AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998.
REGISTRATION NOS. 2-81149
811-3636
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
POST-EFFECTIVE AMENDMENT No. 17 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
AMENDMENT No. 18 |X|
(Check appropriate box or boxes)
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THE GUARDIAN STOCK FUND, INC.
(Exact Name of Registrant as Specified in Charter)
201 Park Avenue South, New York, New York 10003
(Address of Principal Executive Offices)
Registrant's Telephone Number: (212) 598-8359
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Copy to:
Richard T. Potter, Jr., Esq. Cathy G. O'Kelly, Esq.
c/o The Guardian Insurance Vedder, Price, Kaufman & Kammholz
& Annuity Company, Inc. 222 North LaSalle Street
201 Park Avenue South Chicago, Illinois 60601
New York, New York 10003
(Name and Address of Agent for Service)
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It is proposed that this filing will
become effective (check appropriate box):
|_| immediately upon filing pursuant to paragraph (b)
|X| on (May 1, 1998) pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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<PAGE>
THE GUARDIAN STOCK FUND, INC.
CROSS REFERENCE SHEET
(as required by Rule 495)
Form N-1A Item No. Location
Part A
Item 1. Cover Page............................ Cover
Item 2. Synopsis.............................. Not Applicable
Item 3. Condensed Financial Information....... Financial Highlights
Item 4. General Description of Registrant..... Cover Page; Investment
Objective and Policies;
Other Information
Item 5. Management of the Fund................ Fund Management and the
Investment Adviser;
Performance of the Fund;
Other Information
Item 5a. Management Discussion of Fund
Performance......................... Performance Results
Item 6. Capital Stock and Other Securities.... Dividends; Distributions and
Taxes; Other Information
Item 7. Purchase of Securities Being Offered.. Purchase and Redemption of
Shares; Calculation of Net
Asset Value
Item 8. Redemption or Repurchase.............. Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings............. Not Applicable
Part B
Item 10. Cover Page............................ Cover Page
Item 11. Table of Contents..................... Table of Contents
Item 12. General Information and History....... Not Applicable
Item 13. Investment Objectives and Policies.... Investment Restrictions;
Special Investment
Techniques
Item 14. Management of the Fund................ Fund Management
Item 15. Control Persons and Principal
Holders of Securities............... Guardian Life and Other Fund
Affiliates
Item 16. Investment Advisory and
Other Services...................... Investment Adviser and Other
Services; Custodian and
Transfer Agent; Independent
Auditors and Financial
Statements
Item 17. Brokerage Allocation.................. Portfolio Transactions and
Brokerage
Item 18. Capital Stock and Other Securities.... Not Applicable
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered......... Not Applicable
Item 20. Tax Status............................ Not Applicable
Item 21. Underwriters.......................... Not Applicable
Item 22. Calculations of Performance Data...... Performance Data
Item 23. Financial Statements.................. Independent Auditors and
Financial Statements
Part C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
May 1, 1998
THE GUARDIAN STOCK FUND, INC.
The Guardian Stock Fund, Inc. (the "Fund") is an open-end investment
company (commonly known as a "mutual fund"). Its primary investment objective is
long-term growth of capital. The Fund primarily invests in U.S. common stocks
and securities which are convertible into such common stocks. Current income is
of lesser importance; however, it is expected that long-term growth of capital
will be accompanied by growth in income.
Shares of the Fund are available in two classes: Class I shares and Class
II shares. Class I shares are offered to the public only through the ownership
of variable annuities and variable life insurance policies issued by The
Guardian Insurance & Annuity Company, Inc. ("GIAC") through its separate
accounts. Class II shares are offered through the ownership of variable
annuities and variable life insurance policies issued by other insurance
companies that offer the Fund as an investment option through their separate
accounts.
This Prospectus sets forth important information that a contractowner
should know about the investment policies and operations of the Fund before
investing. This Prospectus should be retained for future reference. A Statement
of Additional Information, dated May 1, 1998, has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated herein by reference. A free
copy of the Statement of Additional Information may be obtained and further
inquiries can be made by calling 1-800-221-3253 or by writing to Guardian
Investor Services Corporation(R) ("GISC") at 201 Park Avenue South, New York,
New York 10003. GISC is the Fund's investment adviser and the principal
underwriter of GIAC's variable annuities and variable life insurance policies.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
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FINANCIAL HIGHLIGHTS
The following table provides selected data, total returns and ratios for
one Class I share of the Fund, and has been audited by Ernst & Young LLP,
independent auditors. This information is supplemented by the Fund's audited
financial statements, and their accompanying notes, for the year ended December
31, 1997, which appear in the Fund's 1997 Annual Report to Shareholders. This
Annual Report includes further information about the Fund's 1997 performance and
the unqualified report of Ernst & Young LLP on the Fund's 1997 financial
statements. The 1997 Annual Report is incorporated by reference into the
Statement of Additional Information. Class II shares have not been offered
prior to the date of this Prospectus, and therefore no information is provided
for Class II shares. Free copies of the Statement of Additional Information and
the Fund's 1997 Annual Report to Shareholders may be obtained by calling
1-800-221-3253 or by writing to GISC, 201 Park Avenue South, New York, New York
10003.
Selected data for a Class I share of capital stock outstanding throughout
the years indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ......................... $38.59 $34.72 $27.33 $29.00 $25.52 $23.28 $17.85
----- ------ ------ ------ ------ ------ ------
Income from investment
operations
Net investment income ............ 0.52 0.53 0.44 0.40 0.58 0.48 0.63
Net realized and unrealized
gain/(loss) on investments ..... 12.97 8.62 9.01 (0.77) 4.47 3.97 5.74
----- ------ ------ ------ ------ ------ ------
Net increase/(decrease) from
investment operations .......... 13.49 9.15 9.45 (0.37) 5.05 4.45 6.37
----- ------ ------ ------ ------ ------ ------
Distributions to shareholders
Dividends from net investment
income ......................... (0.52) (0.54) (0.44) (0.40) (0.59) (0.48) (0.64)
Distributions from net realized
gain ........................... (5.51) (4.74) (1.62) (0.90) (0.98) (1.73) (0.30)
----- ------ ------ ------ ------ ------ ------
Total distributions .............. (6.03) (5.28) (2.06) (1.30) (1.57) (2.21) (0.94)
----- ------ ------ ------ ------ ------ ------
Net asset value, end of
period ......................... $46.05 $38.59 $34.72 $27.33 $29.00 $25.52 $23.28
====== ====== ====== ====== ====== ====== ======
Total return* .................... 35.58% 26.90% 34.65% (1.27%) 19.96% 20.07% 35.96%
====== ====== ====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ................ $3,222,187 $2,226,728 $1,615,271 $1,038,991 $869,116 $537,354 $380,962
Ratio of expenses to average
net assets ..................... 0.52% 0.53% 0.53% 0.53% 0.54% 0.55% 0.56%
Ratio of net investment income
to average net assets .......... 1.17% 1.50% 1.39% 1.49% 2.20% 2.14% 3.07%
Portfolio turnover rate .......... 51% 66% 78% 53% 45% 62% 51%
Average rate of commissions paid** $0.0457 $0.0469 -- -- -- -- --
</TABLE>
Year Ended December 31,
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1990 1989 1988
- --------------------------------------------------------------------------
Net asset value, beginning of
period ......................... $21.39 $19.18 $16.35
----- ------ ------
Income from investment
operations
Net investment income ............ 0.69 0.84 0.52
Net realized and unrealized
gain/(loss) on investments ..... (3.13) 3.61 2.80
----- ------ ------
Net increase/(decrease) from
investment operations .......... (2.44) 4.45 3.32
----- ------ ------
Distributions to shareholders
Dividends from net investment
income ......................... (0.71) (0.90) (0.49)
Distributions from net realized
gain ........................... (0.39) (1.34) --
----- ------ ------
Total distributions .............. (1.10) (2.24) (0.49)
----- ------ ------
Net asset value, end of
period ......................... $17.85 $21.39 $19.18
====== ====== ======
Total return* .................... (11.85%) 23.55% 20.37%
====== ====== ======
Ratios/supplemental data:
Net assets, end of period
(000's omitted) ................ $256,039 $269,950 $172,900
Ratio of expenses to average
net assets ..................... 0.57% 0.57% 0.61%
Ratio of net investment income
to average net assets .......... 3.66% 4.13% 2.88%
Portfolio turnover rate .......... 54% 38% 71%
Average rate of commissions paid** -- -- --
- --------------------------------------------------------------------------------
* 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.
** 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.
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INVESTMENT OBJECTIVE AND POLICIES
The Fund is registered with the SEC as an open-end, diversified,
management investment company. The Fund's primary investment objective is to
seek long-term growth of capital. Current income is not a specific objective,
although it is anticipated that long-term growth of capital will be accompanied
by growth in income. The Fund's investment objective is a fundamental policy
which cannot be changed without shareholder approval. There is no assurance that
the Fund will meet its investment objective, and the Fund cannot eliminate the
risk of loss inherent in the ownership of securities by following its investment
policies.
The Fund attempts to meet its objective by normally investing at least 80%
of the value of its assets in a diversified portfolio of U.S. common stocks and
convertible securities. The Fund intends to be fully invested in such securities
unless cicumstances dictate otherwise.
GISC, the Fund's investment adviser, employs a proprietary multi-factor
stock scoring system to analyze and evaluate each security which the Fund may
purchase, hold or sell. This stock-scoring system is based on quantitative
methodologies and is used to identify those securities that represent good
relative value in the marketplace and have reasonable prospects for superior
relative price performance. GISC uses information from numerous sources and
value, momentum and other market factors to modify and refine the stock-scoring
system over time. GISC can also change the proportion of the Fund's assets which
are invested in particular companies and industries based on its evaluation of
the outlook for specific industries and companies and the economy.
Convertible securities are bonds or preferred stock issues which may be
converted at a specified time and price into shares of common stock of the same
or different issuers. Convertible securities are typically senior to common
stock in a corporation's capital structure, so they may entail less risk than
common stocks. Convertible securities purchased by the Fund will primarily be
rated in one of the top four rating categories established by nationally
recognized statistical ratings organizations, making them investment grade.
However, the Fund may acquire convertible securities without regard to their
ratings. See the Statement of Additional Information.
The Fund may also purchase readily marketable interests in real estate
such as real estate investment trusts ("REITs"). REITs are pooled investment
vehicles that invest in real estate. To the extent that the Fund acquires
securities issued by companies engaged in the real estate business, the Fund
could be affected by fluctuations in the real estate market. Real estate markets
are sensitive to variations in conditions such as overall property prices,
property taxes, rental income and interest rates. As with all portfolio
investments, the Fund will be affected by the operations of particular real
estate-related companies selected by GISC as a Fund investment.
The Fund typically invests its available cash in repurchase agreements. In
a repurchase agreement transaction, the Fund purchases a debt security and
obtains a simultaneous commitment from the seller (i.e., a bank or securities
dealer) to repurchase the debt security at an agreed time and price, reflecting
a market rate of interest. Repurchase agreements are fully collateralized
(including the interest earned thereon) by U.S. government securities, bank
obligations, cash or cash equivalents and are marked to market daily during
their respective terms. Costs, delays or losses could result if the seller
becomes bankrupt or is otherwise unable to repurchase a security that is subject
to a repurchase agreement. To attempt to minimize this risk, the Fund's Board of
Directors periodically receives and reviews information about the
creditworthiness of banks and securities dealers which enter into repurchase
agreements with the Fund. The Fund will not enter into a repurchase agreement
which matures in more than seven days if, as a result, more than 15% of its net
assets would be invested in illiquid securities.
From time to time, the Fund may invest up to 5% of its net assets in
securities of U.S. or foreign companies which are issued or settled overseas.
The Fund may enter into forward foreign currency
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exchange contracts in connection with its investments in foreign securities. See
the Statement of Additional Information. If adverse market conditions
necessitate a defensive posture, the Fund may temporarily invest some or all of
its assets in debt obligations, including U.S. government securities, investment
grade corporate bonds, commercial paper, repurchase agreements and cash
equivalents.
Special Investment Techniques -- Options and Futures
The Fund may, from time to time, purchase or write (sell) options on
securities. The Fund normally intends to use options to attempt to hedge the
value of securities in its portfolio that are involved in merger negotiations or
other corporate transactions. Hedging occurs when an investment technique is
used with the goal of managing or reducing risk to the Fund's portfolio. Using
options as a successful hedge depends on GISC's ability to predict pertinent
market movements. Incorrect predictions may make engaging in such transactions
riskier to the Fund than trading in the securities that the Fund is authorized
to buy and sell.
Basically, there are two types of options: call options and put options.
The purchaser of a call option acquires the right to buy a security at a fixed
price during a specified period. The writer (seller) of such an option is then
obligated to sell the security if the option is exercised, and bears the risk
that the security's market price will increase over the purchase price set by
the option. The purchaser of a put option acquires the right to sell a security
at a fixed price during a specified period. The writer of such an option is then
obligated to buy the security if the option is exercised, and bears the risk
that the security's market price will decline from the purchase price set by the
option. Options are typically purchased subject to a premium which can reduce
the risks retained by the option writer.
As the writer of a covered call option or the purchaser of a secured put
option, the Fund must own securities that can be used to cover or secure any
such outstanding options. The cover for a call option that is related to a
foreign currency can be short-term debt securities having a value equal to the
option's face that are denominated in the same currency as the call. Also, when
the Fund writes a put option, it must place cash or liquid, unencumbered
securities, whose value is at least equal to the exercise price of the put
option, in a segregated account with its custodian, marked to market daily, in
accordance with SEC guidelines. Segregating assets may limit the Fund's ability
to pursue other investment opportunities while options are outstanding. Options
transactions can be voluntarily terminated before the exercise or expiration of
the options only by entering into closing transactions. The ability to close out
an option depends, in part, upon the liquidity of the option market. If the Fund
cannot close an option when it wants, it may miss alternative investment
opportunities.
Options trade on U.S. or foreign securities exchanges and in the
over-the-counter ("OTC") market. Exchange listed options are three-party
contracts issued by a clearing corporation. They generally have standardized
prices, expiration dates and performance mechanics. In contrast, all the terms
of an OTC option, including price and expiration date, are set by negotiation
between the buyer and seller. The Fund could lose any premium paid for an OTC
option, as well as any anticipated benefits of the transaction, if its
counterparty fails to perform under the option's terms. Generally, the staff of
the SEC currently requires OTC options and any assets used to cover such options
to be treated as illiquid assets because OTC options may not be actively traded.
Until the SEC staff revises this position, any of the Fund's OTC option
transactions would be subject to a limitation on investment in illiquid
securities of 15% of the Fund's net assets.
Through the writing or purchase of securities index options, the Fund can
achieve many of same objectives as through the use of options on individual
securities. An option on a securities index is similar to an option on a
particular security except that, rather than the right to take or make delivery
of a particular security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than (in the case of a call) or less than (in the case of a put) the
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<PAGE>
exercise price of the option. Price movements in securities which an option
holder owns or intends to purchase probably will not correlate perfectly with
movements in the level of a securities index and, therefore, the option holder
bears the risk of a loss on a securities index option which is not completely
offset by movements in the price of such securities. Because securities index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on a specific stock,
cannot provide in advance for, or cover, its potential settlement obligations by
acquiring and holding underlying securities. Call options written on a
securities index may be covered by holding a mix of stocks which substantially
replicates the movement of the index or by holding a call option on the
securities index with an exercise price no higher than the call option sold.
The Fund may also purchase or sell futures contracts, typically securities
index futures contracts, in order to better manage its cash position. For
example, the use of stock index futures may permit the Fund to gain rapid
exposure to the equity markets following a large cash inflow into the Fund at
times when it is impracticable to purchase large blocks of individual
securities. The purchase of a financial futures contract may also provide the
Fund with a price advantage over the direct purchase of the underlying
securities, either based on a differential between the securities and the
futures markets or because of the lower transaction costs that are associated
with these types of instruments. The Fund may also purchase or sell options on
financial futures contracts as an attempt to hedge against market risks.
Regulations of the Commodity Futures Trading Commission limit the extent
to which mutual funds may engage in futures trading. Under these regulations,
the Fund may engage in futures transactions (i) for bona fide hedging purposes
and (ii) for non-hedging purposes, if the aggregate initial margin and premiums
paid to establish positions in futures contracts do not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account unrealized
profits and losses on the futures contracts and related options. As stated
above, the Fund intends to use futures contracts only for hedging purposes.
The Fund may purchase and sell interest rate futures contracts and
securities index futures contracts. Interest rate futures contracts obligate the
long or short holder to take or make delivery of a specified quantity of a
financial instrument during a specified future period at a specified price.
Securities index futures contracts are similar in economic effect, but they are
based on a specific index of securities (rather than on specified securities)
and are settled in cash. The Fund may also purchase and write put and call
options on financial futures contracts as an attempt to hedge against market
risks.
There are special risks associated with entering into financial futures
contracts. There may be an imperfect correlation between the price movements of
financial futures contracts and the price movements of the securities in which
the Fund invests. There is also a risk that the Fund could be unable to close a
futures position when desired because there is no liquid secondary market for
it. The skills needed to use financial futures contracts effectively are
different from those needed to select the Fund's investments. If GISC misjudges
the general direction of interest rates or markets, the Fund's overall
performance may be poorer than if no financial futures contracts had been
entered into. It is possible that the Fund could lose money on a financial
futures contract and also on the price of related securities, adversely
affecting the Fund's performance. The risk of loss in trading financial futures
contracts can be substantial due to the low margin deposits required and the
extremely high degree of leverage involved in futures pricing. A relatively
small price movement in a financial futures contract could have an immediate and
substantial impact, which may be favorable or unfavorable to a futures
contractholder. It is possible for a price-related loss to exceed the amount of
the Fund's margin deposit.
The risks associated with purchasing and writing put and call options on
financial futures contracts can be influenced by the market for financial
futures contracts. An increase in the market value of a financial futures
contract on which the Fund has written an option may cause the option to be
exercised. In this situation, the benefit to the Fund would be limited to the
value of the exercise price of the option and, if the Fund closes out the
option, the cost of entering into the offsetting transaction
5
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could exceed the premium the Fund initially received for writing the option. In
addition, the Fund's ability to enter into an offsetting transaction depends
upon the market's demand for such financial futures contracts. If a purchased
option expires unexercised, the Fund would realize a loss in the amount of the
premium paid for the option.
FUND MANAGEMENT AND THE INVESTMENT ADVISER
The management and affairs of the Fund are supervised by its Board of
Directors. The Board meets regularly to review the Fund's investments,
performance, expenses, and other business affairs. The Board elects the Fund's
officers. The Board has nine members. Five Directors are not "interested
persons" of the Fund, as that term is defined in the Investment Company Act of
1940 ("the 1940 Act"). The names and business experience of the Directors and
officers of the Fund are set forth in the Statement of Additional Information.
GISC serves as investment adviser and provides certain administrative
services and facilities necessary to conduct the ongoing business of the Fund.
GISC selects, buys and sells securities for the Fund; chooses brokers and
dealers to effect the transactions; and negotiates any brokerage commissions.
The Fund pays GISC an investment management fee for these services at an annual
rate of 0.50% of its average daily net assets. All payments are due on a
quarterly basis. The Fund also incurs other expenses, including legal fees,
auditors' and custodial fees, proxy solicitation expenses, and compensation of
the Directors who are not affiliates of the Fund. The Fund's overall annual
expense ratio, including the management fee and other operating expenses, was
0.52% of the Fund's average daily net assets for the year ended December 31,
1997. During this period, only Class I shares were offered by the Fund. The
expenses of the Class II shares of the Fund, which were not offered prior to the
date of this Prospectus, will be higher to reflect the distribution fee
associated with Class II shares, described below.
GISC is located at 201 Park Avenue South, New York, New York 10003. GISC
is wholly owned by GIAC, which is, in turn, wholly owned by The Guardian Life
Insurance Company of America ("Guardian Life"), a mutual life insurance company
organized in the State of New York in 1860. GISC is the investment adviser to
eight of the ten series funds comprising The Park Avenue Portfolio, The Guardian
Bond Fund, Inc. The Guardian Cash Fund, Inc., and The Guardian Small Cap Stock
Fund, all of which are open-end management investment companies, or series
thereof, and is the manager of another open-end management investment company.
GISC is also the principal underwriter and distributor of The Park Avenue
Portfolio and of variable annuities and variable life insurance policies issued
by GIAC. See the Statement of Additional Information.
Effective April 9, 1998, Frank J. Jones, Ph.D., President of the Fund,
Larry Luxenberg, CFA, Vice President of the Fund, and John B. Murphy, CFA, Vice
President of the Fund, assumed joint responsibility for the portfolio management
of the Fund. Dr. Jones has served as Executive Vice President and Chief
Investment Officer of The Guardian Life Insurance Company of America ("Guardian
Life") since 1994. Prior thereto, he was Senior Vice President and Chief
Investment Officer of Guardian Life. Mr. Murphy, who has been a Vice President,
Equity Securities of The Guardian Life Insurance Company of America ("Guardian
Life") since June 1997 and Second Vice President, Equity Securities prior to
June 1997, has been responsible for the management of Guardian Life's
convertible bond and preferred stock assets for the last eight years. He has not
previously managed a registered management investment company. Mr. Luxenberg,
who is a Second Vice President, Equity Securities of Guardian Life, also manages
The Guardian Small Cap Stock Fund and The Guardian Park Avenue Small Cap Fund, a
series of The Park Avenue Portfolio (the "Portfolio"). Mr. Luxenberg has been a
securities analyst for The Guardian for the last twelve years. Mr. Luxenberg,
Dr. Jones and Mr. Murphy have also assumed joint responsibility for the
management of The Guardian Park Avenue Fund series of the Portfolio.
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The Class II shares of the Fund, which are offered through variable
annuities and variable life insurance policies issued by insurance companies
other than GIAC, bear a pro rata share of the expenses described above for Class
I shares, and also bear an annual fee of 0.25% of the average daily net assets
of the Class II shares. This fee is paid in accordance with a Distribution and
Service Plan adopted under Rule 12b-1 under the Investment Company Act of 1940.
This annual fee is used to pay for marketing and distribution expenses, and/or
ongoing shareholder services, that are provided to Class II shareholders. Some
or all of this fee may be paid to third parties that provide shareholder
services or that offer Class II shares of the Fund.
Like other mutual funds, financial and business organizations around the
world, the Fund could be adversely affected if the computer systems used by the
Fund internally, the systems of the Fund's service providers, and related
computer systems do not properly process and calculate date-related information
and data beginning on January 1, 2000. Many computer systems today cannot
distinguish the year 2000 from the year 1900 because of the way dates were
encoded and calculated in these systems. GISC and the Fund's other service
providers have each been actively working to change their systems, if necessary,
to deal with this problem, and each expects that their respective systems will
be adapted before January 1, 2000. However, there can be no assurance that these
preparations will be successful.
PERFORMANCE OF THE FUND
The Fund may, from time to time, provide performance information in
advertisements, sales literature or other materials furnished to existing or
prospective owners of the variable contracts through which the Fund is offered.
When performance information is provided in advertisements, it will include the
effect of all charges deducted under the terms of the specified contract, as
well as all recurring and non-recurring charges incurred by the Fund. All
performance results are historical and are not representative of future results.
Total return and average annual total return reflect the change in value
of an investment in the Fund over a specified period, assuming the reinvestment
of all capital gains distributions and income dividends. Average annual total
returns show the average change in value for each annual period within a
specified period. Total returns, which are not annualized, show the total
percentage or dollar change in value over a specified period. Promotional
materials relating to the Fund's performance will always at least provide
average annual total returns for each of a short (one to four years), medium
(five to nine years) and long (ten years or more) period of time.
The Fund may also compare its performance to other investment vehicles or
other mutual funds which have similar investment objectives or programs. Also,
the Fund may quote information from securities indices or financial and industry
or general interest publications in its promotional materials. Additionally, the
Fund's promotional materials may contain references to types and characteristics
of certain securities; features of its portfolio; financial markets; or
historical, current or prospective economic trends. Topics of general interest,
such as personal financial planning, may also be discussed. More information
about the Fund's performance is contained in the Fund's Statement of Additional
Information and Annual Report. Free copies may be obtained by calling
1-800-221-3253 or by writing to GISC.
CALCULATION OF NET ASSET VALUE
The Fund's net asset value per share ("NAV") is determined as of the
earlier of the close of trading on the New York Stock Exchange or 4:00 p.m.,
Eastern time, on each day on which the New York Stock Exchange is open for
business. NAV is calculated by subtracting the Fund's liabilities, including
expenses which are accrued daily, from its total assets and dividing the result
by the number of shares outstanding. The Fund values its assets at their current
market value when market quotations are readily available. If a market value
cannot be established, assets are valued at fair value as determined
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in good faith by or under the direction of the Fund's Board of Directors.
Short-term securities which mature in 60 days or less are valued by using the
amortized cost method, unless the Board determines that this does not represent
fair value. Specific information about how the Fund values certain assets is set
forth in the Statement of Additional Information.
PURCHASE AND REDEMPTION OF SHARES
Fund shares are continuously offered at the then current NAV to
contractowners of variable annuity contracts and variable life insurance
policies offered by GIAC or other insurance companies. Contractowners acquire
units in the separate accounts through which these contracts are offered which
directly correspond to shares in the Fund. GIAC, or another participating
insurance company, as applicable, submits purchase and redemption orders to the
Fund based on allocation instructions for premium payments, transfer
instructions, or surrender and withdrawal requests which are furnished by such
contractowners. GIAC contractowners can send such instructions and requests to
GIAC at P.O. Box 26210, Lehigh Valley, PA 18002 by first class mail or 3900
Burgess Place, Bethlehem, PA 18017 by overnight or express mail. For contracts
owned through separate accounts of other insurance companies, please consult the
prospectus for your variable contract to determine how to purchase or redeem
shares of the Fund. Payment for redeemed shares will ordinarily be made within
three (3) business days after the Fund receives a redemption order. The
redemption price will be the NAV next determined after the separate account
processes the contractowner's instructions or request in proper form. The Fund
may suspend the right of redemption or postpone the date of payment during any
period when trading on the New York Stock Exchange is restricted, or such
Exchange is closed for other than weekends and holidays; when an emergency makes
it not reasonably practicable for the Fund to dispose of assets or calculate its
NAV; or as permitted by the SEC.
The accompanying prospectus for a variable annuity or variable life insurance
policy describes the allocation, transfer and withdrawal provisions of such
annuity or policy.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to remain qualified as a regulated investment company
under the Internal Revenue Code of 1986, as amended ("Code"), so that it will
not be subject to federal income tax on net investment income and net capital
gains that are distributed to the separate accounts. Each separate account
reinvests all such distributions in additional shares of the Fund at NAV. The
Fund typically distributes any net investment income twice each year and any net
capital gains once each year. The Fund's Board of Directors can change this
policy. Contractowners who own units in a separate account which correspond to
shares in the Fund will be notified when distributions are made.
The Code and its related Treasury Department regulations require mutual
funds that are offered through insurance company separate accounts to meet
certain diversification requirements to preserve the tax-deferral benefits
provided by the variable contracts which are offered in connection with such
separate accounts. GISC intends to diversify the Fund's investments in
accordance with those requirements. The prospectuses for the variable annuities
and variable life insurance policies describe the federal income tax treatment
of distributions from such contracts.
The foregoing is only a summary of important federal tax law provisions
that can affect the Fund. Other federal, state, or local tax law provisions may
also affect the Fund and its operations. Anyone who is considering allocating,
transferring or withdrawing monies held under a variable contract to or from
this Fund should consult a qualified tax adviser.
OTHER INFORMATION
Organization of the Fund. The Fund is a Maryland corporation which
commenced operations in April
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1983. The Fund has authorized capital stock of 400,000,000 shares of $0.001 par
value. The Fund currently has authorized its shares in two classes, of which
300,000,000 shares are designated Class I shares and 100,000,000 shares are
designated Class II shares. Unissued shares may be redesignated by the Fund's
Board of Directors. Class I shares are offered through variable annuity
contracts and variable life insurance policies issued by GIAC, and Class II
shares are offered through variable annuity contracts and variable life
insurance policies issued by other insurance companies. Each class of shares is
invested in a common investment portfolio, but has a separate expense structure,
as described in "Fund Management and the Investment Adviser". The Fund currently
has one series fund. The Board of Directors may authorize additional classes and
series of shares in the future.
Voting Rights. Through their respective separate accounts, GIAC and other
participating insurance companies are the Fund's only shareholders of record.
Nevertheless, when a shareholders' meeting occurs, each insurance company
solicits and accepts voting instructions from its contractowners who have
allocated or transferred monies for an investment in the Fund as of the record
date for the meeting. Each insurance company then votes the Fund's shares that
are attributable to its contractowners' interests in the Fund in accordance with
their instructions. Shares for which no instructions are received will be voted
in the same proportion as shares for which instructions have been received. Each
participating insurance company will vote any shares that it is entitled to vote
directly due to amounts it has contributed or accumulated in its separate
accounts in the manner described in the prospectuses for its variable annuities
and variable life insurance policies.
Each share of the Fund is entitled to one vote, and fractional shares are
entitled to fractional votes. Fund shares have non-cumulative voting rights, so
the vote of more than 50% of the shares can elect 100% of the directors. All
classes of the Fund's shares are voted together as one class, unless a matter
affects only the shareholders of a particular class. In those cases only the
shareholders of the affected class will be eligible to vote on the matter.
The Fund is not required to hold annual shareholder meetings, but special
meetings may be called to elect or remove directors, change fundamental policies
or approve an investment advisory agreement, among other things.
Availability Of The Fund. The Fund is only available to owners of variable
annuities or variable life insurance policies issued through the separate
accounts of GIAC and other insurance companies. The Fund does not currently
foresee any disadvantages to the contractowners arising from offering its shares
to variable annuity and variable life insurance policy separate accounts
simultaneously, and its Board monitors events for the existence of any material
irreconcilable conflict between or among contractowners. If a material
irreconcilable conflict arises, one or more separate accounts may withdraw their
investments in the Fund. This could possibly force the Fund to sell portfolio
securities at disadvantageous prices. GIAC or other participating insurance
companies will bear the expenses of establishing separate portfolios for
variable annuity and variable life insurance separate accounts if such action
becomes necessary; however, ongoing expenses that are ultimately borne by
contractowners will likely increase due to the loss of the economies of scale
benefits that can be provided to mutual funds with substantial assets.
Custodian, Transfer Agent And Dividend Paying Agent. State Street Bank and
Trust Company, Custody Division, 1776 Heritage Drive, North Quincy,
Massachusetts 02171, is the Fund's custodian, transfer agent and dividend paying
agent.
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THE GUARDIAN STOCK FUND, INC.
201 Park Avenue South, New York, New York 10003
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus, but should
be read in conjunction with the Prospectus of The Guardian Stock Fund, Inc. (the
"Fund") dated May 1, 1998. The Prospectus may be obtained without charge either
by writing to Guardian Investor Services Corporation(R), 201 Park Avenue South,
New York, New York 10003 or by telephoning 1-800-221-3253. Please retain this
document for future reference.
TABLE OF CONTENTS
Page
----
Investment Restrictions..................................................... 2
Special Investment Techniques............................................... 3
Portfolio Transactions and Brokerage........................................ 8
Fund Management............................................................. 8
Guardian Life and Other Fund Affiliates..................................... 14
Investment Adviser and Other Services....................................... 14
Performance Data............................................................ 15
Calculation of Net Asset Value.............................................. 17
Custodian and Transfer Agent................................................ 18
Legal Opinions.............................................................. 18
Independent Auditors and Financial Statements............................... 18
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INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions. Investment
restrictions designated as "fundamental" cannot be changed without the approval
of the holders of a majority of the outstanding shares of the Fund. As defined
by the Investment Company Act of 1940, as amended (the "1940 Act"), the vote of
a majority of the outstanding voting securities of the Fund means the lesser of
the vote of (a) 67 percent of the shares of the Fund at a meeting where more
than 50 percent of the outstanding voting shares are present in person or by
proxy, or (b) more than 50 percent of the outstanding voting shares of the Fund.
Following the list of fundamental investment restrictions are the Fund's
"non-fundamental" restrictions. Non-fundamental restrictions may be changed by
the Board of Directors without shareholder approval. All percentage restrictions
on investments apply when an investment is made. A later increase or decrease
beyond a specified limit that results from a change in value or net assets shall
not constitute a violation of the applicable restriction.
The following fundamental investment restrictions provide that the Fund
may not:
1. Make any investment inconsistent with the Fund's classification as a
diversified company under the Investment Company Act of 1940;
2. Borrow money or pledge its assets, except that the Fund may (i) borrow for
temporary or emergency needs, and engage in reverse repurchase agreements,
mortgage dollar rolls or other transactions which may involve a borrowing
from banks or other persons, provided that the aggregate amount involved
in all such transactions shall not exceed 33 1/3% of the value of the
Fund's total assets (including the amount borrowed) less liabilities
(other than borrowings) or such other percentage permitted by law; (ii)
obtain such short-term credit as may be necessary for the clearance of
transactions in portfolio securities; and (iii) purchase securities on
margin to the extent permitted by applicable law;
3. Make loans to other persons except (i) loans of portfolio securities and
entry into repurchase agreements to the extent permitted under applicable
law; and (ii) to the extent that the purchase of debt obligations in which
the Fund may invest, consistent with its investment objectives and
policies, may be deemed to be loans;
4. Purchase any securities other than the obligations of the U.S. Government,
or its agencies or instrumentalities, if, immediately after such purchase,
25% or more of the value of the Fund's total assets would be invested in
the securities of issuers conducting their principal business activities
in the same industry or group of industries;
5. Engage in the underwriting of the securities of other issuers, except to
the extent that the Fund may be deemed to be an underwriter under the
Securities Act of 1933 in connection with the sale of portfolio
securities;
6. Purchase or sell commodities or commodity contracts, except to the extent
permitted under applicable law without registration as a commodity pool
operator under the Commodity Exchange Act (or any comparable registration
under successor legislation);
7. Purchase, hold, sell or deal in real estate, although the Fund may (i)
purchase and sell securities that are secured by real estate or interests
therein; (ii) purchase and sell securities of issuers that engage in real
estate operations, as well as real estate investment trusts and
mortgage-related securities; and (iii) hold and sell real estate acquired
by the Fund as a result of the ownership of securities; and
8. Issue any senior securities to the extent such issuance would violate
applicable law.
The following non-fundamental restrictions, which may be changed by the Board
of Directors without shareholder approval, provide that the Fund may not:
1. Invest in (i) securities which at the time of such investment are not
readily marketable; (ii) securities restricted as to resale or other
disposition; or (iii) repurchase agreements maturing in more than seven
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days, if, as a result, more than 15% of the Fund's net assets (taken at
current value), or such other percentage provided by applicable law, would
then be invested in the aggregate in securities described in (i), (ii),
and (iii) above. This restriction shall not apply to securities which the
Board of Directors of the Fund has determined to be liquid pursuant to
applicable law;
2. Make short sales of securities or maintain a short position, except to the
extent permitted by applicable law; and
3. Purchase securities for the purpose of exercising control over another
company.
SPECIAL INVESTMENT TECHNIQUES
Convertible Securities.
As described in the Prospectus, the Fund is permitted to invest in
convertible securities. Convertible securities are bonds or preferred stock
issues which may be converted at a stated price within a specified period of
time into a specific number of shares of common stock of the same or a different
issuer. Convertible securities also have characteristics similar to
non-convertible debt securities in that they ordinarily provide income with
generally higher yields than those of common stock of the same or a similar
issuer. However, convertible securities are usually subordinated to
non-convertible debt securities. Convertible securities carry the potential for
capital appreciation should the value of the underlying common stock increase,
but they are subject to a lesser risk of a decline in value, relative to the
underlying common stock, due to their fixed-income nature. Due to the conversion
feature, however, the interest rate or dividend rate on convertible securities
is generally less than would be the case if the securities were not convertible.
In evaluating a convertible security for the Fund, Guardian Investor
Services Corporation ("GISC") looks primarily at the attractiveness of the
underlying common stock and at the fundamental business strengths of the issuer.
Other factors considered by GISC include the yield of the convertible security
in relation to the yield of the underlying common stock, the premium over
investment value and the degree of call protection.
Options on Securities.
General. The Fund may purchase put and call options and write (sell)
covered call options and secured put options. As a covered call option writer,
the Fund must own securities which are acceptable for the purpose of covering
any outstanding options. So long as the Fund is obligated as a writer of a put
option, it will invest an amount not less than the exercise price of the put
option in eligible securities (i.e., cash or cash equivalents). These duties
reduce the Fund's flexibility to pursue other investment opportunities while
options are outstanding.
During the option period, the covered call writer gives up the potential
for capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the writer
having to deliver the underlying security to the holder of the option at the
exercise price, which will likely be lower than the security's value. For the
secured put writer, substantial depreciation in the value of the underlying
security would result in the exercise of the option by the holder, thereby
obligating the writer to purchase the underlying securities at the exercise
price, which will likely exceed the security's value. If a covered call option
expires unexercised, the writer realizes a gain and the buyer a loss in the
amount of the premium. If the covered call option writer has to sell the
underlying security because of the exer-
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cise of the call option, the writer realizes a gain or loss from the sale of the
underlying security, with the proceeds being increased by the amount of the
premium. If a secured put option expires unexercised, the writer realizes a gain
and the buyer a loss in the amount of the premium. If the secured put writer has
to buy the underlying security because of the exercise of the put option, the
secured put writer incurs an unrealized loss to the extent that the current
market value of the underlying security is less than the exercise price of the
put option. However, this would be offset in whole or in part by gain from the
premium received and any interest income earned on the investment of the
premium.
The exercise price of an option may be below, equal to or above the
current market value of the underlying security at the time the option is
written. The buyer of a put who also owns the related security is protected by
ownership of a put option against any decline in that security's price below the
exercise price less the amount paid for the option. The ability to purchase put
options allows the Fund to protect capital gains in an appreciated security
which is already owned, without being required to actually sell that security.
At times the Fund may seek to establish a position in securities upon which call
options are available. By purchasing a call option the Fund is able to fix the
cost of acquiring the security, this being the cost of the call plus the
exercise price of the option. This procedure also provides some protection from
an unexpected downturn in the market, because the Fund is only at risk for the
amount of the premium paid for the call option which it can, if it chooses,
permit to expire.
The Fund may also write or purchase spread options, which are options for
which the exercise price may be a fixed monetary spread or yield spread between
the security underlying the option and another security that is used as a
benchmark. Spread options involve the same risks as are associated with
purchasing and selling options on securities generally, as described above. The
writer (seller) of a spread option which expires unexercised realizes a gain in
the amount of the premium and any interest earned on the investment of the
premium. However, if the spread option is exercised, the writer will forego the
potential for capital appreciation or incur an unrealized loss to the extent the
market value of the underlying security exceeds or is less than the exercise
price of such spread option. The purchaser of a spread option incurs costs equal
to the amount of the premium paid for such option if the spread option expires
unexercised, or the associated transaction costs if the purchaser closes out the
spread option position.
The Fund may purchase a put option and a call option, each with the same
expiration date, on the same underlying security. The Fund will profit from the
combination position if an increase or decrease in the value of the underlying
security is sufficient for the Fund to profit from exercise of either the call
option or the put option. Combined option positions involve higher transaction
costs (because of the multiple positions taken) and may be more difficult to
open and close out than other option positions.
Options on Securities Indices. The Fund may write or purchase options on
securities indices. Index options offer the Fund the opportunity to achieve many
of the same objectives sought through the use of options on individual
securities. Options on securities indices are similar to options on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the securities index upon which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Unlike security options, all settlements are in cash and gain or loss depends on
the aggregate price movements in the relevant index rather than price movements
in individual securities.
Price movements in securities which the Fund owns or intends to purchase
probably will not correlate perfectly with movements in the level of a
securities index and, therefore, the Fund bears the risk of a loss on a
securities index option which is not completely offset by movements in the price
of such securities. Because securities index options are settled in cash, a call
writer cannot determine the amount of its settlement obligations in advance and,
unlike call writing on a specific security, cannot provide in advance for, or
cover, its potential settlement obligations by acquiring and holding underlying
securities. The Fund may, however, cover call options written on a securities
index by holding a mix of securities which substantially replicate the movement
of the index or by holding a call option on the securities index with an
exercise price no higher than the call option sold.
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<PAGE>
When the Fund writes an option on a securities index, it will be required
to cover the option or to segregate assets equal in value to 100% of the
exercise price in the case of a put, or the contract value in the case of a
call. In addition, where the Fund writes a call option on a securities index at
a time when the exercise price exceeds the contract value, the Fund will
segregate, until the option expires or is closed out, cash or cash equivalents
equal in value to such excess.
Options on securities indices involve risks similar to those risks
relating to transactions in financial futures contracts described below. Also, a
purchased option may expire worthless, in which case the premium which was paid
for it is lost.
Financial Futures Transactions.
General. The Fund may enter into interest rate futures contracts and
securities index futures contracts (collectively referred to as "financial
futures contracts") primarily to manage the Fund's cash position or to hedge
(protect) against anticipated future changes in equity market conditions which
otherwise might affect adversely the value of securities which the Fund holds or
intends to purchase. A "sale" of a financial futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value called for by the contract at a specified price during a specified
delivery period. A "purchase" of a financial futures contract means the
undertaking of a contractual obligation to acquire the securities at a specified
price during a specified delivery period.
When the Fund enters into a financial futures contract, it is required to
deposit with its custodian, on behalf of the broker, a specified amount of cash
or eligible securities called "initial margin." The initial margin required for
a financial futures contract is set by the exchange on which the contract is
traded. Subsequent payments, called "variation margin," to and from the broker
are made on a daily basis as the market price of the financial futures contract
fluctuates. At the time of delivery, pursuant to the contract, adjustments are
made to recognize differences in value arising from the delivery of securities
with a different interest rate than that specified in the contract. With respect
to securities index futures contracts, settlement is made by means of a cash
payment based on any fluctuation in the contract value since the last adjustment
in the variation margin was made.
Although some financial futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the contractual
commitment is closed out before delivery of the security. The offsetting of a
contractual obligation is accomplished by purchasing (or selling as the case may
be) on a commodities or futures exchange an identical financial futures contract
calling for delivery in the same month. Such a transaction, if effected through
a member of an exchange, cancels the obligation to make or take delivery of the
securities. All transactions in the futures market are made, offset or fulfilled
through a clearing house associated with the exchange on which the contracts are
traded. The Fund will incur brokerage fees when it purchases or sells financial
futures contracts, and will be required to maintain margin deposits. If a liquid
secondary market does not exist when the Fund wishes to close out a financial
futures contract, it will not be able to do so and will continue to be required
to make daily cash payments of variation margin in the event of adverse price
movements.
Special Considerations Relating to Financial Futures Contracts. Financial
futures contracts entail risks. If the investment adviser's judgment about the
general direction of interest rates or markets is wrong, the overall performance
may be poorer than if the Fund had not entered into financial futures contracts.
For example, in some cases, securities called for by a financial futures
contract may not have been issued at the time the contract was written. There
may also be an imperfect correlation between movements in prices of financial
futures contracts and portfolio securities being hedged. The degree of
difference in price movement between financial futures contracts and the
securities being hedged depends upon such things as differences between the
securities being hedged and the securities underlying the financial futures
contracts, and variations in speculative market demand for financial futures
contracts and securities. In addition, the market prices of financial futures
contracts may be affected by certain factors. If participants
5
<PAGE>
in the futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the securities and financial futures markets could result.
Price distortions could also result if investors in financial futures contracts
decide to make or take delivery of underlying securities rather than engage in
closing transactions, which would reduce the liquidity of the futures market. In
addition, because the margin requirements in the futures markets are less
onerous than margin requirements in the cash market, increased participation by
the speculators in the futures market could cause temporary price distortions.
Due to the possibility of price distortions in the futures market and because
there may be an imperfect correlation between movements in the prices of
securities and movements in the prices of financial futures contracts, a correct
forecast of market trends by the investment adviser may still not result in a
successful hedging transaction. If this should occur, the Fund could lose money
on the financial futures contracts and also on the value of their portfolio
securities.
Regulatory Restrictions.
To the extent required to comply with the 1940 Act and rules and
interpretations thereunder, the Fund may not maintain open short positions in
financial futures contracts, call options written on financial futures contracts
or call options written on indexes if, in the aggregate, the market value of all
such open positions exceeds the current value of the securities in its
portfolio, plus or minus unrealized gains and losses on the open positions,
adjusted for the historical relative volatility of the relationship between the
portfolio and the positions. When purchasing a financial futures contract or
writing a put option on a financial futures contract, the Fund must segregate
cash, cash-equivalents (including any margin) or liquid debt obligations equal
to the market value of such contract. These cover and segregation requirements
may limit the Fund's ability to pursue other investment opportunities.
In order to comply with the Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid being deemed a "commodity pool operator," the
Fund will use commodity futures or commodity options contracts solely for bona
fide hedging purposes within the meaning and intent of Regulation 1.3(z), or,
with respect to positions in commodity futures and commodity options contracts
that do not come with the meaning and intent of Regulation 1.3(z), the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the fair market value of the assets of the Fund, after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. In the case of an option that is in-the-money at the time of purchase, the
in-the-money amount (as defined in Section 190.01(x) of the CFTC Regulations)
may be excluded in computing such 5%.
Options on Financial Futures Contracts.
The Fund may purchase and write call and put options on financial futures
contracts. An option on a financial futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a financial
futures contract at a specified exercise price at any time during the period of
the option. Upon exercise, the writer of the option delivers the financial
futures contract to the holder at the exercise price. The Fund would be required
to deposit with its custodian initial margin and variation margin with respect
to put and call options on a financial futures contract it has written.
Foreign Securities and Forward Foreign Currency Transactions.
From time to time, the Fund may invest in securities of domestic (U.S.) or
foreign companies which are issued and settled overseas. Investing overseas
involves different and additional investment risks from investing in the U.S.
For example: (1) there may be less publicly available or less reliable
information about foreign companies and such companies may be subject to less
regulation and supervision than U.S. companies; (2) foreign stock exchanges and
brokers may be subject to less governmental regulation than similar U.S.
entities; (3) securities of foreign companies may be less liquid or more
volatile than securities
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of U.S. companies; (4) foreign companies may not be subject to the same
accounting, auditing, examination and recordkeeping requirements which are
imposed on U.S. companies; and (5) securities issued by foreign companies may be
adversely affected by political or economic unrest, restrictions on the flow of
international capital, withholding taxes on interest or dividend income,
expropriation, nationalization, confiscatory taxation, investment or currency
exchange controls, or other foreign governmental laws or restrictions applicable
to the payment of such securities. In addition, the time period for settlement
of transactions in foreign securities may be longer than the corresponding
period for settlement of transactions in domestic securities. It may also be
more difficult to obtain and enforce judgments against foreign entities.
The foreign securities held by the Fund may be denominated in foreign
currencies and the Fund may temporarily hold foreign currency in connection with
such investments. As a result, the value of the assets held by the Fund may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations. The Fund may enter into forward foreign
currency exchange contracts ("forward currency contracts") in an effort to
control some of the uncertainties of foreign currency exchange rate
fluctuations. A forward currency contract is an agreement to purchase or sell a
specific currency at a specified future date and price agreed to by the parties
at the time of entering into the contract. The Fund will not engage in forward
currency contracts for speculation, but only as an attempt to hedge against
changes in currency exchange rates affecting the values of securities which it
holds or intends to purchase. Thus, the Fund will not enter into a forward
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.
The Fund will normally be expected to use forward currency contracts to
fix the value of certain securities it has agreed to buy or sell. For example,
when the Fund enters into a contract to purchase or sell securities denominated
in a particular foreign currency, the Fund could effectively fix the maximum
cost of those securities by purchasing or selling a foreign currency contract,
for a fixed value of another currency, in the amount of foreign currency
involved in the underlying transaction. In this way, the Fund can protect the
value of securities in the underlying transaction from an adverse change in the
exchange rate between the currency of the underlying securities in the
transaction and the currency denominated in the foreign currency contract,
during the period between the date the security is purchased or sold and the
date on which payment is made or received.
The Fund may also use forward currency contracts to hedge the value, in
U.S. dollars, of securities it currently owns. For example, if the Fund holds
securities denominated in a foreign currency and anticipates a substantial
decline (or increase) in the value of that currency against the U.S. dollar, the
Fund may enter into a foreign currency contract to sell (or purchase), for a
fixed amount of U.S. dollars, the amount of foreign currency approximating the
value of all or a portion of the securities held which are denominated in such
foreign currency.
Upon the maturity of a forward currency transaction, the Fund may either
accept or make delivery of the currency specified in the contract or, at any
time prior to maturity, enter into a closing transaction which involves the
purchase or sale of an offsetting contract. An offsetting contract terminates
the Fund's contractual obligation to deliver the foreign currency pursuant to
the terms of the forward currency contract by obligating the Fund to purchase
the same amount of the foreign currency, on the same maturity date and with the
same currency trader, as specified in the forward currency contract. The Fund
will realize a gain or loss as a result of entering into such an offsetting
contract to the extent the exchange rate between the currencies involved moved
between the time of the execution of the original forward currency contract and
the offsetting contract.
The use of forward currency contracts to protect the value of securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities the Fund owns or intends to acquire, but
it does fix a future rate of exchange. Although such contracts minimize the risk
of loss
7
<PAGE>
resulting from a decline in the value of the hedged currency, they also limit
the potential for gain resulting from an increase in the value of the hedged
currency. The benefits of forward currency contracts to the Fund will depend on
the ability of the Fund's investment adviser to accurately predict future
currency exchange rates.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GISC currently serves as investment adviser to several other
Guardian-sponsored mutual funds and may act as investment adviser to others in
the future. GISC allocates purchase and sale transactions among the Fund and its
other mutual fund clients as it deems equitable. GISC is also registered with
the Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers, Inc. as a broker-dealer. GISC has no formula for the
distribution of brokerage business when it places orders to buy and sell
approved investments. For over-the-counter transactions, GISC will attempt to
deal with a primary market maker unless better prices and execution are
available elsewhere. In allocating portfolio transactions to different brokers,
GISC gives consideration to brokers whom it believes can obtain the best price
and execution of orders, and to brokers who furnish statistical data, research
and other factual information. GISC is authorized to pay a commission in excess
of that which another broker may charge for effecting the same transaction if
GISC considers that the commissions it pays for brokerage, research services and
other statistical data are appropriate and reasonable for the services rendered.
The research services and statistical data which GISC receives in connection
with the Fund's portfolio transactions may be used by GISC to benefit its other
clients and will not necessarily be used in connection with the Fund.
For the years ended December 31, 1995, 1996 and 1997, the Fund paid
brokerage commissions of $2,410,364, $2,630,124 and $2,742,148, respectively.
Brokerage commissions increased in 1997 because the Fund experienced very
favorable inflows from GIAC contractowners, which increased investment
opportunities. The Fund's portfolio turnover rates for the years ended December
31, 1995, 1996 and 1997 were 78%, 66% and 51%, respectively. Changes in the
Fund's portfolio turnover rate do not indicate any change in the investment
policy. GISC does not participate in commissions paid by the Fund to other
brokers or dealers and does not knowingly receive any reciprocal business
directly or indirectly as a result of paying commissions to other brokers or
dealers.
FUND MANAGEMENT
The directors and officers of the Fund are named below. Information about
their principal occupations during the past five years and certain other current
affiliations is also provided. The business address of each director and officer
is 201 Park Avenue South, New York, New York 10003 unless otherwise noted. The
"Guardian Fund Complex" referred to in this biographical information is
comprised of (1) the Fund, (2) The Guardian Bond Fund, Inc., (3) The Guardian
Cash Fund, Inc., (4) The Park Avenue Portfolio (a series trust that issues its
shares in ten series) and (5) GIAC Funds, Inc. (formerly GBG Funds, Inc.) (a
series fund that issues its shares in three series).
8
<PAGE>
Name and Address Title Business History
- ---------------- ----- ----------------
JOHN C. ANGLE* (74) Director Retired. Former Chairman
3800 South 42nd Street of the Board and Chief
Lincoln, Nebraska 68506 Executive Officer, The
Guardian Life Insurance
Company of America;
Director 1/78-present.
Director (Trustee) of
Guardian Investor
Services Corporation from
6/82-2/96 and The
Guardian Insurance &
Annuity Company, Inc.
Director (Trustee) of
various mutual funds
within the Guardian Fund
Complex.
JOSEPH A. CARUSO (46) Secretary Vice President and
Corporate Secretary, The
Guardian Life Insurance
Company of America
3/96-present; Second Vice
President and Corporate
Secretary 1/95-2/96;
Corporate Secretary prior
thereto. Vice President
and Secretary, The
Guardian Insurance &
Annuity Company, Inc.
and Guardian Investor
Services Corporation.
Secretary, Guardian Asset
Management Corporation,
Park Avenue Life
Insurance Company,
Guardian Baillie Gifford
Limited and various
mutual funds within the
Guardian Fund Complex.
FRANK J. FABOZZI, PH.D. (49) Director Adjunct Professor of
858 Tower View Circle Finance, School of
New Hope, Pennsylvania 18938 Management -- Yale
University 2/94-present;
Visiting Professor of
Finance and Accounting,
Sloan School of
Management --
Massachusetts Institute
of Technology prior
thereto. Editor, Journal
of Portfolio Management.
Director (Trustee) of
various mutual funds
within the Guardian Fund
Complex. Director
(Trustee) of various
closed-end investment
companies sponsored by
Blackstone Financial
Management.
ARTHUR V. FERRARA* (67) Director Retired. Chairman of the
70 Baldwin Farms South Board and Chief Executive
Greenwich, CT 06831 Officer, The Guardian
Life Insurance Company of
America 1/93-12/95;
President and Chief
Executive Officer prior
thereto; Director
1/81-present. Director
(Trustee) of Guardian
Investor Services
Corporation, Guardian
Asset Management
Corporation, The Guardian
Insurance & Annuity
Company, Inc. and various
mutual funds within the
Guardian Fund Complex.
- ----------
* Director who is deemed to be an "interested person" under the 1940 Act.
9
<PAGE>
Name and Address Title Business History
- ---------------- ----- ----------------
LEO R. FUTIA* (78) Director Retired. Former Chairman
18 Interlaken Road of the Board and Chief
Greenwich, Connecticut 06830 Executive Officer, The
Guardian Life Insurance
Company of America;
Director 5/70-present.
Director (Trustee) of The
Guardian Insurance &
Annuity Company, Inc.,
Guardian Investor
Services Corporation, and
various mutual funds
within the Guardian Fund
Complex. Director
(Trustee) of various
mutual funds sponsored by
Value Line, Inc.
WILLIAM W. HEWITT, JR. (69) Director Retired. Former Executive
P.O. Box 2359 Vice President, Shearson
Princeton, New Jersey 08543 Lehman Brothers, Inc.
Director (Trustee) of
various mutual funds
within the Guardian Fund
Complex.
THOMAS R. HICKEY, JR. (45) Vice President Vice President, Equity
Operations, The Guardian
Life Insurance Company of
America. Vice President,
Administration, The
Guardian Insurance &
Annuity Company, Inc.
Senior Vice President,
Guardian Investor
Services Corporation.
Officer of various mutual
funds within the Guardian
Fund Complex.
FRANK J. JONES, PH.D. (59), President Executive Vice President
and Chief Investment
Officer, The Guardian
Life Insurance Company of
America 1/94-present;
Senior Vice President and
Chief Investment Officer
prior thereto. Executive
Vice President and Chief
Investment Officer and
Director, The Guardian
Insurance & Annuity
Company, Inc. Executive
Vice President and Chief
Investment Officer, Park
Avenue Life Insurance
Company. Director and
President, Guardian Asset
Management Corporation.
Director, Guardian
Investor Services
Corporation and Guardian
Baillie Gifford Limited.
Officer of various mutual
funds within the Guardian
Fund Complex.
- ----------
* Director who is deemed to be an "interested person" under the 1940 Act.
10
<PAGE>
Name and Address Title Business History
- ---------------- ----- ----------------
ANN T. KEARNEY (46) Controller Second Vice President,
Group Pensions, The
Guardian Life Insurance
of America 1/95 to
present; Assistant Vice
President and Equity
Controller 6/94-12/94;
Assistant Controller
prior thereto. Second
Vice President of the
Guardian Insurance &
Annuity Company, Inc. and
Guardian Investor
Services Corporation.
Controller of various
mutual funds within the
Guardian Fund Complex.
SIDNEY I. LIRTZMAN, PH.D. (67) Director Professor of Management
38 West 26th Street 9/67-present and Acting
New York, New York 10010 Dean of the School of
Business Management
2/95-present, City
University of New York --
Baruch College.
President, Fairfield
Consulting Associates,
Inc.; Director (Trustee)
of various mutual funds
within the Guardian Fund
Complex.
LAWRENCE A. LUXENBERG (42) Vice President Second Vice President,
Equity Securities, The
Guardian Life Insurance
Company of America
1/97-present; Assistant
Vice President, Equity
Securities, prior
thereto. Officer of
various mutual funds
within the Guardian Fund
Complex.
JOHN B. MURPHY (53) Vice President Vice President, Equity
and Treasurer Securities, The Guardian
Life Insurance Company of
America, since 6/97;
Second Vice President
prior thereto. Officer of
various mutual funds
within the Guardian Fund
Complex.
FRANK L. PEPE (55) Vice President Vice President and Equity
Controller, The Guardian
Life Insurance Company of
America 1/96-present;
Second Vice President and
Equity Controller prior
thereto. Vice President
and Controller, The
Guardian Insurance &
Annuity Company, Inc. and
Guardian Investor
Services Corporation.
Officer of various mutual
funds within the Guardian
Fund Complex.
- ----------
* Director who is deemed to be an "interested person" under the 1940 Act.
11
<PAGE>
Name and Address Title Business History
- ---------------- ----- ----------------
RICHARD T. POTTER, JR. (43) Counsel Vice President and Equity
Counsel, The Guardian
Life Insurance Company of
America 1/96-present;
Second Vice President and
Equity Counsel prior
thereto. Counsel, The
Guardian Insurance &
Annuity Company, Inc.,
Guardian Investor
Services Corporation,
Guardian Asset Management
Corporation and various
mutual funds within the
Guardian Fund Complex.
JOSEPH D. SARGENT*. (60) Director President, Chief
Executive Officer and
Director, The Guardian
Life Insurance Company of
America, since 1/96;
President and Director
prior thereto. Director,
President and Chief
Executive Officer of The
Guardian Insurance &
Annuity Company, Inc.,
Guardian Asset Management
Corporation and Park
Avenue Life Insurance
Company. Director,
Guardian Investor
Services Corporation.
Director (Trustee) of
various mutual funds
within the Guardian Fund
Complex.
CARL W. SCHAFER (62) Director President, Atlantic
P.O. Box 1164 Foundation (charitable
Princeton, New Jersey 08542 foundation supporting
mainly oceanographic
exploration and
research). Director of
Roadway Express
(trucking), Evans
Systems, Inc. (a motor
fuels, convenience store
and diversified company),
Hidden Lake Gold Mines
Ltd. (gold mining),
Electronic Clearing
House, Inc. (financial
transactions processing),
Wainoco Oil Corporation
and Nutraceutrix Inc.
(biotechnology). Chairman
of the Investment
Advisory Committee of the
Howard Hughes Medical
Institute 1985-1992.
Director (Trustee) of
various mutual funds
within the Guardian Fund
Complex. Director
(Trustee) of various
mutual funds sponsored by
Mitchell Hutchins Asset
Management, Inc. and
PaineWebber, Inc.
- ----------
* Director who is deemed to be an "interested person" under the 1940 Act.
12
<PAGE>
Name and Address Title Business History
- ---------------- ----- ----------------
ROBERT G. SMITH, PH.D. (65) Director President, Smith
132 East 72nd Street Affiliated Capital Corp.
New York, New York 10028 Director (Trustee) of
various mutual funds
within the Guardian Fund
Complex.
The Fund pays Directors who are not "interested persons" directors' fees
of $350 per meeting and an annual retainer of $500. Directors who are
"interested persons," except Mr. Sargent, receive the same fees, but they are
paid by GISC. Mr. Sargent receives no compensation for his services as a Fund
Director. All officers of the Fund are employees of Guardian Life; they receive
no compensation from the Fund.
Each Fund Director is also a director of The Guardian Bond Fund, Inc., The
Guardian Cash Fund, Inc., and GIAC Funds, Inc. (formerly GBG Funds, Inc.), a
series fund consisting of Baillie Gifford International Fund, Baillie Gifford
Emerging Markets Fund and The Guardian Small Cap Stock Fund, and a trustee of
The Park Avenue Portfolio, a series trust consisting of The Guardian Park Avenue
Fund, The Guardian Park Avenue Small Cap Fund, The Guardian Park Avenue
Tax-Efficient Fund, The Guardian Investment Quality Bond Fund, The Guardian
Tax-Exempt Fund, The Guardian High Yield Bond Fund, The Guardian Cash Management
Fund, The Guardian Baillie Gifford International Fund, The Guardian Baillie
Gifford Emerging Markets Fund and The Guardian Asset Allocation Fund. The Fund
and the other funds named in this paragraph are a "Fund Complex" for purposes of
the federal securities laws. The following table provides information about the
compensation paid by the Fund and the Fund Complex to the Fund's Directors for
the year ended December 31, 1997.
Compensation Table*
<TABLE>
<CAPTION>
Total Compensation
Aggregate Accrued Pension or Estimated from the Fund and
Compensation Retirement Benefits Annual Benefits Other Members of
Name and Title From the Fund** Paid by the Fund Upon Retirement the Fund Complex**
- -------------- --------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C>
Frank J. Fabozzi
Director $2,500 N/A N/A $42,667
William W. Hewitt, Jr.
Director 2,500 N/A N/A 42,667
Sidney I. Lirtzman
Director 2,500 N/A N/A 42,667
Carl W. Schafer
Director 2,500 N/A N/A 42,667
Robert G. Smith
Director 2,500 N/A N/A 42,667
</TABLE>
* Directors who are "interested persons" of the Fund are not compensated by
the Fund, so information about their compensation is not included in this
table.
** Includes compensation paid to attend meetings of the Board's Audit
Committee.
The Fund's officers and directors had an aggregate interest of less than
1% in the Fund's outstanding shares as of April 1, 1998.
- ----------
* Director who is deemed to be an "interested person" under the 1940 Act.
13
<PAGE>
GUARDIAN LIFE AND OTHER FUND AFFILIATES
As of April 1, 1998, The Guardian Insurance & Annuity Company, Inc.
("GIAC") owned 100% of the Fund's outstanding shares. Such shares were allocated
among separate accounts established by GIAC. GIAC is a wholly owned subsidiary
of Guardian Life. The executive offices of GIAC and Guardian Life are located at
201 Park Avenue South, New York, New York 10003.
INVESTMENT ADVISER AND OTHER SERVICES
Under the investment advisory agreement between the Fund and GISC, GISC
furnishes investment advice and provides or pays for certain of the Fund's
administrative costs. Among other things, GISC pays the fees and expenses of the
Fund Directors who are interested persons under the 1940 Act. Under the
investment advisory agreement, GISC has also agreed to assume those operating
expenses of the Class I shares of the Fund (excluding interest charges and
income, franchise and other taxes) which exceed one percent (1%) of the Fund's
average daily net assets for any fiscal year. For the year ended December 31,
1997, the ratio of operating expenses to average daily net assets of the Fund
did not exceed 1%, so GISC was not obligated to assume any such expenses. From
time to time, GISC may, at its discretion, assume certain of the Fund's ordinary
operating expenses when they are less than 1% of average daily net assets.
For the years ended December 31, 1995, 1996 and 1997, the Fund paid GISC
$6,731,656, $9,077,501 and $13,778,322, respectively, under the investment
advisory agreement.
The investment advisory agreement between the Fund and GISC will continue
in full force and effect from year to year so long as its continuance is
specifically approved at least annually by vote of a majority of the Fund's
outstanding voting shares, or by vote of the Fund's Board of Directors,
including a majority of the Directors who are not parties to the agreement or
"interested persons" of the Fund or of GISC, cast in person at a meeting called
for that purpose. The agreement will terminate automatically upon its
assignment, and may be terminated without penalty at any time by either party
upon 60 days' written notice.
If the investment advisory agreement is terminated and it is not replaced
by an agreement with another affiliate of Guardian Life, the Fund's continued
use of the name "The Guardian Stock Fund, Inc." is subject to the approval of
Guardian Life, because Guardian Life maintains the exclusive ownership interest
of the service mark "The Guardian Stock Fund, Inc."
A service agreement between GISC and Guardian Life provides that Guardian
Life will furnish the office space, clerical staff, services and facilities
which GISC needs to perform under the investment advisory agreement. GISC's
officers are salaried employees of Guardian Life; they receive no compensation
from GISC. GISC reimburses Guardian Life for its expenses under the service
agreement.
Under a Distribution Plan adopted by the Fund pursuant to Rule 12b-1 under
the 1940 Act (the "12b-1 Plan"), the Fund's Class II shares are authorized to
pay a monthly 12b-1 fee at an annual rate of up to 0.25% of average daily net
assets of the Class II shares as compensation for distribution and shareholder
servicing provided to Class II shareholders of the Fund. The 12b-1 fee may be
paid to third parties which may enter into agreements with GIAC to offer Class
II shares of the Fund under variable contracts issued by insurance companies
other than GIAC. Under the 12b-1 Plan, the fee may be used to pay for
communications equipment charges, printing prospectuses, statements of
additional information and reports for prospective shareholders, the costs of
printing sales literature and advertising materials, training and educating
sales personnel and other distribution-related overhead.
The Fund, on behalf of the Class II shares, has entered into a
Distribution Agreement with GISC to effectuate the 12b-1 Plan. The Fund does not
pay GISC any additional amount under the Distribution Agreement. Shareholders
are not responsible for any additional fee if the 12b-1 fee is not sufficient to
pay all the distribution expenses of the Class II shares. Any such excess will
be paid by GISC, and will not be carried forward and assessed against the 12b-1
fees due in succeeding years. Similarly, if the 12b-1 fee is greater than the
amounts spent in any year on distribution-related services on behalf of the
Class II shares,
14
<PAGE>
GISC is entitled to retain the excess. The Fund's Board of Directors may
negotiate changes to the 12b-1 Plan to reduce the amount of the 12b-1 fee or to
add services, or the Board may determine that the excess is justifiable in the
circumstances.
The 12b-1 Plan specifically provides that while it is in effect, the
selection and nomination of the Fund's Board who are not "interested persons" of
the Fund, as that term is defined in the 1940 Act, shall be made solely at the
discretion of the Directors who are not interested persons of the Fund. The fees
to be paid under the 12b-1 Plan may not be materially changed without approval
by vote of: (1) a majority of the Board; (2) a majority of the Directors who are
not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operations of the 12b-1 Plan or related agreements
("Independent Directors"); and (3) a majority of the Fund's outstanding voting
Class II shares, as defined in the 1940 Act.
The 12b-1 Plan will continue from year to year if such continuance is
specifically approved by vote of the Board, and by vote of the Independent
Directors, cast in person at a meeting called for the purpose of voting on the
12b-1 Plan.
PERFORMANCE DATA
As described in the Prospectus, the Fund may state its cumulative total
return and average annual total return in advertisements, sales materials and
communications with existing or prospective owners of variable contracts.
"Cumulative total returns" and "average annual total returns" measure both net
investment income and realized and unrealized appreciation or depreciation for a
specified period, assuming reinvestment of capital gains distributions and
income dividends. Average annual total returns are annualized, so they show the
average annual percentage change over the specified period. Cumulative total
returns are not annualized, so they show the aggregate percentage or dollar
value change over the specified period. Because Class II shares had not
commenced operations prior to May 1, 1998, no information is provided for
Class II shares.
The tables below show the Fund's returns (Class I shares only) for the
periods noted. These figures reflect the reinvestment of all capital gains
distributions and income dividends paid by the Fund, and the deduction of all
Fund expenses. The actual returns for owners of variable annuities or variable
life insurance policies will be lower to reflect the effects of charges deducted
under the terms of the specific contracts.
15
<PAGE>
Guardian
Stock Fund
Year Ended December 31, Total Return
______________________ ___________
1983*....................... 10.28 %
1984........................ 10.79 %
1985........................ 32.01 %
1986........................ 17.10 %
1987........................ 1.87 %
1988........................ 20.37 %
1989........................ 23.55 %
1990........................ (11.85)%
1991........................ 35.96 %
1992........................ 20.07 %
1993........................ 19.96 %
1994........................ (1.27)%
1995........................ 34.65 %
1996........................ 26.90 %
1997........................ 35.58 %
Cumulative and
Average Annual
Period Ended December 31, 1997 Total Returns
----------------------------- ------------
Lifetime Total Return of the Fund*........................ 1,029.81%
Average Annual Lifetime Total Return of the Fund........ 17.91%
Ten-Year Total Return..................................... 487.19%
Average Annual Ten-Year Total Return.................... 19.37%
Five-Year Total Return.................................... 174.37%
Average Annual Five-Year Total Return................... 22.37%
One-Year Total Return..................................... 35.58%
- ----------
* Beginning April 13, 1983 (commencement of Fund's investment operations).
Stock prices fluctuated during the periods covered by the tables and the
results illustrated above are not representative of future performance.
The Fund uses the following standardized formula prescribed by the SEC to
compute its average annual total return.
P(1 + T)^n = ERV
Where: P = a hypothetical initial purchase order of $1,000 (No
sales load is deducted as Fund shares are sold at
net asset value
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000
purchase at the end of the period
Total return is calculated in a similar manner, except the results are not
annualized.
The following example shows the average annual total return performance of
the Class I shares of the Fund for the periods indicated by showing the average
annual percentage change for each period and the ending redeemable value of a
$1,000 investment. The example takes into account all Fund expenses and assumes
reinvestment of all capital gains distributions and income dividends, but does
not take into account charges deducted under the terms of a shareholder's
variable contracts or federal income taxes and tax penalties that may be
incurred when distributions are made from such variable contracts.
16
<PAGE>
% Change ERV
--------- ----
For the year ended December 31, 1997................ 35.58% $1,355.80
For the 5 years ended December 31, 1997............. 22.37% $2,743.70
For the 10 years ended December 31, 1997............ 19.37% $5,871.90
For the life of the Fund through December 31, 1997.. 17.91% $11,298.10
The Fund may also compare its performance to that of other mutual funds
with similar investment objectives or programs and may quote information from
financial and industry or general interest publications in its promotional
materials. Additionally, the Fund's promotional materials may contain references
to types and characteristics of certain securities; features of its portfolio;
financial markets; or historical, current or prospective economic trends. Topics
of general interest, such as personal financial planning, may also be discussed.
Performance calculations contained in reports by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Morningstar, The WM Company,
Variable Annuity & Research Data Service or industry or financial publications
of general interest such as Business Week, Financial World, Forbes, Financial
Times, The Wall Street Journal, The New York Times, Barron's and Money which may
be quoted by the Fund are often based upon changes in net asset value with all
dividends reinvested and may not reflect the imposition of charges deducted
under the terms of specific variable contracts.
The Fund's performance figures are based upon historical results and do
not represent future performance. Returns on net asset value will fluctuate.
Factors affecting the Fund performance include general market conditions,
operating expenses and investment management. Shares of the Fund are redeemable
on behalf of contractowners at net asset value, which may be more or less than
original cost.
CALCULATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of the earlier of
4:00 p.m. Eastern time or the close of trading on the NYSE on each day on which
the NYSE is open for business. The net asset value per share is calculated by
adding the value of all securities, cash or other assets, subtracting
liabilities, dividing the remainder by the number of shares outstanding and
adjusting the results to the nearest full cent per share.
The calculation of the Fund's net asset value may not occur
contemporaneously with the determination of the value of any foreign securities
included in such calculation because trading on foreign exchanges may not take
place every day the NYSE is open and the NYSE may be closed when foreign
exchanges are open for business.
Securities Valuations. Securities which are listed or traded on any U.S.
or foreign securities exchange or on the NASDAQ National Market System 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. Where a security is traded on more
than one exchange, the security is valued on the exchange on which it is
principally traded unless it was not traded on that exchange on the date in
question. In such cases, the last sale price of the security on other exchanges
shall be used. Securities traded both on an exchange and in the over-the-counter
markets will be valued according to the broadest and most representative market.
Investments in U.S. government securities (other than short-term securities) are
valued at the average of the quoted bid and asked price in the over-the-counter
market. Certain debt securities may be valued each business day by an
independent pricing service ("Service"). Debt securities for which quoted bid
prices, in the judgment of the Service, are readily available and are
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 from dealers in 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 for securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Certain debt securities, including securities for which market quotations are
not readily available, such as illiquid securities, are valued at fair value as
determined in
17
<PAGE>
good faith by or under the direction of the Fund's Board of Directors.
Repurchase agreements are carried at cost which approximates market value.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street Bank"), Custody
Division, 1776 Heritage Drive, North Quincy, Massachusetts 02171, is the
custodian of the Fund's assets. Portfolio securities purchased for the Fund
outside of the U.S. are cleared through foreign depositories and are maintained
in the custody of foreign banks and trust companies which are members of State
Street Bank's Global Custody Network. State Street Bank and each of the foreign
custodial institutions holding portfolio securities of the Fund have been
approved by or under the direction of the Board in accordance with regulations
under the 1940 Act.
To the extent required by the SEC, the Board will review whether it is in
the best interest of the Fund and its shareholders to maintain Fund assets in
each foreign custodial institution. However, there can be no assurance that the
Fund will not be adversely affected by any non-investment risks associated with
holding assets abroad. Such risks may be greater than those associated with
holding assets in the U.S.
State Street Bank is also the Fund's transfer agent and dividend paying
agent. As such, State Street Bank issues and redeems shares of the Fund and
distributes dividends to the separate accounts which invest in the Fund's shares
on behalf of variable contractowners.
State Street Bank plays no part in formulating the investment policies of
the Fund or in determining which portfolio securities are to be purchased or
sold by the Fund.
LEGAL OPINIONS
The legality of the Fund shares described in the Prospectus has been
passed upon by Richard T. Potter, Jr., Esq., Vice President and Equity Counsel,
The Guardian Life Insurance Company of America, who is also Counsel of the Fund.
Federal securities law matters relating to the Fund have been passed upon by the
law firm of Vedder, Price, Kaufman & Kammholz of Chicago, Illinois.
INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
The independent auditors of the Fund are Ernst & Young LLP, 787 Seventh
Avenue, New York, New York 10019. Ernst & Young LLP audited and reported on the
financial statements of the Fund which appear in the Fund's Annual Report to
Shareholders for the year ended December 31, 1997. That Annual Report is
incorporated by reference in this Statement of Additional Information.
18
<PAGE>
THE GUARDIAN STOCK FUND, INC.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements (incorporated by reference in Part B):
Schedule of Investments as of December 31, 1997
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the Year Ended December 31, 1997
Statement of Changes in Net Assets for the Years Ended December 31, 1997
and 1996
Financial Highlights
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
(b) Exhibits
Number Description
-------- -----------
1 -- Form of Amendment and Restatement of Articles of Incorporation
(3)
2 -- By-Laws(3)
3 -- Not Applicable
4 -- Not Applicable
5 -- Investment Advisory Agreement(3)
6(a) -- Selected Dealers Agreement(1)
6(b) -- Distribution Agreement(1)
7 -- Not Applicable
8 -- Custodian Agreement and Amendment to Custodian Agreement(3)
9 -- Transfer Agency Agreement(3)
10(a) -- Opinion and Consent of Counsel
10(b) -- Consent of Counsel
11(a) -- Consent of Ernst & Young LLP
11(b) -- Consent of Vedder, Price, Kaufman & Kammholz
12 -- Not Applicable
13 -- Letter from The Guardian Insurance & Annuity Company, Inc. with
respect to providing the initial capital for the Registrant(1)
14 -- Not Applicable
15 -- Not Applicable
16(a) -- Powers of Attorney executed by a majority of the Board of
Directors and certain principal officers of the Fund
16(b) -- Power of Attorney executed by Frank J. Fabozzi(2)
16(c) -- Power of Attorney executed by Joseph D. Sargent(2)
16(d) -- Power of Attorney executed by Carl W. Schafer(2)
27 -- Financial Data Schedule
- ----------
(1.) Incorporated by reference to Registrant's filing (Reg. No. 2-81149) of
March 29, 1983.
(2.) Incorporated by reference to Post-Effective Amendment No. 15 to the
Registrant's registration statement on Form N-1A (Reg. No. 2-81149), filed
via EDGAR on April 23, 1997.
(3.) Incorporated by reference to Post-Effective Amendment No. 17 to the
Registrant's registration statement on Form N-1A (Reg. No. 2-81149), filed
via EDGAR on February 27, 1998.
C-1
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
The following list sets forth the persons directly controlled by The
Guardian Life Insurance Company of America ("Guardian Life") as of February 1,
1998:
Percentage of
State of Incorporation Voting Securities
Name of Entity or Organization Owned
------------ ------------------ -------------
The Guardian Insurance & Delaware 100%
Annuity Company, Inc.
Guardian Asset Management Delaware 100%
Corporation
Park Avenue Life Delaware 100%
Insurance Company
Guardian Reinsurance Connecticut 100%
Services Inc.
Physicians Health Delaware 14%
Services, Inc.
Private Healthcare Delaware 14%
Systems, Inc.
Managed Dental California 100%
Care, Inc.
The Guardian Baillie Gifford Massachusetts 30%
International Fund
The Guardian Investment Massachusetts 52%
Quality Bond Fund
Baillie Gifford Maryland 15%
International Fund
Baillie Gifford Emerging Maryland 23%
Markets Fund
The Guardian Tax-Exempt Fund Massachusetts 86%
The Guardian Asset Massachusetts 17%
Allocation Fund
The Guardian Park Avenue
Small Cap Fund Massachusetts 57%
The following list sets forth the persons directly controlled by
affiliates of Guardian Life, and thereby indirectly controlled by Guardian Life,
as of February 1, 1998:
Approximate
Percentage of Voting
Securities Owned
Place of Incorporation by Guardian Life
Name of Entity or Organization Affiliates
------------ ------------------- --------------
Guardian Investor Services New York 100%
Corporation
Guardian Baillie Gifford Limited Scotland 51%
The Guardian Cash Fund, Inc. Maryland 100%
The Guardian Bond Fund, Inc. Maryland 100%
The Guardian Stock Fund, Inc. Maryland 100%
GIAC Funds, Inc. Maryland 100%
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of February 1, 1998
----------- ----------------------
Capital Stock 11
Item 27. Indemnification
Reference is made to Registrant's Amended and Restated Articles of
Incorporation which have been filed as Exhibit Number 1 to Post-Effective
Amendment No. 17 to the Registration Statement and are incorporated herein by
reference.
C-2
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Guardian Investor Services Corporation ("GISC") acts as the sole
investment adviser for The Guardian Stock Fund, Inc., The Guardian Cash Fund,
Inc., The Guardian Bond Fund, Inc., and six of the eight currently operating
series funds comprising The Park Avenue Portfolio, namely: The Guardian Cash
Management Fund, The Guardian Park Avenue Fund, The Guardian Park Avenue Small
Cap Fund, The Guardian Investment Quality Bond Fund, The Guardian Tax-Exempt
Fund and The Guardian Asset Allocation Fund, and one of the three series funds
comprising GIAC Funds, Inc. namely The Guardian Small Cap Stock Fund. GISC is
also the manager of Gabelli Capital Asset Fund. GISC's principal business
address is 201 Park Avenue South, New York, New York 10003. In addition, GISC is
the distributor of The Park Avenue Portfolio and variable annuities and variable
life insurance policies offered by The Guardian Insurance & Annuity Company,
Inc. ("GIAC") through its separate accounts. These separate accounts, The
Guardian/Value Line Separate Account, The Guardian Separate Account A, The
Guardian Separate Account B, The Guardian Separate Account C, The Guardian
Separate Account D, The Guardian Separate Account E, The Guardian Separate
Account K and The Guardian Separate Account M are all unit investment trusts
registered under the Investment Company Act of 1940, as amended.
A list of GISC's officers and directors is set forth below, indicating the
business, profession, vocation or employment of a substantial nature in which
each person has been engaged during the past two fiscal years for his or her own
account or in the capacity of director, officer, partner, or trustee, aside from
any affiliation with the Registrant. Except where otherwise noted, the principal
business address of each company is 201 Park Avenue South, New York, New York
10003.
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
Philip H. Dutter Director Independent Consultant
(self-employed). Director: The
Guardian Life Insurance Company of
America. Director: The Guardian
Insurance & Annuity Company, Inc.
William C. Warren Director Retired.
Director: The Guardian Life
Insurance Company of America.
Director: The Guardian Insurance &
Annuity Company, Inc.
C-3
<PAGE>
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
Arthur V. Ferrara Director Retired. Chairman of the Board and
Chief Executive Officer: The
Guardian Life Insurance Company of
America until 12/95. Director
(Trustee) of The Guardian
Insurance & Annuity Company, Inc.,
and various Guardian-sponsored
mutual funds.
John M. Smith President & Executive Vice President: The
Director Guardian Life Insurance Company of
America. Executive Vice President
and Director: The Guardian
Insurance & Annuity Company, Inc.
Director: Guardian Baillie Gifford
Limited* and Guardian Asset
Management Corporation. President:
GIAC Funds, Inc.
Leo R. Futia Director Director: The Guardian Life
Insurance Company of America.
Director: The Guardian Insurance &
Annuity Company, Inc.
Director/Trustee of various
Guardian-sponsored mutual funds.
Director/Trustee of various mutual
funds sponsored by Value Line,
Inc.**
Peter L. Hutchings Director Executive Vice President and Chief
Financial Officer: The Guardian
Life Insurance Company of America.
Director: The Guardian Insurance &
Annuity Company, Inc. Director:
Guardian Asset Management
Corporation.
Ryan W. Johnson Senior Vice President Vice President, Equity Sales:
and National Sales The Guardian Life Insurance
Director Company of America since 3/98;
Second Vice President, Equity
Sales prior thereto.
- ----------
* Principal business address:1 Rutland Court, Edinburgh EH#3 8EY, Scotland.
** Principal business address:711 Third Avenue, New York, NY 10017.
C-4
<PAGE>
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
Frank J. Jones Director Executive Vice President and Chief
Investment Officer: The Guardian
Life Insurance Company of America.
Director, Executive Vice President
and Chief Investment Officer: The
Guardian Insurance & Annuity
Company, Inc. Director: Guardian
Asset Management Corporation and
Guardian Baillie Gifford Limited.*
Officer of various
Guardian-sponsored mutual funds.
Joseph D. Sargent Director President, Chief Executive Officer
and Director: The Guardian Life
Insurance Company of America.
President, Chief Executive Officer
and Director: The Guardian
Insurance & Annuity Company, Inc.
and Park Avenue Life Insurance
Company. Director: Guardian Asset
Management Corporation and Park
Avenue Life Insurance Company.
Director: Guardian Baillie Gifford
Limited.* Chairman and Director of
various Guardian-sponsored mutual
funds.
Thomas R. Hickey, Senior Vice President Vice President, Equity Operations:
Jr. The Guardian Life Insurance
Company of America. Vice
President, Administration: The
Guardian Insurance & Annuity
Company, Inc. Officer of various
Guardian-sponsored mutual funds.
- ----------
**Principal business address:1 Rutland Court, Edinburgh EH3 8EY, Scotland.
C-5
<PAGE>
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
Frank L. Pepe Vice President & Vice President and Equity
Controller Controller: The Guardian Life
Insurance Company of America.
Vice President and Controller: The
Guardian Insurance & Annuity
Company, Inc. Officer of various
Guardian-sponsored mutual funds.
Richard T. Potter, Vice President and Vice President and Equity Counsel:
Jr. Counsel The Guardian Life Insurance
Company of America. Counsel:
The Guardian Insurance & Annuity
Company, Inc., Guardian Asset
Management Corporation and various
Guardian-sponsored mutual funds.
Donald P. Sullivan, Vice President Second Vice President: The
Jr. Guardian Life Insurance Company of
America. Vice President: The
Guardian Insurance & Annuity
Company, Inc.
Kevin S. Alter Second Director, Broker-Dealer
Vice President Operations: The Guardian Life
Insurance Company of America.
Ann T. Kearney Second Vice Second Vice President: Group
President Pensions: The Guardian Life
Insurance Company of America.
Second Vice President: The
Guardian Insurance & Annuity
Company, Inc.
Alexander M. Grant, Second Vice Second Vice President:
Jr. President Investments: The Guardian Life
Insurance Company of America since
1/97; Assistant Vice President
prior thereto. Officer of various
Guardian-sponsored mutual funds.
Peggy L. Coppola Second Vice President Assistant Vice President, Equity
Sales, The Guardian Life Insurance
Company of America. Second Vice
President, The Guardian Insurance
& Annuity Company, Inc.
Earl Harry Treasurer Treasurer: The Guardian Life
Insurance Company of America since
7/96, Assistant Treasurer prior
thereto. Treasurer, The Guardian
Insurance &Annuity Company, Inc.
C-6
<PAGE>
Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------
Joseph A. Caruso Vice Presient and Vice President and Secretary, The
Secretary Guardian Life Insurance Company of
America since 3/96; Second Vice
President and Secretary prior
thereto. Secretary: The Guardian
Insurance & Annuity Company, Inc.,
Guardian Asset Management
Corporation, various
Guardian-sponsored mutual funds.
Item 29. Principal Underwriters
(a) GISC is the principal underwriter and distributor of the eight
operational series funds comprising The Park Avenue Portfolio, namely: The
Guardian Park Avenue Fund, The Guardian Park Avenue Small Cap Fund, The Guardian
Cash Management Fund, The Guardian Investment Quality Bond Fund, The Guardian
Tax-Exempt Fund, The Guardian Baillie Gifford International Fund, The Baillie
Gifford Emerging Markets Fund and The Guardian Asset Allocation Fund. In
addition, GISC is the distributor of variable annuities and variable life
insurance policies offered by GIAC through GIAC's separate accounts, The
Guardian/Value Line Separate Account, The Guardian Separate Account A, The
Guardian Separate Account B, The Guardian Separate Account C, The Guardian
Separate Account D, The Guardian Separate Account E, The Guardian Separate
Account K, and The Guardian Separate Account M, which are all registered as unit
investment trusts under the Investment Company Act of 1940, as amended. These
latter separate accounts buy and sell shares of The Guardian Stock Fund, Inc.,
The Guardian Bond Fund, Inc., The Guardian Cash Fund, Inc. and GIAC Funds, Inc.
on behalf of GIAC's variable contractowners.
(b) The principal business address of the officers and directors of GISC
listed below is 201 Park Avenue South, New York, New York 10003.
Position(s) Position(s)
Name with Underwriter with Registrant
----- --------------- -------------
John M. Smith President & Director None
Arthur V. Ferrara Director Director
Leo R. Futia Director Director
Peter L. Hutchings Director None
Philip H. Dutter Director None
William C. Warren Director None
Joseph D. Sargent Director Director
Frank J. Jones Director President
Ryan W. Johnson Vice President and None
National Sales Director
Frank L. Pepe Vice President & Controller Vice President
Thomas R. Hickey, Jr. Vice President Vice President
Richard T. Potter, Jr. Vice President and Counsel Counsel
Donald P. Sullivan, Jr. Vice President None
Ann T. Kearney Second Vice President Controller
Alexander M. Grant, Jr. Second Vice President Treasurer
Kevin S. Alter Second Vice President None
Donald P. Sullivan, Jr. Second Vice President None
Peggy L. Coppola Second Vice President None
Earl Harry Treasurer None
Joseph A. Caruso Vice President and Secretary Secretary
(c) Not Applicable.
C-7
<PAGE>
Item 30. Location of Accounts and Records
Most of the Registrant's accounts, books and other documents required to
be maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder are maintained by the custodian and the transfer
agent for the Registrant, the State Street Bank and Trust Company, 1776 Heritage
Drive, North Quincy, Massachusetts 02171. The Registrant's corporate records are
maintained by the Registrant at 201 Park Avenue South, New York, New York 10003.
Item 31. Management Services
None.
Item 32. Undertakings
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that Section.
Registrant hereby undertakes to furnish upon request and without charge, a
copy of the Registrant's latest Annual Report to Shareholders to each person to
whom a copy of the Registrant's prospectus is delivered.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, the Registrant, The Guardian Stock Fund, Inc., certifies
that it meets all of the requirements for effectiveness of this post-effective
amendment to the registration statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and the State of New York on the 27th
day of April, 1998.
THE GUARDIAN STOCK FUND, INC.
By /s/ THOMAS R. HICKEY, JR.
------------------------------
Thomas R. Hickey, Jr.
Vice President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
/s/FRANK J. JONES* President
- -------------------------------------
Frank J. Jones (Principal Executive Officer)
/s/ALEXANDER M. GRANT* Treasurer
- -------------------------------------
Alexander M. Grant (Principal Financial Officer)
/s/FRANK L. PEPE* Controller
- -------------------------------------
Frank L. Pepe (Principal Accounting Officer)
/s/JOHN C. ANGLE* Director
- -------------------------------------
John C. Angle
/s/FRANK J. FABOZZI Director
- -------------------------------------
Frank J. Fabozzi
/s/ARTHUR V. FERRARA* Director
- -------------------------------------
Arthur V. Ferrara
/s/LEO R. FUTIA* Director
- -------------------------------------
Leo R. Futia
/s/WILLIAM W. HEWITT, JR.* Director
- -------------------------------------
William W. Hewitt, Jr.
/s/SIDNEY I. LIRTZMAN* Director
- -------------------------------------
Sidney I. Lirtzman
/s/JOSEPH D. SARGENT* Director
- -------------------------------------
Joseph D. Sargent
/s/CARL W. SCHAFER* Director
- -------------------------------------
Carl W. Schafer
/s/ROBERT G. SMITH* Director
- -------------------------------------
Robert G. Smith
*By /s/ THOMAS R. HICKEY, JR. Date: April 27, 1998
- -------------------------------------
Thomas R. Hickey, Jr.
Vice President
Pursuant to a Power of Attorney
<PAGE>
THE GUARDIAN STOCK FUND, INC.
Exhibit Index
Number Description
------ -----------
10(a) Opinion and Consent of Counsel
10(b) Consent of Counsel
11(a) Consent of Ernst & Young LLP
11(b) Consent of Vedder, Price,
Kaufman & Kammholz
16(a) Powers of Attorney
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN STOCK FUND
This schedule contains financial information extracted from the
"Annual Report to Shareholders" dated December 31, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,283,240
<INVESTMENTS-AT-VALUE> 3,225,937
<RECEIVABLES> 30,630
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,256,568
<PAYABLE-FOR-SECURITIES> 30,316
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,065
<TOTAL-LIABILITIES> 34,381
<SENIOR-EQUITY> 6,997
<PAID-IN-CAPITAL-COMMON> 2,178,293
<SHARES-COMMON-STOCK> 69,968
<SHARES-COMMON-PRIOR> 57,706
<ACCUMULATED-NII-CURRENT> 298
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 93,901
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 942,697
<NET-ASSETS> 3,222,187
<DIVIDEND-INCOME> 37,871
<INTEREST-INCOME> 8,826
<OTHER-INCOME> 0
<EXPENSES-NET> 14,339
<NET-INVESTMENT-INCOME> 32,358
<REALIZED-GAINS-CURRENT> 392,500
<APPREC-INCREASE-CURRENT> 391,861
<NET-CHANGE-FROM-OPS> 816,719
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (32,059)
<DISTRIBUTIONS-OF-GAINS> (344,493)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,515
<NUMBER-OF-SHARES-REDEEMED> (5,600)
<SHARES-REINVESTED> 8,347
<NET-CHANGE-IN-ASSETS> 995,459
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 45,894
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,778
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14,339
<AVERAGE-NET-ASSETS> 2,755,664
<PER-SHARE-NAV-BEGIN> 38.59
<PER-SHARE-NII> .52
<PER-SHARE-GAIN-APPREC> 12.97
<PER-SHARE-DIVIDEND> (.52)
<PER-SHARE-DISTRIBUTIONS> (5.51)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 46.05
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
[THE GUARDIAN LETTERHEAD]
April 16, 1992
The Guardian Stock Fund, Inc.
201 Park Avenue South
New York, New York 10003
To Whom it may concern:
As Counsel to The Guardian Stock Fund, Inc. (the "Fund"), I have general legal
supervision over the organization of the Fund and the preparation of any
post-effective amendment to its registration statement on Form N-1A which is
filed in connection with the offering of the Fund's shares of capital stock.
It is my opinion that: (a) the Fund is a corporation duly organized and validly
existing under the laws of the State of Maryland; (b) the Fund is authorized to
issue a total of one hundred million (100,000,000) shares; and (c) upon the
issuance of the shares in accordance with the Fund's Articles of Incorporation
and the receipt by the Fund of a purchase price not less than the net asset
value per share, the shares of the Fund will be legally issued and outstanding,
fully paid and non-assessable.
I consent to the use of this opinion in connection with the Fund's registration
statement, as amended, and to the reference to me under the heading "Legal
Opinions" in the Statement of Additional Information constituting part of the
post-effective amendment to the Fund's registration statement.
Sincerely,
/s/ Richard T. Potter, Jr.
Richard T. Potter, Jr.
Counsel to The Guardian Stock Fund, Inc.
Ex-99.10(b)
CONSENT OF COUNSEL
I hereby consent both to the reference to my name under the heading "Legal
Opinions" in the Statement of Additional Information constituting part of this
Post-Effective Amendment to the Registration Statement on Form N-1A for The
Guardian Stock Fund, Inc. and to the filing of this consent as an exhibit to
said Amendment.
/s/ RICHARD T. POTTER, JR.
---------------------------------
Richard T. Potter, Jr.
Counsel
New York, New York
April 27, 1998
Ex-99.11(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Independent Auditors and Financial
Statements" in the Statement of Additional Information in this Registration
Statement (Form N-1A No. 2-81149), and to the incorporation by reference therein
of our report dated February 9, 1998 on the financial statements and financial
highlights of The Guardian Stock Fund, Inc.
ERNST & YOUNG LLP
New York, New York
April 27, 1998
Ex-99.11(b)
CONSENT OF INDEPENDENT COUNSEL
[ LETTERHEAD ]
The Guardian Stock Fund, Inc.
201 Park Avenue South
New York, New York 10003
April 27, 1998
Gentlemen and Ladies:
We hereby consent to the reference to our name under the heading "Legal
Opinions" in the Statement of Additional Information contained in Post-Effective
Amendment No. 17 to the registration statement on Form N-1A for The Guardian
Stock Fund, Inc. (File No. 2-81149) and to the filing of this consent as an
exhibit to the registration statement.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
/s/ CATHY G. O'KELLY
----------------------------------------
Cathy G. O'Kelly
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that John B. Murphy, whose signature
appears below, constitutes and appoints John M. Smith, Herbert N. Grolnick and
Thomas R. Hickey, Jr., and each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for THE
GUARDIAN STOCK FUND, INC. and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
Dated: April 10, 1991 /s/ John B. Murphy
-------------------------
Signature
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that FRANK L. PEPE, whose signature
appears below, constitutes and appoints John M. Smith, Herbert N. Grolnick and
Thomas R. Hickey, Jr., and each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for THE
GUARDIAN STOCK FUND, INC. and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
Dated: March 28, 1991 /s/ Frank L. Pepe
-------------------------
Signature
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that ARTHUR V. FERRARA, whose
signature appears below, constitutes and appoints John M. Smith, Herbert N.
Grolnick and Thomas R. Hickey, Jr., and each of them, his attorney-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for THE
GUARDIAN STOCK FUND, INC. and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
Dated: March 28, 1991 /s/ Arthur V. Ferrara
-------------------------
Signature
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that JOHN C. ANGLE, whose signature
appears below, constitutes and appoints John M. Smith, Herbert N. Grolnick and
Thomas R. Hickey, Jr., and each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for THE
GUARDIAN STOCK FUND, INC. and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
Dated: March 28, 1991 /s/ John C. Angle
-------------------------
Signature
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that LEO R. FUTIA, whose signature
appears below, constitutes and appoints John M. Smith, Herbert N. Grolnick and
Thomas R. Hickey, Jr., and each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for THE
GUARDIAN STOCK FUND, INC. and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
Dated: March 28, 1991 /s/ Leo R. Futia
-------------------------
Signature
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that WILLIAM W. HEWITT, JR., whose
signature appears below, constitutes and appoints John M. Smith, Herbert N.
Grolnick and Thomas R. Hickey, Jr., and each of them, his attorney-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for THE
GUARDIAN STOCK FUND, INC. and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
Dated: March 28, 1991 /s/ William W. Hewitt, Jr.
-------------------------
Signature
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that SIDNEY I. LIRTZMAN, whose
signature appears below, constitutes and appoints John M. Smith, Herbert N.
Grolnick and Thomas R. Hickey, Jr., and each of them, his attorney-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for THE
GUARDIAN STOCK FUND, INC. and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
Dated: March 28, 1991 /s/ Sidney I. Lirtzman
-------------------------
Signature
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that ROBERT G. SMITH, whose signature
appears below, constitutes and appoints John M. Smith, Herbert N. Grolnick and
Thomas R. Hickey, Jr., and each of them, his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for THE
GUARDIAN STOCK FUND, INC. and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
Dated: March 28, 1991 /s/ Robert G. Smith
-------------------------
Signature
