement of Additional Information dated May 1, 1995
-------------
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the current prospectus for The Guardian/Value Line
Separate Account (marketed under the name "Value Guard") dated May 1, 1995.
A free Prospectus is available upon request by writing or calling:
The Guardian Insurance & Annuity Company, Inc.
Customer Service Office
P.O. Box 26210
Lehigh Valley, Pennsylvania 18002
1-800-221-3253
Read the Prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the Prospectus.
TABLE OF CONTENTS
Services to the Separate Account ......................................... B-2
Annuity Payments ......................................................... B-2
Calculation of Yield Quotations for Value Line Cash Fund ................. B-3
Performance Comparisons .................................................. B-3
Valuation of Assets of the Separate Account .............................. B-3
Transferability Restrictions ............................................. B-3
Experts .................................................................. B-4
Financial Statements ..................................................... B-4
B-1
<PAGE>
SERVICES TO THE SEPARATE ACCOUNT
The Guardian Insurance & Annuity Company, Inc. ("GIAC") maintains the books
and records of The Guardian/Value Line Separate Account (the "Separate
Account"). GIAC, a wholly owned subsidiary of The Guardian Life Insurance
Company of America, acts as custodian of the assets of the Separate Account.
GIAC bears all expenses incurred in the operations of the Separate Account,
except the mortality and expense risk charge and the annual contract
administration fee (as described in the Prospectus), which are borne by the
Contractowners.
The firm of Price Waterhouse LLP, 1177 Avenue of the Americas, New York,
New York 10036 currently serves as independent accountants for the Separate
Account and GIAC.
Guardian Investor Services Corporation(R)("GISC"), a wholly owned
subsidiary of GIAC, serves as principal underwriter for the Separate Account
pursuant to a distribution and service agreement between GIAC and GISC. The
Contracts are offered continuously and are sold by GIAC insurance agents who are
registered representatives of GISC or of other broker-dealers which have selling
agreements with GISC and GIAC. In the years 1994, 1993 and 1992, GISC received
underwriting commissions from GIAC with respect to the sales of the Contracts in
the amount of $26,471, $17,500, and $27,543, respectively.
ANNUITY PAYMENTS
Determination of the First Monthly Annuity Payment: At the time Annuity
Payments begin, the value of the Contractowner's account is determined by
multiplying the appropriate Accumulation Unit Value on the valuation date ten
(10) days before the date the first Annuity Payment is due by the corresponding
number of Accumulation Units credited to the Contractowner's account as of the
date the first Annuity Payment is due, less any applicable premium taxes not
previously deducted.
The Contracts contain tables reflecting the dollar amount of the first
monthly payment which can be purchased with each $1,000 of value accumulated
under the Contract. The amount depends on the form of Annuity, the sex (except
in those states which require "unisex" rates) and the nearest age of the
Annuitant(s). The first Annuity Payment is determined by multiplying the benefit
per $1,000 of value shown in the Contract tables by the number of thousands of
dollars of value accumulated under the Contract.
Value of an Annuity Unit: The value of an Annuity Unit is determined
independently for each of the Variable Investment Options. For any valuation
period the value of an Annuity Unit is equal to the value for the immediately
preceding valuation period multiplied by the annuity change factor for the
current valuation period. The Annuity Unit value for a valuation period is the
value determined as of the end of such period. The annuity change factor is
equal to the net investment factor for the same valuation period adjusted to
neutralize the assumed 4% investment return used in determining the amounts of
annuity payable. The net investment factor is reduced by the amount of the
mortality and expense risk charge on an annual basis during the life of the
Contract. The dollar amount of any monthly payment due after the first monthly
payment under an annuity option will be determined by multiplying the number of
Annuity Units by the value of an Annuity Unit for the valuation period ending
ten (10) days prior to the valuation period in which the monthly payment is due.
Determination of the Second and Subsequent Monthly Annuity Payments: The
amount of the second and subsequent Annuity Payments is determined by
multiplying the number of Annuity Units by the appropriate Annuity Unit value as
of the valuation date 10 days prior to the day such payment is due. The number
of Annuity Units under a Contract is determined by dividing the first monthly
payment by the value of the appropriate Annuity Unit on the date of such
payment. This number of Annuity Units remains fixed during the Annuity Payment
period, provided no Variable Investment Options transfers are made.
The assumed investment return of 4% under the Contract is the measuring
point for subsequent Annuity Payments. If the actual net investment rate (on an
annual basis) remains constant at 4%, the annuity payments will remain constant.
If the actual net investment rate exceeds 4%, the payment will increase at a
rate equal to the amount of such excess. Conversely, if the actual rate is less
than 4%, Annuity Payments will decrease.
B-2
<PAGE>
CALCULATION OF YIELD QUOTATIONS FOR VALUE LINE CASH FUND
The yield of the Investment Division of the Separate Account investing in
the Value Line Cash Fund ("Cash Fund") represents the net change, exclusive of
gains and losses realized by the Cash Fund and unrealized appreciation and
depreciation with respect to the portfolio securities of the Cash Fund, in the
value of a hypothetical pre-existing Contract that is credited with one
Accumulation Unit at the beginning of the period for which yield is determined
(the "base period"). The base period generally will be a seven-day period. The
current yield for a base period is calculated by dividing (i) the net change in
the value of the Contract for the base period (see "Accumulation Period" in the
Prospectus) by (ii) the value of the Contract at the beginning of the base
period and multiplying the result by 365/7.
Yield also may be calculated on an effective or compound basis, which
assumes continual reinvestment by the Investment Division throughout an entire
year of net income earned by the Investment Division at the same rate as net
income is earned in the base period. The effective or compound yield for a base
period is calculated by (A) dividing (i) the net change in the value of the
Contract for the base period by (ii) the value of the Contract as of the
beginning of the base period, (B) adding 1 to the result, (C) raising the sum to
a power equal to 365 divided by the number of days in the base period, and (D)
subtracting 1 from the result.
Deductions from purchase payments (for example, any applicable premium
taxes) and any applicable contingent deferred sales charge assessed at the time
of withdrawal or annuitization are not reflected in the computation of current
yield of the Investment Division. The determination of net change in Contract
value does reflect all deductions that are charged to a Contractowner, in
proportion to the length of the base period and the Investment Division's
average Contract size.
The yield of the Cash Fund Investment Division will vary depending on
prevailing interest rates, the operating expenses and the quality, maturity and
type of instruments held in the portfolio of the Cash Fund. Consequently, no
yield quotation should be considered as representative of what the yield of the
Investment Division may be for any specified period in the future. The
Investment Division's respective yields are not guaranteed.
The current and effective annualized yields for the Investment Division
investing in the Value Line Cash Fund for the seven-day period ending December
31, 1994 were 5.25% and 5.39%, respectively, calculated as described above.
PERFORMANCE COMPARISONS
Advertisements and sales literature for the Separate Account's Investment
Divisions and their underlying Funds may compare their performance rankings to
similar options available through the separate accounts of other insurance
companies as reflected in independent performance data furnished by sources such
as Lipper Analytical Services, Inc., Morningstar, and Variable Annuity Research
& Data Service.
VALUATION OF ASSETS OF THE SEPARATE ACCOUNT
The value of Fund shares held in each Separate Account Investment Division
at the time of each valuation is the redemption value of such shares at such
time. If the right to redeem shares of a Fund has been suspended, or payment of
redemption value has been postponed for the sole purpose of computing Annuity
Payments, the shares held in the Separate Account (and Annuity Units) may be
valued at fair value as determined in good faith by the Board of Directors of
GIAC.
TRANSFERABILITY RESTRICTIONS
Where a Contract is owned in conjunction with a retirement plan qualified
under the Internal Revenue Code, or individual retirement account, and
notwithstanding any other provisions of the Contract, the Contractowner may not
change the ownership of the Contract nor may the Contract be sold, assigned or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose to any person other than GIAC, unless the
Contractowner is the trustee of an employee trust qualified under the Internal
Revenue Code of 1986, the custodian of a custodial account treated as such, or
the employer under a qualified non-trusteed pension plan.
B-3
<PAGE>
EXPERTS
The financial statements of the Separate Account incorporated in this
Statement of Additional Information and in the Registration Statement by
reference to the Annual Report to Contractowners for the year ended December 31,
1994 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants. The financial statements of GIAC as of December
31, 1994 and 1993 and for each of the three years in the period ended December
31, 1994 appearing in this Statement of Additional Information have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants. Such financial statements have been included herein or incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of GIAC which are set forth herein beginning on
page B-5 should be considered only as bearing upon the ability of GIAC to meet
its obligations under the Contracts.
The financial statements of the Separate Account are incorporated herein by
reference to the Separate Account's 1994 Annual Report to Contractowners. Such
financial statements, the notes thereto and the report of independent
accountants thereon are incorporated herein by reference or are included
elsewhere in this Registration Statement. A free copy of the 1994 Annual Report
to Contractowners accompanies this Statement of Additional Information.
The 1994 Annual Report to Contractowners is incorporated herein by
reference to a paper submission for which a confirming copy was filed
electronically.
B-4
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1994 1993
---- ----
<S> <C> <C>
ADMITTED ASSETS
Investments:
Fixed maturities, principally at amortized cost
(market: 1994 -- $332,580,514
1993 -- $280,362,319 ......................................................... 349,574,401 $ 274,110,177
Affiliated money market fund, at market, which approximates cost .............. 2,492,635 2,419,128
Investment in subsidiary ...................................................... 7,305,908 7,281,874
Policy loans -- variable life insurance ....................................... 59,319,920 52,792,533
Short-term investments, at cost, which approximates market .................... 750,692 --
Investment in joint venture ................................................... 51,221 306,384
Cash .......................................................................... 3,691,801 11,673,020
Accrued investment income receivable .......................................... 8,339,330 5,981,640
Due from parent and affiliates ................................................ 1,276,279 5,721,961
Other assets .................................................................. 7,799,923 1,895,578
Receivable from separate accounts ............................................. 3,909,554 3,885,818
Variable annuity and EISP/CIP separate account assets ......................... 3,132,332,691 2,761,965,536
Variable life separate account assets ......................................... 269,585,495 289,074,675
--------------- ---------------
TOTAL ADMITTED ASSETS ....................................................... $ 3,846,429,850 $ 3,417,108,324
=============== ===============
LIABILITIES
Policy liabilities and accruals:
Fixed deferred reserves ..................................................... 239,394,355 $ 185,283,194
Fixed immediate reserves .................................................... 5,627,157 5,138,523
Life reserves ............................................................... 21,353,994 1,140,088
Minimum death benefit guarantees ............................................ 1,592,656 1,184,642
Policy loan collateral fund reserve ......................................... 57,224,423 52,016,474
Interest maintenance reserve ................................................ -- 2,052,169
Accounts payable and accrued expenses .............................................. 1,488,701 1,507,251
Advance premiums - variable life insurance ......................................... 156,821 1,203,735
Due to parent and affiliates ....................................................... 11,769,486 8,120,355
Other liabilities (including deferred tax) ......................................... 7,422,866 9,243,601
Asset valuation reserve ............................................................ 5,229,909 2,996,746
Variable annuity and EISP/CIP separate account liabilities ......................... 3,094,929,496 2,728,279,435
Variable life separate account liabilities ......................................... 262,659,454 280,527,449
--------------- ---------------
TOTAL LIABILITIES ........................................................... 3,708,849,318 3,278,693,662
COMMON STOCK AND SURPLUS
Common Stock, $100 par value, 20,000 shares authorized, issued and
outstanding ....................................................................... 2,000,000 2,000,000
Additional paid-in surplus ......................................................... 137,398,292 137,398,292
Special surplus .................................................................... 14,591,361 11,467,339
Unassigned deficit ................................................................. (16,409,121) (12,450,969)
--------------- ---------------
137,580,532 138,414,662
--------------- ---------------
TOTAL LIABILITIES, COMMON STOCK AND SURPLUS ................................. $ 3,846,429,850 $ 3,417,108,324
=============== ===============
</TABLE>
See notes to financial statements.
B-5
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Premiums and annuity considerations:
Variable annuity ................................................ $ 689,382,776 $ 709,523,708 $ 417,074,858
Life -- variable and level term ................................. 7,899,675 4,789,739 6,639,765
Fixed annuity ................................................... 58,851,539 55,272,748 62,302,660
Net investment income ............................................. 27,909,606 22,726,013 17,757,097
Amortization of IMR ............................................... 542,157 378,621 51,109
Service fees ...................................................... 38,805,308 30,388,678 22,195,739
Variable life - cost of insurance ................................. 3,828,702 3,628,039 3,131,839
Net benefit of reinsurance ceded .................................. 2,448,775 7,650,605 213,992
Other income ...................................................... 7,200,339 4,743,938 9,048
------------- ------------- -------------
836,868,877 839,102,089 529,376,107
------------- ------------- -------------
BENEFITS AND EXPENSES:
Benefits:
Death benefits .................................................. 3,465,054 2,399,238 2,405,897
Annuity benefits ................................................ 5,969,228 2,359,686 1,179,155
Surrender benefits .............................................. 237,767,434 202,329,152 160,547,211
Increase in reserves ............................................ 82,752,551 50,659,936 64,848,233
Net transfers to (from) separate accounts:
Variable annuity and EISP/CIP ................................... 448,433,236 531,905,506 275,699,201
Variable life ................................................... (8,836,731) (8,729,386) (10,000,207)
Commissions ....................................................... 45,602,891 38,089,532 23,975,070
General insurance expenses ........................................ 15,103,590 14,748,769 9,232,685
Taxes, licenses and fees .......................................... 2,731,840 1,510,060 1,617,037
------------- ------------- -------------
832,989,093 835,272,493 529,504,282
------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME
TAXES AND REALIZED GAINS
FROM INVESTMENTS ........................................... 3,879,784 3,829,596 (128,175)
Provision for federal income taxes (benefits) ..................... 601,468 1,889,716 (1,268,828)
------------- ------------- -------------
INCOME (LOSS) BEFORE REALIZED
GAINS FROM INVESTMENTS ..................................... 3,278,316 1,939,880 1,140,653
Realized gains from investments, net of federal income
taxes, net of transfer to IMR -- See Note 4 ..................... (2,232) 131,711 426,530
------------- ------------- -------------
NET INCOME ................................................... $ 3,276,084 $ 2,071,591 $ 1,567,183
============= ============= =============
</TABLE>
See notes to financial statements.
B-6
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENTS OF CHANGES IN COMMON STOCK AND SURPLUS
================================================================================
<TABLE>
<CAPTION>
Special and
Additional Unassigned Total
Common Paid-in Surplus Common Stock
Stock Surplus (Deficit) and Surplus
----- ------- --------- -----------
<S> <C> <C> <C> <C>
Balances at December 31, 1991 ............................ $ 2,000,000 $ 78,000,000 $ (4,125,552) $ 75,874,448
------------- ------------- ------------- -------------
Net income from operations ............................... 1,567,183 1,567,183
Capital contributed by parent ............................ 59,398,292 59,398,292
Decrease in unrealized appreciation of
Company's investment in separate accounts,
net of applicable taxes ................................ (885,131) (885,131)
Increase in unrealized appreciation of Company's
investment in joint venture ............................ 57,199 57,199
Decrease in unrealized appreciation of
Company's investment in subsidiary ..................... (2,172,420) (2,172,420)
Increase in non-admitted assets .......................... (84,614) (84,614)
Net increase in asset valuation/mandatory
securities valuation reserves .......................... (564,073) (564,073)
Provision for Guaranty Association
Assessments ............................................ (200,000) (200,000)
------------- ------------- ------------- -------------
Balances at December 31, 1992 ............................ 2,000,000 137,398,292 (6,407,408) 132,990,884
------------- ------------- ------------- -------------
Net income from operations ............................... 2,071,591 2,071,591
Increase in unrealized appreciation of Company's
investment in separate accounts, net of
applicable taxes ....................................... 3,164,752 3,164,752
Increase in unrealized appreciation of
Company's investment in joint venture .................. 178,539 178,539
Increase in unrealized appreciation of
Company's investment in subsidiary ..................... 56,002 56,002
Decrease in non-admitted assets .......................... 53,396 53,396
Net increase in asset valuation reserve .................. (8,291) (8,291)
Provision for Guaranty Association
Assessments ............................................ (92,211) (92,211)
------------- ------------- ------------- -------------
Balances at December 31, 1993 ............................ $ 2,000,000 $ 137,398,292 $ (983,630) $ 138,414,662
============= ============= ============= =============
Net income from operations ............................... 3,276,084 3,276,084
Change in unrealized appreciation of
Company's investment in separate accounts,
net of applicable taxes ................................ (527,472) (527,472)
Change in unrealized appreciation of
Company's investment in joint venture .................. (255,163) (255,163)
Increase in unrealized appreciation of
Company's investment in subsidiary ..................... 24,034 24,034
Decrease in non-admitted assets .......................... 5,818 5,818
Net increase in asset valuation reserve .................. (2,233,163) (2,233,163)
Disallowed interest maintenance reserve .................. (1,124,268) (1,124,268)
------------- ------------- ------------- -------------
Balances at December 31, 1994 ............................ $ 2,000,000 $ 137,398,292 $ (1,817,760) $ 137,580,532
============= ============= ============= =============
</TABLE>
See notes to financial statements.
B-7
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENTS OF CASH FLOW
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from insurance activities:
Premiums and annuity considerations ............................... $ 732,848,313 $ 770,326,214 $ 485,392,095
Investment income ................................................. 26,625,996 24,134,387 14,401,654
Service fees ...................................................... 35,502,165 26,155,952 19,795,426
Variable life cost of insurance ................................... 3,825,865 3,612,218 3,111,907
Net benefit of reinsurance ceded .................................. 15,996,575 4,068,302 2,984,546
Claims and annuity benefits ....................................... (247,055,539) (206,970,151) (163,992,860)
Commissions ....................................................... (37,186,792) (38,002,665) (23,956,010)
General insurance expenses ........................................ (15,895,233) (13,863,833) (9,611,829)
Taxes, licenses and fees .......................................... (2,896,965) (1,028,249) (1,477,903)
Net transfer to separate accounts ................................. (436,829,701) (521,601,186) (263,535,710)
Federal income tax (excluding tax on capital gains) ............... (1,217,735) 1,372,898 (589,421)
Increase in policy loans .......................................... (6,527,387) (4,691,084) (5,755,827)
Advanced premiums - variable life insurance ....................... 1,046,914 976,893 (390,841)
Other sources (applications) ...................................... 9,430,370 5,404,857 (254,130)
------------- ------------- -------------
NET CASH PROVIDED BY INSURANCE ACTIVITIES ................... 77,666,846 49,894,553 56,121,097
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from dispositions of investment securities ............... 150,649,968 107,412,956 123,434,773
Purchases of investment securities ................................ (231,132,415) (153,772,748) (251,663,409)
Net proceeds from short-term investments .......................... -- 2,459,000 13,177,403
Investment in joint venture ....................................... -- -- --
(Increase) decrease in investments in separate accounts ........... (950,000) (1,800,000) --
Federal income tax on capital gains ............................... (1,538,101) (846,813) (479,790)
Amount due from broker ............................................ (1,926,825) 4,590,573 (1,049,134)
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES ....................... (84,897,373) (41,957,032) (116,580,157)
------------- ------------- -------------
Cash flows from financing activities:
Capital contributed by parent ..................................... -- -- 59,398,292
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................... -- -- 59,398,292
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH ............................. (7,230,527) 7,937,521 (1,060,768)
CASH AT BEGINNING OF YEAR ................................... 11,673,020 3,735,499 4,796,267
------------- ------------- -------------
CASH AT END OF YEAR ......................................... $ 4,442,493 $ 11,673,020 $ 3,735,499
============= ============= =============
</TABLE>
See notes to financial statements.
B-8
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
Note 1 -- Organization
Organization: The Guardian Insurance & Annuity Company, Inc. (GIAC or the
Company) is a wholly owned subsidiary of The Guardian Life Insurance Company of
America (Guardian Life). The Company islicensed 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.
Guardian Investor Services Corporation (GISC) is a wholly owned subsidiary
of the Company. GISC is a registered broker-dealer under the Securities Exchange
Act of 1934 and is a registered investment adviser under the Investment
Adviser's Act of 1940. GISC is the distributor and underwriter for GIAC's
variable products, and is the investment adviser to certain mutual funds
sponsored by Guardian Life which are investment options for the variable
products. GISC was contributed to GIAC by Guardian Life on November 30, 1992 at
its carrying value of $9,398,292.
Insurance Separate Accounts: The Company has established ten insurance
separate accounts primarily to support the variable annuity and life insurance
products it offers. The majority of the separate accounts are unit investment
trusts registered under the Investment Company Act of 1940. Proceeds from the
sale of variable products are invested through these separate accounts in
certain mutual funds specified by the contractholders. In addition, certain
variable annuity and variable life insurance contractholders may invest in The
Guardian Real Estate Account. Participating interests in the real estate account
are registered under the Securities Act of 1933. Of these separate accounts the
Company maintains two separate accounts whose sole purpose is to fund certain
employee benefits plans of Guardian Life.
The assets and liabilities of the separate accounts are clearly identified
and distinct from the other assets and liabilities of the Company. The assets of
the separate accounts will not be charged with any liabilities arising out of
any other business of the Company. However, the obligations of the separate
accounts, including the promise to make annuity and death benefit payments,
remain obligations of the Company. Assets and liabilities of the separate
accounts are stated primarily at the market value of the underlying investments
and corresponding contractholders obligations.
Note 2 -- Summary of Significant Accounting Policies
Basis of presentation of financial statements: The financial statements
have been prepared on the basis of accounting practices prescribed or permitted
by the Insurance Department of the State of Delaware. Such practices are
considered generally accepted accounting principles for mutual life insurance
companies and their wholly owned stock life insurance subsidiaries domiciled in
Delaware.
In 1993, the Financial Accounting Standards Board issued Interpretation No.
40, "Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises," which establishes a different definition of
generally accepted accounting principles for mutual life insurance companies.
Under the Interpretation, financial statements of mutual life insurance
companies for periods beginning after December 15, 1995, which are prepared on
the basis of statutory accounting, will no longer be characterized as in
conformity with generally accepted accounting principles. At that time,
financial statements of mutual life insurance companies would have to apply all
applicable authoritative GAAP accounting pronouncements in order to describe the
financial statements as prepared in "conformity with generally accepted
accounting principles".
B-9
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 - Continued
Management has not yet determined the effect on its December 31, 1994
financial statements of applying the new Interpretation nor whether it will
continue to present its general purpose financial statements in conformity with
the statutory basis of accounting or adopt the accounting changes required in
order to present its financial statements in conformity with generally accepted
accounting principles. However, management believes that adopting the accounting
changes required to present its financial statements in accordance with
generally accepted accounting principles would result in higher reported equity.
The effect of the changes would be reported retroactively through restatement of
all previously issued financial statements beginning with the earliest year
presented.
Valuation of investments: Investments in securities are recorded in
accordance with valuation procedures established by the National Association of
Insurance Commissioners (NAIC). Unrealized gains and losses on investments
carried at market are recorded directly to unassigned surplus. Realized gains
and losses on disposition of investments are determined by the specific
identification method.
Bonds: Bonds are valued principally at amortized cost.
Investment in subsidiary: GIAC's investment in GISC is included in common
stocks and carried at equity in GISC's underlying net assets. Undistributed
earnings or losses are reflected as unrealized capital gains and losses directly
in unassigned surlpus. Dividends received from GISC are recorded as investment
income and amounted to $4,900,000 in 1994 and $2,900,000 in 1993.
Short-Term Investments: Short-term investments are stated at amortized cost
and consist primarily of investments having maturities of six months or less.
Market values for such investments approximate carrying value.
Loans on Policies: Loans on policies are stated at unpaid principal
balance. The carrying amount approximates fair value since loans on policies
have no defined maturity date and reduce the amount payable at death or at
surrender of the contract.
Investment Reserves: The NAIC requires adoption of an asset valuation
reserve (AVR) and interest maintenance reserve (IMR). The AVR establishes
reserves for certain categories of invested assets. The purpose of this reserve
is to stabilize policyholders' surplus from credit related gains and losses on
investments. Changes in AVR are recorded directly to unassigned surplus. The IMR
applies to fixed income investments and establishes a reserve for realized
capital gains and losses, net of tax, which result from changes in interest
rates. Such net realized gains and losses are deferred and amortized into
investment income over the life of the investments sold. When, in aggregate,
realized losses exceed realized gains, the net realized loss is reclassified as
a non-admitted asset with a corresponding charge to surplus.
Contract and policy reserves: Fixed deferred reserves represent the Fund
balance left to accumulate at interest under fixed annuity contracts that were
offered directly by the Company and a fixed rate option that is offered to
variable annuity contractowners. The fixed annuity contracts are no longer
offered by the Company. The estimated fair value of contractholder account
balances within the fixed deferred reserves has been determined to be equivalent
to carrying value as the current offering and renewal rates are set in response
to current market conditions and are only guaranteed for one year. The interest
rate credited on fixed annuity contracts included in fixed deferred reserves for
1994 and 1993 was 5.75% and 6.00%, respectively. The interest rates credited on
the fixed rate option offered to certain variable annuity contractowners was
5.00% during 1994. For the fixed rate option currently issued, the issue and
renewal interest rates credited varies from month to month and ranged from 5.25%
to 4.50% in 1994. Fixed immediate reserves are a liability within the general
account for those annuitants who have elected a fixed annuity payout option. The
immediate contract reserve is computed using the 1971 IAM Table and a 4%
discount rate.
B-10
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 - Continued
Minimum death benefits guarantees represent a reserve for term insurance to
support guaranteed insurance amounts on variable life policies in the event of
possible declines in separate account assets, assuming a 4% discount rate and
mortality consistent with the 1958 or 1980 CSO Table applicable in the pricing
of each policy.
The loan collateral fund reserve is the cash value of loaned variable life
policyowner account values. The reserve is credited with interest at 4% per
annum for single premium variable life policyowners and 6.5% for annual pay
variable life policyowners.
Non-admitted Assets: Certain assets designated as "non-admitted assets" in
accordance with rules and regulations of the Department of Insurance of the
State of Delaware are charged directly to unassigned surplus. At December 31,
1994 and 1993 non-admitted assets consisted of agents' balances and
miscellaneous receivables in the amounts of $77,498 and $83,315, respectively.
Acquisition Costs: Commissions and other costs incurred in acquiring new
business are charged to operations as incurred.
Premiums and Other Revenues: Premiums and annuity considerations are
recognized for funds received on variable life insurance and annuity products.
Corresponding transfers to/from separate accounts are included in the expenses.
Revenue also includes service fees from the separate accounts consisting of
mortality and expense charges, annual administration fees, charges for the cost
of term insurance related to variable life policies and penalties for early
withdrawals. Service fees were not charged on separate account assets of $105.5
million and $81.2 million at December 31, 1994 and 1993, respectively, which
represent investments in Guardian Life's employee benefit plans.
Federal Income Taxes: The provision for federal income taxes is based on
income from operations currently taxable, as well as accrued market discount on
bonds. Realized gains and losses are reported after adjustment for the
applicable federal income taxes. The taxable portion of unrealized appreciation
of the Company's separate account investments is also recorded net of the
applicable federal income taxes.
Note 3 --Federal Income Taxes
The Company's federal income tax return is consolidated with its parent,
Guardian Life. The consolidated income tax liability is allocated among the
members of the group according to a tax sharing agreement. In accordance with
the tax sharing agreement between and among the parent and participating
subsidiaries, each member of the group computes its tax provision and liability
on a separate return basis, but may, where applicable, recognize benefits of net
operating losses and capital losses utilized in the consolidated group.
Estimated payments are made between the members of the group during the year.
The Company records directly to unassigned surplus federal income taxes
attributable to the taxable portion of unrealized appreciation on its seed
capital in the separate accounts. These income taxes will be recognized in
operations upon withdrawal of these capital contributions. The taxable portion
of unrealized appreciation amounted to $590,000, $871,000 and $776,000 at
December 31, 1994, 1993 and 1992, respectively.
A reconciliation of federal income tax expense, based on the prevailing
corporate income tax rate of 35% for 1994 and 1993 and 34% for 1992 to the
B-11
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 - Continued
federal income tax expense reflected in the accompanying financial statements is
as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income tax at prevailing corporate income tax rates applied
to pretax statutory income ........................................... $ 1,357,924 $ 1,340,359 $ (43,580)
Add (deduct) tax effect of:
Adjustment for annuity and other reserves ............................ 141,295 (277,137) (1,400,412)
DAC Tax .............................................................. 1,575,953 1,819,878 1,084,203
Dividend from subsidiary ............................................. (1,715,000) (1,015,000) (714,000)
Other -- net ......................................................... (758,704) 21,616 (195,039)
------------ ------------ ------------
Provision for Federal Income Taxes (Benefits) .......................... $ 601,468 $ 1,889,716 $ (1,268,828)
============ ============ ============
</TABLE>
The provision for federal income taxes includes deferred taxes of $99,120
in 1994, $283,571 in 1993 and $104,070 in 1992 applicable to the difference
between the tax basis and the financial statement basis of recording investment
income relating to accrued market discount.
Note 4 -- Investments
The major categories of net investment income are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Fixed maturities ....................................................... $ 19,949,553 $ 18,104,573 $ 13,754,550
Affiliated money market funds .......................................... 84,083 51,072 69,415
Subsidiary ............................................................. 4,900,000 2,900,000 2,100,000
Policy loans ........................................................... 2,547,670 2,296,794 2,058,451
Short-term investments ................................................. 622,391 269,175 582,084
Joint venture dividend ................................................. 789,867 -- --
------------ ------------ ------------
28,893,564 23,621,614 18,564,500
Less investment expenses ............................................... 983,959 895,601 807,403
------------ ------------ ------------
Net Investment Income .................................................. $ 27,909,605 $ 22,726,013 $ 17,757,097
============ ============ ============
</TABLE>
Net realized gains, less applicable federal income taxes and transfer to
IMR, are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Fixed maturities ..................................................... $ (3,994,716) $ 3,170,154 $ 1,514,647
------------ ------------ ------------
Federal income tax expense (benefit):
Current .............................................................. (1,110,135) 1,253,371 562,693
Deferred ............................................................. (248,068) (123,690) (47,713)
------------ ------------ ------------
(1,358,203) 1,129,681 514,980
------------ ------------ ------------
Transfer to IMR ........................................................ (2,634,280) 1,908,762 573,137
------------ ------------ ------------
Net Realized Gains (Losses) ............................................ $ (2,233) $ 131,711 $ 426,530
============ ============ ============
</TABLE>
B-12
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 - Continued
The increase in unrealized appreciation (depreciation) on fixed maturity
securities was $(23,246,030),$120,062 and $1,793,491 for the years ended
December 31, 1994, 1993 and 1992, respectively.
The market values of bonds are based on quoted prices as available. For
certain private placement debt securities where quoted market prices are not
available, fair value is estimated by management using adjusted market prices
for like securities.
The cost and estimated market values of investments by major investment
category at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
December 31, 1994
---------------------------------------------------------------------
Estimated
Unrealized Unrealized Market
Cost Gain Loss Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations of
U.S. government corporations and
agencies ............................................. $ 45,385,889 $ 140,979 $ 2,176,046 $ 43,350,822
Obligations of states and political
subdivisions ......................................... 15,383,160 37,245 241,430 15,178,975
Debt securities issued by foreign
governments .......................................... 8,100,499 -- 503,504 7,596,995
Corporate debt securities .............................. 280,704,853 44,168 14,295,299 266,453,722
Common stocks .......................................... 11,890,926 -- 2,092,384 9,798,542
------------ ------------ ------------ ------------
$361,465,327 $ 222,392 $ 19,308,663 $342,379,056
============ ============ ============ ============
December 31, 1993
---------------------------------------------------------------------
Estimated
Unrealized Unrealized Market
Cost Gain Loss Value
------------ ------------ ------------ ------------
U.S. Treasury securities & obligations of
U.S. government corporations and
agencies ............................................. $ 56,974,539 $ 2,070,134 $ 146,297 $ 58,898,376
Obligations of states and political
subdivisions ......................................... 6,204,951 137,874 1,580 6,341,245
Debt securities issued by foreign
governments .......................................... 8,134,006 192,600 103,818 8,222,788
Corporate debt securities .............................. 202,796,680 5,189,154 1,085,924 206,899,910
Common stocks .......................................... 11,817,419 -- 2,116,418 9,701,001
------------ ------------ ------------ ------------
$285,927,595 $ 7,589,762 $ 3,454,037 $290,063,320
============ ============ ============ ============
</TABLE>
At December 31, 1994, the amortized cost and estimated market value of debt
securities, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers mayhave the right to call
or prepay obligations.
B-13
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 - Continued
Estimated
Amortized Market
Cost Value
------------ ------------
Due in one year or less ...................... $ 12,522,151 $ 12,410,124
Due after one year through five years ........ 213,647,755 205,326,412
Due after five years through ten years ....... 50,131,760 47,620,620
Due after ten years .......................... 37,810,196 34,066,922
------------ ------------
$314,111,862 $299,424,078
Sinking fund bonds
(including Collateralized
Mortgage Obligations) ...................... 35,462,539 33,156,436
------------ ------------
$349,574,401 $332,580,514
============ ============
During 1994 proceeds from sales of investments in debt securities were
$149,529,893 and gross gains of $1,948,693 and losses of $5,940,026 were
realized on these sales.
Note 5 -- Reinsurance
The Company enters into modified coinsurance agreements with Guardian Life
to provide for reinsurance of selected variable annuity contracts and group life
and individual life policies. Under the terms of these agreements, reserves
related to the reinsured business and corresponding assets are held by the
Company.
The effect of these agreements on the components of the gain from
operations have been combined in the accompanying statements of operations. The
components of this benefit (loss) are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Premiums ceded ................................................ $(151,080,027) $(299,753,792) $(103,872,816)
Reserve adjustments ........................................... 84,062,188 241,226,113 65,122,827
Recoveries on annuitant surrenders ............................ 57,457,059 50,480,535 33,551,694
Recoveries on commissions and expense allowances .............. 15,527,236 15,697,749 5,412,287
Terminal surrender ............................................ (3,517,681) -- --
------------- ------------- -------------
Net Benefit (Loss) of Reinsurance Ceded .............. $ 2,448,775 $ 7,650,605 $ 213,992
============= ============= =============
</TABLE>
The Company has also entered into a coinsurance agreement with Guardian
Life in which it cedes a portion of term life insurance policies underwritten by
it. Premiums ceded to Guardian Life under this agreement totalled $6,727,869 and
$2,903,977 in 1994 and 1993, respectively.
At December 31, 1994, the Company entered into a coinsurance agreement with
a non-affiliated underwriter. The Company assumed 100% of certain life and
disability income policies. Premiums include $21,245,974 related to policies
covered under this agreement.
The reinsurance contracts do not relieve the Company of its primary
obligation for policyholder benefits.
NOTE 6 -- RELATED PARTY TRANSACTIONS
On April 1, 1992, GIAC received a voluntary contribution of $50 million
from Guardian Life.
B-14
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 - Continued
A portion of the Company's business is produced by the registered
representatives of the Guardian Investor Services Corporation (GISC), a wholly
owned subsidiary of the Company. During 1994, 1993 and 1992 premium and annuity
considerations produced by GISC amounted to $482,872,000, $494,873,000 and
$304,255,000, respectively. The related commissions paid to GISC amounted to
$1,709,799, $1,738,613 and $1,072,198 for 1994, 1993 and 1992, respectively.
The Company has 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 has contributed capital to GREA from time to time
to provide funds for acquisitions and to preserve liquidity. The Company's most
recent contributions to GREA were made in December 1993, July 1994 and October
1994 when $1,800,000, $400,000 and $550,000 respectively were invested. At
December 31, 1994 GIAC maintained 35% ownership of GREA.
A portion of the Company's separate account assets are invested in
affiliated mutual funds. These funds consist of The Guardian Park Avenue Fund,
The Guardian Bond Fund, The Guardian Stock Fund, and The Guardian Cash Fund.
Each of these funds has an investment advisory agreement with GISC. The
investments as of December 31, 1994 and 1993 are as follows:
1994 1993
---- ----
The Guardian Park Avenue Fund .......... $ 174,246,222 $ 183,000,081
The Guardian Bond Fund ................. 308,983,625 340,247,635
The Guardian Stock Fund ................ 1,038,929,284 869,203,379
The Guardian Cash Fund ................. 386,985,749 310,798,694
-------------- --------------
$1,909,144,880 $1,703,249,789
============== ==============
During November 1990, the Company entered into an agreement with Baillie
Gifford Overseas Ltd. to form a joint venture company -Guardian Baillie Gifford
Ltd. (GBG) - which is organized as a corporation in Scotland. GBG is registered
in both the United Kingdom and the United States to act as an investment adviser
for the Baillie Gifford International Fund (the International Fund) and the
Baillie Gifford Emerging Markets Fund (the Emerging Markets Fund). The Funds are
offered in the U.S. as investment options under certain variable annuity
contracts and variable life policies. The amount of the Company's separate
account assets invested in the Funds was $309,678,696 and $186,779,084 as of
December 31, 1994 and 1993, respectively.
The Company maintains an investment in an affiliated money market mutual
fund, The Guardian Cash Management Fund, at December 31, 1994 and 1993 this
amounted to $2,492,635 and $2,419,128, respectively.
The Company is billed quarterly by Guardian Life for all compensation and
related employee benefits for those employees of Guardian Life who are engaged
in the Company's business and for the Company's use of Guardian Life's
centralized services and agency force. The amounts charged for these services
amounted to $13,225,062 in 1994, $12,702,470 in 1993, and $9,503,000 in 1992,
and, in the opinion of management, were considered appropriate for the services
rendered.
B-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in common stock and surplus and of cash flows present
fairly, in all material respects, the financial position of The Guardian
Insurance & Annuity Company, Inc. at December 31, 1994 and 1993, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles (practices prescribed or permitted by insurance regulatory
authorities, see Note 2). 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 generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 8, 1995
B-16
<PAGE>
The Guardian/Value Line Separate Account
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) The following financial statements have been incorporated by reference
or are included in Part B:
(1) The Guardian/Value Line Separate Account (incorporated by
reference into Part B):
Statement of Assets and Liabilities as of December 31, 1994
Combined Statement of Operations for the Year Ended
December 31, 1994
Combined Statements of Changes in Net Assets for the Two
Years Ended December 31, 1993 and 1994
Notes to Financial Statements
Report of Price Waterhouse, Independent Accountants
(2) The Guardian Insurance & Annuity Company, Inc. (included in Part B):
Balance Sheets as of December 31, 1994 and 1993
Statements of Operations for the Three Years Ended
December 31, 1994, 1993 and 1992
Statements of Changes in Capital Stock and Surplus for the
Three Years Ended December 31, 1994, 1993 and 1992
Statements of Cash Flows for the Three Years Ended
December 31, 1994, 1993 and 1992
Notes to Financial Statements
Report of Price Waterhouse, Independent Accountants
(b) Exhibits
Number Description
------ -----------
1 . . . . . Resolution of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. establishing
Registrant(1)
2 . . . . . Not Applicable
3 . . . . . Underwriting and Distribution Contracts:
(a) Distribution and Service Agreement between The
Guardian Insurance & Annuity Company, Inc. and
Guardian Investor Services Corporation(2)
(b) Form of Broker-Dealer Supervisory and Service
Agreement(3)
4 . . . . . Variable Annuity Contracts:
(a) Specimen of Single Purchase Payment Variable
Annuity Contract(1)
(b) Specimen of Flexible Purchase Payment Variable
Annuity Contract(1)
(c) Form of Endorsement Rider regarding the
Fixed-Rate Option(4)
C-1
<PAGE>
5 . . . . . Form of Application for Variable Annuity Contract5
6 . . . . . (a) Certificate of Incorporation of The Guardian
Insurance & Annuity Company, Inc.(3)
(b) By-laws of The Guardian Insurance & Annuity
Company, Inc.(3)
7 . . . . . Automatic Indemnity Reinsurance Agreement between
The Guardian Insurance & Annuity Company, Inc. and
The Guardian Life Insurance Company of America(3)
8 . . . . . Amended and Restated Agreement for Services and
Reimbursement Therefor between The Guardian Life
Insurance Company of America and The Guardian
Insurance & Annuity Company, Inc.
9 . . . . . Opinion and Consent of Counsel(6)
10 . . . . . Consent of Price Waterhouse
11 . . . . . Not Applicable
12 . . . . . Agreement with Respect to Providing the Initial
Capital for Registrant(l)
13(a). . . . Powers of Attorney executed by a majority of the
Board of Directors and certain principal officers of
The Guardian Insurance & Annuity Company, Inc.(4)
13(b). . . . Power of Attorney executed by a principal officer of
The Guardian Insurance & Annuity Company, Inc.(7)
- ----------
1. Incorporated by reference to the Registration Statement on Form N-4
(Reg. No. 2-70132), as previously filed.
2. Incorporated by reference to Post-Effective Amendment No. 12 to the
Registration Statement on Form N-4 (Reg. No. 2-70132), as filed on
April 26, 1990.
3. Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-4 (Reg. No. 2-70132), as filed on
February 27, 1987.
4. Incorporated by reference to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-4 (Reg. No. 2-70132), as filed on
April 24, 1991.
5. Incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-4 (Reg. No. 2-70132), as filed on
May 16, 1988.
6. Incorporated by reference to Post-Effective Amendment No. 14 to the
Registration Statement on Form N-4 (Reg. No. 2-70132), as filed on
April 30, 1992.
7. Incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-4 (Reg. No. 2-70132), as filed on
April 29, 1993.
C-2
<PAGE>
Item 25. Directors and Officers of the Depositor
The following is a list of each director and officer of The Guardian
Insurance & Annuity Company, Inc. ("GIAC"), the depositor of the Registrant. The
principal business address of each director and officer is 201 Park Avenue
South, New York, New York 10003.
Name Positions with GIAC
---- -------------------
Arthur V. Ferrara Chairman & Chief Executive Officer
Joseph D. Sargent President & Director
John M. Smith Executive Vice President & Director
Edward K. Rane Senior Vice President, General
Counsel & Director
Frank J. Jones Executive Vice President, Chief
Investment Officer & Director
John C. Angle Director
Philip H. Dutter Director
George T. Conklin, Jr. Director
Leo R. Futia Director
Peter L. Hutchings Director
William C. Warren Director
Charles E. Albers Vice President, Equity Securities
Michele S. Babakian Vice President
John M. Fagan Vice President
Charles G. Fisher Vice President & Actuary
William C. Frentz Vice President, Real Estate
John J. Grandsire Vice President, Administrative
Support
Thomas R. Hickey, Jr. Vice President, Operations
Gary B. Lenderink Vice President, Group Pensions
Frank L. Pepe Vice President & Controller
Donald P. Sullivan, Jr. Vice President
Joseph A. Caruso Secretary
Karen Dickinson Assistant Secretary
John M. Emanuele Treasurer
Rodolfo E. Fidelino Chief Medical Director
Ann T. Kearney Second Vice President
Alexander M. Grant Second Vice President
Raymond J. Henry Second Vice President
Paul Iannelli Assistant Vice President
Paul Parenteau Assistant Vice President
Richard T. Potter, Jr. Counsel
Vickie Riccardo Assistant Counsel
Peggy L. Coppola Assistant Vice President
Larry R. Roscoe Assistant Vice President,
Compliance
Item 26. Persons Controlled by or under Common Control with Reqistrant
The following list sets forth the persons directly controlled by The
Guardian Life Insurance Company of America Guardian Life"), the parent company
of GIAC, the Registrant's depositor, as of April 1, 1994:
C-3
<PAGE>
State of Percent of
Incorporation Voting Securities
Name or Organization Owned
---- --------------- ------------------
The Guardian Insurance & Delaware 100%
Annuity Company, Inc.
Guardian Asset Management Delaware 100%
Corporation
Guardian Reinsurance Services, Connecticut 100%
Inc.
Health Care-Guard, Inc. New York 100%
The Guardian Tax-Exempt Fund Massachusetts 63%
The Guardian Baillie Gifford Massachusetts 30%
International Fund
The Guardian Investment Quality Massachusetts 40%
Bond Fund
The Guardian Asset Allocation Massachusetts 32%
Fund
The following list sets forth the persons directly controlled by GIAC
or other affiliates of Guardian Life and, thus, indirectly controlled by
Guardian Life, as of April 19, 1995:
Approximate
Percentage of Voting
Place of Securities Owned
Incorporation by Guardian Life
Name or Organization Affiliates
---- --------------- ----------------
Guardian Investor Services New York 100%
Corporation
Guardian Baillie Gifford Ltd. Scotland 51%
The Guardian Cash Fund, Inc. Maryland 100%
The Guardian Bond Fund, Inc. Maryland 100%
The Guardian Stock Fund, Inc. Maryland 100%
Baillie Gifford International Maryland 100%
Fund, Inc.
The Guardian Park Avenue Fund Massachusetts 28%
Item 27. Number of Contractowners
Type of Contract Number as of April 1. 1995
---------------- --------------------------
Non-Qualified . . . . . . . . . . . 263
Qualified . . . . . . . . . . . . . 6.007
------
Total . . 6,270
C-4
<PAGE>
Item 28. Indemnification
Reference is made to Article VIII of GIAC's By-Laws, as supplemented by
Section 3.2 of the Certificate of Incorporation of GIAC, filed as Exhibits 6~b)
and 6(a), respectively, to this Registration Statement and incorporated herein
by reference.
Item 29. Principal Underwriters
(a) Guardian Investor Services Corporation ("GISC") is the principal
underwriter of the Registrant's variable annuity contracts and it is also the
principal underwriter of shares of The Guardian Bond Fund, Inc.; The Guardian
Stock Fund, Inc.; The Guardian Cash Fund, Inc.; Baillie Gifford International
Fund, Inc.; and The Park Avenue Portfolio, a series trust consisting of the
following seven series: The Guardian Cash Management Fund, The Guardian Park
Avenue Fund, The Guardian U.S. Government Securities Fund, The Guardian
Investment Quality Bond Fund, The Guardian Tax-Exempt Fund, The Guardian Asset
Allocation Fund and The Guardian Baillie Gifford International Fund. All of the
aforementioned funds and the series trust are registered with the SEC as
open-end management investment companies under the Investment Company Act of
1940, as amended ("1940 Act"). In addition, GISC is the distributor of variable
annuity and variable life insurance contracts currently offered by GIAC through
its separate accounts, The Guardiant/Value Line Separate Account, The Guardian
Separate Account A, The Guardian Separate Account B, The Guardian Separate
Account C and The Guardian Separate Account D, which are all registered as unit
investment trusts under the 1940 Act.
(b) The following is a list of each director and officer of GISC. The
principal business address of each person is 201 Park Avenue South, New York,
New York 10003.
Name Position(s) with GISC
---- ---------------------
John M. Smith President & Director
John C. Angle Director
Arthur V. Ferrara Director
Leo R. Futia Director
Peter L. Hutchings Director
Edward K. Kane Senior Vice President,
General Counsel & Director
Philip H. Dutter Director
Joseph D. Sargent Director
William C. Warren Director
Frank J. Jones Director
Charles E. Albers Executive Vice President
Michele S. Babakian Vice President
Nikolaos D. Monoyios Vice President
John M. Fagan Vice President
Ryan W. Johnson Vice President & National
Sales Director
Thomas R. Hickey, Jr. Vice President, Operations
John J. Grandsire Vice President, Administrative
Support
Frank L. Pepe Vice President & Controller
Alexander M. Grant Second Vice President
Donald P. Sullivan, Jr. Vice President
C-5
<PAGE>
Name Position(s) with GISC
---- ---------------------
Peggy L. Coppola Assistant Vice President
Kevin S. Alter Assistant Vice President
Richard T. Potter, Jr. Counsel
Larry R. Roscoe Assistant Vice President,
Compliance
John M. Emanuele Treasurer
Scott E. Horowitz Director, Systems Support
Joseph A. Caruso Secretary
Karen Dickinson Assistant Secretary
Paul Iannelli Assistant Controller
Grace Nunez Director, Agency Sales Support
Item 30. Location of Accounts and Records
Most of the Registrant's accounts, books and other documents required
to be maintained by Section 31(a) of the 1940 Act and the rules promulgated
thereunder are maintained by GIAC, the depositor, at its Customer Service
Office, 3900 Burgess Place, Bethlehem, Pennsylvania 18017. Documents
constituting the Registrant's corporate records are also maintained by GIAC but
are located at its Executive Office, 201 Park Avenue South, New York, New York
10003.
Item 31. Management Services
None.
Item 32. Undertakings
The Registrant hereby undertakes to include, as part of any application
to purchase a contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information.
C-6
<PAGE>
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following directors and principal officers of The Guardian
Insurance & Annuity Company, Inc. in the capacities and on the date indicated.
s/ARTHUR V. FERRARA* President, Chief Executive
- ----------------------------------- Officer and Director
Arthur V. Ferrara
(Principal Executive Officer)
s/FRANK J. JONES* Senior Vice President, Chief
- ----------------------------------- Investment Officer and Director
Frank J. Jones
(Principal Financial Officer)
s/CHARLES E. ALBERS* Vice President, Equity Securities
- -----------------------------------
Charles E. Albers
s/FRANK L. PEPE* Vice President and
- ----------------------------------- Controller
Frank L. Pepe
(Principal Accounting Officer)
s/JOHN M. SMITH* Executive Vice President
- ----------------------------------- and Director
John M. Smith
s/JOSEPH D. SARGENT* Director
- -----------------------------------
Joseph D. Sargent
s/WILLIAM C. WARREN* Director
- -----------------------------------
William C. Warren
s/EDWARD K. KANE* Senior Vice President,
- ----------------------------------- General Counsel and Director
Edward K. Kane
s/JOHN C. ANGLE* Director
- -----------------------------------
John C. Angle
s/LEO R. FUTIA* Director
- -----------------------------------
Leo R. Futia
s/GEORGE T. CONKLIN JR.* Director
- -----------------------------------
George T. Conklin, Jr.
s/PHILIP H. DUTTER* Director
- -----------------------------------
Philip H. Dutter
Director
- -----------------------------------
Peter L. Hutchings
*By s/THOMAS R. HICKEY, JR.* Date: April 27, 1995
------------------------------
Thomas R. Hickey, Jr.
Vice President, Operations
Pursuant to a Power of Attorney
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, The Guardian Separate Account D certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and the State of New York on the 27th day of
April, 1995.
The Guardian Separate Account D
(Registrant)
By: THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
(Depositor)
By: s/THOMAS R. HICKEY. JR.
------------------------------------
Thomas R. Hickey, Jr.
Vice President, Administration
<PAGE>
The Guardian/Value Line Separate Account
Exhibit Index
Number Description Page No.*
------ ----------- ---------
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.
10(a) Consent of Price Waterhouse LLP
Exhibit (8)
AMENDED AND RESTATED
AGREEMENT FOR SERVICES AND REIMBURSEMENT THEREFOR
This Agreement, dated the 18th of November, 1994, amends and restates
the Agreement for Services and Reimbursement Therefor, dated June 22, 1970,
between THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a New York Corporation
having its principal place of business at 201 Park Avenue South, New York, New
York 10003 (hereinafter called "GUARDIAN") and THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC., a Delaware Corporation having its principal place of business at
201 Park Avenue South, New York, New York 10003 (hereinafter called "THE
SUBSIDIARY").
WHEREAS, THE SUBSIDIARY is an insurance company wholly owned by
GUARDIAN, and
WHEREAS, THE SUBSIDIARY was organized for the purpose among others of
distributing variable insurance and annuity products which are subject to the
regulation of the Securities and Exchange Commission and whose benefits are
dependent upon the performance of a portfolio of common stocks and other
investments, and
WHEREAS, the net profit or net loss of THE SUBSIDIARY will ultimately
belong to GUARDIAN and the sole owner of the stock;
NOW, THEREFORE, in consideration of the mutual advantages which will
accrue to each of the parties, it is hereby convenanted and agreed as follows:
1. THE SUBSIDIARY will develop and qualify its various products for
sale to the public through those members of the Guardian Field Force and others
as may become eligible to do so.
2. THE SUBSIDIARY will account for and administer its own activities as
an Insurance Company in accordance with the laws of the several states and the
federal laws and regulations of the Securities and Exchange Commission where
applicable.
<PAGE>
3. THE SUBSIDIARY undertakes to follow standards set by GUARDIAN in its
operations.
4. As consideration for this Agreement and in connection with carrying
out the provisions hereof, GUARDIAN agrees to provide office space, furniture,
equipment, heat and light and clerical staff. It is further agreed that GUARDIAN
will pay salaries and provide pension benefits and other employee services
including health care benefits on the same basis for THE SUBSIDIARY's officers
and staff as for regular full-time GUARDIAN employees. In the case of those
individuals not fully occupied in work for THE SUBSIDIARY, the proportion of
salaries and other costs attributable to the individual which should be charged
to THE SUBSIDIARY will be determined by time analysis methods. The total of such
costs incurred and paid by GUARDIAN on behalf of THE SUBSIDIARY will be repaid
by THE SUBSIDIARY to GUARDIAN at quarterly intervals upon demand accompanied by
a detailed statement substantiating the amount claimed. Such costs will be
allocated by GUARDIAN to THE SUBSIDIARY using GUARDIAN's cost accounting system.
Costs will be allocated to THE SUBSIDIARY based upon services provided by
various Departments of GUARDIAN as determined by either the Department's
supervising officer or manager or through an allocation developed by GUARDIAN's
Cost Accounting Department utilizing asset information, head count or overhead
information.
THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
/s/ Frank L. Pepe By /s/ John M. Smith
- ------------------------ ------------------------
Witness
THE GUARDIAN LIFE INSURANCE COMPANY
OF AMERICA
/s/ Frank L. Pepe By /s/ Peter L. Hutchings
- ------------------------ --------------------------
Witness
Exhibit 10(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 17 to the registration statement on Form N-4 (the "Registration
Statement") of our report dated February ]7, 1995, relating to the financial
statements appearing in the December 31, 1994 Annual Report to Contractowners of
The Guardian/Value Line Separate Account, which are also incorporated by
reference into the Registration Statement. We also consent to the use in the
Statement of Additional Information of our report dated February 8, 1995,
relating to the financial statements of The Guardian Insurance & Annuity
Company, Inc., which appears in such Statement of Additional Information, and to
the incorporation by reference of our report into the Prospectus. We also
consent to the references to us under the heading "Condensed Financial
Information" in the Prospectus and under the heading "Experts" in the Statement
of Additional Information.
s/PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, NY
April 20, ]995
