SEMIANNUAL REPORT TO SHAREHOLDERS
[BACKGROUND GRAPHIC OMITTED]
[GUARDIAN LOGO]
GUARDIAN
SEMIANNUAL
REPORT TO
SHAREHOLDERS
June 30, 1999
THE PARK AVENUE PORTFOLIO(R)
The Guardian Park Avenue Fund(R)
The Guardian Park Avenue
Small Cap Fund(SM)
The Guardian Asset
Allocation Fund(SM)
The Guardian Baillie Gifford
International Fund(SM)
The Guardian Baillie Gifford
Emerging Markets Fund(SM)
The Guardian Investment
Quality Bond Fund(SM)
The Guardian High Yield
Bond Fund(SM)
The Guardian
Tax-Exempt Fund(SM)
The Guardian Cash
Management Fund(SM)
<PAGE>
[BLANK PAGE]
<PAGE>
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
MYOPIA VS. THE BIG PICTURE
- ---------------------
| |
| |
| |
| [PHOTO] |
| |
| |
| |
- ---------------------
Frank J. Jones, Ph.D
Chief Investment Officer,
Co-Portfolio Manager
The Guardian Park
Avenue Fund
The major peril in writing a comment such as this is that during the time
between my writing it and your reading it, the message becomes dated or even
obsolete. This author has frequently been a victim to this peril. Perhaps
uncharacteristically, this comment attempts to focus on the big picture
underlying the economy and the bond and stock markets, and not myopically on the
ephemeral data hitting the tape each minute of the hour and day.
To begin with some perspective, the current economic expansion began during
April 1991, making it the longest peacetime expansion since World War II. The
current bull market in stocks began, by some measures, during September 1990.
Obviously, on an historical basis the end of either would not be premature.
First, the background for this discussion. The Federal Reserve Board (Fed)
eased interest rates three times by a total of 0.75% during late 1998 due to
concerns about credit stress in the U.S. and international economic weakness.
During 1999, the economy has been unexpectedly strong, the bond markets
unexpectedly weak (higher yields), and the stock market mixed (the Dow (DJIA)(1)
and NASDAQ(2) have been strong, small cap stocks weak and the Standard & Poor's
500 (S&P 500) Index(3) somewhere in between). The Fed, in general, and Alan
Greenspan, in particular, have been concerned about the effect of strong
economic growth on labor costs and inflation, even though neither of these have
evidenced themselves yet.
In this vein, the Fed "took back" one of the three previous easings by
raising rates by 0.25% on June 30. During August--the time of this writing--bond
yields had increased to their highest levels since November 1997 and the S&P 500
had declined by approximately 8% from its high of 1419 on July 16. During late
July/early August, there were announcements of lower productivity and higher
wage increases during the second quarter of 1999, adding to the Fed concerns.
The former was particularly troublesome because Greenspan has rationalized the
length and strength of the non-inflationary expansion on the basis of the high
productivity resulting from innovations in technology and communications.
Considering the big picture, what factors typically end expansions? The
most common cause is developing or actual inflation which prompts the Fed to
tighten, or raise rates, often precipitously. Often excesses of some type,
frequently inventory excesses, accompany the inflationary forces. Currently
there are no significant excesses and Greenspan and the Fed appear to be
prepared to act pre-emptively and gradually to obviate the need for a later
draconian tightening that could jeopardize the expansion. This is clear from
Greenspan's comments to Congress on July 22, as indicated in the excerpts below.
"If new data suggest it is likely that the pace of cost and price increases
will be picking up, the Federal Reserve will have to act promptly and forcefully
so as to preclude imbalances from arising that would only require a more
disruptive adjustment later--one that could impair the expansion and bring into
question whether the many gains already made can be sustained...."
"When we can be pre-emptive we should, because moderate pre-emptive actions
can obviate more drastic actions at a later date that can destabilize the
economy."
It appears that the Treasury market has already priced in one or two Fed
tightenings. If inflation becomes significant and requires more Fed tightening,
an outcome we do not think likely, yields could increase further. If, on the
other hand, the economy slows somewhat during late 1999, which seems likely,
yields could decline.
Other factors which could also abort the expansion are higher taxes (taxes
are, in fact, likely to be decreased), tighter regulation, and protectionism.
None seem probable.
The economy could slow, but it is not likely to contract. That is, a
recession is not on the "radar screen". Economic growth will continue to proceed
in various paces, but will not end.
The "big picture" of the stock market involves three variables, namely
corporate profits, interest rates, and current valuations. Stock prices increase
when profits increase and when bond yields decrease. In addition, stock prices
are more likely to increase when current valuations (such as the
price-to-earnings ratio) are lower than they have been. How is the stock market
currently positioned with respect to these three variables?
As indicated, economic growth is likely to remain solid. Thus, corporate
profits should continue to increase. With
- ----------------------------------------------
(1) The Dow Jones Industrial Average (DJIA) is an unmanaged index of 30
industrial stocks listed on the New York Stock Exchange that is generally
considered to be representative of U.S. stock market activity.
(2) The NASDAQ Composite Index is a broad-based capitalization-weighted index of
all NASDAQ National Market stocks.
(3) The S&P 500 Index is an unmanaged index of 500 large cap stocks that is
generally considered to be representative of U.S. stock market performance.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
respect to bond yields, unless the Fed fails and inflation increases, bond
yields should not increase much more and could decrease if economic growth eases
somewhat. The case relative to valuations is more difficult. On the one hand,
and well noted in the press, many stocks have very high or even extreme
valuations, particularly large cap growth stocks and technology and internet
stocks. On the other hand, small cap and cyclical stocks have lower valuations.
The stock market seems to be begging for rotation whereby the valuations of the
various sectors of the stock market would converge.
To be philosophical about the last four years of stock market returns in
excess of 20% and the prospects for the future, consider the counsel of the
Nobel Prize winning economist Paul Samuelson: "Economists have no theory of how
long a bubble will last." So, his advice is to "develop a philosophical
attitude. Any prosperity in a speculative market is lent to you by the Fates and
may have a string on it, and may be taken away."
Consider one other characteristic of the current stock market which affects
stock market volatility. Prior to 1959, the dividend yield on stocks was higher
than the bond yield. For example, during 1955, the dividend yield on the S&P 500
was 4.6% and the ten-year Treasury yield was 2.8%. The rationale for this
relationship was twofold. First, stocks were considered to be more risky than
bonds and, thus, it was deemed, should have higher yields (just as
non-investment grade or high yield bonds have higher yields than investment
grade bonds). Second, capital gains were expected to be low and so most of the
return on common stocks had to be dividends. After 1958, while dividend yields
were lower than bond yields, dividends continued to increase and reached 5.7%
during 1980. Since then, the S&P 500 dividend yields decreased to 1.7% during
1998 and 1.2% during the second quarter of 1999. In fact, many technology stocks
pay no dividends. Obviously now, dividends represent a nearly inconsequential
component of total return.
What is the effect of the recent lower dividends? In general, the dividend
stream is much more stable than capital gains. Hence stocks, due to their
present low dividend yield, are currently much more volatile than they were
previously.
Overall, while volatility will continue to be an unfavorable characteristic
of the stock market, and there could be a moderate decline in the stock market,
I cannot become a stock market bear, and could even be bullish on some sectors.
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 21
==== ====
- ----------------------------------------------------------- ==== ------- ==== --
THE GUARDIAN PARK AVENUE SMALL CAP FUND 6 24
==== ====
- ----------------------------------------------------------- ==== ------- ==== --
THE GUARDIAN ASSET ALLOCATION FUND 8 26
==== ====
- ----------------------------------------------------------- ==== ------- ==== --
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND 10 27
==== ====
- ----------------------------------------------------------- ==== ------- ==== --
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND 12 29
==== ====
- ----------------------------------------------------------- ==== ------- ==== --
THE GUARDIAN INVESTMENT QUALITY BOND FUND 14 32
==== ====
- ----------------------------------------------------------- ==== ------- ==== --
THE GUARDIAN HIGH YIELD BOND FUND 16 35
==== ====
- ----------------------------------------------------------- ==== ------- ==== --
THE GUARDIAN TAX-EXEMPT FUND 18 37
==== ====
- ----------------------------------------------------------- ==== ------- ==== --
THE GUARDIAN CASH MANAGEMENT FUND 20 39
==== ====
- ------------------------------------------------------------------------ ==== --
FINANCIAL STATEMENTS 40
====
- ------------------------------------------------------------------------ ==== --
NOTES TO FINANCIAL STATEMENTS 48
====
- ------------------------------------------------------------------------ ==== --
FINANCIAL HIGHLIGHTS 58
====
- -------------------------------------------------------------------------------
<PAGE>
==============================--------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
=============================
- --------------------- ---------------------
| | | |
| | | |
| | | |
| [PHOTO] | | [PHOTO] |
| | | |
| | | |
| | | |
- --------------------- ---------------------
Larry Luxenberg, C.F.A. John B. Murphy, C.F.A.
Co-Portfolio Manager Co-Portfolio Manager
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, 1999: $3,446,789,140
Q. HOW HAS THE FUND PERFORMED DURING THE FIRST SIX MONTHS OF 1999?
A. During most of the last two years, a narrow group of stocks has powered the
advance of the Standard & Poor's 500 Index(1) (S&P 500), and in the first half
of 1999, the Index had a total return of 12.38%. Starting in April, this advance
has broadened as the worldwide financial crises environment has dissipated. In
the face of continuing great volatility, The Guardian Park Avenue Fund returned
8.12%.(2) Should this pace continue, the Fund would have a double-digit positive
return for the fifth year in a row, something that has occurred only once
previously in the Fund's quarter-century of existence.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS TIME?
A. For most of the last five years, we have been favoring large cap, high
quality growth stocks. These stocks have done particularly well since the
financial crisis began in Thailand in July 1997. More recently, the series of
central bank interest rate easings has strengthened economies around the world.
As a consequence, the stock market returns have broadened. We have, therefore,
adopted a more neutral stance, gradually adding to mid-cap and small-cap
positions and to some economically sensitive names. We believe that many
large-cap growth stocks will continue to prosper but in addition many previously
overlooked companies will join the advance. As has been our historical practice,
we are making a gradual shift and continue to closely monitor economic
developments both domestically and abroad.
At mid-year, the U.S. economy continues to be buoyant. While the economy is
growing rapidly, inflation remains subdued. The Federal Reserve raised interest
rates once, but signs of bottlenecks or dislocations in the economy are
difficult to detect. Moreover, foreign economies have begun to bounce back from
a scary two-year period of rolling financial crises that showed how closely
linked the global economy has become.
- --------------------------------------------------------------------------------
We believe that this is a dramatic period of technological advances powered by
the rapid maturation of the Internet. The portfolio is positioned to benefit
from the companies that provide the structure making these advances in
communications and other areas possible.
- --------------------------------------------------------------------------------
Q. WHICH SECTORS ARE YOU EMPHASIZING?
A. Our biggest commitment this year has been to technology stocks. We had 32% of
the Fund in technology stocks--broadly defined--at mid-year. By our reckoning
the S&P weighting in technology was 24%. We believe that this is a dramatic
period of technological advances powered by the rapid maturation of the
Internet. The portfolio is positioned to benefit from the companies that provide
the structure making these advances in communications and other areas possible.
Prominent among our holdings are Microsoft, IBM, Intel, Sun Microsystems, MCI
WorldCom, Lucent, Cisco and Oracle. The growth in the areas these companies
serve will continue to be tremendous for years.
We also continue to overweight consumer cyclical stocks. U.S. consumers
have been the big beneficiaries of this period of prosperity.
- --------------------------------------------------------------------------------
(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) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents total return for Class A shares--returns for Class B
shares would be lower to reflect higher operating expenses associated with
the B share class. Total return figures do not take into account the
current maximum sales charge 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 that
actual returns would have been somewhat lower.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Q. WHAT DO YOU FORESEE FOR THE MARKET OVER THE REMAINDER OF THE YEAR?
A. If the last few years have taught us anything, it is to be cautious in
forecasting. As the millenium approaches, concern about the Year 2000 bug has
declined, and economies around the world have begun to improve. In the U.S. the
major debate is now what to do with a projected extra $1 trillion budget surplus
over the next 15 years. A mere seven years ago, Washington had no memory of a
time of surplus and in fact despaired of ever bringing the budget into balance.
Corporations are better managed than they have been in at least a generation.
Creativity is spurring incredible advances in such areas as the life sciences
and communications. While stock market valuations as measured by the S&P 500 are
high, the broad market is not expensive by historical measures.
More volatility in the market will not surprise us, especially as we move
into the normally treacherous fall period. But given the current benign economic
backdrop, it is hard to be too negative on the long-term outlook for equities.
==============================--------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
=============================
----------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 1999
COMPANY PERCENT OF NET ASSETS
----------------------------------------------------
1. Microsoft Corp. 5.14%
---------------------------------------------------
2. Int'l. Business Machines 4.51%
----------------------------------------------------
3. Pfizer, Inc. 2.34%
----------------------------------------------------
4. MCI WorldCom, Inc. 2.26%
----------------------------------------------------
5. Intel Corp. 1.97%
----------------------------------------------------
6. General Electric Co. 1.94%
----------------------------------------------------
7. Lucent Technologies, Inc. 1.93%
----------------------------------------------------
8. Wal-Mart Stores, Inc. 1.79%
----------------------------------------------------
9. Ford Motor Co. 1.56%
----------------------------------------------------
10. Sun Microsystems, Inc. 1.48%
----------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE>
==============================--------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
=============================
SECTOR WEIGHTINGS OF
COMMON STOCKS HELD
BY THE FUND ON JUNE 30, 1999
[GRAPHICAL REPRESENTATION OF PIE CHART]
Transportation 1.62%
Utilities 8.71%
Conglomerates 1.15%
Financial 15.67%
Basic Industries 1.52%
Energy 5.25%
Credit Cyclicals 0.55%
Consumer Services 6.06%
Consumer Cyclical 10.69%
Consumer Staples 12.69%
Capital Goods 2.48%
Capital Goods/Technology 33.61%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 1999
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 10.06% 24.11% 17.92% 16.72%
At Net Asset Value (without sales charge) 15.25% 25.26% 18.46% 16.92%
- ---------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 11.21% N/A N/A 24.63%
At Net Asset Value (without sales charge) 14.21% N/A N/A 25.02%
- ---------------------------------------------------------------------------------------------
S&P 500 Index 22.76% 27.86% 18.76% 17.56%
- ---------------------------------------------------------------------------------------------
(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%, 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.
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE>
==============================--------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
==============================
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
2 9352 2 9791 2 9746 2 10072
3 9495 3 10173 3 9548 3 10169
1972 4 9919 4 10936 4 10002 4 10266
5 8954 5 10404 5 8773 5 10483
6 7758 6 9802 6 7699 6 10676
7 9104 7 10271 7 8788 7 10918
1973 8 8355 8 9320 8 7686 8 11184
9 8898 9 9061 9 7492 9 11546
10 8095 10 8376 10 6661 10 11836
11 6816 11 6276 11 5224 11 12222
1974 12 7016 12 6861 12 5701 12 12536
13 9052 13 8434 13 7001 13 12754
14 10222 14 9724 14 8176 14 12923
15 9524 15 8662 15 7174 15 13188
1975 16 10311 16 9410 16 7588 16 13430
17 12315 17 10819 17 8924 17 13527
18 12926 18 11077 18 9084 18 13696
19 13570 19 11281 19 9043 19 13913
1976 20 14713 20 11627 20 9483 20 14106
21 14576 21 10762 21 8951 21 14396
22 15548 22 11107 22 9480 22 14614
23 15170 23 10794 23 9340 23 14807
1977 24 15894 24 10765 24 9674 24 15048
25 16186 25 10235 25 9527 25 15314
26 17952 26 11100 26 10724 26 15700
27 19593 27 12062 27 11821 27 16063
1978 28 18195 28 11455 28 11002 28 16401
29 19967 29 12263 29 11945 29 16884
30 20459 30 12583 30 12544 30 17440
31 22475 31 13535 31 13793 31 17971
1979 32 23489 32 13539 32 14501 32 18575
33 22448 33 12987 33 13536 33 19348
34 24637 34 14722 34 15484 34 19928
35 27183 35 16363 35 18053 35 20266
1980 36 28544 36 17908 36 19852 36 20870
37 30553 37 18146 37 20432 37 21401
38 30553 38 17726 38 20347 38 21860
39 28041 39 15910 39 17993 39 22488
1981 40 30196 40 17010 40 19380 40 22729
41 28244 41 15773 41 18074 41 22874
42 28221 42 15682 42 18100 42 23430
43 32078 43 17473 43 20123 43 23599
1982 44 37863 44 20656 44 24326 44 23599
45 42172 45 22720 45 27061 45 23696
46 49604 46 25228 46 30611 46 24010
47 48521 47 25185 47 29869 47 24251
1983 48 48698 48 25281 48 29333 48 24493
49 46645 49 24675 49 27414 49 24855
50 47823 50 24028 50 26721 50 25048
51 53052 51 26344 51 28574 51 25290
1984 52 54864 52 26823 52 28930 52 25483
53 61530 53 29283 53 31492 53 25797
54 65012 54 31410 54 33601 54 25966
55 60468 55 30132 55 32193 55 26111
1985 56 72960 56 35290 56 37156 56 26449
57 87231 57 40238 57 42720 57 26353
58 93553 58 42592 58 44999 58 26425
59 82542 59 39627 59 41062 59 26570
1986 60 86371 60 41842 60 42571 60 26763
61 106898 61 50759 61 51317 61 27126
62 104621 62 53272 62 52563 62 27400
63 111995 63 56777 63 55749 63 27729
1987 64 88927 64 43977 64 44085 64 27947
65 100335 65 46480 65 47392 65 28164
66 107311 66 49515 66 50056 66 28502
67 105853 67 49563 67 49730 67 28913
1988 68 107404 68 51158 68 50482 68 19179
69 117426 69 54775 69 54123 69 29656
70 124277 70 59546 70 58562 70 29976
71 135522 71 65881 71 64497 71 30169
1989 72 133003 72 67206 72 63984 72 30531
73 131154 73 65183 73 62581 73 31087
74 131990 74 69211 74 67101 74 31401
75 111333 75 59736 75 56465 75 32029
1990 76 116611 76 65046 76 61087 76 32415
77 138452 77 74504 77 71872 77 32633
78 136860 78 74303 78 71176 78 32874
79 149259 79 78263 79 76341 79 33116
1991 80 157618 80 84775 80 83235 80 33382
81 162078 81 82672 81 82319 81 33647
82 159469 82 84210 82 80113 82 33889
83 167044 83 86846 83 82496 83 34106
1992 84 189879 84 91214 84 89848 84 34396
85 208278 85 95200 85 92144 85 34686
86 215651 86 95619 86 92749 86 34879
87 234327 87 98067 87 97203 87 35048
1993 88 228375 88 100342 88 99458 88 35338
89 221843 89 96569 89 96044 89 35556
90 219203 90 96936 90 93504 90 35773
91 227686 91 101657 91 98580 91 36087
1994 92 225091 92 101617 92 97271 92 36280
93 245506 93 111514 93 104431 93 36546
94 271285 94 122063 94 114202 94 36836
95 298576 95 131706 95 123909 95 37005
1995 96 302248 96 139569 96 126735 96 37126
97 317905 97 147050 97 133553 97 37585
98 334627 98 153579 98 139376 98 37850
99 348213 99 158217 99 143418 99 38019
1996 100 382268 100 171365 100 150775 100 38331
101 386091 101 176009 101 148815 101 38712
102 452576 102 206652 102 172283 102 39010
103 502902 103 222048 103 190631 103 39400
1997 104 515475 104 228376 104 188286 104 39873
105 570785 105 260189 105 212500 105 40271
106 586539 106 268697 106 216367 106 40497
1998 107 511638 107 241962 107 187201 107 40720
108 625222 108 293403 108 229378 108 40964
109 639414 109 308014 109 239057 109 41046
6/30/99 110 675925 109 329667 110 255911 110 41128
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 $675,925 on June 30, 1999. 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 $329,667. 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 $255,911. 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] | | [PHOTO] |
| | | |
| | | |
| | | |
- --------------------- ---------------------
Larry Luxenberg, C.F.A. Catherine McRae
Co-Portfolio Manager Co-Portfolio Manager
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, 1999: $112,123,034
Q. HOW DID THE FUND PERFORM DURING THE FIRST SIX MONTHS OF 1999?
A. For the first six months of 1999, The Guardian Park Avenue Small Cap Fund's
return was -1.56%(1), as compared to 9.24% for the Russell 2000 Index.(2)
Although the Fund significantly underperformed the Russell 2000 during the first
half of 1999, the gap began to close during the second quarter. The Fund lagged
during April when investors moved quickly into cyclical stocks based on an
improving outlook for Asia. In May, the Fund basically matched the Russell 2000
performance as sector selection broadened and basic industries/commodities were
no longer the market darlings. The Fund closed the quarter and six-month period
on an upswing, outperforming the index in June by 70 basis points (0.70%). This
improvement reflected the fact that the Federal Reserve (Fed) tightening bias(3)
announced in May was removed on June 30th, the same day interest rates were
raised 25 basis points (0.25%) to 5%. The removal of the bias lifted higher
multiple growth stocks. This upswing was also due to a slight shifting in the
Fund's weighting toward sectors that we believe will outperform in the second
half.
Q. HOW HAS THE INVESTMENT STRATEGY CHANGED?
A. Since its inception two years ago, the Fund has been skewed toward growth.
This bias held during the first half of 1999, as we focused our quantitative
techniques on the technology sector and made selected investments in the
Internet. The latter was prompted by the profound secular changes underway: the
Internet is changing the way businesses sell products and services, consumers
purchase goods, and information is exchanged globally. Although valuation is
often problematic, the sector is ripe for investment. To maintain balance, we
began moving into value, albeit "quality value," which enjoys good earnings
visibility and reasonable valuations. This positioning should reap rewards in
the second half, where a solid profit outlook and benign inflation should lift
small cap stocks. We also pay attention to liquidity and scale our positions
accordingly. This naturally diversifies risk and facilitates trading.
- ------------------------------------------------------------------------
We will continue to invest in technology including the Internet, as well as
telecommunications carriers and suppliers to the industry, financial companies,
and consumer services.
- ------------------------------------------------------------------------
Q. WHAT SECTORS DO YOU FIND PARTICULARLY ATTRACTIVE?
A. We have invested in radio, where market consolidation is leading to higher
advertising rates and activity levels will be helped by the Millennium, the
Olympics, and the 2000 Presidential election. In addition, the radio business
internally generates a substantial cash flow. Cable is another attractive area.
Over the next 5 years, cable stands to benefit from the rollout of new services
such as digital television, high-speed data, and advances in telecommunications.
We will continue to invest in technology including the Internet, as well as
telecommunications carriers and suppliers to the industry, financial companies,
and consumer services.
Q. WHAT DO YOU EXPECT FOR THE BALANCE OF 1999?
A. We expect solid profit growth and stable interest rates. The combination of
continued expansion and low inflation could set the stage for a sustained rally
in small cap stocks. We see many opportunities in our universe to generate
above-average performance and are focused on building positions that will
capitalize on those ideas.
- ------------------------------------------------------------------------
(1) These returns reflect Class A shares without sales charges. 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% except where noted. 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.
(2) The Russell 2000 Index is an unmanaged index that is generally considered
to be representative of small-capitalization issues in the U.S. stock
market. The returns for the Russell 2000 do not reflect expenses that are
deducted from the 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 Federal Reserve Board (Fed) announces a bias after their Federal
Reserve Open Market Committee (FOMC) meetings. The bias reflects the
consensus of the Fed and indicates the more likely direction that the Fed
may take in changing interest rates. There can be a tightening, easing or
neutral bias announced. A tightening bias means that the Fed is more likely
to raise interest rates than lower them in the future. The bias is in place
until the next FOMC meeting, where the Fed may announce a change in bias,
or reaffirm their current bias.
- --------------------------------------------------------------------------------
6
<PAGE>
=======================================-----------------------------------------
THE GUARDIAN PARK AVENUE SMALL CAP FUND
=======================================
-------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 1999
COMPANY PERCENT OF NET ASSETS
-------------------------------------------------------------
1. Nielsen Media Research, Inc. 2.27%
-------------------------------------------------------------
2. Zale Corp. 2.14%
-------------------------------------------------------------
3. Adelphia Communications Corp. 2.07%
-------------------------------------------------------------
4. Valassis Communications, Inc. 2.04%
-------------------------------------------------------------
5. Ethan Allen Interiors, Inc. 1.97%
-------------------------------------------------------------
6. Monaco Coach Corp. 1.77%
-------------------------------------------------------------
7. BJ's Wholesale Club, Inc. 1.72%
-------------------------------------------------------------
8. Loan Star Industries, Inc. 1.53%
-------------------------------------------------------------
9. National RV Hldgs., Inc. 1.33%
-------------------------------------------------------------
10. Thor Industries, Inc. 1.32%
-------------------------------------------------------------
SECTOR WEIGHTINGS OF COMMON STOCKS
HELD BY THE FUND AS OF JUNE 30, 1999
[GRAPHICAL REPRESENTATION OF PIE CHART]
Credit Cyclicals 7.80%
Consumer Services 9.14%
Consumer Cyclical 21.54%
Consumer Staples 6.41%
Capital Goods 1.60%
Capital Goods--Tech 26.94%
Energy 1.66%
Basic Industries 2.37%
Financial 18.86%
Transportation 0.83%
Utilities 2.85
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 1999
Inception Since
Date 1 Year Inception
- --------------------------------------------------------------------------------
Class A Shares (with sales charge) 5/1/97 -17.53% 8.54%
At Net Asset Value (without sales charge) -13.64% 10.88%
- --------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 -16.92% 7.08%
At Net Asset Value (without sales charge) -14.35% 8.37%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
<PAGE>
==================================----------------------------------------------
THE GUARDIAN ASSET ALLOCATION FUND
==================================
- ---------------------
| |
| |
| |
| [PHOTO] |
| |
| |
| |
- ---------------------
Jonathan C. Jankus, C.F.A.
Portfolio Manager
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, The Guardian
Investment Quality Bond and The Guardian Cash Management Funds
INCEPTION: February 16, 1993
NET ASSETS AT JUNE 30, 1999: $249,098,659
Q. THE FINANCIAL MARKETS CONTINUE TO PERFORM WELL. HOW HAS THE FUND PERFORMED IN
THE FIRST HALF OF 1999?
A. In the first half of this year, the total return on stocks as measured by the
S&P 500 Index(1) was 12.38%, and the total return on bonds as measured by the
Lehman Aggregate Bond Index(2) was -1.37%. Our theoretical benchmark, a
portfolio created to hold 60% of its value in the S&P 500 and 40% in the Lehman
Aggregate, would have returned 6.75%. The Fund's return over the period was
4.02%(3).
Our disappointing results relative to our benchmark were also reflected in our
performance relative to our peers. We trailed the 6.24% return of funds with
similar objectives and policies in the Lipper(4) universe, and underperformed
the median return of 4.32% 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 proprietary quantitative models that
attempt to judge the relative risk-adjusted attractiveness of the stock, bond
and cash markets. While interest rates are the operative 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 in mid-February. Specifically, our stock/bond/cash mix at year-end was
70/20/10 and was changed to 60/30/10 on February 12. By the end of April, we had
moved to a 50/40/10 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.
- --------------------------------------------------------------------------------
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 in mid-February.
- --------------------------------------------------------------------------------
The performance was negatively affected by two factors. First was our asset
allocation, which since June 1 has proved to be overly conservative. Second, our
own stock selection has underperformed compared to the S&P 500. Since the Fund
is operated as a "fund of funds," most of its equity assets are invested in The
Guardian Park Avenue Fund. We encourage you to read the section of this report
devoted to The Guardian Park Avenue Fund. On the latter matter at least,
shareholders can be encouraged by the recent performance of The Guardian Park
Avenue Fund.
Q. WHAT ARE YOUR EXPECTATIONS FOR THE FUTURE, AND HOW ARE YOU POSITIONING THE
FUND TO TAKE ADVANTAGE OF THOSE EXPECTATIONS?
A. On June 1, we adopted an even more bearish approach to the stock market with
exposures of approximately 43/29/28 to the stock, bond and cash markets,
respectively. Our asset class weightings on June 30 were unchanged from these
levels, and 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 or selling shares of the Fund.
(3) These returns reflect Class A shares without sales charges. 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% except where noted. 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) 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 assumes the reinvestment of dividends and distributions, and
the deduction of all fund expenses.
- --------------------------------------------------------------------------------
8
<PAGE>
==================================----------------------------------------------
THE GUARDIAN ASSET ALLOCATION FUND
==================================
PORTFOLIO COMPOSITION BY
ASSET CLASS AS OF JUNE 30, 1999
[GRAPHICAL REPRESENTATION OF PIE CHART]
Bonds 29%
Stocks 43%
Cash 28%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 1999
Inception Since
Date 1 Year 3 Years 5 Years Inception
- --------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 8.58% 18.00% 17.57% 14.69%
At Net Asset Value (without
sales charge) 13.70% 19.82% 18.66% 15.52%
- --------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 9.73% N/A N/A 17.83%
At Net Asset Value (without
sales charge) 12.73% N/A N/A 18.27%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9
<PAGE>
===============================================---------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
===============================================
- ---------------------
| |
| |
| |
| [PHOTO] |
| |
| |
| |
- ---------------------
R. Robin Menzies
Portfolio Manager
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, 1999: $125,104,188
Q. HOW DID THE FUND PERFORM IN THE FIRST SIX MONTHS OF 1999?
A. For the six months ended June 30, 1999, the Fund produced a total return of
3.19%.(1) This compares with the total return of 4.11% for the Morgan Stanley
Capital International (MSCI) Europe, Australia, and Far East (EAFE) Index.(2)
The international markets' behavior during the period can be characterized as
strong in Asia and dull in Europe. The MSCI Pacific ex-Japan Index(3) showed a
total return of 26.23% and MSCI Japan Index(4) showed a total return of 20.82%,
while MSCI UK Index(5) was up by only 2.62%, and MSCI Europe ex-UK Index(6) fell
by 4.40%. Part of the weakness was attributable to currency factors. The total
return of the MSCI Europe ex-UK Index was a positive 8.20% in local currency
terms, but those currencies, predominantly the Euro, were weak against the
Dollar.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The reason that the Fund's performance during the past six months was
slightly behind that of the MSCI EAFE Index was that the Fund had, on average,
less of its portfolio invested in Asia than the weight within the EAFE index. By
the end of the second quarter there was little difference in the Asian
proportions of the Fund and the Index. The Fund's performance was helped by the
fact that the stocks that the Fund held in Japan rose by significantly more than
the MSCI Japan Index.
- --------------------------------------------------------------------------------
The international markets' behavior during the period can be characterized as
strong in Asia and dull in Europe . . . Looking forward, we expect growth to
remain strong in Asia and believe that the weakness of the Euro should improve
the competitive position of companies exporting from Europe, and eventually lead
to a recovery in the region.
- --------------------------------------------------------------------------------
During the past six months, it became clear that the countries of the Pacific
ex-Japan region were recovering quicker than had been previously expected from
the recessions they had suffered due to the depreciation of many of their
currencies and the accompanying high interest rates. Also, as a result of very
high levels of government spending, the Japanese economy recovered too. Japan's
GDP grew by 7.9% in the first quarter. In contrast, economic activity in
Continental Europe was patchy. While France expanded, both the German and
Italian economies did not do as well as expected.
The changes in activity in the various international economies led to changes
in our evaluation of the prospects for the companies in the different regions,
and, in consequence, we increased the Fund's exposure to Asia and reduced that
in Europe.
Q. WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A. Our investment strategy continues to be one of identifying individually
attractive companies domiciled in developed markets outside North America. Our
analysts conduct disciplined research on the universe of stocks available for
investment, looking at the prospects of the industries in which the companies
operate, the companies' competitive positions, profitability, and management
strategies. This involves many meetings and much travel from our offices in
Edinburgh.
Looking forward, we expect growth to remain strong in Asia and believe that
the weakness of the Euro should improve the competitive position of companies
exporting from Europe, and eventually lead to a recovery in the region. We will
continue to follow our strategy of investing in fundamentally attractive
businesses, wherever they are based internationally.
- --------------------------------------------------------------
(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% except where noted. 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.
(2) The Morgan Stanley Capital International (MSCI) Europe, Australia and Far
East (EAFE) 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 the returns do not reflect the
fees and expenses that have been deducted from the Fund's return.
(3) The MSCI Pacific Ex-Japan Index is an unmanaged index generally considered
to be representative of the stock market activity of Australia, Singapore,
Hong Kong and New Zealand. The returns for the index do not reflect
expenses that are deducted from the Fund's return.
(4) The MSCI Japan Index is an unmanaged index generally considered to be
representative of Japanese stock market activity. The returns for the index
do not reflect expenses that are deducted from the Fund's return.
(5) The MSCI UK Index is an unmanaged index generally considered to be
representative of stock market activity in the United Kingdom. The returns
for the index do not reflect expenses that are deducted from the Fund's
return.
(6) The MSCI Europe Ex-UK Index is an unmanaged index generally considered to
be representative of European stock market activity, excluding the United
Kingdom. The returns for the index do not reflect expenses that are
deducted from the Fund's return.
- --------------------------------------------------------------------------------
10
<PAGE>
===============================================---------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
===============================================
PORTFOLIO COMPOSITION BY GEOGRAPHIC LOCATION
AS OF JUNE 30, 1999
[GRAPHICAL REPRESENTATION OF PIE CHART]
Europe 44.44%
Cash 4.23%
Pacific 7.47%
Japan 23.52%
United Kingdom 20.34%
<TABLE>
- --------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 1999
<CAPTION>
COMPANY PERCENT OF NET ASSETS NATURE OF COMPANY COUNTRY
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Mannesmann AG 3.61% Industrial Machineries Germany
- --------------------------------------------------------------------------------------------------------
2. Elf Aquitaine 2.24% Oil-Integrated France
- --------------------------------------------------------------------------------------------------------
3. Glaxo Wellcome 2.15% Drugs & Health Care UK
- --------------------------------------------------------------------------------------------------------
4. BP Amoco PLC 1.96% Oil International UK
- --------------------------------------------------------------------------------------------------------
5. Banco Santander Central Hispano S.A. 1.95% Banks Spain
- --------------------------------------------------------------------------------------------------------
6. Acciona S.A. 1.84% Construction & Housing Spain
- --------------------------------------------------------------------------------------------------------
7. Nokia OYJ 1.77% Telecommunications Finland
- --------------------------------------------------------------------------------------------------------
8. DaimlerChrysler AG 1.76% Automotive Germany
- --------------------------------------------------------------------------------------------------------
9. BASF AG 1.71% Chemicals Germany
- --------------------------------------------------------------------------------------------------------
10. Fujitsu Ltd. 1.65% Computer Systems Japan
- --------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 1999
Inception Since
Date 1 Year 3 Years 5 Years Inception
- --------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 -0.77% 11.03% 10.55% 12.69%
At Net Asset Value (without
sales charge) 3.91% 12.75% 11.57% 13.51%
- --------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 -0.26% N/A N/A 10.36%
At Net Asset Value (without
sales charge) 2.74% N/A N/A 10.87%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
<PAGE>
==================================================------------------------------
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
==================================================
- ---------------------
| |
| |
| |
| [PHOTO] |
| |
| |
| |
- ---------------------
Edward H. Hocknell
Portfolio Manager
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, 1999: $22,822,243
Q. HOW DID THE FUND PERFORM IN THE LAST SIX MONTHS?
A. The Guardian Baillie Gifford Emerging Markets Fund returned 24.92%(1) in the
first half of 1999. This compares with a total return of 39.87% in the Morgan
Stanley Capital International (MSCI) Emerging Markets Free Index (EMF)(2) in US
Dollar terms.
The strongest performance came from Asia, with a return of 55.40%; the Chinese
and Indonesian markets doubled. Despite Russia more than doubling--which still
left it lower than a year before--Europe only managed a return of 29.41%. Latin
America came between the two, returning 31.03%.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. The Fund's relative performance was hurt by an excessively cautious approach.
We had (and still have) very little exposure to Russia or Indonesia; we started
the year with a high cash position and a heavy exposure to the more defensive
European markets. We also weighted too low in Asia and too much in Latin
America. This relatively cautious approach has helped our performance in the
longer term but was harmful in the first half of 1999.
During the first half of the year, we made several major changes in policy to
reflect the more benign conditions in the emerging markets, especially in Asia.
The Asian exposure has risen from about a quarter to over half of the Fund's
investments, there have been declines in the exposure to Latin America and
Europe, and the Fund reduced its cash position.
Q. WHAT IS THE OUTLOOK FOR EMERGING MARKETS FOR THE REST OF THE YEAR?
A. The general outlook for the emerging markets has improved markedly. The
financial crises that hit Asia in 1997, Russia in 1998 and Brazil in the early
part of this year have proved far less damaging than was thought at the time. It
is true that local banks have been severely weakened, but many businesses, which
depend on international demand, have emerged virtually unharmed. Companies that
depend on the local consumer have been hit very hard, but the strong exporters
are pulling through.
- --------------------------------------------------------------------------------
During the first half of the year, we made several major changes in policy to
reflect the more benign conditions in the emerging markets, especially in Asia.
- --------------------------------------------------------------------------------
The crucial factor is that the international background has remained
favorable. Growth has remained strong, interest rates low, and commodity prices
have bottomed. This has meant that the earnings prospects of many emerging
companies have improved, while the high interest rates, which were the legacy of
their financial crises, fell. This has proved to be a very stimulating
combination for emerging stock markets.
In general, the markets with the deepest problems have staged the strongest
recoveries. We have been most impressed by the fundamentals in Korea and Taiwan,
where the improvement is sustainable. Mexico is also pulling ahead of its Latin
American peers, particularly Argentina, and central Europe is benefiting from a
recovery in Russia.
We shall continue to concentrate on companies with good fundamental prospects.
Our experience and the long-term performance of the Fund in these volatile
markets strongly support this approach. We believe that the outlook for the
emerging markets is good, particularly in Asia.
- --------------------------------------------------------------------------------
(1) Total returns reflect Class A shares without sales charge. 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% except where noted. 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.
(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 that 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's return.
- --------------------------------------------------------------------------------
12
<PAGE>
==================================================------------------------------
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
==================================================
PORTFOLIO COMPOSITION BY GEOGRAPHIC LOCATION
AS OF JUNE 30, 1999
[GRAPHICAL REPRESENTATION OF PIE CHART]
South Africa 5.83%
Cash 6.50%
Europe 12.13%
Asia 42.79%
Latin America 28.59%
Israel 4.16%
<TABLE>
- --------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 1999
<CAPTION>
COMPANY PERCENT OF NET ASSETS NATURE OF COMPANY COUNTRY
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. SK Telecom Ltd. ADR 5.25% Telecommunications South Korea
- --------------------------------------------------------------------------------------------------------
2. LG Information & Comm. 2.57% Telecommunications South Korea
- --------------------------------------------------------------------------------------------------------
3. Telefonos de Mexico S.A. ADR 2.38% Telecommunications Mexico
- --------------------------------------------------------------------------------------------------------
4. Samsung Co. 2.35% Conglomerates South Korea
- --------------------------------------------------------------------------------------------------------
5. India I.T. Fund Ltd. 2.28% Mutual Funds India
- --------------------------------------------------------------------------------------------------------
6. Infosys Technology Ltd., ADR 1.92% Computer Software India
- --------------------------------------------------------------------------------------------------------
7. PT Telekomunikasi Indonesia 1.83% Telecommunications Indonesia
- --------------------------------------------------------------------------------------------------------
8. Indian Opportunity Fund 1.77% Mutual Funds India
- --------------------------------------------------------------------------------------------------------
9. Ellerine Hldgs. 1.66% Consumer Goods South Africa
- --------------------------------------------------------------------------------------------------------
10. Corp. Interamericana Entretenimiento 1.62% Media and Entertainment Mexico
- --------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 1999
Inception Since
Date 1 Year Inception
- --------------------------------------------------------------------------------
Class A Shares (with sales charge) 5/1/97 6.65% -10.85%
At Net Asset Value (without sales charge) 11.68% -8.94%
- --------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 5.48% -12.69%
At Net Asset Value (without sales charge) 8.48% -11.45%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
<PAGE>
==========================================--------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND
=========================================
- --------------------- ---------------------
| | | |
| | | |
| | | |
| [PHOTO] | | [PHOTO] |
| | | |
| | | |
| | | |
- --------------------- ---------------------
Thomas G. Sorell, C.F.A. Howard W. Chin
Co-Portfolio Manager Co-Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 1999?
A. The Fund had a total return of -1.44%(1) for the six months ended June 30,
1999, outperforming by 16 basis points (0.16%) the average fund in our Lipper
Intermediate Investment Grade peer group(2), which returned -1.60% for the same
period. The group consists of other 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), returned -1.37% for the
first half of 1999.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. During the first half of 1999, interest rates rose approximately 1.00%.
Investors abandoned the safe haven sought in U.S. Treasury securities during
1998's fourth quarter financial crisis and recognized that the U.S. economy
remained impervious to these events as Gross Domestic Product (GDP) grew 4.3% in
1999's first quarter following a 6% increase in 1998's fourth quarter. Although
inflation remained low during the second quarter of 1999, investors became
increasingly concerned that an emerging recovery in Asia, rising commodity
prices, and a low U.S. unemployment rate would increase inflationary risks.
These concerns led market participants late in the quarter to expect that the
Federal Reserve (Fed) would soon adopt a tightening bias(4) in monetary policy.
In May, the Fed did adopt a tightening bias and on June 30th raised the Fed
Funds rate 25 basis points (0.25%) to 5%, its first increase in the target Fed
Funds rate since March 1997.
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
figures do not take into account the current maximum sales charges of 4.5%
except where noted. From June 1, 1994 to December 31, 1998, the investment
adviser for the Fund assumed ordinary operating expenses of the Fund to the
extent they exceeded 0.75% of the Fund's average daily net assets. Effective
January 1, 1999, the investment adviser for the Fund assumed ordinary
operating expenses of the Fund to the extent they exceeded 0.80% 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. 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) The Federal Reserve Board (Fed) announces a bias after their Open Market
Committee (FOMC) meetings. The bias reflects the consensus of the Fed and
indicates the more likely direction that the Fed may take in changing
interest rates. There can be a tightening, easing, or neutral bias
announced. In this case, a tightening bias was announced, meaning that the
Fed was more likely to raise interest rates than lower them in the future.
The bias is in place until the next FOMC meeting, where the Fed may announce
a change in bias, or reaffirm their current bias.
- --------------------------------------------------------------------------------
The Fund's overall strategy is to maximize the total return of a diversified
fixed income portfolio of investment-grade corporate, mortgage-backed,
asset-backed, and U. S. government securities.
- --------------------------------------------------------------------------------
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS PERIOD?
A. During the first quarter, the Fund continued to increase its exposure to
spread assets (corporate bonds, mortgage and asset-backed securities) especially
corporate and asset-backed securities, which remained attractively priced on a
relative valuation basis. The Fund benefited from this increased allocation to
spread sectors during this quarter as yield spreads narrowed and spread sector
bonds significantly outperformed equivalent duration Treasuries, effectively
cushioning the Fund's performance from the full effect of rising interest rates.
Both corporate and mortgage-backed securities, which are the two largest spread
sectors represented in the Fund, performed exceptionally well over this period.
For example, according to the Lehman Aggregate Bond Index, corporate bonds
outperformed Treasuries by 132 basis points (1.32%) in the first quarter of 1999
while mortgage-backed securities outperformed Treasuries by 48 basis points
(0.48%).
During April, spread sector bonds continued to outperform Treasuries and
began to exhibit less attractive risk/return profiles, at which point the Fund
started reducing its holdings in corporate bonds. This strategy was both
appropriate and successful as spread assets reacted poorly to the Fed's policy
change in May, widening significantly in yield spread and underperforming
Treasuries.
As the first half of 1999 came to a close, yields on spread assets had
widened sufficiently that the Fund again found them to be attractive on a
relative valuation basis. Prior to the second quarters' close, the Fund moved to
its most overweighted position in spread assets in several years. While the
potential benefits of this strategy did not contribute
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
positively to our performance during June as liquidity began to suffer and
volatility increased, we believe that continued strength in the U.S. economy,
increasing corporate profitability, and relatively stable financial markets will
support enhanced performance of these asset classes.
Q: WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF THE YEAR?
A. The Fund's overall strategy is to maximize the total return of a diversified
fixed income portfolio of investment-grade corporate, mortgage-backed,
asset-backed, and U. S. government securities. We currently believe that the
spread sectors remain fundamentally attractive relative to their recent
historical value, but may suffer intermittently from short-term concerns of
reduced market liquidity as investors monitor future Fed activity and focus on
potential dislocations associated with Year 2000 concerns. Nevertheless, in our
opinion, asset valuations have already sufficiently discounted these risks.
As 1999 progresses our strategy will continue to focus on monitoring and
balancing these risks by actively adjusting our asset allocations to reflect
changes in sector valuations and continuing to identify attractive investment
opportunities within these sectors.
- --------------------------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND
RECENT ASSET ALLOCATION STRATEGY
(% MARKET VALUES)
4th 1st 2nd
Quarter Quarter Quarter
1998 1999 1999
---- ---- ----
U.S. Treasuries 40.0 25.8 15.9
Corporates 27.0 42.4 43.1
Mortgage-backed Securities 24.7 19.9 31.4
Asset-backed Securities 6.3 10.1 8.0
Cash Equivalents* 2.0 1.8 1.6
* Cash as a percentage of net assets excluding commercial paper and repurchase
agreements matched against forward mortgage purchases and reverse repurchase
agreements.
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 1999
Inception Since
Date 1 Year 3 Years 5 Years Inception
------- ------ ------- ------- ---------
Class A Shares
(with sales charge) 2/16/93 -2.23% 4.90% 5.74% 4.55%
At Net Asset Value
(without sales charge) -- 2.38% 6.52% 6.72% 5.31%
- --------------------------------------------------------------------------------
15
<PAGE>
=================================-----------------------------------------------
THE GUARDIAN HIGH YIELD BOND FUND
=================================
- --------------------- ---------------------
| | | |
| | | |
| | | |
| [PHOTO] | | [PHOTO] |
| | | |
| | | |
| | | |
- --------------------- ---------------------
Peter J. Liebst Thomas G. Sorell, C.F.A.
Co-Portfolio Manager Co-Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 1999?
A. The Fund had a total return of -0.44%(1) for the six months ended June 30,
1999, compared to an average return of 3.85% for the 346 High Current Yield
Funds tracked by Lipper Analytical Services.(2)
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. The Guardian High Yield Bond Fund's performance over the first six months of
1999 was principally impacted by three factors: the general portfolio emphasis
on larger, more actively traded issuers, which are typically higher quality and,
therefore, lower yielding investments in the high yield universe; lack of
exposure to emerging market bonds; and an underperformance of investments in
convertible bond holdings.
Over the first half of 1999, returns within the high yield market varied
significantly based on quality tier. As measured by the Lehman High Yield
Index,(3) the lower credits rated triple "C"(4) within the high yield universe
outperformed the overall market with a return of 8.57% for the period. This
compared to a 2.09% return for single "B's"(5) and a 0.39% return for the double
"B's"(6).
For the first six months of this year, the Fund maintained a conservative
posture emphasizing larger, more actively traded investments, which resulted in
a higher weighting in upper and middle tier investments.
In addition, the Fund had no exposure to emerging markets, which as an asset
class returned 12.24% during the period as measured by the JP Morgan Emerging
Markets Bond Index Plus (EMBI +) Composite Index.(7) While many of the Fund's
Lipper peer group actively invest a portion of assets in emerging markets, to
date The Guardian High Yield Bond Fund has chosen not to make a significant
investment in the emerging market asset class and has emphasized traditional
domestic high yield investments.
Finally, throughout the first half of 1999, the Fund maintained investments in
convertible bonds representing an average of 10.6% of the Funds assets. During
this period, convertible bonds performed poorly, and the Fund's convertible
holdings had a return of -6.56%. The Fund's exposure to this class of bonds had
a significantly negative impact on the Fund's overall performance during this
period.
- --------------------------------------------------------------------------------
The Guardian High Yield Bond Fund's performance over the first six months of
1999 was principally impacted by three factors: the general portfolio emphasis
on larger, more actively traded issuers; . . . lack of exposure to emerging
market bonds; and an underperformance of investments in convertible bond
holdings.
- --------------------------------------------------------------------------------
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE FIRST HALF OF 1999?
A. The Fund's overall strategy was to maximize the total return of a diversified
fixed-income portfolio principally composed of below investment grade bonds with
a portion of assets invested in convertible bonds. Specifically, we sought to
identify attractive asset allocation weightings based on analysis of industry
fundamentals, issuer credit worthiness and risk/return profile, and individual
issue relative value.
Q. WHAT IS YOUR OUTLOOK FOR THE REST OF THE YEAR?
A. Throughout the first six months of 1999, stronger credit quality and actively
traded issues were overweighted with an underweighting in issuers operating in
cyclical industries. Beginning the second half of 1999 the Fund remains cautious
and continues to emphasize liquidity of investments and credit quality.
- --------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deductions of all Fund expenses. Total
return figures do not take into account the current maximum sales charge of
4.5% except where noted. From September 1, 1998 through June 30, 1999, the
investment adviser of the Fund agreed to assume the ordinary operating
expenses of the Class A shares of the Fund to the extent they exceed, on an
annual basis, 0.75% of the Fund's average daily net assets. Total returns
for Class B shares do not take into account the contingent deferred sales
charge applicable to such shares (maximum of 3% except where noted). From
September 1, 1998 to December 31, 1998, the investment adviser for the Fund
assumed 0.51% of the ordinary operating expenses of the Fund's average
daily net assets. Effective January 1, 1999 through June 30, 1999, the
investment adviser has agreed to assume 1.00% of the annual ordinary
operating expenses of the average daily net assets of Class B shares.
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 the
value of your investment, 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. 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 High Yield Bond Index is an unmanaged index that is generally
considered to be representative of high yield bond market activity. The
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 High Yield Bond Index do not reflect any
sales charges that an investor may have to pay when purchasing or selling
shares of the Fund.
(4) Triple C rated securities refer to Bonds rated CCC+, CCC, or CCC- by
Standard & Poor's rating agency, or Caa1, Caa2, or Caa3 by Moody's rating
agency.
(5) Single B rated securities refer to Bonds rated B+, B, or B- by Standard and
Poor's rating agency, or B1, B2, or B3 by Moody's rating agency.
(6) Double B rated securities refer to Bonds rated BB+, BB, or BB- by Standard
& Poor's rating agency, or Ba1, Ba2, or Ba3 by Moody's rating agency.
(7) JP Morgan Emerging Markets Bond Index Plus (EMBI +) Composite Index tracks
total returns for traded external debt instruments in the emerging markets.
The 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 Index do not reflect any sales charges
that an investor may have to pay when purchasing shares of the Fund.
- --------------------------------------------------------------------------------
16
<PAGE>
=================================-----------------------------------------------
THE GUARDIAN HIGH YIELD BOND FUND
=================================
CREDIT QUALITY
AS OF JUNE 30, 1999
[GRAPHICAL REPRESENTATION OF PIE CHART]
BB 17.21%
CCC 6.99%
Short Term 7.58%
B 68.22%
<TABLE>
- --------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 1999
<CAPTION>
COMPANY PERCENT OF NET ASSETS MATURITY DATE COUPON RATE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Pillowtex Corp. 3.54% 11/15/06 10.00%
- --------------------------------------------------------------------------------------------------------
2. Premier Parks, Inc. 2.71% 6/15/07 9.75%
- --------------------------------------------------------------------------------------------------------
3. K & F Ind., Inc. 2.64% 10/15/07 9.25%
- --------------------------------------------------------------------------------------------------------
4. Telecorp PCS, Inc. 1.98% 4/15/09 4.308%
- --------------------------------------------------------------------------------------------------------
5. Pierce Leahy Corp. 1.94% 7/15/06 11.125%
- --------------------------------------------------------------------------------------------------------
6. CSC Hldgs., Inc. 1.91% 2/15/13 9.875%
- --------------------------------------------------------------------------------------------------------
7. NEXTEL Communications, Inc. 1.87% 10/31/07 3.707%
- --------------------------------------------------------------------------------------------------------
8. Lyondell Chemical Co. 1.86% 5/1/09 10.875%
- --------------------------------------------------------------------------------------------------------
9. Fox Liberty Networks LLC 1.86% 8/15/07 8.875%
- --------------------------------------------------------------------------------------------------------
10. RBF Finance 1.85% 3/15/09 11.375%
- --------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
TOTAL RETURN FOR PERIOD ENDED JUNE 30, 1999
Inception Since
Date Inception
- --------------------------------------------------------------------------------
Class A Shares (with sales charge) 9/1/98 4.64%
At Net Asset Value (without sales charge) 9.57%
- --------------------------------------------------------------------------------
Class B Shares (with sales charge) 9/1/98 5.15%
At Net Asset Value (without sales charge) 8.15%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
17
<PAGE>
============================----------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND
============================
- ---------------------
| |
| |
| |
| [PHOTO] |
| |
| |
| |
- ---------------------
Alexander M. Grant, Jr.
Portfolio Manager
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, 1999: $100,084,869
Q. HOW DID THE GUARDIAN TAX-EXEMPT FUND PERFORM FOR THE FIRST SIX MONTHS OF
1999?
A. The Fund produced a total rate of return of -1.77%(1) for the period ending
June 30, 1999. The Lehman Municipal Bond Index(2) produced a total return of
- -0.90% for the same period.
Another important comparison that should be made when measuring the Fund's
performance is how does it stack up to its peers? That is to say, how does it
compare to those funds that have the same investment objective? Lipper
Analytical Services(3) is a good source for this information. Based on our peer
group comparisons, the Fund ranked, for the first six months, 127 out of 265
funds with the same objective. The average Lipper fund return for that period
was -1.82%.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS TIME PERIOD?
A. We continued with our philosophy of investments in sound credits that provide
liquidity and are somewhat insulated during an economic downturn. In keeping
with this mandate, we avoided investments that were related to the hospital
sector.
This proved to be prudent, as this was one of the worst performing sectors for
the first six months. Concentration in the general obligation (G.O.) sector and
essential services, such as water, sewer and transportation, provided low risk
and liquidity. Our over-allocation to New York State credits proved to be a
successful strategy as that was one of the better performing states.
- --------------------------------------------------------------------------------
We continued with our philosophy of investments in sound credits that provide
liquidity and are somewhat insulated during an economic downturn. In keeping
with this mandate, we avoided instruments that were related to the hospital
sector.
- --------------------------------------------------------------------------------
Q. WHAT IS THE OUTLOOK FOR THE REMAINDER OF THE YEAR?
A. Our outlook for the remainder of the year would be consistent with the first
half of the year. We expect continued concentration in sound credits that
provide liquidity with very little risk. Also, we would expect that investor
demand will remain healthy. The supply of new municipal bond issues should
continue at a moderate pace with a slow down in issuance towards the end of the
year.
- --------------------------------------------------------------------------------
(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%, except where noted. From June 1, 1994 to December 31, 1998, the
investment adviser for the Fund assumed the operating expenses of the Fund
to the extent they exceeded 0.75% of the Fund's average daily net assets.
Effective January 1, 1999, the investment adviser for the Fund assumed the
operating expenses of the Fund to the extent they exceeded 0.80% 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 returns
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 Municipal Bond Index
do not reflect any sales charges that an investor may have to pay when
purchasing shares of the Fund.
(3) Lipper Analytical 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.
- --------------------------------------------------------------------------------
18
<PAGE>
============================----------------------------------------------------
THE GUARDIAN TAX-EXEMPT FUND
============================
PORTFOLIO COMPOSITION BY SECTOR ALLOCATION
AS OF JUNE 30, 1999
[GRAPHICAL REPRESENTATION OF PIE CHART]
Revenue Bonds 58.87%
Insured Bonds 3.44%
Local General Obligation Bonds 10.50%
Short Term 15.37%
State General Obligation Bonds 11.82%
CREDIT QUALITY AS OF JUNE 30, 1999
[GRAPHICAL REPRESENTATION OF PIE CHART]
AA 26.21%
A 8.17%
BBB 1.04%
Short Term 15.37%
AAA 49.20%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 1999
Inception Since
Date 1 Year 3 Years 5 Years Inception
- --------------------------------------------------------------------------------
Class A Shares (with
sales charge) 2/16/93 -2.70% 4.35% 4.99% 3.67%
At Net Asset Value
(without sales charge) 1.89% 5.96% 5.96% 4.42%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19
<PAGE>
=================================-----------------------------------------------
THE GUARDIAN CASH MANAGEMENT FUND
=================================
- ---------------------
| |
| |
| |
| [PHOTO] |
| |
| |
| |
- ---------------------
Alexander M. Grant, Jr.
Portfolio Manager
OBJECTIVE: As high a level of current income as is consistent with preservation
of capital and liquidity
PORTFOLIO: Short-term money market instruments
INCEPTION: November 3, 1982
NET ASSETS AT JUNE 30, 1999: $279,655,969
Q. HOW HAS THE GUARDIAN CASH MANAGEMENT FUND PERFORMED DURING THE FIRST HALF OF
1999?
A. As of June 30, 1999, the effective 7-day annualized yield for The Guardian
Cash Management Fund was 4.15%.(1) The Fund produced a total annualized return
of 4.10%(1) for the half-year ended June 30, 1999. In contrast, the effective
7-day annualized yield of Tier One money market funds as measured by IBC
Financial Data was 4.26%; total annualized return for the same category was
4.27%. IBC Financial Data is a research firm that tracks money market funds.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS PERIOD?
A. The Guardian Cash Management Fund is a place for our investors to put their
money while they decide 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 received ratings in the
two highest credit quality categories established by nationally recognized
statistical ratings organizations like Moody's Investors Service Inc. and
Standard & Poor's Ratings Group for the Fund's portfolio. Most of the portfolio
(98.73%) was invested in commercial paper; the balance (1.27%) was invested in
repurchase agreements.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. Money market funds are directly affected by the actions of the Federal
Reserve Board (Fed). The Fed's policy making open market committee (FOMC) raised
the Fed funds target rate on June 30,1999 by 25 basis points (0.25%) to 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. Another factor
affecting performance was the portfolio's average maturity--20 days as of June
30, 1999. The average Tier One money market fund as measured by IBC Financial
Data had an average maturity of 51 days.
- --------------------------------------------------------------------------------
The Guardian Cash Management Fund is a place for our investors to put their
money while they decide their preferred long-term investment vehicle, be it
stocks or bonds. Also, some of our investors prefer the relative stability of
the money markets.
- --------------------------------------------------------------------------------
Q. WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF THE YEAR?
A. Uncertainty with the direction of the stock market contributes to large daily
inflows and outflows of funds in The Guardian Cash Management Fund. As the stock
market rallies, our investors typically transferred cash to equity funds. During
those times when the stock market stalls, we see cash inflows.
================================================================================
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY IN THE FUND.
================================================================================
- -----------------------------------------------
(1) Yields are annualized historical figures and will vary as interest rates
change. Effective yield assumes that income is reinvested. Past performance
is not a guarantee of future results.
(2) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. From
June 1, 1994 to June 30, 1999, the investment adviser for the Fund has
assumed a portion of the operating expenses of the Fund (both Class A and B
shares) to the extent they exceed 0.85% of the Fund's average daily net
assets. Without these expense reimbursements, 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 charge 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.
- --------------------------------------------------------------------------------
20
<PAGE>
================================================================================
SCHEDULE OF INVESTMENTS
================================================================================
June 30, 1999 (Unaudited)
[_] THE GUARDIAN PARK AVENUE FUND
=====================================================================
COMMON STOCKS -- 95.5%
- ---------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.7%
58,500 Alliant Techsystems, Inc.* $ 5,060,250
284,300 United Technologies Corp. 20,380,756
--------------
25,441,006
- ---------------------------------------------------------------------
AIR TRANSPORTATION -- 0.3%
100,000 Continental Airlines, Inc.* 3,762,500
130,000 Delta Airlines, Inc. 7,491,250
--------------
11,253,750
- ---------------------------------------------------------------------
APPLIANCE AND FURNITURE -- 0.3%
264,000 Ethan Allen Interiors, Inc. 9,966,000
49,800 Furniture Brands Int'l., Inc.* 1,388,175
--------------
11,354,175
- ---------------------------------------------------------------------
AUTOMOTIVE -- 2.0%
955,000 Ford Motor Co. 53,897,813
215,000 General Motors Corp. 14,190,000
--------------
68,087,813
- ---------------------------------------------------------------------
AUTOMOTIVE PARTS -- 0.1%
150,269 Delphi Automotive Systems Corp. 2,789,368
- ---------------------------------------------------------------------
BIOTECHNOLOGY -- 1.3%
223,000 Amgen, Inc.* 13,575,125
156,000 Biogen, Inc.* 10,032,750
58,000 MedImmune, Inc.* 3,929,500
194,400 Sepracor, Inc.* 15,795,000
--------------
43,332,375
- ---------------------------------------------------------------------
BROADCASTING -- 3.3%
196,100 Adelphia Communications Corp.* 12,476,862
579,100 CBS Corp. 25,154,656
73,500 Chancellor Media Corp.* 4,051,688
175,000 Clear Channel Communications, Inc.* 12,064,062
310,000 Comcast Corp. 11,915,625
676,900 Infinity Broadcasting Corp.* 20,137,775
349,600 MediaOne Group, Inc.* 26,001,500
--------------
111,802,168
- ---------------------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 0.8%
16,500 Crossman Communities, Inc.* 479,531
150,000 D.R. Horton, Inc. 2,493,750
163,000 Lennar Corp. 3,912,000
143,400 Lone Star Industries, Inc. 5,386,462
50,555 Martin Marietta Materials, Inc. 2,982,745
94,740 Southdown, Inc. 6,087,045
115,800 Vulcan Materials Co. 5,587,350
--------------
26,928,883
- ---------------------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 1.1%
40,000 AFC Cable Systems, Inc.* 1,412,500
101,688 At Home Corp.* 5,484,796
35,600 Critical Path, Inc. 1,969,125
55,000 Doubleclick, Inc.* 5,046,250
54,800 E Bay, Inc.* 8,295,350
127,200 MindSpring Enterprises, Inc.* 5,636,550
58,100 Yahoo, Inc.* 10,007,725
--------------
37,852,296
- ---------------------------------------------------------------------
CHEMICALS -- 0.1%
93,500 Cambrex Corp. 2,454,375
- ---------------------------------------------------------------------
COMPUTER SOFTWARE -- 8.7%
348,700 America Online, Inc.* 38,531,350
185,000 BMC Software, Inc.* 9,990,000
200,000 Computer Associates Int'l., Inc. 11,000,000
27,000 DST Systems, Inc.* 1,697,625
1,964,000 Microsoft Corp.* 177,128,250
932,600 Novell, Inc.* 24,713,900
682,500 Oracle Corp.* 25,337,813
321,400 SunGuard Data Systems, Inc.* 11,088,300
--------------
299,487,238
- ---------------------------------------------------------------------
COMPUTER SYSTEMS -- 11.0%
227,700 Apple Computer, Inc.* $ 10,545,356
741,800 EMC Corp.* 40,799,000
495,000 Hewlett Packard Co. 49,747,500
1,204,200 Int'l. Business Machines 155,642,850
603,200 Lexmark Int'l. Group, Inc.* 39,848,900
150,000 Pitney Bowes, Inc. 9,637,500
176,700 Seagate Technology* 4,527,937
190,000 Solectron Corp.* 12,670,625
740,400 Sun Microsystems, Inc.* 50,995,050
95,000 Xerox Corp. 5,610,938
--------------
380,025,656
- ---------------------------------------------------------------------
CONGLOMERATES -- 1.1%
190,000 Textron, Inc. 15,639,375
244,700 Tyco Int'l. Ltd. 23,185,325
--------------
38,824,700
- ---------------------------------------------------------------------
DRUGS AND HOSPITALS -- 7.8%
682,200 Bristol-Myers Squibb Corp. 48,052,462
156,000 Johnson & Johnson 15,288,000
331,262 Medtronic, Inc. 25,797,028
674,400 Merck & Co., Inc. 49,905,600
171,700 Monsanto Corp. 6,771,419
27,000 Patterson Dental Co.* 938,250
734,900 Pfizer, Inc. 80,655,275
494,800 Schering-Plough Corp. 26,224,400
243,000 Warner-Lambert Co.* 16,858,125
--------------
270,490,559
- ---------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.9%
593,000 General Electric Co. 67,009,000
- ---------------------------------------------------------------------
ENTERTAINMENT AND LEISURE -- 0.9%
400,000 Carnival Corp. 19,400,000
294,000 Viacom, Inc.* 12,936,000
--------------
32,336,000
- ---------------------------------------------------------------------
FINANCIAL-BANKS -- 6.5%
288,000 Bank of America Corp. 21,114,000
515,000 Banc One Corp. 30,674,688
260,000 Bank of New York, Inc. 9,538,750
450,700 Chase Manhattan Corp.* 39,041,888
652,500 Citigroup, Inc. 30,993,750
128,000 Fifth Third Bancorp 8,520,000
202,500 Firstar Corp. 5,670,000
40,000 FirstMerit Corp. 1,122,500
318,000 Fleet Financial Group, Inc. 14,111,250
53,548 Hudson United Bancorp 1,639,908
14,631 M & T Bank Corp. 8,047,050
375,200 Mellon Bank Corp. 13,647,900
391,000 North Fork Bancorp 8,333,188
34,500 Premier Bancshares, Inc., GA 631,781
254,654 Premier National Bancorp, Inc. 4,997,585
160,000 SunTrust Banks, Inc. 11,110,000
114,000 Union BanCal Corp. 4,118,250
15,000 U.S. Trust Corp. 1,387,500
52,000 Webster Financial Corp. 1,410,500
134,600 Zions Bancorp 8,547,100
--------------
224,657,588
- ---------------------------------------------------------------------
FINANCIAL-OTHER -- 5.2%
302,400 American Express Co. 39,349,800
193,600 Charles Schwab Corp. 21,271,800
154,800 Federal Home Loan Mortgage Corp. 8,978,400
166,500 Federal National Mortgage Assn. 11,384,438
26,900 Goldman Sachs Group, Inc.* 1,943,525
125,000 Hambrecht & Quist Group, Inc.* 4,640,625
200,000 Investment Technology Group, Inc. 6,475,000
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
21
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- ---------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------
200,000 Jefferies Group, Inc. $ 6,000,000
218,666 Legg Mason, Inc. 8,418,641
146,300 Lehman Brothers Hldgs., Inc.* 9,107,175
115,000 Merrill Lynch & Co., Inc. 9,192,812
137,200 J. P. Morgan & Co., Inc. 19,276,600
251,775 Morgan Keegan, Inc. 4,767,989
184,000 Morgan Stanley Dean Witter & Co. 18,860,000
187,600 Paine Webber Group, Inc. 8,770,300
31,000 Ragen MacKenzie Group, Inc.* 368,125
-------------
178,805,230
- ---------------------------------------------------------------------
FINANCIAL-THRIFT -- 0.9%
126,600 Astoria Financial Corp. 5,562,488
98,100 BankAtlantic Bancorp, Inc. 797,062
196,993 BankAtlantic Bancorp, Inc. Class A 1,428,199
16,000 California Federal Bancorp, Inc.* 19,000
227,106 Charter One Financial, Inc. 6,316,386
199,700 Coastal Bancorp, Inc. 7,988,000
20,000 Coast Federal Litigation Trust* 21,250
220,000 Dime Bancorp, Inc. 4,427,500
46,400 Golden State Bancorp, Inc.* 60,900
330,601 Sovereign Bancorp, Inc. 4,008,537
-------------
30,629,322
- ---------------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 0.6%
256,600 Anheuser-Busch Cos., Inc. 18,202,562
65,612 Earthgrains Co. 1,693,610
41,070 Tootsie Roll Industries, Inc. 1,586,329
-------------
21,482,501
- ---------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.4%
336,700 Dial Corp. 12,521,031
- ---------------------------------------------------------------------
INSURANCE -- 2.2%
123,000 American Gen. Hospitality Corp. 9,271,125
200,000 American Int'l. Group, Inc. 23,412,500
7,770 Berkshire Hathaway, Inc.* 17,404,800
75,700 Chicago Title Corp. 2,701,544
54,000 Jefferson-Pilot Corp. 3,574,125
63,120 Liberty Financial Cos., Inc. 1,838,370
87,000 Reinsurance Group of America 2,914,500
184,500 State Auto Financial Corp. 2,490,750
150,000 Transamerica Corp. 11,250,000
-------------
74,857,714
- ---------------------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 2.8%
252,000 Dayton Hudson Corp. 16,380,000
143,750 Saks, Inc.* 4,150,781
376,800 TJX Cos., Inc. 12,552,150
1,275,800 Wal-Mart Stores, Inc. 61,557,350
-------------
94,640,281
- ---------------------------------------------------------------------
MERCHANDISING-DRUGS -- 0.5%
261,956 CVS Corp. 13,294,267
150,000 Walgreen Co. 4,406,250
-------------
17,700,517
- ---------------------------------------------------------------------
MERCHANDISING-FOOD -- 1.4%
120,000 Albertson's, Inc. 6,187,500
710,000 Kroger Co.* 19,835,625
428,050 Safeway, Inc.* 21,188,475
-------------
47,211,600
- ---------------------------------------------------------------------
MERCHANDISING-SPECIAL -- 4.1%
150,000 Abercrombie & Fitch Co.* 7,200,000
223,000 Best Buy, Inc.* 15,052,500
318,400 BJ's Wholesale Club, Inc.* 9,571,900
130,000 Costco Cos., Inc.* 10,408,125
442,500 GAP, Inc. 22,290,937
525,000 Home Depot, Inc. 33,829,688
175,600 Lowes Cos., Inc. 9,954,325
159,000 Ross Stores, Inc. 8,009,625
500,000 Tandy Corp. 24,437,500
--------------
140,754,600
- ---------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH CYCLICAL -- 0.1%
29,100 Avis Rent A Car, Inc.* 847,537
58,066 Nielsen Media Research, Inc.* 1,698,431
--------------
2,545,968
- ---------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 0.4%
90,000 A.C. Nielsen Corp.* 2,722,500
285,000 Valassis Communications, Inc.* 10,438,125
--------------
13,160,625
- ---------------------------------------------------------------------
OIL AND GAS PRODUCING -- 1.3%
232,500 Anadarko Petroleum Corp. 8,558,906
216,000 Apache Corp. 8,424,000
238,900 Basin Exploration, Inc.* 4,792,931
216,500 Burlington Resources, Inc. 9,363,625
8,100 Callon Petroleum Co.* 83,531
132,100 Devon Energy Corp. 4,722,575
67,000 Newfield Exploration Co.* 1,905,312
152,100 Vastar Resources, Inc. 7,975,744
--------------
45,826,624
- ---------------------------------------------------------------------
OIL AND GAS SERVICES -- 1.1%
362,000 Halliburton Co. 16,380,500
235,000 Schlumberger Ltd. 14,966,562
292,000 Transocean Offshore, Inc. 7,665,000
--------------
39,012,062
- ---------------------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 0.2%
217,700 Conoco, Inc. 6,068,388
- ---------------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 2.3%
213,000 Chevron Corp. 20,274,937
443,700 Exxon Corp. 34,220,363
371,000 Texaco, Inc. 23,187,500
--------------
77,682,800
- ---------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.7%
169,400 Georgia Pacific Corp.* 8,025,325
313,700 International Paper Co. 15,841,850
--------------
23,867,175
- ---------------------------------------------------------------------
PUBLISHING AND PRINT -- 1.6%
347,000 Dun & Bradstreet Corp. 12,296,812
584,000 Time Warner, Inc. 42,924,000
--------------
55,220,812
- ---------------------------------------------------------------------
RAILROADS -- 0.8%
292,400 Kansas City Southern Inds., Inc. 18,658,775
174,000 Union Pacific Corp. 10,146,375
--------------
28,805,150
- ---------------------------------------------------------------------
RESTAURANTS -- 0.3%
131,000 Outback Steakhouse, Inc.* 5,149,937
215,500 Wendy's Int'l., Inc.* 6,101,344
--------------
11,251,281
- ---------------------------------------------------------------------
SEMICONDUCTORS -- 5.8%
232,700 Adaptec, Inc.* 8,217,219
623,000 Advanced Micro Devices, Inc.* 11,252,937
168,000 Applied Materials, Inc.* 12,411,000
1,142,800 Intel Corp. 67,996,600
507,000 Micron Technology, Inc.* 20,438,438
380,000 Motorola, Inc. 36,005,000
123,000 Texas Instruments 17,835,000
430,000 Xilinx, Inc.* 24,617,500
--------------
198,773,694
- ---------------------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 0.2%
196,000 Jones Apparel Group, Inc.* 6,725,250
- ---------------------------------------------------------------------
- -------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
22
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- ---------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------
TRANSPORTATION-MISCELLANEOUS -- 0.4%
168,800 FDX Corp.* $ 9,157,400
213,100 Maritrans, Inc. 1,198,688
120,000 Sea Containers Ltd. 4,027,500
--------------
14,383,588
- ---------------------------------------------------------------------
TRUCKERS -- 0.2%
155,500 Navistar Int'l. Corp., Inc.* 7,775,000
- ---------------------------------------------------------------------
UTILITIES-ELECTRIC -- 1.7%
174,000 Consolidated Edison, Inc. 7,873,500
148,000 DQE 5,938,500
204,464 Duke Energy Co. 11,117,730
171,200 Energy East Corp. 4,451,200
304,200 IPALCO Enterprises 6,445,238
170,900 Montana Power Co. 12,048,450
60,200 New Century Energies, Inc. 2,336,513
58,000 Nisource, Inc. 1,497,125
160,000 Texas Utilities Co. 6,600,000
--------------
58,308,256
- ---------------------------------------------------------------------
UTILITIES-TELECOMMUNICATIONS -- 12.4%
680,700 Ameritech Corp. 50,031,450
830,365 AT & T Corp. 46,344,747
310,000 Bell Atlantic Corp. 20,266,250
622,000 Cisco Systems, Inc.* 40,080,125
440,000 GTE Corp. 33,330,000
984,300 Lucent Technologies, Inc. 66,378,731
905,120 MCI WorldCom, Inc.* 77,896,890
319,000 Nortel Networks Corp. 27,693,187
78,500 QUALCOMM, Inc.* 11,264,750
126,000 SBC Communications, Inc. 7,308,000
382,000 Sprint Corp. 20,174,375
95,500 Sprint PCS* 5,455,438
103,000 Vodafone Airtouch PLC 20,291,000
--------------
426,514,943
- ---------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $2,281,480,622) 3,288,651,362
- ---------------------------------------------------------------------
=====================================================================
SHORT-TERM INVESTMENTS -- 2.1%
=====================================================================
Principal
Amount Value
- ---------------------------------------------------------------------
$ 25,000,000 BTR Dunlop Finance, Inc.
5.75%, due 7/1/99 $ 25,000,000
24,000,000 Rio Tinto America, Inc.
5.75%, due 7/1/99 24,000,000
25,000,000 Sonoco Products Co.
5.80%, due 7/1/99 25,000,000
- ---------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $74,000,000) 74,000,000
- ---------------------------------------------------------------------
=====================================================================
REPURCHASE AGREEMENT -- 3.9%
=====================================================================
$135,391,000 State Street Bank & Trust Co.
repurchase agreement, dated
6/30/99, maturity value
$135,409,315 at 4.87%,
due 7/1/99 (collateralized by
$65,175,000 Federal Home
Loan Bank Notes, 5.125%,
due 10/15/03, by $46,930,000
Federal Farm Credit Bank
Notes, 4.62%, due 8/2/99,
by $24,490,000 Federal Home
Loan Mortgage Corp. Notes,
4.87%, due 7/12/99, and by
$1,545,000 Federal National
Mortgage Assn. Notes, 6.59%,
due 5/21/02) $ 135,391,000
- ---------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $135,391,000) 135,391,000
- ---------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.5%
(COST $2,490,871,622) 3,498,042,362
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS-- (1.5%) (51,253,222)
- ---------------------------------------------------------------------
NET ASSETS-- 100.0% $3,446,789,140
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
23
<PAGE>
O THE GUARDIAN PARK AVENUE SMALL CAP FUND
============================================================
COMMON STOCKS -- 93.1%
============================================================
Shares Value
- ------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.6%
7,500 Alliant Techsystems, Inc.* $ 648,750
- ------------------------------------------------------------
APPLIANCE AND FURNITURE -- 2.2%
58,500 Ethan Allen Interiors, Inc. 2,208,375
7,300 Furniture Brands Int'l., Inc.* 203,488
------------
2,411,863
- ------------------------------------------------------------
BIOTECHNOLOGY -- 2.5%
42,800 Biomatrix, Inc.* 925,550
65,000 The Liposome Co., Inc.* 1,243,125
7,500 Sepracor, Inc.* 609,375
------------
2,778,050
- ------------------------------------------------------------
BROADCASTING -- 5.2%
36,500 Adelphia Communications Corp.* 2,322,313
37,200 Citadel Communications Corp.* 1,346,175
7,400 Entercom Communications Corp.* 316,350
20,200 Jones Intercable, Inc.* 989,800
14,900 TCA Cable TV, Inc. 826,950
------------
5,801,588
- ------------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 12.7%
14,000 Coachmen Industries, Inc. 325,500
34,000 Crossman Communities, Inc.* 988,125
43,000 D. R. Horton, Inc. 714,875
96,000 Engle Homes, Inc. 1,320,000
53,000 Juno Lighting, Inc. 1,300,156
49,600 Lennar Corp. 1,190,400
45,600 Lone Star Industries, Inc. 1,712,850
46,850 Monaco Coach Corp.* 1,982,341
61,500 National RV Hldgs., Inc.* 1,491,375
21,400 Southdown, Inc. 1,374,950
52,000 Thor Industries, Inc. 1,475,500
40,000 U.S. Concrete, Inc.* 380,000
------------
14,256,072
- ------------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 11.4%
19,000 24/7 Media, Inc.* 731,500
19,100 Abovenet Communications, Inc.* 771,163
28,200 AFC Cable Systems, Inc.* 995,813
1,100 Ask Jeeves, Inc.* 15,400
10,834 At Home Corp.* 584,359
6,800 CMGI, Inc.* 775,625
10,100 Critical Path, Inc.* 558,656
6,300 Exodus Communications, Inc.* 755,606
2,500 Flycast Communicatons Corp.* 47,813
9,500 Infoseek Corp.* 455,406
7,400 Lycos, Inc.* 679,875
250 Media Metrix, Inc.* 13,312
14,200 MindSpring Enterprises, Inc.* 629,238
23,600 National Computer Systems, Inc.* 796,500
4,800 Network Solutions, Inc.* 379,800
14,000 Profit Recovery Group Int'l., Inc.* 662,375
25,000 TheStreet.com, Inc.* 900,000
36,000 US Web Corp.* 798,750
43,700 Xircom, Inc.* 1,313,731
3,519 Yahoo, Inc.* 606,148
25,000 Ziplink, Inc.* 312,500
------------
12,783,570
- ------------------------------------------------------------
CHEMICALS -- 2.0%
18,000 MacDermid, Inc. 837,000
56,000 Myers Industries, Inc. 1,120,000
11,800 Tredegar Industries, Inc. 256,650
------------
2,213,650
- ------------------------------------------------------------
COMPUTER SOFTWARE -- 4.7%
5,500 Inktomi Corp.* $ 723,250
25,000 Legato Systems, Inc.* 1,443,750
25,000 Macromedia, Inc.* 881,250
5,300 Network Appliance, Inc.* 296,138
25,300 Pervasive Software, Inc.* 629,337
6,000 RealNetworks, Inc.* 413,250
2,500 Silknet Software, Inc.* 101,250
8,600 VeriSign, Inc.* 741,750
------------
5,229,975
- ------------------------------------------------------------
COMPUTER SYSTEMS -- 0.9%
8,500 Henry Jack & Associates, Inc. 333,625
41,000 The Intercept Group, Inc.* 635,500
------------
969,125
- ------------------------------------------------------------
DRUGS AND HOSPITALS -- 1.5%
4,000 Andrx Corp.* 308,500
19,000 King Pharmaceuticals, Inc.* 491,625
37,650 United Payors & United Prov., Inc.* 873,009
------------
1,673,134
- ------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.8%
31,400 Plexus Corp.* 945,925
- ------------------------------------------------------------
FINANCIAL-BANKS -- 6.5%
16,700 Cullen Frost Bankers, Inc.* 460,294
18,500 Gold Banc Corp., Inc.* 242,812
27,000 Hudson United Bancorp 826,875
1,800 M & T Bank Corp. 990,000
23,000 MECH Financial, Inc. 862,500
24,000 National Commerce Bancorp. 525,000
27,000 North Fork Bancorp 575,438
5,000 U.S. Trust Corp.* 462,500
35,700 Valley National Bancorp 1,026,375
20,500 Zions Bancorp 1,301,750
------------
7,273,544
- ------------------------------------------------------------
FINANCIAL-OTHER -- 4.2%
11,000 Dain Rauscher Corp. 595,375
15,900 DLJ Direct* 469,050
23,000 Hambrecht & Quist Group, Inc.* 853,875
8,300 Investment Technology Group, Inc. 268,712
8,300 Jefferies Group, Inc. 249,000
30,000 Morgan Keegan, Inc. 568,125
13,100 Knight/Trimark Group, Inc.* 790,094
35,000 Ragen MacKenzie Group, Inc.* 415,625
7,700 Southwest Securities Group, Inc. 552,475
------------
4,762,331
- ------------------------------------------------------------
FINANCIAL-THRIFT -- 1.9%
10,500 Coast Federal Litigation Trust* 11,156
62,420 Peoples Heritage Financial Group 1,174,276
32,000 Waddell & Reed Financial, Inc. 878,000
------------
2,063,432
- ------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 2.1%
22,200 Adolph Coors Co. 1,098,900
23,100 Earthgrains Co. 596,269
5,000 Ralcorp Hldgs., Inc.* 80,312
19,500 Ruby Tuesday, Inc. 370,500
5,960 Tootsie Roll Industries, Inc. 230,205
------------
2,376,186
- ------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.3%
44,600 Home Products Int'l., Inc.* 379,100
- ------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
24
<PAGE>
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Schedule of Investments (Continued)
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
INSURANCE -- 2.7%
10,400 Chicago Title Corp. $ 371,150
4,900 Financial Sec. Assur. Hldgs. Ltd. 254,800
3,800 Markel Corp.* 710,600
21,000 Reinsurance Group of America 703,500
71,000 State Auto Financial Corp. 958,500
------------
2,998,550
- ------------------------------------------------------------
MACHINERY AND EQUIPMENT -- 1.5%
57,000 JLG Industries, Inc. 1,161,375
16,600 Terex Corp.* 505,262
------------
1,666,637
- ------------------------------------------------------------
MERCHANDISING-FOOD -- 0.6%
67,400 Grand Union Co.* 728,763
- ------------------------------------------------------------
MERCHANDISING-SPECIAL -- 7.4%
27,000 Ames Department Stores, Inc.* 1,231,875
25,000 Barnes & Noble, Inc.* 450,000
64,000 BJ's Wholesale Club, Inc.* 1,924,000
3,000 EToys, Inc.* 122,250
24,750 Insight Enterprises, Inc.* 612,563
9,300 JAKKS Pacific, Inc.* 277,256
12,000 Miami Computer Supplies* 226,500
43,300 PC Connection, Inc.* 522,306
49,500 Trans World Entertainment Corp.* 556,875
60,000 Zale Corp.* 2,400,000
------------
8,323,625
- ------------------------------------------------------------
METALS-STEEL -- 0.2%
37,000 Armco, Inc.* 245,125
- ------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH CYCLICAL -- 3.7%
35,000 Avis Rent A Car, Inc.* 1,019,375
8,900 Hertz Corp.* 551,800
87,000 Nielsen Media Research, Inc.* 2,544,750
------------
4,115,925
- ------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 4.1%
22,000 A.C. Nielsen Corp.* 665,500
65,100 Innotrac Corp.* 1,318,275
35,000 Optimal Robotics Corp.* 347,812
62,400 Valassis Communications, Inc.* 2,285,400
------------
4,616,987
- ------------------------------------------------------------
OIL AND GAS PRODUCING -- 0.6%
18,500 Louis Dreyfus Natural Gas Corp.* 398,906
11,500 Newfield Exploration Co.* 327,031
------------
725,937
- ------------------------------------------------------------
OIL AND GAS SERVICES -- 0.9%
34,100 B.J. Svcs. Co.* 1,003,819
- ------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 2.2%
18,000 Brandywine Realty Trust 356,625
26,000 Colonial Pptys. Trust, Inc. 734,500
18,000 Kilroy Realty Corp. 438,750
55,800 Mission West Pptys., Inc.* 460,350
13,000 Prison Realty Corp. 127,563
10,000 Weeks Corp.* 305,000
------------
2,422,788
- ------------------------------------------------------------
SEMICONDUCTORS -- 3.4%
27,000 Advanced Micro Devices, Inc.* 487,688
10,800 KLA-Tencor Corp.* 700,650
9,400 QLogic Corp.* 1,240,800
24,000 Xilinx, Inc.* 1,374,000
------------
3,803,138
- ------------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 2.2%
19,000 Mohawk Industries, Inc.* 577,125
61,000 Shaw Industries, Inc.* 1,006,500
28,700 Tropical Sportswear Int'l. Corp.* 914,812
------------
2,498,437
- ------------------------------------------------------------
TRANSPORTATION-MISCELLANEOUS -- 0.8%
25,700 Sea Containers Ltd. 862,556
- ------------------------------------------------------------
UTILITIES-GAS AND ELECTRIC -- 2.6%
13,300 Central Hudson Gas & Elec. Corp. 558,600
23,000 IPALCO Enterprises 487,312
16,000 Otter Tail Power Co. 617,000
36,000 TNP Enterprises, Inc. 1,305,000
------------
2,967,912
- ------------------------------------------------------------
UTILITIES-TELECOMMUNICATIONS -- 0.7%
26,000 Commscope, Inc.* 799,500
- ------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $88,875,008) 104,345,994
- ------------------------------------------------------------
============================================================
REPURCHASE AGREEMENT -- 6.5%
============================================================
Principal
Amount Value
- ------------------------------------------------------------
$ 7,303,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/99, maturity
value $7,303,988 at 4.87%
due 7/1/99 (collateralized by
$7,455,000 Federal National
Mortgage Assn. Notes, 5.62%
due 3/15/01) $ 7,303,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $7,303,000) 7,303,000
- -----------------------------------------------------------
TOTAL INVESTMENTS -- 99.6%
(COST $96,178,008) 111,648,994
CASH, RECEIVABLES AND OTHER
ASSETS LESS LIABILITIES-- 0.4% 474,040
- -----------------------------------------------------------
NET ASSETS -- 100.0% $112,123,034
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
25
<PAGE>
O THE GUARDIAN ASSET ALLOCATION FUND
===========================================================
COMMON STOCKS -- 6.3%
===========================================================
Shares Value
- -----------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.2%
5,800 United Technologies Corp. $ 415,788
- -----------------------------------------------------------
AIR TRANSPORTATION -- 0.1%
4,000 Continental Airlines, Inc.* 150,500
- -----------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 0.1%
2,289 Martin Marietta Materials, Inc. 135,051
- -----------------------------------------------------------
COMPUTER SOFTWARE -- 1.4%
40,000 Microsoft Corp.* 3,607,500
- -----------------------------------------------------------
COMPUTER SYSTEMS -- 1.0%
25,000 Lexmark Int'l. Group, Inc.* 1,651,562
6,000 Pitney Bowes, Inc. 385,500
6,000 Sun Microsystems, Inc.* 413,250
------------
2,450,312
- -----------------------------------------------------------
CONGLOMERATES -- 0.4%
12,000 Textron, Inc. 987,750
- -----------------------------------------------------------
DRUGS AND HOSPITALS -- 0.1%
4,800 Bristol-Myers Squibb Corp. 338,100
- -----------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.3%
28,200 General Electric Co. 3,186,600
- -----------------------------------------------------------
FINANCIAL-BANKS -- 0.4%
13,500 Firstar Corp. 378,000
10,400 Mellon Bank Corp. 378,300
4,500 Union BanCal Corp. 162,563
2,400 Zions Bancorp 152,400
------------
1,071,263
- -----------------------------------------------------------
FINANCIAL-THRIFT -- 0.1%
5,600 Astoria Financial Corp. 246,050
- -----------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 0.0%
1,600 Earthgrains Co. 41,300
- -----------------------------------------------------------
INSURANCE -- 0.1%
73 Berkshire Hathaway, Inc.* 163,520
- -----------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 0.1%
4,800 Dayton Hudson Corp. 312,000
- -----------------------------------------------------------
MERCHANDISING-DRUGS -- 0.1%
5,304 CVS Corp. 269,178
- -----------------------------------------------------------
MERCHANDISING-FOOD -- 0.4%
19,274 Safeway, Inc.* 954,063
- -----------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 0.3%
10,400 Exxon Corp. 802,100
- -----------------------------------------------------------
UTILITIES-TELECOMMUNICATIONS -- 0.2%
6,400 Ameritech Corp. 470,400
- -----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $4,966,368) 15,601,475
- -----------------------------------------------------------
===========================================================
MUTUAL FUNDS -- 56.0%
===========================================================
EQUITY -- 38.2%
1,739,114 The Guardian Park Avenue
Fund, Class A $ 95,217,921
FIXED INCOME -- 17.8%
4,620,493 The Guardian Investment Quality
Bond Fund, Class A 44,203,697
- -----------------------------------------------------------
TOTAL MUTUAL FUNDS
(COST $129,672,515) 139,421,618
- -----------------------------------------------------------
===========================================================
OPTIONS -- 0.0%
===========================================================
Number of
Contracts Value
- -----------------------------------------------------------
300 U.S. Treasury Bond Futures
Expires August, 1999
Exercise price $120 $ 84,375
75 U.S. Treasury Bond Futures
Expires August, 1999
Exercise price $116 108,984
- -----------------------------------------------------------
TOTAL OPTIONS
(COST $868,632) 193,359
- -----------------------------------------------------------
===========================================================
SHORT-TERM INVESTMENTS -- 27.6%
===========================================================
Principal
Amount Value
- -----------------------------------------------------------
$ 8,000,000 Ameritech Capital Funding Corp.
4.97%, due 7/21/99 $ 7,977,911
8,000,000 Associates First Capital
4.84%, due 7/22/99 7,977,413
8,000,000 BTR Dunlop Fin., Inc.
4.81%, due 7/8/99 7,992,518
7,000,000 DaimlerChrysler N.A. Hldgs. Corp.
4.90%, due 7/23/99 6,979,039
5,000,000 John Deere Credit Group PLC
4.81%, due 7/6/99 4,996,660
7,000,000 FPL Group Capital, Inc.
5.00%, due 7/6/99 6,995,139
8,000,000 General Motors Acceptance Corp.
4.80%, due 7/13/99 7,987,200
8,000,000 Merrill Lynch & Co., Inc.
4.83%, due 8/20/99 7,946,333
10,000,000 Motiva Enterprises
5.04%, due 8/5/99 9,951,000
- -----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $68,803,213) 68,803,213
- -----------------------------------------------------------
===========================================================
REPURCHASE AGREEMENT -- 9.7%
===========================================================
$24,147,000 State Street Bank & Trust Co.
repurchase agreement, dated
6/30/99, maturity value
$24,150,267 at 4.87%, due
7/1/99 (collateralized by
$1,175,000 Federal National
Mortgage Assn. Notes,
5.25%, due 1/15/03 and by
$23,465,000 Federal Home
Loan Bank Notes, 5.125%,
due 10/15/03) $ 24,147,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $24,147,000) 24,147,000
- -----------------------------------------------------------
TOTAL INVESTMENTS -- 99.6%
(COST $228,457,728) 248,166,665
CASH, RECEIVABLES AND OTHER
ASSETS LESS LIABILITIES -- 0.4% 931,994
- -----------------------------------------------------------
NET ASSETS-- 100.0% $249,098,659
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
* Nonincome producing security. See notes to financial statements.
26
<PAGE>
O THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
===========================================================
COMMON STOCKS -- 94.9%
===========================================================
Shares Value
- -----------------------------------------------------------
AUSTRALIA -- 2.7%
BANKS -- 0.9%
34,900 Commonwealth Bank of Australia $ 554,849
38,070 National Australia Bank 629,154
BEVERAGES -- 0.5%
211,200 Fosters Brewing Group 594,475
BUSINESS SERVICES -- 0.4%
21,260 Brambles Industries Ltd. 559,346
MINING -- 0.6%
46,300 Broken Hill Ppty. 535,616
182,450 Pasminco Ltd.* 201,175
TELECOMMUNICATIONS -- 0.3%
55,600 Telstra Corp. 318,183
------------
3,392,798
- -----------------------------------------------------------
FINLAND -- 1.8%
TELECOMMUNICATIONS -- 1.8%
25,100 Nokia OYJ 2,199,319
- -----------------------------------------------------------
FRANCE -- 7.6%
BANKS -- 0.9%
6,270 Societe Generale 1,104,600
COMPUTER SOFTWARE AND TECHNOLOGY -- 1.0%
8,010 CAP Gemini 1,258,384
CONSTRUCTION MATERIALS -- 0.9%
11,400 Lafarge 1,083,506
FINANCIAL SERVICES -- 1.4%
14,340 AXA UAP 1,748,757
OIL-INTEGRATED -- 2.2%
18,930 Elf Aquitaine 2,776,842
RETAIL-FOOD AND DRUG -- 1.2%
10,560 Carrefour 1,551,223
------------
9,523,312
- -----------------------------------------------------------
GERMANY -- 10.0%
AUTOMOTIVE -- 1.7%
25,200 DaimlerChysler AG 2,182,104
BANKS -- 1.0%
19,400 Bayerische Vereinsbank AG 1,259,905
CHEMICALS -- 1.7%
48,110 BASF AG 2,125,112
DRUGS AND HEALTH CARE -- 0.5%
13,590 GEHE AG 624,813
INDUSTRIAL MACHINERIES -- 3.6%
29,990 Mannesmann AG 4,482,704
SOFTWARE -- 1.3%
4,700 SAP AG 1,589,159
TELECOMMUNICATIONS -- 0.2%
6,830 Deutsche Telekom* 286,557
------------
12,550,354
- -----------------------------------------------------------
HONG KONG -- 2.4%
CONGLOMERATES -- 1.2%
171,000 Hutchison Whampoa 1,548,314
REAL ESTATE -- 0.9%
70,000 Cheung Kong Hldgs. 622,535
50,000 Sun Hung Kai Pptys. 455,946
TELECOMMUNICATIONS -- 0.3%
161,600 Hong Kong Telecom. 419,694
------------
3,046,489
- -----------------------------------------------------------
HUNGARY -- 0.2%
PHARMACEUTICALS -- 0.2%
7,180 Richter Gedeon VEG 312,103
- -----------------------------------------------------------
IRELAND -- 2.7%
BANKS -- 1.1%
105,000 Allied Irish Bank 1,380,051
- -----------------------------------------------------------
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
CONSTRUCTION MATERIALS -- 1.6%
110,180 CRH PLC $ 1,953,560
------------
3,333,611
- -----------------------------------------------------------
ITALY -- 2.9%
BANKS -- 2.2%
595,000 Banco di Roma 855,632
140,930 Sao Paolo IMI SPA 1,917,666
OIL AND GAS -- 0.1%
30,600 Tecnost SPA* 75,390
TELECOMMUNICATIONS -- 0.6%
308,100 Olivetti SPA* 740,020
308,100 Olivetti SPA (rights)* 41,447
------------
3,630,155
- -----------------------------------------------------------
JAPAN -- 23.4%
AUTOMOTIVE -- 0.6%
19,000 Honda Motor Co. 805,737
AUTOMOTIVE PARTS -- 0.8%
51,000 Denso Corp. 1,037,117
CHEMICALS -- 2.6%
67,000 Kao Corp. 1,883,112
295,000 Sumitomo Chemical* 1,353,435
COMPUTER SYSTEMS -- 1.7%
102,000 Fujitsu Ltd. 2,053,154
DRUGS AND HEALTH CARE -- 1.0%
49,000 Sankyo Co. 1,235,430
ELECTRONICS -- 4.2%
190,000 Hitachi 1,782,673
70,000 Matsushita Electric Works 675,870
7,000 Rohm Co. 1,096,553
9,000 Sony Corp. 970,902
8,000 TDK Corp. 732,082
ENGINEERING AND MACHINERIES -- 1.0%
10,700 SMC Corp.* 1,198,520
FINANCIAL SERVICES -- 4.4%
84,000 Mitsubishi Trading & Brokerage 816,599
83,000 Nomura Securities Co. Ltd. 972,233
19,100 Promise Co. 1,128,916
105,000,000 Sanwa Int'l. Financial 911,383
2,260 Shohkoh Fund & Co. 1,621,625
LEISURE PRODUCTS -- 0.4%
3,500 Toho Co. 512,110
MERCHANDISING-MASS -- 1.1%
5,700 Ryohin Keikaku Co. Ltd. 1,434,777
PHOTOGRAPHY -- 0.6%
21,000 Fuji Photo Film Co. 795,073
RETAIL TRADE -- 0.7%
13,000 Ito Yokado Co. 870,464
TELECOMMUNICATIONS -- 3.6%
173 Nippon Tele. & Tel. Corp. 2,016,450
37 NTT Mobile Comm. Network, Inc. 501,612
148 NTT Mobile Comm. Network, Inc.
- New* 1,981,979
TOBACCO -- 0.7%
75 Japan Tobacco, Inc.* 830,785
------------
29,218,591
- -----------------------------------------------------------
NETHERLANDS -- 3.4%
BANKS -- 0.9%
49,600 ABN AMRO Hldgs. NV* 1,073,734
BROADCASTING AND PUBLISHING -- 1.5%
47,380 Ver Ned Uitgevers 1,892,615
COMPUTER SERVICES -- 1.0%
50,300 CMG PLC 1,322,220
------------
4,288,569
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Nonincome producing security.
27
<PAGE>
THE GUARDIAN BAILLIE GIFFORD
INTERNATIONAL FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
NEW ZEALAND -- 0.3%
TELECOMMUNICATIONS -- 0.3%
79,010 Telecom. Corp. of New Zealand $ 338,838
- -----------------------------------------------------------
POLAND -- 1.0%
ELECTRICAL EQUIPMENTS -- 1.0%
85,000 Elektrim* 1,201,452
- -----------------------------------------------------------
PORTUGAL -- 0.6%
TRANSPORTATION -- 0.6%
18,120 Brisa (Auto Estrada) 747,160
- -----------------------------------------------------------
SINGAPORE -- 1.2%
BANKS -- 0.3%
40,000 Overseas Chinese Bank 333,725
PUBLISHING -- 0.9%
65,197 Singapore Press Hldgs. 1,110,877
------------
1,444,602
- -----------------------------------------------------------
SOUTH KOREA -- 0.8%
TELECOMMUNICATIONS -- 0.4%
33,100 SK Telecom. Ltd. ADR* 562,700
UTILITIES-ELECTRIC -- 0.4%
23,882 Korea Electric Power Corp. ADR* 489,581
------------
1,052,281
- -----------------------------------------------------------
SPAIN -- 4.6%
BANKS -- 2.0%
232,400 Banco Santander Central
Hispano S.A. 2,419,653
CONSTRUCTION AND HOUSING -- 1.8%
47,900 Acciona S.A. 2,282,732
GAS DISTRIBUTION -- 0.8%
14,000 Gas Natural SDG* 1,017,449
------------
5,719,834
- -----------------------------------------------------------
SWEDEN -- 3.9%
CONSTRUCTION AND MINING EQUIPMENTS -- 1.0%
47,120 Atlas Copco AB 1,265,562
RETAIL-GENERAL -- 1.3%
68,130 Hennes & Mauritz 1,685,393
TELECOMMUNICATIONS -- 1.6%
61,850 LM Ericsson 1,985,408
------------
4,936,363
- -----------------------------------------------------------
SWITZERLAND -- 5.2%
BUSINESS SERVICES -- 1.5%
3,430 Adecco S.A. 1,837,303
INSURANCE -- 1.3%
2,950 Zurich Allied AG 1,676,934
PHARMACEUTICALS -- 1.3%
160 Roche Hldgs. AG 1,644,139
TELECOMMUNICATIONS -- 1.1%
3,610 Swisscom AG 1,358,015
------------
6,516,391
- -----------------------------------------------------------
UNITED KINGDOM -- 20.2%
BANKS -- 4.4%
36,000 Barclays 1,046,945
45,325 Halifax PLC 540,113
48,000 HSBC Hldgs.* 1,697,054
112,000 Lloyds TSB Group PLC 1,520,892
36,500 National Westminster Bank Co. PLC 773,821
COMPUTER SOFTWARE AND TECHNOLOGY-- 0.3%
10,000 Sage Group 355,444
CONGLOMERATES -- 1.8%
135,000 Hanson PLC 1,212,925
76,000 Rentokil Initial PLC 294,696
110,461 Williams Hldgs. 729,538
DATA SERVICES -- 0.4%
34,666 Reuters Group PLC 455,990
- -----------------------------------------------------------
- -----------------------------------------------------------
Shares Value
- -----------------------------------------------------------
DRUGS AND HEALTH CARE -- 2.9%
96,000 Glaxo Wellcome $ 2,667,772
73,000 Smithkline Beecham 949,297
ELECTRONICS -- 0.3%
52,000 Electrocomponents 382,777
FINANCIAL SERVICES -- 0.5%
43,000 CGU PLC 619,159
FOOD, BEVERAGE AND TOBACCO -- 1.4%
132,800 Imperial Tobacco 1,455,863
22,929 Whitbread 355,274
INDUSTRIAL MACHINERIES -- 0.4%
43,000 Smiths Industries PLC 570,697
INSURANCE -- 0.5%
42,000 Prudential Corp. 618,994
LEISURE PRODUCTS -- 0.3%
19,000 Granada Group 351,898
OIL-INTERNATIONAL -- 1.9%
135,880 BP Amoco PLC 2,433,095
OIL AND GAS -- 0.6%
96,000 Shell Transport & Trading 720,283
RETAIL-GENERAL -- 0.4%
40,000 Boots Co. 474,767
TELECOMMUNICATIONS -- 3.6%
119,000 British Telecom. 1,992,034
53,373 Cable & Wireless Co.* 513,188
100,000 Vodafone Group 1,967,160
TRANSPORTATION -- 0.5%
61,000 BAA PLC 587,773
------------
25,287,449
- -----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $96,457,583) 118,739,671
- -----------------------------------------------------------
===========================================================
CONVERTIBLE BOND -- 0.1%
===========================================================
Principal
Amount Value
- -----------------------------------------------------------
$ 147,900 Tecnost Int'l.
4.487% due 6/23/04
(COST $156,609) $ 155,161
- -----------------------------------------------------------
===========================================================
REPURCHASE AGREEMENT -- 2.8%
===========================================================
$3,468,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/99, maturity
value $3,468,385 at 4.00%
due 7/1/99 (collateralized
by $3,540,000 U.S. Treasury
Notes, 3.375% due 1/15/07) $ 3,468,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $3,468,000) 3,468,000
- -----------------------------------------------------------
TOTAL INVESTMENTS -- 97.8%
(COST $100,082,192) 122,362,832
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 2.2% 2,741,356
- -----------------------------------------------------------
NET ASSETS -- 100.0% $125,104,188
- -----------------------------------------------------------
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
* Nonincome producing security. See notes to financial statements.
28
<PAGE>
[_] THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
=====================================================================
COMMON STOCKS -- 92.9%
- ---------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------
ARGENTINA -- 2.2%
METALS -- 0.3%
25,258 Siderar S.A.* $ 76,037
REAL ESTATE -- 0.5%
3,350 IRSA Inversiones Y Represente GDR 103,431
RETAIL-FOOD -- 0.6%
19,480 Imp. Y Exp. Patagonia* 142,223
TELECOMMUNICATIONS -- 0.8%
6,000 Telefonica de Argentina S.A. ADR* 188,250
-----------
509,941
- ---------------------------------------------------------------------
BRAZIL -- 9.6%
BANKS -- 0.8%
340,000 Banco Itau S.A. 174,753
FOOD, BEVERAGE AND TOBACCO -- 0.1%
4,700,000 Comp. Lorenz 19,910
PAPER PRODUCTS -- 0.5%
5,600 Aracruz Celulose S.A. ADR 123,200
PETROLEUM SERVICES -- 1.5%
23,740 Petroleo Brasileiro S.A. ADR 353,132
REAL ESTATE -- 0.4%
6,500 Brazil Realty S.A. GDR 80,768
RETAIL-APPLIANCES -- 0.6%
24,500 Globex Utilidades 128,001
RETAIL-FOOD -- 0.6%
8,168 Comp. Brasileiras de Dist. ADR 152,640
TELECOMMUNICATIONS -- 3.1%
9,300 Embratel Participacoes S.A. ADR 129,037
5,290 Telecom. Centro Sul Participacoes ADR 127,128
1,800,000 Telecom. de Sao Paolo S.A. 149,449
9,400 Telecom. Norte Leste Participacoes ADR 174,488
22,944,500 Telecom. Sudeste Celular Participacoes S.A. 130,249
TEXTILE-APPAREL AND PRODUCTION -- 0.7%
83,700 Confeccoes Guararapes S.A. 152,461
TOBACCO -- 0.5%
15,900 Souza Cruz (Cia) 111,807
UTILITIES-ELECTRIC AND WATER -- 0.8%
8,600 Comp. Energetica de Minas ADR 177,375
-----------
2,184,398
- ---------------------------------------------------------------------
CHILE -- 1.7%
CHEMICALS -- 0.3%
2,100 Sociedad Quimica Y Minera
de Chile S.A. ADR 74,287
MINING -- 0.6%
30,420 Antofagasta Hldgs. 139,533
MUTUAL FUNDS -- 0.4%
2,800 Genesis Chile Fund 88,200
TELECOMMUNICATIONS -- 0.4%
3,500 Comp. de Telecom. de Chile ADR 86,625
-----------
388,645
- ---------------------------------------------------------------------
CZECH REPUBLIC -- 0.4%
TELECOMMUNICATIONS -- 0.4%
5,750 SPT Telecom. AS* 93,204
- ---------------------------------------------------------------------
ESTONIA -- 0.5%
TELECOMMUNICATIONS -- 0.5%
6,000 AS Eesti Telekom GDR 119,100
- ---------------------------------------------------------------------
GREECE -- 1.0%
BANKS -- 0.4%
1,575 Alpha Credit Bank 101,378
TELECOMMUNICATIONS -- 0.6%
6,300 OTE - S.A. Telecom. Org. 134,837
-----------
236,215
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------
HONG KONG -- 3.3%
BANKS -- 0.7%
56,000 Guoco Group* $ 150,130
ELECTRONIC EQUIPMENT -- 0.9%
219,000 Legend Hldgs.* 210,289
REAL ESTATE -- 1.3%
17,000 Cheung Kong Hldgs. 151,187
76,000 New World Infrastructure Ltd.* 143,015
UTILITIES -- 0.4%
384,000 Shandong Int'l. Power* 86,614
-----------
741,235
- ---------------------------------------------------------------------
HUNGARY -- 3.5%
BANKS -- 0.8%
4,400 OTP Bank 183,356
LODGING -- 0.9%
12,000 Danubius Hotel* 217,569
PHARMACEUTICALS -- 0.8%
4,200 Richter Gedeon VEG 182,567
PLASTICS -- 0.4%
4,500 Pannonplast 87,164
TELECOMMUNICATIONS -- 0.6%
25,540 Matav RT* 137,969
-----------
808,625
- ---------------------------------------------------------------------
INDIA -- 6.8%
COMPUTER SOFTWARE -- 1.9%
7,600 Infosys Technology Ltd. ADR 440,800
MUTUAL FUNDS -- 4.1%
22,000 India I.T. Fund Ltd.* 525,250
37,000 Indian Opportunity Fund* 407,000
TELECOMMUNICATIONS -- 0.8%
17,000 Mahanagar Telephone Nigam
Ltd. GDR* 172,550
-----------
1,545,600
- ---------------------------------------------------------------------
INDONESIA -- 1.8%
TELECOMMUNICATIONS -- 1.8%
729,000 PT Telekomunikasi Indonesia 421,083
- ---------------------------------------------------------------------
ISRAEL -- 4.1%
BANKS -- 0.9%
108,000 Bank Leumi Le - Israel* 204,040
COMPUTER SOFTWARE -- 0.9%
20,500 Sapiens Int'l. Corp. NV* 203,719
CONGLOMERATES -- 1.2%
14,000 Clal Industries* 111,349
7,000 Koors Industries Ltd. ADR 163,625
ELECTRONIC EQUIPMENT -- 0.6%
4,000 ECI Telecom. Ltd. 132,750
TELECOMMUNICATIONS -- 0.5%
12,800 Elbit Ltd.* 125,600
-----------
941,083
- ---------------------------------------------------------------------
MALAYSIA -- 2.7%
BANKS -- 1.6%
121,000 Malayan Bank Berhad* 363,000
FOOD, BEVERAGE AND TOBACCO -- 0.2%
32,000 RJ Reynolds Berhad 33,651
UTILITIES -- 0.9%
90,000 Tenaga Nasional* 207,237
-----------
603,888
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
29
<PAGE>
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
- ---------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------
MEXICO -- 12.5%
BANKS -- 0.3%
29,000 Grupo Financiero Banamex
Accival S.A. de C.V.* $ 73,799
CONGLOMERATES -- 1.0%
2,850 Fomento Economico
Mexicano ADR 113,644
25,436 Grupo Carso S.A. de C.V. ADR* 117,862
FINANCIAL SERVICES -- 0.5%
69,400 Grupo Financiero Banorte* 101,550
FOOD, BEVERAGE AND TOBACCO -- 1.4%
93,100 Grupo Continental 145,904
80,000 Grupo Industrial Bimbo S.A.* 178,136
MEDIA AND ENTERTAINMENT -- 2.5%
114,600 Corp. Interamericana Entretenimiento* 373,048
4,400 Grupo Television S.A. de C.V. ADR* 197,175
METALS -- 0.8%
16,600 Tubos de Acero 179,536
PAPER PRODUCTS -- 1.0%
53,000 Kimberly Clark Mexico* 218,047
REAL ESTATE -- 0.8%
44,200 Corp. Geo S.A. de C.V.* 187,467
RETAIL TRADE -- 1.1%
11,400 Grupo Elektra S.A. de C.V. GDR 66,975
39,400 Organiz. Soriana* 185,073
TELECOMMUNICATIONS -- 3.1%
25,300 Grupo Carso Global Telecom.* 160,154
6,770 Telefonos de Mexico S.A. ADR 547,101
-----------
2,845,471
- ---------------------------------------------------------------------
PANAMA -- 0.6%
BANKS -- 0.6%
56,000 Banco Latinoamericano de
Exportaciones S.A. 128,400
- ---------------------------------------------------------------------
PEOPLE'S REPUBLIC OF CHINA -- 1.2%
HOUSEHOLD PRODUCTS -- 1.2%
236,000 Guandong Kelon Elec. Hldgs. 275,282
- ---------------------------------------------------------------------
PERU -- 1.3%
MINING -- 0.5%
7,100 Comp. de Minas Buenaventura ADR 108,719
TELECOMMUNICATIONS -- 0.8%
12,500 Telefonica del Peru S.A. ADR 189,062
-----------
297,781
- ---------------------------------------------------------------------
POLAND -- 5.4%
BANKS -- 2.3%
20,000 Bank Handlowy Warsaw* 277,601
8,130 Bank Roswoju Eksport 255,712
ELECTRICAL EQUIPMENT -- 1.1%
18,430 Elektrim* 260,503
MEDIA -- 0.6%
10,700 Agora S.A. GDR* 124,655
METALS -- 0.6%
20,250 KGHM Polska Miedz* 127,384
TELECOMMUNICATIONS -- 0.8%
25,000 Telekomunikacja Polska GDR* 178,125
-----------
1,223,980
- ---------------------------------------------------------------------
SOUTH AFRICA -- 5.8%
CONSUMER GOODS -- 1.7%
96,000 Ellerine Hldgs. 381,836
ELECTRONIC EQUIPMENT -- 1.3%
11,500 MIH Ltd. Tortola* 304,750
METALS -- 0.6%
93,000 Kroondal Platinum* 129,466
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------
MISCELLANEOUS-FINANCIAL -- 1.3%
6,200 Anglo American Corp. of South Africa $ 289,758
TOBACCO -- 0.9%
11,000 Compagnie Financiere Richemont AG* 213,656
-----------
1,319,466
- ---------------------------------------------------------------------
SOUTH KOREA -- 16.0%
BANKS -- 1.2%
13,000 Kookmin Bank GDR* 266,500
CONGLOMERATES -- 2.4%
23,000 Samsung Co.* 540,475
CONSTRUCTIONS -- 1.4%
5,500 Tae Young Corp.* 313,607
ELECTRONIC EQUIPMENT -- 1.0%
27,500 Comtec System* 243,520
FINANCIAL SERVICES -- 2.1%
20,000 Daishin Securities* 278,186
11,000 Dongwon Securities* 202,419
TELECOMMUNICATIONS -- 7.9%
8,000 LG Information & Comm.* 591,620
71,000 SK Telecom. Ltd. ADR* 1,207,000
-----------
3,643,327
- ---------------------------------------------------------------------
TAIWAN -- 9.3%
BANKS -- 0.9%
110,000 First Commercial Bank* 209,443
DRUGS AND HEALTH CARE -- 0.5%
181,720 Test Rite Int'l.* 126,585
ELECTRONICS AND INSTRUMENTS -- 5.5%
90,000 Accton Technology Corp.* 204,799
37,000 Hon Hai Precision* 334,489
81,760 Taiwan Secom 175,923
70,110 Taiwan Semiconductor* 268,068
124,200 United Micro Electronic 267,241
INSURANCE -- 0.7%
46,000 Cathay Life Insurance Co. Ltd. 165,201
MISCELLANEOUS-CONS. GROWTH CYCLICAL -- 0.5%
50,000 Lee Chi Enterprises Co. Ltd.* 112,229
REAL ESTATE -- 1.2%
106,000 China Development* 264,180
-----------
2,128,158
- ---------------------------------------------------------------------
THAILAND -- 2.1%
BANKS -- 0.7%
92,000 Siam Commercial Bank* 113,519
92,000 Siam Commercial Bank (warrants)* 59,254
REAL ESTATE -- 1.4%
528,000 Olden Land Ppty.* 311,430
-----------
484,203
- ---------------------------------------------------------------------
TURKEY -- 0.7%
BANKS -- 0.7%
27,811 Haci Omer Sabanci Hldgs. S.A. ADR 150,875
- ---------------------------------------------------------------------
UNITED KINGDOM -- 0.4%
MUTUAL FUNDS -- 0.4%
4,450 East Europe Development Fund* 95,351
- ---------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $18,424,579) 21,185,311
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
30
<PAGE>
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
=====================================================================
PREFERRED STOCK -- 0.4%
- ---------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------
830,000 Telecom. de Sao Paolo S.A.
(COST $146,948) $ 98,447
- ---------------------------------------------------------------------
=====================================================================
REPURCHASE AGREEMENT -- 3.6%
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
$ 823,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/99, maturity
value $823,091 at 4.00%
due 7/1/99 (collateralized
by $845,000 U.S.
Treasury Bonds, 12.75%
due 11/15/10) $ 823,000
- ---------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $823,000) 823,000
- ---------------------------------------------------------------------
TOTAL INVESTMENTS -- 96.9%
(COST $19,394,527) 22,106,758
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 3.1% 715,485
- ---------------------------------------------------------------------
NET ASSETS-- 100.0% $22,822,243
- ---------------------------------------------------------------------
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
See notes to financial statements.
31
<PAGE>
O THE GUARDIAN INVESTMENT QUALITY BOND FUND
===========================================================
ASSET BACKED -- 8.0%
===========================================================
Principal
Amount Value
- -----------------------------------------------------------
$ 500,000 Amresco 1997-1 M1F
7.42% due 3/25/27 $ 497,735
1,700,000 Arcadia Automobile Rec. Tr.
1999-A A5
6.12% due 12/15/06 1,683,714
2,000,000 Comed Transitional Funding Tr.
1998 A3
5.34% due 3/25/04 1,962,020
1,400,000 Contimortgage Home Equity Loan Tr.
1999-1 A3
6.17% due 5/25/21 1,379,784
1,300,000 Green Tree Finl. Corp.
1998-4 A5
6.18% due 12/1/17 1,280,370
1,700,000 Peco Energy Transition Tr.
1999-A A6
6.05% due 3/1/09 1,627,886
1,100,000 Pemex Finance Ltd.
6.125% due 11/15/03+ 1,101,441
1,727,000 Premier Auto Tr. 1997-2B
6.53% due 12/6/03 1,735,963
- -----------------------------------------------------------
TOTAL ASSET BACKED
(COST $11,432,669) 11,268,913
- -----------------------------------------------------------
===========================================================
COMMERCIAL MORTGAGE BACKED -- 4.8%
===========================================================
$1,300,000 Chase Coml. Mtg. Secs. Corp.
1998-1 A2
6.56% due 5/18/08 $ 1,270,880
1,500,000 Comm 1999-1 A1
6.145% due 2/15/08 1,445,585
1,300,000 First Union Coml. Mtg. Tr.
1999-C1 A2
6.07% due 10/15/35 1,224,756
1,500,000 First Union Lehman Brothers
1998-Cl A1
6.28% due 6/18/07 1,393,350
1,500,000 Heller Finl. Coml. Mtg. Asset. Co.
1999-PH1 A1
6.50% due 2/15/08 1,479,330
- -----------------------------------------------------------
TOTAL COMMERCIAL MORTGAGE BACKED
(COST $6,984,918) 6,813,901
- -----------------------------------------------------------
===========================================================
CORPORATE BONDS -- 43.1%
===========================================================
AUTOMOTIVE -- 1.8%
$1,500,000 Ford Motor Co.
6.375% due 2/1/29 $ 1,303,265
1,300,000 Ford Motor Credit Co.
5.75% due 2/23/04 1,252,445
------------
2,555,710
- -----------------------------------------------------------
BANKS -- 4.5%
1,400,000 Capital One Bank
6.48% due 1/28/02 1,387,793
1,500,000 Citicorp
6.375% due 11/15/08 1,424,931
2,000,000 Export-Import Bank Korea
6.50% due 2/10/02 1,953,000
- -----------------------------------------------------------
+ Rule 144A restricted security
- -----------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------
$1,600,000 Korea Dev. Bank
7.125% due 9/7/01 $ 1,595,435
------------
6,361,159
- -----------------------------------------------------------
BUILDING PRODUCTS -- 0.7%
1,000,000 Lafarge Corp.
6.375% due 7/15/05 974,222
- -----------------------------------------------------------
CHEMICALS-MAJOR -- 2.1%
1,500,000 ICI Wilmington, Inc.
6.75% due 9/15/02 1,498,672
1,500,000 Rohm & Haas
7.85% due 7/15/29 1,498,905
------------
2,997,577
- -----------------------------------------------------------
ENTERTAINMENT -- 2.5%
1,250,000 Time Warner, Inc.
6.95% due 1/15/28 1,155,651
2,650,000 Time Warner, Inc.
6.625% due 5/15/29 2,334,359
------------
3,490,010
- -----------------------------------------------------------
FERTILIZER -- 1.1%
1,600,000 IMC Global
7.40% due 11/1/02 1,623,662
- -----------------------------------------------------------
FINANCIAL-OTHER -- 4.7%
1,250,000 Donaldson Lufkin & Jenrette
Sec. Corp.
6.11% due 5/15/01 1,243,549
1,400,000 Lehman Brothers Hldgs., Inc.
6.625% due 4/1/04 1,365,990
2,800,000 Lehman Brothers Hldgs., Inc.
6.00% due 2/26/01 2,766,383
1,250,000 Paine Webber Group, Inc.
6.45% due 12/1/03 1,223,218
------------
6,599,140
- -----------------------------------------------------------
FOOD AND BEVERAGE -- 7.7% 1,300,000 Kroger Co.
6.80% due 12/15/18 1,184,600
1,500,000 Fred Meyer, Inc.
7.45% due 3/1/08 1,509,504
1,400,000 Pepsi Bottling Group, Inc.
7.00% due 3/1/29 1,308,702
1,600,000 Safeway, Inc.
5.875% due 11/15/01 1,575,544
1,300,000 Joseph E. Seagram & Sons, Inc.
7.60% due 12/15/28 1,253,899
1,250,000 Joseph E. Seagram & Sons, Inc.
6.40% due 12/15/03 1,230,053
2,800,000 Joseph E. Seagram & Sons, Inc.
6.25% due 12/15/01 2,778,768
------------
10,841,070
- -----------------------------------------------------------
HOMEBUILDERS -- 0.9%
1,250,000 Marlin Water Trust/Cap.+
7.09% due 12/15/01 1,255,185
- -----------------------------------------------------------
HOSPITAL-SUPPLIES -- 1.1%
1,600,000 Mallinckrodt, Inc.+
6.30% due 3/15/11 1,580,139
- -----------------------------------------------------------
INSURANCE -- 0.9%
1,300,000 Conseco, Inc.
6.40% due 6/15/01 1,270,347
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
32
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 1.9%
$1,250,000 Federated Department Stores, Inc.
6.125% due 9/1/01 $ 1,241,518
1,400,000 Saks, Inc.
7.25% due 12/1/04 1,402,944
------------
2,644,462
- -----------------------------------------------------------
MERCHANDISING-DRUGS -- 1.1%
1,500,000 Rite Aid Corp.
6.70% due 12/15/01 1,493,519
- -----------------------------------------------------------
MERCHANDISING-MASS -- 0.8%
1,250,000 Aramark Svcs., Inc.
6.75% due 8/1/04 1,212,799
- -----------------------------------------------------------
MISCELLANEOUS-CAPITAL GOODS -- 0.9%
1,250,000 Ikon Capital, Inc.
6.73% due 6/15/01 1,238,572
- -----------------------------------------------------------
MISCELLANEOUS-FINANCIAL -- 1.1%
1,600,000 Comdisco, Inc.
6.13% due 8/1/01 1,586,102
- -----------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 2.6%
1,400,000 Occidental Petroleum Corp.
8.45% due 2/15/29 1,458,796
1,000,000 Occidental Petroleum Corp.
7.65% due 2/15/06 1,006,328
1,250,000 Occidental Petroleum Corp.
7.375% due 11/15/08 1,230,882
------------
3,696,006
- -----------------------------------------------------------
POLLUTION CONTROLS -- 1.1%
1,600,000 USA Waste Svcs., Inc.
6.125% due 7/15/01 1,589,266
- -----------------------------------------------------------
RAILROADS -- 2.0%
1,600,000 CSX Corp.
7.25% due 5/1/04 1,622,698
1,350,000 Union Pacific Corp.
6.625% due 2/1/29 1,182,623
------------
2,805,321
- -----------------------------------------------------------
TELECOMMUNICATIONS -- 1.9%
1,500,000 AT & T Corp.
6.50% due 3/15/29 1,349,079
1,500,000 Lucent Technologies, Inc.
6.45% due 3/15/29 1,370,628
------------
2,719,707
- -----------------------------------------------------------
UTILITIES-ELECTRIC -- 1.7%
1,000,000 Cinergy Corp.
6.125% due 4/15/04 971,829
1,400,000 Niagara Mohawk Power Corp.
6.875% due 3/1/01 1,411,519
------------
2,383,348
- -----------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $62,509,751) 60,917,323
- -----------------------------------------------------------
===========================================================
COLLATERALIZED MORTGAGE OBLIGATION -- 1.0%
===========================================================
$1,437,330 GE Capital Mortgage Svcs., Inc.
1996-3A7 7.00% due 3/25/26
(COST $1,439,327) $ 1,423,777
- -----------------------------------------------------------
===========================================================
MORTGAGE PASS-THROUGHS -- 25.6%
===========================================================
Principal
Amount Value
- -----------------------------------------------------------
FHLMC
$7,650,000 6.50%, (30 yr. TBA)(a) $ 7,398,988
89,211 7.00%, 8/1/08 89,799
FNMA
4,900,000 6.50%, (30 yr. TBA)(a) 4,736,154
10,500,000 7.00%, (30 yr. TBA)(a) 10,388,438
4,300,000 7.50%, (30 yr. TBA)(a) 4,343,000
2,079,994 6.00%, 1/1/29 1,958,585
670,392 6.50%, 7/1/11 661,596
1,769,131 6.50%, 2013 1,745,284
1,949,121 6.50%, 11/1/28 1,896,252
63,163 7.00%, 2/1/09 63,540
374,297 7.00%, 2012 376,023
30,423 7.00%, 8/1/23 30,178
30,787 7.00%, 10/1/27 30,511
527,502 7.00%, 12/1/28 522,464
23,609 7.50%, 7/1/12 23,718
3,864 7.50%, 5/1/27 3,911
GNMA
1,995,795 6.50%, 3/1/13 1,923,887
- -----------------------------------------------------------
TOTAL MORTGAGE PASS THROUGHS
(COST $36,928,542) 36,192,328
- -----------------------------------------------------------
===========================================================
U.S. GOVERNMENT -- 15.9%
===========================================================
U.S. Treasury Bonds
$3,000,000 5.25%, 11/15/28 $ 2,655,000
270,000 6.125%, 11/15/27 267,469
U.S. Treasury Notes
1,500,000 4.625%, 11/30/00 1,483,125
3,450,000 4.75%, 11/15/08 3,166,455
1,350,000 5.25%, 5/31/01 1,343,250
1,100,000 5.25%, 8/15/03 1,080,750
1,600,000 5.25%, 5/15/04 1,572,000
2,000,000 5.50%, 5/15/09 1,953,126
2,500,000 6.125%, 8/15/07 2,527,345
3,500,000 6.50%, 8/15/05 3,608,283
1,500,000 6.625%, 4/30/02 2,818,750
- -----------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $22,656,815) 22,475,553
- -----------------------------------------------------------
===========================================================
COMMERCIAL PAPER -- 21.5%
===========================================================
AUTOMOTIVE -- 3.1%
$4,351,000 General Motors Acceptance Corp.
5.10% due 8/16/99(a) $ 4,330,659
- -----------------------------------------------------------
BANKS -- 1.7%
2,381,000 Dresdner US Finance
4.86% due 7/14/99(a) 2,376,821
- -----------------------------------------------------------
CONGLOMERATES -- 1.4%
2,000,000 BTR Dunlop Finance, Inc.
4.86% due 7/14/99(a) 1,996,490
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
33
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued
- -----------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------
FINANCIAL -- 5.4%
$3,298,000 Associates Corp. of North America
4.83% due 7/14/99(a) $ 3,292,248
2,275,000 Goldman Sachs Group LP
4.82% due 7/14/99 2,271,040
2,000,000 Lehman Brothers Hldgs., Inc.
4.90% due 7/14/99(a) 1,996,461
------------
7,559,749
- -----------------------------------------------------------
FOOD AND BEVERAGE -- 2.8%
3,972,000 Cadbury Schweppes Money Mgt. PLC
4.90% due 7/1/99(b) 3,972,000
- -----------------------------------------------------------
MINING -- 3.3%
4,736,000 Rio Tinto America, Inc.
5.00% due 7/14/99(a) 4,727,449
- -----------------------------------------------------------
TELECOMMUNICATIONS -- 3.8%
5,400,000 Lucent Technologies, Inc.
4.81% due 7/14/99(b) 5,390,621
- -----------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $30,353,789) 30,353,789
- -----------------------------------------------------------
===========================================================
REPURCHASE AGREEMENT -- 4.3%
===========================================================
$6,081,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/99, maturity
value $6,081,823 at 4.87%
due 7/1/99 (collateralized by
Federal Home Loan Bank Notes
$6,210,000, 6.13% due 5/10/04) $ 6,081,000
- -----------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $6,081,000) 6,081,000
- -----------------------------------------------------------
TOTAL INVESTMENTS--124.2%
(COST $178,386,811) 175,526,584
PAYABLES FOR REVERSE REPURCHASE
AGREEMENTS(b)--(2.8%) (3,971,250)
PAYABLES FOR MORTGAGE PASS-THROUGHS
DELAYED DELIVERY SECURITIES(a)--(19.0%) (26,866,580)
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS--(2.4%) (3,348,189)
- -----------------------------------------------------------
NET ASSETS -- 100.0% $141,340,565
- -----------------------------------------------------------
(a) Commercial paper with the total amount of $26,381,782 is segregated to cover
forward mortgage purchases.
(b) Commercial paper in the amount of $3,972,000 is segregated to cover reverse
repurchase agreements.
- --------------------------------------------------------------------------------
See notes to financial statements.
34
<PAGE>
[_] THE GUARDIAN HIGH YIELD BOND FUND
=====================================================================
FIXED INCOME -- 90.6%
- ---------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- ---------------------------------------------------------------------
AEROSPACE -- 4.0%
$1,500,000 K & F Ind., Inc.
Sr. Sub. Nt. Ser. B
9.25% due 10/15/07 B3/B- $ 1,473,750
1,000,000 Kellstrom Ind., Inc.
Sub. Nt. Conv.
5.50% due 6/15/03 B3/B- 818,750
-----------
2,292,500
- ---------------------------------------------------------------------
BROADCASTING -- 1.8%
1,000,000 Capstar Broadcasting Partners
Sr. Sub. Nt.
9.25% due 7/1/07 B2/B- 1,015,000
- ---------------------------------------------------------------------
CABLE AND WIRELESS VIDEO -- 3.6%
1,000,000 CSC Hldgs., Inc.
Sr. Sub. Deb.
9.875% due 2/15/13 B1/BB- 1,067,500
1,000,000 Pegasus Communications Corp.
Sr. Nt.
9.75% due 12/1/06 B3/B- 1,000,000
-----------
2,067,500
- ---------------------------------------------------------------------
CHEMICALS -- 1.8%
1,000,000 Lyondell Chemical Co.
Sr. Sub. Nt.+
10.875% due 5/1/09 B2/B+ 1,040,000
- ---------------------------------------------------------------------
CONSUMER NON-DURABLES -- 8.7%
1,000,000 Bell Sports, Inc.
Sr. Sub. Nt.
11.00% due 8/15/08 B3/B- 995,000
1,000,000 Ekco Group, Inc.
Sr. Nt. Ser. B
9.25% due 4/1/06 Ba3/B+ 980,000
2,000,000 Pillowtex Corp.
Sr. Sub. Nt.
10.00% due 11/15/06 B2/B+ 1,980,000
1,000,000 Revlon Consumer Prods. Corp.
Sr. Nt.
9.00% due 11/1/06 B2/B 985,000
-----------
4,940,000
- ---------------------------------------------------------------------
DIVERSIFIED MEDIA -- 6.9%
1,000,000 American Media Operations
Sr. Sub. Nt.+
10.25% due 5/1/09 B2/B- 1,007,500
1,000,000 Cinemark USA, Inc.
Sr. Sub. Nt. Ser. B
9.625% due 8/1/08 B2/B 980,000
1,000,000 Fox Liberty Networks LLC
Sr. Nt.
8.875% due 8/15/07 B1/B 1,037,500
1,000,000 Regal Cinemas, Inc.
Sr. Sub. Nt.
8.875% due 12/15/10 B3/B 920,000
-----------
3,945,000
- ---------------------------------------------------------------------
ENERGY -- 6.8%
1,000,000 Houston Exploration Co.
Sr. Sub. Nt. Ser. B
8.625% due 1/1/08 B2/B 980,000
1,000,000 Ocean Energy, Inc.
Sr. Sub. Nt. Ser. B
8.375% due 7/1/08 B1/BB- 970,000
1,000,000 Offshore Logistics, Inc.
Sub. Nt. Conv.
6.00% due 12/15/03 B2/B+ 855,000
- ---------------------------------------------------------------------
+ Rule 144A restricted security.
- ---------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- ---------------------------------------------------------------------
$1,000,000 RBF Finance
Sr. Nt.+
11.375% due 3/15/09 Ba3/BB- $ 1,035,000
-----------
3,840,000
- ---------------------------------------------------------------------
FINANCIAL -- 1.8% 1,000,000 AmeriCredit Corp.
Sr. Nt.+
9.875% due 4/15/06 Ba1/B+ 1,030,000
- ---------------------------------------------------------------------
FOOD AND DRUG -- 0.6%
1,000,000 Jitney Jungle Stores America
Sr. Sub. Nt.
10.375% due 9/15/07 Caa1/B- 360,000
- ---------------------------------------------------------------------
FOOD AND TOBACCO -- 1.6%
1,000,000 CKE Restaurants, Inc.
Sr. Sub. Nt.
9.125% due 5/1/09 B1/B 925,000
- ---------------------------------------------------------------------
FOREST PRODUCTS AND CONTAINERS -- 0.9%
500,000 Packaging Corp. America
Sr. Sub. Nt.+
9.625% due 4/1/09 B3/B 507,500
- ---------------------------------------------------------------------
GAMING AND LEISURE -- 11.9%
1,000,000 Coast Hotels & Casinos, Inc.
Sr. Sub. Nt.+
9.50% due 4/1/09 B3/B- 962,500
1,000,000 Hard Rock Hotel, Inc.
Sr. Sub. Nt. Ser. B
9.25% due 4/1/05 B3/B- 942,500
1,000,000 HMH Properties, Inc.
Sr. Nt. Ser. C
8.45% due 12/1/08 Ba2/BB 950,000
1,500,000 Premier Parks, Inc.
Sr. Nt.
9.75% due 6/15/07 B3/B- 1,515,000
1,000,000 Signature Resorts, Inc.
Sub. Nt. Conv.
5.75% due 1/15/07 Caa1/B 682,500
750,000 Vail Resorts, Inc.
Sr. Sub. Nt.+
8.75% due 5/15/09 B1/B 729,375
1,000,000 Waterford Gaming LLC
Sr. Nt.+
9.50% due 3/15/10 B1/B+ 992,500
-----------
6,774,375
- ---------------------------------------------------------------------
HEALTH CARE -- 10.3%
1,000,000 Alliance Imaging, Inc.
Sr. Sub. Nt.
9.625% due 12/15/05 B3/B- 957,500
700,000 Concentra Mgd. Care, Inc.
Sub. Nt. Conv.+
4.50% due 3/15/03 B2/NR 660,625
1,000,000 Fresenius Medical Care
Capital Trust
9.00% due 12/01/06 Ba3/B+ 990,000
750,000 Hudson Respiratory Care, Inc.
Sr. Sub. Nt.
9.125% due 4/15/08 B3/B- 626,250
1,000,000 Rural/Metro Corp.
Sr. Nt.
7.875% due 3/15/08 Ba3/BB- 905,000
1,000,000 Tenet Health Care Corp.
Sr. Sub. Nt.
8.125% due 12/1/08 Ba3/BB- 945,000
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Unaudited.
35
<PAGE>
THE GUARDIAN HIGH YIELD BOND FUND
Schedule of Investments (Continued)
- ----------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- ----------------------------------------------------------------------
$1,000,000 Total Renal Care Hldgs., Inc.
Sub. Nt. Conv.+
7.00% due 5/15/09 B1/B $ 816,250
-----------
5,900,625
- ---------------------------------------------------------------------
HOUSING -- 1.6%
1,000,000 Building Materials Corp.
Sr. Nt. Ser. B
7.75% due 7/15/05 Ba3/BB 935,000
- ---------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 3.3%
1,000,000 Advanced Micro Devices, Inc.
Sub. Nt. Conv.
6.00% due 5/15/05 B3/CCC+ 756,250
1,000,000 Pierce Leahy Corp.
Sr. Sub. Nt.
11.125% due 7/15/06 B3/B- 1,085,000
-----------
1,841,250
- ---------------------------------------------------------------------
MANUFACTURING -- 1.7%
1,000,000 Fisher Scientific Int'l., Inc.
Sr. Sub. Nt.
9.00% due 2/1/08 B3/B- 950,000
- ---------------------------------------------------------------------
SERVICES -- 1.7%
1,000,000 Anthony Crane Rentals
Sr. Nt.
10.375% due 8/1/08 B3/B 965,000
- ---------------------------------------------------------------------
TELECOMMUNICATIONS -- 12.4%
1,000,000 GST Network Funding, Inc.
Sr. Disc. Nt.+
4.094% due 5/1/08 NR/NR 565,000
1,000,000 Intermedia Comm., Inc.
Sr. Nt. Ser. B
8.60% due 6/1/08 B2/B 920,000
1,000,000 KPNQwest B.V.
Sr. Nt.+
8.125% due 6/1/09 Ba1/BB 975,000
1,000,000 Level 3 Comm., Inc.
Sr. Nt.
9.125% due 5/1/08 B3/B 982,500
200,000 MindSpring Enterprises, Inc.
Sub. Nt. Conv.
5.00% due 4/15/06 B3/B- 189,250
1,000,000 Qwest Comm. Int'l., Inc.
Sr. Disc. Nt.
7.99% due 10/15/07 Ba1/BB+ 780,000
1,000,000 Rhythms NetConnections, Inc.
Sr. Nt.+
12.75% due 4/15/09 B3/CCC+ 935,000
1,000,000 Telewest Communications
Sr. Disc. Nt.+
3.634% due 4/15/09 B1/B+ 666,250
1,000,000 Time Warner Telecom.
Sr. Nt.
9.75% due 7/15/08 B2/B- 1,025,000
-----------
7,038,000
- ---------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 9.2%
1,000,000 Clearnet Communications, Inc.
Sr. Disc. Nt.
1.546% due 12/15/05 B3/NR 915,000
1,500,000 NEXTEL Communications, Inc.
Sr. Disc. Nt.
3.707% due 10/31/07 B2/B- 1,046,250
- ---------------------------------------------------------------------
+ Rule 144A restricted security.
- ----------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- ----------------------------------------------------------------------
$1,000,000 NEXTLINK Communications, Inc.
Sr. Nt.
10.75% due 6/1/09 B3/B $ 1,025,000
500,000 Orbcomm Global LP
Sr. Nt. Ser. B
14.00% due 8/15/04 Caa1/B- 485,000
2,000,000 Telecorp PCS, Inc.
Sr. Sub. Disc. Nt.+
4.308% due 4/15/09 B3/NR 1,105,000
1,000,000 Triton PCS, Inc.
Sr. Sub. Disc. Nt.
5.215% due 5/1/08 B3/CCC+ 642,500
-----------
5,218,750
- ---------------------------------------------------------------------
TOTAL FIXED INCOME
(COST $53,411,143) 51,585,500
- ---------------------------------------------------------------------
=====================================================================
REPURCHASE AGREEMENT -- 7.6%
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
$4,325,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/99, maturity
value $4,325,585 at 4.87%
due 7/1/99 (collateralized
by Federal National Mortgage
Assn. Notes, $4,415,000,
5.125% due 10/15/03 $ 4,325,000
- ---------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $4,325,000) 4,325,000
- ---------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.2%
(COST $57,736,143) 55,910,500
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 1.8% 1,003,942
- ---------------------------------------------------------------------
NET ASSETS -- 100.0% $56,914,442
- ---------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Unaudited. See notes to financial statements.
36
<PAGE>
O THE GUARDIAN TAX-EXEMPT FUND
===========================================================
MUNICIPAL BONDS -- 97.9%
===========================================================
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------
ALABAMA -- 1.3%
$1,300,000 Columbia, AL Indl.
Pol. Control Ser. D(1),
3.85% due 10/1/22 VMIG1/A1 $ 1,300,000
- -----------------------------------------------------------
CALIFORNIA -- 6.1%
1,500,000 California St. Public
Service Ser. A,
5.25% due 10/1/17 A2/A 1,482,540
1,000,000 Fresno, CA Swr. Rev.,
5.25% due 9/1/19 Aaa/AAA 999,930
1,500,000 Los Angeles, CA Regl.
Airport Lease Rev.(1),
3.85% due 12/1/25 NR/A1+ 1,500,000
2,000,000 Northern CA
Transmission Rev.,
6.50% due 5/1/16 Aaa/AAA 2,142,140
------------
6,124,610
- -----------------------------------------------------------
COLORADO -- 1.9%
1,930,000 Boulder Valley, CO
Sch. Dist. G.O.,
5.25% due 12/1/17 Aa3/A 1,888,293
- -----------------------------------------------------------
CONNECTICUT -- 1.5%
1,500,000 Connecticut St.
G.O. Ser. B,
5.25% due 3/15/11 AA3/AA 1,514,040
- -----------------------------------------------------------
FLORIDA -- 7.2%
1,000,000 Florida St. Board of Ed.
Cap. Outlay G.O.,
6.70% due 6/1/22 Aaa/AAA 1,056,900
1,500,000 Florida St. Div. Bd.
Fin. Dept.,
5.25% due 7/1/12 Aaa/AAA 1,513,920
2,500,000 Jacksonville, FL
Elec. Auth.,
5.60% due 10/1/27 Aa3/AA- 2,525,075
2,000,000 Sunrise, FL Prerefunded
Utilities Sys. Rev.,
5.75% due 10/1/06 Aaa/AAA 2,141,680
------------
7,237,575
- -----------------------------------------------------------
GEORGIA -- 2.0%
1,840,000 Georgia St. G.O Ser. B,
6.10% due 3/1/05 Aaa/AAA 1,988,230
- -----------------------------------------------------------
ILLINOIS -- 3.0%
3,000,000 Illinois Health Fac.
Auth. Rev.,
3.30% due 8/1/25(1) Aaa/AAA 3,000,000
- -----------------------------------------------------------
MASSACHUSETTS -- 3.8%
2,000,000 Massachusetts Bay Trans.
Auth. Ser. B,
5.125% due 3/1/15 Aa3/AA- 1,962,940
2,000,000 Massachusetts St.
Water Res. Auth Ser. D,
5.00% due 8/1/24 Aaa/AAA 1,862,180
------------
3,825,120
- -----------------------------------------------------------
MICHIGAN -- 1.5%
1,500,000 Wayne St. Univ, MI, Revs.,
5.25% due 11/15/19 NR/AAA 1,456,095
- -----------------------------------------------------------
(1) Variable rate demand notes.
- -----------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------
MINNESOTA -- 3.0%
$1,000,000 Minnesota Pub. Facs.
Water Poll. Control Rev.,
5.00% due 3/1/12 Aaa/AAA $ 990,690
2,000,000 Minnesota Pub. Facs.
Water Poll. Control Rev.,
5.125% due 3/1/15 Aaa/AAA 1,975,500
------------
2,966,190
- -----------------------------------------------------------
MISSOURI -- 4.0%
2,420,000 Missouri St. Environmental
Energy Rev.,
5.00% due 1/1/20 Aa1/NR 2,309,551
1,485,000 St. Louis, MO Reg. Con.
Prerefunded Ser. C,
7.90% due 8/15/03 Aaa/NR 1,678,302
------------
3,987,853
- -----------------------------------------------------------
NEW JERSEY -- 2.2%
1,600,000 New Jersey Econ. Dev.
Nat. Gas Rev.,(1)
3.80% due 8/1/30 Aaa/AAA 1,600,000
500,000 New Jersey St. Transit
Auth. Ser. A,
6.50% due 6/15/05 Aaa/AAA 549,700
------------
2,149,700
- -----------------------------------------------------------
NEW MEXICO -- 1.5%
1,500,000 Albuquerque, NM
Gross Rcpts Tax Rev.,
5.25% due 7/1/16 A1/AA 1,486,680
- -----------------------------------------------------------
NEW YORK -- 17.6%
2,000,000 Long Island Power Auth., NY
Elec. System Rev.,
5.125% due 12/1/22 Aaa/AAA 1,901,840
1,500,000 Long Island Power Auth., NY
Elec. System Rev.,
5.125% due 4/1/12 Aaa/NR 1,493,640
1,500,000 New York City Muni. Wtr.
Fin. Auth.,
5.625% due 6/15/19 A2/A- 1,513,800
1,000,000 New York St. Dorm.
Auth. Rev. Ref. City Univ.,
5.75% due 7/1/12 Aaa/AAA 1,064,110
2,000,000 New York St. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
6.00% due 5/15/08 A3/A- 2,146,020
1,500,000 New York St. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.00% due 5/15/15 A3/A- 1,436,520
1,000,000 New York St. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.00% due 5/15/17 A3/A- 947,880
1,760,000 New York St. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.25% due 5/15/12 Aaa/AAA 1,771,475
2,000,000 New York St. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.25% due 7/1/15 Aaa/AAA 1,995,700
500,000 New York St. G.O. Ser. A,
5.875% due 3/15/15 A2/A 521,890
2,000,000 New York St. Thruway
Auth. Svc. Contract,
5.00% due 1/1/25 Aa3/AA- 1,853,460
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Unaudited.
37
<PAGE>
THE GUARDIAN TAX-EXEMPT FUND
Schedule of Investments (Continued)
- -----------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------
$1,000,000 New York St. Thruway
Auth. Svc. Contract,
5.75% due 4/1/16 Baa1/BBB+ $ 1,016,370
------------
17,662,705
- -----------------------------------------------------------
NORTH CAROLINA -- 2.0%
2,000,000 Charlotte, NC G.O.
5.25% due 2/1/20 Aaa/AAA 1,985,000
- -----------------------------------------------------------
OHIO -- 2.6%
1,000,000 Cleveland, OH
Parking Fac. Rev.,
5.50% due 9/15/16 Aaa/AAA 1,020,890
500,000 Columbus, OH
Water System Rev.,
6.10% due 11/1/03 Aa3/AA- 530,405
1,000,000 Ohio St. Bldg. Auth. Disalle
Gov't. Center Ser. A,
6.00% due 10/1/05 Aa3/AA- 1,074,510
------------
2,625,805
- -----------------------------------------------------------
OKLAHOMA -- 5.4%
1,270,000 Grand River Dam
Auth., OK,
6.25% due 6/1/11 Aaa/AAA 1,412,253
2,000,000 Oklahoma St. Tpk.
Second Sr. Ser. B,
5.00% due 1/1/15 Aaa/AAA 2,023,820
2,000,000 Oklahoma St. Tpk.
Second Sr. Ser. A,
5.25% due 1/1/28 Aaa/AAA 1,982,460
------------
5,418,533
- -----------------------------------------------------------
PENNSYLVANIA -- 7.8%
2,000,000 Allegheny Cnty, PA
5.25% due 10/1/12 Aaa/AAA 2,009,260
2,000,000 Pennsylvania St. G.O.
Third Ser.,
4.50% due 12/1/07 Aa3/AA 1,962,900
2,060,000 Pennsylvania St. Tpk.
Comm. Oil Ser. A,
5.00% due 12/1/23 Aaa/AAA 1,940,891
2,000,000 Southeastern, PA
Transit Auth. Ser. B,
5.00% due 3/1/20 Aaa/AAA 1,889,120
------------
7,802,171
- -----------------------------------------------------------
SOUTH CAROLINA -- 1.0%
1,000,000 South Carolina Trans.
Infrastructure Ser. A,
5.00% due 10/1/03 Aaa/AAA 1,024,450
- -----------------------------------------------------------
TENNESSEE -- 2.9%
2,000,000 Shelby Cnty., TN G.O.
Ref. Ser. B,
5.50% due 6/1/24 Aa3/AA+ 1,870,300
1,000,000 Shelby Cnty., TN
Ref. Ser. B,
5.50% due 8/1/09 Aa2/AA+ 1,046,390
------------
2,916,690
- -----------------------------------------------------------
TEXAS -- 14.6%
2,225,000 Austin, TX Indpt.
Prerefunded Sch. Dist. G.O.,
5.75% due 8/1/06 Aaa/AAA 2,364,062
2,000,000 Brazos River Auth.
TX Rev.,
5.125% due 11/1/20 Aaa/AAA 1,911,200
- -----------------------------------------------------------
- -----------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------
$1,050,000 Bryan, TX Indpt.
Sch. Dist. G.O.,
5.50% due 2/15/17 Aaa/NR $ 1,060,385
1,200,000 Harris Cnty., TX Health
Fac. Rev.(1),
3.85% due 2/15/27 NR/AA 1,200,000
1,000,000 Houston, TX Prerefunded
Water & Sewer System Ser. A,
6.20% due 12/1/05 Aaa/AAA 1,087,820
3,400,000 North Central, TX
Health Fac. Dev.(1),
3.85% due 12/1/15 Aaa/AAA 3,400,000
2,000,000 San Antonio, TX
Elec. & Gas Rev. Ser. A,
5.25% due 2/1/16 Aa1/AA 1,969,480
555,000 Texas St. G.O. Prerefunded
Water Dev. Brd.,
6.50% due 8/1/05 Aa2/AA 610,722
1,000,000 University, TX Univ. Revs.
Fing. System Ser. D,
4.75% due 8/15/04 Aa1/AAA 1,015,810
------------
14,619,479
- -----------------------------------------------------------
WASHINGTON -- 5.0%
2,000,000 King Cnty., WA G.O.,
5.00% due 12/1/11 Aa1/AA+ 1,987,120
3,000,000 Port Seattle, WA G.O.,
3.30% due 1/1/05 Aa1/AA+ 3,000,000
------------
4,987,120
- -----------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $99,949,816) 97,966,339
- -----------------------------------------------------------
TOTAL INVESTMENTS -- 97.9%
(COST $99,949,816) 97,966,339
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES--2.1% 2,118,530
- -----------------------------------------------------------
NET ASSETS--100.0% $100,084,869
- -----------------------------------------------------------
GLOSSARY:
G.O. -- General Obligation.
(1) Variable rate demand notes.
- --------------------------------------------------------------------------------
* Unaudited. See notes to financial statements.
38
<PAGE>
O THE GUARDIAN CASH MANAGEMENT FUND
=================================================================
COMMERCIAL PAPER - 98.7%
=================================================================
Principal Maturity
Amount Date Value
- -----------------------------------------------------------------
FINANCIAL -- 18.2%
FINANCE COMPANIES -- 13.6%
$ 13,000,000 Associates First Capital
4.84% 7/22/99 $ 12,963,297
12,000,000 Bear Stearns Cos., Inc.
4.83% 7/12/99 11,982,290
13,000,000 USAA Capital Corp.
5.00% 7/26/99 12,954,861
------------
37,900,448
- -----------------------------------------------------------------
INSURANCE -- 4.6%
13,000,000 American General Fin. Corp.
5.06% 8/3/99 12,939,702
- -----------------------------------------------------------------
TOTAL FINANCIAL 50,840,150
- -----------------------------------------------------------------
INDUSTRIAL -- 80.5%
AUTOMOTIVE -- 12.9%
12,000,000 DaimlerChrysler N.A. Hldgs. Corp.
4.90% 7/23/99 11,964,067
12,000,000 Ford Motor Credit Co.
4.83% 7/9/99 11,987,120
12,000,000 General Motors Acceptance Corp.
4.80% 7/13/99 11,980,800
------------
35,931,987
- -----------------------------------------------------------------
BEVERAGES -- 4.3%
12,000,000 Coca Cola Co.
4.76% 7/2/99 11,998,413
- -----------------------------------------------------------------
COMPUTER SYSTEMS -- 4.6%
13,000,000 IBM Credit Corp.
4.83% 7/19/99 12,968,605
- -----------------------------------------------------------------
CONGLOMERATES -- 8.9%
12,000,000 BTR Dunlop Fin., Inc.
4.81% 7/8/99 11,988,777
13,000,000 General Electric Cap. Corp.
4.86% 8/2/99 12,943,840
------------
24,932,617
- -----------------------------------------------------------------
CONTAINERS-METALS AND PLASTICS -- 4.7%
13,000,000 Sonoco Products Co.
5.80% 7/1/99 13,000,000
- -----------------------------------------------------------------
DRUGS -- 4.3%
12,000,000 Pfizer, Inc.
4.88% 7/15/99 11,977,227
- -----------------------------------------------------------------
MACHINERY AND EQUIPMENT -- 6.4%
7,000,000 John Deere Credit Group PLC
4.82% 7/6/99 6,995,314
11,000,000 Xerox Capital Europe PLC
5.00% 7/27/99 10,960,277
------------
17,955,591
- -----------------------------------------------------------------
METALS -- 8.7%
12,000,000 Alcoa, Inc.
4.84% 8/4/99 11,945,147
12,445,000 Rio Tinto America, Inc.
4.81% 7/14/99 12,423,384
------------
24,368,531
- -----------------------------------------------------------------
OIL AND GAS SERVICES -- 3.8%
10,750,000 Motiva Enterprises
5.04% 8/5/99 10,697,325
- -----------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 4.3%
12,000,000 Shell Oil Co.
4.85% 8/3/99 11,946,650
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Principal Maturity
Amount Date Value
- -----------------------------------------------------------------
TELECOMMUNICATIONS -- 8.7%
$ 12,500,000 Ameritech Capital Funding Corp.
4.97% 7/21/99 $ 12,465,486
12,000,000 Telstra Corp. Ltd.
5.05% 8/19/99 11,917,516
------------
24,383,002
- -----------------------------------------------------------------
UTILITIES-ELECTRIC -- 8.9%
13,000,000 FPL Group Capital, Inc.
5.00% 7/6/99 12,990,972
12,000,000 Virginia Electric & Power Co.
4.84% 7/7/99 11,990,320
------------
24,981,292
- -----------------------------------------------------------------
TOTAL INDUSTRIAL 225,141,240
- -----------------------------------------------------------------
Total Commercial Paper
(COST $275,981,390) 275,981,390
- -----------------------------------------------------------------
=================================================================
REPURCHASE AGREEMENT -- 1.3%
- -----------------------------------------------------------------
Principal
Amount Value
- -----------------------------------------------------------------
$ 3,569,000 State Street Bank & Trust Co.
repurchase agreement,
dated 6/30/99, maturity
value $3,569,483 at 4.87%
due 7/1/99 (collateralized
by $3,645,000 Federal National
Mtg. Assn. Notes, 5.62% due
3/15/01) $ 3,569,000
- -----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $3,569,000) 3,569,000
- -----------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $279,550,390) 279,550,390
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.0% 105,579
- -----------------------------------------------------------------
NET ASSETS -- 100.0% $279,655,969
- -----------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
39
<PAGE>
================================================================================
FINANCIAL STATEMENTS
================================================================================
|_| THE PARK AVENUE PORTFOLIO
================================================================================
STATEMENTS OF ASSETS AND LIABILITIES
================================================================================
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE
FUND SMALL CAP
FUND
-------------------------------------
<S> <C> <C>
ASSETS
Investments, at identified cost*............................................... $2,490,871,622 $ 96,178,008
=====================================
Investments, at market......................................................... 3,498,042,362 111,648,994
Cash........................................................................... 696 549
Foreign Currency (cost $1,849,089 GBGIF and $913,381
GBGEMF, respectively)......................................................... -- --
Receivable for securities sold................................................. 22,196,010 2,823,498
Receivable for fund shares sold................................................ 3,808,000 42,246
Dividends receivable .......................................................... 2,139,684 46,210
Interest receivable ........................................................... 18,341 987
Deferred organization expenses--Note 8......................................... -- 27,244
Dividend reclaim receivable.................................................... -- --
-------------------------------------
TOTAL ASSETS................................................................ 3,526,205,093 114,589,728
-------------------------------------
LIABILITIES
Payable for fund shares redeemed............................................... 61,936,172 877,192
Payable for securities purchased............................................... 9,554,507 1,175,839
Accrued expenses............................................................... 531,771 23,554
Payable for forward mortgage securities--Note 7................................ -- --
Payable for reverse repurchase agreements--Note 6.............................. -- --
Distributions payable.......................................................... -- --
Due to affiliates.............................................................. 7,393,503 390,109
-------------------------------------
TOTAL LIABILITIES........................................................... 79,415,953 2,466,694
-------------------------------------
NET ASSETS.................................................................. $3,446,789,140 $112,123,034
=====================================
</TABLE>
* Includes repurchase agreements.
See notes to financial statements.
40
<PAGE>
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
ASSET BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT HIGH YIELD TAX-EXEMPT CASH
ALLOCATION INTERNATIONAL EMERGING QUALITY BOND FUND MANAGEMENT
FUND FUND MARKETS FUND BOND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$228,457,728 $100,082,192 $19,394,527 $178,386,811 $57,736,143 $ 99,949,816 $279,550,390
====================================================================================================================================
248,166,665 122,362,832 22,106,758 175,526,584 55,910,500 97,966,339 279,550,390
936 672 275 728 243 83,004 284,359
-- 1,826,630 891,371 -- -- -- --
78,848 -- -- 9,566,305 -- 3,018,398 --
1,204,298 1,245,359 5,398 1,026,984 81,420 100 4,923,106
228,762 128,713 90,121 -- -- -- --
3,266 534 91 1,467,880 1,046,142 1,160,553 483
-- -- 14,935 -- -- -- --
-- 153,399 2,179 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
249,682,775 125,718,139 23,111,128 187,588,481 57,038,305 102,228,394 284,758,338
- ------------------------------------------------------------------------------------------------------------------------------------
103,833 74,547 -- 1,205,788 7,404 -- 3,534,149
96,639 -- 120,924 13,828,709 -- 1,968,411 --
30,049 55,128 23,052 -- -- -- 52,779
-- -- -- 26,866,580 -- -- --
-- -- -- 3,971,250 -- -- --
-- -- -- 91,759 1,485 5,744 916,122
353,595 484,276 144,909 283,830 114,974 169,370 599,319
- ------------------------------------------------------------------------------------------------------------------------------------
584,116 613,951 288,885 46,247,916 123,863 2,143,525 5,102,369
- ------------------------------------------------------------------------------------------------------------------------------------
$249,098,659 $125,104,188 $22,822,243 $141,340,565 $56,914,442 $100,084,869 $279,655,969
====================================================================================================================================
</TABLE>
41
<PAGE>
|_| THE PARK AVENUE PORTFOLIO
================================================================================
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
================================================================================
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE
FUND SMALL CAP
FUND
--------------------------------------
<S> <C> <C>
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par.............................................. $ 630,270 $ 89,293
Additional paid-in capital......................................................... 2,219,615,443 115,877,573
Undistributed/(overdistributed) net investment income.............................. 362,781 (386,106)
Accumulated net realized gain/(loss) on investments and foreign
currency related transactions..................................................... 219,009,906 (18,928,712)
Net unrealized appreciation/(depreciation) of investments
and foreign currency related transactions......................................... 1,007,170,740 15,470,986
--------------------------------------
NET ASSETS...................................................................... $3,446,789,140 $112,123,034
======================================
NET ASSETS
Class A........................................................................... $3,014,293,568 $ 93,666,815
Class B........................................................................... $ 432,495,572 $ 18,456,219
SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE
Class A........................................................................... 55,056,860 7,435,574
Class B........................................................................... 7,970,174 1,493,762
NET ASSET VALUE PER SHARE
Class A........................................................................... $54.75 $12.60
Class B........................................................................... $54.26 $12.36
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)*......................................... $57.33 $13.19
</TABLE>
* 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.
42
<PAGE>
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
ASSET BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT HIGH YIELD TAX-EXEMPT CASH
ALLOCATION INTERNATIONAL EMERGING QUALITY BOND FUND MANAGEMENT
FUND FUND MARKETS FUND BOND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 168,956 $ 66,595 $ 27,541 $ 147,721 $ 60,704 $ 102,661 $ 2,796,560
220,685,429 97,441,279 27,210,432 145,908,840 59,169,605 101,554,090 276,859,409
696,167 (483,744) (150,684) -- -- -- --
7,839,170 5,828,370 (6,938,212) (1,855,769) (490,224) 411,595 --
19,708,937 22,251,688 2,673,166 (2,860,227) (1,825,643) (1,983,477) --
- ------------------------------------------------------------------------------------------------------------------------------------
$249,098,659 $125,104,188 $22,822,243 $141,340,565 $56,914,442 $100,084,869 $279,655,969
====================================================================================================================================
$214,099,485 $113,646,672 $21,133,146 $141,340,565 $54,012,789 $100,084,869 $267,155,556
$ 34,999,174 $ 11,457,516 $ 1,689,097 N/A $ 2,901,653 N/A $ 12,500,413
14,513,102 6,033,791 2,541,085 14,772,060 5,760,734 10,266,125 267,155,556
2,382,465 625,678 213,056 N/A 309,713 N/A 12,500,413
$14.75 $18.84 $8.32 $9.57 $9.38 $9.75 $1.00
$14.69 $18.31 $7.93 N/A $9.37 N/A $1.00
$15.45 $19.73 $8.71 $10.02 $9.82 $10.21 N/A**
</TABLE>
43
<PAGE>
|_| THE PARK AVENUE PORTFOLIO
================================================================================
STATEMENTS OF OPERATIONS
================================================================================
Six Months Ended June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE
FUND SMALL CAP
FUND
--------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends.......................................................................... $ 14,925,877 $ 366,291
Interest........................................................................... 3,570,753 137,677
Less: Foreign tax withheld......................................................... (7,178) --
--------------------------------
Total Income..................................................................... 18,489,452 503,968
--------------------------------
EXPENSES
Investment advisory fees--Note 2................................................... 8,376,545 446,312
Administrative fees--Class A--Note 2............................................... 2,495,121 125,165
Administrative fees--Class B--Note 2............................................... 501,380 23,605
12b-1 fees--Class B--Note 3........................................................ 1,504,139 70,816
Transfer agent fees--Class A....................................................... 1,165,804 96,995
Transfer agent fees--Class B....................................................... 316,718 31,761
Custodian fees..................................................................... 210,286 44,154
Printing expense................................................................... 147,164 7,166
Registration fees.................................................................. 50,000 20,000
Audit fees......................................................................... 10,250 8,750
Trustees' fees--Note 2............................................................. 9,500 9,500
Legal fees......................................................................... 6,250 1,000
Other.............................................................................. 350 350
Deferred organization expense--Note 8.............................................. -- 4,500
Interest expense on reverse repurchase agreements.................................. -- --
--------------------------------
Total Expenses.................................................................. 14,793,507 890,074
Less: Expenses assumed by investment adviser--Note 2............................... -- --
--------------------------------
Expenses Net of Reimbursement................................................... 14,793,507 890,074
--------------------------------
NET INVESTMENT INCOME/(LOSS)......................................................... 3,695,945 (386,106)
--------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on investments--Note 1.................................... 219,062,828 (2,847,850)
Net realized gains received from underlying funds.................................. -- --
Net realized gain/(loss) on foreign currencies--Note 1............................. -- --
Net change in unrealized appreciation/(depreciation) on investments--Note 4........ 42,160,468 (1,423,411)
Net change in unrealized depreciation from translation of other assets
and liabilities denominated in foreign currencies--Note 4......................... -- --
-------------------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES............................................................ 261,223,296 (4,271,261)
-------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS................................................................. $264,919,241 $(4,657,367)
===============================
</TABLE>
See notes to financial statements.
44
<PAGE>
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
ASSET BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT HIGH YIELD TAX-EXEMPT CASH
ALLOCATION INTERNATIONAL EMERGING QUALITY BOND FUND MANAGEMENT
FUND FUND MARKETS FUND BOND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,396,762 $1,209,789 $ 194,751 $ -- $ -- $ -- $ --
2,046,539 79,869 20,678 4,184,447 2,552,719 1,923,663 6,477,864
-- (138,297) (69,665) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
3,443,301 1,151,361 145,764 4,184,447 2,552,719 1,923,663 6,477,864
- ------------------------------------------------------------------------------------------------------------------------------
757,138 438,856 94,618 352,861 166,735 198,529 653,696
253,262 123,805 21,860 176,431 65,971 99,265 312,201
37,944 13,337 1,795 -- 3,502 -- 14,647
113,833 40,011 5,385 -- 10,505 -- 43,942
100,196 70,961 19,375 40,325 14,159 18,409 186,904
29,698 23,458 16,884 -- 13,874 -- 14,345
45,983 119,716 63,875 41,402 26,469 28,442 40,832
8,885 4,461 1,616 5,127 3,300 3,610 8,135
24,693 19,125 7,625 22,500 15,000 5,950 27,019
8,750 10,500 10,500 8,750 10,250 8,500 8,500
9,500 9,500 9,500 9,500 9,500 9,500 9,500
1,450 1,900 1,000 1,275 1,000 1,200 1,450
350 350 350 350 350 350 350
-- -- 2,650 -- -- -- --
-- -- -- 6,675 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
1,391,682 875,980 257,033 665,196 340,615 373,755 1,321,521
656,011 -- -- 93,815 117,105 56,826 210,237
- ------------------------------------------------------------------------------------------------------------------------------
735,671 875,980 257,033 571,381 223,510 316,929 1,111,284
- ------------------------------------------------------------------------------------------------------------------------------
2,707,630 275,381 (111,269) 3,613,066 2,329,209 1,606,734 5,366,580
- ------------------------------------------------------------------------------------------------------------------------------
9,181,925 5,930,254 (777,081) (1,747,608) (490,065) 411,601 --
2,128,175 -- -- -- -- -- --
-- (101,883) (17,310) -- -- -- --
(4,645,821) (1,929,923) 5,414,578 (3,962,148) (2,104,883) (3,780,132) --
-- (7,259) (53,815) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
6,664,279 3,891,189 4,566,372 (5,709,756) (2,594,948) (3,368,531) --
- ------------------------------------------------------------------------------------------------------------------------------
$9,371,909 $4,166,570 $4,455,103 $(2,096,690) $ (265,739) $(1,761,797) $5,366,580
==============================================================================================================================
</TABLE>
45
<PAGE>
|_| THE PARK AVENUE PORTFOLIO
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
THE GUARDIAN
THE GUARDIAN PARK AVENUE
PARK AVENUE FUND SMALL CAP FUND
---------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999 DECEMBER 31, 1998
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss)............. $ 3,695,945 $ 18,594,966 $ (386,106) $ (603,721)
Net realized gain/(loss) on investments
and foreign currency related
transactions............................. 219,062,828 240,110,403 (2,847,850) (16,113,586)
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions............................. 42,160,468 321,166,359 (1,423,411) 6,377,291
-----------------------------------------------------------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS............................. 264,919,241 579,871,728 (4,657,367) (10,340,016)
-----------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A.................................. (3,696,239) (18,598,388) -- --
Class B.................................. -- -- -- --
Net realized gain on investments and
foreign currency related transactions
Class A.................................. (66,993,369) (199,305,595) -- (978,178)
Class B.................................. (9,585,406) (25,414,666) -- (203,338)
-----------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS........................... (80,275,014) (243,318,649) -- (1,181,516)
-----------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions--Note 9....... (118,111,809) 529,325,454 (32,866,735) 41,904,893
-----------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS...... 66,532,418 865,878,533 (37,524,102) 30,383,361
NET ASSETS:
Beginning of period......................... 3,380,256,722 2,514,378,189 149,647,136 119,263,775
-----------------------------------------------------------------
End of period*.............................. $3,446,789,140 $3,380,256,722 $112,123,034 $149,647,136
=================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of.................. $ 362,781 $ 363,075 $ (386,106) $ --
<CAPTION>
THE GUARDIAN
THE GUARDIAN BAILLIE GIFFORD
ASSET ALLOCATION FUND INTERNATIONAL FUND
------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999 DECEMBER 31, 1998
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss)............. $ 2,707,630 $ 4,482,709 $ 275,381 $ (96,156)
Net realized gain/(loss) on investments
and foreign currency related
transactions............................. 11,310,100 24,550,359 5,828,371 4,322,921
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions............................. (4,645,821) 4,998,042 (1,937,182) 11,033,975
---------------------------------------------------------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS............................. 9,371,909 34,031,110 4,166,570 15,260,740
---------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A.................................. (1,880,563) (4,972,430) (152,235) (27,940)
Class B.................................. (178,771) (455,159) -- --
Net realized gain on investments and
foreign currency related transactions
Class A.................................. (6,657,341) (18,144,589) (771,822) (3,899,799)
Class B.................................. (1,086,224) (2,541,210) (82,589) (423,733)
---------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS........................... (9,802,899) (26,113,388) (1,006,646) (4,351,472)
---------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions--Note 9....... 27,157,423 63,440,174 17,856,706 19,910,823
---------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS...... 26,726,433 71,357,896 21,016,630 30,820,091
NET ASSETS:
Beginning of period......................... 222,372,226 151,014,330 104,087,558 73,267,467
---------------------------------------------------------------
End of period*.............................. $249,098,659 $222,372,226 $125,104,188 $104,087,558
===============================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of.................. $ 696,167 $ 47,871 $ (483,744) $ (606,890)
</TABLE>
See notes to financial statements.
46
<PAGE>
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD EMERGING INVESTMENT QUALITY
MARKETS FUND BOND FUND
-------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999 DECEMBER 31, 1998
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss).............. $ (111,269) $ (4,873) $ 3,613,066 $ 6,469,759
Net realized gain/(loss) on investments
and foreign currency related
transactions............................. (794,391) (5,495,916) (1,747,608) 2,736,440
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions............................. 5,360,763 (1,649,698) (3,962,148) 301,260
----------- ----------- ------------ ------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS............................. 4,455,103 (7,150,487) (2,096,690) 9,507,459
----------- ----------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A.................................. -- (6,306) (3,613,066) (6,469,759)
Class B.................................. -- -- -- --
Net realized gain on investments and
foreign currency related transactions
Class A.................................. -- (727) (429,333) (2,157,409)
Class B.................................. -- (66) -- --
----------- ----------- ------------ ------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS........................... -- (7,099) (4,042,399) (8,627,168)
----------- ----------- ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions--Note 9....... 658,299 1,385,379 5,281,020 42,383,631
----------- ----------- ------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS...... 5,113,402 (5,772,207) (858,069) 43,263,922
NET ASSETS:
Beginning of period......................... 17,708,841 23,481,048 142,198,634 98,934,712
----------- ----------- ------------ ------------
End of period*.............................. $22,822,243 $17,708,841 $141,340,565 $142,198,634
=========== =========== ============ ============
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of.................. $ (150,684) $ (39,415) $ -- $ --
<CAPTION>
THE GUARDIAN
HIGH YIELD THE GUARDIAN
BOND FUND TAX-EXEMPT FUND
----------------------------- ---------------------------------
PERIOD FROM
SIX MONTHS JULY 7, SIX MONTHS
ENDED 1998+ TO ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31, 1998
(UNAUDITED) 1998 (UNAUDITED) (AUDITED)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss).............. $ 2,329,209 $ 1,461,448 $ 1,606,734 $ 2,190,619
Net realized gain/(loss) on investments
and foreign currency related
transactions............................. (490,065) 92,410 411,601 582,307
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions............................. (2,104,883) 279,240 (3,780,132) 208,997
----------- ----------- ------------ -----------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS............................. (265,739) 1,833,098 (1,761,797) 2,981,923
----------- ----------- ------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A.................................. (2,226,170) (1,412,378) (1,606,734) (2,190,619)
Class B.................................. (103,039) (49,070) -- --
Net realized gain on investments and
foreign currency related transactions
Class A.................................. (87,896) -- (41,921) (174,452)
Class B.................................. (4,673) -- -- --
----------- ----------- ------------ -----------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS........................... (2,421,778) (1,461,448) (1,648,655) (2,365,071)
----------- ----------- ------------ -----------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions--Note 9....... 5,831,358 53,398,951 32,775,193 22,742,961
----------- ----------- ------------ -----------
NET INCREASE/(DECREASE) IN NET ASSETS...... 3,143,841 53,770,601 29,364,741 23,359,813
NET ASSETS:
Beginning of period......................... 53,770,601 -- 70,720,128 47,360,315
----------- ----------- ------------ -----------
End of period*.............................. $56,914,442 $53,770,601 $100,084,869 $70,720,128
=========== =========== ============ ===========
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of.................. $ -- $ -- $ -- $ --
<CAPTION>
THE GUARDIAN
CASH MANAGEMENT FUND
---------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
(UNAUDITED) (AUDITED)
---------------------------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss).............. $ 5,366,580 $ 8,448,432
Net realized gain/(loss) on investments
and foreign currency related
transactions............................. -- --
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions............................. -- --
------------ ------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS............................. 5,366,580 8,448,432
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A.................................. (5,126,138) (8,075,149)
Class B.................................. (240,442) (373,283)
Net realized gain on investments and
foreign currency related transactions
Class A.................................. -- --
Class B.................................. -- --
------------ ------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS........................... (5,366,580) (8,448,432)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions--Note 9....... 41,229,369 100,038,914
------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS...... 41,229,369 100,038,914
NET ASSETS:
Beginning of period......................... 238,426,600 138,387,686
------------ ------------
End of period*.............................. $279,655,969 $238,426,600
============ ============
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of.................. $ -- $ --
</TABLE>
47
<PAGE>
================================================================================
NOTES TO
FINANCIAL STATEMENTS
================================================================================
June 30, 1999 (Unaudited)
THE PARK AVENUE PORTFOLIO
[_] THE GUARDIAN PARK AVENUE FUND
[_] THE GUARDIAN PARK AVENUE SMALL CAP FUND
[_] THE GUARDIAN ASSET ALLOCATION FUND
[_] THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
[_] THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
[_] THE GUARDIAN INVESTMENT QUALITY BOND FUND
[_] THE GUARDIAN HIGH YIELD BOND FUND
[_] THE GUARDIAN TAX-EXEMPT FUND
[_] THE GUARDIAN CASH MANAGEMENT FUND
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
The Park Avenue Portfolio (the Portfolio) is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the 1940 Act), which is organized as a business trust under
the laws of the Commonwealth of Massachusetts. The Portfolio consists of nine
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 High Yield Bond Fund (GHYBF); The Guardian Tax-Exempt Fund
(GTEF); and The Guardian Cash Management Fund (GCMF). The series are
collectively referred to herein as the "Funds".
On April 2, 1997 each of GPASCF and GBGEMF sold 2,000,000 Class A shares of
beneficial interest to The Guardian Life Insurance Company of America for
$20,000,000 each, to facilitate the commencement of operations.
On July 2, 1998 GHYBF sold 573,788 Class A shares and 10,000 Class B shares
of beneficial interest to The Guardian Life Insurance Company of America and
Guardian Investor Services Corporation (GISC) for $5,737,876 and $100,000,
respectively, to facilitate the commencement of operations.
Prior to May 1, 1997, GAAF invested entirely in individual securities.
Since May 1, 1997, GAAF has been implementing 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, 1999, Class B shares are offered by GPAF, GPASCF, GAAF, GBGIF, GBGEMF, GHYBF
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, 1999,
Institutional Class shares are offered by GPAF, GPASCF, GAAF, GBGIF, GBGEMF,
GIQBF and GHYBF. Institutional Class shares are offered at net asset value,
without an initial or contingent deferred sales load. As of June 30, 1999, 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
48
<PAGE>
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.
Pursuant to valuation procedures approved by the Board of Trustees, certain
debt securities may be valued each business day by an independent pricing
service (Service). Debt securities for which quoted bid prices, are readily
available and representative of the bid side of the market, in the judgement of
the Service, are valued at the bid price, except for GTEF. In GTEF, debt
securities are valued at the mean between the bid and asked prices each as
obtained by the Service. 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. Dividends on foreign
securities are recorded when the Funds are informed of the dividend.
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, 1999, distribution, administrative and transfer agent
fees were the only class-specific expenses.
Foreign Currency Translation
GPAF, GPASCF, GAAF, GBGIF, GBGEMF and GHYBF are permitted to buy
international securities that are not U.S. dollar denominated. GPAF, GPASCF,
GAAF, GBGIF, GBGEMF and GHYBF'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
as follows:
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, 1999 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
GPAF, GPASCF, GAAF, GBGIF, GBGEMF and GHYBF may enter into foreign currency
contracts in connection with planned purchases or sales of securities, or to
hedge against changes in currency exchange rates
49
<PAGE>
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.
Risks may arise from the potential inability of a counterparty to meet the terms
of a contract and from an unanticipated movement in the value of a foreign
currency relative to the U.S. dollar. 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
GAAF, GBGIF, GBGEMF, GIQBF, GHYBF and GTEF 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 into 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, GHYBF and GTEF, and declared and paid semi-annually for
GPAF, GPASCF, GAAF, GBGIF and GBGEMF. Net realized short-term and long-term
capital gains for these Funds will be distributed at least annually. Dividends
from GCMF's net investment income, which includes any net realized capital gains
or losses, are declared and accrued daily and paid monthly on the last business
day of each month.
All dividends or distributions to the shareholders are recorded on the
ex-dividend date. Such distributions are determined in accordance with federal
income tax regulations. Differences between the recognition of income on an
income tax basis and recognition of income based on generally accepted
accounting principles may cause temporary overdistributions of net realized
gains and net investment income.
Federal Income Taxes
Each Fund qualified 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
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 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, GPASCF and GHYBF, which pay GISC an annual
rate of .75% and .60%, respectively, 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. GISC voluntarily assumes a portion of the ordinary
operating expenses (excluding interest expense associated with reverse
repurchase agreements and securities lending) that exceeds .80% of GIQBF and
GTEF, .75% of GHYBF's
50
<PAGE>
Class "A" average daily net assets and 1.00% of the total expenses of GHYBF
Class "B" shares and operating expenses that exceed .85% of GCMF's average daily
net assets. For the six months ended June 30, 1999 GISC voluntarily assumed
$93,815, $117,105, $56,826 and $210,237 of the ordinary operating expenses of
GIQBF, GHYBF, 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 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.
GAAF received $3,450,294 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 up to .25% of its
average daily net assets. GPAF pays this fee at an annual rate of up to .25% of
the average daily net assets for which a "dealer of record" has been designated.
For the six months ended June 30, 1999, 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, 1999, aggregate sales commissions for the
purchase of Class A shares paid to GISC was as follows:
FUND COMMISSIONS FUND COMMISSIONS
- ---- ----------- ---- -----------
GPAF $1,586,659 GBGEMF $ 5,966
GPASCF 61,613 GIQBF 65,385
GAAF 326,860 GHYBF 26,950
GBGIF 62,153 GTEF 58,524
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, 1999, such charges were as
follows:
FUND CLASS B
- ---- -------
GPAF................................................ $581,609
GPASCF.............................................. 58,758
GAAF................................................ 22,263
GBGIF............................................... 7,880
GBGEMF.............................................. 195
GHYBF............................................... 4,894
GCMF................................................ 49,232
NOTE 4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) for the six months ended June 30, 1999 were as follows:
51
<PAGE>
- --------------------------------------------------------------------------------
GPAF GPASCF
- --------------------------------------------------------------------------------
Purchases $1,070,295,630 $ 49,094,463
Proceeds 1,241,259,748 86,059,531
- --------------------------------------------------------------------------------
GAAF GBGIF
- --------------------------------------------------------------------------------
Purchases $ 12,429,190 $ 40,164,753
Proceeds 9,006,262 27,912,811
- --------------------------------------------------------------------------------
GBGEMF GIQBF
- --------------------------------------------------------------------------------
Purchases $ 12,452,170 $234,097,511
Proceeds 11,081,052 227,561,038
- --------------------------------------------------------------------------------
GHYBF GTEF
- --------------------------------------------------------------------------------
Purchases $ 36,502,575 $ 91,462,953
Proceeds 34,263,433 62,370,460
The cost of investments owned at June 30, 1999 for federal income tax
purposes was substantially 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, 1999, were as follows:
GPAF GPASCF
-------------- ------------
Appreciation $1,048,777,922 $ 19,467,003
(Depreciation) (41,607,182) (3,996,017)
-------------- ------------
NET UNREALIZED
APPRECIATION $1,007,170,740 $ 15,470,986
============== ============
GAAF GBGIF
-------------- ------------
Appreciation $ 21,683,338 $ 25,200,963
(Depreciation) (1,974,401) (2,920,323)
-------------- ------------
NET UNREALIZED
APPRECIATION $ 19,708,937 $ 22,280,640
============== ============
GBGEMF GIQBF
-------------- ------------
Appreciation $ 4,210,178 $ 75,694
(Depreciation) (1,497,947) (2,935,921)
-------------- ------------
NET UNREALIZED
APPRECIATION/
(DEPRECIATION) $ 2,712,231 $ (2,860,227)
============== ============
GHYBF GTEF
-------------- ------------
Appreciation $ 516,983 $ 232,229
(Depreciation) (2,342,626) (2,215,706)
-------------- ------------
NET UNREALIZED
DEPRECIATION $ (1,825,643) $ (1,983,477)
============== ============
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 and GHYBF 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 and GHYBF enter into a
reverse repurchase agreement, the funds establish and maintain cash, U.S.
government securities or liquid, unencumbered securities that are
marked-to-market daily in a segregated account with the Funds' 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 and GHYBF may be unable to deliver the securities when the Funds seek to
repurchase them.
52
<PAGE>
Information regarding transactions by GIQBF under reverse repurchase agreements
is as follows:
<TABLE>
<CAPTION>
MARKET
FACE VALUE VALUE
- ---------- ----------
<S> <C> <C>
$3,971,250 Reverse Repurchase Agreement with Lehman Brothers, Inc., 5.80% dated
6/30/99, to be repurchased at $3,971,724 on 7/1/99.................. $3,971,250
Average amount outstanding during the period........................ $1,045,276
Weighted average interest rate during the period.................... 1.29%
</TABLE>
NOTE 7. DOLLAR ROLL TRANSACTIONS
GIQBF and GHYBF may enter into dollar roll transactions with financial
institutions to take advantage of opportunities in the mortgage 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, 1999: (i) GPAF, GPASCF, GAAF,
GBGIF, GBGEMF and GHYBF 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. Through June 30, 1999, no
Institutional Class shares of the Funds were sold.
Transactions in shares of beneficial interest were as follows:
[_] THE GUARDIAN PARK AVENUE FUND
<TABLE>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
(Unaudited) (Audited) (Unaudited) (Audited)
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 14,626,995 18,152,958 $ 667,143,492 $ 885,038,761
Shares issued in reinvestment of
dividends and distributions 1,289,945 4,072,601 68,237,220 209,800,362
Shares repurchased (18,503,010) (14,727,389) (875,675,105) (721,647,093)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (2,586,070) 7,498,170 $(140,294,393) $ 373,192,030
===============================================================================================================================
CLASS B
Shares sold 865,865 3,603,391 $ 45,435,055 $ 176,030,617
Shares issued in reinvestment of
distributions 174,633 474,635 9,157,135 24,340,017
Shares repurchased (619,578) (912,470) (32,409,606) (44,237,210)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 420,920 3,165,556 $ 22,182,584 $ 156,133,424
===============================================================================================================================
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
O THE GUARDIAN PARK AVENUE SMALL CAP FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
(Unaudited) (Audited) (Unaudited) (Audited)
------------- ----------------- ------------- -----------------
Shares Amount
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 6,557,596 8,955,435 $ 77,947,394 $113,720,444
Shares issued in reinvestment of
distributions -- 66,726 -- 962,201
Shares repurchased (9,081,073) (6,399,295) (107,776,792) (79,156,710)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (2,523,477) 2,622,866 $(29,829,398) $ 35,525,935
============================================================================================================
CLASS B
Shares sold 168,239 947,722 $ 1,970,827 $ 13,042,662
Shares issued in reinvestment of
distributions -- 14,540 -- 207,322
Shares repurchased (428,418) (542,866) (5,008,164) (6,871,026)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (260,179) 419,396 $ (3,037,337) $ 6,378,958
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
O THE GUARDIAN ASSET ALLOCATION FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
(Unaudited) (Audited) (Unaudited) (Audited)
------------- ----------------- ------------- -----------------
Shares Amount
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 1,826,488 3,552,074 27,278,287 $ 52,391,637
Shares issued in reinvestment of
dividends and distributions 574,519 1,528,532 8,336,557 22,611,939
Shares repurchased (1,070,616) (1,642,141) (16,046,566) (24,292,529)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 1,330,391 3,438,465 $ 19,568,278 $ 50,711,047
============================================================================================================
CLASS B
Shares sold 546,212 827,799 $ 8,134,410 $ 12,174,248
Shares issued in reinvestment of
dividends and distributions 85,318 197,429 1,232,891 2,908,672
Shares repurchased (119,465) (159,197) (1,778,156) (2,353,793)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 512,065 866,031 $ 7,589,145 $ 12,729,127
============================================================================================================
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
O THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
(Unaudited) (Audited) (Unaudited) (Audited)
------------- ----------------- ------------- -----------------
Shares Amount
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 5,984,363 5,077,189 $109,873,867 $ 88,983,605
Shares issued in reinvestment of
dividends and distributions 40,031 194,168 756,541 3,581,435
Shares repurchased 5,090,753) (4,337,226) (93,799,666) (75,707,177)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 933,641 934,131 $ 16,830,742 $ 16,857,863
============================================================================================================
Class B
Shares sold 89,805 207,081 $ 1,609,712 $ 3,615,723
Shares issued in reinvestment of
distributions 4,439 23,175 81,564 417,986
Shares repurchased (37,078) (56,683) (665,312) (980,749)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 57,166 173,573 $ 1,025,964 $ 3,052,960
============================================================================================================
</TABLE>
O THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
<TABLE>
<CAPTION>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
(Unaudited) (Audited) (Unaudited) (Audited)
------------- ----------------- ------------- -----------------
Shares Amount
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 152,297 307,937 $ 1,111,838 $ 2,438,788
Shares issued in reinvestment of
distributions -- 951 -- 7,008
Shares repurchased (66,188) (142,603) (458,621) (1,047,780)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 86,109 166,285 $ 653,217 $ 1,398,016
============================================================================================================
CLASS B
Shares sold 15,039 36,991 $ 104,118 $ 284,221
Shares issued in reinvestment of
distributions -- 9 -- 66
Shares repurchased (14,226) (40,736) (99,036) (296,924)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 813 (3,736) $ 5,082 $ (12,637)
============================================================================================================
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
O THE GUARDIAN INVESTMENT QUALITY BOND FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
(Unaudited) (Audited) (Unaudited) (Audited)
------------- ----------------- ------------- -----------------
Shares Amount
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,795,509 5,256,976 $ 27,322,943 $ 52,592,427
Shares issued in reinvestment of
dividends and distributions 398,335 838,248 3,882,968 8,403,203
Shares repurchased (2,655,012) (1,848,650) (25,924,891) (18,611,999)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 538,832 4,246,574 $ 5,281,020 $ 42,383,631
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
O THE GUARDIAN HIGH YIELD BOND FUND
Six Months Period from Period from
Ended July 7, 1998+ Ended July 7, 1998+
June 30, 1999 to December 31, 1998 June 30, 1999 to December 31, 1998
(Unaudited) (Audited) (Unaudited) (Audited)
------------------------------------ -----------------------------------
Shares Amount
------------------------------------ -----------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 374,736 5,073,898 $ 3,624,183 $ 49,633,346
Shares issued in reinvestment of
dividends 239,446 146,405 2,306,436 1,409,495
Shares repurchased (67,258) (6,493) (654,840) (60,633)
- --------------------------------------------------------------------------------------------------------------
NET INCREASE 546,924 5,213,810 $ 5,275,779 $ 50,982,208
==============================================================================================================
CLASS B
Shares sold 109,261 261,298 $ 1,061,465 $ 2,413,483
Shares issued in reinvestment of
dividends 10,683 5,077 102,670 48,933
Shares repurchased (62,761) (13,845) (608,556) (45,673)
- --------------------------------------------------------------------------------------------------------------
NET INCREASE 57,183 252,530 $ 555,579 $ 2,416,743
==============================================================================================================
</TABLE>
- ----------
+ Commencement of operations.
56
<PAGE>
<TABLE>
<CAPTION>
O THE GUARDIAN TAX-EXEMPT FUND
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
(Unaudited) (Audited) (Unaudited) (Audited)
------------- ----------------- ------------- -----------------
Shares Amount
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,577,989 2,184,548 $ 35,683,675 $ 22,216,685
Shares issued in reinvestment of
dividends and distributions 162,116 230,604 1,621,606 2,320,394
Shares repurchased (451,861) (178,814) (4,530,088) (1,794,118)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 3,288,244 2,236,338 $ 32,775,193 $ 22,742,961
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
O THE GUARDIAN CASH MANAGEMENT FUND
Six Months
Ended Year Ended
June 30, 1999 December 31, 1998
(Unaudited) (Audited)
------------ -----------------
Shares/@ $1 per share
--------------------------------
<S> <C> <C>
CLASS A
Shares sold 837,683,238 754,062,229
Shares issued in reinvestment of
dividends 4,843,388 7,764,025
Shares repurchased (801,367,635) (668,353,118)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 41,158,991 93,473,136
============================================================================================================
CLASS B
Shares sold 9,958,061 26,314,334
Shares issued in reinvestment of
dividends 209,893 331,516
Shares repurchased (10,097,576) (20,080,072)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 70,378 6,565,778
============================================================================================================
</TABLE>
57
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
<TABLE>
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
<CAPTION>
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset Net and Foreign (Decrease) Dividends
Value, Investment Currency from from Net
Beginning Income/ Related Investment Investment
of Period (Loss) Transactions Operations Income
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/99++ $51.88 $0.09 $4.08 $4.17 $(0.07)
Year ended 12/31/98 46.12 0.35 9.38 9.73 (0.34)
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)
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)
CLASS B:
Six months ended 6/30/99++ 51.59 (0.14) 4.04 3.90 0.00
Year ended 12/31/98 46.02 (0.08) 9.28 9.20 0.00
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 6/30/99++ 12.80 (0.03) (0.17) (0.20) --
Year ended 12/31/98 13.77 (0.03) (0.83) (0.86) --
Period from 4/2/97+ to 12/31/97 10.00 0.00 3.91 3.91 --
CLASS B:
Six months ended 6/30/99++ 12.61 (0.09) (0.16) (0.25) --
Year ended 12/31/98 13.67 (0.15) (0.80) (0.95) --
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 6/30/99++ 14.78 0.17 0.41 0.58 (0.13)
Year ended 12/31/98 14.05 0.39 2.31 2.70 (0.43)
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)
CLASS B:
Six months ended 6/30/99++ 14.73 0.10 0.42 0.52 (0.08)
Year ended 12/31/98 14.00 0.24 2.31 2.55 (0.28)
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)
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/99++ 18.41 0.06 0.53 0.59 (0.03)
Year ended 12/31/98 16.08 0.02 3.13 3.15 (0.01)
Year ended 12/31/97 15.22 0.02 1.66 1.68 --
Year ended 12/31/96 13.57 0.05 1.89 1.94 (0.05)
Year ended 12/31/95 13.01 0.04 1.40 1.44 (0.04)
Year ended 12/31/94 13.19 0.01 (0.09) (0.08) (0.01)
</TABLE>
+ Commencement of operations.
++ Unaudited.
58
<PAGE>
<TABLE>
<CAPTION>
Distributions
from
Net Realized
Distributions Gain on
in Excess Investment Net Asset
of Net and Foreign Value,
Investment Currency Related End of Total
Income Transactions Period Return*
-------------------------------------------------------------
<S> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/99++ -- $(1.23) $54.75 8.12%
Year ended 12/31/98 -- (3.63) 51.88 21.30
Year ended 12/31/97 -- (4.41) 46.12 34.85
Year ended 12/31/96 $(0.01) (4.46) 37.91 26.49
Year ended 12/31/95 -- (1.79) 33.97 34.28
Year ended 12/31/94 -- (1.02) 26.89 (1.44)
CLASS B:
Six months ended 6/30/99++ -- (1.23) 54.26 7.66
Year ended 12/31/98 -- (3.63) 51.59 20.16
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 6/30/99++ -- -- 12.60 (1.56)
Year ended 12/31/98 -- (0.11) 12.80 (6.35)
Period from 4/2/97+ to 12/31/97 -- (0.14) 13.77 39.16
CLASS B:
Six months ended 6/30/99++ -- -- 12.36 (1.98)
Year ended 12/31/98 -- (0.11) 12.61 (7.05)
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 6/30/99++ -- (0.48) 14.75 4.02
Year ended 12/31/98 -- (1.54) 14.78 19.41
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)
CLASS B:
Six months ended 6/30/99++ -- (0.48) 14.69 3.64
Year ended 12/31/98 -- (1.54) 14.73 18.32
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
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/99++ -- (0.13) 18.84 3.19
Year ended 12/31/98 -- (0.81) 18.41 19.61
Year ended 12/31/97 (0.16) (0.66) 16.08 11.07
Year ended 12/31/96 (0.05) (0.19) 15.22 14.33
Year ended 12/31/95 (0.23) (0.61) 13.57 11.14
Year ended 12/31/94 -- (0.09) 13.01 (0.55)
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------
Net
Net Assets, Investment
End of Expenses Expenses Income/(Loss) Portfolio
Period to Average Waived to Average Turnover
(000's Omitted) Net Assets(b) By GISC Net Assets Rate
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/99++ $3,014,294 0.77% (a) -- 0.33% (a) 33%
Year ended 12/31/98 2,990,767 0.78 -- 0.72 55
Year ended 12/31/97 2,312,632 0.79 -- 0.95 50
Year ended 12/31/96 1,392,186 0.79 -- 1.19 81
Year ended 12/31/95 972,275 0.81 -- 1.07 78
Year ended 12/31/94 640,917 0.84 -- 1.15 54
CLASS B:
Six months ended 6/30/99++ 432,496 1.68 (a) -- (0.58) (a) 33
Year ended 12/31/98 389,489 1.70 -- (0.21) 55
Year ended 12/31/97 201,746 1.73 -- 0.00 50
Period from 5/1/96+ to 12/31/96 36,006 1.77 (a) -- 0.04 (a) 81
THE GUARDIAN PARK AVENUE SMALL CAP FUND
CLASS A:
Six months ended 6/30/99++ 93,667 1.35 (a) -- (0.51) (a) 42
Year ended 12/31/98 127,525 1.32 -- (0.29) 63
Period from 4/2/97+ to 12/31/97 101,016 1.36 (a) -- 0.04 (a) 25
CLASS B:
Six months ended 6/30/99++ 18,456 2.25 (a) -- (1.39) (a) 42
Year ended 12/31/98 22,122 2.17 -- (1.14) 63
Period from 5/6/97+ to 12/31/97 18,248 2.26 (a) -- (1.01) (a) 25
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Six months ended 6/30/99++ 214,099 0.51 (a)(c) $0.57 2.43 (a) 6
Year ended 12/31/98 194,827 0.60 (c) 0.52 2.52 23
Year ended 12/31/97 136,948 0.95 (c) 0.19 2.50 58
Year ended 12/31/96 88,190 1.30 -- 1.91 122
Year ended 12/31/95 70,591 1.25 -- 1.98 219
Year ended 12/31/94 54,875 1.30 -- 2.72 216
CLASS B:
Six months ended 6/30/99++ 34,999 1.36 (a)(c) 0.57 1.61 (a) 6
Year ended 12/31/98 27,545 1.48 (c) 0.52 1.70 23
Year ended 12/31/97 14,066 2.04 (c) 0.19 1.50 58
Period from 5/1/96+ to 12/31/96 5,075 2.39 (a) -- 0.70 (a) 122
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/99++ 113,647 1.50 (a) -- 0.60 (a) 26
Year ended 12/31/98 93,871 1.56 -- (0.01) 44
Year ended 12/31/97 66,999 1.62 -- 0.07 55
Year ended 12/31/96 57,593 1.70 -- 0.29 39
Year ended 12/31/95 44,546 1.74 -- 0.19 51
Year ended 12/31/94 37,542 1.91 -- 0.20 33
</TABLE>
* Excludes the effect of sales load.
(a) Annualized.
(b) After expenses waived by GISC.
(c) Amounts do not include the activity of the underlying Funds.
59
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
<TABLE>
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
<CAPTION>
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset Net and Foreign (Decrease) Dividends
Value, Investment Currency from from Net
Beginning Income/ Related Investment Investment
of Period (Loss) Transactions Operations Income
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS B:
Six months ended 6/30/99++ $17.97 $(0.01) $0.48 $0.47 --
Year ended 12/31/98 15.87 (0.09) 3.00 2.91 --
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)
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
CLASS A:
Six months ended 6/30/99++ 6.66 (0.03) 1.69 1.66 --
Year ended 12/31/98 9.38 0.01 (2.73) (2.72) (0.00)+++
Period from 4/2/97+ to 12/31/97 10.00 0.04 (0.63) (0.59) (0.03)
CLASS B:
Six months ended 6/30/99++ 6.44 (0.13) 1.62 1.49 --
Year ended 12/31/98 9.30 (0.18) (2.68) (2.86) --
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 6/30/99++ 9.99 0.25 (0.39) (0.14) (0.25)
Year ended 12/31/98 9.91 0.53 0.23 0.76 (0.53)
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)
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Six months ended 6/30/99++ 9.84 0.41 (0.44) (0.03) (0.41)
Period from 9/1/98++++ to 12/31/98 9.26 0.38 0.58 0.96 (0.38)
CLASS B:
Six months ended 6/30/99++ 9.83 0.35 (0.44) (0.09) (0.35)
Period from 9/1/98++++ to 12/31/98 9.26 0.31 0.57 0.88 (0.31)
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Six months ended 6/30/99++ 10.13 0.20 (0.38) (0.18) (0.20)
Year ended 12/31/98 9.99 0.43 0.17 0.60 (0.43)
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)
</TABLE>
+ Commencement of operations.
++ Unaudited
+++ Rounds to less than $0.01.
++++ Date of initial public investment.
60
<PAGE>
<TABLE>
<CAPTION>
Distributions
from
Net Realized
Distributions Gain on
in Excess Investment Net Asset
of Net and Foreign Value,
Investment Currency Related End of Total
Income Transactions Period Return*
---------------------------------------------------------
<S> <C> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS B:
Six months ended 6/30/99++ -- $(0.13) $18.31 2.63%
Year ended 12/31/98 -- (0.81) 17.97 18.36
Year ended 12/31/97 -- (0.66) 15.87 9.37
Period from 5/1/96+ to 12/31/96 $(0.08) (0.19) 15.12 4.34
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
CLASS A:
Six months ended 6/30/99++ -- -- 8.32 24.92
Year ended 12/31/98 -- -- 6.66 (28.97)
Period from 4/2/97+ to 12/31/97 -- -- 9.38 (5.86)
CLASS B:
Six months ended 6/30/99++ -- -- 7.93 23.14
Year ended 12/31/98 -- -- 6.44 (30.75)
Period from 5/6/97+ to 12/31/97 -- -- 9.30 (9.71)
THE GUARDIAN INVESTMENT QUALITY BOND FUND
CLASS A:
Six months ended 6/30/99++ -- (0.03) 9.57 (1.44)
Year ended 12/31/98 -- (0.15) 9.99 7.89
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)
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Six months ended 6/30/99++ -- (0.02) 9.38 (0.44)
Period from 9/1/98++++ to 12/31/98 -- -- 9.84 9.24
CLASS B:
Six months ended 6/30/99++ -- (0.02) 9.37 (1.01)
Period from 9/1/98++++ to 12/31/98 -- -- 9.83 8.61
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Six months ended 6/30/99++ -- (0.00)+++ 9.75 (1.77)
Year ended 12/31/98 -- (0.03) 10.13 6.11
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)
<CAPTION>
Ratios/Supplemental Data
------------------------------------------------------------------
Expenses
Net Assets, (excluding
End of Expenses interest expense) Expenses
Period to Average to average Subsidized
(000's Omitted) Net Assets(c) Net Assets (b) By GISC
------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS B:
Six months ended 6/30/99++ $11,458 2.54%(a) -- --
Year ended 12/31/98 10,216 2.67 -- --
Year ended 12/31/97 6,268 2.91 -- --
Period from 5/1/96+ to 12/31/96 3,313 3.05 (a) -- --
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
CLASS A:
Six months ended 6/30/99++ 21,133 2.50 (a) -- --
Year ended 12/31/98 16,342 2.55 -- --
Period from 4/2/97+ to 12/31/97 21,472 2.31 (a) -- --
CLASS B:
Six months ended 6/30/99++ 1,689 5.38 (a) -- --
Year ended 12/31/98 1,367 5.04 -- --
Period from 5/6/97+ to 12/31/97 2,009 4.24 (a) -- --
THE GUARDIAN INVESTMENT QUALITY BOND FUND
CLASS A:
Six months ended 6/30/99++ 141,341 0.81 (a) 0.80%(a) 0.13%(a)
Year ended 12/31/98 142,199 0.85 (b) 0.75 0.21
Year ended 12/31/97 98,935 0.75 (b) -- 0.29
Year ended 12/31/96 50,794 0.75 (b) -- 0.37
Year ended 12/31/95 53,706 0.75 (b) -- 0.39
Year ended 12/31/94 43,487 1.46 -- --
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Six months ended 6/30/99++ 54,013 0.75 (a) -- 0.39 (a)
Period from 9/1/98++++ to 12/31/98 51,288 0.75 (a)(b) -- 0.51 (a)
CLASS B:
Six months ended 6/30/99++ 2,902 1.83 (a) -- 1.00 (a)
Period from 9/1/98++++ to 12/31/98 2,482 2.33 (a)(b) -- 0.51 (a)
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Six months ended 6/30/99++ 100,085 0.80 (a) -- 0.14 (a)
Year ended 12/31/98 70,720 0.75 (b) -- 0.26
Year ended 12/31/97 47,360 0.75 (b) -- 0.31
Year ended 12/31/96 39,185 0.75 (b) -- 0.60
Year ended 12/31/95 17,501 0.75 (b) -- 0.79
Year ended 12/31/94 15,967 1.09 (b) -- 0.47
<CAPTION>
Ratios/Supplemental Data
----------------------------
Net
Investment
Income/(Loss) Portfolio
to Average Turnover
Net Assets Rate
----------------------------
<S> <C> <C>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS B:
Six months ended 6/30/99++ (0.45)%(a) 26%
Year ended 12/31/98 (1.13) 44
Year ended 12/31/97 (1.46) 55
Period from 5/1/96+ to 12/31/96 (1.47) (a) 39
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
CLASS A:
Six months ended 6/30/99++ (0.96) (a) 63
Year ended 12/31/98 0.18 83
Period from 4/2/97+ to 12/31/97 0.61 (a) 36
CLASS B:
Six months ended 6/30/99++ (3.84) (a) 63
Year ended 12/31/98 (2.31) 83
Period from 5/6/97+ to 12/31/97 (0.02) (a) 36
THE GUARDIAN INVESTMENT QUALITY BOND FUND
CLASS A:
Six months ended 6/30/99++ 5.12 (a) 164
Year ended 12/31/98 5.24 309
Year ended 12/31/97 5.94 313
Year ended 12/31/96 5.73 257
Year ended 12/31/95 6.11 401
Year ended 12/31/94 4.94 186
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Six months ended 6/30/99++ 8.44 (a) 65
Period from 9/1/98++++ to 12/31/98 8.31 (a) 11
CLASS B:
Six months ended 6/30/99++ 7.36 (a) 65
Period from 9/1/98++++ to 12/31/98 6.85 (a) 11
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Six months ended 6/30/99++ 4.05 (a) 77
Year ended 12/31/98 4.29 111
Year ended 12/31/97 4.51 202
Year ended 12/31/96 4.96 240
Year ended 12/31/95 4.66 194
Year ended 12/31/94 4.26 107
</TABLE>
* Excludes the effect of sales load.
(a) Annualized. For GHYBF, ratios for 1998 are calculated from 7/7/98
(commencement of operations).
(b) After expenses subsidized by GISC.
(c) Expense ratio includes interest expense associated with the investment in
reverse repurchase agreements.
61
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
<TABLE>
|_| SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
<CAPTION>
Net Asset Dividends Net Asset
Value, Net from Net Value,
Beginning Investment Investment End of Total
of Period Income Income Period Return*
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Six months ended 6/30/99++ $1.000 $0.020 $(0.020) $1.000 2.05%
Year ended 12/31/98 1.000 0.047 (0.047) 1.000 4.76
Year ended 12/31/97 1.000 0.047 (0.047) 1.000 4.81
Year ended 12/31/96 1.000 0.045 (0.045) 1.000 4.62
Year ended 12/31/95 1.000 0.051 (0.051) 1.000 5.22
Year ended 12/31/94 1.000 0.034 (0.034) 1.000 3.48
CLASS B:
Six months ended 6/30/99++ 1.000 0.020 (0.020) 1.000 2.05
Year ended 12/31/98 1.000 0.047 (0.047) 1.000 4.76
Year ended 12/31/97 1.000 0.047 (0.047) 1.000 4.81
Period from 5/1/96+ to 12/31/96 1.000 0.028 (0.028) 1.000 2.81 (b)
</TABLE>
+ Commencement of operations.
++ Unaudited.
62
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------------
Net
Net Assets, Investment
End of Expenses Expenses Income
Period to Average Subsidized to Average
(000's Omitted) Net Assets(c) by GISC Net Assets
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Six months ended 6/30/99++ $267,156 0.85%(a) 0.12%(a) 4.10%(a)
Year ended 12/31/98 225,997 0.85 0.19 4.65
Year ended 12/31/97 132,523 0.85 0.28 4.71
Year ended 12/31/96 88,217 0.90 0.30 4.62
Year ended 12/31/95 69,913 0.85 0.37 5.10
Year ended 12/31/94 56,730 0.87 0.50 3.54
CLASS B:
Six months ended 6/30/99++ 12,500 0.85 (a) 0.97 (a) 4.10(a)
Year ended 12/31/98 12,430 0.85 0.97 4.65
Year ended 12/31/97 5,864 0.85 1.10 4.71
Period from 5/1/96+ to 12/31/96 2,583 1.16 (a) 0.59 (a) 4.43(a)
</TABLE>
* Excludes the effect of sales load.
(a) Annualized.
(b) Not annualized.
(c) After expenses subsidized by GISC.
63
<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
Joseph A. Caruso
Howard W. Chin
Alexander M. Grant, Jr.
Edward H. Hocknell
Jonathan C. Jankus
Ann T. Kearney
Peter J. Liebst
Larry A. Luxenberg
R. Robin Menzies
Andrew J. Mika
Nydia Morrison
John B. Murphy
Karen L. Olvany
Frank L. Pepe
Richard T. Potter, Jr.
Marjorie A. Silverman
Thomas G. Sorell
Donald Sullivan, Jr.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank or depository institution, nor are they federally
insured by the Federal Deposit Insurance Corporation, The Federal Reserve
Board, or any other agency. They involve investment risk, including possible
loss of principal amount invested.
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.
o INVESTMENT ADVISER & DISTRIBUTOR
Guardian Investor Services Corporation(R)
7 Hanover Square
New York, New York 10004
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
[GUARDIAN LOGO]
Guardian Investor Services Corporation(R)
7 Hanover Square
New York, New York 10004
<PAGE>
[LOGO] BULK RATE MAIL
GUARDIAN(SM) U.S. POSTAGE PAID
PERMIT NO. 1104
GUARDIAN INVESTOR SERVICES CORPORATION(R) CLIFTON, NJ
7 Hanover Square
New York, New York 10004
EB011 566M 6/99
