[LOGO] The Guardian(R)
The Guardian
Insurance & Annuity
Company, Inc.
A wholly owned subsidiary of
The Guardian Life Insurance
Company of America
Semiannual Report
to Contractowners
The Guardian
Variable Account 1
The Guardian
Variable Account 2
Executive Offices
201 Park Avenue South
New York, NY 10003
Customer Service Office
P.O. Box 26210
Lehigh Valley, PA 18002-6210
1-800-221-3253
June 30, 1995
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Table of Contents
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The Guardian Park Avenue Fund
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Interview with Charles E. Albers 2
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Fund Profile 4
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The Guardian Variable Account 1 6
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The Guardian Variable Account 2 7
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Combined Notes to Financial Statements 8
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The Guardian Park Avenue Fund
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Schedule of Investments 10
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Financial Statements 14
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Notes to Financial Statements 16
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Financial Highlights 18
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The Guardian Park Avenue Fund
[Photo of Charles E. Albers, Portfolio Manager]
Q. How did the Fund perform during the first six months of 1995?
A. The Guardian Park Avenue Fund performed very well during the first six months
of 1995. During this period, the Fund had a total return of 20.53 percent.* The
Fund slightly outperformed the S&P 500 Index, which had a total return of 20.11
percent.#
Of course, the longer-term results are more significant for investors who are
seeking to build wealth over time. From this perspective, The Guardian Park
Avenue Fund has also done well over longer time periods. For the five- and
ten-year periods ended June 30, 1995, average annual total returns were 15.50
percent and 15.36 percent, respectively.* As the chart below indicates, based on
total returns, for the periods ended June 30, 1995, the Fund outperformed its
Lipper peer group--the group of mutual funds with investment objectives and
policies similar to those of the Fund, over the one-, five-, and ten-year
periods. The Fund ranked in the top fifteen percent of the Lipper Growth Funds
category for both the five- and ten-year periods and in the top half for the
one-year period.+
The Guardian Park Avenue Fund beats Lipper Growth
Funds Average Annual Total Returns
for One, Five, and Ten Years
[The table below was represented as a line graph in the printed material.]
1 Year 5 Years 10 Years
------ ------- --------
The Guardian Park Avenue Fund 23.77% 15.50% 15.36%
Lipper Growth Funds Category 22.14% 11.22% 13.01%
Q. What strategies did you use during
this period?
A. For many years, our fundamental strategic approach to portfolio management
has been a hybrid: It combines a quantitative stock selection system as well as
fundamental judgments about the market sectors and individual securities.
Together these two elements work in a synergistic fashion. It is a "top-down
plus bottom-up" approach. Portfolio manager judgment comes into play from the
top down, making the strategic positioning decisions for the Fund's portfolio,
while the stock scoring system helps identify individual securities in the
particular sectors that the portfolio manager has selected. Let me explain a
little bit more.
Our proprietary stock scoring system, which we have been continuously
developing and refining since 1972, helps us locate attractive stocks. We follow
a universe of approximately 1,300 stocks and create a score for each stock
weekly. Using the stock's score, we determine the relative attractiveness of
buying, holding, and selling each security in our portfolio. The other essential
element of our process is portfolio manager judgment. This comes into play as
the portfolio manager, among other things, determines the portfolio allocation
between large-cap and small-cap segments of the market; determines the portfolio
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* Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account any sales charges that an investor
may incur when purchasing shares of the Fund.
# The S&P 500 Index is an unmanaged index that is generally considered to be
representative of U.S. stock market activity. The S&P 500 Index is not
available for investment and its returns do not reflect any sales charges
which an investor may have to pay when purchasing shares of a fund.
+ Lipper rankings were reported in Lipper's Mutual Funds Performance Analysis
Special Report, 2nd Quarter 1995. Rankings for the periods ended June 30,
1995 illustrate the Fund vs. other growth funds in the specified period. The
Fund ranked 18 out of a field of 145 growth funds over a ten-year period, 26
out of 230 for the five-year period and 203 out of 516 for the one-year
period. Lipper rankings are based on total return and do not take into
account any deductions for sales loads.
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2
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allocation between different economic sectors, such as energy, financial,
technology, etc.; and develops procedures to guide portfolio rebalancing.
Both aspects of our approach contributed to our good relative investment
performance during the first half of 1995. In general, the stock scoring system
successfully distinguished the better and poorer performing stocks. Although all
areas of the stock market did well this half of the year (even the stocks in our
bottom-ranked quintile had an average gain of 14.9 percent), the stocks that
were ranked in our top quintile showed an average gain of 20.4 percent. The
stock scoring system was clearly a valuable tool that enhanced portfolio
performance during this period.
The portfolio manager's judgment also contributed to the above-average
results. Our judgment on major issues during this period was pretty good. For
example, the Fund was substantially overweighted in technology during the
period, and it was the best performing sector of the twelve which we monitor. At
the same time, the portfolio was substantially under-weighted in utility company
shares, and that sector substantially underperformed in the market. Also, during
the first quarter of 1995, we surmised that the continuing decline in the
external value of the U.S. dollar would be an important stimulant for the shares
of U.S. companies with sizable global exposure. As a result, we moved a
significant portion of the portfolio into shares of these companies, which were
generally large-cap companies in either the technology or consumer nondurable
sectors. The move turned out very favorably, as many of those stocks were market
leaders during the balance of the first half of the year. We believe the theme
of large-cap growth-type companies leading the market is likely to continue
through the balance of 1995 and we will continue to move the portfolio in this
direction.
Q. What is your outlook on the economy?
A. The Federal Reserve has attempted to engineer a "soft landing" of the U.S.
economy in 1995, in order to contain inflationary pressures. At this point, it
appears that they have been generally successful. By "soft-landing," we mean two
or more successive quarters where real gross domestic product grows at less than
a two-percent rate and where a recession is avoided. Currently, it appears that
somewhat more rapid growth may resume in the fourth quarter of 1995 and continue
into 1996.
Looking forward for the next five years, we believe that two major areas of
growth stand out: first, high-tech capital equipment including exports of
high-tech capital goods; and second, consumer spending on healthcare, travel,
and recreation.
Q. What about the stock market?
A. Prospects for further stock market gains in the years ahead seem promising.
As the generation of "baby-boomers" ages, and their retirement financing needs
become more clear to them, the flow of money into the stock market seems likely
to increase. This investing may take many forms: direct, mutual funds, 401(k)
plans, pension plans, etc. Corporate stock buy-backs have also become an
important driving force in the marketplace, and the flow of funds from outside
the U.S. seems likely to increase. When you combine these factors with the
effects of an accommodating monetary policy and a reasonable level of stock
valuation, we believe that the basic conditions exist for potentially continuing
the bullish stock market.
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3
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The Guardian Park Avenue Fund Profile
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: 6/1/72
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Net Assets at June 30, 1995: $820,272,305
--------------------------------------------
"Some portfolio managers try to get the market to conform to their theories.
We believe it is more fruitful to simply perceive the 'way of the universe,' and
then get ourselves--and our portfolio--aligned with it."
-- Charles E. Albers
Comparison of Common Stocks Held by the Fund and the S&P 500 by Economic Sector
The two sectors where the Fund had a significant overweighting versus the S&P
500 were technology and basic industry. The overweighting in technology was an
important aid to performance in the first half of 1995.
[The tables below were represented as pie graphs in the printed material.]
The Guardian
Park Avenue Fund
----------------
Utilities - 0.08%
Other - 15.69%
Financial - 13.10%
Consumer Staples - 8.61%
Energy - 12.14%
Technology - 28.02%
Basic Industries - 15.58%
Capital Goods - 6.78%
S&P 500
-------
Utilities - 11.71%
Other - 17.78%
Consumer Staples - 20.94%
Energy - 9.95%
Technology - 15.52%
Financial - 11.45%
Basic Industries - 7.21%
Capital Goods - 5.44%
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Portfolio Composition
The Guardian Park Avenue Fund portfolio holds approximately 250 securities in
a variety of economic sectors. The portfolio manager's goal is to position the
portfolio for consistent performance in both "bull" and "bear" markets.
[The table below was represented as a pie graph in the printed material.]
Fixed Income (Including Convertibles) 1.3%
Cash & Cash Equivalents 7.6%
Common Stocks 91.1%
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4
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Growth of a Hypothetical Investment
[The table below was represented as a line graph in the printed document.]
The Guardian
Park Avenue S&P 500 Consumer Price
Fund Index Index
------------ ---------- --------------
Jun-72 $9,352.32 $9,791.00 $10,072.46
Jun-73 $7,757.72 $9,801.92 $10,676.33
Jun-74 $8,094.75 $8,376.17 $11,835.75
Jun-75 $10,222.18 $9,724.17 $12,922.71
Jun-76 $12,926.28 $11,077.06 $13,695.65
Jun-77 $15,548.55 $11,106.53 $14,613.53
Jun-78 $17,952.63 $11,100.41 $15,700.48
Jun-79 $20,459.31 $12,582.63 $17,439.61
Jun-80 $24,637.29 $14,721.83 $19,927.54
Jun-81 $30,553.08 $17,725.62 $21,859.90
Jun-82 $28,221.25 $15,681.66 $23,429.95
Jun-83 $49,604.02 $25,228.07 $24,009.66
Jun-84 $47,823.05 $24,027.87 $25,048.31
Jun-85 $55,012.85 $31,410.25 $25,966.18
Jun-86 $93,553.20 $42,591.68 $26,425.12
Jun-87 $104,621.96 $53,271.67 $27,439.61
Jun-88 $107,311.97 $49,514.75 $28,502.42
Jun-89 $124,277.43 $59,545.64 $29,975.85
Jun-90 $131,990.46 $69,210.91 $31,400.97
Jun-91 $136,860.25 $74,303.05 $32,874.40
Jun-92 $159,469.47 $84,210.21 $33,888.89
Jun-93 $215,651.58 $95,619.29 $34,879.23
Jun-94 $219,203.63 $96,936.39 $35,772.95
Jun-95 $271,285.18 $122,052.06 $36,884.06
A hypothetical $10,000 investment made at the inception of The Guardian Park
Avenue Fund on June 1, 1972, would have grown to $271,285 on June 30, 1995. This
represents a total return of 2,613 percent! We compare our performance to that
of the S&P 500, which is an unmanaged index that is generally considered the
performance benchmark of the U.S. stock market. The starting point for the Fund
of $9,550 reflects its initial sales charge of 4.5 percent. The starting point
for the S&P 500 Index of $10,000 does not reflect a sales charge. While you may
not invest directly in the S&P 500 Index, a similar hypothetical investment
would have had a total return of 1,121 percent and would now be worth $122,052.
The cost-of-living index, as measured by the consumer price index, which is
generally representative of the level of U.S. inflation, is also provided to
lend a more complete understanding of the investment's real worth.
<TABLE>
<CAPTION>
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Average Annual Returns for Periods Ended 6/30/95
Life of Fund
1 Year 5 Years 10 Years (since 6/1/72)
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<S> <C> <C> <C> <C>
Guardian Park Avenue Fund (without 4.5% sales charge) 23.77% 15.50% 15.36% 15.60%
-------------------------------------------------------------------------------------------------------------
Guardian Park Avenue Fund (incl. 4.5% sales charge) 18.20% 14.44% 14.83% 15.37%
-------------------------------------------------------------------------------------------------------------
S&P 500 Index 25.93% 12.02% 14.54% 11.45%
-------------------------------------------------------------------------------------------------------------
</TABLE>
These figures represent past performance and are no guarantee of future
results. Investment return and principal value will fluctuate and redemption
value may be more or less than original cost.
Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all fund expenses and the current maximum
sales charge of 4.5 percent except where noted. Prior to August 25, 1988, shares
of the Fund were offered at a higher sales charge, so actual returns would have
been somewhat lower.
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5
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THE GUARDIAN VARIABLE ACCOUNT 1
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Assets
Investment in The Guardian Park Avenue Fund (1,215,612 shares at
net asset value of $32.41 per share; LIFO Cost, $14,360,914) ........ $39,397,971
-----------
Liabilities
Due to The Guardian Insurance & Annuity Company, Inc. ................. 249,327
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Total Liabilities ..................................................... 249,327
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Net Assets -- Note 3 ..................................................... $39,148,644
===========
</TABLE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Income:
Reinvested dividends ................................................ $ --
Expense:
Mortality and expense risk charges -- Note 4 ........................ 220,651
-----------
Net investment income/(expense) ....................................... (220,651)
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Realized and Unrealized Gain/(Loss) from Investments
Net realized gain/(loss) from sale of investments ..................... 400,156
Reinvested realized gain distributions ................................ --
Unrealized appreciation/(depreciation) of investments:
End of period ....................................................... $25,037,056
Beginning of period ................................................. 18,603,158
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Change in unrealized appreciation/(depreciation) .................... 6,433,898
-----------
Net realized and unrealized gain/(loss) from investments .............. 6,834,054
-----------
Net Increase/(Decrease) in Net Assets Resulting from Operations
......................................................................... $ 6,613,403
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</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1995 1994
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Increase/(Decrease) from Operations
Net investment income/(expense) ....................................... $ (220,651) $ 37,749
Net realized gain/(loss) from sale of investments ..................... 400,156 (27,313)
Reinvested realized gain distributions ................................ -- 1,287,345
Change in unrealized appreciation/(depreciation) of investments ....... 6,433,898 (2,193,731)
----------- -----------
Net increase/(decrease) resulting from operations ..................... 6,613,403 (895,950)
----------- -----------
Contract Transactions
Net contract purchase payments ........................................ 175,235 207,813
Redemptions and annuity benefits ...................................... (2,269,613) (2,175,001)
----------- -----------
Net increase/(decrease) from contract transactions .................... (2,094,378) (1,967,188)
----------- -----------
Actuarial Increase in Reserves for Contracts in Payment Period ........... 90,804 102,188
----------- -----------
Total Increase/(Decrease) in Net Assets .................................. 4,609,829 (2,760,950)
Net Assets at December 31, 1994 .......................................... 34,538,815 37,299,765
----------- -----------
Net Assets at June 30, 1995 -- Note 3 .................................... $39,148,644 $34,538,815
=========== ===========
</TABLE>
See notes to financial statements.
6
<PAGE>
THE GUARDIAN VARIABLE ACCOUNT 2
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Assets
Investment in The Guardian Park Avenue Fund (352,964 shares at
net asset value of $32.41 per share; LIFO Cost, $4,794,060) ......... $11,439,556
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Liabilities
Annuitant Mortality Fluctuation Fund .................................. 68,634
Due to The Guardian Insurance & Annuity Company, Inc. ................. 60,993
-----------
Total Liabilities ..................................................... 129,627
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Net Assets -- Note 3 ..................................................... $11,309,929
===========
</TABLE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Income:
Reinvested dividends ................................................ $ --
Expense:
Mortality and expense risk charges -- Note 4 ........................ 70,651
-----------
Net investment income/(expense) ....................................... (70,651)
-----------
Realized and Unrealized Gain/(Loss) from Investments
Net realized gain/(loss) from sale of investments ..................... 30,061
Reinvested realized gain distributions ................................ --
Unrealized appreciation/(depreciation) of investments:
End of period ....................................................... $ 6,645,496
Beginning of period ................................................. 4,698,183
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Change in unrealized appreciation/(depreciation) .................... 1,947,313
-----------
Net realized and unrealized gain/(loss) from investments .............. 1,977,374
-----------
Net Increase/(Decrease) in Net Assets Resulting from Operations .......... $ 1,906,723
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
June 30, 1995 1994
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Increase/(Decrease) from Operations
Net investment income/(expense) ....................................... $ (70,651) $ 12,162
Net realized gain/(loss) from sale of investments ..................... 30,061 43,892
Reinvested realized gain distributions ................................ -- 363,080
Change in unrealized appreciation/(depreciation) of investments ....... 1,947,313 (655,900)
----------- -----------
Net increase/(decrease) resulting from operations ..................... 1,906,723 (236,766)
----------- -----------
Contract Transactions
Net contract purchase payments ........................................ 2,270 16,915
Redemptions and annuity benefits ...................................... (365,200) (705,312)
----------- -----------
Net increase/(decrease) from contract transactions .................... (362,930) (688,397)
----------- -----------
Actuarial Increase in Reserves for Contracts in Payment Period ........... 4,929 13,763
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Total Increase/(Decrease) in Net Assets .................................. 1,548,722 (911,400)
Net Assets at December 31, 1994 .......................................... 9,761,207 10,672,607
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Net Assets at June 30,1995 -- Note 3 ..................................... $11,309,929 $ 9,761,207
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</TABLE>
See notes to financial statements.
7
<PAGE>
THE GUARDIAN VARIABLE ACCOUNT 1
THE GUARDIAN VARIABLE ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
NOTE 1 -- Organization
The Guardian Variable Account 1 (VA-1) and The Guardian Variable Account 2
(VA-2) are registered unit investment trusts under the Investment Company Act of
1940, as amended, established by The Guardian Insurance & Annuity Company, Inc.
(GIAC). GIAC is a wholly owned subsidiary of The Guardian Life Insurance Company
of America (Guardian Life). The mutual fund available under the contracts
supported by VA-1 and VA-2 is The Guardian Park Avenue Fund(R) (the Fund). The
Fund has an investment advisory agreement with Guardian Investor Services
Corporation, a wholly owned subsidiary of GIAC. The VA-2 Separate Account has
two divisions, the VA-2 Division and the VA-19 Division. All VA-2 Separate
Account contract payments received subsequent to January 1, 1981 have been
allocated to the VA-19 Division.
Under applicable insurance law, the assets and liabilities of VA-1 and VA-2
are clearly identified and distinguished from the other assets and liabilities
of GIAC. The assets of VA-1 and VA-2 will not be charged with any liabilities
arising out of any other business conducted by GIAC, but the obligations of VA-1
and VA-2, including the promise to make annuity payments, are obligations of
GIAC.
NOTE 2 -- Significant Accounting Policies
The following is a summary of the significant accounting policies of both
VA-1 and VA-2.
Investments
(a) Net proceeds from the sale of variable annuity contracts are invested in
shares of the Fund at the net asset value of the Fund's shares. All
distributions made by the Fund are reinvested in shares of the Fund. (b) The
market value of investments in the Fund is based on the net asset value at the
close of the period. (c) Investment transactions are accounted for on the trade
date and income is recorded on the ex-dividend date. (d) The cost of Fund shares
sold is determined on a last in, first out (LIFO) basis.
During the six months ended June 30, 1995 and the year ended December 31,
1994, VA-1 purchases of shares of the Fund aggregated $438,291 and $2,021,354,
respectively, and VA-2 purchases aggregated $1,771 and $596,024, respectively.
Aggregate sales of shares of the Fund amounted to $2,532,669 and $2,521,383 for
VA-1 and $378,701 and $933,692 for VA-2 for the six months ended June 30, 1995
and the year ended December 31, 1994, respectively.
The Annuitant Mortality Fluctuation Fund
The Annuitant Mortality Fluctuation Fund is funded by GIAC and has been
established in response to various regulatory requirements and provides for any
possible adverse experience.
Federal Income Taxes
The operations of VA-1 and VA-2 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 the tax law, no federal income taxes are payable by GIAC with respect
to the operations of VA-1 and VA-2.
8
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Annuity Reserves
Annuity reserves are computed for currently payable contracts according to
the 1971 Individual Annuity Mortality Table and the 1983 Individual Annuity
Table. The assumed interest rate is 4.0%. Charges to annuity reserves for
mortality and expense risks experience are reimbursed to GIAC if the reserves
required are less than originally estimated. If additional reserves are
required, GIAC reimburses the Account.
NOTE 3 -- Net Assets, June 30, 1995 (Unaudited)
At June 30, 1995 net assets for the VA-1 and VA-2 Separate Accounts are
comprised as follows:
Units Accumulation Total Unit
Owned Unit Value Value
----- ---------- -----
VA-1 Separate Account:
VA-1 Division ................. 154,025.516 $241.132278 $37,140,523
Contracts receiving annuity
benefits .................... 2,008,121
-----------
$39,148,644
===========
VA-2 Separate Account:
VA-2 Division ................. 42,723.155 $218.164690 $ 9,320,684
VA-19 Division ................ 6,864.838 212.347379 1,457,730
-----------
10,778,414
Contracts receiving annuity
benefits .................... 531,515
-----------
$11,309,929
===========
NOTE 4 -- Mortality and Expense Risk Charges
Charges for mortality and expense risks paid to GIAC are computed daily and
are equal to an annual rate of 1% of the average daily net assets.
Currently, GIAC makes no charge against VA-1 and VA-2 for GIAC's federal
income taxes. However, GIAC reserves the right to charge taxes attributable to
VA-1 and VA-2 in the future.
NOTE 5 -- Accumulation Unit Values for the Current Period and
the Four Prior Year Ends
<TABLE>
<CAPTION>
June 30, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
VA-1 Separate Account:
VA-1 Division ........... $241.132278 $201.042264 $205.991442 $172.958667 $144.985656
VA-2 Separate Account:
VA-2 Division ........... $218.164690 $181.893203 $186.370977 $156.484543 $131.175931
VA-19 Division .......... $212.347379 $177.043070 $181.401443 $152.311918 $127.678162
</TABLE>
9
<PAGE>
Schedule of Investments
June 30, 1995 (Unaudited)
o The Guardian Park Avenue Fund
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Common Stocks -- 91.5%
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Aerospace and Defense -- 4.7%
59,000 Litton Industries, Inc. $ 2,175,625
36,400 Lockheed Martin Corp. 2,297,750
93,800 Logicon, Inc. 4,174,100
9,000 Loral Corp. 465,750
231,000 McDonnell Douglas Corp. 17,729,250
93,950 Precision Castparts Corp. 3,299,994
155,000 Rockwell Int'l. Corp. 7,091,250
46,100 Thiokol Corp. 1,394,525
------------
38,628,244
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Appliance and Furniture -- 0.2%
117,400 Maytag Corp. 1,878,400
--------------------------------------------------------------------------------
Automotive -- 0.8%
24,000 Borg Warner Automotive, Inc. 684,000
161,000 Echlin, Inc. 5,594,750
------------
6,278,750
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Broadcasting -- 1.3%
18,415 CBS, Inc. 1,233,805
92,000 Capital Cities, ABC, Inc. 9,936,000
------------
11,169,805
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Building Materials -- 0.3%
42,700 Coachmen Industries, Inc. 651,175
10,100 MCI Building Systems, Inc. 169,175
30,000 McGrath Rent Corp. 525,000
38,000 Del Webb Corp. 883,500
------------
2,228,850
--------------------------------------------------------------------------------
Business Services -- 1.1%
238,650 Paychex, Inc. 8,651,063
--------------------------------------------------------------------------------
Capital Goods-Miscellaneous Technology -- 0.5%
50,000 Aviall, Inc. 418,750
8,255 Olsten Corp. 270,350
105,000 Read-Rite Corp. 2,808,750
37,300 Rexel, Inc. 354,350
------------
3,852,200
--------------------------------------------------------------------------------
Chemicals -- 6.9%
34,000 Albemarle Corp. 531,250
35,000 Avery Dennison Corp. 1,400,000
77,800 Cambrex Corp. 2,625,750
35,000 Dow Chemical Co. 2,515,625
244,700 E.I. Dupont De Nemours, Inc. 16,823,125
127,700 Eastman Chemical Co. 7,598,150
217,800 Hercules, Inc. 10,617,750
23,000 Monsanto Co. 2,072,875
12,900 OM Group, Inc. 367,650
145,000 PPG Industries, Inc. 6,235,000
18,000 Schulman A., Inc. 517,500
182,000 Sterling Chemicals, Inc. 2,115,750
100,000 Union Carbide Corp. 3,337,500
------------
56,757,925
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Conglomerates -- 1.2%
174,700 Pittston Services Group 4,192,800
95,000 Textron, Inc. 5,521,875
------------
9,714,675
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Containers -- 0.2%
61,750 Alltrista Corp. 1,188,687
25,000 Ball Corp. 871,875
------------
2,060,562
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Cosmetics and Toiletries -- 0.2%
8,100 Helen of Troy Ltd. 170,100
44,000 Gillette Co. 1,963,500
------------
2,133,600
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Electrical Equipment -- 0.2%
15,000 Cable Design Technologies Corp. 322,500
21,300 Linear Technology Corp. 1,405,800
------------
1,728,300
--------------------------------------------------------------------------------
Electronics and Instruments -- 0.9%
200,000 Analogic Corp. 3,350,000
37,000 Electroglas, Inc. 2,118,250
31,000 Strattec Sec. Corp. 379,750
38,000 Tektronix, Inc. 1,871,500
------------
7,719,500
--------------------------------------------------------------------------------
Energy-Miscellaneous -- 0.7%
129,500 Giant Industries, Inc. 1,100,750
167,104 Holly Corp. 3,864,280
86,500 Howell Corp. 1,189,375
------------
6,154,405
--------------------------------------------------------------------------------
Entertainment -- 1.1%
58,000 Walt Disney Co. 3,226,250
134,272 Mattel, Inc. 3,491,072
6,000 National Gaming Corp. 51,750
5,880 Viacom, Inc., Cl A* 273,420
44,552 Viacom, Inc., Cl B* 2,066,099
54,800 Viacom, Inc., Non-Voting 82,200
------------
9,190,791
--------------------------------------------------------------------------------
Fertilizer -- 0.8%
55,800 First Mississippi Corp. 1,904,175
52,800 Mississippi Chemical Corp. 1,052,700
289,300 Terra Industries, Inc. 3,507,763
------------
6,464,638
--------------------------------------------------------------------------------
Financial-Banks -- 2.0%
80,000 Bank of New York, Inc. 3,230,000
23,000 Central & Southern Hldgs. Co. 168,188
38,464 Citicorp 2,226,104
18,000 Commonwealth Bankshares, Inc. 147,375
65,000 First Bank Systems Corp. 2,665,000
12,400 First Empire State Corp. 2,126,600
32,226 Gateway Bancorp, Inc. 386,712
49,005 Hubco, Inc. 875,964
70,000 Premier Bancorp., Inc. 1,260,000
--------------------------------------------------------------------------------
See Notes to Financial Statements.
10
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
123,240 Signet Banking Corp. $ 2,695,875
12,000 Star Banc Corp. 552,000
5,000 US Bancorp., Inc. 117,500
------------
16,451,318
--------------------------------------------------------------------------------
Financial-Others -- 4.4%
105,000 American Express Co. 3,688,125
123,240 Capital One Financial Corp. 2,403,180
95,000 Dean Witter Discover & Co. 4,465,000
152,200 Duff & Phelps Corp. 1,636,150
10,000 Duff & Phelps Cr. Rating Co. 130,000
163,000 First USA, Inc. 7,233,125
89,400 Foothill Group, Inc. 2,279,700
190,500 Green Tree Acceptance, Inc. 8,453,437
50,000 Jefferies Group, Inc. 1,800,000
57,400 McDonald & Co. Investments, Inc. 911,225
167,850 Morgan Keegan, Inc. 2,056,162
67,300 Raymond James Financial, Inc. 1,303,938
------------
36,360,042
--------------------------------------------------------------------------------
Financial-Thrift -- 3.7%
9,600 Albank Fin'l. Corp. 250,800
14,000 Bell Bancorp 395,500
75,000 Brooklyn Bancorp., Inc. 2,531,250
88,750 Charter One Financial, Inc. 2,174,375
47,000 Coastal Bank Svgs. Assn. - TX 763,750
152,199 Collective Bancorp, Inc. 3,082,030
53,100 Greenpoint Financial Corp. 1,254,488
59,800 Loyola Capital Corp. 1,853,800
24,600 MAF Bancorp, Inc. 578,100
59,200 Maryland Fed. Bancorp, Inc. 1,909,200
20,960 Pacific Crest Capital, Inc. 115,280
84,800 Progressive Bank, Inc. 2,173,000
171,000 Roosevelt Financial Group, Inc. 2,853,562
347,851 Sovereign Bancorp, Inc. 3,348,066
78,000 Standard Fed. Bk. - Troy, MI 2,622,750
93,982 TCF Financial Corp. 4,464,145
------------
30,370,096
--------------------------------------------------------------------------------
Food, Beverage and Tobacco -- 3.5%
165,000 Archer Daniels Midland Co. 3,073,125
29,700 Brown-Forman Corp. 991,237
196,300 Coca Cola Co. 12,514,125
73,700 IBP, Inc. 3,205,950
124,000 Philip Morris Cos., Inc. 9,222,500
------------
29,006,937
--------------------------------------------------------------------------------
Health Care -- 4.4%
145,700 Caremark International, Inc. 2,914,000
50,000 Circa Pharmaceuticals, Inc. 1,593,750
23,877 Coram Healthcare Corp. 337,263
50,000 Eli Lilly & Co., Inc. 3,925,000
32,400 Healthsource, Inc. 1,134,000
102,000 Humana, Inc. 1,797,750
77,000 Johnson & Johnson 5,207,125
78,000 Liposome, Inc. 848,250
104,000 McKesson Corp. 4,862,000
128,000 Merck & Co., Inc. 6,272,000
100,000 Universal Health Svcs., Inc. 2,900,000
148,900 U.S. Healthcare Systems, Inc. 4,560,062
------------
36,351,200
--------------------------------------------------------------------------------
Household Products -- 0.9%
105,200 Procter & Gamble Co. 7,561,250
--------------------------------------------------------------------------------
Information Processing -- 8.4%
89,800 Amdahl Corp. 999,025
46,200 Astro-Med, Inc. 528,412
66,100 Ceridian Corp. 2,437,438
258,000 Computer Assoc. Int'l., Inc. 17,479,500
80,000 Fair Isaac & Co., Inc. 2,380,000
116,400 Hewlett Packard Co. 8,671,800
30,500 In Focus Systems, Inc. 823,500
260,700 Int'l. Business Machine 25,027,200
18,700 Legent Corp. 818,125
220,000 Quantum Corp. 5,032,500
50,500 Sungard Data Systems, Inc. 2,638,625
38,900 Teradyne, Inc. 2,543,088
------------
69,379,213
--------------------------------------------------------------------------------
Insurance -- 1.9%
55,000 AMBAC, Inc. 2,206,875
48,000 American Eagle Group, Inc. 576,000
74,000 Amer. Bankers Ins. Group, Inc. 2,349,500
22,700 Capital Guaranty Corp. 408,600
17,000 Capitol Amer. Fin'l. Corp. 386,750
89,400 Equitable Iowa Cos., Inc. 2,939,025
42,080 Liberty Financial Cos., Inc. 1,083,560
65,000 MBIA, Inc. 4,322,500
61,500 State Auto Financial Corp. 1,153,125
------------
15,425,935
--------------------------------------------------------------------------------
Leisure Products -- 1.0%
22,700 Arctco, Inc. 266,725
180,000 Brunswick Corp. 3,060,000
56,300 Callaway Golf Co. 844,500
60,000 Harley-Davidson, Inc. 1,462,500
11,000 Recoton Corp. 214,500
30,800 Sturm Ruger & Co., Inc. 1,004,850
64,200 Thor Industries, Inc. 1,267,950
------------
8,121,025
--------------------------------------------------------------------------------
Lodging -- 1.6%
75,000 Hospitality Franchise Sys. Co.* 2,596,875
599,800 Host Marriott Corp. 6,372,875
75,000 Marriott Int'l., Inc. 2,690,625
175,000 Prime Hospitality Corp. 1,728,125
------------
13,388,500
--------------------------------------------------------------------------------
See Notes to Financial Statements.
11
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Machinery and Equipment -- 6.0%
16,000 AGCO Corp. $ 600,000
155,000 Briggs & Stratton Corp. 5,347,500
30,000 Case Corp. 892,500
45,000 Caterpillar, Inc. 2,891,250
136,129 Cummins Engine, Inc. 5,938,628
61,900 Dana Corp. 1,771,887
35,000 Deere & Co. 2,996,875
59,000 Dover Corp. 4,292,250
94,300 Eaton Corp. 5,481,187
12,000 Furon Co. 264,000
155,600 Indresco, Inc. 2,411,800
45,000 Millipore Corp. 3,037,500
55,500 Parker Hannifin Corp. 2,011,875
74,100 Pentair, Inc. 3,223,350
15,400 Robbins & Myers, Inc. 423,500
20,100 Roper Industries, Inc. 703,500
69,900 Tecumseh Products Co. 3,075,600
63,938 Varlen Corp. 1,502,530
60,000 York International Corp. 2,700,000
------------
49,565,732
--------------------------------------------------------------------------------
Merchandising-Department Stores -- 1.4%
59,800 Carson Pirie Scott & Co. 979,225
246,700 Federated Dept. Stores, Inc. 6,352,525
70,000 Sears Roebuck & Co. 4,191,250
------------
11,523,000
--------------------------------------------------------------------------------
Merchandising-Drugs -- 0.2%
52,500 Bergen Brunswig Corp. 1,200,938
13,300 Foxmeyer Health Corp. 237,738
------------
1,438,676
--------------------------------------------------------------------------------
Merchandising-Food -- 0.9%
40,000 Albertson's, Inc. 1,190,000
314,800 Casey's General Stores, Inc. 5,666,400
------------
6,856,400
--------------------------------------------------------------------------------
Merchandising-Special -- 0.6%
87,300 Tandy Corp. 4,528,687
33,800 Waban, Inc. 502,775
------------
5,031,462
--------------------------------------------------------------------------------
Metals and Mining -- 2.7%
30,000 Alumax, Inc. 933,750
70,000 Aluminum Co. of America 3,508,750
128,000 Asarco, Inc. 3,904,000
36,000 Cyprus Amax Minerals Co. 1,026,000
118,300 Magma Copper Co. 1,922,375
70,000 Phelps Dodge Corp. 4,130,000
371,102 Santa Fe Pacific Gold Corp. 4,499,612
73,000 Weirton Steel Corp. 511,000
145,000 WHX Corp. 1,703,750
------------
22,139,237
--------------------------------------------------------------------------------
Natural Gas-Diversified -- 0.4%
118,300 Mitchell Energy & Dev. Corp. 2,114,613
92,500 USX Delhi Group 1,063,750
------------
3,178,363
--------------------------------------------------------------------------------
Oil and Gas Producing -- 3.6%
63,100 Alexander Energy Corp. 264,230
113,055 Apache Corp. 3,094,881
46,100 Barrett Resources Corp. 1,071,825
76,900 Basin Exploration, Inc. 456,594
115,000 Tom Brown, Inc. 1,710,625
90,000 Cairn Energy USA, Inc. 990,000
120,000 Chieftain International, Inc. 1,635,000
156,500 Coho Energy, Inc. 802,063
153,000 Devon Energy Corp. 3,289,500
227,400 Global Natural Res., Inc. 2,444,550
18,900 H S Resources, Inc. 264,600
140,000 Home Oil Ltd. 1,802,500
129,600 Phoenix Resource Cos., Inc. 4,114,800
105,000 Pogo Producing Co. 2,401,875
107,283 Snyder Oil Corp. 1,354,448
125,278 United Meridian Corp. 1,941,809
50,000 Vintage Petroleum, Inc. 937,500
140,000 Wainoco Oil Ltd. 577,500
------------
29,154,300
--------------------------------------------------------------------------------
Oil-Integrated-Domestic -- 1.4%
143,200 Amoco Corp. 9,549,024
207,000 Tesoro Petroleum, Inc. 2,070,000
------------
11,619,024
--------------------------------------------------------------------------------
Oil-Integrated-International -- 4.2%
75,000 Mobil Corp. 7,200,000
379,000 Exxon Corp. 26,819,000
------------
34,019,000
--------------------------------------------------------------------------------
Oil Services -- 0.9%
20,800 Cliffs Drilling Co. 296,400
209,400 Nabors Industries, Inc. 1,727,550
160,416 Noble Drilling Corp. 1,183,068
86,300 Offshore Logistics, Inc. 1,208,200
130,000 Smith International, Inc. 2,177,500
48,000 Weatherford International, Inc.* 606,000
------------
7,198,718
--------------------------------------------------------------------------------
Paper and Forest Products -- 3.8%
105,000 Boise Cascade Corp. 4,252,500
50,000 Federal Paper Board, Inc. 1,768,750
50,000 Georgia Pacific Corp. 4,337,500
33,000 International Paper Co. 2,829,750
60,000 Mead Corp. 3,562,500
328,000 Rayonier, Inc. 11,644,000
46,000 Willamette Industries, Inc. 2,553,000
------------
30,948,000
--------------------------------------------------------------------------------
See Notes to Financial Statements.
12
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
Railroads -- 0.8%
125,000 Illinois Central Corp. $ 4,312,500
97,952 Santa Fe Pacific Corp. 2,497,776
------------
6,810,276
--------------------------------------------------------------------------------
Restaurants -- 0.5%
157,900 Applebees Int'l., Inc. 4,065,925
--------------------------------------------------------------------------------
Semiconductor -- 8.2%
68,800 Adv. Micro-Devices, Inc. 2,502,600
39,000 Altera Corp. 1,686,750
39,000 Analog Devices, Inc. 1,326,000
30,700 Atmel Corp. 1,700,013
38,000 Cypress Semiconductor Corp. 1,539,000
142,000 Intel Corp. 8,990,375
38,000 International Rectifier Corp. 1,235,000
190,000 LSI Logic Corp. 7,433,750
299,500 Micron Technology, Inc. 16,435,062
87,300 Motorola, Inc. 5,860,013
14,000 Novellus Systems, Inc. 948,500
94,500 Texas Instruments, Inc. 12,651,187
50,000 Xilinx, Inc. 4,700,000
------------
67,008,250
--------------------------------------------------------------------------------
Telecommunication -- 1.9%
18,000 ADC Telecommunication, Inc. 643,500
171,450 Andrew Corp. 9,922,669
100,000 DSC Communication Corp. 4,650,000
------------
15,216,169
--------------------------------------------------------------------------------
Textile-Apparel and Production -- 0.6%
113,000 Fieldcrest Cannon, Inc. 2,443,625
101,300 Wellman, Inc. 2,773,088
------------
5,216,713
--------------------------------------------------------------------------------
Transportation-Miscellaneous -- 0.1%
109,400 Maritrans, Inc. 642,725
--------------------------------------------------------------------------------
Truckers -- 0.3%
59,000 FRP Pptys., Inc. 1,268,500
25,000 Landstar System, Inc. 643,750
20,000 Werner Enterprises, Inc. 400,000
------------
2,312,250
--------------------------------------------------------------------------------
Utilities-Gas and Pipeline -- 0.1%
25,000 ONEOK, Inc. 534,375
--------------------------------------------------------------------------------
Total Common Stocks
(Cost $549,389,535) 751,505,819
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Convertible Bonds -- 0.1%
--------------------------------------------------------------------------------
Principal
Amount Value
--------------------------------------------------------------------------------
$ 900,000 Mediq, Inc. 7.25%
Deb., due 6/1/06 $ 760,500
--------------------------------------------------------------------------------
Total Convertible Bonds
(Cost $865,567) 760,500
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
U.S. Government Securities -- 1.4%
--------------------------------------------------------------------------------
Principal
Amount Value
--------------------------------------------------------------------------------
$11,000,000 U.S. Treasury Notes,
4.25% due 7/31/95 $ 10,988,010
--------------------------------------------------------------------------------
Total U.S. Government Securities
(Cost $11,000,868) 10,988,010
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Repurchase Agreement -- 7.0%
--------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
--------------------------------------------------------------------------------
$57,437,000 State Street Bank & Trust
repurchase agreement, dated
6/30/95, maturity value
$57,465,719, 6%, due 7/3/95
(collateralized by $56,420,000
U.S. Treasury Notes,
6.875% due 2/28/97) 7/3/95 $ 57,437,000
--------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $57,437,000) 57,437,000
--------------------------------------------------------------------------------
Total Investments -- 100.1%
(Cost $561,255,970) 820,691,329
Payables in Excess of Cash, Receivables
and Other Assets -- (0.1%) (419,024)
--------------------------------------------------------------------------------
Net Assets -- 100.0% $820,272,305
--------------------------------------------------------------------------------
See Notes to Financial Statements.
13
<PAGE>
Financial Statements
o The Guardian Park Avenue Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
Assets
Investments, at identified cost* $561,225,970
--------------------------------------------------------------------------------
Investments, at market $763,254,329
Repurchase agreements 57,437,000
--------------------------------------------------------------------------------
Total Investments 820,691,329
--------------------------------------------------------------------------------
Cash 786
Receivable for securities sold 10,439,871
Receivable for fund shares sold 1,480,622
Dividends receivable 953,841
Interest receivable 210,017
Other Assets 3,886
--------------------------------------------------------------------------------
Total Assets 833,780,352
--------------------------------------------------------------------------------
Liabilities
Payable for securities purchased 11,329,057
Payable for fund shares redeemed 438,076
Accrued expenses 168,954
Due to affiliates -- Note 2 1,571,960
--------------------------------------------------------------------------------
Total Liabilities 13,508,047
--------------------------------------------------------------------------------
Net Assets $820,272,305
--------------------------------------------------------------------------------
Components of Net Assets
Shares of beneficial interest of $0.01 par value
outstanding (unlimited number of shares
authorized) $ 253,118
Paid-in capital 601,203,305
Undistributed net investment income 3,465,264
Accumulated net realized gain on investments 13,352,235
Net unrealized appreciation of investments 201,998,383
--------------------------------------------------------------------------------
Net Assets $820,272,305
--------------------------------------------------------------------------------
Shares of beneficial interest outstanding --
$0.01 par value 25,311,609
--------------------------------------------------------------------------------
Net Asset Value Per Share $ 32.41
--------------------------------------------------------------------------------
Maximum Offering Price Per Share
--------------------------------------------------------------------------------
(Net asset value per share x 104.71%)* $ 33.94
--------------------------------------------------------------------------------
* Based on sale of less than $100,000. On sale of $100,000 or more, the
offering price is reduced.
** No-load fund.
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
For The Six Months Ended June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
Investment Income:
Income:
Dividends $ 5,018,107
Interest 1,510,207
Other income 32,672
--------------------------------------------------------------------------------
Total Income 6,560,986
--------------------------------------------------------------------------------
Expenses:
Investment advisory fees -- Note 2 1,792,542
12b-1 fees -- Note 3 537,763
Transfer agent fees 465,452
Custodian fees 96,944
Printing expense 44,200
Registration fees 21,280
Audit fees 9,750
Trustees' fees -- Note 2 7,600
Insurance expense 3,862
Legal Fees 1,429
Other 360
--------------------------------------------------------------------------------
Total Expenses 2,981,182
--------------------------------------------------------------------------------
Net Investment Income 3,579,804
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND CURRENCIES -- NOTE 4
Net realized gain on investments -- Note 1 11,640,891
Net change in unrealized appreciation
on investments -- Note 4 121,347,447
--------------------------------------------------------------------------------
Net Realized and Unrealized Gain on
Investments 132,988,338
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 136,568,142
--------------------------------------------------------------------------------
See Notes to Financial Statements
14
<PAGE>
The Guardian Park Avenue Fund
(Continued)
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
For the Six
Months Year Ended
Ended June December 31,
30, 1995 1994
(Unaudited) (Audited)
--------------------------------------------------------------------------------
Increase/(Decrease) in Net Assets:
From Operations:
Net investment income $ 3,579,804 $ 6,992,131
Net realized gain on
investments 11,640,891 14,157,157
Net change in unrealized
appreciation/(depreciation)
of investments 121,347,447 (30,003,248)
--------------------------------------------------------------------------------
Net Increase/
(Decrease) in Net
Assets Resulting
from Operations 136,568,142 (8,853,960)
--------------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income -- (7,003,966)
Net realized gain on investments -- (22,969,311)
--------------------------------------------------------------------------------
Total Distributions to
Shareholders --
--------------------------------------------------------------------------------
From Capital Share Transactions:
Net increase/(decrease) in net
assets from capital share
transactions-- Note 7 42,787,136 119,550,874
--------------------------------------------------------------------------------
Net Increase in
Net Assets 179,355,278 80,723,637
Net Assets:
Beginning of period 640,917,027 560,193,390
--------------------------------------------------------------------------------
End of period** $820,272,305 $ 640,917,027
--------------------------------------------------------------------------------
* Commencement of operations.
** Includes undistributed net
investment income of: $ 3,465,264 $ 80,996
15
<PAGE>
Notes to
Financial Statements
June 30, 1995 (Unaudited)
o The Guardian Park Avenue Fund
Note 1. Accounting Policies
The Guardian Park Avenue Fund (the Fund) is a diversified open-end management
investment company registered under the Investment Company Act of 1940, as
amended (1940 Act). GPAF, originally organized as a Delaware corporation in
1970, was reorganized into a Massachusetts business trust on April 28, 1989. On
December 30, 1992, a majority of the outstanding shares of GPAF voted in favor
of reorganizing the Fund as a series of the Park Avenue Portfolio, also a
Massachusetts business trust. The reorganization is expected to be effected in
February, 1993. Significant accounting policies of the Fund are as follows:
Investments
Equity and debt securities listed on domestic exchanges are valued at the
closing sales prices on such exchanges, or, lacking any sales, at the mean
between closing bid and asked prices. Securities traded in the over-the-counter
market are valued using the last sales price, when available. Otherwise,
over-the-counter securities are valued at the mean between the bid and asked
prices or yield equivalents as obtained from one or more dealers that make a
market in the securities.
Certain debt securities may be valued each business day by an independent
pricing service ("Service") approved by the Board of Trustees. 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 municipal
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 at fair
value as determined in good faith by or under the direction of the Fund's Board
of Trustees.Repurchase agreements are carried at cost which approximates market
value (see Note 4). Investment transactions are recorded on the date of purchase
or sale.
Net realized gain or loss on sales of investments is determined on the basis
of identified cost. Interest income, including amortization of premium and
discount, is recorded when earned. Dividends are recorded on the ex-dividend
date.
Distributions to Shareholders
GPAF distributes each year as dividends or capital gains distributions
substantially all realized earnings by the Fund, if any.
All dividends or distributions to the shareholders are recorded on the
ex-dividend date. Such distributions are determined in conformity with income
tax regulations, which may differ from generally accepted accounting principles
(GAAP). Differences between the recognition of income on an income tax basis and
a GAAP basis may cause temporary over distributions of net realized gains and
net investment income.
Federal Income Taxes
The Fund qualifies to be taxed as a "regulated investment company" and as such
(and by complying with the applicable provisions of the Internal Revenue Code of
1986, as amended (Code)) will not be subject to federal income tax on taxable
income (including any realized capital gains) which is distributed to
shareholders. Therefore, no federal income tax provision is required.
Note 2. Investment Advisory Agreements and Payments to Related Parties
The Fund has an investment advisory agreement with Guardian Investor Services
Corporation (GISC), a wholly-owned subsidiary of The Guardian Life Insurance
Company of America. The investment advisory agreement provides, among other
things, for the quarterly payment by the Fund of a fee calculated at an annual
rate of one-half of 1% of the average daily net assets of the Fund.
In addition, pursuant to the investment advisory agreement, if total expenses
of the Fund, as defined, exceed 1% per annum of the average daily net asset
16
<PAGE>
value of the Fund, GISC has agreed to assume any such excess. Total expenses of
the Fund did not exceed this limitation for the six months ended June 30, 1995.
The Fund has a distribution agreement with GISC under which GISC agrees to
assist as needed in the sale and distribution of the Fund shares when sold with
a sales charge. As compensation for its services, GISC received aggregate sales
commissions of $1,121,908 for the six months ended June 30, 1995.
The aggregate remuneration paid by the Fund to its unaffiliated trustees
($500 per meeting plus and annual stipend of $1,000) amounted to $7,600 for the
six months ended June 30, 1995.
Note 3. Underwriting Agreement and Distribu-tion Plan
The Fund has entered into an Underwriting Agreement with GISC pursuant to
which GISC serves as the principal underwriter for shares of the Fund. In
addition, GISC and the Fund has entered into a Distribution Plan and Agreement
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Plan").
Pursuant to the Plan the Fund pays GISC, on a monthly basis, a distribution fee
of up to .15% on an annual basis of its average daily net assets. Under the
Plan, GISC uses the fees received from the Fund to pay distribution expenses
incurred during the fiscal year, including the payment of fees to dealers
selling shares of the Fund, the payment of advertising costs and the payment for
the preparation, printing and distribution of prospectuses to prospective
investors.
Note 4. Repurchase Agreements
Collateral under repurchase agreements take the form of either cash or fully
negotiable U.S. Government securities. Repurchase agreements are fully
collateralized (including the interest earned thereon) and 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 Fund 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 Fund maintains the right to sell the collateral and may claim any
resulting loss against the seller. The Board of Trustees evaluates the
creditworthiness of broker-dealers and banks engaged in repurchase agreements
with the Fund. The Fund will not enter into repurchase agreements for more than
one week's duration (or invest in any other securities which are not readily
marketable) if more than 10% of its net assets would be so invested. On December
30, 1992, the shareholders of GPAF voted to amend the Fund's fundamental
investment policies to permit up to 15% of the Fund's net assets to be invested
in securities which are not readily marketable, including repurchase agreements
which mature in more than seven days.
Note 5. Investment Transactions
Purchases and proceeds from sales of securities (excluding short-term
securities) amounted to $223,250,303 and $195,735,268, respectively, during the
six months ended June 30, 1995.
Gross unrealized appreciation and depreciation of investments aggregated
$210,625,185 and $(8,626,802), respectively, resulting in net unrealized
appreciation of $201,998,383 at June 30, 1995.
The cost of investments owned at June 30, 1995 for Federal income tax
purposes was the same for financial reporting purposes.
Note 6. Fund Shares
Transactions in Fund Shares were as follows
o The Guardian Six Months Ended
Park Avenue Fund June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
Shares Amount
--------------------------------------------------------------------------------
Shares sold 3,523,999 $103,690,721
--------------------------------------------------------------------------------
3,523,999 $103,690,721
Less shares repurchased (2,046,722) (60,903,585)
--------------------------------------------------------------------------------
Net Increase 1,477,277 $ 42,787,136
================================================================================
o The Guardian Year Ended
Park Avenue Fund December 31, 1994
--------------------------------------------------------------------------------
Shares Amount
--------------------------------------------------------------------------------
Shares sold 6,037,382 $170,046,951
Shares issued to shareholders in
reinvestment of dividends from
net investment income and
net realized gain on investments 1,053,246 28,635,093
--------------------------------------------------------------------------------
7,090,628 198,682,044
Less shares repurchased (2,821,719) (79,131,170)
--------------------------------------------------------------------------------
Net Increase 4,268,909 $119,550,874
================================================================================
Note 7. Line of Credit
A $20,000,000 line of credit available to The Guardian Park Avenue Fund 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, 1995, the Fund had not borrowed against this line of credit.
17
<PAGE>
Financial Highlights
o The Guardian Park Avenue Fund
<TABLE>
<CAPTION>
Selected data for a share of beneficial interest outstanding throughout the periods indicated:
====================================================================================================================================
Six Months
Ended Year Ended December 31,
June 30, 1995 ------------------------------------------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990 1989 1988
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $ 26.89 $ 28.63 $ 25.17 $ 22.23 $ 18.26 $ 21.56 $ 20.46 $ 18.63
------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment
income 0.13 0.31 0.50 0.45 0.65 0.68 0.92 0.60
Net realized and
unrealized gain/
(loss) on
investments 5.39 (0.72) 4.56 4.05 5.71 (3.28) 3.88 3.23
------------------------------------------------------------------------------------------------------------------------------------
Net increase/
(decrease) from
investment
operations 5.52 (0.41) 5.06 4.50 6.36 (2.60) 4.80 3.83
------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
Dividends from net
investment income -- (0.31) (0.50) (0.44) (0.66) (0.70) (0.98) (0.55)
------------------------------------------------------------------------------------------------------------------------------------
Distributions from
net realized gain
on investments -- (1.02) (1.10) (1.12) (1.73) -- (2.72) (1.45)
------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (1.33) (1.60) (1.56) (2.39) (0.70) (3.70) (2.00)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 32.41 $ 26.89 $ 28.63 $ 25.17 $ 22.23 $ 18.26 $ 21.56 $ 20.46
------------------------------------------------------------------------------------------------------------------------------------
Total return* 20.53% (1.44%) 20.28% 20.48% 35.16% (12.21%) 23.66% 20.78%
====================================================================================================================================
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) $820,272 $640,917 $560,193 $335,660 $270,095 $216,457 $228,190 $176,000
Ratio of expenses
to average net
assets 0.83%** 0.84% 0.81% 0.68% 0.67% 0.69% 0.70% 0.69%
Ratio of net
investment income
to average net
assets 1.00%** 1.15% 1.89% 1.94% 2.96% 3.51% 4.01% 2.82%
Portfolio
turnover 29% 54% 46% 64% 57% 47% 47% 58%
====================================================================================================================================
</TABLE>
* Excludes effect of sales load.
** Annualized
Year Ended December 31,
----------------------------------------------------
1987 1986 1985
--------------------------------------------------------------------------------
Net asset value,
beginning of
period $ 20.74 $ 21.20 $ 18.17
--------------------------------------------------------------------------------
Income from investment operations
Net investment
income 0.47 0.35 0.44
Net realized and
unrealized gain/
(loss) on
investments 0.20 3.33 5.12
--------------------------------------------------------------------------------
Net increase/
(decrease) from
investment
operations 0.67 3.68 5.56
--------------------------------------------------------------------------------
Distributions to shareholders
Dividends from net
investment income (0.60) (0.33) (0.49)
--------------------------------------------------------------------------------
Distributions from
net realized gain
on investments (2.18) (3.81) (2.04)
--------------------------------------------------------------------------------
Total distributions (2.78) (4.14) (2.53)
--------------------------------------------------------------------------------
Net asset value,
end of period $ 18.63 $ 20.74 $ 21.20
--------------------------------------------------------------------------------
Total return* 2.95% 18.38% 32.98%
================================================================================
Ratios/supplemental data:
Net assets, end of
period (000's
omitted) $157,045 $136,243 $ 89,617
Ratio of expenses
to average net
assets 0.68% 0.71% 0.70%
Ratio of net
investment income
to average net
assets 2.08% 1.79% 2.48%
Portfolio
turnover 50% 48% 80%
================================================================================
18
<PAGE>
[LOGO] The Guardian(R)
The Guardian Insurance & Annuity Company, Inc.
201 Park Avenue South
New York, NY 10003
FIRST CLASS MAIL
U.S. POSTAGE PAID
PERMIT NO.45
NEWARK, NJ
EB-010247 6/95
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains financial information extracted from the "Semiannual
Report to Shareholders" dated June 30, 1995, and is qualified in its entirety to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 14,360,914
<INVESTMENTS-AT-VALUE> 39,397,971
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39,397,971
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 249,327
<TOTAL-LIABILITIES> 249,327
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (220,651)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 400,156
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,037,056
<NET-ASSETS> 39,148,644
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 220,651
<NET-INVESTMENT-INCOME> (220,651)
<REALIZED-GAINS-CURRENT> 400,156
<APPREC-INCREASE-CURRENT> 6,433,898
<NET-CHANGE-FROM-OPS> 4,609,829
<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> 220,651
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 220,651
<AVERAGE-NET-ASSETS> 36,843,730
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 6,834,054
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
