Dear Shareholder:
[Guardian Life Building]
[Photo]
Frank J. Jones, Ph.D.
The entire first half of 1996 has seen a continuation of the strong U.S. economy
which began over six years ago.
The second quarter of 1996 was very strong for the economy, quite strong
for the stock market and neutral for the bond market. With respect to the
economy, while the complete data for the second quarter are not yet available,
it is virtually certain that real economic growth (measured by real gross
domestic product, GDP) during the second quarter of this year was significantly
higher than the 2.1% annualized growth during the first quarter and 1.9% during
1995 as a whole. Generally, economists' estimates for real GDP growth during the
second quarter exceeded 4%. If this growth were thought to be sustainable, the
Fed would swiftly tighten monetary policy. As of this writing no such tightening
has occurred.
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With respect to the stock market, the S&P 500 Index returned 10.05% during
the first six months of 1996, with 4.44% of this occurring in the second
quarter.(1) This strong performance after the 37.58% return during 1995 has
caused significant nervousness in the market. Indeed, the day-to-day volatility
in the stock and bond markets in July has borne out this nervousness.
Nevertheless, flows into equity mutual funds during the first five months
of 1996 were $123.86 billion, almost up to 1993's record year-end level of
$129.6 billion and 1995's year-end $128.9 billion inflows. If these cash inflows
into equity mutual funds continue at anything like their current rate (although
the inflows slowed during June and early July), these previous records will be
obliterated. While the strong inflows have supported the stock market, a
slowdown or reversal of this trend could trigger a market correction.
After a very negative first quarter (during which the 30-year Treasury bond
yield increased by 0.72% and the Lehman Aggregate Bond Index returned
- -1.77%),(1) the bond market continually improved on a monthly basis during the
second quarter, with the 30-year Treasury bond yield increasing by only 0.23%
and the Lehman Aggregate Bond Index returning 0.57%. Net cash inflows into bond
and income mutual funds were negative during 1995 and were positive but
relatively anemic during the first five months of 1996. Results for the first
six months of 1996 are not yet available.
U.S. Economic Prospects
For at least two years, the Fed has been trying to accomplish a "soft
landing," that is, gradual economic growth of approximately 2 1/2% with
inflation kept under 3%. This outcome has certainly been a possibility during
the last two years. However, the apparently strong, but as yet unverified,
growth during the second quarter has led to the concern for too-rapid growth.
Because of this strong growth, the Fed may soon begin to tighten monetary policy
significantly. The current prevailing forecast for the second half of 1996,
however, is for much slower yet moderate growth, with moderate and only slightly
increased inflation.
As the third quarter of 1996 unfolds, Alan Greenspan and the Fed will
closely monitor employment, consumption, inflation, and other factors to
determine whether tightening is necessary. The Fed would not want to tighten
prematurely because it would regret having enacted a single tightening followed
by a reversal of policy if the economy eased during the second half of 1996. On
the other hand, the Fed would not want to be inactive while the seed of
inflation grew--the initial tightening on February 4, 1994 was justified by the
Fed as an effort to constrain inflation before it "showed the whites of its
eyes."
With respect to fiscal policy, the federal budget deficit could decline to
$130 billion this fiscal year from $164 billion last year, the lowest since 1989
(relative to GDP, the deficit would be the lowest since 1981). This decrease
would tend to retard economic growth and stimulate the bond market.
Arguments can be made in either direction for economic growth during the
second half of 1996. If, as a few analysts expect, the economy continues to be
as strong as during the second half of 1996, inflationary threats would occur
and the Fed would tighten significantly.
A more likely scenario would be moderate but faster than sustainable
economic growth, which would cause the Fed to tighten two or three times, which,
in turn, would increase long-term yields somewhat but not significantly. While
some analysts believe the next Fed move will be an easing late in the year,
moderate intermediate-term tightening seems more likely. Tightening might not be
a significant negative to the bond market since it would show that the Fed still
has anti-inflation "religion," of which there has been some recent doubt.
The strength of the stock market during 1995 was a result of both declining
yields and strong profit growth. 1996's strength has occurred despite increasing
yields and significant, but slowing profits. If economic growth during the
second half of 1996 moderates to the 2% level, yields could stabilize or even
decline somewhat. A moderate increase in bond yields and
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moderate corporate profits would not cause a significant retrenchment in the
stock market based on these fundamentals. Even strong corporate profits,
however, would not be enough to offset the effects of rapid economic growth and
multiple Fed tightenings.
However, given the past strong and sustained growth in the stock market
(the current rally which began during May 1990 is the second longest and the
second strongest during the ten rallies since 1951), a moderate correction in
the stock market is always a possibility. While it is always a possibility, its
timing and magnitude are impossible to predict.
International Prospects
Internationally, economic turning points may be occurring in both Japan and
Germany. Recent economic reports from Japan have been very strong and, in fact,
the next monetary move by the Bank of Japan is likely to be a tightening. On the
other hand, the latest economic reports from Germany have been very weak,
although there have been signs of developing strength. The Bundesbank has
continued to ease and will probably ease again this year. The strong dollar
against both the yen and the deutsche mark should support these economies.
The most likely scenario for the next few quarters seems to be that the
German recovery will have difficulty taking hold; the Japanese recovery will
advance but remain feeble; and the United Kingdom, which has also continued to
ease monetary policy, will grow moderately with low inflation. The major concern
in Japan is that, since the economic turnaround to date has depended mainly on
monetary policy and public works spending, the private economy, particularly
consumption, may not be able to sustain the recovery if monetary policy tightens
or the fiscal stimulus is reduced. The major uncertainties in the U.K. continue
to be political rather than economic.
With all that in mind, I now invite you to read the portfolio manager
interviews on the following pages to learn more about the Funds and the
investment strategies used during the past six months.
Regards,
FRANK J. JONES
Frank J. Jones, Ph.D.
President, The Park Avenue Portfolio
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(1) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The S&P 500
and the Lehman Aggregate Bond Indexes are not available for direct
investment and the returns do not reflect the fees and expenses that have
been deducted from the Funds. Likewise, return figures for the S&P 500 and
Lehman Aggregate Bond Indexes do not reflect any sales charges that an
investor may have to pay when purchasing or redeeming shares of the Fund.
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THE PARK AVENUE PORTFOLIO
Table of Contents
Porfolio Schedule
Manager of
Interview Investments
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The Guardian Park Avenue Fund 2 15
Objective: Long-term growth of capital
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Portfolio: At least 80% common stocks and
securities convertible into
common stocks
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Inception: June 1, 1972
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Net Assets at June 30, 1996: $1,163,029,802
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"Investors should be most interested in long-term performance, rather than
all the short-term zigzags within the market. Here, The Guardian Park Avenue
Fund can be proud of its solid record."
--Charles E. Albers, C.F.A
Portfolio Manager
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The Guardian Asset Allocation Fund 6 19
Objective: Long-term total investment return
consistent with moderate risk
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Portfolio: A mixture of: common stocks and
convertible securities; investment
grade debt obligations and U.S.
government securities; and money
market instruments
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Inception: February 16, 1993
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Net Assets at June 30, 1996: $81,298,736
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"The Fund performed well, thanks to the fact that we were overweighted in
stocks relative to bonds. Our overweighted equity position, which we continue to
hold, is the result of our quantitative model which views stocks as presently
more attractive than bonds, once their expected returns are adjusted for risk."
--Jonathan C. Jankus, C.F.A.
Portfolio Manager
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The Guardian Baillie Gifford International Fund 8 22
Objective: Long-term growth of capital
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Portfolio: At least 80% in a diversified portfolio
of common stocks of companies
domiciled outside of the United States
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Inception: February 16,1993
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Net Assets at June 30, 1996: $56,787,133
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"We are relatively optimistic about the prospects for most international
markets for the remainder of 1996. Overseas share prices have not risen as much
as those in the U.S., and there is still considerable scope for profits to
increase in many countries, as a large number of international companies are
operating below capacity."
--R. Robin Menzies
Portfolio Manager
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Porfolio Schedule
Manager of
Interview Investments
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The Guardian Investment Quality Bond Fund 10 26
Objective: A high level of current income and
capital appreciation without undue
risk
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Portfolio: At least 80% investment-grade bonds
and U.S. government securities
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Inception: February 16, 1993
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Net Assets at June 30, 1996: $50,471,452
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"To enhance the returns of the corporate bond portion of our portfolio, we
expanded the universe of bonds from which we choose securities purchased by the
Fund."
--Michele S. Babakian
Portfolio Manager
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The Guardian Tax-Exempt Fund 12 28
Objective: Maximum current income exempt
from federal taxes
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Portfolio: At least 80% investment grade
obligations issued by state
and local authorities
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Inception: February 16, 1993
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Net Assets at June 30,1996: $17,552,114
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"We seek high-quality bonds, because lower-quality issues do not offer
enough extra yield to compensate for the additional risk. In addition, we are
continuously trying to upgrade the portfolio. Currently, nearly half of the
bonds in the portfolio are rated triple A by Standard & Poor's and Moody's, two
major bond rating organizations."
--Alexander M. Grant, Jr.
Portfolio Manager
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The Guardian Cash Management Fund 14 30
Objective: As high a level of current income
as is consistent with liquidity and
preservation of capital
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Portfolio: Short-term money market
instruments
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Inception: November 3, 1982
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Net Assets at June 30, 1996: $78,268,354
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"We look at the Fund as a place where people can park their money until
they decide where they want to invest it--whether it be stocks, bonds or
tax-exempts. Therefore, we seek to provide investors with a combination of solid
returns, liquidity and preservation of capital."
--Alexander M. Grant, Jr.
Portfolio Manager
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Financial Statements 30
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Notes to Financial Statements 40
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Financial Highlights 50
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The Guardian Park Avenue Fund
[Photo]
Charles E. Albers, C.F.A.
Portfolio Manager
Q. Can you explain some of the ups and downs in the U.S. stock market
during the first six months of 1996? And how has the Fund performed in this
environment?
A. In the first half of 1996, equity investors generally had to contend
with a very challenging market environment. Fortunately, we were again able to
achieve respectable returns for our investors. Based on total returns for the
first six months of 1996,(1) The Guardian Park Avenue Fund performed better than
its peer group, the Lipper U.S. Growth Funds Average,(2) and the venerable S&P
500 Index,(3) albeit by a small margin in each case. Compared to other U.S.
growth mutual funds, as compiled by Lipper Analytical Services, Inc. for the
periods ended June 30, 1996, the Fund ranked 15 out of a field of 103 growth
funds over a twenty-year period, 39 out of 162 for the ten-year period, 21 out
of 248 for the five-year period and 255 out of 619 for the one-year period.
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Total Return for the six months
ended June 30, 1996(1)
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Guardian Park Avenue Fund +10.72%
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Lipper Average U.S. Growth Fund +10.12%
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S&P 500 Composite Index +10.05%
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While the overall stock market rose strongly in the first half of the year,
there were dramatic internal divergencies. For example, there was no "January
Effect" in 1996 (according to this historical pattern, smaller-cap stocks should
excel in January); then, many growth-type small-caps did very well from March
through May, powered by speculative investor enthusiasm; finally, in June, many
of those earlier winners experienced a sharp correction. For the entire
six-month period ended June 30. 1996, small-cap and large-cap indexes produced
very similar returns. Regarding economic sectors, the strongest categories were
Consumer Cyclicals and Capital Goods, where stock performance was aided by
perceptions of stronger economic growth: the weakest sector was Utilities,
reflecting the relatively weak performance of the bond market.
Of course, investors should be most interested in long-term performance,
rather than all the short-term zigzags within the market. Here, The Guardian
Park Avenue Fund can be proud of its solid record, especially when compared with
other U.S. growth funds as measured by the Lipper U.S. Growth Funds Average.(2)
In fact, The Guardian Park Avenue Fund results for the last five years place it
among the top 10% of all U.S. growth funds for the period.
Average Annual Total Returns for the
periods ended June 30, 1996(1,2)
Graphical Representation of Bar Graph below
1 year 5 years 10 years
------ ------- --------
Guardian Park Avenue Fund 23.35% 19.58% 13.58%
Lipper 22.20% 14.85% 12.21%
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(1) Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales charges
except where noted. Returns represent past performance and are not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost. Prior to August 25, 1988 shares of the
Fund were offered at a higher sales charge, so actual returns would have
been somewhat lower.
(2) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service and its database of performance information is based on
historical total returns, which assume the reinvesiment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted. Lipper rankings were reported in
Lipper's Mutual Funds Performance Analysis Special Report 2nd Quarter 1996.
(3) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The S&P 500 Index is not available for direct investment and its returns do
not reflect the fees and expenses that have been deducted from the Fund.
Likewise, return figures for the S&P 500 Index do not reflect any sales
charges that an investor may have to pay when purchasing or redeeming
shares of the Fund.
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2
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Q. To what do you attribute the Fund's performance during the past six months?
A. Throughout the life of the Fund, one of the keys to our solid long-term
results has been our proprietary stock-scoring system. Developed in the late
1970s, this multi-factor quantitative model has helped us rank stocks
successfully over the years. Over the five-year period from 1991 through 1995,
the stock-scoring system has given us valuable predictions in 4 out of 5 years.
While you should remember that past performance is no guarantee of future
results, these results are compelling. During the first half of 1996, the data
shows that our stock-scoring system had only a mild degree of predictive power,
although still positive overall. We are cautiously optimistic that our
soundly-based stock-scoring system will regain more predictive strength over the
balance of 1996 and beyond.
Also important, in the last five years we have been actively researching
several different "style predictor" models to help us predict which
characteristics are most likely to be successful over the next 6 to 12 months.
We have developed several soundly-based "style predictor" models to help us
address this critical portfolio management issue. As we reported in the 1995
Annual Report to shareholders, these models had suggested that a tilt towards
higher-quality and large-cap stocks was more likely to be successful, and we
positioned the portfolio accordingly. The behavior of the stock market in the
first half of 1996 regarding these major style issues was, however, essentially
neutral.
Q. What is your outlook for the future? And what are the messages from the
stock-scoring system?
A. Looking forward, the messages that we are getting from our "style predictor"
models are very much as they were six months ago. The quantitative models now
prefer the high-quality and growth-oriented themes for portfolio emphasis. From
an intuitive viewpoint, we believe these signals are reasonable, and they are
supported by the mature position of the U.S. business cycle and the weakening
prospects for U.S. corporate profit growth. As a practical matter, we believe
that The Guardian Park Avenue Fund portfolio is already well-positioned to
benefit from the style trends which we anticipate--accordingly, we plan only
moderate "fine-tuning" of the portfolio in the months ahead.
The messages from our stock-scoring system and from our "style predictor"
models have led us to favor certain economic sectors at this time. We believe
that the best investment prospects are currently in the Consumer Staples,
Financial and Energy sectors, each of which is overweighted in the Fund's
portfolio.
We also believe that there are selective opportunities in the Technology
sector, and our weighting there is roughly equal to the benchmark. (For complete
sector weightings and changes since year-end, please see the accompanying pie
charts.)
Q. Do you have any final words for shareholders?
A. Summing up, we plan to persevere with our successful, established investment
strategies. The portfolio will remain well-diversified, and we will continue to
heed the messages from our various quantitative models. We intend to remain
fully invested in the stock market, as that is our defined mission. In other
words, in managing the Fund, we try to add value by searching out the more
attractive sectors and individual stocks within the market. We do not try to
time the moves of the overall market because we believe that task is practically
impossible and the effort often leads to lost opportunities. We continue to
think of ourselves as a long-term value-building enterprise. We intend to work
hard to continue producing solid results for our shareholders.
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3
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The Guardian Park Avenue Fund Profile
as of June 30, 1996
Comparison of Common Stocks Held by the Fund
on December 31, 1995 and June 30, 1996
(Graphical Representation of two Pie Charts below)
December 31, 1995 June 30, 1996
--------------------------- ---------------------------
Technology 23.3% Technology 16.8%
Utilities 9.3% Utilities 7.3%
Other 4.9% Other 3.1%
Consumer Cyclical 3.3% Consumer Cyclical 2.1%
Consumer Staples 17.9% Consumer Staples 25.9%
Financial 18.2% Financial 21.0%
Capital Goods 3.3% Capital Goods 5.2%
Basic Industry 7.4% Basic Industry 4.0%
Energy 12.4% Energy 14.6%
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The Guardian Park Avenue Fund(1)
Average Annual Returns for the Periods Ended June 30, 1996
Since Inception
1 Year 5 Years 10 Years (6/1/72)
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At Net Asset Value(2) 23.35 19.58 13.59 15.91
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Class A Shares(3) 17.80 18.49 13.07 15.68
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S&P 500 Index(4) 25.85 15.65 13.69 12.01
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Performance for Class B shares, which became effective on May 1, 1996, will vary
due to differences in expenses charged to each share class.
(1) Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales charges
except where noted. Returns represent past performance and are not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost. Prior to August 25, 1988 shares of the Fund
were offered at a higher sales charge, so actual returns would have been
somewhat lower.
(2) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of any sales charge.
(3) Class A share performance assumes the current maximum front-end sales
charge of 4.5%. Prior to Auguist 25, 1988 shares of the Fund were offered
at a higher sales charge, so actual returns would have been somewhat lower.
(4) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The S&P 500 Index is not available for direct investment and its returns do
not reflect the fees and expenses that have been deducted from the Fund.
Likewise, return figures for the S&P 500 Index do not reflect any sales
charges that an investor may have to pay when purchasing or redeeming
shares of the Fund.
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4
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Growth of a Hypothetical $10,000 Investment
(Graphical Representation of Data Table below)
The Guardian Park S&P 500 Lipper U.S. Cost of
Avenue Fund Index Equity Growth Fund Living
----------- ----------- ----------- ----------
6/1/72 1 9550 1 10000 1 10000 1 10000
1972 2 9352 2 9791 2 9746 2 10072
3 9495 3 10173 3 9548 3 10169
4 9919 4 10936 4 10002 4 10266
5 8954 5 10404 5 8773 5 10483
1973 6 7758 6 9802 6 7699 6 10676
7 9104 7 10271 7 8788 7 10918
8 8355 8 9320 8 7686 8 11184
9 8898 9 9061 9 7492 9 11546
1974 10 8095 10 8376 10 6661 10 11836
11 6816 11 6276 11 5224 11 12222
12 7016 12 6861 12 5701 12 12536
13 9052 13 8434 13 7001 13 12754
1975 14 10222 14 9724 14 8176 14 12923
15 9524 15 8662 15 7174 15 13188
16 10311 16 9410 16 7588 16 13430
17 12315 17 10819 17 8924 17 13527
1976 18 12926 18 11077 18 9084 18 13696
19 13570 19 11281 19 9043 19 13913
20 14714 20 11627 20 9483 20 14106
21 14576 21 10762 21 8951 21 14396
1977 22 15549 22 11107 22 9480 22 14614
23 15171 23 10794 23 9340 23 14807
24 15894 24 10765 24 9674 24 15048
25 16187 25 10235 25 9527 25 15314
1978 26 17953 26 11100 26 10724 26 15700
27 19593 27 12062 27 11821 27 16063
28 18195 28 11455 28 11002 28 16401
29 19967 29 12263 29 11945 29 16884
1979 30 20459 30 12583 30 12544 30 17440
31 22476 31 13535 31 13793 31 17971
32 23490 32 13539 32 14501 32 18575
33 22448 33 12987 33 13536 33 19348
1980 34 24637 34 14722 34 15484 34 19928
35 27184 35 16363 35 18053 35 20266
36 28544 36 17908 36 19852 36 20870
37 30553 37 18146 37 20432 37 21401
1981 38 30553 38 17726 38 20347 38 21860
39 28042 39 15910 39 17993 39 22488
40 30197 40 17010 40 19380 40 22729
41 28244 41 15773 41 18074 41 22874
1982 42 28221 42 15682 42 18100 42 23430
43 32079 43 17473 43 20123 43 23599
44 37864 44 20656 44 24326 44 23599
45 42172 45 22720 45 27061 45 23696
1983 46 49604 46 25228 46 30611 46 24010
47 48521 47 25185 47 29869 47 24251
48 48699 48 25281 48 29333 48 24493
49 46645 49 24675 49 27414 49 24855
1984 50 47823 50 24028 50 26721 50 25048
51 53053 51 26344 51 28574 51 25290
52 54864 52 26823 52 28930 52 25483
53 61531 53 29283 53 31492 53 25797
1985 54 65013 54 31410 54 33601 54 25966
55 60468 55 30132 55 32193 55 26111
56 72961 56 35290 56 37156 56 26449
57 87232 57 40238 57 42720 57 26353
1986 58 93553 58 42592 58 44999 58 26425
59 82543 59 39627 59 41062 59 26570
60 86372 60 41842 60 42571 60 26763
61 106899 61 50759 61 51317 61 27126
1987 62 104622 62 53272 62 52563 62 27440
63 111995 63 56777 63 55749 63 27729
64 88928 64 43977 64 44085 64 27947
65 100336 65 46480 65 47392 65 28164
1988 66 107312 66 49515 66 50056 66 28502
67 105853 67 49653 67 49730 67 28913
68 107405 68 51158 68 50482 68 29179
69 117426 69 54775 69 54123 69 29565
1989 70 124277 70 59546 70 58562 70 29976
71 135523 71 65881 71 64497 71 30169
72 133004 72 67206 72 63984 72 30531
73 131155 73 65183 73 62581 73 31087
1990 74 131990 74 69211 74 67101 74 31401
75 111334 75 59736 75 56465 75 32029
76 116611 76 65046 76 61087 76 32415
77 138452 77 74504 77 71872 77 32633
1991 78 136860 78 74303 78 71176 78 32874
79 149260 79 78263 79 76341 79 33116
80 157618 80 84775 80 83235 80 33382
81 162079 81 82672 81 82319 81 33647
1992 82 159469 82 84210 82 80113 82 33889
83 167044 83 86846 83 82496 83 34106
84 189879 84 91214 84 89848 84 34396
85 208279 85 95200 85 92144 85 34686
1993 86 215652 86 95619 86 92749 86 34879
87 234327 87 98067 87 97203 87 35048
88 228375 88 100342 88 99458 88 35338
89 221844 89 96569 89 96044 89 35556
1994 90 219204 90 96936 90 93504 90 35773
91 227687 91 101657 91 98580 91 36087
92 225091 92 101617 92 97271 92 36280
93 245507 93 111514 93 104431 93 36546
1995 94 271285 94 122063 94 114202 94 36836
95 298576 95 131706 95 123909 95 37005
96 302249 96 139569 96 126735 96 37126
97 317905 97 147050 97 133553 97 37585
6/30/96 98 334627 98 153579 98 139376 98 37850
A hypothetical $10,000 investment in Class A shares made at the inception of The
Guardian Park Avenue Fund on June 1, 1972 has a starting point of $9,550, which
reflects the current maximum sales charge for Class A shares of 4.5%. This
investment would have grown to $334,627 on June 30, 1996. We compare our
performance to that of the S&P 500 Index, which is an unmanaged index that is
generally considered the performance benchmark of the U.S. stock market. While
you may not invest directly in the S&P 500 Index, a similar hypothetical
investment would now be worth $153,579. The Fund also fared well relative to
other U.S. growth funds. The average return of U.S. equity growth funds reported
by Lipper Analytical Services, Inc. measures the performance of other funds with
investment objectives and policies similar to those of The Guardian Park Avenue
Fund. The average of U.S. growth funds on the same $10,000 investment over the
same time period would have been $139,376. The cost of living index, as measured
by the consumer price index, which is generally representative of the level of
U.S. inflation, is also provided to lend a more complete understanding of the
investment's real worth.
Portfolio Composition
The Guardian Park Avenue Fund portfolio holds 221 securities in a variety
of economic sectors. The portfolio manager's goal is to position the portfolio
for consistent performance in both "bull" and "bear" markets.
(Graphical Representation of Pie Chart below)
Cash & Cash Equivalents 6.4%
Common Stocks 93.6%
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5
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THE GUARDIAN ASSET ALLOCATION FUND
[PHOTO] [PHOTO]
Frank J. Jones, Ph.D., Jonathan C. Jankus, C.F.A.,
Co-Portfolio Manager Co-Portfolio Manager
Q. How has the Fund performed during the first six months of 1996? And what
factors affected performance?
A. The Fund performed well, thanks to the fact that we were overweighted in
stocks relative to bonds. In the first half of this year, the total return on
stocks, as measured by the S&P 500 Index, was 10.05% and the total return on
bonds, as measured by the Lehman Aggregate Bond Index, was -1.21%.(1) Our
theoretical benchmark, a portfolio created to hold 60% of its value in the S&P
500 Index and 40% in the Lehman Aggregate Bond Index would thus have returned
5.57%. The Fund's return over the six-month period ended June 30, 1996 was 6.68%
with dividends reinvested.(2)
The Fund also did well relative to its competition, having exceeded the 6.04%
return of the Lipper Flexible Portfolio Average. Compared to the other asset
allocation funds as measured by this Lipper average, the Fund ranked 53 out of
191 for the six-month period and 74 out of 174 similar funds for the one-year
period ended June 30, 1996.(3)
Our overweighted equity position, which we continue to hold, is the result of
our quantitative model which views stocks as presently more attractive than
bonds, once their expected returns are adjusted for risk. As you know, the
allocation decisions are based on theoretical models which integrate information
about the economy and the financial markets.
Q. What are your expectations for the future and how are you positioning the
Fund to take advantage of these expectations?
A. At year-end, our exposure to the stock market was a bullish 77%, with only
20% in bonds and the remaining 3% in cash. We noted in the 1995 Annual Report to
shareholders that:
Probably the greatest risk to our outlook could come from the bond markets,
either in terms of an unexpected surge in inflation or supply. The latter
concern (greater than expected bond issuance) is dependent on a resolution to
the current budget disagreements in Washington.
The politicians basically agreed to disagree, postponing any firm plan to
eliminate the budget deficit until after the presidential election. In the
meantime, economic forecasters went from predictions of a weak economy (due in
part to a severe winter in many parts of the country) to an overheating one (due
to the dwindling unemployment labor pool). The Federal Reserve's leaning was
definitely viewed differently as talk of the next rate cut changed to a
conviction that the next logical move was to tighten.
- ------------
(1) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The S&P 500
and the Lehman Aggregate Bond Indexes are not available for direct
investment and the returns do not reflect the fees and expenses that have
been deducted from the Fund. Likewise, return figures for the S&P 500 and
Lehman Aggregate Bond Indexes do not reflect any sales charges that an
investor may have to pay when purchasing or redeeming shares of the Fund.
(2) Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales charges
except where noted. Returns represent past performance and are not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
(3) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted. Lipper rankings were reported in
Lipper's Mutual Funds Performance Analysis Special Report 2nd Quarter 1996.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
During the first half of the year, this combination of events led to a
dramatic increase in volatility coupled with a decline in the overall bond
market. It would have been surprising that the yield on the long bond rose less
than 1% (from 5.95% to 6.87%) if it weren't for the fact that most forecasters'
inflation expectations remained where they had started the year, at about 3.0%.
The stock market rose, though not as spectacularly as in 1995, supported by
healthy corporate profits.
While the Fund invests only in domestic securities, the story of the
lackluster bond market and profitable equity markets was played out around the
world in the first half of this year. Outside the English language group of
countries (U.S., U.K., Australia, New Zealand, Canada), stock market returns
were well into double-digit territory. Unfortunately, the strength of the dollar
translated into weakness for other currencies, making for less than stellar
returns for American investors in dollar terms. Unlike last year, however, the
U.S. market was something of a laggard in local terms.
In retrospect, we are glad to have positioned the Fund aggressively in terms
of stocks and cautiously in terms of bonds (relative to our "neutral" 60/40
position) and only wish that we had leaned to an even more aggressive position.
We are currently targeting a portfolio weighting of 70% stocks, 22% bond and the
remaining 8% in cash equivalents. We are thus still favoring stocks at the
expense of bonds, but a bit more cautiously as the increase in bond yields has
made them relatively more attractive.
THE GUARDIAN ASSET ALLOCATION FUND PROFILE
AS OF JUNE 30, 1996
-----------------------------------------------------
The Guardian Asset Allocation Fund(1)
Average Annual Returns for the Periods
Ended June 30, 1996
Since Inception
1 Year (2/16/93)
-----------------------------------------------------
At Net Asset Value(4) 16.14 11.84
-----------------------------------------------------
Class A Shares(5) 10.91 10.32
-----------------------------------------------------
Performance for Class B shares, which became effective on May 1, 1996, will vary
due to differences in expenses charged to each share class.
- ------------
(4) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of any sales charge.
(5) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
-----------------------------------------------------
Target Allocation as of June 30, 1996
(Graphical Representation of Pie Chart below)
Cash & Cash Equivalents 8.0%
Bonds 22.0%
Stocks 70.0%
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
[PHOTO]
R. Robin Menzies,
Portfolio Manager
Q. How have international markets performed during the first six months
of 1996? How did the Fund perform?
A. In the first half of this year, the Fund performed well, rising by
9.36%(1), compared to the 4.67% return generated by our benchmark index, the
Morgan Stanley Capital International (MSCI) Europe, Australia and Far East
(EAFE) Index.(2)
According to figures from the MSCI, the continental European markets produced
strong returns of 8.4% for the first six months of 1996, buoyed up by a high
level of corporate restructuring and gradual declines in interest rates. The
United Kingdom, by contrast, returned only 2.7%, as investors became
increasingly concerned about the forthcoming election. The Asian markets
produced a lower return of 2.6%, as the dominant Japanese stock exchange only
managed 1.1%, in U.S. dollar terms. The rise in the value of the U.S. dollar
against the yen reduced the more respectable return of 7.5%, which was the
result before currency fluctuations were taken into account. The other, smaller,
Asian markets produced diverging returns: Australia's 6.5% largely reflects the
recovery of its currency; Malaysia produced an impressive 16.3% and Singapore, a
disappointing -3.2%.
As usual, international market movements reflected a wide range of divergent
influences. The weakness of the yen has been a particularly striking feature of
the world scene; its decline has started to lead to a resurgence in Japanese
growth. In general, the growth of earnings and dividends has been rather better
than expected, but the improvements in Europe continue to be driven by
cost-cutting rather than by the increases in output as has been the case in
Asia.
Q. What factors affected the Fund's performance during the first
six months of 1996?
A. The Fund's performance was particularly strong in continental Europe, where
our investments in companies which are embarking on large-scale restructuring
operations produced excellent returns: Ciba-Geigy, for example, the Swiss
chemicals giant, rose by 38.1% as a result of its planned merger with Sandoz,
which we also held and which rose by 24.6%.
Returns were good from some of the smaller markets too. The Fund's best
performer was the Hungarian pharmaceutical company Richter Gedeon, which rose by
163.6%, and the Irish builder CRH increased its share price by 33.6%. In
general, our emphasis on long-term investment in well-positioned, well-run
businesses produced strong returns as these companies consolidated their
dominant positions and increased their focus on shareholder value.
The Fund also benefited from its strategic allocation of assets between
markets. We had a heavy weighting in the smaller Asian markets, which performed
particularly well, and in Continental Europe, where our returns were high. We
had reduced our weighting in the British market from approximately 15% at
year-end 1995 to only about 11% at June 30, 1996, which was relatively sluggish
during the period, and used hedging strategies to insulate the Fund from some of
the harmful effects of a declining yen.
Apart from our reductions in the United Kingdom, the main change in strategy
was our decision to close out the profitable yen hedges towards the end of the
period. There were several changes in the Fund's underlying investments, but no
other important changes in strategy. New holdings which we have taken during the
first half of this year include a stake in NTT Data Communications Systems,
Japan's largest computer systems integrator, which is benefiting from a rapid
increase in the use of computers in the Japanese
- ------------
(1) Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales charges
except where noted. Returns represent past performance and are not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
(2) The MSCI EAFE Index is an unmanaged index that is generally considered to
be representative of international stock market activity. The Index is
capitalization-weighted and carries a significant higher weighting in Japan
than the Fund is normally likely to have because the Fund seeks to
diversify investments across all major international markets. The
performance of the Fund and the MSCI EAFE Index may not therefore always
correlate closely. The MSCI EAFE Index is not available for direct
investment and its returns do not reflect the fees and expenses that have
been deducted from the Fund. Likewise, return figures for the MSCI EAFFE
Index do not reflect any sales charges that an investor may have to pay
when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
service sector, an area that has lagged behind that of other developed
countries. We have also bought Adidas, the German sportswear company, which has
an excellent, but under-utilized brand name and which is now cutting costs,
outsourcing and expanding into new markets.
Q. What are your expectations for the next six months, and how will that affect
your management strategy?
A. We are relatively optimistic about the prospects for most international
markets for the remainder of 1996. Overseas share prices have not risen as much
as those in the U.S., and there is still considerable scope for profits to
increase in many countries, as a large number of international companies are
operating below capacity. There is very little sign of inflation, and short-term
interest rates are likely to stay low in Europe, and also in Japan, although
pressure to increase rates there may become apparent before the end of this
year.
We are happy with our current strategy: we have a heavy weighting in the
faster-growing Asian economies, whose markets have lagged recently, and which
now appear to offer good value. We have a neutral weighting in Japan: the
economy appears to be recovering more rapidly than expected, but this has
already been partly discounted by the market. We have a large exposure to
Germany where the benefits of corporate restructuring are likely to continue to
flow through to shareholders, and we shall remain underweighted in the United
Kingdom until the political outlook becomes clearer. As always, our strategy
will continue to be strongly influenced by the availability of high-quality
businesses in the world's stock markets.
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND PROFILE
AS OF JUNE 30, 1996
--------------------------------------------------
The Guardian Baillie Gifford International Fund(1)
Average Annual Returns for the Periods
Ended June 30, 1996
Since Inception
1 Year (2/16/93)
--------------------------------------------------
At Net Asset Value(3) 20.80 14.18
--------------------------------------------------
Class A Shares(4) 15.36 12.63
--------------------------------------------------
Performance for Class B shares will vary due to differences in expenses charged
to each share class.
--------------------------------------------------
Portfolio Composition by Geographic Location
(Graphical Representation of Pie Chart below)
UK 11.0%
Other 3.1%
Cash 6.8%
Japan 34.1%
Far East (not Japan) 15.7%
Continental Europe 29.3%
--------------------------------------------------
Top 10 Holdings
----------------------------------------------------------------
Company Nature of Company Country
----------------------------------------------------------------
Cannon Office Equipment/Cameras Japan
----------------------------------------------------------------
NTT Data Computer Systems Japan
----------------------------------------------------------------
Sandoz Pharmaceuticals Switzerland
----------------------------------------------------------------
Ciba Pharmaceuticals Switzerland
----------------------------------------------------------------
Mitsubishi Heavy Industrial Machinery Japan
----------------------------------------------------------------
DDI Telecommunications Japan
----------------------------------------------------------------
Bridgestone Tires Japan
----------------------------------------------------------------
Mitsui & Company Trading Japan
----------------------------------------------------------------
Omron Industrial Controls Japan
----------------------------------------------------------------
Nomura Stockbroker Japan
----------------------------------------------------------------
(3) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of any sales charge.
(4) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Q. How has the overall bond market performed in the past
six months?
[Photo of}
Michele S. Babakian,
Portfolio Manager
A. The bond market returned an unsatisfying -1.21% during the first six months
of the year as measured by the Lehman Aggregate Bond Index.(1) Of the fixed
income sectors, asset-backed securities (ABS) and mortgage-backed securities
(MBS) held up the best with returns of 0.61% and 0.35%, respectively. Both of
these sectors have durations shorter than that of the Index. During a down
market, shorter duration assets will usually suffer less price depreciation.
A dramatic change in market expectations occurred during the first six
months of 1996. January's returns mimicked the strong performance of 1995 as
investors interpreted the economic news to suggest moderate growth and low
inflation. This sentiment was supported by the Federal Reserve's 25 basis point
reduction of the Federal Funds rate to 5.25% on January 31. However, by early
March, jobs data, increasing factory orders and industrial production indicated
a stronger economy than forecasted. In the second quarter, strong housing and
retail demand, coupled with a buildup of inventories, fueled economic growth.
This increased growth caused investors to be concerned that the Fed would raise
rates in order to dampen the strong economic growth. A nervous market became
more bearish when the June average hourly earnings reported a robust increase of
3.4% year-to-year. To moderate the economic growth and potential inflationary
pressures, the Fed is expected to raise rates sometime during July or August.
Toward the end of the second quarter this expectation led to rising rates and
cautious investors.
Q. How has the Fund performed in this market, year-to-date?
A. Despite the volatility of interest rates and the change of market sentiment
from bullish to bearish in the last six months, the Fund performed competitively
versus its peer group, the Lipper "BBB" Corporate Bond Group.(2) As of June 30,
the year-to-date total return for the Fund was -2.0% versus -2.30% for this
Lipper group.(3)
Our strategy during this period was to stay fully invested and purchase
products with strong return characteristics and to manage the Fund's duration
within 5% of the Lehman Aggregate Bond Index's duration. At June 30, the Fund,
compared to the Index, had an overweighting of 10% in the Corporate and MBS
sectors and nearly a 20% overweighting in the ABS sector.
To enhance the returns of the corporate bond portion of our portfolio, we
expanded the universe of bonds from which we choose securities purchased by the
Fund. New sectors such as Insurance, Tobacco, and Telecommunications were
evaluated and purchased because we believe that they will provide higher yields
to investors. The objective was to find positive trends within sectors, and
individual securities that could provide a high level of current income and
solid return characteristics.
Although we have been pleased with the results from our expanded universe, due
to the narrowing in spreads of certain corporate sectors in the second quarter
and negative news on select corporate credits, 7% of the corporate sector was
sold and reinvested in MBS. MBS have higher yields per unit of duration, or
average life, than most corporate bonds. Also added to the MBS sector were
commercial mortgage-backed securities (CMBS), which differ from MBS because the
assets underlying the bonds are commercial mortgages rather than single-family
mortgages. These investments, which comprise 4% of the portfolio, are rated AA
or better by Standard & Poor's or Moody's.
- --------------------------------------------------------------------------------
(1) The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The Lehman
Aggregate Bond Index is not available for direct investment and the returns
do not reflect the fees and expenses that have been deducted from the Fund.
Likewise, return figures for the Lehman Aggregate Bond Index do not reflect
any sales charges that an investor may have to pay when purchasing shares
of the Fund.
(2) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating services and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all Fund expenses. Their returns do not
reflect the deduction of sales loads, and performance would be different if
sales loads were deducted.
(3) Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all fund expenses. Total
return figures do not take into account the current maximum sales charges
except where noted. Returns represent past performance and are not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more of
less than the original cost.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
We continue to use ABS to fill the Fund's need for short-duration
securities as these products are higher yielding than Treasury paper and
corporate issues of the same duration. To enhance our returns the portfolio has
purchased new ABS in the home improvement and auto loan sectors.
Q. What is your outlook for the market?
What strategies do you plan to implement?
A. Assuming there is a Fed tightening this summer, we could see the 30-year
Treasury bond yield rise to 7.50% by year-end. To protect the Fund from the
price depreciation caused by rising rates, we will manage the duration of the
Fund to be slightly shorter than the Lehman Aggregate Bond Index's duration.
There will also continue to be an over-allocation to higher yielding, total
return products. In this sector, we will pay particular attention to the
corporate sectors with superior total return potential. In the next six months,
we expect to select more domestic and Yankee credits and CMBS. As you may
remember from the 1995 Annual Report to shareholders, Yankee credits, or Yankee
bonds are dollar-denominated bonds issued by foreign companies and traded in
domestic U.S. markets. Our current allocation to MBS may be maintained or
reduced depending on volatility and demand in this sector. Current ABS positions
will continue to be swapped for higher-yielding ABS. As always, we will continue
to be opportunistic and manage for total return.
THE GUARDIAN INVESTMENT QUALITY BOND FUND PROFILE AS OF JUNE 30, 1996
Portfolio Composition by Asset Quality
by either Moody's or Standard & Poor's
Graphical Representation of Pie Chart below)
AAA 68.9%
AA 2.0%
A 12.1%
BBB 9.7%
Not Rated 6.6%
Cash Equivalent 0.7%
--------------------------------------------
THE GUARDIAN ASSET ALLOCATION FUND3
AVERAGE ANNUAL RETURNS FOR THE PERIODS ENDED
JUNE 30, 1996
Since Inception
1 Year (2/16/93)
------- ---------------
At Net Asset Value(4) 3.69 4.25
Class A Shares(5) -0.98 2.83
(4) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of any sales charge.
(5) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
--------------------------------------------
Portolio Composition by Asset Class
Graphical Representation of Pie Chart below)
U.S. Government Securities 12.0%
Cash Equivalents 1.7%
Asset-Backed Securities 21.3%
Corporate Bonds 24.3%
Multi-Class Mortgages 19.6%
Mortgage Pass-Throughs 21.1%
Percentage of invested assets, excluding cash equivalents such as receivables
and payables.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND
Q. How did The Guardian Tax-Exempt Fund perform during the first half of 1996?
[Photo of]
Alexander M. Grant, Jr.,
Portfolio Manager
A. The Fund produced a total return of -1.29%(1) for the six months ended
Friday, June 28, 1996. In comparison, the Lehman Municipal Bond Index produced a
total return of -0.45%.(2) For the twelve-month period ended June 30, 1996, the
Fund's total return was 5.48%. In comparison, the Index produced a total return
of 6.64%. It is important to distinguish total return from yield. Total return
is the sum of the Fund's yield and its change in net asset value (NAV), which
fluctuates with the level of interest rates. As of June 30, 1996, the Fund's
30-day yield was 4.30%.
Q. What factors affected the Fund's performance?
A. During the six-month period ended June 30, 1996, the Fund was negatively
affected by the rising interest rates. In a period of sharply rising interest
rates, most municipal bond portfolios, such as the Fund, will show negative
returns. Municipal bond yields usually track Treasury bond yields. However,
during the first half of 1996, municipal bonds outperformed Treasuries.
The main reason that municipal bonds outperformed the 30-year Treasury bond
was a lack of supply in the market. As interest rates rose, municipalities were
less likely to issue new bonds. Secondly, individual investors began to take
another look at municipal bonds as the stock market began to cool
off--especially as muni yields reached 6%. Finally, the issue of tax reform
appears to be dead for now, at least until after the presidential election.
During the presidential primaries, the flat tax received a great deal of
publicity, appearing on the covers of both Time and Newsweek in January. The
flat tax would have eliminated the relative advantage of municipal bonds
compared to other investments. However, neither of the major presidential
candidates seems to favor a flat tax. As a result of all of these factors,
municipal bonds are currently yielding about 80%-82% of U.S. Treasury bonds,
down from 90% in early 1996.
Q. What is the Fund's investment strategy?
A. We are trying to protect ourselves against interest rate volatility by buying
high coupon bonds. By emphasizing bonds that pay 6% to 7%, the portfolio is less
vulnerable to rising interest rates. Ideally, we would buy bonds that cannot be
called. A callable bond offers no protection in the event that interest rates
rise, but it doesn't offer as much upside protection if interest rates drop
because the issuer can redeem the bonds. Understandably, a noncallable feature
is very expensive today, so we look at callable bonds that have at least some
call protection--perhaps ten years or better. In addition, we seek high-quality
bonds, because lower quality issues do not offer enough extra yield to
compensate for the additional risk. Also, we are continuously trying to upgrade
the portfolio. Currently, nearly half of the bonds in the portfolio are
rated triple A by Standard & Poor's and Moody's, two major bond rating
organizations.
- --------------------------------------------------------------------------------
(1) Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales charge of
4.5%, except where noted. Since June 1, 1994, the investment adviser for
the Fund has been assuming the operating expenses of the Fund to the extent
they exceed 0.75% of the Fund's average daily net assets. Without these
expense reimbursements, the performance figures would have been lower.
Returns represent past performance and are not a guarantee of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost.
(2) The Lehman Municipal Bond Index is an unmanaged index that is generally
considered to be representative of U.S. municipal bond market activity. The
Lehman Municipal Bond Index is not available for direct investment and its
return do not reflect the fees and expenses that have been deducted from
the Fund. Likewise, return figures for the Lehman Municipal Bond Index do
not reflect any sales charges that an investor may have to pay when
purchasing shares of the Fund.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Q. What individual securities in the Fund are representative of your strategy?
A. We own Grand River Dam Authority Revenue bonds, 6.25% due 2011. These
noncallable Oklahoma issues were purchased to yield 5.47%. The bond is
attractive because of its high coupon and double tax-exempt status within the
State of Oklahoma, which means it will have strong retail demand. Another
attractive noncallable bond is one issued by the State of Georgia, with a 5.95%
coupon due 2007 which was priced to yield 5.41%. The bond is rated Aaa by
Moody's Investor Services.
Q. What is your outlook for the rest of the year?
A. Although the economy is expanding, the degree to which it is inflationary is
unclear. As a result, interest rates will likely be volatile for the next
several months. However, municipal bonds may continue to outperform other fixed
income securities because the flat tax issues have been resolved and the equity
markets are showing signs of weakness.
- --------------------------------------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND PROFILE AS OF JUNE 30, 1996
THE GUARDIAN TAX-EXEMPT FUND (1)
AVERAGE ANNUAL RETURNS FOR THE PERIODS
ENDED JUNE 30, 1996
Since Inception
1 Year (2/16/93)
------ ---------------
At Net Asset Value(3) 5.48 2.70
Class A Share(4) 0.73 1.30
----------------------------------------------------
Portfolio Composition by Quality
(Moody's Ratings)
(Graphical Representation of Pie Chart below)
A 14.3%
Aa 26.8%
Aaa 50.0%
Cash & Cash Equivalents 8.9%
(3) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of any sales charge.
- --------------------------------------------------------------------------------
Top 10 Holdings
Name State Maturity Coupon
- --------------------------------------------------------------------------------
Triboro Bridge & Tunnel Ser. Y NY 01/01/12 6.000%
- --------------------------------------------------------------------------------
Massachusetts Bay Transit Authority MA 03/01/11 5.800%
- --------------------------------------------------------------------------------
New York City Water & Sewer NY 06/15/13 5.875%
- --------------------------------------------------------------------------------
Texas State Public Finance Authority TX 10/01/10 5.750%
- --------------------------------------------------------------------------------
California G.O. CA 10/01/10 7.000%
- --------------------------------------------------------------------------------
Texas State Water Development TX 08/01/05 6.500%
- --------------------------------------------------------------------------------
Pima County AZ United School District AZ 07/01/10 6.500%
- --------------------------------------------------------------------------------
Grapevine--Colleyville Independent TX 06/15/08 8.250%
- --------------------------------------------------------------------------------
King County School District WA 12/01/99 7.150%
- --------------------------------------------------------------------------------
New Jersey Wastewater Treatment NJ 05/15/08 7.000%
- --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see the Schedule of
Investments.
(4) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
- --------------------------------------------------------------------------------
13
<PAGE>
- -------------------------------------------------------------------------------
The Guardian Cash Management Fund
[Photo]
Alexander M. Grant, Jr.,
Portfolio Manager
Q. How did The Guardian Cash Management Fund perform during the first half of
1996?
A. As of Friday, June 28, 1996, the effective 7-day annualized yield was 4.33%,
down from December 31, 1995, when the effective 7-day annualized yield was
5.17%. The Fund produced an annualized total return of 4.48% for the first half
of 1996.(1)
Q. What factors affected the Fund's performance?
A. On January 31, 1996, the Federal Reserve Board reduced the Federal Funds rate
from 5.50% to 5.25%. Money market securities, like those held by this and
similar funds, tend to track the movement in the Federal Funds rate. Another
factor affecting performance was the portfolio's average maturity--17 days as of
June 30, 1996. In contrast, the average money market fund as measured by IBC
Money Fund Vision had an average maturity of 56 days and a 7-day annualized
yield of 4.71% at June 25, 1996. IBC Financial Data is a research firm that
tracks money market funds. Typically, a fund with a longer maturity will pay a
higher yield. However, in a period of rising interest rates, a fund with a
longer maturity will suffer a greater reduction in total return.
Q. What is your investment strategy?
A. The Guardian Cash Management Fund is a place for investors to put their money
while they are deciding whether to invest in stocks, bonds or tax-exempt
securities. Therefore, we will continue to try to provide a strong 7-day yield,
while offering safety and liquidity. As a result, our strategy will continue to
be to invest in the highest-quality commercial paper that matures in less than
60 days. As you can see from comparing our performance and the performance of
the money market funds tracked by IBC Financial Data during the first half of
1996, the market would not reward us for extending our maturity.
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 that
income is reinvested. Yields will vary as interest rates change. Past
performance is not a guarantee of future results. From January 1 through
April 30, 1996, the investment adviser for the Fund assumed the operating
expenses of the Fund to the extent that they exceeded 0.85% of the Fund's
average daily net assets. Without these expense assumptions, the Fund's
performance and yields would have been lower.
- -------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
[ ] The Guardian Park Avenue Fund
Common Stocks--93.6%
Shares Value
- --------------------------------------------------------------------------------
Aerospace and Defense--4.7%
144,500 Boeing Co. $12,589,563
187,600 Logicon, Inc. 5,604,550
18,000 Loral Corporation 245,250
462,000 McDonnell Douglas Corp. 22,407,000
93,950 Precision Castparts Corp. 4,039,850
110,000 Rockwell Int'l. Corp. 6,297,500
36,000 Sundstrand Corp. 1,318,500
25,000 United Technologies Corp. 2,875,000
-----------
55,377,213
- --------------------------------------------------------------------------------
Air Transportation--0.3%
35,000 AMR Corp. Del 3,185,000
- --------------------------------------------------------------------------------
Automotive--0.4%
77,700 Chrysler Corp. 4,817,400
- --------------------------------------------------------------------------------
Biotechnology--0.3%
56,100 Amgen, Inc. 3,029,400
- --------------------------------------------------------------------------------
Building Materials and Homebuilders--0.3%
32,700 Coachmen Industries, Inc. 1,144,500
10,100 NCI Building Systems, Inc. 340,875
30,000 McGrath Rent Corp. 675,000
39,600 Webb (Del) Corp. 792,000
-----------
2,952,375
- --------------------------------------------------------------------------------
Capital Goods-Miscellaneous Technology--1.0%
20,200 Adtran, Inc, 1,431,675
138,800 Komag, Inc. 3,660,850
12,600 Pairgain Technologies, Inc. 781,200
102,975 Paychex, Inc. 4,955,672
37,300 Rexel, Inc. 526,863
-----------
11,356,260
- --------------------------------------------------------------------------------
Chemicals--2.0%
77,800 Cambrex Corp. 3,977,525
115,500 E.I.Dupont De Nemours, Inc. 9,138,937
240,500 Monsanto Co. 7,816,250
12,900 OM Group, Inc. 506,325
126,400 Sterling Chemicals, Inc. 1,469,400
-----------
22,908,437
- --------------------------------------------------------------------------------
Computer Software--3.4%
11,000 BMC Software, Inc. 657,250
18,900 Cadence Design Systems, Inc. 637,875
107,000 Computer Associates Int'l.,
Inc. 7,623,750
186,400 Electronic Data Systems
Corp. 10,019,000
38,000 Fair Isaac & Co., Inc. 1,681,500
120,000 Microsoft Corp. 14,415,000
56,000 Parametric Technology Corp. 2,429,000
50,000 SunGard Data Systems, Inc. 2,006,250
-----------
39,469,625
- --------------------------------------------------------------------------------
Coal--0.0%
17,000 Eastern Enterprises $ 565,250
- --------------------------------------------------------------------------------
Conglomerates--1.3%
90,000 Loews Corp. 7,098,750
95,000 Textron, Inc. 7,588,125
-----------
14,686,875
- --------------------------------------------------------------------------------
Containers--0.0%
14,250 Alltrista Corp. 338,437
- --------------------------------------------------------------------------------
Cosmetics and Toiletries--1.1%
197,500 Gillette Co. 12,319,062
8,100 Helen of Troy Ltd. 230,850
-----------
12,549,912
- --------------------------------------------------------------------------------
Drugs and Hospitals--15.2%
79,000 Abbott Laboratories 3,436,500
280,700 American Home Products Corp. 16,877,088
29,100 Baxter International, Inc. 1,374,975
13,700 Becton Dickinson & Co. 1,099,425
205,500 Bristol-Myers Squibb Corp. 18,495,000
35,200 Boston Scientific Corp. 1,584,000
193,396 Eli Lilly & Co.,Inc. 12,570,740
97,377 Guidant Corp. 4,795,817
582,400 Johnson & Johnson 28,828,800
81,300 Kinetic Concepts, Inc. 1,260,150
90,000 Medtronic, Inc. 5,040,000
525,900 Merck & Co., Inc. 33,986,288
309,900 Pfizer, Inc. 22,119,112
191,000 Schering Corp. 11,985,250
230,000 Universal Health Services,
Inc. 6,008,750
127,200 Warner Lambert Co. 6,996,000
-----------
176,457,895
- --------------------------------------------------------------------------------
Electrical Equipment--2.7%
359,400 General Electric Co. 31,088,100
- --------------------------------------------------------------------------------
Electronics and Instruments--0.9%
150,000 Analogic Corp. 4,012,500
30,200 Cascade Communications Corp. 2,053,600
34,000 Sanmina Corp. 918,000
7,700 Security Dynamics
Technologies 633,325
25,400 Shiva Corp. 2,032,000
13,000 Strattec Security Corp. 230,750
-----------
9,880,175
- --------------------------------------------------------------------------------
Energy-Miscellaneous--0.6%
129,500 Giant Industries, Inc. 1,877,750
167,104 Holly Corp. 4,177,600
86,500 Howell Corp. 1,167,750
-----------
7,223,100
- --------------------------------------------------------------------------------
See notes to financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Financial-Banks--7.0%
90,000 Bankamerica Corp. $ 6,817,500
43,800 Barnett Banks, Inc. 2,671,800
188,060 Chase Manhattan Corp. 13,281,738
23,000 Central & Southern Hldgs.
Co. 196,937
266,764 Citicorp 22,041,375
17,885 Crestar Financial Corp. 954,612
89,200 First Bank Systems Corp. 5,173,600
12,400 First Empire State Corp. 2,988,400
59,700 First Union Corp. 3,634,237
49,005 Hubco, Inc. 1,035,231
30,000 Mellon Bank Corp. 1,710,000
38,000 J.P. Morgan & Co., Inc. 3,215,750
59,400 Nationsbank Corp. 4,907,925
122,248 Norwest Corp. 4,263,399
22,500 Star Banc Corp. 1,515,937
28,666 Wells Fargo & Co. 6,847,591
-----------
81,256,032
- --------------------------------------------------------------------------------
Financial-Others--8.2%
105,000 American Express Co. 4,685,625
25,000 Associates First Capital
Corp. 940,625
95,000 Dean Witter Discover & Co. 5,438,750
10,000 Duff & Phelps Cr. Rating Co. 212,500
63,200 A.G. Edwards, Inc. 1,714,300
38,700 Federal Home Loan Mortgage
Corp. 3,308,850
404,500 Federal National Mortgage
Assn. 13,550,750
163,000 First USA, Inc. 8,965,000
596,000 Green Tree Financial Corp. 18,625,000
100,000 Jefferies Group, Inc. 3,100,000
109,500 MBNA Corp. 3,120,750
57,400 McDonald & Co. Investments,
Inc. 1,133,650
151,200 Merrill Lynch & Co., Inc. 9,846,900
167,850 Morgan Keegan, Inc. 2,224,013
34,000 Morgan Stanley Group., Inc. 1,670,250
67,300 Raymond James Financial,
Inc. 1,522,662
120,000 Charles Schwab Corp. 2,940,000
255,000 Travelers Group, Inc. 11,634,375
-----------
94,634,000
- --------------------------------------------------------------------------------
Financial-Thrift--2.5%
39,200 Astoria Financial Corp. 1,063,300
160,000 California Federal Bancorp,
Inc. 2,920,000
88,750 Charter One Financial, Inc. 3,095,156
47,000 Coastal Bancorp, Inc. 846,000
152,199 Collective Bancorp, Inc. 3,595,701
76,000 Long Island Bancorp, Inc. 2,322,750
27,060 MAF Bancorp, Inc. 662,970
20,960 Pacific Crest Capital, Inc. 188,640
84,800 Progressive Bank, Inc. 2,459,200
365,243 Sovereign Bancorp, Inc. 3,652,430
78,000 Standard Federal
Bancorporation 3,003,000
187,964 TCF Financial Corp. 6,249,803
-----------
30,058,950
- --------------------------------------------------------------------------------
Food, Beverage and Tobacco--7.1%
103,200 Anheuser Busch Cos., Inc. $ 7,740,000
413,600 Coca Cola Co. 20,214,700
55,500 ConAgra, Inc. 2,518,313
4,128 Earthgrains Co. 135,192
17,000 Hershey Foods Corp. 1,247,375
677,200 PepsiCo, Inc. 23,955,950
255,400 Philip Morris Cos., Inc. 26,561,600
-----------
82,373,130
- --------------------------------------------------------------------------------
Footwear--0.4%
44,100 Nike, Inc. 4,531,275
- --------------------------------------------------------------------------------
Household Products--1.0%
114,140 Kimberly Clark Corp. 8,817,315
34,700 Procter & Gamble Co. 3,144,688
-----------
11,962,003
- --------------------------------------------------------------------------------
Information Processing--3.0%
15,000 Astro-Med, Inc. 135,000
15,000 Cabletron Systems, Inc 1,029,375
198,000 Cisco Systems, Inc. 11,211,750
146,400 Hewlett Packard Co. 14,585,100
30,500 In Focus Systems, Inc. 739,625
132,000 Sun Microsystems, Inc. 7,771,500
-----------
35,472,350
- --------------------------------------------------------------------------------
Insurance--2.0%
74,000 Amer. Bankers Ins. Group,
Inc. 3,228,250
40,000 Amer. Int'l. Group, Inc. 3,945,000
20,000 CMAC Investment Corp. 1,150,000
40,500 Executive Risk, Inc. 1,549,125
57,000 ITT Hartford Group, Inc. 3,035,250
35,000 Jefferson Pilot Corp. 1,806,875
42,080 Liberty Financial Cos., Inc. 1,425,460
67,000 MGIC Investment Corp. 3,760,375
31,500 Sun America, Inc. 1,779,750
61,500 State Auto Financial Corp. 1,491,375
8,500 Travelers Aetna Ppty. Cas.
Corp. 241,187
-----------
23,412,647
- --------------------------------------------------------------------------------
Lodging--0.2%
175,000 Prime Hospitality Corp. 2,887,500
- --------------------------------------------------------------------------------
Machinery and Equipment--2.1%
32,000 AGCO Corp. 888,000
30,000 Case Corp. 1,440,000
118,000 Dover Corp. 5,442,750
129,900 Global Industrial
Technologies, Inc. 2,078,400
51,200 Illinois Tool Works, Inc. 3,462,400
90,000 Millipore Corp. 3,768,750
15,400 Robbins & Myers, Inc. 685,300
58,900 Tecumseh Products Co. 3,165,875
39,751 Varlen Corp. 834,765
60,000 York International Corp. 3,105,000
-----------
24,871,240
- --------------------------------------------------------------------------------
See notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Merchandising-Department Stores--0.2%
65,000 Carson Pirie Scott & Co. $ 1,738,750
- --------------------------------------------------------------------------------
Merchandising-Drugs--0.2%
- --------------------------------------------------------------------------------
75,000 Walgreen Co. 2,512,500
- --------------------------------------------------------------------------------
Merchandising-Food--0.6%
138,300 Casey's General Stores, Inc. 2,748,712
57,000 Kroger Co. 2,251,500
52,500 Safeway, Inc. 1,732,500
-----------
6,732,712
- --------------------------------------------------------------------------------
Merchandising-Special--0.3%
70,000 CompUSA, Inc. 2,388,750
83,560 Host Marriott Services Corp. 605,810
35,000 Pier 1 Imports, Inc. 520,625
-----------
3,515,185
- --------------------------------------------------------------------------------
Miscellaneous-Consumer Growth Staples--0.1%
35,000 Omnicom Group 1,627,500
- --------------------------------------------------------------------------------
Natural Gas-Diversified--0.9%
158,300 Mitchell Energy & Dev. Corp. 3,007,700
60,000 PanEnergy Corp. 1,972,500
260,000 Enserch Corp. 5,655,000
-----------
10,635,200
- --------------------------------------------------------------------------------
Oil and Gas Producing--4.8%
58,100 Alexander Energy Corp. 290,500
194,400 Apache Corp. 6,390,900
121,900 Basin Exploration, Inc. 792,350
267,900 Tom Brown, Inc. 4,587,788
90,000 Cairn Energy USA, Inc. 1,293,750
185,000 Chieftain International, Inc. 3,723,125
153,000 Devon Energy Corp. 3,748,500
50,200 Diamond Offshore Drilling,
Inc. 2,873,950
290,000 Enserch Exploration, Inc. 3,117,500
301,400 Enron Oil and Gas Co. 8,401,525
38,100 Forcenergy Gas Exploration,
Inc. 719,138
347,200 Global Natural Res., Inc. 5,685,400
8,500 H S Resources, Inc. 98,812
367,300 Petromet Resources Ltd. 711,644
79,700 Pogo Producing Co. 3,038,562
500,000 Ranger Oil Ltd. 3,687,500
86,200 St. Mary Land & Exploration
Co. 1,443,850
125,278 United Meridian Corp. 4,510,008
13,400 Vintage Petroleum, Inc. 341,700
170,000 Wainoco Oil Ltd. 531,250
-----------
55,987,752
- --------------------------------------------------------------------------------
Oil-Integrated-Domestic--1.5%
74,800 Amoco Corp. 5,413,650
60,000 Murphy Oil Corp. 2,722,500
328,000 Tesoro Petroleum, Inc. 3,772,000
270,000 USX Marathon Group 5,433,750
-----------
17,341,900
- --------------------------------------------------------------------------------
Oil-Integrated-International-4.5%
93,800 Chevron Corp. $?5,534,200
271,700 Exxon Corp. 23,603,938
125,900 Mobil Corp. 14,116,537
27,000 Royal Dutch Petroleum Co. 4,151,250
53,600 Texaco, Inc. 4,495,700
-----------
51,901,625
- --------------------------------------------------------------------------------
Oil Services--1.5%
20,800 Cliffs Drilling Co. 707,200
24,100 Halliburton Co. 1,337,550
209,400 Nabors Industries, Inc. 3,402,750
86,300 Offshore Logistics, Inc. 1,197,413
60,000 Pride Petroleum Services,
Inc. 855,000
49,000 Schlumberger Ltd. 4,128,250
130,000 Smith International, Inc. 3,916,250
72,400 Varco International, Inc. 1,312,250
24,000 Weatherford Enterra, Inc. 720,000
-----------
17,576,663
- --------------------------------------------------------------------------------
Paper and Forest Products--1.1%
331,500 Rayonier, Inc. 12,597,000
- --------------------------------------------------------------------------------
Railroads--0.7%
40,301 Burlington Northern Santa Fe 3,259,343
64,900 Union Pacific Corp. 4,534,888
-----------
7,794,231
- --------------------------------------------------------------------------------
Semiconductor--0.9%
61,400 Atmel Corp. 1,849,675
89,600 Intel Corp. 6,580,000
146,000 International Rectifier
Corp. 2,354,250
-----------
10,783,925
- --------------------------------------------------------------------------------
Transportation-Miscellaneous--0.1%
114,200 Maritrans, Inc. 699,475
- --------------------------------------------------------------------------------
Truckers --0.1%
59,000 FRP Pptys., Inc. 1,209,500
- --------------------------------------------------------------------------------
Utilities-Communications--8.2%
76,600 Ameritech Corp. 4,548,125
182,025 Andrew Corp. 9,783,844
655,000 AT&T Corp. 40,610,000
47,600 Bell Atlantic Corp. 3,034,500
106,100 Bellsouth Corp. 4,495,987
175,000 GTE Corp. 7,831,250
43,300 Harris Corp. 2,641,300
141,800 Northern Telecom Ltd. 7,710,375
44,700 NYNEX Corp. 2,123,250
144,000 Sprint Corp. 6,048,000
121,300 SBC Communications, Inc. 5,974,025
24,000 360 Communications Co. 576,000
-----------
95,376,656
- --------------------------------------------------------------------------------
See notes to financial statements.
17
<PAGE>
The Guardian Park Avenue Fund
Schedule of Investments (Continued
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
Utilities-Electric -- 0.1%
55,000 Illinova Corp. $ 1,581,250
- -------------------------------------------------------------------------------
Utilities-Gas and Pipeline--0.1%
49,400 Entergy Corp. 1,401,725
- -------------------------------------------------------------------------------
Total Common Stocks
(Cost $840,302,735) 1,088,358,130
- -------------------------------------------------------------------------------
Repurchase Agreement -- 6.5%
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------------------
$76,070,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $76,102,964,
5.20%, due 7/1/96
(collateralized by
$77,545,000 U.S. Treasury
Notes, 5.125% due
2/28/98) 7/1/96 $76,070,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $76,070,000) 76,070,000
- -------------------------------------------------------------------------------
Total Investments -- 100.1%
(Cost $916,372,735) 1,164,428,130
Payables in Excess of Cash, Receivables
and Other Assets -- (0.1%) (1,398,328)
- -------------------------------------------------------------------------------
Net Assets -- 100.0% $1,163,029,802
- -------------------------------------------------------------------------------
See notes to financial statements.
18
<PAGE>
The Guardian Asset Allocation Fund
Common Stock--64.4%
Shares Value
- -------------------------------------------------------------------------------
Aerospace and Defense--2.3%
10,000 Boeing Co. $ 871,250
18,800 McDonnell Douglas Corp. 911,800
1,100 United Technologies Corp. 126,500
----------
1,909,550
- -------------------------------------------------------------------------------
Air Transportation--0.2%
1,600 AMR Corp. Del 145,600
- -------------------------------------------------------------------------------
Automotive--0.3%
3,600 Chrysler Corp. 223,200
- -------------------------------------------------------------------------------
Capital Goods-Miscellaneous Technology--0.7%
2,900 Adtran, Inc. 205,537
9,400 Komag, Inc. 247,925
1,800 Pairgain Technologies, Inc. 111,600
----------
565,062
- -------------------------------------------------------------------------------
Chemicals--0.9%
5,100 E.I. Du Pont de Nemours & Co. 403,538
11,000 Monsanto Co. 357,500
----------
761,038
- -------------------------------------------------------------------------------
Conglomerates--1.8%
12,500 Loews Corp. 985,937
6,000 Textron, Inc. 479,250
----------
1,465,187
- -------------------------------------------------------------------------------
Computer Software--1.5%
1,600 BMC Software, Inc. 95,600
2,700 Cadence Design Systems, Inc. 91,125
8,500 Electronic Data Systems Corp. 456,875
5,000 Microsoft Corp. 600,625
----------
1,244,225
- -------------------------------------------------------------------------------
Cosmetics and Toiletries--0.7%
8,900 Gillette Co. 555,137
- -------------------------------------------------------------------------------
Drugs and Hospitals--11.0%
15,000 American Home Products Corp. 901,875
1,300 Becton Dickinson & Co. 104,325
3,200 Boston Scientific Corp. 144,000
9,300 Bristol Myers Squibb Corp. 837,000
10,000 Eli Lilly & Co.,Inc. 650,000
29,000 Johnson & Johnson 1,435,500
5,400 Medtronic, Inc. 302,400
29,900 Merck & Co., Inc. 1,932,288
15,700 Pfizer, Inc. 1,120,588
20,000 Schering Corp. 1,255,000
12,000 Universal Health
Services, Inc. 313,500
----------
8,996,476
- -------------------------------------------------------------------------------
Electrical Equipment--1.5%
14,200 General Electric Co. 1,228,300
- -------------------------------------------------------------------------------
Electronics and Instruments--0.8%
4,400 Cascade Communications
Corp. $ 299,200
1,100 Security Dynamics Tech.,
Inc. 90,475
3,600 Shiva Corp. 288,000
----------
677,675
- -------------------------------------------------------------------------------
Financial-Banks--5.5%
15,000 Bankamerica Corp. 1,136,250
2,000 Barnett Banks, Inc. 122,000
8,504 Chase Manhattan Corp. 600,595
15,000 Citicorp 1,239,375
3,900 First Bank System, Inc. 226,200
2,800 First Union Corp. 170,450
2,600 Nationsbank Corp. 214,825
1,500 Star Banc Corp. 101,063
2,666 Wells Fargo & Co. 636,841
----------
4,447,599
- -------------------------------------------------------------------------------
Financial-Other--8.4%
20,000 A.G. Edwards, Inc. 542,500
1,800 Federal Home Loan
Mortgage Corp. 153,900
32,000 Federal National
Mortgage Assn. 1,072,000
60,000 Green Tree Financial Corp. 1,875,000
7,500 MBNA Corp. 213,750
20,000 Merrill Lynch & Co., Inc. 1,302,500
40,000 Charles Schwab Corp. 980,000
15,000 Travelers Group, Inc. 684,375
----------
6,824,025
- -------------------------------------------------------------------------------
Financial-Thrift--0.2%
5,600 Astoria Financial Corp. 151,900
- -------------------------------------------------------------------------------
Food, Beverage and Tobacco--5.7%
10,000 Anheuser Busch Cos., Inc. 750,000
29,800 Coca Cola Co. 1,456,475
2,500 ConAgra, Inc. 113,437
400 Earthgrains Co. 13,100
29,600 PepsiCo, Inc. 1,047,100
12,100 Philip Morris Cos., Inc. 1,258,400
----------
4,638,512
- -------------------------------------------------------------------------------
Household Products--0.6%
1,700 Procter & Gamble Co. 154,062
5,800 Warner Lambert Co. 319,000
----------
473,062
- -------------------------------------------------------------------------------
Information Processing--3.7%
20,000 Cisco Systems, Inc 1,132,500
15,000 Hewlett Packard Co. 1,494,375
6,000 Sun Microsystems, Inc. 353,250
----------
2,980,125
- -------------------------------------------------------------------------------
See notes to financial statements.
19
<PAGE>
The Guardian Asset Allocation Fund
Schedule of Investments (Continued)
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
Insurance--0.6%
5,000 Jefferson Pilot Corp. $ 258,125
4,500 Sun America, Inc. 254,250
----------
512,375
- -------------------------------------------------------------------------------
Machinery and Equipment--0.3%
3,500 Illinois Tool Works, Inc. 236,688
- -------------------------------------------------------------------------------
Merchandising-Drugs--0.8%
20,000 Walgreen Co. 670,000
- -------------------------------------------------------------------------------
Merchandising-Food--0.3%
7,500 Safeway, Inc. 247,500
- -------------------------------------------------------------------------------
Miscellaneous-Consumer Growth Staples--0.4%
7,000 Omnicom Group 325,500
- -------------------------------------------------------------------------------
Natural Gas-Diversified--0.3%
12,000 Enserch Corp. 261,000
- -------------------------------------------------------------------------------
Oil and Gas Producing--3.1%
21,000 Apache Corp. 690,375
10,000 Tom Brown, Inc. 171,250
20,000 Chieftain International, Inc. 402,500
10,000 Devon Energy Corp. 245,000
2,200 Diamond Offshore Drilling, Inc. 125,950
50,000 Enserch Exploration, Inc. 537,500
16,700 Global Natural Resources, Inc. 273,462
4,000 HS Resources, Inc. 46,500
----------
2,492,537
- -------------------------------------------------------------------------------
Oil-Integrated-Domestic--2.0%
2,600 Amgen, Inc. 140,400
5,000 Amoco Corp. 361,875
5,000 Murphy Oil Corp. 226,875
35,000 Tesoro Petroleum Corp. 402,500
25,000 USX Marathon Group 503,125
----------
1,634,775
- -------------------------------------------------------------------------------
Oil-Integrated-International--2.1%
6,500 Chevron Corp. 383,500
12,500 Exxon Corp. 1,085,938
2,500 Texaco, Inc. 209,687
----------
1,679,125
- -------------------------------------------------------------------------------
Oil Services--1.3%
1,100 Halliburton Co. 61,050
40,000 Nabors Industries, Inc. 650,000
3,700 Schlumberger Ltd. 311,725
----------
1,022,775
- -------------------------------------------------------------------------------
Paper and Forest Products--1.2%
25,000 Rayonier, Inc. 950,000
- -------------------------------------------------------------------------------
Railroads--0.8%
7,576 Burlington Northern
Santa Fe 612,709
- -------------------------------------------------------------------------------
Semiconductor--0.4%
4,200 Intel Corp. 308,438
- -------------------------------------------------------------------------------
Utilities-Communications--5.1%
30,000 AT&T Corp. $1,860,000
3,800 Ameritech Corp. 225,625
5,100 Bellsouth Corp. 216,112
15,000 GTE Corp. 671,250
7,000 Northern Telecom Ltd. 380,625
6,000 Sprint Corp. 252,000
10,000 SBC Communications, Inc. 492,500
2,000 360 Communications Co. 48,000
----------
4,146,112
- -------------------------------------------------------------------------------
Total Common Stocks
(Cost $45,028,870) 52,386,256
- -------------------------------------------------------------------------------
Corporate Bonds--11.0%
Principal
Amount Value
- -------------------------------------------------------------------------------
$500,000 Burlington Northern
Santa Fe Corp.
6.375% due 12/15/05 $463,715
500,000 Ford Motor Credit Mtn.
Bk. Ent. 5.85%
due 3/26/98 496,380
2,100,000 John Deere Capital Corp.
5.31% due 9/5/96 2,079,556
500,000 McDermott, Inc. Mtn.
Bk. Ent. 6.57%
due 4/20/98 496,585
500,000 Metropolitan Life
Insurance Co.
6.30% due 11/01/03 471,540
2,500,000 Mitsubishi International,
Inc. 5.33%
due 8/30/96 2,477,792
2,500,000 Sonoco Products Co. 5.31%
due 9/10/96 2,473,819
- -------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $9,015,379) 8,959,387
- -------------------------------------------------------------------------------
Multi Class Mortgage Pass-Throughs--2.4%
Principal
Amount Value
- -------------------------------------------------------------------------------
$1,000,000 Federal Home Loan Mortgage
Corp., 7% due 3/15/21 $ 957,180
1,000,000 Federal National Mortgage
Assn., 6.25% due 7/25/07 970,310
- -------------------------------------------------------------------------------
Total Multi Class Mortgage
Pass-Throughs
(Cost $1,899,831) 1,927,490
- -------------------------------------------------------------------------------
See notes to financial statements.
20
<PAGE>
The Guardian Asset Allocation Fund
Schedule of Investments (Continued)
U.S. Government Securities--7.7%
Principal
Amount Value
- -------------------------------------------------------------------------------
$3,275,000 U.S. Treasury Bills, 5.07%
due 9/5/96 $3,244,559
500,000 U.S. Treasury Notes, 5.625%
due 10/31/97 497,970
2,000,000 U.S. Treasury Notes, 6.875%
due 8/31/99 2,028,440
500,000 U.S. Treasury Notes, 5.875%
due 11/15/05 471,015
- -------------------------------------------------------------------------------
Total U.S. Government
Securities
(Cost $6,317,646) 6,241,984
- -------------------------------------------------------------------------------
Options--0.4%
Number of
Contracts Value
- -------------------------------------------------------------------------------
136 U.S. Treasury Note Future
6.875%, Expires Sept. 96,
Exercise price $106 $ 289,000
40 U.S. Treasury Bonds Future
5.78%, Expires Sept. 96,
Exercise price $110 60,000
- -------------------------------------------------------------------------------
Total Options
(Cost $317,507) 349,000
- -------------------------------------------------------------------------------
Repurchase Agreement--14.5%
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------------------
$11,774,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $11,779,102, 5.20%,
due 7/1/96 (collateralized by
$12,005,000 U.S. Treasury
Notes, 5.125% due
2/28/98) 7/1/96 $11,774,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $11,774,000) 11,774,000
- -------------------------------------------------------------------------------
Total Investments--100.4%
(Cost $74,353,233) 81,638,068
Payables in Excess of Cash,
Receivables
and Other Assets(0.4%) (339,332)
- -------------------------------------------------------------------------------
Net Assets--100.0% $81,298,736
- -------------------------------------------------------------------------------
See notes to financial statements.
21
<PAGE>
- --------------------------------------------------------------------------------
[ ] The Guardian Baillie Gifford International Fund
Common Stocks--92.2%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Argentina--0.9%
Electric Utilities--0.3%
11,900 Capex SA $ 196,350
Oil and Gas--0.6%
51,233 Perez Companc SA 335,710
----------
532,060
- --------------------------------------------------------------------------------
Austria--0.4%
Business Services--0.3%
2,380 Flughafen Wien AG 163,528
Metals--0.1%
1,100 Boehler Uddeholm 85,291
----------
248,819
- --------------------------------------------------------------------------------
Australia--4.1%
Banks--0.7%
86,000 Australia & New Zealand
Bank Group 406,853
Business Services--0.6%
22,400 Brambles Industries Ltd. 311,224
Forest Products--0.4%
31,961 Amcor Limited 217,259
Metals--0.4%
35,000 WMC Ltd. 250,295
Petroleum Services--1.0%
38,881 Broken Hill Property 536,848
Real Estate--0.5%
19,019 Lend Lease Corp. 291,450
Retail Trade--0.5%
117,633 Woolworths Ltd. 283,798
----------
2,297,727
- --------------------------------------------------------------------------------
Belgium--1.2%
Banks--1.0%
1,600 Generale De Banque 563,551
Metals--0.2%
1,600 Union Miniere 124,211
----------
687,762
- --------------------------------------------------------------------------------
Brazil--0.6%
Broadcasting--0.6%
4,500 Telecomunicados Brasileras 313,313
- --------------------------------------------------------------------------------
Chile--0.4%
Electric Utilities--0.4%
6,300 Enersis SA 195,300
- --------------------------------------------------------------------------------
Czechoslovakia--0.2%
Banks--0.2%
4,700 Komercni Banka AS 126,900
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
France--4.7%
Bank--0.4%
2,100 Societe Generale $ 231,083
Conglomerates--0.5%
2,110 BIC 299,870
Construction Materials--0.4%
1,850 Poliet 198,178
Containers and Glass--0.4%
1,710 Cie De St Gobain 229,059
Leisure Time--0.4%--
2,322 Club Mediterranee 208,112
Oil-Integrated--0.7%
5,550 Elf Aquitaine 408,514
Retail Trade--1.9%
2,910 Castorama Dubois 573,672
1,160 Comptoirs Modernes 523,664
----------
2,672,152
- --------------------------------------------------------------------------------
Germany--7.3%
Air Travel--0.8%
3,245 Lufthansa AG 458,846
Automobile--0.9%
1,410 Volkswagen AG 524,403
Banks--1.3%
14,600 Bayer Hypo/Wech Bank 354,606
7,790 Deutsche Bank AG 368,879
Chemicals--1.9%
1,880 BASF AG 537,849
16,300 Hoechst AG 553,160
Industrial Machinery--0.9%
1,420 Mannesmann AG 491,233
Drugs and Health Care--0.4%
317 GEHE AG 213,071
Footwear--0.5%
3,600 Adidas AG 302,821
Software--0.6%
2,380 SAP AG 352,970
----------
4,157,838
- --------------------------------------------------------------------------------
Hong Kong--5.3%
Banks--0.7%
38,000 Hang Seng Bank 382,906
Conglomerates--1.8%
105,000 Citic Pacific Ltd. 424,569
59,000 Hutchison Whampoa 371,189
27,500 Swire Pacific 235,360
- --------------------------------------------------------------------------------
See notes to financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford International Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Real Estate--2.1%
59,000 Henderson Land Development $ 442,073
44,000 Sun Hung Kai Properties 444,786
134,122 Hong Kong Land Hldg. 301,775
Telephone--0.7%
221,200 Hong Kong Telecommunications 397,204
----------
2,999,862
- --------------------------------------------------------------------------------
Hungary--0.3%
Chemicals--0.3%
2,800 Richter Gedeon Veg. 140,700
- --------------------------------------------------------------------------------
Ireland--0.3%
Construction Materials--0.3%
19,500 CRH 196,121
- --------------------------------------------------------------------------------
Italy--2.4%
Telephone--1.6%
404,000 Telecom Italia MOB 886,491
Textile-Apparel and Production--0.8%?
6700 Gucci Group NV 434,488
----------
1,320,979
- --------------------------------------------------------------------------------
Japan--34.1%
Automobiles--2.3%
4,000 Autobacs Seven Co. 387,693
43,000 Calsonic Corp. 363,297
40,000 Suzuki Motor Corp. 526,677
Business Services--1.0%
9,000 Secom Co. 595,803
Computer Systems--1.9%
36 NTT Data Comm. Systems 1,079,687
Construction and Mining Equipment--1.2%
32,000 Nishimatsu Contruction 351,118
12,000 Tostem Corp. 354,410
Drugs and Health Care--1.1%
16,000 Sankyo Co. 415,489
8,000 Santen Pharmaceutical Co. 186,531
Electrical Equipment--2.3%
54,000 Hitachi Corp. 503,635
38,000 Omron Corp. 809,583
Electronics--2.4%
8,000 Kyocera Corp. 566,909
12,000 Rohm Co. 794,404
Financial Services--1.6%
18,000 Japan Securities Finance 291,318
12,600 Promise Co. 622,137
Industrial Machinery--3.9%
115,000 Mitsubishi Heavy Ind. 1,002,103
61,000 NSK 462,387
9,400 SMC Corp. 728,862
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Insurance--1.4%
59,000 Tokio Marine & Fire Ins. $ 787,638
Investment Companies--1.4%
41,000 Nomura Securities Co. 802,268
Leisure Time--0.6%
1,900 Toho Co. 337,037
Metals-Steel--1.9%
41,000 Hitachi Metals 472,362
198,000 Sumitomo Metal Ind. 608,312
Photography--2.9%
52,000 Canon, Inc. 1,084,076
18,000 Fuji Photo Film Co. 569,469
Real Estate--1.3%
55,000 Mitsubishi Estate 759,384
Retail Trade--3.7%
20,000 Jusco Co. 656,517
28,000 Marui Co. 622,137
90,000 Mitsui & Co. 817,172
Telecommunication--1.6%
103 DDI Corp. 900,361
Tires and Rubber--1.6%
47,000 Bridgestone Corp. 898,185
----------
19,356,961
- --------------------------------------------------------------------------------
Malaysia--3.3%
Conglomerates--0.8%
290,000 Renong Berhad 462,698
Industrial Machinery--0.9%
72,000 United Engineers Berhad 499,338
Leisure Time--0.9%
86,000 Resorts World Berhad 493,005
Telephone--0.7%
48,000 Telekom Malaysia 427,180
----------
1,882,221
- --------------------------------------------------------------------------------
Mexico--0.7%
Food and Beverage--0.5%
5,800 Pan American Beverages, Inc. 259,550
Telephone--0.2%
3,500 Telefonos de Mexico SA 117,250
----------
376,800
- --------------------------------------------------------------------------------
Netherlands--2.8%
Banks--0.8%
9,040 ABN Amro Holdings NV 485,526
Broadcasting--0.5%
2,550 Wolters Kluwer NV 289,912
- --------------------------------------------------------------------------------
See notes to financial statements.
23
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford International Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Publishing--1.0%
34,800 Ver Ned Uitgevers $ 540,721
Support Services--0.5%
6,850 ASM Lithography Hldg. 283,158
----------
1,599,317
- --------------------------------------------------------------------------------
New Zealand--0.7%
Telecommunication--0.7%
97,000 Telecom Corp. of New Zealand 408,421
- --------------------------------------------------------------------------------
Poland--0.3%
Electric Utilities--0.3%
24,000 Elektrim 196,975
- --------------------------------------------------------------------------------
Singapore--2.5%
Air Travel--0.5%
28,000 Singapore Airlines 295,677
Banks--0.6%
27,500 Overseas Chinese Bank 301,488
Food and Beverage--0.5%
27,000 Fraser & Neave 279,376
Industrial Machinery--0.5%
33,000 Keppel Corp. 275,975
Publishing--0.5%
14,200 Singapore Press HD 278,767
----------
1,431,283
- --------------------------------------------------------------------------------
Spain--1.1%
Banks--0.7%
8,800 Banco Santander SA 411,109
Construction Materials--0.4%
10,100 Continente Cent Co. 239,866
----------
650,975
- --------------------------------------------------------------------------------
Sweden--2.0%
Business Services--0.6%
16,400 Securitas AB 344,346
Construction Materials--1.4%
21,500 Atlas Copco AB 401,089
7,000 Incentive AB 374,843
----------
1,120,278
- --------------------------------------------------------------------------------
Switzerland--5.1%
Business Services--0.3%
125 Danzas Holding 130,979
Chemicals--1.8%
840 Ciba Geigy AG 1,024,636
Drugs and Healthcare--1.8%
900 Sandoz AG 1,030,155
Industrial Machinery--0.2%
90 Bobst AG $ 129,939
Insurance--1.0%
960 Winterthur 572,069
----------
2,887,778
- --------------------------------------------------------------------------------
Taiwan--0.5%
Building Construction--0.3%
45,000 China Development 148,801
Plastics--0.1%
38,000 Nan Ya Plastics 83,539
Shipbuilding--0.1%
54,000 Yang Ming Marine 79,666
----------
312,006
- --------------------------------------------------------------------------------
United Kingdom--11.0%
Banks--0.4%
24,000 National Westminster Bk. Co. 228,855
Building Construction--0.2%
15,000 Fine Art Developments 121,137
Business Services--0.9%
18,000 Associated British Ports 77,438
36,000 BAA 260,817
18,000 De La Rue 166,330
Chemicals--0.2%
31,000 Allbright & Wilson 85,697
Conglomerates--1.9%
90,051 BTR 349,819
39,000 Grand Metropolitan 258,627
65,000 Hanson 181,705
16,000 Hays 112,813
13,500 Siebe 191,839
Construction and Mining Equipment--0.1%
20,000 Weir Group 77,031
Drugs and Healthcare--0.8%
33,000 Glaxo Holdings 444,339
Electric Utilities--0.2%
12,066 Yorkshire Electric Group 135,483
Electronics--0.5%
20,000 Electrocomponents 118,497
40,000 Rotork 153,440
Food, Beverage and Tobacco--0.9%
30,000 Devro International 112,285
20,000 Highland Distilleries 114,303
40,000 Iceland Group 95,978
17,500 Reckitt and Colman 183,996
Household Products--0.1%
27,000 Life Sciences International 44,029
- --------------------------------------------------------------------------------
See notes to financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford International Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
Industrial Machinery--0.1%
5,800 Vosper Thorncroft $ 73,412
International Oil--0.8%
50,000 British Petroleum 438,733
Insurance--0.7%
10,000 Britannic Assurance 111,662
44,000 Prudential Corp. 277,434
Leisure Time--0.8%
22,500 Granada Group 301,037
14,000 Vendome Lux Group SA 130,020
Newspapers--0.4%
40,000 Mirror Group PLC 126,417
20,000 Southnews PLC 110,110
Retail--Grocery--0.4%
43,000 Sainsbury (J) 253,098
Retail Trade--0.9%
35,000 Dixons Group 286,453
34,000 Marks & Spencer 248,439
Telephone--0.5%
68,000 Vodafone Group 252,928
Transportation--0.2%
55,000 Firstbus 136,667
-----------
6,260,868
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $44,540,480) 52,373,416
- --------------------------------------------------------------------------------
Preferred Stock--0.2%
Shares Value
- --------------------------------------------------------------------------------
3,985 Companhia Energetica De Minas $113,074
- --------------------------------------------------------------------------------
Total Preferred Stocks
(Cost $109,200) 113,074
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Corporate Bonds--0.8%
Principal
Amount Value
- --------------------------------------------------------------------------------
$400,000 MBL Int'l. Finance, 3%
Exch. Guaranteed Nts.,
due 11/30/02 $ 468,000
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $400,000) 468,000
- --------------------------------------------------------------------------------
Repurchase Agreement--7.1%
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$4,015,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $4,864,107, 4.75%, due
7/1/96 (collateralized by
$4,205,000 U.S. Treasury
Bills, 5.42% due
12/19/96) 07/01/96 $4,015,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $4,015,000) 4,015,000
- --------------------------------------------------------------------------------
Total Investments--100.3%
(Cost $49,064,680) 56,969,490
Payables in Excess of Cash, Receivables
and Other Assets--(0.3%) (182,357)
- --------------------------------------------------------------------------------
Net Assets--100.0% $56,787,133
- --------------------------------------------------------------------------------
See notes to financial statments.
25
<PAGE>
o The Guardian Investment Quality Bond Fund
Asset Backed--21.3%
Principal
Amount Value
- -------------------------------------------------------------------------------
$2,000,000 Advanta Cr. Card Mst. Tr.,
6.05% due 8/1/03 $ 1,943,120
1,000,000 Chemical Mst. Cr. Card Tr.,
5.55% due 9/15/03 953,430
1,000,000 Contimortgage Home Eq.
Loan Tr., 6.85% due 4/15/44 995,620
1,000,000 Firsts Merchant Auto Tr.,
6.7% due 8/15/99 998,600
1,000,000 Green Tree Financial Corp.,
6.35% due 12/15/25 988,120
1,500,000 Green Tree Financial Corp.,
5.85% due 3/15/27 1,440,000
1,500,000 Green Tree Financial Corp.,
6.10% due 4/15/27 1,411,230
1,000,000 Money Store Tr.,
7.55% due 8/15/20 1,008,100
1,000,000 Olympic Automobile Rec. Tr.,
5.95% due 11/15/99 997,500
- -------------------------------------------------------------------------------
Total Asset Backed
(Cost $10,951,086) 10,735,720
- -------------------------------------------------------------------------------
Mortgage Backed--3.9%
Principal
Amount Value
- --------------------------------------------------------------------------------
$500,000 Donaldson, Lufkin, Jenrette
Mortgage Accep. Corp.,
7.67% due 2/12/06 $ 500,150
972,679 Merrill Lynch Mortgage
Invmts., Inc., 6.788%
due 6/25/15 959,451
500,000 Mortgage Capital Fdg.,
7.9% due 2/15/06 505,625
- -------------------------------------------------------------------------------
Total Mortgage Backed
(Cost $1,961,700) 1,965,226
- -------------------------------------------------------------------------------
Corporate Bonds--22.4%
Principal
Amount Value
- -------------------------------------------------------------------------------
Drugs and Hospital--1.9%
$1,000,000 Rhone Poulenc SA, 6.75%
due 10/15/99 $ 986,440
- -------------------------------------------------------------------------------
Electric Utilities--4.1%
2,000,000 Tenaga Nasional Berhad,
7.875% due 6/15/04 2,068,300
- -------------------------------------------------------------------------------
Financial-Banks--3.9%
2,000,000 Comerica, Inc.,
7.25% due 8/1/07 1,968,840
- -------------------------------------------------------------------------------
Financial-Miscellaneous--4.9%
1,000,000 Ford Motor Cr. Co.,
7.75% due 11/15/02 1,032,900
1,500,000 Salomon, Inc.,
6.75% due 2/15/03 1,435,890
-----------
2,468,790
- -------------------------------------------------------------------------------
Insurance--2.8%
1,500,000 Metropolitan Life Ins. Co.,
6.3% due 11/1/03 1,414,620
- -------------------------------------------------------------------------------
Machinery and Industrial Equipment--1.0%
500,000 McDermott International, Inc.,
6.57% due 4/20/98 496,585
- -------------------------------------------------------------------------------
Paper and Forest Products--1.0%
500,000 Fletcher Challenge Cap. CDA II,
7.75% due 6/20/06 507,040
- -------------------------------------------------------------------------------
Railroads--1.8%
1,000,000 Burlington Northern Santa Fe
Corp., 6.375% due 12/15/05 927,430
- -------------------------------------------------------------------------------
Telecommunications--1.0%
500,000 TCI Communications,
7.25% due 6/15/99 501,165
- -------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $11,856,984) 11,339,210
- -------------------------------------------------------------------------------
See notes to financial statements.
26
<PAGE>
The Guardian Investment Quality Bond Fund
Schedule of Investments (Continued)
Mortgage Pass-Throughs--21.1%
Principal
Amount Value
- --------------------------------------------------------------------------------
$500,000 FNMA TBA
7% due 1/1/99 $ 492,969
1,997,375 FNMA Pool #337592
7% due 2/1/26 1,922,154
394,340 FNMA Pool #300080
8% due 5/1/25 397,621
462,367 FNMA Pool #311434
7% due 5/1/26 444,954
544,953 FNMA Pool #324501
7% due 5/1/26 524,430
2,020,000 FNMA Pool #346053
7% due 6/1/26 1,994,265
605,660 FNMA Pool #348929
8% due 6/1/26 610,699
270,461 GNMA Pool #419796
7% due 9/15/10 268,038
1,005,302 GNMA Pool #365459
7.5% due 10/15/25 991,751
1,009,313 GNMA Pool #398668
7.5% due 5/15/26 995,707
1,989,700 GNMA Pool #424744
8% due 6/15/26 2,006,254
- -------------------------------------------------------------------------------
Total Mortgage Pass-Throughs
(Cost $10,832,381) 10,648,842
- -------------------------------------------------------------------------------
Multi Class Mortgage Pass-Throughs--15.7%
Principal
Amount Value
- -------------------------------------------------------------------------------
$1,000,000 Federal Home Loan Mortgage
Corp., 7% due 3/15/21 $957,180
2,000,000 Federal Home Loan Mortgage
Corp., 6.5% due 5/15/19 1,889,360
807,451 Federal Home Loan Mortgage
Corp., 4% due 8/15/01 798,109
1,495,471 GE Capital Mortgage Svcs.,
Inc., 7% due 3/25/26 1,389,891
1,000,000 Prudential Home Mortgage Secs.
Co., 6.7% due 3/25/08 997,500
2,000,000 Securitized Asset Sales, Inc.,
7.41% due 4/25/24 1,886,400
- -------------------------------------------------------------------------------
Total Multi Class
Mortgage Pass-Throughs
(Cost $7,960,391) 7,918,440
- -------------------------------------------------------------------------------
U.S. Government and Agencies--12.0%
Principal
Amount Value
- -------------------------------------------------------------------------------
$1,000,000 U.S. Treasury Bonds, 6.875%
due 8/15/25 $ 989,840
5,000,000 U.S. Treasury Notes, 6.875%
due 8/31/99 5,071,100
- -------------------------------------------------------------------------------
Total U.S. Government and Agencies
(Cost $6,333,715) 6,060,940
- -------------------------------------------------------------------------------
Yankee Bonds--1.9%
Principal
Amount Value
- -------------------------------------------------------------------------------
$1,000,000 Hydro Quebec Ser. "IU",
7.5% due 4/1/16 $974,170
- -------------------------------------------------------------------------------
Total Yankee Bonds
(Cost $991,527) 974,170
- -------------------------------------------------------------------------------
Repurchase Agreement--0.7%
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------------------
$330,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $330,143, 5.20%, due
7/1/96 (collateralized by
$340,000 U.S. Treasury
Notes, 5.125% due
2/28/98) 7/1/96 $330,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $330,000) 330,000
- -------------------------------------------------------------------------------
Total Investments--99.0%
(Cost $51,217,784) 49,972,548
Cash, Receivables and Other Assets
Less Payables-1.0% 498,904
- -------------------------------------------------------------------------------
Net Assets--100.0% $50,471,452
- -------------------------------------------------------------------------------
See notes to financial statements.
27
<PAGE>
o The Guardian Tax-Exempt Fund
- --------------------------------------------------------------------------------
Municipal Bonds -- 100.7%
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
Alabama--2.8%
$500,000 North Alabama
Environmental Imprvmt.
Auth. PCR, Variable Rate,
3.95% due 12/1/00 P1 $ 500,000
- --------------------------------------------------------------------------------
Arizona--3.3%
530,000 Pima County, AZ.
School District No. 16
Catalina Foothills, 6.50%
due 7/1/10 Aaa/AAA 585,401
- --------------------------------------------------------------------------------
California--3.9%
595,000 California St. G.O.,
7.00% due 10/1/10 A1/A 681,382
- --------------------------------------------------------------------------------
Delaware--2.8%
500,000 Wilmington, DE Hospital
Revenue, Variable Rate,
3.65% due 7/1/11 VNIG1/\\A1+ 500,000
- --------------------------------------------------------------------------------
Florida--5.5%
465,000 Florida St. Board of
Educ. Cap. Outlay,
5.875% due 6/1/12 Aa/AA 471,254
500,000 Florida St. Division Board
of Fin. Dept. Series "A",
5.50% due 7/1/12 Aaa/AAA 493,715
---------
964,969
- --------------------------------------------------------------------------------
Georgia--3.0%
500,000 Georgia St. G.O.
Series B, 5.95%
due 3/1/07 Aaa/Aa 532,450
- --------------------------------------------------------------------------------
Kentucky--2.9%
500,000 Kentucky ST. Turnpike
Auth. Econ. Dev., 5.50%
due 7/1/09 Aaa/AAA 504,395
- --------------------------------------------------------------------------------
Massachusetts--7.5%
800,000 MA Bay Trans. Auth.
Gen. Trans. Sys.,
Series B, 5.80%
due 3/01/11 A1/A+ 807,648
500,000 MA State Cons. Ln.
Ser. A, 5.75% due
2/1/15 Aaa/AAA 500,165
---------
1,307,813
- --------------------------------------------------------------------------------
Nebraska--3.0%
$500,000 Omaha, NE Pub. Pwr.
Dist. Elec. Rev.,
Series "B", 6.05%
due 2/1/08 Aa/AA 534,600
- --------------------------------------------------------------------------------
New Jersey--6.4%
500,000 NJ State Trans. System
Fd. Auth. Series "A",
6.5% due 6/15/05 Aaa/AAA 550,795
500,000 NJ Waste and Water
Treatment Ref. Ser. "C",
7% due 5/15/08 Aaa/AAA 572,995
---------
1,123,790
- --------------------------------------------------------------------------------
New York--12.3%
750,000 New York City Mun.
Water Fin. Auth.,
Rev. Series A,
5.875% due 6/15/13 Aaa/AAA 769,477
500,000 New York State G.O.
5.875% due 3/15/15 A/A- 502,910
850,000 Triborough Bridge &
Tunnel Auth. Rev.
Bond Series Y,
6.00% due 1/01/12 Aa/A+ 887,171
---------
2,159,558
- --------------------------------------------------------------------------------
Ohio--7.1%
300,000 Cleveland, OH Waterworks
Rev. Series "G", 5.50%
due 1/1/08 Aaa/AAA 303,957
500,000 Columbus, OH Water
System Rev., 6.10%
due 11/1/03 A1/AA 536,440
400,000 Ohio St. Water Dev. Auth.
Rev. Series "B", Variable
Rate, 3.60% due 11/1/15 NR/AA+ 400,000
---------
1,240,397
- --------------------------------------------------------------------------------
Oklahoma--1.7%
270,000 Grand River Dam
Auth. Rev., 6.25%
due 6/1/11 Aaa/AAA 291,425
- --------------------------------------------------------------------------------
Pennsylvania--3.0%
500,000 Pennsylvania St.
Tpk. Comm. Rev.,
Series N, 6.25%
due 12/1/11 Aaa/AAA 519,650
- --------------------------------------------------------------------------------
* Unaudited See notes to financial statements.
28
<PAGE>
The Guardian Tax-Exempt Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
Puerto Rico--5.7%
$470,000 Puerto Rico Commonwealth
MBIA IBC, 5.50%
due 7/1/08 Aaa/AAA $ 478,479
500,000 Puerto Rico Electric Pwr.
Auth. Series "W", 6.00%
due 7/1/01 Aaa/AAA 530,190
-----------
1,008,669
- --------------------------------------------------------------------------------
South Carolina--3.0%
500,000 South Carolina St. Cap.
Imprvmt. Series "B",
5.75% due 8/1/00 Aaa/AAA 523,760
- --------------------------------------------------------------------------------
Texas--19.6%
500,000 Grapevine, TX Indpdt. Sch.,
8.25% due 6/15/08 Aaa/AAA 626,140
500,000 Harris County, TX
Toll and Sub. Lien
Series "A", 6.50%
due 8/15/15 Aaa/AAA 527,860
500,000 Houston, TX Ref.
Series "C", 6.00%
due 4/1/04 Aa/AA- 531,950
500,000 San Antonio, TX Electric
and Gas Rev., 5.75%
due 2/1/11 Aa1/AA 502,830
625,000 Texas St. Public Fin.
Auth. Series "A",
5.75% due 10/1/10 Aa/AA 635,406
555,000 Texas St. Water Dev.
Auth. Series "A",
6.50% due 8/1/05 Aa/AA 613,275
-----------
3,437,461
- --------------------------------------------------------------------------------
Virginia--4.1%
$200,000 Peninsula Ports Auth.
Rev. Series "C", Variable
Rate 3.60% due 7/1/16 Aa2/NR $ 200,000
500,000 Virginia St. Rev.,
5.40% due 6/1/00 Aaa/AAA 516,280
-----------
716,280
- --------------------------------------------------------------------------------
Washington--3.1%
500,000 King Cnty., WA Sch.
Dist. No. 401, 7.15%
due 12/1/03 NR/AAA 541,850
- --------------------------------------------------------------------------------
Total Municipal Bonds
(Cost $17,586,350) 17,673,850
- --------------------------------------------------------------------------------
Total Investments--100.7%
(Cost $17,586,350) 17,673,850
Payables in Excess of Cash, Receivables
and Other Assets--(0.7%) (121,736)
- --------------------------------------------------------------------------------
Net Assets--100.0% $17,552,114
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Unaudited
29
<PAGE>
- --------------------------------------------------------------------------------
o The Guardian Cash Management Fund
- --------------------------------------------------------------------------------
Commercial Paper--93.1%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Financial--10.7%
Bank Holding Companies--7.1%
$2,800,000 Commerzbank U.S. Fin.,
5.31% 07/08/96 $2,797,109
2,800,000 J.P. Morgan & Co., Inc.,
5.34% 08/09/96 2,783,802
----------
5,580,911
- --------------------------------------------------------------------------------
Finance Companies--3.6%
2,800,000 Associates Corp. of N.A.,
5.34% 07/15/96 2,794,185
- --------------------------------------------------------------------------------
Total Financial 8,375,096
- --------------------------------------------------------------------------------
Industrial--82.4%
Aerospace and Defense--3.6%
2,800,000 Raytheon Co.,
5.32% 07/08/96 2,797,104
- --------------------------------------------------------------------------------
Automotive--7.1%
2,800,000 Ford Motor Credit
Co., 5.32% 08/01/96 2,787,173
2,800,000 Toyota Motor Credit
Co., 5.30% 07/10/96 2,796,290
----------
5,583,463
- --------------------------------------------------------------------------------
Chemicals--3.6%
2,800,000 Monsanto Co.,
5.30% 07/11/96 2,795,878
- --------------------------------------------------------------------------------
Conglomerates--3.6%
2,800,000 General Electric Cap.
Corp., 5.35% 07/01/96 2,800,000
- --------------------------------------------------------------------------------
Drugs and Hospitals--7.1%
2,800,000 Abbott Laboratories,
5.31% 07/22/96 2,791,327
2,800,000 Smithkline Beecham
Corp., 5.34% 07/24/96 2,790,447
----------
5,581,774
- --------------------------------------------------------------------------------
Electric Utilities--3.6%
2,800,000 Duke Power Co.,
5.31% 07/12/96 2,795,457
- --------------------------------------------------------------------------------
Electronic Instruments--3.5%
2,800,000 Siemens Corp.,
5.35% 08/07/96 2,784,604
- --------------------------------------------------------------------------------
Food and Beverage--17.9%
$2,800,000 Cargill, Inc.,
5.50% 07/01/96 $ 2,800,000
2,800,000 H.J. Heinz Co.,
5.37% 07/30/96 2,787,888
2,800,000 Hershey Foods
Corp., 5.33% 07/09/96 2,796,684
2,800,000 Nestle Capital Corp.,
5.55% 07/01/96 2,800,000
2,800,000 PepsiCo, Inc.,
5.35% 07/23/96 2,790,846
-----------
13,975,418
- --------------------------------------------------------------------------------
Household Products--3.6%
2,800,000 Clorox Co.,
5.27% 07/02/96 2,799,590
- --------------------------------------------------------------------------------
Insurance--3.6%
2,800,000 American General Fin.
Corp., 5.30% 07/12/96 2,795,466
- --------------------------------------------------------------------------------
Machinery and Industrial Equipment--3.6%
2,800,000 John Deere Capital
Corp., 5.34% 07/18/96 2,792,939
- --------------------------------------------------------------------------------
Oil-Integrated-Domestic--3.5%
2,800,000 Chevron Oil Finance
Co., 5.35% 07/26/96 2,789,597
- --------------------------------------------------------------------------------
Oil Services--3.6%
2,800,000 Colonial Pipeline
Co., 5.34% 07/17/96 2,793,355
- --------------------------------------------------------------------------------
Publishing-News--3.5%
2,800,000 Gannett, Inc.,
5.33% 07/19/96 2,792,538
- --------------------------------------------------------------------------------
Telecommunications--11.0%
2,800,000 Bell Atlantic Financial
Svcs., 5.31% 07/03/96 2,799,174
3,000,000 Bellsouth Telecomm.
Inc., 5.35% 07/02/96 2,999,554
2,800,000 U.S. West Comm.
Inc., 5.35% 07/25/96 2,790,012
-----------
8,588,740
- --------------------------------------------------------------------------------
Total Industrial 64,465,923
- --------------------------------------------------------------------------------
Total Commercial Paper
(Cost $72,841,019) $72,841,019
- --------------------------------------------------------------------------------
See notes to financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Cash Management Fund
Schedule of Investments (Continued)
Repurchase Agreement--6.2%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$4,862,000 State Street Bank & Trust
repurchase agreement,
dated 6/28/96, maturity
value $4,864,107, 5.20%, due
7/1/96 (collateralized by
$4,960,000 U.S. Treasury
Notes, 5.125% due
2/28/98) 07/01/96 $ 4,862,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $4,862,000) 4,862,000
- --------------------------------------------------------------------------------
Total Investments--99.3%
(Cost $77,703,019) 77,703,019
Cash, Receivables and Other Assets
Less Payables--0.7% 565,335
- --------------------------------------------------------------------------------
Net Assets--100.0% $78,268,354
- --------------------------------------------------------------------------------
See notes to financial statements.
31
<PAGE>
Financial Statements
o The Park Avenue Portfolio
<TABLE>
Statements of Assets and Liabilities
June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford
Fund Allocation International
Fund Fund
--------------------------------------------------------
ASSETS
<S> <C> <C> <C>
Investments, at identified cost* ..................................... $ 916,372,735 $74,353,233 $49,064,680
========================================================
Investments, at market ............................................... 1,088,358,130 69,864,068 52,954,490
Repurchase agreements ................................................ 76,070,000 11,774,000 4,015,000
--------------------------------------------------------
Total Investments ................................................ 1,164,428,130 81,638,068 56,969,490
Cash ................................................................. 454 461 20,103
Foreign currency (Cost $781,586) ..................................... -- -- 782,976
Receivable for securities sold ....................................... 2,249,026 -- --
Receivable for fund shares sold ...................................... 2,568,793 56,840 69,934
Dividends receivable ................................................. 1,470,988 71,357 105,734
Interest receivable .................................................. 32,964 90,068 2,623
Receivable for open forward foreign currency sold .................... -- -- 394
Receivable for futures margin ........................................ -- 39,375 --
Deferred organization expenses -- Note 6 ............................. -- 5,957 6,094
Foreign tax receivable ............................................... -- -- 86,143
Other Assets ......................................................... 4,539 330 209
--------------------------------------------------------
Total Assets ..................................................... 1,170,754,894 81,902,456 58,043,700
--------------------------------------------------------
LIABILITIES
Payable for securities purchased ..................................... 3,042,940 213,180 957,210
Distributions payable ................................................ 1,790,650 97,538 --
Payable for fund shares redeemed ..................................... 448,722 21,028 6,772
Accrued expenses ..................................................... 374,554 53,341 69,196
Payable for open forward currency contracts -- Note 4 ................ -- -- --
Foreign tax withholding .............................................. -- -- 13,746
Due to affiliates -- Note 2 .......................................... 2,068,226 218,633 209,643
--------------------------------------------------------
Total Liabilities ................................................ 7,725,092 603,720 1,256,567
--------------------------------------------------------
Net Assets ....................................................... $1,163,029,802 $81,298,736 $56,787,133
========================================================
32
<CAPTION>
The Guardian The Guardian The Guardian
Investment Tax-Exempt Cash
Quality Fund Management
Bond Fund Fund
-----------------------------------------------------
ASSETS
<S> <C> <C> <C>
Investments, at identified cost* ..................................... $51,217,784 $17,586,350 $77,703,019
=====================================================
Investments, at market ............................................... 49,642,548 17,673,850 72,841,019
Repurchase agreements ................................................ 330,000 -- 4,862,000
-----------------------------------------------------
Total Investments ................................................ 49,972,548 17,673,850 77,703,019
Cash ................................................................. 249,365 173,068 86,340
Foreign currency (Cost $781,586) ..................................... -- -- --
Receivable for securities sold ....................................... 1,445,829 -- --
Receivable for fund shares sold ...................................... 33,757 193 866,657
Dividends receivable ................................................. -- -- --
Interest receivable .................................................. 467,911 268,554 2,107
Receivable for open forward foreign currency sold .................... -- -- --
Receivable for futures margin ........................................ -- -- --
Deferred organization expenses -- Note 6 ............................. 5,957 5,957 --
Foreign tax receivable ............................................... -- -- --
Other Assets ......................................................... 257 82 351
-----------------------------------------------------
Total Assets ..................................................... 52,175,624 18,121,704 78,658,474
-----------------------------------------------------
LIABILITIES
Payable for securities purchased ..................................... 1,509,590 507,469 --
Distributions payable ................................................ 16,458 7,976 6,425
Payable for fund shares redeemed ..................................... 53,646 -- 146,926
Accrued expenses ..................................................... 988 -- 57,872
Payable for open forward currency contracts -- Note 4 ................ -- -- --
Foreign tax withholding .............................................. -- -- --
Due to affiliates -- Note 2 .......................................... 123,490 54,145 178,897
-----------------------------------------------------
Total Liabilities ................................................ 1,704,172 569,590 390,120
-----------------------------------------------------
Net Assets ....................................................... $50,471,452 $17,552,114 $78,268,354
=====================================================
* Includes repurchase agreements.
See notes to financial statements.
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
o The Park Avenue Portfolio
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (continued)
- --------------------------------------------------------------------------------
June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford
Fund Allocation International
Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMPONENTS OF NET ASSETS
Capital Stock
Class A............................................................... $ 319,981 $ 64,904 $ 37,072
Class B............................................................... 1,208 1,574 1,218
Paid-in capital......................................................... 840,992,960 71,797,782 47,769,897
Undistributed net investment income..................................... 952,146 128,184 52,862
Accumulated net realized gain/(loss) on investments
and foreign currency related transactions............................. 72,708,112 2,031,854 1,020,408
Net unrealized appreciation/(depreciation) of investments
and foreign currency related transactions............................. 248,055,395 7,274,437 7,905,676
-------------------------------------------------------
Net Assets........................................................ $1,163,029,802 $81,298,736 $56,787,133
=======================================================
NET ASSETS:
Class A............................................................... $1,158,657,331 $79,365,583 $54,987,128
Class B............................................................... $ 4,372,471 $ 1,933,153 $ 1,800,005
Shares of beneficial interest of $0.01 par value outstanding
(unlimited number of shares authorized);
Class A............................................................... 31,997,970 6,490,257 3,707,064
Class B............................................................... 120,765 157,373 121,807
Net Asset Value Per Share
Class A............................................................... $36.21 $12.23 $14.83
Class B............................................................... $36.21 $12.28 $14.78
Maximum Offering Price Per Share
Class A Only (Net Asset Value x 104.71%)*............................. $37.92 $12.81 $15.53
</TABLE>
* Based on sale of less than $100,000. On sales of $100,000 or
more, the offering price is reduced.
** No-load fund.
See notes to financial statements.
34
<PAGE>
<TABLE>
<CAPTION>
The Guardian The Guardian The Guardian
Investment Tax-Exempt Cash
Quality Fund Management
Bond Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMPONENTS OF NET ASSETS
Capital Stock
Class A............................................................... $ 52,896 $ 18,754 $ 769,221
Class B............................................................... -- -- 13,463
Paid-in capital......................................................... 52,007,986 18,798,119 77,485,670
Undistributed net investment income..................................... -- -- --
Accumulated net realized gain/(loss) on investments
and foreign currency related transactions............................. (344,194) (1,352,259) --
Net unrealized appreciation/(depreciation) of investments
and foreign currency related transactions............................. (1,245,236) 87,500 --
---------------------------------------------------
Net Assets........................................................ $50,471,452 $17,552,114 $78,268,354
===================================================
NET ASSETS:
Class A............................................................... $50,471,452 $17,552,114 $76,922,028
Class B............................................................... N/A N/A $ 1,346,326
Shares of beneficial interest of $0.01 par value outstanding
(unlimited number of shares authorized);
Class A............................................................... 5,298,266 1,875,439 76,922,028
Class B............................................................... N/A N/A 1,346,326
Net Asset Value Per Share
Class A............................................................... $9.53 $9.36 $1.00
Class B............................................................... N/A N/A N/A
Maximum Offering Price Per Share
Class A Only (Net Asset Value x 104.71%)*............................. $9.98 $9.80 N/A**
</TABLE>
* Based on sale of less than $100,000. On sales of $100,000 or
more, the offering price is reduced.
** No-load fund.
35
<PAGE>
o The Park Avenue Portfolio
<TABLE>
Statements of Operations
For the Six Months Ended June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford
Fund Allocation International
Fund Fund
-----------------------------------------------------
INVESTMENT INCOME
Income:
<S> <C> <C> <C>
Dividends ................................................................ $ 8,340,273 $ 428,629 $ 638,858
Interest ................................................................. 1,904,899 759,969 46,648
Other Income ............................................................. 44,874 -- --
-----------------------------------------------------
10,290,046 1,188,598 685,506
Less: Foreign tax withheld ............................................... 17,440 247 76,259
-----------------------------------------------------
Total Income ....................................................... 10,272,606 1,188,351 609,247
-----------------------------------------------------
Expenses:
Investment advisory fees -- Note 2 ....................................... 2,652,775 243,437 196,614
Transfer agent fees ...................................................... 671,596 64,794 54,021
12b-1 fees -- Note 3 ..................................................... 516,171 68,369 40,832
Administrative fees -- Note 2 ............................................ 227,685 33,001 22,549
Custodian fees ........................................................... 128,329 34,288 70,624
Printing expense ......................................................... 69,788 6,514 6,583
Registration fees ........................................................ 38,977 9,368 8,580
Audit fees ............................................................... 10,250 8,500 10,500
Trustees fees -- Note 2 .................................................. 6,900 6,900 6,900
Insurance expense ........................................................ 4,488 328 206
Legal fees ............................................................... 2,126 2,126 2,126
Other .................................................................... 352 352 352
Deferred organization expense -- Note 6 .................................. -- 1,678 1,614
-----------------------------------------------------
Total Expenses ..................................................... 4,329,437 479,655 421,501
Less: Expenses assumed by investment adviser -- Note 2 ................... -- -- --
-----------------------------------------------------
Expenses Net of Reimbursement ...................................... 4,329,437 479,655 421,501
-----------------------------------------------------
Net Investment Income ...................................................... 5,943,169 708,696 187,746
-----------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND CURRENCIES --
NOTE 4
Net realized gain/(loss) on investments -- Note 1 .......................... 73,047,108 2,120,410 735,316
Net realized gain on foreign currencies -- Note 1 -- -- 251,318
Net change in unrealized appreciation/(depreciation) of investments --
Note 4 ................................................................... 29,126,959 2,038,153 3,080,386
Net change in unrealized appreciation from translation of assets and
liabilities in foreign currencies -- Note 4 .............................. -- -- 88,307
-----------------------------------------------------
Net Realized and Unrealized Loss on Investments and Currencies ............. 102,174,067 4,158,563 4,155,327
-----------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........ $108,117,236 $4,867,259 $4,343,073
=====================================================
36
<CAPTION>
The Guardian The Guardian The Guardian
Investment Tax-Exempt Cash
Quality Fund Management
Bond Fund Fund
--------------------------------------------------
INVESTMENT INCOME
Income:
<S> <C> <C> <C>
Dividends ................................................................ $ -- $ -- $ --
Interest ................................................................. 1,677,299 437,110 1,985,324
Other Income ............................................................. -- -- --
--------------------------------------------------
1,677,299 437,110 1,985,324
Less: Foreign tax withheld ............................................... -- -- --
--------------------------------------------------
Total Income ....................................................... 1,677,299 437,110 1,985,324
--------------------------------------------------
Expenses:
Investment advisory fees -- Note 2 ....................................... 131,780 42,719 182,916
Transfer agent fees ...................................................... 40,405 21,296 110,425
12b-1 fees -- Note 3 ..................................................... 44,517 10,577 61,496
Administrative fees -- Note 2 ............................................ 21,373 7,067 31,723
Custodian fees ........................................................... 25,506 15,854 24,399
Printing expense ......................................................... 3,722 931 6,514
Registration fees ........................................................ 8,803 8,311 13,435
Audit fees ............................................................... 8,750 8,500 8,500
Trustees fees -- Note 2 .................................................. 6,900 6,900 6,900
Insurance expense ........................................................ 255 80 351
Legal fees ............................................................... 2,126 2,126 2,126
Other .................................................................... 352 352 352
Deferred organization expense -- Note 6 .................................. 1,678 1,678 --
--------------------------------------------------
Total Expenses ..................................................... 296,167 126,391 449,137
Less: Expenses assumed by investment adviser -- Note 2 ................... 98,497 62,312 87,310
--------------------------------------------------
Expenses Net of Reimbursement ...................................... 197,670 64,079 361,827
--------------------------------------------------
Net Investment Income ...................................................... 1,479,629 373,031 1,623,497
--------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND CURRENCIES --
NOTE 4
Net realized gain/(loss) on investments -- Note 1 .......................... (344,193) (146,134) --
Net realized gain on foreign currencies -- Note 1 .......................... -- -- --
Net change in unrealized appreciation/(depreciation) of investments --
Note 4 ................................................................... (2,283,770) (449,935) --
Net change in unrealized appreciation from translation of assets and
liabilities in foreign currencies -- Note 4 .............................. -- -- --
--------------------------------------------------
Net Realized and Unrealized Loss on Investments and Currencies ............. (2,627,963) (596,069) --
--------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........ $(1,148,334) $(223,038) $1,623,497
==================================================
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
o The Park Avenue Portfolio
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Guardian The Guardian
Park Avenue Asset
Fund Allocation
Fund
--------------------------- ---------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, December 31, June 30, December 31,
1996 1995 1996 1995
(Unaudited) (Audited) (Unaudited) (Audited)
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income............................... $ 5,943,169 $ 8,735,936 $ 708,696 $ 1,235,786
Net realized gain/(loss) on investments and
foreign currency related transactions.............. 73,047,108 84,973,348 2,120,410 7,181,242
Net change in unrealized appreciation/
(depreciation) of investments and foreign currency
related transactions............................... 29,126,959 138,277,500 2,038,153 4,938,809
-------------------------------------------------------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations........................ 108,117,236 231,986,784 4,867,259 13,355,837
-------------------------------------------------------------
Distribution to Shareholders:
Net investment income:
Class A............................................ (4,797,232) (8,718,311) (580,510) (1,226,150)
Class B............................................ -- -- -- --
Distributions in excess of net investment income
Class A............................................ -- -- -- --
Class B............................................ -- -- -- --
Net realized gain on investments and foreign
currency related transactions:
Class A............................................ (38,145,342) (48,212,589) (4,057,141) (1,870,130)
Class B............................................ (114,469) -- (98,542) --
-------------- ------------ ----------- -----------
Total Distributions to Shareholders............... (43,057,043) (56,930,900) (4,736,193) (3,096,280)
-------------------------------------------------------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital
share transactions-Note 7
Class A............................................ 121,247,320 156,301,684 8,562,005 5,456,777
Class B............................................ 4,447,694 -- 2,014,337 --
-------------------------------------------------------------
125,695,014 156,301,684 10,576,342 5,456,777
-------------------------------------------------------------
Net Increase/(Decrease) in Net Assets................ 190,755,214 331,357,568 10,707,408 15,716,334
NET ASSETS:
Beginning of period.................................. 972,274,595 640,917,027 70,591,328 54,874,994
-------------------------------------------------------------
End of period*....................................... $1,163,029,802 $972,274,595 $81,298,736 $70,591,328
=============================================================
* Includes undistributed net investment income of..... $ 952,146 $ -- $ 128,184 $ --
See notes to financial statements.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
The Guardian The Guardian
Baillie Gifford Investment
International Quality
Fund Bond Fund
--------------------------- ----------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, December 31, June 30, December 31,
1996 1995 1996 1995
(Unaudited) (Audited) (Unaudited) (Audited)
----------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income............................... $ 187,746 $ 96,199 $ 1,479,629 $ 3,120,590
Net realized gain/(loss) on investments and
foreign currency related transactions.............. 986,634 2,029,619 (344,193) 1,517,768
Net change in unrealized appreciation/
(depreciation) of investments and foreign currency
related transactions............................... 3,168,693 2,580,019 (2,283,770) 3,094,239
---------------------------------------------------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations........................ 4,343,073 4,705,837 (1,148,334) 7,732,597
---------------------------------------------------------
Distribution to Shareholders:
Net investment income:
Class A............................................ -- (96,199) (1,479,629) (3,120,590)
Class B............................................ -- -- -- --
Distributions in excess of net investment income
Class A............................................ -- (743,480) -- --
Class B............................................ -- -- -- --
Net realized gain on investments and foreign
currency related transactions:
Class A............................................ -- (1,895,322) -- --
Class B............................................ -- -- -- --
---------------------------------------------------------
Total Distributions to Shareholders............... -- (2,735,001) (1,479,629) (3,120,590)
---------------------------------------------------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital
share transactions-Note 7
Class A............................................ 6,116,782 5,032,799 (606,914) 5,607,609
Class B............................................ 1,781,514 -- -- --
---------------------------------------------------------
7,898,296 5,032,799 (606,914) 5,607,609
---------------------------------------------------------
Net Increase/(Decrease) in Net Assets................ 12,241,369 7,003,635 (3,234,877) 10,219,616
NET ASSETS:
Beginning of period.................................. 44,545,764 37,542,129 53,706,330 43,486,714
---------------------------------------------------------
End of period*....................................... $56,787,133 $44,545,764 $50,471,453 $53,706,330
=========================================================
* Includes undistributed net investment income of..... $ 52,862 $ (134,884) $ -- $ --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The Guardian The Guardian
Tax-Exempt Cash
Fund Management
Fund
--------------------------- ---------------------------
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, December 31, June 30, December 31,
1996 1995 1996 1995
(Unaudited) (Audited) (Unaudited) (Audited)
---------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income............................... $ 373,031 $ 778,854 $ 1,623,497 $ 3,395,963
Net realized gain/(loss) on investments and
foreign currency related transactions.............. (146,134) (208,582) -- --
Net change in unrealized appreciation/
(depreciation) of investments and foreign currency
related transactions............................... (449,935) 1,687,682 -- --
---------------------------------------------------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations........................ (223,038) 2,257,954 1,623,497 3,395,963
---------------------------------------------------------
Distribution to Shareholders:
Net investment income:
Class A............................................ (373,031) (778,854) (1,623,497) (3,395,963)
Class B............................................ -- -- -- --
Distributions in excess of net investment income
Class A............................................ -- -- -- --
Class B............................................ -- -- -- --
Net realized gain on investments and foreign
currency related transactions:
Class A............................................ -- -- -- --
Class B............................................ -- -- -- --
---------------------------------------------------------
Total Distributions to Shareholders............... (373,031) (778,854) (1,623,497) (3,395,963)
---------------------------------------------------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital
share transactions-Note 7
Class A............................................ 646,934 55,107 7,009,020 13,182,759
Class B............................................ -- -- 1,346,326 --
---------------------------------------------------------
646,934 55,107 8,355,346 13,182,759
---------------------------------------------------------
Net Increase/(Decrease) in Net Assets................ 50,865 1,534,207 8,355,346 13,182,759
NET ASSETS:
Beginning of period.................................. 17,501,249 15,967,042 69,913,008 56,730,249
---------------------------------------------------------
End of period*....................................... $17,552,114 $17,501,249 $78,268,354 $69,913,008
=========================================================
* Includes undistributed net investment income of..... $ -- $ -- $ -- $ --
</TABLE>
39
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO
FINANCIAL STATEMENTS
June 30, 1996 (Unaudited)
The Park Avenue Portfolio
o The Guardian Park Avenue Fund
o The Guardian Asset Allocation Fund
o The Guardian Baillie Gifford International Fund
o The Guardian Investment Quality Bond Fund
o The Guardian Tax-Exempt Fund
o 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".
GPAF, GAAF, GBGIF and GCMF (the Funds) offer two classes of shares. All
shares existing prior to May 1, 1996, were classified as Class A shares. Class A
shares are sold with an initial sales charge of up to 4.50% and a continuing
administrative fee of up to .25% on an annual basis. Class B shares are sold
without an initial sales charge but are subject to a distribution fee of .75%
and an administrative fee of up to .25% on an annual basis, and a contingent
deferred sales load (CDSL) of 4% imposed on certain redemptions. The two classes
of shares for each fund represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and certain class
expenses, and has exclusive voting rights with respect to any matter to which a
separate vote of any class is required.
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.
40
<PAGE>
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
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 investments, 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.
All income, expenses (other than class-specific expenses) and realized and
unrealized gains or losses are allocated daily to each class of shares based
upon the relative value of shares of each class. Class-specific expenses which
include distribution and service fees and any other items that are specifically
attributed to a particular class, are charged directly to such class. For the
six months ended June 30, 1996, distribution, service and transfer agent fees
were the only class-specific expenses.
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.
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 currencies. 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 currencies. Net currency gains and
losses from valuing investments and other assets and liabilities denominated in
foreign currency as of June 30, 1996 are reflected in net change in unrealized
appreciation or depreciation on foreign currencies 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
41
<PAGE>
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.
Futures Contracts
The Fund may enter into financial futures contracts for the delayed
delivery of securities, currency or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit either in cash or securities an amount equal to a certain percentage
of the contract amount. Subsequent payments are made or received by the Fund
each day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by the Fund. The Fund's investment in financial futures contracts is
designed to hedge against anticipated future changes in interest or exchange
rates or securities prices (or for non-hedging purposes). Should interest or
exchange rates or securities prices move unexpectedly, the Fund may not achieve
the anticipated benefits of the financial futures contracts and may realize a
loss.
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.
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.
Reclassification of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gain; and the recharacterization of foreign exchange gains
or losses to either ordinary income or realized capital gains for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations, or net asset value per
share of the Fund.
Note 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 six
months ended June 30, 1996, GISC voluntarily assumed $98,497, $62,312 and
$87,310 of the ordinary operating expenses of GIQBF, GTEF and GCMF,
respectively.
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
42
<PAGE>
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.
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 six months ended June 30, 1996. An annual fee of $1,000 per Portfolio
Fund (i.e., $6,000) was also paid to each such trustee during such period. The
aggregate remuneration paid by each of the Portfolio Funds to each of the
trustees who are not interested persons, amounted to $6,900 for the six months
ended June 30, 1996. GISC pays compensation to the trustees who are interested
persons.
Certain officers and trustees of the Portfolio Funds are affiliated with
GISC.
Administrative Services Agreement
Pursuant to the Administrative Services Agreement adopted by the Portfolio
Funds on behalf of both classes of shares, each of the Portfolio Funds pays GISC
an administrative services fee up to an annual rate of .25% of the average daily
net assets. GPAF currently pays GISC up to .15% on an annual basis, of its
average daily net assets. For the six months ended June 30, 1996, such fees
incurred under the Agreement based on the average daily net assets of Class A
and Class B shares, were as follows:
Class A Class B
------- -------
Park Avenue Fund .............. $226,878 $807
Asset Allocation Fund ......... 32,539 462
International Fund ............ 21,950 599
Investment Quality
Bond Fund .................... 21,373 --
Tax-Exempt Fund ............... 7,067 --
Cash Management Fund .......... 31,512 211
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.
For the six months ended June 30, 1996, aggregate sales commissions for the
purchase of capital shares were paid to GISC as compensation for services
rendered as follows:
Fund Commissions Fund Commissions
- ---- ----------- ---- -----------
GPAF .................... $2,323,619 GIQBF $130,678
GAAF .................... 280,286 GTEF 27,869
GBGIF ................... 166,872
Under a Distribution Plan adopted by the Portfolio pursuant to Rule 12b-1
under the 1940 Act (the "12b-1 Plan "), each Multiple Class Fund is authorized
to pay a monthly 12b-1 fee at an annual rate of up to .75% of average daily net
assets of the Fund's Class B shares as compensation for distribution-related
services provided to the Class B shares of those Funds.
For the six months ended June 30, 1996, such charges were as follows:
Class A Class B
-------- -------
Park Avenue Fund ................................... $513,750 $2,421
Asset Allocation Fund .............................. 66,316 2,053
International Fund ................................. 39,035 1,797
Investment Quality
Bond Fund ......................................... 44,517 --
Tax-Exempt Fund .................................... 10,577 --
Cash Management Fund ............................... 59,491 2,005
The Portfolio has also entered into a Distribution Plan pursuant to Rule
12b-1 under the 1940 Act with GISC on behalf of the Class A shares. Effective
May 1, 1996, the Plan has been made dormant and no 12b-1 fees are authorized to
be paid in connection with sales of Class A shares.
GISC is entitled to retain any CDSL imposed on certain redemptions. For the
six months ended June 30, 1996, there were no such charges imposed.
43
<PAGE>
Note 4. Investment Transactions
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
For the Six Months Ended June 30, 1996
(Unaudited)
-----------------------------------------------
GPAF GAAF GBGIF
---- ---- -----
Purchases
- ---------
Stocks and debt
obligations $437,899,922 $32,155,118 $15,539,469
U.S. Government
and government
agency obligations -- 13,885,005 --
Proceeds
- --------
Stocks and debt
obligations 344,725,480 20,725,294 9,134,625
U.S. Government
and government
agency obligations -- 1,028,906 --
Purchases
- ---------
Stocks and debt
obligations $46,915,614 $14,435,319
U.S. Government
and government
agency obligations 23,736,302 --
Proceeds
- --------
Stocks and debt
obligations $27,736,777 $13,724,470
U.S. Government
and government
agency obligations 39,202,430 --
The cost of investments owned at June 30, 1996 for federal income tax
purposes was the same as for financial reporting purposes for the Portfolio
Funds. The gross unrealized appreciation and depreciation at June 30, 1996, were
as follows:
GPAF GAAF GBGIF
---- ---- -----
Appreciation $253,635,941 $7,850,898 $8,655,126
(Depreciation) (5,580,546) (576,412) (750,316)
------------ ---------- ----------
Net Unrealized
Appreciation $248,055,395 $7,274,486 $7,904,810
============ ========== ==========
GIQBF GTEF
----- ----
Appreciation $ 157,014 $154,182
(Depreciation) (1,402,250) (66,682)
----------- --------
Net Unrealized
Appreciation
(Depreciation) $(1,245,236) $ 87,500
=========== ========
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 foreign currency relative to the U.S. dollar.
At June 30, 1996, GBGIF had open forward foreign currency contracts, as
listed below, with net unrealized gains of $394, which is included in net change
in unrealized appreciation or depreciation on foreign currency related
transactions.
<TABLE>
<CAPTION>
Unrealized
Type of Expiration Curent Appreciation
Currency Contract Date Cost Value /(Depreciation)
- -------- -------- ---- ---- ----- ---------------
<S> <C> <C> <C> <C> <C> <C>
2,185,000 Belgian Franc Purchase 07/09/96 $ 69,764 $ 69,805 $ 41
200,425 French Franc Purchase 07/31/96 38,976 38,966 (10)
215,040,000 Italian Lira Purchase 07/03/96 140,244 140,434 190
866,500 Swedish Krona Purchase 07/01/96 130,792 130,889 97
197,660 Swiss Franc Purchase 07/03/96 158,027 158,103 76
----
$394
====
</TABLE>
44
<PAGE>
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
GISC 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.
45
<PAGE>
Note 7. Transactions in Portfolio Fund Shares
o The Guardian Park Avenue Fund
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 Year Ended December 31, 1995
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Sold:
Class A 60,083,921 $149,002,050 7,677,062 $248,191,463
Class B 117,696 4,337,194 -- --
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gains:
Class A 1,142,905 41,144,232 1,609,384 54,438,335
Class B 3,097 111,530 -- --
- ------------------------------------------------------------------------------------------------------------------
61,347,619 194,595,006 9,286,446 302,629,798
Less shares repurchased:
Class A (57,846,812) (68,898,962) (4,502,822) (146,328,114)
Class B (28) (1,030) -- --
- ------------------------------------------------------------------------------------------------------------------
Net Increase 3,500,779 $125,695,014 4,783,624 $156,301,684
==================================================================================================================
<CAPTION>
o The Guardian Asset Allocation Fund
Six Months Ended June 30, 1996 Year Ended December 31, 1995
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Sold:
Class A 3,307,210 $ 8,211,999 895,730 $ 10,610,499
Class B 149,392 1,916,883 -- --
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gains:
Class A 373,976 4,540,063 249,777 3,028,083
Class B 7,986 97,509 -- --
- ------------------------------------------------------------------------------------------------------------------
3,838,564 14,766,454 1,145,507 13,638,582
Less shares repurchased:
Class A (2,984,006) (4,190,057) (716,332) (8,181,805)
Class B (5) (55) -- --
- ------------------------------------------------------------------------------------------------------------------
Net Increase 854,553 $ 10,576,342 429,175 $ 5,456,777
==================================================================================================================
</TABLE>
46
<PAGE>
o The Guardian Baillie Gifford International Fund
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 Year Ended December 31, 1995
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Sold:
Class A 2,286,095 $ 8,602,967 992,691 $ 12,765,871
Class B 121,811 1,781,572 -- --
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gains:
Class A -- -- 199,863 2,694,682
Class B -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
2,407,906 10,384,539 1,192,554 15,460,553
Less shares repurchased:
Class A (1,860,505) (2,486,185) (797,813) (10,427,754)
Class B (4) (58) -- --
- ------------------------------------------------------------------------------------------------------------------
Net Increase 547,397 $ 7,898,296 394,741 $ 5,032,799
==================================================================================================================
<CAPTION>
o The Guardian Investment Quality Bond Fund
Six Months Ended June 30, 1996 Year Ended December 31, 1995
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Sold 462,529 $ 4,491,050 1,359,952 $ 12,911,461
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gains 142,807 1,377,035 302,597 2,917,967
- ------------------------------------------------------------------------------------------------------------------
605,336 5,868,085 1,662,549 15,829,428
Less shares repurchased (678,466) (6,474,999) (1,059,125) (10,221,819)
- ------------------------------------------------------------------------------------------------------------------
Net Increase/Decrease (73,130) $( 606,914) 603,424 $ 5,607,609
o The Guardian Tax-Exempt Fund
Six Months Ended June 30, 1996 Year Ended December 31, 1995
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Sold 114,648 $ 1,075,198 181,089 $ 1,707,367
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gains 37,185 352,129 52,140 736,433
- ------------------------------------------------------------------------------------------------------------------
151,833 1,427,327 233,229 2,443,800
Less shares repurchased (82,486) (780,393) (228,631) (2,388,693)
- ------------------------------------------------------------------------------------------------------------------
Net Increase 69,347 $ 646,934 4,598 $ 55,107
==================================================================================================================
</TABLE>
47
<PAGE>
o The Guardian Cash Management Fund
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 Year Ended December 31, 1995
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Sold:
Class A 80,934,527 $ 80,934,527 155,096,061 $155,096,061
Class B 1,346,029 1,346,029 -- --
Shares issued to shareholders
in reinvestment of dividends
from net investment income:
Class A 1,560,529 1,560,529 3,310,843 3,310,843
Class B 4,960 4,960 -- --
- ------------------------------------------------------------------------------------------------------------------
83,846,045 83,846,045 158,406,904 158,406,904
Less shares repurchased:
Class A (75,486,036) (75,486,036) (145,224,145) (145,224,145)
Class B (4,663) (4,663) -- --
- ------------------------------------------------------------------------------------------------------------------
Net Increase 8,355,346 $ 8,355,346 13,182,759 $ 13,182,759
==================================================================================================================
</TABLE>
Note 8. Line of Credit
A $20,000,000 line of credit available to all of the Portfolio Funds and
the five Funds included in the related Guardian variable products has been
established with Morgan Guaranty Trust Company. The rate of interest charged on
any borrowing is based upon the prevailing Federal Funds rate at the time of the
loan plus .25% calculated on a 360 day basis per annum. For the six months ended
June 30, 1996, none of the Portfolio Funds borrowed against this line of credit.
48
<PAGE>
This page intentionally left blank.
49
<PAGE>
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
<TABLE>
<CAPTION>
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/ Distributions
Net Asset Net and Foreign (Decrease) Dividends in Excess
Value, Investment Currency from from Net of Net
Beginning Income Related Investment Investment Investment
of Period (Loss) Transactions Operations Income Income
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Guardian Park Avenue Fund
Class A:
Six months ended 6/30/96++ $33.97 $0.18 $3.14 $3.32 ($0.16) --
Year ended 12/31/95 26.89 0.33 8.87 9.20 (0.33) --
Year ended 12/31/94 28.63 0.31 (0.72) (0.41) (0.31) --
Year ended 12/31/93 25.17 0.50 4.56 5.06 (0.50) --
Year ended 12/31/92 22.23 0.45 4.05 4.50 (0.44) --
Year ended 12/31/91 18.26 0.65 5.71 6.36 (0.66) --
Year ended 12/31/90 21.56 0.68 (3.28) (2.60) (0.70) --
Year ended 12/31/89 20.46 0.92 3.88 4.80 (0.98) --
Year ended 12/31/88 18.63 0.60 3.23 3.83 (0.55) --
Year ended 12/31/87 20.74 0.47 0.20 0.67 (0.60) --
Year ended 12/31/86 21.20 0.35 3.33 3.68 (0.33) --
Class B:
Period from May 1, 1996+ to
June 30, 1996++ 36.26 (0.02) 1.21 1.19 -- --
The Guardian Cash Management Fund
Class A:
Six months ended 6/30/96++ 1.000 0.022 -- 0.022 (0.022) --
Year ended 12/31/95 1.000 0.051 -- 0.051 (0.051) --
Year ended 12/31/94 1.000 0.034 -- 0.034 (0.034) --
Year ended 12/31/93 1.000 0.021 -- 0.021 (0.021) --
Year ended 12/31/92 1.000 0.030 -- 0.030 (0.030) --
Year ended 12/31/91 1.000 0.053 -- 0.053 (0.053) --
Year ended 12/31/90 1.000 0.076 -- 0.076 (0.076) --
Three months ended 12/31/89 1.000 0.086 -- 0.086 (0.086) --
Year ended 9/30/89 1.000 0.024 -- 0.024 (0.024) --
Year ended 9/30/88 1.000 0.066 -- 0.066 (0.066) --
Year ended 9/30/87 1.000 0.053 -- 0.053 (0.053) --
Year ended 9/30/86 1.000 0.063 -- 0.063 (0.063) --
Class B:
Period from May 1, 1996+ to
June 30, 1996++ 1.000 0.005 -- 0.005 (0.005) --
</TABLE>
+ Commencement of operations.
++ Unaudited.
50
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------
Distributions
from Net Asset Net Assets,
Net Realized Value, End of
Gain on End of Total Period
Investments Period Return* (000's Omitted
--------------------------------------------------------------
<S> <C> <C> <C> <C>
The Guardian Park Avenue Fund
Class A:
Six months ended 6/30/96++ $1.24) 36.21 10.72% $1,158,657
Year ended 12/31/95 (1.79) 33.97 34.28 972,275
Year ended 12/31/94 (1.02) 26.89 (1.44) 640,917
Year ended 12/31/93 (1.10) 28.63 20.28 560,193
Year ended 12/31/92 (1.12) 25.17 20.48 335,660
Year ended 12/31/91 (1.73) 22.23 35.16 270,095
Year ended 12/31/90 -- 18.26 (12.21) 216,457
Year ended 12/31/89 (2.72) 21.56 23.66 228,190
Year ended 12/31/88 (1.45) 20.46 20.78 176,000
Year ended 12/31/87 (2.18) 18.63 2.95 157,045
Year ended 12/31/86 (3.81) 20.74 18.38 136,243
Class B:
Period from May 1, 1996+ to
June 30, 1996++ (1.24) 36.21 (0.04) 4,372
The Guardian Cash Management Fund
Class A:
Six months ended 6/30/96++ -- 1.000 4.04 76,922
Year ended 12/31/95 -- 1.000 5.22 69,913
Year ended 12/31/94 -- 1.000 3.48 56,730
Year ended 12/31/93 -- 1.000 2.15 34,731
Year ended 12/31/92 -- 1.000 3.06 37,780
Year ended 12/31/91 -- 1.000 5.70 44,054
Year ended 12/31/90 -- 1.000 7.91 47,153
Three months ended 12/31/89 -- 1.000 8.60 33,821
Year ended 9/30/89 -- 1.000 2.40*** 21,961
Year ended 9/30/88 -- 1.000 6.60 20,603
Year ended 9/30/87 -- 1.000 5.30 19,618
Year ended 9/30/86 -- 1.000 6.30 20,451
Class B:
Period from May 1, 1996+ to
June 30, 1996++ -- 1.000 0.47 1,346
</TABLE>
*Excludes the effect of sales load.
**Annualized.
***Not annualized.
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------
Net
Investment
Expenses Expenses Income/(Loss)
to Average Subsidized to Average Portfolio
Net Assets by Gisc Net Assets Turnover
-----------------------------------------------------
<S> <C> <C> <C> <C>
The Guardian Park Avenue Fund
Class A:
Six months ended 6/30/96++ 0.81%** -- 1.12%** 34%**
Year ended 12/31/95 0.81 -- 1.07 78
Year ended 12/31/94 0.84 -- 1.15 54
Year ended 12/31/93 0.81 -- 1.89 46
Year ended 12/31/92 0.68 -- 1.94 64
Year ended 12/31/91 0.67 -- 2.96 57
Year ended 12/31/90 0.69 -- 3.51 47
Year ended 12/31/89 0.70 -- 4.01 47
Year ended 12/31/88 0.69 -- 2.82 58
Year ended 12/31/87 0.68 -- 2.08 50
Year ended 12/31/86 0.71 -- 1.79 48
Class B:
Period from May 1, 1996-- to
June 30, 1996++ 2.02** -- (0.78)** 34**
The Guardian Cash Management Fund
Class A:
Six months ended 6/30/96++ 0.98** 0.24** 4.45** --
Year ended 12/31/95 0.85 0.37 5.10 --
Year ended 12/31/94 0.87 0.50 3.54 --
Year ended 12/31/93 1.02 0.42 2.13 --
Year ended 12/31/92 0.70 0.44 3.01 --
Year ended 12/31/91 0.67 0.35 5.30 --
Year ended 12/31/90 0.65 0.41 7.57 --
Three months ended 12/31/89 0.65 0.52 8.56 --
Year ended 9/30/89 1.00** 0.38** 7.63** --
Year ended 9/30/88 1.00 0.28 6.32 --
Year ended 9/30/87 1.00 0.35 5.34 --
Year ended 9/30/86 1.00 0.22 6.36 --
Class B:
Period from May 1, 1996+ to
June 30, 1996--+ 1.75** -- 1.86** --
</TABLE>
51
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
<TABLE>
<CAPTION>
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/ Distributions
Net Asset Net and Foreign (Decrease) Dividends in Excess
Value, Investment Currency from from Net of Net
Beginning Income/ Related Investment Investment Investment
of Period (Loss) Transactions Operations Income Income
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Guardian Asset Allocation Fund
Class A:
Six months ended 6/30/96++ $12.19 $0.11 $0.69 $0.80 ($0.10) --
Year ended 12/31/95 10.23 0.23 2.29 2.52 (0.23) --
Year ended 12/31/94 10.98 0.28 (0.52) (0.24) (0.28) --
Period from 2/16/93+ to 12/31/93 10.00 0.19 1.02 1.21 (0.18) --
Class B:
Period from May 1, 1996+ to
June 30, 1996++ 12.61 (0.01) 0.34 0.33 -- --
The Guardian Baillie Gifford
International Fund
Class A:
Six months ended 6/30/96++ 13.57 0.06 1.20 1.26 -- --
Year ended 12/31/95 13.01 0.04 1.40 1.44 (0.04) ($0.23)
Year ended 12/31/94 13.19 0.01 (0.09) (0.08) (0.01) --
Period from 2/16/93+ to 12/31/93 10.00 (0.02) 3.32 3.30 -- --
Class B:
Period from May 1, 1996+ to
June 30, 1996++ 14.71 (0.02) 0.09 0.07 -- --
The Guardian Investment Quality
Bond Fund
Class A:
Six months ended 6/30/96++ 10.00 0.27 (0.47) (0.20) (0.27) --
Year ended 12/31/95 9.12 0.59 0.88 1.47 (0.59) --
Year ended 12/31/94 10.04 0.46 (0.90) (0.44) (0.46) --
Period from 2/16/93+ to 12/31/93 10.00 0.37 0.18 0.55 (0.37) --
The Guardian Tax-Exempt Fund
Class A:
Six months ended 6/30/96++ 9.69 0.21 (0.33) (0.12) (0.21) --
Year ended 12/31/95 8.86 0.44 0.83 1.27 (0.44) --
Year ended 12/31/94 10.20 0.40 (1.30) (0.90) (0.40) --
Period from 2/16/93+ to 12/31/93 10.00 0.34 0.40 0.74 (0.34) --
</TABLE>
+ Commencement of operations.
++ Unaudited.
52
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-----------------------------
Distributions
from Net Asset Net Assets,
Net Realized Value, End of
Gain on End of Total Period
Investments Period Return* (000's Omitted)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Guardian Asset Allocation Fund
Class A:
Six months ended 6/30/96++ ($0.66) $12.23 6.68% $79,366
Year ended 12/31/95 (0.33) 12.19 24.51 70,591
Year ended 12/31/94 (0.23) 10.23 (2.13) 54,875
Period from 2/16/93+ to 12/31/93 (0.05) 10.98 12.16 50,200
Class B:
Period from May 1, 1996+ to
June 30, 1996++ (0.66) 12.28 2.66 1,933
The Guardian Baillie Gifford
International Fund
Class A:
Six months ended 6/30/96++ -- 14.83 9.36 56,787
Year ended 12/31/95 (0.61) 13.57 11.14 44,546
Year ended 12/31/94 (0.09) 13.01 (0.55) 37,542
Period from 2/16/93+ to 12/31/93 (0.11) 13.19 32.98 20,809
Class B:
Period from May 1, 1996+ to
June 30, 1996++ -- 14.78 (0.54) 1,800
The Guardian Investment Quality
Bond Fund
Class A:
Six months ended 6/30/96++ -- 9.53 (2.00) 50,471
Year ended 12/31/95 -- 10.00 16.64 53,706
Year ended 12/31/94 (0.02) 9.12 (4.50) 43,487
Period from 2/16/93+ to 12/31/93 (0.14) 10.04 4.13 23,310
The Guardian Tax-Exempt Fund
Class A:
Six months ended 6/30/96++ -- $ 9.36 (1.29) 17,552
Year ended 12/31/95 -- 9.69 14.59 17,501
Year ended 12/31/94 (0.04) 8.86 (8.98) 15,967
Period from 2/16/93+ to 12/31/93 (0.20) 10.20 5.55 21,135
</TABLE>
*Excludes the effect of sales load.
**Annualized.
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------
Net
Investment
Expenses Expenses Income/(Loss)
to Average Subsidized to Average Portfolio
Net Assets by Gisc Net Assets Turnover
--------------------------------------------------------
<S> <C> <C> <C> <C>
The Guardian Asset Allocation Fund
Class A:
Six months ended 6/30/96++ 1.26%** -- 1.90%** 39%
Year ended 12/31/95 1.25 -- 1.98 219
Year ended 12/31/94 1.30 -- 2.72 216
Period from 2/16/93+ to 12/31/93 1.29** -- 2.07** 165
Class B:
Period from May 1, 1996+ to
June 30, 1996++ 2.56** -- (0.56)** 39
The Guardian Baillie Gifford
International Fund
Class A:
Six months ended 6/30/96++ 1.70** -- (0.78)** 19
Year ended 12/31/95 1.74 -- 0.19 51
Year ended 12/31/94 1.91 -- 0.20 33
Period from 2/16/93+ to 12/31/93 2.35** -- (0.21)** 9
Class B:
Period from May 1, 1996+ to
June 30, 1996++ 2.82** -- (0.80)** 19
The Guardian Investment Quality
Bond Fund
Class A:
Six months ended 6/30/96++ 0.75** 0.37%** 5.61** 130
Year ended 12/31/95 0.75 0.39 6.11 401
Year ended 12/31/94 1.46 -- 4.94 186
Period from 2/16/93+ to 12/31/93 1.42** -- 3.68** 167
The Guardian Tax--Exempt Fund
Class A:
Six months ended 6/30/96++ 0.75** 0.73** 4.37** 80
Year ended 12/31/95 0.75 0.79 4.66 194
Year ended 12/31/94 1.09 0.47 4.26 107
Period from 2/16/93+ to 12/31/93 1.36** -- 3.35** 108
</TABLE>
53
<PAGE>
This page intentionally left blank.
<PAGE>
o Investment Adviser & Distributor
Guardian Investor Services Corporation(R)
201 Park Avenue South
New York, New York 10003
o Custodan of Assets
State Street Bank and Trust Company
Custody Division
1776 Heritage Drive
North Quincy, Massachusetts 02171
o Shareholder Servicing Agent, Transfer Agent &
Dividend Paying Agent for State Street Bank
and Trust Company
National Financial Data Services
Post Office Box 419611
Kansas City, Missouri 64141-6611
o Trustees
Joseph D. Sargent - 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.
Carl W. Schafer
Robert G. Smith, Ph.D.
o Officers
Frank J. Jones--President
Charles E. Albers
Kevin S. Alter
Michele S. Babakian
Joseph A. Caruso
Alexander M. Grant, Jr.
Thomas R. Hickey, Jr.
Jonathan Jankus
Ann T. Kearney
R. Robin Menzies
Nikolaos D. Monoyios
John B. Murphy
Frank L. Pepe
Richard T. Potter, Jr.
Donald P. Sullivan, Jr.
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.
<PAGE>
[LOGO]
-----------------
Guardian Investor Services Corporation(R) Bulk Rate Mail
201 Park Avenue South U.S. Postage Paid
New York, New York 10003 Newark, NJ
Permit No. 45
-----------------
The
Park Avenue
Portfolio
- -----------------
Semiannual Report
to Shareholders
June 30, 1996
- -----------------
o The Guardian
Park Avenue Fund
o The Guardian
Asset Allocation Fund
o The Guardian
Baillie Gifford
International Fund
o The Guardian
Investment Quality
Bond Fund
o The Guardian
Tax-Exempt Fund
o The Guardian
Management Fund
[LOGO]
Guardian Investor
Services Corporation(R)
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN PARK AVENUE FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1996, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> PARK AVENUE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 916,372,735
<INVESTMENTS-AT-VALUE> 1,164,428,130
<RECEIVABLES> 6,322,225
<ASSETS-OTHER> 4,539
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,170,754,894
<PAYABLE-FOR-SECURITIES> 3,042,940
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,682,152
<TOTAL-LIABILITIES> 7,725,092
<SENIOR-EQUITY> 321,189
<PAID-IN-CAPITAL-COMMON> 840,992,960
<SHARES-COMMON-STOCK> 32,118,735
<SHARES-COMMON-PRIOR> 28,617,956
<ACCUMULATED-NII-CURRENT> 952,146
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 72,708,112
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 248,055,395
<NET-ASSETS> 1,163,029,802
<DIVIDEND-INCOME> 8,322,833
<INTEREST-INCOME> 1,904,899
<OTHER-INCOME> 44,874
<EXPENSES-NET> 4,329,437
<NET-INVESTMENT-INCOME> 5,943,169
<REALIZED-GAINS-CURRENT> 73,047,108
<APPREC-INCREASE-CURRENT> 29,126,959
<NET-CHANGE-FROM-OPS> 108,117,236
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,797,232
<DISTRIBUTIONS-OF-GAINS> 38,259,811
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,201,617
<NUMBER-OF-SHARES-REDEEMED> 57,846,840
<SHARES-REINVESTED> 1,146,002
<NET-CHANGE-IN-ASSETS> 190,755,214
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 37,727,031
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,652,775
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,329,437
<AVERAGE-NET-ASSETS> 1,066,428,619
<PER-SHARE-NAV-BEGIN> 33.97
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> 3.46
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> (1.24)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 36.21
<EXPENSE-RATIO> .81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN ASSET ALLOCATION
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1996, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> ASSET ALLOCATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 74,353,233
<INVESTMENTS-AT-VALUE> 81,638,068
<RECEIVABLES> 258,101
<ASSETS-OTHER> 6,287
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81,902,456
<PAYABLE-FOR-SECURITIES> 213,180
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 390,540
<TOTAL-LIABILITIES> 603,720
<SENIOR-EQUITY> 66,478
<PAID-IN-CAPITAL-COMMON> 71,797,782
<SHARES-COMMON-STOCK> 6,647,630
<SHARES-COMMON-PRIOR> 5,793,077
<ACCUMULATED-NII-CURRENT> 128,184
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,031,854
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,274,437
<NET-ASSETS> 81,298,736
<DIVIDEND-INCOME> 428,382
<INTEREST-INCOME> 759,969
<OTHER-INCOME> 0
<EXPENSES-NET> 479,655
<NET-INVESTMENT-INCOME> 708,696
<REALIZED-GAINS-CURRENT> 2,120,410
<APPREC-INCREASE-CURRENT> 2,038,153
<NET-CHANGE-FROM-OPS> 4,867,259
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 580,510
<DISTRIBUTIONS-OF-GAINS> 4,155,683
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,456,602
<NUMBER-OF-SHARES-REDEEMED> 2,984,011
<SHARES-REINVESTED> 381,962
<NET-CHANGE-IN-ASSETS> 10,707,408
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,067,079
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 404,836
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 779,190
<AVERAGE-NET-ASSETS> 75,055,439
<PER-SHARE-NAV-BEGIN> 12.19
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> .69
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> (.66)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.23
<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1996, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> BAILLIE GIFFORD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 49,064,680
<INVESTMENTS-AT-VALUE> 56,969,490
<RECEIVABLES> 1,067,907
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6,303
<TOTAL-ASSETS> 58,043,700
<PAYABLE-FOR-SECURITIES> 957,210
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 299,357
<TOTAL-LIABILITIES> 1,256,567
<SENIOR-EQUITY> 38,290
<PAID-IN-CAPITAL-COMMON> 47,769,897
<SHARES-COMMON-STOCK> 3,828,871
<SHARES-COMMON-PRIOR> 3,281,474
<ACCUMULATED-NII-CURRENT> 52,862
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,020,408
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,905,676
<NET-ASSETS> 56,787,133
<DIVIDEND-INCOME> 562,599
<INTEREST-INCOME> 46,648
<OTHER-INCOME> 0
<EXPENSES-NET> 421,501
<NET-INVESTMENT-INCOME> 187,746
<REALIZED-GAINS-CURRENT> 986,634
<APPREC-INCREASE-CURRENT> 3,166,693
<NET-CHANGE-FROM-OPS> 4,343,073
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,407,906
<NUMBER-OF-SHARES-REDEEMED> 1,860,509
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,241,369
<ACCUMULATED-NII-PRIOR> (134,884)
<ACCUMULATED-GAINS-PRIOR> (42,109)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 196,614
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 421,501
<AVERAGE-NET-ASSETS> 49,044,754
<PER-SHARE-NAV-BEGIN> 13.57
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 1.20
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.83
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1996, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 04
<NAME> INVESTMENT QUALITY BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 51,217,784
<INVESTMENTS-AT-VALUE> 49,972,548
<RECEIVABLES> 2,196,862
<ASSETS-OTHER> 6,214
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,175,624
<PAYABLE-FOR-SECURITIES> 1,509,590
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 194,582
<TOTAL-LIABILITIES> 1,704,172
<SENIOR-EQUITY> 52,896
<PAID-IN-CAPITAL-COMMON> 52,007,986
<SHARES-COMMON-STOCK> 5,298,266
<SHARES-COMMON-PRIOR> 5,371,396
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (344,194)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,245,236)
<NET-ASSETS> 50,471,452
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,677,299
<OTHER-INCOME> 0
<EXPENSES-NET> 197,670
<NET-INVESTMENT-INCOME> 1,479,629
<REALIZED-GAINS-CURRENT> (344,193)
<APPREC-INCREASE-CURRENT> (2,283,770)
<NET-CHANGE-FROM-OPS> (1,148,334)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,479,629
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 462,529
<NUMBER-OF-SHARES-REDEEMED> 678,466
<SHARES-REINVESTED> 142,807
<NET-CHANGE-IN-ASSETS> (3,234,877)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 131,780
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 296,167
<AVERAGE-NET-ASSETS> 53,001,542
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> (.47)
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.53
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN TAX-EXEMPT FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1996, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> TAX EXEMPT FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 17,586,350
<INVESTMENTS-AT-VALUE> 17,673,850
<RECEIVABLES> 489,527
<ASSETS-OTHER> 6,039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,121,704
<PAYABLE-FOR-SECURITIES> 507,469
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62,121
<TOTAL-LIABILITIES> 569,590
<SENIOR-EQUITY> 18,754
<PAID-IN-CAPITAL-COMMON> 18,798,119
<SHARES-COMMON-STOCK> 1,875,439
<SHARES-COMMON-PRIOR> 1,806,092
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,352,259)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 87,500
<NET-ASSETS> 17,552,114
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 437,110
<OTHER-INCOME> 0
<EXPENSES-NET> 64,079
<NET-INVESTMENT-INCOME> 373,031
<REALIZED-GAINS-CURRENT> (146,134)
<APPREC-INCREASE-CURRENT> (449,935)
<NET-CHANGE-FROM-OPS> (223,038)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 373,031
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 114,648
<NUMBER-OF-SHARES-REDEEMED> 82,486
<SHARES-REINVESTED> 37,185
<NET-CHANGE-IN-ASSETS> 50,865
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,206,125)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 42,719
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 64,079
<AVERAGE-NET-ASSETS> 17,181,488
<PER-SHARE-NAV-BEGIN> 9.69
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> (.33)
<PER-SHARE-DIVIDEND> (.21)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.36
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN CASH MANAGEMENT FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1996, and is qualified in its
entirety to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 06
<NAME> CASH MANAGEMENT FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 77,703,019
<INVESTMENTS-AT-VALUE> 77,703,019
<RECEIVABLES> 955,104
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 351
<TOTAL-ASSETS> 78,658,474
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 390,120
<TOTAL-LIABILITIES> 390,120
<SENIOR-EQUITY> 782,684
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</TABLE>
