February 17, 1995
Our Message to You
Dear Contractowner:
I am pleased to present the 1994 annual report for your Value Guard variable
annuity contract and its underlying investment options.
Our primary mission is to provide high quality insurance and investment products
for long-term financial planning as well as consistent, dependable service to
our contractowners. We believe that Value Guard, with its diverse investment
options, can help you to meet your financial goals over the long term, despite
periods of unfavorable market performance such as we experienced in 1994.
Financial Market Review
During 1994 domestic and international markets suffered significant losses. A
major factor contributing to these disappointing results was the Federal Reserve
Board's decision to raise short-term interest rates six times during the course
of the year. As interest rates increased, bond prices tumbled, and domestic
stocks performed weakly at best. International markets were also adversely
affected by the upheaval in the U.S. markets.
Value Guard's investment options were not exempt from the effects of the
tumultuous markets, and their total returns were generally as disappointing as
those recorded by the broad-based markets. Looking ahead, we remain optimistic
that the potential for growth through the investment options will reward our
contractowners over the long-term.
Investment Review
The chart below shows the total returns for each investment option based on the
percentage change in unit values from January 1, 1994 through December 31, 1994.
Changes in unit values reflect the effects of mortality and expense risk charges
as well as each option's expenses to give you a picture of an investment
option's performance under your contract.
- --------------------------------------------------------------------------------
Investment Option (2) Total Return (1)
--------------------- ----------------
The Guardian Park Avenue Fund ................... - 2.40%
Value Line Leveraged Growth Investors ........... - 4.65%
Value Line Special Situations Fund .............. + 0.05%
Value Line Fund ................................. - 5.41%
Value Line Income Fund .......................... - 5.29%
Value Line U.S. Govt. Securities Fund ........... -11.55%
Value Line Cash Fund ............................ + 2.67%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fixed-Rate Option
The annual rates of interest declared each month for amounts deposited or
renewed in The Fixed-Rate Option during 1994 were:
January -- April: 4.50%
May -- July: 4.75%
August -- September: 5.00%
October -- December: 5.25%
Rates paid by The Fixed-Rate Option are subject to change and may be higher or
lower for new deposits or renewals but are guaranteed from the date of deposit
or renewal to the next contract anniversary.
- --------------------------------------------------------------------------------
Financial Strength
You will be pleased to know that both The Guardian Insurance & Annuity Company
(GIAC), issuer of Value Guard, and its parent, Guardian Life, enjoy the highest
ratings available from four of the nation's leading insurance company
evaluators: Moody's (Aaa), Standard & Poor's (AAA), A.M. Best (A++), and Duff &
Phelps (AAA). Although these ratings do not apply to Value Guard's underlying
variable investment options which are subject to market risk fluctuations,
GIAC's triple-A ratings reflect its ability to meet its guarantee of the
contract's Fixed-Rate Option and pre-retirement death benefit.
We look forward to helping you meet your financial needs in the years to come.
Sincerely,
/s/ Arthur V. Ferrara, CLU
Arthur V. Ferrara, CLU
Chairman of the Board & Chief Executive Officer
The Guardian Insurance & Annuity Company
- --------------------------------------------------------------------------------
(1) Total return performance does not reflect the annual administrative charge
or possible withdrawal charges. Deduction of these amounts would reduce the
stated total returns. Past performance is no guarantee of future results.
(2) You will be receiving 1994 annual reports for the Value Line funds
available under Value Guard shortly.
<PAGE>
- --------------------------------------------------------------------------------
Investment Review
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund(R) -- Charles E. Albers, Portfolio Manager
How did The Guardian Park Avenue Fund perform in 1994?
1994 was a disappointing year for the financial markets. In this difficult
environment, The Guardian Park Avenue Fund produced a total return for the year
of -1.44%.(1) Over the same period the Fund's benchmark index, the S&P 500,
produced a total return of 1.29%.(2)
It is important for investors to remember that the primary objective of The
Guardian Park Avenue Fund is long-term growth of capital. The Fund has proven
itself over the long-term in both up and down markets. Recently, The Wall Street
Journal asked the Morningstar organization to identify diversified U.S. stock
funds which beat the broad market indices in periods of both rising and falling
prices from 1985 through 1994.(3) Out of the group of 350 funds which made up
Morningstar's database for this assignment, only thirteen funds made the
list.(4) We are proud to say that The Guardian Park Avenue Fund was one of the
funds selected. Also, in August of 1994, Forbes placed the Fund on its Honor
Roll for the seventh consecutive year. Only twenty honorees were selected by
Forbes for the current list.(5)
What was your investment strategy during the year?
The Fund's investment strategy is based upon our proprietary stock-scoring
system which we have been continuously developing and refining since the Fund's
inception in 1972.
Our multi-factor model analyzes each company in our research universe of
1200 stocks. In addition, portfolio manager judgment plays a critical role in
the stock-selection process. Stocks favored by our model are reviewed to confirm
that a company's business fundamentals are sound and that, in our view, the
stock is indeed a good purchase candidate. Any stock that may be a sell
candidate is subjected to the same rigorous portfolio manager review that
purchase candidates receive before any transactions occur. In addition, we use
both the quantitative model and portfolio manager judgment to weight the
portfolio in different industries and economic sectors. Still, there can be no
assurance that our disciplined approach to investing will result in the most
favorable return to our shareholders.
What factors affected the Fund's performance in 1994?
The primary factor affecting the Fund's performance was our proprietary
stock-selection model. During 1994, the model produced near-neutral results. The
model has been a valuable tool in our portfolio management process since the
Fund's inception, but there have been a few intervals in which it performed a
mediocre job of identifying buy and sell candidates. In 1994, we believe that
many of the fundamental factors which make a stock attractive were overwhelmed
by shifts in market psychology. For example, shares of basic industrial
companies fell sharply in the fourth quarter. The excellent operating results
and prospects for these companies were overshadowed by exaggerated investor
fears of a softening economy in 1995.
The Fund's economic sector weightings also provided mixed results in 1994.
The Fund was overweighted (relative to the S&P 500 Index) in the capital
goods-technology and financial sectors. Technology stocks did quite well,
outperforming the market considerably because of a stronger economy and improved
products. However, the financial sector trailed the market due mostly to
interest rate concerns. The Fund was underweighted in the utilities and consumer
staples sectors (food, household products, drugs). Our underweight position in
utilities proved to be successful, as electric and gas utilities both
underperformed the market. However, the consumer staples sector, led by
pharmaceuticals and healthcare, did well.
Finally, the capitalization-size factor was a mild negative for the Fund's
performance relative to the S&P 500 Index during 1994. The Fund's portfolio was
mildly tilted toward smaller-cap issues during 1994 which proved to be
unfavorable. While the S&P 500 Index produced a return of 1.29%,(2) the
small-cap Russell 2000 produced a negative return of -3.18%(6) in 1994.
2
<PAGE>
The following graph compares the performance of The Guardian Park Avenue Fund to
the S&P 500 Index. The Fund is a professionally managed mutual fund, while the
Index is not available for investment and is unmanaged. The comparisons are
shown for illustrative purposes only. The starting point ($9,550) for the Fund
reflects its initial sales load of 4.5%. The starting point for the Index
($10,000) does not reflect a sales load.
[The table below was represented as a graph in the printed material.]
GPAF S&P 500 Index
---- -------------
6/1/72 9550 10000
1972 9919 10935
1973 8354 9320
1974 7016 6861
1975 10310 9409
1976 14713 11627
1977 15894 10765
1978 18195 11455
1979 23459 13539
1980 28544 17908
1981 30196 17009
1982 37863 20656
1983 48698 25280
1984 54864 26823
1985 72960 35290
1986 86371 41842
1987 88927 43842
1988 107404 51157
1989 133003 67205
1990 116611 65046
1991 157618 84774
1992 189879 91214
1993 228375 100342
1994 225091 101617
Investment return and principal value of an investment in The Guardian Park
Avenue Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
Average Annual Total Returns Periods ended December 31,1994(1)
- --------------------------------------------------------------------------------
1 year 5 years 10 years Life of Fund
(since 6/1/72)
- --------------------------------------------------------------------------------
Guardian Park Avenue Fund
(without 4.5% sales charge) -1.44% 11.10% 15.16% 15.02%
- --------------------------------------------------------------------------------
Guardian Park Avenue Fund
(incl. 4.5% sales charge) -5.88% 10.08% 14.63% 14.78%
- --------------------------------------------------------------------------------
S&P 500 Index(2) 1.29% 8.63% 14.25% 10.81%
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions, and the deduction of all Fund expenses. Total
returns do not include the current maximum sales charge of 4.5%, except
where noted. Prior to August 25, 1988, shares of The Guardian Park Avenue
Fund were offered at a higher sales charge, so actual returns would have
been somewhat lower.
(2 The S&P 500 Index is generally considered to be representative of U.S.
stock market activity. The ret urns for the Index do not reflect expenses
which are deducted from the Fund's return.
(3) Morningstar Inc. is an independent mutual funds rating service.
Morningstar's database of performance information is based on historical
total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. The returns do not
reflect the deduction of sales loads and would be different if sales loads
were included. Past performance cannot guarantee future results.
(4) As reported in The Wall Street Journal, January 27, 1995.
(5) As cited in Forbes Magazine (Mutual Funds issue) dated August 29, 1994.
Honor Roll selection was based, in part, on performance for the period
3/31/84-6/30/94.
(6) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The returns for the
Russell 2000 do not reflect expenses which are deducted from the Fund's
return.
3
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
Assets
Investments in mutual funds:
The Guardian Park Avenue Fund (4,825,170 shares at net
asset value of $26.89 per share; LIFO cost, $102,424,013) .. $129,748,816
Value Line Fund, Inc. (522,033 shares at net asset value
of $14.36 per share; LIFO cost, $7,536,010) ................ 7,496,398
Value Line Income Fund, Inc. (995,623 shares at net asset
value of $6.21 per share; LIFO cost, $6,951,132) ........... 6,182,821
Value Line Special Situations Fund, Inc. (53,613 shares at
net asset value of $16.15 per share; LIFO cost, $721,651) .. 865,847
Value Line Leveraged Growth Investors, Inc. (164,692 shares
at net asset value of $23.18 per share;
LIFO cost, $3,455,049) ..................................... 3,817,551
Value Line U.S. Government Securities Fund, Inc.
(1,596,337 shares at net asset value of $10.52 per share;
LIFO cost, $19,348,099) .................................... 16,793,464
Value Line Cash Fund, Inc. (25,812,310 shares at net
asset value of $1.00 per share; which equals cost) ......... 25,812,310
------------
Total Assets ................................................... 190,717,207
------------
Liabilities
Annuitant Mortality Fluctuation Fund ........................... 1,667,881
Due to The Guardian Insurance & Annuity Company, Inc. .......... 285,490
------------
Total Liabilities .............................................. 1,953,371
------------
Net Assets -- Note 3 ............................................. $188,763,836
============
See notes to financial statements.
4
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<TABLE>
<CAPTION>
Guardian Value Line Value Line Value Line Value Line Value Line
Park Avenue Value Line Income Special Leveraged U.S. Gov. Cash
Combined Fund Fund Fund Situations Growth Securities Fund
------------ ------------ ----------- --------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends .......... $ 4,081,253 $ 1,450,555 $ 42,464 $ 215,960 $ -- $ 18,645 $ 1,383,796 $969,833
Expenses -- Note 4:
Mortality and expense
risk charges ................ 2,002,253 1,299,141 77,222 65,383 8,811 40,020 202,187 309,489
------------ ------------ ----------- --------- --------- --------- ----------- --------
Net investment income/
(expense) ..................... 2,079,000 151,414 (34,758) 150,577 (8,811) (21,375) 1,181,609 660,344
------------ ------------ ----------- --------- --------- --------- ----------- --------
Realized and Unrealized
Gain/(Loss) from
Investments
Realized gain/(loss)
from investments:
Net realized
gain/(loss)
from sale of
investments ............... (485,173) (53,483) (26,526) (21,945) 2,315 (11,960) (373,574) --
Reinvested realized
gain distributions ........ 6,073,252 4,750,309 1,147,498 52,641 48,663 74,141 -- --
------------ ------------ ----------- --------- --------- --------- ----------- --------
Net realized gain/(loss)
on investments ............ 5,588,079 4,696,826 1,120,972 30,696 50,978 62,181 (373,574) --
------------ ------------ ----------- --------- --------- --------- ----------- --------
Unrealized appreciation/
(depreciation) of
investments:
End of year ................. 24,468,941 27,324,802 (39,612) (768,312) 144,196 362,502 (2,554,635) --
Beginning of year ........... 38,374,021 35,407,460 1,495,555 (213,551) 184,204 605,174 895,179 --
------------ ------------ ----------- --------- --------- --------- ----------- --------
Change in unrealized
appreciation/(depreciation) (13,905,080) (8,082,658) (1,535,167) (554,761) (40,008) (242,672) (3,449,814) --
------------ ------------ ----------- --------- --------- --------- ----------- --------
Net realized and unrealized
gain/(loss) from investments ... (8,317,001) (3,385,832) (414,195) (524,065) 10,970 (180,491) (3,823,388) --
------------ ------------ ----------- --------- --------- --------- ----------- --------
Net Increase/(Decrease) in Net
Assets Resulting From Operations $ (6,238,001) $ (3,234,418) $ (448,953) $(373,488) $ 2,159 $(201,866) $(2,641,779) $630,344
============ ============ =========== ========= ========= ========= =========== ========
</TABLE>
See notes to financial statements.
5
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
COMBINED STATEMENT OF CHANGES IN NET ASSETS
Years Ended December 31, 1993 and 1994
<TABLE>
<CAPTION>
Guardian Value Line Value Line Value Line
Park Avenue Value Line Income Special Leveraged
Combined Fund Fund Fund Situations Growth
------------- ------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1993 Increase/(Decrease) from
Operations
Net investment income/(expense) $ 3,244,833 $ 998,537 $ (58,344) $ 134,279 $ (8,690) $ (27,472)
Net realized gain/(loss) from
sale of investments ........... 425,589 197,956 121,211 24,584 7,521 17,626
Reinvested realized gain
distributions ................. 7,301,274 5,009,127 626,331 824,811 36,068 170,526
Change in unrealized
appreciation/(depreciation)
of investments ................ 15,181,165 15,466,145 (128,579) (464,411) 56,816 362,814
------------- ------------- ----------- ----------- --------- -----------
Net increase/(decrease)
resulting from operations ..... 26,152,861 21,671,765 560,619 519,263 91,715 523,494
------------- ------------- ----------- ----------- --------- -----------
Contract Transactions
Net contract purchase
payments ...................... 9,734,044 6,208,397 286,522 487,695 12,343 87,317
Transfers between funds ........ -- 5,712,631 (1,029,070) (475,529) (47,214) 439,567
Administrative charges ......... (262,733) (166,279) (12,676) (9,642) (1,400) (6,805)
Redemptions and annuity
benefits ...................... (23,398,742) (10,213,188) (1,057,673) (721,359) (38,776) (297,575)
------------- ------------- ----------- ----------- --------- -----------
Net increase/(decrease)
from contract transactions .... (13,927,431) 1,541,561 (1,812,897) (718,835) (75,047) 222,504
------------- ------------- ----------- ----------- --------- -----------
Actuarial Increase in Reserves
for Contracts in Payment Period . 19,269 6,270 -- 507 -- 710
------------- ------------- ----------- ----------- --------- -----------
Total Increase/(Decrease) in Net
Assets .......................... 12,244,699 23,219,596 (1,252,278) (199,065) 16,668 746,708
Net Assets at December 31, 1992 .. 194,378,372 111,479,493 9,927,974 7,348,187 830,723 3,683,454
------------- ------------- ----------- ----------- --------- -----------
Net Assets at December 31, 1993 .. $ 206,623,071 $ 134,699,089 $ 8,675,696 $ 7,149,122 $ 847,391 $ 4,430,162
============= ============= =========== =========== ========= ===========
1994 Increase/(Decrease) from
Operations
Net investment income/(expense) $ 2,079,000 $ 151,414 $ (34,758) $ 150,577 $ (8,811) $ (21,375)
Net realized gain/(loss) from
sale of investments ........... (485,173) (53,483) (26,526) (21,945) 2,315 (11,960)
Reinvested realized gain
distributions ................. 6,073,252 4,750,309 1,147,498 52,641 48,663 74,141
Change in unrealized
appreciation/(depreciation)
of investments ................ (13,905,080) (8,082,658) (1,535,167) (554,761) (40,008) (242,672)
------------- ------------- ----------- ----------- --------- -----------
Net increase/(decrease)
resulting from operations...... (6,238,001) (3,234,418) (448,953) (373,488) 2,159 (201,866)
------------- ------------- ----------- ----------- --------- -----------
Contract Transactions
Net contract purchase payments . 6,617,648 4,241,358 329,177 260,955 27,652 94,924
Transfers between funds ........ -- 2,241,317 (13,316) (255,918) 1,933 (90,426)
Administrative charges ......... (237,095) (155,115) (11,312) (8,543) (1,248) (6,046)
Redemptions and annuity benefits (18,051,453) (8,152,557) (1,045,116) (598,689) (19,852) (416,218)
------------- ------------- ----------- ----------- --------- -----------
Net increase/(decrease) from
contract transactions ......... (11,670,900) (1,824,997) (740,567) (602,195) 8,485 (417,766)
------------- ------------- ----------- ----------- --------- -----------
Actuarial Increase in Reserves for
Contracts in Payment Period ..... 49,666 11,146 -- 316 -- 510
------------- ------------- ----------- ----------- --------- -----------
Total Increase/(Decrease) in Net
Assets .......................... (17,859,235) (5,048,269) (1,189,520) (975,367) 10,644 (619,122)
Net Assets at December 31, 1993 .. 206,623,071 134,699,089 8,675,696 7,149,122 847,391 4,430,162
------------- ------------- ----------- ----------- --------- -----------
Net Assets at December 31,
1994 -- Note 3 .................. $ 188,763,836 $ 129,650,820 $ 7,486,176 $ 6,173,755 $ 858,035 $ 3,811,040
============= ============= =========== =========== ========= ===========
</TABLE>
Value Line Value Line
U.S. Gov. Cash
Securities Fund
------------ ------------
1993 Increase/(Decrease) from
Operations
Net investment income/(expense) $ 1,594,328 $ 612,195
Net realized gain/(loss) from
sale of investments ........... 56,691 --
Reinvested realized gain
distributions ................. 634,411 --
Change in unrealized
appreciation/(depreciation)
of investments ................ (111,620) --
------------ ------------
Net increase/(decrease)
resulting from operations ..... 2,173,810 612,195
------------ ------------
Contract Transactions
Net contract purchase
payments ...................... 1,200,259 1,451,511
Transfers between funds ........ (265,198) (4,335,187)
Administrative charges ......... (25,404) (40,527)
Redemptions and annuity
benefits ...................... (3,579,113) (7,491,058)
------------ ------------
Net increase/(decrease)
from contract transactions .... (2,669,456) (10,415,261)
------------ ------------
Actuarial Increase in Reserves
for Contracts in Payment Period . 1,827 9,955
------------ ------------
Total Increase/(Decrease) in Net
Assets .......................... (493,819) (9,793,111)
Net Assets at December 31, 1992 .. 25,374,686 35,733,855
------------ ------------
Net Assets at December 31, 1993 .. $ 24,880,867 $ 25,940,744
============ ============
1994 Increase/(Decrease) from
Operations
Net investment income/(expense) $ 1,181,609 $ 660,344
Net realized gain/(loss) from
sale of investments ........... (373,574) --
Reinvested realized gain
distributions ................. -- --
Change in unrealized
appreciation/(depreciation)
of investments ................ (3,449,814) --
------------ ------------
Net increase/(decrease)
resulting from operations ..... (2,641,779) 660,344
------------ ------------
Contract Transactions
Net contract purchase payments . 623,245 1,040,337
Transfers between funds ........ (3,514,931) 1,631,341
Administrative charges ......... (21,264) (33,567)
Redemptions and annuity benefits (2,548,861) (5,270,160)
------------ ------------
Net increase/(decrease) from
contract transactions ......... (5,461,811) (2,632,049)
------------ ------------
Actuarial Increase in Reserves for
Contracts in Payment Period ..... 28,221 9,473
------------ ------------
Total Increase/(Decrease) in Net
Assets .......................... (8,075,369) (1,962,232)
Net Assets at December 31, 1993 .. 24,880,867 25,940,744
------------ ------------
Net Assets at December 31,
1994 -- Note 3 .................. $ 16,805,498 $ 23,978,512
============ ============
See notes to financial statements.
6
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
Note 1 -- Organization
The Guardian/Value Line Separate Account (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 October
6, 1980. GIAC is a wholly owned subsidiary of The Guardian Life Insurance
Company of America (Guardian Life). GIAC issues the deferred variable annuity
contracts offered through the Account. GIAC provides for accumulations and
benefits under the contracts by crediting the net premium purchase payments to
one or more investment divisions within the Account or to the Fixed Rate Option
(FRO). Amounts allocated to the FRO are maintained by GIAC in its general
account. The Guardian Park Avenue Funda, one of the investment options available
under the contracts, has an investment advisory agreement with Guardian Investor
Services Corporation, a wholly owned subsidiary of GIAC. A tax-qualified
investment division and a non-tax-qualified investment division have been
established within each investment option available in the Account.
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 annuity payments, are obligations of
GIAC.
Note 2 -- Significant Accounting Policies
The following is a summary of significant accounting policies of the
Account.
Investments
(a) Net proceeds of payments made by contractowners to the Account are
invested by the Account's investment divisions in shares of the corresponding
Funds at net asset value. All distributions made by a Fund are reinvested in
shares of the same Fund.
(b) The market value of investments 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 last in, first out
(LIFO) basis.
During the years ended December 31, 1994 and December 31, 1993, purchases
of shares of all of the Funds aggregated $37,368,355 and $36,962,886,
respectively. Aggregate sales of shares of all of the Funds amounted to
$40,735,309 and $40,102,007 in the years ended December 31, 1994 and December
31, 1993, respectively.
The Annuitant Mortality Fluctuation Fund
The Annuitant Mortality Fluctuation Fund is funded by GIAC and has been
established in response to various regulatory requirements and provides for any
possible adverse experience.
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 the tax law, no federal income taxes are payable by GIAC with respect
to the operations of the Account.
7
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
Owners of non-tax-qualified contracts are taxed directly on the investment
income and realized capital gains distributed by the underlying mutual funds to
the Account's non-tax-qualified divisions.
Annuity Reserves
Annuity reserves are computed for currently payable contracts according to
the 1971 Individual Annuity Mortality Table and the 1983 Individual Annuity
Table. The assumed interest rate is 4.0%. Charges to annuity reserves for
mortality and expense risks experience are reimbursed to GIAC if the reserves
required are less than originally estimated. If additional reserves are
required, GIAC reimburses the Account.
Note 3 -- Net Assets, December 31, 1994
<TABLE>
<CAPTION>
Accumulation
Unit Total
Units Owned Value Unit Value
----------- ----- ----------
<S> <C> <C> <C>
Tax-Qualified Accounts
The Guardian Park Avenue Fund ...................................... 2,011,941.125 $ 64.239324 $129,245,738
Value Line Fund, Inc. .............................................. 217,631.053 34.065614 7,413,736
Value Line Income Fund, Inc. ....................................... 169,481.371 36.177740 6,131,453
Value Line Special Situations Fund, Inc. ........................... 45,689.558 18.569957 848,453
Value Line Leveraged Growth Investors, Inc. ........................ 90,681.097 41.374494 3,751,885
Value Line U.S. Government Securities Fund, Inc. ................... 466,099.488 35.073507 16,347,744
Value Line Cash Fund, Inc. ......................................... 980,421.804 23.942278 23,473,532
Non-Tax-Qualified
Accounts
The Guardian Park Avenue Fund ...................................... 1,093.464 58.627708 64,107
Value Line Fund, Inc. .............................................. 2,469.413 29.335015 72,440
Value Line Income Fund, Inc. ....................................... 896.818 34.073730 30,558
Value Line Special Situations Fund, Inc. ........................... 518.522 18.480070 9,582
Value Line Leveraged Growth Investors, Inc. ........................ 250.558 41.316345 10,352
Value Line U.S. Government Securities Fund, Inc. ................... 548.945 35.074624 19,254
Value Line Cash Fund, Inc. ......................................... 6,883.813 23.942278 164,814
------------
187,583,648
Contracts receiving annuity payments ............................... 1,180,188
------------
$188,763,836
============
</TABLE>
Note 4 -- Administrative and Mortality and Expense Risk Charges
Contractual charges paid to GIAC include:
(1) an annual fee to cover GIAC's administrative expenses to be deducted
on each contract anniversary before annuitization and upon surrender
prior to annuitization. Such charge is $30 for a Single Purchase
Payment Contract and $35 for a Flexible Purchase Payment Contract;
(2) a charge for mortality and expense risks is computed daily and is
equal to an annual rate of 1% of the average daily net assets
applicable to contractowners;
8
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Continued)
(3) contingent deferred sales charges on certain partial or total
surrenders. These charges are assessed against redemptions and paid to
GIAC during the first six contract years for a Single Purchase Payment
Contract. For a Flexible Purchase Payment Contract, each payment is
subject to a contingent deferred sales charge for six years; and
(4) a charge for premium taxes deducted from either the contract payment
or upon annuitization, as determined in accordance with applicable
state law.
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.
Note 5 -- Accumulation Unit Values for the Current Year End and the Four Prior
Year Ends
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1994 1993 1992 1991 1990
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Tax-Qualified Accounts
The Guardian Park
Avenue Fund .......................... $ 64.239324 $ 65.820751 $ 55.265742 $ 46.327481 $ 34.615263
Value Line Fund, Inc. .................. 34.065614 36.013237 34.047914 32.846074 22.283864
Value Line Income
Fund, Inc. ............................ 36.177740 38.200993 35.635145 35.370728 27.798631
Value Line Special
Situations Fund, Inc. ................. 18.569957 18.562076 16.591003 17.355098 12.829595
Value Line Leveraged
Growth Investors, Inc. ................ 41.374494 43.392851 37.713144 39.049373 26.945753
Value Line U.S. ........................
Government Securities
Fund, Inc. ............................ 35.073507 39.653412 36.472675 34.650120 30.059693
Value Line Cash Fund,
Inc ................................... 23.942278 23.319713 22.851156 22.245770 21.215524
Non-Tax-Qualified Accounts
The Guardian Park
Avenue Fund ........................... 58.627708 60.070986 50.438005 42.280543 31.591446
Value Line Fund, Inc. .................. 29.335015 31.012168 29.319768 28.284828 19.189357
Value Line Income
Fund, Inc. ............................ 34.073730 35.979291 33.562683 33.313643 26.181916
Value Line Special
Situations Fund, Inc. .................. 18.480070 18.472220 16.510695 17.271094 12.767499
Value Line Leveraged
Growth Investors, Inc. ................ 41.316345 43.331875 37.660164 38.994527 26.907897
Value Line U.S. ........................
Government Securities
Fund, Inc. ............................ 35.074624 39.654667 36.473831 34.651219 30.060652
Value Line Cash Fund,
Inc ................................... 23.942278 23.319713 22.851156 22.245770 21.215524
</TABLE>
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors of The
Guardian Insurance & Annuity Company, Inc.
and Contractowners of The Guardian/Value Line Separate Account, "Value Guard"
In our opinion, the accompanying statement of assets and liabilities and the
related combined statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the investment
divisions relating to Guardian Park Avenue Fund, Value Line Fund, Value Line
Income Fund, Value Line Special Situations Fund, Value Line Leveraged Growth
Investors, Value Line U.S. Government Securities Fund and Value Line Cash Fund
(constituting The Guardian/Value Line Separate Account, "Value Guard," hereafter
referred to as the "Separate Account") at December 31, 1994, 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
generally accepted accounting principles. 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 generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1994 by correspondence with the transfer agents of the underlying
funds, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 10, 1995
10
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
December 31, 1994
The Guardian Park Avenue Fund
- --------------------------------------------------------------------------------
Common Stocks -- 91.5%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Aerospace and Defense -- 5.8%
112,400 General Dynamics Corp. $ 4,889,400
105,000 Litton Industries, Inc.* 3,885,000
93,800 Logicon, Inc. 2,802,275
30,000 Loral Corporation 1,136,250
36,400 Martin Marietta Corp. 1,615,250
77,000 McDonnell Douglas Corp. 10,934,000
133,950 Precision Castparts Corp. 2,712,488
155,000 Rockwell Int'l. Corp. 5,541,250
122,900 Thiokol Corp. 3,425,837
------------
36,941,750
- --------------------------------------------------------------------------------
Air Transportation -- 0.3%
82,500 Alaska Air Group,Inc.* 1,237,500
66,100 Mesa Airlines, Inc.* 603,162
------------
1,840,662
- --------------------------------------------------------------------------------
Appliance and Furniture -- 0.3%
117,400 Maytag Corp. 1,761,000
- --------------------------------------------------------------------------------
Automotive -- 2.6%
24,000 Borg Warner Automotive, Inc. 603,000
161,000 Echlin, Inc. 4,830,000
288,000 Ford Motor Co. 8,064,000
75,000 Magna International, Inc. 2,878,125
23,700 Mascotech, Inc. 305,137
------------
16,680,262
- --------------------------------------------------------------------------------
Broadcasting -- 1.5%
92,000 Capital Cities, ABC, Inc. 7,843,000
31,915 CBS, Inc. 1,767,292
------------
9,610,292
- --------------------------------------------------------------------------------
Building Materials and Homebuilders -- 0.6%
42,700 Coachmen Industries, Inc. 656,513
23,618 Hughes Supply, Inc. 433,981
38,000 Lennar Corp. 589,000
30,000 McGrath Rent Corp. 510,000
40,000 Ply-Gem Industries, Inc. 765,000
24,000 Skyline Corp. 462,000
7,200 Webb (Del) Corp. 126,900
37,300 Willcox & Gibbs, Inc.* 219,137
------------
3,762,531
- --------------------------------------------------------------------------------
Business Services -- 1.3%
66,100 Ceridian Corp.* 1,776,438
8,255 Olsten Corp. 262,096
159,100 Paychex, Inc. 6,443,550
------------
8,482,084
- --------------------------------------------------------------------------------
Capital Goods-Miscellaneous -- 0.4%
50,000 Aviall, Inc. 381,250
15,000 Cable Design Tech. Corp.* 247,500
105,000 Read-Rite Corp.* 1,949,063
------------
2,577,813
- --------------------------------------------------------------------------------
Chemicals -- 5.9%
74,000 Albemarle Corp. 1,026,750
77,800 Cambrex Corp. 2,022,800
112,700 Eastman Chemical Co. 5,691,350
139,700 E.I. Dupont De Nemours, Inc.* 7,858,125
72,600 Hercules, Inc. 8,376,225
55,000 Monsanto Co. 3,877,500
12,900 OM Group, Inc. 309,600
145,000 PPG Industries, Inc. 5,383,125
16,000 RPM, Inc. 300,000
18,000 Schulman A., Inc. 495,000
95,300 Sterling Chemicals, Inc.* 1,250,812
35,000 Union Carbide Corp. 1,028,125
------------
37,619,412
- --------------------------------------------------------------------------------
Coal -- 0.5%
118,000 Pittston Services Group 3,127,000
- --------------------------------------------------------------------------------
Conglomerates -- 0.8%
30,000 Kaman Corp. 330,000
11,000 Recoton Corp.* 206,250
95,000 Textron, Inc. 4,785,625
------------
5,321,875
- --------------------------------------------------------------------------------
Consumer Cyclicals-Miscellaneous -- 0.4%
82,300 De Beers Cons. Mines Ltd. 1,923,762
18,000 Toro Co. 517,500
------------
2,441,262
- --------------------------------------------------------------------------------
Containers -- 0.2%
61,750 Alltrista Corp.* 1,219,562
- --------------------------------------------------------------------------------
Cosmetics and Toiletries -- 0.0%
17,100 Helen of Troy Ltd.* 290,700
- --------------------------------------------------------------------------------
Drugs and Hospitals -- 5.3%
10,600 Acuson, Inc.* 172,250
264,200 Caremark International, Inc. 4,525,085
50,000 Circa Pharmaceuticals, Inc.* 893,750
41,500 Continental Med. Systems, Inc.* 257,800
23,877 Coram Healthcare Corp.* 393,971
14,200 Cytrx Corp.* 18,637
100,000 Eli Lilly & Co., Inc. 6,562,500
72,000 Humana, Inc.* 1,629,000
77,000 Johnson & Johnson 4,215,750
69,400 Liposome, Inc. 581,225
18,000 United Healthcare Corp. 812,250
100,000 Universal Health Svcs., Inc.* 2,450,000
238,400 U.S. Healthcare Systems, Inc. 9,834,000
50,000 WellpointHealth Networks, Inc.* 1,456,250
------------
33,802,468
- --------------------------------------------------------------------------------
* Non-income producing securities.
See Notes to Financial Statements.
11
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Electronics and Instruments -- 2.0%
200,000 Analogic Corp.* $ 3,800,000
25,000 Augat, Inc. 471,875
30,000 Dynatech Corp.* 990,000
25,000 Electroglas, Inc.* 834,375
39,800 Exabyte Corp.* 850,725
46,200 Hewlett Packard Co. 4,614,225
7,500 In Focus System, Inc.* 195,468
16,600 Methode Electronics, Inc. 282,200
17,600 W.W. Grainger, Inc. 1,016,400
------------
13,055,268
- --------------------------------------------------------------------------------
Energy-Miscellaneous -- 1.4%
129,500 Giant Industries, Inc.* 971,250
167,104 Holly Corp. 4,365,592
86,500 Howell Corp. 1,027,188
86,400 Tosco Corp. 2,516,400
------------
8,880,430
- --------------------------------------------------------------------------------
Entertainment -- 0.8%
49,900 Bally Entertainment Corp.* 305,638
6,410 GC Companies, Inc.* 168,263
107,418 Mattel, Inc. 2,698,877
6,000 National Gaming Corp.* 72,000
5,880 Viacom, Inc., Cl A* 244,755
44,552 Viacom, Inc., Cl B* 1,809,925
73,500 Viacom, Inc., Non-Voting* 82,688
------------
5,382,146
- --------------------------------------------------------------------------------
Fertilizer -- 0.8%
55,800 First Mississippi Corp. 1,395,000
34,800 Mississippi Chemical Corp.* 604,650
289,300 Terra Industries, Inc. 3,001,488
------------
5,001,138
- --------------------------------------------------------------------------------
Financial-Banks -- 4.5%
23,000 Central & Southern Hldgs. Co. 146,625
107,000 Chase Manhattan Corp. 3,678,125
115,618 Citicorp 4,783,695
18,000 Commonwealth Bankshares, Inc.* 159,750
55,211 Crestar Financial Corp. 2,077,314
42,300 Deposit Guaranty Corp.* 1,274,288
65,000 First Bank Systems Corp. 2,161,250
12,400 First Empire State Corp. 1,686,400
17,300 First Interstate Bancorp 1,169,913
32,226 Gateway Bancorp, Inc.* 362,542
92,500 Hawkeye Bancorporation 1,780,625
32,670 Hubco, Inc.* 722,824
57,000 Integra Financial Corp.* 2,344,125
17,970 Nationsbank Corp. 810,896
70,000 Premier Bancorp., Inc.* 1,111,250
123,241 Signet Banking Corp. 3,527,767
12,000 Southern National Corp. 229,500
4,100 Summit Bancorporation 79,437
4,375 Susquehanna Bancshares, Inc. 97,344
27,300 US Bancorp, Inc.* 573,300
------------
28,776,970
- --------------------------------------------------------------------------------
Financial-Others -- 4.0%
65,400 Colonial Group, Inc. 2,125,500
95,000 Dean Witter Discover & Co. 3,218,125
73,000 Duff & Phelps Corp. 629,625
10,000 Duff & Phelps Cr. Rating Co. 98,750
149,200 First USA, Inc. 4,904,950
89,400 Foothill Group, Inc. 1,341,000
136,800 Green Tree Acceptance, Inc. 4,155,300
28,300 Jefferies Group, Inc. 841,925
67,850 Legg Mason, Inc. 1,441,812
103,000 Lehman Bros. Holdings, Inc. 1,519,250
57,400 McDonald & Co. Investments, Inc. 638,575
111,900 Morgan Keegan, Inc. 1,314,825
28,900 Plaza Home Mortgage Corp.* 231,200
67,300 Raymond James Financial, Inc. 942,200
64,650 Charles Schwab Corp. 2,254,668
------------
25,657,705
- --------------------------------------------------------------------------------
Financial-Thrift -- 4.3%
9,600 Albank Fin'l. Corp. 223,200
75,000 Brooklyn Bancorp, Inc.* 2,268,750
88,750 Charter One Financial, Inc.* 1,686,250
47,000 Coastal Bank Svgs. Assn. - TX 675,625
239,199 Collective Bancorp, Inc. 4,066,383
3,713 Great Lakes Bancorp* 99,787
59,800 Loyola Capital Corp. 1,053,975
24,600 MAF Bancorp, Inc. 461,250
65,200 Maryland Fed. Bancorp, Inc. 1,507,750
75,000 ONBANCorp., Inc. 1,743,750
20,960 Pacific Crest Capital, Inc.* 89,080
84,800 Progressive Bank, Inc.* 1,971,600
171,000 Roosevelt Financial Group, Inc. 2,565,000
331,287 Sovereign Bancorp, Inc. 2,567,474
123,000 Standard Fed. Bk. - Troy, MI 2,936,625
91,300 TCF Financial Corp. 3,766,125
------------
27,682,624
- --------------------------------------------------------------------------------
Food, Beverage and Tobacco -- 2.0%
165,000 Archer Daniels Midland Co. 3,403,125
29,700 Brown-Forman Corp. 905,850
97,000 Coca-Cola Co. 4,995,500
73,700 IBP, Inc. 2,229,425
37,000 Ralcorp Holdings, Inc.* 823,250
9,000 Thorn Apple Valley, Inc. 256,500
------------
12,613,650
- --------------------------------------------------------------------------------
Footwear -- 0.5%
90,000 Reebok International Ltd. 3,555,000
- --------------------------------------------------------------------------------
See Notes to Financial Statements. *Non-income producing securities.
12
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Information Processing and Computers -- 9.0%
89,800 Amdahl Corp.* $ 987,800
46,200 Astro-Med, Inc. 496,650
15,000 Atria Software, Inc.* 431,250
82,200 Banctec, Inc.* 1,787,850
258,000 Computer Assoc. Int'l., Inc. 12,513,000
105,000 Compaq Computer Corp.* 4,147,500
26,000 Computer Sciences Corp.* 1,326,000
38,000 Cray Research, Inc.* 598,500
4,000 Electronics for Imaging, Inc.* 110,000
40,000 Fair Isaac & Co., Inc. 2,250,000
223,700 Int'l. Business Machine 16,441,950
18,700 Legent Corp.* 537,625
71,600 Network General Corp.* 1,839,225
220,000 Quantum Corp.* 3,327,166
50,500 Sungard Data Systems, Inc.* 1,944,250
250,600 Tandem Computers, Inc.* 4,291,525
38,900 Teradyne, Inc.* 1,317,737
224,900 Western Digital Corp.* 3,767,075
------------
58,115,103
- --------------------------------------------------------------------------------
Insurance -- 2.3%
55,000 AMBAC, Inc. 2,048,750
48,000 American Eagle Group, Inc. 402,000
74,000 Amer. Bankers Ins. Group, Inc. 1,776,000
22,700 Capital Guaranty Corp. 320,637
17,000 Capitol Amer. Fin'l. Corp. 391,000
89,400 Equitable Iowa Cos., Inc. 2,525,550
47,000 Jefferson Pilot Corp. 2,438,125
65,000 MBIA, Inc. 3,648,125
41,300 National Auto Credit, Inc.* 495,600
61,500 State Auto Financial Corp. 876,375
------------
14,922,162
- --------------------------------------------------------------------------------
Leisure Products -- 1.8%
121,500 Arctco, Inc. 2,354,063
180,000 Brunswick Corp. 3,397,500
67,500 Callaway Golf Co. 2,235,937
60,000 Harley-Davidson, Inc. 1,680,000
30,800 Sturm Ruger & Co., Inc. 873,950
64,200 Thor Industries, Inc. 1,243,875
------------
11,785,325
- --------------------------------------------------------------------------------
Lodging -- 1.7%
60,000 Hospitality Franchise Sys. Co.* 1,590,000
599,800 Host Marriott Corp.* 5,773,075
75,000 Marriott Int'l., Inc. 2,109,375
175,000 Prime Hospitality Corp.* 1,312,500
------------
10,784,950
- --------------------------------------------------------------------------------
Machinery and Equipment -- 6.3%
4,000 AGCO Corp. 121,500
155,000 Briggs & Stratton Corp. 5,076,250
45,000 Caterpillar, Inc. 2,480,625
47,200 Clark Equipment Co.* 2,560,600
133,729 Cummins Engine, Inc. 6,051,799
68,000 Dana Corp. 1,589,500
35,000 Deere & Co. 2,318,750
39,000 Dover Corp. 2,013,375
94,300 Eaton Corp. 4,667,850
155,600 Indresco, Inc.* 2,217,300
45,000 Millipore Corp. 2,176,875
37,000 Parker Hannifin Corp. 1,683,500
19,100 Pentair, Inc. 806,975
15,400 Robbins & Myers, Inc. 277,200
20,100 Roper Industries, Inc. 507,525
69,900 Tecumseh Products Co. 3,145,500
58,125 Varlen Corp. 1,511,250
35,000 York International Corp. 1,290,625
------------
40,496,999
- --------------------------------------------------------------------------------
Merchandising-Department Stores -- 1.5%
21,600 Bradlees, Inc. 249,917
39,000 Carson Pirie Scott & Co.* 741,000
75,000 Dillard Dept. Stores, Inc. 2,006,250
246,700 Federated Dept. Stores, Inc.* 4,748,975
36,000 J.C. Penney, Inc. 1,606,500
14,400 Ross Stores, Inc. 162,000
------------
9,514,642
- --------------------------------------------------------------------------------
Merchandising-Drugs -- 1.0%
50,000 Bergen Brunswig Corp. 1,043,750
13,300 Foxmeyer Health Corp. 197,838
83,000 McKesson Corp. 2,707,875
127,000 Rite Aid Corp. 2,968,625
------------
6,918,088
- --------------------------------------------------------------------------------
Merchandising-Food -- 1.4%
40,000 Albertson's, Inc. 1,160,000
63,600 American Stores Co. 1,709,250
69,500 Bruno's, Inc. 580,512
314,800 Casey's General Stores, Inc. 4,722,000
33,000 Smith Food and Drug Ctrs., Inc. 829,125
------------
9,000,887
- --------------------------------------------------------------------------------
Merchandising-Special -- 0.6%
55,900 Cato Corp. 405,275
210,500 CML Group, Inc. 2,131,313
78,800 Hechinger Co. 916,050
33,800 Waban, Inc.* 599,950
------------
4,052,588
- --------------------------------------------------------------------------------
*Non-income producing securities. See Notes to Financial Statements.
13
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Metals and Mining -- 2.7%
100,000 Alumax, Inc. $ 2,837,500
5,900 Brush Wellman, Inc. 102,513
12,000 Furon Co. 264,000
118,300 Magma Copper Co. 1,975,525
70,000 Phelps Dodge Corp. 4,331,250
435,002 Santa Fe Pacific Gold Corp. 5,600,651
43,200 Weirton Steel Corp.* 386,350
121,000 WHX Corp. 1,603,250
------------
17,101,039
- --------------------------------------------------------------------------------
Natural Gas -- 1.3%
216,400 Allegheny & Western Engy. Corp.* 2,272,200
93,500 Enron Corp. 2,851,750
118,300 Mitchell Energy & Dev. Corp. 2,218,125
16,700 Oneok, Inc. 300,293
92,500 USX Delhi Group 925,000
------------
8,567,368
- --------------------------------------------------------------------------------
Oil and Gas Producing -- 3.5%
63,100 Alexander Energy Corp.* 410,150
76,000 Anadarko Petroleum Corp. 2,926,000
41,900 Basin Exploration, Inc.* 460,900
115,000 Tom Brown, Inc.* 1,322,500
120,000 Chieftain International, Inc.* 1,215,000
156,500 Coho Energy, Inc.* 811,844
129,000 Dekalb Energy Co.* 2,741,250
153,000 Devon Energy Corp. 2,792,250
9,925 Forest Oil Corp.* 22,331
75,000 Global Natural Res., Inc.* 637,500
18,900 H S Resources, Inc. 333,112
140,000 Home Oil Ltd.* 1,470,000
64,800 Phoenix Resource Cos., Inc.* 3,078,000
105,000 Pogo Producing Co. 1,863,750
36,300 Snyder Oil Corp. 539,963
5,278 United Meridian Corp.* 76,531
71,100 Vintage Petroleum, Inc. 1,199,813
46,700 Wainoco Oil Ltd.* 222,540
------------
22,123,434
- --------------------------------------------------------------------------------
Oil-Integrated-Domestic -- 1.0%
107,900 Ashland Oil, Inc. 3,722,550
49,000 Murphy Oil Corp. 2,082,500
72,000 Tesoro Petroleum, Inc.* 666,950
------------
6,472,000
- --------------------------------------------------------------------------------
Oil Services -- 0.9%
67,500 Energy Services, Inc.* 826,875
209,400 Nabors Industries, Inc.* 1,361,100
86,300 Offshore Logistics, Inc.* 1,121,900
8,700 Offshore Pipelines, Inc. 196,838
130,000 Smith International, Inc.* 1,625,000
48,000 Weatherford International, Inc.* 468,000
------------
5,599,713
- --------------------------------------------------------------------------------
Paper and Forest Products -- 1.7%
50,000 Federal Paper Board, Inc. 1,450,348
81,400 Louisiana Pacific Corp. 2,218,150
183,000 Rayonier, Inc. 5,581,500
29,000 Willamette Industries, Inc. 1,377,500
------------
10,627,498
- --------------------------------------------------------------------------------
Publishing and Printing -- 0.1%
31,000 Bowne & Co., Inc. 538,625
- --------------------------------------------------------------------------------
Railroads -- 1.2%
125,000 Illinois Central Corp. 3,843,750
225,000 Santa Fe Pacific Corp. 3,937,500
------------
7,781,250
- --------------------------------------------------------------------------------
Restaurants -- 0.4%
176,700 Applebees Int'l., Inc. 2,363,363
7,300 Wendy's International, Inc. 104,937
------------
2,468,300
- --------------------------------------------------------------------------------
Semiconductor -- 3.9%
138,800 Adv. Micro-Devices, Inc.* 3,452,650
26,000 Analog Devices, Inc.* 913,250
30,700 Atmel Corp.* 1,028,450
38,000 Cypress Semiconductor Corp.* 878,750
45,000 LSI Logic Corp.* 1,816,875
149,750 Micron Technology, Inc. 6,607,719
47,300 Motorola, Inc. 2,737,488
14,000 Novellus Systems, Inc.* 700,000
94,500 Texas Instruments, Inc. 7,075,687
------------
25,210,869
- --------------------------------------------------------------------------------
Telecommunication -- 1.3%
17,000 ADC Telecommunication, Inc.* 850,000
114,300 Andrew Corp.* 5,972,175
2,700 Communication Systems, Inc. 33,750
32,000 SBC Communications 1,292,000
------------
8,147,925
- --------------------------------------------------------------------------------
Textile-Apparel and Production -- 0.9%
113,000 Fieldcrest Cannon, Inc.* 2,881,500
101,300 Wellman, Inc. 2,861,725
------------
5,743,225
- --------------------------------------------------------------------------------
Transportation-Miscellaneous -- 0.1%
109,400 Maritrans, Inc. 601,700
- --------------------------------------------------------------------------------
Truckers -- 0.7%
90,300 Arkansas Best Corp. 1,094,887
34,000 Arnold Industries, Inc. 705,500
59,000 FRP Pptys., Inc.* 1,084,125
4,000 Landstar System, Inc.* 131,000
55,000 Werner Enterprises, Inc. 1,306,250
------------
4,321,762
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $506,205,240) 586,979,056
- --------------------------------------------------------------------------------
See Notes to Financial Statements. *Non-income producing securities.
14
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Convertible Preferred Stocks -- 0.5%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
9,310 Forest Oil Corp.* $ 86,118
29,600 Noble Drilling Corp.* 969,400
33,300 Snyder Oil Corp. 1,998,000
- --------------------------------------------------------------------------------
Total Convertible Preferred
Stocks (Cost $2,460,329) 3,053,518
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Convertible Bonds -- 0.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 900,000 Mediq, Inc. 7.25%
Deb., due 6/1/06 $ 567,000
1,755,000 Richardson Electronics Ltd.
7.25% Deb., due 12/15/06 1,307,475
- --------------------------------------------------------------------------------
Total Convertible Bonds
(Cost $2,426,262) 1,874,475
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government Security -- 1.7%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$11,000,000 U.S. Treasury Notes,
4.25% due 7/31/95 $ 10,841,820
- --------------------------------------------------------------------------------
Total U.S. Government Security
(Cost $11,006,102) 10,841,820
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 2.8%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$17,779,000 State Street Bank & Trust
repurchase agreement,
dated 12/30/94, maturity
value $17,789,174, 5.15%,
due 1/3/95 (collateralized
by $18,070,000 U.S. Trea-
sury Notes, 6.125% due
7/15/96) 1/3/95 $ 17,779,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $17,779,000) 17,779,000
- --------------------------------------------------------------------------------
Total Investments -- 96.8%
(Cost $539,876,933) 620,527,869
Cash, Receivables and Other Assets
Less Payables -- 3.2% 20,389,158
- --------------------------------------------------------------------------------
Net Assets -- 100.0% $640,917,027
- --------------------------------------------------------------------------------
*Non-income producing securities. See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------
ASSETS
Investments, at identified cost* $539,876,933
- --------------------------------------------------------------------------------
Investments, at market 602,748,869
Repurchase agreements 17,779,000
- --------------------------------------------------------------------------------
Total Investments 620,527,869
Cash 695
Foreign currency (Cost $232,642) --
Receivable for securities sold 37,861,147
Receivable for fund shares sold 919,242
Dividends receivable 800,653
Interest receivable 211,818
Deferred organization expenses -- Note 6 --
Foreign tax receivable --
Other assets 7,724
- --------------------------------------------------------------------------------
Total Assets 660,329,148
- --------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 17,014,730
Payable for fund shares redeemed 192,623
Payable for open forward currency
contracts -- Note 4 --
Accrued expenses 201,729
Foreign tax withholding 282
Distributions payable 685,765
Due to affiliates -- Note 2 1,316,992
- --------------------------------------------------------------------------------
Total Liabilities 19,412,121
- --------------------------------------------------------------------------------
Net Assets $640,917,02
- --------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS
Shares of beneficial interest of $0.01 par
value outstanding (unlimited number of
shares authorized) $ 238,345
Paid-in capital 558,425,350
Undistributed net investment income 81,001
Accumulated net realized gain on
investments 1,521,395
Net unrealized appreciation
of investments 80,650,936
- --------------------------------------------------------------------------------
Net Assets $640,917,027
- --------------------------------------------------------------------------------
Shares of beneficial interest
outstanding -- $0.01 par value 23,834,332
- --------------------------------------------------------------------------------
Net Asset Value Per Share $26.89
- --------------------------------------------------------------------------------
Maximum Offering Price Per Share
(Net asset value x 104.71%)** $28.16
- --------------------------------------------------------------------------------
* Includes repurchase agreements.
** Based on sale of less than $100,000. On sale of $100,000 or more,
the offering price is reduced.
See Notes to Financial Statements.
16
<PAGE>
The Guardian Park Avenue Fund
(Continued)
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended December 31, 1994
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Dividends $ 9,621,565
Interest 2,475,337
Other income 33,108
- --------------------------------------------------------------------------------
12,123,336
Less: Foreign tax withheld 6,674
- --------------------------------------------------------------------------------
Total Income 12,123,336
- --------------------------------------------------------------------------------
Expenses:
Investment advisory fees -- Note 2 3,046,391
12b-1 fees -- Note 3 913,918
Transfer agent fees 786,224
Custodian fees 173,934
Printing expense 99,300
Registration fees 61,376
Audit fees 19,500
Trustees' fees -- Note 2 19,000
Insurance expense 7,360
Legal fees 3,473
Other 729
- --------------------------------------------------------------------------------
Total Expenses 5,131,205
- --------------------------------------------------------------------------------
Net Investment Income 6,992,131
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/
(LOSS) ON INVESTMENTS
Net realized gain on investments --
Note 1 14,157,157
Net change in unrealized appreciation of
investments -- Note 4 (30,003,248)
- --------------------------------------------------------------------------------
Net Realized and Unrealized Loss on
Investments (15,846,091)
- --------------------------------------------------------------------------------
NET (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (8,853,960)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Ended December 31,
1994 1993
- --------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 6,992,131 $ 8,694,524
Net realized gain on
investments 14,157,157 27,037,836
Net change in unrealized
appreciation/(depreciation) on
investments (30,003,248) 41,810,865
- --------------------------------------------------------------------------------
Net Increase/(Decrease) in
Net Assets Resulting
from Operations (8,853,960) 77,543,225
- --------------------------------------------------------------------------------
Distributions to Shareholders:
Net investment income (7,003,961) (8,512,189)
Distribution in excess of net
investment income -- (193,786)
Net realized gain on investments (22,969,311) (20,235,237)
- --------------------------------------------------------------------------------
Total Distributions to
Shareholders (29,973,267) (28,941,212)
- --------------------------------------------------------------------------------
From Capital Share Transactions:
Net increase/(decrease) in net
assets from capital share
transactions -- Note 7 119,550,874 175,931,543
- --------------------------------------------------------------------------------
Net Increase in
Net Asset 80,723,637 224,533,556
NET ASSETS:
Beginning of period 560,193,390 335,659,834
- --------------------------------------------------------------------------------
End of period* $640,917,027 $560,193,390
- --------------------------------------------------------------------------------
* Includes undistributed net
investment income of: $ 81,001 $ 92,831
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Notes to
Financial Statements
- --------------------------------------------------------------------------------
December 31, 1994
The Guardian Park Avenue Fund
Note 1. Accounting Policies
The Guardian Park Avenue Fund (the "Fund") is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (1940 Act). GPAF, originally organized as a Delaware
corporation in 1970, was reorganized into a Massachusetts business trust on
April 28, 1989. On December 30, 1992, a majority of the outstanding shares of
GPAF voted in favor of reorganizing the Fund as a series of the Park Avenue
Portfolio, also a Massachusetts business trust. The reorganization took effect
at the close of business on February 12, 1993. Significant accounting policies
of the Fund are as follows:
Investments
Equity and debt securities listed on domestic exchanges are valued at the
closing sales prices on such exchanges, or, lacking any sales, at the mean
between closing bid and asked prices. Securities traded in the over-the-counter
market are valued using the last sales price, when available. Otherwise,
over-the-counter securities are valued at the mean between the bid and asked
prices or yield equivalents as obtained from one or more dealers that make a
market in the securities.
Certain debt securities may be valued each business day by an independent
pricing service ("Service") approved by the Board of Trustees. Debt securities
for which quoted bid prices, in the judgment of the Service, are readily
available and representative of the bid side of the market, are valued at the
mean between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other debt securities that are
valued by the Service are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
Other securities, including securities, for which market quotations are not
readily available, including certain mortgage-backed securities and restricted
securities, are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Trustees.
Repurchase agreements are carried at cost which approximates market value
(see Note 4). Investment transactions are recorded on the date of purchase or
sale.
Net realized gain or loss on sales of investments is determined on the
basis of identified cost. Interest income, including amortization of premium and
discount, is recorded when earned. Dividends are recorded on the ex-dividend
date.
Distributions to Shareholders
GPAF distributes each year as dividends or capital gains distributions
substantially all realized earnings by the Fund, if any.
All dividends or distributions to the shareholders are recorded on the
ex-dividend date. Such distributions are determined in conformity with federal
income tax regulations. Differences between the recognition of income on an
income tax basis and a recognition of income based on generally accepted
accounting principles basis may cause temporary overdistributions of net
realized gains and net investment income.
Federal Income Taxes
The Fund qualifies and intends to remain qualified to be taxed as a
"regulated investment company" and as such (and by complying with the applicable
provisions of the Internal Revenue Code of 1986, as amended (Code)) will not be
subject to federal income tax on taxable income (including any realized capital
18
<PAGE>
gains) which is distributed to shareholders. Therefore, no federal income tax
provision is required.
Note 2. Investment Advisory Agreements and Payments to Related Parties
The Fund has an investment advisory agreement with Guardian Investor Services
Corporation (GISC), a wholly-owned subsidiary of The Guardian Life Insurance
Company of America. The investment advisory agreement provides, among other
things, for the quarterly payment by the Fund of a fee calculated at an annual
rate of one-half of 1% of the average daily net assets of the Fund.
In addition, pursuant to the investment advisory agreement, if total
expenses of the Fund, as defined, exceed 1% per annum of the average daily net
asset value of the Fund, GISC has agreed to assume any such excess. Total
expenses of the Fund did not exceed this limitation for the year ended December
31, 1994.
The Fund has a distribution agreement with GISC under which GISC agrees to
assist as needed in the sale and distribution of the Fund shares when sold with
a sales charge. As compensation for its services, GISC received aggregate sales
commissions of $1,935,806 for the year ended December 31, 1994.
The aggregate remuneration paid by the Fund to its unaffiliated trustees
($500 per meeting plus and annual stipend of $1,000) amounted to $19,000 for the
year ended December 31, 1994.
Note 3. Underwriting Agreement and Distribution Plan
The Fund has entered into an Underwriting Agreement with GISC pursuant to which
GISC serves as the principal underwriter for shares of the Fund. In addition,
GISC and the Fund has entered into a Distribution Plan and Agreement pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Plan"). Pursuant to
the Plan the Fund pays GISC, on a monthly basis, a distribution fee of up to
.15% on an annual basis of its average daily net assets. Under the Plan, GISC
uses the fees received from the Fund to pay distribution expenses incurred
during the fiscal year, including the payment of fees to dealers selling shares
of the Fund, the payment of advertising costs and the payment for the
preparation, printing and distribution of prospectuses to prospective investors.
Note 4. Repurchase Agreements
Collateral under repurchase agreements take the form of either cash or fully
negotiable U.S. Government securities. Repurchase agreements are fully
collateralized (including the interest earned thereon) and marked to market
daily while the agreements remain in force. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Fund will require the seller to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults, the Fund maintains the right to sell the collateral and may claim any
resulting loss against the seller. The Board of Trustees evaluates the
creditworthiness of broker-dealers and banks engaged in repurchase agreements
with the Fund. The Fund will not enter into repurchase agreements for more than
one week's duration (or invest in any other securities which are not readily
marketable) if more than 10% of its net assets would be so invested. On December
30, 1992, the shareholders of GPAF voted to amend the Fund's fundamental
investment policies to permit up to 15% of the Fund's net assets to be invested
in securities which are not readily marketable, including repurchase agreements
which mature in more than seven days.
Note 5. Investment Transactions
Purchases and proceeds from sales of securities (excluding short-term
securities) amounted to $409,156,798 and $303,470,566, respectively, during the
year ended December 31, 1994.
Gross unrealized appreciation and depreciation of investments aggregated
$103,920,844 and $23,269,908, respectively, resulting in net unrealized
appreciation of $80,650,936 at December 31, 1994.
The cost of investments owned at December 31, 1994 for Federal income tax
purposes was the same for financial reporting purposes.
19
<PAGE>
Note 6. Transactions in Fund Shares
The Guardian Park Avenue Fund
Year Ended December 31, 1994
- --------------------------------------------------------------------------------
Shares Amount
- --------------------------------------------------------------------------------
Shares sold 6,037,382 $170,046,951
Shares issued to shareholders in
reinvestment of dividends from
net investment income and
net realized gain on sales of
investments 1,053,246 28,635,093
- --------------------------------------------------------------------------------
7,090,628 198,682,044
Less shares repurchased (2,821,719) (79,131,170)
- --------------------------------------------------------------------------------
Net Increase 4,268,909 $119,550,874
================================================================================
Year Ended December 31, 1993
- --------------------------------------------------------------------------------
Shares Amount
- --------------------------------------------------------------------------------
Shares sold 6,810,199 $192,431,183
Shares issued to shareholders in
reinvestment of dividends from
net investment income and
net realized gain on investments 978,921 27,758,712
- --------------------------------------------------------------------------------
7,789,120 220,189,895
Less shares repurchased (1,560,744) (44,258,352)
- --------------------------------------------------------------------------------
Net Increase 6,228,376 $175,931,543
================================================================================
Note 7. Line of Credit
A $20,000,000 line of credit available to The Guardian Park Avenue Fund has been
established with Morgan Guaranty Trust Company. The rate of interest charged on
any borrowings is based upon the prevailing Federal Funds rate at the time of
the loan plus .25% calculated on a 360 day basis per annum. For the year ended
December 31, 1994, the Fund has not borrowed against this line of credit.
20
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
Selected data for a share of beneficial interest outstanding throughout the
years indicated:
<TABLE>
<CAPTION>
========================================================================================================================
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year $28.63 $25.17 $22.23 $18.26 $21.56 $20.46 $18.63 $20.74 $21.20 $18.17
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment
income 0.31 0.50 0.45 0.65 0.68 0.92 0.60 0.47 0.35 0.44
Net realized and
unrealized gain/
(loss) on
investments (0.72) 4.56 4.05 5.71 (3.28) 3.88 3.23 0.20 3.33 5.12
- -------------------------------------------------------------------------------------------------------------------------
Net increase/
(decrease) from
investment
operations (0.41) 5.06 4.50 6.36 (2.60) 4.80 3.83 0.67 3.68 5.56
- -------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
Dividends from net
investment income (0.31) (0.50) (0.44) (0.66) (0.70) (0.98) (0.55) (0.60) (0.33) (0.49)
- -------------------------------------------------------------------------------------------------------------------------
Distributions from
net realized gain
on investments (1.02) (1.10) (1.12) (1.73) -- (2.72) (1.45) (2.18) (3.81) (2.04)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (1.33) (1.60) (1.56) (2.39) (0.70) (3.70) (2.00) (2.78) (4.14) (2.53)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $26.89 $28.63 $25.17 $22.23 $18.26 $21.56 $20.46 $18.63 $20.74 $21.20
- -------------------------------------------------------------------------------------------------------------------------
Total return* (1.44%) 20.28% 20.48% 35.16% (12.21%) 23.66% 20.78% 2.95% 18.38% 32.98%
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of
year (000's
omitted) $640,917 $560,193 $335,660 $270,095 $216,457 $228,190 $176,000 $157,045 $136,243 $89,617
Ratio of expenses
to average net
assets 0.84% 0.81% 0.68% 0.67% 0.69% 0.70% 0.69% 0.68% 0.71% 0.70%
Ratio of net
investment income
to average net
assets 1.15% 1.89% 1.94% 2.96% 3.51% 4.01% 2.82% 2.08% 1.79% 2.48%
Portfolio
turnover 54% 46% 64% 57% 47% 47% 58% 50% 48% 80%
========================================================================================================================
* Excludes effect of sales load.
</TABLE>
21
<PAGE>
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP
Independent Auditors
- --------------------------------------------------------------------------------
Board of Trustees and Shareholders
The Guardian Park Avenue Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments of The Guardian Park Avenue Fund as of
December 31, 1994, and the related statements of operation for the year then
ended, and the statements of changes in net assets and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund at December 31, 1994, the results of its operations for the year then ended
and the changes in its net assets and financial highlights for each of the
indicated periods, in conformity with generally accepted accounting principles.
New York, New York
February 10, 1995
/s/ Ernst & Young LLP
22
<PAGE>
[Logo] The Guardian (R)
The Guardian
Insurance & Annuity
Company, Inc.
A wholly owned subsidiary of
The Guardian Life Insurance
Company of America
Annual Report
to Contractowners
[Logo]
Value Guard
The Guardian/Value Line
Separate Account
Executive Offices
201 Park Avenue South
New York, NY 10003
Customer Service Office
P.O. Box 26210
Lehigh Valley, PA 18002-6210
1-800-221-3253
December 31, 1994
[Logo] The Guardian (R) BULK RATE MAIL
U.S. POSTAGE PAID
The Guardian JERSEY CITY, NJ
Insurance & Annuity PERMIT NO. 120
Company, Inc.
201 Park Avenue South
New York, NY 10003
