As filed with the Securities and Exchange Commission on May 1, 1996
Registration Nos. 2-70132
811-3117
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
POST-EFFECTIVE AMENDMENT No. 18 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
AMENDMENT No. 12 |X|
(Check appropriate box or boxes)
--------------------
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., Vice President and Counsel
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, New York 10003
(Name and address of agent for service)
--------------------
It is proposed that this filing will be effective (check appropriate
box):
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 1, 1996 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|_| on (date) pursuant to paragraph (a)(2) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(2) of Rule 485
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
------------------------
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
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 28, 1996.
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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 The
Guardian Cash Fund
Item 22. Annuity Payments...................................................... Annuity Payments
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, 1996
The Guardian
Insurance & Annuity
[Logo] 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, 1996, 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 SECURI-TIES
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 ........................................... 13
Charges and Deductions ....................................... 14
Pre-Retirement Death Benefit ................................. 15
Accumulation Period .......................................... 16
Annuity Period ............................................... 16
Surrenders and Partial Withdrawals ........................... 18
Transfers of Contract Values ................................. 19
Other Important Contract Information ......................... 20
Federal Tax Matters .............................................. 20
Voting Rights .................................................... 23
Distribution of the Contracts .................................... 23
Right to Cancel the Contracts .................................... 23
Legal Proceedings ................................................ 23
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(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. (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 20.) 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 16.) 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
20.)
(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 23.)
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 .31%
-----
Total Annual Expenses .81%
Value Line Fund
Management Fees .66%
Other Expenses .17%
-----
Total Annual Expenses .83%
Value Line Income Fund
Management Fees .68%
Other Expenses .25%
-----
Total Annual Expenses .93%
Value Line Leveraged Growth Investors
Management Fees .75%
Other Expenses .13%
-----
Total Annual Expenses .88%
Value Line Cash Fund
Management Fees .40%
Other Expenses .17%
----
Total Annual Expenses .57%
Value Line U.S. Government Securities Fund+
Management Fees .50%
Other Expenses .16%
-----
Total Annual Expenses .66%
Value Line Special Situations Fund++
Management Fees .75%
Other Expenses .31%
-----
Total Annual Expenses 1.06%
- --------------------------------------------------------------------------------
* 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 $101 SP $125SP $228 SP $70 SP $102 SP $127 SP $230 SP
You would pay the following expenses on a $1,000
investment, assuming 5% annual return on assets: $70 FP $112 FP $156 FP $229FP $70 FP $112 FP $157 FP $231 FP
- ------------------------------------------------------------------------------------------------------------------------------------
If you do not surrender or you annuitize your Contract: $20 SP $61 SP $105 SP $228 SP $20 SP $62 SP $107 SP $230 SP
You would pay the following expenses on a $1,000
investment, assuming 5% annual return on assets: $20 FP $62 FP $106 FP $229 FP $20 FP $62 FP $107 FP $231 FP
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
If you surrender your Contract at the end of the applicable
time period: $71 SP $105 SP $132 SP $241 SP $71 SP $104 SP $129 SP $235 SP
You would pay the following expenses on a $1,000
investment, assuming 5% annual return on assets: $71 FP $116FP $163 FP $242 FP $71 FP $114 FP $160 FP $237 FP
- ------------------------------------------------------------------------------------------------------------------------------------
If you do not surrender or you annuitize your Contract: $21 SP $65 SP $112 SP $241 SP $21 SP $64 SP $109 SP $235 SP
You would pay the following expenses on a $1,000
investment, assuming 5% annual return on assets: $21 FP $66 FP $113 FP $242 FP $21 FP $64 FP $110 FP $237 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: $67 SP $94 SP $113 SP $201 SP $68 SP $97 SP $117 SP $211 SP $72 SP $109 SP $139 SP $255 SP
You would pay the
following expenses on
a $1,000 investment,
assuming 5% annual
return on assets: $67 FP $104 FP $143 FP $203 FP $68 FP $107 FP $148 FP $213 FP $73 FP $120 FP $169 FP $256 FP
- ------------------------------------------------------------------------------------------------------------------------------------
If you do not surrender or
you annuitize your
Contract: $17 SP $54 SP $93 SP $201 SP $18 SP $57 SP $97 SP $211 SP $22 SP $69 SP $119 SP $255 SP
You would pay the
following expenses on
a $1,000 investment,
assuming 5% annual
return on assets: $17 FP $54 FP $93 FP $203 FP $18 FP $57 FP $98 FP $213 FP $23 FP $70 FP $119 FP $256 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, 1995 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, 1995,
1994 and 1993, 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 1995 Annual
Report to Contractowners which are incorporated by reference into the Statement
of Additional Information. A copy of the 1995 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 the end of each period:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Park Avenue
Fund $ 64.239 $ 65.821 $ 55.266 $ 46.328 $ 34.615
Value Line Fund 34.066 36.013 34.048 32.846 22.284
Value Line Income Fund 36.178 38.201 35.635 35.371 27.799
Value Line Special Situations
Fund 18.570 18.562 16.591 17.355 12.830
Value Line Leveraged
Growth Investors 41.374 43.393 37.713 39.049 26.946
Value Line US Gov't
Securities Fund 35.074 39.653 36.473 34.650 30.060
Value Line Cash Fund 23.942 23.320 22.851 22.246 21.216
Accumulation Unit Value at
End of Period:
The Guardian Park Avenue
Fund 85.415 64.239 $ 65.821 $ 55.266 $ 46.328
Value Line Fund 44.565 34.066 36.013 34.048 32.846
Value Line Income Fund 45.222 36.178 38.201 35.635 35.371
Value Line Special Situations
Fund 23.713 18.570 18.562 16.591 17.355
Value Line Leveraged Growth
Investors 56.152 41.374 43.393 37.713 39.049
Value Line US Gov't
Securities Fund 39.744 35.074 39.653 36.473 34.650
Value Line Cash Fund 24.992 23.942 23.320 22.851 22.246
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Park Avenue
Fund 1,867,807 2,011,941 2,042,159 2,012,445 2,024,689
Value Line Fund 187,752 217,631 238,775 288,819 264,572
Value Line Income Fund 144,584 169,481 185,808 204,834 189,490
Value Line Special Situations
Fund 21,089 45,690 45,135 49,554 72,962
Value Line Leveraged Growth
Investors 83,438 90,681 100,563 97,359 111,823
Value Line US Gov't
Securities Fund 398,208 466,099 624,392 692,476 740,018
Value Line Cash Fund 835,912 980,422 1,089,853 1,538,970 1,896,733
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1990 1989 1988 1987 1986
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Park Avenue
Fund $ 39.820 $ 32.519 $ 27.192 $ 26.672 $ 22.754
Value Line Fund 22.678 17.426 16.045 15.402 13.342
Value Line Income Fund 27.525 22.686 20.422 21.124 18.268
Value Line Special Situations
Fund 13.560 11.251 10.995 12.214 11.735
Value Line Leveraged
Growth Investors 27.669 21.119 20.041 19.679 16.148
Value Line US Gov't
Securities Fund 27.520 24.822 23.222 22.668 20.684
Value Line Cash Fund 19.855 18.388 17.297 16.409 15.556
Accumulation Unit Value at
End of Period:
The Guardian Park Avenue
Fund $ 34.615 $ 39.820 $ 32.519 $ 27.192 $ 26.672
Value Line Fund 22.284 22.678 17.426 16.045 15.402
Value Line Income Fund 27.799 27.525 22.686 20.422 21.124
Value Line Special Situations
Fund 12.830 13.560 11.251 10.995 12.214
Value Line Leveraged Growth
Investors 26.946 27.669 21.119 20.041 19.679
Value Line US Gov't
Securities Fund 30.060 27.520 24.822 23.222 22.668
Value Line Cash Fund 21.216 19.855 18.388 17.297 16.409
Number of Accumulation Units
Outstanding at End of Period:
The Guardian Park Avenue
Fund 2,004,863 2,024,327 1,978,171 2,086,407 1,795,194
Value Line Fund 303,209 286,760 318,843 407,628 421,450
Value Line Income Fund 200,570 208,745 204,012 222,681 199,881
Value Line Special Situations
Fund 50,596 40,606 59,787 100,367 110,236
Value Line Leveraged Growth
Investors 121,135 114,132 134,771 169,850 148,654
Value Line US Gov't
Securities Fund 657,866 652,888 606,594 482,033 522,565
Value Line Cash Fund 2,281,121 2,517,433 2,711,586 2,558,838 1,861,243
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NON TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Park Avenue
Fund $ 58.628 $ 60.071 $ 50.438 $ 42.281 $ 31.591
Value Line Fund 29.335 31.012 29.320 28.285 19.189
Value Line Income Fund 34.074 35.980 33.563 33.314 26.182
Value Line Special Situations
Fund 18.480 18.472 16.511 17.271 12.767
Value Line Leveraged Growth
Investors 41.316 43.332 37.660 38.995 26.908
Value Line US Gov't
Securities Fund 35.075 39.655 36.474 34.651 30.061
Value Line Cash Fund 23.942 23.320 22.851 22.246 21.216
Accumulation Unit Value at
End of Period:
The Guardian Park Avenue
Fund $ 77.954 $ 58.628 $ 60.071 $ 50.438 $ 42.281
Value Line Fund 38.376 29.335 31.012 29.320 28.285
Value Line Income Fund 42.592 34.074 35.980 33.563 33.314
Value Line Special Situations
Fund 23.599 18.480 18.472 16.511 17.271
Value Line Leveraged Growth
Investors 56.074 41.316 43.332 37.660 38.995
Value Line US Gov't
Securities Fund 39.745 35.075 39.655 36.474 34.651
Value Line Cash Fund 24.992 23.942 23.320 22.851 22.246
Number of Accumulation
Units Outstanding at
End of Period:
The Guardian Park Avenue
Fund 365 1,094 954 1,695 3,522
Value Line Fund 1,861 2,469 2,471 3,216 4,013
Value Line Income Fund 493 897 1,043 1,044 2,541
Value Line Special Situations
Fund 518 519 519 519 988
Value Line Leveraged Growth
Investors 66 251 251 252 962
Value Line US Gov't
Securities Fund 235 549 1,050 1,051 2,678
Value Line Cash Fund 4,676 6,884 7,530 8,932 10,943
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1990 1989 1988 1987 1986
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
NON TAX QUALIFIED
Accumulation Unit Value at
Beginning of Period:
The Guardian Park Avenue
Fund $ 36.342 $ 29.679 $ 24.817 $ 24.342 $ 20.766
Value Line Fund 19.528 15.006 13.817 13.263 11.490
Value Line Income Fund 25.924 21.367 19.234 19.896 17.206
Value Line Special Situations
Fund 13.494 11.197 10.942 12.155 11.679
Value Line Leveraged Growth
Investors 27.630 21.090 20.013 19.651 16.125
Value Line US Gov't
Securities Fund 27.521 24.823 23.223 22.669 20.665
Value Line Cash Fund 19.855 18.388 17.297 16.409 15.556
Accumulation Unit Value at
End of Period:
The Guardian Park Avenue
Fund $ 31.591 $ 36.342 $ 29.679 $ 24.817 $ 24.342
Value Line Fund 19.189 19.528 15.006 13.817 13.263
Value Line Income Fund 26.182 25.924 21.367 19.234 19.896
Value Line Special Situations
Fund 12.767 13.494 11.197 10.942 12.155
Value Line Leveraged Growth
Investors 26.908 27.630 21.090 20.013 19.651
Value Line US Gov't
Securities Fund 30.061 27.521 24.823 23.223 22.669
Value Line Cash Fund 21.216 19.855 18.388 17.297 16.409
Number of Accumulation
Units Outstanding at
End of Period:
The Guardian Park Avenue
Fund 3,961 3,508 3,704 4,931 6,004
Value Line Fund 4,010 4,016 4,214 3,828 4,314
Value Line Income Fund 1,212 1,336 1,175 1,535 1,264
Value Line Special Situations
Fund 991 994 1,012 1,079 1,482
Value Line Leveraged Growth
Investors 2,003 1,904 2,071 2,076 1,619
Value Line US Gov't
Securities Fund 2,563 3,159 2,645 2,218 1,816
Value Line Cash Fund 14,981 18,633 19,822 20,797 24,838
</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
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 $5.0 billion as of December 31, 1995.
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, 1995, Guardian Life had total assets in excess
of $10.9 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. Delaware insurance law provides that the assets of the
Separate Account are not chargeable with liabilities arising out of any other
business GIAC may conduct. (See "Federal Tax Matters.")
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.")
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 maturities of 13 months or less) and
concentrates its investments in U.S. Government securities, bank
obligations and commercial paper. To
10
<PAGE>
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) ("GISC"), 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
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.")
12
<PAGE>
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."
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.")
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," "Descriptions of the Variable Investment
Options," 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.")
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.
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.
13
<PAGE>
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 administrative 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 1995 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
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
14
<PAGE>
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.") 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
CDSC. Such withdrawals may, however, be subject to penalty taxes and/or
mandatory federal income tax withholding. (See "Federal Tax Matters.") 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.") 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.
15
<PAGE>
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.
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)
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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 accommodate 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.
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.
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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"). Surrenders or partial withdrawals may also be subject
to penalty taxes (see "Federal Tax Matters"). 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" 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.
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". 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
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<PAGE>
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.")
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
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
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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."
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.")
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
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<PAGE>
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.
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.
Adverse tax consequences may result from contributions in excess of specified
limits; distributions prior to age 591 1/42 (subject to certain exceptions);
distributions that do not conform to specified commencement and minimum
distribution rules; aggregate distributions in excess of a specified annual
amount; and in other specified circumstances. Purchasers of Contracts for use
with any retirement plan should consult their legal counsel and tax adviser
regarding the suitability of the Contract.
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.
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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 591 1/42; (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.
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.
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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
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.
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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
Page
----
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-4
Experts.............................................................. B-4
Financial Statements................................................. B-4
24
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THE GUARDIAN /VALUE LINE SEPARATE ACCOUNT
OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
--------------
Statement of Additional Information dated May 1, 1996
--------------
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, 1996.
A free Prospectus is available upon request by writing or calling:
The Guardian Insurance & Annuity Company, Inc.
Customer Service Office
P.O. Box 26210
Lehigh Valley, Pennsylvania 18002
1-800-221-3253
Read the Prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the Prospectus.
TABLE OF CONTENTS
Page
----
Services to the Separate Account............................ B-2
Annuity Payments............................................ B-2
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-4
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 1995, 1994 and 1993, GISC received
underwriting commissions from GIAC with respect to the sales of the Contracts in
the amount of $13,517, $26,471 and $17,500, 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.
B-2
<PAGE>
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.
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, 1995 were 5.18% and 5.32%, 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
B-3
<PAGE>
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.
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,
1995 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants. The financial statements of GIAC as of December
31, 1995 and 1994 and for each of the three years in the period ended December
31, 1995 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 1995 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 1995 Annual Report
to Contractowners accompanies this Statement of Additional Information.
B-4
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
---- ----
<S> <C> <C>
ADMITTED ASSETS
Investments:
Fixed maturities, principally at amortized cost
(market: 1995-- $415,119,363; 1994-- $332,580,514)................ $ 405,213,799 $ 349,574,401
Affiliated money market fund, at market, which approximates cost.... 2,633,939 2,492,635
Investment in subsidiary............................................ 7,604,442 7,305,908
Policy loans-- variable life insurance.............................. 63,842,200 59,319,920
Investment in joint venture......................................... 44,418 51,221
Cash and short-term investments..................................... 17,983,654 4,442,493
Accrued investment income receivable................................ 9,771,251 8,339,330
Due from parent and affiliates...................................... 2,982,854 1,989,409
Other assets........................................................ 9,932,726 7,591,680
Receivable from separate accounts................................... 3,543,010 4,359,809
Variable annuity and EISP/CIP separate account assets............... 4,174,493,377 3,132,332,691
Variable life separate account assets............................... 311,173,536 269,585,495
-------------- --------------
TOTAL ADMITTED ASSETS............................................ $5,009,219,206 $3,847,384,992
============== ==============
LIABILITIES
Policy liabilities and accruals:
Fixed deferred reserves........................................... $ 300,059,252 $ 239,394,355
Fixed immediate reserves.......................................... 4,966,569 5,627,157
Life reserves..................................................... 22,502,664 21,353,994
Minimum death benefit guarantees.................................. 1,171,951 1,549,213
Policy loan collateral fund reserve............................... 61,798,105 57,224,423
Accrued expenses, taxes & commissions.................................. 1,250,797 867,435
Due to parent and affiliates........................................... 16,288,804 11,781,592
Other liabilities (including deferred tax)............................. 13,715,162 9,187,431
Asset valuation reserve................................................ 9,341,353 5,229,909
Variable annuity and EISP/CIP separate account liabilities............. 4,129,376,222 3,094,929,496
Variable life separate account liabilities............................. 306,870,400 262,659,454
-------------- --------------
TOTAL LIABILITIES................................................. 4,867,341,279 3,709,804,459
============== ==============
COMMON STOCK AND SURPLUS
Common Stock, $100 par value, 20,000 shares authorized, issued and
outstanding......................................................... 2,000,000 2,000,000
Additional paid-in surplus............................................. 137,398,292 137,398,292
Assigned and unassigned surplus........................................ 2,479,635 (1,817,759)
-------------- --------------
141,877,927 137,580,533
-------------- --------------
TOTAL LIABILITIES, COMMON STOCK AND SURPLUS...................... $5,009,219,206 $3,847,384,992
============== ==============
</TABLE>
See notes to financial statements.
B-5
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Premiums and annuity considerations:
Variable annuity ................................... $ 566,644,345 $ 668,146,802 $ 709,523,708
Life-- variable and level term ..................... 12,647,143 29,135,648 4,789,739
Fixed annuity ...................................... 63,455,538 58,851,539 55,272,748
Net investment income ................................ 36,293,598 27,909,606 22,726,013
Amortization of IMR .................................. 257,380 542,157 378,621
Service fees ......................................... 50,593,228 38,805,312 30,388,678
Variable life-- cost of insurance .................... 4,232,564 3,828,702 3,628,039
Net benefit of reinsurance ceded ..................... (18,138,690) 2,448,774 7,650,605
Other income ......................................... 8,187,301 7,200,339 4,762,342
------------- ------------- -------------
724,172,407 836,868,879 839,120,493
------------- ------------- -------------
BENEFITS AND EXPENSES:
Benefits:
Death benefits ..................................... 7,671,355 3,727,449 2,667,399
Annuity benefits ................................... 330,248,710 233,591,876 196,231,910
Surrender benefits ................................. 18,434,505 9,882,392 8,188,767
Increase in reserves ............................... 65,017,032 82,752,551 50,659,936
Net transfers to (from) separate accounts:
Variable annuity and EISP/CIP ...................... 252,764,129 448,425,833 531,986,941
Variable life ...................................... (17,784,281) (8,822,426) (8,746,188)
Commissions .......................................... 34,364,742 45,602,891 38,089,532
General insurance expenses ........................... 25,925,336 15,096,689 14,702,540
Taxes, licenses and fees ............................. 2,477,492 2,731,840 1,510,060
------------- ------------- -------------
719,119,020 832,989,095 835,290,897
------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME
TAXES AND REALIZED GAINS
FROM INVESTMENTS .............................. 5,053,387 3,879,784 3,829,596
Provision for federal income taxes (benefits) ........ 439,667 601,468 1,889,716
------------- ------------- -------------
INCOME (LOSS) BEFORE REALIZED
GAINS FROM INVESTMENTS ........................ 4,613,720 3,278,316 1,939,880
Realized gains from investments, net of federal income
taxes, net of transfer to IMR ...................... 342,455 (2,232) 131,711
------------- ------------- -------------
NET INCOME ...................................... $ 4,956,175 $ 3,276,084 $ 2,071,591
============= ============= =============
</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, 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
Increase in unrealized appreciation of
Company's investment in separate accounts,
net of applicable taxes ..................... (527,471) (527,471)
Increase 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
Disallowed interest maintenance reserve ........ (1,124,268) (1,124,268)
Decrease in non-admitted assets ................ 5,818 5,818
Net decrease in asset valuation reserve ........ (2,233,163) (2,233,163)
------------- ------------- ------------- -------------
Balances at December 31, 1994 .................. 2,000,000 137,398,292 (1,817,759) 137,580,533
------------- ------------- ------------- -------------
Net income from operations ..................... 4,956,175 4,956,175
Increase in unrealized appreciation of Company's
investment in separate accounts, net of
applicable taxes ............................ 3,024,930 3,024,930
Increase in unrealized appreciation of
Company's investment in joint venture ....... (6,803) (6,803)
Increase in unrealized appreciation of
Company's investment in subsidiary .......... 298,534 298,534
Disallowed interest maintenance reserve ........ 143,080 143,080
Increase in non-admitted assets ................ (7,078) (7,078)
Net decrease in asset valuation reserve ........ (4,111,444) (4,111,444)
------------- ------------- ------------- -------------
Balances at December 31, 1995 .................. $ 2,000,000 $ 137,398,292 $ 2,479,635 $ 141,877,927
============= ============= ============= =============
</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,
-----------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from insurance activities:
Premium and annuity considerations ..................... $ 634,983,490 $ 732,848,313 $ 770,326,214
Investment income ...................................... 35,916,075 26,625,996 24,134,387
Service fees ........................................... 47,345,894 35,502,165 26,155,952
Variable life cost of insurance ........................ 4,196,060 3,825,865 3,612,218
Net benefit of reinsurance ceded ....................... (16,860,850) 15,996,575 4,068,302
Claims and annuity benefits ............................ (351,544,810) (247,055,539) (206,970,151)
Commissions ............................................ (32,903,591) (37,186,792) (38,002,664)
General insurance expenses ............................. (21,641,468) (15,895,233) (13,863,833)
Taxes, licences and fees ............................... (1,883,881) (2,896,965) (1,028,249)
Net transfers to separate accounts ..................... (227,981,221) (436,829,701) (521,601,186)
Federal income tax (excluding tax on capital gains) .... (1,737,654) (1,217,735) 1,372,898
Increase in policy loans ............................... (4,522,280) (6,527,387) (4,691,084)
Other sources (applications) ........................... 8,193,634 10,477,284 6,381,750
------------- ------------- -------------
NET CASH PROVIDED BY INSURANCE
ACTIVITIES ...................................... 71,559,398 77,666,846 49,894,554
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from dispositions of investment securities .... 62,404,716 150,649,968 107,412,956
Purchases of investment securities ..................... (118,543,796) (231,132,415) (153,772,748)
Net proceeds from short-term investments ............... -- -- 2,459,000
Investment in joint venture ............................ -- -- --
(Increase) decrease in investments in separate account . (100,000) (950,000) (1,800,000)
Federal income tax on capital gains .................... 1,173,020 (1,538,101) (846,813)
Amount due to/(from) broker ............................ (2,952,177) (1,926,825) 4,590,573
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES ............. (58,018,237) (84,897,373) (41,957,032)
------------- ------------- -------------
Cash flows from financing activities:
Capital contributed by parent .......................... -- -- --
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES ........................................... -- -- --
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH ...................... 13,541,161 (7,230,527) 7,937,522
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF YEAR ................................. 4,442,493 11,673,020 3,735,499
------------- ------------- -------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD ..................................... $ 17,983,654 $ 4,442,493 $ 11,673,021
============= ============= =============
</TABLE>
See notes to financial statements.
B-8
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
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 is licensed to conduct life and health
insurance business in all fifty states and the District of Columbia. The
Company's primary business is the sale of variable deferred annuity contracts
and variable and term life insurance policies. For variable products other than
401(k) products contracts are sold by insurance agents who are licensed by GIAC
and are either Registered Representatives of Guardian Investor Services
Corporation (GISC) or of broker dealer firms which have entered into sales
agreements with GIAC and GISC. The Company's general agency distribution system
is used for the sale of other products and policies.
Guardian Investor Services Corporation 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 GIAC which
are investment options for the variable products.
Insurance Separate Accounts: The Company has established eleven 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
B-9
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
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."
Management has not yet finalized the effect on its December 31, 1995
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 carried at equity
in GIAC's underlying net assets. Undistributed earnings or losses are reflected
as unrealized capital gains and losses directly in unassigned surplus. Dividends
received from GISC are recorded as investment income and amounted to $6,700,000
in 1995 and $4,900,000 in 1994.
Short-Term Investments: Short-term investments are stated at amortized
cost and consist primarily of investments having maturities at the date of
purchase of six months or less. Market values for such investments approximate
carrying value.
Loans on Policies: Loans on policies are stated at unpaid principal
balance. The carrying amount approximates fair value since loans on policies
have no defined maturity date and reduce the amount payable at death or at
surrender of the contract.
Investment Reserves: 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
1995 and 1994 was 5.75% and 5.75%, respectively. The interest rates credited on
the
B-10
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
fixed rate option offered to certain variable annuity contractowners ranged from
5.00% to 5.25% during 1995. For the fixed rate option currently issued, the
issue and renewal interest rates credited varies from month to month and ranged
from 5.50% to 5.20% in 1995. 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.
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.
The preparation of financial statements in conformity with statutory
accounting practices requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
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,
1995 and 1994 non-admitted assets consisted of agents' balances and
miscellaneous receivables in the amounts of $84,575 and $77,498, 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 $117.7
million and $105.5 million at December 31, 1995 and 1994, 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.
Other: Certain reclassifications have been made in the amounts presented
for prior periods to conform those periods with the 1995 presentation.
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
B-11
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
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 $1,209,000, $590,000 and $871,000 at
December 31, 1995, 1994 and 1993, respectively.
A reconciliation of federal income tax expense, based on the prevailing
corporate income tax rate of 35% for 1995, 1994 and 1993 to the federal income
tax expense reflected in the accompanying financial statements is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income tax at prevailing corporate income tax rates
applied to pretax statutory income ............. $ 1,768,688 $ 1,357,924 $ 1,340,359
Add (deduct) tax effect of:
Adjustment for annuity and other reserves ...... 337,668 141,295 (277,137)
DAC Tax ........................................ 666,260 1,575,953 1,819,878
Dividend from subsidiary ....................... (2,345,000) (1,715,000) (1,015,000)
Other-- net .................................... 12,051 (758,704) 21,616
----------- ----------- -----------
Provision for Federal Income Taxes (Benefits) ..... $ 439,667 $ 601,468 $ 1,889,716
=========== =========== ===========
</TABLE>
The provision for federal income taxes includes deferred taxes of $304,923
in 1995, $99,120 in 1994 and $283,571 in 1993 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:
Year Ended December 31,
-----------------------------------------
1995 1994 1993
---- ---- ----
Fixed maturities .................. $25,795,915 $19,949,553 $18,104,573
Affiliated money market funds ..... 130,729 84,083 51,072
Subsidiary ........................ 6,700,000 4,900,000 2,900,000
Policy loans ...................... 2,847,532 2,547,670 2,296,794
Short-term investments ............ 1,181,215 622,391 269,175
Joint venture dividend ............ 684,306 789,867 --
----------- ----------- -----------
37,339,697 28,893,564 23,621,614
Less investment expenses .......... 1,046,099 983,959 895,601
----------- ----------- -----------
Net Investment Income ............. $36,293,598 $27,909,605 $22,726,013
=========== =========== ===========
B-12
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
Net realized gains, less applicable federal income taxes and transfer to
IMR, are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Realized capital gains (losses) .......... $ 1,323,447 $(3,994,716) $ 3,170,154
----------- ----------- -----------
Federal income tax expense (benefit):
Current .................................. 622,821 (1,110,135) 1,253,371
Deferred ................................. (42,290) (248,068) (123,690)
----------- ----------- -----------
Total Federal income tax expense (benefit) 580,531 (1,358,203) 1,129,681
----------- ----------- -----------
Transfer to IMR ............................. 400,461 (2,634,280) 1,908,762
----------- ----------- -----------
Net Realized Gains (Losses) ................. $ 342,455 $ (2,233) $ 131,711
=========== =========== ===========
</TABLE>
The increase in unrealized appreciation (depreciation) on fixed maturity
securities was $17,129,267, $(23,246,030) and $120,062 for the years ended
December 31, 1995, 1994 and 1993, 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, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
December 31, 1995
---------------------------------------------------------
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 .............................. $ 86,663,351 $ 2,599,555 $ -- $ 89,262,906
Obligations of states and political
subdivisions .......................... 6,086,127 108,215 1,599 6,192,743
Debt securities issued by foreign
governments ........................... 8,061,711 537,479 -- 8,599,190
Corporate debt securities ................ 304,402,610 7,379,556 717,644 311,064,522
Common stocks ............................ 12,032,231 -- 1,793,850 10,238,381
------------ ------------ ------------ ------------
$417,246,030 $ 10,624,805 $ 2,513,093 $425,357,742
============ ============ ============ ============
</TABLE>
B-13
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
<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
============ ============ ============ ============
</TABLE>
At December 31, 1995, 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 may have the right to
call or prepay obligations.
Estimated
Amortized Market
Cost Value
------------ ------------
Due in one year or less ...................... $ 56,986,877 $ 57,324,698
Due after one year through five years ........ 238,553,324 242,364,605
Due after five years through ten years ....... 41,900,535 44,642,381
Due after ten years .......................... 34,405,999 36,306,163
------------ ------------
371,846,735 380,637,847
Sinking fund bonds
(including Collateralized
Mortgage Obligations) ..................... 33,367,064 34,481,514
------------ ------------
$405,213,799 $415,119,361
============ ============
During 1995, proceeds from sales of investments in debt securities were
$62,404,716 and gross gains of $993,944 and losses of $377,851 were realized on
these sales.
Note 5 -- Reinsurance Ceded
The Company enters into coinsurance, modified coinsurance and yearly
renewable term agreements with Guardian Life and outside parties 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:
B-14
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
<TABLE>
<CAPTION>
Year Ended December 31
(Amounts in 000's)
-----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums and annuity considerations ............... $ (37,789) $(147,055) $(286,831)
Deposit - type funds .............................. (3,423) (10,577) (15,966)
Commissions and reinsurance expense allowances .... 10,058 19,542 19,885
Policy and contract claims ........................ 55,109 60,720 52,753
Surrender benefits and other fund withdrawals ..... 774 -- --
Reserve adjustments on reinsurance ceded .......... (32,193) 84,062 241,226
Increase in aggregate reserve for life and accident
and health policies ............................. 11,914 16,350 --
--------- --------- ---------
Net income from reinsurance ceded ....... $ 4,450 $ 23,042 $ 11,067
========= ========= =========
</TABLE>
The Company has entered into a modified coinsurance agreement with
Guardian Life. The net benefit (loss) of reinsurance ceded to Guardian Life
under this agreement totaled ($18,138,690), $2,448,774 and $7,650,605 in 1995,
1994 and 1993 respectively.
The reinsurance contracts do not relieve the Company of its primary
obligation for policyowner benefits.
NOTE 6 -- Reinsurance Assumed
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 $7,153,623 and $21,545,974 in 1995 and 1994,
respectively, related to policies covered under this agreement.
NOTE 7 -- Related Party Transactions
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 1995, 1994 and 1993, premium and annuity
considerations produced by GISC amounted to $400,148,692, $482,872,000 and
$494,873,000, respectively. The related commissions paid to GISC amounted to
$1,409,708, $1,709,799 and $1,738,613 for 1995, 1994 and 1993, 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, 1995 GIAC maintained 37% 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, 1995 and 1994 are as follows:
B-15
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
1995 1994
---- ----
The Guardian Park Avenue Fund .... $ 214,919,292 $ 174,246,222
The Guardian Bond Fund ........... 374,461,581 308,983,625
The Guardian Stock Fund .......... 1,615,270,799 1,038,929,284
The Guardian Cash Fund ........... 356,820,089 386,985,749
-------------- --------------
$2,561,471,761 $1,909,144,880
============== ==============
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 $334,281,959 and $309,678,696
as of December 31, 1995 and 1994, respectively.
The Company maintains an investment in an affiliated money market mutual
fund, The Guardian Cash Management Fund. At December 31, 1995 and 1994 this
amounted to $2,633,939 and $2,492,635, 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 $23,613,359 in 1995, $13,225,062 in 1994 and $12,702,470 in 1993,
and, in the opinion of management, were considered appropriate for the services
rendered.
NOTE 8 -- Separate Accounts
The following represents a reconciliation of net transfers from GIAC to
the separate accounts:
Transfers as reported in the Summary of Operations of the Separate Account
Statement:
1995 1994
---- ----
Transfers to separate accounts ........... $ 582,715,569 $ 688,657,147
Transfers from separate accounts ......... (398,346,503) (288,606,548)
------------- -------------
Net transfers to (from) separate accounts 184,369,066 400,050,599
------------- -------------
Reconciling Adjustments:
Mortality & expense guarantees-- Annuity . 41,474,872 31,629,838
Mortality & expense guarantees-- VLI ..... 1,571,955 1,341,318
Administrative fees-- VA only ............ 3,331,391 2,752,950
Cost of collection-- VLI ................. 4,232,564 3,828,702
------------- -------------
Total adjustments ........................ 50,610,782 39,552,808
------------- -------------
Transfers as reported in the Summary of
Operations of GIAC ..................... $ 234,979,848 $ 439,603,407
============= =============
B-16
<PAGE>
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 -- Continued
NOTE 9 -- Annuity Actuarial Reserves and Deposit Liabilities
The following describes withdrawal characteristics of annuity actuarial
reserves and deposit liabilities:
<TABLE>
<CAPTION>
Year Ending 1995 Year Ending 1994
---------------------- ----------------------
Amount % Amount %
------------ ------ ------------ ------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal
with market value adjustment ........ -- --
at book value less current surrender
charge of 5% or more ................. -- --
at market value ..................... -- --
total with adjustment or at
market value ......................... -- --
at book value without adjustment
(minimal or no charge or
adjustment) ............................ $300,107,673 78.08 $239,437,798 74.56
Not subject to discretionary withdrawal 84,263,477 21.92 81,703,584 25.44
------------ ------ ------------ ------
Total (gross) .......................... 384,371,150 100.00 321,141,382 100.00
Reinsurance ceded ...................... -- --
------------ ------ ------------ ------
Total .................................. $384,371,150 100.00% $321,141,382 100.00%
============ ====== ============ ======
</TABLE>
This does not include $4,046,768,087 of non-guaranteed annuity reserves
held in separate accounts, and $1,500,869 in annuity reserves being held as a
loan collateral fund for loans on certain annuity contracts.
B-17
<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 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, 1995 and 1994, and the results
of its operations and its cash flows for the three years in the period ended
December 31, 1995, 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 9, 1996
B-18
<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, 1995
Combined Statement of Operations for the Year Ended
December 31, 1995
Combined Statements of Changes in Net Assets for the two
Years Ended December 31, 1994 and 1995
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, 1995 and 1994
Statements of Operations for the Three Years Ended
December 31, 1995, 1994 and 1993
Statements of Changes in Capital Stock and Surplus for the
Three Years Ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the Three Years Ended
December 31, 1995, 1994 and 1993
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 Agreement3
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 Contract(5)
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.(8)
9 Opinion and Consent of Counsel6
10 Consent of Price Waterhouse
11 Not Applicable
12 Agreement with Respect to Providing the Initial Capital for
Registrant1
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)
27 Financial Data Schedule
- ----------
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.
8. Incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement on Form N-4 (Reg. No. 2-70132), as filed on April
28, 1995.
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
---- -------------------
Joseph D. Sargent President & Chief Executive Officer
John M. Smith Executive Vice President & Director
Edward K. Kane Senior Vice President, General
Counsel & Director
Frank J. Jones Executive Vice President, Chief Investment
Officer & Director
Philip H. Dutter Director
Arthur V. Ferrara 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
Thomas R. Hickey, Jr. Vice President, Operations
Ryan W. Johnson Vice President, Equity Sales
Gary B. Lenderink Vice President, Group Pensions
Frank L. Pepe Vice President & Controller
Richard T. Potter, Jr. Vice President and Counsel
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, Jr. Second Vice President
Raymond J. Henry Second Vice President
Theresa Kaminski Second Vice President, Group Pensions
Administration
Paul Iannelli Assistant Vice President
Paul Parenteau Assistant Vice President
Peggy L. Coppola Assistant Vice President
Richard A. Cumiskey Assistant Vice President & Compliance Officer
C-3
<PAGE>
Item 26. Persons Controlled by or under Common Control with Registrant
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, 1996:
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, Inc. Connecticut 100%
Health Care-Guard, Inc. New York 100%
The Guardian Tax-Exempt Fund Massachusetts 64%
The Guardian Baillie Gifford Massachusetts 30%
International Fund
The Guardian Investment Quality Massachusetts 33%
Bond Fund
Baillie Gifford Emerging Markets Fund Maryland 44%
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 1, 1996:
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%
GBG Funds, Inc. Maryland 100%
Item 27. Number of Contractowners
Type of Contract Number as of April 1, 1996
---------------- --------------------------
Non-Qualified......................... 242
Qualified............................. 5342
----
Total ............................. 5584
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.; The Park Avenue Portfolio, a
series trust consisting of the following six series: The Guardian Cash
Management Fund, The Guardian Park Avenue Fund, The Guardian Investment Quality
Bond Fund, The Guardian Tax-Exempt Fund, The Guardian Asset Allocation Fund and
The Guardian Baillie Gifford International Fund, and GBG Funds, Inc. a series
fund consisting of Baillie Gifford International Fund and Baillie Gifford
Emerging Markets 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 Guardian/Value Line
Separate Account, The Guardian Separate Account A, The Guardian Separate Account
B, The Guardian Separate Account C, The Guardian Separate Account D and The
Guardian Separate Account K, 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
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
Frank L. Pepe Vice President & Controller
Richard T. Potter, Jr. Vice President and Counsel
Donald P. Sullivan, Jr. Vice President
C-5
<PAGE>
Name Position(s) with GISC
---- ---------------------
Kevin S. Alter Second Vice President
Alexander M. Grant, Jr. Second Vice President
Ann T. Kearney Second Vice President
Peggy L. Coppola Assistant Vice President
Kevin S. Alter Assistant Vice President
Richard A. Cumiskey Assistant Vice President, & Compliance Officer
John M. Emanuele Treasurer
Joseph A. Caruso Secretary
Karen Dickinson Assistant Secretary
Paul Iannelli Assistant Controller
Carol M. Cramer Director, Administrative Support
Scott E. Horowitz Director, Systems Support
Georgia Gaidula Director, Broker-Dealer Operations
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>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, The Guardian/Value Line Separate Account 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 1st day of
May, 1996.
The Guardian/Value Line Separate Account
(Registrant)
By: THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC.
(Depositor)
By: /s/ Thomas R. Hickey, Jr.
-----------------------------
Thomas R. Hickey, Jr.
Vice President, Operations
C-7
<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/JOSEPH D. SARGENT * President, Chief Executive
- ----------------------------- Officer and Director
Joseph D. Sargent
(Principal Executive Officer)
/s/FRANK J. JONES* Executive Vice President, Chief
- ----------------------------- Investment Officer and Director
Frank J. Jones
(Principal Financial Officer)
/s/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/ARTHUR D. FERRARA * Director
- -----------------------------
Arthur D. Ferrara
/s/WILLIAM C. WARREN* Director
- -----------------------------
William C. Warren
/s/EDWARD K. KANE* Senior Vice President,
- ----------------------------- General Counsel and Director
Edward K. Kane
/s/LEO R. FUTIA* Director
- -----------------------------
Leo R. Futia
/s/PHILIP H. DUTTER* Director
- -----------------------------
Philip H. Dutter
__________________________ Director
Peter L. Hutchings
*By: /s/ THOMAS R. HICKEY, JR.* Date: May 1, 1996
----------------------------
Thomas R. Hickey, Jr.
Vice President, Operations
Pursuant to a Power of Attorney
C-8
<PAGE>
The Guardian/Value Line Separate Account
Exhibit Index
-------------
Number Description
------ -----------
10 Consent of Price Waterhouse
27 Financial Data Schedule
C-9
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. 18 to the registration statement on Form N-4 (the "Registration
Statement") of our report dated February 16, 1996, relating to the financial
statements appearing in the December 31, 1995 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 9, 1996,
relating to the financial statements of The Guardian Insurance & Annuity
Company, Inc., which appears in 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, New York
May 1, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1995, and is qualified in its
entirety to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 167,660,508
<INVESTMENTS-AT-VALUE> 220,166,295
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 220,166,295
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,222,179
<TOTAL-LIABILITIES> 2,222,179
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,934,116
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 19,569,578
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</TABLE>
