The Guardian
INVESTOR(R)
A VARIABLE ANNUITY
----------------------------------------------------------------------
Annual Report to Contractowners
The Guardian Separate Account D
The Guardian Stock Fund, Inc.
The Guardian Bond Fund, Inc.
The Guardian Cash Fund, Inc.
Baillie Gifford International Fund
Baillie Gifford Emerging Markets Fund
Value Line Centurion Fund, Inc.
Value Line Strategic Asset Management Trust
----------------------------------------------------------------------
Executive Offices Customer Service Office
201 Park Avenue South P.O. Box 26210
New York, New York 10003 Lehigh Valley, Pennsylvania 18002-6210
1-800-221-3253
December 31, 1994
[Logo] The Guardian(R)
<PAGE>
February 17, 1995
Our Message to You
Dear Contractowner:
I am pleased to present the 1994 annual report for The Guardian Investor
variable annuity and its underlying investment options.
Our primary mission is to provide high quality insurance and investment products
for long-term financial planning as well as consistent, dependable service to
our contractowners. We believe that The Guardian Investor, with its diverse
investment options, can help you to meet your financial goals over the long
term, despite periods of unfavorable market performance such as we experienced
in 1994.
Financial Market Review
During 1994 domestic and international markets suffered significant losses. A
major factor contributing to these disappointing results was the Federal Reserve
Board's decision to raise short-term interest rates six times during the course
of the year. As interest rates increased, bond prices tumbled, and domestic
stocks performed weakly at best. International markets were also adversely
affected by the upheaval in the U.S. markets.
The Guardian Investor's investment options were not exempt from the effects of
the tumultuous markets, and their total returns generally reflect the poor
performance of the broad-based markets. Looking ahead, we remain optimistic that
the potential for growth through the investment options will reward our
contractowners over the long-term.
New Investment Option
On October 17, 1994, we launched Baillie Gifford Emerging Markets Fund which
offers our contractowners the ability to participate in a fund that invests
primarily in companies which operate in developing nations. At the same time, we
also increased the maximum number of investment options to which you can
allocate payments and transfer contract values from four to six.
Investment Review
In the Investment Review section that follows, our portfolio managers discuss
their performance and investment strategies for 1994. The returns presented in
the Investment Review do not reflect mortality and expense risk charges which
are deducted under The Guardian Investor; nor do they reflect contract level
charges which you may incur. These charges will reduce the reported returns, but
they help us to provide important benefits to you.
The chart below shows the total returns for each investment option based on the
change in unit values from January 1, 1994 through December 31, 1994. Changes in
unit values reflect the effects of mortality and expense risk charges as well as
each option's expenses. Accordingly, they show an investment option's
performance under the contract.
Investment Option Total Return (1)
- ----------------- ----------------
The Guardian Stock Fund ...................................... - 2.41%
The Guardian Bond Fund ....................................... - 4.56%
The Guardian Cash Fund ....................................... + 2.63%
Baillie Gifford International Fund ........................... - 0.28%
Baillie Gifford Emerging Markets Fund (2) .................... -12.17%
Value Line Centurion Fund .................................... - 3.34%
Value Line Strategic Asset Mgt. Trust ........................ - 5.97%
The Guardian Real Estate Account (3) ......................... - 1.99%
Fixed-Rate Option
The annual rates of interest declared each month for amounts deposited or
renewed (on a contract anniversary) in the Fixed-Rate Option during 1994 were:
January -- April: 4.50%
May -- July: 4.75%
August -- September: 5.00%
October -- December: 5.25%
Rates paid by The Fixed-Rate Option are subject to change, and may be higher or
lower for new deposits or renewals, but are guaranteed from the date of deposit
or renewal to the next contract anniversary.
Financial Strength
You will be pleased to know that both The Guardian Insurance & Annuity Company
(GIAC), issuer of The Guardian Investor, and its parent, Guardian Life, enjoy
the highest ratings available from four of the nation's leading insurance
company evaluators: Moody's (Aaa), Standard & Poor's (AAA), A.M. Best (A++), and
Duff & Phelps (AAA).
Although these ratings do not apply to The Guardian Investor's underlying
variable investment options which are subject to the risks of investing in
securities, GIAC's triple-A ratings reflect the Company's ability to meet its
guarantee of the contract's Fixed-Rate Option and pre-retirement death benefit.
We look forward to helping you meet your financial needs in the years to come.
Sincerely,
/s/ Arthur V. Ferrara, CLU
Arthur V. Ferrara, CLU
Chairman of the Board & Chief Executive Officer
The Guardian Insurance & Annuity Company
- --------------------------------------------------------------------------------
(1) Total return performance does not reflect the annual administrative charge
or possible withdrawal charges. Deduction of these amounts would reduce the
stated total returns. Past performance is no guarantee of future results.
(2) Baillie Gifford Emerging Markets Fund is not available in all states.
Please consult your GIAC agent.
(3) Contractowners who are invested in The Guardian Real Estate Account will
receive a separate 1994 annual report which details the Account's
performance and investment strategy.
<PAGE>
The Guardian Stock Fund -- Charles E. Albers, Portfolio Manager
How did The Guardian Stock Fund perform in 1994?
1994 was a disappointing year for the financial markets. In this difficult
environment, The Guardian Stock Fund produced a total return for the year of
- -1.27%.(1) The S&P 500 Index produced a total return of 1.29% for 1994.(2) It's
important for investors to remember that the primary objective of The Guardian
Stock Fund is long-term growth of capital. Over the last 10 years, the Fund's
performance has been excellent. The Fund's average annual return for the last
decade is 14.84%(1) compared to the S&P 500 Index of 14.25%.(2) Of course, past
performance does not guarantee future results.
What was your investment strategy during the year?
The Fund's investment strategy is based upon our proprietary stock-scoring
system which we have been continuously developing and refining since the 1970's.
Our multi-factor model analyzes each company in our research universe of 1,200
stocks. In addition, portfolio manager judgment plays a critical role in the
stock-selection process. Stocks favored by our model are reviewed to confirm
that a company's business fundamentals are sound and that, in our view, the
stock is indeed a good purchase candidate. Any stock that may be a sell
candidate is subjected to the same rigorous portfolio manager review that
purchase candidates receive, before any transactions occur. In addition, we use
both the quantitative model and portfolio manager judgment to weight the
portfolio in different industries and economic sectors. Still, there can be no
assurance that our disciplined approach to investing will result in the most
favorable return to our shareholders.
What factors affected the Fund's performance in 1994?
The primary factor affecting the Fund's performance was our proprietary
stock-selection model. During 1994, the model produced near-neutral results. The
model has been a valuable tool in our portfolio management process since the
Fund's inception, but there have been a few intervals in which it performed a
mediocre job of identifying buy and sell candidates. In 1994, we believe that
many of the fundamental factors which make a stock attractive were overwhelmed
by shifts in market psychology. For example, shares of basic industrial
companies fell sharply in the fourth quarter. The excellent operating results
and prospects for these companies were overshadowed by exaggerated investor
fears of a softening economy in 1995.
The Fund's economic sector weightings also provided mixed results in 1994. The
Fund was overweighted (relative to the S&P 500 Index) in the capital
goods-technology and financial sectors. Technology stocks did quite well,
outperforming the market considerably because of a stronger economy and improved
products. However, the financial sector trailed the market due mostly to
interest rate concerns. The Fund was underweighted in the utilities and consumer
staples sectors (food, household products, drugs). Our underweight position in
utilities proved to be successful, as electric and gas utilities both
underperformed the market. However, the consumer staples sector, led by
pharmaceuticals and healthcare, did well.
Finally, the capitalization-size factor was a mild negative for the Fund's
performance in 1994, relative to the S&P 500 Index. The Fund's portfolio was
mildly tilted toward smaller-cap issues which proved to be unfavorable. While
the S&P 500 Index produced a return of 1.29%,(2) the small-cap Russell 2000
Index produced a negative return of -3.18%(3) during 1994.
2
<PAGE>
The following graph compares the performance of The Guardian Stock Fund to the
S&P 500 Index. The Guardian Stock Fund is a professionally managed mutual fund,
while the Index is not available for investment and is unmanaged. The
comparisons are shown for illustrative purposes only.
[The table below was represented as a graph in the printed material.]
GSF S&P 500 Index
--- -------------
4/13/83 10000 10000
1983 11028 10866
1984 12218 11529
1985 16129 15168
1986 18888 17985
1987 19240 18902
1988 23159 21989
1989 28613 28886
1990 25223 27958
1991 34293 36438
1992 41177 39206
1993 49396 43130
1994 48767 43679
Investment return and principal value of an investment in The Guardian Stock
Fund will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
Average Annual Total Returns
Periods ended December 31, 1994
- --------------------------------------------------------------------------------
Life of Fund
1 year 5 years 10 years (since 4/13/83)
- --------------------------------------------------------------------------------
Guardian Stock Fund(1) -1.27% 11.25% 14.84% 14.48%
- --------------------------------------------------------------------------------
S&P 500 Index(2) 1.29% 8.63% 14.25% 13.41%
- --------------------------------------------------------------------------------
(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 annuities or variable life
insurance policies which provide for investment in the Fund will be lower
to reflect charges deducted from the separate account which relate to a
particular contract and the charges under such contract.
(2) The S&P 500 Index is generally considered to be representative of U.S.
stock market activity. The returns for the Index do not reflect expenses
which are deducted from the Fund's return.
(3) The Russell 2000 is generally considered to be representative of
small-capitalization issues. The returns for the Russell 2000 do not
reflect expenses which are deducted from the Fund's return.
3
<PAGE>
The Guardian Bond Fund -- Michele S. Babakian, Portfolio Manager
How did The Guardian Bond Fund perform in 1994?
The Fund underperformed the Lehman Aggregate Bond Index for 1994. The Fund's
total return for the year was -3.45%(1) versus -2.92%(2) for this Index.
However, our performance compared favorably to our peer group of 69 BBB-rated
bond funds as identified by Lipper Analytical Services. This peer group's
average return was -4.46% versus -3.45% for our Fund during the year.(3)
What was your investment strategy during the year?
During 1994, as interest rates rose, we shortened the duration of the portfolio
from 5.2 years to 3.9 years. To accomplish this, we sold longer-term securities
from all of the fixed-income sectors represented in the Fund's portfolio, with
U.S. government securities comprising the bulk of the sales, and we purchased
shorter-duration instruments. This strategy worked to our benefit as
intermediate-term bonds generally outperformed longer-term bonds.
As of December 31, 1994, 22.7% of the Fund's portfolio was invested in U.S.
Government and Agencies, 33.6% in mortgage pass-throughs (both multi-class and
regular), 26.5% in corporate bonds, and 16.5% in repurchase agreements (see
chart below). Significant changes made in the second half of the year included
reducing the Fund's Treasury position by 16% and increasing the Fund's
investments in mortgage pass-throughs.
A portion of the Fund's cash position in December was used to invest in
well-structured, high-yielding mortgage-backed securities (MBS) at favorable
prices. Prices for MBS slid as their durations lengthened in response to slower
prepayments of the mortgages that collateralize these securities. In 1995 we
intend to continue this program and reduce the Fund's cash position in favor of
securities that we believe will perform well in the future.
What factors affected the Fund's performance in 1994?
The Federal Reserve Board permitted the Federal Funds rate to increase by 250
basis points (2.5%) during 1994. This caused short- and long-term interest rates
to rise. In turn, bond prices eroded across the yield curve. The Fund was not
immune from the effects of declines in bond prices caused by the rapid and
negative changes in interest rates.
MBS, especially multi-class securities, were affected by the slowdown in
mortgage prepayments caused by higher interest rates. The key consequence was
increasing durations for MBS which caused price declines. This portion of the
Fund's portfolio performed the worst in 1994.
[The following table is represented by a pie graph in the printed material]
Corporate Bonds ................................ 26.5%
Multi Class Mortgage Pass-Throughs ............. 25.0%
U.S. Gov'ts & Agencies ......................... 22.7%
Repurchase Agreement ........................... 16.5%
Mortgage Pass-Throughs ......................... 8.6%
4
<PAGE>
The following graph compares the performance of The Guardian Bond Fund to the
Lehman Aggregate Bond Index. The Guardian Bond Fund is a professionally managed
mutual fund, while the index is not available for investment and is unmanaged.
The comparisons is shown for illustrative purposes only.
[The table below was represented as a graph in the printed material.]
Lehman Aggregate
GBF Bond Index
--- ----------
4/29/83 10000 10000
1983 9925 10204
1984 11219 11750
1985 13728 14347
1986 15766 16537
1987 15816 16992
1988 17351 18332
1989 19758 20996
1990 21254 22877
1991 24695 26538
1992 26597 28502
1993 29218 31281
1994 28209 30369
Investment return and principal value of an investment in The Guardian Bond Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
Average Annual Total Returns
Periods ended December 31, 1994
- --------------------------------------------------------------------------------
Life of Fund
1 year 5 years 10 years (since 4/29/83)
- --------------------------------------------------------------------------------
Guardian Stock Fund(1) -3.45% 7.38% 9.66% 9.30%
- --------------------------------------------------------------------------------
Lehman Aggregate Bond Index(2) -2.92% 7.66% 9.96% 9.99%
- --------------------------------------------------------------------------------
(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 annuities or variable life
insurance policies which provide for investment in the Fund will be lower
to reflect charges deducted from the separate account which relate to a
particular contract and the charges under such contract.
(2) The Lehman Aggregate Bond Index is generally considered to be
representative of bond market activity. The returns for the Index do not
reflect expenses which are deducted from the Fund's return.
(3) As reported in The Wall Street Journal, Mutual Fund Scorecard, January 17,
1995. Returns calculated by Lipper Analytical Services, Inc. do not reflect
the deduction of sales loads and would be different if the effects of sales
loads were included.
5
<PAGE>
Baillie Gifford International Fund -- R. Robin Menzies, Portfolio Manager
How did Baillie Gifford International Fund perform in 1994?
For the year ended December 31, 1994, Baillie Gifford International Fund
produced a total return of 0.87%.(1) The Fund compares its performance to the
Morgan Stanley Capital International (MSCI) Europe, Australia and Far East
(EAFE) Index which returned 8.06% for the same period.(2)
What was your investment strategy during the year?
The Fund's strategy has been to seek long-term capital growth through investing
in a diversified portfolio of stocks in a large number of countries outside the
United States. During 1994 we increased the Fund's exposure to Japan, where
economic recovery was in its initial stages, while at the same time we reduced
the proportion of fund assets invested in the faster growing economies of
Southeast Asia, such as Hong Kong, Malaysia and Thailand. We did this despite
the rapid economic growth in these countries because we anticipated that
increases in US interest rates would have an adverse effect upon their stock
markets. In Europe, where economic recovery started at the end of 1993, we
benefited from our investments in more cyclical companies, gaining profits as
the year progressed. We also invested small amounts in Eastern Europe and Latin
America. Currency exposure risk was hedged to a limited extent; the German Mark
exposure was partially hedged through March; a Japanese Yen hedge was in place
throughout the year, thereby protecting 50% of the Fund's Yen assets at
year-end.
Finally, we invested in individual companies that we believed were attractive
due to strong competitive positions or high levels of profitability. As of
December 31, 1994, the Fund was invested in 137 companies in 23 countries.
What factors affected the Fund's performance in 1994?
The two most significant factors affecting the Fund's performance during the
year were Japanese investments and Asia ex-Japan investments. Japan performed
quite well in 1994, while other Asian countries performed rather weakly. In
1994, Japan, as measured by the MSCI Japan Index, had a return of 20.7%(2). As
of December 31, 1994, the Fund had a 28.9% weighting in Japan, compared to the
45.8% weighting of the EAFE Index. While Japan's economy is at last recovering,
stock prices remain high; the Fund's Japanese holdings have significantly lower
ratings than the Japanese market as a whole, but they cannot be said to be
cheap.
Malaysia and Hong Kong were the two poorest performing countries in the
MSCI/EAFE Index falling by 20.8% and 31.0% respectively. The Fund's exposure to
these two countries ranged from a high of 15% in January 1994, to 6.9% at the
end of the year, compared to the EAFE weighting of 5.2% at year-end.
In Europe, market movements were less dramatic. The MSCI United Kingdom Index
declined by 4.7%,(2) while the MSCI Europe ex-UK Index rose by 3.1%.(2) Latin
American investments were a small drag on performance and amounted to 2.9% of
the Fund, of which 1.4% was invested in Mexico. This small Mexican position
spared the Fund from the effects of the recent and ongoing upheaval in the
Mexican economy.
The general theme linking many of the weaker performing markets in 1994 was
their reaction to the rise in U.S. interest rates. Some countries, such as Hong
Kong, peg their currencies to the dollar and have to move their interest rates
in tandem with changes in the U.S. Other countries, especially those in Latin
America, have been suffering since flows of U.S. investors' money into these
countries have slowed or reversed as U.S. interest rates rose during 1994. We
anticipate that U.S. interest rates may rise further during 1995, and hence, we
will be cautious about increasing the proportion of the Fund's assets that are
invested in these areas, although some of these countries do have fundamental
long-term potential.
6
<PAGE>
The following graph compares the performance of Baillie Gifford International
Fund to the Morgan Stanley Capital International (MSCI) Europe, Australia and
the Far East (EAFE) Index. Baillie Gifford International Fund is a
professionally managed mutual fund, while the Index is not available for
investment and is unmanaged. The comparisons are shown for illustrative purposes
only.
[The table below was represented as a graph in the printed material.]
BGIF MSCI/EAFE Index
---- ---------------
2/8/91 10000 10000
1991 10860 10770
1992 9885 9603
1993 13250 12767
1994 13366 13796
Investment return and principal value of an investment in Baillie Gifford
International Fund will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
Average Annual Total Returns
Periods ended December 31, 1994
- --------------------------------------------------------------------------------
Life of Fund
1 year (since 2/8/91)
- --------------------------------------------------------------------------------
Baillie Gifford International Fund(1) 0.87% 7.74%
- --------------------------------------------------------------------------------
MSCI/EAFE Index(2) 8.06% 8.62%
- --------------------------------------------------------------------------------
(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 annuities or variable life
insurance policies which provide for investment in the Fund will be lower
to reflect charges deducted from the separate account which relate to a
particular contract and the charges under such contract.
(2) The MSCI/EAFE Index is generally considered to be representative of
international stock market activity. The MSCI Japan Index is an unmanaged
index generally considered to be representative of Japanese stock market
activity. The MSCI United Kingdom Index is an unmanaged index generally
considered to be representative of stock market activity in the United
Kingdom. The MSCI Europe ex-UK Index is an unmanaged index generally
considered to be representative of European stock market activity,
excluding the United Kingdom. The returns for the indices do not reflect
expenses which are deducted from the Fund's return.
7
<PAGE>
Baillie Gifford Emerging Markets Fund -- Edward H. Hocknell,
Portfolio Manager
How did Baillie Gifford Emerging Markets Fund perform since its inception on
10/17/94?
From October 17, 1994 (commencement of public offering of the Fund's shares)
through December 31, 1994, the Fund depreciated by 11.97%.(1) During the same
period, emerging markets declined by 16.76%, as measured by the International
Finance Corporation (IFC) Investable Composite Index(2). The Fund outperformed
its relative index largely because of its high cash position and its
considerable exposure to Asian stock markets, which retained more of their
value.
What was your investment strategy during this period?
The Fund's objective is to achieve long-term capital growth by investing in what
we believe to be sound companies with good long-term growth prospects which are
based, or have most of their operations, in emerging market countries. These
countries have the potential for rapidly growing economies due to locally
generated investment and structural reform. While such investments are likely to
be more volatile than those made in more mature economies, the Fund hopes to
achieve superior returns over the long term. In addition, the Fund's investments
are broadly diversified to attempt to reduce risk. As of December 31, 1994, the
Fund contained over 100 separate investments in approximately 20 different
countries.
Since its inception, the Fund has invested in equity securities issued by
companies in a broad range of countries including Hong Kong, Brazil, Argentina
and Singapore. In strategic terms, the Fund has had a more substantial weighting
in the rapidly growing economies of Asia than in any other area. The Fund's
industrial exposure is well diversified: Latin American holdings consist of
large, well-established businesses such as utilities, banks and construction
companies, while Asian holdings are often smaller manufacturing and exporting
enterprises as well as the companies which service them.
Since the Fund's inception, emerging markets generally have been weak,
especially in Latin America. The Fund has benefited from the tactical decision
to retain relatively high levels of cash which will be invested as markets
stabilize and attractive stock prices present themselves.
What factors affected the Fund's performance in 1994?
The Fund's performance was adversely affected by the weaknesses of both the
markets and currencies in which it invests. This weakness was a result of the
rise in U.S. interest rates in November which had an immediate impact on
countries which follow American monetary policy. More recently, the markets in
Latin America have been hit by the weakness in the Mexican Peso. The Fund
avoided the worst of these declines because of its country selections and large
cash holdings.
We have firm confidence in the long-term outlook for emerging markets. Latin
American countries are on the road to reform and recovery after a long period of
stagnation, and we believe that the rapidly growing Asian economies have the
potential to produce good returns. The markets' recent weakness has begun to
reveal some very attractive valuations and, although it may be difficult for the
emerging markets to perform until the outlook for world interest rates becomes
clearer, we believe that the longer-term prospects appear excellent and we have
begun to put some of the fund's cash reserves to work.
8
<PAGE>
The following graph compares the performance of Baillie Gifford Emerging Markets
Fund to the IFC Investable Composite Index. The International Finance
Corporation (IFC) is a department of the World Bank, part of whose duties
include monitoring the securities markets of emerging countries. Baillie Gifford
Emerging Markets Fund is a professionally managed mutual fund, while the Index
is not available for investment and is unmanaged. The comparisons are shown for
illustrative purposes only.
[The following table was represented as a graph in the printed material.]
BGEMF IFC Index
----- ---------
10/17/94 10000 10000
10/31/94 9838 9701
11/30/94 9402 9328
12/31/94 8803 8324
Investment return and principal value of an investment in Baillie Gifford
Emerging Markets Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
Average Annual Total Returns
Periods ended December 31, 1994
- --------------------------------------------------------------------------------
Life of Fund
(since 10/17/94)
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund(1) -11.97%
- --------------------------------------------------------------------------------
IFC Investable Index(2) -16.76%
- --------------------------------------------------------------------------------
(1) Total returns are historical and assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. The actual total
returns for owners of the variable annuities or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
charges deducted from the separate account which relate to a particular
contract and the charges under such contract. Baillie Gifford Emerging
Markets Fund is not available in all states.
(2) The International Finance Corporation (IFC) Investable Composite Index is
an unmanaged index generally considered to be representative of stock
market activity in emerging markets. The returns for the Index do not
reflect expenses which are deducted from the Fund's return.
9
<PAGE>
Value Line Centurion Fund -- Managed by Value Line Investment Committee
How did Value Line Centurion Fund perform in 1994?
The total return for the Centurion Fund was -2.21% for the year ended December
31, 1994.(1) The Fund underperformed the S&P 500 Index, which produced a total
return of 1.29% during the same period.(2) The first half of 1994 was the most
difficult part of the year for the Fund which depreciated by 12.04%,(1) while
the S&P 500 Index declined by 3.39%.(2) Investors were clearly favoring value
stocks, particularly those of large corporations.
The second half of 1994 provided a shift in market focus from value stocks to
growth stocks. The Centurion Fund rallied substantially in the third quarter,
rising by 10.37%, and for the second half of 1994 the Fund returned 11.16%,(1)
outperforming the S&P 500 Index return of 4.87%, for the same period.(2) It
appears that after several years in which interest rates have been the dominant
factor in the decision-making process, investors may now be looking at the
underlying health and earnings potential of growth stocks.
What was your investment strategy during the year?
Our stock selection is based on the Value Line Ranking System which ranks 1700
stocks on a scale of 1 (highest) to 5 (lowest), for "timeliness" by comparing
the probable market performance of each stock during the coming 12 months with
that of all other ranked stocks. The rankings are based on growth in earnings
and stock momentum. The Fund primarily buys stocks ranked 1 or 2 by the Ranking
System.
In 1994, the Fund predominantly focused on the technology sector and the
healthcare industry, and both performed well as compared to the general market.
The technology sector became quite dominant in the second half of the year. Two
sectors that hurt the Fund were interest-sensitive consumer durables and
financial stocks. Due to the magnitude of the rise in interest rates, and the
short period in which those rates rose, consumer durables and financial stocks
became a significant drag on the Fund.
We are comfortable with the current structure of the Fund, with its emphasis on
the technology, healthcare and financial sectors. We do not believe that 1995
will see the extreme market volatility that we experienced in 1994. Therefore,
our growth approach should offer better relative value. We believe that our
universe of stocks has been reasonably priced and the earnings of such companies
should continue to grow faster than the companies represented in the major
market indices.
What factors affected the Fund's performance in 1994?
During 1994, equity markets were buffeted by multiple factors including the
dramatic rise in interest rates, problems with derivative investments, and the
impact of the collapse of the Mexican peso. Worldwide equity markets, for the
most part, declined in 1994 as well. The fear of double digit interest rates and
renewed fears of inflation represented significant investment concerns resulting
in a reduction in the flow of money into equities.
In our view, it would be reasonable to expect a calmer and more optimistic
financial outlook for 1995. We believe that short-term interest rates should not
rise much above 8.25%, and inflation, while slightly higher than last year,
should not be a major concern. In our view, corporate earnings seem to be
providing some support for stocks, and the 1995 earnings for Dow Jones stocks
could increase by 24% over 1994 earnings. We believe that Gross Domestic Product
growth should slow modestly. The broad market has the potential to appreciate by
5% with good market strength coming from the technology, healthcare and
financial sectors which are well represented in the Fund.
10
<PAGE>
The following graph compares the performance of Value Line Centurion Fund to the
S&P 500 Index. The Value Line Centurion Fund is a professionally managed mutual
fund, while the Index is not available for investment and is unmanaged. The
comparisons are shown for illustrative purposes only.
[The table below was represented as a graph in the printed material.]
VLCF S&P 500 Index
---- -------------
11/15/83 10000 10000
1984 8420 10631
1985 11109 13988
1986 12978 16584
1987 12609 17430
1988 13565 20326
1989 17837 26704
1990 18829 25844
1991 28655 33683
1992 30354 36244
1993 33149 39874
1994 32415 40387
Investment return and principal value of an investment in the Value Line
Centurion Fund will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Average Annual Total Returns
Periods ended December 31, 1994
- --------------------------------------------------------------------------------
Life of Fund
1 year 5 years 10 years (since 11/15/83)
- --------------------------------------------------------------------------------
Value Line Centurion Fund(1) -2.21% 12.69% 14.43% 11.15%
- --------------------------------------------------------------------------------
S&P 500 Index(2) 1.29% 8.63% 14.25% 13.37%
- --------------------------------------------------------------------------------
(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 annuities or variable life
insurance policies which provide for investment in the Fund will be lower
to reflect charges deducted from the separate account which relate to a
particular contract and the charges under such contract.
(2) The S&P 500 Index is generally considered to be representative of U.S.
stock market activity. The returns for the Index do not reflect expenses
which are deducted from the Fund's return.
11
<PAGE>
Value Line Strategic Asset Management Trust -- Managed by Value Line
Investment Committee
How did Value Line Strategic Asset Management Trust perform in 1994?
The total return of Value Line Strategic Asset Management Trust for the year
ended December 31, 1994, was -4.88%.(1) The Trust underperformed both the S&P
500 Index, which returned 1.29%, and the Shearson Government/Corporate Bond
Index, which returned -3.51% during this same period.(2)
What was your investment strategy during the year?
The Trust uses computer stock and bond models developed by Value Line, Inc., as
well as the prevailing yield on 3-month U.S. Treasury bills, to determine an
optimal portfolio mix of stocks, bonds and cash. Individual securities are
selected as described below. When the stock model is bullish, the Trust's stock
allocation percentage will be relatively high, and the bond and cash positions
relatively low. When the bond model is bullish, a greater percentage of the
Trust's assets will be allocated to bonds and a lesser percentage to cash.
During 1994, the stock model was generally bullish, with stock allocations in
the 60% to 85% range. The remainder of the portfolio was split between cash
equivalents and U.S. Treasury notes and bonds, with cash rising to nearly 30% of
assets toward the end of the year.
Stocks are selected for the Trust's portfolio by using the Value Line Ranking
System -- a system of statistical computer analysis that evaluates approximately
1700 stocks on a scale of 1 (Highest) to 5 (Lowest) for "Timeliness". The System
compares the probable market performance of each stock during the coming twelve
months with all 1700 stocks under review, based on growth in earnings and price
momentum. The Trust invests primarily in stocks ranked 1 or 2 by the System. In
order to diversify, and to gain additional dividend income, the Trust may invest
in some stocks ranked 3 (Average).
In 1994, the Trust invested in a greater proportion of cyclical stocks including
steel, chemical and paper, as the strengthening economy helped earnings in these
companies. At the same time, the portfolio remained strongly weighted in the
traditional growth stocks favored by the Ranking System, including companies in
the technology, financial services and retailing sectors. A few international
petroleum companies were added for purposes of diversification and dividend
income.
What factors affected the Trust's performance in 1994?
The first half of 1994 was a weak period for the Value Line Ranking System,
particularly for the larger-capitalization 1- and 2-ranked growth stocks in
which the Trust primarily invests. The Trust's allocation model was most bullish
on stocks during the first half. This combination caused a relatively steep loss
in the first half of the year that was only partially offset by gains in the
second half. Meanwhile, the Trust's bond holdings, although moderate in size,
also hurt performance as bonds experienced their worst overall performance in 65
years.
Overall, 1994 was a difficult year for "growth" stocks -- those stocks issued by
companies with consistently good earnings gains which the Ranking System
generally favors, as opposed to economically sensitive "value" stocks. "Growth"
stocks began a comeback in the second half of the year, and we believe that they
will once again outperform "value" stocks as soon as the U.S. economy begins to
slow.
12
<PAGE>
The following graph compares the performance of Value Line Strategic Asset
Management Trust to the S&P 500 Index and the Shearson Government/Corporate Bond
Index. The Value Line Strategic Asset Management Trust is a professionally
managed mutual fund, while the indices are not available for investment and are
unmanaged. The comparisons are shown for illustrative purposes only.
[The table below was represented as a graph in the printed material.]
Shearson Gov./
VLSAMT Corp. Bond Index S&P 500 Index
------ ---------------- -------------
10/1/87 10000 10000 10000
1988 10453 11386 9033
1989 13124 13007 11867
1990 13104 14084 11485
1991 18783 16355 14968
1992 21611 17595 16106
1993 24174 19536 17720
1994 22994 18555 17948
Investment return and principal value of an investment in Value Line Strategic
Asset Management Trust will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
Average Annual Total Returns
Periods ended December 31, 1994
- --------------------------------------------------------------------------------
Life of Fund
1 year 5 years (since 10/1/87)
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust(1) -4.88% 11.87% 12.17%
- --------------------------------------------------------------------------------
S&P 500 Index(2) 1.29% 8.63% 8.40%
- --------------------------------------------------------------------------------
Shearson Government/Corporate Bond Index(2) -3.51% 7.70% 9.14%
- --------------------------------------------------------------------------------
(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 annuities or variable life
insurance policies which provide for investment in the Trust will be lower
to reflect charges deducted from the separate account which relate to a
particular contract and the charges under such contract.
(2) The S&P 500 Index is generally considered to be representative of U.S.
stock market activity. The Shearson Government/Corporate Bond Index is
generally considered to be representative of U.S. government security and
corporate bond market activity. The returns for the indices do not reflect
expenses which are deducted from the Trust's return.
13
<PAGE>
The Guardian Cash Fund -- Alexander M. Grant, Jr., Portfolio Manager
How did The Guardian Cash Fund perform in 1994?
For the seven days ended December 31, 1994, the Fund's current yield was 5.37%
and its effective yield was 5.51%. The Fund produced a total return of 3.82% in
1994.(1)
What was your investment strategy during the year?
Our investment strategy has been to seek maximum safety by investing in a
diversified portfolio of money market instruments that present minimal credit
risks according to our criteria. During 1994, the Fund only purchased securities
from issuers that had received ratings in the two highest credit quality
categories established by nationally recognized statistical rating organizations
like Moody's and S&P. Since we place a great emphasis on preserving principal,
we generally invest in instruments with no greater than 30-day maturities. Our
past performance and our current performance indicate that we give up very
little yield to be in the short end of the market. Throughout 1994, most of the
portfolio (93.5%) was invested in commercial paper; the balance (6.5%) was
invested in repurchase agreements.
What factors affected the Fund's performance in 1994?
In 1994, we maintained our average days to maturity in the short range (19
days). This allowed us to take advantage of the higher short-term yields that
resulted from the Federal Reserve Board's hikes in interest rates to combat
inflation.
PLEASE NOTE: 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
reinvested income. Yields will vary as interest rates change. The actual
total return for owners of the variable annuities or variable life
insurance policies which provide for investment in the Fund will be lower
to reflect charges deducted from the separate account which relates to a
particular contract and the charges under such contract.
14
<PAGE>
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
Table of Contents
The Guardian Separate Account ................................... 16
The Guardian Stock Fund ......................................... 24
The Guardian Bond Fund .......................................... 39
The Guardian Cash Fund .......................................... 46
Baillie Gifford International Fund .............................. 55
Baillie Gifford Emerging Markets Fund ........................... 68
Value Line Centurion Fund, Inc .................................. 86
Value Line Strategic Asset Management Trust ..................... 98
15
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN SEPARATE ACCOUNT D
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investment in mutual funds:
The Guardian Stock Fund, Inc. (21,257,680 shares at net asset value of
$27.33 per share; LIFO Cost, $564,003,016) ......................................... $ 580,972,405
The Guardian Bond Fund, Inc. (14,275,068 shares at net asset value of
$11.08 per share; LIFO Cost, $176,992,726) ......................................... 158,167,749
The Guardian Cash Fund, Inc. (18,174,973 shares at net asset value of
$10.00 per share; which equals cost) ............................................... 181,749,727
Baillie Gifford International Fund (14,034,471 shares at net asset value
of $14.69 per share; LIFO Cost, $192,898,584) ...................................... 206,166,386
Baillie Gifford Emerging Markets Fund (614,245 shares at net asset value
of $8.68 per share; LIFO Cost $5,676,885) .......................................... 5,331,650
Value Line Centurion Fund, Inc. (8,171,903 shares at net asset value of
$17.83 per share; LIFO Cost, $159,283,202) ......................................... 145,705,031
Value Line Strategic Asset Management Trust (29,125,680 shares at net
asset value of $16.13 per share; LIFO Cost, $455,570,592) .......................... 469,797,226
--------------
Total Assets ......................................................................... 1,747,890,174
--------------
Liabilities
Annuitant Mortality Fluctuation Fund ................................................. 4,071,099
Due to The Guardian Insurance & Annuity Company, Inc. ................................ 2,162,170
--------------
Total Liabilities .................................................................... 6,233,269
--------------
Net Assets -- Note 3 ................................................................... $1,741,656,905
==============
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN SEPARATE ACCOUNT D
COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------
Guardian Guardian Guardian
Stock Bond Cash
Combined Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends .................... $ 25,406,728 $ 7,743,143 $ 9,333,214 $ 6,241,656
Expenses -- Note 4:
Mortality and expense
risk charges ........................... 18,379,909 5,816,708 1,875,195 1,966,725
------------ ------------ ----------- -----------
Net investment income/
(expense) ................................ 7,026,819 1,926,435 7,458,019 4,274,931
------------ ------------ ----------- -----------
Realized and Unrealized
Gain/(Loss) from Investments
Realized gain/(loss) from
investments:
Net realized gain/(loss)
from sale of investments ............... (2,297,672) (1,057,545) (432,068) --
Reinvested realized gain
distribution ........................... 21,486,596 17,343,666 812,048 --
------------ ------------ ----------- -----------
Net realized gain/(loss)
on investments ......................... 19,188,924 16,286,121 379,980 --
------------ ------------ ----------- -----------
Unrealized appreciation/
(depreciation) of investments:
End of year ............................. 11,715,441 16,969,389 (18,824,976) --
Beginning of year ....................... 89,134,439 47,679,156 (3,178,393) --
------------ ------------ ----------- -----------
Change in unrealized
appreciation/(depreciation) ............ (77,418,998) (30,709,767) (15,646,583) --
------------ ------------ ----------- -----------
Net realized and unrealized
gain/(loss) from investments ............. (58,230,074) (14,423,646) (15,266,603) --
------------ ------------ ----------- -----------
Net Increase/(Decrease) in
Net Assets Resulting from
Operations ................................. $(51,203,255) $(12,497,211) $(7,808,584) $ 4,274,931
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN SEPARATE ACCOUNT D
COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1994 (Continued)
- --------------------------------------------------------------------------------------------------------------------------
Baillie Value Line
Gifford Strategic
Baillie Gifford Emerging Value Line Asset
International Markets Centurion Management
Fund Fund Fund Trust
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends .................... $ 1,713,005 $ 5,226 $ 80,389 $ 290,095
Expenses -- Note 4:
Mortality and expense
risk charges ........................... 1,930,140 5,714 1,553,313 5,232,114
------------ ------------ ------------ ------------
Net investment income/
(expense) ................................ (217,135) (488) (1,472,924) (4,942,019)
------------ ------------ ------------ ------------
Realized and Unrealized
Gain/(Loss) from Investments
Realized gain/(loss) from
investments:
Net realized gain/(loss)
from sale of investments ............... (441,762) (15) (234,057) (132,225)
Reinvested realized gain
distribution ........................... -- -- 2,170,502 1,160,380
------------ ------------ ------------ ------------
Net realized gain/(loss)
on investments ......................... (441,762) (15) 1,936,445 1,028,155
------------ ------------ ------------ ------------
Unrealized appreciation/
(depreciation) of investments:
End of year ............................. 13,267,801 (345,236) (13,578,171) 14,226,634
Beginning of year ....................... 15,601,275 -- (8,913,749) 37,946,150
------------ ------------ ------------ ------------
Change in unrealized
appreciation/(depreciation) ............ (2,333,474) (345,236) (4,664,422) (23,719,516)
------------ ------------ ------------ ------------
Net realized and unrealized
gain/(loss) from investments ............. (2,775,236) (345,251) (2,727,977) (22,691,361)
------------ ------------ ------------ ------------
Net Increase/(Decrease) in
Net Assets Resulting from
Operations ................................. $ (2,992,371) $ (345,739) $ (4,200,901) $(27,633,380)
============ ============ ============ ============
</TABLE>
See notes to financial statements.
16 & 17
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN SEPARATE ACCOUNT D
COMBINED STATEMENT OF CHANGES IN NET ASSETS
Years Ended December 31, 1993 and 1994
- --------------------------------------------------------------------------------------------------------------------------
Guardian Guardian Guardian
Stock Bond Cash
Combined Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 Increase/(Decrease) from Operations
Net investment income/(expense) .......... $ 14,259,435 $ 3,428,976 $ 6,590,814 $ 1,465,165
Net realized gain/(loss) from
sale of investments ..................... (449,363) (146,888) (44,120) --
Reinvested realized gain distributions ... 52,127,230 12,684,997 6,596,137 --
Change in unrealized appreciation/
(depreciation) of investments ........... 49,531,462 27,343,633 (2,755,509) --
--------------- --------------- --------------- ---------------
Net increase/(decrease) resulting
from operations ......................... 115,468,764 43,310,718 10,387,322 1,465,165
--------------- --------------- --------------- ---------------
1993 Contract Transactions
Net contract purchase payments ........... 570,882,996 171,413,735 64,805,623 90,536,454
Transfer between/within separate accounts 47,593 38,109,376 (11,881,103) (64,834,156)
Administrative charges - Note 4 .......... (862,263) (227,952) (109,386) (63,108)
Redemptions and annuity benefits ......... (43,201,739) (10,968,178) (6,067,275) (8,360,569)
--------------- --------------- --------------- ---------------
Net increase/(decrease) from contract
transactions ............................ 526,866,587 198,326,981 46,747,859 17,278,621
--------------- --------------- --------------- ---------------
Actuarial Increase in Reserves for
Contracts in Payment Period ............... 41,725 2,341 12,087 5,530
--------------- --------------- --------------- ---------------
Total Increase in Net Assets ............... 642,377,076 241,640,040 57,147,268 18,749,316
Net Assets at December 31, 1992 .......... 737,251,239 179,253,095 109,987,457 96,496,719
--------------- --------------- --------------- ---------------
Net Assets at December 31, 1993 .......... $ 1,379,628,315 $ 420,893,135 $ 167,134,725 $ 115,246,035
=============== =============== =============== ===============
1994 Increase/(Decrease) from Operations
Net investment income/(expense) .......... $ 7,026,819 $ 1,926,435 $ 7,458,019 $ 4,274,931
Net realized gain/(loss) from sale of
investments ............................. (2,297,672) (1,057,545) (432,068) --
Reinvested realized gain distributions ... 21,486,596 17,343,666 812,048 --
Change in unrealized appreciation/
(depreciation) of investments ........... (77,418,998) (30,709,767) (15,646,583) --
--------------- --------------- --------------- ---------------
Net increase/(decrease) resulting
from operations ......................... (51,203,255) (12,497,211) (7,808,584) 4,274,931
--------------- --------------- --------------- ---------------
1994 Contract Transactions
Net contract purchase payments ........... 503,986,245 166,667,511 36,056,334 88,181,951
Transfer between/within separate accounts 259,681 27,950,476 (25,340,683) (11,696,586)
Administrative charges - Note 4 .......... (1,537,653) (526,859) (151,735) (67,170)
Redemptions and annuity benefits ......... (89,548,162) (22,112,355) (11,882,503) (18,541,252)
--------------- --------------- --------------- ---------------
Net increase/(decrease) from contract
transactions ............................ 413,160,111 171,978,773 (1,318,587) 57,876,943
--------------- --------------- --------------- ---------------
Actuarial Increase in Reserves for Contracts
in Payment Period ......................... 71,734 21,930 11,420 4,659
--------------- --------------- --------------- ---------------
Total Increase in Net Assets ............... 362,028,590 159,503,492 (9,115,751) 62,156,533
Net Assets at December 31, 1993 .......... 1,379,628,315 420,893,135 167,134,725 115,246,035
--------------- --------------- --------------- ---------------
Net Assets at December 31, 1994 - Note 3 . $ 1,741,656,905 $ 580,396,627 $ 158,018,974 $ 177,402,568
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN SEPARATE ACCOUNT D
COMBINED STATEMENT OF CHANGES IN NET ASSETS
Years Ended December 31, 1993 and 1994
- --------------------------------------------------------------------------------------------------------------------------
Baillie Value Line
Gifford Strategic
Baillie Gifford Emerging Value Line Asset
International Markets Centurion Management
Fund Fund Fund Trust
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 Increase/(Decrease) from Operations
Net investment income/(expense) .......... $ 631,787 $ -- $ (640,297) $ 2,782,990
Net realized gain/(loss) from
sale of investments ..................... (15,517) -- (237,455) (5,383)
Reinvested realized gain distributions ... -- -- 20,010,811 12,835,285
Change in unrealized appreciation/
(depreciation) of investments ........... 18,878,420 -- (10,463,157) 16,528,075
--------------- --------------- --------------- ---------------
Net increase/(decrease) resulting
from operations ......................... 19,494,690 -- 8,669,902 32,140,967
--------------- --------------- --------------- ---------------
1993 Contract Transactions
Net contract purchase payments ........... 34,763,469 -- 39,260,352 170,103,363
Transfer between/within separate accounts 30,851,221 -- (5,073,578) 12,875,833
Administrative charges - Note 4 .......... (48,941) -- (111,730) (301,146)
Redemptions and annuity benefits ......... (1,805,525) -- (3,364,856) (12,635,336)
--------------- --------------- --------------- ---------------
Net increase/(decrease) from contract
transactions ............................ 63,760,224 -- 30,710,188 170,042,714
--------------- --------------- --------------- ---------------
Actuarial Increase in Reserves for
Contracts in Payment Period ............... 398 -- 4,233 17,136
--------------- --------------- --------------- ---------------
Total Increase in Net Assets ............... 83,255,312 -- 39,384,323 202,200,817
Net Assets at December 31, 1992 .......... 39,263,077 -- 95,064,488 217,186,403
--------------- --------------- --------------- ---------------
Net Assets at December 31, 1993 .......... $ 122,518,389 $ -- $ 134,448,811 $ 419,387,220
=============== =============== =============== ===============
1994 Increase/(Decrease) from Operations
Net investment income/(expense) .......... $ (217,135) $ (488) $ (1,472,924) $ (4,942,019)
Net realized gain/(loss) from sale of
investments ............................. (441,762) (15) (234,057) (132,225)
Reinvested realized gain distributions ... -- -- 2,170,502 1,160,380
Change in unrealized appreciation/
(depreciation) of investments ........... (2,333,474) (345,236) (4,664,422) (23,719,516)
--------------- --------------- --------------- ---------------
Net increase/(decrease) resulting
from operations ......................... (2,992,371) (345,739) (4,200,901) (27,633,380)
--------------- --------------- --------------- ---------------
1994 Contract Transactions
Net contract purchase payments ........... 67,514,027 802,697 27,270,345 117,493,380
Transfer between/within separate accounts 26,214,136 4,883,043 (5,752,976) (15,997,729)
Administrative charges - Note 4 .......... (123,861) (371) (161,836) (505,821)
Redemptions and annuity benefits ......... (7,541,073) (13,696) (6,045,725) (23,411,558)
--------------- --------------- --------------- ---------------
Net increase/(decrease) from contract
transactions ............................ 86,063,229 5,671,673 15,309,808 77,578,272
--------------- --------------- --------------- ---------------
Actuarial Increase in Reserves for Contracts
in Payment Period ......................... 9,929 -- 2,051 21,745
--------------- --------------- --------------- ---------------
Total Increase in Net Assets ............... 83,080,787 5,325,934 11,110,958 49,966,637
Net Assets at December 31, 1993 .......... 122,518,389 -- 134,448,811 419,387,220
--------------- --------------- --------------- ---------------
Net Assets at December 31, 1994 - Note 3 . $ 205,599,176 $ 5,325,934 $ 145,559,769 $ 469,353,857
=============== =============== =============== ===============
</TABLE>
See notes to financial statements.
18-19
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT D
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
Note 1 - Organization
The Guardian Separate Account D (the Account), a unit investment trust
registered under the Investment Company Act of 1940, as amended, was organized
by The Guardian Insurance & Annuity Company, Inc. (GIAC) on August 23, 1989 and
commenced operations on January 16, 1990. GIAC is a wholly owned subsidiary of
The Guardian Life Insurance Company of America (Guardian Life). GIAC issues the
individual and group deferred variable annuity contracts offered through the
Account. GIAC provides for accumulations and benefits under the contracts by
crediting the net premium purchase payments to one or more investment divisions
established within the Account, or to The Guardian Real Estate Account (GREA) or
to the Fixed Rate Option (FRO), as selected by the contractowner. GREA is
another separate investment account established by GIAC. Amounts allocated to
the FRO are maintained by GIAC in its general account. The contractowner may
transfer his or her contract value among the seven investment options within the
Account, GREA or the FRO. The seven investment options of the Account correspond
to the following underlying mutual funds: The Guardian Stock Fund, Inc. (GSF),
The Guardian Bond Fund, Inc. (GBF), The Guardian Cash Fund, Inc. (GCF), Baillie
Gifford International Fund (BGIF), Baillie Gifford Emerging Markets Fund
(BGEMF), the Value Line Centurion Fund, Inc. and the Value Line Strategic Asset
Management Trust (collectively, the Funds and individually, a Fund). A
tax-qualified and a non-tax-qualified investment division have been established
within each investment option available in the Account.
GSF, GBF and GCF each has an investment advisory agreement with Guardian
Investor Services Corporation, a wholly owned subsidiary of GIAC. BGIF and BGEMF
each has an investment advisory agreement with Guardian Baillie Gifford Limited,
a joint venture company formed by GIAC and Baillie Gifford Overseas Ltd.
Between January 22, 1991 and March 14, 1991, GIAC allocated $10,000,000 from
its general account funds to the Account and invested it in BGIF to facilitate
the commencement of BGIF's operations. On September 13, 1994 Guardian Life
contributed $20,000,000 to BGEMF to facilitate the commencement of BGEMF's
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 annuity payments, are obligations of
GIAC.
Note 2 - Significant Accounting Policies
The following is a summary of significant accounting policies of the
Account.
Investments
(a) Net proceeds of payments made by contractowners to the Account are
invested by the Account's investment divisions in shares of the corresponding
Funds at net asset value. All distributions made by a Fund are reinvested in
shares of the same Fund.
(b) The market value of the investments in the Funds is based on the net
asset value of the respective Funds as of their close of business on the
valuation date.
(c) Investment transactions are accounted for on the trade date and income
is recorded on the ex-dividend date.
(d) The cost of investments sold is determined on a last in, first out
(LIFO) basis.
During the years ended December 31, 1994 and December 31, 1993, purchases of
shares of the Funds aggregated $703,697,673 and $751,098,992, respectively.
Aggregate sales of shares of the Funds during the years ended December 31, 1994
and December 31, 1993 amounted to $259,952,795 and $155,383,549, respectively.
20
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT D
NOTES TO FINANCIAL STATEMENTS (Continued)
The Annuitant Mortality Fluctuation Fund
The Annuitant Mortality Fluctuation Fund is funded by GIAC and has been
established in response to various regulatory requirements and provides for any
possible adverse experience.
Federal Income Taxes
The operations of the Account are part of the operations of GIAC and, as
such, are included in the combined tax return of GIAC. GIAC is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended.
Under tax law, no federal income taxes are payable by GIAC with respect to
the operations of the Account.
Annuity Reserves
Annuity reserves are computed for currently payable contracts according to
the 1971 Individual Annuity Mortality Table and the 1983 Individual Annuity
Table. The assumed interest rate is 4.0%. Charges to annuity reserves for
mortality and expense risks experience are reimbursed to GIAC if the reserves
required are less than originally estimated. If additional reserves are
required, GIAC reimburses the Account.
Note 3 - Net Assets, December 31, 1994
<TABLE>
<CAPTION>
Separate Account Accumulation Total
Investment Division Units Owned Unit Value Unit Value
------------------- ----------- ---------- ----------
<S> <C> <C> <C>
Tax-Qualified Accounts:
The Guardian Stock Fund, Inc. ...................... 18,824,239.474 $16.358812 $ 307,942,195
The Guardian Bond Fund, Inc. ....................... 6,312,515.414 13.502913 85,237,347
The Guardian Cash Fund, Inc. ....................... 6,899,486.401 11.808794 81,474,614
Baillie Gifford International Fund ................. 7,632,245.585 12.765807 97,431,774
Baillie Gifford Emerging Markets Fund .............. 248,097.706 8.782325 2,178,875
Value Line Centurion Fund, Inc. .................... 4,045,694.588 17.494618 70,777,881
Value Line Strategic Asset Management Trust ........ 15,618,595.216 17.078883 266,748,160
Non-Tax-Qualified Accounts:
The Guardian Stock Fund, Inc. ...................... 16,594,903.354 16.358812 271,472,904
The Guardian Bond Fund, Inc. ....................... 5,358,555.051 13.502913 72,356,103
The Guardian Cash Fund, Inc. ....................... 8,107,402.836 11.808794 95,738,650
Baillie Gifford International Fund ................. 7,442,570.367 12.765807 95,010,417
Baillie Gifford Emerging Markets Fund .............. 358,340.236 8.782325 3,147,060
Value Line Centurion Fund, Inc. .................... 4,263,709.749 17.494618 74,591,973
Value Line Strategic Asset Management Trust ........ 11,773,225.334 17.078883 201,073,538
--------------
1,725,181,491
Contracts receiving annuity payments ............... 3,558,492
Owned by GIAC ...................................... 12,916,922
--------------
$1,741,656,905
==============
</TABLE>
The amount retained by GIAC in the Account is comprised of amounts which
GIAC allocated to the Account to facilitate the commencement of operations of
the Account and certain of the Funds, as well as amounts accruing to GIAC from
the operations of the Account. Amounts retained by GIAC in the Account may be
transferred by GIAC to its general account.
21
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT D
NOTES TO FINANCIAL STATEMENTS (Continued)
Note 4 - Administrative and Mortality and Expense Risk Charges
Contractual charges paid to GIAC include:
(1) a fixed annual contract fee of $35 is deducted on each contract
anniversary date before annuitization and upon surrender prior to
annuitization to cover GIAC's administrative expenses;
(2) a charge for mortality and expense risks is computed daily and is
equal to an annual rate of 1.15% of the average daily net assets
applicable to contractowners;
(3) contingent deferred sales charges on certain partial or total
surrenders. These charges are assessed against redemptions and paid to
GIAC during the first seven contract years for a Single Purchase
Payment Contract. For a Flexible Purchase Payment Contract, each
payment is subject to a contingent deferred sales charge for seven
years; and
(4) a charge for premium taxes deducted from either the contract payment
or upon annuitization, as determined in accordance with applicable
state law.
Currently, GIAC makes no charge against the Account for GIAC's federal
income taxes. However, GIAC reserves the right to charge taxes attributable to
the Account in the future.
Note 5 - Accumulation Unit Values for the Current Year End and the Four Prior
Year Ends Since Inception for Both Qualified and Non-Qualified Accounts
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
The Guardian Stock Fund ........................... $16.358812 $16.762756 $14.136306 $11.910247 $ 8.862117
The Guardian Bond Fund ............................ 13.502913 14.148558 13.029142 12.238317 10.655367
The Guardian Cash Fund ............................ 11.808794 11.506661 11.340994 11.115363 10.648908
Baillie Gifford International Fund ................ 12.765807 12.802570 9.662405 10.739267 --
Baillie Gifford Emerging Markets Fund ............. 8.782325 -- -- -- --
Value Line Centurion Fund ......................... 17.494618 18.098849 16.765815 16.012030 10.643745
Value Line Strategic Asset Management Trust ....... 17.078883 18.163921 16.427405 14.444559 10.194445
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors of
The Guardian Insurance & Annuity Company, Inc.
and Contractowners of The Guardian Separate Account D, "Guardian Investor"
In our opinion, the accompanying statement of assets and liabilities and the
related combined statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the investment
divisions relating to Guardian Stock Fund, Guardian Bond Fund, Guardian Cash
Fund, Baillie Gifford International Fund, Baillie Gifford Emerging Markets Fund,
Value Line Centurion Fund and Value Line Strategic Asset Management Trust
(constituting The Guardian Separate Account D, "Guardian Investor," hereafter
referred to as the "Separate Account") at December 31, 1994, and the results of
each of their operations for the year then ended and the changes in each of
their net assets for each of the two years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the management of Guardian Insurance & Annuity Company, Inc.;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1994 by correspondence with the transfer agents of the underlying funds,
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 10, 1995
23
<PAGE>
THE GUARDIAN STOCK FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
Number of
Issuer - Description Shares Value
-------------------- ------ -----
<S> <C> <C>
COMMON STOCKS - 90.2%
Aerospace and Defense - 5.6%
General Dynamics Corp. .................................................... 175,600 $ 7,638,600
Litton Industries, Inc.* .................................................. 160,000 5,920,000
Logicon, Inc. ............................................................. 138,200 4,128,725
Loral Corp. ............................................................... 65,000 2,461,875
Martin Marietta Corp. ..................................................... 68,600 3,044,125
McDonnell Douglas Corp. ................................................... 117,000 16,614,000
Precision Castparts Corp. ................................................. 201,750 4,085,437
Rockwell International Corp. .............................................. 238,000 8,508,500
Thiokol Corp. ............................................................. 193,500 5,393,812
-------------
57,795,074
-------------
Air Transportation - 0.3%
Alaska Air Group, Inc.* ................................................... 154,500 2,303,375
Mesa Airlines, Inc.* ...................................................... 95,500 871,438
-------------
3,174,813
-------------
Appliance and Furniture - 0.3%
Maytag Corporation ........................................................ 187,000 2,805,000
-------------
Automotive - 2.4%
Borg Warner Automotive, Inc. .............................................. 38,000 954,750
Echlin, Inc. .............................................................. 227,000 6,810,000
Ford Motor Co. ............................................................ 448,000 12,544,000
Magna International, Inc. ................................................. 96,000 3,684,000
Mascotech, Inc. ........................................................... 50,800 654,155
-------------
24,646,905
-------------
Broadcasting - 1.5%
CBS, Inc. ................................................................. 56,940 3,153,053
Capital Cities, ABC, Inc. ................................................. 151,000 12,872,750
-------------
16,025,803
-------------
Building Materials and Homebuilders - 0.6%
Coachmen Industries, Inc. ................................................. 55,000 845,625
Hughes Supply, Inc. ....................................................... 28,341 520,765
Lennar Corp. .............................................................. 67,000 1,038,500
McGrath Rent Corp. ........................................................ 60,000 1,020,000
Ply-Gem Industries, Inc. .................................................. 58,000 1,109,250
Skyline Corp. ............................................................. 44,000 847,000
Webb Del Corp. ............................................................ 11,000 193,875
Willcox & Gibbs, Inc.* .................................................... 60,400 354,850
-------------
5,929,865
-------------
Business Services - 1.2%
Paychex, Inc. ............................................................. 237,100 9,602,550
Olsten Corp. .............................................................. 18,796 596,773
Ceridian Corp.* ........................................................... 103,600 2,784,250
-------------
12,983,573
-------------
Capital Goods - Miscellaneous - 0.4%
Aviall, Inc. .............................................................. 77,000 587,125
Cable Design Tech. Corp.* ................................................. 23,000 379,500
Read-Rite Corp.* .......................................................... 175,000 3,248,438
-------------
4,215,063
-------------
Chemicals - 5.6%
Albemarle Corp. ........................................................... 110,000 1,526,250
Cambrex Corp. ............................................................. 94,000 2,444,000
E.I. Dupont De Nemours & Co. .............................................. 222,100 12,493,125
Eastman Chemical Co. ...................................................... 194,000 9,797,000
Hercules, Inc. ............................................................ 100,400 11,583,650
Monsanto Co. .............................................................. 90,000 6,345,000
OM Group, Inc. ............................................................ 21,800 523,200
PPG Industries, Inc. ...................................................... 230,000 8,538,750
RPM, Inc. ................................................................. 23,000 431,250
Schulman A., Inc. ......................................................... 28,000 770,000
Sterling Chemicals, Inc.* ................................................. 140,200 1,840,125
Union Carbide Corp. ....................................................... 60,000 1,762,500
-------------
58,054,850
-------------
Coal - 0.5%
Pittston Services Co. ..................................................... 183,100 4,852,150
-------------
Conglomerates - 0.8%
Kaman Corp. ............................................................... 59,800 657,800
Textron, Inc. ............................................................. 155,000 7,808,125
-------------
8,465,925
-------------
Consumer Cyclicals - Miscellaneous - 0.4%
De Beers Cons. Mines Ltd .................................................. 147,200 3,440,800
Toro Co. .................................................................. 29,000 833,750
-------------
4,274,550
-------------
Cosmetics and Toiletries - 0.0%
Helen of Troy Ltd.* ....................................................... 29,200 496,400
-------------
Containers - 0.2%
Alltrista Corp.* .......................................................... 113,675 2,245,081
-------------
</TABLE>
* Non-income producing securities.
See notes to financial statements.
24-25
<PAGE>
THE GUARDIAN STOCK FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Number of
Issuer - Description Shares Value
-------------------- ------ -----
<S> <C> <C>
Drugs and Hospitals - 5.8%
Acuson, Inc.* ............................................................. 20,400 $ 331,500
Caremark International, Inc. .............................................. 418,700 7,171,096
Circa Pharmaceuticals, Inc. ............................................... 84,000 1,501,500
Continental Medical Systems, Inc.* ........................................ 59,000 368,750
Coram Healthcare Corp.* ................................................... 34,776 573,804
Cytrx Corp.* .............................................................. 18,200 23,888
Eli Lilly & Co. ........................................................... 158,000 10,368,750
Humana, Inc.* ............................................................. 110,000 2,488,750
Johnson & Johnson, Inc. ................................................... 255,000 13,961,250
Liposome, Inc. ............................................................ 111,000 929,625
United Healthcare Corp.* .................................................. 36,900 1,665,113
Universal Health Services, Inc. ........................................... 152,000 3,724,000
U.S. Healthcare, Inc. ..................................................... 377,950 15,590,437
Wellpoint Health Networks, Inc. ........................................... 75,000 2,184,375
-------------
60,882,838
-------------
Electronics and Instruments - 1.9%
Analogic Corp.* ........................................................... 240,000 4,560,000
Augat, Inc. ............................................................... 40,000 755,000
Dynatech Corp.* ........................................................... 55,000 1,815,000
Electroglas, Inc.* ........................................................ 39,500 1,318,313
Exabyte Corp.* ............................................................ 68,800 1,470,600
W.W. Grainger, Inc. ....................................................... 31,600 1,824,900
Hewlett Packard Co. ....................................................... 73,500 7,340,812
In Focus Systems, Inc.* ................................................... 11,700 304,931
Methode Electronics, Inc. ................................................. 35,000 595,000
-------------
19,984,556
-------------
Energy - Miscellaneous - 1.1%
Giant Industries, Inc.* ................................................... 192,500 1,443,750
Holly Corp. ............................................................... 196,930 5,144,796
Howell Corp. .............................................................. 84,000 997,500
Tosco Corp. ............................................................... 136,900 3,987,213
-------------
11,573,259
-------------
Entertainment - 0.8%
Bally Entertainment Corp.* ................................................ 75,000 459,375
GC Companies, Inc.* ....................................................... 12,660 332,325
Mattel, Inc. .............................................................. 154,912 3,892,164
National Gaming Corp.* .................................................... 13,000 156,000
Viacom, Inc. Cl A ......................................................... 8,840 367,965
Viacom, Inc. Cl B ......................................................... 66,980 2,721,045
Viacom, Inc. - Non Voting* ................................................ 110,500 124,312
-------------
8,053,186
-------------
Fertilizer - 0.8%
First Mississippi Corp. ................................................... 88,100 2,202,500
Mississippi Chemical Corp.* ............................................... 56,200 976,475
Terra Industries, Inc. .................................................... 499,100 5,178,162
-------------
8,357,137
-------------
Financial - Banks - 4.7%
Central and Southern Hldg. Co.* ........................................... 50,000 318,750
Chase Manhattan Corp. ..................................................... 168,000 5,775,000
Citicorp .................................................................. 192,078 7,947,227
Commonwealth Bankshares, Inc.* ............................................ 18,000 159,750
Crestar Financial Corp. ................................................... 111,484 4,194,585
Deposit Guaranty Corp.* ................................................... 61,700 1,858,712
First Bank Systems Corp. .................................................. 125,000 4,156,250
First Empire State Corp. .................................................. 19,900 2,706,400
First Interstate Bancorp .................................................. 28,900 1,954,363
Gateway Bancorp, Inc. ..................................................... 61,013 686,396
Hawkeye Bancorporation .................................................... 130,000 2,502,500
Hubco, Inc. ............................................................... 51,480 1,138,995
Integra Financial Corp. ................................................... 105,000 4,318,125
Nationsbank Corp. ......................................................... 34,742 1,567,733
Premier Bancorp, Inc.* .................................................... 120,000 1,905,000
Salem Bank & Trust National Assn .......................................... 48,636 571,475
Signet Banking Corp. ...................................................... 191,642 5,485,745
Southern National Corp. ................................................... 20,600 393,975
Summit Bancorporation ..................................................... 6,400 124,000
Susquehanna Bancshares, Inc. .............................................. 6,750 150,187
U.S. Bancorp, Inc.* ....................................................... 51,200 1,075,200
-------------
48,990,368
-------------
Financial - Others - 4.2%
Colonial Group, Inc. ...................................................... 107,000 3,477,500
Dean Witter Discover Tr. & Co. ............................................ 160,000 5,420,000
Duff & Phelps Corp. ....................................................... 110,000 948,750
Duff & Phelps Credit Rating Co. ........................................... 21,666 213,952
First USA, Inc. ........................................................... 243,200 7,995,200
Foothill Group, Inc. ...................................................... 165,500 2,482,500
Green Tree Acceptance Corp. ............................................... 215,200 6,536,700
</TABLE>
* Non-income producing securities.
See notes to financial statements.
26-27
<PAGE>
THE GUARDIAN STOCK FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Number of
Issuer - Description Shares Value
-------------------- ------ -----
<S> <C> <C>
Financial - Others - (continued)
Jefferies Group, Inc ...................................................... 84,500 $ 2,513,875
Legg Mason, Inc ........................................................... 105,400 2,239,750
Lehman Brothers Holdings, Inc ............................................. 168,000 2,478,000
McDonald & Co. Investments, Inc ........................................... 94,000 1,045,750
Morgan Keegan, Inc ........................................................ 170,700 2,005,725
Plaza Home Mortgage Corp.* ................................................ 44,100 352,800
Raymond James Financial, Inc .............................................. 153,825 2,153,550
Schwab, Charles Corp ...................................................... 122,250 4,263,469
-------------
44,127,521
-------------
Financial - Thrift - 4.0%
Albank Financial Corp ..................................................... 18,500 430,125
Brooklyn Bancorp, Inc.* ................................................... 120,000 3,630,000
Charter One Financial, Inc.* .............................................. 148,000 2,812,000
Coastal Bancorp, Inc ...................................................... 66,000 948,750
Collective Bancorp, Inc ................................................... 336,600 5,722,200
Great Lakes Bancorp* ...................................................... 6,897 185,357
Loyola Capital Corp ....................................................... 115,200 2,030,400
MAF Bancorp, Inc .......................................................... 17,850 334,687
Maryland Fed. Bancorp, Inc ................................................ 98,700 2,282,437
ONBANCorp., Inc ........................................................... 119,000 2,766,750
Pacific Crest Capital, Inc.* .............................................. 37,666 160,080
Progressive Bank, Inc.* ................................................... 82,362 1,914,916
Roosevelt Financial Group, Inc ............................................ 285,000 4,275,000
Sovereign Bancorp, Inc .................................................... 479,313 3,714,676
Standard Fed. Bank-Troy, MI ............................................... 167,800 4,006,225
TCF Financial Corp ........................................................ 154,400 6,369,000
-------------
41,582,603
-------------
Food, Beverage and Tobacco - 2.7%
Archer Daniels Midland Co ................................................. 255,000 5,259,375
Brown-Forman Corp ......................................................... 50,100 1,528,050
Coca-Cola Co .............................................................. 303,000 15,604,500
IBP, Inc .................................................................. 131,200 3,968,800
Ralcorp Holdings, Inc.* ................................................... 55,000 1,223,750
Thorn Apple Valley, Inc ................................................... 14,000 399,000
-------------
27,983,475
-------------
Footwear - 0.5%
Reebok International Ltd .................................................. 145,000 5,727,500
-------------
Information Processing and Computers - 8.7%
Amdahl Corp.* ............................................................. 138,400 1,522,400
Astro-Med, Inc ............................................................ 67,550 726,162
Atria Software, Inc.* ..................................................... 22,000 632,500
BancTec, Inc.* ............................................................ 120,900 2,629,575
Compaq Computer Corp ...................................................... 171,000 6,754,500
Computer Assocs. Int'l., Inc .............................................. 391,000 18,963,500
Computer Sciences Corp.* .................................................. 38,000 1,938,000
Cray Research, Inc.* ...................................................... 58,500 921,375
Electronics For Imaging, Inc.* ............................................ 6,000 165,000
Fair Isaac & Co., Inc ..................................................... 57,000 3,206,250
International Business Machines ........................................... 358,700 26,364,450
Legent Corp.* ............................................................. 28,200 810,750
Network General Corp.* .................................................... 117,600 3,020,850
Quantum Corp.* ............................................................ 340,000 5,141,934
Sungard Data Systems, Inc.* ............................................... 73,000 2,810,500
Tandem Computers, Inc ..................................................... 393,900 6,745,538
Teradyne, Inc.* ........................................................... 54,700 1,852,962
Western Digital Corporation ............................................... 377,900 6,329,825
-------------
90,536,071
-------------
Insurance - 2.2%
AMBAC, Inc ................................................................ 80,000 2,980,000
America Bankers Ins. Group, Inc ........................................... 99,000 2,376,000
American Eagle Group, Inc ................................................. 74,000 619,750
Capital Guaranty Corp ..................................................... 44,500 628,563
Capitol American Fin'l. Corp .............................................. 31,000 713,000
Equitable Iowa Companies .................................................. 109,200 3,084,900
Jefferson Pilot Corp ...................................................... 82,000 4,253,750
MBIA, Inc ................................................................. 107,000 6,005,375
National Auto Credit, Inc.* ............................................... 66,500 798,000
State Auto Financial Corp ................................................. 72,000 1,026,000
-------------
22,485,338
-------------
Leisure Products - 2.0%
Arctco, Inc ............................................................... 202,725 3,927,797
Brunswick Corp ............................................................ 276,000 5,209,500
Callaway Golf Co .......................................................... 105,000 3,478,125
Harley Davidson, Inc ...................................................... 130,000 3,640,000
Recoton Corp.* ............................................................ 17,000 318,750
Sturm Ruger & Co., Inc .................................................... 42,800 1,214,450
Thor Industries, Inc ...................................................... 129,700 2,512,938
-------------
20,301,560
-------------
</TABLE>
* Non-income producing securities.
See notes to financial statements.
28-29
<PAGE>
THE GUARDIAN STOCK FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Number of
Issuer - Description Shares Value
-------------------- ------ -----
<S> <C> <C>
Lodging - 1.8%
Hospitality Franchise Systems Corp.* ...................................... 130,000 $ 3,445,000
Host Marriott Corp.* ...................................................... 944,700 9,092,737
Marriott International, Inc. .............................................. 126,000 3,543,750
Prime Hospitality Corp.* .................................................. 298,000 2,235,000
-------------
18,316,487
-------------
Machinery and Equipment - 6.0%
AGCO Corp. ................................................................ 6,000 182,250
Briggs & Stratton Corp. ................................................... 253,000 8,285,750
Caterpillar, Inc. ......................................................... 45,000 2,480,625
Clark Equipment Co. ....................................................... 77,700 4,215,225
Cummins Engine, Inc. ...................................................... 199,381 9,027,822
Dana Corporation .......................................................... 114,000 2,664,750
Deere & Co. ............................................................... 50,000 3,312,500
Dover Corporation ......................................................... 61,000 3,149,125
Eaton Corporation ......................................................... 148,500 7,350,750
Indresco, Inc.* ........................................................... 249,400 3,553,950
Millipore Corp. ........................................................... 67,000 3,241,125
Parker Hannifin Corp. ..................................................... 55,000 2,502,500
Pentair, Inc. ............................................................. 30,900 1,305,525
Robbins & Myers, Inc. ..................................................... 20,000 360,000
Roper Industries, Inc. .................................................... 37,900 956,975
Tecumseh Products Co. ..................................................... 110,100 4,954,500
Varlen Corp. .............................................................. 89,625 2,330,250
York International Corp. .................................................. 60,000 2,212,500
-------------
62,086,122
-------------
Merchandising - Department Store - 1.4%
Bradlees, Inc. ............................................................ 32,400 374,778
Carson Pirie Scott & Co.* ................................................. 63,000 1,197,000
Dillard Dept. Stores, Inc. ................................................ 130,000 3,477,500
Federated Dept. Stores, Inc.* ............................................. 385,200 7,415,100
J.C. Penney, Inc. ......................................................... 50,000 2,231,250
Ross Stores, Inc. ......................................................... 24,600 276,750
-------------
14,972,378
-------------
Merchandising - Drugs - 1.1%
Bergen Brunswig Corp. ..................................................... 75,000 1,565,625
Foxmeyer Health Corp. ..................................................... 23,400 348,075
McKesson Corp. ............................................................ 130,900 4,270,613
Rite-Aid Corp. ............................................................ 220,000 5,142,500
-------------
11,326,813
-------------
Merchandising - Food - 1.4%
Albertson's, Inc. ......................................................... 128,000 3,712,000
American Stores Co. ....................................................... 100,000 2,687,500
Bruno's, Inc. ............................................................. 118,300 987,988
Casey's General Stores, Inc. .............................................. 354,600 5,319,000
Smith's Food & Drug Centers, Inc. ......................................... 53,700 1,349,212
-------------
14,055,700
-------------
Merchandising - Special - 0.6%
Cato Corp. ................................................................ 88,800 643,800
CML Group, Inc. ........................................................... 341,000 3,452,625
Hechinger Co. ............................................................. 121,500 1,412,437
Waban, Inc.* .............................................................. 51,200 908,800
-------------
6,417,662
-------------
Metals and Mining - 2.7%
Alumax, Inc. .............................................................. 163,500 4,639,313
Brush Wellman, Inc. ....................................................... 7,300 126,838
Furon Co. ................................................................. 18,000 396,000
Magma Copper Co. .......................................................... 199,600 3,330,300
Phelps Dodge Corp. ........................................................ 120,000 7,425,000
Santa Fe Pacific Gold Corp. ............................................... 710,623 9,149,270
Weirton Steel Corp.* ...................................................... 71,200 633,830
WHX Corp. ................................................................. 193,700 2,566,525
-------------
28,267,076
-------------
Natural Gas - 1.2%
Allegheny & Western Energy Corp.* ......................................... 255,000 2,677,500
Enron Corp. ............................................................... 150,000 4,575,000
Mitchell Energy Corp. ..................................................... 177,600 3,330,000
ONEOK, Inc. ............................................................... 20,100 361,800
USX Delhi Group ........................................................... 132,500 1,325,000
-------------
12,269,300
-------------
Oil and Gas Producing - 3.1%
Alexander Energy Corp.* ................................................... 103,000 669,500
Anadarko Petroleum Corp. .................................................. 121,000 4,658,500
Basin Exploration, Inc. ................................................... 70,000 770,000
Tom Brown, Inc.* .......................................................... 130,000 1,495,000
Chieftain International, Inc.* ............................................ 180,000 1,822,500
Coho Energy, Inc. ......................................................... 194,700 1,010,006
Dekalb Corp. .............................................................. 114,000 2,422,500
Devon Energy Corp. ........................................................ 247,000 4,507,750
</TABLE>
* Non-income producing securities.
See notes to financial statements.
30-31
<PAGE>
THE GUARDIAN STOCK FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Number of
Issuer - Description Shares Value
-------------------- ------ -----
<S> <C> <C>
Oil and Gas Producing - continued
Forest Oil Corp. .......................................................... 10,850 $ 24,412
Global Natural Resources, Inc.* ........................................... 117,800 1,001,300
HS Resources, Inc. ........................................................ 28,300 498,788
Home Oil Ltd.* ............................................................ 220,000 2,310,000
Phoenix Resource Cos., Inc. ............................................... 98,000 4,655,000
Pogo Producing Co. ........................................................ 161,900 2,873,725
Snyder Oil Corp. .......................................................... 82,000 1,219,750
United Meridian Corp.* .................................................... 8,167 118,422
Vintage Petroleum, Inc. ................................................... 111,500 1,881,563
Wainoco Oil Ltd.* ......................................................... 72,400 345,115
-------------
32,283,831
-------------
Oil - Integrated - 1.0%
Ashland Oil, Inc. ......................................................... 171,100 5,902,950
Murphy Oil Corp. .......................................................... 76,000 3,230,000
Tesoro Petroleum Corp.* ................................................... 106,100 982,490
-------------
10,115,440
-------------
Oil Services - 0.8%
Energy Services, Inc.* .................................................... 72,600 889,350
Nabors Industries, Inc.* .................................................. 341,000 2,216,500
Offshore Logistics, Inc.* ................................................. 131,700 1,712,100
Offshore Pipelines, Inc. .................................................. 13,700 309,962
Smith International, Inc.* ................................................ 205,000 2,562,500
Weatherford International, Inc.* .......................................... 24,000 234,000
-------------
7,924,412
-------------
Paper and Forest Products - 1.6%
Federal Paper Board, Inc. ................................................. 78,000 2,262,720
Louisiana Pacific Corp. ................................................... 134,500 3,665,125
Rayonier, Inc. ............................................................ 286,000 8,723,000
Willamette Industries, Inc. ............................................... 43,900 2,085,250
-------------
16,736,095
-------------
Printing and Publishing - 0.1%
Bowne & Co., Inc. ......................................................... 41,700 724,538
-------------
Railroads - 1.0%
Illinois Central Corp. .................................................... 200,000 6,150,000
Santa Fe Pacific Corp. .................................................... 267,700 4,684,750
-------------
10,834,750
-------------
Restaurants - 0.4%
Applebee's International, Inc. ............................................ 302,800 4,049,950
Wendy's International, Inc. ............................................... 14,500 208,438
-------------
4,258,388
-------------
Semiconductors - 3.9%
Advanced Micro Devices, Inc.* ............................................. 218,900 5,445,138
Analog Devices, Inc.* ..................................................... 38,000 1,334,750
Atmel Corporation* ........................................................ 48,900 1,638,150
Cypress Semiconductor Corp.* .............................................. 62,800 1,452,250
LSI Logic Corporation ..................................................... 87,000 3,512,625
Micron Technology, Inc. ................................................... 242,250 10,689,281
Motorola, Inc. ............................................................ 71,400 4,132,275
Novellus Systems, Inc.* ................................................... 23,000 1,150,000
Texas Instruments, Inc. ................................................... 149,500 11,193,813
-------------
40,548,282
-------------
Telecommunication - 1.3%
ADC Telecommunications, Inc.* ............................................. 29,000 1,450,000
Andrew Corp.* ............................................................. 180,000 9,405,000
Communications Systems, Inc. .............................................. 2,400 30,000
SBC Communications ........................................................ 60,000 2,422,500
-------------
13,307,500
-------------
Textile - Apparel and Production - 0.9%
Fieldcrest Cannon, Inc. ................................................... 176,900 4,510,950
Wellman, Inc. ............................................................. 160,000 4,520,000
-------------
9,030,950
-------------
Transportation - Miscellaneous - 0.1%
Maritrans, Inc. ........................................................... 164,100 902,550
-------------
Truckers - 0.6%
Arkansas Best Corp. ....................................................... 136,700 1,657,488
Arnold Industries, Inc. ................................................... 58,000 1,203,500
FRP Pptys., Inc.* ......................................................... 32,100 589,838
Landstar System, Inc.* .................................................... 6,000 196,500
Werner Enterprises, Inc. .................................................. 97,000 2,303,750
-------------
5,951,076
-------------
TOTAL COMMON STOCKS (Cost $819,313,847) ............................... 936,879,814
-------------
</TABLE>
* Non-income producing securities.
See notes to financial statements.
32-33
<PAGE>
THE GUARDIAN STOCK FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Number of
Issuer - Description Shares Value
-------------------- ------ -----
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 0.4%
Forest Oil Corp.* ......................................................... 21,440 $ 198,320
Noble Drilling Corp.* ..................................................... 41,600 1,362,400
Snyder Oil Corp. .......................................................... 46,800 2,808,000
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,496,216) .................. 4,368,720
--------------
Principal
Amount
------
CONVERTIBLE BONDS - 0.2%
Mediq, Inc. 7.25% Deb., due 6/1/06 ........................................ $ 600,000 378,000
Richardson Electronics Ltd. 7.25% Deb., due 12/15/06 ...................... 2,065,000 1,538,425
--------------
TOTAL CONVERTIBLE BONDS (Cost $2,413,316) ............................. 1,916,425
--------------
U.S. GOVERNMENT SECURITY - 1.6%
U.S. Treasury Notes, 4.25% due 7/31/95 .................................... 17,000,000 16,755,540
--------------
TOTAL U.S. GOVERNMENT SECURITY (Cost $17,009,431) ..................... 16,755,540
--------------
Interest Maturity Principal
Issuer - Description Rate Date Amount
-------------------- ---- ---- ------
REPURCHASE AGREEMENTS - 6.0%
State Street Bank & Trust Co. repurchase agreement,
dated 12/30/94, maturity value $51,892,677, due
1/3/95 (collateralized by $54,135,000 U.S. Treasury
Notes, 4.25% due 11/30/95) .......................... 5.15% 01/03/95 $51,863,000 51,863,000
State Street Bank & Trust Co. repurchase agreement,
dated 12/30/94, maturity value $10,228,850, 5.15%
due 1/3/95 (collaterilzed by $10,390,000 U.S. Treasury
Notes, 6.125% due 7/15/96) .......................... 5.15 01/03/95 10,223,000 10,223,000
--------------
TOTAL REPURCHASE AGREEMENTS (Cost $62,086,000) ... 62,086,000
--------------
TOTAL INVESTMENTS - 98.4% (Cost $904,318,810) ........... 1,022,006,499
CASH, RECEIVABLES AND OTHER ASSETS
PAYABLES - 1.6% ..................................... 16,984,721
--------------
NET ASSETS - 100.0% ..................................... $1,038,991,220
==============
</TABLE>
* Non-income producing securities.
See notes to financial statements.
34
<PAGE>
THE GUARDIAN STOCK FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<S> <C>
Assets
Investments in securities, at market (identified cost - $904,318,810) ..... $1,022,006,499
Cash ...................................................................... 208
Receivable for securities sold ............................................ 44,947,327
Dividends receivable ...................................................... 1,292,895
Receivable for fund shares sold ........................................... 951,324
Interest receivable ....................................................... 330,393
Prepaid insurance ......................................................... 11,937
--------------
Total Assets ........................................................ 1,069,540,583
--------------
Liabilities
Payable for securities purchased .......................................... 29,137,047
Payable for fund shares redeemed .......................................... 8,710
Accrued expenses .......................................................... 82,779
Due to Guardian Investor Services Corporation - Note B .................... 1,320,827
--------------
Total Liabilities ................................................... 30,549,363
--------------
Net Assets .......................................................... $1,038,991,220
==============
Components of Net Assets
Common stock - 38,014,244 shares issued and outstanding $.10 par value
each (100,000,000 shares authorized) .................................... $ 3,801,424
Paid-in capital ........................................................... 914,517,931
Undistributed net investment income ....................................... 80,253
Accumulated net realized gain ............................................. 2,903,923
Net unrealized appreciation of investments ................................ 117,687,689
--------------
Net Assets .......................................................... $1,038,991,220
==============
Net Asset Value Per Share ................................................. $27.33
======
</TABLE>
See notes to financial statements
35
<PAGE>
THE GUARDIAN STOCK FUND, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
<TABLE>
<S> <C>
Investment Income
Income:
Dividends ............................................................... $ 15,067,485
Interest ................................................................ 4,157,949
------------
Total Income ........................................................ 19,225,434
------------
Expenses:
Investment advisory fees - Note B ....................................... 4,755,723
Transfer agent and custodian fees ....................................... 208,050
Registration fees ....................................................... 30,412
Audit fees .............................................................. 16,500
Directors' fees ......................................................... 12,500
Insurance expense ....................................................... 11,520
Printing expense ........................................................ 5,500
Legal expense ........................................................... 3,285
Other ................................................................... 729
------------
Total Expenses ...................................................... 5,044,219
------------
Net Investment Income ............................................... 14,181,215
------------
Realized and Unrealized Gain/(Loss) On Investments - Note D
Net realized gain from securities transactions .......................... 18,979,488
Net change in unrealized depreciation of investments .................... (45,558,052)
------------
Net Realized and Unrealized Loss On Investments ..................... (26,578,564)
------------
Net Decrease In Net Assets Resulting From Operations ........................... $(12,397,349)
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1994 1993
---- ----
<S> <C> <C>
Increase/(Decrease) In Net Assets
From Operations:
Net Investment Income ................................................................. $ 14,181,215 $ 15,738,687
Net realized gain on investments ...................................................... 18,979,488 37,176,191
Net change in unrealized appreciation/(depreciation) of investments ................... (45,558,052) 67,727,815
--------------- ---------------
Net Increase/(Decrease) in Net Assets Resulting From Operations ................. (12,397,349) 120,642,693
--------------- ---------------
Distributions To Shareholders:
Dividends from net investment income .................................................. (14,152,347) (15,687,302)
Distributions from net realized gain on investments ................................... (31,757,209) (27,193,166)
--------------- ---------------
Total Distributions to Shareholders ............................................. (45,909,556) (42,880,468)
--------------- ---------------
From Capital Share Transactions - Note E:
Increase in net assets from capital share transactions ................................ 228,183,927 253,998,110
--------------- ---------------
Net Increase in Net Assets ...................................................... 169,877,022 331,760,335
Net Assets
Beginning of year ..................................................................... 869,114,198 537,353,863
--------------- ---------------
End of year (including undistributed net investment income of $80,253 in 1994 and
$51,385 in 1993) .................................................................... $ 1,038,991,220 $ 869,114,198
=============== ===============
</TABLE>
See notes to financial statements
36
<PAGE>
THE GUARDIAN STOCK FUND, INC.
Financial Highlights
Selected data for a share of capital stock outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .. $ 29.00 $ 25.52 $ 23.28 $ 17.85 $ 21.39 $ 19.18 $ 16.35 $ 17.15 $ 15.40 $ 11.96
------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Income from
investment
operations
Net investment
income ............ 0.40 0.58 0.48 0.63 0.69 0.84 0.52 0.33 0.24 0.26
Net realized
and unrealized
gain/(loss)
on investments .... (0.77) 4.47 3.97 5.74 (3.13) 3.61 2.80 0.06 2.32 3.51
------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net increase/
(decrease)
from investment
operations ........ (0.37) 5.05 4.45 6.37 (2.44) 4.45 3.32 0.39 2.56 3.77
------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Distributions to
shareholders
Dividends from
net investment
income ............ (0.40) (0.59) (0.48) (0.64) (0.71) (0.90) (0.49) (0.43) (0.22) (0.29)
Distributions
from net
realized gain ..... (0.90) (0.98) (1.73) (0.30) (0.39) (1.34) -- (0.76) (0.59) (0.04)
------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Total distributions (1.30) (1.57) (2.21) (0.94) (1.10) (2.24) (0.49) (1.19) (0.81) (0.33)
------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net asset value,
end of year ....... $ 27.33 $ 29.00 $ 25.52 $ 23.28 $ 17.85 $ 21.39 $ 19.18 $ 16.35 $ 17.15 $ 15.40
====== ====== ====== ====== ======= ====== ====== ====== ====== ======
Total return* ....... (1.27%) 19.96% 20.07% 35.96% (11.85%) 23.55% 20.37% 1.87% 17.10% 32.01%
====== ====== ====== ====== ======= ====== ====== ====== ====== ======
Ratios/supplemental
data:
Net assets, end
of year
(000's omitted) ..$1,038,991 $ 869,114 $537,354 $380,962 $256,039 $269,950 $172,900 $139,437 $66,081 $21,875
Ratio of expenses
to average net
assets ............ 0.53% 0.54% 0.55% 0.56% 0.57% 0.57% 0.61% 0.61% 0.75% 1.00%
Ratio of net
investment income
to average net
assets ............ 1.49% 2.20% 2.14% 3.07% 3.66% 4.13% 2.88% 2.08% 2.00% 2.55%
Ratio of expenses
subsidized by GISC -- -- -- -- -- -- -- -- -- 0.10%
Portfolio turnover
rate .............. 53% 45% 62% 51% 54% 38% 71% 37% 36% 61%
</TABLE>
* Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
See notes to financial statements.
37
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Guardian Stock Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of The Guardian Stock Fund, Inc. as of
December 31, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the ten years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Guardian Stock Fund, Inc. at December 31, 1994, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and financial highlights for each of the ten years in
the period then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
February 10, 1995
38
<PAGE>
THE GUARDIAN BOND FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
Interest Maturity
Issuer - Description Rate Date Par Value Value
-------------------- ---- ---- --------- -----
<S> <C> <C> <C> <C>
MULTI CLASS MORTGAGE PASS-THROUGHS - 25.0%
Citibank New York ............................................ 9.500% 08/01/16 $ 306,514 $ 304,552
Citicorp Mortgage Secs., Inc. ................................ 6.500 01/25/24 4,750,000 3,734,450
Citicorp Mortgage Secs., Inc. ................................ 7.750 11/25/06 3,462,000 3,352,601
Citicorp Mortgage Secs., Inc. ................................ 6.250 03/25/24 5,000,000 3,956,000
Residential Funding Mtg. Secs., Inc. ......................... 5.950 11/25/23 5,000,000 3,981,000
Sears Mortgage Secs. Corp. ................................... 6.500 05/25/22 2,715,965 2,545,131
Federal Home Loan Mortgage Corp. ............................. 7.400 12/15/21 3,000,000 2,761,800
Federal Home Loan Mortgage Corp. ............................. 6.800 12/15/18 6,000,000 5,341,860
Federal Home Loan Mortgage Corp. ............................. 6.000 11/15/20 5,000,000 4,296,500
Federal Home Loan Mortgage Corp. ............................. 6.000 02/15/04 1,671,000 1,474,490
Federal Home Loan Mortgage Corp. ............................. 7.500 03/15/20 5,000,000 4,602,500
Federal Home Loan Mortgage Corp. ............................. 7.000 09/15/23 9,000,000 8,069,040
Federal Home Loan Mortgage Corp. ............................. 7.500 06/25/23 8,000,000 7,412,000
Federal National Mortgage Assn. .............................. 7.000 05/25/20 4,000,000 3,530,400
Federal National Mortgage Assn. .............................. 7.000 04/25/12 7,000,000 6,656,510
Federal National Mortgage Assn. .............................. 6.500 01/25/06 4,000,000 3,552,480
Federal National Mortgage Assn. .............................. 6.000 04/25/20 4,359,000 3,693,817
Federal National Mortgage Assn. .............................. 6.500 03/25/12 4,000,000 3,490,000
Federal National Mortgage Assn. .............................. 5.750 04/25/06 2,000,000 1,785,800
Federal National Mortgage Assn. .............................. 6.250 02/25/08 3,000,000 2,642,400
------------
TOTAL MULTI CLASS MORTGAGE PASS-THROUGHS
(Cost $83,153,107) ..................................... 77,183,331
------------
MORTGAGE PASS-THROUGHS - 8.6%
FNMA Pool #068106 ............................................ 8.500 08/01/09 1,012,623 997,069
FNMA Pool #068772 ............................................ 8.000 06/01/08 1,413,082 1,362,692
FNMA Pool #072923 ............................................ 8.250 01/01/09 17,097 16,530
GNMA Pool #000375 ............................................ 11.500 07/20/00 13,491 14,410
GNMA Pool #392735 ............................................ 8.000 11/15/24 9,993,275 9,552,871
GNMA Pool #392738 ............................................ 8.000 11/15/24 1,958,813 1,872,488
GNMA Pool #392755 ............................................ 8.000 11/15/24 4,076,826 3,897,160
GNMA Pool #404926 ............................................ 8.000 11/15/24 9,122,407 8,720,382
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $26,434,063) ..................................... 26,433,602
-----------
</TABLE>
See notes to financial statements.
39
<PAGE>
THE GUARDIAN BOND FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Interest Maturity
Issuer - Description Rate Date Par Value Value
-------------------- ---- ---- --------- -----
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCIES - 22.7%
Federal Home Loan Mortgage Corp. ............................. 7.188% 09/15/99 $ 13,000,000 $ 12,589,720
Federal Home Loan Mortgage Corp. ............................. 8.440 10/27/04 10,000,000 9,821,900
U.S. Treasury Notes .......................................... 5.125 11/30/98 15,000,000 13,645,350
U.S. Treasury Notes .......................................... 6.750 05/31/99 16,000,000 15,342,560
U.S. Treasury Notes .......................................... 6.875 07/31/99 9,500,000 9,143,750
U.S. Treasury Notes .......................................... 6.875 08/31/99 10,000,000 9,625,000
------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(Cost $72,830,377) ..................................... 70,168,280
------------
CORPORATE BONDS -- 26.5%
Automotive -- 2.5%
Gen. Motors Accep. Corp. ..................................... 7.375 06/09/99 8,000,000 7,600,000
------------
Drugs and Hospital -- 2.1%
Rhone Poulenc SA ............................................. 6.750 10/15/99 7,000,000 6,516,370
------------
Electric -- 3.6%
Cleveland Electric Illuminating Co. .......................... 8.750 11/15/05 500,000 446,155
Consumers Power Co. .......................................... 7.500 06/01/02 2,500,000 2,275,350
Duquesne Light Co. ........................................... 6.700 05/15/03 5,000,000 4,412,500
Illinois Power Co. ........................................... 5.625 04/15/00 4,500,000 3,956,850
------------
11,090,855
------------
Electronics and Instruments -- 1.9%
Philips Electronics NV ....................................... 8.375 09/15/06 6,000,000 5,869,860
------------
Financial-Banks -- 1.6%
Keycorp ...................................................... 8.400 04/01/99 3,000,000 2,988,240
Republic NY Corp. ............................................ 8.375 02/15/07 2,000,000 1,962,700
------------
4,950,940
------------
Financial-Others -- 2.2%
Amer. Express Master Tr. ..................................... 5.375 07/15/01 8,000,000 6,930,000
------------
Food, Beverage and Tobacco -- 4.3%
BAT Capital Corp. ............................................ 6.875 04/15/03 8,000,000 7,118,240
Dole Foods, Inc. ............................................. 7.000 05/15/03 2,000,000 1,771,060
Dole Foods, Inc. ............................................. 6.750 07/15/00 5,000,000 4,547,750
------------
13,437,050
------------
Machinery and Equipment -- 1.8%
McDermott, Inc. Mtn. Bk. ..................................... 6.570 04/20/98 6,000,000 5,585,400
------------
Merchandising-Department Store -- 1.1%
Wal Mart Stores, Inc. ........................................ 8.750 12/29/06 3,400,000 3,404,556
------------
</TABLE>
See notes to financial statements.
40
<PAGE>
THE GUARDIAN BOND FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Interest Maturity
Issuer - Description Rate Date Par Value Value
-------------------- ---- ---- --------- -----
<S> <C> <C> <C> <C>
Natural Gas -- 0.7%
Internorth, Inc. ............................................. 9.625% 03/15/06 $ 1,000,000 $ 1,063,260
Texas Eastern Corp. .......................................... 8.500 02/10/97 1,000,000 991,320
------------
2,054,580
------------
Paper and Forest Products -- 3.8%
Boise Cascade Corp. .......................................... 7.100 01/13/99 5,000,000 4,642,000
James River Corp., VA ........................................ 8.375 11/15/01 2,000,000 1,947,240
James River Corp., VA ........................................ 6.700 11/15/03 6,000,000 5,301,000
------------
11,890,240
------------
Taxable Municipals -- 0.9%
Marshall County, WV .......................................... 7.750 03/15/04 388,784 386,607
New Orleans, LA Home Mtg. Auth. .............................. 7.500 03/15/06 2,000,000 1,909,600
Raleigh Fayette/Nichols Cnty, WV ............................. 7.820 12/15/03 399,442 397,724
------------
2,693,931
------------
TOTAL CORPORATE BONDS
(Cost $87,611,282) .................................... 82,023,782
------------
REPURCHASE AGREEMENT -- 16.5%
State Street Bank & Trust Co., repurchase agreement, dated
12/30/94, maturity value $50,905,112 (collateralized by
$51,705,000 U.S.Treasury Notes, 6.125% due 7/15/96) ........ 5.150 01/03/95 50,876,000 50,876,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $50,876,000) ...................................... 50,876,000
------------
TOTAL INVESTMENTS -- 99.3% (Cost $320,904,829) .................. 306,684,995
CASH, RECEIVABLES AND OTHER ASSETS
LESS PAYABLES -- 0.7% ......................................... 2,293,090
------------
NET ASSETS -- 100.0% ............................................ $308,978,085
============
</TABLE>
See notes to financial statements.
41
<PAGE>
THE GUARDIAN BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
Assets
Investments in securities, at market
(identified cost - $270,028,829) ........................ $ 255,808,995
Repurchase agreement (cost - $50,876,000) ................. 50,876,000
Cash ...................................................... 228
Receivable for securities sold ............................ 7,893,225
Interest receivable ....................................... 3,133,388
Receivable for fund shares sold ........................... 70,624
Prepaid insurance ......................................... 3,862
-------------
Total Assets ........................................ 317,786,322
-------------
Liabilities
Payable for securities purchased .......................... 8,100,313
Payable for fund shares redeemed .......................... 255,278
Accrued expenses .......................................... 35,029
Due to Guardian Investor Services Corporation - Note B .... 417,617
-------------
Total Liabilities ................................... 8,808,237
-------------
Net Assets .......................................... $ 308,978,085
=============
Components of Net Assets
Common stock - 27,886,609 shares issued and outstanding,
$.10 par value each (100,000,000 shares authorized) ..... $ 2,788,661
Paid-in capital ........................................... 333,573,598
Undistributed net investment income ....................... 99,343
Accumulated net realized loss ............................. (13,263,683)
Net unrealized depreciation of investments ................ (14,219,834)
-------------
Net Assets ............................................... $ 308,978,085
=============
Net Asset Value Per Share ..................................... $ 11.08
=============
See notes to financial statements.
42
<PAGE>
THE GUARDIAN BOND FUND, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
Investment Income
Income:
Interest ................................................ $ 20,147,980
------------
Expenses:
Investment advisory fees -- Note B ...................... 1,615,477
Transfer agent and custodian fees ....................... 90,025
Audit fees .............................................. 16,500
Directors' fees ......................................... 12,500
Printing expense ........................................ 5,500
Insurance expense ....................................... 4,800
Legal expense ........................................... 3,413
Other ................................................... 729
Registration fees ....................................... 412
------------
Total Expenses ........................................ 1,749,356
------------
Net Investment Income ................................. 18,398,624
------------
Realized and Unrealized Gain/(Loss) On Investments -- Note D
Net realized loss from securities transactions .......... (13,787,259)
Net change in unrealized (depreciation) of investments .. (16,409,226)
------------
Net Realized and Unrealized Loss on Investments ....... (30,196,485)
------------
Net Decrease in Net Assets Resulting from Operations .......... $(11,797,861)
============
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
1994 1993
---- ----
Increase/(Decrease) In Net Assets
From Operations:
Net investment income .................... $ 18,398,624 $ 17,632,620
Net realized gain/(loss) from securities
transactions ........................... (13,787,259) 15,116,239
Net change in unrealized (depreciation)
of investments ......................... (16,409,226) (4,121,726)
------------- -------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations ............ (11,797,861) 28,627,133
------------- -------------
Distributions to Shareholders:
Dividends from net investment income ..... (18,375,937) (17,405,234)
Distribution in excess of net investment
income ................................. -- (268,803)
Distributions from net realized gain on
investments ............................ (1,613,357) (13,475,320)
------------- -------------
Total Distributions to Shareholders .... (19,989,294) (31,149,357)
------------- -------------
From Capital Share Transactions - Note E:
Increase in net assets from capital
share transactions ..................... 496,365 58,460,804
------------- -------------
Net Increase/(Decrease) in Net Assets .. (31,290,790) 55,938,580
Net Assets:
Beginning of year ........................ 340,268,875 284,330,295
------------- -------------
End of year (including undistributed
net investment income of $99,343 in
1994 and $76,656 in 1993) .............. $ 308,978,085 $ 340,268,875
============= =============
See notes to financial statements.
43
<PAGE>
THE GUARDIAN BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the
years indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year ......................... $ 12.24 $ 12.26 $ 12.33 $ 11.56 $ 11.67 $ 11.16 $ 11.12 $ 12.41 $ 11.57 $ 10.18
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from invest-
ment operations
Net investment
income ..................... 0.40 0.70 0.81 0.92 0.97 0.98 1.03 0.96 0.83 0.74
Net realized and
unrealized gain/
(loss) on invest-
ments ...................... (0.82) 0.50 0.13 0.91 (0.11) 0.55 0.02 (0.92) 0.83 1.44
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase/(de-
crease) from
investment oper-
ations ..................... (0.42) 1.20 0.94 1.83 0.86 1.53 1.05 0.04 1.66 2.18
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions to
shareholders
Distributions from
net investment
income ..................... (0.68) (0.70) (0.81) (0.92) (0.97) (1.02) (1.01) (1.23) (0.79) (0.79)
Distributions from
net realized
gain ....................... (0.06) (0.52) (0.20) (0.14) -- -- -- (0.10) (0.03) --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions .......... (0.74) (1.22) (1.01) (1.06) (0.97) (1.02) (1.01) (1.33) (0.82) (0.79)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value,
end of year .................. $ 11.08 $ 12.24 $ 12.26 $ 12.33 $ 11.56 $ 11.67 $ 11.16 $ 11.12 $ 12.41 $ 11.57
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return* .................. (3.45%) 9.85% 7.70% 16.19% 7.57% 13.88% 9.70% .32% 14.84% 22.36%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) ...................$308,978 $340,269 $284,330 $222,299 $165,844 $147,753 $113,616 $103,846 $73,491 $25,537
Ratio of expenses
to average net
assets ..................... 0.54% 0.55% 0.56% 0.57% 0.58% 0.60% 0.61% 0.62% 0.69% 1.00%
Ratio of net invest-
ment income to
average net
assets ..................... 5.69% 5.56% 6.70% 7.81% 8.53% 8.78% 8.97% 8.97% 9.10% 10.25%
Ratio of expenses
subsidized by
GISC ....................... -- -- -- -- -- -- -- -- -- 0.16%
Portfolio turnover
rate ....................... 311% 220% 57% 43% 39% 158% 24% 67% 55% 48%
* 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.
44
<PAGE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Guardian Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of The Guardian Bond Fund, Inc. as of
December 31, 1993, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1993, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Guardian Bond Fund, Inc. at December 31, 1993, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and financial highlights for each of the indicated
periods therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 11, 1994
45
<PAGE>
THE GUARDIAN CASH FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
Interest or
Maturity Discount Principal
Issuer - Description Date Rate Amount Value
-------------------- -------- ----------- --------- -----
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 93.8%
FINANCIAL - 30.4%
Bank Holding Companies - 4.6%
J.P. Morgan & Co., Inc. ..................... 01/20/95 5.950% $18,000,000 $ 17,943,475
------------
Financial - Others - 25.8%
Assoc. Corp. of North Amer. .................. 01/04/95 5.840 16,000,000 15,992,213
Exxon Funding BV ............................. 01/05/95 5.760 14,000,000 13,991,040
General Electric Cap. Corp. .................. 01/19/95 5.700 16,000,000 15,954,400
Household Fin. Corp. ......................... 01/17/95 5.900 18,000,000 17,952,800
Nat'l. Rural Utils. Coop. Fin. ............... 01/09/95 5.950 18,000,000 17,976,200
USAA Capital Corp. ........................... 01/12/95 5.950 18,000,000 17,967,275
------------
99,833,928
------------
TOTAL FINANCIAL ............................ 117,777,403
------------
INDUSTRIAL - 63.4%
Aerospace and Defense - 4.7%
Rockwell Int'l. Corp. ....................... 01/09/95 5.960 18,000,000 17,976,160
------------
Automotive - 13.4%
Daimler Benz ................................. 01/19/95 6.040 18,000,000 17,945,640
Ford Motor Cr. Co. ........................... 01/13/95 5.850 16,000,000 15,968,800
Toyota Motor Credit Corp. .................... 01/11/95 5.920 18,000,000 17,970,400
------------
51,884,840
------------
Drugs and Hospitals - 4.6%
Smithkline Beecham Corp. ..................... 01/26/95 5.980 18,000,000 17,925,250
------------
Food, Beverage and Tobacco - 9.3%
Hershey Foods Corp. .......................... 01/23/95 5.950 18,000,000 17,934,550
Nestl, Capital Corp. ......................... 01/11/95 5.950 18,000,000 17,970,250
------------
35,904,800
------------
Household Products - 4.6%
Colgate Palmolive Co. ........................ 01/13/95 5.980 18,000,000 17,964,120
------------
</TABLE>
See notes to financial statements.
46
<PAGE>
THE GUARDIAN CASH FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Interest or
Maturity Discount Principal
Issuer - Description Date Rate Amount Value
-------------------- -------- ----------- --------- -----
<S> <C> <C> <C> <C>
Oil - Integrated - 9.3%
Chevron Oil Finance Co. ...................... 01/27/95 5.970% $18,000,000 $ 17,922,390
Texaco, Inc. ................................. 01/20/95 5.990 18,000,000 17,943,095
------------
35,845,485
------------
Oil Services - 4.6%
Colonial Pipeline Co. ........................ 01/17/95 6.000 18,000,000 17,952,000
------------
Telecommunications - 12.9%
Amer. Tel. and Telegraph Co. ................. 02/10/95 5.880 18,000,000 17,882,400
British Telecommunications PLC ............... 01/18/95 5.700 16,000,000 15,956,933
U.S. West Comms., Inc. ....................... 01/25/95 6.020 16,000,000 15,935,787
------------
49,775,120
------------
TOTAL INDUSTRIAL ........................... 245,247,775
------------
TOTAL COMMERCIAL PAPER (Cost $363,025,178) . 363,025,178
------------
REPURCHASE AGREEMENT - 6.6%
State Street Bank & Trust Co., repurchase
agreement, dated 12/30/94, maturity value
$25,392,522 (collateralized by $25,790,000
Treasury Notes, 6.125% due 7/15/96) ........ 01/03/95 5.150% 25,378,000 25,378,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $25,378,000) ........................ 25,378,000
------------
TOTAL INVESTMENTS - 100.4% (Cost $388,403,178) .. 388,403,178
PAYABLES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS - (0.4%) ......................... (1,417,342)
------------
NET ASSETS - 100.0% ............................. $386,985,836
============
</TABLE>
See notes to financial statements.
47
<PAGE>
THE GUARDIAN CASH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<S> <C>
Assets
Investments in money market instruments, at amortized cost which approximates value . $388,403,178
Cash ................................................................................ 613
Receivable for fund shares sold ..................................................... 367,509
Interest receivable ................................................................. 7,261
Prepaid insurance ................................................................... 4,915
------------
Total Assets .................................................................. 388,783,476
------------
Liabilities
Payable for fund shares redeemed .................................................... 1,212,561
Accrued expenses .................................................................... 60,141
Due to Guardian Investor Services Corporation - Note B .............................. 524,938
Total Liabilities ............................................................. 1,797,640
------------
Net Assets ................................................................. $386,985,836
============
Components of Net Assets
Common stock - 38,698,584 shares issued and outstanding $.10 par value each
(100,100,000 shares authorized) ................................................ $ 3,869,859
Paid-in capital ..................................................................... 383,115,977
------------
Net Assets ....................................................................... $386,985,836
============
Net Asset Value Per Share ........................................................... $10.00
======
</TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
Investment Income:
Income:
Interest ............................................ $15,882,380
-----------
Expenses:
Investment advisory fees - Note B ................... 1,823,235
Transfer agent and custodian fees ................... 86,336
Registration fees ................................... 23,583
Audit fees .......................................... 16,500
Directors' fees ..................................... 12,500
Insurance expense ................................... 4,160
Printing expense .................................... 5,500
Legal expense ....................................... 2,295
Other ............................................... 729
-----------
Total Expenses .................................... 1,974,838
-----------
Net Investment Income ............................. $13,907,542
===========
See notes to financial statements.
48
<PAGE>
THE GUARDIAN CASH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
---- ----
<S> <C> <C>
Increase/(Decrease) in Net Assets
From Operations:
Net investment income ................................................... $ 13,907,542 $ 7,641,979
------------ ------------
Net Increase in Net Assets Resulting From Operations ................ 13,907,542 7,641,979
------------ ------------
Distributions to Shareholders:
Dividends from net investment income ................................... (13,907,542) (7,641,979)
------------ ------------
From Capital Share Transactions - Note E:
Increase/(decrease) in net assets from capital share transactions ...... 76,187,548 (8,080,944)
------------ ------------
Net Increase/(Decrease) in Net Assets ................................ 76,187,548 (8,080,944)
Net Assets:
Beginning of year ...................................................... 310,798,288 318,879,232
------------ ------------
End of year ........................................................... $386,985,836 $310,798,288
============ ============
</TABLE>
Financial Highlights
Selected data for a share of capital stock outstanding throughout the years
indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment
operations
Net investment
income ............ 0.38 0.26 0.35 0.54 0.77 0.87 0.72 0.63 0.62 0.75
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions to
shareholders
Dividends from
net investment
income ............ (0.38) (0.26) (0.35) (0.54) (0.77) (0.87) (0.72) (0.63) (0.62) (0.75)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year ........ $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return* ........ 3.82% 2.64% 3.21% 5.59% 7.95% 8.70% 7.20% 6.30% 6.20% 7.50%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Ratios/
supplemental data:
Net assets, end
of year (000's
omitted) ......... $386,986 $310,798 $318,879 $331,677 $331,600 $262,865 $228,310 $164,326 $87,403 $58,141
Ratio of expenses
to average net
assets ........... 0.54% 0.54% 0.54% 0.55% 0.56% 0.56% 0.58% 0.61% 0.61% 0.64%
Ratio of net
investment income
to average
net assets ....... 3.81% 2.61% 3.17% 5.44% 7.67% 8.67% 7.17% 6.27% 6.14% 7.61%
</TABLE>
* Total returns do not reflect the effects of charges deducted under the terms
of GIAC's variable contracts. Including such charges would reduce the total
returns for all periods shown.
See notes to financial statements.
49
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Guardian Cash Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of The Guardian Cash Fund, Inc. as of
December 31, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the ten years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Guardian Cash Fund, Inc. at December 31, 1994, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and financial highlights for each of the ten years in the
period then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 10, 1995
50
<PAGE>
THE GUARDIAN STOCK FUND, INC.,
THE GUARDIAN BOND FUND, INC. AND THE GUARDIAN CASH FUND, INC.
COMBINED NOTES TO FINANCIAL STATEMENTS
December 31, 1994
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), are each
incorporated in the state of Maryland and are diversified open-end management
investment companies registered under the Investment Company Act of 1940, as
amended (1940 Act). Each Fund sold 10,000 of its shares to The Guardian
Insurance & Annuity Company, Inc. (GIAC) for $100,000 in order to facilitate the
commencement of its operations. Such shares were subsequently deposited in The
Guardian Separate Account A, a separate account of GIAC which is registered as a
unit investment trust under the 1940 Act. Shares of the Funds are only sold to
certain separate accounts of GIAC. The Funds are available for investment only
through the purchase of certain variable annuity and variable life insurance
contracts issued by GIAC. GIAC is a wholly owned subsidiary of The Guardian Life
Insurance Company of America (Guardian Life). Significant accounting policies of
the Funds are as follows:
Investments
Investments in GSF and GBF are carried at value. Securities listed on
national securities exchanges are valued based upon closing prices on these
exchanges. Securities traded in the over-the-counter market and listed
securities for which there have been no trades for the day are valued at the
mean of the bid and asked prices.
Certain debt securities may be valued each business day by an independent
pricing service (Service) approved by the Board of Directors. Debt securities
for which quoted bid prices, in the judgment of the Service, are readily
available and representative of the bid side of the market, are valued at the
mean between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other debt securities that are
valued by the Service are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
Securities for which market quotations are not readily available, including
certain mortgage-backed securities and restricted securities, are valued by
using methods that each Fund's Board of Directors, in good faith, believes will
accurately reflect their fair value.
The valuation of securities held by GCF is based upon their amortized cost
which approximates market value, in accordance with Rule 2a-7 under the 1940
Act. Amortized cost valuations do not take into account unrealized gains and
losses.
Investment securities transactions are recorded on the date of purchase or
sale. Repurchase agreements are carried at cost, which approximates value (see
Note C).
Net realized gain or loss on sales of investments is determined on the basis
of identified cost. Interest income, including amortization of premium and
discount, is recorded when earned. Dividends are recorded on the ex-dividend
date.
Federal Income Taxes
Each Fund qualifies and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the Internal Revenue Code
of 1986, as amended (Code), and as such will not be subject to federal income
tax on investment income (including any realized capital gains) which is
distributed to its shareholders in accordance with the applicable provisions of
the Code. Therefore, no federal income tax provision is required. Net realized
51
<PAGE>
THE GUARDIAN STOCK FUND, INC.,
THE GUARDIAN BOND FUND, INC. AND THE GUARDIAN CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
losses attributable to security transactions after October 31, 1994 are treated
as arising on the first day of the Funds' next fiscal year.
GBF had $11,866,424 in capital loss carryforwards for federal tax purposes
at December 31, 1994. These amounts are available to be carried forward to
offset future capital gains through the year ending December 31, 2002. To the
extent that such carryforwards are utilized by the fund, no capital gains
distributions will be made.
Reclassifications of Capital Accounts
During the year ended December 31, 1994, GSF reclassified ($113,817) to
paid-in capital from accumulated net realized gains/(losses) to reflect
permanent differences between income recognition on a tax basis and a GAAP
basis. In addition, distributions in excess of net investment income for GBF in
1993 represent prior years' differences between distributions calculated in
accordance with income tax regulations and net investment income and have been
recorded as a temporary overdistribution of net investment income in the
Statement of Changes in Net Assets.
Dividend Distributions
GSF and GBF intend to distribute each year, as dividends or capital gain
distributions, substantially all net investment income and net capital gains
realized. All such dividends or distributions are credited in the form of
additional shares of the applicable Fund at net asset value on the ex-dividend
date. Such distributions are determined in conformity with federal income tax
regulations. Differences between the recognition of income on an income tax
basis and recognition of income based on generally accepted accounting
principles may cause temporary overdistributions of net realized gains and net
investment income. Currently, the policy of GSF and GBF is to distribute net
investment income approximately every six months and net capital gains annually.
This policy is, however, subject to change at any time by each Fund's Board of
Directors.
GCF earns interest on its investments daily and distributes all of its net
investment income, increased or decreased by realized gains or losses, each day
GCF is open for business. Earnings for Saturdays, Sundays and holidays are paid
as a dividend on the next business day.
All dividends and distributions are credited in the form of additional
shares of GCF at net asset value on the payable date.
Note B - Investment Advisory Agreements and Payments to Related Parties
Each Fund has an investment advisory agreement with Guardian Investor
Services Corporation (GISC), a wholly owned subsidiary of GIAC. GISC receives a
management fee from each Fund computed at the rate of .50% of the daily average
net assets during the fiscal year, payable quarterly. If total expenses of any
Fund (excluding taxes, interest and brokerage commissions, but including the
investment advisory fee) exceeds 1% per annum of the average daily net assets of
the Fund, GISC has agreed to assume any such expenses. None of the Funds
exceeded this limit during the year ended December 31, 1994.
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 $12,500 for the year ended
December 31, 1994.
Note C - Repurchase Agreements
Collateral underlying repurchase agreements takes the form of either cash or
fully negotiable U.S. government securities. Repurchase agreements are fully
collateralized (including the interest earned thereon) and such collateral is
marked to market daily while the agreements remain in force. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
52
<PAGE>
THE GUARDIAN STOCK FUND, INC.,
THE GUARDIAN BOND FUND, INC. AND THE GUARDIAN CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
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:
Year Ended December 31, 1994
------------------------------
GSF GBF
--- ---
Purchases
Stocks and debt obligations ........... $861,549,000 $ 45,425,324
U.S. Government and government
agency obligations .................. -- 829,054,577
Proceeds
Stocks and debt obligations ........... $465,954,327 $905,532,509
U.S. Government and government
agency obligations ................. -- 843,391,585
The cost of investments owned at December 31, 1994 for federal income tax
purposes was $904,318,810, $320,904,829 and $388,403,178 for GSF, GBF and GCF,
respectively. The gross unrealized appreciation and depreciation at December 31,
1994 for GSF and GBF were as follows:
GSF GBF
--- ---
Gross Appreciation ..................... $ 154,688,697 $ 203,903
Gross Depreciation ..................... (37,001,008) (14,423,737)
------------- -------------
Net Unrealized
Appreciation/(Depreciation) ........ $ 117,687,689 $ (14,219,834)
============= =============
53
<PAGE>
THE GUARDIAN STOCK FUND, INC.,
THE GUARDIAN BOND FUND, INC. AND THE GUARDIAN CASH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Note E - Transactions in Capital Stock
<TABLE>
<CAPTION>
The Guardian Stock Fund, Inc.
Year Ended December 31,
-----------------------------------------------------------------------------
1994 1993
-------------------------------------- -------------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 10,511,824 $ 299,351,838 10,793,425 $ 307,805,579
Shares issued through reinvestment of
dividends from net investment income
and net realized gain on sales of
investments .................................. 1,661,572 45,909,555 1,497,661 42,880,468
------------- ------------- ------------- -------------
12,173,396 345,261,393 12,291,086 350,686,047
Less shares repurchased ..................... (4,131,682) (117,077,466) (3,378,533) (96,687,937)
------------- ------------- ------------- -------------
NET INCREASE .......................... 8,041,714 $ 228,183,927 8,912,553 $ 253,998,110
============= ============= ============= =============
The Guardian Bond Fund, Inc.
Year Ended December 31,
-----------------------------------------------------------------------------
1994 1993
-------------------------------------- -------------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold .................................... 4,878,473 $ 57,770,327 7,539,809 $ 97,395,550
Shares issued through reinvestment of
dividends from net investment income
and net realized gain on sales of
investments .................................. 1,769,521 19,989,294 2,507,093 31,149,357
------------- ------------- ------------- -------------
6,647,994 77,759,621 10,046,902 128,544,907
Less shares repurchased ........................ (6,559,394) (77,263,256) (5,436,233) (70,084,103)
------------- ------------- ------------- -------------
NET INCREASE .......................... 88,600 $ 496,365 4,610,669 $ 58,460,804
============= ============= ============= =============
The Guardian Cash Fund, Inc.
Year Ended December 31,
-----------------------------------------------------------------------------
1994 1993
-------------------------------------- -------------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold .................................... 28,157,184 $ 281,571,841 20,490,265 $ 204,902,645
Shares issued through reinvestment of
dividends from net investment income .......... 1,390,754 13,907,542 764,460 7,644,600
------------- ------------- ------------- -------------
29,547,938 295,479,383 21,254,725 212,547,245
Less shares repurchased ........................ (21,929,183) (219,291,835) (22,062,819) (220,628,189)
------------- ------------- ------------- -------------
NET INCREASE/(DECREASE) ............... 7,618,755 $ 76,187,548 (808,094) $ (8,080,944)
============= ============= ============= =============
</TABLE>
Note F - Line of Credit
A $20,000,000 line of credit available to all of the Funds was established
with Morgan Guaranty Trust Company. The rate of interest charged on any
borrowings is based upon the prevailing Federal Funds rate at the time of the
loan plus .25% calculated on a 360 day basis per annum. For the year ended
December 31, 1994, none of the Funds borrowed against this line of credit.
54
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer - Description Shares Value
-------------------- ------ -----
COMMON STOCKS -- 94.6%
ARGENTINA -- 0.4%
Real Estate -- 0.4%
Comercial De Plata ...................... 533,000 $ 1,359,014
-----------
AUSTRALIA -- 4.2%
Business Services - 0.6%
Brambles Industries Ltd. ................ 200,000 1,910,670
Conglomerates - 0.5%
Australia National Industries ........... 1,319,397 1,473,272
Electric Utilities - 0.6%
Australia Gas & Light Co. ............... 550,000 1,855,226
Financial-Bank - 0.6%
Commonwealth Bank of Australia .......... 303,559 1,871,351
Forest Products - 0.7%
Amcor Limited ........................... 277,929 2,008,606
Real Estate - 0.6%
Lend Lease Corp. ........................ 153,557 1,900,411
Retail Trade - 0.6%
Woolworths Limited ...................... 847,974 1,841,135
-----------
12,860,671
-----------
AUSTRIA -- 0.8%
Financial-Bank - 0.8%
Creditanstalt Bank ...................... 40,000 2,325,006
-----------
BELGIUM -- 0.7%
Containers and Glass - 0.7%
Glaverbel ............................... 15,000 1,985,225
-----------
CHILE -- 0.5%
Electric Utilities - 0.5%
Enersis SA .............................. 50,000 1,387,500
-----------
CZECHOSLOVAKIA -- 0.4%
Electric Utility - 0.4%
Cez (Cesk En Zavody)* ................... 25,000 1,216,893
-----------
FRANCE -- 7.3%
Business Services - 0.7%
Ecco STE ................................ 17,250 2,047,650
Chemicals - 0.6%
Rhone Poulenc SA* ....................... 75,500 1,751,442
* Non-income producing securities.
See notes to financial statements.
55
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer - Description Shares Value
-------------------- ------ -----
FRANCE (continued)
Containers and Glass - 1.0%
Cie De St Gobain ........................ 26,000 $ 2,988,953
Conglomerates - 1.0%
CGIP* ................................... 2,140 468,789
Lyonnaise Des Eaux SA ................... 30,000 2,634,338
Financial-Bank - 0.9%
Societe Generale ........................ 26,000 2,730,949
Leisure Time - 0.5%
Club Mediterranee* ...................... 20,000 1,673,844
Real Estate - 0.6%
Simco ................................... 20,000 1,722,524
Retail Trade - 1.1%
Carrefour ............................... 5,000 2,070,773
Castorama Dubois ........................ 10,700 1,336,248
Oil-Integrated - 0.9%
Societe Elf Aquitaine ................... 38,000 2,674,443
-----------
22,099,953
-----------
GERMANY -- 6.0%
Air Travel - 0.7%
Lufthansa AG* ........................... 16,500 2,076,208
Building Construction - 0.5%
Kampa Haus AG ........................... 2,600 1,451,249
Chemical - 1.3%
BASF AG ................................. 19,000 3,917,210
Industrial Machinery - 1.6%
Deutsche Babcock* ....................... 11,500 1,558,366
Man AG .................................. 10,000 2,736,013
Krones AG ............................... 1,400 785,959
Drugs and Healthcare - 0.4%
GEHE AG ................................. 3,800 1,373,169
Financial-Banks - 1.4%
Deutsche Bank AG ........................ 9,000 4,181,455
Textile - 0.1%
Jean Pascale AG ......................... 770 193,779
-----------
18,273,408
-----------
HONG KONG -- 5.4%
Conglomerates - 1.4%
Hutchison Whampoa ....................... 600,000 2,427,141
Swire Pacific ........................... 300,000 1,868,821
* Non-income producing securities.
See notes to financial statements.
56
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer - Description Shares Value
-------------------- ------ -----
HONG KONG (continued)
Electric Utilities - 1.0%
Hong Kong Electric Holdings ............. 700,000 $ 1,913,409
Hong Kong and China Gas ................. 720,000 1,163,166
Financial-Bank - 1.0%
HSBC Holdings ........................... 275,565 2,973,787
Real Estate - 0.8%
Amoy Properties ......................... 1,070,000 968,013
Hong Kong Land Holding .................. 800,000 1,561,228
Trucking and Freight Forwarding - 0.5%
Shun Tak Holdings ....................... 2,100,000 1,492,730
Telephone - 0.7%
Hong Kong Telecommunications ............ 1,000,000 1,906,300
-----------
16,274,595
-----------
HUNGARY -- 0.2%
Retail Trade - 0.2%
Fotex ................................... 235,000 710,978
-----------
IRELAND -- 0.5%
Construction Materials - 0.5%
CRH ..................................... 250,000 1,379,017
-----------
ITALY -- 4.0%
Automobiles - 1.1%
Fiat Spa* ............................... 900,000 3,341,866
Conglomerates - 0.9%
CIR Compagnie Inds.* .................... 2,350,000 2,739,553
Insurance - 0.5%
RAS ..................................... 252,000 1,525,600
Telephone - 1.2%
Telecom Italia .......................... 1,350,000 3,513,955
Tires and Rubber - 0.3%
Pirelli Spa* ............................ 645,000 859,337
-----------
11,980,311
-----------
JAPAN -- 28.7%
Automobiles - 1.8%
Calsonic Corp. .......................... 287,000 2,388,785
Suzuki Motor Corp. ...................... 272,000 3,195,181
Business Services - 1.9%
Kamigumi Co. ............................ 295,000 3,139,558
Secom Co. ............................... 44,000 2,738,956
Chemicals - 1.0%
Sumitomo Chemicals ...................... 532,000 3,044,578
* Non-income producing securities.
See notes to financial statements.
57
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer - Description Shares Value
-------------------- ------ -----
JAPAN (continued)
Drugs and Healthcare - 2.6%
DDI Corp. ............................... 487 $ 4,205,020
Sankyo Co. .............................. 80,000 1,991,968
Santen Pharmaceutical Co. ............... 60,000 1,668,675
Electrical Equipment - 1.6%
Hitachi ................................. 482,000 4,786,125
Electronics - 4.3%
Aiwa Co. ................................ 171,000 4,206,325
Kyocera Corp. ........................... 66,000 4,896,988
Murata Manufacturing Co. ................ 98,000 3,788,152
Financial Services - 0.5%
Japan Securities Finance ................ 100,000 1,656,627
Household Appliances - 1.0%
Kyushu Matsushita ....................... 125,000 3,062,249
Homebuilders - 0.7%
Sekisui House ........................... 185,000 2,061,747
Industrial Machinery - 2.0%
Amada Co. ............................... 250,000 3,137,550
Mitsubishi Heavy Ind. ................... 400,000 3,052,209
Insurance - 0.9%
Tokio Marine and Fire ................... 232,000 2,841,767
Investment Company - 1.2%
Nomura Securities ....................... 171,000 3,553,916
Leisure Time - 0.9%
Toho Co. ................................ 15,000 2,635,542
Photography - 1.0%
Canon, Inc. ............................. 183,000 3,105,120
Real Estate - 1.1%
Mitsubishi Estate ....................... 300,000 3,222,891
Retail Grocery - 0.9%
Seven Eleven Japan ...................... 35,000 2,814,759
Retail Trade - 2.5%
Ito Yokado Co. .......................... 42,000 2,247,590
Marui Co.* .............................. 180,000 3,289,157
Shimachu Co. ............................ 54,000 1,946,386
Steel - 1.6%
Hitachi Metals .......................... 300,000 3,674,699
Sumitomo Metal Industries* .............. 400,000 1,297,189
Tires and Rubber - 1.2%
Bridgestone Corp. ....................... 230,000 3,602,410
-----------
87,252,119
-----------
* Non-income producing securities.
See notes to financial statements.
58
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer - Description Shares Value
-------------------- ------ -----
MALAYSIA -- 1.5%
Conglomerate - 0.6%
Sime Darby Berhad ....................... 780,000 $ 1,786,959
Telephone - 0.9%
Telekom Malaysia ........................ 400,000 2,710,006
-----------
4,496,965
-----------
MEXICO -- 1.7%
Broadcasting - 0.5%
Telecomunicadoes Brasileras* ............ 36,000 1,611,000
Financial Services - 0.3%
Tolmex .................................. 11,100 946,594
Food and Beverages - 0.5%
Pan American Beverage ................... 44,500 1,407,313
Telephone - 0.4%
Telefonos de Mexico SA .................. 29,500 1,209,500
-----------
5,174,407
-----------
NETHERLANDS -- 2.1%
Drug and Healthcare - 0.3%
ACF Holdings NV ......................... 45,000 889,164
Financial-Bank - 0.7%
ABN Amro Holdings NV .................... 60,000 2,084,222
Household Appliances - 1.1%
Philips Electronic ...................... 110,000 3,257,100
-----------
6,230,486
-----------
SINGAPORE -- 3.3%
Air Travel - 0.7%
Singapore Airlines ...................... 245,000 2,252,487
Financial-Bank - 1.0%
Overseas Chinese Bank ................... 303,333 3,121,781
Industrial Machinery - 0.8%
Sembawang Corp. ......................... 310,000 2,318,353
Publishing - 0.8%
Singapore Press HD ...................... 130,000 2,363,636
-----------
10,056,257
-----------
* Non-income producing securities.
See notes to financial statements.
59
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer - Description Shares Value
-------------------- ------ -----
SPAIN -- 1.4%
Construction Material - 0.5%
Uralita* ................................ 140,000 $ 1,366,762
Financial-Bank - 0.9%
Banco Santander SA ...................... 75,000 2,871,795
-----------
4,238,557
-----------
SWEDEN -- 3.0%
Business Services - 0.5%
Securitas AB ............................ 53,500 1,439,991
Construction and Mining Equipment - 0.5%
Atlas Copco AB .......................... 110,000 1,406,347
Drugs and Healthcare - 1.0%
Astra AB ................................ 123,830 3,199,655
Forest Products - 1.0%
Stora Kopparbergs ....................... 52,500 3,165,290
-----------
9,211,283
-----------
SWITZERLAND -- 2.9%
Drugs and Healthcare - 0.5%
Sandoz AG* .............................. 3,000 1,563,025
Food and Beverage - 1.2%
Nestle SA ............................... 4,000 3,810,543
Insurance - 0.8%
Winterthur .............................. 4,450 2,311,688
Homebuilders - 0.4%
Intershop Holdings AG ................... 3,000 1,237,586
-----------
8,922,842
-----------
THAILAND -- 2.6%
Construction Materials - 0.9%
Siam Cement Co. ......................... 45,000 2,695,877
Financial-Bank - 1.2%
Bangkok Bank ............................ 330,000 3,522,804
Financial Services - 0.5%
Ind. Fin. Thailand* ..................... 750,000 1,598,287
-----------
7,816,968
-----------
UNITED KINGDOM -- 17.0%
Business Services - 0.9%
Associated British Ports ................ 130,000 555,312
BAA ..................................... 280,000 2,072,289
Building Constructions - 0.2%
Fine Arts Development ................... 120,000 666,562
* Non-income producing securities.
See notes to financial statements.
60
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer - Description Shares Value
-------------------- ------ -----
UNITED KINGDOM (continued)
Chemicals - 0.5%
Allied Colloids ......................... 690,000 $ 1,381,943
Conglomerates - 2.0%
BTR ..................................... 312,000 1,435,268
Badgerline Group ........................ 500,000 1,056,173
Hanson .................................. 297,000 1,073,494
Hays .................................... 150,000 659,521
Siebe* .................................. 205,000 1,783,445
Containers and Glass - 0.4%
Caradon PLC ............................. 280,000 1,104,053
Construction Materials - 0.2%
Scapa Group ............................. 210,000 624,315
Construction and Mining
Equipment - 0.2%
Weir Group .............................. 170,000 750,117
Drugs and Healthcare - 1.0%
Glaxo Holdings .......................... 305,000 3,168,831
Electric Utilities - 1.0%
National Power .......................... 116,000 889,376
Yorkshire Electric Group ................ 185,000 2,107,338
Electronics - 0.7%
Electrocomponents ....................... 155,000 1,152,011
Rotork .................................. 340,000 915,037
Financial Banks - 0.4%
National Westminister Bank .............. 164,500 1,320,427
Food, Beverage and Tobacco - 2.4%
Guinness ................................ 320,000 2,253,169
Highland Distilleries ................... 160,000 1,101,549
Iceland Group ........................... 240,000 563,292
Reckitt & Colman ........................ 169,000 1,554,874
Rothmans Int'l. NV ...................... 250,000 1,775,935
Insurance - 1.4%
Abbey National .......................... 285,000 1,917,540
Britannic Assurance ..................... 70,000 435,926
Prudential Corp. ........................ 400,000 1,984,040
Leisure - 0.9%
Granada Group ........................... 270,000 2,163,042
Vendome ................................. 80,000 627,132
Newspaper - 0.2%
Mirror Group PLC ........................ 250,000 508,528
Oil Transport - 1.2%
Shell Transport & Trading ............... 340,000 3,708,027
* Non-income producing securities.
See notes to financial statements.
61
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer - Description Shares Value
-------------------- ------ -----
UNITED KINGDOM (continued)
Publishing - 0.6%
Reuters Holdings ........................ 233,000 $ 1,706,212
Retail-Grocery - 0.6%
Sainsbury (J) ........................... 290,000 1,867,235
Retail-Trade - 0.6%
Marks & Spencer ......................... 300,000 1,868,252
Telephone - 1.6%
British Telecom ......................... 420,000 2,480,833
Vodafone Group .......................... 700,000 2,322,015
-----------
51,553,113
-----------
TOTAL COMMON STOCKS
(Cost $266,150,643) ..................... 286,805,568
-----------
WARRANTS - 0.0%
BTR ..................................... 8,658 4,403
-----------
TOTAL WARRANTS (Cost $0) ................ 4,403
-----------
Maturity Principal
Interest Date Amount
-------- ---- ------
CONVERTIBLE BONDS -- 0.2%
CIR Compagnie Inds.,
Debenture ................... 6.00% 12/31/99 $478,864 468,157
------------
TOTAL CONVERTIBLE BONDS
(Cost $478,864) ............. 468,157
------------
REPURCHASE AGREEMENT -- 4.8%
State Street Bank & Trust Co.,
repurchase agreement, dated
12/30/94, maturity value
$14,488,286 (collateralized
by $15,115,000 U.S. Treasury
Notes, 4.25% due 11/30/95) ... 5.15% 01/03/95 14,480,000 14,480,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $14,480,000) .......... 14,480,000
------------
TOTAL INVESTMENTS -- 99.6%
(Cost $281,109,507) ............ 301,758,128
CASH, RECEIVABLES AND OTHER
ASSETS LESS PAYABLES -- 0.4% ... 1,291,741
------------
NET ASSETS -- 100.0% ........... $303,049,869
============
See notes to financial statements.
62
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
Assets:
Investments in securities, at market
(identified cost - $281,109,507) ...................... $ 301,758,128
Foreign currency (cost - $1,319,046) ................... 1,325,776
Cash ................................................... 4,956
Dividend and interest receivables ...................... 686,161
Foreign tax receivable ................................. 322,492
Receivable for fund shares sold ........................ 227,269
Deferred organization expense .......................... 7,389
Other assets ........................................... 3,511
-------------
Total Assets ......................................... 304,335,682
-------------
Liabilities:
Payable for open forward foreign
currency contracts - Note D ........................... 302,910
Accrued expenses ....................................... 150,656
Foreign tax withholding ................................ 115,384
Payable for fund shares redeemed ....................... 11,491
Due to Guardian Insurance and
Annuity Company, Inc. - Note B ........................ 705,372
-------------
Total Liabilities .................................... 1,285,813
-------------
Net Assets ........................................... $ 303,049,869
=============
Components of Net Assets:
Capital stock - 20,625,182 shares
of $0.10 par value outstanding
(1,000,000,000 shares authorized) ..................... $ 2,062,518
Paid-in capital ........................................ 281,356,735
Undistributed net investment income .................... 250,232
Accumulated net realized loss on
investments and foreign currency
related transactions .................................. (979,191)
Net unrealized appreciation on
investments and foreign
currency related transactions ......................... 20,359,575
-------------
Net Assets ........................................... $ 303,049,869
=============
Net Asset Value Per Share ............................... $ 14.69
=============
See notes to financial statements.
63
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
STATEMENT OF OPERATIONS
Year Ended December 31, 1994
Investment Income:
Income:
Dividends ............................................. $ 5,506,130
Interest .............................................. 730,338
-------------
6,236,468
Less: Foreign tax withheld ............................ 685,070
-------------
Total Income ........................................ 5,551,398
-------------
Expenses:
Investment advisory fees - Note B ..................... 2,081,994
Custodian and transfer agent fees ..................... 500,198
Registration fees ..................................... 42,115
Audit fees ............................................ 20,000
Amortization of deferred organization expense ......... 7,822
Directors' fees - Note B .............................. 7,500
Printing expense ...................................... 5,500
Legal fees ............................................ 3,523
Insurance expense ..................................... 1,600
Other ................................................. 729
-------------
Total Expenses ...................................... 2,670,981
-------------
Net Investment Income ............................. 2,880,417
-------------
Realized and Unrealized Gain/(Loss) on
Investments and Currencies - Note A
Net realized gain on investment transactions .......... 891,740
Net realized gain on foreign currency
related transactions ................................. 1,397,527
Net change in unrealized depreciation
of investments ....................................... (5,523,557)
Net change in unrealized depreciation on
foreign currency related transactions ................ (960,558)
-------------
Net Realized and Unrealized Loss on
Investments and Currencies ........................... (4,194,848)
-------------
Net Decrease in Net Assets Resulting From Operations .... $ (1,314,431)
=============
See notes to financial statements.
64
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
1994 1993
---- ----
Increase in Net Assets
From Operations:
Net investment income ..................... $ 2,880,417 $ 911,460
Net realized gain on investments
and foreign currency related transactions 2,289,267 255,329
Net change in unrealized appreciation/
(depreciation) on investments and
foreign currency related transactions .... (6,484,115) 28,500,405
------------- -------------
Net Increase/(Decrease) in Net
Assets Resulting From Operations ...... (1,314,431) 29,667,194
------------- -------------
Distributions to Shareholders:
Dividends from net investment income ...... (2,504,843) (1,822,920)
Distributions in excess of net
investment income ........................ -- (125,342)
------------- -------------
Total Distributions to Shareholders .... (2,504,843) (1,948,262)
------------- -------------
From Transaction in Shares:
Increase in net assets from share
transactions - Note F .................... 120,074,014 103,901,580
------------- -------------
Net Increase in Net Assets ............. 116,254,740 131,620,512
Net Assets:
Beginning of year .......................... 186,795,129 55,174,617
------------- -------------
End of year (including under/(over)
distributed net investment income of
$250,232 in 1994 and ($125,342) in 1993) .. $ 303,049,869 $ 186,795,129
============= =============
See notes to financial statements.
65
<PAGE>
BAILLIE GIFFORD INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the
periods indicated:
<TABLE>
<CAPTION>
February 8,
1991** to
Year Ended December 31, December 31,
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................................. $ 14.69 $ 11.16 $ 12.37 $ 10.00
------- ------- ------- -------
Income from Investment Operations
Net investment income ............................................... 0.15 0.23 0.09 0.04
Net realized and unrealized gain/(loss) on investments
and foreign currency related transactions .......................... (0.02) 3.54 (1.20) 2.52
------- ------- ------- -------
Net increase/(decrease) from investment operations .................. 0.13 3.77 (1.11) 2.56
------- ------- ------- -------
Distributions to Shareholders
Dividends from net investment income ................................ (0.13) (0.24) (0.10) (0.04)
Distributions from net realized gain on investments
and foreign currency related transactions .......................... -- -- -- (0.13)
------- ------- ------- -------
Total distributions ................................................ (0.13) (0.24) (0.10) (0.19)
------- ------- ------- -------
Net asset value, end of period ........................................ $ 14.69 $ 14.69 $ 11.16 $ 12.37
======= ======= ======= =======
Total return+ ......................................................... 0.87% 34.04% (8.90%) 8.56%
======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000's omitted) ........................... $303,050 $186,795 $55,175 $36,012
Ratio of expenses to average net assets ............................. 1.03% 1.11% 1.26% 1.67%*
Ratio of net investment income to average net assets ................ 1.11% 1.75% 0.88% 0.61%*
Portfolio turnover rate ............................................. 27% 18% 44% 14%
</TABLE>
* Ratios are annualized.
** Commencement of operations.
+ Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods down.
66
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Baillie Gifford International Fund
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Baillie Gifford International Fund
as of December 31, 1994, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended and financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Baillie Gifford International Fund at December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and financial highlights for each of the
indicated periods, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 10, 1995
67
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
December 31, 1994
Number of
Issuer -- Description Shares Value
--------------------- ------ -----
COMMON STOCKS -- 75.8%
ARGENTINA -- 6.1%
Conglomerates -- 2.2%
Compania Naviera Perez SA .................... 22,000 $ 181,265
Dycasa* ...................................... 22,800 92,331
Juan Minetti* ................................ 16,500 81,667
YPF SA* ...................................... 7,921 166,324
Financial-Banks -- 0.4%
BCO Frances Rio PL ........................... 15,000 98,990
Industrial Machinery -- 0.5%
Quilmes Industrial* .......................... 5,000 115,000
Oil Transport -- 0.5%
Transportadora De Gas Del Sur* ............... 12,000 114,000
Real Estate -- 0.9%
Comercial De Plata ........................... 86,600 220,808
Telecommunications -- 1.0%
Telecom Argentina ............................ 28,900 143,908
Telecom Argentina Stet France ADR* ........... 2,150 103,329
Telephone -- 0.6%
Telefonica De Argentina ...................... 2,850 151,050
-----------
1,468,672
-----------
AUSTRIA -- 0.9%
Conglomerates -- 0.5%
Zalakeramia* ................................. 6,750 120,674
Plastics -- 0.4%
Pannonplast Muanya* .......................... 8,700 99,776
-----------
220,450
-----------
BRAZIL -- 5.3%
Broadcasting -- 1.0%
Telecomunicacoes Brasileras* ................. 2,400 107,400
Telebras* .................................... 3,300,000 142,208
Construction and Mining Equipment -- 0.4%
Cimento Itau* ................................ 220,000 90,909
Electrical Equipment -- 0.5%
Multibras Eletrodo* .......................... 90,000 117,946
Food, Beverage and Tobacco -- 1.3%
Brahma (Cia Cerveja)* ........................ 320,000 105,351
Santista Alimentos* .......................... 50,000 102,715
Souza Cruz (Cia)* ............................ 12,000 99,174
Domestic Oil -- 0.4%
Petrol Brasileiros* .......................... 680,000 85,895
* Non-income producing securities.
See notes to financial statements.
68
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer -- Description Shares Value
--------------------- ------ -----
Oil Services -- 0.3%
Conteminas (Cia Tec)* ........................ 250,000 $ 85,596
Steel -- 0.5%
Usinas Siderurgicas De Minas* ................ 7,000 122,500
Telephone -- 0.9%
Telesp Tel Sao Paulo* ........................ 1,335,000 219,085
-----------
1,278,779
-----------
CHILE -- 2.9%
Construction Material -- 0.5%
Maderas y Sinteticos Sociedad* ............... 3,800 96,900
Electric Utilities -- 0.9%
Enersis SA ................................... 4,200 116,550
Empresa Nacional De Electricidad ............. 4,100 105,575
Investment Companies -- 1.5%
Genesis Chile Fund ........................... 12,500 368,750
-----------
687,775
-----------
CHINA -- 1.3%
Automobiles -- 0.3%
Ek CHor China Motorcycle Co. ................. 4,500 61,313
Containers and Glass -- 0.3%
Yaohua Pilkington Glass Co.* ................. 75,000 73,500
Electrical Equipment -- 0.4%
Shanghai Shangling* .......................... 120,000 103,200
Tires and Rubber -- 0.3%
China Tire Holdings Ltd ...................... 6,000 75,000
-----------
313,013
-----------
COLOMBIA -- 1.2%
Construction Materials -- 0.7%
Cementos Diamante ............................ 6,700 155,775
Retailer -- 0.5%
Cadenalco Gran Cad* .......................... 6,600 126,984
-----------
282,759
-----------
CZECHOSLOVAKIA -- 2.4%
Construction Company -- 0.7%
IPA Prana* .................................... 2,500 172,691
Electric Utility -- 0.8%
Cez (Cesk En Zavody) ......................... 3,800 184,968
Food, Beverage and Tobacco -- 0.4%
Prazske Pivorary* ............................ 850 89,290
* Non-income producing securities.
See notes to financial statements.
69
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer -- Description Shares Value
--------------------- ------ -----
Plastics -- 0.5%
Fatra* ....................................... 1,400 $ 129,026
-----------
575,975
-----------
HONG KONG -- 12.3%
Conglomerates -- 2.1%
China Strategic Holdings Ltd.* ............... 230,000 104,782
Hutchison Whampoa ............................ 53,000 214,397
Swire Pacific ................................ 32,000 199,341
Construction and Mining Equipment -- 1.0%
CNT Group Ltd ................................ 900,000 61,648
Varitronix Int'l ............................. 120,000 170,598
Containers and Glass -- 0.4%
Sinocan Holdings ............................. 400,000 88,917
Electrical Equipment -- 0.8%
Johnson Electrical Holdings .................. 80,000 183,522
Electrical Utilities -- 1.6%
China Light and Power ........................ 42,000 179,128
Hong Kong and China Gas ...................... 130,000 210,016
Financial-Banks -- 0.7%
HSBC Holdings ................................ 15,000 161,874
Industrial Machinery -- 1.1%
Chen Hsong Holdings* ......................... 260,000 164,653
Lung Kee (Bermuda) ........................... 500,000 113,086
Leisure Time -- 0.6%
Mandarin Oriental ............................ 130,000 152,052
Publishing -- 0.4%
Oriental Press Group* ........................ 210,000 98,384
Real Estate -- 2.3%
Amoy Properties .............................. 160,000 144,750
Hong Kong Land Holding ....................... 100,000 195,153
Sun Hung Kai Props ........................... 34,000 203,011
Telephone -- 1.0%
Hong Kong Telecommunications ................. 130,000 247,819
Transportation -- 0.3%
China Merchant Shekou* ....................... 130,000 71,405
-----------
2,964,536
-----------
HUNGARY -- 2.3%
Chemicals -- 0.6%
Chemical Works of Gedeon Richter* ............ 9,000 139,500
Food and Beverages -- 0.9%
Pick Szeged RT* .............................. 3,500 214,980
* Non-income producing securities.
See notes to financial statements.
70
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer -- Description Shares Value
--------------------- ------ -----
Lodging -- 0.8%
Danubius Hotel* .............................. 21,600 $ 209,987
-----------
564,467
-----------
INDIA -- 2.1%
Automobiles -- 0.2%
Bajaj Auto* .................................. 2,000 48,500
Construction -- 0.4%
Larsen & Toubro Ltd.* ........................ 5,500 82,500
Electric Utility -- 0.3%
CESC* ........................................ 10,000 75,000
Food, Beverage and Tobacco -- 0.4%
ITC* ......................................... 8,000 83,000
Industrial Machinery -- 0.5%
Core Parenterals* ............................ 10,000 65,000
NEPC Micon* .................................. 23,000 56,350
Metals -- 0.3%
Indian Aluminum* ............................. 8,000 83,040
-----------
493,390
-----------
INDONESIA -- 1.8%
Household Products -- 0.4%
Unilever Indonesia ........................... 6,000 95,541
Financial-Banks -- 0.4%
Bank International Indonesia* ................ 30,000 95,541
Photography -- 0.3%
Modern Photo Film ............................ 20,000 81,893
Telephone -- 0.7%
Perusahaan Per Per Ind. Sat. Corp.* .......... 4,500 160,875
-----------
433,850
-----------
KOREA -- 1.9%
Electric Utilities -- 0.5%
Korea Electric Power Corp. ................... 5,000 106,875
Investment Company -- 1.4%
Korea Europe Fund* ........................... 80 340,000
-----------
446,875
-----------
MALAYSIA -- 4.8%
Containers and Glass -- 0.5%
Kelang Container Terminal* ................... 52,000 131,349
Conglomerates -- 0.7%
Sime Darby Berhad ............................ 72,000 164,950
Metals -- 0.6%
Maruichi Malay Steel* ........................ 50,000 140,983
* Non-income producing securities.
See notes to financial statements.
71
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer -- Description Shares Value
--------------------- ------ -----
Mining -- 0.4%
IJM Corp. Berhad* ............................ 26,000 $ 87,057
Food, Beverage and Tobacco -- 1.3%
R.J. Reynolds Berhad* ........................ 130,000 188,369
Nestle Malay Berhad* ......................... 20,000 133,151
Retail Trade -- 0.6%
Edaran Otomobil* ............................. 19,000 144,351
Telephone -- 0.7%
Telekom Malaysia* ............................ 24,000 162,600
-----------
1,152,810
-----------
MEXICO -- 9.6%
Conglomerates -- 2.0%
Alfa SA ...................................... 13,500 130,251
DESC SA de CV* ............................... 15,250 360,280
Containers and Glass -- 0.3%
Vitro Sociedad Anonima ....................... 5,600 78,400
Construction and Mining Equipment -- 0.4%
Empresas ICA Sociedad Control ................ 6,600 102,300
Financial Services -- 2.8%
GPO Fin Banamex AC ........................... 19,700 58,209
Grupo Carso SA De CV ......................... 13,000 175,500
Grupo Financiero Bancomer .................... 5,750 66,815
Tolmex ....................................... 4,250 362,434
Food and Beverages -- 0.8%
Pan American Beverage ........................ 5,600 177,100
Industrial Machinery -- 0.6%
Bufete Industrial SA ......................... 4,500 132,750
Metals -- 0.7%
Grupo Simec SA De CV ......................... 10,750 162,594
Retailing -- 0.4%
Organiz Soriana .............................. 90,000 98,774
Telephone -- 1.6%
Telefonos de Mexico SA ....................... 9,600 393,600
-----------
2,315,222
-----------
PERU -- 1.6%
Metals -- 0.4%
Southern Peru Copper* ........................ 18,000 94,780
Building Materials -- 0.4%
Cementos Lima* ............................... 4,800 92,198
Food, Beverage and Tobacco -- 0.4%
Backus & Johnston ............................ 42,300 96,453
Telephone -- 0.4%
Peruana Telefonos* ........................... 80,000 91,209
-----------
374,640
-----------
* Non-income producing securities.
See notes to financial statements.
72
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer -- Description Shares Value
--------------------- ------ -----
PHILIPPINES -- 1.9%
Brewing and Distilling -- 0.6%
San Miguel Corp. ............................. 30,000 $ 157,377
Financial-Banks -- 0.5%
Philippine National Bank ..................... 8,000 113,115
Telephone -- 0.8%
Philippine Long Distance Tel. Co. ............ 3,500 192,938
-----------
463,430
-----------
POLAND -- 4.0%
Bank -- 0.5%
Bre BK Rozwoju Eks ........................... 8,700 132,089
Construction -- 0.8%
Mostostal Export ............................. 30,300 187,743
Construction Materials -- 1.0%
Polifarb ..................................... 26,300 118,712
Polifarb Wroclaw ............................. 85,000 124,136
Electric Utilities -- 0.7%
Elektrim ..................................... 4,000 178,909
Food, Beverage and Tobacco -- 1.0%
Agros ........................................ 10,700 129,105
Zywtec ....................................... 1,600 105,375
-----------
976,069
-----------
SINGAPORE -- 6.9%
Air Travel -- 0.9%
Singapore Airlines ........................... 24,000 220,652
Automobiles -- 0.6%
Cycle and Carriage* .......................... 17,000 152,796
Construction Equipment -- 0.4%
Clipsal Industries Ltd ....................... 48,000 108,000
Financial-Banks -- 0.8%
Overseas Chinese Bank ........................ 18,000 185,249
Food and Beverages -- 0.5%
Fraser & Neave* .............................. 12,000 124,322
Industrial Machinery -- 1.6%
Jurong Shipyard* ............................. 25,000 192,110
Sembawang Corp. .............................. 26,000 194,443
Publishing -- 0.8%
Singapore Press HD ........................... 10,000 181,818
Real Estate -- 0.6%
DBS Land* .................................... 50,000 148,885
Retailer -- 0.7%
Courts (Singapore) ........................... 105,000 157,770
-----------
1,666,045
-----------
* Non-income producing securities.
See notes to financial statements.
73
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Issuer -- Description Shares Value
--------------------- ------ -----
TAIWAN -- 2.0%
Real Estate -- 2.0%
ROC Taiwan Fd ................................ 40,000 $ 475,000
-----------
THAILAND -- 4.5%
Construction Materials -- 0.7%
Siam Cement Co. .............................. 3,000 179,725
Financial-Banks -- 1.5%
Bangkok Bank ................................. 18,000 192,153
Thai Farmers bank ............................ 20,000 162,517
Financial Services -- 0.8%
Ind. Fin. Thailand ........................... 90,000 191,795
Food, Beverage and Tobacco -- 0.4%
CP Feedmill Co.* ............................. 15,000 101,573
Publishing -- 1.1%
Land and House* .............................. 8,000 142,760
Matichon Public Co., Ltd.* ................... 18,000 116,152
-----------
1,086,675
-----------
TOTAL COMMON STOCKS (Cost $21,228,209) .. 18,240,432
-----------
PREFERRED STOCKS -- 1.9%
Casa Anglo Bras SA ........................... 425,000 100,354
Barbella SA Ind .............................. 340 94,333
Confab ....................................... 42,000 79,339
Cemig Cia Energ MG ........................... 1,100,000 100,000
Duratex SA ................................... 1,400,000 90,000
-----------
TOTAL PREFERRED STOCKS (Cost $474,437) .. 464,026
-----------
Interest Maturity Principal
Amount Rate Date
------ ---- ----
REPURCHASE AGREEMENT -- 23.9%
State Street Bank & Trust Co.,
repurchase agreement, dated
12/30/94, maturity value
$5,763,296 (collateralized by
$6,015,000 U.S. Treasury Notes,
4.25% due 11/30/95) ............. 5.15% 01/03/95 $5,760,000 5,760,000
-----------
TOTAL REPURCHASE AGREEMENT (Cost $5,760,000) .............. 5,760,000
-----------
TOTAL INVESTMENTS -- 101.6% (Cost $27,462,646) .................. 24,464,458
PAYABLES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (1.6%) ........................................ (395,558)
-----------
NET ASSETS -- 100.0% ............................................ $24,068,900
===========
* Non-income producing securities.
See notes to financial statements.
74
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities, at market (identified cost -- $21,702,646) .................................. $ 18,704,458
Repurchase agreement (cost -- $5,760,000) .............................................................. 5,760,000
Foreign currency (cost -- $175,285) .................................................................... 175,818
Cash ................................................................................................... 4,523
Receivable for fund shares sold ........................................................................ 294,748
Dividend and interest receivables ...................................................................... 18,303
Deferred organization expense .......................................................................... 2,433
Receivable for open forward foreign currency contracts -- Note D ....................................... 228
Other assets ........................................................................................... 351
------------
Total Assets ......................................................................................... 24,960,862
------------
Liabilities:
Payable for investments purchased ...................................................................... 785,345
Accrued expenses ....................................................................................... 49,754
Payable for deferred organization expense .............................................................. 2,536
Foreign tax withholding ................................................................................ 2,092
Due to Guardian Insurance and Annuity Company, Inc. -- Note B .......................................... 52,235
------------
Total Liabilities .................................................................................... 891,962
------------
Net Assets ........................................................................................... $ 24,068,900
============
Components of Net Assets:
Capital stock -- 2,773,317 shares of $0.10 par value outstanding
(1,000,000,000 shares authorized) .................................................................... $ 277,332
Paid-in capital ........................................................................................ 26,860,750
Undistributed net investment income .................................................................... 18,199
Accumulated net realized loss on investments and foreign currency related
transactions ......................................................................................... (89,075)
Net unrealized depreciation on investments and foreign
currency related transactions ........................................................................ (2,998,306)
------------
Net Assets ........................................................................................... $ 24,068,900
============
Net Asset Value Per Share ................................................................................ $8.68
=====
</TABLE>
See notes to financial statements.
75
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
Period from September 13, 1994
(Commencement of Operations)
to December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Income:
Dividends ............................................................................................... $ 67,917
Interest ................................................................................................ 79,773
-----------
147,690
Less: Foreign tax withheld .............................................................................. 3,683
-----------
Total Income .......................................................................................... 144,007
-----------
Expenses:
Investment advisory fees -- Note B ...................................................................... 44,703
Custodian and transfer agent fees ....................................................................... 24,725
Audit fees .............................................................................................. 17,500
Registration fees ....................................................................................... 6,840
Legal fees .............................................................................................. 5,681
Directors' fees -- Note B ............................................................................... 1,500
Amortization of deferred organization expense ........................................................... 104
Other ................................................................................................... 729
-----------
Total Expenses ........................................................................................ 101,782
-----------
Net Investment Income ............................................................................... 42,225
-----------
Realized and Unrealized Gain/(Loss) on Investments and Currencies -- Note A
Net realized loss on investments ........................................................................ (39,637)
Net realized loss on foreign currency related transactions .............................................. (35,639)
Net change in unrealized depreciation of investments .................................................... (2,998,188)
Net change in unrealized depreciation in foreign currency related transactions .......................... (118)
-----------
Net Realized and Unrealized Loss on Investments
and Currencies ...................................................................................... (3,073,582)
-----------
Net Decrease in Net Assets Resulting From Operations ........................................................ $(3,031,357)
===========
</TABLE>
See notes to financial statements.
76
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period from
September 13,
1994
(Commencement
of Operations)
to
December 31,
1994
----
<S> <C>
Increase in Net Assets
From Operations:
Net investment income ................................................................................... $ 42,225
Net realized loss on investments and foreign currency related transactions .............................. (75,276)
Net change in unrealized depreciation on investments and foreign currency related
transactions .......................................................................................... (2,998,306)
------------
Net Decrease in Net Assets Resulting From Operations ................................................ (3,031,357)
------------
Distribution to Shareholders:
Dividends from net investment income .................................................................... (24,026)
------------
Total Distributions to Shareholders ................................................................. (24,026)
------------
From Transaction in Shares:
Increase in net assets from share transactions -- Note F ................................................ 27,124,283
------------
Net Increase in Net Assets .......................................................................... 24,068,900
Net Assets:
Beginning of period ....................................................................................... --
------------
End of period (including undistributed net investment income of $18,199 in 1994) ......................... $ 24,068,900
============
</TABLE>
See notes to financial statements.
77
<PAGE>
BAILLIE GIFFORD EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the
periods indicated:
<TABLE>
<CAPTION>
October 17,
1994** to
December 31,
1994
----
<S> <C>
Net asset value, beginning of period ............................................................................ $ 9.87
-------
Income from Investment Operations
Net investment income ....................................................................................... (0.01)
Net realized and unrealized loss on investments and foreign currency related transactions ................... (1.17)
-------
Net decrease from investment operations ................................................................... (1.18)
-------
Distributions to Shareholders
Dividends from net investment income ........................................................................ (0.01)
-------
Total distributions ....................................................................................... (0.01)
-------
Net asset value, end of period ............................................................................... $ 8.68
=======
Total return+ ................................................................................................ (11.97)%
=======
Ratios/supplemental data:
Net assets, end of period (000's omitted) .................................................................... $24,069
Ratio of expenses to average net assets ...................................................................... 2.28%*
Ratio of net investment income to average net assets ......................................................... 0.94%*
Portfolio turnover rate ...................................................................................... --
</TABLE>
+ Total returns do not reflect the effects of charges deducted under the terms
of GIAC's variable contracts. Including such charges would reduce the total
returns for all the periods shown.
* Ratios are annualized.
** Commencement of public offering of the Fund's shares.
See notes to financial statements.
78
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Baillie Gifford Emerging Markets Fund
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Baillie Gifford Emerging Markets
Fund as of December 31, 1994, and the related statements of operations, changes
in net assets and financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Baillie Gifford Emerging Markets Fund at December 31, 1994 and the results of
its operations, the changes in its net assets and financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
February 10, 1995
79
<PAGE>
GBG FUNDS, INC.
BAILLIE GIFFORD INTERNATIONAL FUND
AND BAILLIE GIFFORD EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
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; namely: 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. 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.
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.
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.
80
<PAGE>
GBG FUNDS, INC.
BAILLIE GIFFORD INTERNATIONAL FUND
AND BAILLIE GIFFORD EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1994
The resulting gains and losses are included in the Statement of Operations.
It is not the practice of the Funds to identify that portion of the results of
operations that arise as a result of changes in the exchange rates from
fluctuations that arise from changes in the market price during or at the end of
a reporting period except as noted below.
Realized foreign exchange gains and losses, which result from changes in
foreign exchange rates between the date on which the Funds earn dividends and
interest or pays foreign withholding taxes or other expenses, and the date on
which U.S. dollar equivalent amounts are actually received or paid are included
in net realized gain on foreign currency related transactions. Realized foreign
exchange gains and losses which result from changes in foreign exchange rates
between the trade and settlement dates on security and currency transactions are
also included in net realized loss on foreign currency related transactions. Net
currency gains and losses from valuing investments and other assets and
liabilities denominated in foreign currency at the period end exchange rate are
reflected in net change in unrealized appreciation or depreciation on foreign
currency related transactions.
Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts in connection
with planned purchases or sales of securities, or to hedge against changes in
currency exchange rates affecting the values of its securities denominated in a
particular currency. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Fluctuations in the value of forward foreign currency exchange contracts
are recorded for book purposes as unrealized gains or losses on foreign currency
related transactions by the Funds. When forward contracts are closed, the Funds
record realized gains or losses equal to the differences between the values of
such forward contracts at the time each was opened and the value at the time
each was closed. Such amounts are recorded in net realized gain or loss on
foreign currency related transactions. Neither Fund will enter into a forward
foreign currency contract if such contract would obligate the Fund to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency.
Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Net realized gains
or losses on sales of investments are determined on the basis of identified
cost. Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
Taxes
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the provisions of the U.S. Internal Revenue Code of 1986, as amended
(Code), and as such will not be subject to federal income tax on income
(including any realized capital gains) which is distributed in accordance with
the provisions of the Code to its shareholders. Therefore, no federal income tax
provision is required. Net realized losses attributable to security transactions
81
<PAGE>
GBG FUNDS, INC.
BAILLIE GIFFORD INTERNATIONAL FUND
AND BAILLIE GIFFORD EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1994
after October 31, 1994 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.
BGIF and BGEMF had approximately $500,000 and $75,300, respectively, in
capital loss carryforwards for Federal tax purposes at December 31, 1994. These
amounts are available to be carried forward to offset future capital gains
through the year ending December 31, 2001 for BGIF and December 31, 2002 for
BGEMF. To the extent that such carryforwards are utilized by the Fund, no
capital gains distributions will be made.
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.
Reclassifications of Capital Accounts
In accordance with recently approved accounting pronouncements, BGIF has
recorded reclassifications in the capital accounts. These reclassifications have
no impact on the net assets value of the BGIF and are designed generally to
present undistributed income and gains or accumulated losses on a tax basis
which is considered to be more informative to the shareholder. During the year
ended December 31, 1994, BGIF and BGEMF reclassified ($322,462) and ($13,799),
respectively, to paid-in capital from accumulated net realized gains/(losses) to
reflect permanent differences between income recognition on a tax basis and a
GAAP basis. In addition, amounts distributed for tax purposes in excess of net
investment income in 1993 for BGIF have been recorded as a temporary
overdistribution of net investment income in the Statement of Changes in Net
Assets. These amounts reflect the effect of temporary differences in the
computation of net investment income for financial reporting and tax purposes.
82
<PAGE>
GBG FUNDS, INC.
BAILLIE GIFFORD INTERNATIONAL FUND
AND BAILLIE GIFFORD EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1994
Note B -- Investment Management Agreements and Payments to Related Parties
The Company has an investment management agreement 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 a
sub-investment management agreement 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 $1,000 and $700 for
attendance at each meeting of the Company. The aggregate remunerations paid by
BGIF and BGEMF to the Company's disinterested directors were $7,500 and $1,500,
respectively, for the period ended December 31, 1994. BGEMF only commenced its
operations on September 13, 1994.
Note C -- Deferred Organization and Initial Offering Expenses
BGIF incurred expenses of $39,110 in connection with its organization and
registration. BGEMF's expenses of $2,536 in connection with its organization and
registration were advanced by GIAC and will be repaid when it has completed one
year of operations or when net assets reach $50 million. 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.
Note D -- Investment Transactions
Purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows:
For the Year Ended December 31, 1994
------------------------------------
BGIF BGEMF
---- -----
Purchases
---------
Stocks and debt obligations ........ $183,898,251 $ 22,087,701
U.S. Government and government
agency obligations ............... -- --
Proceeds
--------
Stocks and debt obligations ........ $ 66,518,660 $ 345,024
U.S. Government and government
agency obligations ............... -- --
The cost of investments owned at December 31, 1994, for federal income tax
purposes for BGIF and BGEMF are $281,109,507 and $27,462,646, respectively. The
83
<PAGE>
GBG FUNDS, INC.
BAILLIE GIFFORD INTERNATIONAL FUND
AND BAILLIE GIFFORD EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1994
gross unrealized appreciation and (depreciation) at December 31, 1994 were as
follows:
BGIF BGEMF
---- -----
Gross Appreciation ....................... $ 31,582,532 $ 162,072
Depreciation ............................. (10,933,911) (3,160,260)
------------ ------------
Net Unrealized Appreciation/(Depreciation) $ 20,648,621 ($ 2,998,188)
============ ============
Forward foreign currency contracts represent commitments to purchase or sell
a specified amount of foreign currency at a future date and at a future price.
Risks may arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
At December 31, 1994, BGIF and BGEMF had open forward foreign currency
contracts, as listed below, with net unrealized gains/(losses) of $(302,909)
and $228, respectively, which are included in net unrealized
appreciation/(depreciation).
<TABLE>
<CAPTION>
Baillie Gifford International Fund:
Unrealized
Type of Expiration Current Appreciation
Currency Contract Date Cost Value (Depreciation)
- -------- -------- ---- ---- ----- --------------
<S> <C> <C> <C> <C> <C>
Spanish Peseta ....................... Buy 01/04/95 $ 148,183 $ 148,718 $ 535
Japanese Yen ......................... Sell 06/22/95 42,778,570 43,082,014 (303,444)
---------
$(302,909)
=========
Baillie Gifford Emerging Markets Fund:
Unrealized
Type of Expiration Current Appreciation
Currency Contract Date Cost Value (Depreciation)
- -------- -------- ---- ---- ----- --------------
Indonesian Rupiah .................... Sell 01/03/95 $ 589 $ 589 $ --
Malaysian Ringgit .................... Buy 01/04/95 62,867 63,095 228
---------
$ 228
=========
</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
84
<PAGE>
GBG FUNDS, INC.
BAILLIE GIFFORD INTERNATIONAL FUND
AND BAILLIE GIFFORD EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1994
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.
Note F -- Transactions in Capital Stock
Transactions in capital stock were as follows:
Baillie Gifford International Fund:
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
--------------------------------- ---------------------------------
1994 1993
--------------------------------- ---------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ........................................ 11,652,393 $ 175,706,321 8,815,832 $ 117,333,476
Shares issued in reinvestments of dividends
from net investment income and net
realized gain on sales of investments ............ 168,197 2,504,843 146,799 1,948,262
------------- ------------- ------------- -------------
11,820,590 178,211,164 8,962,631 119,281,738
Less shares repurchased ............................ (3,910,118) (58,137,150) (1,192,321) (15,380,158)
------------- ------------- ------------- -------------
NET INCREASE ................................... 7,910,472 $ 120,074,014 7,770,310 $ 103,901,580
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Baillie Gifford Emerging Markets Fund:
Period from September 13,
1994 (Commencement of
Operations) to
December 31, 1994
--------------------------------
Shares Amount
------ ------
<S> <C> <C>
Shares sold ................................................................................ 2,773,779 $ 27,130,118
Shares issued in reinvestments of dividends from net investment income and net
realized gain on sales of investments .................................................... 2,771 24,026
------------ ------------
2,776,550 27,154,144
Less shares repurchased .................................................................... (3,233) (29,861)
------------ ------------
NET INCREASE .......................................................................... 2,773,317 $ 27,124,283
============ ============
</TABLE>
Note G -- Line of Credit
A $20,000,000 line of credit available to both Funds was established with
Morgan Guaranty Trust Company. The rate of interest charged on any borrowings is
based upon the prevailing Federal Funds rate at the time of the loan plus .25%
calculated on a 360-day basis per annum. For the year ended December 31, 1994,
neither of the Funds borrowed against this line of credit.
85
<PAGE>
VALUE LINE CENTURION FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
Number of
Name of Issuer and Title of Issue Shares Value
--------------------------------- ------ -----
<S> <C> <C>
COMMON STOCKS - 95.7%
Advertising - 1.5%
Omnicom Group Inc. .......................................... 100,000 $ 5,175,000
-------------
Aerospace-Defense - 2.0%
Loral Corp. ................................................. 125,000 4,734,375
Watkins-Johnson Co. ......................................... 79,000 2,350,250
-------------
7,084,625
-------------
Bank - 5.9%
Bank of Boston Corp. ........................................ 100,000 2,587,500
Bank of New York Co., Inc. .................................. 100,000 2,900,000
First Interstate Bancorp .................................... 30,000 2,028,750
Midlantic Corp. ............................................. 200,000 5,300,000
State Street Boston Corp. ................................... 100,000 2,862,500
SunTrust Banks, Inc. ........................................ 80,000 3,820,000
West One Bancorp ............................................ 50,000 1,325,000
-------------
20,823,750
-------------
Bank-Midwest - 0.7%
Fifth Third Bancorp ......................................... 50,000 2,400,000
-------------
Broadcasting/Cable TV - 2.0%
Capital Cities/ABC, Inc. .................................... 80,000 6,820,000
*LIN Television Corp. ........................................ 15,000 341,250
-------------
7,161,250
-------------
Chemical-Basic - 3.6%
*Georgia Gulf Corp. .......................................... 175,000 6,803,125
Lyondell Petrochemical Co. .................................. 225,000 5,821,875
-------------
12,625,000
-------------
Chemical-Diversified - 2.2%
First Mississippi Corp. ..................................... 174,100 4,352,500
Goodrich (B.F.) Co. ......................................... 75,000 3,253,125
-------------
7,605,625
-------------
Chemical-Specialty - 2.1%
*Airgas, Inc. ................................................ 100,000 2,125,000
Praxair, Inc. ............................................... 250,000 5,125,000
-------------
7,250,000
-------------
Computer & Peripherals - 5.1%
*Cabletron Systems, Inc. ..................................... 75,000 3,487,500
*EMC Corp. ................................................... 200,000 4,325,000
*3Com Corp. .................................................. 150,000 7,734,375
*Western Digital Corp. ....................................... 150,000 2,512,500
-------------
18,059,375
-------------
Computer Software & Services - 5.9%
Computer Associates International, Inc. ..................... 115,000 5,577,500
*FIserv, Inc. ................................................ 100,000 2,150,000
*Microsoft Corp. ............................................. 120,000 7,335,000
*Oracle Systems Corp. ........................................ 130,000 5,736,250
-------------
20,798,750
-------------
Diversified Companies - 3.7%
Mark IV Industries, Inc. .................................... 285,000 5,628,750
Standex International Corp. ................................. 55,000 1,725,625
*Thermo Electron Corp. ....................................... 125,000 5,609,375
-------------
12,963,750
-------------
Drug - 4.8%
*Amgen Inc. .................................................. 60,000 3,540,000
Pfizer, Inc. ................................................ 89,000 6,875,250
Schering-Plough Corp. ....................................... 90,000 6,660,000
-------------
17,075,250
-------------
Electronics - 2.3%
Avnet, Inc. ................................................. 115,000 4,255,000
*Unitrode Corp. .............................................. 26,600 495,425
*Vishay Intertechnology, Inc. ................................ 70,000 3,430,000
-------------
8,180,425
-------------
Environmental - 0.0%
*Ionics, Inc. ................................................ 1,500 94,125
-------------
Financial Services - 3.5%
*CUC International, Inc. ..................................... 115,000 3,852,500
First Financial Management Corp. ............................ 55,000 3,389,375
Green Tree Financial Corp. .................................. 170,000 5,163,750
-------------
12,405,625
-------------
Food Processing - 1.2%
ConAgra, Inc. ............................................... 100,000 3,125,000
Hudson Foods, Inc. Class "A" ................................ 2,600 65,325
*Smithfield Foods, Inc. ...................................... 30,000 960,000
-------------
4,150,325
-------------
</TABLE>
86-87
<PAGE>
VALUE LINE CENTURION FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Number of
Name of Issuer and Title of Issue Shares Value
--------------------------------- ------ -----
<S> <C> <C>
Food Wholesalers - 0.9%
Sysco Corp. ................................................. 130,000 $ 3,347,500
-------------
Foreign Electronics/Entertainment - 1.0%
Philips Electronics N.V. (N.Y. Shares) ...................... 125,000 3,671,875
-------------
Foreign Telecommunications - 1.6%
Vodafone Group PLC (ADR) .................................... 165,000 5,548,125
-------------
Grocery - 0.5%
*Safeway, Inc. ............................................... 50,000 1,593,750
-------------
Household Products - 1.3%
Lancaster Colony Corp. ...................................... 40,000 1,175,000
Newell Co. .................................................. 160,000 3,360,000
-------------
4,535,000
-------------
Machinery - 0.6%
*IDEX Corp. .................................................. 50,000 2,112,500
-------------
Machinery-Construction & Mining - 1.1%
Caterpillar Inc. ............................................ 70,000 3,858,750
-------------
Medical Services - 6.3%
*Beverly Enterprises, Inc. ................................... 250,000 3,593,750
*Healthcare Compare Corp. .................................... 200,000 6,825,000
*PacifiCare Health Systems, Inc. Class "B" ................... 75,000 4,950,000
United HealthCare Corp. ..................................... 150,000 6,768,750
-------------
22,137,500
-------------
Medical Supplies - 9.4%
Abbott Laboratories, Inc. ................................... 75,000 2,446,875
*Biomet, Inc. ................................................ 450,000 6,300,000
*Cordis Corp. ................................................ 120,000 7,260,000
Invacare Corp. .............................................. 87,600 3,000,300
Johnson & Johnson ........................................... 70,000 3,832,500
Medtronic Inc. .............................................. 100,000 5,562,500
Stryker Corp. ............................................... 125,000 4,593,750
-------------
32,995,925
-------------
Office Equipment & Supplies - 3.6%
*Office Depot, Inc. .......................................... 255,000 6,120,000
*Staples, Inc. ............................................... 270,000 6,682,500
-------------
12,802,500
-------------
Oilfield Services/Equipment - 1.4%
Halliburton Co. ............................................. 150,000 4,968,750
-------------
Packaging & Container - 0.5%
*Crown Cork & Seal Co., Inc. ................................. 50,000 1,887,500
-------------
Restaurant - 1.0%
Morrison Restaurants, Inc. .................................. 145,000 3,552,500
-------------
Retail-Special Lines - 2.8%
*Michaels Stores, Inc. ....................................... 100,000 3,475,000
Pep Boys Inc. (The)-Manny, Moe & Jack ....................... 120,000 3,720,000
*Toys `R' Us, Inc. ........................................... 90,000 2,745,000
-------------
9,940,000
-------------
Retail Building Supply - 1.6%
Home Depot, Inc. (The) ...................................... 120,000 5,520,000
-------------
Retail Store - 2.6%
Dollar General Corp. ........................................ 234,375 7,031,250
Wal-Mart Stores, Inc. ....................................... 100,000 2,125,000
-------------
9,156,250
-------------
Semiconductor - 5.4%
*Applied Materials, Inc. ..................................... 110,000 4,647,500
Micron Technology, Inc. ..................................... 100,000 4,412,500
Motorola, Inc. .............................................. 70,000 4,051,250
*Novellus Systems, Inc. ...................................... 100,000 5,000,000
*Teradyne, Inc. .............................................. 30,000 1,016,250
-------------
19,127,500
-------------
Telecommunications Equipment - 2.7%
*ADC Telecommunications, Inc. ................................ 75,000 3,750,000
*Andrew Corp. ................................................ 110,000 5,747,500
-------------
9,497,500
-------------
Telecommunication Service - 2.9%
*LDDS Communications, Inc. ................................... 150,000 2,915,625
*LIN Broadcasting Corp. ...................................... 30,000 4,005,000
Telephone & Data Systems, Inc. .............................. 75,000 3,459,375
-------------
10,380,000
-------------
Toiletries/Cosmetics - 2.0%
Gillette Co. ................................................ 95,000 7,101,250
-------------
TOTAL COMMON STOCKS AND TOTAL INVESTMENT SECURITIES - 95.7%
(Cost $298,084,482) ............................................. 337,587,550
-------------
</TABLE>
88-89
<PAGE>
VALUE LINE CENTURION FUND, INC.
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
SHORT-TERM INVESTMENTS - 8.1%
Federal Home Loan Bank 5.75%, 1/3/95 .......................... $ 13,955,000 $ 13,950,542
Federal Home Loan Mortgage Corp. 5.75%, 2/6/95 ................ 14,735,000 14,650,274
-------------
TOTAL SHORT-TERM INVESTMENTS - 8.1%
(Cost $28,600,816) ............................................ 28,600,816
EXCESS OF LIABILITIES OVER CASH AND OTHER ASSETS - (-3.8%) ...... (13,443,404)
-------------
NET ASSET - 100.0% .............................................. $ 352,744,962
=============
NET ASSET VALUE PER OUTSTANDING SHARE
($352,744,962 / 19,789,011 shares outstanding) .................. $ 17.83
=============
</TABLE>
* Non-income producing.
See notes to financial statements.
90
<PAGE>
VALUE LINE CENTURION FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
ASSETS:
Investment securities, at value (cost $298,084,482) ..... $337,587,550
Short-term investments (cost $28,600,816) ............... 28,600,816
Cash .................................................... 54,259
Receivable for securities sold .......................... 2,621,998
Dividends receivable .................................... 294,277
Receivable for capital shares sold ...................... 215,466
------------
TOTAL ASSETS ........................................ 369,374,366
------------
LIABILITIES:
Payable for securities purchased ........................ 16,145,335
Payable for capital shares repurchased .................. 214,422
Accrued expenses:
Advisory fee .......................................... 145,857
GIAC administrative service fee ....................... 77,500
Other ................................................. 46,290
------------
TOTAL LIABILITIES ................................... 16,629,404
------------
NET ASSETS:
Capital stock, at $1.00 par value (authorized
50,000,000, outstanding 19,789,011 shares) ............ 19,789,011
Additional paid-in capital .............................. 280,415,819
Undistributed investment income - net ................... 1,952,463
Undistributed net realized gain on investments .......... 11,084,601
Unrealized net appreciation of investments .............. 39,503,068
------------
NET ASSETS .......................................... $352,744,962
============
NET ASSET VALUE PER OUTSTANDING SHARE
($352,744,962/19,789,011 shares outstanding) .................. $ 17.83
============
See notes to financial statements.
91
<PAGE>
VALUE LINE CENTURION FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
Investment Income:
Dividends (Net of foreign withholding taxes of $9,185) .... $ 2,864,299
Interest .................................................. 1,258,319
------------
Total Income ........................................ 4,122,618
------------
Expenses:
Investment advisory fee ................................... 1,731,377
GIAC administrative service fee ........................... 295,116
Auditing and legal fees ................................... 47,158
Custodian fees ............................................ 38,623
Directors' fees and expenses .............................. 11,631
Insurance and dues ........................................ 8,119
Other ..................................................... 958
------------
Total Expenses ...................................... 2,132,982
------------
Investment Income - Net ................................... 1,989,636
------------
Realized and Unrealized Gain (Loss) on Investments - Net:
Realized gain - net ..................................... 11,328,038
Change in unrealized appreciation ....................... (21,682,338)
------------
Net Realized Gain and Change in Unrealized Appreciation on
Investments ............................................. (10,354,300)
------------
Net Decrease in Net Assets from Operations .................... $ (8,364,664)
============
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
Operations:
Investment income - net .................................. $ 1,989,636 $ 2,089,942
Realized gain on investments - net ....................... 11,328,038 60,415,977
Change in unrealized appreciation ........................ (21,682,338) (30,524,228)
------------- -------------
Net (decrease) increase in net assets from operations .... (8,364,664) 31,981,691
------------- -------------
Distributions to Shareholder:
Investment income - net .................................. (194,830) (1,965,462)
Realized gain from investment transactions - net ......... (5,260,408) (55,545,670)
------------- -------------
(5,455,238) (57,511,132)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares ............................. 67,839,012 85,681,342
Proceeds from reinvestment of distributions to shareholder 5,455,238 57,511,123
Cost of shares repurchased ............................... (80,639,504) (90,868,569)
------------- -------------
(Decrease) Increase from capital share transactions ...... (7,345,254) 52,323,896
------------- -------------
Total (Decrease) Increase in Net Assets ...................... (21,165,156) 26,794,455
Net Assets:
Beginning of year ........................................ 373,910,118 347,115,663
------------- -------------
End of year .............................................. $ 352,744,962 $ 373,910,118
============= =============
Undistributed Investment
Income - Net at End of Year .............................. $ 1,952,463 $ 157,657
============= =============
</TABLE>
See notes to financial statements.
92
<PAGE>
VALUE LINE CENTURION FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
1 -- Significant Accounting Policies
Value Line Centurion Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies followed by the Fund in the preparation of its financial
statements.
(A) Security Valuation
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities and for securities traded in the
over-the-counter market, the security is valued at the midpoint between the
latest available and representative asked and bid prices. Short-term investments
with maturities of 60 days or less at the date of purchase are valued at
amortized cost, which approximates market value. Short-term instruments with
maturities greater than 60 days, at the date of purchase, are valued at the
midpoint between the latest available and representative asked and bid prices,
and commencing 60 days prior to maturity such securities are valued at amortized
cost. Other assets and securities for which market valuations are not readily
available are valued at fair value as the Board of Directors may determine in
good faith.
(B) Repurchase Agreements
In connection with transactions in repurchase agreements, the Fund's
custodian takes possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
(C) Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholder. Therefore, no federal income tax is
required.
(D) Dividends and Distributions
It is the Fund's policy to distribute to its shareholder, as dividends and
as capital gains distributions, all the net investment income for the year and
all net capital gains realized by the Fund, if any. Such distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles primarily due to deferral of wash sale
and post-October losses. 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.
93
<PAGE>
VALUE LINE CENTURION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(F) Investments
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income, adjusted for amortization of discount, including
original issue discount required for federal income tax purposes, on investments
is earned from settlement date and recognized on the accrual basis. Dividend
income is recorded on the ex-dividend date.
2 -- Capital Share Transactions, Dividends and Distributions
Shares of the Fund are available to the public only through the purchase of
certain contracts issued by The Guardian Insurance and Annuity Company, Inc.
(GIAC). Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Shares sold ................................................ 3,810,231 4,122,284
Shares issued in reinvestment of dividends and distributions 305,958 3,105,352
---------- ----------
4,116,189 7,227,636
Shares repurchased ......................................... 4,513,989 4,360,768
---------- ----------
Net (decrease) increase .................................... (397,800) 2,866,868
========== ==========
Dividends per share ........................................ $ .01 $ .115
========== ==========
Distributions per share from net realized gains ............ $ .27 $ 3.250
========== ==========
</TABLE>
3 -- Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
1994
------------
PURCHASES:
U.S. Treasury Obligations ............................ $ 15,903,125
Other Investment Securities .......................... 383,579,367
------------
$399,482,492
============
SALES:
U.S. Treasury Obligations ............................ $ 14,646,094
Other Investment Securities .......................... 402,213,719
------------
$416,859,813
============
At December 31, 1994, the aggregate cost of investment securities and
short-term investments for federal income tax purposes is $326,685,346. The
aggregate appreciation and depreciation of investments for the year ended
December 31, 1994, based on a comparison of investment values and their costs
for federal income tax purposes is $46,976,491 and $7,473,471 respectively,
resulting in a net appreciation of $39,503,020.
94
<PAGE>
VALUE LINE CENTURION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
4 -- Investment Advisory Contract, Management Fees and Transactions with
Interested Parties
An advisory fee of $1,731,377 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the year ended December 31, 1994.
This was computed at the rate of 1/2 of 1% per year of the average daily net
assets of the Fund during the period and paid monthly. The Adviser provides
research, investment programs, supervision of the investment portfolio and pays
costs of administrative services, office space, equipment and compensation of
administrative, bookkeeping, and clerical personnel necessary for managing the
affairs of the Fund. The Adviser also provides persons, satisfactory to the
Fund's Board of Directors, to act as officers and employees of the Fund and pays
their salaries and wages. The Fund bears all other costs and expenses. In
addition, the Adviser has agreed to reimburse the Fund for expenses (exclusive
of interest, taxes and brokerage 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% of the remaining average daily net assets. No such reimbursement was
required for the year ended December 31, 1994.
Certain officers and directors of the Adviser and Value Line Securities,
Inc., (the Fund's distributor and a registered broker dealer) and of GIAC are
also officers and directors of the Fund. A former officer of GIAC who is also a
director of the Fund was paid a fee of $2,740 for the year ended December 31,
1994. During the year ended December 31, 1994, the Fund paid brokerage
commissions totalling $654,916 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 performingadministrative and internal accounting functions in connection with
the establishment of contractowner accounts and their ongoing maintenance,
printing and distribution of shareholder reports and providing ongoing
shareholder servicing functions. Such reimbursement is limited to an amount no
greater than $18.00 times the average number of accounts at the end of each
quarter during the year. During the year ended December 31, 1994, the Fund
incurred an aggregate of $295,116 in connection with such services rendered by
GIAC.
95
<PAGE>
VALUE LINE CENTURION FUND, INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each
year:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................ $ 18.52 $ 20.04 $ 20.83 $ 15.04 $ 14.55
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income ....................................... .10 .12 .20 .20 .31
Net gains or losses on securities
(both realized and unrealized) ............................ (.51) 1.73 1.03 7.65 .50
------- ------- ------- ------- -------
Total from investment operations .......................... (.41) 1.85 1.23 7.85 .81
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ........................ (.01) (.12) (.19) (.20) (.32)
Distributions from capital gains ............................ (.27) (3.25) (1.83) (1.86) --
------- ------- ------- ------- -------
Total distributions ....................................... (.28) (3.37) (2.02) (2.06) (.32)
------- ------- ------- ------- -------
Net asset value, end of year .................................... $ 17.83 $ 18.52 $ 20.04 $ 20.83 $ 15.04
======= ======= ======= ======= =======
Total return .................................................... -2.21% 9.21% 5.93% 52.18% 5.56%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of year (in thousands) .......................... $352,745 $373,910 $347,116 $306,589 $172,113
Ratio of operating expenses to average net assets ............... .61% .61% .54% .53% .54%
Ratio of net investment income to average net assets ............ .57% .57% .99% 1.19% 2.19%
Portfolio turnover rate ......................................... 122% 118% 83% 81% 56%
</TABLE>
See notes to financial statements.
96
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
Value Line Centurion Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Centurion Fund, Inc.
(the "Fund") at December 31, 1994, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1994 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 10, 1995
97
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
SCHEDULE OF INVESTMENTS
December 31, 1994
Number of
Name of Issuer and Title of Issue Shares Value
--------------------------------- ------ -----
COMMON STOCKS -- 60.6%
Advertising -- 0.6%
Omnicom Group Inc. ....................... 72,000 $ 3,726,000
------------
Aerospace/Defense -- 2.6%
Loral Corp. .............................. 174,000 6,590,250
McDonnell Douglas Corp. .................. 75,000 10,650,000
------------
17,240,250
------------
Apparel -- 0.1%
*Farah Inc. ............................... 133,200 949,050
------------
Bank -- 1.7%
Citicorp ................................. 242,000 10,012,750
NationsBank Corp. ........................ 33,000 1,489,125
------------
11,501,875
------------
Bank-Midwest -- 0.6%
First Bank System, Inc. .................. 122,000 4,056,500
------------
Beverage-Alcoholic -- 0.6%
*Canadaigua Wine Co., Inc. Class "A" ...... 98,000 3,724,000
------------
Broadcasting/Cable TV -- 3.3%
Capital Cities/ABC, Inc. ................. 146,000 12,446,500
*Viacom, Inc. Class "A" ................... 27,456 1,142,856
*Viacom, Inc. Class "B" ................... 208,030 8,451,219
------------
22,040,575
------------
Chemical-Basic -- 1.6%
Dow Chemical Co. ......................... 40,000 2,690,000
*Georgia Gulf Corp. ....................... 202,000 7,852,750
------------
10,542,750
------------
Chemical-Diversified -- 0.9%
Norsk Hydro A.S. (ADR) ................... 115,000 4,499,375
Terra Industries, Inc. ................... 163,000 1,691,125
------------
6,190,500
------------
Chemical-Specialty -- 0.5%
Hercules, Inc. ........................... 28,000 3,230,500
------------
Computer & Peripherals -- 5.0%
Apple Computer, Inc. ..................... 80,000 3,120,000
*Cabletron Systems, Inc. .................. 84,500 3,929,250
International Business Machines Corp. .... 154,000 11,319,000
*Sequent Computer Systems, Inc. ........... 190,000 3,752,500
98
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Name of Issuer and Title of Issue Shares Value
--------------------------------- ------ -----
Computer & Peripherals -- continued
*Silicon Graphics, Inc. ................... 258,000 $ 7,965,750
*Sun Microsystems, Inc. ................... 80,000 2,840,000
------------
32,926,500
------------
Computer Software & Services -- 2.0%
Adobe Systems, Inc. ...................... 120,000 3,570,000
Computer Associates International, Inc. .. 85,000 4,122,500
*Informix Corp. ........................... 30,000 963,750
*Oracle Systems Corp. ..................... 110,000 4,853,750
------------
13,510,000
------------
Diversified Companies -- 1.8%
Danaher Corp. ............................ 9,000 470,250
Mark IV Industries, Inc. ................. 190,000 3,752,500
Premark International, Inc. .............. 166,000 7,428,500
------------
11,651,250
------------
Drug -- 1.4%
Mylan Laboratories Inc. .................. 220,000 5,940,000
Pfizer, Inc. ............................. 39,000 3,012,750
------------
8,952,750
------------
Electric Utility-East -- 0.1%
American Electric Power Co., Inc. ........ 26,000 854,750
------------
Electronics -- 1.8%
*General Instrument Corp. ................. 100,000 3,000,000
*Symbol Technologies, Inc. ................ 223,000 6,885,125
*Vishay Intertechnology, Inc. ............. 46,500 2,278,500
------------
12,163,625
------------
Environmental -- 0.2%
Browning-Ferris Industries, Inc. ......... 39,900 1,132,163
------------
Financial Services -- 2.7%
ADVANTA Corp. Class "A" .................. 114,000 2,992,500
ADVANTA Corp. Class "B" .................. 53,000 1,338,250
Green Tree Financial Corp. ............... 450,000 13,668,750
------------
17,999,500
------------
Food Processing -- 2.3%
Archer-Daniels-Midland Co. ............... 240,000 4,950,000
ConAgra, Inc. ............................ 100,000 3,125,000
Hudson Foods, Inc. Class "A" ............. 119,500 3,002,437
IBP, Inc. ................................ 148,000 4,477,000
------------
15,554,437
------------
99
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Name of Issuer and Title of Issue Shares Value
--------------------------------- ------ -----
Foreign Electronics/Entertainment -- 0.6%
Philips Electronics N.V. (NY Shares) ..... 125,000 $ 3,671,875
------------
Foreign Telecommunications -- 0.4%
Reuters Holdings PLC (ADR) ............... 37,000 1,623,375
Telecom Corp. of New Zealand Ltd. (ADR) .. 14,000 719,250
------------
2,342,625
------------
Grocery -- 3.4%
American Stores Co. ...................... 155,000 4,165,625
*Kroger Co. .............................. 385,000 9,288,125
*Safeway, Inc. ........................... 278,700 8,883,562
------------
22,337,312
------------
Home Appliance -- 1.2%
Black & Decker Corp. ..................... 260,000 6,175,000
Maytag Corp. ............................. 120,000 1,800,000
------------
7,975,000
------------
Household Products -- 0.7%
Newell Co. ............................... 74,000 1,554,000
Procter & Gamble Co. ..................... 30,000 1,860,000
Sunbeam-Oster Co., Inc. .................. 50,000 1,287,500
------------
4,701,500
------------
Industrial Services -- 2.0%
Equifax, Inc. ............................ 297,000 7,833,375
Manpower, Inc. ........................... 200,000 5,625,000
------------
13,458,375
------------
Machinery -- 0.3%
Parker-Hannifin Corp. .................... 50,000 2,275,000
------------
Machinery-Construction & Mining -- 1.1%
*Clark Equipment Co. ...................... 136,000 7,378,000
------------
Manufactured Housing/Recreational Vehicle -- 1.2%
Clayton Homes, Inc. ...................... 521,532 8,214,129
------------
Medical Supplies -- 3.7%
Cardinal Health, Inc. .................... 76,250 3,536,094
*Cordis Corp. ............................. 90,000 5,445,000
Johnson & Johnson ........................ 104,000 5,694,000
Medtronic Inc. ........................... 178,000 9,901,250
------------
24,576,344
------------
Newspaper -- 0.0%
Dow Jones & Co., Inc. .................... 1,700 52,700
------------
100
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Name of Issuer and Title of Issue Shares Value
--------------------------------- ------ -----
Office Equipment & Supplies -- 2.8%
*Office Depot, Inc. ....................... 386,000 $ 9,264,000
Reynolds & Reynolds Co. Class "A" ........ 19,000 475,000
*Staples, Inc. ............................ 367,500 9,095,625
------------
18,834,625
------------
Packaging & Container -- 0.5%
*Crown Cork & Seal Co., Inc. ............. 86,000 3,246,500
------------
Paper & Forest Products -- 0.6%
Scott Paper Co. .......................... 62,000 4,285,750
------------
Petroleum-Integrated -- 0.8%
Amoco Corp. .............................. 50,000 2,956,250
Occidental Petroleum Corp. ............... 115,000 2,213,750
------------
5,170,000
------------
Precision Instrument -- 0.3%
Tektronix, Inc. .......................... 66,000 2,260,500
------------
Railroad -- 0.4%
Kansas City Southern Industries, Inc. .... 87,900 2,713,913
------------
Recreation -- 2.2%
Brunswick Corp. .......................... 174,000 3,284,250
Harley-Davidson, Inc. .................... 356,000 9,968,000
*WMS Industries, Inc. ..................... 56,600 1,061,250
------------
14,313,500
------------
Retail-Special Lines -- 2.7%
*Michaels Stores, Inc. .................... 83,000 2,884,250
Pep Boys Inc. (The) -- Manny, Moe & Jack . 269,300 8,348,300
United States Shoe Corp. ................. 252,000 4,725,000
*Waban, Inc. .............................. 120,000 2,130,000
------------
18,087,550
------------
Retail Store -- 0.8%
Dollar General Corp. ..................... 168,750 5,062,500
------------
Semiconductor -- 1.0%
*International Rectifier Corp. ............ 83,000 2,012,750
Motorola, Inc. ........................... 75,000 4,340,625
------------
6,353,375
------------
Shoe -- 0.7%
Reebok International Ltd ................. 122,000 4,819,000
------------
Telecommunications Equipment -- 0.9%
*Andrew Corp. ............................ 110,000 5,747,500
------------
101
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
SCHEDULE OF INVESTMENTS (Continued)
December 31, 1994
Number of
Name of Issuer and Title of Issue Shares Value
--------------------------------- ------ -----
Telecommunications Service -- 0.4%
Century Telephone Enterprises, Inc. ...... 84,000 $ 2,478,000
------------
Toiletries/Cosmetics -- 0.9%
Gillette Co. ............................. 77,000 5,755,750
------------
Trucking/Transportation Leasing -- 1.2%
XTRA Corp. ............................... 169,000 7,605,000
------------
TOTAL COMMON STOCKS (Cost $356,342,713) ........ 401,663,298
------------
Principal
Amount Value
------ -----
U.S. TREASURY OBLIGATIONS -- 12.3%
U.S. Treasury Notes 4 1/8%
due May 31, 1995 ......................... $ 10,000,000 9,909,360
U.S. Treasury Notes 6 3/4%
due May 31, 1999 ......................... 10,000,000 9,593,750
U.S. Treasury Notes 7 3/4%
due February 15, 2001 .................... 16,000,000 15,930,000
U.S. Treasury Bonds 7 1/4%
due August 15, 2022 ...................... 50,000,000 46,140,550
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $87,858,515) ......................... 81,573,660
------------
TOTAL INVESTMENT SECURITIES -- 72.9%
(Cost $444,201,228) ........................ 483,236,958
------------
SHORT-TERM INVESTMENTS -- 27.9%
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 27.7%
Federal Home Loan Bank 5.70%, 1/3/95 ....... 20,000,000 19,993,667
Federal Home Loan Bank 5.75%, 1/3/95 ....... 20,560,000 20,553,432
Federal Home Loan Bank 5.81%, 1/3/95 ....... 24,700,000 24,692,027
Federal Home Loan Bank 5.78%, 1/5/95 ....... 25,000,000 24,983,944
Federal Farm Credit Bank 5.75%, 1/20/95 .... 10,000,000 9,969,653
Federal Home Loan Bank 5.78%, 1/23/95 ...... 10,000,000 9,964,678
Federal Farm Credit Bank 5.75%, 1/26/95 .... 10,000,000 9,960,069
Federal National Mortgage Association
5.78%, 2/1/95 ............................ 38,925,000 38,731,262
Federal Home Loan Mortgage Corp.
5.75%, 2/6/95 ............................ 25,000,000 24,856,250
------------
183,704,982
------------
REPURCHASE AGREEMENT -- 0.2%
(includes accrued interest)
Collateralized by $955,000 U.S. Treasury
Notes 4 1/4%, due 5/15/96, with a value
of $920,353. (With State Street Bank &
Trust Company, N.A. 5.15% dated 12/30/94,
due 1/3/95, delivery value of $900,515.) 900,000 900,258
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $184,605,240) 184,605,240
------------
EXCESS OF LIABILITIES OVER CASH AND
RECEIVABLES -- (-0.8%) ....................... (5,120,932)
------------
NET ASSETS -- 100.0% ........................... $662,721,266
============
NET ASSET VALUE PER OUTSTANDING SHARE
($662,721,266/41,079,238 shares outstanding) $ 16.13
============
*Non-income producing.
See notes to financial statements.
102
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
ASSETS:
Investment securities, at value (cost $444,201,228) ........ $ 483,236,958
Short-term investments (cost $184,605,240) ................. 184,605,240
Cash ....................................................... 87,622
Receivable for securities sold ............................. 3,826,794
Interest and dividends receivable .......................... 2,273,386
Receivable for Trust shares sold ........................... 601,225
-------------
TOTAL ASSETS ......................................... 674,631,225
-------------
LIABILITIES:
Payable for securities purchased ........................... 11,236,817
Payable for Trust shares repurchased ....................... 203,958
Accrued expenses:
Advisory fee ............................................. 276,665
GIAC administrative service fee .......................... 125,000
Other .................................................... 67,519
-------------
TOTAL LIABILITIES .................................... 11,909,959
-------------
NET ASSETS:
Capital stock, at $0.01 par value (authorized
unlimited, outstanding 41,079,238 shares) ................. 410,792
Additional paid-in capital ................................. 608,764,037
Undistributed net investment income ........................ 10,418,090
Undistributed net realized gain on investments ............. 4,092,617
Unrealized net appreciation of investments ................. 39,035,730
-------------
NET ASSETS ........................................... $ 662,721,266
=============
NET ASSET VALUE PER OUTSTANDING SHARE ........................ $ 16.13
($662,721,266 / 41,079,238 shares outstanding) =============
See notes to financial statements.
103
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
December 31, 1994
Investment Income:
Interest ............................................... $ 10,547,072
Dividends (Net of foreign withholding
taxes of $20,693) ..................................... 4,012,460
-------------
Total Income ..................................... 14,559,532
-------------
Expenses:
Investment advisory fee ................................ 3,234,550
GIAC administrative service fee ........................ 489,366
Custodian fees ......................................... 62,370
Audit and legal fees ................................... 44,157
Registration fee ....................................... 35,297
Trustees' fees and expenses ............................ 11,958
Insurance and dues ..................................... 11,631
Other .................................................. 721
-------------
Total Expenses ................................... 3,890,050
-------------
Investment Income - Net .................................. 10,669,482
-------------
Realized and Unrealized Gain (Loss) on
Investments - Net:
Realized gain - net .............................. 4,494,696
Change in unrealized appreciation
on investments .................................. (47,316,460)
-------------
Net Realized Gain and Change in
Unrealized Appreciation on Investments ................ (42,821,764)
-------------
Net Decrease in Net Assets from Operations ............... $ (32,152,282)
=============
See notes to financial statements.
104
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
Operations:
Investment income - net ........................................................ $ 10,669,482 $ 9,534,587
Realized gain on investments ................................................... 4,022,796 19,865,368
Change in unrealized appreciation .............................................. (46,844,560) 25,897,041
------------- -------------
Net (decrease) increase in net assets from operations .......................... (32,152,282) 55,296,996
------------- -------------
Distributions to Shareholder:
Investment income - net ........................................................ (409,277) (9,496,024)
Realized gain from investment transactions - net ............................... (1,637,110) (18,819,393)
------------- -------------
(2,046,387) (28,315,417)
------------- -------------
Trust Share Transactions:
Proceeds from sale of shares ................................................... 128,821,109 222,178,919
Proceeds from reinvestment of distributions to shareholder ..................... 2,046,387 28,315,415
Cost of shares repurchased ..................................................... (49,595,204) (23,873,143)
------------- -------------
Increase from Trust share transactions ......................................... 81,272,292 226,621,191
------------- -------------
Total Increase In Net Assets ..................................................... 47,073,623 253,602,770
Net Assets:
Beginning of year .............................................................. 615,647,643 362,044,873
------------- -------------
End of year .................................................................... $ 662,721,266 $ 615,647,643
============= =============
Undistributed Investment Income - Net at End of Year ............................. $ 10,418,090 $ 157,885
============= =============
</TABLE>
See notes to financial statements.
105
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
1 - Significant Accounting Policies
Value Line Strategic Asset Management Trust (the "Trust") is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of its
financial statements.
(A) Security Valuation
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities traded in the over-the-counter market,
the security is valued at the midpoint between the latest available and
representative bid and asked prices.
The Board of Trustees has determined that the value of bonds and other
fixed-income securities be calculated on the valuation date by reference to
valuations obtained from an independent pricing service which determines
valuations for normal institutional-size trading units of debt securities,
without exclusive reliance upon quoted prices. This service takes into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data in determining valuations.
Short-term instruments with maturities of 60 days or less at the date of
purchase are valued at amortized cost which approximates market value.
Short-term instruments with maturities greater than 60 days at the date of
purchase are valued at the midpoint between the latest available and
representative asked and bid prices, and commencing 60 days prior to maturity
such securities are valued at amortized cost. Other assets and securities for
which market valuations are not readily available are valued at fair value as
the Board of Trustees may determine in good faith.
(B) Repurchase Agreements
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase tr ansaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. In the event of default of the
obligation to repurchase, the Trust has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
(C) Federal Income Taxes
It is the Trust's policy to qualify under and comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholder. Therefore, no federal
income tax provision is required.
(D) Dividends and Distributions
It is the Trust's policy to distribute to its shareholder, as dividends and
as capital gains distributions, all the net investment income for the year and
all the net capital gains realized by the Trust, if any. Such distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles primarily due to deferral of wash sale
and post-October losses. All dividends or distributions will be payable in
106
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1994
shares of the Trust at the net asset value on the ex-dividend date. This policy
is, however, subject to change at any time by the Board of Trustees.
(E) Amortization
Discounts on debt securities are amortized to interest income over the life
of the security with a corresponding increase to the security's cost basis;
premiums on debt securities are not amortized.
(F) Investments
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income, adjusted for amortization of discount, including
original issue discount required for federal income tax purposes, on investments
is earned from settlement date and recognized on the accrual basis. Dividend
income is recorded on the ex-dividend date.
2 - Trust Share Transactions, Dividends and Distributions
Shares of the Trust are available to the public only through the purchase of
certain contracts issued by The Guardian Insurance & Annuity Company, Inc.
(GIAC). Transactions in shares of beneficial interest in the Trust were as
follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Shares sold ................................................. 7,820,145 13,216,145
Shares issued to shareholder in reinvestment of dividends and
distributions ............................................. 126,868 1,664,633
----------- -----------
7,947,013 14,880,778
Shares repurchased .......................................... 3,062,343 1,404,644
----------- -----------
Net increase ................................................ 4,884,670 13,476,134
=========== ===========
Dividends per share ......................................... $ .01 $ .275
=========== ===========
Distributions per share from net realized gains ............. $ .04 $ .545
=========== ===========
</TABLE>
107
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1994
3 - Purchases and Sales of Securities
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
1994
------------
PURCHASES:
U.S. Treasury Obligations ............................ $ 39,537,500
Other Investment Securities .......................... 479,697,029
------------
$519,234,529
============
SALES:
Investment Securities ................................ $524,641,480
============
At December 31, 1994, the aggregate cost of investment securities and
short-term investments for federal income tax purposes is $628,836,042. The
aggregate appreciation and depreciation of investments at December 31, 1994,
based on a comparison of investment values and their costs for federal income
tax purposes is $53,770,095 and $14,763,939, respectively, resulting in a net
appreciation of $39,006,156.
For Federal income tax purposes, realized losses incurred after October 31,
1994, within the fiscal year are deemed to arise on the first business day of
the following fiscal year. The Fund incurred and elected to defer such losses of
$2,259,582.
4 - Investment Advisory Contract, Management Fees and Transactions with
Affiliates
An advisory fee of $3,234,550 was paid or payable to Value Line, Inc. (the
Adviser), the Trust's investment adviser, for the year ended December 31, 1994.
This was computed at the rate of 1/2 of 1% per year of the average daily net
assets of the Trust during the period and paid monthly. The Adviser provides
research, investment programs, supervision of the investment portfolio and pays
costs of administrative services, office space, equipment and compensation of
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 year ended December 31, 1994.
Certain officers and directors of the Adviser and Value Line Securities,
Inc. (the Trust's distributor and a registered broker/dealer), and of GIAC are
also officers and Trustees of the Trust. A former officer of GIAC who is also a
Trustee of the Trust was paid a fee of $2,740 by the Trust for the year ended
December 31, 1994. During the year ended December 31, 1994, the Trust paid
brokerage commissions totalling $754,571 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 performingadministrative and internal accounting functions in connection with
the establishment of contract-owner accounts and their ongoing maintenance,
printing and distribution of shareholder reports and providing ongoing
shareholder servicing functions. Such reimbursement is limited to an amount no
greater than $18.00 times the average number of accounts at the end of each
quarter during the year. During the year ended December 31, 1994, the Trust
incurred an aggregate of $489,366 in connection with such services rendered by
GIAC.
108
<PAGE>
VALUE LINE STRATEGIC ASSET MANAGEMENT TRUST
FINANCIAL HIGHLIGHTS
Selected data for a share of stock outstanding throughout each year:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................ $ 17.01 $ 15.94 $ 14.54 $ 11.06 $ 11.46
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income ......................................... .26 .27 .26 .30 .32
Net gains or losses on securities (both realized and
unrealized) ................................................. (1.09) 1.62 1.93 4.50 (.34)
------- ------- ------- ------- -------
Total from investment operations ............................ (.83) 1.89 2.19 4.80 (.02)
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income .......................... (.01) (.28) (.26) (.31) (.33)
Distributions from capital gains .............................. (.04) (.54) (.53) (1.01) (.05)
------- ------- ------- ------- -------
Total dividends and distributions ........................... (.05) (.82) (.79) (1.32) (.38)
------- ------- ------- ------- -------
Net asset value, end of year ...................................... $ 16.13 $ 17.01 $ 15.94 $ 14.54 $ 11.06
======= ======= ======= ======= =======
Total return ...................................................... -4.88% 11.86% 15.05% 43.34% -0.15%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of year (in thousands) ............................ $662,721 $615,648 $362,045 $188,781 $ 86,146
Ratio of operating expenses to average net assets ................. .60% .61% .55% .58% .60%
Ratio of net investment income to average net assets .............. 1.65% 1.96% 2.18% 3.00% 3.28%
Portfolio turnover rate ........................................... 100% 110% 106% 134% 77%
</TABLE>
See notes to financial statements.
109
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Trustees of
Value Line Strategic Asset Management Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Value Line Strategic Asset
Management Trust (the "Trust") at December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 10, 1995
110
<PAGE>
Issuer
The Guardian Insurance & Annuity Company, Inc.
Variable Products Administration
P.O. Box 26210
Lehigh Valley, Pennsylvania 18002-6210
Distributor
Guardian Investor Services Corporation(R)
201 Park Avenue South
New York, New York 10003
Independent Accountants
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
This report is authorized for distribution to the public only when preceded or
accompanied by the current prospectuses for The Guardian Separate Account D and
the underlying variable investment options that comprise "The Guardian Investor"
variable annuity contract.
EB-011033 12/94
<PAGE>
[Logo] The Guardian (R) BULK RATE MAIL
U.S. POSTAGE PAID
The Guardian JERSEY CITY, NJ
Insurance & Annuity PERMIT NO. 120
Company, Inc.
201 Park Avenue South
New York, NY 10003