DEAR SHAREHOLDER:
[PHOTO]
Frank J. Jones, Ph.D.
The year 1995 continued the economic expansion which began during March,
1991. Early in 1995, the policy goal of the Federal Reserve (the "Fed") was a
"soft landing," and the major risk was thought to be that growth might be too
rapid, thus causing inflation. Thus, participants in the bond and stock markets
were somewhat defensive. This concern was evidenced by the fact that the Fed
continued to tighten monetary policy during early 1995 (the last tightening was
on February 1). However, during the second quarter of 1995, while the goal was
still a "soft landing," there was a tilt in the perceived risk from too rapid
growth to too slow growth, with perhaps a "hard landing" or recession to follow.
This concern was also evidenced by Fed behavior. As a result, on July 6, the Fed
eased the Fed Funds target rate (from 6% to 5.75%), the first easing since
September 4, 1992. The Fed again eased on December 19 (to 5.50%).
At year-end 1995, the consensus view was that a "soft landing" would be
achieved during 1996--the Blue Chip consensus of economists forecasts a 2.7%
increase in real gross domestic product (relative to an estimated 3.3% in 1995)
and a 2.8% increase in the consumer price index during 1996. The concern
<PAGE>
continues to be, however, that the "soft landing" will turn into a recession.
And the consumer spending/retail sales sector is viewed as vulnerable and
particularly critical. In addition, the resolution of a federal budget deficit
reduction policy is, as discussed below, pivotal for the 1996 economy.
The U.S. stock and bond markets performed much better than commonly
expected during 1995. And the strong performance of the first half of 1995
continued in the second half. For the year ended December 31, 1995, the returns
on the S&P 500 Index and the Lehman Aggregate Bond Index were 37.36% (the
highest since 1958) and 18.47% (the highest since 1985), respectively(1). Much
of the strength of these markets was due to the euphoria surrounding the
anticipation of a budget deficit reduction package. If such a program were not
implemented, the markets could correct significantly, as Fed chairman Alan
Greenspan has continually instructed--and threatened--the Administration and the
Congress.
Strong corporate profits driven by business restructuring, strong capital
expenditures and low labor costs have contributed to the strong stock market
during 1995, as well as to the strong bond market. In addition, strong cash
flows into common stock mutual funds supported the stock market during
1995--cash inflows into common stock funds during 1995 were $128.89 billion,
only slightly below the record inflows during the entire year of 1993 (of
$128.95). On the other hand, bond mutual funds experienced negative cash flows
during 1995 (outflows of $4.11 billion during 1995, relative to 1993's record
inflows of $113.60 billion) and municipal bond mutual funds and global bond
funds, in particular, experienced more significant outflows than other types of
bond funds.
THE OUTLOOK FOR U.S. MARKETS
As indicated, the consensus view of economic forecasters is that of a "soft
landing," specifically a 2.7% increase in real GDP and 2.8% in CPI during 1996.
Critical elements of this forecast are the consummation of a federal budget
deficit reduction program, relatively strong capital expenditures by businesses,
relatively strong exports and relatively weak consumption demand.
A common interest rate forecast consistent with this economic forecast is
for bond yields to decline moderately in the first half of 1996 and to increase
somewhat in the second half. One or more Fed easings in the first half of 1996
is expected and would support this forecast. With respect to the stock market,
the absence of either a strong rally or a sharp sell-off in the bond market
would be somewhat neutral for the stock markets, although Fed easings could lead
to declining short-term rates (and a steepening yield curve) and could benefit
the stock market. Declining corporate profits during the year, however, should
limit the potential increases in the stock market during 1996. Another risk to
the stock market is mass withdrawals from the common stock mutual funds,
although the relative stability of 401(k) and other retirement-related
investments in common stock mutual funds should limit such outflows.
The major risks for the economic outlook center on Washington, D.C. Since
the common expectation in economic and market forecasts has been the
consummation of a budget reduction deal, the absence of such would cause "all
bets to be off."
The economic expectations for 1996 by economic analysts are much more
homogenous than is typical, so much so that a contrarian would readily assert
that these forecasts will not be vindicated. At this time, it seems that if the
common forecast is in error, the actual outcome is likely to be a weaker, rather
than a stronger, economy than the forecast. A moderate recession during mid-1996
is possible. One scenario for such a
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(1) The S&P 500 Index is an unmanaged index 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 Index and the Lehman Aggregate Bond Index are
not available for investment and their returns do not reflect any sales charges
which an investor may have to pay when purchasing shares of a fund.
<PAGE>
weak economy could be the absence of a federal budget reduction policy and a
resulting absence of Fed easing to support a weakening economy.
For the markets, another critical element of the Washington deliberations
is specific tax policy. For example, the implementation of a capital gains tax
rate reduction, which seems likely, could lead to a short term--six to nine
months--decrease in the price of "heirloom stocks," which are primarily
high-quality growth stocks which have low turnovers and therefore high
unrealized capital gains. On the other hand, such a reduction could cause
increases in the prices of lower turnover stocks, for example, lower cap value
stocks. The implementation of the indexation of capital gains, which seems much
less likely, would be an unmitigated benefit to the stock market. The
implementation of a flat tax, in addition to being negative for housing prices,
would also be negative for the municipal bond market.
The stock and bond markets in 1995 had strong upward trends with only
moderate volatility. Due primarily to the importance of their dependence on
Washington policy, they are likely to be much more volatile during 1996.
INTERNATIONAL MARKETS
Internationally, 1995 was a year of moderate to slow economic growth, with
the central banks of Japan, Germany and the U.K. all ending the year with
monetary easings to support their economies (Japan and Germany did not tighten
monetary policy at all during the year, but the U.K. did tighten early in the
year, as did the U.S.).
The 1996 economic forecast for Japan and Germany is for low inflation, but
weak growth; for the U.K., the forecast is for moderate growth and moderate
inflation. By the end of 1995, growth prospects for the Japanese economy were
improving (consistent with the improving Japanese stock market during the last
half of 1995) and growth prospects for Germany were waning.
Consistent with the weak international economies during 1995, there were
reasonably strong bond markets and only moderately strong stock markets.
Specifically, the local currency bond returns of the U.S., Japan, Germany and
the U.K. were all quite similar, but the U.S. stock market was substantially
stronger than its counterparts. For 1996, many analysts are forecasting that
this stock market relationship will be reversed, that is, foreign stock markets
may outperform U.S. stocks.
Global political risk during 1996 could also be high with an election in
the U.S., and elections potentially in Japan and the U.K., as well as
uncertainties regarding the common currency in Europe.
CONCLUSION
Many professionals missed the early 1995 rallies in the stock and bond
markets. Given this failure, it seems that the prospects of those of us employed
in other professions achieving successful market timing are small. We believe
that the experience of 1995 reemphasizes the lesson that wise investors do not
attempt to make significant short-term changes in their asset allocation, but
rather determine their long-term asset allocation by fundamental factors, such
as the expected length of their working life, their short-term financial needs
and perhaps demographic factors. They should, thus, manage their overall
portfolios on a long-term basis. We believe that 1995 demonstrates the wisdom of
this fundamental investment philosophy.
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 year.
Regards,
/S/ Frank J. Jones
Frank J. Jones, Ph.D.
President, The Park Avenue Portfolio
<PAGE>
THE PARK AVENUE PORTFOLIO
TABLE OF CONTENTS PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND 2 15
OBJECTIVE: Long-term growth of capital "WE UTILIZE WHAT WE
- -------------------------------------------- BELIEVE TO BE SUPERIOR
PORTFOLIO: At least 80% common stocks and DECISION-MAKING SYSTEMS
securities convertible into INCLUDING A BOTTOM-UP
common stocks QUANTITATIVE STOCK SCORING
- -------------------------------------------- SYSTEM AND TOP-DOWN PORTFOLIO
INCEPTION: June 1, 1972 MANAGEMENT STYLE PREDICTORS.
- -------------------------------------------- OUR ORGANIZATIONAL CULTURE
NET ASSETS AT DECEMBER 31, 1995: $972,274,595 SUPPORTS INDEPENDENT THINKING
- -------------------------------------------- AND THE FLEXIBILITY TO ACT
QUICKLY. AND, I SUSPECT, WE
WORK JUST A LITTLE HARDER THAN
MOST OF OUR COMPETITORS."
---Charles E. Albers, C.F.A.
Portfolio Manager
- --------------------------------------------------------------------------------
THE GUARDIAN ASSET ALLOCATION FUND 6 19
OBJECTIVE: Long-term total investment "THIS YEAR'S U.S. ECONOMY
return consistent with moderate REMINDS ME OF VOLTAIRE'S
risk DOCTOR PANGLOSS WHEN HE SAYS,
- -------------------------------------------- 'THIS IS THE BEST OF ALL
PORTFOLIO: A mixture of: common stocks and POSSIBLE WORLDS.' THE FUND
convertible securities; REAPED THE REWARDS OF THAT
investment grade debt ENVIRONMENT."
obligations and U.S. government
securities; and money market --Jonathan C. Jankus, C.F.A.
instruments Portfolio Manager
- --------------------------------------------
INCEPTION: February 16, 1993
- --------------------------------------------
NET ASSETS AT DECEMBER 31, 1995: $70,591,328
- --------------------------------------------
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND 8 21
OBJECTIVE: Long-term growth of capital "THOUGH MOST OVERSEAS
- -------------------------------------------- MARKETS HAVE LAGGED BEHIND THE
PORTFOLIO: At least 80% in a diversified U.S. THIS YEAR, WE ARE QUITE
portfolio of common stocks of OPTIMISTIC ABOUT THE OUTLOOK
companies domiciled outside of FOR 1996. WE WILL CONTINUE TO
the United States LOOK FOR STOCKS OF
- -------------------------------------------- HIGH-QUALITY COMPANIES TO ADD
INCEPTION: February l 6, 1993 TO OUR FUND'S PORTFOLIO."
- --------------------------------------------
NET ASSETS AT DECEMBER 31, 1995: $44,545,764 --R. Robin Menzies
- -------------------------------------------- Portfolio Manager
- --------------------------------------------------------------------------------
<PAGE>
PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
- --------------------------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND 10 25
OBJECTIVE: A high level of current income "1995 WAS A GOOD YEAR FOR
and capital appreciation without THE U.S. BOND MARKETS AND,
undue risk DESPITE THE BUDGET IMPASSE IN
- -------------------------------------------- WASHINGTON, THERE ARE VERY
PORTFOLIO: At least 80% investment-grade POSITIVE THEMES FOR THE
bonds and U.S. government UPCOMING YEAR."
securities
- -------------------------------------------- --Michele S. Babakian
INCEPTION: February 16, 1993 Portfolio Manager
- --------------------------------------------
NET ASSETS AT DECEMBER 31, 1995: $53,706,330
- --------------------------------------------
- --------------------------------------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND 12 27
OBJECTIVE: Maximum current income exempt "THE PORTFOLIO'S OVERALL
from federal taxes CREDIT QUALITY IS AA+, WHICH
- -------------------------------------------- IS THE SECOND HIGHEST POSSIBLE
PORTFOLIO: At least 80% investment grade RANKING. WE DON'T BELIEVE THAT
obligations issued by state and LOWER QUALITY BONDS OFFER
local authorities ENOUGH EXTRA YIELD TO
- -------------------------------------------- COMPENSATE FOR THE ADDED RISK
INCEPTION: February 16, 1993 AND PRICE VOLATILITY."
- --------------------------------------------
NET ASSETS AT DECEMBER 31, 1995: $17,501,249 --Alexander M. Grant. Jr.
- -------------------------------------------- Portfolio Manager
- --------------------------------------------------------------------------------
THE GUARDIAN CASH MANAGEMENT FUND 14 29
OBJECTIVE: As high a level of current "WE LOOK AT THE FUND AS A
income as is consistent with PLACE WHERE PEOPLE CAN PARK
liquidity and preservation of THEIR MONEY UNTIL THEY DECIDE
capital WHERE THEY WANT TO INVEST
- -------------------------------------------- IT--WHETHER IT BE STOCKS,
PORTFOLIO: Short-term money market BONDS OR TAX-EXEMPTS.
instruments THEREFORE, WE SEEK TO PROVIDE
- -------------------------------------------- INVESTORS WITH A COMBINATION
INCEPTION: November 3, 1982 OF SOLID RETURNS, LIQUIDITY
- -------------------------------------------- AND PRESERVATION OF CAPITAL."
NET ASSETS AT DECEMBER 31, 1995: $69,913,008
- -------------------------------------------- --Alexander M. Grant, Jr.
Portfolio Manager
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS 30
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 38
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 48
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 50
<PAGE>
THE GUARDIAN PARK AVENUE FUND
[PHOTO]
Charles E. Albers, C.F.A.
Portfolio Manager
Q. THIS HAS BEEN A TERRIFIC YEAR FOR ALL INVESTMENT CLASSES IN THE U.S. HOW HAS
THE FUND PERFORMED IN THIS MARKET?
A. Stock market returns in 1995 were far above the previous 25-year compounded
annual S&P 500 Index rate of 11.0%.(1) The 37.36% total return on the S&P 500
Index surpassed the 37.16% return of 1975, and one must go back to 1958 to find
a higher return: 43.36%. Three major factors were behind 1995's stellar
performance. First, the market experienced a drop in long-term interest rates
during the year of roughly 2 full percentage points, from 7.9% to 5.9% on the
30-year Treasury Bond. Second, U.S. businesses generally experienced strong
operating profits in 1995, with earnings from operations for S&P 500 companies
increasing by roughly 14% from 1994 levels. And third, until the federal budget
crisis at year's end, there was a reasonably balanced domestic political
environment in 1995, with hopes for a reduction of capital gains taxes providing
a special impetus to the securities markets.
Most stock market investors did very well in 1995. However, the average
investor had a lot of trouble keeping up with the performance of the S&P 500
Index, which was pulled upward by the strong leadership of roughly 25-50
large-capitalization growth stocks. For example, the Russell 2000 Index, a
measure of small-capitalization stock behavior, returned only 28.45%, fully
8.91% behind the S&P 500.(1)
In this context, for the fifth consecutive year, The Guardian Park Avenue
Fund succeeded in outperforming the average growth mutual fund in our peer
group, as tracked by Lipper Analytical Services, Inc., an independent mutual
fund monitoring organization. The Guardian Park Avenue Fund produced a total
return to shareholders of 34.28% in 1995,(2) compared with a lesser average
return of 30.79% from the Lipper peer group average.(3)
We are particularly proud of the Fund's long-term record. Over the last 15
years, the Fund's performance, as measured by total return, has ranked it among
the top 10 U.S. equity funds, based on Lipper data, reported by Barron's.(4)
Q. HAS THERE BEEN ANY CHANGE IN PORTFOLIO MANAGEMENT STRATEGY? WHAT HAS BEEN THE
IMPACT OF PORTFOLIO MANAGER JUDGMENT DURING 1995?
A. Our basic strategy has not changed. As you know, we use several quantitative
models in managing the Fund, and believe that this has given us a competitive
advantage over the years. Our multi-factor stock-scoring system has helped us
keep the portfolio positioned in the more attractive stocks and sectors. This
system performed well again in 1995.
One portfolio characteristic where judgment comes into play is the
positioning with respect to capitalization-size of stocks in the portfolio.
Beginning in the first quarter of 1995, our analysis suggested that a move to
larger capitalization stocks was desirable, and we moved substantially in that
direction, as the chart indicates.
- -------------------------------------------------------------------------------
(1) The S&P 500 Index is an unmanaged index of 500 stocks that is generally
considered to be representative of U.S. stock market activity. Likewise,
the Russell 2000 Index is another index comprising 2,000 stocks with
smaller capitalization than those of the S&P 500 Index and generally is
considered to be another reflection of stock market performance. Neither
index is available for investment and their returns do not reflect any
sales charges which an investor may have to pay when purchasing 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 charge of
4.5%. 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 Service, Inc. is an independent mutual fund monitoring
and rating service and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted.
(4) Lipper rankings were reported in Lipper's Mutual Funds Performance Analysis
Special Report 4th Quarter 1995. Rankings for the periods ended December
31, 1995 illustrate the Fund versus other growth funds in the specified
period. The Fund ranked 6 out of a field of 108 growth funds over a
fifteen-year period, 25 out of 153 for the ten-year period, 27 out of 237
for the five-year period and 187 out of 572 for the one-year period. Lipper
rankings are based on total return and do not take into account any
deductions for sales loads. The fifteen-year figures were presented in
Barron's Lipper Mutual Funds Quarterly Report dated January 8, 1996.
- -------------------------------------------------------------------------------
2
<PAGE>
Weighted Average Market Capitalization
($ millions)
Graphical Representation of Bar Graph below
12/31/94 3/31/95 6/30/95 9/30/95 12/31/95
-------- ------- ------- ------- --------
6,012 6,279 14,902 21,757 24,560
As noted earlier, the large capitalization stocks produced the highest
market performance in 1995, so our move was in the right direction. However, in
retrospect, we did not go far enough in implementing this theme. The weighted
average market capitalization of the S&P 500 Index was $30.57 billion at
year-end and, ideally, our portfolio would have had an even higher
average-capitalization size.
Another important portfolio characteristic we must deal with is the weight
of the investments in each economic sector. Set forth on the following page are
pie charts showing how sector weightings changed during 1995.
The largest shift in sector weighting during 1995 was in Consumer Staples,
which we increased from 6.3% to 17.9% of the portfolio. This group includes
companies providing food, beverages, drugs and household products. Naturally,
these stocks were favorably ranked by our proprietary stock scoring models;
also, investing in these relatively large-cap, high-quality companies was
consistent with our overall theme of increasing those characteristics in the
portfolio. This shift has been positive for performance, as this sector provided
returns above the broad market average during 1995. The other large increase in
sector weight was in Utilities, which was increased from 0.3% up to 9.3% of the
portfolio during 1995. Although the overall Utility sector slightly
underperformed the S&P 500, the Fund's investments were made primarily in the
telecommunications portion of the Utility sector, which outperformed the S&P
500. In the telecommunications sector, here again our stock scoring system
identified some stocks which were well-ranked by our system, and exhibited the
high-quality characteristics which we are presently emphasizing.
The Capital Goods-Technology sector, which comprised on average one quarter
of the Fund's holdings through the year, produced an above-average performance
during 1995, when compared to the overall performance of the S&P 500. This
sector produced outstanding returns during the first three quarters, but was a
relative loser during the fourth. While these stocks were a major plus for the
Fund during the year as a whole, the Fund's quarterly performance reflected the
manic behavior of these volatile technology stocks.
Q. MR. ALBERS, YOU HAVE RECEIVED A LOT OF FAVORABLE PRESS COVERAGE THIS YEAR,
INCLUDING THE NEW YORK TIMES, FORBES, AND INVESTOR'S BUSINESS DAILY. ANY
COMMENT?
A. Basically, I try to manage these things so that media events do not take very
much of my time. I believe it's very important for a portfolio manager to stay
focused on the portfolio in order to achieve superior results.
As you know, I've been managing this Fund since 1972, and media coverage
has fluctuated from year-to-year. I really don't concern myself greatly with
what the press is (or isn't) saying about me currently. My view is simply that
if I keep doing the right things for the portfolio, then the performance figures
will generally work out well most of the time . . . and so will the media
coverage.
Q. WHAT IS YOUR OUTLOOK FOR 1996? AND WHAT CHANGES DO YOU ANTICIPATE MAKING IN
THE FUND?
A. It is hard to predict the future and just because something happened in the
past doesn't mean that it will happen again. But with that said, we hope to
learn from our good choices and mistakes in 1995 and do a better job in 1996.
Naturally, we will continue to follow the guidance of our proprietary
stock-scoring system closely in 1996, because it has been such a reliable guide
in the past.
The economic outlook for 1996 is murky, as is generally the case.
Currently, the evidence seems to
- -------------------------------------------------------------------------------
3
<PAGE>
suggest that U.S. economic growth and the rate of profit growth are both slowing
from the recent strong levels. In this type of slow-growth environment,
historically the best performance has been found in the stocks of higher-quality
companies, which are more resistant to profit pressures. Accordingly, during
early 1996 we expect to continue moving the Fund's portfolio toward these
higher-quality stocks.
The market's 37.36% return in 1995 is not likely to be repeated soon. A
review of the last 50 years of market history shows: After a "big" year (over
+35%, like 1995), in 75% of cases another above-average year follows. Although
past performance is no guarantee of future results, the history is compelling.
So in line with that historical pattern, we believe that many of the positive
underlying valuation dynamics which gave us a great 1995 are still in place, and
that investors may enjoy some excellent returns in the future, too.
THE GUARDIAN PARK AVENUE FUND PROFILE
AS OF DECEMBER 31, 1995
PORTFOLIO COMPOSITION
The Guardian Park Avenue Fund portfolio holds approximately 240 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 8.10% Common Stocks 91.90%
COMPARISON OF COMMON STOCKS HELD BY THE FUND ON DECEMBER 31, 1994 AND 1995
Graphical Representation of two Pie Charts below
1994 1995
Utilities 0.3% Utilities 9.3%
Other 18.2% Other 8.2%
Financial 16.3% Financial 18.2%
Basic Industries 11.9% Basic Industries 7.4%
Energy 9.3% Energy 12.4%
Consumer Cyclical 12.3% Consumer Cyclical 3.3%
Consumer Staples 6.3% Consumer Staples 17.9%
Capital Goods--Technology 25.7% Capital Goods--Technology 23.3%
- -------------------------------------------------------------------------------
4
<PAGE>
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 3 9495 3 10173 3 9548 3 10169
4 9919 4 10936 4 10002 4 10266
5 8954 5 10404 5 8773 5 10483
6 7758 6 9802 6 7699 6 10676
1973 7 9104 7 10271 7 8788 7 10918
8 8355 8 9320 8 7686 8 11184
9 8898 9 9061 9 7492 9 11546
10 8095 10 8376 10 6661 10 11836
1974 11 6816 11 6276 11 5224 11 12222
12 7016 12 6861 12 5701 12 12536
13 9052 13 8434 13 7001 13 12754
14 10222 14 9724 14 8176 14 12923
1975 15 9524 15 8662 15 7174 15 13188
16 10311 16 9410 16 7588 16 13430
17 12315 17 10819 17 8924 17 13527
18 12926 18 11077 18 9084 18 13696
1976 19 13570 19 11281 19 9043 19 13913
20 14714 20 11627 20 9483 20 14106
21 14576 21 10762 21 8951 21 14396
22 15549 22 11107 22 9480 22 14614
1977 23 15171 23 10794 23 9340 23 14807
24 15894 24 10765 24 9674 24 15048
25 16187 25 10235 25 9527 25 15314
26 17953 26 11100 26 10724 26 15700
1978 27 19593 27 12062 27 11821 27 16023
28 18195 28 11455 28 11002 28 16401
29 19967 29 12263 29 11945 29 16884
30 20459 30 12583 30 12544 30 17440
1979 31 22496 31 13535 31 13793 31 17971
32 23490 32 13539 32 14501 32 18575
33 22448 33 12987 33 13536 33 19348
34 24637 34 14722 34 15484 34 19928
1980 35 27184 35 16363 35 18053 35 20266
36 28544 36 17908 36 19852 36 20870
37 30553 37 18146 37 20432 37 21401
38 30553 38 17726 38 20347 38 21860
1981 39 28042 39 15910 39 17993 39 22488
40 30197 40 17010 40 19380 40 22729
41 28244 41 15773 41 18074 41 22874
42 28221 42 15682 42 18100 42 23430
1982 43 32079 43 17473 43 20123 43 23599
44 37864 44 20656 44 24326 44 23599
45 42172 45 22720 45 27061 45 23696
46 49604 46 25228 46 30611 46 24010
1983 47 48521 47 25185 47 29869 47 24251
48 48699 48 25281 48 29333 48 24493
49 46645 49 24675 49 27414 49 24855
50 47823 50 24028 50 26721 50 25048
1984 51 53053 51 26344 51 28574 51 25290
52 54864 52 26823 52 28930 52 25483
53 61531 53 29283 53 31492 53 25797
54 65013 54 31410 54 33601 54 25966
1985 55 60468 55 30132 55 32193 55 26111
56 72961 56 35290 56 37156 56 26449
57 87232 57 40238 57 42720 57 26353
58 93553 58 42592 58 44999 58 26425
1986 59 82543 59 39627 59 41062 59 26570
60 86372 60 41842 60 42571 60 26763
61 106899 61 50759 61 51317 61 27126
62 104622 62 53272 62 52563 62 27440
1987 63 111995 63 56777 63 55749 63 27729
64 88928 64 43977 64 44085 64 27947
65 100336 65 46480 65 47392 65 28164
66 107312 66 49515 66 50056 66 28502
1988 67 105853 67 49653 67 49730 67 28913
68 107405 68 51158 68 50482 68 29179
69 117426 69 54775 69 54123 69 29565
70 124277 70 59546 70 58562 70 29976
1989 71 135523 71 65881 71 64497 71 30169
72 133004 72 67206 72 63984 72 30531
73 131155 73 65183 73 62581 73 31087
74 131990 74 69211 74 63101 74 31401
1990 75 111334 75 59736 75 56465 75 32029
76 116611 76 65046 76 61087 76 32415
77 138452 77 74504 77 71872 77 32633
78 136860 78 74303 78 71176 78 32874
1991 79 149260 79 78263 79 76341 79 33116
80 157618 80 84775 80 83235 80 33382
81 162079 81 82673 81 82319 81 33647
82 159469 82 84210 82 80113 82 33889
1992 83 167044 83 86846 83 82496 83 34106
84 189879 84 91214 84 89848 84 34396
85 208279 85 95200 85 92144 85 34686
86 215612 86 95619 86 92749 86 34879
1993 87 234327 87 98067 87 97203 87 35048
88 228375 88 100342 88 99458 88 35338
89 221844 89 96569 89 96044 89 35556
90 219204 90 96936 90 93504 90 35773
1994 91 227287 91 101657 91 98580 91 36087
92 225091 92 101617 92 97271 92 36280
93 245507 93 111514 93 104431 93 36546
94 271285 94 122063 94 114202 94 36836
12/31/95 95 302249 95 139569 95 126734 95 37126
A hypothetical $10,000 investment 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 of 4.5%. This investment would have grown to
$302,249 on December 31, 1995, which represents a total return of 2,922 percent.
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 have had a total return of 1,296 percent and would
now be worth $139,569. 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 only $126,735. 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.
AVERAGE ANNUAL RETURNS FOR PERIODS ENDED 12/31/95
Since
Inception
1 Year 5 Years 10 Years (6/1/72)
- --------------------------------------------------------------------------------
Guardian Park Avenue Fund
(without 4.5% sales charge) 34.28% 20.99% 15.27% 15.78%
- --------------------------------------------------------------------------------
Guardian Park Avenue Fund
(incl. 4.5% sales charge) 28.24% 19.88% 14.74% 15.55%
- --------------------------------------------------------------------------------
S&P 500 Index 37.36% 16.51% 14.75% 11.83%
- --------------------------------------------------------------------------------
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 indicated. Prior to August 25, 1988 shares of the Fund were offered
at a higher sales charge, so actual returns would have been somewhat 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. Lipper
Analytical Services, Inc. is an independent mutual fund monitoring organization.
- --------------------------------------------------------------------------------
5
<PAGE>
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. EVERY MAJOR U.S. ASSET CLASS HAS PERFORMED WELL THIS YEAR. HOW HAS THE FUND
PERFORMED?
A. To say that the U.S. markets performed well is putting it mildly. The total
bond market, as measured by the Lehman Aggregate Bond Index, returned 18.47% in
1995, the highest bond market return since the 22.10% return of 1985. Even this
paled in comparison to stocks, whose total return, as measured by the S&P 500
Index, was fully 37.36%. You would have to go back to 1958's 43.36% return to
find a better year.(1)
For the year ended December 31, 1995, the Fund's return was 24.49%(2),
placing it a bit above the average 23.56% return of funds with similar
objectives and policies in the Lipper universe.(3) The Fund also slightly
outperformed the median return of 23.84% produced by Morningstar's universe of
asset allocation funds.(3) Since its inception on February 16, 1993, the Fund's
total aggregate return of 36.66% (or 11.49% on an average annual basis) is a bit
behind the aggregate return of 38.70% experienced by its composite benchmark
(60% of the S&P 500 Index and 40% of the Lehman Aggregate Bond Index). This
benchmark's 1995 return was an extraordinary 29.58%.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE AND HOW HAS THE PORTFOLIO
ALLOCATION AMONG STOCKS, BONDS AND CASH CHANGED OVER THE YEAR?
A. Clearly, the Fund's performance in 1995 was affected by the double digit
returns of the bond and stock markets. Our portfolio allocation further
determined the Fund's overall return. The Fund's year-end target weights of 77%
stock, 20% bonds and 3% cash are very similar to the weights of 70% stock, 30%
bonds and 0% cash with which we began the year. The important changes during the
year came when the Fund's stock market exposure was reduced to as low as 50% of
the Fund in the February-to-April period in reaction to huge market gains which
appeared a bit overdone. However, an enormous rally in the bond market, as
long-term interest rates declined by nearly 2% (from about 8% to 6%, from
year-end 1994 to year-end 1995), made stocks seem reasonably priced again in
relative terms and corporate profitability surged. This led us to re-establish a
more bullish orientation in late April, and we have continued along this path.
It is worth noting that the bond market rally was a global phenomenon. In
fact, when compared to the bond markets of other developed countries in 1995,
the U.S. market was only a mediocre performer as inflation subsided around the
globe. Interestingly, U.S. stocks were indeed an exception to global equity
market performance, as most equity markets around the world were disappointing,
at best, due primarily to weak economic growth.
- -------------------------------------------------------------------------------
(1) The S&P 500 Index is an unmanaged index 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 Index and the
Lehman Aggregate Bond Index are not available for investment and their
returns do not reflect any sales charges which an investor may have to pay
when purchasing 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 take into account the current maximum sales charge of 4.5%,
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 Service, Inc. and Morningstar are independent mutual fund
monitoring and rating services and their 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.
- -------------------------------------------------------------------------------
6
<PAGE>
Q. WHAT ARE YOUR EXPECTATIONS FOR THE COMING YEAR?
A. Our portfolio weightings show that we consider both stocks and bonds
attractive, so for the moment we will maintain our current weightings. For the
economy as a whole, compared to a year ago, economists on average are expecting
a bit less real growth (2.7% for 1996 versus the 3.0% that was expected for 1995
a year ago) and a bit less consumer inflation (2.9% for 1996 versus the 3.3%
that was expected for 1995 a year ago). While growth is slowing, a recession
does not seem to be at hand.
Probably the greatest risk to our outlook could come from a shock to 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. Adding this
ingredient to the fact that this is a presidential election year should make
1996 interesting, to say the least. Quite possibly 1996 will prove to be a year
when asset allocation decisions are critical.
THE GUARDIAN ASSET ALLOCATION FUND PROFILE
AS OF DECEMBER 31, 1995
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPH]
Data representation of graph:
The Guardian Asset Lehman Aggreate
Allocation Fund S&P 500 Index Bond Fund Index
--------------- -------------- ---------------
1 9550 1 10000 1 10000
2 9674 2 9980 2 10129
3 9856 3 10190 3 10172
4 9798 4 9944 4 10243
5 9894 5 10209 5 10256
6 10180 6 10239 6 10442
7 10180 7 10198 7 10501
8 10553 8 10584 8 10685
9 10916 9 10503 9 10714
10 10877 10 10720 10 10753
11 10591 11 10618 11 10662
12 10715 12 10746 12 10720
13 11116 13 11111 13 10864
14 10858 14 10810 14 10675
15 10505 15 10339 15 10412
16 10429 16 10472 16 10328
17 10362 17 10643 17 10327
18 10180 18 10383 18 10305
19 10362 19 10723 19 10510
20 10667 20 11162 20 10522
21 10457 21 10890 21 10368
22 10658 22 11134 22 10358
23 10285 23 10729 23 10335
24 10486 24 10887 24 10407
25 10419 25 11170 25 10613
26 11021 26 11604 26 10865
27 11288 27 11946 27 10932
28 11365 28 12398 28 11085
29 11727 29 12788 29 11514
30 11985 30 13085 30 11598
31 12539 31 13519 31 11572
32 12549 32 13553 32 11712
33 12873 33 14124 33 11826
34 12759 34 14074 34 11980
35 13045 35 14691 35 12159
36 13055 36 14974 36 12330
To give you a comparison, the chart above shows the performance of a $10,000
investment made in The Guardian Asset Allocation Fund, the S&P 500 Index and the
Lehman Aggregate Bond Index.(1) The starting point of $9,550 for the Fund
reflects the maximum sales load of 4.5% which an investor may have to pay when
purchasing shares of the Fund. The Indexes begin at $10,000. 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. Past performance is not a
guarantee of future results.
MARKET EXPOSURE BY ASSET CLASS
[PIE CHART]
Data representation of pie chart:
Stock 77.0%
Bonds 20.0%
Cash & Cash Equivalents 3.0%
The market exposure shown above provides an illustration of the Fund's
allocation to different market segments as of December 31, 1995. For a complete
listing of Fund holdings, please refer to the Schedule of Investments.
Average Annual Returns(2)
reflecting 4.5% sales charge
----------------------------
1 year ........................... 18.91%
Since inception (2/16/93) ........ 9.72%
- --------------------------------------------------------------------------------
7
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
[Photo]
R. Robin Menzies,
Portfolio Manager
Q. MARKETS IN THE UNITED STATES HAVE DONE VERY WELL THIS YEAR. HOW HAVE
INTERNATIONAL MARKETS AND THE FUND PERFORMED?
A. International markets rose a decent 11.55% for the year ended December 31,
1995 according to our benchmark index, the Morgan Stanley Capital International
(MSCI) Europe, Australia and Far East (EAFE) Index, but international markets
were overshadowed by a very strong Wall Street.(1) In dollar terms, according to
MSCI, the best-performing area internationally during 1995 was Continental
Europe (up 22.6%) and the worst was Japan (up a mere 0.9%). The main positive
influence on international equity markets was the significant fall in bond
yields during the course of the year, again led by the U.S. where the yield on
the long bond fell by almost 2% from December 31, 1994 to December 31, 1995. As
long bond yields fall, the more inclined large institutional investors are to
buy equities instead of bonds since stocks offer potentially higher, albeit more
volatile, capital returns. Profits and dividend growth were generally
satisfactory in the international markets, but most economies outside the Far
East slowed as the year progressed. The main positive unanticipated profits
arose from companies shedding labor to cut costs. The Fund performed well in
1995, rising by 11.14%.(2)
Q. WHAT FACTORS AFFECTED PERFORMANCE THIS YEAR?
A. While the Fund benefited during the year as a whole from not having as much
in Japan as did the MSCI/EAFE Index, the most significant factor helping
performance was the increase we made to the Japanese stake in early July. (The
Fund held 32% on average in Japan during the year, as compared to over 40% in
the Index). This may sound contradictory, but let me explain. During the first
half of the year, Japan was very weak, down 21.9% measured in yen, again
according to MSCI. The Japanese economy stagnated due in part to a strong
currency which made exports more expensive. Also, during the year, concerns over
the state of the Japanese financial sector increased, rather like the S&L crisis
in the U.S. a few years ago. In dollar terms, much of the fall was offset by the
strength of the yen and the market was down by only 8% in dollars. By the middle
of the year however, once the trade dispute with the U.S. had been settled, we
saw the Japanese authorities, at last, taking a number of steps to boost their
economy, including lowering interest rates and printing money. We felt that this
would be good for the Japanese equity markets, even though it might well lead to
a weaker yen at the same time. So, we increased the proportion of the Fund
invested in Japan by about 5% of the total Fund, and at the same time we raised
the proportion of the Japanese assets hedged from 30% to 50%. This means that we
increased the percentage of our Japanese holdings that were protected (or
"hedged") from downward exchange rate (or currency) movement. In the second half
of 1995, this strategy worked. Japan's securities markets rose, according to
MSCI, by 9.9% in dollar terms, but in yen terms it was even stronger, up by
33.6%. Our partial yen hedge helped the Fund to secure some of that large
increase.
As we were increasing our Japanese holdings, we purchased Rohm. Rohm is a
world leader in specialist semiconductors for industrial applications. Two Rohm
products that are doing particularly well at the moment are the lasers used in
CD-ROM drives, and components
- --------------------------------------------------------------------------------
(1) The Morgan Stanley Capital International EAFE Index is an unmanaged index
that is generally considered to be representative of international stock
market activity. The Index is capitalization-weighted and carries a
significantly higher weighting in Japan than the Fund is normally likely to
have because the Fund seeks to diversify investments across all major
international markets. The performance of the Fund and the EAFE Index may
not therefore always correlate closely. The EAFE Index is not available for
investment.
(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 charge of
4.5%, 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 investors shares, when redeemed, may be worth more or
less than the original cost.
- --------------------------------------------------------------------------------
8
<PAGE>
for cellular telephones. The company has an excellent record of new product
development, and is also moving its production to the low-cost countries of
Asia. Its dollar price rose by 36% over the year 1995.
Another factor that contributed to our overall performance was the strong
stock markets in continental Europe where we have 28.1% of our portfolio
invested. In Italy, we recently purchased Gucci. Over the past three years,
Gucci, the Italian luxury goods company, has cut costs and streamlined both its
product range and distribution network. While this process is continuing, Gucci
has started to take advantage of its powerful, but largely unexploited brand
name to increase sales. In the context of a favorable trading environment for
luxury goods, the outlook for earnings growth is very attractive.
Q. WHAT IS YOUR OUTLOOK FOR 1996? AND WHAT CHANGES DO YOU ANTICIPATE MAKING IN
THE FUND?
A. We are quite optimistic about the outlook for international equities in 1996.
We believe that there is room for further cuts in interest rates in Europe, and
we are impressed by the moves many companies have made to cut costs, and hence
to boost their profit margins. We will continue to look for high-quality
companies for the Fund to invest in, and may increase the proportion invested in
the so-called "Tiger" economies of the Pacific Rim, such as Hong Kong, Malaysia
and Singapore, where economic growth continues to be strong and stock prices
have lagged other areas recently.
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND PROFILE AS OF DECEMBER 31, 1995
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
The Guardian
Baillie Gifford The MSCI/EAFE
Int'l Fund Index
-------------------- --------------
1 9550 1 10000
2 9661 2 10304
3 9828 3 11206
4 10348 4 11627
5 10599 5 12535
6 10386 6 12342
7 10664 7 12777
8 11361 8 13469
9 11398 9 13169
10 11891 10 12777
11 11333 11 12394
12 12353 12 13292
13 12859 13 14418
14 12643 14 14381
15 12241 15 13765
16 12596 16 14352
17 12493 17 14273
18 12381 18 14478
19 12728 19 14620
20 13056 20 14969
21 12550 21 14501
22 12934 22 14988
23 12296 23 14271
24 12285 24 14363
25 11567 25 13815
26 11586 26 13779
27 12020 27 14642
28 12332 28 15197
29 12360 29 15019
30 12360 30 14760
31 13039 31 15683
32 12925 32 15088
33 13154 33 15387
34 12944 34 14977
35 13135 35 15398
36 13654 36 16023
To give you a comparison, the chart above shows the performance of a $10,000
investment made in The Guardian Baillie Gifford International Fund and the
MSCI/EAFE Index.(1) The starting point of $9,550 for the Fund reflects the
maximum sales load of 4.5% which an investor may have to pay when purchasing
shares of the Fund. The Index begins at $10,000. 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. Past performance is not a guarantee of
future results.
AVERAGE ANNUAL RETURNS(2)
REFLECTING 4.5% SALES CHARGE
----------------------------
1 year ........................... 6.14%
Since inception (2/16/93) ........ 11.46%
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Top 10 Holdings
COMPANY NATURE OF COMPANY COUNTRY PERCENT
- --------------------------------------------------------------------------------
MITSUBISHI HEAVY, INDS. INDUSTRIAL MACHINERY JAPAN 1.88%
- --------------------------------------------------------------------------------
SANWA BANK BANKING JAPAN 1.78%
- --------------------------------------------------------------------------------
NOMURA SECURITIES INVESTMENT COMPANY JAPAN 1.57%
- --------------------------------------------------------------------------------
SANDOZ AG DRUGS AND HEALTHCARE SWITZERLAND 1.55%
- --------------------------------------------------------------------------------
DDI CORP. TELECOMMUNICATIONS JAPAN 1.53%
- --------------------------------------------------------------------------------
BRIDGESTONE CORP. TIRES AND RUBBER JAPAN 1.42%
- --------------------------------------------------------------------------------
CIBA GEIGY AG CHEMICALS SWITZERLAND 1.38%
- --------------------------------------------------------------------------------
WINTERTHUR INSURANCE SWITZERLAND 1.36%
- --------------------------------------------------------------------------------
KYOCERA CORP. ELECTRONICS JAPAN 1.33%
- --------------------------------------------------------------------------------
ROHM ELECTRONICS JAPAN 1.27%
- --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see the Schedule of
Investments.
- --------------------------------------------------------------------------------
9
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
[Photo]
Michele S. Babakian,
Portfolio Manager
Q. HOW DID THE GUARDIAN INVESTMENT QUALITY BOND FUND PERFORM IN 1995?
A. The Fund had a total return of 16.64% for the year.(1) This return compared
favorably to our Morningstar peer group of funds that invest in general
corporate and other bonds of various quality ratings. This group had a total
return of 16.46% for the year ended December 31, 1995.(2) In 1995, the
environment was ideal for bonds. The U.S. economy experienced modest economic
growth and low inflation throughout the year. By the end of the second quarter,
it appeared that a "soft landing" was being well orchestrated by the Federal
Reserve Board. As a result, investors began to anticipate lower interest rates,
and the bond markets rallied through the end of the fourth quarter, when the
prospects for a deficit reduction package seemed bright.
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET?
A. Despite the budget impasse in Washington, which is presently of much
concern to the bond market, there are very positive themes that can be
identified as we begin 1996. We are encouraged that the gross domestic product
is expected to be less than 3.0% for the year. Inflation, as measured by the
consumer price index, is expected to be approximately 2.8%. In relation to
inflation, real returns on bonds are still high, so we have room for yields to
rally further. In this environment, the Fund will seek to analyze and invest in
selective investment opportunities to provide investors with positive returns
with limited investment risk.
Q. WHAT WERE THE MAIN FACTORS THAT AFFECTED THE FUND'S PERFORMANCE IN 1995?
A. Though the Fund slightly outperformed our peer group, we underperformed our
broad market index, the Lehman Aggregate Bond Index, which produced a total
return of 18.47 percent.(3) There are two main reasons why the Fund
underperformed the Index.
First was our choice of duration. "Duration" is used to measure the price
change of a bond as market yields vary. At the beginning of 1995, the average
duration of the Fund's holdings was 3.41 years. We positioned the Fund with a
duration shorter than the Index's average duration of 4.67 years because the
economic statistics suggested a strong economy with the potential for increased
inflation. This scenario would have put us in a bear market where yields rise
and prices fall and where a shorter duration portfolio would have been
beneficial. However, by May, it appeared economic growth had moderated and we
increased the Fund's duration to 4.44 years by June 30. At December 31, the Fund
had an average duration of 4.78 years, which was slightly longer than the
Index's year-end average duration of 4.47 years.
The second reason for the underperformance compared to the Index was due to
the Fund's under-exposure in the long corporate bond sector in the first quarter
of the year. In 1995, the best performing bond market sector was the long
duration, high-grade corporate sector (which according to Lehman data provided a
return for the 1995 calendar year of 22.25%). Within the corporate sector, basic
industry, transportation and Yankee bonds (i.e., dollar denominated bonds issued
by foreign companies) were among the best performing categories. At the
beginning
- --------------------------------------------------------------------------------
(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 October 21, 1994, the investment adviser for
the Fund has been assuming the operating expenses of the Fund to the extent
they exceed .75% of the Fund's average daily net assets. Without these
reimbursements, the performance figures would be 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) Morningstar 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. Morningstar returns do not reflect the
deduction of sales loads, and performance would be different if sales loads
were deducted.
(3) 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 investment and its returns do not
reflect any sales charges, which an investor may have to pay when purchasing
shares of the Fund.
- --------------------------------------------------------------------------------
10
<PAGE>
of the year, the Fund held only 9.2% in corporates (the Index held 16.03%), but
the corporates held by the Fund were, on average, of shorter duration than the
ones held by the Index, as discussed above. To make up for this shortfall, the
Fund started to increase its investment in corporates with longer durations and
by midyear, we had increased our holdings to 22.8% of the Fund's assets. We
ended the year with 25.0% of our portfolio in corporates.
Q. BESIDES THE MOVEMENT INTO CORPORATE DEBT INSTRUMENTS, WHAT ELSE DID YOU
FAVOR?
A. During 1995, the Fund increased its holdings of asset-backed securities from
2.0% of the Fund on December 31, 1994 to 13.2% on December 31, 1995.
Asset-backed securities are short-term bonds backed by the interest and
principal payments on credit card, automobile loans and other consumer debt. In
1995, the asset-backed securities sector of the bond market had a total return
of 13.43%, according to Lehman figures. While this return is not as high as the
return generated from corporates, asset-backed securities are an important part
of the Fund's portfolio because they fill a gap in duration. To keep the Fund's
portfolio balanced and not create undue risk, we seek to have bonds in all
maturity ranges. Although the duration of asset-backed securities is typically
comparable to the duration found in short-term Treasury notes, we found the
return on asset-backed securities satisfactory--better, in fact, than the return
on Treasury-notes, with only slightly greater risk. We limited our selection of
bonds in this sector to triple-A rated securities.
THE GUARDIAN INVESTMENT QUALITY BOND FUND PROFILE AS OF DECEMBER 31, 1995
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
The Guardian Lehman
Investment Quality Aggregate
Bond Fund Bond Index
------------------ ----------
1 9550 1 10000
2 9571 2 10129
3 9646 3 10171
4 9677 4 10242
5 9627 5 10255
6 9858 6 10441
7 9876 7 10500
8 10108 8 10684
9 10140 9 10713
10 10133 10 10753
11 10011 11 10662
12 10065 12 10720
13 10251 13 10864
14 10044 14 10676
15 9771 15 10412
16 9659 16 10329
17 9616 17 10328
18 9591 18 10305
19 9714 19 10510
20 9746 20 10523
21 9623 21 10368
22 9615 22 10359
23 9563 23 10336
24 9612 24 10407
25 9768 25 10613
26 10029 26 10865
27 10072 27 10932
28 10185 28 11085
29 10533 29 11514
30 10596 30 11598
31 10551 31 11572
32 10670 32 11712
33 10753 33 11826
34 10897 34 11980
35 11071 35 12159
36 11212 36 12330
To give you a comparison, the chart above shows the performance of a $10,000
investment made in TheGuardian Investment Quality Bond Fund and in the Lehman
Aggregate Bond Index.(3) The starting point of $9,550 for the Fund reflects the
maximum sales load of 4.5%, which an investor may have to pay when purchasing
shares of the Fund. The Index begins at $10,000. 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. Past performance is not a guarantee of
future results.
TOTAL PORTFOLIO COMPOSITION BY ASSET CLASS
Graphical Reprentation of Pie Chart Below
Cash Equivalents 5.7%
Corporate Bonds 23.7%
Multi Class Mortgages 17.7%
Mortgage Pass-Throughs 3.5%
Asset-Backed Securities 12.5%
U.S. Government and Agencies 36.9%
Percentages of invested assets exclude other assets and liabilities. For a
complete list of portfolio holdings, please see the Schedule of Investments.
AVERAGE ANNUAL RETURNS(1)
REFLECTING 4.5% SALES CHARGE
----------------------------
1 year ........................... 11.39%
Since inception (2/16/93) ........ 4.06%
- --------------------------------------------------------------------------------
11
<PAGE>
THE GUARDIAN TAX-EXEMPT FUND
[Photo]
Alexander M. Grant, Jr.,
Portfolio Manager
Q. HOW DID THE GUARDIAN TAX-EXEMPT FUND PERFORM IN 1995?
A. The Fund produced a total return of 14.59% for the year ended December 31,
1995.(1) In comparison, the Lehman Municipal Bond Index produced a total return
of 17.45%.(2) For the six months ended December 31, 1995, the Fund's total
return was 6.86% or just slightly less than the Index, which produced a return
of 7.12% over the same period.
As of December 31, 1995, the Fund's 30-day yield was 4.85%. An individual
in the highest federal income tax bracket would need to earn a taxable yield of
roughly 8% to equate to the Fund's tax-free yield.
Q. WHAT FACTORS AFFECTED YOUR PERFORMANCE?
A. Certainly, proposed tax legislation has added volatility to our markets. A
number of presidential candidates have been discussing a possible flat tax,
which could diminish the tax advantages of municipal bonds when compared with
other investments. Another proposed tax change which has received less publicity
than the flat tax would remove the tax-free benefits for some financial
companies that buy municipal bonds with the proceeds from long-term debt.
Although this so-called de minimus rule would not directly affect The Guardian
Tax-Exempt Fund or any other mutual fund, it has caused concern among municipal
bond investors, like the Fund, because it would eliminate a significant category
of buyers of municipals and therefore reduce the liquidity of the market. In
addition, the stock market's 30+% returns in 1995 reduced the demand for
municipal bonds as investors generally sought the higher potential returns of
the equity markets rather than the advantages of tax-free investing. However,
municipal bonds, like all fixed income securities, benefited from the sharp drop
in intermediate and long-term interest rates in 1995.
Q. WHAT IS THE FUND'S INVESTMENT STRATEGY?
A. We do not, and will not, try to guess the direction of interest rates.
Rather, we look for relative value in the market. Therefore, we keep the Fund's
duration close to the duration of our benchmark index. By doing so, the Fund's
net asset value should fluctuate in a similar manner as the index when interest
rates change. In addition, our strategy is to protect the portfolio against call
risk. Issuers of high coupon bonds tend to call their bonds when interest rates
fall so that they can reissue debt at lower interest rates. To protect the
portfolio against this call risk, we emphasize high-coupon, non-callable bonds.
About 60% to 65% of the portfolio is non-callable, thereby protecting the
portfolio in the event that interest rates fall further. Another Fund investment
strategy is to buy high-quality bonds. The portfolio's overall credit quality is
AA+, the second highest possible ranking. We don't believe that lower quality
bonds offer enough extra yield to compensate for the added risk and price
volatility.
Q. WHAT INDIVIDUAL SECURITIES IN THE FUND REPRESENT YOUR STRATEGY?
A. For example, we own State of Georgia 6.80% coupon general obligation bonds
due 8/1/2000. The bonds are a natural triple A and are non-callable. A "natural
triple A" is a triple A on its own merit and its
- --------------------------------------------------------------------------------
(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 .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 investment and its returns
do not reflect any sales charge which an investor may have to pay when
purchasing shares of the Fund.
- --------------------------------------------------------------------------------
12
<PAGE>
rating is not enhanced by underlying collateral, such as U.S. Treasuries, or
insurance. Another non-callable bond that has performed very well in this
falling interest rate environment is Triborough Bridge & Tunnel Authority
Revenue bonds, with a 6% coupon due 1/1/2012. The bonds are double A-rated.
Non-callable bonds are currently trading in the marketplace at a 0.10% to
0.15% point premium to their callable counterparts. So during 1996, we may start
to look at carefully selected high-coupon callable bonds in order to maintain
our healthy tax-free returns.
THE GUARDIAN TAX-EXEMPT FUND PROFILE
Graphical Representation of Data Table Below
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
The Guardian Lehman Municipal
Tax-Exempt Fund Bond Index
--------------- ----------------
1 9550 1 10000
2 9690 2 10245
3 9475 3 10137
4 9571 4 10239
5 9609 5 10296
6 9830 6 10468
7 9767 7 10482
8 10053 8 10700
9 10231 9 10822
10 10153 10 10843
11 10002 11 10748
12 10223 12 10974
13 10353 13 11100
14 9952 14 10812
15 9403 15 10372
16 9400 16 10460
17 9518 17 10551
18 9377 18 10486
19 9548 19 10678
20 9557 20 10715
21 9391 21 10558
22 9235 22 10371
23 9073 23 10183
24 9305 24 10407
25 9586 25 10705
26 9813 26 11016
27 9889 27 11143
28 9885 28 11156
29 10174 29 11512
30 9978 30 11411
31 10115 31 11519
32 10205 32 11665
33 10245 33 11739
34 10391 34 11910
35 10557 35 12107
36 10663 36 12224
To give you a comparison, the chart above shows the performance of a $10,000
investment made in The Guardian Tax-Exempt Fund and the Lehman Municipal Bond
Index.(2) The starting point of $9,550 for the Fund reflects the maximum sales
load of 4.5% which an investor may have to pay when purchasing shares of the
Fund. The Index begins at $10,000. 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. Past performance is not a guarantee of future
results.
PORTFOLIO COMPOSITION BY QUALITY
RATINGS ARE ACCORDING TO MOODY'S
CASH & CASH EQUIVALENTS .............. 3.9%
A .................................... 13.7%
Aa ................................... 32.5%
Aaa .................................. 49.9%
AVERAGE ANNUAL RETURNS(1)
REFLECTING 4.5% SALES CHARGE
1 year ............................ 9.43%
Since inception (2/16/93) ......... 2.26%
- --------------------------------------------------------------------------------
13
<PAGE>
THE GUARDIAN CASH MANAGEMENT FUND
Q. HOW DID THE GUARDIAN CASH MANAGEMENT FUND PERFORM DURING 1995?
A. As of December 31, 1995, the effective 7-day yield was 5.17%, down slightly
from June 30, 1995, when the effective 7-day yield was 5.30%. The Fund produced
a total return of 5.22% for 1995.(1)
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE IN 1995?
A. Money market funds are directly affected by the actions of the Federal
Reserve Board. In February, the Fed raised the Fed Funds target rate 0.50
percentage points to 6.00%, the seventh such increase in a year. The Fed Funds
Rate is the interest rate that member banks charge each other when they lend
money overnight. While the Federal Reserve Board does not set this rate, it can
establish a target rate and, through open market operations, the Fed can direct
member banks to move in the direction of the target rate. As the economy slowed
in the spring, investors began to expect the Fed to lower interest rates. As a
result, market forces exerted downward pressure on the rates offered on
short-term instruments, i.e., the type of investments made by the Fund, even
before the Fed acted. In July, and again in December, the Fed lowered rates .25
percentage points. At year-end, the Fed Funds target rate was 5.50%.
Q. WHAT IS YOUR INVESTMENT STRATEGY?
A. We look at The Guardian Cash Management 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 try, and will continue to try, to
provide a good 7-day yield offering safety and liquidity. As a result, the Fund
invests primarily in top-rated commercial paper due within 30 days. At the end
of 1995, the Fund's average maturity was 18 days for maximum liquidity and
safety. A shorter maturity is less volatile when interest rates fluctuate.
During the next year, we will continue our investment strategy to provide
investors with a combination of solid returns, liquidity and preservation of
capital.
- --------------------------------------------------------------------------------
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. During 1995, the
investment adviser for the Fund assumed the operating expenses of the Fund
to the extent they exceeded .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
December 31, 1995
o THE GUARDIAN PARK AVENUE FUND
COMMON STOCKS -- 91.9%
Shares Value
- -----------------------------------------------------
AEROSPACE AND DEFENSE -- 4.5%
25,500 Boeing Co. $ 1,998,563
59,000 Litton Industries, Inc. 2,625,500
36,400 Lockheed Martin Corp. 2,875,600
187,600 Logicon, Inc. 5,159,000
18,000 Loral Corporation 636,750
231,000 McDonnell Douglas Corp. 21,252,000
93,950 Precision Castparts Corp. 3,734,513
110,000 Rockwell Int'l. Corp. 5,816,250
-----------
44,098,176
- -----------------------------------------------------
BROADCASTING AND PUBLISHING -- 1.2%
92,000 Capital Cities/ABC, Inc. 11,350,500
10,000 Duff & Phelps Cr. Rating Co. 143,750
-----------
11,494,250
- -----------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 0.2%
32,700 Coachmen Industries, Inc. 711,225
24,600 Del Webb Corp.* 495,075
30,000 McGrath RentCorp. 570,000
10,100 NCI Building Systems, Inc.* 249,975
-----------
2,026,275
- -----------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 1.0%
69,400 Komag, Inc. 3,201,075
78,650 Paychex, Inc. 3,922,668
105,000 Read-Rite Corp.* 2,441,250
37,300 Rexel, Inc. 503,550
-----------
10,068,543
- -----------------------------------------------------
CHEMICALS -- 3.1%
34,000 Albemarle Corp. 658,750
77,800 Cambrex Corp. 3,218,975
59,700 E.I.Dupont De Nemours, Inc.* 4,171,536
127,700 Eastman Chemical Co. 7,997,213
50,200 Hercules, Inc. 2,830,025
12,900 OM Group, Inc. 427,313
145,000 PPG Industries, Inc. 6,633,750
126,400 Sterling Chemicals, Inc.* 1,027,000
100,000 Union Carbide Corp. 3,750,000
-----------
30,714,562
- -----------------------------------------------------
COAL -- 0.1%
17,000 Eastern Enterprises 599,250
- -----------------------------------------------------
COMPUTER SOFTWARE -- 4.0%
387,000 Computer Associates
International, Inc. 22,010,625
55,000 Fair Isaac & Co., Inc. 1,423,125
120,000 Microsoft Corp.* 10,530,000
40,000 Oracle Systems Corp* 1,695,000
101,000 SunGard Data Systems, Inc. 2,878,500
-----------
38,537,250
- -----------------------------------------------------
CONGLOMERATES -- 1.4%
90,000 Loews Corp. $ 7,053,750
95,000 Textron, Inc. 6,412,500
-----------
13,466,250
- -----------------------------------------------------
CONTAINERS -- 0.1%
14,250 Alltrista Corp.* 256,500
29,000 Ball Corp. 797,500
-----------
1,054,000
- -----------------------------------------------------
COSMETICS AND TOILETRIES -- 0.4%
72,800 Gillette Co. 3,794,700
8,100 Helen of Troy Ltd.* 170,100
-----------
3,964,800
- -----------------------------------------------------
DRUGS AND HOSPITALS -- 8.5%
154,000 Abbott Labs 6,429,500
35,000 Boston Scientific Corp.* 1,715,000
82,400 Bristol-Myers Squibb Corp. 7,076,100
97,377 Guidant Corp. 4,114,178
115,100 Johnson & Johnson 9,855,437
90,396 Eli Lilly & Co., Inc. 5,084,775
104,000 McKesson Corp. 5,265,000
90,000 Medtronic, Inc. 5,028,750
209,400 Merck & Co., Inc. 13,768,050
129,000 Pfizer, Inc. 8,127,000
191,000 Schering Corp. 10,457,250
100,000 Universal Health Svcs., Inc. 4,437,500
37,400 Watson Pharmaceuticals, Inc.* 1,832,600
-----------
83,191,140
- -----------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.8%
98,000 Applied Materials, Inc. 3,858,750
60,000 Integrated Device Technology 772,500
42,600 Linear Technology Corp. 1,672,050
18,000 Sundstrand Corp. 1,266,750
-----------
7,570,050
- -----------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.9%
200,000 Analogic Corp. 3,700,000
74,000 Electroglas, Inc. 1,813,000
38,000 Tektronix, Inc. 1,866,750
55,000 Vishay Intertechnology, Inc. 1,732,500
-----------
9,112,250
- -----------------------------------------------------
ENERGY-MISCELLANEOUS -- 0.7%
129,500 Giant Industries, Inc. 1,586,375
167,104 Holly Corp. 3,780,728
86,500 Howell Corp. 1,243,438
-----------
6,610,541
- -----------------------------------------------------
ENTERTAINMENT -- 0.2%
59,272 Mattel, Inc. 1,822,614
- -----------------------------------------------------
See notes to financial statements. *Non-income producing securities.
15
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- -----------------------------------------------------
Shares Value
- -----------------------------------------------------
FERTILIZER -- 0.7%
120,100 First Mississippi Corp. $ 2,792,325
289,300 Terra Industries, Inc. 4,086,362
-----------
6,878,687
- -----------------------------------------------------
FINANCIAL-BANKS -- 3.8%
90,000 BankAmerica Corp. 5,827,500
80,000 Bank of New York, Inc. 3,900,000
23,000 Central & Southern Holding Co. 207,000
80,000 Chemical Banking Corp. 4,700,000
123,464 Citicorp 8,302,954
75,000 Corestates Financial Corp. 2,840,625
12,200 First Bank Systems Corp. 605,425
12,400 First Empire State Corp. 2,703,200
49,005 Hubco, Inc. 1,084,236
122,248 Norwest Corp. 4,034,184
70,000 Premier Bancorp., Inc. 1,636,250
12,000 Star Banc Corp. 714,000
-----------
36,555,374
- -----------------------------------------------------
FINANCIAL-OTHERS -- 7.4%
105,000 American Express Co. 4,344,375
123,240 Capital One Financial Corp. 2,942,355
95,000 Dean Witter Discover & Co. 4,465,000
63,200 A.G. Edwards, Inc. 1,508,900
60,000 Federal National Mortgage
Association 7,447,500
15,245 Financial Sec. Assur
Holdings Ltd. 379,219
163,000 First USA, Inc. 7,233,125
577,000 Green Tree Financial Corp. 15,218,375
50,000 Jefferies Group, Inc. 2,362,500
57,400 McDonald & Co. Investments,
Inc. 1,033,200
151,200 Merrill Lynch & Co., Inc. 7,711,200
167,850 Morgan Keegan, Inc. 2,119,106
152,200 Phoenix Duff & Phelps Corp. 1,046,375
67,300 Raymond James Financial, Inc. 1,421,713
120,000 Charles Schwab Corp. 2,415,000
170,000 Travelers Group, Inc. 10,688,750
-----------
72,336,693
- -----------------------------------------------------
FINANCIAL-THRIFT -- 3.3%
24,000 Bell Bancorp 858,000
75,000 Brooklyn Bancorp., Inc.* 3,056,250
88,750 Charter One Financial, Inc. 2,717,969
47,000 Coastal Bank Svgs. Assn.-TX 822,500
152,199 Collective Bancorp, Inc. 3,862,050
90,000 Greenpoint Financial Corp. 2,407,500
59,800 Loyola Capital Corp. 2,264,925
27,060 MAF Bancorp, Inc. 676,500
20,960 Pacific Crest Capital, Inc. 151,960
84,800 Progressive Bank, Inc. $ 2,501,600
78,000 Standard Federal Bancorp-
Troy, MI 3,071,250
347,851 Sovereign Bancorp, Inc. 3,521,991
187,964 TCF Financial Corp. 6,226,308
-----------
32,138,803
- -----------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 6.5%
70,000 Anheuser-Busch Cos., Inc. 4,681,250
206,800 Coca-Cola Co. 15,354,900
73,700 IBP, Inc. 3,721,850
131,200 PepsiCo, Inc. 7,330,800
352,000 Philip Morris Cos., Inc. 31,856,000
-----------
62,944,800
- -----------------------------------------------------
FOOTWEAR -- 0.2%
66,100 Reebok International Ltd. 1,867,325
- -----------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.0%
115,400 Procter & Gamble Co. 9,578,200
- -----------------------------------------------------
INFORMATION PROCESSING AND COMPUTERS -- 4.5%
227,700 Amdahl Corp.* 1,935,450
46,200 Astro-Med, Inc. 427,350
60,000 Bay Networds, Inc. 2,467,500
81,000 Cisco Systems, Inc. 6,044,625
60,000 Compaq Computer Corp. 2,880,000
146,400 Hewlett Packard Co. 12,261,000
30,500 In Focus Systems, Inc.* 1,101,813
245,400 Sun Microsystems, Inc. 11,196,375
340,000 Tandem Computers, Inc. 3,612,500
77,800 Teradyne, Inc. 1,945,000
-----------
43,871,613
- -----------------------------------------------------
INSURANCE -- 2.2%
119,700 Allstate Corp. 4,922,663
74,000 Amer. Bankers Ins. Group,
Inc. 2,886,000
9,000 Capitol Amer. Fin'l. Corp. 203,625
20,000 CMAC Investment Corp. 880,000
20,000 Integon Corp. 412,500
42,080 Liberty Financial Cos., Inc. 1,272,920
65,000 MBIA, Inc. 4,875,000
67,000 MGIC Investment Corp. 3,634,750
61,500 State Auto Financial Corp. 1,599,000
7,900 Torchmark, Inc. 357,475
----------
21,043,933
- -----------------------------------------------------
LEISURE PRODUCTS -- 0.1%
64,200 Thor Industries, Inc. 1,243,875
- -----------------------------------------------------
LODGING -- 0.7%
417,800 Host Marriott Corp.* 5,535,850
175,000 Prime Hospitality Corp.* 1,750,000
-----------
7,285,850
- -----------------------------------------------------
* Non-income producing securities. See notes to financial statements.
16
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- -----------------------------------------------------
Shares Value
- -----------------------------------------------------
MACHINERY AND EQUIPMENT -- 2.4%
16,000 AGCO Corp. $ 816,000
30,000 Case Corp. 1,372,500
118,000 Dover Corp. 4,351,250
155,600 Global Industrial
Technologies, Inc.* 2,936,950
65,000 Kulicke & Soffa
Industries, Inc. 1,511,250
90,000 Millipore Corp. 3,701,250
15,400 Robbins & Myers, Inc. 462,000
31,000 Strattec Security Corp. 558,000
58,900 Tecumseh Products Co. 3,048,075
63,937 Varlen Corp. 1,374,645
60,000 York International Corp. 2,820,000
----------
22,951,920
- -----------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 0.4%
130,000 Dillard Dept. Stores, Inc. 3,705,000
- -----------------------------------------------------
MERCHANDISING-DRUGS -- 0.3%
10,000 Longs Drug Stores Corp. 478,750
75,000 Walgreen Co. 2,240,625
----------
2,719,375
- -----------------------------------------------------
MERCHANDISING-FOOD -- 0.9%
33,900 American Stores Co.* 906,825
294,700 Casey's General Stores, Inc. 6,446,563
22,000 Fleming Cos., Inc. 453,750
23,000 SuperValu, Inc. 724,500
----------
8,531,638
- -----------------------------------------------------
MERCHANDISING-SPECIAL -- 0.4%
35,000 CompUSA, Inc.* 1,089,375
80,000 Melville Corp. 2,460,000
45,000 Pier 1 Imports, Inc. 511,875
----------
4,061,250
- -----------------------------------------------------
METALS AND MINING -- 0.4%
70,000 Aluminum Co. of America 3,701,250
- -----------------------------------------------------
NATURAL GAS-DIVERSIFIED -- 0.5%
143,000 Mitchell Energy & Dev. Corp. 2,681,250
60,000 Panhandle Eastern Co. 1,672,500
----------
4,353,750
- -----------------------------------------------------
OIL AND GAS PRODUCING -- 3.4%
58,100 Alexander Energy Corp.* 265,081
76,900 Basin Exploration, Inc.* 379,694
267,900 Tom Brown, Inc.* 3,918,038
90,000 Cairn Energy USA, Inc.* 1,260,000
120,000 Chieftain International,
Inc.* 2,130,000
96,500 Coho Energy, Inc.* 470,437
153,000 Devon Energy Corp. 3,901,500
301,400 Enron Oil & Gas Co. 7,233,600
271,000 Global Natural Res., Inc.* 2,845,500
18,900 H S Resources, Inc.* 243,337
259,200 Phoenix Resource Cos., Inc. 4,471,200
92,500 Pogo Producing Co. 2,613,125
125,278 United Meridian Corp. 2,176,705
13,400 Vintage Petroleum, Inc. 301,500
170,000 Wainoco Oil Ltd. 552,500
----------
32,762,217
- -----------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 0.2%
252,100 Tesoro Petroleum, Inc.* $ 2,174,363
- -----------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 5.8%
379,000 Exxon Corp. 30,367,375
162,900 Mobil Corp. 18,244,800
54,000 Royal Dutch Pete Co. 7,620,750
----------
56,232,925
- -----------------------------------------------------
OIL SERVICES -- 0.8%
20,800 Cliffs Drilling Co. 309,400
209,400 Nabors Industries, Inc. 2,329,575
86,300 Offshore Logistics, Inc.* 1,089,537
130,000 Smith International, Inc.* 3,055,000
24,000 Weatherford International,
Inc.* 693,000
----------
7,476,512
- -----------------------------------------------------
PAPER AND FOREST PRODUCTS -- 2.4%
99,840 Kimberly-Clark Corp. 8,261,760
331,500 Rayonier, Inc. 11,063,812
76,000 Willamette Industries, Inc. 4,275,000
----------
23,600,572
- -----------------------------------------------------
POLLUTION CONTROL -- 0.6%
150,000 Browning-Ferris Industries,
Inc. 4,425,000
60,000 Safety-Kleen Corp. 937,500
11,400 Zurn Industries, Inc. 243,675
----------
5,606,175
- -----------------------------------------------------
RAILROADS -- 0.8%
40,301 Burlington Northern Santa Fe 3,143,478
64,900 Union Pacific Corp. 4,283,400
----------
7,426,878
- -----------------------------------------------------
RESTAURANTS -- 0.4%
157,900 Applebees Int'l., Inc. 3,592,225
60,000 Ryan's Family Steak Houses,
Inc. 420,000
----------
4,012,225
- -----------------------------------------------------
SEMICONDUCTOR -- 5.0%
20,000 Altera Corp.* 995,000
39,000 Analog Devices, Inc. 1,379,625
61,400 Atmel Corp. 1,373,825
122,800 Cypress Semiconductor Corp. 1,565,700
142,000 Intel Corp. 8,058,500
146,000 International Rectifier Corp. 3,650,000
115,000 LSI Logic Corp. 3,766,250
219,500 Micron Technology, Inc. 8,697,688
110,000 National Semiconductor Corp. 2,447,500
14,000 Novellus Systems, Inc.* 756,000
221,800 Texas Instruments, Inc. 11,478,150
150,000 Xilinx, Inc. 4,575,000
----------
48,743,238
- -----------------------------------------------------
See notes to financial statements. *Non-income producing securities.
17
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- -----------------------------------------------------
Shares Value
- -----------------------------------------------------
Telecommunications -- 0.7%
121,350 Andrew Corp. $ 4,641,638
43,300 Harris Corp. Del. 2,365,262
-----------
7,006,900
- -----------------------------------------------------
Textile-Apparel and Production -- 0.2%
103,000 Fieldcrest Cannon, Inc. 1,712,375
19,700 Russell Corp. 546,675
-----------
2,259,050
- -----------------------------------------------------
Transportation-Miscellaneous -- 0.1%
109,400 Maritrans, Inc. 642,725
- -----------------------------------------------------
Truckers -- 0.1%
59,000 FRP Pptys., Inc. 1,209,500
- -----------------------------------------------------
Utilities-Communications -- 7.1%
175,000 Ameritech Corp. 10,325,000
365,000 AT&T Corp. 23,633,750
47,600 Bell Atlantic Corp. 3,183,250
343,900 BellSouth Corp. 14,959,650
175,000 GTE Corp. 7,700,000
44,700 NYNEX Corp. 2,413,800
121,300 SBC Communications, Inc. 6,974,750
-----------
69,190,200
- -----------------------------------------------------
Utilities-Electric -- 1.3%
42,400 Consolidated Edison Co.
of N.Y., Inc. 1,356,800
100,500 Detroit Edison Co. 3,467,250
55,000 Illinova Corp. 1,650,000
55,000 Northeast Utilities 1,340,625
110,000 SCECorp 1,952,500
90,700 Unicom Corp. 2,970,425
-----------
12,737,600
- -----------------------------------------------------
Utilities-Gas and Pipeline -- 0.1%
49,400 Entergy Corp. 1,444,950
- -----------------------------------------------------
TOTAL COMMON STOCKS
(COST $674,081,186) 892,625,317
- -----------------------------------------------------
PREFERRED STOCK -- 0.1%
Shares Value
- -----------------------------------------------------
15,220 Phoenix Duff & Phelps Corp.,
Preferred Ser. "A" $384,305
- -----------------------------------------------------
TOTAL PREFERRED STOCK
(COST $0) 384,305
- -----------------------------------------------------
REPURCHASE AGREEMENT -- 7.8%
Principal Maturity
Amount Date Value
- ------------------------------------------------------------------
$76,014,000 State Street Bank & Trust
repurchase agreement,
dated 12/29/95, maturity
value $76,061,298, at 5.6%,
due 1/2/96 (collateralized by
$71,305,000 U.S. Treasury
Notes, 7.125% due 2/29/00,
market value $77,611,036) 1/2/96 $ 76,014,000
- ------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $76,014,000) 76,014,000
- ------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.7%
(COST $750,095,186) 969,023,622
CASH, RECEIVABLES AND OTHER ASSETS
LESS PAYABLES -- 0.3% 3,250,973
- ------------------------------------------------------------------
NET ASSETS -- 100.0% $972,274,595
- ------------------------------------------------------------------
* Non-income producing securities. See notes to financial statements.
18
<PAGE>
o THE GUARDIAN ASSET ALLOCATION FUND
COMMON STOCKS -- 61.0%
Shares Value
- -------------------------------------------------------
BROADCASTING -- 0.7%
3,800 Capital Cities/ABC, Inc. $ 468,825
- -------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 0.3 %
4,700 Komag, Inc. 216,788
- -------------------------------------------------------
CHEMICALS -- 1.8%
32,800 Union Carbide Corp. 1,230,000
- -------------------------------------------------------
COMPUTER SOFTWARE -- 0.9%
5,000 Microsoft Corp.* 438,750
5,000 Oracle Systems Corp.* 211,875
----------
650,625
- -------------------------------------------------------
CONGLOMERATES -- 1.4%
12,500 Loews Corp. 979,688
- -------------------------------------------------------
COSMETICS AND TOILETRIES -- 0.3%
4,100 Gillette Co. 213,712
- -------------------------------------------------------
DRUGS AND HOSPITALS -- 5.1%
5,900 Bristol-Myers Squibb Corp. 506,662
6,900 Johnson & Johnson 590,813
2,400 Medtronic, Inc 134,100
12,800 Merck & Co., Inc. 841,600
7,200 Pfizer, Inc. 453,600
20,000 Schering-Plough Corp. 1,095,000
----------
3,621,775
- -------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 1.5%
20,000 Electroglas, Inc. 490,000
12,000 Sun Microsystems, Inc. 547,500
----------
1,037,500
- -------------------------------------------------------
FINANCIAL-BANKS -- 5.0%
15,000 BankAmerica Corp. 971,250
31,800 Bank of New York, Inc. 1,550,250
15,000 Citicorp. 1,008,750
----------
3,530,250
- -------------------------------------------------------
FINANCIAL-OTHER -- 7.6%
20,000 A.G. Edwards, Inc. 477,500
17,165 Capital One Financial Corp. 409,814
40,000 Charles Schwab Corp. 805,000
8,000 Federal National Mortgage
Association 993,000
40,000 Green Tree Financial Corp. 1,055,000
20,000 Merrill Lynch & Co., Inc. 1,020,000
10,000 Travelers Group, Inc. 628,750
----------
5,389,064
- -------------------------------------------------------
FERTILIZER -- 0.5%
25,000 Terra Industries, Inc. 353,125
- -------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 6.0%
10,000 Anheuser Busch Co., Inc. $ 668,750
14,900 Coca-Cola Co. 1,106,325
8,400 PepsiCo, Inc. 469,350
22,000 Philip Morris Cos., Inc. 1,991,000
----------
4,235,425
- -------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.9%
7,200 Procter & Gamble Co. 597,600
- -------------------------------------------------------
INFORMATION PROCESSING AND COMPUTERS -- 3.8%
20,000 Amdahl Corp.* 170,000
10,000 Cisco Systems, Inc. 746,250
15,000 Hewlett Packard Co. 1,256,250
50,000 Tandem Computers, Inc. 531,250
----------
2,703,750
- -------------------------------------------------------
MACHINERY AND EQUIPMENT -- 0.1%
3,000 Strattec Security Corp. 54,000
- -------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 1.6%
40,000 Dillard Department Stores,
Inc. 1,140,000
- -------------------------------------------------------
MERCHANDISING-DRUGS -- 0.8%
20,000 Walgreen Co. 597,500
- -------------------------------------------------------
MERCHANDISING-SPECIAL -- 0%
900 Melville Corp. 27,382
- -------------------------------------------------------
OIL AND GAS PRODUCING -- 1.5%
10,000 Tom Brown, Inc.* 146,250
10,000 Devon Energy Corp. 255,000
14,000 H S Resources, Inc.* 180,250
28,000 Phoenix Resources Cos., Inc.* 483,000
----------
1,064,500
- -------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 0.4%
35,000 Tesoro Petroleum Corp.* 301,875
- -------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 3.3%
29,000 Exxon Corp. 2,323,625
- -------------------------------------------------------
OIL SERVICES -- 0.6%
40,000 Nabors Industries, Inc. 445,000
- -------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 3.2%
50,000 Rayonier, Inc. 1,668,750
10,000 Willamette Industries, Inc. 562,500
----------
2,231,250
- -------------------------------------------------------
RAILROADS -- 0.8%
7,576 Burlington Northern Santa Fe 590,928
- -------------------------------------------------------
SEMICONDUCTOR -- 5.3%
5,500 Cypress Semiconductor Corp 69,025
20,000 Intel Corp. 1,135,000
22,200 Micron Technology, Inc. 879,675
40,000 National Semiconductor Corp. 890,000
14,300 Texas Instruments, Inc. 740,025
----------
3,713,725
- -------------------------------------------------------
UTILITIES-COMMUNICATIONS -- 6.4%
10,000 Ameritech Corp. $ 590,000
30,000 AT&T Corp. 1,942,500
17,300 BellSouth Corp. 752,550
15,000 GTE Corp. 660,000
10,000 SBC Communications, Inc. 575,000
----------
4,520,050
- -------------------------------------------------------
See notes to financial statements. * Non-income producing securities.
19
<PAGE>
THE GUARDIAN ASSET ALLOCATION FUND
Schedule of Investments (Continued)
- -------------------------------------------------------
Shares Value
- -------------------------------------------------------
UTILITIES-ELECTRIC -- 1.2%
9,400 Consolidated Edison Co.
of N.Y., Inc. 300,800
30,000 SCECorp 532,500
----------
833,300
- -------------------------------------------------------
TOTAL COMMON STOCKS
(COST $38,058,304) 43,071,262
- -------------------------------------------------------
CORPORATE BONDS -- 2.1%
Principal
Amount Value
- -------------------------------------------------------
$500,000 Burlington Northern Santa Fe Corp.
6.375% Deb., due 12/15/05 $ 502,180
500,000 Ford Motor Cr. Mtn. Bk.,
5.85% Deb., due 3/26/98 502,720
500,000 McDermott, Inc. Mtn. Bk. Ent.,
6.57% Deb., due 4/20/98 506,325
- -------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $1,497,236) 1,511,225
- -------------------------------------------------------
U.S. GOVERNMENT SECURITIES -- 19.5%
Principal
Amount Value
- -------------------------------------------------------
$10,150,000 U.S. Treasury Bill, 5.31%
due 3/7/96 $10,051,190
500,000 U.S. Treasury Notes, 5.625%
due 10/31/97 503,670
2,000,000 U.S. Treasury Notes, 6.875%
due 8/31/99 2,101,880
500,000 U.S. Treasury Notes, 5.875%
due 11/15/05 511,250
500,000 U.S. Treasury Bond, 6.875%
due 8/15/25 563,905
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $13,673,210) 13,731,895
- -------------------------------------------------------
MULTI CLASS MORTGAGE PASS-THROUGHS -- 2.9%
Principal
Amount Value
- -------------------------------------------------------
$1,000,000 Federal Home Loan Mortgage
Corp., 7% due 3/15/21 $ 1,018,750
1,000,000 Federal National Mortgage
Assn., 6.25% due 7/25/07 1,009,370
- -------------------------------------------------------
TOTAL MULTI CLASS MORTGAGE
PASS-THROUGHS
(COST $1,897,628) 2,028,120
- -------------------------------------------------------
OPTIONS-- 0.3%
Number of
Contracts Value
- -------------------------------------------------------
55 U.S. Treasury Note
Future 6.375%,
Expires Feb. 96, Exercise
price $118 $ 217,422
- -------------------------------------------------------
TOTAL OPTIONS
(COST $113,988) 217,422
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 9.0%
Principal Maturity
Amount Date Value
- -------------------------------------------------------
$6,378,000 State Street Bank & Trust
repurchase agreement,
dated 12/29/95, maturity
value $6,381,969, at 5.6%,
due 1/2/96 (collateralized
by $5,985,000 U.S. Treasury
Notes, 7.125% due 2/29/00,
market value $6,514,299)
1/2/96 $ 6,378,000
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $6,378,000) 6,378,000
- -------------------------------------------------------
TOTAL INVESTMENTS -- 94.8%
(COST $61,618,366) 66,937,924
CASH, RECEIVABLES AND OTHER ASSETS
LESS PAYABLES-- 5.2% 3,653,404
- -------------------------------------------------------
NET ASSETS--100.0% $70,591,328
- -------------------------------------------------------
<PAGE>
PURCHASED FUTURES CONTRACTS
Underlying
Face Amount Unrealized
- -------------------------------------------------------
Description Expiration of Value Depreciation
- -------------------------------------------------------
17 S&P 500 Stock
Index Contracts June 1996 $5,304,425 $83,225
- -------------------------------------------------------
At December 31, 1995 the Asset Allocation Fund had sufficient cash and/or
securities to cover margin requirements on open futures contracts.
- --------------------------------------------------------------------------
* Non-income producing securities. See notes to financial statements.
20
<PAGE>
o THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
COMMON STOCKS -- 94.7%
Shares Value
- -------------------------------------------------------
ARGENTINA -- 0.9%
BANKS -- 0.6%
9,200 Banco Frances Del Rio
La Plata $ 247,250
Oil and Gas -- 0.2%
13,100 Perez Companc SA* 69,416
Real Estate -- 0.1%
25,100 Comercial De Plata* 66,502
----------
383,168
- -------------------------------------------------------
AUSTRIA -- 0.4%
BUSINESS SERVICES -- 0.4%
2,380 Flughafen Wien AG* 160,579
- -------------------------------------------------------
AUSTRALIA -- 4.4%
BANKS -- 0.7%
68,000 Australian + NZ Bank Corp. 318,924
BUSINESS SERVICES -- 0.4%
17,000 Brambles Industries Ltd. 189,535
FOREST PRODUCTS -- 0.5%
31,961 Amcor Limited 225,680
METALS -- 0.5%
35,000 Western Mining Corp. 224,766
PETROLEUM SERVICES -- 1.1%
33,993 Broken Hill Property 480,056
REAL ESTATE -- 0.6%
16,415 Lend Lease Corp. 237,915
RETAIL TRADE -- 0.6%
114,828 Woolworths Ltd. 276,529
----------
1,953,405
- -------------------------------------------------------
BELGIUM -- 1.4%
BANKS -- 1.2%
1,530 Generale De Banque 530,275
METALS -- 0.2%
1,600 Union Miniere* 107,102
----------
637,377
- -------------------------------------------------------
BRAZIL -- 0.5%
TELEPHONE -- 0.5%
4,500 Telecomunicacoes Brasileiras 213,188
- -------------------------------------------------------
CHILE -- 0.4%
ELECTRIC UTILITIES-- 0.4%
6,300 Enersis SA 179,550
- -------------------------------------------------------
CZECHOSLOVAKIA -- 0.2%
ELECTRIC UTILITIES -- 0.2%
3,020 Ceska Energeticke Zavody* 109,176
- -------------------------------------------------------
DENMARK -- 0.6%
TELEPHONE -- 0.6%
4,490 Tele Danmark AS $ 245,019
- -------------------------------------------------------
FRANCE -- 4.8%
BANK -- 0.6%
2,100 Societe Generale 259,444
CONGLOMERATES -- 0.3%
580 CGIP 114,650
CONSTRUCTION MATERIAL -- 0.3%
1,850 Poliet 150,282
CONTAINERS AND GLASS -- 0.4%
1,710 Cie De St Gobain 186,469
LEISURE PRODUCTS -- 0.4%
2,322 Club Mediterranee* 185,400
OIL-INTEGRATED -- 0.9%
5,550 Societe Elf Aquitaine 408,912
RETAIL TRADE -- 1.6%
2,150 Castorama Dubois 352,113
1,030 Comptoirs Modernes* 334,429
TOYS, AMUSEMENT, SPORTING GOODS -- 0.3%
1,510 BIC 153,559
---------
2,145,258
- -------------------------------------------------------
GERMANY -- 5.9%
AIR TRAVEL -- 0.8%
2,475 Lufthansa AG 340,755
AUTOMOBILE -- 1.1%
1,420 Volkswagen AG 474,752
BANKS -- 0.8%
7,790 Deutsche Bank AG 369,109
BUILDING CONSTRUCTION -- 0.2%
2,571 Kampa Haus AG 101,280
CHEMICAL -- 2.1%
1,800 BASF AG 400,906
1,980 Hoechst AG 536,926
DRUGS AND HEALTH CARE -- 0.4%
317 GEHE AG 158,775
INDUSTRIAL MACHINERY -- 0.5%
970 Man AG 262,363
---------
2,644,866
- -------------------------------------------------------
HONG KONG -- 5.9%
BANKS -- 0.7%
34,000 Hang Seng Bank 304,494
CONGLOMERATES -- 1.2%
51,000 Hutchison Whampoa 310,650
27,500 Swire Pacific 213,385
- -------------------------------------------------------
See notes to financial statements. * Non-income producing securities.
21
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
- -------------------------------------------------------
Shares Value
- -------------------------------------------------------
PUBLISHING -- 0.8%
105,000 Citic Pacific Ltd. $ 359,165
REAL ESTATE -- 2.3%
73,000 Cheung Kong Holdings 444,656
134,122 Hong Kong Land Holding 248,126
41,000 Sun Hung Kai Properties 335,370
TELEPHONE -- 0.9 %
221,200 Hong Kong Telecommunications 394,770
----------
2,610,616
- -------------------------------------------------------
HUNGARY -- 0.2%
CHEMICALS -- 0.2%
5,400 Richter Gedeon Veg 103,680
- -------------------------------------------------------
IRELAND -- 0.3%
CONSTRUCTION MATERIALS -- 0.3%
19,500 CRH 146,734
- -------------------------------------------------------
ITALY -- 2.7%
AUTOMOBILES -- 0.8%
116,300 Fiat Spa 377,872
CONGLOMERATES -- 0.2%
53,400 Fidis* 102,387
INSURANCE -- 0.4%
31,280 RAS 174,887
TELEPHONE -- 1.3%
340,000 Telecom Italia 563,589
----------
1,218,735
- -------------------------------------------------------
JAPAN -- 33.4%
AUTOMOBILES -- 1.7%
43,000 Calsonic Corp. 315,680
40,000 Suzuki Motor Corp. 445,521
BANKS -- 1.8%
39,000 Sanwa Bank 793,220
BUSINESS SERVICES -- 2.3%
50,000 Kamigumi Co. 479,903
8,000 Secom Co. 556,320
CONSTRUCTION AND MINING EQUIPMENT -- 1.6%
32,000 Nishimatsu Contruction* 375,012
10,000 Tostem Corp. 332,203
DRUGS AND HEALTH CARE -- 1.0%
12,000 Sankyo Co. 269,637
8,000 Santen Pharmaceutical Co. 181,308
ELECTRICAL EQUIPMENT -- 1.2%
54,000 Hitachi Corp. 543,923
ELECTRONICS -- 4.7%
21,000 Aiwa Co. 492,203
8,000 Kyocera Corp. 594,286
12,000 Murata Manufacturing Co. 441,646
10,000 Rohm Co. 564,649
FINANCIAL SERVICES -- 1.3%
9,000 Japan Securities Finance $ 129,007
9,600 Promise Co. 462,102
HOMEBUILDERS -- 0.7%
24,000 Sekusui House 306,828
INDUSTRIAL MACHINERY -- 2.6%
105,000 Mitsubishi Heavy Ind. 836,949
43,000 NSK* 312,349
INSURANCE -- 0.9%
32,000 Tokio Marine & Fire Ins. 418,402
INVESTMENT COMPANIES -- 1.6%
32,000 Nomura Securities Co. 697,337
LEISURE PRODUCTS -- 0.7%
1,900 Toho Co. 303,632
PHOTOGRAPHY -- 2.4%
30,000 Canon, Inc. 543,341
18,000 Fuji Photo Film Co. 519,516
REAL ESTATE -- 1.0%
37,000 Mitsubishi Estate 462,276
RETAIL GROCERY -- 0.8%
5,000 Seven Eleven Japan 352,542
RETAIL TRADE -- 2.2%
8,000 Ito Yokado Co. 492,785
24,000 Marui Co. 499,758
STEEL -- 1.9%
38,000 Hitachi Metals 474,770
118,000 Sumitomo Metal Ind.* 357,714
TELECOMMUNICATION -- 1.6%
89 DDI Corp. 689,588
TIRES AND RUBBER -- 1.4%
40,000 Bridgestone Corp. 635,351
----------
14,879,758
- -------------------------------------------------------
MALAYSIA -- 2.5%
CONGLOMERATES -- 0.7%
217,000 Renong Berhad 321,266
LEISURE PRODUCTS -- 1.0%
80,000 Resorts World Berhad 428,397
TELEPHONE -- 0.8%
48,000 Telekom Malaysia 374,218
----------
1,123,881
- -------------------------------------------------------
MEXICO -- 0.9%
FOOD, BEVERAGE AND TOBACCO -- 0.4%
5,800 Pan American Beverage 185,600
REAL ESTATE -- 0.2%
3,900 Sociedad Comercial Del Plata 103,370
- -------------------------------------------------------
* Non-income producing securities. See notes to financial statements.
22
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
- -------------------------------------------------------
Shares Value
- -------------------------------------------------------
Telephone -- 0.3%
3,500 Telefonos de Mexico SA $ 111,562
----------
400,532
- -------------------------------------------------------
Netherlands -- 2.6%
Apparel and Textile -- 0.5%
6,700 Gucci Group NV* 252,602
Banks -- 0.8%
7,970 ABN Amro Holdings NV 363,063
Household Appliances -- 0.3%
3,370 Philip Electronics NV 121,805
Publishing -- 1.0%
3,220 Ver Ned Uitgevers 442,055
----------
1,179,525
- -------------------------------------------------------
New Zealand -- 0.8%
Telecommunication -- 0.8%
80,000 Telecom Corp. of New Zealand 345,188
- -------------------------------------------------------
Poland -- 0.3%
Electric Utilities -- 0.3%
36,000 Elektrim 121,923
- -------------------------------------------------------
Singapore -- 2.9%
Air Travel -- 0.5%
24,000 Singapore Airlines 223,966
Banks -- 0.6%
22,000 Overseas Chinese Bank 275,292
Food and Beverage -- 0.6%
20,000 Fraser & Neave* 254,507
Industrial Machinery -- 0.6%
30,000 Keppel Corp.* 267,232
Publishing -- 0.6%
14,200 Singapore Press HD 250,972
----------
1,271,969
- -------------------------------------------------------
Spain -- 1.6%
Banks -- 1.0%
9,700 Banco Santander SA 486,999
Construction Materials -- 0.6%
10,100 Continente Cent Co.* 228,145
----------
715,144
- -------------------------------------------------------
Sweden -- 1.8%
Business Services -- 0.6%
5,350 Securitas AB 253,814
Construction and Mining Equipment -- 1.2%
18,000 Atlas Copco AB 271,097
6,000 Incentive AB 262,060
----------
786,971
- -------------------------------------------------------
Switzerland -- 5.2%
Business Services -- 0.6%
225 Danzas Holding $ 249,675
Chemicals -- 1.4%
700 Ciba Geigy AG* 615,951
Drugs and Healthcare -- 1.5%
754 Sandoz AG 690,268
Industrial Machinery -- 0.3%
90 Bobst AG 140,442
Insurance -- 1.4%
860 Winterthur 608,375
----------
2,304,711
- -------------------------------------------------------
Taiwan -- 0.1%
Building Construction -- 0.1%
10,000 China Development* 29,501
- -------------------------------------------------------
United Kingdom -- 14.0%
Banks - 0.6%
27,500 National Westminster Bk. Co. PLC 276,965
Building Construction -- 0.2%
15,000 Fine Art Developments 95,512
Business Services -- 0.9%
18,000 Associated British Ports 80,789
31,000 BAA 234,462
9,000 De La Rue 90,992
Chemicals -- 0.3%
70,000 Allied Colloids 144,588
Conglomerates -- 2.7%
72,051 BTR 362,002
48,000 Grand Metropolitan* 345,519
65,000 Hanson 193,819
16,000 Hays 93,431
18,000 Siebe 221,820
Construction and Mining Equipment -- 0.1%
20,000 Weir Group 65,383
Drugs and Healthcare -- 0.9%
29,000 Glaxo Wellcome 412,098
Electric Utilities -- 0.7%
29,000 National Power 202,446
11,480 Yorkshire Electric Group 119,097
Electronics -- 0.6%
28,000 Electrocomponents 156,329
8,685 National Grid Group* 26,841
40,000 Rotork 105,606
Food, Beverage and Tobacco-- 1.7%
30,000 Devro International 118,341
31,000 Guinness 227,962
20,000 Highland Distilleries 100,637
40,000 Iceland Group 93,182
18,000 Reckitt and Colman 199,177
- -------------------------------------------------------
* Non-income producing securities. See notes to financial statements.
23
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
- -------------------------------------------------------
Shares Value
- -------------------------------------------------------
Household Products -- 0.1%
27,000 Life Sciences International $ 37,319
Insurance -- 1.3%
21,000 Abbey National 207,423
10,000 Britannic Assurance 119,273
38,000 Prudential Corp. 244,619
International Oil -- 1.0%
55,000 British Petroleum 459,116
Leisure Products -- 0.7%
26,000 Granada Group 260,444
6,000 Vendome Lux Group SA 54,698
Newspapers -- 0.2%
40,000 Mirror Group PLC 109,334
Retail-Grocery -- 0.5%
37,000 Sainsbury (J) 225,540
Retail Trade -- 0.7%
28,000 Marks & Spencer 195,683
Telephone -- 0.5%
66,000 Vodafone Group 236,776
Transportation -- 0.3%
55,000 Firstbus* 129,834
---------
6,247,057
- -------------------------------------------------------
TOTAL COMMON STOCKS
(COST $37,550,537) 42,157,511
Preferred Stocks -- 0.2%
Shares Value
- -------------------------------------------------------
3,985 Companhia Energetica De Minas $88,666
- -------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $109,200) 88,666
- -------------------------------------------------------
Corporate Bonds -- 1.0%
Principal
Amount Value
- -------------------------------------------------------
$400,000 MBL Int'l Finance, 3%
Exch. Guaranteed Nts.,
due 11/30/02 $ 462,760
- -------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $400,000) 462,760
- -------------------------------------------------------
Repurchase Agreement -- 2.2%
Principal Maturity
Amount Date Value
- -------------------------------------------------------
$995,000 State Street Bank & Trust
repurchase agreement, dated
12/29/95, maturity value
$995,249 at 2.25% due
1/2/96 (collateralized by
$995,000 U.S. Treasury
Bills, 6.875% due 10/31/96,
market value $1,018,839)
1/2/96 $ 995,000
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $995,000) 995,000
- -------------------------------------------------------
TOTAL INVESTMENTS -- 98.1%
(COST $39,054,737) 43,703,937
Cash, Receivables and Other Assets
Less Payables -- 1.9% 841,827
- -------------------------------------------------------
Net Assets -- 100.0% $44,545,764
- -------------------------------------------------------
* Non-income producing securities. See notes to financial statements.
24
<PAGE>
o THE GUARDIAN INVESTMENT QUALITY BOND FUND
ASSET BACKED -- 13.2%
- -------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------
$1,000,000 Advanta Cr Card Mst. Tr.,
6.50% due 8/1/03 $1,015,200
1,000,000 Banc One Auto Tr.,
6.90% due 4/15/98 1,016,560
1,201,304 Chevy Chase Auto Rec.,
6.00% due 12/15/01 1,207,311
781,819 First Security Grantor Tr.
6.25% due 1/15/01 784,993
1,000,000 Green Tree Financial Corp.,
6.35% due 12/15/26 1,014,300
2,000,000 Standard Cr. Card Mst. Tr.,
6.70% due 9/7/02 2,039,360
- -------------------------------------------------------
TOTAL ASSET BACKED
(COST $6,987,423) 7,077,724
- -------------------------------------------------------
CORPORATE BONDS -- 25.0%
- -------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------
Chemicals -- 3.0%
$1,500,000 Union Carbide Corp.,
6.79% due 6/1/25 $1,607,745
- -------------------------------------------------------
Drugs and Hospital -- 1.9%
1,000,000 Rhone Poulenc SA,
6.75% due 10/15/99 1,024,730
- -------------------------------------------------------
Electric Utilities -- 1.9%
1,000,000 Illinois Power Co.,
5.625% due 4/15/00 988,660
- -------------------------------------------------------
Machinery and Industrial Equipment -- 0.9%
500,000 McDermott International, Inc.,
6.57% due 4/20/98 506,325
- -------------------------------------------------------
Merchandising-Department Store -- 1.9%
1,000,000 Sears Roebuck Acceptance Corp.,
6.56% due 9/5/00 1,024,980
- -------------------------------------------------------
Merchandising-Special -- 3.8%
2,000,000 Service Corp. International,
6.375% due 10/01/00 2,036,980
- -------------------------------------------------------
Natural Gas -- 1.9%
1,000,000 Tenneco, Inc.
6.50% due 12/15/05 1,005,440
- -------------------------------------------------------
Paper and Forest Products -- 3.9%
2,000,000 Champion International Corp.,
7.10% due 9/1/05 2,106,180
- -------------------------------------------------------
Oil-Integrated-International -- 3.9%
$2,000,000 Petrolian Nasional Berhad
7.125% due 8/15/05 $ 2,113,840
- -------------------------------------------------------
Railroads -- 1.9%
1,000,000 Burlington Northern Santa Fe Corp.,
6.375% due 12/15/05 1,004,360
- -------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $13,085,330) 13,419,240
- -------------------------------------------------------
MORTGAGE PASS-THROUGHS -- 3.7%
- -------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------
$ 385,461 GNMA Pool #357612
7.00% due 10/15/08 $ 394,372
312,447 GNMA Pool #358764
7.00% due 12/15/08 319,671
283,183 GNMA Pool #367318
7.00% due 11/15/08 289,730
338,686 GNMA Pool #372665
7.00% due 1/15/09 346,516
350,765 GNMA Pool #374845
7.00% due 12/15/08 358,874
300,726 GNMA Pool #419796
7.00% due 9/15/10 307,679
- -------------------------------------------------------
TOTAL MORTGAGE PASS-THROUGHS
(COST $1,983,042) 2,016,842
- -------------------------------------------------------
MULTI CLASS MORTGAGE PASS-THROUGHS -- 18.7%
- -------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------
$1,000,000 Federal Home Loan Mortgage
Corp., 7.00% due 3/15/21 $1,018,750
1,000,000 Federal Home Loan Mortgage
Corp., 7.40% due 12/15/21 1,023,430
2,000,000 Federal Home Loan Mortgage
Corp., 6.50% due 5/15/19 1,981,240
1,000,000 Federal Home Loan Mortgage
Corp., 4.00% due 8/15/01 985,620
2,000,000 Federal National Mortgage
Assn., 6.25% due 5/25/07 2,018,120
1,000,000 Federal National Mortgage
Assn., 6.00% due 3/25/05 1,003,120
2,000,000 Securitized Asset Sales, Inc.,
7.41% due 4/25/24 1,999,800
- -------------------------------------------------------
TOTAL MULTI CLASS MORTGAGE
PASS-THROUGHS
(COST $9,577,113) 10,030,080
- -------------------------------------------------------
See notes to financial statements.
25
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
U.S. GOVERNMENT AND AGENCIES -- 38.9%
- -------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------
$3,000,000 U.S. Treasury Notes, 5.625%
due 10/31/97 $3,022,020
1,000,000 U.S. Treasury Notes, 6.875%
due 7/31/99 1,050,000
5,000,000 U.S. Treasury Notes, 6.875%
due 8/31/99 5,254,700
2,000,000 U.S. Treasury Notes, 5.75%
due 10/31/00 2,028,740
2,000,000 U.S. Treasury Notes, 5.50%
due 12/31/00 2,010,320
750,000 U.S. Treasury Notes, 6.50%
due 8/15/05 798,983
1,000,000 U.S. Treasury Notes, 5.875%
due 11/15/05 1,022,500
500,000 U.S. Treasury Bonds, 8.125%
due 5/15/21 632,265
4,500,000 U.S. Treasury Bonds, 6.875%
due 8/15/25 5,075,145
- -------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(COST $20,767,117) 20,894,673
- -------------------------------------------------------
REPURCHASE AGREEMENT -- 6.0%
- -------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
$3,234,000 State Street Bank & Trust
repurchase agreement,
dated 12/29/95, maturity
value $3,254,123, at 5.6%, due
1/2/96 (collateralized by
$3,035,000 U.S. Treasury
Notes, 7.125% due 2/29/00,
market value $3,298,084) 1/2/96 $3,234,000
- -------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $3,234,000) 3,234,000
- -------------------------------------------------------------------
TOTAL INVESTMENTS -- 105.5%
(COST $55,634,025) 56,672,559
Liabilities in Excess of Cash, Receivables
and Other Assets-- (5.5%) (2,966,229)
- -------------------------------------------------------------------
Net Assets-- 100.0% $53,706,330
- -------------------------------------------------------------------
See notes to financial statements.
26
<PAGE>
o THE GUARDIAN TAX-EXEMPT FUND
MUNICIPAL BONDS -- 100.5%
- ---------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- ---------------------------------------------------------
Arizona -- 3.5%
$ 530,000 Pima County, Arizona
School District No. 16
6.50% due 7/1/10 Aaa/AAA $ 611,026
- ---------------------------------------------------------
Florida -- 5.7%
465,000 Florida St. Board
of Educ. Cap. Outlay,
5.875% due 6/1/12 Aa/AA 488,655
500,000 Jacksonville, FL.
Electric Authority Rev.,
5.375% due 10/1/15 Aa1/AA 502,595
--------
991,250
- ---------------------------------------------------------
Georgia -- 3.2%
500,000 Georgia St. G.O.
Series D, 6.80%
due 8/1/00 Aaa/AA+ 556,700
- ---------------------------------------------------------
Hawaii -- 3.1%
500,000 Honolulu Hawaii,
City & Cnty., 6.00%
due 11/1/10 Aaa/AAA 550,745
- ---------------------------------------------------------
Kentucky -- 3.0%
500,000 Kentucky St. Turnpike
Auth. Econ. Dev., 5.50%
due 7/1/09 Aaa/AAA 526,600
- ---------------------------------------------------------
Massachusetts -- 4.8%
800,000 MA Bay Trans. Auth.
Gen. Trans. Sys.,
Series B, 5.80%
due 3/01/11 A/A+ 837,032
- ---------------------------------------------------------
Michigan -- 4.4%
750,000 Michigan Public Power
Agency Rev., 5.50%
due 1/1/13 A1/AA- 767,910
- ---------------------------------------------------------
Nebraska -- 3.1%
500,000 Omaha Pub Pwr Dist.
NE Elec. Rev., Ser B,
6.05% due 2/1/08 Aa/AA 547,415
- ---------------------------------------------------------
New Jersey -- 6.3%
$ 500,000 NJ State G.O.
5.40% due 2/15/03 Aa1/AA+ $ 530,125
500,000 NJ State Tr. Fd. Auth.
Rev. Bd. Series A,
6.50% due 6/15/05 Aaa/AAA 568,705
---------
1,098,830
- ---------------------------------------------------------
New York -- 16.3%
500,000 New York St. Series A,
5.875% due 3/15/15 525,835
750,000 New York City Mun.
Water Fin. Auth.,
Rev. Series A,
5.875% due 6/15/13 Aaa/AAA 815,280
580,000 New York Environ. Poll.
Series B,
5.25% due 6/15/14 Aa/A- 572,901
850,000 Triborough Bridge &
Tunnel Auth. Rev.
Bond Series Y,
6.00% due 1/01/12 Aa/A+ 935,459
---------
2,849,475
- ---------------------------------------------------------
North Carolina -- 6.4%
1,000,000 Mecklenburg County,
NC Refunding G.O.,
6.00% due 4/01/11 Aaa/AAA 1,118,850
- ---------------------------------------------------------
Ohio -- 4.9%
300,000 Cleveland, OH Wtr.
Works Rev. Series G
5.50% due 1/1/08 Aaa/AAA 316,608
500,000 Columbus, OH
Wtr. Sys. Rev.,
6.10% due 11/1/03 A1/AA- 549,575
-------
866,183
- ---------------------------------------------------------
Oklahoma -- 4.7%
500,000 Grand River Dam
Auth. Rev., 5.50%
due 6/1/10 A/A- 523,090
270,000 Grand River Dam
Auth. Rev., 6.25%
due 6/1/11 Aaa/AAA 306,439
-------
829,529
- ---------------------------------------------------------
See notes to financial statements. *Unaudited
27
<PAGE>
THE GUARDIAN TAX-EXEMPT FUND
Schedule of Investments (Continued)
- -------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------
Oregon -- 2.9%
$ 500,000 Portland, OR Pollution
Control, Daily
Variable Rate 6.00%
due 12/1/09 Aa3/P1 $ 500,000
- -------------------------------------------------------------
Pennsylvania -- 3.1%
500,000 Pennsylvania St.
Tpk. Comm. Rev.,
Series N, 6.25%
due 12/1/11 Aaa/AAA 535,805
- -------------------------------------------------------------
Puerto Rico -- 3.1%
500,000 Puerto Rico Elect.
Power Auth.,
Series W, 6.00%
due 7/1/01 Aaa/AAA 543,315
- -------------------------------------------------------------
South Carolina -- 3.0 %
500,000 South Carolina
Cap. Improv.
Series B, 5.75%
due 8/1/00 Aaa/AA+ 534,925
- -------------------------------------------------------------
Texas -- 10.0%
500,000 Harris Cnty, TX
Series A,
6.50% due 8/15/08 Aa/AA 571,835
500,000 Houston, TX
Series C, 6.00%
due 4/1/04 Aa/AA- 547,770
555,000 Texas St. Wtr. Dev.
Series A, 6.50%
due 8/1/05 Aa/AA 633,449
---------
1,753,054
- -------------------------------------------------------------
Virginia -- 5.8%
500,000 Virginia State
Rev., 5.40%
due 6/1/00 Aaa/AAA 527,785
500,000 Virginia St. Pub Sch
Auth. Rev. Series C,
5.00% due 8/1/16 Aa/AA- 485,895
---------
1,013,680
- -------------------------------------------------------------
Washington -- 3.2%
500,000 King Cnty, WA
Sch. Dist. No. 401,
7.15% due 12/1/03 AAA 556,820
- -------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $17,051,710) 17,589,144
- -------------------------------------------------------------
TOTAL INVESTMENTS -- 100.5%
(COST $17,051,710) $17,589,144
Liabilities in Excess of Cash,
Receivables and Other Assets -- (.5%) (87,895)
- -------------------------------------------------------------
Net Assets -- 100.0% $17,501,249
- -------------------------------------------------------------
GLOSSARY OF TERMS:
G.O. - General Obligation.
- -------------------------------------------------------------
*Unaudited See notes to financial statements.
28
<PAGE>
[ ] THE GUARDIAN CASH MANAGEMENT FUND
Commercial Paper -- 92.2%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Financial -- 24.0%
Bank Holding Companies -- 12.0%
$2,800,000 Barclays US Funding,
Corp., 5.76% 01/11/96 $ 2,795,520
2,800,000 Commerzbank US
Fin. Corp., 5.76% 01/05/96 2,798,208
2,800,000 Republic NY Corp.,
5.72% 01/09/96 2,796,441
----------
8,390,169
- --------------------------------------------------------------------------------
Finance Companies -- 12.0%
2,800,000 Household Finance
Corp., 5.75% 01/08/96 2,796,870
2,800,000 Nat'l Rural Utilities
Coop Fin., 5.70% 01/18/96 2,792,463
2,800,000 USAA Capital
Corp., 5.71% 01/18/96 2,792,450
----------
8,381,783
- --------------------------------------------------------------------------------
Total Financial 16,771,952
- --------------------------------------------------------------------------------
Industrial -- 68.2%
Automotive -- 8.0%
2,800,000 Ford Motor Credit
Co., 5.75% 01/17/96 2,792,845
2,800,000 Toyota Motor Credit
Co., 5.73% 01/17/96 2,792,869
----------
5,585,714
- --------------------------------------------------------------------------------
Conglomerates -- 4.0%
2,800,000 General Elect. Cap.
Corp. 5.70% 01/19/96 2,792,020
- --------------------------------------------------------------------------------
Drugs and Hospitals -- 4.0%
2,800,000 Pfizer, Inc.,
5.68% 01/22/96 2,790,723
- --------------------------------------------------------------------------------
Electronic Instruments -- 4.0%
2,800,000 Siemens Corp.,
5.68% 01/10/96 2,796,024
- --------------------------------------------------------------------------------
Food, Beverage and Tobacco -- 20.2%
2,800,000 Cargill, Inc.,
5.70% 01/19/96 2,792,020
2,800,000 H.J. Heinz Co.,
5.68% 01/12/96 2,795,140
2,800,000 Nestle Cap. Corp.,
5.68% 01/24/96 2,789,839
2,800,000 PepsiCo, Inc.,
5.73% 01/26/96 2,788,858
3,000,000 Philip Morris Cos.,
Inc., 5.90% 01/04/96 2,998,525
----------
14,164,382
- --------------------------------------------------------------------------------
Insurance -- 4.0%
$2,800,000 Amer. General Fin.
Corp., 5.79% 01/29/96 $ 2,787,391
- --------------------------------------------------------------------------------
Machinery and Industrial Equipment -- 4.0%
2,800,000 John Deere Cap.
Corp., 5.73% 01/16/96 2,793,315
- --------------------------------------------------------------------------------
Oil-Integrated-Domestic -- 4.0%
2,800,000 Chevron Oil Fin.
Co., 5.76% 01/25/96 2,789,248
- --------------------------------------------------------------------------------
Oil-Integrated-International -- 4.0%
2,800,000 Texaco, Inc.
5.95% 01/02/96 2,799,537
- --------------------------------------------------------------------------------
Telecommunications -- 12.0%
2,800,000 Bell Atlantic Tel.
Co., 5.75% 01/12/96 2,795,081
2,800,000 BellSouth Telecomm.
Inc., 5.67% 02/05/96 2,784,565
2,800,000 GTE North,
Inc., 5.67% 02/09/96 2,782,801
----------
8,362,447
- --------------------------------------------------------------------------------
Total Industrial 47,660,801
- --------------------------------------------------------------------------------
Total Commercial Paper
(Cost $64,432,753) 64,432,753
- --------------------------------------------------------------------------------
Repurchase Agreement -- 8.9%
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
$6,220,000 State Street Bank & Trust
repurchase agreement,
dated 12/29/95, maturity
value $6,223,870 at
5.6%, due 1/2/96
(collateralized by
$5,835,000 U.S. Treasury
Notes, 7.125% due
2/29/00, market value
$6,351,033) 01/02/96 $ 6,220,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $6,220,000) 6,220,000
- --------------------------------------------------------------------------------
Total Investments -- 101.1%
(Cost $70,652,753) 70,652,753
Liabilities in Excess of Cash,
Receivables and Other Assets-- (1.1%) (739,745)
- --------------------------------------------------------------------------------
Net Assets--100.0% $69,913,008
- --------------------------------------------------------------------------------
See notes to financial statements.
29
<PAGE>
FINANCIAL STATEMENTS
[ ] THE PARK AVENUE PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford Investment Tax-Exempt Cash
Fund Allocation International Quality Fund Management
Fund Fund Bond Fund Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at identified cost* ......... $750,095,186 $61,618,366 $39,054,737 $55,634,025 $17,051,710 $70,652,753
=====================================================================================
Investments, at market ................... $893,009,622 $60,559,924 $42,708,937 $53,438,559 $17,589,144 $64,432,753
Repurchase agreements .................... 76,014,000 6,378,000 995,000 3,234,000 -- 6,220,000
-------------------------------------------------------------------------------------
Total Investments ..................... 969,023,622 66,937,924 43,703,937 56,672,559 17,589,144 70,652,753
Cash ..................................... 790 861 8,609 715 197,976 36,148
Foreign currency (Cost $911,532) ......... -- -- 912,362 -- -- --
Receivable for securities sold ........... 25,525,110 11,525,376 -- -- -- --
Receivable for fund shares sold .......... 4,467,730 87,497 14,334 2,108 25,008 1,955,816
Dividends receivable ..................... 1,527,626 86,085 43,703 -- -- --
Interest receivable ...................... 35,473 96,629 1,220 651,053 266,543 2,903
Receivable for open forward
foreign currency sold .................. -- -- 83,617 -- -- --
Receivable for futures margin ............ -- 6,800 -- -- -- --
Deferred organization expenses --
Note 6 ................................. -- 7,635 7,695 7,635 7,635 --
Foreign tax receivable ................... -- -- 69,376 -- -- --
-------------------------------------------------------------------------------------
Total Assets .......................... 1,000,580,351 78,748,807 44,844,853 57,334,070 18,086,306 72,647,620
LIABILITIES
Payable for securities purchased ......... 23,482,091 7,785,612 -- 2,000,000 526,403 --
Distributions payable .................... 2,277,504 57,832 34,689 15,081 2,639 2,397
Payable for fund shares redeemed ......... 437,366 68,319 11,706 1,480,793 -- 2,558,247
Accrued expenses ......................... 260,516 37,318 75,729 27,331 23,391 19,909
Foreign tax withholding .................. -- -- 5,924 -- -- --
Due to affiliates -- Note 2 .............. 1,848,279 208,398 171,041 104,535 32,624 154,059
-------------------------------------------------------------------------------------
Total Liabilities ..................... 28,305,756 8,157,479 299,089 3,627,740 585,057 2,734,612
-------------------------------------------------------------------------------------
Net Assets ............................ $972,274,595 $70,591,328 $44,545,764 $53,706,330 $17,501,249 $69,913,008
=====================================================================================
- -----------------
* Includes repurchase agreements.
See notes to financial statements.
30 31
</TABLE>
<PAGE>
o THE PARK AVENUE PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford Investment Tax-Exempt Cash
Fund Allocation International Quality Fund Management
Fund Fund Bond Fund Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET ASSETS
Capital stock ......................... $ 286,181 $ 57,932 $ 32,816 $ 53,627 $ 18,061 $ 699,130
Paid-in capital ....................... 715,332,947 61,229,984 39,952,958 52,614,169 18,151,878 69,213,878
Overdistributed net investment
income .............................. -- -- (134,884) -- -- --
Accumulated net realized
gain/(loss) on investments
and foreign currency related
transactions ................ 37,727,031 4,067,079 (42,109) -- (1,206,125) --
Net unrealized appreciation of
investments and translation
of assets and liabilities in
foreign currencies .................. 218,928,436 5,236,333 4,736,983 1,038,534 537,435 --
-------------------------------------------------------------------------------------
Net Assets ........................ $972,274,595 $70,591,328 $44,545,764 $53,706,330 $17,501,249 $69,913,008
=====================================================================================
Shares of beneficial interest
outstanding -- $0.01 par value
(unlimited number of shares
authorized) ......................... 28,617,956 5,793,077 3,281,474 5,371,396 1,806,092 69,913,008
Net Asset Value Per Share ......... $33.97 $12.19 $13.57 $10.00 $9.69 $1.00
Maximum Offering Price Per Share
(Net asset value x 104.71%)* .......... $35.57 $12.76 $14.21 $10.47 $10.15 N/A**
- --------------
* 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.
32 33
</TABLE>
<PAGE>
o THE PARK AVENUE PORTFOLIO
STATEMENTS OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian
Park Avenue Asset Baillie Gifford Investment Tax-Exempt Cash
Fund Allocation International Quality Fund Management
Fund Fund Bond Fund Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends ............................... $ 12,058,227 $ 630,865 $ 895,949 $ -- $ -- $ --
Interest ................................ 3,330,987 1,384,111 79,787 3,423,857 902,479 3,939,736
Other Income ............................ 32,823 -- -- 59,071 -- --
-------------------------------------------------------------------------------------
15,422,037 2,014,976 975,736 3,482,928 902,479 3,939,736
Less: Foreign tax withheld .............. 19,019 -- 158,558 -- -- --
-------------------------------------------------------------------------------------
Total Income ......................... 15,403,018 2,014,976 817,178 3,482,928 902,479 3,939,736
-------------------------------------------------------------------------------------
Expenses:
Investment advisory fees --
Note 2 ................................ 4,093,163 404,836 331,752 255,331 83,564 332,665
12b-1 fees -- Note 3 .................... 1,227,949 155,706 103,673 127,666 41,782 166,333
Trasfer agent fees ...................... 924,671 91,430 87,556 82,031 37,600 195,268
Cutodian fees ........................... 193,757 59,020 133,380 54,087 42,095 48,608
Printing expense ........................ 124,800 12,300 6,493 5,000 878 8,600
Registration fees ....................... 54,045 13,858 13,063 15,342 10,753 20,964
Audit fees .............................. 19,500 16,500 20,000 16,500 16,500 16,000
Trustees fees -- Note 2 ................. 15,700 15,700 15,700 15,700 15,700 15,700
Insurance expense ....................... 7,724 702 352 702 352 702
Legal fees .............................. 5,052 5,052 5,052 3,528 3,475 5,052
Other ................................... 721 721 721 721 721 721
Deferred organization expense --
Note 6 ................................ -- 3,365 3,237 3,365 3,365 --
-------------------------------------------------------------------------------------
Total Expenses ....................... 6,667,082 779,190 720,979 579,973 256,785 810,613
Less: Expenses assumed by
investment adviser -- Note 2 .......... -- -- -- 217,635 133,160 266,840
-------------------------------------------------------------------------------------
Expenses Net of Reimbursement ........ 6,667,082 779,190 720,979 362,338 123,625 543,773
-------------------------------------------------------------------------------------
Net Investment Income ................... 8,735,936 1,235,786 96,199 3,120,590 778,854 3,395,963
-------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS AND
CURRENCIES -- NOTE 4
Net realized gain/(loss) on
investments -- Note 1 ................... 84,973,348 7,181,242 1,681,046 1,517,768 (208,582) --
Net realized gain on foreign
currency related transactions --
Note 1 .................................. -- -- 348,573 -- -- --
Net change in unrealized
appreciation of investments --
Note 4 .................................. 138,277,500 4,938,809 2,457,363 3,094,239 1,687,682 --
Net change in unrealized
appreciation from translation of
assets and liabilities in foreign
currencies -- Note 4 .................... -- -- 122,656 -- -- --
-------------------------------------------------------------------------------------
Net Realized and Unrealized Gain
on Investments and Currencies ........... 223,250,848 12,120,051 4,609,638 4,612,007 1,479,100 --
-------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........... $231,986,784 $13,355,837 $4,705,837 $7,732,597 $2,257,954 $3,395,963
=====================================================================================
See notes to financial statements.
34 35
</TABLE>
<PAGE>
o THE PARK AVENUE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE GUARDIAN
THE GUARDIAN ASSET
PARK AVENUE ALLOCATION
FUND FUND
----------------------- ------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income .................................. $ 8,735,936 $ 6,992,131 $ 1,235,786 $ 1,493,870
Net realized gain/(loss) on investments and
foreign currency related transactions ................. 84,973,348 14,157,157 7,181,242 (1,237,063)
Net change in unrealized appreciation/
(depreciation) of investments and translation
of assets and liabilities in foreign currencies ...... 138,277,500 (30,003,248) 4,938,809 (1,505,052)
--------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ..................................... 231,986,784 (8,853,960) 13,355,837 (1,248,245)
--------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income .................................. (8,718,311) (7,003,966) (1,226,150) (1,492,061)
Distributions in excess of net investment income ....... -- -- -- --
Net realized gain on investments and foreign
currency related transactions ......................... (48,212,589) (22,969,311) (1,870,130) (1,215,906)
--------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS .................. (56,930,900) (29,973,277) (3,096,280) (2,707,967)
--------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from capital
share transactions--Note 7 ............................ 156,301,684 119,550,874 5,456,777 8,630,866
--------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ................... 331,357,568 80,723,637 15,716,334 4,674,654
NET ASSETS:
Beginning of year ....................................... 640,917,027 560,193,390 54,874,994 50,200,340
--------------------------------------------------------------
End of year* ............................................ $972,274,595 $640,917,027 $70,591,328 $54,874,994
==============================================================
* Includes undistributed/(overdistributed) net
investment income of ................................... $ -- $ 81,001 $ -- $ 10,092
See notes to financial statements.
36
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD INVESTMENT
INTERNATIONAL QUALITY
FUND BOND FUND
---------------------- -----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
---------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ................................. $ 96,199 $ 62,143 $ 3,120,590 $ 1,244,317
Net realized gain/(loss) on investments and
foreign currency related transactions ................ 2,029,619 465,449 1,517,768 (982,701)
Net change in unrealized appreciation/
(depreciation) of investments and translation
of assets and liabilities in foreign currencies ..... 2,580,019 (1,099,928) 3,094,239 (3,210,283)
----------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... 4,705,837 (572,336) 7,732,597 (2,948,667)
----------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income ................................. (96,199) (34,205) (3,120,590) (1,244,317)
Distributions in excess of net investment income ...... (743,480) -- -- --
Net realized gain on investments and foreign
currency related transactions ........................ (1,895,322) (265,963) -- (34,794)
----------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................. (2,735,001) (300,168) (3,120,590) (1,279,111)
----------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from capital
share transactions--Note 7 ........................... 5,032,799 17,605,390 5,607,609 24,404,308
----------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ................... 7,003,635 16,732,886 10,219,616 20,176,530
NET ASSETS:
Beginning of year ...................................... 37,542,129 20,809,243 43,486,714 23,310,184
----------------------------------------------------------
End of year* ........................................... $44,545,764 $37,542,129 $53,706,330 $43,486,714
==========================================================
* Includes undistributed/(overdistributed) net
investment income of .................................. $ (134,884) $ 27,938 $ -- $ --
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN
TAX-EXEMPT CASH
FUND MANAGEMENT
FUND
----------------------- -----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ................................. $ 778,854 $ 770,638 $ 3,395,963 $ 1,625,833
Net realized gain/(loss) on investments and
foreign currency related transactions ................ (208,582) (997,544) -- --
Net change in unrealized appreciation/
(depreciation) of investments and translation
of assets and liabilities in foreign currencies ..... 1,687,682 (1,586,569) -- --
--------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... 2,257,954 (1,813,475) 3,395,963 1,625,833
--------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income ................................. (778,854) (770,638) (3,395,963) (1,625,833
Distributions in excess of net investment income ...... -- -- -- --
Net realized gain on investments and foreign
currency related transactions ........................ -- (69,077) -- --
--------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................. (778,854) (839,715) (3,395,963) (1,625,833
--------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from capital
share transactions--Note 7 ........................... 55,107 (2,514,385) 13,182,759 21,999,727
--------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ................... 1,534,207 (5,167,575) 13,182,759 21,999,727
--------------------------------------------------------
NET ASSETS:
Beginning of year ...................................... 15,967,042 21,134,617 56,730,249 34,730,522
--------------------------------------------------------
End of year* ........................................... $17,501,249 $15,967,042 $69,913,008 $56,730,249
========================================================
* Includes undistributed/(overdistributed) net
investment income of ................................. $ -- $ -- $ -- $ --
See notes to financial statements.
37
</TABLE>
<PAGE>
NOTES TO
FINANCIAL STATEMENTS
December 31, 1995
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".
Investments
Equity and debt securities listed on domestic or foreign securities
exchanges are valued at the closing sales prices on such exchanges, or lacking
any sales, at the mean between closing bid and asked prices. Securities traded
in the over-the-counter market are valued using the last sales price, when
available. Otherwise, over-the-counter securities are valued at the mean between
the bid and asked prices or yield equivalents as obtained from one or more
dealers that make a market in the securities.
Certain debt securities may be valued each business day by an independent
pricing service (Service) approved by the Board of Trustees. Debt securities for
which quoted bid prices, in the judgment of the Service, are readily available
and representative of the bid side of the market, are valued at the mean between
the quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other debt securities that are
valued by the Service are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
Other securities, including securities for which market quotations are not
readily available, such as certain mortgage-backed securities and restricted
securities, are valued at fair value as determined in good faith by or under the
direction of the Portfolio Funds' Board of Trustees.
Repurchase agreements are carried at cost which approximates market value
(see Note 5). Short-term securities held by the Portfolio Funds are valued on an
amortized cost basis which approximates market value but does not take into
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
38
<PAGE>
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.
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 December 31, 1995 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 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.
39
<PAGE>
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.
At December 31, 1995, for federal income tax purposes, The Guardian
Tax-Exempt Fund had net capital loss carryforwards of $1,206,126 (of which
$997,544 expires in 2002 and $208,582 expires in 2003).
At December 31, 1995, for federal income tax purposes, The Guardian
Investment Quality Bond Fund had a net capital loss carryforward of $703,772,
which expires in 2002.
Reclassification of Capital Accounts
During the year ended December 31, 1995, certain Portfolio Funds
reclassified amounts to paid-in capital from undistributed/(overdistributed) net
investment income and accumulated net realized gain/(loss) on investment and
foreign currency related transactions. Increases (decreases) to the various
capital accounts were as follows:
ACCUMULATED
NET REALIZED
GAIN/(LOSS) ON
UNDISTRIBUTED/ INVESTMENTS
(OVERDISTRIBUTED) AND FOREIGN
PAID-IN NET INVESTMENT CURRENCY RELATED
CAPITAL INCOME TRANSACTIONS
--------- ----------------- ----------------
GPAF $ 653,749 $ (98,626) $(555,123)
GAAF 26,069 (19,728) (6,341)
GBGIF (305,446) 580,658 (275,212)
GIQBF (702,810) -- 702,810
GTEF (39) -- 39
The GPAF, GAAF and GBGIF redesignated $65,857, $5,527 and $209,130,
respectively of ordinary dividends as long term capital gain dividends.
NOTE 2. INVESTMENT ADVISORY AGREEMENTS
AND PAYMENTS TO RELATED PARTIES
Guardian Investor Services Corporation (GISC) provides investment advisory
services to each of the Portfolio Funds (except GBGIF) under an investment
advisory agreement. Fees for investment advisory services are established under
the terms of separate fee appendices to the agreement at an annual rate of .50%
of the average daily net assets of each Portfolio Fund, except for GAAF which
pays GISC at an annual rate of .65% of its average daily net assets. For the
year ended December 31, 1995, GISC voluntarily assumed $217,635, $133,160 and
$266,840 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 investment management of
GBGIF's portfolio, subject to the supervision of the Portfolio's Board of
Trustees.
40
<PAGE>
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 year ended December 31, 1995. 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 $15,700 for the year ended
December 31, 1995. GISC pays compensation to the trustees who are interested
persons, except for Mr. Ferrara, who receives no compensation for his
trusteeship.
Certain officers and trustees of the Portfolio Funds are affiliated with
GISC.
NOTE 3. UNDERWRITING AGREEMENT
AND DISTRIBUTION PLAN
The Portfolio has entered into an Underwriting Agreement with GISC pursuant
to which GISC serves as the principal underwriter for shares of the Portfolio
Funds.
For the year ended December 31, 1995, 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 ............ $2,576,003 GIQBF ............. $206,434
GAAF ............ 321,465 GTEF .............. 46,429
GBGIF ........... 151,556
GISC and the Portfolio have entered into a Distribution Plan and Agreement
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the Plan).
Pursuant to the Plan, each Portfolio Fund pays GISC a monthly distribution fee
of up to .25% on an annual basis of its average daily net assets. GPAF currently
pays GISC .15%, on an annual basis, of its average daily net assets. Under the
Plan, GISC uses the fees received from the Portfolio Funds to pay distribution
expenses incurred during the fiscal year, including trail commissions, the
payment of advertising costs and expenses incurred in the preparation, printing
and distribution of prospectuses to prospective investors.
NOTE 4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
GPAF GAAF GBGIF
---- ---- -----
PURCHASES
- ---------
Stocks and debt
obligations $661,173,513 $55,717,979 $23,414,815
U.S. Government
and government
agency obligations -- 27,856,682 --
PROCEEDS
- --------
Stocks and debt
obligations 583,165,296 61,277,095 20,040,445
U.S. Government
and government
agency obligations 11,000,000 47,227,990 --
GIQBF GTEF
----- ----
PURCHASES
- ---------
Stocks and debt
obligations $53,122,219 $32,334,588
U.S. Government
and government
agency obligations 44,358,500 --
GIQBF GTEF
----- ----
PROCEEDS
- --------
Stocks and debt
obligations 41,186,079 31,841,670
U.S. Government
and government
agency obligations 148,789,507 --
The cost of investments owned at December 31, 1995 for federal income tax
purposes was the same as for financial reporting purposes for the Portfolio
Funds.
41
<PAGE>
The gross unrealized appreciation and depreciation at December 31, 1995, were as
follows:
GPAF GAAF GBGIF
---- ---- -----
Appreciation $228,060,141 $5,668,085 $5,542,753
(Depreciation) (9,131,705) (431,752) (893,556)
------------ ---------- ----------
Net Unrealized
Appreciation $218,928,436 $5,236,333 $4,649,197
============ ========== ==========
GIQBF GTEF
----- ----
Appreciation $1,051,897 $547,156
(Depreciation) (13,363) (9,721)
---------- --------
Net Unrealized
Appreciation $1,038,534 $537,435
========== ========
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 December 31, 1995, GBGIF had one open forward foreign currency contract,
as listed below, with net unrealized gains of $83,617, which is included in net
change in unrealized appreciation or depreciation on foreign currency related
transactions.
<TABLE>
<CAPTION>
TYPE OF EXPIRATION CURENT UNREALIZED
CURRENCY CONTRACT DATE COST VALUE APPRECIATION
- -------- -------- ---------- ---- ------ ------------
<S> <C> <C> <C> <C> <C>
520,000,000 Japanese Yen Sell 03/21/96 $5,179,283 $5,095,666 $83,617
=======
</TABLE>
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.
42
<PAGE>
NOTE 7. TRANSACTIONS IN PORTFOLIO FUND SHARES
O THE GUARDIAN PARK AVENUE FUND
<TABLE>
<CAPTION>
Year Ended December 31, 1995 Year Ended December 31, 1994
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,677,062 $248,191,463 6,037,382 $170,046,951
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain investments 1,609,384 54,438,335 1,053,246 28,635,093
- ------------------------------------------------------------------------------------------------------------------
9,286,446 302,629,798 7,090,628 198,682,044
Less shares repurchased (4,502,822) (146,328,114) (2,821,719) (79,131,170)
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE 4,783,624 $156,301,684 4,268,909 $119,550,874
==================================================================================================================
O THE GUARDIAN ASSET ALLOCATION FUND
Year Ended December 31, 1995 Year Ended December 31, 1994
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
Shares sold 895,730 $ 10,610,499 1,512,956 $ 16,308,961
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain investments 249,777 3,028,083 256,106 2,621,558
- ------------------------------------------------------------------------------------------------------------------
1,145,507 13,638,582 1,769,062 18,930,519
Less shares repurchased (716,332) (8,181,805) (975,487) (10,299,653)
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE 429,175 $ 5,456,777 793,575 $ 8,630,866
==================================================================================================================
O THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Year Ended December 31, 1995 Year Ended December 31, 1994
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
Shares sold 992,691 $ 12,765,871 1,962,179 $ 26,239,004
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain investments 199,863 2,694,682 22,460 293,682
- ------------------------------------------------------------------------------------------------------------------
1,192,554 15,460,553 1,984,639 26,532,686
Less shares repurchased (797,813) (10,427,754) (675,602) (8,927,296)
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE 394,741 $ 5,032,799 1,309,037 $ 17,605,390
==================================================================================================================
43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
O THE GUARDIAN INVESTMENT QUALITY BOND FUND
Year Ended December 31, 1995 Year Ended December 31, 1994
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,359,952 $ 12,911,461 3,110,719 $30,772,495
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain investments 302,597 2,917,967 127,928 1,202,423
- ------------------------------------------------------------------------------------------------------------------
1,662,549 15,829,428 3,238,647 31,974,918
Less shares repurchased (1,059,125) (10,221,819) (792,656) (7,570,610)
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE 603,424 $ 5,607,609 2,445,991 $24,404,308
==================================================================================================================
O THE GUARDIAN TAX-EXEMPT FUND
Year Ended December 31, 1995 Year Ended December 31, 1994
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
Shares sold 181,089 $ 1,707,367 258,142 $ 2,414,315
Shares issued to shareholders
in reinvestment of dividends
from net investment income and
net realized gain investments 52,140 736,433 83,405 769,939
- ------------------------------------------------------------------------------------------------------------------
233,229 2,443,800 341,547 3,184,254
Less shares repurchased (228,631) (2,388,693) (611,851) (5,698,639)
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 4,598 $ 55,107 (270,304) $ (2,514,385)
==================================================================================================================
O THE GUARDIAN CASH MANAGEMENT FUND
Year Ended December 31, 1995 Year Ended December 31, 1994
- ------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------
Shares sold 155,096,061 $155,096,061 86,145,741 $86,145,741
Shares issued to shareholders
in reinvestment of dividends
from net investment income 3,310,843 3,310,843 1,577,440 1,577,440
- ------------------------------------------------------------------------------------------------------------------
158,406,904 158,406,904 87,723,181 87,723,181
Less shares repurchased (145,224,145) (145,224,145) (65,723,454) (65,723,454)
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE 13,182,759 $ 13,182,759 21,999,727 $21,999,727
==================================================================================================================
</TABLE>
44
<PAGE>
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 year ended
December 31, 1995, none of the Portfolio Funds borrowed against this line of
credit.
45
<PAGE>
FINANCIAL HIGHLIGHTS
o THE GUARDIAN PARK AVENUE FUND
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT THE YEARS INDICATED:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
YEAR ........................... $26.89 $28.63 $25.17 $22.23 $18.26 $21.56 $20.46 $18.63 $20.74 $21.20
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment
income ........................ 0.33 0.31 0.50 0.45 0.65 0.68 0.92 0.60 0.47 0.35
Net realized and
unrealized gain/
(loss) on
investments ................... 8.87 (0.72) 4.56 4.05 5.71 (3.28) 3.88 3.23 0.20 3.33
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase/
(decrease) from
investment
operations .................... 9.20 (0.41) 5.06 4.50 6.36 (2.60) 4.80 3.83 0.67 3.68
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net
investment income ............. (0.33) (0.31) (0.50) (0.44) (0.66) (0.70) (0.98) (0.55) (0.60) (0.33)
Distributions from
net realized gain
on investments ................ (1.79) (1.02) (1.10) (1.12) (1.73) -- (2.72) (1.45) (2.18) (3.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ............. (2.12) (1.33) (1.60) (1.56) (2.39) (0.70) (3.70) (2.00) (2.78) (4.14)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF YEAR .................... $33.97 $26.89 $28.63 $25.17 $22.23 $18.26 $21.56 $20.46 $18.63 $20.74
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN* ................... 34.28% (1.44%) 20.28% 20.48% 35.16% (12.21%) 23.66% 20.78% 2.95% 18.38%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year (000's
omitted) ......................$972,275 $640,917 $560,193 $335,660 $270,095 $216,457 $228,190 $176,000 $157,045 $136,243
Ratio of expenses
to average net
assets ........................ 0.81% 0.84% 0.81% 0.68% 0.67% 0.69% 0.70% 0.69% 0.68% 0.71%
Ratio of net
investment income
to average net
assets ........................ 1.07% 1.15% 1.89% 1.94% 2.96% 3.51% 4.01% 2.82% 2.08% 1.79%
Portfolio turnover ratio ..... 78% 54% 46% 64% 57% 47% 47% 58% 50% 48%
====================================================================================================================================
</TABLE>
* Excludes effect of sales load.
46
<PAGE>
FINANCIAL HIGHLIGHTS
o THE GUARDIAN CASH MANAGEMENT FUND
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT THE PERIODS INDICATED:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Three
Months
Year Ended December 31, Ended Year Ended September 30,
-------------------------------------------------- Dec. 31, ---------------------------------
1995 1994 1993 1992 1991 1990 1989 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment
income 0.051 0.034 0.021 0.030 0.053 0.076 0.086 0.024 0.066 0.053 0.063
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net
investment income (0.051) (0.034) (0.021) (0.030) (0.053) (0.076) (0.086) (0.024) (0.066) (0.053) (0.063)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 5.22% 3.48% 2.15% 3.06% 5.70% 7.91% 8.60% 2.40%** 6.60% 5.30% 6.30%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's
omitted) $69,913 $56,730 $34,731 $37,780 $44,054 $47,143 $33,821 $21,961 $20,603 $19,618 $20,451
Ratio of expenses
to average net
assets 0.85% 0.87% 1.02% 0.70% 0.67% 0.65% 0.65% 1.00%* 1.00% 1.00% 1.00%
Ratio of expenses
subsidized by
GISC 0.37% 0.50% 0.42% 0.44% 0.35% 0.41% 0.52% 0.38%* 0.28% 0.35% 0.22%
Ratio of net
investment income
to average net
assets 5.10% 3.54% 2.13% 3.01% 5.30% 7.57% 8.56% 7.63%* 6.32% 5.34% 6.36%
====================================================================================================================================
</TABLE>
* Ratios are annualized.
** Not annualized.
47
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN
THE GUARDIAN BAILLIE GIFFORD
ASSET ALLOCATION FUND INTERNATIONAL FUND
-------------------------------------------------------------------------------------------------------------------------
Period from
February 16,
Year Ended December 31, 1993* to Year Ended December 31,
----------------------- December 31, -----------------------
1995 1994 1993 1995 1994
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.23 $10.98 $10.00 $13.01 $13.19
-------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.23 0.28 0.19 0.04 0.01
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions 2.29 (0.52) 1.02 1.40 (0.09)
-------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) from
investment operations 2.52 (0.24) 1.21 1.44 (0.08)
-------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.23) (0.28) (0.18) (0.04) (0.01)
Distributions in excess of net
investment income -- -- -- (0.23) --
Distributions from net realized gain
on investments and foreign currency
related transactions (0.33) (0.23) (0.05) (0.61) (0.09)
-------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.51) (0.23) (0.88) (0.10)
-------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.19 $10.23 $10.98 $13.57 $13.01
-------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN** 24.51% (2.13)% 12.16% 11.14% (0.55)%
=========================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $70,591 $54,875 $50,200 $44,546 $37,542
Ratio of expenses to average net assets 1.25% 1.30% 1.29%+ 1.74% 1.91%
Ratio of net investment income/(loss) to
average net assets 1.98% 2.72% 2.07%+ 0.19% 0.20%
Ratio of expenses subsidized by GISC -- -- -- -- --
Portfolio turnover ratio 219% 216% 165% 51% 33%
=========================================================================================================================
* Commencement of operations.
** Excludes effect of sales load
+ Annualized.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD INVESTMENT QUALITY
INTERNATIONAL FUND BOND FUND
--------------------------------------------------------------------------------------------------------------------------
Period from Period from
February 16, February 16,
1993* to Year Ended December 31, 1993* to
December 31, ----------------------- December 31,
1993 1995 1994 1993
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $ 9.12 $10.04 $10.00
---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.02) 0.59 0.46 0.37
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions 3.32 0.88 (0.90) 0.18
---------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) from
investment operations 3.30 1.47 (0.44) 0.55
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income -- (0.59) (0.46) (0.37)
Distributions in excess of net
investment income -- -- -- --
Distributions from net realized gain
on investments and foreign currency
related transactions (0.11) -- (0.02) (0.14)
---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.11) (0.59) (0.48) (0.51)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.19 $10.00 $9.12 $10.04
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN** 32.98% 16.64% (4.50)% 4.13%
===========================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $20,809 $53,706 $43,487 $23,310
Ratio of expenses to average net assets 2.35%+ 0.75% 1.46% 1.42%+
Ratio of net investment income/(loss) to
average net assets (0.21)%+ 6.11% 4.94% 3.68%+
Ratio of expenses subsidized by GISC -- 0.39% -- --
Portfolio turnover ratio 9% 401% 186% 167%
===========================================================================================================================
* Commencement of operations.
** Excludes effect of sales load.
+ Annualized.
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
THE GUARDIAN
TAX-EXEMPT FUND
------------------------------------------------------------------------------------------------
Period from
February 16,
Year Ended December 31, 1993* to
----------------------- December 31,
1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.86 $10.20 $10.00
------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.44 0.40 0.34
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions 0.83 (1.30) 0.40
------------------------------------------------------------------------------------------------
Net increase/(decrease) from
investment operations 1.27 (0.90) 0.74
------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (0.44) (0.40) (0.34)
Distributions in excess of net
investment income -- -- --
Distributions from net realized gain
on investments and foreign currency
related transactions -- (0.04) (0.20)
------------------------------------------------------------------------------------------------
Total Distributions (0.44) (0.44) (0.54)
------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.69 $ 8.86 $10.20
------------------------------------------------------------------------------------------------
TOTAL RETURN** 14.59% (8.98)% 5.55%
================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $17,501 $15,967 $21,135
Ratio of expenses to average net assets 0.75% 1.09% 1.36%+
Ratio of net investment income/(loss) to
average net assets 4.66% 4.26% 3.35%+
Ratio of expenses subsidized by GISC 0.79% 0.47% --
Portfolio turnover ratio 194% 107% 108%
================================================================================================
* Commencement of operations.
** Excludes effect of sales load.
+ Annualized.
49
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
BOARD OF TRUSTEES AND SHAREHOLDERS
THE PARK AVENUE PORTFOLIO
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Park Avenue Portfolio
(comprising, respectively, The Guardian Park Avenue Fund, The Guardian Asset
Allocation Fund, The Guardian Baillie Gifford International Fund, The Guardian
Investment Quality Bond Fund, The Guardian Tax-Exempt Fund and The Guardian Cash
Management Fund) as of December 31, 1995, and the related statements of
operations for the year then ended, and the statements of changes in net assets
for each of the two years in the period then ended and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective Funds constituting The Park Avenue Portfolio at December
31, 1995, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended and
financial highlights for each of the indicated periods, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 9, 1996
50
<PAGE>
o TRUSTEES
Arthur V. Ferrara, CLU. -- Chair
John C. Angle
Frank J. Fabozzi, Ph.D.
Leo R. Futia, CLU
William W. Hewitt, Jr.
Sidney I. Lirtzman, Ph.D.
Joseph D. Sargent
Carl W. Schafer
Robert G. Smith, Ph.D.
o OFFICERS
Frank J. Jones -- President
Charles E. Albers
Michele S. Babakian
Joseph A. Caruso
Alexander M. Grant, Jr.
Raymond J. Henry
Thomas R. Hickey, Jr.
Ann T. Kearney
R. Robin Menzies
Nikolaos D. Monoyios
John B. Murphy
Frank L. Pepe
Richard T. Potter, Jr.
<PAGE>
[ ] INVESTMENT ADVISER
& DISTRIBUTOR
Guardian Investor Services
Corporation(R)
201 Park Avenue South
New York, New York 10003
[ ] CUSTODIAN OF ASSETS
State Street Bank and Trust
Company
Custody and Shareholder
Services Division
P.O. Box 1713
Boston, Massachusetts 02102
[ ] SHAREHOLDER SERVICING AGENT &
DIVIDEND PAYING AGENT FOR STATE
STREET BANK AND TRUST COMPANY
National Financial Data Services
P.O. Box 419611
Kansas City, Missouri 64141-6611
[ ] INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, N.Y. 10019
This report is authorized for distribution to the public only when accompanied
or preceded by a current prospectus for the funds which comprise The Park Avenue
Portfolio.
EB-011566 (12/95)
ANNUAL
REPORT
TO
SHAREHOLDERS
DECEMBER 31, 1995
THE PARK AVENUE PORTFOLIO
[ ] THE GUARDIAN
PARK AVENUE FUND
[ ] THE GUARDIAN
ASSET ALLOCATION FUND
[ ] THE GUARDIAN
BAILLIE GIFFORD
INTERNATIONAL FUND
[ ] THE GUARDIAN
INVESTMENT QUALITY
BOND FUND
[ ] THE GUARDIAN
TAX-EXEMPT FUND
[ ] THE GUARDIAN
CASH MANAGEMENT FUND
(LOGO)
- --------------------------------------------
GUARDIAN INVESTOR SERVICES CORPORATION
<PAGE>
[ ] TRUSTEES
Arthur V. Ferrara, CLU -- Chair
John C. Angle
Frank J. Fabozzi, Ph.D.
Leo R. Futia, CLU
William W. Hewitt, Jr.
Sidney I. Lirtzman, Ph.D.
Joseph D. Sargent
Carl W. Schafer
Robert G. Smith, Ph.D.
[ ] OFFICERS
Frank J. Jones -- President
Charles E. Albers
Michele S. Babakian
Joseph A. Caruso
Alexander M. Grant, Jr.
Raymond J. Henry
Thomas R. Hickey, Jr.
Ann T. Kearney
R. Robin Menzies
Nikolaos D. Monoyios
John B. Murphy
Frank L. Pepe
Richard T. Potter, Jr.
[ ] INVESTMENT ADVISER
& DISTRIBUTOR
Guardian Investor Services Corporation(R)
201 Park Avenue South
New York, New York 10003
[ ] CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Custody and Shareholder Services Division
Post Office Box 1713
Boston, Massachusetts 02102
[ ] SHAREHOLDER SERVICING AGENT &
DIVIDEND PAYING AGENT FOR STATE
STREET BANK AND TRUST COMPANY
National Financial Data Services
Post Office Box 419611
Kansas City, Missouri 64141-6611
[ ] INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, N.Y. 10019
<PAGE>
Guardian Investor Services Corporation(R)
[LOGO] 201 Park Avenue South
New York, New York 10003
This report is authorized for distribution to the public only when accompanied
or preceded by a current prospectus for the funds which comprise The Park Avenue
Portfolio.
EB-011566M (12/95)
Bulk Rate Mail
U.S. Postage Paid
Newark, NJ
Permit No. 45
ANNUAL
REPORT
TO
SHAREHOLDERS
DECEMBER 31, 1995
THE PARK AVENUE PORTFOLIO
[ ]The Guardian
Park Avenue Fund
[ ] The Guardian
Asset Allocation Fund
[ ] The Guardian
Baillie Gifford
International Fund
[ ] The Guardian
Investment Quality
Bond Fund
[ ] The Guardian
Tax-Exempt Fund
[ ] The Guardian
Cash Management Fund
- -------------------------------------- [LOGO]
GUARDIAN INVESTOR SERVICES CORPORATION
