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DECEMBER 31, 1995 [LOGO] Value
Guard II
Annual Report to Contractowners
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The Guardian Separate Account A
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The Guardian Stock Fund, Inc.
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The Guardian Bond Fund, Inc.
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The Guardian Cash Fund, Inc.
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Gabelli Capital Asset Fund
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Baillie Gifford International Fund
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Baillie Gifford Emerging Markets Fund
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Value Line Centurion Fund, Inc.
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Value Line Strategic Asset Management Trust
Executive Offices
201 Park Avenue South
New York, New York 10003
Customer Service Office
P.O. Box 26210
Lehigh Valley, Pennsylvania 18002-6210
1-800-221-3253
[LOGO] The Guardian (R)
The Guardian Insurance &
Annuity Company, Inc.
A wholly owned subsidiary of
The Guardian Life Insurance Company of America
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<PAGE>
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Performance Summary
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[ILLUSTRATION OF BUILDING]
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Investment Option Total Return*
----------------- -------------
The Guardian Stock Fund ....................................... 33.34%
The Guardian Bond Fund ........................................ 16.44%
The Guardian Cash Fund ........................................ 4.50%
Gabelli Capital Asset Fund .................................... 7.65%
Baillie Gifford International Fund ............................ 10.14%
Baillie Gifford Emerging Markets Fund ......................... -1.58%
Value Line Centurion Fund ..................................... 38.71%
Value Line Strategic Asset Mgt. Trust ......................... 27.28%
The Guardian Real Estate Account .............................. 1.36%
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Fixed-Rate Option
-----------------
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
August 31, 1995 was 5.00% and from September 1, 1995 to December 31, 1995
was 5.25%. 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 December 31, 1995, except the Gabelli
Capital Asset Fund which is based on the period May 1, 1995 (commencement
of operations) through December 31, 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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<PAGE>
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Dear Contractowner:
- -------------------
[PHOTO]
Joseph D. Sargent, CLU
President & CEO
As the new President and Chief Executive Officer of The Guardian Insurance &
Annuity Company, Inc. and its parent, The Guardian Life Insurance Company of
America, I am pleased to introduce this annual report on 1995's results. I would
like to take a moment and thank Arthur V. Ferrara for his years of stewardship
at the helm of The Guardian Insurance &Annuity Company, Inc. (GIAC). Although
Mr. Ferrara has recently retired from The Guardian as Chairman of the Board and
Chief Executive Officer, we are pleased that he will continue to serve on the
Board of Directors of GIAC, the issuer of your Value Guard II variable annuity
contract. In my new position, I look forward to maintaining our commitment of
providing you with a full range of insurance and investment options to help you
build your future.
On Your Variable Annuity
On May 1, 1995, 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. With the addition of Gabelli Capital
Asset Fund, we are pleased to provide you with nine variable investment options,
plus a fixed-rate option. Each of the investment options has quality
professional management from either Guardian Investor Services Corporation,
Value Line Inc., Guardian Baillie Gifford Limited, The O'Connor Group or, now,
Gabelli Funds, Inc. For more information about any of the investment options
which are available to you under your Value Guard II variable annuity contract,
please call your registered representative or broker and ask for a free
prospectus. The prospectuses contain more information including sales charges
and expenses. You may also call Guardian Investor Services Corporation at
1-800-221-3253. You should read the prospectus carefully before you invest or
send money.
On Our Ratings
Once again, we are proud to report that as of January 31, 1996, both GIAC
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.
Our Commitment to You
Although 1995 brought a change in leadership at GIAC, we will continue our
proud tradition of commitment to you, our contractowners, and as a provider of
superior customer service.
I invite you to read the portfolio managers' interviews on the following
pages to learn more about the strategies they used to manage your investment
options during 1995.
Thank you for continuing to invest for your future through GIAC.
Regards,
/s/ Joseph D. Sargent
Joseph D. Sargent, CLU
President and Chief Executive Officer
<PAGE>
VALUE GUARD II
Table of Contents
Portfolio Schedule
Manager of
Interview Investments
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The Guardian Stock Fund 4 30
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Objective: Long-term growth of capital "We utilize what we believe
- ----------------------------------------------- to be superior decision-making
Portfolio: At least 80% common stocks and systems including a bottom-up
securities convertible into quantitative stock scoring
common stocks system and top-down portfolio
- ----------------------------------------------- management style predictors.
Inception: April 13, 1983 Our organizational culture
- ----------------------------------------------- supports independent thinking
Net Assets at December 31, 1995: $1,615,270,799 and the flexibility to act
- ----------------------------------------------- quickly. And, I suspect, we
work just a little harder than
most of our competitors."
--Charles E. Albers, C.F.A
Portfolio Manager
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The Guardian Bond Fund 8 40
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Objective: Maximum current income without "1995 was a good year for
undue risk of principal. Capital the U.S. bond markets and
appreciation is a secondary despite the budget impasse in
objective. Washington, there are very
- ----------------------------------------------- positive themes for the
Portfolio: At least 80% investment-grade upcoming year."
bonds and U.S. government --Michele S. Babakian
securities Portfolio Manager
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Inception: May 1, 1983
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Net Assets at December 31, 1995: $374,461,581
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The Guardian Cash Fund 20 48
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Objective: As high a level of current income "We look at the Fund as a
as is consistent with place where people can park
preservation of capital and their money until they decide
liquidity where they want to invest
- ----------------------------------------------- it--whether it be domestic or
Portfolio: Short-term money market international stocks.
instruments Therefore, we seek to provide
- ----------------------------------------------- investors with a combination
Inception: November 1, 1981 of solid returns, liquidity
- ----------------------------------------------- and preservation of capital."
Net Assets at December 31, 1995: $356,820,089 --Alexander M. Grant, Jr.
- ----------------------------------------------- Portfolio Manager
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Gabelli Capital Asset Fund 10 58
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Objective: Growth of capital. Current "1995 was a year in which
income is a secondary stock picking took a back seat
objective. to market momentum. If the
- ----------------------------------------------- market loses steam in 1996,
Portfolio: Primarily common and preferred stock pickers will have the
stocks and other securities opportunity to excel."
representing the right to acquire --Mario J. Gabelli, C.F.A.
common stocks Portfolio Manager
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Inception: May 1, 1995
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Net Assets at December 31, 1995: $26,363,942
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<PAGE>
Portfolio Schedule
Manager of
Interview Investments
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Baillie Gifford International Fund 12 66
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Objective: Long-term capital appreciation "Though most overseas
- ----------------------------------------------- markets have lagged behind the
Portfolio: At least 80% in a diversified U.S. this year, we are quite
portfolio of common stocks of optimistic about the outlook
companies domiciled outside of the for 1996. We will continue to
United States look for stocks of high
- ----------------------------------------------- quality companies to add to
Inception: February 8, 1991 our Fund's portfolio."
- ----------------------------------------------- --R. Robin Menzies
Net Assets at December 31, 1995: $317,286,870 Portfolio Manager
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Baillie Gifford Emerging Markets Fund 14 74
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Objective: Long-term capital appreciation "We believe that if mature
- ----------------------------------------------- economies continue to slow,
Portfolio: At least 65% in a portfolio of the attractions of the rapidly
common stocks issued by emerging expanding emerging countries
market companies will probably be more widely
- ----------------------------------------------- recognized. It is important to
Inception: October 17, 1994 remember the reasons why some
- ----------------------------------------------- people invest in emerging
Net Assets at December 31, 1995: $34,218,467 market countries: to help
- ----------------------------------------------- them, over the long-term,
achieve portfolio
diversification and take
advantage of potential
growth."
--Edward H. Hocknell
Portfolio Manager
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Value Line Centurion Fund 16 90
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Objective: Long-term growth of capital "The strong rally in the
- ----------------------------------------------- U.S. stock market during the
Portfolio: At least 90% common stocks first half of the year
- ----------------------------------------------- continued through the second.
Inception: November 15, 1983 The major indexes climbed
- ----------------------------------------------- higher, driven in part by the
Net Assets at December 31, 1995: $552,964,985 technology, financial and
healthcare sectors."
--Value Line, Inc.
Investment Adviser
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Value Line Strategic Asset Management Trust 18 100
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Objective: High total return consistent with "Guided by the Value Line
reasonable risk Timeliness Ranking System, the
- ----------------------------------------------- Trust maintained a strong
Portfolio: Stock, bonds and money market position in a well-diversified
instruments portfolio of stocks invested
- ----------------------------------------------- in companies with strong
Inception: 10/1/87 earnings momentum and strong
- ----------------------------------------------- stock price momentum."
Net Assets at December 31, 1995: $870,688,025 --Value Line, Inc.
- ----------------------------------------------- Investment Adviser
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The Guardian Separate Account 22
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The Guardian Stock Fund
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[PHOTO]
of
Charles E. Albers, C.F.A.
Portfolio Manager
Q. This has been a terrific year for all investment classes in the U.S. How
has the Fund performed in this market ?
A. Stock market returns in 1995 were far above the previous 25-year compound
annual S&P 500 Index rate of 11.0%.(1) The 37.36% total return on the S&P 500
Index surpassed the 37.16% return of 1975, and one must go back to 1958 to find
a higher return, 43.36%. Three major factors were behind 1995's stellar
performance. First, the market experienced a drop in long-term interest rates
during the year of roughly 2 full percentage points, from 7.9% to 5.9% on the
30-year Treasury Bond. Second, U.S. businesses generally experienced strong
operating profits in 1995, with earnings from operations for S&P 500 companies
increasing by roughly 14% from 1994 levels. And third, until the federal budget
crisis at year's end, there was a reasonably balanced domestic political
environment in 1995, with hopes for a reduction of capital gains taxes providing
a special impetus to the securities markets.
Most stock market investors did very well in 1995. However, the average
investor had a lot of trouble keeping up with the performance of the S&P 500
Index, which was pulled upward by the strong leadership of roughly 25-50
large-capitalization growth stocks. For example, the Russell 2000 Index, a
measure of small-capitalization stock behavior, returned only 28.45%, fully
8.91% behind the S&P 500.(1)
In this context, for the fifth consecutive year, The Guardian Stock Fund
succeeded in outperforming the average U.S. equity growth fund offered through
various insurance products, our peer group, as tracked by Lipper Analytical
Services, Inc., an independent mutual fund monitoring organization. The Guardian
Stock Fund produced a total return to shareholders of 34.66% in 1995,(2)
compared with a lesser average return of 32.47% from the Lipper peer group
average.(3)
We are particularly proud of the Fund's long-term record. Over the last 5
years, the Fund's performance, as measured by total return, has ranked it among
the top 5 U.S. variable equity growth funds, based on Lipper data.(4)
Q. Has there been any change in portfolio management strategy? What has been
the impact of portfolio manager judgment during 1995?
A. Our basic strategy has not changed. As you know, we use several quantitative
models in managing the Fund, and believe that this has given us a competitive
advantage over the years. Our multi-factor stock-scoring system has helped us
keep the portfolio positioned in the more attractive stocks and sectors. This
system performed well again in 1995.
One portfolio characteristic where judgment comes into play is the
positioning with respect to capitalization-size of stocks in the portfolio.
Beginning in the first quarter of 1995, our analysis suggested that a move to
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(1) The S&P 500 Index is an unmanaged index of 500 stocks that is generally
considered to be representative of U.S. stock market activity. Likewise,
the Russell 2000 Index is another index comprising 2,000 stocks with
smaller capitalization than those of the S&P 500 Index and generally is
considered to be another reflection of stock market performance. Neither
index is available for investment.
(2) 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 annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that the value of your investment, when
redeemed, may be worth more or less than the original cost.
(3) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted.
(4) Lipper rankings were reported in Lipper's Variable Annuity Performance
Analysis Special Report, 4th Quarter 1995. Rankings for the periods ended
December 31, 1995 illustrate the Fund versus other U.S. variable equity
growth funds in the specified period. The Fund ranked 8 out of a field of
28 growth funds over the ten-year period, 5 out of 48 for the five-year
period and 40 out of 98 for the one-year period. Lipper rankings are based
on total return and do not take into account any deductions for sales
loads.
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4
<PAGE>
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Weighted Average Market Capitalization
[The following table was represented by a bar chart in the printed material.]
Date Amount
---- ------
12/31/94 $6,224
3/31/95 $8,829
6/30/95 $14,012
9/30/95 $20,040
12/31/95 $22,590
larger capitalization stocks was desirable, and we moved substantially in that
direction, as the above chart indicates.
As noted earlier, the large capitalization stocks produced the highest
market performance in 1995, so our move was in the right direction. However, in
retrospect, we did not go far enough in implementing this theme. The weighted
average market capitalization of the S&P 500 Index was $30.57 billion at
year-end and, ideally, our portfolio would have had an even higher
average-capitalization size.
Another important portfolio characteristic we must deal with is the weight
of the investments in each economic sector. Set forth on the following page are
pie charts showing how sector weightings changed during 1995.
The largest shift in sector weighting during 1995 was in Consumer Staples,
which we increased from 8.06% to 18.33% of the portfolio. This group includes
companies providing food, beverages, drugs and household products. Naturally,
these stocks were favorably ranked by our proprietary stock scoring models;
also, investing in these relatively large-cap, high-quality companies was
consistent with our overall theme of increasing those characteristics in the
portfolio. This shift has been positive for performance, as this sector provided
returns above the broad market average during 1995. The other large increase in
sector weight was in Utilities, which was increased from 0.29% up to 9.46% of
the portfolio during 1995. Although the overall Utility sector slightly
underperformed the S&P 500, the Fund's investments were made primarily in the
telecommunications portion of the Utility sector, which outperformed the S&P
500. In the telecommunications sector, here again, our stock scoring system
identified some stocks which were well-ranked by our system, and exhibited the
high-quality characteristics which we are presently emphasizing.
The Capital Goods-Technology sector, which comprised on average one quarter
of the Fund's holdings through the year, produced an above-average performance
during 1995, when compared to the overall performance of the S&P 500. This
sector produced outstanding returns during the first three quarters, but was a
relative loser during the fourth. While these stocks were a major plus for the
Fund during the year as a whole, the Fund's quarterly performance reflected the
manic behavior of these volatile technology stocks.
Q. Mr. Albers, you have received a lot of favorable press coverage this year,
including The New York Times and Investor's Business Daily. Any comment?
A. Basically, I try to manage these things so that media events do not take very
much of my time. I believe it's very important for a portfolio manager to stay
focused on the portfolio in order to achieve superior results.
As you know, I've been managing this Fund since its inception in 1983, and
media coverage has fluctuated from year-to-year. I really don't concern myself
greatly with what the press is (or isn't) saying about me currently. My view is
simply that if I keep doing the right things for the portfolio, then the
performance figures will generally work out well most of the time . . . and so
will the media coverage.
Q. What is your outlook for 1996? And what changes do you anticipate making in
the Fund?
A. It is hard to predict the future and just because something happened in the
past doesn't mean that it will happen again. But with that said, we hope to
learn from our good choices and mistakes in 1995 and do a better job in 1996.
Naturally, we will continue to follow the guidance of our proprietary
stock-scoring system closely in 1996, because it has been such a reliable guide
in the past.
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5
<PAGE>
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The economic outlook for 1996 is murky, as is generally the case.
Currently, the evidence seems to suggest that U.S. economic growth and the rate
of profit growth are both slowing from the recent strong levels. In this type of
slow-growth environment, historically the best performance has been found in the
stocks of higher-quality companies, which are more resistant to profit
pressures. Accordingly, during early 1996 we expect to continue moving the
Fund's portfolio toward these higher-quality stocks.
The market's 37.36% return in 1995 is not likely to be repeated soon. A
review of the last 50 years of market history shows: after a "big" year (over
+35%, like 1995), in 75% of cases another above-average year follows. Although
past performance is no guarantee of future results, the history is compelling.
So in line with that historical pattern, we believe that many of the positive
underlying valuation dynamics which gave us a great 1995 are still in place, and
that investors may enjoy some excellent returns in the future, too.
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The Guardian Stock Fund Profile
as of December 31, 1995
- ---------------------------------
Comparison of Common Stocks Held by the Fund on December 31, 1994 and 1995 by
Economic Sector
[The following data was represented by two pie charts in the printed material.]
Consumer Cyclical -- 12.15% Consumer Cyclical -- 3.08%
Consumer Staples -- 8.06% Consumer Staples -- 18.33%
Other -- 17.54% Other -- 8.18%
Basic Industries -- 11.78% Basic Industries -- 7.39%
Financial -- 16.56% Financial -- 18.13%
Energy -- 8.40% Energy -- 12.10%
Utilities -- 0.29% Utilities -- 9.46%
Capital Goods-Technology -- 25.22% Capital Goods-Technology -- 23.33%
1994 1995
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[The following table was represented by a pie chart in the printed material.]
Portfolio Composition
The Guardian Stock Fund portfolio holds approximately 230 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.
Others 0.1%
Cash & Cash Equivalents 9.1%
Common Stocks 90.8%
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6
<PAGE>
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Growth of a Hypothetical $10,000 Investment
[The following table was represented by a line chart in the printed material.]
The Guardian S&P 500 Cost of
Stock Fund Index Living
---------- ----- ------
4/13/83 10000 10000 10000
10891 10843 10132
83 11028 10866 10336
10684 10327 10570
84 12218 11529 10754
14359 13501 10858
85 16129 15168 11162
20326 18307 11151
86 18888 17985 11294
22920 22897 11580
87 19240 18902 11794
23115 21282 12028
88 23159 21989 12313
26540 25594 12650
89 28613 28886 12884
28333 29748 13251
90 25223 27958 13679
29787 31937 13873
91 34293 36348 14087
34597 36196 14301
92 41177 39206 14515
46489 41100 14719
93 49396 43130 14913
47471 41666 15096
94 48767 43678 15310
58848 52467 15545
12/31/95 65667 59992 15667
A hypothetical $10,000 investment made at the inception of The Guardian Stock
Fund on April 13, 1983, would have grown to $65,667 on December 31, 1995. This
represents a total return of 556 percent. We compare our performance to that of
the S&P 500 Index, which is an unmanaged index that is generally considered the
performance benchmark of the U.S. stock market. While you may not invest
directly in the S&P 500 Index, a similar hypothetical investment would have had
a total return of 499 percent and would now be worth $59,992. 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(1)
Life of Fund
1 Year 5 Years 10 Years (since 4/13/83)
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The Guardian Stock Fund 34.65% 21.09% 15.07% 15.95%
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S&P 500 Index 37.36% 16.51% 14.75% 15.14%
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(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
actual total returns for owners of the variable annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that the value of your investment, when
redeemed, may be worth more or less than the original cost.
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7
<PAGE>
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The Guardian Bond Fund
- ------------------------
{PHOTO]
of
Michele S. Babakian,
Portfolio Manager
Q. How did The Guardian Bond Fund perform in 1995?
A. The Fund had a total return of 17.59% for the year.(1) This return compared
favorably to our Morningstar peer group of other variable annuity subaccounts
that invest in corporate bonds and other fixed income securities of various
quality ratings. This group had a total return of 17.12% for the year ended
December 31, 1995.(2) In 1995, the environment was ideal for bonds. The U.S.
economy experienced modest economic growth and low inflation throughout the
year. By the end of the second quarter, it appeared that a "soft landing" was
being well orchestrated by the Federal Reserve Board. As a result, investors
began to anticipate lower interest rates, and the bond markets rallied through
the end of the third quarter, when the prospects for a deficit reduction package
seemed bright.
Q. What were the main factors that affected the Fund's performance in 1995?
A. Though the Fund outperformed our peer group, we underperformed our broad
market index, the Lehman Aggregate Bond Index, which produced a total return of
18.47 percent.(3) There are two main reasons why the Fund underperformed the
Index.
First was our choice of duration. "Duration" is used to measure the price
change of a bond as market yields vary. At the beginning of 1995, the average
duration of the Fund's holdings was 3.86 years. We positioned the Fund with a
duration shorter than the Index's average duration of 4.67 years because the
economic statistics suggested a strong economy with the potential for increased
inflation. This scenario would have put us in a bear market where yields rise
and prices fall and where a shorter duration portfolio would have been
beneficial. However, by May, it appeared economic growth had moderated and we
increased the Fund's duration to 4.76 years by June 30. At December 31, the Fund
had an average duration of 4.86 years, which was longer than the Index's
year-end average duration of 4.47 years.
The second reason for the under performance compared to the Index was due
to the Fund's under exposure in the corporate bond sector for the year. In 1995,
the best performing bond market sector was the long duration, high-grade
corporate sector (which according to Lehman data provided a return for the 1995
calendar year of 22.25%). Within the corporate sector, basic industry,
transportation and Yankee bonds (i.e., dollar denominated bonds issued by
foreign companies) were among the best performing categories. At the beginning
of the year, the Fund held 24.5% in corporates (the Index held 16.03%), but
also, the corporates held by the Fund were, on average, of shorter duration than
the ones held by the Index, as discussed above. To make up for this shortfall,
the Fund started to increase its investment in corporates with longer durations
and by midyear, we had increased our holdings to 26.0% of the Fund's assets. We
ended the year with 29.5% of our portfolio in corporates.
- --------------------------------------------------------------------------------
(1) 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 annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that the value of your investment, when
redeemed, may be worth more or less than the original cost.
(2) Morningstar is an independent mutual fund monitoring and rating service and
its database of performance information is based on historical total
returns, which assume the reinvestment of dividends and distributions, and
the deduction of all fund expenses. Morningstar returns do not reflect the
deduction of sales loads, and performance would be different if sales loads
were deducted.
(3) 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 investment.
- --------------------------------------------------------------------------------
8
<PAGE>
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Q. Besides the movement into corporate debt instruments, what else did you
favor?
A. During 1995, the Fund increased its holdings of asset-backed securities from
2.3% of the Fund on December 31, 1994 to 13.2% on December 31, 1995.
Asset-backed securities are short-term bonds backed by the interest and
principal payments on credit card, automobile loans and other consumer debt. In
1995, the asset-backed securities sector of the bond market had a total return
of 13.43%, according to Lehman figures. While this return is not as high as the
return generated from corporates, asset-backed securities are an important part
of the Fund's portfolio because they fill a gap in duration. To keep the Fund's
portfolio balanced and not create undue risk, we seek to have bonds in all
maturity ranges. Although the duration of asset-backed securities is typically
comparable to the duration found in short-term Treasury notes, we found the
return on asset-backed securities satisfactory--better, in fact, than the return
on Treasury notes, with only slightly greater risk. We limited our selection of
bonds in this sector to triple-A rated securities.
Q. What is your outlook for the bond market?
A. Despite the budget impasse in Washington, which is presently of much concern
to the bond market, there are very positive themes that can be identified as we
begin 1996. We are encouraged that the gross domestic product is expected to be
less than 3.0% for the year. Inflation, as measured by the consumer price index,
is expected to be approximately 2.8%. In relation to inflation, real returns on
bonds are still high, so we have room for yields to rally further. In this
environment, the Fund will seek to analyze and invest in selective investment
opportunities to provide investors with positive returns with limited investment
risk.
- --------------------------------------------------------------------------------
The Guardian Bond Fund Profile
as of December 31, 1995
- --------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year ........................................................ 17.59%
5 Years ....................................................... 9.31%
10 Years ...................................................... 9.22%
Since Inception (5/1/83) ...................................... 9.93%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a Hypothetical $10,000 Investment
[The following table was represented by a line chart in the printed material.]
Date Guardian Bond Fund Lehman Aggregate Bond Index
- ---- ------------------ ---------------------------
5/1/83 10000 10000
83 9925 10204
84 11219 11750
85 13728 14347
86 15766 16537
87 15816 16992
88 17351 18332
89 19758 20996
90 21254 22877
91 24695 26538
92 26597 28502
93 29218 31281
94 28209 30369
12/31/95 33170 35979
To give you a comparison, the chart above shows the performance of a $10,000
investment made in The Guardian Bond Fund and the Lehman Aggregate Bond Index.3
Investment return and principal value of an investment will fluctuate, so that
the value of your investment, when redeemed may be worth more or less than the
original cost. Past performance is not a guarantee of future results.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Portfolio Composition by Asset Class
[The following table was represented by a pie chart in the printed material.]
Cash Equivalents - 3.3%
U.S. Governments & Agencies - 25.8%
Corporate Bonds - 29.5%
Multi Class Mortgage Pass-Throughs - 22.4%
Asset-Backed Securities - 13.2%
Mortgage Pass-Throughs - 5.8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percentages of invested assets exclude other assets and liabilities. For a
complete list of portfolio holdings, please see the Schedule of Investments.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------
[PHOTO]
of
Mario J. Gabelli, C.F.A.
Portfolio Manager
Q. How has the Fund performed in its first seven months of existence and what
would you identify as your Fund's competitive strengths or advantages?
A. From the Fund's inception on May 1, 1995 through December 31, 1995, the Fund
had a total return of 8.4%.(1) The Fund's performance was positively affected by
the overall strong performance of the U.S. stock market, as stock picking took a
back seat to market momentum in generating returns. We invested our new cash
selectively in this rising market. If the market loses steam in 1996, stock
pickers will have the opportunity to excel. The motto of our firm is "creating
wealth through research." We believe that thorough fundamental research on
individual stocks is our greatest strength and is the key to delivering
potentially superior long-term investment returns.
Q. How has your investment strategy/focus changed, if at all, in the last
quarter? What conditions or events prompted that change?
A. Our strategy, which is to buy stocks trading at a deep discount to their
"real world" economic value, does not change. Specific pockets of value change
with economic, market and regulatory conditions. Broadcast stocks, which had
been stellar performers over the first three quarters of 1995, got hit hard in
the fourth quarter and are once again outstanding values. With more
consolidation in the industry likely in the year ahead and earnings rebounding
with the Olympics and, more importantly, election year advertising, the
broadcasters should do quite well. Telecommunications and cable television
stocks should also perform well, as a comprehensive telecommunications bill
finally diminishes the regulatory uncertainty that has plagued these industries.
Selected industrial franchises will also prove rewarding as corporate buyers
here and abroad focus on expanding their product lines and distribution systems.
Q. What is your economic overview of the fourth quarter? What is your
economic/financial market outlook for 1996?
A. The economy landed with its nose up in the fourth quarter, propelling the
equities market to record levels. Investors shrugged off soft earnings
comparisons in anticipation of lower interest rates and slow, but steady,
economic growth in 1996. Market leadership shifted from the broad technology
sector to consumer non-durables, offering more predictable earnings growth in
the year ahead.
Looking out to 1996, we expect 2.5% to 3% domestic gross domestic product
growth and 6% to 9% earnings growth for the S&P 500 Index.(2) Food and fuel
prices may rise modestly, but wages will remain constrained and inflation in
total will not be a problem in the year ahead. Interest rates are the wild card
for 1996. The consensus is that, with a soft economy, low inflation, lower
interest rates in Europe, a balanced budget agreement, and a Federal Reserve
Chairman up for reappointment in an election year, long-term interest rates
should come down. With a flat yield curve, we could see the Fed drop short rates
without long rates following, particularly if we get a watered down balanced
budget compromise. Price/earnings multiples are a function of earnings growth
and longer-term interest rates. If earnings growth slows as we anticipate and
long rates remain flat or trend modestly higher, stock multiples are likely to
- --------------------------------------------------------------------------------
(1) 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 annuity contracts or variable life
insurance policies which provide for investment in the Fund will be lower
to reflect separate account and contract/policy charges. Past performance
is not a guarantee of future results. Investment return and principal value
will fluctuate so that the value of your investment, when redeemed, may be
worth more or less than the original cost.
(2) The S&P 500 Index is an unmanaged index that is generally considered to be
representative of U.S. stock market activity and does not reflect deduction
of fees and expenses, which has been deducted within the Fund. The S&P 500
Index is not available for direct investment.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
contract. Our conclusion from all this conjecture is a much less inspiring
overall stock market in 1996.
Q. Do you have any overall Fund "Pearls of Wisdom"?
A. We were among the first on Wall Street to proclaim the beginning of the third
great wave of takeovers since World War II. Record setting merger and
acquisition activity, highlighted by a big jump in hostile deals this year,
further validates this thesis. In 1995, it was the three Bs: banks,
broadcasters, and brokers. In 1996, we believe deal activity will spread to
small and mid-sized industrial franchises. If we do get capital gains tax
relief, smaller companies that still have substantial family ownership will be
on the market.
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund Profile
as of December 31, 1995
- ------------------------------------
TOTAL RETURN(1)
- --------------------------------------------------------------------------------
Since Inception (5/1/95) ..................................... 8.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a Hypothetical $10,000 Investment
[The following table was represented by a line chart in the printed material.]
S&P 500 Index Gabelli Capital Asset Fund
------------- --------------------------
5/1/95 10000 10000
May 31 10399 10050
Jun 30 10641 10200
Jul 31 10994 10414
Aug 31 11021 10529
Sep 30 11486 10582
Oct 31 11445 10476
Nov 30 11948 10759
12/31/95 12178 10856
To give you a comparison, the chart above shows the performance of a $10,000
investment made in the Gabelli Capital Asset Fund and in the S&P 500 Index.(2)
Investment return and principal value of an investment will fluctuate, so that
the value of your investment, when redeemed, may be worth more or less than the
original cost. Past performance is not a guarantee of future results.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top Ten Holdings
1. Cablevision Systems Corporation
2. GEICO Corp.
3. Magma Copper Company
4. Time Warner Inc.
5. Sequa Corporation
6. International Family Entertainment, Inc.
7. United Television, Inc.
8. Quaker Oats Company
9. Cellular Communications, Inc.
10. Capital Cities/ABC, Inc.
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ------------------------------------
[PHOTO]
of
R. Robin Menzies,
Portfolio Manager
Q. Markets in the United States have done very well this year. How have
international markets and the Fund performed?
A. International markets rose a decent 11.55% for the year ended December 31,
1995 according to our benchmark index, the Morgan Stanley Capital International
(MSCI) Europe, Australia and Far East (EAFE) Index, but international markets
were overshadowed by a very strong Wall Street.(1) In dollar terms, according to
MSCI, the best performing area internationally during 1995 was Continental
Europe (up 22.6%) and the worst was Japan (up a mere 0.9%). The main positive
influence on international equity markets was the significant fall in bond
yields in the course of the year, again led by the U.S. where the yield on the
long bond fell by almost 2% from December 31, 1994, to December 31, 1995. As
long bond yields fall, the more inclined large institutional investors are to
buy equities instead of bonds since stocks offer potentially higher albeit more
volatile capital returns. Profits and dividend growth were generally
satisfactory in the international markets, but most economies outside the Far
East slowed as the year progressed. The main positive unanticipated profits
arose from companies shedding labor to cut costs. The Fund performed well in
1995, rising by 11.23%.(2)
Q. What factors affected performance this year?
A. While the Fund benefited during the year as a whole from not having as much
in Japan as did the MSCI/EAFE Index, the most significant factor helping
performance was the increase we made to the Japanese stake in early July. (The
Fund held 32% on average in Japan during the year, as compared to over 40% in
the Index). This may sound contradictory, but let me explain. During the first
half of the year, Japan was very weak, down 21.9% measured in yen, again
according to MSCI. The Japanese economy stagnated due in part to a strong
currency which made exports more expensive. Also, during the year, concerns over
the state of the Japanese financial sector increased, rather like the S&L crisis
in the U.S. a few years ago. In dollar terms, much of the fall was offset by the
strength of the yen and the market was down by only 8% in dollars. By the middle
of the year however, once the trade dispute with the U.S. had been settled, we
saw the Japanese authorities, at last, taking a number of steps to boost their
economy, including lowering interest rates and printing money. We felt that this
would be good for the Japanese equity markets, even though it might well lead to
a weaker yen at the same time. So, we increased the proportion of the Fund
invested in Japan by about 5% of the total Fund, and at the same time we raised
the proportion of the Japanese assets hedged from 30% to 50%. This means that we
increased the percentage of our Japanese holdings that were protected (or
"hedged") from downward exchange rate (or currency) movement. In the second half
of 1995, this strategy worked. Japan's securities markets rose, according to
MSCI, by 9.9% in dollar terms, but in yen terms it was even stronger, up by
33.6%. Our partial yen hedge helped the Fund to secure some of that large
increase.
As we were increasing our Japanese holdings, we purchased Rohm, a world
leader in specialist semiconductors for industrial applications. Two Rohm
products that are doing particularly well at the moment are the lasers used in
- --------------------------------------------------------------------------------
(1) The Morgan Stanley Capital International EAFE Index is an unmanaged index
that is generally considered to be representative of international stock
market activity. The Index is capitalization-weighted and carries a
significantly higher weighting 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 the EAFE Index may
not therefore always correlate closely. The EAFE Index is not available for
investment.
(2) 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 annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that the value of your investment, when
redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
CD-ROM drives, and components for cellular telephones. The company has an
excellent record of new product development, and is also moving its production
to the low-cost countries of Asia. Its Dollar price rose by 36% over the year
1995.
Another factor that contributed to our overall performance was the strong
stock markets in continental Europe where we have 28.1% of our portfolio
invested. In Italy, we recently purchased Gucci. Over the past three years,
Gucci, the Italian luxury goods company, has cut costs and streamlined both its
product range and distribution network. While this process is continuing, Gucci
has started to take advantage of its powerful, but largely unexploited brand
name to increase sales. In the context of a favorable trading environment for
luxury goods, the outlook for earnings growth is very attractive.
Q. What is your outlook for 1996? And what changes do you anticipate making in
the Fund?
A. We are quite optimistic about the outlook for international equities in 1996.
We believe that there is room for further cuts in interest rates in Europe, and
we are impressed by the moves many companies have made to cut costs, and hence
to boost their profit margins. We will continue to look for high-quality
companies for the Fund to invest in, and may increase the proportion invested in
the so-called "Tiger" economies of the Pacific Rim, such as Hong Kong, Malaysia
and Singapore, where economic growth continues to be strong and stock prices
have lagged other areas recently.
- --------------------------------------------------------------------------------
Baillie Gifford International Fund Profile
as of December 31, 1995
- --------------------------------------------
AVERAGE ANNUAL RETURNS(2)
- --------------------------------------------------------------------------------
1 Year ....................................................... 11.23%
Since Inception (2/8/91) ..................................... 8.45%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a Hypothetical $10,000 Investment
[The following table was represented by a line chart in the printed material.]
Baillie Gifford International Fund The MSCI/EAFE Index
---------------------------------- -------------------
2/8/91 10000 10000
91 10860 10770
92 9885 9603
93 13250 12767
94 13366 13796
12/31/95 14867 15390
To give you a comparison, the chart above shows the performance of a $10,000
investment made in Baillie Gifford International Fund and the MSCI/EAFE
Index.(1) Investment return and principal value of an investment will fluctuate,
so that the value of your investment, when redeemed, may be worth more or less
than the original cost. Past performance is not a guarantee of future results.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Holdings
Company Nature of Company Country Percent
- --------------------------------------------------------------------------------
1. Mitsubishi
Heavy Inds. Industrial Machinery Japan 1.96%
2. Sanwa Bank Banking Japan 1.81%
3. DDI Corp. Telecommunications Japan 1.62%
4. Sandoz AG Drugs and Healthcare Switzerland 1.56%
5. Winterthur Insurance Switzerland 1.50%
6. Bridgestone
Corp. Tires and Rubber Japan 1.49%
7. Nomura
Securities Investment Company Japan 1.44%
8. Ciba Geigy AG Chemicals Switzerland 1.41%
9. Rohm Electronics Japan 1.35%
10. Kyocera Corp. Electronics Japan 1.32%
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- ---------------------------------------
[PHOTO]
of
Edward H. Hocknell,
Portfolio Manager
Q. Markets in the United States have done very well this year. How have
emerging market countries and the Fund performed?
A. 1995 overall was not a good year for emerging markets. Although their
performance since March has been more encouraging (up 7.3%), the International
Finance Corporation Investable (IFCI) Index declined by 8.4% for the year ended
December 31, 1995. There was, as usual, a wide range of returns between markets
during the year. According to the IFCI Index, the Latin American markets were
the weakest (Mexico fell by over 24%), while South Africa rose by 17.8%.(1)
The Fund outperformed the Index during 1995, but still showed a decline of
0.60%.(2) The main reason for the Fund's good relative performance was its
country and stock selection. The Fund managed to minimize some of the most
damaging elements of emerging market performance by either avoiding, or having
low weightings in, underperforming markets in the Indian subcontinent and in
Mexico. In general, the Fund was helped by its concentration on carefully
researched companies in the more soundly based emerging economies. For example,
when compared to the composition of the Index, the Fund benefited from a
relatively heavy weighting in Argentina, and from its large exposure to Hong
Kong, which together accounted for about 24% of the portfolio at year-end.
According to the IFCI Index, the total return from Argentina during 1995 was
13.1%, while Hong Kong gained 22.6% in 1995 (as reported by the MSCI Index).(3)
Q. The year-end edition of The Economist writes, "It was a bad year for
emerging markets. After a bungled devaluation in December 1994, Mexico was
saved from default by an American-led $38 billion rescue-package. Other
emerging economies suffered . . . as investors took fright and pulled money
out."(4) How do you respond to this?
A. This quotation from The Economist is a pretty fair description of what
happened in 1995. Investors panicked as they started to see the same sort of
problems that Mexico experienced in other, dissimilar countries. We had always
kept our Mexican weightings low because of our concerns about its public
finances, so our first reaction to the crisis was to re-examine our other bets:
Were these other countries really as badly placed as Mexico? The answer was no.
Just as an individual stock price can be pulled down by factors which really
have nothing to do with it, so too can whole stock markets. However, when it
became clear that Mexico's problems were deep-seated, we began a reduction in
our Latin American exposure. Our reaction was to concentrate our assets in
high-quality investments that had been unjustly beaten up and make a cautious
reduction of cash as markets stabilized. For example, we made a series of
successful investments in South Africa. This approach proved successful, and
helped to shelter the Fund from the worst of the declines.
Let me point out that The Economist in its first edition of the new year,
again speaking of emerging markets writes, "One dire year for emerging stock
markets is not necessarily bad news for those who have invested in them."(5) It
is important to remember the reason that some people invest in emerging markets
is to help them achieve, over the long-term, portfolio diversification and take
advantage of long-term potential growth. Portfolio diversification may be
- --------------------------------------------------------------------------------
(1) The IFCI Index is an unmanaged index that is generally considered to be
representative of the stock markets activity of emerging markets. 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
IFCI Index is not available for investment.
(2) 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 annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that the value of your investment, when
redeemed, may be worth more or less than the original cost.
(3) The MSCI (Morgan Stanley Capital International) Index is a leading
unmanaged index of international stocks. The MSCI Index is not available
for investment.
(4) The Economist, December 23, 1995, p 5.
(5) The Economist, January 6, 1996, p 15.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
achieved because emerging markets tend to move independently from developed
markets and the ups and downs in one market may help to cancel out movements in
the other. The Economist concludes its article by saying, that "for the
foreseeable future, emerging markets will still be a splendid way to spread
risk."(5) In our opinion, the declines in 1995 have left emerging markets well
poised for a recovery.
Q. What is your outlook for 1996? And what changes do you anticipate making in
the Fund?
A. Emerging market performance has always been volatile. After a down year in
1995, we are optimistic about the prospects for this year. Emerging market
countries now look like a good value, in many cases, because their markets have
been weak while, at the same time, their companies' earnings have been strong.
Latin American economies should begin to show some signs of recovery from
last year's crisis. Investors' fears about inflation, which have held back the
Asian markets, will probably abate. Investors may also wish to re-deploy their
profits from U.S. equities this year, which could help many overseas markets
and, if the mature economies continue to slow, the attractions of the rapidly
expanding emerging countries will probably be more widely recognized.
I do not anticipate any major changes in the Fund's strategy but, if
investor sentiment continues to improve, we may increase our exposure to some of
the smaller emerging markets, which would benefit disproportionately from an
in-flow of funds. But the Fund's policy will still be determined by the
availability of soundly based companies in the various markets in which it
invests.
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund Profile
as of December 31, 1995
- -----------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(2)
- --------------------------------------------------------------------------------
1 Year .......................................................... -0.60%
Since Inception (10/17/94) ...................................... -10.53%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio Composition by Region
[The following table was represented by a pie chart in the printed material.]
Other 8.1%
Latin America 31.6%
South Africa 8.8%
Europe 8.4%
Asia 43.1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Growth of a Hypothetical $10,000 Investment
Baillie Gifford
Date Emerging Markets Fund The IFCI Index
---- --------------------- --------------
10/17/94 10000 10000
12/31/95 8750 7579
To give you a comparison, the chart above shows the performance of a $10,000
investment made in Baillie Gifford Emerging Markets Fund and in the IFCI
Index.(1) Investment return and principal value of an investment will fluctuate,
so that the value of your investment, when redeemed, may be worth more or less
than the original cost. Past performance is not a guarantee of future results.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Value Line Centurion Fund
- -------------------------
[LOGO]
Q. In this year when U.S. markets have performed well, how has the Value Line
Ranking System performed? And how has the Fund performed?
A. The Value Line Ranking System greatly affects our performance because it
helps us determine which stocks to buy. The System enjoyed a solid year in 1995,
performing right in line with our expectations. On a capital-appreciation basis,
the Group 1 stocks (ranked highest for "Timeliness") returned 32.0%; Group 2,
27.1%; Group 3, 22.8%; Group 4, 20.3%; and Group 5, 15.7%. That compares with
33.3% for the Dow Jones Industrial Average and 37.36% for the S&P 500 Index.(1)
The Value Line Centurion Fund, which only purchases stocks ranked in Group
1 or 2, had a superb year in 1995, soaring 40.1% on a total-return basis,
compared with 37.36% for the S&P 500.(2) Our decision to selectively overweight
stocks in the technology, healthcare and finance sectors, all of which were
strong performers during 1995, allowed us to generate our excellent returns.
Q. What changes have you made to the portfolio this year?
A. Based on our judgment and our rating system, we have consistently
overweighted our stock selections in the technology and healthcare sectors
during both 1994 and 1995. This was due to the superior revenue and earnings
momentum and attractive relative valuation profiles exhibited by such sectors
when compared with the broad market as a whole. For example, we expect that the
S&P 500 Index will generate average revenue and earnings growth of about 6-7%
annually over the next several years. "Blue chip" technology and healthcare
stocks, however, are generally expected to grow their sales and profits at a
15-20% pace or more over the same period of time. Moreover, these stocks are
selling at reasonable growth-adjusted multiples of earnings, cash flow, book
value and revenues, making them the most potentially attractive sectors for
long-term investment.
We more than doubled our exposure in finance stocks over the past year,
from 7.97% to 17.69%, to benefit from the powerful rally that we had forecast in
the bond market. The 30-year Treasury Bond surged in price, as the yield plunged
from a high of 8.16% near the end of 1994 to a low of 5.94% at the end of 1995,
because of the slow-growth, lowinflation economic environment.
Pfizer (pharmaceuticals), Amgen (biotechnology), and 3Com Corporation
(computer networking) are examples of three blue chip stocks in healthcare and
technology, which more than doubled in price since we purchased them within the
last two years.
Q. What are your expectations for next year? Do you intend to make any
adjustments to your style box?
A. For 1996, we continue to believe that our "soft landing" thesis for the
economy remains intact, given our forecast for slow growth, benign inflation,
declining interest rates, and an elongated business cycle. We expect that
Federal Reserve Chairman Alan Greenspan will engineer interest rate cuts of 50
basis points in both the Federal Funds target rate and the discount rate during
the first quarter of 1996, to counteract the slowing economy that now exists,
and to offset any incremental weakness due to government spending cuts resulting
from an eventual federal budget resolution. The Fed Funds rate is the interest
rate that member banks charge each other when they lend money overnight, and
because of the very short duration of these loans, this rate is the most
volatile of all interest rates. While the Federal Reserve Board does not set the
- --------------------------------------------------------------------------------
(1) 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 that 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.
(2) 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 annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that the value of your investment, when
redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Fed Funds rate (the rate is set by supply and demand), the Fed can establish a
target rate and, through open market operations and can direct member banks to
move toward the target rate. The Fed does have the authority to set the discount
rate, which is the rate that the Fed charges when it lends money to member
banks. As a result, we expect the yield on the 30-year Treasury Bond to decline
from about 6.0% currently to about 5.5% by midyear.
Given our constructive outlook for the economy and interest rates, and our
forecast for modest corporate profit growth of about 6-7% during 1996, we are
estimating an upside objective for the Dow Jones Industrial Average of about
5,700-5,800 for this year.
Unfortunately, the uncertainty and unpredictability of the presidential
election in November 1996 could increase the volatility of the financial markets
after Labor Day, as we get into the full-blown heat of the campaign. Despite
this political uncertainty and potential market volatility, we will continue to
maintain a broadly diversified investment focus, with emphasis on undervalued
blue chip stocks that dominate their market niches and enjoy superior rates of
revenue and earnings growth.
- --------------------------------------------------------------------------------
Value Line Centurion Fund Profile
as of December 31, 1995
- ---------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(2)
- --------------------------------------------------------------------------------
1 Year ....................................................... 40.08%
5 Years ...................................................... 19.25%
10 Years ..................................................... 15.12%
Since Inception (11/15/83) ................................... 13.29%
- --------------------------------------------------------------------------------
[The following table was represented by a line chart in the printed material.]
- --------------------------------------------------------------------------------
Growth of a Hypothetical $10,000 Investment
Value Line Centurion Fund S&P 500 Index
------------------------- -------------
Nov 15, 83 10000 10000
83 9180 10038
84 8420 10650
85 11108 14012
86 12982 16613
87 12611 17461
88 13568 20312
89 17841 26684
90 18833 25827
91 28662 33660
92 30361 36217
93 33156 39841
94 32422 40347
Dec 31, 95 45416 55417
To give you a comparison, the chart above shows the performance of a $10,000
investment made in Value Line Centurion Fund and in the S&P 500 Index.(1)
Investment return and principal value of an investment will fluctuate, so that
the value of your investment, when redeemed, may be worth more or less than the
original cost. Past performance is not a guarantee of future results.
- --------------------------------------------------------------------------------
[The following table was represented by two pie charts in the printed material.]
- --------------------------------------------------------------------------------
Portfolio Composition by Economic Sector as of December 31, 1994 and 1995
Consumer Non-Durables -- 26.12% Consumer Non-Durables -- 27.39%
Capital Goods -- 18.85% Capital Goods -- 14.11%
Other -- 7.02% Other -- 6.58%
Financial -- 7.97% Financial -- 17.69%
Consumer Growth -- 16.17% Consumer Growth -- 6.69%
Technology -- 23.87% Technology -- 27.54%
1994 1995
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- ----------------------------------------------
[LOGO]
Q. The U.S. financial markets, both stocks and bonds, enjoyed a strong year in
1995. How did Value Line SAM Trust perform?
A. The SAM Trust certainly benefited from the favorable market environment. Its
total return of 28.54% for the year ended December 31, 1995,(1) placed it among
the top quintile of funds of its kind, according to Lipper Analytical
Services.(2) This compared with a total return of 37.36% for the Standard &
Poor's 500 Index and a total return of 19.24% for the Lehman
Government/Corporate Bond Index.(3)
You will be pleased to know that, for the eight years ended December 31,
1995, SAM Trust ranks number one for performance among the 31 funds of its kind,
according to Lipper Analytical Services.(2) SAM Trust is just over eight years
old.
Q. How did the Trust's asset allocation affect performance?
A. Contributing to the year's good performance was Value Line's generally
positive view of the stock market, particularly in the first seven months of
1995. Our proprietary stock market model relies on a number of economic and
financial variables to determine what percentage of the total portfolio will be
invested in stocks (55 percent would be neutral, meaning that the model has no
preference for either stocks or bonds). Early in the year, the portfolio's stock
allocation was gradually increased from 60 percent to a peak of 75 percent in
May and June. This increase was driven, in large measure, by a decline in
interest rates. At the end of July, due to the sharp rise in stock prices and a
flattening in interest rates (which turned out to be only temporary), the stock
allocation was moved back down to approximately 60 percent, where it remained
for the rest of the year.
The Trust's bond model did not do as well, maintaining a
neutral-to-negative view of the bond market throughout the year. The Trust had
only 10 percent to 12 percent of its assets in bonds. Thus, we tied up too many
assets in cash and cash equivalents in 1995, with the Trust averaging about 20
percent to 25 percent of assets in this asset class.
Q. How did selection of individual securities affect performance?
A. Individual stock selection was very good, as the stock portion of the
portfolio, viewed by itself, posted a total return of 37.8%. This return was
higher than the return of the S&P 500 Index in a year in which the majority of
stock investors lagged the S&P 500. Benefiting the Trust were its moderately
heavy weightings in healthcare, technology and aerospace/defense. (These
weightings did not change much from the prior year.) Guided by the Value Line
Timeliness Ranking System, the Trust maintains a well-diversified stock
portfolio invested in companies with strong earnings momentum and strong stock
price momentum.
Bond selection was a plus, too, with more than half of the bond allocation
invested in long-term maturities, which provided more bang for the buck in the
strong bond market. By policy, the Trust invests only in high-quality bonds.
- --------------------------------------------------------------------------------
1 Total return figures are historical and assume the reinvestment of
dividends and distributions, and the deduction of all Trust expenses. The
actual total returns for owners of the variable annuity contracts or
variable life insurance policies which provide for investment in the Trust
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that the value of your investment, when
redeemed, may be worth more or less than the original cost.
2 Lipper rankings were reported in Lipper's Mutual Funds Performance Analysis
Special Report, 4th Quarter 1995. Rankings for the periods ended December
31, 1995, illustrate the Trust versus other funds in the specified period.
The Fund ranked 3 out of a field of 53 underlying flexible variable annuity
funds over a five-year period and 11 out of 66 for the one-year period.
Lipper rankings are based on total return and do not take into account any
deductions for sales or contract charges.
3 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.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Currently, its holdings are entirely in U.S. Treasuries, as they have been for
the past three years.
Q. How do you plan to position the Fund in 1996? What do your market models
say about 1996?
A. The Trust entered 1996 just as it entered 1995, with 60 percent of assets
invested in stocks. And just as in 1995, we moved the stock allocation up to 65
percent in January, due primarily to a further drop in U.S. interest rates.
Thus, we will take a moderately positive stance on the stock market for the
months ahead. Could our model become still more bullish, in a repeat of last
spring? Perhaps, but that would probably require either a continuation of the
interest rate decline or a significant pullback in stock prices.
Meanwhile, our bond model still leans toward a negative stance because of
an anticipation of rising interest rates. This causes us to leave our bond
allocation at 10 percent to 12 percent. That leaves 20 percent to 25 percent in
cash and cash equivalents, which is above the Trust's long-term norm of about 10
percent. As mentioned earlier, in a neutral market our portfolio allocation
would be approximately 55 percent stocks, 35 percent bonds and 10 percent cash.
However, until our models perceive a more neutral environment, we will maintain
this disproportionate weighting in cash.
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
Profile as of December 31, 1995
- -------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year .......................................................... 28.54%
5 Years ......................................................... 17.66%
Since Inception (10/1/87) ....................................... 14.04%
- --------------------------------------------------------------------------------
[The following table was represented by a pie chart in the printed material.]
- --------------------------------------------------------------------------------
Portfolio Composition by Asset Class
Cash & Cash Equivalents 30.0%
Stocks 60.2%
Bonds 9.8%
- --------------------------------------------------------------------------------
[The following table was represented by a line chart in the printed material.]
- --------------------------------------------------------------------------------
Growth of a Hypothetical $10,000 Investment
Date SAM Trsut L G/C Index S&P 500
- ---- --------- ----------- -------
10/1/87 10000 10000 10000
87 9476 10583 7745
88 10452 11385 9010
89 13123 13006 11836
90 13104 14083 11456
91 18783 16355 14931
92 21611 17594 16065
93 24173 19535 17673
94 22994 18849 17897
12/31/95 29556 22476 24582
To give you a comparison, the chart above shows the performance of a $10,000
investment made in the Value Line SAM Trust, the S&P 500 Index and in the Lehman
Government/Corporate Bond Index(3). Investment return and principal value of an
investment will fluctuate, so that the value of your investment, when redeemed,
may be worth more or less than the original cost. Past performance is not a
guarantee of future results.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Cash Fund
- ------------------------
[PHOTO]
of
Alexander M. Grant, Jr.
Portfolio Manager
Q. How did The Guardian Cash Fund perform during 1995?
A. As of December 31, 1995, the effective 7-day yield was 5.40%, down slightly
from June 30, 1995, when the effective 7-day yield was 5.66%. The Fund produced
a total return of 5.52% for 1995.(1)
Q. What factors affected the Fund's performance in 1995?
A. Money market funds are directly affected by the actions of the Federal
Reserve Board. In February, the Fed raised the Fed Funds target rate 0.50
percentage points to 6.00%, the seventh such increase in a year. The Fed Funds
Rate is the interest rate that member banks charge each other when they lend
money overnight. While the Federal Reserve Board does not set this rate, it can
establish a target rate and, through open market operations, the Fed can direct
member banks to move toward the target rate. As the economy slowed in the
spring, investors began to expect the Fed to lower interest rates. As a result,
market forces exerted downward pressure on the rates offered on short-term
instruments, i.e., the type of investments made by the Fund, even before the Fed
acted. In July, and again in December, the Fed lowered rates .25 percentage
points. At year-end, the Fed Funds target rate was 5.50%.
Q. What is your investment strategy?
A. We look at The Guardian Cash Fund as a place where most people will park
their money until they decide where they want to invest it--whether it be
stocks, bonds or tax-exempts. Therefore, we try, and will continue to try, to
provide a good 7-day yield offering safety and liquidity. As a result, the Fund
invests primarily in top-rated commercial paper due within 30 days. At the end
of 1995, the Fund's average maturity was 19 days for maximum liquidity and
safety. A shorter maturity is less volatile when interest rates fluctuate.
During the next year, we will continue our investment strategy to provide
investors with liquidity and preservation of capital.
- --------------------------------------------------------------------------------
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.
(1) Yields are annualized historical figures. Effective yield assumes that
income is reinvested income. Yields will vary as interest rates change. The
actual total return for owners of the variable annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results.
20
<PAGE>
- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
21
<PAGE>
<TABLE>
- ------------------- -------------------
Separate Separate
Account A Account A
- ------------------- -------------------
1 1
- ------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
The Guardian Separate Account A
- -------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<S> <C>
Assets
Investments in mutual funds:
The Guardian Stock Fund, Inc. (11,438,191 shares at net asset value of $34.72
per share; FIFO Cost, $260,430,528) .................................................................. $397,133,987
The Guardian Bond Fund, Inc. (8,381,083 shares at net asset value of $12.25
per share; FIFO Cost, $99,552,805) ................................................................... 102,668,273
The Guardian Cash Fund, Inc. (11,200,557 shares at net asset value of $10.00
per share; which equals cost) ........................................................................ 112,005,571
Gabelli Capital Asset Fund (183,719 shares at net asset value of $10.70
per share; FIFO Cost, $1,945,413) .................................................................... 1,965,791
Baillie Gifford International Fund (2,226,048 shares at net asset value of $15.37
per share; FIFO Cost, $31,924,659) ................................................................... 34,214,359
Baillie Gifford Emerging Markets Fund (391,979 shares at net asset value of $8.46
per share; FIFO Cost, $3,206,532) .................................................................... 3,316,146
Value Line Centurion Fund, Inc. (7,688,180 shares at net asset value of $24.25
per share; FIFO Cost, $89,416,840) ................................................................... 186,438,368
Value Line Strategic Asset Management Trust (6,536,455 shares at net asset
value of $20.27 per share; FIFO Cost, $78,460,004)
132,493,938
------------
Total Assets ............................................................................................. 970,236,433
------------
Liabilities
Annuitant Mortality Fluctuation Fund ..................................................................... 7,026,864
Due to The Guardian Insurance & Annuity Company, Inc. .................................................... 874,972
------------
Total Liabilities ........................................................................................ 7,901,836
------------
Net Assets-- Note 3 ....................................................................................... $962,334,597
============
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
The Guardian Separate Account A
- -------------------------------
COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
Guardian Guardian
Stock Bond
Combined Fund Fund
---------------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Reinvested dividends .................................................... $ 20,843,161 $ 4,759,765 $ 6,205,516
Expenses -- Note 4:
Mortality and expense risk charges ...................................... 9,641,479 3,681,489 1,004,541
------------ ------------ ------------
Net investment income/(expense) ............................................ 11,201,682 1,078,276 5,200,975
------------ ------------ ------------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ....................... 61,676,875 31,983,438 2,335,700
Reinvested realized gain distributions .................................. 24,472,650 17,641,220 --
------------ ------------ ------------
Net realized gain/(loss) on investments ................................. 86,149,525 49,624,658 2,335,700
------------ ------------ ------------
Unrealized appreciation/(depreciation) of investments:
End of year ............................................................. 293,294,084 136,703,457 3,115,468
Beginning of year ....................................................... 182,461,918 85,848,769 (4,560,756)
------------ ------------ ------------
Change in unrealized appreciation/(depreciation) ........................ 110,832,166 50,854,688 7,676,224
------------ ------------ ------------
Net realized and unrealized gain/(loss) from investments ................... 196,981,691 100,479,346 10,011,924
------------ ------------ ------------
Net Increase/(Decrease) in Net Assets Resulting from Operations ............. $208,183,373 $101,557,622 $ 15,212,899
============ ============ ============
<CAPTION>
Gabelli Baillie
Guardian Capital Gifford
Cash Asset International
Fund Fund Fund
---------------------------------------------
Investment Income
Income:
Reinvested dividends .................................................... $ 6,760,187 $ 6,229 $ 561,636
Expenses -- Note 4:
Mortality and expense risk charges ...................................... 1,553,639 8,575 346,183
------------ ------------ -----------
Net investment income/(expense) ............................................ 5,206,548 (2,346) 215,453
------------ ------------ -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ....................... -- 46,326 3,163,941
Reinvested realized gain distributions .................................. -- 20,051 1,450,788
------------ ------------ -----------
Net realized gain/(loss) on investments ................................. -- 66,377 4,614,729
------------ ------------ -----------
Unrealized appreciation/(depreciation) of investments:
End of year ............................................................. -- 20,379 2,289,701
Beginning of year ....................................................... -- -- 3,981,850
------------ ------------ -----------
Change in unrealized appreciation/(depreciation) ........................ -- 20,379 (1,692,149)
------------ ------------ -----------
Net realized and unrealized gain/(loss) from investments ................... -- 86,756 2,922,580
------------ ------------ -----------
Net Increase/(Decrease) in Net Assets Resulting from Operations ............. $ 5,206,548 $ 84,410 $ 3,138,033
============ ============ ===========
<CAPTION>
Baillie Value Line
Gifford Strategic
Emerging Value Line Asset
Markets Centurion Management
Fund Fund Trust
---------------------------------------------
Investment Income
Income:
Reinvested dividends .................................................... $ 64,244 $ 768,565 $ 1,717,019
Expenses -- Note 4:
Mortality and expense risk charges ...................................... 30,308 1,746,994 1,269,750
------------ ------------ -----------
Net investment income/(expense) ............................................ 33,936 (978,429) 447,269
------------ ------------ -----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ....................... (100,857) 15,666,522 8,581,805
Reinvested realized gain distributions .................................. -- 4,303,964 1,056,627
------------ ------------ -----------
Net realized gain/(loss) on investments ................................. (100,857) 19,970,486 9,638,432
------------ ------------ -----------
Unrealized appreciation/(depreciation) of investments:
End of year ............................................................. 109,615 97,021,527 54,033,937
Beginning of year ....................................................... (65,755) 62,690,889 34,566,921
------------ ------------ -----------
Change in unrealized appreciation/(depreciation) ........................ 175,370 34,330,638 19,467,016
------------ ------------ -----------
Net realized and unrealized gain/(loss) from investments ................... 74,513 54,301,124 29,105,448
------------ ------------ -----------
Net Increase/(Decrease) in Net Assets Resulting from Operations ............. $ 108,449 $ 53,322,695 $29,552,717
============ ============ ===========
See notes to financial statements
</TABLE>
22-23
<PAGE>
<TABLE>
<CAPTION>
- ------------------- -------------------
Separate Separate
Account A Account A
- ------------------- -------------------
1 1
- ------------------- -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
The Guardian Separate Account A
- -------------------------------
COMBINED STATEMENT OF CHANGES IN NET ASSETS
Years Ended December 31, 1994 and 1995
Guardian Guardian
Stock Bond
Combined Fund Fund
-----------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------
1994 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 7,611,435 $ 1,325,861 $ 4,908,213
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)
------------- ------------- -------------
- --------------------------
1994 Contract Transactions
- --------------------------
Net contract purchase payments ................................ 30,344,490 11,664,318 2,547,339
Transfer between/within separate accounts ..................... 581,497 (844,472) (11,899,302)
Administrative charges-- Note 4 ............................... (851,962) (296,277) (95,188)
Redemptions and annuity benefits .............................. (95,014,187) (23,366,710) (11,830,757)
------------- ------------- -------------
Net increase/(decrease) from contract transactions ............ (64,940,162) (12,843,141) (21,277,908)
------------- ------------- -------------
Actuarial Increase in Reserves for Contracts in Payment Period . 65,173 16,085 14,461
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets ........................ (87,117,163) (20,042,453) (26,370,739)
Net Assets at December 31, 1993 ............................... 921,644,241 324,053,638 123,979,185
------------- ------------- -------------
Net Assets at December 31, 1994 ............................... $ 834,527,078 $ 304,011,185 $ 97,608,446
============= ============= =============
- ----------------------------------------
1995 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 11,201,682 $ 1,078,276 $ 5,200,975
Net realized gain/(loss) from sale of investments ............. 61,676,875 31,983,438 2,335,700
Reinvested realized gain distributions ........................ 24,472,650 17,641,220 --
Change in unrealized appreciation/(depreciation) of investments 110,832,166 50,854,688 7,676,224
------------- ------------- -------------
Net increase/(decrease) resulting from operations ............. 208,183,373 101,557,622 15,212,899
------------- ------------- -------------
- --------------------------
1995 Contract Transactions
- --------------------------
Net contract purchase payments ................................ 24,249,434 9,769,130 1,889,775
Transfer between/within separate accounts ..................... 360,065 18,636,937 76,952
Administrative charges-- Note 4 ............................... (804,227) (295,556) (82,042)
Redemptions and annuity benefits .............................. (104,254,320) (36,680,887) (12,073,173)
------------- ------------- -------------
Net increase/(decrease) from contract transactions ............ (80,449,048) (8,570,376) (10,188,488)
------------- ------------- -------------
Actuarial Increase in Reserves for Contracts in Payment Period . 73,194 21,406 10,093
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets ........................ 127,807,519 93,008,652 5,034,504
Net Assets at December 31, 1994 ............................... 834,527,078 304,011,185 97,608,446
------------- ------------- -------------
Net Assets at December 31, 1995-- Note 3 ...................... $ 962,334,597 $ 397,019,837 $102,642,950
============= ============= =============
<CAPTION>
Gabelli Baillie
Guardian Capital Gifford
Cash Asset International
Fund Fund Fund
-----------------------------------------------------------
- ----------------------------------------
1994 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 3,939,150 $ -- $ (54,941)
Net realized gain/(loss) from sale of investments ............. -- -- (295,305)
Reinvested realized gain distributions ........................ -- -- --
Change in unrealized appreciation/(depreciation) of investments -- -- (180,253)
------------- ------------- -------------
Net increase/(decrease) resulting from operations ............. 3,939,150 -- (530,499)
------------- ------------- -------------
- --------------------------
1994 Contract Transactions
- --------------------------
Net contract purchase payments ................................ 4,660,223 -- 1,962,520
Transfer between/within separate accounts ..................... 21,485,214 -- 7,551,751
Administrative charges-- Note 4 ............................... (129,305) -- (27,813)
Redemptions and annuity benefits .............................. (29,581,821) -- (2,999,452)
------------- ------------- -------------
Net increase/(decrease) from contract transactions ............ (3,565,689) -- 6,487,006
------------- ------------- -------------
Actuarial Increase in Reserves for Contracts in Payment Period . 11,441 -- 2,666
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets ........................ 384,902 -- 5,959,173
Net Assets at December 31, 1993 ............................... 136,952,824 -- 33,627,167
------------- ------------- -------------
Net Assets at December 31, 1994 ............................... $ 137,337,726 $ -- $ 39,586,340
============= ============= =============
- ----------------------------------------
1995 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 5,206,548 $ (2,346) $ 215,453
Net realized gain/(loss) from sale of investments ............. -- 46,326 3,163,941
Reinvested realized gain distributions ........................ -- 20,051 1,450,788
Change in unrealized appreciation/(depreciation) of investments -- 20,379 (1,692,149)
------------- ------------- -------------
Net increase/(decrease) resulting from operations ............. 5,206,548 84,410 3,138,033
------------- ------------- -------------
- --------------------------
1995 Contract Transactions
- --------------------------
Net contract purchase payments ................................ 3,803,961 165,620 730,385
Transfer between/within separate accounts ..................... (16,853,974) 1,808,178 (5,547,470)
Administrative charges-- Note 4 ............................... (112,317) (541) (26,816)
Redemptions and annuity benefits .............................. (25,037,958) (100,451) (3,681,044)
------------- ------------- -------------
Net increase/(decrease) from contract transactions ............ (38,200,288) 1,872,806 (8,524,945)
------------- ------------- -------------
Actuarial Increase in Reserves for Contracts in Payment Period . 11,247 -- 1,477
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets ........................ (32,982,493) 1,957,216 (5,385,435)
Net Assets at December 31, 1994 ............................... 137,337,726 -- 39,586,340
------------- ------------- -------------
Net Assets at December 31, 1995-- Note 3 ...................... $ 104,355,233 $ 1,957,216 $ 34,200,905
============= ============= =============
<CAPTION>
Baillie Value Line
Gifford Strategic
Emerging Value Line Asset
Markets Centurion Management
Fund Fund Trust
-----------------------------------------------------------
- ----------------------------------------
1994 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 157 $ (1,355,090) $ (1,151,915)
Net realized gain/(loss) from sale of investments ............. (134) (826,101) (42,502)
Reinvested realized gain distributions ........................ -- 2,100,410 282,619
Change in unrealized appreciation/(depreciation) of investments (65,755) (5,299,660) (6,970,165)
------------- ------------- -------------
Net increase/(decrease) resulting from operations ............. (65,732) (5,380,441) (7,881,963)
------------- ------------- -------------
- --------------------------
1994 Contract Transactions
- --------------------------
Net contract purchase payments ................................ 58,826 4,265,942 5,185,322
Transfer between/within separate accounts ..................... 1,313,021 (10,499,446) (6,525,269)
Administrative charges-- Note 4 ............................... (74) (194,054) (109,251)
Redemptions and annuity benefits .............................. (5,050) (13,152,193) (14,078,204)
------------- ------------- -------------
Net increase/(decrease) from contract transactions ............ 1,366,723 (19,579,751) (15,527,402)
------------- ------------- -------------
Actuarial Increase in Reserves for Contracts in Payment Period . -- 17,105 3,415
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets ........................ 1,300,991 (24,943,087) (23,405,950)
Net Assets at December 31, 1993 ............................... -- 165,598,782 137,432,645
------------- ------------- -------------
Net Assets at December 31, 1994 ............................... $ 1,300,991 $140,655,695 $114,026,695
============= ============= =============
- ----------------------------------------
1995 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 33,936 $ (978,429) $ 447,269
Net realized gain/(loss) from sale of investments ............. (100,857) 15,666,522 8,581,805
Reinvested realized gain distributions ........................ -- 4,303,964 1,056,627
Change in unrealized appreciation/(depreciation) of investments 175,370 34,330,638 19,467,016
------------- ------------- -------------
Net increase/(decrease) resulting from operations ............. 108,449 53,322,695 29,552,717
------------- ------------- -------------
- --------------------------
1995 Contract Transactions
- --------------------------
Net contract purchase payments ................................ 128,972 3,968,518 3,793,073
Transfer between/within separate accounts ..................... 1,949,978 4,394,453 (4,104,989)
Administrative charges-- Note 4 ............................... (2,419) (182,645) (101,891)
Redemptions and annuity benefits .............................. (172,117) (15,789,120) (10,719,570)
------------- ------------- -------------
Net increase/(decrease) from contract transactions ............ 1,904,414 (7,608,794) (11,133,377)
------------- ------------- -------------
Actuarial Increase in Reserves for Contracts in Payment Period . -- 15,515 13,456
------------- ------------- -------------
Total Increase/(Decrease) in Net Assets ........................ 2,012,863 45,729,416 18,432,796
Net Assets at December 31, 1994 ............................... 1,300,991 140,655,695 114,026,695
------------- ------------- -------------
Net Assets at December 31, 1995-- Note 3 ...................... $ 3,313,854 $186,385,111 $132,459,491
============= ============= =============
See notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24-25
<PAGE>
- -------------------
Separate
Account A
- -------------------
1
- -------------------
- --------------------------------------------------------------------------------
The Guardian Separate Account A
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- ----------------------
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 Ltd., 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 reinvested 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 first in, first out
(FIFO) basis. During 1995, the basis used in recording gains and losses on
investments sold was changed from the last in, first out (LIFO) basis to the
first in, first out (FIFO) basis. This change had no effect on the net assets of
the Account.
During the years ended December 31, 1995 and December 31, 1994, purchases
- --------------------------------------------------------------------------------
26
<PAGE>
-------------------
Separate
Account A
-------------------
1
-------------------
- --------------------------------------------------------------------------------
of shares of the Funds aggregated $178,586,225 and $184,254,588, respectively.
Aggregate sales of shares of the Funds amounted to $222,655,463 and $228,156,571
for the years ended December 31, 1995 and 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 current 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 risk experience are reimbursed to GIAC if the reserves
required are less than originally estimated. If additional reserves are
required, GIAC reimburses the Account.
- ---------------------------------------
Note 3 -- Net Assets, December 31, 1995
- ---------------------------------------
<TABLE>
<CAPTION>
Accumulation Total
Units Owned Unit Value Unit Value
----------- ---------- ----------
Tax-Qualified Accounts:
<S> <C> <C> <C>
The Guardian Stock Fund, Inc. ............................. 3,704,798.435 $ 57.928841 $214,614,679
The Guardian Bond Fund, Inc. .............................. 1,628,229.722 29.376248 47,831,280
The Guardian Cash Fund, Inc. .............................. 2,089,104.255 22.171865 46,319,338
Gabelli Capital Asset Fund ................................ 66,390.673 10.763220 714,577
Baillie Gifford International Fund ........................ 1,077,611.645 14.153848 15,252,351
Baillie Gifford Emerging Markets Fund ..................... 101,949.185 8.646640 881,518
Value Line Centurion Fund, Inc. ........................... 2,390,917.153 40.383489 96,553,577
Value Line Strategic Asset Management Trust ............... 3,010,346.454 27.247234 82,023,614
Non-Tax-Qualified Accounts:
The Guardian Stock Fund, Inc. ............................. 2,999,010.512 57.928841 173,729,203
The Guardian Bond Fund, Inc. .............................. 1,794,933.197 29.376248 52,728,403
The Guardian Cash Fund, Inc. .............................. 2,583,393.312 22.171865 57,278,648
Gabelli Capital Asset Fund ................................ 115,452.260 10.763220 1,242,638
Baillie Gifford International Fund ........................ 1,315,858.240 14.153848 18,624,458
Baillie Gifford Emerging Markets Fund ..................... 281,304.204 8.646640 2,432,336
Value Line Centurion Fund, Inc. ........................... 2,179,325.284 40.383489 88,008,759
Value Line Strategic Asset Management Trust ............... 1,833,099.033 27.247234 49,946,878
------------
948,182,257
Contracts receiving annuity payments ...................... 5,271,908
Owned by GIAC ............................................. 8,880,432
------------
$962,334,597
============
</TABLE>
NOTE: In some instances the calculation of total assets may not agree due to
rounding.
- --------------------------------------------------------------------------------
27
<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 risk is computed daily and is equal
to an annual rate of 1% of the average daily net assets applicable to
contractowners;
(3) contingent deferred sales charges on certain partial or total
surrenders. These charges are assessed against redemptions and paid to GIAC
during the first six contract years for a Single Purchase Payment Contract. For
a Flexible Purchase Payment Contract, each payment is subject to a contingent
deferred sales charge for six years; and
(4) a charge for premium taxes deducted from either the contract payment or
upon annuitization, as determined in accordance with applicable state law.
Currently GIAC makes no charge against the Account for GIAC's federal
income taxes. However, GIAC reserves the right to charge taxes attributable to
the Account in the future.
Note 5 -- Accumulation Unit Values for the Current Year End and the Four Prior
Year Ends for Both Qualified and Non-Qualified Accounts
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
The Guardian Stock Fund, Inc. ............... $57.928841 $43.446001 $44.442667 $37.415159 $31.469340
The Guardian Bond Fund, Inc. ................ 29.376248 25.230236 26.391400 24.261811 22.750149
The Guardian Cash Fund, Inc. ................ 22.171865 21.217142 20.638921 20.306987 19.868839
Gabelli Capital Asset Fund .................. 10.763220 -- -- -- --
Baillie Gifford International Fund .......... 14.153848 12.851309 12.866264 9.693868 10.755746
Baillie Gifford Emerging Markets Fund ....... 8.646640 8.785416 -- -- --
Value Line Centurion Fund, Inc. ............. 40.383489 29.115003 30.069047 27.806724 26.510995
Value Line Strategic Asset
Management Trust ......................... 27.247234 21.407853 22.728967 20.520859 18.012964
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
-------------------
Separate
Account C
-------------------
1
-------------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
and Contractowners of The Guardian Separate
Account A, "Value Guard II"
In our opinion, the accompanying statement of assets and liabilities and the
related combined statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the investment
divisions relating to Guardian Stock Fund, Guardian Bond Fund, Guardian Cash
Fund, Gabelli Capital Asset Fund, Baillie Gifford International Fund, Baillie
Gifford Emerging Markets Fund, Value Line Centurion Fund and Value Line
Strategic Asset Management Trust (constituting The Guardian Separate Account A,
"Value Guard II", hereafter referred to as the "Separate Account") at December
31, 1995, and the results of each of their operations for the year then ended
and the changes in each of their net assets for each of the two years then
ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the management of The Guardian
Insurance & Annuity Company, Inc.; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
transfer agents of the underlying funds, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 9, 1996
- --------------------------------------------------------------------------------
29
<PAGE>
- ------------------
The Guardian
Stock Fund, Inc.
- ------------------
2
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- ---------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS -- 90.8%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Aerospace and Defense -- 4.5%
44,500 Boeing Co. $ 3,487,687
97,000 Litton Industries, Inc. 4,316,500
68,600 Lockheed Martin Corp. 5,419,400
276,400 Logicon, Inc. 7,601,000
39,000 Loral Corporation 1,379,625
351,000 McDonnell Douglas Corp. 32,292,000
201,750 Precision Castparts Corp. 8,019,562
183,000 Rockwell Int'l. Corp. 9,676,125
--------------
72,191,899
--------------
Broadcasting and Publishing -- 1.2%
151,000 Capital Cities/ABC, Inc. 18,629,625
21,666 Duff & Phelps Cr. Rating Co. 311,449
--------------
18,941,074
--------------
Building Materials and Homebuilders -- 0.2%
45,000 Coachmen Industries, Inc. 978,750
45,400 Del Webb Corp.* 913,675
60,000 McGrath Rent Corp. 1,140,000
17,900 NCI Building Systems, Inc.* 443,025
--------------
3,475,450
--------------
Capital Goods-Miscellaneous Technology -- 1.0%
114,000 Komag, Inc. 5,258,250
142,250 Paychex, Inc. 7,094,719
175,000 Read-Rite Corp.* 4,068,750
60,400 Rexel, Inc. 815,400
--------------
17,237,119
--------------
Chemicals -- 3.0%
60,000 Albemarle Corp. 1,162,500
94,000 Cambrex Corp. 3,889,250
102,100 E.I. Dupont De Nemours, Inc.* 7,134,237
204,000 Eastman Chemical Co. 12,775,500
70,900 Hercules, Inc. 3,996,988
21,800 OM Group, Inc. 722,125
230,000 PPG Industries, Inc. 10,522,500
211,700 Sterling Chemicals, Inc.* 1,720,063
195,000 Union Carbide Corp. 7,312,500
--------------
49,235,663
--------------
Coal -- 0.1%
33,000 Eastern Enterprises 1,163,250
--------------
Computer Software -- 3.7%
586,500 Computer Assoc. Int'l., Inc. 33,357,187
89,000 Fair Isaac & Co., Inc. 2,302,875
190,000 Microsoft Corp.* 16,672,500
70,000 Oracle Systems Corp* 2,966,250
146,000 SunGard Data Systems, Inc. 4,161,000
--------------
59,459,812
--------------
Conglomerates -- 1.4%
149,800 Loews Corp. 11,740,575
155,000 Textron, Inc. 10,462,500
--------------
22,203,075
--------------
Containers -- 0.1%
29,975 Alltrista Corp.* 539,550
52,000 Ball Corp. 1,430,000
--------------
1,969,550
--------------
Cosmetics and Toiletries -- 0.4%
120,900 Gillette Co. 6,301,912
15,200 Helen of Troy Ltd.* 319,200
--------------
6,621,112
--------------
Drugs and Hospitals -- 8.6%
259,000 Abbott Labs. 10,813,250
65,000 Boston Scientific Corp.* 3,185,000
137,000 Bristol-Myers Squibb Co. 11,764,875
175,986 Guidant Corp. 7,435,409
192,400 Johnson & Johnson 16,474,250
149,948 Eli Lilly & Co.,Inc. 8,434,575
175,000 McKesson Corp. 8,859,375
150,000 Medtronic, Inc. 8,381,250
347,600 Merck & Co., Inc. 22,854,700
214,900 Pfizer, Inc. 13,538,700
319,000 Schering-Plough Corp. 17,465,250
152,000 Universal Health Svcs., Inc. 6,745,000
62,840 Watson Pharmaceuticals, Inc.* 3,079,160
--------------
139,030,794
--------------
Electrical Equipment -- 0.9%
202,000 Applied Materials, Inc. 7,953,750
90,000 Integrated Device Technology 1,158,750
65,400 Linear Technology Corp. 2,566,950
32,000 Sundstrand Corp. 2,252,000
--------------
13,931,450
--------------
See notes to financial statements. * Non-income producing securities.
- --------------------------------------------------------------------------------
30
<PAGE>
------------------
The Guardian
Stock Fund, Inc.
------------------
2
------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Electronics and Instruments -- 0.9%
240,000 Analogic Corp. $ 4,440,000
119,000 Electroglas, Inc. 2,915,500
62,000 Tektronix, Inc. 3,045,750
95,000 Vishay Inter-Technology, Inc. 2,992,500
--------------
13,393,750
Energy-Miscellaneous -- 0.5%
192,500 Giant Industries, Inc. 2,358,125
196,930 Holly Corp. 4,455,541
84,000 Howell Corp. 1,207,500
--------------
8,021,166
--------------
Entertainment -- 0.2%
93,640 Mattel, Inc. 2,879,430
--------------
Fertilizer -- 0.7%
203,900 Mississippi Chemical Corp. 4,740,675
499,100 Terra Industries, Inc. 7,049,788
--------------
11,790,463
--------------
Financial-Banks -- 3.7%
150,000 BankAmerica Corp. 9,712,500
120,000 Bank of New York, Inc. 5,850,000
50,000 Central & Southern Hldgs. Co. 450,000
133,000 Chemical Banking Corp. 7,813,750
206,484 Citicorp 13,886,048
125,000 Corestates Financial Corp. 4,734,375
23,800 First Bank Systems Inc. 1,181,075
19,900 First Empire State Corp. 4,338,200
77,220 Hubco, Inc. 1,708,492
212,260 Norwest Corp. 7,004,580
120,000 Premier Bancorp., Inc. 2,805,000
18,000 Star Banc Corp. 1,071,000
--------------
60,555,020
--------------
Financial-Others -- 7.4%
160,000 American Express Co. 6,620,000
191,641 Capital One Financial Corp. 4,575,429
200,000 Charles Schwab Corp. 4,025,000
160,000 Dean Witter Discover & Co. 7,520,000
96,800 A.G. Edwards, Inc. 2,311,100
97,000 Federal National Mortgage Association 12,040,125
29,886 Financial Sec. Assur. Holdings Ltd. 743,414
258,000 First USA, Inc. 11,448,750
945,500 Green Tree Financial Corp. 24,937,562
84,500 Jefferies Group, Inc. 3,992,625
94,000 McDonald & Co. Investments, Inc. 1,692,000
251,100 Merrill Lynch & Co., Inc. 12,806,100
256,050 Morgan Keegan, Inc. 3,232,631
295,600 Phoenix Duff & Phelps Corp. 2,032,250
153,825 Raymond James Financial, Inc. 3,249,553
282,000 Travelers Group, Inc. 17,730,750
--------------
118,957,289
--------------
Financial-Thrift -- 3.2%
40,000 Bell Bancorp. 1,430,000
120,000 Brooklyn Bancorp., Inc.* 4,890,000
148,000 Charter One Financial, Inc. 4,532,500
66,000 Coastal Bank Svgs. Assn.-TX 1,155,000
246,600 Collective Bancorp, Inc. 6,257,475
160,000 Greenpoint Financial Corp. 4,280,000
115,200 Loyola Capital Corp. 4,363,200
19,635 MAF Bancorp, Inc. 490,875
37,666 Pacific Crest Capital, Inc. 273,077
82,362 Progressive Bank, Inc. 2,429,679
503,278 Sovereign Bancorp, Inc. 5,095,690
167,800 Standard Fed. Bk.-Troy, MI 6,607,125
318,766 TCF Financial Corp. 10,559,124
--------------
52,363,745
--------------
Food, Beverage and Tobacco -- 6.6%
120,000 Anheuser-Busch Cos., Inc. 8,025,000
354,500 Coca-Cola Co. 26,321,625
131,200 IBP, Inc. 6,625,600
217,900 PepsiCo, Inc. 12,175,163
587,000 Philip Morris Cos., Inc. 53,123,500
--------------
106,270,888
--------------
Footwear -- 0.2%
109,900 Reebok International Ltd. 3,104,675
--------------
Household Products -- 1.0%
191,800 Procter & Gamble Co. 15,919,400
--------------
Information Processing and Computers -- 4.4%
380,800 Amdahl Corp.* 3,236,800
67,550 Astro-Med, Inc. 624,838
90,000 Bay Networks, Inc. 3,701,250
134,000 Cisco Systems, Inc. 9,999,750
90,000 Compaq Computer Corp. 4,320,000
240,000 Hewlett Packard Co. 20,100,000
* Non-income producing securities. See notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
- ------------------
The Guardian
Stock Fund, Inc.
- ------------------
2
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- ---------------------------------
SCHEDULE OF INVESTMENTS (continued)
December 31, 1995
Shares Value
- --------------------------------------------------------------------------------
48,700 In Focus Systems, Inc.* $ 1,759,288
408,000 Sun Microsystems, Inc. 18,615,000
560,000 Tandem Computers, Inc. 5,950,000
109,400 Teradyne, Inc. 2,735,000
--------------
71,041,926
--------------
Insurance -- 2.1%
198,800 Allstate Corp. 8,175,650
99,000 Amer. Bankers Ins. Group, Inc. 3,861,000
21,900 Capitol Amer. Fin'l. Corp. 495,487
30,000 CMAC Investment Corp. 1,320,000
30,000 Integon Corp. 618,750
68,847 Liberty Financial Cos., Inc. 2,082,622
107,000 MBIA, Inc. 8,025,000
108,000 MGIC Investment Corp. 5,859,000
72,000 State Auto Financial Corp. 1,872,000
18,800 Torchmark, Inc. 850,700
--------------
33,160,209
--------------
Leisure Products -- 0.2%
129,700 Thor Industries, Inc. 2,512,938
--------------
Lodging -- 0.7%
685,800 Host Marriott Corp.* 9,086,850
298,000 Prime Hospitality Corp.* 2,980,000
--------------
12,066,850
--------------
Machinery and Equipment -- 2.2%
24,000 AGCO Corp. 1,224,000
70,000 Case Corp. 3,202,500
182,000 Dover Corp. 6,711,250
249,400 Global Industrial Technologies, Inc.* 4,707,425
134,000 Millipore Corp. 5,510,750
20,000 Robbins & Myers, Inc. 600,000
50,600 Strattec Security Corp. 910,800
91,500 Tecumseh Products Co. 4,735,125
98,587 Varlen Corp. 2,119,621
110,000 York International Corp. 5,170,000
--------------
34,891,471
--------------
Merchandising-Department Stores -- 0.4%
230,000 Dillard Department Stores, Inc. 6,555,000
--------------
Merchandising-Drugs -- 0.3%
15,000 Longs Drug Stores Corp. 718,125
125,000 Walgreen Co. 3,734,375
--------------
4,452,500
--------------
Merchandising-Food -- 0.7%
58,500 American Stores Co.* 1,564,875
354,600 Casey's General Stores, Inc. 7,756,875
40,000 Fleming Cos., Inc. 825,000
41,000 SuperValu, Inc. 1,291,500
--------------
11,438,250
--------------
Merchandising-Special -- 0.5%
65,000 CompUSA, Inc.* 2,023,125
145,000 Melville Corp. 4,458,750
75,000 Pier 1 Imports, Inc. 853,125
--------------
7,335,000
--------------
Metals and Mining -- 0.4%
120,000 Aluminum Co. of America 6,345,000
--------------
Natural Gas-Diversified -- 0.4%
226,100 Mitchell Energy & Dev. Corp. 4,239,375
100,000 Panhandle Eastern Corp. 2,787,500
--------------
7,026,875
--------------
Oil and Gas Producing -- 3.3%
98,000 Alexander Energy Corp.* 447,125
125,000 Basin Exploration, Inc.* 617,187
446,500 Tom Brown, Inc.* 6,530,062
140,000 Cairn Energy USA, Inc.* 1,960,000
180,000 Chieftain International, Inc.* 3,195,000
169,700 Coho Energy, Inc.* 827,288
247,000 Devon Energy Corp. 6,298,500
500,100 Enron Oil & Gas Co. 12,002,400
440,600 Global Natural Res., Inc.* 4,626,300
28,300 H S Resources, Inc.* 364,363
392,000 Phoenix Resource Cos., Inc. 6,762,000
161,900 Pogo Producing Co. 4,573,675
208,167 United Meridian Corp. 3,616,902
20,900 Vintage Petroleum, Inc. 470,250
220,000 Wainoco Oil Ltd. 715,000
--------------
53,006,052
--------------
Oil-Integrated-Domestic -- 0.2%
418,300 Tesoro Petroleum, Inc.* 3,607,838
--------------
Oil-Integrated-International -- 5.8%
624,000 Exxon Corp. 49,998,000
See notes to financial statements. * Non-income producing securities.
- --------------------------------------------------------------------------------
32
<PAGE>
------------------
The Guardian
Stock Fund, Inc.
------------------
2
------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
270,800 Mobil Corp. $ 30,329,600
93,000 Royal Dutch Petroleum Co. 13,124,625
--------------
93,452,225
--------------
Oil Services -- 0.7%
29,200 Cliffs Drilling Co. 434,350
341,000 Nabors Industries, Inc. 3,793,625
131,700 Offshore Logistics, Inc.* 1,662,713
205,000 Smith International, Inc.* 4,817,500
12,000 Weatherford International, Inc.* 346,500
--------------
11,054,688
--------------
Paper and Forest Products -- 2.4%
165,360 Kimberly-Clark Corp. 13,683,540
548,000 Rayonier, Inc. 18,289,500
136,900 Willamette Industries, Inc. 7,700,625
--------------
39,673,665
--------------
Pollution Control -- 0.6%
265,000 Browning-Ferris Industries, Inc. 7,817,500
105,000 Safety-Kleen Corp. 1,640,625
13,300 Zurn Industries, Inc. 284,288
--------------
9,742,413
--------------
Railroads -- 0.7%
47,949 Burlington Northern Sante Fe 3,740,022
107,900 Union Pacific Corp. 7,121,400
--------------
10,861,422
--------------
Restaurants -- 0.4%
271,100 Applebees Int'l., Inc. 6,167,525
110,000 Ryan's Family Steak Houses, Inc . 770,000
--------------
6,937,525
--------------
Semiconductor -- 5.4%
45,000 Altera Corp.* 2,238,750
57,000 Analog Devices, Inc. 2,016,375
97,800 Atmel Corp. 2,188,275
208,200 Cypress Semiconductor Corp. 2,654,550
246,000 Intel Corp. 13,960,500
254,000 International Rectifier Corp. 6,350,000
135,000 Kulicke & Soffa Industries, Inc. 3,138,750
199,000 LSI Logic Corp. 6,517,250
364,500 Micron Technology, Inc. 14,443,312
200,000 National Semiconductor Co. 4,450,000
23,000 Novellus Systems, Inc.* 1,242,000
364,600 Texas Instruments, Inc. 18,868,050
300,000 Xilinx, Inc. 9,150,000
--------------
87,217,812
--------------
Telecommunications -- 0.7%
202,000 Andrew Corp. 7,726,500
71,900 Harris Corp. Del. 3,927,538
--------------
11,654,038
--------------
Textile-Apparel and Production -- 0.2%
146,000 Fieldcrest Cannon, Inc. 2,427,250
32,700 Russell Corp. 907,425
--------------
3,334,675
--------------
Transportation-Miscellaneous-- 0.1%
164,100 Maritrans, Inc. 964,088
--------------
Truckers -- 0%
32,100 FRP Pptys., Inc. 658,050
--------------
Utilities-Communications -- 7.1%
290,000 Ameritech Corp. 17,110,000
605,000 AT&T Corp. 39,173,750
79,100 Bell Atlantic Corp. 5,289,812
572,800 BellSouth Corp. 24,916,800
295,000 GTE Corp. 12,980,000
74,400 NYNEX Corp. 4,017,600
201,500 SBC Communications, Inc. 11,586,250
--------------
115,074,212
--------------
Utilities-Electric --1.3%
61,900 Consolidated Edison of N.Y., Inc. 1,980,800
164,200 Detroit Edison Co. 5,664,900
95,000 Illinova Corp. 2,850,000
95,000 Northeast Utilities 2,315,625
210,000 SCECorp. 3,727,500
150,700 Unicom Corp. 4,935,425
--------------
21,474,250
--------------
Utilities-Gas and Pipeline -- 0.1%
82,100 Entergy Corp. 2,401,425
--------------
TOTAL COMMON STOCKS
(Cost $1,119,755,692) 1,466,656,471
--------------
* Non-income producing securities. See notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
- ------------------
The Guardian
Stock Fund, Inc.
- ------------------
2
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- ---------------------------------
SCHEDULE OF INVESTMENTS (continued)
December 31, 1995
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.0%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
29,560 Phoenix Duff & Phelps Corp. $ 746,390
--------------
TOTAL PREFERRED STOCK
(Cost $0) 746,390
--------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.1%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$147,425,000 State Street Bank & Trust
repurchase agreement,
dated 12/29/95, maturity
value $147,516,731, at 5.6%,
due 1/2/96 (collateralized
by $138,290,000 U.S.
Treasury Notes, 7.125%
due 2/29/00, market value
$150,420,021) 1/2/96 $ 147,425,000
--------------
TOTAL REPURCHASE AGREEMENT
(Cost $147,425,000) 147,425,000
--------------
TOTAL INVESTMENTS -- 99.9%
(Cost $1,267,180,692) 1,614,827,861
CASH, RECEIVABLES AND OTHER
ASSETS LESS PAYABLES -- 0.1% 442,938
--------------
NET ASSETS -- 100.0% $1,615,270,799
==============
See notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
------------------
The Guardian
Stock Fund, Inc.
------------------
2
------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995
ASSETS:
Investments, at identified cost* $1,267,180,692
==============
Investments, at market $1,467,402,861
Repurchase agreements 147,425,000
--------------
TOTAL INVESTMENTS 1,614,827,861
Cash 501
Receivable for securities sold 41,152,946
Receivable for fund shares sold 1,761,961
Dividends receivable 2,500,252
Interest receivable 68,798
--------------
TOTAL ASSETS 1,660,312,319
--------------
LIABILITIES:
Payable for securities purchased 42,753,165
Payable for fund shares redeemed 120,647
Accrued expenses 122,125
Due to affiliates -- Note B 2,045,583
--------------
TOTAL LIABILITIES 45,041,520
--------------
NET ASSETS $1,615,270,799
==============
COMPONENTS OF NET ASSETS:
Common Stock -- 46,519,231 shares
and outstanding $.10 par value
each (100,000,000 shares authorized) $ 4,651,923
Paid-in capital 1,196,284,312
Undistributed net investment income 96,928
Accumulated net realized gain on investments 66,590,467
Net unrealized appreciation of investments 347,647,169
--------------
NET ASSETS $1,615,270,799
==============
NET ASSET VALUE PER SHARE $ 34.72
==============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
Year Ended
December 31, 1995
Investment Income:
Income:
Dividends $ 19,899,959
Interest 6,023,534
Other income 11,951
------------
25,935,444
Less: Foreign tax withheld 32,755
------------
Total Income 25,902,689
------------
Expenses:
Investment advisory fees -- Note B 6,731,656
Custodian fees 278,365
Registration fees 67,310
Audit fees 16,500
Insurance expense 11,937
Directors' fees -- Note B 10,000
Printing expense 5,500
Legal fees 3,715
Transfer agent fees 3,300
Other 721
------------
Total Expenses 7,129,004
------------
Net Investment Income 18,773,685
------------
Realized and Unrealized Gain
on Investments -- Note D
Net realized gain on investments 134,802,382
Net change in unrealized appreciation
of investments 229,959,479
------------
Net Realized and Unrealized Gain
on Investments 364,761,861
------------
Net Increase in Net Assets Resulting
from Operations $383,535,546
============
See notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
- ------------------
The Guardian
Stock Fund, Inc.
- ------------------
2
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- ---------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1995 1994
--------------- ---------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 18,773,685 $ 14,181,215
Net realized gain on investments 134,802,382 18,979,488
Net change in unrealized appreciation/(depreciation) of investments 229,959,479 (45,558,052)
--------------- ---------------
Net Increase/(Decrease) in Net Assets Resulting from Operations 383,535,546 (12,397,349)
--------------- ---------------
Distributions to Shareholders:
Net investment income (18,757,010) (14,152,347)
Net realized gain on investments (71,343,468) (31,757,209)
--------------- ---------------
Total Distributions to Shareholders (90,100,478) (45,909,556)
--------------- ---------------
From Capital Share Transactions:
Net increase in net assets from capital share transactions-- Note E 282,844,511 228,183,927
--------------- ---------------
Net Increase in Net Assets 576,279,579 169,877,022
Net Assets:
Beginning of year 1,038,991,220 869,114,198
--------------- ---------------
End of year* $ 1,615,270,799 $ 1,038,991,220
=============== ===============
* Includes undistributed net investment income of: $96,928 $80,253
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
------------------
The Guardian
Stock Fund, Inc.
------------------
2
------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning
of year .............. $27.33 $29.00 $25.52 $23.28 $17.85
------ ------ ------ ------ ------
Income from investment
operations
Net investment
income ............ 0.44 0.40 0.58 0.48 0.63
Net realized and
unrealized gain/
(loss) on invest-
ments ............. 9.01 (0.77) 4.47 3.97 5.74
------ ------ ------ ------ ------
Net increase/
(decrease) from
investment
operations ........ 9.45 (0.37) 5.05 4.45 6.37
---- ----- ---- ---- ----
Distributions to
shareholders
Dividends from net
investment
income ............ (0.44) (0.40) (0.59) (0.48) (0.64)
Distributions from
net realized gain . (1.62) (0.90) (0.98) (1.73) (0.30)
------ ------ ------ ------ ------
Total distributions .. (2.06) (1.30) (1.57) (2.21) (0.94)
------ ------ ------ ------ ------
Net asset value, end of
year ................. $34.72 $27.33 $29.00 $25.52 $23.28
====== ====== ====== ====== ======
Total return* ........... 34.65% (1.27)% 19.96% 20.07% 35.96%
====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of
year (000's
omitted) .......... $1,615,271 $1,038,991 $869,114 $537,354 $380,962
Ratio of expenses to
average net
assets ............ 0.53% 0.53% 0.54% 0.55% 0.56%
Ratio of net invest-
ment income to
average net
assets ........... 1.39% 1.49% 2.20% 2.14% 3.07%
Portfolio turnover
ratio ............. .78% .53% .45% .62% .51%
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning
of year .............. $21.39 $19.18 $16.35 $17.15 $15.40
------ ------ ------ ------ ------
Income from investment
operations
Net investment
income ............ 0.69 0.84 0.52 0.33 0.24
Net realized and
unrealized gain/
(loss) on invest-
ments ............. (3.13) 3.61 2.80 0.06 2.32
------ ------ ------ ------ ------
Net increase/
(decrease) from
investment
operations ........ (2.44) 4.45 3.32 0.39 2.56
------ ------ ------ ------ ------
Distributions to
shareholders
Dividends from net
investment
income ............ (0.71) (0.90) (0.49) (0.43) (0.22)
Distributions from
net realized gain . (0.39) (1.34) -- (0.76) (0.59)
------ ------ ------ ------ ------
Total distributions .. (1.10) (2.24) (0.49) (1.19) (0.81)
------ ------ ------ ------ ------
Net asset value, end of
year ................. $17.85 $21.39 $19.18 $16.35 $17.15
====== ====== ====== ====== ======
Total return* ........... (11.85)% 23.55% 20.37% 1.87% 17.10%
====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of
year (000's
omitted) .......... $256,039 $269,950 $172,900 $139,437 $66,081
Ratio of expenses to
average net
assets ............ 0.57% 0.57% 0.61% 0.61% 0.75%
Ratio of net invest-
ment income to
average net
assets ........... 3.66% 4.13% 2.88% 2.08% 2.00%
Portfolio turnover
ratio ............. .54% .38% .71% .37% .36%
</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.
See notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
- ------------------
The Guardian
Stock Fund, Inc.
- ------------------
2
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- ---------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Guardian Stock Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of The Guardian Stock Fund, Inc. as of
December 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the ten years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Guardian Stock Fund, Inc. at December 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and financial highlights for each of the ten years in
the period then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
February 9, 1996
- --------------------------------------------------------------------------------
38
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- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
39
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
----------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
MULTI CLASS MORTGAGE PASS-THROUGHS -- 22.4%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 255,364 Citibank New York, NA
9.50% due 8/1/16 $ 267,493
5,000,000 Citicorp Mortgage Secs.,
Inc. 7.00% due 6/25/23 5,015,600
4,750,000 Citicorp Mortgage Secs.,
Inc. 6.50% due 1/25/24 4,438,258
5,000,000 Citicorp Mortgage Secs.,
Inc. 6.25% due 3/25/24 4,842,150
2,624,736 Citicorp Mortgage Secs.,
Inc. 7.75% due 11/25/06 2,650,983
5,000,000 Residential Fdg. Mtg. Secs.,
Inc. 5.95% due 11/25/23 4,637,000
2,227,347 Sears Mortgage Secs. Corp.
6.50% due 5/25/22 2,270,743
10,000,000 Securitized Asset Sales,
Inc. 7.41% due 4/25/24 9,999,000
6,000,000 Federal Home Loan Mortgage
Corp. 7.00% due 3/15/21 6,112,500
3,000,000 Federal Home Loan Mortgage
Corp. 7.40% due 12/15/21 3,070,290
12,700,000 Federal Home Loan Mortgage
Corp. 6.50% due 5/15/19 12,580,874
6,000,000 Federal Home Loan Mortgage
Corp. 6.80% due 12/15/18 6,088,080
5,000,000 Federal Home Loan Mortgage
Corp. 6.00% due 11/15/20 4,893,750
3,963,317 Federal Home Loan Mortgage
Corp. 4.00% due 8/15/01 3,906,325
7,000,000 Federal National Mortgage
Assn. 7.00% due 4/25/12 7,037,170
1,000,000 Federal National Mortgage
Assn. 6.25% due 5/25/07 1,009,060
4,840,000 Federal National Mortgage
Assn. 6.00% due 5/25/05 4,855,101
-----------
TOTAL MULTI CLASS MORTGAGE
PASS-THROUGHS
(Cost $80,369,929) 83,674,377
-----------
- --------------------------------------------------------------------------------
MORTGAGE PASS-THROUGHS - 5.8%
- --------------------------------------------------------------------------------
834,638 FNMA Pool #068106
8.50% due 8/1/09 880,218
1,212,465 FNMA Pool #068772
8.00% due 6/1/08 1,267,693
14,698 FNMA Pool #072923
8.25% due 1/1/09 15,368
2,690,309 FNMA Pool #317238
6.50% due 10/1/25 2,659,236
3,071,351 FNMA Pool #319234
6.50% due 11/1/25 3,035,877
2,981,044 FNMA Pool #D65610
6.50% due 11/1/25 2,946,613
3,980,474 FNMA Pool #332096
6.50% due 12/1/25 3,934,500
7,076,822 FNMA Pool #332859
6 50% due 12/1/25 6,995,085
11,201 GNMA Pool #000375
11.50% due 7/20/00 11,678
-----------
TOTAL MORTGAGE
PASS-THROUGHS
(Cost $21,253,056) 21,746,268
-----------
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCIES - 25.7%
- --------------------------------------------------------------------------------
10,000,000 Federal Home Loan Mortgage
Corp., 8.44% due 10/27/04 10,507,800
11,500,000 U.S. Treasury Notes
5.625% due 10/31/97 11,584,410
5,000,000 U.S. Treasury Notes
5.50% due 11/15/98 5,036,700
14,500,000 U.S. Treasury Notes
6.875% due 7/31/99 15,225,000
4,000,000 U.S. Treasury Notes
6.875% due 8/31/99 4,203,760
2,000,000 U.S. Treasury Notes
5.75% due 10/31/00 2,028,740
3,000,000 U.S. Treasury Notes
5.50% due 12/31/00 3,015,480
7,250,000 U.S. Treasury Notes
6.50% due 8/15/05 7,723,498
2,500,000 U.S. Treasury Notes
5.875% due 11/15/05 2,556,250
See notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$11,500,000 U.S. Treasury Bonds
8.125% due 5/15/21 $14,542,095
17,500,000 U.S. Treasury Bonds
6.875% due 8/15/25 19,736,675
-----------
TOTAL U.S. GOVERNMENT
AND AGENCIES
(Cost $94,267,686) 96,160,408
------------
- --------------------------------------------------------------------------------
Asset Backed -- 13.2%
- --------------------------------------------------------------------------------
$4,000,000 Advanta Cr. Card Mst. Tr.
6.050% due 8/1/03 $4,060,800
4,000,000 Banc One Auto Trust,
6.90% due 4/15/98 4,066,240
8,000,000 Banc One Auto Trust,
6.15% due 7/15/02 8,152,480
6,807,391 Chevy Chase Auto Receivables
6.00% due 12/15/01 6,841,427
7,036,368 First Security Grantor Trust
6.25% due 1/15/01 7,064,936
6,000,000 Green Tree Financial Corp.
6.35% due 12/15/26 6,085,800
13,000,000 Standard Credit Card Master Trust
6.70% due 9/7/02 13,255,840
-----------
TOTAL ASSET BACKED
(Cost $48,848,214) 49,527,523
-----------
- --------------------------------------------------------------------------------
CORPORATE BONDS - 29.4%
- --------------------------------------------------------------------------------
Chemicals -- 2.4%
$8,500,000 Union Carbide Corp.,
6.79% due 6/1/25 $ 9,110,555
-----------
Drugs -- 1.9%
7,000,000 Rhone Poulenc SA,
6.75% due 10/15/99 7,173,110
-----------
Financial-Banks -- 1.8%
3,000,000 Key Corp,
8.40% due 4/1/99 3,214,140
3,000,000 PNC Bk. NA Pittsburgh
7.875% due 4/15/05 3,309,060
-----------
6,523,200
-----------
Financial-Other -- 2.3%
8,000,000 Gen. Motors Accep. Corp.
MTN, 7.375% due 6/9/99 8,392,960
-----------
Machinery-Industrial Specialty -- 1.6%
$6,000,000 McDermott, Inc. MTN,
6.57% due 4/20/98 6,075,900
-----------
Merchandising-Department Store -- 2.0%
4,000,000 Sears Roebuck Acceptance Corp.
6.56% due 9/5/00 4,099,920
3,400,000 Wal Mart Stores, Inc.,
8.75% due 12/29/06 3,524,168
-----------
7,624,088
-----------
Merchandising-Special -- 1.1%
4,000,000 Service Corp. International
6.375% due 10/1/00 4,073,960
-----------
Natural Gas-Diversified -- 3.0%
6,000,000 Pacific Gas Co.,
7.10% due 6/1/05 6,281,340
4,000,000 Tenneco, Inc.,
6.50% due 12/15/05 4,021,760
1,000,000 Texas Eastern Corp.,
8.50% due 2/10/97 1,027,850
-----------
11,330,950
-----------
Paper and Forest Products -- 7.2%
7,000,000 Alco Std. Corp.,
6.75% due 12/1/25 6,974,940
5,000,000 Boise Cascade Corp.,
7.10% due 1/13/99 5,119,250
3,000,000 Champion International,
7.10% due 9/1/05 3,159,270
11,500,000 Noranda First, Inc.,
6.875% due 11/15/05 11,763,810
-----------
27,017,270
-----------
Railroads -- 1.5%
5,500,000 Burlington Northern Santa Fe,
6.375% due 12/15/05 5,523,980
-----------
Utilities-Electric -- 3.2%
2,500,000 Consumers Power Co.,
7.50% due 6/1/02 2,547,850
5,000,000 Duquesne Light Co.,
6.70% due 5/15/03 5,097,100
4,500,000 Illinois Power Co.,
5.625% due 4/15/00 4,448,970
-----------
12,093,920
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
- ---------------
The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
----------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
Principal
Amount Value
- --------------------------------------------------------------------------------
Yankee -- 1.4%
$ 5,000,000 Nova Scotia Prov CDA,
7.25% due 7/27/13 $ 5,239,950
------------
TOTAL CORPORATE BONDS
(Cost $107,506,743) 110,179,843
------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 3.3%
- --------------------------------------------------------------------------------
$12,433,000 State Street Bank & Trust
repurchase agreement,
dated 12/29/95, maturity
value $12,440,736 at
5.6% due 1/2/96 (collateralized by
$11,665,000 U.S. Treasury Notes,
7.125% due 2/29/00, market value
$12,695,623) $ 12,433,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $12,433,000) 12,433,000
------------
TOTAL INVESTMENTS -- 99.8%
(Cost $364,678,628) 373,721,419
CASH, RECEIVABLES AND OTHER ASSETS
LESS PAYABLES -- 0.2% 740,162
------------
NET ASSETS-- 100.0% $374,461,581
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
42
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
ASSETS:
Investments, at identified cost* $364,678,628
============
Investments, at market $361,288,419
Repurchase agreements 12,433,000
TOTAL INVESTMENTS 373,721,419
Cash 149,558
Receivable for fund shares sold 335,705
Interest receivable 3,824,111
------------
TOTAL ASSETS 378,030,793
------------
LIABILITIES:
Payable for securities purchased 3,000,000
Accrued expenses 48,149
Payable for fund shares redeemed 25,270
Due to affiliates -- Note B 495,793
------------
TOTAL LIABILITIES 3,569,212
------------
NET ASSETS $374,461,581
============
COMPONENTS OF NET ASSETS:
Common Stock -- 30,566,383 shares
and outstanding $.10 par value each
(100,000,000 shares authorized) $ 3,056,638
Paid-in capital 365,837,772
Undistributed net investment income 737,841
Accumulated net realized loss on investments (4,213,461)
Net unrealized appreciation of investments 9,042,791
------------
NET ASSETS $374,461,581
============
NET ASSET VALUE PER SHARE $ 12.25
=======
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
Year Ended
December 31, 1995
Investment Income:
Income:
Interest $23,919,375
Less: Foreign Tax Withheld 12,848
------------
Total Income 23,906,527
------------
Expenses:
Investment advisory fees -- Note B 1,713,103
Custodian fees 99,193
Audit fees 16,500
Directors' fees -- Note B 10,000
Registration fees 7,833
Printing expense 5,500
Insurance expense 3,862
Legal fees 3,715
Transfer agent fees 3,300
Other 721
------------
Total Expenses 1,863,727
------------
Net Investment Income 22,042,800
------------
Realized and Unrealized Gain
on Investments -- Note D
Net realized gain on investments 9,664,616
Net change in unrealized appreciation
of investments 23,262,625
------------
Net Realized and Unrealized Gain
on Investments 32,927,241
------------
Net Increase in Net Assets
Resulting from Operations $54,970,041
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
- ---------------
The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1995 1994
----------- -----------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 22,042,800 $ 18,398,624
Net realized gain/(loss) on investments 9,664,616 (13,787,259)
Net change in unrealized appreciation/(depreciation) of investments 23,262,625 (16,409,226)
------------- -------------
Net Increase/(Decrease) in Net Assets Resulting from Operations 54,970,041 (11,797,861)
------------- -------------
Distributions to Shareholders:
Net investment income (22,025,063) (18,375,937)
Net realized gain on investments -- (1,613,357)
------------- -------------
Total Distributions to Shareholders (22,025,063) (19,989,294)
------------- -------------
From Capital Share Transactions:
Net increase in net assets from capital share transactions -- Note E 32,538,518 496,365
------------- -------------
Net Increase/(Decrease) in Net Assets 65,483,496 (31,290,790)
Net Assets:
Beginning of year 308,978,085 340,268,875
------------- -------------
End of year* $ 374,461,581 $ 308,978,085
============= =============
* Includes undistributed net investment income of: $737,841 $99,343
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ............ $11.08 $12.24 $12.26 $12.33 $11.56 $11.67 $11.16 $11.12 $12.41 $11.57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment
income .......... 0.76 0.40 0.70 0.81 0.92 0.97 0.98 1.03 0.96 0.83
Net realized and unre-
alized gain/(loss)
on investments .. 1.17 (0.82) 0.50 0.13 0.91 (0.11) 0.55 0.02 (0.92) 0.83
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase/
(decrease) from
investment
operations ...... 1.93 (0.42) 1.20 0.94 1.83 0.86 1.53 1.05 0.04 1.66
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions to
shareholders
Distributions from net
investment
income .......... (0.76) (0.68) (0.70) (0.81) (0.92) (0.97) (1.02) (1.01) (1.23) (0.79)
Distributions from net
realized gain ... -- (0.06) (0.52) (0.20) (0.14) -- -- -- (0.10) (0.03)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ... (0.76) (0.74) (1.22) (1.01) (1.06) (0.97) (1.02) (1.01) (1.33) (0.82)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year ............ $12.25 $11.08 $12.24 $12.26 $12.33 $11.56 $11.67 $11.16 $11.12 $12.41
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* ......... 17.59% (3.45)% 9.85% 7.70% 16.19% 7.57% 13.88% 9.70% .32% 14.84%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of
year (000's
omitted) ........ $374,462 $308,978 $340,269 $284,330 $222,299 $165,844 $147,753 $113,616 $103,846 $73,491
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%
Ratio of net invest-
ment income to
average net
assets .......... 6.43% 5.69% 5.56% 6.70% 7.81% 8.53% 8.78% 8.97% 8.97% 9.10%
Portfolio turnover
ratio ........... 298% 311% 220% 57% 43% 39% 158% 24% 67% 55%
</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.
See notes to financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Guardian Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of The Guardian Bond Fund, Inc. as of
December 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the ten years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Guardian Bond Fund, Inc. at December 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
February 9, 1996
- --------------------------------------------------------------------------------
46
<PAGE>
- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
47
<PAGE>
- ---------------
The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 93.5%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
FINANCIAL -- 25.6%
Bank Holding Companies -- 12.8%
$15,200,000 Barclays U.S. Funding Corp.,
5.76% due 1/11/96 $15,175,680
15,200,000 Commerzbank US Fin. Corp.,
5.76% due 1/5/96 15,190,272
15,200,000 Republic N.Y. Corp.,
2.72% due 1/9/96 15,180,679
-----------
45,546,631
-----------
Financial-Others -- 12.8%
15,200,000 Household Finance Corp.
5.75% due 1/8/96 15,183,005
15,200,000 National Rural Utils
5.70% due 1/18/96 15,159,087
15,200,000 USAA Capital Corp.,
5.71% due 1/18/96 15,159,015
-----------
45,501,107
-----------
Total Financial 91,047,738
-----------
INDUSTRIAL -- 67.9%
Automotive -- 8.5%
15,200,000 Ford Motor Cr. Co.,
5.75% due 1/17/96 15,161,155
15,200,000 Toyota Motor Cr. Co.,
5.73% due 1/17/96 15,161,291
-----------
30,322,446
-----------
Conglomerates -- 4.2%
15,200,000 GE Capital Corp.,
5.70% due 1/19/96 15,156,680
-----------
Drugs -- 4.3%
15,200,000 Pfizer, Inc.,
5.68% due 1/22/96 15,149,637
-----------
Electronic Instruments -- 4.3%
15,200,000 Siemens Corp.,
5.68% due 1/10/96 15,178,416
-----------
Food, Beverage and Tobacco -- 16.9%
15,200,000 Cargill, Inc.,
5.70% due 1/19/96 15,156,680
15,200,000 Heinz H.J.,
5.68% due 1/12/96 15,173,619
15,200,000 Nestle Capital Corp.,
5.68% due 1/24/96 15,144,842
15,200,000 PepsiCo, Inc.,
5.73% due 1/26/96 15,139,517
-----------
60,614,658
-----------
Insurance -- 4.2%
15,200,000 American Gen. Fin. Corp.,
5.79% due 1/29/96 15,131,549
-----------
Machinery-Industrial Specialty -- 4.3%
15,200,000 John Deere Cap. Corp.,
5.73% due 1/16/96 15,163,710
-----------
Oil-Integrated-Domestic -- 4.2%
15,200,000 Chevron Oil Fin. Co.,
5.76% due 1/25/96 15,141,632
-----------
Oil-Integrated-International -- 4.3%
15,200,000 Texaco, Inc.,
5.95% due 1/2/96 15,197,488
-----------
Telecommunications -- 12.7%
15,200,000 Bell Atlantic Fin'l. Svcs.,
5.75% due 1/12/96 15,173,294
15,200,000 Bell South Telecomm.
Inc., 5.67% due 2/5/96 15,116,210
15,200,000 GTE North, Inc.,
5.67% due 2/9/96 15,106,634
-----------
45,396,138
-----------
Total Industrial 242,452,354
-----------
TOTAL COMMERCIAL PAPER
(Cost $333,500,092) 333,500,092
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 6.5%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$23,256,000 State Street Bank & Trust
repurchase agreement, dated
12/29/95, maturity value
$23,270,470, at 5.6%, due
1/2/96 (collateralized by
$21,815,000 U.S. Treasury
Notes, 7.125% due 2/29/00,
market value $23,744,291) $ 23,256,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $23,256,000) 23,256,000
------------
TOTAL INVESTMENTS -- 100.0%
(Cost $356,756,092) 356,756,092
------------
CASH, RECEIVABLES AND OTHER
ASSETS LESS PAYABLES -- 0.0% 63,997
------------
NET ASSETS -- 100.0% $356,820,089
============
See notes to financial statements.
- --------------------------------------------------------------------------------
49
<PAGE>
- ---------------
The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ---------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995
ASSETS:
Investments, at identified cost* $356,756,092
============
Investments, at market $333,500,092
Repurchase agreements 23,256,000
------------
TOTAL INVESTMENTS 356,756,092
Cash 170
Receivable for fund shares sold 1,326,852
Interest receivable 10,853
------------
TOTAL ASSETS 358,093,967
============
LIABILITIES:
Payable for fund shares redeemed 743,888
Accrued expenses 30,609
Due to affiliates -- Note B 499,381
------------
TOTAL LIABILITIES 1,273,878
------------
NET ASSETS $356,820,089
============
COMPONENTS OF NET ASSETS:
Common Stock -- 35,682,009 shares
outstanding $.10 par value each
(100,000,000 shares authorized) $ 3,568,201
Paid-in capital 353,251,888
------------
NET ASSETS $356,820,089
============
NET ASSET VALUE PER SHARE $ 10.00
============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
Year Ended
December 31, 1995
INVESTMENT INCOME:
Income:
Interest $ 21,709,819
------------
Expenses:
Investment advisory fees -- Note B 1,833,520
Custodian fees 82,726
Audit fees 16,500
Directors' fees -- Note B 10,000
Printing expense 5,500
Insurance expense 4,915
Legal fees 3,715
Transfer agent fees 3,300
Registration fees 1,167
Other 721
------------
Total Expenses 1,962,064
------------
Net Investment Income, Representing
Net Increase in Net Assets Resulting
from Operations $ 19,747,755
============
See notes to financial statements
- --------------------------------------------------------------------------------
50
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1995 1994
------------- -------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 19,747,755 $ 13,907,542
------------- -------------
Net Increase in Net Assets Resulting from Operations 19,747,755 13,907,542
------------- -------------
Distributions to Shareholders:
Net investment income (19,747,755) (13,907,542)
------------- -------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from
capital share transactions -- Note E (30,165,747) 76,187,548
------------- -------------
Net Increase/(Decrease) in Net Assets (30,165,747) 76,187,548
Net Assets:
Beginning of year 386,985,836 310,798,288
------------- -------------
End of year $ 356,820,089 $ 386,985,836
============= =============
</TABLE>
See notes to financial statements
- --------------------------------------------------------------------------------
51
<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 years
indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of year .......... $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 ........... 0.54 0.38 0.26 0.35 0.54 0.77 0.87 0.72 0.63 0.62
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Distributions to
Shareholders
Dividends from net
investment income ... (0.54) (0.38) (0.26) (0.35) (0.54) (0.77) (0.87) (0.72) (0.63) (0.62)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year ............. $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return* ....... 5.52% 3.82% 2.64% 3.21% 5.59% 7.95% 8.70% 7.20% 6.30% 6.20%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of
year (000's
omitted) .......... $356,820 $386,986 $310,798 $318,879 $331,677 $331,600 $262,865 $228,310 $164,326 $87,403
Ratio of expenses
to average net
assets ............ 0.54% 0.54% 0.54% 0.54% 0.55% 0.56% 0.56% 0.58% 0.61% 0.61%
Ratio of net invest-
ment income to
average net
assets ............ 5.39% 3.81% 2.61% 3.17% 5.44% 7.67% 8.67% 7.17% 6.27% 6.14%
</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.
See notes to financial statements.
- --------------------------------------------------------------------------------
52
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Guardian Cash Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of The Guardian Cash Fund, Inc. as of
December 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the ten years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Guardian Cash Fund, Inc. at December 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 9, 1996
- --------------------------------------------------------------------------------
53
<PAGE>
- ------------------
The Guardian
Stock, Bond & Cash
- ------------------
4
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, The Guardian Bond Fund, Inc.
The Guardian Cash Fund
- -------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- --------------------------------------------------------------------------------
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
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
- --------------------------------------------------------------------------------
54
<PAGE>
------------------
The Guardian
Stock, Bond & Cash
------------------
4
------------------
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
December 31, 1995
distributed to its shareholders in accordance with the applicable provisions of
the Code. Therefore, no federal income tax provision is required.
At December 31, 1995, for federal income tax purposes, The Guardian Bond
Fund, Inc. had a net capital loss carryforward of $4,213,461, which expires in
2002.
Reclassifications of Capital Accounts
During the year ended December 31, 1995, GSF and GBF reclassified amounts to
paid-in capital from undistributed net investment income and accumulated net
realized gain/(loss) on investments. Increases (decreases) to the various
capital accounts were as follows:
Accumulated net
Paid-in Undistributed net realized gain/(loss)
Capital investment income on investments
------- ----------------- --------------
GSF $(227,630) -- $227,630
GBF (6,367) $620,761 (614,394)
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 year ended December 31, 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 $10,000 for the year ended
December 31, 1995.
- --------------------------------------------------------------------------------
Note C -- Repurchase Agreements
- --------------------------------------------------------------------------------
Collateral underlying repurchase agreements takes the form of either cash
- --------------------------------------------------------------------------------
55
<PAGE>
- ------------------
The Guardian
Stock, Bond & Cash
- ------------------
4
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, The Guardian Bond Fund, Inc.
The Guardian Cash Fund
- -------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
December 31, 1995
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. 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
- --------------------------------------------------------------------------------
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1995
-----------------------------------
GSF GBF
--- ---
<S> <C> <C>
Purchases
Stocks and debt obligations ...................................... $1,111,298,609 $ 77,232,669
U.S. Government and government agency obligations ................ -- 951,375,416
Proceeds
Stocks and debt obligations ...................................... $ 951,576,851 $158,381,463
U.S. Government and government agency obligations ................ 17,000,000 791,476,220
</TABLE>
The cost of investments owned at December 31, 1995 for federal income tax
purposes was $1,267,180,692, $364,678,628 and $356,756,092 for GSF, GBF and GCF,
respectively. The gross unrealized appreciation and depreciation at December 31,
1995 for GSF and GBF were as follows:
<TABLE>
<CAPTION>
GSF GBF
--- ---
<S> <C> <C>
Gross Appreciation $ 363,377,611 $ 9,634,509
Gross Depreciation (15,730,442) (591,718)
-------------- -----------
Net Unrealized Appreciation $ 347,647,169 $ 9,042,791
============== ===========
</TABLE>
- --------------------------------------------------------------------------------
56
<PAGE>
------------------
The Guardian
Stock, Bond & Cash
------------------
4
------------------
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- --------------------------------------------------------------------------------
Note E -- Transactions in Capital Stock
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Guardian Stock Fund, Inc.
Year Ended December 31, Year Ended December 31,
1995 1994
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold .......................................... 9,643,546 $313,867,818 10,511,824 $299,351,838
Shares issued through reinvestment of
dividends from net investment income and
net realized gain on sales of investments .......... 2,609,964 90,100,478 1,661,572 45,909,555
------------ ------------- ------------ -------------
12,253,510 403,968,296 12,173,396 345,261,393
Less shares repurchased .............................. (3,748,523) (121,123,785) (4,131,682) (117,077,466)
------------ ------------- ------------ -------------
NET INCREASE ...................................... 8,504,987 $282,844,511 8,041,714 $228,183,927
============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
The Guardian Bond Fund, Inc.
Year Ended December 31, Year Ended December 31,
1995 1994
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold .......................................... 5,626,400 $67,253,610 4,878,473 $57,770,327
Shares issued through reinvestment of
dividends from net investment income and
net realized gain on sales of investments .......... 1,809,816 22,025,063 1,769,521 19,989,294
------------ ------------- ------------ -------------
7,436,216 89,278,673 6,647,994 77,759,621
Less shares repurchased .............................. (4,756,442) (56,740,155) (6,559,394) (77,263,256)
------------ ------------- ------------ -------------
NET INCREASE ...................................... 2,679,774 $32,538,518 88,600 $496,365
============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
The Guardian Cash Fund, Inc.
Year Ended December 31, Year Ended December 31,
1995 1994
-------------------------------- --------------------------------
Shares Amount Shares Amount
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold .......................................... 23,010,954 $230,109,542 28,157,184 $281,571,841
Shares issued through reinvestment of
dividends from net investment income and
net realized gain on sales of investments .......... 1,974,775 19,747,755 1,390,754 13,907,542
------------ ------------- ------------ -------------
24,985,729 249,857,297 29,547,938 295,479,383
Less shares repurchased .............................. (28,002,304) (280,023,044) (21,929,183) (219,291,835)
------------ ------------- ------------ -------------
NET INCREASE (DECREASE) ........................... (3,016,575) $(30,165,747) 7,618,755 $76,187,548
============ ============= ============ =============
</TABLE>
- --------------------------------------------------------------------------------
Note F -- Line of Credit
- --------------------------------------------------------------------------------
A $20,000,000 line of credit available to each of the Fund and the other
Guardian related Funds has been established with Morgan Guaranty Trust Company.
The rate of interest charged on any borrowings is based upon the prevailing
Federal Funds rate at the time of the loan plus .25% calculated on a 360 day
basis per annum. For the year ended December 31, 1995, none of the Funds
borrowed against this line of credit.
- --------------------------------------------------------------------------------
57
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS -- 76.7%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Aerospace -- 1.5%
5,000 Boeing Co. $ 391,875
------------
Automotive -- 0.8%
2,000 Ford Motor Company 58,000
3,000 General Motors Corporation 158,625
------------
216,625
------------
Automotive: Parts and Accessories -- 2.8%
15,000 GenCorp Inc. 183,750
11,500 Handy & Harman 189,750
12,000 Wynn's International, Inc. 355,500
------------
729,000
------------
Aviation: Parts and Services -- 2.7%
2,000 AAR Corp. 44,000
2,000 Curtiss-Wright Corporation 107,500
6,000 Hi-Shear Industries Inc. + 43,500
4,000 Moog, Inc., Class A + 69,000
10,000 Precision Castparts Corp. 397,500
3,000 Rohr Inc. + 43,125
------------
704,625
------------
Broadcasting -- 10.9%
20,000 Ackerley Communications Inc. 305,000
2,000 BHC Communications, Inc., Class A 189,000
4,000 Capital Cities/ABC, Inc. 493,500
5,000 Chris-Craft Industries, Inc. 216,250
10,000 Liberty Corporation 337,500
7,500 Multi-Market Radio Inc., Class A + 76,875
8,950 Outlet Communications, Inc., Class A + 422,888
6,000 United Television, Inc. 541,500
17,000 Westinghouse Electric Corp. 280,500
------------
2,863,013
------------
Cable -- 12.1%
5,600 BET Holdings, Inc., Class A + 128,100
20,500 Cablevision Systems Corporation, Class A + 1,112,125
33,100 International Family Entertainment, Inc., Class B + 542,012
13,000 Media General, Inc., Class A 394,875
3,000 Tele-Communications, Inc., Class A + 59,625
13,000 Tele-Communications, Inc./Liberty
Media Group, Class A + 349,375
2,000 Tele-Communications International, Inc.,
Class A + 45,500
12,000 United International Holdings, Inc.,
Class A + 177,000
20,000 US WEST Media Group + 385,000
------------
3,193,612
------------
Consumer Products -- 4.0%
6,500 American Brands, Inc. 290,062
5,000 Culbro Corporation + 245,625
2,000 Eastman Kodak Company 134,000
2,500 General Electric Company 180,000
5,000 Kerr Group, Inc. + 50,000
4,000 National Presto Industries Inc. 159,000
------------
1,058,687
------------
Diversified Industrial -- 1.0%
2,500 Minnesota Mining and Manufacturing
Company 165,625
4,000 Thomas Industries Inc. 94,000
------------
259,625
------------
Electric Equipment -- 1.5%
8,000 Honeywell Inc. 389,000
------------
Entertainment -- 3.3%
5,000 GC Companies, Inc. + 167,500
15,000 Time Warner Inc. 568,125
3,000 Viacom Inc., Class A + 137,625
------------
873,250
------------
Financial Services -- 6.8%
6,000 American Express Company 248,250
16,000 GEICO Corporation 1,118,000
3,000 H&R Block Inc. 121,500
6,000 Midland Company 294,750
------------
1,782,500
------------
Food and Beverage -- 4.4%
14,742 Bruno's, Inc. + 154,791
8,000 Celestial Seasonings, Inc. + 150,000
15,000 Quaker Oats Company 517,500
4,000 Seagram Company Ltd. 138,500
2,000 Tootsie Roll Industries, Inc. 79,250
2,000 Wrigley, (Wm.) Jr. Company 105,000
------------
1,145,041
------------
See notes to financial statements.
- --------------------------------------------------------------------------------
58
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Health Care -- 1.4%
7,000 Genentech Inc. + $ 371,000
------------
Hotels/Casinos -- 1.9%
9,000 Aztar Corporation + 72,000
6,000 Hilton Hotels Corporation 369,000
2,000 Mirage Resorts, Incorporated + 69,000
------------
510,000
------------
Industrial Equipment and Supplies -- 6.3%
15,000 AMETEK, Inc. 281,250
5,000 Crane Co. 184,375
2,500 CTS Corporation 94,375
1,000 Franklin Electric Company 33,000
8,000 Ingersoll Rand Co. 281,000
10,000 Navistar International Corporation + 105,000
1,500 Pittway Corporation 99,563
16,000 Sequa Corporation, Class A + 488,000
10,000 TransPro Inc. 106,250
------------
1,672,813
------------
Metals and Mining -- 3.5%
33,500 Magma Copper Company + 933,813
------------
Oil and Gas Equipment/Services -- 0.2%
4,500 RPC Inc. + 41,062
------------
Publishing -- 5.1%
8,000 Houghton Mifflin Company 344,000
10,000 Meredith Corporation 418,750
8,000 Pulitzer Publishing 382,000
8,000 Thomas Nelson Inc. 104,000
11,000 Western Publishing Group, Inc. + 86,625
------------
1,335,375
------------
Specialty Chemical -- 1.2%
14,000 Ferro Corporation 325,500
------------
Telecommunications -- 2.0%
13,100 Pacific Telecom, Inc. 393,000
4,000 US WEST Communications Group 143,000
------------
536,000
------------
Wireless Communications -- 3.3%
10,000 Cellular Communications, Inc., Class A + 497,500
12,000 Centennial Cellular Corp., Class A + 205,500
4,500 Telephone and Data Systems, Inc. 177,750
------------
880,750
------------
TOTAL COMMON STOCK
(Cost $19,360,212) 20,213,166
------------
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.4%
- --------------------------------------------------------------------------------
Cable -- 0.2%
1,500 Cablevision Systems Corporation,
Series I, 8.500%, Conv. Pfd. 40,875
------------
Industrial Equipment and Supplies -- 0.2%
1,000 Sequa Corporation, $5.00, Conv. Pfd. 58,000
------------
TOTAL PREFERRED STOCKS
(Cost $100,675) 98,875
------------
- --------------------------------------------------------------------------------
U.S. TREASURY BILLS -- 23.9%
- --------------------------------------------------------------------------------
Principal
Amount
- --------------------------------------------------------------------------------
$6,308,000 4.84% to 5.33%++ due
01/04/1996-02/08/1996 6,288,495
------------
TOTAL U.S. TREASURY BILLS
(Cost $6,288,495) 6,288,495
------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
- --------------------------------------------------------------------------------
228,000 Agreement with State Street Bank and
Trust Company, 5.00% dated
12/29/1995, to be repurchased at
$228,127 on 01/02/1996, collateralized
by $210,000 U.S. Treasury Bonds,
8.00% due 08/15/1999
(value $234,664) 228,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $228,000) 228,000
------------
See notes to financial statements.
- --------------------------------------------------------------------------------
59
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
Value
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.8%
(Cost $25,977,382) (a) $ 26,828,536
------------
OTHER ASSETS AND LIABILITIES (Net)-(1.8)% (464,594)
------------
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 26,363,942
============
- --------------------------------------------------------------------------------
(a) Aggregate cost for Federal tax purposes was $25,993,437. Net unrealized
appreciation for Federal tax purposes was $835,099 (gross unrealized
appreciation was $1,144,947 and gross unrealized depreciation was
$309,848).
+ Non-income producing security
++ Represents annualized yield at date of purchase (unaudited).
See notes to financial statements.
- --------------------------------------------------------------------------------
60
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995
Assets:
Investments, at value
(Cost $25,977,382) $ 26,828,536
Cash 857
Receivable for investments sold 66,448
Dividends and interest receivable 15,964
Receivable from Manager 14,377
Unamortized organization costs 86,576
------------
Total Assets 27,012,758
------------
Liabilities:
Payable for investments purchased 475,825
Organization costs payable 99,905
Management fee payable 22,578
Accrued Directors' fees 3,500
Accrued expenses and other payables 47,008
------------
Total Liabilities 648,816
------------
Net assets applicable to 2,463,338 shares of
common stock outstanding $ 26,363,942
============
NET ASSETS consist of:
Shares of common stock at par value $ 2,463
Additional paid-in capital 25,525,869
Distributions in excess of net realized
gain on investments (16,055)
Undistributed net investment income 511
Net unrealized appreciation of investments 851,154
------------
Total Net Assets $ 26,363,942
============
Net Asset Value, offering and redemption
price per share ($26,363,942 4 2,463,338
shares outstanding; 500,000,000 shares
authorized of $0.001 par value) $ 10.70
============
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1995*
Investment Income:
Interest income $ 179,568
Dividend income (net of foreign
withholding taxes of $135) 84,468
------------
Total Investment Income 264,036
------------
Expenses:
Management fee 104,276
Legal and audit fees 41,000
Directors' fees 15,885
Amortization of organization costs 13,424
Custodian fees 10,370
Registration and filing fees 9,517
Transfer agent fees 5,223
Other 745
------------
Total expenses before expenses assumed
by Manager and Adviser 200,440
------------
Expenses assumed by Manager and Adviser (14,377)
------------
Total Expenses -- Net 186,063
------------
Net Investment Income 77,973
------------
Net Realized and Unrealized Gain on
Investments:
Net realized gain on investments sold 234,480
Net unrealized appreciation of investments
during the period 851,154
------------
Net realized and unrealized gain on investments 1,085,634
------------
Net increase in net assets resulting from
operations $ 1,163,607
============
- ---------
*The Fund commenced operations on May 1, 1995.
See notes to financial statements.
- --------------------------------------------------------------------------------
61
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Period
Ended
12/31/95*
------------
Net investment income $ 77,973
Net realized gain on investments 234,480
Net unrealized appreciation of investments 851,154
------------
Net increase in net assets resulting from operations 1,163,607
Distribution to shareholders from:
Net investment income (77,462)
Net realized gain on investments (234,480)
Distributions in excess of net realized gain
on investments (16,055)
Net increase in net assets from Fund share
transactions 25,428,332
------------
Net increase in net assets 26,263,942
NET ASSETS:
Beginning of period 100,000
------------
End of period (including undistributed net
investment income of $511) $ 26,363,942
============
- --------
*The Fund commenced operations on May 1, 1995.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Per share amounts for a Fund share outstanding throughout the period.
Period
Ended
12/31/95*
------------
Operating performance:
Net asset value, beginning of period $ 10.00
-------
Net investment income (a) 0.03
Net realized and unrealized gain on investments 0.80
-------
Total from investment operations 0.83
-------
Distributions to shareholders from:
Net investment income (0.03)
Net realized gains (0.09)
Distributions in excess of net realized gains (0.01)
-------
Total Distributions (0.13)
-------
Net asset value, end of period $ 10.70
=======
Total return** 8.4%
=======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $26,364
Ratio of net investment income to average
net assets 0.75%+
Ratio of operating expenses to average
net assets (b) 1.78%+
Portfolio turnover rate 81.4%
- ------------
* 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
including reinvestment of dividends. Total return for the period of less
than one year is not annualized.
+ Annualized.
(a) Net investment income before expenses assumed by the Manager and Adviser
for the period ended December 31, 1995 was $0.03.
(b) Operating expense ratio before expenses assumed by the Manager and Adviser
for the period ended December 31, 1995 was 1.92%.
See notes to financial statements
- --------------------------------------------------------------------------------
62
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Gabelli Capital Asset Fund
(a series of Gabelli Capital Series Funds, Inc.)
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Gabelli Capital Asset Fund (a series
of Gabelli Capital Series Funds, Inc.) as of December 31, 1995, and the related
statements of operations and changes in net assets, and the financial highlights
from May 1, 1995 (commencement of operations) through December 31, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of mate-rial misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Gabelli Capital Asset Fund at December 31, 1995, and the results of its
operations, the changes in its net assets and the financial highlights for the
period from May 1, 1995 to December 31, 1995, in conformity with generally
accepted accounting principles.
/S/ Ernst & Young LLP
New York, New York
February 7, 1996
- --------------------------------------------------------------------------------
63
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- -------------------------------------
1. -- Significant Accounting Policies
- -------------------------------------
Gabelli Capital Asset Fund (the "Fund"), a series of Gabelli Capital Series
Funds, Inc. (the "Company"), was organized on April 8, 1993 as a Maryland
corporation. The Company is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act") whose primary objective is growth of capital. 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. On April 26, 1995,
the Fund sold a total of 10,000 shares of common stock to Guardian Insurance &
Annuity Company, Inc. and proceeds to the Fund amounted to $100,000. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. 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 are quoted on NASDAQ are valued at the last sale price as
of the close of business on the day the securities are being valued or, lacking
any sales, at the mean between closing bid and asked prices. Other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest average of the bid and asked price. 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.
Repurchase Agreements.
The Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement results
in a fixed rate of return that is not subject to market fluctuations during the
Fund's holding period. The value of the collateral is at least equal at all
times to the total amount of the repurchase obligations, including interest. In
the event of counterparty default, the Fund has the right to use the collateral
to offset losses incurred. There is potential loss to the Fund in the event the
Fund is delayed or prevented from exercising its rights to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assert its
rights. The Adviser, acting under the supervision of the Board of Directors,
reviews the value of the collateral and the creditworthiness of those banks and
dealers with which the Fund enters into repurchase agreements to evaluate
potential risks.
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
- --------------------------------------------------------------------------------
64
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
may differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various investment
securities held by the Fund, timing differences and differing characterization
of distributions made by the Fund.
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 advanced by the Guardian Insurance & Annuity Company and
will be reimbursed by the Fund after the sooner of one year or when the Fund
reaches $50 million. 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.
- ----------------------------------------
2. -- Agreements with Affiliated Parties
- ----------------------------------------
Pursuant to a management agreement (the "Management Agreement"), provides
that the Fund will pay the Guardian Investor Services Corporation (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
First Data Investor Services Group, Inc., the Fund's sub-administrator (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. During the period ended December 31, 1995, the
Manager and Adviser assumed certain expenses of the Fund in the amount of
$14,377.
- ---------------------------
3. -- Portfolio Securities
- ---------------------------
Cost of purchases and proceeds from sales of investment securities for the
period ended December 31, 1995, excluding U.S. government and short-term
investments, aggregated $27,936,333 and $8,712,282 respectively.
- ----------------------------------
4. -- Transactions with Affiliates
- ----------------------------------
During the period ended December 31, 1995, the Fund paid brokerage
commissions of $4,045 to Gabelli & Company, Inc. and its affiliates.
- ----------------------------
5. -- Shares of Common Stock
- ----------------------------
Common stock transactions were as follows:
Period Ended
12/31/95*
------------
Shares Amount
--------- -----------
Sold 2,907,580 $30,237,331
Shares issued upon re- investment of dividends 30,769 327,997
Redeemed (485,011) (5,136,996)
--------- -----------
Net increase 2,453,338 $25,428,332
--------- -----------
* The Fund commenced operations on May 1, 1995.
- --------------------------------------------------------------------------------
65
<PAGE>
- ------------------
Baillie Gifford
International Fund
- ------------------
6
- ------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS -- 94.0%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ARGENTINA -- 0.4%
Oil and Gas -- 0.2%
140,500 Perez Companc SA* $ 744,501
Real Estate -- 0.2%
220,500 Comercial De Plata* 584,208
------------
1,328,709
------------
AUSTRIA -- 0.4%
Business Services -- 0.4%
17,470 Flughafen Wien AG* 1,178,707
------------
AUSTRALIA -- 4.4%
Banks -- 0.6%
437,000 Australia + NZ Bank Group 2,049,554
Business Services -- 0.5%
114,000 Brambles Industries Ltd. 1,605,470
Forest Products -- 0.5%
215,929 Amcor Limited 1,524,696
Metals -- 0.6%
278,000 Western Mining Corp. Ltd. 1,785,283
Petroleum Services -- 1.1%
249,288 Broken Hill Property 3,520,494
Real Estate -- 0.6%
122,808 Lend Lease Corp. 1,779,958
Retail Trade -- 0.5%
714,608 Woolworths Ltd. 1,720,923
------------
13,986,378
------------
BELGIUM -- 1.5%
Banks -- 1.2%
11,050 Generale De Banque 3,829,766
Metals -- 0.3%
13,000 Union Miniere* 870,200
------------
4,699,966
------------
BRAZIL -- 0.9%
Broadcasting -- 0.5%
36,000 Telecomunicados Brasileiras 1,705,500
Other -- 0.4%
54,567 Companhia Energetica De Minas 1,214,116
------------
2,919,616
------------
CHILE -- 0.5%
Electric Utilities -- 0.5%
50,000 Enersis SA 1,425,000
------------
CZECHOSLOVAKIA -- 0.3%
Electric Utilities -- 0.3%
25,000 Cez (Cesk En Zavody)* 903,773
------------
DENMARK -- 0.5%
Telephone -- 0.5%
30,750 Tele Danmark AS 1,678,027
------------
FRANCE -- 4.7%
Banks -- 0.6%
14,890 Societe Generale 1,839,585
Conglomerates -- 0.6%
10,700 BIC 1,088,136
4,090 CGIP 808,479
Construction Materials -- 0.3%
13,300 Poliet 1,080,404
Containers -- 0.4%
12,100 Cie De St Gobain 1,319,461
Leisure Products -- 0.4%
16,866 Club Mediterranee* 1,346,662
Oil-Integrated -- 1.0%
41,000 Societe Elf Aquitaine 3,020,788
Retail Trade -- 1.4%
12,820 Castorama Dubois 2,099,579
7,200 Comptoirs Modernes* 2,337,758
------------
14,940,852
------------
GERMANY -- 5.9%
Air Travel -- 0.9%
19,850 Lufthansa AG 2,732,921
Automobiles -- 0.9%
8,880 Volkswagen AG 2,968,873
Banks -- 0.8%
56,550 Deutsche Bank AG 2,679,473
Building Construction -- 0.2%
18,856 Kampa Haus AG 755,817
Chemicals -- 2.1%
12,350 BASF AG 2,750,662
13,910 Hoechst AG 3,772,039
Drugs and Health Care -- 0.4%
2,280 GEHE AG 1,147,351
Industrial Machinery -- 0.6%
7,260 Man AG 1,963,667
------------
18,770,803
------------
*Non-income producing securities. See notes to financial statements.
- --------------------------------------------------------------------------------
66
<PAGE>
------------------
Baillie Gifford
International Fund
------------------
6
------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
HONG KONG -- 5.6%
Banks -- 0.7%
244,000 Hang Seng Bank $ 2,185,192
Conglomerates -- 1.2%
355,000 Hutchison Whampoa 2,162,367
192,000 Swire Pacific 1,489,816
Publishing -- 0.8%
761,000 Citic Pacific Ltd. 2,603,097
Real Estate -- 2.0%
403,000 Cheung Kong Hldgs. 2,454,743
831,220 Hong Kong Land Holding 1,537,757
288,000 Sun Hung Kai Properties 2,355,771
Telephone -- 0.9%
1,602,400 Hong Kong Telecommunications 2,859,763
------------
17,648,506
------------
HUNGARY -- 0.2%
Chemicals -- 0.2%
35,000 Richter Gedeon Veg 672,000
------------
IRELAND -- 0.3%
Construction Materials -- 0.3%
143,000 CRH 1,076,049
------------
ITALY -- 2.8%
Automobiles -- 0.9%
872,300 Fiat Spa 2,834,203
Conglomerates -- 0.2%
387,000 Fidis* 742,017
Insurance -- 0.4%
208,000 RAS 1,128,753
Telephone -- 1.3%
2,435,000 Telecom Italia 4,017,363
------------
8,722,336
------------
JAPAN -- 33.4%
Automobiles -- 1.6%
287,000 Calsonic Corp. 2,106,983
272,000 Suzuki Motor Corp. 3,029,540
Banks -- 1.8%
275,000 Sanwa Bank 5,593,220
Business Services -- 2.3%
361,000 Kamigumi Co. 3,464,901
54,000 Secom Co. 3,755,157
Construction and Mining Equipment -- 1.3%
169,000 Nishimatsu Construction* 1,980,533
67,000 Tostem Corp. 2,225,763
Drugs and Health Care -- 1.1%
88,000 Sankyo Co. 1,977,337
66,000 Santen Pharmaceutical Co. 1,495,787
Electrical Equipment -- 1.1%
354,000 Hitachi Corp. 3,565,714
Electronics -- 4.8%
144,000 Aiwa Co. 3,375,109
55,000 Kyocera Corp. 4,085,714
98,000 Murata Manufacturing Co. 3,606,780
74,000 Rohm Co. 4,178,402
Financial Services -- 1.3%
100,000 Japan Securities Finance 1,433,414
57,400 Promise Co. 2,762,983
Homebuilders -- 0.8%
185,000 Sekisui House 2,365,133
Industrial Machinery -- 2.7%
760,000 Mitsubishi Heavy Ind. 6,057,918
360,000 NSK* 2,615,012
Insurance -- 1.0%
232,000 Tokio Marine & Fire 3,033,414
Investment Company -- 1.4%
205,000 Nomura Securities 4,467,312
Leisure Products -- 0.8%
16,500 Toho Co. 2,636,804
Photography -- 2.4%
222,000 Canon, Inc. 4,020,726
129,000 Fuji Photo Film Co. 3,723,196
Real Estate -- 1.2%
300,000 Mitsubishi Estate 3,748,184
Retail Grocery -- 0.7%
32,000 Seven Eleven Japan 2,256,271
Retail Trade -- 2.2%
57,000 Ito Yokado Co. 3,511,090
171,000 Marui Co. 3,560,775
Steel -- 1.8%
275,000 Hitachi Metals 3,435,835
700,000 Sumitomo Metal Ind.* 2,122,034
Telecommunications -- 1.6%
646 DDICorp. 5,005,327
See notes to financial statements. *Non-income producing securities.
- --------------------------------------------------------------------------------
67
<PAGE>
- ------------------
Baillie Gifford
International Fund
- ------------------
6
- ------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
Shares Value
- --------------------------------------------------------------------------------
Tires and Rubber -- 1.5%
291,000 Bridgestone Corp. $ 4,622,179
------------
105,818,547
------------
MALAYSIA -- 2.6%
Conglomerates -- 0.7%
1,537,000 Renong Berhad 2,275,513
Leisure Products -- 0.9%
528,000 Resorts World Berhad 2,827,421
Telephone -- 1.0%
400,000 Telekom Malaysia 3,118,479
------------
8,221,413
------------
MEXICO -- 0.7%
Food and Beverages -- 0.4%
44,500 Pan American Beverage, Inc. 1,424,000
Telephone -- 0.3%
29,500 Telefonos de Mexico SA 940,312
------------
2,364,312
------------
NETHERLANDS -- 2.6%
Apparel and Textile -- 0.5%
46,300 Gucci Group NV* 1,745,591
Banks -- 0.9%
60,000 ABN Amro Holdings NV 2,733,221
Household Appliances -- 0.3%
24,280 Philips Electronic N 877,572
Publishing -- 0.9%
21,800 Ver Ned Uitgevers 2,992,796
------------
8,349,180
------------
NEW ZEALAND -- 0.7%
Telephone -- 0.7%
515,000 Telecom Corp. of N.Z. 2,222,150
------------
POLAND -- 0.2%
Electric Utilities -- 0.2%
235,000 Elektrim 795,883
------------
SINGAPORE -- 2.8%
Air Travel -- 0.5%
166,000 Singapore Airlines 1,549,099
Banks -- 0.6%
151,333 Overseas Chinese Bank 1,893,669
Food and Beverage -- 0.6%
139,000 Fraser & Neave* 1,768,823
Industrial Machinery -- 0.6%
215,000 Keppel Corp.* 1,915,164
Publishing -- 0.5%
96,000 Singapore Press HD 1,696,713
------------
8,823,468
------------
SPAIN -- 1.5%
Banks -- 1.0%
65,000 Banco Santander SA 3,263,397
Construction Material -- 0.5%
73,600 Continente Cent Co.* 1,662,523
------------
4,925,920
------------
SWEDEN -- 2.0%
Business Services -- 0.8%
53,500 Securitas AB 2,538,142
Construction and Mining Equipment -- 1.2%
135,000 Atlas Copco AB 2,033,224
40,000 Incentive AB 1,747,067
------------
6,318,433
------------
SWITZERLAND -- 5.0%
Business Services -- 0.3%
1,000 Danzas Holding 1,109,666
Chemicals -- 1.4%
4,940 Ciba Geigy AG* 4,346,857
Drugs and Healthcare -- 1.5%
5,280 Sandoz AG 4,833,706
Industrial Machinery -- 0.3%
645 Bobst AG 1,006,502
Insurance -- 1.5%
6,580 Winterthur 4,654,772
------------
15,951,503
------------
TAIWAN -- 0.1%
Building Construction -- 0.1%
50,000 China Development* 147,506
------------
UNITED KINGDOM -- 14.0%
Banks -- 0.5%
164,500 National Westminster Bank PLC 1,656,752
Building Construction -- 0.2%
120,000 Fine Arts Development 764,094
*Non-income producing securities. See notes to financial statements.
- --------------------------------------------------------------------------------
68
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------------------
Baillie Gifford
International Fund
------------------
6
------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Business Services -- 0.9%
130,000 Associated British Ports $ 583,476
223,000 BAA 1,686,613
60,000 De La Rue 606,616
Chemicals -- 0.3%
420,000 Allied Colloids 867,526
Conglomerates -- 2.7%
522,658 BTR 2,621,018
351,000 Grand Metropolitan* 2,526,611
472,000 Hanson 1,407,423
75,000 Hays 437,956
134,000 Siebe 1,651,328
Construction and Mining Equipment -- 0.2%
170,000 Weir Group 555,754
Drugs and Healthcare -- 1.0%
214,000 Glaxo Wellcome 3,041,000
Electric Utilities -- 0.6%
203,000 National Power 1,417,122
37,800 Yorkshire Electric Group 392,148
Electronics -- 0.7%
220,000 Electrocomponents 1,228,296
28,599 National Grid Group* 88,386
340,000 Rotork 897,655
Food, Beverage and Tobacco -- 1.6%
190,000 Devro International 749,495
226,000 Guinness 1,661,920
140,000 Highland Distilleries 704,457
270,000 Iceland Group 628,980
128,000 Reckitt & Colman 1,416,369
Household Products -- 0.1%
220,000 Life Sciences International 304,084
Insurance -- 1.3%
147,000 Abbey National 1,451,965
70,000 Britannic Assurance 834,912
274,000 Prudential Corp. 1,763,830
Leisure Products -- 0.8%
189,000 Granada Group 1,893,229
80,000 Vendome Lux Group SA 729,306
Newspaper -- 0.2%
250,000 Mirror Group PLC 683,336
Oil International --1.1%
399,000 British Petroleum 3,330,680
Retail-Grocery -- 0.5%
271,000 Sainsbury (J) 1,651,926
Retail Trade -- 0.5%
206,000 Marks & Spencer 1,439,664
Telephone -- 0.5%
477,000 Vodafone Group 1,711,244
Transportation -- 0.3%
400,000 Firstbus* 944,246
------------
44,329,417
------------
TOTAL COMMON STOCKS
(Cost $267,198,540) 298,218,454
------------
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.9%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$2,400,000 MBL Int't Finance Exch. Gtd Notes,
3.00% due 11/30/02 $ 2,776,560
------------
TOTAL CONVERTIBLE BONDS
(Cost $2,400,000) 2,776,560
------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.6%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$8,385,000 State Street Bank & Trust repurchase
agreement, dated 12/30/95, maturity
value $8,389,658 at 5.00%
due 1/2/96 (collateralized by
$8,360,000 U.S. Treasury Notes,
6.875% due 10/31/96, market value
$8,464,500) $ 8,385,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $8,385,000) 8,385,000
------------
TOTAL INVESTMENTS -- 97.5%
(Cost $277,983,540) 309,380,014
CASH, RECEIVABLES AND OTHER
ASSETS LESS PAYABLES -- 2.5% 7,906,856
============
NET ASSETS -- 100.0% $317,286,870
------------
See notes to financial statements. *Non-income producing securities.
- --------------------------------------------------------------------------------
69
<PAGE>
- ------------------
Baillie Gifford
International Fund
- ------------------
6
- ------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995
ASSETS:
Investments, at identified cost* $277,983,540
============
Investments, at market $300,995,014
Repurchase agreements 8,385,000
------------
TOTAL INVESTMENTS 309,380,014
Cash 277,130
Foreign currency (Cost $7,150,439) 7,150,049
Unrealized appreciation on open forward
foreign currency contract 578,884
Dividends receivable 348,475
Receivable for fund shares sold 324,877
Interest receivable 9,694
Deferred organization expenses -- Note 6 815
Foreign tax receivable 498,412
------------
TOTAL ASSETS 318,568,350
------------
LIABILITIES:
Payable for fund shares redeemed 404,771
Accrued expenses 100,268
Foreign tax withholding 45,359
Due to affiliates-- Note 2 731,082
------------
TOTAL LIABILITIES 1,281,480
------------
NET ASSETS $317,286,870
============
COMPONENTS OF NET ASSETS
Capital stock -- $0.10 par value
(1,000,000,000 shares authorized) $ 2,064,763
Paid-in capital 281,174,015
Overdistribution of net investment income (263,641)
Accumulated net realized gain on investments
and foreign currency related transactions 2,309,525
Net unrealized appreciation of investments
and translation of assets and liabilities in
foreign currencies 32,002,208
------------
NET ASSETS $317,286,870
------------
Shares outstanding -- $0.10 par value 20,647,629
------------
NET ASSET VALUE PER SHARE $ 15.37
============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
Year Ended
December 31, 1995
INVESTMENT INCOME
Income:
Dividends $ 6,702,906
Interest 393,119
-----------
7,096,025
Less: Foreign tax withheld 1,161,925
-----------
Total Income 5,934,100
-----------
Expenses:
Investment advisory fees -- Note 2 2,430,879
Custodian fees 516,076
Audit fees 20,000
Deferred organization expense -- Note 6 7,822
Directors' fees -- Note 2 7,500
Printing expense 5,500
Legal fees 3,715
Insurance expense 3,511
Transfer agent fees 3,300
Registration fees 263
Other 721
-----------
Total Expenses 2,999,287
-----------
Net Investment Income 2,934,813
-----------
Realized and Unrealized Gain/(Loss) On
Investments and Currencies -- Note 4
Net realized gain on investments -- Note 1 6,468,824
Net realized gain on foreign currency
related transactions-- Note 1 11,452,412
Net change in unrealized appreciation of
investments -- Note 4 10,747,852
Net change in unrealized appreciation from
translation of assets and liabilities in
foreign currencies -- Note 4 894,781
-----------
Investments and Foreign Currencies 29,563,869
-----------
Net Increase in Net Assets
Resulting from Operations $32,498,682
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
70
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------------------
Baillie Gifford
International Fund
------------------
6
------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
------------- -------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 2,934,813 $ 2,880,417
Net realized gain on investments and foreign currency related transactions 17,921,236 2,289,267
Net change in unrealized appreciation/(depreciation) on investments and translation
of assets and liabilities in foreign currencies 11,642,633 (6,484,115)
------------- -------------
Net Increase/(Decrease) in Net Assets Resulting from Operations 32,498,682 (1,314,431)
------------- -------------
Distributions to Shareholders:
Dividends from net investment income (2,934,813) (2,504,843)
Dividends in excess of net investment income (2,291,355) --
Net realized gains from investments (13,499,965) --
------------- -------------
Total Distribution to Shareholders (18,726,133) (2,504,843)
------------- -------------
From Transaction in Shares:
Increase in net assets from capital share transactions -- Note F 464,452 120,074,014
------------- -------------
Net Increase in Net Assets 14,237,001 116,254,740
Net Assets:
Beginning of year 303,049,869 186,795,129
------------- -------------
End of year* $ 317,286,870 $ 303,049,869
============= =============
* Includes (overdistributed)/undistributed net investment income of: $ (263,641) $ 250,232
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
71
<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>
February 8,
1991** to
Year Ended December 31, December 31,
1995 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 0.16 0.15 0.23 0.09 0.04
Net realized and unrealized gain/(loss) on investments
and translation of assets and liabilities in foreign
currencies 1.49 (0.02) 3.54 (1.20) 2.52
------ ------ ------ ------ ------
Net increase/(decrease) from investment operations 1.65 0.13 3.77 (1.11) 2.56
------ ------ ------ ------ ------
Distributions to Shareholders
Dividends from net investment income (0.15) (0.13) (0.24) (0.10) (0.04)
Distributions in excess of net investment income (0.12) -- -- --
Distributions from net realized gain on investments and
foreign currency related transactions (0.70) -- -- -- (0.15)
------ ------ ------ ------ ------
Total distributions (0.97) (0.13) (0.24) (0.10) (0.19)
------ ------ ------ ------ ------
Net asset value, end of period $15.37 $14.69 $14.69 $11.16 $12.37
====== ====== ====== ====== ======
Total return+ 11.23% 0.87% 34.04% (8.90%) 8.56%
====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000's omitted) $317,287 $303,050 $186,795 $55,175 $36,012
Ratio of expenses to average net assets 0.99% 1.03% 1.11% 1.26% 1.67%*
Ratio of net investment income to average net assets 0.97% 1.11% 1.75% 0.88% 0.61%*
Portfolio turnover ratio 52% 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.
- --------------------------------------------------------------------------------
72
<PAGE>
------------------
Baillie Gifford
International Fund
------------------
6
------------------
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
GBG Funds, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Baillie Gifford International Fund
(one of the portfolios of GBG Funds, Inc.) as of December 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Baillie Gifford International Fund at December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and financial highlights for each of the
periods indicated therein, in conformity with generally accepted accounting
principles.
/S/ ERNST & YOUNG LLP
New York, New York
February 9, 1996
- --------------------------------------------------------------------------------
73
<PAGE>
- ----------------
Baillie Gifford
Emerging Markets
- ----------------
7
- ----------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- -------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS -- 85.0%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ARGENTINA -- 9.7%
Automotive -- 0.4%
26,400 Ciadea SA* $ 137,252
Banks -- 1.3%
11,845 Banco Frances Del Rio La Plata 318,334
17,250 BCO Frances Rio PL 152,632
Conglomerates -- 0.9%
22,800 Dycasa 75,225
12,588 Dycasa Dragados SA* 41,532
51,000 Juan Minetti 168,266
Electric Utilities -- 1.2%
11,400 Capex SA 165,300
7,900 Central Costanera SA+ 245,888
Industrial Machinery -- 0.4%
7,800 Quilmes Industrial 121,680
Oil and Gas -- 1.6%
71,740 Perez Companc SA 555,359
Oil Transport -- 1.7%
45,000 Transportadora De Gas Del Sur 579,375
Real Estate -- 1.1%
73,800 Comercial De Plata* 195,531
7,716 IRSA Inversiones Y Represent 196,758
Telecommunications -- 0.5%
13,850 Telecom Argentina 65,359
2,150 Telecom Argentina Stet France A 102,394
Telephone -- 0.6%
8,000 Telefonica De Argentina 218,000
-----------
3,338,885
-----------
AUSTRIA -- 0.4%
Plastics -- 0.4%
11,400 Pannonplast Muanya* 149,366
-----------
BRAZIL -- 5.1%
Broadcasting -- 2.1%
5,900,000 Telebras 228,231
10,200 Telecomunicacoes Brasileiras 483,225
Electronics -- 0.5%
9,000,000 Sider Nacional CIA 185,185
Food, Beverage and Tobacco-- 0.6%
50,000 Santista Alimentos 64,300
26,000 Souza Cruz (Cia) 146,584
Other -- 0.4%
8,600 Companhia Brasilie* 90,300
7,000 Usiminas USI SD MG 57,225
Retail Trade -- 0.5%
7,250,000 Lojas Americanas* 170,062
Steel -- 0.4%
15,300 Usinas Siderurgicas De Minas+ 124,360
Telephone -- 0.6%
1,335,000 Telesp Tel Sao Paolo 192,971
-----------
1,742,443
-----------
CHILE -- 2.6%
Electric Utilities -- 0.6%
4,100 Empresa Nacional De Electricidad 93,275
4,200 Enersis SA 119,700
Investment Companies -- 2.0%
2,667 GT Chile Fund 108,014
14,000 Genesis Chile Fund 567,000
------------
887,989
------------
CHINA -- 0.8%
Automobiles -- 0.2%
6,500 Ek Chor China Motorcycle Co. 75,563
Containers and Glass -- 0.2%
75,000 Yaohua Pilkington Glass Co. 66,000
Electrical Equipment -- 0.2%
120,000 Shanghai Shangling 73,440
Tires and Rubber -- 0.2%
8,000 China Tire Holdings Ltd. 64,000
------------
279,003
------------
COLOMBIA -- 1.2%
Construction Materials -- 1.2%
15,100 Cadenalco Gran Cad 188,750
12,300 Cementos Diamante+ 220,866
------------
409,616
------------
CZECHOSLOVAKIA -- 3.5%
Banks -- 0.6%
11,400 Komercni Banka AS* 207,480
Construction Materials -- 0.8%
3,500 IPS Praha 283,507
Electric Utilities -- 0.4%
3,800 Cez (Cesk En Zavody)* 137,373
See notes to financial statements. *Non-income producing securities.
+Section 144A restricted securities.
- --------------------------------------------------------------------------------
74
<PAGE>
----------------
Baillie Gifford
Emerging Markets
----------------
7
----------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Food, Beverage and Tobacco-- 0.4%
2,650 Praske Pivovary* $ 123,228
Mining -- 0.3%
25,200 Antofagasta Hldgs. 114,474
Telecommunications Services-- 1.0%
3,500 SPTTelecom AS* 330,758
------------
1,196,820
------------
HONG KONG -- 14.7%
Apparel and Textile -- 0.8%
800,000 Esprit Asia 274,167
Banks -- 0.8%
19,000 HSBC Holdings 287,488
Conglomerates -- 3.4%
276,000 China Strategic Holdings Ltd. 100,834
130,000 Hutchison Whampoa 791,853
36,000 Swire Pacific 279,340
Construction and Mining Equipment -- 1.0%
1,800,000 CNT Group Ltd. 107,081
120,000 Varitronix Int'l. 222,696
Electric Utilities -- 0.7%
48,000 China Light and Power 220,989
Financial-Services -- 0.9%
35,000 Gudco Group* 168,833
400,000 Sinocan Holdings 142,258
Food and Beverage -- 0.9%
800,000 Pokphand (CP) Co. 320,724
Industrial Machinery -- 0.8%
260,000 Chen Hsong Holdings 136,178
500,000 Lung Kee (Bermuda) 137,407
Leisure Products -- 0.5%
150,000 Mandarin Oriental 181,500
Publishing -- 0.4%
410,000 Oriental Press Group 124,604
Real Estate -- 2.7%
160,000 Amoy Properties 159,328
229,878 Hong Kong Land Holdings 425,274
42,000 Sun Hung Kai Props. 343,550
Telephone -- 1.6%
304,800 Hong Kong Telecommunications 543,969
Transportation -- 0.2%
143,000 China Merchant Shekou 51,781
------------
5,019,854
------------
HUNGARY -- 2.1%
Chemicals -- 0.5%
9,000 Richter Gedeon Veg 172,800
Food and Beverage -- 0.4%
3,500 Pick Szeged RT+ 133,210
Lodging -- 0.6%
21,600 Danubius Hotel 203,147
Plastics -- 0.6%
9,082 Zalakeramia 216,697
------------
725,854
------------
INDIA -- 1.8%
Automobiles -- 0.2%
2,000 Bajaj Auto 52,240
Construction -- 0.3%
5,500 Larsen & Toubro Ltd. 100,375
Drugs and Healthcare -- 0.1%
10,000 Core Health Care* 26,250
Food, Beverage and Tobacco-- 0.2%
8,000 ITC Ltd. 70,960
Industrial Machinery -- 0.1%
23,000 NEPC Micon* 24,840
Lodging -- 0.3%
5,000 Indian Hotels Co (The)* 96,250
Metals -- 0.2%
12,000 Indian Aluminum 75,000
Other -- 0.4%
10,000 CESC* 28,700
20,000 Himachal Futuristi* 125,000
------------
599,615
------------
INDONESIA -- 2.3%
Banks -- 0.3%
30,000 BK Int'l Indonesia 99,388
Financial Services -- 0.6%
200,000 BK Bira* 194,621
Food, Beverage and Tobacco-- 0.9%
30,000 HM Sampoerna* 312,268
Household Products -- 0.2%
6,000 Unilever Indonesia 72,163
Photography -- 0.3%
20,000 Modern Photo Film 115,898
------------
794,338
------------
*Non-income producing securities. See notes to financial statements.
- --------------------------------------------------------------------------------
75
<PAGE>
- ----------------
Baillie Gifford
Emerging Markets
- ----------------
7
- ----------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- -------------------------------------
SCHEDULE OF INVESTMENTS (continued)
December 31, 1995
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
KOREA -- 4.3%
Electric Utilities -- 1.6%
20,000 Korea Electric Power Corp. $ 535,000
Electrical and Electronics -- 1.1%
6,000 Samsung Electric Co.* 360,000
74 Samsung Electronic* 4,440
Investment Company -- 1.2%
100 Korea Europe Fund 425,000
Steel -- 0.4%
7,000 Pohang Iron & Steel Ltd.* 153,125
------------
1,477,565
------------
MALAYSIA -- 6.5%
Banks -- 0.6%
100,000 Southern Bank Berhad* 190,574
Conglomerates -- 1.1%
250,000 Renong Berhad 370,122
Containers and Glass -- 0.4%
52,000 Kelang Container Terminal 132,063
Food, Beverage and Tobacco -- 0.9%
130,000 R.J. Reynolds Berhad 299,445
Industrial Machinery -- 0.8%
45,000 UTDEngineers Berhad 287,042
Leisure Products -- 1.4%
90,000 Resorts World Berhad 481,947
Metals -- 0.5%
50,000 Maruichi Malay Steel 186,046
Mining -- 0.2%
52,000 IJM Corp. Berhad 82,718
Telephone -- 0.6%
24,000 Telekom Malaysia 187,109
------------
2,217,066
------------
MEXICO -- 3.6%
Conglomerates -- 0.7%
13,500 Alfa SA 173,234
5,000 DESC SA De CV* 71,250
Financial Services -- 1.3%
49,685 GPO Fin Banamex AC 83,019
4,259 GPOFin Bancomer*+ 1,104
100,000 GPOFin Serfin* 51,847
13,000 Grupo Carso SA De CV+ 138,693
30,500 Grupo Financiero Bancomer* 171,800
Food and Beverage -- 0.5%
5,600 Pan American Beverage 179,200
Retailing -- 0.2%
50,000 Organiz Soriana 48,347
Telephone -- 0.9%
9,600 Telefonos De Mexico SA 306,000
------------
1,224,494
------------
PERU -- 2.1%
Building Materials -- 0.5%
14,400 Cementos Lima 181,885
Food and Beverage -- 0.3%
53,578 Backus & Johnston 92,040
Metals -- 0.5%
53,245 Southern Peru Copper 186,621
Telephone -- 0.8%
123,569 CPT Telefonica Del Peru 264,676
------------
725,222
------------
PHILIPPINES -- 1.8%
Drugs and Health Care -- 1.2%
2,250,000 Metro Pacific Corp.* 416,031
Telephone -- 0.6%
4,000 Philippine Long Distance Tel. Co. 216,500
------------
632,531
------------
POLAND -- 2.2%
Bank -- 0.5%
11,800 Bre BK Rozwoju Eks 179,477
Construction Materials -- 0.4%
10,700 Jelfa* 123,253
Drugs and Health Care -- 0.5%
58,000 Polifarb Wroclaw 168,201
Electric Utilities -- 0.4%
40,000 Elektrim 135,469
Food, Beverage and Tobacco-- 0.4%
2,225 Zywtec 153,417
------------
759,817
------------
PORTUGAL -- 0.5%
Construction Materials -- 0.5%
9,200 Cimpor Ciment Port* 152,375
------------
See notes to financial statements. *Non-income producing securities.
+Section 144A restricted securities.
- --------------------------------------------------------------------------------
76
<PAGE>
----------------
Baillie Gifford
Emerging Markets
----------------
7
----------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SINGAPORE -- 4.9%
Air Travel -- 0.7%
27,000 Singapore Airlines $ 251,962
Automobiles -- 0.5%
17,000 Cycle and Carriage 169,459
Banks -- 0.7%
18,000 Overseas Chinese Bank 225,239
Construction Equipment -- 0.3%
48,000 Clipsal Industries Ltd. 108,480
Food and Beverage -- 0.6%
16,000 Fraser & Neave 203,606
Publishing -- 0.9%
18,000 Singapore Press HD 318,134
Real Estate -- 0.7%
66,000 DBS Land 223,033
Retailer -- 0.5%
105,000 Courts (Singapore) 160,339
------------
1,660,252
------------
SOUTH AFRICA -- 8.8%
Banks -- 0.8%
31,000 First National Bank 284,872
Brewing and Distilling -- 1.0%
9,308 South Africa Brews 340,864
Diversified Industrials -- 1.8%
21,000 Barlow Ltd. 299,547
40,000 Smith (C.G.) 307,228
Gas Distribution -- 0.7%
31,043 Sasol 254,186
Insurance -- 0.9%
3,748 Liberty Holdings 313,576
Mining -- 1.7%
10,000 De Beers Centenary 303,113
80,000 Gencor 278,700
Other Services -- 1.0%
4,500 Nedcor* 332,550
Tobacco -- 0.9%
31,000 Rembrandt Group 297,627
------------
3,012,263
------------
TAIWAN -- 2.4%
Building Construction -- 0.1%
10,000 China Development* 29,501
Other -- 0.6%
78,000 ICBC 202,954
Plastics -- 0.6%
130,000 Nan Ya Plastic* 197,237
Ship Building -- 0.5%
140,000 Yang Ming Marine* 163,155
Steel -- 0.6%
275,000 China Steel* 219,702
------------
812,549
------------
THAILAND -- 3.7%
Banks -- 1.2%
18,000 Bangkok Bank 218,658
20,000 Thai Farmers Bank 201,667
Business Services -- 0.3%
18,000 Matichon Public Co., Ltd. 107,900
Construction Materials -- 0.7%
4,000 Siam Cement Co. 221,675
Food, Beverage and Tobacco-- 0.2%
15,000 CP Feedmill Co. 73,243
Financial Services -- 0.9%
90,000 Ind. Fin. Thailand 305,478
Publishing -- 0.4%
8,000 Land and House 131,481
------------
1,260,102
------------
TOTAL COMMON STOCKS
(Cost $29,212,245) 29,078,019
------------
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 7.1%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
29,700,696 BCO Bradesco SA $ 259,728
640 Bardella SA Ind. 52,675
700,000 Brahma (Cia Cerveja) 288,073
17,155,000 Cemig CIA Energ MG 379,457
4,400,000 CESP CIA Energ SP 128,062
8,400,000 Ceval Alimentos SA 95,926
370,000 Cim Port Itau (CIA) 88,313
97,000 Confab 38,920
570,000 Coteminas (Cia Tec) 190,586
1,400,000 Duratex SA 48,683
*Non-income producing securities. See notes to financial statements.
- --------------------------------------------------------------------------------
77
<PAGE>
- ----------------
Baillie Gifford
Emerging Markets
- ----------------
7
- ----------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- -------------------------------------
SCHEDULE OF INVESTMENTS (continued)
December 31, 1995
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
1,170,000 Electrobras (CENTR) $ 316,574
236,000 Multibras Eletrodo 174,815
3,150,000 Petrol Brasileiros 268,949
7,200,000 Sider Tubarao 117,259
-----------
TOTAL PREFERRED STOCKS
(Cost $3,022,328) 2,448,020
-----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.6%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$1,215,000 State Street Bank & Trust repurchase
agreement, dated 12/29/95, maturity
value $1,215,474 at 4.25%
due 1/2/96 (collateralized by
$1,215,000 U.S. Treasury Notes,
6.875% due 10/31/96,
market value $1,230,567) $ 1,215,000
-----------
TOTAL REPURCHASE AGREEMENT
(Cost $1,215,000) 1,215,000
-----------
TOTAL INVESTMENTS -- 95.7%
(Cost $33,449,573) 32,741,039
CASH, RECEIVABLES AND
OTHER ASSETS LESS
PAYABLES -- 4.3% 1,477,428
-----------
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $34,218,467
===========
- --------------------------------------------------------------------------------
See notes to financial statements. *Non-income producing securities.
- --------------------------------------------------------------------------------
78
<PAGE>
----------------
Baillie Gifford
Emerging Markets
----------------
7
----------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995
ASSETS:
Investments, at identified cost* $ 33,449,573
============
Investments, at market $ 31,526,039
Repurchase agreements 1,215,000
------------
TOTAL INVESTMENTS 32,741,039
Cash 3,822
Foreign currency (Cost $1,579,222) 1,580,188
Receivable for fund shares sold 9,920
Dividends receivable 68,911
Interest receivable 430
Deferred organization expenses-- Note 6 1,924
Foreign tax receivable 109
------------
TOTAL ASSETS 34,406,343
------------
LIABILITIES:
Payable for fund shares redeemed 5,118
Accrued expenses 33,604
Foreign tax withholding 3,269
Capital gains tax payable 26,526
Due to affiliates-- Note 2 119,359
------------
TOTAL LIABILITIES 187,876
------------
NET ASSETS $ 34,218,467
============
COMPONENTS OF NET ASSETS
Capital stock -- $0.10 par value
(1,000,000,000 shares authorized) $ 404,260
Paid-in capital 37,009,766
Overdistributed net investment income (372,137)
Accumulated net realized loss on
investments and foreign currency
related transactions (2,089,261)
Net unrealized depreciation of investments
and translation of assets and liabilities
in foreign currency (734,161)
------------
NET ASSETS $ 34,218,467
============
Shares outstanding -- $0.10 par value 4,042,600
------------
NET ASSET VALUE PER SHARE $ 8.46
============
* Includes repurchase agreements.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended
December 31, 1995
INVESTMENT INCOME
Income:
Dividends $ 673,231
Interest 145,403
------------
818,634
Less: Foreign tax withheld 61,632
------------
Total Income 757,002
------------
Expenses:
Investment advisory fees-- Note 2 296,572
Custodian fees 151,237
Audit fees 20,000
Directors' fees-- Note 2 7,500
Printing expense 5,500
Legal fees 5,187
Transfer agent fees 3,300
Registration fees 3,039
Other 721
Deferred organization expense-- Note 6 507
Insurance expense 351
------------
Total Expenses 493,914
------------
Net Investment Income 263,088
------------
Realized and Unrealized Gain/(Loss) On
Investments and Currencies -- Note 4
Net realized loss on investments -- Note 1 (1,994,811)
Net realized loss on foreign currency related
transactions -- Note 1 (98,057)
Net change in unrealized appreciation of
investments -- Note 4 2,917,359
Net change in unrealized depreciation from
translation of assets and liabilities in foreign
currency -- Note 4 (653,214)
------------
Net Realized and Unrealized Gain on
Investments and Foreign Currencies 171,277
------------
Net Increase in Net Assets
Resulting from Operations $ 434,365
============
See notes to financial statements.
- --------------------------------------------------------------------------------
79
<PAGE>
- ----------------
Baillie Gifford
Emerging Markets
- ----------------
7
- ----------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- -------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from
September 13,
1994
(Commencement of
Year Ended Operations) to
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 263,088 $ 42,225
Net realized loss on investments and foreign currency related transactions (2,092,868) (75,276)
Net change in unrealized appreciation/(depreciation) on investments and
translation of assets and liabilities in foreign currencies 2,264,145 (2,998,306)
------------ ------------
Net Increase/(Decrease) in Net Assets Resulting from Operations 434,365 (3,031,357)
------------ ------------
Distributions to Shareholders:
Dividends from net investment income (263,088) (24,026)
Distributions in excess of net investment income (398,138) --
Net realized gains from investments -- --
------------ ------------
Total Distribution to Shareholders (661,226) (24,026)
------------ ------------
From Transaction in Shares:
Increase in net assets from capital share transactions-- Note F 10,376,428 27,124,283
------------ ------------
Net Increase in Net Assets 10,149,567 24,068,900
Net Assets:
Beginning of period 24,068,900 --
------------ ------------
End of period* $ 34,218,467 $ 24,068,900
============ ============
* Includes (overdistributed)/undistributed net investment income of: $ (372,137) $ 18,199
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
80
<PAGE>
----------------
Baillie Gifford
Emerging Markets
----------------
7
----------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for a share of capital stock outstanding throughout the periods indicated:
October 17,
Year Ended 1994** to
December 31, December 31,
1995 1994
----------- -----------
<S> <C> <C>
Net asset value, beginning of period ................................................ $ 8.68 $ 9.87
------- -------
Income from Investment Operations
Net investment income/(loss) ...................................................... 0.07 (0.01)
Net realized and unrealized gain/(loss) on investments and
translation of assets and liabilities in foreign currency ........................ (0.12) (1.17)
------- -------
Net decrease from investment operations ........................................... (0.05) (1.18)
------- -------
Distributions to Shareholders
Dividends from net investment income .............................................. (0.07) (0.01)
Dividends in excess of net investment income ...................................... (0.10) --
------- -------
Total distributions ............................................................... (0.17) (0.01)
------- -------
Net asset value, end of period ...................................................... $ 8.46 $ 8.68
======= =======
Total return+ ....................................................................... (0.60)% (11.97)%
======= =======
Ratios/supplemental data:
Net assets, end of period (000's omitted) ....................................... $34,218 $24,069
Ratio of expenses to average net assets ......................................... 1.67% 2.28%*
Ratio of net investment income to average net assets ............................ 0.89% 0.94%*
Portfolio turnover ratio ........................................................ 51% --
</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. The total return shown may not
accord with the net income in net assets resulting from operations in the
statement of operations due to the timing in reinvestment price of
dividends in 1995.
* Ratios are annualized.
** Commencement of public offering of the Fund's shares.
See notes to financial statements.
- --------------------------------------------------------------------------------
81
<PAGE>
- ----------------
Baillie Gifford
Emerging Markets
- ----------------
7
- ----------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- -------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
GBG Funds, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Baillie Gifford Emerging Markets
Fund (one of the portfolios of GBG Funds, Inc.) as of December 31, 1995, and the
related statements of operations for the year then ended and the statement of
changes in net assets and financial highlights for the year then ended and the
period from September 13, 1994 to December 31, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Baillie Gifford Emerging Markets Fund at December 31, 1995 and the results of
its operations for the year then ended and the changes in its net assets and
financial highlights for the year then ended and the period from September 13,
1994 to December 31, 1994, in conformity with generally accepted accounting
principles.
/S/ Ernst & Young LLP
New York, New York
February 9, 1996
- --------------------------------------------------------------------------------
82
<PAGE>
----------------
GBG Funds
----------------
7
----------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- ----------------------------------------------
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.
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
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
- --------------------------------------------------------------------------------
83
<PAGE>
- ----------------
GBG Funds
- ----------------
7
- ----------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
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 continue 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. Losses on security transactions
arising 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.
At December 31, 1995, for federal income tax purposes, Baillie Gifford
Emerging Markets Fund had a net capital loss carryforward of $1,596,901, which
expires in 2003.
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
to distribute net investment income approximately every six months and net
- --------------------------------------------------------------------------------
84
<PAGE>
----------------
GBG Funds
----------------
7
----------------
- --------------------------------------------------------------------------------
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
During the year ended December 31, 1995, BGIF and BGEMF reclassified
amounts to paid-in capital from overdistributed net investment income and
accumulated net realized gain/(loss) on investments and foreign currency related
transactions. Increases (decreases) to the various capital accounts were as
follows:
Accumulated net
realized gain/(loss)
on investments and
Paid in Overdistributed net foreign currency
Capital investment income related transactions
---------- ------------------- --------------------
BGIF $(644,927) $1,777,482 $(1,132,555)
BGEMF (100,484) 7,802 92,682
- ------------------------------------------
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 $7,500, for
the year ended December 31, 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 were
repaid upon completion of its first year of operations. These expenses have been
deferred and are 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.
- --------------------------------------------------------------------------------
85
<PAGE>
- ----------------
GBG Funds
- ----------------
7
- ----------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- ---------------------------------
Note D -- Investment Transactions
- ---------------------------------
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
For the Year Ended December 31, 1995
------------------------------------
BGIF BGEMF
------ ---------
Purchases
Stocks and debt obligations $149,379,446 $ 26,667,113
Proceeds
Stocks and debt obligations $162,607,377 $ 14,029,845
The cost of investments owned at December 31, 1995 for federal income tax
purposes for BGIF and BGEMF are $277,983,540 and $33,449,573, respectively. The
gross unrealized appreciation and (depreciation) at December 31, 1995 were as
follows:
BGIF BGEMF
------ ---------
Gross Appreciation $ 38,839,414 $ 3,137,396
Gross Depreciation (7,442,940) (3,845,931)
------------ ------------
Net Unrealized Appreciation/
(Depreciation) $ 31,396,474 $ (708,535)
============ ============
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.
- --------------------------------------------------------------------------------
86
<PAGE>
----------------
GBG Funds
----------------
7
----------------
- --------------------------------------------------------------------------------
At December 31, 1995, BGIF had one open forward foreign currency contract,
as listed below, with net unrealized gain of $578,884 which is included in net
change in unrealized appreciation or depreciation on foreign currency related
transactions.
<TABLE>
<CAPTION>
Baillie Gifford International Fund:
Type of Expiration Current Unrealized
Currency Contract Date Cost Value Appreciation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3,600,000,000 Japanese Yen Sell 3/21/96 $35,856,573 $35,277,689 $ 578,884
===========
</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.
- --------------------------------------------------------------------------------
87
<PAGE>
- ----------------
GBG Funds
- ----------------
7
- ----------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- ---------------------------------------
Note F -- Transactions in Capital Stock
- ---------------------------------------
<TABLE>
<CAPTION>
Transactions in capital stock were as follows:
Baillie Gifford International Fund:
Year December 31, Year December 31,
------------------------------ ------------------------------
1995 1994
------------------------------ ------------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 4,880,975 $ 72,367,583 11,652,393 $ 175,706,321
Shares issued in reinvestments of dividends
from net investment income and
net realized gain on sales of investments ......... 1,223,131 18,726,133 168,197 2,504,843
---------- ------------- ---------- -------------
6,104,106 91,093,716 11,820,590 178,211,164
Less shares repurchased ............................ (6,081,659) (90,629,264) (3,910,118) (58,137,150)
---------- ------------- ---------- -------------
NET INCREASE ....................................... 22,447 $ 464,452 7,910,472 $ 120,074,014
========== ============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
Baillie Gifford Emerging Markets Fund:
Period from September 13,
Year December 31, 1994 (Commencement of
------------------------------ Operations) to
1995 December 31, 1994
------------------------------ ------------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 1,755,017 $ 14,439,213 2,773,779 $ 27,130,118
Shares issued in reinvestments of dividends
from net investment income and
net realized gain on sales of investments ......... 78,437 661,226 2,771 24,026
---------- ------------- ---------- -------------
1,833,454 15,100,439 2,776,550 27,154,144
Less shares repurchased ............................ (564,171) (4,724,011) (3,233) (29,861)
---------- ------------- ---------- -------------
NET INCREASE ....................................... 1,269,283 $ 10,376,428 2,773,317 $ 27,124,283
========== ============= ========== =============
</TABLE>
- ------------------------
Note G -- Line of Credit
- ------------------------
A $20,000,000 line of credit available to each Fund and the other Guardian
related Funds has been established with Morgan Guaranty Trust Company. The rate
of interest charged on any borrowings is based upon the prevailing Federal Funds
rate at the time of the loan plus .25% calculated on a 360-day basis per annum.
For the year ended December 31, 1995, neither of the Funds borrowed against this
line of credit.
- --------------------------------------------------------------------------------
88
<PAGE>
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This page intentionally left blank.
- --------------------------------------------------------------------------------
89
<PAGE>
- --------------------
Value Line
Centurion Fund, Inc.
- --------------------
8
- --------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.6%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Advertising -- 1.6%
230,000 Omnicom Group, Inc. $ 8,567,500
-------------
Aerospace/Defense -- 5.5%
600,000 Bombardier Inc., Class "B"(1) 7,909,191
277,500 Logicon, Inc. 7,631,250
380,000 Loral Corp. 13,442,500
-------------
28,982,941
-------------
Bank -- 5.9%
250,000 Bank of Boston Corp. 11,562,500
375,000 Synovus Financial Corp. 10,687,500
110,000 Zions Bancorporation 8,827,500
-------------
31,077,500
-------------
Bank-Midwest -- 2.1%
150,000 Fifth Third Bancorp 10,987,500
-------------
Beverage-Soft Drink -- 2.9%
65,000 Coca-Cola Co. 4,826,250
188,000 PepsiCo Inc. 10,504,500
-------------
15,330,750
-------------
Broadcasting/Cable TV -- 2.4%
100,000 Capital Cities/ABC, Inc. 12,337,500
-------------
Chemical-Diversified -- 4.5%
330,000 First Mississippi Corp. 8,745,000
360,000 IMC Global Inc. 14,715,000
-------------
23,460,000
-------------
Chemical-Specialty -- 1.0%
150,000 Praxair, Inc. 5,043,750
-------------
Computer & Peripherals -- 13.4%
140,000 Cabletron Systems, Inc.* 11,340,000
150,000 Cisco Systems, Inc.* 11,193,750
120,000 Compaq Computer Corp.* 5,760,000
160,000 Dell Computer Corp.* 5,540,000
100,000 Hewlett-Packard Co. 8,375,000
240,000 Silicon Graphics, Inc.* 6,600,000
190,000 Sun Microsystems, Inc.* 8,668,750
275,000 3Com Corp.* 12,821,875
-------------
70,299,375
-------------
Computer Software & Services -- 2.2%
125,000 Oracle Systems Corp.* 5,296,875
95,000 Parametric Technology Corp.* 6,317,500
-------------
11,614,375
-------------
Diversified Companies -- 3.7%
120,000 Service Corp. International 5,280,000
276,000 Thermo Electron Corp.* 14,352,000
-------------
19,632,000
-------------
Drug -- 9.3%
120,000 Amgen Inc.* 7,125,000
90,000 Genzyme Corp.* 5,613,750
225,000 Merck & Co., Inc. 14,793,750
178,000 Pfizer, Inc. 11,214,000
180,000 Schering-Plough Corp. 9,855,000
-------------
48,601,500
-------------
Electronics -- 0.7%
120,000 Vishay Intertechnology, Inc.* 3,780,000
-------------
Financial Services -- 10.0%
140,000 CUC International, Inc.* 4,777,500
110,000 FINOVA Group Inc. 5,307,500
145,000 First Data Corp. 9,696,875
500,000 Green Tree Financial Corp. 13,187,500
80,000 Household International, Inc. 4,730,000
237,500 Money Store, Inc. (The) 3,710,938
110,000 SunAmerica Inc. 5,225,000
95,000 Travelers Group Inc. 5,973,125
-------------
52,608,438
-------------
Healthcare Information Systems -- 0.5%
35,000 HBO & Co. 2,681,875
-------------
Insurance-Diversified -- 2.0%
113,500 American International Group, Inc. 10,498,750
-------------
Machinery -- 1.4%
85,000 Duriron Co., Inc. 1,986,875
125,000 IDEX Corp. 5,093,750
-------------
7,080,625
-------------
Manufactured Housing/Recreational
Vehicles -- 3.7%
468,750 Clayton Homes, Inc. 10,019,531
250,000 Oakwood Homes Corp. 9,593,750
-------------
19,613,281
-------------
See notes to financial statements
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Shares Value
- --------------------------------------------------------------------------------
Medical Services -- 2.5%
300,000 HealthCare COMPARE Corp.* $ 13,050,000
-------------
Medical Supplies -- 8.9%
150,000 Cardinal Health, Inc. 8,212,500
300,000 Invacare Corp. 7,575,000
60,000 Johnson & Johnson 5,137,500
230,000 Medtronic Inc. 12,851,250
250,000 Stryker Corp. 13,125,000
-------------
46,901,250
-------------
Office Equipment & Supplies -- 2.3%
220,000 Office Depot, Inc.* 4,345,000
315,000 Staples, Inc.* 7,678,125
-------------
12,023,125
-------------
Oilfield Services/Equipment -- 1.7%
175,000 Halliburton Co. 8,859,375
-------------
Retail Store -- 0.8%
195,000 Dollar General Corp. 4,046,250
-------------
Semiconductor -- 1.9%
85,000 Intel Corp. 4,823,750
90,000 Motorola, Inc. 5,130,000
-------------
9,953,750
-------------
Shoe -- 1.1%
85,000 NIKE, Inc. Class "B" 5,918,125
-------------
Telecommunication Equipment -- 2.0%
187,500 ADC Telecommunications, Inc.* 6,843,750
100,000 Andrew Corp.* 3,825,000
-------------
10,668,750
-------------
Telecommunication Services-- 1.0%
150,000 WorldCom, Inc.* 5,287,500
-------------
Toiletries/Cosmetics -- 2.6%
265,000 Gillette Co. 13,813,125
-------------
TOTAL COMMON STOCKS AND
TOTAL INVESTMENT
SECURITIES -- 97.6%
(Cost $399,488,488) 512,718,910
-------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.4%
(including accrued interest)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 7,300,000 Collateralized by $5,075,000 U.S.
Treasury Notes 12%, due 5/15/05,
with a value of $7,451,397 (with
Morgan Stanley & Co., Inc. 5.87%,
dated 12/29/95, due 1/2/96, delivery
value $7,304,761) $ 7,303,571
-------------
CASH AND OTHER ASSETS LESS
LIABILITIES -- 1.0% 5,426,494
-------------
NET ASSETS -- 100.0% $525,448,975
=============
NET ASSET VALUE PER
OUTSTANDING SHARE
($525,448,975 / 21,672,107
shares outstanding) $ 24.25
=============
(1) Canadian Security trading on the Toronto exchange.
Value in U.S. dollars.
* Non-income producing
See notes to financial statements.
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Value Line Centurion Fund, Inc.
- ---------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995
ASSETS:
Investment securities, at value
(cost $399,488,488) $512,718,910
Repurchase agreements (cost $7,303,571) 7,303,571
Cash 28,771
Receivable for investments sold 5,086,210
Dividends receivable 491,623
Receivable for capital shares sold 297,121
-------------
TOTAL ASSETS 525,926,206
-------------
LIABILITIES:
Payable for capital shares repurchased 99,797
Accrued expenses:
Advisory fee 221,643
GIAC administrative service fee 95,000
Other 60,791
-------------
TOTAL LIABILITIES 477,231
-------------
NET ASSETS $525,448,975
============
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value
(authorized 50,000,000 shares, outstanding
21,672,107 shares) $ 21,672,107
Additional paid-in capital 320,879,471
Undistributed investment income -- net 2,591,254
Undistributed net realized gain on investments 67,075,721
Unrealized net appreciation of investments 113,230,422
-------------
NET ASSETS $525,448,975
=============
NET ASSET VALUE PER
OUTSTANDING SHARE
($525,448,975 / 21,672,107
shares outstanding) $ 24.25
=============
STATEMENT OF OPERATIONS
Year Ended
December 31, 1995
Investment Income:
Dividends (Net of foreign withholding tax
of $10,269) $ 3,268,779
Interest 2,130,625
-------------
Total Income 5,399,404
-------------
Expenses
Investment advisory fee 2,221,925
GIAC administrative service fee 362,447
Custodian fees 53,135
Auditing and legal fees 52,726
Insurance and dues 20,446
Directors' fees and expenses 11,581
Registration fees 10,002
Other 6,856
-------------
Total Expenses 2,739,118
-------------
Investment Income -- Net 2,660,286
-------------
Realized and Unrealized Gain on
Investments -- Net:
Realized gain -- net 67,311,482
Change in unrealized appreciation 73,727,354
-------------
Net Realized Gain and Change in Unrealized
Appreciation on Investments 141,038,836
-------------
Net Increase in Net Assets from Operations $143,699,122
=============
See notes to financial statements.
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STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Operations:
Investment income-- net $ 2,660,286 $ 1,989,636
Realized gain on investments-- net 67,311,482 11,328,038
Change in unrealized appreciation 73,727,354 (21,682,338)
------------- -------------
Net increase (decrease) in net assets from operations 143,699,122 (8,364,664)
------------- -------------
Distributions to Shareholder:
Investment income-- net (2,021,495) (194,830)
Realized gain from investment transactions-- net (11,320,362) (5,260,408)
------------- -------------
Total distributions (13,341,857) (5,455,238)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares 112,731,860 67,839,012
Proceeds from reinvestment of distributions to shareholder 13,341,857 5,455,238
Cost of shares repurchased (83,726,969) (80,639,504)
------------- -------------
Increase (Decrease) from capital share transactions 42,346,748 (7,345,254)
------------- -------------
Total Increase (Decrease) in Net Assets 172,704,013 (21,165,156)
Net Assets:
Beginning of year 352,744,962 373,910,118
------------- -------------
End of year $ 525,448,975 $ 352,744,962
============= =============
Undistributed Investment Income-- Net At End Of Year $ 2,591,254 $ 1,952,463
============= =============
</TABLE>
See notes to financial statements.
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Value Line Centurion Fund, Inc.
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- --------------------------------------------------------------------------------
1 -- Significant Accounting Policies
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc. (the "Fund") is an open-end diversified
management investment company whose primary investment objective is long-term
growth of capital. The Fund's portfolio will usually consist of common stocks
ranked 1 or 2 for year-ahead performance by The Value Line Investment Survey,
one of the nation's major investment advisory services.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. 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
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Value Line Centurion Fund, Inc.
- ---------------------------------
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.
(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 on investments, adjusted for amortization of discount,
including original issue discount required for federal income tax purposes, 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:
1995 1994
------------ -----------
Shares sold 5,179,470 3,810,231
Shares issued in reinvestment
of dividends and distributions 604,799 305,958
------------ -----------
5,784,269 4,116,189
Shares repurchased 3,901,173 4,513,989
------------ -----------
Net increase (decrease) 1,883,096 (397,800)
========== ==========
Dividends per share $ .10 $ .01
========== ==========
Distributions per share from
net realized gains $ .56 $ 27
========== ==========
- --------------------------------------------------------------------------------
3 -- Purchases and Sales of Securities
- --------------------------------------------------------------------------------
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
1995
------------
PURCHASES:
U.S. Treasury Obligations $ 10,287,500
Investment Securities 490,595,234
-------------
$ 500,882,734
=============
SALES:
U.S. Treasury Obligations $ 10,642,187
Investment Securities 456,147,509
-------------
$ 466,789,696
=============
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8
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Value Line Centurion Fund, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
At December 31, 1995, the aggregate cost of investment securities and
repurchase agreements for federal income tax purposes is $406,792,059. The
aggregate appreciation and depreciation of investments for the year ended
December 31, 1995, based on a comparison of investment values and their costs
for federal income tax purposes is $118,074,713 and $4,844,291 respectively,
resulting in a net appreciation of $113,230,422.
- --------------------------------------------------------------------------------
4 -- Investment Advisory Contract, Management
Fees and Transactions with Interested Parties
- --------------------------------------------------------------------------------
An advisory fee of $2,221,925 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the year ended December 31, 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 year 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
of interest, taxes and brokerage expenses) which in any year expenses exceed
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 year ended December 31, 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 $2,770 for the year ended December 31,
1995. During the year ended December 31, 1995, the Fund paid brokerage
commissions totalling $561,234 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 contract-owner 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 year ended December 31, 1995, the Fund
incurred expenses of $362,447 in connection with such services rendered by GIAC.
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FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.83 $18.52 $20.04 $20.83 $15.04
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income .12 .10 .12 .20 .20
Net gains or losses on securities (both realized
and unrealized) 6.96 (.51) 1.73 1.03 7.65
------ ------ ------ ------ ------
Total from investment operations 7.08 (.41) 1.85 1.23 7.85
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (.10) (.01) (.12) (.19) (.20)
Distributions from capital gains (.56) (.27) (3.25) (1.83) (1.86)
------ ------ ------ ------ ------
Total distributions (.66) (.28) (3.37) (2.02) (2.06)
------ ------ ------ ------ ------
Net asset value, end of year $24.25 $17.83 $18.52 $20.04 $20.83
====== ====== ====== ====== ======
Total return 40.08% -2.21% 9.21% 5.93% 52.18%
====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net assets, end of year (in thousands) $525,449 $352,745 $373,910 $347,116 $306,589
Ratio of operating expenses to average
net assets .62% .61% .61% .54% .53%
Ratio of net investment income to average
net assets .60% .57% .57% .99% 1.19%
Portfolio turnover rate 114% 122% 118% 83% 81%
</TABLE>
See notes to financial statements.
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Value Line Centurion Fund, Inc.
- ---------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
Value Line Centurion Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Centurion Fund, Inc.
(the "Fund") at December 31, 1995, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1995 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 9, 1996
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Value Line Strategic Asset Management Trust
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SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
COMMON STOCKS -- 60.1%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Advertising -- 0.7%
158,000 Omnicom Group, Inc. $ 5,885,500
------------
Aerospace/Defense -- 2.9%
308,000 Loral Corp. 10,895,500
158,000 McDonnell Douglas Corp. 14,536,000
------------
25,431,500
------------
Air Transport -- 0.2%
60,000 Airborne Freight Corp. 1,597,500
------------
Apparel -- 0.3%
90,000 Liz Claiborne, Inc. 2,497,500
------------
Auto Parts-Original Equipment -- 0.0%
12,300 ITT Industries, Inc.* 295,200
------------
Bank -- 0.7%
70,000 Mellon Bank Corp. 3,762,500
78,000 Southtrust Corp. 1,998,750
------------
5,761,250
------------
Bank-Midwest -- 0.5%
90,000 First Bank System, Inc. 4,466,250
------------
Beverage-Alcoholic -- 0.3%
92,000 Canadaigua Wine Co., Inc. Class "A"* 3,001,500
------------
Beverage-Soft Drink -- 0.3%
112,000 Coca-Cola Co. 2,996,000
------------
Broadcasting/Cable TV -- 2.4%
89,000 Capital Cities/ABC, Inc. 10,980,375
120,000 Infinity Broadcasting Corp.* 4,470,000
118,030 Viacom, Inc. Class "B"* 5,591,671
------------
21,042,046
------------
Chemical-Diversified -- 1.0%
62,000 Norsk Hydro A.S. (ADR) 2,596,250
155,000 Pall Corp. 4,165,625
153,000 Terra Industries, Inc. 2,161,125
------------
8,923,000
------------
Chemical-Specialty -- 2.3%
130,000 Hercules, Inc. 7,328,750
230,000 Praxair, Inc. 7,733,750
30,000 Raychem Corp. 1,706,250
70,000 Sigma-Aldrich Corp. 3,465,000
------------
20,233,750
------------
Computer & Peripherals -- 2.2%
74,500 Cabletron Systems, Inc.* 6,034,500
45,000 Gateway 2000, Inc.* 1,102,500
42,500 In Focus Systems, Inc.* 1,535,312
79,000 International Business Machines Corp. 7,248,250
50,000 Mylex Corp.* 956,250
60,000 Sun Microsystems, Inc.* 2,737,500
------------
19,614,312
------------
Computer Software & Services -- 1.8%
160,000 Borland International, Inc.* 2,640,000
54,000 Ceridian Corp.* 2,227,500
90,000 Computer Associates International, Inc. 5,118,750
47,000 National Data Corp. 1,163,250
104,500 Oracle Systems Corp*. 4,428,188
------------
15,577,688
------------
Copper -- 0.2%
50,000 Wolverine Tube, Inc.* 1,875,000
------------
Diversified Companies -- 0.8%
26,000 Danaher Corp. 825,500
198,000 Mark IV Industries, Inc. 3,910,500
28,000 United Technologies Corp. 2,656,500
------------
7,392,500
------------
Drug -- 2.2%
80,000 Merck & Co., Inc. 5,260,000
237,000 Mylan Laboratories Inc. 5,569,500
100,000 Pfizer, Inc. 6,300,000
165,000 Vical, Inc.* 2,000,625
------------
19,130,125
------------
Drugstore -- 0.6%
73,000 Eckerd Corp.* 3,257,625
60,000 Rite Aid Corp. 2,055,000
------------
5,312,625
------------
Electric Utility-East -- 0.2%
51,700 American Electric Power Co., Inc. 2,093,850
------------
Electrical Equipment -- 0.9%
99,500 General Electric Co. 7,164,000
8,000 Thomas & Betts Corp. 590,000
------------
7,754,000
------------
See notes to financial statements.
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Asset Management
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Shares Value
- --------------------------------------------------------------------------------
Electronics -- 1.5%
223,000 Symbol Technologies, Inc.* $ 8,808,500
130,650 Vishay Intertechnology, Inc.* 4,115,475
------------
12,923,975
------------
Environmental -- 0.5%
78,600 Browning-Ferris Industries, Inc. 2,318,700
75,000 Sanifill, Inc.* 2,503,125
------------
4,821,825
------------
Financial Services -- 3.7%
114,000 ADVANTA Corp. Class "A" 4,360,500
53,000 ADVANTA Corp. Class "B" 1,927,875
90,000 American Express Co. 3,723,750
222,500 CUC International, Inc.* 7,592,812
338,000 Green Tree Financial Corp. 8,914,750
51,000 Loews Corp. 3,997,125
30,000 Paychex, Inc. 1,496,250
------------
32,013,062
------------
Food Processing -- 0.9%
82,500 Heinz (H.J.) Co. 2,732,813
103,100 IBP, Inc. 5,206,550
------------
7,939,363
------------
Foreign Telecommunications -- 0.3%
32,000 Telecom Corp. of New Zealand Ltd.
(ADR) 2,220,000
------------
Grocery -- 3.0%
320,000 Kroger Co.* 12,000,000
278,700 Safeway, Inc.* 14,353,050
------------
26,353,050
------------
Healthcare Information Systems -- 0.8%
75,000 HBO & Co. 5,746,875
20,000 Medic Computer Systems, Inc.* 1,210,000
------------
6,956,875
------------
Home Appliance -- 1.0%
251,000 Black & Decker Corp. 8,847,750
------------
Hotel/Gaming -- 1.1%
50,000 Harrahs Entertainment, Inc.* 1,212,500
12,300 ITT Corp. 651,900
67,000 La Quinta Inns, Inc. 1,834,125
160,000 Mirage Resorts, Inc.* 5,520,000
------------
9,218,525
------------
Household Products -- 1.3%
139,620 Kimberly-Clark Corp. 11,553,555
------------
Industrial Services -- 1.9%
516,000 Equifax, Inc. 11,029,500
210,000 Manpower, Inc. 5,906,250
------------
16,935,750
------------
Insurance-Diversified -- 0.5%
88,000 MGIC Investment Corp. 4,774,000
------------
Insurance-Life -- 0.1%
20,700 Aon Corp. 1,032,412
------------
Insurance-Property/Casualty -- 0.5%
8,000 General Re Corp. 1,240,000
12,300 ITT Hartford Group, Inc.* 595,013
160,000 USF & G Corp. 2,700,000
------------
4,535,013
------------
Machinery -- 0.7%
104,000 Dover Corp. 3,835,000
75,000 Parker-Hannifin Corp. 2,568,750
------------
6,403,750
------------
Machinery-Construction & Mining -- 0.5%
61,000 Foster Wheeler Corp. 2,592,500
44,000 Harnischfeger Industries, Inc. 1,463,000
------------
4,055,500
------------
Manufactured Housing/
Recreational Vehicles -- 1.7%
651,915 Clayton Homes, Inc. 13,934,683
35,000 Oakwood Homes Corp. 1,343,125
------------
15,277,808
------------
Medical Services -- 0.7%
100,000 OrNda Health Corp.* 2,325,000
100,000 Surgical Care Affiliates, Inc. 3,400,000
------------
5,725,000
------------
See notes to financial statements.
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Value Line Strategic Asset Management Trust
- ---------------------------------------------
SCHEDULE OF INVESTMENTS
December 31, 1995
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Medical Supplies -- 5.8%
62,000 Becton, Dickinson & Co. $ 4,650,000
87,000 Bergen Brunswig Corp. Class "A" 2,164,125
110,000 Boston Scientific Corp.* 5,390,000
76,250 Cardinal Health, Inc. 4,174,688
78,000 Cordis Corp.* 7,839,000
87,000 Johnson & Johnson 7,449,375
253,000 Medtronic Inc. 14,136,375
20,000 Nellcor Puritan-Bennett, Inc.* 1,160,000
98,000 St. Jude Medical, Inc.* 4,214,000
------------
51,177,563
------------
Natural Gas-Diversified -- 1.4%
155,000 Panhandle Eastern Corp. 4,320,625
188,000 Williams Companies, Inc. 8,248,500
------------
12,569,125
------------
Newspaper -- 0.2%
50,000 New York Times Co. Class "A" 1,481,250
------------
Office Equipment & Supplies -- 1.9%
165,000 Office Depot, Inc.* 3,258,750
461,750 Staples, Inc.* 11,255,156
15,000 Xerox Corp. 2,055,000
------------
16,568,906
------------
Oilfield Services/Equipment -- 0.5%
80,000 Halliburton Co. 4,050,000
------------
Paper & Forest Products -- 0.1%
10,000 Consolidated Papers Inc. 561,250
------------
Petroleum-Integrated -- 1.8%
50,000 Amoco Corp. 3,593,750
30,000 Atlantic Richfield Co. 3,322,500
40,000 British Petroleum Co. PLC (ADR) 4,085,000
23,000 Mobil Corp. 2,576,000
115,000 Occidental Petroleum Corp. 2,458,125
------------
16,035,375
------------
Precision Instrument -- 0.4%
66,000 Tektronix, Inc. 3,242,250
------------
Recreation -- 0.5%
34,000 Brunswick Corp. 816,000
61,000 Disney (Walt) Co. 3,599,000
------------
4,415,000
------------
Restaurant -- 0.2%
70,000 Applebees International, Inc. 1,592,500
------------
Retail-Special Lines -- 0.1%
30,000 Waban, Inc.* 562,500
------------
Retail Store -- 0.7%
129,000 Consolidated Stores Corp.* 2,805,750
150,937 Dollar General Corp. 3,131,943
------------
5,937,693
------------
Semiconductor -- 0.1%
30,000 Silicon Valley Group, Inc.* 757,500
------------
Shoe -- 1.4%
154,000 NIKE, Inc. Class "B" 10,722,250
45,000 Wolverine World Wide, Inc. 1,417,500
------------
12,139,750
------------
Telecommunications Equipment -- 0.8%
140,000 Andrew Corp.* 5,355,000
40,000 Qualcomm Incorporated* 1,720,000
------------
7,075,000
------------
Telecommunications Service -- 1.7%
96,000 Century Telephone Enterprises, Inc. 3,048,000
100,000 GTE Corp. 4,400,000
100,000 Sprint Corp. 3,987,500
92,000 Worldcom, Inc.* 3,243,000
------------
14,678,500
------------
Thrift -- 0.3%
18,000 Federal National Mortgage Association 2,234,250
------------
Trucking/Transportation Leasing -- 1.0%
60,000 Consolidated Freightways, Inc. 1,590,000
169,000 XTRA Corp. 7,182,500
------------
8,772,500
------------
TOTAL COMMON STOCKS
(Cost $373,136,012) 526,319,221
------------
See notes to financial statements.
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U.S. TREASURY OBLIGATIONS -- 9.8%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$10,000,000 U.S. Treasury Notes 6 3/4%,
due May 31, 1999 $10,446,860
16,000,000 U.S. Treasury Notes 7 3/4%,
due February 15, 2001 17,680,000
50,000,000 U.S. Treasury Bonds 7 1/4%,
due August 15, 2022 57,906,250
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $77,891,070) 86,033,110
------------
TOTAL INVESTMENT SECURITIES -- 69.9%
(Cost $451,027,082) 612,352,331
------------
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 30.3%
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 24.3%
$30,000,000 Federal National Mortgage
Association Discount Notes 5.65%,
due 1/19/96 $ 29,915,250
50,000,000 Federal Home Loan Bank Discount
Notes 5.44%, due 1/23/96 49,833,778
50,000,000 Federal Home Loan Bank Discount
Notes 5.47%, due 1/25/96 49,817,667
20,000,000 Federal Farm Credit Bank Discount
Notes 5.64%, due 1/29/96 19,912,266
50,000,000 Federal Home Loan Mortgage Corp.
Discount Notes 5.50%, due 1/30/96 49,778,472
14,000,000 Student Loan Marketing Association
Note 5.48%, due 2/8/96 13,995,759
------------
213,253,192
------------
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 30.3%
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 6.0%
(includes accrued interest)
$14,000,000 Collateralized by $10,355,000 U.S.
Treasury Notes 11 1/8%, due
8/15/03, with a value of
$14,298,201. (With Morgan
Stanley & Co., Inc. 5.87%,
dated 12/29/95, due 1/2/96,
delivery value of $14,009,131.) $ 14,006,848
------------
38,900,00 Collateralized by $41,205,000 U.S.
Treasury Bill due 9/19/96,
with a value of $39,703,593.
(With First Chicago Capital
Markets, Inc. 5.70%,
dated 12/29/95, due 1/2/96,
delivery value of $38,924,637.) 38,918,478
------------
52,925,326
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $266,178,518) 266,178,518
============
EXCESS OF LIABILITIES OVER CASH
AND RECEIVABLES -- (-0.2)% (2,022,042)
============
NET ASSETS -- 100.0% $876,508,807
============
NET ASSET VALUE PER
OUTSTANDING SHARE $ 20.27
============
($876,508,807 / 43,235,231
shares outstanding)
* Non-income producing.
See notes to financial statements.
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Value Line Strategic Asset Management Trust
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STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1995
ASSETS
Investment in securities, at value
(cost $451,027,082) $612,352,331
Short-term investments (cost $266,178,518)266,178,518
Cash 79,939
Receivable for securities sold 7,649,656
Interest and dividends receivable 2,620,166
Receivable for capital shares sold 529,938
------------
TOTAL ASSETS 889,410,548
------------
LIABILITIES
Payable for securities purchased 12,286,990
Payable for capital shares repurchased 31,289
Accrued expenses:
Advisory fee 369,112
GIAC administrative service fee 150,000
Other 64,350
------------
TOTAL LIABILITIES 12,901,741
------------
NET ASSETS $876,508,807
============
NET ASSETS CONSIST OF:
Capital stock, at $0.01 par value
(authorized unlimited, outstanding
43,235,231 shares) $ 432,352
Additional paid-in capital 649,589,977
Undistributed net investment income 16,507,247
Undistributed net realized gain on investments 48,653,982
Unrealized net appreciation of investments 161,325,249
------------
NET ASSETS $876,508,807
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($876,508,807 / 43,235,231
shares outstanding) $ 20.27
============
STATEMENT OF OPERATIONS
For the Year Ended
December 31, 1995
Investment Income:
Interest $ 16,352,845
Dividends (Net of foreign withholding
tax of $40,049) 5,114,935
------------
Total Income 21,467,780
------------
Expenses:
Investment advisory fee 3,853,934
GIAC administrative service fee 577,988
Custodian fees 84,914
Audit and legal fees 58,565
Insurance and dues 40,698
Trustees' fees and expenses 11,581
Registration and filing fee 10,612
Other 1,134
------------
Total Expenses 4,639,426
------------
Investment Income -- Net 16,828,354
------------
Realized and Unrealized Gain On
Investments -- Net:
Realized gain -- net 51,170,099
Change in unrealized appreciation on
investments 122,289,519
------------
Net Realized Gain and Change in Unrealized
Appreciation on Investments 173,459,618
------------
Net Increase in Net Assets from Operations $190,287,972
============
See notes to financial statements.
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STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Operations:
Investment income-- net $ 16,828,354 $ 10,669,482
Realized gain on investments 51,170,099 4,022,796
Change in unrealized appreciation 122,289,519 (46,844,560)
------------- -------------
Net increase (decrease) in net assets from operations 190,287,972 (32,152,282)
------------- -------------
Distributions to Shareholder:
Investment income-- net (10,739,197) (409,277)
Realized gain from investment transactions-- net (6,608,734) (1,637,110)
------------- -------------
Total distributions (17,347,931) (2,046,387)
------------- ------------
Trust Share Transactions:
Proceeds from sale of shares 79,054,790 128,821,109
Proceeds from reinvestment of distributions to shareholder 17,347,931 2,046,387
Cost of shares repurchased (55,555,221) (49,595,204)
------------- -------------
Increase from Trust share transactions 40,847,500 81,272,292
------------- -------------
Total Increase In Net Assets 213,787,541 47,073,623
Net Assets:
Beginning of year 662,721,266 615,647,643
------------- -------------
End of year $876,508,807 $662,721,266
============= =============
Undistributed Investment Income-- Net at End of Year $ 16,507,247 $ 10,418,090
============= =============
</TABLE>
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- --------------------------------------------------------------------------------
1 -- Significant Accounting Policies
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust (the "Trust") is an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended, which seeks to achieve a high total investment
return consistent with reasonable risk by investing primarily in a broad range
of common stocks, bonds and money market instruments. The Trust will attempt to
achieve its objective by following an asset allocation strategy based on data
derived from computer models for the stock and bond markets that shifts the
assets of the Trust among equity, debt and money market securities as the models
indicate and its investment adviser, Value Line, Inc. (the "Adviser"), deems
appropriate.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. 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 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
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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
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:
1995 1994
--------- ---------
Shares sold 4,235,882 7,820,145
Shares issued to shareholder
in reinvestment of dividends
and distributions 943,335 126,868
--------- ---------
5,179,217 7,947,013
Shares repurchased 3,023,224 3,062,343
--------- ---------
Net increase 2,155,993 4,884,670
========= =========
Dividends per share from
net investment income $ .26 $ .01
========= =========
Distributions per share from
net realized gains $ .16 $ .04
========= =========
- --------------------------------------------------------------------------------
3 -- Purchases and Sales of Securities
- --------------------------------------------------------------------------------
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
1995
------------
PURCHASES:
Investment Securities $367,612,847
------------
SALES & MATURITIES:
U.S. Treasury Obligations $ 10,000,000
Other Investment Securities 401,989,647
============
$411,989,647
============
At December 31, 1995, the aggregate cost of investment securities and
short-term investments for federal income tax purposes is $717,217,071. The
aggregate appreciation and depreciation of investments at December 31, 1995,
based on a comparison of investment values and their costs for federal income
tax purposes is $164,318,927 and $3,005,149, respectively, resulting in a net
appreciation of $161,313,778.
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NOTES TO FINANCIAL STATEMENTS
December 31, 1995
- --------------------------------------------------------------------------------
4 -- Investment Advisory Contract, Management
Fees and Transactions with Affiliates
- --------------------------------------------------------------------------------
An advisory fee of $3,853,934 was paid or payable to the Adviser, for the
year ended December 31, 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 year 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 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
expenses 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 year ended December 31, 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 $2,770 by the Trust for the year ended
December 31, 1995. During the year ended December 31, 1995, the Trust paid
brokerage commissions totalling $541,673 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 contract-owner 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 year ended December 31, 1995, the Trust
incurred expenses of $577,988 in connection with such services rendered by GIAC.
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FINANCIAL HIGHLIGHTS
Selected data for a share of stock outstanding throughout each year:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.13 $17.01 $15.94 $14.54 $11.06
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations:
Net investment income .39 .26 .27 .26 .30
Net gains or losses on securities (both realized
and unrealized) 4.17 (1.09) 1.62 1.93 4.50
----------- ----------- ----------- ----------- -----------
Total from investment operations 4.56 (.83) 1.89 2.19 4.80
----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net investment income (.26) (.01) (.28) (.26) (.31)
Distributions from capital gains (.16) (.04) (.54) (.53) (1.01)
----------- ----------- ----------- ----------- -----------
Total distributions (.42) (.05) (.82) (.79) (1.32)
----------- ----------- ----------- ----------- -----------
Net asset value, end of year $20.27 $16.13 $17.01 $15.94 $14.54
=========== =========== =========== =========== ===========
Total return 28.54% -4.88% 11.86% 15.05% 43.34%
=========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Net assets, end of year (in thousands) $876,509 $662,721 $615,648 $362,045 $188,781
Ratio of operating expenses to average
net assets .60% .60% .61% .55% .58%
Ratio of net investment income to average
net assets 2.18% 1.65% 1.96% 2.18% 3.00%
Portfolio turnover rate 63% 100% 110% 106% 134%
</TABLE>
See notes to financial statements.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Trustees of
Value Line Strategic Asset Management Trust
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Strategic Asset
Management Trust (the "Trust") at December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 9, 1996
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<PAGE>
[LOGO] The Guardian(R)
The Guardian Insurance & Annuity Company, Inc. BULKRATE MAIL
201 Park Avenue South U.S. POSTAGE PAID
New York, NY 10003 PERMIT NO. 45
NEWARK, NJ
EB-011033 12/95 [LOGO] Printed on recycled paper
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SEPARATE ACCOUNT A - VALUE GUARD II
This schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1995, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 001
<NAME> THE SEPARATE ACCOUNT A - VALUE GUARD II
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 676,942,350
<INVESTMENTS-AT-VALUE> 970,236,433
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 970,236,433
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,901,836
<TOTAL-LIABILITIES> 7,901,836
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 11,201,682
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 86,149,525
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 293,294,083
<NET-ASSETS> 962,334,597
<DIVIDEND-INCOME> 20,843,161
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 9,641,479
<NET-INVESTMENT-INCOME> 11,201,682
<REALIZED-GAINS-CURRENT> 86,149,525
<APPREC-INCREASE-CURRENT> 110,832,165
<NET-CHANGE-FROM-OPS> 208,183,373
<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> 9,641,479
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,641,479
<AVERAGE-NET-ASSETS> 898,430,837
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 196,981,691
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN STOCK FUND
This schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1995, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 002
<NAME> THE GUARDIAN STOCK FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,267,180,692
<INVESTMENTS-AT-VALUE> 1,614,827,861
<RECEIVABLES> 45,484,458
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,660,312,319
<PAYABLE-FOR-SECURITIES> 42,753,165
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,288,355
<TOTAL-LIABILITIES> 45,041,520
<SENIOR-EQUITY> 4,651,923
<PAID-IN-CAPITAL-COMMON> 1,196,284,312
<SHARES-COMMON-STOCK> 46,519,231
<SHARES-COMMON-PRIOR> 40,961,784
<ACCUMULATED-NII-CURRENT> 96,928
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 66,590,467
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 347,647,169
<NET-ASSETS> 1,615,270,799
<DIVIDEND-INCOME> 19,867,204
<INTEREST-INCOME> 6,023,534
<OTHER-INCOME> 11,951
<EXPENSES-NET> 7,129,004
<NET-INVESTMENT-INCOME> 18,773,685
<REALIZED-GAINS-CURRENT> 134,802,382
<APPREC-INCREASE-CURRENT> 229,959,479
<NET-CHANGE-FROM-OPS> 383,535,546
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,757,010
<DISTRIBUTIONS-OF-GAINS> 71,343,468
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,643,546
<NUMBER-OF-SHARES-REDEEMED> 3,748,523
<SHARES-REINVESTED> 2,609,964
<NET-CHANGE-IN-ASSETS> 576,279,579
<ACCUMULATED-NII-PRIOR> 80,253
<ACCUMULATED-GAINS-PRIOR> 2,903,923
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,731,656
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,129,004
<AVERAGE-NET-ASSETS> 1,346,331,269
<PER-SHARE-NAV-BEGIN> 27.33
<PER-SHARE-NII> .44
<PER-SHARE-GAIN-APPREC> 9.01
<PER-SHARE-DIVIDEND> (.44)
<PER-SHARE-DISTRIBUTIONS> (1.62)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.72
<EXPENSE-RATIO> .53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN BOND FUND
This schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1995, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 003
<NAME> THE GUARDIAN BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 364,678,628
<INVESTMENTS-AT-VALUE> 373,721,419
<RECEIVABLES> 4,309,374
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 378,030,793
<PAYABLE-FOR-SECURITIES> 3,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 569,212
<TOTAL-LIABILITIES> 3,569,212
<SENIOR-EQUITY> 3,056,638
<PAID-IN-CAPITAL-COMMON> 365,837,772
<SHARES-COMMON-STOCK> 30,566,383
<SHARES-COMMON-PRIOR> 27,886,629
<ACCUMULATED-NII-CURRENT> 737,841
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,213,461)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,042,791
<NET-ASSETS> 374,461,581
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,906,527
<OTHER-INCOME> 0
<EXPENSES-NET> 1,863,727
<NET-INVESTMENT-INCOME> 22,042,800
<REALIZED-GAINS-CURRENT> 9,664,616
<APPREC-INCREASE-CURRENT> 23,262,625
<NET-CHANGE-FROM-OPS> 54,970,041
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 22,025,063
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,626,400
<NUMBER-OF-SHARES-REDEEMED> 4,756,442
<SHARES-REINVESTED> 1,809,816
<NET-CHANGE-IN-ASSETS> 65,483,496
<ACCUMULATED-NII-PRIOR> 99,343
<ACCUMULATED-GAINS-PRIOR> (13,263,683)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,713,103
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,863,727
<AVERAGE-NET-ASSETS> 342,620,155
<PER-SHARE-NAV-BEGIN> 11.08
<PER-SHARE-NII> .76
<PER-SHARE-GAIN-APPREC> 1.17
<PER-SHARE-DIVIDEND> (.76)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.25
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN CASH FUND
This schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1995, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 004
<NAME> THE GUARDIAN CASH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 356,756,092
<INVESTMENTS-AT-VALUE> 356,756,092
<RECEIVABLES> 1,337,875
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 358,093,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,273,878
<TOTAL-LIABILITIES> 1,273,878
<SENIOR-EQUITY> 3,568,201
<PAID-IN-CAPITAL-COMMON> 353,251,888
<SHARES-COMMON-STOCK> 35,682,009
<SHARES-COMMON-PRIOR> 38,698,584
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 356,820,089
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21,709,819
<OTHER-INCOME> 0
<EXPENSES-NET> 1,962,064
<NET-INVESTMENT-INCOME> 19,747,755
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 19,747,755
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19,747,755
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,010,954
<NUMBER-OF-SHARES-REDEEMED> 28,002,304
<SHARES-REINVESTED> 1,974,775
<NET-CHANGE-IN-ASSETS> (30,165,747)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,833,520
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,962,064
<AVERAGE-NET-ASSETS> 366,704,062
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.54)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
GABELLI CAPITAL ASSET FUND
This schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1995, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 005
<NAME> GABELLI CAPITAL ASSET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 25,977,382
<INVESTMENTS-AT-VALUE> 26,828,536
<RECEIVABLES> 96,789
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 87,433
<TOTAL-ASSETS> 27,012,758
<PAYABLE-FOR-SECURITIES> 475,825
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 172,991
<TOTAL-LIABILITIES> 648,816
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,528,332
<SHARES-COMMON-STOCK> 2,463,338
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 511
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (16,055)
<ACCUM-APPREC-OR-DEPREC> 851,154
<NET-ASSETS> 26,363,942
<DIVIDEND-INCOME> 84,468
<INTEREST-INCOME> 179,568
<OTHER-INCOME> 0
<EXPENSES-NET> 186,063
<NET-INVESTMENT-INCOME> 77,973
<REALIZED-GAINS-CURRENT> 234,480
<APPREC-INCREASE-CURRENT> 851,154
<NET-CHANGE-FROM-OPS> 1,163,607
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (77,462)
<DISTRIBUTIONS-OF-GAINS> (250,535)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,907,580
<NUMBER-OF-SHARES-REDEEMED> (485,011)
<SHARES-REINVESTED> 30,769
<NET-CHANGE-IN-ASSETS> 26,263,942
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 104,276
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 200,440
<AVERAGE-NET-ASSETS> 15,534,949
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.80
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.70
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
BAILLIE GIFFORD INTERNATIONAL FUND
This schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1995, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 006
<NAME> BAILLIE GIFFORD INTERNATIONAL FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 277,983,540
<INVESTMENTS-AT-VALUE> 309,380,014
<RECEIVABLES> 9,187,521
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 815
<TOTAL-ASSETS> 318,568,350
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,281,480
<TOTAL-LIABILITIES> 1,281,480
<SENIOR-EQUITY> 2,064,763
<PAID-IN-CAPITAL-COMMON> 281,174,015
<SHARES-COMMON-STOCK> 20,647,629
<SHARES-COMMON-PRIOR> 20,625,182
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 263,641
<ACCUMULATED-NET-GAINS> 2,309,525
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32,002,208
<NET-ASSETS> 317,286,870
<DIVIDEND-INCOME> 5,540,981
<INTEREST-INCOME> 393,119
<OTHER-INCOME> 0
<EXPENSES-NET> 2,999,287
<NET-INVESTMENT-INCOME> 2,934,813
<REALIZED-GAINS-CURRENT> 17,921,236
<APPREC-INCREASE-CURRENT> 11,642,633
<NET-CHANGE-FROM-OPS> 32,498,682
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,226,168
<DISTRIBUTIONS-OF-GAINS> 13,499,965
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,880,975
<NUMBER-OF-SHARES-REDEEMED> 6,081,659
<SHARES-REINVESTED> 1,223,131
<NET-CHANGE-IN-ASSETS> 14,237,001
<ACCUMULATED-NII-PRIOR> 250,232
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,430,879
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,999,287
<AVERAGE-NET-ASSETS> 303,859,913
<PER-SHARE-NAV-BEGIN> 14.69
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> 1.49
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> (.70)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.37
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
BAILLIE GIFFORD EMERGING MARKETS FUND
This schedule contains financial information extracted from the "Annual
Report to Shareholders" dated December 31, 1995, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 007
<NAME> BAILLIE GIFFORD EMERGING MARKETS FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 33,449,573
<INVESTMENTS-AT-VALUE> 32,741,039
<RECEIVABLES> 1,663,380
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,924
<TOTAL-ASSETS> 34,406,343
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 187,876
<TOTAL-LIABILITIES> 187,876
<SENIOR-EQUITY> 404,260
<PAID-IN-CAPITAL-COMMON> 37,009,766
<SHARES-COMMON-STOCK> 4,042,600
<SHARES-COMMON-PRIOR> 2,773,317
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 372,137
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,089,261
<ACCUM-APPREC-OR-DEPREC> (734,161)
<NET-ASSETS> 34,218,467
<DIVIDEND-INCOME> 611,599
<INTEREST-INCOME> 145,403
<OTHER-INCOME> 0
<EXPENSES-NET> 493,914
<NET-INVESTMENT-INCOME> 263,088
<REALIZED-GAINS-CURRENT> (2,092,868)
<APPREC-INCREASE-CURRENT> 2,264,145
<NET-CHANGE-FROM-OPS> 434,365
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 661,226
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,755,017
<NUMBER-OF-SHARES-REDEEMED> 564,171
<SHARES-REINVESTED> 78,437
<NET-CHANGE-IN-ASSETS> 10,149,567
<ACCUMULATED-NII-PRIOR> 18,199
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 296,572
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 493,914
<AVERAGE-NET-ASSETS> 29,657,783
<PER-SHARE-NAV-BEGIN> 8.68
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> (.12)
<PER-SHARE-DIVIDEND> (.17)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.46
<EXPENSE-RATIO> 1.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 008
<NAME> Value Line Centurion Fund
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 406,792
<INVESTMENTS-AT-VALUE> 520,022
<RECEIVABLES> 5,875
<ASSETS-OTHER> 29
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 525,926
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 477
<TOTAL-LIABILITIES> 477
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 342,552
<SHARES-COMMON-STOCK> 21,672
<SHARES-COMMON-PRIOR> 17,789
<ACCUMULATED-NII-CURRENT> 2,591
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 67,076
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 113,230
<NET-ASSETS> 525,449
<DIVIDEND-INCOME> 3,269
<INTEREST-INCOME> 2,130
<OTHER-INCOME> 0
<EXPENSES-NET> 2,739
<NET-INVESTMENT-INCOME> 2,660
<REALIZED-GAINS-CURRENT> 67,312
<APPREC-INCREASE-CURRENT> 73,727
<NET-CHANGE-FROM-OPS> 143,699
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,021
<DISTRIBUTIONS-OF-GAINS> 11,320
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,179
<NUMBER-OF-SHARES-REDEEMED> 3,901
<SHARES-REINVESTED> 605
<NET-CHANGE-IN-ASSETS> 172,704
<ACCUMULATED-NII-PRIOR> 1,952
<ACCUMULATED-GAINS-PRIOR> 11,085
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,222
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,739
<AVERAGE-NET-ASSETS> 443,467
<PER-SHARE-NAV-BEGIN> 17.83
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 6.96
<PER-SHARE-DIVIDEND> .10
<PER-SHARE-DISTRIBUTIONS> .56
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.25
<EXPENSE-RATIO> .62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 009
<NAME> Value Line Strategic Asset Management
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 717,206
<INVESTMENTS-AT-VALUE> 878,531
<RECEIVABLES> 10,799
<ASSETS-OTHER> 80
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 889,410
<PAYABLE-FOR-SECURITIES> 12,287
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 614
<TOTAL-LIABILITIES> 12,901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 650,023
<SHARES-COMMON-STOCK> 43,235
<SHARES-COMMON-PRIOR> 41,079
<ACCUMULATED-NII-CURRENT> 16,507
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 48,654
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 161,325
<NET-ASSETS> 876,509
<DIVIDEND-INCOME> 5,115
<INTEREST-INCOME> 16,353
<OTHER-INCOME> 0
<EXPENSES-NET> 4,640
<NET-INVESTMENT-INCOME> 16,828
<REALIZED-GAINS-CURRENT> 51,170
<APPREC-INCREASE-CURRENT> 122,290
<NET-CHANGE-FROM-OPS> 190,288
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,739
<DISTRIBUTIONS-OF-GAINS> 6,609
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,326
<NUMBER-OF-SHARES-REDEEMED> 3,023
<SHARES-REINVESTED> 943
<NET-CHANGE-IN-ASSETS> 213,788
<ACCUMULATED-NII-PRIOR> 10,418
<ACCUMULATED-GAINS-PRIOR> 4,093
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,854
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,639
<AVERAGE-NET-ASSETS> 770,361
<PER-SHARE-NAV-BEGIN> 16.13
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> 4.17
<PER-SHARE-DIVIDEND> .26
<PER-SHARE-DISTRIBUTIONS> .16
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.27
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
