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Table of Contents
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Performance Summary 2
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Letter to Shareholders 3
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The Guardian Park Avenue Fund
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Interview with Charles E. Albers 4
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Fund Profile 6
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Financials
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The Guardian/Value Line Separate Account 8
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The Guardian Park Avenue Fund 16
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- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
- -----------------------------------------------
Objective: Long-term growth of capital
- -----------------------------------------------
Portfolio: At least 80% common stocks and
securities convertible into
common stocks
- -----------------------------------------------
Inception: June 1, 1972
- -----------------------------------------------
Net Assets at December 31, 1996: $1,428,191,372
- -----------------------------------------------
"We believe that soundly-based quantitative
models provide a valuable tool to the equity
portfolio manager. At the same time, fast-breaking
news and unusual investment issues require the
balanced judgment of a capable portfolio manager.
We believe the best path to consistent returns, in
excess of the indexes, requires the synergistic
results of combining good quantitative tools with
good manager judgment."
--Charles E. Albers, C.F.A.
Portfolio Manager
<PAGE>
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Performance Summary
- -----------------------------------------------
[GRAPHICAL REPRESENTATION OF GUARDIAN LIFE BUILDING]
- --------------------------------------------------------
Investment Option Total Return*
- ----------------- -------------
The Guardian Park Avenue Fund ............. 25.24%
Value Line Leveraged Growth Investors ..... 21.10%
Value Line Special Situations Fund ........ 6.19%
Value Line Fund ........................... 21.32%
Value Line Income Fund .................... 16.22%
Value Line U.S. Govt. Securities Fund ..... 2.90%
Value Line Cash Fund ...................... 3.93%
- --------------------------------------------------------
Fixed-Rate Option
- -----------------
The annual rates of interest for amounts deposited
or renewed (on a contract anniversary) in the Fixed-Rate
Option during 1996 were as follows: for the month of
January, 5.10%; for the months of February through May,
5.00%; and for the months of June through December,
5.25%.
Rates paid by the Fixed-Rate Option are subject to
change at any time, 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.
- --------------------------------------------------------
* The chart above shows the total returns for each investment option under
Value Guard based on the percentage change in unit values during the period
January 1, 1996 through December 31, 1996. In contrast to the returns
presented elsewhere, changes in unit values reflect the effects of
mortality and expense risk charges as well as each option's expenses to
give you a better picture of an investment option's performance under the
contract. Total return performance figures stated above do not, however,
reflect the annual contract administration charge or possible withdrawal
charges. Deduction of these amounts would reduce the stated total returns.
Past performance is not a guarantee of future results. Investment returns
and principal value will vary with market conditions.
You will receive, under a separate cover, annual reports for the Value Line
funds (available under Value Guard) shortly.
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2
<PAGE>
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Dear Contractowner:
- ---------------------------------------
[PHOTO]
Joe D. Sargent, CLU
President & CEO
As the President and Chief Executive Officer of The Guardian Insurance &
Annuity Company, Inc. (GIAC) and its parent, The Guardian Life Insurance Company
of America, I am pleased to introduce this annual report on the performance
results of your contract's separate account and its underlying investment
options for the year ended December 31, 1996.
On Our Ratings
Once again, we are proud to report that as of December 31, 1996, the date
of this report, both GIAC and its parent, The Guardian Life Insurance Company of
America, continue to enjoy excellent ratings from four of the nation's leading
insurance company evaluators: Moody's, Standard & Poor's, A.M. Best, and Duff &
Phelps. GIAC's solid ratings reflect its ability to meet its guarantee of your
contract's Fixed-Rate Option and pre-retirement death benefit. However, these
ratings do not apply to Value Guard's underlying variable investment options,
which are subject to the risks of investing in securities. We are very proud
of our ratings as they reflect the strength of the company standing behind the
contract's guarantees.
Our Commitment to You
We at The Guardian are proud of our tradition of commitment to you, our
contractowners. Charles Albers, portfolio manager for the Guardian Park Avenue
Fund, and I invite you to read his interview to learn more about the strategies
he used to manage your investment option during 1996.
Thank you for continuing to invest for your future through GIAC.
Regards,
/s/ JOSEPH D. SARGENT
Joseph D. Sargent, CLU
President & Chief Executive Officer
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3
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
- ---------------------------------------
[PHOTO]
Charles E. Albers, C.F.A.
Portfolio Manager
Q. 1996 was another outstanding year for the Fund. What is your assessment of
how the Fund performed?
A. The Fund had excellent performance in 1996, both in absolute and relative
terms. In absolute terms, the Fund produced a total return to shareholders of
26.5%, after expenses.(1) For the second year in a row, following 34.3% in 1995,
the Fund was able to produce excellent absolute returns. The Fund's 1996 return
of 26.5% also represented a solid return on a relative basis, when comparing the
Fund's returns to the average return of 19.2% shown by all Lipper U.S. Growth
Funds during the same period.(2) The Fund's performance ranked it solidly in the
top decile within Lipper's growth fund category, ranking number 63 out of 669
U.S. equity growth funds. The Fund also bettered the S&P 500 Composite Index,(5)
which returned 22.8%.
Of course, from the shareholders' viewpoint, it's really the long-term
results that count the most. Here too, the Fund has done well, placing it in the
top 5% of Lipper Growth Funds over the last 5 years, ranking number 12 out of
255 for the 5-year period ended December 31, 1996. The Fund ranked number 22 out
of 163 similar funds for the 10-year period and number 8 out of 111 for the
15-year period ended December 31, 1996.
According to Lipper,(3) the Fund has ranked in the top 10 of all U.S.
Equity funds over the 15-year period through year-end 1996 and has also earned a
spot on Barron's Magazine's "list of winners".(4) Clearly, our investment
methods have withstood the test of time.
Q. What factors affected Fund performance in 1996?
A. Two factors deserve special mention here. First, for the second year in a
row, large-cap stocks outperformed small-cap stocks, as can be seen in the
following table:
Total Return %
------------------
1995 1996
------ ------
Large-Cap (S&P 500) +37.4% +22.8%
Small-Cap (Russell 2000)(6) +28.4% +16.5%
------ ------
Difference +9.0% +6.3%
Fortunately, we perceived early in 1995 that a shift to large-caps would be
advantageous, and we tilted the GPAF portfolio accordingly, as shown in the
chart below. That shift had a very positive impact on investment performance in
both 1995 and 1996.
Weighted Average Market Capitalization
($ Billions)
[Bar Chart]
12/31/94 6/30/95 12/31/95 6/30/96 12/31/96
-------- ------- -------- ------- --------
S&P 22.0 26.2 30.6 34.4 39.3
GPAF 6.0 14.9 24.6 34.7 37.7
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents total return for Class A shares--returns for Class B
shares would be lower to reflect higher operating expenses associated with
the B share class. Total return figures do not take into account the
current maximum sales charges except where noted. Returns represent past
performance and are not a guarantee of future results. Investment return
and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Prior to August
25, 1988, shares of the Fund were offered at a higher sales charge, so
actual returns would have been somewhat lower.
(2) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service and its 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. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted.
(3) Lipper rankings were reported in Lipper's Mutual Funds Performance Analysis
Special Report 4th Quarter 1996. Lipper rankings are based on total return
and do not take into account any deductions for sales loads.
(4) As reported in Barron's Magazine, dated January 6, 1997.
(5) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The S&P Index is not available for direct investment and its returns do not
reflect the fees and expenses that have been deducted from the Fund.
Likewise, return figures for the S&P 500 Index do not reflect any sales
charges that an investor may have to pay when purchasing or redeeming
shares of the Fund.
(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.
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4
<PAGE>
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The other factor which had a significant impact on 1996 results was our
proprietary stock scoring system. This system has historically provided us solid
guidance in stock selection, and this record continued into 1996. The predictive
power of this quantitative tool during 1996 can be seen in the table below.
1996 Price Performance (%)
--------------------------
Stock Scoring System S&P 500 Next 1500
Ranking Universe Stocks
- -------------------- -------- ------
Top Quintile 19.4% 23.7%
Universe Average 16.9% 15.2%
Bottom Quintile 9.5% 6.3%
This table shows that, within the S&P 500 stock universe, the stock scoring
system's top-ranked quintile (20%) of stocks appreciated 19.4%, approximately
10% better than the S&P 500 stocks in the system's bottom-ranked quintile.
Moreover, in the "next 1500" universe of smaller stocks, the spread between the
top and bottom quintiles was much greater at 17.4%. Generally, we find that the
predictive power of our models is greater within our universe for smaller cap
stocks.
Q. What strategies did you use to manage the Fund during 1996?
A. There was no change in our strategic approach to managing the portfolio
during 1996. We believe that soundly-based quantitative models provide a
valuable tool to the equity portfolio manager. At the same time, fast-breaking
news and unusual investment issues require the balanced judgment of a capable
portfolio manager. We believe the best path to consistent returns, in excess of
the indexes, requires the synergistic results of combining good quantitative
tools with good manager judgment.
Our quantitative tools look at the portfolio two different ways: "top-down"
and "bottom-up." The "top-down" approach involves a cluster of different
predictive models that we use to identify which portfolio style has the most
attractive performance prospects. The "bottom-up" approach uses our proprietary
stock scoring system to identify specific attractive stocks within our 2000
stock research universe. We believe that both the "top-down" and "bottom-up"
perspectives are important, and the best results can be achieved by combining
them both within one portfolio.
Q. What have been the portfolio's weights in different economic sectors, and how
have these weightings affected performance?
A. The attached table shows the Fund's portfolio weightings for all of the major
economic sectors for the year ended December 31, 1996. As you can see, our three
largest positions were in Financial (25.6%), Consumer Staples (19.3%) and Energy
(18.1%). During 1996, the portfolio's relative weightings in the different
sectors contributed positively to the Fund's good relative performance.
Specifically, the Fund's two most overweighted sectors at 12/31/96, relative to
the S&P 500, were in Financials and Energy. The Fund overweighted the Financial
sector by 10.6% and the Energy sector by 8.4%. Both of these sectors
outperformed the market during the year.
Q. Looking ahead to 1997, how will you be managing the Fund?
A. We continue to believe that well-established, large-cap companies have the
better prospects in 1997. This view is supported both by our quantitative "style
predictor" models and also by our fundamental investment judgment. The current
business cycle expansion is in its mature stage and competitive business
pressures are intensifying in many industries and, thus, overall profit growth
is slowing. We expect this to continue in 1997. In such an environment, we
believe it is the high-quality large-cap companies that are in the best position
to sustain growth of sales and profits. And, the logic is perfectly clear: the
stock prices of those high-quality companies should do fairly well, following
the relatively good fundamental company profits.
As always, we will stay attuned to the changing investment environment. Our
goal is to produce superior results for our shareholders on a consistent basis.
- --------------------------------------------------------------------------------
5
<PAGE>
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- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund Profile
as of December 31, 1996
- -------------------------------------------------------
PIE CHART:
Cash & Cash Equivalents 4%
Common Stock 96%
Portfolio Composition
The Guardian Park Avenue Fund portfolio holds 302 securities in a variety
of economic sectors. The portfolio manager's goal is to position the portfolio
for consistent performance in both "bull" and "bear" markets.
- -----------------------------------------------
Guardian Park Avenue Fund--
Top 10 Holdings as of 12/31/96
1 General Electric 2.99%
- -----------------------------------------------
2 Citicorp 2.53%
- -----------------------------------------------
3 Exxon Corporation 2.23%
- -----------------------------------------------
4 Intel Corporation 2.23%
- -----------------------------------------------
5 Merck & Co. 2.22%
- -----------------------------------------------
6 McDonnell Douglas 2.21%
- -----------------------------------------------
7 Johnson & Johnson 2.11%
- -----------------------------------------------
8 Philip Morris 2.11%
- -----------------------------------------------
9 DuPont De Nemours 1.85%
- -----------------------------------------------
10 Bristol Myers Squibb 1.63%
- -----------------------------------------------
Comparison of Common Stocks Held by the Fund on December 31, 1995 and 1996
PIE CHART: PIE CHART:
Conglomerates - 1.5% Conglomerates - 1.8%
Consumer Services - 2.4% Consumer Services - 1.7%
Other - 10.4% Other - 3.2%
Consumer Cyclical - 3.2% Consumer Cyclical - 3.4%
Technology - 23.3% Technology - 16.9%
Financial - 18.2% Financial - 25.6%
Consumer Staples - 17.9% Consumer Staples - 19.3%
Capital Goods - 3.3% Capital Goods - 5.3%
Energy - 12.4% Energy - 18.1%
Basic Industry - 7.4% Basic Industry - 4.8%
1995 1996
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Growth of a Hypothetical $10,000 Investment
[GRAPHICAL REPRESENTATION OF MOUNTAIN CHART]
The Guardian Park Avenue Fund $382,268
S&P 500 Index $171,365
Lipper U.S. Equity Growth
Fund Average $150,775
Cost of Living $ 38,331
A hypothetical $10,000 investment in Class A shares made at the inception of The
Guardian Park Avenue Fund on June 1, 1972 has a starting point of $9,550, which
reflects the current maximum sales charge for Class A shares of 4.5%. This
investment would have grown to $382,268 on December 31, 1996. We compare our
performance to that of the S&P 500 Index, which is an unmanaged index that is
generally considered the performance benchmark of the U.S. stock market. While
you may not invest directly in the S&P 500 Index, a similar hypothetical
investment would now be worth $171,365. The Fund also fared well relative to
other U.S. growth funds. The average return of U.S. equity growth funds reported
by Lipper Analytical Services, Inc. measures the performance of other funds with
investment objectives and policies similar to those of The Guardian Park Avenue
Fund. The average of U.S. growth funds on the same $10,000 investment over the
same time period would have been $150,775. The Cost of Living, as measured by
the Consumer Price Index, which is generally representative of the level of U.S.
inflation, is also provided to lend a more complete understanding of the
investment's real worth.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Average Annual Returns(1) for Periods Ended 12/31/96
Since Inception
1 Year 5 Years 10 Years (6/1/72)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At Net Asset Value(2) (without sales charge) 26.49% 19.39% 16.03% 16.07%
- ------------------------------------------------------------------------------------------
Class A Shares(3) (with sales charge) 20.80% 18.30% 15.50% 15.86%
- ------------------------------------------------------------------------------------------
S&P 500 Index 22.82% 15.14% 15.15% 12.26%
- ------------------------------------------------------------------------------------------
</TABLE>
Performance for Class B shares, which became effective on May 1, 1996, will vary
due to differences in expenses charged to each share class.
(1) Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales charge of
4.5%, except where indicated. Prior to August 25, 1988 shares of the Fund
were offered at a higher sales charge, so actual returns would have been
somewhat lower. Returns represent past performance and are not a guarantee
of future results. Investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
the original cost.
(2) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of sales charges.
(3) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
The Guardian/Value Line Separate Account
- -------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
Value Line
Guardian Value Line Special
Park Avenue Value Line Income Situations
Combined Fund Fund Fund Fund
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIFO cost ............................................ -- $128,678,470 $ 7,998,838 $ 7,422,601 $ 550,025
=====================================================================
Assets
Shares outstanding ................................. -- 4,983,140 511,267 1,028,974 36,458
Net asset value per share (NAV) .................... -- 37.91 19.29 7.37 13.34
Total Assets (Shares x NAV) ...................... $248,508,637 188,910,838 9,862,341 7,583,535 486,349
------------ ------------ ----------- ----------- ---------
Liabilities
Risk charges and other liabilities ................. 2,773,027 251,136 15,323 9,072 2,056
------------ ------------ ----------- ----------- ---------
Net Assets--Note 3 ................................... $245,735,610 $188,659,702 $ 9,847,018 $ 7,574,463 $ 484,293
============ ============ =========== =========== =========
<CAPTION>
Value Line Value Line
Leveraged U.S. Government Value Line
Growth Securities Cash
Investors Fund Fund
------------------------------------------
<S> <C> <C> <C>
FIFO cost ............................................ $ 3,999,365 $ 14,700,110 $22,961,565
==========================================
Assets
Shares outstanding ................................. 161,003 1,247,100 22,961,565
Net asset value per share (NAV) .................... 31.51 10.93 1.00
Total Assets (Shares x NAV) ...................... 5,073,205 13,630,804 22,961,565
----------- ------------ -----------
Liabilities
Risk charges and other liabilities ................. 7,319 9,838 2,478,283
----------- ------------ -----------
Net Assets--Note 3 ................................... $ 5,065,886 $ 13,620,966 $20,483,282
=========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
Value Line
Guardian Value Line Special
Park Avenue Value Line Income Situations
Combined Fund Fund Fund Fund
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ...................................... $ 4,361,777 $ 1,981,730 $ 51,759 $ 215,952 $ 7,339
Expenses--Note 4:
Mortality and expense risk charges ........................ 2,439,779 1,755,422 95,217 71,219 5,205
----------- ------------ ----------- ----------- ---------
Net investment income/(expense) ............................... 1,921,998 226,308 (43,458) 144,733 2,134
----------- ------------ ----------- ----------- ---------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from sale of investments:
Net realized gain/(loss) from sale of investments ......... 9,507,128 9,259,219 234,674 121,475 9,974
Reinvested realized gain distributions .................... 22,997,974 20,456,737 1,014,458 924,788 104,840
----------- ------------ ----------- ----------- ---------
Net realized gain/(loss) on investments ................... 32,505,102 29,715,956 1,249,132 1,046,263 114,814
----------- ------------ ----------- ----------- ---------
Unrealized appreciation/(depreciation) of investments:
End of year ............................................. 62,197,663 60,232,368 1,863,503 160,934 (63,676)
Beginning of year ....................................... 52,505,788 51,003,037 1,292,758 290,267 22,373
----------- ------------ ----------- ----------- ---------
Change in unrealized appreciation/(depreciation) ........ 9,691,875 9,229,331 570,745 (129,333) (86,049)
----------- ------------ ----------- ----------- ---------
Net realized and unrealized gain/(loss) from investments .. 42,196,977 38,945,287 1,819,877 916,930 28,765
----------- ------------ ----------- ----------- ---------
Net Increase/(Decrease) in Net Assets Resulting from Operations $44,118,975 $ 39,171,595 $ 1,776,419 $ 1,061,663 $ 30,899
=========== ============ =========== =========== =========
<CAPTION>
Value Line Value Line
Leveraged U.S. Government Value Line
Growth Securities Cash
Investors Fund Fund
------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ...................................... $ 59 $ 999,444 $ 1,105,494
Expenses--Note 4:
Mortality and expense risk charges ........................ 49,654 147,746 315,316
----------- ------------ -----------
Net investment income/(expense) ............................... (49,595) 851,698 790,178
----------- ------------ -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from sale of investments:
Net realized gain/(loss) from sale of investments ......... 379,973 (498,187) --
Reinvested realized gain distributions .................... 497,151 -- --
----------- ------------ -----------
Net realized gain/(loss) on investments ................... 877,124 (498,187) --
----------- ------------ -----------
Unrealized appreciation/(depreciation) of investments:
End of year ............................................. 1,073,840 (1,069,306) --
Beginning of year ....................................... 979,278 (1,081,925) --
----------- ------------ -----------
Change in unrealized appreciation/(depreciation) ........ 94,562 12,619 --
----------- ------------ -----------
Net realized and unrealized gain/(loss) from investments .. 971,686 (485,568) --
----------- ------------ -----------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 922,091 $ 366,130 $ 790,178
=========== ============ ===========
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
8 - 9
<PAGE>
- --------------------------------------------------------------------------------
The Guardian/Value Line Separate Account
- -------------------------------------------------
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1995 and 1996
Guardian Value Line
Park Avenue Value Line Income
Combined Fund Fund Fund
------------- ------------------------------------------
<S> <C> <C> <C> <C>
1995 Increase/(Decrease) from Operations
Net investment income/(expense) ............................... $ 1,934,116 $ (57,574) $ (26,293) $ 156,953
Net realized gain/(loss) from sale of investments ............. 10,291,941 9,836,679 337,826 22,942
Reinvested realized gain distributions ........................ 9,277,636 7,985,632 535,047 171,757
Change in unrealized appreciation/(depreciation) of investments 28,036,847 23,678,235 1,332,370 1,058,579
------------- ------------- ----------- -----------
Net increase/(decrease) resulting from operations ............. 49,540,540 41,442,972 2,178,950 1,410,231
------------- ------------- ----------- -----------
Contract Transactions
Net contract purchase payments ................................ 5,089,897 3,608,939 169,566 173,365
Transfers between funds ....................................... -- (893,011) (45,640) (250,799)
Administrative charges ........................................ (228,962) (157,925) (9,942) (7,659)
Redemptions and annuity benefits .............................. (25,235,537) (13,626,884) (1,340,589) (910,315)
------------- ------------- ----------- -----------
Net increase/(decrease) from contract transactions ............ (20,374,602) (11,068,881) (1,226,605) (995,408)
------------- ------------- ----------- -----------
Actuarial Increase in Reserves for Contracts in Payment Period .. 14,343 8,096 -- 2,376
------------- ------------- ----------- -----------
Total Increase/(Decrease) in Net Assets ......................... 29,180,281 30,382,187 952,345 417,199
Net Assets at December 31, 1994 ............................... 188,763,836 129,650,820 7,486,176 6,173,755
------------- ------------- ----------- -----------
Net Assets at December 31, 1995 ............................... $ 217,944,117 $ 160,033,007 $ 8,438,521 $ 6,590,954
============= ============= =========== ===========
1996 Increase/(Decrease) from Operations
Net investment income/(expense) ............................... $ 1,921,998 $ 226,308 $ (43,458) $ 144,733
Net realized gain/(loss) from sale of investments ............. 9,507,128 9,259,219 234,674 121,475
Reinvested realized gain distributions ........................ 22,997,974 20,456,737 1,014,458 924,788
Change in unrealized appreciation/(depreciation) of investments 9,691,875 9,229,331 570,745 (129,333)
------------- ------------- ----------- -----------
Net increase/(decrease) resulting from operations ............. 44,118,975 39,171,595 1,776,419 1,061,663
------------- ------------- ----------- -----------
Contract Transactions
Net contract purchase payments ................................ 5,585,974 4,104,455 163,013 140,420
Transfers between funds ....................................... -- (736,955) 25,430 410,522
Administrative charges ........................................ (204,157) (143,825) (10,142) (6,737)
Redemptions and annuity benefits .............................. (21,757,228) (13,789,822) (546,223) (624,340)
------------- ------------- ----------- -----------
Net increase/(decrease) from contract transactions ............ (16,375,411) (10,566,147) (367,922) (80,135)
------------- ------------- ----------- -----------
Actuarial Increase in Reserves for Contracts in Payment Period .. 47,929 21,247 -- 1,981
------------- ------------- ----------- -----------
Total Increase/(Decrease) in Net Assets ......................... 27,791,493 28,626,695 1,408,497 983,509
Net Assets at December 31, 1995 ............................... 217,944,117 160,033,007 8,438,521 6,590,954
------------- ------------- ----------- -----------
Net Assets at December 31, 1996--Note 3 ....................... $ 245,735,610 $ 188,659,702 $ 9,847,018 $ 7,574,463
============= ============= =========== ===========
<CAPTION>
Value Line Value Line Value Line
Special Leveraged U.S. Government Value Line
Situations Growth Securities Cash
Fund Investors Fund Fund
---------------------------------------------------------
<S> <C> <C> <C> <C>
1995 Increase/(Decrease) from Operations
Net investment income/(expense) ............................... $ (4,480) $ (32,129) $ 916,928 $ 980,711
Net realized gain/(loss) from sale of investments ............. 142,942 242,302 (290,750) --
Reinvested realized gain distributions ........................ 110,630 474,570 -- --
Change in unrealized appreciation/(depreciation) of investments (121,823) 616,776 1,472,710 --
--------- ----------- ------------ ------------
Net increase/(decrease) resulting from operations ............. 127,269 1,301,519 2,098,888 980,711
--------- ----------- ------------ ------------
Contract Transactions
Net contract purchase payments ................................ 13,301 78,008 319,602 727,116
Transfers between funds ....................................... (54,146) (93,640) (535,085) 1,872,321
Administrative charges ........................................ (1,244) (5,563) (17,518) (29,111)
Redemptions and annuity benefits .............................. (430,900) (342,179) (2,376,318) (6,208,352)
--------- ----------- ------------ ------------
Net increase/(decrease) from contract transactions ............ (472,989) (363,374) (2,609,319) (3,638,026)
--------- ----------- ------------ ------------
Actuarial Increase in Reserves for Contracts in Payment Period .. -- 672 9,464 (6,265)
--------- ----------- ------------ ------------
Total Increase/(Decrease) in Net Assets ......................... (345,720) 938,817 (500,967) (2,663,580)
Net Assets at December 31, 1994 ............................... 858,035 3,811,040 16,805,498 23,978,512
--------- ----------- ------------ ------------
Net Assets at December 31, 1995 ............................... $ 512,315 $ 4,749,857 $ 16,304,531 $ 21,314,932
========= =========== ============ ============
1996 Increase/(Decrease) from Operations
Net investment income/(expense) ............................... $ 2,134 $ (49,595) $ 851,698 $ 790,178
Net realized gain/(loss) from sale of investments ............. 9,974 379,973 (498,187) --
Reinvested realized gain distributions ........................ 104,840 497,151 -- --
Change in unrealized appreciation/(depreciation) of investments (86,049) 94,562 12,619 --
--------- ----------- ------------ ------------
Net increase/(decrease) resulting from operations ............. 30,899 922,091 366,130 790,178
--------- ----------- ------------ ------------
Contract Transactions
Net contract purchase payments ................................ 14,788 49,624 226,268 887,406
Transfers between funds ....................................... 15,945 (166,525) (607,440) 1,059,023
Administrative charges ........................................ (1,142) (5,134) (13,013) (24,164)
Redemptions and annuity benefits .............................. (88,512) (484,999) (2,666,666) (3,556,666)
--------- ----------- ------------ ------------
Net increase/(decrease) from contract transactions ............ (58,921) (607,034) (3,060,851) (1,634,401)
--------- ----------- ------------ ------------
Actuarial Increase in Reserves for Contracts in Payment Period .. -- 972 11,156 12,573
--------- ----------- ------------ ------------
Total Increase/(Decrease) in Net Assets ......................... (28,022) 316,029 (2,683,565) (831,650)
Net Assets at December 31, 1995 ............................... 512,315 4,749,857 16,304,531 21,314,932
--------- ----------- ------------ ------------
Net Assets at December 31, 1996--Note 3 ....................... $ 484,293 $ 5,065,886 $ 13,620,966 $ 20,483,282
========= =========== ============ ============
</TABLE>
See notes to financial statements.
10 - 11
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 Fund, 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 first in, first out
(FIFO) basis.
During the years ended December 31, 1996 and December 31, 1995, 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,
The Guardian/Value Line Separate Account 1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Guardian Park Avenue Fund ............ $28,392,918 $18,365,577 $18,051,599 $21,548,337
Value Line Fund ...................... 1,381,332 929,961 767,037 1,653,929
Value Line Income Fund ............... 1,813,831 730,555 814,226 1,403,108
Value Line Special Situations Fund.... 180,605 126,691 131,347 500,490
Value Line Leveraged Growth Fund ..... 720,240 642,017 873,064 567,151
Value Line US Govt Bond Fund ......... 1,978,391 2,055,128 4,162,798 3,729,773
Value Line Cash Fund ................. 8,016,045 10,502,928 8,539,952 12,829,767
------------ ------------ ------------ ------------
Total .............................. $42,483,362 $33,352,857 $33,340,023 $42,232,555
=========== =========== =========== ===========
</TABLE>
12
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (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 the tax law, no federal income taxes are payable by GIAC with respect
to the operations of the Account.
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.
Note 3 -- Net Assets, December 31, 1996
<TABLE>
<CAPTION>
Accumulation
Unit Total
Units Owned Value Unit Value
----------- ----- ----------
<S> <C> <C> <C>
Tax-Qualified Accounts
The Guardian Park Avenue Fund ............. 1,757,096.966 $ 106.975783 $187,966,824
Value Line Fund, Inc. ..................... 180,701.287 54.067255 9,770,023
Value Line Income Fund, Inc. .............. 142,806.501 52.560176 7,505,935
Value Line Special Situations Fund, Inc. .. 18,898.314 25.181424 475,886
Value Line Leveraged Growth Investors, Inc. 73,434.959 68.003247 4,993,816
Value Line U.S. Government Securities Fund,
Inc ...................................... 321,926.099 40.899347 13,166,567
Value Line Cash Fund, Inc. ................ 773,013.141 25.974172 20,078,376
Non-Tax-Qualified Accounts
The Guardian Park Avenue Fund ............. 364.482 97.630911 35,585
Value Line Fund, Inc. ..................... 1,653.706 46.559081 76,995
Value Line Income Fund, Inc. .............. 492.742 49.503397 24,392
Value Line Special Situations Fund, Inc. .. 335.482 25.059541 8,407
Value Line Leveraged Growth Investors, Inc. 66.001 67.907692 4,482
Value Line U.S. Government Securities Fund,
Inc ...................................... -- 40.900662 --
Value Line Cash Fund, Inc. ................ 3,801.603 25.974172 98,743
------------
244,206,031
Contracts receiving annuity payments ...... 1,529,579
------------
Total Net Assets .......................... $245,735,610
============
</TABLE>
In some instances the calculation of total assets may not agree due to
rounding.
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 risk is computed daily and is equal
to an annual rate of 1% of the average daily net assets applicable to
contractowners;
13
<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,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Tax-Qualified Accounts
The Guardian Park
Avenue Fund .......... $106.975783 $ 85.415119 $ 64.239324 $ 65.820751 $ 55.265742
Value Line Fund, Inc. .. 54.067255 44.564679 34.065614 36.013237 34.047914
Value Line Income
Fund, Inc. ........... 52.560176 45.222228 36.177740 38.200993 35.635145
Value Line Special
Situations Fund, Inc. 25.181424 23.713301 18.569957 18.562076 16.591003
Value Line Leveraged
Growth Investors, Inc. 68.003247 56.152490 41.374494 43.392851 37.713144
Value Line U.S. ........
Government Securities
Fund, Inc. ........... 40.899347 39.743747 35.073507 39.653412 36.472675
Value Line Cash Fund,
Inc .................. 25.974172 24.991807 23.942278 23.319713 22.851156
Non-Tax-Qualified Accounts
The Guardian Park
Avenue Fund .......... 97.630911 77.953689 58.627708 60.070986 50.438005
Value Line Fund, Inc. .. 46.559081 38.376101 29.335015 31.012168 29.319768
Value Line Income Fund,
Inc .................. 49.503397 42.592212 34.073730 35.979291 33.562683
Value Line Special
Situations Fund, Inc. 25.059541 23.598522 18.480070 18.472220 16.510695
Value Line Leveraged
Growth Investors, Inc. 67.907692 56.073569 41.316345 43.331875 37.660164
Value Line U.S. ........
Government Securities
Fund, Inc. ........... 40.900662 39.745016 35.074624 39.654667 36.473831
Value Line Cash Fund,
Inc .................. 25.974172 24.991807 23.942278 23.319713 22.851156
</TABLE>
14
<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, 1996, 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, 1996 by correspondence with the transfer agents of the underlying
funds, provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
February 11, 1997
15
<PAGE>
- --------------------------------
Schedule of Investments
- --------------------------------
December 31, 1996
o The Guardian Park Avenue Fund
- --------------------------------------------------------------
Common Stocks -- 94.2%
- --------------------------------------------------------------
Shares Value
- --------------------------------------------------------------
Aerospace and Defense -- 4.9%
147,049 Boeing Co. $ 15,642,380
48,889 Lockheed Martin Corp. 4,473,343
187,600 Logicon, Inc. 6,847,400
462,000 McDonnell Douglas Corp. 29,568,000
93,950 Precision Castparts Corp. 4,662,269
60,700 Rockwell Int'l. Corp. 3,695,112
36,000 Sundstrand Corp. 1,530,000
8,600 Trinity Industries, Inc.* 323,885
50,000 United Technologies Corp. 3,300,000
--------------
70,042,389
- --------------------------------------------------------------
Air Transportation -- 0.3%
44,800 AMR Corp. Del* 3,948,000
- --------------------------------------------------------------
Appliance and Furniture -- 0.1%
66,000 Furniture Brands Int'l., Inc.* 924,000
20,000 Herman Miller, Inc. 1,132,500
--------------
2,056,500
- --------------------------------------------------------------
Automotive -- 0.6%
294,500 Ford Motor Co. DE* 9,387,187
- --------------------------------------------------------------
Biotechnology -- 0.2%
56,100 Amgen, Inc.* 3,050,438
- --------------------------------------------------------------
Building Materials and Homebuilders -- 1.0%
12,000 Armstrong World Industries, Inc.* 834,000
24,700 Centex Corp.* 929,337
95,400 Coachmen Industries, Inc. 2,706,975
58,000 Fleetwood Enterprises, Inc. 1,595,000
38,000 Kaufman & Broad Home Corp.* 489,250
58,900 Lennar Corp.* 1,605,025
30,000 McGrath Rent Corp. 772,500
70,000 Oakwood Homes Corp.* 1,601,250
26,000 Pulte Corp.* 799,500
21,700 Sherwin-Williams Co.* 1,215,200
15,200 U.S. Home Corp.* 395,200
13,600 Vulcan Materials Co. 827,900
9,600 Webb (Del) Corp. 157,200
--------------
13,928,337
- --------------------------------------------------------------
Capital Goods-Miscellaneous Technology -- 0.9%
50,555 Martin Marietta Materials, Inc. 1,175,404
73,800 Minnesota Mining & Mfg. Co. 6,116,175
102,975 Paychex, Inc. 5,296,777
37,300 Rexel, Inc.* 592,137
30,200 Schuller Corp. 320,875
--------------
13,501,368
- --------------------------------------------------------------
Capital Goods-Technology-Telecommunications -- 0.1%
9,200 Harris Corp., DE 631,350
37,500 Network Equip. Technologies* 618,750
--------------
1,250,100
- --------------------------------------------------------------
Chemicals -- 2.5%
40,000 Avery Dennison Corp. 1,415,000
116,700 Cambrex Corp. 3,821,925
269,400 E.I. Dupont De Nemours, Inc. 25,424,625
65,000 PPG Industries, Inc. 3,648,125
25,000 Rohm & Haas Co.* 2,040,625
--------------
36,350,300
- --------------------------------------------------------------
Coal -- 0.0%
17,000 Eastern Enterprises 601,375
- --------------------------------------------------------------
Computer Software -- 3.5%
89,300 BMC Software, Inc.* 3,682,375
18,900 Cadence Design Systems, Inc.* 751,275
160,500 Computer Associates Int'l., Inc. 7,984,875
37,400 Compuware Corp.* 1,874,675
186,400 Electronic Data Systems Corp. 8,061,800
38,000 Fair Isaac & Co., Inc. 1,486,750
240,000 Microsoft Corp.* 19,830,000
34,000 OneWave, Inc.* 265,625
56,000 Parametric Technology Corp.* 2,877,000
59,000 Sterling Software, Inc.* 1,865,875
50,000 SunGuard Data Systems, Inc.* 1,975,000
--------------
50,655,250
- --------------------------------------------------------------
Computer Systems -- 3.2%
198,000 Cisco Systems, Inc.* 12,597,750
60,300 Compaq Computer Corp.* 4,477,275
75,000 Computervision Corp.* 693,750
21,600 Diebold, Inc. 1,358,100
51,000 Health Mgmt. Systems, Inc.* 714,000
52,000 Imitation Corp.* 1,462,500
61,000 Lexmark Int'l. Group, Inc.* 1,685,125
5,500 Mylex Corp.* 68,750
75,000 Pitney Bowes Inc.* 4,087,500
60,000 SCI Systems, Inc.* 2,677,500
290,000 Storage Technology Corp.* 13,811,250
65,200 Sun Microsystems, Inc.* 1,674,825
60,000 Tandem Computers, Inc.* 825,000
--------------
46,133,325
- --------------------------------------------------------------
Conglomerates -- 1.8%
65,300 Allied Signal, Inc. 4,375,100
90,000 Loews Corp. 8,482,500
47,300 Tenneco, Inc.* 2,134,412
95,000 Textron, Inc. 8,953,750
--------------
23,945,762
- --------------------------------------------------------------
Cosmetics and Toiletries -- 0.7%
8,000 Alberto-Culver Co.* 330,000
116,500 Gillette Co. 9,057,875
16,200 Helen of Troy Ltd.* 356,400
--------------
9,744,275
- --------------------------------------------------------------
- --------------------------------------------------------------------------------
*Non-income producing security. See notes to financial statements.
16
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------
Shares Value
- --------------------------------------------------------------
Drugs and Hospitals -- 11.8%
182,400 Abbott Laboratories $ 9,256,800
65,820 Allegiance Corp. 1,818,277
280,700 American Home Products Corp. 16,456,037
29,100 Baxter Int'l., Inc. 1,193,100
27,400 Becton Dickinson & Co. 1,188,475
205,500 Bristol-Myers Squibb Corp. 22,348,125
88,496 Eli Lilly & Co., Inc. 6,460,208
62,500 Genesis Health Ventures, Inc.* 1,945,312
97,377 Guidant Corp. 5,550,489
67,000 Integrated Health Services, Inc. 1,633,125
582,400 Johnson & Johnson 28,974,400
81,300 Kinetic Concepts, Inc. 995,925
38,900 Manor Care, Inc.* 1,050,300
82,200 Mariner Health Group, Inc.* 688,425
382,300 Merck & Co., Inc. 30,297,275
60,000 Old Republic Int'l. Corp.* 1,605,000
198,800 Pfizer, Inc. 16,475,550
141,200 Schering-Plough Corp. 9,142,700
33,500 Sun Healthcare Group, Inc.* 452,250
8,000 Unitrin, Inc. 446,000
230,000 Universal Health Services, Inc.* 6,583,750
47,500 Warner-Lambert Co. 3,562,500
--------------
168,124,023
- --------------------------------------------------------------
Electrical Equipment -- 3.4%
81,800 Emerson Electric Co. 7,914,150
414,400 General Electric Co. 40,973,800
--------------
48,887,950
- --------------------------------------------------------------
Electronics and Instruments -- 0.4%
46,000 Analogic Corp. 1,541,000
7,700 Ascend Communications Inc.* 478,363
21,200 Dynatech Corp.* 938,100
29,500 Intergraph Corp.* 302,375
15,300 Sanmina Corp.* 864,450
21,300 Solectron Corp.* 1,136,887
--------------
5,261,175
- --------------------------------------------------------------
Energy-Miscellaneous -- 0.5%
129,500 Giant Industries, Inc. 1,813,000
167,104 Holly Corp. 4,470,032
86,500 Howell Corp. 1,292,094
--------------
7,575,126
- --------------------------------------------------------------
Entertainment -- 0.1%
131,000 Galoob Toys, Inc.* 1,834,000
- --------------------------------------------------------------
Financial-Banks -- 10.8%
150,600 Banc One Corp. $ 6,475,800
22,000 Bancorp Hawaii, Inc. 924,000
177,300 BankAmerica Corp. 17,685,675
109,100 Bank of Boston Corp. 7,009,675
87,600 Barnett Banks, Inc. 3,602,550
23,000 Central & Southern Hldgs. Co. 270,250
188,060 Chase Manhattan Corp. 16,784,355
336,766 Citicorp 34,686,765
16,500 Comerica, Inc. 864,188
89,200 First Bank Systems Corp. 6,087,900
73,800 First Chicago NBD Corp. 3,966,750
12,400 First Empire State Corp. 3,571,200
20,000 First Merit Corp. 710,000
146,400 First Union Corp. 10,833,600
50,475 Hubco, Inc. 1,236,641
30,000 Mellon Bank Corp. 2,130,000
109,000 Nationsbank Corp. 10,654,750
82,748 Norwest Corp. 3,599,538
15,000 Provident Bancorp., Inc.* 510,000
22,500 Star Banc Corp. 2,067,188
40,000 State Street Boston Corp. 2,580,000
340,000 Travelers Group, Inc. 15,427,500
15,000 UnionBanCal Corp.* 795,000
12,400 Zions Bancorp. 1,289,600
--------------
153,762,925
- --------------------------------------------------------------
Financial-Others -- 6.8%
105,000 American Express Co. 5,932,500
16,400 Countrywide Credit Industries, Inc.* 469,450
10,000 Duff & Phelps Cr. Rating Co. 241,250
83,200 A.G. Edwards, Inc. 2,797,600
38,700 Federal Home Loan Mortgage Corp. 4,261,838
404,500 Federal National Mortgage Assn. 15,067,625
13,000 Financial Sec. Assur. Holdings, Ltd. 427,375
326,000 First USA, Inc. 11,287,750
62,000 Franklin Resources, Inc. 4,239,250
388,400 Green Tree Financial Corp. 15,001,950
100,000 Jefferies Group, Inc. 4,037,500
57,400 McDonald & Co. Investments, Inc. 1,994,650
151,200 Merrill Lynch & Co., Inc. 12,322,800
52,000 J.P. Morgan & Co., Inc. 5,076,500
167,850 Morgan Keegan, Inc. 2,874,431
26,100 Morgan Stanley Group., Inc. 1,490,963
67,300 Raymond James Financial, Inc. 2,027,412
83,300 Salomon, Inc.* 3,925,513
120,000 Charles Schwab Corp. 3,840,000
--------------
97,316,357
- --------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. *Non-income producing security.
17
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------
Shares Value
- --------------------------------------------------------------
Financial-Thrift -- 3.1%
39,200 Astoria Financial Corp. $ 1,445,500
160,000 California Federal Bancorp, Inc.* 3,920,000
93,187 Charter One Financial, Inc. 3,913,854
5,500 CitFed Bancorp, Inc.* 181,500
47,000 Coastal Bancorp, Inc. 1,075,125
150,199 Collective Bancorp, Inc. 5,275,740
45,400 Commercial Federal Corp. 2,179,200
33,000 Greenpoint Financial Corp. 1,559,250
76,000 Long Island Bancorp, Inc. 2,660,000
27,060 MAF Bancorp, Inc. 940,335
20,960 Pacific Crest Capital, Inc.* 241,040
127,200 Progressive Bank, Inc. 2,893,800
365,243 Sovereign Bancorp, Inc. 4,793,814
78,000 Standard Fed. Bancorp. 4,436,250
187,964 TCF Financial Corp. 8,176,434
--------------
43,691,842
- --------------------------------------------------------------
Food, Beverage and Tobacco -- 4.6%
206,400 Anheuser Busch Cos., Inc. 8,256,000
85,000 Archer-Daniels-Midland Co. 1,870,000
70,000 Campbell Soup Co. 5,617,500
69,800 Coca Cola Co. 3,385,300
59,400 ConAgra, Inc. 2,955,150
4,128 Earthgrains Co. 215,688
50,000 Great Atlantic and Pacific Tea, Inc.* 1,593,750
34,000 Hershey Foods Corp. 1,487,500
30,000 Interstate Bakeries Corp.* 1,473,750
255,400 Philip Morris Cos., Inc. 28,764,425
37,900 Ralston-Purina Group 2,780,913
12,000 Schweitzer-Mauduit Int'l., Inc.* 379,500
38,800 Unilever NV 6,799,700
--------------
65,579,176
- --------------------------------------------------------------
Footwear -- 0.4%
88,200 Nike, Inc. 5,269,950
- --------------------------------------------------------------
Hardware and Tools -- 0.2%
122,500 Black and Decker Corp.* 3,690,313
- --------------------------------------------------------------
Household Products -- 1.1%
13,000 Clorox Co.* 1,304,875
69,040 Kimberly Clark Corp. 6,576,060
79,300 Procter and Gamble Co. 8,524,750
--------------
16,405,685
- --------------------------------------------------------------
Insurance -- 3.5%
105,200 Allstate Corp. 6,088,450
27,000 AMBAC, Inc. 1,792,125
74,000 Amer. Bankers Ins. Group, Inc. 3,783,250
86,300 Amer. Int'l., Group, Inc. 9,341,975
40,000 CMAC Investment Corp. 1,470,000
12,000 Enhance Finl. Svcs. Group, Inc. 438,000
40,500 Executive Risk, Inc. 1,498,500
15,400 General Re Corp. 2,429,350
38,100 ITT Hartford Group, Inc. 2,571,750
35,000 Jefferson Pilot Corp. 1,981,875
42,080 Liberty Financial Cos., Inc. 1,635,860
67,000 MGIC Investment Corp. 5,092,000
30,800 Progressive Corp. of Ohio 2,075,150
28,000 ReliaStar Financial Group* 1,617,000
92,250 State Auto Financial Corp. 1,660,500
63,000 Sun America, Inc. 2,795,625
38,500 Travelers Aetna Ppty. Cas. Corp. 1,361,938
--------------
47,633,348
- --------------------------------------------------------------
Lodging -- 0.2%
175,000 Prime Hospitality Corp.* 2,821,875
- --------------------------------------------------------------
Machinery and Equipment -- 1.4%
94,800 Caterpillar, Inc. 7,133,700
88,400 Deere and Co. 3,591,250
51,200 Illinois Tool Works, Inc. 4,089,600
50,000 JLG Industries, Inc. 800,000
30,800 Robbins and Myers, Inc. 770,000
60,000 York Int'l., Corp. 3,352,500
--------------
19,737,050
- --------------------------------------------------------------
Merchandising-Department Stores -- 0.5%
65,000 Carson Pirie Scott & Co.* 1,641,250
40,000 Dollar General Corp. 1,280,000
330,200 K Mart Corp.* 3,425,825
16,000 MacFrugals Bargains Closeouts* 418,000
13,000 Mercantile Stores, Inc.* 641,875
--------------
7,406,950
- --------------------------------------------------------------
- --------------------------------------------------------------------------------
*Non-income producing security. See notes to financial statements.
18
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------
Shares Value
- --------------------------------------------------------------
Merchandising-Drugs -- 0.4%
52,000 DS Revco, Inc.* $ 1,924,000
56,200 Value Health, Inc.* 1,095,900
75,000 Walgreen Co. 3,000,000
--------------
6,019,900
- --------------------------------------------------------------
Merchandising-Food -- 0.8%
57,000 Kroger Co.* 2,650,500
44,000 Richfood Holdings, Inc. 1,067,000
87,500 Safeway, Inc.* 3,740,625
57,000 Supervalu, Inc.* 1,617,375
29,000 Vons Cos., Inc.* 1,736,375
--------------
10,811,875
- --------------------------------------------------------------
Merchandising-Special -- 0.3%
113,600 Claire's Stores, Inc. 1,476,800
23,900 Friedman's, Inc.* 352,525
83,560 Host Marriott Services Corp.* 762,485
35,000 Pier 1 Imports, Inc. 616,875
10,000 Ross Stores, Inc. 500,000
20,000 Tiffany & Co. 732,500
--------------
4,441,185
- --------------------------------------------------------------
Metals and Mining -- 0.5%
130,000 ASARCO, Inc.* 3,233,750
115,100 Bethlehem Steel Corp.* 1,035,900
62,900 Cyprus Amax Minerals Co.* 1,470,288
50,000 USX Steel Group* 1,568,750
--------------
7,308,688
- --------------------------------------------------------------
Miscellaneous-Consumer Growth Staples -- 0.4%
59,200 Cognizant Corp.* 1,953,600
24,000 Interpublic Group Cos., Inc.* 1,140,000
55,000 A.C. Nielson Corp.* 831,875
35,000 Omnicom Group 1,601,250
--------------
5,526,725
- --------------------------------------------------------------
Natural Gas-Diversified -- 0.9%
260,000 Enserch Corp. 5,980,000
158,300 Mitchell Energy & Dev. Corp. 3,502,387
60,000 PanEnergy Corp. 2,700,000
43,000 Western Gas Res., Inc. 827,750
--------------
13,010,137
- --------------------------------------------------------------
Oil and Gas Producing -- 5.3%
200,000 Alberta Energy Ltd.* 4,800,000
194,400 Apache Corp. 6,876,900
121,900 Basin Exploration, Inc.* 761,875
207,100 Tom Brown, Inc.* 4,323,212
90,000 Cairn Energy USA, Inc.* 900,000
185,000 Chieftain Int'l., Inc.* 4,810,000
153,000 Devon Energy Corp. 5,316,750
50,200 Diamond Offshore Drilling, Inc.* 2,861,400
301,400 Enron Oil and Gas Co. 7,610,350
290,000 Enserch Exploration, Inc.* 3,407,500
38,100 Forcenergy Gas Exploration, Inc.* 1,381,125
54,700 Petroleum Sec. Australia Ltd.* 1,244,425
497,300 Petromet Resources Ltd.* 1,056,762
79,700 Pogo Producing Co. 3,765,825
770,000 Ranger Oil Ltd.* 7,603,750
245,000 Rigel Energy Corp.* 2,434,688
305,536 Seagull Energy Corp.* 6,721,792
127,600 St. Mary Land & Exploration Co. 3,174,050
39,300 Snyder Oil Corp. 682,838
54,966 Union Pacific Resources Group, Inc. 1,607,756
62,278 United Meridian Corp.* 3,222,887
13,400 Vintage Petroleum, Inc. 462,300
170,000 Wainoco Oil Ltd.* 531,250
--------------
75,557,435
- --------------------------------------------------------------
Oil and Gas Services -- 3.1%
20,800 Cliffs Drilling Co.* 1,315,600
17,000 Cooper Cameron Corp.* 1,300,500
70,000 ENSCO Int'l., Inc.* 3,395,000
60,500 Halliburton Co. 3,645,125
179,200 Input/Output, Inc.* 3,315,200
329,400 Nabors Industries, Inc.* 6,340,950
130,000 Noble Drilling Corp.* 2,583,750
124,700 Offshore Logistics, Inc.* 2,416,063
60,000 Pride Petroleum Services, Inc.* 1,395,000
107,800 Schlumberger Ltd. 10,766,525
130,000 Smith Int'l., Inc.* 5,833,750
72,400 Varco Int'l., Inc.* 1,674,250
--------------
43,981,713
- --------------------------------------------------------------
Oil-Integrated-Domestic -- 1.7%
74,800 Amoco Corp. 6,021,400
54,500 Atlantic Richfield Co. 7,221,250
120,000 Murphy Oil Corp. 6,675,000
284,000 Tesoro Petroleum, Inc.* 3,976,000
--------------
23,893,650
- --------------------------------------------------------------
Oil-Integrated-International -- 5.8%
168,800 Chevron Corp. 10,972,000
312,200 Exxon Corp. 30,595,600
70,900 Mobil Corp. 8,667,525
126,700 Royal Dutch Petroleum Co. 21,634,025
109,200 Texaco, Inc. 10,715,250
--------------
82,584,400
- --------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. *Non-income producing security.
19
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------
Shares Value
- --------------------------------------------------------------
Paper and Forest Products -- 1.0%
50,000 Caraustar Industries, Inc. $ 1,662,500
331,500 Rayonier, Inc. 12,721,312
--------------
14,383,812
- --------------------------------------------------------------
Photography -- 0.5%
86,100 Eastman Kodak Co. 6,909,525
- --------------------------------------------------------------
Publishing-News -- 0.2%
55,000 A.H. Belo Corp. 1,918,125
2,500 Washington Post Co. 837,813
--------------
2,755,938
- --------------------------------------------------------------
Railroads -- 0.8%
40,301 Burlington Northern Santa Fe 3,480,999
45,800 Norfolk Southern Corp.* 4,007,500
64,900 Union Pacific Corp. 3,902,113
--------------
11,390,612
- --------------------------------------------------------------
Semiconductor -- 2.3%
58,500 Applied Magnetics Corp.* 1,747,687
233,900 Intel Corp.* 30,626,281
--------------
32,373,968
- --------------------------------------------------------------
Textile-Apparel and Production -- 0.5%
72,200 Fruit of the Loom, Inc.* 2,734,575
46,100 Russell Corp. 1,371,475
43,000 V.F. Corp. 2,902,500
--------------
7,008,550
- --------------------------------------------------------------
Transportation-Miscellaneous -- 0.0%
114,200 Maritrans, Inc. 699,475
- --------------------------------------------------------------
Truckers -- 0.0%
18,000 FRP Pptys., Inc.* 459,000
- --------------------------------------------------------------
Utilities-Communications -- 1.0%
76,600 Ameritech Corp. 4,643,875
106,100 Bellsouth Corp. 4,283,787
71,100 SBC Communications, Inc. 3,679,425
41,100 Sprint Corp. 1,638,862
24,000 360 Communications Co.* 555,000
--------------
14,800,949
- --------------------------------------------------------------
Utilities-Gas and Pipeline -- 0.1%
45,000 KN Energy, Inc. 1,766,250
- --------------------------------------------------------------
Total Common Stocks
(Cost $997,724,343) 1,345,276,138
- --------------------------------------------------------------
- --------------------------------------------------------------
Repurchase Agreement -- 5.5%
- --------------------------------------------------------------
- --------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------
$79,179,000 State Street Bank & Trust
repurchase agreement,
dated 12/31/96, maturity
value $79,216,940
5.75%, due 1/2/97
(collateralized by
$80,055,000 U.S. Treasury
Notes, 6.00% due
5/31/98) 1/2/97 $ 79,179,000
- --------------------------------------------------------------
Total Repurchase Agreement
(Cost $79,179,000) 79,179,000
- --------------------------------------------------------------
Total Investments -- 99.7%
(Cost $1,076,903,343) 1,424,455,138
Cash, Receivables and Other Assets
Less Payables--0.3% 3,736,234
- --------------------------------------------------------------
Net Assets -- 100.0% $1,428,191,372
- --------------------------------------------------------------
- --------------------------------------------------------------------------------
*Non-income producing security. See notes to financial statements.
20
<PAGE>
- --------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------
o The Guardian Park Avenue Fund
- --------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------
December 31, 1996
- --------------------------------------------------------------
Assets
Investments, at identified cost* $1,076,903,343
==============================================================
Investments, at market 1,345,276,138
Repurchase agreement 79,179,000
- --------------------------------------------------------------
Total Investments 1,424,455,138
- --------------------------------------------------------------
Cash 22
Receivable for securities sold 32,066,379
Receivable for fund shares sold 5,022,025
Dividends receivable 1,705,117
Interest receivable 17,758
- --------------------------------------------------------------
Total Assets 1,463,266,439
- --------------------------------------------------------------
Liabilities
Payable for securities purchased 21,011,921
Distributions payable 4,769,564
Payable for shares redeemed 6,385,750
Accrued expenses 365,762
Due to affiliates 2,542,070
- --------------------------------------------------------------
Total Liabilities 35,075,067
- --------------------------------------------------------------
Net Assets $1,428,191,372
==============================================================
Components of Net Assets
Shares of beneficial interest of $0.01
par value outstanding (unlimited number
of shares authorized);
Class A $ 367,246
Class B 9,501
Paid-in capital 1,051,942,167
Accumulated net realized gain on
investments 28,320,663
Net unrealized appreciation of investments 347,551,795
- --------------------------------------------------------------
Net Assets $1,428,191,372
==============================================================
Net Assets:
Class A $1,392,185,697
Class B 36,005,675
- --------------------------------------------------------------
Shares of beneficial interest of $0.01 par value
Class A 36,724,597
Class B 950,095
- --------------------------------------------------------------
Net Asset Value Per Share
Class A $ 37.91
Class B $ 37.90
- --------------------------------------------------------------
Maximum Offering Price Per Share
Class A Only (Net Asset Value x 104.71)** $ 39.70
- --------------------------------------------------------------
* Includes repurchase agreement.
** Based on sale of less than $100,000. On sales of $100,000
or more, the offering price is reduced.
- --------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------
Year Ended December 31, 1996
- --------------------------------------------------------------
Investment Income:
Income:
Dividends $ 19,019,449
Interest 4,185,365
Other income 46,889
- --------------------------------------------------------------
23,251,703
Less: Foreign tax withheld 54,912
- --------------------------------------------------------------
Total Income 23,196,791
- --------------------------------------------------------------
Expenses:
Investment advisory fees-- Note 2 5,851,464
12b-1 fees-- Note 3 570,546
Administrative fees 1,106,372
Transfer agent fees 1,278,475
Custodian fees 236,597
Printing fees 139,575
Registration fees 136,561
Audit fees 20,500
Trustees' fees-- Note 2 18,300
Legal fees 12,296
Insurance expense 9,028
Other 705
- --------------------------------------------------------------
Total Expenses 9,380,419
- --------------------------------------------------------------
Net Investment Income 13,816,372
- --------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS -- NOTE 5
Net realized gain on investments
-- Note 1 140,062,592
Net change in unrealized appreciation
of investments-- Note 5 128,623,359
- --------------------------------------------------------------
Net Realized and Unrealized Gain on
Investments 268,685,951
- --------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 282,502,323
==============================================================
- --------------------------------------------------------------------------------
See notes to financial statements. *Non-income producing security.
21
<PAGE>
The Guardian Park Avenue Fund
(Continued)
- --------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------
Year Ended December 31,
---------------------------
1996 1995
- --------------------------------------------------------------
Increase/(Decrease) in Net Assets:
From Operations:
Net investment income $ 13,816,372 $ 8,735,936
Net realized gain on
investments 140,062,592 84,973,348
Net change in unrealized
appreciation of investments 128,623,359 138,277,500
- --------------------------------------------------------------
Net Increase/(Decrease) in Net Assets
Resulting from
Operations 282,502,323 231,986,784
- --------------------------------------------------------------
Distributions to Shareholders:
Net investment income:
Class A (13,778,621) (8,718,311)
Class B (37,751) --
Distributions in excess on
net investment income:
Class A (358,731) --
Class B (7,535) --
Net realized gain on
investments:
Class A (146,944,706) (48,212,589)
Class B (2,841,272) --
- --------------------------------------------------------------
Total Distributions to
Shareholders (163,968,616) (56,930,900)
- --------------------------------------------------------------
From Capital Share Transactions:
Net increase in net assets
from capital share
transactions -- Note 6
Class A 301,588,369 156,301,684
Class B 35,794,701 --
- --------------------------------------------------------------
337,383,070 156,301,684
- --------------------------------------------------------------
Net Increase in Net Assets 455,916,777 331,357,568
Net Assets:
Beginning of year 972,274,595 640,917,027
- --------------------------------------------------------------
End of year* 1,428,191,372 972,274,595
==============================================================
* Includes undistributed net
investment income of $ -- $ --
- --------------------------------------------------------------------------------
See notes to financial statements
22
<PAGE>
- -----------------------------------
Notes to
Financial Statements
- -----------------------------------
December 31, 1996
o 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 (the 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 is expected to be effected in
February, 1993. Significant accounting policies of the Fund are as follows:
GPAF, GAAF, GBGIF and GCMF (the Funds) offer two classes of shares. All
shares existing prior to May 1, 1996, were classified as Class A shares. Class A
shares are sold with an initial sales charge of up to 4.50% and a continuing
administrative fee of up to .25% on an annual basis. Class B shares are sold
without an initial sales charge but are subject to a distribution fee of .75%
and an administrative fee of up to .25% on an annual basis, and a contingent
deferred sales load (CDSL) of 4% imposed on certain redemptions. The two classes
of shares for each fund represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and certain class
expenses, and has exclusive voting rights with respect to any matter to which a
separate vote of any class is required.
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
reporting period. Actual results could differ from those estimates.
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 municipal
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, such as 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.
All income, expenses (other than class-specific expenses) and realized and
unrealized gains or losses are allocated daily to each class of shares based
upon the relative value of shares of each class. Class-specific expenses which
include distribution and service fees and any other items that are specifically
attributed to a particular class, are charged directly to such class. For the
year ended December 31, 1996, distribution, administrative and transfer agent
fees were the only class-specific expenses.
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 income
tax regulations, which may differ from generally accepted accounting principles
(GAAP). Differences between the recognition of income on an income tax basis and
a GAAP basis may cause temporary over distributions 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" under the provisions of the Internal Revenue Code of 1986,
as amended (Code) and as such will not be subject to federal income tax on
23
<PAGE>
taxable income (including any realized capital gains) which is distributed in
accordance with the provisions of the Code. Therefore, no federal income tax
provision is required.
Reclassification of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gain; and the recharacterization of foreign exchange gains
or losses to either ordinary income or realized capital gains for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations, or net asset value per
share of the Fund.
During the year ended December 31, 1996, the Fund reclassified amounts to
paid-in capital from undistributed/(overdistributed) net investment income and
accumulated net realized gain on investments. Increases (decreases) to the
various capital accounts were as follows:
Undistributed Accumulated
Paid-in net investment net realized gain/loss
capital income on investments
------- -------------- ----------------------
$(683,284) $366,266 $317,018
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 .50% 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, 1996.
The aggregate remuneration paid by the Fund to its unaffiliated trustees
($500 per meeting plus and annual stipend of $1,000) amounted to $18,300 for the
year ended December 31, 1996.
Certain officers and trustees of the Fund are affiliated with GISC.
Administrative Services Agreement
Pursuant to the Administrative Services Agreement adopted by the Portfolio
Funds on behalf of both classes of shares, each of the Portfolio Funds pays GISC
an administrative services fee up to an annual rate of .25% of the average daily
net assets. GPAF currently pays GISC up to .15% on an annual basis, of its
average daily net assets. For the year ended December 31, 1996, such fees
incurred under the Agreement based on the average daily net assets of Class A
and Class B shares were as follows:
Class A Class B
------- -------
Park Avenue Fund ............. $1,087,354 $19,018
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. As compensation
for its services, GISC received aggregate sales commissions of $4,205,282 for
the year ended December 31, 1996.
Under a Distribution Plan adopted by the Fund pursuant to Rule 12b-1 under
the 1940 Act (the "12b-1 Plan"), each Multiple Class Fund is authorized to pay a
monthly 12b-1 fee at an annual rate of up to .75% of average daily net assets of
the Fund's Class B shares as compensation for distribution-related services
provided to the Class B shares of the Fund.
For the year ended December 31, 1996, such charges were as follows:
Class A Class B
------- -------
Park Avenue Fund ............. $513,750 $56,796
The Fund has also entered into a Distribution Plan pursuant to Rule 12b-1
under the 1940 Act with GISC on behalf of the Class A shares. Effective May 1,
1996, the Plan has been made dormant and no 12b-1 fees are authorized to be paid
in connection with sales of Class A shares.
GISC is entitled to retain any CDSL imposed on certain redemptions. For the
year ended December 31, 1996, such charges were $6,448.
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
24
<PAGE>
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 $885,822,928 and $702,242,362, respectively, during the
year ended December 31, 1996.
Gross unrealized appreciation and depreciation of investments aggregated
$356,005,274 and $8,453,479, respectively, resulting in net unrealized
appreciation of $347,551,795 at December 31, 1996.
The cost of investments owned at December 31, 1996 for Federal income tax
purposes was the same for financial reporting purposes.
Note 6. Fund Shares
Transactions in Fund Shares were as follows:
o The Guardian
Park Avenue Fund Year Ended December 31, 1996
-----------------------------
Shares Amount
- --------------------------------------------------------------
Shares sold:
Class A 64,654,097 $ 331,495,449
Class B 893,821 33,652,331
Shares issued to shareholders in
reinvestment of dividends from
net investment income and net
realized gains:
Class A 4,095,860 154,626,271
Class B 73,790 2,826,851
- --------------------------------------------------------------
69,717,568 522,600,902
Less shares repurchased:
Class A (60,643,315) (184,533,351)
Class B (17,517) (684,481)
- --------------------------------------------------------------
Net Increase 9,056,736 $ 337,383,070
==============================================================
o The Guardian
Park Avenue Fund Year Ended December 31, 1995
-----------------------------
Shares Amount
- --------------------------------------------------------------
Shares sold:
Class A 7,677,062 $ 248,191,463
Class B -- --
Shares issued to shareholders in
reinvestment of dividends from
net investment income and net
realized gains:
Class A 1,609,384 54,438,335
Class B -- --
- --------------------------------------------------------------
9,286,446 302,629,798
Less shares repurchased:
Class A (4,502,822) (146,328,114)
Class B -- --
- --------------------------------------------------------------
Net Increase 4,783,624 $ 156,301,684
==============================================================
Note 7. Line of Credit
A $20,000,000 line of credit available to The Guardian Park Avenue Fund and the
other related Guardian Funds 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, 1996, the Fund had not
borrowed against this line of credit.
25
<PAGE>
- ---------------------------------------------
Financial Highlights
- ---------------------------------------------
o The Guardian Park Avenue Fund
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
<TABLE>
<CAPTION>
==================================================================================================================================
-------
Class A
-------
Year Ended December 31,
-------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 33.97 $ 26.89 $ 28.63 $ 25.17 $ 22.23 $ 18.26 $ 21.56 $ 20.46
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations
Net investment
income 0.42 0.33 0.31 0.50 0.45 0.65 0.68 0.92
Net realized and
unrealized gain/
(loss) on
investments 8.41 8.87 (0.72) 4.56 4.05 5.71 (3.28) 3.88
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase/
(decrease) from
investment
operations 8.83 9.20 (0.41) 5.06 4.50 6.36 (2.60) 4.80
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders
Dividends from net
investment income (0.42) (0.33) (0.31) (0.50) (0.44) (0.66) (0.70) (0.98)
Distributions in excess
of net investment
income (0.01) -- -- -- -- -- -- --
Distributions from
net realized gain
on investments (4.46) (1.79) (1.02) (1.10) (1.12) (1.73) -- (2.72)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (4.89) (2.12) (1.33) (1.60) (1.56) (2.39) (0.70) (3.70)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 37.91 $ 33.97 $ 26.89 $ 28.63 $ 25.17 $ 22.23 $ 18.26 $ 21.56
- ----------------------------------------------------------------------------------------------------------------------------------
Total return* 26.49% 34.28% (1.44%) 20.28% 20.48% 35.16% (12.21%) 23.66%
==================================================================================================================================
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) $ 1,392,186 $ 972,275 $ 640,917 $ 560,193 $ 335,660 $ 270,095 $ 216,457 $ 228,190
Ratio of expenses
to average net
assets 0.79% 0.81% 0.84% 0.81% 0.68% 0.67% 0.69% 0.70%
Ratio of net
investment income
to average net
assets 1.19% 1.07% 1.15% 1.89% 1.94% 2.96% 3.51% 4.01%
Portfolio turnover
ratio 81% 78% 54% 46% 64% 57% 47% 47%
Average rate of
commissions
paid** $ 0.047
==================================================================================================================================
</TABLE>
======================================================================
------- -------
Class A Class B
------- -------
Year Ended December 31, May 1, 1996++
------------------------- to December
1988 1987 31, 1996
- ----------------------------------------------------------------------
Net asset value,
beginning of
period $ 18.63 $ 20.74 $ 36.26
- ----------------------------------------------------------------------
Income from investment
operations
Net investment
income 0.60 0.47 0.05
Net realized and
unrealized gain/
(loss) on
investments 3.23 0.20 6.10
- ----------------------------------------------------------------------
Net increase/
(decrease) from
investment
operations 3.83 0.67 6.15
- ----------------------------------------------------------------------
Distributions to
shareholders
Dividends from net
investment income (0.55) (0.60) (0.05)
Distributions in excess
of net investment
income -- -- --
Distributions from
net realized gain
on investments (1.45) (2.18) (4.46)
- ----------------------------------------------------------------------
Total distributions (2.00) (2.78) (4.51)
- ----------------------------------------------------------------------
Net asset value,
end of period $ 20.46 $ 18.63 $ 37.90
- ----------------------------------------------------------------------
Total return* 20.78% 2.95% 17.35%
======================================================================
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) $ 176,000 $ 157,045 $ 36,006
Ratio of expenses
to average net
assets 0.69% 0.68% 1.77%+
Ratio of net
investment income
to average net
assets 2.82% 2.08% 0.04%+
Portfolio turnover
ratio 58% 50% 81%
Average rate of
commissions
paid** $ 0.047
======================================================================
* Excludes effect of sales load.
** For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
+ Annualized.
++ Commencement of operations.
26
<PAGE>
- ---------------------------------------------
Report of Ernst & Young LLP
Independent Auditors
- ---------------------------------------------
Board of Trustees and Shareholders
The Guardian Park Avenue Fund
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments of The Guardian Park Avenue Fund as of
December 31, 1996, and the related statement of operations for the year then
ended, and the statement of changes in net assets and the financial highlights
for each of the years 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1996, 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 statement and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund at December 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and financial highlights for each of the indicated periods, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
February 7, 1997
27
<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
[GRAPHIC OMITTED]
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, 1996
[LOGO] The Guardian (R) BULK RATE MAIL
U.S. POSTAGE PAID
The Guardian Insurance & Annuity Company, Inc. PERMIT NO. 45
201 Park Avenue South NEWARK, NJ
New York, NY 10003
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1996.
</LEGEND>
<CIK> 0000320580
<NAME> VALUE LINE SEPARATE ACCOUNT - VALUE GUARD I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 186,310,975
<INVESTMENTS-AT-VALUE> 248,508,637
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 248,508,637
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,773,027
<TOTAL-LIABILITIES> 2,773,027
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,921,998
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 32,505,102
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 62,197,663
<NET-ASSETS> 245,735,610
<DIVIDEND-INCOME> 4,361,777
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,439,779
<NET-INVESTMENT-INCOME> 1,921,998
<REALIZED-GAINS-CURRENT> 32,505,102
<APPREC-INCREASE-CURRENT> 9,691,875
<NET-CHANGE-FROM-OPS> 44,118,975
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,439,779
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,439,779
<AVERAGE-NET-ASSETS> 231,839,864
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 42,196,977
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
