Annual
Report
to
Shareholders
December 31, 1994
The Park Avenue Portfolio
The Guardian
Park Avenue Fund
The Guardian
Baillie Gifford
International Fund
The Guardian
Asset Allocation Fund
The Guardian
Investment Quality
Bond Fund
The Guardian
Tax-Exempt Fund
The Guardian
Cash Management Fund
[Logo]
--------------------------------------
Guardian Investor Services Corporation
<PAGE>
Our Message to You
The economy was quite strong in 1994. However, restrictive Federal Reserve Board
policy designed to ease economic growth via a "soft landing," caused a very
difficult year for the U.S. financial markets, and also contributed
significantly toward weakening foreign financial markets. U.S. economic growth
and employment figures turned in healthy performances: the economy grew at over
4%, ending the year with a 5.4% unemployment rate and a 85.4% capacity
utilization, indicating that the economy was operating very close to full
capacity. Jobs increased by over 3 million during 1994, the largest annual
growth since 1986. These growth figures occurred despite six Federal Reserve
Board short-term interest rate tightenings during 1994, ending the year with a
5.5% interest rate.
Good news for the economy and employment negatively impacted the stock market
and the bond market in particular. In 1994, the U.S. stock market, as measured
by the S&P 500 Index, returned 1.29%, a very mediocre performance.(1) Despite
dismal market valuations, equity mutual funds experienced net inflows of $120
billion during 1994, only slightly below the 1993 record of $128 billion, during
which time the S&P 500 Index returned 10.02%. We believe that this illustrates
investor confidence in the long-term performance potential for stocks.
The U.S. bond market, on the other hand, experienced a harsh downturn with
bond prices plunging as interest rates climbed. The bond market, as represented
by The Lehman Aggregate Bond Index, had a negative return of 2.92%.(2) There has
never been a year of negative annual returns in this Index since its inception
in 1976. Consistent with this poor performance, bond funds and balanced funds
experienced net outflows of $24 billion during 1994. In concert with the U.S.
markets, most foreign stock markets and bond markets were also very volatile and
predominantly negative during the year.
In 1995, we anticipate that U.S. economic growth will remain very strong and
that the Federal Reserve Board will tighten interest rates one or more times to
constrain the growth. Inflation has not yet evidenced itself, but with low
unemployment rates, high capacity utilization, and increasing prices for crude
and intermediate materials, some inflation seems inevitable.
The common forecast is that the economy will be quite strong in the first
half of the year and will slow down in the second half of 1995. Bond interest
rates, which have a built-in premium for inflation, are generally expected to
increase slightly in the first half of the year, and decline in the second half
of the year. Bond prices should not fluctuate nearly as much in either direction
during 1995 as they declined during 1994. And finally, stimulated by strong
corporate profits, stocks could provide attractive alternatives to retail
investors.
The risk to this scenario is that economic growth will remain impervious to
Federal Reserve Board tightenings and inflation may accelerate. If the Federal
Reserve Board continues to tighten interest rates, a recession could occur in
late 1995 or 1996.
<PAGE>
1994 illustrated the wisdom of two of the most fundamental principles in
personal investment management. First, investors should diversify globally among
stocks, bonds and cash. Secondly, investors should not attempt to engage in
short-term market timing. Instead, they should focus on the longest investment
term that is suitable for their particular time horizon. Investors should
continue to adhere to these principles in 1995.
In the Investment Review section that follows, the portfolio managers of the
Park Avenue Portfolio's family of mutual funds discuss each Fund's performance
during 1994 and review the investment strategies that they used to cope with
volatile markets.
There has been one change to the Portfolio during 1994. With the consent of
its shareholders, The Guardian U.S. Government Securities Fund was reorganized
into The Guardian Investment Quality Bond Fund. We believe that consolidating
these funds will benefit shareholders now and into the future. Since the Bond
Fund's asset base has been increased by the infusion of assets from the
Government Fund, we anticipate lower operating cost ratios and other
administrative efficiencies. To assure lower costs to shareholders in 1995,
Guardian Investor Services Corporation, the Bond Fund's investment advisor, will
subsidize Fund expenses in excess of 0.75% of the Fund's average daily
assets.(3)
/s/ Frank J. Jones
Frank J. Jones
President
The Park Avenue Portfolio
- ----------
(1) The S&P 500 Index is an unmanaged index generally considered to be
representative of U.S. stock market activity.
(2) The Lehman Aggregate Bond Index is an unmanaged index generally considered
to be representative of bond market activity.
(3) When the Fund's advisor ceases to subsidize the Fund's expenses, the
expenses actually paid by the Fund will increase and returns to
shareholders will therefore decrease.
<PAGE>
The Park Avenue Portfolio
Table of Contents
Investment Review ............................................... 2
Schedule of Investments ......................................... 13
Financial Statements ............................................ 28
Notes to Financial Statements ................................... 36
Financial Highlights ............................................ 44
<PAGE>
- --------------------------------------------------------------------------------
Investment Review
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund(R) -- Charles E. Albers, Portfolio Manager
How did The Guardian Park Avenue Fund perform in 1994?
1994 was a disappointing year for the financial markets. In this difficult
environment, The Guardian Park Avenue Fund produced a total return for the year
of -1.44%.(1) Over the same period the Fund's benchmark index, the S&P 500,
produced a total return of 1.29%.(2)
It is important for investors to remember that the primary objective of The
Guardian Park Avenue Fund is long-term growth of capital. The Fund has proven
itself over the long-term in both up and down markets. Recently, The Wall Street
Journal asked the Morningstar organization to identify diversified U.S. stock
funds which beat the broad market indices in periods of both rising and falling
prices from 1985 through 1994.(3) Out of the group of 350 funds which made up
Morningstar's database for this assignment, only thirteen funds made the
list.(4) We are proud to say that The Guardian Park Avenue Fund was one of the
funds selected. Also, in August of 1994, Forbes placed the Fund on its Honor
Roll for the seventh consecutive year. Only twenty honorees were selected by
Forbes for the current list.(5)
What was your investment strategy during the year?
The Fund's investment strategy is based upon our proprietary stock-scoring
system which we have been continuously developing and refining since the Fund's
inception in 1972.
Our multi-factor model analyzes each company in our research universe of 1200
stocks. In addition, portfolio manager judgment plays a critical role in the
stock-selection process. Stocks favored by our model are reviewed to confirm
that a company's business fundamentals are sound and that, in our view, the
stock is indeed a good purchase candidate. Any stock that may be a sell
candidate is subjected to the same rigorous portfolio manager review that
purchase candidates receive before any transactions occur. In addition, we use
both the quantitative model and portfolio manager judgment to weight the
portfolio in different industries and economic sectors. Still, there can be no
assurance that our disciplined approach to investing will result in the most
favorable return to our shareholders.
What factors affected the Fund's performance in 1994?
The primary factor affecting the Fund's performance was our proprietary
stock-selection model. During 1994, the model produced near-neutral results. The
model has been a valuable tool in our portfolio management process since the
Fund's inception, but there have been a few intervals in which it performed a
mediocre job of identifying buy and sell candidates. In 1994, we believe that
many of the fundamental factors which make a stock attractive were overwhelmed
by shifts in market psychology. For example, shares of basic industrial
companies fell sharply in the fourth quarter. The excellent operating results
and prospects for these companies were overshadowed by exaggerated investor
fears of a softening economy in 1995.
The Fund's economic sector weightings also provided mixed results in 1994.
The Fund was overweighted (relative to the S&P 500 Index) in the capital
goods-technology and financial sectors. Technology stocks did quite well,
outperforming the market considerably because of a stronger economy and improved
products. However, the financial sector trailed the market due mostly to
interest rate concerns. The Fund was underweighted in the utilities and consumer
staples sectors (food, household products, drugs). Our underweight position in
utilities proved to be successful, as electric and gas utilities both
underperformed the market. However, the consumer staples sector, led by
pharmaceuticals and healthcare, did well.
Finally, the capitalization-size factor was a mild negative for the Fund's
performance relative to the S&P 500 Index during 1994. The Fund's portfolio was
mildly tilted toward smaller-cap issues during 1994 which proved to be
unfavorable. While the S&P 500 Index produced a return of 1.29%,(2) the
small-cap Russell 2000 produced a negative return of -3.18%(6) in 1994.
2
<PAGE>
The following graph compares the performance of The Guardian Park Avenue Fund to
the S&P 500 Index. The Fund is a professionally managed mutual fund, while the
Index is not available for investment and is unmanaged. The comparisons are
shown for illustrative purposes only. The starting point ($9,550) for the Fund
reflects its initial sales load of 4.5%. The starting point for the Index
($10,000) does not reflect a sales load.
[The table below was represented as a graph in the printed material]
GPAF S&P 500 Index
---- -------------
6/1/72 9550 10000
1972 9919 10935
1973 8354 9320
1974 7016 6861
1975 10310 9409
1976 14713 11627
1977 15894 10765
1978 18195 11455
1979 23459 13539
1980 28544 17908
1981 30196 17009
1982 37863 20656
1983 48698 25280
1984 54864 26823
1985 72960 35290
1986 86371 41842
1987 88927 43842
1988 107404 51157
1989 133003 67205
1990 116611 65046
1991 157618 84774
1992 189879 91214
1993 228375 100342
1994 225091 101617
Investment return and principal value of an investment in The Guardian Park
Avenue Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
Average Annual Total Returns Periods ended December 31,1994(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 year 5 years 10 years Life of Fund
(since 6/1/72)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Guardian Park Avenue Fund (without 4.5% sales charge) -1.44% 11.10% 15.16% 15.02%
- ------------------------------------------------------------------------------------------------------------------------
Guardian Park Avenue Fund (incl. 4.5% sales charge) -5.88% 10.08% 14.63% 14.78%
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(2) 1.29% 8.63% 14.25% 10.81%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions, and the deduction of all Fund expenses. Total
returns do not include the current maximum sales charge of 4.5%, except
where noted. Prior to August 25, 1988, shares of The Guardian Park Avenue
Fund were offered at a higher sales charge, so actual returns would have
been somewhat lower.
(2) The S&P 500 Index is generally considered to be representative of U.S.
stock market activity. The returns for the Index do not reflect expenses
which are deducted from the Fund's return.
(3) Morningstar Inc. is an independent mutual funds rating service.
Morningstar's database of performance information is based on historical
total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. The returns do not
reflect the deduction of sales loads and would be different if sales loads
were included. Past performance cannot guarantee future results.
(4) As reported in The Wall Street Journal, January 27, 1995.
(5) As cited in Forbes Magazine (Mutual Funds issue) dated August 29, 1994.
Honor Roll selection was based, in part, on performance for the period
3/31/84-6/30/94.
(6) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The returns for the
Russell 2000 do not reflect expenses which are deducted from the Fund's
return.
3
<PAGE>
The Guardian Baillie Gifford International Fund -- R. Robin Menzies,
Portfolio Manager
How did The Guardian Baillie Gifford International Fund perform in 1994?
For the year ended December 31, 1994, The Guardian Baillie Gifford International
Fund produced a total return of -0.55%.(1) The Fund compares its performance to
the Morgan Stanley Capital International (MSCI) Europe, Australia and Far East
(EAFE) Index which returned 8.06% for the same period.(2)
What was your investment strategy during the year?
The Fund's strategy has been to seek long-term capital growth by investing in a
diversified portfolio of stocks in a large number of countries outside the
United States. During 1994 we increased the Fund's exposure to Japan, where
economic recovery was in its initial stages, while at the same time, we reduced
the proportion of fund assets invested in the faster growing economies of
Southeast Asia, such as Hong Kong, Malaysia and Thailand. We did this despite
the rapid economic growth in these countries because we anticipated that
increases in U.S. interest rates would have an adverse effect upon their stock
markets. In Europe, where economic recovery started at the end of 1993, we
benefited from our investments in more cyclical companies, gaining profits as
the year progressed. We also invested small amounts in Eastern Europe and Latin
America. Currency exposure risk was hedged to a limited extent; the German Mark
exposure was partially hedged through March; a Japanese Yen hedge was in place
throughout the year, thereby protecting 50% of the Fund's Yen assets at
year-end.
Finally, we invested in individual companies that we believed were attractive
due to strong competitive positions or high levels of profitability. As of
December 31, 1994, the Fund was invested in 140 companies in 23 countries.
What factors affected the Fund's performance in 1994?
The two most significant factors affecting the Fund's performance during the
year were Japanese investments and Asia ex-Japan investments. Japan performed
quite well in 1994, while other Asian countries performed rather weakly. In
1994, Japan, as measured by the MSCI Japan Index, had a return of 20.7%.(2) As
of December 31, 1994, the Fund had a 28.1% weighting in Japan, compared to the
45.8% weighting of the EAFE Index. While Japan's economy is at last recovering,
stock prices remain high; the Fund's Japanese holdings have significantly lower
ratings than the Japanese market as a whole, but they cannot be said to be
cheap.
Malaysia and Hong Kong were the two poorest performing countries in the
MSCI/EAFE Index falling by 20.8% and 31.0% respectively. The Fund's exposure to
these two countries ranged from a high of 15.2% in January 1994, to 6.6% at the
end of the year, compared to the EAFE weighting of 5.2% at year-end.
In Europe, market movements were less dramatic. The MSCI United Kingdom Index
declined by 4.7%,(2) while the MSCI Europe ex-UK Index rose by 3.1%.(2) Latin
American investments were a small drag on performance and amounted to 2.7% of
the Fund, of which 1.4% was invested in Mexico. This small Mexican position
spared the Fund from the effects of the recent and ongoing upheaval in the
Mexican economy.
The general theme linking many of the weaker performing markets in 1994 was
their reaction to the rise in U.S. interest rates. Some countries, such as Hong
Kong, peg their currencies to the dollar and have to move their interest rates
in tandem with changes in the U.S. Other countries, especially those in Latin
America, have been suffering since flows of U.S. investors' money into these
countries, have slowed - or reversed - as U.S. interest rates rose during 1994.
We anticipate that U.S. interest rates may rise further during 1995, and hence,
we will be cautious about increasing the proportion invested in these areas,
although some of these countries do have fundamental long-term potential.
4
<PAGE>
The following graph compares the performance of The Guardian Baillie Gifford
International Fund to the Morgan Stanley Capital International (MSCI) Europe,
Australia and Far East (EAFE) Index. The Fund is a professionally managed mutual
fund, while the Index is not available for investment and is unmanaged. The
comparisons are shown for illustrative purposes only. The starting point
($9,550) for the Fund reflects its initial sales load of 4.5%. The starting
point for the Index ($10,000) does not reflect a sales load.
[The table below was represented as a graph in the printed material]
GBGIF MSCI/EAFE Index
----- ---------------
2/16/93 9550 10000
FEB 9661 10121
MAR 9829 10988
APR 10349 12014
MAY 10600 12252
JUN 10386 12045
JUL 10669 12451
AUG 11362 13109
SEP 11399 12798
OCT 11891 13117
NOV 11334 12009
DEC 12353 12861
JAN 12859 14419
FEB 12644 14382
MAR 12241 13765
APR 12597 14353
MAY 12494 14273
JUN 12382 14478
JUL 12728 14621
AUG 13057 15970
SEP 12550 14502
OCT 12935 14988
NOV 12297 14271
DEC 12285 14364
Investment return and principal value of an investment in The Guardian
Baillie Gifford International Fund will fluctuate, so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
Average Annual Total Returns Periods ended December 31, 1994(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 year Life of Fund
(since 2/16/93)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Guardian Baillie Gifford Int. Fund (without 4.5% sales charge) -0.55% 15.14%
- ------------------------------------------------------------------------------------------------------------------------
Guardian Baillie Gifford Int. Fund (incl. 4.5% sales charge) -5.03% 11.63%
- ------------------------------------------------------------------------------------------------------------------------
MSCI/EAFE Index(2) 8.06% 21.39%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions, and the deduction of all fund expenses. Total
returns do not include the maximum sales charge of 4.5%, except where
noted.
(2) The MSCI/EAFE Index is generally considered to be representative of
international stock market activity. The MSCI Japan Index is an unmanaged
index generally considered to be representative of Japanese stock market
activity. MSCI United Kingdom Index is an unmanaged index generally
considered to be representative of stock market activity in the United
Kingdom. The MSCI Europe ex-UK Index is an unmanaged index generally
considered to be representative of European stock market activity,
excluding the United Kingdom. The returns for the Indices do not reflect
expenses which are deducted from the Fund's return.
5
<PAGE>
The Guardian Asset Allocation Fund -- Frank J. Jones,
Portfolio Manager
How did The Guardian Asset Allocation Fund perform in 1994?
For the year ended December 31, 1994, The Guardian Asset Allocation Fund
produced a total return of -2.13%.(1) For the same period, the S&P 500 Index had
a total return of 1.29% and the Lehman Aggregate Bond Index generated a total
return of -2.92%.(2) The Morningstar universe of 97 asset allocation funds had
an average return of -3.17% during 1994.(3) The Fund's composite benchmark (60%
of the S&P 500 Index and 40% of the Lehman Aggregate Bond Index) had a total
return of -0.35% for 1994.
Since its inception, the Fund has generated an agregate total return of
9.77%(1) versus 7.04% for its composite benchmark. The Fund's average annual
total return since inception has been 5.11%.
What was your investment strategy during the year?
The Fund's investments in each of its stock, bond and money market securities
are separately managed by the portfolio managers of The Guardian Park Avenue
Fund, The Guardian Investment Quality Bond Fund and The Guardian Cash Management
Fund. Allocation changes - which shift the Fund's concentrations in stocks,
bonds and cash - are based upon daily signals from theoretical models which
evaluate information from the stock, bond and cash markets, the economy and
other technical factors. There can be no assurance that following the models'
signals will result in the most favorable return to shareholders.
The neutral position for The Guardian Asset Allocation Fund is 60% stocks,
40% bonds and 0% money market instruments. The Fund began 1994 in its neutral
position. During the year there were eight allocation changes and as of December
31, 1994, the Fund's allocation was 70% stocks, 30% bonds and 0% cash.
Throughout most of the year, stocks were underweighted relative to the neutral
position and bonds were overweighted; it was not until December that we made two
allocation changes increasing the stock weighting.
What factors affected the Fund's performance in 1994?
The Fund's negative performance during 1994 was due to negative returns on both
our stock and bond portfolios. Both sectors were negatively affected by higher
interest rates and inflationary worries stemming from continued economic
expansion. In addition, during much of the year, the Fund was overweighted,
relative to its neutral position, in bonds, the sector of the financial markets
most adversely affected by the rise of interest rates in the U.S. in 1994.
6
<PAGE>
The following graph compares the performance of The Guardian Asset Allocation
Fund to the S&P 500 Index and the Lehman Aggregate Bond Index. The Fund is a
professionally managed mutual fund, while the Indices are not available for
investment and are unmanaged. The comparisons are shown for illustrative
purposes only. The starting point ($9,550) for the Fund reflects its initial
sales load of 4.5%. The starting point for the Indices ($10,000) does not
reflect a sales load.
[The table below was represented as a graph in the printed material]
Lehman Aggregate
GAAF S&P 500 Index Bond Index
---- ------------- ----------
2/16/93 9550 10000 10000
FEB 9674 9988 10129
MAR 9856 10197 10172
APR 9798 9962 10243
MAY 9894 10211 10256
JUN 10180 10242 10442
JUL 10180 10211 10501
AUG 10753 10586 10685
SEP 10916 10505 10714
OCT 10877 10732 10753
NOV 10591 10618 10662
DEC 10711 10748 10720
JAN 11121 11123 10864
FEB 10857 10814 10675
MAR 10506 10345 10412
APR 10428 10489 10328
MAY 10360 10644 10327
JUN 10184 10384 10304
JUL 10359 10737 10509
AUG 10672 11165 10522
SEP 10460 10890 10367
OCT 10662 11143 10358
NOV 10288 10729 10335
DEC 10483 10886 10406
Investment return and principal value of an investment in The Guardian Asset
Allocation Fund will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Average Annual Total Returns Periods ended December 31, 1994(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 year Life of Fund
(since 2/16/93)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Guardian Asset Allocation Fund (without 4.5% sales charge) -2.13% 5.11%
- ------------------------------------------------------------------------------------------------------------------------
Guardian Asset Allocation Fund (incl. 4.5% sales charge) -6.53% 2.55%
- ------------------------------------------------------------------------------------------------------------------------
S&P 500 Index(2) 1.29% 4.65%
- ------------------------------------------------------------------------------------------------------------------------
Lehman Aggregate Bond Index(2) -2.92% 2.15%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions, and the deduction of all fund expenses. Total
returns do not include the current maximum sales charge of 4.5%, except
where noted.
(2) The S&P 500 Index is generally considered to be representative of U.S.
stock market activity. The Lehman Aggregate Bond Index is generally
considered to be representative of U.S. bond market activity. The returns
for the indices do not reflect expenses which are deducted from the Fund's
return.
(3) Morningstar Mutual Fund Performance Report, January 1995. Returns
calculated by Morningstar do not reflect the deduction of sales load and
would be different if the effects of sales loads were included.
7
<PAGE>
The Guardian Investment Quality Bond Fund -- Michele S. Babakian,
Portfolio Manager
How did The Guardian Investment Quality Bond Fund perform in 1994?
The Fund underperformed the Lehman Aggregate Bond Index for the year. The Fund's
total return for the year was -4.50%(1) as compared with a total return of
- -2.92%(2) for the Index. This Fund was competitive with its peer group of 69
BBB-rated bond funds as identified by Lipper Analytical Services. For the year,
the peer group returned -4.46%(3) versus a -4.50% return for our Fund.
What was your investment strategy during the year?
As the Federal Reserve Board continued to tighten the Federal Funds rate
throughout the year, interest rates climbed quickly. To limit the price
depreciation caused by rising rates, the Fund's duration was gradually shortened
from 5.5 years at the end of 1993 to 3.5 years by the end of 1994. This was
primarily a defensive strategy since price declines for intermediate-term bonds
were generally less dramatic than declines for longer-term bonds.
At the end of 1994, 40.3% of the Fund's portfolio was invested in U.S.
government and agency securities, 30.8% multi-class mortgage pass-throughs,
including collateralized mortgage obligations, 11.3% in corporate bonds, and
19.1% in repurchase agreements (see chart below). The Fund acquired a large
portfolio of U.S. government and agency securities when The Guardian U.S.
Government Securities Fund was reorganized into the Fund in October 1994. The
added Treasury position was a good match with the Fund's duration objective.
Since U.S. Treasuries can be quickly sold for cash, we expect in 1995 to sell at
least some of the acquired securities to buy mortgage pass-throughs, corporate
bonds and asset-backed securities as spreads widen and opportunities present
themselves.
The Fund's multi-class mortgage pass-through position was reduced from 47.7%
at mid-year to 30.3% at December 31, 1994. We sold a portion of the Fund's
holdings in mortgage-backed securities (MBS) from July to October. Mortgage
prepayments slowed considerably throughout the summer and fall extending
durations and adversely affecting values, particularly among MBS that are
secured by discount collateral.
We believe the mortgage-backed securities market can provide products which
are well structured and priced fairly in 1995. Although fewer new issues are
expected, the secondary market is large.
What factors affected the Fund's performance in 1994?
One factor which affected the Fund's performance was the reorganization of The
Guardian U.S. Government Securities Fund into the Fund in October 1994. The
durations of the Treasury positions in both Funds were compatible. The resulting
infusion of the Government Securities Fund's holdings significantly increased
the Fund's weighting of Treasuries. This immediately enhanced the Fund's
liquidity.
Another important influence was the Federal Reserve Board's actions to
increase interest rates. During the year, the Federal Reserve Board permitted
the Federal Funds rate to increase by 250 basis points (2.5%). This caused
short- and long-term rates to rise. In turn, bond prices eroded across the yield
curve. The Fund was not immune from the effects of declines in bond prices
caused by the rapid and negative changes in interest rates.
MBS, especially multi-class securities, were affected by the slowdown in
mortgage prepayments caused by higher interest rates. The key consequence was
increasing durations for MBS which caused price declines. This portion of the
Fund's portfolio performed the worst in 1994.
[The following table was represented as a pie graph in the printed material]
Multi-Class Mortgage Pass-Throughs 30.8%
Repurchase Agreement 19.1%
Corporate Bonds 11.3%
U.S. Gov'ts & Agencies 40.3%
8
<PAGE>
The following graph compares the performance of The Guardian Investment Quality
Bond Fund to the Lehman Aggregate Bond Index. The Fund is a professionally
managed mutual fund, while the Index is not available for investment and is
unmanaged. The comparisons are shown for illustrative purposes only. The
starting point ($9,550) for the Fund reflects its initial sales load of 4.5%.
The starting point for the Index ($10,000) does not reflect a sales load.
[The table below was represented as a graph in the printed material]
Lehman Aggregate
GIQBF Bond Index
----- ----------
2/16/93 9550 10000
FEB 9571 10129
MAR 9646 10171
APR 9677 10242
MAY 9627 10255
JUN 9858 10441
JUL 9876 10500
AUG 10108 10684
SEP 10140 10713
OCT 10133 10753
NOV 10011 10662
DEC 10065 10720
JAN 10251 10864
FEB 10044 10676
MAR 9771 10412
APR 9659 10329
MAY 9616 10328
JUN 9591 10305
JUL 9714 10510
AUG 9746 10523
SEP 9623 10368
OCT 9615 10359
NOV 9563 10336
DEC 9612 10407
Investment return and principal value of an investment in The Guardian Asset
Allocation Fund will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Average Annual Total Returns Periods ended December 31, 1994(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 year Life of Fund
(since 2/16/93)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Guardian Investment Quality Bond Fund (without 4.5% sales charge) -4.50% 0.35%
- ------------------------------------------------------------------------------------------------------------------------
Guardian Investment Quality Bond Fund (incl. 4.5% sales charge) -8.80% -2.09%
- ------------------------------------------------------------------------------------------------------------------------
Lehman Aggregate Bond Index(2) -2.92% 2.16%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions, and the deduction of all Fund expenses. Total
returns do not include the current maximum sales charge of 4.5%, except
where noted. Currently the advisor is assuming operating expense to the
extent they exceed 0.75% of the Fund's average daily expenses. Without this
expense reimbursement, performance figures would be lower.
(2) The Lehman Aggregate Bond Index is generally considered to be
representative of bond market activity. The returns for the Index do not
reflect expenses which are deducted from the Fund's return.
(3) As reported by The Wall Street Journal, Mutual Fund Scorecard, January 17,
1995. Returns calculated by Lipper Analytical Services, Inc. do not reflect
the deduction of sales loads and would be different if the effects of sales
loads were included.
9
<PAGE>
The Guardian Tax-Exempt Fund -- Alexander M. Grant, Jr.
Portfolio Manager
How did The Guardian Tax-Exempt Fund perform in 1994?
For the year ended December 31, 1994, the Fund produced a total return of
- -8.98%.(1) The Lehman Municipal Bond Index produced a total return of -5.17% for
the same period.(2) We believe that the Fund underperformed its benchmark index
for the year because it contained a larger proportion of high-quality issues of
longer duration than the Index. These securities did not perform well in the
rising interest rate environment experienced in 1994. The Fund started 1994 with
duration of 10.62 years versus 7.07 years for the Index. During the course of
the year, we shortened the Fund's duration. As of December 31, 1994, the Fund's
average duration was 7.83 years versus 8.06 years for the Index.
What was your investment strategy during the year?
During 1994, we continued to concentrate purchases for the Fund's portfolio in
state and county general obligation bonds and revenue bonds. We sold securities
which we identified as underperformers and tried to replace them with securities
which we believe have been better prospects. The municipal obligations held by
the Fund generally provide high quality and liquidity. Throughout the period,
the average credit rating of the securities held by the Fund was double A.
Since counties and states have the power to tax, their bonds present less
credit risk than other municipal obligations. To achieve a higher yield
potential with lower relative risk, we purchase bonds within a maturity range of
10 to 15 years. Within our quality and duration standards, we seek to invest in
bonds offering high coupons which should provide higher interest payments and
therefore more income that is free from federal income taxes for our
shareholders. Some income may be subject to state and local taxes and, for some
investors, the federal alternative minimum tax.
What factors affected the Fund's performance in 1994?
We believe that the high quality and longer duration profile of the Fund's
portfolio adversely affected its performance as compared to its benchmark Index.
Long-term securities generally performed poorly in 1994's rising interest rate
environment. Bringing in the Fund's duration was a good strategy for the Fund
because in doing so the Fund's performance started to pick up at year-end.
In the current climate, we believe that buying lower quality bonds, though
still investment grade, will increase our yield sufficiently to compensate for
the higher risks associated with lower quality. Also, as a relatively new fund,
the Fund's smaller asset base limits its buying opportunities and heightens the
impact of expenses on performance results. Thus, we are happy to report that
operating expenses in excess of 0.75% of the Fund's average daily net assets
will continue to be subsidized in 1995 by the Fund's adviser, Guardian Investor
Services Corporation. We hope that this will help improve the Fund's overall
performance and attract new investors to the Fund.(3)
10
<PAGE>
The following graph compares the performance of The Guardian Tax-Exempt Fund to
the Lehman Municipal Bond Index. The Fund is a professionally managed mutual
fund, while the Index is not available for investment and is unmanaged. The
comparisons are shown for illustrative purposes only. The starting point
($9,550) for the Fund reflects its initial sales load of 4.5%. The starting
point for the Index ($10,000) does not reflect a sales load.
[The table below was represented as a graph in the printed material]
Lehman Municipal
GTEF Bond Index
---- ----------
2/16/93 9550 10000
FEB 9690 10245
MAR 9475 10137
APR 9571 10239
MAY 9609 10296
JUN 9830 10468
JUL 9767 10482
AUG 10053 10700
SEP 10231 10822
OCT 10153 10842
NOV 10002 10747
DEC 10223 10974
JAN 10353 11099
FEB 9952 10811
MAR 9403 10371
APR 9400 10459
MAY 9518 10551
JUN 9377 10486
JUL 9548 10678
AUG 9557 10715
SEP 9391 10558
OCT 9235 10371
NOV 9073 10183
DEC 9305 10407
Investment return and principal value of an investment in The Guardian
Tax-Exempt Fund will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Average Annual Total Returns Periods ended December 31, 1994(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 year Life of Fund
(since 2/16/93)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Guardian Tax-Exempt Fund (without 4.5% sales charge) -8.98% -1.38%
- ------------------------------------------------------------------------------------------------------------------------
Guardian Tax-Exempt Fund (incl. 4.5% sales charge) -13.08% -3.77%
- ------------------------------------------------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -5.17% 2.15%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions, and the deduction of all Fund expenses. Total
returns do not include the current maximum sales charges of 4.5%, except
where noted. Since June 1, 1994, the Fund's investment adviser has been
assuming operating expenses to the extent they exceed .75% of the Fund's
average daily net assets. Without this expense reimbursement, performance
figures would be lower.
(2) The Lehman Municipal Bond Index is generally considered to be
representative of municipal bond market activity. The returns for the Index
do not reflect expenses which are deducted from the Fund's return.
(3) When the Fund's adviser ceases to subsidize the Fund's expenses, the
expenses actually paid by the Fund will increase and returns to
shareholders will correspondingly decrease.
11
<PAGE>
The Guardian Cash Management Fund -- Alexander M. Grant, Jr.
Portfolio Manager
How did The Guardian Cash Management Fund perform in 1994?
For the seven days ended December 31, 1994, the Fund's current yield was 5.12%
and its effective yield was 5.25%. The Fund produced a total return of 3.48% in
1994.(1)
What was your investment strategy during the year?
Our investment strategy has been to seek maximum safety by investing in a
diversified portfolio of money market instruments that present minimal credit
risks according to our criteria. During 1994, the Fund only purchased securities
from issuers that had received ratings in the two highest credit quality
categories established by nationally recognized statistical rating organizations
like Moody's and S&P. Since we place a great emphasis on preserving principal,
we generally invest in instruments with no greater than 30-day maturities. Our
past performance and our current performance indicate that we give up very
little yield to be in the short end of the market. Throughout 1994, most of the
portfolio (92.2%) was invested in commercial paper; the balance (7.8%) was
invested in repurchase agreements.
What factors affected the Fund's performance in 1994?
In 1994, we maintained our average days to maturity in the short range (19
days). This allowed us to take advantage of the higher short-term yields that
resulted from the Federal Reserve Board's hikes in interest rates to combat
inflation.
Please note: Investments in the Fund are neither insured nor guaranteed by the
U.S. government. While the Fund seeks to maintain a stable price of $1.00 per
share, there is no assurance that it will be able to do so.
- ----------
(1) Yields are annualized historical figures. Effective yield assumes
reinvested income. Yields will vary as interest rates change. Since January
1, 1993, the Fund's investment advisor has been assuming some or all of the
Fund's operating expenses. Currently, the advisor is assuming expenses to
the extent they exceed 0.85% of the Fund's average daily assets.
12
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
- --------------------------------------------------------------------------------
December 31, 1994
The Guardian Park Avenue Fund
- --------------------------------------------------------------------------------
Common Stocks -- 91.5%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Aerospace and Defense -- 5.8%
112,400 General Dynamics Corp. $ 4,889,400
105,000 Litton Industries, Inc.* 3,885,000
93,800 Logicon, Inc. 2,802,275
30,000 Loral Corporation 1,136,250
36,400 Martin Marietta Corp. 1,615,250
77,000 McDonnell Douglas Corp. 10,934,000
133,950 Precision Castparts Corp. 2,712,488
155,000 Rockwell Int'l. Corp. 5,541,250
122,900 Thiokol Corp. 3,425,837
------------
36,941,750
- --------------------------------------------------------------------------------
Air Transportation -- 0.3%
82,500 Alaska Air Group,Inc.* 1,237,500
66,100 Mesa Airlines, Inc.* 603,162
------------
1,840,662
- --------------------------------------------------------------------------------
Appliance and Furniture -- 0.3%
117,400 Maytag Corp. 1,761,000
- --------------------------------------------------------------------------------
Automotive -- 2.6%
24,000 Borg Warner Automotive, Inc. 603,000
161,000 Echlin, Inc. 4,830,000
288,000 Ford Motor Co. 8,064,000
75,000 Magna International, Inc. 2,878,125
23,700 Mascotech, Inc. 305,137
------------
16,680,262
- --------------------------------------------------------------------------------
Broadcasting -- 1.5%
92,000 Capital Cities, ABC, Inc. 7,843,000
31,915 CBS, Inc. 1,767,292
------------
9,610,292
- --------------------------------------------------------------------------------
Building Materials and Homebuilders -- 0.6%
42,700 Coachmen Industries, Inc. 656,513
23,618 Hughes Supply, Inc. 433,981
38,000 Lennar Corp. 589,000
30,000 McGrath Rent Corp. 510,000
40,000 Ply-Gem Industries, Inc. 765,000
24,000 Skyline Corp. 462,000
7,200 Webb (Del) Corp. 126,900
37,300 Willcox & Gibbs, Inc.* 219,137
------------
3,762,531
- --------------------------------------------------------------------------------
Business Services -- 1.3%
66,100 Ceridian Corp.* 1,776,438
8,255 Olsten Corp. 262,096
159,100 Paychex, Inc.. 6,443,550
------------
8,482,084
- --------------------------------------------------------------------------------
Capital Goods-Miscellaneous -- 0.4%
50,000 Aviall, Inc. 381,250
15,000 Cable Design Tech. Corp.* 247,500
105,000 Read-Rite Corp.* 1,949,063
------------
2,577,813
- --------------------------------------------------------------------------------
Chemicals -- 5.9%
74,000 Albemarle Corp. 1,026,750
77,800 Cambrex Corp. 2,022,800
112,700 Eastman Chemical Co. 5,691,350
139,700 E.I. Dupont De Nemours, Inc.* 7,858,125
72,600 Hercules, Inc. 8,376,225
55,000 Monsanto Co. 3,877,500
12,900 OM Group, Inc. 309,600
145,000 PPG Industries, Inc. 5,383,125
16,000 RPM, Inc. 300,000
18,000 Schulman A., Inc. 495,000
95,300 Sterling Chemicals, Inc.* 1,250,812
35,000 Union Carbide Corp. 1,028,125
------------
37,619,412
- --------------------------------------------------------------------------------
Coal -- 0.5%
118,000 Pittston Services Group 3,127,000
- --------------------------------------------------------------------------------
Conglomerates -- 0.8%
30,000 Kaman Corp. 330,000
11,000 Recoton Corp.* 206,250
95,000 Textron, Inc. 4,785,625
------------
5,321,875
- --------------------------------------------------------------------------------
Consumer Cyclicals-Miscellaneous -- 0.4%
82,300 De Beers Cons. Mines Ltd. 1,923,762
18,000 Toro Co. 517,500
------------
2,441,262
- --------------------------------------------------------------------------------
Containers -- 0.2%
61,750 Alltrista Corp.* 1,219,562
- --------------------------------------------------------------------------------
Cosmetics and Toiletries -- 0.0%
17,100 Helen of Troy Ltd.* 290,700
- --------------------------------------------------------------------------------
Drugs and Hospitals -- 5.3%
10,600 Acuson, Inc.* 172,250
264,200 Caremark International, Inc. 4,525,085
50,000 Circa Pharmaceuticals, Inc.* 893,750
41,500 Continental Med.
Systems, Inc.* 257,800
23,877 Coram Healthcare Corp.* 393,971
14,200 Cytrx Corp.* 18,637
100,000 Eli Lilly & Co., Inc. 6,562,500
72,000 Humana, Inc.* 1,629,000
77,000 Johnson & Johnson 4,215,750
69,400 Liposome, Inc. 581,225
18,000 United Healthcare Corp. 812,250
100,000 Universal Health
Svcs., Inc.* 2,450,000
238,400 U.S. Healthcare
Systems, Inc. 9,834,000
50,000 WellpointHealth
Networks, Inc.* 1,456,250
------------
33,802,468
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
13
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Electronics and Instruments -- 2.0%
200,000 Analogic Corp.* $ 3,800,000
25,000 Augat, Inc. 471,875
30,000 Dynatech Corp.* 990,000
25,000 Electroglas, Inc.* 834,375
39,800 Exabyte Corp.* 850,725
46,200 Hewlett Packard Co. 4,614,225
7,500 In Focus System, Inc.* 195,468
16,600 Methode Electronics, Inc. 282,200
17,600 W.W. Grainger, Inc. 1,016,400
------------
13,055,268
- --------------------------------------------------------------------------------
Energy-Miscellaneous -- 1.4%
129,500 Giant Industries, Inc.* 971,250
167,104 Holly Corp. 4,365,592
86,500 Howell Corp. 1,027,188
86,400 Tosco Corp. 2,516,400
------------
8,880,430
- --------------------------------------------------------------------------------
Entertainment -- 0.8%
49,900 Bally Entertainment Corp.* 305,638
6,410 GC Companies, Inc.* 168,263
107,418 Mattel, Inc. 2,698,877
6,000 National Gaming Corp.* 72,000
5,880 Viacom, Inc., Cl A* 244,755
44,552 Viacom, Inc., Cl B* 1,809,925
73,500 Viacom, Inc., Non-Voting* 82,688
------------
5,382,146
- --------------------------------------------------------------------------------
Fertilizer -- 0.8%
55,800 First Mississippi Corp. 1,395,000
34,800 Mississippi Chemical Corp.* 604,650
289,300 Terra Industries, Inc. 3,001,488
------------
5,001,138
- --------------------------------------------------------------------------------
Financial-Banks -- 4.5%
23,000 Central & Southern Hldgs. Co. 146,625
107,000 Chase Manhattan Corp. 3,678,125
115,618 Citicorp 4,783,695
18,000 Commonwealth Bankshares, Inc.* 159,750
55,211 Crestar Financial Corp. 2,077,314
42,300 Deposit Guaranty Corp.* 1,274,288
65,000 First Bank Systems Corp. 2,161,250
12,400 First Empire State Corp. 1,686,400
17,300 First Interstate Bancorp 1,169,913
32,226 Gateway Bancorp, Inc.* 362,542
92,500 Hawkeye Bancorporation 1,780,625
32,670 Hubco, Inc.* 722,824
57,000 Integra Financial Corp.* 2,344,125
17,970 Nationsbank Corp. 810,896
70,000 Premier Bancorp., Inc.* 1,111,250
123,241 Signet Banking Corp. 3,527,767
12,000 Southern National Corp. 229,500
4,100 Summit Bancorporation 79,437
4,375 Susquehanna Bancshares, Inc. 97,344
27,300 US Bancorp, Inc.* 573,300
------------
28,776,970
- --------------------------------------------------------------------------------
Financial-Others -- 4.0%
65,400 Colonial Group, Inc. 2,125,500
95,000 Dean Witter Discover & Co. 3,218,125
73,000 Duff & Phelps Corp. 629,625
10,000 Duff & Phelps Cr. Rating Co. 98,750
149,200 First USA, Inc. 4,904,950
89,400 Foothill Group, Inc. 1,341,000
136,800 Green Tree Acceptance, Inc. 4,155,300
28,300 Jefferies Group, Inc. 841,925
67,850 Legg Mason, Inc. 1,441,812
103,000 Lehman Bros. Holdings, Inc. 1,519,250
57,400 McDonald & Co. Investments, Inc. 638,575
111,900 Morgan Keegan, Inc. 1,314,825
28,900 Plaza Home Mortgage Corp.* 231,200
67,300 Raymond James Financial, Inc. 942,200
64,650 Charles Schwab Corp. 2,254,668
------------
25,657,705
- --------------------------------------------------------------------------------
Financial-Thrift -- 4.3%
9,600 Albank Fin'l. Corp. 223,200
75,000 Brooklyn Bancorp, Inc.* 2,268,750
88,750 Charter One Financial, Inc.* 1,686,250
47,000 Coastal Bank Svgs. Assn. - TX 675,625
239,199 Collective Bancorp, Inc. 4,066,383
3,713 Great Lakes Bancorp* 99,787
59,800 Loyola Capital Corp. 1,053,975
24,600 MAF Bancorp, Inc. 461,250
65,200 Maryland Fed. Bancorp, Inc. 1,507,750
75,000 ONBANCorp., Inc. 1,743,750
20,960 Pacific Crest Capital, Inc.* 89,080
84,800 Progressive Bank, Inc.* 1,971,600
171,000 Roosevelt Financial Group, Inc.2,565,000
331,287 Sovereign Bancorp, Inc. 2,567,474
123,000 Standard Fed. Bk. - Troy, MI 2,936,625
91,300 TCF Financial Corp. 3,766,125
------------
27,682,624
- --------------------------------------------------------------------------------
Food, Beverage and Tobacco -- 2.0%
165,000 Archer Daniels Midland Co. 3,403,125
29,700 Brown-Forman Corp. 905,850
97,000 Coca-Cola Co. 4,995,500
73,700 IBP, Inc. 2,229,425
37,000 Ralcorp Holdings, Inc.* 823,250
9,000 Thorn Apple Valley, Inc. 256,500
------------
12,613,650
- --------------------------------------------------------------------------------
Footwear -- 0.5%
90,000 Reebok International Ltd. 3,555,000
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
14
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Information Processing and Computers -- 9.0%
89,800 Amdahl Corp.* $ 987,800
46,200 Astro-Med, Inc. 496,650
15,000 Atria Software, Inc.* 431,250
82,200 Banctec, Inc.* 1,787,850
258,000 Computer Assoc. Int'l., Inc. 12,513,000
105,000 Compaq Computer Corp.* 4,147,500
26,000 Computer Sciences Corp.* 1,326,000
38,000 Cray Research, Inc.* 598,500
4,000 Electronics for Imaging, Inc.* 110,000
40,000 Fair Isaac & Co., Inc. 2,250,000
223,700 Int'l. Business Machine 16,441,950
18,700 Legent Corp.* 537,625
71,600 Network General Corp.* 1,839,225
220,000 Quantum Corp.* 3,327,166
50,500 Sungard Data Systems, Inc.* 1,944,250
250,600 Tandem Computers, Inc.* 4,291,525
38,900 Teradyne, Inc.* 1,317,737
224,900 Western Digital Corp.* 3,767,075
------------
58,115,103
- --------------------------------------------------------------------------------
Insurance -- 2.3%
55,000 AMBAC, Inc. 2,048,750
48,000 American Eagle Group, Inc. 402,000
74,000 Amer. Bankers Ins. Group, Inc. 1,776,000
22,700 Capital Guaranty Corp. 320,637
17,000 Capitol Amer. Fin'l. Corp. 391,000
89,400 Equitable Iowa Cos., Inc. 2,525,550
47,000 Jefferson Pilot Corp. 2,438,125
65,000 MBIA, Inc. 3,648,125
41,300 National Auto Credit, Inc.* 495,600
61,500 State Auto Financial Corp. 876,375
------------
14,922,162
- --------------------------------------------------------------------------------
Leisure Products -- 1.8%
121,500 Arctco, Inc. 2,354,063
180,000 Brunswick Corp. 3,397,500
67,500 Callaway Golf Co. 2,235,937
60,000 Harley-Davidson, Inc. 1,680,000
30,800 Sturm Ruger & Co., Inc. 873,950
64,200 Thor Industries, Inc. 1,243,875
------------
11,785,325
- --------------------------------------------------------------------------------
Lodging -- 1.7%
60,000 Hospitality Franchise
Sys. Co.* 1,590,000
599,800 Host Marriott Corp.* 5,773,075
75,000 Marriott Int'l., Inc. 2,109,375
175,000 Prime Hospitality Corp.* 1,312,500
------------
10,784,950
- --------------------------------------------------------------------------------
Machinery and Equipment-- 6.3%
4,000 AGCO Corp. 121,500
155,000 Briggs & Stratton Corp. 5,076,250
45,000 Caterpillar, Inc. 2,480,625
47,200 Clark Equipment Co.* 2,560,600
133,729 Cummins Engine, Inc. 6,051,799
68,000 Dana Corp. 1,589,500
35,000 Deere & Co. 2,318,750
39,000 Dover Corp. 2,013,375
94,300 Eaton Corp. 4,667,850
155,600 Indresco, Inc.* 2,217,300
45,000 Millipore Corp. 2,176,875
37,000 Parker Hannifin Corp. 1,683,500
19,100 Pentair, Inc. 806,975
15,400 Robbins & Myers, Inc. 277,200
20,100 Roper Industries, Inc. 507,525
69,900 Tecumseh Products Co. 3,145,500
58,125 Varlen Corp. 1,511,250
35,000 York International Corp. 1,290,625
------------
40,496,999
- --------------------------------------------------------------------------------
Merchandising-Department Stores -- 1.5%
21,600 Bradlees, Inc. 249,917
39,000 Carson Pirie Scott & Co.* 741,000
75,000 Dillard Dept. Stores, Inc. 2,006,250
246,700 Federated Dept.
Stores, Inc.* 4,748,975
36,000 J.C. Penney, Inc. 1,606,500
14,400 Ross Stores, Inc. 162,000
------------
9,514,642
- --------------------------------------------------------------------------------
Merchandising-Drugs -- 1.0%
50,000 Bergen Brunswig Corp. 1,043,750
13,300 Foxmeyer Health Corp. 197,838
83,000 McKesson Corp. 2,707,875
127,000 Rite Aid Corp. 2,968,625
------------
6,918,088
- --------------------------------------------------------------------------------
Merchandising-Food -- 1.4%
40,000 Albertson's, Inc. 1,160,000
63,600 American Stores Co. 1,709,250
69,500 Bruno's, Inc. 580,512
314,800 Casey's General Stores, Inc. 4,722,000
33,000 Smith Food and Drug
Ctrs., Inc. 829,125
------------
9,000,887
- --------------------------------------------------------------------------------
Merchandising-Special -- 0.6%
55,900 Cato Corp. 405,275
210,500 CML Group, Inc. 2,131,313
78,800 Hechinger Co. 916,050
33,800 Waban, Inc.* 599,950
------------
4,052,588
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
15
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Metals and Mining -- 2.7%
100,000 Alumax, Inc. $ 2,837,500
5,900 Brush Wellman, Inc. 102,513
12,000 Furon Co. 264,000
118,300 Magma Copper Co. 1,975,525
70,000 Phelps Dodge Corp. 4,331,250
435,002 Santa Fe Pacific Gold Corp. 5,600,651
43,200 Weirton Steel Corp.* 386,350
121,000 WHX Corp. 1,603,250
------------
17,101,039
- --------------------------------------------------------------------------------
Natural Gas -- 1.3%
216,400 Allegheny & Western Engy.
Corp.* 2,272,200
93,500 Enron Corp. 2,851,750
118,300 Mitchell Energy & Dev. Corp. 2,218,125
16,700 Oneok, Inc. 300,293
92,500 USX Delhi Group 925,000
------------
8,567,368
- --------------------------------------------------------------------------------
Oil and Gas Producing -- 3.5%
63,100 Alexander Energy Corp.* 410,150
76,000 Anadarko Petroleum Corp. 2,926,000
41,900 Basin Exploration, Inc.* 460,900
115,000 Tom Brown, Inc.* 1,322,500
120,000 Chieftain International, Inc.* 1,215,000
156,500 Coho Energy, Inc.* 811,844
129,000 Dekalb Energy Co.* 2,741,250
153,000 Devon Energy Corp. 2,792,250
9,925 Forest Oil Corp.* 22,331
75,000 Global Natural Res., Inc.* 637,500
18,900 H S Resources, Inc. 333,112
140,000 Home Oil Ltd.* 1,470,000
64,800 Phoenix Resource Cos., Inc.* 3,078,000
105,000 Pogo Producing Co. 1,863,750
36,300 Snyder Oil Corp. 539,963
5,278 United Meridian Corp.* 76,531
71,100 Vintage Petroleum, Inc. 1,199,813
46,700 Wainoco Oil Ltd.* 222,540
------------
22,123,434
- --------------------------------------------------------------------------------
Oil-Integrated-Domestic -- 1.0%
107,900 Ashland Oil, Inc. 3,722,550
49,000 Murphy Oil Corp. 2,082,500
72,000 Tesoro Petroleum, Inc.* 666,950
------------
6,472,000
- --------------------------------------------------------------------------------
Oil Services -- 0.9%
67,500 Energy Services, Inc.* 826,875
209,400 Nabors Industries, Inc.* 1,361,100
86,300 Offshore Logistics, Inc.* 1,121,900
8,700 Offshore Pipelines, Inc. 196,838
130,000 Smith International, Inc.* 1,625,000
48,000 Weatherford
International, Inc.* 468,000
------------
5,599,713
- --------------------------------------------------------------------------------
Paper and Forest Products -- 1.7%
50,000 Federal Paper Board, Inc. 1,450,348
81,400 Louisiana Pacific Corp. 2,218,150
183,000 Rayonier, Inc. 5,581,500
29,000 Willamette Industries, Inc. 1,377,500
------------
10,627,498
- --------------------------------------------------------------------------------
Publishing and Printing -- 0.1%
31,000 Bowne & Co., Inc. 538,625
- --------------------------------------------------------------------------------
Railroads -- 1.2%
125,000 Illinois Central Corp. 3,843,750
225,000 Santa Fe Pacific Corp. 3,937,500
------------
7,781,250
- --------------------------------------------------------------------------------
Restaurants -- 0.4%
176,700 Applebees Int'l., Inc. 2,363,363
7,300 Wendy's International, Inc. 104,937
------------
2,468,300
- --------------------------------------------------------------------------------
Semiconductor -- 3.9%
138,800 Adv. Micro-Devices, Inc.* 3,452,650
26,000 Analog Devices, Inc.* 913,250
30,700 Atmel Corp.* 1,028,450
38,000 Cypress Semiconductor Corp.* 878,750
45,000 LSI Logic Corp.* 1,816,875
149,750 Micron Technology, Inc. 6,607,719
47,300 Motorola, Inc. 2,737,488
14,000 Novellus Systems, Inc.* 700,000
94,500 Texas Instruments, Inc. 7,075,687
------------
25,210,869
- --------------------------------------------------------------------------------
Telecommunication -- 1.3%
17,000 ADC Telecommunication, Inc.* 850,000
114,300 Andrew Corp.* 5,972,175
2,700 Communication Systems, Inc. 33,750
32,000 SBC Communications 1,292,000
------------
8,147,925
- --------------------------------------------------------------------------------
Textile-Apparel and Production -- 0.9%
113,000 Fieldcrest Cannon, Inc.* 2,881,500
101,300 Wellman, Inc. 2,861,725
------------
5,743,225
- --------------------------------------------------------------------------------
Transportation-Miscellaneous-- 0.1%
109,400 Maritrans, Inc. 601,700
- --------------------------------------------------------------------------------
Truckers -- 0.7%
90,300 Arkansas Best Corp. 1,094,887
34,000 Arnold Industries, Inc. 705,500
59,000 FRP Pptys., Inc.* 1,084,125
4,000 Landstar System, Inc.* 131,000
55,000 Werner Enterprises, Inc. 1,306,250
------------
4,321,762
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $506,205,240) 586,979,056
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
16
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Convertible Preferred Stocks -- 0.5%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
9,310 Forest Oil Corp.* $ 86,118
29,600 Noble Drilling Corp.* 969,400
33,300 Snyder Oil Corp. 1,998,000
- --------------------------------------------------------------------------------
Total Convertible Preferred
Stocks (Cost $2,460,329) 3,053,518
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Convertible Bonds -- 0.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 900,000 Mediq, Inc. 7.25%
Deb., due 6/1/06 $ 567,000
1,755,000 Richardson Electronics Ltd.
7.25% Deb., due 12/15/06 1,307,475
- --------------------------------------------------------------------------------
Total Convertible Bonds
(Cost $2,426,262) 1,874,475
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government Security -- 1.7%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$11,000,000 U.S. Treasury Notes,
4.25% due 7/31/95 $ 10,841,820
Total U.S. Government
Security
(Cost $11,006,102) 10,841,820
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 2.8%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$17,779,000 State Street Bank &
Trust repurchase
agreement, dated
12/30/94, maturity
value $17,789,174,
5.15%, due 1/3/95
(collateralized by
$18,070,000 U.S.
Treasury Notes,
6.125% due 7/15/96) 1/3/95 $ 17,779,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $17,779,000) 17,779,000
- --------------------------------------------------------------------------------
Total Investments -- 96.8%
(Cost $539,876,933) 620,527,869
Cash, Receivables and Other Assets
Less Payables -- 3.2% 20,389,158
- --------------------------------------------------------------------------------
Net Assets-- 100.0% $640,917,027
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
17
<PAGE>
The Guardian Asset Allocation Fund
- --------------------------------------------------------------------------------
Common Stocks -- 66.5%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Air Transportation -- 1.2%
- --------------------------------------------------------------------------------
45,000 Alaska Air Group, Inc.* $ 660,875
- --------------------------------------------------------------------------------
Automotive -- 0.8%
14,000 Echlin, Inc. 420,000
- --------------------------------------------------------------------------------
Broadcasting -- 2.8%
18,000 Capital Cities, ABC, Inc. 1,534,500
- --------------------------------------------------------------------------------
Chemicals -- 6.4%
22,600 Eastman Chemical Co. 1,141,300
27,400 PPG Industries, Inc. 1,017,225
30,000 Sterling Chemicals, Inc.* 393,750
32,800 Union Carbide Corp. 963,500
------------
3,515,775
- --------------------------------------------------------------------------------
Drugs and Hospitals -- 5.6%
30,000 Caremark International, Inc. 514,905
60,300 Humana, Inc. 1,364,288
29,400 U.S. Healthcare Systems, Inc. 1,212,750
------------
3,091,943
- --------------------------------------------------------------------------------
Financial-Banks -- 3.6%
31,800 Bank of New York 922,200
2,223 Citicorp 91,977
4,184 Crestar Financial Corp. 157,422
8,300 Integra Financial Corp.* 341,338
17,166 Signet Banking Corp. 491,364
------------
2,004,301
- --------------------------------------------------------------------------------
Fertilizer -- 0.5%
25,000 Terra Industries, Inc. 259,375
- --------------------------------------------------------------------------------
Information Processing -- 9.4%
40,100 Amdahl Corp.* 441,100
15,000 Ceridian Corp.* 403,125
32,100 General Motors Corp. Cl E 1,235,850
66,000 Quantum Corp.* 992,000
50,000 Tandem Computers, Inc.* 856,250
75,000 Western Digital Corp.* 1,256,250
------------
5,184,575
- --------------------------------------------------------------------------------
Insurance -- 1.5%
22,000 AMBAC, Inc. 819,500
- --------------------------------------------------------------------------------
Lodging -- 1.7%
100,000 Host Marriott Corp. 962,500
- --------------------------------------------------------------------------------
Machinery and Equipment -- 3.9%
15,000 Briggs & Stratton Corp. 491,250
16,400 Cummins Engine, Inc. 742,100
10,000 Deere & Co. 662,500
5,000 Eaton Corp. 247,500
------------
2,143,350
- --------------------------------------------------------------------------------
Merchandising-Department Stores -- 4.4%
40,000 Dillard Department
Stores, Inc. 1,070,000
25,900 Nordstrom, Inc. 1,087,800
5,800 J.C. Penney, Inc. 258,825
------------
2,416,625
- --------------------------------------------------------------------------------
Merchandising-Drugs -- 2.6%
25,000 Bergen Brunswig Corp. 514,000
40,000 Rite Aid Corp. 935,000
------------
1,449,000
- --------------------------------------------------------------------------------
Merchandising-Special -- 0.7%
20,800 Waban, Inc.* 369,200
- --------------------------------------------------------------------------------
Metals and Mining -- 2.5%
14,600 Alumax, Inc. 414,275
40,000 Magma Copper Co. 670,000
25,000 WHX Corp. 329,625
------------
1,413,900
- --------------------------------------------------------------------------------
Oil and Gas Producing -- 5.5%
40,000 Anadarko Petroleum Corp. 1,540,000
30,000 Tom Brown, Inc.* 345,000
10,000 Devon Energy Corp. 182,500
14,000 H S Resources, Inc. 246,750
7,000 Phoenix Resources Cos., Inc.* 332,500
20,000 Pogo Producing Co. 355,000
------------
3,001,750
- --------------------------------------------------------------------------------
Oil-Integrated-Domestic -- 0.6%
35,000 Tesoro Petroleum Corp.* 323,750
- --------------------------------------------------------------------------------
Oil Services --0.5%
40,000 Nabors Industries, Inc.* 260,000
- --------------------------------------------------------------------------------
Paper and Forest Products -- 1.1%
20,000 Rayonier, Inc. 604,100
- --------------------------------------------------------------------------------
Pollution Control -- 2.2%
41,600 Browning Ferris Inds., Inc. 1,180,400
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
18
<PAGE>
The Guardian Asset Allocation Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Railroads -- 4.5%
19,500 Illinois Central Corp. $ 599,625
85,380 Santa Fe Pacific Gold Corp. 1,124,167
42,300 Santa Fe Pacific Corp. 740,250
------------
2,464,042
- --------------------------------------------------------------------------------
Semiconductor -- 2.7%
33,100 Micron Technology, Inc. 1,460,538
- --------------------------------------------------------------------------------
Textile-Apparel and Production -- 1.3%
9,100 Fieldcrest Cannon, Inc.* 232,050
17,900 Wellman, Inc. 505,675
------------
737,725
- --------------------------------------------------------------------------------
Truckers -- 0.5%
11,100 Werner Enterprises, Inc. 263,625
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $35,387,970) 36,541,349
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Corporate Bonds -- 6.5%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$1,000,000 American Express Master Tr.,
5.375% Deb., due 7/15/03 $ 866,250
1,000,000 BAT Capital Corp.,
6.875% Deb., due 4/15/03 889,780
500,000 Ford Motor Cr. Mtn. Bk.,
5.85% Deb., due 3/26/98 464,580
1,000,000 James River Corp. - VA,
6.70% Deb., due 11/15/03 883,500
500,000 McDermott, Inc. Mtn. Bk. Ent.,
6.57% Deb., due 4/20/98 465,450
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $3,858,924) 3,569,560
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government Securities -- 37.4%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$1,000,000 Federal Home Loan Mortgage
Corp., 6% due 2/15/04 $ 882,400
1,000,000 Federal Home Loan Mortgage
Corp., 6.25% due 12/15/18 887,700
4,000,000 Federal Home Loan Mortgage
Corp., 7.188% due 9/15/99 3,873,760
1,000,000 Federal Home Loan Mortgage
Corp., 7.50% due 6/25/23 926,500
1,000,000 Federal National Mortgage
Assn., 5.75% due 4/25/06 892,900
1,000,000 Federal National Mortgage
Assn., 6.25% due 7/25/07 889,300
1,000,000 Federal National Mortgage
Assn., 6.25% due 5/25/07 889,300
1,000,000 Federal National Mortgage
Assn., 6.25% due 2/25/08 880,800
2,500,000 U.S.Treasury Notes, 7.75%
due 12/31/99 2,491,400
5,800,000 U.S. Treasury Bills, 4.90%
due 1/5/95 5,796,842
2,100,000 U.S. Treasury Bills, 4.92%
due 1/5/95 2,098,852
- --------------------------------------------------------------------------------
Total U.S. Government
Securities
(Cost $21,076,245) 20,509,754
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 1.3%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$ 690,000 State Street Bank &
Trust repurchase
agreement, dated
12/30/94, maturity
value $690,395, 5.15%,
due 1/3/95
(collateralized by
$705,000 U.S.Treasury
Notes, 6.125% due
7/15/96) 1/3/95 $ 690,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $690,000) 690,000
- --------------------------------------------------------------------------------
Total Investments -- 111.7%
(Cost $61,013,139) 61,310,663
Payables in Excess of Cash, Receivables
and Other Assets -- (11.7%) (6,435,669)
- --------------------------------------------------------------------------------
Net Assets-- 100.0% $54,874,994
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
19
<PAGE>
The Guardian Baillie Gifford International Fund
- --------------------------------------------------------------------------------
Common Stocks -- 93.6%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Argentina -- .03%
Real Estate -- .03%
50,200 Comercial De Plata $ 127,997
- --------------------------------------------------------------------------------
Austria -- 0.8%
Bank -- 0.8%
5,000 Creditanstalt bank 290,626
- --------------------------------------------------------------------------------
Australia -- 4.2%
Bank -- 0.6%
36,479 Commonwealth Bank of Australia 224,882
Business Services -- 0.4%
17,000 Brambles Industries Ltd. 162,407
Conglomerates -- 0.5%
163,575 Australia National Industries 182,652
Electric Utilities -- 0.8%
85,000 Australia Gas & Light Co. 286,717
Forest Products -- 0.7%
35,961 Amcor Limited 259,892
Real Estate -- 0.6%
18,426 Lend Lease Corp. 228,039
Retail Trade -- 0.6%
109,332 Woolworths Ltd. 237,383
------------
1,581,972
- --------------------------------------------------------------------------------
Belgium -- 0.6%
Merchandising-Special -- 0.6%
1,650 Glaverbel 218,375
- --------------------------------------------------------------------------------
Chile -- 0.5%
Electric Utilities -- 0.5%
6,300 Enersis SA 174,825
- --------------------------------------------------------------------------------
Czechoslovakia -- 0.4%
Electric Utilities -- 0.4%
3,000 CEZ (Cesk En Zavody)* 146,027
- --------------------------------------------------------------------------------
France -- 7.2%
Bank -- 0.9%
3,200 Societe Generale 336,117
Business Services -- 0.6%
1,812 Ecco STE 215,092
Chemicals -- 0.6%
9,250 Rhone Poulenc SA* 214,581
Conglomerates -- 1.3%
270 CGIP* 59,146
1,700 Interbail (Societe Financiere) 114,585
3,750 Lyonnaise Des Eaux SA 329,292
Containers and Glass -- 0.9%
3,100 Cie De St Gobain 356,375
Insurance -- 0.7%
2,500 Union Assurance Federation 248,549
Oil-Integrated -- 0.9%
4,970 Societe Elf Aquitaine 349,789
Retail Trade -- 1.3%
760 Carrefour 314,758
1,300 Castorama Dubois 162,348
------------
2,700,632
- --------------------------------------------------------------------------------
Germany -- 6.5%
Air Travel -- 0.8%
2,475 Lufthansa AG* 311,431
Bank -- 1.2%
975 Deutsche Bank AG 452,991
Building Construction -- 0.6%
375 Kampa Haus AG 209,315
Chemical -- 1.2%
2,100 BASF AG 432,955
Industrial Machinery -- 1.9%
1,850 Deutsche Babcock* 250,694
1,300 Man AG 355,682
200 Krones AG 112,280
Drugs and Health Care -- 0.8%
400 GEHE AG 144,544
271 Ron Klinikum AG 164,380
------------
2,434,272
- --------------------------------------------------------------------------------
Hong Kong -- 5.0%
Bank -- 0.9%
30,679 HSBC Holdings 331,075
Conglomerates -- 1.5%
80,000 Hutchison Whampoa 323,619
40,000 Swire Pacific 249,176
Electric Utilities -- 1.1%
95,000 Hong Kong Electric 259,677
91,200 Hong Kong and China Gas 147,334
Real Estate -- 0.4%
80,000 Hong Kong Land Holding 156,123
Trucking and Freight Forwarding -- 0.4%
240,000 Shun Tak Holdings 170,598
Telephone -- 0.7%
133,000 Hong Kong Telecommunications 253,538
------------
1,891,140
- --------------------------------------------------------------------------------
Hungary -- 0.2%
Retail Trade -- 0.2%
22,000 Fotex 66,560
- --------------------------------------------------------------------------------
Ireland -- 0.5%
Construction Materials -- 0.5%
35,000 CRH 193,062
- --------------------------------------------------------------------------------
Italy -- 4.0%
Automobiles -- 1.0%
100,000 Fiat Spa* 371,318
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
20
<PAGE>
The Guardian Baillie Gifford International Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Conglomerates -- 0.8%
275,000 CIR Compagnie Inds.* $ 320,586
Insurance -- 0.5%
29,120 RAS 176,292
Telephone -- 1.2%
170,000 Telecom Italia 442,498
Tires and Rubber -- 0.5%
140,000 Pirelli Spa* 186,523
------------
1,497,217
- --------------------------------------------------------------------------------
Japan -- 28.6%
Automobiles -- 1.8%
37,000 Calsonic Corp. 307,962
33,000 Suzuki Motor Corp. 387,651
Business Services -- 1.8%
35,000 Kamigumi Co. 372,490
5,000 Secom Co. 311,245
Chemicals -- 1.0%
64,000 Sumitomo Chemical 366,265
Drugs and Health Care -- 2.7%
60 DDI Corp. 518,072
11,000 Sankyo Co. 273,896
8,000 Santen Pharmaceutical Co. 222,490
Electrical Equipment -- 1.6%
59,000 Hitachi Corp. 585,853
250 Yurtec Corp. 5,698
Electronics -- 4.2%
21,000 Aiwa Co. 516,566
8,000 Kyocera Corp. 593,574
12,000 Murata Manufacturing Co. 463,856
Financial Services -- 0.4%
9,000 Japan Securities Finance 149,096
Homebuilders -- 0.7%
24,000 Sekusui House 267,470
Household Appliances -- 1.0%
15,000 Kyushu Matsushita 367,470
Industrial Machinery -- 2.0%
30,000 Amada Co. 376,506
50,000 Mitsubishi Heavy Ind. 381,526
Insurance -- 0.9%
29,000 Tokio Marine & Fire Ins. 355,221
Investment Companies -- 1.2%
21,000 Nomura Securities Co. 436,446
Leisure Time -- 0.8%
1,800 Toho Co. 316,265
Photography -- 1.0%
23,000 Canon, Inc. 390,261
Real Estate -- 1.0%
35,000 Mitsubishi Estate 376,004
Retail Grocery -- 1.1%
5,000 Seven Eleven Japan 402,108
Retail Trade -- 2.5%
6,000 Ito Yokado Co. 321,084
20,000 Marui Co.* 365,462
7,000 Shimachu Co. 252,309
Steel -- 1.7%
38,000 Hitachi Metals 465,462
50,000 Sumitomo Metal Ind.* 162,149
Tires and Rubber -- 1.2%
28,000 Bridgestone Corp. 438,554
------------
10,749,011
- --------------------------------------------------------------------------------
Malaysia -- 1.7%
Conglomerates -- 0.8%
130,800 Sime Darby Berhad 299,659
Telephone -- 0.9%
48,000 Telekom Malaysia 325,201
------------
624,860
- --------------------------------------------------------------------------------
Mexico -- 1.7%
Broadcasting -- 0.5%
4,500 Telecomunicados Brasileras* 201,375
Financial Services -- 0.3%
1,330 Tolmex 113,421
Food, Beverage and Tobacco -- 0.5%
5,800 Pan American Beverage 183,425
Telephone -- 0.4%
3,500 Telefonos de Mexico SA 143,500
------------
641,721
- --------------------------------------------------------------------------------
Netherlands -- 1.8%
Banks -- 0.6%
7,170 ABN Amro Holdings NV 249,065
Drugs and Healthcare -- 0.2%
3,500 ACF Holdings NV 69,157
Household Appliances -- 1.0%
12,500 Philip Electronics NV 370,125
------------
688,347
- --------------------------------------------------------------------------------
Singapore -- 3.5%
Air Travel -- 0.8%
35,000 Singapore Airlines 321,784
Banks -- 1.1%
40,000 Overseas Chinese Bank 411,664
Industrial Machinery -- 0.8%
40,000 Sembawang Corp. 299,142
Publishing -- 0.8%
16,000 Singapore Press HD 290,909
------------
1,323,499
- --------------------------------------------------------------------------------
Spain -- 1.3%
Bank -- 1.0%
9,500 Banco Santander SA 363,761
Construction Materials -- 0.3%
12,000 Uralita* 117,151
------------
480,912
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
21
<PAGE>
The Guardian Baillie Gifford International Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Sweden -- 2.5%
Business Services -- 0.4%
5,350 Securitas AB $ 143,999
Construction & Mining Equipment -- 0.4%
11,000 Atlas Copco AB* 140,635
Drugs and Healthcare -- 1.0%
15,000 Astra AB 387,587
Forest Products -- 0.7%
4,400 Stora Kopparbergs 265,281
------------
937,502
- --------------------------------------------------------------------------------
Switzerland -- 2.9%
Drugs and Healthcare -- 0.5%
370 Sandoz AG* 192,773
Food, Beverage and Tobacco-- 1.1%
440 Nestle SA 419,160
Homebuilders -- 0.4%
400 Intershop Holding AG 165,011
Insurance -- 0.9%
635 Winterthur 329,870
------------
1,106,814
- --------------------------------------------------------------------------------
Thailand -- 2.5%
Bank -- 1.1%
38,000 Bangkok Bank 405,656
Construction Materials -- 0.8%
5,000 Siam Cement Co. 299,542
Financial Services -- 0.6%
100,000 Ind. Fin. Thailand* 213,105
------------
918,303
- --------------------------------------------------------------------------------
United Kingdom -- 16.9%
Bank -- 0.4%
18,500 National Westminster Bk. Co. 148,498
Building Construction -- 0.2%
15,000 Fine Art Developments 83,320
Business Services -- 0.9%
18,000 Associated British Ports 76,889
36,000 BAA 266,437
Chemicals -- 0.5%
100,000 Allied Colloids 200,282
Conglomerates -- 1.9%
38,051 BTR 170,742
55,000 Badgerline Group 116,179
38,000 Hanson 137,350
16,000 Hays 70,349
25,000 Siebe* 217,493
Containers and Glass -- 0.3%
31,000 Caradon PLC 122,234
Construction and Mining Equipment-- 0.4%
20,000 Scapa Group 59,459
20,000 Weir Group 88,249
Drugs and Healthcare -- 1.1%
38,000 Glaxo Holdings 394,805
Electric Utilities -- 0.9%
14,000 National Power 107,339
21,000 Yorkshire Electric Group 239,211
Electronics -- 0.7%
20,000 Electrocomponents 148,647
40,000 Rotork 107,651
Food, Beverage and Tobacco-- 2.4%
40,000 Guinness 281,646
20,000 Highland Distilleries 137,694
30,000 Iceland Group 70,412
20,000 Reckitt and Colman 184,009
30,000 Rothmans Int'l. NV 213,112
International Oil -- 1.3%
46,000 Shell Transport and Trading 501,674
Insurance -- 1.4%
35,000 Abbey National 235,487
10,000 Britannic Assurance 62,275
49,000 Prudential Corp. 243,045
Leisure Time -- 0.9%
34,000 Granada Group 272,383
6,000 Vendome 47,035
Newspapers -- 0.2%
40,000 Mirror Group PLC 81,364
Publishing -- 0.6%
30,000 Reuters Holdings 219,684
Retail Grocery -- 0.6%
35,000 Sainsbury (J) 225,356
Retail Trade -- 0.6%
36,000 Marks & Spencer 224,190
Telephone -- 1.6%
52,000 British Telecom 307,151
86,000 Vodafone Group 285,276
------------
6,346,927
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $32,947,740) 35,140,601
- --------------------------------------------------------------------------------
*Non-income producing securities.
See Notes to Financial Statements
22
<PAGE>
The Guardian Baillie Gifford International Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Convertible Bond -- 0.1%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 45,804 CIR Compagnie Inds., 6% Deb.
due 12/31/99 $ 44,780
- --------------------------------------------------------------------------------
Total Convertible Bonds
(Cost $45,804) 44,780
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 5.8%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$2,155,000 State Street Bank &
Trust repurchase
agreement, dated
12/30/94, maturity
value $2,156,137 at
4.75% due 1/3/95
(collateralized by
$2,250,000 U.S.
Treasury Notes,
4.25% due 11/30/95) 1/3/95 $ 2,155,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $2,155,000) 2,155,000
- --------------------------------------------------------------------------------
Total Investments -- 99.5%
(Cost $35,148,544) 37,340,381
Cash, Receivables and Other Assets
Less Payables -- 0.5% 201,748
- --------------------------------------------------------------------------------
Net Assets -- 100.0% $37,542,129
- --------------------------------------------------------------------------------
See Notes to Financial Statements
23
<PAGE>
The Guardian Investment Quality Bond Fund
- --------------------------------------------------------------------------------
Corporate Bonds -- 11.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
Drugs and Hospital -- 2.2%
$1,000,000 Rhone Poulenc SA,
6.75% due 10/15/99 $ 930,910
- --------------------------------------------------------------------------------
Electric Utilities -- 2.0%
1,000,000 Illinois Power Co., 5.625% due
4/15/00 879,300
- --------------------------------------------------------------------------------
Financial-Miscellaneous -- 2.0%
1,000,000 American Express Master Tr.,
5.375% due 7/15/01 866,250
- --------------------------------------------------------------------------------
Food, Beverage and Tobacco -- 2.0%
1,000,000 BAT Capital Corp., 6.875%
due 4/15/03 889,780
- --------------------------------------------------------------------------------
Machinery and Industrial Equipment -- 1.1%
500,000 McDermott International, Inc.,
6.57% due 4/20/98 465,450
- --------------------------------------------------------------------------------
Paper and Forest Products -- 2.0%
1,000,000 James River Corp. VA,
6.70% due 11/15/03 883,500
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $5,392,092) 4,915,190
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Multi Class Mortgage Pass-Throughs -- 30.8%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$1,000,000 Federal Home Loan Mortgage
Corp., 7.40% due 12/15/21 $ 920,600
2,000,000 Federal Home Loan Mortgage
Corp., 6.00% due 2/15/04 1,764,800
1,000,000 Federal Home Loan Mortgage
Corp., 7.50% due 3/15/20 920,500
1,000,000 Federal Home Loan Mortgage
Corp., 7.00% due 9/15/23 896,560
1,000,000 Federal Home Loan Mortgage
Corp., 7.50% due 6/25/23 926,500
1,000,000 Federal National Mortgage
Assn., 7.00% due 5/25/20 882,600
1,000,000 Federal National Mortgage
Assn., 6.50% due 1/25/06 888,120
1,000,000 Federal National Mortgage
Assn., 6.50% due 3/25/12 872,500
2,000,000 Federal National Mortgage
Assn., 5.75% due 4/25/06 1,785,800
2,000,000 Federal National Mortgage
Assn., 6.25% due 5/25/07 1,778,600
2,000,000 Federal National Mortgage
Assn., 6.25% due 5/25/08 1,761,600
- --------------------------------------------------------------------------------
Total Multi Class Mortgage
Pass-Throughs
(Cost $14,522,770) 13,398,180
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government and Agencies -- 40.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
3,000,000 Federal Home Loan
Corp., 7.188% due 9/15/09 2,905,320
597,000 U.S. Treasury Bonds, 12%
due 8/15/13 793,825
241,000 U.S. Treasury Bonds, 11.75%
due 11/15/14 319,173
7,000,000 U.S. Treasury Notes, 6.75%
due 5/31/99 6,712,370
2,000,000 U.S. Treasury Notes, 6.875%
due 7/31/99 1,925,000
5,000,000 U.S. Treasury Notes, 6.50%
due 8/15/97 4,848,450
- --------------------------------------------------------------------------------
Total U.S. Government and Agencies
(Cost $17,958,351) 17,504,138
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 19.1%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$8,298,000 State Street Bank &
Trust repurchase
agreement, dated
12/30/94, maturity
value $8,302,748,
5.15%, due 1/3/95
(collateralized by
$8,435,000 U.S.
Treasury Notes,
6.125% due 7/15/96) 1/3/95 $ 8,298,000
- --------------------------------------------------------------------------------
Total Repurchase
Agreement
(Cost $8,298,000) 8,298,000
- --------------------------------------------------------------------------------
Total Investments -- 101.5%
(Cost $46,171,213) 44,115,508
Payables in Excess of Cash,
Receivables
and Other Assets -- (1.5%) (628,794)
- --------------------------------------------------------------------------------
Net Assets-- 100.0% $43,486,714
- --------------------------------------------------------------------------------
See Notes to Financial Statements
24
<PAGE>
The Guardian Tax-Exempt Fund
- --------------------------------------------------------------------------------
Municipal Bonds -- 98.0%
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P Value
- --------------------------------------------------------------------------------
Alaska -- 2.5%
$ 400,000 Alaska St. Hag. Fin.
Corp., Series C
Corp. PCR Rev. 5.75%
due 6/1/26 Aa/A+ $ 400,000
- --------------------------------------------------------------------------------
Arizona -- 5.8%
1,000,000 Phoenix, AZ G.O.
Series A, 5.40%
due 7/1/07 Aa/AA+ 932,760
- --------------------------------------------------------------------------------
Connecticut -- 4.1%
700,000 Conn. St. Hsg. Auth.,
6.20% due 5/15/14 Aa/AA 652,225
- --------------------------------------------------------------------------------
Florida -- 4.0%
700,000 Florida St. Board
of Educ. Cap. Outlay,
5.625% due 6/1/12 Aa/AA 632,597
- --------------------------------------------------------------------------------
Georgia -- 16.9%
1,000,000 Atlanta, GA Water
and Sewerage Rev.,
6.00% due 1/01/11 Aa/AA- 959,340
700,000 Fulce, GA Hosp.
Auth. Rev., 9.30%
due 10/01/15 735,805
1,000,000 Georgia St. G.O.
Series B, 6.3%
due 3/01/10 Aaa/AA+ 1,000,850
-----------
2,695,995
- --------------------------------------------------------------------------------
Hawaii -- 10.6%
1,000,000 Hawaii St. G.O.
6.00% due 11/1/09 Aa/AA 971,250
800,000 Honolulu, HI
City & County
G.O. Series B,
5.5% due 10/01/11 Aa/AA 716,736
-----------
1,687,986
- --------------------------------------------------------------------------------
Idaho -- 3.1%
500,000 Idaho Housing Agcy.,
Insured Sec. #8 Asstd.
Hsg., 6% due 1/1/07 Aa/AA 490,380
- --------------------------------------------------------------------------------
Illinois -- 3.0%
500,000 Metro Wtr. Dist. of
Chicago Rev. Bond,
5.95% due 12/01/07 Aa/AA 481,665
- --------------------------------------------------------------------------------
Kentucky -- 3.3%
500,000 Jefferson County
Pollution Control
9.25% due 7/01/15 Aa2/AA 520,225
- --------------------------------------------------------------------------------
Massachusetts -- 7.5%
800,000 MA Bay Trans. Auth.
Gen. Trans. Sys.,
Series B, 5.80%
due 3/01/11 A/A+ 732,432
500,000 MA State Hsg. Fin.
Auth. Res. Dev.
Ser. E, 6.25% due
11/15/12 Aaa/AAA 472,235
-----------
1,204,667
- --------------------------------------------------------------------------------
Minnesota -- 3.2%
500,000 So. Mun. Power
Agcy. Supply,
Series C, 7.125%
due 1/1/15 Aaa/AAA 519,355
- --------------------------------------------------------------------------------
New Jersey -- 3.1%
500,000 NJ State Tpk. Auth.
Rev. Bd. Series C,
6.5% due 1/01/16 A/A 492,965
- --------------------------------------------------------------------------------
New York -- 10.3%
1,000,000 New York, NY G.O.
Ref. Series G,
5.625% due 8/01/12 Baa1/A- 840,710
850,000 Triborough Bridge &
Tunnel Auth. Rev.
Bond Series Y,
6% due 1/01/12 Aa/A+ 806,633
-----------
1,647,343
- --------------------------------------------------------------------------------
North Carolina -- 6.1%
1,000,000 Mecklenburg County,
NC Refunding G.O.
6% due 4/01/11 Aaa/AAA 973,600
- --------------------------------------------------------------------------------
Oregon -- 4.0%
650,000 Washington County,
OR Criminal Justice
Facs., 4.40% due
12/1/96 Aa/AA 637,936
- --------------------------------------------------------------------------------
Pennsylvania -- 3.1%
500,000 Pennsylvania St.
Tpk. Comm. Rev., Series N,
6.25% due 12/1/11 Aaa/AAA 489,250
- --------------------------------------------------------------------------------
See Notes to Financial Statements
25
<PAGE>
The Guardian Tax-Exempt Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P Value
- --------------------------------------------------------------------------------
Utah -- 3.3%
$ 500,000 Intermountain Power
Agcy. Ref. Supply
Rev., Series A,
7.75% due 7/1/17 AAA/AA $ 527,050
- --------------------------------------------------------------------------------
Washington -- 1.2%
200,000 North AL. Environmental
Impt. Auth. ALA. Poll.
Control Rev., 5.85%
due 12/01/00 Aa3/NR 200,000
- --------------------------------------------------------------------------------
Puerto Rico -- 2.9%
500,000 Puerto Rico Public
Impt. Ref. Bonds,
5.10% due 7/1/02 Baa1/A 464,850
- --------------------------------------------------------------------------------
Total Municipal Bonds
(Cost $16,801,096) 15,650,849
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 3.1%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$ 496,000 State Street Bank & Trust
repurchase agreement,
dated 12/30/94, maturity
value $496,284 at 5.15%,
due 7/1/94 (collateralized
by $505,000 U.S.
Treasury Notes, 6.125%
due 7/15/96) 1/3/95 $ 496,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $496,000) 496,000
- --------------------------------------------------------------------------------
Total Investments -- 101.1%
(Cost $17,297,096) 16,146,849
Payables in Excess of Cash, Receivables
and Other Assets-- (1.1%) (179,807)
- --------------------------------------------------------------------------------
Net Assets -- 100.0% $15,967,042
- --------------------------------------------------------------------------------
Glossary of Terms:
G.O. - Government Obligation
PCR - Pollution Control Revenue
See Notes to Financial Statements
26
<PAGE>
The Guardian Cash Management Fund
- --------------------------------------------------------------------------------
Commercial Paper -- 92.3%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Financial -- 29.9%
Bank Holding Companies -- 4.4%
$2,500,000 J.P. Morgan & Co.,
Inc., 5.95% 01/20/95 $ 2,492,149
- --------------------------------------------------------------------------------
Finance Companies -- 25.5%
2,250,000 Associates Corp. of
N.A., 5.84% 01/04/95 2,248,905
2,500,000 Exxon Funding BV
Corp., 5.76% 01/05/95 2,498,400
2,250,000 General Electric
Cap. Corp., 5.70% 01/19/95 2,243,588
2,500,000 Household Finance
Corp., 5.90% 01/17/95 2,493,444
2,500,000 National Rural
Utils.Cooperative
Fin., 5.95% 01/09/95 2,496,694
2,500,000 USAA Capital
Corp., 5.95% 01/12/95 2,495,455
------------
14,476,486
- --------------------------------------------------------------------------------
Total Financial 16,968,635
- --------------------------------------------------------------------------------
Industrial -- 62.4%
Aerospace and Defense -- 4.4%
2,500,000 Rockwell Int'l.
Corp., 5.96% 01/09/95 2,496,689
- --------------------------------------------------------------------------------
Automotive -- 12.8%
2,500,000 Daimler Benz N.A.,
6.04% 01/19/95 2,492,450
2,250,000 Ford Motor Cr.
Co., 5.85% 01/13/95 2,245,612
2,500,000 Toyota Motor Credit
Co., 5.92% 01/11/95 2,495,889
------------
7,233,951
- --------------------------------------------------------------------------------
Drugs and Hospitals -- 4.4%
2,500,000 Smithkline Beecham
Corp., 5.98% 01/26/95 2,489,618
- --------------------------------------------------------------------------------
Food, Beverage and Tobacco -- 12.3%
2,000,000 H.J. Heinz Co.,
5.68% 01/12/95 1,996,529
2,500,000 Hershey Foods
Corp., 5.95% 01/23/95 2,490,910
2,500,000 Nestle Capital
Corp., 5.95% 01/11/95 2,495,868
------------
6,983,307
- --------------------------------------------------------------------------------
Household Products -- 3.5%
$2,000,000 Colgate Palmolive
Co., 5.98% 01/13/95 1,996,013
- --------------------------------------------------------------------------------
Oil-Integrated -- 8.8%
2,500,000 Chevron Oil Fin.
Co., 5.98% 01/27/95 2,489,221
2,500,000 Texaco, Inc.,
5.99% 01/20/95 2,492,097
------------
4,981,318
- --------------------------------------------------------------------------------
Oil Service -- 4.4%
2,500,000 Colonial Pipeline
Co., 6.00% 01/17/95 2,493,333
- --------------------------------------------------------------------------------
Telecommunications -- 11.8%
2,500,000 Amer. Telephone &
Telegraph Co., 5.88% 02/10/95 2,483,667
2,250,000 British Telecomm.
PLC, 5.70% 01/18/95 2,243,944
2,000,000 U.S. West Comm.,
Inc., 6.02% 01/25/95 1,991,973
------------
6,719,584
- --------------------------------------------------------------------------------
Total Industrial 35,393,813
- --------------------------------------------------------------------------------
Total Commercial Paper
(Cost $52,362,448) 52,362,448
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 7.9%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$4,471,000 State Street Bank & Trust
repurchase agreement,
dated 12/30/94, maturity
value $4,473,558 at
5.15%, due 1/3/95
(collateralized by
$4,545,000 U.S. Treasury
Notes, 6.125% due
7/15/96 01/03/95 $ 4,471,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $4,471,000) 4,471,000
- --------------------------------------------------------------------------------
Total Investments -- 100.2%
(Cost $56,833,448) 56,833,448
Payables in Excess of Cash, Receivables
and Other Assets-- (0.2%) (103,199)
- --------------------------------------------------------------------------------
Net Assets-- 100.0% $56,730,249
- --------------------------------------------------------------------------------
See Notes to Financial Statements
27
<PAGE>
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford
Fund Allocation International
Fund Fund
-----------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at identified cost* ........................ $539,876,933 $ 61,013,139 $ 35,148,544
============================================================
Investments, at market .................................. 602,748,869 60,620,663 35,185,381
Repurchase agreements ................................... 17,779,000 690,000 2,155,000
-----------------------------------------------------------
Total Investments .............................. 620,527,869 61,310,663 37,340,381
Cash .................................................... 695 318 3,976
Foreign currency (Cost $232,642) ........................ -- -- 234,331
Receivable for securities sold .......................... 37,861,147 1,505,793 --
Receivable for fund shares sold ......................... 919,242 75,341 96,090
Dividends receivable .................................... 800,653 40,025 79,496
Interest receivable ..................................... 211,818 174,513 1,920
Deferred organization
expenses-- Note 6 ..................................... -- 11,001 10,933
Foreign tax receivable .................................. -- -- 38,763
Other assets ............................................ 7,724 702 352
-----------------------------------------------------------
Total Assets ................................... 660,329,148 63,118,356 37,806,242
LIABILITIES
Payable for securities purchased ........................ 17,014,730 7,956,847 --
Payable for fund shares redeemed ........................ 192,623 46,211 9,142
Payable for open forward
currency contracts-- Note 4 ........................... -- -- 37,502
Accrued expenses ........................................ 201,729 37,927 57,558
Foreign tax withholding ................................. 282 -- 14,002
Distributions payable ................................... 685,765 26,068 5,507
Due to affiliates-- Note 2 .............................. 1,316,992 176,309 140,402
-----------------------------------------------------------
Total Liabilities .............................. 19,412,121 8,243,362 264,113
-----------------------------------------------------------
Net Assets ..................................... $640,917,027 $ 54,874,994 $ 37,542,129
============================================================
</TABLE>
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 (Continuned)
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian
Investment Tax-Exempt Cash
Quality Fund Management
Bond Fund Fund
-----------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at identified cost* ........................ $ 46,171,213 $ 17,297,096 $ 56,833,448
============================================================
Investments, at market .................................. 35,817,508 15,650,849 52,362,448
Repurchase agreements ................................... 8,298,000 496,000 4,471,000
-----------------------------------------------------------
Total Investments .............................. 44,115,508 16,146,849 56,833,448
Cash .................................................... 602 943 34,472
Foreign currency (Cost $232,642) ........................ -- -- --
Receivable for securities sold .......................... -- -- --
Receivable for fund shares sold ......................... 2,556 27,253 126,552
Dividends receivable .................................... -- -- --
Interest receivable ..................................... 464,014 313,893 1,279
Deferred organization
expenses-- Note 6 ..................................... 11,001 11,001 --
Foreign tax receivable .................................. -- -- --
Other assets ............................................ 702 352 1,429
-----------------------------------------------------------
Total Assets ................................... 44,594,383 16,500,291 56,997,180
LIABILITIES
Payable for securities purchased ........................ 900,035 464,124 --
Payable for fund shares redeemed ........................ 4,456 10,916 106,789
Payable for open forward
currency contracts-- Note 4 ........................... -- -- --
Accrued expenses ........................................ 51,185 28,829 43,096
Foreign tax withholding ................................. -- -- --
Distributions payable ................................... 14,425 3,989 1,734
Due to affiliates-- Note 2 .............................. 137,568 25,391 115,312
-----------------------------------------------------------
Total Liabilities .............................. 1,107,669 533,249 266,931
-----------------------------------------------------------
Net Assets ..................................... $ 43,486,714 $ 15,967,042 $ 56,730,249
============================================================
</TABLE>
* Includes repurchase agreements.
See Notes to Financial Statements.
28 & 29
<PAGE>
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford
Fund Allocation International
Fund Fund
-----------------------------------------------------------
<S> <C> <C> <C>
COMPONENTS OF NET ASSETS
Shares of beneficial interest of $0.01 par value outstanding
(unlimited number of shares authorized) .................... $ 238,345 $ 53,639 $ 28,867
Paid-in capital .............................................. 558,425,350 55,751,431 35,111,841
Undistributed net investment income .......................... 81,001 10,092 27,938
Accumulated net realized gain/(loss) on investments and
foreign currency related transactions ...................... 1,521,395 (1,237,692) 216,519
Net unrealized appreciation/(depreciation) of investments
and foreign currency related transactions .................. 80,650,936 297,524 2,156,964
-----------------------------------------------------------
Net Assets ............................................... $640,917,027 $ 54,874,994 $ 37,542,129
============================================================
Shares of beneficial interest outstanding -- $0.01 par value 23,834,332 5,363,902 2,886,733
Net Asset Value Per Share ................................ $ 26.89 $ 10.23 $ 13.01
Maximum Offering Price Per Share
(Net asset value x 104.71%)* ................................. $ 28.16 $ 10.71 $ 13.62
</TABLE>
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Assets and Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 (Continuned)
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian
Investment Tax-Exempt Cash
Quality Fund Management
Bond Fund Fund
-----------------------------------------------------------
<S> <C> <C> <C>
COMPONENTS OF NET ASSETS
Shares of beneficial interest of $0.01 par value outstanding
(unlimited number of shares authorized) .................... $ 47,680 $ 18,015 $ 567,303
Paid-in capital .............................................. 47,715,317 18,096,856 56,162,946
Undistributed net investment income .......................... -- -- --
Accumulated net realized gain/(loss) on investments and
foreign currency related transactions ...................... (2,220,578) (997,582) --
Net unrealized appreciation/(depreciation) of investments
and foreign currency related transactions .................. (2,055,705) (1,150,247) --
-----------------------------------------------------------
Net Assets ............................................... $ 43,486,714 $ 15,967,042 $ 56,730,249
============================================================
Shares of beneficial interest outstanding -- $0.01 par value . 4,767,972 1,801,494 56,730,249
Net Asset Value Per Share ................................ $ 9.12 $ 8.86 $ 1.00
Maximum Offering Price Per Share
(Net asset value x 104.71%)* ................................. $ 9.55 $ 9.28 N/A**
* Based on sale of less than $100,000. On sale of $100,000 or more, the offering price is reduced.
** No-load fund.
</TABLE>
See Notes to Financial Statements.
30 & 31
<PAGE>
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statement of Operations
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford
Fund Allocation International
Fund Fund
--------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends ..................................................... $ 9,621,565 $ 373,588 $ 659,692
Interest ...................................................... 2,475,337 1,834,024 88,430
Other income .................................................. 33,108 -- --
--------------------------------------------------------
12,130,010 2,207,612 748,122
Less: Foreign tax withheld .................................... 6,674 1,168 82,631
--------------------------------------------------------
Total Income ............................................ 12,123,336 2,206,444 665,491
--------------------------------------------------------
Expenses:
Investment advisory fees -- Note 2 ............................ 3,046,391 357,563 253,292
12b-1 fees -- Note 3 .......................................... 913,918 137,524 79,153
Transfer agent fees ........................................... 786,224 85,579 69,370
Custodian fees ................................................ 173,934 58,376 130,889
Printing expense .............................................. 99,300 8,000 4,600
Registration fees ............................................. 61,376 18,171 22,774
Audit fees .................................................... 19,500 14,500 17,500
Trustees' fees -- Note 2 ...................................... 19,000 19,000 19,000
Insurance expense ............................................. 7,360 640 320
Legal fees .................................................... 3,473 9,127 2,483
Other ......................................................... 729 729 729
Deferred organization expense -- Note 6 ....................... -- 3,365 3,238
--------------------------------------------------------
Total Expenses ......................................... 5,131,205 712,574 603,348
Less: Expenses assumed by investment
adviser -- Note 2 ........................................... -- -- --
--------------------------------------------------------
Expenses Net of Reimbursement .......................... 5,131,205 712,574 603,348
--------------------------------------------------------
Net Investment Income ......................................... 6,992,131 1,493,870 62,143
--------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND CURRENCIES
Net realized gain/(loss) of
investments -- Note 1 ....................................... 14,157,157 (1,237,063) 229,373
Net realized gain on foreign currency
related transactions -- Note 1 .............................. -- -- 236,076
Net change in unrealized appreciation of
investments -- Note 4 ....................................... (30,003,248) (1,505,052) (987,837)
Net change in unrealized depreciation on
foreign currency related transactions -- Note 4 ............. -- -- (112,091)
--------------------------------------------------------
Net Realized and Unrealized Loss on Investments
and Currencies .............................................. (15,846,091) (2,742,115) (634,479)
--------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ................................................ $ (8,853,960) $ (1,248,245) $ (572,336)
=========================================================
</TABLE>
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statement of Operations
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 (Continuned)
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian
Investment Tax-Exempt Cash
Quality Fund Management
Bond Fund Fund
----------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends $ -- $ -- $ --
Interest .......................................................... 1,612,281 967,993 2,024,960
Other income ...................................................... -- -- --
----------------------------------------------------
1,612,281 967,993 2,024,960
Less: Foreign tax withheld ........................................ -- -- --
----------------------------------------------------
Total Income ................................................ 1,612,281 967,993 2,024,960
----------------------------------------------------
Expenses:
Investment advisory fees-- Note 2 ................................. 126,947 90,421 229,729
12b-1 fees -- Note 3 .............................................. 63,474 45,210 114,865
Transfer agent fees ............................................... 52,834 37,718 167,158
Custodian fees .................................................... 53,388 54,086 50,444
Printing expense .................................................. 5,700 2,300 4,000
Registration fees ................................................. 24,105 11,595 25,911
Audit fees ........................................................ 14,500 14,500 16,000
Trustees' fees -- Note 2 .......................................... 19,000 19,000 19,000
Insurance expense ................................................. 320 320 640
Legal fees ........................................................ 3,602 2,483 2,483
Other ............................................................. 729 729 729
Deferred organization expense -- Note 6 ........................... 3,365 3,365 --
----------------------------------------------------
Total Expenses ............................................. 367,964 281,727 630,959
Less: Expenses assumed by investment
adviser -- Note 2 ............................................... -- 84,372 231,832
----------------------------------------------------
Expenses Net of Reimbursement .............................. 367,964 197,355 399,127
----------------------------------------------------
Net Investment Income ............................................. 1,244,317 770,638 1,625,833
----------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND CURRENCIES
Net realized gain/(loss) of
investments -- Note 1 ........................................... (982,701) (997,544) --
Net realized gain on foreign currency
related transactions -- Note 1 .................................. -- -- --
Net change in unrealized appreciation of
investments -- Note 4 ........................................... (3,210,283) (1,586,569) --
Net change in unrealized depreciation on
foreign currency related transactions -- Note 4 ................. -- -- --
----------------------------------------------------
Net Realized and Unrealized Loss on Investments
and Currencies .................................................. (4,192,984) (2,584,113) --
----------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS .................................................... $(2,948,667) $(1,813,475) $ 1,625,833
=====================================================
</TABLE>
See Notes to Financial Statements.
32 & 33
<PAGE>
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian
Park Avenue Asset
Fund Allocation
Fund
------------------------------- -------------------------------
Period from
February 16,
Year Ended 1993* to
Year Ended December 31, December 31, December 31,
1994 1993 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income/(loss) ............................. $ 6,992,131 $ 8,694,524 $ 1,493,870 $ 829,835
Net realized gain/(loss) on investments and
foreign currency related transactions ................... 14,157,157 27,037,836 (1,237,063) 1,446,505
Net change in unrealized appreciation/
(depreciation) on investments and
foreign currency related transactions ................... (30,003,248) 41,810,865 (1,505,052) 1,802,576
-------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations ............................. (8,853,960) 77,543,225 (1,248,245) 4,078,916
-------------------------------------------------------------------
Distributions to Shareholders:
Net investment income .................................... (7,003,961) (8,512,189) (1,492,061) (821,552)
Distribution in excess of net investment income .......... -- (193,786) -- --
Net realized gain on investments and foreign
currency related transactions .......................... (22,969,311) (20,235,237) (1,215,906) (231,228)
-------------------------------------------------------------------
Total Distributions to Shareholders ...................... (29,973,267) (28,941,212) (2,707,967) (1,052,780)
-------------------------------------------------------------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital
share transactions -- Note 7 ............................ 119,550,874 175,931,543 8,630,866 47,174,204
-------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets ..................... 80,723,637 224,533,556 4,674,654 50,200,340
NET ASSETS:
Beginning of period ....................................... 560,193,390 335,659,834 50,200,340 --
-------------------------------------------------------------------
End of period** ........................................... $ 640,917,027 $ 560,193,390 $ 54,874,994 $ 50,200,340
===================================================================
* Commencement of operations.
** Includes undistributed net investment income of: ........ $ 81,001 $ 92,831 $ 10,092 $ 8,283
</TABLE>
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian
Baillie Gifford Investment
International Quality
Fund Bond Fund
------------------------------- -------------------------------
Period from Period from
February 16, February 16,
Year Ended 1993* to Year Ended 1993* to
December 31, December 31, December 31, December 31,
1994 1993 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income/(loss) ............................. $ 62,143 $ (42,519) $ 1,244,317 $ 752,079
Net realized gain/(loss) on investments and
foreign currency related transactions ................... 465,449 183,767 (982,701) 350,511
Net change in unrealized appreciation/
(depreciation) on investments and
foreign currency related transactions ................... (1,099,928) 3,256,892 (3,210,283) (83,057)
-------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations ............................. (572,336) 3,398,140 (2,948,667) 1,019,533
-------------------------------------------------------------------
Distributions to Shareholders:
Net investment income .................................... (34,205) -- (1,244,317) (752,079)
Distribution in excess of net investment income .......... -- -- -- --
Net realized gain on investments and foreign
currency related transactions .......................... (265,963) (166,734) (34,794) (315,959)
-------------------------------------------------------------------
Total Distributions to Shareholders ...................... (300,168) (166,734) (1,279,111) (1,068,038)
-------------------------------------------------------------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital
share transactions -- Note 7 ............................ 17,605,390 17,577,837 24,404,308 23,358,689
-------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets ..................... 16,732,886 20,809,243 20,176,530 23,310,184
NET ASSETS:
Beginning of period ....................................... 20,809,243 -- 23,310,184 --
-------------------------------------------------------------------
End of period** ........................................... $ 37,542,129 $ 20,809,243 $ 43,486,714 $ 23,310,184
===================================================================
* Commencement of operations.
** Includes undistributed net investment income of: ........ $ 27,938 $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
The Park Avenue Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian
Tax-Exempt Cash
Fund Management
Fund
------------------------------- -------------------------------
Period from
February 16,
Year Ended 1993* to
December 31, December 31, Year Ended December 31,
1994 1993 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income/(loss) ............................. $ 770,638 $ 741,601 $ 1,625,833 $ 773,017
Net realized gain/(loss) on investments and
foreign currency related transactions ................... (997,544) 468,254 -- --
Net change in unrealized appreciation/
(depreciation) on investments and
foreign currency related transactions ................... (1,586,569) 436,322 -- --
-------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations ............................. (1,813,475) 1,646,177 1,625,833 773,017
-------------------------------------------------------------------
Distributions to Shareholders:
Net investment income .................................... (770,638) (741,601) (1,625,833) (773,017)
Distribution in excess of net investment income .......... -- -- -- --
Net realized gain on investments and foreign
currency related transactions .......................... (69,077) (399,215) -- --
-------------------------------------------------------------------
Total Distributions to Shareholders ...................... (839,715) (1,140,816) (1,625,833) (773,017)
-------------------------------------------------------------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital
share transactions -- Note 7 ............................ (2,514,385) 20,629,256 21,999,727 (3,049,750)
-------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets ..................... (5,167,575) 21,134,617 21,999,727 (3,049,750)
NET ASSETS:
Beginning of period ....................................... 21,134,617 -- 34,730,522 37,780,272
-------------------------------------------------------------------
End of period** ........................................... $ 15,967,042 $ 21,134,617 $56,730,249 $34,730,522
===================================================================
* Commencement of operations.
** Includes undistributed net investment income of: ........ $ -- $ -- $ -- $ --
</TABLE>
See Notes to Financial Statements.
34 & 35
<PAGE>
- --------------------------------------------------------------------------------
Notes to
Financial Statements
- --------------------------------------------------------------------------------
December 31, 1994
The Park Avenue Portfolio
The Guardian Park Avenue Fund
The Guardian Asset Allocation Fund
The Guardian Baillie Gifford International Fund
The Guardian Investment Quality Bond Fund
The Guardian Tax-Exempt Fund
The Guardian Cash Management Fund
Note 1. Organization and Accounting Policies
The Park Avenue Portfolio (the "Portfolio") is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), which is organized as a business trust under
the laws of the Commonwealth of Massachusetts. Shares of the Portfolio are
offered in six series; namely: The Guardian Park Avenue Fund (GPAF); The
Guardian Asset Allocation Fund (GAAF); The Guardian Baillie Gifford
International Fund (GBGIF); The Guardian Investment Quality Bond Fund (GIQBF);
The Guardian Tax-Exempt Fund (GTEF); and The Guardian Cash Management Fund
(GCMF). The series are collectively referred to herein as the "Portfolio Funds".
Prior to the close of business on February 12, 1993, GPAF and GCMF were each
separately organized as Massachusetts business trusts and registered under the
1940 Act as diversified open-end management investment companies. As of the
close of business on February 12, 1993, GPAF and GCMF were reorganized as series
of the Portfolio, and GAAF, GBGIF, GIQBF and GTEF were also added as series.
Investments
Equity and debt securities listed on domestic or foreign securities exchanges
are valued at the closing sales prices on such exchanges, or, lacking any sales,
at the mean between closing bid and asked prices. Securities traded in the
over-the-counter market are valued using the last sales price, when available.
Otherwise, over-the-counter securities are valued at the mean between the bid
and asked prices or yield equivalents as obtained from one or more dealers that
make a market in the securities.
Certain debt securities may be valued each business day by an independent
pricing service ("Service") approved by the Board of Trustees. Debt securities
for which quoted bid prices, in the judgment of the Service, are readily
available and representative of the bid side of the market, are valued at the
mean between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other debt securities that are
valued by the Service are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
Other securities including securities, for which market quotations are not
readily available, such as certain mortgage-backed securities and restricted
securities, are valued at fair value as determined in good faith by or under the
direction of the Portfolio Funds' Board of Trustees.
Repurchase agreements are carried at cost which approximates market value
(see Note 5). Short-term securities held by the Portfolio Funds are valued on an
amortized cost basis which approximates market value but does not take into
36
<PAGE>
account unrealized gains and losses. GCMF values its investments based on
amortized cost in accordance with Rule 2a-7 under the 1940 Act. Investment
transactions are recorded on the date of purchase or sale.
Investing outside of the U.S. may involve certain considerations and risks
not typically associated with domestic investment, including the possibility of
political and economic unrest and different levels of governmental supervision
and regulation of foreign securities markets.
Net realized gain or loss on sales of investments is determined on the basis
of identified cost. Interest income, including amortization of premium and
discount, is recorded when earned. Dividends are recorded on the ex-dividend
date.
Foreign Currency Translation
Only GBGIF is permitted to buy international securities that are not U.S.
dollar denominated. GBGIF's books and records are maintained in U.S. dollars as
follows:
(1) The foreign currency market value of investment securities and other
assets and liabilities stated in foreign currencies are translated into U.S.
dollars at the current rate of exchange.
(2) Purchases, sales, income and expenses are translated at the rate of
exchange prevailing on the respective dates of such transactions.
The resulting gains and losses are included in the Statement of Operations.
It is not the practice of GBGIF to identify that portion of the results of
operations that arise as a result of changes in exchange rates from fluctuations
that arise from changes in market price during or at the end of a reporting
period except as noted below.
Realized foreign exchange gains and losses, which result from changes in
foreign exchange rates between the date on which a Portfolio Fund earns
dividends and interest or pays foreign withholding taxes or other expenses, and
the date on which U.S. dollar equivalent amounts are actually received or paid
are included in net realized gain on foreign currency related transactions.
Realized foreign exchange gains and losses which result from changes in foreign
exchange rates between the trade and settlement dates on security and currency
transactions are also included in net realized gain on foreign currency related
transactions. Net currency gains and losses from valuing investments and other
assets and liabilities denominated in foreign currency as of December 31, 1994
are reflected in net change in unrealized appreciation or depreciation on
foreign currency related transactions based on the applicable exchange rate in
effect at the end of the period.
Forward Foreign Currency Contracts
GBGIF may enter into forward foreign currency contracts in connection with
planned purchases or sales of securities, or to hedge against changes in
currency exchange rates affecting the values of its investments that are
denominated in a particular currency. A forward exchange currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward exchange rate. Fluctuations in the value of forward foreign
currency contracts are recorded for book purposes as unrealized gains or losses
on foreign currency related transactions by GBGIF. When a forward contract is
closed, GBGIF records a realized gain or loss equal to the difference between
the value of the forward contract at the time it was opened and the value at the
time it was closed. Such amount is recorded in net realized gain or loss on
foreign currency related transactions. GBGIF will not enter into a forward
foreign currency contract if such contract would obligate it to deliver an
amount of foreign currency in excess of the value of its portfolio securities or
other assets denominated in that currency.
Distributions to Shareholders
Dividends from net investment income are declared and accrued daily and are
paid monthly for GIQBF, and GTEF and declared and paid semi- annually for GPAF,
GAAF and GBGIF. Net realized short-term and long-term capital gains for these
Portfolio Funds will be distributed at least annually. Dividends from GCMF's net
investment income, which includes any net realized capital gains or losses, are
declared and accrued daily and paid monthly on the last business day of each
month.
37
<PAGE>
All dividends or distributions to the shareholders are recorded on the
ex-dividend date. Such distributions are determined in conformity with federal
income tax regulations. Differences between the recognition of income on an
income tax basis and recognition of income based on generally accepted
accounting principles may cause temporary overdistributions of net realized
gains and net investment income.
Federal Income Taxes
Each Portfolio Fund qualifies and intends to remain qualified to be taxed as
a "regulated investment company" under the provisions of the Internal Revenue
Code of 1986, as amended (Code), and as such will not be subject to federal
income tax on taxable income (including any realized capital gains) which is
distributed in accordance with the provisions of the Code. Therefore, no federal
income tax provision is required.
GAAF, GIQBF and GTEF have $1,237,063, $2,128,861 and $940,272, respectively,
in capital loss carryforwards for federal tax purposes at December 31, 1994.
These amounts are available to be carried forward to offset future capital gains
through the year ending December 31, 2002. To the extent that such carryforwards
are utilized by the Funds, no capital gain distributions will be made.
Reclassification of Capital Accounts
In accordance with a recently approved accounting pronouncement, GBGIF has
recorded a reclassification to its capital accounts. This reclassification has
no impact on the net asset value of GBGIF and was made to adjust undistributed
investment income for differences arising from the treatment of investment
income for book purposes and amounts recorded for dividends, which are
calculated on a tax basis. As a result, during the year ended December 31, 1994,
GBGIF reclassified $117,713 to paid-in capital from accumulated net investment
income. In addition, distributions in excess of net investment income for GPAF
represent prior years' differences between distributions calculated in
accordance with income tax regulations and net investment income. In addition,
amounts distributed for tax purposes in excess of net investment income have
been reflected as a temporary overdistribution of net investment income in the
Statement of Changes in Net Assets. These amounts reflect the effect of
temporary differences in the computation of net investment income for financial
reporting and tax purposes.
Note 2. Investment Advisory Agreements and Payments to Related Parties
Guardian Investor Services Corporation (GISC) provides investment advisory
services to each of the Portfolio Funds (except GBGIF) under an investment
advisory agreement. Fees for investment advisory services are established under
the terms of separate fee appendices to the agreement at an annual rate of .50%
of the average daily net assets of each Portfolio Fund, except for GAAF which
pays GISC at an annual rate of .65% of its average daily net assets. For the
year ended December 31, 1994, GISC voluntarily assumed $231,832 of the ordinary
operating expenses of GCMF. GISC also assumed $84,372 of the ordinary operating
expenses of GTEF for the year ended December 31, 1994.
GBGIF has an investment management agreement with Guardian Baillie Gifford
Ltd. (GBG), a Scottish corporation formed through a joint venture between The
Guardian Insurance & Annuity Company, Inc. (GIAC) and Baillie Gifford Overseas
Ltd. (BG Overseas). GBG is responsible for the overall investment management of
GBGIF's portfolio, subject to the supervision of the Portfolio's Board of
Trustees. GBG has entered into a sub-investment management agreement with BG
Overseas pursuant to which BG Overseas is responsible for the day-to-day
management of GBGIF. GBG continually monitors and evaluates the performance of
BG Overseas. As compensation for its services, GBG receives a management fee
computed at the rate of .80% of GBGIF's average daily net assets. One-half of
this fee (.40%) is payable by GBG to BG Overseas for its services. Payment of
the sub-management fee does not represent a separate or additional expense to
GBGIF.
For the year ended December 31, 1994, aggregate sales commissions for the
38
<PAGE>
purchase of capital shares were paid to GISC as compensation for services
rendered as follows:
Fund Commissions Fund Commissions
- ---- ----------- ---- -----------
GPAF ......... $1,935,806 GIQBF ......... $117,413
GAAF ......... 420,381 GTEF .......... 62,365
GBGIF ........ 415,376
Trustees who are not deemed to be "interested persons" (as defined in the
1940 Act) were paid $500 per Portfolio Fund's meeting of the Board of Trustees
during the year ended December 31, 1994. An annual fee of $1,000 per Portfolio
Fund (i.e., $6,000) was also paid to each such trustee during such period. The
remuneration paid by each of the Portfolio Funds to the trustees, who are not
interested persons, amounted to $19,000 for the year ended December 31, 1994.
GISC pays the trustees who are interested persons, except for Mr. Ferrara, who
receives no compensation for his trusteeship.
Certain officers and trustees of the Portfolio Funds are affiliated with
GISC.
Note 3. Underwriting Agreement and Distribution Plan
The Portfolio has entered into an Underwriting Agreement with GISC pursuant
to which GISC serves as the principal underwriter for shares of the Portfolio
Funds. In addition, GISC and the Portfolio have entered into a Distribution Plan
and Agreement pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan"). Pursuant to the Plan each Portfolio Fund pays GISC a monthly
distribution fee of up to .25% on an annual basis of its average daily net
assets. GPAF currently pays GISC .15%, on an annual basis, of its average daily
net assets. Under the Plan, GISC uses the fees received from the Portfolio Funds
to pay distribution expenses incurred during the fiscal year, including trail
commissions, the payment of advertising costs and expenses incurred to prepare,
printing and distribution of prospectuses to prospective investors.
Note 4. Investment Transactions
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
For the Year Ended December 31, 1994
------------------------------------------------
GPAF GAAF GBGIF
---- ---- -----
Purchases
Stocks and debt
obligations ............. $409,156,798 $ 37,777,905 $ 26,053,080
U.S. Govern-
ment and gov-
ernment agency
obligations ............. -- 77,343,885 --
Proceeds
Stocks and debt
obligations ............. 303,470,566 32,445,536 9,677,187
U.S. Govern-
ment and gov-
ernment agency
obligations ............. -- 76,414,450 --
GIQBF GTEF
----- ----
Purchases
Stocks and debt
obligations ......................... $ 866,719 $ 18,935,999
U.S. Govern-
ment and gov-
ernment agency
obligations ......................... 59,943,786 --
Proceeds
Stocks and debt
obligations ......................... 4,188,506 20,973,105
U.S. Government
and government
agency obligations .................. 39,695,505 --
The cost of investments owned at December 31, 1994, for federal income tax
purposes was the same as for financial reporting purposes for the Portfolio
Funds. The gross unrealized appreciation and (depreciation) at December 31,
1994, were as follows:
GPAF GAAF GBGIF
---- ---- -----
Appreciation $ 103,920,844 $ 2,089,951 $ 3,536,390
(Depreciation) (23,269,908) (1,792,427) (1,344,550)
------------- ------------- -------------
Net Unrealized
Appreciation $ 80,650,936 $ 297,524 $ 2,191,837
============= ============= =============
GIQBF GTEF
----- ----
Appreciation $ 48,028 $ 7,808
(Depreciation) (2,103,733) (1,158,055)
------------ ------------
Net Unrealized
Appreciation
(Depreciation) $ (2,055,705) $ (1,150,247)
============ ============
Forward foreign currency contracts represent commitments to purchase or sell
a specified amount of foreign currency at a future date and at a future price
(Note 1). Risks may arise from the potential inability of a counterparty to meet
the terms of a contract and from unanticipated movements in the value of a
39
<PAGE>
foreign currency relative to the U.S. dollar.
At December 31, 1994, the GBGIF had open forward foreign currency contracts,
as listed below, with net unrealized losses of $(37,502), which are included in
net unrealized appreciation or depreciation on foreign currency related
transactions.
Unrealized
Type of Expiration Current Appreciation
Currency Contract Date Cost Value (Depreciation)
- -------- -------- ---- ---- ----- --------------
Spanish Pesetas Buy 01/04/95 $ 18,766 $ 18,834 $ 68
Japanese Yen Sell 06/22/95 5,333,964 5,296,394 (37,570)
------
Total unrealized depreciation on open forward contracts $(37,502)
======
Note 5. Repurchase Agreements
The collateral for repurchase agreements is either cash or fully negotiable
U.S. Government securities. Repurchase agreements are fully collateralized
(including the interest earned thereon) and such collateral is marked-to-market
daily while the agreements remain in force. If the value of the collateral falls
below the value of the repurchase price plus accrued interest, the applicable
Portfolio Fund will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or the
seller defaults, the applicable Portfolio Fund maintains the right to sell the
collateral and may claim any resulting loss against the seller. The Board of
Trustees has established standards to evaluate the creditworthiness of
broker-dealers and banks which engage in repurchase agreements with each
Portfolio Fund. Repurchase agreements of more than seven days' duration,
together with investments in any other securities which are not considered
readily marketable by the Securities and Exchange Commission, are not permitted
if more than the applicable portion of a Portfolio Fund's net assets (either,
10% or 15% depending on the Portfolio Fund) would be so invested.
Note 6. Deferred Organization and Initial Offering Expenses
GAAF, GIQBF and GTEF incurred expenses of $16,418 each in connection with
their organization and registration. Such expenses were advanced by GISC and
were repaid by each of these Portfolio Funds upon the completion of their first
year of operations or when net assets reached $50 million. GBGIF's expenses of
$15,218 in connection with its organization and registration were advanced by
GIAC and were repaid when GBGIF completed one year of operations. Organization
and initial offering expenses have been deferred and are being amortized on a
straight-line method over a five year period, beginning with the commencement of
the Portfolio Funds' operations in February, 1993.
40
<PAGE>
Note 7. Transactions in Portfolio Fund Shares
The Guardian Park Avenue Fund
<TABLE>
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1993
- --------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,037,382 $170,046,951 6,810,199 $192,431,183
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain on sales of
investments 1,053,246 28,635,093 978,921 27,758,712
- --------------------------------------------------------------------------------------------------------------------
7,090,628 198,682,044 7,789,120 220,189,895
Less shares repurchased (2,821,719) (79,131,170) (1,560,744) (44,258,352)
- --------------------------------------------------------------------------------------------------------------------
Net Increase 4,268,909 $119,550,874 6,228,376 $175,931,543
====================================================================================================================
The Guardian Asset Allocation Fund
<CAPTION>
Period from February 16, 1993
(Commencement of Operations)
Year Ended December 31, 1994 to December 31, 1993
- --------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,512,956 $16,308,961 5,036,746 $52,307,048
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain on investments 256,106 2,621,558 91,850 1,010,351
- --------------------------------------------------------------------------------------------------------------------
1,769,062 18,930,519 5,128,596 53,317,399
Less shares repurchased (975,487) (10,299,653) (558,268) (6,143,195)
- --------------------------------------------------------------------------------------------------------------------
Net Increase 793,575 $ 8,630,866 4,570,328 $47,174,204
====================================================================================================================
The Guardian Baillie Gifford International Fund
<CAPTION>
Period from February 16, 1993
(Commencement of Operations)
Year Ended December 31, 1994 to December 31, 1993
- --------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,962,179 $26,239,004 1,652,811 $18,491,697
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain on investments 22,460 293,682 12,479 164,473
- --------------------------------------------------------------------------------------------------------------------
1,984,639 26,532,686 1,665,290 18,656,170
Less shares repurchased (675,602) (8,927,296) (87,594) (1,078,333)
- --------------------------------------------------------------------------------------------------------------------
Net Increase 1,309,037 $17,605,390 1,577,696 $17,577,837
====================================================================================================================
</TABLE>
41
<PAGE>
Note 7. Transactions in Portfolio Fund Shares (Continued)
The Guardian Investment Quality Bond Fund
<TABLE>
<CAPTION>
Period from February 16, 1993
(Commencement of Operations)
Year Ended December 31, 1994 to December 31, 1993
- --------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,110,719 $30,772,495 2,666,436 $26,879,555
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain on investments 127,928 1,202,423 100,240 1,018,277
- --------------------------------------------------------------------------------------------------------------------
3,238,647 31,974,918 2,766,676 27,897,832
Less shares repurchased (792,656) (7,570,610) (444,695) (4,539,143)
- --------------------------------------------------------------------------------------------------------------------
Net Increase 2,445,991 $24,404,308 2,321,981 $23,358,689
====================================================================================================================
The Guardian Tax-Exempt Fund
<CAPTION>
Period from February 16, 1993
(Commencement of Operations)
Year Ended December 31, 1994 to December 31, 1993
- --------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 258,142 $ 2,414,315 2,722,163 $27,349,519
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain on investments 83,405 769,939 103,864 1,060,514
- --------------------------------------------------------------------------------------------------------------------
341,547 3,184,254 2,826,027 28,410,033
Less shares repurchased (611,851) (5,698,639) (754,229) (7,780,777)
- --------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) (270,304) $(2,514,385) 2,071,798 $20,629,256
====================================================================================================================
The Guardian Cash Management Fund
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1993
- --------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 86,145,741 $86,145,741 52,631,480 $52,631,480
Shares issued to shareholders
in reinvestment of dividends
from net investment income 1,577,440 1,577,440 759,890 759,890
- --------------------------------------------------------------------------------------------------------------------
87,723,181 87,723,181 53,391,370 53,391,370
Less shares repurchased (65,723,454) (65,723,454) (56,441,120) (56,441,120)
- --------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) 21,999,727 $21,999,727 (3,049,750) $(3,049,750)
====================================================================================================================
</TABLE>
42
<PAGE>
Note 8. Line of Credit
A $20,000,000 line of credit available to all of the Portfolio Funds has been
established with Morgan Guaranty Trust Company. The rate of interest charged on
any borrowings is based upon the prevailing Federal Funds rate at the time of
the loan plus .25% calculated on a 360 day basis per annum. For the year ended
December 31, 1994, none of the Portfolio Funds borrowed against this line of
credit.
Note 9. Merger
On October 19, 1994, shareholders of The Guardian U.S. Government Securities
Fund approved a transfer of its net assets to GIQBF. A tax-free exchange,
whereby 2,593,184 GIQBF shares, valued at $23,857,291, were exchanged for the
net assets of The Guardian U.S. Government Securities Fund on October 21, 1994.
For each share of beneficial interest owned, shareholders of The Guardian U.S.
Government Securities Fund received 1.0326 shares of beneficial interest in
GIQBF.
On October 21, 1994, The Guardian U.S. Government Securities Fund had net
assets of $23,857,291, including $(734,604) of unrealized depreciation. Before
the transfer, GIQBF had net assets of $19,826,336. After the transfer, the
combined net assets totaled $43,683,627.
43
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
Selected data for a share of beneficial interest outstanding throughout the
years indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
year $28.63 $25.17 $22.23 $18.26 $21.56 $20.46 $18.63 $20.74 $21.20 $18.17
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment
income 0.31 0.50 0.45 0.65 0.68 0.92 0.60 0.47 0.35 0.44
Net realized and
unrealized gain/
(loss) on
investments (0.72) 4.56 4.05 5.71 (3.28) 3.88 3.23 0.20 3.33 5.12
- ------------------------------------------------------------------------------------------------------------------------
Net increase/
(decrease) from
investment
operations (0.41) 5.06 4.50 6.36 (2.60) 4.80 3.83 0.67 3.68 5.56
- ------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
Dividends from net
investment income (0.31) (0.50) (0.44) (0.66) (0.70) (0.98) (0.55) (0.60) (0.33) (0.49)
Distributions from
net realized gain
on investments (1.02) (1.10) (1.12) (1.73) -- (2.72) (1.45) (2.18) (3.81) (2.04)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (1.33) (1.60) (1.56) (2.39) (0.70) (3.70) (2.00) (2.78) (4.14) (2.53)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year $26.89 $28.63 $25.17 $22.23 $18.26 $21.56 $20.46 $18.63 $20.74 $21.20
- ------------------------------------------------------------------------------------------------------------------------
Total return* (1.44%) 20.28% 20.48% 35.16% (12.21%) 23.66% 20.78% 2.95% 18.38% 32.98%
========================================================================================================================
Ratios/supplemental data:
Net assets, end of
year (000's
omitted) $640,917 $560,193 $335,660 $270,095 $216,457 $228,190 $176,000 $157,045 $136,243 $89,617
Ratio of expenses
to average net
assets 0.84% 0.81% 0.68% 0.67% 0.69% 0.70% 0.69% 0.68% 0.71% 0.70%
Ratio of net
investment income
to average net
assets 1.15% 1.89% 1.94% 2.96% 3.51% 4.01% 2.82% 2.08% 1.79% 2.48%
Portfolio
turnover 54% 46% 64% 57% 47% 47% 58% 50% 48% 80%
========================================================================================================================
* Excludes effect of sales load.
</TABLE>
44
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Guardian Cash Management Fund
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
<TABLE>
<CAPTION>
========================================================================================================================
Three
Months
Ended
Year Ended December 31, Dec. 31 Year Ended September 30,
1994 1993 1992 1991 1990 1989 1988 1988 1987 1986 1985
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.034 0.021 0.030 0.053 0.076 0.086 0.024 0.066 0.053 0.063 0.075
- ------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
Dividends from net
investment income (0.034) (0.021) (0.030) (0.053) (0.076) (0.086) (0.024) (0.066) (0.053) (0.063) (0.075)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ------------------------------------------------------------------------------------------------------------------------
Total return 3.48% 2.15% 3.06% 5.70% 7.91% 8.60% 2.40%** 6.60% 5.30% 6.30% 7.50%
========================================================================================================================
Ratios/Supplemental data:
Net assets, end of period
(000's omitted) $56,730 $34,731 $37,780 $44,054 $47,143 $33,821 $21,961 $20,603 $19,618 $20,451 $20,630
Ratio of expenses to
average net assets 0.87% 1.02% 0.70% 0.67% 0.65% 0.65% 1.00%* 1.00% 1.00% 1.00% 1.00%
Ratio of expenses
subsidized by GISC 0.50% 0.42% 0.44% 0.35% 0.41% 0.52% 0.38%* 0.28% 0.35% 0.22% 0.41%
Ratio of net investment
income to average
net assets 3.54% 2.13% 3.01% 5.30% 7.57% 8.56% 7.63%* 6.32% 5.34% 6.36% 7.69%
========================================================================================================================
* Ratios are annualized.
** Not annualized.
</TABLE>
45
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian
The Guardian Baillie Gifford
Asset Allocation Fund International Fund
- --------------------------------------------------------------------------------------------------------------------------------
Period from Period from
February 15, February 15,
Year Ended 1993* to Year Ended 1993* to
December 31, December 31, December 31, December 31,
1994 1993 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.98 $10.00 $13.19 $10.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income/(loss) 0.28 0.19 0.01 (0.02)
Net realized and unrealized gain/(loss) on
Investments and foreign currency
related transactions (0.52) 1.02 (0.09) 3.32
- --------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) from investment operations (0.24) 1.21 (0.08) 3.30
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Dividends from net investment income (0.28) (0.18) (0.01) --
Distributions from net realized gain on investments
and foreign currency related transactions (0.23) (0.05) (0.09) (0.11)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.23) (0.10) (0.11)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.23 $10.98 $13.01 $13.19
- --------------------------------------------------------------------------------------------------------------------------------
Total return** (2.13)% 12.16% (0.55)% 32.98%
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000's omitted) $54,875 $50,200 $37,542 $20,809
Ratio of expenses to average net assets 1.30% 1.29% 1.91% 2.35%
Ratio of net investment income/(loss) to average
net assets 2.72% 2.07% 0.20% (0.21)%
Ratio of expenses subsidized by GISC -- -- -- --
Portfolio turnover 216% 165% 33% 9%
================================================================================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian
Investment Quality The Guardian
Bond Fund Tax-Exempt Fund
- --------------------------------------------------------------------------------------------------------------------------------
Period from Period from
February 15, February 15,
Year Ended 1993* to Year Ended 1993* to
December 31, December 31, December 31, December 31,
1994 1993 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.04 $10.00 $10.20 $10.00
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income/(loss) 0.46 0.37 0.40 0.34
Net realized and unrealized gain/(loss) on
Investments and foreign currency
related transactions (0.90) 0.18 (1.30) 0.40
- --------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) from investment operations (0.44) 0.55 (0.90) 0.74
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Dividends from net investment income (0.46) (0.37) (0.40) (0.34)
Distributions from net realized gain on investments
and foreign currency related transactions (0.02) (0.14) (0.04) (0.20)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.51) (0.44) (0.54)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.12 $10.04 $8.86 $10.20
- --------------------------------------------------------------------------------------------------------------------------------
Total return** (4.50)% 4.13% (8.98)% 5.55%
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000's omitted) $43,487 $23,310 $15,967 $21,135
Ratio of expenses to average net assets 1.46% 1.42% 1.09% 1.36%
Ratio of net investment income/(loss) to average
net assets 4.94% 3.68% 4.26% 3.35%
Ratio of expenses subsidized by GISC -- -- 0.47% --
Portfolio turnover 186% 167% 107% 108%
================================================================================================================================
</TABLE>
* Commencement of operations.
** Excludes effect of sales load.
46 & 47
<PAGE>
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP
Independent Auditors
- --------------------------------------------------------------------------------
Board of Trustees and Shareholders
The Park Avenue Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments of The Park Avenue Portfolio (comprising,
respectively, The Guardian Park Avenue Fund, The Guardian Asset Allocation Fund,
The Guardian Baillie Gifford International Fund, The Guardian Investment Quality
Bond Fund, The Guardian Tax-Exempt Fund and The Guardian Cash Management Fund)
as of December 31, 1994, and the related statements of operation for the year
then ended, and the statements of changes in net assets and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Portfolio's management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting The Park Avenue Portfolio at December 31,
1994, the results of their operations for the year then ended and the changes in
their net assets and financial highlights for each of the indicated periods, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 10, 1995
48
<PAGE>
Trustees
George T. Conklin, Jr. -- Chair
John C. Angle
Frank J. Fabozzi, Ph.D.
Arthur V. Ferrara, CLU
Leo R. Futia, CLU
William W. Hewitt, Jr.
Sidney I. Lirtzman, Ph.D.
Gerard E. Mills
Robert G. Smith, Ph.D.
Officers
Frank J. Jones -- President
Charles E. Albers
Michele S. Babakian
Joseph A. Caruso
Alexander M. Grant, Jr.
Raymond J. Henry
Thomas R. Hickey, Jr.
Ann T. Kearney
R. Robin Menzies
Nikolaos D. Monoyios
John B. Murphy
Frank L. Pepe
Richard T. Potter, Jr.
<PAGE>
Investment Adviser
& Distributor
Guardian Investor Services
Corporation(R)
201 Park Avenue South
New York, New York 10003
Custodian of Assets
State Street Bank and Trust
Company
Custody and Shareholder
Services Division
P.O. Box 1713
Boston, Massachusetts 02102
Shareholder Servicing Agent &
Dividend Paying Agent for State
Street Bank and Trust Company
National Financial Data Services
P.O. Box 419611
Kansas City, Missouri 64141-6611
Independent Auditors
Ernst & Young
787 Seventh Avenue
New York, New York 10019
This report is authorized for distribution to the public only when accompanied
or preceded by a current prospectus for the funds which comprise The Park Avenue
Portfolio.
EB-011566 12/94
