[LOGO]
GUARDIAN
SEMI-ANNUAL
REPORT TO
CONTRACTOWNERS
June 30, 2000
VALUE GUARD
THE GUARDIAN/VALUE LINE
SEPARATE ACCOUNT
THE GUARDIAN INSURANCE &
ANNUITY COMPANY, INC.
A wholly owned subsidiary of
The Guardian Life Insurance Company of America
EXECUTIVE OFFICE
7 Hanover Square
New York, New York 10004
CUSTOMER SERVICE OFFICE
P.O. Box 26210
Lehigh Valley, Pennsylvania 18002-6210
1-800-221-3253
Distributed by:
GUARDIAN INVESTOR SERVICES CORPORATION(R)
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Performance Summary
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INVESTMENT OPTION TOTAL RETURNS*
----------------- --------------
The Guardian Park Avenue Fund ....................................... 2.37%
Value Line Leveraged Growth Investors ............................... 1.38%
Value Line Special Situations Fund .................................. 7.55%
Value Line Fund ..................................................... -1.06%
Value Line Income Fund .............................................. 2.36%
Value Line U.S. Govt. Securities Fund ............................... 1.11%
Value Line Cash Fund ................................................ 2.26%
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FIXED-RATE OPTION
The rates of interest for amounts deposited or renewed (on a contract
anniversary) in the Fixed-Rate Option for the month of January 2000 was 5.00%
and for the months of February to May 2000 was 5.25%, and for the month of June
2000 was 5.50%.
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.
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* 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, 2000 through June 30, 2000. In contrast to the returns presented
elsewhere, changes in unit values reflect the effects of mortality and
expense risk charges as well as each option's expenses to give you a better
picture of an investment option's performance under the contract. Total
return performance figures stated above do not, however, reflect the annual
contract administration charge or possible withdrawal charges. Deduction of
these amounts would reduce the stated total returns. Past performance is
not a guarantee of future results. Investment returns and principal value
will vary with market conditions.
You will receive, under a separate cover, annual reports for the Value Line
funds (available under Value Guard) shortly.
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<PAGE>
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DEAR CONTRACTOWNER:
-------------------
[PHOTO OMITTED}
Joseph D. Sargent, CLU
President and CEO
As President and Chief Executive Officer of The Guardian Insurance &
Annuity Company, Inc., and its parent, The Guardian Life Insurance Company of
America, I am pleased to send you this Semi-Annual Report on the performance of
your Value Guard contract's separate account and its underlying variable
investment options during the first half of the year.
HELPING YOU REACH YOUR GOALS
As an owner of a variable annuity, you are among a rapidly growing group of
people who are planning for their future with a retirement product that is
linked to the investment markets. A variable annuity, such as Value Guard, may
be one of the best ways to prepare for your retirement and because of the
benefits it offers, may help you reach your goals faster.
This Report tells you how each investment option available in your contract
has performed. Also included is a letter from Frank J. Jones, Ph.D., our chief
investment officer, and interviews with the portfolio managers of the funds that
comprise our investment options. These materials discuss the current economic
environment as well as specific issues that may impact your investment strategy.
I am confident that this information will be invaluable to you as you
assess your financial situation and investment strategies.
Thank you for selecting Guardian to assist you in investing for your
future.
Sincerely,
/s/ JOSEPH D. SARGENT, CLU
--------------------------
Joseph D. Sargent, CLU
President and Chief Executive Officer
The Guardian Insurance & Annuity Company, Inc.
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TABLE OF CONTENTS
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THE GUARDIAN PARK AVENUE FUND
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PORTFOLIO MANAGERS INTERVIEW 4
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FUND PROFILE 5
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SCHEDULE OF INVESTMENTS 8
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FINANCIALS
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THE GUARDIAN PARK AVENUE FUND 11
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THE GUARDIANN/VALUE LINE SEPARATE ACCOUNT 18
FOR VALUE GUARD CONTRACTOWNERS
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THE GUARDIAN VARIABLE ACCOUNT 1 25
FOR VARIABLE ACCOUNT 1 CONTRACTOWNERS
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THE GUARDIAN VARIABLE ACCOUNT 2 26
FOR VARIABLE ACCOUNT 2 CONTRACTOWNERS
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COMBINED NOTES TO FINANCIAL STATEMENTS FOR 27
VARIABLE ACCOUNT 1 & 2
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Investments offered through The Guardian Insurance & Annuity Company, Inc. are
not deposits or obligations of, or guaranteed or endorsed by, any bank or
depository institution, nor are they federally insured by the Federal Deposit
Insurance Corporation, The Federal Reserve Board, or any other agency. They
involve investment risk, including possible loss of principal amount invested.
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THE GUARDIAN PARK AVENUE FUND
-----------------------------
[PHOTOS OMITTED]
Larry Luxenberg, C.F.A.
Co-Portfolio Manager
John B. Murphy, C.F.A.
Co-Portfolio Manager
Mark Dunetz
Co-Portfolio Manager
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 JUNE 30, 2000: $3,952,489,952
Q. HOW HAS THE FUND PERFORMED DURING THE FIRST HALF OF 2000?
A. By any standard, this has been a tumultuous year for the stock market. After
the first two weeks of January, veteran stock market analysts were already
asserting that this was one of the most volatile periods in stock market
history. The rest of the first half has done nothing to change this view. Given
such volatility, any tally of performance can quickly change. Nonetheless, over
the six months, The Guardian Park Avenue Fund was up 2.88%(1) while the S&P 500
Index(2) was down 0.42%. While the absolute returns are low by recent
standards--both the Fund and the S&P 500 Index have returned more than 20
percent annually for an unprecedented five consecutive years--they are still
impressive in relative terms.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS TIME?
A. The volatility of the first half of the year strengthened our beliefs in
three things. First, it is important to take a long-term outlook. Second, timing
the market is exceedingly difficult. Third, investing in good companies pays off
eventually.
In a fickle market, it's easy to get caught up in the almost daily mood
swings and give up too quickly on sound investment ideas. Moreover, many studies
have shown that missing just a few days during strong market rallies greatly
diminishes long-term returns. To cite just two examples: a study by Sanford
Bernstein & Co. showed that if investors were out of the market for the ten best
days from 1980 to 1994, they missed more than one-quarter of the total S&P 500
returns. If they missed only forty days (fewer than three per year) during that
period, they lost nearly two-thirds of total returns. In a more recent example,
April was the third worst month in the entire history of the NASDAQ Composite
Index(3) while June was the third best month.
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"The volatility of the first half of the year strengthened our beliefs in three
things. First, it is important to take a long-term outlook. Second, timing the
market is exceedingly difficult. Third, investing in good companies pays off
eventually."
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Our portfolio continues to emphasize large-cap growth stocks, although over
the last year, we have added to our weightings in mid- and small-cap stocks. We
plan to continue adding selected small and mid-cap companies with promising
fundamentals.
Q. WHAT IS YOUR OUTLOOK FOR THE SECOND HALF OF 2000?
A. Despite the market's first-half gyrations, we believe that the outlook for
stocks is still positive. Most importantly, the domestic and global economies
remain sound. At year-end, central banks eased monetary conditions to
accommodate concerns about Y2K disruptions. This interrupted a period of global
tightening and may have contributed to an unusually strong first quarter.
Concerns about the economy overheating and rising inflation have been put to
rest, at least temporarily. Now, with the central banks relegated to the
sidelines and growth still solid but slowing, it looks promising for stocks. As
recent actions show, policy errors have not been banished from Washington but
with only one short recession in eighteen years, somebody is doing something
right.
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(1) Total return figures 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 noted. Total return figures for
Class B shares do not take into account the contingent deferred sales
charge applicable to such shares (maximum of 3%), 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, Class A shares of the Fund were
offered at a higher sales charge, so that actual returns would have been
somewhat lower.
(2) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The S&P 500 Index is not available for direct investment and its returns do
not reflect the fees and expenses that have been deducted from the Fund.
Likewise, return figures for the S&P 500 Index do not reflect any sales
charges that an investor may have to pay when purchasing or redeeming
shares of the Fund.
(3) The NASDAQ Composite Index is a broad-based capitalization-weighted index
of all NASDAQ National Market stocks.
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4
<PAGE>
Meanwhile, technological change around the globe is, if anything,
accelerating. Mobile communications, both voice and data, are proliferating.
Internet traffic is doubling every quarter. The completion of the mapping of the
human genome is characteristic of great strides being made in the life sciences.
Corporations, freed from the drag of Y2K spending, can now update their internal
systems and plenty of innovative software and hardware is available. Companies
such as Cisco and Microsoft have converted most of their internal systems to
digital ones and realized tremendous efficiences as well as greatly improved
access to timely information.
While the short-term outlook is always difficult to gauge, the long-term view
still looks good. In our view, it would be premature to sound the death knell
for the longest-running bull market of our lifetimes.
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THE GUARDIAN PARK AVENUE FUND
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TOP TEN HOLDINGS AS OF JUNE 30, 2000
COMPANY PERCENT OF TOTAL NET ASSETS
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1. Microsoft Corp. 3.94%
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2. Intel Corp. 3.87%
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3. Cisco Systems, Inc. 3.48%
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4. General Electric Co. 3.45%
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5. Citigroup, Inc. 2.92%
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6. Nortel Networks Corp 2.67%
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7. Oracle Corp. 2.12%
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8. EMC Corp. 2.05%
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9. Int'l. Business Machines 2.05%
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10. Xilinx, Inc. 1.48%
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5
<PAGE>
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THE GUARDIAN PARK AVENUE FUND
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SECTOR WEIGHTINGS OF
COMMON STOCKS HELD
BY THE FUND ON JUNE 30, 2000
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
UTILITIES 0.21%
CONSUMER CYCLICALS 2.52%
CASH 2.58%
CONSUMER SERVICES 3.36%
CAPITAL GOODS 4.82%
CONSUMER STAPLES 5.47%
ENERGY 7.79%
FINANCIALS 10.66%
TELECOMMUNICATIONS 18.04%
TECHNOLOGY 44.55%
<TABLE>
<CAPTION>
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AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2000
Inception Since
Date 1 Year 5 Years 10 Years Inception
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<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 6/1/72 18.36% 24.15% 19.75% 17.07%
At Net Asset Value (without sales charge) 23.93% 25.30% 20.30% 17.27%
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Class B Shares (with sales charge) 5/1/96 19.12% N/A N/A 23.62%
At Net Asset Value (without sales charge) 22.70% N/A N/A 24.50%
-----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index 7.24% 23.78% 17.75% 13.55%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return figures 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 3%), 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.
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6
<PAGE>
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THE GUARDIAN PARK AVENUE FUND
-----------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
1999
--------
The Guardian Park Avenue Fund (Class A) $876,333
S&P 500 Index $354,761
Cost of Living $ 41,204
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 $876,333 on June 30, 2000. 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 Index, a similar hypothetical investment
would now be worth $354,761. The Cost of Living, as measured by the Consumer
Price Index, which is generally representative of the level of U.S. inflation,
is also provided to lend a more complete understanding of the investment's real
worth.
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7
<PAGE>
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SCHEDULE OF INVESTMENTS
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June 30, 2000 (Unaudited)
O THE GUARDIAN PARK AVENUE FUND
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COMMON STOCKS -- 96.2%
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Shares Value
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APPLIANCE AND FURNITURE -- 1.3%
195,800 Corning, Inc. $ 52,841,525
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BIOTECHNOLOGY -- 4.1%
89,500 Affymetrix, Inc.* 14,778,688
309,400 Amgen, Inc.* 21,735,350
191,000 Cephalon, Inc.* 11,436,125
265,300 Enzon, Inc.* 11,275,250
72,700 Genentech, Inc.* 12,504,400
188,200 Human Genome Sciences, Inc.* 25,101,175
120,900 Immunex Corp.* 5,976,994
164,800 MedImmune, Inc.* 12,195,200
193,000 Millenium Pharmaceuticals, Inc.* 21,591,875
35,700 Myriad Genetics, Inc.* 5,286,389
121,000 Sepracor, Inc.* 14,595,625
64,300 Vertex Pharmaceuticals, Inc.* 6,775,613
--------------
163,252,684
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BROADCASTING -- 0.3%
306,500 Infinity Broadcasting Corp.* 11,168,094
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CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 0.3%
74,600 Amdocs Ltd.* 5,725,550
137,800 Amkor Technology, Inc.* 4,866,062
--------------
10,591,612
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COMPUTER SOFTWARE -- 12.7%
125,000 Adobe Systems, Inc. 16,250,000
105,600 Advent Software, Inc.* 6,811,200
433,000 BEA Systems, Inc.* 21,406,438
229,300 BroadVision, Inc.* 11,651,306
44,400 Check Point Software Technologies Ltd.* 9,401,700
104,800 Computer Associates Int'l., Inc. 5,364,450
44,500 i2 Technologies, Inc.* 4,639,820
176,600 Inktomi Corp.* 20,882,950
119,500 Mercator Software, Inc.* 8,215,625
186,000 Mercury Interactive Corp.* 17,995,500
102,000 Micromuse, Inc.* 16,879,406
1,946,545 Microsoft Corp.* 155,723,600
995,000 Oracle Corp.* 83,642,188
101,000 Rational Software Corp.* 9,386,688
322,300 Saga Systems, Inc.* 4,008,606
174,900 Siebel Systems, Inc.* 28,607,081
254,200 Symantec Corp.* 13,710,912
149,700 TIBCO Software, Inc.* 16,052,986
178,530 VeriSign, Inc.* 31,510,545
90,525 VERITAS Software Corp.* 10,230,739
188,400 Vitria Technology, Inc.* 11,515,950
--------------
503,887,690
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COMPUTER SYSTEMS -- 9.7%
304,200 Apple Computer, Inc.* 15,932,475
598,100 Compaq Computer Corp. 15,288,931
89,400 Comverse Technology, Inc.* 8,314,200
930,700 Dell Computer Corp.* 45,895,144
144,800 Efficient Networks, Inc.* 10,651,850
1,053,600 EMC Corp.* 81,061,350
375,300 Hewlett Packard Co. 46,865,587
739,000 Int'l. Business Machines 80,966,688
70,400 Network Appliance, Inc.* 5,667,200
214,000 NVIDIA Corp.* 13,602,375
55,900 QLogic Corp.* 3,692,894
77,600 SanDisk Corp.* 4,748,150
564,800 Sun Microsystems, Inc.* 51,361,500
--------------
384,048,344
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DRUGS AND HOSPITALS -- 0.9%
265,800 Andrx Corp.* 16,990,434
206,300 Regeneron Pharmaceuticals, Inc.* 6,150,319
517,200 Tenet Healthcare Corp. 13,964,400
--------------
37,105,153
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ELECTRICAL EQUIPMENT -- 4.8%
164,800 American Power Conversion Corp.* 6,725,900
185,900 Arrow Electronics, Inc.* 5,762,900
127,000 Avnet, Inc. 7,524,750
195,480 Flextronics Int'l. Ltd.* 13,427,033
2,571,900 General Electric Co. 136,310,700
487,400 SCI Systems, Inc.* 19,099,987
--------------
188,851,270
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ELECTRONICS AND INSTRUMENTS -- 0.5%
99,800 Jabil Circuit, Inc.* 4,952,575
41,500 PerkinElmer, Inc.* 2,676,966
131,400 Sanmina Corp.* 11,234,700
--------------
18,864,241
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ELECTRONICS-SEMICONDUCTORS -- 8.5%
354,000 Analog Devices, Inc.* 26,904,000
331,400 Atmel Corp.* 12,220,375
232,000 AVX Corp. 5,321,500
161,400 Burr-Brown Corp.* 13,991,363
85,500 Chartered Semiconductor Mfg. Ltd.* 7,695,000
54,300 Cree, Inc.* 7,249,050
43,000 EPCOS AG* 4,235,500
166,300 Integrated Device Technology, Inc.* 9,957,213
1,142,800 Intel Corp. 152,778,075
36,900 Intersil Hldgs. Corp.* 1,994,906
240,000 Int'l. Rectifier Corp.* 13,440,000
846,600 LSI Logic Corp.* 45,822,225
139,500 LTX Corp.* 4,873,781
145,500 Microchip Technology, Inc.* 8,477,648
124,200 Palm, Inc.* 4,145,175
143,400 STMicroelectronics N.V. 9,204,488
177,792 Taiwan Semiconductor Mfg. Co.
Ltd. ADS* 6,889,440
62,500 Taiwan Semiconductor Mfg. Co. Ltd.
ADS (new)* 2,425,781
--------------
337,625,520
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ENERGY-MISCELLANEOUS -- 0.1%
166,700 Tosco Corp. 4,719,694
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ENTERTAINMENT AND LEISURE -- 2.4%
1,276,700 Walt Disney Co.* 49,551,919
209,800 Time Warner, Inc. 13,505,875
453,976 Viacom, Inc.* 30,955,488
--------------
94,013,282
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FINANCIAL-BANKS -- 3.8%
325,300 Bank of New York, Inc.* 15,126,450
1,916,000 Citigroup, Inc. 115,439,000
414,900 Mellon Financial Corp.* 15,117,919
173,019 Premier National Bancorp, Inc. 2,249,247
--------------
147,932,616
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FINANCIAL-OTHER -- 4.6%
463,500 American Express Co. 24,159,937
280,000 Countrywide Credit Industries, Inc.* 8,487,500
218,666 Legg Mason, Inc. 10,933,300
394,700 Lehman Brothers Hldgs., Inc. 37,323,819
295,500 Merrill Lynch & Co., Inc. 33,982,500
615,400 Morgan Stanley Dean Witter & Co. 51,232,050
466,357 Charles Schwab Corp. 15,681,271
--------------
181,800,377
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* Non-income producing security. See notes to financial statements.
8
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
-------------------------------------------------------------------------------
Shares Value
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FINANCIAL-THRIFT -- 0.8%
347,400 Charter One Financial, Inc. $ 7,990,200
380,100 Golden West Financial Corp.* 15,512,831
248,800 Washington Mutual, Inc.* 7,184,100
--------------
30,687,131
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MERCHANDISING-SPECIAL -- 0.8%
140,500 Best Buy, Inc.* 8,886,625
28,200 Borders Group, Inc.* 438,862
300,000 Starbucks Corp.* 11,456,250
273,000 United Stationers, Inc.* 8,838,375
--------------
29,620,112
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MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 0.2%
91,300 Omnicom Group, Inc. 8,131,406
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NATURAL GAS-DIVERSIFIED -- 0.3%
165,900 Coastal Corp. 10,099,163
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OIL AND GAS PRODUCING -- 1.9%
309,200 Apache Corp. 18,184,825
232,600 Burlington Resources, Inc. 8,896,950
225,400 EOG Resources, Inc.* 7,550,900
241,200 Newfield Exploration Co.* 9,436,950
501,200 Talisman Energy, Inc.* 16,602,250
152,100 Vastar Resources, Inc. 12,491,213
--------------
73,163,088
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OIL AND GAS SERVICES -- 2.7%
160,900 B.J. Svcs. Co.* 10,056,250
172,300 Cooper Cameron Corp.* 11,371,800
203,600 Global Marine, Inc.* 5,738,975
289,800 Halliburton Co. 13,674,938
281,200 Noble Drilling Corp.* 11,581,925
395,400 Santa Fe Int'l. Corp. 13,814,287
268,200 Schlumberger Ltd. 20,014,425
152,609 Transocean Sedco Forex, Inc. 8,155,043
305,500 Weatherford Int'l., Inc.* 12,162,719
--------------
106,570,362
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OIL-INTEGRATED-DOMESTIC -- 0.2%
165,000 Kerr-McGee Corp. 9,724,688
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OIL-INTEGRATED-INTERNATIONAL -- 2.6%
699,700 Exxon Mobil Corp. 54,926,450
799,200 Royal Dutch Petroleum Co. 49,200,750
--------------
104,127,200
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PUBLISHING-NEWS -- 0.2%
128,500 Dow Jones & Co., Inc.* 9,412,625
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SEMICONDUCTORS -- 3.6%
529,400 Advanced Micro Devices, Inc.* 40,896,150
475,800 Kemet Corp.* 11,924,737
480,200 Micron Technology, Inc.* 42,287,612
444,900 National Semiconductor Corp.* 25,248,075
516,450 Vishay Intertechnology, Inc.* 19,592,822
--------------
139,949,396
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SEMICONDUCTORS-COMMUNICATIONS -- 6.8%
298,300 Altera Corp.* 30,407,956
193,100 Applied Micro Circuits Corp.* 19,068,625
85,900 Conexant Systems, Inc.* 4,176,888
507,600 Cypress Semiconductor Corp.* 21,446,100
407,000 Micrel, Inc.* 17,679,062
100,700 PMC-Sierra, Inc.* 17,893,131
48,600 RF Micro Devices, Inc.* 4,258,575
217,800 Semtech Corp.* 16,658,297
772,800 Texas Instruments, Inc. 53,081,700
159,450 Transwitch Corp.* 12,307,547
56,600 TriQuint Semiconductor, Inc.* 5,415,912
134,200 Vitesse Semiconductor Corp.* 9,872,088
706,200 Xilinx, Inc.* 58,305,637
--------------
270,571,518
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SEMICONDUCTORS-EQUIPMENT -- 3.2%
58,200 Advanced Energy Industries, Inc.* 3,430,163
318,839 Agilent Technologies, Inc.* 23,514,376
387,400 Applied Materials, Inc.* 35,108,125
267,600 Credence Systems Corp.* 14,768,175
221,800 KLA-Tencor Corp.* 12,989,163
289,800 Lam Research Corp.* 10,867,500
89,600 Novellus Systems, Inc.* 5,068,000
277,500 Teradyne, Inc.* 20,396,250
--------------
126,141,752
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TELECOMMUNICATIONS -- 1.8%
198,075 AT & T Corp. 6,264,122
191,400 AT & T Wireless Group* 5,335,275
216,000 McLeodUSA, Inc.* 4,468,500
822,300 Qwest Comm. Int'l., Inc.* 40,858,031
153,700 U S West, Inc. 13,179,775
--------------
70,105,703
-------------------------------------------------------------------------------
TELECOMMUNICATIONS-EQUIPMENT -- 13.1%
234,500 American Tower Corp.* 9,775,719
112,000 Bookham Technology PLC* 6,636,000
66,700 Brocade Comm. Systems, Inc.* 12,238,408
110,400 Ciena Corp.* 18,402,300
2,164,000 Cisco Systems, Inc.* 137,549,250
74,500 Copper Mountain Networks, Inc.* 6,565,312
209,300 Crown Castle Corp.* 7,639,450
86,800 GlobeSpan, Inc.* 10,596,381
404,568 JDS Uniphase Corp.* 48,497,589
85,800 Juniper Networks, Inc.* 12,489,262
665,500 Nokia Corp. 33,233,406
1,548,600 Nortel Networks Corp. 105,691,950
227,700 Paradyne Networks, Inc.* 7,414,481
95,000 Pinnacle Hldgs., Inc.* 5,130,000
146,600 Proxim, Inc.* 14,508,819
271,600 QUALCOMM, Inc.* 16,296,000
51,200 Redback Networks, Inc.* 9,113,600
405,300 Scientific Atlanta, Inc. 30,194,850
72,000 SDL, Inc.* 20,533,500
122,400 Silicon Image, Inc.* 6,104,700
--------------
518,610,977
-------------------------------------------------------------------------------
TELECOMMUNICATIONS-SPECIALTY -- 3.9%
125,500 Advanced Fibre Comm., Inc.* 5,686,719
730,400 Exodus Comm., Inc.* 33,644,050
83,600 InfoSpace, Inc.* 4,618,900
184,800 Level 3 Comm., Inc.* 16,262,400
243,800 Nextel Comm., Inc.* 14,917,513
337,900 Nextel Partners, Inc.* 11,002,869
222,200 NEXTLINK Comm., Inc.* 8,429,712
42,000 Phone.com, Inc.* 2,735,250
242,400 Primus Telecomm. Group, Inc.* 6,029,700
347,200 Sprint Corp. 20,658,400
106,000 Triton PCS Hldgs., Inc.* 6,121,500
42,000 Williams Comm. Group* 1,393,875
192,600 Yahoo, Inc.* 23,858,325
--------------
155,359,213
-------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 0.1%
55,200 Calpine Corp.* 3,629,400
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $2,510,434,127) 3,802,605,836
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
9
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
-------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.5%
-------------------------------------------------------------------------------
Principal
Amount Value
-------------------------------------------------------------------------------
$29,000,000 Duke Capital Corp.
7.00%, due 7/5/00 $ 28,977,444
32,000,000 UBS Fin. (Delaware), Inc.
6.92%, due 7/5/00 31,975,396
-------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $60,952,840) 60,952,840
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.9%
-------------------------------------------------------------------------------
$74,368,000 State Street Bank & Trust Co.
repurchase agreement, dated
6/30/00, maturity value $74,408,593
at 6.55% due 7/3/00(1)
(COST $74,368,000) $ 74,368,000
-------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.6%
(COST $2,645,754,967) 3,937,926,676
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.4% 14,563,276
-------------------------------------------------------------------------------
NET ASSETS -- 100% $3,952,489,952
-------------------------------------------------------------------------------
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
-------------------------------------------------------------------------------
See notes to financial statements.
10
<PAGE>
---------------------
FINANCIAL STATEMENTS
--------------------
O THE GUARDIAN PARK AVENUE FUND
-------------------------------------------------------------------------------
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------
ASSETS
Investments, at market (cost $2,645,754,967) $3,937,926,676
Receivable for securities sold 64,948,647
Receivable for fund shares sold 8,803,964
Dividends receivable 428,991
Interest receivable 13,785
Other assets 4,582
--------------
TOTAL ASSETS 4,012,126,645
--------------
LIABILITIES
Payable for securities purchased 45,234,931
Due to custodian 6,825,067
Payable for fund shares redeemed 4,626,730
Accrued expenses 351,829
Due to affiliates 2,598,136
--------------
TOTAL LIABILITIES 59,636,693
--------------
NET ASSETS $3,952,489,952
--------------
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par $648,249
Additional paid-in capital 2,319,184,573
Overdistributed net investment income (6,049,525)
Accumulated net realized gain on investments 346,534,946
Net unrealized appreciation of investments 1,292,171,709
--------------
NET ASSETS $3,952,489,952
--------------
NET ASSETS:
Class A $3,402,685,471
Class B $ 549,804,481
SHARES OF BENEFICIAL INTEREST OUTSTANDING - $0.01 PAR VALUE
Class A 55,661,460
Class B 9,163,471
NET ASSET VALUE PER SHARE
Class A $61.13
Class B $60.00
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)* $64.01
* Based on sale of less than $100,000. On sale of $100,000 or more, the
offering price is reduced.
-------------------------------------------------------------------------------
Statement of Operations
-------------------------------------------------------------------------------
Six Months Ended June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 6,182,998
Interest 5,040,103
Less: Foreign tax withheld (79,965)
--------------
TOTAL INCOME 11,143,136
--------------
EXPENSES:
Investment advisory fees-- Note 2 9,762,615
Administrative fees - Class A-- Note 2 3,232,928
Administrative fees - Class B-- Note 2 660,775
12b-1 fees - Class B-- Note 3 1,982,324
Transfer agent fees - Class A 1,040,031
Transfer agent fees - Class B 304,211
Custodian fees 206,144
Printing expense 173,913
Registration fees 44,809
Legal fees 23,990
Audit fees 11,373
Trustees' fees-- Note 2 9,448
Loan commitment fees-- Note 7 5,407
Insurance expense 3,761
Other 350
--------------
TOTAL EXPENSES 17,462,079
--------------
NET INVESTMENT LOSS (6,318,943)
--------------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS -- NOTE 5
Net realized gain on investments-- Note 1 210,295,489
Net change in unrealized appreciation of
investments-- Note 5 (92,122,693)
--------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 118,172,796
--------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 111,853,853
--------------
-------------------------------------------------------------------------------
See notes to financial statements.
11
<PAGE>
THE GUARDIAN PARK AVENUE FUND
(Continued)
-------------------------------------------------------------------------------
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
Six Months Year Ended
Ended December 31,
June 30, 2000 1999
(Unaudited) (Audited)
-------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) $ (6,318,943) $ 4,244,467
Net realized gain on investments 210,295,489 507,876,945
Net change in unrealized
appreciation of investments (92,122,693) 419,284,130
-------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 111,853,853 931,405,542
-------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A -- (4,338,070)
Class B -- --
Net realized gain on investments
Class A -- (389,011,284)
Class B -- (59,152,111)
-------------------------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS -- (452,501,465)
-------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net decrease in net
assets from capital share
transactions -- Note 6 (1,849,377) (16,675,323)
-------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 110,004,476 462,228,754
NET ASSETS:
Beginning of period 3,842,485,476 3,380,256,722
-------------------------------------------------------------------------------
End of period* $3,952,489,952 $3,842,485,476
-------------------------------------------------------------------------------
* Includes undistributed/
(overdistributed) net
investment income of $ (6,049,525) $ 269,418
-------------------------------------------------------------------------------
See notes to financial statements.
12
<PAGE>
---------------------
NOTES TO
FINANCIAL STATEMENTS
---------------------
June 30, 2000 (Unaudited)
THE GUARDIAN PARK AVENUE FUND
NOTE 1. ACCOUNTING POLICIES
The Guardian Park Avenue Fund (the Fund or GPAF) is a series of The Park
Avenue Portfolio, which is a diversified open-end management investment company
registered under the Investment Company Act of 1940, as amended (the 1940 Act).
Significant accounting policies of the Fund are as follows:
As of June 30, 2000, the Fund offers three classes of shares. Class A
shares are sold with an initial sales load of up to 4.50% and an administrative
fee of up to .25% on an annual basis of the Fund's average daily net assets.
Class B shares are sold without an initial sales load but are subject to a
12b-1 fee of .75% and an administrative fee of up to .25% on an annual basis of
the Fund's average daily net assets, and a contingent deferred sales load
(CDSL) of up to 3% imposed on certain redemptions. Institutional Class shares
are offered at net asset value, without an initial or contingent deferred sales
load. All three classes of shares 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments
Equity and debt securities listed on domestic or foreign securities
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.
Pursuant to valuation procedures approved by the Board of Trustees,
certain debt securities may be valued each business day by an independent
pricing service (Service). Debt securities for which quoted bid prices are
readily available and representative of the bid side of the market, in the
judgment of the Service, are valued at the bid price. 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
six months ended June 30, 2000, distribution, administrative and transfer agent
fees were the only class-specific expenses.
Foreign Currency Translation
GPAF is permitted to buy international securities that are not U.S.
dollar-denominated. GPAF's books and records are maintained in U.S. dollars as
follows:
(1) The foreign currency market value of investment securities and
other assets and liabilities stated in foreign currencies are translated
into U.S. dollars at the current rate of exchange.
(2) Purchases, sales, income and expenses are translated at the rate
of exchange prevailing on the respective dates of such transactions.
The resulting gains and losses are included in the Statement of
Operations.
13
<PAGE>
Realized foreign exchange gains and losses, which result from changes in
foreign exchange rates between the date on which a Fund earns dividends and
interest or pays foreign withholding taxes or other expenses and the date on
which U.S. dollar equivalent amounts are actually received or paid, are
included in net realized gain or loss on foreign currencies. Realized foreign
exchange gains and losses which result from changes in foreign exchange rates
between the trade and settlement dates on security and currency transactions
are also included in net realized gain on foreign currencies. Net currency
gains and losses from valuing other assets and liabilities denominated in
foreign currency as of June 30, 2000 are reflected in net change in unrealized
appreciation or depreciation from translation of assets and liabilities in
foreign currencies based on the applicable exchange rate in effect at the end
of period.
Forward Foreign Currency Contracts
GPAF may enter into forward foreign currency contracts in connection with
planned purchases or sales of securities, or to hedge against changes in
currency exchange rates affecting the values of its investments that are
denominated in a particular currency. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward exchange rate. Risks may arise from the potential inability
of a counterparty to meet the terms of a contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Fluctuations in the value of forward foreign currency contracts are recorded
for book purposes as unrealized gains or losses from translation of other
assets and liabilities denominated in foreign currencies by GPAF. When a
forward contract is closed, GPAF will record a realized gain or loss equal to
the difference between the value of the forward contract at the time it was
opened and the value at the time it was closed. Such amount is recorded in net
realized gain or loss on foreign currencies. GPAF will not enter into a forward
foreign currency contract if such contract would obligate it to deliver an
amount of foreign currency in excess of the value of its portfolio securities
or other assets denominated in that currency.
Dividends and Distributions to Shareholders
GPAF distributes each year as dividends or capital gain 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 accordance 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.
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), an indirect 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 for each meeting of the Board of Trustees. An annual
fee of $1,000 is also paid to each such Trustee. GISC pays compensation to the
Trustees who are interested persons. Certain officers and Trustees of the Fund
are affiliated with GISC.
Administrative Services Agreement
Pursuant to the Administrative Services Agreement adopted by the Fund on
behalf of the Class A and Class B shares, the Fund pays GISC an administrative
service fee at an annual rate of .25% of the average daily net assets for which
a "dealer of record" has been designated. For the six months ended June 30,
2000, GPAF Class A shares paid an annualized rate of .19% of its average daily
net assets under the Administrative Services Agreement.
14
<PAGE>
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
$137,622 for the six months ended June 30, 2000.
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 six months ended June 30, 2000, GISC received CDSL
charges of $376,728.
NOTE 4. REPURCHASE AGREEMENTS
Collateral under repurchase agreements takes 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 collateral
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 has established
standards to evaluate the creditworthiness of broker-dealers and banks which
engage in repurchase agreements with the Fund.
NOTE 5. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) amounted to $1,904,776,427 and $1,930,706,222, respectively, during
the six months ended June 30, 2000.
The cost of investments owned at June 30, 2000 for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes.
Gross unrealized appreciation and depreciation of investments excluding
foreign currency at June 30, 2000 aggregated $1,356,053,595 and $63,881,886,
respectively, resulting in net unrealized appreciation of $1,292,171,709.
NOTE 6. SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.01 par value shares of beneficial
interest authorized. As of June 30, 2000, such shares were divided into three
classes, designated as Class A, Class B and Institutional Class shares. Through
June 30, 2000, no Institutional Class shares of the Fund were sold.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2000 December 31, 1999 June 30, 2000 December 31, 1999
(Unaudited) (Audited) (Unaudited) (Audited)
------------------------------------------------------------------------------------------------------------------------------------
Shares Amount
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 11,051,887 27,359,054 $ 672,716,374 $ 1,374,220,548
Shares issued in reinvestment of
dividends and distributions -- 6,674,168 -- 378,300,756
Shares repurchased (11,512,581) (35,553,998) (703,880,598) (1,831,479,707)
-----------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (460,694) (1,520,776) $ (31,164,224) $ (78,958,403)
===================================================================================================================================
CLASS B
Shares sold 977,507 1,278,710 $ 58,229,373 $ 68,200,561
Shares issued in reinvestment of
distributions -- 1,003,393 -- 56,213,737
Shares repurchased (483,619) (1,161,774) (28,914,526) (62,131,218)
-----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 493,888 1,120,329 $ 29,314,847 $ 62,283,080
===================================================================================================================================
</TABLE>
NOTE 7. LINE OF CREDIT
A $100,000,000 line of credit available to The Guardian Park Avenue Fund
and the other related Guardian Funds has been established with State Street Bank
and Trust Company and Bank of Montreal. The rate of interest charged on any
borrowing is based upon the prevailing Federal Funds rate at the time of the
loan plus .50% calculated on a 360-day basis per annum. For the six months ended
June 30, 2000 the Fund did not borrow against this line of credit.
The Fund is obligated to pay State Street Bank and Trust Company and Bank
of Montreal a commitment fee computed at a rate of .08% per annum on the average
daily unused portion of the revolving credit.
15
<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
------------------------------------------------------------------------------------
Six Months
Ended Year Ended December 31, (Audited)
June 30, 2000 ----------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $59.42 $51.88 $46.12 $37.91 $33.97 $26.89
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income/(loss) (0.06) 0.13 0.35 0.40 0.42 0.33
Net realized and unrealized
gain on investments 1.77 15.04 9.38 12.61 8.41 8.87
----------------------------------------------------------------------------------------------------------------------------------
Net increase from
investment operations 1.71 15.17 9.73 13.01 8.83 9.20
----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income -- (0.08) (0.34) (0.39) (0.42) (0.33)
Distributions in excess of net
investment income -- -- -- -- (0.01) --
Net realized gain on investments -- (7.55) (3.63) (4.41) (4.46) (1.79)
----------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions -- (7.63) (3.97) (4.80) (4.89) (2.12)
----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $61.13 $59.42 $51.88 $46.12 $37.91 $33.97
----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN* 2.88 % 30.25% 21.30% 34.85% 26.49% 34.28%
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $3,402,685 $3,334,722 $2,990,767 $2,312,632 $1,392,186 $972,275
Ratio of expenses to average
net assets 0.78 %(a) 0.77% 0.78% 0.79% 0.79% 0.81%
Ratio of net investment income/(loss)
to average net assets (0.20)%(a) 0.24% 0.72% 0.95% 1.19% 1.07%
Portfolio turnover rate 51 % 74% 55% 50% 81% 78%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Excludes effect of sales load.
(a) Annualized.
16
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
O The Guardian Park Avenue Fund
<TABLE>
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
<CAPTION>
--------------------------------------------------------------------------------------
CLASS B
--------------------------------------------------------------------------------------
Six Months
Ended Year Ended December 31, (Audited) May 1, 1996+
June 30, 2000 ------------------------------------------ to December 31,
(Unaudited) 1999 1998 1997 1996 (Audited)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $58.57 $51.59 $46.02 $37.90 $36.26
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income/(loss) (0.29) (0.31) (0.08) 0.00 0.05
Net realized and unrealized gain
on investments 1.72 14.84 9.28 12.54 6.10
Net increase from
investment operations 1.43 14.53 9.20 12.54 6.15
------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income -- -- -- (0.01) (0.05)
Net realized gain on investments -- (7.55) (3.63) (4.41) (4.46)
------------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions -- (7.55) (3.63) (4.42) (4.51)
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $60.00 $58.57 $51.59 $46.02 $37.90
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN* 2.44 % 29.13 % 20.16 % 33.53 % 17.35 %
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $549,804 $507,764 $389,489 $201,746 $36,006
Ratio of expenses to average
net assets 1.64 %(a) 1.67 % 1.70 % 1.73% 1.77%(a)
Ratio of net investment income/(loss)
to average net assets (1.06)%(a) (0.66)% (0.21)% 0.00% 0.04%(a)
Portfolio turnover rate 51 % 74 % 55 % 50% 81%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
* Excludes effect of sales load.
(a) Annualized.
17
<PAGE>
--------------------------------------------------------------------------------
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
----------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
ASSETS
Shares owned in underlying fund--Note 1.............................
Net asset value per share (NAV).....................................
Total Assets (Shares x NAV)......................................
LIABILITIES
Risk charges and other liabilities..................................
NET ASSETS--NOTE 3......................................................
FIFO Cost...............................................................
--------------------------------------------------------------------------------
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
----------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
INVESTMENT INCOME
Income:
Reinvested dividends.............................................
Expenses--Note 4:
Mortality and expense risk charges...............................
Net investment income/(expense)..................................
REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS
Realized gain/(loss) from sale of investments:
Net realized gain/(loss) from sale of investments................
Reinvested realized gain distributions...........................
Net realized gain/(loss) on investments..........................
Net change in unrealized appreciation/(depreciation) of investments
Net realized and unrealized gain/(loss) from investments.........
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.........
See notes to financial statements.
--------------------------------------------------------------------------------
18
<PAGE>
INVESTMENT DIVISIONS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
VALUE LINE
VALUE LINE LEVERAGED VALUE LINE
GUARDIAN VALUE LINE SPECIAL GROWTH U.S. GOVERNMENT VALUE LINE
PARK AVENUE VALUE LINE INCOME SITUATIONS INVESTORS SECURITIES CASH
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4,063,141 402,115 725,329 38,123 121,613 668,300 18,187,291
61.13 26.10 10.36 29.28 59.07 10.63 1.00
------------ ----------- ---------- ---------- ---------- ---------- -----------
$248,379,818 $10,495,188 $7,514,413 $1,116,242 $7,183,703 $7,104,028 $18,187,291
165,189 14,301 47,130 2,811 8,317 10,607 3,164,708
------------ ----------- ---------- ---------- ---------- ---------- -----------
$248,214,629 $10,480,887 $7,467,283 $1,113,431 $7,175,386 $7,093,421 $15,022,583
$162,101,989 $ 7,545,970 $6,142,063 $ 749,925 $4,031,064 $7,393,929 $18,187,291
============ =========== ========== ========== ========== ========== ===========
$ -- $ -- $ 47,790 $ -- $ -- $ 226,069 $ 527,005
1,266,219 52,337 39,181 6,074 37,203 39,814 168,578
------------ ----------- ---------- ---------- ---------- ---------- -----------
(1,266,219) (52,337) 8,609 (6,074) (37,203) 186,255 358,427
------------ ----------- ---------- ---------- ---------- ---------- -----------
10,861,279 264,593 436,485 26,576 630,840 (121,651) --
-- -- -- -- -- -- --
------------ ----------- ---------- ---------- ---------- ---------- -----------
10,861,279 264,593 436,485 26,576 630,840 (121,651) --
(3,300,513) (341,338) (256,567) 49,758 (441,992) 123,182 --
------------ ----------- ---------- ---------- ---------- ---------- -----------
7,560,766 (76,745) 179,918 76,334 188,848 1,531 --
------------ ----------- ---------- ---------- ---------- ---------- -----------
$ 6,294,547 $ (129,082) $ 188,527 $ 70,260 $ 151,645 $ 187,786 $ 358,427
============ =========== ========== ========== ========== ========== ===========
See notes to financial statements.
</TABLE>
--------------------------------------------------------------------------------
19
<PAGE>
--------------------------------------------------------------------------------
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
----------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1999 (AUDITED)
AND SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
1999 INCREASE/(DECREASE) FROM OPERATIONS
Net investment income/(expense).............................................
Net realized gain/(loss) from sale of investments...........................
Reinvested realized gain distributions......................................
Net change in unrealized appreciation/(depreciation) of investments.........
Net increase/(decrease) resulting from operations...........................
CONTRACT TRANSACTIONS
Net contract purchase payments..............................................
Transfers between investment divisions......................................
Administrative charges--Note 4..............................................
Redemptions and annuity benefits............................................
Transfers--other............................................................
Net increase/(decrease) from contract transactions..........................
ACTUARIAL INCREASE IN RESERVES FOR CONTRACTS IN PAYMENT PERIOD..................
TOTAL INCREASE/(DECREASE) IN NET ASSETS.........................................
NET ASSETS AT DECEMBER 31, 1998.............................................
NET ASSETS AT DECEMBER 31, 1999.............................................
2000 INCREASE/(DECREASE) FROM OPERATIONS
Net investment income/(expense).............................................
Net realized gain/(loss) from sale of investments...........................
Reinvested realized gain distributions......................................
Net change in unrealized appreciation/(depreciation) of investments.........
Net increase/(decrease) resulting from operations...........................
CONTRACT TRANSACTIONS
Net contract purchase payments..............................................
Transfers between investment divisions......................................
Administrative charges--Note 4..............................................
Redemptions and annuity benefits............................................
Transfers--other............................................................
Net increase/(decrease) from contract transactions..........................
ACTUARIAL INCREASE IN RESERVES FOR CONTRACTS IN PAYMENT PERIOD..................
TOTAL INCREASE/(DECREASE) IN NET ASSETS.........................................
NET ASSETS AT DECEMBER 31, 1999.............................................
NET ASSETS AT JUNE 30, 2000--NOTE 3.........................................
See notes to financial statements.
--------------------------------------------------------------------------------
20
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT DIVISIONS
------------------------------------------------------------------------------------------------------------------------------------
VALUE LINE
VALUE LINE LEVERAGED VALUE LINE
GUARDIAN VALUE LINE SPECIAL GROWTH U.S. GOVERNMENT VALUE LINE
PARK AVENUE VALUE LINE INCOME SITUATIONS INVESTORS SECURITIES CASH
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ (1,949,363) $ (103,185) $ 2,488 $ (11,056) $ (75,360) $ 422,519 $ 646,037
26,053,463 467,906 290,346 13,080 557,770 (49,624) --
29,374,403 911,384 1,196,431 51,149 667,087 -- --
5,332,981 1,054,499 209,585 314,595 769,651 (587,849) --
------------ ----------- ----------- ---------- ---------- ----------- -----------
58,811,484 2,330,604 1,698,850 367,768 1,919,148 (214,954) 646,037
------------ ----------- ----------- ---------- ---------- ----------- -----------
1,740,907 154,190 139,713 6,015 45,045 248,390 273,779
(4,977,698) (66,701) 408,644 192,943 43,024 544,964 3,854,824
(128,670) (7,161) (5,113) (832) (4,099) (6,570) (14,907)
(34,060,477) (953,742) (739,794) (44,608) (797,478) (1,602,978) (4,592,068)
10,753 765 311 29 (948) 111 (46)
------------ ----------- ----------- ---------- ---------- ----------- -----------
(37,415,185) (872,649) (196,239) 153,547 (714,456) (816,083) (478,418)
------------ ----------- ----------- ---------- ---------- ----------- -----------
-- -- -- -- -- -- 92,804
------------ ----------- ----------- ---------- ---------- ----------- -----------
21,396,299 1,457,955 1,502,611 521,315 1,204,692 (1,031,037) 260,423
231,326,980 9,696,297 7,029,001 510,555 6,772,573 10,185,726 17,792,117
------------ ----------- ----------- ---------- ---------- ----------- -----------
$252,723,279 $11,154,252 $ 8,531,612 $1,031,870 $7,977,265 $ 9,154,689 $18,052,540
============ =========== =========== ========== ========== =========== ===========
$ (1,266,219) $ (52,337) $ 8,609 $ (6,074) $ (37,203) $ 186,255 $ 358,427
10,861,279 264,593 436,485 26,576 630,840 (121,651) --
(3,300,513) (341,338) (256,567) 49,758 (441,992) 123,182 --
------------ ----------- ----------- ---------- ---------- ----------- -----------
6,294,547 (129,082) 188,527 70,260 151,645 187,786 358,427
------------ ----------- ----------- ---------- ---------- ----------- -----------
1,051,188 54,808 18,975 5,856 24,758 69,513 111,359
3,221,934 108,968 (468,553) 49,211 (8,164) (1,103,156) (1,804,251)
(79,692) (4,405) (3,266) (582) (2,819) (3,309) (7,541)
(14,990,890) (700,827) (800,183) (43,407) (967,222) (1,211,889) (1,793,795)
(5,737) (2,827) 171 223 (77) (213) 134
------------ ----------- ----------- ---------- ---------- ----------- -----------
(10,803,197) (544,283) (1,252,856) 11,301 (953,524) (2,249,054) (3,494,094)
------------ ----------- ----------- ---------- ---------- ----------- -----------
-- -- -- -- -- -- 105,710
------------ ----------- ----------- ---------- ---------- ----------- -----------
(4,508,650) (673,365) (1,064,329) 81,561 (801,879) (2,061,268) (3,029,957)
252,723,279 11,154,252 8,531,612 1,031,870 7,977,265 9,154,689 18,052,540
------------ ----------- ----------- ---------- ---------- ----------- -----------
$248,214,629 $10,480,887 $ 7,467,283 $1,113,431 $7,175,386 $ 7,093,421 $15,022,583
============ =========== =========== ========== ========== =========== ===========
See notes to financial statements.
</TABLE>
-------------------------------------------------------------------------------
21
<PAGE>
--------------------------------------------------------------------------------
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
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). 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.
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.
--------------------------------------------------------------------------------
22
<PAGE>
--------------------------------------------------------------------------------
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Owners of non-tax-qualified contracts are taxed directly on the investment
income and realized capital gains distributed by the underlying mutual funds to
the Account's non-tax-qualified divisions.
NOTE 3 -- NET ASSETS, JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
UNITS ACCUMULATION TOTAL
OUTSTANDING UNIT VALUE UNIT VALUE
------------- ------------ ------------
<S> <C> <C> <C>
TAX-QUALIFIED ACCOUNTS
The Guardian Park Avenue Fund ........................................... 1,088,867.719 $226.525151 $246,655,924
Value Line Fund, Inc. ................................................... 108,742.558 96.242339 10,465,638
Value Line Income and Growth Fund, Inc. ................................. 74,406.386 99.529438 7,405,626
The Value Line Special Situations Fund, Inc. ............................ 15,266.619 72.932377 1,113,431
Value Line Leveraged Growth Investors Fund, Inc. ........................ 46,593.204 151.544511 7,060,944
Value Line U.S. Government Securities Fund, Inc. ........................ 141,995.428 47.334763 6,721,320
The Value Line Cash Fund, Inc. .......................................... 487,412.376 29.842649 14,545,677
NON-TAX-QUALIFIED ACCOUNTS
The Guardian Park Avenue Fund ........................................... 206.007 206.737004 42,589
Value Line Fund, Inc. ................................................... -- 82.877450 --
Value Line Income and Growth Fund, Inc. ................................. -- 93.741034 --
The Value Line Special Situations Fund, Inc. ............................ -- 72.579306 --
Value Line Leveraged Growth Investors Fund, Inc. ........................ 65.728 151.331548 9,947
Value Line U.S. Government Securities Fund, Inc. ........................ -- 47.336299 --
The Value Line Cash Fund, Inc. .......................................... 761.734 29.842649 22,732
------------
294,043,828
Contracts receiving annuity payments .................................... 2,523,792
------------
Total Net Assets ........................................................ $296,567,620
============
</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. The total amount of these charges for
the period ended June 30, 2000 was $101,614.
(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; the total annual charge for the period ended June 30, 2000 was
$1,609,406.
(3) contingent deferred sales charges on certain partial or total
surrenders. These charges are assessed against redemptions and paid to GIAC
during the first six contract years for a Single Purchase Payment Contract. For
a Flexible Purchase Payment Contract, each payment is subject to a contingent
deferred sales charge for six years; contingent deferred sales charges for the
period ended June 30, 2000 amounted to $53,740; 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.
--------------------------------------------------------------------------------
23
<PAGE>
THE GUARDIAN/VALUE LINE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- ACCUMULATION UNIT VALUES FOR THE CURRENT PERIOD AND THE FOUR PRIOR
YEAR ENDS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
TAX-QUALIFIED ACCOUNTS
The Guardian Park Avenue Fund .................. $226.525151 $221.273308 $171.570338 $142.844239 $106.975783
Value Line Fund, Inc. .......................... 96.242339 97.272359 77.512813 65.095659 54.067255
Value Line Income and Growth Fund, Inc. ........ 99.529438 96.917599 78.095792 61.696713 52.560176
The Value Line Special Situations
Fund, Inc. ................................... 72.932377 67.809755 42.360815 32.938107 25.181424
Value Line Leveraged Growth Investors,
Fund Inc. .................................... 151.544511 149.480887 115.251491 83.359180 68.003247
Value Line U.S. Government Securities
Fund, Inc. ................................... 47.334763 46.162339 47.162071 44.232575 40.899347
The Value Line Cash Fund, Inc. ................. 29.842649 29.183200 28.118022 27.033761 25.974172
NON-TAX-QUALIFIED ACCOUNTS
The Guardian Park Avenue Fund .................. 206.737004 201.943931 156.582788 130.366067 97.630911
Value Line Fund, Inc. .......................... 82.877450 83.764438 66.748835 56.056010 46.559081
Value Line Income and Growth Fund, Inc. ........ 93.741034 91.281093 73.553931 58.108568 49.503397
The Value Line Special Situations Fund, Inc. ... 72.579306 67.481488 42.155748 32.778671 25.059541
Value Line Leveraged Growth Investors, Inc. .... 151.331578 149.270845 115.095887 83.242057 67.907692
Value Line U.S. Government Securities
Fund, Inc. ................................... 47.336299 46.163837 47.163601 44.234002 40.900662
The Value Line Cash Fund, Inc. ................. 29.842649 29.182947 28.118022 27.033761 25.974172
</TABLE>
NOTE 6 -- PURCHASES AND SALES
During the six months ended June 30, 2000 and the year ended December 31,
1999, purchases and sales of shares of the Funds were as follows:
<TABLE>
<CAPTION>
PURCHASES PURCHASES SALES SALES
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2000 1999 2000 1999
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
The Guardian Park Avenue Fund ..................................... $4,021,121 $33,099,126 $ 16,154,318 $42,942,560
Value Line Fund, Inc. ............................................. 267,911 1,144,309 862,193 1,205,574
Value Line Income and Growth Fund, Inc. ........................... 140,107 1,960,323 1,345,173 959,085
The Value Line Special Situations Fund, Inc. ...................... 71,933 249,997 70,633 55,301
Value Line Leveraged Growth Investors Fund, Inc. .................. 55,855 804,132 1,049,378 921,501
Value Line U.S. Government Securities Fund, Inc. .................. 419,699 1,712,234 2,482,684 2,091,920
The Value Line Cash Fund, Inc. .................................... 3,335,212 10,274,443 6,302,301 9,587,243
---------- ----------- ----------- -----------
Total $8,311,838 $49,244,564 $28,266,680 $57,763,184
========== =========== =========== ===========
</TABLE>
NOTE: In some instances the calculation of total assets may not agree due to
rounding.
--------------------------------------------------------------------------------
24
<PAGE>
THE GUARDIAN VARIABLE ACCOUNT 1
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment in The Guardian Park Avenue Fund (1,114,830
shares at net asset value of $61.13 per share; FIFO
Cost, $41,840,185) ............................................... $68,149,553
LIABILITIES
Due to The Guardian Insurance & Annuity Company, Inc. .............. (61,203)
-----------
NET ASSETS-- NOTE 3 .................................................. $68,210,756
===========
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
INVESTMENT INCOME
Income:
Reinvested dividends ............................................. $ --
Expense:
Mortality and expense risk charges-- Note 4 ...................... 344,749
-----------
Net investment income/(expense) .................................... (344,749)
-----------
REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS
Net realized gain/(loss) from sale of investments .................. 6,901,762
Reinvested realized gain distributions ............................. --
Net change in unrealized appreciation/(depreciation) of investments .. (5,010,071)
-----------
Net realized and unrealized gain/(loss) from investments ........... 1,891,691
-----------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 1,546,942
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 1999
(UNAUDITED) (AUDITED)
------------- --------------
<S> <C> <C>
INCREASE/(DECREASE) FROM OPERATIONS
Net investment income/(expense) ..................................... $ (344,749) $ (623,820)
Net realized gain/(loss) from sale of investments ................... 6,901,762 7,470,384
Reinvested realized gain distributions .............................. 8,278,898
Net change in unrealized appreciation/(depreciation) of investments . (5,010,071) 1,358,291
------------ -----------
Net increase/(decrease) resulting from operations ................... 1,546,942 16,483,753
------------ -----------
CONTRACT TRANSACTIONS
Net contract purchase payments ...................................... 26,839 120,711
Redemptions and annuity benefits .................................... (5,011,099) (8,242,103)
------------ -----------
Net increase/(decrease) from contract transactions .................. (4,984,260) (8,121,392)
------------ -----------
ACTUARIAL INCREASE IN RESERVES FOR CONTRACTS IN PAYMENT PERIOD ........ 344,220 484,831
------------ -----------
TOTAL INCREASE/(DECREASE) IN NET ASSETS ............................... (3,093,098) 8,847,192
NET ASSETS AT DECEMBER 31, 1999 ....................................... 71,303,854 62,456,662
------------ -----------
NET ASSETS AT JUNE 30, 2000-- NOTE 3 .................................. $ 68,210,756 $71,303,854
============ ===========
</TABLE>
See notes to financial statements.
--------------------------------------------------------------------------------
25
<PAGE>
--------------------------------------------------------------------------------
THE GUARDIAN VARIABLE ACCOUNT 2
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment in The Guardian Park Avenue Fund (352,160 shares at net asset
value of $61.13 per share; FIFO Cost, $11,578,934) ................................ $ 21,527,518
LIABILITIES
Due to The Guardian Insurance & Annuity Company, Inc. ............................... 43,340
------------
NET ASSETS-- NOTE 3 ................................................................... $ 21,484,178
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income:
Reinvested dividends .............................................................. $ --
Expense:
Mortality and expense risk charges-- Note 4 ....................................... 109,942
------------
Net investment income/(expense) ..................................................... (109,942)
------------
REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS
Net realized gain/(loss) from sale of investments ................................... 669,078
Reinvested realized gain distributions .............................................. --
Net change in unrealized appreciation/(depreciation) of investment .................... (60,484)
------------
Net realized and unrealized gain/(loss) from investments ............................ 608,594
------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ....................... $ 498,652
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 2000 1999
(UNAUDITED) (AUDITED)
------------- --------------
<S> <C> <C>
INCREASE/(DECREASE) FROM OPERATIONS
Net investment income/(expense) ................................... $ (109,942) $ (203,719)
Net realized gain/(loss) from sale of investments ................. 669,078 2,366,869
Reinvested realized gain distributions ............................ -- 2,504,122
Net change in unrealized appreciation/(depreciation) of investments (60,484) 317,536
------------ ------------
Net increase/(decrease) resulting from operations ................. 498,652 4,984,808
------------ ------------
CONTRACT TRANSACTIONS
Net contract purchase payments .................................... 1,342 12,311
Redemptions and annuity benefits .................................. (735,764) (2,768,069)
------------ ------------
Net increase/(decrease) from contract transactions ................ (734,422) (2,755,758)
------------ ------------
ACTUARIAL INCREASE IN RESERVES FOR CONTRACTS IN PAYMENT PERIOD ...... 94,734 132,382
------------ ------------
TOTAL INCREASE/(DECREASE) IN NET ASSETS ............................. 141,036 2,361,432
NET ASSETS AT DECEMBER 31, 1999 ..................................... 21,625,214 19,263,782
------------ ------------
NET ASSETS AT JUNE 30, 2000-- NOTE 3 ................................ $ 21,484,178 $ 21,625,214
============ ============
</TABLE>
See notes to financial statements.
--------------------------------------------------------------------------------
26
<PAGE>
--------------------------------------------------------------------------------
THE GUARDIAN VARIABLE ACCOUNT 1
THE GUARDIAN VARIABLE ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
NOTE 1 -- ORGANIZATION
The Guardian Variable Account 1 (VA-1) and The Guardian Variable Account 2
(VA-2) are registered unit investment trusts under the Investment Company Act of
1940, as amended, established by The Guardian Insurance & Annuity Company, Inc.
(GIAC). GIAC is a wholly owned subsidiary of The Guardian Life Insurance Company
of America (Guardian). The mutual fund available under the contracts supported
by VA-1 and VA-2 is The Guardian Park Avenue Fund (the Fund). The Fund has an
investment advisory agreement with Guardian Investor Services Corporation, a
wholly owned subsidiary of GIAC. The VA-2 Separate Account has two divisions,
the VA-2 Division and the VA-19 Division. All VA-2 Separate Account contract
payments received subsequent to January 1, 1981 have been allocated to the VA-19
Division.
Under applicable insurance law, the assets and liabilities of VA-1 and VA-2
are clearly identified and distinguished from the other assets and liabilities
of GIAC. The assets of VA-1 and VA-2 will not be changed with any liabilities
arising out of any other business conducted by GIAC, but the obligations of VA-1
and VA-2, including the promise to make annuity payments, are obligations of
GIAC.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of both
VA-1 and VA-2.
Investments
(a) Net proceeds from the sale of variable annuity contracts are invested
in shares of the Fund at the net asset value of the Fund's shares. All
distributions made by the Fund are reinvested in shares of the Fund. (b) The
market value of investments in the Fund is based on the net asset value at the
close of the period. (c) Investment transactions are accounted for on the trade
date and income is recorded on the ex-dividend date. (d) The cost of Fund shares
sold is determined on a first in, first out (FIFO) basis.
During the six months ended June 30, 2000 and the year ended December 31,
1999, VA-1 purchases of shares of the Fund aggregated $3,858,678 and $9,853,899,
respectively, and VA-2 purchases aggregated $25,901 and $2,668,395,
respectively. Aggregate sales of shares of the fund amounted to $8,982,938 and
$9,765,451 for VA-1 and $820,323 and $3,012,812 for VA-2 for the six months
ended June 30, 2000 and the year ended December 31, 1999, respectively.
Federal Income Taxes
The operations of VA-1 and VA-2 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 VA-1 and VA-2.
--------------------------------------------------------------------------------
27
<PAGE>
--------------------------------------------------------------------------------
NOTE 3 -- NET ASSETS, JUNE 30, 2000 (UNAUDITED)
At June 30, 2000, net assets for the VA-1 and VA-2 Separate Accounts are
comprised as follows:
<TABLE>
<CAPTION>
UNITS ACCUMULATION TOTAL UNIT
OUTSTANDING UNIT VALUE VALUE
----------- ------------ -----------
<S> <C> <C> <C>
VA-1 Separate Account:
VA-1 Division ............................................. 90,728.667 $708.928976 $64,320,181
Contracts receiving annuity benefits ...................... 3,890,575
-----------
$68,210,756
===========
VA-2 Separate Account:
VA-2 Division ............................................. 26,742.717 $641.404199 $17,152,891
VA-19 Division ............................................ 4,430.782 624.301308 2,766,143
-----------
19,919,034
Contracts receiving annuity benefits ...................... 1,565,144
-----------
$21,484,178
===========
</TABLE>
NOTE 4 -- MORTALITY AND EXPENSE RISK CHARGES
Charges for mortality and expense risk paid to GIAC are computed daily and
are equal to an annual rate of 1% of the average daily net assets. The total
annual charge for the six months ended June 30, 2000 was $344,749 for VA-1 and
$109,942 for VA-2.
Currently, GIAC makes no charge against VA-1 and VA-2 for GIAC's federal
income taxes. However, GIAC reserves the right to charge taxes attributable to
VA-1 and VA-2 in the future.
NOTE 5 -- ACCUMULATION UNIT VALUES FOR THE CURRENT PERIOD AND THE FOUR PRIOR
YEAR ENDS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 1997 1996
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
VA-1 Separate Account:
VA-1 Division ............ $708.928976 $692.492916 $536.943448 $447.042768 $334.789490
VA-2 Separate Account:
VA-2 Division ............ $641.404199 $626.533647 $458.800106 $404.462389 $302.901130
VA-19 Division ........... $624.301308 $609.827483 $472.846449 $393.677554 $294.824378
</TABLE>
NOTE: In some instances the calculation of total assets may not agree due to
rounding.
--------------------------------------------------------------------------------
28
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[LOGO]
GUARDIAN INVESTOR INSURANCE & ANNUITY COMPANY, INC. BULK RATE MAIL
7 Hanover Square U.S. POSTAGE PAID
New York, New York 10004 PERMIT NO. 1104
CLIFTON, NJ
EB-010248
