The Guardian
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JUNE 30, 1996 INVESTOR(R)
A VARIABLE ANNUITY
Semiannual Report to Contractowners
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The Guardian Separate Account D
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The Guardian Stock Fund, Inc.
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The Guardian Bond Fund, Inc.
- ------------------------------------------- Executive Offices
The Guardian Cash Fund, Inc. 201 Park Avenue South
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Gabelli Capital Asset Fund
- ------------------------------------------- Customer Service Office
Baillie Gifford International Fund P.O. Box 26210
- ------------------------------------------- Lehigh Valley, Pennsylvania
Baillie Gifford Emerging Markets Fund 18002-6210
- ------------------------------------------- 1-800-221-3253
Value Line Centurion Fund, Inc.
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Value Line Strategic Asset Management Trust [Logo] The Guardian(R)
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Performance Summary
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[Sketch of Guardian Life Building]
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Investment Option Total Return*
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The Guardian Stock Fund............. 10.21%
The Guardian Bond Fund.............. -2.54%
The Guardian Cash Fund.............. 1.87%
Gabelli Capital Asset Fund.......... 10.67%
Baillie Gifford International Fund.. 9.12%
Baillie Gifford Emerging Markets Fund 17.05%
Value Line Centurion Fund........... 11.27%
Value Line Strategic Asset Mgt. Trust 9.77%
The Guardian Real Estate Account.... 2.61%
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Fixed-Rate Option
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The annual rate of interest for amounts deposited
or renewed (on a contract anniversary) in the
Fixed-Rate Option for the period January 1, 1996
was 5.10%; for the months of February-May it was
5.00% and for the month of June it was 5.25%.
Rates paid by the Fixed-Rate Option are subject
to change at any time, 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.
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* The chart above shows the total returns for each investment option under The
Guardian Investor based on the percentage change in unit values during the
period January 1, 1996 through June 30, 1996. In contrast to the returns
presented in the portfolio managers' interviews, changes in unit values reflect
the effects of mortality and expense risk charges as well as each option's
expenses to give you a better picture of an investment option's performance
under the contract. Total return performance figures stated above do not,
however, reflect the annual contract administration charge or possible
withdrawal charges. Deduction of these amounts would reduce the stated total
returns. Past performance is not a guarantee of future results.
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Dear Contractowner:
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[Photo of Joseph D. Sargent, CLU President & CEO]
As the President and Chief Executive Officer of The Guardian Insurance & Annuity
Company, Inc. (GIAC) and its parent, The Guardian Life Insurance Company of
America, I am pleased to introduce this semiannual report on the performance
results of your contract's separate account and its underlying investment
options during the first six months of 1996.
On Our Ratings
Once again, we are proud to report that as of June 30, 1996, the date of
this report, both GIAC and its parent, The Guardian Life Insurance Company of
America, continue to enjoy the highest ratings available from four of the
nation's leading insurance company evaluators: Moody's (Aaa), Standard & Poor's
(AAA), A.M. Best (A++), and Duff & Phelps (AAA). As you know, 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 its ability to meet its guarantee of your contract's Fixed-Rate
Option and pre-retirement death benefit. We are very proud of our ratings and
believe that you will be, too.
Our Commitment to You
We at The Guardian are proud of our tradition of commitment to you, our
contractowners. In keeping with our tradition of providing superior customer
service we have enhanced your statements. The new revised statements, sent
quarterly with an informative performance review of your investment options,
make it easier for you to track the allocation of your contract's assets and
their performance.
As part of this ongoing commitment to providing increasing levels of
information and service, we are pleased to include an economic report from Frank
J. Jones, Ph.D. Dr. Jones is the Chief Investment Officer of GIAC and we believe
that you will enjoy reading his insightful economic overview.
Dr. Jones' economic report is followed by interviews with the portfolio
managers. I invite you to read the interviews to learn more about the strategies
the portfolio managers used to manage your investment options during the first
half of 1996.
Thank you for continuing to invest for your future through GIAC.
Regards,
/s/ Joseph D. Sargent
Joseph D. Sargent, CLU
President and Chief Executive Officer
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THE GUARDIAN INVESTOR
Table of Contents
Portfolio Schedule
Manager of
Interview Investments
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Economic Report 4
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The Guardian Stock Fund 6 32
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Objective: Long-term growth of capital
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Portfolio: At least 80% common stocks and secu-
rities convertible into common stocks
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Inception: April 13, 1983
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Net Assets at June 30, 1996: $1,870,335,793
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"Investors should be most interested in long-term performance, rather than
all the short-term zigzags within the market. Here, The Guardian Stock Fund can
be proud of its solid record."
--Charles E. Albers, C.F.A
Portfolio Manager
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The Guardian Bond Fund 10 40
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Objective: Maximum current income without undue
risk of principal. Capital appreciation is a
secondary objective.
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Portfolio: At least 80% investment-grade bonds
and U.S. government securities
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Inception: May 1, 1983
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Net Assets at June 30, 1996: $356,326,323
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"To enhance the returns of the corporate bond portion of our portfolio, we
expanded the universe of bonds from which we choose securities purchased by the
Fund."
--Michele S. Babakian
Portfolio Manager
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The Guardian Cash Fund 22 46
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Objective: As high a level of current income as is
consistent with preservation of capital
and liquidity
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Portfolio: Short-term money market
instruments
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Inception: November 1, 1981
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Net Assets at June 30, 1996: $377,292,070
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"We look at the Fund as a place where people can park their money until
they decide where they want to invest it -- whether it be bonds or domestic or
international stocks. Therefore, we seek to provide investors with a combination
of solid returns, liquidity and preservation of capital."
--Alexander M. Grant, Jr.
Portfolio Manager
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Gabelli Capital Asset Fund 12 56
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Objective: Growth of capital. Current income
is a secondary objective.
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Portfolio: Primarily common and preferred stocks
and other securities representing
the right to acquire common stocks
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Inception: May 1, 1995
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Net Assets at June 30, 1996: $45,024,413
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"We believe our value orientation and the Fund's focus on niche industries
and companies that can do well irrespective of the prevailing economic and
market trends will help us preserve and enhance assets in a less hospitable
broad market environment."
--Mario J. Gabelli, C.F.A.
Portfolio Manager
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Portfolio Schedule
Manager of
Interview Investments
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Baillie Gifford International Fund 14 66
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Objective: Long-term capital appreciation
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Portfolio: At least 80% in a diversified portfolio
of common stocks of companies
domiciled outside of the United States
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Inception: February 8, 1991
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Net Assets at June 30, 1996: $382,806,775
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"We are relatively optimistic about the prospects for most international
markets for the remainder of 1996. Overseas share prices have not risen as much
as those in the U.S., and there is still considerable scope for profits to
increase in many countries, as a large number of international companies are
operating below capacity."
--R. Robin Menzies
Portfolio Manager
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Baillie Gifford Emerging Markets Fund 16 74
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Objective: Long-term capital appreciation
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Portfolio: At least 65% in a portfolio of common stocks issued by emerging
market companies
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Inception: October 17, 1994
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Net Assets at June 30, 1996: $56,580,667
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"Emerging market countries' share of world trade is markedly increasing, as
a result of rising investment, while their governments are competing for capital
by adopting more investor-friendly policies."
--Edward H. Hocknell
Portfolio Manager
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Value Line Centurion Fund 18 88
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Objective: Long-term growth of capital
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Portfolio: At least 90% common stocks
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Inception: November 15, 1983
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Net Assets at June 30, 1996: $599,983,509
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"Corporate profits for the second quarter were reported much as we had
expected, with positive surprises outnumbering negatives by a three-to-one
ratio. Going forward, we continue to forecast an economy growing at a moderate
pace with benign inflationary pressures, an elongated business cycle, and
declining interest rates."
--Value Line, Inc.
Investment Adviser
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Value Line Strategic Asset Management Trust 20 96
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Objective: High total return consistent with
reasonable risk
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Portfolio: Stock, bonds and money market instruments
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Inception: October 1, 1987
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Net Assets at June 30, 1996: $1,002,357,632
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"Good stock selection and an underweighting in bonds were key to Value Line
Strategic Asset Management Trust's continued strong performance in the first
half of 1996."
--Value Line, Inc.
Investment Adviser
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The Guardian Separate Account 24
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Economic Report:
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[Photo of Frank J. Jones, Ph.D. Chief Investment Officer]
I am pleased to write an introduction and economic overview to your
semiannual report. The entire first half of 1996 has seen a continuation of the
strong U.S. economy which began over six years ago.
The second quarter of 1996 was very strong for the economy, quite strong
for the stock market and neutral for the bond market. With respect to the
economy, while the complete data for the second quarter are not yet available,
it is virtually certain that real economic growth (measured by real gross
domestic product, GDP) during the second quarter of this year was significantly
higher than the 2.1% annualized growth during the first quarter and 1.9% during
1995 as a whole. Generally, economists' estimates for real GDP growth during the
second quarter exceeded 4%. If this growth were thought to be sustainable, the
Fed would swiftly tighten monetary policy. As of this writing, no such
tightening has occured.
With respect to the stock market, the S&P 500 Index returned 10.05% during
the first six months of 1996, with 4.44% of this occurring in the second
quarter.(1) This strong performance after the 37.58% return during 1995 has
caused significant nervousness in the market. Indeed, the day-to-day volatility
experienced in the stock and bond markets in July has borne out this
nervousness.
Nevertheless, flows into equity mutual funds during the first five months
of 1996 were $123.86 billion, almost up to 1993's record year-end level of
$129.6 billion and 1995's year-end $128.9 billion inflows. If these cash inflows
into equity mutual funds continue at anything like their current rate (although
the inflows slowed during June and early July), these previous records will be
obliterated. While the strong inflows have supported the stock market, a
slowdown or reversal of this trend could trigger a market correction.
After a very negative first quarter (during which the 30-year Treasury bond
yield increased by 0.72% and the Lehman Aggregate Bond Index returned
- -1.77%(1)), the bond market continually improved on a monthly basis during the
second quarter, with the 30-year Treasury bond yield increasing by only 0.23%
and the Lehman Aggregate Bond Index returning 0.57%. Net cash inflows into bond
and income mutual funds were negative during 1995 and were positive but
relatively anemic during the first five months of 1996. Results for the first
six months of 1996 are not yet available.
U.S. Economic Prospects
For at least two years, the Fed has been trying to accomplish a "soft
landing," that is gradual economic growth of approximately 2 1/2% with
inflation kept under 3%. This outcome has certainly been a possibility during
the last two years. However, the apparently strong, but as yet unverified,
growth during the second quarter has led to a concern for too-rapid growth.
Because of this strong growth, the Fed may soon begin to tighten monetary policy
significantly. The current prevailing forecast for the second half of 1996,
however, is for much slower yet moderate growth, with moderate and only slightly
increased inflation.
As the third quarter of 1996 unfolds, Alan Greenspan and the Fed will
closely monitor employment, consumption, inflation, and other factors to
determine whether tightening is necessary. The Fed would not want to tighten
prematurely because it would regret having enacted a single tightening followed
by a reversal of policy if the economy eased during the second half of 1996. On
the other hand, the Fed would not want to be inactive while the seed of
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(1) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that is
generally considered to be representative of U.S. stock market activity. The
Lehman Aggregate Bond Index is an unmanaged index that is generally considered
to be representative of U.S. bond market activity. The S&P 500 and the Lehman
Aggregate Bond Indexes are not available for direct investment and the returns
do not reflect the fees and expenses that have been deducted from the Funds.
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4
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inflation grew -- the initial tightening on February 4, 1994 was justified by
the Fed as an effort to constrain inflation before it "showed the whites of its
eyes."
With respect to fiscal policy, the federal budget deficit could decline to
$130 billion this fiscal year from $164 billion last year, the lowest since 1989
(relative to GDP, the deficit would be the lowest since 1981). This decrease
would tend to retard economic growth and stimulate the bond market.
Arguments can be made in either direction for economic growth during the
second half of 1996. If, as a few analysts expect, the economy continues to be
as strong as during the second half of 1996, inflationary threats would occur
and the Fed would tighten significantly.
A more likely scenario would be moderate but faster than sustainable
economic growth, which would cause the Fed to tighten two or three times, which,
in turn, would increase long-term yields somewhat but not significantly. While
some analysts believe the next Fed move will be an easing late in the year,
moderate intermediate-term tightening seems more likely. Tightening might not be
a significant negative to the bond market since it would show that the Fed still
has anti-inflation "religion," of which there has been some recent doubt.
The strength of the stock market during 1995 was a result of both declining
yields and strong profit growth. 1996's strength has occurred despite increasing
yields and significant, but slowing profits. If economic growth during the
second half of 1996 moderates to the 2% level, yields could stabilize or even
decline somewhat. A moderate increase in bond yields and moderate corporate
profits would not cause a significant retrenchment in the stock market based on
these fundamentals. Even strong corporate profits, however, would not be enough
to offset the effects of rapid economic growth and multiple Fed tightenings.
However, given the past strong and sustained growth in the stock market
(the current rally which began during May 1990 is the second longest and the
second strongest during the ten rallies since 1951), a moderate correction in
the stock market is always a possibility. While it is always a possibility, its
timing and magnitude are impossible to predict.
International Prospects
Internationally, economic turning points may be occurring in both Japan and
Germany. Recent economic reports from Japan have been very strong and, in fact,
the next monetary move by the Bank of Japan is likely to be a tightening. On the
other hand, the latest economic reports from Germany have been very weak,
although there have been signs of developing strength. The Bundesbank has
continued to ease and will probably ease again this year. The strong dollar
against both the yen and the deutsche mark should support these economies.
The most likely scenario for the next few quarters seems to be that the
German recovery will have difficulty taking hold; the Japanese recovery will
advance but remain feeble; and the United Kingdom, which has also continued to
ease monetary policy, will grow moderately with low inflation. The major concern
in Japan is that, since the economic turnaround to date has depended mainly on
monetary policy and public works spending, the private economy, particularly
consumption, may not be able to sustain the recovery if monetary policy tightens
or the fiscal stimulus is reduced. The major uncertainties in the U.K. continue
to be political rather than economic.
With all that in mind, I now invite you to read the portfolio manager
interviews on the following pages to learn more about the Funds and the
investment strategies used during the past six months.
Regards,
/s/ Frank J. Jones, Ph.D.
Frank J. Jones, Ph.D.
Chief Investment Officer
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5
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The Guardian Stock Fund
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[Photo of Charles E. Albers, C F.A. Portfolio Manager]
Q. Can you explain some of the ups and downs in the U.S. stock market during
the first six months of 1996? And how has the Fund performed in this
environment?
A. In the first half of 1996, equity investors generally had to contend with a
very challenging market environment. Fortunately, we were again able to achieve
respectable returns for our investors. Based on total returns for the first six
months of 1996,(1) The Guardian Stock Fund performed better than its peer group,
the Lipper U.S. Variable Products Growth Funds Average,(2) and the venerable S&P
500 Index,(3) albeit by a small margin in each case. Compared to other U.S.
growth mutual funds, as compiled by Lipper Analytical Services, Inc. for the
periods ended June 30, 1996, the Fund ranked 8 out of a field of 29 growth funds
over a ten-year period, 3 out of 46 for the five-year period and 49 out of 99
for the one-year period.
While the overall stock market rose strongly in the first half of the
year, there were dramatic internal divergencies. For example, there was no
"January Effect" in 1996 (according to this historical pattern, smaller-cap
stocks should excel in January); then, many growth-type small-caps did very well
from March through May, powered by speculative investor enthusiasm; finally, in
June, many of those earlier winners experienced a sharp correction. For the
entire six-month period ended June 30, 1996, small-cap and large-cap indices
produced very similar returns. Regarding economic sectors, the strongest
categories were Consumer Cyclicals and Capital Goods, where stock performance
was aided by perceptions of stronger economic growth; the weakest sector was
Utilities, reflecting the relatively weak performance of the bond market.
Of course, investors should be most interested in long-term performance,
rather than all the short-term zigzags within the market. Here, The Guardian
Stock Fund can be proud of its solid record, especially when compared with other
U.S. growth funds as measured by the Lipper Variable Products U.S. Growth Funds
Average.(2) In fact, The Guardian Stock Fund's results for the last five years
place it among the top 10% of all U.S. growth funds for the period.
Q. To what do you attribute the Fund's performance during the past six months?
A. Throughout the life of the Fund, one of the keys to our solid long-term
results has been our proprietary stock-scoring system. Developed in the late
1970s, this multi-factor quantitative model has helped us rank stocks
successfully over the years. Over the five-year period from 1991 through 1995,
the stock-scoring sys-
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TOTAL RETURN FOR THE SIX MONTHS
ENDED JUNE 30, 1996(1)(2)
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Guardian Stock Fund................................................... +10.85%
Lipper Average U.S. Growth Fund....................................... +10.33%
S&P 500 Composite Index............................................... +10.05%
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(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The actual total
returns for owners of the variable annuity contracts or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
separate account and contract/policy charges. Past performance is not a
guarantee of future results. Investment return and principal value will
fluctuate so that the value of your investment, when redeemed, may be worth more
or less than the original cost.
(2) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do not
reflect the deduction of sales loads, and performance would be different if
sales loads were deducted. Lipper rankings were reported in Lipper's Variable
Insurance Products Performance Analysis Special Report 2nd Quarter 1996.
(3) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that is
generally considered to be representative of U.S. stock market activity. The S&P
500 Index is not available for direct investment and its returns do not reflect
the fees and expenses that have been deducted from the Fund.
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6
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[The following table was represented as a bar graph in the printed material]
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Average Annual Total Returns for the
periods ended June 30, 1996(1), (2)
Fund Lipper
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1 Year 23.69% 23.59%
5 Years 19.57% 14.76%
10 Years 13.61% 12.01%
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tem has given us valuable predictions in 4 out of 5 years. While you should
remember that past performance is no guarantee of future results, these results
are compelling. During the first half of 1996, the data shows that our
stock-scoring system had only a mild degree of predictive power, although still
positive overall. We are cautiously optimistic that our soundly-based
stock-scoring system will regain more predictive strength over the balance of
1996 and beyond.
Also important, in the last five years we have been actively researching
several different "style predictor" models to help us predict which
characteristics are most likely to be successful over the next 6 to 12 months.
We have developed several soundly-based "style predictor" models to help us
address this critical portfolio management issue. As we reported in the 1995
Annual Report to shareholders, these models had suggested that a tilt towards
higher-quality and large-cap stocks was more likely to be successful, and we
positioned the portfolio accordingly. The behavior of the stock market in the
first half of 1996 regarding these major style issues was, however, essentially
neutral.
Q. What is your outlook for the future? And what are the messages from the
stock-scoring system?
A. Looking forward, the messages that we are getting from our "style predictor"
models are very much as they were six months ago. The quantitative models now
prefer the high-quality and growth-oriented themes for portfolio emphasis. From
an intuitive viewpoint, we believe these signals are reasonable, and they are
supported by the mature position of the U.S. business cycle and the weakening
prospects for U.S. corporate profit growth. As a practical matter, we believe
that The Guardian Stock Fund portfolio is already well-positioned to benefit
from the style trends which we anticipate--accordingly, we plan only moderate
"fine-tuning" of the portfolio in the months ahead.
The messages from our stock-scoring system and from our "style predictor"
models have led us to favor certain economic sectors at this time. We believe
that the best investment prospects are currently in the Consumer Staples,
Financial and Energy sectors, each of which is overweighted in the Fund's
portfolio.
We also believe that there are selective opportunities in the Technology
sector, and our weighting there is roughly equal to the benchmark. (For complete
sector weightings and changes since year-end, please see the accompanying pie
charts.)
Q. Do you have any final words for shareholders?
A. Summing up, we plan to persevere with our successful, established investment
strategies. The portfolio will remain well-diversified, and we will continue to
heed the messages from our various quantitative models. We intend to remain
fully invested in the stock market, as that is our defined mission. In other
words, in managing the Fund, we try to add value by searching out the more
attractive sectors and individual stocks within the market. We do not try to
time the moves of the overall market because we believe that task is practically
impossible and the effort often leads to lost opportunities. We continue to
think of ourselves as a long-term value-building enterprise. We intend to work
hard to continue producing solid results for our shareholders.
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7
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The Guardian Stock Fund Profile
as of June 30, 1996
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Comparison of Common Stocks Held by the Fund on December 31, 1995 and
June 30, 1996 by Economic Sector
[The following table was represented by pie graphs in the printed material]
December 31, 1995 June 30, 1996
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Consumer Cyclical -- 3.08% Consumer Cyclical -- 2.06%
Consumer Staples -- 18.33% Consumer Staples -- 25.09%
Other -- 8.18% Other -- 9.21%
Financial -- 18.13% Financial -- 20.97%
Basic Industries -- 7.39% Basic Industries -- 4.02%
Energy -- 12.10% Energy -- 14.57%
Utilities -- 9.46% Utilities -- 7.31%
Capital Goods-Technology -- 23.33% Capital Goods-Technology -- 16.77%
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Portfolio Composition
The Guardian Stock Fund portfolio holds approximately 221 securities in a
variety of economic sectors. The portfolio manager's goal is to position the
portfolio for consistent performance in both "bull" and "bear" markets.
[The following material was represented by a pie graph in the printed material]
Cash & Cash Equivalents - 4.6% Common Stocks - 95.4%
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8
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Growth of a Hypothetical $10,000 Investment
[The following table was represented as line graph in the printed material]
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The Guardian S&P 500 Cost of
Stock Fund Index Living
---------- ----- ------
4/13/83 10,000 10,000 10,000
10,891 10,844 10,133
83 11,028 10,867 10,336
10,684 10,328 10,571
84 12,218 11,529 10,754
14,360 13,501 10,958
85 16,130 15,169 11,162
20,326 18,307 11,152
86 18,889 17,985 11,295
22,920 22,898 11,580
87 19,241 18,903 11,794
23,115 21,283 12,029
88 23,160 21,989 12,314
26,541 25,595 12,650
89 28,613 28,887 12,885
28,334 29,749 13,252
90 25,224 27,959 13,680
29,788 31,938 13,874
91 34,293 36,439 14,088
34,598 36,196 14,302
92 41,178 39,207 14,516
46,490 41,100 14,720
93 49,396 43,130 14,913
47,471 41,667 15,097
94 48,767 43,679 15,311
58,848 52,468 15,545
95 65,667 59,992 15,668
6/30/96 72,792 66,752 15,973
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A hypothetical $10,000 investment made at the inception of The Guardian Stock
Fund on April 13, 1983 would have grown to $72,792 on June 30, 1996. We compare
our performance to that of the S&P 500 Index, which is an unmanaged index that
is generally considered the performance benchmark of the U.S. stock market.
While you may not invest directly in the S&P 500 Index, a similar hypothetical
investment would now be worth $66,752. The cost of living index, as measured by
the consumer price index, which is generally representative of the level of U.S.
inflation, is also provided to lend a more complete understanding of the
investment's real worth.
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Average Annual Returns(1)
Life of Fund
1 Year 5 Years 10 Years (since 4/13/83)
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The Guardian Stock Fund 23.69% 19.57% 13.61% 16.21%
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S&P 500 Index(2) 25.85% 15.65% 13.69% 15.36%
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(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The actual total
returns for owners of the variable annuity contracts or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
separate account and contract/policy charges. Past performance is not a
guarantee of future results. Investment return and principal value will
fluctuate so that the value of your investment, when redeemed, may be worth more
or less than the original cost.
(2) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity. The
S&P 500 Index is not available for direct investment and its returns do not
reflect the fees and expenses that have been deducted from the Fund.
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9
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The Guardian Bond Fund
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[Photo of Michele S. Babakian, Portfolio Manager]
Q. How has the overall bond market performed in the past six months?
A. The bond market returned an unsatisfying -1.21% during the first six months
of the year as measured by the Lehman Aggregate Bond Index.(1) Of the fixed
income sectors, asset-backed securities (ABS) and mortgage-backed securities
(MBS) held up the best with returns of 0.61% and 0.35%, respectively. Both of
these sectors have durations shorter than that of the Index. During a down
market, shorter duration assets will usually suffer less price depreciation.
A dramatic change in market expectations occurred during the first six
months of 1996. January's returns mimicked the strong performance of 1995 as
investors interpreted the economic news to suggest moderate growth and low
inflation. This sentiment was supported by the Federal Reserve's 25 basis point
reduction of the Federal Funds rate to 5.25% on January 31. However, by early
March, jobs data, increasing factory orders and industrial production indicated
a stronger economy than forecasted. In the second quarter, strong housing and
retail demand, coupled with a buildup of inventories, fueled economic growth.
This increased growth caused investors to be concerned that the Fed would raise
rates in order to dampen the strong economic growth. A nervous market became
more bearish when the June average hourly earnings reported a robust increase of
3.4% year-to-year. To moderate the economic growth and potential inflationary
pressures, the Fed is expected to raise rates sometime during July or August.
Toward the end of the second quarter this expectation led to rising rates and
cautious investors.
Q. How has the Fund performed in this market, year-to-date?
A. Despite the volatility of interest rates and the change of market sentiment
from bullish to bearish in the last six months, the Fund performed competitively
versus its peer group, the Lipper Variable Product "BBB" Corporate Bond
Group.(2) As of June 30, the year-to-date total return for the Fund was -1.98%
versus -1.88% for this Lipper group.(3)
Our strategy during this period was to stay fully invested and purchase
products with strong return characteristics and to manage the Fund's duration
within 5% of the Lehman Aggregate Bond Index's duration. At June 30, the Fund,
compared to the Index, had an overweighting of approximately 8.5% in the
Corporate and MBS sectors and 13% overweighting in the ABS sector.
To enhance the returns of the corporate bond portion of our portfolio, we
expanded the universe of bonds from which we choose securities purchased by the
Fund. New sectors such as Insurance, Tobacco, and Telecommunications were
evaluated and purchased because we believe that they will provide higher yields
to investors. The objective was to find positive trends within sectors, and
individual securities that could provide a high level of current income and
solid return characteristics.
Although we have been pleased with the results from our expanded universe,
due to the narrowing of corporate spreads in the second quarter and negative
news on select corporate credits, 11% of the corporate sector was sold and
reinvested in MBS. MBS have higher yields per unit of duration, or average life,
than
- --------------------------------------------------------------------------------
(1) The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The Lehman
Aggregate Bond Index is not available for direct investment and the returns do
not reflect the fees and expenses that have been deducted from the Fund.
(2) Lipper Analytical Services, Inc. is an independent fund monitoring and
rating service and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Their returns do not
reflect the deduction of sales loads, and performance would be different if
sales loads were deducted.
(3) Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of all Fund expenses. The actual total
returns for owners of the variable annuity contracts or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
separate account and contract/policy charges. Past performance is not a
guarantee of future results. Investment return and principal value will
fluctuate so that the value of your investment, when redeemed, may be worth more
or less than the original cost.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
most corporate bonds. These MBS can also be financed through the dollar
roll market for additional income. Also added to the MBS sector were commercial
mortgage-backed securities (CMBS), which differ from MBS because the assets
underlying the bonds are commercial mortgages rather than single-family
mortgages. These investments, which comprise 4% of the portfolio, are rated AA
or better by either Moody's or Standard &Poor's.
We continue to use ABS to fill the Fund's need for short-duration
securities as these products are higher yielding than Treasury paper and
corporate issues of the same duration. To enhance our returns the portfolio has
purchased new ABS in the home improvement and auto loan sectors.
Q. What is your outlook for the market? What strategies do you plan to
implement?
A. Assuming there is a Fed tightening this summer, we could see the 30-year
Treasury bond yield rise to 7.50% by year-end. To protect the Fund from the
price depreciation caused by rising rates, we will manage the duration of the
Fund to be slightly shorter than the Lehman Aggregate Bond Index's duration.
There will also continue to be an over-allocation to higher yielding, total
return products. In this sector, we will pay particular attention to the
corporate sectors with superior total return potential. In the next six months,
we expect to select more domestic and Yankee credits and CMBS. As you may
remember from the 1995 Annual Report to shareholders, Yankee credits, or Yankee
bonds, are dollar-denominated bonds issued by foreign companies and traded in
domestic U.S. markets. Our current allocation to MBS may be maintained or
reduced depending on volatility and demand in this sector. Current ABS positions
will continue to be swapped for higher-yielding ABS. As always, we will continue
to be opportunistic and manage for total return.
- --------------------------------------------------------------------------------
The Guardian Bond Fund Profile
as of June 30, 1996
- ---------------------------------------
[The following table was represented by a pie graph in the printed material]
- --------------------------------------------------------------------------------
Portfolio Composition by Quality
by either Moody's or Standard &Poor's
AAA - 56.6%
Cash Equivalents - 11.7%
Non-rated - 3.1%
BBB - 15.2%
A - 10.7%
AA - 2.7%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(3)
- --------------------------------------------------------------------------------
1 Year................................. 3.38%
5 Years................................ 7.85%
10 Years............................... 8.15%
Since Inception (5/1/83)............... 9.37%
- --------------------------------------------------------------------------------
[The following table was represented by a pie graph in the printed material]
- --------------------------------------------------------------------------------
Portfolio Composition by Asset Class
Corporate Bonds - 30.3%
Cash Equivalents - 2.7%
U.S. Government Securities - 10.9%
Asset-Backed Securities - 15.7%
Mortgage Pass-Throughs - 17.3%
Multi-class Mortgages - 23.1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percentages of invested assets, excluding cash equivalents such as receivables
and payables.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ---------------------------------------
[Photo of Mario J. Gabelli, C.F.A, Portfolio Manager]
Q. How did the Fund perform during the first six months of 1996 and what do you
identify as the Fund's competitive strengths or advantages?
A. In the first half of 1996, the performance of the Fund and the broad equities
market exceeded our expectations. The Fund's net asset value increased 11.3%(1)
over this time period and compares favorably to the 10.1% increase in the S&P
500 Index.(2) For the balance of the year, we expect equities to struggle
against the headwinds of renewed inflationary concern and higher long-term
interest rates.
We believe our value orientation and the Fund's focus on niche industries
and companies that can do well irrespective of the prevailing economic and
market trends will help us preserve and enhance assets in a less hospitable
broad market environment.
Q. What are your thoughts on the economy and the stock market?
A. There is an old saying that, "If you laid all the world's economists end to
end, they wouldn't reach a conclusion." To that, we would add, "...and if they
did, it would most likely be the wrong one." To wit, let's take a short trip
down memory lane to the beginning of this year. Following a sluggish fourth
quarter 1995 (0.5% GDP growth), the consensus expected only a modest pickup in
economic activity in the first half of 1996. Inflation was declared dead and it
would be just a matter of time before the Federal Reserve would jump-start the
economy by dropping short-term interest rates. Long rates would follow and we
would see a vibrant bond market that would help sustain the bull market in
stocks. Some well-known mutual fund managers, and one particularly visible, now
former, mutual fund manager, placed big bets on this economic scenario.
What actually happened? The economy started the year strong with 2.3% GDP
growth in the first quarter and gained momentum--the second quarter is projected
to come in at a 3.5 to 4.0% growth rate. Employment surged with a series of not
so good Fridays for the stock market (employment statistics are released on the
first Friday of every month). Grain prices soared with "beans in the teens" as
the rallying cry in the commodities pits. Higher oil and gasoline prices made
headlines before backing off in early summer. Lo and behold, inflation was not
dead! Bonds dropped and the Fed started hinting that its next move was more
likely up than down. Buoyed by strong cash inflow into equity mutual funds, the
stock market posted good gains. However, an increasingly choppy market indicated
that investors were finally looking down as well as up.
Q. What have you learned from this?
A. Despite being more right than wrong in our own economic/market projections
(we did forecast inflationary pressure and higher long-term interest rates, but
we also expressed very limited expectations for what has proved to be a fairly
vibrant stock market), we were once again reminded that our long-held and
articulated belief that focusing on the fundamental value of individual stocks
is, over the long term, a safer and vastly more reliable way to generate
consistent returns.
This is not to say that we don't have opinions on the economy and financial
markets. We do and will continue to share them with you. For example, we have
long opined that President Clinton was not likely to make the same mistake in an
election year that the then incumbent President Bush made in 1992. He'll want a
strong economy through the election. While domestic GDP growth is likely to ebb
in the second half from the unsustainable pace of the second quarter as higher
interest rates begin impacting economic activity and the somewhat overextended
American consumer tightens the purse strings, economic growth should be good
through the rest of the year. Corporate earnings will be decent--up around 10%
for the year. It is inflation, interest rates and the flow of funds that will
call the tune for the stock and bond markets over the next several quarters.
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of Fund expenses. The actual total returns
for owners of the variable annuity contracts or variable life insurance policies
which provide for investment in the Fund will be lower to reflect separate
account and contract/policy charges. Past performance is not a guarantee of
future results. Investment return and principal value will fluctuate so that the
value of your investment, when redeemed, may be worth more or less than the
original cost.
(2) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that is
generally considered to be representative of U.S. stock market activity. The S&P
500 Index is not available for direct investment and its returns do not reflect
the fees and expenses that have been deducted from the Fund.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
On the inflation front, we echo our comments from our year-end 1995 letter
to you. Inflation is peeking out of the coffin to which it was consigned by the
majority of Wall Street economists. What are the inflationary gremlins? Oil is a
wild card. The bombing of an American military base in Saudi Arabia may
represent an escalation of terrorism in the Mid-East. Political instability in
the region, along with increasing worldwide demand for oil, could translate into
higher prices. Wholesale food inflation is another wild card. With corn at $5.50
per bushel, soybeans at around $8.50, and wheat above $5.00, it is just a matter
of time before we see higher prices at the supermarket. Retail food inflation
has been moderated in the first half as declining meat prices have partially
compensated for higher grain prices--cattle and hog farmers slaughter herds
rather than continue to fatten them up with more expensive grain. We will see
higher beef and pork prices next year. Finally and most importantly, we may see
some upward pressure on wages as outsourcing, downsizing, globalization of labor
and technology inputs run their course. Strong employment and a potential
showdown between General Motors and the United Auto Workers may prove
disquieting. The recent confirmation of Federal Reserve Chairman Greenspan to
another term should pave the way for these stirrings of inflation prior to the
election. Long rates are up more than 100 basis points this year. Long bonds are
already down 3% on a total return basis and nearly double that in price alone.
In addition, we expect both candidates to talk about tax cuts--which could spark
more jitters for the long bond. If, as we anticipate, inflation does hit the
3.5% level in the second half, equity investors may have cause to pause. In
other words, if bonds keep sneezing, sooner or later stocks will catch a cold.
Market observers may respond to this note of caution by saying investors no
longer care about the economy, inflation, interest rates or valuations. Flow of
funds is the only thing that matters. The stock market will move relentlessly
higher until all the baby boomers who are pouring money into equity funds reach
retirement age. Other observers point out that the aging of populations around
the world and the explosive growth in private pension plans in industrial
countries such as Japan, Germany, France, Italy and England point to strong
demand for global equities and, ultimately, for U.S. equities. We do not
discount the favorable influence these demographics have on the flow of funds
and on the equities market. We do think valuations matter and competition to
stocks in the form of higher bond yields could easily disrupt this comfortable
scenario.
Q. Do you have any pearls of wisdom?
A. Food retailers are dull. Who in their right mind would want to invest in a
business with such modest revenue growth and paper thin margins? Right now, we
do. There are several positive dynamics unfolding in the retail food industry,
which, for the value investor, make supermarket stocks more exciting than in the
past.
The first is wholesale food inflation. Grain prices are rising. Meat and
poultry prices will follow. Your friendly neighborhood grocer is going to pass
these higher costs on to you and tack on a little extra in the bargain. Yes,
supermarket margins generally rise during periods of wholesale food inflation.
Secondly, like most American industries, supermarkets are successfully reducing
costs through automation. More importantly, expansion has been curtailed.
Finally, just like the American banking industry, food retailing is ripe for
consolidation. Stronger supermarket chains are buying weaker chains, and this is
occurring as international food giants move into the U.S. (most recently, Royal
Ahold buying Stop & Shop) and are either operating them more cost-efficiently or
simply closing the doors to eliminate unprofitable locations and increase
margins.
The end result is that the skinny margins in the industry are becoming a
little fatter. With current net after-tax margins averaging around 2% of
revenues, even modest margin improvement produces enormous earnings gains. To
wit, a 0.5% expansion in margins translates into a 25% earnings gain. That's why
smart people like Kohlberg, Kravis, and Roberts bought Bruno's, Inc. and why
Royal Ahold NV of the Netherlands is buying Stop & Shop Companies, Inc. That's
why your Fund owns Giant Food, Inc. Margins and earnings for this company should
improve and, if current management can't make substantial progress in this
favorable environment, a stronger operator will step in.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year................................... 18.2%
Since Inception (5/1/95)................. 17.4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ---------------------------------------
[Photo of R. Robin Menzies, Portfolio Manager]
Q. How have international markets performed during the first six months of
1996? How did the Fund perform?
A. In the first half of this year, the Fund performed well, rising by 9.75%1,(1)
compared to the 4.67% return generated by our benchmark index, the Morgan
Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE)
Index.(2)
According to figures from the MSCI, the continental European markets
produced strong returns of 8.4% for the first six months of 1996, buoyed up by a
high level of corporate restructuring and gradual declines in interest rates.
The United Kingdom, by contrast, returned only 2.7%, as investors became
increasingly concerned about the forthcoming election. The Asian markets
produced a lower return of 2.6%, as the dominant Japanese stock exchange only
managed 1.1%, in U.S. dollar terms. The rise in the value of the U.S. dollar
against the yen reduced the more respectable return of 7.5%, which was the
result before currency fluctuations were taken into account. The other, smaller,
Asian markets produced diverging returns: Australia's 6.5% largely reflects the
recovery of its currency; Malaysia produced an impressive 16.3% and Singapore, a
disappointing -3.2%.
As usual, international market movements reflected a wide range of
divergent influences. The weakness of the yen has been a particularly striking
feature of the world scene; its decline has started to lead to a resurgence in
Japanese growth. In general, the growth of earnings and dividends has been
rather better than expected, but the improvements in Europe continue to be
driven by cost-cutting rather than by the increases in output as has been the
case in Asia.
Q. What factors affected the Fund's performance during the first six months of
1996?
A. The Fund's performance was particularly strong in continental Europe, where
our investments in companies which are embarking on large-scale restructuring
operations produced excellent returns: Ciba-Geigy, for example, the Swiss
chemicals giant, rose by 38.1% as a result of its planned merger with Sandoz,
which we also held and which rose by 24.6%.
Returns were good from some of the smaller markets too. Among the Fund's
best performers were the Hungarian pharmaceutical company Richter Gedeon, which
rose by 163.6%, and the Irish builder CRH increased its share price by 33.6%. In
general, our emphasis on long-term investment in well-positioned, well-run
businesses produced strong returns as these companies consolidated their
dominant positions and increased their focus on shareholder value.
The Fund also benefited from its strategic allocation of assets between
markets. We had a heavy weighting in the smaller Asian markets, which performed
particularly well, and in Continental Europe, where our returns were high. We
had reduced our weighting in the British market from approximately 15% at
year-end 1995 to only about 11% at June 30, 1996, which was relatively sluggish
during the period, and used hedging strategies to insulate the Fund from some of
the harmful effects of a declining yen.
Apart from our reductions in the United Kingdom, the main change in
strategy was our decision to close out the profitable yen hedges towards the end
of the period. There were several changes in the Fund's underlying investments,
but no other important changes in strategy. New holdings which we have
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of all Fund expenses. The actual total
returns for owners of the variable annuity contracts or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
separate account and contract/policy charges. Past performance is not a
guarantee of future results. Investment return and principal value will
fluctuate so that the value of your investment, when redeemed, may be worth more
or less than the original cost.
(2) The MSCI EAFE Index is an unmanaged index that is generally considered to be
representative of international stock market activity. The Index is
capitalization-weighted and carries a significantly higher weighting in Japan
than the Fund is normally likely to have because the Fund seeks to diversify
investments across all major international markets. The performance of the Fund
and the MSCI EAFE Index may not therefore always correlate closely. The MSCI
EAFE Index is not available for direct investment and its returns do not reflect
the fees and expenses that have been deducted from the Fund.
- --------------------------------------------------------------------------------
14
<PAGE>
- -------------------------------------------------------------------------------
taken during the first half of this year include a stake in NTT Data
Communications Systems, Japan's largest computer systems integrator, which is
benefiting from a rapid increase in the use of computers in the Japanese service
sector, an area that has lagged behind that of other developed countries. We
have also bought Adidas, the German sportswear company, which has an excellent,
but under-utilized brand name and which is now cutting costs, outsourcing and
expanding into new markets.
Q. What are your expectations for the next six months, and how will that affect
your management strategy?
A. We are relatively optimistic about the prospects for most international
markets for the remainder of 1996. Overseas share prices have not risen as much
as those in the U.S., and there is still considerable scope for profits to
increase in many countries, as a large number of international companies are
operating below capacity. There is very little sign of inflation, and short-term
interest rates are likely to stay low in Europe, and also in Japan, although
pressure to increase rates there may become apparent before the end of this
year.
We are happy with our current strategy: We have a heavy weighting in the
faster-growing Asian economies, whose markets have lagged recently, and which
now appear to offer good value. We have a neutral weighting in Japan: The
economy appears to be recovering more rapidly than expected, but this has
already been partly discounted by the market. We have a large exposure to
Germany where the benefits of corporate restructuring are likely to continue to
flow through to shareholders, and we shall remain underweighted in the United
Kingdom until the political outlook becomes clearer. As always, our strategy
will continue to be strongly influenced by the availability of high-quality
businesses in the world's stock markets.
- --------------------------------------------------------------------------------
Baillie Gifford International Fund Profile
as of June 30, 1996
- ------------------------------------------
[The following table was represented by a pie graph in the printed material]
- --------------------------------------------------------------------------------
Portfolio Composition by Geographical Location
Latin America -- 2.8%
Cash Equivalents -- 4.7%
U.K. -- 11.4%
Far East -- 16.9%
(excluding Japan)
Continental
Europe -- 29.7%
Japan -- 34.5%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year.................................. 21.58%
5 Years................................. 9.32%
Since Inception (2/8/91)................ 9.51%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Holdings
Company Nature of Company Country
1. Canon, Inc. Office Equipment & Cameras Japan
2. Sandoz AG Pharmaceuticals Switzerland
3. Ciba Geigy AG Pharmaceuticals Switzerland
4. Mitsubishi Heavy Industrial Machinery Japan
5. DDI Corp. Telecommunications Japan
6. NTT Data. Computer Systems Japan
7. Bridgestone Corp. Tires Japan
8. Tokio Marine & Fire Insurance Japan
9. Rohm Electronic Components Japan
10. Mitsubishi Estate Property Japan
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- ---------------------------------------
[Photo of Edward H. Hocknell, Portfolio Manager]
Q. Emerging markets have looked like a hot performer during the first six months
of 1996. Can you explain?
A. The emerging markets certainly have been hot performers so far this year. In
the first half of 1996, the total return of the Morgan Stanley Capital
International (MSCI) Emerging Markets Free (EMF) Index (which is the benchmark
we use) was 10.7%(1). The performance of Baillie Gifford Emerging Markets Fund
has exceeded this by a wide margin, returning 17.7% for the same period.(2)
Returns for other periods are shown on the facing page.
As measured by the MSCI EMF Index, most emerging markets have been strong
this year. Eastern European stocks have been the standout performers; the
Hungarian market, for example, rose by 76.5%. The other strong exchanges include
Taiwan, up 37.0%, and Brazil, up 28.4%. The only one of the larger markets to
turn in a disappointing performance was South Africa, which declined by 7.1%.
The main reason for the strong performance was investors' increasing
confidence that the problems associated with Mexico's public finances were not
widespread. In general, interest rates in emerging countries began to fall to
more reasonable levels, and portfolio investment recovered strongly, leading to
widespread rises in stock markets.
There were, of course, a number of fundamental factors underlying this
return in confidence. First, it is becoming clear that a solid recovery is
building in Latin America, after last year's sluggish performance. Second, an
improvement in the Chinese economy has helped the smaller Asian countries.
Third, the sharpest turnaround came in Eastern Europe, where a surge in foreign
direct investment has rekindled enthusiasm about the region's stock markets,
which were trading on very low valuations.
It is also important to reiterate that the long-term case for emerging
market investing remains intact, and is being recognized by an increasing number
of investors. Emerging market countries' share of world trade is markedly
increasing, as a result of rising investment, while their governments are
competing for capital by adopting more investor-friendly policies. Although
there is always uncertainty in financial markets, especially those of emerging
economies, we anticipate that this process will lead to a virtuous circle of
high growth, and positive long-term returns for the Fund's investors.
Q. What factors and strategies have affected the Fund's performance during this
period?
A. The Fund's good performance, compared to its benchmark, has arisen both from
good stock selection within individual emerging markets and from good allocation
of resources between countries.
Our stock selection, which has concentrated on well-financed market leaders
in their respective countries, has added value in almost all of the major
markets. Many of the Fund's best-performing stocks are based in Eastern Europe.
Elektrim, for example, the Polish industrial conglomerate, saw a 138% rise in
its share price in the first half of this year, and Panonplast, a Hungarian
company which produces many of the modern building supplies which are vital to
improve the country's infrastructure, saw an appreciation of 105%.
The Fund benefited strongly from its generally heavy weighting in Eastern
Europe and also from its reduced exposure to South Africa. Our increases in
- --------------------------------------------------------------------------------
(1) The Morgan Stanley Capital International (MSCI) Emerging Markets Free Index
(EMF) is an unmanaged index that is generally considered to be representative of
the stock market activity of emerging markets. The Index is a market
capitalization weighted index composed of companies representative of the market
structure of 22 emerging market countries in Europe, Latin America, and the
Pacific Basin. The MSCI EMF Index excludes closed markets and those shares in
otherwise free markets which may not be purchased by foreigners. The MSCI EMF
Index is not available for direct investment and the returns do not reflect the
fees and expenses that have been deducted from the Fund.
(2) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The actual total
returns for owners of the variable annuity contracts or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
separate account and contract/policy charges. Past perfomance is not a guarantee
of future results. Investment return and principal value will fluctuate so that
the value of your investment, when redeemed, may by worth more or less than the
original cost.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Taiwan were profitable, as the market rose by 37.0% during the period, according
to the MSCI EMF Index, and this helped to offset the effect of our
underweighting in Malaysia.
In Latin America, we have a heavy weighting in Brazil, which, according to
the MSCI EMFIndex, rose by 28.4%, and are very light in Chile, which only
managed a 1.7% increase over the six-month period ended June 30, 1996. Stock
selection was also particularly beneficial in this part of the world.
Q. What are your expectations for the balance of the year, and how do you plan
to position the Fund to take advantage of these opportunities?
A. We expect the factors which have led to the good performance of emerging
markets in recent months to persist into the future. Short-term forecasts are
hard to make because emerging markets are, by nature, volatile. Although the
Fund can, to some extent, overcome this natural volatility by having a wide
diversity of holdings, a decline in the U.S. markets would certainly be
reflected in emerging markets. Nevertheless, the longer-term prospects are very
bright, and, despite the occasional setback, the patient investor may earn a
premium return by investing in these markets. Even excluding the effects of the
high valuations of the Japanese market, emerging markets are still a markedly
better value than developed ones when compared to earnings, cash flow or book
value, despite the fact that the real growth rates of the emerging countries is
expected to remain at least twice that of the developed ones.
There have been no significant changes in the Fund's policy in recent
months. We are especially optimistic about the prospects for Eastern Europe,
Argentina, Brazil, Taiwan and Korea; we are less enthusiastic about Malaysia,
Mexico and South Africa. As always, our policy is strongly influenced by the
availability of attractive companies in the various emerging markets. We are
currently invested in 23 countries and are constantly on the lookout for
investment opportunities in new markets.
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund Profile
as of June 30, 1996
- ---------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(2)
- --------------------------------------------------------------------------------
1 Year................................. 20.92%
Since Inception (10/17/94)............. 1.76%
- --------------------------------------------------------------------------------
[The following table was represented by a pie graph in the printed material]
- --------------------------------------------------------------------------------
Portfolio Composition by Region
South Africa 3.7%
Cash 8.9%
Europe 8.6%
Asia 50.6%
Latin America 28.2%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top Ten Holdings
Nature
Company of Company Country
- --------------------------------------------------------------------------------
1. Telebras Telecomm. Brazil
2. Korea Europe Fund Fund Korea
3. Metro Pacific Property Hong Kong
4. Henderson Land Property Hong Kong
5. Genesis Chile Fund Chile
6. New World Devel Property Hong Kong
7. Asia Pacific Conglomerate Hong Kong
8. Celesc Electricity Distr. Brazil
9. Hutchison Whampoa Property Hong Kong
10. Panamerican Bever. Bottling Mexico
- --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Value Line Centurion Fund
- ---------------------------------------
[Logo]
Q. Following a tremendous year for the stock market in 1995, how have the market
and the Fund performed during the first six months of this year?
A. The Value Line Centurion Fund has enjoyed an excellent year so far in 1996.
Through June 30, the Fund produced a total return of 11.92%(1) compared with a
10.05% total return for the S&P 500 Index.(2)
Q. What changes were made to the portfolio during the first half of the year?
A. Technology has been the story thus far during 1996. We started the year with
about one-quarter of the Fund's investment in Technology. We increased that
allocation to nearly one-third during March, when we found the values offered by
selected Technology stocks particularly attractive. We then began to sell shares
and take profits through the second quarter, as individual stocks began to
approach our target prices. We are presently less than 20% invested in
Technology.
Financial stocks are also an area worth noting, as we began the year with
about a 19% weighting. As the long bond (the 30-year Treasury Bond) sold off
during the first half of 1996, we began to take profits in the Financial sector,
which reduced our exposure to about 6% by the end of June.
As we shifted out of the Technology and Financial sectors, Consumer Growth
stocks, particularly retailers, have been the beneficiary, as we increased our
weighting in this sector from about 7% in January to 15% in June. These stocks
should do well in a slow-growth economy.
Q. What is your stock selection process?
A. The Fund uses a process developed by Value Line, which invests using a
disciplined, bottom-up investment approach. Stocks selected for purchase must be
ranked #1 or #2 for Timeliness in the Value Line Investment Survey.
Historically, stocks so ranked generally have above-average earnings and price
momentum, but trade at reasonable price/earnings multiples relative to their
expected growth rates. Another important input to our proprietary, structured
investment process comes from Value Line's 75 in-house research analysts, who
monitor our 1,700 stock universe.
Although past performance is no guarantee of future results, over the
30-year period from 1965 through 1995 in which the Value Line Ranking System was
employed, our #1 and #2 ranked stocks outperformed the S&P 500 Index on a
total-return basis by a wide margin: 21.7% annualized for the #1 ranked stocks;
12.1% for the #2 ranked stocks; and 11.1% for the S&P 500 Index.
Q. What are your expectations for next year? What adjustments will you make?
A. Although our asset-allocation model continues to espouse a cautious approach
to the equity market for the remainder of 1996, we believe that the recent 10%
correction in the Dow Jones Industrial Average(3) from 5,800 to 5,200 has
largely run its course. Corporate profits for the second quarter were reported
much as we had expected, with positive surprises outnumbering negatives by a
three-to-one ratio. In fact, most of the
- --------------------------------------------------------------------------------
(1) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that is
generally considered to be representative of U.S. stock market activity. The
S&P500 Index is not available for direct investment and its returns do not
reflect the fees and expenses that have been deducted from the Fund.
(2) Total return figures are historical and assume the reinvestment of dividends
and distributions, and the deduction of all Fund expenses. The actual total
returns for owners of the variable annuity contracts or variable life insurance
policies which provide for investment in the Fund will be lower to reflect
separate account and contract/policy charges. Past performance is not a
guarantee of future results. Investment return and principal value will
fluctuate so that the value of your investment, when redeemed, may be worth more
or less than the original cost.
(3) The Dow Jones Industrial Average (DJIA) is an unmanaged average of 30
industrial stocks listed on the New York Stock Exchange that, like the S&P 500
Index, is generally considered to be representative of U.S. stock market
performance. The DJIA is not available for direct investment and its returns do
not reflect the fees and expenses that have been deducted from the Fund.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
negative news came in the form of pre-releases during June, as has been the
pattern over the past year, with the positive news on profits coming after the
quarter had ended. Going forward, we continue to forecast an economy growing at
a moderate pace with benign inflationary pressures, an elongated business cycle,
and declining interest rates.
Specifically, we continue to believe that two major upcoming new-product
introductions in the Technology industry will serve to initiate a significant
corporate upgrade cycle, as businesses purchase the new technology in late 1996
that will extend through 1997. Microsoft will shortly unveil its 4.0 version of
Windows NT, a robust corporate network software. Similarly, Intel will soon
begin volume shipments of its Pentium Pro microprocessor, a powerful
686-generation semiconductor chip.
We believe that the broad availability of these two state-of-the-art
products will unleash pent-up corporate demand, which will reverse the slowdown
in technology spending that we had anticipated over the prior three quarters.
- --------------------------------------------------------------------------------
Value Line Centurion Fund Profile
as of June 30, 1996
- ---------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year................................. 27.40%
5 Years................................ 17.52%
10 Years............................... 13.41%
Since Inception (11/15/83)............. 13.74%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Holdings
26%of the Portfolio
o Nike, Inc. o Cardinal Health
o Cisco Systems o Cabletron Systems
o McDonald's Corp. o IMCGlobal Inc.
o Sonat o Philip Morris
o Merck &Co. o Home Depot
- --------------------------------------------------------------------------------
[The following table was represented by two pie graphs in the printed material]
For a complete list of portfolio holdings,
please see the Schedule of Investments.
- --------------------------------------------------------------------------------
Portfolio Composition by Economic Sector as of
December 31, 1995 and June 30, 1996
December 31, 1995 June 30, 1996
----------------- -------------
Consumer Non-Durables -- 27.39% Consumer Non-Durables -- 23.34%
Capital Goods -- 14.11% Capital Goods -- 12.15%
Other -- 6.58% Other -- 15.75%
Consumer Growth -- 6.69% Consumer Growth -- 15.11%
Financial -- 17.69% Financial -- 5.61%
Technology -- 27.54% Technology -- 28.04%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- -------------------------------------------
[LOGO]
Q. This has been an interesting six months for the U.S. stock and bond markets.
How has the Trust performed?
A. Good stock selection and an underweighting in bonds were keys to Value Line
Strategic Asset Management Trust's continued strong performance in the first
half of 1996. Its total return of 10.41% for the six-month period ended June 30,
1996(1) extended the Trust's track record as one of the top-performing funds of
its kind as measured by the Lipper Flexible Portfolio Average.(2) In fact, as
reported by Lipper Analytical Services, Inc. for the six-month period ended June
30, 1996, the Trust ranked number 3 out of 70 similar funds, number 4 out of 67
for the one-year period, number 8 of 56 for the three-year period and number 3
out of 51 for the five-year period. The Trust's 10.41% return can be compared
with a total return of 10.05% for the unmanaged Standard & Poor's 500 Index and
a total return of -1.88% for the unmanaged Lehman Government/Corporate Bond
Index.(3)
Q. On December 31, 1995, the Trust had a cash and cash equivalents position of
30.0%. Do you still maintain a large cash position? How has portfolio
composition changed since December 31, 1995?
A. Cash declined to 20% of the portfolio by mid-February and has since remained
at about that level. At first, the cash was deployed into stocks, which
accounted for about 70% of the portfolio at mid-February, up from 60% at
year-end. Beginning in late March, however, the Trust began shifting assets out
of stocks and into bonds. Bonds accounted for only 10% of assets at year-end
1995, but by June 30 made up about 30% of the portfolio. The stock allocation,
meanwhile, has declined to about 50% of the portfolio.
The Trust uses Value Line's proprietary stock and bond market models to
determine the suggested optimal asset allocation at any given time. These models
use a number of different economic and financial variables. The rise in interest
rates is the main factor that has made bonds increasingly attractive relative to
stocks in recent months. The central tendency for the Trust's allocation over
time will be 55% in stocks, 35% in bonds, and 10% in cash equivalents. Thus, the
Trust is still holding more cash than can be expected over the long run,
reflecting the current cautionary stance of Value Line's models.
Q. What are your expectations for the future and how are you positioning the
Trust to take advantage of upcoming opportunities?
A. It appears that an additional rise in U.S. interest rates in early July may
suggest a further reduction in the Trust's stockholdings. National employment
figures are coming in stronger than expected, and the Federal Reserve may have
to take steps to rein in
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions, and the deduction of all Trust expenses. The
actual total returns for owners of the variable annuity contracts or
variable life insurance policies which provide for investment in the Trust
will be lower to reflect separate account and contract/policy charges. Past
performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that the value of your investment, when
redeemed, may be worth more or less than the original cost.
(2) Lipper rankings were reported by Lipper Variable Insurance Products
Performance Analysis Service, in its underlying funds report dated June 30,
1996. Lipper Analytical Services, Inc. is an independent fund monitoring
and rating organization and its database of performance information is
based on historical total returns, which assume the reinvestment of
dividends and distributions, and the deduction of all fund expenses.
(3) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The S&P 500
and The Lehman Aggregate Bond Indexes are not available for direct
investment and the returns do not reflect the fees and expenses that have
been deducted from the Trust.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
economic growth. Action by the Federal Reserve would probably put downward
pressure on the stock market. By keeping the Trust's stockholdings at or below
50% of the portfolio, we will have the buying power available to take advantage
of any significant fall in stock prices. Guided by the Value Line Timeliness
Ranking System, the Trust maintains a well-diversified stock portfolio invested
in companies with strong relative earnings momentum and strong relative stock
price momentum. Meanwhile, our bond holdings are of top quality (all Treasuries)
and tilted toward shorter maturities, which can be expected to be less
vulnerable to any further price declines in the bond market.
- --------------------------------------------------------------------------------
Top Ten Stock Holdings
1. Johnson & Johnson
2. Staples Inc.
3. Safeway Inc.
4. Equifax Inc.
5. HFS Inc.
6. Nike Inc.
7. Clayton Homes
8. McDonnell Douglas
9. Cardinal Health
10. Praxair Inc.
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
Profile as of June 30, 1996
- -------------------------------------------
- -------------------------------------------
AVERAGE ANNUAL RETURNS(1)
===========================================
1 Year........................... 22.81%
5 Years.......................... 15.93%
Since Inception (10/1/87)........ 14.47%
- -------------------------------------------
- --------------------------------------------------------------------------------
[The following tables were depicted as two pie charts in the printed material.]
Portfolio Composition by Asset Class
December 31, 1995 June 30, 1996
Cash & Cash Equivalents 30.0% Cash 20.0%
Stocks 60.2% Stocks 55.0%
Bonds 9.8% Bonds 25.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Cash Fund
- ----------------------
[A photo of Alexander M. Grant, Jr., Portfolio Manager appears in the printed
material]
Alexander M. Grant, Jr.,
Portfolio Manager
Q. How did The Guardian Cash Fund perform during the first half of 1996?
A. As of Friday, June 28, 1996, the effective 7-day annualized yield was 5.01%,
down from December 31, 1995, when the effective 7-day annualized yield was
5.40%. The Fund produced an annualized total return of 4.93% for the first half
of 1996.(1)
Q. What factors affected the Fund's performance?
A. On January 31, 1996, the Federal Reserve Board reduced the Federal Funds rate
from 5.50% to 5.25%. Money market securities, like those held by this and
similar funds, tend to track the movement in the Federal Funds rate. Another
factor affecting performance was the portfolio's average maturity-17 days as of
June 30, 1996. In contrast, the average money market fund as measured by IBC
Money Fund Vision had an average maturity of 56 days and a 7-day annualized
yield of 4.71% at June 25, 1996. IBC Financial Data is a research firm that
tracks money market funds. Typically, a fund with a longer maturity will pay a
higher yield. However, in a period of rising interest rates, a fund with a
longer maturity will suffer a greater reduction in total return.
Q. What is your investment strategy?
A. The Guardian Cash Fund is a place for investors to put their money while they
are deciding whether to invest in stocks or bonds. Therefore, we will continue
to try to provide a strong 7-day yield, while offering safety and liquidity. As
a result, our strategy will continue to be to invest in the highest-quality
commercial paper that matures in less than 60 days.
- --------------------------------------------------------------------------------
INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. WHILE THE FUND SEEKS TO MAINTAIN A STABLE PRICE OF $10.00 PER SHARE,
THERE IS NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Yields are annualized historical figures. Effective yield assumes that
income is reinvested. Yields will vary as interest rates change. Past
performance is not a guarantee of future results.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------- ---------
Separate Separate
Account D Account D
- --------- ---------
1 1
- --------- ---------
- --------------------------------------------------------------------------------
The Guardian Separate Account D
- -------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (Unaudited)
Assets
Investments in mutual funds:
The Guardian Stock Fund, Inc. (30,797,748
shares at net asset value of $36.90 per
share; FIFO Cost, $928,771,394) ........................... $1,136,436,892
The Guardian Bond Fund, Inc. (16,713,763
shares at net asset value of $11.70 per
share; FIFO Cost, $206,311,719) ........................... 195,551,023
The Guardian Cash Fund, Inc. (18,628,601
shares at net asset value of $10.00 per
share; which equals cost) ................................. 186,286,011
Gabelli Capital Asset Fund (3,324,522 shares
at net asset value of $11.91 per share; FIFO
Cost, $36,091,333) ........................................ 39,595,061
Baillie Gifford International Fund (14,597,096
shares at net asset value of $16.73 per share;
FIFO Cost, $216,441,429) .................................. 244,209,411
Baillie Gifford Emerging Markets Fund (2,783,513
shares at net asset value of $9.96 per share; FIFO
Cost, $25,170,990) ........................................ 27,723,788
Value Line Centurion Fund, Inc. (10,586,720 shares
at net asset value of $27.14 per share; FIFO Cost,
$227,993,024) ............................................. 287,323,574
Value Line Strategic Asset Management Trust (32,157,593
shares at net asset value of $22.38 per share; FIFO
Cost, $529,021,196) ....................................... 719,686,927
--------------
Total Assets ................................................. 2,836,812,687
--------------
Liabilities
Annuitant Mortality Fluctuation Fund ...................... 7,765,367
Due to The Guardian Insurance & Annuity Company, Inc. ..... 4,293,722
--------------
Total Liabilities ......................................... 12,059,089
--------------
Net Assets -- Note 3 ......................................... $2,824,753,598
==============
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
The Guardian Separate Account D
- -------------------------------
COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1996 (Unaudited)
<CAPTION>
Guardian Guardian Guardian
Stock Bond Cash
Combined Fund Fund Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ........................................ $ 15,845,711 $ 6,087,167 $ 4,969,246 $ 4,332,650
Expenses -- Note 4:
Mortality and expense risk charges .......................... 15,627,173 6,213,263 1,158,890 1,155,157
------------- ------------- ------------- -------------
Net investment income/(expense) ................................ 218,538 (126,096) 3,810,356 3,177,493
------------- ------------- ------------- -------------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ........... 30,427,864 19,101,565 (217,359) --
Reinvested realized gain distributions ...................... 42,008,227 40,456,202 -- --
------------- ------------- ------------- -------------
Net realized gain/(loss) on investments ..................... 72,436,091 59,557,767 (217,359) --
------------- ------------- ------------- -------------
Unrealized appreciation/(depreciation) of investments:
End of period ............................................... 480,725,592 207,665,498 (10,760,696) --
Beginning of period ......................................... 339,848,739 166,241,621 (1,829,312) --
------------- ------------- ------------- -------------
Change in unrealized appreciation/(depreciation) ............ 140,876,853 41,423,877 (8,931,384) --
------------- ------------- ------------- -------------
Net realized and unrealized gain/(loss) from investments ....... 213,312,944 100,981,644 (9,148,743) --
------------- ------------- ------------- -------------
Net Increase/(Decrease) in Net Assets Resulting from Operations . $ 213,531,482 $ 100,855,548 $ (5,338,387) $ 3,177,493
============= ============= ============= =============
<CAPTION>
Baillie Value Line
Gabelli Baillie Gifford Strategic
Capital Gifford Emerging Value Line Asset
Asset International Markets Centurion Management
Fund Fund Fund Fund Trust
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ...................................... $ -- $ 456,648 $ -- $ -- $ --
Expenses -- Note 4:
Mortality and expense risk charges ........................ 200,023 1,241,177 123,816 1,539,333 3,995,514
---------- ----------- ---------- ----------- ------------
Net investment income/(expense) .............................. (200,023) (784,529) (123,816) (1,539,333) (3,995,514)
---------- ----------- ---------- ----------- ------------
Realized and Unrealized Gain/(Loss) from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of investments ......... 195,576 2,759,877 526,482 4,445,083 3,616,640
Reinvested realized gain distributions .................... -- 1,552,025 -- -- --
---------- ----------- ---------- ----------- ------------
Net realized gain/(loss) on investments ................... 195,576 4,311,902 526,482 4,445,083 3,616,640
---------- ----------- ---------- ----------- ------------
Unrealized appreciation/(depreciation) of investments:
End of period ............................................. 3,503,728 27,767,982 2,552,798 59,330,551 190,665,731
Beginning of period ....................................... 538,243 11,551,715 116,434 35,144,059 128,085,979
---------- ----------- ---------- ----------- ------------
Change in unrealized appreciation/(depreciation) .......... 2,965,485 16,216,267 2,436,364 24,186,492 62,579,752
---------- ----------- ---------- ----------- ------------
Net realized and unrealized gain/(loss) from investments ..... 3,161,061 20,528,169 2,962,846 28,631,575 66,196,392
---------- ----------- ---------- ----------- ------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $2,961,038 $19,743,640 $2,839,030 $27,092,242 $ 62,200,878
========== =========== ========== =========== ============
See notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24 & 25
<PAGE>
- --------- ---------
Separate Separate
Account D Account D
- --------- ---------
1 1
- --------- ---------
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
The Guardian Separate Account D
- -------------------------------
COMBINED STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1995 (Audited) and
Six Months Ended June 30, 1996 (Unaudited)
<CAPTION>
Guardian Guardian Guardian
Stock Bond Cash
Combined Fund Fund Fund
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------
1995 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................... $ 19,707,706 $ 1,564,894 $ 9,886,652 $ 7,345,954
Net realized gain/(loss) from sale of investments . 42,012,933 16,036,940 294,696 --
Reinvested realized gain distributions ............ 60,487,322 41,892,141 -- --
Change in unrealized appreciation/(depreciation) of
investments ...................................... 328,133,298 149,272,232 16,995,664 --
--------------- --------------- ------------- -------------
Net increase/(decrease) resulting from operations . 450,341,259 208,766,207 27,177,012 7,345,954
--------------- --------------- ------------- -------------
- --------------------------
1995 Contract Transactions
- --------------------------
Net contract purchase payments .................... 369,698,658 144,822,173 23,949,764 72,143,019
Transfer between/within separate accounts ......... 295,000 55,184,318 11,122,356 (62,730,388)
Administrative charges-- Note 4 ................... (2,053,325) (773,797) (160,067) (109,917)
Redemptions and annuity benefits .................. (128,119,230) (40,080,339) (13,679,831) (19,332,792)
--------------- --------------- ------------- -------------
Net increase/(decrease) from contract transactions 239,821,103 159,152,355 21,232,222 (10,030,078)
--------------- --------------- ------------- -------------
Actuarial Increase in Reserves for Contracts in
Payment Period .................................... 58,225 20,278 6,316 3,406
--------------- --------------- ------------- -------------
Total Increase/(Decrease) in Net Assets ............ 690,220,587 367,938,840 48,415,550 (2,680,718)
Net Assets at December 31, 1994 ................... 1,741,656,905 580,396,627 158,018,974 177,402,568
--------------- --------------- ------------- -------------
Net Assets at December 31, 1995 ................... $ 2,431,877,492 $ 948,335,467 $ 206,434,524 $ 174,721,850
=============== =============== ============= =============
- ----------------------------------------
1996 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................... $ 218,538 $ (126,096) $ 3,810,356 $ 3,177,493
Net realized gain/(loss) from sale of investments . 30,427,864 19,101,565 (217,359) --
Reinvested realized gain distributions ............ 42,008,227 40,456,202 -- --
Change in unrealized appreciation/(depreciation) of
investments ...................................... 140,876,853 41,423,877 (8,931,384) --
--------------- --------------- ------------- -------------
Net increase/(decrease) resulting from operations . 213,531,482 100,855,548 (5,338,387) 3,177,493
--------------- --------------- ------------- -------------
- --------------------------
1996 Contract Transactions
- --------------------------
Net contract purchase payments .................... 262,683,782 105,328,887 17,037,225 42,160,803
Transfer between/within separate accounts ......... 269,199 9,178,088 (14,702,336) (29,107,214)
Administrative charges-- Note 4 ................... (1,260,329) (514,547) (87,890) (53,121)
Redemptions and annuity benefits .................. (82,417,369) (28,434,880) (8,085,383) (12,573,003)
--------------- --------------- ------------- -------------
Net increase/(decrease) from contract transactions 179,275,283 85,557,548 (5,838,384) 427,465
--------------- --------------- ------------- -------------
Actuarial Increase in Reserves for Contracts in
Payment Period .................................... 69,341 19,661 13,960 (2,392)
--------------- --------------- ------------- -------------
Total Increase/(Decrease) in Net Assets ............ 392,876,106 186,432,757 (11,162,811) 3,602,566
Net Assets at December 31, 1995 ................... 2,431,877,492 948,335,467 206,434,524 174,721,850
--------------- --------------- ------------- -------------
Net Assets at June 30, 1996-- Note 3 .............. $ 2,824,753,598 $ 1,134,768,224 $ 195,271,713 $ 178,324,416
=============== =============== ============= =============
<CAPTION>
Baillie Value Line
Gabelli Baillie Gifford Strategic
Capital Gifford Emerging Value Line Asset
Asset International Markets Centurion Management
Fund Fund Fund Fund Trust
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------
1995 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................... $ (40,532) $ 1,228,347 $ 128,073 $ (1,457,274) $ 1,051,592
Net realized gain/(loss) from sale of investments . 204,283 10,981,610 (379,448) 6,000,336 8,874,516
Reinvested realized gain distributions ............ 221,712 8,917,484 -- 4,761,142 4,694,843
Change in unrealized appreciation/(depreciation) of
investments ...................................... 538,243 (1,716,086) 461,670 48,722,230 113,859,345
------------ ------------- ------------ ------------- -------------
Net increase/(decrease) resulting from operations . 923,706 19,411,355 210,295 58,026,434 128,480,296
------------ ------------- ------------ ------------- -------------
- --------------------------
1995 Contract Transactions
- --------------------------
Net contract purchase payments .................... 13,565,796 22,490,039 4,332,030 26,256,915 62,138,922
Transfer between/within separate accounts ......... 8,918,601 (27,230,808) 2,973,199 15,756,035 (3,698,313)
Administrative charges-- Note 4 ................... (2,745) (202,669) (8,505) (198,953) (596,672)
Redemptions and annuity benefits .................. (200,520) (10,652,654) (405,448) (10,998,445) (32,769,201)
------------ ------------- ------------ ------------- -------------
Net increase/(decrease) from contract transactions 22,281,132 (15,596,092) 6,891,276 30,815,552 25,074,736
------------ ------------- ------------ ------------- -------------
Actuarial Increase in Reserves for Contracts in
Payment Period .................................... -- 8,525 -- 4,648 15,052
------------ ------------- ------------ ------------- -------------
Total Increase/(Decrease) in Net Assets ............ 23,204,838 3,823,788 7,101,571 88,846,634 153,570,084
Net Assets at December 31, 1994 ................... -- 205,599,176 5,325,934 145,559,769 469,353,857
------------ ------------- ------------ ------------- -------------
Net Assets at December 31, 1995 ................... $ 23,204,838 $ 209,422,964 $ 12,427,505 $ 234,406,403 $ 622,923,941
============ ============= ============ ============= =============
- ----------------------------------------
1996 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................... $ (200,023) $ (784,529) $ (123,816) $ (1,539,333) $ (3,995,514)
Net realized gain/(loss) from sale of investments . 195,576 2,759,877 526,482 4,445,083 3,616,640
Reinvested realized gain distributions ............ -- 1,552,025 -- -- --
Change in unrealized appreciation/(depreciation) of
investments ...................................... 2,965,485 16,216,267 2,436,364 24,186,492 62,579,752
------------ ------------- ------------ ------------- -------------
Net increase/(decrease) resulting from operations . 2,961,038 19,743,640 2,839,030 27,092,242 62,200,878
------------ ------------- ------------ ------------- -------------
- --------------------------
1996 Contract Transactions
- --------------------------
Net contract purchase payments .................... 8,340,815 14,909,477 2,968,007 22,137,202 49,801,366
Transfer between/within separate accounts ......... 5,469,780 5,282,859 9,856,558 9,847,262 4,444,202
Administrative charges-- Note 4 ................... (6,248) (108,541) (9,812) (123,207) (356,963)
Redemptions and annuity benefits .................. (684,601) (5,382,679) (398,215) (6,461,751) (20,396,857)
------------ ------------- ------------ ------------- -------------
Net increase/(decrease) from contract transactions 13,119,746 14,701,116 12,416,538 25,399,506 33,491,748
------------ ------------- ------------ ------------- -------------
Actuarial Increase in Reserves for Contracts in
Payment Period .................................... 2 4,238 2 7,068 26,802
------------ ------------- ------------ ------------- -------------
Total Increase/(Decrease) in Net Assets ............ 16,080,786 34,448,994 15,255,570 52,498,816 95,719,428
Net Assets at December 31, 1995 ................... 23,204,838 209,422,964 12,427,505 234,406,403 622,923,941
------------ ------------- ------------ ------------- -------------
Net Assets at June 30, 1996-- Note 3 .............. $ 39,285,624 $ 243,871,958 $ 27,683,075 $ 286,905,219 $ 718,643,369
============ ============= ============ ============= =============
See notes to financial statements
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26 & 27
<PAGE>
- ---------
Separate
Account D
- ---------
1
- ---------
- --------------------------------------------------------------------------------
The Guardian Separate Account D
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- ----------------------
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 contract owner. GREA is
another separate investment account established by GIAC. Amounts allocated to
the FRO are maintained by GIAC in its general account. The contractowner may
transfer his or her contract value among the eight investment options within the
Account, GREA or the FRO. The eight investment options of the Account correspond
to the following underlying mutual funds: The Guardian Stock Fund, Inc. (GSF),
The Guardian Bond Fund, Inc. (GBF), The Guardian Cash Fund, Inc. (GCF), the
Gabelli Capital Asset Fund (GCAF), the Baillie Gifford International Fund
(BGIF), the 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 (GISC), a wholly owned subsidiary of GIAC. GCAF
has a management agreement with GISC. BGIF and BGEMF each has an investment
advisory agreement with Guardian Baillie Gifford Ltd., a joint venture company
formed by GIAC and Baillie Gifford Overseas Ltd.
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. On May 1, 1995, GIAC contributed $100,000 to GCAF to
facilitate the commencement of its 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 contract-owners 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
- --------------------------------------------------------------------------------
28
<PAGE>
---------
Separate
Account D
---------
1
---------
- --------------------------------------------------------------------------------
trade date and income is recorded on the ex-dividend date.
(d) The cost of investments sold is determined on a first in, first out
(FIFO) basis.
During the six months ended June 30, 1996 and the year ended December 31,
1995, purchases of shares of the Funds aggregated $445,847,318 and $670,213,681,
respectively. Aggregate sales of shares of the Funds during the six months ended
June 30, 1996 and the year ended December 31, 1995 amounted to $219,719,097 and
$348,870,334, respectively.
The Annuitant Mortality Fluctuation Fund
The Annuitant Mortality Fluctuation Fund is funded by GIAC and has been
established in response to various regulatory requirements and provides for any
possible adverse experience.
Federal Income Taxes
The operations of the Account are part of the operations of GIAC and, as
such, are included in the combined tax return of GIAC. GIAC is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended.
Under tax law, no federal income taxes are payable by GIAC with respect to
the operations of the Account.
Annuity Reserves
Annuity reserves are computed for currently payable contracts according to
the 1971 Individual Annuity Mortality Table and the 1983 Individual Annuity
Table. The assumed interest rate is 4.0%. Charges to annuity reserves for
mortality and expense risk experience are reimbursed to GIAC if the reserves
- -----------------------------------
Note 3 -- Net Assets, June 30, 1996
- -----------------------------------
<TABLE>
<CAPTION>
Accumulation Total
Units Owned Unit Value Unit Value
-------------- ---------- --------------
<S> <C> <C> <C>
Tax-Qualified Accounts:
The Guardian Stock Fund, Inc. ....................... 25,928,543.821 $23.998725 $ 622,251,993
The Guardian Bond Fund, Inc. ........................ 6,896,489.884 15.296174 105,489,909
The Guardian Cash Fund, Inc. ........................ 6,824,047.305 12.549691 85,639,685
Gabelli Capital Asset Fund .......................... 1,586,523.221 11.897656 18,875,908
Baillie Gifford International Fund .................. 7,944,439.413 15.316178 121,678,448
Baillie Gifford Emerging Markets Fund ............... 1,225,214.290 10.100377 12,375,126
Value Line Centurion Fund, Inc. ..................... 5,356,998.398 26.955266 144,399,317
Value Line Strategic Asset Management Trust ......... 17,428,051.287 23.821473 415,161,853
Non-Tax-Qualified Accounts:
The Guardian Stock Fund, Inc. ....................... 21,265,251.582 23.998725 510,338,925
The Guardian Bond Fund, Inc. ........................ 5,820,872.542 15.296174 89,037,079
The Guardian Cash Fund, Inc. ........................ 7,371,763.628 12.549691 92,513,356
Gabelli Capital Asset Fund .......................... 1,705,302.997 11.897656 20,289,108
Baillie Gifford International Fund .................. 6,924,668.213 15.316178 106,059,451
Baillie Gifford Emerging Markets Fund ............... 1,515,581.934 10.100377 15,307,949
Value Line Centurion Fund, Inc. ..................... 5,275,044.783 26.955266 142,190,235
Value Line Strategic Asset Management Trust ......... 12,636,335.196 23.821473 301,016,118
--------------
2,802,624,460
Contracts receiving annuity payments ................ 6,240,159
Owned by GIAC........................................ 15,888,979
--------------
$2,824,753,598
==============
NOTE: In some instances the calculation of total assets may not agree due to rounding.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
- ---------
Separate
Account D
- ---------
1
- ---------
- --------------------------------------------------------------------------------
The Guardian Separate Account D
- -------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
required are less than originally estimated. If additional reserves are
required, GIAC reimburses the Account.
The amount retained by GIAC in the Account is comprised of amounts which
GIAC allocated to the Account to facilitate the commencement of operations of
the Account and certain of the Funds, as well as amounts accruing to GIAC from
the operations of the Account. Amounts retained by GIAC in the Account may be
transferred by GIAC to its general account.
- --------------------------------------
Note 4 -- Administrative and Mortality
and Expense Risk Charges
- --------------------------------------
Contractual charges paid to GIAC include:
(1) a fixed annual 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 risk is computed daily and is equal
to an annual rate of 1.15% of the average daily net assets applicable to
contract owners;
(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 Period and the Four Prior
Year Ends for Both Qualified and Non-Qualified Accounts
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31, December 31, December 31, December 31,
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
The Guardian Stock Fund, Inc. ............. $23.998725 $21.774794 $16.358812 $16.762756 $14.136306
The Guardian Bond Fund, Inc. .............. 15.296174 15.694939 13.502913 14.148558 13.029142
The Guardian Cash Fund, Inc. .............. 12.549691 12.319068 11.808794 11.506661 11.340994
Gabelli Capital Asset Fund ................ 11.897656 10.750707 -- -- --
Baillie Gifford International Fund ........ 15.316178 14.035634 12.765807 12.802570 9.662405
Baillie Gifford Emerging Markets Fund ..... 10.100377 8.628815 8.782325 -- --
Value Line Centurion Fund, Inc. ........... 26.955266 24.224164 17.494618 18.098849 16.765815
Value Line Strategic Asset
Management Trust ....................... 23.821473 21.700306 17.078883 18.163921 16.427405
</TABLE>
- --------------------------------------------------------------------------------
30
<PAGE>
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- --------------------------------------------------------------------------------
31
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
- ----------------------
COMMON STOCKS -- 95.4%
- ----------------------
Shares Value
- ------------------------------------------------------------
240,500 Boeing Co. $20,953,563
276,400 Logicon, Inc. 8,257,450
39,000 Loral Corporation 531,375
702,000 McDonnell Douglas Corp. 34,047,000
201,750 Precision Castparts Corp. 8,675,250
183,000 Rockwell Int'l. Corp. 10,476,750
64,000 Sundstrand Corp. 2,344,000
41,500 United Technologies Corp. 4,772,500
-----------
90,057,888
-----------
Air Transportation -- 0.3%
58,000 AMR Corp. Del 5,278,000
-----------
Automotive -- 0.4%
128,700 Chrysler Corp. 7,979,400
-----------
Biotechnology -- 0.3%
93,600 Amgen, Inc. 5,054,400
-----------
Building Materials and Homebuilders -- 0.3%
45,000 Coachmen Industries, Inc. 1,575,000
17,900 NCI Building Systems, Inc. 604,125
60,000 McGrath Rent Corp. 1,350,000
80,400 Webb (Del) Corp. 1,608,000
-----------
5,137,125
-----------
Capital Goods-Miscellaneous Technology -- 1.1%
34,500 Adtran, Inc, 2,445,188
228,000 Komag, Inc. 6,013,500
21,400 Pairgain Technologies, Inc. 1,326,800
188,475 Paychex, Inc. 9,070,359
60,400 Rexel, Inc. 853,150
-----------
19,708,997
-----------
Chemicals -- 1.9%
94,000 Cambrex Corp. 4,805,750
191,400 E.I.Dupont De Nemours, Inc. 15,144,525
398,500 Monsanto Co. 12,951,250
21,800 OM Group, Inc. 855,650
211,700 Sterling Chemicals, Inc. 2,461,012
-----------
36,218,187
-----------
Coal -- 0.1%
33,000 Eastern Enterprises 1,097,250
-----------
Computer Software -- 3.4%
18,900 BMC Software, Inc. 1,129,275
32,400 Cadence Design Systems, Inc. 1,093,500
181,500 Computer Associates Int'l., Inc. 12,931,875
308,900 Electronic Data Systems Corp. 16,603,375
56,000 Fair Isaac & Co., Inc. 2,478,000
190,000 Microsoft Corp. 22,823,750
94,000 Parametric Techonology Corp. 4,077,250
69,400 SunGard Data Systems, Inc. 2,784,675
-----------
63,921,700
-----------
Conglomerates -- 1.3%
149,800 Loews Corp. 11,815,475
155,000 Textron, Inc. 12,380,625
-----------
24,196,100
-----------
Containers -- 0.0%
29,975 Alltrista Corp. 711,906
-----------
Cosmetics and Toiletries-- 1.1%
329,900 Gillette Co. 20,577,513
15,200 Helen of Troy Ltd. 433,200
-----------
21,010,713
-----------
Drugs and Hospitals -- 15.6%
134,000 Abbott Laboratories 5,829,000
460,700 American Home Products Corp. 27,699,587
48,300 Baxter International, Inc. 2,282,175
22,100 Becton Dickinson & Co. 1,773,525
343,300 Bristol-Myers Squibb Corp. 30,897,000
52,200 Boston Scientific Corp. 2,349,000
322,948 Eli Lilly & Co., Inc. 20,991,620
175,986 Guidant Corp. 8,667,310
954,800 Johnson & Johnson 47,262,600
136,400 Kinetic Concepts, Inc. 2,114,200
150,000 Medtronic, Inc. 8,400,000
872,200 Merck & Co., Inc. 56,365,925
509,900 Pfizer, Inc. 36,394,112
319,000 Schering Corp. 20,017,250
362,000 Universal Health Services, Inc. 9,457,250
208,700 Warner Lambert Co. 11,478,500
-----------
291,979,054
-----------
Electrical Equipment -- 2.7%
580,000 General Electric Co. 50,170,000
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
----------------
The Guardian
Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
Electronics and Instruments-- 0.9%
240,000 Analogic Corp. $ 6,420,000
51,800 Cascade Communications Corp. 3,522,400
58,000 Sanmina Corp. 1,566,000
13,200 Security Dynamics Technologies 1,085,700
43,500 Shiva Corp. 3,480,000
18,600 Strattec Security Corp. 330,150
-----------
16,404,250
-----------
Energy-Miscellaneous -- 0.5%
192,500 Giant Industries, Inc. 2,791,250
196,930 Holly Corp. 4,923,250
84,000 Howell Corp. 1,134,000
-----------
8,848,500
-----------
Financial-Banks -- 7.2%
150,000 Bankamerica Corp. 11,362,500
73,000 Barnett Banks, Inc. 4,453,000
308,568 Chase Manhattan Corp. 21,792,615
50,000 Central & Southern Hldgs. Co. 428,125
437,484 Citicorp 36,147,116
35,032 Crestar Financial Corp. 1,869,833
146,300 First Bank Systems Corp. 8,485,400
19,900 First Empire State Corp. 4,795,900
99,500 First Union Corp. 6,057,060
77,220 Hubco, Inc. 1,631,273
50,000 Mellon Bank Corp. 2,850,000
62,000 J.P. Morgan & Co., Inc. 5,246,750
97,300 Nationsbank Corp. 8,039,413
212,260 Norwest Corp. 7,402,568
36,000 Star Banc Corp. 2,425,500
48,666 Wells Fargo & Co. 11,625,091
-----------
134,612,144
-----------
Financial-Others -- 8.4%
160,000 American Express Co. 7,140,000
41,000 Associates First Capital Corp. 1,542,625
160,000 Dean Witter Discover & Co. 9,160,000
21,666 Duff & Phelps Cr. Rating Co. 460,402
96,800 A.G. Edwards, Inc. 2,625,700
64,600 Federal Home Loan Mortgage 5,523,300
664,600 Federal National Mortgage Assn. 22,264,100
258,000 First USA, Inc. 14,190,000
1,000,000 Green Tree Financial Corp. 31,250,000
169,000 Jefferies Group, Inc. 5,239,000
183,050 MBNA Corp. 5,216,925
94,000 McDonald & Co. Investments, Inc. 1,856,500
251,100 Merrill Lynch & Co., Inc. 16,352,887
256,050 Morgan Keegan, Inc. 3,392,663
56,000 Morgan Stanley Group., Inc. 2,751,000
153,825 Raymond James Financial, Inc. 3,480,291
200,000 Charles Schwab Corp. 4,900,000
423,000 Travelers Group, Inc. 19,299,375
-----------
156,644,768
-----------
Financial-Thrift -- 2.5%
67,200 Astoria Financial Corp. 1,822,800
270,400 California Federal Bancorp, Inc. 4,934,800
148,000 Charter One Financial, Inc. 5,161,500
66,000 Coastal Bancorp, Inc. 1,188,000
246,600 Collective Bancorp, Inc. 5,825,925
124,000 Long Island Bancorp, Inc. 3,789,750
19,635 MAF Bancorp, Inc. 481,057
37,666 Pacific Crest Capital, Inc. 338,994
82,362 Progressive Bank, Inc. 2,388,498
528,441 Sovereign Bancorp, Inc. 5,284,410
167,800 Standard Federal Bancorporation 6,460,300
318,766 TCF Financial Corp. 10,598,970
-----------
48,275,004
-----------
Food, Beverage and Tobacco -- 7.3%
171,800 Anheuser Busch Cos., Inc. 12,885,000
687,200 Coca Cola Co. 33,586,900
95,000 ConAgra, Inc. 4,310,625
6,872 Earthgrains Co. 225,057
28,000 Hershey Foods Corp. 2,054,500
110,200 PepsiCo, Inc. 39,273,325
424,800 Philip Morris Cos., Inc. 44,179,200
-----------
136,514,607
-----------
Footwear -- 0.4%
73,400 Nike, Inc. 7,541,850
-----------
Household Products -- 1.1%
189,960 Kimberly Clark Corp. 14,674,410
61,700 Procter & Gamble Co. 5,591,563
-----------
20,265,973
-----------
Information Processing -- 3.1%
28,550 Astro-Med, Inc. 256,950
25,000 Cabletron Systems, Inc 1,715,625
See notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
Shares Value
- ------------------------------------------------------------
332,000 Cisco Systems, Inc. $18,799,500
240,000 Hewlett Packard Co. 23,910,000
48,700 In Focus Systems, Inc. 1,180,975
220,500 Sun Microsystems, Inc. 12,981,938
-----------
58,844,988
-----------
Insurance -- 1.9%
99,000 Amer. Bankers Ins. Group, Inc. 4,318,875
60,000 Amer. Int'l. Group, Inc 5,917,500
30,000 CMAC Investment Corp. 1,725,000
66,700 Executive Risk, Inc. 2,551,275
93,000 ITT Hartford Group, Inc. 4,952,250
60,000 Jefferson Pilot Corp. 3,097,500
68,847 Liberty Financial Cos., Inc. 2,332,192
108,000 MGIC Investment Corp. 6,061,500
54,000 Sun America, Inc. 3,051,000
72,000 State Auto Financial Corp. 1,746,000
12,000 Travelers Aetna Ppty. Cas. Corp. 340,500
-----------
36,093,592
-----------
Lodging -- 0.3%
298,000 Prime Hospitality Corp. 4,917,000
-----------
Machinery and Equipment -- 2.2%
48,000 AGCO Corp. 1,332,000
70,000 Case Corp. 3,360,000
182,000 Dover Corp. 8,394,750
210,900 Global Industrial Technologies 3,374,400
83,900 Illinois Tool Works, Inc. 5,673,738
134,000 Millipore Corp. 5,611,250
20,000 Robbins & Myers, Inc. 890,000
91,500 Tecumseh Products Co. 4,918,125
58,726 Varlen Corp. 1,233,240
110,000 York International Corp. 5,692,500
-----------
40,480,003
-----------
Merchandising-Department Stores -- 0.2%
110,000 Carson Pirie Scott & Co. 2,942,500
-----------
Merchandising-Drugs -- 0.2%
125,000 Walgreen Co. 4,187,500
-----------
Merchandising-Food -- 0.6%
203,700 Casey's General Stores, Inc. 4,048,538
93,000 Kroger Co. 3,673,500
90,000 Safeway, Inc. 2,970,000
-----------
10,692,038
-----------
Merchandising-Special -- 0.3%
130,000 CompUSA, Inc. 4,436,250
137,160 Host Marriott Services Corp. 994,410
60,000 Pier 1 Imports, Inc. 892,500
-----------
6,323,160
-----------
Miscellaneous-Consumer Growth Staples -- 0.1%
58,000 Omnicom Group 2,697,000
-----------
Natural Gas-Diversified -- 0.9%
267,600 Mitchell Energy & Dev. Corp. 5,084,400
100,000 PanEnergy Corp. 3,287,500
428,000 Enserch Corp. 9,309,000
-----------
17,680,900
-----------
Oil and Gas Producing -- 4.9%
98,000 Alexander Energy Corp. 490,000
294,000 Apache Corp. 9,665,250
205,000 Basin Exploration, Inc. 1,332,500
446,500 Tom Brown, Inc. 7,646,312
140,000 Cairn Energy USA, Inc. 2,012,500
304,000 Chieftain International, Inc. 6,118,000
247,000 Devon Energy Corp. 6,051,500
81,800 Diamond Offshore Drilling, Inc. 4,683,050
460,000 Enserch Exploration, Inc. 4,945,000
500,100 Enron Oil and Gas Co. 13,940,288
61,900 Forcenergy Gas Exploration, Inc. 1,168,362
554,000 Global Natural Res., Inc. 9,071,750
16,300 H S Resources, Inc. 189,488
550,900 Petromet Resources Ltd. 1,067,369
137,600 Pogo Producing Co. 5,246,000
835,000 Ranger Oil Ltd. 6,158,125
141,800 St. Mary Land & Exploration Co. 2,375,150
208,167 United Meridian Corp. 7,494,012
20,900 Vintage Petroleum, Inc. 532,950
220,000 Wainoco Oil Ltd. 687,500
-----------
90,875,106
-----------
Oil-Integrated-Domestic -- 1.5%
122,600 Amoco Corp. 8,873,175
85,000 Murphy Oil Corp. 3,856,875
545,000 Tesoro Petroleum, Inc. 6,267,500
445,000 USX Marathon Group 8,955,625
-----------
27,953,175
-----------
See notes to financial statements.
- -------------------------------------------------------------------------------
34
<PAGE>
----------------
The Guardian
Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
Oil-Integrated-International-- 4.6%
153,800 Chevron Corp. $ 9,074,200
453,500 Exxon Corp. 39,397,812
207,800 Mobil Corp. 23,299,575
45,000 Royal Dutch Petroleum Co. 6,918,750
89,400 Texaco, Inc. 7,498,425
-----------
86,188,762
-----------
Oil Services -- 1.5%
29,200 Cliffs Drilling Co. 992,800
40,300 Halliburton Co. 2,236,650
341,000 Nabors Industries, Inc. 5,541,250
131,700 Offshore Logistics, Inc. 1,827,338
95,000 Pride Petroleum Services, Inc. 1,353,750
77,700 Schlumberger Ltd. 6,546,225
205,000 Smith International, Inc. 6,175,625
117,700 Varco International, Inc. 2,133,312
12,000 Weatherford Enterra, Inc. 360,000
-----------
27,166,950
-----------
Paper and Forest Products -- 1.1%
548,000 Rayonier, Inc. 20,824,000
-----------
Railroads -- 0.6%
47,949 Burlington Northern Santa Fe 3,877,875
107,900 Union Pacific Corp. 7,539,513
-----------
11,417,388
-----------
Semiconductor -- 1.0%
97,800 Atmel Corp. 2,946,225
149,400 Intel Corp. 10,971,563
254,000 International Rectifier Corp. 4,095,750
-----------
18,013,538
-----------
Transportation-Miscellaneous -- 0.1%
164,100 Maritrans, Inc. 1,005,113
-----------
Truckers -- 0.0%
32,100 FRP Pptys., Inc. 658,050
-----------
Utilities-Communications - 8.5%
128,500 Ameritech Corp. 7,629,687
303,000 Andrew Corp. 16,286,250
1,090,000 AT&T Corp. 67,580,000
79,100 Bell Atlantic Corp. 5,042,625
177,000 Bellsouth Corp. 7,500,375
295,000 GTE Corp. 13,201,250
71,900 Harris Corp. 4,385,900
233,200 Northern Telecom Ltd. 12,680,250
74,400 NYNEX Corp. 3,534,000
240,000 Sprint Corp. 10,080,000
201,500 SBC Communications, Inc. 9,923,875
40,666 360 Communications Co. 975,984
-----------
158,820,196
-----------
Utilities-Electric -- 0.1%
95,000 Illinova Corp. 2,731,250
-----------
Utilities-Gas and Pipeline -- 0.1%
82,100 Entergy Corp. 2,329,587
-----------
TOTAL COMMON STOCKS
(Cost $1,385,701,173) 1,784,469,612
-------------
- ----------------------------
REPURCHASE AGREEMENT -- 4.7%
- ----------------------------
Principal Maturity
Amount Date Value
- ------------------------------------------------------------
$87,622,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $87,659,970, 5.20%,
due 7/1/96 (collateralized by
$89,320,000 U.S. Treasury
Notes, 5.125% due
2/28/98) 7/1/96 $ 87,622,000
--------------
TOTAL REPURCHASE AGREEMENT
(Cost $87,622,000) 87,622,000
--------------
TOTAL INVESTMENTS -- 100.1%
(Cost $1,473,323,173) 1,872,091,612
PAYABLES IN EXCESS OF CASH,
RECEIVABLES AND OTHER
ASSETS-- (0.1%) (1,755,819)
--------------
NET ASSETS -- 100.0% $1,870,335,793
==============
See notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $1,473,323,173
==============
Investments, at market $1,784,469,612
Repurchase agreements 87,622,000
--------------
TOTAL INVESTMENTS 1,872,091,612
Cash 535
Receivable for securities sold 3,589,771
Dividends receivable 2,418,875
Receivable for fund shares sold 355,457
Interest receivable 37,970
Other Assets 7,558
--------------
TOTAL ASSETS 1,878,501,778
--------------
LIABILITIES:
Payable for securities purchased 5,096,340
Payable for fund shares redeemed 643,144
Accrued expenses 67,896
Due to affiliates -- Note B 2,358,605
--------------
TOTAL LIABILITIES 8,165,985
--------------
NET ASSETS $1,870,335,793
==============
COMPONENTS OF NET ASSETS:
Common Stock -- 50,689,164 shares
and outstanding $.10 par value
each (100,000,000 shares authorized) $ 5,068,916
Paid-in capital 1,348,833,899
Undistributed net investment income 2,343,763
Accumulated net realized gain on
investments 115,320,776
Net unrealized appreciation of investments 398,768,439
--------------
NET ASSETS $1,870,335,793
==============
NET ASSET VALUE PER SHARE $ 36.90
==============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
For the Six Months Ended
June 30, 1996 (Unaudited)
Investment Income:
Income:
Dividends $ 13,787,073
Interest 3,002,894
Other income 28,382
------------
16,818,349
Less: Foreign tax withheld 28,980
------------
Total Income 16,789,369
Expenses:
Investment advisory fees-- Note B 4,343,941
Custodian fees 119,504
Printing expense 25,670
Audit fees 8,750
Registration fees 7,842
Insurance expense 7,475
Directors' fees-- Note B 4,600
Legal fees 2,126
Transfer agent fees 1,650
Other 352
------------
Total Expenses 4,521,910
------------
Net Investment Income $ 12,267,459
------------
Realized and Unrealized Gain/(Loss)
on Investments -- Note D
Net realized gain on investments $115,123,555
Net change in unrealized appreciation
of investments 51,121,270
------------
Net Realized and Unrealized Gain
on Investments 166,244,825
------------
Net Increase in Net Assets Resulting
from Operations $178,512,284
============
See notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
----------------
The Guardian
Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended ended
June 30, December 31,
1996 1995
(Unaudited) (Audited)
--------------- ---------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 12,267,459 $ 18,773,685
Net realized gain on investments 115,123,555 134,802,382
Net change in unrealized appreciation of investments 51,121,270 229,959,479
--------------- ---------------
Net Increase in Net Assets Resulting from Operations 178,512,284 383,535,546
--------------- ---------------
Distributions to Shareholders:
Net investment income (10,020,624) (18,757,010)
Net realized gain on investments (66,598,532) (71,343,468)
--------------- ---------------
Total Distributions to Shareholders (76,619,156) (90,100,478)
--------------- ---------------
From Capital Share Transactions:
Net increase in net assets from capital share transactions-- Note E 153,171,866 282,844,511
--------------- ---------------
Net Increase in Net Assets 255,064,994 576,279,579
Net Assets:
Beginning of period 1,615,270,799 1,038,991,220
--------------- ---------------
End of period* $ 1,870,335,793 $ 1,615,270,799
=============== ===============
* Includes undistributed net investment income of: $ 2,343,763 $ 96,928
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- -------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31, (Audited)
June 30, 1996 ------------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................... $ 34.72 $ 27.33 $ 29.00 $ 25.52 $ 23.28
------------- ------------- ------------- ------------- -------------
Income from investment
operations
Net investment income ................... 0.25 0.44 0.40 0.58 0.48
Net realized and unrealized gain/
(loss) on investments ............... 3.51 9.01 (0.77) 4.47 3.97
------------- ------------- ------------- ------------- -------------
Net increase/
(decrease) from
investment operations ............... 3.76 9.45 (0.37) 5.05 4.45
------------- ------------- ------------- ------------- -------------
Distributions to
shareholders
Dividends from net
investment income ................... (0.21) (0.44) (0.40) (0.59) (0.48)
Distributions from
net realized gain ................... (1.37) (1.62) (0.90) (0.98) (1.73)
------------- ------------- ------------- ------------- -------------
Total distributions ..................... (1.58) (2.06) (1.30) (1.57) (2.21)
------------- ------------- ------------- ------------- -------------
Net asset value, end of
period .................................. $ 36.90 $ 34.72 $ 27.33 $ 29.00 $ 25.52
============= ============= ============= ============= =============
Total return* ............................... 10.85% 34.65% (1.27)% 19.96% 20.07%
============= ============= ============= ============= =============
Ratios/supplemental data:
Net assets, end of
period (000's omitted) .............. $ 1,870,336 $ 1,615,271 $ 1,038,991 $ 869,114 $ 537,354
Ratio of expenses to
average net assets .................. 0.52%+ 0.53%* 0.53% 0.54% 0.55%
Ratio of net investment income to
average net assets .................. 1.41%+ 1.39%* 1.49% 2.20% 2.14%
Portfolio turnoverratio ................. .32% .78% .53% .45% .62%
<CAPTION>
Year Ended December 31, (Audited)
---------------------------------------------------------------------------------------
1991 1990 1989 1988 1987 1986
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ............................. $ 17.85 $ 21.39 $ 19.18 $ 16.35 $ 17.15 $ 15.40
----------- ----------- ----------- ----------- ----------- ----------
Income from investment
operations
Net investment income ................. 0.63 0.69 0.84 0.52 0.33 0.24
Net realized and unrealized gain/
(loss) on investments ............. 5.74 (3.13) 3.61 2.80 0.06 2.32
----------- ----------- ----------- ----------- ----------- ----------
Net increase/
(decrease) from
investment operations ............. 6.37 (2.44) 4.45 3.32 0.39 2.56
----------- ----------- ----------- ----------- ----------- ----------
Distributions to
shareholders
Dividends from net
investment income ................. (0.64) (0.71) (0.90) (0.49) (0.43) (0.22)
Distributions from
net realized gain ................. (0.30) (0.39) (1.34) -- (0.76) (0.59)
----------- ----------- ----------- ----------- ----------- ----------
Total distributions ................... (0.94) (1.10) (2.24) (0.49) (1.19) (0.81)
----------- ----------- ----------- ----------- ----------- ----------
Net asset value, end of
period ................................ $ 23.28 $ 17.85 $ 21.39 $ 19.18 $ 16.35 $ 17.15
=========== =========== =========== =========== =========== ==========
Total return* ............................. 35.96% (11.85)% 23.55% 20.37% 1.87% 17.10%
=========== =========== =========== =========== =========== ==========
Ratios/supplemental data:
Net assets, end of
period (000's omitted) ............ $ 380,962 $ 256,039 $ 269,950 $ 172,900 $ 139,437 $ 66,081
Ratio of expenses to
average net assets ................ 0.56% 0.57% 0.57% 0.61% 0.61% 0.75%
Ratio of net investment income to
average net assets ................ 3.07% 3.66% 4.13% 2.88% 2.08% 2.00%
Portfolio turnover ratio .............. .51% .54% .38% .71% .37% .36%
</TABLE>
* Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
+ Annualized.
See notes to financial statements.
- --------------------------------------------------------------------------------
38
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- --------------------------------------------------------------------------------
39
<PAGE>
- ---------------
The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
- ---------------------
ASSET BACKED -- 15.7%
- ---------------------
Principal
Amount Value
- ------------------------------------------------------------------------
$14,000,000 Advanta Cr. Card Mst. Tr.,
6.05% due 8/1/03 $13,601,840
6,000,000 Chemical Mst. Cr. Card Tr.,
5.55% due 9/15/03 5,720,580
6,000,000 Contimortgage Home Eq.
Loan Tr., 6.85% due 4/15/44 5,973,720
4,000,000 Firsts Merchant Auto Tr.,
6.7% due 8/15/99 3,994,400
5,000,000 Green Tree Financial Corp.,
6.35% due 12/15/25 4,940,600
5,000,000 Green Tree Financial Corp.,
5.85% due 3/15/27 4,800,000
6,151,873 Green Tree Financial Corp.,
6.10% due 4/15/27 6,115,330
2,000,000 Money Store Tr.,
7.55% due 8/15/20 2,016,200
5,000,000 Money Store Tr.,
7.35% due 5/15/12 5,039,000
4,000,000 Olympic Automobile Rec. Tr.,
5.95% due 11/15/99 3,990,000
-----------
TOTAL ASSET BACKED
(Cost $57,536,883) 56,191,670
-----------
- -----------------------
CORPORATE BONDS -- 29.2%
- -----------------------
Conglomerates -- 1.3%
$5,000,000 RJR Nabisco, Inc.,
7.625% due 9/15/03 4,763,900
-----------
Drugs and Hospital-- 1.9%
7,000,000 Rhone Poulenc SA, 6.75%
due 10/15/99 6,905,080
-----------
Electric Utilities -- 4.4%
2,500,000 Consumers Power Co.,
7.5% due 6/1/02 2,490,425
5,000,000 Duquesne Lt. Co. Secured Mtn.
Bk. Ent., 6.7% due 5/15/03 4,828,150
8,000,000 Tenaga Nasional Berhad,
7.875% due 6/15/04 8,273,200
-----------
15,591,775
-----------
Financial-Banks -- 1.7%
3,000,000 Comerica, Inc.,
7.25% due 8/1/07 2,953,260
3,000,000 PNC Bank NA-Pittsburgh, PA,
7.875% due 4/15/05 3,086,820
-----------
6,040,080
-----------
Financial-Miscellaneous -- 8.5%
5,000,000 BHP Fin. USA Ltd.,
6.69% due 3/1/06 4,777,900
4,000,000 Ford Motor Cr. Co.,
7.75% due 11/15/02 4,131,600
8,000,000 General Motors Accep. Corp. Mtn.,
7.375% due 6/9/99 8,155,040
6,000,000 Salomon, Inc.,
6.70% due 121/98 5,983,440
4,500,000 Salomon, Inc.,
6.75% due 2/15/03 4,307,670
3,000,000 Salomon, Inc.,
7.25% due 5/1/01 2,992,560
-----------
30,348,210
-----------
Insurance -- 0.9%
3,200,000 Metropolitan Life Ins. Co.,
6.3% due 11/1/03 3,017,856
Machinery and Industrial Equipment-- 1.7%
6,000,000 McDermott International, Inc.,
6.57% due 4/20/98 5,959,020
Merchandising Mass -- 1.0%
3,400,000 Wal Mart Stores, Inc.,
8.75% due 12/29/06 3,523,148
Miscellaneous Capital Goods-Technology-- 0.4%
1,500,000 Northrop Grumman Corp.,
7.75% due 3/16/16 1,461,675
Natural Gas-Diversified -- 0.3%
1,000,000 Texas Eastern Corp.,
8.5% due 2/10/97 1,012,430
Paper and Forest Products -- 4.4%
7,000,000 Alco Standard Corp.,
6.75% due 12/1/25 6,101,830
5,000,000 Boise Cascade Corp. Mtn. Bk. Ent.,
7.1% due 1/13/99 4,994,500
See notes to financial statements
- --------------------------------------------------------------------------------
40
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
- --------------------------------------------------------------------------------
Principal
Amount Value
- ------------------------------------------------------------------------
$4,500,000 Fletcher Challenge Cap. CDA II,
7.75% due 6/20/06 $ 4,563,360
-----------
15,659,690
-----------
Railroads -- 1.4%
5,500,000 Burlington Northern Santa Fe
Corp., 6.375% due 12/15/05 5,100,865
-----------
Telecommunications-- 1.3%
4,500,000 TCI Communications,
7.25% due 6/15/99 4,510,485
-----------
TOTAL CORPORATE BONDS
(Cost $106,770,745) 103,894,214
-----------
- ----------------------
MORTGAGE BACKED-- 3.6%
- ----------------------
$4,500,000 Donaldson, Lufkin, Jenrette
Mortgage Accep. Corp.,
7.67% due 2/12/06 $ 4,501,350
5,836,075 Merrill Lynch Mortgage
Invmts., Inc., 6.788%
due 6/25/15 5,756,705
2,500,000 Mortgage Capital Fdg.,
7.9% due 2/15/06 2,528,125
-----------
Total Mortgage Backed
(Cost $12,774,907) 12,786,180
-----------
- -------------------------------
MORTGAGE PASS-THROUGHS -- 17.3%
- -------------------------------
$ 4,500,000 FNMA TBA
7% due 1/1/99 $ 4,436,719
8,000,000 FNMA TBA
7.5% due 1/1/99 7,898,080
14,000,000 FNMA TBA
8% due 1/1/99 14,116,480
751,955 FNMA Pool #068106
8.5% due 8/1/09 779,724
1,153,139 FNMA Pool #068772
8% due 6/1/08 1,186,833
13,629 FNMA Pool #072923
8.25% due 1/1/09 14,049
6,331,458 FNMA Pool #324193
7% due 9/1/25 6,093,015
6,351,848 FNMA Pool #331814
7% due 12/1/25 6,112,637
10,384 GNMA Pool #000375
11.5% due 7/20/00 10,851
119,905 GNMA Pool #352913
7.5% due 5/15/24 118,664
522,091 GNMA Pool #368294
7.5% due 1/15/24 517,340
544,905 GNMA Pool #363384
7.5% due 2/15/24 539,265
112,164 GNMA Pool #369417
7.5% due 2/15/24 111,144
322,059 GNMA Pool #375967
7.5% due 1/15/24 318,725
716,123 GNMA Pool #376437
7.5% due 3/15/24 708,711
540,752 GNMA Pool #378966
7.5% due 1/15/24 535,155
2,563,885 GNMA Pool #395476
7.5% due 5/15/26 2,529,324
8,006,412 GNMA Pool #399303
8% due 6/15/24 8,096,564
3,476,003 GNMA Pool #417223
7.5% due 1/15/26 3,429,147
3,555,111 GNMA Pool #425423
7.5% due 5/15/26 3,507,188
576,351 GNMA Pool #222105
7.5% due 3/15/24 571,106
-----------
TOTAL MORTGAGE
PASS-THROUGHS
(Cost $62,227,882) 61,630,721
-----------
- -------------------------------------------
MULTI CLASS MORTGAGE PASS-THROUGHS -- 19.5%
- -------------------------------------------
$6,000,000 Federal Home Loan Mortgage
Corp., 7% due 3/15/21 $5,743,080
12,700,000 Federal Home Loan Mortgage
Corp., 6.5% due 5/15/19 11,997,436
3,200,186 Federal Home Loan Mortgage
Corp., 4% due 8/15/01 3,163,160
4,115,058 Federal Home Loan Mortgage
Corp., 7% due 4/25/12 4,109,914
222,508 Citibank, NA,
9.5% due 8/1/16 226,335
See notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
- ---------------
The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
Principal
Amount Value
- ------------------------------------------------------------------------
$ 5,000,000 Citicorp Mortgage Secs., Inc.,
7% due 6/25/23 $ 4,664,050
4,750,000 Citicorp Mortgage Secs., Inc.,
6.5% due 1/25/24 4,013,750
5,000,000 Citicorp Mortgage Secs., Inc.,
6.25% due 3/25/24 4,489,050
1,717,715 Citicorp Mortgage Secs., Inc.,
7.75% due 11/25/06 1,726,304
10,966,790 GE Capital Mortgage Svcs.,
Inc., 7% due 3/25/26 10,192,534
4,000,000 Prudential Home Mortgage Secs.
Co., 6.7% due 3/25/08 3,990,000
5,000,000 Residential Funding Motgage Secs.
Inc., 5.95% due 11/25/23 4,361,000
1,551,408 Sears Mortgage Securities Corp.,
6.5% due 5/25/22 1,541,945
10,000,000 Securitized Asset Sales, Inc.
7.41% due 4/25/24 9,432,000
------------
TOTAL MULTI CLASS MORTGAGE
PASS-THROUGHS
(Cost $71,236,693) 69,650,558
------------
- --------------------------------------------
SHORT-TERM INVESTMENTS-MORTGAGE ROLLS - 8.5%
- --------------------------------------------
$7,940,000 General Electric Cap. Corp.,
5.29% due 7/15/96 $ 7,923,666
14,210,000 Household Finance Corp.,
5.31% due 7/15/96 14,180,656
8,082,000 Lucent Techonogies, Inc.,
5.33% due 7/22/96 8,056,872
------------
TOTAL MORTGAGE ROLLS
(Cost $30,161,194) 30,161,194
------------
- --------------------------------------
U. S. GOVERNMENT AND AGENCIES -- 10.9%
- --------------------------------------
$14,000,000 U.S. Treasury Bonds, 7.625%
due 2/15/25 $ 15,085,000
4,000,000 U.S. Treasury Notes, 6.875%
due 8/31/99 4,056,880
3,000,000 U.S. Treasury Notes, 7.5%
due 10/31/99 3,097,980
10,000,000 U.S. Treasury Notes, 5.5%
due 11/15/98 9,842,200
4,000,000 U.S. Treasury Notes, 5.625%
due 2/15/06 3,706,240
3,000,000 U.S. Treasury Notes, 6.875%
due 5/15/06 3,027,186
------------
TOTAL U.S. GOVERNMENT
AND AGENCIES
(Cost $41,187,251) 38,815,486
------------
- ------------------
YANKEE BOND-- 1.1%
- ------------------
$4,000,000 Hydro Quebec
7.5% due 4/1/16 $ 3,896,680
------------
TOTAL YANKEE BOND
(Cost $3,965,680) 3,896,680
------------
- ------------------------------------
REVERSE REPURCHASE AGREEMENT -- 1.0%
- ------------------------------------
$3,730,000 J.P. Morgan Co., Inc. reverse
repurchase agreement,
5.25% due 7/1/96 $ 3,730,000
------------
TOTAL REVERSE
REPURCHASE AGREEMENT
(Cost $3,730,000) 3,730,000
------------
- ----------------------------
REPURCHASE AGREEMENT -- 3.4%
- ----------------------------
Principal Maturity
Amount Date Value
- -----------------------------------------------------------------------
$12,073,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $12,078,232, 5.20%, due
7/1/96 (collateralized by
$12,310,000 U.S. Treasury
Notes, 5.125% due
2/28/98) 7/1/96 $12,073,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $12,073,000) 12,073,000
------------
TOTAL INVESTMENTS -- 110.2%
(Cost $401,664,235) 392,829,703
------------
PAYABLES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (10.2%) (36,503,380)
------------
NET ASSETS - 100.0% $356,326,323
============
See notes to financial statements.
- --------------------------------------------------------------------------------
42
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $401,664,235
============
Investments, at market $380,756,703
Repurchase agreements 12,073,000
------------
TOTAL INVESTMENTS 392,829,703
Cash 151
Receivable for securities sold 5,273,455
Interest receivable 3,252,529
Receivable for fund shares sold 821,327
Other assets 1,753
------------
TOTAL ASSETS 402,178,918
------------
LIABILITIES:
Payable for securities purchased 37,318,686
Dollar Roll Payable 7,985,971
Payable for fund shares redeemed 40,836
Accrued expenses 29,492
Due to affiliates -- Note B 477,610
------------
TOTAL LIABILITIES 45,852,595
------------
NET ASSETS $356,326,323
============
COMPONENTS OF NET ASSETS:
Common Stock - 30,442,950 shares
and outstanding $.10 par value
each (100,000,000 shares
authorized) $ 3,044,295
Paid-in capital 364,110,509
Undistributed net investment income 2,524,601
Accumulated net realized (loss)
on investments (4,518,550)
Net unrealized depreciation of
investments (8,834,532)
------------
NET ASSETS $356,326,323
============
NET ASSET VALUE PER SHARE $ 11.70
============
* Includes repurchase agreements.
STATEMENTS OF OPERATIONS
For the Six Months Ended
June 30, 1996 (Unaudited)
Investment Income:
Income:
Interest $11,803,490
-----------
Expenses:
Investment advisory fees -- Note B 902,588
Custodian fees 49,302
Printing expense 11,438
Audit fees 8,750
Directors' fees-- Note B 4,600
Legal fees 2,126
Insurance expense 1,733
Transfer agent fees 1,650
Registration fees 548
Other 352
-----------
Total Expenses 983,087
-----------
Net Investment Income 10,820,403
-----------
Realized and Unrealized Gain/(Loss)
on Investments -- Note D
Net realized loss on investments (305,087)
Net change in unrealized
depreciation of investments (17,877,323)
-----------
Net Realized and Unrealized Loss
on Investments (18,182,410)
-----------
Net Decrease in Net Assets
Resulting from Operations ($7,362,007)
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
- ---------------
The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1996 1995
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 10,820,403 $ 22,042,800
Net realized gain/(loss) on investments (305,087) 9,664,616
Net change in unrealized appreciation/(depreciation) of investments (17,877,323) 23,262,625
------------ ------------
Net Increase/(Decrease) in Net Assets Resulting from Operations (7,362,007) 54,970,041
------------ ------------
Distributions to Shareholders:
Net investment income (9,033,642) (22,025,063)
Net realized gain on investments -- --
------------ ------------
Total Distributions to Shareholders (9,033,642) (22,025,063)
------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital share transactions
-- Note E (1,739,609) 32,538,518
------------ ------------
Net Increase/(Decrease) in Net Assets (18,135,258) 65,483,496
Net Assets:
Beginning of period 374,461,581 308,978,085
------------ ------------
End of period* $356,326,323 $374,461,581
============ ============
* Includes undistributed net investment income of: $2,524,601 $737,841
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
---------------
The Guardian
Bond Fund
---------------
3
---------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31, (Audited)
June 30, 1996 ------------------------------------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $ 12.25 $ 11.08 $ 12.2 $ 12.26 $ 12.33 $ 11.56 $ 11.67 $ 11.16 $ 11.12 $ 12.41 $ 11.57
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations
Net investment
income ................ 0.36 0.76 0.40 0.70 0.81 0.92 0.97 0.98 1.03 0.96 0.83
Net realized and
unrealized gain/
(loss) on
investments ........... (0.60) 1.17 (0.82) 0.50 0.13 0.91 (0.11) 0.55 0.02 (0.92) 0.83
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net increase/
(decrease) from
investment
operations ............ (0.24) 1.93 (0.42) 1.20 0.94 1.83 0.86 1.53 1.05 0.04 1.66
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Distributions to
shareholders
Distributions from net
investment
income ................ (0.31) (0.76) (0.68) (0.70) (0.81) (0.92) (0.97) (1.02) (1.01) (1.23) (0.79)
Distributions from net
realized gain ......... -- -- (0.06) (0.52) (0.20) (0.14) -- -- -- (0.10) (0.03)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions ..... (0.31) (0.76) (0.74) (1.22) (1.01) (1.06) (0.97) (1.02) (1.01) (1.33) (0.82)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period ................ $ 11.70 $ 12.25 $ 11.08 $ 12.24 $ 12.26 $ 12.33 $ 11.56 $ 11.67 $ 11.16 $ 11.12 $ 12.41
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return* ........... (1.98%) 17.59% (3.45)% 9.85% 7.70% 16.19% 7.57% 13.88% 9.70% .32% 14.84%
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) .............. $356,326 $374,462 $308,978 $340,269 $284,330 $222,299 $165,844 $147,753 $113,616 $103,846 $ 73,491
Ratio of expenses to
average net
assets ................ 0.54%+ 0.54 0.54% 0.55% 0.56% 0.57% 0.58% 0.60% 0.61% 0.62% 0.69%
Ratio of net investment
income to
average net
assets ................ 5.99%+ 6.43 5.69% 5.56% 6.70% 7.81% 8.53% 8.78% 8.97% 8.97% 9.10%
Portfolio turnover
ratio ................. 116% 298% 311% 220% 57% 43% 39% 158% 24% 67% 55%
</TABLE>
* Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
+ Annualized
See notes to financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
- ---------------
The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
-------------------------
COMMERCIAL PAPER -- 93.9%
-------------------------
Principal
Amount Value
- ---------------------------------------------------
FINANCIAL -- 11.3%
Bank Holding Companies -- 7.5%
$14,200,000 Commerzbank U.S. Fin.
5.31% due 7/8/96 $14,185,339
14,200,000 J.P. Morgan & Co., Inc.
5.34% due 8/9/96 14,117,853
-----------
28,303,192
-----------
Finance Companies -- 3.8%
14,200,000 Associates Corp. of N.A.
5.34% due 7/15/96 14,170,511
-----------
Total Financial 42,473,703
-----------
INDUSTRIAL -- 82.6%
Aerospace and Defense -- 3.8%
14,200,000 Raytheon Co.,
5.32% due 7/8/96 14,185,311
-----------
Automotive -- 7.5%
14,200,000 Ford Motor Credit
Co., 5.32% due 8/1/96 14,134,948
14,200,000 Toyota Motor Credit Co.,
5.30% due 7/10/96 14,181,185
-----------
28,316,133
-----------
Chemicals -- 3.8%
14,200,000 Monsanto Co.,
5.30% due 7/11/96 14,179,095
-----------
Conglomerates -- 3.8%
14,200,000 General Electric Cap.
Corp., 5.35% due 7/1/96 14,200,000
-----------
Drugs and Hospitals -- 7.5%
14,200,000 Abbott Laboratories,
5.31% due 7/22/96 14,156,016
14,200,000 Smithkline Beecham Corp.,
5.34% due 7/24/96 14,151,554
-----------
28,307,570
-----------
Electric Utilities -- 3.8%
$14,200,000 Duke Power Co.,
5.31% due 7/12/96 14,176,960
-----------
Electronic Instruments -- 3.7%
14,200,000 Siemens Corp.,
5.35% due 8/7/96 14,121,920
-----------
Food and Beverage -- 18.8%
14,200,000 Cargill, Inc.,
5.50% due 7/1/96 14,200,000
14,200,000 Hershey Foods Corp.,
5.33% due 7/9/96 14,183,181
14,200,000 H.J. Heinz Co.,
5.37% due 7/30/96 14,138,573
14,200,000 Nestle Capital Corp.,
5.55% due 7/1/96 14,200,000
14,200,000 PepsiCo, Inc.,
5.35% due 7/23/96 14,153,574
-----------
70,875,328
-----------
Household Products -- 3.8%
14,200,000 Clorox Co..
5.27% due 7/2/96 14,197,921
-----------
Insurance -- 3.8%
14,200,000 American General Fin.
Corp., 5.30% due 7/12/96 14,177,004
-----------
Machinery and Industrial
Equipment -- 3.7%
14,200,000 John Deere Capital Corp.,
5.34% due 7/18/96 14,164,192
-----------
Oil-Integrated-Domestic -- 3.7%
14,200,000 Chevron Oil Finance Co.,
5.35% due 7/26/96 14,147,243
-----------
Oil Services -- 3.7%
14,200,000 Colonial Pipeline Co.,
5.34% due 7/17/96 14,166,299
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
46
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- --------------------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------
Publishing-News -- 3.7%
$14,200,000 Gannett, Inc.,
5.33% due 7/19/96 $ 14,162,157
------------
Telecommunications -- 7.5%
14,200,000 Bell Atlantic Financial
Svcs., 5.31% due 7/3/96 14,195,811
14,200,000 U.S. West Comm. , Inc.,
5.35% due 7/25/96 14,149,353
------------
28,345,164
------------
Total Industrial 311,722,297
------------
TOTAL COMMERCIAL PAPER
(Cost $354,196,000) 354,196,000
------------
----------------------------
Repurchase Agreement -- 6.8%
----------------------------
$25,575,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $25,586,083, 5.20%,
due 7/1/96 (collateralized
by $26,075,000 U.S.
Treasury Notes, 5.125% due
2/28/98) $ 25,575,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $25,575,000) 25,575,000
------------
TOTAL INVESTMENTS -- 100.7%
(Cost $379,771,000) 379,771,000
PAYABLES IN EXCESS OF CASH,
RECEIVABLES AND
OTHER ASSETS-- (0.7%) (2,478,930)
------------
NET ASSETS-- 100.0% $377,292,070
============
See notes to financial statements.
- --------------------------------------------------------------------------------
47
<PAGE>
- ---------------
The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ------------------------------
STATEMENTS OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $379,771,000
============
Investments, at market $354,196,000
Repurchase agreements 25,575,000
------------
TOTAL INVESTMENTS 379,771,000
Cash 446
Interest receivable 11,083
Receivable for fund shares sold 10,345
Other assets 1,668
------------
TOTAL ASSETS 379,794,542
------------
LIABILITIES:
Payable for fund shares redeemed 1,973,611
Accrued expenses 31,659
Due to affiliates-- Note B 497,202
------------
TOTAL LIABILITIES 2,502,472
------------
NET ASSETS $377,292,070
============
COMPONENTS OF NET ASSETS:
Common Stock -- 37,729,207 shares
outstanding $.10 par value each
(100,000,000 shares authorized) $ 3,772,921
Paid-in capital 373,519,149
------------
NET ASSETS $377,292,070
============
NET ASSET VALUE PER SHARE $ 10.00
============
* Includes repurchase agreements.
STATEMENTS OF OPERATIONS
For the Six Months Ended
June 30, 1996 (Unaudited)
INVESTMENT INCOME:
Income:
Interest $ 9,746,599
-----------
Expenses:
Investment advisory fees-- Note B 896,949
Custodian fees 43,214
Printing expense 11,501
Audit fees 8,500
Directors' fees-- Note B 4,600
Registration fees 2,821
Legal fees 2,126
Transfer agent fees 1,650
Insurance expense 1,649
Other 352
-----------
Total Expenses 973,362
-----------
Net Investment Income $ 8,773,237
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- ---------
INCREASE/(DECREASE) INNETASSETS
From Operations:
Net investment income $ 8,773,237 $ 19,747,755
------------ ------------
Net Increase in Net Assets Resulting
from Operations 8,773,237 19,747,755
------------ ------------
Distributions to Shareholders:
Net investment income (8,773,237) (19,747,755)
------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from
capital share transactions-- Note E 20,471,981 (30,165,747)
------------ ------------
Net Increase/(Decrease) in Net Assets 20,471,981 (30,165,747)
Net Assets:
Beginning of period 356,820,089 386,985,836
------------ ------------
End of period $377,292,070 $356,820,089
============ ============
See notes to financial statements.
- --------------------------------------------------------------------------------
49
<PAGE>
- ---------------
The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31, (Audited)
June 30, 1996 ------------------------------------------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period ........... $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from invest-
ment operations
Net investment
income .............. 0.24 0.54 0.38 0.26 0.35 0.54 0.77 0.87 0.72 0.63 0.62
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions to
Shareholders
Dividends from net
investment income ..... (0.24) (0.54) (0.38) (0.26) (0.35) (0.54) (0.77) (0.87) (0.72) (0.63) (0.62)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period .............. $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return* .......... 2.47% 5.52% 3.82% 2.64% 3.21% 5.59% 7.95% 8.70% 7.20% 6.30% 6.20%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/supplemental
data:
Net assets, end of
period (000's
omitted) ............. $377,292 $356,820 $386,986 $310,798 $318,879 $331,677 $331,600 $262,865 $228,310 $164,326 $87,403
Ratio of expenses
to average net
assets ............... 0.54%+ 0.54% 0.54% 0.54% 0.54% 0.55% 0.56% 0.56% 0.58% 0.61% 0.61%
Ratio of net invest-
ment income to
average net
assets ............... 4.89%+ 5.39% 3.81% 2.61% 3.17% 5.44% 7.67% 8.67% 7.17% 6.27% 6.14%
</TABLE>
* Total returns do not reflect the effects of charges deducted under the
terms of GIAC's variable contracts. Including such charges would reduce the
total returns for all periods shown.
+ Annualized. The Guardian Cash Fund, Inc. 4 See notes to financial
statements.
See notes to financial statements.
- --------------------------------------------------------------------------------
50
<PAGE>
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This page intentionally left blank.
- --------------------------------------------------------------------------------
51
<PAGE>
- ------------------
The Guardian
Stock, Bond & Cash
- ------------------
4
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, The Guardian Bond Fund,
The Guardian Cash Fund
------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
----------------------------------------------
Note A -- Organization and Accounting Policies
----------------------------------------------
The Guardian Stock Fund, Inc. (GSF), The Guardian Bond Fund, Inc. (GBF) and
The Guardian Cash Fund, Inc. (GCF) (collectively, the Funds and individually, a
Fund), are each incorporated in the state of Maryland and are diversified
open-end management investment companies registered under the Investment Company
Act of 1940, as amended (1940 Act). Each Fund sold 10,000 of its shares to The
Guardian Insurance & Annuity Company, Inc. (GIAC) for $100,000 in order to
facilitate the commencement of its operations. Such shares were subsequently
deposited in The Guardian Separate Account A, a separate account of GIAC which
is registered as a unit investment trust under the 1940 Act. Shares of the Funds
are only sold to certain separate accounts of GIAC. The Funds are available for
investment only through the purchase of certain variable annuity and variable
life insurance contracts issued by GIAC. GIAC is a wholly owned subsidiary of
The Guardian Life Insurance Company of America (Guardian Life). Significant
accounting policies of the Funds are as follows:
Investments
Investments in GSF and GBF are carried at value. Securities listed on
national securities exchanges are valued based upon closing prices on these
exchanges. Securities traded in the over-the-counter market and listed
securities for which there have been no trades for the day are valued at the
mean of the bid and asked prices.
Certain debt securities may be valued each business day by an independent
pricing service (Service) approved by the Board of Directors. Debt securities
for which quoted bid prices, in the judgment of the Service, are readily
available and representative of the bid side of the market, are valued at the
mean between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other debt securities that are
valued by the Service are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
Securities for which market quotations are not readily available, including
certain mortgage-backed securities and restricted securities, are valued by
using methods that each Fund's Board of Directors, in good faith, believes will
accurately reflect their fair value.
The valuation of securities held by GCF is based upon their amortized cost
which approximates market value, in accordance with Rule 2a-7 under the 1940
Act. Amortized cost valuations do not take into account unrealized gains and
losses.
Investment securities transactions are recorded on the date of purchase or
sale. Repurchase agreements are carried at cost, which approximates value (see
Note C).
Net realized gain or loss on sales of investments is determined on the
basis of identified cost. Interest income, including amortization of premium and
discount, is recorded when earned. Dividends are recorded on the ex-dividend
date.
Federal Income Taxes
Each Fund qualifies and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the Internal Revenue Code
of 1986, as amended (Code), and as such will not be subject to federal income
tax on investment income
- --------------------------------------------------------------------------------
52
<PAGE>
------------------
The Guardian
Stock, Bond & Cash
------------------
4
------------------
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
(including any realized capital gains) which is distributed to its shareholders
in accordance with the applicable provisions of the Code. Therefore, no federal
income tax provision is required.
Reclassifications of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gain for federal income tax purposes. Where such
differences are permanent in nature, they are reclassified in the components of
net assets based on their ultimate characterization for federal income tax
purposes. Any such reclassifications will have no effect on net assets, results
of operations, or net asset value per share of the Fund. Dividend Distributions
GSF and GBF intend to distribute each year, as dividends or capital gain
distributions, substantially all net investment income and net capital gains
realized. All such dividends or distributions are credited in the form of
additional shares of the applicable Fund at net asset value on the ex-dividend
date. Such distributions are determined in conformity with federal income tax
regulations. Differences between the recognition of income on an income tax
basis and recognition of income based on generally accepted accounting
principles may cause temporary overdistributions of net realized gains and net
investment income. Currently, the policy of GSF and GBF is to distribute net
investment income approximately every six months and net capital gains annually.
This policy is, however, subject to change at any time by each Fund's Board of
Directors.
GCF earns interest on its investments daily and distributes all of its net
investment income, increased or decreased by realized gains or losses, each day
GCF is open for business. Earnings for Saturdays, Sundays and holidays are paid
as a dividend on the next business day.
All dividends and distributions are credited in the form of additional
shares of GCF at net asset value on the payable date.
- ----------------------------------------
Note B -- Investment Advisory Agreements
- ----------------------------------------
and Payments to Related Parties Each Fund has an investment advisory agreement
with Guardian Investor Services Corporation (GISC), a wholly owned subsidiary of
GIAC. GISC receives a management fee from each Fund computed at the rate of .50%
of the daily average net assets during the fiscal year, payable quarterly. If
total expenses of any Fund (excluding taxes, interest and brokerage commissions,
but including the investment advisory fee) exceeds 1% per annum of the average
daily net assets of the Fund, GISC has agreed to assume any such expenses. None
of the Funds exceeded this limit during the six months ended June 30, 1996.
No compensation is paid by any of the Funds to a director who is deemed to
be an "interested person" (as defined in the 1940 Act) of a Fund. Each director
not deemed an "interested person" is paid an annual fee of $500 by each Fund,
and $350 for attendance at each meeting of each Fund. The aggregate remuneration
paid by each Fund to its disinterested directors was $4,600 for the six months
ended June 30, 1996.
- --------------------------------
Note C -- Repurchase Agreements
- --------------------------------
Collateral underlying repurchase agreements takes the form of either cash
or fully negotiable U.S. gov-
- --------------------------------------------------------------------------------
53
<PAGE>
- ------------------
The Guardian
Stock, Bond & Cash
- ------------------
4
- ------------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, The Guardian Bond Fund,
The Guardian Cash Fund
- --------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1996 (Unaudited)
ernment securities. Repurchase agreements are fully collateralized (including
the interest earned thereon) and such collateral is marked to market daily while
the agreements remain in force. If the value of the underlying securities falls
below the value of the repurchase price plus accrued interest, the Funds will
require the seller to deposit additional collateral by the next business day. If
the request for additional collateral is not met, or the seller defaults, the
Funds maintain the right to sell the collateral and may claim any resulting loss
against the seller. Each Fund's Board of Directors has established standards to
evaluate the creditworthiness of broker-dealers and banks which engage in
repurchase agreements with each Fund. Repurchase agreements of more than one
week's duration (or investments in any other securities which are deemed to be
not readily marketable by the staff of the Securities and Exchange Commission)
are not permitted if more than 10% of a Fund's net assets would be so invested.
---------------------------------
Note D -- Investment Transactions
---------------------------------
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996
------------------------------
GSF GBF
--- ---
<S> <C> <C>
Purchases
Stocks and debt obligations ......................................... $725,595,620 $160,895,108
U.S. Government and government agency obligations ................... -- 258,753,744
Proceeds
Stocks and debt obligations ......................................... $574,773,694 $120,681,916
U.S. Government and government agency obligations ................... -- 284,160,504
</TABLE>
The cost of investments owned at June 30, 1996 for federal income tax
purposes was $1,473,323,173, $401,664,235 and $379,771,000 for GSF, GBF and GCF,
respectively. The gross unrealized appreciation and depreciation at June 30,
1996 for GSF and GBF were as follows:
<TABLE>
<CAPTION>
GSF GBF
--- ---
<S> <C> <C>
Gross Appreciation .................................................. $408,278,879 $1,739,312
Gross Depreciation .................................................. (9,510,440) (10,573,844)
------------ -----------
Net Unrealized Appreciation/(Depreciation) ........................ $398,768,439 $(8,834,532)
============ ===========
</TABLE>
- --------------------------------------------------------------------------------
54
<PAGE>
------------------
The Guardian
Stock, Bond & Cash
------------------
4
------------------
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1996 (Unaudited)
---------------------------------------
Note E -- Transactions in Capital Stock
---------------------------------------
<TABLE>
<CAPTION>
The Guardian Stock Fund, Inc.
Six Months Ended Year Ended December 31,
June 30, 1996 (Unaudited) 1995 (Audited)
------------------------- -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 4,961,215 $ 181,397,287 9,643,546 $ 313,867,818
Shares issued to shareholders in reinvestment of
dividends from net investment income and
net realized gains: .......................... 2,089,423 76,619,156 2,609,964 90,100,478
----------- ------------- ----------- -------------
7,050,638 258,016,443 12,253,510 403,968,296
Less shares repurchased: ....................... (2,880,705) (104,844,577) (3,748,523) (121,123,785)
----------- ------------- ----------- -------------
NET INCREASE ................................ 4,169,933 $ 153,171,866 8,504,987 $ 282,844,511
=========== ============= =========== =============
<CAPTION>
The Guardian Bond Fund, Inc.
Six Months Ended Year Ended December 31,
June 30, 1996 (Unaudited) 1995 (Audited)
------------------------- -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 2,271,266 $ 27,365,088 5,626,400 $ 67,253,610
Shares issued to shareholders in reinvestment of
dividends from net investment income and
net realized gains: .......................... 778,762 9,033,641 1,809,816 22,025,063
----------- ------------- ----------- -------------
3,050,028 36,398,729 7,436,216 89,278,673
Less shares repurchased ........................ (3,173,461) (38,138,338) (4,756,442) (56,740,155)
----------- ------------- ----------- -------------
NET INCREASE/(DECREASE) ..................... (123,433) $ (1,739,609) 2,679,774 $ 32,538,518
=========== ============= =========== =============
<CAPTION>
The Guardian Cash Fund, Inc.
Six Months Ended Year Ended December 31,
June 30, 1996 (Unaudited) 1995 (Audited)
------------------------- -------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 16,271,347 $ 162,713,468 23,010,954 $ 230,109,542
Shares issued to shareholders in reinvestment of
dividends from net investment income and
net realized gains: .......................... 877,324 8,773,237 1,974,775 19,747,755
----------- ------------- ----------- -------------
17,148,671 171,486,705 24,985,729 249,857,297
Less shares repurchased ........................ (15,101,473) (151,014,724) (28,002,304) (280,023,044)
----------- ------------- ----------- -------------
NET INCREASE /(DECREASE) .................... 2,047,198 $ 20,471,981 (3,016,575) $ (30,165,747)
=========== ============= =========== =============
</TABLE>
------------------------
Note F -- Line of Credit
------------------------
A $20,000,000 line of credit available to each of the Fund and the other
Guardian related Funds has been established with Morgan Guaranty Trust Company.
The rate of interest charged on any borrowings is based upon the prevailing
Federal Funds rate at the time of the loan plus .25% calculated on a 360 day
basis per annum. For the six months ended June 30, 1996, none of the Funds
borrowed against this line of credit.
- --------------------------------------------------------------------------------
55
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
----------------------
COMMON STOCKS -- 97.2%
----------------------
Shares Value
- -----------------------------------------------------
Aerospace -- 1.6%
8,000 Boeing Co. $ 697,000
---------
Automotive -- 0.3%
3,000 General Motors Corporation 157,125
---------
Automotive: Parts and Accessories-- 3.4%
30,000 GenCorp Inc. 453,750
25,000 Handy & Harman 425,000
8,000 Quaker State Corporation 120,000
18,250 Wynn's International, Inc. 515,563
---------
1,514,313
---------
Aviation: Parts and Services-- 4.6%
18,000 AAR Corp. 366,750
10,000 Coltec Industries Inc.+ 142,500
2,000 Curtiss-Wright Corporation 108,000
7,500 Hi-Shear Industries Inc.+ 45,937
15,000 Hudson General Corporation 530,625
10,000 Moog, Inc., Class A+ 245,000
12,000 Precision Castparts Corp. 516,000
6,000 Rohr Inc.+ 125,250
---------
2,080,062
---------
Broadcasting -- 10.6%
28,000 Ackerley Communications Inc. 763,000
4,500 BHC Communications, Inc., Class A 439,875
17,905 Chris-Craft Industries, Inc. 787,820
13,000 Grupo Televisa S.A., GDR+ 399,750
10,000 Liberty Corporation 317,500
10,000 LIN Television Corporation+ 360,000
10,000 Multi-Market Radio Inc., Class A+ 109,375
13,000 United Television, Inc. 1,274,000
17,000 Westinghouse Electric Corp. 318,750
---------
4,770,070
---------
Cable -- 10.7%
10,000 BET Holdings, Inc., Class A+ 263,750
27,000 Cablevision Systems Corporation,
Class A+ 1,248,750
50,000 International Family Entertainment,
Inc., Class B+ 925,000
20,000 Media General, Inc., Class A 745,000
4,000 Tele-Communications, Inc., Class A+ 72,500
40,000 Tele-Communications, Inc./Liberty
Media Group, Class A+ $ 1,060,000
18,000 Tele-Communications International,
Inc., Class A+ 317,250
12,000 United International Holdings, Inc.,
Class A+ 165,000
---------
4,797,250
---------
Consumer Products -- 6.3%
20,000 American Brands, Inc. 907,500
12,000 Culbro Corporation+ 715,500
2,000 Eastman Kodak Company 155,500
21,000 General Housewares Corp. 259,875
10,000 Kerr Group, Inc.+ 43,750
6,500 National Presto Industries Inc. 247,000
8,000 Ralston Purina Group 513,000
---------
2,842,125
---------
Consumer Services -- 1.8%
35,000 Rollins, Inc. 822,500
---------
Diversified Industrial -- 4.6%
15,000 GATX Corporation 723,750
5,000 ITT Industries Inc. 125,625
35,000 Katy Industries, Inc. 525,000
10,000 Thomas Industries Inc. 191,250
15,000 Trinity Industries, Inc. 510,000
---------
2,075,625
---------
Electrical Equipment and Supplies -- 2.7%
27,000 General Instrument Corporation+ 779,625
8,000 Honeywell Inc. 436,000
---------
1,215,625
---------
Energy -- 1.2%
160,000 Kaneb Services, Inc.+ 520,000
---------
Entertainment -- 5.1%
21,000 Gaylord Entertainment Company,
Class A 593,250
12,000 GC Companies, Inc.+ 447,000
10,000 Jackpot Enterprises Inc. 127,500
22,000 Time Warner Inc. 863,500
7,000 Viacom Inc., Class A+ 266,875
---------
2,298,125
---------
See notes to financial statements.
- --------------------------------------------------------------------------------
56
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------
Financial Services -- 2.1%
8,000 American Express Company $ 357,000
3,000 H&R Block Inc. 97,875
12,000 Midland Company 504,000
---------
958,875
---------
Food and Beverage -- 6.6%
25,942 Bruno's, Inc.+ 359,945
8,000 Celestial Seasonings, Inc.+ 164,000
33,000 PepsiCo, Inc. 1,167,375
22,500 Quaker Oats Company 767,813
8,000 Seagram Company Ltd. 269,000
4,560 Tootsie Roll Industries, Inc. 162,450
2,000 Wrigley, (Wm.) Jr. Company 101,000
---------
2,991,583
---------
Health Care -- 5.4%
40,000 Community Health Systems+ 2,070,000
7,000 Genentech Inc.+ 366,625
---------
2,436,625
---------
Hotels/Casinos -- 2.2%
12,000 Aztar Corporation+ 138,000
5,000 Hilton Hotels Corporation 562,500
3,000 ITT Corporation, New+ 198,750
2,000 Mirage Resorts, Incorporated+ 108,000
---------
1,007,250
---------
Industrial Equipment and Supplies -- 8.4%
20,000 AMETEK, Inc. 435,000
3,000 Ampco-Pittsburgh Corporation 35,250
5,000 Crane Co. 205,000
8,000 CTS Corporation 376,000
2,000 Dynamics Corporation of America 53,250
12,500 Franklin Electric Company 437,500
20,000 Goulds Pumps, Incorporated+ 512,500
8,000 Ingersoll Rand Co. 350,000
30,000 Navistar International Corporation+ 296,250
7,500 Pittway Corporation 330,000
16,000 Sequa Corporation, Class A+ 690,000
12,000 TransPro Inc. 82,500
---------
3,803,250
---------
Oil and Gas Equipment/Services-- 0.1%
4,500 RPC Inc.+ 51,750
---------
Publishing -- 6.0%
20,000 Golden Books Family
Entertainment, Inc.+ 240,000
16,000 Houghton Mifflin Company 798,000
10,000 Lee Enterprises, Incorporated 236,250
10,000 Meredith Corporation 417,500
5,000 Providence Journal Company, Class A+ 76,875
12,000 Pulitzer Publishing Company 711,000
15,000 Thomas Nelson Inc. 200,625
---------
2,680,250
---------
Retail -- 6.1%
16,200 Giant Food Inc., Class A 581,175
30,000 Neiman Marcus Group, Inc.+ 810,000
40,000 Stop & Shop Companies, Inc.+ 1,335,000
---------
2,726,175
---------
Specialty Chemical -- 0.8%
14,000 Ferro Corporation 371,000
---------
Telecommunications -- 0.9%
13,100 Pacific Telecom, Inc. (a) 393,000
---------
Wireless Communications -- 5.7%
10,000 Cellular Communications, Inc.,
Class A+ 531,250
20,000 Centennial Cellular Corp., Class A+ 337,500
15,000 COMSAT Corporation, Series 1 390,000
25,000 Loral Space & Communications Ltd.+ 340,625
14,000 Rogers Cantel Mobile
Communications, Inc., Class B+ 327,250
14,000 Telephone and Data Systems, Inc. 630,000
---------
2,556,625
---------
TOTAL COMMON STOCKS
(Cost $40,096,630) 43,766,203
-----------------------
PREFERRED STOCK -- 0.1%
-----------------------
Industrial Equipment and Supplies -- 0.1%
1,000 Sequa Corporation, $5.00, Conv.
Pfd. 71,875
---------
TOTAL PREFERRED STOCK
(Cost $63,175) 71,875
---------
See notes to financial statements.
- --------------------------------------------------------------------------------
56
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
---------------------------
U.S. TREASURY BILLS -- 3.5%
---------------------------
Principal
Amount Value
- ----------------------------------------------------
$1,570,000 4.94% to 5.04%++ due
07/05/1996 - 08/22/1996 $ 1,563,434
------------
TOTAL U.S. TREASURY BILLS
(Cost $1,563,434) 1,563,434
------------
TOTAL INVESTMENTS -- 100.8%
(Cost $41,723,239) (b) 45,401,512
------------
OTHER ASSETS AND LIABILITIES
(Net) - (0.8)% (377,099)
------------
NET ASSETS-- 100.0% $ 45,024,413
============
(a) Security fair valued under procedures established by the Board of
Directors.
(b) Aggregate cost for Federal tax purposes was $41,739,294. Net unrealized
appreciation for Federal tax purposes was $3,662,218 (gross unrealized
appreciation was $4,395,267 and gross unrealized depreciation was
$733,049).
+ Non-income producing security
++ Represents annualized yield at date of purchase.
GDR- Global Depositary Receipt
- --------------------------------------------
Top Ten Holdings
June 30, 1996
1. Community Health Systems, Inc.
2. Stop & Shop Companies, Inc.
3. United Television, Inc.
4. Cablevision Systems Corporation
5. PepsiCo, Inc.
6. TCI/Liberty Media Group
7. International Family Entertainment, Inc.
8. American Brands, Inc.
9. Time Warner Inc.
10. Rollins, Inc.
- --------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------
58
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
Assets:
Investments, at value
(Cost $41,723,239) $45,401,512
-----------
Cash 64,629
Unamortized organization costs 76,631
Dividends receivable 24,881
-----------
Total Assets 45,567,653
-----------
Liabilities:
Payable for investments purchased 367,513
Organization costs payable 99,905
Management fee payable 36,365
Accrued Directors' fees 6,250
Accrued expenses and other payables 33,207
-----------
Total Liabilities 543,240
-----------
Net assets applicable to 3,781,009
shares of common stock outstanding $45,024,413
===========
NET ASSETS consist of:
Shares of common stock at par value $ 3,781
Additional paid-in capital 40,613,215
Accumulated net realized
gain on investments 672,948
Undistributed net investment income 56,196
Net unrealized appreciation of
investments 3,678,273
-----------
Total Net Assets $45,024,413
===========
Net Asset Value, offering and redemption
price per share ($45,024,413 4 3,781,009
shares outstanding; 500,000,000 shares
authorized of $0.001 par value) $ 11.91
===========
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (Unaudited)
Investment Income:
Dividend income (net of foreign
withholding taxes of $180) $ 166,024
Interest income 126,772
----------
Total Investment Income 292,796
----------
Expenses:
Management fee 179,044
Directors' fees 15,533
Custodian fees 11,280
Legal and audit fees 11,204
Amortization of organization costs 9,945
Shareholder services fees 6,192
Other 3,913
----------
Total expenses 237,111
----------
Net Investment Income 55,685
----------
Net Realized and Unrealized Gain on
Investments:
Net realized gain on investments sold 689,003
Change in net unrealized appreciation of
investments during the period 2,827,119
----------
Net realized and unrealized gain on
investments 3,516,122
----------
Net increase in net assets resulting from
operations $3,571,807
==========
See notes to financial statements.
- --------------------------------------------------------------------------------
59
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months
Ended Period
6/30/96 Ended
(Unaudited) 12/31/95*
------------ -----------
Net investment income $ 55,685 $ 77,973
Net realized gain on investments 689,003 234,480
Net change in unrealized appreciation of
investments 2,827,119 851,154
----------- -----------
Net increase in net assets resulting from
operations 3,571,807 1,163,607
Distribution to shareholders from:
Net investment income -- (77,462)
Net realized gain on investments -- (234,480)
Distributions in excess of net realized gain
on investments -- (16,055)
Net increase in net assets from Fund share
transactions 15,088,664 25,428,332
----------- -----------
Net increase in net assets 18,660,471 26,263,942
NET ASSETS:
Beginning of period 26,363,942 100,000
----------- -----------
End of period (including undistributed net
investment income of $56,196 and $511,
respectively) $45,024,413 $26,363,942
=========== ===========
- --------
*The Fund commenced operations on May 1, 1995.
See notes to financial statements.
- --------------------------------------------------------------------------------
60
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Per share amounts for a Fund share outstanding throughout each period.
Six Months
Ended Period
6/30/96 Ended
(Unaudited) 12/31/95*
------------ ------------
Operating performance:
Net asset value, beginning of period $10.70 $10.00
------- -------
Net investment income (a) 0.01 0.03
Net realized and unrealized gain on investments 1.20 0.80
------- -------
Total from investment operations 1.21 0.83
------- -------
Distributions to shareholders from:
Net investment income -- (0.03)
Net realized gains -- (0.09)
Distributions in excess of net realized gains -- (0.01)
------- -------
Total Distributions -- (0.13)
------- -------
Net asset value, end of period $11.91 $10.70
======= =======
Total return** 11.3% 8.4%
======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $45,024 $26,364
Ratio of net investment income to average
net assets 0.31%+ 0.75%+
Ratio of operating expenses to average
net assets (b) 1.32%+ 1.78%+
Portfolio turnover rate 34.9% 81.4%
Average commission rate (per share of security) $0.0494 N/A
- ------------
* The Fund commenced operations on May 1, 1995.
** Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for the period of less
than one year is not annualized.
+ Annualized.
(a) Net investment income before expenses assumed by the Manager and Adviser
for the period ended December 31, 1995 was $0.03.
(b) Operating expense ratio before expenses assumed by the Manager and Adviser
for the period ended December 31, 1995 was 1.92%.
See notes to financial statements.
- --------------------------------------------------------------------------------
61
<PAGE>
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
-------------------------------------
1. -- Significant Accounting Policies
-------------------------------------
Gabelli Capital Asset Fund (the "Fund"), a series of Gabelli Capital Series
Funds, Inc. (the "Company"), was organized on April 8, 1993 as a Maryland
corporation. The Company is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), whose primary objective is growth of capital. Shares of the Fund
are available to the public only through the purchase of certain variable
annuity and variable life insurance contracts issued by The Guardian Insurance &
Annuity Company, Inc. The Fund commenced operations on May 1, 1995. On April 26,
1995, the Fund sold a total of 10,000 shares of common stock to Guardian
Insurance & Annuity Company, Inc. and proceeds to the Fund amounted to $100,000.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements.
Security Valuation.
Portfolio securities which are traded only on a nationally recognized
securities exchange or are quoted on NASDAQ are valued at the last sale price as
of the close of business on the day the securities are being valued or, lacking
any sales, at the mean between closing bid and asked prices. Other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest average of the bid and asked price. Portfolio
securities which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market, as
determined by Gabelli Funds, Inc. (the "Adviser"). Securities and assets for
which market quotations are not readily available are valued at fair value, as
determined in good faith by or under the direction of the Board of Directors of
the Company. Short-term investments that mature in more than 60 days are valued
at the highest bid price obtained from a dealer maintaining an active market in
that security. Short-term investments that mature in 60 days or less are valued
at amortized cost, unless the Board of Directors determines that such valuation
does not constitute fair value.
Repurchase Agreements.
The Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement results
in a fixed rate of return that is not subject to market fluctuations during the
Fund's holding period. The value of the collateral is at least equal at all
times to the total amount of the repurchase obligations, including interest. In
the event of counterparty default, the Fund has the right to use the collateral
to offset losses incurred. There is potential loss to the Fund in the event the
Fund is delayed or prevented from exercising its rights to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assert its
rights. The Adviser, acting under the supervision of the Board of Directors,
reviews the value of the collateral and the creditworthiness of those banks and
dealers with which the Fund enters into repurchase agreements to evaluate
potential risks.
Securities Transactions and Investment Income.
Securities transactions are accounted for on the trade date with realized
gain or loss on investments
- --------------------------------------------------------------------------------
62
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited) (Continued)
determined using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned.
Dividends and Distributions to Shareholders.
Dividend income and dividends and distributions to shareholders are
recorded on the ex-dividend date. Income dividends and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various investment
securities held by the Fund, timing differences and differing characterization
of distributions made by the Fund.
Provision for Income Taxes.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. As a result, a Federal income tax provision is not required. Deferred
Organization Expenses.
A total of $100,000 was incurred in connection with the organization of the
Fund. These costs were advanced by the Guardian Insurance & Annuity Company Inc.
and will be reimbursed by the Fund after the sooner of one year or when the Fund
reaches $50 million. These costs were deferred and are being amortized on a
straight-line basis over a period of 60 months from the date the Fund commenced
investment operations.
-----------------------------------------
2. -- Agreements with Affiliated Parties
-----------------------------------------
Pursuant to a management agreement (the "Management Agreement"), the Fund
will pay Guardian Investor Services Corporation (the "Manager") a fee, computed
daily and paid monthly, at the annual rate of 1.00 percent of the value of the
Fund's average daily net assets. Pursuant to an Investment Advisory Agreement
among the Fund, the Manager and the Adviser, the Adviser, under the supervision
of the Company's Board of Directors and the Manager, manages the Fund's assets
in accordance with the Fund's investment objectives and policies, makes
investment decisions for the Fund, places purchase and sale orders on behalf of
the Fund, provides investment research and provides facilities and personnel
required for the Fund's administrative needs. The Adviser may delegate its
administrative role and currently has done so to First Data Investor Services
Group, Inc., the Fund's sub-administrator (the "Sub-Administrator"). The Adviser
will supervise the performance of administrative and professional services
provided by others and pays the compensation of the Sub-Administrator and all
officers and directors of the Fund who are its affiliates. As compensation for
its services and the related expenses borne by the Adviser, the Manager pays the
Adviser a fee, computed daily and paid monthly, at the annual rate of 0.75
percent of the value of the Fund's average daily net assets.
---------------------------
3. -- Portfolio Securities
---------------------------
Cost of purchases and proceeds from sales of investment securities for the
six months ended June 30, 1996, excluding U.S. government and short-term
investments, aggregated $31,061,978 and $11,054,530, respectively.
----------------------------------
4. -- Transactions with Affiliates
----------------------------------
During the six months ended June 30, 1996, the Fund paid brokerage
commissions of $31,075 to Gabelli & Company, Inc. and its affiliates.
- --------------------------------------------------------------------------------
63
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ----------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)(Continued)
----------------------------
5. -- Shares of Common Stock
----------------------------
Common stock transactions were as follows:
<TABLE>
<CAPTION>
Six Months Ended Period Ended
6/30/96 12/31/95*
---------------- -------------
Shares Amount Shares Amount
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shares sold 1,724,314 $19,637,713 2,907,580 $30,237,331
Shares issued upon re-
investment of dividends -- -- 30,769 327,997
Shares redeemed (406,643) (4,549,049) (485,011) (5,136,996)
--------- ----------- --------- -----------
Net increase 1,317,671 $15,088,664 2,453,338 $25,428,332
--------- ----------- --------- -----------
</TABLE>
* The Fund commenced operations on May 1, 1995.
- --------------------------------------------------------------------------------
64
<PAGE>
- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
65
<PAGE>
- -------------------
Baillie Gifford
International Fund
- -------------------
6
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
- ----------------------
COMMON STOCKS -- 94.2%
- ----------------------
Shares Value
- ----------------------------------------------------
ARGENTINA -- 0.5%
Energy -- 0.5%
288,602 Perez Companc SA $ 1,891,099
------------
AUSTRIA -- 0.5%
Business Services -- 0.3%
17,470 Flughafen Wein AG 1,200,354
Metals -- 0.2%
8,500 Boehler Uddeholm 659,068
------------
1,859,422
------------
AUSTRALIA -- 4.1%
Banks -- 0.7%
539,000 Australia & NZ Bank Group 2,549,925
Business Services -- 0.6%
154,700 Brambles Industries Ltd. 2,149,388
Forest Products -- 0.4%
215,929 Amcor Limited 1,467,808
Metals -- 0.5%
278,000 Western Mining Corp. Ltd. 1,988,055
Petroleum Services -- 0.9%
264,633 Broken Hill Property 3,653,911
Real Estate -- 0.5%
137,730 Lend Lease Corp. 2,110,597
Retail Trade -- 0.5%
830,067 Woolworths Limited 2,002,598
------------
15,922,282
------------
BELGIUM -- 1.3%
Banks -- 1.0%
11,050 Generale De Banque 3,892,026
Metals -- 0.3%
13,000 Union Miniere 1,009,217
------------
4,901,243
------------
BRAZIL -- 0.7%
Broadcasting -- 0.7%
36,000 Telecomunicacoes Brasileras 2,506,500
------------
CHILE -- 0.4%
Electric Utilities -- 0.4%
50,000 Enersis SA 1,550,000
------------
CZECHOSLOVAKIA -- 0.2%
Banks -- 0.2%
33,900 Komercni Banka AS 915,300
------------
FRANCE -- 4.7%
Banks -- 0.4%
14,890 Societe Generale 1,638,491
Conglomerates -- 0.5%
13,500 BIC 1,918,598
Construction Materials -- 0.4%
13,300 Poliet 1,424,741
Containers -- 0.4%
12,100 Cie De St Gobain 1,620,830
Gas Exploration -- 0.8%
41,000 Elf Aquitaine 3,017,847
Leisure Products -- 0.4%
16,866 Club Mediterranee 1,511,631
Retail Trade -- 1.8%
17,820 Castorama Dubois 3,513,003
25,120 Comptoirs Modernes 3,295,474
------------
17,940,615
------------
GERMANY -- 7.4%
Air Travel -- 0.9%
23,580 Lufthansa AG 3,334,232
Automobiles -- 1.0%
10,080 Volkswagen AG 3,748,925
Banks -- 1.3%
88,000 Bayer Hypo/Wech Bank 2,137,350
56,550 Deutsche Bank AG 2,677,803
Chemicals -- 1.9%
12,350 BASF AG 3,533,213
109,100 Hoechst AG 3,702,440
Drugs and Health Care -- 0.4%
2,280 GEHE AG 1,532,496
Footwear- 0.5%
25,650 Adidas AG 2,157,602
Industrial Machinery -- 0.8%
8,970 Mannesmann AG 3,103,071
Software -- 0.6%
16,900 SAP AG 2,506,380
------------
28,433,512
------------
HONG KONG -- 5.5%
Banks -- 0.7%
270,000 Hang Seng Bank 2,720,649
See notes to financial statements.
- --------------------------------------------------------------------------------
66
<PAGE>
-------------------
Baillie Gifford
International Fund
-------------------
6
-------------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------
Conglomerates -- 1.1%
421,000 Hutchison Whampoa $ 2,648,654
192,000 Swire Pacific 1,643,241
Publishing -- 0.8%
761,000 Citic Pacific Ltd. 3,077,111
Real Estate -- 2.1%
428,000 Henderson Land Development 3,206,904
916,220 Hong Kong Land Hldg. 2,061,495
288,000 Sun Hung Kai Properties 2,911,327
Telephone -- 0.8%
1,602,400 Hong Kong Telecomm. 2,877,397
------------
21,146,778
------------
HUNGARY -- 0.3%
Chemicals -- 0.3%
20,900 Richter Gedeon Veg 1,050,225
------------
IRELAND -- 0.4%
Construction Materials -- 0.4%
143,000 CRH 1,438,218
------------
ITALY -- 2.3%
Telephone -- 1.5%
1,310,000 Telecom Italia 2,818,906
1,325,000 Telecom Italia MOB 2,963,674
Textile-Apparel and Production -- 0.8%
46,300 Gucci Group NV 3,002,510
------------
8,785,090
------------
JAPAN -- 34.5%
Automobiles -- 2.3%
29,700 Autobacs Seven Co. 2,878,617
287,000 Calsonic Corp. 2,424,798
272,000 Suzuki Motor Corp. 3,581,402
Business Services -- 1.1%
62,000 Secom Co. 4,104,421
Computer System -- 1.7%
212 NTT Data Comm. System 6,358,158
Construction and Mining Equipment -- 1.1%
169,000 Nishimatsu Construction 1,854,341
84,000 Tostem Corp. 2,480,867
Drugs and Healthcare -- 1.1%
95,000 Sankyo Co. 2,466,968
72,000 Santen Pharmaceutical Co. 1,678,782
Electrical Equipment -- 2.3%
354,000 Hitachi 3,301,605
255,000 Omron Corp. 5,432,725
Electronics -- 2.7%
64,000 Kyocera Corp. 4,535,272
85,000 Rohm Co. 5,627,029
Financial Services -- 1.6%
133,000 Japan Securities Finance 2,152,517
83,400 Promise Co. 4,117,954
Industrial Machinery -- 4.0%
760,000 Mitsubishi Heavy Ind. 6,622,594
440,000 NSK 3,335,254
66,300 SMC Corp. 5,140,804
Insurance -- 1.4%
426,000 Tokio Marine and Fire 5,687,011
Investment Company -- 1.3%
259,000 Nomura Securities 5,067,983
Leisure Products -- 0.8%
16,500 Toho Co. 2,926,896
Metals-Steel -- 1.8%
292,000 Hitachi Metals 3,364,148
1,200,000 Sumitomo Metal Industries 3,686,737
Photography -- 2.9%
340,000 Canon, Inc. 7,088,191
129,000 Fuji Photo Film Co. 4,081,196
Real Estate -- 1.4%
393,000 Mitsubishi Estate 5,426,142
Retail Trade -- 3.8%
148,000 Jusco Co. 4,858,227
192,000 Marui Co. 4,266,081
594,000 Mitsui & Co. 5,393,334
Telephone -- 1.7%
735 DDI Corp. 6,424,907
Tires and Rubber -- 1.5%
304,000 Bridgestone Corp. 5,809,537
------------
132,174,498
------------
MALAYSIA -- 3.5%
Conglomerates -- 0.7%
1,992,000 Renong Berhad 3,178,256
Industrial Machinery -- 0.9%
463,000 United Engineers Berhad 3,211,024
See notes to financial statements.
- --------------------------------------------------------------------------------
67
<PAGE>
- -------------------
Baillie Gifford
International Fund
- -------------------
6
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
Shares Value
- ----------------------------------------------------
Leisure Products -- 0.9%
620,000 Resorts World Berhad $ 3,554,219
Telephone -- 1.0%
400,000 Telekom Malaysia 3,559,832
------------
13,503,331
------------
MEXICO -- 0.8%
Food and Beverages -- 0.5%
44,500 Pan American Beverage 1,991,375
Telephone -- 0.3%
29,500 Telefonos De Mexico SA 988,250
------------
2,979,625
------------
NETHERLANDS -- 3.0%
Banks -- 0.9%
66,200 ABN Amro Holdings NV 3,555,509
Broadcasting -- 0.6%
18,500 Wolters Kluwer NV 2,103,283
Publishing -- 1.0%
250,000 Ver Ned Uitgevers 3,884,491
Support Services -- 0.5%
49,800 ASM Lithography Hldg. 2,058,575
------------
11,601,858
------------
NEW ZEALAND -- 0.7%
Telephone -- 0.7%
622,000 Telecom Corp of N.Z. 2,618,947
------------
POLAND -- 0.4%
Electric Utilities -- 0.4%
175,000 Elektrim 1,436,274
------------
SINGAPORE -- 2.5%
Air Travel -- 0.5%
195,000 Singapore Airlines 2,059,178
Banks -- 0.6%
195,066 Overseas Chinese Bank 2,138,552
Food and Beverage -- 0.4%
166,800 Fraser & Neave 1,725,924
Industrial Machinery -- 0.5%
215,000 Keppel Corp. 1,798,016
Publishing -- 0.5%
96,000 Singapore Press HD 1,884,621
------------
9,606,291
------------
SPAIN -- 1.3%
Banks -- 0.8%
65,000 Banco Santander SA 3,036,600
Construction Material -- 0.5%
73,600 Continente Cent Co. 1,747,932
------------
4,784,532
------------
SWEDEN -- 2.0%
Business Services -- 0.6%
107,000 Securitas AB 2,246,643
Construction and Mining Equipment -- 1.4%
155,000 Atlas Copco AB 2,891,573
50,500 Incentive AB 2,704,227
------------
7,842,443
------------
SWITZERLAND -- 5.2%
Business Services -- 0.3%
1,000 Danzas Holding 1,047,832
Chemicals -- 1.7%
5,460 Ciba Geigy AG 6,660,134
Drugs and Healthcare -- 1.8%
6,020 Sandoz AG 6,890,594
Industrial Machinery -- 0.3%
645 Bobst AG 931,231
Insurance -- 1.1%
7,080 Winterthur 4,219,005
------------
19,748,796
------------
TAIWAN -- 0.6%
Building Construction -- 0.3%
338,000 China Development 1,117,660
Plastics -- 0.1%
257,000 Nan Ya Plastic 564,989
Shipbuilding -- 0.2%
388,000 Yang Ming Marine 572,413
------------
2,255,062
------------
UNITED KINGDOM -- 11.4%
Banks -- 0.5%
190,500 National Westminster Bank PLC 1,816,540
Business Services -- 0.8%
130,000 Associated British Ports 559,248
223,000 BAA 1,615,616
120,000 De La Rue 1,108,868
See notes to financial statements.
- --------------------------------------------------------------------------------
68
<PAGE>
-------------------
Baillie Gifford
International Fund
-------------------
6
-------------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------
Building Construction -- 0.3%
120,000 Fine Arts Development $ 969,095
Chemicals -- 0.2%
245,000 Allbright & Wilson 677,279
Conglomerates -- 2.0%
602,658 BTR 2,334,942
276,000 Grand Metropolitan 1,830,284
472,000 Hanson 1,319,460
75,000 Hays 528,809
116,000 Siebe 1,648,392
Construction and Mining Equipment -- 0.2%
170,000 Weir Group 654,760
Drugs and Healthcare -- 0.7%
214,000 Glaxo Wellcome 2,881,472
Electric Utilities -- 0.3%
85,666 Yorkshire Electric Group 961,897
Electronics -- 0.6%
140,000 Eletrocomponents 829,477
340,000 Rotork 1,304,240
Food, Beverage and Tobacco -- 0.9%
190,000 Devro International 711,135
140,000 Highland Distilleries 800,124
270,000 Iceland Group 647,849
128,000 Reckitt & Colman 1,345,799
Household Products -- 0.1%
220,000 Life Sciences International 358,751
Industrial Machinery -- 0.1%
42,000 Vosper Thorncroft 531,604
Insurance -- 0.6%
70,000 Britannic Assurance 781,643
274,000 Prudential Corp. 1,727,660
Leisure Products -- 0.7%
157,000 Granada Group 2,100,567
80,000 Vendome Lux Group SA 742,973
Newspaper -- 0.4%
250,000 Mirror Group PLC 790,107
155,000 Southnews PLC 853,354
Oil International -- 0.8%
333,000 British Petroleum 2,921,960
Retail Grocery -- 0.4%
271,000 Sainsbury (J) 1,595,108
Retail Trade -- 1.0%
251,000 Dixons Group 2,054,310
256,000 Marks & Spencer 1,870,601
Telephone -- 0.5%
477,000 Vodafone Group 1,774,212
Transportation -- 0.3%
400,000 Firstbus 993,943
------------
43,642,079
------------
TOTAL COMMON STOCKS
(Cost $303,609,050) 360,534,020
------------
- -----------------------
PREFERRED STOCK -- 0.4%
- -----------------------
Shares Value
- ----------------------------------------------------
54,567 Companhia Energetica De Minas $ 1,548,339
------------
TOTAL PREFERRED STOCKS
(Cost $1,442,790) 1,548,339
------------
- -------------------------
CONVERTIBLE BONDS -- 0.7%
- -------------------------
Principal
Amount Value
- ----------------------------------------------------
$2,400,000 MBL Int'l Finance Exch. Gtd.
Notes, 3% due 11/30/02 $ 2,808,000
------------
TOTAL CONVERTIBLE BONDS
(Cost $2,400,000) 2,808,000
------------
- ----------------------------
REPURCHASE AGREEMENT -- 3.7%
- ----------------------------
Principal
Amount Maturity Date Value
- ----------------------------------------------------
$14,040,000 State Street Bank
& Trust repurchase
agreement, dated
6/28/96, maturity
value $14,045,556
at 4.75% due 7/1/96
(collateralized
by $14,695,000 U.S.
Treasury Bills,
5.42% due 12/19/96) 7/1/96 $ 14,040,000
------------
See notes to financial statements.
- --------------------------------------------------------------------------------
69
<PAGE>
- -------------------
Baillie Gifford
International Fund
- -------------------
6
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
Principal
Amount Value
- ----------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $14,040,000) $ 14,040,000
------------
TOTAL INVESTMENTS -- 99.0%
(Cost $321,491,840) 378,930,359
------------
CASH, RECEIVABLES AND
OTHER ASSETS LESS
PAYABLES -- 1.0% 3,876,416
------------
NET ASSETS -- 100.0% $382,806,775
============
See notes to financial statements.
- --------------------------------------------------------------------------------
70
<PAGE>
-------------------
Baillie Gifford
International Fund
-------------------
6
-------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $321,491,840
============
Investments, at market $364,890,359
Repurchase agreements 14,040,000
------------
TOTAL INVESTMENTS 378,930,359
Cash 2,664
Foreign currency (Cost $4,635,520) 4,646,234
Dividends receivable 798,470
Foreign tax receivable 680,342
Receivable for fund shares sold 183,664
Interest receivable 11,758
Receivable for open forward
foreign currency sold 886
Other assets 1,486
------------
TOTAL ASSETS 385,255,863
------------
LIABILITIES:
Payable for securities purchased 1,284,522
Payable for fund shares redeemed 31,085
Accrued expenses 116,890
Foreign tax withholding 99,966
Capital Gains Tax Payable --
Due to affiliates -- Note 2 916,625
------------
TOTAL LIABILITIES 2,449,088
------------
NET ASSETS $382,806,775
============
COMPONENTS OF NET ASSETS
Capital stock -- $0.10 par value
(1,000,000,000 shares authorized) $ 2,289,781
Paid-in capital 317,903,736
Undistributed net investment income 2,375,317
Accumulated net realized gain on investments
and foreign currency related transactions 2,785,822
Net unrealized appreciation of investments
and translation of assets and liabilities in
foreign currency 57,452,119
------------
NET ASSETS $382,806,775
============
Shares outstanding -- $0.10 par value 22,897,807
------------
NET ASSET VALUE PER SHARE $ 16.72
============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
For the Six Months Ended
June 30, 1996 (Unaudited)
INVESTMENT INCOME
Income:
Dividends $ 4,643,760
Interest 299,544
------------
4,943,304
Less: Foreign tax withheld 563,019
------------
Total Income 4,380,285
------------
Expenses:
Investment advisory fees -- Note 2 1,403,497
Custodian fees 294,828
Printing expense 15,766
Audit fees 10,500
Registration fees 6,123
Directors fees -- Note 2 4,600
Legal fees 2,126
Transfer agent fees 1,650
Insurance expense 1,471
Deferred organization expense -- Note 6 814
Other 352
------------
Total Expenses 1,741,727
------------
Net Investment Income 2,638,558
------------
Realized and Unrealized Gain/(Loss) On
Investments and Currencies -- Note 4
Net realized gain/(loss) on investments -- Note 1 2,128,986
Net realized gain/(loss) on foreign currency
related transactions -- Note 1 2,150,700
Net change in unrealized appreciation of
investments -- Note 4 26,042,045
Net change in unrealized appreciation from
translation of assets and liabilities in
foreign currencies -- Note 4 (592,134)
------------
Net Realized and Unrealized Gain on
Investments and Foreign Currencies 29,729,597
------------
Net Increase in Net Assets
Resulting from Operations $ 32,368,155
============
See notes to financial statements.
- --------------------------------------------------------------------------------
71
<PAGE>
- -------------------
Baillie Gifford
International Fund
- -------------------
6
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Year Ended
Ended December 31,
June 30, 1996 1995
(Unaudited) (Audited)
----------- -----------
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 2,638,558 $ 2,934,813
Net realized gain/(loss) on
investments and foreign currency
related transactions 4,279,686 17,921,236
Net change in unrealized appreciation
on investments and translation of
assets and liabilities in foreign
currencies 25,449,911 11,642,633
------------- -------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations 32,368,155 32,498,682
------------- -------------
Distributions to Shareholders:
Dividends from net investment income (715,896) (2,934,813)
Distributions in excess of net investment
income -- (2,291,355)
Net realized gains from investments (2,432,411) (13,499,965)
------------- -------------
Total Distribution to Shareholders (3,148,307) (18,726,133)
------------- -------------
From Transaction in Shares:
Increase/(decrease) in net assets from
capital share transactions-- Note F 36,300,057 464,452
------------- -------------
Net Increase/(Decrease) in Net Assets 65,519,905 14,237,001
Net Assets:
Beginning of period 317,286,870 303,049,869
------------- -------------
End of period $ 382,806,775 $ 317,286,870
============= =============
* Includes (overdistributed)/undistributed
net investment income of: $ 2,375,317 $ (263,641)
See notes to financial statements.
- --------------------------------------------------------------------------------
72
<PAGE>
-------------------
Baillie Gifford
International Fund
-------------------
6
-------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
June 30, 1996 (unaudited)
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months February 8,
Ended 1991** to
June 30, Year Ended December 31, December 31,
1996 1994 1993 1991
(Unaudited) 1995 (Audited) 1992 (Audited)
--------- -------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 15.37 $ 14.69 $ 14.69 $ 11.16 $ 12.37 $ 10.00
-------- -------- -------- -------- -------- --------
Income from Investment Operations
Net investment income ...................... 0.15 0.16 0.15 0.23 0.09 0.04
Net realized and unrealized gain/(loss)
on investments and translation of assets
and liabilities in foreign currencies ..... 1.34 1.49 (0.02) 3.54 (1.20) 2.52
-------- -------- -------- -------- -------- --------
Net increase/(decrease) from investment
operations ................................ 1.49 1.65 0.13 3.77 (1.11) 2.56
-------- -------- -------- -------- -------- --------
Distributions to Shareholders
Dividends from net investment income ....... (0.03) (0.15) (0.13) (0.24) (0.10) (0.04)
Distributions in excess of net investment
income .................................... -- (0.12) -- -- -- --
Distributions from net realized gain on
investments and foreign currency related
transactions .............................. (0.11) (0.70) -- -- -- (0.15)
-------- -------- -------- -------- -------- --------
Total distributions ........................ (0.14) (0.97) (0.13) (0.24) (0.10) (0.19)
-------- -------- -------- -------- -------- --------
Net asset value, end of period .................. $ 16.72 $ 15.37 $ 14.69 $ 14.69 $ 11.16 $ 12.37
======== ======== ======== ======== ======== ========
Total return+ ................................... 9.75% 11.23% 0.87% 34.04% (8.90%) 8.56%
======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000's omitted) .. $382,807 $317,287 $303,050 $186,795 $55,175 $36,012
Ratio of expenses to average net assets .... 0.99%*** 0.99% 1.03% 1.11% 1.26% 1.67%*
Ratio of net investment income to average
net assets ................................ 1.50%*** 0.97% 1.11% 1.75% 0.88% 0.61%*
Portfolio turnover ratio ................... 23% 52% 27% 18% 44% 14%
- ----------
* Ratios are annualized.
** Commencement of operations.
*** Annualized.
+ Total returns do not reflect the effects of charges deducted under the terms of GIAC's variable contracts.
Including such charges would reduce the total returns for all periods shown.
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
73
<PAGE>
- -------------------
Baillie Gifford
Emerging Markets
- -------------------
7
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- -------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
- ----------------------
COMMON STOCKS -- 83.4%
- ----------------------
Shares Value
- ----------------------------------------------------
ARGENTINA -- 6.9%
Automotive -- 0.3%
23,900 Ciadea SA $ 166,178
Banks -- 0.6%
17,250 Banco Frances Del Rio de
La Plata 163,941
5,350 Banco Frances Del Rio de
La Plata ADR 153,813
Building Construction -- 0.4%
43,400 Dycasa Dragados SA 201,891
Electric Utilities -- 0.8%
28,000 Capex SA 462,000
Industrial Machinery -- 0.4%
19,800 Quilmes Industrial 203,594
Oil and Gas -- 1.4%
99,891 Perez Companc SA 788,867
Oil Transport -- 0.9%
42,500 Transportadora De Gas Del Sur 520,625
Other -- 0.9%
6,000 Disco SA 132,750
11,700 IRSA Inversiones Y Represente 394,875
Real Estate -- 0.2%
41,000 Commercial De Plata 127,151
Telecommunications -- 0.3%
16,100 Telecom Argentina 170,590
Telephone -- 0.7%
14,000 Telefonica De Argentina SA 414,750
------------
3,901,025
------------
BRAZIL -- 5.7%
Broadcasting -- 3.1%
10,600 Telebras ADR 738,025
16,850,000 Telebras ON 989,992
Industrial Machinery -- 0.3%
21,500 Souza Cruz (Cia) 187,338
Other -- 0.9%
26,200 Companhia Brasileira De Dist. 432,300
Steel -- 0.3%
23,500 Usiminas 254,826
Telephone -- 1.1%
1,458,284 Telesp ON 599,917
------------
3,202,398
------------
CHINA -- 0.4%
Automobile -- 0.2%
6,500 Ek Chor China Motorcycle Co. 87,750
Electrical Equipment -- 0.1%
144,000 Shanghai Shangling 76,032
Tires and Rubber -- 0.1%
8,000 China Tire Hldgs. Ltd. 72,000
------------
235,782
------------
CHILE -- 4.2%
Electric Utilities -- 1.2%
22,800 Empresa Nacional De ELec. 490,200
7,100 Enersis SA 220,100
Investment Companies -- 2.1%
25,600 Genesis Chile Fund 1,062,400
2,667 Regent Kingpin Acquisition Ltd. 108,014
Mining -- 0.9%
100,000 Antofagasta Hldgs. 496,971
------------
2,377,685
------------
COLOMBIA -- 0.6%
Banks -- 0.4%
12,300 Banco Industrial Colombiano ADR 207,563
Retail-- 0.2%
15,100 Gran Cadena De Almacenes ADR 151,000
------------
358,563
------------
CZECH REPUBLIC -- 2.4%
Banks -- 0.6%
13,100 Komercni Banka GDR 353,700
Construction Materials -- 0.7%
3,500 IPS Praha 408,988
Food and Beverages -- 0.3%
2,650 Prazske Pivorary 182,041
Telecommunications -- 0.8%
3,500 SPT Telecom AS 427,434
------------
1,372,163
------------
HONG KONG -- 14.3%
Banks -- 0.5%
19,000 HSBC Holdings 287,180
Construction and Mining Equipment -- 0.2%
1,800,000 CNT Group Ltd. 109,291
See notes to financial statements.
- --------------------------------------------------------------------------------
74
<PAGE>
-------------------
Baillie Gifford
Emerging Markets
-------------------
7
-------------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------
Conglomerates -- 2.7%
276,000 China Strategic Holdings Ltd. $ 78,441
200,000 CITIC Pacific Ltd. 808,702
106,000 Hutchison Whampoa 666,882
Financial Services -- 1.4%
135,000 Guoco Group 643,538
400,000 Sinocan Holdings 175,692
Food and Beverage -- 0.6%
800,000 Pokphand (CP) Co. 317,797
Industrial Machinery -- 0.5%
260,000 Chen Hsong Holdings 139,391
500,000 Lung Kee (Bermuda) 127,894
Lodging -- 0.4%
150,000 Mandarin Oriental 210,000
Publishing -- 0.4%
410,000 Oriental Press Group 219,809
Real Estate -- 6.2%
148,000 Henderson Land Development 1,108,929
750,000 Hon Kwok Land Inv. 261,601
229,878 Hong Kong Land Hldg. 517,226
200,000 New World Development Co. 927,553
42,000 Sun Hung Kai Properties 424,568
300,000 Tai Cheung Holdings 249,974
Telephone -- 1.0%
304,800 Hong Kong Telecommunications 547,323
Textile-Apparel and Production -- 0.4%
800,000 Esprit Asia 253,204
------------
8,074,995
------------
HUNGARY -- 3.0%
Building Construction -- 0.7%
13,750 Pannonplast 370,916
Building Materials -- 0.7%
9,082 Zalakeramia 372,027
Food and Beverage -- 0.5%
7,000 Pick Szeged RT 302,982
Lodging -- 0.6%
20,000 Danubius Hotel 339,694
Pharmaceuticals -- 0.5%
5,650 Richter Gedeon Veg 285,779
------------
1,671,398
------------
INDIA -- 1.2%
Automobile -- 0.2%
2,000 Bajaj Auto 76,500
Homebuilders -- 0.2%
5,500 Larsen & Toubro Ltd. 103,125
Drugs and Healthcare -- 0.1%
10,000 Core Health Care Parenterals 28,750
Electrical Equipment -- 0.2%
20,000 Himachal Futuristi 95,000
Electric Utilities -- 0.1%
10,000 CESC 30,500
Lodging -- 0.3%
5,000 Indian Hotel 142,500
Industrial Machinery -- 0.0%
23,000 NEPC Micon 23,000
Metals -- 0.1%
12,000 Indian Aluminum 84,000
Tobacco -- 0.1%
8,000 Indian Tobacco Co. Ltd. 84,000
------------
667,375
------------
INDONESIA -- 2.1%
Banks -- 1.1%
30,000 Bank Internasional Indonesia 148,228
480,000 Bk Bira 433,083
Household Products -- 0.1%
6,000 Unilever Indonesia 88,679
Photography -- 0.1%
20,000 Modern Photo Film 85,929
Retail Trade -- 0.2%
53,000 Matahari Putra Pri 96,777
Tobacco -- 0.6%
30,000 HM Sampoerna 341,568
------------
1,194,264
------------
KOREA -- 3.5%
Automobile -- 0.4%
17,000 Hyundai Motor Co. 216,750
Electrical Equipment -- 0.3%
8,138 Samsung Electronics Ltd. 199,399
Investment Company -- 2.8%
378 Korea Europe Fund 1,559,250
------------
1,975,399
------------
See notes to financial statements.
- --------------------------------------------------------------------------------
75
<PAGE>
- -------------------
Baillie Gifford
Emerging Markets
- -------------------
7
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- ------------------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
Shares Value
- ----------------------------------------------------
MALAYSIA -- 6.9%
Banks -- 0.4%
100,000 Southern Bank Berhad $ 244,538
Conglomerates -- 0.7%
250,000 Renong Berhad 398,877
Construction -- 0.8%
52,000 IJM Corp. Berhad 90,054
45,000 United Engineers Berhad 312,085
Insurance -- 1.0%
110,000 Malaysian Assurance 582,081
Financial Services -- 1.1%
100,000 Affin Holdings Berhad 234,516
300,000 DCB Holdings Berhad 394,468
Food, Beverage and Tobacco-- 1.1%
40,000 KFC Holdings (Mal) 216,476
130,000 R.J. Reynolds Berhad 383,043
Leisure Time -- 0.9%
90,000 Resorts World Berhad 515,935
Metals -- 0.3%
50,000 Maruichi Malay Steel 186,410
Port Services -- 0.2%
52,000 Kelang Container Terminal 134,456
Telephone -- 0.4%
24,000 Telekom Malaysia 213,590
------------
3,906,529
------------
MEXICO -- 4.9%
Conglomerates -- 0.7%
83,665 Alfa SA 377,788
Financial Services -- 1.3%
163,652 Grupo Fin Banamex AC 339,002
55,400 Grupo Fin Imbursa 229,342
15,600 Grupo Carso SA De CV+ 221,041
Beverage -- 1.5%
60,000 Grupo Continental 223,072
13,700 Pan American Beverages 613,075
Retail Trade -- 0.8%
255,400 Cifra SA De CV 369,715
50,000 Soriana 76,203
Telephone -- 0.6%
9,800 Telefonos De Mexico SA 328,300
------------
2,777,538
------------
PANAMA -- 0.3%
Banks -- 0.3%
3,000 Banco Latino Americano
De Exp ADR 168,750
------------
PAKISTAN -- 0.8%
Electric Utilities -- 0.8%
19,000 Hub Power Co. 465,500
------------
PERU -- 2.1%
Building Materials -- 0.5%
18,588 Cementos Lima 260,978
Food and Beverage -- 0.5%
216,011 Backus & Johnston 273,219
Mining -- 0.4%
16,500 Southern Peru Copper Corp. 257,813
Telephone -- 0.7%
200,000 Telefonica Del Peru 406,058
------------
1,198,068
------------
PHILIPPINES -- 4.6%
Drugs and Healthcare -- 2.2%
4,250,000 Metro Pacific Corp. 1,265,267
Homebuilders -- 0.9%
600,000 C & P Homes, Inc. 520,992
Food and Beverages -- 0.1%
350,000 RFM Corp. 70,802
Other -- 1.0%
65,000 Benpres Holdings Corp. 520,000
Port Services -- 0.4%
350,000 Int'l Container Terminal Svcs. 237,118
------------
2,614,179
------------
POLAND -- 2.8%
Banks -- 0.6%
12,700 BRE (Bk Rozw Exp.) 331,861
Chemicals -- 0.9%
100,000 Polifarb Wroclaw 504,214
Electric Utilities -- 0.8%
56,000 Elektrim 459,608
Food and Beverage -- 0.5%
4,000 Zywiec 309,153
------------
1,604,836
------------
See notes to financial statements.
+ Section 144A restricted securities
- --------------------------------------------------------------------------------
76
<PAGE>
-------------------
Baillie Gifford
Emerging Markets
-------------------
7
-------------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------
PORTUGAL -- 0.7%
Construction Material -- 0.7%
17,900 Cimpor $ 372,183
------------
SINGAPORE -- 3.1%
Air Travel -- 0.5%
27,000 Singapore Airlines 285,117
Automobiles -- 0.3%
17,000 Cycle & Carriage 181,928
Banks -- 0.4%
19,800 Oversea Chinese Bank 217,072
Construction Equipment -- 0.2%
48,000 Clipsal Industries 134,880
Publishing -- 0.6%
18,000 Singapore Press HD 353,366
Real Estate -- 0.8%
66,000 DBS Land 226,393
95,000 Wing Tai Holdings 201,984
Retailer -- 0.3%
105,000 Courts (Singapore) 168,551
------------
1,769,291
------------
SOUTH AFRICA -- 3.7%
Food and Beverages -- 0.5%
9,308 South Africa Brews 272,817
Insurance -- 0.8%
5,008 Liberty Holdings 425,905
Mining -- 1.1%
10,000 De Beers Centenary 339,257
80,000 Gencor 295,407
Oil and Petrochemicals-- 0.8%
44,683 Sasol 484,676
Tobacco -- 0.5%
31,000 Rembrandt Group 291,184
------------
2,109,246
------------
TAIWAN -- 6.5%
Banks -- 0.7%
112,000 ICBC 392,733
Containers -- 0.7%
252,000 Ton Yi Industrial Corp. 401,991
Electronics -- 0.7%
181,000 Tatung 401,199
Financial-Other -- 0.6%
99,000 China Development 327,362
Insurance -- 0.9%
74,000 Cathay Life 521,657
Merchandising-Department Store -- 0.8%
331,500 Far East Dept. Store 425,216
Plastics -- 0.7%
187,000 Nan Ya Plastic 411,101
Shipbuilding -- 0.7%
256,000 Yang Ming Marine 377,675
Steel -- 0.7%
393,000 China Steel 411,279
------------
3,670,213
------------
THAILAND -- 2.7%
Banks -- 0.8%
18,000 Bangkok Bank 243,923
20,000 Thai Farmers Bank 219,027
Business Services -- 0.3%
18,000 Matichon Public Co., Ltd. 138,980
Construction Materials -- 0.4%
4,000 Siam Cement Co. 196,336
Financial Services -- 0.7%
90,000 Industrial Fin. Thailand 404,176
Food and Beverages -- 0.1%
15,000 CP Feedmill Co. 79,772
Real Estate -- 0.2%
8,000 Land and House 100,847
Shipping -- 0.2%
28,000 Precious Shipping 115,816
------------
1,498,877
------------
TOTAL COMMON STOCKS
(Cost $42,057,899) 47,186,257
------------
- ------------------------
PREFERRED STOCKS -- 7.3%
- ------------------------
74,527,737 Banco Bradesco SA 608,571
900 Bardella Ind. SA 100,827
700,000 Brahma (CIA Cervejas) 417,546
18,355,000 Cemig CIA Energ. MG 488,029
872,750 Cent. Elet. Sta. Cata 816,954
97,000 Confab 35,740
980,000 Conteminas CIA Tec 386,945
See notes to financial statements.
- --------------------------------------------------------------------------------
77
<PAGE>
- -------------------
Baillie Gifford
Emerging Markets
- -------------------
7
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- ------------------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1996 (Unaudited)
Shares Value
- ----------------------------------------------------
5,200,000 Petrol Brasileiros $ 639,514
6,700,000 Sider Tubarao 106,752
500,000 Telepar Tel. Parana 242,482
11,400,000 Unibanco 308,670
------------
TOTAL PREFERRED STOCKS
(Cost $3,491,670) 4,152,030
------------
- -------------------------
CONVERTIBLE BONDS -- 0.4%
- -------------------------
Principal
Amount Value
- ----------------------------------------------------
$200,000 RFM Capital Convertible Bds.
2.75% due 5/30/06 $194,500
------------
TOTAL CONVERTIBLE BONDS
(Cost $199,610) 194,500
------------
- ----------------------------
REPURCHASE AGREEMENT -- 8.2%
- ----------------------------
Principal Maturity
Amount Date Value
- ----------------------------------------------------
$4,625,000 State Street Bank &
Trust repurchase
agreement, dated
6/28/96, maturity
value $4,626,831
at 4.75% due 7/1/96
(collateralized
by $4,840,000 U.S.
Treasury Bills,
5.42% due 12/19/96) 7/1/96 $4,625,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $4,625,000) 4,625,000
------------
TOTAL INVESTMENTS -- 99.3%
(Cost $50,374,179) 56,157,787
CASH, RECEIVABLES AND OTHER
ASSETS LESS PAYABLES -- 0.7% 422,880
------------
NET ASSETS -- 100.0% $56,580,667
============
See notes to financial statements.
- --------------------------------------------------------------------------------
78
<PAGE>
-------------------
Baillie Gifford
Emerging Markets
-------------------
7
-------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (Unaudited)
ASSETS:
Investments, at identified cost* $ 50,374,179
============
Investments, at market $ 51,532,787
Repurchase agreements 4,625,000
------------
TOTAL INVESTMENTS 56,157,787
Cash 4,182
Foreign currency (Cost $174,401) 176,466
Receivable for securities sold 268,221
Dividends receivable 219,361
Receivable for fund shares sold 28,106
Interest receivable 2,200
Deferred organization expenses-- Note 6 1,671
Foreign tax receivable 189
Other assets 160
------------
TOTAL ASSETS 56,858,343
------------
LIABILITIES:
Payable for securities purchased 6,583
Payable for fund shares redeemed 2,106
Accrued expenses 54,020
Payable for open forward
foreign currency contract 12,312
Foreign tax withholding 13,851
Due to affiliates-- Note 2 188,804
------------
TOTAL LIABILITIES 277,676
------------
NET ASSETS $ 56,580,667
============
COMPONENTS OF NET ASSETS
Capital stock -- $0.10 par value
(1,000,000,000 shares authorized) $ 568,130
Paid-in capital 52,177,970
Overdistributed net investment income (135,893)
Accumulated net realized loss on
investments and foreign currency
related transactions (1,800,325)
Net unrealized appreciation of investments
and translation of assets and liabilities
in foreign currency 5,770,785
------------
NET ASSETS $ 56,580,667
============
Shares outstanding -- $0.10 par value 5,681,301
------------
NET ASSET VALUE PER SHARE $ 9.96
============
* Includes repurchase agreements.
STATEMENT OF OPERATIONS
For The Six Months Ended
June 30, 1996 (Unaudited)
INVESTMENT INCOME
Income:
Dividends $ 601,944
Interest 79,514
-----------
681,458
Less: Foreign tax withheld 41,457
-----------
Total Income 640,001
-----------
Expenses:
Investment advisory fees -- Note 2 234,633
Custodian fees 140,902
Audit fees 10,500
Printing expense 5,928
Directors' fees -- Note 2 4,600
Registration fees 2,656
Legal fees 2,126
Transfer agent fees 1,650
Other 352
Deferred organization expense -- Note 6 253
Insurance expense 158
-----------
Total Expenses 403,758
-----------
Net Investment Income 236,243
-----------
Realized and Unrealized Gain/(Loss) On
Investments and Currencies -- Note 4
Net realized gain on investments -- Note 1 824,732
Net realized loss on foreign currency related
transactions -- Note 1 (355,377)
Net change in unrealized appreciation of
investments -- Note 4 6,492,142
Net change in unrealized appreciation from
translation of assets and liabilities in foreign
currencies-- Note 4 12,804
-----------
Net Realized and Unrealized Gain on
Investments and Foreign Currencies 6,974,301
-----------
Net Increase in Net Assets
Resulting from Operations $ 7,210,544
============
See notes to financial statements.
- --------------------------------------------------------------------------------
79
<PAGE>
- -------------------
Baillie Gifford
Emerging Markets
- -------------------
7
- -------------------
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund
- ------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Six Months
Ended Year Ended
June 30, December 31,
1996 1995
(Unaudited) (Audited)
----------- -----------
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 236,243 $ 263,088
Net realized gain/(loss) on investments
and foreign currency related transactions 469,355 (2,092,868)
Net change in unrealized appreciation on
investments and translation of assets and
liabilities in foreign currencies 6,504,946 2,264,145
------------ ------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations 7,210,544 434,365
------------ ------------
Distributions to Shareholders:
Dividends from net investment income -- (263,088)
Dividends in excess of net investment
income -- (398,138)
Net realized gains from investments -- --
------------ ------------
Total Distribution to Shareholders -- (661,226)
------------ ------------
From Transaction in Shares:
Increase/(decrease) in net assets from
capital share transactions-- Note F 15,151,656 10,376,428
------------ ------------
Net Increase/(Decrease) in Net Assets 22,362,200 10,149,567
Net Assets:
Beginning of period 34,218,467 24,068,900
------------ ------------
End of period $ 56,580,667 $ 34,218,467
============ ============
* Includes overdistributed net investment
income of: $ (135,893) $ (372,137)
See notes to financial statements.
- --------------------------------------------------------------------------------
80
<PAGE>
-------------------
Baillie Gifford
Emerging Markets
-------------------
7
-------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for a share of capital stock outstanding throughout the periods indicated:
October 17,
Six Months Ended Year Ended 1994** to
June 30, December 31, December 31,
1996 1995 1994
(Unaudited) (Audited) (Audited)
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period ........................ $8.46 $ 8.68 $ 9.87
------- ------- ------
Income from Investment Operations
Net investment income/(loss) .............................. 0.07 0.07 (0.01)
Net realized and unrealized gain/(loss) on investments and
translation of assets and liabilities in foreign currency .. 1.43 (0.12) (1.17)
------- ------- ------
Net decrease from investment operations ................... 1.50 (0.05) (1.18)
------- ------- ------
Distributions to Shareholders
Dividends from net investment income ...................... -- (0.07) (0.01)
Dividends in excess of net investment income .............. -- (0.10) --
------- ------- ------
Total distributions ....................................... -- (0.17) (0.01)
------- ------- ------
Net asset value, end of period .............................. $9.96 $8.46 $8.68
======= ======= ======
Total return+ ............................................... 17.73% (0.60)% (11.97)%
======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000's omitted) ............... $56,581 $34,218 $24,069
Ratio of expenses to average net assets ................. 1.72%*** 1.67% 2.28%*
Ratio of net investment income to average net assets .... 1.01%*** 0.89% 0.94%*
Portfolio turnover ratio ................................ 24% 51% --
- ------------
+ Total returns do not reflect the effects of charges deducted under the terms of GIAC's variable
contracts. Including such charges would reduce the total returns for all the periods shown. The total
return shown may not accord with the net income in net assets resulting from operations in the statement
of operations due to the timing in reinvestment price dividends in 1995.
* Ratios are annualized.
** Commencement of public offering of the Fund's shares.
*** Annualized.
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
81
<PAGE>
- ---------------
GBG Funds
- ---------------
7
- ---------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- ----------------------------------------------
Note A -- Organization and Accounting Policies
- ----------------------------------------------
GBG Funds, Inc. (the Company) is a diversified open-end management
investment company registered under the Investment Company Act of 1940, as
amended (1940 Act). The Company, which was incorporated in Maryland on October
29, 1990, was formerly known as Baillie Gifford International Fund, Inc. Shares
of the Company are offered in two series: Baillie Gifford International Fund
(BGIF) and Baillie Gifford Emerging Markets Fund (BGEMF). The series are
collectively referred to herein as the "Funds." Shares of the Funds are only
sold to certain separate accounts of The Guardian Insurance and Annuity Company,
Inc. (GIAC). GIAC is a wholly owned subsidiary of The Guardian Life Insurance
Company of America. The Funds are available for investment only through the
allocation of contract values under certain variable annuity and variable life
insurance contracts issued by GIAC. Upon commencing its operations on September
13, 1994, BGEMF sold 2,000,000 shares of its capital stock to The Guardian Life
Insurance Company of America for $20,000,000 to facilitate the commencement of
operations.
Valuation of Investments
Investments are carried at value. Securities listed on foreign exchanges
and for which market quotations are readily available are valued at the closing
price on the exchange on which the securities are traded at the close of the
appropriate exchange or, if there have been no sales during the day, at the mean
of the closing bid and asked prices. Securities traded in the over-the-counter
market are valued at the mean between the bid and asked prices. Securities
listed or traded on any domestic (U.S.) exchanges are valued at the last sale
price or, if there have been no sales during the day, at the mean of the closing
bid and asked prices. Securities for which market quotations are not readily
available, including restricted securities and illiquid assets, are valued at
fair value as determined in good faith by or under the direction of the
Company's Board of Directors. Investing outside of the U.S. may involve certain
considerations and risks not typically associated with domestic investments
including: the possibility of political and economic unrest and different levels
of governmental supervision and regulation of foreign securities markets.
Repurchase agreements are carried at cost which approximates market value
(See note E).
Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars as
follows:
(1) The foreign currency market value of investment securities and other
assets and liabilities stated in foreign currencies are translated into U.S.
dollars at the current rate of exchange.
(2) Purchases, sales, income and expenses are translated at the rate of
exchange prevailing on the respective dates of such transactions.
The resulting gains and losses are included in the Statement of Operations.
Realized foreign exchange gains and losses, which result from changes in
foreign exchange rates between the date on which the Funds earn dividends and
interest or pay foreign withholding taxes or other expenses and the date on
which U.S. dollar equivalent amounts are actually received or paid, are included
in net realized gain on foreign currency related transactions. Realized foreign
exchange gains and losses which result from changes in foreign exchange rates
between the trade and settlement dates on security and currency transactions are
also included in net realized
- --------------------------------------------------------------------------------
82
<PAGE>
---------------
GBG Funds
---------------
7
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
loss on foreign currency related transactions. Net currency gains and losses
from valuing investments and other assets and liabilities denominated in foreign
currency at the period end exchange rate are reflected in net change in
unrealized appreciation or depreciation on foreign currency related
transactions. Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts in connection
with planned purchases or sales of securities, or to hedge against changes in
currency exchange rates affecting the values of securities denominated in a
particular currency. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Fluctuations in the value of forward foreign currency exchange contracts
are recorded for book purposes as unrealized gains or losses on foreign currency
related transactions by the Funds. When forward contracts are closed, the Funds
record realized gains or losses equal to the differences between the values of
such forward contracts at the time each was opened and the value at the time
each was closed. Such amounts are recorded in net realized gain or loss on
foreign currency related transactions. Neither Fund will enter into a forward
foreign currency contract if such contract would obligate the Fund to deliver an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency.
Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Net realized gains
or losses on sales of investments are determined on the basis of identified
cost. Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
Taxes
Each Fund intends to continue to qualify to be taxed as a "regulated
investment company" under the provisions of the U.S. Internal Revenue Code of
1986, as amended (Code), and as such will not be subject to federal income tax
on income (including any realized capital gains) which is distributed in
accordance with the provisions of the Code to its shareholders. Therefore, no
federal income tax provision is required. Losses on security transactions
arising after October 31 are treated as arising on the first day of the Funds'
next fiscal year.
Investment income received from investments in foreign currencies may be
subject to foreign withholding tax. Whenever possible, the Fund will attempt to
operate so as to qualify for reduced tax rates or tax exemptions in those
countries with which the United States has a tax treaty.
Dividends and Distributions to Shareholders
The Funds intend to distribute each year, as dividends, substantially all
net investment income and net capital gains realized. All such dividends or
distributions are credited in the form of additional shares of the Funds at net
asset value on the ex-dividend date. Such distributions are determined in
conformity with federal income tax regulations. Differences between the
recognition of income on an income tax basis and recognition of income based on
generally accepted accounting principles may cause temporary overdistributions
of net realized gains and net investment income. Currently, the Funds' policy is
to distribute net investment income approximately every six months and net
capital gains once a year. This policy is, however, subject to change at any
time by the Company's Board of Directors.
- --------------------------------------------------------------------------------
83
<PAGE>
- ---------------
GBG Funds
- ---------------
7
- ---------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
Reclassifications of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gain; and the recharacterization of foreign exchange gains
or losses to either ordinary income or realized capital gains for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations, or net asset value per
share of the Fund.
- -------------------------------------------
Note B -- Investment Management Agreements
and Payments to Related Parties
- -------------------------------------------
The Company has investment management agreements with Guardian Baillie
Gifford Ltd. (GBG), a Scottish corporation formed through a joint venture
between GIAC and Baillie Gifford Overseas Ltd. (BG Overseas). GBG is responsible
for the overall investment management of the Funds' portfolios subject to the
supervision of the Company's Board of Directors. GBG has entered into
sub-investment management agreements with BG Overseas pursuant to which BG
Overseas is responsible for the day-to-day management of the Funds' portfolios.
GBG continually monitors and evaluates the performance of BG Overseas.
As compensation for its services, GBG receives a management fee computed at
the rate of .80% of BGIF's daily average net assets and 1.00% of BGEMF's daily
average net assets. One-half of these fees (.40% relating to BGIF and .50%
relating to BGEMF) are payable by GBG to BG Overseas for its services. Payment
of the sub-management fees does not represent a separate or additional expense
to the Funds.
No compensation is paid by the Company to a director who is deemed to be an
"interested person" (as defined in the 1940 Act) of the Company. Each director
not deemed an "interested person" is paid an annual fee of $500 and $350 for
attendance at each meeting of the Company. The aggregate remunerations paid by
BGIF and BGEMF to the Company's disinterested directors amounted to $4,600, for
the six months ended June 30, 1996.
- -------------------------------------------
Note C -- Deferred Organization and Initial
Offering Expenses
- -------------------------------------------
BGIF incurred expenses of $39,110 in connection with its organization and
registration. These expenses were advanced by GIAC and were repaid by BGIF upon
completion of its first year of operations. BGEMF's expenses of $2,536 in
connection with its organization and registration were advanced by GIAC and were
repaid upon completion of its first year of operations. These expenses have been
deferred and are being amortized on a straight-line basis over a five year
period, beginning with the commencement of BGIF's operations in February, 1991
and BGEMF's operations in September, 1994.
- --------------------------------------------------------------------------------
84
<PAGE>
---------------
GBG Funds
---------------
7
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- ---------------------------------
Note D -- Investment Transactions
- ---------------------------------
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
For the Six Months Ended June 30, 1996 (unaudited)
--------------------------------------------------
BGIF BGEMF
---- -----
Purchases
Stocks and debt obligations .... $95,467,646 $ 23,315,928
Proceeds
Stocks and debt obligations .... $59,010,545 $ 10,295,172
The cost of investments owned at June 30, 1996 for federal income tax
purposes for BGIF and BGEMF are $321,491,840 and $50,374,179, respectively. The
gross unrealized appreciation and (depreciation) at June 30, 1996 were as
follows:
BGIF BGEMF
---- -----
Gross Appreciation ................ $ 63,496,452 $ 8,318,770
Gross Depreciation ................ (6,057,933) (2,535,162)
------------ ------------
Net Unrealized Appreciation $ 57,438,519 $ 5,783,608
============ ============
Forward foreign currency contracts represent commitments to purchase or
sell a specified amount of foreign currency at a future date and at a future
price. Risks may arise from the potential inability of a counterparty to meet
the terms of a contract and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
- --------------------------------------------------------------------------------
85
<PAGE>
- ---------------
GBG Funds
- ---------------
7
- ---------------
- --------------------------------------------------------------------------------
GBG Funds Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
At June 30, 1996, BGIF and BGEMF had open forward foreign currency
contracts, as listed below, with net unrealized gain of $886 and $(12,312),
respectively, which are included in net change in unrealized appreciation or
depreciation on foreign currency related transactions.*
<TABLE>
<CAPTION>
Baillie Gifford International Fund:
Type of Expiration Current Unrealized
Currency Contract Date Cost Value Appreciation
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
690,000,000 Italian Lira Purchase 07/03/96 $450,001 $450,612 $ 611
2,460,000 Swedish Krona Purchase 07/01/96 371,321 371,596 275
--------
$ 886
========
<CAPTION>
Baillie Gifford Emerging Markets Fund:
Type of Expiration Current Unrealized
Currency Contract Date Cost Value Depreciation
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1,870,734 Hungarian Forint Sell 07/02/96 $12,460 $ 151 $(12,309)
126,775 Taiwan Dollar Sell 07/02/96 4,607 4,605 (3)
--------
$(12,312)
========
</TABLE>
- -------------------------------
Note E -- Repurchase Agreements
- -------------------------------
Collateral underlying repurchase agreements takes the form of either cash
or fully negotiable U.S. government securities. Repurchase agreements are fully
collateralized (including the interest earned thereon) and such collateral is
marked-to-market daily while the agreements remain in force. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
interest, the Funds will require the seller to deposit additional collateral by
the next business day. If the request for additional collateral is not met, or
the seller defaults, the Funds maintain the right to sell the collateral and may
claim any resulting loss against the seller. The Company's Board of Directors
has established standards to evaluate the creditworthiness of broker-dealers and
banks which engage in repurchase agreements with the Funds. Repurchase
agreements of more than seven days' duration (or investments in any other
securities which are deemed to be not readily marketable by the staff of the
Securities and Exchange Commission) are not permitted if more than 10% of the
applicable Fund's net assets would be so invested.
- --------------------------------------------------------------------------------
86
<PAGE>
---------------
GBG Funds
---------------
7
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
- ---------------------------------------
Note F -- Transactions in Capital Stock
- ---------------------------------------
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Baillie Gifford International Fund:
Six Months Ended June 30, Year Ended December 31,
---------------------------- ----------------------------
1996 (Unaudited) 1995 (Audited)
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ............................... 3,631,822 $ 58,288,522 4,880,975 $ 72,367,583
Shares issued in reinvestments of dividends
from net investment income and
net realized gain on sales of investments 188,565 3,149,037 1,223,131 18,726,133
------------ ------------ ------------ ------------
3,820,387 61,437,559 6,104,106 91,093,716
Less shares repurchased ................... (1,570,209) (25,137,502) (6,081,659) (90,629,264)
------------ ------------ ------------ ------------
NET INCREASE .............................. 2,250,178 $ 36,300,057 22,447 $ 464,452
============ ============ ============ ============
Baillie Gifford Emerging Markets Fund:
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
---------------------------- ----------------------------
1996 (Unaudited) 1995 (Audited)
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ............................... 2,577,453 $ 24,191,935 1,755,017 $ 14,439,213
Shares issued in reinvestments of dividends
from net investment income and
net realized gain on sales of investments -- -- 78,437 661,226
------------ ------------ ------------ ------------
2,577,453 24,191,935 1,833,454 15,100,439
Less shares repurchased ................... (938,752) (9,040,279) (564,171) (4,724,011)
------------ ------------ ------------ ------------
NET INCREASE .............................. 1,638,701 15,151,656 1,269,283 $ 10,376,428
============ ============ ============ ============
</TABLE>
- ------------------------
Note G -- Line of Credit
- ------------------------
A $20,000,000 line of credit available to each Fund and the other Guardian
related Funds has been established with Morgan Guaranty Trust Company. The rate
of interest charged on any borrowings is based upon the prevailing Federal Funds
rate at the time of the loan plus .25% calculated on a 360-day basis per annum.
For the six months ended June 30, 1996, neither of the Funds borrowed against
this line of credit.
- --------------------------------------------------------------------------------
87
<PAGE>
- ----------------------
Value Line Centurion
Fund, Inc.
- ----------------------
8
- ----------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
-------------------------------
COMMON STOCKS -- 96.9%
-------------------------------
Shares Value
- --------------------------------------------------------------------------------
Advertising -- 1.8%
230,000 Omnicom Group, Inc. $10,695,000
-----------
Air Transport -- 3.0%
100,000 AMR Corp.* 9,100,000
310,000 Southwest Airlines Co. 9,028,750
-----------
18,128,750
-----------
Beverage-Soft Drink -- 3.8%
200,000 Coca-Cola Co. 9,775,000
376,000 PepsiCo Inc. 13,301,000
-----------
23,076,000
-----------
Building Materials -- 1.6%
150,000 Fluor Corp. 9,806,250
-----------
Chemical-Diversified -- 4.2%
140,000 Goodrich (B.F.) Co. 5,232,500
360,000 IMC Global Inc. 13,545,000
150,000 Millipore Corp. 6,281,250
-----------
25,058,750
-----------
Chemical-Specialty -- 1.3%
178,750 Praxair, Inc. 7,552,188
-----------
Computer & Peripherals -- 13.6%
200,000 Cabletron Systems, Inc.* 13,725,000
300,000 Cisco Systems, Inc.* 16,987,500
200,000 Dell Computer Corp.* 10,175,000
200,000 Digital Equipment Corp.* 9,000,000
100,000 Hewlett-Packard Co. 9,962,500
155,000 Sun Microsystems, Inc.* 9,125,625
275,000 3Com Corp.* 12,581,250
-----------
81,556,875
-----------
Computer Software & Services -- 8.8%
150,000 BMC Software, Inc.* 8,962,500
165,000 Computer Associates
International, Inc. 11,756,250
100,000 Microsoft Corp.* 12,012,500
300,000 Oracle Systems Corp.* 11,831,250
190,000 Parametric Technology Corp.* 8,241,250
-----------
52,803,750
-----------
Diversified Companies -- 1.3%
189,000 Thermo Electron Corp.* 7,867,125
-----------
Drug -- 8.3%
300,000 ALZA Corp.* 8,212,500
120,000 Amgen Inc.* 6,480,000
150,000 Genzyme Corp.* 7,537,500
225,000 Merck & Co., Inc. 14,540,625
178,000 Pfizer, Inc. 12,704,750
-----------
49,475,375
-----------
Financial Services -- 3.7%
250,000 Green Tree Financial Corp. 7,812,500
356,800 Money Store, Inc. (The) 7,894,200
142,500 Travelers Group Inc. 6,501,562
-----------
22,208,262
-----------
Hotel/Gaming -- 1.8%
200,000 Mirage Resorts, Inc.* 10,800,000
-----------
Insurance-Diversified -- 1.9%
113,500 American International
Group, Inc. 11,193,937
-----------
Machinery-Construction & Mining -- 1.9%
285,000 Deere & Co. 11,400,000
-----------
Manufactured Housing/Recreational
Vehicles -- 1.7%
500,000 Oakwood Homes Corp. 10,312,500
-----------
Medical Services -- 3.2%
310,000 Omnicare, Inc. 8,215,000
220,000 United Healthcare Corp. 11,110,000
-----------
19,325,000
Medical Supplies -- 5.2%
150,000 Boston Scientific Corp.* 6,750,000
200,000 Cardinal Health, Inc. 14,425,000
200,000 Johnson & Johnson 9,900,000
-----------
31,075,000
Office Equipment & Supplies -- 1.5%
472,500 Staples, Inc.* 9,213,750
-----------
Oilfield Services/Equipment -- 3.6%
200,000 Baker Hughes Inc. 6,575,000
300,000 Sonat Offshore Drilling, Inc. 15,150,000
-----------
21,725,000
Petroleum-Producing -- 1.1%
110,000 Louisiana Land & Exploration
Co. 6,338,750
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
88
<PAGE>
----------------------
Value Line Centurion
Fund, Inc.
----------------------
8
----------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Restaurant -- 2.8%
360,000 McDonald's Corp. $16,830,000
-----------
Retail Building Supply -- 2.3%
250,000 Home Depot, Inc. (The) 13,500,000
-----------
Retail-Special Lines -- 1.9%
178,700 AutoZone, Inc.* 6,209,825
160,000 CompUSA, Inc.* 5,460,000
-----------
11,669,825
-----------
Retail Store -- 1.1%
300,000 Price/Costco, Inc.* 6,487,500
-----------
Semiconductor -- 1.0%
85,000 Intel Corp. 6,242,188
-----------
Shoe -- 3.9%
225,000 NIKE, Inc. Class "B" 23,118,750
-----------
Telecommunications Equipment -- 4.4%
125,000 ADC Telecommunications, Inc.* 5,625,000
200,000 Newbridge Networks Corp.* 13,100,000
115,000 Tellabs, Inc..* 7,690,625
-----------
26,415,625
-----------
Telecommunication Services-- 1.4%
150,000 WorldCom, Inc.* 8,306,250
-----------
Tobacco -- 2.3%
130,000 Philip Morris Companies, Inc. 13,520,000
-----------
Toiletries/Cosmetics -- 1.0%
100,000 Gillette Co. 6,237,500
-----------
Toys & School Supplies -- 1.5%
320,000 Mattel, Inc. 9,160,000
-----------
TOTAL COMMON STOCKS AND
TOTAL INVESTMENT
SECURITIES -- 96.9%
(Cost $477,459,474) 581,099,900
-----------
-------------------------------
SHORT-TERM INVESTMENTS -- 3.8%
-------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 2.6%
$15,482,000 Federal Home Loan Mortgage
Discount Notes 5.270%,
due 7/15/96 $ 15,450,271
------------
REPURCHASE AGREEMENT -- 1.2%
(including accrued interest)
7,600,000 Collateralized by $5,995,000 U.S.
Treasury Notes 11 1/8%, due 8/15/03,
with a value of $7,739,273 (with
Morgan Stanley & Co., Inc. 5.30%,
dated 6/28/96, due 7/1/96, delivery
value $7,603,357) 7,603,357
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $23,053,628) 23,053,628
============
EXCESS OF LIABILITIES OVER
CASH AND OTHER ASSETS -- (-0.7%) (4,170,019)
============
NET ASSETS -- 100.0% $599,983,509
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($599,983,509 / 22,105,468
shares outstanding) $ 27.14
============
* Non-income producing
See notes to financial statements.
- --------------------------------------------------------------------------------
89
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Fund, Inc.
- ----------------------
8
- ----------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (unaudited)
ASSETS:
Investment securities, at value
(cost $477,459,474) $581,099,900
Short-term investments (cost $23,053,628) 23,053,628
Cash 66,149
Receivable for capital shares sold 540,532
Dividends receivable 487,250
------------
TOTAL ASSETS 605,247,459
------------
LIABILITIES:
Payable for securities purchased 4,867,582
Payable for capital shares repurchased 1,819
Accrued expenses:
Advisory fee 245,506
GIAC administrative service fee 110,000
Other 39,043
------------
TOTAL LIABILITIES 5,263,950
------------
NET ASSETS $599,983,509
============
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value
(authorized 50,000,000 shares, outstanding
22,105,468 shares) $ 22,105,468
Additional paid-in capital 332,532,441
Undistributed investment income -- net 3,652,891
Undistributed net realized gain on investments 138,052,283
Unrealized net appreciation of investments 103,640,426
------------
NET ASSETS $599,983,509
============
NET ASSET VALUE PER
OUTSTANDING SHARE
($599,983,509 / 22,105,468
shares outstanding) $ 27.14
============
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1996 (unaudited)
Investment Income:
Dividends (Net of foreign withholding tax
of $3,406) $ 2,032,037
Interest 733,981
------------
Total Income 2,766,018
------------
Expenses
Investment advisory fee 1,396,323
GIAC administrative service fee 217,060
Custodian fees 31,902
Auditing and legal fees 26,771
Insurance and dues 17,704
Registration fees 8,069
Directors' fees and expenses 6,020
Other 2,579
------------
Total Expenses Before Expense Offset 1,706,428
Less:Expense Offset (2,047)
------------
Net Expenses 1,704,381
------------
Investment Income -- Net 1,061,637
------------
Realized and Unrealized Gain (Loss) on
Investments -- Net:
Realized gain -- net 70,976,562
Change in unrealized appreciation (9,589,996)
------------
Net Realized Gain and Change in Unrealized
Appreciation on Investments 61,386,566
------------
Net Increase in Net Assets from Operations $ 62,448,203
============
See notes to financial statements.
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Fund, Inc.
----------------------
8
----------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 (unaudited)
and for the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Six Months
Ended Year
June 30, Ended
1996 December 31,
(Unaudited) 1995
------------- -------------
<S> <C> <C>
Operations:
Investment income-- net $ 1,061,637 $ 2,660,286
Realized gain on investments-- net 70,976,562 67,311,482
Change in unrealized appreciation (9,589,996) 73,727,354
------------- -------------
Net increase in net assets from operations 62,448,203 143,699,122
------------- -------------
Distributions to Shareholder:
Investment income-- net -- (2,021,495)
Realized gain from investment transactions-- net -- (11,320,362)
------------- -------------
Total distributions -- (13,341,857)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares 68,507,614 112,731,860
Proceeds from reinvestment of distributions to shareholder -- 13,341,857
Cost of shares repurchased (56,421,283) (83,726,969)
------------- -------------
Increase from capital share transactions 12,086,331 42,346,748
------------- -------------
Total Increase in Net Assets 74,534,534 172,704,013
Net Assets:
Beginning of period 525,448,975 352,744,962
------------- -------------
End of period $ 599,983,509 $ 525,448,975
============= =============
Undistributed Investment Income-- Net At End Of Period $ 3,652,891 $ 2,591,254
============= =============
</TABLE>
See notes to financial statements.
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Fund, Inc.
- ----------------------
8
- ----------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
------------------------------------
1 -- Significant Accounting Policies
------------------------------------
Value Line Centurion Fund, Inc. (the "Fund") is an open-end diversified
management investment company whose primary investment objective is long-term
growth of capital. The Fund's portfolio will usually consist of common stocks
ranked 1 or 2 for year-ahead performance by The Value Line Investment Survey,
one of the nation's major investment advisory services.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
(A) Security Valuation.
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities and for securities traded in the
over-the- counter market, the security is valued at the midpoint between the
latest available and representative asked and bid prices. Short-term instruments
with maturities of 60 days or less at the date of purchase are valued at
amortized cost, which approximates market value. Short-term instruments with
maturities greater than 60 days, at the date of purchase, are valued at the
midpoint between the latest available and representative asked and bid prices,
and commencing 60 days prior to maturity such securities are valued at amortized
cost. Other assets and securities for which market valuations are not readily
available are valued at fair value as the Board of Directors may determine in
good faith.
(B) Repurchase Agreements.
In connection with transactions in repurchase agreements, the Fund's
custodian takes possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
(C) Federal Income Taxes.
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholder. Therefore, no federal income tax is
required.
(D) Dividends and Distributions.
It is the Fund's policy to distribute to its shareholder, as dividends and
as capital gains distributions, all the net investment income for the year and
all net capital gains realized by the Fund, if any. Such distri-
- --------------------------------------------------------------------------------
92
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Fund, Inc.
----------------------
8
----------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
butions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. All dividends or
distributions will be payable in shares of the Fund at the net asset value on
the ex-dividend date. This policy is, however, subject to change at any time by
the Board of Directors.
(E) Amortization.
Discounts on debt securities are amortized to interest income over the life
of the security with a corresponding increase to the security's cost basis;
premiums on debt securities are not amortized.
(F) Investments.
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income on investments, adjusted for amortization of discount,
including original issue discount required for federal income tax purposes, is
earned from settlement date and recognized on the accrual basis. Dividend income
is recorded on the ex-dividend date.
------------------------------------------------------------
2 -- Capital Share Transactions, Dividends and Distributions
------------------------------------------------------------
Shares of the Fund are available to the public only through the purchase of
certain contracts issued by The Guardian Insurance and Annuity Company, Inc.
(GIAC). Transactions in capital stock were as follows:
Six Months Ended
June 30, 1996 Year Ended
(unaudited) Dec. 31,1995
---------- ----------
Shares sold 2,644,999 5,179,470
Shares issued in reinvestment
of dividends and distributions -- 604,799
---------- ----------
2,644,999 5,784,269
Shares repurchased 2,211,638 3,901,173
---------- ----------
Net increase 433,361 1,883,096
========== ==========
Dividends per share $ -- $ .10
========== ==========
Distributions per share from
net realized gains $ -- $ .56
========== ==========
On June 27, 1996, the Board of Directors declared an income dividend of
$2,591,254, a short-term capital gain of $24,678,779 and a long-term capital
gain of $42,396,942 (approximately $0.12, $1.14, and $1.95 per share
respectively) to shareholders of record 7/29/96 payable 7/30/96.
--------------------------------------
3 -- Purchases and Sales of Securities
--------------------------------------
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
Six Months Ended
June 30, 1996
(unaudited)
---------------
PURCHASES:
Investment Securities $371,817,657
============
SALES:
Investment Securities $364,821,150
============
- --------------------------------------------------------------------------------
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Fund, Inc.
- ----------------------
8
- ----------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
At June 30, 1996, the aggregate cost of investment securities and short-term
investments for federal income tax purposes is $500,513,102. The aggregate
appreciation and depreciation of investments for the six months ended June 30,
1996, based on a comparison of investment values and their costs for federal
income tax purposes is $114,981,603 and $11,341,177 respectively, resulting in a
net appreciation of $103,640,426.
-----------------------------------------------------------------------------
4 -- Investment Advisory Contract, Management Fees and Transactions with
Interested Parties
-----------------------------------------------------------------------------
An advisory fee of $1,396,323 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the six months ended June 30, 1996.
This was computed at the rate of 1/2 of 1% of the average daily net assets of
the Fund during the period and paid monthly. The Adviser provides research,
investment programs, supervision of the investment portfolio and pays costs of
administrative services, office space, equipment and compensation of
administrative, bookkeeping, and clerical personnel necessary for managing the
affairs of the Fund. The Adviser also provides persons, satisfactory to the
Fund's Board of Directors, to act as officers and employees of the Fund and pays
their salaries and wages. The Fund bears all other costs and expenses. In
addition, the Adviser has agreed to reimburse the Fund for expenses (exclusive
of interest, taxes and brokerage expenses) which in any year exceeds 2.5% of the
first $30 million of the average daily net assets, 2% of the next $70 million
and 1.5% of the remaining average daily net assets. No such reimbursement was
required for the six months ended June 30, 1996.
Certain officers and directors of the Adviser and Value Line Securities,
Inc., (the Fund's distributor and a registered broker/dealer) and of GIAC are
also officers and directors of the Fund. A former officer of GIAC who is also a
director of the Fund was paid a fee of $1,183 for the six months ended June 30,
1996. During the six months ended June 30, 1996, the Fund paid brokerage
commissions totalling $433,439 to Value Line Securities, Inc., a wholly owned
subsidiary of the Adviser, which clears its transactions through unaffiliated
brokers.
The Fund has an agreement with GIAC to reimburse GIAC for expenses incurred
in performing administrative and internal accounting functions in connection
with the establishment of contract-owner accounts and their ongoing maintenance,
printing and distribution of shareholder reports and providing ongoing
shareholder servicing functions. Such reimbursement is limited to an amount no
greater than $18.00 times the average number of accounts at the end of each
quarter during the year. During the six months ended June 30, 1996, the Fund
incurred expenses of $217,060 in connection with such services rendered by GIAC.
- --------------------------------------------------------------------------------
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----------------------
8
----------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1996 -------------------------------------------------------
(unaudited) 1995 1994 1993 1992 1991
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.25 $ 17.83 $ 18.52 $ 20.04 $ 20.83 $ 15.04
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income .05 .12 .10 .12 .20 .20
Net gains or losses on securities (both realized
and unrealized) 2.84 6.96 (.51) 1.73 1.03 7.65
-------- -------- -------- -------- -------- --------
Total from investment operations 2.89 7.08 (.41) 1.85 1.23 7.85
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- (.10) (.01) (.12) (.19) (.20)
Distributions from capital gains -- (.56) (.27) (3.25) (1.83) (1.86)
-------- -------- -------- -------- -------- --------
Total distributions -- (.66) (.28) (3.37) (2.02) (2.06)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 27.14 $ 24.25 $ 17.83 $ 18.52 $ 20.04 $ 20.83
======== ======== ======== ======== ======== ========
Total return 11.92%+ 40.08% -2.21% 9.21% 5.93% 52.18%
======== ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $599,984 $525,449 $352,745 $373,910 $347,116 $306,589
Ratio of operating expenses to average
net assets .61%* .62% .61% .61% .54% .53%
Ratio of net investment income to average
net assets .38%* .60% .57% .57% .99% 1.19%
Portfolio turnover rate 68%+ 114% 122% 118% 83% 81%
+ Not annualized.
* Annualized.
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
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Asset Management Trust
- ----------------------
9
- ----------------------
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- ---------------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
----------------------
COMMON STOCKS -- 50.4%
----------------------
Shares Value
- --------------------------------------------------------------------------------
Advertising -- 0.7%
158,000 Omnicom Group, Inc. $ 7,347,000
-----------
Aerospace/Defense -- 1.0%
214,000 McDonnell Douglas Corp. 10,379,000
-----------
Apparel -- 0.4%
110,000 Liz Claiborne, Inc. 3,808,750
-----------
Bank -- 0.5%
50,000 Mellon Bank Corp. 2,850,000
78,000 SouthTrust Corp. 2,193,750
-----------
5,043,750
-----------
Bank-Midwest -- 0.5%
90,000 First Bank System, Inc. 5,220,000
-----------
Beverage-Soft Drink -- 1.0%
112,000 Coca-Cola Enterprises Inc. 3,878,000
180,000 PepsiCo, Inc. 6,367,500
-----------
10,245,500
-----------
Broadcasting/Cable TV -- 0.4%
38,000 Infinity Broadcasting Corp.* 1,140,000
100,000 Jacor Communications, Inc.* 3,087,500
-----------
4,227,500
-----------
Building Materials -- 0.3%
40,600 Fluor Corp. 2,654,225
-----------
Chemical-Specialty -- 1.7%
230,000 Praxair, Inc. 9,717,500
53,000 Raychem Corp. 3,809,375
60,000 Sigma-Aldrich Corp. 3,210,000
-----------
16,736,875
-----------
Computer & Peripherals -- 1.2%
20,000 Adaptec, Inc.* 947,500
74,500 Cabletron Systems, Inc.* 5,112,563
42,500 In Focus Systems, Inc.* 1,030,625
56,000 Mylex Corp.* 994,000
60,000 Sun Microsystems, Inc.* 3,532,500
-----------
11,617,188
-----------
Computer Software & Services-- 1.8%
34,000 BMC Software, Inc.* 2,031,500
54,000 Ceridian Corp.* 2,727,000
116,000 Computer Associates
International, Inc. 8,265,000
47,000 National Data Corp. 1,609,750
140,000 Structural Dynamics Research
Corp*. 3,080,000
-----------
17,713,250
-----------
Diversified Companies -- 0.6%
26,000 Danaher Corp. 1,131,000
50,925 Mark IV Industries, Inc. 1,152,178
28,000 United Technologies Corp. 3,220,000
-----------
5,503,178
-----------
Drug -- 2.4%
46,000 Dura Pharmaceuticals, Inc.* 2,576,000
126,000 Interneuron Pharmaceuticals,
Inc.* 3,780,000
80,000 Merck & Co., Inc. 5,170,000
217,000 Mylan Laboratories Inc. 3,743,250
100,000 Pfizer, Inc. 7,137,500
103,000 Vical, Inc.* 1,648,000
-----------
24,054,750
-----------
Drugstore -- 0.3%
146,000 Eckerd Corp.* 3,303,250
-----------
Electric Utility-East -- 0.2%
51,700 American Electric Power Co.,
Inc. 2,203,712
-----------
Electrical Equipment -- 0.3%
39,500 General Electric Co. 3,416,750
-----------
Electronics -- 0.9%
203,000 Symbol Technologies, Inc.* 9,033,500
-----------
Environmental -- 0.4%
75,000 Sanifill, Inc.* 3,693,750
-----------
Financial Services -- 2.5%
114,000 ADVANTA Corp. Class "A" 5,814,000
53,000 ADVANTA Corp. Class "B" 2,398,250
120,500 CUC International, Inc.* 4,277,750
78,000 Green Tree Financial Corp. 2,437,500
60,000 Loews Corp. 4,732,500
130,000 Olympic Financial Ltd.* 2,990,000
45,000 Paychex, Inc. 2,165,625
-----------
24,815,625
-----------
See notes to financial statements.
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Asset Management Trust
----------------------
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----------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Food Processing -- 0.2%
50,000 ConAgra, Inc. $ 2,268,750
-----------
Grocery -- 2.1%
210,000 Kroger Co.* 8,295,000
382,400 Safeway, Inc.* 12,619,200
-----------
20,914,200
-----------
Healthcare Information Systems -- 0.8%
88,000 HBO & Co. 5,962,000
20,000 Medic Computer Systems, Inc.* 1,622,500
-----------
7,584,500
-----------
Home Appliance -- 1.0%
251,000 Black & Decker Corp. 9,694,875
-----------
Hotel/Gaming -- 2.3%
165,000 HFS Inc.* 11,550,000
20,000 Hilton Hotels Corp. 2,250,000
45,000 MGM Grand, Inc.* 1,794,375
25,000 Marriott International Inc. 1,343,750
120,000 Mirage Resorts, Inc.* 6,480,000
-----------
23,418,125
-----------
Industrial Services -- 2.0%
466,000 Equifax, Inc. 12,232,500
210,000 Manpower, Inc. 8,242,500
-----------
20,475,000
-----------
Insurance-Life -- 0.7%
168,000 Conseco, Inc. 6,720,000
-----------
Insurance-Property/Casualty -- 0.1%
32,000 PartnerRe Holdings Ltd. 956,000
-----------
Machinery -- 0.8%
104,000 Dover Corp. 4,797,000
75,000 Parker-Hannifin Corp. 3,178,125
-----------
7,975,125
-----------
Machinery-Construction & Mining -- 0.3%
61,000 Foster Wheeler Corp. 2,737,375
-----------
Manufactured Housing/
Recreational Vehicles -- 1.2%
531,915 Clayton Homes, Inc. 10,638,300
70,000 Oakwood Homes Corp. 1,443,750
-----------
12,082,050
-----------
Medical Services -- 1.1%
170,000 Omnicare, Inc. 4,505,000
114,000 OrNda Health Corp.* 2,736,000
40,000 Oxford Health Plans, Inc.* 1,645,000
75,000 Universal Health Services, Inc.*1,959,375
-----------
10,845,375
-----------
Medical Supplies -- 4.5%
74,000 Becton, Dickinson & Co. 5,938,500
122,000 Boston Scientific Corp.* 5,490,000
136,250 Cardinal Health, Inc. 9,827,031
40,000 Gulf South Medical Supply Inc.* 1,560,000
270,154 Johnson & Johnson 13,372,623
55,000 Medtronic Inc. 3,080,000
30,000 Nellcor Puritan-Bennett, Inc.* 1,455,000
146,000 United States Surgical Corp. 4,526,000
-----------
45,249,154
-----------
Natural Gas-Diversified -- 1.2%
105,000 PanEnergy Corp. 3,451,875
168,000 Williams Companies, Inc. 8,316,000
-----------
11,767,875
-----------
Office Equipment & Supplies -- 1.7%
62,000 Danka Business Systems PLC(ADR) 1,813,500
662,625 Staples, Inc.* 12,921,188
80,000 Viking Office Products, Inc.* 2,510,000
-----------
17,244,688
-----------
Oilfield Services/Equipment-- 1.6%
140,000 Baker Hughes Inc. 4,602,500
104,000 Halliburton Co. 5,772,000
135,000 Tidewater, Inc. 5,923,125
-----------
16,297,625
-----------
Petroleum-Integrated -- 2.0%
50,000 Amoco Corp. 3,618,750
30,000 Atlantic Richfield Co. 3,555,000
40,000 British Petroleum Co. PLC (ADR) 4,275,000
23,000 Mobil Corp. 2,578,875
115,000 Occidental Petroleum Corp. 2,846,250
180,000 USX-Marathon Group 3,622,500
-----------
20,496,375
-----------
Petroleum-Producing -- 0.7%
73,000 Chesapeake Energy Corp.* 6,560,875
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
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Asset Management Trust
- ----------------------
9
- ----------------------
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- ---------------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Value
- --------------------------------------------------------------------------------
Recreation -- 0.3%
51,389 Disney (Walt) Co. $ 3,231,083
-----------
Retail-Special Lines -- 1.7%
220,000 Bed, Bath & Beyond, Inc.* 5,885,000
194,000 Gap, Inc. 6,232,250
90,000 Ross Stores Inc. 3,127,500
40,000 TJX Companies, Inc. 1,350,000
20,000 Waban, Inc.* 477,500
-----------
17,072,250
-----------
Retail Store -- 1.5%
119,000 Consolidated Stores Corp.* 4,373,250
188,671 Dollar General Corp. 5,518,627
220,000 Price/Costco, Inc.* 4,757,500
-----------
14,649,377
-----------
Shoe -- 1.3%
112,000 NIKE, Inc. Class "B" 11,508,000
53,000 Wolverine World Wide, Inc. 1,722,500
-----------
13,230,500
-----------
Telecommunications Equipment -- 0.9%
175,000 Andrew Corp.* 9,406,250
-----------
Telecommunication Services -- 2.4%
60,000 Cascade Communications Corp.* 4,080,000
80,000 Century Telephone Enterprises,
Inc. 2,550,000
30,000 GTE Corp. 1,342,500
308,000 Loral Space & Communications
Ltd.* 4,196,500
100,000 Sprint Corp. 4,200,000
144,000 WorldCom, Inc.* 7,974,000
-----------
24,343,000
-----------
Tobacco -- 0.5%
52,000 Philip Morris Companies, Inc. 5,408,000
-----------
Trucking/Transportation Leasing -- 0.4%
81,000 XTRA Corp. 3,584,250
-----------
TOTAL COMMON STOCKS
(Cost $340,005,827) 505,230,230
===========
----------------------------------
U.S. TREASURY OBLIGATIONS -- 29.6%
----------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$62,000,000 U.S. Treasury Notes 6 1/8%,
due March 31, 1998 $62,058,032
60,000,000 U.S. Treasury Notes 6 1/4%,
due June 30, 1998 60,168,600
70,000,000 U.S. Treasury Notes 6 3/4%,
due May 31, 1999 70,831,250
16,000,000 U.S. Treasury Notes 7 3/4%,
due February 15, 2001 16,810,000
38,000,000 U.S. Treasury Notes 5 7/8%,
due November 15, 2005 35,803,068
50,000,000 U.S. Treasury Bonds 7 1/4%,
due August 15, 2022 51,250,000
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $297,151,701) 296,920,950
===========
TOTAL INVESTMENT SECURITIES -- 80.0%
(Cost $637,157,528) 802,151,180
===========
See notes to financial statements.
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Asset Management Trust
----------------------
9
----------------------
- --------------------------------------------------------------------------------
-------------------------------
SHORT-TERM INVESTMENTS -- 26.4%
-------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 23.4%
$10,000,000 Federal Farm Credit Bank Notes
5.26%, due 7/1/96 $ 10,000,000
50,000,000 Federal Home Loan Mortgage Corp.
Discount Notes 5.27%, due 7/8/96 49,948,764
20,000,000 Federal National Mortgage
Association Discount Notes 5.25%,
due 7/12/96 19,967,916
50,000,000 Federal Home Loan Mortgage Corp.
Discount Notes 5.27%,
due 7/15/96 49,897,528
50,000,000 Federal National Mortgage
Association Discount Notes
5.27%, due 7/15/96 49,897,528
20,000,000 Federal Home Loan Mortgage Corp.
Discount Notes 5.20%, due 7/15/96 19,959,556
5,000,000 Federal National Mortgage
Association Discount Notes
5.28%, due 7/31/96 4,978,000
10,000,000 Federal Farm Credit Bank Notes
5.10%, due 8/1/96 9,997,880
10,000,000 Federal Farm Credit Bank Notes
5.32%, due 9/3/96 10,000,000
10,000,000 Federal Farm Credit Bank Notes
5.41%, due 10/1/96 10,000,000
-----------
234,647,172
-----------
REPURCHASE AGREEMENTS -- 3.0%
(includes accrued interest)
$29,900,000 Collateralized by $29,900,000 U.S.
Treasury Notes 6%, due 8/31/97,
with a value of $30,494,344
(With First Chicago Capital
Markets, Inc. 5.35%, dated
6/28/96, due 7/1/96, delivery
value of $29,913,330.)
$ 29,913,330
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $264,562,622) 264,560,502
--------------
EXCESS OF LIABILITIES OVER CASH
AND RECEIVABLES -- (-6.4)% (64,354,050)
--------------
NET ASSETS -- 100.0% $1,002,357,632
==============
NET ASSET VALUE PER
OUTSTANDING SHARE $ 22.38
==============
($1,002,357,632 / 44,793,672
shares outstanding)
* Non-income producing.
See notes to financial statements.
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Asset Management Trust
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9
- ----------------------
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Value Line Strategic Asset Management Trust
- ---------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1996 (unaudited)
ASSETS
Investment in securities, at value
(cost $637,157,528) $ 802,151,180
Short-term investments (cost $264,562,622) 264,560,502
Cash 67,245
Receivable for securities sold 4,768,068
Interest and dividends receivable 4,076,612
Receivable for capital shares sold 717,453
--------------
TOTAL ASSETS 1,076,341,060
--------------
LIABILITIES
Payable for securities purchased 73,007,000
Payable for capital shares repurchased 360,929
Accrued expenses:
Advisory fee 409,022
GIAC administrative service fee 170,000
Other 36,477
--------------
TOTAL LIABILITIES 73,983,428
--------------
NET ASSETS $1,002,357,632
--------------
NET ASSETS CONSIST OF:
Capital stock, at $0.01 par value
(authorized unlimited, outstanding
44,793,672 shares) $ 447,937
Additional paid-in capital 682,948,283
Undistributed net investment income 27,183,714
Undistributed net realized gain on investments 126,786,166
Unrealized net appreciation of investments 164,991,532
--------------
NET ASSETS $1,002,357,632
==============
NET ASSET VALUE PER
OUTSTANDING SHARE
($1,002,357,632 / 44,793,672
shares outstanding) $ 22.38
==============
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1996 (unaudited)
Investment Income:
Interest $ 10,489,964
Dividends (Net of foreign withholding
tax of $19,586) 2,989,885
------------
Total Income 13,479,849
------------
Expenses:
Investment advisory fee 2,354,222
GIAC administrative service fee 328,143
Custodian fees 52,060
Audit and legal fees 28,959
Insurance and dues 25,205
Registration and filing fee 13,332
Trustees' fees and expenses 6,020
Other 416
------------
Total Expenses Before Expense Offset 2,808,357
Less: Expense Offset (4,975)
------------
Net Expenses 2,803,382
------------
Investment Income -- Net 10,676,467
------------
Realized and Unrealized Gain on
Investments -- Net:
Realized gain -- net 78,132,184
Change in unrealized appreciation on
investments 3,666,283
Net Realized Gain and Change in
Unrealized Appreciation on Investments 81,798,467
------------
Net Increase in Net Assets from Operations $ 92,474,934
============
See notes to financial statements.
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Asset Management Trust
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STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1996 (unaudited)
and For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1996 December 31,
(Unaudited) 1995
--------------- -------------
<S> <C> <C>
Operations:
Investment income-- net $ 10,676,467 $ 16,828,354
Realized gain on investments 78,132,184 51,170,099
Change in unrealized appreciation 3,666,283 122,289,519
--------------- -------------
Net increase in net assets from operations 92,474,934 190,287,972
--------------- -------------
Distributions to Shareholder:
Investment income-- net -- (10,739,197)
Realized gain from investment transactions-- net -- (6,608,734)
--------------- -------------
Total distributions -- (17,347,931)
--------------- -------------
Trust Share Transactions:
Proceeds from sale of shares 60,080,227 79,054,790
Proceeds from reinvestment of distributions to shareholder -- 17,347,931
Cost of shares repurchased (26,706,336) (55,555,221)
--------------- -------------
Increase from Trust share transactions 33,373,891 40,847,500
--------------- -------------
Total Increase in Net Assets 125,848,825 213,787,541
Net Assets:
Beginning of period 876,508,807 662,721,266
--------------- -------------
End of period $ 1,002,357,632 $ 876,508,807
=============== =============
Undistributed Investment Income-- Net at End of Period $ 27,183,714 $ 16,507,247
=============== =============
</TABLE>
See notes to financial statements.
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Asset Management Trust
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- ---------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of stock outstanding throughout each period
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1996 ------------------------------------------------------------------
(unaudited) 1995 1994 1993 1992 1991
---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.27 $ 16.13 $ 17.01 $ 15.94 $ 14.54 $ 11.06
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from investment
operations:
Net investment income .24 .39 .26 .27 .26 .30
Net gains or losses on securities
(both realized and unrealized) 1.87 4.17 (1.09) 1.62 1.93 4.50
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.11 4.56 (.83) 1.89 2.19 4.80
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income -- (.26) (.01) (.28) (.26) (.31)
Distributions from capital gains -- (.16) (.04) (.54) (.53) (1.01)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions -- (.42) (.05) (.82) (.79) (1.32)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 22.38 $ 20.27 $ 16.13 $ 17.01 $ 15.94 $ 14.54
========== ========== ========== ========== ========== ==========
Total return 10.41%+ 28.54% - 4.88 11.86% 15.05% 43.34%
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Net assets, end of period(in thousands) $1,002,358 $ 876,509 $ 662,721 $ 615,648 $ 362,045 $ 188,781
Ratio of operating expenses to average
net assets .60%* .60% .60% .61% .55% .58%
Ratio of net investment income to average
net assets 2.26%* 2.18% 1.65% 1.96% 2.18% 3.00%
Portfolio turnover rate 47%+ 63% 100% 110% 106% 134%
</TABLE>
+ Not annualized.
* Annualized.
See notes to financial statements.
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Asset Management Trust
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NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
------------------------------------
1 -- Significant Accounting Policies
------------------------------------
Value Line Strategic Asset Management Trust (the "Trust") is an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended, which seeks to achieve a high total investment
return consistent with reasonable risk by investing primarily in a broad range
of common stocks, bonds and money market instruments. Its investment objective
is to achieve a high total investment return consistent with reasonable risk.
The Trust will attempt to achieve its objective by following an asset allocation
strategy based on data derived from computer models for the stock and bond
markets that shifts the assets of the Trust among equity, debt and money market
securities as the models indicate and its investment adviser, Value Line, Inc.
(the "Adviser"), deems appropriate.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Trust in the preparation of its financial statements.
(A) Security Valuation.
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities traded in the over-the-counter market,
the security is valued at the midpoint between the latest available and
representative bid and asked prices.
The Board of Trustees has determined that the value of bonds and other
fixed-income securities be calculated on the valuation date by reference to
valuations obtained from an independent pricing service which determines
valuations for normal institutional-size trading units of debt securities,
without exclusive reliance upon quoted prices. This service takes into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data in determining valuations. Short-term
instruments with maturities of 60 days or less are valued at amortized cost
which approximates market value. Short-term instruments with maturities greater
than 60 days at the date of purchase are valued at the midpoint between the
latest available and representative asked and bid prices, and commencing 60 days
prior to maturity such securities are valued at amortized cost. Other assets and
securities for which market valuations are not readily available are valued at
fair value as the Board of Trustees may determine in good faith.
(B) Repurchase Agreements.
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. In the event of default of the
obligation to repurchase, the
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Asset Management Trust
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Value Line Strategic Asset Management Trust
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 (unaudited)
Trust has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
(C) Federal Income Taxes.
It is the Trust's policy to qualify under, and comply with, the requirements
of the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholder. Therefore, no federal
income tax provision is required.
(D) Dividends and Distributions.
It is the Trust's policy to distribute to its shareholder, as dividends and
as capital gains distributions, all the net investment income for the year and
all the net capital gains realized by the Trust, if any. Such distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. All dividends or distributions will be
payable in shares of the Trust at the net asset value on the ex-dividend date.
This policy is, however, subject to change at any time by the Board of Trustees.
(E) Amortization.
Discounts on debt securities are amortized to interest income over the life
of the security with a corresponding increase to the security's cost basis;
premiums on debt securities are not amortized.
(F) Investments.
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Interest income on investments, adjusted for amortization of discount,
including original issue discount required for federal income tax purposes, is
earned from settlement date and recognized on the accrual basis. Dividend income
is recorded on the ex-dividend date.
----------------------------------------------------------
2 -- Trust Share Transactions, Dividends and Distributions
----------------------------------------------------------
Shares of the Trust are available to the public only through the purchase of
certain contracts issued by The Guardian Insurance & Annuity Company, Inc.
(GIAC). Transactions in shares of beneficial interest in the Trust were as
follows:
Six Months Ended
June 30, 1996 Year Ended
(unaudited) Dec. 31, 1995
---------- ---------
Shares sold 2,798,261 4,235,882
Shares issued to shareholder
in reinvestment of dividends
and distributions -- 943,335
---------- ---------
2,798,261 5,179,217
Shares repurchased 1,239,820 3,023,224
---------- ---------
Net increase 1,558,441 2,155,993
========== =========
Dividends per share $ -- $ .26
========== =========
Distributions per share from
net realized gains $ -- $ .16
========== =========
On June 27, 1996, the Board of Trustees declared an income dividend of
$16,507,247, a short-term capital gain of $9,340,367 and a long-term capital
gain of $39,325,086 (approximately $0.37, $0.21, and $0.88 per share,
respectively) to the shareholders of record on July 29, 1996, payable 7/30/96.
--------------------------------------
3 -- Purchases and Sales of Securities
--------------------------------------
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
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Asset Management Trust
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Six Months Ended
June 30, 1996
(unaudited)
------------
PURCHASES:
U.S. Treasury Obligations $238,453,437
Investment Securities 222,241,905
------------
$460,695,342
============
SALES & MATURITIES:
U.S. Treasury Obligations $ 18,795,313
Other Investment Securities 333,971,056
------------
$352,766,369
============
At June 30, 1996, the aggregate cost of investment securities and short-term
investments for federal income tax purposes is $901,720,150. The aggregate
appreciation and depreciation of investments at June 30, 1996, based on a
comparison of investment values and their costs for federal income tax purposes
is $171,110,390 and $6,118,858, respectively, resulting in a net appreciation of
$164,991,532.
-----------------------------------------------------------------------------
4 -- Investment Advisory Contract, Management Fees and Transactions with
Affiliates
-----------------------------------------------------------------------------
An advisory fee of $2,354,222 was paid or payable to the Adviser, for the
period ended June 30, 1996. This was computed at the rate of 1/2 of 1% of the
average daily net assets of the Trust during the period and paid monthly. The
Adviser provides research, investment programs, supervision of the investment
portfolio and pays costs of administrative services, office space, equipment and
compensation of administrative, bookkeeping and clerical personnel necessary for
managing the affairs of the Trust. The Adviser also provides persons,
satisfactory to the Trust's Board of Trustees, to act as officers and employees
of the Trust and pays their salaries and wages. The Trust bears all other costs
and expenses.
The Adviser has agreed to reimburse the Trust for expenses (exclusive of
interest, taxes, brokerage and extraordinary expenses) which in any year exceed
2.5% of the first $30 million of the average daily net assets, 2% of the next
$70 million and 1.5% on any excess over $100 million. No such reimbursement was
required for the six months ended June 30, 1996.
Certain officers and directors of the Adviser and Value Line Securities,
Inc. (the Trust's distributor and a registered broker/dealer), and of GIAC are
also officers and Trustees of the Trust. A former officer of GIAC who is also a
trustee of the Trust was paid a fee of $1,183 by the Trust for the six months
ended June 30, 1996. During the six months ended June 30, 1996, the Trust paid
brokerage commissions totalling $278,954 to Value Line Securities, Inc., a
wholly owned subsidiary of the Adviser, which clears its transactions through
unaffiliated brokers.
The Trust has an agreement with GIAC to reimburse GIAC for expenses incurred
in performing administrative and internal accounting functions in connection
with the establishment of contract-owner accounts and their ongoing maintenance,
printing and distribution of shareholder reports and providing ongoing
shareholder servicing functions. Such reimbursement is limited to an amount no
greater than $18.00 times the average number of accounts at the end of each
quarter during the year. During the six months ended June 30, 1996, the Trust
incurred expenses of $328,143 in connection with such services rendered by GIAC.
- --------------------------------------------------------------------------------
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<PAGE>
[Logo] The Guardian (R) BULKRATE MAIL
U.S. POSTAGE PAID
The Guardian Insurance & Annuity Company, Inc. PERMIT NO. 45
201 Park Avenue South NEWARK, NJ
New York, NY 10003
EB-011033 6/96 [Logo] Printed on recycled paper
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000856943
<NAME> THE GUARDIAN SEPARATE ACCOUNT D - THE GUARDIAN INVESTOR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 2,356,087,096
<INVESTMENTS-AT-VALUE> 2,836,812,687
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,836,812,687
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,059,089
<TOTAL-LIABILITIES> 12,059,089
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 218,538
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 72,436,091
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 480,725,592
<NET-ASSETS> 2,824,753,598
<DIVIDEND-INCOME> 15,845,711
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 15,627,173
<NET-INVESTMENT-INCOME> 218,538
<REALIZED-GAINS-CURRENT> 72,436,091
<APPREC-INCREASE-CURRENT> 140,876,853
<NET-CHANGE-FROM-OPS> 213,531,482
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,627,173
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,627,173
<AVERAGE-NET-ASSETS> 2,628,315,545
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 213,312,944
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
