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JUNE 30, 1995 [LOGO] Value
Guard II
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Semiannual Report to Contractowners
The Guardian Separate Account A
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The Guardian Stock Fund, Inc. Executive Offices
------------------------------------------- 201 Park Avenue South
The Guardian Bond Fund, Inc. New York, New York 10003
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The Guardian Cash Fund, Inc. Customer Service Office
------------------------------------------- P.O. Box 26210
Gabelli Capital Asset Fund Lehigh Valley, Pennsylvania 18002-6210
------------------------------------------- 1-800-221-3253
Baillie Gifford International Fund
------------------------------------------- [LOGO] The Guardian(R)
Baillie Gifford Emerging Markets Fund
------------------------------------------- The Guardian Insurance &
Value Line Centurion Fund, Inc. Annuity Company, Inc.
------------------------------------------- A wholly owned subsidiary of
Value Line Strategic Asset Management Trust The Guardian Life Insurance Company of America
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Performance Summary
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Investment Option Total Return*
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The Guardian Stock Fund ................ 20.08%
The Guardian Bond Fund ................. 10.47%
The Guardian Cash Fund ................. 2.25%
Gabelli Capital Asset Fund ............. 1.83%
Baillie Gifford International Fund ..... -0.08%
Baillie Gifford Emerging Markets Fund .. -3.70%
Value Line Centurion Fund .............. 22.45%
Value Line Strategic Asset Mgt. Trust .. 15.00%
The Guardian Real Estate Account ....... 6.33%
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Fixed-Rate Option
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The annual rate of interest declared for amounts
deposited or renewed (on a contract anniversary)
in the Fixed-Rate Option from January 1, 1995 to
June 30, 1995 was 5.0%. This rate is subject to
change at any time, and may be higher or lower
for new deposits or renewals on a contract
anniversary, but is guaranteed until the
following contract anniversary.
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* The chart above shows the total returns for each investment option under
Value Guard II based on the percentage change in unit values during the
period January 1, 1995 through June 30, 1995 except the Gabelli Capital
Asset Fund which is based on the period May 1, 1995 (commencement of
operations) through June 30, 1995. In contrast to the returns presented in
the portfolio managers' interviews, 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.
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Dear Contractowner:
[Photo of Arthur V. Ferrara]
Arthur V. Ferrara
On the Economy
The first half of 1995 was a period of transition for both the U.S. and
global economies and financial markets.
The slowing economy in the U.S. and the expectation of Federal Reserve
easing of interest rates have been very supportive of the markets during the
first half of 1995.
The current conventional wisdom is that real economic growth will
strengthen during the third quarter and fourth quarters. If such expectations
are realized, the Fed will have accomplished a "soft landing."
Abroad, the global economy was one of moderate growth with mild
inflationary forces. Consistent with their economies, the stock market returns
in the United Kingdom, Germany, and Japan were weak during the first six months
of 1995 when compared, in U.S. dollar terms, to the U.S. stock market.
On Our Financial Strength
Once again, we are proud to report that as of June 30, 1995, both The
Guardian Insurance & Annuity Company (GIAC), issuer of Value Guard II, and its
parent, The Guardian Life Insurance Company of America, continue to enjoy the
highest ratings available from four of the nation's leading insurance company
evaluators: Moody's (Aaa), Standard & Poor's (AAA), A.M. Best (A++), and Duff &
Phelps (AAA). Although these ratings do not apply to Value Guard II's underlying
variable investment options, which are subject to the risks of investing in
securities, GIAC's triple-A ratings reflect its ability to meet its guarantee of
the contract's Fixed-Rate Option and pre-retirement death benefit.
On Your Variable Annuity
On May 1st, we were pleased to launch our newest investment option, Gabelli
Capital Asset Fund. The Gabelli Capital Asset Fund seeks growth of capital
through investment in a diversified portfolio of companies selling below their
private market value. Mario Gabelli, CFA and Chief Investment Officer of Gabelli
Funds, Inc., is the portfolio manager for the new Fund. We are excited by the
prospects offered by this new fund and welcome the Gabelli name to our roster of
talented investment managers. For more information on Gabelli Capital Asset Fund
including a free prospectus describing fees and expenses, please contact your
registered representative or broker for Guardian Investor Services Corporation
or call 1-800-221-3253. Please read the prospectus carefully before you invest
or send money.
I invite you to read the portfolio managers' interviews on the following
pages to learn more about the strategies used to manage your investment options.
The interviews highlight fund performance during the first half of the year.
Thank you for continuing to invest for your future through GIAC.
Regards,
/s/ Arthur V. Ferrara
Arthur V. Ferrara, CLU
Chairman of the Board & Chief Executive Officer
The Guardian Insurance & Annuity Company
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The Guardian Stock Fund
[Photo of Charles E. Albers, Portfolio Manager]
Q. How did the Fund perform during the first six months of 1995?
A. The Guardian Stock Fund performed very well during the first six months of
1995. During this period, the Fund had a total return of 20.67 percent.* The
Fund slightly outperformed the S&P 500 Index, which had a total return of 20.11
percent.#
Of course, the longer-term results are more significant for investors who
are seeking to build wealth over time. From this perspective, The Guardian Stock
Fund has also done well over longer time periods. For the five- and ten-year
periods ended June 30, 1995, average annual total returns were 15.74 percent and
15.15 percent, respectively. As the chart below indicates, based on total
returns, for the periods ended June 30, 1995, the Fund outperformed its Lipper
peer group average, a group of mutual funds with investment objectives and
policies similar to those of the Fund, over the one- and five-year time periods.
The Fund ranked in the top quintile of the Lipper U.S. Variable Account Growth
Fund category for the five-year period and in the second quintile for the
one-year period.+
[The table below was represented as a bar graph in the printed material.]
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The Guardian Stock Fund Beats Lipper U.S. Variable Acct.
Growth Fund Average for One and Five Years
1 Year 5 Years
------ -------
The Guardian Stock Fund 23.97 15.74
Lipper U.S. Variable Acct. Growth Fund Category 22.70 11.36
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Q. What strategies did you use during this period?
A. For many years, our fundamental strategic approach to portfolio management
has been a hybrid: It combines a quantitative stock selection system as well as
fundamental judgments about the market sectors and individual securities.
Together these two elements work in a synergistic fashion. It is a "top-down
plus bottom-up" approach. Portfolio manager judgment comes into play from the
top down, making the strategic positioning decisions for the Fund's portfolio,
while the stock scoring system helps identify individual securities in the
particular sectors that the portfolio manager has selected. Let me explain a
little bit more.
Our proprietary stock scoring system, which we have been continuously
developing and refining since 1972, helps us locate attractive stocks. We follow
a universe of approximately 1,300 stocks and create a score for each stock
weekly. Using the stock's score, we determine the relative attractiveness of
buying, holding, and selling each security in our portfolio. The other essential
element of our process is portfolio manager judgment. This comes into play as
the portfolio manager, among other things, determines the portfolio allocation
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* Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of Fund expenses. The actual
total returns for owners of the variable annuities or variable life
insurance policies which provide for investment in the Fund will be lower
to reflect charges deducted from the separate account which relate to a
particular contract and the charges under such contract. Past performance
is not a guarantee of future results.
# The S&P 500 Index is an unmanaged index that is generally considered to be
representative of U.S. stock market activity. The S&P 500 Index is not
available for direct investment.
+ Lipper rankings were reported in Lipper's Mutual Funds Performance Analysis
Special Report, 2nd Quarter 1995. Rankings, for the periods ended June 30,
1995, illustrate the Fund vs. other growth funds in the specified period.
The Fund ranked 4 out of a field of 43 growth funds over a five-year period
and 32 out of 83 for the one-year period. Lipper does not provide
information for its U.S. Variable Account Growth Fund ranking category for
the ten-year period. Lipper rankings are based on total return and do not
take into account any deductions for sales or contract charges.
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between large-cap and small-cap segments of the market; determines the portfolio
allocation between different economic sectors, such as energy, financial,
technology, etc.; and develops procedures to guide portfolio rebalancing.
Both aspects of our approach contributed to our good relative investment
performance during the first half of 1995. In general, the stock scoring system
successfully distinguished the better and poorer performing stocks. Although all
areas of the stock market did well this half of the year (even the stocks in our
bottom-ranked quintile had an average gain of 14.9 percent), the stocks that
were ranked in our top quintile showed an average gain of 20.4 percent. The
stock scoring system was clearly a valuable tool that enhanced portfolio
performance during this period.
The portfolio manager's judgment also contributed to the above-average
results. Our judgment on major issues during this period was pretty good. For
example, the Fund was substantially overweighted in technology during the
period, and it was the best performing sector of the twelve which we monitor. At
the same time, the portfolio was substantially under-weighted in utility company
shares, and that sector substantially underperformed in the market. Also, during
the first quarter of 1995, we surmised that the continuing decline in the
external value of the U.S. dollar would be an important stimulant for the shares
of U.S. companies with sizable global exposure. As a result, we moved a
significant portion of the portfolio into shares of these companies, which were
generally large-cap companies in either the technology or consumer nondurable
sectors. The move turned out very favorably, as many of those stocks were market
leaders during the balance of the first half of the year. We believe the theme
of large-cap growth-type companies leading the market is likely to continue
through the balance of 1995 and we will continue to move the portfolio in this
direction.
Q. What is your outlook on the economy?
A. The Federal Reserve has attempted to engineer a "soft landing" of the U.S.
economy in 1995, in order to contain inflationary pressures. At this point, it
appears that they have been generally successful. By "soft-landing," we mean two
or more successive quarters where real gross domestic product grows at less than
a two-percent rate and where a recession is avoided. Currently, it appears that
somewhat more rapid growth may resume in the fourth quarter of 1995 and continue
into 1996.
Looking forward for the next five years, we believe that two major areas of
growth stand out: first, high-tech capital equipment including exports of
high-tech capital goods; and second, consumer spending on healthcare, travel,
and recreation.
Q. What about the stock market?
A. Prospects for further stock market gains in the years ahead seem promising.
As the generation of "baby-boomers" ages, and their retirement financing needs
become more clear to them, the flow of money into the stock market seems likely
to increase. This investing may take many forms: direct, mutual funds, 401(k)
plans, pension plans, etc. Corporate stock buy-backs have also become an
important driving force in the marketplace, and the flow of funds from outside
the U.S. seems likely to increase. When you combine these factors with the
effects of an accommodating monetary policy and a reasonable level of stock
valuation, we believe that the basic conditions exist for potentially continuing
the bullish stock market.
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The Guardian Stock Fund Profile
Objective: Long-term growth of capital
-------------------------------------------
Portfolio: At least 80% common stocks
and securities convertible into
common stocks
-------------------------------------------
Inception: 4/13/83
-------------------------------------------
Net Assets at June 30, 1995: $1,350,990,170
-------------------------------------------
"Some portfolio managers try to get the market to conform to their
theories. We believe it is more fruitful to simply perceive the `way of the
universe,' and then get ourselves--and our portfolio--aligned with it."
-- Charles E. Albers
Comparison of Common Stocks Held by the Fund and the S&P 500 by Economic Sector
The two sectors where the Fund had a significant overweighting versus the S&P
500 were technology and basic industry. The overweighting in technology was an
important aid to performance in the first half of 1995.
[The tables below were represented as pie graphs in the printed material.]
The Guardian
Stock Fund S&P 500
---------- -------
Utilities - 0.07% Utilities - 11.71%
Other - 15.44% Other - 17.78%
Financial - 13.02% Consumer Staples - 20.94%
Consumer Staples - 9.52% Energy - 9.95%
Energy - 11.48% Financial - 11.45%
Basic Industries - 15.95% Basic Industries - 7.21%
Technology - 27.99% Technology - 15.52%
Capital Goods - 6.53% Capital Goods - 5.44%
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Portfolio Composition
The Guardian Stock Fund portfolio holds approximately 250 securities in a
variety of economic sectors. The portfolio manager's goal is to position the
portfolio for consistent performance in both "bull" and "bear" markets.
[The table below was represented as a pie graph in the printed material.]
Fixed Income (Including Convertibles) 1.3%
Cash & Cash Equivalents 7.7%
Common Stocks 91.0%
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Growth of a Hypothetical Investment
[The table below was represented as a line graph in the printed material.]
The Guardian Stock Fund: Growth of a $10,000 Investment
GSF S&P 500 CPI
--- ------- ---
4/83 $10,000.00 $10,000.00 $10,000.00
6/84 10,684.49 10,327.92 10,570.85
6/85 14,359.51 13,501.09 10,958.21
6/86 20,326.09 18,307.21 11,151.89
6/87 22,920.09 22,897.80 11,580.02
6/88 23,115.03 21,282.96 12,028.54
6/89 26,540.99 25,594.54 12,650.36
6/90 28,333.78 29,748.97 13,251.78
6/91 29,787.98 31,937.73 13,873.60
6/92 34,597.53 36,196.13 14,301.73
6/93 46,489.86 41,100.11 14,719.67
6/94 47,471.00 41,666.51 15,096.84
6/95 57,775.00 43,645.48 15,565.75
A hypothetical $10,000 investment made at the inception of The Guardian Stock
Fund on April 13, 1983, would have grown to $57,775 on June 30, 1995. This
represents a total return of 477 percent! We compare our performance to that of
the S&P 500, which is an unmanaged index that is generally considered the
performance benchmark of the U.S. stock market. While you may not invest
directly in the S&P, a similar hypothetical investment would have had a total
return of 336 percent and would now be worth $43,645. The cost-of-living index,
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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Average Annual Returns for Periods Ended 6/30/95
Life of Fund
1 Year 5 Years 10 Years (since 4/13/83)
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Guardian Stock Fund 23.97% 15.74% 15.15% 15.62%
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S&P 500 Index 25.93% 12.02% 14.54% 14.54%
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These figures represent past performance and are no guarantee of future
results. Investment return and principal value will fluctuate and redemption
value may be more or less than original cost.
Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all fund expenses. The actual
total returns for owners of the variable annuities or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
charges deducted from the separate account, which relate to a particular
contract and the charges under such contract.
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The Guardian Bond Fund
[Photo of Michele S. Babakian, Portfolio Manager]
Q. How was overall bond market performance during the first six months of 1995?
Were there specific sectors that did better than others?
A.The bond market performed extremely well in the first half of 1995 with the
Lehman Aggregate Bond Index producing an 11.44 percent return.* The Index's
return is made up of the returns of various types of fixed-income securities
with each sector class providing the following returns: 11.21 percent on
Treasury and agency securities, 13.80 percent on corporate bonds, 10.73 percent
on mortgage-backed securities, and 8.14 percent on asset-backed securities.
Corporate bonds obviously outperformed all other sectors of the fixed-income
market. This occurred despite narrow yield spreads to the Treasury curve.
Investor demand and low supply in the first quarter caused spreads to continue
to narrow to historically tight levels. In the second quarter, an increase in
the number of new issues caused spreads to widen. Nonetheless, new corporates
continued to be aggressively purchased.
Q. How did the Fund perform in this environment?
A. The Fund had a total return of 10.37 percent for the six-month period ended
June 30, 1995.# The chart below compares the composition of the Fund to the
Lehman Aggregate Bond Index at June 30, 1995.
The main sector that caused the Fund to lag behind the Index's year-to-date
return was the mortgage-backed sector. Interest rate volatility increased
significantly in the second quarter causing mortgage prices to lag behind the
performance of other fixed-income sectors. Our comparatively heavy allocation to
this sector is being maintained into the third quarter as, however, volatility
is expected to drop.
[The table below was represented as a bar graph in the printed material.]
The Guardian Bond Fund Lehman Aggregate Bond Index
---------------------- ---------------------------
Treasury & Agency 25.6 54.2
Corporate 25.9 16.7
Mortgage-backed 38.1 28.0
Asset-backed 6.8 1.1
Cash 3.6 0.0
Q. What has been your investment strategy so far this year and will you continue
it during the next period?
A. During the first quarter, we maintained a relatively large cash position
until a low growth/inflation trend was confirmed. This more defensive posture
included a higher allocation to Treasury securities and short-term asset-backed
securities. As the bond market rally continued, we became more bullish on the
market and extended the duration of the portfolio from being shorter than that
of the Lehman Aggregate Bond Index to a duration on June 30 of 5.0 years, which
was .23 years longer than the Index. The steepening of the yield curve and
expectation of a Federal Reserve easing of rates prompted us to purchase more
assets in the shorter end of the curve. After reaching 34.4 percent at the end
of January 1995, the Fund's total Treasury and agency position has since been
pared down to 25.6 percent on June 30, 1995, while net purchases of higher
yielding corporate securities and mortgage pass-throughs have increased.
Q. What is your outlook on the economy?
A. The final two quarters of 1995 are expected to exhibit more stability in
yields as well as lower volatility levels. There may be mixed economic growth
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* The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The Lehman
Aggregate Bond Index is not available for direct investment.
# Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of all fund expenses. The actual total
returns for owners of the variable annuities or variable life insurance
policies which provide for investment in the fund will be lower to reflect
charges deducted from the separate account, which relate to a particular
contract and the charges under such contract. Past performance is not a
guarantee of future results.
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statistics and inflation data but recent economic forecasts project that gross
domestic product figures for the third and fourth quarters should come in at
around 1.5 percent and 2.7 percent, respectively, with the annual consumer price
index rate, a rate that is used as a measure of inflation, expected to be
approximately 3.0 percent to 3.5 percent.
Unlike the first half of 1995 when the major calamities of the collapse of
emerging markets, the Mexican debt crisis, and depreciation of the dollar
occurred, the second half should exhibit more stability. Emerging markets have
recovered, the dollar has regained some of its strength and our domestic budget
process should be bullish for the market.
With the expected stabilizing of the U.S. and global financial markets and
with moderate gross domestic product growth, we believe that we can look forward
to continued positive returns.
"We expect that volatility in the mortgage market should decrease in the
third and fourth quarters from the high levels of the second quarter, causing
better total returns for this sector."
-- Michele S. Babakian
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The Guardian Bond Fund Profile
Objective: A high level of current income and
capital appreciation without undue
risk
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Portfolio: At least 80% investment-grade bonds
and U.S. government securities
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Inception: 5/1/83
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Net Assets at June 30, 1995: $345,490,335
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Effective SEC 30-Day Yield
(as of June 30, 1995): 6.42%
[The table below was represented as pie graph in the printed material.]
S&P's Credit Ratings as of June 30, 1995
AAA 67.4%
A 5.0%
BBB 18.1%
Nonrated 2.8%
Other 3.6%
AA 1.7%
BB 1.4%
The Guardian Bond Fund manages credit risk by investing at least 80 percent of
its assets in investment-grade bonds rated in the four highest categories by
Standard & Poor's or Moody's Investors Service.
Portfolio Composition
[The table below was represented as pie graph in the printed material.]
U.S. Govts. & Agencies 25.6%
Mortgages (multi-class) 28.6%
Mortgages (pass-throughs) 9.5%
Asset-backed 6.8%
Corporate Bonds 25.9%
Cash & Cash Equivalents 3.6%
The Guardian Bond Fund can help smooth out the market fluctuations in your
overall portfolio because bond prices do not generally move in step with stock
prices. And although money market securities can provide less risk to principal,
bonds generally provide higher income.
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Gabelli Capital Asset Fund
[Photo of Mario Gabelli, Chief Investment Officer]
In the Fund's first two months of operation, the net asset value increased
2.0 percent.
We thought in our first communication we would share with you a description
of our valuation methodology as well as excerpts from BARRON'S 1995 midyear
interview with the Fund's Chief Investment Officer, Mario Gabelli. Discussions
of individual companies are not necessarily reflective of the Fund's portfolio
holdings.
[Pyramid drawing]
Our focus is on free cash flow: earnings before interest, taxes,
depreciation, and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business's value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous-earnings momentum players, we do not try to forecast earnings with
accounting precision and then trade stocks based on quarterly expectations and
realities. We simply try to position ourselves in front of long-term earnings
uptrends. In addition, we analyze on and off balance-sheet assets and
liabilities such as plant and equipment, inventories, receivables, and legal,
environmental, and healthcare issues. We want to know everything and anything
that will add to or detract from our private market value estimates. Finally, we
look for a catalyst, i.e., something happening in the company's industry or
indigenous to the company itself that will surface value. In the case of the
independent telephone stocks, the catalyst is a regulatory change. In the
agricultural equipment business, it is the increasing worldwide demand for
American food and feed crops. In other instances, it may be a change in
management, sale or spin-off of a division, or the development of a profitable
new business.
BARRON'S 1995 Midyear Roundtable
Barron's: Tell us, Mario, will the rest of '95 be as good as the first half?
Gabelli: When we started the year, I basically said, "Look, every company I
follow has been cutting costs, and earnings are going to be good. Well, earnings
have been terrific."
Q: Okay. We'll grant, too, that there's more deal activity, as you predicted.
Gabelli: My prescription for 1995 was that we were going to have a deal a day;
that the phenomenon was going to be global and focused; that certain companies
would buy other companies to gain distribution or product niches. I also pointed
to Jack Welch and Kemper as the beginning of the third wave of takeovers, in
which hostile deals would become increasingly common. And you saw, just in the
last three months - what's that company? - IBM launched a hostile bid for a
company they wanted. And Ingersoll-Rand, which is a really sleepy company that
you would never dream would do a hostile, took over Clark Equipment. You also
saw it with International Paper trying to overbid a Swiss paper company, taking
it to court. What I did not get right was the level of interest rates. I felt
rates wouldn't back off from 8 percent - and they've had one of the bigger
rallies in the last six months.
Q: But - don't tell us - individual stocks are another matter for a savvy stock
picker like you.
Gabelli: How did you guess? Individual stocks are going to do quite well in
their sectors. In the takeover game, even you can identify some fairly obvious
trends.
Q: Why not just tell us about them?
Gabelli: There are the broadcasters, the banks, the brokers - you can take a
triple-B approach. The broadcasters, because of changes in regulations. I
identified this back in January and they have done spectacularly well. The
brokers, because Glass-Steagall is going to be changed, as we also discussed at
the Roundtable. We've already seen the Germans going into Britain and buying
Kleinwort; the Dresdner Bank did the deal. You're going to see, if
Glass-Steagall is changed, that it rings a big bell for banks to get into the
brokerage business. Then there are the banks themselves. Every day, you're
seeing a bank deal in the headlines. Those 8,000 banks - or whatever the number
is - are going to be consolidated.
My conclusion is that over the next six months, the next twelve months,
you're going to have some fairly strong stocks.
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Q: Which ones, is the question.
Gabelli: I just got back from a quick trip abroad - six countries in six days or
something. Being in Kuwait and driving to the border there, I got the feeling I
wouldn't want to play golf on the border because I slice. Being in Jerusalem,
one hopes there is peace and a great deal of opportunity. Being in Italy, which
is about thirty minutes by F16 to Bosnia, you worry about those pockets of
conflict. But I was also in Paris and stopped off at the Paris Air Show, where I
saw some other dynamics.
Q: Sure, aerodynamics.
Gabelli: Those, too! But one of the dynamics that is very clear to me, and which
I talked about at the Roundtable, is that there are three billion new consumers
out there. You have them in China. You have them in India. The 5 percent of the
population in India that's middle class is bigger than the population of Italy.
It's almost as big as the population of Germany. And they are going to travel. I
was on enough airplanes to make me sensitive to the age of those machines.
Q: There must be an investment idea in here somewhere?
Gabelli: Boeing has an advantage, from a currency point of view, and because of
its technology position. Also, because an aging fleet needs to be replaced, and
from the point of view that the growth in these emerging markets is
consumer-driven. So Boeing - and vendors to Boeing - are going to be quite
attractive over the next two or three years. I like a bunch of companies in the
Boeing-vendor category. One might argue that I should just buy Boeing at $64 or
buy Honeywell, which makes some advanced avionics for it, at $42 - and I'm kind
of orienting my thinking in that fashion. But the ones that I'm particularly
fond of - and I have ridden them up and down - are the nuts and bolts makers.
Q: Can you be a tad more specific?
Gabelli: There's a company called SPS Technologies, with 5.5 million shares
outstanding and a new management. The stock is at $37. Earnings this year should
be $2.35-$2.50, and they are going to march right up to $5 by 1998. Management
will make some acquisitions on top of that, so you're talking about $7-$8 of
earnings. The stock is going to sell at a materially higher price. Hi-Shear is a
company that sells at $7 and has six million shares outstanding. It's a small
cap, but it's breaking even at the bottom of its cycle and - as soon as Boeing
starts shipping more - they're going to get better orders.
Then, you have some bigger companies like Crane, which has 30 million shares
on the New York Stock Exchange and trades at $36. They earned $1.85 in '94;
they're going to do $2.40 this year. Earnings are going to march right up to
$3.50-$5.00 by the year 2000. In the Boeing category, they make things like
anti-skid brakes, so the planes stop when you want them to. They make pumps. And
they've bought a couple of other small suppliers to Boeing, so they have a
package there. We are also very fond of another company, called Ametek, on the
New York Stock Exchange. It has about 34 million shares outstanding. The stock
is at $17. They are going to do $1.35 this year, which marches steadily up to
about three bucks in the year 2000. We're a major shareholder. They've been
buying back the stock. They're very shareholder-sensitive, they're
cash-generators. And the only part of Ametek's business that's been limping is
this aerospace part, where they do precision instruments, fluid gauges and so
on.
Q: What else are you doing?
Gabelli: In the global game, you have things like music, that travel well. I'm
sure Batman Forever will do quite well in the global interactive-couch potato
game. So I'm still recommending stocks like Time Warner and Viacom.
Entertainment is terrific. When I was driving from the airport in Kuwait, every
house had a dish on it. In India they've gone from 500,000 to 16 million
satellite dishes. In Iran, they have them - and they're not supposed to. In
Indonesia they are growing. Other things that travel well are CNN, Turner
Broadcasting and News Corp. And Disney cartoons - everybody I talked to wants a
cartoon channel.
Q: That says something.
Gabelli: I also like other companies in the global media area. I talked about
Seagram in January. Essentially, they sold plastics, contrary to the advice in
The Graduate, and got into filmed entertainment. Seagram is probably going to
figure out a way to get a network distributor; they'll buy a CBS at some point,
even though the price is a little rich here.
Q: Too bad you never speak your mind.
Gabelli: In the restructuring camp, I also like an old favorite, which I own a
lot of, Hilton. They put the company up for auction. They got a lot of bidders,
but not for the whole company. That may also have been the case with Multimedia,
which I recommended in January and still like. They are going to split Hilton in
two. And when somebody sits down and calculates the present value of the parts,
it'll be interesting. So I like Hilton at $67. The spin-offs, in hotels and in
gaming, are going to find their own respective suitors. Finally, going back to
another old idea, regulatory change coming out of the Telecommunications
Deregulation Act of 1995 or 1996 will allow broadcasters to be basically
non-controlled. Cable will be able to get into telephone; telephones will be
able to get into cable. We're going see a lot of mergers and acquisitions. On my
list of transaction-driven companies all are the small ones: Media General,
Multimedia, Outlet Communications, Citicasters, and a bunch of radio operators.
Barron's: Thanks, Mario.
--------------------------------------------------------------------------------
9
<PAGE>
--------------------------------------------------------------------------------
Baillie Gifford International Fund
[Photo of R. Robin Menzies, Portfolio Manager]
Q. We have all heard about the drop in the U.S. dollar. How has that affected
the international securities markets?
A. The clearest impact of the dollar's decline is that it has inflated the
returns from overseas investments. But if you look at the performance of
overseas markets in local terms, many of the overseas markets now appear
reasonably priced compared with the U.S. For example, the German market has
hardly risen at all and the Japanese market has fallen sharply.
However, many overseas markets have not yet reflected the strong growth in
local earnings because interest rates overseas are still quite high (with the
exception of Japan). Since there is still considerable room for interest rates
to fall in overseas markets (and low interest rates are generally good for stock
markets), stocks in these markets present a potentially good value. We believe
that the next six months will be positive for investors in overseas markets in
general.
Q. What factors and strategies affected the Fund's performance over the past six
months?
A. The Fund had a total return for the six-month period ended June 30 of 0.41
percent.* Our benchmark index, the Morgan Stanley Europe, Australia, and the Far
East (EAFE) Index had a return of 2.76 percent for the same period.# Japan had a
tough six months, with its stock market returning -8.2 percent in dollar terms
(-21.9 percent in yen). Correspondingly, our holdings in Japan (approximately
27.9 percent of the portfolio) retarded Fund performance. Fortunately, the other
Asian markets, where we have a sizable exposure, have done much better, as have
some European ones, especially on the Continent.
The Fund has had a strategy of hedging some of its exposure in yen in order
to protect U.S. investors from the effects of a decline in the highly valued
Japanese currency. This insurance policy was a costly one for most of the past
six months, as the yen continued to appreciate, but more recently the dollar has
been a little stronger and, currently, our hedges are profitable.
As regards individual stocks, we have continued to concentrate on
high-quality growth stocks which we buy and hold after in-depth research.
Examples of these include: some of the lightly regulated British utilities, such
as National Power, which are growing their dividends rapidly; Lufthansa, the
German airline whose freight and passenger business is booming and whose
management has improved enormously since privatization; and companies with
exposure to the rapidly growing economies of the Far East, such as Thailand's
Industrial Finance Company, whose shares have already risen by nearly 26 percent
this year.
Q. Are there any political or demographic factors that are making certain
countries or regions particularly attractive?
A. We are still impressed by the smaller Asian economies, several of which, such
as Malaysia and Thailand, are achieving real growth rates of 7 to 10 percent --
and look set to continue to do so.
We are impressed by the core hard-currency countries of Europe such as
Germany and Holland. There are many strong companies based in these countries,
and interest rates are likely to fall over the next few months.
The British market is also looking quite attractive; its valuation has been
depressed by overblown political concerns but earnings growth is still strong.
--------------------------------------------------------------------------------
* Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of Fund expenses. The actual total
returns for owners of the variable annuities or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
charges deducted from the separate account, which relate to a particular
contract and the charges under such contract. Past performance is not a
guarantee of future results.
# The Morgan Stanley EAFE Index is a leading unmanaged index of international
stocks. It is capitalization-weighted and carries a significantly higher
weighting (50 percent plus) in Japan than the Fund is normally likely to have
because the Fund seeks to diversify investments across all major
international markets. The performance of the Fund and EAFE may not therefore
always correlate closely. The EAFE Index is not available for investment.
--------------------------------------------------------------------------------
10
<PAGE>
Though the Japanese market remains very highly rated, its valuations are
now back to what are, for Japan, normal levels after the excesses of the "bubble
economy" period from 1985 to 1989 when prices rose out of control. Japan's
economic recovery is continually deterred by the strength of the yen, but
exporters, amazingly, seem to be slowly adjusting to this tough situation. It is
also encouraging that Japanese banks are finally recognizing their bad debt
problems. Compared to our benchmark, we have a relatively low weighting in Japan
at present; our next move will probably be to increase it.
The political wild card among the major markets is probably France. The
recently elected President Chirac is far less of a hawk on interest rates and is
less concerned about the strength of the franc. He is likely to cut interest
rates more over the next few months, and the French market should begin to show
a positive response to this.
--------------------------------------------------------------------------------
Baillie Gifford International Fund Profile
Objective: Long-term capital appreciation
----------------------------------------------
Portfolio: At least 80% in a diversified
portfolio of common stocks
of companies outside of the
United States
----------------------------------------------
Inception: 2/8/91
----------------------------------------------
Net Assets at June 30, 1995: $301,203,060
"Most overseas markets have lagged behind the U.S. this year--at some point
we believe they will start to catch up. We think that point is quite close."
-- R. Robin Menzies
--------------------------------------------------------------------------------
Access to equity markets worldwide?
Many foreign markets have outperformed the U.S. market over the past ten
years. In today's market environment, an investor with a well-chosen mix of
domestic and foreign investments may experience higher overall returns than an
investor holding only U.S. investments. International funds such as Baillie
Gifford International Fund allow you to take advantage of many long-term growth
opportunities that exist beyond U.S. borders.
[The tables below were represented as pie graphs in the printed material.]
-------------------------------------------
World Equity Markets
as of January 1995
U.S. Market 34%
International Markets 66%
-------------------------------------------
Diversifying your portfolio internationally may lower your overall
portfolio risk as well as increase your investment returns. Baillie Gifford
International Fund seeks to provide the opportunity to counterbalance swings in
the U.S. stock market because long-term data show a relatively low correlation
between the performance of the U.S. stock market and the performance of
collective international markets.
--------------------------------------------
Composition by Geographic Allocation
as of 6/30/95
Latin America 2.6%
Cash & Deposits 4.6%
Asia (except Japan) 17.7%
Europe 28.0%
U.K. 19.2%
Japan 27.9%
--------------------------------------------
--------------------------------------------------------------------------------
11
<PAGE>
--------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
[Photo of Edward H. Hocknell, Porfolio Manager]
Q. How have emerging markets performed in the last six months?
A. You really have to divide this period into two halves. Up until the end of
March, the markets performed very poorly. The International Finance Corporation
(IFC) Investable Composite Index was down by 14.7 percent through the end of
March. Since then, there has been a rebound of nearly 9 percent in the Index.*
Although the markets are still down year-to-date, the market outlook is
generally much improved. The real turnaround has occurred in Latin America;
those markets fell hardest during early 1995 according to the IFC. Now they are
recovering most strongly--they were up 18.5 percent in the second quarter. The
Asian markets have been much steadier this year.
The main reason for the turnaround in emerging markets was the markets'
realization that Mexico's problems were not shared by other countries and were
unlikely to spread because the Federal Funds rate in the U.S. had probably
peaked. This loosening of the U.S. monetary vise should have a positive impact
on the securities markets of emerging market countries.
Q. How has the Fund performed? What factors and strategies have affected
performance?
A. Over the past six months, while the IFC Index is down 7.03 percent for the
period, the Fund has fallen only 3.23 percent.# One of the main reasons that the
Fund outperformed the Index was our decision to retain high cash reserves
earlier in the year. This was a tactical decision which we took in light of poor
market conditions. We also overweighted the Asian markets which have been better
performers, on a relative basis, so far this year. Within Asia, we concentrated
on East Asian countries with high levels of local investment, such as Singapore,
Malaysia, and Hong Kong. We avoided places like India and Pakistan, which are
still in the early stages of the emerging process. Both of these strategies
helped our performance.
Q. Tell us some more specifics. Were some investments, regions, or sectors
particularly successful for the Fund? Did you have any disappointments?
A. We have been particularly encouraged by the recent recovery in some of the
Eastern European markets, where we have a relatively heavy weighting. For
example, the Polish stock market, where 3.1 percent of our assets are invested,
rose by 37 percent in the second quarter. For the six-month period ended June
30, 1995, our Polish holdings returned 24 percent. Poland is enjoying high
levels of investment and growth as it begins to reap rewards from its tough
free-market policies and its proximity to Western Europe. Some of the Fund's
best investments this year have been in Eastern Europe: Polifarb, for example,
the Polish paint manufacturer, has seen its share price double this year.
Our main disappointment over the period has been with the South African
economy, and, even here, the disappointment has not been a severe one. It is
clear, however, that the country is not growing as we had hoped and that
inflation seems to be more deeply entrenched than we feared. There are many fine
companies in South Africa, but the overall background is not as favorable as in
many other emerging markets.
--------------------------------------------------------------------------------
* The IFC Investable Composite Index covers securities which can be dealt in by
foreign investors in emerging countries. The Index is market
capitalization-weighted and carries a significantly higher weighting in a
combination of Mexico and Malaysia (about 50 percent) than the Fund is
normally likely to have. The Fund may also invest in markets such as Hong
Kong and Singapore, which are not included in the Index, so the performance
of the Fund and Index may not always correlate closely. The IFC Investable
Composite Index is not available for investment.
# Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of Fund expenses. The actual total
returns for owners of the variable annuities or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
charges deducted from the separate account, which relate to a particular
contract and the charges under such contract. Past performance is not a
guarantee of future results.
--------------------------------------------------------------------------------
12
<PAGE>
--------------------------------------------------------------------------------
Q. What are your expectations for the next six months?
A. We are optimistic. Though emerging markets have underperformed most developed
country markets this year in dollar terms, their long-term attractions are far
superior. The growth rates of emerging market countries are about twice those of
the developed ones and, as the larger economies slow down, the search for growth
will concentrate increasingly on the emerging markets. Emerging markets should
benefit particularly from lower interest rates worldwide and the return of
investors' confidence. According to the World Bank, capital investments are
flooding back to these countries, after only a short interruption following
Mexico's problems. The long-term outlook is excellent.
--------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund Profile
Objective: Long-term capital appreciation
----------------------------------------------
Portfolio: At least 65% in a diversified
portfolio of common stocks of
companies located in emerging
market countries
----------------------------------------------
Inception: 10/17/94
----------------------------------------------
Net Assets at June 30, 1995: $31,020,734
--------------------------------------------------------------------------------
"Mexico's problems have made governments in the region screw inflation down
even tighter. Latin America's long-term prospects are even better, as a result."
-- Edward H. Hocknell
--------------------------------------------------------------------------------
What Are Emerging Markets?
Emerging markets are created when formerly closed-market societies undergo
dynamic political, ideological, and demographic changes which allow them to open
their economies to foreign investments. This move toward free-market policies
may create capital markets that have the potential to produce exceptional
long-term growth.
Emerging markets are primarily located in Latin America, Europe, Asia, the
Middle East, and some areas of Africa. Foreign investments can stimulate markets
and provide the opportunity to jump-start smaller economies.
--------------------------------------------------------------------------------
Portfolio Composition as of June 30, 1995
[The table below was represented as a pie graph in the printed material.]
Cash 8.8%
South Africa 8.8%
Europe/Middle East/Africa 45.3%
Latin America 29.4%
--------------------------------------------------------------------------------
The Investment Approach
The Fund is managed by Guardian Baillie Gifford Ltd., a company formed
through a joint venture between The Guardian Life Insurance & Annuity Company,
Inc., and the Scottish investment firm Baillie Gifford Overseas Limited. Baillie
Gifford emphasizes a long-term, fundamental approach to investments. To achieve
a high level of current income and capital appreciation for the Fund, Guardian
Baillie Gifford, Ltd., organizes over fifty investment professionals into teams
to concentrate on original, in-house research and to meet on-site with
approximately 1,200 foreign companies each year.
Years of
Experience BAILLIE GIFFORD IS A LEADER IN:
20+ Direct investments in smaller Asian markets
10+ Long-term investments in Mexico, North America's
sole emerging market, prior to NAFTA
5+ Analysts sent to Central and Eastern European
companies immediately after the fall of the Berlin Wall
--------------------------------------------------------------------------------
13
<PAGE>
--------------------------------------------------------------------------------
Value Line Centurion Fund
[LOGO]
Q. How has the Fund performed during the past six months?
A. We have been very pleased with the Fund's performance during the six months
ended June 30, 1995. It had a total return of 23.05 percent* compared to the S&P
500 Index and the Dow Jones Industrial Average, which had total returns of 20.11
percent and 20.29 percent, respectively.# The stock market performance during
this period has been driven by large capitalization stocks (stocks of companies
with over $14 billion in market capitalization), stocks with high price/earnings
ratios (where the price is over eighteen times the earnings) and low yield
stocks (where the return is less than 1 percent).
Q. What has been your investment focus during the first six months of the year?
What will it be for the next six months?
A. Our investment focus remains the same as six months ago. The portfolio is
biased toward the technology sector, where we see continued earnings momentum.
Through the end of June, technology has clearly been the leader. We do not
anticipate making major changes to our strategy at this point. However, small
capitalization stocks represent an overlooked area and may be an area of
opportunity in the coming quarters as investors start bargain-hunting. In
anticipation of this move, the average market capitalization of the Centurion
Fund may drift lower as we see good value in this overlooked area. We will
continue to use the Value Line Ranking System and select only those stocks that
are ranked in the two highest categories for "timeliness" -- probable market
performance in the following six to twelve months.
Q. What is your outlook on the economy?
A. When the numbers are finally in, it is our view that the second quarter will
reflect some economic weakness, but it will not be the beginning of a slide into
recession. The economy appears sound and we believe that it should have a modest
rebound going into 1996. Inflation remains in check and interest rates should
continue to decline modestly. Corporate earnings remain sufficiently strong to
provide support for this market. While it is possible to have a correction at
any time, the long-term investor should use this as a buying opportunity. We
believe that the current economic cycle is of a longer term, having three to
four years remaining before we need to worry about a possible recession.
--------------------------------------------------------------------------------
* Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of Fund expenses. The actual total
returns for owners of the variable annuities or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
charges deducted from the separate accounts, which relate to a particular
contract and the charges under such contract. Past performance is not a
guarantee of future results.
# The S&P 500 Index is an unmanaged index that is generally considered to be
representative of U.S. stock market activity. The Dow Jones Industrial
Average is another unmanaged index which is generally considered to be
representative of the U.S. stock market activity. The S&P 500 Index and the
Dow Jones Industrial Average are not available for investment and their
returns do not reflect any sales charges which an investor may have to pay
when purchasing shares of a fund.
--------------------------------------------------------------------------------
14
<PAGE>
--------------------------------------------------------------------------------
Value Line Centurion Fund Profile
Objective: Long-term growth of capital
-------------------------------------------
Portfolio: At least 90% common stocks
-------------------------------------------
Inception: 11/15/83
-------------------------------------------
Net Assets at June 30, 1995: $445,177,030
-------------------------------------------
"Significant changes are likely to take place in the coming years that will
alter the face of corporate America, driven by a technological revolution and
changing demographics. This should create significant opportunities for
investors in small-to mid-cap stocks."
----------------------------
Value Line RANKING SYSTEM
1700 STOCKS
HIGHEST
1
BUY
2
3
SELL
4
5
LOWEST
----------------------------
Each week, Value Line ranks approximately 1,700 stocks in over 90 different
industries on a scale of 1 (highest), to 5 (lowest) for "Timeliness." Timeliness
is Value Line's estimate of the probable market performance of each stock during
the next year relative to all 1,700 stocks. Value Line believes that stocks
ranked #1 will perform the best and stocks ranked #5 will perform the worst. The
Value Line Centurion Fund buys only stocks ranked #1 or #2 by the Value Line
Ranking System and sells stocks if their ranks drop below #2.
[The table below was represented as a pie graph in the printed material.]
--------------------------------------------------------------------------------
Composition as of June 30, 1995
Transportation 1.2%
Miscellaneous 2.0%
Other Securities 3.2%
Consumer Staples 4.2%
Basic Industries 4.2%
Cash & Cash Equivalents 7.1%
Financial Services 7.2%
Capital Goods 8.5%
Consumer Cyclical 13.4%
Healthcare 16.0%
Technology 33.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Average Annual Returns for Period Ended 6/30/95
Life of Fund
1 Year 5 Years 10 Years (since 11/15/83)
--------------------------------------------------------------------------------
Value Line Centurion Fund 36.80% 14.85% 14.28% 12.64%
--------------------------------------------------------------------------------
S&P 500 Index 25.93% 12.02% 14.54% 14.55%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
15
<PAGE>
--------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
[LOGO]
Q. How were the Trust's assets allocated in the first half of 1995?
A. The Strategic Asset Management Trust uses Value Line's proprietary stock and
bond market models to determine the suggested optimal asset allocation at any
given time. Although the Trust may place as much as 100 percent of its
investments in any given asset class, on average over time it will hold about 55
percent of assets in stocks, 35 percent in bonds, and 10 percent in money market
instruments. In the first half of 1995, the stock model continued to suggest a
moderately bullish stance, and 65 percent to 75 percent of assets were held in
stocks. The variable in the model that suggested a moderately bullish stance was
the decline in long-term U.S. interest rates. This, combined with a relatively
high level of free reserves in the banking system, offset the negative factor of
higher stock prices. The bond model determines what proportion of remaining
assets will be in bonds versus cash. The bond model moved from neutral to
negative in the first half of 1995. This shift was due to the declining yields
offered by bonds--meaning that the income earned from a bond compared to its
price deteriorated. The Trust has therefore purchased no additional bonds in
1995, and this asset class has stood at just over 10 percent of total holdings
throughout the period. That has left 15 percent to 25 percent of the Trust
invested in cash equivalents such as short-term U.S. government agency
obligations and repurchase agreements thus far in 1995.
--------------------------------------------------------------------------------
* Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of Trust expenses. The actual total
returns for owners of the variable annuities or variable life insurance
policies which provide for investment in the Trust will be lower to reflect
charges deducted from the separate account, which relate to a particular
contract and the charges under such contract. Past performance is not a
guarantee of future results.
# The S&P 500 Index is an unmanaged index that is generally considered to be
representative of U.S. stock market activity. The Lehman Government/Corporate
Bond Index is an unmanaged index that is generally considered to be
representative of U.S. government bond and corporate bond market activity.
The S&P 500 Index and the Lehman Government/Corporate Bond Index are not
available for investment.
Q. How did the Trust perform in the first six months of the year?
A. The Trust earned a total return of 15.56 percent in the first six months of
the year.* This compared with gains of 20.11 percent for the unmanaged Standard
& Poor's 500 Index and 11.80 percent for the Lehman Government/Corporate Bond
Index.#
Q. What were some successful investments during this period? Were there any
disappointments?
A. The Trust's stock investments are selected from among issues ranked highly by
the Value Line "Timeliness" Ranking System, which tends to favor stocks with
strong earnings momentum, strong stock price momentum, and attractive
valuations. Investments are currently well-diversified among about 130 different
stocks. Top contributors to performance during the first half of the year
included McDonnell Douglas (aerospace), Safeway (grocery), IBM (computers),
Capital Cities/ABC (broadcasting), and Medtronic (healthcare). As always, there
were disappointments, too, including Sunbeam (household products), Pep Boys
(retailing), Georgia Gulf (chemicals), and WMS Industries (recreation). These
disappointing stocks have been replaced with issues with the potential for
stronger earnings and price momentum.
As for bond investments, the Trust always stays with high-quality
selections. In 1995, the portfolio has held only U.S. Treasury bonds. Just over
half of these holdings are the 7.25 percent interest rate bonds maturing in
August, 2022; they have provided the Trust with an excellent total return of
about 19 percent in the first half of 1995.
--------------------------------------------------------------------------------
16
<PAGE>
--------------------------------------------------------------------------------
Q. What are the Trust's allocation models saying as we point toward the
remainder of 1995?
A. As stock prices have risen, the Trust's stock market model has been moving
toward a neutral posture, although it remains slightly bullish at 60 percent
invested. The bond model remains negative due to this year's sharp rally in
prices, which resulted in a drop in yields. It seems likely, then, that at this
time the portfolio will be trimming its stockholdings a bit, with the proceeds
going into cash equivalents rather than into bonds.
"Over a significantly reliable period, history shows us that a certain
combination of stocks and bonds will have the same risk level as bonds alone,
but a substantially higher rate of return."
--------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust Profile
Objective: High total return consistent with
reasonable risk
-----------------------------------------------------
Portfolio: Stock, bonds, and money market
instruments
-----------------------------------------------------
Inception: 10/1/87
-----------------------------------------------------
Net Assets at June 30, 1995: $769,180,988
-----------------------------------------------------
[The table below was represented as a pie graph in the printed material.]
---------------------------------------------------
Trust Allocation as of June 30, 1995
Money Market Instruments/Cash 15.0%
Bonds 10.5%
Stocks 74.5%
---------------------------------------------------
--------------------------------------------------------------------------------
Model Indicator Allocation
-------------------------------------------------
Stock Slightly Slightly higher in stocks
Bullish Lower in bonds & cash
-------------------------------------------------
Bond Bearish Lower in bonds
Higher in cash
-------------------------------------------------
When the stock model is bullish, the Trust's stock allocation percentage
will be relatively high, and the bond and cash positions relatively low. The
stock position is also affected by the relationship of the stock model reading
to the current U.S. Treasury bill yield.
When the bond model is bullish, a greater percentage of the Trust's assets
will be allocated to bonds and a lesser percentage to cash.
The Trust's portfolio mix is based on the outputs of Value Line's stock and
bond computer models as well as the prevailing yield on three-month U.S.
Treasury bills. The models have been rigorously back-tested over a twenty-year
time span by Value Line's statistical research staff and have shown significant
predictive ability over this period. Although past performance of these models
is no guarantee of future results for the Trust, Value Line believes its models
can be successful in predicting future market trends.
There are no limits on the percentage of the Trust's assets that can be
invested in any of the three asset classes. But under "neutral" circumstances
and over a long time period, the portfolio will be 55 percent invested in
stocks, 35 percent in bonds, and 10 percent in money market instruments.
--------------------------------------------------------------------------------
17
<PAGE>
--------------------------------------------------------------------------------
The Guardian Cash Fund
[Photo of Alexander M. Grant, Jr., Portfolio Manager]
Q. How did The Guardian Cash Fund perform during the first six months of 1995?
A. As of June 30, 1995, the current 7-day yield for The Guardian Cash Fund was
5.51 percent and the effective 7-day yield was 5.66 percent. The Fund produced
an annualized total return of 5.54 percent through June 30, 1995.*
Q. What was your investment strategy during this period?
A. As always, our investment strategy was to seek high current income along with
maximum safety by investing in a diversified portfolio of money market
instruments that, according to our criteria, we believe present minimal credit
risks. During the first half of 1995, the Fund only purchased securities from
issuers that had received ratings in the highest credit quality categories
established by nationally recognized statistical ratings organizations such as
Moody's and/or Standard & Poor's. Most of the portfolio (92.8 percent) was
invested in commercial paper; the balance (7.2 percent) was invested in
repurchase agreements.
Q. What factors affected the Fund's performance?
A. Our standard policy is to maintain the Fund's "average days to maturity" in
the short range. In the first half of 1995, this policy allowed the Fund to take
advantage of the higher yields which market volatility caused to become
available in the types of securities typically purchased by the Fund.
"A money market fund investment option is suitable for those who wish to
remain invested in the market but are concerned about safety of principal."
-- Alexander M. Grant, Jr.
--------------------------------------------------------------------------------
The Guardian Cash Fund Profile
Objective: As high a level of current income
as is consistent with liquidity and
preservation of capital
--------------------------------------------------
Portfolio: Short-term money market
instruments
--------------------------------------------------
Inception: 11/1/81
--------------------------------------------------
Net Assets at June 30, 1995: $359,222,022
--------------------------------------------------
--------------------------------------------------------------------------------
Investments in the Fund are neither insured nor guaranteed by the U.S.
government. While the Fund seeks to maintain a stable price of $10.00 per share,
there is no assurance that it will be able to do so.
* Yields are annualized historical figures. Effective yield assumes
reinvested income. Yields will vary as interest rates change. The actual
total return for owners of the variable annuities or variable life
insurance policies which provide for investment in the Fund will be lower
to reflect charges deducted from the separate account, which relate to a
particular contract and the charges under such contract.
--------------------------------------------------------------------------------
18
<PAGE>
--------------------------------------------------------------------------------
Guide To Financials
--------------------------------------------------------------------------------
The Guardian Separate Account 20
--------------------------------------------------------------------------------
The Guardian Stock Fund, Inc. 28
--------------------------------------------------------------------------------
The Guardian Bond Fund, Inc. 36
--------------------------------------------------------------------------------
The Guardian Cash Fund, Inc. 42
--------------------------------------------------------------------------------
Gabelli Capital Asset Fund 52
--------------------------------------------------------------------------------
Baillie Gifford International Fund 58
--------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund 66
--------------------------------------------------------------------------------
Value Line Centurion Fund, Inc. 80
--------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust 88
<PAGE>
Separate Account A - 1
--------------------------------------------------------------------------------
The Guardian Separate Account A
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
Combined Fund Fund Fund Fund
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIFO Cost ................................ $ -- $217,705,585 $ 95,518,689 $125,076,360 $709,314
======================================================================================
Assets
Shares outstanding ...................... -- 11,094,735 8,223,116 12,507,636 70,270
Net asset value per share (NAV) ......... 32.98 12.30 10.00 10.20
Total Assets (Shares x NAV) ......... $922,634,528 $365,904,370 $101,144,322 $125,076,360 $716,758
------------ ------------ ------------ ------------ --------
Liabilities
Annuitant Mortality Fluctuation Fund .... 6,567,580 (91,033) (95,474) 6,838,192 --
Due to The Guardian Insurance &
Annuity Company, Inc. .................. 1,998,853 699,362 264,151 385,694 494
------------ ------------ ------------ ------------ --------
Total Liabilities .................... 8,566,433 608,329 168,677 7,223,886 494
------------ ------------ ------------ ------------ --------
Net Assets -- Note 3 ..................... $914,068,095 $365,296,041 $100,975,645 $117,852,474 $716,264
============ ============ ============ ============ ========
</TABLE>
Separate Account A - 1
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Baillie Value Line
Baillie Gifford Strategic
Gifford Emerging Value Line Asset
International Markets Centurion Management
Fund Fund Fund Trust
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIFO Cost ................................ $30,385,930 $3,336,441 $ 74,142,391 $ 72,676,074
=====================================================================
Assets
Shares outstanding ...................... 2,347,023 395,215 7,673,046 6,625,949
Net asset value per share (NAV) ......... 14.75 8.40 21.94 18.64
Total Assets (Shares x NAV) ......... $34,618,587 $3,319,806 $168,346,638 $123,507,687
----------- ---------- ------------ ------------
Liabilities
Annuitant Mortality Fluctuation Fund .... (3,308) -- (58,892) (21,905)
Due to The Guardian Insurance &
Annuity Company, Inc. .................. 62,957 14,751 344,636 226,808
----------- ---------- ------------ ------------
Total Liabilities .................... 59,649 14,751 285,744 204,903
----------- ---------- ------------ ------------
Net Assets -- Note 3 ..................... $34,558,938 $3,305,055 $168,060,894 $123,302,784
=========== ========== ============ ============
</TABLE>
--------------------------------------------------------------------------------
The Guardian Separate Account A
COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
Combined Fund Fund Fund Fund
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ................... $ 3,600,910 $ -- $ -- $ 3,600,910 $ --
Expenses -- Note 4:
Mortality and expense risk charges ..... 4,595,939 1,706,360 501,439 804,012 494
------------ ------------ ------------ ------------ --------
Net investment income/(expense) ......... (995,029) (1,706,360) (501,439) 2,796,898 (494)
------------ ------------ ------------ ------------ --------
Realized and Unrealized Gain/(Loss)
from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from
sale of investments .................. 2,119,332 920,372 192,156 -- (1)
------------ ------------ ------------ ------------ --------
Net realized gain/(loss) on investments 2,119,332 920,372 192,156 -- (1)
------------ ------------ ------------ ------------ --------
Unrealized appreciation/(depreciation)
of investments:
End of period ........................ 303,083,743 148,198,785 5,625,633 -- 7,444
Beginning of period .................. 182,461,918 85,848,769 (4,560,756) -- --
------------ ------------ ------------ ------------ --------
Change in unrealized appreciation/
(depreciation) ....................... 120,621,825 62,350,016 10,186,389 -- 7,444
------------ ------------ ------------ ------------ --------
Net realized and unrealized
gain/(loss) from investments ......... 122,741,157 63,270,388 10,378,545 -- 7,443
------------ ------------ ------------ ------------ --------
Net Increase/(Decrease) in Net Assets
Resulting from Operations ............... $121,746,128 $ 61,564,028 $ 9,877,106 $ 2,796,898 $ 6,949
============ ============ ============ ============ ========
</TABLE>
See notes to financial statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Baillie Value Line
Baillie Gifford Strategic
Gifford Emerging Value Line Asset
International Markets Centurion Management
Fund Fund Fund Trust
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ................... $ -- $ -- $ -- $ --
Expenses -- Note 4:
Mortality and expense risk charges ..... 171,543 13,766 790,646 607,679
----------- ---------- ------------ ------------
Net investment income/(expense) ......... (171,543) (13,766) (790,646) (607,679)
----------- ---------- ------------ ------------
Realized and Unrealized Gain/(Loss)
from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from
sale of investments .................. (252,808) (781) 369,349 891,045
----------- ---------- ------------ ------------
Net realized gain/(loss) on investments (252,808) (781) 369,349 891,045
----------- ---------- ------------ ------------
Unrealized appreciation/(depreciation)
of investments:
End of period ........................ 4,232,656 (16,635) 94,204,246 50,831,614
Beginning of period .................. 3,981,850 (65,755) 62,690,889 34,566,921
----------- ---------- ------------ ------------
Change in unrealized appreciation/
(depreciation) ....................... 250,806 49,120 31,513,357 16,264,693
----------- ---------- ------------ ------------
Net realized and unrealized
gain/(loss) from investments ......... (2,002) 48,339 31,882,706 17,155,738
----------- ---------- ------------ ------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations ............... $ (173,545) $ 34,573 $ 31,092,060 $ 16,548,059
=========== ========== ============ ============
</TABLE>
See notes to financial statements
--------------------------------------------------------------------------------
20 & 21
<PAGE>
Separate Account A - 1
--------------------------------------------------------------------------------
The Guardian Separate Account A
COMBINED STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1994 (Audited) and
Six Months Ended June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Gabelli
Guardian Guardian Guardian Capital
Stock Bond Cash Asset
Combined Fund Fund Fund Fund
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 Increase/(Decrease) from Operations
Net investment income/(expense) ......... $ 7,611,435 $ 1,325,861 $ 4,908,213 $ 3,939,150 $ --
Net realized gain/(loss) from sale
of investments ......................... (1,243,997) 99,283 (179,238) -- --
Reinvested realized gain distributions .. 12,703,157 9,781,931 538,197 -- --
Change in unrealized appreciation/
(depreciation) of investments .......... (41,312,769) (18,422,472) (10,374,464) -- --
------------ ------------ ------------ ------------ --------
Net increase/(decrease) resulting
from operations ........................ (22,242,174) (7,215,397) (5,107,292) 3,939,150 --
------------ ------------ ------------ ------------ --------
1994 Contract Transactions
Net contract purchase payments .......... 30,344,490 11,664,318 2,547,339 4,660,223 --
Transfer between/within separate accounts 581,497 (844,472) (11,899,302) 21,485,214 --
Administrative charges -- Note 4 ........ (851,962) (296,277) (95,188) (129,305) --
Redemptions and annuity benefits ........ (95,014,187) (23,366,710) (11,830,757) (29,581,821) --
------------ ------------ ------------ ------------ --------
Net increase/(decrease) from contract
transactions ........................... (64,940,162) (12,843,141) (21,277,908) (3,565,689) --
------------ ------------ ------------ ------------ --------
Actuarial Increase in Reserves for
Contracts in Payment Period ............. 65,173 16,085 14,461 11,441 --
------------ ------------ ------------ ------------ --------
Total Increase/(Decrease) in Net Assets .. (87,117,163) (20,042,453) (26,370,739) 384,902 --
Net Assets at December 31, 1993 ......... 921,644,241 324,053,638 123,979,185 136,952,824 --
------------ ------------ ------------ ------------ --------
Net Assets at December 31, 1994 ......... $834,527,078 $304,011,185 $ 97,608,446 $137,337,726 $ --
============ ============ ============ ============ ========
1995 Increase/(Decrease) from Operations
Net investment income/(expense) ......... $ (995,029) $ (1,706,360) $ (501,439) $ 2,796,898 $ (494)
Net realized gain/(loss) from sale
of investments ......................... 2,119,332 920,372 192,156 -- (1)
Change in unrealized appreciation/
(depreciation) of investments .......... 120,621,825 62,350,016 10,186,389 -- 7,444
------------ ------------ ------------ ------------ --------
Net increase/(decrease) resulting
from operations ........................ 121,746,128 61,564,028 9,877,106 2,796,898 6,949
------------ ------------ ------------ ------------ --------
1995 Contract Transactions
Net contract purchase payments .......... 12,452,774 4,939,508 1,016,159 2,101,029 100,477
Transfer between/within separate accounts 172,908 12,472,425 72,960 (11,471,418) 609,597
Administrative charges -- Note 4 ........ (494,339) (177,490) (50,356) (66,922) --
Redemptions and annuity benefits ........ (54,368,512) (17,522,712) (7,555,307) (12,848,910) (759)
------------ ------------ ------------ ------------ --------
Net increase/(decrease) from contract
transactions ........................... (42,237,169) (288,269) (6,516,544) (22,286,221) 709,315
------------ ------------ ------------ ------------ --------
Actuarial Increase in Reserves for
Contracts in Payment Period ............. 32,058 9,097 6,637 4,071 --
------------ ------------ ------------ ------------ --------
Total Increase/(Decrease) in Net Assets .. 79,541,017 61,284,856 3,367,199 (19,485,252) 716,264
Net Assets at December 31, 1994 ......... 834,527,078 304,011,185 97,608,446 137,337,726 --
------------ ------------ ------------ ------------ --------
Net Assets at June 30, 1995 -- Note 3 ... $914,068,095 $365,296,041 $100,975,645 $117,852,474 $716,264
============ ============ ============ ============ ========
</TABLE>
See notes to financial statements
--------------------------------------------------------------------------------
Separate Account A - 1
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Baillie Value Line
Baillie Gifford Strategic
Gifford Emerging Value Line Asset
International Markets Centurion Management
Fund Fund Fund Trust
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 Increase/(Decrease) from Operations
Net investment income/(expense) ......... $ (54,941) $ 157 $ (1,355,090) $ (1,151,915)
Net realized gain/(loss) from sale
of investments ......................... (295,305) (134) (826,101) (42,502)
Reinvested realized gain distributions .. -- -- 2,100,410 282,619
Change in unrealized appreciation/
(depreciation) of investments .......... (180,253) (65,755) (5,299,660) (6,970,165)
----------- ---------- ------------ ------------
Net increase/(decrease) resulting
from operations ........................ (530,499) (65,732) (5,380,441) (7,881,963)
----------- ---------- ------------ ------------
1994 Contract Transactions
Net contract purchase payments .......... 1,962,520 58,826 4,265,942 5,185,322
Transfer between/within separate accounts 7,551,751 1,313,021 (10,499,446) (6,525,269)
Administrative charges -- Note 4 ........ (27,813) (74) (194,054) (109,251)
Redemptions and annuity benefits ........ (2,999,452) (5,050) (13,152,193) (14,078,204)
----------- ---------- ------------ ------------
Net increase/(decrease) from contract
transactions ........................... 6,487,006 1,366,723 (19,579,751) (15,527,402)
----------- ---------- ------------ ------------
Actuarial Increase in Reserves for
Contracts in Payment Period ............. 2,666 -- 17,105 3,415
----------- ---------- ------------ ------------
Total Increase/(Decrease) in Net Assets .. 5,959,173 1,300,991 (24,943,087) (23,405,950)
Net Assets at December 31, 1993 ......... 33,627,167 -- 165,598,782 137,432,645
----------- ---------- ------------ ------------
Net Assets at December 31, 1994 ......... $39,586,340 $1,300,991 $140,655,695 $114,026,695
=========== ========== ============ ============
1995 Increase/(Decrease) from Operations
Net investment income/(expense) ......... $ (171,543) $ (13,766) $ (790,646) $ (607,679)
Net realized gain/(loss) from sale
of investments ......................... (252,808) (781) 369,349 891,045
Change in unrealized appreciation/
(depreciation) of investments .......... 250,806 49,120 31,513,357 16,264,693
----------- ---------- ------------ ------------
Net increase/(decrease) resulting
from operations ........................ (173,545) 34,573 31,092,060 16,548,059
----------- ---------- ------------ ------------
1995 Contract Transactions
Net contract purchase payments .......... 382,775 71,612 1,783,345 2,057,869
Transfer between/within separate accounts (3,051,327) 1,941,420 2,684,150 (3,084,899)
Administrative charges -- Note 4 ........ (16,709) (1,169) (118,781) (62,912)
Redemptions and annuity benefits ........ (2,169,240) (42,372) (8,039,254) (6,189,958)
----------- ---------- ------------ ------------
Net increase/(decrease) from contract
transactions ........................... (4,854,501) 1,969,491 (3,690,540) (7,279,900)
----------- ---------- ------------ ------------
Actuarial Increase in Reserves for
Contracts in Payment Period ............. 644 -- 3,679 7,930
----------- ---------- ------------ ------------
Total Increase/(Decrease) in Net Assets .. (5,027,402) 2,004,064 27,405,199 9,276,089
Net Assets at December 31, 1994 ......... 39,586,340 1,300,991 140,655,695 114,026,695
----------- ---------- ------------ ------------
Net Assets at June 30, 1995 -- Note 3 ... $34,558,938 $3,305,055 $168,060,894 $123,302,784
=========== ========== ============ ============
</TABLE>
See notes to financial statements
--------------------------------------------------------------------------------
22 & 23
<PAGE>
Separate Account A - 1
--------------------------------------------------------------------------------
The Guardian Separate Account A
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
Note 1 -- Organization
The Guardian Separate Account A (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 31, 1981.
GIAC is a wholly owned subsidiary of The Guardian Life Insurance Company of
America (Guardian Life). GIAC issues the deferred variable annuity contracts
offered through the Account. GIAC provides for accumulations and benefits under
the contracts by crediting the net premium purchase payments to one or more
investment divisions established within the Account, or to The Guardian Real
Estate Account (GREA) or to the Fixed Rate Option (FRO), as selected by the
contractowner. GREA is another separate investment account established by GIAC.
Amounts allocated to the FRO are maintained by GIAC in its general account. The
contractowner may transfer his or her contract value among the eight investment
divisions within the Account, GREA or the FRO. The eight investment options of
the Account correspond to the following underlying mutual funds: The Guardian
Stock Fund, Inc. (GSF), The Guardian Bond Fund, Inc. (GBF), The Guardian Cash
Fund, Inc. (GCF), Gabelli Capital Asset Fund (GCAF), Baillie Gifford
International Fund (BGIF), Baillie Gifford Emerging Markets Fund (BGEMF), Value
Line Centurion Fund, Inc. and Value Line Strategic Asset Management Trust
(collectively, the Funds and individually, a Fund). A tax-qualified and a
non-tax-qualified investment division have been established within each Account
investment option available in the Account.
GSF, GBF and GCF each has an investment advisory agreement with Guardian
Investor Services Corporation (GISC), a wholly owned subsidiary of GIAC. GCAF
has a management agreement with GISC. BGIF and BGEMF each has an investment
advisory agreement with Guardian Baillie Gifford Limited, a joint venture
company formed by GIAC and Baillie Gifford Overseas Ltd.
Under applicable insurance law, the assets and liabilities of the Account
are clearly identified and distinguished from the other assets and liabilities
of GIAC. The assets of the Account will not be charged with any liabilities
arising out of any other business conducted by GIAC, but the obligations of the
Account, including the promise to make 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 re-invested in
shares of the same Fund.
(b) The market value of the investments in the Funds is based on the net
asset value of the respective Funds as of their close of business on the
valuation date.
(c) Investment transactions are accounted for on the trade date and income
is recorded on the ex-dividend date.
(d) The cost of investments sold is determined on a last in, first out
(LIFO) basis.
During the six months ended June 30, 1995 and the year ended December 31,
1994, purchases of shares of the Funds aggregated $68,707,698 and $184,254,588,
respectively. Aggregate sales of shares of the Funds amounted to $110,610,957
--------------------------------------------------------------------------------
24
<PAGE>
Separate Account A - 1
--------------------------------------------------------------------------------
and $228,156,571 for the six months ended June 30, 1995 and the year ended
December 31, 1994, respectively.
The Annuitant Mortality Fluctuation Fund
The Annuitant Mortality Fluctuation Fund is funded by GIAC and has been
established in response to various regulatory requirements and provides for any
possible adverse experience.
Federal Income Taxes
The operations of the Account are part of the operations of GIAC and, as
such, are included in the combined tax return of GIAC. GIAC is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended.
Under the tax law, no federal income taxes are payable by GIAC with respect
to the operations of the Account.
Annuity Reserves
Annuity reserves are computed for currently payable contracts according to
the 1971 Individual Annuity Mortality Table and the 1983 Individual Annuity
Table. The assumed interest rate is 4.0%. Charges to annuity reserves for
mortality and expense risks experience are reimbursed to GIAC if the reserves
required are less than originally estimated. If additional reserves are
required, GIAC reimburses the Account.
Note 3 -- Net Assets, June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Accumulation Total
Units Owned Unit Value Unit Value
----------- ---------- ----------
<S> <C> <C> <C>
Tax-Qualified Accounts:
The Guardian Stock Fund, Inc. .................... 3,810,980.817 $52.172367 $198,827,890
The Guardian Bond Fund, Inc. ..................... 1,708,683.025 27.871821 47,624,107
The Guardian Cash Fund, Inc. ..................... 2,408,269.075 21.694822 52,246,969
Gabelli Capital Asset Fund ....................... 41,477.384 10.182397 422,339
Baillie Gifford International Fund ............... 1,161,797.499 12.840894 14,918,519
Baillie Gifford Emerging Markets Fund ............ 104,976.930 8.460558 888,163
Value Line Centurion Fund, Inc. .................. 2,440,298.686 35.651850 87,001,163
Value Line Strategic Asset Management Trust ...... 3,117,339.459 24.618634 76,744,639
Non-Tax-Qualified Accounts:
The Guardian Stock Fund, Inc. .................... 3,044,290.431 52.172367 158,827,838
The Guardian Bond Fund, Inc. ..................... 1,844,479.907 27.871821 51,409,014
The Guardian Cash Fund, Inc. ..................... 2,989,302.595 21.694822 64,852,387
Gabelli Capital Asset Fund ....................... 28,865.984 10.182397 293,925
Baillie Gifford International Fund ............... 1,506,836.338 12.840894 19,349,126
Baillie Gifford Emerging Markets Fund ............ 285,665.755 8.460558 2,416,892
Value Line Centurion Fund, Inc. .................. 2,234,671.315 35.651850 79,670,167
Value Line Strategic Asset Management Trust ...... 1,872,848.039 24.618634 46,106,960
------------
901,600,098
Contracts receiving annuity payments ............. 4,468,421
Owned by GIAC .................................... 7,999,576
------------
$914,068,095
============
</TABLE>
--------------------------------------------------------------------------------
25
<PAGE>
Separate Account A - 1
--------------------------------------------------------------------------------
The Guardian Separate Account A
NOTES TO FINANCIAL STATEMENTS (continued)
The amount retained by GIAC in the Account is comprised of amounts which
GIAC allocated to the Account to facilitate the commencement of operations of
the Account and certain of the Funds, as well as amounts accruing to GIAC from
the operations of the Account. Amounts retained by GIAC in the Account may be
transferred by GIAC to its general account.
Note 4 -- Administrative and Mortality and Expense Risk Charges
Contractual charges paid to GIAC include:
(1) a fixed annual $30 fee for single payment contracts and a fixed annual
$35 fee for flexible payment contracts to cover GIAC's administrative expenses.
This charge is deducted on each contract anniversary before annuitization and
upon surrender prior to annuitization;
(2) a charge for mortality and expense risks is computed daily and is equal
to an annual rate of 1% of the average daily net assets applicable to
contractowners;
(3) contingent deferred sales charges on certain partial or total
surrenders. These charges are assessed against redemptions and paid to GIAC
during the first six contract years for a Single Purchase Payment Contract. For
a Flexible Purchase Payment Contract, each payment is subject to a contingent
deferred sales charge for six years; and
(4) a charge for premium taxes deducted from either the contract payment or
upon annuitization, as determined in accordance with applicable state law.
Note 5 -- Accumulation Unit Values for the Current Period and the Four Prior
Year Ends for Both Qualified and Non-Qualified Accounts
<TABLE>
<CAPTION>
June 30, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
The Guardian Stock Fund ................... $52.172367 $43.446001 $44.442667 $37.415159 $31.469340
The Guardian Bond Fund .................... 27.871821 25.230236 26.391400 24.261811 22.750149
The Guardian Cash Fund .................... 21.694822 21.217142 20.638921 20.306987 19.868839
Gabelli Capital Asset Fund ................ 10.182397 -- -- -- --
Baillie Gifford International Fund ........ 12.840894 12.851309 12.866264 9.693868 10.755746
Baillie Gifford Emerging Markets Fund ..... 8.460558 8.785416 -- -- --
Value Line Centurion Fund ................. 35.651850 29.115003 30.069047 27.806724 26.510995
Value Line Strategic Asset
Management Trust ....................... 24.618634 21.407853 22.728967 20.520859 18.012964
</TABLE>
--------------------------------------------------------------------------------
26
<PAGE>
This page intentionally left blank.
--------------------------------------------------------------------------------
27
<PAGE>
The Guardian Stock Fund, Inc. - 2
--------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
COMMON STOCKS -- 91.1%
Shares Value
-----------------------------------------------------------------
Aerospace and Defense -- 4.6%
97,000 Litton Industries, Inc. $ 3,576,875
68,600 Lockheed Martin Corp. 4,330,375
138,200 Logicon, Inc. 6,149,900
19,500 Loral Corp. 1,009,125
351,000 McDonnell Douglas Corp. 26,939,250
201,750 Precision Castparts Corp. 7,086,469
238,000 Rockwell Int'l. Corp. 10,888,500
77,800 Thiokol Corp. 2,353,450
-----------
62,333,944
-----------
Appliance and Furniture -- 0.2%
187,000 Maytag Corp. 2,992,000
-----------
Automotive -- 0.7%
38,000 Borg Warner Automotive, Inc. 1,083,000
257,000 Echlin, Inc. 8,930,750
-----------
10,013,750
-----------
Broadcasting -- 1.4%
30,740 CBS, Inc. 2,059,580
151,000 Capital Cities, ABC, Inc. 16,308,000
-----------
18,367,580
-----------
Building Materials -- 0.3%
55,000 Coachmen Industries, Inc. 838,750
17,900 MCI Building Systems, Inc. 299,825
60,000 McGrath Rent Corp. 1,050,000
70,000 Del Webb Corp. 1,627,500
-----------
3,816,075
-----------
Business Services -- 0.9%
355,650 Paychex, Inc. 12,892,313
-----------
Capital Goods-Miscellaneous Technology -- 0.5%
77,000 Aviall, Inc. 644,875
18,796 Olsten Corp. 615,569
175,000 Read-Rite Corp. 4,681,250
60,400 Rexel, Inc. 573,800
-----------
6,515,494
-----------
Chemicals -- 6.8%
60,000 Albemarle Corp. 937,500
65,000 Avery Dennison Corp. 2,600,000
94,000 Cambrex Corp. 3,172,500
65,000 Dow Chemical Co. 4,671,875
417,100 E.I. Dupont De Nemours, Inc. 28,675,625
204,000 Eastman Chemical Co. 12,138,000
301,200 Hercules, Inc. 14,683,500
40,000 Monsanto Co. 3,605,000
21,800 OM Group, Inc. 621,300
230,000 PPG Industries, Inc. 9,890,000
28,000 A. Schulman, Inc. 805,000
300,000 Sterling Chemicals, Inc. 3,487,500
195,000 Union Carbide Corp. 6,508,125
-----------
91,795,925
-----------
Conglomerates -- 1.2%
287,100 Pittston Services Group 6,890,400
155,000 Textron, Inc. 9,009,375
-----------
15,899,775
-----------
Containers -- 0.3%
113,675 Alltrista Corp. 2,188,244
50,000 Ball Corp. 1,743,750
-----------
3,931,994
-----------
Cosmetics and Toiletries -- 0.3%
15,200 Helen of Troy Ltd. 319,200
70,000 Gillette Co. 3,123,750
-----------
3,442,950
-----------
Electrical Equipment -- 0.2%
23,000 Cable Design Technologies Corp. 494,500
32,700 Linear Technology Corp. 2,158,200
-----------
2,652,700
-----------
Electronics and Instruments -- 0.8%
240,000 Analogic Corp. 4,020,000
59,500 Electroglas, Inc. 3,406,375
50,600 Strattec Sec. Corp. 619,850
62,000 Tektronix, Inc. 3,053,500
-----------
11,099,725
-----------
Energy-Miscellaneous -- 0.5%
192,500 Giant Industries, Inc. 1,636,250
196,930 Holly Corp. 4,554,006
84,000 Howell Corp. 1,155,000
-----------
7,345,256
-----------
Entertainment -- 1.1%
100,000 Walt Disney Co. 5,562,500
193,640 Mattel, Inc. 5,034,640
See notes to financial statements.
--------------------------------------------------------------------------------
28
<PAGE>
The Guardian Stock Fund, Inc. - 2
--------------------------------------------------------------------------------
Shares Value
-----------------------------------------------------------------
Entertainment -- 1.1% (Continued)
13,000 National Gaming Corp. $ 112,125
8,840 Viacom, Inc., Cl A 411,060
66,979 Viacom, Inc., Cl B 3,106,151
82,500 Viacom, Inc., Non-Voting 123,750
-----------
14,350,226
-----------
Fertilizer -- 0.8%
88,100 First Mississippi Corp. 3,006,413
86,200 Mississippi Chemical Corp. 1,718,613
499,100 Terra Industries, Inc. 6,051,587
-----------
10,776,613
-----------
Financial-Banks -- 2.0%
120,000 Bank of New York, Inc. 4,845,000
50,000 Central & Southern Hldgs. Co. 365,625
71,484 Citicorp 4,137,137
18,000 Commonwealth Bankshares, Inc. 147,375
125,000 First Bank Systems Corp. 5,125,000
19,900 First Empire State Corp. 3,412,850
61,013 Gateway Bancorp, Inc. 732,156
77,220 Hubco, Inc. 1,380,307
120,000 Premier Bancorp, Inc. 2,160,000
191,641 Signet Banking Corp. 4,192,147
18,000 Star Banc Corp. 828,000
10,000 US Bancorp, Inc. 235,000
-----------
27,560,597
-----------
Financial-Others -- 4.5%
160,000 American Express Co. 5,620,000
191,641 Capital One Financial Corp. 3,737,000
160,000 Dean Witter Discover & Co. 7,520,000
295,600 Duff & Phelps Corp. 3,177,700
21,666 Duff & Phelps Cr. Rating Co. 281,657
258,000 First USA, Inc. 11,448,750
165,500 Foothill Group, Inc. 4,220,250
317,500 Green Tree Acceptance, Inc. 14,089,063
84,500 Jefferies Group, Inc. 3,042,000
94,000 McDonald & Co. Investments, Inc. 1,492,250
256,050 Morgan Keegan, Inc. 3,136,612
153,825 Raymond James Financial, Inc. 2,980,359
--------------
60,745,641
--------------
Financial-Thrift -- 3.7%
18,500 Albank Fin'l. Corp. 483,313
22,600 Bell Bancorp. 638,450
120,000 Brooklyn Bancorp., Inc. 4,050,000
148,000 Charter One Financial, Inc. 3,626,000
66,000 Coastal Bank Svgs. Assn.-TX 1,072,500
246,600 Collective Bancorp, Inc. 4,993,650
86,900 Greenpoint Financial Corp. 2,053,012
115,200 Loyola Capital Corp. 3,571,200
17,850 MAF Bancorp, Inc. 419,475
94,700 Maryland Fed. Bancorp, Inc. 3,054,075
37,666 Pacific Crest Capital, Inc. 207,163
82,362 Progressive Bank, Inc. 2,110,526
285,000 Roosevelt Financial Group, Inc. 4,755,938
45,635 Salem Bank & Trust Nat'l. Assn. 519,097
503,278 Sovereign Bancorp, Inc. 4,844,051
167,800 Standard Fed. Bk.-Troy, MI 5,642,275
159,383 TCF Financial Corp. 7,570,692
--------------
49,611,417
--------------
Food, Beverage and Tobacco -- 3.6%
255,000 Archer Daniels Midland Co. 4,749,375
50,100 Brown-Forman Corp. 1,672,087
328,600 Coca Cola Co. 20,948,250
131,200 IBP, Inc. 5,707,200
207,000 Philip Morris Cos., Inc. 15,395,625
--------------
48,472,537
--------------
Healthcare -- 5.1%
228,300 Caremark International, Inc. 4,566,000
84,000 Circa Pharmaceuticals, Inc. 2,677,500
34,776 Coram Healthcare Corp. 491,211
83,000 Eli Lilly & Co., Inc. 6,515,500
54,900 Healthsource, Inc. 1,921,500
175,000 Humana, Inc. 3,084,375
255,000 Johnson & Johnson 17,244,375
115,700 Liposome, Inc. 1,258,238
175,000 McKesson Corp. 8,181,250
210,000 Merck & Co., Inc. 10,290,000
152,000 Universeal Health Svcs., Inc. 4,408,000
266,950 U.S. Healthcare Systems, Inc. 8,175,344
--------------
68,813,293
--------------
Household Products -- 0.9%
176,800 Procter & Gamble Co. 12,707,500
--------------
See notes to financial statements.
--------------------------------------------------------------------------------
29
<PAGE>
The Guardian Stock Fund, Inc. - 2
--------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
Shares Value
-----------------------------------------------------------------
Information Processing -- 8.1%
138,400 Amdahl Corp. $ 1,539,700
67,550 Astro-Med, Inc. 772,603
103,600 Ceridian Corp. 3,820,250
391,000 Computer Assoc. Int'l., Inc. 26,490,250
114,000 Fair Isaac & Co., Inc. 3,391,500
185,000 Hewlett Packard Co. 13,782,500
48,700 In Focus Systems, Inc. 1,314,900
439,700 Int'l. Business Machine 42,211,200
28,200 Legent Corp. 1,233,750
340,000 Quantum Corp. 7,777,500
73,000 Sungard Data Systems, Inc. 3,814,250
54,700 Teradyne, Inc. 3,576,013
--------------
109,724,416
--------------
Insurance -- 1.7%
80,000 AMBAC, Inc. 3,210,000
74,000 American Eagle Group, Inc. 888,000
99,000 Amer. Bankers Ins. Group, Inc. 3,143,250
44,500 Capital Guaranty Corp. 801,000
31,000 Capitol Amer. Fin'l., Corp. 705,250
109,200 Equitable Iowa Cos., Inc. 3,589,950
68,847 Liberty Financial Cos., Inc. 1,772,810
107,000 MBIA, Inc. 7,115,500
72,000 State Auto Financial Corp. 1,350,000
--------------
22,575,760
--------------
Leisure Products -- 1.0%
39,525 Arctco, Inc. 464,419
276,000 Brunswick Corp. 4,692,000
82,300 Callaway Golf Co. 1,234,500
130,000 Harley-Davidson, Inc. 3,168,750
17,000 Recoton Corp. 331,500
42,800 Sturm Ruger & Co., Inc. 1,396,350
129,700 Thor Industries, Inc. 2,561,575
--------------
13,849,094
--------------
Lodging -- 1.7%
165,000 Hospitality Franchise Sys. Co.* 5,713,125
944,700 Host Marriott Corp. 10,037,438
126,000 Marriott Int'l., Inc. 4,520,250
298,000 Prime Hospitality Corp. 2,942,750
--------------
23,213,563
--------------
Machinery and Equipment -- 5.8%
24,000 AGCO Corp. 900,000
253,000 Briggs & Stratton Corp. 8,728,500
70,000 Case Corp. 2,082,500
45,000 Caterpillar, Inc. 2,891,250
224,381 Cummins Engine, Inc. 9,788,621
114,000 Dana Corp. 3,263,250
50,000 Deere & Co. 4,281,250
91,000 Dover Corp. 6,620,250
148,500 Eaton Corp. 8,631,563
18,000 Furon Co. 396,000
249,400 Indresco, Inc. 3,865,700
67,000 Millipore Corp. 4,522,500
82,500 Parker Hannifin Corp. 2,990,625
115,900 Pentair, Inc. 5,041,650
20,000 Robbins & Myers, Inc. 550,000
37,900 Roper Industries, Inc. 1,326,500
110,100 Tecumseh Products Co. 4,844,400
98,588 Varlen Corp. 2,316,806
110,000 York International Corp. 4,950,000
--------------
` 77,991,365
--------------
Merchandising-Department Stores -- 1.4%
91,700 Carson Pirie Scott & Co. 1,501,588
385,200 Federated Dept. Stores, Inc. 9,918,900
120,000 Sears Roebuck & Co. 7,185,000
--------------
18,605,488
--------------
Merchandising-Drugs -- 0.2%
78,750 Bergen Brunswig Corp. 1,801,406
23,400 Foxmeyer Health Corp. 418,275
--------------
2,219,681
--------------
Merchandising-Food -- 0.8%
128,000 Albertson's, Inc. 3,808,000
354,600 Casey's General Stores, Inc. 6,382,800
--------------
10,190,800
--------------
Merchandising-Special -- 0.7%
168,500 Tandy Corp. 8,740,938
51,200 Waban, Inc. 761,600
--------------
9,502,538
--------------
* Includes repurchase agreements.
See notes to financial statements.
--------------------------------------------------------------------------------
30
<PAGE>
The Guardian Stock Fund, Inc. - 2
--------------------------------------------------------------------------------
Shares Value
-----------------------------------------------------------------
Metals and Mining -- 2.8%
53,500 Alumax, Inc. $ 1,665,188
120,000 Aluminum Co. of America 6,015,000
232,000 Asarco, Inc. 7,076,000
64,000 Cyprus Amax Minerals Co. 1,824,000
199,600 Magma Copper Co. 3,243,500
120,000 Phelps Dodge Corp. 7,080,000
612,723 Santa Fe Pacific Gold Corp. 7,429,266
110,000 Weirton Steel Corp. 770,000
239,700 WHX Corp. 2,816,475
--------------
37,919,429
--------------
Natural Gas-Diversified -- 0.3%
177,600 Mitchell Energy & Dev. Corp. 3,174,600
132,500 USX Delhi Group 1,523,750
--------------
4,698,350
--------------
Oil and Gas Producing -- 3.2%
103,000 Alexander Energy Corp. 431,312
99,909 Apache Corp. 2,735,009
65,400 Barrett Resources Corp. 1,520,550
125,000 Basin Exploration, Inc. 742,187
192,000 Tom Brown, Inc. 2,856,000
140,000 Cairn Energy USA, Inc. 1,540,000
180,000 Chieftain International, Inc. 2,452,500
194,700 Coho Energy, Inc. 997,837
247,000 Devon Energy Corp. 5,310,500
375,100 Global Natural Res., Inc. 4,032,325
28,300 H S Resources, Inc. 396,200
220,000 Home Oil Ltd. 2,832,500
196,000 Phoenix Resource Cos., Inc. 6,223,000
161,900 Pogo Producing Co. 3,703,463
170,868 Snyder Oil Corp. 2,157,209
208,167 United Meridian Corp. 3,226,588
82,600 Vintage Petroleum, Inc. 1,548,750
220,000 Wainoco Oil Ltd. 907,500
--------------
43,613,430
--------------
Oil-Integrated-Domestic -- 1.4%
234,600 Amoco Corp. 15,630,225
342,000 Tesoro Petroleum, Inc. 3,420,000
--------------
19,050,225
--------------
Oil-Integrated-International-- 4.1%
125,000 Mobil Corp. 12,000,000
624,000 Exxon Corp. 44,070,000
--------------
56,070,000
--------------
Oil Services -- 0.8%
29,200 Cliffs Drilling Co. 416,100
341,000 Nabors Industries, Inc. 2,813,250
225,448 Noble Drilling Corp. 1,662,682
131,700 Offshore Logistics, Inc. 1,843,800
205,000 Smith International, Inc. 3,433,750
24,000 Weatherford International, Inc.* 303,000
--------------
10,472,582
--------------
Paper and Forest Products -- 4.0%
175,000 Boise Cascade Corp. 7,087,500
78,000 Federal Paper Board, Inc. 2,759,250
100,000 Georgia Pacific Corp. 8,675,000
62,000 International Paper Co. 5,316,500
115,000 Mead Corp. 6,828,125
541,000 Rayonier, Inc. 19,205,500
76,900 Willamette Industries, Inc. 4,267,950
--------------
54,139,825
--------------
Railroads -- 0.7%
200,000 Illinois Central Corp. 6,900,000
116,542 Santa Fe Pacific Corp. 2,971,821
--------------
9,871,821
--------------
Restaurants -- 0.5%
271,100 Applebees Int'l., Inc. 6,980,825
--------------
Semiconductor -- 8.6%
138,900 Adv. Micro-Devices, Inc. 5,052,488
91,000 Altera Corp. 3,935,750
57,000 Analog Devices, Inc. 1,938,000
48,900 Atmel Corp. 2,707,837
62,800 Cypress Semiconductor Corp. 2,543,400
246,000 Intel Corp. 15,574,875
62,000 International Rectifier Corp. 2,015,000
374,000 LSI Logic Corp. 14,632,750
484,500 Micron Technology, Inc. 26,586,938
151,400 Motorola, Inc. 10,162,725
23,000 Novellus Systems, Inc. 1,558,250
149,500 Texas Instruments, Inc. 20,014,313
100,000 Xilinx, Inc. 9,400,000
--------------
116,122,326
--------------
* Includes repurchase agreements.
See notes to financial statements.
--------------------------------------------------------------------------------
31
<PAGE>
The Guardian Stock Fund, Inc. - 2
--------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
Shares Value
-----------------------------------------------------------------
Telecommunication -- 1.9%
30,000 ADC Telecommunication, Inc. $ 1,072,500
270,000 Andrew Corp. 15,626,250
200,000 DSC Communication Corp. 9,300,000
--------------
25,998,750
--------------
Textile-Apparel and Production -- 0.6%
176,900 Fieldcrest Cannon, Inc. 3,825,462
160,000 Wellman, Inc. 4,380,000
--------------
8,205,462
--------------
Transportation-Miscellaneous -- 0.1%
164,100 Maritrans, Inc. 964,087
--------------
Truckers -- 0.2%
32,100 FRP Pptys., Inc. 690,150
39,500 Landstar System, Inc. 1,017,125
35,100 Werner Enterprises, Inc. 702,000
--------------
2,409,275
--------------
Utilities-Gas and Pipeline -- 0.1%
39,500 ONEOK, Inc. 844,312
--------------
Total Common Stocks
(Cost $911,331,537) 1,231,370,709
--------------
CONVERTIBLE BONDS -- 0.0%
Principal
Amount Value
-----------------------------------------------------------------
$ 600,000 Mediq, Inc. 7.25%
Deb., due 6/1/06 $ 507,000
--------------
Total Convertible Bonds
(Cost $577,045) 507,000
--------------
U.S. GOVERNMENT SECURITIES -- 1.3%
Principal
Amount Value
-----------------------------------------------------------------
$ 17,000,000 U.S. Treasury Notes,
4.25% due 7/31/95 $ 16,981,470
--------------
Total U.S. Government Securities
(Cost $17,001,341) 16,981,470
--------------
REPURCHASE AGREEMENT -- 7.6%
Principal Maturity
Amount Date Value
-----------------------------------------------------------------
$102,415,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/95, maturity
value $102,466,208, 6%,
due 7/3/95(collateralized
by $100,600,000 U.S.
Treasury Notes, 6.875%
due 2/28/97) 7/3/95 $ 102,415,000
--------------
Total Repurchase Agreement
(Cost $102,415,000) 102,415,000
--------------
Total Investments -- 100.0%
(Cost $1,031,324,923) 1,351,274,179
Payables in Excess of Cash,
Receivables and Other Assets -- (0.0%) (284,009)
--------------
NET ASSETS -- 100.0% $1,350,990,170
==============
See notes to financial statements.
--------------------------------------------------------------------------------
32
<PAGE>
The Guardian Stock Fund, Inc. - 2
--------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995 (Unaudited)
ASSETS:
Investments, at identified cost* ........... $1,031,324,923
==============
Investments, at market ..................... 1,248,859,201
Repurchase agreements ...................... 102,415,000
--------------
TOTAL INVESTMENTS .......................... 1,351,274,201
Cash ....................................... 430
Receivable for securities sold ............. 17,456,420
Receivable for fund shares sold ............ 2,008,284
Dividends receivable ....................... 1,546,236
Interest receivable ........................ 322,069
Other assets ............................... 5,969
--------------
TOTAL ASSETS ............................... 1,372,613,609
--------------
LIABILITIES:
Payable for securities purchased ........... 19,932,840
Accrued expenses ........................... 57,789
Due to affiliates -- Note B ................ 1,632,810
--------------
TOTAL LIABILITIES .......................... 21,623,439
--------------
NET ASSETS ................................. $1,350,990,170
==============
COMPONENTS OF NET ASSETS:
Common Stock -- $.10 par value
each (100,000,000
shares authorized) ....................... $ 4,096,178
Paid-in capital ............................ 1,002,061,021
Undistributed net investment income ........ 7,527,379
Accumulated net realized gain on investments 17,356,314
Net unrealized appreciation of investments . 319,949,278
--------------
NET ASSETS .................................. $1,350,990,170
==============
SHARES OUTSTANDING ........................... 40,961,784
==============
NET ASSET VALUE PER SHARE ................... $ 32.98
==============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
For The Six Months Ended
June 30, 1995(Unaudited)
Investment Income:
Dividends .................................. $ 8,196,391
Interest ................................... 2,657,337
Other Income ............................... 11,951
--------------
Total Income ............................. 10,865,679
--------------
Expenses:
Investment advisory fees -- Note B ......... 2,921,403
Custodian fees ............................. 148,997
Registration fees .......................... 12,785
Audit fees ................................. 8,250
Insurance expense .......................... 5,969
Directors' fees -- Note B .................. 5,000
Printing expense ........................... 2,750
Transfer agent fees ........................ 1,650
Legal fees ................................. 1,429
Other ...................................... 360
--------------
Total Expenses ........................... 3,108,593
--------------
Net Investment Income ...................... 7,757,086
==============
Realized and Unrealized Gain/(Loss)
on Investments -- Note D
Net realized gain on investments ........... 13,937,145
Net change in unrealized appreciation
of investments ........................... 202,261,589
--------------
Net Realized and Unrealized Gain
on Investments ........................... 216,198,734
--------------
Net Increase in Net Assets Resulting
from Operations .......................... $ 223,955,820
==============
See notes to financial statements.
--------------------------------------------------------------------------------
33
<PAGE>
The Guardian Stock Fund, Inc. - 2
--------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1995 December 31,
(Unaudited) 1994
------------- ------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 7,757,086 $ 14,181,215
Net realized gain on investments 13,937,145 18,979,488
Net change in unrealized appreciation/(depreciation) of investments 202,261,589 (45,558,052)
-------------- --------------
Net Increase/(Decrease) in Net Assets Resulting from Operations 223,955,820 (12,397,349)
-------------- --------------
Distributions to Shareholder:
Net investment income -- (14,152,347)
Realized gain from investments -- (31,757,209)
-------------- --------------
Total Distribution to Shareholders -- (45,909,556)
-------------- --------------
From Capital Share Transactions:
Net increase in net assets from capital share transactions -- Note E 88,043,130 228,183,927
-------------- --------------
Net Increase in Net Assets 311,998,950 169,877,022
Net Assets:
Beginning of period 1,038,991,220 869,114,198
-------------- --------------
End of period* $1,350,990,170 $1,038,991,220
============== ==============
* Includes undistributed net investment income of: $7,527,379 $80,253
</TABLE>
See notes to financial statements.
--------------------------------------------------------------------------------
34
<PAGE>
The Guardian Stock Fund, Inc. - 2
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
1995 ------------------------------------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period ............. $27.33 $29.00 $25.52 $23.28 $17.85 $21.39 $19.18 $16.35 $17.15 $15.40 $11.96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment
income .............. 0.19 0.40 0.58 0.48 0.63 0.69 0.84 0.52 0.33 0.24 0.26
Net realized and
unrealized gain/
(loss) on invest-
ments .............. 5.46 (0.77) 4.47 3.97 5.74 (3.13) 3.61 2.80 0.06 2.32 3.51
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase/
(decrease) from
investment
operations ......... 5.65 (0.37) 5.05 4.45 6.37 (2.44) 4.45 3.32 0.39 2.56 3.77
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions to
shareholders
Dividends from net
investment
income ............. -- (0.40) (0.59) (0.48) (0.64) (0.71) (0.90) (0.49) (0.43) (0.22) (0.29)
Distributions from
net realized gain .. -- (0.90) (0.98) (1.73) (0.30) (0.39) (1.34) -- (0.76) (0.59) (0.04)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ... -- (1.30) (1.57) (2.21) (0.94) (1.10) (2.24) (0.49) (1.19) (0.81) (0.33)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period ................ $32.98 $27.33 $29.00 $25.52 $23.28 $17.85 $21.39 $19.18 $16.35 $17.15 $15.40
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* ............ 20.67% (1.27)% 19.96% 20.07% 35.96% (11.85)% 23.55% 20.37% 1.87% 17.10% 32.01%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) ........... $1,350,990 $1,038,991 $869,114 $537,354 $380,962 $256,039 $269,950 $172,900 $139,437 $66,081 $21,875
Ratio of expenses to
average net
assets ............. 0.53%** 0.53% 0.54% 0.55% 0.56% 0.57% 0.57% 0.61% 0.61% 0.75% 1.00%
Ratio of net invest-
ment income to
average net
assets ............. 1.33%** 1.49% 2.20% 2.14% 3.07% 3.66% 4.13% 2.88% 2.08% 2.00% 2.55%
Ratio of expenses
subsidized by
GISC ............... -- -- -- -- -- -- -- -- -- -- 0.10%
Portfolio turnover
rate ............... 28% 53% 45% 62% 51% 54% 38% 71% 37% 36% 61%
</TABLE>
* Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
** Annualized
See notes to financial statements.
--------------------------------------------------------------------------------
35
<PAGE>
The Guardian Bond Fund, Inc. - 3
--------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
MULTI CLASS MORTGAGE PASS-THROUGHS -- 32.3%
Principal
Amount Value
---------------------------------------------------------------------
$ 296,484 Citibank New York, NA
9.50% due 8/1/16 $ 306,209
5,000,000 Citicorp Mortgage Secs.,
Inc. 7.00% due 6/25/23 4,892,150
4,750,000 Citicorp Mortgage Secs.,
Inc. 6.50% due 1/25/24 4,190,355
5,000,000 Citicorp Mortgage Secs.,
Inc. 6.25% due 3/25/24 4,551,550
3,352,519 Citicorp Mortgage Secs.,
Inc. 7.75% due 11/25/06 3,374,646
7,770,759 GE Capital Mortgage Svcs.,
Inc. 6.50% due 4/25/24 7,486,582
5,000,000 Residential Fdg. Mtg. Secs.,
Inc. 5.95% due 11/25/23 4,490,500
7,308,326 Residential Fdg. Mtg. Secs.,
Inc. 6.50% due 9/25/08 7,002,253
2,616,725 Sears Mortgage Secs. Corp.
6.50% due 5/25/22 2,579,568
10,000,000 Securitized Asset Sales, Inc.
10.00% due 12/1/99 9,794,000
6,000,000 Federal Home Loan Mortgage
Corp. 7.00% due 3/15/21 5,902,500
3,000,000 Federal Home Loan Mortgage
Corp. 7.40% due 12/15/21 3,042,180
12,700,000 Federal Home Loan Mortgage
Corp. 6.50% due 5/15/19 12,211,812
6,000,000 Federal Home Loan Mortgage
Corp. 6.80% due 12/15/18 5,960,580
5,000,000 Federal Home Loan Mortgage
Corp. 6.00% due 11/15/20 4,756,250
4,000,000 Federal National Mortgage Assn.
7.00% due 5/25/20 3,943,720
7,000,000 Federal National Mortgage Assn.
7.00% due 4/25/12 7,024,010
4,359,000 Federal National Mortgage Assn.
6.00% due 4/25/20 4,141,050
2,000,000 Federal National Mortgage Assn.
5.75% due 4/25/06 1,933,120
1,000,000 Federal National Mortgage Assn.
6.25% due 5/25/07 969,060
13,000,000 Federal National Mortgage Assn.
6.44% due 6/21/05 12,914,200
------------
Total Multi Class Mortgage Pass-Throughs
(Cost $109,686,719) 111,466,295
------------
MORTGAGE PASS-THROUGHS -- 9.5%
$ 988,938 FNMA Pool #068106
8.50% due 8/1/09 $ 1,029,940
1,318,955 FNMA Pool #068772
8.00% due 6/1/08 1,356,452
15,935 FNMA Pool #072923
8.25% due 1/1/09 16,390
14,266,768 FNMA Pool #190541
7.00% due 1/1/24 14,021,523
7,034,058 FNMA Pool #250030
7.00% due 5/1/24 6,913,143
1,969,028 FNMA Pool #250083
7.00% due 7/1/24 1,935,180
783,206 FNMA Pool #277038
7.00% due 5/1/24 769,743
609,989 FNMA Pool #283501
7.00% due 5/1/24 599,503
5,964,437 FNMA Pool #307331
8.00% due 8/1/19 6,135,079
12,882 GNMA Pool #000375
11.50% due 7/20/00 13,562
1,383 GNMA Pool #780002
6.50% due 7/15/24 1,329
------------
Total Mortgage Pass-Throughs
(Cost $31,968,047) 32,791,844
------------
U.S. GOVERNMENT AND AGENCIES -- 21.7%
$13,000,000 Federal Home Loan Mortgage
Corp., 7.188% due 9/15/99 $13,229,580
10,000,000 Federal Home Loan Mortgage
Corp., 8.44% due 10/27/04 10,395,800
20,500,000 U.S. Treasury Bonds 7.625%
due 2/15/25 23,152,085
9,500,000 U.S. Treasury Notes 6.875%
due 7/31/99 9,796,875
10,000,000 U.S. Treasury Notes 6.875%
due 8/31/99 10,317,200
See notes to financial statements.
--------------------------------------------------------------------------------
36
<PAGE>
The Guardian Bond Fund, Inc. - 3
--------------------------------------------------------------------------------
Principal
Amount Value
---------------------------------------------------------------------
$ 8,000,000 U.S. Treasury Notes 6.75%
due 4/30/00 $ 8,242,480
------------
Total U.S. Government and Agencies
(Cost $73,049,457) 75,134,020
------------
CORPORATE BONDS -- 32.8%
Asset Backed -- 6.8%
$2,700,000 Amer. Express Master Tr.,
5.375% due 7/15/01 2,569,212
4,000,000 Banc One Auto Trust,
6.90% due 4/15/98 4,056,400
8,000,000 Banc One Auto Trust,
6.15% due 7/15/02 7,953,600
8,500,000 Premier Auto Trust,
7.85% due 2/4/98 8,715,135
------------
23,294,347
------------
Chemicals -- 2.5%
8,500,000 Union Carbide Corp.,
6.79% due 6/1/25 8,433,870
------------
Drugs -- 2.0%
7,000,000 Rhone Poulenc SA,
6.75% due 10/15/99 7,015,820
------------
Electronics -- 1.9%
6,000,000 Philips Electronics NV,
8.375% due 9/15/06 6,627,180
------------
Financial-Banks -- 1.6%
3,000,000 Keycorp, 8.40% due
4/1/99 3,175,320
2,000,000 Republic NY Corp.,
8.375% due 2/15/07 2,231,500
------------
5,406,820
------------
Financial-Other -- 5.3%
8,000,000 Gen. Motors Accep. Corp.
MTN, 7.375% due 6/9/99 8,204,320
5,500,000 Gen. Motors Accep. Corp.
MTN, 8.50% due 12/15/00 5,928,725
4,000,000 Grand Metropolitan Corp.
7.00% due 6/15/99 4,052,000
------------
18,185,045
------------
Machinery-Industrial Specialty -- 1.7%
6,000,000 McDermott, Inc. MTN,
6.57% due 4/20/98 5,975,880
------------
Merchandising-Department Store -- 1.0%
3,400,000 Wal Mart Stores, Inc.,
8.75% due 12/29/06 3,544,330
------------
Natural Gas-Diversified -- 0.6%
1,000,000 Internorth, Inc.,
9.625% due 3/15/06 1,186,150
1,000,000 Texas Eastern Corp.,
8.50% due 2/10/97 1,024,060
------------
2,210,210
------------
Paper and Forest Product -- 2.3%
5,000,000 Boise Cascade Corp.,
7.10% due 1/13/99 4,926,900
3,000,000 James River Corp.,
6.75% due 10/1/99 2,990,370
------------
7,917,270
------------
Telecommunications -- 1.4%
5,000,000 Amer. Tel. & Tel. Cap. Corp.,
5.28% due 8/15/97 4,898,900
------------
Tobacco -- 2.3%
8,000,000 BAT Capital Corp.,
6.875% due 4/15/03 7,934,160
------------
Utilities-Electric -- 3.4%
2,500,000 Consumers Power Co.,
7.50% due 6/1/02 2,533,575
5,000,000 Duquesne Light Co.,
6.70% due 5/15/03 4,940,150
4,500,000 Illinois Power Co.,
5.625% due 4/15/00 4,303,890
------------
11,777,615
------------
Total Corporate Bonds
(Cost $111,606,244) 113,221,447
------------
See notes to financial statements.
--------------------------------------------------------------------------------
37
<PAGE>
The Guardian Bond Fund, Inc. - 3
--------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
REPURCHASE AGREEMENT -- 3.6%
Principal
Amount Value
---------------------------------------------------------------------
$12,390,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/95, maturity
value $12,396,195 at
6% due 7/3/95 (colla-
teralized by $12,000,000
U.S. Treasury Notes, 6.875%
due 2/28/97) $ 12,390,000
------------
TOTAL REPURCHASE AGREEMENT
(COST $12,390,000) 12,390,000
------------
TOTAL INVESTMENTS -- 99.9%
(COST $338,700,467) 345,003,606
CASH, RECEIVABLES AND
OTHER ASSETS LESS PAYABLES -- 0.1% 486,729
------------
NET ASSETS -- 100.0% $345,490,335
============
See notes to financial statements.
--------------------------------------------------------------------------------
38
<PAGE>
The Guardian Bond Fund, Inc. - 3
--------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995 (Unaudited)
ASSETS:
Investments, at identified cost* $ 338,700,467
=============
Investments, at market 332,613,606
Repurchase agreements 12,390,000
-------------
TOTAL INVESTMENTS 345,003,606
Cash 156,357
Interest receivable 3,869,896
Other assets 2,763
-------------
TOTAL ASSETS 349,032,622
-------------
LIABILITIES:
Payable for securities purchased 3,064,440
Accrued expenses 27,611
Due to affiliates -- Note B 450,236
-------------
TOTAL LIABILITIES 3,542,287
-------------
NET ASSETS $ 345,490,335
=============
COMPONENTS OF NET ASSETS:
Common Stock -- $.10 par value each
(100,000,000 shares authorized) $ 2,809,607
Paid-in capital 335,893,044
Undistributed net investment income 11,081,187
Accumulated net realized (loss) on investments (10,596,642)
Net unrealized appreciation of investments 6,303,139
-------------
NET ASSETS $ 345,490,335
=============
SHARES OUTSTANDING 28,096,071
-------------
NET ASSET VALUE PER SHARE $ 12.30
=============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
For The Six Months Ended
June 30, 1995 (Unaudited)
Investment Income:
Interest $11,864,769
-----------
Expenses:
Investment advisory fee -- Note B 814,615
Custodian fees 46,114
Audit fees 8,250
Directors' fees -- Note B 5,000
Printing expense 2,750
Insurance expense 1,931
Transfer agent fees 1,650
Legal fees 1,429
Registration fees 826
Other 360
-----------
Total Expenses 882,925
-----------
Net Investment Income 10,981,844
===========
Realized and Unrealized Gain/(Loss)
on Investments -- Note D
Net realized gain on investments 2,667,043
Net change in unrealized appreciation
of investments 20,522,973
-----------
Net Realized and Unrealized Gain
on Investments 23,190,016
-----------
Net Increase in Net Assets
from Operations $34,171,860
===========
See notes to financial statements.
--------------------------------------------------------------------------------
39
<PAGE>
The Guardian Bond Fund, Inc. - 3
--------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1995 December 31,
(Unaudited) 1994
----------- ------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 10,981,844 $ 8,398,624
Net realized gain/(loss) on investments 2,667,043 (13,787,259)
Net change in unrealized appreciation/(depreciation) of investments 20,522,973 (16,409,226)
------------ ------------
Net Increase/(Decrease) in Net Assets Resulting from Operations 34,171,860 (11,797,861)
------------ ------------
Distributions to Shareholders:
Net investment income -- (18,375,937)
Net realized gain on investments -- (1,613,357)
------------ ------------
Total Distributions to Shareholders -- (19,989,294)
------------ ------------
From Capital Share Transactions:
Net increase in net assets from capital share transactions -- Note E 2,340,390 496,365
------------ ------------
Net Increase/(Decrease) in Net Assets 36,512,250 (31,290,790)
Net Assets:
Beginning of period 308,978,085 340,268,875
------------ ------------
End of period* $345,490,335 $308,978,085
============ ============
* Includes undistributed net investment income of: $11,081,187 $99,343
</TABLE>
See notes to financial statements.
--------------------------------------------------------------------------------
40
<PAGE>
The Guardian Bond Fund, Inc. - 3
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
1995 ------------------------------------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............. $11.08 $12.24 $12.26 $12.33 $11.56 $11.67 $11.16 $11.12 $12.41 $11.57 $10.18
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment
income .............. 0.39 0.40 0.70 0.81 0.92 0.97 0.98 1.03 0.96 0.83 0.74
Net realized and unre-
alized gain/(loss)
on investments ..... 0.83 (0.82) 0.50 0.13 0.91 (0.11) 0.55 0.02 (0.92) 0.83 1.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase/
(decrease) from
investment
operations ......... 1.22 (0.42) 1.20 0.94 1.83 0.86 1.53 1.05 0.04 1.66 2.18
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions to
shareholders
Distributions from net
investment
income ............. -- (0.68) (0.70) (0.81) (0.92) (0.97) (1.02) (1.01) (1.23) (0.79) (0.79)
Distributions from net
realized gain ...... -- (0.06) (0.52) (0.20) (0.14) -- -- -- (0.10) (0.03) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ... -- (0.74) (1.22) (1.01) (1.06) (0.97) (1.02) (1.01) (1.33) (0.82) (0.79)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period ................ $12.30 $11.08 $12.24 $12.26 $12.33 $11.56 $11.67 $11.16 $11.12 $12.41 $11.57
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* ............ 11.01% (3.45)% 9.85% 7.70% 16.19% 7.57% 13.88% 9.70% .32% 14.84% 22.36%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) ......... $345,490 $308,978 $340,2694 $284,330 $222,299 $165,844 $147,753 $113,616 $103,846 $73,491 $25,537
Ratio of expenses to
average net
assets ........... 0.54%** 0.54% 0.55% 0.56% 0.57% 0.58% 0.60% 0.61% 0.62% 0.69% 1.00%
Ratio of net invest-
ment income to
average net
assets ........... 3.34%** 5.69% 5.56% 6.70% 7.81% 8.53% 8.78% 8.97% 8.97% 9.10% 10.25%
Ratio of expenses
subsidized by
GISC -- -- -- -- -- -- -- -- -- -- 0.16%
Portfolio turnover
rate ............. 195% 311% 220% 57% 43% 39% 158% 24% 67% 55% 48%
</TABLE>
* Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
** Annualized.
See notes to financial statements.
--------------------------------------------------------------------------------
41
<PAGE>
The Guardian Cash Fund, Inc. - 4
--------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
COMMERCIAL PAPER -- 92.9%
Principal
Amount Value
-----------------------------------------------------------------------------
FINANCIAL -- 16.9%
Bank Holding Companies -- 8.4%
$15,200,000 Barclays U.S. Funding Corp.,
5.95% due 7/3/95 $ 15,194,976
15,200,000 Commerzbank US Fin. Corp.,
5.94% due 7/31/95 15,124,760
------------
30,319,736
------------
Financial-Others -- 8.5%
15,200,000 AT&T Capital Corp.,
5.95% due 7/17/95 15,159,805
15,200,000 USAA Capital Corp.,
5.95% due 7/27/95 15,134,682
------------
30,294,487
------------
Total Financial 60,614,223
------------
INDUSTRIAL -- 76.0%
Aerospace and Defense -- 4.2%
15,200,000 Rockwell Int'l. Corp.,
5.95% due 7/14/95 15,167,341
------------
Automotive -- 8.5%
15,200,000 Ford Motor Co.,
5.96% due 7/19/95 15,154,704
15,200,000 Toyota Motor Cr. Co.,
5.93% due 7/7/95 15,184,977
------------
30,339,681
------------
Beverage-Soft Drinks -- 4.2%
15,200,00 PepsiCo, Inc.,
5.93% due 7/21/95 15,149,924
------------
Conglomerate -- 4.2%
15,200,000 GE Capital Svcs., Inc.
5.94% due 7/17/95 15,159,872
------------
Containers-Metals and Plastic -- 4.2%
15,200,000 Sonoco Products Co.,
5.90% due 7/6/95 15,187,545
------------
Drugs -- 8.5%
15,200,000 Abbott Laboratories,
5.92% due 7/10/95 15,177,504
15,200,000 Pfizer, Inc.,
5.83% due 7/13/95 15,170,461
------------
30,347,965
------------
Electronics -- 4.2%
15,200,000 TDK USA Corp.,
5.96% due 7/20/95 15,152,188
------------
Food Processing -- 4.2%
15,200,000 Cargill, Inc.,
5.92% due 7/24/95 15,142,510
------------
Insurance-Multiline -- 4.3%
15,200,000 American Gen. Cap. Svcs.,
5.94% due 7/5/95 15,189,968
------------
Machinery-Industrial Specialty -- 4.2%
15,200,000 John Deere Cap. Corp.,
5.92% due 7/10/95 15,177,504
------------
Merchandising-Special -- 4.2%
15,200,000 Toys "R" Us, Inc.,
5.91% due 7/12/95 15,172,551
------------
Oil-Integrated-Domestic -- 4.2%
15,200,000 Chevron Oil Fin. Co.,
5.93% due 7/7/95 15,184,977
------------
Oil Services -- 4.2%
15,200,000 Colonial Pipeline Co.,
5.95% due 7/6/95 15,187,439
------------
Telecommunication -- 12.7%
15,200,000 Amer. Telephone & Telegraph
Co., 5.92% due 7/26/95 15,137,511
15,200,000 Bell Atlantic Fin'l. Svcs.,
5.97% due 8/2/95 15,119,339
15,200,000 Bell South Telecomm.
Inc., 5.93% due 7/13/95 15,169,955
------------
45,426,805
------------
Total Industrial 272,986,270
------------
TOTAL COMMERCIAL PAPER
(Cost $333,600,493) 333,600,493
------------
See notes to financial statements.
--------------------------------------------------------------------------------
42
<PAGE>
The Guardian Cash Fund, Inc. - 4
--------------------------------------------------------------------------------
Repurchase Agreement -- 7.4%
Principal
Amount Value
-----------------------------------------------------------------------------
$26,654,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/95, maturity
value $26,667,327, 6%,
due 7/3/95 (collateralized
by $26,185,000 U.S. Treasury
Notes, 6.875% due 2/28/97) $ 26,654,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $26,654,000) 26,654,000
------------
TOTAL INVESTMENTS -- 100.3%
(Cost $361,709,970) 360,254,493
PAYABLES IN EXCESS OF CASH,
RECEIVABLES AND
OTHER ASSETS -- (0.3%) (1,032,471)
------------
NET ASSETS -- 100.0% $359,222,022
============
See notes to financial statements.
--------------------------------------------------------------------------------
43
<PAGE>
The Guardian Cash Fund, Inc. - 4
--------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995 (Unaudited)
ASSETS:
Investments, at identified cost* $360,254,493
============
Investments, at market 333,600,493
Repurchase agreements 26,654,000
------------
TOTAL INVESTMENTS 360,254,493
Cash 231
Receivable for fund shares sold 317,830
Interest receivable 4,442
Other assets 2,458
------------
TOTAL ASSETS 360,579,454
------------
LIABILITIES:
Payable for fund shares redeemed 852,036
Accrued expenses 27,833
Due to affiliates-- Note B 477,563
------------
TOTAL LIABILITIES 1,357,432
------------
NET ASSETS $359,222,022
============
COMPONENTS OF NET ASSETS:
Common Stock -- $.10 par
value each (100,000,000
shares authorized) $ 3,592,220
Paid-in capital 355,629,802
------------
NET ASSETS $359,222,022
============
SHARES OUTSTANDING 35,922,022
------------
NET ASSET VALUE PER SHARE $ 10.00
============
* Includes repurchase agreements
STATEMENT OF OPERATIONS
for the Six Months Ended
June 30, 1995 (Unaudited)
INVESTMENT INCOME:
Income:
Interest $ 11,047,222
------------
EXPENSES:
Investment advisory fees -- Note B 919,659
Custodian fees 41,494
Audit fees 8,250
Directors' fees -- Note B 5,000
Printing expense 2,750
Insurance expense 2,458
Transfer agent fees 1,650
Legal fees 1,429
Registration fees 387
Other 360
------------
Total Expenses 983,437
------------
Net Investment Income $ 10,063,785
============
See notes to financial statements.
--------------------------------------------------------------------------------
44
<PAGE>
The Guardian Cash Fund, Inc. - 4
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1995 (Unaudited) 1994
-------------- ------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 10,063,785 $ 13,907,542
------------ ------------
Net Increase in Net Assets Resulting from Operations 10,063,785 13,907,542
------------ ------------
Distributions to Shareholders:
Net investment income (10,063,785) (13,907,542)
------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from
capital share transactions -- Note E (27,763,814) 76,187,548
------------ ------------
Net Increase/(Decrease) in Net Assets (27,763,814) 76,187,548
Net Assets:
Beginning of period 386,985,836 310,798,288
------------ ------------
End of period $359,222,022 $386,985,836
============ ============
</TABLE>
See notes to financial statements
--------------------------------------------------------------------------------
45
<PAGE>
The Guardian Cash Fund, Inc. - 4
--------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
1995 -----------------------------------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from invest-
ment operations
Net investment
income 0.27 0.38 0.26 0.35 0.54 0.77 0.87 0.72 0.63 0.62 0.75
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions to
Shareholders
Dividends from net
investment income (0.27) (0.38) (0.26) (0.35) (0.54) (0.77) (0.87) (0.72) (0.63) (0.62) (0.75)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* 5.54% 3.82% 2.64% 3.21% 5.59% 7.95% 8.70% 7.20% 6.30% 6.20% 7.50%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) $359,222 $386,986 $310,798 $318,879 $331,677 $331,600 $262,865 $228,310 $164,326 $87,403 $58,141
Ratio of expenses
to average net
assets 0.53%** 0.54% 0.54% 0.54% 0.55% 0.56% 0.56% 0.58% 0.61% 0.61% 0.64%
Ratio of net invest-
ment income to
average net
assets 5.47%** 3.81% 2.61% 3.17% 5.44% 7.67% 8.67% 7.17% 6.27% 6.14% 7.61%
</TABLE>
* Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
** Annualized.
See notes to financial statements.
--------------------------------------------------------------------------------
46
<PAGE>
The Guardian Stock, Bond & Cash - 4
--------------------------------------------------------------------------------
The Guardian Stock Fund, Inc., The Guardian Bond Fund, Inc.,
The Guardian Cash Fund, Inc.
COMBINED NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
Note A -- Organization and Accounting Policies
The Guardian Stock Fund, Inc. (GSF), The Guardian Bond Fund, Inc. (GBF) and
The Guardian Cash Fund, Inc. (GCF) (collectively, the Funds and individually, a
Fund), are each incorporated in the state of Maryland and are diversified
open-end management investment companies registered under the Investment Company
Act of 1940, as amended (1940 Act). Each Fund sold 10,000 of its shares to The
Guardian Insurance & Annuity Company, Inc. (GIAC) for $100,000 in order to
facilitate the commencement of its operations. Such shares were subsequently
deposited in The Guardian Separate Account A, a separate account of GIAC which
is registered as a unit investment trust under the 1940 Act. Shares of the Funds
are only sold to certain separate accounts of GIAC. The Funds are available for
investment only through the purchase of certain variable annuity and variable
life insurance contracts issued by GIAC. GIAC is a wholly owned subsidiary of
The Guardian Life Insurance Company of America (Guardian Life). Significant
accounting policies of the Funds are as follows:
Investments
Investments in GSF and GBF are carried at value. Securities listed on
national securities exchanges are valued based upon closing prices on these
exchanges. Securities traded in the over-the-counter market and listed
securities for which there have been no trades for the day are valued at the
mean of the bid and asked prices.
Certain debt securities may be valued each business day by an independent
pricing service (Service) approved by the Board of Directors. Debt securities
for which quoted bid prices, in the judgment of the Service, are readily
available and representative of the bid side of the market, are valued at the
mean between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other debt securities that are
valued by the Service are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
Securities for which market quotations are not readily available, including
certain mortgage-backed securities and restricted securities, are valued by
using methods that each Fund's Board of Directors, in good faith, believes will
accurately reflect their fair value.
The valuation of securities held by GCF is based upon their amortized cost
which approximates market value, in accordance with Rule 2a-7 under the 1940
Act. Amortized cost valuations do not take into account unrealized gains and
losses.
Investment securities transactions are recorded on the date of purchase or
sale. Repurchase agreements are carried at cost, which approximates value (see
Note C).
Net realized gain or loss on sales of investments is determined on the basis
of identified cost. Interest income, including amortization of premium and
discount, is recorded when earned. Dividends are recorded on the ex-dividend
date.
Federal Income Taxes
Each Fund qualifies and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the Internal Revenue Code
--------------------------------------------------------------------------------
47
<PAGE>
The Guardian Stock, Bond & Cash - 4
--------------------------------------------------------------------------------
The Guardian Stock Fund, Inc., The Guardian Bond Fund, Inc.,
The Guardian Cash Fund, Inc.
COMBINED NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
of 1986, as amended (Code), and as such will not be subject to federal income
tax on investment income (including any realized capital gains) which is
distributed to its shareholders in accordance with the applicable provisions of
the Code. Therefore, no federal income tax provision is required.
Reclassifications of Capital Accounts
During the year ended December 31, 1994, GSF reclassified ($113,817) to
paid-in capital from accumulated net realized gains/(losses) to reflect
permanent differences between income recognition on a tax basis and a GAAP
basis.
Dividend Distributions
GSF and GBF intend to distribute each year, as dividends or capital gain
distributions, substantially all net investment income and net capital gains
realized. All such dividends or distributions are credited in the form of
additional shares of the applicable Fund at net asset value on the ex-dividend
date. Such distributions are determined in conformity with federal income tax
regulations. Differences between the recognition of income on an income tax
basis and recognition of income based on generally accepted accounting
principles may cause temporary overdistributions of net realized gains and net
investment income. Currently, the policy of GSF and GBF is to distribute net
investment income approximately every six months and net capital gains annually.
This policy is, however, subject to change at any time by each Fund's Board of
Directors.
GCF earns interest on its investments daily and distributes all of its net
investment income, increased or decreased by realized gains or losses, each day
GCF is open for business. Earnings for Saturdays, Sundays and holidays are paid
as a dividend on the next business day.
All dividends and distributions are credited in the form of additional shares
of GCF at net asset value on the payable date.
Note B -- Investment Advisory Agreements
and Payments to Related Parties
Each Fund has an investment advisory agreement with Guardian Investor
Services Corporation (GISC), a wholly owned subsidiary of GIAC. GISC receives a
management fee from each Fund computed at the rate of .50% of the daily average
net assets during the fiscal year, payable quarterly. If total expenses of any
Fund (excluding taxes, interest and brokerage commissions, but including the
investment advisory fee) exceeds 1% per annum of the average daily net assets of
the Fund, GISC has agreed to assume any such expenses. None of the Funds
exceeded this limit during the six months ended June 30, 1995.
No compensation is paid by any of the Funds to a director who is deemed to be
an "interested person" (as defined in the 1940 Act) of a Fund. Each director not
deemed an "interested person" is paid an annual fee of $500 by each Fund, and
$350 for attendance at each meeting of each Fund. The aggregate remuneration
paid by each Fund to its disinterested directors was $5,000 for the six months
ended June 30, 1995.
Note C -- Repurchase Agreements
Collateral underlying 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 such collateral is
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
--------------------------------------------------------------------------------
48
<PAGE>
The Guardian Stock, Bond & Cash - 4
--------------------------------------------------------------------------------
interest, the Funds 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 Funds maintain the right to sell the collateral and may
claim any resulting loss against the seller. Each Fund's Board of Directors has
established standards to evaluate the creditworthiness of broker-dealers and
banks which engage in repurchase agreements with each Fund. Repurchase
agreements of more than one week's duration (or investments in any other
securities which are deemed to be not readily marketable by the staff of the
Securities and Exchange Commission) are not permitted if more than 10% of a
Fund's net assets would be so invested.
Note D -- Investment Transactions
<TABLE>
<CAPTION>
Purchases and proceeds from sales of securities (excluding short-term securities) were as follows:
Six Months Ended June 30, 1995 (Unaudited)
-----------------------------------------
GSF GBF
----- -----
<S> <C> <C>
Purchases
Stocks and debt obligations $ 383,094,399 $ 141,242,086
U.S. Government and government agency obligations -- 501,948,057
Proceeds
Stocks and debt obligations $ 310,354,216 $ 163,139,778
U.S. Government and government agency obligations -- 425,858,202
</TABLE>
<TABLE>
The cost of investments owned at June 30, 1995 for federal income tax purposes was $1,031,324,923,
$338,700,467 and $360,254,493 for GSF, GBF and GCF, respectively. The gross unrealized appreciation and
depreciation at June 30, 1995 for GSF and GBF were as follows:
GSF GBF
----- -----
<S> <C> <C>
Gross Appreciation $ 333,524,402 $ 8,305,058
Gross Depreciation (13,575,124) (2,001,919)
------------- -----------
Net Unrealized Appreciation $ 319,949,278 $ 6,303,139
============= ===========
</TABLE>
--------------------------------------------------------------------------------
49
<PAGE>
The Guardian Stock, Bond & Cash - 4
--------------------------------------------------------------------------------
The Guardian Stock Fund, Inc., The Guardian Bond Fund, Inc.,
The Guardian Cash Fund, Inc.
COMBINED NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
Note E -- Transactions in Capital Stock
<TABLE>
<CAPTION>
The Guardian Stock Fund, Inc.
Six Months Ended June 30, Year Ended December 31,
1995 (Unaudited) 1994
-------------------------- --------------------------
Shares Amount Shares Amount
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 4,830,224 $143,558,734 10,511,824 $299,351,838
Shares issued through reinvestment of
dividends from net investment income and
net realized gain on sales of investments -- -- 1,661,572 45,909,555
------------ ------------ ---------- ------------
4,830,224 143,558,734 12,173,396 345,261,393
Less shares repurchased (1,882,684) (55,515,605) (4,131,682) (117,077,466)
------------ ------------ ---------- ------------
NET INCREASE 2,947,540 $ 88,043,129 8,041,714 $228,183,927
============ ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
The Guardian Bond Fund, Inc.
Six Months Ended June 30, Year Ended December 31,
1995 (Unaudited) 1994
-------------------------- --------------------------
Shares Amount Shares Amount
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,619,517 $ 30,497,213 4,878,473 $ 57,770,327
Shares issued through reinvestment of
dividends from net investment income and
net realized gain on sales of investments -- -- 1,769,521 19,989,294
------------ ------------ ---------- ------------
2,619,517 30,497,213 6,647,994 77,759,621
Less shares repurchased (2,410,055) (28,156,821) (6,559,394) (77,263,256)
------------ ------------ ---------- ------------
NET INCREASE 209,462 $ 2,340,392 88,600 $ 496,365
============ ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
The Guardian Cash Fund, Inc.
Six Months Ended June 30, Year Ended December 31,
1995 (Unaudited) 1994
-------------------------- --------------------------
Shares Amount Shares Amount
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 9,859,897 $ 98,598,981 28,157,184 $281,571,841
Shares issued through reinvestment of
dividends from net investment income and
net realized gain on sales of investments 1,006,368 10,063,680 1,390,754 13,907,542
------------ ------------ ---------- ------------
10,866,265 108,662,661 29,547,938 295,479,383
Less shares repurchased (13,642,647) (136,426,475) (21,929,183) (219,291,835)
------------ ------------ ---------- ------------
NET INCREASE (DECREASE) $ (2,776,382) $(27,763,814) 7,618,755 $ 76,187,548
============ ============ ========== ============
</TABLE>
Note F -- Line of Credit
A $20,000,000 line of credit available to all of the Funds was 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 six months ended
June 30, 1995, none of the Funds borrowed against this line of credit.
--------------------------------------------------------------------------------
50
<PAGE>
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--------------------------------------------------------------------------------
51
<PAGE>
Gabelli Capital Asset Fund -- 5
--------------------------------------------------------------------------------
Gabelli Capital Asset Fund
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
COMMON STOCKS -- 46.2%
Shares Value
--------------------------------------------------------------------------------
Aerospace -- 0.9%
1,000 Boeing Co. $ 62,625
---------
Automotive: Parts and Accessories -- 0.6%
2,000 GenCorp Inc. 21,500
1,000 Wynn's International, Inc. 23,250
---------
44,750
---------
Aviation: Parts and Services -- 1.7%
800 Curtiss-Wright Corporation 35,700
6,000 Hi-Shear Industries Inc. 44,250
1,000 Precision Castparts Corporation 35,125
---------
115,075
---------
Broadcasting -- 6.1%
7,000 Ackerley Communications Inc. 85,750
1,500 BHC Communications, Inc., Class A+ 120,563
1,000 Chris-Craft Industries, Inc. 35,000
2,000 Multi-Market Radio Inc., Class A+ 20,000
500 Outlet Communications, Inc., Class A+ 18,750
2,000 United Television, Inc. 142,000
---------
422,063
---------
Business Services -- 8.2%
2,000 LEGENT Corporation+ 87,500
7,500 Lotus Development Corporation+ 478,125
---------
565,625
---------
Cable -- 2.3%
3,500 Media General, Inc., Class A 106,750
1,000 Multimedia, Inc., New+ 38,750
500 Tele-Communications, Inc., Class A+ 11,719
---------
157,219
---------
Consumer Products -- 6.5%
5,000 American Brands, Inc. 198,750
2,000 Culbro Corporation+ 66,000
2,500 General Electric Company 140,937
1,000 National Presto Industries Inc. 45,375
---------
451,062
---------
Diversified Industrial -- 1.3%
1,000 Minnesota Mining and
Manufacturing Company 57,250
2,000 Thomas Industries Inc. 32,750
---------
90,000
---------
Electric Equipment -- 1.6%
2,500 Honeywell Inc. 107,813
---------
Entertainment -- 2.5%
3,000 Time Warner Inc. 123,375
1,000 Viacom Inc., Class A+ 46,500
---------
169,875
---------
Food and Beverage -- 3.2%
6,400 Bruno's, Inc. 74,400
2,000 Seagram Company Ltd. 69,250
500 Tootsie Roll Industries, Inc. 34,625
1,000 Wrigley, (Wm.) Jr. Company 46,375
---------
224,650
---------
Health Care -- 1.1%
1,500 Genentech Inc.+ 72,937
---------
Hotels/Casinos -- 2.0%
2,000 Hilton Hotels Corporation 140,500
---------
Industrial Equipment and Supplies -- 2.2%
3,000 AMETEK, Inc. 54,000
2,000 Crane Co. 72,500
1,000 Sequa Corporation, Class A+ 29,250
---------
155,750
---------
Oil and Gas Equipment/Services -- 0.3%
2,600 RPC Inc.+ 23,563
---------
Publishing -- 2.9%
4,500 Pulitzer Publishing 191,812
1,000 Western Publishing Group, Inc.* 11,250
---------
203,062
---------
Wireless Communications -- 2.8%
1,500 Cellular Communications, Inc., Class A+ 68,250
1,000 LIN Broadcasting Corporation 126,500
---------
194,750
---------
TOTAL COMMON STOCKS
(Cost $3,145,658) 3,201,319
---------
See notes to financial statements.
--------------------------------------------------------------------------------
52
<PAGE>
Gabelli Capital Asset Fund -- 5
--------------------------------------------------------------------------------
PREFERRED STOCK -- 0.5%
Shares Value
--------------------------------------------------------------------------------
Industrial Equipment and Supplies -- 0.5%
500 Sequa Corporation, $5.00 Conv. Pfd. $ 33,500
----------
TOTAL PREFERRED STOCK
(Cost $32,400) 33,500
----------
U.S. TREASURY BILLS -- 46.9%
Principal
Amount Value
--------------------------------------------------------------------------------
$3,260,000 5.000% to 5.420%++ due
07/06/1995-08/24/1995 3,245,058
----------
TOTAL U.S. TREASURY BILLS
(Cost$3,245,058) 3,245,058
----------
TOTAL INVESTMENTS -- 93.6%
(Cost $6,423,116) (a) 6,479,877
----------
OTHER ASSETS AND
LIABILITIES (Net) -- 6.4% 445,152
----------
NET ASSETS -- 100.0% $6,925,029
==========
(a) Aggregate cost for Federal tax purposes was $6,423,116. Net unrealized
appreciation for Federal tax purposes was $56,761 (gross unrealized
appreciation was $83,060 and gross unrealized depreciation was $26,299).
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See notes to financial statements.
--------------------------------------------------------------------------------
53
<PAGE>
Gabelli Capital Asset Fund -- 5
--------------------------------------------------------------------------------
Gabelli Capital Asset Fund
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995 (Unaudited)
ASSETS
Investments, at value
(Cost $6,423,116) $6,479,877
Cash 391,270
Receivable for Fund shares sold 456,355
Unamortized organization cost 96,667
Receivable from Manager 14,377
Dividends receivable 1,637
----------
TOTAL ASSETS 7,440,183
----------
LIABILITIES
Payable for investments purchased 400,452
Organization costs payable 100,000
Management fee payable 3,102
Accrued Directors' fees 2,600
Accrued expenses and other payables 9,000
----------
TOTAL LIABILITIES 515,154
----------
Net assets applicable to 678,644 shares of
common stock outstanding $6,925,029
==========
NET ASSETS consist of:
Shares of common stock at par value $ 679
Additional paid-in capital 6,856,338
Accumulated net realized loss on investments (285)
Undistributed net investment income 11,536
Net unrealized appreciation of investments 56,761
----------
TOTAL NET ASSETS $6,925,029
==========
Net Asset Value, offering and redemption
price per share ($6,925,029 / 678,644
shares outstanding; 500,000,000 shares
authorized of $0.001 par value) $ 10.20
==========
STATEMENT OF OPERATIONS
For the Period Ended June 30, 1995 (Unaudited)*
Investment Income:
Interest income $ 14,298
Dividend income 1,638
----------
Total Investment Income 15,936
----------
Expenses:
Management fee 3,844
Amortization of organization costs 3,333
Legal and audit fees 3,200
Directors' fees 2,600
Registration and filing fees 2,500
Transfer agent fees 1,800
Custodian fees 1,500
Expenses assumed by manager (14,377)
----------
Total Expenses 4,400
----------
Net Investment Income 11,536
----------
Net Realized and Unrealized Gain/(Loss) on
Investments:
Net realized loss on investments sold (285)
Net unrealized appreciation of investments
during the period 56,761
----------
Net realized and unrealized gain on investments 56,476
----------
Net increase in net assets resulting from
operations $ 68,012
==========
----------
*The Fund commenced operations on May 1, 1995.
See notes to financial statements.
--------------------------------------------------------------------------------
54
<PAGE>
Gabelli Capital Asset Fund -- 5
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Period
Ended
6/30/95*
(Unaudited)
-----------
Net investment income $ 11,536
Net realized loss on investments (285)
Net unrealized appreciation of investments 56,761
-----------
Net increase in net assets resulting from operations 68,012
Net increase in net assets from Fund share
transactions 6,757,017
-----------
Net increase in Net Assets 6,825,029
NET ASSETS:
Beginning of period 100,000
-----------
End of period (including undistributed net
investment income of $11,536) $ 6,925,029
===========
----------
*The Fund commenced operations on May 1, 1995.
FINANCIAL HIGHLIGHTS
Per share amounts for a Fund share outstanding throughout the period.
Period
Ended
6/30/95*
(Unaudited)
-----------
Operating performance:
Net asset value, beginning of period $10.00
------
Net investment income (a) 0.02
Net realized and unrealized gain on investments 0.18
------
Total from investment operations 0.20
------
Net asset value, end of period $10.20
------
Total return** 2.0%
------
Ratios to average net assets/supplemental data:
Net assets, end of period $6,925
Ratio of net investment income to average
net assets 3.00%+
Ratio of operating expenses to average
net assets (b) 1.14%+
Portfolio turnover rate 0.0%
----------
* The Fund commenced operations on May 1, 1995.
** Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period. Total return for the period less than one year is not annualized.
+ Annualized.
(a) Net investment loss before expenses assumed by Manager for the period ended
June 30, 1995 was $(0.02).
(b) Operating expense ratio before expenses assumed by Manager for the period
ended June 30, 1995 was 4.89%.
See notes to financial statements.
--------------------------------------------------------------------------------
55
<PAGE>
Gabelli Capital Asset Fund -- 5
--------------------------------------------------------------------------------
Gabelli Capital Asset Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
1. -- Significant Accounting Policies
Gabelli Capital Asset Fund (the "Fund"), a series of The Gabelli Capital
Series Funds, Inc., (the "Company"), was organized on April 8, 1993 as a
Maryland corporation. The Fund is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). Shares of the Fund are available to the public only through the
purchase of certain variable annuity and variable life insurance contracts
issued by The Guardian Insurance & Annuity Company, Inc. The Fund commenced
operations on May 1, 1995. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
Security Valuation.
Portfolio securities which are traded only on a nationally recognized
securities exchange or in the over-the-counter market, which are National Market
System Securities, are valued at the last sale price as of the close of business
on the day the securities are being value or, lacking any sales, at the mean
between closing bid and asked prices. Portfolio securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, as determined by Gabelli Funds,
Inc. (the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at fair value, as determined in good faith by or
under the direction of the Board of Directors of the Company. Short-term
investments that mature in more than 60 days are valued at the highest bid price
obtained from a dealer maintaining an active market in that security. Short-term
investments that mature in 60 days or less are valued at amortized cost, unless
the Board of Directors determines that such valuation does not constitute fair
value.
Securities Transactions and Investment Income.
Securities transactions are accounted for on the trade date with realized
gain or loss on investments determined using specific identification as the cost
method. Interest income (including amortization of premium and discount) is
recorded as earned.
Dividends and Distributions to Shareholders.
Dividend income and dividends and distributions to shareholders are recorded
on the ex-dividend date. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
Provision for Income Taxes.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended. As a result, a
Federal income tax provision is not required.
Deferred Organization Expenses.
A total of $100,000 was incurred in connection with the organization of the
Fund. These costs were deferred and are being amortized on a straight-line basis
over a period of 60 months from the date the Fund commenced investment
operations.
--------------------------------------------------------------------------------
56
<PAGE>
Gabelli Capital Asset Fund -- 5
--------------------------------------------------------------------------------
2. -- Agreements with Affiliated Parties
Pursuant to a management agreement (the "Management Agreement"), Guardian
Investor Services Corporation (the "Manager") serves as the Fund's Manager. The
Management Agreement provides that the Fund will pay the Manager a fee, computed
daily and paid monthly, at the annual rate of 1.00 percent of the value of the
Fund's average daily net assets. Pursuant to an Investment Advisory Agreement
among the Fund, the Manager and the Adviser, the Adviser, under the supervision
of the Company's Board of Directors and the Manager, manages the Fund's assets
in accordance with the Fund's investment objectives and policies, makes
investment decisions for the Fund, places purchase and sale orders on behalf of
the Fund, provides investment research and provides facilities and personnel
required for the Fund's administrative needs. The Adviser may delegate its
administrative role and currently has done so to the Sub-Administrator. The
Adviser will supervise the performance of administrative and professional
services provided by others and pays the compensation of the Sub-Administrator
and all officers and directors of the Fund who are its affiliates. As
compensation for its services and the related expenses borne by the Adviser, the
Manager pays the Adviser a fee, computed daily and paid monthly, at the annual
rate of 0.75 percent of the value of the Fund's average daily net assets. The
Manager has agreed to assume certain expenses of the Fund if such expenses
exceed a certain annual expense limitation. For the period ended June 30, 1995,
such expenses totaled $14,377.
3. -- Portfolio Securities
Cost of purchases of investment securities, excluding short-term investments,
aggregated $3,178,058 for the period ended June 30, 1995. For the same period
ended June 30, 1995, there were no sales of long-term investment securities.
4. -- Transactions with Affiliates
During the period ended June 30, 1995, the Fund paid brokerage commissions of
$275 to Gabelli & Company, Inc. and its affiliates.
5. -- Shares of Common Stock
Common stock transactions were as follows:
Period Ended
6/30/95*
---------------------------------
Shares Amount
----------- -----------
Sold 672,163 $ 6,792,327
Redeemed (3,519) (35,310)
----------- -----------
Net increase 668,644 $ 6,757,017
=========== ===========
* The Fund commenced operations on May 1, 1995.
--------------------------------------------------------------------------------
57
<PAGE>
Baillie Gifford International Fund -- 6
--------------------------------------------------------------------------------
Baillie Gifford International Fund
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
COMMON STOCKS -- 94.8%
Shares Value
--------------------------------------------------------------------------------
ARGENTINA -- 0.4%
Real Estate -- 0.4%
533,000 Comercial De Plata $ 1,322,104
-----------
AUSTRIA -- 0.9%
Banks -- 0.3%
13,940 Creditanstalt Bank 802,910
Business Services -- 0.3%
17,470 Flughafen Wien AG 929,103
Construction Materials -- 0.3%
2,520 Wienerberger Baust 967,639
-----------
2,699,652
-----------
AUSTRALIA -- 4.7%
Business Services -- 0.6%
200,000 Brambles Industries Ltd. 1,896,233
Electric Utilities -- 0.6%
566,582 Australia Gas & Light Co. 1,791,962
Forest Products -- 0.7%
277,929 Amcor Limited 2,050,393
Metals -- 0.5%
278,000 Western Mining Corp. 1,531,272
Petroleum Services -- 1.0%
245,707 Broken Hill Proprietary 3,024,624
Real Estate -- 0.7%
157,222 Lend Lease Corp. 2,009,134
Retail Trade -- 0.6%
866,665 Woolworths Ltd. 1,798,622
-----------
14,102,240
-----------
BELGIUM -- 1.5%
Banks -- 1.2%
11,050 Generale De Banque 3,550,481
Metals -- 0.3%
13,000 Union Miniere 850,032
-----------
4,400,513
-----------
BRAZIL -- 0.8%
Broadcasting -- 0.4%
36,000 Telecomunicados Brasileras 1,201,500
Energy -- 0.4%
54,567 Companhia Energetica De Minas 1,104,982
-----------
2,306,482
-----------
CHILE -- 0.5%
Electric Utilities -- 0.5%
50,000 Enersis SA 1,475,000
-----------
CZECHOSLOVAKIA -- 0.3%
Electric Utilities -- 0.3%
25,000 Ceska Energeticke Zavody 909,091
-----------
DENMARK -- 0.3%
Telephone -- 0.3%
17,150 Tele Danmark AS 954,277
-----------
FRANCE -- 5.5%
Bank -- 0.9%
21,850 Societe Generale 2,553,738
Chemicals -- 0.6%
75,500 Rhone Poulenc SA 1,701,018
Conglomerates -- 0.3%
4,090 CGIP 953,516
Containers and Glass -- 0.7%
18,270 Cie De St Gobain 2,206,877
Leisure Time -- 0.7%
20,000 Club Mediterranee 2,038,629
Oil-Integrated -- 0.9%
36,000 Societe Elf Aquitaine 2,660,318
Retail Trade -- 1.4%
5,000 Carrefour 2,561,169
10,700 Castorama Dubois 1,773,298
-----------
16,448,563
-----------
GERMANY -- 5.9%
Air Travel -- 0.8%
16,500 Lufthansa AG 2,386,290
Automobile -- 0.8%
8,500 Volkswagen AG 2,455,528
Banks -- 1.4%
90,000 Deutsche Bank AG 4,373,418
Building Construction -- 0.5%
2,600 Kampa Haus AG 1,573,650
Chemical -- 0.8%
10,610 BASF AG 2,266,392
Drugs and Health Care -- 0.7%
4,750 GEHE AG 2,164,618
Industrial Machinery -- 0.9%
10,000 Man AG 2,577,916
-----------
17,797,812
-----------
See notes to financial statements.
--------------------------------------------------------------------------------
58
<PAGE>
Baillie Gifford International Fund -- 6
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
HONG KONG -- 5.6%
Conglomerates -- 1.7%
600,000 Hutchison Whampoa $ 2,900,049
300,000 Swire Pacific 2,287,472
Electric Utilities -- 1.2%
864,000 Hong Kong and China Gas 1,378,997
700,000 Hong Kong Electric 2,379,229
Financial-Bank -- 1.2%
275,565 HSBC Holdings 3,534,574
Real Estate -- 0.8%
1,070,000 Amoy Properties 940,319
800,000 Hong Kong Land Holding 1,456,000
Telephone -- 0.7%
1,000,000 Hong Kong Telecommunications 1,977,306
-----------
16,853,946
-----------
HUNGARY -- 0.1%
Retail Trade -- 0.1%
235,000 Fotex 343,814
-----------
IRELAND -- 0.3%
Construction Materials -- 0.3%
143,000 CRH 957,234
-----------
ITALY -- 2.6%
Automobiles -- 0.9%
747,300 Fiat Spa 2,635,245
Insurance -- 0.5%
288,000 RAS 1,689,278
Telephone -- 1.2%
1,350,000 Telecom Italia 3,659,129
-----------
7,983,652
-----------
JAPAN -- 27.7%
Automobiles -- 1.6%
287,000 Calsonic Corp. 1,953,855
272,000 Suzuki Motor Corp. 3,032,741
Banks -- 0.9%
140,000 Sanwa Bank 2,642,912
Business Services -- 1.9%
295,000 Kamigumi Co. 2,958,528
44,000 Secom Co. 2,767,034
Drugs and Health Care -- 1.3%
88,000 Sankyo Co. 2,045,425
66,000 Santen Pharmaceutical Co. 1,759,896
Electrical Equipment -- 1.2%
354,000 Hitachi Corp. 3,529,349
Electronics -- 4.4%
171,000 Aiwa Co. 4,136,039
66,000 Kyocera Corp. 5,435,432
98,000 Murata Manufacturing Co. 3,711,640
Financial Services -- 1.2%
100,000 Japan Securities Finance 1,120,878
57,480 Promise Co. 2,400,793
Homebuilders -- 0.8%
185,000 Sekusui House 2,291,900
Industrial Machinery -- 1.9%
250,000 Amada Co. 2,138,517
520,000 Mitsubishi Heavy Ind. 3,533,951
Insurance -- 0.9%
232,000 Tokio Marine & Fire Ins. 2,660,657
Investment Companies -- 1.0%
171,000 Nomura Securities Co. 2,986,019
Leisure Time -- 0.8%
15,000 Toho Co. 2,495,428
Photography -- 1.9%
222,000 Canon, Inc. 3,614,654
85,000 Fuji Photo Film Co. 2,015,810
Real Estate -- 1.1%
300,000 Mitsubishi Estate 3,380,332
Retail Grocery -- 0.9%
38,000 Seven Eleven Japan 2,721,491
Retail Trade -- 2.1%
42,000 Ito Yokado Co. 2,215,091
180,000 Marui Co. 2,867,087
54,000 Shimachu Co. 1,369,831
Steel -- 1.3%
200,000 Hitachi Metals 2,244,115
700,000 Sumitomo Metal Ind. 1,825,261
Telecommunication -- 1.4%
540 DDI Corp. 4,332,488
Tires and Rubber -- 1.1%
230,000 Bridgestone Corp. 3,392,130
-----------
83,579,284
-----------
MALAYSIA -- 2.7%*
Conglomerates -- 0.7%
780,000 Sime Darby Berhad 2,175,554
See notes to financial statements.
--------------------------------------------------------------------------------
59
<PAGE>
Baillie Gifford International Fund -- 6
--------------------------------------------------------------------------------
Baillie Gifford International Fund
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
Shares Value
--------------------------------------------------------------------------------
Leisure Time -- 1.0%
528,000 Resorts World Berhad $ 3,096,965
Telephone -- 1.0%
400,000 Telekom Malaysia 3,035,275
-----------
8,307,794
-----------
MEXICO -- 0.9%
Building and Construction -- 0.1%
11,100 Tolmex 433,274
Beverage -- 0.5%
44,500 Pan American Beverage 1,335,000
Telephone -- 0.3%
29,500 Telefonos de Mexico SA 873,938
-----------
2,642,212
-----------
NETHERLANDS -- 2.9%
Banks -- 0.8%
60,000 ABN Amro Holdings NV 2,315,586
Household Appliances -- 1.5%
110,000 Philip Electronics NV 4,656,986
Publishing -- 0.6%
14,800 Ver Ned Uitgevers 1,771,797
-----------
8,744,369
-----------
NEW ZEALAND -- 0.6%
Telecommunication -- 0.6%
515,000 Telecom Corp. of New Zealand 1,928,065
-----------
POLAND -- 0.3%
Engineering -- 0.3%
235,000 Elektrim 828,172
-----------
SINGAPORE -- 3.3%
Air Travel -- 0.8%
245,000 Singapore Airlines 2,261,539
Banks -- 1.1%
303,333 Overseas Chinese Bank 3,364,337
Industrial Machinery -- 0.6%
310,000 Sembawang Corp. 1,885,510
Publishing -- 0.8%
156,000 Singapore Press HD 2,333,023
-----------
9,844,409
-----------
SPAIN -- 1.0%
Banks -- 1.0%
75,000 Banco Santander SA 2,956,656
-----------
SWEDEN -- 1.8%
Business Services -- 0.6%
53,500 Securitas AB 1,854,190
Construction & Mining Equipment -- 1.2%
110,000 Atlas Copco AB 1,527,967
48,150 Incentive AB 1,940,277
-----------
5,322,434
-----------
SWITZERLAND -- 4.5%
Business Services -- 0.3%
1,000 Danzas Holding 859,748
Drugs and Healthcare -- 1.1%
4,846 Sandoz AG 3,341,488
Food Producer -- 1.4%
4,000 Nestle SA 4,165,002
Industrial Machinery -- 0.3%
645 Bobst AG 980,242
Insurance -- 1.4%
13,600 Winterthur 4,134,920
-----------
13,481,400
-----------
THAILAND -- 0.6%
Financial Services -- 0.6%
750,000 Ind. Fin. Thailand 1,974,884
-----------
UNITED KINGDOM -- 19.1%
Banks -- 1.2%
164,500 National Westminster Bk. Co. 1,429,923
285,000 Abbey National Bank 2,121,521
Business Services -- 1.8%
130,000 Associated British Ports 578,972
316,000 BAA 2,480,452
272,000 Reuters Holdings 2,264,864
Chemicals -- 0.5%
690,000 Allied Colloids 1,355,416
Conglomerates -- 2.4%
653,658 BTR 3,281,553
297,000 Hanson 1,036,925
150,000 Hays 751,551
205,000 Siebe 2,050,978
Containers and Glass -- 0.3%
280,000 Caradon PLC 1,051,058
Construction and Mining Equipment -- 0.5%
210,000 Scapa Group 776,603
See notes to financial statements.
--------------------------------------------------------------------------------
60
<PAGE>
Baillie Gifford International Fund -- 6
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
170,000 Weir Group $ 686,814
Drugs and Healthcare -- 1.1%
270,000 Glaxo Holdings 3,313,266
Electric Utilities -- 1.0%
167,000 National Power Co. 1,183,370
162,800 Yorkshire Electric Group 1,786,735
Electronics -- 0.8%
155,000 Electrocomponents 1,479,243
340,000 Rotork 886,910
Food, Beverage and Tobacco -- 2.8%
320,000 Guinness 2,407,508
160,000 Highland Distilleries 890,727
300,000 Iceland Group 858,915
170,000 Reckitt and Colman 1,798,155
250,000 Rothmans Int'l. NV 2,449,499
Household Products -- 0.1%
220,000 Life Sciences International 423,413
Insurance -- 0.9%
70,000 Britannic Assurance 609,034
400,000 Prudential Corp. 2,125,020
International Oil -- 1.5%
385,000 Shell Transport and Trading 4,601,996
Leisure Time -- 1.1%
270,000 Granada Group 2,619,691
80,000 Vendome Lux Group SA 601,877
Miscellaneous -- 0.6%
190,000 Devro International 670,908
500,000 Firstbus 1,137,267
Newspapers -- 0.2%
250,000 Mirror Group PLC 528,869
Retail-Grocery -- 0.8%
338,000 Sainsbury (J) 2,373,580
Retail Trade -- 0.8%
120,000 Fine Arts Developments 750,119
300,000 Marks & Spencer 1,927,788
Telephone -- 0.7%
600,000 Vodafone Group 2,228,408
-----------
57,518,928
-----------
TOTAL COMMON STOCKS
(Cost $260,539,315) 285,682,987
-----------
REPURCHASE AGREEMENT -- 3.3%
Principal
Amount Value
--------------------------------------------------------------------------------
$9,800,000 State Street Bank & Trust repurchase
agreement, dated 6/30/95, maturity
value $9,804,492 at 5.50%
due 7/3/95 (collateralized by
$7,610,000 U.S. Treasury Bonds,
9.25% due 2/15/16) $ 9,800,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $9,800,000) 9,800,000
------------
TOTAL INVESTMENTS -- 98.1%
(Cost $270,339,315) 295,482,987
CASH, RECEIVABLES AND
OTHER ASSETS LESS
PAYABLES -- 1.9% 5,720,073
------------
NET ASSETS -- 100.0% $301,203,060
------------
See notes to financial statements.
--------------------------------------------------------------------------------
61
<PAGE>
Baillie Gifford International Fund -- 6
--------------------------------------------------------------------------------
Baillie Gifford International Fund
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995 (Unaudited)
ASSETS:
Investments, at identified cost* $270,339,315
============
Investments, at market 285,682,987
Repurchase agreements 9,800,000
------------
TOTAL INVESTMENTS 295,482,987
Cash 4,497
Foreign currency (Cost $4,611,557) 4,655,816
Dividends receivable 1,133,558
Foreign tax receivable 521,737
Receivable for fund shares sold 220,902
Receivable for securities sold 141,213
Receivable for open forward foreign currency
sold 138,789
Interest receivable 7,491
Deferred organization expenses -- Note C 3,510
Other assets 1,756
------------
TOTAL ASSETS 302,312,256
------------
LIABILITIES:
Foreign tax withholding 177,315
Payable for fund shares redeemed 104,527
Accrued expenses 91,199
Due to affiliates -- Note 2 736,155
------------
TOTAL LIABILITIES 1,109,196
------------
NET ASSETS $301,203,060
============
COMPONENTS OF NET ASSETS
Capital stock -- $0.10 par value
(1,000,000,000 shares authorized) $ 2,042,466
Paid-in capital 279,140,020
Undistributed net investment income 2,122,579
Accumulated net realized (loss) on
investments and foreign currency (7,482,498)
Net unrealized appreciation of
investments and foreign currency related
transactions 25,380,493
------------
NET ASSETS $301,203,060
============
SHARES OUTSTANDING 20,424,659
------------
NET ASSET VALUE PER SHARE $ 14.75
============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
For The Six Months Ended
June 30, 1995 (Unaudited)
Investment Income:
Income
Dividends $ 3,915,918
Interest 264,706
------------
4,180,624
Less: Foreign tax withheld 521,456
------------
Total Income 3,659,168
------------
Expenses:
Investment advisory fees -- Note B 1,186,467
Custodian fees 237,412
Audit fees 10,000
Deferrred organization expense -- Note C 3,879
Directors' fees-- Note B 3,375
Printing expense 2,750
Insurance expense 1,757
Transfer agent fees 1,650
Legal fees 1,429
Registration fees 465
Other 360
------------
Total Expenses 1,449,544
------------
Net Investment Income 2,209,624
============
Realized and Unrealized Gain/(Loss) On
Investments and Currencies -- Note D
Net realized (loss) on investments and foreign
currency related transaction -- Note A (6,186,633)
Net change in unrealized appreciation of
investments and foreign currency related
transactions -- Note D 5,020,918
------------
Net Realized and Unrealized (Loss) on
Investments and Foreign Currencies (1,165,715)
------------
Net Increase in Net Assets
Resulting from Operations $ 1,043,909
============
See notes to financial statements.
--------------------------------------------------------------------------------
62
<PAGE>
Baillie Gifford International Fund -- 6
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1995 December 31,
(Unaudited) 1994
----------- -----------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 2,209,624 $ 2,880,417
Net realized gain/(loss) on investments and foreign currency related transactions (6,186,633) 2,289,267
Net change in unrealized appreciation/(depreciation) on investments and foreign
currency related transactions 5,020,918 (6,484,115)
------------ ------------
Net Increase/(Decrease) in Net Assets from Operations 1,043,909 (1,314,431)
------------ ------------
Distributions to Shareholders:
Net investment income -- (2,504,843)
------------ ------------
Total Distributions to Shareholders -- (2,504,843)
------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in assets from capital share transactions -- Note F (2,890,718) 120,074,014
------------ ------------
Net Increase/(Decrease) in Net Assets (1,846,809) 116,254,740
Net Assets:
Beginning of period 303,049,869 186,795,129
------------ ------------
End of period* $301,203,060 $303,049,869
============ ============
* Includes undistributed net investment income of: $ 2,122,579 $ 250,232
</TABLE>
See notes to financial statements.
--------------------------------------------------------------------------------
63
<PAGE>
Baillie Gifford International Fund -- 6
--------------------------------------------------------------------------------
Baillie Gifford International Fund
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months February 8,
Ended 1991** to
June 30, 1995 Year Ended December 31, December 31,
(Unaudited) 1994 1993 1992 1991
------------ -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................................ $ 14.69 $ 14.69 $ 11.16 $ 12.37 $ 10.00
-------- -------- -------- ------- -------
Income from Investment Operations
Net investment income ......................................... 0.09 0.15 0.23 0.09 0.04
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions ................. (0.03) (0.02) 3.54 (1.20) 2.52
-------- -------- -------- ------- -------
Net increase/(decrease) from investment operations ............ 0.06 0.13 3.77 (1.11) 2.56
-------- -------- -------- ------- -------
Distributions to Shareholders
Dividends from net investment income .......................... -- (0.13) (0.24) (0.10) (0.04)
Distributions from net realized gain on investments and
foreign currency related transactions ..................... -- -- -- -- (0.13)
-------- -------- -------- ------- -------
Total distributions ........................................... -- (0.13) (0.24) (0.10) (0.19)
-------- -------- -------- ------- -------
Net asset value, end of period ...................................... $ 14.75 $ 14.69 $ 14.69 $ 11.16 $ 12.37
======== ======== ======== ======= =======
Total return+ ....................................................... 0.41% 0.87% 34.04% (8.90%) 8.56%
======== ======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000's omitted) ..................... $301,203 $303,050 $186,795 $55,175 $36,012
Ratio of expenses to average net assets ....................... 0.98%* 1.03% 1.11% 1.26% 1.67%*
Ratio of net investment income to average net assets .......... 1.49%* 1.11% 1.75% 0.88% 0.61%*
Portfolio turnover rate ....................................... 22% 27% 18% 44% 14%
</TABLE>
----------
* Ratios are annualized.
** Commencement of operations.
+ Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
See notes to financial statements.
--------------------------------------------------------------------------------
64
<PAGE>
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65
<PAGE>
Baille Gifford Emerging Markets - 7
--------------------------------------------------------------------------------
Baille Gifford Emerging Markets Fund
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
COMMON STOCKS -- 84.3%
Shares Value
--------------------------------------------------------------------------------
ARGENTINA -- 8.3%
Automobile -- 0.3%
19,800 Ciades SA $ 96,049
Banks -- 0.6%
15,000 BCO Frances Rio PL 90,018
5,300 Banco Frances Del Rio La Plata 95,400
Conglomerates -- 1.5%
33,040 Compania Naviera Perez SA 277,622
22,800 Dycasa 47,890
42,500 Juna Minetti 131,776
Electric Utilities -- 1.4%
11,400 Capex SA 175,275
7,900 Central Costanera SA 252,800
Industrial Machinery -- 0.3%
5,000 Quilmes Industrial 97,500
Oil Transport -- 1.5%
45,000 Transportadora De Gas Del Sur 472,500
Real Estate -- 1.2%
147,600 Commercial De Plata 366,121
Telecommunications -- 0.7%
28,900 Telecom Argentina 131,521
2,150 Telecom Argentina Stet France 97,825
Telephone -- 0.8%
9,500 Telefonica De Argentina 235,125
---------
2,567,422
---------
BRAZIL -- 4.4%
Broadcasting -- 1.1%
5,900,000 Telebras 167,290
5,100 Telecomunicacoes Brasileras 170,213
Food, Beverage and Tobacco -- 0.8%
50,000 Santista Alimentos 38,023
26,000 Souza Cruz 196,306
Retail Trade -- 0.5%
7,250,000 Lojas Americanas 161,461
Steel -- 0.8%
15,300 Usinas Siderurgicas De Minas 171,051
7,000 Usiminas USI SD MG 78,750
Telephone -- 0.5%
1,335,000 Telesp Tel Sao Paolo 169,685
Other Services -- 0.7%
9,000,000 Sider Nacional CIA 205,225
----------
1,358,004
----------
CHILE -- 2.9%
Construction Material -- 0.2%
3,800 Maderas y Sinteticos Sociedad 71,250
Electric Utilities -- 0.7%
4,200 Enersis SA 123,900
4,100 Empresa Nacional De Electricidad 108,650
Investment Companies -- 2.0%
4,000 GT Chile Growth Fund 155,000
12,500 Genesis Chile Fund 456,250
----------
915,050
----------
CHINA -- 1.2%
Automobile -- 0.3%
6,500 Ek Chor China Motorcycle Co. 104,813
Container and Glass -- 0.3%
75,000 Yaohua Pilkington Glass Co. 75,000
Electrical Equipment -- 0.3%
120,000 Shanghai Shangling 99,600
Tire and Rubber -- 0.3%
8,000 China Tire Holdings Ltd. 85,000
----------
364,413
----------
COLOMBIA -- 0.9%
Construction Material -- 0.5%
6,700 Cementos Diamante 138,518
Retailer -- 0.4%
6,600 Cadenalco Gran Cad 125,821
----------
264,339
----------
CZECHOSLOVAKIA -- 1.4%
Construction Company -- 0.7%
2,500 IPS Praha 203,095
Electric Utilities -- 0.4%
3,800 Ceska Energeticke Zavody 138,182
Food, Beverage and Tobacco -- 0.2%
850 Praske Pivorary 44,390
Plastic -- 0.1%
1,400 Fatra 35,420
----------
421,087
----------
HONG KONG -- 15.3%
Bank -- 0.8%
19,000 HSBC Holdings 243,706
See notes to financial statements.
--------------------------------------------------------------------------------
66
<PAGE>
Baille Gifford Emerging Markets - 7
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Conglomerates -- 3.2%
276,000 China Strategic Holding Ltd. $ 105,224
130,000 Hutchison Whampoa 628,344
36,000 Swire Pacific 274,497
Containers and Glass -- 0.4%
400,000 Sinocan Holdings 113,727
Construction and Mining Equipments -- 0.9%
900,000 CNT Group Ltd. 61,645
120,000 Varitronix Int'l. 210,137
Electrical Equipment -- 0.5%
80,000 Johnson Electrical Holdings 161,286
Electric Utilities -- 1.6%
48,000 China Light and Power 246,892
156,000 Hong Kong and China Gas 248,986
Industrial Machinery -- 0.9%
260,000 Chen Hsong Holdings 165,486
500,000 Lung Kee (Bermuda) 116,312
Leisure Time -- 0.5%
150,000 Mandarin Oriental 150,000
Publishing -- 0.3%
210,000 Oriental Press Group 84,811
Real Estate -- 2.2%
160,000 Amoy Properties 140,608
125,000 Hong Kong Land Holdings 227,500
42,000 Sun Hung Kai Props. 310,747
Retail Trade -- 1.9%
800,000 Esprit Asia 307,581
800,000 Pokphand (CP) Co. 281,734
Telephone -- 1.9%
304,800 Hong Kong Telecommunications 602,683
Transportation -- 0.2%
130,000 China Merchant Shekou 70,563
----------
4,752,469
----------
HUNGARY -- 2.9%
Chemicals -- 0.5%
9,000 Chemical Works of Gedeon Richter 146,250
Conglomerates -- 0.6%
9,082 Zalakeramia 179,392
Food -- 0.6%
3,500 Pick Szeged RT 187,827
Lodging -- 0.6%
21,600 Danubius Hotel 210,809
Plastic -- 0.4%
11,400 Pannonplast 115,896
Retail Trade -- 0.2%
42,000 Fotex 60,803
----------
900,977
----------
INDIA -- 1.7%
Automobile -- 0.2%
2,000 Bajaj Auto 56,000
Construction -- 0.3%
5,500 Larsen & Toubro Ltd. 108,625
Drugs and Healthcare -- 0.1%
10,000 Core Health Care 47,500
Electric Utilities -- 0.3%
10,000 CESC 47,500
8,000 ITC Ltd. 59,040
Industrial Machinery -- 0.2%
23,000 NEPC Micon 52,325
Lodging -- 0.3%
5,000 The Indian Hotels Co. 80,650
Metals -- 0.3%
8,000 Indian Aluminum 85,040
----------
536,680
----------
INDONESIA -- 1.6%
Bank -- 0.3%
30,000 Bank International Indonesia 92,614
Household Products -- 0.3%
6,000 Unilever Indonesia 88,909
Photography -- 0.4%
20,000 Modern Photo Film 108,666
Telephone -- 0.6%
5,200 Perusahaan Per Per Ind. Sat Corp. 198,900
----------
489,089
----------
KOREA -- 4.3%
Electrical Equipment -- 1.0%
6,000 Samsung Elect. Co. 318,750
Electric Utility -- 1.4%
20,000 Korea Electric Power Corp. 452,500
See notes to financial statements.
--------------------------------------------------------------------------------
67
<PAGE>
Baille Gifford Emerging Markets - 7
--------------------------------------------------------------------------------
Baille Gifford Emerging Markets Fund
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
Shares Value
--------------------------------------------------------------------------------
Investment Company -- 1.2%
100 Korea Europe Fund $ 368,750
Steel -- 0.7%
7,000 Pohang Iron & Steel Co. 206,500
----------
1,346,500
----------
MALAYSIA -- 7.1%
Container -- 0.4%
52,000 Kelang Container Terminal 136,505
Conglomerates -- 0.6%
72,000 Sime Darby Berhad 200,820
Engineering -- 0.9%
45,000 United Engineers Berhad 286,095
Food, Beverage and Tobacco -- 1.4%
20,000 Nestle Malay Berhad 153,404
130,000 R.J. Reynolds Berhad 249,549
Leisure Time -- 1.7%
90,000 Resorts World Berhad 527,892
Metals and Mining -- 0.9%
50,000 Maruichi Malay Steel 185,603
26,000 IJM Corp. Berhad 103,446
Retail Trade -- 0.6%
19,000 Edaran Otomobil 185,480
Telephone -- 0.6%
24,000 Telekom Malaysia 182,117
----------
2,210,911
----------
MEXICO -- 4.3%
Conglomerates -- 0.9%
13,500 Alfa SA 163,944
10,000 DESC SA De CV 128,750
Financial Services -- 1.4%
19,700 GPO Fin. Banamex AC 29,818
13,000 Grupo Carso SA De CV 142,039
4,259 Grupo Financiero Bancomer 1,124
5,750 Grupo Financiero Bancomer Ser. "C" 33,114
6,050 Tolmex 236,154
Food and Beverages -- 0.6%
5,600 Pan American Beverage 168,000
Metals -- 0.3%
10,000 Grupo Simec SA De CV 98,750
Retail Trade -- 0.2%
50,000 Organiz Soriana 57,440
Telephone -- 0.9%
9,600 Telefonos De Mexico SA 284,400
----------
1,343,533
----------
PERU -- 1.9%
Building Materials -- 0.3%
5,848 Cementos Lima 95,166
Food, Beverage and Tobacco -- 0.3%
42,300 Backus & Johnston 100,022
Metals -- 0.6%
36,698 Southern Peru Copper 166,622
1,347 Southern Peru Copper Ser. 2 4,270
Telephone -- 0.7%
123,569 CPT Telefonica Del Peru 211,087
----------
577,167
----------
PHILIPPINES -- 2.6%
Bank -- 0.3%
8,000 Philippine National Bank 93,187
Brewing and Distilling -- 1.3%
99,000 San Miguel Corp. 410,885
Telephone -- 1.0%
4,000 Philippine Long Distance Tel. Co. 287,000
----------
791,072
----------
POLAND -- 3.1%
Bank -- 0.4%
8,700 Bre BK Rozwoju Eks 139,364
Construction Materials -- 0.9%
26,300 Polifarb 144,925
40,000 Polifarb Wroclaw 127,296
Electric Utility -- 0.5%
40,000 Elektrim 140,965
Food, Beverage and Tobacco -- 0.8%
10,700 Agros 137,121
1,600 Zywiec 120,974
Pharmaceuticals -- 0.5%
10,700 Jelfa 155,861
----------
966,506
----------
SINGAPORE -- 5.4%
Air Travel -- 0.8%
27,000 Singapore Airlines 249,231
Automobile -- 0.5%
17,000 Cycle and Carriage 152,057
See notes to financial statements.
--------------------------------------------------------------------------------
68
<PAGE>
Baille Gifford Emerging Markets - 7
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Bank -- 0.6%
18,000 Overseas Chinese Bank $ 199,642
Construction Equipment -- 0.3%
48,000 Clipsal Industries Ltd. 110,880
Food and Beverages -- 0.6%
16,000 Fraser & Neave 184,329
Industrial Machinery -- 0.5%
26,000 Sembawang Corp. 158,140
Publishing -- 0.9%
18,000 Singapore Press HD 269,195
Real Estate -- 0.7%
66,000 DBS Land 206,855
Retailer -- 0.5%
105,000 Courts Singapore 156,279
----------
1,686,608
----------
SOUTH AFRICA -- 8.8%
Bank -- 1.9%
40,000 First National Bank 255,754
6,500 Nedcor 323,375
Brewing and Distilling -- 0.9%
10,000 South Africa Brews 285,317
Diversified Industrials -- 1.7%
26,000 Barlow Ltd. 266,342
49,000 Smith (C.G.) 259,398
Gas Distribution -- 0.9%
30,465 Sasol 291,974
Insurance -- 0.9%
3,700 Liberty Holdings 264,555
Mining -- 1.7%
10,000 De Beers Cons. Mines 261,255
80,000 Gencor 275,005
Tobacco -- 0.8%
35,000 Rembrandt Group 240,629
----------
2,723,604
----------
TAIWAN -- 1.4%
Real Estate -- 1.4%
40,000 ROC Taiwan Fd. 440,000
----------
THAILAND -- 4.0%
Bank -- 1.3%
18,000 Bangkok Bank 198,339
20,000 Thai Farmers Bank 191,209
Construction Material -- 0.8%
4,000 Siam Cement Co. 255,378
Financial Services -- 0.8%
90,000 Ind. Fin. Thailand 236,986
Food, Beverage and Tobacco -- 0.3%
15,000 CP Feedmill Co. 91,148
Publishing -- 0.8%
8,000 Land and House 168,523
18,000 Matichon Public Co., Ltd. 92,607
----------
1,234,190
----------
TURKEY -- 0.4%
Electronics -- 0.4%
312,000 Raks Electronik 121,723
----------
UNITED KINGDOM -- 0.4%
Conglomerates -- 0.4%
25,200 Antofagasta Holdings 127,463
----------
TOTAL COMMON STOCKS
(Cost $33,016,738) 26,138,807
----------
PREFERRED STOCKS -- 6.7%
12,000,000 BCO Bradesco SA 101,684
640 Bardella SA Ind. 99,424
700,000 Brahma (CIA Cerveja) 229,650
425,000 Casa Anglo Bras SA 40,168
17,155,000 Cemig CIA Energ MG 335,459
4,400,000 CESP CIA Energ SP 173,993
8,400,000 Ceval Alimentos SA 95,818
370,000 Cimento Itau 108,528
97,000 Confab 71,657
570,000 Coteminas CIA TEC 179,576
1,400,000 Duratex SA 68,472
470,000 Electrobras (CENTR) 125,095
180,000 Multibras Eletrodo 148,810
1,530,000 Petrol Brasileiros 129,647
240,000 Sider Tubarao 178,208
----------
TOTAL PREFERRED STOCKS
(Cost $2,785,156) 2,086,189
----------
See notes to financial staements.
--------------------------------------------------------------------------------
69
<PAGE>
Baille Gifford Emerging Markets - 7
--------------------------------------------------------------------------------
Baille Gifford Emerging Markets Fund
SCHEDULE OF INVESTMENTS
June 30, 1995 (Unaudited)
REPURCHASE AGREEMENT -- 8.0%
Principal
Amount Value
--------------------------------------------------------------------------------
$2,475,000 State Street Bank & Trust repurchase
agreement, dated 6/30/95, maturity
value $2,475,980 at 4.75%
due 7/3/95 (collateralized by
$1,925,000 U.S. Treasury Bonds,
9.25% due 2/15/16) $ 2,475,000
REPURCHASE AGREEMENT
(Cost $2,475,000) 2,475,000
-----------
TOTAL INVESTMENTS -- 99.0%
(Cost $33,326,894) 30,699,996
-----------
CASH, RECEIVABLES AND
OTHER ASSETS LESS
PAYABLES -- 1.0% 320,738
-----------
NET ASSETS -- 100.0% $31,020,734
===========
See notes to financial statements.
--------------------------------------------------------------------------------
70
<PAGE>
Baille Gifford Emerging Markets - 7
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS
AND LIABILITIES
June 30, 1995 (Unaudited)
ASSETS:
Investments, at identified cost* $33,826,894
===========
Investments, at market 28,224,996
Repurchase agreement 2,475,000
-----------
TOTAL INVESTMENTS 30,699,996
Cash 10,526
Foreign currency (Cost $168,366) 167,148
Receivable for securities sold 494,465
Dividends receivable 79,482
Receivable for fund shares sold 39,731
Deferred organization expenses -- Note C 2,180
Interest receivable 327
Other assets 175
Foreign tax receivable 72
-----------
TOTAL ASSETS 31,494,102
-----------
LIABILITIES:
Payable for securities purchased 295,348
Accrued expenses 13,470
Foreign tax withholding 9,160
Payable for deferred organization
expense -- Note C 2,536
Due to affiliates -- Note B 152,854
-----------
TOTAL LIABILITIES 473,368
-----------
NET ASSETS $31,020,734
===========
COMPONENTS OF NET ASSETS
Capital stock -- $0.10 par value
(1,000,000,000 shares authorized) $ 369,492
Paid-in capital 34,162,489
Undistributed net investment income 147,088
Accumulated net realized (loss) on
investments and foreign currency (1,030,311)
Net unrealized (depreciation) of investments
and foreign currency related transactions (2,628,024)
-----------
NET ASSETS $31,020,734
===========
SHARES OUTSTANDING 3,694,919
-----------
NET ASSET VALUE PER SHARE $ 8.40
===========
STATEMENT OF OPERATIONS
For The Six Mpnths Ended
June 30, 1995 (Unaudited)
Investment Income:
Income
Dividends $ 330,653
Interest 87,196
------------
417,849
Less: Foreign tax withheld 28,449
------------
Total Income 389,400
------------
Expenses:
Investment advisory fees -- Note B 132,009
Custodian fees 73,048
Audit fees 10,000
Directors fees -- Note B 3,375
Printing expense 2,750
Legal fees 2,163
Transfer agent fees 1,650
Registration fees 1,370
Other 360
Deferrred organization expense -- Note C 252
Insurance expense 175
------------
Total Expenses 227,152
------------
Net Investment Income 162,248
============
Realized and Unrealized Gain/(Loss) On
Investments and Currencies -- Note D
Net realized (loss) on investments and foreign
currency related transaction -- Note A (988,394)
Net change in unrealized appreciation of
investments and foreign currency related
transactions -- Note D 370,282
------------
Net Realized and Unrealized (Loss) on
Investments and Foreign Currencies (618,112)
------------
Net (Decrease) in Net Assets
Resulting from Operations $ (455,864)
============
See notes to financial statements.
--------------------------------------------------------------------------------
71
<PAGE>
Baille Gifford Emerging Markets - 7
--------------------------------------------------------------------------------
Baille Gifford Emerging Markets Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months October 17,
Ended 1994** to
June 30, 1995 December 31,
(Unaudited) 1994
------------ ------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 162,248 $ 42,225
Net realized (loss) on investments and foreign currency related transactions (988,394) (75,276)
Net change in unrealized appreciation/(depreciation) on investments and foreign
related transactions 370,282 (2,998,306)
------------ ------------
Net (Decrease) in Net Assets from Operations (455,864) (3,031,357)
------------ ------------
Distributions to Shareholders:
Net investment income -- (24,026)
Distribution in excess of net investment income -- --
Net realized gain on investments and foreign currency related transactions -- --
------------ ------------
Total Distributions to Shareholders -- (24,026)
------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in assets from capital share transactions -- Note F 7,407,698 27,124,283
------------ ------------
Net Increase in Net Assets 6,951,834 24,068,900
Net Assets:
Beginning of period 24,068,900 --
------------ ------------
End of period* $ 31,020,734 $ 24,068,900
============ ============
* Includes undistributed net investment income of: $ 147,088 $ 18,199
** Commencement of public offering of the Fund's shares
</TABLE>
See notes to financial statements.
--------------------------------------------------------------------------------
72
<PAGE>
Baille Gifford Emerging Markets - 7
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months October 17,
Ended 1994** to
June 30, 1995 December 31,
(Unaudited) 1994
---------- ----------
<S> <C> <C>
Net asset value, beginning of period .............................. $ 8.68 $ 9.87
-------- --------
Income from Investment Operations
Net investment income ........................................... 0.05 (0.01)
Net realized and unrealized loss on investments and
foreign currency related transactions .......................... (0.33) (1.17)
-------- --------
Net decrease from investment operations ......................... (0.28) (1.18)
-------- --------
Distributions to Shareholders
Dividends from net investment income ............................ -- (0.01)
-------- --------
Total distributions ............................................. -- (0.01)
-------- --------
Net asset value, end of period .................................... $ 8.40 $ 8.68
======== ========
Total return+ ..................................................... (3.23)% (11.97)%
======== ========
Ratios/supplemental data:
Net assets, end of period (000's omitted) ..................... $ 31,021 $24,069
Ratio of expenses to average net assets ....................... 1.76%* 2.28%*
Ratio of net investment income to average net assets........... 1.23%* 0.94%*
Portfolio turnover rate ....................................... 30% --
</TABLE>
------------
+ Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all the periods shown.
* Ratios are annualized.
** Commencement of public offering of the Fund's shares.
See notes to financial statements.
--------------------------------------------------------------------------------
73
<PAGE>
GBG Funds -- 7
--------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
Note A -- Organization and Accounting Policies
GBG Funds, Inc. (the Company) is a diversified open-end management
investment company registered under the Investment Company Act of 1940, as
amended (1940 Act). The Company, which was incorporated in Maryland on October
29, 1990, was formerly known as Baillie Gifford International Fund, Inc. Shares
of the Company are offered in two series: Baillie Gifford International Fund
(BGIF) and Baillie Gifford Emerging Markets Fund (BGEMF). The series are
collectively referred to herein as the "Funds." Shares of the Funds are only
sold to certain separate accounts of The Guardian Insurance and Annuity Company,
Inc. (GIAC). GIAC is a wholly owned subsidiary of The Guardian Life Insurance
Company of America. The Funds are available for investment only through the
allocation of contract values under certain variable annuity and variable life
insurance contracts issued by GIAC. Upon commencing its operations on September
13, 1994, BGEMF sold 2,000,000 shares of its capital stock to The Guardian Life
Insurance Company of America for $20,000,000 to facilitate the commencement of
operations.
Valuation of Investments
Investments are carried at value. Securities listed on foreign exchanges
and for which market quotations are readily available are valued at the closing
price on the exchange on which the securities are traded at the close of the
appropriate exchange or, if there have been no sales during the day, at the mean
of the closing bid and asked prices. Securities traded in the over-the-counter
market are valued at the mean between the bid and asked prices. Securities
listed or traded on any domestic (U.S.) exchanges are valued at the last sale
price or, if there have been no sales during the day, at the mean of the closing
bid and asked prices. Securities for which market quotations are not readily
available, including restricted securities and illiquid assets, are valued at
fair value as determined in good faith by or under the direction of the
Company's Board of Directors. Investing outside of the U.S. may involve certain
considerations and risks not typically associated with domestic investments
including: the possibility of political and economic unrest and different levels
of governmental supervision and regulation of foreign securities markets.
Repurchase agreements are carried at cost which approximates market value
(See note E).
Foreign Currency Translation
The books and records of the Funds 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.
It is not the practice of the Funds to identify that portion of the results of
operations that arise as a result of changes in the exchange rates from
fluctuations that arise from changes in the market price during or at the end of
a reporting period except as noted below.
Realized foreign exchange gains and losses, which result from changes in
foreign exchange rates between the date on which the Funds earn dividends and
interest or pay foreign withholding taxes or other expenses and the date on
which U.S. dollar equivalent amounts are actually received or paid, are included
--------------------------------------------------------------------------------
74
<PAGE>
GBG Funds -- 7
--------------------------------------------------------------------------------
in net realized gain on foreign currency related transactions. 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 loss on foreign currency related transactions. Net
currency gains and losses from valuing investments and other assets and
liabilities denominated in foreign currency at the period end exchange rate are
reflected in net change in unrealized appreciation or depreciation on foreign
currency related transactions.
Forward Foreign Currency Contracts
The Funds 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 securities denominated in a
particular currency. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Fluctuations in the value of forward foreign currency exchange contracts
are recorded for book purposes as unrealized gains or losses on foreign currency
related transactions by the Funds. When forward contracts are closed, the Funds
record realized gains or losses equal to the differences between the values of
such forward contracts at the time each was opened and the value at the time
each was closed. Such amounts are recorded in net realized gain or loss on
foreign currency related transactions. Neither Fund will enter into a forward
foreign currency contract if such contract would obligate the Fund to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency.
Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Net realized gains
or losses on sales of investments are determined on the basis of identified
cost. Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
Taxes
Each Fund intends to qualify to be taxed as a "regulated investment
company" under the provisions of the U.S. Internal Revenue Code of 1986, as
amended (Code), and as such will not be subject to federal income tax on income
(including any realized capital gains) which is distributed in accordance with
the provisions of the Code to its shareholders. Therefore, no federal income tax
provision is required. Security transactions after October 31 are treated as
arising on the first day of the Funds' next fiscal year.
Investment income received from investments in foreign currencies may be
subject to foreign withholding tax. Whenever possible, the Fund will attempt to
operate so as to qualify for reduced tax rates or tax exemptions in those
countries with which the United States has a tax treaty.
Dividends and Distributions to Shareholders
The Funds intend to distribute each year, as dividends, substantially all
net investment income and net capital gains realized. All such dividends or
distributions are credited in the form of additional shares of the Funds at net
asset value on the ex-dividend date. Such distributions are determined in
conformity with federal income tax regulations. Differences between the
recognition of income on an income tax basis and recognition of income based on
generally accepted accounting principles may cause temporary overdistributions
of net realized gains and net investment income. Currently, the Funds' policy is
--------------------------------------------------------------------------------
75
<PAGE>
GBG Funds -- 7
--------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
to distribute net investment income approximately every six months and net
capital gains once a year. This policy is, however, subject to change at any
time by the Company's Board of Directors.
Reclassifications of Capital Accounts
In accordance with recently approved accounting pronouncements, the Funds
have recorded reclassifications in the capital accounts. These reclassifications
have no impact on the net asset value of the Funds and are designed generally to
present undistributed income and gains or accumulated losses on a tax basis
which is considered to be more informative to the shareholder. During the year
ended December 31, 1994, BGIF and BGEMF reclassified ($322,462) and ($13,799),
respectively, to paid-in capital from accumulated net realized gains/(losses) to
reflect permanent differences between income recognition on a tax basis and a
GAAP basis. In addition, amounts distributed for tax purposes in excess of net
investment income in 1993 for BGIF have been recorded as a temporary
overdistribution of net investment income in the Statement of Changes in Net
Assets. These amounts reflect the effect of temporary differences in the
computation of net investment income for financial reporting and tax purposes.
Note B -- Investment Management Agreements
and Payments to Related Parties
The Company has investment management agreements with Guardian Baillie
Gifford Ltd. (GBG), a Scottish corporation formed through a joint venture
between GIAC and Baillie Gifford Overseas Ltd. (BG Overseas). GBG is responsible
for the overall investment management of the Funds' portfolios subject to the
supervision of the Company's Board of Directors. GBG has entered into
sub-investment management agreements with BG Overseas pursuant to which BG
Overseas is responsible for the day-to-day management of the Funds' portfolios.
GBG continually monitors and evaluates the performance of BG Overseas.
As compensation for its services, GBG receives a management fee computed at
the rate of .80% of BGIF's daily average net assets and 1.00% of BGEMF's daily
average net assets. One-half of these fees (.40% relating to BGIF and .50%
relating to BGEMF) are payable by GBG to BG Overseas for its services. Payment
of the sub- management fees does not represent a separate or additional expense
to the Funds.
No compensation is paid by the Company to a director who is deemed to be an
"interested person" (as defined in the 1940 Act) of the Company. Each director
not deemed an "interested person" is paid an annual fee of $500 and $350 for
attendance at each meeting of the Company. The aggregate remunerations paid by
BGIF and BGEMF to the Company's disinterested directors amounted to $3,375, for
the six months ended June 30, 1995.
Note C -- Deferred Organization and Initial
Offering Expenses
BGIF incurred expenses of $39,110 in connection with its organization and
registration. These expenses were advanced by GIAC and were repaid by BGIF upon
completion of its first year of operations. BGEMF's expenses of $2,536 in
connection with its organization and registration were advanced by GIAC and will
be repaid when it has completed one year of operations or when net assets reach
$50 million, whichever comes first. These expenses have been deferred and are
--------------------------------------------------------------------------------
76
<PAGE>
GBG Funds -- 7
--------------------------------------------------------------------------------
being amortized on a straight-line basis over a five year period, beginning with
the commencement of BGIF's operations in February, 1991 and BGEMF's operations
in September, 1994.
Note D -- Investment Transactions
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1995 (Unaudited)
--------------------------------------------------
BGIF BGEMF
---- -----
<S> <C> <C>
Purchases
Stocks and debt obligations ............................... $ 60,239,544 $17,144,875
U.S. Government and government agency obligations ......... -- --
Proceeds
Stocks and debt obligations ............................... $ 67,535,162 $ 6,970,916
U.S. Government and government agency obligations ......... -- --
</TABLE>
The cost of investments owned at June 30, 1995 for federal income tax
purposes for BGIF and BGEMF are $270,339,315 and $33,826,894, respectively. The
gross unrealized appreciation and (depreciation) at June 30, 1995 were as
follows:
<TABLE>
<CAPTION>
BGIF BGEMF
---- -----
<S> <C> <C>
Gross Appreciation ........................................... $ 38,463,001 $ 1,720,066
Gross Depreciation ........................................... (13,082,508) (4,348,090)
------------ -----------
Net Unrealized Appreciation/(Depreciation) ............. $ 25,380,493 $(2,628,024)
============ ===========
</TABLE>
Forward foreign currency contracts represent commitments to purchase or sell
a specified amount of foreign currency at a future date and at a future price.
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.
At June 30, 1995, BGIF had open forward foreign currency contracts, as listed
below, with net unrealized gain of $138,789 which are included in net unrealized
appreciation/(depreciation).
--------------------------------------------------------------------------------
77
<PAGE>
GBG Funds -- 7
--------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (Unaudited)
Baillie Gifford International Fund:
<TABLE>
<CAPTION>
Unrealized
Type of Expiration Current Appreciation/
Currency Contract Date Cost Value (Depreciation)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australian Dollar Sell 07/05/95 $ 58,986 $ 58,675 $ 311
Deutsch Mark Sell 07/05/95 68,574 69,323 (749)
French Franc Sell 07/05/95 24,832 25,081 (249)
Hong Kong Dollar Sell 07/05/95 92,368 92,391 (23)
Japanese Yen Sell 07/05/95 58,666 59,113 (447)
Japanese Yen Sell 12/20/95 43,599,370 43,456,241 143,129
Malaysian Ringgit Sell 07/05/95 7,971 7,982 (11)
Pound Sterling Sell 07/05/95 352,195 354,554 (2,359)
Singapore Dollar Sell 07/05/95 47,483 47,517 (34)
Swedish Krona Sell 07/05/95 76,124 76,301 (177)
Swiss Franc Sell 07/05/95 73,068 73,670 (602)
---------
$ 138,789
=========
</TABLE>
Note E -- Repurchase Agreements
Collateral underlying 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 such collateral is
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 Funds 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 Funds maintain the right to sell the collateral and may
claim any resulting loss against the seller. The Company's Board of Directors
has established standards to evaluate the creditworthiness of broker-dealers and
banks which engage in repurchase agreements with the Funds. Repurchase
agreements of more than seven days' duration (or investments in any other
securities which are deemed to be not readily marketable by the staff of the
Securities and Exchange Commission) are not permitted if more than 10% of the
applicable Fund's net assets would be so invested.
--------------------------------------------------------------------------------
78
<PAGE>
GBG Funds -- 7
--------------------------------------------------------------------------------
Note F -- Transactions in Capital Stock
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Baillie Gifford International Fund:
Six Momths Ended June 30, Year Ended December 31,
------------------------------- --------------------------------
1995 (Unaudited) 1994
------------------------------- --------------------------------
Shares Amount Shares Amount
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold .......................................... 3,206,402 $ 46,162,802 11,652,393 $ 175,706,321
Shares issued in reinvestments of dividends
from net investment income and
net realized gain on sales of investments .......... -- -- 168,197 2,504,843
----------- ------------- ------------ -------------
3,206,402 46,162,802 11,820,590 178,211,164
Less shares repurchased .............................. (3,406,925) (49,053,520) (3,910,118) (58,137,150)
----------- ------------- ------------ -------------
NET INCREASE ......................................... (200,523) $ (2,890,718) 7,910,472 $ 120,074,014
=========== ============= ============= =============
Baillie Gifford Emerging Markets Fund:
Period from September 13,
Six Momths Ended June 30, 1994 (Commencement of
------------------------------- Operations) to
1995 (Unaudited) December 31, 1994
------------------------------- --------------------------------
Shares Amount Shares Amount
----------- ------------- ------------ -------------
Shares sold .......................................... . 1,128,124 $ 9,082,515 2,773,779 $ 27,130,118
Shares issued in reinvestments of dividends
from net investment income and
net realized gain on sales of investments .......... -- -- 2,771 24,026
----------- ------------- ------------ -------------
1,128,124 9,082,515 2,776,550 27,154,144
=============
Less shares repurchased .............................. (206,522) (1,674,817) (3,233) (29,861)
----------- ------------- ------------ -------------
NET INCREASE ......................................... 921,602 $ 7,407,698 2,773,317 $ 27,124,283
=========== ============= ============ =============
</TABLE>
Note G -- Line of Credit
A $20,000,000 line of credit available to both Funds was 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 six months ended June 30, 1995,
neither of the Funds borrowed against this line of credit.
--------------------------------------------------------------------------------
79
<PAGE>
Value Line Centurion Fund, Inc. -- 8
--------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
SCHEDULE OF INVESTMENTS
June 30, 1995 (unaudited)
COMMON STOCKS -- 90.9%
Shares Value
--------------------------------------------------------------------------------
Advertising -- 1.4%
100,000 Omnicom Group, Inc. $6,062,500
----------
Aerospace-Defense -- 3.7%
300,000 Bombardier, Inc., Class "B"(1) 7,281,818
95,000 Loral Corp. 4,916,250
95,400 Watkins-Johnson Co. 4,245,300
----------
16,443,368
----------
Bank -- 1.8%
200,000 Midlantic Corp. 8,000,000
----------
Bank -- Midwest -- 0.6%
50,000 Fifth Third Bancorp 2,812,500
----------
Beverage-Soft Drink -- 1.5%
150,000 PepsiCo Inc. 6,843,750
----------
Broadcasting/Cable TV -- 1.6%
65,000 Capital Cities/ABC, Inc. 7,020,000
----------
Chemical-Diversified -- 2.9%
375,000 First Mississippi Corp. 12,796,875
----------
Chemical-Specialty -- 1.4%
250,000 Praxair, Inc. 6,250,000
----------
Computer & Peripherals -- 4.7%
75,000 Cabletron Systems, Inc.* 3,993,750
400,000 EMC Corp.* 9,700,000
105,000 3Com Corp.* 7,035,000
----------
20,728,750
----------
Computer Software & Services -- 8.0
300,000 Acclaim Entertainment, Inc.* 5,531,250
101,000 Computer Associates International, Inc. 6,842,750
120,000 Microsoft Corp.* 10,845,000
195,000 Oracle Systems Corp.* 7,531,875
95,000 Parametric Technology Corp.* 4,726,250
----------
35,477,125
----------
Diversified Companies -- 1.7%
187,500 Thermo Electron Corp.* 7,546,875
----------
Drug -- 4.7%
60,000 Amgen Inc.* 4,826,250
89,000 Pfizer, Inc. 8,221,375
180,000 Schering-Plough Corp. 7,942,500
----------
20,990,125
----------
Electronics -- 2.4%
115,000 Avnet, Inc. 5,563,125
147,000 Vishay Intertechnology, Inc.* 5,310,375
----------
10,873,500
----------
Financial Services -- 3.5%
55,000 First Financial Management Corp. 4,702,500
250,000 Green Tree Financial Corp. 11,093,750
----------
15,796,250
----------
Food Wholesalers -- 0.9%
130,000 Sysco Corp. 3,835,000
----------
Hotel/Gaming -- 2.1%
300,000 Mirage Resorts, Inc.* 9,187,500
----------
Insurance-Diversified -- 1.4%
53,000 American International Group, Inc. 6,042,000
----------
Machinery -- 0.9%
125,000 IDEX Corp. 4,187,500
----------
Manufactured Housing/Recreational
Vehicles -- 2.3%
320,000 Clayton Homes, Inc. 5,240,000
200,000 Oakwood Homes Corp. 5,125,000
----------
10,365,000
----------
Medical Services -- 3.1%
300,000 HealthCare COMPARE Corp.* 9,000,000
97,500 PacifiCare Health Systems, Inc.
Class "B" 4,972,500
----------
13,972,500
----------
Medical Supplies -- 8.1%
75,000 Abbott Laboratories, Inc. 3,037,500
400,000 Biomet, Inc.* 6,200,000
120,000 Cordis Corp.* 8,010,000
87,600 Invacare Corp. 3,635,400
100,000 Medtronic Inc. 7,712,500
200,000 Stryker Corp. 7,675,000
----------
36,270,400
----------
Office Equipment & Supplies -- 3.9%
395,000 Office Depot, Inc.* 11,109,375
210,000 Staples, Inc.* 6,063,750
----------
17,173,125
----------
Railroad -- 1.3%
100,000 Conrail, Inc. 5,562,500
----------
See notes to financial statements.
--------------------------------------------------------------------------------
80
<PAGE>
Value Line Centurion Fund, Inc. -- 8
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Recreation -- 1.8%
300,000 Electronic Arts, Inc.* $8,137,500
----------
Retail Store -- 1.7%
233,700 Dollar General Corp. 7,390,762
----------
Semiconductor -- 12.7%
150,000 Applied Materials, Inc.* 12,993,750
150,000 Integrated Device Technology, Inc.*6,937,500
170,000 Micron Technology, Inc. 9,328,750
100,000 Motorola, Inc. 6,712,500
100,000 Novellus Systems, Inc.* 6,775,000
110,000 Teradyne, Inc.* 7,191,250
50,000 Texas Instruments Inc. 6,693,750
----------
56,632,500
----------
Telecommunications Equipment -- 6.0%
187,500 ADC Telecommunications, Inc.* 6,703,125
142,500 Andrew Corp.* 8,247,188
150,000 DSC Communications Corp.* 6,975,000
100,000 Tellabs, Inc.* 4,812,500
----------
26,737,813
----------
Telecommunications Service-- 0.9%
150,000 WorldCom, Inc.* 4,050,000
----------
Toiletries/Cosmetics -- 1.9%
190,000 Gillette Co. 8,478,750
----------
Trucking/Transportation Leasing -- 2.0%
195,000 XTRA Corp. 9,018,750
----------
TOTAL COMMON STOCKS AND
TOTAL INVESTMENT
SECURITIES -- 90.9%
(Cost $292,769,560) 404,683,218
-----------
SHORT-TERM INVESTMENTS -- 9.5%
Principal
Amount Value
--------------------------------------------------------------------------------
$22,310,000 Federal Home Loan Mortgage Corp.
Discount Notes, 6.10%, 7/3/95 $ 22,302,439
20,000,000 Federal Home Loan Bank Corp.
Discount Notes, 5.86%, 7/14/95 19,957,678
------------
TOTAL SHORT-TERM INVESTMENTS -- 9.5%
(Cost $42,260,117) 42,260,117
------------
EXCESS OF LIABILITIES OVER CASH
AND OTHER ASSETS -- (-0.4%) (1,766,305)
------------
NET ASSETS -- 100.0% $445,177,030
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($445,177,030 / 20,287,897
shares outstanding) $ 21.94
============
(1) Canadian security trading on the Toronto exchange.
Value in U.S. dollars.
* Non-income producing
See notes to financial statements.
--------------------------------------------------------------------------------
81
<PAGE>
Value Line Centurion Fund, Inc. -- 8
--------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995 (unaudited)
ASSETS
Investment securities, at value
(cost $292,769,560) $404,683,218
Short-term investments (cost $42,260,117) 42,260,117
Cash 93,126
Receivable for capital shares sold 276,481
Dividends receivable 181,604
------------
TOTAL ASSETS 447,494,546
------------
LIABILITIES
Payable for securities purchased 1,780,158
Payable for capital shares repurchased 248,569
Accrued expenses:
Advisory fee 175,203
GIAC administrative service fee 80,000
Other 33,586
------------
TOTAL LIABILITIES 2,317,516
------------
NET ASSETS
Capital stock, at $1.00 par value
(authorized 50,000,000 shares, outstanding
20,287,897 shares) 20,287,897
Additional paid-in capital 290,557,308
Undistributed investment income -- net 2,814,449
Undistributed net realized gain on investments 19,603,718
Unrealized net appreciation of investments 111,913,658
------------
NET ASSETS $445,177,030
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($445,177,030 / 20,287,897
shares outstanding) $ 21.94
============
STATEMENT OF OPERATIONS
For the Six Months Ended
June 30, 1995 (unaudited)
Investment Income
Dividends (Net of foreign withholding tax
of $3,395) $ 1,398,304
Interest 659,173
------------
Total Income 2,057,477
------------
Expenses
Investment advisory fee 956,629
GIAC administrative service fee 166,456
Auditing and legal fees 28,032
Custodian fees 22,733
Insurance and dues 11,446
Director' fees and expenses 5,729
Other 4,466
------------
Total Expenses 1,195,491
------------
Investment Income -- Net 861,986
------------
Realized and Unrealized Gain on
Investments -- Net:
Realized gain -- net 8,519,117
Change in unrealized appreciation 72,410,590
------------
Net Realized Gain and Change in Unrealized
Appreciation on Investments 80,929,707
------------
Net Increase in Net Assets from Operations $ 81,791,693
============
See notes to financial statements.
--------------------------------------------------------------------------------
82
<PAGE>
Value Line Centurion Fund, Inc. -- 8
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1995 December 31,
(unaudited) 1994
------------- ------------
<S> <C> <C>
Operations:
Investment income -- net $ 861,986 $ 1,989,636
Realized gain on investments -- net 8,519,117 11,328,038
Change in unrealized appreciation 72,410,590 (21,682,338)
------------ ------------
Net increase (decrease) in net assets from operations 81,791,693 (8,364,664)
------------ ------------
Distributions to Shareholder:
Investment income -- net -- (194,830)
Realized gain from investment transactions -- net -- (5,260,408)
------------ ------------
-- (5,455,238)
------------ ------------
Capital Share Transactions:
Proceeds from sale of shares 46,168,215 67,839,012
Proceeds from reinvestment of distributions to shareholder -- 5,455,238
Cost of shares repurchased (35,527,840) (80,639,504)
------------ -----------
Increase (Decrease) from capital share transactions 10,640,375 (7,345,254)
------------ ------------
Total Increase (Decrease) in Net Assets 92,432,068 (21,165,156)
Net Assets:
Beginning of period 352,744,962 373,910,118
------------ ------------
End of period $445,177,030 $352,744,962
============ ============
Undistributed Investment Income -- Net At End Of Period $ 2,814,449 $ 1,952,463
============ ============
</TABLE>
See notes to financial statements.
--------------------------------------------------------------------------------
83
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Value Line Centurion Fund, Inc. -- 8
--------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1995 ---------------------------------------------------
(unaudited) 1994 1993 1992 1991 1990
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.83 $18.52 $20.04 $20.83 $15.04 $14.55
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income .04 .10 .12 .20 .20 .31
Net gains or losses on securities
(both realized and unrealized) 4.07 (.51) 1.73 1.03 7.65 .50
------ ------ ------ ------ ------ ------
Total from investment operations 4.11 (.41) 1.85 1.23 7.85 .81
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income -- (.01) (.12) (.19) (.20) (.32)
Distributions from capital gains -- (.27) (3.25) (1.83) (1.86) --
------ ------ ------ ------ ------ ------
Total distributions -- (.28) (3.37) (2.02) (2.06) (.32)
------ ------ ------ ------ ------ ------
Net asset value, end of period $21.94 $17.83 $18.52 $20.04 $20.83 $15.04
====== ====== ====== ====== ====== ======
Total return 23.05%+ -2.21% 9.21% 5.93% 52.18% 5.56%
====== ====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $445,177 $352,745 $373,910 $347,116 $306,589 $172,113
Ratio of operating expenses to average
net assets .62%* .61% .61% .54% .53% .54%
Ratio of net investment income to average
net assets .45%* .57% .57% .99% 1.19% 2.19%
Portfolio turnover rate .44%+ 122% 118% 83% 81% 56%
</TABLE>
+ Not annualized.
* Annualized.
See notes to financial statements.
--------------------------------------------------------------------------------
84
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Value Line Centurion Fund, Inc. -- 8
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (unaudited)
1 -- Significant Accounting Policies
Value Line Centurion Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies followed by the Fund in the preparation of its financial
statements.
(A) Security Valuation.
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities and for securities traded in the
over-the- counter market, the security is valued at the midpoint between the
latest available and representative asked and bid prices. Short-term instruments
with maturities of 60 days or less at the date of purchase are valued at
amortized cost, which approximates market value. Short-term instruments with
maturities greater than 60 days, at the date of purchase, are valued at the
midpoint between the latest available and representative asked and bid prices,
and commencing 60 days prior to maturity such securities are valued at amortized
cost. Other assets and securities for which market valuations are not readily
available are valued at fair value as the Board of Directors may determine in
good faith.
(B) Repurchase Agreements.
In connection with transactions in repurchase agreements, the Fund's
custodian takes possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
(C) Federal income Taxes.
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholder. Therefore, no federal income tax is
required.
(D) Dividends and Distributions.
It is the Fund's policy to distribute to its shareholder, as dividends and as
capital gains distributions, all the net investment income for the year and all
net capital gains realized by the Fund, if any. Such distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. All dividends or distributions will be
payable in shares of the Fund at the net asset value on the ex-dividend date.
This policy is, however, subject to change at any time by the Board of
Directors.
(E) Amortization.
Discounts on debt securities are amortized to interest income over the life
of the security with a corresponding increase to the security's cost basis;
premiums on debt securities are not amortized.
--------------------------------------------------------------------------------
85
<PAGE>
Value Line Centurion Fund, Inc. -- 8
--------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (unaudited)
(F) Investments.
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income, adjusted for amortization of discount, including
original issue discount required for federal income tax purposes, on investments
is earned from settlement date and recognized on the accrual basis. Dividend
income is recorded on the ex-dividend date.
2 -- Capital Share Transactions, Dividends and
Distributions
Shares of the Fund are available to the public only through the purchase of
certain contracts issued by The Guardian Insurance and Annuity Company, Inc.
(GIAC). Transactions in capital stock were as follows:
Six Months Ended Year Ended
June 30, 1995 June 30,
(unaudited) 1994
---------- ----------
Shares sold 2,350,361 3,810,231
Shares issued in reinvestment
of dividends and distributions -- 305,958
---------- ----------
2,350,361 4,116,189
Shares repurchased 1,851,475 4,513,989
---------- ----------
Net increase (decrease) 498,886 (397,800)
========== ==========
Dividends per share $ -- $ .01
========== ==========
Distributions per share from
net realized gains $ -- $ .27
========== ==========
On June 30, 1995, the Board of Directors declared a dividend from net
investment income of $.10 per share and a long-term capital gain distribution of
$.56 per share to shareholders of record on July 19, 1995.
3 -- Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
Six Months Ended
June 30, 1995
(unaudited)
------------
PURCHASES:
Investment Securities $159,725,100
============
SALES:
Investment Securities $173,558,571
============
At June 30, 1995, the aggregate cost of investment securities and short-term
investments for federal income tax purposes is $335,029,677. The aggregate
appreciation and depreciation of investments for the six months ended June 30,
1995, based on a comparison of investment values and their costs for federal
income tax purposes is $114,040,353 and $2,126,695 respectively, resulting in a
net appreciation of $111,913,658.
4 -- Investment Advisory Contract, Management
Fees and Transactions with Interested Parties
An advisory fee of $956,629 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the six months ended June 30, 1995.
This was computed at the rate of 1/2 of 1% per year of the average daily net
assets of the Fund during the period and paid monthly. The Adviser provides
research, investment programs, supervision of the investment portfolio and pays
costs of administrative services, office space, equipment and compensation of
administrative, bookkeeping, and clerical personnel necessary for managing the
affairs of the Fund. The Adviser also provides persons, satisfactory to the
Fund's Board of Directors, to act as officers and employees of the Fund and pays
their salaries and wages. The Fund bears all other costs and expenses. In
addition, the Adviser has agreed to reimburse the Fund for expenses (exclusive
--------------------------------------------------------------------------------
86
<PAGE>
Value Line Centurion Fund, Inc. -- 8
--------------------------------------------------------------------------------
of interest, taxes and brokerage expenses) which in any year exceeds 2.5% of the
first $30 million of the average daily net assets, 2% of the next $70 million
and 1.5% of the remaining average daily net assets. No such reimbursement was
required for the six months ended June 30, 1995.
Certain officers and directors of the Adviser and Value Line Securities,
Inc., (the Fund's distributor and a registered broker/dealer) and of GIAC are
also officers and directors of the Fund. A former officer of GIAC who is also a
director of the Fund was paid a fee of $1,370 for the six months ended June 30,
1995. During the six months ended June 30, 1995, the Fund paid brokerage
commissions totalling $241,985 to Value Line Securities, Inc., a wholly owned
subsidiary of the Adviser, which clears its transactions through unaffiliated
brokers.
The Fund has an agreement with GIAC to reimburse GIAC for expenses incurred
in performing administrative and internal accounting functions in connection
with the establishment of contractowner accounts and their ongoing maintenance,
printing and distribution of shareholder reports and providing ongoing
shareholder servicing functions. Such reimbursement is limited to an amount no
greater than $18.00 times the average number of accounts at the end of each
quarter during the year. During the six months ended June 30, 1995, the Fund
incurred expenses of $166,456 in connection with such services rendered by GIAC.
--------------------------------------------------------------------------------
87
<PAGE>
Value Line Strategic Asset Management Trust -- 9
--------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
SCHEDULE OF INVESTMENTS
June 30, 1995 (unaudited)
COMMON STOCKS -- 74.1%
Shares Value
--------------------------------------------------------------------------------
Advertising -- 0.6%
79,000 Omnicom Group, Inc. $ 4,789,375
------------
Aerospace/Defense -- 3.3%
154,000 Loral Corp. 7,969,500
194,000 McDonnell Douglas Corp. 14,889,500
50,000 Rockwell International Corp. 2,287,500
------------
25,146,500
------------
Bank-Midwest -- 0.5%
97,000 First Bank System, Inc. 3,977,000
------------
Beverage-Alcoholic -- 0.6%
98,000 Canadaigua Wine Co., Inc. Class "A"* 4,385,500
------------
Beverage-Soft Drink -- 1.6%
60,000 Coca-Cola Co. 3,825,000
112,000 Coca-Cola Enterprises Inc. 2,450,000
135,000 PepsiCo Inc. 6,159,375
------------
12,434,375
------------
Broadcasting/Cable TV -- 3.1%
118,000 Capital Cities/ABC, Inc. 12,744,000
27,456 Viacom, Inc. Class "A"* 1,276,704
208,030 Viacom, Inc. Class "B"* 9,647,391
------------
23,668,095
------------
Chemical-Basic -- 0.2%
20,000 Monsanto Co. 1,802,500
------------
Chemical-Diversified -- 1.1%
62,000 Norsk Hydro A.S. (ADR) 2,588,500
155,000 Pall Corp. 3,448,750
213,000 Terra Industries, Inc. 2,582,625
------------
8,619,875
------------
Chemical-Specialty -- 3.0%
156,000 Hercules, Inc. 7,605,000
100,000 International Flavors & Fragrances Inc. 4,975,000
31,900 Lubrizol Corp. 1,128,463
260,000 Praxair, Inc. 6,500,000
62,000 Sigma-Aldrich Corp. 3,045,750
------------
23,254,213
------------
Computer & Peripherals -- 3.5%
40,000 Apple Computer, Inc. 1,857,500
84,500 Cabletron Systems, Inc.* 4,499,625
104,000 International Business Machines Corp. 9,984,000
258,000 Silicon Graphics, Inc.* 10,287,750
------------
26,628,875
------------
Computer Software & Services -- 3.3%
154,000 Ceridian Corp.* 5,678,750
85,000 Computer Associates International, Inc. 5,758,750
125,000 General Motors Corp. Class "E" 5,437,500
60,000 Informix Corp.* 1,522,500
47,000 National Data Corp. 1,086,875
112,500 Oracle Systems Corp*. 4,345,312
85,000 System Software Associates, Inc. 1,700,000
------------
25,529,687
------------
Diversified Companies -- 0.9%
26,000 Danaher Corp. 786,500
12,300 ITT Corp. 1,445,250
199,500 Mark IV Industries, Inc. 4,289,250
------------
6,521,000
------------
Drug -- 2.9%
30,000 Bristol-Myers Squibb Co. 2,043,750
80,000 Merck & Co., Inc. 3,920,000
220,000 Mylan Laboratories Inc. 6,765,000
69,000 Pfizer, Inc. 6,373,875
64,000 Schering-Plough Corp. 2,824,000
------------
21,926,625
------------
Drugstore -- 0.3%
60,000 Rite Aid Corp. 1,537,500
20,000 Walgreen Co. 1,002,500
------------
2,540,000
------------
Electric Utility-East -- 0.3%
71,700 American Electric Power Co., Inc. 2,518,463
------------
Electronics -- 2.3%
100,000 General Instrument Corp.* 3,837,500
45,000 Molex, Inc. 1,743,750
223,000 Symbol Technologies, Inc.* 8,557,625
97,650 Vishay Intertechnology, Inc.* 3,527,606
------------
17,666,481
------------
Environmental -- 0.5%
108,600 Browning-Ferris Industries, Inc. 3,923,175
------------
European-Diversified -- 0.2%
49,000 Danka Business Systems PLC (ADR) 1,185,187
------------
See notes to financial statements.
--------------------------------------------------------------------------------
88
<PAGE>
Value Line Strategic Asset Management Trust -- 9
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Financial Services -- 3.3%
114,000 ADVANTA Corp. Class "A" $ 4,752,375
53,000 ADVANTA Corp. Class "B" 2,000,750
155,000 CUC International, Inc.* 6,510,000
248,000 Green Tree Financial Corp. 11,005,000
30,000 Paychex, Inc. 1,087,500
------------
25,355,625
------------
Food Processing -- 2.5%
310,000 Archer-Daniels-Midland Co. 5,773,750
50,000 ConAgra, Inc. 1,743,750
55,000 Heinz (H.J.) Co. 2,440,625
179,250 Hudson Foods, Inc. Class "A" 2,487,094
148,000 IBP, Inc. 6,438,000
------------
18,883,219
------------
Foreign Electronics/Entertainment -- 0.9%
165,000 Philips Electronics N.V. (NY Shares) 7,053,750
------------
Foreign Telecommunications -- 0.4%
40,000 Ericsson (L.M.) Telephone Co.
Class"B" (ADR) 800,000
32,000 Telecom Corp. of New Zealand Ltd.
(ADR) 1,940,000
------------
2,740,000
------------
Grocery -- 2.7%
385,000 Kroger Co.* 10,346,875
278,700 Safeway, Inc.* 10,416,412
------------
20,763,287
------------
Healthcare Information Systems -- 0.6%
75,000 HBO & Co. 4,087,500
20,000 Medic Computer Systems, Inc.* 770,000
------------
4,857,500
------------
Home Appliance -- 1.1%
260,000 Black & Decker Corp. 8,027,500
------------
Hotel/Gaming -- 1.8%
140,000 Circus Circus Enterprises, Inc.* 4,935,000
67,000 La Quinta Inns, Inc. 1,809,000
160,000 Mirage Resorts, Inc.* 4,900,000
50,000 Promus Companies, Inc.* 1,950,000
------------
13,594,000
------------
Household Products -- 0.5%
15,000 Lancaster Colony Corp. $ 536,250
89,000 Newell Co. 2,180,500
20,000 Procter & Gamble Co. 1,437,500
------------
4,154,250
------------
Industrial Services -- 2.1%
297,000 Equifax, Inc. 9,912,375
252,000 Manpower, Inc. 6,426,000
------------
16,338,375
------------
Insurance-Diversified -- 1.7%
72,000 American International Group, Inc. 8,208,000
100,000 MGIC Investment Corp. 4,687,500
------------
12,895,500
------------
Insurance-Property/Casualty -- 1.1%
38,000 General Re Corp. 5,087,250
230,000 USF & G Corp. 3,737,500
------------
8,824,750
------------
Machinery -- 0.8%
52,000 Dover Corp. 3,783,000
75,000 Parker-Hannifin Corp. 2,718,750
------------
6,501,750
------------
Machinery-Construction & Mining -- 0.2%
44,000 Harnischfeger Industries, Inc. 1,523,500
------------
Manufactured Housing/
Recreational Vehicles -- 1.2%
521,532 Clayton Homes, Inc. 8,540,087
35,000 Oakwood Homes Corp. 896,875
------------
9,436,962
------------
Medical Services -- 0.2%
100,000 Surgical Care Affiliates, Inc. 1,912,500
------------
Medical Supplies -- 5.6%
52,000 Becton, Dickinson & Co. 3,029,000
115,000 Bergen Brunswig Corp. Class "A" 2,630,625
120,000 Boston Scientific Corp.* 3,825,000
76,250 Cardinal Health, Inc. 3,602,812
100,000 Cordis Corp.* 6,675,000
129,000 Johnson & Johnson 8,723,625
149,000 Medtronic Inc. 11,491,625
60,000 St. Jude Medical, Inc.* 3,007,500
------------
42,985,187
------------
See notes to financial statements.
--------------------------------------------------------------------------------
89
<PAGE>
Value Line Strategic Asset Management Trust -- 9
--------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
SCHEDULE OF INVESTMENTS
June 30, 1995 (unaudited)
Shares Value
--------------------------------------------------------------------------------
Natural Gas-Diversified -- 1.4%
155,000 Panhandle Eastern Corp. $ 3,778,125
200,000 Williams Companies, Inc. 6,975,000
------------
10,753,125
------------
Office Equipment & Supplies -- 3.8%
386,000 Office Depot, Inc.* 10,856,250
19,000 Reynolds & Reynolds Co. Class "A" 560,500
367,500 Staples, Inc.* 10,611,563
64,000 Xerox Corp. 7,504,000
------------
29,532,313
------------
Oilfield Services/Equipment -- 0.4%
80,000 Halliburton Co. 2,860,000
------------
Paper & Forest Products -- 1.2%
179,000 Scott Paper Co. 8,860,500
------------
Petroleum-Integrated -- 2.4%
80,000 Amoco Corp. 5,330,000
30,000 Atlantic Richfield Co. 3,292,500
40,000 British Petroleum Co. PLC (ADR) 3,425,000
40,000 Chevron Corp. 1,865,000
23,000 Mobil Corp. 2,208,000
115,000 Occidental Petroleum Corp. 2,630,625
------------
18,751,125
------------
Precision Instrument -- 0.4%
66,000 Tektronix, Inc. 3,250,500
------------
Railroad -- 0.1%
23,900 Kansas City Southern Industries, Inc. 890,275
------------
Recreation -- 1.2%
114,000 Brunswick Corp. 1,938,000
127,000 Disney (Walt) Co. 7,064,375
------------
9,002,375
------------
Restaurant -- 1.3%
70,000 Applebee's International, Inc.* 1,802,500
210,000 McDonald's Corp. 8,216,250
------------
10,018,750
------------
Retail-Special Lines -- 0.2%
120,000 Waban, Inc.* 1,785,000
------------
Retail Store -- 1.2%
129,000 Consolidated Stores Corp.* 2,692,875
210,937 Dollar General Corp. 6,670,883
------------
9,363,758
------------
Semiconductor -- 0.4%
83,000 International Rectifier Corp.* 2,697,500
------------
Shoe -- 0.9%
83,000 NIKE, Inc. Class "B" 6,972,000
------------
Telecommunications Equipment -- 1.4%
165,000 Andrew Corp.* 9,549,375
30,000 Qualcomm Incorporated* 1,036,875
------------
10,586,250
------------
Telecommunications Service -- 0.5%
106,000 Century Telephone Enterprises, Inc. 3,007,750
60,000 U.S. Long Distance Corp.* 975,000
------------
3,982,750
------------
Tobacco -- 0.4%
100,000 UST, Inc. 2,975,000
------------
Toiletries/Cosmetics -- 0.8%
134,000 Gillette Co. 5,979,750
------------
Trucking/Transportation Leasing -- 1.2%
60,000 Consolidated Freightways, Inc. 1,327,500
169,000 XTRA Corp. 7,816,250
------------
9,143,750
------------
TOTAL COMMON STOCKS
(Cost $452,504,605) 569,769,302
------------
U.S. TREASURY OBLIGATIONS -- 10.5%
Principal
Amount Value
--------------------------------------------------------------------------------
$10,000,000 U.S. Treasury Notes 6 3/4%
due May 31, 1999 $ 10,268,750
16,000,000 U.S. Treasury Notes 7 3/4%
due February 15 17,320,000
50,000,000 U.S. Treasury Bonds 7 1/4%
due August 15, 2022 53,421,800
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $77,878,090) 81,010,550
TOTAL INVESTMENT SECURITIES -- 84.6%
(Cost $530,382,695) 650,779,852
------------
See notes to financial statements.
--------------------------------------------------------------------------------
90
<PAGE>
Value Line Strategic Asset Management Trust -- 9
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 14.9%
Principal
Amount Value
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 12.8%
$13,230,000 Federal Home Loan Mortgage Corp.
Discount Notes 6.10%,
due 7/3/95 $13,225,517
20,000,000 Federal National Mortgage
Association Discount Notes 5.83%,
due 7/5/95 19,987,044
20,000,000 Federal National Mortgage
Association Discount Notes 5.86%,
due 7/6/95 19,983,722
25,000,000 Federal National Mortgage
Association Discount Notes 5.88%,
due 7/20/95 24,922,417
20,000,000 Federal National Mortgage
Association Discount Notes 5.80%,
due 8/11/95 19,867,889
-----------
97,986,589
-----------
REPURCHASE AGREEMENT -- 2.1%
(includes accrued interest)
$16,370,000 Collateralized by $12,165,000 U.S.
Treasury Notes 11 7/8%, due
11/15/03, with a value of
$16,709,768. (With Morgan
Stanley & Co., Inc. 6.00%,
dated 6/30/95, due 7/3/95,
delivery value of $16,378,185.) $16,372,728
------------
TOTAL SHORT-TERM
INVESTMENTS -- 14.9%
(Cost $114,359,317) 114,359,317
------------
CASH AND RECEIVABLES LESS
LIABILITIES -- 0.5% 4,041,819
------------
NET ASSETS -- 100.0% $769,180,988
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($769,180,988 / 41,271,909
shares outstanding) $ 18.64
============
* Non-income producing.
See notes to financial statements.
--------------------------------------------------------------------------------
91
<PAGE>
Value Line Strategic Asset Management Trust -- 9
--------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1995 (unaudited)
ASSETS
Investment securities, at value
(cost $530,382,695) $650,779,852
Short-term investments (cost $114,359,317) 114,359,317
Cash 56,971
Receivable for securities sold 3,764,835
Interest and dividends receivable 2,372,229
Receivable for capital shares sold 139,926
------------
TOTAL ASSETS 771,473,130
------------
LIABILITIES
Payable for capital shares repurchased 1,052,151
Payable for securities purchased 776,038
Accrued expenses:
Advisory fee 311,454
GIAC administrative service fee 135,000
Other 17,499
------------
TOTAL LIABILITIES 2,292,142
------------
NET ASSETS
Capital stock, at $0.01 par value
(authorized unlimited, outstanding
41,271,909 shares) 412,719
Additional paid-in capital 612,209,272
Undistributed net investment income 17,755,236
Undistributed net realized gain on investments 18,406,604
Unrealized net appreciation of investments 120,397,157
------------
NET ASSETS $769,180,988
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($769,180,988 / 41,271,909
shares outstanding) $ 18.64
============
STATEMENT OF OPERATIONS
For the Six Months Ended
June 30, 1995 (unaudited)
Investment Income:
Interest $ 6,790,632
Dividends (Net of foreign withholding
tax of $11,456) 2,674,678
------------
Total Income 9,465,310
------------
Expenses:
Investment advisory fee 1,764,412
GIAC administrative service fee 275,318
Custodian fees 37,567
Audit and legal fees 29,873
Insurance and dues 12,698
Trustees' fees and expenses 5,729
Registration fee 1,561
Other 1,006
------------
Total Expenses 2,128,164
------------
Investment Income -- Net 7,337,146
------------
Realized and Unrealized Gain On
Investments -- Net:
Realized gain -- net 14,313,987
Change in unrealized appreciation on
investments 81,361,427
------------
Net Realized Gain and Change in Unrealized
Appreciation on Investments 95,675,414
------------
Net Increase in Net Assets from Operations $103,012,560
============
See notes to financial statements.
--------------------------------------------------------------------------------
92
<PAGE>
Value Line Strategic Asset Management Trust -- 9
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1995 December 31,
(unaudited) 1994
------------ ------------
<S> <C> <C>
Operations:
Investment income -- net $ 7,337,146 $ 10,669,482
Realized gain on investments 14,313,987 4,022,796
Change in unrealized appreciation 81,361,427 (46,844,560)
------------ ------------
Net increase (decrease) in net assets from operations 103,012,560 (32,152,282)
------------ ------------
Distributions to Shareholder:
Investment income -- net -- (409,277)
Realized gain from investment transactions -- net -- (1,637,110)
------------ ------------
-- (2,046,387)
------------ ------------
Trust Share Transactions:
Proceeds from sale of shares 31,392,257 128,821,109
Proceeds from reinvestment of distributions to shareholder -- 2,046,387
Cost of shares repurchased (27,945,095) (49,595,204)
------------ ------------
Increase from Trust share transactions 3,447,162 81,272,292
------------ ------------
Total Increase In Net Assets 106,459,722 47,073,623
Net Assets:
Beginning of period 662,721,266 615,647,643
------------ ------------
End of period $769,180,988 $662,721,266
============ ============
Undistributed Investment Income -- Net at End of Period $ 17,755,236 $ 10,418,090
============ ============
</TABLE>
See notes to financial statements.
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Value Line Strategic Asset Management Trust -- 9
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Value Line Strategic Asset Management Trust
FINANCIAL HIGHLIGHTS
Selected data for a share of stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1995 ---------------------------------------------------
(unaudited) 1994 1993 1992 1991 1990
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.13 $17.01 $15.94 $14.54 $11.06 $11.46
------ ------ ------ ------ ------ -----
Income (loss) from investment operations:
Net investment income .18 .26 .27 .26 .30 .32
Net gains or losses on securities
(both realized and unrealized) 2.33 (1.09) 1.62 1.93 4.50 (.34)
------ ------ ------ ------ ------ -----
Total from investment operations 2.51 (.83) 1.89 2.19 4.80 (.02)
------ ------ ------ ------ ------ -----
Less distributions:
Dividends from net investment income -- (.01) (.28) (.26) (.31) (.33)
Distributions from capital gains -- (.04) (.54) (.53) (1.01) (.05)
------ ------ ------ ------ ------ -----
Total distributions -- (.05) (.82) (.79) (1.32) (.38)
------ ------ ------ ------ ------ -----
Net asset value, end of period $18.64 $16.13 $17.01 $15.94 $14.54 $11.06
====== ====== ====== ====== ====== ======
Total return 15.56%+ -4.88% 11.86% 15.05% 43.34% -0.15%
====== ====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $769,181 $662,721 $615,648 $362,045 $188,781 $86,146
Ratio of operating expenses to
average net assets .60%* .60% .61% .55% .58% .60%
Ratio of net investment income to
average net assets 2.08%* 1.65% 1.96% 2.18% 3.00% 3.28%
Portfolio turnover rate 36%+ 100% 110% 106% 134% 77%
</TABLE>
+ Not annualized.
* Annualized.
See notes to financial statements.
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Value Line Strategic Asset Management Trust -- 9
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NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (unaudited)
1 -- Significant Accounting Policies
Value Line Strategic Asset Management Trust (the "Trust") is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of its
financial statements.
(A) Security Valuation.
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities and for securities traded in the
over-the-counter market, the security is valued at the midpoint between the
latest available and representative bid and asked prices.
The Board of Trustees has determined that the value of bonds and other
fixed-income securities be calculated on the valuation date by reference to
valuations obtained from an independent pricing service which determines
valuations for normal institutional-size trading units of debt securities,
without exclusive reliance upon quoted prices. This service takes into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data in determining valuations.
Short-term instruments with maturities of 60 days or less at the date of
purchase are valued at amortized cost which approximates market value.
Short-term instruments with maturities greater than 60 days at the date of
purchase are valued at the midpoint between the latest available and
representative asked and bid prices, and commencing 60 days prior to maturity
such securities are valued at amortized cost. Other assets and securities for
which market valuations are not readily available are valued at fair value as
the Board of Trustees may determine in good faith.
(B) Repurchase Agreements.
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. In the event of default of the
obligation to repurchase, the Trust has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
(C) Federal Income Taxes.
It is the Trust's policy to qualify under, and comply with, the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholder. Therefore, no federal
income tax provision is required.
(D) Dividends and Distributions.
It is the Trust's policy to distribute to its shareholder, as dividends and
as capital gains distributions, all the net investment income for the year and
all the net capital gains realized by the Trust, if any. Such distributions are
determined in accordance with income tax regulations which may differ from
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Value Line Strategic Asset Management Trust
NOTES TO FINANCIAL STATEMENTS
June 30, 1995 (unaudited)
generally accepted accounting principles. All dividends or distributions will be
payable in shares of the Trust at the net asset value on the ex-dividend date.
This policy is, however, subject to change at any time by the Board of Trustees.
(E) Amortization.
Discounts on debt securities are amortized to interest income over the life
of the security with a corresponding increase to the security's cost basis;
premiums on debt securities are not amortized.
(F) Investments.
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income, adjusted for amortization of discount, including
original issue discount required for federal income tax purposes, on investments
is earned from settlement date and recognized on the accrual basis. Dividend
income is recorded on the ex-dividend date.
2 -- Trust Share Transactions, Dividends
and Distributions
Shares of the Trust are available to the public only through the purchase of
certain contracts issued by The Guardian Insurance & Annuity Company, Inc.
(GIAC). Transactions in shares of beneficial interest in the Trust were as
follows:
Six Months Ended Year Ended
June 30, 1995 December 31,
(unaudited) 1994
---------------- ------------
Shares sold 1,804,718 7,820,145
Shares issued to shareholder
in reinvestment of dividends
and distributions -- 126,868
--------- ---------
1,804,718 7,947,013
Shares repurchased 1,612,047 3,062,343
--------- ---------
Net increase 192,671 4,884,670
========= =========
Dividends per share $ -- $ .01
========= =========
Distributions per share from
net realized gains $ -- $ .04
========= =========
On June 30, 1995, the Board of Directors declared a dividend from net
investment income of $.26 per share and a long-term capital gain distribution of
$.16 per share to shareholders of record on July 19, 1995.
3 -- Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
Six Months Ended
June 30, 1995
(unaudited)
------------
PURCHASES:
Investment Securities $278,439,576
------------
SALES & MATURITIES:
U.S. Treasury Obligations $ 10,000,000
Other Investment Securities 196,591,672
------------
$206,591,672
------------
At June 30, 1995, the aggregate cost of investment securities and short-term
investments for federal income tax purposes is $644,760,495. The aggregate
appreciation and depreciation of investments at June 30, 1995, based on a
comparison of investment values and their costs for federal income tax purposes
is $124,253,102 and $3,874,428, respectively, resulting in a net appreciation of
$120,378,674.
4 -- Investment Advisory Contract, Management
Fees and Transactions with Affiliates
An advisory fee of $1,764,412 was paid or payable to Value Line, Inc. (the
Adviser), the Trust's investment adviser, for the six months ended June 30,
1995. This was computed at the rate of 1/2 of 1% per year of the average daily
net assets of the Trust during the period and paid monthly. The Adviser provides
research, investment programs, supervision of the investment portfolio and pays
costs of administrative services, office space, equipment and compensation of
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Value Line Strategic Asset Management Trust -- 9
--------------------------------------------------------------------------------
administrative, bookkeeping and clerical personnel necessary for managing the
affairs of the Trust. The Adviser also provides persons, satisfactory to the
Trust's Board of Trustees, to act as officers and employees of the Trust and
pays their salaries and wages. The Trust bears all other costs and expenses.
The Adviser has agreed to reimburse the Trust for expenses (exclusive of
interest, taxes, brokerage and extraordinary expenses) which in any year exceed
2.5% of the first $30 million of the average daily net assets, 2% of the next
$70 million and 1.5% on any excess over $100 million. No such reimbursement was
required for the six months ended June 30, 1995.
Certain officers and directors of the Adviser and Value Line Securities, Inc.
(the Trust's distributor and a registered broker/dealer), and of GIAC are also
officers and Trustees of the Trust. A former officer of GIAC who is also a
trustee of the Trust was paid a fee of $1,370 by the Trust for the six months
ended June 30, 1995. During the six months ended June 30, 1995, the Trust paid
brokerage commissions totalling $367,010 to Value Line Securities, Inc., a
wholly owned subsidiary of the Adviser, which clears its transactions through
unaffiliated brokers.
The Trust has an agreement with GIAC to reimburse GIAC for expenses incurred
in performing administrative and internal accounting functions in connection
with the establishment of contractowner accounts and their ongoing maintenance,
printing and distribution of shareholder reports and providing ongoing
shareholder servicing functions. Such reimbursement is limited to an amount no
greater than $18.00 times the average number of accounts at the end of each
quarter during the year. During the six months ended June 30,1995, the Trust
incurred expenses of $275,318 in connection with such services rendered by GIAC.
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<PAGE>
[logo] The Guardian(R)
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-011033 6/95
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains financial information extracted from the "Semiannual
Report to Shareholders" dated June 30, 1995, and is qualified in its entirety to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 619,550,784
<INVESTMENTS-AT-VALUE> 922,634,528
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 922,634,528
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,566,433
<TOTAL-LIABILITIES> 8,566,433
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (995,029)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,119,332
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 303,083,743
<NET-ASSETS> 914,068,095
<DIVIDEND-INCOME> 3,600,910
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,595,939
<NET-INVESTMENT-INCOME> (995,029)
<REALIZED-GAINS-CURRENT> 2,119,332
<APPREC-INCREASE-CURRENT> 120,621,825
<NET-CHANGE-FROM-OPS> 79,541,017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,595,939
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,595,939
<AVERAGE-NET-ASSETS> 874,297,587
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 122,741,157
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.005
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
