- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
- -----------------
[GRAPHICAL REPRESENTATION OF GUARDIAN LIFE BUILDING]
THE RETURN OF GOLDILOCKS
[PHOTO]
Frank J. Jones, Ph.D.
The economy is now in its seventh year of uninterrupted growth--the current
expansion began in March, 1991. Growth during this period, however, has not been
uniform--it has oscillated between periods of rapid and slow growth (but growth
nevertheless). Occasionally during this period, economists have observed that we
have a "Goldilocks" economy in which growth is "not too hot, not too cold."
Goldilocks seems to have returned. The unemployment rate during May was a
24-year low of 4.8%; jobs are being created at a robust pace (1.4 million jobs
created during the first half of 1997); labor costs have retreated somewhat from
a previously inflation-inducing level (the 12-month average hourly earnings rate
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
through March, 1997 increased at an annual rate of 4.1% and decreased to a more
moderate annual rate of 3.5% through June); inflation is near a 31-year low (the
Consumer Price Index (CPI) is up at an annual rate of 2.3% over the year through
June and the Producer Price Index (PPI) declined by 0.3% over this period); gold
prices are at an 11-year low; and consumer confidence is high.
How can we still have such moderate inflationary forces with the economy so
strong and labor markets so tight? Certainly, the significantly increased use of
technology, increased productivity, the discipline of global competition and the
strong dollar have served to moderate inflation. But even discounting these
forces, the Fed is uncertain or even confused about this issue. In this regard,
the following is an excerpt from the May 20, 1997 Federal Open Market Committee
(FOMC) meeting minutes:
With regard to the outlook for inflation, members observed that increases
in prices had remained subdued despite the rapid expansion in economic
activity in recent quarters and the associated increases in pressures on
already highly utilized resources. The appreciation of the dollar
undoubtedly had helped dampen domestic inflation this year, and reported
increases in consumer prices also had been held down to a marginal extent
by an ongoing series of technical adjustments in the CPI.
These were only partial explanations, however, and the members found it
very difficult to account for the surprisingly benign behavior of inflation
in an economy that had been operating at a level approximating full
employment-indeed, possibly above sustainable full employment in labor
markets in the view of a number of members, especially taking into
consideration the recent further decline in the unemployment rate.
When the Fed tightened monetary policy on March 25 by increasing the
Federal Funds rate by 25 basis points, or 0.25%, the first Fed action since
January 31, 1996 and the first Fed tightening since February 1, 1995, the
markets thought, based on history, that this would be the first in a series of
tightenings. On April 11 the 30-year Treasury yield increased to its 1997 high
of 7.17% and the DJIA (Dow Jones Industrial Average (1) decreased to 6,392, 9.8%
below its previous high on March 11, 1997. However, the Fed refrained from
tightening at its next meeting on May 20 in a marginal decision (see the
previous quote) and again at its July 2 meeting, in an easy decision. The May
non-tightening by the Fed made Alan Greenspan, the Federal Reserve Chairman,
seem prescient, as did the difficult and widely scrutinized August 1996
non-tightening.
Where do we go from here? Real Gross Domestic Product (GDP) increased by
5.9% in the first quarter of 1997, faster than could be sustained given the
initial full utilization of labor and capital. This expectation is what caused
the Fed to tighten during March. Second quarter real GDP increased by only 2.2%.
The Fed's expectation of this slow growth caused the Fed non-tightenings during
May and July.
Either the first quarter 1997 economic growth rate of 5.9% or the second
quarter 1997 rate of 2.2% was a "head fake" (despite the warm first quarter
weather factor which added to first quarter growth at the expense of second
quarter growth). But which quarterly growth rate was the head fake? Probably
both! Real GDP growth during the third and fourth quarters will be well within
this range, probably within the fairly wide range of 2 1/2% to 3 1/2%. Given
the current high utilization rate of capital and labor and the maximum
sustainable economic growth rate of 2 1/2% to 2 3/4%, this level of economic
growth rate is expected to tax capital and labor resources and cause an increase
in labor costs and inflation. Given these conditions, the Fed may have to
respond with one or two moderate tightenings at the September 30 FOMC meeting or
after, but not a more aggressive series of tightenings, as expected after the
March tightening.
While such growth during the second half of 1997 and potential Fed moderate
responses may cause short-term instability in the stock and bond markets, these
events may prolong the seven-year economic expansion--due to the lack of
excesses of any type--and keep Goldilocks in residence.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
July was an interesting, pivotal and positive month for the markets. The
Fed refrained from tightening at its July 1 FOMC meeting, a "lay-up" decision.
More importantly, June employment growth was somewhat less than expected and the
increase in labor costs was also less than expected. Finally, a balanced budget
plan was agreed to by the President and Congress.
The following "headlines" summarize market activity so far this year:
o The DJIA,(1) S&P 500,(2) NASDAQ Composite(3) and Russell 2000(4)
indexes were all at record levels during late July (the S&P 500
returned 30.19% for the year through July 31);
o Cash inflows into stock mutual funds have remained high during 1997;
o The 10-year Treasury yield decreased to 6.35%, the lowest since
November 29, 1996;
o June, 1997 experienced the highest new issuance of junk bonds ever
(with only a slight widening of spreads);
o The U.S. dollar has grown very strong against the German mark, the
British pound and the Japanese yen; and
o The stock markets of the U.K., Germany, France, Italy, Hong Kong (the
latter, despite the transition from the U.K. to China), Mexico and
several other developed and developing countries, as well as the U.S.,
reached record highs.
With respect to the U.S. stock market, the major negative is the current
rich market valuation levels. However, there are also many positives for the
stock market. Among these positives are the prolonged strong economy, the
correspondingly strong corporate profits, and the low inflationary environments
(helped by the strong dollar). The strong corporate profits can be attributed to
strong productivity gains which were achieved, in part, by advances in
technology, corporate restructuring and, as a result, global competition.
Obviously, optimism is high--Goldilocks has returned. But while some of the
markets seem to have "thrown caution to the wind," individual investors should
not. These observations lead to our bottom line, which is to maintain our
offensive approach, but be prepared for short-term volatility.
Do not bail out, but tighten your seat belts.
Regards,
/s/ FRANK J. JONES
----------------------------------------
Frank J. Jones, Ph.D.
President, The Park Avenue Portfolio
- --------------------------------------------------------------------------------
(1) The Dow Jones Industrial Average (DJIA) is an unmanaged average of 30
industrial stocks listed on the New York Stock Exchange that, like the S&P
500 Index, is generally considered to be representative of U.S. stock
market performance. The DJIA is not available for direct investment and its
returns do not reflect the fees and expenses that are deducted from the
Funds in The Park Avenue Portfolio.
(2) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The S&P 500 Index is not available for direct investment and its returns do
not reflect the fees and expenses that are deducted from the Funds in The
Park Avenue Portfolio.
(3) The Nasdaq Composite Index is a broad-based capitalization-weighted index
of all Nasdaq National Market & small cap stocks.
(4) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The returns for the
Russell 2000 do not reflect expenses that are deducted from the Funds in
The Park Avenue Portfolio.
- --------------------------------------------------------------------------------
<PAGE>
THE PARK AVENUE PORTFOLIO
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
- ---------------------------------------
OBJECTIVE: Long-term growth of capital
- --------------------------------------------------------------------------------
PORTFOLIO: At least 80% common stocks and securities convertible into
common stocks
- --------------------------------------------------------------------------------
INCEPTION: June 1, 1972
- --------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1997: $1,936,054,659
- --------------------------------------------------------------------------------
PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
- --------------------------------------------------------------------------------
2 19
---- ----
"OUR QUANTITATIVE MODELS LOOK AT THE PORTFOLIO TWO DIFFERENT WAYS:
"TOP-DOWN" AND "BOTTOM-UP." THE "TOP-DOWN" APPROACH INVOLVES A CLUSTER OF
DIFFERENT PREDICTIVE MODELS THAT WE USE TO IDENTIFY WHICH OVERALL PORTFOLIO
STYLE HAS THE MOST ATTRACTIVE PERFORMANCE PROSPECTS. THE "BOTTOM-UP" APPROACH
USES OUR MULTI-FACTOR STOCK SCORING SYSTEM TO IDENTIFY SPECIFIC ATTRACTIVE
STOCKS WITHIN OUR 2000-STOCK RESEARCH UNIVERSE."
--Charles E. Albers, C.F.A.
Portfolio Manager
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE SMALL CAP FUND
- ---------------------------------------
OBJECTIVE: Long-term growth of capital
- --------------------------------------------------------------------------------
PORTFOLIO: At least 85% in a diversified portfolio of common stocks and
convertible securities issued by companies with small market
capitalization
- --------------------------------------------------------------------------------
INCEPTION: April 2, 1997
- --------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1997: $36,476,324
- --------------------------------------------------------------------------------
6 24
---- ----
"AS A GENERAL PRACTICE, THE FUND INTENDS TO REMAIN FULLY INVESTED IN COMMON
STOCKS. SUCCESSFUL MARKET TIMING IS EXTREMELY DIFFICULT, AND TO INVEST EVEN A
SMALL PORTION OF THE SMALL CAP FUND'S ASSETS ELSEWHERE WOULD RISK BEING OUT OF
THE MARKET DURING THE QUICK SURGES THAT CHARACTERIZE A BULL MARKET."
--Charles E. Albers, C.F.A.
Co-Portfolio Manager
--Larry Luxenberg, C.F.A.
Co-Portfolio Manager
- --------------------------------------------------------------------------------
THE GUARDIAN ASSET ALLOCATION FUND
- ---------------------------------------
OBJECTIVE: Long-term total investment return consistent with moderate risk
- --------------------------------------------------------------------------------
PORTFOLIO: A mixture of equity securities, debt obligations and money
market instruments; purchases shares of the Park Avenue,
Investment Quality Bond and Cash Management Funds
- --------------------------------------------------------------------------------
INCEPTION: February 16, 1993
- --------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1997: $119,320,665
- --------------------------------------------------------------------------------
8 26
---- ----
"THE FUND IS MANAGED USING PROPRIETARY QUANTITATIVE MODELS WHICH ATTEMPT TO
JUDGE THE RELATIVE RISK-ADJUSTED ATTRACTIVENESS OF THE STOCK, BOND AND CASH
MARKETS. WHILE INTEREST RATES ARE THE OPERATIVE VARIABLE IN THE FIXED INCOME
MARKETS, CORPORATE PROFITABILITY AND GROWTH ARE ADDED TO THE MIX FOR THE EQUITY
MARKETS."
--Jonathan C. Jankus, C.F.A.
Portfolio Manager
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
- -----------------------------------------------
OBJECTIVE: Long-term growth of capital
- --------------------------------------------------------------------------------
PORTFOLIO: At least 80% in a diversified portfolio of common stocks of
companies domiciled outside of the United States
- --------------------------------------------------------------------------------
INCEPTION: February 16, 1993
- --------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1997: $72,456,807
- --------------------------------------------------------------------------------
PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
- --------------------------------------------------------------------------------
10 29
---- ----
"DURING THIS PERIOD, MANY MARKETS CONTINUED TO BE EXPENSIVE, RELATIVE TO
HISTORIC LEVELS, ON A NUMBER OF DIFFERENT MEASURES. HOWEVER, WE HAVE RECOGNIZED
THAT A HIGH LEVEL OF LIQUIDITY WORLDWIDE HAS BEEN DRIVING MARKETS. OUR STRATEGY
HAS CONTINUED TO BE ONE OF STOCK-DRIVEN ALLOCATION AND THIS PROVED SUCCESSFUL
AGAIN IN THE FIRST HALF OF THIS YEAR."
--R. Robin Menzies
Portfolio Manager
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
- --------------------------------------------------
OBJECTIVE: Long-term capital appreciation
- --------------------------------------------------------------------------------
PORTFOLIO: At least 65% in a portfolio of common stocks issued by emerging
market companies
- --------------------------------------------------------------------------------
INCEPTION: April 2, 1997
- --------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1997: $24,507,824
- --------------------------------------------------------------------------------
12 32
---- ----
"WE REMAIN OPTIMISTIC ABOUT THE INVESTMENT PROSPECTS FOR EMERGING MARKETS
IN GENERAL. GROWTH RATES REMAIN HIGH AND THE INTERNATIONAL BACKGROUND IS
FAVORABLE: INTEREST RATES MAY RISE FURTHER IN THE DEVELOPED COUNTRIES, BUT NOT
BY VERY MUCH."
--Edward H. Hocknell
Portfolio Manager
- --------------------------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND
- -----------------------------------------
OBJECTIVE: A high level of current income and capital appreciation without
undue risk
- --------------------------------------------------------------------------------
PORTFOLIO: At least 80% investment-grade bonds and U.S. government securities
- --------------------------------------------------------------------------------
INCEPTION: February 16, 1993
- --------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1997: $83,358,986
- --------------------------------------------------------------------------------
14 35
---- ----
"THE FUND'S OVERALL STRATEGY CONTINUES TO FOCUS ON "OPTIMAL" ASSET
ALLOCATION AND SECURITY SELECTION WITHIN THE VARIOUS BOND SECTORS AND TO AVOID
MARKET TIMING. THIS STRATEGY SHOULD PROVIDE OPPORTUNITIES TO OUTPERFORM OUR
BENCHMARK AND PEER GROUPS WITH A RELATIVELY LOW RISK PROFILE."
--Thomas G. Sorell, C.F.A.
Portfolio Manager
<PAGE>
- --------------------------------------------------------------------
THE PARK AVENUE PORTFOLIO
TABLE OF CONTENTS--(CONTINUED)
- --------------------------------------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND
- ---------------------------------------
OBJECTIVE: Maximum current income exempt from federal taxes consistent with
preservation of capital
- --------------------------------------------------------------------------------
PORTFOLIO: At least 80% investment-grade debt obligations issued by state
and local authorities
- --------------------------------------------------------------------------------
INCEPTION: February 16, 1993
- --------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1997: $42,381,979
- --------------------------------------------------------------------------------
PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
- --------------------------------------------------------------------------------
16 38
---- ----
"WITH NEW ISSUE VOLUME BEING EASILY ABSORBED AND QUALITY SPREADS
HISTORICALLY VERY NARROW, WE STAYED WITH THE HIGHER RATED CREDITS. BY DOING SO,
WE AVOIDED CHASING "HOT" DEALS WHERE THE YIELD INCREASE MAY HAVE BEEN ONLY .05%,
BUT THE CREDIT QUALITY SPREAD DIFFERENTIAL WAS SIGNIFICANTLY MORE."
--Alexander M. Grant, Jr.
Portfolio Manager
- --------------------------------------------------------------------------------
THE GUARDIAN CASH MANAGEMENT FUND
- ---------------------------------
OBJECTIVE: As high a level of current income as is consistent with liquidity
and preservation of capital
- --------------------------------------------------------------------------------
PORTFOLIO: Short-term money market instruments
- --------------------------------------------------------------------------------
INCEPTION: November 3, 1982
- --------------------------------------------------------------------------------
NET ASSETS AT JUNE 30, 1997: $107,645,651
- --------------------------------------------------------------------------------
18 40
---- ----
"OUR INVESTMENT STRATEGY WAS TO CREATE A DIVERSIFIED PORTFOLIO OF MONEY
MARKET INSTRUMENTS THAT PRESENTS MINIMAL CREDIT RISKS ACCORDING TO OUR CRITERIA.
AS ALWAYS, WE ONLY PURCHASED SECURITIES FROM ISSUERS THAT HAD RECEIVED RATINGS
IN THE TWO HIGHEST CREDIT QUALITY CATEGORIES."
--Alexander M. Grant, Jr.
Portfolio Manager
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS 42
- --------------------------------- ----
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 50
- --------------------------------- ----
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 60
- --------------------------------- ----
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
- -----------------------------
[PHOTO]
Charles E. Albers, C.F.A.
Portfolio Manager
Q. THE STOCK MARKET'S CONTINUED STRENGTH IN 1997 HAS SURPRISED MANY MARKET
OBSERVERS. HOW HAS THE FUND PERFORMED DURING THE FIRST HALF OF 1997?
A. The Guardian Park Avenue Fund has performed very well in the first half of
1997, both absolutely and also relative to our mutual fund peer group. The
return to our shareholders for that period was a robust 18.40%,(1) far above
historic average returns for the U.S. stock market. Also, that return
substantially exceeded the return of the average fund in our peer group, Lipper
U.S. Growth Funds,(2) which was a lesser 14.26% over the same period. This was
accomplished in an environment where the large-cap stock index, the S&P 500,(3)
completely dominated the results of most "active" money managers: its total
return for the six-months ended June 30, 1997 was 20.60%.
Of course, from a shareholder's viewpoint, what is most important is the
long-term investment record. Here, too, the Fund has done well, placing it in
the top 5% of Lipper Growth Funds over the last 5 years, ranking number 12 out
of 280 for the five-year period and number 21 out of 174 funds (top 13%) for the
10-year period ended June 30, 1997.(4) And, for the last 15 years, we are
pleased to note that the Fund ranked number 5 out of 113 growth funds (top 5%),
a pretty impressive statistic!
- --------------------------------------------------------------------------------
COMPARATIVE AVERAGE ANNUAL
TOTAL RETURNS FOR THE PERIODS
ENDED JUNE 30, 1997
-----------------------------------
GUARDIAN PARK GUARDIAN PARK
GUARDIAN PARK LIPPER U.S. AVENUE FUND AVENUE FUND
AVENUE FUND GROWTH FUNDS AVERAGE LIPPER RANK(4) PERCENT RANK
- --------------------------------------------------------------------------------
1 Year +35.26% +23.62% 66 (out of 758) Top 9%
- --------------------------------------------------------------------------------
5 Year +23.20% +16.58% 12 (out of 280) Top 5%
- --------------------------------------------------------------------------------
10 Year +15.77% +12.62% 21 (out of 174) Top 13%
- --------------------------------------------------------------------------------
15 Year +20.30% +16.02% 5 (out of 113) Top 5%
- --------------------------------------------------------------------------------
Q. WHAT FACTORS AFFECTED FUND PERFORMANCE IN THE FIRST HALF OF 1997?
A. Six months ago, in the Annual Report to shareholders, we said: "We continue
to believe that well-established, large-cap companies have the better prospects
in 1997. This view is supported both by our quantitative 'style predictor'
models and also by our fundamental investment judgment."
Our judgment at that time has been vindicated by subsequent developments.
The current multi-year
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents total return for Class A shares--returns for Class B
shares would be lower to reflect higher operating expenses associated with
the B share class. Total return figures do not take into account the
current maximum sales charges. Returns represent past performance and are
not a guarantee of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than the original cost. Prior to August 25, 1988, shares of
the Fund were offered at a higher sales charge, so actual returns would
have been somewhat lower.
(2) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service. 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.
(3) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The S&P 500 Index is not available for direct investment and its returns do
not reflect the fees and expenses that have been deducted from the Fund.
Likewise, return figures for the S&P 500 Index do not reflect any sales
charges that an investor may have to pay when purchasing or redeeming
shares of the Fund.
(4) Lipper rankings were reported in Lipper's Mutual Funds Performance Analysis
Special Report 2nd Quarter 1997. Lipper rankings are based on total returns
and do not take into account any deductions for sales loads.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
cycle of domestic large-cap outperformance, which began in 1995, has continued
to roll on in the first half of 1997. This phenomenon is shown in the following
table:
TOTAL RETURN %
------------------------------
SIX-
YEAR YEAR MONTHS
ENDED ENDED ENDED
DEC. 31, DEC. 31, JUNE 30,
1995 1996 1997
------ ------ ------
Large-Cap (S&P 500) +37.4% +22.8% +20.6%
Small-Cap (Russell 2000)(5) +28.4% +16.5% +10.2%
------ ------ ------
Amount of Large-Cap
Outperformance + 9.0% + 6.3% +10.4%
Throughout this period, from mid-1995 through mid-1997, we have positioned
the Fund with a portfolio cap-size which has been much larger than those of most
other actively managed funds, and this has given us a meaningful competitive
advantage during this period.
THE GUARDIAN PARK AVENUE FUND
WEIGHTED AVERAGE MARKET CAPITALIZATION
($ Billions)
[GRAPHICAL REPRESENTATION OF BAR GRAPH BELOW]
6/30/95 14.9
12/31/95 24.6
6/30/96 34.7
12/31/96 37.7
6/30/97 46.1
Another factor that contributed to our relatively good investment
performance in the first half of 1997 was our multi-factor quantitative stock
scoring system. This system has generally provided us solid guidance over the
years in stock selection, and this favorable record has continued into 1997.
Q. WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND DURING THE FIRST HALF OF 1997?
A. There was no change in our strategic approach to managing the portfolio
during this period. We believe that soundly-based quantitative models provide a
valuable tool. At the same time, fast-breaking news and unusual investment
issues require the balanced judgment of a capable portfolio manager. We believe
the surest path to consistently above-average returns requires the synergistic
results of combining good quantitative tools with good manager judgment.
Our quantitative models look at the portfolio two different ways:
"top-down" and "bottom-up." The "top-down" approach involves a cluster of
different predictive models that we use to identify which overall portfolio
style has the most attractive performance prospects. The "bottom-up" approach
uses our multi-factor stock scoring system to identify specific attractive
stocks within our 2000-stock research universe. We believe that both the
"top-down" and "bottom-up" perspectives are important, and the best results can
be achieved by combining them both within one portfolio.
Q. WHAT ARE THE PORTFOLIO'S WEIGHTS IN DIFFERENT ECONOMIC SECTORS, AND HOW HAVE
THESE WEIGHTINGS AFFECTED PERFORMANCE?
A. The attached pie chart shows the Fund's portfolio weightings for each of the
major economic sectors as of June 30, 1997. These weightings are not the primary
driver of our portfolio management process, but there is an interesting
perspective here. The Fund's greatest sector overweight is the Financial sector
(26.3% weight versus 15.3% in the S&P 500), and this sector was a superior
performer in the first half of 1997. The Fund's greatest sector underweight was
Utilities (3.2% weight versus 8.5% in the S&P 500), and this sector was a
significant underperformer in the first half. The two largest S&P 500 sectors
are Consumer Staples and Technology, and the Fund weighting is close to the
benchmark for both.
Q. MANY INVESTORS HAVE SHIFTED TO PASSIVE "INDEXING" IN RECENT YEARS. WHAT DOES
THE FUTURE HOLD FOR "ACTIVE" PORTFOLIO MANAGEMENT?
A. As shown in the table above, within the U.S. stock market, large cap stocks
have been substantially
- --------------------------------------------------------------------------------
(5) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The returns for the
Russell 2000 do not reflect expenses, which are deducted from the Fund's
return.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
outperforming small caps for roughly the last 3 years. Most active money
managers in the U.S. have tended to be substantially "under-weighted" in the S&P
500 (large-cap) stocks, particularly the mega-cap stocks (the largest 50),
causing their performance to lag the S&P 500 over this span.
In response to those trends, "indexing" has been experiencing a boomlet of
popularity. Many investors have been "throwing in the towel" on active portfolio
management and shifting their money into funds which mimic a stock price index,
most often the S&P 500. Promptly, those "index funds" turn around and buy the
underlying stocks, with most of the money going into the mega-cap stocks. In the
short run, this boomlet of popularity of indexing has been like a
self-fulfilling prophecy: with the mega-cap stocks getting much of the
incremental buying power, their prices have been pushed upward, leading the
market.
Small cap stocks, compared to large ones, have now become very cheap by
historic norms. Over the long term, relative valuations between large caps and
small caps will almost certainly return to normal historic relationships, and
that implies that small caps will have to "catch up" on a relative performance
basis.
The bottom line: Most active money managers have looked bad during the last
few years, at least relative to the S&P 500 Index. However, this seems to be a
very poor time for investors to throw in the towel on all active equity
managers. Indeed, over the next several years, it seems quite likely that many
active managers will be able to do substantially better than the venerable, but
now-bloated, S&P 500 Index.
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND PROFILE
AS OF 6/30/97
- -------------------------------------------------------
---------------------------------------
THE GUARDIAN PARK AVENUE FUND--
TOP 10 HOLDINGS AS OF 6/30/97
1. General Electric 3.44%
---------------------------------------
2. Merck & Co. 2.58%
---------------------------------------
3. Bristol Myers Squibb 2.54%
---------------------------------------
4. Intel Corp. 2.34%
---------------------------------------
5. Citicorp 2.15%
---------------------------------------
6. Exxon Corp. 2.03%
---------------------------------------
7. Johnson & Johnson 1.85%
---------------------------------------
8. DuPont DeNemours 1.69%
---------------------------------------
9. Coca Cola Co. 1.68%
---------------------------------------
10. BankAmerica 1.61%
---------------------------------------
For a complete list of portfolio
holdings, please see the schedule of
investments.
---------------------------------------
SECTOR WEIGHTINGS OF
COMMON STOCKS HELD
BY THE FUND ON JUNE 30, 1997
[GRAPHICAL REPRESENTATION OF PIE CHART BELOW]
Credit Cyclicals - 0.5%
Utilities - 3.2%
Consumer Cyclical - 3.6%
Conglomerates - 1.5%
Consumer Services - 2.1%
Transportation - 2.1%
Consumer Staples - 20.0%
Financial - 26.3%
Capital Goods - 5.9%
Basic Industries - 3.9%
Energy - 15.8%
Capital Goods-Technology - 15.2%
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
[GRAPHICAL REPRESENTATION OF DATA TABEL BELOW]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
The Guardian Park Avenue Fund - $452,576
S&P 500 Index - $206,652
Lipper U.S. Equity
Growth Fund Average - $172,283
Cost of Living - $39,010
A hypothetical $10,000 investment in Class A shares made at the inception of The
Guardian Park Avenue Fund on June 1, 1972 has a starting point of $9,550, which
reflects the current maximum sales charge for Class A shares of 4.5%. This
investment would have grown to $452,576 on June 30, 1997. We compare our
performance to that of the S&P 500 Index, which is an unmanaged index that is
generally considered the performance benchmark of the U.S. stock market. While
you may not invest directly in the S&P 500 Index, a similar hypothetical
investment would now be worth $206,652. 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 $172,283. The Cost of Living, 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(1) FOR PERIODS ENDED 6/30/97
Since
Inception
1 Year 5 Years 10 Years (6/1/72)
- --------------------------------------------------------------------------------
At Net Asset Value(2) (without
sales charge) 35.26% 23.20% 15.77% 16.51%
- --------------------------------------------------------------------------------
Class A Shares(3) (with sales charge) 29.17% 22.07% 15.24% 16.30%
- --------------------------------------------------------------------------------
S&P 500 Index 34.59% 18.29% 14.59% 12.68%
- --------------------------------------------------------------------------------
PERFORMANCE FOR CLASS B SHARES, WHICH WERE FIRST OFFERED ON MAY 1, 1996, WILL
VARY DUE TO DIFFERENCES IN EXPENSES CHARGED TO EACH SHARE CLASS.
(1) Total return figures shown are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales 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.
(2) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of sales charges.
(3) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE SMALL CAP FUND
- ---------------------------------------
[PHOTO] [PHOTO]
Charles E. Albers, C.F.A. Larry Luxenberg, C.F.A.
Co-Portfolio Manager Co-Portfolio Manager
Q. HOW DID THE FUND PERFORM IN ITS INITIAL PERIOD?
A. The Guardian Park Avenue Small Cap Fund got under way on May 1, 1997 amid a
sudden, sharp rally in small capitalization stocks. After a year in which small
cap stocks significantly underperformed blue chip stocks, May was one of the
best months ever for small caps.
In May, the new Fund was up 9.11%.(1) The Russell 2000 Index(2), the most
widely used measure of small cap stock performance, snapped back strongly (from
being down 5% during the first four months of 1997), surging 11.12%. The Lipper
Small Cap Funds Index was up 12.14% while the Lipper U.S. Growth Funds Index(3)
was up 7.40%. In June, while the averages cooled off to a less torrid pace, The
Guardian Park Avenue Small Cap Fund was up 5.57%, compared to 4.29% for the
Russell 2000, 5.28% for the Lipper Small Cap Funds Index and 3.93% for Lipper
U.S. Growth Funds Index.
Q. SMALL CAP STOCKS HAVE BEEN WEAK RELATIVE PERFORMERS OVER THE LAST FEW YEARS.
IS THERE ANY SIGN OF A CHANGE?
A. While recent returns are high relative to historical norms and unlikely to be
sustainable at this level, there are indications that the relative performance
of small cap stocks may keep improving. Many market analysts now believe that
small cap stocks are poised for a period of sustained outperformance. Although
it is difficult to pinpoint when such a period of strong relative performance
might occur, analysts highlight three significant factors. First, the overall
valuations of small cap stocks, as measured by price/earnings ratios,
price/sales and book value are at the most favorable levels since 1990.
Secondly, the strong dollar generally penalizes large companies with their
international operations. Finally, Congress and the Clinton Administration have
enacted a capital gains tax cut that will likely be of more benefit to small cap
stocks. Typically, small cap shareholders realize more of their total return
from capital appreciation than from dividends.
Q. HOW IS THE SMALL CAP FUND MANAGED AND HOW DOES IT COMPARE TO THE GUARDIAN
PARK AVENUE FUND?
A. The new Small Cap Fund employs the same time-tested methods which we have
used to manage The Guardian Park Avenue Fund for the last 25 years. The
management process combines a quantitative approach as well as traditional
fundamental analysis for picking stocks and weighting industry groups and
broader economic sectors. The Guardian Park Avenue Small Cap Fund uses a
quantitative multi-factor stock selection model similar to the one The Guardian
Park Avenue Fund has historically used. This disciplined approach has enabled
The Park Avenue Fund to generate consistently solid returns in both bull and
bear markets, and we believe that this approach will translate well to the small
cap environment.
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents total return for Class A shares--returns for Class B
shares would be lower to reflect higher operating expenses associated with
the B share class. Total return figures do not take into account the
current maximum sales charges. 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 Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The returns for the
Russell 2000 do not reflect expenses, which are deducted from the Fund's
return.
(3) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service. 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.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Q. ARE THERE ANY SIGNIFICANT DIFFERENCES BETWEEN INVESTING IN LARGE CAP AND
SMALL CAP STOCKS?
A. By their nature, small cap stocks tend to be more volatile than those of
larger companies. Often, the smaller companies are more dependent on a single
product line, a single market or a small number of customers. As compensation
for that added riskiness, smaller companies also have the opportunity to grow
faster and generate greater returns for shareholders. By building a broad-based,
diversified portfolio, The Guardian Park Avenue Small Cap Fund hopes to
capitalize on the long-term appreciation possibilities of small cap stocks
without undue risk.
Q. HOW IS YOUR PORTFOLIO STRUCTURED NOW?
A. As of June 30, the Small Cap Fund had about 90 different stocks broadly
diversified across industry groups. Financial and energy stocks were
overweighted relative to the Russell 2000 Index.(2) Financial stocks have been
benefiting from the sustained period of low inflation, low interest rates,
moderate growth in Gross Domestic Product (GDP) and industry consolidation. In
the energy area, we emphasized drilling suppliers and exploration companies
selling near asset value but with significant prospects. The Small Cap Fund also
has a large weighting in technology stocks, particularly in stocks of
fast-growing companies which are leaders in their fields.
As a general practice we intend to remain fully invested in common stocks.
Successful market timing is extremely difficult, and to invest even a small
portion of the Small Cap Fund's assets elsewhere would risk being out of the
market during the quick surges that characterize a bull market. While the stock
market in recent years has been exceptionally strong by historic standards and
may experience a downturn at any time, we believe that the business climate
remains quite favorable for stocks. Given the low inflation rate and steady GDP
growth, the domestic small cap stock market's overall valuation seems
reasonable.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN ASSET ALLOCATION FUND
- ----------------------------------
[Photo]
Jonathan C. Jankus, C.F.A.
Portfolio Manager
Q. THIS HAS BEEN AN INTERESTING SIX MONTHS FOR THE U.S. STOCK AND BOND MARKETS.
HOW HAS THE FUND PERFORMED?
A. The Fund has performed well. In the first half of this year, the total return
on stocks, as measured by the S&P 500 Index, was 20.60% and the total return on
bonds, as measured by the Lehman Aggregate Bond Index was 3.09%.(1) Our
theoretical benchmark, a portfolio created to hold 60% of its value in the S&P
500 and 40% in the Lehman Aggregate would thus have returned 13.40%. The Fund's
total return over the period was 14.26%.(2)
The Fund also did well relative to its competition, having exceeded the
10.25% return of funds with similar objectives and policies in Lipper's universe
of flexible equity funds.(3) The Fund also outperformed the median return of
9.55% produced by Morningstar's universe of asset allocation funds.(4)
Q. WHAT STRATEGIES WERE USED BY THE FUND AND HOW DID THEY AFFECT PERFORMANCE?
A. As always, the Fund is managed using proprietary quantitative models that
attempt to judge the relative risk-adjusted attractiveness of the stock, bond
and cash markets. While interest rates are the operative variable in the fixed
income markets, corporate profitability and growth are added to the mix for the
equity markets.
In general, a benign interest rate environment and a healthy profit outlook
led us to overweight stocks at the end of last year, moving to a more neutral
position at the beginning of March. Specifically, our stock/bond/cash mix at
year-end was 76%, 20%, 4% and was lowered to 63%, 21%, and 16%, respectively, at
the beginning of March. These weightings should be compared to the completely
neutral mix of 60% stocks, 40% bonds, and 0% cash that we would expect to own
when the markets were all fairly valued relative to one another. In retrospect,
our positions paid off since stocks did so well, while bonds and cash matched
each other with uninspiring returns. The increased caution that we showed after
the stock market and bond yields had each risen during the first two months of
the year looked like a good move through most of April, but unfortunately turned
out to be unnecessary as corporate profits came in even higher than expected and
bond yields dropped back to the levels at which they began the year.
Q. WHAT ARE YOUR EXPECTATIONS FOR THE FUTURE AND HOW ARE YOU POSITIONING THE
FUND TO TAKE ADVANTAGE OF THOSE EXPECTATIONS?
A. We are presently in a very neutral position with market exposures of
approximately 62% stocks, 37% bonds, and 1% cash. Essentially, stocks and bonds
seem fairly valued and there appears to be little need for the defensive
characteristics of cash in the short term. We
- --------------------------------------------------------------------------------
(1) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market activity.
The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The S&P 500
and the Lehman Aggregate Bond Index are not available for direct investment
and the returns do not reflect the fees and expenses that have been
deducted from the Fund. Likewise, return figures for the S&P 500 and Lehman
Aggregate Bond Indexes do not reflect any sales charges that an investor
may have to pay when purchasing or redeeming shares of the Fund.
(2) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales charges.
Returns represent past performance and are not a guarantee of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost.
(3) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted.
(4) 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.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
currently intend to maintain this stance until either interest rates reverse
again or corporate profitability deteriorates as the economy slows.
It should also be mentioned that, since May 1, 1997, the Fund has had the
authority to operate as a "fund of funds," as approved by the shareholders of
the Fund. Accordingly, we have replaced the bulk of our bond positions with
shares of The Guardian Investment Quality Bond Fund, another member of The Park
Avenue Portfolio family. As our value models dictate the sale of individual
stocks, they are replaced with shares of our flagship, The Guardian Park Avenue
Fund. As we move forward, we expect the Fund to benefit from the greater
diversification that this transition allows, not to mention more efficient and
less costly trading. As a fund of funds, the management fee of the Fund will be
charged at a lower rate of 0.50% of assets annually. This lower management fee
will apply only while the Fund is operated as a "fund of funds" at the
discretion of management. Of course, there will be no "double charging" of
management fees when the Fund's assets are invested in other funds.
- --------------------------------------------------------------------------------
THE GUARDIAN ASSET ALLOCATION FUND PROFILE
AS OF JUNE 30, 1997
- ------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(2) FOR PERIODS ENDED 6/30/97
Since
Inception
1 Year 3 Year (2/16/93)
- --------------------------------------------------------------------------------
At Net Asset Value(5) (without sales charge) 27.19% 20.25% 15.16%
- --------------------------------------------------------------------------------
Class A Shares(6) (with sales charge) 21.47% 18.42% 13.95%
- --------------------------------------------------------------------------------
PERFORMANCE FOR CLASS B SHARES, WHICH WERE FIRST OFFERED ON MAY 1, 1996, WILL
VARY DUE TO DIFFERENCES IN EXPENSES CHARGED TO EACH SHARE CLASS.
(5) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of sales charge.
(6) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
- -----------------------------------------------
[Photo]
R. Robin Menzies,
Portfolio Manager
Q. HOW HAS THE FUND PERFORMED DURING THE FIRST HALF OF 1997?
A. The Fund performed well in the first half of this year, returning 14.9%(1)
compared to a rise of 11.3% in our bench-mark index--the Morgan Stanley Capital
International (MSCI) Europe, Australia and Far East (EAFE) Index.(2)
Within the overall Index return, the Continental European region was the
strongest, its return of 17.1% in the first six months of 1997 being driven by
healthy stock markets in Germany (up 16.9%) and Switzerland (up 31.6%). Domestic
economies remain relatively weak but exporters in Germany have benefited from a
more competitive Deutschemark and strong demand from outside the region.
Strength in the Japanese market in the second quarter of the period, off the
back of good company results, reversed negative first quarter returns to give a
six-month rise of 9.2%, well ahead of the weak smaller Asia Pacific markets such
as Malaysia, which fell 11.8%.
Q. WHAT FACTORS CONTRIBUTED TO THE PERFORMANCE OF THE FUND?
A. The greatest contribution to the Fund's outperformance came from the very
good relative performance of the stocks we hold in Japan, with the Fund
returning 19.4% in this country during the first half of the year. This compares
very favorably with the index return attributable to Japan of 9.2%. It is
encouraging that the share prices of well-managed, financially strong companies
with dominant market positions in attractive industries have been showing the
outperformance they deserve. We are seeing distinct changes in the financial
environment in Japan, with deregulation and welcome alterations to the rules
governing domestic pension fund investment, which we feel will lead to greater
acknowledgement by the market of the attractions of the highest quality
companies and to more appropriate ratings. It is also fair to say that a weaker
yen has helped exporters to increase profits ahead of the already buoyant 18%
year-on-year recurring profits growth of non-financial Japanese companies as a
whole.
The Fund also gained from a strong performance in Continental Europe, with
a 46.5% return in Switzerland and 22.3% in the Netherlands. Additionally, the
portfolio contains many stocks benefiting from restructuring, with managements
focusing on making their companies more profitable and shareholder friendly. The
share prices of these stocks are reflecting the realization, by international
investors, of the potential cost efficiencies and enhanced earnings which can be
gained by the restructuring process.
Our strategic country allocation also had a positive impact on the Fund's
overall performance. This came primarily from heavy weighting in Continental
Europe, where returns were high, together with an early move out of the less
attractive, smaller Asia Pacific markets.
Q. WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND?
A. During this period many markets continued to be expensive, relative to
historic levels, on a number of different measures. However, we have recognized
that a high level of liquidity worldwide has been driving
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents total return for the A shares--returns for Class B shares
would be lower to reflect higher operating expenses associated with the B
share class. Total return figures do not take into account the current
maximum sales charges. Returns represent past performance and are not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
(2) The MSCI EAFE Index is an unmanaged index that is generally considered to
be representative of international stock market activity. The Index is
capitalization-weighted and carries a 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 MSCI EAFE Index may not therefore always
correlate closely. The MSCI EAFE Index is not available for direct
investment and its returns do not reflect the fees and expenses that have
been deducted from the Fund. Likewise, return figures for the MSCI EAFE
Index do not reflect any sales charges that an investor may have to pay
when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
markets. Our strategy has continued to be one of stock-driven allocation and
this proved successful again in the first half of this year. For example, in
both Continental Europe and Japan, by selecting the high quality exporters with
dominant worldwide market shares, the Fund's returns from these geographical
areas have been high. This is despite weak domestic economies which alone are
not sufficiently strong to underpin significant earnings growth. This approach
continues to pay dividends and our investment professionals' efforts are focused
on finding further attractive investments in the ever changing stock markets of
the world.
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND PROFILE
AS OF JUNE 30, 1997
- -------------------------------------------------------
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
COMPANY NATURE OF COMPANY COUNTRY
- --------------------------------------------------------------------------------
1. Novartis Pharmaceuticals Switzerland
- --------------------------------------------------------------------------------
2. Rohm General Industry Japan
- --------------------------------------------------------------------------------
3. Canon Electronic Equipment Japan
- --------------------------------------------------------------------------------
4. Banco Santander Banking Spain
- --------------------------------------------------------------------------------
5. Volkswagen Vehicle Manuf. Germany
- --------------------------------------------------------------------------------
6. Sony Electronic Equipment Japan
- --------------------------------------------------------------------------------
7. Mannesmann Industrial Conglom. Germany
- --------------------------------------------------------------------------------
8. Adidas Sports Apparel Germany
- --------------------------------------------------------------------------------
9. ABN Amro Banking Netherlands
- --------------------------------------------------------------------------------
10. Gucci Group Luxury Goods/Apparel Italy
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
BY GEOGRAPHICAL LOCATION
[GRAPHICAL REPRESENTATION OF PIE CHART BELOW]
Latin America - 4.9%
Asia - 10.5%
Japan - 25.9%
U.K - 13.3%
Europe - 41.1%
Cash - 4.3%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 6/30/97
Since Inception
1 Year 3 Year (2/16/93)
- --------------------------------------------------------------------------------
At Net Asset Value(3) (without sales charge) 18.93% 12.77% 15.25%
- --------------------------------------------------------------------------------
Class A Shares(4) (with sales charge) 13.58% 11.05% 14.04%
- --------------------------------------------------------------------------------
PERFORMANCE FOR CLASS B SHARES, WHICH WERE FIRST OFFERED ON MAY 1, 1996, WILL
VARY DUE TO DIFFERENCES IN EXPENSES CHARGED TO EACH SHARE CLASS.
(3) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of sales charges.
(4) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
- --------------------------------------------------
[Photo]
Edward H. Hocknell
Portfolio Manager
Q. HOW DID THE FUND PERFORM IN THE FIRST HALF OF 1997 AND WHAT FACTORS AFFECTED
THE FUND'S PERFORMANCE?
A. There has been a wide range of returns from the emerging markets in recent
months. The Asian markets have continued to disappoint and are still below the
levels they reached in 1993, while Latin America, however, has maintained its
strong outperformance, and has now reached new highs. The investor in Asia has
suffered a protracted bear market, while Brazil, Argentina and Mexico have been
among the world's best performers. It is hard to find convincing reasons why
this divergence should end soon.
From April 30 until June 30, 1997 (the first two months of its existence),
the Fund produced a return of 9.11%,(1) compared with a return from the Morgan
Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index(2) of
8.4%. One of the main reasons for the outperformance is that the Fund has the
freedom to be selective across a wide range of markets. This has become
increasingly important in the emerging markets because, in some cases, the high
levels of growth and inward investment that emerging countries are enjoying are
proving to be "too much of a good thing." Surging imports and excessive bank
lending are usually the first symptoms of the malaise afflicting these
countries; the illness then progresses to the stock market. The long term
fundamentals are often fine, but investors do best by leaving such countries
alone for a while, keeping them under observation, and--as Peter Lynch puts
it--tuning in later.
Q. WHAT HAS BEEN HAPPENING IN EMERGING MARKET COUNTRIES AND HOW HAVE YOU MANAGED
THE FUND SO FAR TO ADJUST TO THESE EVENTS?
A. We remain most enthusiastic about the outlook for Latin America. The strong
recovery following 1995's recession is continuing; there is little evidence of
overheating. Growth in the region has slowed down a little, as consumers are
still wary, but we believe that the current pace is sustainable. Argentina has
done particularly well and should continue to grow at a rate of around 6%, or
more. Exports and the agricultural sector have revived; a wave of foreign
acquisitions has helped boost confidence in the banking sector, and the
government's revenues (which had been a source of concern) have begun to pick
up.
Inflation in the region is continuing to fall sharply; in Brazil, for
example, it should be below 7% this year, less than one third of 1995's level.
There is still a need for further reform in Brazil, so it is reassuring that
President Cardoso has been allowed to seek re-election, and the stock market is
on little more than 12 times this year's earnings, which we believe is good
value. The improvement of Brazil's standing in the eyes of foreign investors was
vividly illustrated by the recent issue of an uncollateralized $3 billion dollar
30-year bond at less than 4% above U.S. long bond yields.
Latin America now seems likely to enjoy the kind of steady growth which has
eluded it for many years. At the same time, the sharpest differences between the
region's main economies are diminishing, and this is leading to an even greater
emphasis on stock selection. We are finding that many companies, having been
starved of investment for years, are now achieving high marginal returns on
capital as they concentrate on the obvious, easy projects. We are currently
identifying numerous attractive investment opportunities of this kind and expect
to retain a heavy weighting in Latin America.
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents total return for Class A shares--returns for Class B
shares would be lower to reflect higher operating expenses associated with
the B share class. Total return figures do not take into account the
current maximum sales charges. 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 Morgan Stanley Capital International (MSCI) Emerging Markets Free Index
(EMF) is an unmanaged index that is generally considered to be
representative of the stock market activity of emerging markets. The Index
is a market capitalization weighted index composed of companies
representative of the market structure of 22 emerging market countries in
Europe, Latin America, and the Pacific Basin. The MSCI EMF Index excludes
closed markets and those shares in otherwise free markets which may not be
purchased by foreigners. The MSCI EMF Index is not available for direct
investment and the returns do not reflect the fees and expenses that have
been deducted from the Fund.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
The outlook for the Asian economies is much more mixed. On the surface,
everything looks good: headline growth rates are still impressive in most cases,
but they conceal mounting financial imbalances. In Malaysia, for example, we
have become concerned about excessive office building and its likely effects on
the banking system; and in Thailand, a large and persistent current account
deficit is proving increasingly hard to finance. There has also been excessive
investment in industrial capacity in several sectors and this is restraining
profitability.
Hong Kong reverted to Chinese control at the end of June, and all the omens
(commercially, at least) look very good. We are encouraged that the Chinese are
effectively using the Hong Kong market to privatize state assets, and that local
companies are being treated even-handedly. Most of our investments in Asia will
be focused on China, although, in the medium term, we expect the whole region to
benefit from the recovery of the Japanese economy.
In the rest of the emerging markets, one of the most striking events was
the disappointing devaluation of the Czech Krona, which has revealed some
intractable structural problems. The government's reaction will probably lead to
a sharp deceleration in growth rates for a while. As in Thailand, the number of
companies benefiting from devaluation is limited because so many of them have
foreign debts. We have reduced our exposure to the Czech Republic and may go
further.
On the positive side, there has been some improvement in the South African
economy. Growth is very slow, even excluding the depressed agricultural sector,
but there is now scope to reduce the country's very high interest rates, and
this has encouraged us to broaden our exposure to some of the country's well-run
businesses.
We remain optimistic about the investment prospects for emerging markets in
general. Growth rates remain high and the international background is favorable:
interest rates may rise further in the developed countries, but not by very
much. Nevertheless, as recent events have shown, not all emerging markets do
well at the same time: while many are maturing into strong, steady growers,
others are finding that persistently high growth rates bring their own problems.
Against this background, the Fund will be broadly diversified and highly
selective in the markets and companies in which it invests.
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
PROFILE AS OF JUNE 30, 1997
- --------------------------------------------------
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
COMPANY COUNTRY NATURE OF COMPANY
- --------------------------------------------------------------------------------
1. ROC Taiwan Fund Taiwan Trading Conglomerate
- --------------------------------------------------------------------------------
2. Telebras ON Brazil Telephone Utility
- --------------------------------------------------------------------------------
3. China Overseas Land Hong Kong General Industry
- --------------------------------------------------------------------------------
4. Petrobas ADR Brazil Energy
- --------------------------------------------------------------------------------
5. New World Development Hong Kong Property Developer
- --------------------------------------------------------------------------------
6. Telebras ADR Brazil Telephone Utility
- --------------------------------------------------------------------------------
7. China Resources Hong Kong General Industry
- --------------------------------------------------------------------------------
8. Hutchison Whampoa Hong Kong Trading Conglomerate
- --------------------------------------------------------------------------------
9. Telmex ADR Mexico Telephone Utility
- --------------------------------------------------------------------------------
10. Hub Power Pakistan Energy
- --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see the Schedule of
Investments.
PORTFOLIO COMPOSITION GEOGRAPHICAL LOCATION
[GRAPHICAL REPRESENTATION OF PIE CHART BELOW]
Cash - 4.0%
South Africa - 3.6%
Europe - 9.9%
Asia - 42.2%
Latin America - 40.3%
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND
- -----------------------------------------
[Photo]
Thomas G. Sorell, C.F.A.,
Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 1997?
A. During the first half of 1997, the Fund returned 3.14%,(1) outperforming the
Lehman Aggregate Bond Index(2) which returned 3.09%. The Fund's return was two
basis points less than the average return of our Lipper peer group(3) (3.16%).
Our Lipper peer group consists of other mutual funds that invest primarily in
bonds rated "BBB" or better.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. During the first quarter of 1997, fears that rapid economic growth would lead
to higher inflation, given tight labor markets and high levels of capacity
utilization, created a bearish market for bonds. The economy did in fact grow at
a rate of 4.9% in the first quarter, well beyond what most economists would
consider a non-inflationary pace. The Fed, anticipating this growth, tightened
monetary policy by raising the Fed Funds rate by 0.25% on March 25. Although
this move was not unexpected, the bond market, as measured by the Lehman
Aggregate Bond Index, had a -0.56% return during the first quarter. As the
economy slowed in the second quarter and the Fed left rates unchanged at the May
20 and July 2 policy meetings, the bond market recovered. With the Fed on hold,
the yield on the 30-year Treasury bond dropped over 40 basis points during the
second quarter and the Lehman Aggregate Bond Index posted its best quarterly
return (3.67%) since the fourth quarter of 1995.
The Fund's performance is principally attributable to a significant
allocation to mortgage-backed securities and triple-B-rated corporate bonds,
which were two of the best performing subsectors when measured by the Lehman
Aggregate Bond Index data on a duration-adjusted basis.(4) The Lehman Index's
asset classes had the following nominal six-month returns through June 30:
mortgage-backed securities 3.92%, corporate bonds 3.97%, and asset-backed
securities 2.96%. Measured on a duration-adjusted basis, mortgages outperformed
the other sectors, returning 1.14% over Treasuries, while the excess return on
all corporates was 0.55% (triple-B-rated issues earned 0.96%), and asset-backed
securities 0.25%.
Mortgage-backed securities performed exceptionally well during the first
half of 1997 predominantly due to declining levels of implied interest rate
volatility and expectations of slower prepayment rates.
The performance of the corporate sector varied significantly by credit
quality during the first half of 1997. While the entire sector returned 0.55% on
a duration-adjusted basis, securities rated from triple-A to single-A returned
between 40 and 45 basis points, while securities rated triple-B earned more than
two times that amount, returning 96 basis points. Our corporate bond investment
strategy throughout the first half was to overweight triple-B-rated credits that
we believed had attractive return profiles as measured by both their breakeven
spreads(5) to Treasuries and our expectation of an improvement in credit
quality. Although we had numerous successes, one of our best was an investment
in Comcast 8 7/8 due 5/1/2017. The security was purchased at a spread of 153
basis points, or 1.53% over Treasuries and as of June 30 the spread had narrowed
to 108 basis points or 1.08%. This represented a holding period return of 7.01%
and a return in excess of Treasuries of 3.91%.
Asset-backed securities realized the lowest returns, both nominally and
duration-adjusted, of the three main spread sectors for the first six months of
1997, but provided an attractive alternative to short duration Treasuries.
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures do not take into account the current maximum sales charges.
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 Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The Lehman
Aggregate Bond Index is not available for direct investment and the
returns do not reflect the fees and expenses that have been deducted from
the Fund. Likewise, return figures for the Lehman Aggregate Bond Index do
not reflect any sales charges that an investor may have to pay when
purchasing shares of the Fund.
(3) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service and its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted.
(4) Duration-adjusted, expressed in percentage terms, represents the excess
return over the weighted average return of a group of similar duration
Treasuries.
(5) Breakeven spreads, expressed in percentage terms, for a particular
security, represent the amount of yield spread widening which can occur
over a specified time period, and still match the total return of another
duration-equivalent security (usually Treasuries).
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Q. WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND?
A. The Fund's overall strategy continues to focus on optimal asset allocation
among the various bond sectors and security selection, and to avoid market
timing. This strategy should provide opportunities to outperform our benchmark
and peer groups with a relatively low risk profile.
More specifically, our strategy for mortgage-related securities consisted
of adding seasoned pools with favorable prepayment histories and incremental
option adjusted spread.(6) As Treasury yields declined further, we became
concerned that prepayment risk would rise and/or volatility would increase, both
of which would negatively affect the mortgage market. As of June 30, 1997, we
are underweighted in mortgages relative to the Lehman Aggregate Index.
Our corporate strategy has been to increase and diversify our corporate
holdings, especially in the higher yielding sector of triple-B-rated credits.
During the first half of 1997 we increased our corporate holdings to 35% of the
Fund's portfolio. We made new investments in the transportation and bank capital
securities sectors, while adding to our exposure to the cable/media and tobacco
sectors. Overall, we will continue to take our credit risk in the short end of
the yield curve where breakeven spreads are attractive, and become more
defensive given the tight level of quality spreads by predominantly investing in
higher-rated improving credits in longer maturities.
Our strategy for asset-backed securities continues to focus on adding value
at the short end of the yield curve, and as of quarter-end the Fund was
substantially overweighted in this sector versus the Lehman Aggregate Bond
Index. During the first half of the year, the Fund moved from securities backed
by credit card and auto receivables into securities backed by home equity and
home improvement loans, which offered higher yield spreads and better
diversification.
- --------------------------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND PROFILE
AS OF JUNE 30, 1997
- -------------------------------------------------
[GRAPHICAL REPRESENTATION OF PIE CHARTS BELOW]
INVESTMENT QUALITY BOND FUND
(COMPOSITION BY ASSET CLASS)
Corporate Bonds - 31.8%
U.S. Government Securities - 24.2%
Mortgage Pass-Throughs - 19.4%
Asset Backed - 16.7%
Cash/Other Assets less Liabilities - 3.5%
Multi-Class MBS - 2.9%
Yankee Bonds - 1.5%
ASSET QUALITY ACCORDING TO S&P
AAA - 62.5%
BBB - 21.5%
A - 9.3%
Cash/Other Assets less Liabilities - 3.6%
AA - 2.5%
BB - 0.6%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 6/30/97
Since Inception
1 Year (2/16/93)
- --------------------------------------------------------------------------------
At Net Asset Value(7) (without sales charge) 8.08% 5.10%
- --------------------------------------------------------------------------------
Class A Shares(8) (with sales charge) 3.22% 4.00%
- --------------------------------------------------------------------------------
(6) Option-adjusted spread means the incremental return or risk premium over
Treasury securities, that has been adjusted for interest rate volatility
and for the effect of options.
(7) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of sales charge.
(8) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND
- ----------------------------
[Photo]
Alexander M. Grant, Jr.
Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING THE FIRST SIX MONTHS OF 1997?
A. The Fund produced a total return of 2.77%(1) for the six months ended June
30, 1997 as compared to the Lehman Municipal Bond Index(2) which produced a
total return of 3.20%. The average return for municipal bonds in the Lipper(3)
universe was 2.95% for the same period.
Another important comparison to consider when measuring the Fund's
performance is how it stacks up against its peers. Lipper, a service that ranks
general municipal bond funds by total rate of return, is a good source of this
information. Based on peer group comparisons, the Fund ranked 98 out of 226
funds with the same objective for the 12-month period ended June 30, 1997.
As of June 30, 1997, the Fund's 30-day yield was 4.74%, which grosses up to
over 7.00% taxable equivalent yield for a person in the highest (39.6%) federal
income tax bracket.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. The biggest factor that affected the Fund's performance was the lack of new
issue supply in the municipal market. The current estimate of supply, which has
not changed from the beginning of the year, is approximately $180 billion.
However, net issuance (redemptions minus new issuance) when calculated on a
month-to-month basis, is in some cases negative. What this means is that bonds
are leaving the municipal market, either through calls or redemptions, and are
not being replaced by new issues. The lack of supply, along with other factors
such as high demand, affects the performance of the Fund in a number of ways.
For example, as new issues enter the market they are met with great demand from
institutional investors. Institutional investors, such as certain insurance
companies, are not as sensitive to new issue pricing as mutual funds are. Some
institutional investors that have recently experienced huge cash inflows are
willing to pay higher prices to own municipal bonds. This, in turn, drives
prices up and yields down, which has helped the municipal market to perform.
This performance has not been without consequences, as each new issue was met
with high institutional demand, causing credit quality spreads to compress. With
a compression in credit quality, all credits began to look alike with little
differentiation between AAA and BBB credits. This development effectively took
credit value out of the market which in turn affected the performance of the
Fund. In other words, in recent months all credits have tended to look alike and
finding value has become more difficult.
Q. WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND?
A. New issue volume was relatively flat for the first half of this year versus
the comparable period last year, while property and casualty insurance
companies, as well as individuals, were strong buyers. In light of limited
supply and strong demand, the management of the Fund was driven by four
guideposts.
- --------------------------------------------------------------------------------
(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%. Since June 1, 1994, the investment adviser for the Fund has been
assuming the operating expenses of the Fund to the extent they exceed 0.75%
of the Fund's average daily net assets. Without these expense
reimbursements, the performance figures would have been lower. Returns
represent past performance and are not a guarantee of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
(2) The Lehman Municipal Bond Index is an unmanaged index that is generally
considered to be representative of U.S. municipal bond market activity. The
Lehman Municipal Bond Index is not available for direct investment and its
return does not reflect the fees and expenses that have been deducted from
the Fund. Likewise, return figures for the Lehman Municipal Bond Index do
not reflect any sales charges that an investor may have to pay when
purchasing shares of the Fund.
(3) Lipper Analytical Service, Inc. is an independent mutual fund monitoring
and rating service. 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.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
First, with new issue volume being easily absorbed and quality spreads
historically very narrow, we stayed with the higher rated credits. By doing so,
we avoided chasing "hot" deals where the yield increase may have been only .05%,
but the credit quality spread differential was significantly more. With any
increase in new issue volume, slowdown in the economy, or weakened buying demand
by institutional buyers, we would expect the credit spreads to quickly widen.
Therefore, we did not see the reward for taking on the added risk of lower rated
bonds. Second, to enhance current interest return for our investors, we
increased the purchases of full coupon housing bonds. This is a sector in which
the structures are not easily understood by many of our competitors and where,
as a result, from time to time bonds become available at attractive yields. Our
third strategy was to buy high-quality non-insured bonds. These bonds tended to
have ratings much higher than many of the underlying ratings on insured bonds
and yet they offered higher yields. The last guidepost of our investment
strategy was to look for relative values between the various general obligation
and revenue sectors as technical supply and demand forces temporarily increased
yields in either the new issue or the secondary markets.
- --------------------------------------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND PROFILE
AS OF JUNE 30, 1997
- ------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 6/30/97
Since Inception
1 Year (2/16/93)
- --------------------------------------------------------------------------------
At Net Asset Value(4) (without sales charge) 7.97% 4.17%
- --------------------------------------------------------------------------------
Class A Shares(5) (with sales charge) 3.11% 3.08%
- --------------------------------------------------------------------------------
(4) Net Asset Value (NAV) assumes the reinvestment of all dividends and
distributions and does not reflect the payment of sales charge.
(5) Class A share performance assumes the current maximum front-end sales
charge of 4.5%.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN CASH MANAGEMENT FUND
- ---------------------------------
[Photo]
Alexander M. Grant, Jr.
Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING THE FIRST SIX MONTHS OF 1997?
A. As of June 24, 1997, the effective 7-day annualized yield for The Guardian
Cash Management Fund was 4.91%.(1) The Fund produced an annualized total return
of 4.69%(2) through June 30. In contrast, the average Tier One money market
fund, as measured by IBC Financial Data, had an effective 7-day annualized yield
of 5.06% at June 24, 1997 and returned 4.89% through June 30. IBC Financial Data
is a research firm that tracks money market funds.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. Money market funds are directly affected by the actions of the Federal
Reserve Board. On March 25, the Federal Reserve raised the Federal Funds target
from 5.25% to 5.50%. This move followed several months of strong economic data
particularly with respect to housing data, consumer consumption and payroll
data. The discount rate was left unchanged at 5.00%. The Fed Funds target is the
rate at which banks can borrow from each other 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 move member banks in the direction
of that target rate. The discount rate is the rate at which banks can borrow
directly from the Federal Reserve. Uncertainty regarding the direction of the
stock market contributed to large daily inflows and outflows of funds in the
Cash Management Fund. As the stock market rallied, cash was transferred by our
investors to equity funds. During those times when the stock market stalled, we
saw cash inflows. Another factor affecting performance was the portfolio's
average maturity--22 days as of June 24, 1997. The average Tier One money market
fund, as measured by IBC Financial Data, had an average maturity of 60 days.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE YEAR?
A. The Guardian Cash Management Fund is a place for our investors to put their
money while they decide upon their preferred long-term investment vehicle, be it
stocks or bonds. Also, some of our investors prefer the relative stability of
the money markets. To best accommodate all our investors, we will continue to
try to provide a strong 7-day yield, while offering safety and liquidity. Our
investment strategy was to create a diversified portfolio of money market
instruments that presents minimal credit risks according to our criteria. As
always, we only purchased securities from issuers that had received ratings in
the two highest credit quality categories established by nationally recognized
statistical ratings organizations like Moody's Investors Service, Inc. and
Standard & Poor's Ratings Group for the Fund's portfolio. Most of the portfolio
(94%) was invested in commercial paper; the balance (6%) was invested in
repurchase agreements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 and will vary as interest rates
change. Effective yield assumes that income is reinvested. Past performance
is not a guarantee of future results. Throughout 1997, the investment
adviser for the Fund will assume the operating expenses of the Fund to the
extent that they exceed, on annual basis, 0.85% of the Fund's average daily
net assets. Without these expense assumptions, the Fund's performance and
yields would have been lower. Total return (or yields) represents total
return for Class A shares--returns for Class B shares would be lower to
reflect higher operating expenses associated with the B share class.
(2) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents total return for Class A shares--returns for Class B
shares would be lower to reflect higher operating expenses associated with
the B share class. 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.
- --------------------------------------------------------------------------------
18
<PAGE>
- -----------------------
SCHEDULE OF INVESTMENTS
- -----------------------
June 30, 1997 (Unaudited)
o THE GUARDIAN PARK AVENUE FUND
- -----------------------------------------------------------
COMMON STOCKS -- 95.3%
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
AEROSPACE AND DEFENSE -- 3.2%
294,098 Boeing Co. $ 15,605,575
34,400 General Dynamics Corp. 2,580,000
60,800 Gulfstream Aerospace Corp. 1,793,600
48,889 Lockheed Martin Corp. 5,063,067
187,600 Logicon, Inc. 9,942,800
138,950 Precision Castparts Corp. 8,284,894
98,800 Rockwell Int'l. Corp. 5,829,200
25,000 Sundstrand Corp. 1,395,313
40,000 Thiokol Corp. 2,800,000
36,100 TRW, Inc. 2,050,931
73,200 United Technologies Corp. 6,075,600
------------
61,420,980
- -----------------------------------------------------------
AIR TRANSPORTATION -- 0.8%
94,000 AMR Corp., DE 8,695,000
100,000 Continental Airlines, Inc. 3,493,750
54,000 UAL Corp. 3,864,375
------------
16,053,125
- -----------------------------------------------------------
APPLIANCE AND FURNITURE -- 0.5%
30,000 Ethan Allen Interiors, Inc. 1,710,000
133,000 Furniture Brands Int'l., Inc. 2,576,875
40,000 Hon Industries, Inc. 1,770,000
30,000 Leggett & Platt, Inc. 1,290,000
40,000 Miller Herman, Inc. 1,440,000
------------
8,786,875
- -----------------------------------------------------------
AUTOMOTIVE PARTS -- 0.4%
19,130 Autoliv, Inc. 748,461
37,500 Borg-Warner Automotive, Inc. 2,027,344
84,000 Goodyear Tire & Rubber Co. 5,318,250
17,000 Tower Automotive, Inc. 731,000
------------
8,825,055
- -----------------------------------------------------------
BIOTECHNOLOGY -- 0.2%
56,100 Amgen, Inc. 3,260,812
- -----------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 0.8%
12,000 Armstrong World Industries, Inc. 880,500
82,000 Johns Manville Corp. 968,625
63,000 Lennar Corp. 2,012,062
60,000 McGrath Rent Corp. 1,230,000
43,400 Sherwin-Williams Co. 1,339,975
30,000 Southdown, Inc. 1,308,750
65,000 USG Corp. 2,372,500
24,000 U.S. Home Corp. 637,500
38,600 Vulcan Materials Co. 3,030,100
20,200 Webb (Del) Corp. 328,250
------------
14,108,262
- -----------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 0.4%
50,555 Martin Marietta Materials, Inc. 1,636,718
154,462 Paychex, Inc. 5,869,556
37,300 Rexel, Inc. 690,050
------------
8,196,324
- -----------------------------------------------------------
CHEMICALS -- 2.5%
116,700 Cambrex Corp. 4,638,825
506,600 E.I. Dupont de Nemours, Inc. 31,852,475
81,100 Lubrizol Corp. 3,401,131
56,100 Morton Int'l., Inc. 1,693,519
65,000 PPG Industries, Inc. 3,778,125
25,000 Rohm & Haas Co. 2,251,562
------------
47,615,637
- -----------------------------------------------------------
COMPUTER SOFTWARE -- 2.4%
50,000 Affiliated Computer Services, Inc. 1,400,000
89,000 BMC Software, Inc. 4,928,375
18,900 Cadence Design Systems, Inc. 633,150
74,800 Compuware Corp. 3,571,700
38,000 Fair Isaac & Co., Inc. 1,693,375
240,000 Microsoft Corp. 30,330,000
37,000 Sterling Software, Inc. 1,156,250
50,000 SunGuard Data Systems, Inc. 2,325,000
------------
46,037,850
- -----------------------------------------------------------
COMPUTER SYSTEMS -- 5.1%
208,400 Compaq Computer Corp. 20,683,700
32,400 Diebold, Inc. 1,263,600
19,400 Hewlett Packard Co. 1,086,400
37,200 Honeywell, Inc. 2,822,550
236,500 Int'l. Business Machines 21,329,344
309,600 Lexmark Int'l. Group, Inc. 9,404,100
75,000 Pitney Bowes, Inc. 5,212,500
80,000 Quantum Corp. 1,625,000
60,000 SCI Systems, Inc. 3,825,000
450,000 Storage Technology Corp. 20,025,000
49,000 Stratus Computer, Inc. 2,450,000
65,200 Sun Microsystems, Inc. 2,451,620
60,000 Tandem Computers, Inc. 1,215,000
186,600 Western Digital Corp. 5,901,225
------------
99,295,039
- -----------------------------------------------------------
CONGLOMERATES -- 1.4%
65,300 Allied Signal, Inc. 5,485,200
90,000 Loews Corp. 9,011,250
190,000 Textron, Inc. 12,611,250
------------
27,107,700
- -----------------------------------------------------------
See notes to financial statements.
19
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
DRUGS AND HOSPITALS -- 12.4%
299,000 Abbott Laboratories $ 19,958,250
65,820 Allegiance Corp. 1,793,595
280,700 American Home Products Corp. 21,473,550
27,400 Becton Dickinson & Co. 1,387,125
590,800 Bristol-Myers Squibb Corp. 47,854,800
65,296 Eli Lilly & Co., Inc. 7,137,669
25,000 Health Care & Retirement Co. 834,375
25,900 Integrated Health Services, Inc. 997,150
542,400 Johnson & Johnson 34,917,000
81,300 Kinetic Concepts, Inc. 1,463,400
23,000 Lincare Hldgs., Inc. 989,000
476,300 Merck & Co., Inc. 49,297,050
182,300 Pfizer, Inc. 21,784,850
302,400 Schering-Plough Corp. 14,477,400
20,000 Sybron Int'l. Corp., WI 797,500
8,000 Unitrin, Inc. 488,000
230,000 Universal Health Services, Inc. 8,855,000
29,600 Warner-Lambert Co. 3,677,800
26,000 Wellpoint Health Networks, Inc. 1,192,750
------------
239,376,264
- -----------------------------------------------------------
ELECTRICAL EQUIPMENT -- 4.0%
163,600 Emerson Electric Co. 9,008,225
998,000 General Electric Co. 65,244,250
24,500 W.W. Grainger, Inc. 1,915,594
6,500 Jabil Circuit, Inc. 545,187
------------
76,713,256
- -----------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.2%
46,000 Analogic Corp. 1,564,000
61,200 Dynatech Corp. 2,187,900
15,300 Sanmina Corp. 971,550
------------
4,723,450
- -----------------------------------------------------------
ENERGY-MISCELLANEOUS -- 0.4%
129,500 Giant Industries, Inc. 2,047,719
167,104 Holly Corp. 4,146,268
86,500 Howell Corp. 1,730,000
------------
7,923,987
- -----------------------------------------------------------
ENTERTAINMENT AND LEISURE -- 0.1%
52,400 Galoob Toys, Inc. 989,050
17,000 Harley-Davidson, Inc. 814,938
24,000 Regal Cinemas, Inc. 792,000
------------
2,595,988
- -----------------------------------------------------------
FINANCIAL-BANKS -- 12.6%
164,392 Banc One Corp. 7,962,733
471,000 BankAmerica Corp. 30,408,937
109,100 Bank of Boston Corp. 7,862,019
87,600 Barnett Banks, Inc. 4,599,000
284,260 Chase Manhattan Corp. 27,590,986
336,764 Citicorp 40,601,110
62,700 Comerica, Inc. 4,263,600
30,000 Compass Bancshares, Inc. 1,008,750
89,200 First Bank Systems Corp. 7,615,450
205,200 First Chicago NBD Corp. 12,414,600
12,400 First Empire State Corp. 4,178,800
20,000 First Merit Corp. 960,000
191,100 First Union Corp. 17,676,750
50,475 Hubco, Inc. 1,463,775
46,100 KeyCorp 2,575,838
127,600 Mellon Bank Corp. 5,757,950
59,300 National City Corp. 3,113,250
218,000 Nationsbank Corp. 14,061,000
82,748 Norwest Corp. 4,654,575
23,000 Premier Bancshares, Inc., GA 395,312
55,000 Provident Financial Group, Inc. 2,351,250
67,500 Star Banc Corp. 2,851,875
80,000 State Street Corp. 3,700,000
147,964 TCF Financial Corp. 7,305,723
375,000 Travelers Group, Inc. 23,648,437
38,000 Union BanCal Corp. 2,731,250
49,600 Zions Bancorp 1,866,200
------------
243,619,170
- -----------------------------------------------------------
FINANCIAL-OTHER -- 4.3%
105,000 American Express Co. 7,822,500
75,000 Countrywide Credit Industries, Inc. 2,339,062
10,000 Duff & Phelps Credit Rating Co. 303,750
83,200 A.G. Edwards, Inc. 3,556,800
154,800 Federal Home Loan Mortgage Corp. 5,321,250
299,500 Federal National Mortgage Assn. 13,065,688
93,000 Franklin Resources, Inc. 6,748,312
67,200 Green Tree Financial Corp 2,394,000
100,000 Jefferies Group, Inc. 5,700,000
72,000 Lehman Brothers Hldgs., Inc. 2,916,000
57,400 McDonald & Co. Investments, Inc. 2,633,225
302,400 Merrill Lynch & Co., Inc. 18,030,600
52,000 J.P. Morgan & Co., Inc. 5,427,500
167,850 Morgan Keegan, Inc. 3,336,019
22,000 Pacific Century Financial Corp. 1,017,500
100,950 Raymond James Financial, Inc. 2,763,506
------------
83,375,712
- -----------------------------------------------------------
See notes to financial statements.
20
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
FINANCIAL-THRIFT -- 2.0%
39,200 Astoria Financial Corp. $ 1,862,000
137,500 Bank Atlantic Bancorp, Inc. 1,938,750
16,000 California Federal Bancorp, Inc. 270,000
93,187 Charter One Financial, Inc. 5,020,450
34,000 CitFed Bancorp, Inc. 1,317,500
47,000 Coastal Bancorp, Inc. 1,398,250
20,000 Coast Savings Financial, Inc. 908,750
150,199 Collective Bancorp, Inc. 6,740,180
68,100 Commercial Federal Corp. 2,528,212
33,000 Greenpoint Financial Corp. 2,196,562
76,000 Long Island Bancorp, Inc. 2,759,750
27,060 MAF Bancorp, Inc. 1,133,138
20,960 Pacific Crest Capital, Inc. 277,720
127,200 Progressive Bank, Inc. 4,006,800
438,291 Sovereign Bancorp, Inc. 6,683,938
------------
39,042,000
- -----------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 5.6%
118,700 Anheuser-Busch Cos., Inc. 4,977,981
140,000 Campbell Soup Co. 7,000,000
466,300 Coca Cola Co. 31,475,250
328,200 Coca Cola Enterprises, Inc. 7,548,600
59,400 ConAgra, Inc. 3,809,025
71,000 Dean Foods Co. 2,866,625
4,128 Earthgrains Co. 270,642
89,000 Fortune Brands, Inc. 3,320,813
89,000 Gallaher Group Plc. 1,640,938
34,000 Hershey Foods Corp. 1,880,625
50,000 Interstate Bakeries Corp. 2,965,625
616,200 Philip Morris Cos., Inc. 27,343,875
54,100 Ralston-Purina Group 4,446,344
12,000 Scweitzer-Mauduit Int'l., Inc. 450,000
38,800 Unilever NV 8,458,400
------------
108,454,743
- -----------------------------------------------------------
FOOTWEAR -- 0.4%
88,200 Nike, Inc. 5,148,675
49,000 Payless ShoeSource, Inc. 2,679,688
------------
7,828,363
- -----------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.8%
78,080 Kimberly-Clark Corp. 3,884,480
79,300 Procter & Gamble Co. 11,201,125
------------
15,085,605
- -----------------------------------------------------------
INSURANCE -- 6.1%
152,800 Allstate Corp. 11,154,400
27,000 AMBAC, Inc. 2,062,125
74,000 Amer. Bankers Ins. Group, Inc. 4,680,500
86,300 Amer. Int'l. Group, Inc. 12,891,063
20,000 W.R. Berkley Corp. 1,177,500
46,000 Chubb Corp. 3,076,250
51,000 Cigna Corp. 9,052,500
22,000 Cincinnati Financial Corp. 1,738,000
40,000 CMAC Investment Corp. 1,910,000
12,000 Enhance Financial Svcs. Group, Inc. 526,500
98,000 Everest Reinsurance Hldgs. 3,883,250
40,500 Executive Risk, Inc. 2,106,000
13,000 Financial Sec. Assur. Hldgs. Ltd. 506,187
40,000 Fremont General Corp. 1,610,000
24,000 Frontier Insurance Group, Inc. 1,554,000
28,400 General Re Corp. 5,168,800
60,100 Hartford Financial Svcs. Group, Inc. 4,973,275
75,000 Horace Mann Educators Corp. 3,675,000
36,000 Jefferson Pilot Corp. 2,515,500
42,080 Liberty Financial Cos., Inc. 2,098,740
61,000 Lincoln National Corp., Inc. 3,926,875
43,000 Marsh & McLennan Cos., Inc. 3,069,125
25,300 MBIA, Inc. 2,854,156
15,000 Mercury General Corp. 1,091,250
206,000 MGIC Investment Corp. 9,875,125
39,200 Ohio Casualty Corp. 1,724,800
60,000 Old Republic Int'l. Corp. 1,818,750
30,800 Progressive Corp. of Ohio 2,679,600
28,000 ReliaStar Financial Group 2,047,500
47,900 St. Paul Cos., Inc. 3,652,375
92,250 State Auto Financial Corp. 2,075,625
63,000 SunAmerica, Inc. 3,071,250
34,000 Torchmark, Inc. 2,422,500
38,500 Travelers Ppty. Casualty Corp. 1,535,188
------------
118,203,709
- -----------------------------------------------------------
LODGING -- 0.2%
17,000 Doubletree Corp. 699,125
175,000 Prime Hospitality Corp. 3,456,250
------------
4,155,375
- -----------------------------------------------------------
MACHINERY AND EQUIPMENT -- 1.5%
67,000 AAR Corp. 2,123,062
94,800 Caterpillar, Inc. 10,179,150
88,400 Deere & Co. 4,850,950
15,000 Eaton Corp. 1,309,688
102,400 Illinois Tool Works, Inc. 5,113,600
30,800 Robbins & Myers, Inc. 1,001,000
35,000 Universal Corp., VA 1,111,250
60,000 York Int'l. Corp. 2,760,000
------------
28,448,700
- -----------------------------------------------------------
See notes to financial statements.
21
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 0.7%
65,000 Carson Pirie Scott & Co. $ 2,063,750
33,750 Consolidated Stores Corp. 1,172,813
60,200 Dayton Hudson Corp. 3,201,888
50,000 Dollar General Corp. 1,875,000
16,000 MacFrugals Bargains Closeouts 436,000
82,500 Fred Meyer, Inc., DE 4,264,219
48,000 Shopko Stores, Inc. 1,224,000
------------
14,237,670
- -----------------------------------------------------------
MERCHANDISING-DRUGS -- 0.3%
35,000 Bergen Brunswig Corp. 975,625
66,000 Value Health, Inc. 1,336,500
75,000 Walgreen Co. 4,021,875
------------
6,334,000
- -----------------------------------------------------------
MERCHANDISING-FOOD -- 0.5%
120,000 Richfood Hldgs., Inc. 3,120,000
128,825 Safeway, Inc. 5,942,053
19,000 Smithfield Foods, Inc. 1,168,500
------------
10,230,553
- -----------------------------------------------------------
MERCHANDISING-SPECIAL -- 0.6%
45,978 CVS Corp. 2,356,372
83,560 Host Marriott Services Corp. 981,830
65,000 Pier 1 Imports, Inc. 1,722,500
125,000 Ross Stores, Inc. 4,085,938
20,000 Stein Mart, Inc. 600,000
32,500 Tiffany & Co., Inc. 1,501,094
35,000 Waban, Inc. 1,126,562
------------
12,374,296
- -----------------------------------------------------------
MISCELLANEOUS -- 0.1%
14,400 Alberto-Culver Co. 335,700
16,200 Helen of Troy Ltd. 415,125
20,000 Lands End, Inc. 592,500
22,900 Mississippi Chemical Corp. 475,175
37,500 Zeigler Coal Hldg. Co. 876,563
------------
2,695,063
- -----------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 0.6%
59,200 Cognizant Corp. 2,397,600
80,000 Equifax, Inc. 2,975,000
24,000 Interpublic Group Cos., Inc. 1,471,500
55,000 A.C. Nielsen Corp. 1,079,375
35,000 Omnicom Group 2,156,875
60,000 Valassis Communications, Inc. 1,440,000
------------
11,520,350
- -----------------------------------------------------------
NATURAL GAS-DIVERSIFIED -- 0.5%
260,000 ENSERCH Corp. 5,785,000
158,300 Mitchell Energy & Dev. Corp. 3,443,025
43,000 Western Gas Resources, Inc. 838,500
------------
10,066,525
- -----------------------------------------------------------
OIL AND GAS PRODUCING -- 3.5%
194,400 Apache Corp. 6,318,000
98,000 Barrett Resources Corp. 2,933,875
121,900 Basin Exploration, Inc. 944,725
172,500 Tom Brown, Inc. 3,665,625
90,000 Cairn Energy USA, Inc. 1,181,250
185,000 Chieftain Int'l., Inc. 4,058,438
153,000 Devon Energy Corp. 5,622,750
50,200 Diamond Offshore Drilling, Inc. 3,921,875
146,400 Enron Oil and Gas Co. 2,653,500
264,600 Enserch Exploration, Inc. 2,894,063
38,100 Forcenergy Gas Exploration, Inc. 1,157,288
20,000 Nuevo Energy Co. 820,000
497,300 Petromet Resources Ltd. 1,150,006
54,700 Petsec Energy Ltd. 1,244,425
79,700 Pogo Producing Co. 3,083,394
770,000 Ranger Oil Ltd. 7,170,625
245,000 Rigel Energy Corp. 2,618,438
204,600 St. Mary Land & Exploration Co. 7,186,575
305,536 Seagull Energy Corp. 5,346,880
39,300 Snyder Oil Corp. 722,137
33,378 United Meridian Corp. 1,001,340
33,000 Vintage Petroleum, Inc. 1,014,750
270,000 Wainoco Oil Ltd. 1,147,500
------------
67,857,459
- -----------------------------------------------------------
OIL AND GAS SERVICES -- 3.5%
62,000 BJ Services Co. 3,324,750
85,960 Camco Int'l., Inc. 4,706,310
41,600 Cliffs Drilling Co. 1,518,400
64,000 Cooper Cameron Corp. 2,992,000
70,000 ENSCO Int'l., Inc. 3,692,500
60,500 Halliburton Co. 4,794,625
14,616 Halter Marine Group, Inc. 350,784
370,500 Input/Output, Inc. 6,715,312
329,400 Nabors Industries, Inc. 8,235,000
130,000 Noble Drilling Corp. 2,933,125
127,700 Offshore Logistics, Inc. 2,410,338
60,000 Pride Petroleum Services, Inc. 1,440,000
107,800 Schlumberger Ltd. 13,475,000
80,000 Smith Int'l., Inc. 4,860,000
26,000 Transocean Offshore, Inc. 1,888,250
72,400 Varco Int'l., Inc. 2,334,900
70,000 Weatherford Enterra, Inc. 2,695,000
------------
68,366,294
- -----------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 1.3%
74,800 Amoco Corp. 6,502,925
109,000 Atlantic Richfield Co. 7,684,500
120,000 Murphy Oil Corp. 5,850,000
284,000 Tesoro Petroleum, Inc. 4,206,750
------------
24,244,175
- -----------------------------------------------------------
See notes to financial statements.
22
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 5.9%
168,800 Chevron Corp. $ 12,480,650
624,400 Exxon Corp. 38,400,600
346,600 Mobil Corp. 24,218,675
506,800 Royal Dutch Petroleum Co. 27,367,200
103,200 Texaco, Inc. 11,223,000
------------
113,690,125
- -----------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.9%
50,000 Caraustar Industries, Inc. 1,731,250
18,000 Consolidated Papers, Inc. 972,000
34,285 Deltic Timber Corp. 1,004,979
331,500 Rayonier, Inc. 13,943,719
------------
17,651,948
- -----------------------------------------------------------
PHOTOGRAPHY -- 0.4%
99,700 Eastman Kodak Co. 7,651,975
- -----------------------------------------------------------
PUBLISHING-NEWS -- 0.6%
45,000 Central Newspapers, Inc. 3,223,125
43,200 Gannett Co., Inc. 4,266,000
65,700 Harte-Hanks Communications 1,938,150
20,000 Lee Enterprises, Inc. 527,500
5,700 Washington Post Co. 2,268,600
------------
12,223,375
- -----------------------------------------------------------
RAILROADS -- 0.7%
40,301 Burlington Northern Santa Fe 3,622,052
15,000 Kansas City Southern Inds., Inc. 967,500
45,800 Norfolk Southern Corp. 4,614,350
64,900 Union Pacific Corp. 4,575,450
------------
13,779,352
- -----------------------------------------------------------
SEMICONDUCTOR -- 2.7%
60,000 Adaptec, Inc. 2,085,000
57,100 Altera Corp. 2,883,550
80,000 Dallas Semiconductor Corp. 3,140,000
311,200 Intel Corp. 44,132,050
------------
52,240,600
- -----------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 0.6%
73,000 Jones Apparel Group, Inc. 3,485,750
50,000 Liz Claiborne, Inc. 2,331,250
46,100 Russell Corp. 1,365,712
43,000 V.F. Corp. 3,644,250
------------
10,826,962
- -----------------------------------------------------------
TRANSPORTATION-MISCELLANEOUS -- 0.4%
46,000 Airborne Freight Corp. 1,926,250
22,000 Expeditors Int'l. Wash., Inc. 624,250
32,000 GATX Corp. 1,848,000
239,500 Maritrans, Inc. 1,856,125
42,000 Trinity Industries, Inc. 1,333,500
------------
7,588,125
- -----------------------------------------------------------
TRUCKERS -- 0.1%
18,000 FRP Ppty., Inc. 486,000
25,000 Swift Transportation, Inc. 737,500
------------
1,223,500
- -----------------------------------------------------------
UTILITIES-COMMUNICATIONS -- 2.5%
140,600 Ameritech Corp. 9,552,013
251,600 Bellsouth Corp. 11,667,950
9,200 Harris Corp., DE 772,800
312,000 NYNEX Corp. 17,979,000
151,700 SBC Communications, Inc. 9,386,438
------------
49,358,201
- -----------------------------------------------------------
UTILITIES-ELECTRIC -- 0.5%
36,000 CalEnergy, Inc. 1,368,000
62,664 Duke Power Co. 3,003,955
26,000 KU Energy Corp. 887,250
31,000 LG&E Energy Corp. 683,938
29,000 Nipsco Industries, Inc. 1,198,061
40,000 Public Service Co., CO 1,660,000
------------
8,801,204
- -----------------------------------------------------------
UTILITIES-GAS AND PIPELINE -- 0.1%
45,000 KN Energy, Inc. 1,895,623
- -----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,301,517,930) 1,845,111,356
- -----------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.5%
- -----------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------
COMMERCIAL PAPER -- 5.5%
$38,000,000 Corning, Inc.
6.15% due 7/1/97 $ 38,000,000
19,250,000 Goldman Sachs Group, LP
6.15% due 7/1/97 19,250,000
50,000,000 Koch Industries, Inc.
6.07% due 7/1/97 50,000,000
- -----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $107,250,000) 107,250,000
- -----------------------------------------------------------
TOTAL INVESTMENTS -- 100.8%
(COST $1,408,767,930) 1,952,361,356
PAYABLES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.8%) (16,306,697)
- -----------------------------------------------------------
NET ASSETS -- 100.0% $1,936,054,659
- -----------------------------------------------------------
See notes to financial statements.
23
<PAGE>
o THE GUARDIAN PARK AVENUE SMALL CAP FUND
- -----------------------------------------------------------
COMMON STOCKS -- 94.3%
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.4%
5,100 Gulfstream Aerospace Corp. $ 150,450
- -----------------------------------------------------------
APPLIANCE AND FURNITURE -- 2.7%
10,000 Ethan Allen Interiors, Inc. 570,000
21,000 Furniture Brands Int'l., Inc. 406,875
------------
976,875
- -----------------------------------------------------------
AUTOMOTIVE-PARTS -- 0.9%
6,100 Borg-Warner Automotive, Inc. 329,781
- -----------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 2.4%
11,000 Lone Star Industries, Inc. 498,435
8,200 Southdown, Inc. 357,725
------------
856,160
- -----------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 2.8%
31,800 AFC Cable Systems, Inc. 858,600
4,700 Analysts Int'l. Corp. 157,450
------------
1,016,050
- -----------------------------------------------------------
CHEMICALS -- 2.6%
8,000 H.B. Fuller Co. 440,000
21,600 McWhorter Technologies, Inc. 515,700
------------
955,700
- -----------------------------------------------------------
COAL -- 1.2%
18,100 Zeigler Coal Hldg. Co. 423,088
- -----------------------------------------------------------
COMPUTER SOFTWARE -- 2.9%
9,200 National Instruments Corp. 324,300
11,000 Pegasystems, Inc. 345,125
5,800 Siebel Systems, Inc. 187,050
2,600 Visio Corp. 183,300
------------
1,039,775
- -----------------------------------------------------------
COMPUTER SYSTEMS -- 1.2%
9,000 Stratus Computer, Inc. 450,000
- -----------------------------------------------------------
DRUGS AND HOSPITALS -- 2.5%
16,500 Life Technologies, Inc. 457,875
12,000 Universal Health Services, Inc. 462,000
------------
919,875
- -----------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.1%
5,000 Jabil Circuit, Inc. 419,375
- -----------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 6.4%
4,400 ANADIGICS, Inc. 136,400
10,900 Dallas Semiconductor Corp. 427,825
9,000 Fluke Corp. 533,250
3,000 Micrel, Inc. 153,000
13,000 Smart Modular Technologies, Inc. 438,750
10,000 Unitrode Corp. 503,750
4,000 Vitesse Semiconductor Corp. 130,750
------------
2,323,725
- -----------------------------------------------------------
FINANCIAL-BANKS -- 2.6%
20,000 North Fork Bancorp, Inc. 427,500
9,500 U.S. Bancorp, Inc. 517,750
------------
945,250
- -----------------------------------------------------------
FINANCIAL-THRIFT -- 4.0%
5,500 Astoria Financial Corp. 261,250
16,000 CitFed Bancorp, Inc. 620,000
10,500 Coast Savings Financial, Inc. 477,094
3,200 Commercial Federal Corp. 118,800
------------
1,477,144
- -----------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 2.8%
8,800 Earthgrains Co. 576,950
7,100 Smithfield Foods, Inc. 436,650
------------
1,013,600
- -----------------------------------------------------------
FOOTWEAR -- 0.6%
7,700 Wolverine World Wide, Inc. 233,888
- -----------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.6%
5,400 Williams-Sonoma, Inc. 230,850
- -----------------------------------------------------------
INSURANCE -- 12.9%
8,500 W.R. Berkley Corp. 500,438
10,000 Enhance Financial Svcs. Group, Inc. 438,750
9,000 Executive Risk, Inc. 468,000
12,000 Financial Sec. Assur. Hldgs. Ltd. 467,250
9,000 Frontier Insurance Group, Inc. 582,750
17,000 HCC Insurance Hldgs., Inc. 453,687
3,800 Markel Corp. 486,400
33,400 Penn America Group, Inc. 503,088
23,000 State Auto Financial Corp. 517,500
6,800 Vesta Insurance Group, Inc. 294,100
------------
4,711,963
- -----------------------------------------------------------
LODGING -- 3.1%
10,000 Bristol Hotel Co. 385,000
21,600 Signature Resorts, Inc. 746,550
------------
1,131,550
- -----------------------------------------------------------
MACHINERY AND EQUIPMENT -- 4.6%
4,000 AAR Corp. 129,250
10,500 Applied Power, Inc. 542,062
8,200 Manitowoc, Inc. 383,350
18,700 Robbins & Myers, Inc. 607,750
------------
1,662,412
- -----------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 3.2%
13,000 Carson Pirie Scott & Co. 412,750
15,000 MacFrugals Bargains Closeouts 408,750
12,500 Shopko Stores, Inc. 318,750
------------
1,140,250
- -----------------------------------------------------------
See notes to financial statements.
24
<PAGE>
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
MERCHANDISING-SPECIAL -- 3.7%
12,000 The Dress Barn $ 234,000
8,800 Lands End, Inc. 260,700
12,000 Pier 1 Imports, Inc. 318,000
18,000 Stein Mart, Inc. 540,000
------------
1,352,700
- -----------------------------------------------------------
METALS -- 0.8%
9,500 Titanium Metals Corp. 300,438
- -----------------------------------------------------------
OIL AND GAS PRODUCING -- 5.4%
15,000 Alamco, Inc. 230,625
53,000 Basin Exploration, Inc. 410,750
22,000 Bellwether Exploration Co. 220,688
11,000 Chieftain Int'l., Inc. 241,313
144,000 Petromet Resources Ltd. 333,000
7,800 St. Mary Land & Exploration Co. 273,975
60,000 Wainoco Oil Corp. 255,000
------------
1,965,351
- -----------------------------------------------------------
OIL AND GAS SERVICES -- 3.6%
6,500 Dreco Energy Services Ltd. 341,250
23,000 Halter Marine Group, Inc. 552,000
13,300 Varco Int'l., Inc. 428,925
------------
1,322,175
- -----------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.6%
8,850 Mosinee Paper Corp. 216,825
- -----------------------------------------------------------
PUBLISHING-NEWS -- 3.2%
15,000 Bowne & Co., Inc. 523,125
16,000 Harte-Hanks Communications 472,000
5,800 McClatchy Newspapers, Inc. 170,375
------------
1,165,500
- -----------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- 11.0%
16,000 Ambassador Apartments, Inc. 362,000
16,000 American Gen. Hospitality Corp. 396,000
18,000 Arden Realty, Inc. 468,000
15,400 Camden Ppty. Trust 487,025
14,500 Commercial Net Lease Realty, Inc. 222,031
28,500 Cornerstone Ppty., Inc. 438,188
30,000 Innkeepers USA Trust 450,000
8,000 JDN Realty Corp. 250,000
24,000 Lexington Corp. Ppty., Inc. 336,000
11,000 National Golf Ppty., Inc. 382,250
7,500 Charles E. Smith Residential Realty 216,562
------------
4,008,056
- -----------------------------------------------------------
SEMICONDUCTOR -- 0.1%
2,500 RF Micro Devices, Inc. 47,812
- -----------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 2.1%
21,900 Paxar Corp. 413,363
6,600 St. John Knits, Inc. 356,400
------------
769,763
- -----------------------------------------------------------
TRANSPORTATION-MISCELLANEOUS -- 1.2%
5,300 Airborne Freight Corp. 221,937
7,400 Expeditors Int'l. Wash., Inc. 209,975
------------
431,912
- -----------------------------------------------------------
TRUCKERS -- 0.5%
6,400 Swift Transportation, Inc. 188,800
- -----------------------------------------------------------
UTILITIES-GAS AND PIPELINE -- 0.6%
15,000 Aquila Gas Pipeline Corp. 209,063
- -----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $30,185,844 ) 34,386,156
- -----------------------------------------------------------
REPURCHASE AGREEMENT -- 4.1%
- -----------------------------------------------------------
Principal Maturity
Amount Date Value
- -----------------------------------------------------------
$1,514,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/97, maturity
value $1,514,246 at 5.85%,
due 7/1/97 (collateralized
by $1,535,000 U.S. Treasury
Notes, 6.00% due 5/31/98) 7/1/97 $ 1,514,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $1,514,000) 1,514,000
- -----------------------------------------------------------
TOTAL INVESTMENTS -- 98.4%
(COST $31,699,844) 35,900,156
CASH, RECEIVABLES AND OTHER ASSETS
LESS PAYABLES -- 1.6% 576,168
- -----------------------------------------------------------
NET ASSETS -- 100.0% $36,476,324
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
25
<PAGE>
o THE GUARDIAN ASSET ALLOCATION FUND
- -----------------------------------------------------------
COMMON STOCKS -- 55.2%
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.9%
20,000 Boeing Co. $ 1,061,250
3,200 Gulfstream Aerospace Corp. 94,400
2,215 Lockheed Martin Corp. 229,391
5,000 Precision Castparts Corp. 298,125
3,900 Rockwell Int'l. Corp. 230,100
1,400 TRW, Inc. 79,537
2,900 United Technologies Corp. 240,700
------------
2,233,503
- -----------------------------------------------------------
AIR TRANSPORTATION -- 0.5%
4,500 AMR Corp., DE 416,250
4,000 Continental Airlines, Inc. 139,750
------------
556,000
- -----------------------------------------------------------
AUTOMOTIVE-REPLACEMENT PARTS -- 0.1%
750 Autoliv, Inc. 29,344
1,600 Goodyear Tire & Rubber Co. 101,300
------------
130,644
- -----------------------------------------------------------
BIOTECHNOLOGY -- 0.1%
2,600 Amgen, Inc. 151,125
- -----------------------------------------------------------
BUILDING MATERIALS -- 0.1%
2,000 Sherwin-Williams Co. 61,750
- -----------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 0.1%
2,289 Martin Marietta Materials, Inc. 74,106
- -----------------------------------------------------------
CHEMICALS -- 1.5%
21,600 E.I. Dupont de Nemours, Inc. 1,358,100
2,200 Morton Int'l., Inc. 66,413
3,000 PPG Industries, Inc. 174,375
2,000 Rohm & Haas Co. 180,125
------------
1,779,013
- -----------------------------------------------------------
COMPUTER SOFTWARE -- 1.4%
3,200 BMC Software, Inc. 177,200
2,700 Cadence Design Systems, Inc. 90,450
2,000 Compuware Corp. 95,500
10,000 Microsoft Corp. 1,263,750
------------
1,626,900
- -----------------------------------------------------------
COMPUTER SYSTEMS -- 2.1%
6,200 Compaq Computer Corp. 615,350
1,500 Diebold, Inc. 58,500
800 Hewlett Packard Co. 44,800
1,500 Honeywell, Inc. 113,813
12,500 Lexmark Int'l. Group, Inc. 379,687
3,000 Pitney Bowes, Inc. 208,500
6,000 Quantum Corp. 121,875
3,000 SCI Systems, Inc. 191,250
13,000 Storage Technology Corp. 578,500
3,000 Sun Microsystems, Inc. 111,656
4,600 Western Digital Corp. 145,475
------------
2,569,406
- -----------------------------------------------------------
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
CONGLOMERATES -- 1.9%
2,900 Allied Signal, Inc. $ 243,600
12,500 Loews Corp. 1,251,563
12,000 Textron, Inc. 796,500
------------
2,291,663
- -----------------------------------------------------------
DRUGS AND HOSPITALS -- 8.2%
12,100 Abbott Laboratories 807,675
5,000 Allegiance Corp. 136,250
15,000 American Home Products Corp. 1,147,500
2,600 Becton Dickinson & Co. 131,625
24,100 Bristol-Myers Squibb Corp 1,952,100
3,000 Eli Lilly & Co., Inc. 327,938
1,100 Integrated Health Services, Inc. 42,350
20,000 Johnson & Johnson 1,287,500
18,300 Merck & Co., Inc. 1,894,050
7,100 Pfizer, Inc. 848,450
11,800 Schering-Plough Corp. 564,925
12,000 Universal Health Services, Inc. 462,000
1,300 Warner-Lambert Co. 161,525
------------
9,763,888
- -----------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.5%
7,200 Emerson Electric Co. 396,450
40,200 General Electric Co. 2,628,075
------------
3,024,525
- -----------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.1%
5,000 Dynatech Corp. 178,750
- -----------------------------------------------------------
FINANCIAL-BANKS -- 7.6%
5,930 Banc One Corp. 282,366
30,000 BankAmerica Corp. 1,936,875
4,900 Bank of Boston Corp. 353,106
4,000 Barnett Banks, Inc. 210,000
11,404 Chase Manhattan Corp. 1,106,901
15,000 Citicorp 1,808,437
2,500 Comerica, Inc. 170,000
3,900 First Bank Systems Corp. 332,962
8,200 First Chicago NBD Corp. 496,100
7,100 First Union Corp. 656,750
1,700 KeyCorp 94,987
5,200 Mellon Bank Corp. 234,650
10,200 Nationsbank Corp. 657,900
3,000 Provident Financial Group, Inc. 128,250
4,500 Star Banc Corp. 190,125
4,000 State Street Corp. 185,000
1,500 Union BanCal Corp. 107,813
2,400 Zions Bancorp 90,000
------------
9,042,222
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
26
<PAGE>
THE GUARDIAN ASSET ALLOCATION FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
FINANCIAL-OTHER -- 4.9%
3,000 Countrywide Credit Industries,
Inc. $ 93,562
20,000 A.G. Edwards, Inc. 855,000
7,200 Federal Home Loan Mortgage Corp. 247,500
12,000 Federal National Mortgage Assn. 523,500
3,000 Franklin Resources, Inc. 217,688
2,500 Green Tree Financial Corp. 89,063
40,000 Merrill Lynch & Co., Inc 2,385,000
2,100 J.P. Morgan & Co., Inc. 219,187
20,000 Travelers Group, Inc. 1,261,250
------------
5,891,750
- -----------------------------------------------------------
FINANCIAL-THRIFT -- 0.4%
5,600 Astoria Financial Corp. 266,000
1,050 Commercial Federal Corp. 38,981
2,000 Greenpoint Financial Corp. 133,125
------------
438,106
- -----------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 2.4%
5,100 Anheuser-Busch Cos., Inc. 213,881
6,000 Campbell Soup Co. 300,000
13,200 Coca Cola Enterprises 303,600
2,700 ConAgra, Inc. 173,138
400 Earthgrains Co. 26,225
3,000 Fortune Brands, Inc. 111,938
3,000 Gallaher Group Plc. 55,312
2,000 Interstate Bakeries Corp. 118,625
24,300 Philip Morris Cos., Inc. 1,078,313
2,200 Ralston-Purina Group 180,813
1,700 Unilever NV 370,600
------------
2,932,445
- -----------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.4%
3,100 Procter & Gamble Co. 437,875
- -----------------------------------------------------------
INSURANCE -- 2.1%
4,700 Allstate Corp. 343,100
3,900 Amercian Int'l. Group, Inc. 582,562
1,000 Chubb Corp. 66,875
700 General Re Corp. 127,400
2,500 Hartford Financial Svcs. Group, Inc. 206,875
1,800 Marsh & McLennan Cos., Inc. 128,475
400 MBIA, Inc. 45,125
8,400 MGIC Investment Corp. 402,675
1,000 Progressive Corp. of Ohio 87,000
9,000 SunAmerica, Inc. 438,750
2,000 Travelers Ppty. Casualty Corp. 79,750
------------
2,508,587
- -----------------------------------------------------------
MACHINERY AND EQUIPMENT -- 0.8%
4,200 Caterpillar, Inc. 450,975
2,600 Deere and Co. 142,675
600 Eaton Corp. 52,387
7,000 Illinois Tool Works, Inc. 349,562
------------
995,599
- -----------------------------------------------------------
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 0.1%
2,400 Dayton Hudson Corp. $ 127,650
- -----------------------------------------------------------
MERCHANDISING-DRUGS -- 0.9%
20,000 Walgreen Co. 1,072,500
- -----------------------------------------------------------
MERCHANDISING-FOOD -- 0.5%
3,700 Richfood Hldgs., Inc. 96,200
9,637 Safeway, Inc. 444,507
------------
540,707
- -----------------------------------------------------------
MERCHANDISING-SPECIAL -- 0.1%
2,652 CVS Corp. 135,915
- -----------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 0.6%
2,700 Cognizant Corp. 109,350
3,000 Equifax, Inc. 111,563
1,000 Interpublic Group Cos., Inc. 61,313
7,000 Omnicom Group 431,375
------------
713,601
- -----------------------------------------------------------
NATURAL GAS-DIVERSIFIED -- 0.2%
12,000 ENSERCH Corp. 267,000
- -----------------------------------------------------------
OIL AND GAS PRODUCING -- 2.1%
9,000 Apache Corp. 292,500
4,000 Barrett Resources Corp. 119,750
7,000 Tom Brown, Inc. 148,750
8,000 Chieftain Int'l., Inc. 175,500
10,000 Devon Energy Corp. 367,500
2,200 Diamond Offshore Drilling, Inc. 171,875
45,600 Enserch Exploration, Inc. 498,750
50,000 Ranger Oil Ltd. 465,625
14,696 Seagull Energy Corp. 257,180
------------
2,497,430
- -----------------------------------------------------------
OIL AND GAS SERVICES -- 2.2%
6,000 ENSCO Int'l., Inc. 316,500
2,700 Halliburton Co. 213,975
8,500 Input/Output, Inc. 154,062
40,000 Nabors Industries, Inc. 1,000,000
15,000 Noble Drilling Corp. 338,437
4,800 Schlumberger Ltd. 600,000
------------
2,622,974
- -----------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 1.0%
5,000 Amoco Corp. 434,688
3,600 Atlantic Richfield Co. 253,800
5,000 Murphy Oil Corp. 243,750
16,700 Tesoro Petroleum, Inc. 247,369
------------
1,179,607
- -----------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 3.8%
7,500 Chevron Corp. 554,531
28,400 Exxon Corp. 1,746,600
14,000 Mobil Corp. 978,250
22,800 Royal Dutch Petroleum Co. 1,239,750
------------
4,519,131
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
27
<PAGE>
THE GUARDIAN ASSET ALLOCATION FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.9%
1,428 Deltic Timber Corp. $ 41,858
25,000 Rayonier, Inc. 1,051,563
------------
1,093,421
- -----------------------------------------------------------
PHOTOGRAPHY -- 0.3%
4,000 Eastman Kodak Co. 307,000
- -----------------------------------------------------------
PUBLISHING-NEWS -- 0.1%
1,700 Gannett Co., Inc. 167,875
- -----------------------------------------------------------
RAILROADS -- 0.4%
2,576 Burlington Northern Santa Fe 231,518
2,100 Norfolk Southern Corp. 211,575
------------
443,093
- -----------------------------------------------------------
SEMICONDUCTOR -- 1.7%
3,000 Adaptec, Inc. 104,250
2,300 Altera Corp. 116,150
12,400 Intel Corp. 1,758,475
------------
1,978,875
- -----------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 0.2%
2,100 Russell Corp. 62,212
2,000 V.F. Corp. 169,500
------------
231,712
- -----------------------------------------------------------
UTILITIES-COMMUNICATIONS -- 1.0%
5,700 Ameritech Corp. 387,244
10,200 Bellsouth Corp. 473,025
6,100 SBC Communications, Inc. 377,422
------------
1,237,691
- -----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $44,769,768) 65,824,039
- -----------------------------------------------------------
- -----------------------------------------------------------
MUTUAL FUNDS -- 15.6%
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
EQUITY -- 5.9%
159,130 The Guardian Park Avenue
Fund, Cl. A $ 7,011,856
FIXED INCOME -- 9.7%
1,194,901 The Guardian Investment
Quality Bond Fund 11,593,003
------------
TOTAL MUTUAL FUNDS
(COST $18,383,004) 18,604,859
- -----------------------------------------------------------
- -----------------------------------------------------------
CORPORATE BONDS -- 2.5%
- -----------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------
$2,500,000 Assoc. Corp. of North America
8.125% due 1/15/98 $ 2,527,975
500,000 McDermott Int'l., Inc.
6.57% due 4/20/98 499,485
- -----------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $3,028,891) 3,027,460
- -----------------------------------------------------------
- -----------------------------------------------------------
U.S. GOVERNMENT SECURITIES -- 4.1%
- -----------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------
$ 5,000,000 U.S. Treasury Bills, 5.07%
due 12/11/97
(COST $4,874,164) $ 4,883,650
- -----------------------------------------------------------
- -----------------------------------------------------------
OPTIONS -- 0.4%
- -----------------------------------------------------------
Number of
Contracts Value
- -----------------------------------------------------------
150 U.S. Treasury Note Futures
Expires November, 1997
Exercise price $107 $ 241,406
100 U.S. Treasury Bond Futures
Expires November, 1997
Exercise price $110 257,813
- -----------------------------------------------------------
TOTAL OPTIONS
(COST $350,174) 499,219
- -----------------------------------------------------------
- -----------------------------------------------------------
SHORT-TERM INVESTMENTS -- 10.5%
- -----------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------
COMMERCIAL PAPER -- 10.5%
$ 5,000,000 Caisse Nationale de Credit Agr.
5.78% due 12/5/97 $ 5,001,079
5,000,000 Norinchukin Bank NY Branch
5.71% due 8/18/97 5,000,066
2,575,000 Pacific Dunlop Hldgs., Inc.
5.62% due 12/5/97 2,511,888
- -----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $12,513,033) 12,513,033
- -----------------------------------------------------------
- -----------------------------------------------------------
REPURCHASE AGREEMENT -- 11.7
- -----------------------------------------------------------
Principal Maturity
Amount Date Value
- -----------------------------------------------------------
$13,985,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/97, maturity
value $13,987,272 at 5.85%,
due 7/1/97 (collateralized by
14,170,000 U.S. Treasury
Notes, 6.00% due 5/31/98)
7/1/97 $ 13,985,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $13,985,000) 13,985,000
- -----------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% 119,337,260
(COST $97,904,034)
PAYABLES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.0%) (16,595)
- -----------------------------------------------------------
NET ASSETS -- 100.0% $119,320,665
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
28
<PAGE>
o The Guardian Baillie Gifford International Fund
- -----------------------------------------------------------
COMMON STOCKS -- 95.0%
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
ARGENTINA -- 1.0%
ELECTRIC UTILITIES -- 0.1%
3,800 Capex S.A. $ 71,250
OIL AND GAS -- 0.5%
42,267 Perez Companc S.A. 339,457
TELEPHONE -- 0.4%
8,800 Telefonica De Argentina S.A. 304,700
------------
715,407
- -----------------------------------------------------------
AUSTRALIA -- 3.6%
BANK -- 0.9%
86,000 Australia & NZ Bank Group 643,446
BEVERAGE -- 0.4%
178,400 Fosters Brewing Group 331,671
BUSINESS SERVICES -- 0.6%
22,400 Brambles Industries Ltd. 443,382
METALS AND MINING -- 0.4%
42,106 WMC Ltd. 265,710
PETROLEUM SERVICES -- 0.7%
4,627 Broken Hill Proprietary 68,129
52,700 Woodside Petroleum 454,039
REAL ESTATE -- 0.6%
19,450 Lend Lease Corp. 411,581
------------
2,617,958
- -----------------------------------------------------------
BRAZIL -- 2.1%
FOOD, BEVERAGE AND TOBACCO -- 0.3%
14,300 Companhia Cerveja Ria Brahma 218,969
OIL-INTEGRATED -- 0.4%
9,600 Petroleo Brasileiro S.A. 278,400
RETAIL-FOOD -- 0.3%
8,800 Companhia Brasileira De Distribution 211,200
TELECOMMUNICATIONS -- 1.1%
5,200 Telecomunicacoes Brasileiras 789,100
------------
1,497,669
- -----------------------------------------------------------
CHILE -- 0.6%
ELECTRIC UTILITIES -- 0.6%
12,200 Enersis S.A. 433,863
- -----------------------------------------------------------
CZECH REPUBLIC -- 0.2%
BANK -- 0.2%
6,062 Komercni Banka S.A. 125,787
- -----------------------------------------------------------
FRANCE -- 4.1%
BROADCASTING -- 0.6%
2,330 Canal Plus 453,574
- -----------------------------------------------------------
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
CONSUMER GOODS -- 0.4%
1,730 BIC $ 282,902
ELECTRONICS-SEMICONDUCTOR -- 0.9%
8,000 SGS Thomson Microelectronics NV 631,647
OIL-INTEGRATED -- 0.9%
6,200 Elf Aquitaine 668,879
RETAIL TRADE -- 1.3%
1,790 Comptoirs Modernes 944,237
------------
2,981,239
- -----------------------------------------------------------
GERMANY -- 10.4%
AUTOMOBILE -- 1.9%
1,810 Volkswagen AG 1,387,518
BANK -- 0.8%
20,350 Bayerische Hypo/Wech Bank 608,481
CHEMICALS -- 2.5%
24,600 BASF AG 909,048
18,960 Hoechst AG 804,232
DRUGS AND HEALTH CARE -- 0.3%
3,270 GEHE AG 223,112
FOOTWEAR -- 1.5%
10,050 Adidas AG 1,112,121
INDUSTRIAL MACHINERY -- 1.7%
2,700 Mannesmann AG 1,202,855
SOFTWARE -- 0.7%
2,620 SAP AG 525,773
TELECOMMUNICATIONS -- 1.0%
30,240 Deutsche Telekom 728,215
------------
7,501,355
- -----------------------------------------------------------
HONG KONG -- 5.2%
BANK -- 0.8%
42,000 Hang Seng Bank 599,047
CONGLOMERATES -- 1.7%
78,000 CITIC Pacific Ltd. 487,292
84,000 Hutchison Whampoa 726,447
REAL ESTATE -- 2.7%
116,000 Henderson Land Development 1,029,391
134,122 Hong Kong Land Hldgs. 356,765
101,000 New World Development Co. 602,300
------------
3,801,242
- -----------------------------------------------------------
HUNGARY -- 0.8%
FOOD AND BEVERAGE -- 0.3%
3,041 Pick Szeged RT 233,804
PHARMACEUTICALS -- 0.5%
4,100 Richter Gedeon VEG 377,503
------------
611,307
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
29
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
IRELAND -- 1.2%
BANK -- 0.6%
52,200 Allied Irish Bank $ 400,923
CONSTRUCTION MATERIALS -- 0.6%
41,850 CRH 438,430
------------
839,353
- -----------------------------------------------------------
ITALY -- 5.5%
OIL-INTEGRATED -- 1.2%
156,000 Eni Spa 883,459
TELEPHONE -- 2.8%
306,000 Telecom Italia 982,148
322,000 Telecom Italia MOB 1,042,028
TEXTILE-APPAREL AND PRODUCTION -- 1.5%
16,900 Gucci Group NV 1,102,043
------------
4,009,678
- -----------------------------------------------------------
JAPAN -- 25.3%
AUTOMOBILE -- 1.3%
31,000 Honda Motor Co. 933,083
BUSINESS SERVICES -- 0.7%
7,000 Secom Co. 513,610
CHEMICALS -- 1.0%
27,000 Shin Etsu Chemical Co. 716,105
COMPUTER SYSTEMS -- 1.4%
26 NTT Data Communication Systems 1,004,886
DRUGS AND HEALTH CARE -- 1.3%
19,000 Sankyo Co. 638,196
14,000 Santen Pharmaceutical Co. 282,150
ELECTRICAL EQUIPMENT -- 1.2%
42,000 Omron Corp. 890,421
ELECTRONICS -- 5.9%
55,000 Canon, Inc. 1,497,121
15,000 Rohm Co. 1,544,233
14,500 Sony Corp. 1,263,785
FINANCIAL SERVICES -- 2.8%
32,200 Credit Saison Co. 786,599
12,600 Promise Co. 721,131
1,700 Shohkoh Fund & Co. 514,657
INDUSTRIAL MACHINERY -- 1.1%
9,400 SMC Corp. 793,858
LEISURE PRODUCTS -- 0.4%
1,900 Toho Co. 313,296
PHOTOGRAPHY -- 1.1%
20,000 Fuji Photo Film Co. 804,397
REAL ESTATE -- 1.4%
70,000 Mitsubishi Estate 1,013,785
RETAIL TRADE -- 2.0%
27,000 Jusco Co. 911,621
55,000 Mitsui & Co. 527,831
TELECOMMUNICATIONS -- 2.5%
114 DDI Corp. 841,424
- -----------------------------------------------------------
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
28,000 Matsushita Communications $ 945,385
TIRES AND RUBBER -- 1.2%
38,000 Bridgestone Corp. 881,871
------------
18,339,445
- -----------------------------------------------------------
MEXICO -- 1.1%
CONGLOMERATE -- 0.3%
28,100 Alfa S.A. 191,635
FOOD, BEVERAGE AND TOBACCO -- 0.3%
7,600 Pan American Beverages, Inc. 249,850
TELECOMMUNICATIONS -- 0.5%
7,600 Telefonos de Mexico S.A. 362,900
------------
804,385
- -----------------------------------------------------------
NETHERLANDS -- 4.7%
BANK -- 1.6%
60,200 ABN Amro Hldgs. NV 1,122,482
BROADCASTING AND PUBLISHING -- 2.0%
35,000 Ver Ned Uitgevers 773,855
5,770 Wolters Kluwer NV 702,547
SEMICONDUCTOR-EQUIPMENT -- 1.1%
13,700 ASM Lithography Hldgs. 792,170
------------
3,391,054
- -----------------------------------------------------------
NEW ZEALAND -- 0.7%
TELECOMMUNICATIONS -- 0.7%
97,000 Telecom Corp. of New Zealand 494,154
- -----------------------------------------------------------
POLAND -- 0.3%
ELECTRICAL EQUIPMENT -- 0.3%
24,000 Elektrim 208,854
- -----------------------------------------------------------
SINGAPORE -- 1.0%
BANK -- 0.5%
33,140 Overseas Chinese Bank 343,059
PUBLISHING -- 0.5%
20,200 Singapore Press Hldgs. 406,911
------------
749,970
- -----------------------------------------------------------
SPAIN -- 2.0%
BANK -- 2.0%
47,100 Banco Santander S.A. 1,451,198
- -----------------------------------------------------------
SWEDEN -- 4.5%
BUSINESS SERVICES -- 0.9%
23,000 Securitas AB 648,180
CONGLOMERATE -- 1.2%
9,500 Incentive AB 868,270
CONSTRUCTION AND MINING EQUIPMENT -- 1.0%
29,050 Atlas Copco AB 758,594
TELECOMMUNICATIONS -- 1.4%
25,550 LM Ericsson 1,005,749
------------
3,280,793
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
30
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
SWITZERLAND -- 7.4%
BUSINESS SERVICES -- 1.0%
1,840 Adecco S.A. $ 705,754
625 Danzas Hldgs. AG 9,418
INDUSTRIAL MACHINERY -- 0.4%
175 Bobst AG 297,260
INSURANCE -- 1.0%
820 Winterthur 722,274
PHARMACEUTICALS -- 5.0%
2,270 Novartis AG 3,628,890
------------
5,363,596
- -----------------------------------------------------------
UNITED KINGDOM -- 13.3%
BANK -- 2.1%
38,000 Abbey National 518,908
49,000 National Westminster Bank Co. PLC 658,918
25,500 HSBC Hldgs. 768,940
CAPITAL GOODS-TECHNOLOGY -- 0.1%
9,000 Sage Group 98,170
CHEMICALS -- 0.1%
31,000 Albright & Wilson 82,599
CONGLOMERATES -- 0.6%
1,051 BTR PLC (wts.) 35
77,000 Williams Hldgs. 416,742
DISTRIBUTOR -- 0.1%
29,000 Litho Supplies 100,209
DRUGS AND HEALTHCARE -- 1.8%
43,000 Glaxo Wellcome 889,729
11,500 Zeneca Group 380,338
ELECTRONICS -- 0.7%
20,000 Electrocomponents 148,878
28,000 Premier Farnell 217,755
40,000 Rotork 174,524
ENGINEERING -- 0.5%
19,000 Siebe 322,103
5,800 Vosper Thorncroft 73,503
FINANCIAL SERVICES -- 0.2%
15,000 3i Group 124,148
FOOD, BEVERAGE AND TOBACCO -- 1.4%
30,000 Devro Int'l. 169,361
20,000 Highland Distilleries 109,577
71,800 Imperial Tobacco 461,535
23,000 Whitbread 290,903
INSURANCE -- 1.4%
10,000 Britannic Assurance 134,889
44,000 Prudential Corp. 430,055
LEISURE PRODUCTS -- 0.5%
27,000 Granada Group 355,209
NEWSPAPERS -- 0.4%
40,000 Mirror Group PLC 125,231
21,000 Southnews PLC 136,388
- -----------------------------------------------------------
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
OIL-INTERNATIONAL -- 0.8%
45,000 British Petroleum $ 559,791
RETAIL TRADE -- 0.6%
50,600 Dixons Group 398,570
SUPPORT SERVICES -- 0.1%
18,000 Dawson Hldgs. 55,455
TELECOMMUNICATIONS -- 1.1%
66,373 Cable & Wireless Co. 350,383
95,000 Vodafone Group 463,537
TRANSPORTATION -- 0.8%
18,000 Associated British Ports 76,887
36,000 BAA PLC 331,828
55,000 Firstbus 192,342
------------
9,617,440
- -----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $49,999,539) 68,835,747
- -----------------------------------------------------------
- -----------------------------------------------------------
PREFERRED STOCK -- 0.1%
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
2,000 Companhia Energetica De Minas+
(COST $54,806) $ 103,000
- -----------------------------------------------------------
- -----------------------------------------------------------
CORPORATE BOND -- 0.6%
- -----------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------
$400,000 MBL Int'l. Finance
Exch. Guaranteed Notes, 3.00%
due 11/30/02
(COST $400,000) $ 438,500
- -----------------------------------------------------------
- -----------------------------------------------------------
REPURCHASE AGREEMENT -- 3.6
- -----------------------------------------------------------
Principal Maturity
Amount Date Value
- -----------------------------------------------------------
$2,569,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/97, maturity
value $2,569,357 at 5.00%
due 7/1/97 (collateralized
by $2,625,000 U.S. Treasury
Notes, 5.875% due 1/31/99) 7/1/97 $ 2,569,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $2,569,000) 2,569,000
- -----------------------------------------------------------
TOTAL INVESTMENTS -- 99.3%
(COST $53,023,345) 71,946,247
CASH, RECEIVABLES AND OTHER ASSETS
LESS PAYABLES -- 0.7% 510,560
- -----------------------------------------------------------
NET ASSETS -- 100.0% $72,456,807
- -----------------------------------------------------------
+ Rule 144A restricted security.
- -------------------------------------------------------------------------------
See notes to financial statements.
31
<PAGE>
o THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
- -----------------------------------------------------------------------
COMMON STOCKS -- 89.6%
- -----------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------
ARGENTINA -- 6.5%
BANK -- 0.9%
6,200 Banco Ganadero S.A. $ 223,200
BUILDING CONSTRUCTION -- 0.4%
21,200 Dycasa Dragados S.A. 93,294
GAS TRANSPORT -- 0.7%
14,430 Transportadora De Gas Del Sur 180,375
OIL AND GAS -- 1.4%
42,267 Perez Companc S.A. 339,457
REAL ESTATE -- 1.0%
5,400 IRSA Inversiones Y Represente 236,250
RETAIL FOOD -- 0.7%
2,400 Disco S.A. 95,100
5,860 Imp. y Exp. Patagonia 86,155
TELECOMMUNICATIONS -- 1.1%
5,000 Telecom Argentina 173,125
1,630 Telecom Argentina ADR 85,575
UTILITY-ELECTRIC -- 0.3%
3,660 Capex S.A. 68,625
-----------
1,581,156
- -----------------------------------------------------------------------
BRAZIL -- 16.0%
FOOD, BEVERAGE AND TOBACCO -- 0.7%
11,240 Comp. Cerv. Ria Brahma ADR+ 172,113
INDUSTRIAL MACHINERY -- 1.0%
18,400 Elevadores Atlas 239,710
METALS-STEEL -- 0.9%
2,700 Comp. Energetica De Minas ADR 139,050
7,000 Usinas Sid. De Minas ADR+ 77,000
PETROLEUM SERVICES -- 2.3%
19,300 Petroleo Brasileiro S.A. 559,700
REAL ESTATE -- 0.4%
4,100 Brazil Realty S.A. 101,686
RETAIL-FOOD -- 1.1%
4,600 Bomp. S.A. Supermercados 111,780
6,800 Comp. Brasileira De Dist. GDR 163,200
TELECOMMUNICATIONS -- 6.0%
5,100,000 Telecom. Brasileiras S.A. 691,654
3,200 Telecom. Brasileiras S.A. ADR 485,600
1,000,000 Telesp Tel Sao Paolo 294,924
18,302 Telesp Tel Sao Paolo (rts.) 136
TEXTILE-APPAREL & PRODUCTION -- 0.9%
31,500 Confeccoes Guararapes S.A. 228,229
TOBACCO -- 1.1%
25,600 Souza Cruz (Cia) 269,899
UTILITIES-ELECTRIC -- 1.6%
263,600,000 CIA de Elect. de Rio de Janeiro 190,988
80,000 Light Particapacoes 191,277
-----------
3,916,946
- -----------------------------------------------------------------------
CHILE -- 3.2%
MINING -- 0.8%
25,740 Antofagasta Hldgs. 197,178
MUTUAL FUND -- 1.0%
5,000 Genesis Chile Fund 251,250
TELECOMMUNICATIONS -- 0.4%
2,540 CIA De Telecommunicaciones 83,820
UTILITIES-ELECTRIC -- 1.0%
4,000 Empresa Nacional De Elec. 90,250
4,660 Enersis S.A. 165,722
-----------
788,220
- -----------------------------------------------------------------------
CZECH REPUBLIC -- 2.3%
BANK -- 0.6%
7,200 Komercni Banka 149,400
FOOD AND BEVERAGES -- 1.0%
1,155 Plzensky Prazdroj 109,903
17,700 Prazske Pivorary 120,107
TELECOMMUNICATIONS -- 0.7%
1,650 SPT Telecom AS 173,036
-----------
552,446
- -----------------------------------------------------------------------
HONG KONG -- 21.7%
AIR TRANSPORTATION -- 1.4%
606,000 China Travel Int'l., Inc. 351,994
BANK -- 1.3%
10,800 HSBC Hldgs. 324,810
CONGLOMERATES -- 3.1%
46,000 CITIC Pacific Ltd. 287,378
54,000 Hutchinson Whampoa 467,001
FINANCIAL SERVICES -- 2.6%
96,000 China Resources EN 470,874
29,000 Guoco Group 152,724
LODGING -- 0.7%
133,000 Mandarin Oriental 172,900
MUTUAL FUND -- 4.2%
89,000 ROC Taiwan Fund 1,040,188
REAL ESTATE -- 7.7%
736,000 China Overseas Land 593,755
36,000 Henderson Land Development 319,466
51,000 Hong Kong Land Hldg. 135,660
976,000 Hon Kwok Land Investment Ltd. 321,247
88,000 New World Development Co. 524,776
UTILITY-ELECTRIC -- 0.7%
354,000 Beijing Datang Pow 163,354
-----------
5,326,127
- -----------------------------------------------------------------------
HUNGARY -- 5.1%
BUILDING CONSTRUCTION AND MATERIAL -- 0.5%
3,540 Zalakeramia 137,030
CONSUMER GOODS -- 0.8%
4,040 Graboplast Textile 189,818
FOOD AND BEVERAGE -- 1.1%
3,455 Pick Szeged RT 265,634
LODGING -- 0.8%
6,830 Danubius Hotel 201,842
- -----------------------------------------------------------------------
+ Rule 144A restricted security.
- -----------------------------------------------------------------------
See notes to financial statements.
32
<PAGE>
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------
PHARMACEUTICAL -- 1.0%
2,650 Richter Gedeon VEG $ 243,997
PLASTIC -- 0.9%
4,200 Pannonplast 210,790
------------
1,249,111
- -----------------------------------------------------------------------
INDIA -- 2.4%
BANK -- 0.6%
5,000 State Bank India 132,500
MUTUAL FUND -- 0.9%
22,000 India Opportunity Fund 217,360
TELECOMMUNICATIONS -- 0.9%
11,000 Videsh Sanchar Nigam Ltd. 228,250
------------
578,110
- -----------------------------------------------------------------------
INDONESIA -- 3.4%
BANKS -- 0.7%
113,000 Bank Bira 166,108
FOOD AND BEVERAGE -- 2.7%
192,000 Davomas Abadi 236,842
148,000 Daya Guna Samudera 266,242
96,000 Fiskar Agung Perkasa 154,934
------------
824,126
- -----------------------------------------------------------------------
MALAYSIA -- 3.0%
BUILDING CONSTRUCTION -- 1.1%
130,000 IJM Corp. Berhad 272,979
FINANCIAL SERVICES -- 0.6%
68,000 Affin Hldgs. Berhad 161,649
FOOD, BEVERAGE AND TOBACO -- 0.3%
32,000 RJ Reynolds Berhad 79,873
PUBLISHING-NEWS -- 1.0%
38,000 New Straits Times 222,821
------------
737,322
- -----------------------------------------------------------------------
MEXICO -- 6.8%
CONGLOMERATE -- 1.0%
35,380 Alfa S.A. 241,283
FINANCIAL SERVICES -- 1.0%
111,100 Grupo Financiero Banorte 115,469
31,900 Grupo Financiero Inbursa S.A. 135,668
FOOD, BEVERAGE AND TOBACCO -- 1.9%
26,200 Grupo Carso S.A. De CV 182,963
33,750 Grupo Continental 92,576
5,570 Pan American Beverages, Inc. 183,114
LEISURE TIME -- 0.4%
21,150 Corp. Interamericana Entretenimiento 90,481
RETAIL TRADE -- 0.7%
72,000 Organiz. Soriana 180,646
TELECOMMUNICATIONS -- 1.8%
9,200 Telefonos De Mexico S.A. 439,300
------------
1,661,500
- -----------------------------------------------------------------------
PAKISTAN -- 4.1%
BANK -- 1.0%
350,000 Faysal Bank 232,499
CHEMICAL -- 1.4%
178,000 Fauji Fertilizer 350,103
UTILITY-ELECTRIC -- 1.7%
17,000 Hub Power Co. GDR 416,500
------------
999,102
- -----------------------------------------------------------------------
PANAMA -- 0.4%
BANK -- 0.4%
2,420 Banco Latino Americano De Exp. 104,363
PERU -- 1.8%
BUILDING MATERIAL -- 0.4%
5,010 Cementos Lima 100,861
FOOD AND BEVERAGES -- 0.8%
50,000 Cerv. Backus Johnston & Co. 52,026
10,024 Minera Milpo 151,163
TELECOMMUNICATIONS -- 0.6%
5,000 Telefonica Del Peru 130,938
------------
434,988
- -----------------------------------------------------------------------
PHILIPPINES -- 1.4%
BUSINESS SERVICES -- 0.8%
400,000 Int'l. Container Terminal Svcs. 204,732
HOMEBUILDER -- 0.3%
210,000 C & P Homes, Inc. 78,822
REAL ESTATE -- 0.3%
574,000 MRC Allied Industries 66,375
------------
349,929
- -----------------------------------------------------------------------
POLAND -- 2.0%
BANKS -- 1.2%
13,000 Bank Handlowy Warsaw 138,354
6,900 Bank Roswoju Eksport 144,865
ELECTRICAL EQUIPMENT -- 0.8%
23,000 Elektrim 200,152
------------
483,371
- -----------------------------------------------------------------------
PORTUGAL -- 0.6%
TELECOMMUNICATIONS -- 0.6%
1,890 Telecel-Comunicacoes Pessoais S.A. 156,775
- -----------------------------------------------------------------------
SINGAPORE -- 1.3%
CONSTRUCTION -- 0.7%
48,000 Clipsal Industries 169,920
ELECTRONICS -- 0.6%
46,000 Venture Manufacturing 149,931
------------
319,851
- -----------------------------------------------------------------------
SOUTH AFRICA -- 3.6%
BANK -- 0.8%
23,000 First National Bank 197,708
CONGLOMERATE -- 0.6%
24,000 C.G. Smith 133,833
INDUSTRIAL MACHINERY -- 0.6%
13,000 Barlow Ltd. 141,404
MINING -- 1.1%
4,000 De Beers Centenary 147,675
28,000 Gencor 128,984
OIL-DOMESTIC -- 0.5%
10,000 Sasol 131,144
------------
880,748
- -----------------------------------------------------------------------
See notes to financial statements.
33
<PAGE>
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
- ------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------
TAIWAN -- 3.6%
BUILDING CONSTRUCTION -- 0.9%
125,000 Cathay Construction $ 215,827
COMPUTERS AND BUSINESS EQUIPMENT -- 0.9%
20,000 Asustek Computer, Inc. GDR 226,500
ELECTRONICS -- 1.8%
63,000 Advanced Semiconductor Eng'g., Inc. 239,083
75,000 D-Link Corp. 210,432
-----------
891,842
- ------------------------------------------------------------------------
VENEZUELA -- 0.4%
OIL AND GAS -- 0.4%
7,240 Benton Oil & Gas Co. 108,600
- ------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $19,878,912) 21,944,633
- ------------------------------------------------------------------------
PREFERRED STOCKS-- 5.2%
- ------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------
13,000,000 Banco Bradesco S.A. $ 131,020
600,000 Banco Itau S.A. 336,074
5,200,000 CIA Lorenz 198,808
120,000 Companhia Cerveja Ria Brahma 91,403
490,000 Coteminas CIA Tec 191,166
490,000 Encorpar 184
3,500,000 Ericsson Telecom S.A. 208,072
1,300,000 Lojas Renner S.A. 66,657
250,000 Petrol Brasileiros 69,438
- ------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $1,225,572) 1,292,822
- ------------------------------------------------------------------------
CORPORATE BOND-- 1.1%
- ------------------------------------------------------------------------
Principal
Amount Value
- ------------------------------------------------------------------------
$ 260,000 Metro Pacific Capital,
2.50% due 4/11/03
(COST $297,362) $ 274,300
- ------------------------------------------------------------------------
REPURCHASE AGREEMENT-- 4.1%
- ------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- ------------------------------------------------------------------------
$ 995,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/97, maturity
value $995,138 at 5.00%
due 7/1/97 (collateralized
by $1,020,000 U.S.
Treasury Notes, 5.875%
due 1/31/99) 7/1/97 $ 995,000
- ------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $995,000) 995,000
- ------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $22,396,846) 24,506,755
CASH, RECEIVABLES AND OTHER ASSETS
LESS PAYABLES -- 0.0% 1,069
- ------------------------------------------------------------------------
NET ASSETS -- 100.0% $24,507,824
- ------------------------------------------------------------------------
GLOSSARY OF TERMS:
ADR -- American Depository Receipt.
GDR -- Global Depository Receipt.
- ------------------------------------------------------------------------
See notes to financial statements.
34
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
- -------------------------------------------------------------------------------
ASSET BACKED -- 16.6%
- -------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 500,000 Amresco 1997-1 M1F
7.42% due 3/25/27 $ 502,400
500,000 Contimortgage 1997-2 A8
7.62% due 4/15/28 504,850
500,000 Contimortgage 1997-2 A7
7.34% due 3/15/23 503,650
1,000,000 Contimortgage 1996-2 A4
6.85% due 4/15/11 1,004,680
750,000 Deutsche Financial 1997-I A2
6.55% due 9/15/27 747,525
750,000 Equi Credit 1996-1 A4
6.56% due 3/15/23 736,425
1,100,000 Equi Credit 1997-2 A5
6.54% due 4/15/11 1,098,130
500,000 Firstplus 1997-1 A4
6.60% due 7/10/10 497,200
2,000,000 Green Tree 1996-10 A5
6.83% due 11/15/28 1,992,600
1,420,972 Green Tree 1996-2 A1
6.10% due 4/15/27 1,076,291
1,500,000 Green Tree 1996-1 A2
5.85% due 3/15/27 1,465,305
750,000 Green Tree Recreational 1997-B A1
6.55% due 7/15/28 748,350
490,000 The Money Store 1997-A A7
7.41% due 11/15/24 494,743
2,000,000 The Money Store 1996-C A11
6.96% due 8/15/10 2,012,600
500,000 The Money Store 1995-C A9
6.375% due 9/15/11 493,600
- -----------------------------------------------------------------------
TOTAL ASSET BACKED
(COST $13,860,597) 13,878,349
- -----------------------------------------------------------------------
CORPORATE BONDS -- 3.8%
- -----------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------------------
BIOTECHNOLOGY -- 0.6%
$ 500,000 Millipore Corp.
7.20% due 4/1/02 $ 504,955
BROADCASTING -- 2.5%
500,000 Time Warner, Inc.
7.95% due 2/1/00 514,045
750,000 Time Warner, Inc.
7.75% due 6/15/05 762,188
750,000 Turner Broadcasting System, Inc.
8.375% due 7/1/13 777,862
-----------
2,054,095
- -----------------------------------------------------------------------
CONGLOMERATE -- 0.9%
800,000 RJR Nabisco, Inc.
7.625% due 9/15/03 787,968
- -----------------------------------------------------------------------
CONTAINERS-METAL -- 0.6%
$1,000,000 Crown Cork & Seal Financial, PLC
7.00% due 12/15/06 495,005
- -----------------------------------------------------------------------
DRUGS AND HOSPITAL -- 1.2%
1,000,000 Rhone Poulenc S.A.
6.75% due 10/15/99 1,001,930
- -----------------------------------------------------------------------
FERTILIZER -- 1.2%
1,000,000 Potash Corp. Sask, Inc.
7.125% due 6/15/07 994,240
- -----------------------------------------------------------------------
FINANCIAL-BANKS -- 3.3%
1,750,000 Bankers Trust Pref. Capital Tr. II
7.875% due 2/25/27 1,692,618
1,000,000 Nationsbank Capital Tr. IV
8.25% due 4/15/27 1,024,740
-----------
2,717,358
- -----------------------------------------------------------------------
FINANCIAL-OTHER -- 2.1%
500,000 Lehman Brothers, Inc.
6.92% due 10/4/99 503,550
500,000 Salomon, Inc.
6.50% due 3/1/00 497,480
750,000 Sears Roebuck Acceptance Corp.
7.00% due 6/15/07 743,055
-----------
1,744,085
- -----------------------------------------------------------------------
INSURANCE -- 2.2%
1,000,000 Prudential Insurance Co. of America
7.65% due 7/1/07 1,011,910
800,000 Zurich Capital Tr.
8.376% due 6/1/37 826,720
-----------
1,838,630
- -----------------------------------------------------------------------
MACHINERY AND CONSTRUCTION -- 1.5%
750,000 Aktiebolaget SKF
7.125% due 7/1/07 743,303
500,000 McDermott Int'l., Inc.
6.57% due 4/20/98 499,485
-----------
1,242,788
- -----------------------------------------------------------------------
MISCELLANEOUS-CAPITAL GOODS -- 1.5%
1,250,000 Ikon Capital, Inc.
6.73% due 6/15/01 1,245,513
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
OIL-INTEGRATED INTERNATIONAL -- 1.2%
1,000,000 Petroliam Nasional Berhad
7.625% due 10/15/26 998,660
- -----------------------------------------------------------------------
PUBLISHING -- 1.5%
1,250,000 News Amer. Hldgs., Inc.
7.50% due 3/1/00 1,274,825
- -----------------------------------------------------------------------
REAL ESTATE -- 0.6%
500,000 Simon DeBartolo Group, LP
6.875% due 11/15/06 483,850
- -----------------------------------------------------------------------
See notes to financial statements.
35
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------------------
RAILROADS -- 4.0%
$1,500,000 CSX Corp.
7.95% due 5/1/27 $ 1,551,855
1,000,000 CSX Corp.
7.90% due 5/1/17 1,036,320
750,000 Norfolk Southern Corp.
7.80% due 5/15/27 770,325
------------
3,358,500
- -----------------------------------------------------------------------
TELECOMMUNICATIONS -- 2.7%
800,000 Comcast Cable Communications
8.875% due 5/1/17 872,008
1,400,000 TCI Communications
7.25% due 6/15/99 1,410,696
------------
2,282,704
- -----------------------------------------------------------------------
TOBACCO -- 2.7%
500,000 Bat Capital Corp.
6.875% due 4/15/03 494,225
1,000,000 Philip Morris Cos., Inc.
7.50% due 4/1/04 1,016,080
750,000 Philip Morris Cos., Inc.
7.20% due 2/1/07 743,490
------------
2,253,795
- -----------------------------------------------------------------------
UTILITIES-GAS AND PIPELINE -- 1.5%
750,000 Tennessee Gas Pipeline Co.
7.50% due 4/1/17 749,910
750,000 Tennessee Gas Pipeline Co.
7.00% due 3/15/27 499,700
------------
1,249,610
- -----------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $26,481,000) 26,528,511
- -----------------------------------------------------------------------
MORTGAGE PASS-THROUGHS -- 19.4%
$1,250,000 FNMA TBA
7.00% due 7/15/12 (a) $ 1,247,987
6,000,000 FNMA TBA
7.50% due 7/15/27 (a) 6,016,320
1,750,000 FNMA TBA
6.50% due 7/15/12 (a) 1,716,015
235,594 FHLMC Pool E54124
7.00% due 8/1/08 236,723
1,980,000 FNMA Pool #250799
7.50% 1/1/27 1,949,739
272,469 FNMA Pool #339754
7.50% due 5/1/27 273,000
470,031 FNMA Pool #339760
7.50% due 5/1/27 466,043
3,807 FNMA Pool #250650
7.00% due 7/1/11 3,808
558 FNMA Pool #311434
7.00% due 5/1/26 547
8,492 FNMA Pool #324501
7.00% due 5/1/26 8,336
591,263 FNMA Pool #217042
6.50% due 6/1/08 583,966
952,555 GNMA Pool #365459
7.50% due 10/15/25 956,832
1,010,000 GNMA Pool #398668
7.50% due 5/15/26 975,521
42,954 GNMA Pool #417608
7.50% due 12/15/26 42,929
629,015 GNMA Pool #430152
7.50% due 12/15/26 623,752
505,000 GNMA Pool #431737
7.50% due 12/15/26 504,408
337,884 GNMA Pool #443174
7.50% due 12/15/26 337,575
303,506 GNMA Pool #419796
7.00% due 9/15/10 242,367
- -----------------------------------------------------------------------
TOTAL MORTGAGE PASS-THROUGHS
(COST $16,157,937) 16,185,868
- -----------------------------------------------------------------------
MULTI-CLASS MORTGAGE PASS-THROUGHS -- 2.9%
- -----------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------------------
$ 972,344 Federal National Mortgage Assn.
6.50% due 10/25/08 $ 957,180
1,479,805 GE Capital Mortgage Svcs., Inc.
7.00% due 3/25/26 1,432,596
- -----------------------------------------------------------------------
TOTAL MULTI-CLASS MORTGAGE
PASS-THROUGHS
(COST $2,455,804) 2,389,776
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
U. S. GOVERNMENT -- 24.2%
- -----------------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------------------
$2,250,000 U.S. Treasury Bonds
6.50% due 11/15/26 $ 2,157,885
4,500,000 U.S. Treasury Notes
6.875% due 8/31/99 4,566,780
1,500,000 U.S. Treasury Notes
6.625% due 4/30/02 1,513,830
2,250,000 U.S. Treasury Notes
6.50% due 5/31/01 2,262,308
- -----------------------------------------------------------------------
See notes to financial statements.
36
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
$4,650,000 U.S. Treasury Notes
6.375% due 5/15/00 $ 4,666,694
3,500,000 U.S. Treasury Notes
6.125% due 8/31/98 3,508,750
1,500,000 U.S. Treasury Notes
5.625% due 2/28/01 1,466,490
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
(COST $20,139,701) 20,142,737
- -------------------------------------------------------------------------------
YANKEE BONDS -- 1.5%
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 500,000 Corporacion Andina De Fomento
7.25% due 3/1/07 $ 501,775
750,000 Export Import Bank of Korea
6.50% due 2/10/02 735,878
- -------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(COST $1,235,316) 1,237,653
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.2%
- -------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------------------
$3,464,000 State Street Bank &
Trust repurchase
agreement, dated
6/30/97, maturity
value $3,464,563 at
5.85% due 7/1/97
(collateralized by
U.S. Treasury Notes,
$2,750,000, 6.00%
due 5/31/98 and
$770,000, 5.25%
due 12/31/97) 7/1/97 $ 3,464,000
- -------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $3,464,000) 3,464,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (b) -- 100.6% 83,826,894
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES -- (0.6%)%
- -------------------------------------------------------------------------------
Commercial Paper vs. Forward MBS Purchases(a)
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
AUTOMOBILE
$3,000,000 Volkswagen of America, Inc.
5.52% due 7/14/97 $ 2,994,020
- -------------------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS
2,965,000 EG & G, Inc.
5.57% due 7/17/97 2,957,660
3,010,000 Xerox Corp.
5.50% due 7/14/97 3,004,000
-----------
5,961,660
- -------------------------------------------------------------------------------
OIL INTEGRATED-DOMESTIC
1,800,000 Koch Industries, Inc.
5.49% due 7/21/97 1,794,510
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $10,750,190) 10,750,190
- --------------------------------------------------------------------------------
LIABILITIES (11,218,098)
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS (467,908)
- -------------------------------------------------------------------------------
NET ASSETS-- 100.0% $ 83,358,986
- -------------------------------------------------------------------------------
(a) Total commercial paper is pledged against mortgage backed securities
payables of $8,980,322.
(b) Total Investments including commercial paper with the cost of $94,544,545
amounted to $94,577,084.
GLOSSARY:
MBS -- MORTGAGE BACKED SECURITIES.
- --------------------------------------------------------------------------------
See notes to financial statements.
37
<PAGE>
o THE GUARDIAN TAX-EXEMPT FUND
- -------------------------------------------------------------------------------
MUNICIPAL BONDS -- 101.2%
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
ALASKA -- 2.4%
$1,000,000 Alaska St. Housing
Fin. Corp. G.O. Ser. A,
5.90% due 12/1/19 Aaa/AAA $ 1,007,610
- -------------------------------------------------------------------------------
ARIZONA -- 4.2%
1,000,000 Phoenix, AZ G.O. Ser. A,
7.00% due 7/1/10 Aa1/AA+ 1,181,620
530,000 Pima Cty., AZ
School District No. 16
Catalina Foothills G.O.,
6.50% due 7/1/10 Aaa/AAA 603,972
----------
1,785,592
- -------------------------------------------------------------------------------
CALIFORNIA -- 11.1%
1,000,000 California Housing Fin. Agy.
Ser. C, 5.65% due 8/1/14 Aa2/AA- 1,003,990
595,000 California St. G.O.,
7.00% due 10/1/10 A1/A 703,831
1,500,000 California St. Public
Works Lease G.O. Ser. A,
5.50% due 10/1/14 A/A 1,494,900
500,000 Los Angeles, CA
Regional Airport Lease
G.O. Variable Rate,
4.10% due 12/1/24 Aa2/NR 500,000
1,060,000 San Francisco, CA
Public Utilities Ser. A,
5.00% due 11/1/17 Aa/AA- 1,008,601
----------
4,711,322
- -------------------------------------------------------------------------------
CONNECTICUT -- 2.4%
1,000,000 Connecticut St. Housing
Fin. Auth. Subser. A3,
5.95% due 5/15/17 Aa3/AA 1,007,080
- -------------------------------------------------------------------------------
FLORIDA -- 5.2%
1,000,000 Florida St. Board of Ed.
Cap. Outlay G.O.,
6.70% due 6/1/22 Aaa/AAA 1,093,190
1,140,000 Jacksonville, Fl. Sales
Tax River City Ren. Proj.,
5.125% due 10/1/18 Aaa/AAA 1,098,458
----------
2,191,648
- -------------------------------------------------------------------------------
GEORGIA -- 2.9%
1,100,000 Fulton Cty., Georgia
Water & Sewer Rev.,
6.25% due 1/1/08 Aaa/AAA 1,224,135
- -------------------------------------------------------------------------------
ILLINOIS -- 2.4%
$1,000,000 Chicago, Ill. O'Hare
Int'l. Airport Passenger
Fac. Rev. Ser. A,
5.625% due 1/1/14 Aaa/AAA $1,005,910
- -------------------------------------------------------------------------------
MASSACHUSETTS -- 7.5%
1,185,000 Massachusetts Bay
Transit Auth. G.O. Ser. A,
5.375% due 3/1/15 A1/A+ 1,171,586
1,000,000 Massachusetts St.
Cons. Ln. G.O. Ser. B,
5.25% due 6/1/15 Aaa/A1 984,560
1,000,000 Massachusetts St.
Water Res. Auth. Ser. A,
5.50% due 11/1/16 Aaa/AAA 1,003,690
----------
3,159,836
- -------------------------------------------------------------------------------
MISSOURI -- 2.4%
1,000,000 Missouri St. G.O. Ser. A
Fourth State Bldg.
5.75% due 8/1/18 Aaa/AAA 1,028,800
- -------------------------------------------------------------------------------
NEW JERSEY -- 9.9%
1,750,000 New Jersey St.
Hwy. Auth.,
6.25% due 1/1/14 A1/AA- 1,862,700
500,000 New Jersey St. Transit
Auth. G.O. Ser. A,
6.50% due 6/15/05 Aaa/AAA 556,535
1,200,000 New Jersey St. Transit
Auth. G.O. Ser. B,
5.25% due 6/15/15 Aa/A+ 1,181,472
500,000 New Jersey Waste &
Water Treat. Ser. C,
7.00% due 5/15/08 Aaa/AAA 584,670
----------
4,185,377
- -------------------------------------------------------------------------------
NEW YORK -- 17.4%
1,000,000 New York City G.O.
Prerefunded Ser. C Subser. C1,
6.375% due 8/1/07 Aaa/AAA 1,101,350
1,500,000 New York City G.O. Ser. E,
5.875% due 8/1/23 Baa1/BBB- 1,518,810
1,000,000 New York St. Dorm.
Auth. City Univ. G.O.,
5.75% due 7/1/12 Aaa/AAA 1,058,410
500,000 New York St. G.O. Ser. A,
5.875% due 3/15/15 A/A- 514,480
- -------------------------------------------------------------------------------
* Unaudited See notes to financial statements.
38
<PAGE>
THE GUARDIAN TAX-EXEMPT FUND
Schedule of Investments (Continued)
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
NEW YORK -- (Continued)
$1,000,000 New York St. Thruway
Auth. Hwy. & Brdg.
Ser. B, 6.25% due 4/1/12 Aaa/AAA $1,081,230
1,000,000 New York St. Urban
Dev. Corp. G.O. Ser. A,
5.50% due 4/1/10 Aaa/AAA 1,019,020
1,000,000 Suffolk Cty., NY
Industrial Dev. Agy.,
6.00% due 2/1/07 Aaa/AAA 1,084,490
----------
7,377,790
- -------------------------------------------------------------------------------
OHIO -- 6.2%
1,000,000 Cleveland, OH
Parking Fac. Rev.,
5.50% due 9/15/16 Aaa/AAA 1,000,320
500,000 Columbus, OH
Water System Rev.,
6.10% due 11/1/03 A1/AA- 538,685
1,000,000 Ohio St. Bldg. Auth. Disalle
Gov't. Center G.O. Ser. A,
6.00% due 10/1/05 A1/AA- 1,081,250
----------
2,620,255
- -------------------------------------------------------------------------------
OKLAHOMA -- 3.3%
1,270,000 Grand River Dam
Auth. OK G.O.,
6.25% due 6/1/11 Aaa/AAA 1,417,599
- -------------------------------------------------------------------------------
SOUTH CAROLINA -- 2.6%
1,000,000 South Carolina St.
Public Svcs. Auth. Ser. B,
7.00% due 7/1/12 Aaa/AAA 1,112,640
- -------------------------------------------------------------------------------
TENNESSEE -- 3.5%
1,000,000 Tennessee St. G.O.,
5.25% due 5/1/14 Aaa/AA+ 1,002,240
500,000 Tennessee St. Metro.
Nashville Airport G.O.
Ser. B Variable Rate,
4.10% due 10/1/12 NR/A1+ 500,000
----------
1,502,240
- -------------------------------------------------------------------------------
TEXAS -- 10.2%
1,050,000 Bryan, TX Indpt.
Sch. Dist. G.O.,
5.50% due 2/15/17 Aaa/NR $1,051,050
500,000 Grapevine-Colleyville, TX
Indpt. Sch. Dist. G.O.,
8.25% due 6/15/08 Aaa/AAA 633,620
1,000,000 Lone Star, TX Airport
Improve. Auth. G.O.
Variable Rate,
4.10% due 12/1/14 VMIG1 1,000,000
1,000,000 Texas St. Dept. Housing &
Com. Affairs Ser. B,
6.00% due 3/1/17 Aaa/AAA 1,025,270
555,000 Texas St. Water Dev't.
G.O. Ser. A,
6.5% due 8/1/05 Aa/AA 619,752
----------
4,329,692
- -------------------------------------------------------------------------------
UTAH -- 3.7%
1,500,000 Intermountain Power Agy.
Utah Power Supply,
7.75% due 7/1/20 Aa/A+ 1,579,395
- -------------------------------------------------------------------------------
WASHINGTON -- 3.9%
1,500,000 Washington St. Public
Power Supply Ser. B,
7.375% due 7/1/04 Aa1/AA- 1,634,596
- -------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $42,307,766) 42,881,517
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 101.2%
(COST $42,307,766) 42,881,517
PAYABLES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (1.2%) (499,538)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $42,381,979
- --------------------------------------------------------------------------------
GLOSSARY:
G.O. -- GENERAL OBLIGATION.
- --------------------------------------------------------------------------------
See notes to financial statements. * Unaudited
39
<PAGE>
o The Guardian Cash Management Fund
- ------------------------------------------------------------
COMMERCIAL PAPER -- 93.5%
- ------------------------------------------------------------
Principal Maturity
Amount Date Value
- ------------------------------------------------------------
FINANCIAL -- 37.0%
BANK HOLDING COMPANIES -- 7.4%
$4,000,000 J.P. Morgan & Co., Inc.
5.53% 7/25/97 $ 3,985,253
4,000,000 Republic New York
Corp., 5.53% 7/28/97 3,983,410
------------
7,968,663
- ------------------------------------------------------------
FINANCE COMPANIES -- 18.5%
4,000,000 Associates Corp. of N.A.
5.62% 7/2/97 3,999,376
4,000,000 Household Finance
Corp., 5.56% 7/21/97 3,987,644
4,000,000 Nat'l. Rural Utils. Coop.
Fin. Corp., 5.50% 7/9/97 3,995,111
4,000,000 USAA Capital Corp.
5.55% 7/14/97 3,991,983
4,000,000 U.S. Central Credit
Union, 5.53% 8/15/97 3,972,350
------------
19,946,464
- ------------------------------------------------------------
INSURANCE -- 3.7%
4,000,000 American Gen. Financial
Corp., 5.31% 7/30/97 3,982,149
- ------------------------------------------------------------
OTHER MAJOR BANKS -- 7.4%
4,000,000 Barclays U.S. Funding
Corp., 5.50% 7/7/97 3,996,333
4,000,000 Dresdner U.S. Finance
Co., 5.54% 7/11/97 3,993,844
------------
7,990,177
- ------------------------------------------------------------
TOTAL FINANCIAL 39,887,453
- ------------------------------------------------------------
INDUSTRIAL -- 56.5%
AEROSPACE-DEFENSE -- 3.7%
4,000,000 Rockwell Int'l. Corp.
5.53% 8/20/97 3,969,278
- ------------------------------------------------------------
AUTOMOTIVE -- 3.7%
4,000,000 Ford Motor Credit Co.
5.54% 8/4/97 3,979,071
- ------------------------------------------------------------
CHEMICALS -- 7.4%
4,000,000 E.I. Dupont de Nemours,
Inc., 5.49% 7/24/97 3,985,970
4,000,000 Monsanto Co.
5.53% 8/1/97 3,980,952
------------
7,966,922
- ------------------------------------------------------------
CONGLOMERATES -- 7.4%
4,000,000 General Electric Cap.
Corp., 5.53% 7/31/97 3,981,567
4,000,000 Mitsubishi Int'l. Corp.
5.59% 7/29/97 3,982,609
------------
7,964,176
- ------------------------------------------------------------
- ------------------------------------------------------------
Principal Maturity
Amount Date Value
- ------------------------------------------------------------
ENTERTAINMENT -- 4.7%
$5,000,000 Walt Disney Co.
5.50% 7/2/97 $ 4,999,236
- ------------------------------------------------------------
FOOD AND BEVERAGE -- 3.7%
4,000,000 Hershey Foods Corp.
5.50% 7/17/97 3,990,222
- ------------------------------------------------------------
HOUSEHOLD PRODUCT -- 3.7%
4,000,000 Colgate Palmolive Co.
5.55% 8/6/97 3,977,800
- ------------------------------------------------------------
OIL-INTEGRATED INTERNATIONAL -- 3.7%
4,000,000 Texaco, Inc.
5.52% 7/10/97 3,994,480
- ------------------------------------------------------------
TELECOMMUNICATIONS -- 11.1%
4,000,000 Bell Atlantic Fin'l. Svcs.
5.56% 7/1/97 4,000,000
4,000,000 Lucent Technologies, Inc.
5.52% 7/23/97 3,986,507
4,000,000 Southwestern Bell Telephone
Co., 5.53% 8/29/97 3,963,750
------------
11,950,257
- ------------------------------------------------------------
UTILITIES-ELECTRIC -- 7.4%
4,000,000 Carolina Power & Light
Co., 5.53% 7/18/97 3,989,554
4,000,000 Union Electric Co.
5.50% 7/16/97 3,990,833
------------
7,980,387
- ------------------------------------------------------------
TOTAL INDUSTRIAL 60,771,829
- ------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $100,659,282) 100,659,282
- ------------------------------------------------------------
- ------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.3%
- ------------------------------------------------------------
Principal Maturity
Amount Date Value
- ------------------------------------------------------------
$6,726,000 State Street Bank & Trust
repurchase agreement,
dated 6/30/97, maturity
value $6,727,093 at 5.85%
due 7/1/97 (collateralized
by $6,815,000 U.S. Treasury
Notes, 6.00% due
5/31/98) 7/1/97 $ 6,726,000
- ------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $6,726,000) 6,726,000
- ------------------------------------------------------------
TOTAL INVESTMENTS -- 99.8%
(COST $107,385,282) 107,385,282
CASH, RECEIVABLES AND OTHER ASSETS
LESS PAYABLES -- 0.2% 260,369
- ------------------------------------------------------------
NET ASSETS -- 100.0% $107,645,651
- ------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
40
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
41
<PAGE>
<TABLE>
======================
FINANCIAL STATEMENTS
======================
_
[_] The Park Avenue Portfolio
- ---------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
- ---------------------------------------
June 30, 1997 (Unaudited)
- ---------------------------------------
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE ASSET BAILLIE GIFFORD
FUND SMALL CAP ALLOCATION INTERNATIONAL
FUND FUND FUND
------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at identified cost* ....................... $1,408,767,930 $31,699,844 $ 97,904,034 $53,023,345
==================================================================
Investments, at market ................................. 1,952,361,356 34,386,156 105,352,260 69,377,247
Repurchase agreements -- 1,514,000 13,985,000 2,569,000
------------------------------------------------------------------
TOTAL INVESTMENTS ................................... 1,952,361,356 35,900,156 119,337,260 71,946,247
Cash ................................................... 6,800 649 422 23,171
Foreign currency (Cost $784,166 GBGIF and $457,106
GBGEMF, respectively) ................................. -- -- -- 782,700
Receivable for securities sold ......................... 27,564,113 -- 1,290,845 296,551
Receivable for fund shares sold ........................ 6,245,469 650,973 93,859 50,628
Dividends receivable ................................... 1,393,742 32,539 99,546 142,230
Interest receivable .................................... -- 246 131,305 1,390
Deferred organization expenses -- Note 6 ............... -- 43,155 2,592 2,856
Dividend reclaim receivable ............................ -- -- -- 53,697
Other assets ........................................... 5,015 -- 328 210
------------------------------------------------------------------
TOTAL ASSETS ........................................ 1,987,576,495 36,627,718 120,956,157 73,299,680
------------------------------------------------------------------
LIABILITIES
Payable for securities purchased ....................... 46,533,718 -- 1,284,560 440,814
Distributions payable .................................. -- -- -- --
Payable for fund shares redeemed ....................... 1,020,056 -- 7,069 59,012
Payable for forward currency purchased ................. -- -- -- 5,141
Accrued expenses ....................................... 391,184 70,599 39,850 50,355
Foreign tax withholding ................................ -- -- -- 12,261
Due to affiliates ...................................... 3,576,878 80,795 304,013 275,290
------------------------------------------------------------------
TOTAL LIABILITIES ................................... 51,521,836 151,394 1,635,492 842,873
------------------------------------------------------------------
NET ASSETS .......................................... $1,936,054,659 $36,476,324 $119,320,665 $72,456,807
==================================================================
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD INVESTMENT TAX-EXEMPT CASH
EMERGING QUALITY FUND MANAGEMENT
MARKETS FUND BOND FUND FUND
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at identified cost* ....................... $22,396,846 $94,544,545 $42,307,766 $107,385,282
===================================================================
Investments, at market ................................. 23,511,755 91,113,084 42,881,517 100,659,282
Repurchase agreements 995,000 3,464,000 -- 6,726,000
-------------------------------------------------------------------
TOTAL INVESTMENTS ................................... 24,506,755 94,577,084 42,881,517 107,385,282
Cash ................................................... -- 3,824 110,617 10,164
Foreign currency (Cost $784,166 GBGIF and $457,106
GBGEMF, respectively) ................................. 456,898 -- -- --
Receivable for securities sold ......................... 158,330 6,969,886 -- --
Receivable for fund shares sold ........................ 30,301 26,310 995,148 908,557
Dividends receivable ................................... 81,295 -- -- --
Interest receivable .................................... 1,583 893,469 772,477 1,093
Deferred organization expenses -- Note 6 ............... 25,661 2,592 2,592 --
Dividend reclaim receivable ............................ 386 -- -- --
Other assets ........................................... -- 178 139 319
-------------------------------------------------------------------
TOTAL ASSETS ........................................ 25,261,209 102,473,343 44,762,490 108,305,415
-------------------------------------------------------------------
LIABILITIES
Payable for securities purchased ....................... 577,661 18,876,038 2,299,972 --
Distributions payable .................................. -- 16,510 8,607 23,854
Payable for fund shares redeemed ....................... -- 114,144 -- 353,434
Payable for forward currency purchased ................. -- -- -- --
Accrued expenses ....................................... 71,045 871 -- 48,848
Foreign tax withholding ................................ 5,990 -- -- --
Due to affiliates ...................................... 98,689 106,794 71,932 233,628
-------------------------------------------------------------------
TOTAL LIABILITIES ................................... 753,385 19,114,357 2,380,511 659,764
-------------------------------------------------------------------
NET ASSETS .......................................... $24,507,824 $83,358,986 $42,381,979 $107,645,651
===================================================================
* Includes repurchase agreements.
See notes to financial statements.
42 43
</TABLE>
<PAGE>
<TABLE>
_
[_] The Park Avenue Portfolio
- ---------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
- ---------------------------------------------------
June 30, 1997 (Unaudited)
- ---------------------------------------------------
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE ASSET BAILLIE GIFFORD
FUND SMALL CAP ALLOCATION INTERNATIONAL
FUND FUND FUND
------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par ....................... $ 439,416 $ 31,013 $ 82,645 $ 41,963
Additional paid-in capital .................................. 1,311,709,644 32,203,350 93,891,592 53,477,621
Undistributed net investment income/(loss) .................. 851,481 32,687 73,468 (94,376)
Accumulated net realized gain/(loss) on investments and
foreign currency related transactions ...................... 79,460,692 8,962 2,628,655 111,193
Net unrealized appreciation of investments
and foreign currency related transactions .................. 543,593,426 4,200,312 22,644,305 18,920,406
------------------------------------------------------------------
NET ASSETS ............................................... $1,936,054,659 $36,476,324 $119,320,665 $72,456,807
==================================================================
NET ASSETS:
Class A .................................................... $1,826,532,074 $32,928,008 $110,101,993 $67,423,772
Class B .................................................... $ 109,522,585 $ 3,548,316 $ 9,218,672 $ 5,033,035
SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE
Class A .................................................... 41,451,039 2,798,963 7,623,437 3,901,046
Class B .................................................... 2,490,566 302,369 641,031 295,217
NET ASSET VALUE PER SHARE
Class A .................................................... $44.06 $11.76 $14.44 $17.28
Class B .................................................... $43.97 $11.74 $14.38 $17.05
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)* .................. $46.14 $12.31 $15.12 $18.09
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD INVESTMENT TAX-EXEMPT CASH
EMERGING QUALITY FUND MANAGEMENT
MARKETS FUND BOND FUND FUND
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par ....................... $ 22,001 $ 85,919 $ 43,899 $ 1,076,457
Additional paid-in capital .................................. 22,060,235 84,531,184 42,673,342 106,569,194
Undistributed net investment income/(loss) .................. 157,370 -- -- --
Accumulated net realized gain/(loss) on investments and
foreign currency related transactions ...................... 158,778 (1,290,656) (909,013) --
Net unrealized appreciation of investments
and foreign currency related transactions .................. 2,109,440 32,539 573,751 --
-------------------------------------------------------------------
NET ASSETS ............................................... $24,507,824 $83,358,986 $42,381,979 $107,645,651
===================================================================
NET ASSETS:
Class A .................................................... $22,811,775 $83,358,986 $42,381,979 $103,406,387
Class B .................................................... $ 1,696,049 N/A N/A $ 4,239,264
SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE
Class A .................................................... 2,047,572 8,591,887 4,389,872 103,406,387
Class B .................................................... 152,550 N/A N/A 4,239,264
NET ASSET VALUE PER SHARE
Class A .................................................... $11.14 $9.70 $9.65 $1.00
Class B .................................................... $11.12 N/A N/A $1.00
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)* .................. $11.66 $10.16 $10.10 N/A**
* Based on sale of less than $100,000. On sale of $100,000 or more, the offering price is reduced.
** No-load fund.
See notes to financial statements.
44 45
</TABLE>
<PAGE>
<TABLE>
_
[_] The Park Avenue Portfolio
- ----------------------------------------------
STATEMENTS OF OPERATIONS
- ----------------------------------------------
Six Months Ended June 30, 1997 (Unaudited)
- ----------------------------------------------
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE ASSET BAILLIE GIFFORD
FUND SMALL CAP ALLOCATION INTERNATIONAL
FUND+ FUND FUND
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends .................................................... $ 11,509,091 $ 61,647 $ 686,364 $ 756,094
Interest ..................................................... 2,986,999 79,274 1,003,716 48,310
Other income ................................................. 13,636 -- -- --
----------------------------------------------------------------
14,509,726 140,921 1,690,080 804,404
Less: Foreign tax withheld ................................... 85,563 -- 4,017 84,786
----------------------------------------------------------------
Total Income .............................................. 14,424,163 140,921 1,686,063 719,618
----------------------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2 ........................... 4,075,522 47,332 298,240 247,182
Administrative fees -- Class A ............................... 1,070,880 14,843 120,506 77,250
Administrative fees -- Class B ............................... 85,131 934 8,624 5,244
12b-1 fees -- Class B ........................................ 255,393 2,802 25,874 14,807
Transfer agent fees .......................................... 964,799 12,738 98,053 84,880
Custodian fees ............................................... 141,448 13,178 50,436 89,676
Printing expense ............................................. 101,900 833 6,550 6,583
Registration fees ............................................ 67,600 2,604 11,050 7,950
Audit fees ................................................... 10,250 5,833 8,750 10,500
Trustees' fees -- Note 2 ..................................... 9,500 4,667 9,500 9,500
Legal fees ................................................... 6,250 -- 1,450 1,900
Insurance expense ............................................ 4,934 -- 322 204
Other ........................................................ 350 233 350 350
Deferred organization expense -- Note 6 ...................... -- 2,237 1,669 1,605
----------------------------------------------------------------
Total Expenses ............................................ 6,793,957 108,234 641,374 557,631
Less: Expenses assumed by investment advisor -- Note 2 ....... -- -- -- --
----------------------------------------------------------------
Expenses Net of Reimbursement ............................. 6,793,957 108,234 641,374 557,631
----------------------------------------------------------------
NET INVESTMENT INCOME ......................................... 7,630,206 32,687 1,044,689 161,987
----------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on investments -- Note 1 ............. 79,458,180 8,962 3,564,046 129,201
Net realized gain on foreign currencies -- Note 1 ............. -- -- -- 5,093
Net change in unrealized appreciation/(depreciation)
on investments -- Note 4 ..................................... 196,041,631 4,200,312 9,344,106 8,208,040
Net change in unrealized depreciation from translation
of assets and liabilities in foreign currencies -- Note 4 .... -- -- -- 3,653
----------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES ....................................... 275,499,811 4,209,274 12,908,152 8,345,987
----------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .................. $283,130,017 $4,241,961 $13,952,841 $8,507,974
================================================================
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD INVESTMENT TAX-EXEMPT CASH
EMERGING QUALITY FUND MANAGEMENT
MARKETS FUND+ BOND FUND FUND
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends .................................................... $ 240,161 $ -- $ -- $ --
Interest ..................................................... 70,556 1,864,704 1,039,123 2,820,561
Other income ................................................. -- -- -- --
------------------------------------------------------------------
310,717 1,864,704 1,039,123 2,820,561
Less: Foreign tax withheld ................................... 9,273 -- -- --
------------------------------------------------------------------
Total Income .............................................. 301,444 1,864,704 1,039,123 2,820,561
----------------------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2 ........................... 54,328 133,472 96,312 256,630
Administrative fees -- Class A ............................... 12,977 66,736 48,156 124,464
Administrative fees -- Class B ............................... 605 -- -- 3,850
12b-1 fees -- Class B ........................................ 1,815 -- -- --
Transfer agent fees .......................................... 8,574 43,957 18,913 143,404
Custodian fees ............................................... 50,979 28,548 31,040 36,017
Printing expense ............................................. 733 3,722 930 6,550
Registration fees ............................................ 2,000 4,050 4,512 11,664
Audit fees ................................................... 5,833 8,750 8,500 8,500
Trustees' fees -- Note 2 ..................................... 4,667 9,500 9,500 9,500
Legal fees ................................................... -- 1,275 1,200 1,450
Insurance expense ............................................ -- 176 134 314
Other ........................................................ 233 350 350 350
Deferred organization expense -- Note 6 ...................... 1,330 1,669 1,669 --
------------------------------------------------------------------
Total Expenses ............................................ 144,074 302,205 221,216 602,693
Less: Expenses assumed by investment advisor -- Note 2 ....... -- 101,996 76,748 166,496
------------------------------------------------------------------
Expenses Net of Reimbursement ............................. 144,074 200,209 144,468 436,197
------------------------------------------------------------------
NET INVESTMENT INCOME ......................................... 157,370 1,664,495 894,655 2,384,364
------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on investments -- Note 1 ............. 151,784 (532,289) 241,180 --
Net realized gain on foreign currencies -- Note 1 ............. 6,994 -- -- --
Net change in unrealized appreciation/(depreciation)
on investments -- Note 4 ..................................... 2,109,701 664,513 (58,997) --
Net change in unrealized depreciation from translation
of assets and liabilities in foreign currencies -- Note 4 .... (261) -- -- --
------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES ....................................... 2,268,218 132,224 182,183 --
------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .................. $2,425,588 $1,796,719 $1,076,838 $2,384,364
==================================================================
+ Period from April 2, 1997 (commencement of operations) to June 30, 1997.
See notes to financial statements.
46 47
</TABLE>
<PAGE>
<TABLE>
_
[_] The Park Avenue Portfolio
- ----------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------
<CAPTION>
THE GUARDIAN
THE GUARDIAN PARK AVENUE THE GUARDIAN
PARK AVENUE FUND SMALL CAP FUND ASSET ALLOCATION FUND
------------------------------ ----------------- ------------------------------
SIX MONTHS YEAR ENDED PERIOD FROM SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, APRIL 2, 1997+ TO ENDED DECEMBER 31,
JUNE 30, 1997 1996 JUNE 30, 1997 JUNE 30, 1997 1996
(UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) (AUDITED)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE/(DECREASE)
IN NET ASSETS
FROM OPERATIONS:
Net investment income ...................... $ 7,630,206 $ 13,816,372 $ 32,687 $ 1,044,689 $ 1,473,705
Net realized gain/(loss)
on investments and foreign
currency related transactions ............. 79,458,180 140,062,592 8,962 3,564,046 4,725,802
Net change in unrealized
appreciation/(depreciation)
of investments and foreign
currency related transactions ............. 196,041,631 128,623,359 4,200,312 9,344,106 8,063,867
----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ......................... 283,130,017 282,502,323 4,241,961 13,952,841 14,263,374
----------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A ................................... (6,763,141) (13,778,621) -- (943,193) (1,460,511)
Class B ................................... (15,584) (37,751) -- (36,013) (13,194)
Distributions in excess of
net investment income
Class A .................................. -- (358,731) -- -- (11,667)
Class B .................................. -- (7,535) -- -- (889)
Net realized gain on investments
Class A ................................... (26,715,624) (146,944,706) -- (1,796,452) (7,495,631)
Class B ................................... (1,602,527) (2,841,272) -- (150,335) (291,381)
----------------------------------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS ......................... (35,096,876) (163,968,616) -- (2,925,993) (9,273,273)
----------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease)
in net assets from capital
share transactions--Note 7 ................ 259,830,146 337,383,070 32,234,363 15,027,929 17,684,459
----------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ....... 507,863,287 455,916,777 36,476,324 26,054,777 22,674,560
NET ASSETS:
Beginning of period ......................... 1,428,191,372 972,274,595 -- 93,265,888 70,591,328
----------------------------------------------------------------------------------
End of period* .............................. $1,936,054,659 $1,428,191,372 $36,476,324 $119,320,665 $93,265,888
==================================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of .................. $ 851,481 $ -- $ 32,687 $ 73,468 $ 7,985
THE GUARDIAN
THE GUARDIAN BAILLE GIFFORD THE GUARDIAN
BAILLIE GIFFORD EMERGING INVESTMENT QUALITY
INTERNATIONAL FUND MARKET FUND BOND FUND
---------------------------- ---------------- ----------------------------
SIX MONTHS YEAR ENDED PERIOD FROM SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, APRIL 2, 1997+ TO ENDED DECEMBER 31,
JUNE 30, 1997 1996 JUNE 30, 1997 JUNE 30, 1997 1996
(UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) (AUDITED)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE/(DECREASE)
IN NET ASSETS
FROM OPERATIONS:
Net investment income ...................... $ 161,987 $ 130,769 $ 157,370 $ 1,664,495 $ 2,970,849
Net realized gain/(loss)
on investments and foreign
currency related transactions ............. 134,294 1,013,178 158,778 (532,289) (40,548)
Net change in unrealized
appreciation/(depreciation)
of investments and foreign
currency related transactions ............. 8,211,693 5,971,730 2,109,440 664,513 (1,670,508)
----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ......................... 8,507,974 7,115,677 2,425,588 1,796,719 1,259,793
----------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A ................................... (130,875) (150,910) -- (1,664,495) (2,970,849)
Class B ................................... -- (7,962) -- -- --
Distributions in excess of
net investment income
Class A .................................. -- (208,284) -- -- --
Class B .................................. -- (28,103) -- -- --
Net realized gain on investments
Class A ................................... -- (714,593) -- -- --
Class B ................................... -- (40,907) -- -- --
----------------------------------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS ......................... (130,875) (1,150,759) -- (1,664,495) (2,970,849)
----------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease)
in net assets from capital
share transactions--Note 7 ................ 3,173,739 10,395,287 22,082,236 32,432,841 (1,201,353)
----------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ....... 11,550,838 16,360,205 24,507,824 32,565,065 (2,912,409)
NET ASSETS:
Beginning of period ......................... 60,905,969 44,545,764 -- 50,793,921 53,706,330
----------------------------------------------------------------------------------
End of period* .............................. $72,456,807 $60,905,969 $24,507,824 $83,358,986 $50,793,921
==================================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of .................. $ (94,376) $ (125,488) $ 157,370 $ -- $ --
THE GUARDIAN THE GUARDIAN
TAX-EXEMPT FUND CASH MANAGEMENT FUND
------------------------------ ----------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1997 1996 JUNE 30, 1997 1996
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE)
IN NET ASSETS
FROM OPERATIONS:
Net investment income ...................... $ 894,655 $ 1,042,147 $ 2,384,364 $ 3,589,650
Net realized gain/(loss)
on investments and foreign
currency related transactions ............. 241,180 55,933 -- --
Net change in unrealized
appreciation/(depreciation)
of investments and foreign
currency related transactions ............. (58,997) 95,313 -- --
------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ......................... 1,076,838 1,193,393 2,384,364 3,589,650
------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A ................................... (894,655) (1,042,148) (2,312,462) (3,542,728)
Class B ................................... -- -- (71,902) (46,922)
Distributions in excess of
net investment income
Class A .................................. -- -- -- --
Class B .................................. -- -- -- --
Net realized gain on investments
Class A ................................... -- -- -- --
Class B ................................... -- -- -- --
------------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS ......................... (894,655) (1,042,148) (2,384,364) (3,589,650)
------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease)
in net assets from capital
share transactions--Note 7 ................ 3,014,608 21,532,694 16,845,850 20,886,793
------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ....... 3,196,791 21,683,939 16,845,850 20,886,793
NET ASSETS:
Beginning of period ......................... 39,185,188 17,501,249 90,799,801 69,913,008
------------------------------------------------------------
End of period* .............................. $42,381,979 $39,185,188 $107,645,651 $90,799,801
============================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of .................. $ -- $ -- $ -- $ --
See notes to financial statements.
48 49
</TABLE>
<PAGE>
NOTES TO
FINANCIAL STATEMENT
June 30, 1997 (Unaudited)
THE PARK AVENUE PORTFOLIO
o THE GUARDIAN PARK AVENUE FUND
o THE GUARDIAN PARK AVENUE SMALL CAP FUND
o THE GUARDIAN ASSET ALLOCATION FUND
o THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
o THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS 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 eight series, namely: The Guardian Park Avenue Fund (GPAF); The
Guardian Park Avenue Small Cap Fund (GPASCF); The Guardian Asset Allocation Fund
(GAAF); The Guardian Baillie Gifford International Fund (GBGIF); The Guardian
Baillie Gifford Emerging Markets Fund (GBGEMF); 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
"Funds".
On April 2, 1997, each of GPASCF and GBGEMF sold 2,000,000 shares each of
its respective capital stock to The Guardian Life Insurance Company of America
for $20,000,000 each, to facilitate the commencement of operations.
Prior to May 1, 1997, GAAF invested entirely in individual securities.
Beginning May 1, 1997, GAAF implemented a gradual conversion to a "fund of
funds" arrangement. As a fund of funds, GAAF invests the equity portion of its
assets in GPAF, the debt portion of its assets in the GIQBF and the cash portion
in GCMF.
GPAF, GPASCF, GAAF, GBGIF, GBGEMF, and GCMF (the Multiple Class Funds)
offer two classes of shares. All shares existing prior to May 1, 1996, were
classified as Class A shares. Class A shares are sold with an initial sales load
of up to 4.50% and a continuing administrative fee of up to .25% on an annual
basis. Class B shares are sold without an initial sales load but are subject to
a distribution fee of .75% and an administrative fee of up to .25% on an annual
basis, and a contingent deferred sales load (CDSL) of up to 4% imposed on
certain redemptions. The two classes of shares for each Fund represent interests
in the same portfolio of investments, have the same rights and are generally
identical in all respects except that each class bears its separate distribution
and certain class expenses, and has exclusive voting rights with respect to any
matter to which a separate vote of any class is required.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets
50
<PAGE>
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Investment in foreign securities are vulnerable to
the effects of changes in the relative values of the local currency and the U.S.
dollar and to the effects of changes in each country's legal, political and
economic environment.
Investments
Equity and debt securities listed on domestic or foreign securities
exchanges are valued at the last sales price of such exchanges, or if no sale
occurred, at the mean of the 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 Funds' Board of Trustees.
Repurchase agreements are carried at cost which approximates market value
(see Note 5). Short-term securities held by the Funds are valued on an amortized
cost basis which approximates market value but does not take into account
unrealized gains and losses. GCMF values its investments based on amortized cost
in accordance with Rule 2a-7 under the 1940 Act. Investment transactions are
recorded on the date of purchase or sale.
Investing outside of the U.S. may involve certain considerations and risks
not typically associated with domestic investments, including the possibility of
political and economic unrest and different levels of governmental supervision
and regulation of foreign securities markets.
Security gains or losses are determined on the identified cost basis.
Interest income, including amortization of premium and discount, is accrued
daily. Dividend income is recorded on the ex-dividend date.
All income, expenses (other than class-specific expenses) and realized and
unrealized gains or losses are allocated daily to each class of shares based
upon the relative value of shares of each class. Class-specific expenses which
include distribution and service fees and any other items that are specifically
attributed to a particular class, are charged directly to such class. For the
six months ended June 30, 1997, distribution, administrative and transfer agent
fees were the only class-specific expenses.
Foreign Currency Translation
Only GBGIF, GBGEMF and GPASCF are permitted to buy international securities
that are not U.S. dollar denominated. GBGIF, GBGEMF and GPASCF'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 Fund earns dividends and
interest or pays foreign withholding taxes or other expenses and
51
<PAGE>
the date on which U.S. dollar equivalent amounts are actually received or paid,
are included in net realized gain on foreign currencies. Realized foreign
exchange gains and losses which result from changes in foreign exchange rates
between the trade and settlement dates on security and currency transactions are
also included in net realized gain on foreign currencies. Net currency gains and
losses from valuing investments and other assets and liabilities denominated in
foreign currency as of June 30, 1997 are reflected in net change in unrealized
appreciation or depreciation from translation of assets and liabilities in
foreign currencies based on the applicable exchange rate in effect at the end of
the period.
Forward Foreign Currency Contracts
GBGIF and GBGEMF 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
from translation of assets and liabilities in foreign currencies by GBGIF and
GBGEMF. When a forward contract is closed, GBGIF or GBGEMF will record 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 currencies. Neither
GBGIF nor GBGEMF 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
Certain Funds 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 Funds are 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 Funds'
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 Funds. The Funds' 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 Funds may not achieve
the anticipated benefits of the financial futures contracts and may realize a
loss.
Dividends and 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,
GPASCF, GAAF, GBGIF and GBGEMF. Net realized short-term and long-term capital
gains for these 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 accordance 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 Fund qualifies and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the Internal Revenue Code
of 1986, as amended (Code), and as such will not be subject to federal income
tax on taxable income (including any realized capital gains) which is
distributed in accordance with the provisions of the Code. Therefore, no federal
income tax provision is required.
Reclassification of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
52
<PAGE>
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gain; and the recharacterization of foreign exchange gains
or losses to either ordinary income or realized capital gains for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations, or net asset value per
share of the Fund.
NOTE 2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO RELATED PARTIES
Guardian Investor Services Corporation (GISC) provides investment advisory
services to each of the Funds (except GBGIF and GBGEMF) 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 Fund, except for GAAF, which is subject
to a contractual annual fee of .65% of its average daily net assets, and GPASCF,
which pays GISC at an annual rate of .75% of its average daily net assets. GISC
has agreed to a waiver of .15% of GAAF's annual advisory fee when GAAF is
operated as a "fund of funds," so that GAAF's effective advisory fee is .50% of
its average daily net assets. For the six months ended June 30, 1997, GISC
voluntarily assumed $101,996, $76,748 and $166,496 of the ordinary operating
expenses of GIQBF, GTEF and GCMF, respectively.
The Portfolio, on behalf of GBGIF and GBGEMF, 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 and GBGEMF's portfolio, subject
to the supervision of the Portfolio's Board of Trustees. GBG has entered into a
sub-investment management agreement with BG Overseas pursuant to which BG
Overseas is responsible for the day-to-day management of GBGIF and GBGEMF. GBG
continually monitors and evaluates the performance of BG Overseas. As a
compensation for its services, GBGIF and GBGEMF pay GBG annual investment
management fees of .80% and 1.00%, respectively, of average daily net assets.
One half of the fee for each of those funds is payable by GBG to GB Overseas for
its services. Payment of the sub-management fee does not represent a separate or
additional expense to GBGIF and GBGEMF.
Trustees who are not deemed to be "interested persons" (as defined in the
1940 Act) were paid $500 per Fund's meetings of the Board of Trustees for the
six months ended June 30, 1997. An annual fee of $1,000 per Fund was also paid
to each such trustee during such period. The aggregate remuneration paid by each
of the Portfolio Funds excluding GPASCF and GBGEMF to each of the trustees who
are not interested persons, amounted to $9,500 for the six months ended June 30,
1997. GPASCF and GBGEMF paid the trustees $4,667 for April 2, 1997 (commencement
of operations) through June 30, 1997. GISC pays compensation to the trustees who
are interested persons.
Certain officers and trustees of the Funds are affiliated with GISC.
Administrative Services Agreement
Pursuant to the Administrative Services Agreement adopted by the Funds on
behalf of both classes of shares, each of the Funds pays GISC an administrative
services fee of up to an annual rate of .25% of its average daily net assets.
GPAF currently pays GISC up to .15% of its average daily net assets, on an
annual basis.
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 Funds.
For the six months ended June 30, 1997, aggregate sales commissions for the
purchase of capital shares were paid to GISC as compensation for services
rendered as follows:
53
<PAGE>
FUND COMMISSIONS FUND COMMISSIONS
---- ----------- ---- -----------
GPAF $3,217,006 GBGEMF $ 3,892
GPASCF 49,258 GIQBF 72,762
GAAF 278,049 GTEF 13,889
GBGIF 103,771
Under a Distribution Plan adopted by the Portfolio pursuant to Rule 12b-1
under the 1940 Act (the "12b-1 Plan"), each Multiple Class Fund is authorized to
pay a monthly 12b-1 fee at an annual rate of up to .75% of average daily net
assets of the Fund's Class B shares as compensation for distribution-related
services provided to the Class B shares of those Funds.
The Portfolio has also entered into a Distribution Plan pursuant to Rule
12b-1 under the 1940 Act with GISC on behalf of the Class A shares. Effective
May 1, 1996, the Plan has been made dormant and no 12b-1 fees are authorized to
be paid in connection with sales of Class A shares.
GISC is entitled to retain any CDSL imposed on certain redemptions. For the
six months ended June 30, 1997, such charges were as follows:
FUND CLASS B
---- -------
GPAF $34,580
GAAF 3,033
GBGIF 2,682
GCMF 1,252
NOTE 4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) were as follows:
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
GPAF GPASCF
- --------------------------------------------------------------------------------
PURCHASES
---------
Stocks and debt
obligations $577,443,899 $30,440,232
U.S. Government
and government
agency obligations -- --
PROCEEDS
--------
Stocks and debt
obligations 353,108,493 263,350
U.S. Government
and government
agency obligations -- --
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
GAAF GBGIF
- --------------------------------------------------------------------------------
PURCHASES
---------
Stocks and debt
obligations $33,108,936 $16,130,776
U.S. Government
and government
agency obligations -- --
PROCEEDS
---------
Stocks and debt
obligations 18,186,374 15,560,617
U.S. Government
and government
agency obligations 4,442,345 --
- --------------------------------------------------------------------------------
GBGEMF GIQBF
- --------------------------------------------------------------------------------
PURCHASES
---------
Stocks and debt
obligations $24,400,012 $13,364,535
U.S. Government
and government
agency obligations -- 99,111,914
PROCEEDS
--------
Stocks and debt
obligations 1,148,746 9,490,228
U.S. Government
and government
agency obligations -- 72,520,425
- --------------------------------------------------------------------------------
GTEF
- --------------------------------------------------------------------------------
PURCHASES
---------
Stocks and debt
obligations $39,983,139
U.S. Government
and government
agency obligations --
PROCEEDS
--------
Stocks and debt
obligations 35,729,423
U.S. Government
and government
agency obligations --
54
<PAGE>
The cost of investments owned at June 30, 1997 for federal income tax
purposes was the same as the cost for financial reporting purposes for the
Funds. The gross unrealized appreciation and depreciation at June 30, 1997, were
as follows:
GPAF GPASCF
---- -----
Appreciation $549,163,961 $ 4,405,032
(Depreciation) (5,570,535) (204,720)
------------ -----------
Net Unrealized
Appreciation $543,593,426 $ 4,200,312
============ ==========
GAAF GBGIF
---- -----
Appreciation $ 22,766,038 $19,246,632
(Depreciation) (121,733) (323,730)
------------ -----------
Net Unrealized
Appreciation $ 22,644,305 $18,922,902
============ ==========
GBGEMF GIQBF
------ -----
Appreciation $ 2,323,879 $ 285,941
(Depreciation) (213,970) (253,402)
------------ -----------
Net Unrealized
Appreciation $ 2,109,909 $ 32,539
============ ==========
GTEF
----
Appreciation $ 576,057
(Depreciation) (2,306)
------------ -----------
Net Unrealized
Appreciation $ 573,751
============
Forward foreign currency contracts represent commitments to purchase or
sell a specified amount of foreign currency at a future date and at a future
price (Note 1). Risks may arise from the potential inability of a counterparty
to meet the terms of a contract and from unanticipated movements in the value of
a foreign currency relative to the U.S. dollar.
At June 30, 1997, GBGIF and GBGEMF had no open forward foreign currency
contracts.
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
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 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 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 Fund's net assets (either 10% or 15% depending on the Fund) would be so
invested.
NOTE 6. DEFERRED ORFGANIZATION 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 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. GPASCF and GBGEMF have
incurred $15,392 and $26,991, respectively, in connection with their
organization and registration. Such expenses were advanced by GISC and will be
repaid by each Fund upon the completion of its first year of operations or when
its net assets reach $50 million. 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 operations of the Funds.
55
<PAGE>
NOTE 7. SHARES OF BENEFICIAL IFNTEREST
There is an unlimited number of $0.01 par value shares of beneficial
interest authorized, divided into two classes, designated as Class A and Class B
shares.
Transactions in shares of beneficial interest were as follows:
o THE GUARDIAN PARK AVENUE FUND
<TABLE>
<CAPTION>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1997 December 31, 1996 June 30, 1997 December 31, 1996
(Unaudited) (Audited) (Unaudited) (Audited)
------------------------------------------------------------------------------------------------------------------
Shares Amount
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 8,377,352 64,654,097 $342,894,835 $331,495,449
Shares issued in reinvestment of
dividends and distributions 732,636 4,095,860 32,303,506 154,626,271
Shares repurchased (4,383,546) (60,643,315) (178,410,298) (184,533,351)
-------------------------------------------------------------------------------------------------------------------
NET INCREASE 4,726,442 8,106,642 $196,788,043 $301,588,369
===================================================================================================================
CLASS B
Shares sold 1,558,077 893,821 $ 63,615,660 $ 33,652,331
Shares issued in reinvestment of
dividends and distributions 35,827 73,790 1,576,637 2,826,851
Shares repurchased (53,433) (17,517) (2,150,194) (684,481)
-------------------------------------------------------------------------------------------------------------------
NET INCREASE 1,540,471 950,094 $ 63,042,103 $ 35,794,701
===================================================================================================================
o THE GUARDIAN PARK AVENUE SMALL CAP FUND
Period from April 2, 1997*
to June 30, 1997
(Unaudited)
-------------------------------------------------------------------------------------------------------------------
Shares Amount
-------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 2,802,077 $ 28,978,318
Shares repurchased (3,114) (35,837)
-------------------------------------------------------------------------------------------------------------------
NET INCREASE 2,798,963 $ 28,942,481
===================================================================================================================
CLASS B
Shares sold 303,205 $ 3,301,590
Shares repurchased (836) (9,708)
-------------------------------------------------------------------------------------------------------------------
NET INCREASE 302,369 $ 3,291,882
===================================================================================================================
* Commencement of operations.
</TABLE>
56
<PAGE>
<TABLE>
o THE GUARDIAN ASSET ALLOCATION FUND
<CAPTION>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1997 December 31, 1996 June 30, 1997 December 31, 1996
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 1,126,993 3,920,241 $ 15,746,537 $ 16,989,447
Shares issued in reinvestment of
dividends and distributions 184,830 694,480 2,672,257 8,751,925
Shares repurchased (493,708) (3,602,476) (6,766,133) (13,059,740)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE 818,115 1,012,245 $ 11,652,661 $ 12,681,632
=================================================================================================================
CLASS B
Shares sold 257,331 372,449 $ 3,455,288 $ 4,745,296
Shares issued in reinvestment of
dividends and distributions 12,809 23,657 184,313 302,802
Shares repurchased (21,859) (3,356) (264,333) (45,271)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE 248,281 392,750 $ 3,375,268 $ 5,002,827
=================================================================================================================
o THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1997 December 31, 1996 June 30, 1997 December 31, 1996
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 564,422 2,612,878 $ 8,832,095 $ 13,437,950
Shares issued in reinvestment of
dividends and distributions 7,426 71,249 128,624 1,078,788
Shares repurchased (454,751) (2,181,652) (6,947,282) (7,338,578)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE 117,097 502,475 $ 2,013,437 $ 7,178,160
=================================================================================================================
CLASS B
Shares sold 85,214 216,878 $ 1,300,464 $ 3,182,994
Shares issued in reinvestment of
dividends and distributions -- 3,182 -- 47,852
Shares repurchased (9,160) (897) (140,162) (13,719)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE 76,054 219,163 $ 1,160,302 $ 3,217,127
=================================================================================================================
57
</TABLE>
<PAGE>
<TABLE>
o THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
<CAPTION>
Period from April 2, 1997*
to June 30, 1997
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A
Shares sold 2,047,888 $20,510,706
Shares repurchased (316) (3,487)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 2,047,572 $20,507,219
================================================================================================================
CLASS B
Shares sold 152,550 $ 1,575,017
Shares repurchased -- --
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 152,550 $ 1,575,017
================================================================================================================
o THE GUARDIAN INVESTMENT QUALITY BOND FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1997 December 31, 1996 June 30, 1997 December 31, 1996
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,155,462 809,831 $ 40,131,454 $ 7,622,176
Shares issued in reinvestment of
dividends and distributions 136,709 264,949 1,316,665 2,773,040
Shares repurchased (935,796) (1,210,664) (9,015,278) (11,596,569)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 3,356,375 (135,884) $ 32,432,841 ($ 1,201,353)
================================================================================================================
o THE GUARDIAN TAX-EXEMPT FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1997 December 31, 1996 June 30, 1997 December 31, 1996
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 375,831 2,339,544 $ 3,630,083 $ 22,165,990
Shares issued in reinvestment of
dividends and distributions 91,015 105,473 869,548 1,003,876
Shares repurchased (155,196) (172,887) (1,485,023) (1,637,172)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 311,650 2,272,130 $ 3,014,608 $ 21,532,694
===============================================================================================================
* Commencement of operations.
58
</TABLE>
<PAGE>
<TABLE>
o THE GUARDIAN CASH MANAGEMENT FUND
<CAPTION>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1997 December 31, 1996 June 30, 1997 December 31, 1996
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 201,069,393 197,623,132 $201,296,879 $197,623,132
Shares issued in reinvestment of
dividends and distributions 2,203,059 3,398,518 1,844,203 3,398,518
Shares repurchased (188,083,296) (182,717,426) (187,954,118) (182,717,426)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE 15,189,156 18,304,224 $ 15,186,964 $ 18,304,224
==============================================================================================================
CLASS B
Shares sold 3,553,826 3,453,164 $ 3,557,833 $ 3,453,164
Shares issued in reinvestment of
dividends and distributions 68,645 44,613 68,737 44,613
Shares repurchased (1,965,777) (915,208) (1,967,684) (915,208)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE 1,656,694 2,582,569 $ 1,658,886 $ 2,582,569
==============================================================================================================
</TABLE>
NOTE 8. LINE OF CREDIT
A $20,000,000 line of credit available to all of the Funds and the six
mutual funds included in the related Guardian variable products has been
established with Morgan Guaranty Trust Company. The rate of interest charged on
any borrowing is based upon the prevailing Federal Funds rate at the time of the
loan plus .25% calculated on a 360 day basis per annum. For the six months ended
June 30, 1997 none of the Funds borrowed against this line of credit.
NOTE 9. SHAREHOLDER MEETING
On April 8, 1997, a special meeting of the shareholders of GAAF was held.
The shareholders of GAAF approved amendments to two fundamental investment
restrictions in order to permit GAAF to operate as a "fund of funds". The first
amendment permits GAAF to invest a greater portion of its assets in particular
issuers such as other mutual funds. The shareholder votes to approve that
amendment were 3,473,007 FOR, 139,912 AGAINST and 137,449 ABSTAINING.
GAAF shareholders also approved an amendment to its fundamental investment
restriction with respect to the portion of assets that may be invested in other
mutual funds. The amendment permits GAAF to invest a greater portion of its
assets in other mutual funds, as is necessary under the fund of funds
arrangement. The shareholder votes were 3,477,920 FOR, 140,574 AGAINST and
131,875 ABSTAINING.
59
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
<CAPTION>
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset and Foreign (Decrease) Dividends
Value, Net Currency from from Net
Beginning Investment Related Investment Investment
of Period Income Transactions Operations Income
--------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/97++ $37.91 $0.19 $6.79 $6.98 ($0.17)
Year ended 12/31/96 33.97 0.42 8.41 8.83 (0.42)
Year ended 12/31/95 26.89 0.33 8.87 9.20 (0.33)
Year ended 12/31/94 28.63 0.31 (0.72) (0.41) (0.31)
Year ended 12/31/93 25.17 0.50 4.56 5.06 (0.50)
Year ended 12/31/92 22.23 0.45 4.05 4.50 (0.44)
Year ended 12/31/91 18.26 0.65 5.71 6.36 (0.66)
Year ended 12/31/90 21.56 0.68 (3.28) (2.60) (0.70)
Year ended 12/31/89 20.46 0.92 3.88 4.80 (0.98)
Year ended 12/31/88 18.63 0.60 3.23 3.83 (0.55)
Year ended 12/31/87 20.74 0.47 0.20 0.67 (0.60)
CLASS B:
Six months ended 6/30/97++ 37.90 -- 6.74 6.74 (0.01)
Period from 5/1/96+ to 12/31/96 36.26 0.05 6.10 6.15 (0.05)
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Six months ended 6/30/97++ 1.000 0.023 -- 0.023 (0.023)
Year ended 12/31/96 1.000 0.045 -- 0.045 (0.045)
Year ended 12/31/95 1.000 0.051 -- 0.051 (0.051)
Year ended 12/31/94 1.000 0.034 -- 0.034 (0.034)
Year ended 12/31/93 1.000 0.021 -- 0.021 (0.021)
Year ended 12/31/92 1.000 0.030 -- 0.030 (0.030)
Year ended 12/31/91 1.000 0.053 -- 0.053 (0.053)
Year ended 12/31/90 1.000 0.076 -- 0.076 (0.076)
Three months ended 12/31/89 1.000 0.086 -- 0.086 (0.086)
Year ended 9/30/89 1.000 0.024 -- 0.024 (0.024)
Year ended 9/30/88 1.000 0.066 -- 0.066 (0.066)
Year ended 9/30/87 1.000 0.053 -- 0.053 (0.053)
CLASS B:
Six months ended 6/30/97++ 1.000 0.023 -- 0.023 (0.023)
Period from 5/1/96+ to 12/31/96 1.000 0.028 -- 0.028 (0.028)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Distributions Distributions
in Excess from Net Asset
of Net Net Realized Value,
Investment Gain on End of Total
Income Investments Period Return*
------------ ------------- --------- -------
<S> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/97++ -- ($0.66) $44.06 18.40%
Year ended 12/31/96 ($0.01) (4.46) 37.91 26.49
Year ended 12/31/95 -- (1.79) 33.97 34.28
Year ended 12/31/94 -- (1.02) 26.89 (1.44)
Year ended 12/31/93 -- (1.10) 28.63 20.28
Year ended 12/31/92 -- (1.12) 25.17 20.48
Year ended 12/31/91 -- (1.73) 22.23 35.16
Year ended 12/31/90 -- -- 18.26 (12.21)
Year ended 12/31/89 -- (2.72) 21.56 23.66
Year ended 12/31/88 -- (1.45) 20.46 20.78
Year ended 12/31/87 -- (2.18) 18.63 2.95
CLASS B:
Six months ended 6/30/97++ -- (0.66) 43.97 17.77
Period from 5/1/96+ to 12/31/96 -- (4.46) 37.90 17.35
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Six months ended 6/30/97 __ -- -- 1.000 2.32
Year ended 12/31/96 -- -- 1.000 4.62
Year ended 12/31/95 -- -- 1.000 5.22
Year ended 12/31/94 -- -- 1.000 3.48
Year ended 12/31/93 -- -- 1.000 2.15
Year ended 12/31/92 -- -- 1.000 3.06
Year ended 12/31/91 -- -- 1.000 5.70
Year ended 12/31/90 -- -- 1.000 7.91
Three months ended 12/31/89 -- -- 1.000 8.60(c)
Year ended 9/30/89 -- -- 1.000 2.40
Year ended 9/30/88 -- -- 1.000 6.60
Year ended 9/30/87 -- -- 1.000 5.30
CLASS B:
Six months ended 6/30/97 ++ -- -- 1.000 2.32
Period from 5/1/96+ to 12/31/96 -- -- 1.000 2.81
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------------
Net
Net Assets, Investment Average
End of Expenses Expenses Income Portfolio Rate of
Period to Average Subsidized to Average Turnover Commissions
(000's Omitted) Net Assets by GISC Net Assets Rate Paid(b)
-------------- ---------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/97++ $1,826,532 0.79%(a) -- 1.00%(a) 23% $0.055
Year ended 12/31/96 1,392,186 0.79 -- 1.19 81 0.047
Year ended 12/31/95 972,275 0.81 -- 1.07 78 --
Year ended 12/31/94 640,917 0.84 -- 1.15 54 --
Year ended 12/31/93 560,193 0.81 -- 1.89 46 --
Year ended 12/31/92 335,660 0.68 -- 1.94 64 --
Year ended 12/31/91 270,095 0.67 -- 2.96 57 --
Year ended 12/31/90 216,457 0.69 -- 3.51 47 --
Year ended 12/31/89 228,190 0.70 -- 4.01 47 --
Year ended 12/31/88 176,000 0.69 -- 2.82 58 --
Year ended 12/31/87 157,045 0.68 -- 2.08 50 --
CLASS B:
Six months ended 6/30/97++ 109,523 1.75(a) -- -- 23 0.055
Period from 5/1/96+ to 12/31/96 36,006 1.77(a) -- 0.04(a) 81 0.047
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Six months ended 6/30/97 __ 103,406 0.85(a) 0.32%(a) 4.64(a) -- --
Year ended 12/31/96 88,217 0.90 0.30 4.62 -- --
Year ended 12/31/95 69,913 0.85 0.37 5.10 -- --
Year ended 12/31/94 56,730 0.87 0.50 3.54 -- --
Year ended 12/31/93 34,731 1.02 0.42 2.13 -- --
Year ended 12/31/92 37,780 0.70 0.44 3.01 -- --
Year ended 12/31/91 44,054 0.67 0.35 5.30 -- --
Year ended 12/31/90 47,153 0.65 0.41 7.57 -- --
Three months ended 12/31/89 33,821 0.65(a) 0.52(a) 8.56(a) -- --
Year ended 9/30/89 21,961 1.00 0.38 7.63 -- --
Year ended 9/30/88 20,603 1.00 0.28 6.32 -- --
Year ended 9/30/87 19,618 1.00 0.35 5.34 -- --
CLASS B:
Six months ended 6/30/97++ 4,239 0.85(a) 1.13(a) 4.64(a) -- --
Period from 5/1/96+ to 12/31/96 2,583 1.16(a) 0.59(a) 4.43(a) -- --
</TABLE>
+ Commencement of operations.
++ Unaudited.
* Excludes the effect of sales load.
(a) Annualized.
(b) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
(c) Not annualized.
60 61
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
<CAPTION>
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset Net and Foreign (Decrease) Dividends
Value, Investment Currency from from Net
Beginning Income/ Related Investment Investment
of Period (Loss) Transactions Operations Income
--------- --------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Six months ended 6/30/97++ $12.96 $0.14 $1.71 $1.85 ($0.13)
Year ended 12/31/96 12.19 0.23 1.96 2.19 (0.23)
Year ended 12/31/95 10.23 0.23 2.29 2.52 (0.23)
Year ended 12/31/94 10.98 0.28 (0.52) (0.24) (0.28)
Period from 2/16/93+ to 12/31/93 10.00 0.19 1.02 1.21 (0.18)
CLASS B:
Six months ended 6/30/97++ 12.92 0.06 1.70 1.76 (0.06)
Period from 5/1/96+ to 12/31/96 12.61 0.04 1.50 1.54 (0.04)
THE GUARDIAN BAILLIE GIFFORD
INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/97++ 15.22 0.05 2.04 2.09 (0.03)
Year ended 12/31/96 13.57 0.05 1.89 1.94 (0.05)
Year ended 12/31/95 13.01 0.04 1.40 1.44 (0.04)
Year ended 12/31/94 13.19 0.01 (0.09) (0.08) (0.01)
Period from 2/16/93+ to 12/31/93 10.00 (0.02) 3.32 3.30 --
CLASS B:
Six months ended 6/30/97++ 15.12 -- 1.93 1.93 --
Period from 5/1/96+ to 12/31/96 14.71 (0.04) 0.76 0.72 (0.04)
THE GUARDIAN INVESTMENT QUALITY
BOND FUND
CLASS A:
Six months ended 6/30/97++ 9.70 0.30 -- 0.30 (0.30)
Year ended 12/31/96 10.00 0.55 (0.30) 0.25 (0.55)
Year ended 12/31/95 9.12 0.59 0.88 1.47 (0.59)
Year ended 12/31/94 10.04 0.46 (0.90) (0.44) (0.46)
Period from 2/16/93+ to 12/31/93 10.00 0.37 0.18 0.55 (0.37)
</TABLE>
<TABLE>
<CAPTION>
Distributions Distributions
in Excess from Net Asset
of Net Net Realized Value,
Investment Gain on End of Total
Income Investments Period Return*
---------- ------------ --------- ------
<S> <C> <C> <C> <C>
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Six months ended 6/30/97++ -- ($0.24) $14.44 14.26%
Year ended 12/31/96 -- (1.19) 12.96 18.74
Year ended 12/31/95 -- (0.33) 12.19 24.51
Year ended 12/31/94 -- (0.23) 10.23 (2.13)
Period from 2/16/93+ to 12/31/93 -- (0.05) 10.98 12.16
CLASS B:
Six months ended 6/30/97++ -- (0.24) 14.38 13.73
Period from 5/1/96+ to 12/31/96 -- (1.19) 12.92 12.07
THE GUARDIAN BAILLIE GIFFORD
INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/97++ -- -- 17.28 14.90
Year ended 12/31/96 ($0.05) (0.19) 15.22 14.33
Year ended 12/31/95 (0.23) (0.61) 13.57 11.14
Year ended 12/31/94 -- (0.09) 13.01 (0.55)
Period from 2/16/93+ to 12/31/93 -- (0.11) 13.19 32.98
CLASS B:
Six months ended 6/30/97++ -- -- 17.05 12.76
Period from 5/1/96+ to 12/31/96 (0.08) (0.19) 15.12 4.34
THE GUARDIAN INVESTMENT QUALITY
BOND FUND
CLASS A:
Six months ended 6/30/97++ -- -- 9.70 3.14
Year ended 12/31/96 -- -- 9.70 2.73
Year ended 12/31/95 -- -- 10.00 16.64
Year ended 12/31/94 -- (0.02) 9.12 (4.50)
Period from 2/16/93+ to 12/31/93 -- (0.14) 10.04 4.13
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------------------------
Net
Net Assets, Investment Average
End of Expenses Expenses Income/(Loss) Portfolio Rate of
Period to Average Subsidized to Average Turnover Commissions
(000's Omitted) Net Assets by GISC Net Assets Rate Paid(b)
--------------- ----------- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Six months ended 6/30/97++ $110,102 1.17%(a) -- 2.14%(a) 36% $0.007
Year ended 12/31/96 88,190 1.30 -- 1.91 122 0.053
Year ended 12/31/95 70,591 1.25 -- 1.98 219 --
Year ended 12/31/94 54,875 1.30 -- 2.72 216 --
Period from 2/16/93+ to 12/31/93 50,200 1.29(a) -- 2.07(a) 165 --
CLASS B:
Six months ended 6/30/97++ 9,219 2.26(a) -- 1.10(a) 36 0.007
Period from 5/1/96+ to 12/31/96 5,075 2.39(a) -- 0.70(a) 122 0.053
THE GUARDIAN BAILLIE GIFFORD
INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/97++ 67,424 1.70(a) -- 0.62(a) 26 0.053
Year ended 12/31/96 57,593 1.70 -- (0.29) 39 0.036
Year ended 12/31/95 44,546 1.74 -- 0.19 51 --
Year ended 12/31/94 37,542 1.91 -- 0.20 33 --
Period from 2/16/93+ to 12/31/93 20,809 2.35(a) -- (0.21)(a) 9 --
CLASS B:
Six months ended 6/30/97++ 5,033 3.02(a) -- 0.64(a) 26 0.053
Period from 5/1/96+ to 12/31/96 3,313 3.05(a) -- (1.47)(a) 39 0.036
THE GUARDIAN INVESTMENT QUALITY
BOND FUND
CLASS A:
Six months ended 6/30/97++ 83,359 0.75(a) 0.38%(a) 6.68(a) 154 --
Year ended 12/31/96 50,794 0.75 0.37 5.73 257 --
Year ended 12/31/95 53,706 0.75 0.39 6.11 401 --
Year ended 12/31/94 43,487 1.46 -- 4.94 186 --
Period from 2/16/93+ to 12/31/93 23,310 1.42(a) -- 3.68(a) 167 --
</TABLE>
+ Commencement of operations.
++ Unaudited.
* Excludes the effect of sales load.
(a) Annualized.
(b) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
62 63
<PAGE>
<TABLE>
==========================
FINANCIAL HIGHLIGHTS
==========================
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
<CAPTION>
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset Net and Foreign (Decrease) Dividends
Value, Investment Currency from from Net
Beginning Income/ Related Investment Investment
of Period (Loss) Transactions Operations Income
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Six months ended 6/30/97++ ..................... $ 9.61 $0.22 $0.04 $0.26 ($0.22)
Year ended 12/31/96 ............................ 9.69 0.42 (0.08) 0.34 (0.42)
Year ended 12/31/95 ............................ 8.86 0.44 0.83 1.27 (0.44)
Year ended 12/31/94 ............................ 10.20 0.40 (1.30) (0.90) (0.40)
Period from 2/16/9+ to 12/31/93 ................ 10.00 0.34 0.40 0.74 (0.34)
THE GUARDIAN PARK AVENUE
SMALL CAP FUND
CLASS A:
Period from 4/2/97+ to 6/30/97++ ............... 10.00 0.01 1.75 1.76 --
CLASS B:
Period from 5/5/97+ to 6/30/97++ ............... 10.57 (0.03) 1.20 1.17 --
THE GUARDIAN BAILLIE GIFFORD
EMERGING MARKETS FUND
CLASS A:
Period from 4/2/97+ to 6/30/97++ ............... 10.00 0.07 1.07 1.14 --
CLASS B:
Period from 5/5/97+ to 6/30/97++ ............... 10.28 0.01 0.83 0.84 --
Distributions Distributions
in Excess from Net Asset
of Net Net Realized Value,
Investment Gain on End of Total
Income Investments Period Return*
---------------------------------------------------------
<S> <C> <C> <C> <C>
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Six months ended 6/30/97++ ..................... -- -- $ 9.65 2.77%
Year ended 12/31/96 ............................ -- -- 9.61 3.62
Year ended 12/31/95 ............................ -- -- 9.69 14.59
Year ended 12/31/94 ............................ -- ($0.04) 8.86 (8.98)
Period from 2/16/9+ to 12/31/93 ................ -- (0.20) 10.20 5.55
THE GUARDIAN PARK AVENUE
SMALL CAP FUND
CLASS A:
Period from 4/2/97+ to 6/30/97++ ............... -- -- 11.76 17.60
CLASS B:
Period from 5/5/97+ to 6/30/97++ ............... -- -- 11.74 11.07
THE GUARDIAN BAILLIE GIFFORD
EMERGING MARKETS FUND
CLASS A:
Period from 4/2/97+ to 6/30/97++ ............... -- -- 11.14 11.40
CLASS B:
Period from 5/5/97+ to 6/30/97++ ............... -- -- 11.12 8.17
Ratios/Supplemental Data
-------------------------------------------------------------------------------
Net
Net Assets, Investment Average
End of Expenses Expenses Income/(Loss) Portfolio Rate of
Period to Average Subsidized to Average Turnover Commissions
(000's Omitted) Net Assets by GISC Net Assets Rate Paid(b)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Six months ended 6/30/97++ ..................... $42,382 0.75%(a) 0.40%(a) 4.67%(a) 92% --
Year ended 12/31/96 ............................ 39,185 0.75 0.60 4.96 240 --
Year ended 12/31/95 ............................ 17,501 0.75 0.79 4.66 194 --
Year ended 12/31/94 ............................ 15,967 1.09 0.47 4.26 107 --
Period from 2/16/9+ to 12/31/93 ................ 21,135 1.36(a) -- 3.35(a) 108 --
THE GUARDIAN PARK AVENUE
SMALL CAP FUND
CLASS A:
Period from 4/2/97+ to 6/30/97++ ............... 32,928 1.35(a) -- 0.58(a) 1 $0.042
CLASS B:
Period from 5/5/97+ to 6/30/97++ ............... 3,548 2.15(a) -- (1.29)(a) 1 0.042
THE GUARDIAN BAILLIE GIFFORD
EMERGING MARKETS FUND
CLASS A:
Period from 4/2/97+ to 6/30/97++ ............... 22,812 2.24(a) -- 2.31(a) 6 0.115
CLASS B:
Period from 5/5/97+ to 6/30/97++ ............... 1,696 3.59(a) -- 0.41(a) 6 0.115
+ Commencement of operations.
++ Unaudited.
* Excludes the effect of sales load.
(a) Annualized.
(b) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average
commission rate per share for trades on which commissions are charged.
64 65
</TABLE>
<PAGE>
o Investment Adviser & Distributor
Guardian Investor Services Corporation(R)
201 Park Avenue South
New York, New York 10003
o Custodian of Assets
State Street Bank and Trust Company
Custody Division
1776 Heritage Drive
North Quincy, Massachusetts 02171
o Shareholder Servicing Agent, Transfer Agent &
Dividend Paying Agent for State Street Bank
and Trust Company
National Financial Data Services
Post Office Box 419611
Kansas City, Missouri 64141-6611
o Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
o Trustees
Joseph D. Sargent -- Chair
John C. Angle
Frank J. Fabozzi, Ph.D.
Arthur V. Ferrara, CLU
Leo R. Futia, CLU
William W. Hewitt, Jr.
Sidney I. Lirtzman, Ph.D.
Carl W. Schafer
Robert G. Smith, Ph.D.
o Officers
Frank J. Jones -- President
Charles E. Albers
Joseph A. Caruso
Alexander M. Grant, Jr.
Thomas R. Hickey, Jr.
Edward H. Hocknell
Jonathan C. Jankus
Ann T. Kearney
R. Robin Menzies
Nikolaos D. Monoyios
John B. Murphy
Frank L. Pepe
Richard T. Potter, Jr.
Thomas G. Sorell
This report is authorized for distribution to the public only when accompanied
or preceded by a current prospectus for the funds which comprise The Park Avenue
Portfolio.
<PAGE>
[LOGO]
-----------------
Guardian Investor Services Corporation(R) Bulk Rate Mail
201 Park Avenue South U.S. Postage Paid
New York, New York 10003 Newark, NJ
Permit No. 45
-----------------
The
Park Avenue
Portfolio
- -----------------
Semiannual Report
to Shareholders
June 30, 1997
- -----------------
o The Guardian
Park Avenue Fund
o The Guardian Park
Avenue Small Cap Fund
o The Guardian
Asset Allocation Fund
o The Guardian
Baillie Gifford
International Fund
o The Guardian
Baillie Gifford
Emerging Markets Fund
o The Guardian
Investment Quality
Bond Fund
o The Guardian
Tax-Exempt Fund
o The Guardian Cash
Management Fund
[LOGO]
Guardian Investor
Services Corporation(R)
EB-011566M 6/97
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN PARK AVENUE FUND CLASS A
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 011
<NAME> THE GUARDIAN PARK AVENUE FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 1,408,768
<INVESTMENTS-AT-VALUE> 1,952,361
<RECEIVABLES> 35,210
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,987,576
<PAYABLE-FOR-SECURITIES> 46,534
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,988
<TOTAL-LIABILITIES> 51,522
<SENIOR-EQUITY> 439
<PAID-IN-CAPITAL-COMMON> 1,311,710
<SHARES-COMMON-STOCK> 41,451<F1>
<SHARES-COMMON-PRIOR> 36,724<F1>
<ACCUMULATED-NII-CURRENT> 851
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 79,461
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 543,593
<NET-ASSETS> 1,826,532<F1>
<DIVIDEND-INCOME> 11,423
<INTEREST-INCOME> 2,987
<OTHER-INCOME> 14
<EXPENSES-NET> 6,794
<NET-INVESTMENT-INCOME> 7,630
<REALIZED-GAINS-CURRENT> 79,458
<APPREC-INCREASE-CURRENT> 196,042
<NET-CHANGE-FROM-OPS> 283,130
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,763)<F1>
<DISTRIBUTIONS-OF-GAINS> (1,602)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,377<F1>
<NUMBER-OF-SHARES-REDEEMED> (4,383)<F1>
<SHARES-REINVESTED> 733<F1>
<NET-CHANGE-IN-ASSETS> 507,863
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 28,321
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,075
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,794
<AVERAGE-NET-ASSETS> 1,643,719
<PER-SHARE-NAV-BEGIN> 37.91<F1>
<PER-SHARE-NII> .19<F1>
<PER-SHARE-GAIN-APPREC> 6.79<F1>
<PER-SHARE-DIVIDEND> (.17)<F1>
<PER-SHARE-DISTRIBUTIONS> (.66)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 44.06<F1>
<EXPENSE-RATIO> .79<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN PARK AVENUE FUND CLASS B
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 012
<NAME> THE GUARDIAN PARK AVENUE FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 1,408,768
<INVESTMENTS-AT-VALUE> 1,952,361
<RECEIVABLES> 35,210
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,987,576
<PAYABLE-FOR-SECURITIES> 46,534
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,988
<TOTAL-LIABILITIES> 51,522
<SENIOR-EQUITY> 439
<PAID-IN-CAPITAL-COMMON> 1,311,710
<SHARES-COMMON-STOCK> 2,490<F1>
<SHARES-COMMON-PRIOR> 950<F1>
<ACCUMULATED-NII-CURRENT> 851
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 79,461
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 543,593
<NET-ASSETS> 109,522<F1>
<DIVIDEND-INCOME> 11,423
<INTEREST-INCOME> 2,987
<OTHER-INCOME> 14
<EXPENSES-NET> 6,794
<NET-INVESTMENT-INCOME> 7,630
<REALIZED-GAINS-CURRENT> 79,458
<APPREC-INCREASE-CURRENT> 196,042
<NET-CHANGE-FROM-OPS> 283,130
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (157)<F1>
<DISTRIBUTIONS-OF-GAINS> (1,602)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,558<F1>
<NUMBER-OF-SHARES-REDEEMED> (537)<F1>
<SHARES-REINVESTED> 36<F1>
<NET-CHANGE-IN-ASSETS> 507,863
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 28,321
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,075
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,794
<AVERAGE-NET-ASSETS> 1,643,719
<PER-SHARE-NAV-BEGIN> 37.90<F1>
<PER-SHARE-NII> 0<F1>
<PER-SHARE-GAIN-APPREC> 6.74<F1>
<PER-SHARE-DIVIDEND> (.01)<F1>
<PER-SHARE-DISTRIBUTIONS> (.66)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 43.97<F1>
<EXPENSE-RATIO> 1.75<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN PARK AVENUE SMALL CAP FUND CLASS A
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 071
<NAME> THE GUARDIAN PARK AVENUE SMALL CAP FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 31,699,844
<INVESTMENTS-AT-VALUE> 35,900,156
<RECEIVABLES> 727,562
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,627,718
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 151,394
<SENIOR-EQUITY> 31,013
<PAID-IN-CAPITAL-COMMON> 32,203,350
<SHARES-COMMON-STOCK> 3,101,332
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 32,687
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,962
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,200,312
<NET-ASSETS> 36,476,324
<DIVIDEND-INCOME> 61,647
<INTEREST-INCOME> 79,274
<OTHER-INCOME> 0
<EXPENSES-NET> 108,234
<NET-INVESTMENT-INCOME> 32,687
<REALIZED-GAINS-CURRENT> 8,962
<APPREC-INCREASE-CURRENT> 4,200,312
<NET-CHANGE-FROM-OPS> 4,241,961
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,105,282
<NUMBER-OF-SHARES-REDEEMED> 3,950
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 36,476,324
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 47,332
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 32,687
<AVERAGE-NET-ASSETS> 27,454,156
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 1.75
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.76
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN PARK AVENUE SMALL CAP FUND CLASS B
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 072
<NAME> THE GUARDIAN PARK AVENUE SMALL CAP FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 31,700
<INVESTMENTS-AT-VALUE> 35,900
<RECEIVABLES> 727
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,628
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 151
<SENIOR-EQUITY> 31
<PAID-IN-CAPITAL-COMMON> 32,203
<SHARES-COMMON-STOCK> 302<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 33
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,200
<NET-ASSETS> 3,548<F1>
<DIVIDEND-INCOME> 62
<INTEREST-INCOME> 79
<OTHER-INCOME> 0
<EXPENSES-NET> 108
<NET-INVESTMENT-INCOME> 33
<REALIZED-GAINS-CURRENT> 9
<APPREC-INCREASE-CURRENT> 4,200
<NET-CHANGE-FROM-OPS> 4,242
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 303<F1>
<NUMBER-OF-SHARES-REDEEMED> 1<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 36,476
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 47
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 33
<AVERAGE-NET-ASSETS> 27,454
<PER-SHARE-NAV-BEGIN> 10.57<F1>
<PER-SHARE-NII> (.03)<F1>
<PER-SHARE-GAIN-APPREC> 1.20<F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.74<F1>
<EXPENSE-RATIO> 2.15<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN ASSET ALLOCATION FUND CLASS A
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 021
<NAME> THE GUARDIAN ASSET ALLOCATION FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 97,904
<INVESTMENTS-AT-VALUE> 119,337
<RECEIVABLES> 1,615
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,956
<PAYABLE-FOR-SECURITIES> 1,285
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 351
<TOTAL-LIABILITIES> 1,635
<SENIOR-EQUITY> 83
<PAID-IN-CAPITAL-COMMON> 93,891
<SHARES-COMMON-STOCK> 7,623<F1>
<SHARES-COMMON-PRIOR> 6,805<F1>
<ACCUMULATED-NII-CURRENT> 73
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,629
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,644
<NET-ASSETS> 110,102<F1>
<DIVIDEND-INCOME> 686
<INTEREST-INCOME> 1,004
<OTHER-INCOME> 0
<EXPENSES-NET> 641
<NET-INVESTMENT-INCOME> 1,045
<REALIZED-GAINS-CURRENT> 3,564
<APPREC-INCREASE-CURRENT> 9,344
<NET-CHANGE-FROM-OPS> 13,953
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (943)<F1>
<DISTRIBUTIONS-OF-GAINS> (1,796)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,127<F1>
<NUMBER-OF-SHARES-REDEEMED> (494)<F1>
<SHARES-REINVESTED> 185<F1>
<NET-CHANGE-IN-ASSETS> 26,055
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,011
<OVERDISTRIB-NII-PRIOR> 8
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 298
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 641
<AVERAGE-NET-ASSETS> 104,160,252
<PER-SHARE-NAV-BEGIN> 12.96<F1>
<PER-SHARE-NII> .14<F1>
<PER-SHARE-GAIN-APPREC> 1.71<F1>
<PER-SHARE-DIVIDEND> (.13)<F1>
<PER-SHARE-DISTRIBUTIONS> (.24)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.44<F1>
<EXPENSE-RATIO> 1.17<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> THE GUARDIAN ASSET ALLOCATION FUND CLASS B
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 022
<NAME> THE GUARDIAN ASSET ALLOCATION FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 97,904
<INVESTMENTS-AT-VALUE> 119,337
<RECEIVABLES> 1,615
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,956
<PAYABLE-FOR-SECURITIES> 1,285
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 351
<TOTAL-LIABILITIES> 1,635
<SENIOR-EQUITY> 83
<PAID-IN-CAPITAL-COMMON> 93,891
<SHARES-COMMON-STOCK> 641<F1>
<SHARES-COMMON-PRIOR> 393<F1>
<ACCUMULATED-NII-CURRENT> 73
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,629
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,644
<NET-ASSETS> 9,219<F1>
<DIVIDEND-INCOME> 686
<INTEREST-INCOME> 1,004
<OTHER-INCOME> 0
<EXPENSES-NET> 641
<NET-INVESTMENT-INCOME> 1,045
<REALIZED-GAINS-CURRENT> 3,564
<APPREC-INCREASE-CURRENT> 9,344
<NET-CHANGE-FROM-OPS> 13,953
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (36)<F1>
<DISTRIBUTIONS-OF-GAINS> (150)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 257<F1>
<NUMBER-OF-SHARES-REDEEMED> (22)<F1>
<SHARES-REINVESTED> 13<F1>
<NET-CHANGE-IN-ASSETS> 26,055
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,011
<OVERDISTRIB-NII-PRIOR> 8
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 298
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 641
<AVERAGE-NET-ASSETS> 104,160,252
<PER-SHARE-NAV-BEGIN> 12.92<F1>
<PER-SHARE-NII> .06<F1>
<PER-SHARE-GAIN-APPREC> 1.70<F1>
<PER-SHARE-DIVIDEND> (.06)<F1>
<PER-SHARE-DISTRIBUTIONS> (.24)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.38<F1>
<EXPENSE-RATIO> 2.26<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND CLASS A
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 031
<NAME> THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 53,023
<INVESTMENTS-AT-VALUE> 71,946
<RECEIVABLES> 1,353
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 210
<TOTAL-ASSETS> 73,300
<PAYABLE-FOR-SECURITIES> 441
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 402
<TOTAL-LIABILITIES> 843
<SENIOR-EQUITY> 42
<PAID-IN-CAPITAL-COMMON> 53,478
<SHARES-COMMON-STOCK> 3,901<F1>
<SHARES-COMMON-PRIOR> 3,784<F1>
<ACCUMULATED-NII-CURRENT> (94)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 111
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 18,920
<NET-ASSETS> 67,424<F1>
<DIVIDEND-INCOME> 671
<INTEREST-INCOME> 48
<OTHER-INCOME> 0
<EXPENSES-NET> 558
<NET-INVESTMENT-INCOME> 162
<REALIZED-GAINS-CURRENT> 129
<APPREC-INCREASE-CURRENT> 8,212
<NET-CHANGE-FROM-OPS> 8,508
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (131)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 564<F1>
<NUMBER-OF-SHARES-REDEEMED> (455)<F1>
<SHARES-REINVESTED> 7<F1>
<NET-CHANGE-IN-ASSETS> 11,551
<ACCUMULATED-NII-PRIOR> (125)
<ACCUMULATED-GAINS-PRIOR> (23)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 917
<AVERAGE-NET-ASSETS> 62,308
<PER-SHARE-NAV-BEGIN> 15.22<F1>
<PER-SHARE-NII> .05<F1>
<PER-SHARE-GAIN-APPREC> 2.04<F1>
<PER-SHARE-DIVIDEND> (.03)<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.28<F1>
<EXPENSE-RATIO> 1.70<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND CLASS B
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 032
<NAME> THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 53,023
<INVESTMENTS-AT-VALUE> 71,946
<RECEIVABLES> 1,353
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 210
<TOTAL-ASSETS> 73,300
<PAYABLE-FOR-SECURITIES> 441
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 402
<TOTAL-LIABILITIES> 843
<SENIOR-EQUITY> 42
<PAID-IN-CAPITAL-COMMON> 53,478
<SHARES-COMMON-STOCK> 295<F1>
<SHARES-COMMON-PRIOR> 219<F1>
<ACCUMULATED-NII-CURRENT> (94)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 111
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 18,920
<NET-ASSETS> 5,033<F1>
<DIVIDEND-INCOME> 671
<INTEREST-INCOME> 48
<OTHER-INCOME> 0
<EXPENSES-NET> 558
<NET-INVESTMENT-INCOME> 162
<REALIZED-GAINS-CURRENT> 129
<APPREC-INCREASE-CURRENT> 8,212
<NET-CHANGE-FROM-OPS> 8,508
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 85<F1>
<NUMBER-OF-SHARES-REDEEMED> (9)<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 11,551
<ACCUMULATED-NII-PRIOR> (125)
<ACCUMULATED-GAINS-PRIOR> (23)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 424
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 917
<AVERAGE-NET-ASSETS> 62,308
<PER-SHARE-NAV-BEGIN> 15.12<F1>
<PER-SHARE-NII> 0<F1>
<PER-SHARE-GAIN-APPREC> 1.93<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.05<F1>
<EXPENSE-RATIO> 3.02<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND CLASS A
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 081
<NAME> THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 22,397
<INVESTMENTS-AT-VALUE> 24,507
<RECEIVABLES> 754
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,261
<PAYABLE-FOR-SECURITIES> 578
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176
<TOTAL-LIABILITIES> 753
<SENIOR-EQUITY> 22
<PAID-IN-CAPITAL-COMMON> 22,060
<SHARES-COMMON-STOCK> 2,047<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 157
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 159
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,109
<NET-ASSETS> 22,812<F1>
<DIVIDEND-INCOME> 240
<INTEREST-INCOME> 71
<OTHER-INCOME> 0
<EXPENSES-NET> 144
<NET-INVESTMENT-INCOME> 157
<REALIZED-GAINS-CURRENT> 159
<APPREC-INCREASE-CURRENT> 2,109
<NET-CHANGE-FROM-OPS> 2,425
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,048<F1>
<NUMBER-OF-SHARES-REDEEMED> 0<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 24,508
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 22,011
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> .07<F1>
<PER-SHARE-GAIN-APPREC> 1.07<F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.14<F1>
<EXPENSE-RATIO> 2.24<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND CLASS B
This schedule contains financial information extracted form the
"Semiannual Report to Sharehilders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 082
<NAME> THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 22,397
<INVESTMENTS-AT-VALUE> 24,507
<RECEIVABLES> 754
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,261
<PAYABLE-FOR-SECURITIES> 578
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176
<TOTAL-LIABILITIES> 753
<SENIOR-EQUITY> 22
<PAID-IN-CAPITAL-COMMON> 22,060
<SHARES-COMMON-STOCK> 152<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 157
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 159
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,109
<NET-ASSETS> 1,696<F1>
<DIVIDEND-INCOME> 240
<INTEREST-INCOME> 71
<OTHER-INCOME> 0
<EXPENSES-NET> 144
<NET-INVESTMENT-INCOME> 157
<REALIZED-GAINS-CURRENT> 159
<APPREC-INCREASE-CURRENT> 2,109
<NET-CHANGE-FROM-OPS> 2,425
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 152<F1>
<NUMBER-OF-SHARES-REDEEMED> 0<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 24,508
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 22,011
<PER-SHARE-NAV-BEGIN> 10.28<F1>
<PER-SHARE-NII> .01<F1>
<PER-SHARE-GAIN-APPREC> .83<F1>
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.12<F1>
<EXPENSE-RATIO> 3.59<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 04
<NAME> THE GUARDIAN INVESTMENT QUALITY BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 94,544
<INVESTMENTS-AT-VALUE> 94,577
<RECEIVABLES> 7,894
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 102,473
<PAYABLE-FOR-SECURITIES> 18,876
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 238
<TOTAL-LIABILITIES> 19,114
<SENIOR-EQUITY> 86
<PAID-IN-CAPITAL-COMMON> 84,531
<SHARES-COMMON-STOCK> 8,592
<SHARES-COMMON-PRIOR> 5,235
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,291)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32
<NET-ASSETS> 83,359
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,865
<OTHER-INCOME> 0
<EXPENSES-NET> 200
<NET-INVESTMENT-INCOME> 1,664
<REALIZED-GAINS-CURRENT> (532)
<APPREC-INCREASE-CURRENT> 664
<NET-CHANGE-FROM-OPS> 1,797
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,664
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,155
<NUMBER-OF-SHARES-REDEEMED> 936
<SHARES-REINVESTED> 137
<NET-CHANGE-IN-ASSETS> 32,565
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (758)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 133
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 302
<AVERAGE-NET-ASSETS> 53,831
<PER-SHARE-NAV-BEGIN> 9.70
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.70
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN TAX-EXEMPT FUND
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 05
<NAME> THE GUARDIAN TAX-EXEMPT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 42,308
<INVESTMENTS-AT-VALUE> 42,881
<RECEIVABLES> 1,878
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44,762
<PAYABLE-FOR-SECURITIES> 2,300
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80
<TOTAL-LIABILITIES> 2,380
<SENIOR-EQUITY> 44
<PAID-IN-CAPITAL-COMMON> 42,673
<SHARES-COMMON-STOCK> 4,390
<SHARES-COMMON-PRIOR> 4,078
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (909)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 574
<NET-ASSETS> 42,382
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,039
<OTHER-INCOME> 0
<EXPENSES-NET> 144
<NET-INVESTMENT-INCOME> 895
<REALIZED-GAINS-CURRENT> 241
<APPREC-INCREASE-CURRENT> (59)
<NET-CHANGE-FROM-OPS> (1,077)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 895
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 376
<NUMBER-OF-SHARES-REDEEMED> 155
<SHARES-REINVESTED> 91
<NET-CHANGE-IN-ASSETS> 3,197
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,150)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 96
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 144
<AVERAGE-NET-ASSETS> 38,844
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> .22
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> (.22)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.65
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN CASH MANAGEMENT FUND CLASS A
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 061
<NAME> THE GUARDIAN CASH MANAGEMENT FUND CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 107,385
<INVESTMENTS-AT-VALUE> 107,385
<RECEIVABLES> 920
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 108,305
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 660
<SENIOR-EQUITY> 1,076
<PAID-IN-CAPITAL-COMMON> 106,569
<SHARES-COMMON-STOCK> 103,406<F1>
<SHARES-COMMON-PRIOR> 88,217<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 103,406<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,820
<OTHER-INCOME> 0
<EXPENSES-NET> 436
<NET-INVESTMENT-INCOME> 2,384
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,384
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,312)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 201,069<F1>
<NUMBER-OF-SHARES-REDEEMED> (188,083)<F1>
<SHARES-REINVESTED> 2,203<F1>
<NET-CHANGE-IN-ASSETS> 16,846
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 389
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 934
<AVERAGE-NET-ASSETS> 103,503
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .23<F1>
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.23)<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .85<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are on a fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE GUARDIAN CASH MANAGEMENT FUND CLASS B
This schedule contains financial information extracted from the
"Semiannual Report to Shareholders" dated June 30, 1997, and is qualified
in its entirety to such financial statements.
</LEGEND>
<CIK> 0000837910
<NAME> THE PARK AVENUE PORTFOLIO
<SERIES>
<NUMBER> 062
<NAME> THE GUARDIAN CASH MANAGEMENT FUND CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 107,385
<INVESTMENTS-AT-VALUE> 107,385
<RECEIVABLES> 920
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 108,305
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 660
<SENIOR-EQUITY> 1,076
<PAID-IN-CAPITAL-COMMON> 106,569
<SHARES-COMMON-STOCK> 4,239<F1>
<SHARES-COMMON-PRIOR> 2,582<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,239<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,820
<OTHER-INCOME> 0
<EXPENSES-NET> 436
<NET-INVESTMENT-INCOME> 2,384
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,384
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (72)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,554<F1>
<NUMBER-OF-SHARES-REDEEMED> (1,966)<F1>
<SHARES-REINVESTED> 69<F1>
<NET-CHANGE-IN-ASSETS> 16,846
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 389
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 934
<AVERAGE-NET-ASSETS> 103,503
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .23<F1>
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.23)<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .85<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B only. All other data are on a fund level.
</FN>
</TABLE>
