================================================================================
TABLE OF CONTENTS
================================================================================
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY 2
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS 3
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
- --------------------------------------------------------------------------------
INTERVIEW WITH CHARLES E. ALBERS 4
- --------------------------------------------------------------------------------
FUND PROFILE 6
- --------------------------------------------------------------------------------
FINANCIALS
- --------------------------------------------------------------------------------
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT 8
- --------------------------------------------------------------------------------
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, 1997: $2,514,378,189
- --------------------------------------------------------------------------------
"WE BELIEVE THAT SOUNDLY-BASED QUANTITATIVE MODELS PROVIDE A VALUABLE TOOL.
AT THE SAME TIME, FAST-BREAKING NEWS AND UNUSUAL INVESTMENT ISSUES REQUIRE THE
BALANCED JUDGMENT OF A CAPABLE PORTFOLIO MANAGER. WE BELIEVE THE SUREST PATH TO
CONSISTENTLY ABOVE-AVERAGE RETURNS REQUIRES THE SYNERGISTIC RESULTS OF COMBINING
GOOD QUANTITATIVE TOOLS WITH GOOD MANAGER JUDGMENT."
--CHARLES E. ALBERS, C.F.A.
PORTFOLIO MANAGER
<PAGE>
================================================================================
PERFORMANCE SUMMARY
================================================================================
[GRAPHIC]
- --------------------------------------------------------------------------------
INVESTMENT OPTION TOTAL RETURN*
----------------- -------------
The Guardian Park Avenue Fund.................... 33.53%
Value Line Leveraged Growth Investors............ 22.58%
Value Line Special Situations Fund............... 30.80%
Value Line Fund.................................. 20.40%
Value Line Income Fund........................... 17.38%
Value Line U.S. Govt. Securities Fund............ 8.15%
Value Line Cash Fund............................. 4.08%
- --------------------------------------------------------------------------------
FIXED-RATE OPTION
-----------------
The annual rates of interest for amounts deposited or renewed (on a
contract anniversary) in the Fixed-Rate Option during 1997 were as follows: for
the months of January through April, 5.25%; and for the months of May through
December, 5.40%.
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, 1997 through December 31, 1997. 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.
- --------------------------------------------------------------------------------
2
<PAGE>
================================================================================
DEAR CONTRACTOWNER:
================================================================================
[PHOTO]
Joseph 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, 1997.
ON OUR RATINGS
Once again, we are proud to report that as of December 31, 1997, the date
of this report, GIAC continues to enjoy exemplary 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 GIAC, which
stands behind the contract's guarantees.
OUR COMMITMENT TO YOU
We at GIAC 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 1997.
Thank you for continuing to invest for your future through GIAC.
Regards,
/s/ Joseph D. Sargent
Joseph D. Sargent, CLU
President & Chief Executive Officer
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
- -----------------------------
[PHOTO]
Charles E. Albers, C.F.A.
Portfolio Manager
Q. HOW DID THE FUND PERFORM IN 1997?
A. The year 1997 was terrific for most U.S. equity investors. Despite
challenging crosscurrents within the market, The Guardian Park Avenue Fund
performed very well, both absolutely and relative to our mutual fund peer group.
During 1997, the Fund provided a total return of 34.85% to its
shareholders.(1) That result bettered the 33.28% total return on the benchmark
S&P 500 Composite Index.(2) Also, the Fund's 1997 return substantially exceeded
the return of the average fund in our peer group, Lipper's U.S. Growth Funds,
which was 25.30% over the same period.(3)
Of course, from a shareholder's viewpoint, what matters most is the
long-term investment record. Here, too, the Fund looks good. For the 5-year
period ended December 31, 1997, the Fund ranked in the top 5.1% of the Lipper
peer group; for the period of the last 10 years, it ranked in the top 12.2% of
the peer group; and for the period of the last 15 years, it ranked in the top
5.1% (and #6 overall).(4) (See details in the following table.) We think these
statistics are pretty impressive!
- --------------------------------------------------------------------------------
COMPARATIVE AVERAGE ANNUAL
TOTAL RETURNS FOR PERIODS RANKING INFORMATION FOR PERIODS
ENDED DECEMBER 31, 1997 ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
LIPPER U.S. GUARDIAN PARK GUARDIAN PARK
GUARDIAN PARK GROWTH FUNDS AVENUE FUND AVENUE FUND
AVENUE FUND AVERAGE LIPPER RANK PERCENT RANK
- --------------------------------------------------------------------------------
1 Year 34.85% 25.30% 63 (out of 820) 7.7%
- --------------------------------------------------------------------------------
5 Year 22.11% 16.82% 16 (out of 311) 5.1%
- --------------------------------------------------------------------------------
10 Year 19.21% 16.39% 22 (out of 181) 12.2%
- --------------------------------------------------------------------------------
15 Year 19.00% 14.97% 6 (out of 116) 5.1%
- --------------------------------------------------------------------------------
Q: WHAT FACTORS AFFECTED FUND PERFORMANCE IN 1997?
A: Looking back, three factors were critical.
First, we did a comparatively good job of addressing the important cap-size
issue. In 1997, for the third consecutive year, large cap stocks performed
better than small caps, as shown in this table:
- -------------------------------------------------------
% TOTAL RETURN
----------------------
1995 1996 1997
---- ---- ----
Large Caps (S&P 500
Composite Index) +37.4 +22.8 +33.3
----------------------------------------------------
Small Caps (Russell 2000
Index)(5) +28.4 +16.5 +22.2
- -------------------------------------------------------
- --------------------------------------------------------------------------------
(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--return 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) The S&P 500 Composite 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 500 Index is not available for direct investment
and its returns do not reflect expenses, which are deducted from the Fund's
return. 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.
(3) 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.
(4) Lipper rankings were reported in Lipper's Mutual Funds Performance Analysis
Special Report 4th Quarter 1997. Lipper rankings are based on total returns
and do not take into account any deductions for sales loads.
(5) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Throughout this period, the Fund has correctly maintained a weighted
average cap size which was larger than our peer group of mutual funds, and this
has benefited the Fund's relative performance. We tilted the GPAF portfolio
slightly more towards small caps in the second quarter, which proved timely as
the small caps outperformed large caps during the second and third quarters.
Next, during the third quarter, we perceived the developing Asian contagion
a bit earlier than most U.S. money managers. In the fall of 1997, we reacted by
paring back positions in many companies with significant Asian exposure, while
re-deploying the proceeds into other companies with more domestically-oriented
businesses. That move undoubtedly benefited our results in the fourth quarter,
when the impact of the Asian financial collapse became widely discounted in U.S.
market prices.
And, finally, another factor which contributed to our relatively good
investment performance was our multi-factor quantitative stock scoring system.
This system has generally provided us solid guidance over the years in stock
selection, and this favorable record continued in 1997.
Q. WHAT STRATEGIES DO YOU USE TO MANAGE THE FUND?
A. There was no change in our strategic approach during this period. We believe
that soundly-based quantitative models provide a valuable tool. At the same
time, fast-breaking news and unusual investment issues require the balanced
judgment of a capable portfolio manager. We believe the surest path to
consistently above-average returns requires the synergistic results of combining
good quantitative tools with good manager judgment.
Our quantitative models 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 overall portfolio
style has the best performance prospects. The "bottom-up" approach uses our
multi-factor 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 both within one portfolio.
Q. HOW HAS THE PORTFOLIO BEEN POSITIONED IN DIFFERENT ECONOMIC SECTORS?
A. The portfolio's principal sector overweight during 1997 has been Financials,
which represented 30.3% of the portfolio at year-end, compared with 17.1% in the
S&P 500 Composite Index. This sector was a strong outperformer during the year,
benefiting from a decline in interest rates, the best asset quality in a
generation, industry consolidation and more efficient use of capital.
The portfolio at year-end also had major stakes in the Energy (15.9%) and
Capital Goods/Technology (14.4%) sectors. (See following pie chart for the
complete portfolio breakdown.) Importantly, the major sector with the worst
relative market performance in 1997 was Basic Industries, and the Fund was
underweighted there compared with the benchmark.
Q. HAVE YOU ANY COMMENTS ON THE OUTLOOK FOR 1998?
A. We are certainly not market timers. We are cautiously optimistic about market
prospects for 1998. As usual, we counsel investors to take a long-term view of
the equity investment process.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND PROFILE
AS OF DECEMBER 31, 1997
- --------------------------------------------
----------------------------------------
THE GUARDIAN PARK AVENUE FUND-- SECTOR WEIGHTINGS
TOP 10 HOLDINGS AS OF 12/31/97 COMMON STROCKS HELD
BY THE FUND ON DECEMBER 31, 1997
1. General Electric Co. 2.91%
----------------------------------------
2. Exxon Corp. 2.66% [GRAPHICAL REPRESENTATION
---------------------------------------- OF PIE CHART]
3. Int'l. Business Machines 2.50%
---------------------------------------- Credit Cyclicals--0.5%
4. Storage Technology Corp. 1.80% Utilities--4.3%
---------------------------------------- Consumer Cyclical--6.7%
5. Travelers Group, Inc. 1.69% Conglomerates--1.4%
---------------------------------------- Consumer Services--2.6%
6. Chase Manhattan Corp. 1.67% Transportation--2.9%
---------------------------------------- Consumer Staples--9.2%
7. Microsoft Corp. 1.40% Financial--30.4%
---------------------------------------- Capital Goods--7.1%
8. BankAmerica Corp. 1.37% Basic Industries--4.6%
---------------------------------------- Energy--15.9%
9. Ameritech Corp. 1.37% Capital Goods-
---------------------------------------- Technology--14.4%
10. Allstate Corp. 1.36%
----------------------------------------
For a complete list of portfolio holdings,
please see the schedule of investments.
- ---------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 12/31/97
Inception Since
Date 1 Year 5 Years 10 Years Inception
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 6/1/72 28.76% 20.99% 18.66% 16.54%
At Net Asset Value (without sales charge) 34.85% 22.11% 19.21% 16.75
- ----------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 29.53% N/A N/A 29.18%
At Net Asset Value (without sales charge) 33.53% N/A N/A 30.95%
- ----------------------------------------------------------------------------------------------------------
S&P 500 Index 33.28% 20.17% 17.92% 13.01%
(6/1/72)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(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 for Class A shares do not take into account the current
maximum sales charge of 4.5%, except where indicated. Prior to August 25,
1988, Class A shares of the Fund were offered at a higher sales charge, so
actual returns would have been somewhat lower. Total return figures for
Class B shares do not take into account the contingent deferred sales
charge applicable to such shares (maximum of 4%), 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.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHICAL REPRESENTATION OF MOUNTAIN CHART]
The Guardian Lipper U.S.
Park Avenue Fund S&P 500 Equity Growth Cost of
(Class A) Index Fund Average Living
----------- ----------- ----------- ----------
6/1/72 1 9550 1 10000 1 10000 1 10000
1972 2 9352 2 9791 2 9746 2 10072
3 9495 3 10173 3 9548 3 10169
4 9919 4 10936 4 10002 4 10266
1973 5 8954 5 10404 5 8773 5 10483
6 7758 6 9802 6 7699 6 10676
7 9104 7 10271 7 8788 7 10918
8 8355 8 9320 8 7686 8 11184
1974 9 8898 9 9061 9 7492 9 11546
10 8095 10 8376 10 6661 10 11836
11 6816 11 6276 11 5224 11 12222
12 7016 12 6861 12 5701 12 12536
1975 13 9052 13 8434 13 7001 13 12754
14 10222 14 9724 14 8176 14 12923
15 9524 15 8662 15 7174 15 13188
16 10311 16 9410 16 7588 16 13430
1976 17 12315 17 10819 17 8924 17 13527
18 12926 18 11077 18 9084 18 13696
19 13570 19 11281 19 9043 19 13913
20 14714 20 11627 20 9483 20 14106
1977 21 14578 21 10762 21 8951 21 14396
22 15548 22 11107 22 9480 22 14614
23 15171 23 10794 23 9340 23 14807
24 15894 24 10765 24 9674 24 15048
1978 25 16186 25 10235 25 9527 25 15314
26 17952 26 11100 26 10724 26 15700
27 19593 27 12062 27 11821 27 16063
28 18195 28 11455 28 11002 28 16401
1979 29 19967 29 12263 29 11945 29 16884
30 20459 30 12583 30 12544 30 17440
31 22475 31 13535 31 13793 31 17971
32 23489 32 13539 32 14501 32 18575
1980 33 22448 33 12987 33 13536 33 19348
34 24637 34 14722 34 15484 34 19928
35 27183 35 16363 35 18053 35 20266
36 28544 36 17908 36 19852 36 20870
1981 37 30553 37 18146 37 20432 37 21401
38 30553 38 17726 38 20347 38 21860
39 28041 39 15910 39 17993 39 22488
40 30196 40 17010 40 19380 40 22729
1982 41 28244 41 15773 41 18074 41 22874
42 28221 42 15682 42 18100 42 23430
43 32078 43 17473 43 20123 43 23599
44 37863 44 20656 44 24326 44 23599
1983 45 42172 45 22720 45 27061 45 23696
46 49604 46 25228 46 30611 46 24010
47 48521 47 25185 47 29869 47 24251
48 48698 48 25281 48 29333 48 24493
1984 49 46645 49 24675 49 27414 49 24855
50 47823 50 24028 50 26721 50 25048
51 53052 51 26344 51 28574 51 25290
52 54864 52 26823 52 28930 52 25483
1985 53 61530 53 29283 53 31492 53 25797
54 65012 54 31410 54 33601 54 25966
55 60468 55 30132 55 32193 55 26111
56 72960 56 35290 56 37156 56 26449
1986 57 87231 57 40238 57 42720 57 26353
58 93553 58 42592 58 44999 58 26425
59 82542 59 39627 59 41062 59 26570
60 86371 60 41842 60 42571 60 26763
1987 61 106898 61 50759 61 51317 61 27126
62 104621 62 53272 62 52563 62 27440
63 111995 63 56777 63 55749 63 27729
64 88927 64 43977 64 44085 64 27947
1988 65 100335 65 46480 65 47392 65 28164
66 107311 66 49515 66 50056 66 28502
67 105853 67 49653 67 49730 67 28913
68 107404 68 51158 68 50482 68 29179
1989 69 117426 69 54775 69 54123 69 29656
70 124277 70 59546 70 58562 70 29976
71 135522 71 65881 71 64497 71 30169
72 133003 72 67206 72 63984 72 30531
1990 73 131154 73 65183 73 62581 73 31087
74 131990 74 69211 74 67101 74 31401
75 111333 75 59736 75 56465 75 32029
76 116611 76 65046 76 61087 76 32415
1991 77 138452 77 74504 77 71872 77 32633
78 136860 78 74303 78 71176 78 32874
79 149259 79 78263 79 76341 79 33116
80 157618 80 84775 80 83235 80 33382
1992 81 162078 81 82672 81 82319 81 33647
82 159469 82 84210 82 80113 82 33889
83 167044 83 86846 83 82496 83 34106
84 189879 84 91214 84 89848 84 34396
1993 85 208278 85 95200 85 92144 85 34686
86 215651 86 95619 86 92749 86 34879
87 234327 87 98067 87 97203 87 35048
88 228375 88 100342 88 99458 88 35338
1994 89 221843 89 96569 89 96044 89 35556
90 219203 90 96936 90 93504 90 35773
91 227686 91 101657 91 98580 91 36087
92 225091 92 101617 92 97271 92 36280
1995 93 245506 93 111514 93 104431 93 36546
94 271285 94 122063 94 114202 94 36836
95 298576 95 131706 95 123909 95 37005
96 302248 96 139569 96 126735 96 37126
1996 97 317905 97 147050 97 133553 97 37585
98 334627 98 153579 98 139376 98 37850
99 348213 99 158217 99 143418 99 38019
100 382268 100 171365 100 150775 100 38331
1997 101 386091 101 176009 101 148815 101 38712
102 452576 102 206652 102 172283 102 39010
103 502902 103 222048 103 190631 103 39400
104 515475 104 228376 104 188286 104 39873
PERFORMANCE FOR CLASS B SHARES, WHICH WERE FIRST OFFERED ON MAY 1, 1996, WILL
VARY DUE TO DIFFERENCES IN SALES LOAD AND OTHER EXPENSES CHARGED TO SUCH SHARE
CLASS.
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 $515,475 on December 31, 1997. 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 cannot invest directly in the S&P 500 Index, a similar hypothetical
investment would now be worth $228,376. 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 $188,286. 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 lenda more complete understanding of the
investment's real worth.
- --------------------------------------------------------------------------------
7
<PAGE>
================================================================================
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
COMBINED
---------------
FIFO cost................................... --
===============
ASSETS
Shares owned in underlying fund--Note 1.... --
Net asset value per share (NAV)............ --
Total Assets (Shares x NAV)............... $279,108,278
---------------
LIABILITIES
Risk charges and other liabilities......... 2,927,883
---------------
NET ASSETS--NOTE 3.......................... $276,180,395
===============
<TABLE>
<CAPTION>
================================================================================
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
================================================================================
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<S> <C>
INVESTMENT INCOME
Income:
Reinvested dividends............................................. $ 3,833,116
Expenses--Note 4:
Mortality and expense risk charges............................... 2,841,544
------------
Net investment income/(expense).................................. 991,572
------------
REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS
Realized gain/(loss) from sale of investments:
Net realized gain/(loss) from sale of investments............... 18,218,460
Reinvested realized gain distributions.......................... 22,774,320
------------
Net realized gain/(loss) on investments......................... 40,992,780
------------
Unrealized appreciation/(depreciation) of investments:
End of year.................................................... 86,566,226
Beginning of year.............................................. 62,197,663
------------
Change in unrealized appreciation/(depreciation)............... 24,368,563
------------
Net realized and unrealized gain/(loss) from investments........ 65,361,343
------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.... $ 66,352,915
============
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE LINE VALUE LINE VALUE LINE
GUARDIAN VALUE LINE SPECIAL LEVERAGED U.S. GOVERNMENT VALUE LINE
PARK AVENUE VALUE LINE INCOME SITUATIONS GROWTH SECURITIES CASH
FUND FUND FUND FUND INVESTORS FUND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$142,093,044 $ 9,190,735 $ 6,886,203 $ 532,415 $ 4,199,149 $11,234,458 $18,406,049
=======================================================================================================
4,884,405 556,691 937,213 35,745 157,913 991,036 18,408,049
46.12 19.29 7.98 14.48 35.58 11.18 1.00
225,268,757 10,738,569 7,478,960 517,597 5,618,560 11,079,786 18,406,049
- ------------ ----------- ----------- ----------- ----------- ----------- -----------
370,684 23,553 15,447 8,344 12,621 14,578 2,482,656
- ------------ ----------- ----------- ----------- ----------- ----------- -----------
$224,898,073 $10,715,016 $ 7,463,513 $ 509,253 $ 5,605,939 $11,065,208 $15,923,393
============ =========== =========== =========== =========== =========== ===========
- ------------------------------------------------------------------------------------------------------
$ 1,796,007 $ 67,986 $ 138,649 $ 18 $ -- $ 804,092 $ 1,026,364
2,160,371 108,230 77,329 6,288 56,678 126,442 306,206
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
(364,364) (40,244) 61,320 (6,270) (56,678) 677,650 720,158
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
17,648,492 579,402 225,732 6,228 377,593 (618,987) --
19,979,111 1,744,863 495,950 87,677 466,719 --
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
37,627,603 2,324,265 721,682 93,905 844,312 (618,987) --
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
83,175,714 1,547,835 592,757 (14,818) 1,419,410 (154,672) --
60,232,368 1,863,503 160,934 (63,676) 1,073,840 (1,069,306) --
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
22,943,346 (315,668) 431,823 48,858 345,570 914,634 --
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
60,570,949 2,008,597 1,153,505 142,763 1,189,882 295,647 --
- ----------- ----------- ----------- ----------- ----------- ----------- ------------
$60,206,585 $ 1,968,353 $ 1,214,825 $ 136,493 $ 1,133,204 $ 973,297 $ 720,158
=========== =========== =========== =========== =========== =========== ============
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
9
<PAGE>
================================================================================
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
COMBINED
------------
<S> <C>
1996 INCREASE/(DECREASE) FROM OPERATIONS
Net investment income/(expense)......................................... $ 1,921,998
Net realized gain/(loss) from sale of investments....................... 9,507,128
Reinvested realized gain distributions.................................. 22,997,974
Change in unrealized appreciation/(depreciation) of investments......... 9,691,875
------------
Net increase/(decrease) resulting from operations....................... 44,118,975
------------
CONTRACT TRANSACTIONS
Net contract purchase payments.......................................... 5,585,974
Transfers between funds................................................. --
Administrative charges--Note 4.......................................... (204,157)
Redemptions and annuity benefits........................................ (21,757,228)
------------
Net increase/(decrease) from contract transactions...................... (16,375,411)
------------
ACTUARIAL INCREASE IN RESERVES FOR CONTRACTS IN PAYMENT PERIOD............ 47,929
------------
TOTAL INCREASE/(DECREASE) IN NET ASSETS................................... 27,791,493
NET ASSETS AT DECEMBER 31, 1995......................................... 217,944,117
------------
NET ASSETS AT DECEMBER 31, 1996......................................... $245,735,610
============
1997 INCREASE/(DECREASE) FROM OPERATIONS
Net investment income/(expense)......................................... $ 991,572
Net realized gain/(loss) from sale of investments....................... 18,218,460
Reinvested realized gain distributions.................................. 22,774,320
Change in unrealized appreciation/(depreciation) of investments......... 24,368,563
------------
Net increase/(decrease) resulting from operations....................... 66,352,915
------------
CONTRACT TRANSACTIONS
Net contract purchase payments.......................................... 4,742,437
Transfers between funds................................................. --
Administrative charges--Note 4.......................................... (189,665)
Redemptions and annuity benefits........................................ (40,519,435)
Transfers--other........................................................ 1,846
------------
Net increase/(decrease) from contract transactions...................... (35,964,817)
------------
ACTUARIAL INCREASE IN RESERVES FOR CONTRACTS IN PAYMENT PERIOD............ 56,687
------------
TOTAL INCREASE/(DECREASE) IN NET ASSETS................................... 30,444.785
NET ASSETS AT DECEMBER 31, 1996......................................... 245,735,610
------------
NET ASSETS AT DECEMBER 31, 1997--NOTE 3................................. $276,180,395
============
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE LINE VALUE LINE VALUE LINE
GUARDIAN VALUE LINE SPECIAL LEVERAGED U.S. GOVERNMENT VALUE LINE
PARK AVENUE VALUE LINE INCOME SITUATIONS GROWTH SECURITIES CASH
FUND FUND FUND FUND INVESTORS FUND FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 226,308 $ (43,458) $ 144,733 $ 2,134 $ (49,595) $ 851,698 $ 790,178
9,259,219 234,674 121,475 9,974 379,973 (498,187) --
20,456,737 1,014,458 924,788 104,840 497,151 -- --
9,229,331 570,745 (129,333) (86,049) 94,562 12,619 --
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
39,171,595 1,776,419 1,061,663 30,899 922,091 366,130 790,178
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
4,104,455 163,013 140,420 14,788 49,624 226,268 887,406
(736,955) 25,430 410,522 15,945 (166,525) (607,440) 1,059,023
(143,825) (10,142) (6,737) (1,142) (5,134) (13,013) (24,164)
(13,789,822) (546,223) (624,340) (88,512) (484,999) (2,666,666) (3,556,666)
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
(10,566,147) (367,922) (80,135) (58,921) (607,034) (3,060,851) (1,634,401)
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
21,247 -- 1,981 -- 972 11,156 12,573
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
28,626,695 1,408,497 983,509 (28,022) 316,029 (2,683,565) (831,650)
160,033,007 8,438,521 6,590,954 512,315 4,749,857 16,304,531 21,314,932
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
$188,659,702 $ 9,847,018 $7,574,463 $ 484,293 $5,065,886 $13,620,966 $20,483,282
============ ============= ========== ========== ========== =========== ===========
$ (364,364) $ (40,244) $ 61,320 $ (6,270) $ (56,678) $ 677,650 $ 720,158
17,648,492 579,402 225,732 6,228 377,593 (618,987) --
19,979,111 1,744,863 495,950 87,677 466,719 -- --
22,943,346 (315,668) 431,823 48,858 345,570 914,634 --
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
60,206,585 1,968,353 1,214,825 136,493 1,133,204 973,297 720,158
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
3,401,837 131,359 111,683 17,205 69,173 330,369 680,811
2,593,421 (250,803) 188,559 4,042 35,846 (622,765) (1,948,300)
(136,832) (8,754) (6,623) (850) (4,557) (10,037) (22,012)
(29,859,341) (972,170) (1,620,181) (132,063) (694,981) (3,238,338) (4,002,361)
1,879 13 (167) 133 (9) 14 (17)
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
(23,999,036) (1,100,355) (1,326,729) (111,533) (594,528) (3,540,757) (5,291,879)
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
30,822 -- 954 -- 1,377 11,702 11,832
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
36,238,371 867,998 (110,950) 24,960 540,053 (2,555,758) (4,559,889)
188,659,702 9,847,018 7,574,463 484,293 5,065,886 13,620,966 20,483,282
- ------------ ------------ ---------- ---------- ---------- ----------- -----------
$224,898,073 $ 10,715,016 $7,463,513 $ 509,253 $5,605,939 $11,065,208 $15,923,393
============ ============= ========== ========== ========== =========== ===========
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 contract 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, 1997 and December 31, 1996, 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 1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
The Guardian Park Avenue Fund...................... $28,757,901 $28,392,918 $32,991,819 $18,051,599
Value Line Fund, Inc. ............................. 2,151,626 1,381,332 1,539,131 767,037
Value Line Income Fund, Inc. ...................... 1,125,897 1,813,831 1,888,027 814,226
Value Line Special Situations Fund, Inc. .......... 115,214 180,605 139,053 131,347
Value Line Leveraged Growth
Investors Fund, Inc. ............................. 614,731 720,240 792,540 873,064
Value Line U.S. Government
Securities Fund, Inc. ............................ 2,329,086 1,978,391 5,175,751 4,162,798
Value Line Cash Fund, Inc. ........................ 6,976,200 8,016,045 11,531,715 8,539,952
------------ ------------ ------------ ------------
Total............................................ $42,070,655 $42,483,362 $54,058,036 $33,340,023
============ ============ ============ ============
</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, 1997
<TABLE>
<CAPTION>
ACCUMULATION
UNIT TOTAL
UNITS OWNED VALUE UNIT VALUE
------------- ------------ ------------
<S> <C> <C> <C>
TAX-QUALIFIED ACCOUNTS
The Guardian Park Avenue Fund.................. 1,566,903.716 $142.844239 $223,823,169
Value Line Fund, Inc. ......................... 163,659.453 65.095659 10,653,520
Value Line Income Fund, Inc. .................. 120,191.123 61.696713 7,415,397
Value Line Special Situations Fund, Inc. ...... 15,127.159 32.938107 498,260
Value Line Leveraged Growth Investors, Inc. ... 66,275.276 83.359180 5,524,653
Value Line U.S. Government Securities Fund,
Inc. ......................................... 240,263.484 44.232575 10,627,473
Value Line Cash Fund, Inc. .................... 575,885.880 27.033761 15,568,361
NON-TAX-QUALIFIED ACCOUNTS
The Guardian Park Avenue Fund ................. 509.996 130.366067 66,486
Value Line Fund, Inc. ......................... 1,097.051 56.056010 61,496
Value Line Income Fund, Inc. .................. -- 58.108568 --
Value Line Special Situations Fund, Inc. ...... 335.378 32.778671 10,993
Value Line Leveraged Growth Investors, Inc. ... 65.896 83.242057 5,485
Value Line U.S. Government Securities Fund,
Inc. ......................................... -- 44.234002 --
Value Line Cash Fund, Inc. .................... 2,638.166 27.033761 71,320
------------
274,326,613
Contracts receiving annuity payments........... 1,853,782
------------
Total Net Assets............................... $276,180,395
============
</TABLE>
NOTE 4 -- ADMINISTRATIVE AND MORTALITY AND EXPENSE RISK CHARGES
Contractual charges paid to GIAC include:
(1) an annual fee to cover GIAC's administrative expenses to be deducted on
each contract anniversary before annuitization and upon surrender prior to
annuitization. Such charge is $30 for a Single Purchase Payment Contract and $35
for a Flexible Purchase Payment Contract;
(2) a charge for mortality and expense risk is computed daily and is equal
to an annual rate of 1% of the average daily net assets applicable to
contractowners;
(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
13
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
TAX-QUALIFIED ACCOUNTS
The Guardian Park
Avenue Fund............. $142.844239 $106.975783 $85.415119 $64.239324 $65.820751
Value Line Fund, Inc. ... 65.095659 54.067255 44.564679 34.065614 36.013237
Value Line Income
Fund, Inc. ............. 61.696713 52.560176 45.222228 36.177740 38.200993
Value Line Special
Situations Fund, Inc. .. 32.938107 25.181424 23.713301 18.569957 18.562076
Value Line Leveraged
Growth Investors, Inc. . 83.359180 68.003247 56.152490 41.374494 43.392851
Value Line U.S.
Government Securities
Fund, Inc. ............. 44.232575 40.899347 39.743747 35.073507 39.653412
Value Line Cash Fund,
Inc. ................... 27.033761 25.974172 24.991807 23.942278 23.319713
NON-TAX-QUALIFIED ACCOUNTS
The Guardian Park
Avenue Fund............. 130.366067 97.630911 77.953689 58.627708 60.070986
Value Line Fund, Inc. ... 56.056010 46.559081 38.376101 29.335015 31.012168
Value Line Income Fund,
Inc. ................... 58.108568 49.503397 42.592212 34.073730 35.979291
Value Line Special
Situations Fund, Inc. .. 32.778671 25.059541 23.598522 18.480070 18.472220
Value Line Leveraged
Growth Investors, Inc. . 83.242057 67.907692 56.073569 41.316345 43.331875
Value Line U.S.
Government Securities
Fund, Inc. ............. 44.234002 40.900662 39.745016 35.074624 39.654667
Value Line Cash Fund,
Inc. ................... 27.033761 25.974172 24.991807 23.942278 23.319713
</TABLE>
NOTE: In some instances the calculation of total assets may not agree due to
rounding.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
TO THE BOARD OF DIRECTORS OF
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
AND THE CONTRACTOWNERS OF THE GUARDIAN/VALUE LINE
SEPARATE ACCOUNT, "VALUE GUARD"
In our opinion, the accompanying statement of assets and liabilities and
the related statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the investment
divisions relating to The Guardian Park Avenue Fund, Value Line Fund, Inc.,
Value Line Income Fund, Inc., Value Line Special Situations Fund, Inc., Value
Line Leveraged Growth Investors, Inc., Value Line U.S. Government Securities
Fund, Inc. and Value Line Cash Fund, Inc. (constituting The Guardian/Value Line
Separate Account, "Value Guard") at December 31, 1997, 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, 1997 by correspondence with the transfer agents of the underlying
funds, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 13, 1998
15
<PAGE>
================================================================================
SCHEDULE OF INVESTMENTS
================================================================================
December 31, 1997
o The Guardian Park Avenue Fund
================================================================================
COMMON STOCKS -- 93.8%
================================================================================
Shares Value
- --------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 2.1%
24,000 Alliant Techsystems, Inc.* $ 1,338,000
34,400 General Dynamics Corp. 2,973,450
48,889 Lockheed Martin Corp. 4,815,566
115,580 Northrop Grumman Corp. 13,291,700
138,950 Precision Castparts Corp. 8,380,422
98,800 Rockwell Int'l. Corp. 5,162,300
25,000 Sundstrand Corp. 1,259,375
40,000 Thiokol Corp. 3,250,000
36,100 TRW, Inc. 1,926,837
128,200 United Technologies Corp. 9,334,562
----------
51,732,212
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 1.1%
63,000 Alaska Air Group, Inc.* 2,441,250
94,000 AMR Corp., DE* 12,079,000
43,000 Comair Hldgs., Inc.* 1,037,375
100,000 Continental Airlines, Inc.* 4,812,500
77,000 UAL Corp.* 7,122,500
----------
27,492,625
- --------------------------------------------------------------------------------
APPLIANCE AND FURNITURE -- 0.8%
115,000 Ethan Allen Interiors, Inc. 4,434,688
141,000 Furniture Brands Int'l., Inc.* 2,890,500
50,000 Hon Industries, Inc. 2,950,000
80,000 Knoll Corp.* 2,570,000
30,000 Leggett & Platt, Inc. 1,256,250
90,000 Herman Miller, Inc. 4,910,625
----------
19,012,063
- --------------------------------------------------------------------------------
AUTOMOTIVE PARTS -- 1.1%
38,000 Arvin Industries, Inc. 1,265,875
19,130 Autoliv, Inc. 626,508
37,500 Borg-Warner Automotive, Inc. 1,950,000
130,900 Cooper Tire & Rubber Co.* 3,190,688
73,000 Cummins Engines, Inc. 4,311,563
84,000 Goodyear Tire & Rubber Co. 5,344,500
45,000 Kaydon Corp. 1,468,125
222,933 Meritor Automotive, Inc. 4,695,526
24,000 Modine Manufacturing Co.* 819,000
112,000 Timken Co. 3,850,000
17,000 Tower Automotive, Inc.* 715,063
----------
28,236,848
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.1%
56,100 Amgen, Inc. 3,036,413
- --------------------------------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 1.1%
58,000 AK Steel Hldg. Corp. 1,025,875
12,000 Armstrong World Industries, Inc. 897,000
33,000 Centex Construction Products, Inc. 994,125
65,000 Fleetwood Enterprises, Inc. 2,758,437
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
92,500 Lafarge Corp. $ 2,734,531
63,000 Lennar Corp. 1,358,437
6,700 Lone Star Industries, Inc. 355,937
50,555 Martin Marietta Materials, Inc. 1,848,417
60,000 McGrath Rentcorp 1,470,000
18,000 Medusa Corp. 752,625
43,400 Sherwin-Williams Co. 1,204,350
62,000 Southdown, Inc. 3,658,000
65,000 USG Corp.* 3,185,000
24,000 U.S. Home Corp.* 942,000
6,300 Valspar Corp. 200,812
38,600 Vulcan Materials Co. 3,942,025
----------
27,327,571
- --------------------------------------------------------------------------------
CHEMICALS -- 3.5%
68,000 Albemarle Corp. 1,623,500
116,700 Cambrex Corp. 5,368,200
49,000 Carlisle Cos., Inc. 2,094,750
115,000 Crompton & Knowles Corp.* 3,047,500
51,000 Dexter Corp. 2,202,563
110,000 Dow Chemical Co. 11,165,000
506,600 E.I. Dupont de Nemours, Inc. 30,427,663
81,100 Lubrizol Corp. 2,990,562
150,000 Millennium Chemicals, Inc.* 3,534,375
118,500 Minnesota Mng. & Mfg. Co. 9,724,406
146,100 Morton Int'l., Inc. 5,022,187
65,000 PPG Industries, Inc. 3,713,125
25,000 Rohm & Haas Co. 2,393,750
147,900 Solutia, Inc.* 3,947,081
43,700 Union Carbide Corp.* 1,890,462
----------
89,145,124
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.2%
160,000 Adobe Systems, Inc. 6,600,000
145,000 Autodesk, Inc.* 5,365,000
8,000 ChoicePoint, Inc.* 382,000
27,000 DST Systems, Inc.* 1,152,563
7,500 J.D. Edwards* 221,250
272,900 Microsoft Corp.* 35,272,325
37,000 Sterling Software, Inc.* 1,517,000
100,000 SunGuard Data Systems, Inc.* 3,100,000
65,000 Symantec Corp.* 1,425,937
36,000 Wind River Systems, Inc.* 1,428,750
----------
56,464,825
- --------------------------------------------------------------------------------
COMPUTER SYSTEMS -- 7.3%
257,500 Compaq Computer Corp. 14,532,656
32,400 Diebold, Inc. 1,640,250
10,100 DII Group, Inc.* 275,225
37,200 Honeywell, Inc. 2,548,200
602,100 Int'l. Business Machines 62,957,081
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
16
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
459,600 Lexmark Int'l. Group, Inc.* $ 17,464,800
203,200 Oracle Systems Corp.* 4,533,900
75,000 Pitney Bowes, Inc. 6,745,313
126,600 Quantum Corp.* 2,539,913
15,300 Sanmina Corp.* 1,036,575
120,000 SCI Systems, Inc.* 5,227,500
72,000 Smart Modular Technologies, Inc.* 1,656,000
732,800 Storage Technology Corp.* 45,387,800
91,000 Stratus Computer, Inc.* 3,440,938
240,200 Sun Microsystems, Inc.* 9,577,975
186,600 Western Digital Corp.* 2,997,263
-----------
182,561,389
- --------------------------------------------------------------------------------
CONGLOMERATES -- 1.0%
130,600 Allied Signal, Inc. 5,085,238
90,000 Loews Corp. 9,551,250
190,000 Textron, Inc. 11,875,000
----------
26,511,488
- --------------------------------------------------------------------------------
CONTAINERS-METALS AND PLASTIC -- 0.1%
37,000 Aptargroup, Inc. 2,053,500
- --------------------------------------------------------------------------------
COSMETICS AND TOILETRIES -- 0.1%
14,400 Alberto-Culver Co. 388,800
32,400 Helen of Troy Ltd.* 522,450
43,000 Herbalife Int'l., Inc. 917,333
---------
1,828,583
- --------------------------------------------------------------------------------
DRUGS AND HOSPITALS -- 5.3%
176,900 Abbott Laboratories 11,598,006
90,000 Acuson, Inc.* 1,490,625
65,820 Allegiance Corp. 2,332,496
25,000 C.R. Bard, Inc.* 782,813
27,400 Becton Dickinson & Co. 1,370,000
333,200 Bristol-Myers Squibb Corp. 31,529,050
35,400 Columbia Healthcare Corp.* 1,050,849
25,000 Health Care & Retirement Co.* 1,006,250
33,000 ICN Pharmaceuticals, Inc. 1,610,812
25,900 Integrated Health Svcs., Inc. 807,756
130,592 Eli Lilly & Co., Inc. 9,092,468
72,500 Lincare Hldgs., Inc.* 4,132,500
194,300 Merck & Co., Inc. 20,644,375
81,200 Mylan Labs, Inc. 1,700,125
18,000 Patterson Dental Co.* 814,500
101,200 Pfizer, Inc. 7,545,725
26,000 Safeskin Corp.* 1,475,500
302,400 Schering-Plough Corp. 18,786,600
8,000 Unitrin, Inc. 517,000
224,000 Universal Health Services, Inc.* 11,284,000
29,600 Warner-Lambert Co. 3,670,400
26,000 Wellpoint Health Networks, Inc.* 1,098,500
-----------
134,340,350
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Electrical Equipment -- 3.3%
73,300 Emerson Electric Co. $ 4,136,868
998,000 General Electric Co. 73,228,250
12,200 W.W. Grainger, Inc. 1,185,687
25,000 Hubbel, Inc. 1,232,812
13,000 Jabil Circuit, Inc.* 516,750
90,000 Raychem Corp. 3,875,625
----------
84,175,992
- --------------------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.4%
46,000 Analogic Corp. 1,748,000
61,200 Dynatech Corp.* 2,868,750
75,000 Fluke Corp. 1,954,687
60,000 Tektronix, Inc. 2,381,250
30,600 Texas Instruments, Inc.* 1,374,974
----------
10,327,661
- --------------------------------------------------------------------------------
ENERGY-MISCELLANEOUS -- 0.3%
129,500 Giant Industries, Inc. 2,460,500
167,104 Holly Corp. 4,616,248
86,500 Howell Corp. 1,497,531
---------
8,574,279
- --------------------------------------------------------------------------------
ENTERTAINMENT AND LEISURE -- 0.1%
16,500 Anchor Gaming* 919,875
34,000 Harley-Davidson, Inc. 930,750
---------
1,850,625
- --------------------------------------------------------------------------------
FINANCIAL-BANKS -- 11.3%
20,000 Associated Bank Corp. 1,102,500
471,000 BankAmerica Corp. 34,383,000
109,745 Bank of Boston Corp. 10,309,171
130,000 Bank of New York, Inc. 7,515,625
87,600 Barnett Banks, Inc. 6,296,250
13,000 CCB Financial Corp. 1,397,500
384,260 Chase Manhattan Corp. 42,076,470
236,764 Citicorp 29,935,848
81,000 City National Corp. 2,991,938
62,700 Comerica, Inc. 5,658,675
26,250 Commerce Bankshares, Inc. 1,778,437
30,000 Compass Bancshares, Inc. 1,312,500
20,100 Cullen Frost Bankers, Inc. 1,219,819
205,200 First Chicago NBD Corp. 17,134,200
12,400 First Empire State Corp. 5,766,000
40,000 First Merit Corp. 1,135,000
482,200 First Union Corp. 24,712,750
185,000 Fleet Financial Group, Inc. 13,863,437
51,989 Hubco, Inc. 2,034,070
43,000 Imperial Bancorp* 2,120,437
46,100 KeyCorp 3,264,456
187,600 Mellon Bank Corp. 11,373,250
60,188 National City Corp. 3,957,361
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
17
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
218,000 Nationsbank Corp. $ 13,257,125
165,496 Norwest Corp. 6,392,283
23,000 Premier Bancshares, Inc., GA 618,125
55,000 Provident Financial Group, Inc. 2,667,500
67,500 Star Banc Corp. 3,872,812
80,000 State Street Corp. 4,655,000
201,642 Summit Bancorp 10,737,436
38,000 Union BanCal Corp.* 4,085,000
15,000 U.S. Trust Corp. 939,375
26,000 Webster Financial Corp. 1,729,000
12,000 Westamerica Bancorp 1,227,000
49,600 Zions Bancorp 2,250,600
-----------
283,769,950
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 7.6%
302,400 American Express Co. 26,989,200
75,000 Bear Stearns Cos., Inc.* 3,562,500
11,000 Community First Bankshares 585,750
75,000 Countrywide Credit Industries, Inc. 3,215,625
11,500 Donaldson Lufkin & Jenrette* 914,250
10,000 Duff & Phelps Credit Rating Co. 406,250
124,800 A.G. Edwards, Inc. 4,960,800
154,800 Federal Home Loan Mortgage Corp. 6,491,925
299,500 Federal National Mortgage Assn. 17,090,219
33,000 Fidelity National Financial, Inc.* 1,027,125
93,000 Franklin Resources, Inc. 8,085,187
125,000 H & R Block, Inc. 5,601,563
200,000 Jefferies Group, Inc. 8,187,500
34,333 Legg Mason, Inc. 1,920,502
109,500 Lehman Brothers Hldgs., Inc. 5,584,500
114,800 McDonald & Co. Investments, Inc. 3,257,450
213,500 Merrill Lynch & Co., Inc. 15,572,156
251,775 Morgan Keegan, Inc. 6,373,055
163,300 Morgan Stanley Dean Witter 9,655,113
18,000 ONBANCorp, Inc. 1,269,000
20,960 Pacific Crest Capital, Inc.* 382,520
175,000 Paine Webber Group, Inc.* 6,048,438
100,950 Raymond James Financial, Inc. 4,006,453
50,000 SLM Hldg. Corp.* 6,956,250
787,500 Travelers Group, Inc. 42,426,563
-----------
190,569,894
- --------------------------------------------------------------------------------
FINANCIAL-THRIFT -- 2.0%
39,200 Astoria Financial Corp. 2,185,400
246,875 Bank Atlantic Bancorp, Inc. 4,075,273
16,000 California Federal Bancorp, Inc.* 456,000
97,846 Charter One Financial, Inc. 6,176,529
51,000 CitFed Bancorp, Inc. 1,989,000
47,000 Coastal Bancorp, Inc. 1,639,125
20,000 Coast Savings Financial, Inc.* 1,371,250
102,150 Commercial Federal Corp. 3,632,709
104,000 Dime Bancorp, Inc.* 3,146,000
46,400 Golden State Bancorp, Inc.* 1,734,200
54,000 Greenpoint Financial Corp. 3,918,375
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
76,000 Long Island Bancorp, Inc. $ 3,771,500
40,590 MAF Bancorp, Inc. 1,435,871
127,200 Progressive Bank, Inc. 4,865,400
438,291 Sovereign Bancorp, Inc. 9,094,538
----------
49,491,170
- --------------------------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 2.1%
140,000 Campbell Soup Co. 8,137,500
60,200 CKE Restaurants, Inc. 2,535,925
118,800 ConAgra, Inc. 3,898,125
71,000 Dean Foods Co. 4,224,500
48,256 Earthgrains Co. 2,268,032
89,000 Fortune Brands, Inc. 3,298,562
34,000 Hershey Foods Corp. 2,105,875
35,000 Hormel Foods Corp. 1,146,250
100,000 Interstate Bakeries Corp. 3,737,500
338,700 Philip Morris Cos., Inc. 15,347,344
12,400 Ralston-Purina Group 1,152,425
12,000 Scweitzer-Mauduit Int'l., Inc. 447,000
38,000 Smithfield Foods, Inc.* 1,254,000
55,700 Unilever NV 3,477,769
----------
53,030,807
- --------------------------------------------------------------------------------
FOOTWEAR -- 0.4%
81,200 Footstar, Inc.* 2,182,250
49,000 Payless ShoeSource, Inc.* 3,289,125
144,200 Reebok Int'l. Ltd.* 4,154,763
64,000 Stride Rite Corp.* 768,000
----------
10,394,138
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.8%
105,000 Dial Corp. 2,185,313
158,600 Procter & Gamble Co. 12,658,263
200,000 Tupperware Corp. 5,575,000
----------
20,418,576
- --------------------------------------------------------------------------------
INSURANCE -- 7.6%
37,500 Allied Group, Inc. 1,073,438
377,800 Allstate Corp. 34,332,575
54,000 AMBAC Financial Group, Inc. 2,484,000
148,000 Amer. Bankers Ins. Group, Inc. 6,798,750
30,000 W.R. Berkley Corp.* 1,316,250
46,000 Chubb Corp. 3,478,750
51,000 Cigna Corp. 8,826,188
40,000 CMAC Investment Corp. 2,415,000
12,000 Enhance Financial Svcs. Group, Inc. 714,000
130,000 Equitable Cos., Inc.* 6,467,500
98,000 Everest Reinsurance Hldgs. 4,042,500
40,500 Executive Risk, Inc. 2,827,406
37,000 Financial Sec. Assur. Hldgs. Ltd. 1,785,250
38,400 Fremont General Corp. 2,102,400
78,000 Frontier Insurance Group, Inc. 1,784,250
74,000 General RE Corp. 15,688,000
90,100 Hartford Financial Svcs. Group, Inc. 8,429,981
150,000 Horace Mann Educators Corp. 4,265,625
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
18
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
36,000 Jefferson Pilot Corp. $ 2,803,500
63,120 Liberty Financial Cos., Inc. 2,382,780
118,000 Lincoln National Corp., Inc. 9,218,750
158,000 Marsh & McLennan Cos., Inc. 11,780,875
50,600 MBIA, Inc. 3,380,712
30,000 Mercury General Corp. 1,657,500
206,000 MGIC Investment Corp. 13,699,000
21,000 NAC RE Corp. 1,025,063
39,200 Ohio Casualty Corp. 1,749,300
88,000 Old Republic Int'l. Corp. 3,272,500
33,000 Orion Capital Corp. 1,532,438
56,247 ReliaStar Financial Group 2,316,673
77,900 St. Paul Cos., Inc.* 6,392,669
92,250 State Auto Financial Corp. 2,975,062
94,500 SunAmerica, Inc. 4,039,875
102,000 Torchmark, Inc. 4,290,375
38,500 Travelers Ppty. Casualty Corp. 1,694,000
225,000 USF&G Corp.* 4,964,063
35,000 Vesta Insurance Group, Inc.* 2,078,125
-----------
190,085,123
- --------------------------------------------------------------------------------
LODGING -- 0.1%
135,000 Prime Hospitality Corp.* 2,750,625
17,000 Promus Hotel Corp.* 714,000
---------
3,464,625
- --------------------------------------------------------------------------------
MACHINERY AND EQUIPMENT -- 2.4%
67,000 AAR Corp. 2,596,250
25,000 Applied Power, Inc. 1,725,000
58,000 Case Corp. 3,505,375
189,600 Caterpillar, Inc. 9,207,450
88,400 Deere & Co. 5,154,825
250,000 Dover Corp. 9,031,250
93,000 Eaton Corp. 8,300,250
56,300 Illinois Tool Works, Inc. 3,385,038
53,000 Kennametal, Inc. 2,746,062
102,500 Parker Hannifin Corp.* 4,702,187
50,000 Robbins & Myers, Inc. 1,981,250
25,000 SPX Corp.* 1,725,000
54,000 Texas Industries, Inc. 2,430,000
63,000 Universal Corp., VA 2,590,875
65,000 US Industries, Inc. 1,958,125
----------
61,038,937
- --------------------------------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 1.7%
65,000 Carson Pirie Scott & Co.* 3,258,125
60,200 Dayton Hudson Corp. 4,063,500
125,000 Federated Department Stores, Inc.* 5,382,812
215,000 Fred Meyer, Inc., DE* 7,820,625
36,000 MacFrugals Bargains Closeouts* 1,480,500
87,000 Shopko Stores, Inc.* 1,892,250
20,000 Stein Mart, Inc.* 535,000
138,400 TJX Cos., Inc. 4,757,500
326,900 Wal-Mart Stores, Inc. 12,892,119
----------
42,082,431
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MERCHANDISING-DRUGS -- 0.3%
50,250 Arbor Drugs, Inc. $ 929,625
50,000 Bergen Brunswig Corp. 2,106,250
37,000 General Nutrition Cos., Inc.* 1,258,000
75,000 Walgreen Co. 2,353,125
---------
6,647,000
- --------------------------------------------------------------------------------
MERCHANDISING-FOOD -- 0.7%
60,000 Fleming Cos., Inc.* 806,250
188,825 Safeway, Inc.* 11,943,181
20,000 Suiza Foods Corp.* 1,191,250
113,000 Supervalu, Inc. 4,731,875
----------
18,672,556
- --------------------------------------------------------------------------------
MERCHANDISING-MASS -- 0.1%
43,500 Brylane, Inc.* 2,142,375
20,000 Lands End, Inc.* 701,250
---------
2,843,625
- --------------------------------------------------------------------------------
MERCHANDISING-SPECIAL -- 1.8%
34,000 Barnes & Noble, Inc.* 1,134,750
69,000 BJ's Wholesale Club, Inc.* 2,164,875
107,400 Burlington Coat Factory* 1,765,388
70,000 Claire's Stores, Inc. 1,360,625
45,978 CVS Corp. 2,945,466
71,000 The Dress Barn* 2,014,625
360,000 GAP, Inc. 12,757,500
35,000 Homebase, Inc.* 275,625
83,560 Host Marriott Services Corp.* 1,242,955
97,500 Pier 1 Imports, Inc. 2,205,938
30,000 Proffitts, Inc.* 853,125
159,000 Ross Stores, Inc. 5,783,625
250,000 Tandy Corp. 9,640,625
32,500 Tiffany & Co., Inc. 1,172,031
----------
45,317,153
- --------------------------------------------------------------------------------
METALS-MISCELLANEOUS -- 0.2%
70,700 Alumax, Inc.* 2,403,800
19,500 Aluminum Co. of America* 1,373,260
54,000 Titanium Metals Corp.* 1,559,250
---------
5,336,310
- --------------------------------------------------------------------------------
MISCELLANEOUS-CAPITAL GOODS -- 0.4%
69,000 Aeroquip-Vickers, Inc.* 3,385,313
100,000 Tidewater, Inc. 5,512,500
---------
8,897,813
- --------------------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 0.8%
70,000 American Greetings Corp. 2,738,750
59,200 Cognizant Corp. 2,638,100
97,900 Deluxe Corp.* 3,377,550
36,000 Interpublic Group Cos., Inc. 1,793,250
90,000 A.C. Nielsen Corp.* 2,193,750
190,000 Valassis Communications, Inc.* 7,030,000
----------
19,771,400
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
19
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
NATURAL GAS-DIVERSIFIED -- 0.2%
158,300 Mitchell Energy & Dev. Corp. $ 4,610,487
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCING -- 3.3%
194,400 Apache Corp. 6,816,150
98,000 Barrett Resources Corp.* 2,964,500
238,900 Basin Exploration, Inc.* 4,240,475
172,500 Tom Brown, Inc.* 3,320,625
64,300 Callon Petroleum Co.* 1,046,884
185,000 Chieftain Int'l., Inc.* 3,931,250
153,000 Devon Energy Corp. 5,890,500
100,400 Diamond Offshore Drilling, Inc. 4,831,750
177,171 EEX Corp.* 1,605,612
146,400 Enron Oil and Gas Co. 3,101,850
38,100 Forcenergy Gas Exploration, Inc.* 997,744
97,200 Meridian Resource Corp.* 929,475
497,300 Petromet Resources Ltd.* 1,087,844
46,000 Petsec Energy Ltd.* 632,500
79,700 Pogo Producing Co. 2,351,150
60,000 Pride Int'l., Inc.* 1,515,000
770,000 Ranger Oil Ltd. 5,293,750
495,000 Rigel Energy Corp.* 4,052,813
204,600 St. Mary Land & Exploration Co. 7,161,000
305,536 Seagull Energy Corp.* 6,301,680
91,300 Snyder Oil Corp. 1,666,225
100,000 USX Marathon Group 3,375,000
152,100 Vastar Resources, Inc.* 5,437,575
66,000 Vintage Petroleum, Inc. 1,254,000
495,300 Wainoco Oil Ltd.* 3,931,444
----------
83,736,796
- --------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 3.7%
75,000 BJ Services Co.* 5,395,313
85,960 Camco Int'l., Inc. 5,474,578
41,600 Cliffs Drilling Co.* 2,074,800
64,000 Cooper Cameron Corp.* 3,904,000
140,000 ENSCO Int'l., Inc. 4,690,000
121,000 Halliburton Co. 6,284,437
21,924 Halter Marine Group, Inc.* 633,055
190,500 Input/Output, Inc.* 5,655,469
55,000 Lone Star Technologies, Inc.* 1,560,625
329,400 Nabors Industries, Inc.* 10,355,513
250,000 Noble Drilling Corp.* 7,656,250
127,700 Offshore Logistics, Inc.* 2,729,587
215,600 Schlumberger Ltd. 17,355,800
80,000 Smith Int'l., Inc.* 4,910,000
52,000 Transocean Offshore, Inc. 2,505,750
144,800 Varco Int'l., Inc.* 3,104,150
30,000 Veritas DGC, Inc.* 1,185,000
118,000 Weatherford Enterra, Inc.* 5,162,500
170,000 Willbros Group, Inc.* 2,550,000
----------
93,186,827
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 1.7%
199,800 Amoco Corp. $ 17,007,975
109,000 Atlantic Richfield Co. 8,733,625
120,000 Murphy Oil Corp. 6,502,500
142,000 Sun, Inc.* 5,972,875
284,000 Tesoro Petroleum, Inc.* 4,402,000
----------
42,618,975
- --------------------------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 5.5%
168,800 Chevron Corp. 12,997,600
1,093,700 Exxon Corp. 66,920,769
346,600 Mobil Corp. 25,020,188
416,000 Royal Dutch Petroleum Co. 22,542,000
206,400 Texaco, Inc. 11,223,000
-----------
138,703,557
- --------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.6%
34,285 Deltic Timber Corp. 938,552
331,500 Rayonier, Inc. 14,109,469
----------
15,048,021
- --------------------------------------------------------------------------------
PUBLISHING-NEWS -- 0.8%
45,000 Central Newspapers, Inc. 3,327,188
86,400 Gannett Co., Inc. 5,340,600
65,700 Harte-Hanks Communications 2,439,112
18,000 Houghton Mifflin Co. 690,750
80,000 New York Times Co. 5,290,000
5,700 Washington Post Co. 2,773,050
----------
19,860,700
- --------------------------------------------------------------------------------
RAILROADS -- 0.6%
40,301 Burlington Northern Santa Fe 3,745,474
109,000 Kansas City Southern Inds., Inc. 3,460,750
137,400 Norfolk Southern Corp. 4,233,638
64,900 Union Pacific Corp. 4,052,194
----------
15,492,056
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.1%
63,000 LNR Property Corp. 1,488,375
- --------------------------------------------------------------------------------
SEMICONDUCTOR -- 0.4%
41,000 ADE Corp.* 717,500
80,000 Dallas Semiconductor Corp. 3,260,000
200,000 National Semiconductor Corp.* 5,187,500
42,000 Unitrode Corp.* 903,000
43,000 VLSI Technology, Inc.* 1,015,875
----------
11,083,875
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
20
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 0.9%
70,000 Burlington Industries, Inc.* $ 966,875
98,000 Jones Apparel Group, Inc.* 4,214,000
29,000 Kellwood Co.* 870,000
93,000 Liz Claiborne, Inc. 3,888,562
37,500 Nautica Enterprises, Inc.* 871,875
15,000 St. John Knits, Inc. 600,000
115,000 Unifi, Inc. 4,679,063
136,000 V.F. Corp. 6,247,500
26,500 Westpoint Stevens, Inc.* 1,252,125
----------
23,590,000
- --------------------------------------------------------------------------------
TRANSPORTATION-MISCELLANEOUS -- 0.7%
96,000 Airborne Freight Corp. 5,964,000
33,000 Air Express Int'l. Corp.* 1,006,500
37,000 Alexander & Baldwin, Inc.* 1,010,563
22,000 Expeditors Int'l. Wash., Inc. 847,000
54,000 GATX Corp. 3,918,375
239,500 Maritrans, Inc. 2,335,125
42,000 Trinity Industries, Inc. 1,874,250
----------
16,955,813
- --------------------------------------------------------------------------------
TRUCKERS -- 0.3%
25,000 Arnold Industries, Inc. 431,250
18,000 FRP Pptys., Inc.* 564,750
25,000 Roadway Express, Inc. 553,125
33,000 Rollins Truck Leasing Corp. 589,875
25,000 Swift Transportation, Inc.* 809,375
60,000 U.S. Freightways Corp. 1,950,000
45,000 Werner Enterprises, Inc. 922,500
105,000 Yellow Corp.* 2,638,125
---------
8,459,000
- --------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 1.2%
22,600 Central LA Electric Co.* 731,675
59,464 Duke Energy Co. 3,292,819
135,000 Florida Progress Corp.* 5,298,750
160,000 FPL Group, Inc. 9,470,000
57,100 IPALCO Enterprises 2,394,631
26,000 KU Energy Corp. 1,020,500
21,500 Minnesota Power & Light Co.* 936,594
40,000 New Century Energies, Inc. 1,917,500
29,000 NIPSCO Industries, Inc. 1,433,687
58,500 Texas Utilities Co. 2,431,406
----------
28,927,562
- --------------------------------------------------------------------------------
UTILITIES-GAS AND PIPELINE -- 0.3%
5,100 Indiana Energy, Inc.* 167,981
45,000 KN Energy, Inc. 2,430,000
85,600 New York State E&G Corp.* 3,038,800
33,700 NICOR, Inc. 1,421,719
---------
7,058,500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
UTILITIES-TELECOMMUNICATIONS -- 3.3%
29,000 Aliant Communications, Inc. $ 909,875
425,600 Ameritech Corp. 34,260,800
275,000 Bay Networks, Inc.* 7,029,688
64,716 Bell Atlantic Corp. 5,889,156
328,100 Bellsouth Corp. 18,476,131
18,400 Harris Corp., DE 844,100
148,100 SBC Communications, Inc. 10,848,325
130,000 WorldCom, Inc.* 3,932,890
----------
82,190,965
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,715,670,652) 2,359,514,565
- --------------------------------------------------------------------------------
================================================================================
REPURCHASE AGREEMENT--6.2%
================================================================================
Principal
Amount Value
- --------------------------------------------------------------------------------
$155,301,000 Goldman Sachs Group, LP
repurchase agreement,
dated 12/31/97, maturity
value $155,352,767 at 6.00%,
due 1/2/98 (collateralized
by $52,100,000 U.S. Treasury
Notes, 6.25%, due 1/31/02, by
$51,750,000 U.S. Treasury
Notes, 6.375%, due 9/30/01
and by $54,630,000 U.S.
Treasury Notes, 5.50%,
due 12/31/00) $155,301,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $155,301,000) 155,301,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $1,870,971,652) 2,514,815,565
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS-- (0.0%) (437,376)
- --------------------------------------------------------------------------------
NET ASSETS-- 100.0% $2,514,378,189
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
21
<PAGE>
================================================================================
FINANCIAL STATEMENTS
================================================================================
o The Guardian Park Avenue Fund
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
================================================================================
December 31, 1997[--- Unable To Translate Graphic ---]
- --------------------------------------------------------------------------------
ASSETS
Investments, at identified cost* $1,870,971,652
================================================================================
Investments, at market 2,359,514,565
Repurchase agreement 155,301,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS 2,514,815,565
- --------------------------------------------------------------------------------
Cash 447
Receivable for securities sold 19,823,124
Receivable for fund shares sold 12,048,337
Dividends receivable 2,335,896
Interest receivable 25,909
- --------------------------------------------------------------------------------
TOTAL ASSETS 2,549,049,278
- --------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 24,837,932
Payable for fund shares redeemed 4,186,608
Accrued expenses 523,853
Due to affiliates 5,122,696
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 34,671,089
- --------------------------------------------------------------------------------
NET ASSETS $2,514,378,189
================================================================================
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par $ 545,285
Additional paid-in capital 1,808,486,783
Undistributed net investment income 367,804
Accumulated net realized gain on
investments 61,134,404
Net unrealized appreciation of investments 643,843,913
- --------------------------------------------------------------------------------
NET ASSETS $2,514,378,189
================================================================================
NET ASSETS:
Class A $2,312,632,436
Class B $ 201,745,753
- --------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING--$0.01 Par Value
Class A 50,144,760
Class B 4,383,698
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Class A $46.12
Class B $46.02
- --------------------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)** $48.29
- --------------------------------------------------------------------------------
* Includes repurchase agreement.
** Based on sale of less than $100,000. On sale of $100,000
or more, the offering price is reduced.
================================================================================
STATEMENT OF OPERATIONS
================================================================================
Year Ended December 31, 1997
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends $ 26,759,009
Interest 7,343,161
Less: Foreign tax withheld (144,017)
- --------------------------------------------------------------------------------
Total Income 33,958,153
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees-- Note 2 9,792,148
Administrative fees-- Class A-- Note 2 2,876,989
Administrative fees-- Class B-- Note 2 284,649
12b-1 fees-- Note 3 853,946
Transfer agent fees 1,845,408
Custodian fees 321,582
Printing expense 262,000
Registration fees 135,200
Audit fees 20,500
Trustees fees-- Note 2 19,000
Legal fees 12,500
Insurance expense 9,950
Other 700
- --------------------------------------------------------------------------------
Total Expenses 16,434,572
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 17,523,581
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS -- NOTE 5
Net realized gain on
investments -- Note 1 250,113,783
Net change in unrealized appreciation
of investments-- Note 5 296,292,118
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 546,405,901
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $563,929,482
================================================================================
- --------------------------------------------------------------------------------
22 See notes to financial statements.
<PAGE>
THE GUARDIAN PARK AVENUE FUND
(Continued)
================================================================================
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
Year Ended December 31,
-----------------------
1997 1996
- --------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 17,523,581 $ 13,816,372
Net realized gain on
investments 250,113,783 140,062,592
Net change in unrealized
appreciation of investments 296,292,118 128,623,359
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 563,929,482 282,502,323
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (17,140,750) (13,778,621)
Class B (15,027) (37,751)
Distributions in excess of net
investment income
Class A -- (358,731)
Class B -- (7,535)
Net realized gain on
investments
Class A (200,697,619) (146,944,706)
Class B (16,602,423) (2,841,272)
- --------------------------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS (234,455,819) (163,968,616)
- --------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase in net assets
from capital share
transactions -- Note 6 756,713,154 337,383,070
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 1,086,186,817 455,916,777
NET ASSETS
Beginning of year 1,428,191,372 972,274,595
- --------------------------------------------------------------------------------
End of year* $2,514,378,189 $1,428,191,372
================================================================================
* Includes undistributed net
investment income of $ 367,804 $ --
- --------------------------------------------------------------------------------
See notes to financial statements.
23
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
================================================================================
December 31, 1997
O THE GUARDIAN PARK AVENUE FUND
NOTE 1. ACCOUNTING POLICIES
The Guardian Park Avenue Fund (the Fund or GPAF) 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. Significant accounting policies
of the Fund are as follows:
The Fund offers two classes of shares. Class A shares are sold with an
initial sales load 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 load
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 the 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 amount 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
last sales price of such exchanges, or, if no sale occurred, at the mean of the
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.
Security gains or losses are determined on the identified cost basis.
Interest income, including amortization of premium and discount, is accrued
daily. Dividend income is 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, 1997, distribution, administrative and transfer agent
fees were the only class specific expenses.
Dividends and 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 overdistributions of net realized gains and net
investment income.
24
<PAGE>
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
(Code) and as such will not be subject to federal income tax on 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.
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.
Trustees who are not deemed to be "interested persons" (as defined in the
1940 Act) are paid $500 per Fund meeting of the Board of Trustees. An annual fee
of $1,000 per Fund was also paid to each such trustee during such period. GISC
pays compensation to the trustees who are interested persons.
Certain officers and trustees of the Fund are affiliated with GISC.
Administrative Service Agreement
Pursuant to the Administrative Services Agreement adopted by the Fund on
behalf of both classes of shares, the Fund pays GISC an administrative services
fee at an annual rate of .25% of the average daily net assets for which a
"dealer of record" has been designated. For the year ended December 31, 1997,
GPAF Class A paid .16% of its average daily net assets.
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
$6,829,208 for the year ended December 31, 1997.
Under a Distribution Plan adopted by the Fund pursuant to Rule 12b-1 under
the 1940 Act (the "12b-1 Plan"), the 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.
GISC is entitled to retain any CDSL imposed on certain redemptions on Class
B shares. For the year ended December 31, 1997, such charges were $101,089.
NOTE 4. REPURCHASE AGREEMENTS
Collateral under repurchase agreements take the form of either cash or
fully negotiable U.S. Government securities. Repurchase agreements are fully
collateralized (including the interest earned thereon) and marked to market
daily while the agreements remain in force. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Fund will require the seller to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults, the Fund maintains the right to sell the collateral and may claim any
resulting loss against the seller. The Board of Trustees evaluates the
creditworthiness of broker-dealers and banks engaged in repurchase agreements
with the Fund. The Fund will not enter into repurchase agreements for more than
one week's duration (or invest in any other securities which are not readily
marketable) if more than 15% of its net assets would be so invested.
25
<PAGE>
NOTE 5. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) amounted to $1,369,683,747 and $901,517,669, respectively, during
the year ended December 31, 1997.
The cost of investments owned at December 31, 1997 for Federal income tax
purposes was the same for financial reporting purposes.
Gross unrealized appreciation and depreciation of investments aggregated
$671,487,691 and $27,643,778, respectively, resulting in net unrealized
appreciation of $643,843,913 at December 31, 1997.
NOTE 6. SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.01 par value shares of beneficial
interest authorized, divided into two classes, designated as Class A and Class B
shares. Transactions inshares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C>
Shares sold 17,883,364 64,654,097 $799,066,805 $331,495,449
Shares issued in reinvestment of
dividends and distributions 4,641,797 4,095,860 208,919,318 154,626,271
Shares repurchased (9,104,998) (60,643,315) (403,755,099) (184,533,351)
- ----------------------------------------------------------------------------------------------
NET INCREASE 13,420,163 8,106,642 $604,231,024 $301,588,369
- ----------------------------------------------------------------------------------------------
CLASS B
Shares sold 3,236,995 893,821 $143,714,212 $33,652,331
Shares issued in reinvestment of
dividends and distributions 359,417 73,790 16,167,277 2,826,851
Shares repurchased (162,809) (17,517) (7,399,359) (684,481)
- ----------------------------------------------------------------------------------------------
NET INCREASE 3,433,603 950,094 $152,482,130 $35,794,701
- ----------------------------------------------------------------------------------------------
</TABLE>
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, 1997, the Fund had not
borrowed against this line of credit.
26
<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,
- ----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAR $37.91 $33.97 $26.89 $28.63 $25.17 $22.23 $18.26 $21.56 $20.46 $18.63
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income 0.40 0.42 0.33 0.31 0.50 0.45 0.65 0.68 0.92 0.60
Net realized and
unrealized gain/
(loss) on
investments 12.61 8.41 8.87 (0.72) 4.56 4.05 5.71 (3.28) 3.88 3.23
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase/
(decrease) from
investment
operations 13.01 8.83 9.20 (0.41) 5.06 4.50 6.36 (2.60) 4.80 3.83
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment
income (0.39) (0.42) (0.33) (0.31) (0.50) (0.44) (0.66) (0.70) (0.98) (0.55)
Distributions in excess
of net investment
income -- (0.01) -- -- -- -- -- -- -- --
Net realized gain
on investments (4.41) (4.46) (1.79) (1.02) (1.10) (1.12) (1.73) -- (2.72) (1.45)
- ----------------------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions (4.80) (4.89) (2.12) (1.33) (1.60) (1.56) (2.39) (0.70) (3.70) (2.00)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR $46.12 $37.91 $33.97 $26.89 $28.63 $25.17 $22.23 $18.26 $21.56 $20.46
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN* 34.85% 26.49% 34.28% (1.44%) 20.28% 20.48% 35.16% (12.21%) 23.66% 20.78%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's
omitted) $2,312,632 $1,392,186 $972,275 $640,917 $560,193 $335,660 $270,095 $216,457 $228,190 $176,000
Ratio of expenses
to average net
assets 0.79% 0.79% 0.81% 0.84% 0.81% 0.68% 0.67% 0.69% 0.70% 0.69%
Ratio of net invest-
ment income to
average net assets 0.95% 1.19% 1.07% 1.15% 1.89% 1.94% 2.96% 3.51% 4.01% 2.82%
Portfolio turnover
rate 50% 81% 78% 54% 46% 64% 57% 47% 47% 58%
Average rate of
commissions
paid (a) $0.0461 $0.0470 -- -- -- -- -- -- -- --
===================================================================================================================================
</TABLE>
* Excludes effect of sales load.
(a)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.
27
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
The Guardian Park Avenue Fund
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
- --------------------------------------------------------------------------------
================================================================================
CLASS B
================================================================================
Year ended May 1, 1996_
December 31, to December
1997 31, 1996
- --------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF
PERIOD $37.90 $36.26
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income 0.00 0.05
Net realized and
unrealized gain
on investments 12.54 6.10
Net increase from
investment operations 12.54 6.15
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income (0.01) (0.05)
Net realized gain
on investments (4.41) (4.46)
- --------------------------------------------------------------------------------
Total dividends and
distributions (4.42) (4.51)
- --------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $46.02 $37.90
- --------------------------------------------------------------------------------
TOTAL RETURN* 33.53% 17.35%
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $201,746 $36,006
Ratio of expenses
to average net
assets 1.73% 1.77%(a)
Ratio of net invest-
ment income to
average net assets 0.00% 0.04%(a)
Portfolio turnover
rate 50% 81%
Average rate of
commissions
paid $0.0461 $0.0470
================================================================================
_ Commencement of operations.
* Excludes effect of sales load.
(a) Annualized.
28
<PAGE>
================================================================================
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
================================================================================
BOARD OF TRUSTEES AND SHAREHOLDERS THE GUARDIAN PARK AVENUE FUND (ONE OF THE
FUNDS CONSTITUTING THE PARK AVENUE PORTFOLIO)
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments of The Guardian Park Avenue Fund (oneof
the funds constituting the Park Avenue Portfolio) as of December 31, 1997, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the ten years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund'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, 1997, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Guardian Park Avenue Fund at December 31, 1997, 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 the financial highlights for each of the ten years
in the period then ended, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
New York, New York
February 9, 1998
29
<PAGE>
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<PAGE>
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<PAGE>
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THE GUARDIAN
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
201 PARK AVENUE SOUTH
NEW YORK, NY 10003
BULK RATE MAIL
U.S. POSTAGE PAID
PERMIT NO. 45
NEWARK, NJ
EB-010248 S 12/97
[LOGO]
THE GUARDIAN
THE GUARDIAN
INSURANCE & ANNUITY
COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
Annual Report
to Contractowners
[LOGO] VALUE GUARD
THE GUARDIAN/VALUE LINE
SEPARATE ACCOUNT
Executive Offices
201 Park Avenue South
New York, NY 10003
Customer Service Office
P.O. Box 26210
Lehigh Valley, PA 18002-6210
1-800-221-3253
DECEMBER 31, 1997
