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JUNE 30, 1997 PARK AVENUE LIFE[LOGO}
Semiannual Report to Policyowners
- ------------------------------------------- Executive Offices
The Guardian Separate Account K 201 Park Avenue South
- ------------------------------------------- New York, New York 10003
- ------------------------------------------- Customer Service Office
The Guardian Stock Fund, Inc. 201 Park Avenue South
- ------------------------------------------- Specialty Life -- 215 B
The Guardian Bond Fund, Inc. New York, New York 10003
- ------------------------------------------- 1-800-935-4128
The Guardian Cash Fund, Inc.
- ------------------------------------------- Distributed by: [Logo]
Baillie Gifford International Fund Guardian Investor Services
- ------------------------------------------- Corporation(R)
Value Line Centurion Fund, Inc.
- ------------------------------------------- [Logo] The Guardian(R)
Value Line Strategic Asset Management Trust Issued by:
- ------------------------------------------- The Guardian Insurance &
Annuity Company, Inc.
A wholly owned subsidiary of
The Guardian Life Insurance
Company of America
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<PAGE>
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Performance Summary
- ----------------------------
[Sketch of Guardian Life Building]
- -----------------------------------------------------
Investment Options Total Return*
- ------------------ -------------
The Guardian Stock Fund .............. 18.97%
The Guardian Bond Fund ............... 3.50%
The Guardian Cash Fund ............... 4.99%
Baillie Gifford International Fund ... 14.61%
Value Line Centurion Fund ............ 9.91%
Value Line Strategic Asset Mgt. Trust 7.03%
- -----------------------------------------------------
Fixed-Rate Option
- ------------------------
The interest rates for money deposited or renewed (on a policy anniversary) into
the Fixed-Rate Option during the first six months of 1997 were: January through
April, 5.50%; May and June, 5.65%.
A current interest rate for the Fixed-Rate Option is declared periodically.
Amounts allocated or transferred to the Fixed-Rate Option are guaranteed to earn
interest at the rate in effect on the date of the applicable transaction until
the next policy anniversary.
- -----------------------------------------------------
* The chart above reflects the investment performance of the variable investment
options available in a Park Avenue Life policy, based on the percentage change
in the net asset value with dividends and capital gains reinvested during the
period January 1, 1997 through June 30, 1997. Returns are net of investment
advisory fees and operating expenses. They are not representative of the actual
returns you would receive in a policy. These returns do not reflect insurance
and administrative charges, applicable sales charges and the mortality and
expense risk charge applicable under a policy. Past performance is not a
guarantee of future results. Investment returns and principal value will vary
with market conditions.
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<PAGE>
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Dear Policyowner:
- ----------------------------
[Photo of Joseph D. Sargent, CLU President & CEO]
As President and CEO of The Guardian Insurance & Annuity Company, Inc. (GIAC)
and its parent, The Guardian Life Insurance Company of America, I am pleased to
provide your 1997 semiannual report for Park Avenue Life's separate account and
its underlying investment options. This report reflects investment returns
through June 30, 1997, and shows the consistently favorable track record of many
of the variable investment options offered through Park Avenue Life (PAL).
Much of this favorable investment performance can be attributed to our
quality money managers. These talented people rely on extensive resources and
years of investment experience -- many of them spent managing the funds
available through your PAL policy.
About This Report
In this semiannual report, you will find information that will help you
understand your investment choices and the factors that impact them.
Frank J. Jones, PhD, Chief Investment Officer of GIAC, offers an
insightful look at the state of the economy through his economic overview. Also,
the in-depth portfolio manager interviews identify the strategies used to manage
the PAL investment funds during the first half of 1997.
About Your Policy
Your Park Avenue Life variable life insurance policy is designed to help
you provide security and financial opportunity for your family or business. In
one product, you have guaranteed life insurance protection, plus the long-term
growth potential of PAL's investment options.
You also have the support of a company dedicated to servicing our valued
customers. Whether you have questions about your insurance coverage or a need to
change your policy's investment strategy, your Guardian agent and our service
staff are ready to help.
About Our Ratings
GIAC, the issuer of Park Avenue Life, continues to enjoy exemplary ratings
from four of the nation's leading insurance company evaluators: Moody's
Investors Services, Standard & Poor's, Duff & Phelps, and A.M. Best Company.
While these high ratings do not apply to PAL's variable investment options,
which are subject to the risks of securities investing, they do reflect our
ability to meet our insurance-related obligations and the guarantee of your
policy's Fixed-Rate Option. We are proud of our ratings and believe they will
reinforce your confidence in us.
Thank you for your continued business.
Regards,
/s/ Joseph D. Sargent, CLU
Joseph D. Sargent, CLU
President and Chief Executive Officer
<PAGE>
PARK AVENUE LIFE
Table of Contents
Portfolio Schedule
Manager of
Interview Investments
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Economic Report 4
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The Guardian Stock Fund 6 26
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Objective: Long-term growth of capital
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Portfolio: At least 80% common stocks and
securities convertible into common
stocks
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Inception: April 13, 1983
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Net Assets at June 30, 1997: $2,755,629,244
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"Our quantitative models look at the portfolio two different ways: "top-down"
and "bottom-up." The "top-down" approach involves a cluster of different
predictive models that we use to identify which overall portfolio style has the
most attractive performance prospects. The "bottom-up" approach uses our
multi-factor stock scoring system to identify specific attractive stocks within
our 2000-stock research universe."
-- Charles E. Albers, C.F.A.
Portfolio Manger
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The Guardian Bond Fund 10 36
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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, 1997: $342,478,207
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"The Fund's overall strategy continues to focus on "optimal" asset allocation
and security selection within the various bond sectors, and to avoid market
timing. This strategy should provide opportunities to outperform our benchmark
and peer groups with a relatively low risk profile."
-- Thomas G. Sorell, C.F.A.
Portfolio Manager
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The Guardian Cash Fund 18 44
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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, 1997: $399,335,104
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"Our investment strategy was to create a diversified portfolio of money market
instruments that presents minimal credit risks according to our criteria. As
always, we only purchased securities from issuers that had received ratings in
the two highest credit quality categories."
-- Alexander M. Grant, Jr.
Portfolio Manager
<PAGE>
Portfolio Schedule
Manager of
Interview Investments
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Baillie Gifford International Fund 12 54
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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, 1997: $550,744,229
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"During this period, many markets continued to be expensive, relative to
historic levels, on a number of different measures. However, we have recognized
that a high level of liquidity worldwide has been driving markets. Our strategy
has continued to be one of stock-driven allocation and this proved successful
again in the first half of this year."
-- R. Robin Menzies
Portfolio Manager
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Value Line Centurion Fund 14 68
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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, 1997: $672,281,829
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"We continue to believe that we are in the midst of a moderate-growth economy
with benign levels of inflation. As a result, the Value Line Ranking System
screens for stocks that are expected to produce revenue and earnings growth that
could be significantly above the 7-8% level expected for the S&P 500 over the
next five years."
-- Value Line, Inc.
Investment Adviser
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Value Line Strategic Asset Management Trust 16 76
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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, 1997: $1,151,969,591
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"To reduce risk, we maintain a very diversified portfolio and avoid large bets
on any particular sector or company. In addition, we invest in certain stocks
that are ranked neutral by our Ranking System, such utilities or energy
companies, in order to increase the portfolio's dividend yield and further
reduce risk."
-- Value Line, Inc.
Investment Adviser
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The Guardian Separate Account K 20
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<PAGE>
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Economic Report:
- ---------------------------------------
The Return of Goldilocks
The economy is now in its seventh year of uninterrupted growth -- the current
expansion began in March, 1991. Growth during this period, however, has not been
uniform -- it has oscillated between periods of rapid and slow growth (but
growth nevertheless). Occasionally during this period, economists have observed
that we have a "Goldilocks" economy in which growth is "not too hot, not too
cold."
Goldilocks seems to have returned. The unemployment rate during May was a
24-year low of 4.8%; jobs are being created at a robust pace (1.4 million jobs
created during the first half of 1997); labor costs have retreated somewhat from
a previously inflation-inducing level (the 12-month average hourly earnings rate
through March, 1997 increased at an annual rate of 4.1% and decreased to a more
moderate annual rate of 3.5% through June); inflation is near a 31-year low (the
Consumer Price Index (CPI) is up at an annual rate of 2.3% over the year through
June and the Producer Price Index (PPI) declined by 0.3% over this period); gold
prices are at an 11-year low; and consumer confidence is high.
How can we still have such moderate inflationary forces with the economy
so strong and labor markets so tight? Certainly, the significantly increased use
of technology, increased productivity, the discipline of global competition and
the strong dollar have served to moderate inflation. But even discounting these
forces, the Fed is uncertain or even confused about this issue. In this regard,
the following is an excerpt from the May 20, 1997 Federal Open Market Committee
(FOMC) meeting minutes:
With regard to the outlook for inflation, members observed that
increases in prices had remained subdued despite the rapid expansion
in economic activity in recent quarters and the associated increases
in pressures on already highly utilized resources. The appreciation
of the dollar undoubtedly had helped dampen domestic inflation this
year, and reported increases in consumer prices also had been held
down to a marginal extent by an ongoing series of technical
adjustments in the CPI.
These were only partial explanations, however, and the members found
it very difficult to account for the surprisingly benign behavior of
inflation in an economy that had been operating at a level
approximating full employment -- indeed, possibly above sustainable
full employment in labor markets in the view of a number of members,
especially taking into consideration the recent further decline in
the unemployment rate.
When the Fed tightened monetary policy on March 25 by increasing the
Federal Funds rate by 25 basis point or 0.25%, the first Fed action since
January 31, 1996 and the first Fed tightening since February 1, 1995, the
markets thought, based on history, that this would be the first in a series of
tightenings. On April 11, the 30-year Treasury yield increased to its 1997 high
of 7.17% and the DJIA (Dow Jones Industrial Average)(1) decreased to 6,392, 9.8%
below its previous high on March 11. However, the Fed refrained from tightening
at its next meeting on May 20 in a marginal decision (see the above quote) and
again at its July 2 meeting, in an easy decision. The May non-tightening by the
Fed made Alan Greenspan, the Federal Reserve Chairman, seem prescient, as did
the difficult and widely scrutinized August 1996 non-tightening.
Where do we go from here? Real Gross Domestic Product (GDP) increased by
5.9% in the first quarter of 1997, faster than could be sustained given the
initial full utilization of labor and capital. This expectation is what caused
the Fed to tighten during March. Second quarter real GDP increased by only 2.2%.
The Fed's expectation of this slow growth caused the Fed non-tightenings during
May and July.
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(1) 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 are deducted from the Funds in The Park
Avenue Portfolio.
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4
<PAGE>
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Either the first quarter 1997 economic growth rate of 5.9% or the second
quarter 1997 rate of 2.2% was a "head fake" (despite the warm first quarter
weather factor which added to first quarter growth at the expense of second
quarter growth). But which quarterly growth rate was the head fake? Probably
both! Real GDP growth during the third and fourth quarters will be well within
this range, probably within the fairly wide range of 21 1/42% to 31 1/42%. Given
the current high utilization rate of capital and labor and the maximum
sustainable economic growth rate of 21 1/42% to 23 1/44%, this level of economic
growth rate is expected to tax capital and labor resources, and cause an
increase in labor costs and inflation. Given these conditions, the Fed may have
to respond with one or two moderate tightenings at the September 30 FOMC meeting
or after, but not a more aggressive series of tightenings, as expected after the
March tightening.
While such growth during the second half of 1997 and potential Fed
moderate responses may cause short-term instability in the stock and bond
markets, these events may prolong the seven-year economic expansion -- due to
the lack of excesses of any type -- and keep Goldilocks in residence.
July was an interesting, pivotal and positive month for the markets. The
Fed refrained from tightening at its July 1 FOMC meeting, a "lay-up" decision.
More importantly, June employment growth was somewhat less than expected and the
increase in labor costs was also less than expected. Finally, a balanced budget
plan was agreed to by the President and Congress.
The following "headlines" summarize market activity so far this year:
o The DJIA,(1) S&P 500,(2) NASDAQ Composite(3) and Russell 2000(4)
indexes were all at record levels during late July (the S&P 500
returned 30.19% for the year through July 31);
o Cash inflows into stock mutual funds have remained high during 1997;
o The 10-year Treasury yield decreased to 6.35%, the lowest since
November 29, 1996;
o June, 1997 experienced the highest new issuance of junk bonds ever
(with only a slight widening of spreads);
o The U.S. dollar has grown very strong against the German mark, the
British pound and the Japanese yen; and
o The stock markets of the U.K., Germany, France, Italy, Hong Kong
(the latter, despite the transition from the U.K. to China), Mexico
and several other developed and developing countries, as well as the
U.S., reached record highs.
With respect to the U.S. stock market, the major negative is the current
rich market valuation levels. However, there are also many positives for the
stock market. Among these positives are the prolonged strong economy, the
correspondingly strong corporate profits, and the low inflation environments
(helped by the strong dollar). The strong corporate profits can be attributed to
strong productivity gains which were achieved, in part, by advances in
technology, corporate restructuring and, as a result, global competition.
Obviously, optimism is high -- Goldilocks has returned. But while some of
the markets seem to have "thrown caution to the wind," individual investors
should not. These observations lead to our bottom line, which is to maintain our
offensive approach, but be prepared for short term volatility. Do not bail out,
but tighten your seat belts.
Regards,
/s/ Frank J. Jones
Frank J. Jones, Ph.D.
Chief Investment Officer
The Guardian Insurance & Annuity Company, Inc.
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(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 are deducted from the
Funds in The Park Avenue Portfolio.
(3) The Nasdaq Composite Index is a broad-based capitalization-weighted index
of all Nasdaq National Market and small cap stocks.
(4) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The returns for the
Russell 2000 do not reflect expenses that are deducted from the Fund's
return.
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5
<PAGE>
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The Guardian Stock Fund
- ---------------------------------------
[Photo of Charles E. Albers, C.F.A. Portfolio Manager]
Q. The stock market's continued strength in 1997 has surprised many market
observers. How has the Fund performed during the first half of 1997?
A. The Guardian Stock Fund has performed very well in the first half of 1997,
both absolutely and also relative to our mutual fund peer group. The return
to our shareholders for that period was a robust 18.97%,(1) far above
historic average returns for the U.S. stock market. Also, that return
substantially exceeded the return of the average fund in our peer group,
Lipper U.S. Variable Insurance Product Underlying Growth Funds,(2) which was
a lesser 13.88% over the same period. This was accomplished in an
environment where the large-cap stock index, the S&P 500,(3) completely
dominated the results of most "active" money managers: its total return for
the six-months ended June 30, 1997 was 20.60%.
Of course, from a shareholder's viewpoint, what is most important is the
long-term investment record. Here, too, the Fund has done well, placing it in
the top 2% of Lipper U.S. Variable Insurance Product Underlying Growth Funds
over the last 5 years, ranking number 1 out of 50 for the five-year period and
number 1 out of 31 funds (top 4%) for the 10-year peiod ended June 30, 1997.(4)
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Comparative Average
Annual Total Returns
for the Periods
ended June 30, 1997
----------------------------------- Guardian Stock Guardian Stock
Guardian Lipper U.S. Underlying Fund Fund
Stock Fund Growth Funds Average Lipper Rank(4) Percent Rank
- --------------------------------------------------------------------------------
1 Year + 36.19% + 24.07% 7 (out of 117) Top 6%
5 Year + 23.43% + 17.07% 1 (out of 50) Top 2%
10 Year + 15.77% + 12.62% 1 (out of 31) Top 4%
Q. What factors affected Fund performance in the first half of 1997?
A. Six months ago, in the Annual Report to shareholders, we said:
"We continue to believe that well-established, large-cap companies have
the better prospects in 1997. This view is supported both by our quantitative
'style predictor' models and also by our fundamental investment judgment."
Our judgment at that time has been vindicated by subsequent developments.
The current multi-year cycle of domestic large-cap outperformance, which began
in 1995, has continued to roll on in the first half of 1997. This phenomenon is
shown in the following table:
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Total Returns(%)
-------------------------------------
Year Ended Year Ended Six months
Dec. 31, Dec. 31, ended
1995 1996 June 30, 1997
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Large-Cap Stocks
(S&P 500) + 37.4% + 22.8% + 20.6%
Small-Cap Stocks
(Russell 2000)(5) + 28.4% + 16.5% + 10.2%
------- ------- -------
Amount of Large-Cap
Outperformance + 9.0% + 6.3% + 10.4%
================================================================================
(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 that 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. 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.
(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.
(4) Lipper rankings were reported by Lipper Variable Insurance Products
Performance Analysis Service, in its underlying Fund report dated June 30,
1997.
(5) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The returns for the
Russell 2000 do not reflect expenses that are deducted from the Fund's
return.
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6
<PAGE>
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Throughout this period, from mid-1995 through mid-1997, we have positioned
the Fund with a portfolio cap-size which has been much larger than those of most
other actively managed funds, and this has given us a meaningful competitive
advantage during this period.
[The following table was represented as a bar graph in the printed material.]
================================================================================
The Guardian Stock Fund
Weighted Average Market Cap
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($ billion)
6/30/95 12/21/95 6/30/96 12/31/96 6/63/97
------- -------- ------- -------- -------
$14.0 $24.6 $34.7 $37.7 $46.1
Another factor that contributed to our relatively good investment
performance in the first half of 1997 was our multi-factor quantitative stock
scoring system. This system has generally provided us with solid guidance over
the years in stock selection, and this favorable record has continued into 1997.
Q. What strategies did you use to manage the Fund during the first half of 1997?
A. There was no change in our strategic approach to managing the portfolio
during this period. We believe that soundly-based quantitative models provide a
valuable tool. At the same time, fast-breaking news and unusual investment
issues require the balanced judgment of a capable portfolio manager. We believe
the surest path to consistently above-average returns requires the synergistic
results of combining good quantitative tools with good manager judgment.
Our quantitative models look at the portfolio two different ways:
"top-down" and "bottom-up." The "top-down" approach involves a cluster of
different predictive models that we use to identify which overall portfolio
style has the most attractive performance prospects. The "bottom-up" approach
uses our multi-factor stock scoring system to identify specific attractive
stocks within our 2000-stock research universe. We believe that both the
"top-down" and "bottom-up" perspectives are important, and the best results can
be achieved by combining them both within one portfolio.
Q. What are the portfolio's weights in different economic sectors, and how
have these weightings affected performance?
A. The attached pie chart shows the Fund's portfolio weightings for each of the
major economic sectors as of June 30, 1997. These weightings are not the primary
driver of our portfolio management process, but there is an interesting
perspective here. The Fund's greatest sector overweight is the Financial sector
(26.3% weight vs. 15.3% in the S&P 500), and this sector was a superior
performer in the first half of 1997. The Fund's greatest sector underweight was
Utilities (3.2% weight vs. 8.5% in the S&P 500), and this sector was a
significant underperformer in the first half. The two largest S&P 500 sectors
are Consumer Staples and Technology, and the Fund weighting is close to the
benchmark for both.
Q. Many investors have shifted to passive "indexing" in recent years. What
does the future hold for "active" portfolio management?
A. As shown in the table above, within the U.S. stock market, large cap stocks
have been substantially outperforming small caps for roughly the last 3 years.
Most active money managers in the U.S. have tended to be substantially
"underweighted" in the S&P 500 (large-cap) stocks, particularly the mega-cap
stocks (the largest 50), causing their performance to lag the S&P 500 over this
span.
In response to those trends, "indexing" has been experiencing a boomlet of
popularity. Many investors have been "throwing in the towel" on active portfolio
management and shifting their money into funds which mimic a stock price index,
most often the S&P 500. Promptly, those "index funds" turn around and buy the
underlying stocks, with most of the money going into the mega-cap stocks. In the
short run, this boomlet of popularity o7f indexing has been like a
self-fulfilling prophecy: with the mega-cap stocks getting much of the
incremental buying power, their prices have been pushed upward, leading the
market.
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7
<PAGE>
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Small cap stocks, compared to large ones, have now become very cheap by
historic norms. Over the long term, relative valuations between large caps and
small caps will almost certainly return to normal historic relationships, and
that implies that small caps will have to "catch up" on a relative performance
basis.
The bottom line: Most active money managers have looked bad during the
last few years, at least relative to the S&P 500 Index. However, this seems to
be a very poor time for investors to throw in the towel on all active equity
managers. Indeed, over the next several years, it seems quite likely that many
active managers will be able to do substantially better than the venerable, but
now-bloated, S&P 500 Index.
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The Guardian Stock Fund Profile
as of June 30, 1997
- ---------------------------------------
Sector Weightings of Common Stocks
Held by the Fund on June 30, 1997
[The following table was represented as a pie graph in the printed material.]
Utilities -- 2.5%
Credit Cyclicals -- 0.5%
Transportation -- 2.0%
Consumer Cyclicals -- 3.1%
Consumer Services -- 2.0%
Conglomerates -- 1.7%
Consumer Staples -- 18.8%
Basic Industry -- 4.0%
Capital Goods -- 6.2%
Financial -- 27.3%
Capital Goods/Technology -- 15.4%
Energy -- 16.5%
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The Guardian Stock Fund
Top 10 Holdings as of 6/30/97
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1. General Electric 3.65%
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2. Bristol Myers Squibb 2.67%
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3. Intel Corporation 2.48%
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4. Exxon Corporation 2.28%
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5. Citicorp 2.27%
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6. Johnson & Johnson 1.85%
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7. DuPont DeNemours 1.83%
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8. Microsoft Corporation 1.75%
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9. BankAmerica 1.69%
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10. Royal Dutch Petroleum 1.58%
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For a complete list of portfolio holdings, please see the Schedule of
Investments.
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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 36.19% 23.43% 15.77% 17.51%
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S&P 500 Index(2) 34.59% 19.69% 14.53% 16.62%
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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's return.
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8
<PAGE>
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Growth of a Hypothetical $10,000 Investment
- --------------------------------------------------------------------------------
GSF S&P CPI
--- --- ---
4/13/83 $10,000 $10,000 $10,000
83
84
85
86
87
88
89 [NEED PLOT POINTS FOR THIS GRAPH]
90
91
92
93
94
95
96
6/30/97 $99,134 $85,090 $16,463
A hypothetical $10,000 investment made at the inception of The Guardian Stock
Fund on April 13, 1983 would have grown to $99,134 on June 30, 1997. 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 $85,090. The Cost of Living, 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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9
<PAGE>
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The Guardian Bond Fund
- ---------------------------------------
[Photo of Thomas G. Sorell, C.F.A. Portfolio Manager]
Q. How did the Fund perform during the first half of 1997?
A. During the first half of 1997, the Fund returned 3.50%,(1) outperforming both
the Lehman Aggregate Bond Index(2) which returned 3.09% and the 3.11% average
return of our Lipper peer group.(3) Our Lipper peer group consists of other
Lipper variable annuity subaccounts that invest primarily in bonds rated "BBB"
or better.
Q. What factors affected the Fund's performance?
A. During the first quarter of 1997, fears that rapid economic growth would lead
to higher inflation, given tight labor markets and high levels of capacity
utilization, created a bearish market for bonds. The economy did in fact grow at
a rate of 4.9% in the first quarter, well beyond what most economists would
consider a non-inflationary pace. The Fed, anticipating this growth, tightened
monetary policy by raising the Fed Funds rate by 0.25% on March 25. Although
this move was not unexpected, the bond market, as measured by the Lehman
Aggregate Bond Index, had a -0.56% return during the first quarter. As the
economy slowed in the second quarter and the Fed left rates unchanged at the May
20 and July 2 policy meetings, the bond market recovered. With the Fed on hold,
the yield on the 30-year Treasury bond dropped over 40 basis points, or -0.40%,
during the second quarter and the Lehman Aggregate Bond Index posted its best
quarterly return (3.67%) since the fourth quarter of 1995.
The Fund's performance is principally attributable to a significant
allocation to mortgage-backed securities and triple-B rated corporate bonds,
which were two of the best performing subsectors when measured by the Lehman
Aggregate Bond Index data on a duration-adjusted basis.(4) The Lehman Index's
asset classes had the following nominal six-month returns through June 30:
mortgage-backed securities 3.92%, corporate bonds 3.97%, and asset-backed
securities 2.96%. Measured on a duration-adjusted basis, mortgages outperformed
the other sectors, returning 1.14% over Treasuries, while the excess return on
all corporate bonds was 0.55%, (triple-B-rated issues earned 0.96%), and
asset-backed securities 0.25%.
Mortgage-backed securities performed exceptionally well during the first
half of 1997 predominantly due to declining levels of implied interest rate
volatility and expectations of slower prepayment rates.
The performance of the corporate sector varied significantly by credit
quality during the first half of 1997. While the entire sector returned 0.55% on
a duration-adjusted basis, bonds rated from triple-A to single-A returned
between 40 and 45 basis points, while bonds rated triple-B earned more than two
times that amount, returning 96 basis points. Our corporate bond investment
strategy throughout the first half was to overweight triple-B rated credits that
we believed had attractive return profiles as measured by both their breakeven
spreads(5) to Treasuries and our expectation of an improvement in credit
quality. Although we had numerous successes, one of our best was an investment
in Comcast 8 7/8 due 5/1/2017. The security was purchased at a spread of 153
basis points, or 1.53% over Treasuries, and as of June 30 the spread had
narrowed to 108 basis points or 1.08%. This represented a holding period return
of 7.01% and a return in excess of Treasuries of 3.91%.
- --------------------------------------------------------------------------------
(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 that 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 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.
(3) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted.
(4) Duration-adjusted, expressed in percentage terms, represents the excess
return over the weighted average return of a group of similar duration
Treasuries.
(5) Breakeven spreads, expressed in percentage terms, for a particular
security represents the amount of yield spread widening which can occur
over a specified time period, and still match the total return of another
duration-equivalent security (usually Treasuries).
- --------------------------------------------------------------------------------
10
<PAGE>
The security was purchased at a spread of 153 basis points, or 1.53% over
Treasuries, and as of June 30 the spread had narrowed to 108 basis points or
1.08%. This represented a holding period return of 7.01% and a return in excess
of Treasuries of 3.91%.
Asset-backed securities realized the lowest returns, both nominally and
duration-adjusted, of the three main spread sectors for the first six months of
1997, but provided an attractive alternative to short duration Treasuries.
Q. What strategies did you use to manage the Fund?
A. The Fund's overall strategy continues to focus on optimal asset allocation
and security selection, and to avoid market timing. This strategy should provide
opportunities to outperform our benchmark and peer groups with a relatively low
risk profile.
More specifically, our strategy with respect to mortgage-backed securities
consisted of adding seasoned pools with favorable prepayment histories and
incremental option adjusted spread,(6) as well as continuing to finance newly
issued collateral. As Treasury yields declined further, we became concerned that
prepayment risk would rise and/or volatility would increase, both of which would
negatively affect the mortgage market. As of June 30, 1997, we are underweighted
in mortgages relative to the Lehman Aggregate Bond Index.
Our corporate strategy has been to increase and diversify our corporate
holdings, especially in the higher yielding sector triple-B rated credits.
During the first half of 1997 we increased our corporate holdings to 35% of the
Fund's Portfolio. We made new investments in the transportation and bank capital
securities sectors, while adding to our exposure to the cable/media and tobacco
sectors. Overall, we will continue to take our credit risk in the short end of
the yield curve where breakeven spreads are attractive, and become more
defensive given the tight level of quality spreads by predominantly investing in
higher-rated improving credits in longer maturities.
Our asset-backed securities strategy continues to focus on adding value at
the short end of the yield curve, and as of quarter-end the Fund was
substantially overweighted in this sector versus the Lehman Aggregate Bond
Index. During the first half of the year, the Fund moved from securities backed
by credit card and auto receivables into securities backed by home equity and
home improvement loans, which offered higher yield spreads and better
diversification.
- --------------------------------------------------------------------------------
(6) Option-adjusted spread means the incremental return or risk premium over
Treasury securities, that has been adjusted for interest rate volatility and
for the effect of options.
- --------------------------------------------------------------------------------
The Guardian Bond Fund Profile
as of June 30, 1997
- ------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year ................................................................. 8.62%
5 Years ................................................................ 6.73%
10 Years ............................................................... 8.59%
Since Inception (5/1/83) ............................................... 9.32%
- --------------------------------------------------------------------------------
[The following table was represented as a pie chart in the printed material.]
- --------------------------------------------------------------------------------
Guardian Bond Fund
(Asset Quality According to S&P)
AAA - 50.3%
BBB - 28.6%
A - 13.0%
AA - 4.1%
Other Assets - 1.6%
Cash/Short Term Equivalent - 1.3%
BB - 1.2%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- -----------------------------------------
[Photo of R. Robin Menzies, Portfolio Manager]
Q. How has the Fund performed during the first half of 1997?
A. The Fund performed well in the first half of this year, returning 15.4%(1)
compared to a rise of 11.3% in our benchmark index -- the Morgan Stanley Capital
International (MSCI) Europe, Australia and Far East (EAFE) Index.(2)
Within the overall Index return, the Continental European region was the
strongest, its return of 17.1% in the first six months of 1997 being driven by
healthy stock markets in Germany (up 16.9%) and Switzerland (up 31.6%). Domestic
economies remain relatively weak but exporters in Germany have benefited from a
more competitive Deutschemark and strong demand from outside the region.
Strength in the Japanese market in the second quarter of the period, off the
back of good company results, reversed negative first quarter returns to give a
six-month rise of 9.2%, well ahead of the weak smaller Asia Pacific markets such
as Malaysia, which fell 11.8%.
Q. What factors contributed to the performance of the Fund?
A. The greatest contribution to the Fund's outperformance came from the very
good relative performance of the stocks we hold in Japan, with the Fund
returning 19.9% in this country during the first half of the year. This compares
very favorably with the Index return attributable to Japan of 9.2%. It is
encouraging that the share prices of well-managed, financially strong companies
with dominant market positions in attractive industries have been showing the
outperformance they deserve. We are seeing distinct changes in the financial
environment in Japan, with deregulation and welcome alterations to the rules
governing domestic pension fund investment, which we feel will lead to greater
acknowledgement by the market of the attractions of the highest quality
companies and to more appropriate ratings. It is also fair to say that a weaker
yen has helped exporters to increase profits ahead of the already buoyant 18%
year-on-year recurring profits growth of non-financial Japanese companies as a
whole.
The Fund also gained from a strong performance in Continental Europe, with
a 47.1% return in Switzerland and 24.6% in the Netherlands. Additionally, the
portfolio contains many stocks benefiting from restructuring, with managements
focusing on making their companies more profitable and shareholder friendly. The
share prices of these stocks are reflecting the realization, by international
investors, of the potential cost efficiencies and enhanced earnings which can be
gained by the restructuring process.
Our strategic country allocation also had a positive impact on the Fund's
overall performance. This came primarily from heavy weighting in Continental
Europe, where returns were high, together with an early move out of the less
attractive, smaller Asia Pacific markets.
- --------------------------------------------------------------------------------
(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 that provide for investment in the Fund will be lower to
reflect separate account and contract/policy charges. Past performance is
not a guarantee of future results. Investment return and principal value
will fluctuate so that the value of your investment, when redeemed, may be
worth more or less than the original cost.
(2) The MSCI EAFE Index is an unmanaged index that is generally considered to be
representative of international stock market activity. The Index is
capitalization-weighted and carries a significantly higher weighting in
Japan than the Fund is normally likely to have because the Fund seeks to
diversify investments across all major international markets. The
performance of the Fund and the MSCI EAFE Index may not therefore always
correlate closely. The MSCI EAFE Index is not available for direct
investment and its returns do not reflect the fees and expenses that have
been deducted from the Fund.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Q. What strategies did you use to manage the Fund?
A. During this period many markets continued to be expensive, relative to
historic levels, on a number of different measures. However, we have recognized
that a high level of liquidity worldwide has been driv-ing markets. Our strategy
has continued to be one of stock-driven allocation and this proved successful
again in the first half of this year. For example, in both Continental Europe
and Japan, by selecting the high quality exporters with dominant worldwide
market shares, the Fund's returns from these geographical areas have been high.
This is despite weak domestic economies which alone are not sufficiently strong
to underpin significant earnings growth. This approach continues to pay
dividends and our investment professionals' efforts are focused on finding
further attractive investments in the ever-changing stock markets of the world.
- --------------------------------------------------------------------------------
Baillie Gifford International Fund Profile
as of June 30, 1997
- ---------------------------------------------
[The following table was represented as a pie chart in the printed material.]
- --------------------------------------------------------------------------------
Portfolio Composition by Geographical Location
U.K. -- 13.4%
Cash -- 2.8%
Latin America -- 5.2%
Far East -- 10.8%
(excluding Japan)
Continental
Europe -- 41.6%
Japan -- 26.2%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year .............................................................. 31.25%
3 Year .............................................................. 14.45%
5 Year .............................................................. 14.67%
Since Inception (2/8/91) ............................................ 14.47%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Holdings
Company Nature of Company Country
------- ----------------- -------
1. Novartis Pharmaceuticals Switzerland
2. Rohm General Industry Japan
3. Banco Santander Banking Spain
4. Canon Electronic Equipment Japan
5. Volkswagen Vehicle Manuf. Germany
6. Mannesmann Industrial Conglomerate Germany
7. Sony Electronic Equipment Japan
8. Adidas Sports Apparel Germany
9. Gucci Group Luxury Goods/Apparel Italy
10. ABN Amro Banking Netherlands
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Value Line Centurion Fund
- ---------------------------------
[Value Line LOGO]
Q. How did the Fund perform for the six months ended June 30, 1997?
A. The Value Line Centurion Fund, with a 9.9%(1) return, underperformed the
20.6% return produced by the S&P 500(2) on a total return basis by 10.7% during
the first half of 1997. Most of the damage was done during the first quarter,
when Centurion produced a -4.8% return, which underperformed the 2.7% generated
by the S&P 500, for a total performance spread of -7.5%. Returns improved during
the second quarter, with Centurion producing a 15.5% return versus 17.5% for the
S&P 500.
Q. What factors affected the Fund's performance?
A. The Value Line Centurion Fund selects from among the #1 and #2 ranked stocks
in the Value Line Ranking System to make its bottoms-up stock picks and to
structure the portfolio. Unfortunately, the Value Line Ranking System, whose
focus is on small- and mid-capitalization growth stocks, was out of favor during
the early part of this year, as the market's focus was more attuned to
large-capitalization value stocks.
To best illustrate this capitalization-based divergence in the financial
markets, consider the following relative performance trend. For the first four
months of this year, the S&P 500, as a proxy for large-capitalization stocks,
produced an 8.8% total return. That compares with a loss of -4.9% for the
Russell 2000,(3) as a small- and mid-cap proxy, over the same period of time,
for a total underperformance of -13.7%. During May and June, however, the S&P
500 was up 10.8%, versus 15.9% for the Russell 2000, as the small- and mid-cap
index outperformed the large-cap stocks by 5.1%.
Moreover, even though the S&P 500 solidly outperformed the Russell 2000 in
the early going in 1997, the financial markets were highly volatile, suffered
from extremely narrow breadth and focused almost exclusively on the largest blue
chip stocks within the index. For example, the 50 largest companies within the
S&P 500 (known as the Nifty Fifty) comprise nearly half of that index's market
capitalization, while 20 of the 30 Dow Jones Industrial Average (DJIA)(4) stocks
are included within that largest 10% grouping. Further, the 100 largest stocks
in the S&P 500 collectively account for nearly two-thirds of the index's market
cap, while simultaneously accounting for 26 of the DJIA's 30 stocks. In
addition, with the divisor on the DJIA now at about 0.269, a single point move
in each of the 30 DJIA component stocks on the same day will result in roughly
an 111-point move.
So it would appear that the financial market's focus on a New Era Nifty
Fifty or Hot One Hundred created enough volatility among a handful of stocks to
generate a powerful move for the entire S&P 500 Index. Unfortunately for Value
Line, only about one-third of the 100 largest S&P 500 stocks were ranked either
a #1 or a #2 in the Value Line Ranking System, which impaired our relative
performance over the first half of the year. However, the market's more recent
trend, in which its focus is broadening to allow small- and mid-cap stocks to
catch up to the large-caps, has benefited Value Line's relative performance.
- --------------------------------------------------------------------------------
(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 that 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.
(3) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The returns for the
Russell 2000 do not reflect expenses, which are deducted from the Fund's
return.
(4) The Dow Jones Industrial Average (DJIA) is an unmanaged average of 30
industrial stocks listed on the New York Stock Exchange that, like the S&P
500 Index, is generally considered to be representative of U.S. stock market
performance. The DJIA is not available for direct investment and its returns
do not reflect the fees and expenses that have been deducted from the Fund.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Q. What strategies did you use to manage the Fund?
A. We continue to believe that we are in the midst of a moderate-growth economy
with benign levels of inflation. As a result, the Value Line Ranking System
screens for stocks that are expected to produce revenue and earnings growth that
could be significantly above the 7-8% level expected for the S&P 500 over the
next five years. Yet, such stocks should trade at reasonable levels of relative
valuation for them to be attractive to us.
Our models have identified three industry sectors that have particular
appeal to us, with regard to our dual disciplines for above-average sales and
profit growth and below-average relative valuation: technology, financial
services, and energy. Unfortunately, each of these three sectors, in which we
are overweighted compared with the S&P 500, underperformed the market during the
first quarter of 1997, resulting in our poor relative performance.
Since that time, however, the markets have begun to recognize the strong
underlying fundamentals of these sectors, and technology, financial, and oil
service and drilling stocks have more recently outperformed their benchmark. We
believe that this trend will continue, as investors begin to sector rotate by
taking profits in stocks that have achieved fair value and by reinvesting those
funds in undervalued lagging issues.
The combination of stronger-than-expected company profits and
lower-than-expected interest rates has ignited a furious 30% rally in the Dow
Jones Industrial Average (DJIA) over the past three months, to record levels,
just under 8,300. As of this writing, we are forecasting an upside objective for
the DJIA of about 8,900 in 1998 and 8,300 during 1997. As a result, we believe,
that the DJIA has probably rallied too far and too fast, discounting a
tremendous amount of good news on the economy, interest rates, and corporate
profits in the process. We would not be surprised to see a near-term
disappointment in any of these areas, which we believe could result in some
profit taking, perhaps to the 7,600 level.
- --------------------------------------------------------------------------------
Value Line Centurion Fund Profile
as of June 30, 1997
- ----------------------------------------
[The following table was represented as a pie chart in the printed material.]
- --------------------------------------------------------------------------------
Portfolio Composition by Economic Sector
Consumer Goods
(Non-Durables) -- 13.6%
Consumer Cyclical -- 0.1%
Capital Goods -- 3.1%
Energy -- 18.9%
Financial -- 27.2%
Consumer Growth -- 9.6%
Technology -- 20.6%
Cash -- 7.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year ............................................................... 15.23%
5 Years .............................................................. 18.07%
10 Years ............................................................. 13.95%
Since Inception (11/15/83) ........................................... 13.85%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Holdings
1. Citicorp
2. Transocean Offshore Inc.
3. Nike Inc.
4. Tidewater Inc
5. Computer Assoc.
6. Medtronic Inc.
7. Conseco Inc.
8. Ascend Communications Inc.
9. Louisiana Land & Exploration Co.
10. HBO & Co.
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- ------------------------------------------------
[Value Line LOGO]
Q. How has the Trust performed during the first half of 1997?
A. In the first half of 1997, the Trust earned a total return of 7.03%.(1) This
compared with a total return of 20.61% for the unmanaged Standard & Poor's 500
Index(2) and a total return of 2.75% for the unmanaged Lehman
Government/Corporate Bond Index.(3)
Since inception nearly ten years ago, the Trust has essentially matched
the performance of the S&P 500, with an annualized total return of 14.25% versus
the S&P's 14.31%. We are quite pleased with this track record, especially
considering that the Trust has held significant amounts of cash and bonds. Over
the same period, the Lehman Government/Corporate Bond Index returned 9.28%
annually.
Q. What factors affected performance of the Trust?
A. The portfolio's stock allocation has been only 45%-50% of total assets this
year, which reduced returns in the powerful stock market rally. Obviously,
during periods of rising stock prices, we would prefer to be 100% invested in
stocks. Over time, however, the portfolio's bond and cash holdings have produced
a reduced risk profile for investors, while still allowing the Trust to generate
excellent long-term total returns, as described above.
A second factor limiting this year's gains has been stock selection.
Optimally, the Trust would have held the largest stocks in the S&P 500 during
the period. By contrast, though, the Trust holds a widely diversified portfolio
of over 100 small-, medium-, and large-capitalization stocks. Small- and mid-cap
stocks lagged the S&P 500 by an unusually large degree in the first half of
1997, and this affected the Trust's performance. The bond market, meanwhile, was
relatively flat in the first half of 1997 and had only a minor effect on
performance.
Q. How does the Trust determine asset allocation?
A. 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. This year's rise in
stock prices, combined with relatively steady interest rates, has kept the
Trust's stock allocation below its long-term central tendency of 55%. At June
30, the stock allocation was 45%. The bond model has maintained an essentially
neutral stance; hence, the approximately 30% position in bonds and remaining 25%
position in cash.
Q. What strategies were used in stock and bond selection?
A. For stock selection, we rely primarily upon the renowned Value Line
Timeliness Ranking System, which favors stocks with strong earnings and price
- --------------------------------------------------------------------------------
(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.
(3) The Lehman Government/Corporate Bond Index is an unmanaged index that is
generally considered to be representative of U.S. government and corporate
bond market activity. The Lehman Government/Corporate 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.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
momentum. To reduce risk, we maintain a very diversified portfolio and avoid
large bets on any particular sector or company. In addition, we invest in
certain stocks that are ranked neutral by our Ranking System, such as utilities
or energy companies, in order to increase the portfolio's dividend yield and
further reduce risk.
As for bonds, our policy is to invest only in high-quality securities. The
Trust's bondholdings are currently all in U.S. Treasuries, because the extra
yield currently offered by corporate bonds or U.S. agencies is too modest to be
attractive. Maturities in the portfolio range from one to 25 years, with an
average of about five years.
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
Profile as of June 30, 1997
- ----------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1)
- --------------------------------------------------------------------------------
1 Year ................................................................. 12.32%
5 Years ................................................................ 14.93%
Since Inception (10/1/87) .............................................. 14.25%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top Ten Stock Holdings
1. Safeway Inc.
2. Johnson & Johnson
3. Conseco
4. Kroger Co.
5. United Technologies
6. Omnicom Group
7. Pfizer Inc.
8. Symbol Technologies
9. Coca-Cola Enterprises
10. International Business Machines
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
[The following tables were represented as a pie chart in the printed material.]
- --------------------------------------------------------------------------------
Portfolio Composition by Asset Class
December 31, 1996 June 30, 1997
----------------- -------------
Cash 22.2% Cash 24.0%
Stocks 48.0% Stocks 45.1%
Bonds 29.8% Bonds 30.9%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Cash Fund
- -----------------------------
[Photo of Alexander M. Grant, Jr., Portfolio Manager]
Q. How did The Guardian Cash Fund perform during the first six months of 1997?
A. As of June 24, 1997, the effective 7-day annualized yield for the Fund was
5.20%.(1) The Fund produced an annualized total return of 4.99% through June
30.(2) In contrast, the average Tier One money market fund, as measured by IBC
Financial Data, had an effective 7-day annualized yield of 5.06% at June 24,
1997 and returned 4.89%. IBC Financial Data is a research firm that tracks money
market funds.
Q. What factors affected the Fund's performance?
A. Money market funds are directly affected by the actions of the Federal
Reserve Board. On March 25, the Federal Reserve raised the Federal Funds target
from 5.25% to 5.50%. This move followed several months of strong economic data
particularly with respect to housing data, consumer consumption and payroll
data. The discount rate was left unchanged at 5.00%. The Fed Funds target is the
rate at which banks can borrow from each other overnight. While the Federal
Reserve Board does not set this rate, it can establish a target rate and,
through open market operations, the Fed can move member banks in the direction
of that target rate. The discount rate is the rate at which banks can borrow
directly from the Federal Reserve. Uncertainty regarding the direction of the
stock market contributed to large daily inflows and outflows of funds in the
Cash Fund. As the stock market rallied, cash was transferred by our investors to
equity funds. During those times when the stock market stalled, we saw cash
inflows. Another factor affecting performance was the portfolio's average
maturity--24 days as of June 24, 1997. The average Tier One money market fund,
as measured by IBC Financial Data, had an average maturity of 60 days.
Q. What was your investment strategy during the year?
A. The Guardian Cash Fund is a place for our investors to put their money while
they decide upon their preferred long-term investment vehicle, be it stocks or
bonds. Also, some of our investors prefer the relative stability of the money
markets. To best accommodate all our investors, we will continue to try to
provide a strong 7-day yield, while offering safety and liquidity. Our
investment strategy was to create a diversified portfolio of money market
instruments that presents minimal credit risks according to our criteria. As
always, we only purchased securities from issuers that had received ratings in
the two highest credit quality categories established by nationally recognized
statistical ratings organizations like Moody's Investors Service, Inc. and
Standard & Poor's Ratings Group for the Fund's portfolio. Most of the portfolio
(95.5%) was invested in commercial paper; the balance (4.5%) was invested in
repurchase agreements.
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.
(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 that 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.
- --------------------------------------------------------------------------------
18
<PAGE>
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- --------------------------------------------------------------------------------
19
<PAGE>
- --------- ---------
Separate Separate
Account K Account K
- --------- ---------
1 1
- --------- ---------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
The Guardian Separate Account K
- ----------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (Unaudited)
Baillie
Guardian Guardian Guardian Gifford Value Line
Stock Bond Cash International Centurion
Combined Fund Fund Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FIFO Cost .................................. -- $13,713,910 $ 192,974 $1,152,081 $1,120,158 $ 1,812,387
=========== =========== ========= ========== ========== ===========
Assets
Shares outstanding ........................ -- 340,977 16,061 115,208 64,805 72,015
Net asset value per share (NAV) ........... -- 44.93 11.88 10.00 19.68 27.29
Total Assets (Shares x NAV) ............. $21,392,839 $15,320,106 $ 190,809 $1,152,081 $1,275,368 $ 1,965,284
----------- ----------- --------- ---------- ---------- -----------
Liabilities
Due to The Guardian Insurance &
Annuity Company, Inc. .................... 76,697 54,107 759 5,528 4,585 6,945
----------- ----------- --------- ---------- ---------- -----------
Net Assets -- Note 4 ....................... $21,316,142 $15,265,999 $ 190,050 $1,146,553 $1,270,783 $ 1,958,339
=========== =========== ========= ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
The Guardian Separate Account K
- ----------------------------------------
COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1997 (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Investment Income
Income:
Reinvested dividends ................... $ 107,343 $ 70,750 $ 5,687 $ 26,518 $ 4,388 $ --
Expenses -- Note 3:
Mortality and expense risk charges ..... 52,437 37,461 466 3,308 3,188 4,734
----------- ----------- --------- ---------- ---------- -----------
Net investment income/(expense) .......... 54,906 33,289 5,221 23,210 1,200 (4,734)
----------- ----------- --------- ---------- ---------- -----------
Realized and Unrealized Gain/(Loss)
from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of
investments ........................... 49,405 40,318 652 -- 5,317 1,048
Reinvested realized gain distributions . 254,376 252,092 -- -- 2,284 --
----------- ----------- --------- ---------- ---------- -----------
Net realized gain/(loss) on investments. 303,781 292,410 652 -- 7,601 1,048
----------- ----------- --------- ---------- ---------- -----------
Unrealized appreciation/(depreciation)
of investments:
End of period .......................... 1,997,178 1,606,196 (2,165) -- 155,210 152,897
Beginning of period .................... 72,274 43,886 (1,258) -- 16,141 5,035
----------- ----------- --------- ---------- ---------- -----------
Change in unrealized
appreciation/(depreciation) ........... 1,924,904 1,562,310 (907) -- 139,069 147,862
----------- ----------- --------- ---------- ---------- -----------
Net realized and unrealized gain/(loss)
from investments ........................ 2,228,685 1,854,720 (255) -- 146,670 148,910
----------- ----------- --------- ---------- ---------- -----------
Net Increase/(Decrease) in Net Assets
Resulting from Operations ............ $ 2,283,591 $ 1,888,009 $ 4,966 $ 23,210 $ 147,870 $ 144,176
=========== =========== ========= ========== ========== ===========
</TABLE>
Value Line
Strategic
Asset
Management
Trust
------------
FIFO Cost .................................. $ 1,404,151
===========
Assets
Shares outstanding ........................ 63,532
Net asset value per share (NAV) ........... 23.44
Total Assets (Shares x NAV) ............. $ 1,489,191
-----------
Liabilities
Due to The Guardian Insurance &
Annuity Company, Inc. .................... 4,773
-----------
Net Assets -- Note 4 ....................... $ 1,484,418
===========
- -----------------------------------------------------------
The Guardian Separate Account K
- ----------------------------------------
COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1997 (Unaudited)
Investment Income
Income:
Reinvested dividends .................... $ --
Expenses -- Note 3:
Mortality and expense risk charges ...... 3,280
-----------
Net investment income/(expense) .......... (3,280)
-----------
Realized and Unrealized Gain/(Loss)
from Investments
Realized gain/(loss) from investments:
Net realized gain/(loss) from sale of
investments ............................ 2,070
Reinvested realized gain distributions .. --
-----------
Net realized gain/(loss) on investments . 2,070
-----------
Unrealized appreciation/(depreciation)
of investments:
End of period ........................... 85,040
Beginning of period ..................... 8,470
-----------
Change in unrealized
appreciation/(depreciation) ............. 76,570
-----------
Net realized and unrealized gain/(loss)
from investments ....................... 78,640
-----------
Net Increase/(Decrease) in Net Assets
Resulting from Operations .............. $ 75,360
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
20 & 21
<PAGE>
- --------- ---------
Separate Separate
Account K Account K
- --------- ---------
1 1
- --------- ---------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Guardian Separate Account K
- ----------------------------------------
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 1996 (Audited) and
June 30, 1997 (Unaudited)
Baillie
Guardian Guardian Guardian Gifford Value Line
Stock Bond Cash International Centurion
Combined Fund Fund Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------
1996 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................ $ 73,345 $ 44,814 $ 4,885 $ 15,451 $ 5,664 $ (575)
Net realized gain/(loss) from sale of
investments ................................... 29,600 24,573 (468) -- 2,887 785
Reinvested realized gain distributions ......... 647,845 587,072 -- -- 5,202 42,026
Change in unrealized appreciation/(depreciation)
of investments ................................ 76,078 47,251 (1,142) -- 16,652 4,915
----------- ----------- -------- ---------- ---------- ----------
Net increase/(decrease) resulting from
operations .................................... 826,868 703,710 3,275 15,451 30,405 47,151
----------- ----------- -------- ---------- ---------- ----------
- ------------------------
1996 Policy Transactions
- ------------------------
Transfer of net premium ........................ 10,590,800 7,073,350 125,075 1,186,092 626,366 942,911
Transfer on account of other terminations ...... (15,361) (12,165) (219) (112) (542) (1,483)
Transfer of cost of insurance .................. (1,532,174) (1,083,025) (18,048) (56,279) (102,199) (161,278)
Transfer between/within separate accounts ...... (557) 64,322 42 (138,841) 8,335 47,081
Transfers -- other ............................. 1,692 (244) 275 423 474 704
----------- ----------- -------- ---------- ---------- ----------
Net increase/(decrease) from contract
transactions .................................. 9,044,400 6,042,238 107,125 991,283 532,434 827,935
----------- ----------- -------- ---------- ---------- ----------
Total Increase/(Decrease) in Net Assets ........... 9,871,268 6,745,948 110,400 1,006,734 562,839 875,086
Net Assets at December 31, 1995 ................ 239,097 189,561 5,846 1,871 12,005 18,588
----------- ----------- -------- ---------- ---------- ----------
Net Assets at December 31, 1996 ................ $10,110,365 $ 6,935,509 $116,246 $1,008,605 $ 574,844 $ 893,674
=========== =========== ======== ========== ========== ==========
- ----------------------------------------
1997 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................ $ 54,906 $ 33,289 $ 5,221 $ 23,210 $ 1,200 $ (4,734)
Net realized gain/(loss) from sale of
investments ................................... 49,405 40,318 652 -- 5,317 1,048
Reinvested realized gain distributions ......... 254,376 252,092 -- -- 2,284 --
Change in unrealized appreciation/(depreciation)
of investments ................................ 1,924,904 1,562,310 (907) -- 139,069 147,862
----------- ----------- -------- ---------- ---------- ----------
Net increase/(decrease) resulting from
operations .................................... 2,283,591 1,888,009 4,966 23,210 147,870 144,176
----------- ----------- -------- ---------- ---------- ----------
- ------------------------
1997 Policy Transactions
- ------------------------
Transfer of net premium ........................ 11,248,059 8,138,251 82,450 628,183 628,751 974,812
Transfer on account of death ................... (1,068) (649) -- -- (419) --
Transfer on account of other terminations ...... (165,225) (131,377) (2,154) (235) (15,161) (9,874)
Transfer of policy loans ....................... (65,447) (50,498) -- -- (5,597) (8,751)
Transfer of cost of insurance .................. (2,095,206) (1,520,250) (19,875) (72,034) (134,080) (200,609)
Transfer between/within separate accounts ...... (103) 7,958 8,460 (440,346) 75,218 164,269
Transfers -- other ............................. 1,176 (954) (43) (830) (643) 642
----------- ----------- -------- ---------- ---------- ----------
Net increase/(decrease) from contract
transactions .................................. 8,922,186 6,442,481 68,838 114,738 548,069 920,489
----------- ----------- -------- ---------- ---------- ----------
Total Increase/(Decrease) in Net Assets ........... 11,205,777 8,330,490 73,804 137,948 695,939 1,064,665
Net Assets at December 31, 1996 ................ 10,110,365 6,935,509 116,246 1,008,605 574,844 893,674
----------- ----------- -------- ---------- ---------- ----------
Net Assets at June 30, 1997 -- Note 4 .......... $21,316,142 $15,265,999 $190,050 $1,146,553 $1,270,783 $1,958,339
=========== =========== ======== ========== ========== ==========
</TABLE>
Value Line
Strategic
Asset
Management
Trust
----------
- ----------------------------------------
1996 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................ $ 3,106
Net realized gain/(loss) from sale of
investments ................................... 1,823
Reinvested realized gain distributions ......... 13,545
Change in unrealized appreciation/(depreciation)
of investments ................................ 8,402
----------
Net increase/(decrease) resulting from
operations .................................... 26,876
----------
- ------------------------
1996 Policy Transactions
- ------------------------
Transfer of net premium ........................ 637,006
Transfer on account of other terminations ...... (840)
Transfer of cost of insurance .................. (111,345)
Transfer between/within separate accounts ...... 18,504
Transfers -- other ............................. 60
----------
Net increase/(decrease) from contract
transactions .................................. 543,385
----------
Total Increase/(Decrease) in Net Assets ........... 570,261
Net Assets at December 31, 1995 ................ 11,226
----------
Net Assets at December 31, 1996 ................ $ 581,487
==========
- ----------------------------------------
1997 Increase/(Decrease) from Operations
- ----------------------------------------
Net investment income/(expense) ................ $ (3,280)
Net realized gain/(loss) from sale of
investments ................................... 2,070
Reinvested realized gain distributions ......... --
Change in unrealized appreciation/(depreciation)
of investments ................................ 76,570
----------
Net increase/(decrease) resulting from
operations .................................... 75,360
----------
- ------------------------
1997 Policy Transactions
- ------------------------
Transfer of net premium ........................ 795,612
Transfer on account of death ................... --
Transfer on account of other terminations ...... (6,424)
Transfer of policy loans ....................... (601)
Transfer of cost of insurance .................. (148,358)
Transfer between/within separate accounts ...... 184,338
Transfers -- other ............................. 3,004
----------
Net increase/(decrease) from contract
transactions .................................. 827,571
----------
Total Increase/(Decrease) in Net Assets ........... 902,931
Net Assets at December 31, 1996 ................ 581,487
----------
Net Assets at June 30, 1997 -- Note 4 .......... $1,484,418
==========
See notes to financial statements.
- --------------------------------------------------------------------------------
22 & 23
<PAGE>
- ---------
Separate
Account K
- ---------
1
- ---------
- --------------------------------------------------------------------------------
The Guardian Separate Account K
- ----------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
- ----------------------
Note 1 -- Organization
- ----------------------
The Guardian Separate Account K (the Account), a unit investment trust
registered under the Investment Company Act of 1940, as amended, was established
by The Guardian Insurance & Annuity Company, Inc. (GIAC) on September 1, 1995
and commenced operations on October 1, 1995. GIAC is a wholly owned subsidiary
of The Guardian Life Insurance Company of America (Guardian Life). GIAC issues
the annual premium variable life insurance policies offered through the Account.
GIAC provides for variable accumulations and benefits under the policies by
crediting the net premium payments to one or more investment divisions
established within the Account as selected by the policyowner. The policyowner
also has the ability to transfer his or her policy value among the investment
divisions within the Account. The Account currently comprises six investment
divisions which invest in shares of the following mutual funds: The Guardian
Stock Fund, Inc. (GSF), The Guardian Bond Fund, Inc. (GBF), The Guardian Cash
Fund, Inc. (GCF), Baillie Gifford International Fund (BGIF), Value Line
Centurion Fund, Inc. and Value Line Strategic Asset Management Trust
(collectively, the Funds and individually, a Fund).
GSF, GBF and GCF each has an investment advisory agreement with Guardian
Investor Services Corporation, a wholly owned subsidiary of GIAC. BGIF is
managed by Guardian Baillie Gifford Ltd., a joint venture company formed by GIAC
and Baillie Gifford Overseas Ltd.
Under applicable insurance law, the assets and liabilities of the Account
are clearly identified and distinguished from the other assets and liabilities
of GIAC. The assets of the Account will not be charged with any liabilities
arising out of any other business conducted by GIAC, but the obligations of the
Account, including the promise to make benefit payments, are obligations of
GIAC.
The changes in net assets maintained in the Account provide the basis for
the periodic determination of benefits under the policies. The net assets may
not be less than the amount required under state insurance laws to provide for
death benefits (without regard to the minimum death benefit guarantee) and other
policy benefits. Additional assets are held in GIAC's general account to cover
the contingency that the guaranteed minimum death benefit might exceed the death
benefit which would have been payable in the absence of such guarantee.
- -----------------------------------------
Note 2 -- Significant Accounting Policies
- -----------------------------------------
The following is a summary of significant accounting policies of the
Account.
Investments
(a) Net proceeds from the sale of annual premium variable life insurance
policies are invested by the Account's investment divisions in shares of the
corresponding Funds at the net asset value of each Fund's shares. All
distributions made by a Fund are reinvested in shares of the same Fund.
(b) The market value of the investments in the Funds is based on the net
asset value of the respective Funds as of their close of business on the
valuation date.
(c) Investment transactions are accounted for on the trade date and income
is recorded on the ex-dividend date.
(d) The cost of investments sold is determined on a first in, first out
(FIFO) basis.
Federal Income Taxes
The operations of the Account are part of the operations of GIAC and, as
such, are included in the combined tax return of GIAC. GIAC is taxed as a life
insurance company under the Internal Revenue Code of 1986, as amended.
Under current tax law, no federal taxes are payable by GIAC with respect
to the operations of the Account.
- --------------------------------------------------------------------------------
24
<PAGE>
---------
Separate
Account K
---------
1
---------
During the six months ended June 30, 1997 and the year ended December 31,
1996, purchases and sales of shares of the Funds were as follows:
<TABLE>
<CAPTION>
The Guardian Separate Account K Purchases Purchases Sales Sales
June 30, December 31, June 30, December 31,
1997 1996 1997 1996
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Guardian Stock Fund .............. $ 7,168,101 $ 7,453,097 $ 402,777 $ 762,371
Guardian Bond Fund ............... 113,316 142,104 38,791 29,801
Guardian Cash Fund ............... 715,228 1,797,215 573,972 788,260
Baillie Gifford International Fund 640,120 602,423 85,379 57,730
Value Line Centurion Fund ........ 1,035,445 971,334 114,956 99,743
Value Line SAM Trust ............. 920,406 660,006 92,835 98,478
----------- ----------- ---------- ----------
Total ......................... $10,592,616 $11,626,179 $1,308,710 $1,836,383
=========== =========== ========== ==========
</TABLE>
- --------------------------------------
Note 3 -- Administrative and Mortality
and Expense Risk Charges
- --------------------------------------
GIAC assumes mortality and expense risk related to the operations of the
Account. To cover these risks, GIAC deducts a daily charge from the net assets
of the Account which, on an annual basis, is equal to a rate of .60% of the
policy account value.
In addition, GIAC makes a monthly charge for the cost of life insurance,
based on the face value of the policyowner's insurance in-force, as compensation
for the anticipated cost of paying death benefits.
Under the terms of the policy, GIAC deducts charges from the gross
premiums before transferring the net premiums (gross premiums less other
contractual charges) to the Account. These other contractual charges consist of:
a) policy and administrative fees which vary with the face amount, age of
the insured or the duration of the contract;
b) an annual state premium tax charge of 2.5% of the basic premium.
Currently, GIAC makes no charge against the Account for GIAC's federal
income taxes. However, GIAC reserves the right to charge taxes attributable to
the Account in the future.
Under current laws, GIAC may incur state and local taxes in several
states. At present, these taxes are not significant. In the event of a material
change in applicable state or local tax laws, GIAC reserves the right to charge
the Account for such taxes, if any, which are attributable to the Account.
- -----------------------------------------------
Note 4 -- Net Assets, June 30, 1997 (Unaudited)
- -----------------------------------------------
At June 30, 1997, net assets of the Account were as follows:
Accumulation of Annual Premium
Variable Life Insurance
Policyowners' Accounts $12,650,880
Owned by GIAC 8,665,262
-----------
$21,316,142
===========
The amount retained by GIAC in the Account is comprised of GIAC's initial
contribution to the Account together with amounts accruing to GIAC from the
operations of the Account and retained therein. Amounts retained by GIAC in the
Account may be transferred by GIAC to its general account.
In some instances the calculation of total assets may not agree due to
rounding.
- --------------------------------------------------------------------------------
25
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
- ----------------------
COMMON STOCKS -- 95.7%
- ----------------------
Shares Value
- ----------------------------------------------------------------
Aerospace and Defense -- 3.1%
473,146 Boeing Co. $ 25,106,310
32,600 General Dynamics Corp. 2,445,000
60,800 Gulfstream Aerospace Corp. 1,793,600
77,025 Lockheed Martin Corp. 7,976,902
276,400 Logicon, Inc. 14,649,200
201,750 Precision Castparts Corp. 12,029,344
95,800 Rockwell Int'l. Corp. 5,652,200
25,000 Sundstrand Corp. 1,395,312
40,000 Thiokol Corp. 2,800,000
53,000 TRW, Inc. 3,011,063
113,100 United Technologies Corp. 9,387,300
--------------
86,246,231
--------------
Air Transportation -- 0.8%
143,000 AMR Corp., DE 13,227,500
151,000 Continental Airlines, Inc. 5,275,563
54,000 UAL Corp. 3,864,375
--------------
22,367,438
--------------
Appliance and Furniture -- 0.3%
40,000 Ethan Allen Interiors, Inc. 2,280,000
136,500 Furniture Brands Int'l., Inc. 2,644,688
40,000 Hon Industries, Inc. 1,770,000
30,000 Leggett & Platt, Inc. 1,290,000
50,000 Miller Herman, Inc. 1,800,000
--------------
9,784,688
--------------
Automotive-Parts -- 0.3%
19,437 AUTOLIV, INC. 760,473
37,500 BORG-WARNER AUTOMOTIVE, INC. 2,027,344
84,000 GOODYEAR TIRE & RUBBER CO. 5,318,250
17,000 TOWER AUTOMOTIVE, INC. 731,000
--------------
8,837,067
--------------
Biotechnology -- 0.2%
93,600 Amgen, Inc 5,440,500
--------------
Building Materials and Homebuilders -- 0.7%
18,000 Armstrong World Industries, Inc. 1,320,750
123,000 Johns Manville Corp. 1,452,938
95,000 Lennar Corp. 3,034,063
120,000 McGrath Rent Corp. 2,460,000
68,200 Sherwin-Williams Co. 2,105,675
30,000 Southdown, Inc. 1,308,750
65,000 USG Corp. 2,372,500
36,000 U.S. Home Corp. 956,250
45,700 Vulcan Materials Co. 3,587,450
30,400 Webb (Del) Corp. 494,000
--------------
19,092,376
--------------
Capital Goods-Miscellaneous Technology -- 0.5%
79,650 Martin Marietta Materials, Inc. 2,578,669
282,713 Paychex, Inc. 10,743,075
60,400 Rexel, Inc. 1,117,400
--------------
14,439,144
--------------
Chemicals -- 2.6%
141,000 Cambrex Corp. 5,604,750
798,000 E.I. Dupont de Nemours, Inc. 50,174,250
81,100 Lubrizol Corp. 3,401,131
57,000 Morton Int'l., Inc. 1,720,688
102,000 PPG Industries, Inc. 5,928,750
40,000 Rohm & Haas Co. 3,602,500
--------------
70,432,069
--------------
Computer Software -- 2.5%
50,000 Affiliated Computer Services, Inc. 1,400,000
107,800 BMC Software, Inc. 5,969,425
32,400 Cadence Design Systems, Inc. 1,085,400
86,200 Compuware Corp. 4,116,050
56,000 Fair Isaac & Co., Inc. 2,495,500
380,000 Microsoft Corp. 48,022,500
52,000 Sterling Software, Inc. 1,625,000
69,400 SunGuard Data Systems, Inc. 3,227,100
--------------
67,940,975
--------------
Computer Systems -- 5.1%
291,500 Compaq Computer Corp. 28,931,375
49,500 Diebold, Inc. 1,930,500
30,300 Hewlett Packard Co. 1,696,800
57,500 Honeywell, Inc. 4,362,813
299,500 Int'l. Business Machines 27,011,156
478,200 Lexmark Int'l. Group, Inc. 14,525,325
115,000 Pitney Bowes, Inc. 7,992,500
114,000 Quantum Corp. 2,315,625
87,000 SCI Systems, Inc. 5,546,250
667,000 Storage Technology Corp. 29,681,500
49,000 Stratus Computer, Inc. 2,450,000
102,800 Sun Microsystems, Inc. 3,826,088
See notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
----------------
The Guardian
Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------------------
90,000 Tandem Computers, Inc. $ 1,822,500
247,800 Western Digital Corp. 7,836,675
--------------
139,929,107
--------------
Conglomerates -- 1.6%
102,900 Allied Signal, Inc. 8,643,600
149,800 Loews Corp. 14,998,725
310,000 Textron, Inc. 20,576,250
--------------
44,218,575
--------------
Drugs and Hospitals -- 11.2%
401,300 Abbott Laboratories 26,786,775
99,660 Allegiance Corp. 2,715,735
460,700 American Home Products Corp. 35,243,550
44,200 Becton Dickinson & Co. 2,237,625
903,400 Bristol-Myers Squibb Corp. 73,175,400
102,848 Eli Lilly & Co., Inc. 11,242,572
25,000 Health Care & Retirement Corp. 834,375
34,200 Integrated Health Services, Inc. 1,316,700
789,800 Johnson & Johnson 50,843,375
136,400 Kinetic Concepts, Inc. 2,455,200
23,000 Lincare Hldgs., Inc. 989,000
288,500 Merck & Co., Inc. 29,859,750
250,900 Pfizer, Inc. 29,982,550
413,400 Schering-Plough Corp. 19,791,525
20,000 Sybron Int'l. Corp., WI 797,500
12,000 Unitrin, Inc. 732,000
362,000 Universal Health Services, Inc. 13,937,000
46,700 Warner-Lambert Co. 5,802,475
26,000 Wellpoint Health Networks, Inc. 1,192,750
--------------
309,935,857
--------------
Electrical Equipment -- 4.3%
256,800 Emerson Electric Co. 14,140,050
1,541,200 General Electric Co. 100,755,950
25,500 W.W. Grainger, Inc. 1,993,781
6,500 Jabil Circuit, Inc. 545,188
--------------
117,434,969
--------------
Electronics and Instruments -- 0.3%
64,400 Analogic Corp. 2,189,600
84,400 Dynatech Corp. 3,017,300
30,700 Sanmina Corp. 1,949,450
--------------
7,156,350
--------------
Energy-Miscellanneous -- 0.4%
192,500 Giant Industries, Inc. 3,043,906
237,430 Holly Corp. 5,891,232
84,000 Howell Corp. 1,680,000
--------------
10,615,138
--------------
Entertainment and Leisure -- 0.1%
78,800 Galoob Toys, Inc. 1,487,350
17,000 Harley-Davidson, Inc. 814,938
24,000 Regal Cinemas, Inc. 792,000
--------------
3,094,288
--------------
Financial-Banks -- 13.4%
244,839 Banc One Corp. 11,859,389
720,000 BankAmerica Corp. 46,485,000
171,000 Bank of Boston Corp. 12,322,688
146,000 Barnett Banks, Inc. 7,665,000
434,468 Chase Manhattan Corp. 42,170,550
517,484 Citicorp 62,389,165
96,800 Comerica, Inc. 6,582,400
30,000 Compass Bancshares, Inc. 1,008,750
146,300 First Bank Systems Corp. 12,490,363
313,700 First Chicago NBD Corp. 18,978,850
19,900 First Empire State Corp. 6,706,300
30,000 First Merit Corp. 1,440,000
271,900 First Union Corp. 25,150,750
79,536 Hubco, Inc. 2,306,544
70,000 KeyCorp 3,911,250
197,000 Mellon Bank Corp. 8,889,625
86,500 National City Corp. 4,541,250
332,800 Nationsbank Corp. 21,465,600
135,060 Norwest Corp. 7,597,125
50,000 Premier Bancshares, Inc., GA 859,375
79,500 Provident Financial Group, Inc. 3,398,625
108,000 Star Banc Corp. 4,563,000
116,000 State Street Corp. 5,365,000
208,766 TCF Financial Corp. 10,307,821
564,000 Travelers Group, Inc. 35,567,250
49,500 Union BanCal Corp. 3,557,813
72,000 Zions Bancorp 2,709,000
--------------
370,288,483
--------------
See notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE>
- ----------------
The Guardian
Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1997 (Unaudited)
Shares Value
- ----------------------------------------------------------------
Financial-Other -- 4.8%
160,000 American Express Co. $ 11,920,000
102,000 Countrywide Credit Industires, Inc. 3,181,125
21,666 Duff & Phelps Credit Rating Co. 658,105
126,800 A.G. Edwards, Inc. 5,420,700
258,400 Federal Home Loan Mortgage Corp. 8,882,500
434,600 Federal National Mortgage Assn. 18,959,425
144,000 Franklin Resources, Inc. 10,449,000
124,600 Green Tree Financial Corp. 4,438,875
169,000 Jefferies Group, Inc. 9,633,000
72,000 Lehman Brothers Hldgs., Inc. 2,916,000
94,000 McDonald & Co. Investments, Inc. 4,312,250
502,200 Merrill Lynch & Co., Inc. 29,943,675
82,100 J.P. Morgan & Co., Inc. 8,569,188
256,050 Morgan Keegan, Inc. 5,088,994
30,000 Pacific Century Financial Corp. 1,387,500
230,737 Raymond James Financial, Inc. 6,316,425
--------------
132,076,762
--------------
Financial-Thrift -- 2.1%
67,200 Astoria Financial Corp. 3,192,000
200,000 Bank Atlantic Bancorp, Inc. 2,820,000
27,040 California Federal Bancorp, Inc. 456,300
155,400 Charter One Financial, Inc. 8,372,175
49,000 CitFed Bancorp, Inc. 1,898,750
66,000 Coastal Bancorp, Inc. 1,963,500
20,000 Coast Savings Financial, Inc. 908,750
243,600 Collective Bancorp, Inc. 10,931,550
103,950 Commercial Federal Corp. 3,859,144
55,000 Greenpoint Financial Corp. 3,660,938
124,000 Long Island Bancorp, Inc. 4,502,750
19,635 MAF Bancorp, Inc. 822,216
37,666 Pacific Crest Capital, Inc. 499,075
123,543 Progressive Bank, Inc. 3,891,605
634,129 Sovereign Bancorp, Inc. 9,670,467
--------------
57,449,220
--------------
Food, Beverage and Tobacco -- 5.6%
186,900 Anheuser-Busch Cos., Inc. 7,838,119
204,000 Campbell Soup Co. 10,200,000
608,900 Coca Cola Co. 41,100,750
506,700 Coca Cola Enterprises, Inc. 11,654,100
93,600 ConAgra, Inc. 6,002,100
71,000 Dean Foods Co. 2,866,625
6,872 Earthgrains Co. 450,545
86,000 Fortune Brands, Inc. 3,208,875
86,000 Gallaher Group Plc. 1,585,625
56,000 Hershey Foods Corp. 3,097,500
71,000 Interstate Bakeries Corp. 4,211,188
904,400 Philip Morris Cos., Inc. 40,132,750
83,600 Ralston-Purina Group 6,870,875
18,000 Schweitzer-Mauduit Int'l., Inc. 675,000
61,100 Unilever NV 13,319,800
--------------
153,213,852
--------------
Footwear -- 0.4%
146,800 Nike, Inc. 8,569,450
49,000 Payless ShoeSource, Inc. 2,679,688
--------------
11,249,138
--------------
Household Products -- 0.9%
122,720 Kimberly-Clark Corp. 6,105,320
124,900 Procter & Gamble Co. 17,642,125
--------------
23,747,445
--------------
Insurance -- 5.8%
217,300 Allstate Corp. 15,862,900
38,000 AMBAC, Inc. 2,902,250
99,000 Amer. Bankers Ins. Group, Inc. 6,261,750
136,300 Amer. Int'l. Group, Inc. 20,359,813
20,000 W.R. Berkley Corp. 1,177,500
46,000 Chubb Corp. 3,076,250
74,100 Cigna Corp. 13,152,750
22,000 Cincinnati Financial Corp. 1,738,000
60,000 CMAC Investment Corp. 2,865,000
18,000 Enhance Financial Svcs. Group, Inc. 789,750
98,000 Everest Reinsurance Hldgs. 3,883,250
66,700 Executive Risk, Inc. 3,468,400
18,000 Financial Sec. Assur. Hldgs. Ltd. 700,875
40,000 Fremont General Corp. 1,610,000
24,000 Frontier Insurance Group, Inc. 1,554,000
36,900 General Re Corp. 6,715,800
61,900 Hartford Financial Svcs. Group, Inc. 5,122,225
75,000 Horace Mann Educators Corp. 3,675,000
36,000 Jefferson Pilot Corp. 2,515,500
68,847 Liberty Financial Cos., Inc. 3,433,744
75,000 Lincoln National Corp., Inc. 4,828,125
See notes to financial statements.
- --------------------------------------------------------------------------------
28
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----------------
The Guardian
Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------------------
66,400 Marsh & McLennan Cos., Inc. $ 4,739,300
25,300 MBIA, Inc. 2,854,156
15,000 Mercury General Corp. 1,091,250
315,000 MGIC Investment Corp. 15,100,313
40,000 Ohio Casualty Corp. 1,760,000
90,000 Old Republic Int'l. Corp. 2,728,125
45,000 Progressive Corp. of Ohio 3,915,000
42,000 ReliaStar Financial Group 3,071,250
69,800 St. Paul Cos., Inc. 5,322,250
108,000 State Auto Financial Corp. 2,430,000
108,000 SunAmerica, Inc. 5,265,000
34,000 Torchmark, Inc. 2,422,500
60,000 Travelers Ppty. Casualty Corp. 2,392,500
--------------
158,784,526
--------------
Lodging -- 0.2%
17,000 Doubletree Corp. 699,125
298,000 Prime Hospitality Corp. 5,885,500
--------------
6,584,625
--------------
Machinery and Equipment -- 1.5%
68,000 AAR Corp. 2,197,250
148,800 Caterpillar, Inc. 15,977,400
91,400 Deere & Co. 5,015,575
15,000 Eaton Corp. 1,309,688
167,800 Illinois Tool Works, Inc. 8,379,513
40,000 Robbins & Myers, Inc. 1,300,000
35,000 Universal Corp., VA 1,111,250
110,000 York Int'l. Corp. 5,060,000
--------------
40,350,676
--------------
Merchandising-Department Stores -- 0.6%
110,000 Carson Pirie Scott & Co. 3,492,500
33,750 Consolidated Stores, Inc. 1,172,813
61,000 Dayton Hudson Corp. 3,244,437
66,250 Dollar General Corp. 2,484,375
23,000 MacFrugals Bargains Closeouts 626,750
82,500 Fred Meyer Inc., DE 4,264,219
48,000 Shopko Stores, Inc. 1,224,000
--------------
16,509,094
--------------
Merchandising-Drugs -- 0.4%
35,000 Bergen Brunswig Corp. 975,625
100,000 Value Health, Inc. 2,025,000
125,000 Walgreen Co. 6,703,125
--------------
9,703,750
--------------
Merchandising-Food -- 0.5%
176,300 Richfood Hldgs., Inc. 4,583,800
188,995 Safeway, Inc. 8,717,394
19,000 Smithfield Foods, Inc. 1,168,500
--------------
14,469,694
--------------
Merchandising-Special -- 0.6%
70,736 CVS Corp. 3,625,220
137,160 Host Marriott Services Corp. 1,611,630
90,000 Pier 1 Imports, Inc. 2,385,000
125,000 Ross Stores, Inc. 4,085,938
20,000 Stein Mart, Inc. 600,000
42,500 Tiffany & Co., Inc. 1,962,969
35,000 Waban, Inc. 1,126,562
--------------
15,397,319
--------------
Miscellaneous -- 0.1%
21,600 Alberto-Culver Co. 503,550
30,400 Helen of Troy Ltd. 779,000
20,000 Lands End, Inc. 592,500
39,100 Mississippi Chemical Corp. 811,325
37,500 Zeigler Coal Hldg. Co. 876,563
--------------
3,562,938
--------------
Miscellaneous-Consumer Growth Staples -- 0.6%
93,100 Cognizant Corp. 3,770,550
117,000 Equifax, Inc. 4,350,938
35,000 Interpublic Group Cos., Inc. 2,145,937
75,000 A.C. Nielsen Corp. 1,471,875
58,000 Omnicom Group 3,574,250
60,000 Valassis Communications, Inc. 1,440,000
--------------
16,753,550
--------------
Natural Gas-Diversified -- 0.6%
428,000 ENSERCH Corp. 9,523,000
267,600 Mitchell Energy & Dev. Corp. 5,820,300
62,000 Western Gas Resources, Inc. 1,209,000
--------------
16,552,300
--------------
Oil and Gas Producing -- 3.8%
294,000 Apache Corp. 9,555,000
148,000 Barrett Resources Corp. 4,430,750
See notes to financial statements.
- --------------------------------------------------------------------------------
29
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Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1997 (Unaudited)
Shares Value
- ----------------------------------------------------------------
205,000 Basin Exploration, Inc. $ 1,588,750
280,400 Tom Brown, Inc. 5,958,500
140,000 Cairn Energy USA, Inc. 1,837,500
304,000 Chieftain Int'l., Inc. 6,669,000
247,000 Devon Energy Corp. 9,077,250
81,800 Diamond Offshore Drilling, Inc. 6,390,625
228,100 Enron Oil and Gas Co. 4,134,312
419,800 Enserch Exploration, Inc. 4,591,563
61,900 Forcenergy Gas Exploration, Inc. 1,880,213
30,600 Nuevo Energy Co. 1,254,600
750,900 Petromet Resources Ltd. 1,736,456
54,700 Petsec Energy Ltd. 1,244,408
137,600 Pogo Producing Co. 5,323,400
1,160,000 Ranger Oil Ltd. 10,802,500
365,700 Rigel Energy Corp. 3,908,419
325,100 St. Mary Land & Exploration Co. 11,419,138
487,520 Seagull Energy Corp. 8,531,600
60,700 Snyder Oil Corp. 1,115,363
50,767 United Meridian Corp. 1,523,010
53,500 Vintage Petroleum, Inc. 1,645,125
320,000 Wainoco Oil Ltd. 1,360,000
--------------
105,977,482
--------------
Oil and Gas Services -- 3.4%
62,000 BJ Services Co. 3,324,750
86,090 Camco Int'l., Inc. 4,713,428
58,400 Cliffs Drilling Co. 2,131,600
70,000 Cooper Cameron Corp. 3,272,500
74,000 ENSCO Int'l., Inc. 3,903,500
95,200 Halliburton Co. 7,544,600
20,184 Halter Marine Group, Inc. 484,416
558,300 Input/Output, Inc. 10,119,188
521,000 Nabors Industries, Inc. 13,025,000
180,000 Noble Drilling Corp. 4,061,250
189,300 Offshore Logistics, Inc. 3,573,038
95,000 Pride Petroleum Services, Inc. 2,280,000
169,700 Schlumberger Ltd. 21,212,500
125,000 Smith Int'l., Inc. 7,593,750
26,000 Transocean Offshore, Inc. 1,888,250
117,700 Varco Int'l., Inc. 3,795,825
70,000 Weatherford Enterra, Inc. 2,695,000
--------------
95,618,595
--------------
Oil-Integrated-Domestic -- 1.3%
122,600 Amoco Corp. 10,658,538
114,600 Atlantic Richfield Co. 8,079,300
185,000 Murphy Oil Corp. 9,018,750
460,500 Tesoro Petroleum, Inc. 6,821,156
--------------
34,577,744
--------------
Oil-Integrated-International -- 6.2%
228,800 Chevron Corp. 16,916,900
1,018,800 Exxon Corp. 62,656,200
529,800 Mobil Corp. 37,019,775
798,800 Royal Dutch Petroleum Co. 43,135,200
113,400 Texaco, Inc. 12,332,250
--------------
172,060,325
--------------
Paper and Forest Products -- 1.0%
50,000 Caraustar Industries, Inc. 1,731,250
18,000 Consolidated Papers, Inc. 972,000
52,857 Deltic Timber Corp. 1,549,371
548,000 Rayonier, Inc. 23,050,250
--------------
27,302,871
--------------
Photography -- 0.4%
154,000 Eastman Kodak Co. 11,819,500
--------------
Publishing-News -- 0.5%
35,100 Central Newspapers, Inc. 2,514,038
66,700 Gannett Co., Inc. 6,586,625
74,100 Harte-Hanks Communications 2,185,950
20,000 Lee Enterprises, Inc. 527,500
6,700 Washington Post Co. 2,666,600
--------------
14,480,713
--------------
Railroads -- 0.7%
47,949 Burlington Northern Santa Fe 4,309,416
15,000 Kansas City Southern Inds., Inc. 967,500
72,200 Norfolk Southern Corp. 7,274,150
107,900 Union Pacific Corp. 7,606,950
--------------
20,158,016
--------------
Semiconductor -- 2.9%
91,000 Adaptec, Inc. 3,162,250
88,100 Altera Corp. 4,449,050
80,000 Dallas Semiconductor Corp. 3,140,000
480,400 Intel Corp. 68,126,725
--------------
78,878,025
--------------
See notes to financial statements.
- --------------------------------------------------------------------------------
30
<PAGE>
----------------
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Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------------------
Textile-Apparel and Production -- 0.5%
73,000 Jones Apparel Group, Inc. $ 3,485,750
70,000 Liz Claiborne, Inc. 3,263,750
72,600 Russell Corp. 2,150,775
64,000 V.F. Corp. 5,424,000
--------------
14,324,275
--------------
Transportation-Miscellaneous -- 0.3%
46,000 Airborne Freight Corp. 1,926,250
22,000 Expeditors Int'l. Wash., Inc. 624,250
32,000 GATX Corp. 1,848,000
376,700 Maritrans, Inc. 2,919,425
58,000 Trinity Industries, Inc. 1,841,500
--------------
9,159,425
--------------
Truckers -- 0.1%
32,100 FRP Ppty., Inc. 866,700
25,000 Swift Transportation, Inc. 737,500
--------------
1,604,200
--------------
Utilities-Communications -- 2.0%
148,000 Ameritech Corp. 10,054,750
255,400 Bellsouth Corp. 11,844,175
14,500 Harris Corp., DE 1,218,000
345,200 NYNEX Corp. 21,782,250
161,900 SBC Communications, Inc. 10,017,563
--------------
54,916,738
--------------
Utilities-Electric -- 0.4%
36,000 CalEnergy, Inc. 1,368,000
104,440 Duke Power Co. 5,006,593
26,000 KU Energy Corp. 887,250
31,000 LG&E Energy Corp. 683,938
29,000 Nipsco Industries, Inc. 1,198,062
40,000 Public Service Co., CO 1,660,000
--------------
10,803,843
--------------
Utilities-Gas and Pipeline -- 0.1%
45,000 KN Energy, Inc. 1,895,625
--------------
TOTAL COMMON STOCKS
(Cost $1,812,743,421) 2,637,235,521
--------------
- ------------------------------
SHORT-TERM INVESTMENTS -- 5.4%
- ------------------------------
Principal
Amount Value
- ----------------------------------------------------------------
COMMERCIAL PAPER -- 5.4%
$50,000,000 Corning, Inc.
6.15% due 7/1/97 $ 50,000,000
48,400,000 Goldman Sachs Group, LP
6.15% due 7/1/97 48,400,000
50,000,000 Koch Industries, Inc.
6.07% due 7/1/97 50,000,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $148,400,000) 148,400,000
--------------
TOTAL INVESTMENTS -- 101.1%
(Cost $1,961,143,421) 2,785,635,521
PAYABLES IN EXCESS OF CASH,
RECEIVABLES AND
OTHER ASSETS -- (1.1%) (30,006,277)
--------------
NET ASSETS -- 100.0% $2,755,629,244
==============
See notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
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Stock Fund, Inc.
- ----------------
2
- ----------------
- --------------------------------------------------------------------------------
The Guardian Stock Fund, Inc.
- -----------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997 (Unaudited)
ASSETS:
Investments, at identified cost $1,961,143,421
==============
Investments, at market 2,785,635,521
--------------
Cash 4,365,090
Receivable for securities sold 40,437,194
Dividends receivable 1,824,573
Receivable for fund shares sold 1,342,152
Other assets 7,691
Dividend reclaim receivable 40
--------------
TOTAL ASSETS 2,833,612,261
--------------
LIABILITIES:
Payable for securities purchased 72,116,914
Payable for fund shares redeemed 2,437,186
Accrued expenses 216,322
Due to affiliates 3,212,595
--------------
TOTAL LIABILITIES 77,983,017
--------------
NET ASSETS $2,755,629,244
--------------
COMPONENTS OF NET ASSETS:
Capital stock, at par $ 6,133,705
Additional paid-in capital 1,783,327,283
Undistributed net investment income 1,766,455
Accumulated net realized gain on investments 139,909,701
Net unrealized appreciation of investments 824,492,100
--------------
NET ASSETS $2,755,629,244
==============
Shares Outstanding -- $0.10 par value 61,337,052
--------------
NET ASSET VALUE PER SHARE $ 44.93
==============
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1997 (Unaudited)
Investment Income:
Income:
Dividends $ 17,251,277
Interest 3,835,043
--------------
21,086,320
Less: Foreign tax withheld 134,197
--------------
Total Income 20,952,123
--------------
Expenses:
Investment advisory fees -- Note B 6,075,082
Custodian fees 148,474
Registration fees 50,087
Audit fees 8,750
Insurance expense 7,691
Directors' fees -- Note B 6,250
Legal fees 2,800
Printing expense 2,750
Transfer agent fees 1,650
Other 350
--------------
Total Expenses 6,303,884
--------------
Net Investment Income 14,648,239
--------------
Realized and Unrealized Gain/(Loss)
on Investments -- Note D
Net realized gain on investments 139,914,958
Net change in unrealized appreciation
of investments 273,656,005
--------------
Net Realized and Unrealized Gain
on Investments 413,570,963
--------------
Net Increase in Net Assets
from Operations $ 428,219,202
==============
See notes to financial statements.
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32
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Stock Fund, Inc.
----------------
2
----------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1997 1996
(Unaudited) (Audited)
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 14,648,239 $ 27,147,649
Net realized gain on investments 139,914,958 222,958,266
Net change in unrealized appreciation of investments 273,656,005 203,188,926
--------------- ---------------
Net Increase in Net Assets from Operations 428,219,202 453,294,841
--------------- ---------------
Dividends and Distributions to Shareholders from:
Net investment income (12,881,784) (27,352,727)
Net realized gain on investments (45,899,231) (243,546,609)
--------------- ---------------
Total Dividends and Distributions to Shareholders (58,781,015) (270,899,336)
--------------- ---------------
From Capital Share Transactions:
Net increase in net assets from capital share transactions -- Note E 159,463,127 429,061,626
--------------- ---------------
Net Increase in Net Assets 528,901,314 611,457,131
Net Assets:
Beginning of period 2,226,727,930 1,615,270,799
--------------- ---------------
End of period* $ 2,755,629,244 $ 2,226,727,930
=============== ===============
* Includes undistributed net investment income of: $ 1,766,455 $ --
</TABLE>
See notes to financial statements.
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33
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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, 1997 -----------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
------------ -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ..... $38.59 $34.72 $27.33 $29.00 $25.52 $23.28
------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment
income ................ 0.24 0.53 0.44 0.40 0.58 0.48
Net realized and
unrealized gain/
(loss) on invest-
ments ................. 7.08 8.62 9.01 (0.77) 4.47 3.97
------ ------ ------ ------ ------ ------
Net increase/
(decrease) from
investment
operations ............ 7.32 9.15 9.45 (0.37) 5.05 4.45
------ ------ ------ ------ ------ ------
Dividends and Distributions
to Shareholders from:
Net investment income ... (0.21) (0.54) (0.44) (0.40) (0.59) (0.48)
Net realized gain ....... (0.77) (4.74) (1.62) (0.90) (0.98) (1.73)
------ ------ ------ ------ ------ ------
Total dividends and
distributions ......... (0.98) (5.28) (2.06) (1.30) (1.57) (2.21)
------ ------ ------ ------ ------ ------
Net asset value, end of
period .................. $44.93 $38.59 $34.72 $27.33 $29.00 $25.52
------ ------ ------ ------ ------ ------
Total return* ............. 18.97% 26.90% 34.65% (1.27)% 19.96% 20.07%
------ ------ ------ ------ ------ ------
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ....... $2,755,629 $2,226,728 $1,615,271 $1,038,991 $869,114 $537,354
Ratio of expenses to
average net assets .... 0.52%(a) 0.53% 0.53% 0.53% 0.54% 0.55%
Ratio of net invest-
ment income to
average net assets .... 1.21%(a) 1.50% 1.39% 1.49% 2.20% 2.14%
Portfolio turnover
rate .................. 24% 66% 78% 53% 45% 62%
Average rate of
commissions paid(b) ... $0.056 $0.047
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
1991 1990 1989 1988 1987
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ..... $17.85 $21.39 $19.18 $16.35 $17.15
------ ------ ------ ------ ------
Income from investment
operations
Net investment
income ................ 0.63 0.69 0.84 0.52 0.33
Net realized and
unrealized gain/
(loss) on invest-
ments ................. 5.74 (3.13) 3.61 2.80 0.06
------ ------ ------ ------ ------
Net increase/
(decrease) from
investment
operations ............ 6.37 (2.44) 4.45 3.32 0.39
------ ------ ------ ------ ------
Dividends and Distributions
to Shareholders from:
Net investment income ... (0.64) (0.71) (0.90) (0.49) (0.43)
Net realized gain ....... (0.30) (0.39) (1.34) -- (0.76)
------ ------ ------ ------ ------
Total dividends and
distributions ......... (0.94) (1.10) (2.24) (0.49) (1.19)
------ ------ ------ ------ ------
Net asset value, end of
period .................. $23.28 $17.85 $21.39 $19.18 $16.35
------ ------ ------ ------ ------
Total return* ............. 35.96% (11.85)% 23.55% 20.37% 1.87%
------ ------ ------ ------ ------
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ....... $380,962 $256,039 $269,950 $172,900 $139,437
Ratio of expenses to
average net assets .... 0.56% 0.57% 0.57% 0.61% 0.61%
Ratio of net invest-
ment income to
average net assets .... 3.07% 3.66% 4.13% 2.88% 2.08%
Portfolio turnover
rate .................. 51% 54% 38% 71% 37%
Average rate of
commissions paid(b) ...
</TABLE>
* Total returns do not reflect the effects of charges deducted pursuant to
the terms of GIAC's variable contracts. Inclusion of such charges would
reduce the total returns for all periods shown.
(a) Annualized.
(b) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
See notes to financial statements.
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35
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The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
- ---------------------
ASSET BACKED -- 17.4%
- ---------------------
Principal
Amount Value
- --------------------------------------------------------------------
$2,700,000 Amresco 1997-- 1 M1F
7.42% due 3/25/27 $ 2,712,960
6,000,000 Contimortgage 1996-2 A4
6.85% due 4/15/11 6,028,080
4,500,000 Contimortgage 1997-2 A7
7.34% due 3/15/23 4,532,850
4,500,000 Contimortgage 1997-2 A8
7.62% due 4/15/28 4,543,650
3,500,000 Deutsche Financial 1997-I A2
6.55% due 9/15/27 3,488,450
5,250,000 Equi Credit 1996-1 A4
6.56% due 3/15/23 5,154,975
1,100,000 Equi Credit 1997-2 A5
6.54% due 4/15/11 1,098,130
4,500,000 Firstplus 1997-1 A4
6.60% due 7/10/10 4,474,800
5,000,000 Green Tree 1996-1 A2
5.85% due 3/15/27 4,884,350
4,672,710 Green Tree 1996-2 A1
6.10% due 4/15/27 4,663,925
3,500,000 Green Tree Recreational 1997-B A1
6.55% due 7/1/18 3,492,300
4,250,000 The Money Store 1997-A A7
7.41% due 11/15/24 4,291,140
5,920,000 The Money Store 1996-C A11
6.96% due 8/15/10 5,957,296
4,500,000 The Money Store 1995-C A9
6.375% due 9/15/11 4,442,400
------------
TOTAL ASSET BACKED
(Cost $59,602,204) 59,765,306
------------
- ------------------------
CORPORATE BONDS -- 43.7%
- ------------------------
Biotechnology -- 1.0% $3,500,000 Millipore Corp.
7.20% due 4/1/02 $ 3,534,685
------------
Broadcasting -- 2.5%
2,500,000 Time Warner, Inc.
7.95% due 2/1/00 2,570,225
3,000,000 Time Warner, Inc.
7.75% due 6/15/05 3,048,750
$ 300,000 Turner Broadcasting System, Inc.
8.375% due 7/1/13 $ 3,111,450
------------
8,730,425
------------
Conglomerate -- 1.0% 3,500,000 RJR Nabisco, Inc.
7.625% due 9/15/03 3,447,360
------------
Containers-Metal -- 0.4%
1,500,000 Crown Cork & Seal Financial, PLC
7.00% due 12/15/06 1,485,015
------------
Drugs and Hospital -- 2.0% 7,000,000 Rhone Poulenc S.A
6.75% due 10/15/99 7,013,510
------------
Energy-Miscellaneous -- 0.7%
2,500,000 Consumers Energy Co.
7.50% due 6/1/02 2,529,200
------------
Fertilizer -- 1.0%
3,500,000 Potash Corp. Sask., Inc.
7.125% due 6/15/07 3,479,840
------------
Financial-Banks -- 3.2%
7,000,000 Bankers Trust Pref. Capital Tr. II
7.875% due 2/25/27 6,770,470
------------
4,000,000 Nationsbank Capital Tr. IV
8.25% due 4/15/27 4,098,960
------------
10,869,430
------------
Financial-Other -- 5.5%
9,500,000 Lehman Brothers, Inc.
6.92% due 10/4/99 9,567,450
6,000,000 Salomon, Inc.
6.70% due 12/1/98 6,022,500
3,000,000 Salomon, Inc.
7.25% due 5/1/01 3,034,800
------------
18,624,750
------------
Insurance -- 2.5%
5,000,000 Prudential Ins. Co. of America
7.65% due 7/15/01 5,059,550
3,500,000 Zurich Capital Tr
8.376% due 6/1/37 3,616,900
------------
8,676,450
------------
See notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
Principal
Amount Value
- --------------------------------------------------------------------
Machinery and Construction -- 2.2%
$ 3,500,000 Aktiebolaget SKF
7.125% due 7/1/07 $ 3,468,745
4,000,000 McDermott Int'l., Inc.
6.57% due 4/20/98 3,995,880
------------
7,464,625
------------
Merchandising-Department Store -- 1.0%
3,250,000 Sears Roebuck Acceptance Corp.
7.00% due 6/15/07 3,219,905
------------
Merchandising-Mass -- 1.0%
3,400,000 Wal Mart Stores, Inc.
8.75% due 12/29/06 3,505,604
------------
Miscellaneous-Capital Goods -- 1.5%
5,000,000 Ikon Capital, Inc.
6.73% due 6/15/01 4,982,050
------------
Oil-Integrated-International -- 1.5%
5,000,000 Petroliam Nasional Berhad
7.625% due 10/15/26 4,993,300
------------
Publishing -- 1.5%
5,000,000 News Amer. Hldgs., Inc.
7.50% due 3/1/00 5,099,300
------------
Railroads -- 4.4% 4,000,000 CSX Corp.
7.90% due 5/1/17 4,145,280
7,000,000 CSX Corp.
7.95% due 5/1/26 7,241,990
3,500,000 Norfolk Southern Corp.
7.80% due 5/14/27 3,594,850
------------
14,982,120
------------
Real Estate -- 0.6%
2,000,000 Simon DeBartolo Group, LP
6.875% due 11/15/06 1,935,400
------------
Telecommunications -- 3.2%
3,500,000 Comcast Cable Communications
8.875% due 5/1/17 3,815,035
7,000,000 TCI Communications
7.25% due 6/15/99 7,053,480
------------
10,868,515
------------
Tobacco -- 3.6%
$ 5,500,000 Bat Capital Corp.
6.875% due 4/15/03 $ 5,436,475
4,000,000 Philip Morris Cos., Inc.
7.50% due 4/1/04 4,064,320
3,000,000 Philip Morris Cos., Inc.
7.20% due 2/1/07 2,973,960
------------
12,474,755
------------
Utilities-Electric -- 1.4%
5,000,000 Duquesne Lt. Co. Secd. Mtn. Bk
6.70% due 5/15/03 4,887,900
------------
Utilities-Gas and Pipeline -- 2.0%
3,500,000 Tennessee Gas Pipeline Co.
7.50% due 4/1/17 3,499,580
3,500,000 Tennessee Gas Pipeline Co.
7.00% due 3/15/27 3,497,900
------------
6,997,480
------------
TOTAL CORPORATE BONDS
(Cost $149,335,829) 149,801,619
------------
- -------------------------------
MORTGAGE PASS-THROUGHS -- 19.6%
- -------------------------------
$ 6,600,000 FNMA TBA
6.50% due 7/15/12 (a) $ 6,471,828
32,300,000 FNMA TBA
7.50% due 7/15/27 (a) 32,387,856
5,200,000 FNMA TBA
7.00% due 7/15/12 (a) 5,191,628
1,989,826 FHLMC Pool #E54124
7.00% due 8/1/08 1,999,357
530,755 FNMA Pool #068106
8.50% due 8/1/09 554,378
989,995 FNMA Pool #068772
8.00% due 6/1/08 1,021,982
11,868 FNMA Pool #072923
8.25% due 1/1/09 12,252
2,956,313 FNMA Pool #217042
6.50% due 6/1/08 2,919,832
6,282 GNMA Pool #000375
11.50% due 7/20/00 6,637
See notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
- ---------------
The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1997 (Unaudited)
Principal
Amount Value
- --------------------------------------------------------------------
$ 110,589 GNMA Pool #352913
7.50% due 5/15/24 $ 111,431
455,140 GNMA Pool #368294
7.50% due 1/15/24 458,603
496,465 GNMA Pool #363384
7.50% due 2/15/24 500,243
101,615 GNMA Pool #369417
7.50% due 2/15/24 102,389
298,734 GNMA Pool #375967
7.50% due 1/15/24 301,007
638,315 GNMA Pool #376437
7.50% due 3/15/24 643,172
480,086 GNMA Pool #378966
7.50% due 1/15/24 483,739
310,359 GNMA Pool #381252
7.50% due 6/15/26 311,557
4,334,925 GNMA Pool #398991
7.50% due 12/15/26 4,351,658
24,417 GNMA Pool #408194
7.50% due 1/15/26 24,511
23,166 GNMA Pool #408275
7.50% due 4/15/26 23,255
25,400 GNMA Pool #410325
7.50% due 3/15/26 25,498
1,850,402 GNMA Pool #410896
7.50% due 1/15/26 1,857,544
201,067 GNMA Pool #421100
7.50% due 6/15/26 201,843
28,166 GNMA Pool #429109
7.50% due 4/15/26 28,275
334,844 GNMA Pool #430117
7.50% due 12/15/26 336,137
314,344 GNMA Pool #433313
7.50%due 12/15/26 315,558
334,306 GNMA Pool #433316
7.50% due 12/15/26 335,597
351,936 GNMA Pool #433329
7.50% due 12/15/26 353,296
3,157,283 GNMA Pool #439470
7.50% due 12/15/26 3,169,470
524,856 GNMAPool# 441339
7.50% due 12/15/26 526,882
$ 610,382 GNMA Pool #441939
7.50% due 12/15/26 $ 612,738
250,791 GNMA Pool #442186
7.50% due 12/15/26 251,760
809,545 GNMA Pool #442193
7.50% due 12/15/26 812,671
545,259 GNMA Pool #222105
7.50% due 3/15/24 549,408
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $66,960,940) 67,253,992
------------
- ------------------------------------------
MULTI-CLASS MORTGAGE PASS-THROUGHS -- 3.0%
- ------------------------------------------
$ 178,401 Citibank, NA
9.50% due 8/1/16 $ 180,631
381,233 Federal Nat'l. Mortgage Assn
7.00% due 4/25/12 379,803
4,000,000 Federal Nat'l. Mortgage Assn
6.50% due 10/25/08 3,828,720
5,919,221 GE Capital Mortgage Svcs., Inc.
7.00% due 3/25/26 5,730,398
------------
TOTAL MULTI-CLASS MORTGAGE
PASS-THROUGHS
(Cost $10,375,716) 10,119,552
------------
- ------------------------
U.S. GOVERNMENT -- 11.2%
- ------------------------
$ 1,250,000 U.S. Treasury Bonds
7.625% due 2/15/25 $ 1,368,750
3,000,000 U.S. Treasury Notes
7.50% due 10/31/99 3,085,320
3,600,000 U.S. Treasury Notes
6.875% due 8/31/99 3,653,424
2,250,000 U.S. Treasury Notes
6.625% due 515/07 2,268,630
9,000,000 U.S. Treasury Notes
6.50% due 5/31/01 9,049,230
3,000,000 U.S.Treasury Notes
6.50% due 5/31/02 3,012,180
1,000,000 U.S. Treasury Notes
6.50% due 11/15/06 959,060
See notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
- ---------------
The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
Principal
Amount Value
- --------------------------------------------------------------------
$10,000,000 U.S. Treasury Notes
5.875% due 11/15/99 $ 9,935,900
400,000 U.S. Treasury Notes
5.875% due 2/15/00 396,812
4,500,000 U.S. Treasury Notes
5.625% due 11/30/00 4,407,885
------------
TOTAL U.S. GOVERNMENT
(Cost $ 38,304,376) 38,137,191
------------
- --------------------
YANKEE BONDS -- 2.2%
- --------------------
$ 3,500,000 Corporacion Andina De Fomento
7.25% due 3/1/07 $ 3,512,425
4,250,000 Export Import Bank of Korea
6.50% due 2/10/02 4,169,973
------------
TOTAL YANKEE BONDS
(Cost $7,662,724) 7,682,398
------------
- ----------------------------
REPURCHASE AGREEMENT -- 1.3%
- ----------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------
$ 4,402,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/97, maturity
value $4,402,715 at 5.85%
due 7/1/97 (collateralized by
$4,460,000 U.S. Treasury
Notes, 6.00% due 5/31/98) 7/1/97 $ 4,402,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $4,402,000) 4,402,000
------------
TOTAL INVESTMENTS(b) -- 98.4%
(Cost $336,643,789) 337,162,058
------------
- -------------------------------------
OTHER ASSETS LESS LIABILITIES -- 1.6%
- -------------------------------------
Commercial Paper Vs. Forward MBS Purchases(a)
Automobile
$ 2,035,000 Volkswagen of America, Inc.
5.50% due 7/17/97 $ 2,030,026
------------
Electronics and Instruments
$ 2,050,000 EG & G, Inc.
5.55% due 7/17/97 $ 2,044,944
10,000,000 Xerox Corp.
5.50% due 7/14/97 9,980,139
------------
12,025,083
------------
Financial
10,664,000 Bank of America
5.50% due 7/14/97 10,642,820
12,136,000 Goldman Sachs Group, LP
5.55% due 7/14/97 12,111,765
------------
22,754,585
------------
Financial-Other
5,500,000 Clipper Receivables Corp.
5.57% due 8/18/97 5,459,153
------------
Utilities-Electric
4,200,000 PG & E Corp.
5.62% due 7/17/97 4,189,509
------------
TOTAL COMMERCIAL PAPER
(Cost $46,416,355) 46,458,356
------------
LIABILITIES (41,142,207)
------------
OTHER ASSETS LESS LIABILITIES 5,316,149
------------
NET ASSETS -- 100.0% $342,478,207
============
(a) Total commercial paper is pledged against mortgage backed securities
payables of $44,051,312.
(b) Total investments including commercial paper with the cost of $383,060,144
amounted to $383,620,414.
Glossary:
MBS -- Mortgage Backed Securities.
See notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
- ---------------
The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond Fund, Inc.
- ----------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997 (Unaudited)
ASSETS:
Investments, at identified cost* $ 383,060,144
=============
Investments, at market 379,218,414
Repurchase agreement 4,402,000
-------------
TOTAL INVESTMENTS 383,620,414
Cash 887
Receivable for securities sold 32,196,326
Interest receivable 3,443,733
Dollar roll receivable 410,480
Receivable for fund shares sold 219,913
Other assets 1,244
-------------
TOTAL ASSETS 419,892,997
-------------
LIABILITIES:
Payable for securities purchased 76,143,788
Payable for fund shares sold 780,914
Accrued expenses 31,700
Due to affiliates 458,388
-------------
TOTAL LIABILITIES 77,414,790
-------------
NET ASSETS $ 342,478,207
=============
COMPONENTS OF NET ASSETS:
Capital stock, at par $ 2,881,604
Additional paid-in capital 344,665,604
Undistributed net investment income 1,873,014
Accumulated net realized loss on investments (7,502,285)
Net unrealized appreciation of investments 560,270
-------------
NET ASSETS $ 342,478,207
=============
Shares Outstanding -- $0.10 par value 28,816,037
-------------
NET ASSET VALUE PER SHARE $ 11.88
=============
* Includes repurchase agreement.
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1997 (Unaudited)
Investment Income:
Income:
Interest $ 12,016,320
-------------
Expenses:
Investment advisory fees-- Note B 853,458
Custodian fees 61,760
Audit fees 8,750
Directors' fees 6,250
Printing expense 2,750
Transfer agent fees 1,650
Legal fees 1,493
Registration fees 1,327
Insurance expense 1,223
Other 350
-------------
Total Expenses 939,011
-------------
Net Investment Income 11,077,309
-------------
Realized and Unrealized Gain/(Loss)
on Investments -- Note D
Net realized loss on investments (5,199,140)
Net change in unrealized depreciation
of investments 5,939,086
-------------
Net Realized and Unrealized Gain
on Investments 739,946
-------------
Net Increase in Net Assets
from Operations $ 11,817,255
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
---------------
The Guardian
Bond Fund, Inc.
---------------
3
---------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1997 1996
(Unaudited) (Audited)
------------- -------------
<S> <C> <C>
INCREASE/(DECREASE) IN NETASSETS
From Operations:
Net investment income $ 11,077,309 $ 22,010,719
Net realized gain/(loss) on investments (5,199,140) 2,193,816
Net change in unrealized appreciation/
(depreciation) of investments 5,939,086 (14,421,607)
------------- -------------
Net Increase in Net Assets from Operations 11,817,255 9,782,928
------------- -------------
Dividends to Shareholders from:
Net investment income (10,203,167) (22,033,188)
------------- -------------
From Capital Share Transactions:
Net decrease in net assets from capital
share transactions-- Note E (13,568,878) (7,778,324)
------------- -------------
Net Decrease in Net Assets (11,954,790) (20,028,584)
Net Assets:
Beginning of period 354,432,997 374,461,581
------------- -------------
End of period* $ 342,478,207 $ 354,432,997
============= =============
* Includes undistributed net investment
income of: $ 1,873,014 $ 998,872
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
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The Guardian
Bond Fund, Inc.
- ---------------
3
- ---------------
- --------------------------------------------------------------------------------
The Guardian Bond 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, 1997 -----------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992 1991 1990
------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ........ $11.83 $12.25 $11.08 $12.24 $12.26 $12.33 $11.56 $11.67
------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment
income .................... 0.40 0.76 0.76 0.40 0.70 0.81 0.92 0.97
Net realized and unre-
alized gain/(loss)
on investments ............ 0.01 (0.42) 1.17 (0.82) 0.50 0.13 0.91 (0.11)
------ ------ ------ ------ ------ ------ ------ ------
Net increase/(decrease)
from investment
operations ................ 0.41 0.34 1.93 (0.42) 1.20 0.94 1.83 0.86
------ ------ ------ ------ ------ ------ ------ ------
Dividends and Distributions
to Shareholders from:
Net investment income ...... (0.36) (0.76) (0.76) (0.68) (0.70) (0.81) (0.92) (0.97)
Net realized gain .......... -- -- -- (0.06) (0.52) (0.20) (0.14) --
------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions ............. (0.36) (0.76) (0.76) (0.74) (1.22) (1.01) (1.06) (0.97)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period ..................... $11.88 $11.83 $12.25 $11.08 $12.24 $12.26 $12.33 $11.56
====== ====== ====== ====== ====== ====== ====== ======
Total return* ................ 3.50% 2.88% 17.59% (3.45)% 9.85% 7.70% 16.19% 7.57%
====== ====== ====== ====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ........... $342,478 $354,433 $374,462 $308,978 $340,269 $284,330 $222,299 $165,844
Ratio of expenses to
average net assets ........ 0.55%(a) 0.54% 0.54% 0.54% 0.55% 0.56% 0.57% 0.58%
Ratio of net invest-
ment income to
average net assets ........ 6.49%(a) 6.12% 6.43% 5.69% 5.56% 6.70% 7.81% 8.53%
Portfolio turnover
rate ...................... 171% 188% 298% 311% 220% 57% 43% 39%
</TABLE>
---------------------------
1989 1988 1987
---------------------------
Net asset value,
beginning of period ........ $11.16 $11.12 $12.41
------ ------ ------
Income from investment
operations
Net investment
income .................... 0.98 1.03 0.96
Net realized and unre-
alized gain/(loss)
on investments ............ 0.55 0.02 (0.92)
------ ------ ------
Net increase/(decrease)
from investment
operations ................ 1.53 1.05 0.04
------ ------ ------
Dividends and Distributions
to Shareholders from:
Net investment income ...... (1.02) (1.01) (1.23)
Net realized gain .......... -- -- (0.10)
------ ------ ------
Total dividends and
distributions ............. (1.02) (1.01) (1.33)
------ ------ ------
Net asset value, end of
period ..................... $11.67 $11.16 $11.12
====== ====== ======
Total return* ................ 13.88% 9.70% 0.32%
====== ====== ======
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ........... $147,753 $113,616 $103,846
Ratio of expenses to
average net assets ........ 0.60% 0.61% 0.62%
Ratio of net invest-
ment income to
average net assets ........ 8.78% 8.97% 8.97%
Portfolio turnover
rate ...................... 158% 24% 67%
* Total returns do not reflect the effects of charges deducted pursuant to
the terms of GIAC's variable contracts. Inclusion of such charges would
reduce the total returns for all periods shown.
(a) Annualized.
See notes to financial statements.
- --------------------------------------------------------------------------------
42
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- --------------------------------------------------------------------------------
43
<PAGE>
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The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ----------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
- -------------------------
COMMERCIAL PAPER -- 95.8%
- -------------------------
Principal
Amount Value
- -------------------------------------------------------------
FINANCIAL -- 39.9%
Bank Holding Companies -- 8.0%
$16,000,000 J.P. Morgan & Co., Inc.
5.53% due 7/25/97 $ 15,941,013
16,000,000 Republic New York Corp.
5.53% due 7/28/97 15,933,640
-------------
31,874,653
-------------
Finance Companies -- 19.9%
16,000,000 Associates Corp. of N.A.
5.62% due 7/2/97 15,997,502
16,000,000 Household Finance Corp.
5.56% due 7/21/97 15,950,578
16,000,000 Nat'l. Rural Utils. Coop. Fin. Corp.
5.50% due 7/9/97 15,980,444
16,000,000 USAA Capital Corp.
5.55% due 7/14/97 15,967,933
16,000,000 U.S. Central Credit Union
5.53% due 8/15/97 15,889,400
-------------
79,785,857
-------------
Insurance -- 4.0%
16,000,000 American Gen. Financial Corp.
5.54% due 7/30/97 15,928,596
-------------
Other Major Banks -- 8.0%
16,000,000 Barclays U.S. Funding Corp.
5.50% due 7/7/97 15,985,333
16,000,000 Dresdner U.S. Finance Co.
5.54% due 7/11/97 15,975,378
-------------
31,960,711
-------------
Total Financial 159,549,817
-------------
INDUSTRIAL -- 55.9%
Aerospace and Defense -- 3.9%
16,000,000 Rockwell Int'l. Corp.
5.53% due 8/20/97 15,877,111
-------------
Automotive -- 4.0%
16,000,000 Ford Motor Credit Co.
5.54% due 8/4/97 15,916,284
-------------
Chemicals -- 8.0%
16,000,000 E.I. Dupont de Nemours, Inc.
5.49% due 7/24/97 15,943,880
16,000,000 Monsanto Co.
5.53% due 8/1/97 15,923,809
-------------
31,867,689
-------------
Conglomerates -- 8.0%
16,000,000 General Electric Cap. Corp.
5.53% due 7/31/97 15,926,267
16,000,000 Mitsubishi Int'l. Corp.
5.59% due 7/29/97 15,930,436
-------------
31,856,703
-------------
Food and Beverage -- 4.0%
16,000,000 Hershey Foods Corp.
5.50% due 7/17/97 15,960,889
-------------
Household Products -- 4.0%
16,000,000 Colgate Palmolive Co.
5.55% due 8/6/97 15,911,200
-------------
Oil-Integrated-International -- 4.0%
16,000,000 Texaco, Inc.
5.52% due 7/10/97 15,977,920
-------------
Telecommunications -- 12.0%
16,000,000 Bell Atlantic Fin'l. Svcs.
5.56% due 7/1/97 16,000,000
16,000,000 Lucent Technologies, Inc.
5.52% due 7/23/97 15,946,027
16,000,000 Southwestern Bell Telephone Co.
5.53% due 8/29/97 15,854,991
-------------
47,801,018
-------------
Utilities-Electric -- 8.0%
16,000,000 Carolina Power & Light Co.
5.53% due 7/18/97 15,958,218
16,000,000 Union Electric Co.
5.50% due 7/16/97 15,963,333
-------------
31,921,551
-------------
Total Industrial 223,090,365
-------------
TOTAL COMMERCIAL PAPER
(Cost $382,640,182) 382,640,182
-------------
See notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- ----------------------------
REPURCHASE AGREEMENT -- 4.6%
- ----------------------------
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------
$18,159,000 State Street Bank & Trust
repurchase agreement,
date 6/30/97, maturity
value $18,161,951 at 5.85%
due 7/1/97 (collateralized
by $18,395,000 U.S.
Treasury Notes, 6.00%
due 5/31/98) 7/1/97 $ 18,159,000
-------------
TOTAL REPURCHASE AGREEMENT
(Cost $18,159,000) 18,159,000
-------------
TOTAL INVESTMENTS -- 100.4%
(Cost $400,799,182) 400,799,182
PAYABLES IN EXCESS OF CASH,
RECEIVABLES AND
OTHER ASSETS--(0.4%) (1,464,078)
-------------
NET ASSETS-- 100.0% $ 399,335,104
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
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The Guardian
Cash Fund, Inc.
- ---------------
4
- ---------------
- --------------------------------------------------------------------------------
The Guardian Cash Fund, Inc.
- ----------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997 (Unaudited)
ASSETS:
Investments, at identified cost* $400,799,182
============
Investments, at market 382,640,182
Repurchase agreement 18,159,000
------------
TOTAL INVESTMENTS 400,799,182
Cash 948
Receivable for fund shares sold 973,695
Interest receivable 2,951
Other assets 1,328
------------
TOTAL ASSETS 401,778,104
------------
LIABILITIES:
Payable for fund shares redeemed 1,821,576
Accrued expenses 72,582
Due to affiliates 548,842
------------
TOTAL LIABILITIES 2,443,000
------------
NET ASSETS $399,335,104
============
COMPONENTS OF NET ASSETS:
Capital stock, at par $ 3,993,351
Additional paid-in capital 395,341,753
------------
NET ASSETS $399,335,104
============
Shares Outstanding-- $0.10 par value 39,933,510
------------
NET ASSET VALUE PER SHARE $ 10.00
============
* Includes repurchase agreement.
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1997 (Unaudited)
Investment Income:
Income:
Interest $10,888,383
------------
Expenses:
Investment advisory fees-- Note B 992,219
Custodian fees 43,453
Registration fees 18,321
Audit fees 8,500
Directors' fees-- Note B 6,250
Printing expense 2,750
Transfer agent fees 1,650
Legal fees 1,400
Insurance expense 1,307
Other 350
------------
Total Expenses 1,076,200
------------
Net Investment Income, Representing
Net Increase in Net Assets
from Operations $ 9,812,183
============
See notes to financial statements.
- --------------------------------------------------------------------------------
46
<PAGE>
---------------
The Guardian
Cash Fund, Inc.
---------------
4
---------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
June 30, December 31,
1997 1996
(Unaudited) (Audited)
------------ ------------
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 9,812,183 $ 18,377,984
------------ ------------
Net Increase in Net Assets from Operations 9,812,183 18,377,984
------------ ------------
Dividends to Shareholders from:
Net investment income (9,812,183) (18,377,984)
------------ ------------
From Capital Share Transactions:
Net increase in net assets from capital
share transactions-- Note E 21,013,394 21,501,621
------------ ------------
Net Increase in Net Assets 21,013,394 21,501,621
Net Assets:
Beginning of period 378,321,710 356,820,089
------------ ------------
End of period $399,335,104 $378,321,710
============ ============
See notes to financial statements.
- --------------------------------------------------------------------------------
47
<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, 1997 ----------------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992 1991 1990
------------- ----------------------------------------------------------------------------------------
<S> <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
--------- --------- --------- --------- --------- --------- --------- ---------
Income from investment
operations
Net investment
income .............. 0.24 0.49 0.54 0.38 0.26 0.35 0.54 0.77
--------- --------- --------- --------- --------- --------- --------- ---------
Dividends to
Shareholders from:
Net investment income . (0.24) (0.49) (0.54) (0.38) (0.26) (0.35) (0.54) (0.77)
--------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of
period ............... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
========= ========= ========= ========= ========= ========= ========= =========
Total return* ........... 2.47% 4.98% 5.52% 3.82% 2.64% 3.21% 5.59% 7.95%
========= ========= ========= ========= ========= ========= ========= =========
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ....... $ 399,335 $ 378,322 $ 356,820 $ 386,986 $ 310,798 $ 318,879 $ 331,677 $ 331,600
Ratio of expenses to
average net assets .... 0.54%(a) 0.54% 0.54% 0.54% 0.54% 0.54% 0.55% 0.56%
Ratio of net investment
income to average
net assets ............ 4.94%(a) 4.86% 5.39% 3.81% 2.61% 3.17% 5.44% 7.67%
</TABLE>
Year Ended December 31, (Audited)
-----------------------------------
1989 1988 1987
Net asset value,
beginning of period ... $ 10.00 $ 10.00 $ 10.00
--------- --------- ---------
Income from investment
operations
Net investment
income .............. 0.87 0.72 0.63
--------- --------- ---------
Dividends to
Shareholders from:
Net investment income . (0.87) (0.72) (0.63)
--------- --------- ---------
Net asset value, end of
period ............... $ 10.00 $ 10.00 $ 10.00
========= ========= =========
Total return* ........... 8.70% 7.20% 6.30%
========= ========= =========
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ....... $ 262,865 $ 228,310 $ 164,326
Ratio of expenses to
average net assets .... 0.56% 0.58% 0.61%
Ratio of net investment
income to average
net assets ............ 8.67% 7.17% 6.27%
* Total returns do not reflect the effects of charges deducted pursuant to the
terms of GIAC's variable contracts. Inclusion of such charges would reduce
the total returns for all periods shown.
(a) Annualized.
See notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
49
<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, 1997 (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
per Fund 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:
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 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.
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
identified cost basis. Interest income, including amortization of premium and
discount, is recorded when earned. Dividends are re corded on the ex-dividend
date.
- --------------------------------------------------------------------------------
50
<PAGE>
------------------
The Guardian
Stock, Bond & Cash
------------------
4
------------------
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited) (continued)
Federal Income Taxes
Each Fund qualifies and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the Internal Revenue Code
of 1986, as amended (Code), and as such will not be subject to federal income
tax on investment income (including any realized capital gains) which is
distributed to its shareholders in accordance with the applicable provisions of
the Code. Therefore, no federal income tax provision is required.
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.
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 in come 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, 1997.
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 $6,250 for the six months
ended June 30, 1997.
- --------------------------------------------------------------------------------
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, 1997 (Unaudited) (continued)
- -------------------------------
Note C -- Repurchase Agreements
- -------------------------------
Collateral underlying repurchase agreements takes the form of either cash
or fully negotiable U.S. government securities. Repurchase agreements are fully
collateralized (including the interest earned thereon) and such collateral is
marked to market daily while the agreements remain in force. If the value of the
underlying securities falls below the value of the repurchase price plus accrued
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:
Six Months Ended June 30, 1997
(Unaudited)
--------------------------------
GSF GBF
--- ---
Purchases
Stocks and debt obligations ............ $ 689,635,573 $ 177,030,642
U.S. Government and government
agency obligations ................... -- 398,148,143
Proceeds
Stocks and debt obligations ............ $ 562,392,414 $ 177,723,333
U.S. Government and government
agency obligations ................... -- 397,398,546
The cost of investments owned at June 30, 1997 for federal income tax
purposes was the same as for financial reporting purposes. The gross unrealized
appreciation and depreciation of investments at June 30, 1997 for GSF and GBF
were as follows:
GSF GBF
--- ---
Gross Appreciation ..................... $ 832,134,025 $ 2,053,946
Gross Depreciation ..................... (7,641,925) (1,493,676)
------------- -------------
Net Unrealized Appreciation .......... $ 824,492,100 $ 560,270
============= =============
- --------------------------------------------------------------------------------
52
<PAGE>
------------------
The Guardian
Stock, Bond & Cash
------------------
4
------------------
- --------------------------------------------------------------------------------
COMBINED NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited) (continued)
- ---------------------------------------
Note E -- Transactions in Capital Stock
- ---------------------------------------
There are 100,000,000 shares of $0.10 par value capital stock authorized.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Year Ended Six Months Year Ended
Ended December Ended December
June 30, 1997 31, 1996 June 30, 1997 31, 1996
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
o The Guardian Stock Fund, Inc.
Shares sold 5,156,757 9,984,589 $ 216,285,699 $ 376,271,228
Shares issued in reinvestment of
dividends and distributions 1,307,116 7,056,955 58,781,016 270,899,336
Shares repurchased (2,833,149) (5,854,449) (115,603,588) (218,108,938)
- ----------------------------------------------------------------------------------------------------
Net increase 3,630,724 11,187,095 $ 159,463,127 $ 429,061,626
- ----------------------------------------------------------------------------------------------------
o The Guardian Bond Fund, Inc.
Shares sold 1,270,463 4,464,537 $ 15,183,129 $ 53,654,579
Shares issued in reinvestment of
dividends and distributions 857,409 1,871,161 10,203,167 22,033,188
Shares repurchased (3,262,496) (6,951,420) (38,955,174) (83,466,091)
- ----------------------------------------------------------------------------------------------------
Net decrease (1,134,624) (615,722) ($ 13,568,878) ($ 7,778,324)
- ----------------------------------------------------------------------------------------------------
o The Guardian Cash Fund, Inc.
Shares sold 16,573,653 33,287,898 $ 165,736,537 $ 332,878,981
Shares issued in reinvestment of
dividends and distributions 981,218 1,837,798 9,812,182 18,377,984
Shares repurchased (15,453,532) (32,975,534) (154,535,325) (329,755,344)
- ----------------------------------------------------------------------------------------------------
Net increase 2,101,339 2,150,162 $ 21,013,394 $ 21,501,621
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
Note F -- 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, 1997, none of the Funds borrowed against this
line of credit.
- --------------------------------------------------------------------------------
53
<PAGE>
- ------------------
Baillie Gifford
International Fund
- ------------------
5
- ------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
- ----------------------
COMMON STOCKS -- 94.1%
- ----------------------
Shares Value
- ----------------------------------------------------------------
ARGENTINA -- 1.2%
Gas Transport -- 0.3%
126,500 Transportadora De Gas Del Sur $ 1,581,250
Oil and Gas -- 0.5%
315,055 Perez Companc S.A. 2,530,284
Telephone -- 0.4%
64,500 Telefonica De Argentina S.A. 2,233,313
------------
6,344,847
------------
AUSTRALIA -- 3.5%
Bank -- 0.8%
608,000 Australia & NZ Bank Group 4,549,010
Beverage -- 0.4%
1,335,300 Fosters Brewing Group 2,482,516
Business Services -- 0.6%
175,700 Brambles Industries Ltd. 3,477,779
Metals and Mining -- 0.4%
325,689 WMC Ltd. 2,055,264
Petroleum Services -- 0.7%
39,961 Broken Hill Proprietary 588,397
358,200 Woodside Petroleum 3,086,090
Real Estate -- 0.6%
162,332 Lend Lease Corp. 3,435,107
------------
19,674,163
------------
BRAZIL -- 2.0%
Food and Beverage -- 0.3%
110,000 Companhia Cerveja Ria Brahma 1,684,375
Petroleum Services -- 0.4%
75,000 Petroleo Brasileiro S.A. 2,175,000
Retail Food -- 0.3%
64,000 Companhia Brasileira De Distribution 1,536,000
Telecommunications -- 1.0%
35,300 Telecomunicacoes Brasileiras 5,356,775
------------
10,752,150
------------
CHILE -- 0.7%
Mining -- 0.3%
202,800 Antofagasta Hldgs. 1,553,526
Utility - Electric -- 0.4%
60,000 Enersis S.A. 2,133,750
------------
3,687,276
------------
CZECH REPUBLIC -- 0.2%
Bank -- 0.2%
45,996 Komercni Banka S.A. 954,417
------------
FRANCE -- 3.8%
Broadcasting -- 0.6%
17,100 Canal Plus 3,328,807
Consumer Goods -- 0.4%
13,500 BIC 2,207,617
Electronics -- 0.8%
58,000 SGS Thomson Microelectronics NV 4,579,441
Oil-Integrated -- 0.9%
48,500 Elf Aquitaine 5,232,358
Retail Trade -- 1.1%
11,850 Comptoirs Modernes 6,250,957
------------
21,599,180
------------
GERMANY -- 10.2%
Automobile -- 1.8%
13,150 Volkswagen AG 10,080,586
Bank -- 0.8%
152,000 Bayerische Hypo/Wech Bank 4,544,923
Chemicals -- 2.4%
187,690 BASF AG 6,935,738
145,000 Hoechst AG 6,150,507
Drugs and Health Care-- 0.3%
22,000 GEHE AG 1,501,061
Footwear -- 1.5%
76,000 Adidas AG 8,410,068
Industrial Machinery -- 1.7%
20,450 Mannesmann AG 9,110,515
Software -- 0.7%
20,100 SAP AG 4,033,599
See notes to financial statements.
- --------------------------------------------------------------------------------
54
<PAGE>
------------------
Baillie Gifford
International Fund
------------------
5
------------------
Shares Value
- ----------------------------------------------------------------
Telecommunications -- 1.0%
225,470 Deutsche Telekom $ 5,429,586
------------
56,196,583
------------
HONG KONG -- 6.4%
Banks -- 1.9%
195,500 HSBC Hldgs. 5,895,591
330,000 Hang Seng Bank 4,706,801
Conglomerates -- 1.7%
579,000 CITIC Pacific Ltd. 3,617,209
644,000 Hutchison Whampoa 5,569,424
Real Estate -- 2.8%
891,000 Henderson Land Development 7,906,787
1,088,220 Hong Kong Land Hldgs. 2,894,665
768,000 New World Development Co. 4,579,867
------------
35,170,344
------------
HUNGARY -- 0.9%
Food and Beverage -- 0.4%
27,000 Pick Szeged RT 2,075,869
Pharmaceutical -- 0.5%
31,700 Richter Gedeon VEG 2,918,746
------------
4,994,615
------------
IRELAND -- 1.1%
Bank -- 0.6%
391,900 Allied Irish Bank 3,009,997
Construction Material -- 0.5%
273,080 CRH 2,861,026
------------
5,871,023
------------
ITALY -- 5.5%
Oil-lntegrated -- 1.2%
1,214,200 Eni Spa 6,876,254
Telephone -- 2.7%
2,186,000 Telecom Italia 7,016,263
2,435,000 Telecom Italia MOB 7,879,934
Textile-Apparel and Production -- 1.6%
127,800 Gucci Group NV 8,333,792
------------
30,106,243
------------
JAPAN -- 25.0%
Automobile -- 1.0%
190,000 Honda Motor Co. 5,718,897
Business Services-- 0.7%
54,000 Secom Co. 3,962,136
Chemical -- 1.0%
200,000 Shin Etsu Chem. Co. 5,304,485
Computer Systems -- 1.4%
200 NTT Data Communication Systems 7,729,890
Drugs and Health Care -- 1.3%
146,000 Sankyo Co. 4,904,031
102,000 Santen Pharmaceutical Co. 2,055,662
Electrical Equipment -- 2.4%
210,000 Matsushita Comm. 7,090,386
289,000 Omron Corp. 6,126,941
Electronics -- 5.6%
390,000 Canon, Inc. 10,615,949
113,000 Rohm Co. 11,633,223
100,000 Sony Corp. 8,715,757
Financial Services -- 2.9%
240,100 Credit Saison Co. 5,865,294
110,400 Promise Co. 6,318,479
12,800 Shohkoh Fund & Co. 3,875,066
Industrial Machinery -- 1.1%
69,300 SMC Corp. 5,852,592
Leisure Product -- 0.5%
16,500 Toho Co. 2,720,729
Photography -- 1.1%
153,000 Fuji Photo Film Co. 6,153,638
Real Estate -- 1.4%
523,000 Mitsubishi Estate 7,574,420
Retail Trade -- 2.3%
191,000 Jusco Co. 6,448,875
673,000 Mitsui & Co. 6,458,733
Telecommunications -- 1.1%
816 DDI Corp. 6,022,824
See notes to financial statements.
- --------------------------------------------------------------------------------
55
<PAGE>
- ------------------
Baillie Gifford
International Fund
- ------------------
5
- ------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
Schedule of investments (continued)
June 30, 1997 (Unaudited)
Shares Value
- ----------------------------------------------------------------
Tires and Rubber -- 1.2%
295,000 Bridgestone Corp. $ 6,846,100
------------
137,994,107
------------
MEXICO -- 1.1%
Conglomerate -- 0.3%
207,000 Alfa S.A. 1,411,689
Food, Beverage and Tobacco -- 0.3%
56,000 Pan American Beverages, Inc. 1,841,000
Telecommunications -- 0.5%
56,400 Telefonos De Mexico S.A. 2,693,100
------------
5,945,789
------------
NETHERLANDS -- 4.8%
Bank -- 1.5%
445,200 ABN Amro Hldgs. NV 8,301,146
Broadcasting and Publishing -- 2.1%
280,000 Ver Ned Uitgevers 6,190,840
43,010 Wolters Kluwer NV 5,236,838
Semiconductor-Equipment -- 1.2%
118,000 ASM Lithography Hldgs. 6,823,068
------------
26,551,892
------------
NEW ZEALAND -- 0.6%
Telecommunications -- 0.6%
679,000 Telecom Corp. of New Zealand 3,459,081
------------
POLAND -- 0.3%
Conglomerate -- 0.3%
175,000 Elektrim 1,522,897
------------
SINGAPORE -- 1.0%
Bank -- 0.5%
284,278 Overseas Chinese Bank 2,942,795
Publishing -- 0.5%
127,000 Singapore Press Hldgs. 2,558,299
------------
5,501,094
------------
SPAIN -- 2.0%
Bank -- 2.0%
351,500 Banco Santander S.A. 10,823,902
------------
SWEDEN -- 4.4%
Business Services -- 0.8
165,000 Securitas AB 4,649,990
Conglomerate -- 1.2%
72,000 Incentive AB 6,580,570
Construction and Mining Equipment -- 1.0%
216,000 Atlas Copco AB 5,640,489
Telecommunications -- 1.4%
192,700 LM Ericsson 7,585,437
------------
24,456,486
------------
SWITZERLAND -- 7.3%
Business Services -- 1.0%
13,800 Adecco S.A. 5,293,151
5,000 Danzas Hldgs. AG 75,342
Industrial Machinery -- 0.4%
1,245 Bobst AG 2,114,795
Insurance -- 1.1%
7,080 Winterthur 6,236,219
Pharmaceutical -- 4.8%
16,440 Novartis AG 26,281,479
------------
40,000,986
------------
UNITED KINGDOM -- 12.1%
Bank -- 1.6%
288,000 Abbey National 3,932,775
376,000 National Westminster Bank Co., PLC 5,056,187
Capital Goods-Technology -- 0.2%
100,000 Sage Group 1,090,772
Chemical -- 0.1%
245,000 Albright & Wilson 652,798
Conglomerate -- 0.5%
8,658 BTR PLC (wts.) 288
578,000 Williams Hldgs. 3,128,268
Construction Materials -- 0.1%
43,220 CRH 452,718
See notes to financial statements.
- --------------------------------------------------------------------------------
56
<PAGE>
------------------
Baillie Gifford
International Fund
------------------
5
------------------
Shares Value
- ----------------------------------------------------------------
Distributor -- 0.1%
204,000 Litho Supplies $ 704,922
Drugs and Healthcare -- 1.8%
320,000 Glaxo Wellcome 6,621,237
104,000 Zeneca Group 3,439,580
Electronics -- 0.7%
140,000 Eletrocomponents 1,042,145
139,000 Premier Farnell 1,080,997
340,000 Rotork 1,483,450
Engineering -- 0.5%
116,000 Siebe 1,966,521
46,500 Vosper Thorncroft 589,292
Financial Services -- 0.2%
135,000 3i Group 1,117,334
Food, Beverage and Tobacco -- 1.3%
190,000 Devro Int'l. 1,072,620
140,000 Highland Distilleries 767,038
538,900 Imperial Tobacco 3,464,083
153,000 Whitbread 1,935,138
Insurance -- 0.8%
70,000 Britannic Assurance 944,226
344,000 Prudential Corp. 3,362,251
Leisure Product -- 0.5%
203,000 Granada Group 2,670,643
Newspapers -- 0.3%
250,000 Mirror Group PLC 782,692
164,000 Southnews PLC 1,065,127
Oil-lnternational -- 0.9%
386,000 British Petroleum 4,801,763
Retail Trade -- 0.5%
369,700 Dixons Group 2,912,080
Support Services -- 0.1%
160,000 Dawson Hldgs. 492,929
Telecommunications -- 1.0%
503,991 Cable & Wireless Co. 2,660,571
585,000 Vodafone Group 2,854,409
Transportations -- 0.9%
130,000 Associated British Ports 555,295
288,000 BAA PLC 2,654,623
400,000 Firstbus 1,398,853
------------
66,753,625
------------
TOTAL COMMON STOCKS
(Cost $374,436,616) 518,360,700
------------
- -----------------------
PREFERRED STOCK -- 0.3%
- -----------------------
Shares Value
- ----------------------------------------------------------------
27,300 Companhia Energetica
De Minas+
(Cost $721,831) $ 1,405,950
------------
- ----------------------
CORPORATE BOND -- 0.5%
- ----------------------
Principal
Amount Value
- ----------------------------------------------------------------
$2,400,000 MBL Int'l. Finance Exch. Gtd.
Notes, 3% due 11/30/02
(Cost $2,400,000) $ 2,631,000
------------
See notes to financial statements.
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
57
<PAGE>
- ------------------
Baillie Gifford
International Fund
- ------------------
5
- ------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
SCHEDULE OF INVESTMENTS (continued)
June 30, 1997 (Unaudited)
- ----------------------------
REPURCHASE AGREEMENT -- 1.9%
- ----------------------------
Principal Maturity
Amount Date Value
- ----------------------------------------------------------------
$10,527,000 State Street Bank & Trust
repurchase agreement, dated
6/30/97, maturity value
$10,528,462 at 5.00% due
7/1/97 (collateralized by
$10,740,000 U.S. Treasury
Note, 5.875% due 1/31/99) 7/1/97 $ 10,527,000
------------
TOTAL REPURCHASE AGREEMENT
(Cost $10,527,000) 10,527,000
------------
TOTAL INVESTMENTS -- 96.8%
(Cost $388,085,447) 532,924,650
------------
CASH, RECEIVABLES AND
OTHER ASSETS LESS
PAYABLES -- 3.2% 17,819,579
------------
NET ASSETS -- 100.0% $550,744,229
============
See notes to financial statements.
- --------------------------------------------------------------------------------
58
<PAGE>
------------------
Baillie Gifford
International Fund
------------------
5
------------------
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997 (Unaudited)
ASSETS:
Investments, at identified cost* $ 388,085,447
=============
Investments, at market 522,397,650
Repurchase agreements 10,527,000
-------------
TOTAL INVESTMENTS 532,924,650
-------------
Cash 729
Foreign currency (Cost $6,693,663) 6,682,525
Receivable for fund shares sold 10,419,716
Receivable for securities sold 1,899,887
Dividends receivable 928,813
Dividend reclaims receivable 487,251
Interest receivable 7,662
Other assets 1,601
-------------
TOTAL ASSETS 553,352,834
-------------
LIABILITIES:
Payable for securities purchased 1,055,169
Payable for fund shares redeemed 222,229
Accrued expenses 167,660
Payable for foreign currency purchased 2,857
Due to affiliates 1,160,690
-------------
TOTAL LIABILITIES 2,608,605
-------------
NET ASSETS $ 550,744,229
=============
COMPONENTS OF NET ASSETS:
Capital stock, at par $ 2,798,919
Additional paid-in capital 405,227,373
Undistributed net investment income 1,247,702
Accumulated net realized loss on investments
and foreign currency related transactions (3,369,547)
Net unrealized appreciation of investments
and translation of assets and liabilities in
foreign currencies 144,839,782
-------------
NET ASSETS $ 550,744,229
=============
Shares Outstanding -- $0.10 par value 27,989,195
-------------
NET ASSET VALUE PER SHARE $ 19.68
=============
* Includes repurchase agreement.
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1997 (Unaudited)
Investment Income
Income:
Dividends $ 5,913,110
Interest 287,865
------------
6,200,975
Less: Foreign tax withheld 662,553
------------
Total Income 5,538,422
-------------
Expenses:
Investment advisory fees -- Note B 1,874,465
Custodian fees 327,509
Registration fees 14,500
Audit fees 10,500
Directors' fees -- Note B 6,250
Printing expenses 2,750
Transfer agent fees 1,750
Insurance expense 1,577
Legal fees 1,475
Other 360
------------
Total Expenses 2,241,136
------------
Net Investment Income 3,297,286
------------
Realized and Unrealized Gain/(Loss) on
Investments and Foreign Currencies -- Note D
Net realized loss on investments -- Note A (2,193,373)
Net realized loss on foreign currency
related transactions -- Note A (22,690)
Net change in unrealized appreciation of
investments -- Note D 66,798,755
Net change in unrealized depreciation from
translation of assets and liabilities in
foreign currencies -- Note D 54,518
------------
Net Realized and Unrealized Gain on
Investments and Foreign Currencies 64,637,210
-------------
Net Increase in Net Assets
from Operations $ 67,934,496
============
See notes to financial statements.
- --------------------------------------------------------------------------------
59
<PAGE>
- ------------------
Baillie Gifford
International Fund
- ------------------
5
- ------------------
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1997 1996
(Unaudited) (Audited)
------------- -------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income $ 3,297,286 $ 3,598,533
Net realized gain/(loss) on investments and foreign currency related transactions (2,216,063) 6,850,247
Net change in unrealized appreciation/(depreciation) on investments and translation of
assets and liabilities in foreign currencies 66,853,273 45,984,301
------------- -------------
Net Increase in Net Assets from Operations 67,934,496 56,433,081
------------- -------------
Dividends and Distributions to Shareholders from:
Net investment income (1,868,696) (3,598,533)
Distributions in excess of net investment income -- (2,499,964)
Net realized gain from investments (2,124,775) (5,631,085)
------------- -------------
Total Dividends and Distribution to Shareholders (3,993,471) (11,729,582)
------------- -------------
From Capital Share Transactions:
Net increase in net assets from capital share transactions-- Note F 30,600,463 94,212,372
------------- -------------
Net Increase in Net Assets 94,541,488 138,915,871
Net Assets:
Beginning of period 456,202,741 317,286,870
------------- -------------
End of period* $ 550,744,229 $ 456,202,741
============= =============
* Includes undistributed/(overdistributed) net investment income of: $ 1,247,702 $ (180,888)
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
60
<PAGE>
------------------
Baillie Gifford
International Fund
------------------
5
------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
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, (Audited) December 31,
1997 --------------------------------------------------------- 1991
(Unaudited) 1996 1995 1994 1993 1992 (Audited)
--------- --------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ..................... $ 17.26 $ 15.37 $ 14.69 $ 14.69 $ 11.16 $ 12.37 $ 10.00
--------- --------- --------- --------- --------- --------- ---------
Income from Investment Operations
Net investment income ................ 0.12 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 ........................ 2.41 2.21 1.49 (0.02) 3.54 (1.20) 2.52
--------- --------- --------- --------- --------- --------- ---------
Net increase/(decrease) from
investment operations ............. 2.53 2.36 1.65 0.13 3.77 (1.11) 2.56
--------- --------- --------- --------- --------- --------- ---------
Dividends and Distributions to
Shareholders from:
Net investment income ................ (0.07) (0.14) (0.15) (0.13) (0.24) (0.10) (0.04)
Distributions in excess of
net investment income ............. -- (0.10) (0.12) -- -- -- --
Net realized gain on investments
and foreign currency related
transactions ...................... (0.04) (0.23) (0.70) -- -- -- (0.15)
--------- --------- --------- --------- --------- --------- ---------
Total dividends and distributions .... (0.11) (0.47) (0.97) (0.13) (0.24) (0.10) (0.19)
--------- --------- --------- --------- --------- --------- ---------
Net asset value, end of period ............ $ 19.68 $ 17.26 $ 15.37 $ 14.69 $ 14.69 $ 11.16 $ 12.37
========= ========= ========= ========= ========= ========= =========
Total return+ ............................. 15.40% 15.41% 11.23% 0.87% 34.04% (8.90%) 8.56%
========= ========= ========= ========= ========= ========= =========
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ................... $ 550,744 $ 456,203 $ 317,287 $ 303,050 $ 186,795 $ 55,175 $ 36,012
Ratio of expenses to average
net assets ........................ 0.96%(a) 0.98% 0.99% 1.03% 1.11% 1.26% 1.67%(a)
Ratio of net investment income to
average net assets ................ 1.40%(a) 0.94% 0.97% 1.11% 1.75% 0.88% 0.61%(a)
Portfolio turnover rate .............. 22% 38% 52% 27% 18% 44% 14%
Average rate of commissions paid(b) .. $ 0.023 $ 0.036
</TABLE>
- ----------
* Commencement of operations.
+ Total returns do not reflect the effects of charges deducted pursuant to
the terms of GIAC's variable contracts. Inclusion of such charges would
reduce the total returns for all periods shown.
(a) Annualized.
(b) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
See notes to financial statements.
- --------------------------------------------------------------------------------
61
<PAGE>
- ----------------
GIAC Funds, Inc.
- ----------------
5
- ----------------
- --------------------------------------------------------------------------------
GIAC Funds, Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
- ------------------------------------------------
Note A -- Organization and Accounting Policies
- ------------------------------------------------
GIAC Funds, Inc. (the Company) is a diversified open-end management
investment company registered under the Investment Company Act of 1940, as
amended (1940 Act), which was incorporated in Maryland on October 29, 1990. The
Company was known as Baillie Gifford International Fund, Inc. prior to October
11, 1994 and GBG Funds, Inc. prior to March 27, 1997. Shares of the Company are
offered in three series, two of which, Baillie Gifford International Fund (BGIF)
and Baillie Gifford Emerging Markets Fund (BGEMF) are included in this report.
The remaining series had not commenced operations during this period. 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 & 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.
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 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. Investments in foreign securities are vulnerable to the effects of
changes in the relative values of the local currency and the U.S. dollar and to
the effects of changes in each country's legal, political and economic
environment.
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.
- --------------------------------------------------------------------------------
62
<PAGE>
----------------
GIAC Funds, Inc.
----------------
5
----------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 (Unaudited)
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 gain or 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 from translation of assets and liabilities in foreign currencies.
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 identified cost basis.
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
- --------------------------------------------------------------------------------
63
<PAGE>
- ----------------
GIAC Funds, Inc.
- ----------------
5
- ----------------
- --------------------------------------------------------------------------------
GIAC Funds, Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 (Unaudited)
temporary overdistributions of net realized gains and net investment income.
Currently, the Funds' policy is to distribute net investment income
approximately every six months and net capital gains once a year. This policy
is, however, subject to change at any time by the Company's Board of Directors.
Reclassifications of Capital Accounts
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 Funds.
- --------------------------------------------
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 average daily net assets and 1.00% of BGEMF's
average daily 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
$6,250 for the six months ended June 30, 1997.
- ---------------------------------------------
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.
- -----------------------------------
Note D -- Investment Transactions
- -----------------------------------
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
- --------------------------------------------------------------------------------
64
<PAGE>
----------------
GIAC Funds, Inc.
----------------
5
----------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 (Unaudited)
Six Months Ended June 30, 1997
(Unaudited)
-------------------------------
BGIF BGEMF
---- -----
Purchases
Stocks and debt obligations ............... $115,535,399 $43,574,761
Proceeds
Stocks and debt obligations ............... $103,049,225 $19,725,891
The cost of investments owned at June 30, 1997 for federal income tax
purposes for BGIF and BGEMF are the same as for financial reporting purposes.
The gross unrealized appreciation and (depreciation) of investments at June 30,
1997 were as follows:
BGIF BGEMF
---- -----
Gross Appreciation ........................... $147,181,388 $ 24,832,045
Gross Depreciation ........................... (2,342,185) (2,026,416)
------------ ------------
Net Unrealized Appreciation ............ $144,839,203 $ 22,805,629
============ ============
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.
There were no open forward foreign currency contracts at June 30, 1997.
- --------------------------------
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.
- --------------------------------------------------------------------------------
65
<PAGE>
- ----------------
GIAC Funds, Inc.
- ----------------
5
- ----------------
- --------------------------------------------------------------------------------
GIAC Funds, Inc., Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 1997 (Unaudited)
- ----------------------------------------
Note F -- Transactions in Capital Stock
- ----------------------------------------
There are 1,000,000,000 shares of $0.10 par value capital stock authorized.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Year Ended Six Months Year Ended
Ended December Ended December
June 30, 1997 31, 1996 June 30, 1997 31, 1996
(Unaudited) (Audited) (Unaudited) (Audited)
- -----------------------------------------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
o Baillie Gifford International Fund:
Shares sold 3,073,516 8,699,658 $ 56,919,808 $ 141,728,936
Shares issued in reinvestments of dividends
and distributions 144,154 688,306 2,841,292 11,729,581
Shares repurchased (1,660,690) (3,603,378) (29,160,637) (59,246,145)
- -----------------------------------------------------------------------------------------------------------
Net increase 1,556,980 5,784,586 $ 30,600,463 $ 94,212,372
- -----------------------------------------------------------------------------------------------------------
o Baillie Gifford Emerging Markets Fund:
Shares sold 3,025,180 4,246,440 $ 35,989,748 $ 40,664,774
Shares issued in reinvestments of dividends
and distributions 32,471 -- 412,105 --
Shares repurchased (827,543) (1,923,662) (10,524,593) (18,578,466)
- -----------------------------------------------------------------------------------------------------------
Net increase 2,230,108 2,322,778 $ 25,877,260 $ 22,086,308
- -----------------------------------------------------------------------------------------------------------
</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, 1997, neither of the Funds borrowed against
this line of credit.
- --------------------------------------------------------------------------------
66
<PAGE>
- --------------------------------------------------------------------------------
This page intentionally left blank.
- --------------------------------------------------------------------------------
67
<PAGE>
- --------------------
Value Line Centurion
Fund, Inc.
- --------------------
6
- --------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (unaudited)*
----------------------
COMMON STOCKS -- 89.5%
----------------------
Shares Value
- --------------------------------------------------------------------------------
Bank -- 8.0%
150,000 BankAmerica Corp. $ 9,684,375
200,000 Citicorp 24,112,500
300,000 Mellon Bank Corp. 13,537,500
100,000 NationsBank Corp. 6,456,250
------------
53,790,625
------------
Bank-Midwest -- 1.1%
151,567 Banc One Corp. 7,341,527
------------
Computer & Peripherals -- 6.0%
200,000 Cisco Systems, Inc.* 13,425,000
65,000 Compaq Computer Corp.* 6,451,250
60,000 Dell Computer Corp.* 7,046,250
180,000 Gateway 2000, Inc.* 5,838,750
200,000 Sun Microsystems, Inc.* 7,443,750
------------
40,205,000
------------
Computer Software & Services -- 7.9%
200,000 BMC Software, Inc.* 11,100,000
350,000 Computer Associates International,
Inc. 19,490,625
100,000 Microsoft Corp.* 12,637,500
200,000 Oracle Systems Corp.* 10,075,000
------------
53,303,125
------------
Drug -- 5.2%
170,000 Amgen Inc.* 9,881,250
120,000 Merck & Co., Inc. 12,420,000
105,000 Pfizer, Inc. 12,547,500
------------
34,848,750
------------
Financial Services -- 4.9%
200,000 Green Tree Financial Corp. 7,125,000
475,000 Money Store, Inc. (The) 13,626,562
190,000 Travelers Group, Inc. 11,981,875
------------
32,733,437
------------
Healthcare Information Systems -- 2.6%
250,000 HBO & Co. 17,218,750
------------
Insurance-Diversified -- 2.2%
100,000 American International Group, Inc. 14,937,500
------------
Insurance-Life -- 4.6%
500,000 Conseco, Inc. 18,500,000
250,000 SunAmerica, Inc. 12,187,500
------------
30,687,500
------------
Manufactured Housing/Recreational
Vehicles -- 3.2%
400,000 Coachmen Industries, Inc. 6,850,000
600,000 Oakwood Homes Corp. 14,400,000
------------
21,250,000
------------
Medical Supplies -- 5.5%
200,000 Cardinal Health, Inc. 11,450,000
120,000 Johnson & Johnson 7,725,000
220,000 Medtronic, Inc. 17,820,000
------------
36,995,000
------------
Oilfield Services/Equipment -- 15.9%
300,000 BJ Services Co.* 16,087,500
300,000 Baker Hughes Inc. 11,606,250
250,000 ENSCO International Inc.* 13,187,500
350,000 Global Marine, Inc.* 8,137,500
135,000 Halliburton Co. 10,698,750
500,000 Tidewater, Inc. 22,000,000
350,000 Transocean Offshore, Inc. 25,418,750
------------
107,136,250
------------
Packaging & Container -- 0.1%
25,100 Owens-Illinois, Inc.* 778,100
------------
Petroleum-Producing -- 2.8%
325,000 Louisiana Land & Exploration Co. 18,565,625
------------
Retail Building Supply -- 0.8%
150,000 Lowe's Companies, Inc. 5,568,750
------------
Retail-Special Lines -- 2.1%
300,000 Bed, Bath & Beyond, Inc.* 9,112,500
250,000 CompUSA, Inc.* 5,375,000
------------
14,487,500
------------
Retail Store -- 1.5%
400,000 Shopko Stores, Inc.* 10,200,000
------------
See notes to financial statements.
- --------------------------------------------------------------------------------
68
<PAGE>
--------------------
Value Line Centurion
Fund, Inc.
--------------------
6
--------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Securities Brokerage -- 2.8%
200,000 Merrill Lynch & Co., Inc. $ 11,925,000
170,000 Schwab (Charles) Corp. 6,916,875
------------
18,841,875
------------
Semiconductor -- 2.1%
100,000 Intel Corp. 14,181,250
------------
Shoe -- 3.5%
400,000 NIKE, Inc. Class "B" 23,350,000
------------
Telecommunications Equipment -- 2.5%
200,000 Ascend Communications, Inc.* 7,875,000
600,000 PairGain Technologies, Inc.* 9,300,000
------------
17,175,000
------------
Thrift -- 2.2%
215,000 Federal Home Loan Mortgage
Corp. 7,390,625
165,000 Federal National Mortgage
Association 7,198,125
------------
14,588,750
------------
Tobacco -- 2.0%
300,000 Philip Morris Companies, Inc. 13,312,500
------------
TOTAL COMMON STOCKS AND
TOTAL INVESTMENT
SECURITIES -- 89.5%
(Cost $466,735,652) 601,496,814
------------
- -------------------------------
SHORT-TERM INVESTMENTS -- 16.5%
- -------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 14.4%
$25,000,000 Federal National Mortgage
Association Discount Notes
5.41%, due 7/3/97 $ 24,992,486
25,000,000 Federal Home Loan Mortgage Corp.,
Discount Notes 5.43%, due 7/14/97 24,950,979
25,000,000 Federal National Mortgage
Association Discount Notes
5.49%, due 7/21/97 24,923,750
22,000,000 Federal Farm Credit Bank Notes
5.55%, due 8/1/97 22,000,000
------------
96,867,215
------------
REPURCHASE AGREEMENT -- 2.1%
(including accrued interest)
14,500,000 Collateralized by $11,435,000
U.S. Treasury Notes 11 7/8%,
due 11/15/03, with a value of
$14,813,685 (With Morgan Stanley
& Co., Inc. 5.70%, dated 6/30/97,
due 7/1/97, delivery value
$14,502,296) 14,502,296
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $111,369,511) 111,369,511
------------
EXCESS OF LIABILITIES OVER
CASH AND RECEIVABLES -- (-6.0%) (40,584,496)
------------
NET ASSETS -- 100.0% $672,281,829
============
NET ASSET VALUE PER
OUTSTANDING SHARE $ 27.29
============
($672,281,829 / 24,633,438
shares outstanding)
* Non-income producing
See notes to financial statements.
- --------------------------------------------------------------------------------
69
<PAGE>
- --------------------
Value Line Centurion
Fund, Inc.
- --------------------
6
- --------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997 (unaudited)
ASSETS:
Investment securities, at value
(cost $466,735,652) $ 601,496,814
Short-term investments (cost $111,369,511) 111,369,511
Cash 62,773
Dividends and interest receivable 457,025
Receivable for capital shares sold 189,368
-------------
TOTAL ASSETS 713,575,491
-------------
LIABILITIES:
Payable for securities purchased 40,810,991
Payable for capital shares repurchased 51,481
Accrued expenses:
Advisory fee 275,612
GIAC administrative service fee 125,000
Other 30,578
-------------
TOTAL LIABILITIES 41,293,662
-------------
NET ASSETS $ 672,281,829
=============
NET ASSETS CONSIST OF:
Capital stock, at $1.00 par value
(authorized 50,000,000, outstanding
24,633,438 shares) $ 24,633,438
Additional paid-in capital 383,705,646
Undistributed investment income -- net 3,435,265
Undistributed net realized gain on investments 125,746,318
Unrealized net appreciation of investments 134,761,162
-------------
NET ASSETS $ 672,281,829
=============
NET ASSET VALUE PER
OUTSTANDING SHARE
($672,281,829 / 24,633,438
shares outstanding) $ 27.29
=============
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1997 (unaudited)
Investment Income:
Dividends $ 1,880,896
Interest 1,402,693
-------------
Total Income 3,283,589
-------------
Expenses:
Investment advisory fee 1,607,719
GIAC administrative service fee 268,488
Custodian fees 38,249
Auditing and legal fees 21,475
Insurance and dues 16,160
Directors' fees and expenses 7,509
Taxes and other 666
-------------
Total Expenses Before Custody Credits 1,960,266
Less: Custody Credits (2,833)
-------------
Net Expenses 1,957,433
-------------
Investment Income -- Net 1,326,156
-------------
Realized and Unrealized Gain on Investments -- Net:
Realized gain -- net 11,966,427
Change in unrealized appreciation
of investments 47,209,751
-------------
Net Realized Gain and Change in Unrealized
Appreciation on Investments 59,176,178
-------------
Net Increase in Net Assets from Operations $ 60,502,334
=============
See notes to financial statements.
- --------------------------------------------------------------------------------
70
<PAGE>
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Value Line Centurion
Fund, Inc.
--------------------
6
--------------------
STATEMENT OF CHANGES IN NET ASSETS
for the Six Months Ended June 30, 1997 (unaudited)
and for the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1997 December 31,
(unaudited) 1996
------------- -------------
<S> <C> <C>
Operations:
Investment income -- net $ 1,326,156 $ 2,135,403
Realized gain on investments -- net 11,966,427 114,105,936
Change in unrealized appreciation 47,209,751 (25,679,011)
------------- -------------
Net increase in net assets from operations 60,502,334 90,562,328
------------- -------------
Distributions to Shareholder:
Investment income -- net -- (2,617,548)
Realized gain from investment transactions -- net -- (67,401,766)
------------- -------------
Total distributions -- (70,019,314)
------------- -------------
Capital Share Transactions:
Proceeds from sale of shares 35,194,947 134,593,465
Proceeds from reinvestment of distributions to shareholder -- 70,019,314
Cost of shares repurchased (62,756,278) (111,263,942)
------------- -------------
(Decrease) Increase from capital share transactions (27,561,331) 93,348,837
------------- -------------
Total Increase in Net Assets 32,941,003 113,891,851
Net Assets:
Beginning of period 639,340,826 525,448,975
------------- -------------
End of period $ 672,281,829 $ 639,340,826
============= =============
Undistributed Investment Income -- Net at End of Period $ 3,435,265 $ 2,109,109
============= =============
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
71
<PAGE>
- --------------------
Value Line Centurion
Fund, Inc.
- --------------------
6
- --------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited)
------------------------------------
1 -- Significant Accounting Policies
------------------------------------
Value Line Centurion Fund, Inc. (the "Fund") is an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's 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 may 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 system 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 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
- --------------------------------------------------------------------------------
72
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--------------------
Value Line Centurion
Fund, Inc.
--------------------
6
--------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited)
capital gains realized by the Fund, if any. Such distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. 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 Year Ended
June 30, 1997 December 31,
(unaudited) 1996
---------------- ------------
Shares sold 1,372,319 5,349,533
Shares issued in reinvestment
of dividends and distributions -- 3,184,143
----------- -----------
1,372,319 8,533,676
Shares repurchased 2,491,466 4,453,198
----------- -----------
Net (decrease) increase (1,119,147) 4,080,478
=========== ===========
Dividends per share $ -- $ .12
=========== ===========
Distributions per share from
net realized gains $ -- $ 3.09
=========== ===========
--------------------------------------
3 -- Purchases and Sales of Securities
--------------------------------------
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
Six Months Ended
June 30, 1997
(unaudited)
----------------
PURCHASES:
Investment Securities $236,962,860
============
SALES:
Investment Securities $309,652,786
============
- --------------------------------------------------------------------------------
73
<PAGE>
- --------------------
Value Line Centurion
Fund, Inc.
- --------------------
6
- --------------------
- --------------------------------------------------------------------------------
Value Line Centurion Fund, Inc.
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited)
At June 30, 1997, the aggregate cost of investment securities and
short-term investments for federal income income tax purposes is $578,105,163.
The aggregate appreciation and depreciation of investments for the period ended
June 30, 1997, based on a comparison of investment values and their costs for
federal in come tax purposes is $146,663,494 and $11,902,332 respectively,
resulting in a net appreciation of $134,761,162.
--------------------------------------------------
4 -- Investment Advisory Contract, Management
Fees and Transactions with Interested Parties
--------------------------------------------------
An advisory fee of $1,607,719 was paid or payable to Value Line, Inc. (the
Adviser), the Fund's investment adviser, for the period ended June 30, 1997.
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 re search,
investment programs, supervision of the investment port folio 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.
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 $1,234 for the period ended June 30,
1997. During the six months ended June 30, 1997, the Fund paid brokerage
commissions totalling $191,662 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 contractowner accounts and their ongoing maintenance,
printing and distribution of shareholder reports and providing ongoing
shareholder servicing functions. Such reimbursement is limited to an amount no
greater than $18.00 times the average number of accounts at the end of each
quarter during the year. During the period ended June 30, 1997, the Fund
incurred expenses of $268,488 in connection with such services rendered by
GIAC.
- --------------------------------------------------------------------------------
74
<PAGE>
--------------------
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Fund, Inc.
--------------------
6
--------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1997 -------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.83 $ 24.25 $ 17.83 $ 18.52 $ 20.04 $ 20.83
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income .06 .08 .12 .10 .12 .20
Net gains or losses on securities (both
realized and unrealized) 2.40 3.71 6.96 (.51) 1.73 1.03
-------- -------- -------- -------- -------- --------
Total from investment operations 2.46 3.79 7.08 (.41) 1.85 1.23
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- (.12) (.10) (.01) (.12) (.19)
Distributions from capital gains -- (3.09) (.56) (.27) (3.25) (1.83)
-------- -------- -------- -------- -------- --------
Total distributions -- (3.21) (.66) (.28) (3.37) (2.02)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 27.29 $ 24.83 $ 24.25 $ 17.83 $ 18.52 $ 20.04
======== ======== ======== ======== ======== ========
Total return** 9.91%+ 17.34% 40.08% -2.21% 9.21% 5.93%
======== ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $672,282 $639,341 $525,449 $352,745 $373,910 $347,116
Ratio of operating expenses to average
net assets .59%*(1) .60%(1) .62% .61% .61% .54%
Ratio of net investment income to average
net assets .41%* .36% .60% .57% .57% .99%
Portfolio turnover rate 39%+ 141% 114% 122% 118% 83%
Average commissions paid per share of
common stock investments purchased/sold $ .0493(2) $ .0490(2)
</TABLE>
(1) Before offset for custody credits.
(2) Disclosure effective for fiscal years beginning on or after 9/1/95.
+ Not annualized
* 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.
See notes to financial statements.
- --------------------------------------------------------------------------------
75
<PAGE>
- --------------------
Value Line Strategic
Asset Management
- --------------------
7
- --------------------
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- ---------------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (unaudited)
----------------------
COMMON STOCKS -- 45.2%
----------------------
Shares Value
- --------------------------------------------------------------------------------
Advertising -- 0.8%
158,000 Omnicom Group, Inc. $ 9,736,750
-----------
Aerospace/Defense -- 2.1%
75,000 BE Aerospace, Inc.* 2,371,875
112,000 McDonnell Douglas Corp. 7,672,000
29,000 Northrop Grumman Corp. 2,546,563
89,700 Precision Castparts Corp. 5,348,362
53,000 Sundstrand Corp. 2,958,062
45,000 Thiokol Corp. 3,150,000
-----------
24,046,862
-----------
Air Transport -- 0.6%
96,000 Airborne Freight Corp. 4,020,000
90,000 U.S. Airways Group, Inc.* 3,150,000
-----------
7,170,000
-----------
Apparel -- 0.6%
126,800 Fruit of the Loom, Inc.
Class "A"* 3,930,800
63,200 Liz Claiborne, Inc. 2,946,700
-----------
6,877,500
-----------
Auto & Truck -- 0.1%
30,000 Paccar, Inc. 1,393,125
-----------
Auto Parts-Original Equipment -- 0.4%
120,000 Tower Automotive, Inc.* 5,160,000
-----------
Bank -- 0.6%
88,000 Mellon Bank Corp. 3,971,000
78,000 SouthTrust Corp. 3,227,250
-----------
7,198,250
-----------
Bank-Midwest -- 0.6%
82,000 First Bank System, Inc. 7,000,750
-----------
Beverage-Soft Drink -- 0.8%
396,000 Coca-Cola Enterprises Inc. 9,108,000
-----------
Cement -- 0.1%
3,800 Vulcan Materials Co. 298,300
-----------
Chemical-Diversified -- 0.2%
47,000 Cytec Industries, Inc.* 1,756,625
-----------
Chemical-Specialty -- 0.2%
27,000 Praxair, Inc. 1,512,000
7,000 Rohm & Haas Co. 630,438
-----------
2,142,438
-----------
Coal/Alternate Energy -- 0.5%
79,500 AES Corp. (The)* 5,624,625
-----------
Computer & Peripherals -- 0.9%
50,000 Data General Corp.* 1,300,000
104,000 International Business
Machines Corp. 9,379,500
-----------
10,679,500
-----------
Computer Software & Services -- 1.9%
134,000 Compuware Corp.* 6,398,500
72,000 Electronics For Imaging, Inc.* 3,402,000
90,000 Fiserv, Inc.* 4,016,250
40,000 McAfee Associates Inc.* 2,525,000
60,000 National Data Corp. 2,598,750
53,000 PeopleSoft, Inc.* 2,795,750
-----------
21,736,250
-----------
Diversified Companies -- 3.0%
102,000 AlliedSignal, Inc. 8,568,000
34,000 Danaher Corp. 1,727,625
33,000 Raychem Corp. 2,454,375
56,000 Textron, Inc. 3,717,000
120,000 Tyco International, Ltd. 8,347,500
120,000 United Technologies Corp. 9,960,000
-----------
34,774,500
-----------
Drug -- 1.8%
110,000 Bio-Technology General Corp.* 1,485,000
7,000 Bristol-Myers Squibb Co. 567,000
52,000 Dura Pharmaceuticals, Inc.* 2,073,500
53,000 Merck & Co., Inc. 5,485,500
24,000 NBTY, Inc.* 672,000
80,000 Pfizer, Inc. 9,560,000
81,000 Vical, Inc.* 1,032,750
-----------
20,875,750
-----------
Drugstore -- 0.4%
94,000 CVS Corp. 4,817,500
-----------
Electric Utility-Central -- 0.3%
30,000 Cinergy Corp. 1,044,375
100,000 Houston Industries, Inc. 2,143,750
-----------
3,188,125
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
76
<PAGE>
--------------------
Value Line Strategic
Asset Management
--------------------
7
--------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Electric Utility-East -- 0.9%
51,700 American Electric Power Co.,
Inc. $ 2,171,400
30,000 Consolidated Edison Co. of
New York, Inc. 883,125
140,994 Duke Power Co. 6,758,900
-----------
9,813,425
-----------
Electric Utility-West -- 0.2%
80,000 Edison International 1,990,000
-----------
Electrical Equipment -- 1.1%
20,000 Cooper Industries, Inc. 995,000
103,000 General Electric Co. 6,733,625
41,000 Honewell, Inc. 3,110,875
26,000 Jabil Circuit, Inc.* 2,180,750
-----------
13,020,250
-----------
Electronics -- 1.3%
40,000 Hadco Corp.* 2,620,000
70,000 Lexmark International Group,
Inc.* 2,126,250
286,500 Symbol Technologies, Inc. 9,633,562
-----------
14,379,812
-----------
Entertainment -- 0.5%
90,000 Clear Channel Communications,
Inc.* 5,535,000
-----------
Environmental -- 0.7%
65,500 USA Waste Services, Inc.* 2,529,938
125,000 U.S. Filter Corp.* 3,406,250
60,000 United Waste Systems, Inc.* 2,460,000
-----------
8,396,188
-----------
Financial Services -- 0.8%
48,000 ADVANTA Corp. Class "A" 1,764,000
58,000 Green Tree Financial Corp. 2,066,250
37,000 Loews Corp. 3,704,625
34,000 Travelers Group, Inc. 2,144,125
-----------
9,679,000
-----------
Food Processing -- 0.9%
38,000 Campbell Soup Co. 1,900,000
150,000 Chiquita Brands International,
Inc. 2,062,500
50,000 ConAgra, Inc. 3,206,250
47,000 Dean Foods Co. 1,897,625
52,000 Morningstar Group Inc. (The)* 1,527,500
-----------
10,593,875
-----------
Grocery -- 2.5%
60,000 American Stores Co. 2,962,500
356,000 Kroger Co.* 10,324,000
342,400 Safeway, Inc.* 15,793,200
-----------
29,079,700
-----------
Hotel/Gaming -- 0.9%
44,000 Doubletree Corp.* 1,809,500
60,000 Hilton Hotels Corp. 1,593,750
195,000 International Game Technology 3,461,250
200,000 Prime Hospitality Corp.* 3,950,000
-----------
10,814,500
-----------
Household Products -- 0.4%
31,000 Procter & Gamble Co. 4,378,750
-----------
Industrial Services -- 0.5%
152,000 Equifax, Inc. 5,652,500
-----------
Insurance-Diversified -- 1.1%
50,000 American Bankers Insurance
Group, Inc. 3,162,500
34,000 American International
Group, Inc. 5,078,750
56,000 Marsh & McClennan Companies,
Inc. 3,997,000
-----------
12,238,250
-----------
Insurance-Life -- 1.6%
336,000 Conseco, Inc. 12,432,000
50,000 Equitable Companies, Inc.
(The) 1,662,500
30,000 SunAmerica Inc. 1,462,500
40,000 Torchmark Corp. 2,850,000
-----------
18,407,000
-----------
Insurance-Property/Casualty -- 0.8%
70,000 Allstate Corp. (The) 5,110,000
51,000 Progressive Corp. 4,437,000
-----------
9,547,000
-----------
Machinery -- 1.4%
100,000 DT Industries, Inc. 3,575,000
83,000 Deere & Co. 4,554,625
18,000 Dover Corp. 1,107,000
40,000 GATX Corp. 2,310,000
35,700 Parker-Hannifin Corp. 2,166,544
57,000 Zoltek Companies, Inc.* 2,180,250
-----------
15,893,419
-----------
See notes to financial statements.
- --------------------------------------------------------------------------------
77
<PAGE>
- --------------------
Value Line Strategic
Asset Management
- --------------------
7
- --------------------
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- ---------------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (unaudited)
Shares Value
- --------------------------------------------------------------------------------
Medical Services -- 0.7%
22,000 Aetna Inc. $ 2,252,250
108,000 Tenet Healthcare Corp.* 3,192,750
70,000 Universal Health Services,
Inc. Class "B"* 2,695,000
-----------
8,140,000
-----------
Medical Supplies -- 1.7%
20,000 Becton, Dickinson & Co. 1,012,500
218,154 Johnson & Johnson 14,043,664
32,000 McKesson Corp. 2,480,000
73,000 Safeskin Corp.* 2,148,937
-----------
19,685,101
-----------
Natural Gas-Diversified -- 0.2%
50,000 Burlington Resources, Inc. 2,206,250
-----------
Newspaper -- 0.1%
8,000 Gannett Co., Inc. 790,000
-----------
Office Equipment & Supplies -- 0.5%
267,625 Staples, Inc.* 6,222,281
-----------
Oilfield Services/Equipment -- 0.5%
88,000 Baker Hughes Inc. 3,404,500
80,000 Global Industries, Ltd.* 1,868,750
-----------
5,273,250
-----------
Packaging & Container -- 0.1%
28,000 Owens-Illinois, Inc.* 868,000
-----------
Petroleum-Integrated -- 2.2%
50,000 Amoco Corp. 4,346,875
60,000 Atlantic Richfield Co. 4,230,000
80,000 British Petroleum Co. PLC
(ADR) 5,990,000
46,000 Mobil Corp. 3,214,250
115,000 Occidental Petroleum Corp. 2,882,188
180,000 USX-Marathon Group 5,197,500
-----------
25,860,813
-----------
Petroleum-Producing -- 0.4%
249,000 Chesapeake Energy Corp. 2,443,312
60,000 Noble Affiliates, Inc. 2,321,250
-----------
4,764,562
-----------
Precision Instrument -- 0.2%
30,000 Perkin-Elmer Corp. 2,386,875
-----------
Recreation -- 0.3%
83,000 Harley- Davidson, Inc. 3,978,812
-----------
Retail-Special Lines -- 2.1%
40,000 AnnTaylor Stores Corp.* 780,000
108,000 Bed, Bath & Beyond, Inc.* 3,280,500
104,000 Borders Group, Inc.* 2,509,000
90,000 Goody's Family Clothing, Inc.* 2,463,750
23,600 Pier 1 Imports, Inc. 625,400
200,000 Ross Stores Inc. 6,537,500
200,000 TJX Companies, Inc. 5,275,000
70,000 Tiffany & Co. 3,233,125
-----------
24,704,275
-----------
Retail Building Supply -- 0.3%
168,000 Eagle Hardware and Garden,
Inc.* 3,843,000
-----------
Retail Store -- 2.4%
111,437 Consolidated Stores Corp.* 3,872,453
128,000 Costco Companies Inc.* 4,208,000
80,000 Dayton-Hudson Corp. 4,255,000
75,838 Dollar General Corp. 2,843,925
100,000 Family Dollar Stores, Inc. 2,725,000
110,000 Meyer (Fred), Inc.* 5,685,625
75,400 Shopko Stores, Inc.* 1,922,700
55,000 Stein Mart, Inc.* 1,650,000
-----------
27,162,703
-----------
Securities Brokerage -- 0.2%
50,000 Schwab (Charles) Corp. 2,034,375
-----------
Semiconductor-Capital Equipment -- 0.3%
100,000 Kulicke & Soffa Industries
Inc.* 3,246,875
-----------
Shoe -- 0.3%
119,250 Wolverine World Wide, Inc. 3,622,219
-----------
Telecommunications Equipment -- 0.2%
128,000 Loral Space & Communications
Ltd.* 1,920,000
-----------
Telecommunication Services -- 0.5%
184,000 Cincinnati Bell, Inc. 5,796,000
-----------
Tobacco -- 0.5%
129,000 Philip Morris Companies, Inc. 5,724,375
-----------
TOTAL COMMON STOCKS
(Cost $365,224,241) 521,233,285
-----------
See notes to financial statements.
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- ------------------------------------
U.S. TREASURY OBLIGATIONS -- 31.0%
- ------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$60,000,000 U.S. Treasury Notes 6 1/4%,
due June 30, 1998 $ 60,284,400
20,000,000 U.S. Treasury Notes 6 1/8%,
due August 31, 1998 20,052,200
70,000,000 U.S. Treasury Notes 6 3/4%,
due May 31, 1999 70,803,600
50,000,000 U.S. Treasury Notes 6.375%,
due May 15, 2000 50,156,500
16,000,000 U.S. Treasury Notes 7 3/4%,
due February 15, 2001 16,722,400
50,000,000 U.S. Treasury Notes 6 1/2%,
due May 31, 2002 50,172,500
38,000,000 U.S. Treasury Notes 5 7/8%,
due November 15, 2005 36,340,160
50,000,000 U.S. Treasury Bonds 7 1/4%,
due August 15, 2022 52,160,500
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $355,496,104) 356,692,260
-----------
TOTAL INVESTMENT SECURITIES -- 76.2%
(Cost $720,720,345) 877,925,545
-----------
- ---------------------------------
SHORT-TERM INVESTMENTS -- 23.7%
- ---------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY AND GOVERNMENT AGENCY
OBLIGATIONS -- 20.1%
$25,000,000 Federal National Mortgage
Association Discount Note
5.41%, due 7/3/97 $ 24,992,486
50,000,000 Federal National Mortgage
Association Discount Notes
5.44%, due 7/14/97 49,901,778
60,000,000 Federal Home Loan Mortgage
Corp. Notes 5.44%,
due 7/14/97 59,882,133
25,000,000 Federal National Mortgage
Association 5.43%,
due 7/17/97 24,939,667
10,000,000 Federal Farm Credit Bank
Notes 5.50%, due 9/2/97 10,000,000
62,000,000 U.S. Treasury Notes 6 1/8%,
due March 31, 1998 62,200,260
-----------
231,916,324
-----------
REPURCHASE AGREEMENTS -- 3.6%
(includes accrued interest)
41,000,000 Collateralized by $33,135,000
U.S. Treasury Notes 8 7/8%,
due 2/15/19, with a value of
$41,806,221 (with Goldman,
Sachs & Co., 5 3/4%, dated
6/30/97, due 7/1/97, delivery
value of $41,006,549) 41,006,549
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $272,732,301) 272,922,873
--------------
CASH AND RECEIVABLES
LESS LIABILITIES -- 0.1% 1,121,173
--------------
NET ASSETS -- 100.0% $1,151,969,591
==============
NET ASSET VALUE PER
OUTSTANDING SHARE $ 23.44
==============
($1,151,969,591 / 49,143,606
shares outstanding)
* Non-income producing.
See notes to financial statements.
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Asset Management
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- --------------------
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- ---------------------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997 (unaudited)
ASSETS
Investment in securities, at value
(cost $720,720,345) $ 877,925,545
Short-term investments (cost
$272,732,301) 272,922,873
Cash 71,790
Receivable for securities sold 23,378,853
Interest and dividends receivable 4,963,071
Receivable for capital shares sold 732,863
--------------
TOTAL ASSETS 1,179,994,995
--------------
LIABILITIES
Payable for securities purchased 25,635,185
Payable for capital shares repurchased 1,712,471
Accrued expenses:
Advisory fee 469,410
GIAC administrative service fee 176,050
Other 32,288
--------------
TOTAL LIABILITIES 28,025,404
--------------
NET ASSETS $1,151,969,591
==============
NET ASSETS CONSIST OF:
Capital stock, at $0.01 par value
(authorized unlimited, outstanding
49,143,606 shares) $ 491,436
Additional paid-in capital 771,977,352
Undistributed net investment income 43,410,690
Undistributed net realized gain on
investments 178,694,341
Unrealized net appreciation of
investments 157,395,772
--------------
NET ASSETS $1,151,969,591
==============
NET ASSET VALUE PER
OUTSTANDING SHARE
($1,151,969,591 / 49,143,606
shares outstanding) $ 23.44
==============
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 1997 (unaudited)
Investment Income:
Interest $17,349,296
Dividends (Net of foreign withholding
tax of $11,324) 2,592,252
--------------
Total Income 19,941,548
--------------
Expenses:
Investment advisory fee 2,735,297
GIAC administrative service fee 376,770
Custodian fees 51,539
Insurance and dues 28,090
Audit and legal fees 21,449
Trustees' fees and expenses 7,509
Taxes and other 346
--------------
Total Expenses Before Custody
Credits 3,221,000
--------------
Less: Custody credits (2,486)
--------------
Net Expenses 3,218,514
--------------
Investment Income -- Net 16,723,034
--------------
Realized and Unrealized Gain on
Investments -- Net:
Realized gain -- net 56,052,804
Change in unrealized appreciation of
investments 2,921,389
--------------
Net Realized Gain and Change in
Unrealized Appreciation on Investments 58,974,193
--------------
Net Increase in Net Assets from
Operations $75,697,227
==============
See notes to financial statements.
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STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1997 (unaudited)
and for the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1997 December, 31
(unaudited) 1996
--------------- ---------------
<S> <C> <C>
Operations:
Investment income -- net $ 16,723,034 $ 26,749,041
Realized gain on investments -- net 56,052,804 122,797,850
Change in unrealized appreciation 2,921,389 (6,850,866)
--------------- ---------------
Net increase in net assets from operations 75,697,227 142,696,025
--------------- ---------------
Distributions to Shareholder:
Investment income -- net -- (16,568,632)
Realized gain from investment transactions -- net -- (48,810,295)
--------------- ---------------
Total distributions -- (65,378,927)
--------------- ---------------
Trust Share Transactions:
Proceeds from sale of shares 42,577,220 119,168,249
Proceeds from reinvestment of distributions to shareholder -- 65,378,927
Cost of shares repurchased (39,089,615) (65,588,322)
--------------- ---------------
Increase from Trust share transactions 3,487,605 118,958,854
--------------- ---------------
Total Increase in Net Assets 79,184,832 196,275,952
Net Assets:
Beginning of period 1,072,784,759 876,508,807
--------------- ---------------
End of period $ 1,151,969,591 $ 1,072,784,759
=============== ===============
Undistributed Investment Income -- Net at End of Period $ 43,410,690 $ 26,687,656
=============== ===============
</TABLE>
See notes to financial statements.
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Asset Management
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- --------------------
- --------------------------------------------------------------------------------
Value Line Strategic Asset Management Trust
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (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. The Trust will attempt to
achieve its objective by following an asset allocation strategy based on data
derived from computer models for the stock and bond markets that shifts the
assets of the Trust among equity, debt and money market securities as the models
indicate and its investment adviser, Value Line, Inc. (the "Adviser"), deems
appropriate.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Trust in the
preparation of its financial statements.
(A) Security Valuation.
Securities listed on a securities exchange and over-the-counter securities
traded on the NASDAQ national market are valued at the closing sales price on
the date as of which the net asset value is being determined. In the absence of
closing sales prices for such securities traded in the over-the-counter market,
the security is valued at the midpoint between the latest available and
representative bid and asked prices.
The Board of Trustees has determined that the value of bonds and other
fixed-income securities be calculated on the valuation date by reference to
valuations obtained from an independent pricing service which determines
valuations for normal institutional-size trading units of debt securities,
without exclusive reliance upon quoted prices. This service takes into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data in determining valuations.
Short-term instruments with maturities of 60 days or less are valued at
amortized cost which approximates market value. Short-term instruments with
maturities greater than 60 days at the date of purchase are valued at the
midpoint between the latest available and representative asked and bid prices,
and commencing 60 days prior to maturity such securities are valued at amortized
cost. Other assets and securities for which market valuations are not readily
available are valued at fair value as the Board of Trustees may determine in
good faith.
(B) Repurchase Agreements.
In connection with transactions in repurchase agreements, the Trust's
custodian takes possession of the underlying collateral securities, the value of
which exceeds the principal amount of the repurchase transaction, including
accrued interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked-to-market on a daily basis
to ensure the adequacy of the collateral. In the event of default of the
obligation to repurchase, the
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (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 Year Ended
June 30, 1997 December 31,
(unaudited) 1996
---------------- ------------
Shares sold 1,892,025 5,553,832
Shares issued to shareholder
in reinvestment of dividends
and distributions -- 3,244,612
---------- ---------
1,892,025 8,798,444
Shares repurchased 1,733,887 3,048,207
---------- ---------
Net increase 158,138 5,750,237
========== =========
Dividends per share from
net investment income $ -- $ .37
========== =========
Distributions per share from
net realized gains $ -- $ 1.09
========== =========
- --------------------------------------------------------------------------------
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Asset Management
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Value Line Strategic Asset Management Trust
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited)
- --------------------------------------
3 -- Purchases and Sales of Securities
- --------------------------------------
Purchases and sales of investment securities, excluding short-term
investments, were as follows:
Six Months Ended
June 30, 1997
(unaudited)
----------------
PURCHASES:
U.S. Treasury Obligations $100,203,125
Other Investment Securities 159,211,500
------------
$259,414,625
============
SALES & MATURITIES:
Investment Securities $215,869,642
============
At June 30, 1997, the aggregate cost of investment securities and short-term
investments for federal income tax purposes is $993,477,834. The aggregate
appreciation and depreciation of investments at June 30, 1997, based on a
comparison of investment values and their costs for federal income tax purposes
is $165,228,149 and $7,857,565, respectively, resulting in a net appreciation of
$157,370,584.
- -----------------------------------------------
4 -- Investment Advisory Contract, Management
Fees and Transactions with Affiliates
- -----------------------------------------------
An advisory fee of $2,735,297 was paid or payable to the adviser, for the
period ended June 30, 1997. 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.
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 $1,234 by the Trust for the period ended
June 30, 1997. During the six months ended June 30, 1997, the Trust paid
brokerage commissions totalling $177,818 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 contractowner accounts and their ongoing maintenance,
printing and distribution of shareholder reports and providing ongoing
shareholder servicing functions. Such reimbursement is limited to an amount no
greater than $18.00 times the average number of accounts at the end of each
quarter during the year. During the six months ended June 30, 1997, the Trust
incurred expenses of $376,770 in connection with such services rendered by GIAC.
- --------------------------------------------------------------------------------
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--------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1997 ----------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.90 $20.27 $16.13 $17.01 $15.94 $14.54
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income .34 .53 .39 .26 .27 .26
Net gains or losses on securities (both realized
and unrealized) 1.20 2.56 4.17 (1.09) 1.62 1.93
------ ------ ------ ------ ------ ------
Total from investment operations 1.54 3.09 4.56 (.83) 1.89 2.19
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income -- (.37) (.26) (.01) (.28) (.26)
Distributions from capital gains -- (1.09) (.16) (.04) (.54) (.53)
------ ------ ------ ------ ------ ------
Total distributions -- (1.46) (.42) (.05) (.82) (.79)
------ ------ ------ ------ ------ ------
Net asset value, end of period $23.44 $21.90 $20.27 $16.13 $17.01 $15.94
====== ====== ====== ====== ====== ======
Total return** 7.03%+ 15.87% 28.54% -4.88% 11.86% 15.05%
====== ====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $1,151,970 $1,072,785 $876,509 $662,721 $615,648 $362,045
Ratio of operating expenses to average
net assets .59%*(1) .58%(1) .60% .60% .61% .55%
Ratio of net investment income to average
net assets 3.06%* 2.70% 2.18% 1.65% 1.96% 2.18%
Portfolio turnover rate 25%+ 71% 63% 100% 110% 106%
Average commissions paid per share of
common stock purchased/sold $.0493(2) $.0490(2) -- -- -- --
</TABLE>
(1) Before offset for custody credits.
(2) Disclosure effective for fiscal years beginning on or after 9/1/95.
+ Not annualized
* 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.
See notes to financial statements.
- --------------------------------------------------------------------------------
85
<PAGE>
[Logo]The Guardian(R) BULK RATE 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-012325 6/97 [Logo]Printed on recycled paper
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
SEPARATE ACCOUNT K - PARK AVENUE LIFE
This schedule contains financial information extracted from
the "Semi-Annual Report to Shareholders" dated June 30, 1997.
</LEGEND>
<CIK> 0000929240
<NAME> SEPARATE ACCOUNT K - PARK AVENUE LIFE
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 19,395,661
<INVESTMENTS-AT-VALUE> 21,392,839
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,392,839
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 76,697
<TOTAL-LIABILITIES> 76,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 54,906
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 303,781
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,997,178
<NET-ASSETS> 21,316,142
<DIVIDEND-INCOME> 107,343
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 52,437
<NET-INVESTMENT-INCOME> 54,906
<REALIZED-GAINS-CURRENT> 303,781
<APPREC-INCREASE-CURRENT> 1,924,904
<NET-CHANGE-FROM-OPS> 2,283,591
<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> 52,437
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52,437
<AVERAGE-NET-ASSETS> 15,713,254
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 2,228,685
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .003
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
BAILLIE GIFFORD EMERGING MARKETS FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 84,547
<INVESTMENTS-AT-VALUE> 107,353
<RECEIVABLES> 2,225
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 109,580
<PAYABLE-FOR-SECURITIES> 418
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 409
<TOTAL-LIABILITIES> 827
<SENIOR-EQUITY> 859
<PAID-IN-CAPITAL-COMMON> 84,442
<SHARES-COMMON-STOCK> 8,595
<SHARES-COMMON-PRIOR> 6,365
<ACCUMULATED-NII-CURRENT> 176
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 468
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,805
<NET-ASSETS> 108,752
<DIVIDEND-INCOME> 1,043
<INTEREST-INCOME> 151
<OTHER-INCOME> 0
<EXPENSES-NET> 636
<NET-INVESTMENT-INCOME> 557
<REALIZED-GAINS-CURRENT> 987
<APPREC-INCREASE-CURRENT> 14,680
<NET-CHANGE-FROM-OPS> 16,225
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,025
<NUMBER-OF-SHARES-REDEEMED> 827
<SHARES-REINVESTED> 32
<NET-CHANGE-IN-ASSETS> 41,690
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 30
<OVERDIST-NET-GAINS-PRIOR> (518)
<GROSS-ADVISORY-FEES> 513
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 442
<AVERAGE-NET-ASSETS> 89,234
<PER-SHARE-NAV-BEGIN> 10.54
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 2.10
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.5)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.65
<EXPENSE-RATIO> 1.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
BAILLIE GIFFORD INTERNATIONAL FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 388,085
<INVESTMENTS-AT-VALUE> 532,925
<RECEIVABLES> 20,426
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 553,353
<PAYABLE-FOR-SECURITIES> 1,055
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,553
<TOTAL-LIABILITIES> 2,609
<SENIOR-EQUITY> 2,799
<PAID-IN-CAPITAL-COMMON> 405,227
<SHARES-COMMON-STOCK> 27,989
<SHARES-COMMON-PRIOR> 26,432
<ACCUMULATED-NII-CURRENT> 1,248
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,3697)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 144,840
<NET-ASSETS> 550,744
<DIVIDEND-INCOME> 5,250
<INTEREST-INCOME> 288
<OTHER-INCOME> 0
<EXPENSES-NET> 2,241
<NET-INVESTMENT-INCOME> 3,297
<REALIZED-GAINS-CURRENT> (2,216)
<APPREC-INCREASE-CURRENT> 66,853
<NET-CHANGE-FROM-OPS> 67,934
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,869
<DISTRIBUTIONS-OF-GAINS> 2,125
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,073
<NUMBER-OF-SHARES-REDEEMED> 1,661
<SHARES-REINVESTED> 144
<NET-CHANGE-IN-ASSETS> 95,541
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 971
<OVERDISTRIB-NII-PRIOR> (181)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,049
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,874
<AVERAGE-NET-ASSETS> 472,500
<PER-SHARE-NAV-BEGIN> 17.26
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 2.41
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.68
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN BOND FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 383,060
<INVESTMENTS-AT-VALUE> 383,620
<RECEIVABLES> 36,270
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 419,893
<PAYABLE-FOR-SECURITIES> 76,144
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,271
<TOTAL-LIABILITIES> 77,415
<SENIOR-EQUITY> 2,882
<PAID-IN-CAPITAL-COMMON> 344,666
<SHARES-COMMON-STOCK> 28,816
<SHARES-COMMON-PRIOR> 29,951
<ACCUMULATED-NII-CURRENT> 1,873
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,502)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 560
<NET-ASSETS> 342,478
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12,016
<OTHER-INCOME> 0
<EXPENSES-NET> 939
<NET-INVESTMENT-INCOME> 11,077
<REALIZED-GAINS-CURRENT> (5,199)
<APPREC-INCREASE-CURRENT> 5,939
<NET-CHANGE-FROM-OPS> 11,817
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,203
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,270
<NUMBER-OF-SHARES-REDEEMED> 3,262
<SHARES-REINVESTED> 857
<NET-CHANGE-IN-ASSETS> (11,955)
<ACCUMULATED-NII-PRIOR> 999
<ACCUMULATED-GAINS-PRIOR> (2,303)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 853
<AVERAGE-NET-ASSETS> 344,208
<PER-SHARE-NAV-BEGIN> 11.83
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.36)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.88
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN CASH FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30,1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 400,799
<INVESTMENTS-AT-VALUE> 400,799
<RECEIVABLES> 977
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 401,778
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,443
<TOTAL-LIABILITIES> 2,443
<SENIOR-EQUITY> 3,993
<PAID-IN-CAPITAL-COMMON> 395,342
<SHARES-COMMON-STOCK> 39,933
<SHARES-COMMON-PRIOR> 37,832
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 399,335
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,888
<OTHER-INCOME> 0
<EXPENSES-NET> 1,076
<NET-INVESTMENT-INCOME> 9,812
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,812
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,812)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,574
<NUMBER-OF-SHARES-REDEEMED> 15,453
<SHARES-REINVESTED> 981
<NET-CHANGE-IN-ASSETS> 21,013
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,889
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 992
<AVERAGE-NET-ASSETS> 400,176
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.24)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN STOCK FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 1,961,143
<INVESTMENTS-AT-VALUE> 2,785,635
<RECEIVABLES> 47,969
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,833,612
<PAYABLE-FOR-SECURITIES> 72,117
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,866
<TOTAL-LIABILITIES> 77,983
<SENIOR-EQUITY> 6,134
<PAID-IN-CAPITAL-COMMON> 1,783,327
<SHARES-COMMON-STOCK> 61,337
<SHARES-COMMON-PRIOR> 57,706
<ACCUMULATED-NII-CURRENT> 1,766
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 139,910
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 824,492
<NET-ASSETS> 2,755,629
<DIVIDEND-INCOME> 17,117
<INTEREST-INCOME> 3,835
<OTHER-INCOME> 0
<EXPENSES-NET> 6,304
<NET-INVESTMENT-INCOME> 14,648
<REALIZED-GAINS-CURRENT> 139,915
<APPREC-INCREASE-CURRENT> 273,656
<NET-CHANGE-FROM-OPS> 428,219
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,882
<DISTRIBUTIONS-OF-GAINS> 45,899
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,157
<NUMBER-OF-SHARES-REDEEMED> 2,833
<SHARES-REINVESTED> 1,307
<NET-CHANGE-IN-ASSETS> 528,901
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 45,894
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,075
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,304
<AVERAGE-NET-ASSETS> 2,450,171
<PER-SHARE-NAV-BEGIN> 38.59
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 7.08
<PER-SHARE-DIVIDEND> (.21)
<PER-SHARE-DISTRIBUTIONS> (.77)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 44.93
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
