Registration Nos. 33-8_____
811-08736
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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REGISTRATION STATEMENT
on
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
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THE GUARDIAN SEPARATE ACCOUNT K
(Exact Name of Trust)
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THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
7 Hanover Square, New York, New York 10004
(Complete Address of Principal Executive Offices)
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RICHARD T. POTTER, JR., ESQ.
The Guardian Insurance & Annuity Company, Inc.
7 Hanover Square
New York, New York 10004
(Name and address of agent for service)
Copy to:
Kim Smith
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
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Variable Whole Life Insurance Policies -- Registration of Indefinite Amount of
Securities Pursuant to Rule 24F-2 Under the Investment Company Act of 1940
(Title, amount and proposed maximum offering price of securities being
registered)
Approximate date of proposed public offering: Upon the effective date of this
Registration Statement
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
N-8B-2 Item Heading in Prospectus
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1,2,3,51(a)..................... Cover Page; Summary
4............................... Distribution of the policy and other
contractual arrangements
5............................... Summary
6(a)............................ The variable investment options
6(b)............................ The variable investment options
7............................... Not Applicable
8............................... Financial Statements of the Guardian
Separate Account K
9............................... Legal proceedings
10(a),(b)....................... Partial withdrawals; your right to cancel
your policy; Surrendering your policy
10(d)........................... Fixed-benefit insurance during the
first 24 months; Transfers between the
investment options; Dollar cost averaging
transfer option; Decreasing the face amount
10(e)........................... Premiums (Default; Grace period;
Reinstating your policy)
10(f)........................... Voting rights
10(g),(h)....................... Rights Reserved by GIAC
10(i),44(a),51(g)............... Premiums; Benefits and policy values; Policy
proceeds
11.............................. The variable investment options
12.............................. The variable investment options
13(a),(b),(c),51(g)............. Premiums, deductions and charges
13(d),(g)....................... Not Applicable
13(e),(f)....................... Deductions and charges; Distribution of the
policy and other contractual arrangements
14.............................. Issuing the policy
15.............................. Premiums (How your premiums are allocated;
Crediting payments)
16.............................. Premiums (How your premiums are allocated;
Transfers between the investment options);
Dollar cost averaging transfer option;
Policy loans
17.............................. Surrendering your policy; Partial
withdrawals; Your right to cancel your
policy; Policy proceeds
18.............................. The variable investment options
19.............................. Communications from GIAC
20.............................. Not Applicable
21(a),(b)....................... Policy Loans; Premiums (Automatic Premium
Loan); Policy proceeds
21(c),22,23..................... Not Applicable
24.............................. Policy Loans; Payment options; Limits to
GIAC's right to challenge a policy; Other
information
25,27,29,48..................... Summary
26.............................. Not Applicable
28.............................. GIAC's management
30,31,32,33,34,35,36,37......... Not Applicable
38,39,41(a)..................... Distribution of the policy and other
contractual arrangements
40.............................. The variable investment options (The funds'
investment advisers)
41(b),(c),42,43................. Not Applicable
44(a)........................... Premiums; Benefits and Policy Values
44(b)........................... Exhibits
44(c)........................... Premiums
45.............................. Not Applicable
46(a),47........................ Benefits and policy values (Amounts in the
Separate Account; Net investment factor);
Policy Proceeds
46(b)........................... Not Applicable
49,50........................... Not Applicable
51(b)........................... Cover Page
51(c),(d)....................... Death benefit options; Deductions and
charges; (Cost of Insurance Charge;)
(Deductions from the Separate Account)
51(e),(f)....................... The Policyowner; The Beneficiary
51(h),(i),(j)................... Not Applicable
52(a),(c)....................... Rights Reserved by GIAC
52(b),(d)....................... Not Applicable
53(a)........................... GIAC's taxes
53(b),54,55,56,57,58............ Not Applicable
59.............................. Financial Statements of the Guardian
Separate Account K
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December _, 2000
PROSPECTUS FOR PARK AVENUE LIFE - MILLENNIUM SERIES
Park Avenue Life - Millennium Series is a variable whole life insurance policy
with modified scheduled premiums. It provides lifetime insurance protection with
a guaranteed minimum death benefit until the policy anniversary nearest the
insured's 100th birthday that at least equals the face amount if policy premiums
are paid when due or skipped under the Premium Skip Option, no partial
withdrawals are made and there is no policy debt.
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The minimum death benefit may grow under certain circumstances. Premiums are
guaranteed for 10 years, or until the policy anniversary nearest the insured's
75th birthday if this is later. It offers you flexibility in deciding how your
premiums are invested, but you bear the risk of investment losses for any
premiums or cash values allocated to the variable investment options. A
prospective purchaser should evaluate the need for life insurance and the
policy's long term investment potential before buying a policy. In addition, it
may not be advantageous to replace existing life insurance coverage by
purchasing a Park Avenue Life policy. Your policy has the potential to generate
an increased cash value, while deferring your taxes on this growth. However, no
cash value is guaranteed, and you must make premium payments to keep the policy
in force. Variable life insurance is not a short-term investment. The policy is
issued by The Guardian Insurance & Annuity Company, Inc. (GIAC), a wholly-owned
subsidiary of The Guardian Life Insurance Company of America (Guardian Life)
through its Separate Account K (Separate Account). Our offices are located at 7
Hanover Square, Mail Station 215-B, New York, New York 10004.
This prospectus sets forth information that you should know about the policy
before investing, and you should retain it for future reference. It must be
accompanied by the current prospectuses for:
o The Guardian Variable Contract Funds, Inc.
- The Guardian Stock Fund
- The Guardian VC 500 Index Fund
- The Guardian VC Asset Allocation Fund
- The Guardian VC High Yield Bond Fund
o The Guardian Bond Fund, Inc.
o The Guardian Cash Fund, Inc.
o GIAC Funds, Inc.
- Baillie Gifford International Fund
- Baillie Gifford Emerging Markets Fund
- The Guardian Small Cap Stock Fund
o AIM Variable Insurance Funds, Inc.
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Global Utilities Fund
- AIM V.I. Value Fund
o Davis Variable Account Fund, Inc.
- Davis Financial Portfolio
- Davis Real Estate Portfolio
- Davis Value Portfolio
o Fidelity Variable Insurance Products Fund
- Fidelity VIP II Contrafund(R) Portfolio
- Fidelity VIP Equity-Income Portfolio
- Fidelity VIP III Growth Opportunities Portfolio
- Fidelity VIP III Mid Cap Portfolio
o Gabelli Capital Series Funds, Inc.
- Gabelli Capital Asset Fund
o Janus Aspen Series
- Janus Aspen Aggressive Growth Portfolio
- Janus Aspen Capital Appreciation Portfolio
- Janus Aspen Growth Portfolio
- Janus Aspen Worldwide Growth Portfolio
o MFS(R) Variable Insurance Trust(SM)
- MFS Emerging Growth Series
- MFS Growth With Income Series
- MFS New Discovery Series
- MFS Research Series
- MFS Total Return Series
o Value Line Strategic Asset Management Trust
o Value Line Centurion Fund
All funds may not be available in your state. Ask your registered representative
for further information about availability.
These funds correspond to the policy's variable investment options. You can also
allocate premiums to a fixed-rate option. Special limits apply to transfers out
of the fixed-rate option.
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These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Commission or
any state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The policy is not a deposit or obligation of or guaranteed or endorsed by, any
bank or depository institution, is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency, and
involves investment risk, including possible loss of principal amount invested.
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CONTENTS
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Summary .................................................................. 1
About the Park Avenue Life Policy ........................................ 13
- Issuing the policy ..................................................... 13
- The Policyowner ........................................................ 14
- The Beneficiary ........................................................ 14
Benefits and policy values ............................................... 15
- Death benefit options .................................................. 15
- Minimum death benefit .................................................. 16
- The variable insurance amount .......................................... 16
- Adjustable renewable term rider ........................................ 17
- Changing your death benefit option ..................................... 18
- Paying the death benefit ............................................... 19
- Policy values .......................................................... 19
Premiums, deductions and charges ......................................... 22
- Premiums ............................................................... 22
- Deductions and charges ................................................. 31
Your allocation options .................................................. 40
- The variable investment options ........................................ 40
- The fixed-rate option .................................................. 48
Special features of your policy .......................................... 49
- Policy loans ........................................................... 49
- Decreasing the face amount ............................................. 51
- Partial withdrawals .................................................... 52
- Surrendering your policy ............................................... 54
- Transfers between the investment options ............................... 55
- Transfers from the fixed-rate option ................................... 55
- Dollar cost averaging transfer option .................................. 56
- Policy proceeds ........................................................ 57
- Policy value options ................................................... 58
- Exchanging a policy .................................................... 61
- Payment options ........................................................ 62
Tax considerations ....................................................... 64
- Tax status of the policy ............................................... 64
- Treatment of policy proceeds ........................................... 65
- Exchanges .............................................................. 66
- Policy changes ......................................................... 66
- Estate and generation skipping transfer taxes .......................... 67
- Other tax consequences ................................................. 67
<PAGE>
- Possible tax law changes ............................................... 68
- GIAC's taxes ........................................................... 68
- Income tax withholding ................................................. 68
Rights and responsibilities .............................................. 69
- Assigning the rights to your policy .................................... 69
- Voting rights .......................................................... 69
- Limits to GIAC's right to challenge a policy ........................... 70
- Rights reserved by GIAC ................................................ 71
- Your right to cancel your policy ....................................... 72
Other information ........................................................ 73
- Distribution of the policy and other contractual arrangements .......... 73
- Communications we'll send you .......................................... 74
- Special provisions for group or sponsored arrangements ................. 74
- Legal considerations for employers ..................................... 75
- Advertising practices .................................................. 75
- Legal proceedings ...................................................... 76
- Legal matters .......................................................... 76
- Registration statement ................................................. 76
- Financial statements ................................................... 77
- Financial and actuarial experts ........................................ 77
- GIAC's management ...................................................... 78
Special terms used in this prospectus .................................... 80
Financial Statements of The Guardian Separate Account K .................. 84
Consolidated Financial Statements of
The Guardian Insurance & Annuity Company, Inc ............................ 96
Appendices A to D ........................................................ 111
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The Park Avenue Life policy may not be available in all states or jurisdictions.
This prospectus does not constitute an offering in any state or jurisdiction in
which such offering may not lawfully be made. GIAC does not authorize any
information or representations regarding the offering described in this
prospectus other than as contained in this prospectus or any supplement thereto
or in any supplemental sales material authorized by GIAC.
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SUMMARY
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THIS SUMMARY outlines the principal features of your Park Avenue Life variable
life insurance policy. It is qualified by the detailed explanation which follows
and the terms of your Park Avenue Life policy. We deliver this prospectus with a
copy of the prospectuses for each of the mutual funds corresponding to the
variable investment options in which you may invest your Park Avenue Life
premiums.
Please read this prospectus and the fund prospectuses carefully before
investing.
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WHAT IS VARIABLE LIFE INSURANCE AND HOW DOES IT WORK?
Variable life insurance is intended to provide two important benefits:
o a death benefit that is not taxable to your beneficiary, and
o a cash value that can grow, with taxes on the growth being deferred.
You allocate your net premium payments (the amount that remains after we deduct
premium charges from your basic scheduled premium) and cash value among the
variable investment options and the fixed-rate option. Most of these options
provide variable returns. That's why it's called variable life insurance.
If the investment options that you choose perform well, the cash value of your
policy will increase, and the death benefit may also increase. As a variable
life insurance policyowner, however, you bear the risk of investment losses to
the extent that your cash values are invested in the variable options. Your
policy has no guaranteed cash value.
WHO CAN BUY A PARK AVENUE LIFE POLICY?
You can buy a Park Avenue Life policy if:
o you live in a state or jurisdiction where we offer the policy, and
o the person being insured is under age 80 and meets our insurance
requirements.
If you already own a fixed-benefit insurance policy from us or our parent
company, Guardian Life, you may be able to buy a Park Avenue Life policy without
meeting our insurance requirements by exchanging your present policy. You may
also convert it to a Park Avenue Life policy if your fixed-benefit policy
includes the appropriate riders. In this case you may have to meet minimal
insurance requirements.
Terms we've used
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In this document, we, us, and our refer to The Guardian Insurance & Annuity
Company, Inc., and you and your refer to the policyowner. You can find
definitions of special terms used in this prospectus at the end of this
document. We've used italic script to highlight these terms the first time they
appear in the text.
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SUMMARY PROSPECTUS 1
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<PAGE>
Consult your legal or tax adviser about the consequences of exchanging your
existing policy for a Park Avenue Life policy. See the sections in this
prospectus called Deductions and charges, Tax considerations, and Special
provisions for group or sponsored arrangements.
WHAT ARE THE BENEFITS UNDER YOUR POLICY?
There are two types of insurance benefits available through this policy: death
benefits and rider benefits. We pay death benefits to the beneficiary named in
the policy when we receive proof that the insured has died while the policy was
in force. Rider benefits offer special optional coverage in addition to the
death benefit. The rider benefits you choose will determine the additional
amount, if any, that's paid to the beneficiary.
Death benefits
You have a choice of two death benefit options with this policy:
o under Option 1, the death benefit will at least equal your policy's face
amount when the insured dies, or
o under Option 2, the death benefit is a variable amount that may grow
beyond the face amount if your policy account value increases and exceeds
your policy's benchmark value shown in your policy. The benchmark value is
a measure we use to assess the adequacy of the funding in your policy over
time. For an explanation see Special terms used in this prospectus. Under
this option the death benefit will also at least equal your policy's face
amount.
You may choose either of these options until the policy anniversary (the
anniversary each year of the date your policy was effective) closest to the
insured's 100th birthday. On or after this date, the death benefit will be the
policy account value.
You can change your policy's death benefit option once in a policy year, after
your policy has been in force for one year, and as long as the insured is still
living. If you are changing from Option 1 to Option 2, you will need to prove
that the insured meets our insurance requirements. For more information see
Death benefit options.
Benefits
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There are two types of insurance benefits available through this policy: death
benefits and rider benefits. We pay death benefits to the beneficiary named in
the policy when we receive proof that the insured has died while the policy was
in force. Rider benefits offer special optional coverage in addition to the
death benefit.
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2 PROSPECTUS SUMMARY
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<PAGE>
Rider benefits
Riders are a way to add to the coverage offered by your policy. The following
riders are offered under this policy. They are subject to GIAC's insurance and
policy issuing requirements, and all may not be available in all states:
o adjustable renewable term insurance
o waiver of premium
o combined waiver of premium
o accidental death benefit
o guaranteed purchase option
o simplified insurability option
o select security rider
o exchange of insureds rider.
Premiums for any rider benefits you buy will be included in your policy
premiums, but are not allocated to the variable investment or fixed-rate
options. Riders have no cash value.
HOW MUCH DO WE PAY OUT IF THE INSURED DIES?
The amount we pay when the insured dies is:
o the proceeds of the death benefit option in place at the time of the
insured's death, minus
o the amount of any partial withdrawals since the monthly date immediately
preceding the date of death, minus
o any outstanding policy loans, plus accrued interest, and any policy
premiums that are due, plus
o the extra insurance provided by any riders included in your policy, plus
o any policy premium assessments that you have paid after the policy month
in which the insured dies.
We pay these benefits in a lump sum, or under one of the options described in
Payment options.
HOW MUCH DO YOU HAVE TO PAY IN PREMIUMS?
Premiums are the payments you make to buy and keep your insurance in force.
There are several types of premiums associated with your Park Avenue Life
policy, which together form your policy premium. They are:
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SUMMARY PROSPECTUS 3
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<PAGE>
o the basic scheduled premium, which you must pay each year in exchange for
life insurance coverage. This basic scheduled premium is based on your
policy's face amount, the insured's age and premium class. It's also based
on the insured's sex except where gender-neutral rates are required by
law.
Your basic scheduled premium will not increase during the guaranteed
premium period. It may decrease however, if you reduce the face amount.
After the guaranteed premium period, we will review your policy each year
to determine if your basic scheduled premium should change. If we do
change your basic scheduled premium, it will never be higher than the
maximum basic scheduled premium shown in your policy. Nor will it be lower
than the basic scheduled premium during your policy's guaranteed premium
period, unless you reduce the face amount. See Basic scheduled premiums.
o rating charges, which are added to your basic scheduled premium if the
insured doesn't meet our insurance requirements for standard insurance
when we issue your policy,
o rider premiums for any additional coverage you have added to your policy
through a rider.
Rating charges and rider premiums are policy premium assessments. They are not
invested in the variable or fixed-rate allocation options, and do not add to the
cash value of your policy.
After you pay the first policy premium, you must pay further policy premiums
once a year. You can, however, ask to pay them semi-annually, quarterly or
monthly through an automatic payment plan, or at any other interval that we
agree to. Within limits, you may also make unscheduled payments to your policy
at any time.
If you are eligible for and choose the Premium Skip Option you may, after the
first policy year and under certain circumstances, "skip" paying one or more
annual premiums without causing the policy to lapse or reducing the face amount.
You may also pay your premiums by taking out a loan through our Automatic
Premium Loan feature.
Choosing the Premium Skip Option or the Automatic Premium Loan Feature can
adversely affect the overall value of your policy, but won't reduce your
guaranteed death benefit or cause your policy to lapse. See Could my policy
lapse?
Paying premiums
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After you pay the first policy premium, you must pay further policy premiums
once a year. You can, however, ask to pay them semi-annually, quarterly or
monthly through an automatic payment plan, or at any other interval that we
agree to. Within limits, you may also make unscheduled payments to your policy
at any time.
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4 PROSPECTUS SUMMARY
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<PAGE>
WHAT ARE YOUR ALLOCATION OPTIONS?
You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your net premiums may be allocated
to a maximum of seven allocation options at one time.
Each variable investment option invests in a series of a mutual fund. The value
of these options, and your policy account value in them, will vary depending on
the performance of the mutual funds corresponding to the options you choose.
There is no minimum guaranteed policy account value for the amounts allocated to
the variable investment options.
The mutual funds that are currently available through the variable investment
options are:
o The Guardian Variable Contract Funds, Inc.
- The Guardian Stock Fund
- The Guardian VC 500 Index Fund
- The Guardian VC Asset Allocation Fund
- The Guardian VC High Yield Bond Fund
o The Guardian Bond Fund, Inc.
o The Guardian Cash Fund, Inc.
o GIAC Funds, Inc.
- Baillie Gifford International Fund
- Baillie Gifford Emerging Markets Fund
- The Guardian Small Cap Stock Fund
o AIM Variable Insurance Funds, Inc.
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Global Utilities Fund
- AIM V.I. Value Fund
o Davis Variable Account Fund, Inc.
- Davis Financial Portfolio
- Davis Real Estate Portfolio
- Davis Value Portfolio
o Fidelity Variable Insurance Products Fund
- Fidelity VIP II Contrafund(R) Portfolio
- Fidelity VIP Equity-Income Portfolio
- Fidelity VIP III Growth Opportunities Portfolio
- Fidelity VIP III Mid Cap Portfolio
o Gabelli Capital Series Funds, Inc.
- Gabelli Capital Asset Fund
o Janus Aspen Series
- Janus Aspen Aggressive Growth Portfolio
- Janus Aspen Capital Appreciation Portfolio
- Janus Aspen Growth Portfolio
- Janus Aspen Worldwide Growth Portfolio
o MFS(R) Variable Insurance Trust(SM)
- MFS Emerging Growth Series
- MFS Growth With Income Series
- MFS New Discovery Series
- MFS Research Series
- MFS Total Return Series
o Value Line Strategic Asset Management Trust
o Value Line Centurion Fund
Allocation options
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You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your net premiums may be allocated
to a maximum of seven allocation options at one time.
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SUMMARY PROSPECTUS 5
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You will find the investment objectives, policies, risks, fees and expenses for
each of these funds listed in the accompanying prospectus for that fund. You
should read the corresponding fund prospectus carefully before investing in any
variable investment option. For a summary of this information see The variable
investment options.
The fixed-rate option earns a set rate of interest. You earn interest on the
total that you have invested in the fixed-rate option, including interest you
have earned in previous years. Interest accrues daily at a minimum annual
interest rate of 4%. GIAC sets the rate of interest for the fixed-rate option
and guarantees your principal and interest under this option. See The fixed-rate
option.
CAN YOU TRANSFER THE MONEY IN YOUR POLICY AMONG DIFFERENT ALLOCATION OPTIONS?
Provided the money in your policy is not being held as collateral against a
loan, you can transfer it among the variable investment options, and into the
fixed-rate option, at any time. You may choose up to seven allocation options at
any time but no more than 10 in any policy year. We limit transfers out of the
fixed-rate option. See The fixed-rate option.
DO YOU HAVE ACCESS TO THE MONEY YOU'VE INVESTED IN YOUR POLICY?
After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's unloaned cash surrender value. The unloaned
cash surrender value is your policy account value minus any surrender charges
and policy debt. Policy debt is made up of all unpaid policy loans, plus the
accumulated and unpaid interest on those loans.
You may also borrow up to 90% of your policy's cash surrender value. The cash
surrender value is the policy account value minus any surrender charges. We will
charge you an annual interest rate of 5%, calculated daily, on all outstanding
loans that you have taken against your policy. This rate will decrease to 4.5%
after your policy's 20th anniversary.
You may at any time surrender your policy for the net cash surrender value. The
net cash surrender value is your policy account value minus any surrender
charges and policy debt, plus any amounts paid as policy premium assessments
beyond the next monthly date. After you surrender your policy, you no longer
have insurance coverage and your policy cannot be reinstated.
Withdrawing money
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After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's unloaned cash surrender value. You may also
borrow up to 90% of your policy's cash surrender value. You may at any time
surrender your policy for the net cash surrender value.
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6 PROSPECTUS SUMMARY
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<PAGE>
Tax on increases
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Increases in the value of your policy should not be taxed unless you make a
withdrawal (or, in some cases, take a loan) or surrender your policy before the
insured dies.
HOW IS YOUR POLICY AFFECTED BY TAXES?
Increases in the value of your policy and the death benefit
We believe that it is reasonable to conclude that your Park Avenue Life policy
will receive the tax benefits generally associated with life insurance contracts
under existing federal tax laws. This means that increases in the value of your
policy should not be taxed unless you make a withdrawal (or, in some cases, take
a loan) or surrender your policy before the insured dies. Partial withdrawals,
surrenders and policy loans all result in money being taken out of your policy
before the insured dies. We believe that the money the beneficiary receives when
the insured dies generally should not be subject to federal income tax, but may
be subject to federal estate taxes or generation skipping transfer taxes. See
Tax Considerations.
WHAT DEDUCTIONS AND CHARGES DO YOU HAVE TO PAY?
There are various deductions and charges associated with maintaining your Park
Avenue Life policy. Each of these charges is outlined below and in detail in
Deductions and charges. Some of these charges can vary, depending on certain
circumstances, and there may be a guaranteed or maximum charge, and a current
charge. The guaranteed or maximum charge is the most that we can charge you for
a particular item. The current charge is what we are now charging for that item.
We have the right to increase the current charge up to the maximum charge. Where
the law requires, we will tell you if we increase these charges.
Charges deducted from your policy premiums and unscheduled payments
Policy premium assessments: These are ratings charges and rider premiums which
have been added to your basic scheduled premium to form your policy premium. We
deduct this amount from each policy premium payment.
Premium charge: During each of the first 12 policy years after issue, a charge
of 8% is deducted from each premium you pay until you have paid one basic
scheduled premium in a policy year, and 4% is deducted from premiums paid in
excess of the basic scheduled premium. After the 12th year, this charge drops to
4% for premiums paid in a policy year, until you have paid one basic scheduled
premium, and no charge for premiums paid in excess of one basic scheduled
premium.
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SUMMARY PROSPECTUS 7
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<PAGE>
Monthly deductions
We deduct these charges from your policy account value on the same date each
month. The monthly deductions are as follows:
Policy charge: At the beginning of each policy month, we will deduct an
administrative charge of $7.50.
Administration charge: For the first 12 years of your policy, we deduct a
monthly administration charge based on the insured's age, sex, face amount and
underwriting class.
Guaranteed insurance amount charge: At the beginning of each month, we will
deduct a charge of $0.01 per $1,000 of your policy's face amount.
Mortality and expense risk charge: this charge is based on the policy account
value in the variable investment options and is guaranteed never to exceed the
current rates stated below plus 0.25%. Through the twelfth policy anniversary,
we will deduct a monthly charge at a current annual rate of 0.60% of the policy
account value in the variable investment options. Starting in the thirteenth
policy year, we will deduct a monthly charge at a current annual rate of 0.40%
of the policy account value in the variable investment options, up to the
account value breakpoint, and 0.20% on the amount in excess of the account value
breakpoint. See Charges and deductions (Mortality and expense risk charge).
Cost of insurance charge: We base this charge on our current cost of insurance
rates for the insured, depending on his or her age, policy duration, sex,
premium class and face amount (including the amount of any term rider coverage).
The maximum that we can charge for each $1,000 of the net amount at risk (the
difference between your policy account value and your policy's death benefit) is
set out in your policy.
After the anniversary closest to the insured's 100th birthday, we no longer
collect these monthly deductions.
Transaction deductions
We deduct these charges from the policy account value when you ask us to do
certain transactions. The charges are as follows:
Surrender charge: This charge applies if you surrender your policy or let it
lapse during the first 9 policy years. This charge is a flat rate for every
$1,000 that your policy would pay at death or maturity, and is outlined in your
policy. It decreases to zero after 9 years, and varies depending on the
insured's age when the policy was issued, sex and premium class.
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8 PROSPECTUS SUMMARY
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<PAGE>
Premium Skip Option deduction: If you skip a premium under our Premium Skip
Option, we will deduct from the unloaned policy account value an amount equal to
your policy premium assessments multiplied by [1 minus the applicable premium
charge for the current policy year].
Transfer charge: After you make twelve transfers of policy account value among
the allocation options within a policy year, we may charge you $25 for each
additional transfer. We don't currently impose this charge.
Deductions associated with the Separate Account
We have the right to charge the Separate Account to cover any taxes that are
applicable to the Separate Account or the policies. We don't currently impose
this charge.
Deductions associated with the mutual funds
Daily deductions are made from the value of the mutual funds in which you invest
through the Separate Account, to cover advisory fees and other expenses. As a
result, you pay these fees and expenses indirectly. The fees and expenses vary
for each mutual fund and are described in more detail in the fund prospectuses.
WHAT CHANGES CAN YOU MAKE TO YOUR POLICY?
Decreasing the face amount of the policy
After your policy has been in force for one year, you may request a decrease in
the face amount. The decrease must be at least $5,000, and the insured must be
alive when we receive your request. The new face amount cannot be lower than
GIAC's current minimum face amount.
Exchanging your Park Avenue Life policy for a fixed-benefit life insurance
policy
You may exchange all or a portion of your Park Avenue Life policy for a level
premium fixed-benefit whole life insurance policy issued by GIAC or one of our
affiliates prior to the later of the second policy anniversary or the policy
anniversary nearest the insured's 70th birthday. If you do this, you don't have
to prove that the person being insured meets our insurance requirements for
issuing a policy. Depending on the amount applied to the new policy, there may
be a credit or a cost to be paid. See Special features of your policy.
Policy changes
--------------------------------------------------------------------------------
With certain restrictions, you may:
o request a decrease in the face amount of your policy
o exchange your Park Avenue Life Policy for a level premium fixed benefit
life insurance policy
o cancel your policy after it has been issued.
See accompanying text for details.
------------
SUMMARY PROSPECTUS 9
------------
<PAGE>
Canceling your policy after it has been issued
You may cancel your policy by returning it with a written cancellation notice to
either our executive office or the agent from whom you bought the policy. You
must do this within:
o 10 days after you receive your policy, or
o 45 days after you sign Part 1 of the completed application for your
policy.
Longer periods may apply in some states. Once we receive your notice, we will
refund all of the premiums you paid, and your policy will be considered void
from the beginning. See Your right to cancel your policy.
COULD YOUR POLICY LAPSE?
Your policy may lapse if you don't pay a policy premium within 31 days of the
due date or if you have excess policy debt. You must pay policy premiums in cash
by the due date, unless you qualify and have signed up for your policy's Premium
Skip Option or Automatic Premium Loan feature. We will tell you that you must
make a loan repayment if the amount that you owe us becomes greater than your
cash surrender value.
We will tell you if your policy is in danger of lapsing, and will keep your
policy in force if we receive the required payment when requested. If your
policy does lapse, we can continue your coverage for a limited time, or for a
reduced amount, under one of the policy value options.
If your policy has lapsed and it has not been surrendered for its cash value,
you may have up to five years to reinstate it. See Premiums (Premium Skip
Option, Automatic Premium Loan, Grace Period and Reinstating your policy) and
Policy value options.
Could your policy lapse?
--------------------------------------------------------------------------------
Your policy may lapse if you don't pay a policy premium within 31 days of the
due date or if you have excess policy debt.
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10 PROSPECTUS SUMMARY
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<PAGE>
HOW CAN YOU COMMUNICATE WITH US?
We cannot act on any request (except for proper telephone transfer requests)
unless it is received in writing at our customer service office, in a form
acceptable to us. Your request must include:
o your policy number
o the full name of all policyowners
o the full name of the insured, and
o your current address.
Our address for regular mail is:
The Guardian Insurance & Annuity Company, Inc.
7 Hanover Square
Mail Station 215-B
New York, New York 10004
Our address for registered, certified or express mail is:
The Guardian Insurance & Annuity Company, Inc.
215 Park Avenue South
18th floor
New York, New York 10003
If you need information on the value of your policy, you may call us at
1-800-935-4128 between 9 a.m. and 4 p.m. New York time.
WHO ISSUES YOUR PARK AVENUE LIFE POLICY?
Your Park Avenue Life policy is issued, through its Separate Account K, by The
Guardian Insurance & Annuity Company, Inc. (GIAC), a Delaware stock insurance
company formed in 1970. GIAC is licensed to sell life insurance in all 50 states
of the United States of America and the District of Columbia. As of December 31,
1999, our total assets (GAAP basis) exceeded $12 billion.
We are wholly owned by The Guardian Life Insurance Company of America (Guardian
Life). The offices of both Guardian Life and GIAC are located at 7 Hanover
Square, New York, New York 10004.
Both Guardian Life and GIAC have consistently received exemplary ratings from
Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff & Phelps
and A.M. Best. These ratings may change at any time and only reflect GIAC's
ability to meet its insurance-related obligations and the guaranteed return on
the fixed-rate option. These ratings do not apply to the variable investment
options, which are subject to the risks of investing in any securities. Guardian
Life does not issue the Park Avenue Life policies, and does not guarantee the
benefits provided by the policy.
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SUMMARY PROSPECTUS 11
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<PAGE>
The Park Avenue Life diagram(1)
--------------------------------------------------------------------------------
----------------------------- Less
POLICY PREMIUMS ------------> Policy premium
----------------------------- assessments:
o Rider premiums
o Rating charges
----------------------------- Less
UNSECHEDULED PAYMENTS ------------> Premium charge
-----------------------------
|
|
V
-----------------------------
POLICY ACCOUNT VALUE
-----------------------------
-----------------------------
THE SEPARATE ACCOUNT
-----------------------------
-------------------------------------------
THE MUTUAL FUNDS Less
(including any investment -------------> Advisory fees and
return): other expenses
Guardian Investor Services Corporation
The Guardian Stock Fund
The Guardian VC Asset Allocation Fund
The Guardian VC High Yield Bond Fund
The Guardian VC 500 Index Fund
The Guardian Small Cap Stock Fund
The Guardian Bond Fund
The Guardian Cash Fund
Guardian Baillie Gifford Limited
Baillie Gifford International Fund
Baillie Gifford Emerging Markets Fund
Value Line, Inc.
Value Line Centurion Fund
Value Line Strategic Asset Management Trust
Gabelli Funds, LLC
Gabelli Capital Asset Fund Less
------------> Monthly deductions:
Davis Selected Advisors, LP o Policy charge
Davis Financial Portfolio o Administration charge
Davis Real Estate Portfolio o Guaranteed insurance
Davis Value Portfolio amount charge
o Charge for the cost
Janus Capital Corporation of insurance
Janus Aspen Aggressive Growth Portfolio o Mortality and expense
Janus Aspen Capital Appreciation Portfolio risk charge
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Massachusetts Financial Services Company
MFS Emerging Growth Series
MFS Total Return Series
MFS Growth With Income Series
MFS Research Series
MFS New Discovery Series
A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
AIM V.I. Global Utilities Fund
Fidelity Management & Research Company
Fidelity VIP III Growth Opportunities
Portfolio
Fidelity VIP Equity Income Portfolio
Fidelity VIP II Contrafund(R) Portfolio
Fidelity VIP III Mid Cap Portfolio
-------------------------------------------
FIXED-RATE OPTION LOAN COLLATERAL ACCOUNT
(plus interest credited) (plus interest credited)
-------------------------------------------
|
| Less
-------------------------> Transaction deductions:
| o Surrender charge
V o Premium skip option
================================== deduction
CASH SURRENDER VALUE
==================================
| Less
-------------------------> Policy debt
|
V
==================================
UNLOANED CASH SURRENDER VALUE
==================================
| Plus
-------------------------> Policy premium
| assessments paid beyond
V next monthly date
==================================
NET CASH SURRENDER VALUE
==================================
--------------------------------------------------------------------------------
(1) This diagram excludes the transfer charge which is not being imposed
currently. Interest on policy debt and repayments of policy debt are also
not reflected in the diagram.
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12 PROSPECTUS SUMMARY
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<PAGE>
--------------------------------------------------------------------------------
ABOUT THE PARK AVENUE LIFE POLICY
--------------------------------------------------------------------------------
THIS SECTION provides detailed information about your policy. It explains your
rights and responsibilities under the policy, and those of GIAC. Because the
laws and regulations that govern the policy vary among the jurisdictions where
the policy is sold, some of the policy's terms will vary depending on where you
live. These will be outlined in the policy we send you.
--------------------------------------------------------------------------------
ISSUING THE POLICY
A Park Avenue Life insurance policy must have a face amount of at least $100,000
($125,000 for the pension trust version of the policy). To issue a policy:
o the insured must be age 80 or under (age 15-80 for the pension trust
version of the policy) and meet our insurance requirements, and
o you must live in a state or jurisdiction in which we offer the policy.
If you already own certain fixed-benefit life insurance policies issued by us or
by Guardian Life, you may be able to buy a Park Avenue Life policy without
having to meet our insurance requirements again. You can do this by exchanging
your current policy for a Park Avenue Life policy or if your fixed-benefit
policy contains a rider to permit you to purchase a Park Avenue Life policy. You
may also be able to convert to a Park Avenue Life policy if your existing policy
contains appropriate riders. In this case you may have to meet minimal insurance
requirements.
If you have a convertible term policy, or a whole life policy with a convertible
term rider, you may receive a credit of up to one basic scheduled premium if you
convert it to a Park Avenue Life policy.
If you are interested in exchanging an existing policy for a Park Avenue Life
policy, we recommend that you speak with your lawyer or tax adviser first.
Replacing your existing policy may not be advantageous.
Some jurisdictions do not allow insurance companies to provide different
benefits based on the sex of the insured. For these jurisdictions we offer a
version of the policy with the same benefits for men and women.
Backdating your policy
Under certain circumstances we will backdate your policy if you ask us to,
giving you a policy date up to six months before the application was actually
signed. Backdating your policy may be beneficial if, for example, it would allow
you to qualify for a lower premium because the insured was younger on the policy
date. To backdate a policy you must pay all policy premiums that would have been
due from the backdated policy date. We deduct the monthly deductions due from
the backdated policy date to the issue date.
Issuing the policy
--------------------------------------------------------------------------------
A Park Avenue Life insurance policy must have a face amount of at least
$100,000.
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ABOUT THE PARK AVENUE LIFE POLICY PROSPECTUS 13
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<PAGE>
The Policyowner
--------------------------------------------------------------------------------
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured.
THE POLICYOWNER
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured. While the insured is living, only the
policyowner named in our records has the right to exercise rights granted by the
policy unless ownership of the policy has been assigned to someone else. Except
for transfers, all of the policy's joint owners must approve policy transactions
or changes in writing, including assigning ownership of the policy to someone
else. When a joint policyowner dies, we will divide his or her share of the
policy equally among the other policyowners, unless the deceased policyowner has
indicated otherwise.
If you want to change the policyowner, you must request it in writing in a form
acceptable to us. Your request must be signed and dated by all of the
policyowners. The change will be made effective on the date your request was
signed, but will not apply to any payments or actions taken before we receive
your request.
If you are not the insured and die before the insured, your estate (or if there
had been joint owners, the estate of the last surviving joint owner) becomes the
policyowner, unless you have named someone to take over ownership of the policy
(a successor owner). If you are both the policyowner and the insured, a
successor owner may not be named because the policy ends when you die.
THE BENEFICIARY
The beneficiary is the person you name to receive the proceeds when the insured
dies. You can change the beneficiary until the insured dies. Also, you may name
a "contingent" beneficiary, who will receive the proceeds if the first
beneficiary dies before the insured, or a second or "concurrent" beneficiary who
will receive a portion of the proceeds when the insured dies. The beneficiary
must live longer than the insured to qualify as a beneficiary and has no rights
under the policy until the insured dies. If the insured outlives all of the
beneficiaries named in the policy, then the policyowner or the policyowner's
estate becomes the beneficiary.
If you want to change the beneficiary, you must give us your instructions in
writing in a form acceptable to us. Your request must be signed and dated by all
of the policyowners listed in our records. The change is made effective on the
date your request was signed, but will not apply to any payments or actions
taken before we receive your request.
The Beneficiary
--------------------------------------------------------------------------------
The beneficiary is the person you name to receive the proceeds when the insured
dies.
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14 PROSPECTUS ABOUT THE PARK AVENUE LIFE POLICY
-------------
<PAGE>
--------------------------------------------------------------------------------
BENEFITS AND POLICY VALUES
--------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS
You have a choice of two death benefit options with this policy. You should
choose the death benefit option that best meets your insurance needs and
investment objectives. If a fixed amount of insurance coverage and potentially
lower monthly deductions best fits your needs, you should choose Option 1. If
you want the potential to increase the amount of your insurance coverage beyond
your policy's guaranteed face amount, you should choose Option 2.
Option 1
Under Option 1, your death benefit is the greater of:
o the face amount on the date of the insured person's death,
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code on the monthly date before the insured's death, or
o after the first policy year, the variable insurance amount. This is
explained below.
Under this option, if the policy account value increases, the net amount at risk
decreases. When this happens, the amount that we deduct for the cost of
insurance charges each month may also go down.
Option 2
Under Option 2, your death benefit is the greater of:
o the face amount on the date of the insured person's death, plus the amount
by which the policy account value, as of the monthly date before the
insured's death, exceeds the interpolated benchmark value,
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code on the monthly date before the insured's death, or
o after the first policy year, the variable insurance amount. This is
explained below.
Under this option, if your investments perform well or you make unscheduled
payments, your policy account value may increase enough to increase your death
benefit. If your investments perform poorly, your death benefit could be lower,
but it will never be lower than the face amount. Investment performance and
unscheduled payments do not affect your net amount at risk under this option, if
the policy account value exceeds the benchmark value.
Regardless of which option you choose, after the policy anniversary closest to
the insured's 100th birthday the death benefit is the policy account value. The
tax consequences of continuing the policy beyond the insured's 100th birthday
are unclear. You should consult a tax adviser for more information.
Death benefit options
--------------------------------------------------------------------------------
You have a choice of two death benefit options with this policy. If a fixed
amount of insurance coverage and potentially lower monthly deductions best fits
your needs, you should choose Option 1. If you want the potential to increase
the amount of your insurance coverage beyond your policy's guaranteed face
amount, you should choose Option 2. See accompanying text for details.
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BENEFITS AND POLICY VALUES PROSPECTUS 15
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<PAGE>
If you make a partial withdrawal from your policy between the most recent
monthly date and the death of the insured, the proceeds of the death benefit
under either option will be reduced by the amount of your withdrawal.
THE VARIABLE INSURANCE AMOUNT
The variable insurance amount provides a guarantee that your policy's death
benefit will be greater than its face amount if the policy account value exceeds
the net single premium on any policy review date. We calculate the variable
insurance amount for each year of your policy after the first policy anniversary
by multiplying $1,000 by the policy account value on the policy review date and
then dividing that number by the net single premium per $1,000 that applies for
that policy review date. If you reduce the face amount of your policy, the
variable insurance amount is reduced by the same amount that the base policy is
reduced. If you make a partial withdrawal from your policy, the variable
insurance amount will be reduced by the full amount of the partial withdrawal
(including any reduction-free amount). See Special features of your policy
(Partial withdrawals and Decreasing the face amount). The net single premium for
a policy review date is based on the net single premiums for the policy
anniversaries immediately before and after the policy review date, and is then
adjusted for the number of days that the policy review date falls between these
anniversaries.
--------------------------------------------------------------------------------
Minimum death benefit
The minimum death benefit required under Section 7702 of the Internal Revenue
Code on any monthly date is $1,000 multiplied by the policy account value, then
divided by the interpolated net single premium per $1,000 for the insured's
attained age, sex, and premium class. The net single premium on any monthly date
is determined by interpolation between the net single premiums for the policy
anniversaries immediately before and after that monthly date. The net single
premium is adjusted to the monthly date immediately before the insured's death.
You will find a table of net single premiums in your policy.
--------------------------------------------------------------------------------
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16 PROSPECTUS BENEFITS AND POLICY VALUES
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<PAGE>
ADJUSTABLE RENEWABLE TERM RIDER
At issue and at policy anniversaries you may choose to add an annual renewable
term rider (the "term rider") if the insured is between ages 20 and 80 (70 in
New York). Where permitted by state law, the term rider provides a level death
benefit to age 100. The face amount of your term rider, if any, plus the face
amount of your base policy are the two components of your target benefit. The
minimum term rider face amount is $50,000; the maximum term rider face amount is
four times the base policy face amount.
Premiums for your term rider are equal to the premium rate multiplied by the
term insurance benefit. The term insurance benefit is initially set at the term
rider face amount. It is reset annually in the following manner. On each policy
review date, the variable insurance amount is calculated for the coming year.
See The variable insurance amount. The term insurance benefit for the coming
year is the amount obtained by subtracting the variable insurance amount from
the target benefit, but will not exceed the face amount of the term rider.
You should consider several factors in deciding whether to purchase coverage
under the base policy or under the term rider.
o The term rider has no additional surrender charges.
o The amount of premium charges you will pay may be less if you purchase
coverage under the term rider, rather than the base policy, but the cost
of the term rider is reflected in policy premium assessments.
o The term rider does not affect the administration charge or the guaranteed
minimum death benefit charge.
-------------
BENEFITS AND POLICY VALUES PROSPECTUS 17
-------------
<PAGE>
You may cancel or reduce the term rider face amount at any time. The minimum
reduction is $5,000 unless the reduction is the result of a partial withdrawal.
You may not reduce the term rider face amount to an amount less than the minimum
of $50,000. If you reduce the face amount of the term rider, we may also need to
reduce the term insurance benefit simultaneously, so that it does not exceed the
term rider face amount. Your term rider face amount will also be reduced by the
amount of any reduction-free partial withdrawal. See Special features of your
policy (Decreasing the face amount). If the base policy face amount is reduced,
the term rider face amount may need to be reduced to maintain a maximum four to
one ratio of term rider face amount to base policy face amount. In addition, any
reduction in the base policy face amount or the term rider face amount will
reduce the target benefit, which may affect the term insurance benefit in
subsequent years.
The term rider can be converted in the first five policy years to permanent life
insurance issued by GIAC or Guardian Life. You will not need to provide evidence
of insurability. The permanent life insurance will be issued based on the
insured's attained age at the time of conversion. Should you choose to convert
only a part of the term rider, the term rider face amount will be reduced by the
amount converted. The remaining term rider face amount must be greater than the
minimum term rider face amount.
Coverage under the term rider will affect the calculation of premiums for
determining whether your policy is a modified endowment contract.
CHANGING YOUR DEATH BENEFIT OPTION
After the first anniversary of your policy, you may change the death benefit
option once each policy year, as long as the insured is alive. Changes to your
death benefit option will take effect on the monthly date after we receive the
request, and will not affect the face amount of your policy. Changing the death
benefit option may have adverse tax consequences. You should consult a tax
adviser before doing so.
If you are changing your death benefit from Option 1 to Option 2, the insured
will have to meet our insurance requirements for issuing a policy at the time of
the change. This is because the change will increase your death benefit by any
positive amount by which the policy account value exceeds your policy's
benchmark value on the date the change takes effect. Your death benefit will
decrease by this amount if you change from Option 2 to Option 1.
We will not approve a change from Option 1 to Option 2 if your policy premiums
are being waived under a waiver of premium rider.
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18 PROSPECTUS BENEFITS AND POLICY VALUES
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<PAGE>
PAYING THE DEATH BENEFIT
We will pay a death benefit to the beneficiaries named in your policy when we
receive proof that the insured has died while the policy was in effect. If there
is reason to dispute the policy, then we may delay the payment of death
benefits. See Limits to GIAC's right to challenge a policy.
POLICY VALUES
The following is a detailed breakdown of how we calculate the different values
associated with your policy.
Amounts in the Separate Account
Any net premiums that you allocate or transfer to a variable investment option
are used to buy shares in the mutual fund corresponding to the variable
investment option, according to your instructions. We will sell these shares
when you make a withdrawal, transfer or take a policy loan, or when we withdraw
your monthly deductions, or make dollar cost averaging transfers. Based on the
value of each share on the transaction date, we will sell the number of shares
needed to cover the cost of that transaction.
To calculate the value of your investment in a particular variable investment
option, multiply the unit value of the option by the number of units you own.
Unit values change based on the investment performance of mutual fund shares. We
calculate the unit value for each variable investment option at the end of each
business day. Note that you bear all risks associated with the investments in
the Separate Account.
-------------
BENEFITS AND POLICY VALUES PROSPECTUS 19
-------------
<PAGE>
Policy account value
This is the total value of the investments held in your policy. This includes
the value of your allocations to the fixed-rate and variable investment options,
and any policy values that may be in the Loan Collateral Account as collateral
for a policy loan. It is calculated as:
o net premiums that you contribute to your policy; plus or minus
o any profit or loss generated by your policy account value in the variable
investment options; plus
o any interest you earn on allocations to the fixed-rate option or interest
we credit on the Loan Collateral Account; minus
o your total monthly deductions; minus
o any partial withdrawals you've made; minus
o any transfer charges; minus
o any Premium Skip Option deductions.
Cash surrender value, unloaned cash surrender value and net cash surrender value
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy has been in effect for 9 policy
years. Unloaned cash surrender value is the cash surrender value minus any
policy debt. Net cash surrender value is the amount you would actually receive
if you surrendered your life insurance policy. It is your policy account value
minus any surrender charges and policy debt, plus any policy premium assessments
you've paid covering the period beyond the next monthly date.
Benchmark value
A hypothetical account value that we use as a guide, comparing it against the
policy account value or cash surrender value when we determine:
o whether your death benefit has increased above the face amount, and if so
by how much, if you've chosen Option 2
o if you can skip a premium under the Premium Skip Option
o if you can make a partial withdrawal, and
o any change in your basic scheduled premium after the guaranteed premium
period has ended.
Your policy's benchmark value for each policy year is set out in your policy. To
calculate your policy's benchmark value on a given day, we will take the
benchmark values for your last policy anniversary and your upcoming policy
anniversary, and adjust for the number of days that your given day is between
these anniversaries. GIAC does not guarantee that the policy account value will
equal or exceed the benchmark values set forth in the policy. See Special terms
used in this prospectus for complete description of benchmark value.
Cash surrender value, unloaned cash surrender value and net cash surrender value
--------------------------------------------------------------------------------
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy has been in effect for ~9
policy years. Unloaned cash surrender value is the cash surrender value minus
any policy debt. Net cash surrender value is the amount you would actually
receive if you surrendered your life insurance policy.
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20 PROSPECTUS BENEFITS AND POLICY VALUES
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<PAGE>
Tabular account value
The value of a hypothetical account that we compare to your policy account value
when we set your basic scheduled premium each year after the guaranteed premium
period. It is also used to calculate your policy's benchmark values. For a full
explanation, see Special terms used in this prospectus. GIAC does not guarantee
that the policy account value will equal or exceed the tabular account values
set forth in the policy.
Net investment factor
We calculate the unit value of each variable investment option on each business
day by multiplying the option's immediately preceding unit value by the net
investment factor for that day. We calculate the net investment factor as
follows on each business day:
o the net asset value of one share of the mutual fund corresponding to the
variable investment option at the close of the current business day, plus
o the amount per share of any dividends or capital gains distributed by the
fund on the current business day minus any federal, state or local taxes
payable by GIAC and allocated by GIAC to the variable investment option;
divided by
o the net asset value of one share of the same mutual fund at the close of
the previous business day.
The accompanying prospectuses for each fund describe how they calculate the net
asset values of their mutual fund shares.
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BENEFITS AND POLICY VALUES PROSPECTUS 21
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<PAGE>
--------------------------------------------------------------------------------
PREMIUMS, DEDUCTIONS AND CHARGES
--------------------------------------------------------------------------------
PREMIUMS
There are several types of premiums associated with your Park Avenue Life
policy, which together form your policy premium.
After you pay your first policy premium and your policy takes effect, you will
normally pay policy premiums once a year until the death of the insured, or
until the policy anniversary nearest the insured's 100th birthday. You can,
however, ask to pay policy premiums semi-annually, quarterly, monthly through an
automatic payment plan, or at any other interval that we agree to. These
periodic premium payments must be at least $100 unless you are paying through an
automatic payment plan. The minimum premium payment we will accept under an
automatic payment plan is $25. The total of your periodic policy premium
payments for a policy year will be higher than if you make one annual premium
payment. We calculate the amount of each periodic policy premium by taking your
annual policy premium and multiplying it by a factor, as shown in the table
below.
Paying your premiums
Difference in cost
from paying your
Payment frequency Factor premiums annually
--------------------------------------------------------------------------------
Semi-annual .515 3.00% more
--------------------------------------------------------------------------------
Quarterly .26265 5.06% more
--------------------------------------------------------------------------------
Monthly .085833 3.00% more
--------------------------------------------------------------------------------
The value of the investments in your policy can be affected either positively or
negatively by choosing to pay your policy premiums periodically. To change the
frequency of your payments you must make your request in writing to us. If we
receive your request too close to your payment date and are unable to make the
change in time, we will make the change effective for the next scheduled
payment.
Basic scheduled premiums
The basic scheduled premium, together with any policy premium assessments, is
the policy premium you must pay each year to keep your policy in force. The
basic scheduled premium depends on your policy's face amount, and the insured's
age when the policy started, sex (unless gender-neutral rates are required by
law), and premium class. It is shown in your policy.
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22 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
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<PAGE>
Guaranteed premium period
--------------------------------------------------------------------------------
Your basic scheduled premium will not increase during the guaranteed premium
period.
Your basic scheduled premium will not increase during the guaranteed premium
period. The guaranteed premium period starts on the policy date and ends either
on the policy anniversary closest to the insured's 75th birthday, or on the
tenth policy anniversary, whichever is later. We will decrease your basic
scheduled premium if you reduce your policy's face amount. If this happens, we
will send you new policy pages indicating your new basic scheduled premium.
On the last policy review date before the end of the guaranteed premium period,
we will review your policy to determine if your basic scheduled premium will
change for the policy year that begins when the guaranteed premium period ends.
We compare your policy account value on that policy review date with the
interpolated benchmark value and the interpolated tabular account value on the
same date, and make any necessary adjustments as described below. After the
guaranteed premium period, we will review your policy each year to determine if
your basic scheduled premium will change. The interpolated benchmark value is
found by linear interpolation between the benchmark value on the prior policy
anniversary and the benchmark value on the next policy anniversary. The
interpolated tabular account value is found by linear interpolation between the
tabluar account value on the prior policy anniversary and the tabular account
value on the next policy anniversary.
After the guaranteed premium period, if your policy account value is less than
or equal to the interpolated tabular account value, we will charge you the
maximum basic scheduled premium shown in your policy. If it is greater than or
equal to the interpolated benchmark value, we will charge you the basic
scheduled premium that you were paying during the guaranteed premium period for
your policy's current face amount. If your policy account value falls somewhere
between the interpolated tabular account value and the interpolated benchmark
value, we will calculate a premium based on a linear interpolation between the
basic scheduled premium charged during the guaranteed premium period and the
maximum basic scheduled premium. For example, if the policy account value is
halfway between the interpolated benchmark value and the interpolated tabular
account value, then the new basic scheduled premium is halfway between the basic
scheduled premium you paid, or would have paid, during the guaranteed premium
period for your policy's current face amount and the maximum basic scheduled
premium.
If you pay your policy premiums when they are due (or skip them under the
Premium Skip Option), make no partial withdrawals, and repay any loans that you
take against your policy, your policy will not lapse and will have a death
benefit of at least the face amount listed in your policy until the policy
anniversary closest to the insured's 100th birthday.
We will tell you of any change in your basic scheduled premium in the billing
notices you receive. All policy premiums must be sent directly to us.
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PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 23
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<PAGE>
Unscheduled payments
Under certain circumstances, you may make extra payments towards your policy, in
addition to your regular policy premiums. By making these unscheduled payments
you can add to your policy account value and possibly increase your death
benefit under Death Benefit Option 2. Unscheduled payments must be at least
$100, unless they are made at the same time as a regular policy premium payment.
You may not make an unscheduled payment:
o if your policy premiums are being waived under a waiver of premium rider,
o while a policy value option is in effect (see Policy value options), or
o on or after the policy anniversary closest to the insured's 100th
birthday.
In the first policy year the maximum that you may contribute in unscheduled
payments is the lesser of $1,000,000, or your basic scheduled premium for that
year multiplied by the factor in the accompanying chart, based on the insured's
age as of the policy date.
From the second to the tenth policy year, the maximum that you may contribute in
unscheduled payments each policy year is the lesser of $500,000 or three times
the basic scheduled premium payable during the guaranteed premium period for the
current face amount of your policy.
We reserve the right to refuse an unscheduled payment if, after the first year
of your policy, you have not made an unscheduled payment for three consecutive
policy years.
After the tenth year of your policy, the total amount that you may contribute in
unscheduled payments each policy year is the least of: i) 1.25 times the largest
total of unscheduled payments in any of the three previous policy years, ii)
three times your basic scheduled premium during your policy's guaranteed premium
period for your current face amount, or iii) $500,000. If you provide us with
evidence that the insured meets our insurance requirements, you may be allowed
to make additional unscheduled payments during a policy year, to a maximum
amount of one basic scheduled premium payable during the guaranteed premium
period for your policy's current face amount.
--------------------------------------------------------------------------------
Unscheduled payments
Making unscheduled payments towards your policy may cause it to be considered a
modified endowment contract under the Internal Revenue Code, which has tax
implications. There are certain restrictions on the total amount of unscheduled
payments we permit, depending on how long your policy has been in force. We will
return the portion of any unscheduled payment that exceeds the maximum you are
allowed.
--------------------------------------------------------------------------------
Unscheduled payments
Insured's age Factor
----------------------------------
0 to 35 17
----------------------------------
36 to 40 16
----------------------------------
41 to 45 15
----------------------------------
46 to 50 14
----------------------------------
51 to 55 13
----------------------------------
56 to 60 12
----------------------------------
61 to 65 11
----------------------------------
66 to 70 10
----------------------------------
71 9
----------------------------------
72 8
----------------------------------
73 7
----------------------------------
74 6
----------------------------------
75 to 80 5
----------------------------------
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24 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
-------------
<PAGE>
Regardless of how long your policy has been in force, if the Premium Skip Option
is in effect the maximum that you may contribute in unscheduled payments will
not be less than the policy premium for that year. There are further
restrictions on making unscheduled payments to your policy within 45 days of the
date Part 1 of your completed application form was signed, or 15 days after the
issue date, whichever is later. See How your premiums are allocated.
Premium Skip Option
After the first policy year, you may "skip" paying your annual policy premium.
You must tell us in writing that you want to put the Premium Skip Option into
force by the end of the grace period for the first annual policy premium that
you intend to skip. Your policy must meet all of the following requirements on
the date that each premium is skipped:
o your policy account value must exceed your policy's benchmark value on
that date by at least the amount of the annual policy premium
o your unloaned cash surrender value must equal or exceed your policy
premium assessments for that policy year multiplied by [1 minus the
applicable premium charge for the current policy year]
o your policy premiums are not being waived under a waiver of premium rider.
You may inquire about your policy account value and your net cash surrender
value by calling us at 1-800-935-4128 during normal business hours. We also
provide these values, along with your policy's benchmark value as of the most
recent policy anniversary, in your annual policy statement. You can find the
benchmark value for each policy anniversary in your policy.
Premium Skip Option
--------------------------------------------------------------------------------
After the first policy year, you may "skip" paying your annual policy premium,
provided your policy meets certain requirements. (See accompanying text). You do
not have to make up any policy premiums that you skip under the Premium Skip
Option, and you may re-exercise the option throughout the life of your policy.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 25
-------------
<PAGE>
If the values in your policy fail to meet the criteria above, and your policy
would lapse if a premium were skipped under the Premium Skip Option, we will
notify you that you must pay the annual policy premium within your policy's
grace period. See Grace period. When you receive this notice you have three
choices. You may:
o choose to pay the annual premium due
o choose to make more frequent, but lower, periodic policy premium payments.
You must send your request for this change in writing, along with your
payment, to our customer service office, or,
o if eligible, pay your policy premium through the policy's Automatic
Premium Loan feature.
If we receive your first request to skip a premium during the grace period for
that premium, and you meet our requirements, your request will be effective on
the date we receive it. Otherwise, any premium you skip will be effective on the
policy anniversary when your next annual policy premium would be due.
If you elect the Premium Skip Option, you will be placed on the annual payment
mode. If you were paying your policy premiums on a periodic basis
(semi-annually, quarterly or monthly), you will still be responsible for all
periodic payments up until the time the premium skip becomes effective.
While the Premium Skip Option is in effect, we will continue to send you annual
policy premium billing notices. You may disregard these notices as long as your
policy continues to meet the criteria for the Premium Skip Option. However, if
you do send us a policy premium, we will consider it a cancellation of the
Premium Skip Option.
When you skip a premium under this option, we will deduct on a policy
anniversary from your policy account value an amount equal to any applicable
policy premium assessments multiplied by [1 minus the applicable premium charge
for the current policy year]. This amount will first be deducted proportionately
from the portion of your policy account value invested in the variable
investment options. If this is not enough to cover the deduction, we will take
the remaining amount from the portion of your policy account value in the
fixed-rate option. These deductions will reduce the amount invested in your Park
Avenue Life policy, as well as the amount available for you to borrow from your
policy.
-------------
26 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
-------------
<PAGE>
We will continue to charge the monthly deductions described in Deductions and
charges while the Premium Skip Option is in effect. The difference between the
policy account value and the death benefit, the net amount at risk, will often
increase at first when an annual policy premium is skipped. This increases the
monthly cost of insurance charge.
The Premium Skip Option will remain in effect until:
o we receive your written instructions to cancel the option, or
o we receive a payment from you that is credited to your account as a policy
premium, or
o we receive your written request to pay premiums periodically instead of
annually, or
o you no longer meet the requirements for exercising the premium skip option
because your policy's unloaned cash surrender value or policy account
value is no longer sufficient, or
o you no longer meet the requirements for exercising the premium skip option
because you are not paying premiums under a waiver of premium rider.
You do not have to make up any policy premiums that you skip under the Premium
Skip Option, and you may re-exercise the option throughout the life of your
policy after it has been canceled, as long as you continue to meet the
requirements. Please note: If you use the Premium Skip Option, you will not be
able to make policy premium payments until the next policy anniversary. You can
still make unscheduled payments, within the prescribed limits. See Unscheduled
payments.
Automatic premium loan
If you are eligible, you can borrow against your policy's loan value to pay your
policy premiums. See Policy loans. You may request this feature when you first
complete your policy application, or at any time during the life of the policy.
We must receive your request in writing at our executive office by the end of
the grace period for the premium that you wish to pay through the Automatic
Premium Loan.
You will not actually receive any money when you take out an Automatic Premium
Loan. Instead, we will transfer the amount required to pay a policy premium from
your unloaned policy account value into the Loan Collateral Account. The money
will then be used to pay the required premium. The end of the grace period is
considered to be the date the loan was made, and interest will be calculated
from this date. If your policy's loan value is not enough to cover an overdue
policy premium, we will not be able to make an Automatic Premium Loan and your
policy may lapse.
Borrowing to pay premiums
--------------------------------------------------------------------------------
If you are eligible, you can borrow against your policy's loan value to pay your
policy premiums.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 27
-------------
<PAGE>
If you have chosen both the Premium Skip Option and the Automatic Premium Loan
feature, we will treat an overdue policy premium as a skipped premium before we
initiate an Automatic Premium Loan. We will cancel your policy's Automatic
Premium Loan feature if we receive a written request from you to do so.
Please note: If you use the Automatic Premium Loan feature you will not be able
to make policy premium payments. You can still make unscheduled payments, within
the prescribed limits. See Unscheduled payments.
See Policy loans and Tax considerations for additional information on the
treatment of policy loans.
Crediting payments
If we receive a payment within 31 days before or after a policy premium due date
that equals or exceeds the amount that is due, and you have not provided
specific instructions, we will:
o pay the policy premium,
o then, repay any outstanding policy loans and accrued interest, and
o finally, treat any remaining excess as an unscheduled payment.
We will use any other unidentified payments that we receive from you to:
o pay any outstanding policy loans and accrued interest, and
o then, credit your policy with an unscheduled payment.
We normally credit your payments and allocate the net premium as of the business
day we receive it, so long as we receive it at our executive office by the close
of the business day, which is 4:00 p.m. New York City time. There are three
exceptions:
o any payments that we receive before your policy has been issued will be
held and credited on the issue date
o any payment that we receive within 31 days before a premium due date will
have the portion of that payment covering your policy premium credited on
the premium due date, and
o any payments that we receive after your policy has been issued that
require additional underwriting will be held and credited as of the date
the underwriting process is complete.
See How your premiums are allocated and Policy loans for specific information on
how your payments are distributed among the fixed rate and variable investment
options.
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28 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
-------------
<PAGE>
How your premiums are allocated
When you pay your basic scheduled premium or an unscheduled payment, the amount
that remains after we deduct premium charges (see Deductions and charges) is the
net premium. We invest your net premiums in the fixed-rate and/or variable
investment options according to your instructions. When net premiums have been
invested they become part of your policy account value.
As part of your initial application, you tell us how you would like your net
premiums distributed among the various allocation options. The percentage you
choose for each allocation option must be in whole numbers, and the total must
equal 100%. You may change how your net premiums are invested at any time by
telling us in writing. The change will be effective on and after the date we
receive your instructions at our executive office, but will not affect any
existing policy values. To change the allocation of these amounts, you must
effect a transfer. See Transfers between the investment options.
Currently you may invest your net premiums and policy account value in up to 7
different allocation options at any one time, but no more than 10 allocation
options may be utilized within any policy year. We reserve the right to change
this number from time to time.
If you pay policy premiums or unscheduled payments i) within 45 days of signing
Part 1 of your application or ii) within 15 days of the issue date, whichever is
later, only $100,000 may be invested in the variable investment options.
Anything over this amount will be treated as an "excess net premium" and
invested in The Guardian Cash Fund. This amount and any earnings from this money
will be reallocated based on your investment instructions at the end of the
later of (i) or (ii). Any amounts you have allocated to the fixed-rate option or
The Guardian Cash Fund will not be counted towards the $100,000 limit and will
be allocated to those options as of the business day we receive them.
Default
Unless you have chosen and qualify for the Premium Skip Option or the Automatic
Premium Loan feature, your policy premiums must be paid when they are due. If
you do not pay a policy premium by its due date, or if you have excessive policy
debt, your policy will be in default.
You must pay annual policy premiums on your policy anniversary. You must pay
periodic premiums on the monthly dates that we indicate for the frequency you
choose. You must make a payment toward any loans you have taken from your policy
if the amount of outstanding loans plus accrued interest is more than the cash
surrender value of your policy. We will tell you if a loan repayment is
required, how much you must repay, and when it is due.
Investing net premiums
--------------------------------------------------------------------------------
When you pay your basic scheduled premium or an unscheduled payment, the amount
that remains after we deduct premium charges is the net premium. We invest your
net premiums according to your instructions. When net premiums have been
invested, they become part of your policy account value.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 29
-------------
<PAGE>
Grace period
With the exception of your first policy premium, which puts your policy into
force, you have a 31-day grace period for the payment of policy premiums and
loan repayments followed by a 30-day late payment offer period. Your insurance
coverage will continue in full during the grace period, but if the insured dies
during the grace period we will deduct the amount of any outstanding policy
premiums through the policy month of death, or unpaid policy debt, from the
death benefit paid to the beneficiary. During the late payment offer period,
your policy is placed under the nonforfeiture option selected and your insurance
coverage ceases.
If we do not receive your payment before the end of the grace period and you
have qualified for and chosen either the Premium Skip Option or the Automatic
Premium Loan feature, your premium will be paid accordingly. Otherwise, your
policy will lapse. When your policy lapses your insurance coverage ends, unless
you elect a policy value option. If you are unable to continue paying the
premiums on your policy you may surrender it for its net cash surrender value.
In this event, we will pay you your policy's net cash surrender value, and all
insurance coverage will end. See Policy value options and Surrendering your
policy.
Reinstating your policy
During the late payment offer period, your policy can be reinstated without
evidence of insurability by paying the required premium payment.
If your policy has lapsed (and you have not surrendered it for its net cash
surrender value) you may reinstate it up to five years after you defaulted. To
reinstate your policy:
o we must receive your request for reinstatement in writing at our executive
office
o the insured must be alive
o you must show that the insured meets our insurance requirements
o you must repay or reinstate any outstanding policy debt with interest.
Interest will be compounded annually, at the rate that is in effect when
you make your request, and
o you must pay us all overdue policy premiums with 6% interest compounded
annually.
If you are reinstating your policy after a policy lapse based on excessive
policy debt, and you are reinstating your policy loans, your payments must also
include a loan repayment equal to policy debt minus 90% of the cash surrender
value, calculated as of the date of default
Your reinstated policy will have the same policy date, face amount and death
benefit option as the policy that lapsed. You will have to re-apply for the
Premium Skip Option and the Automatic Premium Loan feature if you want these
features available for your reinstated policy.
Reinstating your policy
--------------------------------------------------------------------------------
If your policy has lapsed, you may reinstate it up to five years after you
defaulted, subject to certain conditions described in the text.
-------------
30 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
-------------
<PAGE>
DEDUCTIONS AND CHARGES
There are various deductions and charges required to maintain your Park Avenue
Life Policy. These deductions and charges help defray certain costs associated
with the policies.
o the cost of underwriting, issuing and maintaining the policies, including
preparing and sending billing notices, reports and policy owner
statements, communications with insurance agents and other overhead costs.
o the risk that those insured under the policies may not live as long as we
estimated when we issued the policy, and our administrative expenses may
also be higher than expected.
o the cost of paying death benefits, especially in the early policy years
when the policy account value may be far below the death benefit we pay if
the insured dies.
o our sales and promotional expenses, commissions, and local, state and
federal taxes. You may not claim the portion of these charges used to pay
taxes as a federal income tax deduction.
The amount of a deduction or charge does not necessarily correspond to our costs
in providing the service or benefits associated with a particular policy. For
example, the sales portion of the premium charge and the surrender charge may
not cover all of our actual sales expenses for the policies, and proceeds from
other charges, including the mortality and expense risk charge and cost of
insurance charges, may be used in part to cover sales expenses. Once deductions
and charges are taken from your policy they do not contribute to the value of
your policy.
All of the deductions and charges are summarized and explained below.
Deductions from policy premiums and unscheduled payments
Policy premium assessments
Policy premium assessments are charges we add to your basic scheduled premium,
which together make up your policy premium. They cover the cost of any
additional coverage you have added to your policy through riders, or any rating
charges. Policy premium assessments may change if you change the riders attached
to your policy, or if the circumstances that gave rise to rating charges change.
We deduct this amount from each policy premium, but not from unscheduled
payments.
Premium charge
During each of the first 12 policy years after issue, a charge of 8% is deducted
from each premium you pay until you have paid one basic scheduled premium in a
policy year and 4% is deducted from premiums paid in excess of the basic
scheduled premium. After the 12th year, this charge drops to 4% for premiums
paid in a policy year until you have paid one basic scheduled premium in a
policy year and no charge for premiums paid in excess of one basic scheduled
premium.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 31
-------------
<PAGE>
Monthly deductions from the policy account value
We deduct from the policy account value, on each monthly date, amounts to cover
certain costs described below. These deductions are made proportionately from
your policy account value in the fixed rate and variable investment options. We
do not make these monthly deductions after the policy anniversary closest to the
insured's 100th birthday.
A combination of unfavorable investment performance and ongoing monthly
deductions can cause your policy account value to drop below zero. Even if this
happens, your policy will not lapse as long as you pay all policy premiums when
they are due, and there is no policy debt. However, we will continue to accrue
monthly deductions, which will increase the negative balance of your policy
account value. While your policy has a negative balance we will calculate the
cost of insurance charges based on a policy account value of zero, and all net
premiums, including net premiums resulting from unscheduled payments, will be
used to reduce your policy's negative balance until your policy account value
exceeds zero.
Policy and administration charges
We deduct a monthly charge of $7.50
We also deduct a monthly charge based on the base policy face amount on each
monthly date for the first 12 policy years after issue. The amount of this
charge depends on the insured's age, sex and underwriting class when the policy
is issued. This charge is not reduced if you decrease your face amount.
The charge will range from $0.035 to $0.583 per $1,000 of the base policy face
amount. Representative monthly rates per $1,000 are shown in Appendix D. Your
policy's charge is set forth in your policy.
Mortality and expense risk charge
We deduct this charge based on the policy account value in the variable
investment options before any other monthly deductions are made. Through the
twelfth policy anniversary, we deduct a monthly charge at a current annual rate
of 0.60% of the policy account value in the variable investment options.
Starting in the thirteenth policy year, we deduct a monthly charge at a current
annual rate of 0.40% of the policy account value in the variable investment
options, up to the account value breakpoint, and 0.20% on the amount in excess
of the account value breakpoint. The account value breakpoint is equal to
$100,000 less any policy account value allocated to the fixed-rate option, but
not less than zero. This charge is guaranteed never to exceed the current charge
stated above plus 0.25%.
Monthly deductions
--------------------------------------------------------------------------------
We deduct from the policy account value, on each monthly date, amounts to cover
certain costs. These deductions are made proportionately from your investments
in the fixed rate and variable investment options.
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32 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
-------------
<PAGE>
Guaranteed Insurance Amount charge
This is a monthly charge of $0.01 per $1,000 of your policy's face amount. It is
charged at the same rate for all policies and compensates us for guaranteeing a
minimum death benefit even if the investments in your policy perform poorly. You
will find the actual dollar amount of this charge in your policy. This charge
supports the guarantee that no matter how unfavorable investment performance
might be, the death benefit will never be less than the face amount if all
policy premiums are paid when due, no partial withdrawals are taken and there is
no policy debt.
Cost of Insurance charge
This charge is based on our cost of insurance rates for insured people of the
same age, sex, policy duration, face amount (including any term rider coverage),
and premium class. The maximum that we can charge for each $1,000 of net amount
at risk is set out in your policy and is based on the 1980 Commissioners'
Standard Ordinary Mortality Tables published by the National Association of
Insurance Commissioners. The cost of insurance rate generally increases as the
insured ages. Rates are currently lower for policies with a face amount plus
term rider face amount at least equal to $500,000. Our current cost of insurance
rates are lower than the guaranteed maximum.
We calculate the cost of insurance charge by multiplying your policy's net
amount at risk each month by the current cost of insurance rate that applies to
the insured, and dividing the result by $1,000. Your net amount at risk is
determined after all other monthly deductions have been withdrawn from your
policy account.
We may change the cost of insurance rates prospectively, at our discretion, up
to the guaranteed maximum rate listed in your policy. Changes in the health of
the insured will not cause your cost of insurance charge to increase. Increases
in the cost of insurance rates are not made to an individual policy, but are
made equally to all policies where the insured people are of the same age,
policy duration, sex and premium class. We may increase this charge when we
expect:
o a higher number of deaths among people in a certain group
o higher expenses or federal income taxes
o a higher number of policies that are allowed to lapse by their
policyowners
o an increase in state or local premium taxes
o lower earnings in our general account.
Cost of insurance charge
--------------------------------------------------------------------------------
This charge allows us to pay death benefits, especially in the early policy
years when the policy account value is far below the death benefit we pay if the
insured dies.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 33
-------------
<PAGE>
Generally, as your net amount at risk increases or decreases each month (for
example, due to payments you make or policy transactions you request), so will
your cost of insurance charges. If you choose death benefit Option 1, paying
policy premiums and making unscheduled payments may reduce your policy's net
amount at risk by increasing the policy account value, assuming that your
investments do not fall in value. If you choose death benefit Option 2, paying
policy premiums and making unscheduled payments may have the result of
increasing your death benefit over the face amount, in which case they will not
affect your policy's net amount at risk.
Transaction deductions from the policy account value
When you ask us to make certain transactions, we will take a transaction
deduction from your policy account value. Except as described differently below,
we will make these deductions from your policy account value invested in the
variable investment options, until these are exhausted, and then from your
fixed-rate option.
Surrender charge
During the first 9 years of your policy, you pay a surrender charge if you:
o surrender your policy, or
o let your policy lapse.
This charge is a flat rate for every $1,000 of your policy's initial face
amount. The first year rate varies from $2.82 to $56.18 per $1,000, depending on
the insured's age when the policy started, sex and premium class. The rate
declines proportionally each year until it is zero after 9 years.
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34 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
-------------
<PAGE>
Surrender charges
--------------------------------------------------------------------------------
EXAMPLE
The example on the right shows how the surrender charge declines
over a twelve year period so that in year __ it equals $0.
--------------------------------------------------------------------------------
Male Insured, Age 45
--------------------------------------------------------------------------------
Preferred Plus Premium Class
--------------------------------------------------------------------------------
Face Amount: $250,000
--------------------------------------------------------------------------------
Surrender Charge per $1000 of Face Amount in policy
year one (from Appendix D): $____
--------------------------------------------------------------------------------
Surrender charge in policy year one is:
The surrender charge per $1000 multiplied by 250,
or ($____ x $250,000),
divided by 1000 = $______.
Proportional reduction in surrender charge over __ year period:
$____ divided by 12 or $___ per year.
All figures in the table following are rounded to the nearest $ .01.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Surrender
charge per Actual
$1000 of face surrender
Policy amount charge
year ($) ($)
----------------------------------------
1
----------------------------------------
2
----------------------------------------
3
----------------------------------------
4
----------------------------------------
5
----------------------------------------
6
----------------------------------------
7
----------------------------------------
8
----------------------------------------
9
----------------------------------------
10
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
--------------------------------------------------------------------------------
We do not reduce or deduct a surrender charge upon a change in death benefit
option or upon a partial withdrawal. In addition, we do not reduce or deduct a
surrender charge if you reduce or eliminate your coverage under a term rider, or
reduce your face amount. The surrender charge shown on page 3 of your policy
remains in effect until you either surrender your policy for its net cash
surrender value or the policy lapses, at which time the surrender charge will be
deducted, or until the applicable surrender charge period expires.
Representative surrender charges for specific ages, sex and premium classes are
set out in Appendix E of this prospectus.
Premium skip option deduction
If you skip a premium under the Premium Skip Option, we will deduct an amount
needed to cover any policy premium assessments from your policy account value
that is not being held as collateral for a loan.
Transfer charge
You may transfer your policy account value among the allocation options. If you
make more than 12 transfers within a policy year, we reserve the right to charge
you $25 for each additional transfer. We will deduct the transfer charge from
the allocation options from which you are making the transfer and will use this
amount to cover our processing costs.
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PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 35
-------------
<PAGE>
We will not deduct a transfer charge when:
o we transfer any excess net premiums and related earnings out of The
Guardian Cash Fund (See How your premiums are allocated)
o you make multiple transfers under your policy's dollar cost averaging
feature
o we transfer amounts as part of your taking or repaying a policy loan, or
o you transfer amounts out of a variable investment option because the
investment policies of the corresponding mutual fund have materially
changed.
We do not currently deduct transfer charges.
Deductions from the Separate Account
Income Tax charge
We have the right to charge the Separate Account, the account through which we
invest your premiums in the variable investment option, for any federal, state
or local income taxes relating to the Separate Account. We also have the right
to impose additional charges if there is a change in our tax status, if the
income tax treatment of variable life insurance changes for insurance companies,
or for any other tax-related charges associated with the Separate Account or the
policies. We don't currently charge for taxes attributable to the Separate
Account.
Deductions from Mutual Funds
Daily deductions are made from the assets of the mutual funds to cover advisory
fees and other expenses. As a result, you pay these fees and expenses
indirectly. These expenses vary from year to year. Except as noted below, the
following table shows the actual fees and expenses for each fund for the year
ended December 31, 1999 as a percentage of the fund's average daily net assets.
Please see the individual fund prospectuses for a complete explanation of the
funds' fees and expenses.
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36 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
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<PAGE>
Fees and expenses for mutual funds
Other Total
expenses expenses
(after any (after any
applicable applicable
waivers waivers
Advisory and expense and expense
Fund name fee reimbursements) reimbursements)
--------------------------------------------------------------------------------
Guardian Stock Fund 0.50% 0.02% 0.52%
--------------------------------------------------------------------------------
Guardian Small Cap Stock Fund 0.75% 0.08% 0.83%
--------------------------------------------------------------------------------
Guardian Cash Fund 0.50% 0.03% 0.53%
--------------------------------------------------------------------------------
Guardian Bond Fund(1) 0.50% 0.05% 0.55%
--------------------------------------------------------------------------------
Guardian VC 500 Index Fund(1) 0.25% 0.03% 0.28%
--------------------------------------------------------------------------------
Guardian VC Asset Allocation Fund(1) 0.50% 0.17% 0.67%
--------------------------------------------------------------------------------
Guardian VC High Yield Bond Fund 0.60% 0.39% 0.99%
--------------------------------------------------------------------------------
Baillie Gifford International Fund 0.80% 0.16% 0.96%
--------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund 1.00% 0.44% 1.44%
--------------------------------------------------------------------------------
Value Line Centurion Fund(1) 0.50% 0.09% 0.59%
--------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust(1) 0.50% 0.08% 0.58%
--------------------------------------------------------------------------------
Gabelli Capital Asset Fund 1.00% 0.08% 1.08%
--------------------------------------------------------------------------------
MFS Emerging Growth Series(1) 0.75% 0.09% 0.84%
--------------------------------------------------------------------------------
MFS Total Return Series(1) 0.75% 0.15% 0.90%
--------------------------------------------------------------------------------
MFS Growth With Income Series 0.75% 0.13% 0.88%
--------------------------------------------------------------------------------
MFS New Discovery Series(1) 0.90% 0.27% 1.17%
--------------------------------------------------------------------------------
MFS Research Series(1) 0.75% 0.11% 0.86%
--------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62% 0.11% 0.73%
--------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund 0.65% 0.49% 1.14%
--------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% 0.15% 0.76%
--------------------------------------------------------------------------------
Davis Financial Portfolio(1) 0.75% 0.25% 1.00%
--------------------------------------------------------------------------------
Davis Real Estate Portfolio(1) 0.75% 0.25% 1.00%
--------------------------------------------------------------------------------
Davis Value Portfolio(1) 0.75% 0.25% 1.00%
--------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities
Portfolio (Service Class 2)(1) 0.58% 0.38% 0.96%
--------------------------------------------------------------------------------
Fidelity VIP Equity-Income
Portfolio (Service Class 2)(1) 0.48% 0.35% 0.83%
--------------------------------------------------------------------------------
Fidelity VIP III
Mid Cap Portfolio (Service Class 2)(1) 0.57% 0.68% 1.25%
--------------------------------------------------------------------------------
Fidelity VIP II Contrafund
Portfolio (Service Class 2)(1) 0.58% 0.37% 0.95%
--------------------------------------------------------------------------------
Janus Aspen Aggressive
Growth Portfolio (Service Class)(1) 0.65% 0.27% 0.92%
--------------------------------------------------------------------------------
Janus Aspen Capital Appreciation
Portfolio (Service Class)(1) 0.65% 0.29% 0.94%
--------------------------------------------------------------------------------
Janus Aspen Growth Portfolio
(Service Class)(1) 0.65% 0.27% 0.92%
--------------------------------------------------------------------------------
Janus Aspen Worldwide Growth
Portfolio (Service Class)(1) 0.65% 0.30% 0.95%
--------------------------------------------------------------------------------
(1) See Notes to fees and expense table
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 37
-------------
<PAGE>
Notes to fees and expense table
These percentages reflect the actual fees and expenses incurred by each Fund
during the year ended December 31, 1999 except for the Janus Funds and Fidelity
Portfolios, whose expenses are estimated for the year ending December 31, 2000,
and Guardian VC 500 Index Fund whose expenses are restated as described below.
Guardian VC Asset Allocation Fund. Expenses do not include expenses of the
underlying funds in which the Asset Allocation Fund invests its assets.
Including the expense of the underlying funds, the Fund's total expenses would
be 0.98%.
The Guardian Bond Fund, Inc. Expenses do not include interest expense. If
interest expense were included, total expenses would be 0.57%.
The Guardian VC 500 Index Fund. Expenses are based upon expenses for the fiscal
year ended December 31, 1999, restated to reflect a reduction in the management
fee for the Fund. Expenses for the year ended December 31, 1999 were 0.29% after
applicable waivers and expense reimbursements, and 0.36% before applicable
waivers and expense reimbursements.
The Guardian VC High Yield Bond Fund. Expenses have been grossed up to include
the effects of custody credits received by the Funds. Without these credits
total expenses would have been 1.14%.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund. Total
expenses have been grossed up to include custody credit arrangements. However,
the credit received does not affect the funds' total expenses.
MFS Emerging Growth Series, MFS Total Return Series, MFS New Discovery Series,
MFS Research Series. All of the MFS funds have expense offset arrangements which
reduce their custodian fees based upon the amount of cash maintained by each
fund with its custodian. The "Total expenses" in the table do not take into
account this expense reduction and are therefore higher than the actual expenses
of each fund.
The expenses shown for MFS New Discovery Series reflect an agreement by the
Fund's adviser to bear expenses, subject to reimbursement by the Fund, such that
the Fund's "Other expenses" will not exceed 0.25% of the Fund's average daily
net assets during 1999. Reimbursement by the Fund will be accomplished by the
payment of an expense reimbursement fee by the Fund to the adviser, subject to
the maximum 0.25% described above. Effective May 1, 2000, the adviser has
contractually agreed, subject to reimbursement, to bear expenses for the New
Discovery Series such that the New Discovery Series' "Other expenses" (after
taking into effect expense offset arrangements referred to above) will not
exceed
-------------
38 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
-------------
<PAGE>
0.15%. This arrangement will continue until at least May 1, 2001, unless changed
with the consent of the board of trustees which oversees the Series.
Davis Value Portfolio, Davis Financial Portfolio and Davis Real Estate
Portfolio. Had the adviser not absorbed certain expenses, the ratio of expenses
to average net assets would have been 2.29%, 4.24%, and 11.70% for Davis Value
Portfolio, Davis Financial Portfolio and Davis Real Estate Portfolio,
respectively.
Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP III Mid Cap Portfolio, and Fidelity VIP II Contrafund
Portfolio. Service Class 2 share expenses are based on estimated expenses for
the first year and are without reimbursement. Service Class 2 "other expenses"
include 12b-1 fees.
Janus Aspen Aggressive Growth Portfolio, Janus Aspen Capital Appreciation
Portfolio, Janus Aspen Growth Portfolio, and Janus Aspen Worldwide Growth
Portfolio. Expenses are based on the estimated expenses that the new service
shares class of each portfolio expects to incur in its initial fiscal year.
Service class "other expenses" include 12b-1 fees.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund. The
operational expenses for Value Line Strategic Asset Management Trust and Value
Line Centurion Fund reflect expense reimbursements paid by those funds to us for
certain administrative and shareholder servicing expenses that we incur on their
behalf. For the year ended December 31, 1999, we were reimbursed $857,868 by
Value Line Strategic Asset Management Trust, and $586,401 by Value Line
Centurion Fund.
We have also entered into agreements with certain fund advisers under which we
will be reimbursed for certain administrative, distribution or other expenses
that we incur as a result of offering certain funds, including the MFS, AIM,
Davis, Fidelity and Janus funds, to our policyowners. The amount of compensation
may be based on assets of the fund attributable to policies we issue and may
vary from adviser to adviser.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 39
-------------
<PAGE>
--------------------------------------------------------------------------------
YOUR ALLOCATION OPTIONS
--------------------------------------------------------------------------------
AS PART OF YOUR POLICY you are able to direct where a portion of your premiums
are allocated. There are several variable investment options and a fixed-rate
option. You may choose up to seven allocation options at any time.
--------------------------------------------------------------------------------
THE VARIABLE INVESTMENT OPTIONS
The variable investment options give you the opportunity to invest a portion of
your net premiums, indirectly, in a series of mutual funds offering variable
rates of return. The value of your investments will vary depending on the
performance of the mutual funds. There is no minimum guaranteed policy account
value for the portion of your policy that is held in the variable investment
options.
The Separate Account
The Separate Account is the account through which we invest your net premiums in
the variable investment options. We are the record owner of the assets in the
Separate Account, and use them exclusively to support the variable life
insurance policies issued through the Separate Account. The Separate Account
consists of 31 investment divisions, each corresponding to a mutual fund in
which the Separate Account invests. The Separate Account was established by
GIAC's Board of Directors on November 18, 1993 under the insurance law of the
state of Delaware, and meets the definition of a separate account under the
federal securities laws.
Our Separate Account is registered with the SEC as a unit investment trust - a
type of investment company under the Investment Company Act of 1940 (the 1940
Act). Registration under the 1940 Act does not involve any supervision by the
SEC of the investment management or programs of the Separate Account or GIAC.
However, both GIAC and the Separate Account are subject to regulation under
Delaware law. GIAC is also subject to the insurance laws and regulations of all
states and jurisdictions where the company is authorized to do business.
GIAC owns the assets held in the Separate Account. The assets equal to the
reserves and other liabilities of the Separate Account are used only to support
the variable life insurance policies issued through the Separate Account.
Delaware insurance law provides that these assets may not be used to satisfy
liabilities arising from any other business that GIAC may conduct. This means
that the assets supporting policy account values maintained in the variable
investment options are not available to meet the claims of GIAC's general
creditors. GIAC may also retain in the Separate Account assets that exceed the
reserves and other liabilities of the Separate Account.
-------------
40 PROSPECTUS ALLOCATION OPTIONS
-------------
<PAGE>
Such assets can include GIAC's direct contributions to the Account, or the
investment results attributable to GIAC's retained assets. Because such retained
assets do not support policy account values, GIAC may transfer them from the
Separate Account to its general account.
Each mutual fund is briefly described below. Complete information can be found
in the accompanying fund prospectuses.
The Funds
Each of the funds corresponding to a variable investment option is either an
open-end diversified management company or a series of an open-end diversified
management company registered with the Securities and Exchange Commission. The
funds don't charge us for buying or selling their shares, allowing us to buy and
sell them at their net asset value in response to your instructions and other
policy-related transactions.
Currently, other investment products that we and other insurers offer are also
able to invest in certain of the mutual funds through the Separate Account.
While the Board of Directors of each fund monitors activities in an effort to
avoid or correct any material irreconcilable conflicts arising out of this
arrangement, we may also take actions to protect the interests of our
policyowners. For more information see Rights reserved by GIAC, and the
prospectuses for the individual mutual funds.
Investment objectives and policies of the Funds
Each fund has a different investment objective that it tries to achieve by
following certain investment policies. These objectives affect the potential
risks and returns for each fund, and there is no guarantee that a fund will be
able to meet its investment objectives fully. Some funds have similar investment
objectives and policies to other funds managed by the same adviser. The
investment results of the funds, however, may be higher or lower than the
adviser's other funds. There is no assurance, and we make no representation,
that the performance of any fund will be comparable to the performance results
of any other fund.
The table below summarizes each fund's investment objective, along with the
typical investments that make up that fund.
-------------
ALLOCATION OPTIONS PROSPECTUS 41
-------------
<PAGE>
Variable investment options
<TABLE>
<CAPTION>
Fund Investment objectives Typical investments
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Guardian Stock Fund Long-term growth of capital U.S. common stocks
------------------------------------------------------------------------------------------------------------------------------------
The Guardian VC 500 Index Fund Seeks to match the investment performance Common stocks of companies in the S&P
of the Standard & Poor's 500 Corporate Index, which emphasizes large U.S.
Stock Price Index ("the S&P Index") Companies
------------------------------------------------------------------------------------------------------------------------------------
The Guardian Small Cap Stock Fund Long-term growth of capital U.S. common stocks of companies with small
market capitalization
------------------------------------------------------------------------------------------------------------------------------------
The Guardian Bond Fund Maximum income without undue Investment grade debt obligations
risk of principal; capital appreciation
is a secondary objective
------------------------------------------------------------------------------------------------------------------------------------
The Guardian VC High Yield Bond Fund Current income; capital appreciation is Corporate bonds and other debt
a secondary objective securities rated below investment grade
------------------------------------------------------------------------------------------------------------------------------------
The Guardian Cash Fund High level of current income consistent Money market instruments
with liquidity and preservation of capital
------------------------------------------------------------------------------------------------------------------------------------
The Guardian VC Asset Allocation Fund Long-term total investment return Shares of The Guardian Stock Fund, The
consistent with moderate investment risk Guardian Bond Fund, and The Guardian
Cash Fund
------------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford International Fund Long-term capital appreciation Common stocks and convertible securities
issued by foreign companies
------------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund Long-term capital appreciation Common stocks and convertible securities of
emerging market companies
------------------------------------------------------------------------------------------------------------------------------------
Value Line Centurion Fund Long-term growth of capital U.S. common stocks with selections based on
rankings of the Value Line Ranking System
------------------------------------------------------------------------------------------------------------------------------------
Value Line Strategic Asset High total investment return (current U.S. common stocks with selections
Management Trust income and capital appreciation) based on rankings of the Value Line
consistent with reasonable risk Ranking System, bonds and money
market instruments
------------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund Growth of capital; current income as U.S. common stocks and convertible
a secondary objective securities
------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Growth of capital Common stocks of medium and
small-sized growth companies
------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund High current income; growth of capital Common and preferred stocks
as a secondary objective of domestic or foreign public utilities
------------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of capital; Equity securities judged to be
income as a secondary objective undervalued by the investment advisor
------------------------------------------------------------------------------------------------------------------------------------
Davis Financial Portfolio Growth of capital Common stocks of financial companies
------------------------------------------------------------------------------------------------------------------------------------
Davis Real Estate Portfolio Total return through a combination of Securities issued by companies that are
growth and income "principally engaged" in real estate
------------------------------------------------------------------------------------------------------------------------------------
Davis Value Portfolio Growth of capital U.S. common stocks of companies with
at least $5 billion market capitalization
------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio Long-term capital appreciation U.S. and foreign common stocks of
companies believed to be undervalued
------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio Reasonable income; also considers Income-producing equity securities
potential for capital appreciation
------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Capital growth U.S. and foreign common stocks
Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Mid Cap Portfolio Long-term growth of capital Common stocks with medium market
capitalization, both U.S. and foreign
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-------------
42 PROSPECTUS ALLOCATION OPTIONS
-------------
<PAGE>
Variable investment options (Continued)
<TABLE>
<CAPTION>
Fund Investment objectives Typical investments
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Janus Aspen Aggressive Long-term growth of capital Equity securities of medium-sized
Growth Portfolio companies
------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Capital Long-term growth of capital Equity securities of companies of any size
Appreciation Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio Long term growth of capital Common stocks of issuers of any size
in a manner consistent with
preservation of capital
------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Long term growth of capital Common stocks of foreign and U.S.
Growth Portfolio in a manner consistent with issuers; usually invests in at least five
preservation of capital countries, including the U.S.
------------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series Long-term growth of capital Common stocks of emerging growth
companies of any size
------------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series Reasonable current income and Equity securities issued by U.S. and
long-term growth of capital and income foreign companies
------------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series To seek capital appreciation Equity securities of companies that offer
superior prospects for growth, both U.S.
and foreign
------------------------------------------------------------------------------------------------------------------------------------
MFS Research Series Long-term growth of capital Equity securities of companies
and future income believed to possess better than average
prospects for long-term growth
------------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series Above average income consistent Broad list of securities, including a
with prudent employment of capital; combination of equity and fixed-income,
as a secondary objective, to provide both U.S. and foreign
reasonable opportunity for growth of
capital and income
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Some of these Funds may not be available in your state.
-------------
ALLOCATION OPTIONS PROSPECTUS 43
-------------
<PAGE>
Investment performance of the Funds
The table below shows the average annual total returns for the mutual funds for
years ended December 31, 1999. The performance figures reflect the deduction of
fund investment advisory fees and operating expenses, and assume that any
dividends and capital gains are reinvested in the fund. These figures do not
reflect how the funds' investment performance will affect the value of your
policy, because they do not take into account the insurance and other charges we
deduct from your policy. If these charges were taken into account, total returns
for each fund would be lower. Also, past returns should not be used to predict
future performance. Total returns for The Guardian Cash Fund are not presented
here.
Years ended December 31, 1999
--------------------------------
10 Years
or since
Fund name inception,
and inception date 1 Year 5 Years if less
-------------------------------------------------------------------------------
The Guardian Stock Fund(1)
(4/13/83) 31.17% 29.48% 20.04%
-------------------------------------------------------------------------------
The Guardian VC 500 Index Fund
(9/13/99) N/A N/A 6.38%*
-------------------------------------------------------------------------------
The Guardian Small Cap Stock Fund
(7/16/97) 35.04% N/A 16.25%*
-------------------------------------------------------------------------------
The Guardian Bond Fund(1)
(5/1/83) -0.84% 7.16% 7.27%
-------------------------------------------------------------------------------
The Guardian VC High Yield Bond Fund
(9/13/99) N/A N/A 2.78%*
-------------------------------------------------------------------------------
The Guardian VC Asset Allocation Fund
(9/13/99) N/A N/A 8.67%*
-------------------------------------------------------------------------------
Baillie Gifford International Fund
(2/8/91) 39.11% 19.35% 16.01%*
-------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund
(10/17/94) 72.30% 9.76% 6.71%*
-------------------------------------------------------------------------------
Value Line Centurion Fund
(11/15/83) 28.23% 26.67% 19.48%
-------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
(10/1/87) 24.32% 22.24% 16.94%
-------------------------------------------------------------------------------
Gabelli Capital Asset Fund(2)
(5/1/95) 19.81% N/A 19.49%*
-------------------------------------------------------------------------------
AIM V.I. Capital
Appreciation Fund(3)
(5/5/93) 44.61% 25.59% 22.33%*
-------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund(3)
(5/2/94) 33.56% 21.87% 18.45%*
-------------------------------------------------------------------------------
AIM V.I. Value Fund(3)
(5/5/93) 29.90% 27.23% 23.07%*
-------------------------------------------------------------------------------
Davis Financial Portfolio(4)
(7/1/99) N/A N/A -7.17%*
-------------------------------------------------------------------------------
Davis Real Estate Portfolio(4)
(7/1/99) N/A N/A -10.79%*
-------------------------------------------------------------------------------
Davis Value Portfolio(4)
(7/1/99) N/A N/A 2.64%*
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total returns do not reflect deductions
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, or transaction deductions.
Including the effects of these deductions reduces returns under the policy. See
Special terms used in this prospectus and Deductions and charges for additional
information.
--------------------------------------------------------------------------------
-------------
44 PROSPECTUS ALLOCATION OPTIONS
-------------
<PAGE>
Years ended December 31, 1999
--------------------------------
10 Years
or since
Fund name inception,
and inception date 1 Year 5 Years if less
-------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio(5)
(Service Class 2) (1/3/95) N/A N/A N/A
-------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(5)
(Service Class 2) (10/9/96) N/A N/A N/A
-------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio(5)
(Service Class 2) (1/3/95) N/A N/A N/A
-------------------------------------------------------------------------------
Fidelity VIP III Mid Cap Portfolio(5)
(Service Class 2) (12/28/98) N/A N/A N/A
-------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio(6)
(Service Class) (9/13/93) 123.16% 35.83% 33.98%
-------------------------------------------------------------------------------
Janus Aspen Capital Appreciation Portfolio(6)
(Service Class) (5/1/97) 64.60% N/A 56.39%
-------------------------------------------------------------------------------
Janus Aspen Growth Portfolio(6)
(Service Class) (9/13/93) 43.01% 29.53% 23.86%
-------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio(6)
(Service Class) (9/13/93) 63.49% 33.28% 29.35%
-------------------------------------------------------------------------------
MFS Emerging Growth Series(7)
(7/24/95) 76.71% N/A 36.44%*
-------------------------------------------------------------------------------
MFS Growth with Income Series(7)
(10/9/95) 6.69% N/A 21.12%*
-------------------------------------------------------------------------------
MFS New Discovery Series(7)
(5/1/98) 73.41% N/A 40.91%*
-------------------------------------------------------------------------------
MFS Research Series(7)
(7/26/95) 24.05% N/A 22.86%*
-------------------------------------------------------------------------------
MFS Total Return Series(7)
(1/3/95) 3.08% N/A 15.42%*
-------------------------------------------------------------------------------
* since inception
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, transaction deductions or
any deductions from the Separate Account. Including the effects of these
deductions reduces returns. See Special terms used in this prospectus and
Deductions and charges for additional information.
(1) Results for The Guardian Bond Fund and The Guardian Stock Fund reflect
effects of expense reimbursements that occurred during the years ended
December 31, 1984 and 1985. Without these expense reimbursements, results
for these funds would be lower. The inception date for The Guardian Small
Cap Stock Fund is the date of commencement of the public offering of the
fund.
(2) For the period from May 1, 1995 through December 31, 1995, the Manager and
the Adviser of Gabelli Capital Asset Fund absorbed a portion of the fund's
operating expenses. Total returns for this period would have been lower if
these expenses had not been absorbed.
(3) Total returns for AIM V.I. Value Fund, AIM V.I. Capital Appreciation Fund
and AIM V.I. Global Utilities Fund reflect the effects of fee waivers
and/or expense offset arrangements. In the absence of such arrangements
total returns would have been lower.
(4) Total returns for Davis Financial, Davis Real Estate and Davis Value
Portfolios reflect the effects of fee waivers and/or expense offset
arrangements. In the absence of such arrangements, total returns would
have been lower.
(5) Service Class 2 is a new class of shares issued by the Portfolio and no
historical performance is yet available.
(6) Total returns for Janus Aspen Aggressive Growth, Janus Aspen Capital
Appreciation, Janus Aspen Growth and Janus Aspen Worldwide Growth
Portfolios reflect the effects or fee waivers and/or expense offset
arrangements. In the absence of such arrangements total returns would have
been lower. The Portfolios' Service Shares commenced operations on
December 31, 1999. The returns shown for the Service Shares of these
Portfolio reflect the historical performance of a different class of
shares (the Institutional Shares) prior to December 31, 1999, restated
based on the Service Shares' estimated fees and expenses (ignoring any fee
and expense limitations).
(7) Total returns for the MFS Growth With Income Series, Emerging Growth
Series, New Discovery Series, Research Series and Total Return Series
reflect the agreement by the series' Adviser to bear expenses for the
series, subject to reimbursement by the series, such that the operational
expenses shall not exceed 0.25% of the average daily net assets of the
series for each fiscal year since inception. In the absence of this
agreement, except where a series is reimbursing its adviser for previous
years' expense payments on its behalf, total returns would be lower.
-------------
ALLOCATION OPTIONS PROSPECTUS 45
-------------
<PAGE>
The funds' investment advisers
All of the funds' investment advisers are registered with the SEC as investment
advisers under the Investment Advisers Act of 1940 (Advisers Act).
Guardian Investor Services Corporation
The Guardian Stock Fund, The Guardian Small Cap Stock Fund, The Guardian Bond
Fund, The Guardian Cash Fund, The Guardian VC 500 Index Fund, The Guardian VC
High Yield Bond Fund and The Guardian VC Asset Allocation Fund (the Guardian
funds) are advised by Guardian Investor Services Corporation (GISC), 7 Hanover
Square, New York, New York, 10004. GISC is wholly owned by GIAC.
Guardian Baillie Gifford Limited
Baillie Gifford International Fund and Baillie Gifford Emerging Markets Fund are
advised by Guardian Baillie Gifford Limited (GBG), 1 Rutland Court, Edinburgh,
EH3 8EY, Scotland. GBG is a member of Great Britain's Investment Management
Regulatory Organization Limited (IMRO). GBG was incorporated in Scotland by GIAC
and Baillie Gifford Overseas Limited (BG Overseas) in November 1990. BG Overseas
is wholly owned by Baillie Gifford & Co., which is currently one of the largest
investment management partnerships in the United Kingdom.
Baillie Gifford Overseas Limited
GBG has appointed BG Overseas to serve as sub-investment adviser to Baillie
Gifford International Fund and Baillie Gifford Emerging Markets Fund. Like GBG,
BG Overseas is located at 1 Rutland Court, Edinburgh, EH3 8EY, Scotland. BG
Overseas is also a member of IMRO. No separate or additional fee is paid by the
fund to BG Overseas.
Value Line, Inc.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund are
advised by Value Line, Inc., 220 East 42nd Street, New York, New York 10017.
Gabelli Funds, LLC
Gabelli Capital Asset Fund is managed by GISC, which has appointed Gabelli
Funds, LLC as the investment adviser to the Fund. The adviser has its principal
offices at One Corporate Center, Rye, New York 10580. No separate or additional
fee is paid by the Fund to the adviser.
Massachusetts Financial Services Company
MFS Growth With Income Series, MFS Emerging Growth Series, MFS New Discovery
Series, MFS Research Series, and MFS Total Return Series are advised by
Massachusetts Financial Services Company (MFS), 500 Boylston Street, Boston, MA.
MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings,
Inc. which is itself an indirect wholly owned subsidiary of Sun Life Assurance
Company of Canada.
-------------
46 PROSPECTUS ALLOCATION OPTIONS
-------------
<PAGE>
A I M Advisors, Inc.
AIM V.I. Value Fund, AIM V.I. Global Utilities Fund and AIM V.I. Capital
Appreciation Fund are advised by A I M Advisors, Inc. (AIM), 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
Fidelity Management & Research Company
The Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP III Mid Cap Portfolio, and Fidelity VIP II Contrafund
Portfolio are advised by Fidelity Management & Research Company (FMR), 82
Devonshire Street, Boston, Massachusetts 02109.
On behalf of the Fidelity VIP II Contrafund Portfolio, Fidelity VIP III Growth
Opportunities Portfolio, and Fidelity VIP III Mid Cap Portfolio, FMR has
sub-advisory agreements with two affiliates, FMR U.K. and FMR Far East. No
separate or additional fee is paid by the portfolios to the sub-adviser.
Davis Selected Advisers, LP
Davis Financial Portfolio, Davis Real Estate Portfolio, and Davis Value
Portfolio are advised by Davis Selected Advisers, LP, 2949 East Elvira Road,
Suite 101, Tucson, Arizona 85706 (Davis). Davis Selected Advisers-NY, Inc. acts
as sub-adviser to the Funds. It is located at 609 Fifth Avenue, New York 10017.
Janus Capital Corporation
Janus Aspen Growth Portfolio, Janus Aspen Aggressive Growth Portfolio, Janus
Aspen Capital Appreciation Portfolio, and Janus Aspen Worldwide Growth Portfolio
are advised by Janus Capital Corporation, 100 Fillmore Street, Denver, Colorado
80206.
-------------
ALLOCATION OPTIONS PROSPECTUS 47
-------------
<PAGE>
THE FIXED-RATE OPTION
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. You may allocate some or all of your net premiums to the fixed-rate
option, and may transfer some or all of your investments in the variable
investment options into the fixed-rate option. There are restrictions on making
transfers out of the fixed rate option. See Transfers between the investment
options. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
We have not registered the fixed-rate option or our general account as
investment companies, and interests in the fixed-rate option are not registered
under the Securities Act of 1933. The SEC staff does not review the prospectus
disclosure about the fixed-rate option or the general account, but the
information we present may be subject to certain generally applicable provisions
of the federal securities laws regarding the accuracy and completeness of
information appearing in a prospectus.
Amounts in the fixed-rate option
The total amount that you have invested in the fixed-rate option consists of:
o the portion of your net premiums and any loan repayments that you have
allocated to this option, plus
o any amounts that you have transferred to this option from the variable
investment options, plus
o the interest paid on your policy account value in this option, minus
o any deductions or withdrawals from the fixed-rate option, including
applicable charges.
Because different interest rates may be in effect as you make transfers and
contributions throughout the year, your effective interest rate for that year
may be a weighted average of the different rates which apply to the portions of
your policy account value in the fixed-rate option. Interest accrues daily on
the total that you have invested in the fixed-rate option, including interest
you have earned in previous years. The minimum annual interest rate for the
fixed-rate option is 4%. Interest rates may be changed at any time in our
discretion. We are not obliged to pay more than 4% in interest, although we may
choose to do so. Deductions from the fixed-rate option are made from amounts in
the fixed-rate option in the order in which they were added, beginning with
amounts held there the longest.
Fixed-rate option
--------------------------------------------------------------------------------
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
-------------
48 PROSPECTUS ALLOCATION OPTIONS
-------------
<PAGE>
--------------------------------------------------------------------------------
SPECIAL FEATURES OF YOUR POLICY
--------------------------------------------------------------------------------
POLICY LOANS
While the insured is alive, you may borrow all or a portion of the loan value of
your policy, by assigning your policy to us as collateral for your loan. Your
policy's loan value is:
o 90% of the cash surrender value of your policy on the date we receive your
written request, minus
o the amount of any outstanding policy debt.
You may not take a policy loan if your policy has lapsed and is being continued
under the fixed-benefit extended term insurance policy value option.
Except for Automatic Premium Loans, the minimum loan amount is $500; however, we
will allow a loan of less than $500, if 90% of cash surrender value minus policy
debt is less than $500. Generally, we will pay loan proceeds to you within seven
days of receiving your request (see Policy proceeds for exceptions to this
general rule). If you are taking an Automatic Premium Loan, you will not
actually receive any money. Instead, the proceeds will be used to pay the policy
premium that is due.
We will transfer the amount of your loan first proportionately from your policy
account value in the variable investment options, and if this is insufficient,
from your policy account value in the fixed-rate option, into our Loan
Collateral Account.
When taking out a policy loan, you should consider:
o amounts transferred out of the variable and fixed-rate options and into
our Loan Collateral Account are no longer affected by the investment
experience, positive or negative, of those allocation options
o as a result, taking a policy loan will have a permanent effect on your
policy account value, even once the loan is repaid in full
o the amount of your policy that is available for withdrawal or surrender,
and your policy's death benefit proceeds, will also be reduced
dollar-for-dollar by the amount of any policy debt
o if your policy is considered to be a modified endowment contract under the
Internal Revenue Code, there may be tax consequences associated with
taking a policy loan or using your policy's Automatic Premium Loan
feature. See Tax considerations for a discussion of modified endowment
contracts and the effects on policy loans.
Policy loans
--------------------------------------------------------------------------------
While the insured is alive, you may borrow all or a portion of the loan value of
your policy, by assigning your policy to us as collateral for your loan.
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SPECIAL FEATURES PROSPECTUS 49
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<PAGE>
Interest on your policy loan
We charge interest at an annual rate of 5% on all outstanding policy debt,
payable in arrears, until the 20th policy anniversary. After this point the
annual rate falls to 4.5% for all existing and new policy loans. Interest
accrues daily and is due on each policy anniversary. If you do not pay the
interest on your loan when it is due, we will transfer the interest that you owe
first proportionately from your policy account value in the variable investment
options, and if this is insufficient, from the fixed-rate option, into our Loan
Collateral Account, and add that interest to your policy debt. This is called
capitalization of loan interest. The maximum amount of loan interest that can be
capitalized is 100% of the net cash surrender value.
The investments in the Loan Collateral Account will earn interest at a minimum
annual rate of 4%. Although this means that you are effectively paying a maximum
of 1% interest on your policy loans, you are expected to pay the loan interest
charged, when it is due.
Repaying your policy loan
You may repay all or part of any outstanding policy debt at any time while the
insured is alive and the policy is in force, or has been continued after lapse
under the reduced paid-up or variable reduced paid-up insurance policy value
options. See Policy value options. Unless your loan repayment is made along with
your policy premium, the minimum loan repayment amount is $100 or the
outstanding balance of your policy debt, whichever is lower.
If the insured has died and the death benefit proceeds have not been paid,
either in cash or under a payment option, you have 60 days after his or her
death to repay any policy debt. We will then increase the amount payable to the
beneficiary by the amount of your repayment.
When you make a loan repayment, we transfer out of the Loan Collateral Account
the amount of your repayment, minus a proportional amount of any accrued
interest owing, plus a proportional amount of any accrued interest we owe you on
the amount that was being held in the Loan Collateral Account. Your repayment
will be credited first to the fixed-rate option, up to the amount that was
deducted for your loan, then into the variable investment options according to
your current allocation instructions. The amount credited to the fixed-rate
option will earn the interest rate in effect at that time.
Transfers under your policy that are made in connection with policy loans are
not subject to transfer charges. Also, loan repayments are not subject to
premium charges, so it may be to your advantage, if you have outstanding loans
or interest, to make loan repayments rather than unscheduled payments.
Interest on policy loans
--------------------------------------------------------------------------------
We charge interest at an annual rate of 5% on all outstanding policy debt,
payable in arrears, until the 20th anniversary of your policy. After this point
the annual rate falls to 4.5% for all existing and new policy loans.
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50 PROSPECTUS SPECIAL FEATURES
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<PAGE>
If, on any monthly date, you owe more in loans and interest than your cash
surrender value, we will notify you that a loan repayment is required for your
policy to remain in force. Your policy will lapse 31 days after the default date
set out in our notice if we do not receive a loan repayment equal to the policy
debt minus 90% of the cash surrender value.
If the insured dies after we have sent this notice, but before the 31 days are
up, we will pay the beneficiary the death benefit proceeds, minus any policy
debt and unpaid interest.
DECREASING THE FACE AMOUNT
After the first policy year, you may request a reduction in your policy's face
amount, which is the guaranteed minimum amount your policy will pay at death or
maturity. To do this we require that:
o you make your request in writing and we receive it at our executive office
o the insured is alive when we receive your request
o the reduction is at least $5,000 unless it is caused by a partial
withdrawal, in which case the partial withdrawal rules apply, and
o the new face amount is not lower than our minimum face amount, currently
$100,000.
We reduce your face amount on the monthly date coinciding with or next following
the date we approve your request. We do not deduct a surrender charge from your
policy account value if you decrease your face amount. Since we do not deduct a
surrender charge upon decrease, the surrender charge does not change.
A partial withdrawal may also result in a reduction in your policy's face
amount. See Partial Withdrawals.
Decreasing the face amount
--------------------------------------------------------------------------------
After the first policy year, you may request a reduction in the face amount of
your policy, which is the guaranteed minimum amount your policy will pay at
death or maturity.
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SPECIAL FEATURES PROSPECTUS 51
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<PAGE>
Your death benefit option will determine how your policy is affected by a
reduction in the face amount due to a partial withdrawal:
o under Option 1, a partial withdrawal will typically cause an immediate
reduction in your policy's face amount
o under Option 2, a partial withdrawal will not reduce your policy's face
amount. However, the amount of your death benefit will decline with each
partial withdrawal.
When you reduce your policy's face amount, we reduce the premiums, benefits and
certain charges that are calculated using the face amount. These include:
o your basic scheduled premium
o your policy's benchmark values and tabular values
o policy account value
o your monthly deduction for cost of insurance
o the variable insurance amount, and
o any additional rider coverage (if the resulting death benefit for a rider
is less than the minimum issue amount, we will terminate the rider).
We will send you new policy pages reflecting the changes resulting from your
reduction in the face amount.
Reducing the face amount of your policy may have tax consequences, including
possibly causing it to be considered a modified endowment contract under the
Internal Revenue Code. See Tax considerations.
You cannot increase the face amount of your Park Avenue Life policy.
PARTIAL WITHDRAWALS
After the first policy year, you may withdraw part of your policy's cash
surrender value. You must make your request for withdrawal in writing, and the
insured must be alive when you make the withdrawal. The minimum partial
withdrawal is $500.
If we approve your request, it will be effective as of the business day we
receive it at our customer service office. The proceeds will normally be paid
within seven days of the time we receive your request. We will only approve or
process a partial withdrawal if, after giving effect thereto:
o your cash surrender value is greater than the adjusted interpolated
benchmark value, and
o your policy would have a positive unloaned cash surrender value.
We will tell you if you do not satisfy these conditions.
Partial withdrawals
--------------------------------------------------------------------------------
After the first year of your policy, you may withdraw part of your policy's cash
surrender value. The minimum partial withdrawal is $500.
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52 PROSPECTUS SPECIAL FEATURES
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<PAGE>
For the purpose of making partial withdrawals only:
o for withdrawals on a policy anniversary, the adjusted benchmark value is
the benchmark value on your policy anniversary, plus the amount of your
basic scheduled premium payable during the guaranteed premium period for
the current face amount of your policy
o for withdrawals on other dates the adjusted interpolated benchmark value
is determined by linear interpolation between the adjusted benchmark value
on your last policy anniversary and the benchmark value on your next
policy anniversary.
o if you make a partial withdrawal on a policy anniversary, the adjusted
interpolated benchmark value is equal to the adjusted benchmark value.
We reserve the right to limit the number of partial withdrawals to 12 in a
policy year.
We will deduct the amount of your withdrawal as follows:
o first, from the variable investment options that you specify
o if this amount is insufficient to meet your withdrawal request plus
applicable charges, or you have not specified a particular variable
investment option, then proportionately from the other variable investment
options in which your policy is invested
o if these amounts are still insufficient to meet your withdrawal request,
the remainder of the withdrawal will be deducted from your policy account
value in the fixed-rate option.
A partial withdrawal will reduce your policy account value by the amount of the
partial withdrawal. In addition the face amount will be reduced by the amount of
any partial withdrawal that exceeds the reduction-free partial withdrawal
amount. So if you wish to make a partial withdrawal that does not reduce your
face amount, you should make a reduction-free partial withdrawal. The amount of
your reduction-free partial withdrawal depends on the death benefit option in
effect and is calculated as shown below. Any reduction-free partial withdrawal
will reduce the term rider face amount, if applicable. See Primary insured term
rider and Decreasing the face amount.
We will calculate the reduction-free partial withdrawal amount as of the close
of business on the date we receive your request. This amount will be affected by
which death benefit option you have chosen.
If you have chosen death benefit Option 1, the maximum reduction-free partial
withdrawal amount is the greater of zero, or:
o your policy account value, minus
o your policy's face amount multiplied by the interpolated net single
premium outlined in your policy.
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SPECIAL FEATURES PROSPECTUS 53
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<PAGE>
If you have chosen death benefit Option 2, all partial withdrawals are
reduction-free.
The tax consequences of making partial withdrawals are discussed under Tax
considerations.
SURRENDERING YOUR POLICY
You may surrender your policy for its net cash surrender value while the insured
is alive. We will calculate your policy's net cash surrender value on the
business day we receive your written request, which must include your policy, or
an acceptable affidavit confirming that you've lost your policy, at our customer
service office. Your policy's net cash surrender value will normally be paid
within seven days of the time we receive your request. Your policy's net cash
surrender value will be calculated as follows:
o your policy account value, including any amount held in the Loan
Collateral Account, minus
o any surrender charge, minus
o any outstanding policy debt, plus
o any policy premium assessments that you have paid beyond the next monthly
date
--------------------------------------------------------------------------------
EXAMPLE
Surrender in policy year 5
--------------------------------------------------------------------------------
Male insured, Age 35
--------------------------------------------------------------------------------
Preferred Plus Premium Class
--------------------------------------------------------------------------------
Face Amount: $250,000
--------------------------------------------------------------------------------
Annual Policy Premium: $
--------------------------------------------------------------------------------
Assuming 6% hypothetical gross return: ( % net return)
(See Appendix A)
--------------------------------------------------------------------------------
Policy Account Value $
---------------------------------------- -------------------------------------
Surrender Charge
---------------------------------------- -------------------------------------
Policy Debt 0
---------------------------------------- -------------------------------------
Pre-paid Policy Premium Assessments 0
---------------------------------------- -------------------------------------
Net Cash Surrender Value $
--------------------------------------------------------------------------------
All insurance coverage will end on the day we calculate your policy's net cash
surrender value. For a discussion of the tax consequences of surrendering your
policy, see Tax considerations.
Surrendering your policy
--------------------------------------------------------------------------------
You may surrender your policy for its net cash surrender value while the insured
is alive. Your policy's net cash surrender value will normally be paid within
seven days of the time we receive your request.
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54 PROSPECTUS SPECIAL FEATURES
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<PAGE>
TRANSFERS BETWEEN THE INVESTMENT OPTIONS
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. We will make
transfers based on the unit values at the end of the business day on which we
receive your instructions, either in writing or by telephone. You can request a
transfer by writing to our customer service office or by calling 1-800-935-4128.
Written requests that are received after 4:00 p.m. New York time will be
effective on the next business day. Before you can request transfers over the
telephone, you must first send us a written authorization form.
Your policy account value may not be invested in more than seven of our
allocation options at any one time. Each transfer must be for a minimum of $500,
or the total amount you have invested in the option you are transferring funds
out of, whichever is lower. You may request transfer of a percentage of a
variable investment option or a dollar amount. If expressed as a percentage, the
percentage must be a whole number. If you make more than twelve transfers within
a policy year, we reserve the right to charge you $25 for each additional
transfer. We also reserve the right to limit you to one transfer every 30 days.
We do not currently charge for additional transfers. There are also restrictions
on making transfers out of the fixed-rate option, which are outlined below.
We will accept transfer instructions by telephone between 9:00 a.m. and 3:30
p.m. New York time on each business day. We will ask callers to provide
identification and a personal security code for the policy, and will accept the
instructions of anyone who can provide this information. We may also record
telephone transfer requests without notifying the caller. If we reasonably
believe that telephone instructions are genuine, we are not liable for any
losses, damages or costs resulting from a transaction. As a result, you bear the
risk of any losses caused by unauthorized or fraudulent telephone transactions.
The rules for telephone transfers are subject to change, and we reserve the
right to suspend or withdraw this service without notice. During periods of
financial market or economic volatility, it may be difficult to contact us in
order to make a transfer by telephone. If this happens, you should send your
request to us in writing.
TRANSFERS FROM THE FIXED-RATE OPTION
You may only transfer your policy account value out of the fixed-rate option
once each policy year. We must receive your request within 30 days of your
policy anniversary. If we receive your request in the 30 days before your policy
anniversary, we will make the transfer on your policy anniversary. If we receive
your request in the 30 day period after your policy anniversary, we will make
the transfer on the business day we receive your request. We will not honor
requests to transfer investments out of the fixed-rate option that we receive at
any other time of the year.
Transfers between the investment options
--------------------------------------------------------------------------------
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. Each transfer
must be for a minimum of $500, or the total amount you have invested in the
option you are transferring funds out of, whichever is lower.
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SPECIAL FEATURES PROSPECTUS 55
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<PAGE>
When you request a transfer from the fixed-rate option, the amounts that you
have held in the fixed-rate option longest will be withdrawn first.
The maximum that you may transfer out of the fixed-rate option each policy year
is either 331/3% of your allocation in the fixed-rate option on the policy
anniversary on or immediately preceding the date of transfer, or $2,500,
whichever is higher. If you have less than $2,500 in the fixed-rate option, you
may transfer the entire amount.
DOLLAR COST AVERAGING TRANSFER OPTION
Under this option, you transfer the same dollar amount from The Guardian Cash
Fund to a particular variable investment option or options each month, over a
period of time. Using dollar cost averaging, you purchase more units in the
variable investment options when their share prices are low, and fewer units
when prices are higher. In this way, dollar cost averaging may reduce the impact
of price fluctuations on unit values of the variable investment options over the
period that automatic transfers are made, but cannot guarantee an increase in
the overall value of your investments or offer protection against losses in a
declining market.
The amount of your monthly transfer under this option must be at least $100 for
each variable investment option you wish to invest in. Amounts will be
transferred automatically on each monthly date from The Guardian Cash Fund into
the variable investment option or options you have chosen.
Before the program can begin, you must submit an authorization form.
We will stop your dollar cost averaging program when:
o the period of time listed on your dollar cost averaging authorization form
ends, or
o your policy account value in The Guardian Cash Fund is insufficient to
cover your monthly investment in the variable investment options you have
chosen. If this happens we will divide what you do have in the variable
investment option investing in The Guardian Cash Fund among the variable
investment options you have chosen, leaving a balance of zero in The
Guardian Cash Fund
o you tell us in writing to end the program, and we receive this notice at
least three days before the next monthly date
o your policy lapses or you surrender it, or
o a policy value option takes effect.
You may change your transfer instructions or reinstate the dollar cost averaging
program, subject to the rules above, if we receive a new authorization form at
least three days before your policy's next monthly date.
Dollar cost averaging
--------------------------------------------------------------------------------
Under this option, you transfer the same dollar amount from The Guardian Cash
Fund to a particular variable investment option or options each month, over a
period of time. Dollar cost averaging may reduce the impact of price
fluctuations on unit values of the variable investment options over the period
that automatic transfers are made, but cannot guarantee an increase in the
overall value of your investments or offer protection against losses in a
declining market.
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56 PROSPECTUS SPECIAL FEATURES
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<PAGE>
POLICY PROCEEDS
The amount that your beneficiaries will receive upon the death of the insured is
determined as explained under Death benefit options, and is payable when we
receive proof that the insured has died while the policy was in effect. It will
include:
o the death proceeds based on the death benefit option you have chosen, plus
o any policy premium assessments paid for coverage beyond the monthly date
after the insured's death, plus
o the proceeds of any coverage you have added to your policy through riders,
minus
o any outstanding policy debt.
If your policy premium is overdue and the insured dies during the grace period,
we will calculate the death benefit as though the premium had been paid when due
and then deduct any due and unpaid policy premium through the policy month of
the insured's death.
If the person insured is attained age 100 or older at death, the death proceeds
will be the policy account value minus any policy debt as of the date of death.
The death proceeds paid to the beneficiaries may also be adjusted if:
o the age or sex listed on the policy application is incorrect,
o the insured commits suicide within two years of either the policy's issue
date, or the date a change in the death benefit from Option 1 to Option 2
(but only for any increase in the death benefit over your policy's face
amount that was a result of the change) takes effect, or
o there are limits imposed by riders to the policy.
The amount of all other transactions will be calculated at the end of the
business day on which we receive the necessary instructions, information or
documentation at our customer service office.
If the proceeds are being taken from your policy account value in the variable
investment options, we will normally pay proceeds within seven days of receiving
the necessary information. However, we may delay any transfers, loans or other
payments made from the variable investment options when:
o the New York Stock Exchange is closed, except for weekends or holidays, or
when trading has been restricted,
o the Securities and Exchange Commission determines that a state of
emergency exists, making policy transactions impracticable, or
o when one or more of the mutual funds corresponding to the variable
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SPECIAL FEATURES PROSPECTUS 57
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<PAGE>
investment options legally suspends payment or redemption of their shares.
If the proceeds are from your policy account value in the fixed-rate option,
they will normally be paid promptly once we have received the necessary
information. However, we may delay any transfers, loans or other payments made
from the fixed-rate option for up to six months from the date of your request.
If we do this, we will pay interest of at least 3% per year on payments that we
delay for 30 days or more. Please note that requests for transfers from the
fixed-rate option may only be made during certain periods. See Transfers from
the fixed-rate option.
POLICY VALUE OPTIONS
Policy value options allow you to continue insurance coverage with a reduced
amount of insurance if your policy has lapsed but has a cash surrender value.
Your other options in this situation are to:
o request payment of your net cash surrender value, in which case your
insurance coverage will end, or
o reinstate your policy, by following the required conditions (see
Reinstatement).
If you choose to continue coverage under a policy value option, you have three
choices, as described below. Each option has certain restrictions and offers a
different level of coverage. Contact your agent or us for details.
Policy Value Option A (non-participating fixed benefit extended term insurance)
is the automatic option if you do not request payment of your net cash surrender
value, reinstate your policy, or choose another option. It provides coverage for
a limited term. It is not available if your policy was issued in premium class 3
or higher, if we have imposed temporary rating charges, or if your policy does
not have a positive net cash surrender value. No further premiums will be due,
no unscheduled payments or partial withdrawals will be permitted and no further
monthly deductions will be taken when Option A is in force.
Policy Value Option B (non-participating fixed reduced paid up insurance) will
be used if you do not qualify for Option A, or if Option B would provide the
same or greater insurance coverage than Option A. It provides lifetime coverage.
If this option is used, the net cash surrender value of your policy is
transferred irrevocably to the fixed-rate option. No further premiums will be
due and no unscheduled payments are permitted under Policy Value Option B. We
will deduct the monthly cost of insurance charge from the fixed-rate option when
Option B is in force.
The initial death benefit is the sum of the net cash surrender value and any
outstanding policy loan that is repaid on the default date, divided by the
interpolated net single premium as shown in the table of net single premiums in
your policy.
Policy value options
--------------------------------------------------------------------------------
Policy value options allow you to continue insurance coverage with a reduced
amount of insurance if your policy has lapsed but has a cash surrender value. If
you choose to continue coverage under a policy value option, you have three
choices, as described in the accompanying text.
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58 PROSPECTUS SPECIAL FEATURES
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<PAGE>
Policy Value Option C (non-participating variable reduced paid-up insurance)
continues coverage for the lifetime of the insured. Because this option allows
you to invest in both the variable and fixed-rate investment options, your death
benefit may reflect the performance of the variable investment options.
The initial death benefit is the sum of the net cash surrender value and any
outstanding policy loan that is repaid on the default date, divided by the
interpolated net single premium as shown in the table of net single premiums in
your policy.
The death proceeds payable under this option will equal (1) divided by (2); less
(3), where:
o (1) is $1000 multiplied by the policy account value on the monthly date
preceding the date of death;
o (2) is the interpolated net single premium for the insured's attained age;
o (3) is any outstanding policy debt on the date of death.
Partial withdrawals between the monthly date and date of death will reduce the
death benefit under this option by the amount of the partial withdrawal
To qualify for this option, the insured under your policy must have been in a
standard or better premium class when the policy was issued, the policy must
have been in force for at least one policy year, and your cash surrender value
must be at least $10,000 on the default date. If you apply for Option C and do
not qualify, you will be provided coverage under Policy Value Option B.
Under Option C, you may continue to make transfers among the variable investment
options and the fixed-rate option, as with your original Park Avenue Life
policy. Unlike your original policy, this option does not have a guaranteed
minimum death benefit. If your variable investment options perform poorly, or if
you take partial withdrawals or loans from Option C, the death benefit may be
reduced or eliminated. If the cash value of your policy declines to zero, there
will be no death benefit and this option will lapse.
You do not make premium payments and you cannot make unscheduled payments under
Option C. We will deduct the monthly cost of insurance charge, any loan interest
charges, and any transfer charges, from the value of your Option C policy. If
your policy had outstanding loans or interest when it lapsed, you may ask us to
deduct these from the value of the investments held in your policy before we
transfer your investments to the fixed rate option. If you choose not to repay
any outstanding loans or interest when this option takes effect, or if you take
out new loans, these will be governed by your Park Avenue Life policy's rules
regarding policy loans.
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SPECIAL FEATURES PROSPECTUS 59
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<PAGE>
Surrendering a policy value option
You may surrender a policy value option for its current net cash surrender value
if the insured is still alive. The amount that you will receive is based on your
option's cash value minus any outstanding policy debt. The cash values for the
different policy value options are calculated as follows:
o for Option A the cash value is the then present value of insurance
currently provided
o for Option B the cash value is the total value of the fixed-rate option
and the Loan Collateral Account
o for Option C the cash value is the total value of the fixed-rate and
variable investment options, and the Loan Collateral Account
Surrendering a policy value option
--------------------------------------------------------------------------------
You may surrender a policy value option for its current net cash surrender value
if the insured is still alive. The amount that you will receive is based on your
option's cash value minus any outstanding policy debt.
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60 PROSPECTUS SPECIAL FEATURES
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<PAGE>
EXCHANGING A POLICY
Exchange for Fixed-Benefit Whole Life Insurance Option
At any time prior to the later of the insured's 70th birthday or the second
policy anniversary, you have the right to exchange all or a portion of your
policy for a level premium fixed-benefit whole life policy issued by us or our
affiliate, Guardian Life, without having to prove that the insured meets our
insurance requirements. Once exercised, this right terminates. Under the new
policy, your policy value will be held in the issuer's general account. The face
amount of the new policy cannot exceed the face amount of this policy on the
date you make the exchange nor be less than the minimum face amount under GIAC's
or its affiliate's rules. If you exchange a portion of the face amount, the face
amount remaining must meet GIAC's minimum face amount requirements. The
insured's age when the Park Avenue Life policy took effect will also be carried
over. Before you can make any exchange, however, you must repay any outstanding
policy debt on your Park Avenue Life policy, and all due policy premiums must be
paid. See your policy for details.
The exchange may result in a cost or credit to you. On or before the fifth
policy anniversary, the exchange cost or credit is the greater of (a) or (b)
where:
o (a) is the cumulative premiums for the new policy (i.e., the premiums that
would have been paid to the date of exchange if the new policy had been in
force from the policy date), less any dividends that would have been paid,
with an annual interest rate of 6%, less the pro-rata portion of the
policy premiums for this policy paid for this policy to the date of the
exchange accumulated at an annual interest rate of 6%; and
o (b) is the cash value of the new policy, less the pro-rata portion of this
policy's net cash surrender value on the exchange date applicable to the
face amount exchanged.
After the fifth policy anniversary, the exchange cost is equal to the cash value
of the new policy less the pro-rata portion of this policy's net cash surrender
value on the exchange date applicable to the face amount exchanged.
If this amount is greater than zero, you must pay the exchange cost to the
issuing company. If this amount is less than zero, the issuing company will pay
an exchange credit to you, or may permit you to purchase paid-up additions on
the new policy.
The new policy will be issued and effective either on the business day that we
receive your written exchange request at our customer service office along with
your policy, or on the date that any exchange cost is received by the issuer of
your new policy, whichever is later.
Additional rider benefits are available only if you provide the issuer of your
new policy with satisfactory evidence of insurability for the
Exchanging a policy
--------------------------------------------------------------------------------
You may exchange all or a portion of your policy for a level premium
fixed-benefit whole life policy issued by us or one of our affiliates, without
having to prove that the insured meets our insurance requirements.
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SPECIAL FEATURES PROSPECTUS 61
-------------
<PAGE>
insured, and will be subject to the issuing company's rules on theexchange date.
You should consult with legal and tax advisers before exchanging your policy.
PAYMENT OPTIONS
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options listed below. You may select a payment option while
the insured is living. If the insured has died and you have not chosen a payment
option, the beneficiaries may choose the payment options, up to one year after
the insured's death. If you are surrendering your policy, you have 60 days after
the proceeds of your policy become payable within which to choose a payment
option. You, or the beneficiaries, may choose to distribute the proceeds under
more than one payment option at a time, but you must distribute at least $5,000
through each option selected. Monthly payments under each option must be at
least $50.
The proceeds of your policy must be paid to a "natural person". Payments will
not be made to his or her estate if they die before the proceeds have been fully
paid. You may name a second person to receive any remaining payments if this
happens.
The proceeds that we hold in order to make payments under one of the payment
options do not share in the income, gains or losses of the variable investment
options, nor do they earn interest in the same way or amount as funds in the
fixed-rate option.
Under Option 1, we will hold the proceeds and make monthly interest payments at
a guaranteed annual rate of 3%.
Payment options
--------------------------------------------------------------------------------
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options specified in the accompanying text.
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62 PROSPECTUS SPECIAL FEATURES
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<PAGE>
Under Option 2, we will make monthly payments of a specified amount until the
proceeds and interest are fully paid. At least 10% of the original proceeds must
be paid each year. Guaranteed interest of 3% will be added to the proceeds each
year.
Under Option 3, we will make monthly payments for a specified number of years.
The amount of the minimum payments will include interest at 3% per year.
Under Option 4, we will make monthly payments for the longer of the life of the
payee or 10 years. The minimum amount of each payment will include interest at
3% per year.
Under Option 5, we will make monthly payments until the amount paid equals the
proceeds settled, and for the remaining life of the payee. The minimum amount of
each payment will include interest at 3% per year.
Under Option 6, we will make monthly payments for 10 years and for the remaining
life of the last surviving of two payees. The minimum amount of each payment
will include interest at 3% per year.
Payment option tables for Options 4, 5 and 6 are based on the Annuity 2000
Mortality Tables (male and female) projected 20 years to the year 2020 by 100%
of the male scale G Factors (for males) and 50% of the female scale G Factors
(for females).
Your policy lists the monthly payment for every $1,000 of proceeds that the
payee applies under Options 3 to 6, as well as the amount we pay if the payee
cancels a payment option.
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SPECIAL FEATURES PROSPECTUS 63
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<PAGE>
--------------------------------------------------------------------------------
TAX CONSIDERATIONS
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THIS DISCUSSION of tax considerations for your Park Avenue Life policy is
general in nature, does not purport to be complete or to cover all tax
situations, and should not be considered as tax advice. It is based on our
understanding of the federal income tax laws as they are currently being
interpreted. We cannot guarantee that these laws will not change while this
prospectus is in use, or while your policy is in force. If you are interested in
purchasing a policy, taking a policy loan or effecting policy transactions, you
should consult a legal or tax adviser regarding your particular circumstances.
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TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax purposes
and to receive the tax treatment normally accorded life insurance contracts
under Federal tax law, a life insurance policy must satisfy certain requirements
which are set forth in Section 7702 of the Internal Revenue Code. Guidance as to
how these requirements are to be applied is limited. Accordingly, there is some
uncertainty about the application of Section 7702 to a policy, particularly so
with respect to policies issued on an insured who does not meet our standard
insurance requirements. Nevertheless, we believe it is reasonable to conclude
that your policy should satisfy the applicable requirements. If it is
subsequently determined that a policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the policy into compliance
with such requirements and we reserve the right to modify the policy as
necessary in order to do so.
In certain circumstances, owners of variable life insurance policies have been
considered for Federal income tax purposes to be the owners of the assets of the
separate account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the policyowners
have been currently taxed on income and gains attributable to separate account
assets. There is little guidance in this area, and some features of the Park
Avenue Life policy, such as your flexibility to allocate premiums and the policy
account value, have not been explicitly addressed in published rulings. While we
believe that the policy does not give policyowners investment control over the
Separate Account's assets, we reserve the right to modify the policy as
necessary to prevent the policyowner from being treated as the owner of the
Separate Account assets supporting the policy.
In addition, the Code requires that the investments of the investment divisions
of our Separate Account be "adequately diversified" in order for the policy to
be treated as a life insurance contract for Federal income tax purposes. It is
intended that the investment divisions of the Separate Account, through the
mutual funds, will satisfy these diversification requirements.
The following discussion assumes that the policy will qualify as a life
insurance contract for Federal income tax purposes.
Tax status
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To qualify as a life insurance contract and to receive the tax treatment
normally accorded life insurance contracts under Federal tax law, a life
insurance policy must satisfy certain requirements which are set forth in
Section 7702 of the Internal Revenue Code.
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64 PROSPECTUS TAX CONSIDERATIONS
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Treatment of policy proceeds
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We believe that the death benefits under your policy should generally be
excludable from the gross income of the beneficiary. Generally, under the
existing federal tax laws, increases in the value of your policy will not be
taxed federally unless you make a withdrawal before the insured dies.
TREATMENT OF POLICY PROCEEDS
We believe that the death benefits under your policy should generally be
excludable from the gross income of the beneficiary. Generally, under the
existing federal tax laws, increases in the value of your policy will not be
taxed federally unless you make a withdrawal before the insured dies. The money
that you receive when the insured dies is not subject to federal income tax, but
may be subject to federal estate taxes or generation skipping taxes. The tax
consequences of continuing the policy beyond the insured's 100th year are
unclear. You should consult a tax adviser if you intend to keep the policy in
force beyond the insured's 100th year.
Partial withdrawals, surrenders and policy loans all result in money being taken
out of your policy before the insured dies. How this money is taxed depends on
whether your policy is classified as a modified endowment contract.
Under the Internal Revenue Code, certain life insurance contracts are classified
as "modified endowment contracts," with less favorable tax treatment than other
life insurance contracts. Due to the flexibility of the policy as to premiums
and benefits, the individual circumstances of each policy will determine whether
it is classified as a modified endowment contract. The rules are too complex to
be summarized here, but generally depend on the amount of premium payments made
during the first seven policy years. Certain changes in a policy after it is
issued could also cause it to be classified as a modified endowment contract.
You should consult with a competent tax adviser to determine whether a policy
transaction will cause your policy to be classified as a modified endowment
contract.
If your policy is not considered a modified endowment contract:
o money that you withdraw from your policy will generally be taxed only if
the total that you withdraw exceeds your "basis" in the policy - which is
generally equal to the total amount that you have paid in premiums. The
difference between what you have put in and what you take out will be
taxed as ordinary income. When you withdraw money from your policy, your
basis is reduced by any amount withdrawn that is not taxed
o if you surrender your policy, you will generally be taxed only on the
amount by which the value of your policy, including any policy debt, is
greater than your basis in the policy. The tax consequences of
surrendering your policy may vary if you receive the proceeds under one of
the payment plans. Losses are generally not tax deductible
o policy loans are generally not taxable because they must be paid back. The
interest you pay on these loans is generally not tax deductible. However,
if your policy lapses while you have an outstanding policy loan, you may
have to pay tax on the amount that you still owe to your policy. The tax
consequences of a policy loan are unclear if the difference between the
rate we charge on the loan and the interest rate earned on the loan is
very small. You should consult a tax adviser regarding these consequences.
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TAX CONSIDERATIONS PROSPECTUS 65
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If your policy is considered a modified endowment contract:
o all distributions other than death benefits, including partial
withdrawals, surrenders, assignments and policy loans, will be treated
first as distributions of gain taxable as ordinary income, and as a tax
free recovery of basis only after all the gain in the contract has been
distributed
o all modified endowment contracts owned by you and issued by GIAC or its
affiliates during any calendar year will be treated as one modified
endowment contract to determine the taxable portion of any distribution
o a 10% penalty tax will also apply to any taxable distribution unless it is
made to a taxpayer who is 591/2 years of age or older; is attributable to
a disability; or is received as substantially equal periodic payments made
over the life of the taxpayer, or the life of the taxpayer and a
beneficiary.
If a policy becomes a modified endowment contract, distributions that occur
during the contract year will be taxed as distributions from a modified
endowment contract. In addition, distributions from a policy within two years
before it becomes a modified endowment contract will be taxed in this manner.
This means that a distribution made from a policy that is not a modified
endowment contract could later become taxable as a distribution from a modified
endowment contract.
EXCHANGES
Generally, there are no tax consequences when you exchange one life insurance
policy for another, as long as the same person is being insured (a change of the
insured under a policy is a taxable event). Paying additional premiums under the
new policy may cause it to be treated as a modified endowment contract. Your
policy may also lose any "grandfathering" privilege, where you would be exempt
from certain legislative or regulatory changes made after your original policy
was issued, if you exchange your policy. You should consult with a tax adviser
if you are considering exchanging any life insurance policy.
POLICY CHANGES
We will make changes to policies and their riders where necessary to attempt to
ensure: (i) that they continue to qualify as life insurance under the Internal
Revenue Code, and (ii) that policyowners are not considered the direct owners of
the mutual funds held in the Separate Account. Any changes will be made
uniformly to all policies affected. We will provide advance notice in writing of
these changes when required by state insurance regulators.
Federal, state and local governments may, from time to time, introduce new
legislation concerning the taxation of life insurance policies. They can also
change or adopt new interpretations of existing laws and regulations without
notice. If you have questions about the tax consequences of your Park Avenue
Life policy, please consult a legal or tax adviser.
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66 PROSPECTUS TAX CONSIDERATIONS
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<PAGE>
ESTATE AND GENERATION SKIPPING TRANSFER TAXES
If you are both the policyowner and the insured, the death benefit under your
Park Avenue Life policy will generally be included in the value of your gross
estate for federal estate tax purposes. If you are not the insured, the value of
the policy will be included in your gross estate.
Also, if the beneficiary of the policy is someone who is two or more generations
younger than the policyowner, the generation-skipping transfer (GST) tax may be
imposed on the death benefit.
The individual situation of a policyowner or beneficiary will determine how the
ownership of a policy or the receipt of policy proceeds will affect their tax
situation. Because the rules are complex, a legal or tax adviser should be
consulted for specific information.
OTHER TAX CONSEQUENCES
Park Avenue Life policies can be used in various ways, including:
o as non-qualified deferred compensation or salary continuance plans
o in split-dollar insurance plans
o as part of executive bonus plans, retiree medical benefits plans, or other
similar plans.
The tax consequences of these plans will vary depending on individual
arrangements and circumstances. We recommend that anyone considering buying a
Park Avenue Life policy with the expectation of favorable tax consequences
should consult with a qualified tax adviser before investing.
In addition, new rules have recently been passed by Congress relating to life
insurance owned by businesses. Any business should consult with a qualified tax
adviser before buying a policy, and before making any changes or transactions
under the policy.
Tax Shelter Regulations. Prospective policyowners that are corporations should
consult a tax advisor about the treatment of the policy under the temporary and
proposed regulations applicable to corporate tax shelters.
Alternative Minimum Tax. There may also be an indirect tax upon the income in
the policy or the proceeds of a policy under the Federal corporate alternative
minimum tax, if the policyowner is subject to that tax.
Transfer taxes
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If you are both the policyowner and the insured, the death benefit under your
Park Avenue Life policy will generally be included in the value of your gross
estate for federal estate tax purposes. If the beneficiary of the policy is
someone who is two or more generations younger than the policyowner, the
generation-skipping transfer (GST) tax may be imposed.
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TAX CONSIDERATIONS PROSPECTUS 67
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<PAGE>
Possible tax law changes
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Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
GIAC'S TAXES
Based on current life insurance tax regulations, GIAC does not pay tax on
investment income or capital gains from the assets held in the Separate Account.
The operations of the Separate Account are reported on our federal income tax
return, which is then consolidated with that of our parent company, Guardian
Life.
We may pay taxes at the state and local level, as well as premium taxes, but at
present these are not substantial. If they increase, we reserve the right to
recover these costs by charging the Separate Account or the policy.
INCOME TAX WITHHOLDING
We are generally required to withhold money for income taxes when you make a
transaction on which you will have to pay tax. You can request in writing that
we not withhold any amount for income tax purposes. If we do not, or if we fail
to withhold enough to cover the taxes that are due, you could be penalized. You
would also be responsible for any unpaid taxes when you file your regular income
tax return. We may similarly withhold generation skipping transfer taxes unless
you tell us in writing that these taxes are not required.
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68 PROSPECTUS TAX CONSIDERATIONS
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RIGHTS AND RESPONSIBILITIES
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ASSIGNING THE RIGHTS TO YOUR POLICY
You may assign the rights under your Park Avenue Life policy to another person
or business. This is often done, for example, to secure a loan. We will only be
bound by such an agreement when we have received a copy of the assignment
papers, signed by you, the entity or person to whom you are assigning your
rights, and your policy's beneficiaries, if applicable. Assignments are subject
to all payments made or actions we have taken on or before the date we receive
the assignment papers. We are not responsible for determining whether the
assignment of your policy's rights is legally valid.
The entity or person to whom you assign your rights may exercise all rights
granted under the policy except the right to:
o change the policyowner or beneficiary
o change a payment option,
o direct where your net premiums will be invested or make transfers among
the fixed-rate and variable investment options.
VOTING RIGHTS
As explained in The variable investment options, we are the owner of the fund
shares held in the Separate Account. As a result, we have the right to vote at
any meeting of the funds' shareholders.
Where we are required to by law, we will vote fund shares based on the
instructions we receive from Park Avenue Life policyowners. If we do not receive
instructions from some policyowners, we will vote fund shares attributable to
their policies, and any shares we own in our own right, in the same proportion
as the shares attributable to the policyowners from whom we do receive
instructions. This proportion could include policyowners and contract owners
from other separate accounts.
If changes in the law or its interpretation allow us to make voting decisions in
our own right, or to restrict the voting of policyowners, we reserve the right
to do so. We will ask you for your voting instructions if, on the record date
set by the fund's directors, part of your policy account value is invested in
the variable investment option of the Separate Account that corresponds to the
mutual fund holding a shareholders' meeting.
The number of votes that you have will be based on the number of shares that you
hold. We will calculate the number of shares, or fraction of a share, that you
hold on the record date by dividing the dollar value of your investment in the
division of the Separate Account corresponding to the mutual fund, by the net
asset value of the variable investment option's shares on that date.
Assigning policy rights
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You may assign the rights under your Park Avenue Life policy to another person
or business, subject to certain restrictions discussed in the accompanying text.
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RIGHTS AND RESPONSIBILITIES PROSPECTUS 69
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<PAGE>
If, after careful examination, we reasonably disapprove of a proposed change to
a mutual fund's investment adviser, its advisory contract, or its investment
objectives or policies, we may disregard policyowners' voting instructions, if
the law allows us to do so. If the change affects the investment adviser or
investment policy, we will only exercise this right if we determine in good
faith that the proposed change is contrary to state law or is inappropriate in
view of the fund's investment objective and purpose. If we exercise this right,
we will provide a detailed explanation of our actions in the next semi-annual
report to policyowners.
Certain activities related to the operation of the Separate Account may require
the approval of policyowners. See Rights reserved by GIAC. If a vote is
required, you will be given one vote for every $100 of your policy that is held
in the variable investment options. For any investments that we hold on our own
behalf, we will vote in the same proportion as our policyowners.
You do not have the right to vote on the operations of the fixed-rate option.
LIMITS TO GIAC'S RIGHT TO CHALLENGE A POLICY
Incontestability
Generally, we cannot challenge your policy once it is in force, or has been
reinstated, for two years, provided you have paid your premiums when they are
due. If you change your policy's death benefit from Option 1 to Option 2, we
have two years to challenge any increase in the death benefit that results from
this change. If we are successful in our challenge, your death benefit will
revert to what it would have been under Option 1.
Misstatement of age or sex
If we find that the information in the application regarding the age or sex of
the insured is wrong, we will adjust the death benefit to that which would have
been purchased by the most recent deduction for cost of insurance under the
policy and any rider premium payment, using the correct age or sex. Some
jurisdictions do not allow insurance companies to provide different benefits
based on the sex of the insured. For these jurisdictions we offer a version of
the Park Avenue Life policy with the same benefits for men and women.
Incontestability
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Generally, we cannot challenge your policy once it is in force, or has been
reinstated, for two years, provided you have paid your premiums when they are
due.
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70 PROSPECTUS RIGHTS AND RESPONSIBILITIES
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Suicide exclusion
If the insured commits suicide within two years of the policy's issue date,
regardless of whether he or she is considered sane at the time, the amount that
we must pay in death benefits will be limited to the greater of i) the net cash
surrender value as of the date of death, or ii):
o the policy premiums paid, plus
o any unscheduled payments made, minus
o any policy debt, minus
o any partial withdrawals and any related charges.
If the insured commits suicide within two years of an increase in your policy's
death benefit due to a change from Option 1 to Option 2, the death benefit will
be limited to the original death benefit under Option 1, plus the additional
cost of insurance charges paid for the increased death benefit.
RIGHTS RESERVED BY GIAC
We reserve the right to make changes or take actions that we feel are in the
best interests of Park Avenue Life policyowners and their beneficiaries, or are
appropriate for the policy. We will follow applicable laws and regulations in
exercising our rights, and will seek the approval of policyowners or regulators
when necessary. Some of the changes or actions we may take include:
o operating the Separate Account in any form permitted by law
o taking any action that will allow the Separate Account either to comply
with or be exempt from sections of the 1940 Act
o de-registering the Separate Account under the 1940 Act
o transferring the assets from one division of the Separate Account into
other divisions, or to one or more Separate Accounts, or to our general
account, and adding, combining, or removing investment divisions in the
Separate Account
o substituting the shares of one mutual fund held through the Separate
Account for shares of a different class in the same mutual fund, shares of
a different mutual fund, or any other investment allowed by law
o adding to, suspending or eliminating your ability to direct how your net
premiums are invested, or to transfer your investments among the variable
investment options or the fixed-rate option
o changing the way we make deductions or collect charges, consistent with
the limits outlined in the policy
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RIGHTS AND RESPONSIBILITIES PROSPECTUS 71
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<PAGE>
o changing the policy as required to ensure that it continues to qualify as
life insurance under the Internal Revenue Code, or to preserve favorable
tax treatment for your benefits under the policy
o making any changes necessary to the policy so that it conforms with any
action we are permitted to take.
We will inform you if we make a change that affects the basic nature of the
investments in any of the variable investment options. If this occurs, you will
have 60 days from the postmark on our notice to transfer your investments out of
this option and into one of the other investment options, without charge. See
Transfers.
YOUR RIGHT TO CANCEL YOUR POLICY
You may cancel your policy by returning it with a written cancellation notice to
either our executive office or the agent from whom you bought the policy. You
must do this within the later of:
o 10 days of receiving your policy, or
o 45 days of signing Part 1 of your completed policy application
Longer periods may apply in some states. If a cancellation notice is sent by
mail, it will be effective on the date of the postmark. Once we receive your
notice, we will refund all of the premiums and unscheduled payments you have
made towards your policy, and it will be considered void from the beginning. We
may delay refunding any payments you made by check until your check has cleared.
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72 PROSPECTUS RIGHTS AND RESPONSIBILITIES
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OTHER INFORMATION
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DISTRIBUTION OF THE POLICY AND OTHER CONTRACTUAL ARRANGEMENTS
We have an agreement with Guardian Investor Services Corporation (GISC) for GISC
to act as the principal underwriter of Park Avenue Life policies, as well as the
other variable life insurance policies and variable annuity contracts that we
offer. GISC is a broker-dealer registered under the Securities and Exchange Act
of 1934, and a member of the National Association of Securities Dealers, Inc.
Under this agreement we paid through GISC for the sale of products issued by the
Separate Account a total of $2,603,576 in 1997, $3,193,282 in 1998 and
$3,511,369 in 1999. GISC is a New York corporation organized on August 9, 1968.
Agents and commissions
GIAC agents who are licensed by state insurance authorities to sell variable
life insurance policies must also be registered representatives of GISC, or of
broker-dealer firms which have entered into agreements with GIAC and GISC to
sell Park Avenue Life policies, including Park Avenue Securities LLC, a wholly
owned subsidiary of GIAC. Our agents receive a maximum sales commission of:
o 55% of the policy premium payable for the first policy year, then
o 5% of the policy premiums paid for policy years two through ten.
In addition, GIAC pays a commission of no more than:
o 3% of each unscheduled payment in the first ten policy years, and
o 2% of any unscheduled payments thereafter.
We may also compensate our agents in the form of commission overrides, expense
allowances, bonuses, wholesaler fees and training allowances. In addition,
agents may qualify for non-cash compensation such as expense-paid trips or
educational seminars.
If you return your policy under the right to cancel provisions, the agent may
have to return some or all of any commissions we have paid.
Administrative services
Through an agreement with our parent company, Guardian Life, to carry out the
administration of Park Avenue Life policies, we are billed quarterly for the
time that their staff spends on GIAC business, and for the use of their
centralized services and sales force.
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OTHER INFORMATION PROSPECTUS 73
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Other agreements
We have entered into several other agreements, including:
o an agreement with Value Line, Inc. under which we are compensated for
marketing the Value Line Centurion Fund and the Value Line Strategic Asset
Management Trust to our policyowners
o agreements with MFS, AIM, Fidelity, Davis and Janus Capital under which we
are compensated for certain administrative costs and expenses connected to
the offering and sale of their funds to our policyholders. The amount we
receive is based on a percentage of assets under management.
SPECIAL PROVISIONS FOR GROUP OR SPONSORED ARRANGEMENTS
Where state insurance laws allow us to, we may sell Park Avenue Life policies
under a group or sponsored arrangement.
A group arrangement is one in which a group of individuals is covered under a
single policy. This might be arranged, for example, by an employer, a trade
union, or a professional association.
A sponsored arrangement is one in which we are allowed to offer members of a
group, such as employees of a company or members of an association, insurance
policies on an individual basis.
We may reduce or eliminate certain deductions and charges outlined in this
prospectus for policies bought under group or sponsored arrangements including
policies issued in connection with certain business insurance arrangements. We
may, for instance, sell policies without surrender charges and/or with reduced
or eliminated fees and charges to employees, officers, directors and agents of
Guardian Life and its subsidiaries and their immediate family members. We may
reduce or waive policy charges and deductions in accordance with the rules in
effect as of the date an application for a policy is approved.
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Communications we'll send you
Shortly after your policy anniversary each year, we will send you an updated
statement showing the following information:
o the amount of your current death benefit
o the instructions we have on file regarding where to invest your net
premiums, and how much you have invested in each of the investment options
o your policy account value, cash surrender value, net cash surrender value,
and benchmark value
o the amount you have paid in policy premiums and unscheduled payments, and
the charges that we have deducted, since the last policy anniversary
o a summary of any transfers or partial withdrawals, loans or loan
repayments that you have made since your last annual statement
o the total of any outstanding policy debt that you owe us, and
o the interest rate for investments held in the fixed-rate option.
Twice a year we will also send you reports containing the financial statements
of the mutual funds and the Separate Account through which you invest in these
funds. Of these reports, the annual reports will contain audited financial
statements.
We will confirm in writing receipt of your policy premiums and any unscheduled
payments, transfers or other transactions. We will also write you to request a
premium or loan repayment to keep your policy in force.
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74 PROSPECTUS OTHER INFORMATION
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<PAGE>
In addition, GIAC may permit groups and persons purchasing under a sponsored
arrangement to apply for simplified issue and multi-life underwriting. To
qualify for a reduction in the policy's charges or deductions certain criteria
must be met. These may include:
o the size of the group
o the expected number of participants
o the expected amount of premium payments
o the expected number of policies to be issued
o the amount of coverage.
The amount of any reduction in charges or deductions and the criteria to qualify
for a reduction will reflect our reduced cost of selling and/or maintaining the
policies in group or sponsored arrangements.
From time to time we may change the amount of any reduction in charges or
deductions, or the criteria that a group must meet to qualify for these
reductions. Any change will be made on a non-discriminatory basis.
LEGAL CONSIDERATIONS FOR EMPLOYERS
The Park Avenue Life policy estimates different risks for men and women in
establishing a policy's premiums, benefits and deductions, except in states
where gender-neutral standards must be used. In 1983, the United States Supreme
Court held that optional annuity benefits offered under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Anyone interested in buying Park
Avenue Life policies in connection with insurance or benefits programs should
consult with their legal advisers to determine if the policy is appropriate for
this purpose.
ADVERTISING PRACTICES
In our advertisements and sales materials for Park Avenue Life policies we may
include:
o articles or reports on variable life insurance in general, or Park Avenue
Life specifically, and any other information published in business or
general information publications
o relevant indices or rankings of investment securities or similar groups of
funds
o comparisons of the variable investment options with the mutual funds
offered through the separate accounts of other insurance companies, or
those with similar investment objectives and policies, and
o comparisons with other investments, including those guaranteed by various
governments.
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OTHER INFORMATION PROSPECTUS 75
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<PAGE>
We may use the past performance of the variable investment divisions and funds
to promote the policies. These data are not indicative of the future performance
of the funds or the policies, or the investment experience of individual
policyowners.
We may feature individual funds and their managers, and describe the asset
levels and sales volumes of GIAC, GISC and others in the investment industry. We
may also refer to past, current, or prospective economic trends and investment
performance, and any other information that may be of interest.
We are a member of the Insurance Marketplace Standards Association ("IMSA") and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards for sales and service of individually sold life insurance and
annuities.
LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings that would threaten our
financial position or that of the Separate Account.
LEGAL MATTERS
The legal validity of the Park Avenue Life policy, as described in this
prospectus, has been confirmed by Richard T. Potter, Jr., Vice President and
Counsel of GIAC.
REGISTRATION STATEMENT
We have omitted some information from this prospectus, which is contained in our
registration with the Securities and Exchange Commission (SEC), relating to the
Separate Account and the Park Avenue Life policy. You can obtain this
information by contacting the SEC's main office in Washington, DC, and paying
the required fee.
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76 PROSPECTUS OTHER INFORMATION
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<PAGE>
FINANCIAL STATEMENTS
The GIAC consolidated basis financial statements contained in this prospectus
should only be used to determine our ability to meet our obligations under the
Park Avenue Life policies, and not as an indication of the investment experience
of the Separate Account.
FINANCIAL AND ACTUARIAL EXPERTS
The consolidated financial statements of GIAC as of December 31, 1999 and
December 31, 1998 and for each of the three years in the period ended 1999 and
financial statements of the Separate Account as of December 31, 1999 and for the
period ended December 31, 1999 and 1998 included in this prospectus have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing. PricewaterhouseCoopers LLP is located at 1177 Avenue of the Americas,
New York, New York 10036. Other financial statements included in this prospectus
are unaudited.
The actuarial matters contained in this prospectus have been examined by Charles
G. Fisher, FSA, Vice President and Actuary of GIAC. His opinion on actuarial
matters is filed as an exhibit to the registration statement filed with the
Securities and Exchange Commission.
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OTHER INFORMATION PROSPECTUS 77
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GIAC'S MANAGEMENT
The directors and officers of GIAC are named in the following table together
with information about their principal occupations and affiliations during the
past five years. The business address of each director and officer is 7 Hanover
Square, New York, New York 10004. The "Guardian Fund Complex" referred to in the
biographical information is comprised of (1) The Guardian Variable Contract
Funds, Inc. (2) The Guardian Bond Fund (3) The Guardian Cash Fund (4) The Park
Avenue Portfolio (a series trust that issues its shares in nine series) and (5)
GIAC Funds, Inc. (a series fund that issues its shares in three series).
<TABLE>
<CAPTION>
Name Title Business History
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph A. Caruso Vice President Vice President and Corporate Secretary, The Guardian Life Insurance Company of
and Secretary America 3/96-present; Second Vice President and Corporate Secretary 1/95-2/96;
Vice President and Secretary, Guardian Investor Services Corporation, Secretary,
Guardian Asset Management Corporation, Guardian Baillie Gifford Limited, Park
Avenue Securities LLC and various mutual funds within the Guardian Fund Complex.
------------------------------------------------------------------------------------------------------------------------------------
Philip H. Dutter Director Management Consultant (self-employed). Director of The Guardian Life Insurance
Company of America 3/88-present. Director of Guardian Investor Services
Corporation.
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Earl C. Harry Treasurer Treasurer, The Guardian Life Insurance Company of America 11/96-present. Assistant
Treasurer prior thereto. Treasurer of Guardian Investor Services Corporation, Park
Avenue Securities LLC and Guardian Asset Management Corporation.
------------------------------------------------------------------------------------------------------------------------------------
Arthur V. Ferrara Director Retired. Former Chairman of the Board and Chief Executive Officer, The Guardian
Life Insurance Company of America 1/93-12/95; Director 1/81- present. Director
(Trustee) of Guardian Investor Services Corporation, Guardian Asset Management
Corporation, Gabelli Capital Asset Fund, Park Avenue Securities LLC and various
mutual funds within the Guardian Fund Complex.
------------------------------------------------------------------------------------------------------------------------------------
Charles G. Fisher Vice President Second Vice President and Actuary, The Guardian Life Insurance Company of
and Actuary America.
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Leo R. Futia Director Retired. Former Chairman of the Board and Chief Executive Officer, The Guardian
Life Insurance Company of America; Director 5/70-present. Director (Trustee) of
Guardian Investor Services Corporation, Park Avenue Securities LLC and various
mutual funds within the Guardian Fund Complex. Director (Trustee) of various
mutual funds sponsored by Value Line, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Peter L. Hutchings Director Executive Vice President and Chief Financial Officer, The Guardian Life Insurance
Company of America 5/87-present. Director of Guardian Investor Services
Corporation, Park Avenue Securities LLC and Guardian Asset Management Corporation.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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78 PROSPECTUS OTHER INFORMATION
-------------
<PAGE>
<TABLE>
<CAPTION>
Name Title Business History
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Frank J. Jones Executive Vice Executive Vice President and Chief Investment Officer, The Guardian Life
President, Insurance Company of America, Director, Guardian Investor Services
Chief Investment Corporation, Guardian Baillie Gifford Limited, Park Avenue Securities LLC;
Officer, and Director and President Guardian Asset Management Corporation. Executive Vice
Director President, GIAC Funds, Inc. Officer of various mutual funds within the
Guardian Fund Complex.
------------------------------------------------------------------------------------------------------------------------------------
Edward K. Kane Executive Executive Vice President, The Guardian Life Insurance Company of America
Vice President 1/97-present; Senior Vice President and General Counsel prior thereto.
and Director Director, Guardian Asset Management Corporation.
------------------------------------------------------------------------------------------------------------------------------------
Bruce C. Long Director and Senior Vice President, The Guardian Life Insurance Company of America,
Executive Vice 9/99-present; President, New England Annuities, 2/94-6/99. Director and
President, Equity President, Guardian Investor Services Corporation; Director, Guardian Baillie
Products Gifford Limited.
------------------------------------------------------------------------------------------------------------------------------------
Frank L. Pepe Vice President Vice President and Controller, Equity Products, The Guardian Life Insurance
and Controller Company of America 1/96-present; Second Vice President and Controller,
Equity Products prior thereto. Vice President and Controller of Guardian
Investor Services Corporation. Vice President and Treasurer, GIAC Funds, Inc.
Officer of various mutual funds within the Guardian Fund Complex.
------------------------------------------------------------------------------------------------------------------------------------
Richard T. Potter, Jr. Vice President Vice President and Equity Counsel, The Guardian Life Insurance Company
and Counsel of America 1/96-present; Second Vice President and Equity Counsel prior
thereto. Vice President and Counsel of Guardian Investor Services Corporation.
Counsel of Guardian Asset Management Corporation, Park Avenue Securities LLC
and various mutual funds within the Guardian Fund Complex.
------------------------------------------------------------------------------------------------------------------------------------
Joseph D. Sargent President, President, Chief Executive Officer and Director The Guardian Life Insurance
Chief Executive Company of America 1/96-present; President prior thereto; Director 1/93-
Officer and present. Chairman of the Board of Guardian Investor Services Corporation and
Director Guardian Asset Management Corporation and various mutual funds within the
Guardian Fund Complex. Director of Guardian Baillie Gifford Limited and Park
Avenue Securities LLC.
------------------------------------------------------------------------------------------------------------------------------------
William C. Warren Director Retired. Dean Emeritus, Columbia Law School. Former Chairman of the Board,
Sandoz, Inc.; Director of The Guardian Life Insurance Company of America since
1/57; Director, Park Avenue Securities LLC and Director of Guardian Investor
Services Corporation.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
No officer or director of GIAC receives any compensation from the Separate
Account. No separately allocable compensation has been paid by GIAC, or any of
its affiliates, to any person listed above for services rendered to the Separate
Account.
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OTHER INFORMATION PROSPECTUS 79
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<PAGE>
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SPECIAL TERMS USED IN THIS PROSPECTUS
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Age
The insured's age on his or her birthday closest to the date the policy date.
Attained age
The insured's age plus the number of policy years completed since the policy
date.
Base policy
The policy without any additional riders
Basic scheduled premium
A regularly scheduled payment that you must make in order to keep your policy in
force. It is set out in your policy and does not include charges for any
additional coverage provided by riders that you may add to your policy, or
rating charges if the insured does not meet our insurance requirements for
standard insurance when we issue your policy.
Benchmark value
Benchmark value is a hypothetical measure we use to assess the adequacy of the
funding level in your policy account over time. It is based on assumptions about
the basic scheduled premium and insurance charges you would pay, as well as the
net rate of return your account would be expected to earn. Benchmark values for
each policy anniversary date are set out in the policy.
During the guaranteed premium period, the benchmark value is the greater of 1)
your tabular account value and 2) the amount that would cause your policy
account value to at least equal the benchmark value at the end of the guaranteed
premium period, assuming that:
o the policyowner paid basic scheduled premiums, when due, throughout the
guaranteed premium period
o the policyowner made no unscheduled payments and took no loans or
withdrawals
o the policy had a face amount of $250,000 and premiums were paid annually
o we charged the current cost of insurance and other charges
o we did not charge the mortality and expense risks charge, and
o the policy account value earned an annual net return of 5.22% in the first
12 years and 5.44% thereafter.
The resulting policy account values are divided by 250 to obtain rates per
$1,000 of face amount.
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80 PROSPECTUS SPECIAL TERMS
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<PAGE>
After the guaranteed premium period, the benchmark value is the greater of 1)
your tabular account value for a $100,000 face amount plus the product of [1
minus the premium load for the current year for premiums up to one basic
scheduled premium] and the difference between the maximum basic scheduled
premium and the basic scheduled premium payable during the guaranteed premium
period for a $100,000 face amount, and 2) the amount that would cause your
policy account value to at least equal your policy's face amount on the policy
anniversary nearest the insured's 100th birthday, assuming that:
o the policyowner paid basic scheduled premiums payable during the
guaranteed premium period for a $100,000 face amount, when due, until the
policy anniversary nearest the insured's 100th birthday
o the policyowner made no unscheduled payments and took no loans or
withdrawals
o the policy had a face amount of $100,000 and premiums were paid monthly
o the policyowner paid all basic scheduled premiums, made no unscheduled
payments and took no loans or withdrawals
o we charged the current cost of insurance charges and the maximum rate of
any other charges and deductions
o we did not charge the mortality and expense risks charge, and
o the policy account value earned an annual net return of 4% after the
guaranteed premium period.
The resulting policy account values are divided by 100 to obtain rates per
$1,000 of face amount.
The benchmark values for your policy are the rates calculated above multiplied
by the face amount, divided by 1,000.
To calculate the benchmark value on a given day, we will take the benchmark
values for your last policy anniversary and your upcoming policy anniversary,
and adjust for the number of days that the date is between these anniversaries.
This is the interpolated benchmark value.
Business day
Each day that GIAC processes transactions, currently including each day that the
New York Stock Exchange or its successor is open for trading and GIAC is open
for business. GIAC's close of business is 4 p.m. New York City time. If any
transaction or event occurs or is scheduled to occur on a day that is not a
business day, or if a transaction request is received after GIAC's close of
business, such transaction or event will be processed using values as of the
next following business day unless otherwise specified.
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SPECIAL TERMS PROSPECTUS 81
-------------
<PAGE>
Face amount or Guaranteed insurance amount
The minimum amount that you will receive on the death of the insured, until the
policy anniversary closest to the insured's 100th birthday, as long as:
o you pay all policy premiums when they are due, except those skipped under
the Premium Skip Option
o you don't make any partial withdrawals, and
o you don't have any policy debt outstanding.
The Guaranteed insurance amount is set out in your policy. The minimum for a
policy is currently $100,000 ($125,000 for the pension trust version of the
policy).
Guaranteed premium period
The period during which your basic scheduled premiums will remain the same. This
period begins on the policy date and ends on the later of the policy anniversary
closest to the insured's 75th birthday or the 10th policy anniversary.
Internal revenue code
The Internal Revenue Code of 1986, as amended, and its related rules and
regulations.
Issue date
The date your policy is issued at GIAC's customer service.
Monthly date
The same date in each month as the policy date, or the last day of a month if
that is earlier.
Net amount at risk
The difference between the policy account value and the amount that you would be
paid under the base policy's death benefit.
Policy account value
The sum of the values attributable to a policy which are allocated to the
variable investment options, the fixed-rate option and the loan collateral
account.
Policy anniversary
The same date each year as the policy date.
Policy date
The date your policy comes into effect. This date is used to measure policy
months, policy years, policy anniversaries, and monthly dates.
Policy debt
All unpaid policy loans, plus the accumulated and unpaid interest on those
loans.
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82 PROSPECTUS SPECIAL TERMS
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<PAGE>
Policy review date
The monthly date before your policy anniversary.
Tabular account value
The value of a hypothetical account that we compare to your policy account value
when we set your basic scheduled premium each year after the guaranteed premium
period. It is also used to calculate your policy's benchmark values. During the
guaranteed premium period, the tabular account value is equal to the policy
account value that would result assuming that:
o the policy had a face amount of $100,000 and premiums were paid monthly
o the policyowner paid the basic scheduled premium, when due, during the
guaranteed premium period
o the policyowner made no unscheduled payments and took no loans or
withdrawals
o we charged the guaranteed cost of insurance and other charges
o we did not charge the mortality and expense risks charge, and
o the policy account value earned an annual net return of 4%.
After the guaranteed premium period, the tabular account value is the amount
that would cause your policy account value to at least equal your policy's face
amount on the policy anniversary nearest the insured's 100th birthday, assuming
that:
o the policyowner paid the maximum basic scheduled premiums, when due, until
the policy anniversary nearest the insured's 100th birthday
o the policyowner made no unscheduled payments and took no loans or
withdrawals
o the policy had a face amount of $100,000 and premiums were paid monthly
o we charged the guaranteed cost of insurance and other charges
o we did not charge the mortality and expense risks charge, and
o the policy account value earned an annual net return of 4%.
The resulting policy account values are divided by 100 to obtain rates per
$1,000 of face amount.
The benchmark values for your policy are the rates calculated above multiplied
by the face amount, divided by 1,000.
To calculate your tabular account value on a given day, we will take the tabular
account values for your last policy anniversary and your upcoming policy
anniversary, and adjust for the number of days that your date is between these
anniversaries.
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SPECIAL TERMS PROSPECTUS 83
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<PAGE>
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APPENDIX A
--------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS, POLICY ACCOUNT VALUES,
NET CASH SURRENDER VALUES AND ACCUMULATED POLICY PREMIUMS
The following tables illustrate how the policies operate. Specifically, they
show how the death benefit, net cash surrender value and policy account value
can vary over an extended period of time assuming hypothetical gross rates of
return (i.e., investment income and capital gains and losses, realized or
unrealized) for the Separate Account that are equal to constant after tax annual
rates of 0%, 6% and 12%. The tables are based on policies with face amounts of
$250,000 for a male insured at Age 40 and shown in the preferred plus
classification and also in the preferred classification. Values are first given
based on current charges and then based on the policy's higher guaranteed
charges. In addition, each illustration is given first for a policy with an
Option 1 death benefit and then for a policy with an Option 2 death benefit.
These illustrations may assist in the comparison of death benefits, net cash
surrender values and policy account values for Park Avenue Life policies with
those under other variable life insurance policies that may be issued by GIAC or
other companies. Prospective policyowners are advised, however, that it may not
be advantageous to replace existing life insurance coverage by purchasing a Park
Avenue Life policy, particularly if the decision to replace existing coverage is
based solely on a comparison of policy illustrations.
Death benefits, net cash surrender values and policy account values will be
different from the amounts shown if: (1) the actual gross rates of return
average 0%, 6% or 12%, but vary above and below the average over the period; and
(2) policy premiums are paid at other than annual intervals, or if Unscheduled
Payments are made. Benefits and values will also be affected by the
policyowner's allocation of the unloaned policy account value among the variable
investment options and the fixed-rate option. if the actual gross rate of return
for all options averages 0%, 6% or 12%, but varies above or below that average
for individual options, allocation and transfer decisions can have a significant
impact on a policy's performance. Policy loans and other policy transactions,
such as skipping policy premiums and partial withdrawals, will also affect
results, as will the insured's sex, and premium class.
Death benefits, net cash surrender values and policy account values shown in the
tables reflect the fact that: (1) deductions have been made from annual policy
premiums for policy premium assessments and premium charges; and (2) monthly
deductions are deducted from the policy account value on each monthly date. The
net cash surrender values shown in the tables reflect the fact that a surrender
charge is deducted upon surrender or lapse during the first 9 policy years. See
Deductions and charges. The amounts shown in the illustrations also reflect an
average of the investment advisory fees and operating expenses incurred by the
mutual funds, at an annual rate of x.xx% of the average daily net assets of such
funds.
The average is based upon actual expenses, after applicable expense
reimbursements and fee waivers, incurred during 1999 for all funds, except
Guardian VC 500 Index and Janus Aspen Series, the expenses of which have been
restated to reflect a reduction in the management fee, and the Fidelity
portfolio which will utilize estimates for the first year. In the absence of
these arrangements, operating expenses of the various funds, and the average
investment adviser fees and expenses used in the following illustrations would
have been higher. For an explanation of the expenses see the accompanying fund
prospectuses.
Taking account of the charges for mortality and expense risks in the Separate
Account and the average investment advisory fee and operating expenses of the
mutual funds, the gross annual rates of return of 0%, 6% and 12% correspond to
net investment experience at -x.xx%, x.xx% and xx.xx%, respectively. See Net
investment factor.
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APPENDICES PROSPECTUS 84
--------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Separate Account since no charges are currently
made. If any such charges are imposed in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the death benefits, net cash surrender values
and policy account values illustrated. See GIAC's Taxes.
The fourth column of each table shows the amount which would accumulate if an
amount equal to the annual policy premium was invested to earn interest, after
taxes, of 5% per year, compounded annually. There can be no assurance that a
prospective policyowner would be able to earn this return. During the guaranteed
premium period, the annual policy premium is $2,532.50 for the preferred plus
policy illustrated and $3,045 for the preferred policy illustrated.
GIAC will furnish upon request an illustration reflecting the proposed insured's
age, sex, premium class and the face amount or basic scheduled premium
requested, but a premium-based illustration must reflect GIAC's current minimum
face amount requirement for Park Avenue Life -- which is $100,000.
These illustrations will refer to "net outlay" as the cash flow into or out of
the policy. It is equal to the sum of all Policy Premiums and accrued loan
interest paid in cash and reduced by the proceeds of any policy loan or partial
withdrawal received in cash.
From time to time, advertisements or sales literature for Park Avenue Life may
quote historical performance data of one or more of the underlying funds, and
may include cash surrender values and death benefit figures computed using the
same methodology as that used in the following illustrations, but with average
annual total return of the underlying funds for which performance data is shown
in the advertisement or sales literature replacing the hypothetical rates of
return shown in the following tables. This information may be shown in the form
of graphs, charts, tables, and examples. Any such information is intended to
show the policy's investment experience based on the historical experience of
the underlying funds and is not intended to represent what may happen in the
future.
GIAC began to offer Park Avenue Life Millennium Series on _________, 2000. As
such the policies may not have been available when the funds commenced their
operations. However, illustrations may be based on the actual investment
experience of the funds since their respective inception dates (See The variable
investment options -- Investment performance of the Funds). The result for any
period prior to the policies' being offered would be calculated as if the
policies had been offered during that period of time, with all charges assumed
to be those applicable to the policies. Thus the illustrations will reflect
deductions for each fund's expenses, the charges deducted from premiums, monthly
deductions, and any transaction deductions associated with the policy in
question.
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85 PROSPECTUS PARK AVENUE LIFE
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<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
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APPENDICES PROSPECTUS 86
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<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
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87 PROSPECTUS PARK AVENUE LIFE
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<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
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APPENDICES PROSPECTUS 88
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<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
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89 PROSPECTUS PARK AVENUE LIFE
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<PAGE>
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APPENDIX B USES OF LIFE INSURANCE
--------------------------------------------------------------------------------
The following are examples of ways in which the policy can be used to address
certain financial objectives, bearing in mind that variable life insurance is
not a short-term investment and that its primary purpose is to provide benefits
upon the death of the insured.
Family Income Protection
Life insurance may be purchased on the lives of a family's income earners to
provide a death benefit to cover final expenses, and continue the current income
to the family. The amount of insurance purchase should be an amount which will
provide a death benefit that when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the insured's income.
Estate Protection
Life insurance may be purchased by a trust on the life of a person whose estate
will incur federal estate taxes upon his or her death. The amount of insurance
purchased should equal the amount of the estimated estate tax liability. Upon
the insured's death, the trustee could make the death proceeds available to the
estate for the payment of estate taxes.
Education Funding
Life insurance may be purchased on the life of the parent(s) or primary person
funding an education. The amount of insurance purchased should equal the total
education cost projected at a reasonable inflation rate.
In the event of the insured's death, the guaranteed death benefit is available
to help pay the education costs. If the insured lives through the education
years, the cash value accumulations may be accessed to help offset the remaining
education costs. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Mortgage Protection
Life insurance may be purchased on the life of the person(s) responsible for
making mortgage payments. The amount of insurance purchased should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to offset the remaining mortgage balance.
During the insured's lifetime, the cash value accumulations may be accessed late
in the mortgage term to help make the remaining mortgage payments. Any policy
loans or partial withdrawals will reduce the policy's death benefit and may have
tax consequences.
Key Person Protection
Life insurance may be purchased by a business on the life of a key person in an
amount equal to a key person's value, considering salary, benefits, and
contribution to business profits. Upon the key person's death, the business can
use the death benefit to ease the interruption of business operations and/or to
provide a replacement fund for hiring a new executive.
Business Continuation Protection
Life insurance may be purchased on the life of each business owner in an amount
equal to the value of each owner's business interest. In the event of death, the
guaranteed death benefit may provide the funds needed to carry out the purchase
of the deceased's business interest by the business, or surviving owners, from
the deceased owner's heirs.
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APPENDICES PROSPECTUS 90
--------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX B
USES OF LIFE INSURANCE
Retirement Income
Life insurance may be purchased on the life of a family income earner during his
or her working life. If the insured lives to retirement, the cash value
accumulations may be accessed to provide retirement payments. In the event of
the insured's death, the proceeds may be used to provide retirement income to
his or her spouse. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Deferred Compensation Plans
Life insurance may be purchased to fund a Deferred Compensation Plan, or
Selective Incentive Plan, for key employees. A Deferred Compensation Plan, or
Selective Incentive Plan, is a written agreement between an employer and an
executive. The employer makes an unsecured promise to make future benefit
payments to a key executive if the executive meets certain stated requirements.
Under this type of plan, a company purchases a cash value life insurance policy
insuring an executive's life to (1) informally fund the promised benefits and
(2) recover its plan costs at the death of the executive. The policy cash values
may be used to help pay the promised benefits to the executive. In the event
that the executive dies prior to retirement, the policy death benefits can be
used to fund survivor benefits.
Split Dollar Plans
Life insurance may be purchased by an employer on the life of an employee under
a Split Dollar Plan. In a Split Dollar Plan, the employer advances the executive
the premium on a life insurance policy. Both the employer and the executive
share the cash value and death benefit under the policy. Generally, the employer
has rights to the cash value and death benefit equal to its advances. The
balance of the cash value and death benefit belong to the executive.
The executive receives an economic benefit for which he or she must contribute
into the plan or pay income tax. The economic benefit is equal to the term value
of the death benefit assuming taxation under IRS Revenue Rulings and IRC Section
72. Different results are possible if these or other code sections are applied
or amended.
Executive Bonus Plans
Life Insurance may be purchased by an employee with funds provided by his or her
employer for that purpose. An Executive Bonus plan involves an employer
providing an executive with additional compensation to enable the executive to
pay premiums on a life insurance policy. The bonus is tax deductible by the
employer and received as taxable income by the executive.
* * * *
Because the policy provides a death benefit and cash surrender value, the policy
can be used for various individual and business planning purposes. Purchasing
the policy in part for such purposes entails certain risks, particularly if the
policy's cash surrender value, as opposed to its death benefit, will be the
principal policy feature used for such planning purposes. If Policy Premiums are
not paid, the investment performance of the Variable Investment Options to which
Policy Account Value is allocated is poorer than anticipated, or insufficient
cash surrender value is maintained, then the policy may lapse or may not
accumulate sufficient values to fund the purpose for which the policy was
purchased. Because the policy is designed to provide benefits on a long-term
basis, before purchasing a policy for a specialized purpose, a purchaser should
consider whether the long-term nature of the policy is consistent with the
purpose for which it is being considered.
Policyowners are urged to consult competent tax advisors about the possible tax
consequences of pre-death distributions from any life insurance policy,
including Park Avenue Life.
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91 PROSPECTUS PARK AVENUE LIFE
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<PAGE>
--------------------------------------------------------------------------------
APPENDIX C ADDITIONAL BENEFITS BY RIDER
--------------------------------------------------------------------------------
Additional benefits are available by riders to the policy. Riders are issued
subject to GIAC's standards for classifying risks. GIAC charges premiums for
additional benefit riders. These premium amounts are included in the policy
premium charged to a Park Avenue Life policyowner, but rider premiums are not
allocated to the variable investment options or fixed-rate option under the
policy. The benefits provided by the riders are fully described in the riders
and summarized here.
Waiver of Premium rider -- This rider provides for the waiver of Policy
Premiums while the insured is totally disabled.
Combined Waiver of Premium rider -- This rider provides for the waiver of
premiums upon the death or disability of the applicant or the total
disability of the insured.
Select Security rider -- This rider, used in split dollar cases, is an
endorsement that prevents the policyowner from making certain policy
changes without the consent of the policyowner's employer. There is no
charge for this rider.
Exchange of Insureds rider -- This rider gives the policyowner the right
to exchange the policy for a new one on the life of a subsititure insured.
The exercise of this rider will be treated as a taxable exchange for
federal income tax purposes.
Accidental Death Benefit rider -- This rider provides additional insurance
coverage if the insured's death results from accidental bodily injury.
Guaranteed Purchase Option -- This rider provides the policyowner the
right to purchase additional insurance policies on the insured's life
without evidence of insurability on the policy anniversaries nearest
certain birthdays of the insured (the "Option Dates") or within specified
time periods of qualifying life events ("Alternate Option Dates") provided
(i) all policy premiums are paid to the applicable Option Date or
Alternate Option Date, (ii) written application and evidence of
insurability satisfactory to the issuer and the first premium for the new
policy are received as set forth in the rider, (iii) if applicable,
satisfactory evidence of the qualifying life event accompanies the
application.
Simplified Insurability Option -- This rider allows the policyowner to
purchase additional policies on certain policy anniversaries ("Option
Dates") provided: (i) all policy premiums are paid to the applicable
Option Date, (ii) written application and evidence of insurability
satisfactory to the issuer are received as set forth in the rider, and
(iii) policy premiums are not being waived under a waiver of premium
rider.
Adjustable Renewable Term rider -- This rider provides term insurance to
supplement the base policy. By adding this rider to a Park Avenue Life
policy, a policyowner can increase the insurance coverage provided by the
entire contract. Generally, term insurance is intended to fill a temporary
insurance need, and permanent (whole life) insurance such as that provided
by the base policy is intended to fill long-term insurance needs. Term
insurance is generally more economical for short periods, while permanent
insurance is generally more economical over longer periods. If a
policyowner has a short-term need for more insurance protection, it may be
in his or her interest to supplement a Park Avenue Life policy with this
rider. When the need abates, the rider can be terminated without
triggering surrender charges. See Adjustable Renewable Term Rider,
Decreasing the face amount and Deductions and charges.
GIAC may from time to time discontinue the availability of one or more of these
riders, or make other riders available. GIAC agents can provide information
about the current availablity of particular riders.
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APPENDICES PROSPECTUS 92
--------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX D
REPRESENTATIVE MONTHLY ADMINISTRATIVE EXPENSE CHARGES PER $1,000 OF BASE POLICY
FACE AMOUNT
<TABLE>
<CAPTION>
Male Female Unisex
Age Plus Preferred Standard Plus Preferred Standard Plus Preferred Standard
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25 0.088 0.088 0.113 0.076 0.076 0.098 0.087 0.087 0.110
30 0.099 0.103 0.119 0.087 0.087 0.111 0.098 0.101 0.118
35 0.125 0.131 0.150 0.100 0.109 0.129 0.122 0.128 0.147
40 0.149 0.150 0.175 0.112 0.119 0.146 0.143 0.145 0.171
45 0.149 0.168 0.187 0.128 0.132 0.167 0.146 0.163 0.183
50 0.175 0.192 0.219 0.165 0.167 0.179 0.173 0.188 0.213
55 0.188 0.225 0.234 0.187 0.189 0.189 0.188 0.220 0.228
60 0.200 0.225 0.250 0.188 0.192 0.198 0.198 0.220 0.243
65 0.225 0.225 0.250 0.196 0.199 0.199 0.221 0.221 0.243
</TABLE>
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93 PROSPECTUS PARK AVENUE LIFE
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<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX E
VARIABLE WHOLE LIFE INSURANCE WITH MODIFIED SCHEDULED PREMIUMS
REPRESENTATIVE FIRST YEAR SURRENDER CHARGE RATES PER $1,000 OF BASE POLICY FACE
AMOUNT
<TABLE>
<CAPTION>
Male Female Unisex
Age Plus Preferred Standard Plus Preferred Standard Plus Preferred Standard
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25 6.264 6.489 9.135 4.986 5.166 6.525 6.012 6.228 8.586
30 7.335 7.614 10.881 5.778 5.976 8.262 7.020 7.290 10.206
35 8.829 9.180 13.338 6.786 7.308 10.404 8.424 8.757 12.789
40 10.737 11.169 17.082 8.046 9.099 13.302 10.197 10.881 16.560
45 13.059 14.130 22.356 9.612 11.466 16.839 12.366 13.752 21.591
50 16.290 17.721 18.710 11.979 14.418 21.267 15.354 17.253 27.684
55 20.475 22.590 37.287 15.156 18.117 27.054 19.188 21.951 35.883
60 25.983 28.431 47.187 19.395 23.130 34.209 24.192 27.666 45.378
65 32.868 39.771 51.797 24.903 29.682 42.651 30.582 38.322 51.270
</TABLE>
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APPENDICES PROSPECTUS 94
--------------
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING PURSUANT TO RULE 484
Under Article VIII of GIAC's By-Laws, as supplemented by Section 3.2 of
GIAC's Certificate of Incorporation, any past or present director or officer of
GIAC (including persons who serve at GIAC's request or for its benefit as
directors or officers of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise [hereinafter referred to
as a "Covered Person"]) is indemnified to the fullest extent permitted by law
against liability and all expenses reasonably incurred by such Covered Person in
connection with any action, suit or proceeding to which such Covered Person may
be a party or otherwise involved by reason of being or having been a Covered
Person. However, this provision does not protect a Covered Person against any
liability to either GIAC or its stockholder to which such Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Covered Person's office. This provision does protect a director of GIAC against
any liability to GIAC or its stockholder for monetary damages or for breach of
fiduciary duty as a director of GIAC, except for liability (i) for any breach of
the director's duty of loyalty to GIAC or its stockholder, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26
GIAC hereby presents that the fees and charges deducted under the contract, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by GIAC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The representation pursuant to Section 26 of The Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Richard T. Potter, Jr., Esq. *
Charles G. Fisher*
PricewaterhouseCoopers LLP*
----------
* To be filed by amendment.
II-1
<PAGE>
The following exhibits:
1.A (1) Resolution of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. establishing The
Guardian Separate Account K.
(2) Not Applicable.
(3)(a),
(b), (c),
(d) and
(e) Distribution Agreements.
(4) Not Applicable.
(5) Specimen of the Modified Scheduled Premium Variable Whole
Life Insurance Policy.
(6)(a) Certificate of Incorporation of The Guardian Insurance &
Annuity Company, Inc.
(6)(b) By-laws of The Guardian Insurance & Annuity Company, Inc.
(7) Not Applicable.
(8) Amended and Restated Agreement for Services and
Reimbursement Therefor between The Guardian Life Insurance
Company of America and The Guardian Insurance & Annuity
Company, Inc.
(9) Not Applicable.
(10) Form of Application for the Modified Scheduled Premium
Variable Whole Life Policy.
(11) Memorandum on the Policy's Issuance, Transfer and
Redemption Procedures and on the Method of Computing Cash
Adjustments upon Exchange of the Policy.
2. See Exhibit 1.A(5).
3. (a)Opinion of Richard T. Potter, Jr., Esq.*
3. (b)Consent of Richard T. Potter, Jr., Esq.*
4. None.
5. Not Applicable.
6. Opinion and Consent of Charles G. Fisher, F.S.A.*
7. Consent of PricewaterhouseCoopers LLP*
8. Powers of Attorney executed by a majority of the Board of Directors
and certain principal officers of The Guardian Insurance & Annuity
Company, Inc.
----------
* To be filed by amendment.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, The
Guardian Separate Account K, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York, on the 14th day of August, 2000.
THE GUARDIAN SEPARATE ACCOUNT K
(Name of Registrant)
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
By: /s/ Richard T. Potter, Jr
-------------------------------------
Richard T. Potter, Jr
Vice President and Counsel
Attest: /s/ Sheri L. Kocen
---------------------------------
SHERI L. KOCEN
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following directors and
principal officers of The Guardian Insurance & Annuity Company, Inc. in the
capacities and on the date indicated.
/s/ Joseph D. Sargent* President, Chief Executive Officer
----------------------------------- and Director
Joseph D. Sargent
(Principal Executive Officer)
/s/ Frank J. Jones* Executive Vice President, Chief Investment
----------------------------------- Officer and Director
Frank J. Jones
(Principal Financial Officer)
/s/ Edward K. Kane* Executive Vice President
----------------------------------- and Director
Edward K. Kane
/s/ Frank L. Pepe Vice President and Controller
-----------------------------------
Frank L. Pepe
(Principal Accounting Officer)
/s/ Bruce C. Long* Director
-----------------------------------
Bruce C. Long
/s/ Philip H. Dutter* Director
-----------------------------------
Philip H. Dutter
/s/ Arthur V. Ferrara* Director
-----------------------------------
Arthur V. Ferrara
/s/ Leo R. Futia* Director
-----------------------------------
Leo R. Futia
/s/ Peter L. Hutchings* Director
-----------------------------------
Peter L. Hutchings
/s/ William C. Warren* Director
-----------------------------------
William C. Warren
*By: /s/ Richard T. Potter, Jr. Date: August 14, 2000
---------------------------------
Richard T. Potter, Jr.
Vice President and Counsel
Pursuant to Power of Attorney
II-4
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT K
EXHIBIT INDEX
Exhibit
Number Description Page*
1. A(1) Resolutions of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. establishing The
Guardian Separate Account K.
1. A(3)(a)(b) Forms of Distribution Agreements.
and (c)(d)
and (e)
1. A(5) Specimen of the Modified Scheduled Premium Variable Whole Life
Insurance Policy.
1. A(6)(a) Certificate of Incorporation of The Guardian Insurance
& Annuity Company, Inc.
(b) By-Laws of The Guardian Insurance & Annuity Company,
Inc.
1. A(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.
1. A(10) Form of Application for the Modified Scheduled Premium
Variable Whole Life Insurance Policy.
1. A(11) Memorandum on the Policy's Issuance, Transfer and
Redemption Procedures and on the Method of Computing
Cash Adjustments upon Exchange of the Policy.
8. Powers of Attorney executed by the Board of Directors
and certain principal officers of The Guardian
Insurance & Annuity Company, Inc.
