Registration Nos. 33-83412
811-8736
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 5
to
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:
KIMBERLY SMITH, ESQ.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
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It is proposed that this filing will become effective (check appropriate
box):
|_| immediately upon filing pursuant to paragraph (b), or
|X| on May 1, 2000 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i), or
|_| on (date) pursuant to paragraph (a)(i) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for
a previously-filed post-effective amendment.
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The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The notice required by such rule for the Registrant's most recent
fiscal year was filed on March 24, 2000.
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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 value options; 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)
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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May 1, 2000
PARK AVENUE LIFE PROSPECTUS
PARK AVENUE LIFE 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
70th 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:
The Guardian Variable Contract Funds, Inc.
The Guardian Stock Fund
The Guardian VC Asset Allocation Fund
The Guardian VC 500 Index Fund
The Guardian Bond Fund, Inc.
The Guardian Cash Fund, Inc.
GIAC Funds, Inc.
The Guardian Small Cap Stock Fund
Baillie Gifford International Fund
Baillie Gifford Emerging Markets Fund
Value Line Centurion Fund
Value Line Strategic Asset Management Trust
Gabelli Capital Series Fund, Inc.
Gabelli Capital Asset Fund
MFS(R) Variable Insurance Trust(SM)
MFS Emerging Growth Series
MFS Total Return Series
MFS Growth With Income Series
MFS Bond Series
MFS New Discovery Series
MFS Research Series
American Century Variable Portfolios, Inc.
American Century VP Value Fund
American Century VP International Fund
AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Global Utilities Fund
AIM V.I. Value Fund
Fidelity Variable Insurance Products Fund
(Fidelity VIP)
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Fidelity Variable Insurance Products Fund II
Fidelity VIP II Contrafund(R) Portfolio
Fidelity VIP II Index 500 Portfolio
Fidelity Variable Insurance Products Fund III
Fidelity VIP III Growth Opportunities Portfolio
Janus Aspen Series
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
All funds may not be available in your state. Ask your registered representative
for further information about availability.
These funds correspond to the policy's variable investment options. You can also
allocate premiums to a fixed-rate option. Special limits apply to transfers out
of the fixed-rate option.
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These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Commission or
any state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The policy is not a deposit or obligation of or guaranteed or endorsed by, any
bank or depository institution, is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency, and
involves investment risk, including possible loss of principal amount invested.
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Policy Form 95-MPVL
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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
- - Changing your death benefit option .................................... 16
- - Paying the death benefit .............................................. 17
- - Policy values ......................................................... 17
Premiums, deductions and charges ......................................... 20
- - Premiums .............................................................. 20
- - Deductions and charges ................................................ 29
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................................................... 59
- - Fixed-benefit insurance during the first 24 months..................... 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
- - Possible tax law changes .............................................. 68
- - GIAC's taxes .......................................................... 68
- - Income tax withholding ................................................ 68
<PAGE>
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................................................... 76
- - Financial and actuarial experts ....................................... 76
- - 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............................. 102
Appendices A to C......................................................... 119
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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.
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Terms we've used
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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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.
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 issued) closest to the
insured's 100th birthday. On or after this date, the death benefit will be the
policy account value.
You can change your policy's death benefit option 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.
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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 waiver of premium
o accidental death benefit
o adjustable renewable term insurance.
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 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 premiums or other charges that you have paid to provide coverage 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 that 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 in states 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.
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.
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 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?
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4 PROSPECTUS SUMMARY
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<PAGE>
Allocation options
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You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your premiums may be allocated to a
maximum of seven allocation options at one time.
WHAT ARE YOUR ALLOCATION OPTIONS?
You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your premiums may be allocated to a
maximum of seven allocation options at one time.
Each variable investment option invests in a series of a mutual fund. The value
of these options, and your policy account value in them, will vary depending on
the performance of the mutual funds corresponding to the options you choose.
There is no minimum guaranteed policy account value for the amounts allocated to
the variable investment options.
The mutual funds that are currently available through the variable investment
options are:
The Guardian Variable Contract Funds, Inc.
The Guardian Stock Fund
The Guardian VC Asset Allocation Fund
The Guardian VC 500 Index Fund
The Guardian Bond
Fund, Inc.
The Guardian Cash
Fund, Inc.
GIAC Funds, Inc.
The Guardian Small Cap
Stock Fund
Baillie Gifford
International Fund
Baillie Gifford Emerging
Markets Fund
Value Line Centurion
Fund, Inc.
Value Line Strategic Asset
Management Trust
Gabelli Capital Series
Fund, Inc.
Gabelli Capital Asset Fund
MFS(R) Variable Insurance Trust(SM)
MFS Emerging Growth Series
MFS Total Return Series
MFS Growth With
Income Series
MFS Bond Series
MFS New Discovery Series
MFS Research Series
American Century Variable
Portfolios, Inc.
American Century VP
Value Fund
American Century VP
International Fund
AIM Variable Insurance
Funds, Inc.
AIM V.I. Capital
Appreciation Fund
AIM V.I. Global Utilities Fund
AIM V.I. Value Fund
Fidelity Variable Insurance
Products Fund
(Fidelity VIP)
Fidelity VIP Equity-Income
Portfolio
Fidelity VIP High Income
Portfolio
Fidelity Variable Insurance
Products Fund II
Fidelity VIP II Index 500
Portfolio
Fidelity VIP II Contrafund(R) Portfolio
Fidelity Variable Insurance
Products Fund III
Fidelity VIP III Growth
Opportunities Portfolio
Janus Aspen Series
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
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SUMMARY PROSPECTUS 5
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<PAGE>
You will find the investment objectives, policies, risks, fees and expenses for
each of these funds listed in the accompanying prospectus for that fund. You
should read the corresponding fund prospectus carefully before investing in any
variable investment option. For a summary of this information see The variable
investment options.
The fixed-rate option earns a set rate of interest. The interest rate is
guaranteed from the time you allocate net premiums or transfer policy values to
the fixed-rate option until your next policy anniversary, when the rate is set
for the next year. You earn interest on the total that you have invested in the
fixed-rate option, including interest you have earned in previous years.
Interest accrues daily at a minimum annual interest rate of 4%. GIAC sets the
rate of interest for the fixed-rate option and guarantees your principal and
interest under this option.
CAN YOU TRANSFER THE MONEY IN YOUR POLICY
AMONG DIFFERENT ALLOCATION OPTIONS?
Provided the money in your policy is not being held as collateral against a
loan, you can transfer it among the variable investment options, and into the
fixed-rate option, at any time. You may choose up to seven allocation options at
any time. We limit transfers out of the fixed-rate option. See The fixed-rate
option.
DO YOU HAVE ACCESS TO THE MONEY YOU'VE
INVESTED IN YOUR POLICY?
After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's net cash surrender value. The net cash
surrender value is your policy account value minus any surrender charges and
policy debt, plus any amounts paid as policy premium assessments beyond the next
monthly date. 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 8%, calculated daily, on all outstanding
loans that you have taken against your policy.
You may at any time surrender your policy for the net cash surrender value.
After you surrender your policy, you no longer have insurance coverage and your
policy cannot be reinstated.
Withdrawing money
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After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's net cash surrender value. You may also
borrow up to 90% of your policy's cash surrender value. You may at any time
surrender your policy for the net cash surrender value.
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6 PROSPECTUS SUMMARY
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Tax on increases
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Increases in the value of your policy will not be taxed unless you make a
withdrawal (or, in some cases, take a loan) or surrender your policy before the
insured dies.
HOW IS YOUR POLICY AFFECTED BY TAXES?
Increases in the value of your policy and the death benefit
We believe that 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.
Policy premium assessments: These are ratings charges and rider premiums which
have been added to your basic sheduled premium to form your policy premium. We
deduct this amount from each policy premium payment.
Premium tax charge: We charge you 2.5% of each basic scheduled premium and any
unscheduled payments you make, to cover premium taxes that we pay in states and
jurisdictions where the policy is sold.
Deferred Acquisition Cost (DAC) tax charge: We charge you 1% of each basic
scheduled premium and any unscheduled payments you make, and it relates to
federal income taxes that we pay.
Premium sales charge: This charge of 6% of each basic scheduled premium and any
unscheduled payments you make is deducted after we deduct any handling fees. It
will fall to 3% after you have paid an amount equal to 12 annual basic scheduled
premiums through basic scheduled premiums and unscheduled payments.
Handling fee: We can charge you a maximum handling fee of $2 for each
unscheduled payment you make. We deduct this fee from your payment before the
premium charge is calculated. We do not currently charge this fee.
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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: For the first three policy years, we charge you $10 per month.
After three years, the charge is currently $4 per month, and is guaranteed never
to exceed $8 per month.
Administration charge: For the first 12 years of your policy, we base the
monthly administration charge on the insured's age when the policy started. It
is a set rate of no more than $0.04 for every $1,000 of your policy's face
amount. After the 12th year, the administration charge is $0.015 per $1,000 of
your policy's face amount.
Guaranteed insurance amount charge: A monthly charge of $0.01 per $1,000 of your
policy's face amount.
Cost of insurance charge: We base this charge on our current cost of insurance
rates for the insured, depending on his or her attained age (which is the
insured's age on the policy date plus the number of policy years completed since
the policy date), sex and premium class. 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: During the first 12 policy years, this charge applies if you
surrender your policy, let it lapse, or reduce the face amount either because
you ask us to, or as the result of a partial withdrawal. This charge is made up
of two parts, a deferred administrative charge and a deferred sales charge. The
amount of your surrender charge will depend on the policy year in which the
event occurs, and will generally decline over time. If you are surrendering your
policy, the surrender charges will be highest in policy year three because
Securities and Exchange Commission (SEC) restrictions effectively limit
surrender charges in the first two years of a policy.
The deferred administration charge will never be higher than $4.80 per $1000 of
your policy's face amount. The deferred sales charge will never be higher than
36% of one annual basic scheduled premium. The deferred sales charge must be
paid in addition to the premium sales charge described above.
Partial withdrawal charge: If you make a partial withdrawal, we will charge you
$25 or 2% of the amount of your withdrawal, whichever is lower, in addition to
any surrender charges that may apply.
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8 PROSPECTUS SUMMARY
- -------------
<PAGE>
Premium Skip Option deduction: If you skip a premium under our Premium Skip
Option, we will deduct an amount equal to 90.5% of any policy premium
assessments from the policy account value.
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 deduct a daily charge, based on an annual rate of 0.60%, from the variable
investment options to cover the mortality and expense risks that we assume for
Park Avenue Life policies. This charge will never be more than 0.90%.
We also have the right to charge the Separate Account to cover any taxes that
are applicable to the Separate Account or the policies. We don't currently
impose this charge.
Deductions associated with the mutual funds
Daily deductions are made from the value of the mutual funds in which you invest
through the Separate Account, to cover advisory fees and other expenses. As a
result, you pay these fees and expenses indirectly. The fees and expenses vary
for each mutual fund and are described in more detail in the fund prospectuses.
Policy changes
- --------------------------------------------------------------------------------
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 fixed benefit life insurance
policy
o cancel your policy after it has been issued.
See accompanying text for details.
WHAT CHANGES CAN YOU MAKE
TO YOUR POLICY?
Decreasing the face amount of the policy
After your policy has been in force for one year, you may request a decrease in
the face amount. The decrease must be at least $10,000, and the insured must be
alive when we receive your request. If you ask us to reduce the face amount in
the first 12 years of your policy, you will pay a surrender charge. 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 your Park Avenue Life policy for a fixed-benefit whole life
insurance policy issued by GIAC or one of our affiliates within two years of the
issue date of your policy. If you do this, you don't have to prove that the
person being insured meets our insurance requirements for issuing a policy.
Depending on the amount applied to the new policy, there may be a credit or a
cost to be paid.
-------------
SUMMARY PROSPECTUS 9
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<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, or
o 10 days after the postmarked date on any Notice of Withdrawal Right that
we mail you.
Longer periods may apply in some states. Once we receive your notice, we will
refund all of the premiums you paid, and your policy will be considered void
from the beginning. See Your right to cancel your policy.
Could your policy lapse?
- --------------------------------------------------------------------------------
Your policy may lapse if you don't pay a policy premium within 31 days of the
due date or if you have excess policy debt.
COULD YOUR POLICY LAPSE?
Your policy may lapse if 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.
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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 executive office, in a form acceptable
to us. Your request must include:
o your policy number
o the full name of all policyowners
o the full name of the insured, and
o your current address.
Our address for regular mail is:
The Guardian Insurance & Annuity Company, Inc.
7 Hanover Square
Mail Station 215-B
New York, New York 10004
Our address for registered, certified or express mail is:
The Guardian Insurance & Annuity Company, Inc.
215 Park Avenue South
18th floor
New York, New York 10003
If you need information on the value of your policy, you may call us at
1-800-935-4128 between 9 a.m. and 4 p.m. New York time.
WHO ISSUES YOUR PARK AVENUE 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>
Park Avenue Life Policy Diagram(1)
- --------------------------------------------------------------------------------
Less
POLICY PREMIUMS ------------> Policy premium
assessments:
o Rider premiums
o Rating charges
Less
UNSCHEDULED PAYMENTS ------------> Premium tax charge
Deferred acquisition
cost tax charge
Premium Sales Charge
POLICY ACCOUNT VALUE
THE SEPARATE ACCOUNT
THE MUTUAL FUNDS Less
(including any investment return): ------------> Advisory fees and
other expenses
Guardian Investor Services Corporation
The Guardian Stock Fund
The Guardian Small Cap Stock Fund
The Guardian VC Asset Allocation Fund
The Guardian VC 500 Index Fund
The Guardian Bond Fund
The Guardian Cash Fund
Guardian Baillie Gifford Limited Less
Baillie Gifford International Fund ------------> Mortality and expense
Baillie Gifford Emerging Markets Fund risk charge
Value Line, Inc.
Value Line Centurion Fund
Value Line Strategic Asset Management
Trust
Gabelli Funds, LLC Less
Gabelli Capital Asset Fund ------------> Monthly deductions:
o Policy charge
Massachusetts Financial Services Company o Administration
MFS Emerging Growth Series charge
MFS Total Return Series o Guaranteed
MFS Growth With Income Series insurance amount
MFS Bond Series charge
MFS New Discovery Series o Charge for the cost
MFS Research Series of insurance
American Century Investment Management, Inc.
American Century VP Value Fund
American Century VP International Fund
A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Global Utility Fund
AIM V.I. Value Fund
Fidelity Management & Research Company
Fidelity VIP III Growth Opportunities
Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP High Income Portfolio
Fidelity VIP II ContraFund(R) Portfolio
Fidelity VIP II Index 500 Portfolio
Janus Capital Corporation
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
FIXED-RATE OPTION LOAN COLLATERAL ACCOUNT
(plus interest credited) (plus interest credited)
Less
---------------------------> Transaction deductions
CASH SURRENDER VALUE o Surrender charge
o Partial withdrawal
charge
o Premium skip option
deduction
Less
---------------------------> Policy debt
NET CASH SURRENDER VALUE
- --------------------------------------------------------------------------------
(1) This diagram excludes the unscheduled payment handling fee and transfer
charge which are 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.
ISSUING THE POLICY
A Park Avenue Life insurance policy must have a face amount of at least
$100,000. To issue a policy:
o the insured must be age 80 or under and meet our insurance requirements,
and
o you must live in a state or jurisdiction in which we offer the policy.
If you already own certain fixed-benefit life insurance policies issued by us or
by Guardian Life, you may be able to buy a Park Avenue 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.
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.
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ABOUT THE POLICY PROSPECTUS 13
-------------
<PAGE>
The Policyowner
- --------------------------------------------------------------------------------
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured.
THE POLICYOWNER
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured. While the insured is living, only the
policyowner named in our records has the right to exercise rights granted by the
policy unless ownership of the policy has been assigned to someone else. Except
for transfers, all of the policy's joint owners must approve policy transactions
or changes in writing, including assigning ownership of the policy to someone
else. When a joint policyowner dies, we will divide his or her share of the
policy equally among the other policyowners, unless the deceased policyowner has
indicated otherwise.
If you want to change the policyowner, you must request it in writing in a form
acceptable to us. Your request must be signed and dated by all of the
policyowners. The change will be made effective on the date your request was
signed, but will not apply to any payments or actions taken before we receive
your request.
If you are not the insured and die before the insured, your estate (or if there
had been joint owners, the estate of the last surviving joint owner) becomes the
policyowner, unless you have named someone to take over ownership of the policy
(a successor owner). If you are both the policyowner and the insured, a
successor owner may not be named because the policy ends when you die.
The Beneficiary
- --------------------------------------------------------------------------------
The beneficiary is the person you name to receive the proceeds when the insured
dies.
THE BENEFICIARY
The beneficiary is the person you name to receive the proceeds when the insured
dies. You can change the beneficiary until the insured dies. Also, you may name
a 'contingent' beneficiary, who will receive the proceeds if the first
beneficiary dies before the insured, or a second or 'concurrent' beneficiary,
who will receive a portion of the proceeds when the insured dies. The
beneficiary must live longer than the insured to qualify as a beneficiary and
has no rights under the policy until the insured dies. If the insured outlives
all of the beneficiaries named in the policy, then the policyowner or the
policyowner's estate becomes the beneficiary.
If you want to change the beneficiary, you must give us your instructions in
writing in a form acceptable to us. Your request must be signed and dated by all
of the policyowners listed in our records. The change is made effective on the
date your request was signed, but will not apply to any payments or actions
taken before we receive your request.
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14 PROSPECTUS ABOUT THE POLICY
- -------------
<PAGE>
- --------------------------------------------------------------------------------
BENEFITS AND POLICY VALUES
- --------------------------------------------------------------------------------
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.
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 your investments perform well or you make unscheduled
payments and the policy account value increases by a sufficient amount, then the
net amount at risk will be lower. When this happens, the amount that we deduct
for the cost of insurance charges each month may also go down.
Option 2
Under Option 2, your death benefit is the greater of:
o the face amount on the date of the insured person's death, plus the amount
by which the policy account value exceeds the benchmark value as of the
date of the insured'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 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.
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.
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BENEFITS AND POLICY VALUES PROSPECTUS 15
-------------
<PAGE>
If you make a partial withdrawal from your policy between the most recent
monthly date and the death of the insured, the death benefit under both options
will be reduced by the amount of your withdrawal plus any applicable charges.
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 sum of your policy account
value, plus any policy premium assessments you've paid covering the period
beyond the policy month in which the insured died (if premiums are not being
waived under a waiver of premium rider), divided by the net single premium per
$1,000 for the insured's attained age, sex and premium class. The net single
premium will be adjusted to the date of the insured's death. A table of net
single premiums is included in your policy.
THE VARIABLE INSURANCE AMOUNT
The variable insurance amount provides a guarantee that your policy's death
benefit will be greater than its current face amount if the investments held in
your policy performed sufficiently well in the last policy year. 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, or you make a partial withdrawal from your policy, the variable
insurance amount will be reduced. 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.
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 approve the
change, 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 you are not paying
your policy premiums under a waiver of premium rider.
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16 PROSPECTUS BENEFITS AND POLICY VALUES
- -------------
<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 valuation 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 and
the daily deductions that are made to cover our mortality and expense risks. We
calculate the unit value for each variable investment option at the end of each
valuation date. Note that you bear all risks associated with the investments in
the Separate Account.
Policy account value
This is the total value of the investments held in your policy. This includes
the value of your allocations to the fixed-rate and variable investment options,
and any policy values that may be in the Loan Collateral Account as collateral
for a policy loan. It is calculated as:
o net premiums that you contribute to your policy; plus or minus
o any profit or loss generated by your policy account value in the variable
investment options; plus
o any interest you earn on allocations to the fixed-rate option or interest
we credit on the Loan Collateral Account; minus
o your total monthly deductions; minus
o any partial withdrawals you've made, minus
o any surrender, partial withdrawal or transfer charges; minus
o any Premium Skip Option deductions.
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BENEFITS AND POLICY VALUES PROSPECTUS 17
-------------
<PAGE>
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 12
years. Net cash surrender value is the amount you would actually receive if you
surrendered your life insurance policy.
Cash surrender value and net cash surrender value
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy has been in effect for 12
years. 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.
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.
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18 PROSPECTUS BENEFITS AND POLICY VALUES
- -------------
<PAGE>
Net investment factor
We calculate the unit value of each variable investment option by multiplying
the option's immediately preceding unit value by the net investment factor for
the valuation period. We calculate the net investment factor as follows on each
valuation period:
o the net asset value of one share of the mutual fund corresponding to the
variable investment option at the close of the current valuation date,
plus
o the amount per share of any dividends or capital gains distributed by the
fund on that valuation date, divided by
o the net asset value of one share of the same mutual fund for the
immediately preceding valuation period, minus
o the total daily charges we deduct from the Separate Account to cover
mortality and expense risks, which will not exceed .00002477% per day or
0.90% annually, and any federal, state or local taxes.
Currently we do not make daily deductions from the separate account to cover
income taxes. The accompanying prospectuses for each fund describe how they
calculate the net asset values of their mutual fund shares.
-------------
BENEFITS AND POLICY VALUES PROSPECTUS 19
-------------
<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 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. 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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20 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
- -------------
<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 70th 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
benchmark value and the 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.
After the guaranteed premium period, if your policy account value is less than
or equal to the 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
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 tabular account
value and the 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.
If your policy account value equals or exceeds the benchmark value we will not
increase your basic scheduled premium for the next policy year. However, if your
policy account value is below the benchmark value after the guaranteed premium
period, your basic scheduled premium will increase for the next policy year.
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 21
-------------
<PAGE>
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 during the first policy year
Insured's age Factor
- --------------------------------------------------------------------------------
0 to 35 17
- --------------------------------------------------------------------------------
36 to 40 16
- --------------------------------------------------------------------------------
41 to 45 15
- --------------------------------------------------------------------------------
46 to 50 14
- --------------------------------------------------------------------------------
51 to 55 13
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56 to 60 12
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61 to 65 11
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66 to 70 10
- --------------------------------------------------------------------------------
71 9
- --------------------------------------------------------------------------------
72 8
- --------------------------------------------------------------------------------
73 7
- --------------------------------------------------------------------------------
74 6
- --------------------------------------------------------------------------------
75 to 80 5
- --------------------------------------------------------------------------------
Unscheduled payments during the first policy year
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.
We have the right to deduct a handling fee of up to $2 from each unscheduled
payment before deducting any other charges and crediting the balance to your
policy. We do not currently charge a handling fee.
You may not make an unscheduled payment:
o if you are not paying your policy premiums 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 after the "free look" period (see Your right to cancel your policy) is
the lesser of $1,000,000, or your basic scheduled premium for that year
multiplied by the factor outlined to the left, based on the insured's age as of
the policy date.
After the first policy anniversary, the maximum that you may contribute in
unscheduled payments is the lesser of $200,000 or:
o in policy years two through five, three times the annual basic scheduled
premium payable in that year,
o in policy years six through ten, two times the annual basic scheduled
premium payable in that year,
o in each year thereafter, the annual basic scheduled premium payable during
the guaranteed premium period.
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22 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
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<PAGE>
We will return the portion of any unscheduled payment that exceeds the maximum
in place at the time of your payment.
Making unscheduled payments may cause your policy to be considered a modified
endowment contract under the Internal Revenue Code. We cannot guarantee that
your policy will never be considered a modified endowment contract, because a
number of policy transactions you may take could cause your policy to be
considered a modified endowment contract under the Internal Revenue Code. See
Tax considerations.
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.
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 net cash surrender value must equal or exceed your policy premium
assessments for that policy year, and
o you cannot be waiving policy premiums 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.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 23
-------------
<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 executive 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
your policy anniversary when your 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 90.5% of any
policy premium assessments. 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.
- -------------
24 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 net 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.
Borrowing to pay premiums
- --------------------------------------------------------------------------------
If you are eligible, you can borrow against your policy's loan value to pay your
policy premiums.
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.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 25
-------------
<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.
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 a policy premium due date that
equals or exceeds the amount that is due, and you have not provided specific
instructions, we will:
o first 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
valuation date we receive it, so long as we receive it at our executive office
by the close of the business day, which is 4:00 p.m. New York time. There are
three exceptions:
o any payments that we receive before your policy has been issued will be
held and credited on the policy 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.
- -------------
26 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
- -------------
<PAGE>
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.
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 equal to or greater
than 10, and the total must equal 100%. You may change how your net premiums are
invested at any time by telling us in writing. The change will be effective on
and after the date we receive your instructions at our executive office, but
will not affect any existing policy values. To change the allocation of these
amounts, you must effect a transfer. See Transfers between the investment
options.
Currently you may invest your net premiums and policy account value in up to 7
different allocation options, although we reserve the right to change this
number from time to time.
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 date your policy was
issued, whichever is later, only $100,000 may be invested in the variable
investment options. Anything over this amount will be treated as an "excess net
premium" and invested in The Guardian Cash Fund. This amount and any earnings
from this money will be reallocated based on your investment instructions at the
end of the later of (i) or (ii). Any amounts you have allocated to the
fixed-rate option or The Guardian Cash Fund will not be counted towards the
$100,000 limit and will be allocated to those options as of the business day we
receive them.
Default
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.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 27
-------------
<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. Your insurance coverage will continue in full, 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.
If we do not receive your payment before the end of the grace period and you
have not qualified for and chosen either the Premium Skip Option or the
Automatic Premium Loan feature, 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 at any time during the grace period. 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 Surrender.
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.
Reinstating your policy
If your policy has lapsed (and you have not surrendered it for its net cash
surrender value) you may reinstate it up to 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 any outstanding policy debt with 8% interest, compounded
annually.
o you must pay us the greater of: all overdue policy premiums with 6%
interest compounded annually; or, 110% of any increase in cash surrender
value of your policy due to your policy's reinstatement, plus any overdue
premiums for extra coverage you purchased through riders or for rating
charges with 6% interest compounded annually.
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.
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28 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
- -------------
<PAGE>
DEDUCTIONS AND CHARGES
There are various deductions and charges required to maintain your Park Avenue
Life Policy. The amount of a charge does not necessarily correspond to our costs
in providing the service or benefits associated with a particular policy. For
example, the sales portion of the premium charges 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.
Amounts deducted as policy premium assesments are not subject to the premium tax
charge, DAC tax or premium sales charge. We deduct this amount from each policy
premium, but not from unscheduled payments.
Premium tax charge
A premium tax charge of 2.5% is deducted from each basic scheduled premium and
any unscheduled payments you make to cover premium taxes imposed by the states
and jurisdictions where the policy is sold. The charge of 2.5% is charged on all
policies regardless of the premium taxes actually charged by the jurisdiction in
which you live. It is an average of the premium taxes we expect to pay for all
policies, which currently range from zero to 4%. We reserve the right to
increase this charge if the average premium tax that we pay increases. This
charge may not be claimed as a tax deduction because the premium taxes are
incurred by GIAC. We do not expect to generate a profit from this charge.
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 29
-------------
<PAGE>
Monthly deductions
- --------------------------------------------------------------------------------
We deduct from the policy account value, on the same date each month, an amount
to cover administration costs and the cost of insuring the insured. These
deductions are made proportionately from your investments in the fixed rate and
variable investment options.
Deferred Acquisition Cost (DAC) tax charge
This 1% charge is deducted from each basic scheduled premium and any unscheduled
payments you make. We believe the charge is reasonable in relation to the
increased federal income tax burden under Section 848 of the Internal Revenue
Code from our receipt of policy premiums and unscheduled payments. We reserve
the right to increase this charge to reflect any changes in our federal income
tax burden. See GIAC's taxes. Like the premium tax charge, DAC tax charges are
not tax deductible.
Premium sales charge
A charge of 6% is deducted from each basic scheduled premium and any unscheduled
payments you make, after the deduction of any handling fees. Except on policies
issued for those insured at ages 78, 79 or 80, this charge will fall to 3% after
you have paid an amount equaling 12 annual basic scheduled premiums in basic
scheduled premiums and unscheduled payments. Policy premium assessments are not
counted towards this total. For policies issued at age 78, this charge will fall
to 3% after you have paid an amount equaling 11 annual basic scheduled premiums
in basic scheduled premiums and unscheduled payments. For policies issued at
ages 79 and 80, the reduction will take effect after you have paid an amount
equaling 10 annual basic scheduled premiums.
This charge covers sales and promotional expenses, such as commissions,
advertising, and the cost of preparing sales literature and prospectuses. We may
also use some of the proceeds from other charges to cover these costs. See
Deductions from the Separate Account and Transaction deductions from the policy
account value.
Handling fee
We have the right to charge you a maximum handling fee of $2 for each
unscheduled payment you make toward your policy. We deduct this fee from your
payment before the premium charges are calculated, and use it to cover the costs
of processing your payment. We do not currently charge this fee.
Monthly deductions from the policy account value
We deduct from the policy account value, on the same date each month, an amount
to cover administration costs and the cost of insuring the insured. These
deductions are made proportionately from your policy account value in the fixed
rate and variable investment options. We do not make these monthly deductions
after the policy anniversary closest to the insured's 100th birthday.
- -------------
30 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
- -------------
<PAGE>
A combination of partial withdrawals, 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
For the first three policy years, you pay a policy charge of $10 per month.
After three years the charge is currently $4 per month and is guaranteed never
to exceed $8 per month.
For the first 12 years of your policy the monthly administration charge is based
on the insured's age when the policy started, and is a set rate of no more than
$0.04 for every $1,000 of your policy's face amount. This rate applies to
policies issued to insureds between the ages of 35 to 80 years. Charges are
lower if the insured person is younger than 35 when the policy takes effect.
After the 12th year, the administration charge is $0.015 per $1,000 of your
policy's face amount. You will find the actual dollar amount of this charge in
your policy.
These charges compensate us for underwriting, issuing and maintaining your
policy. We do not expect to generate a profit from these charges.
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.
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PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 31
-------------
<PAGE>
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.
Cost of Insurance charge
This charge is based on our cost of insurance rates for insured people of the
same age, sex 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. 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. The cost of insurance
rates for non-smokers are lower than the rates for smokers at most attained
ages. The cost of insurance rate generally increases as the insured ages. 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 attained
age, sex and premium class. We will increase this charge when we expect:
o a higher number of deaths among people in a certain group,
o higher expenses or federal income taxes,
o a higher number of policies that are allowed to lapse by their
policyowners, or
o lower earnings in our general account.
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, and therefore will not
affect your policy's net amount at risk.
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32 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
- -------------
<PAGE>
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 charges
During the first 12 years of your policy, you pay a surrender charge if you:
o surrender your policy
o reduce the face amount either by asking us to reduce it or through a
partial withdrawal
o let your policy lapse.
The amount of your surrender charges depends on the policy year in which the
event occurs. They consist of a deferred administrative charge and a deferred
sales charge. The deferred administrative charge covers costs which are not
recovered through monthly policy and administration charges, such as the costs
of processing applications, conducting medical examinations, determining
insurability and establishing records. The charge is $4.80 per $1000 of your
policy's face amount, declining to zero after the 12th policy year for insureds
between ages 35 and 80 when the policy is issued. This charge is generally lower
for those under age 35 when the policy begins.
The deferred sales charge covers costs which are not recovered through the
premium sales charge, such as the expenses related to the sale of Park Avenue
Life policies. For policies where the insured is 78 or younger, the deferred
sales charge is the lesser of:
o 36% of the annual basic scheduled premium payable in the first policy
year, minus the sum of 3% of all basic scheduled premiums and unscheduled
payments made up to the date that the deferred sales charge is incurred,
plus any sales charges deducted for earlier reductions in your policy's
face amount, or
o the percentage of the annual basic scheduled premium, as outlined in the
chart below, for the policy year in which the charge is applied:
Policy year
- --------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9 10 11 12 13+
- --------------------------------------------------------------------------------
36% 33% 30% 27% 24% 21% 18% 15% 12% 9% 6% 3% 0
- --------------------------------------------------------------------------------
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PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 33
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<PAGE>
For policies where the insured is 78, 79 or 80 at issue, the deferred sales
charge is calculated in a similar way, but declines to zero after 11 years for
age 78 and 10 years for ages 79 and 80, because the initial percentage used in
the calculations is 33% for age 78 and 30% for ages 79 and 80.
We prorate the surrender charges in connection with a face amount decrease by
multiplying the surrender charges by the following fraction to reduce the
charges payable:
amount of decrease
--------------------------------
face amount just before decrease
We deduct the adjusted surrender charge from the unloaned policy account value,
which is your policy account value minus any policy debt. After we deduct any
applicable surrender charge, a policy's net cash surrender value may be zero,
particularly in the early policy years.
Together, the premium sales charge and the deferred sales charge form Park
Avenue Life's total sales load. The SEC imposes limits on the total sales load
that can be collected in the first two years of a policy if the policy lapses or
is surrendered. Accordingly, the maximum sales load that you will pay during the
first two policy years is:
o 30% of payments made in the first year that do not exceed one annual basic
scheduled premium, plus
o 10% of payments made during the second policy year that do not exceed one
annual basic scheduled premium, plus
o 9% of all unscheduled payments made in the first two policy years.
The total sales charge that you pay over the life of your policy will not exceed
9% of the total basic scheduled premiums payable over the shorter of 20 years or
the insured's anticipated life expectancy. Because you can pay more than your
policy's basic scheduled premiums by making unscheduled payments, the period of
time in which the maximum sales load is reached may be shorter than outlined
above.
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34 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
- -------------
<PAGE>
Partial withdrawal charge
If you make a partial withdrawal, we will charge you $25 or 2% of the amount of
your withdrawal, whichever is lower, in addition to any surrender charges that
may apply because the partial withdrawal reduces the face amount. We will deduct
this charge, as well as the amount of your withdrawal, proportionately from your
unloaned policy account value. This charge is to recover our processing costs.
Premium skip option deduction
If you skip a premium under the Premium Skip Option, we will deduct 90.5% of the
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.
We will not deduct a transfer charge when:
o we transfer any excess net premiums and related earnings out of The
Guardian Cash Fund (see How your premiums are allocated)
o you make multiple transfers under your policy's dollar cost averaging
feature
o you transfer amounts as part of taking or repaying a policy loan, or
o you transfer amounts out of a variable investment option because the
investment policies of the corresponding mutual fund have materially
changed.
We do not currently deduct transfer charges.
Deductions from the Separate Account
Mortality and Expense Risk charge
We will deduct a daily charge, based on an annual rate of 0.60% of the average
daily net assets of the variable investment options, to cover the mortality and
expense risks that we assume for Park Avenue Life policies. This charge will
never be more than 0.90%.It covers the risk that the insureds under Park Avenue
Life policies may not live as long as we estimated when we issued the policy,
and that our administrative expenses may also be higher than we estimated. If
the amount we collect is higher than our expenses, we may generate a profit on
this charge. We may use any profit to cover the cost of selling Park Avenue Life
policies.
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PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 35
-------------
<PAGE>
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. Except for the charge for DAC taxes, which is deducted from your
policy premiums and any unscheduled payments, 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 operational 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.
- -------------
36 PROSPECTUS PREMIUMS, DEDUCTIONS AND CHARGES
- -------------
<PAGE>
Fees and expenses for mutual funds
<TABLE>
<CAPTION>
Other Total
expenses expenses
(after any (after any
applicable waivers applicable waivers
Advisory and expense and expense
Fund name fee reimbursements) reimbursements)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guardian Stock Fund 0.50% 0.02% 0.52%
- -------------------------------------------------------------------------------------------------
Guardian Small Cap Stock Fund 0.75% 0.08% 0.83%
- -------------------------------------------------------------------------------------------------
Guardian Bond Fund 0.50% 0.05% 0.55%
- -------------------------------------------------------------------------------------------------
Guardian Cash Fund 0.50% 0.03% 0.53%
- -------------------------------------------------------------------------------------------------
Guardian VC 500 Index Fund(1) 0.25% 0.03% 0.28%
- -------------------------------------------------------------------------------------------------
Guardian VC Asset Allocation Fund(1) 0.50% 0.17% 0.67%
- -------------------------------------------------------------------------------------------------
Baillie Gifford International Fund 0.80% 0.16% 0.96%
- -------------------------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund 1.00% 0.44% 1.44%
- -------------------------------------------------------------------------------------------------
Value Line Centurion Fund(1) 0.50% 0.09% 0.59%
- -------------------------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust(1) 0.50% 0.08% 0.58%
- -------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund 1.00% 0.08% 1.08%
- -------------------------------------------------------------------------------------------------
MFS Emerging Growth Series 0.75% 0.09% 0.84%
- -------------------------------------------------------------------------------------------------
MFS Total Return Series(1) 0.75% 0.15% 0.90%
- -------------------------------------------------------------------------------------------------
MFS Growth With Income Series(1) 0.75% 0.13% 0.88%
- -------------------------------------------------------------------------------------------------
MFS Bond Series(1) 0.60% 0.40% 1.01%
- -------------------------------------------------------------------------------------------------
MFS New Discovery Series(1) 0.90% 0.27% 1.17%
- -------------------------------------------------------------------------------------------------
MFS Research Series(1) 0.75% 0.11% 0.86%
- -------------------------------------------------------------------------------------------------
American Century VP Value Fund(1) 1.00% -- 1.00%
- -------------------------------------------------------------------------------------------------
American Century VP
International Fund(1) 1.34% -- 1.34%
- -------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62% 0.11% 0.73%
- -------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund 0.65% 0.49% 1.14%
- -------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61% 0.15% 0.76%
- -------------------------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio(1) 0.58% 0.10% 0.68%
- -------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income
Portfolio(1) 0.48% 0.08% 0.56%
- -------------------------------------------------------------------------------------------------
Fidelity VIP High Income
Portfolio(1) 0.58% 0.11% 0.69%
- -------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund (R)
Portfolio 0.58% 0.07% 0.65%
- -------------------------------------------------------------------------------------------------
Fidelity VIP II Index
500 Portfolio(1) 0.24% 0.04% 0.28%
- -------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth
Portfolio(1) 0.65% 0.02% 0.67%
- -------------------------------------------------------------------------------------------------
Janus Aspen Capital Appreciation
Portfolio(1) 0.65% 0.04% 0.69%
- -------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio(1) 0.65% 0.02% 0.67%
- -------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth
Portfolio(1) 0.65% 0.05% 0.70%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) See Notes to fees and expense table
-------------
PREMIUMS, DEDUCTIONS AND CHARGES PROSPECTUS 37
-------------
<PAGE>
Notes to fees and expense table
Guardian VC Asset Allocation Fund. Expenses do not include expenses of the
underlying funds in which the Asset Allocation Fund invests its assets.
Including the expense of the underlying funds, the Fund's total expenses would
be 0.98%.
The Guardian Bond Fund, Inc. Expenses do not include interest expense. If
interest expense were included, total expenses would be 0.57%.
The Guardian VC 500 Index Fund. Expenses are based upon expenses for the fiscal
year ended December 31, 1999, restated to reflect a reduction in the management
fee for the Fund. Expenses for the year ended December 31, 1999 were 0.29% after
applicable waivers and expense reimbursements, and 0.36% before applicable
waivers and expense reimbursements.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund. Total
expenses have been grossed up to include custody credit arrangements. However,
the credit received does not affect the funds' total expenses.
MFS Emerging Growth Series, MFS Total Return Series, MFS New Discovery Series,
MFS Research Series and MFS Bond Series and MFS Growth With Income Series. All
of the MFS funds have expense offset arrangements which reduce their custodian
fees based upon the amount of cash maintained by each fund with its custodian.
The "Tota1 expenses" in the table do not take into account this expense
reduction and are therefore higher than the actual expenses of each fund.
The expenses shown for MFS New Discovery Series reflect an agreement by the
Fund's adviser to bear expenses, subject to reimbursement by the Fund, such that
the Fund's "Other expenses" will not exceed 0.25% of the Fund's average daily
net assets during 1999. Reimbursement by the Fund will be accomplished by the
payment of an expense reimbursement fee by the Fund to the adviser, subject to
the maximum 0.25% described above. Effective May 1, 2000, the adviser has
contractually agreed, subject to reimbursement, to bear expenses for the New
Discovery Series such that the New Discovery Series' "Other expenses" (after
taking into effect expense offset arrangements referred to above) will not
exceed 0.15%. This arrangement will continue until at least May 1, 2001, unless
changed with the consent of the board of trustees which oversees the Series.
Subject to reimbursement by the Series, the adviser has voluntarily agreed,
under a temporary expense reimbursement agreement, to pay all of its operating
expenses exclusive of the management fee. In consideration, the Series pays the
adviser a fee not greater than 0.40% of average daily net assets. To the extent
that actual expenses were over this limitation the total expenses for the year
ended December 31, 1999 would have been 1.06% for the Bond Series. Although the
MFS Bond series has an expense offset arrangement which reduces its custodian
fee based upon the amount of cash maintained by the series with its custodian,
the series expenses are calculated without reduction for this expense offset
arrangement pursuant to SEC requirements. Thus the total expense for the Bond
Series are shown as 1.01%.
Effective May 1, 2000, the adviser has contractually agreed, subject to
reimbursement, to bear expenses for the Bond Series such that the Bond Series'
"Other expenses" (after taking into effect expense offset arrangements referred
to above) will not exceed 0.15%. This arrangement will continue until at least
May 1, 2001, unless changed with the consent of the board of trustees which
oversees the Series.
Please see the Fund's prospectus for a complete explanation of the Fund's fees
and expenses.
Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP II Index 500 Portfolio, and Fidelity VIP II Contrafund
Portfolio. A portion of the brokerage commissions that certain funds pay was
used to reduce fund expenses. In addition, through arrangements with certain
funds, or FMR on behalf of certain funds, custodian credits realized as a
result of uninvested cash balances were used to reduce a portion of each
applicable fund's expenses. Without these reductions, the total operating
expenses presented in the table would have been 0.57% for Equity-Income
Portfolio, 0.67% for Contrafund Portfolio, and 0.69% for Growth Opportunities
Portfolio.
FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during the
period. Without this reimbursement, the Portfolios' management fee, other
expenses and total expenses would have been 0.24%, 0.10%, 0.34%.
Janus Aspen Aggressive Growth Portfolio, Janus Aspen Capital Appreciation
Portfolio, Janus Aspen Growth Portfolio, and Janus Aspen Worldwide Growth
Portfolio. Expenses are based upon expenses for the fiscal year ended December
31, 1999, restated to reflect a reduction in the management fee for these
Portfolios. All expenses are shown without the effect of expense offset
arrangements.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund. The
operational expenses for the Value Line Strategic Asset Management Trust and
Value Line Centurion Fund reflect expense reimbursements paid by those funds to
us for certain administrative and shareholder servicing expenses that we incur
on their behalf. For the year ended December 31, 1999, we were reimbursed
$857,868 by Value Line Strategic Asset Management Trust, and $586,401 by Value
Line Centurion Fund.
We have also entered into agreements with certain fund advisers under which we
will be reimbursed for certain administrative distribution or other expenses
that we incur as a result of offering certain funds, including the MFS, AIM,
Fidelity and Janus funds, to our policyowners. The amount of compensation may be
based on assets of the fund attributable to policies we issue and may vary from
adviser to adviser.
-------------
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, accumulated
charges for mortality and expense risks or the investment results attributable
to GIAC's retained assets. Because such retained assets do not support policy
account values, GIAC may transfer them from the Separate Account to its general
account.
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>
Summary of fund objectives and policies
<TABLE>
<CAPTION>
Fund Investment objective Typical investments
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Guardian Stock Fund Long-term growth of capital U.S. common stocks
- -----------------------------------------------------------------------------------------------------------------------------------
Guardian VC Asset Allocation Fund Long-term total investment Shares of the Guardian
return consistent with Stock Fund, the Guardian
moderate investment risk Bond Fund, and the
Guardian Cash Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Guardian VC 500 Index Fund Seeks to match the Common Stocks of companies
investment performance of the in the S&P Index, which
Standard & Poor's 500 emphasizes large U.S.
Corporate Stock Price Index Companies
("the S&P Index")
- -----------------------------------------------------------------------------------------------------------------------------------
Guardian Small Cap Stock Fund Long-term growth of capital U.S. common stocks of companies
with small market capitalization
- -----------------------------------------------------------------------------------------------------------------------------------
Guardian Bond Fund Maximum income without Investment grade debt obligations
undue risk of principal
- -----------------------------------------------------------------------------------------------------------------------------------
Guardian Cash Fund High level of current income; Money market instruments
preservation of capital
- -----------------------------------------------------------------------------------------------------------------------------------
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 by the Value Line ranking system)
- -----------------------------------------------------------------------------------------------------------------------------------
Value Line Strategic Asset High total investment return U.S. common stocks (with selections on rankings
Management Trust consistent with reasonable risk by the Value Line ranking system), bonds and
money market instruments
- -----------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund Growth of capital; current income U.S. common stocks
as a secondary objective and convertible securities
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series Long-term growth of capital U.S. common stocks of emerging
growth companies
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series Above-average income Equity securities and non-convertible
(compared to a portfolio invested fixed income securities
entirely in equity securities)
consistent with prudent employment
of capital, and secondarily to
provide a reasonable opportunity
for growth of capital and income
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Growth With Income Series Reasonable current income Equity securities issued by
and long-term growth of capital U.S. and foreign companies
and income
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------
42 PROSPECTUS ALLOCATION OPTIONS
- -------------
<PAGE>
<TABLE>
<CAPTION>
Fund Investment objective Typical investments
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
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 believed to possess
and future income better than average prospects for long-term growth.
- -----------------------------------------------------------------------------------------------------------------------------------
MFS Bond Series As high a level of current income Convertible and non-convertible debt securities and
as is believed consistent with preferred stocks; U.S. government securities;
prudent investment risk and mortgage-backed and asset-backed securities; commercial
secondarily to protect paper; repurchase agreements; derivative securities;
shareholders' capital foreign securities; cash or cash equivalents
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Value Fund Long-term capital growth Equity securities of
with income as a well-established intermediate-to-large
secondary objective companies whose securities are
believed to be undervalued
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP International Capital growth International common stocks
Fund with potential for appreciation
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital through Common stocks of medium and
Appreciation Fund investments in common stocks small-sized growth companies
with emphasis on medium and
small-sized growth companies
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund High current income; growth Common and preferred
of capital as a secondary stocks of domestic or
objective foreign public utilities
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of capital Equity securities judged by the
by investing primarily in fund's adviser to be undervalued.
undervalued equity securities
with income as a secondary
objective
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Capital growth Common stocks and convertibles
Opportunities Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Long-term capital U.S. and foreign common
Contrafund Portfolio appreciation stocks of companies
believed to be undervalued
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Reasonable income with capital Income-producing equity securities
Portfolio appreciation as a secondary
objective
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio High level of current income High-yielding debt securities with an
emphasis on lower-quality securities
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio Total return that corresponds Equity securities of companies
to that of the Standard & Poor's that compose the Standard & Poor's
500 Index 500 and in other instruments that
are based on the value of the Index
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Long-term growth of capital Equity securities of medium-sized companies
Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Capital Appreciation Long-term growth of capital Equity securities of companies of any size;
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 Growth Portfolio Long-term growth of capital Common stocks of foreign and U.S. issuers; usually
in a manner consistent with invests in at least five countries, including the U.S.
preservation of capital
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-------------
ALLOCATION OPTIONS PROSPECTUS 43
-------------
<PAGE>
Total returns do not reflect deductions
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums and unscheduled payments, monthly deductions,
transaction deductions or deductions from the Separate Account. Including the
effects of these deductions reduces returns. See Special terms used in this
prospectus and Deductions and charges for additional information.
Investment performance of the Funds
The table below shows the average annual total returns for the mutual funds for
years ended December 31, 1999. The performance figures reflect the deduction of
fund investment advisory fees and operating expenses, and assume that any
dividends and capital gains are reinvested in the fund. These figures do not
reflect how the funds' investment performance will affect the value of your
policy, because they do not take into account the insurance and other charges we
deduct from your policy. If these charges were taken into account, total returns
for each fund would be lower. Also, past returns should not be used to predict
future performance. Total returns for The Guardian Cash Fund are not presented
here.
Years ended December 31, 1999
----------------------------------
10 Years or
Fund name since inception,
and inception date 1 Year 5 Years if less
- -------------------------------------------------------------------------------
The Guardian Stock Fund (1)
(4/13/83) 31.17% 29.48% 20.04%
- -------------------------------------------------------------------------------
The Guardian VC 500 Index Fund
9/13/99 N/A N/A 6.38% *
- -------------------------------------------------------------------------------
The Guardian Small Cap
Stock Fund
(7/16/97) 35.04% N/A 16.25% *
- -------------------------------------------------------------------------------
The Guardian Bond Fund (1)
(5/1/83) -0.84% 7.16% 7.27%
- -------------------------------------------------------------------------------
The Guardian VC Asset Allocation Fund
(9/13/99) N/A N/A 8.67% *
- -------------------------------------------------------------------------------
Baillie Gifford
International Fund
(2/8/91) 39.11% 19.35% 16.01% *
- -------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund
(10/17/94) 72.30% 9.76% 6.71% *
- -------------------------------------------------------------------------------
Value Line Centurion Fund
(11/15/83) 28.23% 26.67% 19.48%
- -------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
(10/1/87) 24.32% 22.24% 16.94%
- -------------------------------------------------------------------------------
Gabelli Capital Asset Fund (2)
(5/1/95) 19.81% N/A 19.49% *
- -------------------------------------------------------------------------------
AIM V.I. Capital
Appreciation Fund (3)
(5/5/93) 44.61% 25.59% 22.33% *
- -------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund (3)
(5/2/94) 33.56% 21.87% 18.45% *
- -------------------------------------------------------------------------------
AIM V.I. Value Fund (3)
(5/5/93) 29.90% 27.23% 23.07% *
- --------------------------------------------------------------------------------
- -------------
44 PROSPECTUS ALLOCATION OPTIONS
- -------------
<PAGE>
Years ended December 31, 1999
----------------------------------
10 Years or
Fund name since inception,
and inception date 1 Year 5 Years if less
- -------------------------------------------------------------------------------
Fidelity VIP High Income
Portfolio (4) (9/19/85) 8.25% 10.90% 12.44%
- --------------------------------------------------------------------------------
Fidelity VIP II Index
500 Portfolio (4)
(8/27/92) 20.52% 28.16% 21.07% *
- --------------------------------------------------------------------------------
Fidelity VIP II Contrafund
Portfolio (4)
(1/3/95) 24.25% N/A 27.73% *
- --------------------------------------------------------------------------------
Fidelity VIP Equity-
Income Portfolio (4)
(10/9/86) 6.33% 18.61% 14.49%
- --------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio (4)
(1/3/95) 4.27% N/A 21.51% *
- --------------------------------------------------------------------------------
American Century VP
Value Fund
(5/1/96) -0.85% N/A 11.10% *
- --------------------------------------------------------------------------------
American Century
VP International Fund
(5/1/94) 64.04% 24.28% 20.07% *
- --------------------------------------------------------------------------------
Janus Aspen Aggressive Growth
Portfolio (5)
(9/13/93) 125.40% 36.23% 34.42% *
- --------------------------------------------------------------------------------
Janus Aspen Capital Appreciation
Portfolio (5)
(5/1/97) 67.00% N/A 57.18% *
- --------------------------------------------------------------------------------
Janus Aspen Growth Portfolio (5)
(9/13/93) 43.98% 29.89% 24.28% *
- --------------------------------------------------------------------------------
Janus Aspen Worldwide Growth
Portfolio (5)
(9/13/93) 64.45% 33.60% 29.71% *
- --------------------------------------------------------------------------------
MFS Emerging Growth Series (6)
(7/24/95) 76.71% N/A 36.44% *
- -------------------------------------------------------------------------------
MFS Growth With Income Series (6)
(10/9/95) 6.69% N/A 21.12% *
- -------------------------------------------------------------------------------
MFS New Discovery Series (6)
(5/1/98) 73.41% N/A 40.91% *
- -------------------------------------------------------------------------------
MFS Bond Series (6)
(10/24/95) -1.56% N/A 4.82% *
- -------------------------------------------------------------------------------
MFS Research Series (6)
(7/26/95) 24.05% N/A 22.86% *
- -------------------------------------------------------------------------------
MFS Total Return Series (6)
(1/3/95) 3.08% N/A 15.42% *
- -------------------------------------------------------------------------------
* since inception
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, transaction deductions or
any deductions from the Separate Account. Including the effects of these
deductions reduces returns under the policy. See Special terms used in this
prospectus and Deductions and charges for additional information.
(1) Results for The Guardian Bond Fund and The Guardian Stock Fund reflect
effects of expense reimbursements that occurred during the years ended
December 31, 1984 and 1985. Without these expense reimbursements, results
for these funds would be lower. The inception date for The Guardian Small
Cap Stock Fund is the date of commencement of the public offering of the
fund.
(2) For the period from May 1, 1995 through December 31, 1995, the Manager and
the Adviser of Gabelli Capital Asset Fund absorbed a portion of the fund's
operating expenses. Total returns for this period would have been lower if
these expenses had not been absorbed.
(3) Total returns for AIM V.I. Value Fund, AIM V.I. Capital Appreciation
Fund and AIM V.I. Global Utilities Fund reflect the effects of fee waivers
and/or expense offset arrangements. In the absence of such arrangements
total returns would have been lower.
(4) Total returns for the Fidelity VIP III Growth Opportunities, Fidelity VIP
Equity-Income, Fidelity VIP II Contrafund, Fidelity VIP High Income and
Fidelity VIP II Index 500 Portfolios reflect the reimbursement of certain
fund expenses by the Adviser during certain periods and/or the effects of
varying arrangements with third parties who either paid or reimbursed a
portion of the fund's expenses. In the absence of these arrangements total
returns would have been lower.
(5) Total returns for Janus Aspen Aggressive Growth, Janus Aspen Capital
Appreciation, Janus Aspen Growth and Janus Aspen Worldwide Growth
Portfolios reflect the effects or fee waivers and/or expense offset
arrangements. In the absence of such arrangements total returns would have
been lower.
(6) Total returns for the MFS Growth With Income Series, Emerging Growth
Series, New Discovery Series, Research Series, and Total Return Series
reflect the agreement by the series' Adviser to bear expenses for the
series, subject to reimbursement by the series, such that the operational
expenses shall not exceed, for the Growth With Income, Emerging Growth,
New Discovery Series, Research Series, and Total Return Series, 0.25%, and
for the Bond Series, 0.40% of the average daily net assets of the series
for each fiscal year since inception. In the absence of this agreement,
except where a series is reimbursing its adviser for previous years'
expense payments on its behalf, total returns would be lower.
-------------
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 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.
- -------------
46 PROSPECTUS ALLOCATION OPTIONS
- -------------
<PAGE>
Massachusetts Financial Services Company
MFS Growth With Income Series, MFS Emerging Growth Series, MFS Bond 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.) which is itself an
indirect wholly owned subsidiary of Sun Life Assurance Company of Canada.
American Century Investment Management, Inc.
The American Century VP Value Fund and the American Century VP International
Fund are advised by American Century Investment Management, Inc., American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
A I M Advisors, Inc.
AIM V.I. Value Fund, AIM V.I. Global Utilities Fund and AIM V.I. Capital
Appreciation Fund are advised by A I M Advisors, Inc. (AIM), 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
Fidelity Management & Research Company
The Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP High Income Portfolio, Fidelity VIP II ContraFund
Portfolio and Fidelity VIP II Index 500 Portfolio are advised by Fidelity
Management & Research Company (FMR), 82 Devonshire Street, Boston, Massachusetts
02109.
On behalf of the Fidelity VIP High Income, Fidelity VIP II Contrafund
Portfolio, and Fidelity VIP III Growth Opportunities Portfolios, FMR has
sub-investment advisory agreements with two affiliates, FMR U.K. and FMR Far
East. No separate or additional fee is paid by the portfolios to the
sub-adviser.
Bankers Trust Company (BT) has been appointed sub-investment adviser to the
Fidelity VIP II Index 500 Portfolio. BT, a New York Banking Corporation with
principal offices at 130 Liberty Street, New York, New York 10006, is a wholly
owned subsidiary of Bankers Trust New York Corporation. No separate or
additional fee is paid by the Portfolio to BT.
Janus Capital Corporation
Janus Aspen Growth Portfolio, Janus Aspen Aggressive Growth Portfolio, Janus
Aspen Capital Appreciation Portfolio, and Janus Aspen Worldwide Growth Portfolio
are advised by Janus Capital Corporation, 100 Fillmore Street, Denver 80206
-------------
ALLOCATION OPTIONS PROSPECTUS 47
-------------
<PAGE>
Fixed-rate option
- --------------------------------------------------------------------------------
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
THE FIXED-RATE OPTION
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. You may allocate some or all of your net premiums to the fixed-rate
option, and may transfer some or all of your investments in the variable
investment options into the fixed-rate option. There are restrictions on making
transfers out of the fixed rate option. See Transfers between the investment
options. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
We have not registered the fixed-rate option or our general account as
investment companies, and interests in the fixed-rate option are not registered
under the Securities Act of 1933. The SEC staff does not review the prospectus
disclosure about the fixed-rate option or the general account, but the
information we present may be subject to certain generally applicable provisions
of the federal securities laws regarding the accuracy and completeness of
information appearing in a prospectus.
Amounts in the fixed-rate option
The total amount that you have invested in the fixed-rate option consists of:
o the portion of your net premiums and any loan repayments that you have
allocated to this option, plus
o any amounts that you have transferred to this option from the variable
investment options, plus
o the interest paid on your policy account value in this option, minus
o any deductions or withdrawals from the fixed-rate option, including
applicable charges
You earn interest at a guaranteed rate, from the date of transfer or allocation
until your next policy anniversary, at which time the interest rate for the
total amount you have invested in the fixed-rate option is set for the coming
year. Because different interest rates may be in effect as you make transfers
and contributions throughout the year, your effective interest rate for that
year may be a weighted average of the different rates which apply to the
portions of your policy account value in the fixed-rate option. Interest accrues
daily on the total that you have invested in the fixed-rate option, including
interest you have earned in previous years. The minimum annual interest rate for
the fixed-rate option is 4%. We will tell you of any changes in the current
interest rate for the fixed-rate option as they occur. We are not obliged to pay
more than 4% in interest, although we may choose to do so.
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48 PROSPECTUS ALLOCATION OPTIONS
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<PAGE>
- --------------------------------------------------------------------------------
SPECIAL FEATURES OF YOUR POLICY
- --------------------------------------------------------------------------------
Policy loans
- --------------------------------------------------------------------------------
While the insured is alive, you may borrow all or a portion of the loan value of
your policy, by assigning your policy to us as collateral for your loan.
POLICY LOANS
After the first year of your policy and 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 during the first year of your policy or if your
policy has lapsed and is being continued under the fixed-benefit extended term
insurance policy value option.
The minimum loan amount is $500, unless it is an Automatic Premium Loan.
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.
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SPECIAL FEATURES PROSPECTUS 49
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<PAGE>
Interest on policy loans
- --------------------------------------------------------------------------------
We charge interest at an annual rate of 8% on all outstanding policy debt.
Interest on your policy loan
We charge interest at an annual rate of 8% on all outstanding policy debt.
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.
The investments in the Loan Collateral Account will earn interest at a minimum
annual rate of 6%. Although this means that you are effectively paying a maximum
of 2% interest on your policy loans, you are expected to pay the loan interest
charged, when it is due.
Repaying your policy loan
You may repay all or part of any outstanding policy debt at any time while the
insured is alive and the policy is in force, 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 tax, DAC tax or premium sales charges, so it may be to your advantage,
if you have outstanding loans or interest, to make loan repayments rather than
unscheduled payments.
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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:
o the amount by which your policy debt exceeds the cash surrender value on
the monthly date in question, plus
o 10% of the cash surrender value on that monthly date.
If the insured dies after we have sent this notice, but before the 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 year of your policy, you may request a reduction in its face
amount, which is the guaranteed minimum amount your policy will pay at death or
maturity.
DECREASING THE FACE AMOUNT
After the first year of your policy, you may request a reduction in its face
amount, which is the guaranteed minimum amount your policy will pay at death or
maturity. To do this we require that:
o you make your request in writing and we receive it at our executive office
o the insured is alive when we receive your request
o the reduction is at least $10,000 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, unless the reduction is caused by a partial withdrawal.
We reduce your face amount on the monthly date coinciding with or next following
the date we approve your request. If you reduce the face amount in the first 12
years of your policy, we will deduct a surrender charge from your policy account
value, as described in Transaction deductions.
A partial withdrawal may also result in a reduction in your policy's face
amount. If, as a result of a partial withdrawal, we must reduce your face
amount, we will reduce it by the amount of the partial withdrawal which exceeds
the difference, if positive, between (i) the policy account value, and (ii) the
face amount multiplied by the net single premium on the date of the partial
withdrawal. The face amount will also be reduced by the withdrawal charge and
any applicable surrender charges.
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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, as long as your policy account value is higher than the current
benchmark value. 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
o surrender charges
o policy account value
o your monthly deductions
o the variable insurance amount, and
o any additional rider coverage.
We will send you new policy pages reflecting the changes resulting from your
reduction in the face amount.
Reducing the face amount of your policy may have tax consequences, including
possibly causing it to be considered a modified endowment contract under the
Internal Revenue Code. See Tax considerations.
You cannot increase the face amount of your Park Avenue Life policy.
Partial withdrawals
- --------------------------------------------------------------------------------
After the first year of your policy, you may withdraw part of your policy's net
cash surrender value. The minimum net partial withdrawal is $500.
PARTIAL WITHDRAWALS
After the first year of your policy, you may withdraw part of your policy's net
cash surrender value. You must make your request for withdrawal in writing, and
the insured must be alive when you make the withdrawal. The minimum net partial
withdrawal is $500.
If we approve your request, it will be effective as of the valuation date we
receive it at our executive office. The proceeds will normally be paid within
seven days of the time we receive your request. We will not approve or process a
partial withdrawal if, after all related charges:
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52 PROSPECTUS SPECIAL FEATURES
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<PAGE>
o your cash surrender value would be less than the benchmark value as of the
date of your withdrawal, or
o your policy would have no net cash surrender value.
We will tell you if these conditions apply.
For each partial withdrawal we will charge you $25 or 2% of the amount of your
withdrawal, whichever is lower, in addition to any surrender charges that may
apply. This covers our administrative costs.
We will deduct the amount of your withdrawal and any charges as follows:
o proportionately from the variable investment options in which your policy
is invested
o then, if these amounts are insufficient to meet your withdrawal request,
the remainder of the withdrawal will be deducted from your policy account
value in the fixed-rate option.
In addition to reducing your net cash surrender value, partial withdrawals
reduce the amount of your policy's death benefit on a dollar-for-dollar basis,
as follows:
o under Option 1, each partial withdrawal will typically cause an immediate
equal reduction in the face amount
o under Option 2, the reduction in your death benefit will generally be the
same as the reduction in your policy's net cash surrender value.
The tax consequences of making partial withdrawals are discussed under Tax
considerations.
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SPECIAL FEATURES PROSPECTUS 53
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<PAGE>
Surrendering your policy
- --------------------------------------------------------------------------------
You may surrender your policy for its net cash surrender value while the insured
is alive. Your policy's net cash surrender value will normally be paid within
seven days of the time we receive your request.
SURRENDERING YOUR POLICY
You may surrender your policy for its net cash surrender value while the insured
is alive. We will calculate your policy's net cash surrender value on the
valuation date we receive your written request, which must include your policy,
or an acceptable affidavit confirming that you've lost your policy, at our
executive office. Your policy's net cash surrender value will normally be paid
within seven days of the time we receive your request. Your policy's net cash
surrender value will be calculated as follows:
o your policy account value, including any amount held in the Loan
Collateral Account, minus
o any surrender charge, minus
o any outstanding policy debt, 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
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Preferred Premium Class, Nonsmoker
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Face Amount, $250,000
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Annual Policy Premium, $2,225
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Assuming, 6% hypothetical gross return: (4.56% net return)
(See Appendix A)
--------------------------------------------------------------------------
Policy Account Value $8,410
----------------------------------- -------------------------
Deferred Administrative Charge (800.00)
----------------------------------- -------------------------
Deferred Sales Charge (467.25)
----------------------------------- -------------------------
Policy Debt 0
----------------------------------- -------------------------
Pre-paid Policy Premium Assessments 0
----------------------------------- -------------------------
Net Cash Surrender Value $7,143
The deferred administrative charge and deferred sales charge are surrender
charges, which gradually decline to zero by the end of the 12th policy year. See
Deductions and charges. All insurance coverage will end on the valuation date we
calculate your policy's net cash surrender value. For a discussion of the tax
consequences of surrendering your policy, see Tax considerations.
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54 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 valuation date on which we
receive your instructions, either in writing or by telephone. You can request a
transfer by writing to our executive office or by calling 1-800-935-4128.
Written requests that are received after 4:00 p.m. New York time will be
effective on the next valuation date. Before you can request transfers over the
telephone, you must first send us a written authorization form.
Your policy account value may not be invested in more than seven of our
allocation options at any one time. Each transfer must be for a minimum of $500,
or the total amount you have invested in the option you are transferring funds
out of, whichever is lower. If you make more than twelve transfers within a
policy year, we reserve the right to charge you $25 for each additional
transfer. We also reserve the right to limit you to one transfer every 30 days.
We do not currently charge for additional transfers. There are also restrictions
on making transfers out of the fixed-rate option, which are outlined below.
We will accept transfer instructions by telephone between 9:00 a.m. and 3:30
p.m. New York time on each day that we are open for business. 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
- --------------------------------------------------------------------------------
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. Each transfer
must be for a minimum of $500, or the total amount you have invested in the
option you are transferring funds out of, whichever is lower.
TRANSFERS 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 valuation date we receive your request. We will not honor
requests to transfer investments out of the fixed-rate option that we receive at
any other time of the year.
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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 33 1/3% of your allocation in the fixed-rate option on the policy
anniversary on or immediately preceding the date of transfer, or $2,500,
whichever is higher. If you have less than $2,500 in the fixed-rate option, you
may transfer the entire amount.
Dollar cost averaging
- --------------------------------------------------------------------------------
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.
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, and it must remain in
effect for at least 12 months. Amounts will be transferred automatically on each
monthly date from The Guardian Cash Fund into the variable investment option or
options you have chosen.
Before the program can begin, you must submit an authorization form. Your policy
account value in The Guardian Cash Fund also must equal your monthly transfer
amount multiplied by the number of months you have chosen (for example, $100 per
month x 12 months = $1,200). We will tell you if you have not met this
requirement, and will not begin the program until you have. You can extend the
dollar cost averaging program beyond the initial number of months chosen by
adding to your policy account value in The Guardian Cash Fund.
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56 PROSPECTUS SPECIAL FEATURES
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<PAGE>
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 valuation dates before the next scheduled transfer
o your policy lapses or you surrender it.
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 valuation dates before your policy's next monthly date.
POLICY PROCEEDS
The amount that your beneficiaries will receive upon the death of the insured is
calculated as of the date of the insured's death. It is determined according to
the death benefit option that is in force when the insured dies. See Death
benefit options. Death proceeds are payable when we receive proof that the
insured has died while the policy was in effect. They 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,
plus
o interest earned on the proceeds, as outlined in your policy, from the date
of death to the date the proceeds are paid or applied under a payment
option, 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 the amount that covered the period up to the policy month of the
insured's death.
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SPECIAL FEATURES PROSPECTUS 57
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<PAGE>
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
valuation period during which we receive the necessary instructions, information
or documentation at our executive 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
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 in accordance with state law requirements.
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.
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58 PROSPECTUS SPECIAL FEATURES
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<PAGE>
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.
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, or if we have imposed temporary rating
charges. 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.
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 and
any partial withdrawal charges from the fixed-rate option when Option B is in
force.
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 coverage that you could have bought for the
policy's cash surrender value on the default date, for the attained age, sex and
premium class of the insured.
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SPECIAL FEATURES PROSPECTUS 59
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<PAGE>
To qualify for this option, the insured under your policy must have been in a
standard or better premium class for at least one year from the date your policy
was issued, 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, and any partial
withdrawal or 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.
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.
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
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60 PROSPECTUS SPECIAL FEATURES
- -------------
<PAGE>
Exchanging a policy
- --------------------------------------------------------------------------------
During the first 24 policy months, you may exchange your Park Avenue Life policy
for a fixed-benefit whole life policy issued by us or one of our affiliates,
without having to prove that the insured meets our insurance requirements.
FIXED-BENEFIT INSURANCE DURING THE FIRST 24 MONTHS
During the first 24 policy months, you may exchange your Park Avenue Life policy
for a fixed-benefit whole life policy issued by us or one of our affiliates,
without having to prove that the insured meets our insurance requirements. Under
the new policy, your policy value will be held in the issuer's general account.
Your face amount will be the same as under your Park Avenue Life policy on the
date you make the exchange. 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.
Depending on the amount being applied to the new policy, there may be a cost or
a credit to be paid. The amount being applied to the new policy is calculated as
the greater of:
o the cumulative premiums for your new policy with interest at 6% minus the
cumulative policy premiums for your Park Avenue Life policy with interest
at 6%, or
o the guaranteed cash value of the new policy, minus the cash surrender
value of your Park Avenue Life policy on the exchange date.
If the greater of these two amounts is less than zero, the issuer of the new
policy will pay you an exchange credit. If it is greater than zero, you will
have to pay the issuer of your new policy the exchange cost.
The new policy will be issued and effective either on the date we receive your
written exchange request at our executive office along with your policy, or on
the date that any exchange cost owing is received by the issuer of your new
policy, whichever is later.
If you have waiver of premium or accidental death benefit riders attached to
your Park Avenue Life policy, these can also be transferred to your new policy.
Other rider benefits are available only with the consent of the issuer of your
new policy.
You should consult with legal and tax advisers before exchanging your policy.
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SPECIAL FEATURES PROSPECTUS 61
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<PAGE>
Payment options
- --------------------------------------------------------------------------------
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options specified in the accompanying text.
PAYMENT OPTIONS
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options listed below. You may select a payment option while
the insured is living. If the insured has died and you have not chosen a payment
option, the beneficiaries may choose the payment options, up to one year after
the insured's death. If you are surrendering your policy, you have 60 days after
the proceeds of your policy become payable within which to choose a payment
option. You, or the beneficiaries, may choose to distribute the proceeds under
more than one payment option at a time, but you must distribute at least $5,000
through each option selected. Monthly payments under each option must be at
least $50.
The proceeds of your policy must be paid to a 'natural person'. Payments will
not be made to his or her estate if 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%. We will calculate any additional interest that
is to be paid annually, and add it to our monthly interest payment.
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. We will make annual payments of any additional interest that we owe you.
Under Option 3, we will make monthly payments for a specified number of years.
The amount of the payments will include interest at 3% per year. We will make
annual payments of any additional interest that we owe you.
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62 PROSPECTUS SPECIAL FEATURES
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<PAGE>
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
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To qualify as a life insurance contract and to receive the tax treatment
normally accorded life insurance contracts under Federal tax law, a life
insurance policy must satisfy certain requirements which are set forth in
Section 7702 of the Internal Revenue Code. For example, the underlying
investments must be "adequately diversified" in order for the policy to be
treated as a life insurance contract for Federal income tax purposes. It is
intended that the investment divisions of the Separate Account, through the
mutual funds, will satisfy these diversification requirements.
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.
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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.
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 issued by GIAC or its affiliates during
any calendar year will be treated as one modified endowment contract to
determine the taxable portion of any distribution
o a 10% penalty tax will also apply to any taxable distribution unless it is
made to a taxpayer who is 59 1/2 years of age or older; is attributable
to a disability; or is received as substantially equal periodic payments
made over the life of the taxpayer, or the life of the taxpayer and a
beneficiary.
EXCHANGES
Generally, there are no tax consequences when you exchange one life insurance
policy for another, as long as the same person is being insured. Paying
additional premiums under the new policy may cause it to be treated as a
modified endowment contract. Your policy may also lose any "grandfathering"
privilege, where you would be exempt from certain legislative or regulatory
changes made after your original policy was issued, if you exchange your policy.
You should consult with a tax adviser if you are considering exchanging any life
insurance policy.
POLICY CHANGES
We will make changes to policies and their riders where necessary to attempt to
ensure that they continue to qualify as life insurance under the Internal
Revenue Code, and policyowners are not considered the direct owners of the
mutual funds held in the Separate Account. Any changes will be made uniformly to
all policies affected. We will provide advance notice in writing of these
changes when required by state insurance regulators.
Federal, state and local governments may, from time to time, introduce new
legislation concerning the taxation of life insurance policies. They can also
change or adopt new interpretations of existing laws and regulations without
notice. If you have questions about the tax consequences of your Park Avenue
Life Policy, please consult a legal or tax adviser.
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66 PROSPECTUS TAX CONSIDERATIONS
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Transfer taxes
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If you are both the policyowner and the insured, the death benefit under your
Park Avenue 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.
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.
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TAX CONSIDERATION PROSPECTUS 67
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Possible tax law changes
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Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
GIAC'S TAXES
Based on current life insurance tax regulations, GIAC does not pay tax on
investment income or capital gains from the assets held in the Separate Account.
The operations of the Separate Account are reported on our federal income tax
return, which is then consolidated with that of our parent company, Guardian
Life.
We currently charge a 1% federal tax charge on all basic scheduled premiums and
any unscheduled payments you make. This covers our increased corporate income
tax burden under Section 848 of the Internal Revenue Code, which requires all
life insurance companies to amortize certain expenses over a 10 year period. See
Deductions from policy premiums and unscheduled payments.
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 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.
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, and
o direct where your net premiums will be invested or make transfers among
the fixed-rate and variable investment options.
VOTING RIGHTS
As explained in The variable investment options, we are the owner of the fund
shares held in the Separate Account. As a result, we have the right to vote at
any meeting of the funds' shareholders.
Where we are required to by law, we will vote fund shares based on the
instructions we receive from Park Avenue 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.
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RIGHTS AND RESPONSIBILITIES PROSPECTUS 69
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If, after careful examination, we reasonably disapprove of a proposed change to
a mutual fund's investment adviser, its advisory contract, or its investment
objectives or policies, we may disregard policyowners' voting instructions, if
the law allows us to do so. If the change affects the investment adviser or
investment policy, we will only exercise this right if we determine in good
faith that the proposed change is contrary to state law or is inappropriate in
view of the fund's investment objective and purpose. If we exercise this right,
we will provide a detailed explanation of our actions in the next semi-annual
report to policyowners.
Certain activities related to the operation of the Separate Account may require
the approval of policyowners. See Rights reserved by GIAC. If a vote is
required, you will be given one vote for every $100 of your policy that is held
in the variable investment options. For any investments that we hold on our own
behalf, we will vote in the same proportion as our policyowners.
You do not have the right to vote on the operations of the fixed-rate option.
Incontestability
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Generally, we cannot challenge your policy once it is in force, or has been
reinstated, for two years, provided you have paid your premiums when they are
due.
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.
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.
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70 PROSPECTUS RIGHTS AND RESPONSIBILITIES
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<PAGE>
Suicide exclusion
If the insured commits suicide within two years of the policy's issue date,
regardless of whether he or she is considered sane at the time, the amount that
we must pay in death benefits will be limited to the greater of i) the net cash
surrender value as of the date of death, or ii):
o the policy premiums paid, plus
o any unscheduled payments made, minus
o any policy debt, minus
o any partial withdrawals and any related charges.
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 latest of:
o 10 days of receiving your policy or
o 45 days of signing Part 1 of your completed policy application, or
o 10 days after the postmarked date on any Notice of Withdrawal Right that
we mail you.
Longer 'free look' periods may apply in some states. Policies issued in these
states will include the applicable 'free look' period. 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. Under
this agreement we paid through GISC a total of $2,603,576 in 1997, $3,193,282 in
1998 and $3,511,369 in 1999 for the sale of products issued by the Separate
Account. GISC is a New York corporation.
Agents and commissions
GIAC agents who are licensed by state insurance authorities to sell variable
life insurance policies must also be registered representatives of GISC, or of
broker-dealer firms which have entered into agreements with GIAC and GISC to
sell Park Avenue Life policies. Our agents receive sales commissions paid out of
our resources, including amounts we collect as premium sales charges and
deferred sales charges. Our agents receive a maximum sales commission of:
o 50% of the policy premium paid for the first policy year, then
o 5% of the policy premiums paid for policy years two through ten, and
o 2% of the policy premiums paid for policy years thereafter
In addition, GIAC pays a commission of:
o 3.5% 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 an agreement with MFS, AIM, American Century 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.
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 anniversary of your
policy
o a summary of any transfers or partial withdrawals, loans or loan
repayments that you have made since your last annual statement
o the total of any outstanding policy debt that you owe us, and
o the interest rate for investments held in the fixed-rate option.
Twice a year we will also send you reports containing the financial statements
of the mutual funds and the 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 from lapsing.
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. 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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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.
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.
FINANCIAL STATEMENTS
The GIAC financial statements contained in this prospectus should only be used
to determine our ability to meet our obligations under the Park Avenue Life
policies, and not as an indication of the investment experience of the Separate
Account.
FINANCIAL AND ACTUARIAL EXPERTS
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76 PROSPECTUS OTHER INFORMATION
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<PAGE>
The consolidated financial statements of GIAC as of December 31, 1999 and
December 31, 1998 and for each of the three years in the period ended 1999 and
financial statements of the Separate Account as of December 31, 1999 and for the
period ended December 31, 1999 and 1998 included in this prospectus have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing. PricewaterhouseCoopers LLP is located at 1177 Avenue of the Americas,
New York, New York 10036.
The actuarial matters contained in this prospectus have been examined by Charles
G. Fisher, FSA, Vice President and Actuary of GIAC. His opinion on actuarial
matters is filed as an exhibit to the registration statement filed with the
Securities and Exchange Commission.
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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).
Name Title Business History
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Joseph A. Caruso Vice President Vice President and Corporate
and Secretary Secretary, The Guardian Life
Insurance Company of America 3/96 -
present; Second Vice President and
Corporate Secretary 1/95 - 2/96;
Vice President and Secretary,
Guardian Investor Services
Corporation; Secretary, Guardian
Asset Management Corporation,
Guardian Baillie Gifford Limited,
Park Avenue Securities LLC and
various mutual funds within the
Guardian Fund Complex.
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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.
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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.
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Charles G. Fisher Vice President Second Vice President and Actuary,
and Actuary The Guardian Life Insurance Company
of America.
- --------------------------------------------------------------------------------
Leo R. Futia Director Retired. Former Chairman of the
Board and Chief Executive Officer,
The Guardian Life Insurance Company
of America; Director 5/70 - present.
Director (Trustee) of Guardian
Investor Services Corporation, Park
Avenue Securities LLC and various
mutual funds within the Guardian
Fund Complex. Director (Trustee) of
various mutual funds sponsored by
Value Line, Inc.
- --------------------------------------------------------------------------------
Peter L. Hutchings Director Executive Vice President and Chief
Financial Officer, The Guardian Life
Insurance Company of America 5/87 -
present. Director of Guardian
Investor Services Corporation, Park
Avenue Securities LLC and Guardian
Asset Management Corporation.
- --------------------------------------------------------------------------------
- -------------
78 PROSPECTUS OTHER INFORMATION
- -------------
<PAGE>
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.
Name Title Business History
- --------------------------------------------------------------------------------
Frank J. Jones Executive Executive Vice President and Chief
Vice President, Investment Officer, The Guardian
Chief Investment Life Insurance Company of America;
Officer, and Director, Guardian Investor Services
Director Corporation, Guardian Baillie
Gifford Limited, and Park Avenue
Securities LLC; Director and
President Guardian Asset Management
Corporation; Executive Vice
President, GIAC Funds, Inc.; Officer
of various mutual funds within the
Guardian Fund Complex.
- --------------------------------------------------------------------------------
Edward K. Kane Executive Executive Vice President, The
Vice President Guardian Life Insurance Company of
and Director America 1/97 - present; Senior Vice
President and General Counsel prior
thereto. Director, Guardian Asset
Management Corporation.
- --------------------------------------------------------------------------------
Bruce C. Long Director and Senior Vice President, The Guardian
Executive Vice Life Insurance Company of America,
President, 9/99-Present; President, New England
Equity Products Annuities, 2/94-6/99.
Director and President, Guardian
Investor Services Corporation;
Director, Guardian Baillie Gifford
Limited.
- --------------------------------------------------------------------------------
Frank L. Pepe Vice President Vice President and Controller,
and Controller Equity Products, The Guardian Life
Insurance 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,
and Counsel The Guardian Life Insurance Company
of America 1/96 - present; Second
Vice President and Equity Counsel
prior thereto. Vice President and
Counsel of Guardian Investor
Services Corporation. Counsel of
Guardian Asset Management
Corporation, Park Avenue Securities
LLC and various mutual funds
within the Guardian Fund Complex.
- --------------------------------------------------------------------------------
Joseph D. Sargent President, President, Chief Executive Officer
Chief Executive and Director, The Guardian Life
Officer and Insurance Company of America 1/96 -
Director present; President prior thereto;
Director 1/93 - present. Chairman of
the Board of Guardian Investor
Services Corporation and 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, The
Guardian Life Insurance Company of
America since 1/57, Park Avenue
Securities LLC and Guardian Investor
Services Corporation.
- --------------------------------------------------------------------------------
-------------
OTHER INFORMATION PROSPECTUS 79
-------------
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL TERMS USED IN THIS PROSPECTUS
- --------------------------------------------------------------------------------
Age
The insured's age on his or her birthday closest to the date the policy takes
effect.
Attained age
The insured's age plus the number of policy years completed since the
policy date.
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 policy had a face amount of $250,000 and premiums were paid annually
o we charged the current cost of insurance charges, and
o the policy account value earned an annual gross return of 6.59% throughout
the guaranteed premium period
After the guaranteed premium period, the benchmark value is the greater of 1)
your tabular account value plus the product of 0.955 and the difference between
the maximum basic scheduled premium and the basic scheduled premium payable
during the guaranteed premium period for the current face amount, and 2) the
amount that
- -------------
80 PROSPECTUS SPECIAL TERMS
- -------------
<PAGE>
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 for the current face amount
until the policy anniversary nearest the insured's 100th birthday
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, and
o the policy account value earned an annual net return of 4% throughout the
life of the policy
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.
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.
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 70th birthday or the 10th policy anniversary.
-------------
SPECIAL TERMS PROSPECTUS 81
-------------
<PAGE>
Internal Revenue Code
The Internal Revenue Code of 1986, as amended, and its related rules and
regulations.
Issue date
The date your policy is issued at GIAC's Executive Office.
Monthly date
The same date in each month as the policy date, or the last day of a month if
that is earlier.
Net amount at risk
The difference between the policy account value and the amount that you would be
paid under the policy's death benefit.
Policy anniversary
The same date each year as the policy date.
Policy date
The date your policy comes into effect. This date is used to measure policy
months, policy years, policy anniversaries, and monthly dates.
Policy debt
All unpaid policy loans, plus the accumulated and unpaid interest on those
loans.
Policy review date
The monthly date before your policy anniversary.
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. 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
o premiums were paid monthly
o the policyowner paid the basic scheduled premium during the guaranteed
premium period and the maximum basic scheduled premium thereafter
o we charged the guaranteed charges beginning on the policy date, and
o the policy account value earned an annual net return of 4% throughout the
life of the policy
- -------------
82 PROSPECTUS SPECIAL TERMS
- -------------
<PAGE>
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.
Valuation date
Any date on which the New York Stock Exchange is open for trading and GIAC is
open for business. Valuations for any date other than a valuation date will be
made on the next valuation date.
Valuation period
The period between two successive valuation dates, beginning after 4 p.m. New
York time on one valuation date, and ending at 4 p.m. New York time on the next
valuation date.
-------------
SPECIAL TERMS PROSPECTUS 83
-------------
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------------------------
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ......................... 1,894,951 99,411 275,660 56,782
Net asset value per share (NAV) ................................... 55.20 11.41 10.00 17.48
------------- ------------- ------------- -------------
Total Assets (Shares x NAV) .................................... $ 104,601,287 $ 1,134,283 $ 2,756,599 $ 992,553
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ............ 439,688 5,827 11,919 4,475
------------- ------------- ------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ........................................... $ 104,161,599 $ 1,128,456 $ 2,744,680 $ 988,078
- ------------------------------------------------------------------------------------------------------------------------------------
============= ============= ============= =============
Number of units outstanding ......................................... 3,886,140 92,085 228,387 76,285
Unit value .......................................................... 26.80 12.25 12.02 12.95
FIFO Cost ........................................................... $ 93,372,066 $ 1,212,303 $ 2,756,599 $ 985,010
<CAPTION>
-------------------------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------------------------
Baillie
Baillie Gifford Guardian
Gifford Emerging Small Cap Value Line
International Markets Stock Centurion
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ......................... 271,429 15,895 207,130 256,081
Net asset value per share (NAV) ................................... 26.78 12.73 17.18 36.09
------------- ------------- ------------- -------------
Total Assets (Shares x NAV) .................................... $ 7,268,866 $ 202,343 $ 3,558,487 $ 9,241,951
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ............ 29,910 713 15,398 42,826
------------- ------------- ------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ........................................... $ 7,238,956 $ 201,630 $ 3,543,089 $ 9,199,125
- ------------------------------------------------------------------------------------------------------------------------------------
============= ============= ============= =============
Number of units outstanding ......................................... 323,132 15,388 275,082 405,089
Unit value .......................................................... 22.40 13.10 12.88 22.71
FIFO Cost ........................................................... $ 5,717,346 $ 147,421 $ 2,593,697 $ 7,318,025
<CAPTION>
------------------------------
INVESTMENT DIVISIONS
------------------------------
Value Line
Strategic
Asset MFS Growth
Management with Income
----------------------------
<S> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ......................... 294,648 93,608
Net asset value per share (NAV) ................................... 29.39 21.31
------------- -------------
Total Assets (Shares x NAV) .................................... $ 8,659,708 $ 1,994,779
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ............ 35,415 8,067
------------- -------------
- ---------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ........................................... $ 8,624,293 $ 1,986,712
- ---------------------------------------------------------------------------------------------------
============= =============
Number of units outstanding ......................................... 401,104 144,482
Unit value .......................................................... 21.50 13.75
FIFO Cost ........................................................... $ 7,147,118 $ 1,852,918
</TABLE>
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- -------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------------------------
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ............................................ $ 369,754 $ 60,839 $ 111,469 $ 1,156
Expenses-- Note 3:
Mortality and expense risk charges .............................. 529,673 5,998 14,620 3,872
------------- ------------- ------------- -------------
Net investment income/(expense) ................................... (159,919) 54,841 96,849 (2,716)
------------- ------------- ------------- -------------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ............... 1,325,605 (4,349) -- 9,887
Reinvested realized gain distributions .......................... 13,654,816 2,663 -- 93,608
------------- ------------- ------------- -------------
Net realized gain/(loss) on investments ........................... 14,980,421 (1,686) -- 103,495
Net change in unrealized appreciation/(depreciation) of investments 8,347,267 (66,810) -- 1,093
------------- ------------- ------------- -------------
Net realized and unrealized gain/(loss) from investments ............ 23,327,688 (68,496) -- 104,588
------------- ------------- ------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations ..... $ 23,167,769 $ (13,655) $ 96,849 $ 101,872
- ------------------------------------------------------------------------------------------------------------------------------------
============= ============= ============= =============
<CAPTION>
--------------------------------------------------------------
INVESTMENT DIVISIONS
--------------------------------------------------------------
Baillie
Baillie Gifford Guardian
Gifford Emerging Small Cap Value Line
International Markets Stock Centurion
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ............................................ $ 23,818 $ -- $ 4,393 $ 20,623
Expenses-- Note 3:
Mortality and expense risk charges .............................. 35,350 681 16,530 51,938
------------- ------------- ------------- -------------
Net investment income/(expense) ................................... (11,532) (681) (12,137) (31,315)
------------- ------------- ------------- -------------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ............... 142,151 5,796 (110,496) 239,620
Reinvested realized gain distributions .......................... 496,655 -- -- 554,526
------------- ------------- ------------- -------------
Net realized gain/(loss) on investments ........................... 638,806 5,796 (110,496) 794,146
Net change in unrealized appreciation/(depreciation) of investments 1,289,281 53,916 1,036,194 1,138,849
------------- ------------- ------------- -------------
Net realized and unrealized gain/(loss) from investments ............ 1,928,087 59,712 925,698 1,932,995
------------- ------------- ------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations ..... $ 1,916,555 $ 59,031 $ 913,561 $ 1,901,680
- ------------------------------------------------------------------------------------------------------------------------------------
============= ============= ============= =============
<CAPTION>
-----------------------------
INVESTMENT DIVISIONS
-----------------------------
Value Line
Strategic
Asset MFS Growth
Management with Income
----------------------------
<S> <C> <C>
Investment Income
Income:
Reinvested dividends ............................................ $ 67,093 $ 3,764
Expenses-- Note 3:
Mortality and expense risk charges .............................. 43,035 8,789
------------- -------------
Net investment income/(expense) ................................... 24,058 (5,025)
------------- -------------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ............... 93,618 29,918
Reinvested realized gain distributions .......................... 346,059 4,518
------------- -------------
Net realized gain/(loss) on investments ........................... 439,677 34,436
Net change in unrealized appreciation/(depreciation) of investments 979,634 69,607
------------- -------------
Net realized and unrealized gain/(loss) from investments ............ 1,419,311 104,043
------------- -------------
- ---------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations ..... $ 1,443,369 $ 99,018
- ---------------------------------------------------------------------------------------------------
============= =============
</TABLE>
See notes to financial statements
- --------------------------------------------------------------------------------
- ------------------
84 & 85 PROSPECTUS FINANCIAL STATEMENTS
- ------------------
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------------------
MFS American
Emerging MFS MFS Century VP
Growth Total Return Bond Value
-------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ................... 41,680 7,831 4,576 10,586
Net asset value per share (NAV) ............................. 37.94 17.75 10.93 5.95
----------- ----------- ----------- -----------
Total Assets (Shares x NAV) .............................. $ 1,581,336 $ 139,002 $ 50,015 $ 62,984
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ...... 5,743 564 290 516
----------- ----------- ----------- -----------
- ----------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ..................................... $ 1,575,593 $ 138,438 $ 49,725 $ 62,468
- ----------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
Number of units outstanding ................................... 72,636 12,311 4,815 6,647
Unit value .................................................... 21.69 11.25 10.33 9.40
FIFO Cost ..................................................... $ 1,034,742 $ 139,903 $ 51,004 $ 66,821
<CAPTION>
---------------------------------------------------------
INVESTMENT DIVISIONS
---------------------------------------------------------
Fidelity
American VIP III Fidelity Fidelity
Century VP Growth VIP Equity- VIP High
International Opportunities Income Income
----------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ................... 52,798 72,671 14,093 11,631
Net asset value per share (NAV) ............................. 12.50 23.15 25.71 11.31
----------- ----------- ----------- -----------
Total Assets (Shares x NAV) .............................. $ 659,971 $ 1,682,328 $ 362,329 $ 131,541
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ...... 2,653 6,026 1,508 1,051
----------- ----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ..................................... $ 657,318 $ 1,676,302 $ 360,821 $ 130,490
- ------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
Number of units outstanding ................................... 38,403 134,893 31,610 13,103
Unit value .................................................... 17.12 12.43 11.41 9.96
FIFO Cost ..................................................... $ 445,157 $ 1,634,482 $ 356,478 $ 129,522
<CAPTION>
---------------------------------------
INVESTMENT DIVISIONS
---------------------------------------
Fidelity AIM V.I.
VIP II Capital AIM V.I.
Index 500 Appreciation Value
---------------------------------------
<S> <C> <C> <C>
Assets:
Shares owned in underlying fund -- Note 1 ................... 24,708 13,073 107,741
Net asset value per share (NAV) ............................. 167.41 35.58 33.50
----------- ----------- -----------
Total Assets (Shares x NAV) .............................. $ 4,136,416 $ 465,144 $ 3,609,316
Liabilities:
Due to The Guardian Insurance & Annuity Company, Inc. ...... 13,575 2,291 10,769
----------- ----------- -----------
- --------------------------------------------------------------------------------------------------------
Net Assets -- Note 4 ..................................... $ 4,122,841 $ 462,853 $ 3,598,547
- --------------------------------------------------------------------------------------------------------
=========== =========== ===========
Number of units outstanding ................................... 281,639 27,760 218,745
Unit value .................................................... 14.64 16.67 16.45
FIFO Cost ..................................................... $ 3,711,599 $ 355,815 $ 3,160,712
</TABLE>
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
<TABLE>
<CAPTION>
------------------------------------------------------
INVESTMENT DIVISIONS
------------------------------------------------------
MFS American
Emerging MFS MFS Century VP
Growth Total Return Bond Value
------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ...................................... $ -- $ 1,578 $ 850 $ 913
Expenses -- Note 3:
Mortality and expense risk charges ........................ 5,295 515 246 276
----------- ----------- ----------- -----------
Net investment income/(expense) ............................. (5,295) 1,063 604 637
----------- ----------- ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ......... 46,138 1,134 31 (9,014)
Reinvested realized gain distributions .................... -- 2,927 64 8,647
----------- ----------- ----------- -----------
Net realized gain/(loss) on investments ..................... 46,138 4,061 95 (367)
Net change in unrealized appreciation/(depreciation)
of investments ............................................ 517,484 (2,372) (1,411) (2,494)
----------- ----------- ----------- -----------
Net realized and unrealized gain/(loss) from investments ...... 563,622 1,689 (1,316) (2,861)
----------- ----------- ----------- -----------
- ----------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 558,327 $ 2,752 $ (712) $ (2,224)
- ----------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
-------------------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------------------
Fidelity
American VIP III Fidelity Fidelity
Century VP Growth VIP Equity- VIP High
International Opportunities Income Income
--------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ...................................... $ -- $ 3,410 $ 1,840 $ 10,494
Expenses -- Note 3:
Mortality and expense risk charges ........................ 2,577 5,596 1,309 746
----------- ----------- ----------- -----------
Net investment income/(expense) ............................. (2,577) (2,186) 531 9,748
----------- ----------- ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ......... 7,075 12,936 3,518 (11,878)
Reinvested realized gain distributions .................... 0 6,375 4,067 392
----------- ----------- ----------- -----------
Net realized gain/(loss) on investments ..................... 7,075 19,311 7,585 (11,486)
Net change in unrealized appreciation/(depreciation)
of investments ............................................ 211,520 23,602 (1,189) 8,124
----------- ----------- ----------- -----------
Net realized and unrealized gain/(loss) from investments ...... 218,595 42,913 6,396 (3,362)
----------- ----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 216,018 $ 40,727 $ 6,927 $ 6,386
- -----------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
---------------------------------------
INVESTMENT DIVISIONS
---------------------------------------
Fidelity AIM V.I.
VIP II Capital AIM V.I.
Index 500 Appreciation Value
---------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ...................................... $ 4,912 $ 277 $ 9,040
Expenses -- Note 3:
Mortality and expense risk charges ........................ 12,947 1,993 10,504
----------- ----------- -----------
Net investment income/(expense) ............................. (8,035) (1,716) (1,464)
----------- ----------- -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ......... 54,936 19,527 31,006
Reinvested realized gain distributions .................... 3,333 8,629 47,273
----------- ----------- -----------
Net realized gain/(loss) on investments ..................... 58,269 28,156 78,279
Net change in unrealized appreciation/(depreciation)
of investments ............................................ 387,799 96,748 436,555
----------- ----------- -----------
Net realized and unrealized gain/(loss) from investments ...... 446,068 124,904 514,834
----------- ----------- -----------
- --------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 438,033 $ 123,188 $ 513,370
- --------------------------------------------------------------------------------------------------------
=========== =========== ===========
</TABLE>
See notes to financial statements
- --------------------------------------------------------------------------------
- ------------------
86 & 87 PROSPECTUS FINANCIAL STATEMENTS
- ------------------
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
-----------------------------------------------
INVESTMENT DIVISIONS
-----------------------------------------------
Guardian Guardian Guardian
Stock Bond Cash
-----------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ 186,840 $ 34,045 $ 80,427
Net realized gain/(loss) from sale of investments ................. 536,650 4,699 --
Reinvested realized gain distributions ............................ 5,820,263 9,949 --
Net change in unrealized appreciation/(depreciation) of investments 1,589,925 (9,988) --
------------- ------------- -------------
Net increase/(decrease) resulting from operations ................. 8,133,678 38,705 80,427
------------- ------------- -------------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 34,613,795 538,047 2,776,530
Transfer on account of other terminations ......................... (1,312,799) (10,800) (32,049)
Transfer of policy loans .......................................... (855,181) (19,668) (183,277)
Transfer of cost of insurance and policy fees -- Note 3 ........... (7,973,104) (102,944) (222,295)
Transfer between investment divisions ............................. (105,592) 82,476 (1,223,730)
Transfers -- other ................................................ 43,938 (172) 537
------------- ------------- -------------
Net increase/(decrease) from policy transactions .................. 24,411,057 486,939 1,115,716
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets .............................. 32,544,735 525,644 1,196,143
Net Assets at December 31, 1997 ................................... 27,668,711 291,269 1,065,699
------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 60,213,446 $ 816,913 $ 2,261,842
- -----------------------------------------------------------------------------------------------------------------------
============= ============= =============
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (159,919) $ 54,841 $ 96,849
Net realized gain/(loss) from sale of investments ................. 1,325,605 (4,349) --
Reinvested realized gain distributions ............................ 13,654,816 2,663 --
Change in unrealized appreciation/(depreciation) of investments ... 8,347,267 (66,810) --
------------- ------------- -------------
Net increase/(decrease) resulting from operations ................. 23,167,769 (13,655) 96,849
------------- ------------- -------------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 40,171,243 564,988 2,218,578
Transfer on account of other terminations ......................... (3,434,504) (36,707) (56,117)
Transfer of policy loans .......................................... (2,780,926) (25,016) (10,943)
Transfer of cost of insurance and policy fees -- Note 3 ........... (10,206,068) (129,534) (324,257)
Transfer between investment divisions ............................. (2,907,439) (49,007) (1,442,011)
Transfers -- other ................................................ (61,922) 474 739
------------- ------------- -------------
Net increase/(decrease) from policy transactions .................. 20,780,384 325,198 385,989
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets .............................. 43,948,153 311,543 482,838
Net Assets at December 31, 1998 ................................... 60,213,446 816,913 2,261,842
------------- ------------- -------------
- -----------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ......................... $ 104,161,599 $ 1,128,456 $ 2,744,680
- -----------------------------------------------------------------------------------------------------------------------
============= ============= =============
<CAPTION>
-----------------------------------------------
INVESTMENT DIVISIONS
-----------------------------------------------
Baillie
Gabelli Baillie Gifford
Capital Gifford Emerging
Asset International Markets
------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (155) $ 615 $ (6)
Net realized gain/(loss) from sale of investments ................. (5,571) 88,794 581
Reinvested realized gain distributions ............................ 13,612 206,536 --
Net change in unrealized appreciation/(depreciation) of investments 6,450 267,513 1,007
------------- ------------- -------------
Net increase/(decrease) resulting from operations ................. 14,336 563,458 1,582
------------- ------------- -------------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 258,656 2,143,109 27,595
Transfer on account of other terminations ......................... (229) (124,051) --
Transfer of policy loans .......................................... (54,075) (49,072) (15,106)
Transfer of cost of insurance and policy fees -- Note 3 ........... (36,899) (495,103) (1,203)
Transfer between investment divisions ............................. 100,671 105,839 6,275
Transfers -- other ................................................ 2,837 8,014 (333)
------------- ------------- -------------
Net increase/(decrease) from policy transactions .................. 270,961 1,588,736 17,228
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets .............................. 285,297 2,152,194 18,810
Net Assets at December 31, 1997 ................................... -- 2,132,879 --
------------- ------------- -------------
- ------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 285,297 $ 4,285,073 $ 18,810
- ------------------------------------------------------------------------------------------------------------------------
============= ============= =============
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (2,716) $ (11,532) $ (681)
Net realized gain/(loss) from sale of investments ................. 9,887 142,151 5,796
Reinvested realized gain distributions ............................ 93,608 496,655 --
Change in unrealized appreciation/(depreciation) of investments ... 1,093 1,289,281 53,916
------------- ------------- -------------
Net increase/(decrease) resulting from operations ................. 101,872 1,916,555 59,031
------------- ------------- -------------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 559,201 2,350,183 62,476
Transfer on account of other terminations ......................... (5,615) (322,891) (178)
Transfer of policy loans .......................................... (17,743) (170,218) (5,752)
Transfer of cost of insurance and policy fees -- Note 3 ........... (123,479) (570,782) (14,180)
Transfer between investment divisions ............................. 188,975 (244,599) 81,037
Transfers -- other ................................................ (430) (4,365) 386
------------- ------------- -------------
Net increase/(decrease) from policy transactions .................. 600,909 1,037,328 123,789
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets .............................. 702,781 2,953,883 182,820
Net Assets at December 31, 1998 ................................... 285,297 4,285,073 18,810
------------- ------------- -------------
- ------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ......................... $ 988,078 $ 7,238,956 $ 201,630
- ------------------------------------------------------------------------------------------------------------------------
============= ============= =============
<CAPTION>
---------------------------------
INVESTMENT DIVISIONS
---------------------------------
Guardian
Small Cap Value Line
Stock Centurion
---------------------------------
<S> <C> <C>
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (4,060) $ (15,517)
Net realized gain/(loss) from sale of investments ................. (14,581) 44,526
Reinvested realized gain distributions ............................ 7,863 285,700
Net change in unrealized appreciation/(depreciation) of investments (69,553) 818,004
------------- -------------
Net increase/(decrease) resulting from operations ................. (80,331) 1,132,713
------------- -------------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 1,490,969 2,588,770
Transfer on account of other terminations ......................... (4,832) (159,004)
Transfer of policy loans .......................................... (4,262) (166,387)
Transfer of cost of insurance and policy fees -- Note 3 ........... (253,132) (625,378)
Transfer between investment divisions ............................. 407,408 14,975
Transfers -- other ................................................ 12,028 13,570
------------- -------------
Net increase/(decrease) from policy transactions .................. 1,648,179 1,666,546
------------- -------------
Total Increase/(Decrease) in Net Assets .............................. 1,567,848 2,799,259
Net Assets at December 31, 1997 ................................... 224,488 3,165,728
------------- -------------
- ---------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 1,792,336 $ 5,964,987
- ---------------------------------------------------------------------------------------------------------
============= =============
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (12,137) $ (31,315)
Net realized gain/(loss) from sale of investments ................. (110,496) 239,620
Reinvested realized gain distributions ............................ -- 554,526
Change in unrealized appreciation/(depreciation) of investments ... 1,036,194 1,138,849
------------- -------------
Net increase/(decrease) resulting from operations ................. 913,561 1,901,680
------------- -------------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 1,522,695 2,926,594
Transfer on account of other terminations ......................... (169,392) (682,439)
Transfer of policy loans .......................................... (21,737) (272,806)
Transfer of cost of insurance and policy fees -- Note 3 ........... (363,566) (758,065)
Transfer between investment divisions ............................. (131,585) 106,401
Transfers -- other ................................................ 777 12,773
------------- -------------
Net increase/(decrease) from policy transactions .................. 837,192 1,332,458
------------- -------------
Total Increase/(Decrease) in Net Assets .............................. 1,750,753 3,234,138
Net Assets at December 31, 1998 ................................... 1,792,336 5,964,987
------------- -------------
- ---------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ......................... $ 3,543,089 $ 9,199,125
- ---------------------------------------------------------------------------------------------------------
============= =============
<CAPTION>
---------------------------------
INVESTMENT DIVISIONS
---------------------------------
Value Line
Strategic
Asset MFS Growth
Management with Income
-------------------------------
<S> <C> <C>
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ 77,238 $ (2,240)
Net realized gain/(loss) from sale of investments ................. 34,594 18,898
Reinvested realized gain distributions ............................ 292,034 --
Net change in unrealized appreciation/(depreciation) of investments 516,114 72,163
------------- -------------
Net increase/(decrease) resulting from operations ................. 919,980 88,821
------------- -------------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 2,416,789 612,543
Transfer on account of other terminations ......................... (128,388) (354)
Transfer of policy loans .......................................... (75,052) (2,197)
Transfer of cost of insurance and policy fees -- Note 3 ........... (541,143) (97,445)
Transfer between investment divisions ............................. (147,784) 135,765
Transfers -- other ................................................ 4,187 5,742
------------- -------------
Net increase/(decrease) from policy transactions .................. 1,528,609 654,054
------------- -------------
Total Increase/(Decrease) in Net Assets .............................. 2,448,589 742,875
Net Assets at December 31, 1997 ................................... 2,541,939 45,558
------------- -------------
- -------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 4,990,528 $ 788,433
- -------------------------------------------------------------------------------------------------------
============= =============
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ 24,058 $ (5,025)
Net realized gain/(loss) from sale of investments ................. 93,618 29,918
Reinvested realized gain distributions ............................ 346,059 4,518
Change in unrealized appreciation/(depreciation) of investments ... 979,634 69,607
------------- -------------
Net increase/(decrease) resulting from operations ................. 1,443,369 99,018
------------- -------------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 2,975,722 1,394,529
Transfer on account of other terminations ......................... (176,858) (21,141)
Transfer of policy loans .......................................... (186,814) (16,235)
Transfer of cost of insurance and policy fees -- Note 3 ........... (741,671) (301,635)
Transfer between investment divisions ............................. 324,318 42,884
Transfers -- other ................................................ (4,301) 859
------------- -------------
Net increase/(decrease) from policy transactions .................. 2,190,396 1,099,261
------------- -------------
Total Increase/(Decrease) in Net Assets .............................. 3,633,765 1,198,279
Net Assets at December 31, 1998 ................................... 4,990,528 788,433
------------- -------------
- -------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999 -- Note 4 ......................... $ 8,624,293 $ 1,986,712
- -------------------------------------------------------------------------------------------------------
============= =============
</TABLE>
See notes to financial statements
- --------------------------------------------------------------------------------
- ------------------
88 & 89 PROSPECTUS FINANCIAL STATEMENTS
- ------------------
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- -------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------
INVESTMENT DIVISIONS
-------------------------------------------------------
MFS American
Emerging MFS MFS Century VP
Growth Total Return Bond Value
-------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (448) $ (49) $ (44) $ (240)
Net realized gain/(loss) from sale of investments ................. (6,069) 104 14 (299)
Reinvested realized gain distributions ............................ 285 -- -- --
Net change in unrealized appreciation/(depreciation) of investments 29,110 1,471 422 (1,343)
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 22,878 1,526 392 (1,882)
----------- ----------- ----------- -----------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 73,952 26,474 17,904 19,991
Transfer on account of other terminations ......................... (3,396) -- -- --
Transfer of policy loans .......................................... (81) -- -- --
Transfer of cost of insurance and policy fees -- Note 3 ........... (13,871) (3,575) (2,913) (3,222)
Transfer between investment divisions ............................. 108,559 20,407 6,895 61,095
Transfers -- other ................................................ (491) (64) 184 96
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 164,672 43,242 22,070 77,960
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 187,550 44,768 22,462 76,078
Net Assets at December 31, 1997 ................................... -- -- -- --
----------- ----------- ----------- -----------
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 187,550 $ 44,768 $ 22,462 $ 76,078
- -------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (5,295) $ 1,063 $ 604 $ 637
Net realized gain/(loss) from sale of investments ................. 46,138 1,134 31 (9,014)
Reinvested realized gain distributions ............................ -- 2,927 64 8,647
Change in unrealized appreciation/(depreciation) of investments ... 517,484 (2,372) (1,411) (2,494)
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 558,327 2,752 (712) (2,224)
----------- ----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 614,914 112,985 33,617 57,899
Transfer on account of other terminations ......................... (17,418) (1,083) (962) (10,430)
Transfer of policy loans .......................................... (32,357) (1,127) -- (3,325)
Transfer of cost of insurance and policy fees -- Note 3 ........... (123,113) (19,249) (4,805) (10,005)
Transfer between investment divisions ............................. 386,324 (587) 142 (44,632)
Transfers -- other ................................................ 1,366 (21) (17) (893)
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 829,716 90,918 27,975 (11,386)
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 1,388,043 93,670 27,263 (13,610)
Net Assets at December 31, 1998 ................................... 187,550 44,768 22,462 76,078
----------- ----------- ----------- -----------
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999-- Note 4 .......................... $ 1,575,593 $ 138,438 $ 49,725 $ 62,468
- -------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
--------------------------------------------------------
INVESTMENT DIVISIONS
--------------------------------------------------------
Fidelity
American VIP III Fidelity Fidelity
Century VP Growth VIP Equity- VIP High
International Opportunities Income Income
--------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (76) $ (430) $ (199) $ (305)
Net realized gain/(loss) from sale of investments ................. (79) 502 (214) (857)
Reinvested realized gain distributions ............................ -- -- -- --
Net change in unrealized appreciation/(depreciation) of investments 3,294 24,244 7,040 (6,105)
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 3,139 24,316 6,627 (7,267)
----------- ----------- ----------- -----------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 64,812 165,731 109,160 75,300
Transfer on account of other terminations ......................... (5) -- -- --
Transfer of policy loans .......................................... (21,697) -- (310) --
Transfer of cost of insurance and policy fees -- Note 3 ........... (4,600) (23,212) (9,674) (8,144)
Transfer between investment divisions ............................. 13,788 148,154 9,125 49,168
Transfers -- other ................................................ 632 1,297 (453) 212
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 52,930 291,970 107,848 116,536
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 56,069 316,286 114,475 109,269
Net Assets at December 31, 1997 ................................... -- -- -- --
----------- ----------- ----------- -----------
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 56,069 $ 316,286 $ 114,475 $ 109,269
- --------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (2,577) $ (2,186) $ 531 $ 9,748
Net realized gain/(loss) from sale of investments ................. 7,075 12,936 3,518 (11,878)
Reinvested realized gain distributions ............................ -- 6,375 4,067 392
Change in unrealized appreciation/(depreciation) of investments ... 211,520 23,602 (1,189) 8,124
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 216,018 40,727 6,927 6,386
----------- ----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 187,691 1,338,771 193,907 90,046
Transfer on account of other terminations ......................... (389) (3,633) (2,488) (564)
Transfer of policy loans .......................................... (2,111) (4,189) (1,718) (2,052)
Transfer of cost of insurance and policy fees -- Note 3 ........... (36,461) (215,706) (37,721) (18,326)
Transfer between investment divisions ............................. 235,492 204,866 87,452 (54,633)
Transfers -- other ................................................ 1,009 (820) (13) 364
----------- ----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 385,231 1,319,289 239,419 14,835
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 601,249 1,360,016 246,346 21,221
Net Assets at December 31, 1998 ................................... 56,069 316,286 114,475 109,269
----------- ----------- ----------- -----------
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999-- Note 4 .......................... $ 657,318 $ 1,676,302 $ 360,821 $ 130,490
- --------------------------------------------------------------------------------------------------------------------------------
=========== =========== =========== ===========
<CAPTION>
---------------------------------------
INVESTMENT DIVISIONS
---------------------------------------
Fidelity AIM V.I.
VIP II Capital AIM V.I.
Index 500 Appreciation Value
---------------------------------------
<S> <C> <C> <C>
- ----------------------------------------
1998 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (628) $ (106) $ 308
Net realized gain/(loss) from sale of investments ................. 1,314 (506) 688
Reinvested realized gain distributions ............................ -- 3,390 5,068
Net change in unrealized appreciation/(depreciation) of investments 37,019 12,582 12,049
----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 37,705 15,360 18,113
----------- ----------- -----------
- ------------------------
1998 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 194,140 118,325 115,212
Transfer on account of other terminations ......................... (747) (6) (214)
Transfer of policy loans .......................................... (16,813) -- (80)
Transfer of cost of insurance and policy fees -- Note 3 ........... (33,332) (5,794) (16,662)
Transfer between investment divisions ............................. 166,538 11,414 14,597
Transfers -- other ................................................ 4,672 (255) (1,155)
----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 314,458 123,684 111,698
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 352,163 139,044 129,811
Net Assets at December 31, 1997 ................................... -- -- --
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1998 ................................... $ 352,163 $ 139,044 $ 129,811
- ---------------------------------------------------------------------------------------------------------------
=========== =========== ===========
- ----------------------------------------
1999 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................................... $ (8,035) $ (1,716) $ (1,464)
Net realized gain/(loss) from sale of investments ................. 54,936 19,527 31,006
Reinvested realized gain distributions ............................ 3,333 8,629 47,273
Change in unrealized appreciation/(depreciation) of investments ... 387,799 96,748 436,555
----------- ----------- -----------
Net increase/(decrease) resulting from operations ................. 438,033 123,188 513,370
----------- ----------- -----------
- ------------------------
1999 Policy Transactions
- ------------------------
Net policy purchase payments ...................................... 2,439,592 151,803 1,539,999
Transfer on account of other terminations ......................... (12,948) (743) (18,182)
Transfer of policy loans .......................................... (24,709) -- 1,007
Transfer of cost of insurance and policy fees -- Note 3 ........... (393,386) (27,896) (229,233)
Transfer between investment divisions ............................. 1,326,464 77,662 1,668,384
Transfers -- other ................................................ (2,368) (205) (6,609)
----------- ----------- -----------
Net increase/(decrease) from policy transactions .................. 3,332,645 200,621 2,955,366
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets .............................. 3,770,678 323,809 3,468,736
Net Assets at December 31, 1998 ................................... 352,163 139,044 129,811
----------- ----------- -----------
- ---------------------------------------------------------------------------------------------------------------
Net Assets at December 31, 1999-- Note 4 .......................... $ 4,122,841 $ 462,853 $ 3,598,547
- ---------------------------------------------------------------------------------------------------------------
=========== =========== ===========
</TABLE>
See notes to financial statements
- --------------------------------------------------------------------------------
- ------------------
90 & 91 PROSPECTUS FINANCIAL STATEMENTS
- ------------------
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- ----------------------
Note 1 -- Organization
- ----------------------
The Guardian Separate Account K (the Account), a unit investment trust
registered under the Investment Company Act of 1940, as amended, was established
by The Guardian Insurance & Annuity Company, Inc. (GIAC) on September 1, 1995
and commenced operations on October 1, 1995. GIAC is a wholly owned subsidiary
of The Guardian Life Insurance Company of America (Guardian). GIAC issues the
annual premium variable life insurance policies offered through the Account.
GIAC provides for variable accumulations and benefits under the policies by
crediting the net premium payments to one or more investment divisions
established within the Account, or to the Fixed Rate Option (FRO), as selected
by the policyowner. Amounts allocated to the FRO are maintained by GIAC in its
general account. The policyowner also has the ability to transfer his or her
policy value among the investment divisions within the Account.
The Account currently comprises twenty-one investment divisions which
invest in shares of the following mutual funds: The Guardian Stock Fund (GSF),
The Guardian Bond Fund, Inc. (GBF), The Guardian Cash Fund, Inc. (GCF), Gabelli
Capital Asset Fund, Baillie Gifford International Fund (BGIF), Baillie Gifford
Emerging Markets Fund (BGEMF), The Guardian Small Cap Stock Fund (GSCF), Value
Line Centurion Fund, Inc., Value Line Strategic Asset Management Trust, MFS
Growth with Income Series, MFS Emerging Growth Series, MFS Total Return Series,
MFS Bond Series, American Century VP Value Fund, American Century VP
International Fund, Fidelity VIP III Growth Opportunities Portfolio, Fidelity
VIP Equity-Income Portfolio, Fidelity VIP High Income Portfolio, Fidelity VIP II
Index 500 Portfolio, AIM V.I. Capital Appreciation Fund, and AIM V.I. Value Fund
(collectively, the Funds and individually, a Fund). However, a policyowner may
only invest in up to seven investment divisions, including the FRO.
GSF, GBF, GCF and GSCF each has an investment advisory agreement with
Guardian Investor Services Corporation, a wholly owned subsidiary of GIAC. BGIF
and BGEMF are managed by Guardian Baillie Gifford Ltd., a joint venture company
formed by GIAC and Baillie Gifford Overseas Ltd.
Under applicable insurance law, the assets and liabilities of the Account
are clearly identified and distinguished from the other assets and liabilities
of GIAC. The assets of the Account will not be charged with any liabilities
arising out of any other business conducted by GIAC, but the obligations of the
Account, including the promise to make benefit payments, are obligations of
GIAC.
The changes in net assets maintained in the Account provide the basis for
the periodic determination of benefits under the policies. The net assets may
not be less than the amount required under state insurance laws to provide for
death benefits (without regard to the minimum death benefit guarantee) and other
policy benefits. Additional assets are held in GIAC's general account to cover
the contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
- -----------------------------------------
Note 2 -- Significant Accounting Policies
- -----------------------------------------
The following is a summary of significant accounting policies of the
Account.
Investments
(a) Net proceeds from the sale of annual premium variable life insurance
policies are invested by the Account's investment divisions in shares of the
corresponding Funds at the net asset value of each Fund's shares. All
distributions made by a Fund are reinvested in shares of the same Fund.
(b) The market value of the investments in the Funds is based on the net
asset value of the respective Funds as of' their close of business on the
valuation date.
(c) Investment transactions are accounted for on the trade date and income
is recorded on the ex-dividend date.
(d) The cost of investments sold is determined on a first in, first out
(FIFO) basis.
- --------------------------------------------------------------------------------
- -------------
92 PROSPECTUS FINANCIAL STATEMENTS
- -------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 (Continued)
Federal Income Taxes
The operations of the Account are part of the operations of GIAC and, as
such, are included in the combined tax return of GIAC. GIAC is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended.
Under current tax law, no federal taxes are payable by GIAC with respect
to the operations of the Account.
- --------------------------------------
Note 3 -- Administrative and Mortality
and Expense Risk Charges
- --------------------------------------
GIAC assumes mortality and expense risk related to the operations of the
Account. To cover these risks, GIAC deducts a daily charge from the net assets
of the policyowner's account which, on an annual basis, is equal to a rate of
.60% of the policy account value. For the year ended December 31, 1999 this
amount was $ 752,490.
Under the terms of the policy, GIAC also deducts certain charges from the
policy account value. These other contractual charges are deducted by redeeming
units of the investment divisions and consist of:
a) a monthly charge for the cost of life insurance, based on the face
value of the policyowner's insurance inforce, as compensation for the
anticipated cost of paying death benefits. For the years ended December 31, 1999
and December 31, 1998, deductions for cost of life insurance amounted to
$9,818,037 and $6,920,312, respectively.
b) policy and administrative fees which vary with the face amount, age of
the insured or the duration of the contract. For the years ended December 31,
1999 and December 31, 1998 these fees amounted to $4,831,100 and $3,553,333,
respectively.
c) an annual state premium tax charge as a percentage of the basic
premium. This rate varies by state of jurisdiction. The annual state premium tax
charge for the year ended December 31, 1999 was $ 1,551,577.
Currently, GIAC makes no charge against the Account for GIAC's federal
income taxes. However, GIAC reserves the right to charge taxes attributable to
the Account in the future.
Under current laws, GIAC may incur state and local taxes in several
states. At present, these taxes are not significant. In the event of a material
change in applicable state or local tax laws, GIAC reserves the right to charge
the Account for such taxes, if any, which are attributable to the Account.
- --------------------------------------
Note 4-- Net Assets, December 31, 1999
- --------------------------------------
At December 31, 1999, net assets of the Account were as follows:
Accumulation of
Variable Life Insurance
Policyowners' Accounts $110,316,570
Owned by GIAC 42,335,444
------------
$152,652,014
============
The amount retained by GIAC in the Account is comprised of amounts
accruing to GIAC from the operations of the Account and retained therein.
Amounts retained by GIAC in the Account may be transferred by GIAC to its
general account.
- --------------------------------------------------------------------------------
-------------
FINANCIAL STATEMENT PROSPECTUS 93
-------------
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 (Continued)
- -----------------------------
Note 5 -- Purchases and Sales
- -----------------------------
During the years ended December 31, 1999 and December 31, 1998, purchases
and sales of shares of the Funds were as follows:
<TABLE>
<CAPTION>
Purchases Purchases Sales Sales
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
The Guardian Stock Fund .............. $40,197,732 $32,802,820 $ 5,716,777 $ 2,176,893
The Guardian Bond Fund, Inc. ......... 552,238 665,277 167,539 130,957
The Guardian Cash Fund, Inc. ......... 3,523,728 3,391,687 3,039,269 2,187,271
Gabelli Capital Asset Fund ........... 816,264 380,959 120,592 95,937
Baillie Gifford International Fund ... 2,323,392 2,354,699 788,593 543,283
Baillie Gifford Emerging Markets Fund 143,195 41,680 19,406 24,426
The Guardian Small Cap Stock Fund .... 1,313,504 1,954,094 478,918 296,386
Value Line Centurion Fund, Inc. ...... 3,024,194 2,479,523 1,151,586 520,585
Value Line Strategic Asset
Management Trust ................... 3,123,122 2,338,163 547,573 423,202
MFS Growth with Income Series ........ 1,467,895 857,518 363,353 203,463
MFS Emerging Growth Series ........... 1,021,280 220,378 191,565 55,421
MFS Total Return Series .............. 130,430 50,152 35,006 6,910
MFS Bond Series ...................... 32,771 22,992 3,882 922
American Century VP Value Fund ....... 94,078 80,227 95,904 2,267
American Century VP International Fund 428,929 88,448 43,698 35,518
Fidelity VIP III Growth Opportunities
Portfolio .......................... 1,458,472 308,523 129,398 16,553
Fidelity VIP Equity Income Portfolio . 289,600 119,735 44,276 11,887
Fidelity VIP High Income Portfolio ... 106,545 123,681 80,823 7,146
Fidelity VIP II Index 500 Portfolio .. 3,678,236 366,042 337,346 51,584
AIM V.I. Capital Appreciation Fund ... 341,453 142,957 131,925 15,691
AIM V.I. Value Fund .................. 3,167,787 131,546 156,107 14,207
----------- ----------- ----------- -----------
Total .............................. $67,234,845 $48,921,101 $13,643,536 $ 6,820,509
----------- ----------- ----------- -----------
</TABLE>
In some instances the calculation of total assets may not agree due to
rounding.
- --------------------------------------------------------------------------------
- -------------
94 PROSPECTUS FINANCIAL STATEMENTS
- -------------
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
and the Contract Owners of The Guardian Separate Account K
In our opinion, the accompanying statement of assets and liabilities and
the related statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the Guardian Stock,
Guardian Bond, Guardian Cash, Gabelli Capital Asset, Baillie Gifford
International, Baillie Gifford Emerging Markets, Guardian Small Cap Stock, Value
Line Centurion, Value Line Strategic Asset Management, MFS Growth with Income,
MFS Emerging Growth, MFS Total Return, MFS Bond, American Century VP Value,
American Century VP International, Fidelity VIP III Growth Opportunities,
Fidelity VIP Equity-Income, Fidelity VIP High Income, Fidelity VIP II Index 500,
AIM V.I. Capital Appreciation and AIM V.I. Value investment divisions
(constituting The Guardian Separate Account K) at December 31, 1999, and the
results of each of their operations for the year then ended and the changes in
each of their net assets for each of the two years then ended, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the management of The Guardian
Insurance & Annuity Company, Inc.; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of shares owned at December 31, 1999 by
correspondence with the transfer agents of the underlying funds, provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 20, 2000
- --------------------------------------------------------------------------------
-------------
FINANCIAL STATEMENTS 95 PROSPECTUS
-------------
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN INSURANCE
& ANNUITY COMPANY, INC.
- --------------------------------------------------------------------------------
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
---------------------
1999 1998
-------- --------
(In millions)
<S> <C> <C>
Assets:
Bonds, available for sale at fair
value (cost $572.7 million; $538.6 million, respectively) ....... $ 554.8 $ 549.0
Affiliated mutual funds ............................................ 78.0 42.9
Joint ventures ..................................................... 0.5 0.4
Policy loans ....................................................... 80.1 72.9
Short-term investments ............................................. 7.1 --
--------- ---------
Total invested assets .............................................. 720.5 665.2
--------- ---------
Cash and cash equivalents .......................................... 63.6 18.5
Deferred acquisition costs ......................................... 357.5 313.6
Deferred software costs ............................................ 11.6 --
Uncollected and unpaid premiums .................................... 3.4 2.1
Amounts receivable from reinsurers ................................. 46.5 42.5
Investment income due and accrued .................................. 9.9 9.4
Other assets ....................................................... 5.1 3.3
Accounts receivable ................................................ 37.5 22.2
Separate account assets ............................................ 11,063.8 8,841.7
--------- ---------
Total Assets ....................................................... $12,319.4 $ 9,918.5
========= =========
Liabilities:
Future policy benefits and other policyholder liabilities .......... $ 547.9 $ 480.0
Due to parent and mutual fund affiliates ........................... 69.6 32.2
Current federal income taxes ....................................... 18.2 25.8
Deferred federal income taxes ...................................... 102.8 98.8
Accrued expenses and other liabilities ............................. 110.0 47.5
Separate account liabilities ....................................... 10,970.4 8,764.8
--------- ---------
Total Liabilities .................................................. 11,818.9 9,449.1
--------- ---------
Stockholder's equity:
Common stock, 1999 - $100 par value, 25,000 shares authorized,
issued and outstanding; 1998 - $100 par value, 20,000 shares
authorized, issued and oustanding ............................... 2.5 2.0
Additional paid-in capital ......................................... 136.9 137.4
Retained earnings .................................................. 347.9 310.6
Accumulated other comprehensive income ............................. 13.2 19.4
--------- ---------
Stockholder's equity ............................................... 500.5 469.4
--------- ---------
Total Liabilities & Stockholder's Equity ........................... $12,319.4 $ 9,918.5
========= =========
</TABLE>
See notes to consolidated financial statements.
- --------------
96 PROSPECTUS FINANCIAL STATEMENTS
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
Revenues:
<S> <C> <C> <C>
Premiums ............................................... $ 12.0 $ 9.1 $ 3.7
Net investment income .................................. 45.4 41.4 38.7
Realized capital (losses) gains on investments ......... (1.7) 2.1 0.9
Income from brokerage operations ....................... 67.1 39.7 31.1
Administrative service fees ............................ 217.1 173.6 130.5
Other income ........................................... 17.5 24.0 20.3
------ ------ ------
Total revenues ......................................... 357.4 289.9 225.2
------ ------ ------
Benefits and other deductions:
Policyholder benefits .................................. 21.2 23.7 20.3
Amortization of deferred policy acquisition costs ...... 67.1 55.3 36.6
Amortization of deferred software costs ................ 1.8 -- --
Other operating costs and expenses ..................... 165.6 105.1 73.3
------ ------ ------
Total benefits and other deductions .................... 255.7 184.1 130.2
------ ------ ------
Income before income taxes ............................. 101.7 105.8 95.0
Federal income taxes:
Current expense ........................................ 12.1 24.4 17.2
Deferred expense ....................................... 12.3 12.0 16.2
------ ------ ------
Total federal income taxes ............................. 24.4 36.4 33.4
------ ------ ------
Net income ............................................. 77.3 69.4 61.6
Other comprehensive income, net of income tax:
Change in unrealized investment (losses) gains ......... (6.2) 3.2 12.6
------ ------ ------
Comprehensive income ................................... $ 71.1 $ 72.6 $ 74.2
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
---------------
FINANCIAL STATEMENTS PROSPECTUS 97
---------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Common stock at par value, beginning of year ........... $ 2.0 $ 2.0 $ 2.0
Increase in par value .................................. 0.5 -- --
------ ------ ------
Common stock at par value, end of year ................. 2.5 2.0 2.0
------ ------ ------
Capital in excess of par value, beginning of year ...... 137.4 137.4 137.4
(Decrease) in capital .................................. (0.5) -- --
------ ------ ------
Capital in excess of par value, end of year ............ 136.9 137.4 137.4
------ ------ ------
Retained earnings, beginning of year ................... 310.6 241.2 179.6
Net income ............................................. 77.3 69.4 61.6
Dividends to parent .................................... (40.0) -- --
------ ------ ------
Retained earnings, end of year ......................... 347.9 310.6 241.2
------ ------ ------
Accumulated comprehensive income,
net of deferred taxes, beginning of year ............ 19.4 16.2 3.6
Change in unrealized investment (losses) gains,
net of deferred taxes ............................... (6.2) 3.2 12.6
------ ------ ------
Accumulated comprehensive income,
net of deferred taxes, end of year .................. 13.2 19.4 16.2
------ ------ ------
Total stockholder's equity, end of year ................ $500.5 $469.4 $396.8
====== ====== ======
</TABLE>
See notes to consolidated financial statements
- --------------
98 PROSPECTUS FINANCIAL STATEMENTS
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1999 1998 1997
------ ------ ------
(In millions)
<S> <C> <C> <C>
Operating activities
Net income .............................................. $ 77.3 $ 69.4 $ 61.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in
Deferred policy acquisition costs .................... (43.9) (46.2) (45.9)
Deferred software costs .............................. (11.6) -- --
Uncollected premiums ................................. (1.3) 2.4 0.5
Amounts receivable from reinsurers ................... (4.0) (13.4) 24.9
Investment income due and accrued .................... (0.5) (0.5) (0.3)
Other assets ......................................... (1.8) 0.1 0.6
Accounts receivable .................................. (15.3) 8.6 (10.4)
Separate accounts, net ............................... (16.5) (14.8) (5.1)
Future policy benefits and policyholder liabilities .. 20.9 21.9 (17.0)
Payable to parent .................................... 10.7 5.7 8.9
Federal income taxes:
Current ............................................ (7.6) 9.1 6.9
Deferred ........................................... 4.0 14.1 19.2
Accrued expenses and other liabilities ............... 62.5 (1.5) (14.0)
Realized losses(gains) on investments ................ 1.7 (2.1) (0.9)
Other, net ........................................... (0.7) 1.0 (3.8)
------ ------ ------
Net cash provided by operating activities .......... 73.9 53.8 25.2
------ ------ ------
Investment activities
Proceeds from investments sold
Bonds ................................................ 142.2 280.9 315.4
Other items, net ..................................... -- -- (1.3)
Investments purchased
Bonds ................................................ (180.1) (331.7) (310.5)
Affiliated mutual funds .............................. (24.6) (3.3) (20.5)
------ ------ ------
Net cash used by investing activities .............. (62.5) (54.1) (16.9)
------ ------ ------
Financing activities
Additions to policyholder contract deposits ............. 107.7 54.8 61.7
Withdrawals from policyholder contract deposits ......... (60.7) (64.4) (61.8)
Dividend to parent ...................................... (13.3) -- --
------ ------ ------
Net cash provided (used) by financing activities ... 33.7 (9.6) (0.1)
------ ------ ------
(Decrease) Increase in cash ................................ 45.1 (9.9) 8.2
Cash and cash equivalents, at beginning of year ............ 18.5 28.4 20.2
------ ------ ------
Cash and cash equivalents, at end of year .................. $ 63.6 $ 18.5 $ 28.4
====== ====== ======
Supplemental disclosure:
Federal income taxes paid ............................... $ 19.7 $ 15.4 $ 10.2
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
---------------
FINANCIAL STATEMENTS PROSPECTUS 99
---------------
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Guardian Insurance & Annuity Company, Inc. (GIAC or the Company) is a
wholly owned subsidiary of The Guardian Life Insurance Company of America (The
Guardian). The Company, domiciled in the state of Delaware, is licensed to
conduct life and health insurance business in all fifty states and the District
of Columbia. The Company's primary business is the sale of variable deferred
annuity contracts and variable and term life insurance policies. For variable
products, other than 401(k) products, contracts are sold by insurance agents who
are licensed by GIAC and are either Registered Representatives of Park Avenue
Securities, LLP (PAS) or of broker dealer firms that have entered into sales
agreements with GIAC. The Company's general agency distribution system is used
for the sale of other products and policies.
PAS, a wholly owned subsidiary of the Company, is a registered broker
dealer under the Securities Exchange Act of 1934. PAS was established as a
broker dealer during 1999 and has assumed the registered representatives
formally affiliated with Guardian Investor Services Corporation (GISC).
GISC, a wholly owned subsidiary of the Company, is a registered broker
dealer under the Securities Exchange Act of 1934 and is a registered investment
advisor under the Investment Adviser's Act of 1940. GISC is the distributor and
underwriter for GIAC's variable products, and is the investment advisor to
certain mutual funds sponsored by GIAC which are investment options for the
variable products.
The Company has established fourteen insurance separate accounts primarily
to support the variable annuity, universal variable life and variable life
insurance products it offers. The majority of the separate accounts are unit
investment trusts registered under the Investment Company Act of 1940. Proceeds
from the sale of variable products are invested through these separate accounts
in certain mutual funds specified by the contractholders. Of these separate
accounts the Company maintains two separate accounts whose sole purpose is to
fund certain employee benefits plans of The Guardian.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Company's consolidated financial statements are
prepared in accordance with accounting principles generally accepted in the
United States (GAAP). All significant intercompany balances and transactions
have been eliminated.
Accounting Changes: In March 1998, the American Institute of Certified
Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", which requires capitalization of external and certain internal
costs incurred to obtain or develop internal-use computer software during the
application development stage. The Company applied the provisions of SOP 98-1
prospectively effective January 1, 1999. The adoption of SOP 98-1 resulted in
$14.9 million of software costs being capitalized. Capitalized internal use
software is amortized on a straight-line basis over the estimated useful life of
the software.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES:
Bonds and common stocks are classified as available for sale and carried
at estimated fair value, with unrealized appreciation or depreciation recorded
net of applicable deferred taxes are included in a separate component of equity,
"Accumulated other comprehensive income". The investment portfolio is reviewed
for investments that may have experienced a decline in value considered to be
other than temporary.
Joint ventures are carried on the equity basis of accounting.
Policy loans are stated at unpaid principal balance. The carrying amount
approximates fair value since loans on policies have no defined maturity date
and reduce the amount payable at death or surrender of the contract.
- --------------
100 PROSPECTUS FINANCIAL STATEMENTS
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Securities purchase under agreements to resell and securities sold under
agreements to repurchase are treated as financing arrangements and are carried
at the amounts at which the securities will be subsequently resold or
reacquired, including accrued interest, as specified in the respective
agreements. The Company's policy is to take possession of securities purchased
under agreements to resell. The market value of securities to be repurchased or
resold is monitored, and additional collateral is requested, where appropriate,
to protect against credit exposure.
Securities repurchase and resale agreements and securities borrowed and
loaned transactions are used to generate net investment income and facilitate
trading activity. These instruments are short-term in nature (usually 30 days or
less) and are collateralized principally by U.S. Government and mortgage-backed
securities. The carrying amounts of these instruments approximate fair value
because of the relatively short period of time between the origination of the
instruments and their expected realization.
Realized investment gains, net are computed using the specific
identification method. Costs of bonds and stocks are adjusted for impairments
considered other than temporary. Allowances for losses on mortgage loans and
real estate are netted against asset categories to which they apply and
provisions for losses on investments are included in "Realized investment gains,
net." Decreases in lower of depreciated cost or fair value less selling costs of
investment real estate held for sale are recorded in "Realized investment gains,
net."
Short-term investments are stated at amortized cost and consist primarily
of investments with maturities as of purchase date of six months or less. Market
values for such investments approximate carrying value.
Cash and cash equivalents include cash on hand and highly liquid debt
instruments purchased with an original maturity of three months or less.
Deferred Policy Acquisition Costs are costs of acquiring new business,
principally commissions, underwriting, agency and policy issue expenses, all of
which vary with and are primarily related to the production of new business, are
deferred. Deferred policy acquisition costs are subject to recoverability
testing at the time of policy issue and loss recognition testing at the end of
each accounting period.
For investment-type products, deferred policy acquisition costs are
amortized over the shorter of the expected average life of the contracts or
thirty years, as a constant percentage of estimated gross profits arising
principally from investment results, mortality and expense margins and surrender
charges based on actual results and anticipated future experience, updated at
the end of each accounting period. The effect on the amortization of deferred
policy acquisition costs of revisions to estimated gross profits is reflected in
earnings in the period such estimated gross profits are revised.
For life insurance products, deferred policy acquisition costs are
amortized in proportion to anticipated premiums. Assumptions as to anticipated
premiums are estimated at the date of policy issue and are consistently applied
during the life of the contracts. Deviations from estimated experience are
reflected in earnings in the period such deviations occur. For these contracts,
the amortization periods generally are for the estimated life of the policy.
Separate account assets and liabilities are reported at market value, and
represent policyholder funds maintained in accounts having specific investment
objectives. The assets of each account are legally segregated and are not
subject to claims that arise out of any other business of the Company.
Investment risks associated with market value changes are generally borne by the
customers, except to the extent of minimum guarantees made by the Company with
respect to certain amounts. The investment results of separate accounts are
reflected in separate account liabilities. The amounts provided by the Company
to establish separate account investment portfolios (seed money) are included in
separate account assets.
Insurance Revenue and Expense Recognition consists of premiums and
benefits. Premiums for term life and certain annuity insurance products are
recognized as revenue when due and collected. The reserve for future policy
benefits has been provided on a net-level premium method based upon estimated
investment yields, mortality, and other assumptions which were appropriate at
the time the policies were issued. Benefits and expenses are associated with
earned premiums so as to result in recognition of profits over the life of the
contract. This association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition costs.
Revenues for variable life and for individual and group variable annuity
products consist of net investment income and cost of insurance, policy
administration and surrender charges that have been earned and assessed against
policyholder account balances during the period. Policy benefits and claims that
are charged to expense include benefits and
---------------
FINANCIAL STATEMENTS PROSPECTUS 101
---------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
claims incurred in the period in excess of related policy account balances,
maintenance costs and interest credited to policyholder account balances. The
policyholder account values represent an accumulation of gross premium payments
plus credited interest less expense and mortality charges and withdrawals.
Income Taxes for the Guardian and its life insurance and non-life
insurance subsidiaries file a consolidated federal income tax return. Current
federal taxes are charged or credited to operations based on amounts estimated
to be payable or recoverable as a result of taxable operations for the current
year. Deferred income tax assets and liabilities are recognized based on the
difference between financial statement carrying amounts and income tax basis of
assets and liabilities using enacted income tax rates and laws.
Reclassifications of certain amounts in prior years have been adjusted to
conform to current year presentation.
NOTE 3 - INVESTMENT SECURITIES
Market values of bonds and common stocks are based on quoted prices as
available. For certain private placement debt securities where quoted market
prices are not available, management estimates fair market value by using
adjusted market prices for like securities.
The cost and estimated market values of investments by major investment
category as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31, 1999
(In millions)
-------------------------------------------------
Gross Gross Estimated
Cost Unrealized Unrealized Market
Basis Gains Losses Value
------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities & obligations of U.S. ....
government corporations and agencies ............ $ 24.5 $ 0.2 $ 0.7 $ 24.0
Obligations of states and political subdivisions .. 30.7 0.1 0.5 30.3
Debt securities issued by foreign governments ..... 3.8 -- 0.1 3.7
Corporate debt securities ......................... 513.7 0.5 17.4 496.8
------- ------- ------- -------
Subtotal ........................................ 572.7 0.8 18.7 554.8
Affiliated mutual funds ........................... 61.0 17.2 0.2 78.0
------- ------- ------- -------
$ 633.7 $ 18.0 $ 18.9 $ 632.8
======= ======= ======= =======
(In millions)
-------------------------------------------------
Gross Gross Estimated
Cost Unrealized Unrealized Market
Basis Gains Losses Value
------- ---------- ---------- ---------
U.S. Treasury securities & obligations of U.S. ....
government corporations and agencies ............ $ 28.4 $ 1.5 $ -- $ 29.9
Obligations of states and political subdivisions .. 60.2 1.4 -- 61.6
Debt securities issued by foreign governments ..... 8.0 0.1 -- 8.1
Corporate debt securities ......................... 442.0 10.0 2.6 449.4
------- ------- ------- -------
Subtotal ........................................ 538.6 13.0 2.6 549.0
Affiliated mutual funds ........................... 36.9 6.6 0.6 42.9
------- ------- ------- -------
$ 575.5 $ 19.6 $ 3.2 $ 591.9
======= ======= ======= =======
</TABLE>
The amortized cost and estimated market value of bonds as of December 31,
1999 and 1998 by contractual maturity is shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations.
- --------------
102 PROSPECTUS FINANCIAL STATEMENTS
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
<TABLE>
<CAPTION>
As of December 31, 1999
(In millions)
-----------------------
Estimated
Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less ............................................ $ 61.4 $ 61.2
Due after one year through five years .............................. 296.4 290.0
Due after five years through ten years ............................. 100.1 95.5
Due after ten years ................................................ 51.7 46.7
Sinking fund bonds (including collateralized mortgage obligations) . 63.1 61.4
--------- ---------
$ 572.7 $ 554.8
========= =========
As of December 31, 1998
(In millions)
-----------------------
Estimated
Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less ............................................ $ 47.5 $ 47.7
Due after one year through five years .............................. 250.0 253.2
Due after five years through ten years ............................. 102.5 107.8
Due after ten years ................................................ 67.6 68.3
Sinking fund bonds (including collateralized mortgage obligations) . 71.0 72.0
--------- ---------
$ 538.6 $ 549.0
========= =========
</TABLE>
The major categories of net investment income are summarized as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Fixed maturities ....................................... $ 37.2 $ 33.9 $ 31.8
Affiliated mutual funds ................................ 1.6 1.5 1.1
Policy loans ........................................... 3.7 3.5 3.4
Short-term investment .................................. 2.9 2.3 2.4
Joint venture dividend ................................. 1.3 1.3 1.1
------ ------ ------
46.7 42.5 39.8
Less: Investment expenses .............................. 1.3 1.1 1.1
------ ------ ------
Net investment income .................................. $ 45.4 $ 41.4 $ 38.7
====== ====== ======
</TABLE>
Realized gains and losses are based upon specific identification of the
investments. The components of gross realized gains and losses for the year
ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Realized gains from dispositions:
Bonds ................................................ $ 0.6 $ 2.2 $ 1.1
Separate account seed ................................ 0.9 -- 0.9
Realized losses from dispositions:
Bonds ................................................ (3.1) (0.1) (1.1)
Affiliated mutual funds .............................. (0.1) -- --
------ ------ ------
Realized gains ......................................... $ (1.7) $ 2.1 $ 0.9
====== ====== ======
</TABLE>
---------------
FINANCIAL STATEMENTS PROSPECTUS 103
---------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The net unrealized holding gains and losses, included in the consolidated
balance sheets as a component of comprehensive income and the changes for the
corresponding years are summarized as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Balance, beginning of year ............................. $ 19.4 $ 16.2 $ 3.6
Changes in unrealized investment gains (losses),
net of deferred taxes, attributable to:
Bonds .............................................. (20.4) 2.6 4.6
Affiliated mutual funds ............................ 9.1 (1.8) 7.3
Separate account seed .............................. 5.1 2.4 1.7
Other .............................................. -- -- (1.0)
------ ------ ------
Balance, end of year ................................... $ 13.2 $ 19.4 $ 16.2
====== ====== ======
</TABLE>
Currently, comprehensive income for the Company consists of net income and
the change in unrealized gains and losses on securities. As of December 31,
1999, 1998 and 1997, the change in unrealized gains and losses before tax was
$(12.9), $7.4 and $15.6 and after tax was $(6.2), $3.2 and $12.6, respectively.
Reclassification adjustments for the period, which include gains on
investment securities that were realized and included in net income of the
current period that also had been included in other comprehensive income as
unrealized holding gains in the period in which they arose, are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Unrealized holding (losses) gains ...................... $(14.5) $ 5.7 $ 15.6
Less: Reclassification adjustments ..................... 1.6 1.7 --
------ ------ ------
Change in unrealized holding (losses) gains ............ $(12.9) $ 7.4 $ 15.6
====== ====== ======
</TABLE>
Special Deposit assets of $3.7 million and $4.1 million at December 31,
1999 and 1998, respectively, were on deposit with governmental authorities or
trustees as required by certain insurance laws.
NOTE 4 - DEFERRED POLICY ACQUISITION COSTS
The balances of and changes in deferred policy acquisition costs as of and
for the years ended December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
As of December 31,
(In millions)
-----------------------
1999 1998
<S> <C> <C>
Balance, beginning of year ......................................... $ 313.6 $ 267.4
Capitalization of deferrable expenses .............................. 93.8 77.0
Amortization of recoverable DAC balances ........................... (67.1) (55.3)
Interest on DAC .................................................... 21.7 24.2
Retrospectively applied adjustments ................................ (4.5) 0.3
--------- ---------
Balance, end of year ............................................... $ 357.5 $ 313.6
========= =========
</TABLE>
- --------------
104 PROSPECTUS FINANCIAL STATEMENTS
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 5 - POLICYHOLDERS' ACCOUNT BALANCES
The balances of policyholders' account balances as of and for the years
ended December 31, 1999 and 1998 are summarized as follows:
As of December 31,
(In millions)
-----------------------
1999 1998
---------- ---------
Individual annuities ................................ $ 7,617.9 $ 6,492.8
Group annuities ..................................... 3,105.7 2,104.3
Variable life ....................................... 713.7 569.6
Interest-sensitive life contracts ................... 4.2 4.5
---------- ---------
Policyholders' account balances ..................... $ 11,441.5 $ 9,171.2
========== =========
Policyholders' account balances for investment-type contracts represent an
accumulation of gross premium payments plus credited interest less withdrawals,
expenses and mortality charges.
NOTE 6 - FEDERAL INCOME TAXES
The federal income tax expense in the consolidated statements of earnings
is summarized as follows:
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
Federal Income Tax expense:
Current ................................... $ 12.1 $ 24.4 $ 17.2
Deferred .................................. 12.3 12.0 16.2
------ ------ ------
Total ....................................... $ 24.4 $ 36.4 $ 33.4
====== ====== ======
The federal income taxes attributable to consolidated operations in
certain circumstances can be different from the amounts determined by
multiplying the earnings from operations before federal income taxes by the
expected federal income tax rate of 35%. The sources of the difference and the
tax effects of each source are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Expected taxes on pre-tax income ....................... $ 35.6 $ 37.5 $ 33.3
Permanent adjustments:
Dividends received deduction on separate accounts .... (13.1) -- --
Reserve on overpayment of 1998 taxes in 1999 ........... 1.3 -- --
True-up of tax basis reserves .......................... 1.3 -- --
State and local taxes .................................. -- (0.5) 0.1
Foreign tax credit ..................................... (0.3) (0.3) --
Other .................................................. (0.4) (0.3) --
------ ------ ------
Total tax expense ...................................... $ 24.4 $ 36.4 $ 33.4
====== ====== ======
</TABLE>
---------------
FINANCIAL STATEMENTS PROSPECTUS 105
---------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The tax effect of temporary differences which give rise to deferred
federal income tax assets and liabilities as of December 31, 1999 and 1998, are
as follows:
As of December 31,
(In millions)
-----------------------
1999 1998
--------- ---------
Deferred tax assets:
Other liabilities ................................... $ 19.5 $ 15.7
DAC Proxy ........................................... 13.7 11.1
Amounts receivable from reinsurer ................... 0.3 0.9
Other ............................................... 3.9 1.4
--------- ---------
Total deferred tax assets ........................... 37.4 29.1
Deferred tax liabilities:
Deferred acquisition costs .......................... $ 125.1 $ 109.8
Capitalized software costs .......................... 4.1 --
Reserves ............................................ 7.7 6.0
Investments ......................................... 3.3 10.3
Other ............................................... -- 1.8
--------- ---------
Total deferred tax liabilities ...................... 140.2 127.9
--------- ---------
Net deferred tax liability .......................... $ 102.8 $ 98.8
========= =========
Management has concluded that the deferred income tax assets are more
likely than not to be realized. Therefore, no valuation allowance has been
provided.
NOTE 7 - REINSURANCE
The Company has entered into cession and assumption agreements on a
coinsurance, modified coinsurance and yearly renewable term basis with
affiliated and non-affiliated companies. Ceding reinsurance is used by the
Company to limit its risk from large exposures and to permit recovery of a
portion of direct losses, although ceded reinsurance does not relieve the
originating insurer of liability.
The Company has assumed and ceded coinsurance and modified coinsurance
agreements with affiliated companies. Under these agreements, included in the
consolidated statements of income are $0.9 million, $0.9 million and $1.0
million of assumed premiums at December 31, 1999, 1998 and 1997, and $83.1
million, $65.2 million and $43.6 million of ceded premiums at December 31, 1999,
1998 and 1997, respectively.
The Company terminated, during 1997, an assumption agreement with an
unaffiliated company. Under this agreement, included in the consolidated
statements of income are $(2.3) million of premiums at December 31, 1997.
NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated fair values for fixed maturities and equity securities, other
than private placement securities, are based on quoted market prices or
estimates from independent pricing services. Fair values for private placement
securities are estimated using a discounted cash flow model which considers the
current market spreads between the U.S. Treasury yield curve and corporate bond
yield curve, adjusted for the type of issue, its current credit quality and its
remaining average life. The fair value of certain non-performing private
placement securities is based on amounts estimated by management.
- --------------
106 PROSPECTUS FINANCIAL STATEMENTS
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company is billed by The Guardian for all compensation and related
employee benefits for those employees of The Guardian who are engaged in the
Company's business and for the Company's use of The Guardian's centralized
services and agency force. The amounts charged for these services amounted to
$141.0 million in 1999, $100.8 million in 1998 and $72.2 million in 1997, and,
in the opinion of management, were considered appropriate for the services
rendered.
The Company had an investment in the Guardian Real Estate Account (GREA),
which was established in 1987 under Delaware Insurance law as an insurance
company separate account. GIAC had contributed capital to GREA to provide for
funds and to preserve liquidity. Effective December 19, 1997 GREA was liquidated
and, as a result, $6.7 million was returned to GIAC in the form of capital and
there was a realized gain recorded of $1.0 million.
A significant portion of the Company's separate account assets is invested
in affiliated mutual funds. Each of these funds has an investment advisory
agreement with the Company, except for The Baillie Gifford International Fund,
The Baillie Gifford Emerging Markets Fund, The Guardian Baillie Gifford
International Fund and The Guardian Baillie Gifford Emerging Markets Fund.
The separate account assets invested in affiliated mutual funds as of
December 31, 1999 and 1998 are as follows (in millions):
1999 1998
--------- ---------
The Guardian Stock Fund .............................. $ 4,153.9 $ 3,664.9
The Guardian VC 500 Index Fund ....................... 1.8 --
The Guardian VC Allocation Fund ...................... 0.8 --
The Guardian High Yield Bond Fund .................... 0.2 --
The Guardian Bond Fund ............................... 320.0 381.5
The Guardian Cash Fund ............................... 484.1 419.5
The Baillie Gifford International Fund ............... 662.3 526.4
The Baillie Gifford Emerging Markets Fund ............ 64.6 34.6
The Guardian Small Cap Stock Fund .................... 130.6 109.2
The Guardian Park Avenue Fund ........................ 621.3 511.6
The Guardian Park Avenue Small Cap Fund .............. 22.8 13.2
The Guardian Asset Allocation Fund ................... 46.0 39.8
The Guardian Baillie Gifford International Fund ...... 15.5 9.1
The Guardian Baillie Gifford Emerging Markets Fund ... 6.8 0.8
The Guardian Investment Quality Bond Fund ............ 12.7 9.3
The Guardian High Yield Bond Fund .................... 0.8 --
The Guardian Cash Management Fund .................... 126.4 57.9
--------- ---------
$ 6,670.6 $ 5,777.8
========= =========
The Company, in agreement with Baillie Gifford Overseas Ltd., has a joint
venture company -- Guardian Baillie Gifford Ltd. (GBG) -- that is organized as a
corporation in Scotland. GBG is registered in both the United Kingdom and the
United States to act as an investment advisor for the Baillie Gifford
International Fund (BGIF), the Baillie Gifford Emerging Markets Fund (BGEMF),
The Guardian Baillie Gifford International Fund (GBGIF) and The Guardian Baillie
Gifford Emerging Markets Fund (GBGEMF). The Funds are offered in the U.S. as
investment options under certain variable annuity contracts and variable life
policies.
---------------
FINANCIAL STATEMENTS PROSPECTUS 107
---------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The Company maintains investments in affiliated mutual funds. These
investments as of December 31, 1999 and 1998 are as follows (in millions):
1999 1998
--------- ---------
The Guardian Park Avenue Fund ........................ $ 0.1 $ 0.1
The Guardian Park Avenue Small Cap Fund .............. 2.5 1.8
The Guardian Small Cap Stock Fund .................... 35.2 26.1
The Guardian Asset Allocation Fund ................... 2.8 2.5
The Guardian Baillie Gifford International Fund ...... 2.9 2.1
The Guardian Baillie Gifford Emerging Markets Fund ... 1.5 0.9
The Guardian Investment Quality Bond Fund ............ 1.6 1.6
The Guardian High Yield Bond Fund .................... 1.6 1.6
The Guardian Cash Management Fund .................... 29.8 6.2
--------- ---------
$ 78.0 $ 42.9
========= =========
NOTE 10 - STATUTORY EQUITY AND INCOME
Applicable insurance department regulations require that the Company
prepare statutory financial statements in accordance with statutory accounting
practices prescribed or permitted by the New York Department of Insurance.
Statutory accounting practices primarily differ from GAAP by charging policy
acquisition costs to expense as incurred, establishing future policy benefits
reserves using different actuarial and interest assumptions, not providing for
deferred taxes, and valuing securities on a different basis.
The following reconciles the consolidated GAAP net income of the Company
to statutory net income as reported to the regulatory authorities:
<TABLE>
<CAPTION>
For the years ended December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Consolidated GAAP net income ........................... $ 77.3 $ 69.4 $ 61.6
Adjustments to restate to statutory basis:
Statutory net income of subsidiaries ................. 3.3 (4.5) (4.3)
Change in deferred policy acquisition costs .......... (45.2) (43.2) (41.9)
Change in deferred software costs .................... (8.8) -- --
Deferred premiums .................................... 0.3 1.5 5.6
Re-estimation of future policy benefits .............. 13.1 9.7 3.3
Reinsurance .......................................... (3.8) (4.1) (12.4)
Deferred federal income tax expense .................. 11.2 11.9 16.2
Amortization of interest maintenance reserve ......... 0.4 0.3 0.1
Transfer to interest maintenance reserve ............. 2.4 (1.4) --
Other, net ........................................... 2.8 0.9 (0.2)
------ ------ ------
Statutory net income ................................... $ 53.0 $ 40.5 $ 28.0
====== ====== ======
</TABLE>
- --------------
108 PROSPECTUS FINANCIAL STATEMENTS
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The following reconciles the consolidated GAAP stockholder's equity of the
Company to statutory capital and surplus as reported to the regulatory
authorities:
<TABLE>
<CAPTION>
As of December 31,
(In millions)
--------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Consolidated GAAP stockholder's equity ................. $500.5 $469.4 $396.8
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs .................... (357.5) (313.6) (267.4)
Deferred software costs .............................. (11.6) -- --
Elimination of asset valuation reserve ............... (42.7) (29.6) (26.3)
Re-estimation of future policy benefits .............. (53.4) (46.9) (41.3)
Establishment of deferred income tax liability ....... 102.8 98.8 84.7
Unrealized gains on investments ...................... 19.8 (11.7) (7.9)
Other liabilities .................................... 66.7 48.1 33.5
Deferred premiums .................................... 8.2 7.8 7.0
Other, net ........................................... 5.4 5.1 3.6
------ ------ ------
Statutory capital and surplus .......................... $238.2 $227.4 $182.7
====== ====== ======
</TABLE>
---------------
FINANCIAL STATEMENTS PROSPECTUS 109
---------------
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive income, of changes in equity
and of cash flows present fairly, in all material respects, the financial
position of The Guardian Insurance & Annuity Company, Inc. and its subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for costs of computer software developed or
obtained for internal use in 1999.
/s/ PricewaterhouseCoopers LLP
February 14, 2000
---------------
FINANCIAL STATEMENTS PROSPECTUS 110
---------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS, POLICY ACCOUNT VALUES, NET CASH SURRENDER
VALUES AND ACCUMULATED POLICY PREMIUMS
The following tables illustrate how the policies operate. Specifically,
they show how the death benefit, net cash surrender value and policy account
value can vary over an extended period of time assuming hypothetical gross rates
of return (i.e., investment income and capital gains and losses, realized or
unrealized) for the Separate Account that are equal to constant after tax annual
rates of 0%, 6% and 12%. The tables are based on policies with face amounts of
$250,000 for a male insured at Age 40. These insureds are assumed to be in the
nonsmoker preferred risk 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 premium and partial withdrawals, will also affect
results, as will the insured's sex, smoker status 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, the state premium tax charge,
the DAC tax charge and the premium sales charge; 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 surrender charges
(consisting of a deferred sales charge and a deferred administrative charge) are
deducted upon surrender, face amount reduction or lapse during the first 12
policy years. The death benefits, net cash surrender values and policy account
values also reflect a daily charge assessed against the Separate Account for
mortality and expense risks equivalent to an annual charge of .60% (on a current
basis) and .90% (on a guaranteed basis) of the average daily value of the assets
in the separate account attributable to the policies. See Deductions and
charges. The amounts shown in the illustrations also reflect an average of the
investment advisory fees and operating expenses incurred by the mutual funds, at
an annual rate of 0.77% of the average daily net assets of such funds.
The average is based upon actual expenses, after applicable expense
reimbursements and fee waivers, incurred during 1999 for all funds, except
Guardian VC 500 Index, Janus Aspen Series, MFS Bond Series and MFS New Discovery
Series the expenses of which have been restated to reflect a reduction in the
management fees.
In the absence of these arrangements, operating expenses of the various
funds, and the average investment advisory fees and expenses used in the
following illustrations would have been higher. For an explanation of the
expenses see the accompanying fund prospectuses. Taking account of the charges
for mortality and expense risks in the Separate Account and the average
investment 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 constant annual rates of -1.37%, 4.60% and 10.56%, respectively, based on
GIAC's current charge for mortality and expense risks, and -1.66%, 4.28% and
10.23%, respectively, based on GIAC's guaranteed maximum charge for mortality
and expense risks. See Net investment factor.
- --------------
111 PROSPECTUS APPENDICES
- --------------
<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 $2,785 for the 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.
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
historical average annual total returns of the underlying funds for which
performance data is shown in the advertisement or sales literature replacing the
hypothetical rates of return shown in the following tables. This information may
be shown in the form of graphs, charts, tables, and examples. Any such
information is intended to show the policy's investment experience based on the
historical experience of the underlying funds and is not intended to represent
what may happen in the future.
GIAC began to offer Park Avenue Life on September 1, 1995. As such, the
policies may not have been available when the funds commenced their operations.
However, illustrations may be based on the actual investment experience of the
funds since their respective inception dates (See Investment Performance of the
Funds). The 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, as well as the
Separate Account's charge for mortality and expense risks, and the charges
deducted from premiums, Monthly Deductions, and any transaction deductions
associated with the policy in question.
--------------
APPENDICES PROSPECTUS 112
--------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
These values reflect CURRENT cost of insurance and other charges
<TABLE>
<CAPTION>
Assuming Current Charges Assuming Current Charges Assuming Current Charges
and 0 % Gross and 6% Gross and 12 % Gross
Return Return Return
Premiums ----------------------------- ---------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,785 2,924 1,814 0 250,000 1,942 74 250,000 2,071 203 250,000
2 41 2,785 5,995 3,576 1,696 250,000 3,947 2,067 250,000 4,334 2,454 250,000
3 42 2,785 9,219 5,297 3,545 250,000 6,027 4,275 250,000 6,818 5,067 250,000
4 43 2,785 12,604 7,014 5,446 250,000 8,223 6,655 250,000 9,589 8,020 250,000
5 44 2,785 16,158 8,674 7,290 250,000 10,487 9,102 250,000 12,619 11,234 250,000
6 45 2,785 19,890 10,287 9,086 250,000 12,831 11,630 250,000 15,946 14,745 250,000
7 46 2,785 23,809 11,844 10,827 250,000 15,252 14,234 250,000 19,596 18,578 250,000
8 47 2,785 27,924 13,351 12,516 250,000 17,755 16,921 250,000 23,607 22,773 250,000
9 48 2,785 32,244 14,798 14,148 250,000 20,339 19,688 250,000 28,011 27,360 250,000
10 49 2,785 36,781 16,191 15,724 250,000 23,009 22,542 250,000 32,854 32,387 250,000
15 54 2,785 63,101 21,476 21,476 250,000 36,965 36,965 250,000 64,786 64,786 250,000
20 59 2,785 96,693 24,257 24,257 250,000 52,463 52,463 250,000 116,639 116,639 250,000
25 64 2,785 139,566 24,291 24,291 250,000 70,047 70,047 250,000 201,852 201,852 343,549
30 69 2,785 194,284 19,206 19,206 250,000 88,677 88,677 250,000 336,246 336,246 508,924
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS CHOSEN
BY A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
THE RECALCULATED BASIC SCHEDULED PREMIUM (ROUNDED TO THE NEAREST DOLLAR) AT
ATTAINED AGE 70 WOULD BE $16,655, ASSUMING THE 0% RETURN; $6,934, ASSUMING THE
6% RETURN; AND $2,785, ASSUMING THE 12% RETURN.
- --------------
113 PROSPECTUS APPENDICES
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 1
These values reflect GUARANTEED cost of insurance and other charges
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
Premiums ---------------------------- ---------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,785 2,924 1,807 0 250,000 1,935 67 250,000 2,064 196 250,000
2 41 2,785 5,995 3,385 1,505 250,000 3,749 1,869 250,000 4,128 2,249 250,000
3 42 2,785 9,219 4,897 3,145 250,000 5,599 3,847 250,000 6,363 4,611 250,000
4 43 2,785 12,604 6,362 4,794 250,000 7,508 5,940 250,000 8,806 7,238 250,000
5 44 2,785 16,158 7,756 6,371 250,000 9,451 8,066 250,000 11,453 10,068 250,000
6 45 2,785 19,890 9,070 7,868 250,000 11,422 10,221 250,000 14,316 13,115 250,000
7 46 2,785 23,809 10,304 9,286 250,000 13,421 12,403 250,000 17,418 16,401 250,000
8 47 2,785 27,924 11,454 10,619 250,000 15,443 14,609 250,000 20,780 19,946 250,000
9 48 2,785 32,244 12,515 11,865 250,000 17,486 16,836 250,000 24,425 23,775 250,000
10 49 2,785 36,781 13,483 13,015 250,000 19,544 19,077 250,000 28,378 27,911 250,000
15 54 2,785 63,101 17,023 17,023 250,000 30,227 30,227 250,000 54,341 54,341 250,000
20 59 2,785 96,693 16,567 16,567 250,000 39,832 39,832 250,000 94,224 94,224 250,000
25 64 2,785 139,566 9,090 9,090 250,000 45,200 45,200 250,000 157,165 157,165 267,493
30 69 2,785 194,284 0 0 250,000 40,021 40,021 250,000 252,212 252,212 381,735
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS CHOSEN
BY A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
THE RECALCULATED BASIC SCHEDULED PREMIUM (ROUNDED TO THE NEAREST DOLLAR) AT
ATTAINED AGE 70 WOULD BE $16,655, ASSUMING THE 0% RETURN; $14,391, ASSUMING THE
6% RETURN; AND $2,785, ASSUMING THE 12% RETURN.
--------------
APPENDICES PROSPECTUS 114
--------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
These values reflect CURRENT cost of insurance and other charges
<TABLE>
<CAPTION>
Assuming Current Charges Assuming Current Charges Assuming Current Charges
and 0 % Gross and 6% Gross and 12 % Gross
Return Return Return
Premiums ----------------------------- ---------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,785 2,924 1,814 0 250,000 1,942 74 250,000 2,071 203 250,000
2 41 2,785 5,995 3,576 1,696 250,000 3,947 2,067 250,000 4,334 2,454 250,000
3 42 2,785 9,219 5,297 3,545 250,000 6,027 4,275 250,000 6,818 5,067 250,000
4 43 2,785 12,604 7,014 5,446 250,000 8,223 6,655 250,000 9,589 8,020 250,000
5 44 2,785 16,158 8,674 7,290 250,000 10,487 9,102 250,000 12,619 11,234 250,000
6 45 2,785 19,890 10,287 9,086 250,000 12,831 11,630 250,000 15,946 14,745 250,000
7 46 2,785 23,809 11,844 10,827 250,000 15,252 14,234 250,000 19,596 18,578 250,000
8 47 2,785 27,924 13,351 12,516 250,000 17,755 16,921 250,000 23,607 22,773 250,000
9 48 2,785 32,244 14,798 14,148 250,000 20,339 19,688 250,000 28,011 27,360 250,000
10 49 2,785 36,781 16,191 15,724 250,000 23,009 22,542 250,000 32,854 32,387 250,000
15 54 2,785 63,101 21,476 21,476 250,000 36,965 36,965 250,000 64,694 64,694 259,444
20 59 2,785 96,693 24,257 24,257 250,000 52,463 52,463 250,000 115,355 115,355 292,105
25 64 2,785 139,566 24,291 24,291 250,000 70,047 70,047 250,000 197,411 197,411 353,912
30 69 2,785 194,284 19,206 19,206 250,000 88,677 88,677 250,000 328,942 328,942 497,869
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS CHOSEN
BY A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
THE RECALCULATED BASIC SCHEDULED PREMIUM (ROUNDED TO THE NEAREST DOLLAR) AT
ATTAINED AGE 70 WOULD BE $16,655, ASSUMING THE 0% RETURN; $6,934, ASSUMING THE
6% RETURN; AND $2,785, ASSUMING THE 12% RETURN.
- --------------
115 PROSPECTUS APPENDICES
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX A
Male Issue Age 40, Preferred Underwriting Risk
$250,000 Face Amount
Death Benefit Option 2
These values reflect GUARANTEED cost of insurance and other charges
<TABLE>
<CAPTION>
Assuming Guaranteed Assuming Guaranteed Assuming Guaranteed
Charges and 0% Gross Return Charges and 6% Gross Return Charges and 12% Gross Return
Premiums ----------------------------- ---------------------------- ----------------------------
End Age Accumulated Net Net Net
of Beginning at 5% Policy Cash Net Policy Cash Net Policy Cash Net
Policy of Net Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Year Outlay Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ------ --------- ------ ----------- -------- --------- --------- ------- --------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40 2,785 2,924 1,807 0 250,000 1,935 67 250,000 2,064 196 250,000
2 41 2,785 5,995 3,385 1,505 250,000 3,749 1,869 250,000 4,128 2,249 250,000
3 42 2,785 9,219 4,897 3,145 250,000 5,599 3,847 250,000 6,363 4,611 250,000
4 43 2,785 12,604 6,362 4,794 250,000 7,508 5,940 250,000 8,806 7,238 250,000
5 44 2,785 16,158 7,756 6,371 250,000 9,451 8,066 250,000 11,453 10,068 250,000
6 45 2,785 19,890 9,070 7,868 250,000 11,422 10,221 250,000 14,316 13,115 250,000
7 46 2,785 23,809 10,304 9,286 250,000 13,421 12,403 250,000 17,418 16,401 250,000
8 47 2,785 27,924 11,454 10,619 250,000 15,443 14,609 250,000 20,780 19,946 250,000
9 48 2,785 32,244 12,515 11,865 250,000 17,486 16,836 250,000 24,425 23,775 250,000
10 49 2,785 36,781 13,483 13,015 250,000 19,544 19,077 250,000 28,378 27,911 250,000
15 54 2,785 63,101 17,023 17,023 250,000 30,227 30,227 250,000 54,341 54,341 250,000
20 59 2,785 96,693 16,567 16,567 250,000 39,832 39,832 250,000 93,620 93,620 270,371
25 64 2,785 139,566 9,090 9,090 250,000 45,200 45,200 250,000 152,285 152,285 308,785
30 69 2,785 194,284 0 0 250,000 40,021 40,021 250,000 240,158 240,158 374,409
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL RESULTS MAY BE HIGHER OR
LOWER THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
ALLOCATIONS MADE BY A POLICYOWNER, THE FREQUENCY OF THE PREMIUM PAYMENTS CHOSEN
BY A POLICYOWNER, THE INVESTMENT EXPERIENCE OF THE POLICY'S VARIABLE INVESTMENT
OPTIONS, AND THE RATE OF INTEREST PAID ON AMOUNTS HELD IN THE FIXED-RATE OPTION.
THE DEATH BENEFIT, POLICY ACCOUNT VALUE AND NET CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE AND
BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY
LOANS OR OTHER POLICY TRANSACTIONS WERE EFFECTED DURING THE PERIOD. NO
REPRESENTATIONS CAN BE MADE BY GIAC OR THE MUTUAL FUNDS THAT THE ILLUSTRATED
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
THE RECALCULATED BASIC SCHEDULED PREMIUM (ROUNDED TO THE NEAREST DOLLAR) AT
ATTAINED AGE 70 WOULD BE $16,655, ASSUMING THE 0% RETURN; $14,391, ASSUMING THE
6% RETURN; AND $2,785, ASSUMING THE 12% RETURN.
--------------
APPENDICES PROSPECTUS 116
--------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
USES OF LIFE INSURANCE
- --------------------------------------------------------------------------------
The following are examples of ways in which the policy can be used to address
certain financial objectives, bearing in mind that variable life insurance is
not a short-term investment and that its primary purpose is to provide benefits
upon the death of the insured.
Family Income Protection
Life insurance may be purchased on the lives of a family's income earners to
provide a death benefit to cover final expenses, and continue the current income
to the family. The amount of insurance purchase should be an amount which will
provide a death benefit that when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the insured's income.
Estate Protection
Life insurance may be purchased by a trust on the life of a person whose estate
will incur federal estate taxes upon his or her death. The amount of insurance
purchased should equal the amount of the estimated estate tax liability. Upon
the insured's death, the trustee could make the death proceeds available to the
estate for the payment of estate taxes.
Education Funding
Life insurance may be purchased on the life of the parent(s) or primary person
funding an education. The amount of insurance purchased should equal the total
education cost projected at a reasonable inflation rate.
In the event of the insured's death, the guaranteed death benefit is available
to help pay the education costs. If the insured lives through the education
years, the cash value accumulations may be accessed to help offset the remaining
education costs. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Mortgage Protection
Life insurance may be purchased on the life of the person(s) responsible for
making mortgage payments. The amount of insurance purchased should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to offset the remaining mortgage balance.
During the insured's lifetime, the cash value accumulations may be accessed late
in the mortgage term to help make the remaining mortgage payments. Any policy
loans or partial withdrawals will reduce the policy's death benefit and may have
tax consequences.
Key Person Protection
Life insurance may be purchased by a business on the life of a key person in an
amount equal to a key person's value, considering salary, benefits, and
contribution to business profits. Upon the key person's death, the business can
use the death benefit to ease the interruption of business operations and/or to
provide a replacement fund for hiring a new executive.
Business Continuation Protection
Life insurance may be purchased on the life of each business owner in an amount
equal to the value of each owner's business interest. In the event of death, the
guaranteed death benefit may provide the funds needed to carry out the purchase
of the deceased's business interest by the business, or surviving owners, from
the deceased owner's heirs.
Retirement Income
Life insurance may be purchased on the life of a family income earner during his
or her working life. If the insured lives to retirement, the cash value
accumulations may be accessed to provide retirement payments. In the event of
the insured's death, the proceeds may be used to provide retirement income to
his or her spouse. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Deferred Compensation Plans
Life insurance may be purchased to fund a Deferred Compensation Plan, or
Selective Incentive Plan, for key employees. A Deferred Compensation Plan, or
Selective Incentive Plan, is a written agreement between an employer and an
executive. The employer makes an unsecured promise to make future benefit
payments to a key executive if the executive meets certain stated requirements.
Under this type of plan, a company purchases a cash value life insurance policy
insuring an executive's life to (1)
- --------------
117 PROSPECTUS APPENDICES
- --------------
<PAGE>
The Guardian Insurance & Annuity Company, Inc.
APPENDIX B
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.
--------------
APPENDICES PROSPECTUS 118
--------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
ADDITIONAL BENEFITS BY RIDER
- --------------------------------------------------------------------------------
Additional benefits are available by riders to the policy. Riders are issued
subject to GIAC's standards for classifying risks. GIAC charges premiums for
additional benefit riders. These premium amounts are included in the policy
premium charged to a Park Avenue Life policyowner, but rider premiums are not
allocated to the variable investment options or fixed-rate option under the
policy. The benefits provided by the riders are fully described in the riders
and summarized here.
Waiver of Premium -- This rider provides for the waiver of Policy
Premiums while the insured is totally disabled.
Accidental Death Benefit -- This rider provides additional insurance
coverage if the insured's death results from accidental bodily
injury.
Guaranteed Purchase Option -- This rider provides the policyowner
the right to purchase additional insurance policies on the insured's
life without evidence of insurability on the policy anniversaries
nearest certain birthdays of the insured (the "Option Dates") or
within specified time periods of qualifying life events ("Alternate
Option Dates") provided (i) all policy premiums are paid to the
applicable Option Date or Alternate Option Date, (ii) written
application and evidence of insurability satisfactory to the issuer
and the first premium for the new policy are received as set forth
in the rider, (iii) if applicable, satisfactory evidence of the
qualifying life event accompanies the application.
Simplified Insurability Option -- This rider allows the policyowner
to purchase additional policies on certain policy anniversaries
("Option Dates") provided: (i) all policy premiums are paid to the
applicable Option Date, (ii) written application and evidence of
insurability satisfactory to the issuer are received as set forth in
the rider, and (iii) policy premiums are not being waived under a
waiver of premium rider.
Adjustable Renewable Term (ART) Insurance -- This rider provides
term insurance for one year periods.
By adding an ART rider to a Park Avenue Life policy, a policyowner can increase
the insurance coverage provided by the entire contract. Generally, term
insurance is intended to fill a temporary insurance need, and permanent (whole
life) insurance is intended to fill long-term insurance needs. Term insurance is
generally more economical for short periods, while permanent insurance is
generally more economical over longer periods. If a policyowner has a short-term
need for more insurance protection, it may be in his or her interest to
supplement a Park Avenue Life policy with an ART rider. When the need abates,
the rider can be terminated without triggering surrender charges, which are
imposed when the policy's coverage is reduced during the first 12 policy years.
See "Decreasing the Face Amount" and "Deductions and Charges."
GIAC may from time to time discontinue the availability of one or more of these
riders, or make other riders available. GIAC agents can provide information
about the current availablity of particular riders.
- --------------
119 PROSPECTUS APPENDICES
- --------------
<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, F.S.A.
PricewaterhouseCoopers LLP
II-1
<PAGE>
The following exhibits:
1.A (1) Resolution of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. establishing The
Guardian Separate Account K.*
(2) Not Applicable.
(3)(a), (b)
and (c) Distribution Agreements.*
(4) Not Applicable.
(5) Specimen of the Variable Whole Life Insurance Policy with
Modified Scheduled Premiums.*
(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 Variable Whole Life Policy with
Modified Scheduled Premiums.*
(11) Amended and Restated Memorandum on the Policy's Issuance,
Transfer, and Redemption Procedures and on the method of
computing cash adjustments upon exchange of the Policy.*
2. See Exhibit 1.A(5).
3. (a)Opinion of Richard T. Potter, Jr., Esq.*
3. (b)Consent of Richard T. Potter, Jr., Esq.
4. None.
5. Not Applicable.
6. Opinion and Consent of Charles G. Fisher, F.S.A.
7. Consent of PricewaterhouseCoopers LLP
8. Powers of Attorney executed by a majority of the Board of Directors
and certain principal officers of The Guardian Insurance & Annuity
Company, Inc.
* Incorporated by reference to the Registration Statement on Form S-6 filed
by the Registrant on April 30, 1998 (Registration No. 33-83412)
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, The
Guardian Separate Account K, certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York, on the 20th of April, 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* Senior Vice President, General Counsel
- ----------------------------------- and Director
Edward K. Kane
s/ Frank L. Pepe Vice President and Controller
- -----------------------------------
Frank L. Pepe
(Principal Accounting Officer)
s/ Bruce C. Long Executive Vice President, Equity Products
- ----------------------------------- and Director
Bruce C. Long
s/ Philip H. Dutter* Director
- -----------------------------------
Philip H. Dutter
s/ Arthur V. Ferrara* Director
- -----------------------------------
Arthur V. Ferrara
s/ Leo R. Futia* Director
- -----------------------------------
Leo R. Futia
s/ Peter L. Hutchings* Director
- -----------------------------------
Peter L. Hutchings
s/ William C. Warren* Director
- -----------------------------------
William C. Warren
*By: s/ Richard T. Potter, Jr. Date: April 20, 2000
---------------------------------
Richard T. Potter, Jr.
Vice President and Counsel
Pursuant to Power of Attorney
II-4
<PAGE>
The Guardian Separate Account K
Exhibit Index
Exhibit Number Description
- -------------- -----------
3.(b) Consent of Richard T. Potter, Jr., Esq.
6. Opinion and Consent of Charles G. Fisher, F.S.A.
7. Consent of PricewaterhouseCoopers LLP
8. Powers of Attorney
EX-3.(b)
CONSENT OF COUNSEL
I hereby consent both to the reference to my name under the heading
"Legal Opinion" in this Post-Effective Amendment No. 5 to the Registration
Statement on Form S-6 for The Guardian Separate Account K and to the filing of
this consent as an exhibit thereto.
By /s/ Richard T. Potter, Jr.
--------------------------------
Richard T. Potter, Jr.
Vice President and Equity Counsel
New York, New York
April 20, 2000
EXHIBIT 6
April 20, 2000
The Guardian Insurance & Annuity Company, Inc.
7 Hanover Square
New York, New York 10004
Gentlemen:
In my capacity as Vice President and Actuary of The Guardian Insurance & Annuity
Company, Inc. ("GIAC"), I have participated in the development of the Park
Avenue Life variable whole life insurance policy with modified scheduled
premiums (the "Policy") and the preparation of the Policy form. The Policy has
been registered under the Securities Act of 1933. It is described in
Registration Statement No. 33-83412 on Form S-6. I am familiar with the
Registration Statement and its Exhibits.
In my opinion, the illustrations of death benefits, Policy Account Values, Net
Cash Surrender Values and Accumulated Policy Premiums included in Appendix A of
the prospectus, based on the assumptions stated in the illustrations, are
consistent with the provisions of the form of the Policy. Further, the rate
structure of the Policy has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Policy at age 35 or 45 than to
prospective purchasers of the Policy at other Ages.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 5 to the Registration Statement.
Very truly yours,
Charles G. Fisher, FSA
Vice President and Actuary
CONSULTING ACTUARY: _______________________
Alan M. Emmer, FSA
EXHIBIT 7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment Number 5 to the Guardian Separate Account K
registration statement on Form S-6 (the "Registration Statement") of our report
dated February 20, 2000, relating to the financial statements of The Guardian
Separate Account K and our report dated February 14, 2000, relating to the
consolidated financial statements of The Guardian Insurance & Annuity Company,
Inc., which appear in such Registration Statement. We also consent to the
reference to us under the heading "Financial and Actuarial Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
-------------------------------
PRICEWATERHOUSECOOPERS LLP
New York, New York
April 20, 2000
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Peter L. Hutchings, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Peter L. Hutchings
----------------------------
Peter L. Hutchings
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Leo R. Futia, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Leo R. Futia
----------------------------
Leo R. Futia
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Philip H. Dutter, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Philip H. Dutter
----------------------------
Philip H. Dutter
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Edward K. Kane, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Edward K. Kane
----------------------------
Edward K. Kane
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Frank J. Jones, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Frank J. Jones
----------------------------
Frank J. Jones
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Arthur V. Ferrara, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Arthur V. Ferrara
----------------------------
Arthur V. Ferrara
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Joseph D. Sargent, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ Joseph D. Sargent
----------------------------
Joseph D. Sargent
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that William C. Warren, whose
signature appears below, constitutes and appoints Bruce C. Long, Frank L. Pepe
and Richard T. Potter, Jr. each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for any and
all separate accounts established by The Guardian Insurance & Annuity Company,
Inc. which are currently in existance or which may be established in the future
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitutes,
may do or cause to be done by virtue hereof.
Dated September 23, 1999
/s/ William C. Warren
----------------------------
William C. Warren
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Bruce C. Long, whose
signature appears below, constitutes and appoints Frank L. Pepe and Richard T.
Potter, Jr. each of them, his attorney-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any registration
statements and amendments to registration statements for any and all separate
accounts established by The Guardian Insurance & Annuity Company, Inc. which are
currently in existance or which may be established in the future and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitutes, may do or cause to be
done by virtue hereof.
Dated April 7, 2000
/s/ Bruce C. Long
----------------------------
Bruce C. Long
