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VALUE LINE
CENTURION FUND, INC.
--------------------------------
PROSPECTUS
MAY 1, 1999
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[LOGO]
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS, AND ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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FUND SUMMARY
What is the Fund's goal? PAGE 2
What are the Fund's main investment strategies? PAGE
2
What are the main risks of investing in the Fund?
PAGE 2
How has the Fund performed? PAGE 3
What are the Fund's fees and expenses? PAGE 4
HOW WE MANAGE THE FUND
Our principal investment strategies PAGE 5
The principal risks of investing in the Fund PAGE 6
WHO MANAGES THE FUND
Investment Adviser PAGE 8
Management fees PAGE 8
Portfolio management PAGE 8
ABOUT YOUR ACCOUNT
How to buy and sell shares PAGE 9
Dividends, distributions and taxes PAGE 10
FINANCIAL HIGHLIGHTS
Financial Highlights PAGE 11
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FUND SUMMARY
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WHAT IS THE FUND'S GOAL?
The Fund's investment objective is long-term growth of
capital. Although the Fund will strive to achieve this goal,
there is no assurance that it will. 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. ("GIAC").
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
To achieve the Fund's goals, we invest substantially all of
the Fund's net assets in common stocks. In selecting
securities for purchase or sale, we rely on the Value Line
Timeliness-TM- Ranking System, which compares the Adviser's
estimate of the probable market performance of each stock
during the next six to twelve months relative to all of the
approximately 1,700 stocks under review and ranks stocks on a
scale of 1 (highest) to 5 (lowest). The common stocks in
which the Fund will usually invest are those U.S. Securities
ranked 1 or 2 by the Ranking System. There are no set
limitations of investments according to the company's size,
although the Fund generally invests in U.S. securities issued
by larger, more established companies.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
Investing in any mutual fund involves risk, including the
risk that you may receive little or no return on your
investment, and the risk that you may lose part or all of the
money you invest. Therefore, before you invest in this Fund
you should carefully evaluate the risks. The chief risk that
you assume when investing in the Fund is market risk, the
possibility that the securities in a certain market will
decline in value because of factors such as economic
conditions. Market risk may affect a single issuer, industry,
sector of the economy or the market as a whole. The price of
Fund shares will increase and decrease according to changes
in the value of the Fund's investments. The Fund will be
affected by changes in stock prices which tend to fluctuate
more than bond prices. An investment in the Fund is not a
complete investment program and you should consider it just
one part of your total investment program. For a more
complete discussion of risk, please turn to page 7.
2
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HOW HAS THE FUND PERFORMED?
This bar chart and table can help you evaluate the potential
risks of investing in the Fund. We show how returns for the
Fund's shares have varied over the past ten calendar years,
as well as the average annual returns of these shares for
one, five, and ten years all compared to the performance of
the S&P 500-Registered Trademark-, a broad based market
index. You should remember that unlike the Fund, this index
is unmanaged and does not include the costs of buying,
selling, and holding the securities. This performance
information does not reflect separate account or variable
insurance contract fees or charges. If such fees and charges
were reflected, the Fund's returns would be less than those
shown. The Fund's past performance is not necessarily an
indication of how it will perform in the future.
TOTAL RETURNS AS OF 12/31 EACH YEAR (%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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1989 31.49%
1990 5.56%
1991 52.18%
1992 5.93%
1993 9.21%
1994 -2.21%
1995 40.08%
1996 17.34%
1997 21.39%
1998 27.47%
</TABLE>
<TABLE>
<S> <C> <C>
BEST QUARTER: Q4 1998 +29.26%
WORST QUARTER: Q3 1990 (15.29%)
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
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VALUE LINE CENTURION FUND 27.47% 19.99% 19.78%
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S&P 500-REGISTERED TRADEMARK- INDEX 28.58% 24.06% 19.21%
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</TABLE>
3
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WHAT ARE THE FUND'S FEES AND EXPENSES?
These tables describe the fees and expenses you pay in
connection with an investment in the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
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<CAPTION>
<S> <C>
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MAXIMUM SALES CHARGES (LOAD) IMPOSED ON PURCHASES NONE
AS A PERCENTAGE OF OFFERING PRICE
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MAXIMUM DEFERRED SALES CHARGES (LOAD) AS A NONE
PERCENTAGE OF ORIGINAL PURCHASE PRICE OR
REDEMPTION PRICE, WHICHEVER IS LOWER
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MAXIMUM SALES CHARGES (LOAD) IMPOSED ON REINVESTED
DIVIDENDS NONE
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REDEMPTION FEE NONE
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EXCHANGE FEE NONE
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</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
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<S> <C>
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MANAGEMENT FEES 0.50%
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DISTRIBUTION AND SERVICE (12b-1) FEES NONE
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OTHER EXPENSES 0.09%
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TOTAL ANNUAL FUND OPERATING EXPENSES 0.59%
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</TABLE>
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other
mutual funds. We show the cumulative amount of Fund expenses
on a hypothetical investment of $10,000 with an annual 5%
return over the time shown. This is an example only, and your
actual costs may be greater or less than those shown here.
Based on these assumptions, your costs would be:
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<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
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VALUE LINE CENTURION FUND,
INC. $60 $189 $329 $738
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</TABLE>
4
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HOW WE MANAGE THE FUND
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OUR PRINCIPAL INVESTMENT STRATEGIES
We analyze economic and market conditions, seeking to
identify the market sector or securities that we think make
the best investments. Because of the nature of the Fund, you
should consider an investment in it to be a long-term
investment that will best meet its objectives when held for a
number of years. The following is a description of how the
Adviser pursues the Fund's objectives.
In selecting securities for purchase or sale, the Adviser
relies on the Value Line Timeliness-TM- Ranking System which
has evolved after many years of research and has been used in
substantially its present form since 1965. It is based upon
historical prices and reported earnings, recent earnings and
price momentum and the degree to which the last reported
earnings deviated from estimated earnings, among other
factors. The Timeliness Rankings are published weekly in the
Standard Edition of The Value Line Investment Survey for
approximately 1,700 of the most actively traded stocks in
U.S. markets, including stocks with large, mid and small
market capitalizations. There are only a few stocks of
foreign issuers that are included and stocks that have traded
for less than two years are not ranked. On a scale of 1
(highest) to 5 (lowest), the rankings compare an estimate of
the probable market performance of each stock during the
coming six to twelve months relative to all 1,700 stocks
under review. The Rankings are updated weekly to reflect the
most recent information.
At least 90% of the Fund's portfolio will typically consist
of common stocks ranked 1 or 2 by the Value Line Timeliness
Ranking System. Stocks that fall in rank below 2 will be sold
as soon as practical, although stocks ranked 1 or 2 may also
be sold if the Adviser deems a sale to be advisable. There
are at present 100 stocks ranked 1 and 300 stocks ranked 2.
The Value Line Timeliness Ranking System does not eliminate
market risk, but the Adviser believes that it provides
objective standards for determining expected relative
performance for the next six to twelve months. Reliance upon
the 1 and 2 rankings, whenever feasible, is a fundamental
policy of the Fund which may not be changed without
shareholder approval. Accordingly, the Fund generally will
purchase and hold securities which are believed to have
relatively superior potential for capital appreciation over
the next six to twelve months. Reliance on the rankings is no
assurance that the Fund will
5
<PAGE>
perform more favorably than the market in general over any
particular period.
TEMPORARY DEFENSIVE POSITION
From time to time in response to adverse market or other
conditions, we may invest a portion of the Fund's net assets
in cash or cash equivalents, debt securities or bonds, for
temporary defensive purposes. This could help the Fund avoid
losses, but it may result in lost opportunities. If this
becomes necessary, the Fund may not achieve its investment
objectives.
PORTFOLIO TURNOVER
The Fund may engage in active and frequent trading of
portfolio securities in order to take advantage of better
investment opportunities to achieve its investment objectives
which would result in higher brokerage commissions and other
expenses. High portfolio turnover may negatively affect the
Fund's performance.
THE PRINCIPAL RISKS OF INVESTING IN THE FUND
Investing in any mutual fund involves risk, including the
risk that you may receive little or no return on your
investment, and the risk that you may lose part or all of the
money you invest. Therefore, before you invest in this Fund
you should carefully evaluate the risks.
The Fund limits its investments to stocks ranked 1 or 2 by
the Value Line Timeliness Ranking System. The Fund's use of
the Value Line Ranking Systems involves the risk that over
certain periods of time the price of securities not covered
by the Ranking Systems, or lower ranked securities, may
appreciate to a greater extent than those securities in the
Fund's portfolio. Please see the Statement of Additional
Information for a further discussion of risks. Information on
the Fund's recent holdings can be found in the Fund's current
annual or semi-annual report.
YEAR 2000 RISKS
Like other mutual funds, the Fund could be adversely affected
if the computer systems used by the Adviser and other service
providers do not properly process and calculate date-related
information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Adviser is
taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to the computer
systems that it uses and
6
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to obtain satisfactory assurances that comparable steps are
being taken by the Fund's other major service providers. At
this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the
Fund.
The Year 2000 Problem is expected to impact corporations,
which may include issuers of portfolio securities held by the
Fund, to varying degrees based upon various factors,
including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Fund
is unable to predict what impact, if any, the Year 2000
Problem will have on issuers of the portfolio securities held
by the Fund.
7
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WHO MANAGES THE FUND
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The business and affairs of the Fund are managed by the
Fund's officers under the direction of the Fund's Board of
Directors.
INVESTMENT ADVISER
Value Line, Inc., 220 East 42nd Street, New York, NY 10017,
serves as the Fund's investment adviser and manages the
Fund's business affairs. Value Line also acts as investment
adviser to the other Value Line mutual funds and furnishes
investment counseling services to private and institutional
clients resulting in combined assets under management of over
$5 billion.
The Adviser was organized in 1982 and is the successor to
substantially all of the operations of Arnold Bernhard & Co.,
Inc. which with its predecessor has been in business since
1931. A subsidiary of the Adviser publishes The Value Line
Investment Survey and other publications.
MANAGEMENT FEES
For managing the Fund and its investments, the Adviser is
paid a yearly fee of 0.50% of the Fund's average daily net
assets.
PORTFOLIO MANAGEMENT
A committee of employees of the Investment Adviser is jointly
and primarily responsible for the day-to-day management of
the Fund's portfolio.
8
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ABOUT YOUR ACCOUNT
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HOW TO BUY AND SELL SHARES
You may invest in the Fund only by purchasing certain
variable annuity and variable insurance contracts
("Contracts") issued by GIAC. The Fund continuously offers
its shares to GIAC's separate accounts at the net asset value
per share next determined after a proper purchase request has
been received by GIAC. GIAC then offers to owners of the
Contracts ("Contractowners") units in its separate accounts
which directly correspond to shares in the Fund. GIAC submits
purchase and redemption orders to the Fund based on
allocation instructions for premium payments, transfer
instructions and surrender or partial withdrawal requests
which are furnished to GIAC by such Contractowners.
Contractowners can send such instructions and requests to
GIAC at P.O. Box 26210, Lehigh Valley, Pennsylvania 18002 by
first class mail or 3900 Burgess Place, Bethlehem,
Pennsylvania 18017 by overnight or express mail. The Fund
redeems shares from GIAC's separate accounts at the net asset
value per share next determined after receipt of a redemption
order from GIAC.
THE ACCOMPANYING PROSPECTUS FOR A GIAC VARIABLE ANNUITY OR
VARIABLE LIFE INSURANCE POLICY DESCRIBES THE ALLOCATION,
TRANSFER AND WITHDRAWAL PROVISIONS OF SUCH ANNUITY OR POLICY.
/ / NET ASSET VALUE
We determine the Fund's net asset value (NAV) per share as of
the close of regular trading on the New York Stock Exchange
each day that exchange is open for business. The Exchange is
currently closed on New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day and on the
preceding Friday or subsequent Monday if any of those days
falls on a Saturday or Sunday, respectively. We calculate NAV
by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and
dividing the resulting number by the number of shares
outstanding. The result is the net asset value per share. We
price securities for which market prices or quotations are
available at their market value. We price securities for
which market valuations are not available at their fair
market value as determined by the Board of Directors. Any
investments which have a maturity of less than 60 days we
price at amortized cost. The amortized cost method of
valuation involves valuing a security at its cost and
accruing any discount or premium over the period until
maturity, regardless of the impact of fluctuating interest
rates on the market value of the security.
9
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to pay dividends from its net investment
income and distribute any capital gains that it has realized
annually. All dividends and capital gains distributions will
be automatically reinvested, at net asset value, by GIAC's
separate accounts in additional shares of the Fund.
Tax laws are subject to change, so we urge you to consult
your tax adviser about your particular tax situation and how
it might be affected by current tax law. The prospectus for
GIAC's variable annuities and variable life insurance
policies describe the federal income tax treatment of
distributions from such contracts to Contractowners.
10
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FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you
understand the Fund's financial performance for the past five
years. Certain information reflects financial results for a
single Fund share. The total returns in the table represent
the rate that an investor would have earned or lost on an
investment in the Fund assuming reinvestment of all dividends
and distributions. This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the
Fund's financial statements, is included in the Fund's annual
report, which is available upon request by calling
800-221-3253.
FINANCIAL HIGHLIGHTS
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<TABLE>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
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NET ASSET VALUE, BEGINNING OF YEAR $25.52 $24.83 $24.25 $17.83 $18.52
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INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income .09 .09 .08 .12 .10
Net gains or losses on
securities (both realized and
unrealized) 6.67 5.30 3.71 6.96 (.51)
- ----------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 6.76 5.39 3.79 7.08 (.41)
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LESS DISTRIBUTIONS:
Dividends from net investment
income (.09) (.09) (.12) (.10) (.01)
Distributions from capital
gains (1.75) (4.61) (3.09) (.56) (.27)
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Total distributions (1.84) (4.70) (3.21) (.66) (.28)
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NET ASSET VALUE, END OF YEAR $30.44 $25.52 $24.83 $24.25 $17.83
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TOTAL RETURN* 27.47% 21.39% 17.34% 40.08% (2.21)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands) $ 815,207 $ 720,091 $ 639,341 $ 525,449 $ 352,745
Ratio of expenses to average net
assets .59%(1) .60%(1) .59%(1) .62% .61%
Ratio of net income to average net
assets .31% .35% .36% .60% .57%
Portfolio turnover rate 112% %85 141% 114% 122%
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</TABLE>
(1) Before offset of custody credits. Including the custody
credits would not have changed the expense ratio.
* 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 return for
all periods shown.
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11
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FOR MORE INFORMATION
Additional information about the Fund's investments is
available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its
last fiscal year. You can find more detailed information
about the Fund in the current Statement of Additional
Information dated May 1, 1999, which we have filed
electronically with the Securities and Exchange Commission
(SEC) and which is legally a part of this prospectus. If you
want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any
questions about investing in this Fund, you can write to the
Fund, c/o GIAC, 201 Park Avenue South, New York, NY 10003 or
call toll-free 800-221-3253.
You can find reports and other information about the Fund on
the SEC Web site (http://www.sec.gov), or you can get copies
of this information, after payment of a duplicating fee, by
writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund,
including its Statement of Additional Information, can be
reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. You
can get information on operation of the public reference room
by calling the SEC at 1-800-SEC-0330.
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<S> <C>
INVESTMENT ADVISER CUSTODIAN
Value Line, Inc. State Street Bank and Trust Company
220 East 42nd Street 225 Franklin Street
New York, NY 10017-5891 Boston, MA 02110
</TABLE>
<TABLE>
<S> <C>
File no. 811-3835
</TABLE>
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VALUE LINE CENTURION FUND, INC.
220 East 42nd Street, New York, New York 10017-5891
1-800-223-0818
www.valueline.com
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
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This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Value Line Centurion Fund, Inc. dated
May 1, 1999, a copy of which may be obtained without charge by writing or
telephoning the Fund. The financial statements, accompanying notes and report of
independent auditors appearing in the Fund's 1998 Annual Report to Shareholders
are incorporated by reference in this Statement. A copy of the Annual Report is
available from the Fund upon request and without charge by calling 800-223-0818.
--------------
TABLE OF CONTENTS
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PAGE
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Description of the Fund and Its Investments and Risks............................... B-2
Management of the Fund.............................................................. B-4
Investment Advisory and Other Services.............................................. B-6
Brokerage Allocation and Other Practices............................................ B-8
Capital Stock....................................................................... B-9
Purchase, Redemption and Pricing of Shares.......................................... B-9
Taxes............................................................................... B-10
Performance Data.................................................................... B-11
Financial Statements................................................................ B-11
</TABLE>
B-1
<PAGE>
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
CLASSIFICATION. The Fund is an open-end, diversified management investment
company incorporated in Maryland in 1983. The Fund's investment adviser is Value
Line, Inc. (the "Adviser").
INVESTMENT STRATEGIES AND RISKS. The primary investment objective of the
Fund is long-term growth of capital. The Fund's investment objective cannot be
changed without shareholder approval. There can be no assurance that the Fund
will achieve its investment objective. There are risks in all investments,
including any stock investment, and in all mutual funds that invest in stocks.
The Fund seeks to achieve its investment objective by investing
substantially all of its assets in common stocks ranked 1 or 2 for year-ahead
performance by the Value Line Timeliness Ranking System. However, a portion of
its assets may be held from time to time in cash, debt securities, bonds or
preferred stocks when the Adviser deems such a position appropriate in the light
of economic or market conditions. The Fund may also purchase restricted
securities, write covered call options, purchase and sell stock index futures
contracts and options thereon, and enter into repurchase agreements.
REPURCHASE AGREEMENTS. The Fund may invest temporary cash balances in
repurchase agreements. A repurchase agreement involves a sale of securities to
the Fund, with the concurrent agreement of the seller (a member bank of the
Federal Reserve System or a securities dealer which the Adviser believes to be
financially sound) to repurchase the securities at the same price plus an amount
equal to an agreed-upon interest rate, within a specified time, usually less
than one week, but, on occasion, at a later time. The Fund will make payment for
such securities only upon physical delivery or evidence of book-entry transfer
to the account of the custodian or a bank acting as agent for the Fund.
Repurchase agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. The value of the
underlying securities will be at least equal at all times to the total amount of
the repurchase obligation, including the interest factor. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Fund seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights. The Board of Directors
monitors the creditworthiness of parties with which the Fund enters into
repurchase agreements.
YEAR 2000. Like other mutual funds, the Fund could be adversely affected if
the computer systems used by the Adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Adviser
is taking steps that it believes are reasonably designed to address the Year
2000 Problem with respect to the computer systems that it uses and to obtain
satisfactory assurances that comparable steps are being taken by the Fund's
other major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but
B-2
<PAGE>
not limited to, the corporation's industry sector and degree of technological
sophistication. The Fund is unable to predict what impact, if any, the Year 2000
Problem will have on issuers of the portfolio securities held by the Fund.
FUND POLICIES.
(i)
The Fund may not issue senior securities except evidences of
indebtedness permitted under clause (ii) below.
(ii)
The Fund may not borrow money in excess of 10% of the value of its
assets and then only as a temporary measure to meet unusually heavy
redemption requests or for other extraordinary or emergency purposes.
Securities will not be purchased while borrowings are outstanding. No assets
of the Fund may be pledged, mortgaged or otherwise encumbered, transferred
or assigned to secure a debt.
(iii)
The Fund may not engage in the underwriting of securities except to
the extent that the Fund may be deemed an underwriter as to
restricted securities under the Securities Act of 1933 in selling portfolio
securities.
(iv)
The Fund may not invest 25% or more of its assets in securities of
issuers in any one industry.
(v)
The Fund may not purchase securities of other investment companies
or invest in real estate, mortgages or illiquid securities of real
estate investment trusts although the Fund may purchase securities of
issuers which engage in real estate operations.
(vi)
The Fund may not lend money except in connection with the purchase
of debt obligations or by investment in repurchase agreements,
provided that repurchase agreements maturing in more than seven days when
taken together with other illiquid investments do not exceed 10% of the
Fund's assets.
(vii)
The Fund may not engage in arbitrage transactions, short sales,
purchases on margin or participate on a joint or joint and several
basis in any trading account in securities.
(viii)
The Fund may not write, purchase or sell any put or call options or
any combination thereof.
(ix)
The Fund may not invest more than 5% of its total assets in the
securities of any one issuer or purchase more than 10% of the
outstanding voting securities, or any other class of securities, of any one
issuer. For purposes of this restriction, all outstanding debt securities of
an issuer are considered as one class, and all preferred stock of an issuer
is considered as one class. This restriction does not apply to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
(x)
The Fund may not invest more than 5% of its total assets in
securities of issuers having a record, together with its
predecessors, of less than three years of continuous operation. This
restriction does not apply to any obligation issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
(xi)
The Fund may not purchase securities for the purpose of exercising
control over another company.
B-3
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(xii)
The Fund may not invest more than 5% of the value of its total
assets in warrants or more than 2% of such value in warrants which
are not listed on the New York or American Stock Exchanges except that
warrants attached to other securities are not subject to these limitations.
(xiii)
The Fund may not invest in commodities or commodity contracts.
(xiv)
The Fund may not purchase the securities of any issuer if, to the
knowledge of the Fund, those officers and directors of the Fund and
of the Adviser, who each owns more than 0.5% of the outstanding securities
of such issuer, together own more than 5% of such securities.
(xv)
The primary investment objective of the Fund is long-term growth of
capital.
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values or assets will not be
considered a violation of the restriction. For purposes of industry
classifications, the Fund follows the industry classifications in The Value Line
Investment Survey.
The policies set forth above may not be changed without the affirmative vote
of the majority of the outstanding voting securities of the Fund which means the
lesser of (1) the holders of more than 50% of the outstanding shares of capital
stock of the Fund or (2) 67% of the shares present if more than 50% of the
shares are present at a meeting in person or by proxy.
Since the Fund will be used as an investment vehicle for variable annuity
contracts and variable life insurance policies issued through The Guardian
Insurance & Annuity Company Inc. ("GIAC"), its investments may be subject in the
future to further restrictions under the insurance laws and regulations of the
states in which such contracts or policies are offered for sale.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed by the Fund's officers
under the direction of the Board of Directors. Set forth below is certain
information regarding the Directors and Officers of the Fund.
DIRECTORS AND OFFICERS
<TABLE>
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NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
*Jean Bernhard Buttner Chairman of the Board Chairman, President and Chief Executive
Age 64 of Directors and Officer of the Adviser and Value Line Pub-
President lishing, Inc. Chairman and President of the
Value Line Funds and Value Line Securities,
Inc. (the "Distributor"); Chairman and
President of each of the 15 Value Line Funds.
John W. Chandler Director Consultant, Academic Search Consultation
2801 New Mexico Ave., N.W. Service, Inc. Trustee Emeritus and Chairman
Washington, DC 20007 (1993-1994) of Duke University; President
Age 75 Emeritus, Williams College.
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ---------------------------------- --------------------- ---------------------------------------------
<S> <C> <C>
*Leo R. Futia Director Retired Chairman and Chief Executive Officer
201 Park Avenue South of The Guardian Life Insurance Company of
New York, NY 10003 America and Director since 1970. Director
Age 79 (Trustee) of The Guardian Insurance & Annuity
Company, Inc., Guardian Investor Services
Corporation and the Guardian-sponsored mutual
funds.
David H. Porter Director President Emeritus, Skidmore College since
5 Birch Run Drive January 1, 1999; President, Skidmore College,
Saratoga Springs, NY 12866 1987-1998; Director of Adirondack Trust
Age 63 Company.
Paul Craig Roberts Director Chairman, Institute for Political Economy;
505 S. Fairfax Street Director, A. Schulman Inc. (plastics).
Alexandria, VA 22320
Age 60
Nancy-Beth Sheerr Director Chairman, Radcliffe College Board of
1409 Beaumont Drive Trustees.
Gladwyne, PA 19035
Age 49
Philip J. Orlando, CFA Vice President Chief Investment Officer with the Adviser's
Age 40 Asset Management Division since 1995.
Nancy Bendig Vice President Portfolio Manager with the Adviser
Age 43
David T. Henigson Vice President, Director, Vice President and Compliance
Age 41 Secretary and Officer of the Adviser. Director and Vice
Treasurer President of the Distributor. Vice Presi-
dent, Secretary and Treasurer of each of the
15 Value Line Funds.
</TABLE>
- --------------
* "Interested" director as defined in the Investment Company Act of 1940 (the
"1940 Act").
Unless otherwise indicated, the address for each of the above is 220 East 42nd
Street, New York, NY.
Directors of the Fund are also directors/trustees of 11 other Value Line
Funds.
The following table sets forth information regarding compensation of
Directors by the Fund and by the Fund and the eleven other Value Line Funds of
which each of the Directors is a director or trustee for the fiscal year ended
December 31, 1998. Directors who are officers or employees of the Adviser do not
receive any compensation from the Fund or any of the Value Line Funds.
B-5
<PAGE>
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
TOTAL
PENSION OR ESTIMATED COMPENSATION
RETIREMENT ANNUAL FROM FUND
AGGREGATE BENEFITS BENEFITS AND FUND
COMPENSATION ACCRUED AS PART UPON COMPLEX
NAME OF PERSONS FROM FUND OF FUND EXPENSES RETIREMENT (12 FUNDS)
- ------------------------------------------- --------------- ------------------ ----------- --------------
<S> <C> <C> <C> <C>
Jean B. Buttner $ -0- N/A N/A $ -0-
John W. Chandler 2,968 N/A N/A 35,620
Leo R. Futia 2,718 N/A N/A 32,620
David H. Porter 2,968 N/A N/A 35,620
Paul Craig Roberts 2,718 N/A N/A 32,620
Nancy-Beth Sheer 2,968 N/A N/A 35,620
</TABLE>
As of the date of this Statement of Additional Information, The Guardian
Insurance & Annuity Company, Inc., a Delaware corporation, owned all of the
outstanding shares of the Fund. Such shares are allocated to one or more
Guardian separate accounts which are registered as unit investment trusts under
the 1940 Act. The address of The Guardian Insurance & Annuity Company, Inc. is
201 Park Avenue South, New York, New York. It is a subsidiary of The Guardian
Life Insurance Company of America, a mutual life insurance company organized
under the laws of the State of New York.
INVESTMENT ADVISORY AND OTHER SERVICES
The Fund's investment adviser is Value Line, Inc. (the "Adviser"). Arnold
Bernhard & Co., Inc., 220 East 42nd Street, New York, NY 10017, a holding
company, owns approximately 81% of the outstanding shares of the Adviser's
common stock. Jean Bernhard Buttner, Chairman, President and Chief Executive
Officer of the Adviser and Chairman and President of the Fund, owns all of the
voting stock of Arnold Bernhard & Co., Inc.
The investment advisory agreement between the Fund and the Adviser, dated
August 10, 1988, provides for an advisory fee at an annual rate of 0.50% of the
Fund's average daily net assets. During 1996, 1997 and 1998, the Fund paid or
accrued to the Adviser advisory fees of $2,927,833, $3,485,040 and $3,632,919,
respectively.
The investment advisory agreement provides that the Adviser shall render
investment advisory and other services to the Fund including, at its expense,
all administrative services, office space and the services of all officers and
employees of the Fund. The Fund pays all other expenses not assumed by the
Adviser including taxes, interest, brokerage commissions, insurance premiums,
fees and expenses of the custodian and shareholder servicing agents, legal and
accounting fees, fees and expenses in connection with qualification under
federal and state securities laws and costs of shareholder reports and proxy
materials. In addition, the Fund has agreed to reimburse GIAC for certain
administrative and shareholder servicing expenses incurred by GIAC on behalf of
the Fund. See note 4 of the notes to the Fund's financial statements for the
year ended December 31, 1998. The Fund has agreed that it will use the words
"Value Line" in its name only so long as Value Line, Inc. serves as investment
adviser to the Fund. The agreement will terminate upon its assignment.
B-6
<PAGE>
The Adviser acts as investment adviser to 14 other investment companies
constituting The Value Line Family of Funds and furnishes investment counseling
services to private and institutional accounts resulting in combined assets
under management in excess of $5 billion.
Certain of the Adviser's clients may have investment objectives similar to
the Fund and certain investments may be appropriate for the Fund and for other
clients advised by the Adviser. From time to time, a particular security may be
bought or sold for only one client or in different amounts and at different
times for more than one but less than all such clients. In addition, a
particular security may be bought for one or more clients when one or more other
clients are selling such security, or purchases or sales of the same security
may be made for two or more clients at the same time. In such event, such
transactions, to the extent practicable, will be averaged as to price and
allocated as to amount in proportion to the amount of each order. In some cases,
this procedure could have a detrimental effect on the price or amount of the
securities purchased or sold by the Fund. In other cases, however, it is
believed that the ability of the Fund to participate, to the extent permitted by
law, in volume transactions will produce better results for the Fund.
The Adviser and/or its affiliates, officers, directors and employees may
from time to time own securities which are also held in the portfolio of the
Fund. The Adviser has imposed rules upon itself and such persons requiring
monthly reports of security transactions for their respective accounts and
restricting trading in various types of securities in order to avoid possible
conflicts of interest. The Adviser may from time to time, directly or through
affiliates, enter into agreements to furnish for compensation special research
or financial services to companies, including services in connection with
acquisitions, mergers or financings. In the event that such agreements are in
effect with respect to issuers of securities held in the portfolio of the Fund,
specific reference to such agreements will be made in the "Schedule of
Investments" in shareholder reports of the Fund. As of the date of this
Statement of Additional Information no such agreements exist.
The Fund has entered into a distribution agreement with Value Line
Securities, Inc. (the "Distributor") whose address is 220 East 42nd Street, New
York, NY 10017, pursuant to which the Distributor acts as principal underwriter
and distributor of the Fund for the sale and distribution of its shares. The
Distributor is a wholly-owned subsidiary of the Adviser. For its services under
the agreement, the Distributor is not entitled to receive any compensation. The
Distributor also serves as distributor to the other Value Line funds. Jean
Bernhard Buttner is Chairman and President of the Distributor.
The Adviser has retained State Street Bank and Trust Company ("State
Street") to provide certain bookkeeping and accounting services for the Fund.
The Adviser pays State Street $32,400 per annum for each Value Line fund for
which State Street provides these services. State Street, whose address is 225
Franklin Street, Boston, MA 02110, also acts as the Fund's custodian, transfer
agent and dividend-paying agent. As custodian, State Street is responsible for
safeguarding the Fund's cash and securities, handling the receipt and delivery
of securities and collecting interest and dividends on the Fund's investments.
As transfer agent and dividend-paying agent, State Street effects transfers of
Fund shares by the registered owners and transmits payments for dividends and
distributions declared by the Fund. National Financial Data Services, Inc., a
State Street affiliate, whose address is 330 W. 9th Street, Kansas City, MO
64105, provides certain transfer agency functions to the Fund as an agent for
State Street. PricewaterhouseCoopers LLP, whose address is 1177 Avenue of the
Americas, New York, NY 10036, acts as the Fund's independent accountants and
also performs certain tax preparation services.
B-7
<PAGE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
Orders for the purchase and sale of portfolio securities are placed with
brokers and dealers who, in the judgment of the Adviser, are able to execute
them as expeditiously as possible and at the best obtainable price. Debt
securities are traded principally in the over-the-counter market on a net basis
through dealers acting for their own account and not as brokers. Purchases and
sales of securities which are not listed or traded on a securities exchange will
ordinarily be executed with primary market makers acting as principal, except
when it is determined that better prices and executions may otherwise be
obtained. The Adviser is also authorized to place purchase or sale orders with
brokers or dealers who may charge a commission in excess of that charged by
other brokers or dealers if the amount of the commission charged is reasonable
in relation to the value of the brokerage and research services provided. Such
allocation will be in such amounts and in such proportions as the Adviser may
determine. Orders may also be placed with brokers or dealers who sell shares of
the Fund or other funds for which the Adviser acts as investment adviser, but
this fact, or the volume of such sales, is not a consideration in their
selection. During 1996, 1997 and 1998, the Fund paid brokerage commissions of
$1,324,485, $763,773 and $1,298,590, respectively, of which $835,307 (63%),
$448,753 (59%) and $785,670 (61%), respectively, was paid to Value Line
Securities, Inc., the Fund's distributor and a subsidiary of the Adviser. Value
Line Securities, Inc. clears transactions for the Fund through unaffiliated
broker-dealers.
The Board of Directors has adopted procedures incorporating the standards of
Rule 17e-1 under the 1940 Act which requires that the commissions paid to Value
Line Securities or any other "affiliated person" be "reasonable and fair"
compared to the commissions paid to other brokers in connection with comparable
transactions. The procedures require that the Adviser furnish reports to the
Directors with respect to the payment of commissions to affiliated brokers and
maintain records with respect thereto. During 1998, $1,085,655 (84%) of the
Fund's brokerage commissions were paid to brokers or dealers solely for their
services in obtaining the best prices and executions; the balance, or $212,935
(16%), went to brokers or dealers who provided information or services to the
Adviser and, therefore, indirectly to the Fund and to shareholders of the Value
Line funds. The information and services furnished to the Adviser include the
furnishing of research reports and statistical compilations and computations and
the providing of current quotations for securities. The services and information
were furnished to the Adviser at no cost to it; no such services or information
were furnished directly to the Fund, but certain of these services might have
relieved the Fund of expenses which it would otherwise have had to pay. Such
information and services are considered by the Adviser, and brokerage
commissions are allocated in accordance with its assessment of such information
and services, but only in a manner consistent with the placing of purchase and
sale orders with brokers and/or dealers, which, in the judgment of the Adviser,
are able to execute such orders as expeditiously as possible and at the best
obtainable price. The Fund is advised that the receipt of such information and
services has not reduced in any determinable amount the overall expenses of the
Adviser.
PORTFOLIO TURNOVER. The Fund's annual portfolio turnover rate may exceed
100%. A rate of portfolio turnover of 100% would occur if all of the Fund's
portfolio were replaced in a period of one year. To the extent that the Fund
engages in short-term trading in attempting to achieve its objective,
B-8
<PAGE>
it may increase portfolio turnover and incur higher brokerage commissions and
other expenses than might otherwise be the case. The Fund's portfolio turnover
rate for recent fiscal years is shown under "Financial Highlights" in the Fund's
Prospectus.
CAPITAL STOCK
Each share of the Fund's common stock, $1 par value, has one vote with
fractional shares voting proportionately. Shares have no preemptive rights, are
freely transferable, are entitled to dividends as declared by the Directors and,
if the Fund were liquidated, would receive the net assets of the Fund.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASES: Shares of the Fund are purchased at net asset value next calculated
after receipt of a purchase order. Shares of the Fund are available to the
public only through the purchase of certain contracts or policies issued by
GIAC. There are no minimum investor requirements.
REDEMPTION: The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period, by the Fund under the following
conditions authorized by the 1940 Act: (1) For any period (a) during which the
New York Stock Exchange is closed, other than customary weekend and holiday
closing, or (b) during which trading on the New York Stock Exchange is
restricted; (2) For any period during which an emergency exists as a result of
which (a) disposal by the Fund of securities owned by it is not reasonably
practical, or (b) it is not reasonably practical for the Fund to determine the
fair value of its net assets; (3) For such other periods as the Securities and
Exchange Commission may by order permit for the protection of the Fund's
shareholders.
The value of shares of the Fund on redemption may be more or less than the
shareholder's cost, depending upon the market value of the Fund's assets at the
time.
NET ASSET VALUE: The net asset value of the Fund's shares for purposes of both
purchases and redemptions is determined once daily as of the close of regular
trading on the New York Stock Exchange (generally 4:00 p.m., New York time) on
each day that the New York Stock Exchange is open for trading except on days on
which no orders to purchase, sell or redeem Fund shares have been received. The
net asset value per share is determined by dividing the total value of the
investments and other assets of the Fund, less any liabilities, by the total
outstanding shares. 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.
Securities for which market quotations are not readily available or which are
not readily marketable and all other assets of the Fund are valued at fair value
as the Board of Directors or persons acting at their direction may determine in
good faith. Short-term instruments with maturities of 60 days or less at the
date of purchase are valued at amortized cost, which approximates market.
B-9
<PAGE>
TAXES
The Fund intends to continue to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"). The Fund so
qualified during the Fund's last fiscal year. By so qualifying, the Fund is not
subject to Federal income tax on its net investment income or net realized
capital gains which are distributed to GIAC's separate accounts. The Fund's net
investment income is made up of dividends and interest, less expenses. The
computation of net capital gains takes into account any capital loss carry
forward of the Fund.
Federal tax regulations require that mutual funds that are offered through
insurance company separate accounts must meet certain diversification
requirements to preserve the tax-deferral benefits provided by the variable
contracts which are offered in connection with such separate accounts. The
Adviser intends to diversify the Fund's investments in accordance with those
requirements. The prospectuses for GIAC's variable annuities and variable life
insurance policies describe the federal income tax treatment of distributions
from such contracts to Contractowners.
B-10
<PAGE>
PERFORMANCE DATA
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
or other performance data on the Fund will be accompanied by information on the
Fund's average annual compounded rate of return for the periods of one year,
five years and ten years, all ended on the last day of a recent calendar
quarter. The Fund may also advertise aggregate total return information for
different periods of time.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
P(1+T) to the power of n = ERV
Where: P = a hypothetical initial purchase order of
$1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the
hypothetical $1,000 purchase at the end
of the period.
The Fund's average annual total returns for the one, five and ten year
periods ending December 31, 1998 were 27.47%, 19.99% and 19.78%, respectively.
The Fund's total return may be compared to relevant indices and data from
Lipper Analytical Services, Inc., Morningstar or Standard & Poor's Indices.
From time to time, evaluations of the Fund's performance by independent
sources may also be used in advertisements and in information furnished to
present or prospective investors in the Fund.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield, total return or
distribution rate for any period should not be considered as a representation of
what an investment may earn or what an investor's total return, yield or
distribution rate may be in any future period.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended December 31, 1998,
including the financial highlights for each of the five fiscal years in the
period ended December 31, 1998, appearing in the 1998 Annual Report to
Shareholders and the report thereon of PricewaterhouseCoopers LLP, independent
accountants, appearing therein, are incorporated by reference in this Statement
of Additional Information.
B-11
