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JUNE 30, 1996 SELECT GUARD
Semiannual Report to Policyowners
Executive Offices
- ------------------------------------------- 201 Park Avenue South
The Guardian Separate Account C New York, New York 10003
- -------------------------------------------
Customer Service Office
- ------------------------------------------- P.O. Box 26100
The Guardian Stock Fund, Inc. Lehigh Valley, Pennsylvania
- ------------------------------------------- 18002-6210
The Guardian Bond Fund, Inc. 1-800-441-6455
- -------------------------------------------
The Guardian Cash Fund, Inc. [Logo] The Guardian(R)
- -------------------------------------------
Baillie Gifford International Fund The Guardian Insurance &
- ------------------------------------------- Annuity Company, Inc.
Value Line Centurion Fund, Inc. A wholly owned subsidiary of
- ------------------------------------------- The Guardian Life Insurance
Value Line Strategic Asset Management Trust Company of America
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SELECT GUARD
Table of Contents
Portfolio Schedule
Manager of
Interview Investments
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Economic Report 4
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The Guardian Stock Fund 6 26
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Objective: Long-term growth of capital
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Portfolio: At least 80% common stocks and secu-
rities convertible into common stocks
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Inception: April 13, 1983
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Net Assets at June 30, 1996: $1,870,335,793
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"Investors should be most interested in long-term performance, rather than
all the short-term zigzags within the market. Here, The Guardian Stock Fund can
be proud of its solid record."
--Charles E. Albers, C.F.A
Portfolio Manager
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The Guardian Bond Fund 10 34
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Objective: Maximum current income without undue
risk of principal. Capital appreciation is a
secondary objective.
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Portfolio: At least 80% investment-grade bonds
and U.S. government securities
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Inception: May 1, 1983
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Net Assets at June 30, 1996: $356,326,323
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"To enhance the returns of the corporate bond portion of our portfolio, we
expanded the universe of bonds from which we choose securities purchased by the
Fund."
--Michele S. Babakian
Portfolio Manager
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The Guardian Cash Fund 18 40
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Objective: As high a level of current income as is
consistent with preservation of capital
and liquidity
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Portfolio: Short-term money market
instruments
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Inception: November 1, 1981
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Net Assets at June 30, 1996: $377,292,070
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"We look at the Fund as a place where people can park their money until
they decide where they want to invest it -- whether it be bonds or domestic or
international stocks. Therefore, we seek to provide investors with a combination
of solid returns, liquidity and preservation of capital."
--Alexander M. Grant, Jr.
Portfolio Manager
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Portfolio Schedule
Manager of
Interview Investments
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Baillie Gifford International Fund 12 50
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Objective: Long-term capital appreciation
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Portfolio: At least 80% in a diversified portfolio
of common stocks of companies
domiciled outside of the United States
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Inception: February 8, 1991
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Net Assets at June 30, 1996: $382,806,775
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"We are relatively optimistic about the prospects for most international
markets for the remainder of 1996. Overseas share prices have not risen as much
as those in the U.S., and there is still considerable scope for profits to
increase in many countries, as a large number of international companies are
operating below capacity."
--R. Robin Menzies
Portfolio Manager
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Value Line Centurion Fund 14 64
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Objective: Long-term growth of capital
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Portfolio: At least 90% common stocks
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Inception: November 15, 1983
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Net Assets at June 30, 1996: $599,983,509
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"Corporate profits for the second quarter were reported much as we had
expected, with positive surprises outnumbering negatives by a three-to-one
ratio. Going forward, we continue to forecast an economy growing at a moderate
pace with benign inflationary pressures, an elongated business cycle, and
declining interest rates."
--Value Line, Inc.
Investment Adviser
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Value Line Strategic Asset Management Trust 16 72
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Objective: High total return consistent with
reasonable risk
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Portfolio: Stock, bonds and money market instruments
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Inception: October 1, 1987
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Net Assets at June 30, 1996: $1,002,357,632
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"Good stock selection and an underweighting in bonds were key to Value Line
Strategic Asset Management Trust's continued strong performance in the first
half of 1996."
--Value Line, Inc.
Investment Adviser
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The Guardian Separate Account 20
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Economic Report:
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[Photo of Frank J. Jones, Ph.D. Chief Investment Officer]
I am pleased to write an introduction and economic overview to your
semiannual report. The entire first half of 1996 has seen a continuation of the
strong U.S. economy which began over six years ago.
The second quarter of 1996 was very strong for the economy, quite strong
for the stock market and neutral for the bond market. With respect to the
economy, while the complete data for the second quarter are not yet available,
it is virtually certain that real economic growth (measured by real gross
domestic product, GDP) during the second quarter of this year was significantly
higher than the 2.1% annualized growth during the first quarter and 1.9% during
1995 as a whole. Generally, economists' estimates for real GDP growth during the
second quarter exceeded 4%. If this growth were thought to be sustainable, the
Fed would swiftly tighten monetary policy. As of this writing, no such
tightening has occured.
With respect to the stock market, the S&P 500 Index returned 10.05% during
the first six months of 1996, with 4.44% of this occurring in the second
quarter.(1) This strong performance after the 37.58% return during 1995 has
caused significant nervousness in the market. Indeed, the day-to-day volatility
experienced in the stock and bond markets in July has borne out this
nervousness.
Nevertheless, flows into equity mutual funds during the first five months
of 1996 were $123.86 billion, almost up to 1993's record year-end level of
$129.6 billion and 1995's year-end $128.9 billion inflows. If these cash inflows
into equity mutual funds continue at anything like their current rate (although
the inflows slowed during June and early July), these previous records will be
obliterated. While the strong inflows have supported the stock market, a
slowdown or reversal of this trend could trigger a market correction.
After a very negative first quarter (during which the 30-year Treasury bond
yield increased by 0.72% and the Lehman Aggregate Bond Index returned
- -1.77%(1)), the bond market continually improved on a monthly basis during the
second quarter, with the 30-year Treasury bond yield increasing by only 0.23%
and the Lehman Aggregate Bond Index returning 0.57%. Net cash inflows into bond
and income mutual funds were negative during 1995 and were positive but
relatively anemic during the first five months of 1996. Results for the first
six months of 1996 are not yet available.
U.S. Economic Prospects
For at least two years, the Fed has been trying to accomplish a "soft
landing," that is gradual economic growth of approximately 2 1/2% with
inflation kept under 3%. This outcome has certainly been a possibility during
the last two years. However, the apparently strong, but as yet unverified,
growth during the second quarter has led to a concern for too-rapid growth.
Because of this strong growth, the Fed may soon begin to tighten monetary policy
significantly. The current prevailing forecast for the second half of 1996,
however, is for much slower yet moderate growth, with moderate and only slightly
increased inflation.
As the third quarter of 1996 unfolds, Alan Greenspan and the Fed will
closely monitor employment, consumption, inflation, and other factors to
determine whether tightening is necessary. The Fed would not want to tighten
prematurely because it would regret having enacted a single tightening followed
by a reversal of policy if the economy eased during the second half of 1996. On
the other hand, the Fed would not want to be inactive while the seed of
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(1) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that is
generally considered to be representative of U.S. stock market activity. The
Lehman Aggregate Bond Index is an unmanaged index that is generally considered
to be representative of U.S. bond market activity. The S&P 500 and the Lehman
Aggregate Bond Indexes are not available for direct investment and the returns
do not reflect the fees and expenses that have been deducted from the Funds.
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4
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inflation grew -- the initial tightening on February 4, 1994 was justified by
the Fed as an effort to constrain inflation before it "showed the whites of its
eyes."
With respect to fiscal policy, the federal budget deficit could decline to
$130 billion this fiscal year from $164 billion last year, the lowest since 1989
(relative to GDP, the deficit would be the lowest since 1981). This decrease
would tend to retard economic growth and stimulate the bond market.
Arguments can be made in either direction for economic growth during the
second half of 1996. If, as a few analysts expect, the economy continues to be
as strong as during the second half of 1996, inflationary threats would occur
and the Fed would tighten significantly.
A more likely scenario would be moderate but faster than sustainable
economic growth, which would cause the Fed to tighten two or three times, which,
in turn, would increase long-term yields somewhat but not significantly. While
some analysts believe the next Fed move will be an easing late in the year,
moderate intermediate-term tightening seems more likely. Tightening might not be
a significant negative to the bond market since it would show that the Fed still
has anti-inflation "religion," of which there has been some recent doubt.
The strength of the stock market during 1995 was a result of both declining
yields and strong profit growth. 1996's strength has occurred despite increasing
yields and significant, but slowing profits. If economic growth during the
second half of 1996 moderates to the 2% level, yields could stabilize or even
decline somewhat. A moderate increase in bond yields and moderate corporate
profits would not cause a significant retrenchment in the stock market based on
these fundamentals. Even strong corporate profits, however, would not be enough
to offset the effects of rapid economic growth and multiple Fed tightenings.
However, given the past strong and sustained growth in the stock market
(the current rally which began during May 1990 is the second longest and the
second strongest during the ten rallies since 1951), a moderate correction in
the stock market is always a possibility. While it is always a possibility, its
timing and magnitude are impossible to predict.
International Prospects
Internationally, economic turning points may be occurring in both Japan and
Germany. Recent economic reports from Japan have been very strong and, in fact,
the next monetary move by the Bank of Japan is likely to be a tightening. On the
other hand, the latest economic reports from Germany have been very weak,
although there have been signs of developing strength. The Bundesbank has
continued to ease and will probably ease again this year. The strong dollar
against both the yen and the deutsche mark should support these economies.
The most likely scenario for the next few quarters seems to be that the
German recovery will have difficulty taking hold; the Japanese recovery will
advance but remain feeble; and the United Kingdom, which has also continued to
ease monetary policy, will grow moderately with low inflation. The major concern
in Japan is that, since the economic turnaround to date has depended mainly on
monetary policy and public works spending, the private economy, particularly
consumption, may not be able to sustain the recovery if monetary policy tightens
or the fiscal stimulus is reduced. The major uncertainties in the U.K. continue
to be political rather than economic.
With all that in mind, I now invite you to read the portfolio manager
interviews on the following pages to learn more about the Funds and the
investment strategies used during the past six months.
Regards,
/s/ Frank J. Jones, Ph.D.
Frank J. Jones, Ph.D.
Chief Investment Officer
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5
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The Guardian Stock Fund
- ---------------------------------------
[Photo of Charles E. Albers, C F.A. Portfolio Manager]
Q. Can you explain some of the ups and downs in the U.S. stock market during
the first six months of 1996? And how has the Fund performed in this
environment?
A. In the first half of 1996, equity investors generally had to contend with a
very challenging market environment. Fortunately, we were again able to achieve
respectable returns for our investors. Based on total returns for the first six
months of 1996,(1) The Guardian Stock Fund performed better than its peer group,
the Lipper U.S. Variable Products Growth Funds Average,(2) and the venerable S&P
500 Index,(3) albeit by a small margin in each case. Compared to other U.S.
growth mutual funds, as compiled by Lipper Analytical Services, Inc. for the
periods ended June 30, 1996, the Fund ranked 8 out of a field of 29 growth funds
over a ten-year period, 3 out of 46 for the five-year period and 49 out of 99
for the one-year period.
While the overall stock market rose strongly in the first half of the
year, there were dramatic internal divergencies. For example, there was no
"January Effect" in 1996 (according to this historical pattern, smaller-cap
stocks should excel in January); then, many growth-type small-caps did very well
from March through May, powered by speculative investor enthusiasm; finally, in
June, many of those earlier winners experienced a sharp correction. For the
entire six-month period ended June 30, 1996, small-cap and large-cap indices
produced very similar returns. Regarding economic sectors, the strongest
categories were Consumer Cyclicals and Capital Goods, where stock performance
was aided by perceptions of stronger economic growth; the weakest sector was
Utilities, reflecting the relatively weak performance of the bond market.
Of course, investors should be most interested in long-term performance,
rather than all the short-term zigzags within the market. Here, The Guardian
Stock Fund can be proud of its solid record, especially when compared with other
U.S. growth funds as measured by the Lipper Variable Products U.S. Growth Funds
Average.(2) In fact, The Guardian Stock Fund's results for the last five years
place it among the top 10% of all U.S. growth funds for the period.
Q. To what do you attribute the Fund's performance during the past six months?
A. Throughout the life of the Fund, one of the keys to our solid long-term
results has been our proprietary stock-scoring system. Developed in the late
1970s, this multi-factor quantitative model has helped us rank stocks
successfully over the years. Over the five-year period from 1991 through 1995,
the stock-scoring sys-
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TOTAL RETURN FOR THE SIX MONTHS
ENDED JUNE 30, 1996(1)(2)
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Guardian Stock Fund................................................... +10.85%
Lipper Average U.S. Growth Fund....................................... +10.33%
S&P 500 Composite Index............................................... +10.05%
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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.
(2) 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. Lipper rankings were reported in Lipper's Variable
Insurance Products Performance Analysis Special Report 2nd Quarter 1996.
(3) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that is
generally considered to be representative of U.S. stock market activity. The S&P
500 Index is not available for direct investment and its returns do not reflect
the fees and expenses that have been deducted from the Fund.
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6
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[The following table was represented as a bar graph in the printed material]
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Average Annual Total Returns for the
periods ended June 30, 1996(1), (2)
Fund Lipper
---- ------
1 Year 23.69% 23.59%
5 Years 19.57% 14.76%
10 Years 13.61% 12.01%
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tem has given us valuable predictions in 4 out of 5 years. While you should
remember that past performance is no guarantee of future results, these results
are compelling. During the first half of 1996, the data shows that our
stock-scoring system had only a mild degree of predictive power, although still
positive overall. We are cautiously optimistic that our soundly-based
stock-scoring system will regain more predictive strength over the balance of
1996 and beyond.
Also important, in the last five years we have been actively researching
several different "style predictor" models to help us predict which
characteristics are most likely to be successful over the next 6 to 12 months.
We have developed several soundly-based "style predictor" models to help us
address this critical portfolio management issue. As we reported in the 1995
Annual Report to shareholders, these models had suggested that a tilt towards
higher-quality and large-cap stocks was more likely to be successful, and we
positioned the portfolio accordingly. The behavior of the stock market in the
first half of 1996 regarding these major style issues was, however, essentially
neutral.
Q. What is your outlook for the future? And what are the messages from the
stock-scoring system?
A. Looking forward, the messages that we are getting from our "style predictor"
models are very much as they were six months ago. The quantitative models now
prefer the high-quality and growth-oriented themes for portfolio emphasis. From
an intuitive viewpoint, we believe these signals are reasonable, and they are
supported by the mature position of the U.S. business cycle and the weakening
prospects for U.S. corporate profit growth. As a practical matter, we believe
that The Guardian Stock Fund portfolio is already well-positioned to benefit
from the style trends which we anticipate--accordingly, we plan only moderate
"fine-tuning" of the portfolio in the months ahead.
The messages from our stock-scoring system and from our "style predictor"
models have led us to favor certain economic sectors at this time. We believe
that the best investment prospects are currently in the Consumer Staples,
Financial and Energy sectors, each of which is overweighted in the Fund's
portfolio.
We also believe that there are selective opportunities in the Technology
sector, and our weighting there is roughly equal to the benchmark. (For complete
sector weightings and changes since year-end, please see the accompanying pie
charts.)
Q. Do you have any final words for shareholders?
A. Summing up, we plan to persevere with our successful, established investment
strategies. The portfolio will remain well-diversified, and we will continue to
heed the messages from our various quantitative models. We intend to remain
fully invested in the stock market, as that is our defined mission. In other
words, in managing the Fund, we try to add value by searching out the more
attractive sectors and individual stocks within the market. We do not try to
time the moves of the overall market because we believe that task is practically
impossible and the effort often leads to lost opportunities. We continue to
think of ourselves as a long-term value-building enterprise. We intend to work
hard to continue producing solid results for our shareholders.
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7
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The Guardian Stock Fund Profile
as of June 30, 1996
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Comparison of Common Stocks Held by the Fund on December 31, 1995 and
June 30, 1996 by Economic Sector
[The following table was represented by pie graphs in the printed material]
December 31, 1995 June 30, 1996
----------------- -------------
Consumer Cyclical -- 3.08% Consumer Cyclical -- 2.06%
Consumer Staples -- 18.33% Consumer Staples -- 25.09%
Other -- 8.18% Other -- 9.21%
Financial -- 18.13% Financial -- 20.97%
Basic Industries -- 7.39% Basic Industries -- 4.02%
Energy -- 12.10% Energy -- 14.57%
Utilities -- 9.46% Utilities -- 7.31%
Capital Goods-Technology -- 23.33% Capital Goods-Technology -- 16.77%
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Portfolio Composition
The Guardian Stock Fund portfolio holds approximately 221 securities in a
variety of economic sectors. The portfolio manager's goal is to position the
portfolio for consistent performance in both "bull" and "bear" markets.
[The following material was represented by a pie graph in the printed material]
Cash & Cash Equivalents - 4.6% Common Stocks - 95.4%
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8
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Growth of a Hypothetical $10,000 Investment
[The following table was represented as line graph in the printed material]
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The Guardian S&P 500 Cost of
Stock Fund Index Living
---------- ----- ------
4/13/83 10,000 10,000 10,000
10,891 10,844 10,133
83 11,028 10,867 10,336
10,684 10,328 10,571
84 12,218 11,529 10,754
14,360 13,501 10,958
85 16,130 15,169 11,162
20,326 18,307 11,152
86 18,889 17,985 11,295
22,920 22,898 11,580
87 19,241 18,903 11,794
23,115 21,283 12,029
88 23,160 21,989 12,314
26,541 25,595 12,650
89 28,613 28,887 12,885
28,334 29,749 13,252
90 25,224 27,959 13,680
29,788 31,938 13,874
91 34,293 36,439 14,088
34,598 36,196 14,302
92 41,178 39,207 14,516
46,490 41,100 14,720
93 49,396 43,130 14,913
47,471 41,667 15,097
94 48,767 43,679 15,311
58,848 52,468 15,545
95 65,667 59,992 15,668
6/30/96 72,792 66,752 15,973
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A hypothetical $10,000 investment made at the inception of The Guardian Stock
Fund on April 13, 1983 would have grown to $72,792 on June 30, 1996. 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 now be worth $66,752. 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 23.69% 19.57% 13.61% 16.21%
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S&P 500 Index(2) 25.85% 15.65% 13.69% 15.36%
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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.
(2) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity. The
S&P 500 Index is not available for direct investment and its returns do not
reflect the fees and expenses that have been deducted from the Fund.
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9
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The Guardian Bond Fund
- ---------------------------------------
[Photo of Michele S. Babakian, Portfolio Manager]
Q. How has the overall bond market performed in the past six months?
A. The bond market returned an unsatisfying -1.21% during the first six months
of the year as measured by the Lehman Aggregate Bond Index.(1) Of the fixed
income sectors, asset-backed securities (ABS) and mortgage-backed securities
(MBS) held up the best with returns of 0.61% and 0.35%, respectively. Both of
these sectors have durations shorter than that of the Index. During a down
market, shorter duration assets will usually suffer less price depreciation.
A dramatic change in market expectations occurred during the first six
months of 1996. January's returns mimicked the strong performance of 1995 as
investors interpreted the economic news to suggest moderate growth and low
inflation. This sentiment was supported by the Federal Reserve's 25 basis point
reduction of the Federal Funds rate to 5.25% on January 31. However, by early
March, jobs data, increasing factory orders and industrial production indicated
a stronger economy than forecasted. In the second quarter, strong housing and
retail demand, coupled with a buildup of inventories, fueled economic growth.
This increased growth caused investors to be concerned that the Fed would raise
rates in order to dampen the strong economic growth. A nervous market became
more bearish when the June average hourly earnings reported a robust increase of
3.4% year-to-year. To moderate the economic growth and potential inflationary
pressures, the Fed is expected to raise rates sometime during July or August.
Toward the end of the second quarter this expectation led to rising rates and
cautious investors.
Q. How has the Fund performed in this market, year-to-date?
A. Despite the volatility of interest rates and the change of market sentiment
from bullish to bearish in the last six months, the Fund performed competitively
versus its peer group, the Lipper Variable Product "BBB" Corporate Bond
Group.(2) As of June 30, the year-to-date total return for the Fund was -1.98%
versus -1.88% for this Lipper group.(3)
Our strategy during this period was to stay fully invested and purchase
products with strong return characteristics and to manage the Fund's duration
within 5% of the Lehman Aggregate Bond Index's duration. At June 30, the Fund,
compared to the Index, had an overweighting of approximately 8.5% in the
Corporate and MBS sectors and 13% overweighting in the ABS sector.
To enhance the returns of the corporate bond portion of our portfolio, we
expanded the universe of bonds from which we choose securities purchased by the
Fund. New sectors such as Insurance, Tobacco, and Telecommunications were
evaluated and purchased because we believe that they will provide higher yields
to investors. The objective was to find positive trends within sectors, and
individual securities that could provide a high level of current income and
solid return characteristics.
Although we have been pleased with the results from our expanded universe,
due to the narrowing of corporate spreads in the second quarter and negative
news on select corporate credits, 11% of the corporate sector was sold and
reinvested in MBS. MBS have higher yields per unit of duration, or average life,
than
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(1) The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The Lehman
Aggregate Bond Index is not available for direct investment and the returns do
not reflect the fees and expenses that have been deducted from the Fund.
(2) Lipper Analytical Services, Inc. is an independent 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. Their returns do not
reflect the deduction of sales loads, and performance would be different if
sales loads were deducted.
(3) 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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10
<PAGE>
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most corporate bonds. These MBS can also be financed through the dollar
roll market for additional income. Also added to the MBS sector were commercial
mortgage-backed securities (CMBS), which differ from MBS because the assets
underlying the bonds are commercial mortgages rather than single-family
mortgages. These investments, which comprise 4% of the portfolio, are rated AA
or better by either Moody's or Standard &Poor's.
We continue to use ABS to fill the Fund's need for short-duration
securities as these products are higher yielding than Treasury paper and
corporate issues of the same duration. To enhance our returns the portfolio has
purchased new ABS in the home improvement and auto loan sectors.
Q. What is your outlook for the market? What strategies do you plan to
implement?
A. Assuming there is a Fed tightening this summer, we could see the 30-year
Treasury bond yield rise to 7.50% by year-end. To protect the Fund from the
price depreciation caused by rising rates, we will manage the duration of the
Fund to be slightly shorter than the Lehman Aggregate Bond Index's duration.
There will also continue to be an over-allocation to higher yielding, total
return products. In this sector, we will pay particular attention to the
corporate sectors with superior total return potential. In the next six months,
we expect to select more domestic and Yankee credits and CMBS. As you may
remember from the 1995 Annual Report to shareholders, Yankee credits, or Yankee
bonds, are dollar-denominated bonds issued by foreign companies and traded in
domestic U.S. markets. Our current allocation to MBS may be maintained or
reduced depending on volatility and demand in this sector. Current ABS positions
will continue to be swapped for higher-yielding ABS. As always, we will continue
to be opportunistic and manage for total return.
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The Guardian Bond Fund Profile
as of June 30, 1996
- ---------------------------------------
[The following table was represented by a pie graph in the printed material]
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Portfolio Composition by Quality
by either Moody's or Standard &Poor's
AAA - 56.6%
Cash Equivalents - 11.7%
Non-rated - 3.1%
BBB - 15.2%
A - 10.7%
AA - 2.7%
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AVERAGE ANNUAL RETURNS(3)
- --------------------------------------------------------------------------------
1 Year................................. 3.38%
5 Years................................ 7.85%
10 Years............................... 8.15%
Since Inception (5/1/83)............... 9.37%
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[The following table was represented by a pie graph in the printed material]
- --------------------------------------------------------------------------------
Portfolio Composition by Asset Class
Corporate Bonds - 30.3%
Cash Equivalents - 2.7%
U.S. Government Securities - 10.9%
Asset-Backed Securities - 15.7%
Mortgage Pass-Throughs - 17.3%
Multi-class Mortgages - 23.1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percentages of invested assets, excluding cash equivalents such as receivables
and payables.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ---------------------------------------
[Photo of R. Robin Menzies, Portfolio Manager]
Q. How have international markets performed during the first six months of
1996? How did the Fund perform?
A. In the first half of this year, the Fund performed well, rising by 9.75%1,(1)
compared to the 4.67% return generated by our benchmark index, the Morgan
Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE)
Index.(2)
According to figures from the MSCI, the continental European markets
produced strong returns of 8.4% for the first six months of 1996, buoyed up by a
high level of corporate restructuring and gradual declines in interest rates.
The United Kingdom, by contrast, returned only 2.7%, as investors became
increasingly concerned about the forthcoming election. The Asian markets
produced a lower return of 2.6%, as the dominant Japanese stock exchange only
managed 1.1%, in U.S. dollar terms. The rise in the value of the U.S. dollar
against the yen reduced the more respectable return of 7.5%, which was the
result before currency fluctuations were taken into account. The other, smaller,
Asian markets produced diverging returns: Australia's 6.5% largely reflects the
recovery of its currency; Malaysia produced an impressive 16.3% and Singapore, a
disappointing -3.2%.
As usual, international market movements reflected a wide range of
divergent influences. The weakness of the yen has been a particularly striking
feature of the world scene; its decline has started to lead to a resurgence in
Japanese growth. In general, the growth of earnings and dividends has been
rather better than expected, but the improvements in Europe continue to be
driven by cost-cutting rather than by the increases in output as has been the
case in Asia.
Q. What factors affected the Fund's performance during the first six months of
1996?
A. The Fund's performance was particularly strong in continental Europe, where
our investments in companies which are embarking on large-scale restructuring
operations produced excellent returns: Ciba-Geigy, for example, the Swiss
chemicals giant, rose by 38.1% as a result of its planned merger with Sandoz,
which we also held and which rose by 24.6%.
Returns were good from some of the smaller markets too. Among the Fund's
best performers were the Hungarian pharmaceutical company Richter Gedeon, which
rose by 163.6%, and the Irish builder CRH increased its share price by 33.6%. In
general, our emphasis on long-term investment in well-positioned, well-run
businesses produced strong returns as these companies consolidated their
dominant positions and increased their focus on shareholder value.
The Fund also benefited from its strategic allocation of assets between
markets. We had a heavy weighting in the smaller Asian markets, which performed
particularly well, and in Continental Europe, where our returns were high. We
had reduced our weighting in the British market from approximately 15% at
year-end 1995 to only about 11% at June 30, 1996, which was relatively sluggish
during the period, and used hedging strategies to insulate the Fund from some of
the harmful effects of a declining yen.
Apart from our reductions in the United Kingdom, the main change in
strategy was our decision to close out the profitable yen hedges towards the end
of the period. There were several changes in the Fund's underlying investments,
but no other important changes in strategy. New holdings which we have
- --------------------------------------------------------------------------------
(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) The MSCI 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 MSCI EAFE Index may not therefore always correlate closely. The MSCI
EAFE Index is not available for direct investment and its returns do not reflect
the fees and expenses that have been deducted from the Fund.
- --------------------------------------------------------------------------------
12
<PAGE>
- -------------------------------------------------------------------------------
taken during the first half of this year include a stake in NTT Data
Communications Systems, Japan's largest computer systems integrator, which is
benefiting from a rapid increase in the use of computers in the Japanese service
sector, an area that has lagged behind that of other developed countries. We
have also bought Adidas, the German sportswear company, which has an excellent,
but under-utilized brand name and which is now cutting costs, outsourcing and
expanding into new markets.
Q. What are your expectations for the next six months, and how will that affect
your management strategy?
A. We are relatively optimistic about the prospects for most international
markets for the remainder of 1996. Overseas share prices have not risen as much
as those in the U.S., and there is still considerable scope for profits to
increase in many countries, as a large number of international companies are
operating below capacity. There is very little sign of inflation, and short-term
interest rates are likely to stay low in Europe, and also in Japan, although
pressure to increase rates there may become apparent before the end of this
year.
We are happy with our current strategy: We have a heavy weighting in the
faster-growing Asian economies, whose markets have lagged recently, and which
now appear to offer good value. We have a neutral weighting in Japan: The
economy appears to be recovering more rapidly than expected, but this has
already been partly discounted by the market. We have a large exposure to
Germany where the benefits of corporate restructuring are likely to continue to
flow through to shareholders, and we shall remain underweighted in the United
Kingdom until the political outlook becomes clearer. As always, our strategy
will continue to be strongly influenced by the availability of high-quality
businesses in the world's stock markets.
- --------------------------------------------------------------------------------
Baillie Gifford International Fund Profile
as of June 30, 1996
- ------------------------------------------
[The following table was represented by a pie graph in the printed material]
- --------------------------------------------------------------------------------
Portfolio Composition by Geographical Location
Latin America -- 2.8%
Cash Equivalents -- 4.7%
U.K. -- 11.4%
Far East -- 16.9%
(excluding Japan)
Continental
Europe -- 29.7%
Japan -- 34.5%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year.................................. 21.58%
5 Years................................. 9.32%
Since Inception (2/8/91)................ 9.51%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Holdings
Company Nature of Company Country
1. Canon, Inc. Office Equipment & Cameras Japan
2. Sandoz AG Pharmaceuticals Switzerland
3. Ciba Geigy AG Pharmaceuticals Switzerland
4. Mitsubishi Heavy Industrial Machinery Japan
5. DDI Corp. Telecommunications Japan
6. NTT Data. Computer Systems Japan
7. Bridgestone Corp. Tires Japan
8. Tokio Marine & Fire Insurance Japan
9. Rohm Electronic Components Japan
10. Mitsubishi Estate Property Japan
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Value Line Centurion Fund
- ---------------------------------------
[Logo]
Q. Following a tremendous year for the stock market in 1995, how have the market
and the Fund performed during the first six months of this year?
A. The Value Line Centurion Fund has enjoyed an excellent year so far in 1996.
Through June 30, the Fund produced a total return of 11.92%(1) compared with a
10.05% total return for the S&P 500 Index.(2)
Q. What changes were made to the portfolio during the first half of the year?
A. Technology has been the story thus far during 1996. We started the year with
about one-quarter of the Fund's investment in Technology. We increased that
allocation to nearly one-third during March, when we found the values offered by
selected Technology stocks particularly attractive. We then began to sell shares
and take profits through the second quarter, as individual stocks began to
approach our target prices. We are presently less than 20% invested in
Technology.
Financial stocks are also an area worth noting, as we began the year with
about a 19% weighting. As the long bond (the 30-year Treasury Bond) sold off
during the first half of 1996, we began to take profits in the Financial sector,
which reduced our exposure to about 6% by the end of June.
As we shifted out of the Technology and Financial sectors, Consumer Growth
stocks, particularly retailers, have been the beneficiary, as we increased our
weighting in this sector from about 7% in January to 15% in June. These stocks
should do well in a slow-growth economy.
Q. What is your stock selection process?
A. The Fund uses a process developed by Value Line, which invests using a
disciplined, bottom-up investment approach. Stocks selected for purchase must be
ranked #1 or #2 for Timeliness in the Value Line Investment Survey.
Historically, stocks so ranked generally have above-average earnings and price
momentum, but trade at reasonable price/earnings multiples relative to their
expected growth rates. Another important input to our proprietary, structured
investment process comes from Value Line's 75 in-house research analysts, who
monitor our 1,700 stock universe.
Although past performance is no guarantee of future results, over the
30-year period from 1965 through 1995 in which the Value Line Ranking System was
employed, our #1 and #2 ranked stocks outperformed the S&P 500 Index on a
total-return basis by a wide margin: 21.7% annualized for the #1 ranked stocks;
12.1% for the #2 ranked stocks; and 11.1% for the S&P 500 Index.
Q. What are your expectations for next year? What adjustments will you make?
A. Although our asset-allocation model continues to espouse a cautious approach
to the equity market for the remainder of 1996, we believe that the recent 10%
correction in the Dow Jones Industrial Average(3) from 5,800 to 5,200 has
largely run its course. Corporate profits for the second quarter were reported
much as we had expected, with positive surprises outnumbering negatives by a
three-to-one ratio. In fact, most of the
- --------------------------------------------------------------------------------
(1) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that is
generally considered to be representative of U.S. stock market activity. The
S&P500 Index is not available for direct investment and its returns do not
reflect the fees and expenses that have been deducted from the Fund.
(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 Dow Jones Industrial Average (DJIA) is an unmanaged average of 30
industrial stocks listed on the New York Stock Exchange that, like the S&P 500
Index, is generally considered to be representative of U.S. stock market
performance. The DJIA is not available for direct investment and its returns do
not reflect the fees and expenses that have been deducted from the Fund.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
negative news came in the form of pre-releases during June, as has been the
pattern over the past year, with the positive news on profits coming after the
quarter had ended. Going forward, we continue to forecast an economy growing at
a moderate pace with benign inflationary pressures, an elongated business cycle,
and declining interest rates.
Specifically, we continue to believe that two major upcoming new-product
introductions in the Technology industry will serve to initiate a significant
corporate upgrade cycle, as businesses purchase the new technology in late 1996
that will extend through 1997. Microsoft will shortly unveil its 4.0 version of
Windows NT, a robust corporate network software. Similarly, Intel will soon
begin volume shipments of its Pentium Pro microprocessor, a powerful
686-generation semiconductor chip.
We believe that the broad availability of these two state-of-the-art
products will unleash pent-up corporate demand, which will reverse the slowdown
in technology spending that we had anticipated over the prior three quarters.
- --------------------------------------------------------------------------------
Value Line Centurion Fund Profile
as of June 30, 1996
- ---------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year................................. 27.40%
5 Years................................ 17.52%
10 Years............................... 13.41%
Since Inception (11/15/83)............. 13.74%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Holdings
26%of the Portfolio
o Nike, Inc. o Cardinal Health
o Cisco Systems o Cabletron Systems
o McDonald's Corp. o IMCGlobal Inc.
o Sonat o Philip Morris
o Merck &Co. o Home Depot
- --------------------------------------------------------------------------------
[The following table was represented by two pie graphs in the printed material]
For a complete list of portfolio holdings,
please see the Schedule of Investments.
- --------------------------------------------------------------------------------
Portfolio Composition by Economic Sector as of
December 31, 1995 and June 30, 1996
December 31, 1995 June 30, 1996
----------------- -------------
Consumer Non-Durables -- 27.39% Consumer Non-Durables -- 23.34%
Capital Goods -- 14.11% Capital Goods -- 12.15%
Other -- 6.58% Other -- 15.75%
Consumer Growth -- 6.69% Consumer Growth -- 15.11%
Financial -- 17.69% Financial -- 5.61%
Technology -- 27.54% Technology -- 28.04%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- -------------------------------------------
[LOGO]
Q. This has been an interesting six months for the U.S. stock and bond markets.
How has the Trust performed?
A. Good stock selection and an underweighting in bonds were keys to Value Line
Strategic Asset Management Trust's continued strong performance in the first
half of 1996. Its total return of 10.41% for the six-month period ended June 30,
1996(1) extended the Trust's track record as one of the top-performing funds of
its kind as measured by the Lipper Flexible Portfolio Average.(2) In fact, as
reported by Lipper Analytical Services, Inc. for the six-month period ended June
30, 1996, the Trust ranked number 3 out of 70 similar funds, number 4 out of 67
for the one-year period, number 8 of 56 for the three-year period and number 3
out of 51 for the five-year period. The Trust's 10.41% return can be compared
with a total return of 10.05% for the unmanaged Standard & Poor's 500 Index and
a total return of -1.88% for the unmanaged Lehman Government/Corporate Bond
Index.(3)
Q. On December 31, 1995, the Trust had a cash and cash equivalents position of
30.0%. Do you still maintain a large cash position? How has portfolio
composition changed since December 31, 1995?
A. Cash declined to 20% of the portfolio by mid-February and has since remained
at about that level. At first, the cash was deployed into stocks, which
accounted for about 70% of the portfolio at mid-February, up from 60% at
year-end. Beginning in late March, however, the Trust began shifting assets out
of stocks and into bonds. Bonds accounted for only 10% of assets at year-end
1995, but by June 30 made up about 30% of the portfolio. The stock allocation,
meanwhile, has declined to about 50% of the portfolio.
The Trust uses Value Line's proprietary stock and bond market models to
determine the suggested optimal asset allocation at any given time. These models
use a number of different economic and financial variables. The rise in interest
rates is the main factor that has made bonds increasingly attractive relative to
stocks in recent months. The central tendency for the Trust's allocation over
time will be 55% in stocks, 35% in bonds, and 10% in cash equivalents. Thus, the
Trust is still holding more cash than can be expected over the long run,
reflecting the current cautionary stance of Value Line's models.
Q. What are your expectations for the future and how are you positioning the
Trust to take advantage of upcoming opportunities?
A. It appears that an additional rise in U.S. interest rates in early July may
suggest a further reduction in the Trust's stockholdings. National employment
figures are coming in stronger than expected, and the Federal Reserve may have
to take steps to rein in
- --------------------------------------------------------------------------------
(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 by Lipper Variable Insurance Products
Performance Analysis Service, in its underlying funds report dated June 30,
1996. Lipper Analytical Services, Inc. is an independent fund monitoring
and rating organization 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.
(3) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The S&P 500
and The Lehman Aggregate Bond Indexes are not available for direct
investment and the returns do not reflect the fees and expenses that have
been deducted from the Trust.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
economic growth. Action by the Federal Reserve would probably put downward
pressure on the stock market. By keeping the Trust's stockholdings at or below
50% of the portfolio, we will have the buying power available to take advantage
of any significant fall in stock prices. Guided by the Value Line Timeliness
Ranking System, the Trust maintains a well-diversified stock portfolio invested
in companies with strong relative earnings momentum and strong relative stock
price momentum. Meanwhile, our bond holdings are of top quality (all Treasuries)
and tilted toward shorter maturities, which can be expected to be less
vulnerable to any further price declines in the bond market.
- --------------------------------------------------------------------------------
Top Ten Stock Holdings
1. Johnson & Johnson
2. Staples Inc.
3. Safeway Inc.
4. Equifax Inc.
5. HFS Inc.
6. Nike Inc.
7. Clayton Homes
8. McDonnell Douglas
9. Cardinal Health
10. Praxair Inc.
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
Profile as of June 30, 1996
- -------------------------------------------
- -------------------------------------------
AVERAGE ANNUAL RETURNS(1)
===========================================
1 Year........................... 22.81%
5 Years.......................... 15.93%
Since Inception (10/1/87)........ 14.47%
- -------------------------------------------
- --------------------------------------------------------------------------------
[The following tables were depicted as two pie charts in the printed material.]
Portfolio Composition by Asset Class
December 31, 1995 June 30, 1996
Cash & Cash Equivalents 30.0% Cash 20.0%
Stocks 60.2% Stocks 55.0%
Bonds 9.8% Bonds 25.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Cash Fund
- ----------------------
[A photo of Alexander M. Grant, Jr., Portfolio Manager appears in the printed
material]
Alexander M. Grant, Jr.,
Portfolio Manager
Q. How did The Guardian Cash Fund perform during the first half of 1996?
A. As of Friday, June 28, 1996, the effective 7-day annualized yield was 5.01%,
down from December 31, 1995, when the effective 7-day annualized yield was
5.40%. The Fund produced an annualized total return of 4.93% for the first half
of 1996.(1)
Q. What factors affected the Fund's performance?
A. On January 31, 1996, the Federal Reserve Board reduced the Federal Funds rate
from 5.50% to 5.25%. Money market securities, like those held by this and
similar funds, tend to track the movement in the Federal Funds rate. Another
factor affecting performance was the portfolio's average maturity-17 days as of
June 30, 1996. In contrast, the average money market fund as measured by IBC
Money Fund Vision had an average maturity of 56 days and a 7-day annualized
yield of 4.71% at June 25, 1996. IBC Financial Data is a research firm that
tracks money market funds. Typically, a fund with a longer maturity will pay a
higher yield. However, in a period of rising interest rates, a fund with a
longer maturity will suffer a greater reduction in total return.
Q. What is your investment strategy?
A. The Guardian Cash Fund is a place for investors to put their money while they
are deciding whether to invest in stocks or bonds. Therefore, we will continue
to try to provide a strong 7-day yield, while offering safety and liquidity. As
a result, our strategy will continue to be to invest in the highest-quality
commercial paper that matures in less than 60 days.
- --------------------------------------------------------------------------------
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. Yields will vary as interest rates change. Past
performance is not a guarantee of future results.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------- ---------------
Separate Separate
Account C Account C
- --------------- ---------------
1 1
- --------------- ---------------
- --------------------------------------------------------------------------------
The Guardian Separate Account C
- ---------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Guardian Guardian Guardian
Stock Bond Cash
Combined Fund Fund Fund
-----------------------------------------------------
<S> <C> <C> <C> <C>
FIFO Cost .......................................................... -- $2,312,365 $ 242,332 $ 56,477
=====================================================
Assets
Shares outstanding ............................................... -- 77,741 19,905 5,648
Net asset value per share (NAV) .................................. -- 36.90 11.70 10.00
Total Assets (Shares x NAV) ................................... $5,337,293 2,868,629 232,884 56,477
---------- ---------- ---------- ----------
Liabilities
Due to The Guardian Insurance & Annuity Company, Inc. ............ 47,134 31,788 1,689 423
---------- ---------- ---------- ----------
Net Assets -- Note 4 ............................................... $5,290,159 $2,836,841 $ 231,195 $ 56,054
========== ========== ========== ==========
<CAPTION>
Value Line
Baillie Strategic
Gifford Value Line Asset
International Centurion Management
Fund Fund Trust
-----------------------------------------
<S> <C> <C> <C>
FIFO Cost .......................................................... $ 758,253 $ 419,239 $ 600,265
=========================================
Assets
Shares outstanding ............................................... 50,655 20,655 34,462
Net asset value per share (NAV) .................................. 16.73 27.14 22.38
Total Assets (Shares x NAV) ................................... 847,458 560,588 771,257
---------- ---------- ----------
Liabilities
Due to The Guardian Insurance & Annuity Company, Inc. ............ 4,468 3,742 5,024
---------- ---------- ----------
Net Assets -- Note 4 ............................................... $ 842,990 $ 556,846 $ 766,233
========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
The Guardian Separate Account C
- ---------------------------------
COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Guardian Guardian Guardian
Stock Bond Cash
Combined Fund Fund Fund
----------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ........................................... $ 24,358 $ 15,300 $ 6,071 $ 1,430
Expenses -- Note 3:
Mortality and expense risk charges ............................. 14,541 7,961 579 154
---------- ---------- ---------- ----------
Net investment income/(expense) .................................. 9,817 7,339 5,492 1,276
---------- ---------- ---------- ----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments .............. 81,967 46,352 (425) --
Reinvested realized gain distributions ......................... 106,977 101,686 -- --
---------- ---------- ---------- ----------
Net realized gain/(loss) on investments ........................ 188,944 148,038 (425) --
---------- ---------- ---------- ----------
Unrealized appreciation/(depreciation) of investments:
End of period .................................................. 948,361 556,264 (9,448) --
Beginning of period ............................................ 701,218 449,818 1,117 --
---------- ---------- ---------- ----------
Change in unrealized appreciation/(depreciation) ............... 247,143 106,446 (10,565) --
---------- ---------- ---------- ----------
Net realized and unrealized gain/(loss) from investments ........ 436,087 254,484 (10,990) --
---------- ---------- ---------- ----------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 445,904 $ 261,823 $ (5,498) $ 1,276
========== ========== ========== ==========
<CAPTION>
Value Line
Baillie Strategic
Gifford Value Line Asset
International Centurion Management
Fund Fund Trust
----------------------------------------
<S> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ........................................... $ 1,557 $ -- $ --
Expenses -- Note 3:
Mortality and expense risk charges ............................. 2,138 1,592 2,117
---------- ---------- ----------
Net investment income/(expense) .................................. (581) (1,592) (2,117)
---------- ---------- ----------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments .............. 6,474 13,145 16,421
Reinvested realized gain distributions ......................... 5,291 -- --
---------- ---------- ----------
Net realized gain/(loss) on investments ........................ 11,765 13,145 16,421
---------- ---------- ----------
Unrealized appreciation/(depreciation) of investments:
End of period .................................................. 89,204 141,349 170,992
Beginning of period ............................................ 34,230 97,156 118,897
---------- ---------- ----------
Change in unrealized appreciation/(depreciation) ............... 54,974 44,193 52,095
---------- ---------- ----------
Net realized and unrealized gain/(loss) from investments ........ 66,739 57,338 68,516
---------- ---------- ----------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 66,158 $ 55,746 $ 66,399
========== ========== ==========
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
20 & 21
<PAGE>
- --------------- ---------------
Separate Separate
Account C Account C
- --------------- ---------------
1 1
- --------------- ---------------
- --------------------------------------------------------------------------------
The Guardian Separate Account C
- ---------------------------------
COMBINED STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1995 (Audited) and
Six Months Ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Guardian Guardian Guardian
Stock Bond Cash
Combined Fund Fund Fund
-----------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------
1995 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 49,194 $ 16,011 $ 12,519 $ 9,983
Net realized gain/(loss) from sale of investments ............. 2,779 727 50 --
Reinvested realized gain distributions ........................ 140,113 102,047 -- --
Change in unrealized appreciation/(depreciation)
of investments ............................................... 641,372 383,785 18,592 --
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ............. 833,458 502,570 31,161 9,983
----------- ----------- ----------- -----------
- ------------------------
1995 Policy Transactions
- ------------------------
Transfer of net premium ....................................... 1,546,300 824,023 66,022 42,349
Transfer on account of death .................................. (3,466) -- -- --
Transfer on account of other terminations ..................... (133,633) (69,645) (5,775) (2,762)
Transfer of policy loans ...................................... (99,168) (49,762) (1,831) (4,772)
Transfer between funds ........................................ -- 30,391 (7,149) 3,703
Transfer of cost of insurance ................................. (283,696) (160,079) (13,106) (6,656)
Transfers -- other ............................................ (148,399) 4,350 (450) (143,756)
----------- ----------- ----------- -----------
Net increase/(decrease) from contract transactions ............ 877,938 579,278 37,711 (111,894)
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets ........................... 1,711,396 1,081,848 68,872 (101,911)
Net Assets at December 31, 1994 ............................... 2,556,604 1,221,147 168,969 171,881
----------- ----------- ----------- -----------
Net Assets at December 31, 1995 ............................... $ 4,268,000 $ 2,302,995 $ 237,841 $ 69,970
=========== =========== =========== ===========
- ----------------------------------------
1996 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 9,817 $ 7,339 $ 5,492 $ 1,276
Net realized gain/(loss) from sale of investments ............. 81,967 46,352 (425) --
Reinvested realized gain distributions ........................ 106,977 101,686 -- --
Change in unrealized appreciation/(depreciation) of investments 247,143 106,446 (10,565) --
----------- ----------- ----------- -----------
Net increase/(decrease) resulting from operations ............. 445,904 261,823 (5,498) 1,276
----------- ----------- ----------- -----------
- ------------------------
1996 Policy Transactions
- ------------------------
Transfer of net premium ....................................... 813,083 489,080 24,454 15,241
Transfer on account of death .................................. (7,086) (2,370) -- --
Transfer on account of other terminations ..................... (103,728) (76,499) (2,665) 268
Transfer of policy loans ...................................... 44,833 (37,782) (258) (374)
Transfer between funds ........................................ -- 2,305 (16,214) (26,866)
Transfer of cost of insurance ................................. (171,134) (102,481) (6,404) (3,454)
Transfers -- other ............................................ 287 (230) (61) (7)
----------- ----------- ----------- -----------
Net increase/(decrease) from contract transactions ............ 576,255 272,023 (1,148) (15,192)
----------- ----------- ----------- -----------
Total Increase/(Decrease) in Net Assets ........................... 1,022,159 533,846 (6,646) (13,916)
Net Assets at December 31, 1995 ............................... 4,268,000 2,302,995 237,841 69,970
----------- ----------- ----------- -----------
Net Assets at June 30, 1996 -- Note 4 ......................... $ 5,290,159 $ 2,836,841 $ 231,195 $ 56,054
=========== =========== =========== ===========
<CAPTION>
Value Line
Baillie Strategic
Gifford Value Line Asset
International Centurion Management
Fund Fund Trust
---------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------
1995 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ 6,972 $ (416) $ 4,125
Net realized gain/(loss) from sale of investments ............. (61) 1,506 557
Reinvested realized gain distributions ........................ 24,029 9,710 4,327
Change in unrealized appreciation/(depreciation)
of investments ............................................... 19,960 106,286 112,749
----------- ----------- -----------
Net increase/(decrease) resulting from operations ............. 50,900 117,086 121,758
----------- ----------- -----------
- ------------------------
1995 Policy Transactions
- ------------------------
Transfer of net premium ....................................... 254,498 138,717 220,691
Transfer on account of death .................................. -- -- (3,466)
Transfer on account of other terminations ..................... (12,127) (17,753) (25,571)
Transfer of policy loans ...................................... (16,935) (10,360) (15,508)
Transfer between funds ........................................ (19,593) (3,435) (3,917)
Transfer of cost of insurance ................................. (41,071) (23,906) (38,878)
Transfers -- other ............................................ 115 (7,179) (1,479)
----------- ----------- -----------
Net increase/(decrease) from contract transactions ............ 164,887 76,084 131,872
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets ........................... 215,787 193,170 253,630
Net Assets at December 31, 1994 ............................... 346,189 265,160 383,258
----------- ----------- -----------
Net Assets at December 31, 1995 ............................... $ 561,976 $ 458,330 $ 636,888
=========== =========== -----------
- ----------------------------------------
1996 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ............................... $ (581) $ (1,592) $ (2,117)
Net realized gain/(loss) from sale of investments ............. 6,474 13,145 16,421
Reinvested realized gain distributions ........................ 5,291 -- --
Change in unrealized appreciation/(depreciation) of investments 54,974 44,193 52,095
----------- ----------- -----------
Net increase/(decrease) resulting from operations ............. 66,158 55,746 66,399
----------- ----------- -----------
- ------------------------
1996 Policy Transactions
- ------------------------
Transfer of net premium ....................................... 113,677 78,228 92,403
Transfer on account of death .................................. -- -- (4,716)
Transfer on account of other terminations ..................... (4,783) (9,630) (10,419)
Transfer of policy loans ...................................... 107,716 (14,134) (10,335)
Transfer between funds ........................................ 20,755 3,318 16,702
Transfer of cost of insurance ................................. (22,796) (15,011) (20,988)
Transfers -- other ............................................ 287 (1) 299
----------- ----------- -----------
Net increase/(decrease) from contract transactions ............ 214,856 42,770 62,946
----------- ----------- -----------
Total Increase/(Decrease) in Net Assets ........................... 281,014 98,516 129,345
Net Assets at December 31, 1995 ............................... 561,976 458,330 636,888
----------- ----------- -----------
Net Assets at June 30, 1996-- Note 4 .......................... $ 842,990 $ 556,846 $ 766,233
=========== =========== -----------
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
22 & 23
<PAGE>
- ---------------
Separate
Account C
- ---------------
1
- ---------------
- --------------------------------------------------------------------------------
The Guardian Separate Account C
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- -------------------------
Note 1 -- Organization
- -------------------------
The Guardian Separate Account C (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 August 10, 1988.
GIAC is a wholly owned subsidiary of The Guardian Life Insurance Company of
America (Guardian Life). GIAC issues the annual premium variable life insurance
policies offered through the Account. GIAC provides for variable accumulations
and benefits under the policies by crediting the net premium payments to one or
more investment divisions established within the Account as selected by the
policyowner. The policyowner also has the ability to transfer his or her policy
value among the investment divisions within the Account. The Account currently
comprises six investment divisions which invest in shares of the following
mutual funds: The Guardian Stock Fund, Inc. (GSF), The Guardian Bond Fund, Inc.
(GBF), The Guardian Cash Fund, Inc. (GCF), Baillie Gifford International Fund
(BGIF), Value Line Centurion Fund, Inc. and Value Line Strategic Asset
Management Trust (collectively, the Funds and individually, a Fund).
GSF, GBF and GCF each has an investment advisory agreement with Guardian
Investor Services Corporation, a wholly owned subsidiary of GIAC. BGIF is
managed by Guardian Baillie Gifford Ltd., a joint venture company formed by GIAC
and Baillie Gifford Overseas Ltd.
On January 12, 1989, GIAC allocated $100,000 from its general funds to the
Account which was invested in GCF to facilitate the commencement of operations.
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 benefit payments, are obligations of
GIAC.
The change in net assets maintained in the Account provide the basis for
the periodic determination of benefits under the policies. The net assets may
not be less than the amount required under state insurance laws to provide for
death benefits (without regard to the minimum death benefit guarantee) and other
policy benefits. Additional assets are held in GIAC's general account to cover
the contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
- -------------------------------------------
Note 2 -- Significant Accounting Policies
- -------------------------------------------
The following is a summary of significant accounting policies of the
Account.
Investments
(a) Net proceeds from the sale of annual premium variable life insurance
policies are invested by the Account's investment divisions in shares of the
corresponding Funds at the net asset value of each Fund's shares. 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.
- --------------------------------------------------------------------------------
24
<PAGE>
---------------
Separate
Account C
---------------
1
---------------
- --------------------------------------------------------------------------------
(d) The cost of investments sold is determined on a first in, first out
(FIFO) basis. In 1996, 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 six months ended June 30, 1996 and the year ended December 31,
1995, purchases of shares of the Funds aggregated $970,512 and $1,693,362,
respectively. Aggregate sales of shares of the Funds amounted to $258,099 and
$632,238 for the six months ended June 30, 1996 and the year ended December 31,
1995, respectively.
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 taxes are payable by GIAC with respect to
the operations of the Account.
- ----------------------------------------
Note 3 -- Administrative and Mortality
and Expense Risk Charges
- ----------------------------------------
GIAC assumes mortality and expense risk related to the operations of the
Account. To cover these risks, GIAC deducts a daily charge from the net assets
of the Account which, on an annual basis, is equal to a rate of .50% of the
policy account value.
In addition, GIAC makes a monthly charge for the cost of life insurance,
based on the face value of the policyowner's insurance in-force, as compensation
for the anticipated cost of paying death benefits.
Under the terms of the policy, GIAC deducts charges from the gross premiums
before transferring the net premiums (gross premiums less other contractual
charges) to the Account. These other contractual charges consist of:
a) a $50 annual policy fee;
b) an administrative charge of $5 per $1,000 of the policy's face amount,
assessed against the first premium only; and
c) an annual state premium tax charge of approximately 2.5% of the basic
premium.
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.
Under current laws, GIAC may incur state and local taxes in several states.
At present, these taxes are not significant. In the event of a material change
in applicable state or local tax laws, GIAC reserves the right to charge the
Account for such taxes, if any, which are attributable to the Account.
- -------------------------------------
Note 4 -- Net Assets, June 30, 1996
- -------------------------------------
At June 30, 1996, net assets of the Account were as follows:
Accumulation of Annual Premium
Variable Life Insurance
Policyowners' Accounts $5,290,159
The amount retained by GIAC in the Account is comprised of amounts accruing
to GIAC from the operations of the Account and retained therein. Amounts
retained by GIAC in the Account may be transferred by GIAC to its general
account.
In some instances the calculation of total assets may not agree due to
rounding.
- --------------------------------------------------------------------------------
25
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
- ----------------------
COMMON STOCKS -- 95.4%
- ----------------------
Shares Value
- ------------------------------------------------------------
240,500 Boeing Co. $20,953,563
276,400 Logicon, Inc. 8,257,450
39,000 Loral Corporation 531,375
702,000 McDonnell Douglas Corp. 34,047,000
201,750 Precision Castparts Corp. 8,675,250
183,000 Rockwell Int'l. Corp. 10,476,750
64,000 Sundstrand Corp. 2,344,000
41,500 United Technologies Corp. 4,772,500
-----------
90,057,888
-----------
Air Transportation -- 0.3%
58,000 AMR Corp. Del 5,278,000
-----------
Automotive -- 0.4%
128,700 Chrysler Corp. 7,979,400
-----------
Biotechnology -- 0.3%
93,600 Amgen, Inc. 5,054,400
-----------
Building Materials and Homebuilders -- 0.3%
45,000 Coachmen Industries, Inc. 1,575,000
17,900 NCI Building Systems, Inc. 604,125
60,000 McGrath Rent Corp. 1,350,000
80,400 Webb (Del) Corp. 1,608,000
-----------
5,137,125
-----------
Capital Goods-Miscellaneous Technology -- 1.1%
34,500 Adtran, Inc, 2,445,188
228,000 Komag, Inc. 6,013,500
21,400 Pairgain Technologies, Inc. 1,326,800
188,475 Paychex, Inc. 9,070,359
60,400 Rexel, Inc. 853,150
-----------
19,708,997
-----------
Chemicals -- 1.9%
94,000 Cambrex Corp. 4,805,750
191,400 E.I.Dupont De Nemours, Inc. 15,144,525
398,500 Monsanto Co. 12,951,250
21,800 OM Group, Inc. 855,650
211,700 Sterling Chemicals, Inc. 2,461,012
-----------
36,218,187
-----------
Coal -- 0.1%
33,000 Eastern Enterprises 1,097,250
-----------
Computer Software -- 3.4%
18,900 BMC Software, Inc. 1,129,275
32,400 Cadence Design Systems, Inc. 1,093,500
181,500 Computer Associates Int'l., Inc. 12,931,875
308,900 Electronic Data Systems Corp. 16,603,375
56,000 Fair Isaac & Co., Inc. 2,478,000
190,000 Microsoft Corp. 22,823,750
94,000 Parametric Techonology Corp. 4,077,250
69,400 SunGard Data Systems, Inc. 2,784,675
-----------
63,921,700
-----------
Conglomerates -- 1.3%
149,800 Loews Corp. 11,815,475
155,000 Textron, Inc. 12,380,625
-----------
24,196,100
-----------
Containers -- 0.0%
29,975 Alltrista Corp. 711,906
-----------
Cosmetics and Toiletries-- 1.1%
329,900 Gillette Co. 20,577,513
15,200 Helen of Troy Ltd. 433,200
-----------
21,010,713
-----------
Drugs and Hospitals -- 15.6%
134,000 Abbott Laboratories 5,829,000
460,700 American Home Products Corp. 27,699,587
48,300 Baxter International, Inc. 2,282,175
22,100 Becton Dickinson & Co. 1,773,525
343,300 Bristol-Myers Squibb Corp. 30,897,000
52,200 Boston Scientific Corp. 2,349,000
322,948 Eli Lilly & Co., Inc. 20,991,620
175,986 Guidant Corp. 8,667,310
954,800 Johnson & Johnson 47,262,600
136,400 Kinetic Concepts, Inc. 2,114,200
150,000 Medtronic, Inc. 8,400,000
872,200 Merck & Co., Inc. 56,365,925
509,900 Pfizer, Inc. 36,394,112
319,000 Schering Corp. 20,017,250
362,000 Universal Health Services, Inc. 9,457,250
208,700 Warner Lambert Co. 11,478,500
-----------
291,979,054
-----------
Electrical Equipment -- 2.7%
580,000 General Electric Co. 50,170,000
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
----------------
The Guardian
Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
Electronics and Instruments-- 0.9%
240,000 Analogic Corp. $ 6,420,000
51,800 Cascade Communications Corp. 3,522,400
58,000 Sanmina Corp. 1,566,000
13,200 Security Dynamics Technologies 1,085,700
43,500 Shiva Corp. 3,480,000
18,600 Strattec Security Corp. 330,150
-----------
16,404,250
-----------
Energy-Miscellaneous -- 0.5%
192,500 Giant Industries, Inc. 2,791,250
196,930 Holly Corp. 4,923,250
84,000 Howell Corp. 1,134,000
-----------
8,848,500
-----------
Financial-Banks -- 7.2%
150,000 Bankamerica Corp. 11,362,500
73,000 Barnett Banks, Inc. 4,453,000
308,568 Chase Manhattan Corp. 21,792,615
50,000 Central & Southern Hldgs. Co. 428,125
437,484 Citicorp 36,147,116
35,032 Crestar Financial Corp. 1,869,833
146,300 First Bank Systems Corp. 8,485,400
19,900 First Empire State Corp. 4,795,900
99,500 First Union Corp. 6,057,060
77,220 Hubco, Inc. 1,631,273
50,000 Mellon Bank Corp. 2,850,000
62,000 J.P. Morgan & Co., Inc. 5,246,750
97,300 Nationsbank Corp. 8,039,413
212,260 Norwest Corp. 7,402,568
36,000 Star Banc Corp. 2,425,500
48,666 Wells Fargo & Co. 11,625,091
-----------
134,612,144
-----------
Financial-Others -- 8.4%
160,000 American Express Co. 7,140,000
41,000 Associates First Capital Corp. 1,542,625
160,000 Dean Witter Discover & Co. 9,160,000
21,666 Duff & Phelps Cr. Rating Co. 460,402
96,800 A.G. Edwards, Inc. 2,625,700
64,600 Federal Home Loan Mortgage 5,523,300
664,600 Federal National Mortgage Assn. 22,264,100
258,000 First USA, Inc. 14,190,000
1,000,000 Green Tree Financial Corp. 31,250,000
169,000 Jefferies Group, Inc. 5,239,000
183,050 MBNA Corp. 5,216,925
94,000 McDonald & Co. Investments, Inc. 1,856,500
251,100 Merrill Lynch & Co., Inc. 16,352,887
256,050 Morgan Keegan, Inc. 3,392,663
56,000 Morgan Stanley Group., Inc. 2,751,000
153,825 Raymond James Financial, Inc. 3,480,291
200,000 Charles Schwab Corp. 4,900,000
423,000 Travelers Group, Inc. 19,299,375
-----------
156,644,768
-----------
Financial-Thrift -- 2.5%
67,200 Astoria Financial Corp. 1,822,800
270,400 California Federal Bancorp, Inc. 4,934,800
148,000 Charter One Financial, Inc. 5,161,500
66,000 Coastal Bancorp, Inc. 1,188,000
246,600 Collective Bancorp, Inc. 5,825,925
124,000 Long Island Bancorp, Inc. 3,789,750
19,635 MAF Bancorp, Inc. 481,057
37,666 Pacific Crest Capital, Inc. 338,994
82,362 Progressive Bank, Inc. 2,388,498
528,441 Sovereign Bancorp, Inc. 5,284,410
167,800 Standard Federal Bancorporation 6,460,300
318,766 TCF Financial Corp. 10,598,970
-----------
48,275,004
-----------
Food, Beverage and Tobacco -- 7.3%
171,800 Anheuser Busch Cos., Inc. 12,885,000
687,200 Coca Cola Co. 33,586,900
95,000 ConAgra, Inc. 4,310,625
6,872 Earthgrains Co. 225,057
28,000 Hershey Foods Corp. 2,054,500
110,200 PepsiCo, Inc. 39,273,325
424,800 Philip Morris Cos., Inc. 44,179,200
-----------
136,514,607
-----------
Footwear -- 0.4%
73,400 Nike, Inc. 7,541,850
-----------
Household Products -- 1.1%
189,960 Kimberly Clark Corp. 14,674,410
61,700 Procter & Gamble Co. 5,591,563
-----------
20,265,973
-----------
Information Processing -- 3.1%
28,550 Astro-Med, Inc. 256,950
25,000 Cabletron Systems, Inc 1,715,625
See notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
Shares Value
- ------------------------------------------------------------
332,000 Cisco Systems, Inc. $18,799,500
240,000 Hewlett Packard Co. 23,910,000
48,700 In Focus Systems, Inc. 1,180,975
220,500 Sun Microsystems, Inc. 12,981,938
-----------
58,844,988
-----------
Insurance -- 1.9%
99,000 Amer. Bankers Ins. Group, Inc. 4,318,875
60,000 Amer. Int'l. Group, Inc 5,917,500
30,000 CMAC Investment Corp. 1,725,000
66,700 Executive Risk, Inc. 2,551,275
93,000 ITT Hartford Group, Inc. 4,952,250
60,000 Jefferson Pilot Corp. 3,097,500
68,847 Liberty Financial Cos., Inc. 2,332,192
108,000 MGIC Investment Corp. 6,061,500
54,000 Sun America, Inc. 3,051,000
72,000 State Auto Financial Corp. 1,746,000
12,000 Travelers Aetna Ppty. Cas. Corp. 340,500
-----------
36,093,592
-----------
Lodging -- 0.3%
298,000 Prime Hospitality Corp. 4,917,000
-----------
Machinery and Equipment -- 2.2%
48,000 AGCO Corp. 1,332,000
70,000 Case Corp. 3,360,000
182,000 Dover Corp. 8,394,750
210,900 Global Industrial Technologies 3,374,400
83,900 Illinois Tool Works, Inc. 5,673,738
134,000 Millipore Corp. 5,611,250
20,000 Robbins & Myers, Inc. 890,000
91,500 Tecumseh Products Co. 4,918,125
58,726 Varlen Corp. 1,233,240
110,000 York International Corp. 5,692,500
-----------
40,480,003
-----------
Merchandising-Department Stores -- 0.2%
110,000 Carson Pirie Scott & Co. 2,942,500
-----------
Merchandising-Drugs -- 0.2%
125,000 Walgreen Co. 4,187,500
-----------
Merchandising-Food -- 0.6%
203,700 Casey's General Stores, Inc. 4,048,538
93,000 Kroger Co. 3,673,500
90,000 Safeway, Inc. 2,970,000
-----------
10,692,038
-----------
Merchandising-Special -- 0.3%
130,000 CompUSA, Inc. 4,436,250
137,160 Host Marriott Services Corp. 994,410
60,000 Pier 1 Imports, Inc. 892,500
-----------
6,323,160
-----------
Miscellaneous-Consumer Growth Staples -- 0.1%
58,000 Omnicom Group 2,697,000
-----------
Natural Gas-Diversified -- 0.9%
267,600 Mitchell Energy & Dev. Corp. 5,084,400
100,000 PanEnergy Corp. 3,287,500
428,000 Enserch Corp. 9,309,000
-----------
17,680,900
-----------
Oil and Gas Producing -- 4.9%
98,000 Alexander Energy Corp. 490,000
294,000 Apache Corp. 9,665,250
205,000 Basin Exploration, Inc. 1,332,500
446,500 Tom Brown, Inc. 7,646,312
140,000 Cairn Energy USA, Inc. 2,012,500
304,000 Chieftain International, Inc. 6,118,000
247,000 Devon Energy Corp. 6,051,500
81,800 Diamond Offshore Drilling, Inc. 4,683,050
460,000 Enserch Exploration, Inc. 4,945,000
500,100 Enron Oil and Gas Co. 13,940,288
61,900 Forcenergy Gas Exploration, Inc. 1,168,362
554,000 Global Natural Res., Inc. 9,071,750
16,300 H S Resources, Inc. 189,488
550,900 Petromet Resources Ltd. 1,067,369
137,600 Pogo Producing Co. 5,246,000
835,000 Ranger Oil Ltd. 6,158,125
141,800 St. Mary Land & Exploration Co. 2,375,150
208,167 United Meridian Corp. 7,494,012
20,900 Vintage Petroleum, Inc. 532,950
220,000 Wainoco Oil Ltd. 687,500
-----------
90,875,106
-----------
Oil-Integrated-Domestic -- 1.5%
122,600 Amoco Corp. 8,873,175
85,000 Murphy Oil Corp. 3,856,875
545,000 Tesoro Petroleum, Inc. 6,267,500
445,000 USX Marathon Group 8,955,625
-----------
27,953,175
-----------
See notes to financial statements.
- -------------------------------------------------------------------------------
28
<PAGE>
----------------
The Guardian
Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
Oil-Integrated-International-- 4.6%
153,800 Chevron Corp. $ 9,074,200
453,500 Exxon Corp. 39,397,812
207,800 Mobil Corp. 23,299,575
45,000 Royal Dutch Petroleum Co. 6,918,750
89,400 Texaco, Inc. 7,498,425
-----------
86,188,762
-----------
Oil Services -- 1.5%
29,200 Cliffs Drilling Co. 992,800
40,300 Halliburton Co. 2,236,650
341,000 Nabors Industries, Inc. 5,541,250
131,700 Offshore Logistics, Inc. 1,827,338
95,000 Pride Petroleum Services, Inc. 1,353,750
77,700 Schlumberger Ltd. 6,546,225
205,000 Smith International, Inc. 6,175,625
117,700 Varco International, Inc. 2,133,312
12,000 Weatherford Enterra, Inc. 360,000
-----------
27,166,950
-----------
Paper and Forest Products -- 1.1%
548,000 Rayonier, Inc. 20,824,000
-----------
Railroads -- 0.6%
47,949 Burlington Northern Santa Fe 3,877,875
107,900 Union Pacific Corp. 7,539,513
-----------
11,417,388
-----------
Semiconductor -- 1.0%
97,800 Atmel Corp. 2,946,225
149,400 Intel Corp. 10,971,563
254,000 International Rectifier Corp. 4,095,750
-----------
18,013,538
-----------
Transportation-Miscellaneous -- 0.1%
164,100 Maritrans, Inc. 1,005,113
-----------
Truckers -- 0.0%
32,100 FRP Pptys., Inc. 658,050
-----------
Utilities-Communications - 8.5%
128,500 Ameritech Corp. 7,629,687
303,000 Andrew Corp. 16,286,250
1,090,000 AT&T Corp. 67,580,000
79,100 Bell Atlantic Corp. 5,042,625
177,000 Bellsouth Corp. 7,500,375
295,000 GTE Corp. 13,201,250
71,900 Harris Corp. 4,385,900
233,200 Northern Telecom Ltd. 12,680,250
74,400 NYNEX Corp. 3,534,000
240,000 Sprint Corp. 10,080,000
201,500 SBC Communications, Inc. 9,923,875
40,666 360 Communications Co. 975,984
-----------
158,820,196
-----------
Utilities-Electric -- 0.1%
95,000 Illinova Corp. 2,731,250
-----------
Utilities-Gas and Pipeline -- 0.1%
82,100 Entergy Corp. 2,329,587
-----------
TOTAL COMMON STOCKS
(Cost $1,385,701,173) 1,784,469,612
-------------
- ----------------------------
REPURCHASE AGREEMENT -- 4.7%
- ----------------------------
Principal Maturity
Amount Date Value
- ------------------------------------------------------------
$87,622,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $87,659,970, 5.20%,
due 7/1/96 (collateralized by
$89,320,000 U.S. Treasury
Notes, 5.125% due
2/28/98) 7/1/96 $ 87,622,000
--------------
TOTAL REPURCHASE AGREEMENT
(Cost $87,622,000) 87,622,000
--------------
TOTAL INVESTMENTS -- 100.1%
(Cost $1,473,323,173) 1,872,091,612
PAYABLES IN EXCESS OF CASH,
RECEIVABLES AND OTHER
ASSETS-- (0.1%) (1,755,819)
--------------
NET ASSETS -- 100.0% $1,870,335,793
==============
See notes to financial statements.
- --------------------------------------------------------------------------------
29
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $1,473,323,173
==============
Investments, at market $1,784,469,612
Repurchase agreements 87,622,000
--------------
TOTAL INVESTMENTS 1,872,091,612
Cash 535
Receivable for securities sold 3,589,771
Dividends receivable 2,418,875
Receivable for fund shares sold 355,457
Interest receivable 37,970
Other Assets 7,558
--------------
TOTAL ASSETS 1,878,501,778
--------------
LIABILITIES:
Payable for securities purchased 5,096,340
Payable for fund shares redeemed 643,144
Accrued expenses 67,896
Due to affiliates -- Note B 2,358,605
--------------
TOTAL LIABILITIES 8,165,985
--------------
NET ASSETS $1,870,335,793
==============
COMPONENTS OF NET ASSETS:
Common Stock -- 50,689,164 shares
and outstanding $.10 par value
each (100,000,000 shares authorized) $ 5,068,916
Paid-in capital 1,348,833,899
Undistributed net investment income 2,343,763
Accumulated net realized gain on
investments 115,320,776
Net unrealized appreciation of investments 398,768,439
--------------
NET ASSETS $1,870,335,793
==============
NET ASSET VALUE PER SHARE $ 36.90
==============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
For the Six Months Ended
June 30, 1996 (Unaudited)
Investment Income:
Income:
Dividends $ 13,787,073
Interest 3,002,894
Other income 28,382
------------
16,818,349
Less: Foreign tax withheld 28,980
------------
Total Income 16,789,369
Expenses:
Investment advisory fees-- Note B 4,343,941
Custodian fees 119,504
Printing expense 25,670
Audit fees 8,750
Registration fees 7,842
Insurance expense 7,475
Directors' fees-- Note B 4,600
Legal fees 2,126
Transfer agent fees 1,650
Other 352
------------
Total Expenses 4,521,910
------------
Net Investment Income $ 12,267,459
------------
Realized and Unrealized Gain/(Loss)
on Investments -- Note D
Net realized gain on investments $115,123,555
Net change in unrealized appreciation
of investments 51,121,270
------------
Net Realized and Unrealized Gain
on Investments 166,244,825
------------
Net Increase in Net Assets Resulting
from Operations $178,512,284
============
See notes to financial statements.
- --------------------------------------------------------------------------------
30
<PAGE>
----------------
The Guardian
Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended ended
June 30, December 31,
1996 1995
(Unaudited) (Audited)
--------------- ---------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 12,267,459 $ 18,773,685
Net realized gain on investments 115,123,555 134,802,382
Net change in unrealized appreciation of investments 51,121,270 229,959,479
--------------- ---------------
Net Increase in Net Assets Resulting from Operations 178,512,284 383,535,546
--------------- ---------------
Distributions to Shareholders:
Net investment income (10,020,624) (18,757,010)
Net realized gain on investments (66,598,532) (71,343,468)
--------------- ---------------
Total Distributions to Shareholders (76,619,156) (90,100,478)
--------------- ---------------
From Capital Share Transactions:
Net increase in net assets from capital share transactions-- Note E 153,171,866 282,844,511
--------------- ---------------
Net Increase in Net Assets 255,064,994 576,279,579
Net Assets:
Beginning of period 1,615,270,799 1,038,991,220
--------------- ---------------
End of period* $ 1,870,335,793 $ 1,615,270,799
=============== ===============
* Includes undistributed net investment income of: $ 2,343,763 $ 96,928
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
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The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- -------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31, (Audited)
June 30, 1996 ------------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................... $ 34.72 $ 27.33 $ 29.00 $ 25.52 $ 23.28
------------- ------------- ------------- ------------- -------------
Income from investment
operations
Net investment income ................... 0.25 0.44 0.40 0.58 0.48
Net realized and unrealized gain/
(loss) on investments ............... 3.51 9.01 (0.77) 4.47 3.97
------------- ------------- ------------- ------------- -------------
Net increase/
(decrease) from
investment operations ............... 3.76 9.45 (0.37) 5.05 4.45
------------- ------------- ------------- ------------- -------------
Distributions to
shareholders
Dividends from net
investment income ................... (0.21) (0.44) (0.40) (0.59) (0.48)
Distributions from
net realized gain ................... (1.37) (1.62) (0.90) (0.98) (1.73)
------------- ------------- ------------- ------------- -------------
Total distributions ..................... (1.58) (2.06) (1.30) (1.57) (2.21)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period .................................. $ 36.90 $ 34.72 $ 27.33 $ 29.00 $ 25.52
============= ============= ============= ============= =============
Total return* ............................... 10.85% 34.65% (1.27)% 19.96% 20.07%
============= ============= ============= ============= =============
Ratios/supplemental data:
Net assets, end of
period (000's omitted) .............. $ 1,870,336 $ 1,615,271 $ 1,038,991 $ 869,114 $ 537,354
Ratio of expenses to
average net assets .................. 0.52%+ 0.53%* 0.53% 0.54% 0.55%
Ratio of net investment income to
average net assets .................. 1.41%+ 1.39%* 1.49% 2.20% 2.14%
Portfolio turnoverratio ................. .32% .78% .53% .45% .62%
<CAPTION>
Year Ended December 31, (Audited)
---------------------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................. $ 17.85 $ 21.39 $ 19.18 $ 16.35 $ 17.15 $ 15.40
----------- ----------- ----------- ----------- ----------- ----------
Income from investment
operations
Net investment income ................. 0.63 0.69 0.84 0.52 0.33 0.24
Net realized and unrealized gain/
(loss) on investments ............. 5.74 (3.13) 3.61 2.80 0.06 2.32
----------- ----------- ----------- ----------- ----------- ----------
Net increase/
(decrease) from
investment operations ............. 6.37 (2.44) 4.45 3.32 0.39 2.56
----------- ----------- ----------- ----------- ----------- ----------
Distributions to
shareholders
Dividends from net
investment income ................. (0.64) (0.71) (0.90) (0.49) (0.43) (0.22)
Distributions from
net realized gain ................. (0.30) (0.39) (1.34) -- (0.76) (0.59)
----------- ----------- ----------- ----------- ----------- ----------
Total distributions ................... (0.94) (1.10) (2.24) (0.49) (1.19) (0.81)
----------- ----------- ----------- ----------- ----------- ----------
Net asset value, end of
period ................................ $ 23.28 $ 17.85 $ 21.39 $ 19.18 $ 16.35 $ 17.15
=========== =========== =========== =========== =========== ==========
Total return* ............................. 35.96% (11.85)% 23.55% 20.37% 1.87% 17.10%
=========== =========== =========== =========== =========== ==========
Ratios/supplemental data:
Net assets, end of
period (000's omitted) ............ $ 380,962 $ 256,039 $ 269,950 $ 172,900 $ 139,437 $ 66,081
Ratio of expenses to
average net assets ................ 0.56% 0.57% 0.57% 0.61% 0.61% 0.75%
Ratio of net investment income to
average net assets ................ 3.07% 3.66% 4.13% 2.88% 2.08% 2.00%
Portfolio turnover ratio .............. .51% .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.
+ Annualized.
See notes to financial statements.
- --------------------------------------------------------------------------------
32
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33
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The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
- ---------------------
ASSET BACKED -- 15.7%
- ---------------------
Principal
Amount Value
- ------------------------------------------------------------------------
$14,000,000 Advanta Cr. Card Mst. Tr.,
6.05% due 8/1/03 $13,601,840
6,000,000 Chemical Mst. Cr. Card Tr.,
5.55% due 9/15/03 5,720,580
6,000,000 Contimortgage Home Eq.
Loan Tr., 6.85% due 4/15/44 5,973,720
4,000,000 Firsts Merchant Auto Tr.,
6.7% due 8/15/99 3,994,400
5,000,000 Green Tree Financial Corp.,
6.35% due 12/15/25 4,940,600
5,000,000 Green Tree Financial Corp.,
5.85% due 3/15/27 4,800,000
6,151,873 Green Tree Financial Corp.,
6.10% due 4/15/27 6,115,330
2,000,000 Money Store Tr.,
7.55% due 8/15/20 2,016,200
5,000,000 Money Store Tr.,
7.35% due 5/15/12 5,039,000
4,000,000 Olympic Automobile Rec. Tr.,
5.95% due 11/15/99 3,990,000
-----------
TOTAL ASSET BACKED
(Cost $57,536,883) 56,191,670
-----------
- -----------------------
CORPORATE BONDS -- 29.2%
- -----------------------
Conglomerates -- 1.3%
$5,000,000 RJR Nabisco, Inc.,
7.625% due 9/15/03 4,763,900
-----------
Drugs and Hospital-- 1.9%
7,000,000 Rhone Poulenc SA, 6.75%
due 10/15/99 6,905,080
-----------
Electric Utilities -- 4.4%
2,500,000 Consumers Power Co.,
7.5% due 6/1/02 2,490,425
5,000,000 Duquesne Lt. Co. Secured Mtn.
Bk. Ent., 6.7% due 5/15/03 4,828,150
8,000,000 Tenaga Nasional Berhad,
7.875% due 6/15/04 8,273,200
-----------
15,591,775
-----------
Financial-Banks -- 1.7%
3,000,000 Comerica, Inc.,
7.25% due 8/1/07 2,953,260
3,000,000 PNC Bank NA-Pittsburgh, PA,
7.875% due 4/15/05 3,086,820
-----------
6,040,080
-----------
Financial-Miscellaneous -- 8.5%
5,000,000 BHP Fin. USA Ltd.,
6.69% due 3/1/06 4,777,900
4,000,000 Ford Motor Cr. Co.,
7.75% due 11/15/02 4,131,600
8,000,000 General Motors Accep. Corp. Mtn.,
7.375% due 6/9/99 8,155,040
6,000,000 Salomon, Inc.,
6.70% due 121/98 5,983,440
4,500,000 Salomon, Inc.,
6.75% due 2/15/03 4,307,670
3,000,000 Salomon, Inc.,
7.25% due 5/1/01 2,992,560
-----------
30,348,210
-----------
Insurance -- 0.9%
3,200,000 Metropolitan Life Ins. Co.,
6.3% due 11/1/03 3,017,856
Machinery and Industrial Equipment-- 1.7%
6,000,000 McDermott International, Inc.,
6.57% due 4/20/98 5,959,020
Merchandising Mass -- 1.0%
3,400,000 Wal Mart Stores, Inc.,
8.75% due 12/29/06 3,523,148
Miscellaneous Capital Goods-Technology-- 0.4%
1,500,000 Northrop Grumman Corp.,
7.75% due 3/16/16 1,461,675
Natural Gas-Diversified -- 0.3%
1,000,000 Texas Eastern Corp.,
8.5% due 2/10/97 1,012,430
Paper and Forest Products -- 4.4%
7,000,000 Alco Standard Corp.,
6.75% due 12/1/25 6,101,830
5,000,000 Boise Cascade Corp. Mtn. Bk. Ent.,
7.1% due 1/13/99 4,994,500
See notes to financial statements
- --------------------------------------------------------------------------------
34
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
- --------------------------------------------------------------------------------
Principal
Amount Value
- ------------------------------------------------------------------------
$4,500,000 Fletcher Challenge Cap. CDA II,
7.75% due 6/20/06 $ 4,563,360
-----------
15,659,690
-----------
Railroads -- 1.4%
5,500,000 Burlington Northern Santa Fe
Corp., 6.375% due 12/15/05 5,100,865
-----------
Telecommunications-- 1.3%
4,500,000 TCI Communications,
7.25% due 6/15/99 4,510,485
-----------
TOTAL CORPORATE BONDS
(Cost $106,770,745) 103,894,214
-----------
- ----------------------
MORTGAGE BACKED-- 3.6%
- ----------------------
$4,500,000 Donaldson, Lufkin, Jenrette
Mortgage Accep. Corp.,
7.67% due 2/12/06 $ 4,501,350
5,836,075 Merrill Lynch Mortgage
Invmts., Inc., 6.788%
due 6/25/15 5,756,705
2,500,000 Mortgage Capital Fdg.,
7.9% due 2/15/06 2,528,125
-----------
Total Mortgage Backed
(Cost $12,774,907) 12,786,180
-----------
- -------------------------------
MORTGAGE PASS-THROUGHS -- 17.3%
- -------------------------------
$ 4,500,000 FNMA TBA
7% due 1/1/99 $ 4,436,719
8,000,000 FNMA TBA
7.5% due 1/1/99 7,898,080
14,000,000 FNMA TBA
8% due 1/1/99 14,116,480
751,955 FNMA Pool #068106
8.5% due 8/1/09 779,724
1,153,139 FNMA Pool #068772
8% due 6/1/08 1,186,833
13,629 FNMA Pool #072923
8.25% due 1/1/09 14,049
6,331,458 FNMA Pool #324193
7% due 9/1/25 6,093,015
6,351,848 FNMA Pool #331814
7% due 12/1/25 6,112,637
10,384 GNMA Pool #000375
11.5% due 7/20/00 10,851
119,905 GNMA Pool #352913
7.5% due 5/15/24 118,664
522,091 GNMA Pool #368294
7.5% due 1/15/24 517,340
544,905 GNMA Pool #363384
7.5% due 2/15/24 539,265
112,164 GNMA Pool #369417
7.5% due 2/15/24 111,144
322,059 GNMA Pool #375967
7.5% due 1/15/24 318,725
716,123 GNMA Pool #376437
7.5% due 3/15/24 708,711
540,752 GNMA Pool #378966
7.5% due 1/15/24 535,155
2,563,885 GNMA Pool #395476
7.5% due 5/15/26 2,529,324
8,006,412 GNMA Pool #399303
8% due 6/15/24 8,096,564
3,476,003 GNMA Pool #417223
7.5% due 1/15/26 3,429,147
3,555,111 GNMA Pool #425423
7.5% due 5/15/26 3,507,188
576,351 GNMA Pool #222105
7.5% due 3/15/24 571,106
-----------
TOTAL MORTGAGE
PASS-THROUGHS
(Cost $62,227,882) 61,630,721
-----------
- -------------------------------------------
MULTI CLASS MORTGAGE PASS-THROUGHS -- 19.5%
- -------------------------------------------
$6,000,000 Federal Home Loan Mortgage
Corp., 7% due 3/15/21 $5,743,080
12,700,000 Federal Home Loan Mortgage
Corp., 6.5% due 5/15/19 11,997,436
3,200,186 Federal Home Loan Mortgage
Corp., 4% due 8/15/01 3,163,160
4,115,058 Federal Home Loan Mortgage
Corp., 7% due 4/25/12 4,109,914
222,508 Citibank, NA,
9.5% due 8/1/16 226,335
See notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
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The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
Principal
Amount Value
- ------------------------------------------------------------------------
$ 5,000,000 Citicorp Mortgage Secs., Inc.,
7% due 6/25/23 $ 4,664,050
4,750,000 Citicorp Mortgage Secs., Inc.,
6.5% due 1/25/24 4,013,750
5,000,000 Citicorp Mortgage Secs., Inc.,
6.25% due 3/25/24 4,489,050
1,717,715 Citicorp Mortgage Secs., Inc.,
7.75% due 11/25/06 1,726,304
10,966,790 GE Capital Mortgage Svcs.,
Inc., 7% due 3/25/26 10,192,534
4,000,000 Prudential Home Mortgage Secs.
Co., 6.7% due 3/25/08 3,990,000
5,000,000 Residential Funding Motgage Secs.
Inc., 5.95% due 11/25/23 4,361,000
1,551,408 Sears Mortgage Securities Corp.,
6.5% due 5/25/22 1,541,945
10,000,000 Securitized Asset Sales, Inc.
7.41% due 4/25/24 9,432,000
------------
TOTAL MULTI CLASS MORTGAGE
PASS-THROUGHS
(Cost $71,236,693) 69,650,558
------------
- --------------------------------------------
SHORT-TERM INVESTMENTS-MORTGAGE ROLLS - 8.5%
- --------------------------------------------
$7,940,000 General Electric Cap. Corp.,
5.29% due 7/15/96 $ 7,923,666
14,210,000 Household Finance Corp.,
5.31% due 7/15/96 14,180,656
8,082,000 Lucent Techonogies, Inc.,
5.33% due 7/22/96 8,056,872
------------
TOTAL MORTGAGE ROLLS
(Cost $30,161,194) 30,161,194
------------
- --------------------------------------
U. S. GOVERNMENT AND AGENCIES -- 10.9%
- --------------------------------------
$14,000,000 U.S. Treasury Bonds, 7.625%
due 2/15/25 $ 15,085,000
4,000,000 U.S. Treasury Notes, 6.875%
due 8/31/99 4,056,880
3,000,000 U.S. Treasury Notes, 7.5%
due 10/31/99 3,097,980
10,000,000 U.S. Treasury Notes, 5.5%
due 11/15/98 9,842,200
4,000,000 U.S. Treasury Notes, 5.625%
due 2/15/06 3,706,240
3,000,000 U.S. Treasury Notes, 6.875%
due 5/15/06 3,027,186
------------
TOTAL U.S. GOVERNMENT
AND AGENCIES
(Cost $41,187,251) 38,815,486
------------
- ------------------
YANKEE BOND-- 1.1%
- ------------------
$4,000,000 Hydro Quebec
7.5% due 4/1/16 $ 3,896,680
------------
TOTAL YANKEE BOND
(Cost $3,965,680) 3,896,680
------------
- ------------------------------------
REVERSE REPURCHASE AGREEMENT -- 1.0%
- ------------------------------------
$3,730,000 J.P. Morgan Co., Inc. reverse
repurchase agreement,
5.25% due 7/1/96 $ 3,730,000
------------
TOTAL REVERSE
REPURCHASE AGREEMENT
(Cost $3,730,000) 3,730,000
------------
- ----------------------------
REPURCHASE AGREEMENT -- 3.4%
- ----------------------------
Principal Maturity
Amount Date Value
- -----------------------------------------------------------------------
$12,073,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $12,078,232, 5.20%, due
7/1/96 (collateralized by
$12,310,000 U.S. Treasury
Notes, 5.125% due
2/28/98) 7/1/96 $12,073,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $12,073,000) 12,073,000
------------
TOTAL INVESTMENTS -- 110.2%
(Cost $401,664,235) 392,829,703
------------
PAYABLES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (10.2%) (36,503,380)
------------
NET ASSETS - 100.0% $356,326,323
============
See notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $401,664,235
============
Investments, at market $380,756,703
Repurchase agreements 12,073,000
------------
TOTAL INVESTMENTS 392,829,703
Cash 151
Receivable for securities sold 5,273,455
Interest receivable 3,252,529
Receivable for fund shares sold 821,327
Other assets 1,753
------------
TOTAL ASSETS 402,178,918
------------
LIABILITIES:
Payable for securities purchased 37,318,686
Dollar Roll Payable 7,985,971
Payable for fund shares redeemed 40,836
Accrued expenses 29,492
Due to affiliates -- Note B 477,610
------------
TOTAL LIABILITIES 45,852,595
------------
NET ASSETS $356,326,323
============
COMPONENTS OF NET ASSETS:
Common Stock - 30,442,950 shares
and outstanding $.10 par value
each (100,000,000 shares
authorized) $ 3,044,295
Paid-in capital 364,110,509
Undistributed net investment income 2,524,601
Accumulated net realized (loss)
on investments (4,518,550)
Net unrealized depreciation of
investments (8,834,532)
------------
NET ASSETS $356,326,323
============
NET ASSET VALUE PER SHARE $ 11.70
============
* Includes repurchase agreements.
STATEMENTS OF OPERATIONS
For the Six Months Ended
June 30, 1996 (Unaudited)
Investment Income:
Income:
Interest $11,803,490
-----------
Expenses:
Investment advisory fees -- Note B 902,588
Custodian fees 49,302
Printing expense 11,438
Audit fees 8,750
Directors' fees-- Note B 4,600
Legal fees 2,126
Insurance expense 1,733
Transfer agent fees 1,650
Registration fees 548
Other 352
-----------
Total Expenses 983,087
-----------
Net Investment Income 10,820,403
-----------
Realized and Unrealized Gain/(Loss)
on Investments -- Note D
Net realized loss on investments (305,087)
Net change in unrealized
depreciation of investments (17,877,323)
-----------
Net Realized and Unrealized Loss
on Investments (18,182,410)
-----------
Net Decrease in Net Assets
Resulting from Operations ($7,362,007)
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
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The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1996 1995
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 10,820,403 $ 22,042,800
Net realized gain/(loss) on investments (305,087) 9,664,616
Net change in unrealized appreciation/(depreciation) of investments (17,877,323) 23,262,625
------------ ------------
Net Increase/(Decrease) in Net Assets Resulting from Operations (7,362,007) 54,970,041
------------ ------------
Distributions to Shareholders:
Net investment income (9,033,642) (22,025,063)
Net realized gain on investments -- --
------------ ------------
Total Distributions to Shareholders (9,033,642) (22,025,063)
------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital share transactions
-- Note E (1,739,609) 32,538,518
------------ ------------
Net Increase/(Decrease) in Net Assets (18,135,258) 65,483,496
Net Assets:
Beginning of period 374,461,581 308,978,085
------------ ------------
End of period* $356,326,323 $374,461,581
============ ============
* Includes undistributed net investment income of: $2,524,601 $737,841
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
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The Guardian
Bond Fund
---------------
3
---------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31, (Audited)
June 30, 1996 ------------------------------------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $ 12.25 $ 11.08 $ 12.2 $ 12.26 $ 12.33 $ 11.56 $ 11.67 $ 11.16 $ 11.12 $ 12.41 $ 11.57
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment
income ................ 0.36 0.76 0.40 0.70 0.81 0.92 0.97 0.98 1.03 0.96 0.83
Net realized and
unrealized gain/
(loss) on
investments ........... (0.60) 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 ............ (0.24) 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 ................ (0.31) (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 ..... (0.31) (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
period ................ $ 11.70 $ 12.25 $ 11.08 $ 12.24 $ 12.26 $ 12.33 $ 11.56 $ 11.67 $ 11.16 $ 11.12 $ 12.41
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return* ........... (1.98%) 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
period (000's
omitted) .............. $356,326 $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 0.54% 0.55% 0.56% 0.57% 0.58% 0.60% 0.61% 0.62% 0.69%
Ratio of net investment
income to
average net
assets ................ 5.99%+ 6.43 5.69% 5.56% 6.70% 7.81% 8.53% 8.78% 8.97% 8.97% 9.10%
Portfolio turnover
ratio ................. 116% 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.
+ Annualized
See notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
- ---------------
The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
-------------------------
COMMERCIAL PAPER -- 93.9%
-------------------------
Principal
Amount Value
- ---------------------------------------------------
FINANCIAL -- 11.3%
Bank Holding Companies -- 7.5%
$14,200,000 Commerzbank U.S. Fin.
5.31% due 7/8/96 $14,185,339
14,200,000 J.P. Morgan & Co., Inc.
5.34% due 8/9/96 14,117,853
-----------
28,303,192
-----------
Finance Companies -- 3.8%
14,200,000 Associates Corp. of N.A.
5.34% due 7/15/96 14,170,511
-----------
Total Financial 42,473,703
-----------
INDUSTRIAL -- 82.6%
Aerospace and Defense -- 3.8%
14,200,000 Raytheon Co.,
5.32% due 7/8/96 14,185,311
-----------
Automotive -- 7.5%
14,200,000 Ford Motor Credit
Co., 5.32% due 8/1/96 14,134,948
14,200,000 Toyota Motor Credit Co.,
5.30% due 7/10/96 14,181,185
-----------
28,316,133
-----------
Chemicals -- 3.8%
14,200,000 Monsanto Co.,
5.30% due 7/11/96 14,179,095
-----------
Conglomerates -- 3.8%
14,200,000 General Electric Cap.
Corp., 5.35% due 7/1/96 14,200,000
-----------
Drugs and Hospitals -- 7.5%
14,200,000 Abbott Laboratories,
5.31% due 7/22/96 14,156,016
14,200,000 Smithkline Beecham Corp.,
5.34% due 7/24/96 14,151,554
-----------
28,307,570
-----------
Electric Utilities -- 3.8%
$14,200,000 Duke Power Co.,
5.31% due 7/12/96 14,176,960
-----------
Electronic Instruments -- 3.7%
14,200,000 Siemens Corp.,
5.35% due 8/7/96 14,121,920
-----------
Food and Beverage -- 18.8%
14,200,000 Cargill, Inc.,
5.50% due 7/1/96 14,200,000
14,200,000 Hershey Foods Corp.,
5.33% due 7/9/96 14,183,181
14,200,000 H.J. Heinz Co.,
5.37% due 7/30/96 14,138,573
14,200,000 Nestle Capital Corp.,
5.55% due 7/1/96 14,200,000
14,200,000 PepsiCo, Inc.,
5.35% due 7/23/96 14,153,574
-----------
70,875,328
-----------
Household Products -- 3.8%
14,200,000 Clorox Co..
5.27% due 7/2/96 14,197,921
-----------
Insurance -- 3.8%
14,200,000 American General Fin.
Corp., 5.30% due 7/12/96 14,177,004
-----------
Machinery and Industrial
Equipment -- 3.7%
14,200,000 John Deere Capital Corp.,
5.34% due 7/18/96 14,164,192
-----------
Oil-Integrated-Domestic -- 3.7%
14,200,000 Chevron Oil Finance Co.,
5.35% due 7/26/96 14,147,243
-----------
Oil Services -- 3.7%
14,200,000 Colonial Pipeline Co.,
5.34% due 7/17/96 14,166,299
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- --------------------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------
Publishing-News -- 3.7%
$14,200,000 Gannett, Inc.,
5.33% due 7/19/96 $ 14,162,157
------------
Telecommunications -- 7.5%
14,200,000 Bell Atlantic Financial
Svcs., 5.31% due 7/3/96 14,195,811
14,200,000 U.S. West Comm. , Inc.,
5.35% due 7/25/96 14,149,353
------------
28,345,164
------------
Total Industrial 311,722,297
------------
TOTAL COMMERCIAL PAPER
(Cost $354,196,000) 354,196,000
------------
----------------------------
Repurchase Agreement -- 6.8%
----------------------------
$25,575,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $25,586,083, 5.20%,
due 7/1/96 (collateralized
by $26,075,000 U.S.
Treasury Notes, 5.125% due
2/28/98) $ 25,575,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $25,575,000) 25,575,000
------------
TOTAL INVESTMENTS -- 100.7%
(Cost $379,771,000) 379,771,000
PAYABLES IN EXCESS OF CASH,
RECEIVABLES AND
OTHER ASSETS-- (0.7%) (2,478,930)
------------
NET ASSETS-- 100.0% $377,292,070
============
See notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
- ---------------
The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ------------------------------
STATEMENTS OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $379,771,000
============
Investments, at market $354,196,000
Repurchase agreements 25,575,000
------------
TOTAL INVESTMENTS 379,771,000
Cash 446
Interest receivable 11,083
Receivable for fund shares sold 10,345
Other assets 1,668
------------
TOTAL ASSETS 379,794,542
------------
LIABILITIES:
Payable for fund shares redeemed 1,973,611
Accrued expenses 31,659
Due to affiliates-- Note B 497,202
------------
TOTAL LIABILITIES 2,502,472
------------
NET ASSETS $377,292,070
============
COMPONENTS OF NET ASSETS:
Common Stock -- 37,729,207 shares
outstanding $.10 par value each
(100,000,000 shares authorized) $ 3,772,921
Paid-in capital 373,519,149
------------
NET ASSETS $377,292,070
============
NET ASSET VALUE PER SHARE $ 10.00
============
* Includes repurchase agreements.
STATEMENTS OF OPERATIONS
For the Six Months Ended
June 30, 1996 (Unaudited)
INVESTMENT INCOME:
Income:
Interest $ 9,746,599
-----------
Expenses:
Investment advisory fees-- Note B 896,949
Custodian fees 43,214
Printing expense 11,501
Audit fees 8,500
Directors' fees-- Note B 4,600
Registration fees 2,821
Legal fees 2,126
Transfer agent fees 1,650
Insurance expense 1,649
Other 352
-----------
Total Expenses 973,362
-----------
Net Investment Income $ 8,773,237
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
42
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- ---------
INCREASE/(DECREASE) INNETASSETS
From Operations:
Net investment income $ 8,773,237 $ 19,747,755
------------ ------------
Net Increase in Net Assets Resulting
from Operations 8,773,237 19,747,755
------------ ------------
Distributions to Shareholders:
Net investment income (8,773,237) (19,747,755)
------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from
capital share transactions-- Note E 20,471,981 (30,165,747)
------------ ------------
Net Increase/(Decrease) in Net Assets 20,471,981 (30,165,747)
Net Assets:
Beginning of period 356,820,089 386,985,836
------------ ------------
End of period $377,292,070 $356,820,089
============ ============
See notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
- ---------------
The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31, (Audited)
June 30, 1996 ------------------------------------------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period ........... $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from invest-
ment operations
Net investment
income .............. 0.24 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 ..... (0.24) (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
period .............. $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* .......... 2.47% 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
period (000's
omitted) ............. $377,292 $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% 0.54% 0.55% 0.56% 0.56% 0.58% 0.61% 0.61%
Ratio of net invest-
ment income to
average net
assets ............... 4.89%+ 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.
+ Annualized. The Guardian Cash Fund, Inc. 4 See notes to financial
statements.
See notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
45
<PAGE>
- ------------------
The Guardian
Stock, Bond & Cash
- ------------------
4
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, The Guardian Bond Fund,
The Guardian Cash Fund
------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
----------------------------------------------
Note A -- Organization and Accounting Policies
----------------------------------------------
The Guardian Stock Fund, Inc. (GSF), The Guardian Bond Fund, Inc. (GBF) and
The Guardian Cash Fund, Inc. (GCF) (collectively, the Funds and individually, a
Fund), are each incorporated in the state of Maryland and are diversified
open-end management investment companies registered under the Investment Company
Act of 1940, as amended (1940 Act). Each Fund sold 10,000 of its shares to The
Guardian Insurance & Annuity Company, Inc. (GIAC) for $100,000 in order to
facilitate the commencement of its operations. Such shares were subsequently
deposited in The Guardian Separate Account A, a separate account of GIAC which
is registered as a unit investment trust under the 1940 Act. Shares of the Funds
are only sold to certain separate accounts of GIAC. The Funds are available for
investment only through the purchase of certain variable annuity and variable
life insurance contracts issued by GIAC. GIAC is a wholly owned subsidiary of
The Guardian Life Insurance Company of America (Guardian Life). Significant
accounting policies of the Funds are as follows:
Investments
Investments in GSF and GBF are carried at value. Securities listed on
national securities exchanges are valued based upon closing prices on these
exchanges. Securities traded in the over-the-counter market and listed
securities for which there have been no trades for the day are valued at the
mean of the bid and asked prices.
Certain debt securities may be valued each business day by an independent
pricing service (Service) approved by the Board of Directors. Debt securities
for which quoted bid prices, in the judgment of the Service, are readily
available and representative of the bid side of the market, are valued at the
mean between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other debt securities that are
valued by the Service are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
Securities for which market quotations are not readily available, including
certain mortgage-backed securities and restricted securities, are valued by
using methods that each Fund's Board of Directors, in good faith, believes will
accurately reflect their fair value.
The valuation of securities held by GCF is based upon their amortized cost
which approximates market value, in accordance with Rule 2a-7 under the 1940
Act. Amortized cost valuations do not take into account unrealized gains and
losses.
Investment securities transactions are recorded on the date of purchase or
sale. Repurchase agreements are carried at cost, which approximates value (see
Note C).
Net realized gain or loss on sales of investments is determined on the
basis of identified cost. Interest income, including amortization of premium and
discount, is recorded when earned. Dividends are recorded on the ex-dividend
date.
Federal Income Taxes
Each Fund qualifies and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the Internal Revenue Code
of 1986, as amended (Code), and as such will not be subject to federal income
tax on investment income
- --------------------------------------------------------------------------------
46
<PAGE>
------------------
The Guardian
Stock, Bond & Cash
------------------
4
------------------
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
(including any realized capital gains) which is distributed to its shareholders
in accordance with the applicable provisions of the Code. Therefore, no federal
income tax provision is required.
Reclassifications of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gain for federal income tax purposes. Where such
differences are permanent in nature, they are reclassified in the components of
net assets based on their ultimate characterization for federal income tax
purposes. Any such reclassifications will have no effect on net assets, results
of operations, or net asset value per share of the Fund. Dividend Distributions
GSF and GBF intend to distribute each year, as dividends or capital gain
distributions, substantially all net investment income and net capital gains
realized. All such dividends or distributions are credited in the form of
additional shares of the applicable Fund at net asset value on the ex-dividend
date. Such distributions are determined in conformity with federal income tax
regulations. Differences between the recognition of income on an income tax
basis and recognition of income based on generally accepted accounting
principles may cause temporary overdistributions of net realized gains and net
investment income. Currently, the policy of GSF and GBF is to distribute net
investment income approximately every six months and net capital gains annually.
This policy is, however, subject to change at any time by each Fund's Board of
Directors.
GCF earns interest on its investments daily and distributes all of its net
investment income, increased or decreased by realized gains or losses, each day
GCF is open for business. Earnings for Saturdays, Sundays and holidays are paid
as a dividend on the next business day.
All dividends and distributions are credited in the form of additional
shares of GCF at net asset value on the payable date.
- ----------------------------------------
Note B -- Investment Advisory Agreements
- ----------------------------------------
and Payments to Related Parties Each Fund has an investment advisory agreement
with Guardian Investor Services Corporation (GISC), a wholly owned subsidiary of
GIAC. GISC receives a management fee from each Fund computed at the rate of .50%
of the daily average net assets during the fiscal year, payable quarterly. If
total expenses of any Fund (excluding taxes, interest and brokerage commissions,
but including the investment advisory fee) exceeds 1% per annum of the average
daily net assets of the Fund, GISC has agreed to assume any such expenses. None
of the Funds exceeded this limit during the six months ended June 30, 1996.
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 $4,600 for the six months
ended June 30, 1996.
- --------------------------------
Note C -- Repurchase Agreements
- --------------------------------
Collateral underlying repurchase agreements takes the form of either cash
or fully negotiable U.S. gov-
- --------------------------------------------------------------------------------
47
<PAGE>
- ------------------
The Guardian
Stock, Bond & Cash
- ------------------
4
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, The Guardian Bond Fund,
The Guardian Cash Fund
- --------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1996 (Unaudited)
ernment 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>
Six Months Ended June 30, 1996
------------------------------
GSF GBF
--- ---
<S> <C> <C>
Purchases
Stocks and debt obligations ......................................... $725,595,620 $160,895,108
U.S. Government and government agency obligations ................... -- 258,753,744
Proceeds
Stocks and debt obligations ......................................... $574,773,694 $120,681,916
U.S. Government and government agency obligations ................... -- 284,160,504
</TABLE>
The cost of investments owned at June 30, 1996 for federal income tax
purposes was $1,473,323,173, $401,664,235 and $379,771,000 for GSF, GBF and GCF,
respectively. The gross unrealized appreciation and depreciation at June 30,
1996 for GSF and GBF were as follows:
<TABLE>
<CAPTION>
GSF GBF
--- ---
<S> <C> <C>
Gross Appreciation .................................................. $408,278,879 $1,739,312
Gross Depreciation .................................................. (9,510,440) (10,573,844)
------------ -----------
Net Unrealized Appreciation/(Depreciation) ........................ $398,768,439 $(8,834,532)
============ ===========
</TABLE>
- --------------------------------------------------------------------------------
48
<PAGE>
------------------
The Guardian
Stock, Bond & Cash
------------------
4
------------------
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1996 (Unaudited)
---------------------------------------
Note E -- Transactions in Capital Stock
---------------------------------------
<TABLE>
<CAPTION>
The Guardian Stock Fund, Inc.
Six Months Ended Year Ended December 31,
June 30, 1996 (Unaudited) 1995 (Audited)
------------------------- -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 4,961,215 $ 181,397,287 9,643,546 $ 313,867,818
Shares issued to shareholders in reinvestment of
dividends from net investment income and
net realized gains: .......................... 2,089,423 76,619,156 2,609,964 90,100,478
----------- ------------- ----------- -------------
7,050,638 258,016,443 12,253,510 403,968,296
Less shares repurchased: ....................... (2,880,705) (104,844,577) (3,748,523) (121,123,785)
----------- ------------- ----------- -------------
NET INCREASE ................................ 4,169,933 $ 153,171,866 8,504,987 $ 282,844,511
=========== ============= =========== =============
<CAPTION>
The Guardian Bond Fund, Inc.
Six Months Ended Year Ended December 31,
June 30, 1996 (Unaudited) 1995 (Audited)
------------------------- -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 2,271,266 $ 27,365,088 5,626,400 $ 67,253,610
Shares issued to shareholders in reinvestment of
dividends from net investment income and
net realized gains: .......................... 778,762 9,033,641 1,809,816 22,025,063
----------- ------------- ----------- -------------
3,050,028 36,398,729 7,436,216 89,278,673
Less shares repurchased ........................ (3,173,461) (38,138,338) (4,756,442) (56,740,155)
----------- ------------- ----------- -------------
NET INCREASE/(DECREASE) ..................... (123,433) $ (1,739,609) 2,679,774 $ 32,538,518
=========== ============= =========== =============
<CAPTION>
The Guardian Cash Fund, Inc.
Six Months Ended Year Ended December 31,
June 30, 1996 (Unaudited) 1995 (Audited)
------------------------- -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 16,271,347 $ 162,713,468 23,010,954 $ 230,109,542
Shares issued to shareholders in reinvestment of
dividends from net investment income and
net realized gains: .......................... 877,324 8,773,237 1,974,775 19,747,755
----------- ------------- ----------- -------------
17,148,671 171,486,705 24,985,729 249,857,297
Less shares repurchased ........................ (15,101,473) (151,014,724) (28,002,304) (280,023,044)
----------- ------------- ----------- -------------
NET INCREASE /(DECREASE) .................... 2,047,198 $ 20,471,981 (3,016,575) $ (30,165,747)
=========== ============= =========== =============
</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 six months ended June 30, 1996, none of the Funds
borrowed against this line of credit.
- --------------------------------------------------------------------------------
49
<PAGE>
- -------------------
Baillie Gifford
International Fund
- -------------------
5
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
- ----------------------
COMMON STOCKS -- 94.2%
- ----------------------
Shares Value
- ----------------------------------------------------
ARGENTINA -- 0.5%
Energy -- 0.5%
288,602 Perez Companc SA $ 1,891,099
------------
AUSTRIA -- 0.5%
Business Services -- 0.3%
17,470 Flughafen Wein AG 1,200,354
Metals -- 0.2%
8,500 Boehler Uddeholm 659,068
------------
1,859,422
------------
AUSTRALIA -- 4.1%
Banks -- 0.7%
539,000 Australia & NZ Bank Group 2,549,925
Business Services -- 0.6%
154,700 Brambles Industries Ltd. 2,149,388
Forest Products -- 0.4%
215,929 Amcor Limited 1,467,808
Metals -- 0.5%
278,000 Western Mining Corp. Ltd. 1,988,055
Petroleum Services -- 0.9%
264,633 Broken Hill Property 3,653,911
Real Estate -- 0.5%
137,730 Lend Lease Corp. 2,110,597
Retail Trade -- 0.5%
830,067 Woolworths Limited 2,002,598
------------
15,922,282
------------
BELGIUM -- 1.3%
Banks -- 1.0%
11,050 Generale De Banque 3,892,026
Metals -- 0.3%
13,000 Union Miniere 1,009,217
------------
4,901,243
------------
BRAZIL -- 0.7%
Broadcasting -- 0.7%
36,000 Telecomunicacoes Brasileras 2,506,500
------------
CHILE -- 0.4%
Electric Utilities -- 0.4%
50,000 Enersis SA 1,550,000
------------
CZECHOSLOVAKIA -- 0.2%
Banks -- 0.2%
33,900 Komercni Banka AS 915,300
------------
FRANCE -- 4.7%
Banks -- 0.4%
14,890 Societe Generale 1,638,491
Conglomerates -- 0.5%
13,500 BIC 1,918,598
Construction Materials -- 0.4%
13,300 Poliet 1,424,741
Containers -- 0.4%
12,100 Cie De St Gobain 1,620,830
Gas Exploration -- 0.8%
41,000 Elf Aquitaine 3,017,847
Leisure Products -- 0.4%
16,866 Club Mediterranee 1,511,631
Retail Trade -- 1.8%
17,820 Castorama Dubois 3,513,003
25,120 Comptoirs Modernes 3,295,474
------------
17,940,615
------------
GERMANY -- 7.4%
Air Travel -- 0.9%
23,580 Lufthansa AG 3,334,232
Automobiles -- 1.0%
10,080 Volkswagen AG 3,748,925
Banks -- 1.3%
88,000 Bayer Hypo/Wech Bank 2,137,350
56,550 Deutsche Bank AG 2,677,803
Chemicals -- 1.9%
12,350 BASF AG 3,533,213
109,100 Hoechst AG 3,702,440
Drugs and Health Care -- 0.4%
2,280 GEHE AG 1,532,496
Footwear- 0.5%
25,650 Adidas AG 2,157,602
Industrial Machinery -- 0.8%
8,970 Mannesmann AG 3,103,071
Software -- 0.6%
16,900 SAP AG 2,506,380
------------
28,433,512
------------
HONG KONG -- 5.5%
Banks -- 0.7%
270,000 Hang Seng Bank 2,720,649
See notes to financial statements.
- --------------------------------------------------------------------------------
50
<PAGE>
-------------------
Baillie Gifford
International Fund
-------------------
5
-------------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------
Conglomerates -- 1.1%
421,000 Hutchison Whampoa $ 2,648,654
192,000 Swire Pacific 1,643,241
Publishing -- 0.8%
761,000 Citic Pacific Ltd. 3,077,111
Real Estate -- 2.1%
428,000 Henderson Land Development 3,206,904
916,220 Hong Kong Land Hldg. 2,061,495
288,000 Sun Hung Kai Properties 2,911,327
Telephone -- 0.8%
1,602,400 Hong Kong Telecomm. 2,877,397
------------
21,146,778
------------
HUNGARY -- 0.3%
Chemicals -- 0.3%
20,900 Richter Gedeon Veg 1,050,225
------------
IRELAND -- 0.4%
Construction Materials -- 0.4%
143,000 CRH 1,438,218
------------
ITALY -- 2.3%
Telephone -- 1.5%
1,310,000 Telecom Italia 2,818,906
1,325,000 Telecom Italia MOB 2,963,674
Textile-Apparel and Production -- 0.8%
46,300 Gucci Group NV 3,002,510
------------
8,785,090
------------
JAPAN -- 34.5%
Automobiles -- 2.3%
29,700 Autobacs Seven Co. 2,878,617
287,000 Calsonic Corp. 2,424,798
272,000 Suzuki Motor Corp. 3,581,402
Business Services -- 1.1%
62,000 Secom Co. 4,104,421
Computer System -- 1.7%
212 NTT Data Comm. System 6,358,158
Construction and Mining Equipment -- 1.1%
169,000 Nishimatsu Construction 1,854,341
84,000 Tostem Corp. 2,480,867
Drugs and Healthcare -- 1.1%
95,000 Sankyo Co. 2,466,968
72,000 Santen Pharmaceutical Co. 1,678,782
Electrical Equipment -- 2.3%
354,000 Hitachi 3,301,605
255,000 Omron Corp. 5,432,725
Electronics -- 2.7%
64,000 Kyocera Corp. 4,535,272
85,000 Rohm Co. 5,627,029
Financial Services -- 1.6%
133,000 Japan Securities Finance 2,152,517
83,400 Promise Co. 4,117,954
Industrial Machinery -- 4.0%
760,000 Mitsubishi Heavy Ind. 6,622,594
440,000 NSK 3,335,254
66,300 SMC Corp. 5,140,804
Insurance -- 1.4%
426,000 Tokio Marine and Fire 5,687,011
Investment Company -- 1.3%
259,000 Nomura Securities 5,067,983
Leisure Products -- 0.8%
16,500 Toho Co. 2,926,896
Metals-Steel -- 1.8%
292,000 Hitachi Metals 3,364,148
1,200,000 Sumitomo Metal Industries 3,686,737
Photography -- 2.9%
340,000 Canon, Inc. 7,088,191
129,000 Fuji Photo Film Co. 4,081,196
Real Estate -- 1.4%
393,000 Mitsubishi Estate 5,426,142
Retail Trade -- 3.8%
148,000 Jusco Co. 4,858,227
192,000 Marui Co. 4,266,081
594,000 Mitsui & Co. 5,393,334
Telephone -- 1.7%
735 DDI Corp. 6,424,907
Tires and Rubber -- 1.5%
304,000 Bridgestone Corp. 5,809,537
------------
132,174,498
------------
MALAYSIA -- 3.5%
Conglomerates -- 0.7%
1,992,000 Renong Berhad 3,178,256
Industrial Machinery -- 0.9%
463,000 United Engineers Berhad 3,211,024
See notes to financial statements.
- --------------------------------------------------------------------------------
51
<PAGE>
- -------------------
Baillie Gifford
International Fund
- -------------------
5
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
Shares Value
- ----------------------------------------------------
Leisure Products -- 0.9%
620,000 Resorts World Berhad $ 3,554,219
Telephone -- 1.0%
400,000 Telekom Malaysia 3,559,832
------------
13,503,331
------------
MEXICO -- 0.8%
Food and Beverages -- 0.5%
44,500 Pan American Beverage 1,991,375
Telephone -- 0.3%
29,500 Telefonos De Mexico SA 988,250
------------
2,979,625
------------
NETHERLANDS -- 3.0%
Banks -- 0.9%
66,200 ABN Amro Holdings NV 3,555,509
Broadcasting -- 0.6%
18,500 Wolters Kluwer NV 2,103,283
Publishing -- 1.0%
250,000 Ver Ned Uitgevers 3,884,491
Support Services -- 0.5%
49,800 ASM Lithography Hldg. 2,058,575
------------
11,601,858
------------
NEW ZEALAND -- 0.7%
Telephone -- 0.7%
622,000 Telecom Corp of N.Z. 2,618,947
------------
POLAND -- 0.4%
Electric Utilities -- 0.4%
175,000 Elektrim 1,436,274
------------
SINGAPORE -- 2.5%
Air Travel -- 0.5%
195,000 Singapore Airlines 2,059,178
Banks -- 0.6%
195,066 Overseas Chinese Bank 2,138,552
Food and Beverage -- 0.4%
166,800 Fraser & Neave 1,725,924
Industrial Machinery -- 0.5%
215,000 Keppel Corp. 1,798,016
Publishing -- 0.5%
96,000 Singapore Press HD 1,884,621
------------
9,606,291
------------
SPAIN -- 1.3%
Banks -- 0.8%
65,000 Banco Santander SA 3,036,600
Construction Material -- 0.5%
73,600 Continente Cent Co. 1,747,932
------------
4,784,532
------------
SWEDEN -- 2.0%
Business Services -- 0.6%
107,000 Securitas AB 2,246,643
Construction and Mining Equipment -- 1.4%
155,000 Atlas Copco AB 2,891,573
50,500 Incentive AB 2,704,227
------------
7,842,443
------------
SWITZERLAND -- 5.2%
Business Services -- 0.3%
1,000 Danzas Holding 1,047,832
Chemicals -- 1.7%
5,460 Ciba Geigy AG 6,660,134
Drugs and Healthcare -- 1.8%
6,020 Sandoz AG 6,890,594
Industrial Machinery -- 0.3%
645 Bobst AG 931,231
Insurance -- 1.1%
7,080 Winterthur 4,219,005
------------
19,748,796
------------
TAIWAN -- 0.6%
Building Construction -- 0.3%
338,000 China Development 1,117,660
Plastics -- 0.1%
257,000 Nan Ya Plastic 564,989
Shipbuilding -- 0.2%
388,000 Yang Ming Marine 572,413
------------
2,255,062
------------
UNITED KINGDOM -- 11.4%
Banks -- 0.5%
190,500 National Westminster Bank PLC 1,816,540
Business Services -- 0.8%
130,000 Associated British Ports 559,248
223,000 BAA 1,615,616
120,000 De La Rue 1,108,868
See notes to financial statements.
- --------------------------------------------------------------------------------
52
<PAGE>
-------------------
Baillie Gifford
International Fund
-------------------
5
-------------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------
Building Construction -- 0.3%
120,000 Fine Arts Development $ 969,095
Chemicals -- 0.2%
245,000 Allbright & Wilson 677,279
Conglomerates -- 2.0%
602,658 BTR 2,334,942
276,000 Grand Metropolitan 1,830,284
472,000 Hanson 1,319,460
75,000 Hays 528,809
116,000 Siebe 1,648,392
Construction and Mining Equipment -- 0.2%
170,000 Weir Group 654,760
Drugs and Healthcare -- 0.7%
214,000 Glaxo Wellcome 2,881,472
Electric Utilities -- 0.3%
85,666 Yorkshire Electric Group 961,897
Electronics -- 0.6%
140,000 Eletrocomponents 829,477
340,000 Rotork 1,304,240
Food, Beverage and Tobacco -- 0.9%
190,000 Devro International 711,135
140,000 Highland Distilleries 800,124
270,000 Iceland Group 647,849
128,000 Reckitt & Colman 1,345,799
Household Products -- 0.1%
220,000 Life Sciences International 358,751
Industrial Machinery -- 0.1%
42,000 Vosper Thorncroft 531,604
Insurance -- 0.6%
70,000 Britannic Assurance 781,643
274,000 Prudential Corp. 1,727,660
Leisure Products -- 0.7%
157,000 Granada Group 2,100,567
80,000 Vendome Lux Group SA 742,973
Newspaper -- 0.4%
250,000 Mirror Group PLC 790,107
155,000 Southnews PLC 853,354
Oil International -- 0.8%
333,000 British Petroleum 2,921,960
Retail Grocery -- 0.4%
271,000 Sainsbury (J) 1,595,108
Retail Trade -- 1.0%
251,000 Dixons Group 2,054,310
256,000 Marks & Spencer 1,870,601
Telephone -- 0.5%
477,000 Vodafone Group 1,774,212
Transportation -- 0.3%
400,000 Firstbus 993,943
------------
43,642,079
------------
TOTAL COMMON STOCKS
(Cost $303,609,050) 360,534,020
------------
- -----------------------
PREFERRED STOCK -- 0.4%
- -----------------------
Shares Value
- ----------------------------------------------------
54,567 Companhia Energetica De Minas $ 1,548,339
------------
TOTAL PREFERRED STOCKS
(Cost $1,442,790) 1,548,339
------------
- -------------------------
CONVERTIBLE BONDS -- 0.7%
- -------------------------
Principal
Amount Value
- ----------------------------------------------------
$2,400,000 MBL Int'l Finance Exch. Gtd.
Notes, 3% due 11/30/02 $ 2,808,000
------------
TOTAL CONVERTIBLE BONDS
(Cost $2,400,000) 2,808,000
------------
- ----------------------------
REPURCHASE AGREEMENT -- 3.7%
- ----------------------------
Principal
Amount Maturity Date Value
- ----------------------------------------------------
$14,040,000 State Street Bank
& Trust repurchase
agreement, dated
6/28/96, maturity
value $14,045,556
at 4.75% due 7/1/96
(collateralized
by $14,695,000 U.S.
Treasury Bills,
5.42% due 12/19/96) 7/1/96 $ 14,040,000
------------
See notes to financial statements.
- --------------------------------------------------------------------------------
53
<PAGE>
- -------------------
Baillie Gifford
International Fund
- -------------------
5
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
Principal
Amount Value
- ----------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $14,040,000) $ 14,040,000
------------
TOTAL INVESTMENTS -- 99.0%
(Cost $321,491,840) 378,930,359
------------
CASH, RECEIVABLES AND
OTHER ASSETS LESS
PAYABLES -- 1.0% 3,876,416
------------
NET ASSETS -- 100.0% $382,806,775
============
See notes to financial statements.
- --------------------------------------------------------------------------------
54
<PAGE>
-------------------
Baillie Gifford
International Fund
-------------------
5
-------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $321,491,840
============
Investments, at market $364,890,359
Repurchase agreements 14,040,000
------------
TOTAL INVESTMENTS 378,930,359
Cash 2,664
Foreign currency (Cost $4,635,520) 4,646,234
Dividends receivable 798,470
Foreign tax receivable 680,342
Receivable for fund shares sold 183,664
Interest receivable 11,758
Receivable for open forward
foreign currency sold 886
Other assets 1,486
------------
TOTAL ASSETS 385,255,863
------------
LIABILITIES:
Payable for securities purchased 1,284,522
Payable for fund shares redeemed 31,085
Accrued expenses 116,890
Foreign tax withholding 99,966
Capital Gains Tax Payable --
Due to affiliates -- Note 2 916,625
------------
TOTAL LIABILITIES 2,449,088
------------
NET ASSETS $382,806,775
============
COMPONENTS OF NET ASSETS
Capital stock -- $0.10 par value
(1,000,000,000 shares authorized) $ 2,289,781
Paid-in capital 317,903,736
Undistributed net investment income 2,375,317
Accumulated net realized gain on investments
and foreign currency related transactions 2,785,822
Net unrealized appreciation of investments
and translation of assets and liabilities in
foreign currency 57,452,119
------------
NET ASSETS $382,806,775
============
Shares outstanding -- $0.10 par value 22,897,807
------------
NET ASSET VALUE PER SHARE $ 16.72
============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
For the Six Months Ended
June 30, 1996 (Unaudited)
INVESTMENT INCOME
Income:
Dividends $ 4,643,760
Interest 299,544
------------
4,943,304
Less: Foreign tax withheld 563,019
------------
Total Income 4,380,285
------------
Expenses:
Investment advisory fees -- Note 2 1,403,497
Custodian fees 294,828
Printing expense 15,766
Audit fees 10,500
Registration fees 6,123
Directors fees -- Note 2 4,600
Legal fees 2,126
Transfer agent fees 1,650
Insurance expense 1,471
Deferred organization expense -- Note 6 814
Other 352
------------
Total Expenses 1,741,727
------------
Net Investment Income 2,638,558
------------
Realized and Unrealized Gain/(Loss) On
Investments and Currencies -- Note 4
Net realized gain/(loss) on investments -- Note 1 2,128,986
Net realized gain/(loss) on foreign currency
related transactions -- Note 1 2,150,700
Net change in unrealized appreciation of
investments -- Note 4 26,042,045
Net change in unrealized appreciation from
translation of assets and liabilities in
foreign currencies -- Note 4 (592,134)
------------
Net Realized and Unrealized Gain on
Investments and Foreign Currencies 29,729,597
------------
Net Increase in Net Assets
Resulting from Operations $ 32,368,155
============
See notes to financial statements.
- --------------------------------------------------------------------------------
55
<PAGE>
- -------------------
Baillie Gifford
International Fund
- -------------------
5
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Year Ended
Ended December 31,
June 30, 1996 1995
(Unaudited) (Audited)
----------- -----------
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 2,638,558 $ 2,934,813
Net realized gain/(loss) on
investments and foreign currency
related transactions 4,279,686 17,921,236
Net change in unrealized appreciation
on investments and translation of
assets and liabilities in foreign
currencies 25,449,911 11,642,633
------------- -------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations 32,368,155 32,498,682
------------- -------------
Distributions to Shareholders:
Dividends from net investment income (715,896) (2,934,813)
Distributions in excess of net investment
income -- (2,291,355)
Net realized gains from investments (2,432,411) (13,499,965)
------------- -------------
Total Distribution to Shareholders (3,148,307) (18,726,133)
------------- -------------
From Transaction in Shares:
Increase/(decrease) in net assets from
capital share transactions-- Note F 36,300,057 464,452
------------- -------------
Net Increase/(Decrease) in Net Assets 65,519,905 14,237,001
Net Assets:
Beginning of period 317,286,870 303,049,869
------------- -------------
End of period $ 382,806,775 $ 317,286,870
============= =============
* Includes (overdistributed)/undistributed
net investment income of: $ 2,375,317 $ (263,641)
See notes to financial statements.
- --------------------------------------------------------------------------------
56
<PAGE>
-------------------
Baillie Gifford
International Fund
-------------------
5
-------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
June 30, 1996 (unaudited)
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months February 8,
Ended 1991** to
June 30, Year Ended December 31, December 31,
1996 1994 1993 1991
(Unaudited) 1995 (Audited) 1992 (Audited)
--------- -------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 15.37 $ 14.69 $ 14.69 $ 11.16 $ 12.37 $ 10.00
-------- -------- -------- -------- -------- --------
Income from Investment Operations
Net investment income ...................... 0.15 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 ..... 1.34 1.49 (0.02) 3.54 (1.20) 2.52
-------- -------- -------- -------- -------- --------
Net increase/(decrease) from investment
operations ................................ 1.49 1.65 0.13 3.77 (1.11) 2.56
-------- -------- -------- -------- -------- --------
Distributions to Shareholders
Dividends from net investment income ....... (0.03) (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 .............................. (0.11) (0.70) -- -- -- (0.15)
-------- -------- -------- -------- -------- --------
Total distributions ........................ (0.14) (0.97) (0.13) (0.24) (0.10) (0.19)
-------- -------- -------- -------- -------- --------
Net asset value, end of period .................. $ 16.72 $ 15.37 $ 14.69 $ 14.69 $ 11.16 $ 12.37
======== ======== ======== ======== ======== ========
Total return+ ................................... 9.75% 11.23% 0.87% 34.04% (8.90%) 8.56%
======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000's omitted) .. $382,807 $317,287 $303,050 $186,795 $55,175 $36,012
Ratio of expenses to average net assets .... 0.99%*** 0.99% 1.03% 1.11% 1.26% 1.67%*
Ratio of net investment income to average
net assets ................................ 1.50%*** 0.97% 1.11% 1.75% 0.88% 0.61%*
Portfolio turnover ratio ................... 23% 52% 27% 18% 44% 14%
- ----------
* Ratios are annualized.
** Commencement of operations.
*** Annualized.
+ 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.
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
57
<PAGE>
- ---------------
GBG Funds
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- ----------------------------------------------
Note A -- Organization and Accounting Policies
- ----------------------------------------------
GBG Funds, Inc. (the Company) is a diversified open-end management
investment company registered under the Investment Company Act of 1940, as
amended (1940 Act). The Company, which was incorporated in Maryland on October
29, 1990, was formerly known as Baillie Gifford International Fund, Inc. Shares
of the Company are offered in two series: Baillie Gifford International Fund
(BGIF) and Baillie Gifford Emerging Markets Fund (BGEMF). The series are
collectively referred to herein as the "Funds." Shares of the Funds are only
sold to certain separate accounts of The Guardian Insurance and Annuity Company,
Inc. (GIAC). GIAC is a wholly owned subsidiary of The Guardian Life Insurance
Company of America. The Funds are available for investment only through the
allocation of contract values under certain variable annuity and variable life
insurance contracts issued by GIAC. Upon commencing its operations on September
13, 1994, BGEMF sold 2,000,000 shares of its capital stock to The Guardian Life
Insurance Company of America for $20,000,000 to facilitate the commencement of
operations.
Valuation of Investments
Investments are carried at value. Securities listed on foreign exchanges
and for which market quotations are readily available are valued at the closing
price on the exchange on which the securities are traded at the close of the
appropriate exchange or, if there have been no sales during the day, at the mean
of the closing bid and asked prices. Securities traded in the over-the-counter
market are valued at the mean between the bid and asked prices. Securities
listed or traded on any domestic (U.S.) exchanges are valued at the last sale
price or, if there have been no sales during the day, at the mean of the closing
bid and asked prices. Securities for which market quotations are not readily
available, including restricted securities and illiquid assets, are valued at
fair value as determined in good faith by or under the direction of the
Company's Board of Directors. Investing outside of the U.S. may involve certain
considerations and risks not typically associated with domestic investments
including: the possibility of political and economic unrest and different levels
of governmental supervision and regulation of foreign securities markets.
Repurchase agreements are carried at cost which approximates market value
(See note E).
Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars as
follows:
(1) The foreign currency market value of investment securities and other
assets and liabilities stated in foreign currencies are translated into U.S.
dollars at the current rate of exchange.
(2) Purchases, sales, income and expenses are translated at the rate of
exchange prevailing on the respective dates of such transactions.
The resulting gains and losses are included in the Statement of Operations.
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
- --------------------------------------------------------------------------------
58
<PAGE>
---------------
GBG Funds
---------------
5
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
loss on foreign currency related transactions. Net currency gains and losses
from valuing investments and other assets and liabilities denominated in foreign
currency at the period end exchange rate are reflected in net change in
unrealized appreciation or depreciation on foreign currency related
transactions. Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts in connection
with planned purchases or sales of securities, or to hedge against changes in
currency exchange rates affecting the values of securities denominated in a
particular currency. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Fluctuations in the value of forward foreign currency exchange contracts
are recorded for book purposes as unrealized gains or losses on foreign currency
related transactions by the Funds. When forward contracts are closed, the Funds
record realized gains or losses equal to the differences between the values of
such forward contracts at the time each was opened and the value at the time
each was closed. Such amounts are recorded in net realized gain or loss on
foreign currency related transactions. Neither Fund will enter into a forward
foreign currency contract if such contract would obligate the Fund to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency.
Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Net realized gains
or losses on sales of investments are determined on the basis of identified
cost. Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
Taxes
Each Fund intends to 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.
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
capital gains once a year. This policy is, however, subject to change at any
time by the Company's Board of Directors.
- --------------------------------------------------------------------------------
59
<PAGE>
- ---------------
GBG Funds
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
Reclassifications of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gain; and the recharacterization of foreign exchange gains
or losses to either ordinary income or realized capital gains for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations, or net asset value per
share of the Fund.
- -------------------------------------------
Note 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 $4,600, for
the six months ended June 30, 1996.
- -------------------------------------------
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.
- --------------------------------------------------------------------------------
60
<PAGE>
---------------
GBG Funds
---------------
5
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- ---------------------------------
Note D -- Investment Transactions
- ---------------------------------
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
For the Six Months Ended June 30, 1996 (unaudited)
--------------------------------------------------
BGIF BGEMF
---- -----
Purchases
Stocks and debt obligations .... $95,467,646 $ 23,315,928
Proceeds
Stocks and debt obligations .... $59,010,545 $ 10,295,172
The cost of investments owned at June 30, 1996 for federal income tax
purposes for BGIF and BGEMF are $321,491,840 and $50,374,179, respectively. The
gross unrealized appreciation and (depreciation) at June 30, 1996 were as
follows:
BGIF BGEMF
---- -----
Gross Appreciation ................ $ 63,496,452 $ 8,318,770
Gross Depreciation ................ (6,057,933) (2,535,162)
------------ ------------
Net Unrealized Appreciation $ 57,438,519 $ 5,783,608
============ ============
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.
- --------------------------------------------------------------------------------
61
<PAGE>
- ---------------
GBG Funds
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
At June 30, 1996, BGIF and BGEMF had open forward foreign currency
contracts, as listed below, with net unrealized gain of $886 and $(12,312),
respectively, which are 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>
690,000,000 Italian Lira Purchase 07/03/96 $450,001 $450,612 $ 611
2,460,000 Swedish Krona Purchase 07/01/96 371,321 371,596 275
--------
$ 886
========
<CAPTION>
Baillie Gifford Emerging Markets Fund:
Type of Expiration Current Unrealized
Currency Contract Date Cost Value Depreciation
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,870,734 Hungarian Forint Sell 07/02/96 $12,460 $ 151 $(12,309)
126,775 Taiwan Dollar Sell 07/02/96 4,607 4,605 (3)
--------
$(12,312)
========
</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.
- --------------------------------------------------------------------------------
62
<PAGE>
---------------
GBG Funds
---------------
5
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- ---------------------------------------
Note F -- Transactions in Capital Stock
- ---------------------------------------
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Baillie Gifford International Fund:
Six Months Ended June 30, Year Ended December 31,
---------------------------- ----------------------------
1996 (Unaudited) 1995 (Audited)
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ............................... 3,631,822 $ 58,288,522 4,880,975 $ 72,367,583
Shares issued in reinvestments of dividends
from net investment income and
net realized gain on sales of investments 188,565 3,149,037 1,223,131 18,726,133
------------ ------------ ------------ ------------
3,820,387 61,437,559 6,104,106 91,093,716
Less shares repurchased ................... (1,570,209) (25,137,502) (6,081,659) (90,629,264)
------------ ------------ ------------ ------------
NET INCREASE .............................. 2,250,178 $ 36,300,057 22,447 $ 464,452
============ ============ ============ ============
Baillie Gifford Emerging Markets Fund:
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
---------------------------- ----------------------------
1996 (Unaudited) 1995 (Audited)
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ............................... 2,577,453 $ 24,191,935 1,755,017 $ 14,439,213
Shares issued in reinvestments of dividends
from net investment income and
net realized gain on sales of investments -- -- 78,437 661,226
------------ ------------ ------------ ------------
2,577,453 24,191,935 1,833,454 15,100,439
Less shares repurchased ................... (938,752) (9,040,279) (564,171) (4,724,011)
------------ ------------ ------------ ------------
NET INCREASE .............................. 1,638,701 15,151,656 1,269,283 $ 10,376,428
============ ============ ============ ============
</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 six months ended June 30, 1996, neither of the Funds borrowed against
this line of credit.
- --------------------------------------------------------------------------------
63
<PAGE>
- ----------------------
Value Line Centurion
Fund, Inc.
- ----------------------
6
- ----------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
-------------------------------
COMMON STOCKS -- 96.9%
-------------------------------
Shares Value
- --------------------------------------------------------------------------------
Advertising -- 1.8%
230,000 Omnicom Group, Inc. $10,695,000
-----------
Air Transport -- 3.0%
100,000 AMR Corp.* 9,100,000
310,000 Southwest Airlines Co. 9,028,750
-----------
18,128,750
-----------
Beverage-Soft Drink -- 3.8%
200,000 Coca-Cola Co. 9,775,000
376,000 PepsiCo Inc. 13,301,000
-----------
23,076,000
-----------
Building Materials -- 1.6%
150,000 Fluor Corp. 9,806,250
-----------
Chemical-Diversified -- 4.2%
140,000 Goodrich (B.F.) Co. 5,232,500
360,000 IMC Global Inc. 13,545,000
150,000 Millipore Corp. 6,281,250
-----------
25,058,750
-----------
Chemical-Specialty -- 1.3%
178,750 Praxair, Inc. 7,552,188
-----------
Computer & Peripherals -- 13.6%
200,000 Cabletron Systems, Inc.* 13,725,000
300,000 Cisco Systems, Inc.* 16,987,500
200,000 Dell Computer Corp.* 10,175,000
200,000 Digital Equipment Corp.* 9,000,000
100,000 Hewlett-Packard Co. 9,962,500
155,000 Sun Microsystems, Inc.* 9,125,625
275,000 3Com Corp.* 12,581,250
-----------
81,556,875
-----------
Computer Software & Services -- 8.8%
150,000 BMC Software, Inc.* 8,962,500
165,000 Computer Associates
International, Inc. 11,756,250
100,000 Microsoft Corp.* 12,012,500
300,000 Oracle Systems Corp.* 11,831,250
190,000 Parametric Technology Corp.* 8,241,250
-----------
52,803,750
-----------
Diversified Companies -- 1.3%
189,000 Thermo Electron Corp.* 7,867,125
-----------
Drug -- 8.3%
300,000 ALZA Corp.* 8,212,500
120,000 Amgen Inc.* 6,480,000
150,000 Genzyme Corp.* 7,537,500
225,000 Merck & Co., Inc. 14,540,625
178,000 Pfizer, Inc. 12,704,750
-----------
49,475,375
-----------
Financial Services -- 3.7%
250,000 Green Tree Financial Corp. 7,812,500
356,800 Money Store, Inc. (The) 7,894,200
142,500 Travelers Group Inc. 6,501,562
-----------
22,208,262
-----------
Hotel/Gaming -- 1.8%
200,000 Mirage Resorts, Inc.* 10,800,000
-----------
Insurance-Diversified -- 1.9%
113,500 American International
Group, Inc. 11,193,937
-----------
Machinery-Construction & Mining -- 1.9%
285,000 Deere & Co. 11,400,000
-----------
Manufactured Housing/Recreational
Vehicles -- 1.7%
500,000 Oakwood Homes Corp. 10,312,500
-----------
Medical Services -- 3.2%
310,000 Omnicare, Inc. 8,215,000
220,000 United Healthcare Corp. 11,110,000
-----------
19,325,000
Medical Supplies -- 5.2%
150,000 Boston Scientific Corp.* 6,750,000
200,000 Cardinal Health, Inc. 14,425,000
200,000 Johnson & Johnson 9,900,000
-----------
31,075,000
Office Equipment & Supplies -- 1.5%
472,500 Staples, Inc.* 9,213,750
-----------
Oilfield Services/Equipment -- 3.6%
200,000 Baker Hughes Inc. 6,575,000
300,000 Sonat Offshore Drilling, Inc. 15,150,000
-----------
21,725,000
Petroleum-Producing -- 1.1%
110,000 Louisiana Land & Exploration
Co. 6,338,750
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
64
<PAGE>
----------------------
Value Line Centurion
Fund, Inc.
----------------------
6
----------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Restaurant -- 2.8%
360,000 McDonald's Corp. $16,830,000
-----------
Retail Building Supply -- 2.3%
250,000 Home Depot, Inc. (The) 13,500,000
-----------
Retail-Special Lines -- 1.9%
178,700 AutoZone, Inc.* 6,209,825
160,000 CompUSA, Inc.* 5,460,000
-----------
11,669,825
-----------
Retail Store -- 1.1%
300,000 Price/Costco, Inc.* 6,487,500
-----------
Semiconductor -- 1.0%
85,000 Intel Corp. 6,242,188
-----------
Shoe -- 3.9%
225,000 NIKE, Inc. Class "B" 23,118,750
-----------
Telecommunications Equipment -- 4.4%
125,000 ADC Telecommunications, Inc.* 5,625,000
200,000 Newbridge Networks Corp.* 13,100,000
115,000 Tellabs, Inc..* 7,690,625
-----------
26,415,625
-----------
Telecommunication Services-- 1.4%
150,000 WorldCom, Inc.* 8,306,250
-----------
Tobacco -- 2.3%
130,000 Philip Morris Companies, Inc. 13,520,000
-----------
Toiletries/Cosmetics -- 1.0%
100,000 Gillette Co. 6,237,500
-----------
Toys & School Supplies -- 1.5%
320,000 Mattel, Inc. 9,160,000
-----------
TOTAL COMMON STOCKS AND
TOTAL INVESTMENT
SECURITIES -- 96.9%
(Cost $477,459,474) 581,099,900
-----------
-------------------------------
SHORT-TERM INVESTMENTS -- 3.8%
-------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 2.6%
$15,482,000 Federal Home Loan Mortgage
Discount Notes 5.270%,
due 7/15/96 $ 15,450,271
------------
REPURCHASE AGREEMENT -- 1.2%
(including accrued interest)
7,600,000 Collateralized by $5,995,000 U.S.
Treasury Notes 11 1/8%, due 8/15/03,
with a value of $7,739,273 (with
Morgan Stanley & Co., Inc. 5.30%,
dated 6/28/96, due 7/1/96, delivery
value $7,603,357) 7,603,357
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $23,053,628) 23,053,628
============
EXCESS OF LIABILITIES OVER
CASH AND OTHER ASSETS -- (-0.7%) (4,170,019)
============
NET ASSETS -- 100.0% $599,983,509
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($599,983,509 / 22,105,468
shares outstanding) $ 27.14
============
* Non-income producing
See notes to financial statements.
- --------------------------------------------------------------------------------
65
<PAGE>
- ----------------------
Value Line Centurion
Fund, Inc.
- ----------------------
6
- ----------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (unaudited)
ASSETS:
Investment securities, at value
(cost $477,459,474) $581,099,900
Short-term investments (cost $23,053,628) 23,053,628
Cash 66,149
Receivable for capital shares sold 540,532
Dividends receivable 487,250
------------
TOTAL ASSETS 605,247,459
------------
LIABILITIES:
Payable for securities purchased 4,867,582
Payable for capital shares repurchased 1,819
Accrued expenses:
Advisory fee 245,506
GIAC administrative service fee 110,000
Other 39,043
------------
TOTAL LIABILITIES 5,263,950
------------
NET ASSETS $599,983,509
============
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value
(authorized 50,000,000 shares, outstanding
22,105,468 shares) $ 22,105,468
Additional paid-in capital 332,532,441
Undistributed investment income -- net 3,652,891
Undistributed net realized gain on investments 138,052,283
Unrealized net appreciation of investments 103,640,426
------------
NET ASSETS $599,983,509
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($599,983,509 / 22,105,468
shares outstanding) $ 27.14
============
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1996 (unaudited)
Investment Income:
Dividends (Net of foreign withholding tax
of $3,406) $ 2,032,037
Interest 733,981
------------
Total Income 2,766,018
------------
Expenses
Investment advisory fee 1,396,323
GIAC administrative service fee 217,060
Custodian fees 31,902
Auditing and legal fees 26,771
Insurance and dues 17,704
Registration fees 8,069
Directors' fees and expenses 6,020
Other 2,579
------------
Total Expenses Before Expense Offset 1,706,428
Less:Expense Offset (2,047)
------------
Net Expenses 1,704,381
------------
Investment Income -- Net 1,061,637
------------
Realized and Unrealized Gain (Loss) on
Investments -- Net:
Realized gain -- net 70,976,562
Change in unrealized appreciation (9,589,996)
------------
Net Realized Gain and Change in Unrealized
Appreciation on Investments 61,386,566
------------
Net Increase in Net Assets from Operations $ 62,448,203
============
See notes to financial statements.
- --------------------------------------------------------------------------------
66
<PAGE>
----------------------
Value Line Centurion
Fund, Inc.
----------------------
6
----------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 (unaudited)
and for the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Six Months
Ended Year
June 30, Ended
1996 December 31,
(Unaudited) 1995
------------- -------------
<S> <C> <C>
Operations:
Investment income-- net $ 1,061,637 $ 2,660,286
Realized gain on investments-- net 70,976,562 67,311,482
Change in unrealized appreciation (9,589,996) 73,727,354
------------- -------------
Net increase in net assets from operations 62,448,203 143,699,122
------------- -------------
Distributions to Shareholder:
Investment income-- net -- (2,021,495)
Realized gain from investment transactions-- net -- (11,320,362)
------------- -------------
Total distributions -- (13,341,857)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares 68,507,614 112,731,860
Proceeds from reinvestment of distributions to shareholder -- 13,341,857
Cost of shares repurchased (56,421,283) (83,726,969)
------------- -------------
Increase from capital share transactions 12,086,331 42,346,748
------------- -------------
Total Increase in Net Assets 74,534,534 172,704,013
Net Assets:
Beginning of period 525,448,975 352,744,962
------------- -------------
End of period $ 599,983,509 $ 525,448,975
============= =============
Undistributed Investment Income-- Net At End Of Period $ 3,652,891 $ 2,591,254
============= =============
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
67
<PAGE>
- ----------------------
Value Line Centurion
Fund, Inc.
- ----------------------
6
- ----------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
------------------------------------
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 distri-
- --------------------------------------------------------------------------------
68
<PAGE>
----------------------
Value Line Centurion
Fund, Inc.
----------------------
6
----------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
butions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. All dividends or
distributions will be payable in shares of the Fund at the net asset value on
the ex-dividend date. This policy is, however, subject to change at any time by
the Board of Directors.
(E) Amortization.
Discounts on debt securities are amortized to interest income over the life
of the security with a corresponding increase to the security's cost basis;
premiums on debt securities are not amortized.
(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:
Six Months Ended
June 30, 1996 Year Ended
(unaudited) Dec. 31,1995
---------- ----------
Shares sold 2,644,999 5,179,470
Shares issued in reinvestment
of dividends and distributions -- 604,799
---------- ----------
2,644,999 5,784,269
Shares repurchased 2,211,638 3,901,173
---------- ----------
Net increase 433,361 1,883,096
========== ==========
Dividends per share $ -- $ .10
========== ==========
Distributions per share from
net realized gains $ -- $ .56
========== ==========
On June 27, 1996, the Board of Directors declared an income dividend of
$2,591,254, a short-term capital gain of $24,678,779 and a long-term capital
gain of $42,396,942 (approximately $0.12, $1.14, and $1.95 per share
respectively) to shareholders of record 7/29/96 payable 7/30/96.
--------------------------------------
3 -- Purchases and Sales of Securities
--------------------------------------
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
Six Months Ended
June 30, 1996
(unaudited)
---------------
PURCHASES:
Investment Securities $371,817,657
============
SALES:
Investment Securities $364,821,150
============
- --------------------------------------------------------------------------------
69
<PAGE>
- ----------------------
Value Line Centurion
Fund, Inc.
- ----------------------
6
- ----------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
At June 30, 1996, the aggregate cost of investment securities and short-term
investments for federal income tax purposes is $500,513,102. The aggregate
appreciation and depreciation of investments for the six months ended June 30,
1996, based on a comparison of investment values and their costs for federal
income tax purposes is $114,981,603 and $11,341,177 respectively, resulting in a
net appreciation of $103,640,426.
-----------------------------------------------------------------------------
4 -- Investment Advisory Contract, Management Fees and Transactions with
Interested Parties
-----------------------------------------------------------------------------
An advisory fee of $1,396,323 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the six months ended June 30, 1996.
This was computed at the rate of 1/2 of 1% of the average daily net assets of
the Fund during the period and paid monthly. The Adviser provides research,
investment programs, supervision of the investment portfolio and pays costs of
administrative services, office space, equipment and compensation of
administrative, bookkeeping, and clerical personnel necessary for managing the
affairs of the Fund. The Adviser also provides persons, satisfactory to the
Fund's Board of Directors, to act as officers and employees of the Fund and pays
their salaries and wages. The Fund bears all other costs and expenses. In
addition, the Adviser has agreed to reimburse the Fund for expenses (exclusive
of interest, taxes and brokerage expenses) which in any year exceeds 2.5% of the
first $30 million of the average daily net assets, 2% of the next $70 million
and 1.5% of the remaining average daily net assets. No such reimbursement was
required for the six months ended June 30, 1996.
Certain officers and directors of the Adviser and Value Line Securities,
Inc., (the Fund's distributor and a registered broker/dealer) and of GIAC are
also officers and directors of the Fund. A former officer of GIAC who is also a
director of the Fund was paid a fee of $1,183 for the six months ended June 30,
1996. During the six months ended June 30, 1996, the Fund paid brokerage
commissions totalling $433,439 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 six months ended June 30, 1996, the Fund
incurred expenses of $217,060 in connection with such services rendered by GIAC.
- --------------------------------------------------------------------------------
70
<PAGE>
----------------------
Value Line Centurion
Fund, Inc.
----------------------
6
----------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1996 -------------------------------------------------------
(unaudited) 1995 1994 1993 1992 1991
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.25 $ 17.83 $ 18.52 $ 20.04 $ 20.83 $ 15.04
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income .05 .12 .10 .12 .20 .20
Net gains or losses on securities (both realized
and unrealized) 2.84 6.96 (.51) 1.73 1.03 7.65
-------- -------- -------- -------- -------- --------
Total from investment operations 2.89 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 period $ 27.14 $ 24.25 $ 17.83 $ 18.52 $ 20.04 $ 20.83
======== ======== ======== ======== ======== ========
Total return 11.92%+ 40.08% -2.21% 9.21% 5.93% 52.18%
======== ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $599,984 $525,449 $352,745 $373,910 $347,116 $306,589
Ratio of operating expenses to average
net assets .61%* .62% .61% .61% .54% .53%
Ratio of net investment income to average
net assets .38%* .60% .57% .57% .99% 1.19%
Portfolio turnover rate 68%+ 114% 122% 118% 83% 81%
+ Not annualized.
* Annualized.
</TABLE>
See notes to financial statements.
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SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
----------------------
COMMON STOCKS -- 50.4%
----------------------
Shares Value
- --------------------------------------------------------------------------------
Advertising -- 0.7%
158,000 Omnicom Group, Inc. $ 7,347,000
-----------
Aerospace/Defense -- 1.0%
214,000 McDonnell Douglas Corp. 10,379,000
-----------
Apparel -- 0.4%
110,000 Liz Claiborne, Inc. 3,808,750
-----------
Bank -- 0.5%
50,000 Mellon Bank Corp. 2,850,000
78,000 SouthTrust Corp. 2,193,750
-----------
5,043,750
-----------
Bank-Midwest -- 0.5%
90,000 First Bank System, Inc. 5,220,000
-----------
Beverage-Soft Drink -- 1.0%
112,000 Coca-Cola Enterprises Inc. 3,878,000
180,000 PepsiCo, Inc. 6,367,500
-----------
10,245,500
-----------
Broadcasting/Cable TV -- 0.4%
38,000 Infinity Broadcasting Corp.* 1,140,000
100,000 Jacor Communications, Inc.* 3,087,500
-----------
4,227,500
-----------
Building Materials -- 0.3%
40,600 Fluor Corp. 2,654,225
-----------
Chemical-Specialty -- 1.7%
230,000 Praxair, Inc. 9,717,500
53,000 Raychem Corp. 3,809,375
60,000 Sigma-Aldrich Corp. 3,210,000
-----------
16,736,875
-----------
Computer & Peripherals -- 1.2%
20,000 Adaptec, Inc.* 947,500
74,500 Cabletron Systems, Inc.* 5,112,563
42,500 In Focus Systems, Inc.* 1,030,625
56,000 Mylex Corp.* 994,000
60,000 Sun Microsystems, Inc.* 3,532,500
-----------
11,617,188
-----------
Computer Software & Services-- 1.8%
34,000 BMC Software, Inc.* 2,031,500
54,000 Ceridian Corp.* 2,727,000
116,000 Computer Associates
International, Inc. 8,265,000
47,000 National Data Corp. 1,609,750
140,000 Structural Dynamics Research
Corp*. 3,080,000
-----------
17,713,250
-----------
Diversified Companies -- 0.6%
26,000 Danaher Corp. 1,131,000
50,925 Mark IV Industries, Inc. 1,152,178
28,000 United Technologies Corp. 3,220,000
-----------
5,503,178
-----------
Drug -- 2.4%
46,000 Dura Pharmaceuticals, Inc.* 2,576,000
126,000 Interneuron Pharmaceuticals,
Inc.* 3,780,000
80,000 Merck & Co., Inc. 5,170,000
217,000 Mylan Laboratories Inc. 3,743,250
100,000 Pfizer, Inc. 7,137,500
103,000 Vical, Inc.* 1,648,000
-----------
24,054,750
-----------
Drugstore -- 0.3%
146,000 Eckerd Corp.* 3,303,250
-----------
Electric Utility-East -- 0.2%
51,700 American Electric Power Co.,
Inc. 2,203,712
-----------
Electrical Equipment -- 0.3%
39,500 General Electric Co. 3,416,750
-----------
Electronics -- 0.9%
203,000 Symbol Technologies, Inc.* 9,033,500
-----------
Environmental -- 0.4%
75,000 Sanifill, Inc.* 3,693,750
-----------
Financial Services -- 2.5%
114,000 ADVANTA Corp. Class "A" 5,814,000
53,000 ADVANTA Corp. Class "B" 2,398,250
120,500 CUC International, Inc.* 4,277,750
78,000 Green Tree Financial Corp. 2,437,500
60,000 Loews Corp. 4,732,500
130,000 Olympic Financial Ltd.* 2,990,000
45,000 Paychex, Inc. 2,165,625
-----------
24,815,625
-----------
See notes to financial statements.
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Shares Value
- --------------------------------------------------------------------------------
Food Processing -- 0.2%
50,000 ConAgra, Inc. $ 2,268,750
-----------
Grocery -- 2.1%
210,000 Kroger Co.* 8,295,000
382,400 Safeway, Inc.* 12,619,200
-----------
20,914,200
-----------
Healthcare Information Systems -- 0.8%
88,000 HBO & Co. 5,962,000
20,000 Medic Computer Systems, Inc.* 1,622,500
-----------
7,584,500
-----------
Home Appliance -- 1.0%
251,000 Black & Decker Corp. 9,694,875
-----------
Hotel/Gaming -- 2.3%
165,000 HFS Inc.* 11,550,000
20,000 Hilton Hotels Corp. 2,250,000
45,000 MGM Grand, Inc.* 1,794,375
25,000 Marriott International Inc. 1,343,750
120,000 Mirage Resorts, Inc.* 6,480,000
-----------
23,418,125
-----------
Industrial Services -- 2.0%
466,000 Equifax, Inc. 12,232,500
210,000 Manpower, Inc. 8,242,500
-----------
20,475,000
-----------
Insurance-Life -- 0.7%
168,000 Conseco, Inc. 6,720,000
-----------
Insurance-Property/Casualty -- 0.1%
32,000 PartnerRe Holdings Ltd. 956,000
-----------
Machinery -- 0.8%
104,000 Dover Corp. 4,797,000
75,000 Parker-Hannifin Corp. 3,178,125
-----------
7,975,125
-----------
Machinery-Construction & Mining -- 0.3%
61,000 Foster Wheeler Corp. 2,737,375
-----------
Manufactured Housing/
Recreational Vehicles -- 1.2%
531,915 Clayton Homes, Inc. 10,638,300
70,000 Oakwood Homes Corp. 1,443,750
-----------
12,082,050
-----------
Medical Services -- 1.1%
170,000 Omnicare, Inc. 4,505,000
114,000 OrNda Health Corp.* 2,736,000
40,000 Oxford Health Plans, Inc.* 1,645,000
75,000 Universal Health Services, Inc.*1,959,375
-----------
10,845,375
-----------
Medical Supplies -- 4.5%
74,000 Becton, Dickinson & Co. 5,938,500
122,000 Boston Scientific Corp.* 5,490,000
136,250 Cardinal Health, Inc. 9,827,031
40,000 Gulf South Medical Supply Inc.* 1,560,000
270,154 Johnson & Johnson 13,372,623
55,000 Medtronic Inc. 3,080,000
30,000 Nellcor Puritan-Bennett, Inc.* 1,455,000
146,000 United States Surgical Corp. 4,526,000
-----------
45,249,154
-----------
Natural Gas-Diversified -- 1.2%
105,000 PanEnergy Corp. 3,451,875
168,000 Williams Companies, Inc. 8,316,000
-----------
11,767,875
-----------
Office Equipment & Supplies -- 1.7%
62,000 Danka Business Systems PLC(ADR) 1,813,500
662,625 Staples, Inc.* 12,921,188
80,000 Viking Office Products, Inc.* 2,510,000
-----------
17,244,688
-----------
Oilfield Services/Equipment-- 1.6%
140,000 Baker Hughes Inc. 4,602,500
104,000 Halliburton Co. 5,772,000
135,000 Tidewater, Inc. 5,923,125
-----------
16,297,625
-----------
Petroleum-Integrated -- 2.0%
50,000 Amoco Corp. 3,618,750
30,000 Atlantic Richfield Co. 3,555,000
40,000 British Petroleum Co. PLC (ADR) 4,275,000
23,000 Mobil Corp. 2,578,875
115,000 Occidental Petroleum Corp. 2,846,250
180,000 USX-Marathon Group 3,622,500
-----------
20,496,375
-----------
Petroleum-Producing -- 0.7%
73,000 Chesapeake Energy Corp.* 6,560,875
-----------
See notes to financial statements.
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SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Value
- --------------------------------------------------------------------------------
Recreation -- 0.3%
51,389 Disney (Walt) Co. $ 3,231,083
-----------
Retail-Special Lines -- 1.7%
220,000 Bed, Bath & Beyond, Inc.* 5,885,000
194,000 Gap, Inc. 6,232,250
90,000 Ross Stores Inc. 3,127,500
40,000 TJX Companies, Inc. 1,350,000
20,000 Waban, Inc.* 477,500
-----------
17,072,250
-----------
Retail Store -- 1.5%
119,000 Consolidated Stores Corp.* 4,373,250
188,671 Dollar General Corp. 5,518,627
220,000 Price/Costco, Inc.* 4,757,500
-----------
14,649,377
-----------
Shoe -- 1.3%
112,000 NIKE, Inc. Class "B" 11,508,000
53,000 Wolverine World Wide, Inc. 1,722,500
-----------
13,230,500
-----------
Telecommunications Equipment -- 0.9%
175,000 Andrew Corp.* 9,406,250
-----------
Telecommunication Services -- 2.4%
60,000 Cascade Communications Corp.* 4,080,000
80,000 Century Telephone Enterprises,
Inc. 2,550,000
30,000 GTE Corp. 1,342,500
308,000 Loral Space & Communications
Ltd.* 4,196,500
100,000 Sprint Corp. 4,200,000
144,000 WorldCom, Inc.* 7,974,000
-----------
24,343,000
-----------
Tobacco -- 0.5%
52,000 Philip Morris Companies, Inc. 5,408,000
-----------
Trucking/Transportation Leasing -- 0.4%
81,000 XTRA Corp. 3,584,250
-----------
TOTAL COMMON STOCKS
(Cost $340,005,827) 505,230,230
===========
----------------------------------
U.S. TREASURY OBLIGATIONS -- 29.6%
----------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$62,000,000 U.S. Treasury Notes 6 1/8%,
due March 31, 1998 $62,058,032
60,000,000 U.S. Treasury Notes 6 1/4%,
due June 30, 1998 60,168,600
70,000,000 U.S. Treasury Notes 6 3/4%,
due May 31, 1999 70,831,250
16,000,000 U.S. Treasury Notes 7 3/4%,
due February 15, 2001 16,810,000
38,000,000 U.S. Treasury Notes 5 7/8%,
due November 15, 2005 35,803,068
50,000,000 U.S. Treasury Bonds 7 1/4%,
due August 15, 2022 51,250,000
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $297,151,701) 296,920,950
===========
TOTAL INVESTMENT SECURITIES -- 80.0%
(Cost $637,157,528) 802,151,180
===========
See notes to financial statements.
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-------------------------------
SHORT-TERM INVESTMENTS -- 26.4%
-------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 23.4%
$10,000,000 Federal Farm Credit Bank Notes
5.26%, due 7/1/96 $ 10,000,000
50,000,000 Federal Home Loan Mortgage Corp.
Discount Notes 5.27%, due 7/8/96 49,948,764
20,000,000 Federal National Mortgage
Association Discount Notes 5.25%,
due 7/12/96 19,967,916
50,000,000 Federal Home Loan Mortgage Corp.
Discount Notes 5.27%,
due 7/15/96 49,897,528
50,000,000 Federal National Mortgage
Association Discount Notes
5.27%, due 7/15/96 49,897,528
20,000,000 Federal Home Loan Mortgage Corp.
Discount Notes 5.20%, due 7/15/96 19,959,556
5,000,000 Federal National Mortgage
Association Discount Notes
5.28%, due 7/31/96 4,978,000
10,000,000 Federal Farm Credit Bank Notes
5.10%, due 8/1/96 9,997,880
10,000,000 Federal Farm Credit Bank Notes
5.32%, due 9/3/96 10,000,000
10,000,000 Federal Farm Credit Bank Notes
5.41%, due 10/1/96 10,000,000
-----------
234,647,172
-----------
REPURCHASE AGREEMENTS -- 3.0%
(includes accrued interest)
$29,900,000 Collateralized by $29,900,000 U.S.
Treasury Notes 6%, due 8/31/97,
with a value of $30,494,344
(With First Chicago Capital
Markets, Inc. 5.35%, dated
6/28/96, due 7/1/96, delivery
value of $29,913,330.)
$ 29,913,330
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $264,562,622) 264,560,502
--------------
EXCESS OF LIABILITIES OVER CASH
AND RECEIVABLES -- (-6.4)% (64,354,050)
--------------
NET ASSETS -- 100.0% $1,002,357,632
==============
NET ASSET VALUE PER
OUTSTANDING SHARE $ 22.38
==============
($1,002,357,632 / 44,793,672
shares outstanding)
* Non-income producing.
See notes to financial statements.
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- ---------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (unaudited)
ASSETS
Investment in securities, at value
(cost $637,157,528) $ 802,151,180
Short-term investments (cost $264,562,622) 264,560,502
Cash 67,245
Receivable for securities sold 4,768,068
Interest and dividends receivable 4,076,612
Receivable for capital shares sold 717,453
--------------
TOTAL ASSETS 1,076,341,060
--------------
LIABILITIES
Payable for securities purchased 73,007,000
Payable for capital shares repurchased 360,929
Accrued expenses:
Advisory fee 409,022
GIAC administrative service fee 170,000
Other 36,477
--------------
TOTAL LIABILITIES 73,983,428
--------------
NET ASSETS $1,002,357,632
--------------
NET ASSETS CONSIST OF:
Capital stock, at $0.01 par value
(authorized unlimited, outstanding
44,793,672 shares) $ 447,937
Additional paid-in capital 682,948,283
Undistributed net investment income 27,183,714
Undistributed net realized gain on investments 126,786,166
Unrealized net appreciation of investments 164,991,532
--------------
NET ASSETS $1,002,357,632
==============
NET ASSET VALUE PER
OUTSTANDING SHARE
($1,002,357,632 / 44,793,672
shares outstanding) $ 22.38
==============
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1996 (unaudited)
Investment Income:
Interest $ 10,489,964
Dividends (Net of foreign withholding
tax of $19,586) 2,989,885
------------
Total Income 13,479,849
------------
Expenses:
Investment advisory fee 2,354,222
GIAC administrative service fee 328,143
Custodian fees 52,060
Audit and legal fees 28,959
Insurance and dues 25,205
Registration and filing fee 13,332
Trustees' fees and expenses 6,020
Other 416
------------
Total Expenses Before Expense Offset 2,808,357
Less: Expense Offset (4,975)
------------
Net Expenses 2,803,382
------------
Investment Income -- Net 10,676,467
------------
Realized and Unrealized Gain on
Investments -- Net:
Realized gain -- net 78,132,184
Change in unrealized appreciation on
investments 3,666,283
Net Realized Gain and Change in
Unrealized Appreciation on Investments 81,798,467
------------
Net Increase in Net Assets from Operations $ 92,474,934
============
See notes to financial statements.
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STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 (unaudited)
and For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1996 December 31,
(Unaudited) 1995
--------------- -------------
<S> <C> <C>
Operations:
Investment income-- net $ 10,676,467 $ 16,828,354
Realized gain on investments 78,132,184 51,170,099
Change in unrealized appreciation 3,666,283 122,289,519
--------------- -------------
Net increase in net assets from operations 92,474,934 190,287,972
--------------- -------------
Distributions to Shareholder:
Investment income-- net -- (10,739,197)
Realized gain from investment transactions-- net -- (6,608,734)
--------------- -------------
Total distributions -- (17,347,931)
--------------- -------------
Trust Share Transactions:
Proceeds from sale of shares 60,080,227 79,054,790
Proceeds from reinvestment of distributions to shareholder -- 17,347,931
Cost of shares repurchased (26,706,336) (55,555,221)
--------------- -------------
Increase from Trust share transactions 33,373,891 40,847,500
--------------- -------------
Total Increase in Net Assets 125,848,825 213,787,541
Net Assets:
Beginning of period 876,508,807 662,721,266
--------------- -------------
End of period $ 1,002,357,632 $ 876,508,807
=============== =============
Undistributed Investment Income-- Net at End of Period $ 27,183,714 $ 16,507,247
=============== =============
</TABLE>
See notes to financial statements.
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FINANCIAL HIGHLIGHTS
Selected data for a share of stock outstanding throughout each period
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1996 ------------------------------------------------------------------
(unaudited) 1995 1994 1993 1992 1991
---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.27 $ 16.13 $ 17.01 $ 15.94 $ 14.54 $ 11.06
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from investment
operations:
Net investment income .24 .39 .26 .27 .26 .30
Net gains or losses on securities
(both realized and unrealized) 1.87 4.17 (1.09) 1.62 1.93 4.50
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.11 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 period $ 22.38 $ 20.27 $ 16.13 $ 17.01 $ 15.94 $ 14.54
========== ========== ========== ========== ========== ==========
Total return 10.41%+ 28.54% - 4.88 11.86% 15.05% 43.34%
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Net assets, end of period(in thousands) $1,002,358 $ 876,509 $ 662,721 $ 615,648 $ 362,045 $ 188,781
Ratio of operating expenses to average
net assets .60%* .60% .60% .61% .55% .58%
Ratio of net investment income to average
net assets 2.26%* 2.18% 1.65% 1.96% 2.18% 3.00%
Portfolio turnover rate 47%+ 63% 100% 110% 106% 134%
</TABLE>
+ Not annualized.
* Annualized.
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
------------------------------------
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. Its investment objective
is to achieve a high total investment return consistent with reasonable risk.
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 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
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NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
Trust has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
(C) Federal Income Taxes.
It is the Trust's policy to qualify under, and comply with, the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholder. Therefore, no federal
income tax provision is required.
(D) Dividends and Distributions.
It is the Trust's policy to distribute to its shareholder, as dividends and
as capital gains distributions, all the net investment income for the year and
all the net capital gains realized by the Trust, if any. Such distributions are
determined in accordance with income tax regulations which may differ from
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 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 -- Trust Share Transactions, Dividends and Distributions
----------------------------------------------------------
Shares of the Trust are available to the public only through the purchase of
certain contracts issued by The Guardian Insurance & Annuity Company, Inc.
(GIAC). Transactions in shares of beneficial interest in the Trust were as
follows:
Six Months Ended
June 30, 1996 Year Ended
(unaudited) Dec. 31, 1995
---------- ---------
Shares sold 2,798,261 4,235,882
Shares issued to shareholder
in reinvestment of dividends
and distributions -- 943,335
---------- ---------
2,798,261 5,179,217
Shares repurchased 1,239,820 3,023,224
---------- ---------
Net increase 1,558,441 2,155,993
========== =========
Dividends per share $ -- $ .26
========== =========
Distributions per share from
net realized gains $ -- $ .16
========== =========
On June 27, 1996, the Board of Trustees declared an income dividend of
$16,507,247, a short-term capital gain of $9,340,367 and a long-term capital
gain of $39,325,086 (approximately $0.37, $0.21, and $0.88 per share,
respectively) to the shareholders of record on July 29, 1996, payable 7/30/96.
--------------------------------------
3 -- Purchases and Sales of Securities
--------------------------------------
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
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Six Months Ended
June 30, 1996
(unaudited)
------------
PURCHASES:
U.S. Treasury Obligations $238,453,437
Investment Securities 222,241,905
------------
$460,695,342
============
SALES & MATURITIES:
U.S. Treasury Obligations $ 18,795,313
Other Investment Securities 333,971,056
------------
$352,766,369
============
At June 30, 1996, the aggregate cost of investment securities and short-term
investments for federal income tax purposes is $901,720,150. The aggregate
appreciation and depreciation of investments at June 30, 1996, based on a
comparison of investment values and their costs for federal income tax purposes
is $171,110,390 and $6,118,858, respectively, resulting in a net appreciation of
$164,991,532.
-----------------------------------------------------------------------------
4 -- Investment Advisory Contract, Management Fees and Transactions with
Affiliates
-----------------------------------------------------------------------------
An advisory fee of $2,354,222 was paid or payable to the Adviser, for the
period ended June 30, 1996. This was computed at the rate of 1/2 of 1% of the
average daily net assets of the Trust during the period and paid monthly. The
Adviser provides research, investment programs, supervision of the investment
portfolio and pays costs of administrative services, office space, equipment and
compensation of administrative, bookkeeping and clerical personnel necessary for
managing the affairs of the Trust. The Adviser also provides persons,
satisfactory to the Trust's Board of Trustees, to act as officers and employees
of the Trust and pays their salaries and wages. The Trust bears all other costs
and expenses.
The Adviser has agreed to reimburse the Trust for expenses (exclusive of
interest, taxes, brokerage and extraordinary expenses) which in any year exceed
2.5% of the first $30 million of the average daily net assets, 2% of the next
$70 million and 1.5% on any excess over $100 million. No such reimbursement was
required for the six months ended June 30, 1996.
Certain officers and directors of the Adviser and Value Line Securities,
Inc. (the Trust's distributor and a registered broker/dealer), and of GIAC are
also officers and Trustees of the Trust. A former officer of GIAC who is also a
trustee of the Trust was paid a fee of $1,183 by the Trust for the six months
ended June 30, 1996. During the six months ended June 30, 1996, the Trust paid
brokerage commissions totalling $278,954 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 six months ended June 30, 1996, the Trust
incurred expenses of $328,143 in connection with such services rendered by GIAC.
- --------------------------------------------------------------------------------
81
<PAGE>
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The Guardian Insurance & Annuity Company, Inc. PERMIT NO. 45
NEWARK, NJ
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New York, NY 10003
EB-011035 6\96 [Logo] Printed on recycled paper
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