=======================---------------------------------------------------------
DEAR SHAREHOLDER:
======================
[GRAPHICAL REPRESENTATION OF GUARDIAN LIFE BUILDING]
FROM GOLDILOCKS TO JEKYLL AND HYDE
---------------------
[PHOTO]
---------------------
Frank J. Jones, Ph.D.
A year ago, we described the U.S. economy as a Goldilocks economy, that is,
an economy with high economic growth, low unemployment, high capacity
utilization, and no real sector weakness, but also with no price or wage
pressures. By mid-1998, the Goldilocks economy has given way to a Dr. Jekyll and
Mr. Hyde economy, an economy with very strong domestic consumption and business
investment sectors and still absent inflation; but weak export sectors,
including manufacturing and agriculture, and increasing labor costs.
What caused the transition from Goldilocks to Jekyll and Hyde? Two factors.
First, the economic expansion had been too strong for too long. The expansion is
into its eighth year (the last recession ended during March 1991), and real
Gross Domestic Product (GDP) has grown at approximately 4% for two years. Wage
and price pressures were bound to develop. Wage pressures have been developing
(average hourly earnings costs
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
increased by 4.13% over the last 12 months) and, although inflation is not a
concern (over the last twelve months, the Consumer Price Index (CPI) has
increased by 1.6% and the Producer Price Index (PPI) has decreased by 0.8%,
respectively), neither has deflation been mentioned recently, as it frequently
was earlier during the year.
Second, on July 2, 1997, Thailand devalued its baht. Sounds innocuous
enough. But what has resulted is similar to the "Butterfly Effect" from chaos
theory whereby a butterfly stirring the air today in Peking can transform storm
systems next month in New York. From Thailand, the crisis went to other Asian
countries: Malaysia, Philippines, Indonesia, South Korea, Hong Kong (a crisis
last October), and even affected Japan and potentially China. It subsequently
went to the developing Eastern European countries, and even Russia. Then on to
Latin America, including Brazil. And after all these, not surprisingly, to the
U.S. The transmission process from Thailand to the U.S. has taken longer than
many thought (last January when the effect was not yet significant, many pundits
said the worst was over) but may turn out to be stronger than originally
expected.
The current symmetry in the concerns about the U.S. economy were well
captured by Alan Greenspan's recent comments to Congress.
A bullish view of the U.S. economy emphasizes:
o an unemployment rate near its 20-year lows;
o consumer confidence at a 30-year high, mainly based on high employment
and high personal income;
o a resulting high level of consumer demand; and
o strength in the interest rate sensitive sectors of the economy,
particularly housing, due to the low yield levels.
A bearish view of the economy, however, emphasizes:
o weak exports, particularly to Asia, due to the strong dollar;
o the weak export sectors particularly affected were manufacturing and
agriculture (which were also affected by El Nino weather patterns);
and
o the actual and potential effects of the G.M. strike.
These contrary concerns have caused and will continue to cause a balance in
Fed concerns and continued Fed inaction (the only Fed change since January 31,
1996 was the 25 basis point tightening of the Federal Funds Rate to 5.50% on
March 25, 1997). The Fed balance is further stabilized by the absence of
observed inflation (as indicated above), but offset by increasing wage inflation
(as indicated above).
As the markets, and even some Fed members, have oscillated between
expectations of a Fed easing and a Fed tightening, the Fed has done nothing. And
at his recent Congressional testimony, while Greenspan emphasized the risk of
undue economic strength more than the risk of undue economic weakness, he
suggested that the Fed would most likely continue to watch vigilantly and remain
inactive. The Fed will steer between the Scylla of economic strength and the
Charybdis of economic weakness (which Greenspan referred to as "important
crosscurrents") by maintaining an even keel.
Greenspan's forecast for real GDP growth for 1998 was in the range of 3% to
3.25% (implying a slowing from the first quarter's 5.4% growth) and a range from
2.0% to 2.5% in 1999. The forecast for CPI was a range of from 2% to 2.5% in
1999 from less than 2% in 1998. I believe the markets would welcome these
forecasts becoming reality. And I also believe that these forecasts are
reasonable.
Greenspan again alluded to the "New Paradigm" for reconciling rapid
economic growth and low inflation. This paradigm suggests that recent
productivity gains, most likely linked to improved technology, have been higher
than in recent history and higher than measured. It may also be the reason that
faster economic growth has been achieved without inflation. If so,
optimistically, more rapid, non-inflationary growth could continue. It is,
however, premature to declare victory for this paradigm.
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<PAGE>
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Consider the prospects for the stock market in a similar vein. The
"positives" for the stock market are low inflation, low yields, at least
reasonable economic growth, and, on a secular basis, very favorable demographics
(the Baby Boomers are now between 34 and 52 years old, years of significant
savings, and are very common stock-oriented). The "negatives" are the continuing
high valuations for stocks (which are based on continued strong profit growth)
and concerns about future profits, particularly related to the risks in Asia.
We provide one other thought with respect to the stock market. Perhaps the
period most like the current period was 1972, when valuations were high and
market strength was narrow (old timers will remember the "nifty fifty" of this
period). During December 1972, the trailing Price Earnings (P/E) ratio for the
S&P 500 was 18.4; during July 1998, it was 28.1. After the nifty fifty, the S&P
500 declined by 23.15% during 1973 and 25.82% during 1974. The cause for this
decline, most likely, was the beginning of the OPEC oil cartel and inflation.
Could Asia be the current equivalent? Not likely, but possibly.
While stock performance has been strong during 1998, there has been
considerable variation among large cap, mid cap, and small cap stocks. A rally
in small cap stocks is overdue. But do not bet on it. Not yet.
Despite the old saw that "you can't tell a bubble until it bursts" and
Greenspan's continued references to a U.S. asset bubble and "irrational
exuberance," the stock market will continue to be volatile, but the onset of a
bear market does not seem likely. And, in fact, Greenspan's continued caution
may prove to be constructive by constraining the stock market from continued
growth at an unsustainable pace.
To consider the bright side of the Asia effect, imagine what current U.S.
conditions would be without the Asian effect. Without the economy-slowing
effects of Asia (during second quarter 1998 real GDP actually increased by
5.4%), the Fed would have undoubtedly tightened the Fed funds rate, most likely
more than once. A not-unlikely mid-1998 scenario without Asia would be:
o a Federal Funds rate of 6.25% (three 25 basis point tightenings)
rather than the current 5.50%; and
o a 30-year Treasury yield of 6.25%--a flat yield curve (as of this
writing, with the Federal Funds rate at 5.50% the 30-year Treasury is
at 5.70%)
And the strength of the U.S. economy without the Asian problems may not
have slowed to a sustainable pace even with such Fed changes. Thus, more
tightenings might be expected. And how would the stock market be performing
under such actions and expectations? Not well. Thus, from a purely parochial
perspective, we must say, "Thank you, Asia."
I believe that the economy and the markets will be better served if
something like Greenspan's forecast--with Asia--comes to pass rather than the
likely ex-Asia outcome described above. And based on his track record, I'll go
with Greenspan.
Regards,
/s/ FRANK J. JONES
----------------------------------------
Frank J. Jones, Ph.D.
President, The Park Avenue Portfolio
- --------------------------------------------------------------------------------
<PAGE>
THE PARK AVENUE PORTFOLIO
TABLE OF CONTENTS
PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
===================================================-----------------------------
THE GUARDIAN PARK AVENUE FUND | 2 | | 19 |
===================================================
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, 1998: $3,216,233,759
- ---------------------------------------------------
"WHILE MANY FOREIGN ECONOMIES WERE EXPERIENCING
DIFFICULTIES, THE DOMESTIC ECONOMY CONTINUED RECEIVING
ACCOLADES . . . IN OUR PORTFOLIO, WE TRIED TO CAPITALIZE ON
THIS STATE OF AFFAIRS BY OVERWEIGHTING STABLE, HIGH-QUALITY
GROWTH STOCKS IN WHICH THE PREPONDERANCE OF THE ISSUERS'
INCOME CAME FROM THE U.S."
--Frank J. Jones, Ph.D.
Co-Portfolio Manager
--Larry Luxenberg, C.F.A.
Co-Portfolio Manager
--John B. Murphy, C.F.A.
Co-Portfolio Manager
===================================================-----------------------------
THE GUARDIAN PARK AVENUE SMALL CAP FUND | 6 | | 24 |
===================================================
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: May 1, 1997
- ---------------------------------------------------
NET ASSETS AT JUNE 30, 1998: $161,079,158
- ---------------------------------------------------
"IN THIS DIFFICULT MARKET WE ALSO EMPHASIZE SYSTEMATIC
EFFORTS TO WEED OUT POSSIBLE SOURCES OF TROUBLE EARLY IN THE
PROCESS. COMPANIES AND INDUSTRIES, ONCE THEY BEGIN
STRUGGLING, TEND TO FACE DIFFICULTIES FOR A LONG TIME.
INVESTORS AND ANALYSTS ARE ALWAYS AMAZED AT HOW FAR DOWN A
STOCK CAN GO. WHILE WE TEND TO BE PATIENT LONG-TERM
INVESTORS, SOMETIMES THE OLD WALL STREET AXIOM OF 'CUT YOUR
LOSSES' IS A WISE ONE."
--Larry Luxenberg, C.F.A.
Portfolio Manager
===================================================-----------------------------
THE GUARDIAN ASSET ALLOCATION FUND | 8 | | 28 |
===================================================
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 Guardian Park Avenue,
Investment Quality Bond and Cash
Management Funds
- ---------------------------------------------------
INCEPTION: February 16, 1993
- ---------------------------------------------------
NET ASSETS AT JUNE 30, 1998: $190,628,127
- ---------------------------------------------------
"AS ALWAYS, THE FUND IS MANAGED USING QUANTITATIVE MODELS
THAT ATTEMPT TO JUDGE THE RELATIVE RISK-ADJUSTED
ATTRACTIVENESS OF THE STOCK, BOND AND CASH MARKETS. WHILE
INTEREST RATES ARE THE OPERATIVE VARIABLES 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>
PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
===================================================-----------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND | 10 | | 30 |
===================================================
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, 1998: $93,881,094
- ---------------------------------------------------
"WE BELIEVE THAT DETAILED ANALYSIS OF THE BUSINESSES OF
INDIVIDUAL COMPANIES HAS BEEN THE BEST ROUTE TO INVESTMENT
SUCCESS. AS A RESULT, WE HAVE HAD A LOW WEIGHTING IN JAPAN
FOR THE FUND, AND THE JAPANESE HOLDINGS HAVE BEEN
CONCENTRATED IN COMPANIES THAT ARE GLOBAL LEADERS IN AREAS
LIKE ELECTRONICS, OFFICE EQUIPMENT, AND AUTO MANUFACTURING."
--R. Robin Menzies
Portfolio Manager
===================================================-----------------------------
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND | 12 | | 33 |
===================================================
OBJECTIVE: Long-term capital appreciation
- ---------------------------------------------------
PORTFOLIO: At least 65% in a portfolio of
common stocks issued by emerging
market companies
- ---------------------------------------------------
INCEPTION: May 1, 1997
- ---------------------------------------------------
NET ASSETS AT JUNE 30, 1998: $19,671,724
- ---------------------------------------------------
"TO SUM UP: THE EMERGING MARKETS HAVE TAKEN A BEATING, BUT
THE CONCEPT IS STILL INTACT AND GOOD GROWTH PROSPECTS CAN BE
FOUND THERE AT LOWER VALUATIONS THAN ELSEWHERE. WE NEED TO
SEE SOME STABILITY IN ASIA BEFORE BECOMING REALLY CONFIDENT,
BUT THE LONGER TERM PROSPECTS ARE GOOD."
--Edward H. Hocknell
Portfolio Manager
===================================================-----------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND | 14 | | 36 |
==================================================
OBJECTIVE: A high level of current income and
capital appreciation without undue
risk to principal
- --------------------------------------------------
PORTFOLIO: At least 80% investment-grade debt
obligations and U.S. government
securities
- --------------------------------------------------
INCEPTION: February 16, 1993
- --------------------------------------------------
NET ASSETS AT JUNE 30, 1998: $132,822,624
- --------------------------------------------------
"WE CURRENTLY BELIEVE THAT CORPORATE AND MORTGAGE-BACKED
VALUATIONS ARE THE MOST ATTRACTIVE THAT THEY HAVE BEEN IN
SOME TIME, BUT NEVERTHELESS WE REMAIN CAUTIOUS AND WILL BE
VERY SELECTIVE WITH RESPECT TO CORPORATE CREDITS AND THE
MORTGAGE RISK EXPOSURE WE INCLUDE IN THE FUND."
--Thomas G. Sorell, C.F.A.
Co-Portfolio Manager
--Howard W. Chin
Co-Portfolio Manager
<PAGE>
THE PARK AVENUE PORTFOLIO
TABLE OF CONTENTS--(Continued)
PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
===================================================-----------------------------
THE GUARDIAN TAX-EXEMPT FUND | 16 | | 39 |
===================================================
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, 1998: $48,470,333
- ---------------------------------------------------
"GUIDING OUR DECISIONS ARE THE BOND ANALYTICS SYSTEMS WE
HAVE INTERNALLY DEVELOPED, WHICH HELP US IDENTIFY THE MOST
ATTRACTIVE SELLS AND BUYS FOR MAXIMIZING PORTFOLIO
PERFORMANCE. WE CONTINUED TO AVOID LOWER QUALITY BONDS, AS
THE 'RISK-REWARD' OF NARROW CREDIT SPREADS DID NOT JUSTIFY
THEIR PURCHASE."
--Alexander M. Grant, Jr.
Portfolio Manager
===================================================-----------------------------
THE GUARDIAN CASH MANAGEMENT FUND | 18 | | 41 |
===================================================
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, 1998: $179,984,227
- ---------------------------------------------------
"THE GUARDIAN CASH MANAGEMENT FUND IS A PLACE FOR OUR
INVESTORS TO PUT THEIR MONEY WHILE THEY DETERMINE THEIR
PREFERRED LONG TERM INVESTMENT VEHICLE, BE IT STOCKS OR
BONDS."
--Alexander M. Grant, Jr.
Portfolio Manager
===================================================-----------------------------
FINANCIAL STATEMENTS | 42 |
===================================================
===================================================-----------------------------
NOTES TO FINANCIAL STATEMENTS | 50 |
===================================================
===================================================-----------------------------
FINANCIAL HIGHLIGHTS | 62 |
===================================================
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
- -----------------------------
[PHOTOS]
Frank J. Jones, Ph.D. Larry Luxenberg, C.F.A. John B. Murphy, C.F.A.
Co-Portfolio Manager Co-Portfolio Manager Co-Portfolio Manager
Q. U.S. STOCK MARKET AVERAGES CONTINUED THEIR POWERFUL ADVANCE IN THE FIRST HALF
OFF 1998, ALTHOUGH THE PERFORMANCE FOR THE BROAD MARKET WAS MORE VARIED. HOW
DID THE FUND PERFORM DURING THIS TIME?
A. The Guardian Park Avenue Fund advanced 13.79% in the first half of the year,
(1) compared with a total return of 17.68% for the S&P 500.(2) Over the last
twelve months, the Fund was up 29.58%, nearly equal to the S&P 500's 30.03%
total return and ahead of the 25.56% total return of the Lipper Average U.S.
Growth Fund.(3)
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING THIS PERIOD?
A. Two notable policies have contributed to the Fund's recent performance.
First, for most of the last four years, we have anticipated that large stocks
would outperform smaller ones. Over the last three years we have increased our
portfolio's weighted average market capitalization by $46.3 billion to a total
of $61.2 billion as of June 30, 1998, as shown below.
THE GUARDIAN PARK AVENUE FUND
WEIGHTED AVERAGE MARKET CAPITALIZATION
($ Billions)
6/30/95 $14.9
6/30/96 $34.7
6/30/97 $46.1
6/30/98 $61.2
Secondly, we recognized early on that the economic problems in Asia would
have profound and long-lasting effects on the economies of major countries
throughout the world. We have lowered our holdings in companies whose profits
were heavily dependent on Asia.
The last year has been an unusual period in which the very largest stocks
have dominated the stock market averages. Performance has been concentrated in a
handful of huge companies such as Microsoft, General Electric and Pfizer. Part
of the phenomenon can be attributed to economic fundamentals. In addition, an
influx of foreign money, which generally seeks out the household names first,
has had an impact. Then, too, with the current worldwide economic volatility,
investors place a premium on safety.
While there is no telling how long these trends will continue, we believe
they are powerful. As of mid-year, our portfolio was positioned to benefit from
a continuation of these trends into the third quarter.
- --------------------------------------------------------------------------------
(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--return 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 except where noted. Returns represent past
performance and are not a guarantee of future results. Investment return
and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Prior to August
25, 1988, shares of the Fund were offered at a higher sales charge, so
actual returns would have been somewhat lower.
(2) 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.
(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.
- --------------------------------------------------------------------------------
2
<PAGE>
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Q. WERE THERE ANY OTHER IMPORTANT STRATEGIES THAT YOU USED TO MANAGE THE FUND?
A. While many foreign economies were experiencing difficulties, the domestic
economy continued receiving accolades. Pundits competed to heap praise on the
most balanced economic recovery in a generation. Among the most popular
nicknames were the "Goldilocks Economy" (not too hot, not too cold, just right)
and "Supertanker America."
In our portfolio, we tried to capitalize on this state of affairs by
overweighting stable, high-quality growth stocks in which the preponderance of
the issuers' income came from the U.S. In addition, we sought to benefit from
the gradual reduction in domestic interest rates, a nearly unprecedented
situation this late in a U.S. recovery. Employment remained strong, consumer
confidence soared, and inflation was on the verge of disappearing.
Q. WHAT ARE THE PORTFOLIO'S WEIGHTS IN DIFFERENT SECTORS AND HOW HAVE THESE
AFFECTED PERFORMANCE THIS YEAR?
A. Our sector weights are generally unchanged from last year. Our largest
weighting remained in financial stocks. At mid-year, 27% of the portfolio was in
financials compared to 17.7% for the S&P 500. Financials continue to benefit
from the continuing decline in interest rates, stable economic growth, and
industry consolidation.
Our second largest concentration was in consumer staples with 14.6%,
although that was under the S&P's 22.6% weighting. We have been increasing our
weighting in the pharmaceutical companies but have been underweighted in such
areas as tobacco and food. Pharmaceutical companies are benefiting from a golden
age of discovery of important new medicines. Given the strong increase in
disposable income, we have been gradually increasing our weighting in additional
areas that would benefit, such as retail and homebuilders.
Q. WHAT PROBLEMS DO YOU FORESEE LOOMING THAT COULD UPSET THIS HAPPY STATE OF
AFFAIRS?
A. The biggest concern at mid-summer had to be the continuing difficulties in
Asia, including Japan. The huge contraction in economic activity there casts a
shadow over worldwide commerce. If the economies of mainland Asia and Japan do
not begin a bottoming process, there is a risk of spreading deflationary
pressures and social chaos. Leaders worldwide recognize the scope and severity
of the problems, and we are hopeful that they will act prudently.
In the U.S., corporations have had their highest profit margins since the
mid-1960's. They have benefited from a period of intense cost-cutting and
reorganization, effective deployment of technology and telecommunications, and
progressive management. Most companies now have little ability to raise prices
and those most exposed to foreign competition must continually find new ways to
lower prices. At the same time, a scarcity of workers has put pressure on wages
for the first time in this recovery. As a consequence, corporate profits now
seem likely to be squeezed and are particularly vulnerable to any revenue
shortfalls.
An unknown wild card is the ability of corporations and governments
worldwide to adapt their computer systems to the new millenium, the "Y2K"
problem. While predictions of doom are increasing, no one seems to know with any
certainty what the end result will be. Hopefully, the feverish and expensive
efforts underway will be successful.
- --------------------------------------------------------------------------------
3
<PAGE>
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THE GUARDIAN PARK AVENUE FUND PROFILE
AS OF JUNE 30, 1998
- --------------------------------------------
---------------------------------------- SECTOR WEIGHTINGS
TOP 10 HOLDINGS AS OF 6/30/98 COMMON STOCKS HELD
---------------------------------------- BY THE FUND ON JUNE 30, 1998
1. Microsoft Corp. 3.15%
----------------------------------------
2. General Electric Co. 2.83% [GRAPHICAL REPRESENTATION
---------------------------------------- OF PIE CHART]
3. Pfizer, Inc. 2.49%
---------------------------------------- Financial--27.1%
4. Exxon Corp. 2.44% Credit Cyclicals--0.5%
---------------------------------------- Conglomerates--1.0%
5. Int'l Business Machines 2.16% Consumer Services--2.2%
---------------------------------------- Transportation--3.2%
6. Storage Technology Corp. 2.00% Basic Industries--4.4%
---------------------------------------- Capital Goods--4.8%
7. Wal-Mart Stores, Inc. 1.90% Utilities--8.5%
---------------------------------------- Energy--8.8%
8. Chase Manhattan Corp. 1.81% Consumer Staples--14.6%
---------------------------------------- Capital Goods-
9. BellSouth Corp. 1.80% Technology--13.0%
---------------------------------------- Consumer Cyclical--11.9%
10. Ford Motor Co. 1.73%
----------------------------------------
For a complete list of portfolio holdings,
please see the Schedule of Investments.
----------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 6/30/98
Inception Since
Date 1 Year 5 Years 10 Years Inception
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 6/1/72 23.75% 21.03% 17.97% 16.78%
At Net Asset Value (without sales charge) 29.58% 22.15% 18.51% 16.98%
- ----------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 25.44% N/A N/A 29.68%
At Net Asset Value (without sales charge) 28.44% N/A N/A 30.37%
- ----------------------------------------------------------------------------------------------------------
S&P 500 Index 30.03% 20.98% 18.44% 13.45%
(6/1/72)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(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 for Class A shares do not take into account the current
maximum sales charge of 4.5%, except where indicated. Prior to August 25,
1988, Class A shares of the Fund were offered at a higher sales charge, so
actual returns would have been somewhat lower. Total return figures for
Class B shares do not take into account the contingent deferred sales
charge applicable to such shares (maximum of 3%), except where noted.
Returns represent past performance and are not a guarantee of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHICAL REPRESENTATION OF MOUNTAIN CHART]
The Guardian Lipper U.S.
Park Avenue Fund S&P 500 Equity Growth Cost of
(Class A) Index Fund Average Living
----------- ----------- ----------- ----------
6/1/72 1 9550 1 10000 1 10000 1 10000
1972 2 9352 2 9791 2 9746 2 10072
3 9495 3 10173 3 9548 3 10169
4 9919 4 10936 4 10002 4 10266
1973 5 8954 5 10404 5 8773 5 10483
6 7758 6 9802 6 7699 6 10676
7 9104 7 10271 7 8788 7 10918
8 8355 8 9320 8 7686 8 11184
1974 9 8898 9 9061 9 7492 9 11546
10 8095 10 8376 10 6661 10 11836
11 6816 11 6276 11 5224 11 12222
12 7016 12 6861 12 5701 12 12536
1975 13 9052 13 8434 13 7001 13 12754
14 10222 14 9724 14 8176 14 12923
15 9524 15 8662 15 7174 15 13188
16 10311 16 9410 16 7588 16 13430
1976 17 12315 17 10819 17 8924 17 13527
18 12926 18 11077 18 9084 18 13696
19 13570 19 11281 19 9043 19 13913
20 14714 20 11627 20 9483 20 14106
1977 21 14578 21 10762 21 8951 21 14396
22 15548 22 11107 22 9480 22 14614
23 15171 23 10794 23 9340 23 14807
24 15894 24 10765 24 9674 24 15048
1978 25 16186 25 10235 25 9527 25 15314
26 17952 26 11100 26 10724 26 15700
27 19593 27 12062 27 11821 27 16063
28 18195 28 11455 28 11002 28 16401
1979 29 19967 29 12263 29 11945 29 16884
30 20459 30 12583 30 12544 30 17440
31 22475 31 13535 31 13793 31 17971
32 23489 32 13539 32 14501 32 18575
1980 33 22448 33 12987 33 13536 33 19348
34 24637 34 14722 34 15484 34 19928
35 27183 35 16363 35 18053 35 20266
36 28544 36 17908 36 19852 36 20870
1981 37 30553 37 18146 37 20432 37 21401
38 30553 38 17726 38 20347 38 21860
39 28041 39 15910 39 17993 39 22488
40 30196 40 17010 40 19380 40 22729
1982 41 28244 41 15773 41 18074 41 22874
42 28221 42 15682 42 18100 42 23430
43 32078 43 17473 43 20123 43 23599
44 37863 44 20656 44 24326 44 23599
1983 45 42172 45 22720 45 27061 45 23696
46 49604 46 25228 46 30611 46 24010
47 48521 47 25185 47 29869 47 24251
48 48698 48 25281 48 29333 48 24493
1984 49 46645 49 24675 49 27414 49 24855
50 47823 50 24028 50 26721 50 25048
51 53052 51 26344 51 28574 51 25290
52 54864 52 26823 52 28930 52 25483
1985 53 61530 53 29283 53 31492 53 25797
54 65012 54 31410 54 33601 54 25966
55 60468 55 30132 55 32193 55 26111
56 72960 56 35290 56 37156 56 26449
1986 57 87231 57 40238 57 42720 57 26353
58 93553 58 42592 58 44999 58 26425
59 82542 59 39627 59 41062 59 26570
60 86371 60 41842 60 42571 60 26763
1987 61 106898 61 50759 61 51317 61 27126
62 104621 62 53272 62 52563 62 27440
63 111995 63 56777 63 55749 63 27729
64 88927 64 43977 64 44085 64 27947
1988 65 100335 65 46480 65 47392 65 28164
66 107311 66 49515 66 50056 66 28502
67 105853 67 49653 67 49730 67 28913
68 107404 68 51158 68 50482 68 29179
1989 69 117426 69 54775 69 54123 69 29656
70 124277 70 59546 70 58562 70 29976
71 135522 71 65881 71 64497 71 30169
72 133003 72 67206 72 63984 72 30531
1990 73 131154 73 65183 73 62581 73 31087
74 131990 74 69211 74 67101 74 31401
75 111333 75 59736 75 56465 75 32029
76 116611 76 65046 76 61087 76 32415
1991 77 138452 77 74504 77 71872 77 32633
78 136860 78 74303 78 71176 78 32874
79 149259 79 78263 79 76341 79 33116
80 157618 80 84775 80 83235 80 33382
1992 81 162078 81 82672 81 82319 81 33647
82 159469 82 84210 82 80113 82 33889
83 167044 83 86846 83 82496 83 34106
84 189879 84 91214 84 89848 84 34396
1993 85 208278 85 95200 85 92144 85 34686
86 215651 86 95619 86 92749 86 34879
87 234327 87 98067 87 97203 87 35048
88 228375 88 100342 88 99458 88 35338
1994 89 221843 89 96569 89 96044 89 35556
90 219203 90 96936 90 93504 90 35773
91 227686 91 101657 91 98580 91 36087
92 225091 92 101617 92 97271 92 36280
1995 93 245506 93 111514 93 104431 93 36546
94 271285 94 122063 94 114202 94 36836
95 298576 95 131706 95 123909 95 37005
96 302248 96 139569 96 126735 96 37126
1996 97 317905 97 147050 97 133553 97 37585
98 334627 98 153579 98 139376 98 37850
99 348213 99 158217 99 143418 99 38019
100 382268 100 171365 100 150775 100 38331
1997 101 386091 101 176009 101 148815 101 38712
102 452576 102 206652 102 172283 102 39010
103 502902 103 222048 103 190631 103 39400
104 515475 104 228376 104 188286 104 39873
1998 105 570785 105 260189 105 212500 105 40271
6/30/98 106 586539 106 268697 106 216367 106 40497
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 $586,539 on June 30, 1998. 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 cannot invest directly in the S&P 500 Index, a similar hypothetical
investment would now be worth $268,697. 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 $216,367. 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.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE SMALL CAP FUND
- ---------------------------------------
[PHOTO]
Larry Luxenberg, C.F.A.
Portfolio Manager
Q. SMALL CAP STOCKS HAVE BEEN IGNORED IN THIS MARKET, WHICH HAS FAVORED LARGE
CAP STOCKS. HOW HAS THE FUND FARED DURING THE FIRST HALF OF 1998?
A. This has been a discouraging period for small cap stocks as investors seem to
ignore any good news and cling to anything bad. In spite of this, the actual
returns have not been too bad. In the first half of 1998, the Fund had a return
of 6.75%,(1) compared to 4.93% for the Russell 2000,(2) a leading index of small
cap performance. For the last twelve months, the Fund had a return of 26.32%,
compared to 16.51% for the Russell 2000 and 30.03% for the S&P 500.(3)
Q. WHAT WERE THE SIGNIFICANT FACTORS THAT AFFECTED THE FUND'S PERFORMANCE?
A. We continued to overweight financial stocks, which have benefited from the
current benign interest rate environment. Additionally, we added to our holdings
in retailers, homebuilders and business services, which are benefiting from the
extended recovery, high consumer confidence and increasing disposable income.
In this difficult market we also emphasize systematic efforts to weed out
possible sources of trouble early in the process. Companies and industries, once
they begin struggling, tend to face difficulties for a long time. Investors and
analysts are always amazed at how far down a stock can go. While we tend to be
patient long-term investors, sometimes the old Wall Street axiom of "cut your
losses" is a wise one.
Q. WHAT STRATEGIES ARE USED TO MANAGE THE FUND?
A. We look for dynamic companies with sound business models able to exploit
opportunities in our fast-changing economy. Many of our companies are in
businesses that did not exist a decade ago.
Also, we continue to invest in companies whose operations are largely
domestic. Most of our companies do not have much direct exposure to the Asian
economies. Meanwhile, we have been looking for companies in market niches, who
can heavily influence their own fate regardless of external economic forces.
With outsourcing and partnerships so prevalent, small companies with important
breakthroughs are able to grow much faster than in the past.
Q. WHAT IS THE OUTLOOK FOR SMALL CAP STOCKS?
A. While small cap stocks have trailed the broad market recently, historically
they have outperformed large cap stocks, according to a recent Ibbotson
Sinquefield study.(4) The timing of any switch in performance is uncertain, but
the fundamental outlook continues to improve.
While some small caps have had unexpected earnings difficulties, so too
have some large cap stocks. But what is harder to explain is why small cap
companies that have performed well and met or exceeded investors, expectations
still lag the bigger cap stocks. One reason is that in times of turmoil,
investors prefer perceived safety as opposed to opportunity--fear triumphs over
greed. With the cloud of financial
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures for Class A shares do not take into account the current
maximum sales charge of 4.5%. Total return figures for Class B shares do
not take into account the contingent deferred sales charge applicable to
such shares (maximum of 3%). 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
returns. Likewise, return figures for the Russell 2000 Index do not
reflect any sales charges that an investor may have to pay when purchasing
or redeeming shares of the Fund.
(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) The study is taken from Stocks, Bonds, Bills & Inflation 1997 Yearbook, (TM)
Ibbotson, Chicago (annually updates work by Roger G. Ibbotson and Rex
Sinquefield.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
meltdown and disarray in Asia overhanging our markets, investors have continued
to gravitate to the largest companies. A second reason is the continued
popularity of indexing, much of which is tied to the S&P 500. In the short run
this becomes a self-fulfilling prophecy in which cash is blindly thrown at the
largest stocks. Thirdly, the U.S. economic recovery, which began during the Gulf
War, is now one of the longest on record. In the early phases, corporate profit
growth was rapid. Companies had downsized during the recession and profitability
soared afterwards.
Now after years of near record margins and profitability, companies are
having difficulty maintaining that growth. Pricing power is confined to small
sectors of the economy, wages are rising and cost cutting opportunities are much
diminished. Productivity, however, has been improving. Normally, late in a bull
market, investors turn to smaller and more speculative issues as performance
gets harder to come by. Lately, much of that sort of attention has been confined
to internet stocks and other technology issues. Investment fads can persist for
long periods. In time, though, these excesses or neglected securities tend to
correct. No doubt in some future report we will be remarking that small caps are
the current "smash hit" among investors.
- --------------------------------------------------------------------------------
THE GUARDIAN PARK AVENUE SMALL CAP FUND PROFILE AS OF JUNE 30, 1998
- -------------------------------------------------------------------
--------------------------------------------
TOP TEN HOLDINGS AS OF 6/30/98
--------------------------------------------
1. Fidelity National Financial, Inc. 3.07%
--------------------------------------------
2. AFC Cable Systems, Inc. 2.99%
--------------------------------------------
3. Ethan Allen Interiors, Inc. 2.03%
--------------------------------------------
4. Earthgrains Co. 1.41%
--------------------------------------------
5. Fifth Third Bancorp 1.26%
--------------------------------------------
6. National RV Holdings, Inc. 1.14%
--------------------------------------------
7. Lone Star Industries, Inc. 1.08%
--------------------------------------------
8. Shopko Stores, Inc. 1.04%
--------------------------------------------
9. Southdown, Inc. 0.94%
--------------------------------------------
10. Landamerica Financial Group, Inc. 0.92%
--------------------------------------------
For a complete list of portfolio holdings,
please see the Schedule of Investments.
--------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN(1) FOR PERIODS ENDED 6/30/98
Inception Since
Date 1 Year Inception
- --------------------------------------------------------------------------------
Class A Shares (with sales charge) 5/1/97 20.64% 32.09%
At Net Asset Value (without sales charge) 26.32% 37.42%
- --------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 22.17% 30.36%
At Net Asset Value (without sales charge) 25.17% 32.85%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. In the first half of this year, the total return on stocks, as measured by
the S&P 500 Index,(1) was 17.71% and the total return on bonds, as measured by
the Lehman Aggregate Bond Index,(2) was 3.93%. 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 12.11%. The Fund's return over the period was
9.24%.(3)
While our return relative to our benchmark was a disappointment, the Fund
performed in line with its competition. We modestly trailed the 10.13% return of
funds with similar objectives and policies in the Lipper(4) universe, but
exceeded the median return of 8.60% produced by Morningstar's(5) universe of
asset allocation funds.
Q. WHAT STRATEGIES WERE USED BY THE FUND AND HOW DID THEY AFFECT PERFORMANCE?
A. As always, the Fund is managed using quantitative models that attempt to
judge the relative risk-adjusted attractiveness of the stock, bond and cash
markets. While interest rates are the operative variables 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%/16% at the beginning of
March. By the end of April, we had moved to a 50%/50%/0% mix as a rise in
interest rates made stocks relatively less attractive than bonds. These
weightings should be compared to the completely neutral 60%/40%/0% mix that we
would expect to own when the markets were all fairly valued relative to one
another.
The increased caution that we have shown by maintaining this modest
underweighting in stocks for the past two months has, so far, proved unnecessary
as stocks have risen another 2.27% (as measured by the S&P 500) since then.
Q. WHAT ARE YOUR EXPECTATIONS FOR THE FUTURE AND HOW ARE YOU POSITIONING THE
FUND TO TAKE ADVANTAGE OF THOSE EXPECTATIONS?
A. At present, we maintain our somewhat cautious approach to the stock market
with exposures of approximately 50%/50%/0% to the stock, bond and cash markets
respectively. We will maintain this stance until either interest rates decline
sufficiently or corporate profitability rebounds in spite of a slowing economy.
- --------------------------------------------------------------------------------
(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 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.
(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) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures for Class A shares do not take into account the current
maximum sales charge of 4.5%. Total return figures for Class B shares do
not take into account the contingent deferred sales charge applicable to
such shares (maximum of 3%). 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.
(4) 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.
(5) 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.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN ASSET ALLOCATION FUND PROFILE
AS OF JUNE 30, 1998
- ------------------------------------------
PORTFOLIO COMPOSITION BY ASSET CLASS
[GRAPHICAL REPRESENTATION OF 2 PIE CHARTS]
Cash 4% Stocks 50%
Stocks 76% Bonds 50%
Bonds 20%
AS OF DECEMBER 31, 1997 AS OF JUNE 30, 1998
The market exposure shown above provides a comparison of the Fund's allocation
to different market segments. For a complete listing of Fund holdings, please
refer to the Schedule of Investments.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 6/30/98
Inception Since
Date 1 Year 3 Years 5 Years Inception
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 2/16/93 13.62% 18.84% 14.60% 14.87%
At Net Asset Value (without sales charge) 18.97% 20.68% 15.66% 15.86%
- ------------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 14.84% N/A N/A 20.18%
At Net Asset Value (without sales charge) 17.84% N/A N/A 20.93%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
- -------------------------------------------------
[PHOTO]
R. Robin Menzies,
Portfolio Manager
Q. HOW DID THE FUND PERFORM FOR THE FIRST SIX MONTHS OF 1998?
A. The first six months, and particularly the second quarter of the year, was
packed with incident: the new European currency was successfully launched and
the European Central Bank got under way, while in Asia the Japanese economy and
currency weakened and the Asian crisis deepened. The contrast between generally
good news in the west and bad news in the east was reflected in market
movements. For the first half of 1998 the Fund returned 18.79%,(1) while the
Morgan Stanley Capital International (MSCI) Europe, Australia, and Far East
(EAFE) Index(2) returned 16.08% during this period. Even in the west, where
equities performed well, there were signs that investors were beginning to favor
bond markets as the quarter progressed. This tendency was less marked in Europe
than it was in the U.S., where earnings growth is clearly slowing and Treasury
obligations attracted those looking for a safe haven.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE AND
WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND?
A. We always felt that the Asian crisis would deepen and so resisted the
temptation to reinvest in those markets when they staged an ill-founded recovery
earlier in the year. In fact, Asian markets have deteriorated even more than we
anticipated. A vicious circle has developed in which worsening Asian prospects
undermine confidence in Japanese banks and exporters, weakening the yen, which
in turn makes it more difficult for the rest of Asia to export its way out of
trouble. There is a danger that this vortex will suck in the Chinese, which
would have a very harmful effect on the whole region. The only way for this
vicious circle to be broken is for the Japanese economy to stabilize, and this
requires continual fiscal stimulus (the most recently announced package is just
starting to take effect) backed up by structural reform. The likelihood is that
the Japanese will do just enough to stop the situation deteriorating
dramatically--but the possibility that they might not is the single greatest
threat to world financial markets at the moment.
We believe that detailed analysis of the businesses of individual
companies has been the best route to investment success. As a result, we have
had a low weighting in Japan for the Fund, and the Japanese holdings have been
concentrated in companies that are global leaders in areas like electronics,
office equipment, and auto manufacturing. And it was our company analysis that
deterred us from going back into the other Asian markets which bounced in the
first quarter and then retreated again. We have little invested there.
On the surface at least, it is surprising that European stock markets have
continued to perform very well despite the problems of Asia. On further
investigation, however, the good performance does have solid foundations:
European companies are continuing to restructure and pass on more of the
benefits of their success to shareholders; euro interest rates will remain
sustainably low for some time to come and, on top of this, the long-awaited
recovery is finally taking place. The result is that top line growth is
amplifying the effect of cost cutting, which is leading to strong earnings
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures for Class A shares do not take into account the current
maximum sales charge of 4.5%. Total return figures for Class B shares do
not take into account the contingent deferred sales charge applicable to
such shares (maximum of 3%). 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 MSCI EAFE
Index is not available for direct investment and its returns do not reflect
expenses that have been deducted from the Fund's return.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
growth against a background of low interest rates. This happy combination is
likely to persist as there is still considerable underused capacity on the
Continent. It is not surprising, therefore, that European markets have done well
and we continue to have a heavy weighting in them.
It is worth saying something about the effect that the Asian crisis has
had so far on the global economy. The crisis has had two main outcomes, as far
as the rest of the world is concerned: it has altered trade patterns and
depressed commodity prices. Western exports to Asia have fallen sharply, and
this has shown up in deteriorating trade deficits. Few Asian countries are
showing much increase in exports in U.S. dollar terms, although volumes have
picked up. In any case, the effect is likely to be a slightly dampening one on
growth in the West.
Industrial commodities are now 24.3% cheaper in U.S. dollar terms than they
were a year ago using the Economist index, and the Brent crude oil price is
22.3% lower. These sharp declines are damaging some countries (Chile, for
example with its dependence on copper, and Norway with its huge oil revenues),
but the overall effect is likely to be positive on margins and inflation.
As a result of these two Asian effects (lower growth because of weaker
trade and lower inflation), the balance of attraction tipped towards bonds in
most markets during the quarter, apart from in Europe, where growth and profits
remain strong.
Q. WHAT IS YOUR OUTLOOK FOR THE INTERNATIONAL MARKET?
A. The final piece of the jigsaw puzzle is the so called 'technical position,'
in other words the supply and demand for equities in world markets. This remains
extremely favorable and goes a long way to explain equity markets' resilience.
The retirees of the future are pouring money into equities and there is a
significant switch in favor of equities away from traditional cash and bond
based investments taking place in Europe. At the same time, equity issuance
remains very low. The favorable technical position and Europe's good prospects
are the two main supports for our generally optimistic view.
We are positive about Continental Europe, less so about the UK. Many of the
smaller Asian economies have deep seated problems. The progress of reform in
Japan is an important factor for markets. We believe that the authorities are
likely to do just enough to get by. Markets in the rest of the world will
probably continue to receive support from technical factors and try their
hardest to put a positive interpretation on bad news from Asia.
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND PROFILE
AS OF JUNE 30, 1997
- --------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 6/30/98
Inception Since
Date 1 Year 3 Years 5 Years Inception
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 2/16/93 10.76% 16.74% 13.62% 14.41%
At Net Asset Value (without sales charge) 15.98% 18.55% 14.67% 15.39%
- ------------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 11.68% N/A N/A 14.06%
At Net Asset Value (without sales charge) 14.68% N/A N/A 14.85%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
[PHOTO]
Edward H. Hocknell
Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 1998?
A. For the six months ended June 30, 1998, the Fund had a total return of
- -20.54%,(1) compared with a return of -19.87% over the same period from the
Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index.(2) The Fund's performance was hit by the renewed weakness in the emerging
markets following investors' reappraisal of the depth of the Asian crisis. Asian
markets performed worse, but the others did not escape. One effect of the Asian
crisis was to spread concerns (partially with respect to Latin America) about
growth, commodity prices and the interest rates that other emerging economies
would have to pay in the future. Central European markets were largely unharmed
during the period (Poland's market, for example, rose by over 14%).
Q. WHAT FACTORS AFFECTED THE PERFORMANCE OF THE FUND?
A. We remained overweighted in the Latin American and Central European markets
during the period. This strategy hurt us in the first quarter of the year as
Asia enjoyed a short lived recovery, but was beneficial over the period as a
whole.
The outlook for the emerging markets is clouded by the deteriorating
situation in Asia. Years of low interest rates have led to excessive investment
and bad debts, which have severely weakened the financial infrastructure of many
Asian economies. Whatever problems Latin America suffers from, they are not the
result of years of low interest rates and excessive investment. Nevertheless,
emerging market investors have shown once again their tendency to tar all the
emerging markets with the same brush. Geographic diversification has provided
little protection (in the short term at least). There has been no place to hide.
Q. WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND AND WHAT IS YOUR OUTLOOK GOING
FORWARD?
A. The crisis rumbles on in Asia. There will be no quick bailout on the Mexican
model. Some countries have responded well to the challenge--Korea is a good
example--and others, such as China, Taiwan and India, have enough momentum to
maintain their growth, albeit at a lower level than in recent years. These are
the countries where we have maintained an exposure for the Fund in the belief
that, from a longer term perspective, some excellent companies can now be bought
at very low valuations. We are keeping pretty well clear of Indonesia, Thailand
and Malaysia where massive amounts of capital are still required to stabilize
the situation. Our perception is that consensus expectations for Asian growth
and profitability over the next couple of years are only just now beginning to
catch up with reality, having previously been too high, so it is still too early
to become optimistic about equity prices there. We should also like to see
evidence that the Japanese yen has stabilized before becoming more confident
about the region.
The situation in Latin America is quite different. Governments there reacted
sensibly to the Asian crisis; although growth has decelerated as rates have had
to rise, we do not expect the tough monetary disciplines of recent years to be
abandoned. Shares are reasonably valued on undemanding expectations for earnings
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures for Class A shares do not take into account the current
maximum sales charge of 4.5%. Total return figures for Class B shares do
not take into account the contingent deferred sales charge applicable to
such shares (maximum of 3%). 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>
growth, and the better companies have continued to cut costs and consolidate. We
think the fears about continuing reform in Brazil are overdone; the market is
now trading at less than 10 times 1998 earnings and has been depressed by
extraneous concerns (a possible currency crisis in Russia, for example). The
Fund now has a heavy weighting in Brazil.
We have recently become more optimistic about Central Europe (Poland,
Hungary and the Czech Republic). Markets there have been quite weak and are
reasonably valued. We expect them to show good earnings growth again this year.
They are all beneficiaries of a stronger recovery than expected in Germany, and
there is now the prospect (however distant) of eventual inclusion in the single
European currency, which will have a beneficial effect on interest rates and
long term inflation expectations.
To sum up: The emerging markets have taken a beating, but the concept is
still intact and good growth prospects can be found there at lower valuations
than elsewhere. We need to see some stability in Asia before becoming really
confident, but the longer term prospects are good.
- --------------------------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
PROFILE AS OF JUNE 30, 1998
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
COMPANY COUNTRY NATURE OF COMPANY
- --------------------------------------------------------------------------------
1. Telesp Brazil Telecommunications
- --------------------------------------------------------------------------------
2. CIE Mexico Media & Entertainment
- --------------------------------------------------------------------------------
3. Telebras ADR Brazil Telecommunications
- --------------------------------------------------------------------------------
4. Banco Itau Brazil Banking
- --------------------------------------------------------------------------------
5. Siliconware Precision Ind. Taiwan Industrial
- --------------------------------------------------------------------------------
6. Orient Semiconductor Elect. Taiwan Electricals
- --------------------------------------------------------------------------------
7. Bank Handlowy Poland Banking
- --------------------------------------------------------------------------------
8. Bank Roswoju Eksport Poland Banking
- --------------------------------------------------------------------------------
9. Comp. Brasileiras de Dist. Brazil Retail
- --------------------------------------------------------------------------------
10. Elektrim Poland Electricals
- --------------------------------------------------------------------------------
For a complete list of portfolio holdings, please see the Schedule of
Investments.
PORTFOLIO COMPOSITION BY GEOGRAPHIC LOCATION
[GRAPHICAL REPRESENTATION OF PIE CHART
South Africa--4.8%
Cash--11.0%
Eastern Europe--15.3%
Asia--18.3%
Latin America--50.6%
- --------------------------------------------------------------------------------
TOTAL RETURNS(1) FOR PERIOD FROM INCEPTION TO 6/30/98
Inception Since
Date 1 Year Inception
- --------------------------------------------------------------------------------
Class A Shares (with sales charge) 5/1/97 -35.90% -26.57%
At Net Asset Value (without sales charge) -32.88% -23.61%
- --------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 -36.23% -27.65%
At Net Asset Value (without sales charge) -34.26% -25.72%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND
- -----------------------------------------
[PHOTO]
Thomas G. Sorell, C.F.A.
Co-Portfolio Manager
[PHOTO]
Howard W. Chin
Co-Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 1998?
A. The Fund performed well for the first half of 1998. The Fund had a total
return of 3.87%(1) for the six months ended June 30, 1998, exceeding the return
of the average fund in our Lipper Intermediate Investment Grade peer group,(2)
which returned 3.61% for the same period. This group consists of mutual funds
that invest primarily in investment grade debt with average maturities of 5-10
years. Another commonly used benchmark, the Lehman Aggregate Bond Index,(3)
which is not available for direct investment, returned 3.93% for the first half
of 1998.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. Early in the year market participants expected that the Asian financial
crisis would significantly slow U.S. economic growth and might motivate the
Federal Reserve to ease monetary policy. However, as it became apparent that
U.S. domestic demand remained robust and that the Asian effect might not reduce
growth sufficiently to alleviate inflationary pressures from developing, market
psychology changed to one of expecting the Fed to leave rates unchanged. The
Fed's patience and inaction proved appropriate as the economy grew 5.5% in the
first quarter but slowed to 1.4% in the second quarter.
Although it was not clear to what degree the financial crisis in Asia would
slow U.S. economic growth, there is no doubt that it caused a flight to quality
as both U.S. and international investors sought U.S. Treasuries as a safe
investment haven. By July, Treasury rates had declined 15 to 30 basis points
along the yield curve, with the 30-year Treasury bond declining to its lowest
level (5.57%) since first issued in 1977.
Unlike 1997, when the Fund's performance was driven by its overweight in
the spread product sectors (corporate bonds, mortgage- and asset-backed
securities), performance in the first half of 1998 was driven by the Treasury
sector. For the most part, spread products have lagged the performance of
Treasuries in 1998. As the year began, the Fund was properly positioned for
this, being overweighted in U.S. Treasuries, and the Fund's performance
benefited. As the year progressed, the Fund began to reduce the Treasury
position and reinvest in cheaper spread sectors, particularly corporate and
mortgage-backed securities. This strategy worked until further spread widening
in June, and ultimately acted as a small positive contribution to overall
performance for the first half of the year.
As mentioned earlier, the corporate bond sector experienced some volatility
during the first half of 1998, returning 4.15% as measured by the Lehman
Corporate Bond Index, but underperformed comparable-duration Treasuries by 25
basis points, or 0.25%. Corporate bonds began the year by underperforming by 54
basis points (0.54%) on a duration-adjusted basis(4) in January, and under-
performed once again in June by 47 basis points (0.47%). In the intervening
months, the corporate market performed fairly well but not enough to overcome
January and June's negative returns.
- --------------------------------------------------------------------------------
(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 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, on
an annual basis, 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) 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.
(3) The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The Lehman
Aggregate Bond Index is not available for 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.
(4) Duration-adjusted, expressed in percentage terms, represents the excess
return over the weighted average return of a group of similar duration
Treasuries.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Historically low interest rates were a significant contributor to the
sector's underperformance as corporations deluged the market with new issuance
to take advantage of attractive financing rates. As of June 30, 1998, corporate
issuance had exceeded $200 billion; an increase of $70 billion relative to the
comparable period last year.
Within the corporate market, only two sectors outperformed Treasuries
during the first half of 1998; Finance and Media/Cable. The Fund was well
represented in these two sectors.
The mortgage-backed securities sector returned 3.38% in the first half of
1998 as measured by the Lehman Mortgage-Backed Index, and outperformed
comparable-duration Treasuries by 0.10%. Interest rate volatility continued to
remain at low levels, and although low Treasury yields have caused prepayment
concerns, the Fund was positioned favorably since a high percentage of its
holdings were in below par mortgages, which have less exposure to prepayment
risk relative to higher coupons. Much of the widening observed in the
mortgage-backed sector was experienced by the higher coupons.
The Fund also offset some of its prepayment risk by adding mortgage-related
asset-backed securities such as home equity loans and manufactured housing loans
which have less incentive to refinance due to their lower loan balances.
Asset-backed securities returned 3.61% as measured by the Lehman Asset-Backed
Index, but turned in the best performance among the various components of the
Index on a duration-adjusted basis, outperforming Treasuries by 0.21%.
Q. WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND AND WHAT IS YOUR OUTLOOK FOR
THE REST OF 1998?
A. Owning corporate, mortgage-backed and asset-backed securities provided a
small positive return to the Fund's performance, while our early defensive
position in U.S. Treasuries served us extremely well. We currently believe that
corporate and mortgage-backed valuations are the most attractive that they have
been in some time, but nevertheless we remain cautious and will be very
selective with respect to both the corporate credits and the mortgage risk
exposure we include in the Fund. As always, we will continue to adjust asset
allocations to reflect changes in sector valuations and take advantage of
attractive investment opportunities.
- --------------------------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND
PROFILE AS OF JUNE 30, 1998
- ---------------------------
[GRAPHICAL REPRESENTATION OF PIE CHART]
Yankee Bonds--1.4%
Cash Equivalents--3.4%
Multi-Class MBS--5.2%
Asset-Backed--11.4%
Mortgage Pass Throughs--13.7%
U.S. Government Securities--32.2%
Corporate Bonds--32.7%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 6/30/98
Inception Since
Date 1 Year 3 Years 5 Years Inception
- --------------------------------------------------------------------------------
Class A Shares
(with sales charge) 2/16/93 4.31% 5.34% 4.66% 4.96%
At Net Asset Value
(without sales charge) 9.23% 6.97% 5.63% 5.86%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 1998?
A. The Fund produced a total return of 2.31%(1) for the six-month period ended
June 30, 1998. The Lehman Municipal Bond Index,(2) which is not available for
direct investment, produced a total return of 2.69% for the same period.
Another important comparison that should be considered when measuring the
Fund's performance is how it stacks up to its peers. Lipper Analytical, a
service that ranks general municipal bond funds by total rate of return, is a
good source of this information.(3) Based on peer group comparisons, the Fund
ranked, for the first six months of 1998, 115 out of 246 funds with the same
objective. The average Lipper municipal bond fund return for that period was
2.26%.
As of June 30, 1998 the Fund's 30-day yield was 4.46%, which provides a
taxable equivalent yield of 7.38% for a person in the highest federal income tax
bracket.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. The biggest factor affecting the Fund's performance was the 51% jump in
year-to-date municipal bond new issue volume above 1997 levels. Seeing 30-year
Treasury bond yields at or close to historic lows, municipal bonds issuers have
flooded the market with new money as well as refunding bonds. In June alone,
long-term municipal bond sales jumped 20% from sales in June 1997 and reflected
the highest issuance since 1993.
The combination of this high new issue volume and continued stock market
appeal for investor dollars drove the municipal bond market to underperform long
Treasury bonds. The latter, unlike the municipal bond market, benefited in part
by investors fleeing the troubled emerging markets. Consequently, the municipal
market did not experience the Treasury market's rallies. The ratio of long-term
municipal bond yields as a percentage of Treasury yields are at 12-month highs.
Q. WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND DURING THIS PERIOD?
A. With the flood of new issues along with weak demand, buying opportunities
presented themselves. With our disciplined investment strategy we looked to swap
old bonds with lower yields and undesirable structures into new issues with
higher yields and better structures. Guiding our decisions are the bond
analytics systems we have internally developed, which help us identify the most
attractive sells and buys for maximizing portfolio performance. We continued to
avoid lower quality bonds, as the "risk-reward" of narrow credit spreads did not
justify their purchase. Additionally, we focused on the strongly secured
national trading name General Obligation and Revenue bonds since the market was
glutted with bonds and the ones we liked were available at attractive prices.
- --------------------------------------------------------------------------------
(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 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, on
an annual basis, 0.75% of the Fund's average daily net assets. Without
these expense assumptions, 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 expenses that have been deducted from the
Fund's return. 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 .
- --------------------------------------------------------------------------------
16
<PAGE>
Additionally, we tended to minimize buying insured bonds and only bought them
when we were satisfied with the underlying credit quality of the bond and would
pay little or nothing for the insurance. We have found that even generic AA
state general obligation and revenue bonds, while lower in rating than an
insured AAA bond, are better trading bonds with much more liquidity in both up
and down markets.
- --------------------------------------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND PROFILE
AS OF JUNE 30, 1998
- ------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED 6/30/98
Inception Since
Date 1 Year 3 Years 5 Years Inception
- --------------------------------------------------------------------------------
Class A Shares (with sales
charge) 2/16/93 3.29% 5.55% 3.62% 4.01%
At Net Asset Value (without
sales charge) 8.16% 7.18% 4.58% 4.90%
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
THE GUARDIAN CASH MANAGEMENT FUND
- ---------------------------------
[PHOTO]
Alexander M. Grant, Jr.
Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 1998?
A. As of June 26, 1998, the effective 7-day annualized yield for the Fund was
4.70%.(1) The Fund produced an annualized total return of 4.75%(2) in the first
half of 1998. In contrast, the effective 7-day annualized yield of Tier One
money market funds, as measured by IBC Financial Data, was 4.91% on June 26,
1998. These funds had a six-month total return of 4.95% for the period ended
June 30, 1998. 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. The Federal Reserve last changed the Fed Funds target from 5.25%
to 5.50% on March 25, 1997. 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 with 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--26 days as of June 30, 1998. The average Tier One money market
fund as measured by IBC Financial Data had an average maturity of 52 days.
Q. WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND?
A. The Guardian Cash Management Fund is a place for our investors to put their
money while they determine 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 Corporation for the Fund's portfolio. Most of the portfolio
(85.2%) was invested in commercial paper; the balance (14.8%) 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. Yields will vary
as interest rates change. Past performance is not a guarantee of future
results. Throughout the six months ending June 30, 1998, the investment
adviser for the Fund assumed the operating expenses of the Fund to the
extent that they exceeded, on an 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.
(2) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Since
June 1, 1994, the investment adviser for the Fund has been assuming the
operating expenses of the Fund to the extent they exceeed, on an annual
basis, 0.85% of the Fund's average daily net assets. Without these expense
assumptions, the performance figures would have been lower. The total
return and yield figures cited represent total return and yield for both
Class A and Class B shares. 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.
- --------------------------------------------------------------------------------
18
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998 (Unaudited)
O The Guardian Park Avenue Fund
- --------------------------------------------------------------------------------
COMMON STOCKS -- 93.0%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.7%
39,000 Alliant Techsystems, Inc.* $ 2,466,750
80,000 Cordant Technologies, Inc. 3,690,000
68,800 General Dynamics Corp. 3,199,200
48,889 Lockheed Martin Corp. 5,176,123
115,580 Northrop Grumman Corp. 11,919,188
138,950 Precision Castparts Corp. 7,416,456
98,800 Rockwell Int'l. Corp. 4,748,575
50,000 Sundstrand Corp. 2,862,500
128,200 United Technologies Corp. 11,858,500
-----------
53,337,292
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 1.7%
63,000 Alaska Air Group, Inc.* 3,437,438
125,000 America West Hldg. Corp.* 3,570,313
348,000 AMR Corp., DE* 28,971,000
43,000 Comair Hldgs., Inc. 1,327,625
100,000 Continental Airlines, Inc.* 6,087,500
75,000 Delta Airlines, Inc. 9,693,750
37,000 UAL Corp.* 2,886,000
55,973,626
-----------
- --------------------------------------------------------------------------------
APPLIANCE AND FURNITURE -- 0.8%
176,000 Ethan Allen Interiors, Inc. 8,789,000
141,000 Furniture Brands Int'l., Inc.* 3,956,812
100,000 Hon Industries, Inc. 3,400,000
80,000 Knoll Corp.* 2,360,000
60,000 Leggett & Platt, Inc. 1,500,000
180,000 Herman Miller, Inc. 4,376,250
-----------
24,382,062
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 2.1%
150,000 Chrysler Corp. 8,456,250
940,000 Ford Motor Co. 55,460,000
69,700 General Motors Corp. 4,656,831
-----------
68,573,081
- --------------------------------------------------------------------------------
AUTOMOTIVE PARTS -- 0.6%
38,000 Arvin Industries, Inc. 1,379,875
68,000 Cooper Tire & Rubber Co. 1,402,500
84,000 Goodyear Tire & Rubber Co. 5,412,750
104,500 Kaydon Corp. 3,690,156
282,933 Meritor Automotive, Inc. 6,790,392
24,000 Modine Mfg. Co. 831,000
18,000 Timken Co. 554,625
-----------
20,061,298
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.1%
56,100 Amgen, Inc.* 3,667,538
- --------------------------------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 0.9%
33,000 Centex Construction Products, Inc. 1,270,500
16,500 Crossman Communities, Inc.* 501,188
65,000 Fleetwood Enterprises, Inc. 2,600,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
150,000 D.R. Horton, Inc.* $ 3,131,250
92,500 Lafarge Corp. 3,636,406
63,000 Lennar Corp. 1,858,500
6,700 Lone Star Industries, Inc. 516,319
50,555 Martin Marietta Materials, Inc. 2,274,975
18,000 Medusa Corp. 1,129,500
62,000 Southdown, Inc. 4,425,250
65,000 USG Corp. 3,518,125
24,000 U.S. Home Corp.* 990,000
6,300 Valspar Corp. 249,637
38,600 Vulcan Materials Co. 4,118,138
-----------
30,219,788
- --------------------------------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 0.0%
40,000 AFC Cable Systems, Inc.* 1,420,000
- --------------------------------------------------------------------------------
CHEMICALS -- 3.9%
68,000 Albemarle Corp. 1,500,250
233,400 Cambrex Corp. 6,126,750
49,000 Carlisle Cos., Inc. 2,110,063
115,000 Crompton & Knowles Corp. 2,896,562
36,900 Dexter Corp. 1,173,881
270,000 Dow Chemical Co. 26,105,625
551,600 E.I. Dupont de Nemours, Inc. 41,163,150
230,000 Lyondell Petrochemical Co. 7,000,625
150,000 Millennium Chemicals, Inc. 5,081,250
153,500 Minnesota Mining & Mfg. Co. 12,615,781
146,100 Morton Int'l., Inc. 3,652,500
65,000 PPG Industries, Inc. 4,521,562
25,000 Rohm & Haas Co. 2,598,438
215,000 Solutia, Inc. 6,167,812
43,700 Union Carbide Corp. 2,332,488
-----------
125,046,737
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 3.9%
8,000 ChoicePoint, Inc.* 405,000
215,000 Computer Associates Int'l., Inc. 11,945,938
27,000 DST Systems, Inc.* 1,512,000
7,500 J.D. Edwards* 322,031
932,000 Microsoft Corp.* 101,005,500
74,000 Sterling Software, Inc.* 2,187,625
100,000 SunGuard Data Systems, Inc.* 3,837,500
65,000 Symantec Corp.* 1,698,125
36,000 Wind River Systems, Inc.* 1,291,500
-----------
124,205,219
- --------------------------------------------------------------------------------
COMPUTER SYSTEMS -- 6.1%
24,000 Apple Computer, Inc.* 687,000
325,300 Compaq Computer Corp. 9,230,387
37,200 Honeywell, Inc. 3,108,525
602,100 Int'l. Business Machines 69,128,606
459,600 Lexmark Int'l. Group, Inc.* 28,035,600
150,000 Pitney Bowes, Inc. 7,218,750
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
19
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
30,600 Sanmina Corp.* $ 1,327,275
1,465,600 Storage Technology Corp.* 63,570,400
240,200 Sun Microsystems, Inc.* 10,433,687
186,600 Western Digital Corp.* 2,204,213
------------
194,944,443
- --------------------------------------------------------------------------------
CONGLOMERATES -- 0.7%
90,000 Loews Corp. 7,841,250
190,000 Textron, Inc. 13,620,625
------------
21,461,875
- --------------------------------------------------------------------------------
CONTAINERS-METALS AND PLASTIC -- 0.1%
37,000 Aptargroup, Inc. 2,300,937
- --------------------------------------------------------------------------------
COSMETICS AND TOILETRIES -- 0.0%
14,400 Alberto-Culver Co. 365,400
15,666 Herbalife Int'l., Inc. 323,111
------------
688,511
- --------------------------------------------------------------------------------
DRUGS AND HOSPITALS -- 9.4%
1,060,000 Abbott Laboratories 43,327,500
65,820 Allegiance Corp. 3,373,275
240,000 American Home Products Corp. 12,420,000
302,000 Arterial Vascular Engineering, Inc.* 10,796,500
19,500 Biomet, Inc.* 644,719
463,200 Bristol-Myers Squibb Corp. 53,239,050
25,000 Health Care & Retirement Co.* 985,938
145,000 Lincare Hldgs., Inc.* 6,099,062
319,300 Merck & Co., Inc. 42,706,375
27,000 Patterson Dental Co.* 988,875
734,900 Pfizer, Inc. 79,874,444
27,000 Safeskin Corp.* 1,110,375
517,400 Schering-Plough Corp. 47,406,775
------------
302,972,888
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.9%
998,000 General Electric Co. 90,818,000
25,000 Hubbel, Inc. 1,040,625
------------
91,858,625
- --------------------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.1%
46,000 Analogic Corp. 2,058,500
30,600 Dynatech Corp.* 95,625
23,200 Fluke Corp. 762,700
60,000 Tektronix, Inc. 2,122,500
------------
5,039,325
- --------------------------------------------------------------------------------
ENERGY-MISCELLANEOUS -- 0.3%
495,300 Frontier Oil Corp.* 3,962,400
129,500 Giant Industries, Inc. 2,250,063
167,104 Holly Corp. 4,302,928
86,500 Howell Corp. 940,687
------------
11,456,078
- --------------------------------------------------------------------------------
ENTERTAINMENT AND LEISURE -- 0.5%
16,500 Anchor Gaming* 1,280,812
400,000 Carnival Corp. 15,850,000
------------
17,130,812
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FINANCIAL-BANKS -- 9.2%
25,000 Associated Bank Corp. $ 940,625
471,000 BankAmerica Corp. 40,712,063
221,944 Bank of Boston Corp. 12,345,635
130,000 Bank of New York, Inc. 7,889,375
53,000 BB&T Corp. 3,584,125
13,000 CCB Financial Corp. 1,381,250
15,000 Centura Banks, Inc. 937,500
768,520 Chase Manhattan Corp. 58,023,260
153,364 Citicorp 22,889,577
81,000 City National Corp. 2,991,937
94,050 Comerica, Inc. 6,230,813
67,875 Commerce Bankshares, Inc. 3,313,148
22,000 Community First Bankshares 576,125
20,100 Cullen Frost Bankers, Inc. 1,090,425
51,255 Fifth Third Bancorp* 3,229,065
36,200 First Chicago NBD Corp. 3,208,225
40,000 First Merit Corp. 1,165,000
482,200 First Union Corp. 28,088,150
235,000 Fleet Financial Group, Inc. 19,622,500
51,989 Hubco, Inc. 1,861,856
90,000 Imperial Bancorp* 2,700,000
92,200 KeyCorp 3,284,625
14,631 M & T Bank Corp. 8,105,574
187,600 Mellon Bank Corp. 13,061,650
61,060 National City Corp. 4,335,260
165,496 Norwest Corp. 6,185,413
34,500 Premier Bancshares, Inc., GA 914,250
67,500 Star Banc Corp. 4,311,563
201,642 Summit Bancorp 9,577,995
38,000 Union BanCal Corp. 3,667,000
150,000 U.S. Bancorp, Inc. 6,450,000
15,000 U.S. Trust Corp. 1,143,750
52,000 Webster Financial Corp. 1,729,000
21,500 Wells Fargo & Co. 7,933,500
36,000 Westamerica Bancor 1,156,500
49,600 Zions Bancorp 2,635,000
------------
297,271,734
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 7.9%
302,400 American Express Co. 34,473,600
200,495 Associates First Capital Corp. 15,413,053
155,000 Countrywide Credit Industries, Inc. 7,866,250
25,000 Dain Rauscher Corp. 1,368,750
23,000 Donaldson, Lufkin & Jenrette Sec. Corp. 1,168,688
10,000 Duff & Phelps Credit Rating Co. 557,500
124,800 A.G. Edwards, Inc. 5,327,400
154,800 Federal Home Loan Mortgage Corp. 7,285,275
396,500 Federal National Mortgage Assn. 24,087,375
186,000 Franklin Resources, Inc. 10,044,000
125,000 H & R Block, Inc. 5,265,625
200,000 Jefferies Group, Inc. 8,200,000
109,333 Legg Mason, Inc. 6,293,481
122,000 Lehman Brothers Hldgs., Inc. 9,462,625
164,800 McDonald & Co. Investments, Inc. 5,407,500
- --------------------------------------------------------------------------------
* Non-income producineg security. See notes to financial statements.
20
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
213,500 Merrill Lynch & Co., Inc. $ 19,695,375
251,775 Morgan Keegan, Inc. 6,514,678
180,000 Morgan Stanley Dean Witter 16,447,500
175,000 Paine Webber Group, Inc. 7,503,125
26,200 Ragen MacKenzie Group, Inc.* 396,275
151,425 Raymond James Financial, Inc. 4,533,286
175,000 SLM Hldg. Corp. 8,575,000
787,500 Travelers Group, Inc. 47,742,187
------------
253,628,548
- --------------------------------------------------------------------------------
FINANCIAL-THRIFT -- 1.6%
16,164 H.F. Ahmanson & Co. 1,147,644
39,200 Astoria Financial Corp. 2,097,200
308,593 BankAtlantic Bancorp, Inc. 3,762,130
16,000 California Federal Bancorp, Inc.* 344,000
216,292 Charter One Financial, Inc. 7,286,337
70,500 Coastal Bancorp, Inc. 1,727,250
20,000 Coast Federal Litigation Trust* 302,500
102,150 Commercial Federal Corp. 3,230,494
220,000 Dime Bancorp, Inc. 6,586,250
46,400 Golden State Bancorp, Inc.* 1,380,400
46,400 Golden State Bancorp, Inc.* (warrants) 246,500
108,000 Greenpoint Financial Corp. 4,063,500
76,000 Long Island Bancorp, Inc. 4,617,000
40,590 MAF Bancorp, Inc. 1,476,461
20,960 Pacific Crest Capital, Inc.* 369,420
127,200 Progressive Bank, Inc. 4,968,750
525,949 Sovereign Bancorp, Inc. 8,595,979
------------
52,201,815
- --------------------------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 1.4%
66,220 CKE Restaurants, Inc. 2,731,575
48,256 Earthgrains Co. 2,696,304
189,000 Fortune Brands, Inc. 7,264,688
100,000 Interstate Bakeries Corp. 3,318,750
338,700 Philip Morris Cos., Inc. 13,336,313
72,600 Pioneer Hi-Bred Int'l., Inc. 3,003,825
125,000 Sara Lee Corp. 6,992,188
38,000 Smithfield Foods, Inc.* 1,159,000
63,000 Universal Corp., VA 2,354,625
------------
42,857,268
- --------------------------------------------------------------------------------
FOOTWEAR -- 0.3%
107,200 Footstar, Inc.* 5,145,600
49,000 Payless ShoeSource, Inc.* 3,610,687
64,000 Stride Rite Corp. 964,000
------------
9,720,287
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.5%
186,700 Dial Corp. 4,842,531
478,600 Procter & Gamble Co 43,582,512
------------
48,425,043
- --------------------------------------------------------------------------------
INSURANCE -- 6.1%
37,500 Allied Group, Inc. 1,755,469
487,800 Allstate Corp. 44,664,188
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
30,000 W.R. Berkley Corp. $ 1,201,875
134,000 Chicago Title Corp.* 6,189,125
46,000 Chubb Corp. 3,697,250
153,000 Cigna Corp. 10,557,000
40,000 CMAC Investment Corp. 2,460,000
24,000 Enhance Financial Svcs. Group, Inc. 810,000
130,000 Equitable Cos., Inc. 9,741,875
98,000 Everest Reinsurance Hldgs 3,766,875
40,500 Executive Risk, Inc. 2,986,875
33,000 Fidelity National Financial, Inc. 1,313,812
37,000 Financial Sec. Assur. Hldgs. Ltd. 2,173,750
74,000 General RE Corp. 18,759,000
90,100 Hartford Financial Svcs. Group, Inc. 10,305,187
150,000 Horace Mann Educators Corp. 5,175,000
54,000 Jefferson Pilot Corp. 3,128,625
63,120 Liberty Financial Cos., Inc. 2,177,640
118,000 Lincoln National Corp., Inc. 10,782,250
237,000 Marsh & McLennan Cos., Inc. 14,323,687
50,600 MBIA, Inc. 3,788,675
30,000 Mercury General Corp. 1,933,125
206,000 MGIC Investment Corp. 11,754,875
229,500 Old Republic Int'l. Corp. 6,727,219
134,000 Penn America Group, Inc.* 1,809,000
58,000 Reinsurance Group of America* 2,976,125
56,706 ReliaStar Financial Group 2,721,888
130,045 St. Paul Cos., Inc. 5,470,018
92,250 State Auto Financial Corp. 2,940,469
8,000 Unitrin, Inc. 556,000
------------
196,646,877
- --------------------------------------------------------------------------------
LODGING -- 0.1%
100,000 Fairfield Communities, Inc.* 1,918,750
135,000 Prime Hospitality Corp.* 2,354,063
------------
4,272,813
- --------------------------------------------------------------------------------
MACHINERY AND EQUIPMENT -- 0.7%
100,500 AAR Corp. 2,971,031
72,500 Dover Corp. 2,483,125
93,000 Eaton Corp. 7,230,750
54,100 Illinois Tool Works, Inc. 3,607,794
102,500 Parker Hannifin Corp. 3,907,813
25,000 SPX Corp.* 1,609,375
------------
21,809,888
- --------------------------------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 3.0%
120,400 Dayton Hudson Corp. 5,839,400
125,000 Federated Department Stores, Inc.* 6,726,562
215,000 Fred Meyer, Inc., DE* 9,137,500
87,000 Shopko Stores, Inc.* 2,958,000
40,000 Stein Mart, Inc.* 540,000
376,800 TJX Cos., Inc. 9,090,300
1,001,900 Wal-Mart Stores, Inc. 60,865,425
------------
95,157,187
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
21
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MERCHANDISING-DRUGS -- 0.6%
38,000 Cardinal Health, Inc. $ 3,562,500
261,956 CVS Corp. 10,199,912
37,000 General Nutrition Cos., Inc.* 1,151,625
75,000 Walgreen Co. 3,098,437
------------
18,012,474
- --------------------------------------------------------------------------------
MERCHANDISING-FOOD -- 1.1%
240,000 Albertson's, Inc. 12,435,000
377,650 Safeway, Inc.* 15,365,634
20,000 Suiza Foods Corp.* 1,193,750
113,000 Supervalu, Inc. 5,014,375
------------
34,008,759
- --------------------------------------------------------------------------------
MERCHANDISING-MASS -- 0.1%
43,500 Brylane, Inc.* 2,001,000
20,000 Lands End, Inc.* 632,500
------------
2,633,500
- --------------------------------------------------------------------------------
MERCHANDISING-SPECIAL -- 2.9%
42,300 Best Buy, Inc.* 1,530,625
69,000 BJ's Wholesale Club, Inc.* 2,803,125
71,000 The Dress Barn* 1,766,125
360,000 GAP, Inc. 22,185,000
370,000 Home Depot, Inc. 30,733,125
46,600 Lowes Cos., Inc.* 1,890,213
237,500 Pier 1 Imports, Inc. 5,670,312
143,750 Proffitts, Inc.* 5,803,906
159,000 Ross Stores, Inc.* 6,837,000
250,000 Tandy Corp. 13,265,625
32,500 Tiffany & Co., Inc. 1,560,000
------------
94,045,056
- --------------------------------------------------------------------------------
METALS-MISCELLANEOUS -- 0.1%
47,619 Alumax, Inc. 2,208,331
- --------------------------------------------------------------------------------
MISCELLANEOUS-CAPITAL GOODS -- 0.1%
69,000 Aeroquip-Vickers, Inc. 4,027,875
- --------------------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 0.8%
70,000 American Greetings Corp. 3,565,625
174,200 Cognizant Corp.* 10,974,600
36,000 Interpublic Group Cos., Inc. 2,184,750
90,000 A.C. Nielsen Corp.* 2,272,500
190,000 Valassis Communications, Inc.* 7,326,875
------------
26,324,350
- --------------------------------------------------------------------------------
NATURAL GAS-DIVERSIFIED -- 0.1%
153,000 Mitchell Energy & Dev. Corp. 2,945,250
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCING -- 1.6%
78,400 Barrett Resources Corp.* 2,935,100
238,900 Basin Exploration, Inc.* 4,210,612
64,300 Callon Petroleum Co.* 920,294
263,600 Chieftain Int'l., Inc.* 6,244,025
153,000 Devon Energy Corp. 5,345,437
190,401 Diamond Offshore Drilling, Inc. 7,616,009
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
26,100 Forcenergy Gas Exploration, Inc.* $ 464,906
97,200 Meridian Resource Corp.* 686,475
497,300 Petromet Resources Ltd.* 1,118,925
46,000 Petsec Energy Ltd.* 744,625
60,000 Pride Int'l., Inc.* 1,016,250
570,000 Rigel Energy Corp.* 5,190,446
204,600 St. Mary Land & Exploration Co. 4,935,975
91,300 Snyder Oil Corp. 1,820,294
152,100 Vastar Resources, Inc. 6,644,869
------------
49,894,242
- --------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 2.2%
150,000 BJ Services Co.* 4,359,375
85,960 Camco Int'l., Inc. 6,694,135
64,000 Cooper Cameron Corp.* 3,264,000
82,900 ENSCO Int'l., Inc. 1,440,388
121,000 Halliburton Co. 5,392,062
190,500 Input/Output, Inc.* 3,393,281
466,400 Nabors Industries, Inc.* 9,240,550
200,000 Noble Drilling Corp.* 4,812,500
127,700 Offshore Logistics, Inc.* 2,266,675
215,600 Schlumberger Ltd. 14,728,175
80,000 Smith Int'l., Inc.* 2,785,000
52,000 Transocean Offshore, Inc. 2,314,000
144,800 Varco Int'l., Inc.* 2,868,850
30,000 Veritas DGC, Inc.* 1,498,125
112,100 Weatherford Enterra, Inc.* 4,161,712
170,000 Willbros Group, Inc.* 2,656,250
------------
71,875,078
- --------------------------------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 0.3%
142,000 Sun, Inc. 5,511,375
284,000 Tesoro Petroleum, Inc.* 4,508,500
------------
10,019,875
- --------------------------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 3.7%
168,800 Chevron Corp. 14,020,950
1,093,700 Exxon Corp. 77,994,481
346,600 Mobil Corp. 26,558,225
------------
118,573,656
- --------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.5%
34,285 Deltic Timber Corp. 859,268
215,000 Kimberly Clark Corp. 9,863,125
111,500 Rayonier, Inc. 5,129,000
------------
15,851,393
- --------------------------------------------------------------------------------
PUBLISHING-NEWS -- 0.8%
45,000 Central Newspapers, Inc. 3,138,750
86,400 Gannett Co., Inc. 6,139,800
191,400 Harte-Hanks Communications 4,940,513
80,000 New York Times Co. 6,340,000
50,000 Tribune Co. 3,440,625
5,700 Washington Post Co. 3,283,200
------------
27,282,888
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
22
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
RAILROADS -- 0.4%
40,301 Burlington Northern Santa Fe $ 3,957,054
182,500 Kansas City Southern Inds., Inc. 9,056,563
------------
13,013,617
- --------------------------------------------------------------------------------
REAL ESTATE -- 0.1%
63,000 LNR Property Corp. 1,614,375
- --------------------------------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 1.0%
70,000 Burlington Industries, Inc.* 984,375
93,000 Liz Claiborne, Inc. 4,859,250
196,000 Jones Apparel Group, Inc.* 7,166,250
29,000 Kellwood Co. 1,036,750
37,500 Nautica Enterprises, Inc.* 1,005,469
15,000 St. John Knits, Inc. 579,375
215,000 Unifi, Inc. 7,363,750
136,000 V.F. Corp. 7,004,000
53,000 Westpoint Stevens, Inc.* 1,749,000
------------
31,748,219
- --------------------------------------------------------------------------------
TRANSPORTATION-MISCELLANEOUS -- 0.7%
192,000 Airborne Freight Corp. 6,708,000
37,000 Alexander & Baldwin, Inc. 1,077,625
22,000 Expeditors Int'l. Wash., Inc. 968,000
108,000 GATX Corp.* 4,738,500
239,500 Maritrans, Inc. 2,170,469
120,000 Sea Containers Ltd.* 4,590,000
42,000 Trinity Industries, Inc. 1,743,000
------------
21,995,594
- --------------------------------------------------------------------------------
TRUCKERS -- 0.1%
18,000 FRP Pptys., Inc.* 585,000
49,500 Rollins Truck Leasing Corp. 612,562
60,000 U.S. Freightways Corp. 1,970,625
56,250 Werner Enterprises, Inc. 1,072,266
------------
4,240,453
- --------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 1.3%
22,600 Cleco Corp. 672,350
134,464 Duke Energy Co. 7,966,992
85,600 Energy East Corp. 3,563,100
185,000 Florida Progress Corp. 7,608,125
210,000 FPL Group, Inc. 13,230,000
57,100 IPALCO Enterprises 2,537,381
43,420 LG & E Energy Corp. 1,175,054
21,500 Minnesota Power & Light Co. 854,625
58,000 NIPSCO Industries, Inc. 1,624,000
58,500 Texas Utilities Co. 2,435,063
------------
41,666,690
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
UTILITIES-GAS AND PIPELINE -- 0.1%
5,100 Indiana Energy, Inc. $ 152,363
45,000 KN Energy, Inc. 2,438,437
33,700 NICOR, Inc. 1,352,212
------------
3,943,012
- --------------------------------------------------------------------------------
UTILITIES-TELECOMMUNICATIONS -- 6.8%
29,000 Aliant Communications, Inc. 795,688
680,700 Ameritech Corp. 30,546,412
666,200 AT & T Corp. 38,056,675
650,000 Bell Atlantic Corp. 29,656,250
858,100 BellSouth Corp. 57,599,963
440,000 GTE Corp.* 24,475,000
386,200 SBC Communications, Inc. 15,448,000
120,000 Sprint Corp.* 8,460,000
285,000 U.S. West, Inc.* 13,395,000
------------
218,432,988
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $2,096,367,434) 2,991,089,270
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.4%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$205,104,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/98, maturity
value $205,136,475 at 5.70%,
due 7/1/98 (collateralized
by $5,105,000 U.S. Treasury
Notes, 5.50%, due 3/31/03,
by $25,505,000 U.S. Treasury
Notes, 5.625%, due 12/31/99,
by $20,405,000 U.S. Treasury
Notes, 6.00%, due 6/30/99,
by $51,010,000 U.S. Treasury
Notes, 6.625%, due 6/30/01,
by $56,215,000 U.S. Treasury
Notes, 6.75%, due 5/31/99, and
by $51,005,000 U.S. Treasury
Notes, 6.75%, due 4/30/00) $ 205,104,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $205,104,000) 205,104,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.4%
(COST $2,301,471,434) 3,196,193,270
CASH, RECEIVABLES AND OTHER
ASSETS LESS LIABILITIES -- 0.6% 20,040,489
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $3,216,233,759
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
23
<PAGE>
o THE GUARDIAN PARK AVENUE SMALL CAP FUND
- --------------------------------------------------------------------------------
COMMON STOCKS -- 94.6%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.5%
40,000 Kaman Corp. $ 761,250
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 1.3%
29,000 Airnet Systems, Inc.* 467,625
13,800 Alaska Air Group, Inc.* 752,963
30,000 America West Hldg. Corp.* 856,875
----------
2,077,463
- --------------------------------------------------------------------------------
APPLIANCE AND FURNITURE -- 3.2%
66,000 Ethan Allen Interiors, Inc. 3,295,875
42,000 Furniture Brands Int'l., Inc.* 1,178,625
35,000 SMed Int'l., Inc.* 630,000
----------
5,104,500
- --------------------------------------------------------------------------------
AUTOMOTIVE PARTS -- 0.5%
8,700 Arvin Industries, Inc. 315,919
52,000 Automobile Protection Corp.* 516,750
----------
832,669
- --------------------------------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 6.8%
22,900 Cameron Ashley Building Products* 386,438
34,000 Crossman Communities, Inc.* 1,032,750
45,000 Giant Cement Hldgs., Inc.* 1,288,125
43,000 D. R. Horton, Inc.* 897,625
42,000 Lennar Corp. 1,239,000
22,800 Lone Star Industries, Inc. 1,757,025
41,000 National RV Hldgs., Inc.* 1,850,125
10,000 NCI Building Systems, Inc.* 577,500
21,400 Southdown, Inc. 1,527,425
112,000 Stratus Pptys., Inc.* 476,000
----------
11,032,013
- --------------------------------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS -- 5.1%
40,000 Cultural Access World Wide* 390,000
57,500 Dispatch Mgt. Svcs. Corp.* 1,444,688
42,000 Dynamex, Inc.* 509,250
54,000 Hawk Corp.* 951,750
105,000 Hawker Pacific Aerospace* 1,168,125
33,000 Ladish, Inc.* 412,500
50,000 LMI Aerospace* 503,120
50,000 Market Facts, Inc.* 1,087,500
53,100 Western Staff Svcs., Inc.* 982,350
50,000 Zomax Optical Media, Inc.* 768,750
----------
8,218,033
- --------------------------------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 5.3%
136,600 AFC Cable Systems, Inc.* 4,849,300
10,300 Alliant Techsystems, Inc.* 651,475
29,500 Centex Construction Products, Inc. 1,135,750
23,300 Chart Industries, Inc. 556,288
24,000 Kaydon Corp. 847,500
22,000 National Computer Systems, Inc. 528,000
----------
8,568,313
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
CHEMICALS-- 2.8%
13,200 AptarGroup, Inc. $ 820,875
28,000 Cambrex Corp. 735,000
34,600 LeaRonal, Inc. 826,075
39,000 MacDermid, Inc. 1,101,750
11,000 Minerals Technologies, Inc.* 559,625
20,000 Myers Industries, Inc. 480,000
----------
4,523,325
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.9%
53,000 Ducocorp, Inc.* 347,813
44,000 May & Speh, Inc.* 874,500
13,800 National Instruments Corp.* 493,350
11,400 Visio Corp.* 544,350
24,000 Wind River Systems, Inc.* 861,000
----------
3,121,013
- --------------------------------------------------------------------------------
COMPUTER SYSTEMS -- 1.7%
50,000 Dunn Computer Corp., VA* 412,500
16,500 Henry Jack & Associates, Inc . 567,188
53,600 HTE, Inc.* 723,600
85,000 The Intercept Group, Inc.* 632,188
30,000 Sandisk Corp.* 414,375
----------
2,749,851
- --------------------------------------------------------------------------------
DRUGS AND HOSPITALS -- 3.0%
18,600 Boron LePore & Associates, Inc.* 706,800
36,000 Depotech Corp.* 56,250
39,000 Genesis Health Ventures, Inc.* 975,000
11,500 Integrated Health Svcs., Inc. 431,250
75,000 Iomed, Inc.* 384,375
17,000 Jones Pharma, Inc. 563,125
38,000 King Pharmaceuticals, Inc.* 532,000
8,300 Maxxim Medical, Inc.* 240,700
20,000 Respironics, Inc.* 311,250
25,650 United Payors & United Providers, Inc.* 580,331
----------
4,781,081
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.7%
30,000 Daisytek Int'l. Corp.* 763,125
60,000 EFTC Corp.* 780,000
22,600 Esterline Technologies Corp.* 471,775
17,500 Kopin Corp.* 336,875
22,000 Power One, Inc.* 207,625
4,600 Sanmina Corp.* 199,525
----------
2,758,925
- --------------------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.6%
55,000 FARO Technologies, Inc.* 580,938
26,000 SMART Modular Technologies, Inc.* 380,250
----------
961,188
- --------------------------------------------------------------------------------
ENERGY-MISCELLANEOUS -- 0.7%
135,000 Frontier Oil Corp.* 1,080,000
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
24
<PAGE>
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ENTERTAINMENT AND LEISURE -- 0.7%
13,800 Anchor Gaming* $ 1,071,225
- --------------------------------------------------------------------------------
FINANCIAL-BANKS -- 3.8%
19,400 Cullen Frost Bankers, Inc. 1,052,450
32,411 Fifth Third Bancorp* 2,041,909
3,500 Prime Bancshares, Inc. 88,812
5,000 Republic Banking Corp. of Florida 80,000
20,400 Silicon Valley Bancshares* 726,112
17,200 U.S. Bancorp, Inc. 1,329,775
23,100 Westamerica Bancorp 742,088
----------
6,061,146
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 3.4%
14,000 Dain Rauscher Corp. 766,500
25,000 DVI, Inc.* 637,500
30,000 Federated Investors, Inc., PA* 555,000
23,300 Freedom Securities Corp.* 422,313
8,300 Jefferies Group, Inc. 340,300
38,000 McDonald & Co. Investments, Inc. 1,246,875
30,000 Morgan Keegan, Inc. 776,250
29,600 Ragen Mackenzie Group, Inc.* 447,700
14,000 Southwest Securities Group, Inc. 315,000
----------
5,507,438
- --------------------------------------------------------------------------------
FINANCIAL-THRIFT -- 1.7%
5,500 Astoria Financial Corp. 294,250
41,250 BankAtlantic Bancorp, Inc. 487,266
10,500 Coast Federal Litigation Trust* 158,812
24,800 Commercial Federal Corp. 784,300
42,422 Peoples Heritage Financial Group 1,002,220
----------
2,726,848
- --------------------------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 3.5%
11,000 CKE Restaurants, Inc. 453,750
40,900 Earthgrains Co. 2,285,288
47,800 Fresh Foods, Inc.* 717,000
50,000 Hain Food Group, Inc.* 1,293,750
56,000 Omega Protein Corp.* 861,000
----------
5,610,788
- --------------------------------------------------------------------------------
FOOTWEAR -- 1.0%
16,000 Footstar, Inc.* 768,000
43,300 Shoe Carnival, Inc.* 600,787
7,700 Wolverine World Wide, Inc. 166,994
----------
1,535,781
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.8%
27,000 Home Products Int'l., Inc.* 313,875
20,250 Oneida Ltd. 620,156
10,800 Williams-Sonoma, Inc.* 343,575
----------
1,277,606
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
INSURANCE -- 10.5%
45,600 American Heritage Life Investments $ 1,054,500
17,500 American Insurance Group* 205,625
12,750 W.R. Berkley Corp. 510,797
27,000 Chicago Title Corp.* 1,247,062
12,300 CMAC Investment Corp. 756,450
39,200 Enhance Financial Svcs. Group, Inc. 1,323,000
9,000 Executive Risk, Inc. 663,750
124,960 Fidelity National Financial, Inc. 4,974,970
12,000 Financial Sec. Assur. Hldgs. Ltd. 705,000
14,000 Harleysville Group, Inc. 290,500
26,000 Landamerica Financial Group, Inc. 1,488,500
3,800 Markel Corp.* 676,400
72,400 Penn America Group, Inc. 977,400
25,000 Presidential Life Corp.* 534,375
14,000 Reinsurance Group of America* 718,375
23,000 State Auto Financial Corp. 733,125
----------
16,859,829
- --------------------------------------------------------------------------------
LODGING -- 1.5%
30,200 Fairfield Communities, Inc.* 579,463
65,000 ILX, Inc.* 381,875
66,400 Signature Resorts, Inc.* 1,095,600
24,000 Silverleaf Resorts, Inc.* 366,000
----------
2,422,938
- --------------------------------------------------------------------------------
MACHINERY AND EQUIPMENT -- 2.5%
16,200 AAR Corp. 478,913
18,000 Manitowoc Co., Inc. 725,625
61,000 Northwest Pipe Co.* 1,433,500
10,500 SPX Corp.* 675,937
8,250 Varlen Corp. 284,625
15,200 Wabash National Corp.* 391,400
----------
3,990,000
- --------------------------------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 1.0%
49,500 Shopko Stores, Inc.* 1,683,000
- --------------------------------------------------------------------------------
MERCHANDISING-DRUGS -- 0.0%
1,700 Duane Reade, Inc.* 51,000
- --------------------------------------------------------------------------------
MERCHANDISING-FOOD -- 0.6%
32,200 Smithfield Foods, Inc.* 982,100
- --------------------------------------------------------------------------------
MERCHANDISING-MASS -- 1.5%
26,400 Brylane, Inc.* 1,214,400
41,000 Lands End, Inc.* 1,296,624
----------
2,511,024
- --------------------------------------------------------------------------------
MERCHANDISING-SPECIAL -- 7.1%
49,000 1-800 Contacts, Inc.* 747,250
51,700 American Coin Merchandising* 1,021,075
27,000 Ames Department Stores, Inc.* 710,438
8,400 A.C. Moore Arts & Crafts, Inc.* 136,500
32,000 BJ's Wholesale Club, Inc.* 1,300,000
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
25
<PAGE>
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
22,000 The Dress Barn* $ 547,250
16,000 Freds, Inc. 408,000
40,000 Genesis Direct, Inc.* 445,000
70,000 The Good Guys, Inc.* 942,812
60,000 Homebase, Inc.* 476,250
21,000 Hughes Supply, Inc. 769,125
23,300 Miami Computer Supplies* 372,800
43,000 Pier 1 Imports, Inc. 1,026,624
10,000 Stage Stores, Inc.* 452,500
36,000 Stein Mart, Inc.* 486,000
18,000 Trans World Entertainment Corp.* 776,250
24,000 Wet Seal, Inc.* 768,000
----------
11,385,874
- --------------------------------------------------------------------------------
METALS-STEEL -- 0.7%
39,500 Quanex Corp. 1,197,344
- --------------------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 2.2%
105,000 Innotrac Corp.* 997,500
64,200 Mail Well Hldgs., Inc.* 1,392,336
17,700 StaffMark, Inc.* 648,263
15,000 Valassis Communications, Inc.* 578,436
----------
3,616,535
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCING -- 3.6%
53,000 Basin Exploration, Inc.* 934,125
125,000 Beau Canada Exploration Ltd.* 148,653
40,000 Bellwether Exploration Co.* 312,500
30,500 Callon Petroleum Co.* 436,531
350,600 Canadian 88 Energy Corp.* 1,468,137
38,000 Chieftain Int'l., Inc.* 900,125
144,000 Petromet Resources Ltd.* 324,000
24,000 Rigel Energy Corp.* 218,545
27,800 St. Mary Land & Exploration Co. 670,675
19,000 Snyder Oil Corp. 378,813
----------
5,792,104
- --------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 1.1%
6,000 Friede Goldman Int'l., Inc.* 173,250
10,000 IRI Int'l. Corp.* 107,500
13,300 Unifab Int'l., Inc.* 216,125
26,600 Varco Int'l., Inc.* 527,013
51,000 Willbros Group, Inc.* 796,875
----------
1,820,763
- --------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.3%
18,800 Deltic Timber Corp. 471,175
- --------------------------------------------------------------------------------
POLLUTION CONTROL -- 0.5%
45,000 Imco Recycling, Inc. 832,500
- --------------------------------------------------------------------------------
PUBLISHING-NEWS -- 1.3%
15,000 Bowne & Co., Inc. 675,000
32,000 Harte-Hanks Communications 826,000
6,000 Pulitzer Publishing Co. 535,500
----------
2,036,500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 3.5%
16,000 American Gen. Hospitality Corp. $ 340,000
8,848 Apartment Investment & Mgt. Co. 349,495
18,000 Arden Realty, Inc. 465,750
18,000 Brandywine Realty Trust 402,750
15,400 Camden Ppty. Trust 458,150
13,000 CCA Prison Realty Trust 398,124
16,000 Colonial Pptys. Trust, Inc. 496,000
14,500 Commercial Net Lease Realty, Inc. 234,719
15,000 Eldertrust 257,812
16,000 Glenborough Realty Trust 422,000
30,000 Innkeepers USA Trust 378,750
8,000 JDN Realty Corp. 255,000
69,000 Sunstone Hotel Investors, Inc. 918,563
9,600 Tower Realty Trust, Inc. 214,800
----------
5,591,913
- --------------------------------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 1.6%
21,000 Burlington Industries, Inc.* 295,312
2,800 Columbia Sportswear Co.* 53,200
13,000 Mohawk Industires, Inc.* 411,938
13,000 Nautica Enterprises, Inc.* 348,562
9,300 St. John Knits, Inc. 359,213
55,000 Tropical Sportswear Int'l. Corp.* 1,168,750
----------
2,636,975
- --------------------------------------------------------------------------------
TRANSPORTATION-MISCELLANEOUS -- 3.8%
41,200 Airborne Freight Corp. 1,439,425
23,000 Budget Group, Inc.* 734,563
5,700 Central Parking Corp. 265,050
37,500 Dollar Thrifty Automotive Group, Inc.* 496,875
31,000 Eagle USA Airfreight, Inc.* 1,075,313
17,300 Expeditors Int'l. Wash., Inc. 761,200
26,250 Rollins Truck Leasing Corp. 324,844
25,700 Sea Containers Ltd. 983,025
----------
6,080,295
- --------------------------------------------------------------------------------
TRUCKERS -- 0.6%
21,500 U.S. Freightways Corp. 706,141
16,250 Werner Enterprises, Inc. 309,766
----------
1,015,907
- --------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 0.1%
2,000 Minnesota Power & Light Co. 79,500
- --------------------------------------------------------------------------------
UTILITIES-GAS AND PIPELINE -- 0.2%
7,700 Cleco Corp. 229,075
4,300 Indiana Energy, Inc. 128,462
----------
357,537
- --------------------------------------------------------------------------------
UTILITIES-TELECOMMUNICATIONS -- 0.4%
55,000 Startec Global Communications Corp.* 632,500
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $131,843,816) 152,407,769
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
26
<PAGE>
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$10,200,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/98, maturity
value $10,201,615 at 5.70%
due 7/1/98 (collateralized by
$10,410,000 U.S. Treasury
Notes, 6.75% due 5/31/99) $ 10,200,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $10,200,000) 10,200,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.9%
(COST $142,043,816) 162,607,769
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.9%) (1,528,611)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $161,079,158
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
27
<PAGE>
o THE GUARDIAN ASSET ALLOCATION FUND
COMMON STOCKS -- 22.1%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.5%
2,215 Lockheed Martin Corp. $ 234,513
5,000 Precision Castparts Corp. 266,875
3,900 Rockwell Int'l. Corp. 187,444
2,900 United Technologies Corp. 268,250
----------
957,082
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.5%
9,000 AMR Corp., DE* 749,250
4,000 Continental Airlines, Inc.* 243,500
----------
992,750
- --------------------------------------------------------------------------------
AUTOMOTIVE PARTS -- 0.1%
1,600 Goodyear Tire & Rubber Co. 103,100
1,299 Meritor Automotive, Inc. 31,176
----------
134,276
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.1%
2,600 Amgen, Inc.* 169,975
- --------------------------------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 0.1%
2,289 Martin Marietta Materials, Inc. 103,005
- --------------------------------------------------------------------------------
CHEMICALS -- 1.1%
21,600 E.I. Dupont de Nemours, Inc. 1,611,900
2,200 Morton Int'l., Inc. 55,000
3,000 PPG Industries, Inc. 208,688
2,000 Rohm & Haas Co. 207,875
----------
2,083,463
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 1.1%
300 ChoicePoint, Inc.* 15,187
20,000 Microsoft Corp.* 2,167,500
----------
2,182,687
- --------------------------------------------------------------------------------
COMPUTER SYSTEMS -- 1.4%
6,300 Compaq Computer Corp. 178,762
1,500 Honeywell, Inc. 125,344
12,500 Lexmark Int'l. Group, Inc.* 762,500
6,000 Pitney Bowes, Inc. 288,750
26,000 Storage Technology Corp.* 1,127,750
3,000 Sun Microsystems, Inc.* 130,312
4,600 Western Digital Corp.* 54,337
----------
2,667,755
- --------------------------------------------------------------------------------
CONGLOMERATES -- 1.0%
12,500 Loews Corp. 1,089,062
12,000 Textron, Inc. 860,250
----------
1,949,312
- --------------------------------------------------------------------------------
DRUGS AND HOSPITALS -- 1.3%
5,000 Allegiance Corp. 256,250
7,400 Bristol-Myers Squibb Corp. 850,537
3,400 Pfizer, Inc. 369,537
11,800 Schering-Plough Corp. 1,081,175
----------
2,557,499
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.9%
40,200 General Electric Co. $ 3,658,200
- --------------------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.0%
2,500 Dynatech Corp.* 7,813
- --------------------------------------------------------------------------------
FINANCIAL-BANKS -- 3.9%
30,000 BankAmerica Corp. 2,593,125
9,964 Bank of Boston Corp. 554,248
22,808 Chase Manhattan Corp. 1,722,004
2,800 Citicorp 417,900
3,750 Comerica, Inc. 248,438
14,200 First Union Corp. 827,150
3,400 KeyCorp 121,125
5,200 Mellon Bank Corp. 362,050
4,500 Star Banc Corp. 287,438
1,500 Union BanCal Corp. 144,750
2,400 Zions Bancorp 127,500
----------
7,405,728
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 2.8%
3,000 Countrywide Credit Industries, Inc. 152,250
30,000 A.G. Edwards, Inc. 1,280,625
7,200 Federal Home Loan Mortgage Corp. 338,850
12,000 Federal National Mortgage Assn. 729,000
6,000 Franklin Resources, Inc. 324,000
6,000 Merrill Lynch & Co., Inc. 553,500
30,000 Travelers Group, Inc. 1,818,750
----------
5,196,975
- --------------------------------------------------------------------------------
FINANCIAL-THRIFT -- 0.3%
5,600 Astoria Financial Corp. 299,600
1,575 CommercialFederal Corp. 49,809
4,000 Greenpoint Financial Corp. 150,500
----------
499,909
- --------------------------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 0.4%
800 Earthgrains Co. 44,700
3,000 Fortune Brands, Inc. 115,312
4,000 Interstate Bakeries Corp. 132,750
11,900 Philip Morris Cos., Inc. 468,563
----------
761,325
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.3%
6,200 Procter & Gamble Co. 564,587
- --------------------------------------------------------------------------------
INSURANCE -- 0.9%
4,700 Allstate Corp. 430,344
1,000 Chubb Corp. 80,375
700 General RE Corp. 177,450
2,500 Hartford Financial Svcs. Group, Inc. 285,938
2,700 Marsh & McLennan Cos., Inc. 163,181
800 MBIA, Inc. 59,900
8,400 MGIC Investment Corp. 479,325
----------
1,676,513
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
28
<PAGE>
THE GUARDIAN ASSET ALLOCATION FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MACHINERY AND EQUIPMENT -- 0.0%
600 Eaton Corp. $ 46,650
- --------------------------------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 0.1%
4,800 Dayton Hudson Corp. 232,800
- --------------------------------------------------------------------------------
MERCHANDISING-DRUGS -- 0.1%
5,304 CVS Corp. 206,525
- --------------------------------------------------------------------------------
MERCHANDISING-FOOD -- 0.4%
19,274 Safeway, Inc.* 784,211
- --------------------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 0.1%
2,700 Cognizant Corp.* 170,100
1,500 Interpublic Group Cos., Inc. 91,031
----------
261,131
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCING -- 0.4%
3,200 Barrett Resources Corp.* 119,800
8,000 Chieftain Int'l., Inc.* 189,500
10,000 Devon Energy Corp. 349,375
4,400 Diamond Offshore Drilling, Inc. 176,000
----------
834,675
- --------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 0.6%
3,600 ENSCO Int'l., Inc. 62,550
5,400 Halliburton Co. 240,637
11,500 Nabors Industries, Inc.* 227,844
9,600 Schlumberger Ltd. 655,800
----------
1,186,831
- --------------------------------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 0.1%
16,700 Tesoro Petroleum, Inc.* 265,113
- --------------------------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 2.0%
7,500 Chevron Corp. 622,969
28,400 Exxon Corp. 2,025,275
14,000 Mobil Corp. 1,072,750
----------
3,720,994
- --------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.0%
1,428 Deltic Timber Corp. 35,789
- --------------------------------------------------------------------------------
PUBLISHING-NEWS -- 0.1%
3,400 Gannett Co., Inc. 241,613
- --------------------------------------------------------------------------------
RAILROADS -- 0.1%
2,576 Burlington Northern Santa Fe 252,931
- --------------------------------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 0.1%
4,000 V.F. Corp. 206,000
- --------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 0.1%
2,700 Texas Utilities Co. 112,387
- --------------------------------------------------------------------------------
UTILITIES-TELECOMMUNICATIONS -- 0.2%
6,400 Ameritech Corp. 287,200
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $21,479,132) 42,243,704
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUTUAL FUNDS -- 52.4%
- --------------------------------------------------------------------------------
EQUITY -- 29.7%
1,104,236 The Guardian Park Avenue
Fund, Class A $56,663,715
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FIXED INCOME -- 22.7%
4,315,690 The Guardian Investment Quality
Bond Fund, Class A $ 43,225,215
- --------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(COST $94,882,539) 99,888,930
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. GOVERNMENT -- 3.6%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 7,000,000 U.S. Treasury Bills, 5.12%
due 12/10/98
(COST $6,838,720) $ 6,838,720
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPTIONS -- 0.6%
- --------------------------------------------------------------------------------
Number of
Contracts Value
- --------------------------------------------------------------------------------
320 U.S. Treasury Bonds Futures
Expires August, 1998
Exercise price $122 $ 765,000
- --------------------------------------------------------------------------------
430 U.S. Treasury Notes Futures
Expires August, 1998
Exercise price $114 295,625
- --------------------------------------------------------------------------------
TOTAL OPTIONS
(COST $527,423) 1,060,625
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 21.1%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$40,164,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/98, maturity
value $40,170,359 at 5.70%,
due 7/1/98 (collateralized by
$40,970,000 U.S. Treasury
Bills, 5.12%, due 12/24/98) $ 40,164,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $40,164,000) 40,164,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.8%
(COST $163,891,814) 190,195,979
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.2% 432,148
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $190,628,127
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PURCHASED FUTURES CONTRACTS
- --------------------------------------------------------------------------------
Unrealized
Contract Description Expiration Depreciation
- --------------------------------------------------------------------------------
33 S&P 500 Stock Index September, 1998 $ (399,221)
- --------------------------------------------------------------------------------
At June 30, 1998 the Asset Allocation Fund had sufficient cash and/or securities
to cover margin requirements on open futures contracts and had set aside
$1,000,000 U.S. Treasury Bill due 12/10/98 as collateral.
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
29
<PAGE>
o THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
- --------------------------------------------------------------------------------
COMMON STOCKS -- 93.2%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ARGENTINA -- 0.3%
OIL AND GAS -- 0.2%
37,000 Perez Companc S.A. $ 185,767
TELECOMMUNICATIONS -- 0.1%
4,100 Telefonica de Argentina ADR* 132,994
----------
318,761
- --------------------------------------------------------------------------------
AUSTRALIA -- 1.7%
BANKS -- 0.3%
24,430 National Australia Bank 323,013
BEVERAGE -- 0.5%
178,400 Fosters Brewing Group420,819
BUSINESS SERVICES -- 0.5%
22,400 Brambles Industries Ltd. 440,643
CONSUMER GOODS -- 0.1%
35,000 Woolworths Ltd. 114,063
REAL ESTATE -- 0.3%
13,350 Lend Lease Corp. 270,571
----------
1,569,109
- --------------------------------------------------------------------------------
BRAZIL -- 1.1%
FOOD, BEVERAGE AND TOBACCO -- 0.2%
12,900 Comp. Cerveja Ria Brahma ADR 161,250
PETROLEUM SERVICES -- 0.2%
9,600 Petroleo Brasileiro S.A. ADR 178,462
RETAIL-FOOD -- 0.2%
8,800 Comp. Brasileira de Distribution ADR+ 199,100
TELECOMMUNICATIONS -- 0.3%
1,700 Telecom. Brasileiras ADR 185,619
837,598 Telesp. Tel. Sao Paolo* 121,614
UTILITIES-ELECTRIC -- 0.2%
2,953 Comp. Energetica de Minas ADR 91,918
2,448 Comp. Energetica de Minas ADR+ 76,185
6,600 Comp. Paranaense de Energia ADR 61,050
----------
1,075,198
- --------------------------------------------------------------------------------
CHILE -- 0.2%
MUTUAL FUND -- 0.1%
3,730 Genesis Chile Fund 110,035
RETAIL-FOOD -- 0.1%
5,300 Distribucion Y Servicio S.A. ADR 79,500
----------
189,535
- --------------------------------------------------------------------------------
FRANCE -- 9.1%
CAPITAL GOODS -- 0.9%
3,990 Alcatel Alsthom 812,427
CONSTRUCTION MATERIALS -- 2.7%
24,300 Lafarge 2,512,116
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 2.5%
21,700 AXA UAP $ 2,440,743
OIL-INTEGRATED -- 1.9%
12,500 Elf Aquitaine 1,757,447
RETAIL TRADE -- 1.1%
1,969 Comptoirs Moderne 1,025,911
-----------
8,548,644
- --------------------------------------------------------------------------------
GERMANY -- 18.3%
AUTOMOBILES -- 2.8%
2,574 Bayerische Motoren Werke AG 2,604,757
BANKS -- 2.0%
22,050 Bayerische Vereinsbank AG 1,870,665
CHEMICALS -- 1.4%
27,880 BASF AG 1,325,631
DRUGS AND HEALTH CARE -- 0.8%
13,590 GEHE AG 729,065
FOOTWEAR -- 2.3%
12,500 Adidas AG 2,179,850
INDUSTRIAL MACHINERIES -- 3.9%
35,719 Mannesmann AG 3,674,000
INSURANCE -- 2.5%
4,685 Munchener Ruckvers* 2,327,628
SOFTWARE -- 2.6%
4,105 SAP AG 2,492,431
-----------
17,204,027
- --------------------------------------------------------------------------------
HONG KONG -- 0.7%
CONGLOMERATES -- 0.5%
84,000 Hutchison Whampoa 443,418
REAL ESTATE -- 0.2%
106,000 New World Development Co. 205,214
-----------
648,632
- -------------------------------------------------------------------------------
HUNGARY -- 0.8%
FOOD AND BEVERAGE -- 0.2%
3,041 Pick Szeged RT 177,884
PHARMACEUTICALS -- 0.6%
7,180 Richter Gedeon VEG 577,947
-----------
755,831
- --------------------------------------------------------------------------------
IRELAND -- 2.5%
BANKS -- 1.4%
91,200 Allied Irish Bank 1,319,941
CONSTRUCTION MATERIALS -- 1.1%
75,000 CRH PLC 1,064,810
-----------
2,384,751
- --------------------------------------------------------------------------------
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
30
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ITALY -- 7.3%
BANKS -- 3.6%
1,271,000 Banco di Roma* $ 2,646,799
52,600 Istituto Bco. Sao Paolo Torino* 759,358
TELECOMMUNICATIONS -- 3.7%
238,000 Telecom. Italia SPA 1,752,768
281,000 Telecom. Italia MOB 1,719,133
----------
6,878,058
- --------------------------------------------------------------------------------
JAPAN -- 10.6%
AUTOMOBILE -- 0.7%
18,000 Honda Motor Co. 643,090
CHEMICALS -- 1.1%
44,000 Kao Corp. 680,986
22,000 Shin Etsu Chemical Co. 381,861
DRUGS AND HEALTH CARE -- 0.6%
26,000 Sankyo Co. 594,200
ELECTRONICS -- 3.1%
21,000 Canon, Inc. 478,412
65,000 Matsushita Electric Works 526,506
7,000 Rohm Co. 721,415
8,000 Sony Corp. 691,401
6,000 TDK Corp.* 444,782
FINANCIAL SERVICES -- 2.3%
18,900 Credit Saison Co. 375,895
19,100 Promise Co. 788,754
84,000,000 Sanwa Int'l. Financial* 619,657
1,700 Shohkoh Fund & Co. 419,252
LEISURE PRODUCTS -- 0.2%
2,000 Toho Co. 211,181
PHOTOGRAPHY -- 0.6%
16,000 Fuji Photo Film Co. 558,906
REAL ESTATE -- 0.4%
37,000 Mitsubishi Estate 326,463
RETAIL TRADE -- 0.6%
11,000 Ito Yokado Co.* 519,491
TELECOMMUNICATIONS -- 1.0%
111 Nippon Tele. & Tel. Corp. 923,194
----------
9,905,446
- --------------------------------------------------------------------------------
MEXICO -- 0.7%
LEISURE TIME -- 0.2%
53,724 Corp. Interamericana Entretenimiento* 149,474
PAPER AND FOREST PRODUCTS -- 0.1%
26,500 Kimberly-Clark de Mexico 93,637
RETAIL TRADE -- 0.2%
11,800 Grupo Elektra S.A. de C.V. GDR 115,050
33,000 Organiz. Soriana 94,018
TELECOMMUNICATIONS -- 0.0%
800,000 Telesp. Celular S.A.* 33,928
TRANSPORTATION -- 0.2%
4,700 Grupo Television S.A. de C.V. ADR* 176,838
----------
662,945
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
NETHERLANDS -- 2.6%
BANKS -- 0.5%
17,617 ABN Amro Hldgs. NV $ 412,529
BROADCASTING AND PUBLISHING -- 2.1%
54,600 Ver Ned Uitgevers 1,984,966
----------
2,397,495
- --------------------------------------------------------------------------------
NEW ZEALAND -- 0.1%
TELECOMMUNICATIONS -- 0.1%
61,310 Telecom. Corp. of New Zealand 131,439
- --------------------------------------------------------------------------------
PEOPLE'S REPUBLIC OF CHINA -- 0.2%
TELECOMMUNICATIONS -- 0.2%
100,000 China Telecom.* 173,593
- --------------------------------------------------------------------------------
POLAND -- 0.8%
ELECTRICAL EQUIPMENT -- 0.8%
58,150 Elektrim* 708,740
- --------------------------------------------------------------------------------
SINGAPORE -- 0.2%
PUBLISHING -- 0.2%
25,775 Singapore Press Hldgs. 172,853
- --------------------------------------------------------------------------------
SPAIN -- 4.2%
BANKS -- 2.2%
81,300 Banco Santander S.A. 2,080,877
INDUSTRIALS -- 2.0%
7,710 Grupo Acciona S.A.* 1,834,110
----------
3,914,987
- --------------------------------------------------------------------------------
SWEDEN -- 3.3%
CONSTRUCTION AND MINING EQUIPMENT -- 0.8%
29,050 Atlas Copco AB 792,173
TELECOMMUNICATIONS -- 2.5%
78,800 LM Ericsson 2,301,956
----------
3,094,129
- --------------------------------------------------------------------------------
SWITZERLAND -- 6.8%
BUSINESS SERVICES -- 1.7%
3,445 Adecco S.A. 1,556,085
INSURANCE -- 2.3%
3,450 Zurich Versicherungs-Gesellschaft 2,205,375
PHARMACEUTICALS -- 2.8%
1,570 Novartis AG 2,616,839
----------
6,378,299
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 21.7%
BANKS -- 2.9%
60,500 HSBC Hldgs. 1,466,765
59,861 Lloyds TSB Group PLC 838,080
24,500 National Westminster Bank Co. PLC 438,121
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
31
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
CONGLOMERATES -- 3.4%
189,000 Hanson PLC $ 1,149,476
155,000 Rentokil Initial PLC 1,115,443
150,000 Williams Hldgs. 964,252
CONTAINERS-PAPER AND PLASTIC -- 0.4%
80,000 Bunzl PLC 376,684
DATA SERVICES -- 0.4%
34,667 Reuters Group PLC 396,502
DRUGS AND HEALTH CARE -- 3.3%
81,000 Glaxo Wellcome 2,433,070
16,500 Zeneca Group 708,587
ELECTRONICS -- 0.4%
52,000 Electrocomponents 408,075
ENGINEERING -- 0.7%
34,000 Siebe 679,534
FINANCIAL SERVICES -- 0.9%
43,000 CGU PLC* 802,692
FOOD, BEVERAGE AND TOBACCO -- 2.5%
55,000 Devro Int'l. 462,382
132,800 Imperial Tobacco 980,074
55,929 Whitbread 905,831
LEISURE PRODUCTS -- 0.8%
39,000 Granada Group 717,604
NEWSPAPERS -- 0.4%
40,000 Southnews PLC 343,958
OIL-INTERNATIONAL -- 1.7%
109,896 British Petroleum 1,603,732
RETAIL TRADE -- 0.6%
66,337 Dixons Group 529,447
TELECOMMUNICATIONS -- 2.7%
66,000 British Telecom.* 815,481
88,373 Cable & Wireless Co.* 895,667
66,000 Vodafone Group 838,072
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
TRANSPORTATION-- 0.6%
37,051 BAA PLC $ 388,916
6,000 Stagecoach Hldgs.* 127,732
-----------
20,386,177
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $65,321,108) 87,498,649
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.2%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$5,842,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/98, maturity
value $5,842,811 at 5.00%
due 7/1/98 (collateralized
by $5,965,000 U.S. Treasury
Notes, 8.125% due 8/15/21) $ 5,842,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $5,842,000) 5,842,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.4%
(COST $71,163,108) 93,340,649
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.6% 540,445
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $93,881,094
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
32
<PAGE>
o The Guardian Baillie Gifford Emerging Markets Fund
- --------------------------------------------------------------------------------
COMMON STOCKS -- 82.2%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ARGENTINA -- 6.5%
BANKS -- 0.5%
5,319 Banco Galicia Y Buenos
Aires S.A. ADR* $ 97,072
BUILDING CONSTRUCTION -- 0.3%
21,200 Dycasa Dragados S.A. 65,730
OIL AND GAS -- 1.2%
47,000 Perez Companc S.A. 235,974
REAL ESTATE -- 1.1%
7,200 IRSA Inversiones Y Represente GDR* 209,700
RETAIL-FOOD -- 1.9%
24,500 Imp. Y Exp. Patagonia* 363,878
TELECOMMUNICATIONS -- 1.5%
9,327 Telefonica de Argentina S.A. ADR* 302,545
----------
1,274,899
- --------------------------------------------------------------------------------
BRAZIL -- 24.9%
BANKS -- 2.2%
770,000 Banco Itau S.A. 439,410
FOOD, BEVERAGE AND TOBACCO -- 2.2%
280,000 Comp. Cerv. Ria Brahma 174,311
11,240 Comp. Cerv. Ria Brahma ADR 140,500
4,700,000 Comp. Lorenz 117,850
INDUSTRIAL MACHINERIES -- 1.3%
15,300 Elevadores Atlas 257,966
PETROLEUM SERVICES -- 3.5%
1,750,000 Petroleo Brasileiro S.A. 325,321
19,300 Petroleo Brasileiro S.A. ADR 358,783
REAL ESTATE -- 0.7%
6,500 Brazil Realty S.A. GDR* 145,000
RETAIL-APPLIANCES -- 1.1%
24,500 Globex Utilidades* 211,837
RETAIL-FOOD -- 1.9%
16,500 Comp. Brasileiras de Dist. ADR 373,313
TELECOMMUNICATIONS -- 7.6%
12,300,000 Ericsson Telecom. S.A. 233,972
4,250 Telecom. Brasileiras S.A. ADR 464,047
4,265,224 Telecom. de Sao Paolo S.A. 625,477
4,073,767 Telesp. Celular S.A.* 175,765
TEXTILE-APPAREL AND PRODUCTION -- 0.8%
53,700 Confeccoes Guararapes S.A. 160,187
UTILITIES-ELECTRIC AND WATER -- 3.6%
6,246,000 Comp. Energetica de Minas* 194,419
3,304 Comp. Energetica de Minas ADR 102,849
2,948 Comp. Paranaense de Energia ADR 27,269
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
1,470,004 Comp. Saneam. Basico
Est. de Sao Paolo $ 176,672
1,968,396 Eletropaulo Metropolitana S.A. 148,070
1,968,396 Emp. Bandeirante de Energia S.A.* 31,145
1,968,396 Emp. Metropolitana Aguas Energia* 1,532
1,968,396 Emp. Paulista Transmissao de Energia* 6,961
1,157,880 Light Particapacoes 410
----------
4,893,066
- --------------------------------------------------------------------------------
CHILE -- 4.6%
CHEMICALS -- 1.0%
5,700 Sociedad Quimica Y Minera de Chile S.A. ADR 190,950
FOOD AND BEVERAGE -- 1.0%
12,300 Embotelladora Andina S.A. ADR 192,188
MINING -- 0.6%
30,420 Antofagasta Hldgs. 126,981
MUTUAL FUND -- 1.2%
8,000 Genesis Chile Fund 236,000
RETAIL-FOOD -- 0.8%
10,714 Distribucion Y Servicio ADR 160,710
----------
906,829
- --------------------------------------------------------------------------------
COLOMBIA -- 0.8%
BANKS -- 0.8%
8,600 Banco Ganadero S.A. ADR 151,575
- --------------------------------------------------------------------------------
CZECH REPUBLIC -- 1.2%
FINANCIAL SERVICES -- 0.4%
13,000 IKS KB Plus* 76,923
FOOD AND BEVERAGE -- 0.2%
17,700 Prazske Pivovary* 37,444
TELECOMMUNICATIONS -- 0.6%
8,000 SPT Telecom. AS* 110,617
----------
224,984
- --------------------------------------------------------------------------------
HONG KONG -- 2.0%
REAL ESTATE -- 0.9%
736,000 China Overseas Land 94,992
44,000 New World Development Co. 85,183
TELECOMMUNICATIONS -- 1.1%
120,000 China Telecom.* 208,312
----------
388,487
- --------------------------------------------------------------------------------
HUNGARY -- 7.9%
BUILDING CONSTRUCTION AND MATERIALS -- 0.9%
4,830 Zalakeramia 171,640
CONSUMER GOODS -- 0.7%
5,140 Graboplast Textile 130,234
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
33
<PAGE>
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 1.2%
4,180 Pick Szeged RT $ 244,510
LODGING -- 1.0%
9,930 Danubius Hotel* 199,826
PHARMACEUTICALS -- 1.9%
4,530 Richter Gedeon VEG 364,638
PLASTICS -- 1.3%
6,750 Pannonplast 250,057
TRANSPORTATION -- 0.9%
9,690 North American Bus* 190,565
----------
1,551,470
- --------------------------------------------------------------------------------
INDIA -- 2.9%
MUTUAL FUND -- 2.0%
22,000 India I.T. Fund Ltd.* 222,750
22,000 Indian Opportunity Fund* 170,500
TELECOMMUNICATIONS -- 0.9%
17,000 Mahanagar Telephone Nigam Ltd. GDR* 178,075
----------
571,325
- --------------------------------------------------------------------------------
MALAYSIA -- 0.2%
FOOD, BEVERAGE AND TOBACCO -- 0.2%
32,000 RJ Reynolds Berhad 44,335
- --------------------------------------------------------------------------------
MEXICO -- 12.8%
BANKS -- 0.8%
85,000 Grupo Financiero Banamex* 165,544
CONGLOMERATES -- 0.8%
40,000 Grupo Carso S.A. de C.V.* 165,600
FINANCIAL SERVICES -- 0.9%
153,000 Grupo Financiero Banorte* 170,274
FOOD, BEVERAGE AND TOBACCO -- 2.0%
75,250 Grupo Continental 251,238
4,500 Pan American Beverages, Inc. 141,469
MEDIA AND ENTERTAINMENT -- 4.2%
170,852 Corp. Interamericana Entretenimiento* 475,355
9,200 Grupo Television S.A. de C.V. ADR* 346,150
PAPER AND FOREST PRODUCTS -- 1.3%
72,000 Kimberly-Clark de Mexico 254,410
REAL ESTATE -- 1.2%
42,200 Corp. Geo S.A.* 235,762
RETAIL TRADE -- 1.0%
11,400 Grupo Elektra S.A. GDR 111,150
30,000 Organiz. Soriana 85,471
TELECOMMUNICATIONS -- 0.6%
2,300 Telefonos de Mexico S.A. ADR 110,544
----------
2,512,967
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
PAKISTAN -- 0.1%
BANKS -- 0.1%
41,000 Faysal Bank $ 8,003
- --------------------------------------------------------------------------------
PEOPLE'S REPUBLIC OF CHINA -- 1.4%
HOUSEHOLD PRODUCTS -- 0.9%
236,000 Guandong Kelon Elec. Hldgs. 185,803
UTILITIES-ELECTRIC -- 0.5%
354,000 Beijing Datang Power Gen. Co.* 99,374
----------
285,177
- --------------------------------------------------------------------------------
PERU -- 1.1%
TELECOMMUNICATIONS -- 1.1%
27,000 Telefonica del Peru* 55,609
8,100 Telefonica del Peru S.A. ADR* 165,544
----------
221,153
- --------------------------------------------------------------------------------
PHILIPPINES -- 0.3%
BUSINESS SERVICES -- 0.3%
600,000 Int'l. Container Terminal Svcs.* 68,345
- --------------------------------------------------------------------------------
POLAND -- 5.7%
BANKS -- 3.8%
19,700 Bank Handlowy Warsaw 375,695
13,800 Bank Roswoju Eksport 373,989
ELECTRICAL EQUIPMENT -- 1.9%
30,000 Elektrim* 365,644
----------
1,115,328
- --------------------------------------------------------------------------------
PORTUGAL -- 0.6%
FINANCIAL SERVICES -- 0.6%
4,380 Comp. de Seguros Tranquilidade 118,635
- --------------------------------------------------------------------------------
SINGAPORE -- 0.2%
CONSTRUCTION -- 0.2%
48,000 Clipsal Industries Ltd.* 42,960
- --------------------------------------------------------------------------------
SOUTH AFRICA -- 4.8%
BREWING -- 1.6%
15,000 South African Breweries 308,600
CONGLOMERATES -- 0.4%
13,099 Barlow Ltd. 69,029
CONSUMER GOODS -- 0.6%
23,000 Ellerine Hldgs.* 126,054
FINANCIAL SERVICES -- 1.9%
155,250 FirstRand Ltd. 238,242
7,200 Liberty Life Assoc.* 140,358
OIL-DOMESTIC -- 0.3%
10,000 Sasol 57,926
----------
940,209
- --------------------------------------------------------------------------------
SOUTH KOREA -- 0.6%
ELECTRONIC EQUIPMENTS -- 0.6%
8,000 Samsung Electronics. Ltd. GDR*+ 127,000
- --------------------------------------------------------------------------------
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
34
<PAGE>
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SRI LANKA -- 0.6%
BANKS -- 0.6%
60,000 National Development Bank $ 114,679
- --------------------------------------------------------------------------------
TAIWAN -- 3.0%
FINANCIAL SERVICES -- 0.9%
73,500 China Development* 170,057
INDUSTRIAL MACHINERIES -- 0.9%
151,000 Yungtay Engineering Co. Ltd. 182,375
TEXTILE-APPAREL AND PRODUCTION -- 1.2%
313,600 Far East Textile 242,772
----------
595,204
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $20,076,305) 16,156,630
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 6.8%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 350,000 Amkor Technology, Inc.
5.75% due 5/1/03 $ 320,460
260,000 Metro Pacific Capital
2.50% due 4/11/03 206,050
450,000 Orient Semiconductor Elect. Ltd.
1.50% due 2/26/03 397,305
430,000 Siliconware Precision Industries
.50% due 7/21/04 412,714
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(COST $1,435,542) 1,336,529
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 8.4%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$1,661,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/98, maturity
value $1,661,231 at 5.00%
due 7/1/98 (collateralized
by $1,700,000 U.S.
Treasury Bonds, 6.75%
due 8/15/26) $ 1,661,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $1,661,000) 1,661,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 97.4%
(COST $23,172,847) 19,154,159
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 2.6% 517,565
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $19,671,724
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
35
<PAGE>
o THE GUARDIAN INVESTMENT QUALITY BOND FUND
- --------------------------------------------------------------------------------
ASSET BACKED -- 11.4%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$1,000,000 Advanta Mtg. Loan Trust 1998 A3
6.27% due 12/25/17 $ 1,005,490
500,000 Amresco 1997-1 M1F
7.42% due 3/25/27 512,815
988,000 Deutsche Financial 1997-1 A2
6.55% due 9/15/27 997,445
1,000,000 EQCC Home Equity Loan Tr. 1996 A4
6.56% due 3/15/23 1,013,220
1,250,000 Green Tree 1998-4 A5
6.18% due 4/1/30 1,253,500
1,500,000 Green Tree 1997-4A6
7.03% due 2/15/29 1,546,698
1,000,000 Green Tree 1997-E HEA4
6.69% due 1/15/29 1,009,000
1,000,000 Money Store Tr. 1998-A AF5
6.37% due 12/15/02 1,004,880
1,565,000 Premier Auto Tr. 1997-2 B
6.53% due 12/6/03 1,587,646
1,200,000 Sears Cr. Account Master 1998-1 A
5.80% due 8/15/05 1,196,760
1,000,000 UAC Auto Trust 1997-B A2
6.70% due 6/10/03 1,013,570
1,740,000 UCFC Loan Tr. 1997-D A6
7.095% due 4/15/27 1,784,596
1,200,000 Vanderbilt Mtg. 1997-B 1A3
6.975% due 8/7/11 1,226,544
- --------------------------------------------------------------------------------
TOTAL ASSET BACKED
(COST $15,023,717) 15,152,164
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 32.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.7%
$1,000,000 Lockheed Martin Corp.
6.55% due 5/15/99 $ 1,003,031
1,250,000 Raytheon Co.
5.95% due 3/15/01 1,249,642
------------
2,252,673
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 0.8%
1,000,000 Ford Motor Credit Co.
6.125% due 4/28/03 1,001,753
- --------------------------------------------------------------------------------
BEVERAGE AND TOBACCO -- 2.7%
$1,200,000 Coca Cola Enterprises, Inc.
6.95% due 11/15/26 1,257,952
1,000,000 Philip Morris Cos., Inc.
7.50% due 4/1/04 1,051,613
1,250,000 Philip Morris Cos., Inc.
6.15% due 3/15/00 1,249,362
------------
3,558,927
- --------------------------------------------------------------------------------
CONGLOMERATES -- 0.9%
$1,200,000 Tyco Int'l. Group S.A.
6.125 due 6/15/01 $ 1,203,295
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 0.8%
1,000,000 Time Warner, Inc.
6.95% due 1/15/28 1,013,715
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 10.7%
1,000,000 Associates Corp. of North America
5.85% due 1/15/01 996,794
1,000,000 Bear Stearns Cos., Inc.
6.20% due 3/30/03 1,001,608
1,250,000 Donaldson Lufkin & Jenrette Sec. Corp.
6.11% due 5/15/01 1,251,125
1,000,000 Hutchinson Whampoa Fin. C I Ltd.+
7.50% due 8/1/27 765,293
500,000 Lehman Brothers Hldgs., Inc.
6.94% due 9/30/99 504,745
500,000 Lehman Brothers Hldgs., Inc.
6.92% due 10/4/99 505,350
1,500,000 Lehman Brothers Hldgs., Inc.
6.84% due 10/7/99 1,512,687
2,500,000 Lehman Brothers Hldgs., Inc.
6.00% due 2/26/01 2,490,950
1,100,000 Merrill Lynch & Co., Inc.
6.02% due 5/11/01 1,101,636
850,000 Morgan Stanley Dean Witter
6.09% due 3/9/01 849,830
1,000,000 Salomon, Inc.
6.65% due 7/15/01 1,016,613
2,160,000 Salomon, Inc.
6.625% due 11/30/00 2,192,169
------------
14,188,800
- --------------------------------------------------------------------------------
HOSPITAL-SUPPLIES -- 0.8%
1,000,000 Mallinckrodt, Inc.+
6.30% due 3/15/11 1,003,066
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.9%
1,250,000 U.S. Filter Corp.+
6.375% due 5/15/11 1,248,375
- --------------------------------------------------------------------------------
<PAGE>
INSURANCE -- 1.8%
1,300,000 Conseco, Inc.
6.40% due 6/15/01 1,297,790
950,000 Zurich Capital Tr.+
8.376% due 6/1/37 1,054,519
------------
2,352,309
- --------------------------------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 0.9%
1,300,000 Dayton Hudson Corp.
5.95% due 6/15/00 1,299,706
- --------------------------------------------------------------------------------
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
36 See notes to financial statements.
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
MERCHANDISING-FOOD -- 0.9%
$1,200,000 Albertsons, Inc.
6.625% due 6/1/28 $ 1,195,080
- --------------------------------------------------------------------------------
MISCELLANEOUS-CAPITAL GOODS -- 0.9%
1,250,000 Ikon Capital, Inc.
6.73% due 6/15/01 1,271,678
- --------------------------------------------------------------------------------
MISCELLANEOUS-FINANCIAL -- 0.8%
1,000,000 Comdisco, Inc.
6.06% due 5/5/00 1,000,394
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCING -- 0.8%
1,000,000 Vastar Resources, Inc.
6.00% due 4/20/00 1,000,394
- --------------------------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 0.5%
800,000 LG Caltex Oil Corp.+
7.50% due 7/15/07 598,400
- --------------------------------------------------------------------------------
RAILROADS -- 1.1%
1,250,000 Norfolk Southern Corp.
7.80% due 5/15/27 1,431,465
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 3.0%
1,000,000 Lucent Technologies, Inc.
6.50% due 1/15/28 1,019,797
1,000,000 MCI Communications Corp.
6.125% due 4/15/02 1,001,051
2,000,000 TCI Communications, Inc.
7.25% due 6/15/99 2,022,344
-----------
4,043,192
- --------------------------------------------------------------------------------
UTILITIES-GAS AND PIPELINE -- 2.3%
650,000 Occidental Petroleum Corp.
6.40% due 4/1/03 654,393
2,500,000 Williams Cos., Inc.+
5.95% due 2/15/00 2,495,658
------------
3,150,051
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $42,861,415) 42,813,273
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.2%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$1,000,000 Bear Asset Trust 1997-1 A
6.682% due 2/15/06 $ 1,001,600
1,250,000 Bear Stearns Coml. Mtg. Secs., Inc.
CTF 1998-1 A2
6.44% due 6/1/30 1,264,500
1,000,000 Federal Home Loan Mtg. Corp.
1998 EB 7.00% due 1/15/25 1,016,234
1,000,000 Federal National Mortgage Assn.
1995-13C 6.50% due 10/25/08 1,006,240
1,459,977 GE Capital Mortgage Svcs., Inc.
1996-3A7 7.00% due 3/25/26 1,479,594
1,150,000 GMAC Coml. Mtg. Sec., Inc.
1998-1C 6.806% due 4/15/08 1,180,820
- --------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(COST $6,860,568) 6,948,988
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE PASS-THROUGHS -- 13.7%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 194,109 FHLMC Pool # E54124
7.00% due 8/1/08 $ 197,701
700,000 FNMA TBA
7.00% (15 yr.)(a) 712,469
800,000 FNMA TBA
7.00% (30 yr.)(a) 811,244
3,400,000 FNMA TBA
6.50% (15 yr.)(a) 3,419,108
11,660,000 FNMA TBA
6.50% (30 yr.)(a) 11,608,906
82,715 FNMA Pool # 050989
7.00% due 2/1/09 84,232
32,313 FNMA Pool # 250993
7.00% due 7/1/12 32,896
6,154 FNMA Pool # 339760
7.50% due 5/1/27 6,313
36,882 FNMA Pool # 392283
7.00% due 6/1/12 37,547
438,905 FNMA Pool # 395044
7.00% due 12/1/12 446,823
41,385 FNMA Pool # 395781
7.00% due 10/1/27 41,982
750,000 GNMA TBA
6.50% (30 yr.)(a) 748,120
- --------------------------------------------------------------------------------
TOTAL MORTGAGE PASS-THROUGHS
(COST $18,101,624) 18,147,341
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. GOVERNMENT -- 32.2%
- --------------------------------------------------------------------------------
$3,475,000 U.S. Treasury Bonds
6.625% due 2/15/27 $ 3,925,666
700,000 U.S. Treasury Bonds
6.50% due 11/15/26 777,437
- --------------------------------------------------------------------------------
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
See notes to financial statements. 37
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 830,000 U.S. Treasury Bonds
6.375% due 8/15/27 $ 911,703
5,220,000 U.S. Treasury Bonds
6.125% due 11/15/27(b) 5,593,559
1,000,000 U.S. Treasury Notes
7.875% due 11/15/04 1,123,125
5,800,000 U.S. Treasury Notes
6.875% due 8/31/99 5,887,000
2,660,000 U.S. Treasury Notes
6.625% due 6/30/01 2,737,308
3,000,000 U.S. Treasury Notes
6.50% due 5/15/05 3,166,875
1,800,000 U.S. Treasury Notes
6.50% due 8/15/05 1,900,125
2,200,000 U.S. Treasury Notes
6.375% due 5/15/00 2,233,000
650,000 U.S. Treasury Notes
6.125% due 8/15/07 676,610
2,250,000 U.S. Treasury Notes
5.750% due 4/30/03 2,271,798
965,000 U.S. Treasury Notes
5.625% due 5/15/01 968,318
6,900,000 U.S. Treasury Notes
5.500% due 3/15/00 6,897,847
1,200,000 U.S. Treasury Notes
5.500% due 5/31/03 1,200,000
2,450,000 U.S. Treasury Notes
5.500% due 2/15/08 2,449,236
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $41,911,726) 42,719,607
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YANKEE BONDS -- 1.8%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 650,000 Petroliam Nasional Berhad+
6.625% due 10/18/01 $ 601,464
600,000 Thailand Kingdom
7.55% due 8/15/99 590,687
1,200,000 Yorkshire Pwr. Fin. Ltd.+
6.154% due 2/25/03 1,203,431
- --------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(COST $2,402,100) 2,395,582
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 17.1%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
CONGLOMERATES -- 0.5%
$ 720,000 General Elec. Cap. Corp.
5.51% due 7/20/98(a) $ 717,906
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 7.5%
3,449,000 Dakota Certificates
5.52% due 7/20/98(a) 3,438,952
5,818,000 Goldman Sachs Group LP
5.51% due 7/14/98(a) 5,806,424
752,000 Merrill Lynch & Co., Inc.
5.53% due 7/21/98(a) 749,690
-----------
9,995,066
- --------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 5.0%
6,674,000 Baker Hughes, Inc.
5.52% due 7/14/98(a) 6,660,696
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 4.1%
5,391,000 Lucent Technologies, Inc.
6.00% due 7/1/98(b) 5,391,000
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $22,764,668) 22,764,668
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.6%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$2,176,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/98, maturity
value $2,176,345 at 5.70%
due 7/1/98 (collateralized
by U.S. Treasury Notes,
$2,225,000, 6.75% due
5/31/99 $ 2,176,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $2,176,000) 2,176,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 115.3%
(COST $152,101,818) 153,117,623
PAYABLES FOR REVERSE REPURCHASE
AGREEMENTS(a) -- (4.1%) (5,390,225)
PAYABLES FOR FORWARD MORTGAGE
SECURITIES(a) -- (13.0%) (17,299,847)
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 1.8% 2,395,073
- --------------------------------------------------------------------------------
NET ASSET -- 100.0% $132,822,624
- --------------------------------------------------------------------------------
(a) Commercial paper with the total amount of $17,373,668 is segregated to
cover forward mortgage purchases.
(b) Commercial paper in the amount of $5,391,000 is segregated to cover reverse
repurchase agreements.
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
38 See notes to financial statements.
<PAGE>
o THE GUARDIAN TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 94.8%
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
ARIZONA -- 3.8%
- --------------------------------------------------------------------------------
$1,000,000 Phoenix, AZ G.O. Ser. A,
7.00% due 7/1/10 Aa1/AA+ $ 1,224,150
530,000 Pima Cty., AZ
School District No.16
Catalina Foothills G.O.,
6.50% due 7/1/10 Aaa/AAA 624,504
------------
1,848,654
- --------------------------------------------------------------------------------
CALIFORNIA -- 3.1%
1,500,000 California St. Public
Service G.O. Ser. A,
5.25% due 10/1/17 A/A 1,511,926
- --------------------------------------------------------------------------------
FLORIDA -- 13.9%
1,000,000 Florida St. Board of Ed.
Cap. Outlay G.O.,
6.70% due 6/1/22 Aaa/AAA 1,083,370
1,140,000 Jacksonville, FL Sales Tax
River City Ren. Proj.,
5.125% due 10/1/18 Aaa/AAA 1,135,634
1,500,000 Orange Cty., FL
Tourist Dev. Tax G.O.
5.00% due 10/1/15 Aaa/AAA 1,500,480
1,200,000 Orlando, FL G.O. Ser. A,
5.00% due 10/1/18 Aa3/AA- 1,181,136
1,385,000 Orlando, FL G.O. Utilities
Water & Elec. Rev. Ser. A,
6.50% due 10/1/20 Aaa/AA- 1,514,982
300,000 Orlando, FL G.O. Utilities
Water & Elec. Rev.,
6.00% due 10/1/10 Aa1/AA 340,641
------------
6,756,243
- --------------------------------------------------------------------------------
GEORGIA -- 2.1%
1,000,000 Burke Cty., GA
Dev. Auth. Pol.,
3.95% due 7/1/24 A1/A+ 1,000,000
- --------------------------------------------------------------------------------
MINNESOTA -- 3.0%
1,500,000 Minneapolis & St. Paul, MN
Ser. A,
5.00% due 1/1/19 Aaa/AAA 1,474,500
- --------------------------------------------------------------------------------
MISSOURI -- 5.8%
1,000,000 Missouri St. G.O. Ser. A,
Fourth State Bldg.,
5.75% due 8/1/18 Aaa/AAA 1,066,100
1,485,000 St. Louis, MO Reg. Con.
Prerefunded Ser. C
7.90% due 8/15/21 Aaa/AAA 1,739,989
------------
2,806,089
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
NEVADA -- 2.3% $1,000,000 Nevada St.
Colorado Riv. Comm.
6.50% due 7/1/19 A1/AA- $ 1,127,290
- --------------------------------------------------------------------------------
NEW JERSEY -- 5.1%
1,750,000 New Jersey St.
Hwy. Auth.,
6.25% due 1/1/14 A1/AA- 1,889,143
500,000 New Jersey St. Transit
Auth. G.O. Ser. A,
6.50% due 6/15/05 Aaa/AAA 564,415
------------
2,453,558
- --------------------------------------------------------------------------------
NEW YORK -- 17.1%
1,500,000 New York City G.O. Ser. E,
5.875% due 8/1/13 A3/BBB+ 1,604,025
1,500,000 New York City Mun.
Water & Sewer Fin. Auth. Ser. A,
5.625% due 6/15/19 A2/A- 1,555,485
1,000,000 New York St. G.O. Dorm.
Auth. Rev. Ref. City Univ.
5.75% due 7/1/12 Aaa/AAA 1,102,500
1,500,000 New York St. G.O. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.00% due 5/15/15 A3/A- 1,483,905
1,000,000 New York St. G.O. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.00% due 5/15/17 A3/A- 982,560
500,000 New York St. G.O. Ser. A,
5.875% due 3/15/15 A/A- 532,190
1,000,000 New York St. Thruway
Auth. Svc. Contract,
5.75% due 4/1/16 Baa1/BBB 1,041,960
------------
8,302,625
- --------------------------------------------------------------------------------
OHIO -- 9.7%
1,000,000 Cleveland, OH
Parking Fac. Rev.,
5.50% due 9/15/16 Aaa/AAA 1,042,360
500,000 Columbus, OH
Water System Rev.,
6.10% due 11/1/03 Aa3/AA- 540,075
1,000,000 Ohio St. Bldg. Auth. Disalle
Gov't. Center G.O. Ser. A,
6.00% due 10/1/05 Aa3/AA- 1,102,590
1,000,000 Ohio St. G.O. Water Dev.
Pollution Control,
5.00% due 6/1/15 Aaa/AAa 996,000
1,000,000 Ohio St. Water
Dev. Auth. Rev.,
5.125% due 12/1/18 Aa3/A+ 998,700
------------
4,679,725
- --------------------------------------------------------------------------------
See notes to financial statements. * Unaudited.
39
<PAGE>
THE GUARDIAN TAX-EXEMPT FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
OKLAHOMA -- 6.1%
$1,270,000 Grand River Dam
Auth., OK G.O.,
6.25% due 6/1/11 Aaa/AAA $ 1,467,637
1,500,000 Oklahoma St. Tpk.
Second Sr. Ser. A,
5.00% due 1/1/16 Aaa/AAA 1,499,130
------------
2,966,767
- ------------------------------------------------------------------------------
SOUTH CAROLINA -- 2.3%
1,000,000 South Carolina St.
Public Svc. Auth. Ser. B,
7.00% due 7/1/12 Aaa/AAA 1,102,300
- --------------------------------------------------------------------------------
PUERTO RICO -- 6.2%
1,500,000 Puerto Rico Comwlth.,
5.00% due 7/1/17 Aaa/AAA 1,493,625
1,500,000 Puerto Rico Comwlth., Ser. A,
5.00% due 7/1/17 Aaa/AAA 1,493,625
------------
2,987,250
- --------------------------------------------------------------------------------
TEXAS -- 11.2%
1,250,000 Austin, TX
5.00% due 9/1/15 Aa2/AA 1,249,200
1,050,000 Bryan, TX Indpt.
Sch. Dist. G.O.,
5.50% due 2/15/17 Aaa/NR 1,083,579
1,000,000 Texas St. Pub. Fin.
Auth. Bldg. Gen. Svc.
Comm. Proj. Ser. A,
5.00% due 2/1/14 Aaa/AAA 998,350
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
$ 555,000 Texas St. Water Dev't.
G.O. Ser. A,
6.50% due 8/1/05 Aa2/AA $ 627,971
1,500,000 Texas St. Water Dev't.
Brd. Revolving Fd.
Sr. Lien B
5.00% due 7/15/19 Aa2/AAA 1,474,095
------------
5,433,195
- --------------------------------------------------------------------------------
VIRGINIA -- 3.1%
1,500,000 Virginia College Bldg.
Auth. Ser. A,
5.00% due 9/1/16 Aa2/AA 1,486,650
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $44,778,984) 45,936,772
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 94.8%
(COST $44,778,984) 45,936,772
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 5.2% 2,533,561
- --------------------------------------------------------------------------------
NET ASSETS-- 100.0% $48,470,333
- --------------------------------------------------------------------------------
GLOSSARY:
G.O. -- General Obligation.
- --------------------------------------------------------------------------------
* Unaudited. See notes to financial statements.
40
<PAGE>
o THE GUARDIAN CASH MANAGEMENT FUND
- -------------------------------------------------------------------------------
COMMERCIAL PAPER -- 85.2%
- -------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------------------
FINANCIAL -- 27.7%
BANK HOLDING COMPANIES -- 3.6%
$ 6,500,000 J.P. Morgan & Co.,
Inc. 5.50% 8/21/98 $ 6,449,355
- -------------------------------------------------------------------------------
FINANCE COMPANIES -- 13.9%
6,000,000 Goldman Sachs Group
LP 5.51% 7/10/98 5,991,736
5,000,000 Merrill Lynch & Co.,
Inc. 5.51% 7/31/98 4,977,043
1,500,000 Merrill Lynch & Co.,
Inc. 5.52% 7/31/98 1,493,100
6,000,000 Private Export Funding
Corp. 5.49% 8/5/98 5,967,975
6,500,000 USAA Capital Corp.
5.50% 7/1/98 6,500,000
------------
24,929,854
- -------------------------------------------------------------------------------
OTHER MAJOR BANKS -- 6.9%
6,500,000 Commerzbank U.S. Finance
5.55% 7/27/98 6,473,946
6,000,000 Dresdner U.S. Finance
5.51% 8/3/98 5,969,695
------------
12,443,641
- -------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 3.3%
6,000,000 Nat'l. Rural Utils. Coop.
Fin. Corp. 5.47% 7/17/98 5,985,413
- -------------------------------------------------------------------------------
TOTAL FINANCIAL 49,808,263
- -------------------------------------------------------------------------------
INDUSTRIAL -- 57.5%
AUTOMOTIVE -- 13.9%
6,500,000 Daimler Benz North America Co.
5.52% 8/20/98 6,450,167
6,500,000 Ford Motor Credit Co.
5.54% 7/6/98 6,494,999
6,000,000 Toyota Motor Credit Co.
5.48% 7/20/98 5,982,647
6,000,000 Volkswagen of America, Inc.
5.51% 7/20/98 5,982,552
------------
24,910,365
- -------------------------------------------------------------------------------
COMPUTER SYSTEMS -- 3.6%
6,500,000 Int'l. Business Machines
5.51% 7/22/98 6,479,108
- -------------------------------------------------------------------------------
CONGLOMERATES -- 3.6%
6,500,000 General Electric Cap. Corp.
5.60% 1/20/98 6,457,221
- -------------------------------------------------------------------------------
FOOD AND BEVERAGE -- 5.8%
4,000,000 H. J. Heinz Co.
5.50% 7/23/98 3,986,556
6,500,000 Hershey Foods Corp.
5.51% 7/24/98 6,477,113
------------
10,463,669
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.3%
$ 6,000,000 Colgate Palmolive Co.
5.50% 9/10/98 $ 5,934,917
- -------------------------------------------------------------------------------
MACHINERY AND EQUIPMENT -- 3.3%
6,000,000 Deere & Co.
5.48% 7/9/98 5,992,693
- -------------------------------------------------------------------------------
METALS -- 3.6%
6,500,000 Aluminum Co. of America
5.55% 7/8/98 6,492,985
- -------------------------------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 3.6%
6,500,000 Shell Finance
5.50% 7/23/98 6,478,153
- -------------------------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 3.3%
6,000,000 Texaco, Inc.
5.49% 8/4/98 5,968,890
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 10.2%
6,500,000 Bell Atlantic Financial Svcs.
5.52% 7/10/98 6,491,030
6,000,000 GTE Finance Corp.
5.56% 7/22/98 5,980,540
6,000,000 Telstra Corp. Ltd.
5.54% 8/24/98 5,950,140
------------
18,421,710
- -------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 3.3%
6,000,000 Electricite de France
5.47% 8/12/98 5,961,710
- -------------------------------------------------------------------------------
TOTAL INDUSTRIAL 103,561,421
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $153,369,684) 153,369,684
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 14.9%
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
$26,761,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/98, maturity
value $26,765,237 at 5.70%
due 7/1/98 (collateralized
by $27,300,000 U.S. Treasury
Notes, 5.50% due
3/31/03) $ 26,761,000
- -------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $26,761,000) 26,761,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(COST $180,130,684) 180,130,684
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (0.1%) (146,457)
- -------------------------------------------------------------------------------
NET ASSETS -- 100.0% $179,984,227
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
See notes to financial statements. 41
<PAGE>
<TABLE>
=====================
FINANCIAL STATEMENTS
====================
_
|_| THE PARK AVENUE PORTFOLIO
====================================================
STATEMENTS OF ASSETS AND LIABILITIES
====================================================
June 30, 1998 (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* ............................ $2,301,471,434 $142,043,816 $163,891,814 $71,163,108
==================================================================
Investments, at market ...................................... 3,196,193,270 162,607,769 150,031,979 93,340,649
Repurchase agreements -- -- 40,164,000 --
------------------------------------------------------------------
TOTAL INVESTMENTS ..................................... 3,196,193,270 162,607,769 190,195,979 93,340,649
Cash ........................................................ 823,936 5,114 971 717
Foreign currency (cost $2,403,720 GBGIF and $467,957
GBGEMF, respectively) ..................................... -- -- -- 2,396,757
Receivable for securities sold .............................. 52,559,711 733,712 53,428 131,657
Receivable for fund shares sold ............................. 5,846,077 606,083 544,662 167,035
Receivable for futures margin variation ..................... -- -- 70,125 --
Dividends receivable ........................................ 2,484,411 80,636 235,103 109,809
Interest receivable ......................................... 32,500 1,615 6,360 811
Deferred organization expenses -- Note 8 .................... -- 34,081 -- --
Dividend reclaims receivable ................................ -- -- -- 100,585
Other assets ................................................ 1,929 11,069 891 717
------------------------------------------------------------------
TOTAL ASSETS .......................................... 3,257,941,834 164,080,079 191,107,519 96,248,737
------------------------------------------------------------------
LIABILITIES
Payable for securities purchased ............................ 31,486,373 2,261,671 63,812 1,805,901
Payable for reverse repurchase agreements -- Note 6 ......... -- -- -- --
Payable for forward mortgage securities -- Note 7 ........... -- -- -- --
Unrealized depreciation on closed forward foreign
currency contracts ........................................ -- -- -- 106,080
Distributions payable ....................................... -- -- -- --
Payable for fund shares redeemed ............................ 3,072,722 181,047 78,884 62,103
Accrued expenses ............................................ 351,898 6,743 16,587 47,884
Due to affiliates ........................................... 6,797,082 551,460 320,109 345,675
------------------------------------------------------------------
TOTAL LIABILITIES ..................................... 41,708,075 3,000,921 479,392 2,367,643
------------------------------------------------------------------
NET ASSETS ............................................ $3,216,233,759 $161,079,158 $190,628,127 $93,881,094
==================================================================
* Includes repurchase agreements.
See notes to financial statements.
42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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* ............................ $23,172,847 $152,101,818 $44,778,984 $180,130,684
=================================================================
Investments, at market ...................................... 19,154,159 153,117,623 45,936,772 153,369,684
Repurchase agreements -- -- -- 26,761,000
-----------------------------------------------------------------
TOTAL INVESTMENTS ..................................... 19,154,159 153,117,623 45,936,772 180,130,684
Cash ........................................................ 1,467 255 327,395 32,102
Foreign currency (cost $2,403,720 GBGIF and $467,957
GBGEMF, respectively) ..................................... 441,338 -- -- --
Receivable for securities sold .............................. 116,028 976,585 2,708,271 --
Receivable for fund shares sold ............................. 2,137 1,312,626 287 775,184
Receivable for futures margin variation ..................... -- -- -- --
Dividends receivable ........................................ 96,260 -- -- --
Interest receivable ......................................... 7,935 1,405,536 778,744 4,237
Deferred organization expenses -- Note 8 .................... 20,279 -- -- --
Dividend reclaims receivable ................................ 1,098 -- -- --
Other assets ................................................ 21,179 -- 425 2,226
-----------------------------------------------------------------
TOTAL ASSETS .......................................... 19,861,880 156,812,625 49,751,894 180,944,433
-----------------------------------------------------------------
LIABILITIES
Payable for securities purchased ............................ -- 995,062 1,182,905 --
Payable for reverse repurchase agreements -- Note 6 ......... -- 5,390,225 -- --
Payable for forward mortgage securities -- Note 7 ........... -- 17,299,847 -- --
Unrealized depreciation on closed forward foreign
currency contracts ........................................ -- -- -- --
Distributions payable ....................................... -- 19,727 9,047 35,983
Payable for fund shares redeemed ............................ 13,677 61,849 -- 528,000
Accrued expenses ............................................ 10,850 5,571 -- 52,779
Due to affiliates ........................................... 165,629 217,720 89,609 343,444
-----------------------------------------------------------------
TOTAL LIABILITIES ..................................... 190,156 23,990,001 1,281,561 960,206
-----------------------------------------------------------------
NET ASSETS ............................................ $19,671,724 $132,822,624 $48,470,333 $179,984,227
=================================================================
* Includes repurchase agreements.
See notes to financial statements.
43
</TABLE>
<PAGE>
<TABLE>
_
|_| THE PARK AVENUE PORTFOLIO
====================================================
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
====================================================
June 30, 1998 (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 .................... $ 627,011 $ 110,637 $ 126,208 $ 49,894
Additional paid-in capital ............................... 2,204,075,918 142,330,335 157,609,553 67,830,659
Undistributed/(overdistributed) net
investment income ...................................... 1,012,257 (308,208) 520,467 (440,091)
Accumulated net realized gain/(loss)
on investments and foreign currency
related transactions ................................... 115,796,737 (1,617,559) 6,466,955 4,382,111
Net unrealized appreciation/(depreciation)
of investments and foreign currency
related transactions ................................... 894,721,836 20,563,953 25,904,944 22,058,521
-------------------------------------------------------------------
NET ASSETS ......................................... $3,216,233,759 $161,079,158 $190,628,127 $93,881,094
===================================================================
NET ASSETS
Class A ................................................ $2,876,742,621 $133,808,366 $169,275,654 $85,297,901
Class B ................................................ $ 339,491,138 $ 27,270,792 $ 21,352,473 $ 8,583,193
SHARES OF BENEFICIAL INTEREST
OUTSTANDING -- $0.01 PAR VALUE
Class A ................................................ 56,061,398 9,173,288 11,202,254 4,525,889
Class B ................................................ 6,639,677 1,890,390 1,418,582 463,519
NET ASSET VALUE PER SHARE
Class A ................................................ $51.31 $14.59 $15.11 $18.85
Class B ................................................ $51.13 $14.43 $15.05 $18.52
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)* .............. $53.73 $15.28 $15.82 $19.74
* Based on sale of less than $100,000. On sale of $100,000 or more,
the offering price is reduced.
See notes to financial statements.
44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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 .................... $ 26,454 $ 132,612 $ 48,460 $ 1,799,842
Additional paid-in capital ............................... 26,522,864 130,845,907 47,133,208 178,184,385
Undistributed/(overdistributed) net
investment income ...................................... 41,822 -- -- --
Accumulated net realized gain/(loss)
on investments and foreign currency
related transactions ................................... (2,871,845) 828,300 130,877 --
Net unrealized appreciation/(depreciation)
of investments and foreign currency
related transactions ................................... (4,047,571) 1,015,805 1,157,788 --
------------------------------------------------------------------
NET ASSETS ......................................... $19,671,724 $132,822,624 $48,470,333 $179,984,227
==================================================================
NET ASSETS
Class A ................................................ $18,062,081 $132,822,624 $48,470,333 $172,835,201
Class B ................................................ $ 1,609,643 N/A N/A $ 7,149,026
SHARES OF BENEFICIAL INTEREST
OUTSTANDING -- $0.01 PAR VALUE
Class A ................................................ 2,425,397 13,261,234 4,845,973 172,835,201
Class B ................................................ 220,047 N/A N/A 7,149,026
NET ASSET VALUE PER SHARE
Class A ................................................ $7.45 $10.02 $10.00 $1.00
Class B ................................................ $7.31 N/A N/A $1.00
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)* .............. $7.80 $10.49 $10.47 N/A**
* Based on sale of less than $100,000. On sale of $100,000 or more,
the offering price is reduced.
** No load is charged on Class A shares.
See notes to financial statements.
45
</TABLE>
<PAGE>
<TABLE>
_
|_| THE PARK AVENUE PORTFOLIO
====================================================
STATEMENTS OF OPERATIONS
====================================================
Six Months Ended June 30, 1998 (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
Dividends ................................................ $ 17,369,345 $ 511,159 $ 1,235,054 $ 934,483
Interest ................................................. 5,179,084 232,232 1,403,469 66,142
Less: Foreign tax withheld ............................... (6,750) -- -- (116,468)
------------------------------------------------------------------
Total Income ....................................... 22,541,679 743,391 2,638,523 884,157
------------------------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2 ....................... 7,284,233 540,987 240,250 329,364
Administrative fees -- Class A -- Note 2 ................. 2,202,622 150,393 107,859 93,607
Administrative fees -- Class B -- Note 2 ................. 344,161 29,936 12,266 9,319
12b-1 fees -- Class B -- Note 3 .......................... 1,032,483 89,809 65,625 27,957
Transfer agent fees ...................................... 1,315,990 121,672 110,839 88,669
Custodian fees ........................................... 205,779 53,894 56,036 100,437
Printing expense ......................................... 199,313 9,757 11,805 5,632
Registration fees ........................................ 146,280 27,991 24,693 19,125
Trustees' fees -- Note 2 ................................. 12,000 12,000 10,750 10,750
Audit fees ............................................... 10,250 8,750 8,750 10,500
Legal fees ............................................... 6,250 1,000 1,450 1,900
Insurance expense ........................................ 1,899 561 878 704
Other .................................................... 350 350 350 350
Deferred organization expense -- Note 8 .................. -- 4,499 897 1,224
------------------------------------------------------------------
Total Expenses ..................................... 12,761,610 1,051,599 652,448 699,538
Less: Expenses assumed by investment
advisor -- Note 2 ................................ -- -- -- --
------------------------------------------------------------------
Expenses Net of Reimbursement ...................... 12,761,610 1,051,599 652,448 699,538
------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS) ............................... 9,780,069 (308,208) 1,986,075 184,619
------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on
investments -- Note 1 .................................... 115,802,323 (1,617,843) 5,390,638 4,557,203
Net realized gains received from
underlying funds ......................................... -- -- 1,076,107 --
Net realized gain/(loss) on foreign
currencies -- Note 1 ..................................... -- -- -- 37,569
Net change in unrealized appreciation/(depreciation)
on investments -- Note 4 ................................. 250,877,923 10,046,847 6,548,228 8,978,915
Net change in unrealized appreciation/(depreciation)
from translation of other assets and liabilities
denominated in foreign currencies -- Note 4 .............. -- -- -- (75,289)
------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES ....................... 366,680,246 8,429,004 13,014,973 13,498,398
------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS ...................................... $376,460,315 $ 8,120,796 $15,001,048 $13,683,017
==================================================================
See notes to financial statements.
46
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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
Dividends ................................................ $ 299,956 $ -- $ -- $ --
Interest ................................................. 38,572 3,348,857 1,221,558 4,371,211
Less: Foreign tax withheld ............................... (2,444) -- -- --
---------------------------------------------------------------
Total Income ....................................... 336,084 3,348,857 1,221,558 4,371,211
---------------------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2 ....................... 112,282 270,433 118,589 390,112
Administrative fees -- Class A -- Note 2 ................. 25,723 135,216 59,295 187,562
Administrative fees -- Class B -- Note 2 ................. 2,347 -- -- 7,494
12b-1 fees -- Class B -- Note 3 .......................... 7,042 -- -- 22,481
Transfer agent fees ...................................... 32,313 38,271 18,264 163,660
Custodian fees ........................................... 78,547 39,974 18,178 38,678
Printing expense ......................................... 1,575 7,450 3,500 11,183
Registration fees ........................................ 8,625 20,000 5,950 22,019
Trustees' fees -- Note 2 ................................. 10,750 10,750 10,750 10,750
Audit fees ............................................... 10,500 8,750 8,500 8,500
Legal fees ............................................... 992 1,275 1,200 1,450
Insurance expense ........................................ 561 176 136 313
Other .................................................... 350 350 350 350
Deferred organization expense -- Note 8 .................. 2,650 896 896 --
------------------------------------------------------------------
Total Expenses ..................................... 294,257 533,541 245,608 864,552
Less: Expenses assumed by investment
advisor -- Note 2 ................................ -- 127,891 67,725 201,362
------------------------------------------------------------------
Expenses Net of Reimbursement ...................... 294,257 405,650 177,883 663,190
---------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS) ............................... 41,827 2,943,207 1,043,675 3,708,021
---------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on
investments -- Note 1 .................................... (2,043,242) 1,100,659 496,817 --
Net realized gains received from
underlying funds ......................................... -- -- -- --
Net realized gain/(loss) on foreign
currencies -- Note 1 ..................................... (30,765) -- -- --
Net change in unrealized appreciation/(depreciation)
on investments -- Note 4 ................................. (2,976,501) 215,144 (429,870) --
Net change in unrealized appreciation/(depreciation)
from translation of other assets and liabilities
denominated in foreign currencies -- Note 4 .............. (33,171) -- -- --
---------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES ....................... (5,083,679) 1,315,803 66,947 --
---------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS ...................................... $(5,041,852) $4,259,010 $1,110,622 $3,708,021
===============================================================
See notes to financial statements.
47
</TABLE>
<PAGE>
<TABLE>
_
|_| THE PARK AVENUE PORTFOLIO
====================================================
STATEMENTS OF CHANGES IN NET ASSETS
====================================================
<CAPTION>
THE GUARDIAN
THE GUARDIAN PARK AVENUE
PARK AVENUE FUND SMALL CAP FUND
------------------------------- -----------------------------
PERIOD FROM
SIX MONTHS SIX MONTHS APRIL 2,
ENDED YEAR ENDED ENDED 1997+ TO
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ........................... $ 9,780,069 $ 17,523,581 $ (308,208) $ (41,076)
Net realized gain/(loss) on investments and
foreign currency related transactions ................ 115,802,323 250,113,783 (1,617,843) 2,422,438
Net change in unrealized appreciation/(depreciation)
of investments and foreign currency related
transactions ......................................... 250,877,923 296,292,118 10,046,847 10,517,106
-----------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................ 376,460,315 563,929,482 8,120,796 12,898,468
-----------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A .............................................. (9,135,616) (17,140,750) -- --
Class B .............................................. -- (15,027) -- --
Distribution in excess of net investment income
Class A .............................................. -- -- -- --
Net realized gain on investments and foreign
currency related transactions
Class A .............................................. (54,649,863) (200,697,619) (977,750) (1,015,732)
Class B .............................................. (6,490,127) (16,602,423) (203,459) (184,137)
-----------------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS .................................. (70,275,606) (234,455,819) (1,181,209) (1,199,869)
-----------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions--Note 9 ................... 395,670,861 756,713,154 34,875,796 107,565,176
-----------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS .................... 701,855,570 1,086,186,817 41,815,383 119,263,775
NET ASSETS:
Beginning of period ...................................... 2,514,378,189 1,428,191,372 119,263,775 --
-----------------------------------------------------------------
End of period* ........................................... $3,216,233,759 $2,514,378,189 $161,079,158 $119,263,775
=================================================================
* Includes undistributed/overdistributed net investment
income of ................................................ $ 1,012,257 $ 367,804 $ (308,208) $ --
<CAPTION>
THE GUARDIAN
THE GUARDIAN BAILLIE GIFFORD
ASSET ALLOCATION FUND INTERNATIONAL FUND
---------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ........................... $ 1,986,075 $ 2,914,100 $ 184,619 $ (25,976)
Net realized gain/(loss) on investments and
foreign currency related transactions ................ 6,466,745 16,232,374 4,594,772 4,071,149
Net change in unrealized appreciation/(depreciation)
of investments and foreign currency related
transactions ......................................... 6,548,228 6,056,517 8,903,626 2,446,182
-----------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................ 15,001,048 25,202,991 13,683,017 6,491,355
-----------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A .............................................. (1,377,232) (2,813,753) (27,720) --
Class B .............................................. (88,376) (140,422) -- --
Distribution in excess of net investment income
Class A .............................................. -- -- -- (630,995)
Net realized gain on investments and foreign
currency related transactions
Class A .............................................. (1,243,783) (14,369,551) (1,072,095) (2,642,377)
Class B .............................................. (156,833) (1,441,303) (109,783) (250,985)
-----------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS .................................. (2,866,224) (18,765,029) (1,209,598) (3,524,357)
-----------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions--Note 9 ................... 27,478,973 51,310,480 8,140,208 9,394,500
-----------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS .................... 39,613,797 57,748,442 20,613,627 12,361,498
NET ASSETS:
Beginning of period ...................................... 151,014,330 93,265,888 73,267,467 60,905,969
-----------------------------------------------------------
End of period* ........................................... $190,628,127 $151,014,330 $93,881,094 $73,267,467
===========================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of ................................. $ 520,467 $ -- $ (440,091) $ (596,990)
See notes to financial statements.
48
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD EMERGING INVESTMENT QUALITY
MARKETS FUND BOND FUND
----------------------------- -------------------------------
PERIOD FROM
SIX MONTHS APRIL 2, SIX MONTHS
ENDED 1997+ TO ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ........................... $ 41,827 $ 80,943 $ 2,943,207 $ 4,216,366
Net realized gain/(loss) on investments and
foreign currency related transactions ................ (2,074,007) (794,872) 1,100,659 486,008
Net change in unrealized appreciation/(depreciation)
of investments and foreign currency related
transactions ......................................... (3,009,672) (1,037,899) 215,144 1,432,635
----------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................ (5,041,852) (1,751,828) 4,259,010 6,135,009
----------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A .............................................. (6,305) (76,816) (2,943,207) (4,216,366)
Class B .............................................. -- -- -- --
Distribution in excess of net investment income
Class A .............................................. -- -- -- --
Net realized gain on investments and foreign
currency related transactions
Class A .............................................. (727) -- -- --
Class B .............................................. (66) -- -- --
----------------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS .................................. (7,098) (76,816) (2,943,207) (4,216,366)
----------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions-- Note 9 .................. 1,239,626 25,309,692 32,572,109 46,222,148
----------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS .................... (3,809,324) 23,481,048 33,887,912 48,140,791
NET ASSETS:
Beginning of period ...................................... 23,481,048 -- 98,934,712 50,793,921
----------------------------------------------------------------
End of period* ........................................... $19,671,724 $23,481,048 $132,822,624 $98,934,712
================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of ................................. $ 41,822 $ 6,300 $ -- $ --
<CAPTION>
THE GUARDIAN THE GUARDIAN
TAX-EXEMPT FUND CASH MANAGEMENT FUND
---------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1997 1998 1997
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ........................... $ 1,043,675 $ 1,910,755 $ 3,708,021 $ 5,275,865
Net realized gain/(loss) on investments and
foreign currency related transactions ................ 496,817 784,253 -- --
Net change in unrealized appreciation/(depreciation)
of investments and foreign currency related
transactions ......................................... (429,870) 954,910 -- --
----------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................ 1,110,622 3,649,918 3,708,021 5,275,865
----------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A .............................................. (1,043,675) (1,910,755) (3,565,961) (5,094,586)
Class B .............................................. -- -- (142,060) (181,279)
Distribution in excess of net investment income
Class A .............................................. -- -- -- --
Net realized gain on investments and foreign
currency related transactions
Class A .............................................. -- -- -- --
Class B .............................................. -- -- -- --
----------------------------------------------------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS .................................. (1,043,675) (1,910,755) (3,708,021) (5,275,865)
----------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions-- Note 9 .................. 1,043,071 6,435,964 41,596,541 47,587,885
----------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS .................... 1,110,018 8,175,127 41,596,541 47,587,885
NET ASSETS:
Beginning of period ...................................... 47,360,315 39,185,188 138,387,686 90,799,801
----------------------------------------------------------------
End of period* ........................................... $48,470,333 $47,360,315 $179,984,227 $138,387,686
================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of ................................. $ -- $ -- $ -- $ --
See notes to financial statements.
49
</TABLE>
<PAGE>
===================================
NOTES TO
FINANCIAL SATEMENTS
===================================
June 30, 1998 (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. The Portfolio consists of ten
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); The Guardian Cash Management Fund
(GCMF); The Guardian High Yield Bond Fund (GHYBF); and The Guardian Park Avenue
Tax-Efficient Fund (GPATEF). As of June 30, 1998, neither GHYBF nor GPATEF had
commenced operations. The series are collectively referred to herein as the
"Funds".
On April 2, 1997 each of GPASCF and GBGEMF sold 2,000,000 shares of
beneficial interest 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 GIQBF and the cash portion in
GCMF.
The Funds offer up to three classes of shares: Class A, Class B and the
Institutional Class. Each of the Funds offers Class A 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 an administrative fee of
up to .25% on an annual basis of the Funds' average daily net assets. As of June
30, 1998, Class B shares are offered by GPAF, GPASCF, GAAF, GBGIF, GBGEMF and
GCMF. Class B shares are sold without an initial sales load but are subject to a
12b-1 fee of .75% and an administrative fee of up to .25% on an annual basis of
the Funds' average daily net assets, and a contingent deferred sales load (CDSL)
of up to 3% imposed on certain redemptions. As of June 30, 1998, Institutional
Class shares are offered by GPAF, GPASCF, GAAF, GBGIF, GBGEMF and GIQBF.
Institutional Class shares are offered at net
50
<PAGE>
asset value, without an initial or contingent deferred sales load. As of June
30, 1998, none of the Funds had issued Institutional Class Shares. All 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 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.
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) selected pursuant to procedures 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 an 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, 1998, distribution, administrative and transfer agent
fees were the only class-specific expenses.
Foreign Currency Translation
GBGIF, GBGEMF, GPAF and GPASCF are permitted to buy international
securities that are not U.S. dollar denominated. GBGIF, GBGEMF, GPAF
51
<PAGE>
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 the date on
which U.S. dollar equivalent amounts are actually received or paid, are included
in net realized gain or loss 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, 1998 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
period.
Forward Foreign Currency Contracts
GBGIF, GBGEMF, GPAF and GPASCF 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 foreign
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 other assets and liabilities denominated in
foreign currencies by the Fund. When a forward contract is closed, the Fund 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. The Funds will not enter into a forward foreign currency contract if
such contract would obligate the applicable Fund 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' investments in financial futures contracts
are 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.
52
<PAGE>
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
(Code), and as such will not be subject to federal income tax on taxable income
(including any realized capital gains) which is distributed in accordance with
the provisions of the Code. Therefore, no federal income tax provision is
required.
Reclassification of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gain; and the recharacterization of foreign exchange gains
or losses to either ordinary income or realized capital gains for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations, or net asset value per
share of the Fund.
NOTE 2. INVESTMENT ADVISORY AGREEMENTS AND
PAYMENTS TO RELATED PARTIES
Guardian Investor Services Corporation (GISC) provides investment advisory
services to each of the 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. Although GHYBF and GPATEF have not commenced
operations as of June 30, 1998, each has agreed to an appendix to the agreement
pursuant to which GISC will be paid at an annual rate of .60% of each Fund's
average daily net assets when operations commence. GISC voluntarily assumes a
portion of the operating expenses that exceeds .75% of GIQBF and GTEF's
respective average daily net assets and operating expenses that exceed .85% of
GCMF's average daily net assets. For the six months ended June 30, 1998, GISC
voluntarily assumed $127,891, $67,725 and $201,362 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 Limited (GBG), a Scottish corporation
formed through a joint venture between The Guardian Insurance & Annuity Company,
Inc. (GIAC) and Baillie Gifford Overseas Limited (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 compensation for its services, GBGIF and GBGEMF pay GBG annual investment
management fees of .80% and 1.00%, respectively, of their respective average
daily net assets. One half of the fee for each of those Funds is payable by GBG
to BG Overseas for its services. Payment of the sub-investment management fee
does
53
<PAGE>
not represent a separate or additional expense to GBGIF or GBGEMF.
Trustees who are not deemed to be "interested persons" (as defined in the
1940 Act) are paid $500 per Fund for each meeting of the Board of Trustees. An
annual fee of $1,000 per Fund was also paid to each such Trustee during such
period. GISC pays compensation to the Trustees who are interested persons.
Certain officers and Trustees of the Funds are affiliated with GISC.
Dividend income in GAAF includes $930,121 of dividends received from other
Guardian mutual funds.
Administrative Services Agreement
Pursuant to the Administrative Services Agreement adopted by the Funds on
behalf of the Class A and Class B shares, each of the Funds, except GPAF, pays
GISC an administrative service fee at an annual rate of .25% of its average
daily net assets. GPAF pays this fee at an annual rate of .25% of the average
daily net assets for which a "dealer of record" has been designated. For the six
months ended June 30, 1998, GPAF Class A shares paid an annualized rate of .17%
of its average daily net assets under the Administrative Services Agreement.
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, 1998, aggregate sales commissions for the
purchase of capital shares were paid to GISC as compensation for services
rendered as follows:
FUND COMMISSIONS FUND COMMISSIONS
- ---- ----------- ---- -----------
GPAF $4,645,433 GBGEMF $ 23,286
GPASCF 655,612 GIQBF 148,672
GAAF 481,343 GTEF 16,866
GBGIF 163,312
Under a Distribution Plan adopted by the Portfolio pursuant to the 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.
GISC is entitled to retain any CDSL imposed on certain Class B share
redemptions. For the six months ended June 30, 1998, such charges were as
follows:
FUND CLASS B
- ---- -------
GPAF ..................................... $299,380
GPASCF ................................... 27,021
GAAF ..................................... 8,062
GBGIF .................................... 5,815
GBGEMF ................................... 897
GCMF ..................................... 9,513
NOTE 4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) for the six months ended June 30, 1998 were as follows:
- -----------------------------------------------------
GPAF GPASCF
- -----------------------------------------------------
Purchases $846,531,416 $ 60,294,902
Proceeds 581,608,020 27,814,182
- -----------------------------------------------------
GAAF GBGIF
- -----------------------------------------------------
Purchases $ 34,306,864 $ 24,896,689
Proceeds 12,785,183 22,464,868
- -----------------------------------------------------
GBGEMF GIQBF
- -----------------------------------------------------
Purchases $ 7,753,331 $192,804,978
Proceeds 6,414,270 160,937,036
- -----------------------------------------------------
GTEF
- -----------------------------------------------------
Purchases $ 38,642,939
Proceeds 39,174,858
54
<PAGE>
The cost of investments owned at June 30, 1998 for federal income tax
purposes was the same as the cost for financial reporting purposes for the
Funds. The gross unrealized appreciation and depreciation of investments
excluding foreign currency at June 30, 1998, were as follows:
GPAF GPASCF
------------ -----------
Appreciation $927,754,001 $27,319,069
(Depreciation) (33,032,165) (6,755,116)
------------ -----------
NET UNREALIZED
APPRECIATION $894,721,836 $20,563,953
============ ===========
GAAF GBGIF
------------ -----------
Appreciation $ 26,548,420 $24,167,726
(Depreciation) (643,476) (1,990,185)
------------ -----------
NET UNREALIZED
APPRECIATION $ 25,904,944 $22,177,541
============ ===========
GBGEMF GIQBF
------------ ------------
Appreciation $ 879,756 $ 1,395,188
(Depreciation) (4,898,444) (379,383)
------------ -----------
NET UNREALIZED
APPRECIATION/
(DEPRECIATION) $ (4,018,688) $ 1,015,805
============ ===========
GTEF
------------
Appreciation $ 1,164,569
(Depreciation) (6,781)
------------
NET UNREALIZED
APPRECIATION $ 1,157,788
============
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 (See 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, 1998, GBGIF, GBGEMF, GPAF and GPASCF 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.
NOTE 6. REVERSE REPURCHASE AGREEMENTS
GIQBF may enter into reverse repurchase agreements with banks or third
party broker-dealers to borrow short term funds. Interest on the value of
reverse repurchase agreements issued and outstanding is based upon competitive
market rates at the time of issuance. At the time GIQBF enters into a reverse
repurchase agreement, it establishes and maintains cash, U.S. government
securities or liquid, unencumbered securities that are marked-to-market daily in
a segregated account with the Fund's custodian. The value of such segregated
assets must be at least equal to the value of the repurchase obligation
(principal plus accrued interest), as applicable. Reverse repurchase agreements
involve the risk that the buyer of the securities sold by GIQBF may be unable to
deliver the securities when the Fund seeks to repurchase them. Interest paid on
reverse repurchase agreements for the six months ended June 30, 1998 amounted to
$74,720.
55
<PAGE>
Information regarding transactions by GIQBF under reverse repurchase
agreements is as follows:
MARKET
FACE VALUE VALUE
- ---------- -----------
$5,390,225 Reverse Repurchase Agreement with J.P. Morgan,
6.00% dated 6/30/98, to be repurchased at
$5,391,011 on 7/1/98, collateralized by $5,391,000
Lucent Technologies, Inc., 6.00% due 7/1/98 ......... $ 5,390,225
Average amount outstanding during the year .......... $ 3,302,657
Average monthly shares outstanding during the year .. 29,122,803
Average debt per share outstanding during the year .. $ 0.11
Weighted average interest rate during the year ...... 4.00%
NOTE 7. DOLLAR ROLL TRANSACTIONS
GIQBF may enter into dollar roll transactions with financial institutions
to take advantage of opportunities in the mortgage-backed securities market. A
dollar roll transaction involves a sale by the Fund of securities that it holds
with an agreement by the Fund to repurchase similar securities at an agreed upon
price and date. The securities repurchased will bear the same interest as those
sold, but generally will be collateralized at the time of delivery by different
pools of mortgages.
NOTE 8. DEFERRED ORGANIZATION AND INITIAL OFFERING EXPENSES
GPASCF and GBGEMF incurred $45,392 and $26,758, respectively, in connection
with their organization and registration. Such expenses were advanced by GISC
and were repaid by GPASCF and GBGEMF. 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.
NOTE 9. SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.01 par value shares of beneficial
interest authorized, divided into three classes, designated as Class A, Class B
and Institutional Class shares. As of June 30, 1998: (i) GPAF, GPASCF, GAAF,
GBGIF and GBGEMF offered all three classes; (ii) GIQBF offered Class A and
Institutional Class shares; (iii) GCMF offered Class A and Class B shares; and
(iv) GTEF offered Class A shares only.
56
<PAGE>
<TABLE>
Transactions in shares of beneficial interest were as follows:
<CAPTION>
o THE GUARDIAN PARK AVENUE FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 11,308,679 17,883,364 $553,993,879 $799,066,805
Shares issued in reinvestment of
dividends and distributions 1,208,282 4,641,797 61,659,044 208,919,318
Shares repurchased (6,600,323) (9,104,998) (330,412,066) (403,755,099)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 5,916,638 13,420,163 $285,240,857 $604,231,024
================================================================================================================
CLASS B
Shares sold 2,534,441 3,236,995 $124,247,004 $143,714,212
Shares issued in reinvestment of
dividends and distributions 123,215 359,417 6,266,728 16,167,277
Shares repurchased (401,677) (162,809) (20,083,728) (7,399,359)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 2,255,979 3,433,603 $110,430,004 $152,482,130
================================================================================================================
<CAPTION>
o THE GUARDIAN PARK AVENUE SMALL CAP FUND
Six Months Period from Six Months Period from
Ended April 2, 1997+ to Ended April 2, 1997+ to
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 2,830,726 7,627,273 $ 41,454,928 $ 94,368,743
Shares issued in reinvestment of
dividends and distributions 66,673 74,820 961,416 1,001,090
Shares repurchased (1,060,296) (365,908) (15,599,024) (5,041,538)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 1,837,103 7,336,185 $ 26,817,320 $ 90,328,295
================================================================================================================
CLASS B
Shares sold 669,665 1,358,653 $ 9,727,329 $ 17,466,551
Shares issued in reinvestment of
dividends and distributions 14,479 13,670 206,569 181,544
Shares repurchased (128,299) (37,778) (1,875,422) (411,214)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 555,845 1,334,545 $ 8,058,476 $ 17,236,881
================================================================================================================
+ Commencement of operations.
57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
o THE GUARDIAN ASSET ALLOCATION FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 2,030,079 2,726,033 $29,826,512 $40,059,487
Shares issued in reinvestment of
dividends and distributions 169,769 1,201,442 2,556,599 16,793,107
Shares repurchased (741,840) (988,551) (10,987,879) (14,336,286)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 1,458,008 2,938,924 $21,395,232 $42,516,308
================================================================================================================
CLASS B
Shares sold 438,210 550,382 $ 6,434,347 $ 7,896,309
Shares issued in reinvestment of
dividends and distributions 15,734 109,733 236,180 1,525,775
Shares repurchased (39,731) (48,496) (586,786) (627,912)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 414,213 611,619 $ 6,083,741 $ 8,794,172
================================================================================================================
<CAPTION>
o THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 768,784 1,128,171 $13,802,550 $18,720,231
Shares issued in reinvestment of
dividends and distributions 58,391 199,985 1,083,145 3,205,710
Shares repurchased (467,305) (946,086) (7,979,975) (15,383,791)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 359,870 382,070 $ 6,905,720 $ 6,542,150
================================================================================================================
CLASS B
Shares sold 87,888 176,590 $ 1,571,216 $ 2,867,170
Shares issued in reinvestment of
dividends and distributions 5,954 15,633 108,538 246,383
Shares repurchased (25,262) (16,447) (445,266) (261,203)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 68,580 175,776 $ 1,234,488 $ 2,852,350
===============================================================================================================
58
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
o THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Six Months Period from Six Months Period from
Ended April 2, 1997+ to Ended April 2, 1997+ to
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 184,893 2,336,844 $ 1,622,632 $23,610,122
Shares issued in reinvestment of
dividends and distributions 951 8,288 7,010 76,167
Shares repurchased (49,138) (56,441) (432,714) (627,877)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE 136,706 2,288,691 $ 1,196,928 $23,058,412
===============================================================================================================
CLASS B
Shares sold 20,544 222,415 $ 178,784 $ 2,319,202
Shares issued in reinvestment of
dividends and distributions 9 -- 66 --
Shares repurchased (16,485) (6,436) (136,152) (67,922)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE 4,068 215,979 $ 42,698 $ 2,251,280
===============================================================================================================
<CAPTION>
o THE GUARDIAN INVESTMENT QUALITY BOND FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,478,168 5,848,887 $34,607,001 $56,852,114
Shares issued in reinvestment of
dividends and distributions 287,014 386,846 2,862,653 3,786,174
Shares repurchased (490,602) (1,484,591) (4,897,545) (14,416,140)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE 3,274,580 4,751,142 $32,572,109 $46,222,148
===============================================================================================================
+ Commencement of operations.
59
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
o THE GUARDIAN TAX-EXEMPT FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1998 December 31, 1997 June 30, 1998 December 31, 1997
(Unaudited) (Audited) (Unaudited) (Audited)
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 89,430 720,851 $ 893,231 $6,983,816
Shares issued in reinvestment of
dividends and distributions 102,064 191,773 1,018,150 1,862,173
Shares repurchased (87,064) (249,303) (868,310) (2,410,025)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 104,430 663,321 $1,043,071 $6,435,964
================================================================================================================
<CAPTION>
o THE GUARDIAN CASH MANAGEMENT FUND
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
(Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------
Shares/@ $1 per share
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A
Shares sold 304,568,185 435,510,421
Shares issued in reinvestment of
dividends and distributions 3,411,962 4,841,856
Shares repurchased (267,668,375) (396,046,079)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 40,311,772 44,306,198
================================================================================================================
CLASS B
Shares sold 11,091,057 9,032,391
Shares issued in reinvestment of
dividends and distributions 123,639 165,039
Shares repurchased (9,929,927) (5,915,743)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE 1,284,769 3,281,687
================================================================================================================
</TABLE>
NOTE 10. LINE OF CREDIT
A $50,000,000 line of credit available to all of the Funds and other
Guardian-related Funds 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, 1998, none of the Funds
borrowed against this line of credit.
60
<PAGE>
[INTENTIONALLY LEFT BLANK]
61
<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/ DISTRIBUTIONS
NET ASSET NET AND FOREIGN (DECREASE) DIVIDENDS IN EXCESS
VALUE, INVESTMENT CURRENCY FROM FROM NET OF NET
BEGINNING INCOME/ RELATED INVESTMENT INVESTMENT INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS OPERATIONS INCOME INCOME
--------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/98++ $46.12 $0.18 $ 6.18 $ 6.36 $(0.17) --
Year ended 12/31/97 37.91 0.40 12.61 13.01 (0.39) --
Year ended 12/31/96 33.97 0.42 8.41 8.83 (0.42) $(0.01)
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) --
CLASS B:
Six months ended 6/30/98++ 46.02 (0.03) 6.14 6.11 -- --
Year ended 12/31/97 37.90 0.00 12.54 12.54 (0.01) --
Period from 5/1/96+ to 12/31/96 36.26 0.05 6.10 6.15 (0.05) --
THE GUARDIAN PARK AVENUE
SMALL CAP FUND
CLASS A:
Six months ended 6/30/98++ 13.77 (0.02) 0.95 0.93 -- --
Period from 4/2/97+ to 12/31/97 10.00 0.00 3.91 3.91 -- --
CLASS B:
Six months ended 6/30/98++ 13.67 (0.07) 0.94 0.87 -- --
Period from 5/6/97+ to 12/31/97 10.57 (0.04) 3.28 3.24 -- --
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Six months ended 6/30/98++ 14.05 0.17 1.12 1.29 (0.12) --
Year ended 12/31/97 12.96 0.34 2.77 3.11 (0.34) --
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 6/30/98++ 14.00 0.10 1.13 1.23 (0.07) --
Year ended 12/31/97 12.92 0.17 2.77 2.94 (0.18) --
Period from 5/1/96+ to 12/31/96 12.61 0.04 1.50 1.54 (0.04) --
+ Commencement of operations.
++ Unaudited.
62
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS
FROM NET ASSET
NET REALIZED VALUE,
GAIN ON END OF TOTAL
INVESTMENT PERIOD RETURN*
----------- --------- -------
<S> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/98++ $(1.00) $51.31 13.79%
Year ended 12/31/97 (4.41) 46.12 34.85
Year ended 12/31/96 (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
CLASS B:
Six months ended 6/30/98++ (1.00) 51.13 13.28
Year ended 12/31/97 (4.41) 46.02 33.53
Period from 5/1/96+ to 12/31/96 (4.46) 37.90 17.35
THE GUARDIAN PARK AVENUE
SMALL CAP FUND
CLASS A:
Six months ended 6/30/98++ (0.11) 14.59 6.75
Period from 4/2/97+ to 12/31/97 (0.14) 13.77 39.16
CLASS B:
Six months ended 6/30/98++ (0.11) 14.43 6.36
Period from 5/6/97+ to 12/31/97 (0.14) 13.67 30.47
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Six months ended 6/30/98++ (0.11) 15.11 9.24
Year ended 12/31/97 (1.68) 14.05 24.44
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 6/30/98++ (0.11) 15.05 8.77
Year ended 12/31/97 (1.68) 14.00 23.09
Period from 5/1/96+ to 12/31/96 (1.19) 12.92 12.07
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------
NET
NET ASSETS, INVESTMENT AVERAGE
END OF EXPENSES EXPENSES INCOME/(LOSS) PORTFOLIO RATE OF
PERIOD TO AVERAGE WAIVED TO AVERAGE TURNOVER COMMISSIONS
(000'S OMITTED) NET ASSETS (b) BY GISC NET ASSETS RATE PAID (c)
--------------- -------------- ---------- ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/98++ $2,876,743 0.79%(a) -- 0.76%(a) 21% $0.0507
Year ended 12/31/97 2,312,632 0.79 -- 0.95 50 0.0461
Year ended 12/31/96 1,392,186 0.79 -- 1.19 81 0.0470
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 --
CLASS B:
Six months ended 6/30/98++ 339,491 1.71 (a) -- (0.16)(a) 21 0.0507
Year ended 12/31/97 201,746 1.73 -- 0.00 50 0.0461
Period from 5/1/96+ to 12/31/96 36,006 1.77 (a) -- 0.04 (a) 81 0.0470
THE GUARDIAN PARK AVENUE
SMALL CAP FUND
CLASS A:
Six months ended 6/30/98++ 133,808 1.32 (a) -- (0.29)(a) 20 0.0286
Period from 4/2/97+ to 12/31/97 101,016 1.36 (a) -- 0.04 (a) 25 0.0296
CLASS B:
Six months ended 6/30/98++ 27,271 2.15 (a) -- (1.12)(a) 20 0.0286
Period from 5/6/97+ to 12/31/97 18,248 2.26 (a) -- (1.01)(a) 25 0.0296
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Six months ended 6/30/98++ 169,276 0.67 (a) 0.48% 2.42 (a) 10 0.0017
Year ended 12/31/97 136,948 0.95 0.19 2.50 58 0.0133
Year ended 12/31/96 88,190 1.30 -- 1.91 122 0.0529
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 6/30/98++ 21,352 1.59 (a) 0.48 1.52 (a) 10 0.0017
Year ended 12/31/97 14,066 2.04 0.19 1.50 58 0.0133
Period from 5/1/96+ to 12/31/96 5,075 2.39 (a) -- 0.70 (a) 122 0.0529
+ Commencement of operations. (a) Annualized.
++ Unaudited. (b) After expenses waived by GISC.
* Excludes the effect of sales load. (c) 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.
63
</TABLE>
<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/ DISTRIBUTIONS
NET ASSET NET AND FOREIGN (DECREASE) DIVIDENDS IN EXCESS
VALUE, INVESTMENT CURRENCY FROM FROM NET OF NET
BEGINNING INCOME/ RELATED INVESTMENT INVESTMENT INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS OPERATIONS INCOME INCOME
--------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD
INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/98++ $16.08 $0.06 $2.96 $3.02 $(0.01) --
Year ended 12/31/97 15.22 0.02 1.66 1.68 -- $(0.16)
Year ended 12/31/96 13.57 0.05 1.89 1.94 (0.05) (0.05)
Year ended 12/31/95 13.01 0.04 1.40 1.44 (0.04) (0.23)
Year ended 12/31/94 13.19 0.01 (0.09) (0.08) (0.01) --
Period from 2/16/93+ to 12/31/93 10.00 (0.02) 3.32 3.30 -- --
CLASS B:
Six months ended 6/30/98++ 15.87 (0.01) 2.90 2.89 -- --
Year ended 12/31/97 15.12 (0.11) 1.52 1.41 -- --
Period from 5/1/96+ to 12/31/96 14.71 (0.04) 0.76 0.72 (0.04) (0.08)
THE GUARDIAN BAILLIE GIFFORD
EMERGING MARKETS FUND
CLASS A:
Six months ended 6/30/98++ 9.38 0.02 (1.95) (1.93) -- --
Period from 4/2/97+ to 12/31/97 10.00 0.04 (0.63) (0.59) (0.03) --
CLASS B:
Six months ended 6/30/98++ 9.30 (0.07) (1.92) (1.99) -- --
Period from 5/6/97+ to 12/31/97 10.28 (0.09) (0.89) (0.98) -- --
THE GUARDIAN INVESTMENT QUALITY
BOND FUND
CLASS A:
Six months ended 6/30/98++ 9.91 0.27 0.11 0.38 (0.27) --
Year ended 12/31/97 9.70 0.58 0.21 0.79 (0.58) --
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) --
THE GUARDIAN TAX EXEMPT FUND
CLASS A:
Six months ended 6/30/98++ 9.99 0.22 0.01 0.23 (0.22) --
Year ended 12/31/97 9.61 0.44 0.38 0.82 (0.44) --
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 2/16/93+ to 12/31/93 10.00 0.34 0.40 0.74 (0.34) --
+ Commencement of operations.
++ Unaudited.
64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS
FROM NET ASSET
NET REALIZED VALUE,
GAIN ON END OF TOTAL
INVESTMENTS PERIOD RETURN*
-------------------------------------
<S> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD
INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/98++ $(0.24) $18.85 18.79%
Year ended 12/31/97 (0.66) 16.08 11.07
Year ended 12/31/96 (0.19) 15.22 14.33
Year ended 12/31/95 (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 6/30/98++ (0.24) 18.52 18.24
Year ended 12/31/97 (0.66) 15.87 9.37
Period from 5/1/96+ to 12/31/96 (0.19) 15.12 4.34
THE GUARDIAN BAILLIE GIFFORD
EMERGING MARKETS FUND
CLASS A:
Six months ended 6/30/98++ -- 7.45 (20.54)
Period from 4/2/97+ to 12/31/97 -- 9.38 (5.86)
CLASS B:
Six months ended 6/30/98++ -- 7.31 (21.40)
Period from 5/6/97+ to 12/31/97 -- 9.30 (9.71)
THE GUARDIAN INVESTMENT QUALITY
BOND FUND
CLASS A:
Six months ended 6/30/98++ -- 10.02 3.87
Year ended 12/31/97 -- 9.91 8.43
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
THE GUARDIAN TAX EXEMPT FUND
CLASS A:
Six months ended 6/30/98++ -- 10.00 2.31
Year ended 12/31/97 -- 9.99 8.74
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 2/16/93+ to 12/31/93 (0.20) 10.20 5.55
<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 (b) BY GISC NET ASSETS RATE PAID (c)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD
INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/98++ $85,298 1.60%(a) -- 0.55%(a) 28% $0.0011
Year ended 12/31/97 66,999 1.62 -- 0.07 55 0.0235
Year ended 12/31/96 57,593 1.70 -- 0.29 39 0.0364
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 6/30/98++ 8,583 2.74 (a) -- (0.57)(a) 28 0.0011
Year ended 12/31/97 6,268 2.91 -- (1.46) 55 0.0235
Period from 5/1/96+ to 12/31/96 3,313 3.05 (a) -- (1.47)(a) 39 0.0364
THE GUARDIAN BAILLIE GIFFORD
EMERGING MARKETS FUND
CLASS A:
Six months ended 6/30/98++ 18,062 2.44 (a) -- 0.55 (a) 31 0.0001
Period from 4/2/97+ to 12/31/97 21,472 2.31 (a) -- 0.61 (a) 36 0.0004
CLASS B:
Six months ended 6/30/98++ 1,610 4.60 (a) -- (1.61)(a) 31 0.0001
Period from 5/6/97+ to 12/31/97 2,009 4.24 (a) -- (0.02)(a) 36 0.0004
THE GUARDIAN INVESTMENT QUALITY
BOND FUND
CLASS A:
Six months ended 6/30/98++ 132,823 0.75 (a) 0.24% 5.44 (a) 151 --
Year ended 12/31/97 98,935 0.75 0.29 5.94 313 --
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 --
THE GUARDIAN TAX EXEMPT FUND
CLASS A:
Six months ended 6/30/98++ 48,470 0.75 (a) 0.29 4.40 (a) 83 --
Year ended 12/31/97 47,360 0.75 0.31 4.51 202 --
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 2/16/93+ to 12/31/93 21,135 1.36 (a) -- 3.35 (a) 108 --
+ Commencement of operations. (a) Annualized.
++ Unaudited. (b) After expenses subsidized by GISC.
* Excludes the effect of sales load. (c) 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.
65
</TABLE>
<PAGE>
<TABLE>
=========================================
FINANCIAL HIGHLIGHTS
=========================================
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
Net Asset Net Dividends
Value, Investment from Net
Beginning Income/ Investment
of Period (Loss) Income
-------------------------------------------
<S> <C> <C> <C>
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Six months ended 6/30/98++ $1.000 $0.024 $(0.024)
Year ended 12/31/97 1.000 0.047 (0.047)
Year ended 12/31/96 1.000 0.045 (0.045)
Year ended 12/31/95 1.000 0.051 (0.051)
Year ended 12/31/94 1.000 0.034 (0.034)
Year ended 12/31/93 1.000 0.021 (0.021)
Year ended 12/31/92 1.000 0.030 (0.030)
Year ended 12/31/91 1.000 0.053 (0.053)
Year ended 12/31/90 1.000 0.076 (0.076)
Year ended 12/31/89 1.000 0.086 (0.086)
Three months ended 12/31/88 1.000 0.024 (0.024)
Year ended 9/30/88 1.000 0.066 (0.066)
CLASS B:
Six months ended 6/30/98++ 1.000 0.024 (0.024)
Year ended 12/31/97 1.000 0.047 (0.047)
Period from 5/1/96+ to 12/31/96 1.000 0.028 (0.028)
+ Commencement of operations.
++ Unaudited.
66
</TABLE>
<PAGE>
<TABLE>
Ratios/Supplemental Data
---------------------------------------------------------
Net
Net Asset Net Assets, Investment
Value, End of Expenses Expenses Income/(Loss)
End of Total Period to Average Subsidized to Average
Period Return* (000's Omitted) Net Assets(c) By GISC Net Assets
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Six months ended 6/30/98++ $1.000 2.38% $172,835 0.85%(a) 0.23%(a) 4.75%(a)
Year ended 12/31/97 1.000 4.81 132,523 0.85 0.28 4.71
Year ended 12/31/96 1.000 4.62 88,217 0.90 0.30 4.62
Year ended 12/31/95 1.000 5.22 69,913 0.85 0.37 5.10
Year ended 12/31/94 1.000 3.48 56,730 0.87 0.50 3.54
Year ended 12/31/93 1.000 2.15 34,731 1.02 0.42 2.13
Year ended 12/31/92 1.000 3.06 37,780 0.70 0.44 3.01
Year ended 12/31/91 1.000 5.70 44,054 0.67 0.35 5.30
Year ended 12/31/90 1.000 7.91 47,153 0.65 0.41 7.57
Year ended 12/31/89 1.000 8.60 33,821 0.65 0.52 8.56
Three months ended 12/31/88 1.000 2.40(b) 21,961 1.00 (a) 0.38 (a) 7.63 (a)
Year ended 9/30/88 1.000 6.60 20,603 1.00 0.28 6.32
CLASS B:
Six months ended 6/30/98++ 1.000 2.38 7,149 0.85 (a) 1.01 (a) 4.74 (a)
Year ended 12/31/97 1.000 4.81 5,864 0.85 1.10 4.71
Period from 5/1/96+ to 12/31/96 1.000 2.81(b) 2,583 1.16 (a) 0.59 (a) 4.43 (a)
+ Commencement of operations. (a) Annualized.
++ Unaudited. (b) Not annualized.
* Excludes the effect of sales load. (c) After expenses subsidized by GISC.
67
</TABLE>
<PAGE>
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
Kevin S. Alter
Joseph A. Caruso
Howard W. Chin
Alexander M. Grant, Jr.
Thomas R. Hickey, Jr.
Edward H. Hocknell
Jonathan C. Jankus
Ann T. Kearney
Larry A. Luxenberg
R. Robin Menzies
Andrew J. Mika
John B. Murphy
Karen L. Olvany
Frank L. Pepe
Richard T. Potter, Jr.
Marjorie A. Silverman
Thomas G. Sorell
Donald Sullivan, Jr.
This report is authorized for distribution to the public only
when accompanied or preceded by a current prospectus for the
funds which comprise The Park Avenue Portfolio.
<PAGE>
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
[LOGO]
Guardian Investors Services Corporation(R)
201 Park Avenue South
New York, NY 10003
(C)1998 Guardian Investor Services Corporation
EB-011566 6/98
- ---------------------------------
SEMIANNUAL REPORT TO SHAREHOLDERS
- ---------------------------------
THE
PARK AVENUE
PORTFOLIO
- ----------------------------
SEMIANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1998
- ----------------------------
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)
<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 Heritages 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
Kevin S. Alter
Joseph A. Caruso
Howard W. Chin
Alexander M. Grant, Jr.
Thomas R. Hickey, Jr.
Edward H. Hocknell
Jonathan C. Jankus
Ann T. Kearney
Larry A. Luxenberg
R. Robin Menzies
Andrew J. Mika
John B. Murphy
Karen L. Olvany
Frank L. Pepe
Richard T. Potter, Jr.
Marjorie A. Silverman
Thomas G. Sorell
Donald Sullivan, Jr.
This report is authorized for distribution to the public only when
accompanied or preceded by a current prospectus for the funds which
comprise The Park Avenue Portfolio.
<PAGE>
[LOGO]
Guardian Investor Services Corporation[R]
201 Park Avenue South
New York, NY 10003
EB-011566M 6/98
- ------------------
BULK RATE MAIL
U.S. POSTAGE PAID
CLIFTON, NJ
PERMIT NO. 1104
- ------------------
SEMIANNUAL REPORT TO SHAREHOLDERS
THE
PARK AVENUE
PORTFOLIO
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1998
- --------------------------------------------------------------------------------
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]
