ANNUAL REPORT TO SHAREHOLDERS
[LOGO]
GUARDIAN
ANNUAL
REPORT TO
SHAREHOLDERS
December 31, 1999
THE PARK AVENUE Portfolio
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)
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Dear Shareholder:
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CAN TREES GROW TO THE SKY?
[PHOTO OMITTED]
Frank J. Jones, Ph.D.
Chief Investment Officer,
Co-Portfolio Manager
The Guardian Park
Avenue Fund
As of February 2000, the U.S. economy had grown for 106 consecutive months (the
current expansion began during April 1991), exceeding the longest post-World War
II expansion of 1961-69, which was supported by the Vietnam War. And yet, the
economy at present shows no significant geriatric strains.
The current stock market rally began during October 1990 (some say the
structural bull market began in 1982), and the S&P 500 Index(1) has returned
over 20% for five consecutive years from 1995 through 1999, an unprecedented
run.
Are these two streaks related? Can these two streaks continue? If not,
when will they end? This report addresses these key questions.
First, are they related? Obviously. Economists fret that a weakening
economy will weaken corporate profits and, thus, the stock market. On the other
hand, Alan Greenspan frets that a stock market correction will cause an economic
correction through the wealth effect, that is, funding consumption out of
wealth, rather than income. Who is right in terms of causality? Probably both. A
weakening in either the economy or the stock market could affect the other.
Can these two streaks continue? That is, can trees grow to the sky? It
seems clear that the economy and the stock market cannot continue to grow at
their recent pace. Real Gross Domestic Product (GDP) grew by 4% during 1999
(down from 4.6% during 1998), and the unemployment rate is 4.1%, the lowest
since 1969. Greenspan is appropriately concerned about labor shortages and
resulting labor cost increases, which has heretofore been mitigated by
immigration, job insecurity resulting from continuing corporate restructuring,
and other factors.
With respect to the stock market, stock prices have outgrown earnings for
several years. The price-to-earnings ratio for the S&P 500 was 31.49 at the end
of 1999, significantly the highest since World War II. The S&P 500 cannot
continue to return 20% every year--the average return over the period from
1926-1999 was 11.35%.
As the noted economist Herb Stein profoundly said, "If a trend cannot
continue, it will stop." Thus, these two trees cannot grow to the sky. But when
will they stop growing? Most immediately, will they stop growing during 2000?
This is the timely question. To put the answer before the reasoning, we expect
growth in the economy and the stock market to moderate during 2000, but do not
expect significant reversals.
Before we proceed, however, we should comment on the other major financial
market, the bond market, which is related to our expectation for 2000. If the
economy and the stock markets received grades of "A" during 1999, the bond
market received a "D-". 1999 experienced the second worst bond market
performance since 1973, the worst being 1994. This weak showing by bonds during
1999 was no surprise. During 1994, an even weaker year for bonds, the Federal
Reserve (Fed) tightened six times, increasing the Fed funds rate from 3% to
5.5%. During 1999, the Fed tightened three times, increasing the rate from 4.75%
to 5.50%.
The bond market never responds well to Fed tightening. But the three Fed
tightenings during 1999 and the two or perhaps more expected during 2000 should
moderate economic growth during 2000 to a level of about 3% - 3 1/2%, which is
currently thought to be "sustainable," without causing a recession or even a
severe economic softening. That is, the weak bond market during 1999 planted the
seeds for a moderation in the economy during 2000.
THE ECONOMY
As indicated, as of February, the U.S. economy will have experienced its
longest post-World War II economic expansion, accompanied by a low unemployment
rate (the lowest in 29 years) and also moderate inflation. This combination of
desirable conditions, previously thought to be too good to be true, has been
referred to as the "New Economy" or "New Paradigm".
Among the reasons for this salutary environment are the following. First,
productivity has been quite high due to, among other factors, technology.
Second, monetary policy (due to Alan Greenspan) and fiscal policy (due primarily
to the strong economy resulting in a federal budget surplus) have been prudent.
Third, several factors have mitigated inflation. They include globalization, the
strong U.S. dollar, the (until recently) economic slowdown in Asia (and its
effect on commodity prices) and improved technology (including e-commerce), all
leading to weaker pricing power. Weaker labor unions, the increased use of
"temps" and the increased use of stock options rather than salary have also
moderated wage inflation. And fourth, the strong stock market has been both a
cause and an effect of the long expansion.
Looking back, why have past economic expansions ended? The first reason
has been the inventory cycles. However, while there will be some inventory
adjustment from the fourth
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(1) The Standard & Poor's (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.
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quarter of 1999 through the first quarter of 2000, due to Y2K, prudent inventory
management, including "just in time" inventory, may have rendered the inventory
cycle obsolete. The second is inflation (at times caused by oil shocks) and a
resulting aggressive Fed tightening. This is the reason we had recessions in
1960, 1970, 1980 and 1990. This threat to economic expansion is alive and well,
as indicated below.
There are three risks to the current economic expansion. The first is
continued above sustainable economic growth, leading to incipient inflation,
perhaps supported by increased oil prices, resulting in an aggressive Fed
tightening of interest rates (a la 1994).
The second is the current high trade deficit (a net import of goods and services
financed by international investment in U.S. financial markets). This excess of
imports over exports has satisfied the strong U.S. demand for consumer goods and
perhaps abated inflationary forces resulting from excess demand for domestic
production. This deficit could lead to a self-reinforcing cycle of:
o Weaker U.S. Dollar;
o Withdrawal of international funds from U.S.; and
o Weaker U.S. stock and bond markets.
Finally, there is the current high consumption (that is, a low, even
negative, savings rate) supported by the "wealth effect", due to a strong stock
market and strong residential housing prices. A decline in the stock market
(which Alan Greenspan has long thought to be overvalued) could cause a
significant decline in consumption, which is approximately two-thirds of GDP,
and cause a consumption-led recession during 2000.
Our expectation for the economy is that fundamental growth will remain
unsustainably strong and the Fed will raise rates two or more times during the
first half of 2000. However, adroit Fed policy will lead to approximately 3%
growth during 2000, which may be sustainable without inflation. The two or three
Fed tightenings expected during 2000 will increase yields during the first half
of 2000, but due to moderated economic growth, yields should be lower than they
are now by the end of 2000, providing moderate returns on bonds during 2000. The
two other risks mentioned will remain, but we do not believe that they will
cause an end to the expansion during 2000.
THE STOCK MARKET
The current bull market began during October of 1990, and the S&P 500 has
returned over 500% (including dividends) since then. In addition, as indicated,
the S&P 500 has returned over 20% annually during 1995-1999. Three fundamental
reasons for the long bull market are: the decline in interest rates; high profit
growth (due largely to the long economic expansion); and the decline in the
common stock risk premium. The risk premium has declined, as more individual
investors have become comfortable with the stock market, partly due to its long
sustained growth.
The main theme of the 1999 stock market was technology stocks. Technology
stocks tend to be growth rather than value stocks, but are dispersed across
large, mid and small capitalization stocks. In this regard, the S&P 500 returned
21.04% during 1999, while the S&P 500, exclusive of its technology issues,
returned only 2% and the technology sector (which represents approximately 29.7%
of the S&P 500) returned 74.76%. In addition, for non-technology stocks, the
stock market was unforgiving for stocks with weak earnings and rewarding for
those with strong earnings (for example, during 1999 Pfizer and GE returned
- -21.50% and 53.56%, respectively). At the opposite end of the technology sector
in the return universe was the utility sector, which behaves like bonds, and
returned -5.81% (as measured by the Dow Jones Utilities Average).(2)
Our expectation for the stock market is that while the market will exhibit
considerable volatility during 2000, due both to specific events and consumer
psychology, and while the S&P 500 will not return 20% or more during 2000, the
S&P 500 return will be moderate and more consistent with average historical
returns (11.35% over the period 1926-1999). There will again, however, be
considerable disparity among sectors and stocks. In particular, while there will
again be many technology "winners," there will also be many bankruptcies and
other weaknesses within technology stocks. This would be expected because many
of 1999's technology IPOs are basically yesterday's venture capital companies
going public prematurely, at least by previous standards.
OVERVIEW
Given our expectations for the economy and Fed behavior, bond yields
should increase early during the year, decrease later in the year, and bond
investors should experience a moderate return during 2000. Bonds returns,
however, will be much more competitive with stock returns than they were during
1999.
Stock investors should keep their seat belts on during 2000. Volatility
due to specific events, such as earnings announcements, and other factors
related to investor psychology will be high. But overall, the stock market,
based on reasonable corporate profits, should provide reasonable returns,
although most likely not the 20% returns on the S&P 500 that we have experienced
for the last five years.
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(2) The Dow Jones Utilities Average is an unmanaged average of utility stocks
listed on the New York Stock Exchange that is generally considered to be
representative of U.S. utility sector performance.
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This overview would not be complete without a comment on last year's
winner, technology stocks. Our sense is that, on average, technology stocks
will, despite considerable volatility, perform well during 2000. There will be a
major difference from 1999, however. During 1999, the flow of capital into
technology stocks was bountiful and, perhaps, indiscriminate. Many technology
stocks attracted funds even in the absence of actual profits, expected profits
or even revenues.
During 2000, however, while earnings growth will remain large and capital
will continue to flow into the technology sector, the funds will flow into the
sector in a much more judicious manner. There will be some big winners and
perhaps many big losers. This outcome would not be unexpected because many of
these new corporations were fundamentally venture capital companies which were
able to conduct IPOs only because of the bountiful and indiscriminate capital
flows. The easy money in this sector is gone; it's time for the pros.
Regards,
/s/ Frank J. Jones, Ph.D.
Frank J. Jones, Ph.D.
President, The Park Avenue Portfolio
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THE PARK AVENUE PORTFOLIO
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Table of Contents
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PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
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THE GUARDIAN PARK AVENUE FUND 2 21
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THE GUARDIAN PARK AVENUE SMALL CAP FUND 6 24
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THE GUARDIAN ASSET ALLOCATION FUND 8 27
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THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND 10 28
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THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND 12 30
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THE GUARDIAN INVESTMENT QUALITY BOND FUND 14 33
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THE GUARDIAN HIGH YIELD BOND FUND 16 35
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THE GUARDIAN TAX-EXEMPT FUND 18 38
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THE GUARDIAN CASH MANAGEMENT FUND 20 40
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FINANCIAL STATEMENTS 42
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NOTES TO FINANCIAL STATEMENTS 50
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FINANCIAL HIGHLIGHTS 60
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The Guardian Park Avenue Fund
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[PHOTO OMITTED] [PHOTO OMITTED]
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 DECEMBER 31, 1999: $3,842,485,476
Q. HOW DID THE FUND PERFORM IN 1999?
A. For an unprecedented fifth consecutive year, The Guardian Park Avenue Fund
had a return of more than 20%. The Fund earned a total return of 30.25%1 for the
year compared to 21.04% for the S&P 500 Index,2 a margin of 9.21%. Once again,
this was a year of high volatility in the stock market. As the year began, there
was continuing concern about the global financial crisis as Brazil's economy
became only the latest to get crushed. By spring, however, it became apparent
that a global recovery was under way, particularly in some of the hardest hit
areas of Asia, such as Korea. By year-end the concern had shifted 180 degrees:
financial markets had come to believe the real threat was too high a rate of
growth, which could potentially re-ignite inflation. All year the market
continued to compress major moves--which had once taken years--into a matter of
months.
Once again, the market also retained its narrow focus. In fact, according
to Merrill Lynch,3 half of the S&P 500 stocks actually were down on the year.
The S&P 500's equally weighted index was up only 11.6%, a little over half of
the S&P 500 Index, which is weighted by the market capitalization of the
companies included in the Index. While real estate and other value stocks got
decimated, technology stocks soared. The rapid spread of the Internet and
improvements in networking and mobile communications as well as preparations for
Y2K spurred huge demand for technology. The NASDAQ Composite Index,4 viewed now
as a proxy for large technology stocks, was up 86%, with much of that coming
late in the year.
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"The main factors contributing to our good performance in 1999 were our
assessments that technology and growth stocks would do well. We were
overweighted in technology stocks all year and continued that posture heading
into 2000."
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Q. WHAT FACTORS AFFECTED PERFORMANCE IN 1999?
A. The main factors contributing to our good performance in 1999 were our
assessments that technology and growth stocks would do well. We were
overweighted in technology stocks all year and continued that posture heading
into 2000. Technology stocks began to rally in the fall of 1998 and by late
winter many market strategists believed that their run was over.
In less than two weeks in mid-April, cyclical and deep value
stocks--stocks which are normally poor performers but can make large increase in
value when the economy expands--had their biggest rally in a quarter-century,
and the technology rally looked like history. After an intensive review of our
portfolio in early summer, we decided to remain with our basic position. The
biggest change we made was adding a heavier weighting of mid-and small cap
stocks to the mix and we continued that through year-end. The addition of Yahoo!
to the S&P 500 in December brought the S&P 500's pure Internet weighting (along
with America Online) to almost 2.5%, reflecting the market's assessment of the
powerful transformation of the U.S. economy.
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(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. 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) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment and its
returns do not reflect the fees and expenses that have been deducted from
the Fund. Likewise, return figures for the S&P 500 Index do not reflect
any sales charges that an investor may have to pay when purchasing or
redeeming shares of the Fund.
(3) From Merrill Lynch "Style Performance Monitor," January 7, 2000
(4) The NASDAQ Composite Index is a broad-based capitalization-weighted index
of all NASDAQ National Market Stocks. The NASDAQ Composite 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 Index do not reflect any sales charges that an investor
may have to pay when purchasing or redeeming shares of the Fund.
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2
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Q. WHAT STRATEGIES DO YOU USE TO MANAGE THE FUND?
A. We have for many years employed a combination of quantitative techniques and
fundamental judgements. We believe that this is the best way to achieve
consistently outstanding returns. As always, we continue to refine our growing
cluster of quantitative techniques. With a fast-changing economy and volatile
market, managers need to constantly explore new strategies and be alert to
declining effectiveness of older techniques. The rapid changes in the economy
are affecting nearly all industries and our analysts attempt to keep up with the
most important developments in such far-flung areas as telecommunications,
genomics (the study of genetics and DNA) and the Internet, as well as the
ramifications for older industries.
Q. WHAT DO YOU ENVISION FOR THE STOCK MARKET IN 2000?
A. Now that all the millennium hoopla has died down and Y2K's passage proved
uneventful, we look forward to another interesting year. The first few weeks of
the year had more volatility and excitement compressed into them than many prior
years. Once again, the financial markets focus intensely on the Federal Reserve
Board, with most people expecting from one to three more rate increases.
Overall, the economy remains robust, with growth accelerating and inflation
subdued even as this expansion becomes the longest in U.S. history. The
valuation in the stock market is high for the narrow group of leaders but their
growth and profitability are also exceptionally high.
While the last five years have been the best in modern stock market history
and volatility remains near a historic high, we continue to be optimistic. Most
importantly, the economy remains in the best shape it's been in since the 1960s.
Innovation is flourishing at the most rapid pace in perhaps a century and the
prospects for peace around the world are the brightest in a long time. Under
these circumstances, we find it hard to be pessimistic about the stock market.
The Guardian Park Avenue Fund
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TOP TEN HOLDINGS AS OF DECEMBER 31, 1999
COMPANY PERCENT OF TOTAL NET ASSETS
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1. Microsoft Corp. 5.56%
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2. Intel Corp. 2.45%
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3. Int'l. Business Machines 2.08%
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4. Wal-Mart Stores, Inc. 1.84%
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5. General Electric Co. 1.81%
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6. America Online, Inc. 1.76%
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7. Citigroup, Inc. 1.63%
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8. EMC Corp. 1.50%
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9. Motorola, Inc. 1.46%
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10. Oracle Corp. 1.45%
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3
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The Guardian Park Avenue Fund
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SECTOR WEIGHTINGS OF
COMMON STOCKS HELD
BY THE FUND ON DECEMBER 31, 1999
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
CREDIT CYCLICALS 0.15%
TRANSPORTATION 0.69%
UTILITIES 0.84%
BASIC MATERIALS 1.58%
CAPITAL GOODS 1.84%
CASH 3.34%
ENERGY 5.21%
FINANCIALS 7.37%
CONSUMER CYCLICALS 7.68%
CONSUMER SERVICES 7.75%
CONSUMER STAPLES 7.97%
TELECOMMUNICATIONS 18.18%
TECHNOLOGY 37.40%
<TABLE>
<CAPTION>
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AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED DECEMBER 31, 1999
Inception Since
Date 1 Year 5 Years 10 Years Inception
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<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 6/1/72 24.39% 28.14% 19.33% 17.18%
At Net Asset Value (without sales charge) 30.25% 29.33% 19.88% 17.38%
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Class B Shares (with sales charge) 5/1/96 26.13% N/A N/A 27.15%
At Net Asset Value (without sales charge) 29.13% N/A N/A 27.44%
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S&P 500 Index 21.04% 28.51% 18.17% 13.96%
(since 6/1/72)
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</TABLE>
(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.
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4
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The Guardian Park Avenue Fund
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GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
1999
The Guardian Park Avenue Fund (Class A) $814,470
S&P 500 Index $375,338
Cost of Living $ 40,566
PERFORMANCE FOR CLASS B SHARES, WHICH WERE FIRST OFFERED ON MAY 1, 1996, WILL
VARY DUE TO DIFFERENCES IN SALES LOAD AND OTHER EXPENSES CHARGED TO SUCH SHARE
CLASS.
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 $814,470 on December 31, 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 Index, a similar hypothetical investment
would now be worth $375,338. 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.
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5
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The Guardian Park Avenue Small Cap Fund
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Larry Luxemberg, 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 DECEMBER 31, 1999: $141,461,735
Q. HOW DID THE FUND PERFORM IN 1999?
A. The Guardian Park Avenue Small Cap Fund outperformed the Russell 2000
Index(1) by 15.21% in 1999, providing a total return of 36.56%(2) versus 21.35%
for the index. But it was a year in two parts. The first six months of 1999 were
extraordinarily difficult, marked by rapid sector rotation, a lack of
leadership, and continued investor bias toward large capitalization companies.
At mid-year the Fund significantly lagged the benchmark. However, a completely
different picture began to emerge in August. Technology stocks, which had been
quiescent for months, started an upward march and gained momentum through
year-end. At the same time, small cap stocks, which looked relatively
undervalued and/or offered opportunities to participate in the New Economy,
began to overtake their large cap counterparts. The combination helped vault The
Guardian Park Avenue Small Cap Fund ahead of the benchmark for the year.
Q. WHAT WAS THE INVESTMENT STRATEGY FOR THE FUND?
A. The strategy of the Fund has always been to provide consistent, long-term
out performance through a variety of tools, including fundamental analysis and
quantitative models. We applied this formula throughout the year. From a sector
standpoint, we made several bets that paid off handsomely. By late spring, we
realized that the Internet was transforming the US economy. Accordingly, we
overweighted sectors that we believed would benefit from the exploding demand
for high-speed data, including optical networking, fiber channel, telecom, and
cable. Within the Internet universe, we invested in companies that were enabling
the New Economy in many ways, including: building out the Web and facilitating
the delivery of content; providing services such as Web hosting, applications
hosting, and e-mail to corporations; developing Web-centric software; operating
business-to-business trading communities; and providing Web-based procurement.
And finally, we invested heavily in radio, which has reaped the benefits of
Internet brand-building. At mid-year, technology represented approximately 25%
of the portfolio; at year-end technology topped 35% with telecom at 12.6% and
broadcasting at 9.4%.
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"The strategy of the Fund has always been to provide consistent, long-term
outperformance through a variety of tools, including fundamental analysis and
quantitative models."
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Q. WHAT IS YOUR OUTLOOK FOR 2000?
A. We see more of the same for 2000. In technology, we are backing the same
themes with a bias toward software providers, which should benefit as corporate
information technology spending is redirected from Y2K to upgrading internal and
Web-based systems. In telecom, we are focusing on the "last mile" (e.g., Digital
Subscriber Line [DSL] providers and cable companies) as well as wireless and
satellite companies. We are also adding to our biotech exposure. Although we are
significantly underweighted in financials, we will add if the interest rate
backdrop becomes more benign. We believe it is an extraordinary time for small
cap investors. The emergence of the New Economy and companies formed to address
its specific requirements has created unprecedented opportunities.
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(1) 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.
(2) 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 an principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost.
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6
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The Guardian Park Avenue Small Cap Fund
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GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
12/99
The Guardian Park Avenue Small Cap Fund (Class A) $16,666
The Guardian Park Avenue Small Cap Fund (Class B) $16,928
Russell 2000 Index $16,152
To give you a comparison, the chart above shows the performance of a $10,000
investment made in Class A and Class B shares of The Guardian Park Avenue Small
Cap Fund and the Russell 2000 Index. The starting point of $9,550 for Class A
shares reflects the maximum sales charge of 4.5% that an investor may have to
pay when purchasing shares of the Fund. For Class B shares the contingent
deferred sales charge of 3% was imposed at the end of the period. The Index and
Class B shares begin at $10,000.
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TOP TEN HOLDINGS AS OF DECEMBER 31, 1999
COMPANY PERCENT OF TOTAL NET ASSETS
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1. VeriSign, Inc. 1.78%
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2. Zale Corp. 1.73%
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3. Citadel Comm. Corp. 1.71%
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4. BJ's Wholesale Club, Inc. 1.65%
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5. Valassis Comm., Inc. 1.56%
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6. Applied Micro Circuits Corp. 1.33%
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7. CMGI, Inc. 1.33%
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8. Exodus Comm., Inc. 1.31%
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9. SDL, Inc. 1.25%
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10. Xilinx, Inc. 1.25%
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SECTOR WEIGHTINGS OF COMMON STOCKS
HELD BY THE FUND AS OF DECEMBER 31, 1999
[GRAPHIC OMITTED]
[The following table was represented as a pie chart in the printed materials.]
CAPITAL GOODS 1.17%
BASIC MATERIALS 1.76%
ENERGY 2.84%
CREDIT CYCLICALS 2.18%
UTILITIES 3.99%
CASH 4.57%
CONSUMER STAPLES 6.05%
FINANCIALS 9.13%
CONSUMER CYCLICALS 9.26%
CONSUMER SERVICES 13.84%
TELECOMMUNICATIONS 12.32%
TECHNOLOGY 32.89%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(2) FOR PERIODS ENDED DECEMBER 31, 1999
Inception Since
Date 1 Year Inception
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares (with sales charge) 5/1/97 30.56% 20.92%
At Net Asset Value (without sales charge) 36.56% 23.03%
- -------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 32.44% 20.01%
At Net Asset Value (without sales charge) 35.29% 20.56%
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Asset Allocation Fund
- ----------------------------------
[PHOTO OMITTED]
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 DECEMBER 31, 1999: $267,945,267
Q. HOW DID THE FUND PERFORM IN 1999?
A. For the year ending December 31, 1999, the Fund's return was 12.99%(2),
placing it a bit above the average 12.55% return of funds with similar
objectives and policies in the Lipper(2) universe. This return also compares
favorably to the 11.98% return from the Fund's passive composite benchmark (60%
of the S&P 500 Index(3) and 40% of the Lehman Aggregate Bond Index(4) rebalanced
monthly). Since its inception on February 16, 1993, the Fund's annualized return
of 15.69% places its slightly ahead of the annualized return of 15.36%
experienced by the passive composite benchmark.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. This was yet another year in which the equity market did very well, at least
if you were in the right place at the right time. The overall market, as
measured by the S&P 500 Index, achieved a total return of 21.04% during 1999,
but the real story was being played out in the NASDAQ(5) over- the-counter
market, which returned a staggering 86.13%.
The Fund's equity allocations proved, after the fact, to be overly
conservative since we reduced our equity position to below our neutral 60% level
in May. Fortunately, our underlying equity portfolio (which is, in fact, The
Guardian Park Avenue Fund) performed so well that we were able to overcome our
caution with respect to equity exposure. We encourage the reader to read the
annual review contained herein for The Guardian Park Avenue Fund for greater
detail.
- --------------------------------------------------------------------------------
"We manage the Fund using disciplined techniques that continue to focus our
attention on the variables that are critical to the markets."
- --------------------------------------------------------------------------------
Q. WHAT ARE YOUR EXPECTATIONS FOR THE COMING YEAR?
A. Our investing will, of course, continue to be guided by our quantitative
model which, as of year-end, has us invested 20% in stocks, 46% in bonds and 34%
in cash. This is the lowest level of stock exposure that we have ever held, and
it is not a position that we take lightly.
It would be easy and, perhaps, more entertaining to throw up concerns like
the recent resignation of Boris Yeltsin, the skyrocketing price of oil or the
surprising weakness of the Euro, in considering the coming year. We manage the
Fund using disciplined techniques that continue to focus our attention on the
variables that are critical to the markets. In particular, while interest rates
have risen considerably, the equity market has ignored that fact. Historically,
this has not been a harbinger of strong equity returns and we feel that the
risk/return tradeoff now favors bonds.
- ----------
(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) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service. Its database of performance information is based on
historical total returns, which assume the reinvestment of dividends and
distributions, and the deduction of all fund expenses. Lipper returns do
not reflect the deduction of sales loads, and performance would be
different if sales loads were deducted.
(3) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment, and
its returns do not reflect the fees and expenses that have been deducted
from the Fund. Likewise, return figures for the S&P 500 Index do not
reflect any sales charges that an investor may have to pay when purchasing
or redeeming shares of the Fund.
(4) 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.
(5) The NASDAQ Composite Index is a broad-based capitalization-weighted index
of all NASDAQ National Market Stocks. The NASDAQ Composite 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 Index do not reflect any sales charges that an investor
may have to pay when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Asset Allocation Fund
- ----------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
S&P 500 Index $38,171
The Guardian Asset Allocation Fund (Class A) $26,003
Lehman Aggregate Bond Fund Index $15,105
To give you a comparison, the chart above shows the performance of a $10,000
investment made in Class A shares of The Guardian Asset Allocation Fund, the S&P
500 Index and the Lehman Aggregate Bond Index. The starting point of $9,550 for
Class A shares reflects the maximum sales charge of 4.5% that an investor may
have to pay when purchasing Class A shares of the Fund. Each Index begins at
$10,000.
PERFORMANCE FOR CLASS B SHARES, WHICH WERE FIRST OFFERED ON MAY 1, 1996, WILL
VARY DUE TO DIFFERENCES IN SALES LOAD AND OTHER EXPENSES CHARGED TO SUCH SHARE
CLASS.
PORTFOLIO COMPOSITION BY
ASSET CLASS AS OF DECEMBER 31, 1999
[GRAPHIC OMITTED]
[The following table was represented as a pie chart in the printed material.]
STOCKS 20%
BONDS 46%
CASH 34%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED DECEMBER 31, 1999
Inception Since
Date 1 Year 3 Years 5 Years Inception
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 2/16/93 7.91% 17.04% 18.84% 14.92%
At Net Asset Value (without sales charge) 12.99% 18.85% 19.94% 15.69%
- -------------------------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 9.08% 27.08% N/A 27.15%
At Net Asset Value (without sales charge) 12.09% 27.49% N/A 27.44%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford International Fund
- -----------------------------------------------
[PHOTO OMITTED]
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 DECEMBER 31, 1999: $164,350,016
Q. HOW DID THE FUND PERFORM?
A. The Fund performed well in 1999. The total return for the year was 37.21%,(1)
compared with the total return of 27.30% of the MSCI EAFE Index.(2) Most
international markets were strong. The major European markets benefited from an
upturn in economic activity in the region, while the Japanese market was strong
as the country moved to sort out the problems of its financial sector, which
until recently has been weak. In local currency terms (Pound Sterling), the
total return of the MSCI Europe ex-UK Index(3) was 37.04%, while in Yen terms,
the MSCI Japan Index(4) total return was 46.79%. However, currency fluctuations
had a major influence upon returns for the U.S. investor. The Euro, which was
launched at the beginning of the year, was weak against the Dollar, and the MSCI
Europe ex-UK Index3 had a total return of only 17.84% when expressed in Dollars.
In contrast, the Japanese Yen was surprisingly strong, and in Dollar terms the
MSCI Japan Index had a 61.77% total return.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. The Fund outperformed the MSCI EAFE Index for a number of reasons. Baillie
Gifford specializes in picking good businesses in which to invest. We conduct a
fundamental analysis of the prospects for a company, and usually meet with the
management, before we consider whether or not to purchase its stock. In 1999, we
had a good year at picking businesses, especially in two specific areas. Those
areas were the telecommunications sector, where the Fund had an above Index
exposure to mobile telephone network companies, and in Japan, where the stocks
held by the Fund did significantly better than the MSCI Japan Index.
- --------------------------------------------------------------------------------
"Baillie Gifford specializes in picking good businesses in which to invest. We
conduct a fundamental analysis of the prospects for a company, and usually meet
with the management, before we consider whether or not to purchase its stock. In
1999, we had a good year at picking businesses."
- --------------------------------------------------------------------------------
Q. WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A. We still believe that inflation is likely to remain very low by historical
standards, but we have become increasingly concerned about interest rates. We
think that the cautious rate rises which began last year in Europe and the U.S.
will continue, and that this may prove unsettling for markets in the early part
of this year.
Markets have become very narrow, and their leading stocks are very
vulnerable to a setback, especially if a bout of uncertainty about the path of
interest rates provides an excuse to take profits. Nevertheless, we are
confident that the long term earnings prospects of our investments are strong
and that the central banks of the world are determined to pre-empt inflation.
This is a good background for investment in the longer term. In the meantime, it
continues to be our responsibility to search for good investments among the many
stocks that were left behind by 1999's amazing rally.
- ----------
(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) Index is an unmanaged index that is generally considered to be
representative of international stock market activity. The MSCI EAFE Index
is not available for direct investment and the returns do not reflect the
fees and expenses that have been deducted from the Fund's return.
(3) 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.
(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.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford International Fund
- ----------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF DECEMBER 31, 1999
COMPANY PERCENT OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
1. Mannesmann AG 4.10%
- --------------------------------------------------------------------------------
2. Nokia OYJ 3.96%
- --------------------------------------------------------------------------------
3. NTT Mobile Comm. Network, Inc. 3.72%
- --------------------------------------------------------------------------------
4. Fujitsu Ltd. 2.94%
- --------------------------------------------------------------------------------
5. Sonera OYJ 2.29%
- --------------------------------------------------------------------------------
6. LM Ericsson 2.15%
- --------------------------------------------------------------------------------
7. Rohm Co. 2.00%
- --------------------------------------------------------------------------------
8. Hitachi 1.97%
- --------------------------------------------------------------------------------
9. Total Fina S.A. 1.77%
- --------------------------------------------------------------------------------
10. Nippon Tele. & Tel. Corp. 1.72%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY GEOGRAPHIC LOCATION
AS OF DECEMBER 31, 1999
[GRAPHIC OMITTED]
[The following table was represented as a pie chart in the printed material.]
Cash 1.5%
Pacific ex Japan 7.1%
UK 15.1%
Japan 29.2%
Europe ex UK 47.1%
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
The Guardian Baillie Gifford International Fund (Class A) $28,459
MCSI/EAFE Index $26,584
To give you a comparison, the chart above shows the performance of a $10,000
investment made in Class A shares of The Guardian Baillie Gifford International
Fund and the MSCI/EAFE Index. The starting point of $9,550 for Class A shares
reflects the maximum sales charge of 4.5% that an investor may have to pay when
purchasing shares of the Fund. The Index begins at $10,000.
PERFORMANCE FOR CLASS B SHARES, WHICH WERE FIRST OFFERED ON MAY 1, 1996, WILL
VARY DUE TO DIFFERENCES IN SALES LOAD AND OTHER EXPENSES CHARGED TO SUCH SHARE
CLASS.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED DECEMBER 31, 1999
Inception Since
Date 1 Year 3 Years 5 Years Inception
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 2/16/93 31.04% 20.30% 17.21% 16.45%
At Net Asset Value (without sales charge) 37.21% 22.16% 18.29% 17.23%
- --------------------------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 33.16% 20.34% N/A 17.74%
At Net Asset Value (without sales charge) 36.16% 20.80% N/A 18.09%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
[PHOTO OMITTED]
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 DECEMBER 31, 1999: $35,259,494
Q. HOW DID THE FUND PERFORM IN 1999?
A. 1999 has proved to be an excellent year for the emerging markets. The total
return for the MSCI Emerging Markets Free (EMF) Index(1) was 66.4% over the 12
months; our Fund outperformed, returning 69.91%.(2) Latin America has made up
some lost ground during the last three months, so the disparity in performance
between the main emerging regions, Latin America, Asia and Central Europe, is
not nearly as great as it has been in previous years. There have been some
conspicuous winners (Korea up 92.4% and Malaysia up 114.3%, for example) and
some very disappointing performances (the Czech Republic and Hungary have done
particularly badly), but the most striking divergences in returns have been
between industries rather than between countries.
Q. WHAT FACTORS HAVE AFFECTED THE FUND'S
PERFORMANCE?
A. We have found that sectoral themes have played an increasing role in our
analysis. Our investments in India, for example, depend more for their success
on the prospects for software and the Internet than on the ponderous progress of
the Indian economy.
Geographical factors remain very important; however, there is still plenty
of scope for politicians to get things wrong. In Asia, where many of the leading
high tech companies are based, a divide is materializing. The northern
economies, especially Korea, Taiwan, Hong Kong and China, are motoring ahead,
while the southerners, especially Thailand, Malaysia and the Philippines, are
certainly recovering, but their longer term prospects are less exciting.
Our view is that the current technology-led rally has further to go, and
that most of the sectors, companies and countries which have been left behind
still have little attraction, despite their historically significant levels of
underperformance.
In Latin America, Mexico is doing very well; the economy was growing at a
4.6% rate in the third quarter, powered by a 17% surge in exports to its
northern neighbor. Mexico's proximity to the U.S. is likely to make it the best
bet of the Latin markets. The apparent loss of momentum in the reform process in
Brazil is overshadowing the rest of the region at the moment.
- --------------------------------------------------------------------------------
"The emerging markets are beneficiaries of accelerating world growth. With
recovery in Europe and Asia, and little evidence that the U.S. is slowing down,
conditions are very favorable."
- --------------------------------------------------------------------------------
Turning to Europe, the central part of the region has underperformed most
other emerging markets this year. Russia's problems, sluggish growth in Germany
and persistent inflation explain part of this, but the main reason is that there
has been more excitement elsewhere. The region lacks a well-developed technology
sector. The most exciting market in this part of the world is Turkey, where the
government, with IMF backing, is introducing tough reforms, and interest rates
are falling as a result.
Q. WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A. The emerging markets are beneficiaries of accelerating world growth. With
recovery in Europe and Asia, and little evidence that the U.S. is slowing down,
conditions are very favorable. Until the central banks of the developed world
apply firm pressure on the brakes, the emerging markets in general should
continue to do well. We are focusing the portfolio on those businesses,
especially in Asia, which have sustainable competitive advantages.
- ----------
(1) The Morgan Stanley Capital International (MSCI) Emerging Markets Free
(EMF) Index 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.
(2) 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.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford Emerging Markets Fund
- --------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF DECEMBER 31, 1999
PERCENT
OF TOTAL
COMPANY NET ASSETS
- --------------------------------------------------------------------------------
1. Infosys Technology Ltd. ADR 4.68%
- --------------------------------------------------------------------------------
2. UTI Int'l. Ltd. 4.27%
- --------------------------------------------------------------------------------
3. Samsung Electronics 2.86%
- --------------------------------------------------------------------------------
4. Telefonos de Mexico S.A. ADR 2.65%
- --------------------------------------------------------------------------------
5. United Micro Electronic 2.29%
- --------------------------------------------------------------------------------
6. MIH Ltd. Tortola 1.92%
- --------------------------------------------------------------------------------
7. Korea Thrunet Co. Ltd. 1.89%
- --------------------------------------------------------------------------------
8. Indian Opportunity Fund 1.67%
- --------------------------------------------------------------------------------
9. Taiwan Semiconductor 1.57%
- --------------------------------------------------------------------------------
10. Haci Omer Sabanci Hldgs. S.A. ADR 1.57%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY GEOGRAPHIC LOCATION
AS OF DECEMBER 31, 1999
[GRAPHIC OMITTED]
[The following table was represented as a pie chart in the printed material.]
Pacific ex Japan 51.0%
Latin America 28.0%
Europe 10.7%
South Africa 6.5%
Cash 3.8%
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
The Guardian Ballie Gifford Emerging Markets Fund (Class A) $10,431
The Guardian Ballie Gifford Emerging Markets Fund (Class B) $10,595
MSCI EMF Index $10,107
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(2) FOR PERIODS ENDED DECEMBER 31, 1999
Inception Since
Date 1 Year Inception
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares (with sales charge) 5/1/97 59.60% 1.60%
At Net Asset Value (without sales charge) 69.91% 3.37%
- --------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 62.37% 2.68%
At Net Asset Value (without sales charge) 65.37% 3.40%
- --------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Investment Quality Bond Fund
- -----------------------------------------
[PHOTO OMITTED] [PHOTO OMITTED]
Thomas G. Sorell, C.F.A. Howard W. Chin
Co-Portfolio Manager Co-Portfolio Manager
Q. HOW DID THE FUND PERFORM DURING 1999?
A. The Fund had a total return of -1.02%(1) for the year ended December 31,
1999, outperforming the average fund in our Lipper Intermediate Investment Grade
peer group by 0.29%, which returned -1.31%(2) for the year. 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) which is not available for direct investment, returned
- -0.82% in 1999.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. The year 1999 saw a reversal of fortunes in the fixed income market, as many
of the factors that caused the sharp outperformance of Treasuries in 1998
(relative to the spread sectors, namely corporate bonds, mortgage and
asset-backed securities and agency debt) diminished as the year progressed.
First and foremost, the three interest rate reductions undertaken by the Federal
Reserve in 1998 to inject liquidity and restore confidence during that year's
global and domestic financial crises were fully reversed. Amidst concerns that
the domestic economy was growing at an unsustainably strong rate, the Fed
increased the Fed Funds rate by 0.75% in a series of three tightenings over the
course of 1999. Furthermore, the prospects for the overseas economies improved
in 1999, so the demand for Treasuries as a safe haven eased as well.
As a result of these combined effects, Treasury yields rose substantially. The
yield on the 2-year Treasury note increased by over 1.70% to finish 1999 at a
6.24% yield, while the 30-year bond increased by nearly 1.40% to 6.48%. Putting
this into perspective, the Treasury component of the Lehman Aggregate Bond Index
returned -2.56% in 1999, after turning in a 10.03% performance in 1998. This
sharp reversal was the primary reason that the overall Lehman Aggregate Bond
Index experienced a -0.82% return in 1999, a negative return for only the second
time in Index history. In fact, during the 1990s, the Lehman Aggregate Bond
Index, which is representative of the overall fixed income market, earned an
average annual return of 7.88%.
- --------------------------------------------------------------------------------
"Speaking more broadly, the last two years are excellent examples of the benefit
of owning a well-diversified bond fund."
- --------------------------------------------------------------------------------
Even though Treasuries performed poorly in 1999, the spread sectors
enjoyed a very good year as their performance cushioned much of the weakness
experienced in the Treasury sector. For example, the two major spread sectors in
the Lehman Index, corporate bonds and mortgage-backed securities (MBS), both
outperformed Treasuries handily, returning 1.75% and 1.13%, respectively, over
comparable-duration Treasuries. The corresponding averages for the 1990s were
0.43% and 0.32%, respectively.
Speaking more broadly, the last two years are excellent examples of the
benefit of owning a well-diversified bond fund. In 1998, the Fund posted a good
performance in nominal terms due to the strong performance of Treasuries, but
the performance of the spread sectors was very disappointing. On the other hand,
in 1999, the Fund's performance was negative on a nominal basis due to the
increase in overall yields, but was somewhat offset by the exceptional
performance of the spread sectors. In both cases though, the Fund's performance
benefited from our focus on asset allocation.
Much of the spread sectors' outperformance occurred in the first and
fourth quarters. All spread assets were very undervalued coming into 1999 as a
result of 1998's financial turmoil, but as investor concerns eased, spread
assets came back into favor, and turned in a strong performance in the first
quarter. Part of this strong performance was eroded during 1999's middle
quarters, as the prospect of higher interest rates dampened the demand for fixed
income assets in general. However, this weakness proved to be temporary. The
rise in yields greatly mitigated many fears of prepayment risk in MBS and
additional supply in corporates, and as concerns over Y2K diminished, spread
sectors outperformed in the fourth quarter and experienced a strong year
overall.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE YEAR?
A. Despite the fixed income market's second-worst performance (and only second
negative-return year) since the inception of the Lehman Aggregate Index in 1976,
the Fund compared favorably to the average fund in the Lipper peer group as the
result of a successful asset allocation strategy. We strongly favored spread
assets over Treasuries for much
- ----------
(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%. 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.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
of the year, and at one point, we reduced our Treasury exposure to its lowest
level in several years.
We believed that all spread assets were still undervalued at the end of
1998, and entered 1999 in a significantly overweighted position in both
corporates and MBS. This posture served us well as these sectors outperformed in
the first quarter. Following some continued strong performance by spread assets,
we reduced our exposure to corporate bonds and decreased the duration of our MBS
holdings in the second quarter as these sectors became less attractive on a
risk/return basis, especially in the context of anticipated Fed tightenings.
After some subsequent weakening in these sectors, we resumed our strategy of
overweighting spread sectors after determining that the weakening had left them
fundamentally undervalued once again. Unfortunately, this move proved to be
somewhat early as the sectors weakened further in the third quarter in the wake
of the market's reduced liquidity and increased volatility. Nonetheless, our
exposure left the Fund well-poised going forward. In fact, both corporates and
MBS outperformed comparable duration Treasuries in each of the last four months
of 1999, as measured by the Lehman Index.
The Fund's performance in 1999 was a result of our overweighted positions
in spread product, but it was further enhanced by our security selection.
Specifically, given our positive outlooks on both the economy and the corporate
profit picture, we increased our exposure to lower-rated investment grade bonds,
which subsequently returned more than their higher-rated counterparts. In
addition, we rebalanced our holdings in the MBS sector in favor of higher coupon
(and higher yielding) mortgage passthroughs, since the higher rate and lower
volatility environments improved their risk/return outlook and reduced the need
for the prepayment protection in discount securities.
Q. WHAT IS YOUR OUTLOOK FOR 2000?
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 Treasury securities. We will continue to focus on monitoring
and balancing these risks by actively adjusting our asset allocations as
appropriate, consistent with our views on relative sector valuations. We will
not take interest rate bets, but we do recognize that the market may be facing
the end of the decline in rates that has been in place since the 1980s. In any
event, our goal will remain to identify attractive investment opportunities that
will allow us to maximize returns in the context of a well-diversified
portfolio.
- --------------------------------------------------------------------------------
The Guardian Investment Quality Bond Fund
- -----------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
Lehman Aggregate Bond Index $15,104
The Guardian Investment Quality Bond Fund $13,347
To give you a comparison, the chart above shows the performance of a $10,000
investment made in The Guardian Investment Quality Bond Fund and the Lehman
Aggregate Bond Index. The starting point of $9,550 for the Fund reflects the
maximum sales charge of 4.5% that an investor may have to pay when purchasing
shares of the Fund. The Index begins at $10,000.
RECENT ASSET ALLOCATION STRATEGY
(% MARKET VALUE, TOTAL AT QUARTER END)
[BAR CHART OMITTED]
[The following table was depicted as a bar chart in the printed material.]
[PLOT POINTS TO COME]
* Cash as a percentage of net assets excluding commercial paper and
repurchase agreements matched against forward mortgage purchases and
reverse repurchase agreements.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED DECEMBER 31, 1999
Inception Since
Date 1 Year 3 Years 5 Years Inception
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 2/16/93 -5.47 3.41% 5.78% 4.27%
At Net Asset Value (without sales charge) -1.02 5.01% 6.76% 4.97%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
The Guardian High Yield Bond Fund
- ---------------------------------
[PHOTO OMITTED] [PHOTO OMITTED]
Peter J. Liebst Thomas G. Sorrell, C.F.A.
Co-Portfolio Manager Co-Portfolio Manager
OBJECTIVE: Seeks current income. Capital appreciation is a secondary objective.
PORTFOLIO: At least 75% of the value of the Fund's assets is invested in
corporate bonds and other debt securities that, at the time of
purchase, are rated below investment grade.
INCEPTION: September 1, 1998
NET ASSETS AT DECEMBER 31, 1999: $57,361,696
Q. HOW DID THE FUND PERFORM DURING 1999?
A. The Guardian High Yield Bond Fund posted a -0.63% return(1) for the calendar
year 1999. This compared to a 4.78% return for the 339 funds tracked by Lipper
Analytical Services,(2) and a 3.59% return for the overall high yield market as
measured by the Donaldson, Lufkin & Jenrette (DLJ) High Yield Index.(3)
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. While the Fund's emphasis on higher quality obligors contributed to an
under-performance compared to the overall high yield market, we did not consider
it prudent to accept additional credit risk during a period of rising defaults
and Treasury rates.
1999 was a challenging year for fixed income investors. Reversing its 1998
actions, the Federal Reserve in 1999 raised rates in an effort to address what
it believed to be an unsustainable level of growth in the U.S. economy. In a
series of three actions, the Federal Reserve raised the Fed Funds rate a total
of 0.75% during the year. These actions, combined with waning international
demand for U.S. Treasuries, resulted in a 1.79% rise in the 10 year Treasury
yield, which ended the year at 6.44%. Total return for the 10 year Treasury was
- -8.43% for the year.
Despite this dismal performance of the Treasury market, the high yield
market was able to outperform all fixed income asset classes with a total return
of 3.59% for the year 1999. This compares to its average annual return of 11.1%
over the last decade. Not only was this a notable return compared to that of the
10 year Treasury, but comparing the high yield market's performance to other
spread-sensitive fixed income asset classes such as corporate bonds and mortgage
and asset-backed securities, it exceeded the -1.96% annual return posted by the
investment grade corporate bonds, as measured by the Lehman Corporate Index,4
and the 1.86% returned by fixed rate mortgage backed securities (MBS), as
measured by the Lehman MBS Fixed Rate Index.5 In general, the high yield market
benefited during the year from a 0.91% tightening in average spread which left
the year-end average yield at 11.91% for the high yield market.
- --------------------------------------------------------------------------------
"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."
- --------------------------------------------------------------------------------
While numerous factors influenced the performance of individual bonds
throughout 1999, there were some general themes exhibited by the market on the
whole. Of note was the continued growth in the influence of the media and
telecom sectors on the high yield market. Representing an estimated 34.9% of the
high yield market as of the end of 1999, the 9.36% return from these sectors was
a primary factor in the overall performance of the high yield market for 1999.
From a credit perspective, the high yield market saw a consistently higher
level of credit rating agency downgrades than upgrades throughout the year.
This, combined with a rising default rate which reached 4.02% at the end of
1999, resulted in a highly volatile market for any credit which released
negative financial or event-related news. In several situations, upon the
release of such news by an issuer, the market saw a precipitous drop in the
price of the respective bonds, often immediately to levels which typically are
equated with workout levels. Such a situation was
- ----------
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does 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) 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 DLJ High Yield Index is an unmanaged index that is generally
considered to be representative of the investable universe of the
US-dominated high yield debt market. The DLJ High Yield Index is not
available for direct investment, and the returns do not reflect the fees
that have been deducted from the Fund. Likewise, return figures for the
DLJ High Yield Index do not reflect any sales charges that an investor may
have to pay when purchasing shares of the Fund.
(4) The Lehman Corporate Bond Index is an unmanaged index that is generally
considered to be representative of corporate 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 Corporate Bond Index do not
reflect any sales charges that an investor may have to pay when purchasing
or selling shares of the Fund.
(5) The Lehman MBS Fixed Rate Index is an unmanaged index that is generally
considered to be representative of fixed-rate Mortgage Backed Security
(MBS) 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 Index do not
reflect any sales charges that an investor may have to pay when purchasing
or selling shares of the Fund.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
experienced with two of the Fund's holdings during 1999 and contributed to its
overall performance during the year. These situations exemplified the overall
markets underlying credit sensitivity and demand for liquidity.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE YEAR AND WHAT IS YOUR OUTLOOK
FOR THE FUTURE?
A. The Fund's overall strategy was to maximize the total return of a diversified
fixed-income portfolio principally composed of below investment grade securities
with up to 25% invested in convertible securities. 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. Throughout 1999, stronger credit quality and larger, more
liquid issues were overweighted with an underweighting in issuers operating in
cyclical industries. Investments in convertible securities were limited to 11.6%
during this period and were reduced to 2.2% at year-end. At year-end the Fund
remains cautious with regard to credit quality and liquidity and is therefore
overweighted in higher-rated issuers and continues to emphasize issues of larger
size. The strategy of underweighting cyclical industries will continue into 2000
while regularly reviewing and estimating each industry's total return potential.
- --------------------------------------------------------------------------------
The Guardian High Yield Bond Fund
- ---------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
The Guardian High Yield Bond Fund Class A $10,371
The Guardian High Yield Bond Fund Class B $10,534
Donaldson, Luftkin & Jenrette High Yield Index $10,645
To give you a comparison, the chart above shows the performance of a $10,000
investment made in Class A and Class B shares of The Guardian High Yield Bond
Fund and the Donaldson, Lufkin & Jenrette (DLJ) High Yield Index. The starting
point of $9,550 for Class A shares reflects the maximum sales charge of 4.5%
that an investor may have to pay when purchasing shares of the Fund. For Class B
shares the contingent deferred sales charge of 3% was imposed at the end of the
period. The Index and Class B shares begin at $10,000.
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF DECEMBER 31, 1999
COMPANY PERCENT OF TOTAL NET ASSETS
- --------------------------------------------------------------------------------
1. Pierce Leahy Corp. 1.85%
- --------------------------------------------------------------------------------
2. Hollywood Casino Corp. 1.82%
- --------------------------------------------------------------------------------
3. Twin Laboratories, Inc. 1.80%
- --------------------------------------------------------------------------------
4. Fox Liberty Networks LLC 1.78%
- --------------------------------------------------------------------------------
5. Globenet Comm. Group Ltd. 1.78%
- --------------------------------------------------------------------------------
6. Pegasus Comm. Corp. 1.76%
- --------------------------------------------------------------------------------
7. American Media Operations 1.75%
- --------------------------------------------------------------------------------
8. Stone Container Corp. 1.75%
- --------------------------------------------------------------------------------
9. Bell Sports, Inc. 1.74%
- --------------------------------------------------------------------------------
10. Premier Parks, Inc 1.73%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(2) FOR PERIOD ENDED DECEMBER 31, 1999
Inception Since
Date 1 Year Inception
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares (with sales charge) 9/1/98 -5.10 3.33%
At Net Asset Value (without sales charge) -0.63 6.97%
- --------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 9/1/98 -4.73 3.36%
At Net Asset Value (without sales charge) -1.78 5.58%
- --------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Tax-Exempt Fund
- ----------------------------
[PHOTO OMITTED]
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 DECEMBER 31, 1999: $97,907,828
Q. HOW DID THE GUARDIAN TAX-EXEMPT FUND PERFORM DURING 1999?
A. The Fund produced a total rate of return of -3.29%(1) for 1999. The overall
total rate of return for the universe of municipal bond funds, as measured by
the Lipper General Municipal Debt Index,(2) declined by -4.07%. Thus, the Fund
had a return 0.78% better than the comparison index. This performance placed The
Guardian Tax-Exempt Fund in Lipper's 17th percentile, ranking it 45 out of 265
funds. The Lehman Municipal Bond Index,(3) which does not include expenses and
includes all bonds regardless of maturity, declined by -2.06%.
Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A. In 1999, support for the bond market came from the retail investor, in the
form of mutual fund buying, trust department buying and individual investors
buying bonds themselves. While there was reduced bond issuance, there was also
reduced buying by institutional investors, such as property and casualty
insurers and crossover hedge fund buyers. In the last half of the year, new
issue volume tumbled 21.1% from 1998. The decline occurred in the last half of
the year and was attributable almost entirely to the increase in interest rates
that reduced refunding issuance. However, despite the decline, 1999 remains the
fourth highest year on record for new bond issuance.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE YEAR?
A. First, with new issue volume being easily absorbed and quality spreads
historically narrow, it still pays to stay with higher rated credits. By doing
so we can avoid chasing "hot" deals where the yield enhancement may be at most
0.05%, but the credit quality spread--the difference between the bid and offer
prices on a bond--differential significantly more. Second, to enhance current
interest return we find purchasing full coupon housing bonds attractive. The
structures are not easily understood and as a result, from time to time, bonds
are available at attractive yields. Our third strategy is buying quality
non-insured bonds. These tend to have ratings much higher than many of the
underlying ratings on insured bonds, yet offer higher yields. The last point of
our investment strategy is to search for relative values among the various
General Obligation and Revenue sectors as technical supply and demand forces
temporarily increased yields in either the new issue or secondary markets.
- --------------------------------------------------------------------------------
"In 1999, support for the bond market came from the retail investor, in the form
of mutual fund buying, trust department buying and individual investors buying
bonds themselves."
- --------------------------------------------------------------------------------
Q. WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A. For 2000 we expect a further decline from the 1999 new issuance volume, if as
is expected, the Federal Reserve raises Federal Funds rates over the coming
months. In an environment of limited new supply and continued retail demand for
municipals, we plan to use the same four-point portfolio management strategy in
the early part of 2000 that we employed in the last half of 1999.
- ----------
(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%. 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 Lipper General Municipal Debt Index is an unmanaged index that is
generally considered to be representative of U.S. general municipal bond
market activity. The Lipper General Municipal Debt Index is not available
for direct investment and its return does not reflect the fees and
expenses that have been deducted from the Fund's return. Likewise, return
figures for the Lipper General Municipal Debt Index do not reflect any
sales charges than an investor may have to pay when purchasing shares of
the Fund.
(3) 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.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Tax-Exempt Fund
- ----------------------------
PORTFOLIO COMPOSITION BY SECTOR ALLOCATION
AS OF DECEMBER 31, 1999
[GRAPHIC OMITTED]
[The following table was represented as a pie chart in the printed material.]
Revenue Bonds 58.49%
State General Obligation Bonds 17.95%
Local General Obligation Bonds 11.40%
Short-Term 10.70%
Other General Obligation Bonds 1.46%
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[GRAPHIC OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
Lehman Municipal Bond Index $14,535
The Guardian Tax-Exempt Fund $12,343
To give you a comparison, the chart above shows the performance of a $10,000
investment made in The Guardian Tax-Exempt Fund and the Lehman Municipal Bond
Index. The starting point of $9,550 for the Fund reflects the maximum sales loan
of 4.5% that an investor may have to pay when purchasing Class A shares of the
fund. The Index beings at $10,000.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED DECEMBER 31, 1999
Inception Since
Date 1 Year 3 Years 5 Years Inception
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (with sales charge) 2/16/93 -7.63% 2.15% 4.82% 3.17%
At Net Asset Value (without sales charge) -3.29% 3.73% 5.79% 3.86%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
The Guardian Cash Management Fund
- ---------------------------------
[PHOTO OMITTED]
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 DECEMBER 31, 1999: $403,888,354
Q. HOW DID THE GUARDIAN CASH MANAGEMENT FUND PERFORM DURING 1999?
A. As of December 31, 1999, the effective 7-day annualized yield for The
Guardian Cash Management Fund was 5.04%.(1) The Fund produced a total annualized
return of 4.45%(2) for the year ended December 31, 1999. In contrast, the
effective 7-day annualized yield of Tier One money market funds as measured by
IBC Financial Data was 5.15%; total return for the same category was 4.48%. IBC
Financial Data is a research firm that tracks money market funds.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE YEAR?
A. The Guardian Cash Management Fund is a place for our investors to put their
money while they decide their preferred long-term investment vehicle, be it
stocks or bonds. Also, some of our investors prefer the relative stability of
the money markets. To best accommodate all our investors, we will continue to
try to provide a strong 7-day yield, while offering safety and liquidity. Our
investment strategy was to create a diversified portfolio of money market
instruments that presents minimal credit risks according to our criteria. As
always, we only purchased securities from issuers that had received ratings in
the two highest credit quality categories established by nationally recognized
statistical ratings organizations like Moody's Investors Service Inc. and
Standard & Poor's Ratings Group for the Fund's portfolio. Most of the portfolio
(90.6%) was invested in commercial paper; the balance (9.4%) 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 by 0.75% to 5.50% in the second half of 1999 with
increases of 0.25% on June 30, August 24, and again on November 16. 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. With the increase in
interest rates during the later half of the year, 30-day tier one commercial
paper increased in yield by approximately 0.55% from 4.98% to 5.53%. Another
factor affecting performance was the portfolio's average maturity--20 days as of
December 31, 1999. The average Tier One money market fund as measured by IBC
Financial Data had an average maturity of 51 days. Y2K concerns caused most
companies to avoid issuing commercial paper in December. This, coupled with
excess liquidity provided by the Fed, drove year-end interest rates down to the
1-2% range.
- --------------------------------------------------------------------------------
"To best accommodate all our investors, we will continue to try to provide a
strong 7-day yield, while offering safety and liquidity."
- --------------------------------------------------------------------------------
Q. WHAT IS YOUR OUTLOOK FOR THE YEAR 2000?
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 transfer cash to equity funds. During
those times when the stock market stalls, we see cash inflows. Due to the
relatively short average days-to-maturity these daily fluctuations have little
effect on the Fund.
- --------------------------------------------------------------------------------
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. Effective yield assumes
reinvested income. Yields will vary as interest rates change. 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 December 31, 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
- --------------------------------------------------------------------------------
December 31, 1999
o THE GUARDIAN PARK AVENUE FUND
- --------------------------------------------------------------------------------
Common Stocks -- 96.8%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
APPLIANCE AND FURNITURE -- 0.2%
141,500 Whirlpool Corp.* $ 9,206,344
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 0.4%
282,400 Ford Motor Co. 15,090,750
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 2.3%
55,300 Affymetrix, Inc.* 9,383,719
446,000 Amgen, Inc.* 26,787,875
156,000 Biogen, Inc.* 13,182,000
265,300 Enzon, Inc.* 11,507,388
79,400 MedImmune, Inc.* 13,170,475
63,000 Millenium Pharmaceuticals* 7,686,000
60,500 Sepracor, Inc.* 6,000,844
--------------
87,718,301
- --------------------------------------------------------------------------------
BROADCASTING -- 4.9%
196,100 Adelphia Comm. Corp.* 12,869,063
151,000 AMFM, Inc.* 11,815,750
579,100 CBS Corp.* 37,026,206
393,200 Charter Comm., Inc.* 8,601,250
175,000 Clear Channel Comm., Inc.* 15,618,750
310,000 Comcast Corp.* 15,674,375
220,700 Cox Comm., Inc.* 11,366,050
81,500 Cumulus Media, Inc.* 4,136,125
676,900 Infinity Broadcasting Corp.* 24,495,319
250,500 Insight Comm., Inc.* 7,421,063
436,700 MediaOne Group, Inc.* 33,544,019
29,700 RealNetworks, Inc.* 3,573,281
--------------
186,141,251
- --------------------------------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 0.1%
136,000 Crossman Communities, Inc.* 2,108,000
260,000 Johns Manville Corp. 3,640,000
--------------
5,748,000
- --------------------------------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 3.0%
73,100 CMGI, Inc.* 20,239,563
56,600 CNET, Inc.* 3,212,050
215,600 Critical Path, Inc.* 20,347,250
77,000 Doubleclick, Inc.* 19,485,812
149,400 E Bay, Inc.* 18,703,013
120,200 Internet Capital Group, Inc.* 20,434,000
76,800 VerticalNet, Inc.* 12,595,200
--------------
115,016,888
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 12.8%
211,200 Adobe Systems, Inc. 14,203,200
52,800 Advent Software, Inc.* 3,402,300
34,600 Agile Software Corp.* 7,516,309
57,800 Ariba, Inc.* 10,252,275
160,600 Bea Systems, Inc.* 11,231,962
98,600 Broadvision, Inc.* 16,768,162
73,800 Citrix Systems, Inc.* 9,077,400
64,300 Commerce One, Inc.* 12,634,950
58,300 Cybersource Corp.* 3,017,025
125,200 Inktomi Corp.* 11,111,500
48,000 Legato Systems, Inc.* 3,303,000
93,000 Mercury Interactive Corp.* 10,038,187
51,000 Micromuse, Inc.* 8,670,000
1,831,300 Microsoft Corp.* 213,804,275
497,500 Oracle Corp.* 55,751,094
426,200 Saga Systems, Inc.* 8,497,363
214,800 Siebel Systems, Inc.* 18,043,200
557,200 Sybase, Inc.* 9,472,400
143,000 Symantec Corp.* 8,383,375
119,500 TSI Int'l. Software Ltd.* 6,766,688
79,800 VeriSign, Inc.* 15,236,812
43,350 Veritas Software Corp.* 6,204,469
256,100 Visio Corp.* 12,164,750
76,000 Vitria Technology, Inc.* 17,784,000
--------------
493,334,696
- --------------------------------------------------------------------------------
COMPUTER SYSTEMS -- 6.6%
152,100 Apple Computer, Inc.* 15,637,781
195,200 Cabletron Systems, Inc.* 5,075,200
364,100 Dell Computer Corp.* 18,569,100
526,800 EMC Corp.* 57,552,900
134,500 Hewlett Packard Co. 15,324,594
739,000 Int'l. Business Machines 79,812,000
190,000 Solectron Corp.* 18,073,750
564,800 Sun Microsystems, Inc.* 43,736,700
--------------
253,782,025
- --------------------------------------------------------------------------------
DRUGS AND HOSPITALS -- 4.2%
132,900 Andrx Corp.* 5,623,331
682,200 Bristol-Myers Squibb Corp. 43,788,713
141,200 Idec Pharmaceuticals Corp.* 13,872,900
156,000 Johnson & Johnson 14,527,500
341,400 Merck & Co., Inc. 22,895,137
623,900 Pfizer, Inc. 20,237,756
494,800 Schering-Plough Corp. 20,874,375
243,000 Warner-Lambert Co. 19,910,812
--------------
161,730,524
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.0%
68,000 DII Group, Inc.* 4,825,875
86,000 Flextronics Int'l. Ltd.* 3,956,000
449,200 General Electric Co. 69,513,700
--------------
78,295,575
- --------------------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.3%
49,900 Jabil Circuit, Inc.* 3,642,700
96,900 Power Integrations, Inc.* 4,645,144
31,700 Sanmina Corp.* 3,166,037
--------------
11,453,881
- --------------------------------------------------------------------------------
ELECTRONICS-SEMICONDUCTORS -- 4.8%
177,000 Analog Devices, Inc.* 16,461,000
331,400 Atmel Corp.* 9,797,013
116,000 AVX Corp.* 5,792,750
66,500 Epcos AG* 4,966,719
222,700 Integrated Device Technology, Inc.* 6,458,300
1,142,800 Intel Corp. 94,066,725
240,000 Int'l. Rectifier Corp.* 6,240,000
127,100 Lattice Semiconductor Corp.* 5,989,587
423,300 LSI Logic Corp.* 28,572,750
97,000 Microchip Technology, Inc.* 6,638,437
--------------
184,983,281
- --------------------------------------------------------------------------------
ENTERTAINMENT AND LEISURE -- 1.1%
516,100 Blockbuster, Inc. 6,902,837
217,200 Time Warner, Inc. 15,733,425
294,000 Viacom, Inc.* 17,768,625
--------------
40,404,887
- --------------------------------------------------------------------------------
FINANCIAL-BANKS -- 2.8%
145,300 Chase Manhattan Corp. 11,287,994
1,126,200 Citigroup, Inc. 62,574,488
128,000 Fifth Third Bancorp 9,392,000
363,000 Firstar Corp. 7,668,375
191,300 FleetBoston Financial Corp. 6,659,631
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
21
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
4,031 M & T Bank Corp. $ 1,669,842
142,600 North Fork Bancorp 2,495,500
254,654 Premier National Bancorp, Inc. 4,695,183
15,000 U.S. Trust Corp. 1,202,812
--------------
107,645,825
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 4.4%
302,400 American Express Co. 50,274,000
38,100 Dain Rauscher Corp. 1,771,650
26,900 Goldman Sachs Group, Inc. 2,533,644
137,800 Jefferies Group, Inc. 3,031,600
218,666 Legg Mason, Inc. 7,926,643
394,700 Lehman Brothers Hldgs., Inc. 33,426,156
115,000 Merrill Lynch & Co., Inc. 9,602,500
104,600 J. P. Morgan & Co., Inc. 13,244,975
245,700 Morgan Stanley Dean Witter & Co. 35,073,675
259,500 Charles Schwab Corp. 9,958,313
--------------
166,843,156
- --------------------------------------------------------------------------------
FINANCIAL-THRIFT -- 0.4%
768,161 Charter One Financial, Inc. 14,691,079
123,100 Commercial Federal Corp. 2,192,719
--------------
16,883,798
- --------------------------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 0.2%
101,400 Anheuser-Busch Cos., Inc. 7,186,725
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.7%
237,600 Church & Dwight, Inc. 6,340,950
303,000 Kimberly-Clark Corp. 19,770,750
--------------
26,111,700
- --------------------------------------------------------------------------------
INSURANCE -- 0.0%
47,800 State Auto Financial Corp. 436,175
- --------------------------------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 2.1%
129,000 Dayton Hudson Corp. 9,473,437
1,020,800 Wal-Mart Stores, Inc. 70,562,800
--------------
80,036,237
- --------------------------------------------------------------------------------
MERCHANDISING-SPECIAL -- 3.0%
58,500 Amazon.com, Inc.* 4,453,312
223,000 Best Buy, Inc.* 11,191,812
318,400 BJ's Wholesale Club, Inc.* 11,621,600
130,000 Costco Wholesale Corp.* 11,862,500
585,000 Home Depot, Inc. 40,109,062
300,000 Starbucks Corp.* 7,275,000
500,000 Tandy Corp. 24,593,750
112,200 Zale Corp.* 5,427,675
--------------
116,534,711
- --------------------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH CYCLICAL -- 0.6%
93,800 Go2Net, Inc.* 8,160,600
70,000 Sapient Corp.* 9,865,625
53,000 Viant Corp.* 5,247,000
--------------
23,273,225
- --------------------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 1.5%
149,900 Interpublic Group Cos., Inc.* 8,647,356
177,200 Intuit, Inc.* 10,620,925
158,300 Lamar Advertising Co.* 9,587,044
475,000 Valassis Comm., Inc.* 20,068,750
141,800 Young & Rubicam, Inc. 10,032,350
--------------
58,956,425
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCING -- 1.2%
192,100 Anadarko Petroleum Corp. 6,555,413
216,000 Apache Corp. 7,978,500
132,100 Devon Energy Corp. 4,342,788
257,000 Newfield Exploration Co.* 6,874,750
431,700 Talisman Energy, Inc* 11,116,275
152,100 Vastar Resources, Inc. 8,973,900
--------------
45,841,626
- --------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 1.3%
194,900 B.J. Svcs. Co.* 8,149,256
172,300 Cooper Cameron Corp.* 8,431,931
289,800 Halliburton Co. 11,664,450
281,200 Noble Drilling Corp.* 9,209,300
189,100 Schlumberger Ltd. 10,636,875
36,610 Transocean Sedco Forex, Inc. 1,233,291
--------------
49,325,103
- --------------------------------------------------------------------------------
OIL-INTEGRATED-DOMESTIC -- 0.3%
387,100 Conoco, Inc. 9,629,113
- --------------------------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 2.3%
213,000 Chevron Corp. 18,451,125
203,700 Exxon Mobil Corp. 16,410,581
425,700 Royal Dutch Petroleum Co.* 25,728,244
498,600 Texaco, Inc. 27,080,212
--------------
87,670,162
- --------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 1.5%
391,400 Abitibi-Consolidated, Inc. 4,647,875
87,100 Bowater, Inc. 4,730,619
125,700 Champion Int'l. Corp. 7,785,544
169,400 Georgia-Pacific Group 8,597,050
313,700 Int'l. Paper Co. 17,704,444
180,600 Mead Corp. 7,844,813
315,400 Smurfit-Stone Container Corp.* 7,727,300
--------------
59,037,645
- --------------------------------------------------------------------------------
PHOTOGRAPHY -- 0.4%
224,600 Eastman Kodak Co.* 14,879,750
- --------------------------------------------------------------------------------
SEMICONDUCTORS -- 2.9%
232,700 Adaptec, Inc.* 11,605,913
623,000 Advanced Micro Devices, Inc.* 18,028,062
141,100 Kemet Corp.* 6,358,319
577,600 Micron Technology, Inc.* 44,908,400
335,200 National Semiconductor Corp.* 14,350,750
168,600 Sawtek, Inc.* 11,222,437
179,200 Vishay Intertechnology, Inc.* 5,667,200
--------------
112,141,081
- --------------------------------------------------------------------------------
SEMICONDUCTORS-COMMUNICATIONS -- 4.8%
181,300 Altera Corp.* 8,985,681
140,000 Applied Micro Circuits Corp.* 17,815,000
85,900 Conexant Systems, Inc.* 5,701,612
333,100 Cypress Semiconductor Corp.* 10,784,113
80,900 DSP Group, Inc.* 7,523,700
74,200 Linear Technology Corp.* 5,309,937
49,900 Micrel, Inc.* 2,841,181
84,200 PMC Sierra, Inc.* 13,498,312
207,600 RF Micro Devices, Inc.* 14,207,625
217,800 Semtech Corp.* 11,352,825
246,000 Texas Instruments, Inc. 23,831,250
106,300 Transwitch Corp.* 7,713,394
76,100 Triquint Semiconductor, Inc.* 8,466,125
226,800 Vitesse Semiconductor Corp.* 11,892,825
770,000 Xilinx, Inc.* 35,010,938
--------------
184,934,518
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
22
<PAGE>
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SEMICONDUCTORS-EQUIPMENT -- 2.6%
76,400 Agilent Technologies, Inc.* 5,906,675
216,900 Applied Materials, Inc.* 27,478,519
265,600 Cadence Design Systems, Inc.* 6,374,400
101,300 Credence Systems Corp.* 8,762,450
115,000 Cymer Corp.* 5,290,000
92,500 DuPont Photomasks, Inc.* 4,463,125
110,900 KLA-Tencor Corp.* 12,351,488
96,600 Lam Resh Corp.* 10,776,937
277,500 Teradyne, Inc.* 18,315,000
--------------
99,718,594
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 6.6%
571,465 AT & T Corp. 29,001,849
310,000 Bell Atlantic Corp. 19,084,375
440,000 GTE Corp. 31,047,500
764,880 MCI WorldCom, Inc.* 40,586,445
459,200 Nortel Networks Corp. 46,379,200
1,021,801 SBC Comm., Inc. 49,812,799
382,000 Sprint Corp. 25,713,375
168,000 US West, Inc. 12,096,000
--------------
253,721,543
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS-EQUIPMENT -- 7.9%
234,500 American Tower Corp.* 7,166,906
32,700 AudioCodes Ltd.* 3,008,400
110,400 Ciena Corp.* 6,348,000
516,000 Cisco Systems, Inc.* 55,276,500
142,700 CommScope, Inc.* 5,752,594
358,400 Crown Castle, Int'l.* 11,513,600
96,700 ETek Dynamics, Inc.* 13,018,237
29,000 Juniper Networks, Inc.* 9,860,000
622,300 Lucent Technologies, Inc. 46,555,819
380,000 Motorola, Inc. 55,955,000
94,700 Nokia Corp.* 17,993,000
32,400 Optical Coating Lab., Inc. 9,590,400
95,000 Pinnacle Hldgs.* 4,025,625
96,400 Proxim, Inc.* 10,604,000
178,000 QUALCOMM, Inc.* 31,350,250
167,100 Scientific Atlanta, Inc. 9,294,938
70,500 Tellabs, Inc.* 4,525,219
--------------
301,838,488
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS-SPECIALTY -- 5.7%
125,500 Advanced Fibre Comm., Inc.* 5,608,281
898,800 America Online, Inc.* 67,803,225
365,200 Exodus Comm., Inc.* 32,434,325
683,060 Global Crossing Ltd.* 34,153,000
277,400 GST Telecomm., Inc.* 2,513,937
130,600 Intermedia Comm., Inc.* 5,068,913
73,100 Level 3 Comm., Inc.* 5,985,063
95,500 Sprint PCS (FON Group)* 9,788,750
146,000 Time Warner Telecom, Inc.* 7,290,875
42,000 Williams Comm. Group* 1,215,375
78,400 Winstar Comm., Inc.* 5,899,600
96,300 Yahoo, Inc.* 41,667,806
--------------
219,429,150
- --------------------------------------------------------------------------------
TRANSPORTATION-MISCELLANEOUS -- 0.1%
38,000 United Parcel Svcs. 2,622,000
- --------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 0.6%
27,600 Calpine Corp.* 1,766,400
171,200 Energy East Corp. 3,563,100
440,400 Montana Power Co. 15,881,925
131,200 Potomac Electric Power Co. 3,009,400
--------------
24,220,825
- --------------------------------------------------------------------------------
UTILITIES-GAS & PIPELINE -- 0.2%
262,600 Keyspan Corp. 6,089,037
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $2,333,619,108) 3,717,913,015
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 3.8%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$146,725,000 State Street Bank & Trust Co.
repurchase agreement, dated
12/31/99, maturity value
$146,764,738 at 3.25%,
due 1/3/00 (1) $ 146,725,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $146,725,000) 146,725,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.6%
(COST $2,480,344,108) 3,864,638,015
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.6%) (22,152,539)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $3,842,485,476
- --------------------------------------------------------------------------------
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
23
<PAGE>
o THE GUARDIAN PARK AVENUE SMALL CAP FUND
- --------------------------------------------------------------------------------
Common Stocks -- 94.3%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.8%
7,500 Alliant Techsystems, Inc.* $ 467,344
11,700 L-3 Comm. Hldgs., Inc.* 487,012
8,800 Newport News Shipbuilding Corp. 242,000
------------
1,196,356
- --------------------------------------------------------------------------------
APPLIANCE AND FURNITURE -- 0.8%
34,700 Ethan Allen Interiors, Inc. 1,112,569
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.6%
14,600 Caliper Technologies, Inc.* 974,550
8,900 Enzon, Inc.* 386,037
4,000 Millenium Pharmaceuticals, Inc.* 488,000
4,000 Sepracor, Inc.* 396,750
------------
2,245,337
- --------------------------------------------------------------------------------
BROADCASTING -- 8.8%
5,000 ACME Comm., Inc.* 166,250
23,500 Adelphia Comm. Corp.* 1,542,187
37,200 Citadel Comm. Corp.* 2,413,350
8,800 Classic Comm., Inc.* 321,750
22,105 Cox Comm., Inc.* 1,138,407
10,200 Cox Radio, Inc.* 1,017,450
13,600 Cumulus Media, Inc.* 690,200
14,800 Entercom Comm. Corp.* 976,800
25,200 Insight Comm., Inc.* 746,550
20,200 Jones Intercable, Inc.* 1,400,112
5,400 OpenTV Corp.* 433,350
10,000 Radio Unica Comm., Inc.* 288,750
6,000 RealNetworks, Inc.* 721,875
15,000 Spanish Broadcasting Systems, Inc.* 603,750
------------
12,460,781
- --------------------------------------------------------------------------------
BUILDING MATERIALS AND HOMEBUILDERS -- 3.1%
9,300 Centex Corp. 229,594
34,000 Crossman Communities, Inc.* 527,000
11,000 Elcor Chemical Corp. 331,375
15,700 Lafarge Corp. 433,713
12,400 Martin Marietta Materials, Inc. 508,400
26,000 National RV Hldgs., Inc.* 500,500
10,300 Southdown, Inc. 531,737
35,900 Thor Industries, Inc. 1,092,706
40,000 U.S. Concrete, Inc.* 240,000
------------
4,395,025
- --------------------------------------------------------------------------------
CAPITAL GOODS-MISCELLANEOUS TECHNOLOGY -- 5.0%
10,834 At Home, Inc.* 464,508
6,800 CMGI, Inc.* 1,882,750
10,100 Critical Path, Inc.* 953,188
1,000 Freemarkets, Inc.* 341,312
3,700 Intertrust Technologies Corp.* 435,212
23,600 National Computer Systems, Inc. 887,950
10,000 Netzero, Inc.* 269,375
13,200 Profit Recovery Group Int'l., Inc.* 350,625
19,800 Xircom, Inc.* 1,485,000
------------
7,069,920
- --------------------------------------------------------------------------------
CHEMICALS -- 1.1%
14,500 Cabot Corp. 295,438
7,900 Dexter Corp. 314,025
9,600 MacDermid, Inc. 394,200
17,200 Spartech Corp. 554,700
------------
1,558,363
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 10.9%
1,700 Agile Software Corp.* 369,298
3,700 Akamai Technologies, Inc.* 1,212,212
5,200 Bea Systems, Inc.* 363,675
6,200 Broadvision, Inc.* 1,054,388
3,100 Commerce One, Inc.* 609,150
4,800 Cybersource Corp.* 248,400
2,800 Digital Impact, Inc.* 140,350
1,600 E.Piphany, Inc.* 357,000
1,900 Engage Technologies, Inc.* 114,000
13,400 Fulton Financial Corp.* 241,200
11,000 Inktomi Corp.* 976,250
3,800 Interwoven, Inc.* 462,175
9,000 Intuit, Inc.* 539,438
7,200 KANA Comm., Inc.* 1,476,000
5,400 Legato Systems, Inc.* 371,587
17,300 Macromedia, Inc.* 1,265,063
3,500 Mercury Interactive Corp.* 377,781
3,000 Red Hat, Inc.* 633,750
2,500 Silknet Software, Inc.* 414,375
1,300 VA Linux Systems, Inc.* 268,612
13,200 VeriSign, Inc.* 2,520,375
7,000 Visio Corp.* 332,500
4,300 Vitria Technology, Inc.* 1,006,200
------------
15,353,779
- --------------------------------------------------------------------------------
COMPUTER SYSTEMS -- 3.4%
2,900 Alteon Websystems, Inc.* 254,475
3,800 Cacheflow, Inc.* 496,612
2,400 Cobalt Networks, Inc.* 260,100
5,000 Emulex Corp.* 562,500
6,200 FiniStar Corp.* 557,225
500 Foundry Networks, Inc.* 150,844
14,800 Henry Jack & Associates, Inc. 794,575
19,900 The Intercept Group, Inc.* 590,781
3,700 JNI Corp.* 244,200
10,600 Network Appliance, Inc.* 880,462
------------
4,791,774
- --------------------------------------------------------------------------------
DRUGS AND HOSPITALS -- 2.5%
13,700 Alpharma, Inc. 421,275
5,500 Andrx Corp.* 232,719
4,600 Idec Pharmaceuticals Corp.* 451,950
16,500 Jones Pharma, Inc. 716,719
12,250 King Pharmaceuticals, Inc.* 686,766
37,650 United Payors & United Prov., Inc.* 623,578
11,000 Watson Pharmaceuticals, Inc.* 393,938
------------
3,526,945
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.2%
14,600 Celestica, Inc.* 810,300
9,200 DII Group, Inc.* 652,912
12,200 Flextronics Int'l. Ltd.* 561,200
26,100 Plexus Corp.* 1,148,400
------------
3,172,812
- --------------------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 0.2%
6,400 Power Integrations, Inc.* 306,800
- --------------------------------------------------------------------------------
ELECTRONICS-SEMICONDUCTORS -- 1.0%
6,900 AVX Corp. 344,569
5,400 Epcos AG* 403,312
13,100 Integrated Device Technology, Inc.* 379,900
6,700 Lattice Semiconductor Corp.* 315,737
------------
1,443,518
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 0.1%
5,000 World Wrestling Federation Etmt.* 86,250
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
24
<PAGE>
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
FINANCIAL-BANKS -- 4.5%
6,800 Commerce Bancorp, Inc.* $ 274,975
16,700 Cullen Frost Bankers, Inc. 430,025
22,500 First Tenn Nat'l. Corp. 641,250
500 M & T Bank Corp. 207,125
9,700 Marshall & Ilsley Corp.* 609,281
24,000 National Commerce Bancorp 544,500
27,000 North Fork Bancorp 472,500
10,000 U.S. Trust Corp. 801,875
35,700 Valley National Bancorp 999,600
24,400 Zions Bancorp 1,444,175
------------
6,425,306
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 1.0%
11,000 Dain Rauscher Corp. 511,500
15,600 DLJ Direct* 211,575
8,300 Investment Technology Group, Inc.* 238,625
8,300 Jefferies Group, Inc. 182,600
7,700 Legg Mason, Inc. 279,125
------------
1,423,425
- --------------------------------------------------------------------------------
FINANCIAL-THRIFT -- 2.1%
18,700 Bay View Capital Corp.* 265,306
24,400 Commercial Federal Corp. 434,625
15,900 Dime Bancorp, Inc.* 240,488
76,820 Peoples Heritage Financial Group 1,157,101
32,000 Waddell & Reed Financial, Inc. 868,000
------------
2,965,520
- --------------------------------------------------------------------------------
FOOD, BEVERAGE AND TOBACCO -- 0.8%
22,200 Adolph Coors Co. 1,165,500
- --------------------------------------------------------------------------------
FOOTWEAR -- 0.1%
4,400 Madden Steven Ltd.* 83,875
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.4%
21,600 Church & Dwight, Inc. 576,450
- --------------------------------------------------------------------------------
INSURANCE -- 0.7%
8,900 Arthur J. Gallagher & Co. 576,275
8,000 Hilb Rogal & Hamilton Co. 226,000
18,500 State Auto Financial Corp. 168,813
------------
971,088
- --------------------------------------------------------------------------------
MACHINERY AND EQUIPMENT -- 0.7%
33,300 JLG Industries, Inc. 530,719
16,600 Terex Corp.* 460,650
------------
991,369
- --------------------------------------------------------------------------------
MACHINERY-INDUSTRIAL SPECIALTY -- 0.3%
14,100 Shaw Group, Inc.* 356,906
- --------------------------------------------------------------------------------
MERCHANDISING-FOOD -- 0.5%
67,400 Grand Union Co.* 682,425
- --------------------------------------------------------------------------------
MERCHANDISING-SPECIAL -- 5.0%
24,500 3 DO Co.* 222,797
27,000 Ames Department Stores, Inc.* 777,938
6,900 Ann Taylor Stores Corp.* 237,619
64,000 BJ's Wholesale Club, Inc.* 2,336,000
18,200 JAKKS Pacific, Inc.* 340,113
6,500 THQ, Inc.* 150,719
21,200 United Stationers, Inc.* 605,525
50,600 Zale Corp.* 2,447,775
------------
7,118,486
- --------------------------------------------------------------------------------
METALS-MISCELLANEOUS -- 0.2%
12,500 Ucar Int'l. Corp.* 222,656
- --------------------------------------------------------------------------------
MISCELLANEOUS-CAPITAL GOODS -- 0.2%
7,100 American Standards Cos., Inc.* 325,712
- --------------------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH CYCLICAL -- 1.6%
5,500 Agency.com Ltd.* 280,500
3,100 Go2Net* 269,700
8,300 Netratings, Inc.* 399,438
2,700 Retek, Inc.* 203,175
4,000 Sapient Corp.* 563,750
3,000 Viant Corp.* 297,000
9,000 Xpedior, Inc.* 258,750
------------
2,272,313
- --------------------------------------------------------------------------------
MISCELLANEOUS-CONSUMER GROWTH STAPLES -- 4.0%
10,000 Expedia, Inc.* 350,000
9,800 Lamar Advertising Co.* 593,512
15,300 Learning Tree Int'l.* 428,400
35,000 Optimal Robotics Corp.* 1,303,750
52,100 Valassis Comm., Inc.* 2,201,225
12,000 Young & Rubicam, Inc. 849,000
------------
5,725,887
- --------------------------------------------------------------------------------
OIL AND GAS PRODUCING -- 1.0%
8,900 Barrett Resources Corp.* 261,994
18,500 Louis Dreyfus Natural Gas Corp.* 335,313
11,500 Newfield Exploration Co.* 307,625
15,750 Spinnaker Exploration Co.* 222,469
9,300 Stone Energy Corp.* 331,313
------------
1,458,714
- --------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 1.7%
34,100 B.J. Svcs. Co.* 1,425,806
6,600 Cooper Cameron Corp.* 322,987
13,800 Maverick Tube Corp.* 340,687
22,800 Veritas DGC, Inc.* 319,200
------------
2,408,680
- --------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.4%
19,500 Abitibi-Consolidated, Inc. 231,563
6,200 Bowater, Inc. 336,737
------------
568,300
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.4%
8,700 Alexandria Real Estate Equities 276,769
9,200 Home Pptys. NY, Inc. 252,425
------------
529,194
- --------------------------------------------------------------------------------
SEMICONDUCTORS -- 2.0%
27,000 Advanced Micro Devices, Inc.* 781,313
8,300 Kemet Corp.* 374,019
10,800 QLogic Corp.* 1,726,650
------------
2,881,982
- --------------------------------------------------------------------------------
SEMICONDUCTORS-COMMUNICATIONS -- 5.2%
14,800 Applied Micro Circuits Corp.* 1,883,300
7,700 AudioCodes Ltd.* 708,400
10,600 Cypress Semiconductor Corp.* 343,175
4,400 DSP Group, Inc.* 409,200
7,700 Exar Corp.* 453,338
14,600 Metalink Ltd.* 297,475
5,000 RF Micro Devices, Inc.* 342,188
6,500 Semtech Corp.* 338,813
10,600 Transwitch Corp.* 769,162
38,800 Xilinx, Inc.* 1,764,187
------------
7,309,238
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
25
<PAGE>
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
SEMICONDUCTORS-EQUIPMENT -- 2.3%
11,000 Advanced Energy Industries* $ 541,750
5,600 Credence Systems Corp.* 484,400
6,200 Cymer Corp.* 285,200
8,200 Helix Technology Corp. 367,463
10,800 KLA-Tencor Corp.* 1,202,850
3,900 Lam Resh Corp.* 435,094
------------
3,316,757
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 0.7%
14,600 Airnet Comm., Inc.* 531,075
19,500 Gric Comm., Inc.* 494,813
------------
1,025,888
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS-EQUIPMENT -- 6.6%
7,500 Aether Systems, Inc.* 537,187
12,500 American Tower Corp.* 382,031
26,000 CommScope, Inc.* 1,048,125
14,400 Crown Castle, Int'l.* 462,600
5,400 Deltathree Comm., Inc.* 139,050
14,000 Dycom Industries, Inc.* 616,875
9,000 E Tek Dynamics, Inc.* 1,211,625
3,800 Harmonic, Inc.* 360,762
2,000 Juniper Networks, Inc.* 680,000
7,300 Metasolv Software, Inc.* 596,775
2,500 Optical Coating Lab., Inc. 740,000
10,000 Pinnacle Hldgs.* 423,750
5,200 Scientific Atlanta, Inc. 289,250
8,100 SDL, Inc.* 1,765,800
------------
9,253,830
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS-SPECIALTY -- 5.9%
20,800 Exodus Comm., Inc.* 1,847,300
8,600 Intermedia Comm., Inc.* 333,788
10,300 ITC Deltacom* 284,538
22,442 Metromedia Fiber Network, Inc.* 1,075,813
12,800 Next Level Comm., Inc.* 958,400
14,000 Primus Telecomm. Group, Inc.* 535,500
7,500 Silicon Image, Inc.* 525,469
4,000 Sycamore Networks, Inc.* 1,232,000
8,100 Telecorp PCS, Inc.* 307,800
8,000 Time Warner Telecom, Inc.* 399,500
8,800 Tritel, Inc.* 278,850
7,200 Virata Corp.* 215,100
5,200 Winstar Comm., Inc.* 391,300
------------
8,385,358
- --------------------------------------------------------------------------------
TEXTILE-APPAREL AND PRODUCTION -- 0.8%
19,000 Mohawk Industries, Inc.* 501,125
36,700 Shaw Industries, Inc. 566,556
------------
1,067,681
- --------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 3.0%
7,400 Calpine Corp.* 473,600
13,300 CH Energy Group 438,900
9,400 Energy East Corp.* 195,638
37,900 Nisource, Inc.* 677,462
16,000 Otter Tail Power Co. 600,000
14,100 Philadelphia Subn. Corp.* 291,694
36,000 TNP Enterprises, Inc. 1,485,000
------------
4,162,294
- --------------------------------------------------------------------------------
UTILITIES-GAS AND PIPELINE -- 0.7%
9,300 Equitable Res., Inc. 310,387
17,600 Midcoast Energy Res. 294,800
7,400 National Fuel Gas Co. 344,100
------------
949,287
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $85,723,460) 133,344,350
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 4.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 6,088,000 State Street Bank & Trust Co.
repurchase agreement, dated
12/31/99, maturity value
$6,089,649 at 3.25%,
due 1/3/00 (1) $ 6,088,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $6,088,000) 6,088,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.6%
(COST $91,811,460) 139,432,350
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 1.4% 2,029,385
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $141,461,735
- --------------------------------------------------------------------------------
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
26
<PAGE>
o THE GUARDIAN ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
Mutual Fund -- 66.5%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
EQUITY -- 49.9%
2,251,544 The Guardian Park Avenue
Fund, Class A $133,786,747
FIXED INCOME -- 16.6%
4,758,419 The Guardian Investment Quality
Bond Fund, Class A 44,396,044
- --------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(COST $159,588,315) 178,182,791
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government -- 9.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$25,000,000 U.S. Treasury Bill, 4.935%
due 1/27/00
(COST $24,910,896) $ 24,910,896
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Options -- 0.4%
- --------------------------------------------------------------------------------
Number of
Contracts Value
- --------------------------------------------------------------------------------
1,000 U.S. Treasury Bond Futures
Expires February, 2000
Exercise price $98 $ 62,500
680 U.S. Treasury Bond Futures
Expires May, 2000
Exercise price $92 1,126,250
- --------------------------------------------------------------------------------
TOTAL OPTIONS
(COST $3,442,890) 1,188,750
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Short-term Investments -- 13.0%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 6,000,000 Associates First Capital
5.90%, due 2/3/00 $ 5,967,550
6,000,000 Colgate Palmolive Co.
5.82%, due 1/31/00 5,970,900
7,000,000 Electricite de France
5.82%, due 1/11/00 6,988,683
10,000,000 General Electric Capital Corp.
5.82%, due 1/28/00 9,956,350
6,000,000 Procter & Gamble Co.
5.90%, due 1/28/00 5,973,450
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $34,856,933) 34,856,933
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 11.0%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$29,326,000 State Street Bank & Trust Co.
repurchase agreement, dated
12/31/99, maturity value
$29,333,942 at 3.25%, due
1/3/00 (1) $ 29,326,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $29,326,000) 29,326,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.2%
(COST $252,125,034) 268,465,370
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.2%) (520,103)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $267,945,267
- --------------------------------------------------------------------------------
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
Solid Futures Contracts
- --------------------------------------------------------------------------------
Unrealized
Contract Description Expiration Depreciation
- --------------------------------------------------------------------------------
216 S&P 500 Stock Index March, 2000 $ (782,918)
At December 31, 1999 The Guardian Asset Allocation Fund had sufficient cash
and/or securities to cover margin requirements on open futures contracts and had
set aside $2,300,000 U.S. Treasury Bill due 1/27/00 as collateral.
- --------------------------------------------------------------------------------
See notes to financial statements.
27
<PAGE>
o THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Common Stocks -- 98.7%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
AUSTRALIA -- 2.0%
BANKS -- 0.6%
35,170 Commonwealth Bank of Australia $ 605,627
28,070 National Australia Bank 429,371
BEVERAGES -- 0.3%
196,100 Fosters Brewing Group 562,592
BUSINESS SERVICES -- 0.4%
21,260 Brambles Industries Ltd. 587,919
MINING -- 0.5%
46,300 Broken Hill Ppty. 607,950
182,450 Pasminco Ltd.* 200,030
TELECOMMUNICATIONS -- 0.2%
55,600 Telstra Corp. 302,232
------------
3,295,721
- --------------------------------------------------------------------------------
FINLAND -- 6.3%
TELECOMMUNICATIONS -- 6.3%
35,900 Nokia OYJ* 6,509,493
54,880 Sonera OYJ* 3,762,032
------------
10,271,525
- --------------------------------------------------------------------------------
FRANCE -- 8.9%
BANKS -- 1.0%
18,000 Banque Nationale de Paris* 1,660,918
COMPUTER SOFTWARE AND TECHNOLOGY -- 0.9%
5,510 CAP Gemini* 1,398,725
INSURANCE -- 1.5%
17,670 AXA UAP* 2,463,502
MEDIA AND ENTERTAINMENT -- 1.1%
3,520 Societe Television Francaise 1* 1,843,853
OIL AND GAS -- 1.8%
21,800 Total Fina S.A.* 2,909,729
RETAIL-FOOD AND DRUGS -- 1.7%
15,310 Carrefour* 2,823,864
TELECOMMUNICATIONS -- 0.9%
12,600 Equant NV* 1,430,457
------------
14,531,048
- --------------------------------------------------------------------------------
GERMANY -- 10.4%
AUTOMOTIVE -- 0.6%
11,670 DaimlerChrysler AG* 907,545
CHEMICALS -- 1.3%
40,690 BASF AG* 2,090,442
CONGLOMERATES -- 4.1%
27,960 Mannesmann AG* 6,745,636
DISTRIBUTORS -- 0.3%
13,590 GEHE AG* 527,060
ELECTRONICS AND ELECTRICAL EQUIPMENT -- 1.5%
17,940 Epcos AG* 1,346,353
9,460 Siemens AG* 1,203,579
SOFTWARE -- 1.3%
4,516 SAP AG* 2,224,554
TELECOMMUNICATIONS -- 1.3%
29,410 Deutsche Telekom* 2,094,569
------------
17,139,738
- --------------------------------------------------------------------------------
HONG KONG -- 3.3%
BANKS -- 0.5%
275,600 Bank of East Asia Ltd.* 767,574
COMPUTER SYSTEMS -- 0.4%
254,000 Legend Hldgs. Ltd.* 628,996
CONGLOMERATES -- 1.3%
147,000 Hutchison Whampoa 2,136,875
REAL ESTATE -- 0.8%
64,000 Cheung Kong Hldgs. 810,960
58,000 Sun Hung Kai Pptys. 604,361
TELECOMMUNICATIONS -- 0.3%
113,500 SmarTone Telecom. Hldgs. Ltd. 547,533
------------
5,496,299
- --------------------------------------------------------------------------------
IRELAND -- 2.2%
BANKS -- 0.7%
94,400 Allied Irish Bank 1,076,462
CONSTRUCTION MATERIALS -- 1.5%
114,350 CRH PLC 2,465,075
------------
3,541,537
- --------------------------------------------------------------------------------
ITALY -- 2.4%
BANKS -- 2.4%
26,500 Bipop-Carire SPA* 2,345,135
112,000 San Paolo IMI SPA* 1,521,984
------------
3,867,119
- --------------------------------------------------------------------------------
JAPAN -- 29.2%
AUTOMOTIVE -- 1.9%
19,000 Honda Motor Co. 706,665
50,000 Toyota Motor Corp.* 2,422,433
CHEMICALS -- 0.8%
282,000 Sumitomo Chemical* 1,324,851
COMMERCIAL SERVICES -- 0.9%
5,800 Benesse Corp.* 1,396,496
COMPUTER SOFTWARE AND TECHNOLOGY -- 1.1%
1,800 Softbank Corp.* 1,723,011
COMPUTER SYSTEMS -- 2.9%
106,000 Fujitsu Ltd. 4,834,687
DRUGS AND HEALTH CARE -- 0.8%
61,000 Sankyo Co. 1,253,793
ELECTRONICS -- 5.6%
202,000 Hitachi 3,242,439
8,000 Rohm Co. 3,288,637
9,000 Sony Corp. 2,669,081
ENGINEERING AND MACHINERIES -- 1.4%
10,700 SMC Corp. 2,367,887
FINANCIAL SERVICES -- 3.9%
160,000 Mitsubishi Trading & Brokerage 1,409,416
90,000 Nomura Securities Co. Ltd.* 1,625,233
24,600 Promise Co. 1,252,031
126,000,000 Sanwa Int'l. Financial 1,358,043
1,810 Shohkoh Fund & Co. 716,595
HOUSEHOLD PRODUCTS -- 1.3%
75,000 Kao Corp. 2,139,816
MERCHANDISING-MASS -- 1.2%
10,000 Ryohin Keikaku Co. Ltd. 2,007,439
RETAIL TRADE -- 0.9%
14,000 Ito Yokado Co. 1,520,994
TELECOMMUNICATIONS -- 6.5%
900 Hikari Tsushin, Inc. 1,805,814
165 Nippon Tele. & Tel. Corp. 2,826,172
159 NTT Mobile Comm. Network, Inc. 6,115,983
------------
48,007,516
- --------------------------------------------------------------------------------
MALAYSIA -- 0.2%
BANKS -- 0.2%
112,000 Malayan Banking Berhad 397,895
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
28
<PAGE>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
NETHERLANDS -- 4.6%
BANKS -- 0.6%
38,770 ABN AMRO Hldgs. NV $ 968,563
BROADCASTING AND PUBLISHING -- 1.6%
50,060 Ver Ned Uitgevers 2,631,329
COMPUTER SERVICES -- 0.7%
16,510 CMG PLC 1,229,056
COMPUTER SYSTEMS -- 0.9%
13,000 ASM Lithography Hldg. NV* 1,444,439
INSURANCE -- 0.8%
13,730 Aegon NV* 1,326,384
------------
7,599,771
- --------------------------------------------------------------------------------
NEW ZEALAND -- 0.2%
TELECOMMUNICATIONS -- 0.2%
79,010 Telecom. Corp. of New Zealand 371,544
- --------------------------------------------------------------------------------
PORTUGAL -- 0.4%
TRANSPORTATION -- 0.4%
90,600 Brisa (Auto Estrada)* 695,446
- --------------------------------------------------------------------------------
SINGAPORE -- 0.8%
BANKS -- 0.2%
42,000 Overseas Chinese Bank 385,830
PUBLISHING -- 0.6%
45,197 Singapore Press Hldgs.* 979,653
------------
1,365,483
- --------------------------------------------------------------------------------
SOUTH KOREA -- 0.5%
UTILITIES-ELECTRIC -- 0.5%
51,282 Korea Electric Power Corp. ADR 858,974
- --------------------------------------------------------------------------------
SPAIN -- 4.4%
BANKS -- 1.3%
196,030 Banco Santander Central Hispano S.A. 2,219,571
CONSTRUCTION AND HOUSING -- 1.1%
31,900 Acciona S.A. 1,799,529
GAS DISTRIBUTION -- 0.6%
42,000 Gas Natural SDG 967,600
TELECOMMUNICATIONS -- 1.4%
91,000 Telefonica S.A.* 2,273,387
------------
7,260,087
- --------------------------------------------------------------------------------
SWEDEN -- 4.4%
CONSTRUCTION AND MINING EQUIPMENTS -- 0.9%
49,360 Atlas Copco AB* 1,403,822
RETAIL-GENERAL -- 1.4%
69,000 Hennes & Mauritz* 2,311,082
TELECOMMUNICATIONS -- 2.1%
54,930 LM Ericsson * 3,531,168
------------
7,246,072
- --------------------------------------------------------------------------------
SWITZERLAND -- 3.4%
BUSINESS SERVICES -- 1.6%
3,410 Adecco S.A.* 2,655,530
INSURANCE -- 0.8%
2,270 Zurich Allied AG* 1,294,455
PHARMACEUTICALS -- 1.0%
133 Roche Hldgs. AG* 1,578,660
------------
5,528,645
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 15.1%
BANKS -- 3.4%
36,000 Barclays 1,034,503
45,325 Halifax PLC 494,923
108,000 HSBC Hldgs. 1,496,802
99,000 Lloyds TSB Group PLC 1,229,744
60,500 National Westminster Bank Co. PLC 1,299,751
COMPUTER SOFTWARE AND TECHNOLOGY -- 0.7%
100,000 Sage Group* 1,224,398
CONGLOMERATES -- 0.4%
43,000 Smiths Industries PLC 642,486
CONSTRUCTION -- 0.7%
135,000 Hanson PLC 1,131,760
DRUGS AND HEALTH CARE -- 1.8%
64,000 Glaxo Wellcome 1,813,271
92,000 Smithkline Beecham 1,166,570
ELECTRONICS -- 0.4%
52,000 Electrocomponents 575,370
FINANCIAL SERVICES -- 0.4%
43,000 CGU PLC 693,884
FOOD, BEVERAGE AND TOBACCO -- 0.8%
132,800 Imperial Tobacco 1,094,011
22,929 Whitbread 231,112
INSURANCE -- 0.4%
33,000 Prudential Corp. 643,923
LEISURE PRODUCTS -- 0.2%
38,000 Granada Group 383,634
OIL-INTERNATIONAL -- 1.6%
254,760 BP Amoco PLC 2,571,632
OIL AND GAS -- 0.5%
96,000 Shell Transport & Trading 797,829
TELECOMMUNICATIONS -- 3.8%
90,000 British Telecom. 2,180,655
53,373 Cable & Wireless Co.* 763,084
17,000 Energis PLC* 816,938
500,000 Vodafone Airtouch PLC 2,492,327
------------
24,778,607
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $104,165,208) 162,253,027
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 1.3%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 2,117,000 State Street Bank & Trust Co.
repurchase agreement,
dated 12/31/99, maturity
value $2,117,441 at 2.50%
due 1/3/00 (1) $ 2,117,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $2,117,000) 2,117,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $106,282,208) 164,370,027
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.0%) (20,011)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $164,350,016
- --------------------------------------------------------------------------------
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
29
<PAGE>
o THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
Common Stocks -- 94.8%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
ARGENTINA -- 1.6%
BANKS -- 0.4%
13,300 Banco Rio de la Plata S.A. ADR* $ 162,094
REAL ESTATE -- 0.3%
3,388 IRSA Inversiones Y Represente GDR 109,475
RETAIL-FOOD -- 0.5%
19,480 Imp. Y Exp. Patagonia 171,449
TELECOMMUNICATIONS -- 0.4%
4,340 Telefonica de Argentina S.A. ADR 133,997
-----------
577,015
- --------------------------------------------------------------------------------
BRAZIL -- 8.9%
BANKS -- 0.4%
1,700,000 Banco Itau S.A. 145,862
FOOD, BEVERAGE AND TOBACCO -- 0.1%
4,700,000 Comp. Lorenz* 19,513
GAS DISTRIBUTION -- 0.2%
6,361 Ultrapar Participacoes S.A. ADR* 73,151
PAPER PRODUCTS -- 0.4%
5,600 Aracruz Celulose S.A. ADR* 147,000
PETROLEUM SERVICES -- 1.2%
17,200 Petroleo Brasileiro S.A. ADR 438,600
REAL ESTATE -- 0.3%
6,500 Brazil Realty S.A. GDR* 87,102
RETAIL-APPLIANCES -- 0.6%
24,500 Globex Utilidades 196,651
RETAIL-FOOD -- 0.8%
8,168 Comp. Brasileiras de Dist. ADR* 263,928
TELECOMMUNICATIONS -- 3.7%
16,000,000 Embratel Participacoes S.A.* 267,479
6,580 Embratel Participacoes S.A. ADR 179,305
5,290 Telecom. Centro Sul Participacoes ADR 207,872
7,009,100 Telecom. de Sao Paolo 95,446
9,400 Telecom. Norte Leste Participacoes ADR* 239,700
41,001,500 Telecom. Sudeste Celular Participacoes S.A.* 303,016
TEXTILE-APPAREL AND PRODUCTION -- 0.7%
83,700 Confeccoes Guararapes S.A.* 259,463
UTILITIES-ELECTRIC AND WATER -- 0.5%
8,600 Comp. Energetica de Minas ADR 189,200
-----------
3,113,288
- --------------------------------------------------------------------------------
CHILE -- 1.2%
CHEMICALS -- 0.2%
2,100 Sociedad Quimica Y Minera
de Chile S.A. ADR* 66,281
MINING -- 0.6%
30,420 Antofagasta Hldgs. 211,291
MUTUAL FUNDS -- 0.2%
2,800 Genesis Chile Fund* 87,864
TELECOMMUNICATIONS -- 0.2%
3,500 Comp. de Telecom. de Chile ADR 63,875
-----------
429,311
- --------------------------------------------------------------------------------
CZECH REPUBLIC -- 0.4%
TELECOMMUNICATIONS -- 0.4%
9,000 SPT Telecom. AS* 145,287
- --------------------------------------------------------------------------------
GREECE -- 1.0%
BANKS -- 0.4%
1,575 Alpha Credit Bank* 123,328
HOSPITALS AND HEALTH CARE -- 0.3%
2,000 Athens Medical Care S.A.* 103,540
TELECOMMUNICATIONS -- 0.3%
8,770 Panafon Hellenic Telecom S.A.* 117,754
-----------
344,622
- --------------------------------------------------------------------------------
HONG KONG -- 3.5%
BANKS -- 0.5%
56,000 Guoco Group 170,734
COMPUTER SYSTEMS -- 1.5%
219,000 Legend Hldgs. Ltd. 542,323
CONGLOMERATES -- 0.7%
300,000 First Pacific Co. Ltd.* 233,486
REAL ESTATE -- 0.6%
17,000 Cheung Kong Hldgs. 215,411
UTILITIES -- 0.2%
384,000 Shandong Int'l. Power* 54,338
-----------
1,216,292
- --------------------------------------------------------------------------------
HUNGARY -- 3.0%
BANKS -- 1.0%
6,000 OTP Bank* 351,481
CHEMICALS -- 0.5%
4,100 BorsodChem RT 168,019
PHARMACEUTICALS -- 0.8%
4,200 Richter Gedeon VEG* 276,386
TELECOMMUNICATIONS -- 0.7%
38,000 Matav RT* 266,313
-----------
1,062,199
- --------------------------------------------------------------------------------
INDIA -- 11.9%
COMPUTER SOFTWARE -- 4.7%
5,000 Infosys Technology Ltd. ADR 1,650,000
MUTUAL FUNDS -- 5.9%
37,000 Indian Opportunity Fund* 587,375
22,000 UTI Int'l. Ltd.* 1,507,000
TELECOMMUNICATIONS -- 0.6%
17,000 Mahanagar Telephone Nigam
Ltd. GDR 192,950
TELECOMMUNICATIONS-SPECIALTY -- 0.7%
1,700 Satyam Infoway Ltd. ADR* 263,500
-----------
4,200,825
- --------------------------------------------------------------------------------
ISRAEL -- 2.5%
BANKS -- 0.6%
108,000 Bank Leumi Le-Israel 227,199
COMPUTER SOFTWARE -- 0.4%
8,700 Sapiens Int'l. Corp. NV* 143,006
CONGLOMERATES -- 0.6%
14,000 Clal Industries* 132,095
4,500 Koors Industries Ltd. ADR 90,000
ELECTRONIC EQUIPMENT -- 0.2%
2,200 ECI Telecom. Ltd. 69,575
TELECOMMUNICATIONS -- 0.7%
12,800 Elbit Ltd.* 226,400
-----------
888,275
- --------------------------------------------------------------------------------
MALAYSIA -- 2.7%
BANKS -- 1.2%
121,000 Malayan Banking Berhad 429,868
FOOD, BEVERAGE AND TOBACCO -- 0.1%
32,000 RJ Reynolds Berhad 39,747
TELECOMMUNICATIONS -- 0.7%
415,000 Technology Resources Inds. Berhad* 256,645
UTILITIES -- 0.7%
90,000 Tenaga Nasional 232,105
-----------
958,365
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
30
<PAGE>
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
MEXICO -- 12.0%
BANKS -- 0.7%
60,000 Grupo Financiero Banamex
Accival S.A. de C.V.* $ 240,633
CONGLOMERATES -- 1.3%
44,000 Alfa S.A.* 206,649
4,260 Desc S.A. de C.V. ADR* 71,355
4,000 Fomento Economico
Mexicano ADR* 178,000
CONSTRUCTION -- 0.8%
22,000 Apasco S.A. de C.V.* 136,992
79,800 Consorcio Ara S.A. de C.V.* 132,228
FINANCIAL SERVICES -- 0.3%
69,400 Grupo Financiero Banorte* 104,741
FOOD, BEVERAGE AND TOBACCO -- 0.7%
93,100 Grupo Continental 135,597
47,000 Grupo Industrial Bimbo S.A.* 104,913
MEDIA AND ENTERTAINMENT -- 2.1%
130,000 Corp. Interamericana Entretenimiento* 519,314
3,350 Grupo Television S.A. de C.V. ADR* 228,637
METALS -- 0.6%
16,600 Tubos de Acero* 218,822
PAPER PRODUCTS -- 0.4%
37,000 Kimberly Clark Mexico 144,485
REAL ESTATE -- 0.3%
33,100 Corp. Geo S.A. de C.V.* 124,715
RETAIL TRADE -- 1.0%
21,500 Grupo Elektra S.A. de C.V. GDR* 206,937
28,700 Organiz. Soriana* 131,763
TELECOMMUNICATIONS -- 3.8%
42,000 Grupo Carso Global Telecom.* 394,512
8,300 Telefonos de Mexico S.A. ADR 933,750
-----------
4,214,043
- --------------------------------------------------------------------------------
PANAMA -- 0.3%
BANKS -- 0.3%
4,800 Banco Latinoamericano de
Exportaciones S.A.* 112,800
- --------------------------------------------------------------------------------
PEOPLE'S REPUBLIC OF CHINA -- 0.5%
ELECTRICAL EQUIPMENT -- 0.5%
236,000 Guandong Kelon Elec. Hldgs.* 179,121
- --------------------------------------------------------------------------------
PERU -- 1.0%
BANKS -- 0.4%
11,600 Credicorp Ltd.* 139,200
MINING -- 0.3%
7,100 Comp. de Minas Buenaventura ADR 114,044
TELECOMMUNICATIONS -- 0.3%
9,000 Telefonica del Peru S.A. ADR 120,375
-----------
373,619
- --------------------------------------------------------------------------------
POLAND -- 1.3%
BANKS -- 0.5%
5,630 Bank Roswoju Eksport* 178,363
METALS -- 0.4%
20,250 KGHM Polska Miedz 127,328
TELECOMMUNICATIONS -- 0.4%
25,000 Telekomunikacja Polska GDR 159,375
-----------
465,066
- --------------------------------------------------------------------------------
QATAR -- 0.7%
COMPUTER SOFTWARE -- 0.7%
30,000 Qatar Tele QSC (Q-Tell) GDR* 230,250
- --------------------------------------------------------------------------------
SOUTH AFRICA -- 6.5%
BANKS -- 0.8%
62,000 Standard Bank Investment Corp. Ltd.* 257,368
CONGLOMERATES -- 0.9%
33,000 Bidvest Group Ltd.* 322,226
ELECTRONIC EQUIPMENT -- 1.9%
11,500 MIH Ltd. Tortola* 678,500
METALS -- 0.6%
93,000 Kroondal Platinum* 222,868
MINING -- 1.5%
26,600 Anglovaal Mining Ltd. 231,643
41,000 Ashanti Goldfields Co. Ltd. GDR* 107,625
6,700 De Beers Centenary 194,850
TOBACCO -- 0.8%
11,000 Compagnie Financiere Richemont AG 272,006
-----------
2,287,086
- --------------------------------------------------------------------------------
SOUTH KOREA -- 16.3%
BANKS -- 0.9%
19,200 Hanvit Bank GDR* 123,840
14,305 Kookmin Bank GDR 207,780
CONGLOMERATES -- 1.0%
23,500 Samsung Co.* 351,827
CONSTRUCTION -- 1.4%
12,788 Tae Young Corp.* 495,528
ELECTRONIC EQUIPMENT -- 5.5%
27,500 Comtec System* 372,963
15,000 Sam Hwa Electronics Co.* 257,596
4,500 Samsung Electro-Mechanics Co.* 299,207
4,300 Samsung Electronics* 1,007,310
FINANCIAL SERVICES -- 1.6%
24,896 Daishin Securities* 326,685
11,000 Dongwon Securities* 237,340
METALS -- 1.6%
15,700 Pohang Iron & Steel Co. Ltd. ADR 549,500
TELECOMMUNICATIONS -- 1.4%
12,875 SK Telecom Ltd. ADR 494,078
TELECOMMUNICATIONS-SPECIALTY -- 1.9%
9,800 Korea Thrunet Co. Ltd.* 665,175
UTILITIES-ELECTRIC -- 1.0%
22,000 Korea Electric Power Corp. ADR 368,500
-----------
5,757,329
- --------------------------------------------------------------------------------
SPAIN -- 1.0%
TELECOMMUNICATIONS-SPECIALTY -- 1.0%
6,800 Terra Networks S.A. ADR* 372,300
- --------------------------------------------------------------------------------
TAIWAN -- 11.3%
BANKS -- 0.9%
256,000 First Commercial Bank* 318,929
ELECTRONICS AND INSTRUMENTS -- 9.7%
103,500 Accton Technology Corp.* 351,211
63,000 Accton Technology Corp. GDR* 458,325
51,800 Hon Hai Precision* 386,210
184,000 Mitac Int'l. Corp.* 281,995
81,760 Taiwan Secom* 234,456
104,110 Taiwan Semiconductor* 553,971
226,200 United Micro Electronic* 807,214
16,000 Winbond Electronic Corp. GDR* 370,000
FINANCIAL SERVICES -- 0.7%
148,400 China Development Industrial Bank* 236,419
-----------
3,998,730
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements. * Non-income producing security.
31
<PAGE>
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
THAILAND -- 1.6%
REAL ESTATE -- 0.8%
528,000 Golden Land Ppty.* $ 273,357
TELECOMMUNICATIONS -- 0.8%
70,000 Total Access Communication Public Co.* 275,800
-----------
549,157
- --------------------------------------------------------------------------------
TURKEY -- 5.0%
BANKS -- 2.9%
41,800 Haci Omer Sabanci Hldgs. S.A. ADR* 553,850
15,570,000 Yapi ve Kredi Bankasi A.S.* 480,821
ELECTRONIC EQUIPMENT -- 0.5%
717,000 Vestel Elektronik Sanayi ve Ticaret A.S.* 171,847
MEDIA -- 1.0%
19,100,000 Hurriyet Gazetecilik ve Matbaacilik A.S.* 352,139
RETAIL-APPLIANCES -- 0.6%
2,920,000 Arcelik A.S.* 191,114
-----------
1,749,771
- --------------------------------------------------------------------------------
VENEZUELA -- 0.6%
TELECOMMUNICATIONS -- 0.6%
8,000 Compania Anononima Nacional Telefonos
de Venezuela ADR* 197,000
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $23,050,743) 33,421,751
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred Stocks -- 1.4%
- --------------------------------------------------------------------------------
7,600 Comp. Vale do Rio Doce $ 210,352
282,000 Itausa-Investimentos Itau S.A. 291,913
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $311,684) 502,265
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 3.4%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 1,206,000 State Street Bank & Trust Co.
repurchase agreement,
dated 12/31/99, maturity
value $1,206,251 at 2.50%
due 1/3/00 (1) $ 1,206,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $1,206,000) 1,206,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.6%
(COST $24,568,427) 35,130,016
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.4% 129,478
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $35,259,494
- --------------------------------------------------------------------------------
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
* Non-income producing security. See notes to financial statements.
32
<PAGE>
o THE GUARDIAN INVESTMENT QUALITY BOND FUND
- --------------------------------------------------------------------------------
Asset Backed -- 8.5%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 500,000 Amresco 1997-1 M1F
7.42% due 3/25/27 $ 489,690
1,700,000 Arcadia Automobile Rec. Tr.
1999-A A5
6.12% due 12/15/06 1,649,102
1,400,000 Contimortgage Home Equity Loan Tr.
1999-1 A3
6.17% due 5/25/21 1,344,490
1,300,000 Green Tree Finl. Corp.
1998-4 A5
6.18% due 12/1/17 1,263,067
1,400,000 Green Tree Finl. Corp.
1999-5 A3
6.97% due 4/1/31 1,387,344
1,700,000 Peco Energy Transition Tr.
1999-A A6
6.05% due 3/1/09 1,587,766
1,100,000 Pemex Finance Ltd.
6.125% due 11/15/03[ 1,072,962
1,500,000 PP & L Transition Bond Co.
1999-1 A4
6.72% due 12/26/05 1,482,105
1,727,000 Premier Auto Tr. 1997-2B
6.53% due 12/6/03 1,710,490
- --------------------------------------------------------------------------------
TOTAL ASSET BACKED
(COST $12,332,240) 11,987,016
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Commercial Mortgage Backed -- 2.8%
- --------------------------------------------------------------------------------
$1,300,000 Chase Coml. Mtg. Secs. Corp.
1998-1 A2
6.56% due 5/18/08 $ 1,232,037
1,300,000 First Union Coml. Mtg. Tr.
1999-C1 A2
6.07% due 10/15/35 1,188,351
1,489,283 TIAA Retail Coml. Mortgage Tr.
1999-A
7.17% due 10/15/07 1,466,795
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL MORTGAGE BACKED
(COST $4,150,973) 3,887,183
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Corporate Bonds -- 32.9%
- --------------------------------------------------------------------------------
BANKS -- 2.9%
$1,400,000 Bank of New York, Inc.
7.30% due 12/1/09 $ 1,371,616
1,400,000 Capital One Bank
6.48% due 1/28/02 1,371,678
1,400,000 Chase Manhattan Corp.
7.00% due 11/15/09 1,345,579
------------
4,088,873
- --------------------------------------------------------------------------------
CHEMICALS-MAJOR -- 1.1%
1,500,000 ICI Wilmington, Inc.
6.75% due 9/15/02 1,478,582
- --------------------------------------------------------------------------------
ENERGY -- 1.7%
1,000,000 Occidental Petroleum Corp.
7.65% due 2/15/06 995,386
1,400,000 Occidental Petroleum Corp.
8.45% due 2/15/29 1,453,106
------------
2,448,492
- --------------------------------------------------------------------------------
ENTERTAINMENT-CABLE-MEDIA -- 5.1%
$1,000,000 Cox Comm., Inc.
7.875% due 8/15/09 1,012,752
1,400,000 Joseph E. Seagram & Sons, Inc.
6.25% due 12/15/01 1,370,750
1,250,000 Joseph E. Seagram & Sons, Inc.
6.40% due 12/15/03 1,204,019
1,300,000 Joseph E. Seagram & Sons, Inc.
7.60% due 12/15/28 1,224,883
2,650,000 Time Warner, Inc.
6.625% due 5/15/29 2,255,378
------------
7,067,782
- --------------------------------------------------------------------------------
FINANCIAL -- 3.9%
1,600,000 Comdisco, Inc.
6.13% due 8/1/01 1,560,941
1,400,000 Lehman Brothers Hldgs., Inc.
6.00% due 2/26/01 1,382,588
1,400,000 Lehman Brothers Hldgs., Inc.
6.625% due 4/1/04 1,356,254
1,250,000 Paine Webber Group, Inc.
6.45% due 12/1/03 1,198,610
------------
5,498,393
- --------------------------------------------------------------------------------
FOOD AND BEVERAGE -- 0.8%
1,250,000 Aramark Svcs., Inc.
6.75% due 8/1/04 1,193,744
- --------------------------------------------------------------------------------
HOSPITAL-SUPPLIES -- 1.1%
1,600,000 Mallinckrodt, Inc.+
6.30% due 3/15/11 1,579,403
- --------------------------------------------------------------------------------
INDUSTRIAL-PIPELINES -- 1.0%
1,400,000 Williams Cos., Inc.
7.625% due 7/15/19 1,343,916
- --------------------------------------------------------------------------------
INSURANCE -- 0.9%
1,300,000 Conseco, Inc.
6.40% due 6/15/01 1,267,703
- --------------------------------------------------------------------------------
MERCHANDISING-DEPARTMENT STORES -- 2.8%
1,250,000 Federated Department Stores, Inc.
6.125% due 9/1/01 1,224,400
1,400,000 Saks, Inc.
7.00% due 7/15/04 1,324,953
1,400,000 Saks, Inc.
7.25% due 12/1/04 1,332,727
------------
3,882,080
- --------------------------------------------------------------------------------
MERCHANDISING-DRUGS -- 1.4%
2,300,000 Rite Aid Corp.
6.70% due 12/15/01 1,932,000
- --------------------------------------------------------------------------------
MERCHANDISING-SUPERMARKETS -- 2.8%
1,300,000 Kroger Co.
6.80% due 12/15/18 1,133,413
1,500,000 Fred Meyer, Inc.
7.45% due 3/1/08 1,457,051
1,400,000 Safeway, Inc.
7.00% due 9/15/02 1,391,247
------------
3,981,711
- --------------------------------------------------------------------------------
MISCELLANEOUS-CAPITAL GOODS -- 0.9%
1,250,000 Ikon Capital, Inc.
6.73% due 6/15/01 1,223,241
- --------------------------------------------------------------------------------
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
See notes to financial statements.
33
<PAGE>
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
RAILROADS -- 3.0%
$1,600,000 CSX Corp.
7.25% due 5/1/04 $ 1,584,344
1,500,000 Union Pacific Corp.
5.78% due 10/15/01 1,467,180
1,350,000 Union Pacific Corp.
6.625% due 2/1/29 1,140,257
------------
4,191,781
- --------------------------------------------------------------------------------
UTILITIES -- 2.4%
1,000,000 Cinergy Corp.
6.125% due 4/15/04 939,574
1,011,000 Marlin Water Trust/Cap.+
7.09% due 12/15/01 992,453
1,400,000 Southern Union Co.
8.25% due 11/15/29 1,399,275
------------
3,331,302
- --------------------------------------------------------------------------------
WASTE SERVICES -- 1.1%
1,600,000 USA Waste Svcs., Inc.
6.125% due 7/15/01 1,524,685
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $48,242,988) 46,033,688
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligation -- 0.9%
- --------------------------------------------------------------------------------
$1,424,660 GE Capital Mortgage Svcs., Inc.
1996-3A7 7.00% due 3/25/26
(COST $1,426,601) $ 1,343,457
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mortgage Pass-Throughs -- 31.0%
- --------------------------------------------------------------------------------
FHLMC
$2,400,000 7.00%, (30 yr. TBA)(a) $ 2,322,749
1,600,000 7.50%, (30 yr. TBA)(a) 1,584,499
7,118,907 6.50%, 2029 6,718,008
79,345 7.00%, 8/1/08 78,980
FNMA
10,700,000 7.00%, (30 yr. TBA)(a) 10,345,562
12,200,000 7.50%, (30 yr. TBA)(a) 12,066,556
4,700,000 8.00%, (30 yr. TBA)(a) 4,736,716
568,917 6.50%, 7/1/11 554,251
1,892,648 6.50%, 11/1/28 1,787,492
56,280 7.00%, 2/1/09 55,990
347,707 7.00%, 2012 344,456
28,210 7.00%, 8/1/23 27,505
28,795 7.00%, 10/1/27 27,892
462,513 7.00%, 12/1/28 447,643
3,837 7.50%, 5/1/27 3,798
GNMA
1,960,797 6.50%, 3/1/13 1,841,914
- --------------------------------------------------------------------------------
TOTAL MORTGAGE PASS-THROUGHS
(COST $44,091,435) 42,944,011
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government -- 22.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds
$5,825,000 5.25%, 2/15/29 $ 4,818,370
1,500,000 6.00%, 2/15/26 1,372,032
1,250,000 6.625%, 2/15/27 1,237,891
1,500,000 9.25%, 2/15/16 1,852,500
U.S. Treasury Notes
3,500,000 4.75%, 11/15/08 3,087,658
700,000 5.25%, 8/15/03 674,625
2,100,000 5.375%, 6/30/03 2,035,687
1,900,000 5.50%, 1/31/03 1,854,875
$1,225,000 5.50%, 5/15/09 1,141,165
2,000,000 5.75%, 11/30/02 1,969,376
5,100,000 6.00%, 8/15/04 5,020,312
1,500,000 6.00%, 8/15/09 1,453,125
4,200,000 6.50%, 10/15/06 4,188,190
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $31,308,148) 30,705,806
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Commercial Paper -- 20.2%
- --------------------------------------------------------------------------------
AUTOMOTIVE -- 1.3%
$1,800,000 General Motors Acceptance Corp.
5.88% due 1/19/00(a) $ 1,794,708
- --------------------------------------------------------------------------------
BANKS -- 3.5%
5,000,000 Nordenbanken North America, Inc.
6.05% due 1/19/00(a) 4,984,875
- --------------------------------------------------------------------------------
CONGLOMERATES -- 4.7%
1,600,000 General Electric Cap. Corp.
5.81% due 1/19/00(a) 1,595,352
5,000,000 Invensys PLC
6.17% due 1/19/00(a) 4,984,575
------------
6,579,927
- --------------------------------------------------------------------------------
FINANCIAL -- 10.7%
6,000,000 Duke Capital Corp.
6.14% due 1/19/00(a) 5,981,580
4,000,000 Household Finl. Corp.
6.05% due 1/19/00(a) 3,987,900
5,000,000 Morgan Stanley Dean Witter & Co.
6.00% due 1/19/00(a) 4,985,000
------------
14,954,480
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $28,313,990) 28,313,990
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 2.9%
- --------------------------------------------------------------------------------
$4,104,000 State Street Bank & Trust Co.
repurchase agreement,
dated 12/31/99, maturity
value $4,105,112 at 3.25%
due 1/3/00 (1) $ 4,104,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $4,104,000) 4,104,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 121.2%
(COST $173,970,375) 169,319,151
- --------------------------------------------------------------------------------
PAYABLES FOR MORTGAGE PASS-THROUGHS
DELAYED DELIVERY SECURITIES(A) -- (24.3%) (34,051,177)
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES-- 3.1% 4,393,058
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $139,661,032
- --------------------------------------------------------------------------------
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
(a) Commercial paper and repurchase agreement are segregated to cover forward
mortgage purchases.
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
See notes to financial statements.
34
<PAGE>
o THE GUARDIAN HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
Corporate Bonds -- 89.0%
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
AEROSPACE -- 1.1%
$ 670,000 K & F Ind., Inc.
Sr. Sub. Nt. Ser. B
9.25% due 10/15/07 B3/B- $ 636,500
- --------------------------------------------------------------------------------
BROADCASTING -- 1.2%
670,000 Spanish Broadcasting Sys., Inc.
Sr. Sub. Nt.
9.625% due 11/1/09 B3/B- 673,350
- --------------------------------------------------------------------------------
CABLE AND WIRELESS VIDEO -- 6.2%
670,000 Adelphia Comm. Corp.
Sr. Nt. Ser. B
10.50% due 7/15/04 B1/B+ 695,125
670,000 Charter Comm. Hldgs. LLC
Sr. Nt.
8.625% due 4/1/09 B2/B+ 618,913
670,000 CSC Hldgs., Inc.
Sr. Sub. Deb.
9.875% due 2/15/13 B1/BB- 701,825
500,000 Echostar DBS Corp.
Sr. Nt.
9.375% due 2/1/09 B2/B 502,500
1,000,000 Pegasus Comm. Corp.
Sr. Nt. Ser. B
9.625% due 10/15/05 B3/CCC+ 1,010,000
-----------
3,528,363
- --------------------------------------------------------------------------------
CHEMICALS -- 1.2%
670,000 Lyondell Chemical Co.
Sr. Sub. Nt.
10.875% due 5/1/09 B2/B+ 690,100
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 6.2%
1,000,000 Bell Sports, Inc.
Sr. Sub. Nt. Ser. B
11.00% due 8/15/08 B3/B- 1,000,000
500,000 Pillowtex Corp.
Sr. Sub. Nt.
10.00% due 11/15/06 B2/CC 230,000
750,000 St. John Knits Int'l., Inc.
Sr. Sub. Nt.+
12.50% due 7/1/09 B3/B- 663,750
1,000,000 Twin Laboratories, Inc.
Sr. Sub. Nt.
10.25% due 5/15/06 B3/B+ 1,035,000
670,000 Westpoint Stevens, Inc.
Sr. Nt.
7.875% due 6/15/08 Ba3/BB 599,650
-----------
3,528,400
- --------------------------------------------------------------------------------
DIVERSIFIED MEDIA -- 6.4%
1,000,000 American Media Operations
Sr. Sub. Nt.
10.25% due 5/1/09 B2/B- 1,002,500
1,000,000 Cinemark USA, Inc.
Sr. Sub. Nt. Ser. B
9.625% due 8/1/08 B2/B 900,000
1,000,000 Fox Liberty Networks LLC
Sr. Nt.
8.875% due 8/15/07 Ba1/BBB- 1,020,000
1,000,000 Regal Cinemas, Inc.
Sr. Sub. Nt.
9.50% due 6/1/08 Caa1/B- 755,000
-----------
3,677,500
- --------------------------------------------------------------------------------
EXPLORATION AND PRODUCTION -- 9.7%
$ 670,000 Belco Oil & Gas Corp.
Sr. Sub. Nt. Ser. B
8.875% due 9/15/07 B1/B $ 639,850
660,000 Chesapeake Energy Corp.
Sr. Nt. Ser. B
9.625% due 5/1/05 B3/B 622,050
670,000 Cliffs Drilling Co.
Sr. Sub. Nt. Ser. B
10.25% due 5/15/03 Ba2/BB- 676,700
1,000,000 Houston Exploration Co.
Sr. Sub. Nt.
8.625% due 1/1/08 B2/B 965,000
1,000,000 Ocean Energy, Inc.
Sr. Sub. Nt. Ser. B
8.375% due 7/1/08 Ba3/BB- 960,000
330,000 Pride Int'l., Inc.
Sr. Nt.
9.375% due 5/1/07 Ba3/BB 328,350
670,000 Swift Energy Co.
Sr. Sub. Nt.
10.25% due 8/1/09 B2/B- 675,025
670,000 Vintage Petroleum, Inc.
Sr. Sub. Nt.
9.75% due 6/30/09 B+/B1 685,075
-----------
5,552,050
- --------------------------------------------------------------------------------
FINANCIAL -- 1.2%
670,000 Americredit Corp.
Sr. Sub. Nt.
9.875% due 4/15/06 Ba1/B+ 675,863
- --------------------------------------------------------------------------------
FOOD AND TOBACCO -- 1.8%
670,000 Del Monte Corp.
Sr. Sub. Nt. Ser. B
12.25% due 4/15/07 B3/B- 740,350
330,000 Premier Int'l. Foods Plc
Sr. Nt.+
12.00% due 9/1/09 B3/B- 323,400
-----------
1,063,750
- --------------------------------------------------------------------------------
FOREST PRODUCTS AND CONTAINERS -- 4.1%
670,000 Kappa Beheer BV
Sr. Sub. Nt.+
10.625% due 7/15/09 B2/B 696,800
670,000 Packaging Corp. of America
Sr. Sub. Nt.
9.625% due 4/1/09 B3/B 684,237
1,000,000 Stone Container Corp.
Sr. Sub. Deb.
12.25% due 4/1/02 B3/B- 1,001,250
-----------
2,382,287
- --------------------------------------------------------------------------------
GAMING AND LEISURE -- 10.3%
1,000,000 HMH Properties, Inc.
Sr. Nt. Ser. C
8.45% due 12/1/08 Ba2/BB 925,000
1,000,000 Hollywood Casino Corp.
Sr. Nt.
11.25% due 5/1/07 B3/B 1,045,000
670,000 Intrawest Corp.
Sr. Nt.
9.75% due 8/15/08 B1/B+ 656,600
- --------------------------------------------------------------------------------
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
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 Premier Parks, Inc.
Sr. Nt.
9.75% due 6/15/07 B3/B- $ 995,000
1,000,000 Signature Resorts, Inc.
Sub. Nt. Conv.
5.75% due 1/15/07 Caa1/B 611,250
750,000 Vail Resorts, Inc.
Sr. Sub. Nt.
8.75% due 5/15/09 B1/B 703,125
977,000 Waterford Gaming LLC
Sr. Nt.+
9.50% due 3/15/10 B1/B+ 962,345
-----------
5,898,320
- --------------------------------------------------------------------------------
HEALTH CARE -- 6.2%
1,000,000 Fisher Scientific Int'l., Inc.
Sr. Sub. Nt.
9.00% due 2/01/08 B3/B- 958,750
100,000 Fresenius Medical Care
Capital Trust
9.00% due 12/01/06 Ba3/B+ 980,000
670,000 Insight Health Services Corp.
Sr. Sub. Nt.
9.625% due 6/15/08 B3/B- 629,800
330,000 Tenet Health Care Corp.
Sr. Sub. Nt. Ser. B
8.125% due 12/1/08 Ba3/BB- 306,900
670,000 Triad Hospitals Hldgs., Inc.
Sr. Sub. Nt. Ser. B
11.00% due 5/15/09 B3/B- 693,450
-----------
3,568,900
- --------------------------------------------------------------------------------
HOUSING -- 0.8%
500,000 Building Materials Corp.
Sr. Nt. Ser. B
7.75% due 7/15/05 Ba3/BB 455,000
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY-- 3.0%
670,000 Iron Mountain, Inc.
Sr. Sub. Nt.
10.125% due 10/1/06 B2/B- 681,725
1,000,000 Pierce Leahy Corp.
Sr. Sub. Nt.
11.125% due 7/15/06 B3/B- 1,060,000
-----------
1,741,725
- --------------------------------------------------------------------------------
MANUFACTURING -- 0.5%
200,000 Commscope, Inc.
Sub. Nt. Conv.+
4.00% due 12/15/06 Baa3/BB+ 216,250
100,000 Int'l. Wire Group, Inc.
Sr. Sub. Nt.
11.75% due 6/1/05 B3/B- 103,250
-----------
319,500
- --------------------------------------------------------------------------------
SERVICES -- 2.8%
1,000,000 Building One Services
Sr. Sub. Nt.
10.50% due 5/1/09 B2/B 960,000
670,000 United Rentals, Inc.
Sr. Sub. Nt.
9.00% due 4/1/09 B1/BB- 633,150
-----------
1,593,150
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 17.7%
$ 670,000 Alestra SA
Sr. Nt.
12.625% due 5/15/09 B2/BB- 675,025
330,000 Exodus Comm., Inc.
Sr. Nt.+
10.75% due 12/15/09 NR/B- 335,775
1,000,000 Globenet Comm. Group Ltd.
Sr. Nt.+
13.00% due 7/15/07 Caa1/B 1,018,750
500,000 Intermedia Comm., Inc.
Sr. Nt. Ser. B
9.50% due 3/1/09 B2/B 477,500
670,000 Int'l. Cabletel, Inc.
Sr. Nt. Ser. B
11.50% due 2/1/06 B3/B- 606,350
670,000 IXC Comm., Inc.
Sr. Sub. Nt.
9.00% due 4/15/08 B1/BB- 676,700
670,000 McLeodUSA, Inc.
Sr. Nt.
8.125% due 2/15/09 B1/B+ 624,775
330,000 Metromedia Fiber
Network, Inc.
Sr. Nt.
10.00% due 12/15/09 B3/B- 338,250
200,000 Mindspring Enterprises, Inc.
Conv. Sub. Deb.
5.00% due 4/15/06 B3/B- 191,500
670,000 Nextlink Comm., Inc.
Sr. Nt.
10.75% due 6/1/09 B3/B 688,425
1,170,000 Nextlink Comm., Inc.
Sr. Nt.+
12.125% due 12/1/09 B2/B 681,525
330,000 NTL, Inc.
Sr. Nt. Conv.+
5.75% due 12/15/09 NR/NR 354,750
670,000 Pac-West Telecomm., Inc.
Sr. Nt.
13.50% due 2/1/09 B3/B 693,450
340,000 RCN Corp.
Sr. Nt.
10.00% due 10/15/07 B3/B- 337,875
500,000 Rhythms Netconnections, Inc.
Sr. Nt.
12.75% due 4/15/09 B3/CCC+ 483,750
1,000,000 Telewest Comm. Plc
Sr. Disc. Nt.+
9.25% due 4/15/09 B1/B+ 630,000
670,000 Williams Comm. Group, Inc.
Sr. Nt.
10.875% due 10/1/09 B2/BB- 700,150
670,000 Winstar Comm., Inc.
Sr. Disc. Nt.
14.00% due 10/15/05 Caa1/CCC+ 649,900
-----------
10,164,450
- --------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 8.6%
1,000,000 Airgate PCS, Inc.
Sr. Sub. Disc. Nt.
13.50% due 10/1/09 Caa1/CCC 555,000
1,000,000 Clearnet Comm., Inc.
Sr. Disc. Nt.
14.75% due 12/15/05 B3/NR 981,250
- --------------------------------------------------------------------------------
+ Rule 144A restricted security.
- --------------------------------------------------------------------------------
* Unaudited See notes to financial statements.
36
<PAGE>
THE GUARDIAN HIGH YIELD BOND FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
$ 670,000 Microcell Telecomm.
Sr. Disc. Nt. Ser. B
14.00% due 6/1/06 B3/B $ 591,275
330,000 Nextel Comm., Inc.
Sr. Disc. Nt.
9.75% due 10/31/07 B1/B 235,950
500,000 Orbcomm Global LP
Sr. Nt. Ser. B
14.00% due 8/15/04 B3/CCC+ 360,000
1,000,000 Telecorp PCS, Inc.
Sr. Sub. Disc. Nt.
11.625% due 4/15/09 B3/NR 630,000
1,000,000 Triton PCS, Inc.
Sr. Sub. Disc. Nt.
11.00% due 5/1/08 B3/CCC+ 707,500
330,000 U.S. Unwired, Inc.
Sr. Sub. Disc. Nt.+
13.375% due 11/1/09 Caa1/CCC+ 193,050
250,000 Voicestream Wire Corp.
Sr. Nt.+
10.375% due 11/15/09 B2/B- 257,500
670,000 Voicestream Wireless Corp.
Sr. Disc. Nt.+
11.875% due 11/15/09 B2/B- 402,000
-----------
4,913,525
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $51,609,071) 51,062,733
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 10.1%
- --------------------------------------------------------------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$5,776,000 State Street Bank & Trust Co.
repurchase agreement,
dated 12/31/99, maturity
value $5,777,564 at 3.25%
due 1/3/00 (1) $ 5,776,000
TOTAL REPURCHASE AGREEMENT
(COST $5,776,000) 5,776,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.1%
(COST $57,385,071) 56,838,733
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES-- 0.9% 522,963
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $57,361,696
- --------------------------------------------------------------------------------
+ Rule 144A restricted security.
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements. * Unaudited
37
<PAGE>
o THE GUARDIAN TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
Municipal Bonds -- 98.2%
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
ARIZONA -- 5.3%
$2,000,000 Maricopa Cnty., AZ
Indl. Dev. Auth.,
5.65% due 7/1/19 Aaa/AAA $ 1,913,540
1,700,000 Maricopa Cnty., AZ
Sch. Dist. Proj., Ser. D,
5.125% due 7/1/15 Aa2/AA 1,590,350
1,765,000 Scottsdale, AZ
5.50% due 7/1/22 Aa1/AA+ 1,658,888
-------------
5,162,778
- --------------------------------------------------------------------------------
CALIFORNIA -- 6.5%
1,000,000 California St. G.O.,
5.00% due 2/1/17 Aa3/A+ 900,950
1,500,000 California St. Pub. Wks.
Bd. Lease Rev., Ser. A,
5.25% due10/1/17 A2/A 1,385,760
1,000,000 Los Angeles, CA Regl.
Airport Lease Rev.(1),
3.80% due 12/1/25 NR/A1+ 1,000,000
1,000,000 Metropolitan Water Dist.
Southern CA Water Rev.,
5.50% due 7/1/19 Aa2/AA 958,490
2,000,000 Northern CA
Transmission Rev.,
6.50% due 5/1/16 Aaa/AAA 2,102,300
-------------
6,347,500
- --------------------------------------------------------------------------------
COLORADO -- 0.9%
1,000,000 Boulder Valley, CO
Sch. Dist. G.O.,
5.125% due 12/1/17 Aa3/AA 908,790
- --------------------------------------------------------------------------------
FLORIDA -- 6.2%
2,350,000 Florida St. Board of Ed.
Prerefunded Cap. Outlay Ser. C
5.60% due 6/1/03 AAA/AAA 2,438,055
1,500,000 Florida St. Tpk. Auth.
Tpk. Rev.,
5.50% due 7/1/11 Aaa/AAA 1,516,275
2,000,000 Sunrise, FL Prerefunded
Utilities Sys. Rev.,
5.75% due 10/1/06 Aaa/AAA 2,108,480
-------------
6,062,810
- --------------------------------------------------------------------------------
GEORGIA -- 2.0%
1,840,000 Georgia St. G.O Ser. B,
6.10% due 3/1/05 Aaa/AAA 1,947,106
- --------------------------------------------------------------------------------
IDAHO -- 1.6%
1,625,000 Boise City, ID Urban
Renewal Agy. Lease,
6.00% due 8/15/23 Aaa/AAA 1,608,685
- --------------------------------------------------------------------------------
KANSAS -- 1.8%
1,780,000 Kansas St. Dept. Trans.
Hwy. Rev.,
5.25% due 9/1/13 Aa2/AA+ 1,722,595
- --------------------------------------------------------------------------------
MAINE -- 1.4%
1,375,000 Maine St. Hsg. Auth.,
5.85% due 11/15/20 Aa2/AA 1,342,536
- --------------------------------------------------------------------------------
MASSACHUSETTS -- 4.3%
1,750,000 Massachusetts Bay Trans.
Auth. Ser. B,
5.125% due 3/1/15 Aa3/AA- 1,618,523
$2,500,000 Massachusetts St. G.O.,
Prerefunded
5.625% due 8/1/05 Aaa/AAA 2,613,900
-------------
4,232,423
- --------------------------------------------------------------------------------
MICHIGAN -- 1.4%
1,500,000 Wayne St. Univ., MI,
5.25% due 11/15/19 Aaa/AAA 1,352,640
- --------------------------------------------------------------------------------
MINNESOTA -- 4.9%
1,000,000 Minnesota Pub. Facs.
Water Poll. Control Rev.,
5.00% due 3/1/12 Aaa/AAA 958,590
2,000,000 Minnesota Pub. Facs.
Water Poll. Control Rev.,
5.125% due 3/1/15 Aaa/AAA 1,861,120
2,000,000 Minnesota St.
Hsg. Fin. Agy.,
5.80% due 7/1/21 Aa2/AA+ 1,937,960
-------------
4,757,670
- --------------------------------------------------------------------------------
MISSOURI -- 2.2%
2,420,000 Missouri St. Environmental
Energy Rev.,
5.00% due 1/1/20 Aa1/NR 2,145,524
- --------------------------------------------------------------------------------
NEW JERSEY -- 6.6%
2,000,000 New Jersey St., G.O.,
5.25% due 3/1/06 Aa1/AA+ 2,036,680
1,250,000 New Jersey St. Hsg. &
Mtg. Fin. Agy. Rev.,
5.35% due 10/1/11 Aaa/AAA 1,238,087
2,500,000 New Jersey St. Transit
Auth. Ser. A,
6.00% due 6/15/04 Aaa/AAA 2,623,800
500,000 New Jersey St. Transit
Auth. Ser. A,
6.50% due 6/15/05 Aaa/AAA 539,045
-------------
6,437,612
- --------------------------------------------------------------------------------
NEW MEXICO -- 2.5%
1,500,000 Albuquerque, NM
Gross Rcpts. Tax Rev.,
5.25% due 7/1/16 A1/AA 1,408,620
1,000,000 New Mexico St. Hwy.
Community Tax Rev.,
6.00% due 6/15/10 Aa2/AA+ 1,049,180
-------------
2,457,800
- --------------------------------------------------------------------------------
NEW YORK -- 11.7%
1,500,000 Long Island Power Auth., NY
Elec. System Rev.,
5.125% due 4/1/12 Aaa/AAA 1,448,955
2,200,000 Long Island Power Auth., NY
Elec. System Rev. Ser. 6(1),
3.30% due 5/1/33 VMIG1/A1+ 2,200,000
2,000,000 New York, NY
G.O. Ser. A,
6.25% due 8/1/08 A3/A- 2,123,180
1,000,000 New York, NY
G.O. Ser. F,
5.125% due 8/1/11 A3/A- 963,190
1,500,000 New York St. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.00% due 5/15/15 A3/A- 1,338,240
- --------------------------------------------------------------------------------
(1) Variable rate demand notes.
- --------------------------------------------------------------------------------
* Unaudited See notes to financial statements.
38
<PAGE>
THE GUARDIAN TAX-EXEMPT FUND
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------------
$1,000,000 New York St. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.00% due 5/15/17 A3/A- $ 873,430
1,000,000 New York St. Dorm.
Auth. Rev. St. Univ. Ed. Facs.,
5.75% due 7/1/12 Aaa/AAA 1,030,570
500,000 New York St. Ser. A,
5.875% due 3/15/15 A2/A 501,840
1,000,000 New York St. Thruway
Auth. Svc. Contract,
5.75% due 4/1/16 Baa1/A- 977,220
-------------
11,456,625
- --------------------------------------------------------------------------------
NORTH CAROLINA -- 1.9%
2,000,000 Charlotte, NC G.O.
5.25% due 2/1/20 Aaa/AAA 1,837,140
- --------------------------------------------------------------------------------
NORTH DAKOTA -- 1.8%
1,750,000 Grand Forks, ND
Hosp. Facs. Rev.(1),
3.00% due 12/1/16 A1/NR 1,750,000
- --------------------------------------------------------------------------------
OHIO -- 6.9%
1,000,000 Cleveland, OH
Parking Fac. Rev.,
5.50% due 9/15/16 Aaa/AAA 968,100
500,000 Columbus, OH
Water System Rev.,
6.10% due 11/1/03 Aa3/AA- 522,850
1,210,000 Ohio Hsg. Fin. Agy.
Mtg. Rev.,
5.70% due 3/1/17 Aaa/AAA 1,187,833
1,000,000 Ohio St. Bldg. Auth. Disalle
Gov't. Center Ser. A,
6.00% due 10/1/05 Aa3/AA- 1,054,360
2,000,000 Ohio St. Tpk. Community
Prerefunded Tpk. Rev. Ser. A,
5.50% due 2/15/06 Aaa/AAA 2,084,800
1,000,000 University Akron OH
Gen. Receipts,
5.70% due 1/1/24 Aaa/AAA 949,930
-------------
6,767,873
- --------------------------------------------------------------------------------
OKLAHOMA -- 3.3%
1,500,000 Oklahoma St. Tpk.
Second Sr. Ser. B,
5.25% due 1/1/11 Aaa/AAA 1,495,035
1,750,000 Oklahoma St. Tpk.
Second Sr. Ser. B,
5.25% due 1/1/14 Aaa/AAA 1,707,685
-------------
3,202,720
- --------------------------------------------------------------------------------
OREGON -- 3.0%
3,000,000 Port Portland, OR
Special Oblig. Rev.(1),
3.00% due 6/15/27 NR/A1+ 3,000,000
- --------------------------------------------------------------------------------
PENNSYLVANIA -- 3.6%
1,000,000 Delaware River Port
Auth. PA & NJ Rev.,
6.00% due 1/1/17 Aaa/AAA 1,017,270
1,600,000 Pennsylvania St.,
5.375% due 11/15/05 Aaa/AAA 1,639,856
$1,000,000 Southeastern, PA
Transit Auth. Ser. B,
5.00% due 3/1/20 Aaa/AAA 869,120
-------------
3,526,246
- --------------------------------------------------------------------------------
SOUTH CAROLINA -- 1.0%
1,000,000 South Carolina Trans.
Infrastructure Ser. A,
5.00% due 10/1/03 Aaa/AAA 1,011,130
- --------------------------------------------------------------------------------
SOUTH DAKOTA -- 2.0%
2,000,000 South Dakota
Hsg. Dev. Auth.,
6.00% due 5/1/21 Aa1/AAA 1,987,900
- --------------------------------------------------------------------------------
TENNESSEE -- 1.9%
2,000,000 Tennessee Hsg. Dev. Agy.
Home Ownership Prog.,
5.50% due 7/1/20 Aa2/AA 1,887,440
- --------------------------------------------------------------------------------
TEXAS -- 11.5%
2,225,000 Austin, TX Indpt.
Prerefunded Sch. Dist. G.O.,
5.75% due 8/1/06 Aaa/AAA 2,321,209
2,000,000 Brazos River Auth.
TX Rev.,
5.125% due 11/1/20 Aaa/AAA 1,741,860
2,000,000 Harris Cnty., TX Health
Fac. Rev.(1),
3.30% due 2/15/27 NR/A1+ 2,000,000
1,000,000 Houston, TX Prerefunded
Water & Sewer System Ser. A,
6.20% due 12/1/05 Aaa/AAA 1,066,440
2,000,000 San Antonio, TX
Elec. & Gas Rev. Ser. A,
5.25% due 2/1/16 Aa1/AA 1,860,220
150,000 Texas St. G.O. Prerefunded
Water Dev. Brd.,
6.50% due 8/1/05 NR/AA 161,649
405,000 Texas St. G.O.
Water Dev. Brd.,
6.50% due 8/1/05 Aa1/AA 437,270
1,800,000 University, TX Univ. Revs.
Fing. System Ser. B,
5.375% due 8/15/17 Aa1/AAA 1,691,604
-------------
11,280,252
- --------------------------------------------------------------------------------
WASHINGTON -- 2.0%
2,000,000 King Cnty., WA G.O.,
5.00% due 12/1/11 Aa1/AA+ 1,930,300
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $99,524,301) 96,124,095
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.2%
(COST $99,524,301) 96,124,095
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 1.8% 1,783,733
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 97,907,828
- --------------------------------------------------------------------------------
GLOSSARY:
G.O.-- General Obligation.
(1) Variable rate demand notes.
- --------------------------------------------------------------------------------
See notes to financial statements. * Unaudited
39
<PAGE>
o THE GUARDIAN CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
Commercial Paper -- 90.8%
- --------------------------------------------------------------------------------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
FINANCIAL -- 46.4%
DATA PROCESSING -- 3.9%
$ 16,000,000 First Data Corp.
6.00% 1/18/00 $ 15,954,667
- --------------------------------------------------------------------------------
FINANCE COMPANIES -- 12.8%
10,000,000 Associates Corp. of N.A.
5.82% 1/19/00 9,970,900
7,000,000 Associates First Capital
5.90% 2/1/00 6,964,436
2,000,000 Associates First Capital
5.90% 2/3/00 1,989,183
14,000,000 Bear Stearns Cos., Inc.
5.76% 1/11/00 13,977,600
19,000,000 Merrill Lynch & Co., Inc.
6.12% 1/28/00 18,912,790
------------
51,814,909
- --------------------------------------------------------------------------------
FINANCIAL-OTHER -- 2.5%
10,000,000 Govco, Inc.
6.15% 1/28/00 9,953,875
- --------------------------------------------------------------------------------
FOODS -- 3.7%
15,000,000 Cargill Global Funding Plc
6.95% 1/14/00 14,962,354
- --------------------------------------------------------------------------------
INSURANCE -- 4.4%
18,000,000 American General Fin. Corp.
5.96% 2/2/00 17,904,640
- --------------------------------------------------------------------------------
OTHER MAJOR BANKS -- 14.4%
15,000,000 Bank of America Corp.
5.93% 1/12/00 14,972,821
10,000,000 Dresdner U.S. Fin.
6.34% 1/3/00 9,996,478
15,000,000 HVB Fin. (Delaware), Inc.
5.85% 1/14/00 14,968,313
18,000,000 UBS Fin. (Delaware), Inc.
5.00% 1/3/00 17,995,000
------------
57,932,612
- --------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 4.7%
19,000,000 Nat'l. Rural Utils. Coop. Fin. Corp.
5.85% 3/6/00 18,799,313
- --------------------------------------------------------------------------------
TOTAL FINANCIAL 187,322,370
- --------------------------------------------------------------------------------
INDUSTRIAL -- 44.4%
AUTOMOTIVE -- 8.8%
$ 18,500,000 BMW U.S. Capital Corp.
4.00% 1/4/00 $18,493,833
17,000,000 General Motors Acceptance Corp.
5.96% 2/7/00 16,895,866
------------
35,389,699
- --------------------------------------------------------------------------------
CONGLOMERATES -- 7.9%
15,000,000 General Electric Capital Corp.
6.01% 1/25/00 14,939,900
10,000,000 Invensys Plc
6.10% 1/13/00 9,979,667
7,000,000 Invensys Plc
5.80% 1/19/00 6,979,700
------------
31,899,267
- --------------------------------------------------------------------------------
FOOD AND BEVERAGES -- 3.7%
$15,000,000 Diageo Capital Plc
5.75% 1/20/00 14,954,479
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 5.4%
11,900,000 Colgate Palmolive Co.
5.82% 1/31/00 11,842,285
10,000,000 Procter & Gamble Co.
5.82% 1/10/00 9,985,450
------------
21,827,735
- --------------------------------------------------------------------------------
METALS -- 3.7%
15,000,000 Rio Tinto America, Inc.
5.97% 1/7/00 14,985,075
- --------------------------------------------------------------------------------
OIL AND GAS SERVICES -- 4.6%
18,581,000 Baker Hughes, Inc.
4.75% 1/3/00 18,576,096
- --------------------------------------------------------------------------------
OIL-INTEGRATED-INTERNATIONAL -- 2.0%
8,000,000 Texaco, Inc.
5.73% 1/18/00 7,978,353
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 4.4%
18,200,000 SBC Comm., Inc.
5.85% 1/27/00 18,123,105
- --------------------------------------------------------------------------------
UTILITIES-ELECTRIC -- 3.9%
16,000,000 Electricite de France
5.82% 1/11/00 15,974,133
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL 179,707,942
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $367,030,312) 367,030,312
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 9.5%
- --------------------------------------------------------------------------------
$ 38,174,000 State Street Bank & Trust Co.
repurchase agreement,
dated 12/31/99, maturity
value $38,184,339 at 3.25%
due 1/3/00 (1) $ 38,174,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $38,174,000) 38,174,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.3%
(COST $405,204,312) 405,204,312
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.3%) (1,315,958)
- --------------------------------------------------------------------------------
NET ASSETS -- 100.0% $403,888,354
- --------------------------------------------------------------------------------
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
40
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
41
<PAGE>
- --------------------
Financial Statements
- --------------------
o THE PARK AVENUE PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE ASSET BAILLIE GIFFORD
FUND SMALL CAP ALLOCATION INTERNATIONAL
FUND FUND FUND
----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at identified cost* ............................... $2,480,344,108 $ 91,811,460 $252,125,034 $106,282,208
================================================================
Investments, at market ......................................... 3,717,913,015 133,344,350 239,139,370 162,253,027
Repurchase agreements .......................................... 146,725,000 6,088,000 29,326,000 2,117,000
----------------------------------------------------------------
TOTAL INVESTMENTS ........................................ 3,864,638,015 139,432,350 268,465,370 164,370,027
Cash ........................................................... 14,963 7,371 451 89
Foreign Currency (cost $151,870 GBGIF and $136,765
GBGEMF, respectively) ........................................ -- -- -- 135,032
Receivable for fund shares sold ................................ 2,938,300 66,901 179,506 13,879
Dividends receivable ........................................... 1,503,518 39,675 227,179 80,938
Interest receivable ............................................ 13,271 550 2,647 147
Receivable for securities sold ................................. -- 2,401,847 -- --
Deferred organization expenses-- Note 8 ........................ -- 22,670 -- --
Dividend reclaim receivable .................................... -- -- -- 80,187
----------------------------------------------------------------
TOTAL ASSETS ............................................. 3,869,108,067 141,971,364 268,875,153 164,680,299
----------------------------------------------------------------
LIABILITIES
Payable for securities purchased ............................... 19,395,991 48,238 -- --
Payable for fund shares redeemed ............................... 4,349,879 302,221 645,300 123,772
Accrued expenses ............................................... 2,876,721 159,170 100,986 198,351
Accrued foreign capital gains tax .............................. -- -- -- 8,160
Payable for margin variation ................................... -- -- 183,600 --
Payable for forward mortgage securities purchased-- Note 7 ..... -- -- -- --
Distributions payable ......................................... -- -- -- --
----------------------------------------------------------------
TOTAL LIABILITIES ........................................ 26,622,591 509,629 929,886 330,283
----------------------------------------------------------------
NET ASSETS ............................................... $3,842,485,476 $141,461,735 $267,945,267 $164,350,016
================================================================
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD INVESTMENT HIGH YIELD
EMERGING QUALITY BOND
MARKETS FUND BOND FUND FUND
-----------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at identified cost* ............................... $24,568,427 $173,970,375 $57,385,071
=====================================================
Investments, at market ......................................... 33,924,016 165,215,151 51,062,733
Repurchase agreements .......................................... 1,206,000 4,104,000 5,776,000
-----------------------------------------------------
TOTAL INVESTMENTS ........................................ 35,130,016 169,319,151 56,838,733
Cash ........................................................... 551 34,125 45,889
Foreign Currency (cost $151,870 GBGIF and $136,765
GBGEMF, respectively) ........................................ 137,824 -- --
Receivable for fund shares sold ................................ 26,858 7,003 18,093
Dividends receivable ........................................... 54,875 -- --
Interest receivable ............................................ 84 1,987,034 1,200,610
Receivable for securities sold ................................. -- 2,769,425 --
Deferred organization expenses-- Note 8 ........................ 12,241 -- --
Dividend reclaim receivable .................................... 2,320 -- --
-----------------------------------------------------
TOTAL ASSETS ............................................. 35,364,769 174,116,738 58,103,325
-----------------------------------------------------
LIABILITIES
Payable for securities purchased ............................... -- -- 683,146
Payable for fund shares redeemed ............................... -- 207,580 6,159
Accrued expenses ............................................... 26,914 102,030 50,838
Accrued foreign capital gains tax .............................. 78,361 -- --
Payable for margin variation ................................... -- -- --
Payable for forward mortgage securities purchased-- Note 7 ..... -- 34,051,177 --
Distributions payable ......................................... -- 94,919 1,486
-----------------------------------------------------
TOTAL LIABILITIES ........................................ 105,275 34,455,706 741,629
-----------------------------------------------------
NET ASSETS ............................................... $35,259,494 $139,661,032 $57,361,696
=====================================================
<CAPTION>
THE GUARDIAN THE GUARDIAN
TAX-EXEMPT CASH
FUND MANAGEMENT
FUND
-------------------------------
<S> <C> <C>
ASSETS
Investments, at identified cost* ............................... $99,524,301 $405,204,312
===============================
Investments, at market ......................................... 96,124,095 367,030,312
Repurchase agreements .......................................... -- 38,174,000
-------------------------------
TOTAL INVESTMENTS ........................................ 96,124,095 405,204,312
Cash ........................................................... 388,713 73,960
Foreign Currency (cost $151,870 GBGIF and $136,765
GBGEMF, respectively) ........................................ -- --
Receivable for fund shares sold ................................ 100 1,654,646
Dividends receivable ........................................... -- --
Interest receivable ............................................ 1,509,209 3,446
Receivable for securities sold ................................. -- --
Deferred organization expenses-- Note 8 ........................ -- --
Dividend reclaim receivable .................................... -- --
-------------------------------
TOTAL ASSETS ............................................. 98,022,117 406,936,364
-------------------------------
LIABILITIES
Payable for securities purchased ............................... -- --
Payable for fund shares redeemed ............................... 2,463 2,651,498
Accrued expenses ............................................... 108,725 300,028
Accrued foreign capital gains tax .............................. -- --
Payable for margin variation ................................... -- --
Payable for forward mortgage securities purchased-- Note 7 ..... -- --
Distributions payable ......................................... 3,101 96,484
-------------------------------
TOTAL LIABILITIES ........................................ 114,289 3,048,010
-------------------------------
NET ASSETS ............................................... $97,907,828 $403,888,354
===============================
</TABLE>
* Includes repurchase agreements
See notes to financial statements.
42 & 43
<PAGE>
o THE PARK AVENUE PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (continued)
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE ASSET BAILLIE GIFFORD
FUND SMALL CAP ALLOCATION INTERNATIONAL
FUND FUND FUND
---------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par ............................ $ 647,917 $ 81,240 $ 181,449 $ 70,569
Additional paid-in capital ....................................... 2,321,034,282 104,759,783 238,649,543 105,491,181
Undistributed/(overdistributed) net investment income ............ 269,418 -- 28,923 (367,315)
Accumulated net realized gain/(loss) on investments and foreign
currency related transactions .................................. 136,239,457 (11,000,208) 13,527,933 1,088,270
Net unrealized appreciation/(depreciation) of investments
and foreign currency related transactions ....................... 1,384,294,402 47,620,920 15,557,419 58,067,311
---------------------------------------------------------------
NET ASSETS .................................................... $3,842,485,476 $141,461,735 $267,945,267 $164,350,016
===============================================================
NET ASSETS
Class A ......................................................... $3,334,721,901 $119,032,049 $227,031,241 $148,727,251
Class B ......................................................... $ 507,763,575 $ 22,429,686 $ 40,914,026 $ 15,622,765
SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE
Class A ......................................................... 56,122,154 6,809,188 15,366,137 6,365,792
Class B ......................................................... 8,669,583 1,314,817 2,778,746 691,103
NET ASSET VALUE PER SHARE
Class A ......................................................... $59.42 $17.48 $14.77 $23.36
Class B ......................................................... $58.57 $17.06 $14.72 $22.61
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)* ....................... $62.22 $18.30 $15.47 $24.46
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD INVESTMENT HIGH YIELD
EMERGING QUALITY BOND
MARKETS FUND BOND FUND FUND
-----------------------------------------------------
<S> <C> <C> <C>
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par ............................ $ 31,779 $ 149,683 $ 63,881
Additional paid-in capital ....................................... 31,036,916 147,800,503 62,048,872
Undistributed/(overdistributed) net investment income ............ (893,619) -- --
Accumulated net realized gain/(loss) on investments and foreign
currency related transactions .................................. (5,473,438) (3,637,930) (4,204,719)
Net unrealized appreciation/(depreciation) of investments
and foreign currency related transactions ....................... 10,557,856 (4,651,224) (546,338)
-----------------------------------------------------
NET ASSETS .................................................... $35,259,494 $139,661,032 $57,361,696
=====================================================
NET ASSETS
Class A ......................................................... $32,939,547 $139,661,032 $54,177,754
Class B ......................................................... $ 2,319,947 -- $ 3,183,942
SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE
Class A ......................................................... 2,960,107 14,968,269 6,033,346
Class B ......................................................... 217,836 -- 354,803
NET ASSET VALUE PER SHARE
Class A ......................................................... $11.13 $9.33 $8.98
Class B ......................................................... $10.65 -- $8.97
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)* ....................... $11.65 $9.77 $9.40
<CAPTION>
THE GUARDIAN THE GUARDIAN
TAX-EXEMPT CASH
FUND MANAGEMENT
FUND
--------------------------------
<S> <C> <C>
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par ............................ $ 104,189 $ 4,038,884
Additional paid-in capital ....................................... 103,015,928 399,849,470
Undistributed/(overdistributed) net investment income ............ -- --
Accumulated net realized gain/(loss) on investments and foreign
currency related transactions .................................. (1,812,083) --
Net unrealized appreciation/(depreciation) of investments
and foreign currency related transactions ....................... (3,400,206) --
--------------------------------
NET ASSETS .................................................... $ 97,907,828 $403,888,354
================================
NET ASSETS
Class A ......................................................... $ 97,907,828 $390,106,361
Class B ......................................................... -- $ 13,781,993
SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE
Class A ......................................................... 10,418,932 390,106,361
Class B ......................................................... -- 13,781,993
NET ASSET VALUE PER SHARE
Class A ......................................................... $9.40 $1.00
Class B ......................................................... -- $1.00
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)* ....................... $9.84 N/A**
</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.
44 & 45
<PAGE>
o THE PARK AVENUE PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE PARK AVENUE ASSET
FUND SMALL CAP ALLOCATION
FUND FUND
-------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends ...................................................................... $ 26,394,370 $ 671,235 $ 2,675,865
Interest ....................................................................... 8,016,529 334,139 4,555,702
Less: Foreign tax withheld ..................................................... (20,287) (395) --
-------------------------------------------------
Total Income ................................................................. 34,390,612 1,004,979 7,231,567
-------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2 ............................................. 17,021,192 872,368 1,587,497
Administrative fees -- Class A-- Note 2 ........................................ 5,292,187 244,291 525,841
Administrative fees -- Class B-- Note 2 ........................................ 1,053,059 46,498 84,734
12b-1 fees-- Class B-- Note 3 .................................................. 3,159,177 139,495 254,203
Transfer agent fees-- Class A .................................................. 2,114,513 166,212 187,109
Transfer agent fees-- Class B .................................................. 605,332 57,504 56,915
Custodian fees ................................................................. 408,102 86,400 72,163
Printing expense ............................................................... 289,999 12,500 16,884
Registration fees .............................................................. 100,000 50,000 52,896
Legal fees ..................................................................... 52,000 1,999 2,900
Audit fees ..................................................................... 22,234 19,232 18,732
Trustees' fees -- Note 2 ....................................................... 19,000 19,000 19,000
Insurance expense .............................................................. 8,650 383 569
Other .......................................................................... 700 700 700
Amortization of organization costs -- Note 8 ................................... -- 9,074 --
Interest expense on reverse repurchase agreements .............................. -- -- --
-------------------------------------------------
Total Expenses before Reimbursement and Custody credits .................... 30,146,145 1,725,656 2,880,143
Less: Expenses assumed by investment adviser -- Note 2 ......................... -- -- (1,422,190)
Custody credits -- Note 1 .................................................. -- -- --
-------------------------------------------------
Expenses Net of Reimbursement and Custody credits .......................... 30,146,145 1,725,656 1,457,953
-------------------------------------------------
NET INVESTMENT INCOME/(LOSS) .................................................... 4,244,467 (720,677) 5,773,614
-------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on investments -- Note 1* ............................. 507,876,945 5,066,646 18,896,999
Net realized gains received from underlying funds .............................. -- -- 15,039,680
Net realized loss on foreign currencies -- Note 1 .............................. -- -- --
Net change in unrealized appreciation/(depreciation) on investments -- Note 4 .. 419,284,130 30,726,523 (8,797,339)
Net change in unrealized appreciation/(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 ......................................................... 927,161,075 35,793,169 25,139,340
-------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS .............................................................. $ 931,405,542 $35,072,492 $30,912,954
=================================================
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT
INTERNATIONAL EMERGING QUALITY
FUND MARKETS FUND BOND FUND
-------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends ...................................................................... $ 1,764,929 $ 300,338 $ --
Interest ....................................................................... 162,004 38,201 8,928,781
Less: Foreign tax withheld ..................................................... (192,115) (33,958) --
-------------------------------------------------
Total Income ................................................................. 1,734,818 304,581 8,928,781
-------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2 ............................................. 982,932 223,060 707,872
Administrative fees -- Class A-- Note 2 ........................................ 277,808 51,714 353,936
Administrative fees -- Class B-- Note 2 ........................................ 29,358 4,051 --
12b-1 fees-- Class B-- Note 3 .................................................. 88,074 12,154 --
Transfer agent fees-- Class A .................................................. 131,634 37,639 73,352
Transfer agent fees-- Class B .................................................. 44,601 33,624 --
Custodian fees ................................................................. 237,416 134,168 81,444
Printing expense ............................................................... 8,210 2,100 10,500
Registration fees .............................................................. 40,872 36,797 42,493
Legal fees ..................................................................... 2,000 2,000 2,550
Audit fees ..................................................................... 22,734 22,733 19,232
Trustees' fees -- Note 2 ....................................................... 19,000 19,000 19,000
Insurance expense .............................................................. 266 45 363
Other .......................................................................... 700 700 700
Amortization of organization costs -- Note 8 ................................... -- 5,343 --
Interest expense on reverse repurchase agreements .............................. -- -- 20,427
-------------------------------------------------
Total Expenses before Reimbursement and Custody credits .................... 1,885,605 585,128 1,331,869
Less: Expenses assumed by investment adviser -- Note 2 ......................... -- -- (178,375)
Custody credits -- Note 1 .................................................. -- -- --
-------------------------------------------------
Expenses Net of Reimbursement and Custody credits .......................... 1,885,605 585,128 1,153,494
-------------------------------------------------
NET INVESTMENT INCOME/(LOSS) .................................................... (150,787) (280,547) 7,775,287
-------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on investments -- Note 1* ............................. 12,405,194 640,622 (3,529,769)
Net realized gains received from underlying funds .............................. -- -- --
Net realized loss on foreign currencies -- Note 1 .............................. (466,198) (30,563) --
Net change in unrealized appreciation/(depreciation) on investments -- Note 4 .. 33,877,256 13,263,936 (5,753,145)
Net change in unrealized appreciation/(depreciation) from translation of
other assets and liabilities denominated in foreign currencies -- Note 4 1,185 (18,483) --
-------------------------------------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES ......................................................... 45,817,437 13,855,512 (9,282,914)
-------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS .............................................................. $45,666,650 $13,574,965 $(1,507,627)
=================================================
<CAPTION>
THE GUARDIAN THE GUARDIAN THE GUARDIAN
HIGH YIELD TAX-EXEMPT CASH
BOND FUND MANAGEMENT
FUND FUND
-------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends ...................................................................... $ -- $ -- $ --
Interest ....................................................................... 5,117,347 4,398,021 15,997,850
Less: Foreign tax withheld ..................................................... -- -- --
-------------------------------------------------
Total Income ................................................................. 5,117,347 4,398,021 15,997,850
-------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2 ............................................. 337,621 447,929 1,522,239
Administrative fees -- Class A-- Note 2 ........................................ 133,268 223,965 729,319
Administrative fees -- Class B-- Note 2 ........................................ 7,407 -- 31,800
12b-1 fees-- Class B-- Note 3 .................................................. 22,222 -- 95,401
Transfer agent fees-- Class A .................................................. 31,178 35,782 363,853
Transfer agent fees-- Class B .................................................. 30,389 -- 27,119
Custodian fees ................................................................. 53,785 57,834 82,380
Printing expense ............................................................... 4,500 5,500 18,000
Registration fees .............................................................. 35,500 27,386 63,596
Legal fees ..................................................................... 2,000 2,400 2,900
Audit fees ..................................................................... 22,233 18,733 18,733
Trustees' fees -- Note 2 ....................................................... 19,000 19,000 19,000
Insurance expense .............................................................. 138 181 610
Other .......................................................................... 700 700 700
Amortization of organization costs -- Note 8 ................................... -- -- --
Interest expense on reverse repurchase agreements .............................. -- -- --
-------------------------------------------------
Total Expenses before Reimbursement and Custody credits .................... 699,941 839,410 2,975,650
Less: Expenses assumed by investment adviser -- Note 2 ......................... (244,714) (69,380) (398,419)
Custody credits -- Note 1 .................................................. -- (57,704) --
-------------------------------------------------
Expenses Net of Reimbursement and Custody credits .......................... 455,227 712,326 2,577,231
-------------------------------------------------
NET INVESTMENT INCOME/(LOSS) .................................................... 4,662,120 3,685,695 13,420,619
-------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on investments -- Note 1* ............................. (4,204,560) (1,812,077) --
Net realized gains received from underlying funds .............................. -- -- --
Net realized loss on foreign currencies -- Note 1 .............................. -- -- --
Net change in unrealized appreciation/(depreciation) on investments -- Note 4 .. (825,578) (5,196,861) --
Net change in unrealized appreciation/(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 ......................................................... (5,030,138) (7,008,938) --
-------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS .............................................................. $ (368,018) $ (3,323,243) $13,420,619
=================================================
</TABLE>
* Net of foreign capital gains tax of $8,160 GBGIF and $85,027 GBGEMF.
See notes to financial statements.
46 & 47
<PAGE>
o The Park Avenue Portfolio
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE GUARDIAN
THE GUARDIAN PARK AVENUE
PARK AVENUE FUND SMALL CAP FUND
----------------------------------- ---------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ....................... $ 4,244,467 $ 18,594,966 $ (720,677) $ (603,721)
Net realized gain/(loss) on investments
and foreign currency related
transactions ...................................... 507,876,945 240,110,403 5,066,646 (16,113,586)
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions ...................................... 419,284,130 321,166,359 30,726,523 6,377,291
----------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ...................................... 931,405,542 579,871,728 35,072,492 (10,340,016)
----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A ........................................... (4,338,070) (18,598,388) -- --
Class B ........................................... -- -- -- --
In excess of net investment income
Class A ........................................... -- -- -- --
Net realized gain on investments and
foreign currency related transactions
Class A ........................................... (389,011,284) (199,305,595) -- (978,178)
Class B ........................................... (59,152,111) (25,414,666) -- (203,338)
----------------------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS .................................... (452,501,465) (243,318,649) -- (1,181,516)
----------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions-- Note 9 ............... (16,675,323) 529,325,454 (43,257,893) 41,904,893
----------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ............... 462,228,754 865,878,533 (8,185,401) 30,383,361
NET ASSETS:
Beginning of year .................................... 3,380,256,722 2,514,378,189 149,647,136 119,263,775
----------------------------------------------------------------------------
End of year* ......................................... $3,842,485,476 $3,380,256,722 $141,461,735 $149,647,136
============================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of ........................... $ 269,418 $ 363,075 $ -- $ --
<CAPTION>
THE GUARDIAN
THE GUARDIAN BAILLIE GIFFORD
ASSET ALLOCATION FUND INTERNATIONAL FUND
------------------------------- --------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ....................... $ 5,773,614 $ 4,482,709 $ (150,787) $ (96,156)
Net realized gain/(loss) on investments
and foreign currency related
transactions ...................................... 33,936,679 24,550,359 11,938,996 4,322,921
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions ...................................... (8,797,339) 4,998,042 33,878,441 11,033,975
----------------------------------------------------------------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ...................................... 30,912,954 34,031,110 45,666,650 15,260,740
----------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A ........................................... (5,299,394) (4,972,430) -- (27,940)
Class B ........................................... (580,691) (455,159) -- --
In excess of net investment income
Class A ........................................... -- -- (201,240) --
Net realized gain on investments and
foreign currency related transactions
Class A ........................................... (20,934,692) (18,144,589) (10,007,897) (3,899,799)
Class B ........................................... (3,659,166) (2,541,210) (1,105,637) (423,733)
----------------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS .................................... (30,473,943) (26,113,388) (11,314,774) (4,351,472)
----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions-- Note 9 ............... 45,134,030 63,440,174 25,910,582 19,910,823
----------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ............... 45,573,041 71,357,896 60,262,458 30,820,091
NET ASSETS:
Beginning of year .................................... 222,372,226 151,014,330 104,087,558 73,267,467
----------------------------------------------------------------------
End of year* ......................................... $267,945,267 $222,372,226 $164,350,016 $104,087,558
======================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of ........................... $ 28,923 $ 47,871 $ (367,315) $ (606,890)
<CAPTION>
THE GUARDIAN THE GUARDIAN
BAILLIE GIFFORD EMERGING INVESTMENT QUALITY
MARKETS FUND BOND FUND
------------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ....................... $ (280,547) $ (4,873) $ 7,775,287 $ 6,469,759
Net realized gain/(loss) on investments
and foreign currency related
transactions ...................................... 610,059 (5,495,916) (3,529,769) 2,736,440
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions ...................................... 13,245,453 (1,649,698) (5,753,145) 301,260
---------------------------------------------------------------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ...................................... 13,574,965 (7,150,487) (1,507,627) 9,507,459
---------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A ........................................... (513,333) (6,306) (7,775,287) (6,469,759)
Class B ........................................... -- -- -- --
In excess of net investment income
Class A ........................................... -- -- -- --
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 .................................... (513,333) (7,099) (8,204,620) (8,627,168)
---------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions-- Note 9 ............... 4,489,021 1,385,379 7,174,645 42,383,631
---------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ............... 17,550,653 (5,772,207) (2,537,602) 43,263,922
NET ASSETS:
Beginning of year .................................... 17,708,841 23,481,048 142,198,634 98,934,712
---------------------------------------------------------------------
End of year* ......................................... $35,259,494 $17,708,841 $139,661,032 $142,198,634
=====================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of ........................... $ (893,619) $ (39,415) $ -- $ --
<CAPTION>
THE GUARDIAN
HIGH YIELD THE GUARDIAN
BOND FUND TAX-EXEMPT FUND
----------------------------------- --------------------------------
PERIOD FROM
YEAR ENDED JULY 7, 1998+ TO
DECEMBER DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ....................... $ 4,662,120 $ 1,461,448 $ 3,685,695 $ 2,190,619
Net realized gain/(loss) on investments
and foreign currency related
transactions ...................................... (4,204,560) 92,410 (1,812,077) 582,307
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related
transactions ...................................... (825,578) 279,240 (5,196,861) 208,997
----------------------------------------------------------------------
NET INCREASE/(DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS ...................................... (368,018) 1,833,098 (3,323,243) 2,981,923
----------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A ........................................... (4,448,296) (1,412,378) (3,685,695) (2,190,619)
Class B ........................................... (213,824) (49,070) -- --
In excess of net investment income
Class A ........................................... -- -- -- --
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 .................................... (4,754,689) (1,461,448) (3,727,616) (2,365,071)
----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions-- Note 9 ............... 8,713,802 53,398,951 34,238,559 22,742,961
----------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ............... 3,591,095 53,770,601 27,187,700 23,359,813
NET ASSETS:
Beginning of year .................................... 53,770,601 -- 70,720,128 47,360,315
----------------------------------------------------------------------
End of year* ......................................... $57,361,696 $53,770,601 $97,907,828 $70,720,128
======================================================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of ........................... $ -- $ -- $ -- $ --
<CAPTION>
THE GUARDIAN
CASH MANAGEMENT FUND
---------------------------------
YEAR ENDED DECEMBER 31,
1999 1998
---------------------------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss) ....................... $ 13,420,619 $ 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 ...................................... 13,420,619 8,448,432
---------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A ........................................... (12,862,588) (8,075,149)
Class B ........................................... (558,031) (373,283)
In excess of net investment income
Class A ........................................... -- --
Net realized gain on investments and
foreign currency related transactions
Class A ........................................... -- --
Class B ........................................... -- --
---------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS .................................... (13,420,619) (8,448,432)
---------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net assets from
capital share transactions-- Note 9 ............... 165,461,754 100,038,914
---------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS ............... 165,461,754 100,038,914
NET ASSETS:
Beginning of year .................................... 238,426,600 138,387,686
---------------------------------
End of year* ......................................... $403,888,354 $238,426,600
=================================
+ Commencement of operations.
* Includes undistributed/(overdistributed)
net investment income of ........................... $ -- $ --
</TABLE>
See notes to financial statements.
48 & 49
<PAGE>
- --------------------
Notes to
Financial Statements
- --------------------
December 31, 1999
THE PARK AVENUE PORTFOLIO
o THE GUARDIAN PARK AVENUE FUND
o THE GUARDIAN PARK AVENUE SMALL CAP FUND
o THE GUARDIAN ASSET ALLOCATION FUND
o THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
o THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
o THE GUARDIAN INVESTMENT QUALITY BOND FUND
o THE GUARDIAN HIGH YIELD BOND FUND
o THE GUARDIAN TAX-EXEMPT FUND
o THE GUARDIAN CASH MANAGEMENT FUND
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
The Park Avenue Portfolio (the Portfolio) is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the 1940 Act), which is organized as a business trust under
the laws of the Commonwealth of Massachusetts. The Portfolio consists of 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".
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
December 31, 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
December 31, 1999, Institutional Class shares are offered by GPAF, GPASCF, GAAF,
GBGIF, GBGEMF, GIQBF and GHYBF. None of the Funds had issued Institutional Class
shares. Institutional Class shares are offered at net asset value, without an
initial or contingent deferred sales load. All classes of shares for each Fund
represent interests in the same portfolio of investments, have the same rights
and are generally identical in all respects except that each class bears its
separate distribution and certain class expenses, and has exclusive voting
rights with respect to any matter to which a separate vote of any class is
required.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments
Equity and debt securities listed on domestic or foreign securities
exchanges are valued at the last sales price of such exchanges, or if no sale
occurred, at the mean of the bid and asked prices. Securities traded in the
over-the-counter market are valued using the last sales price, when available.
Otherwise, over-the-counter securities are valued at the mean between the bid
and asked prices or yield equivalents as obtained from one or more dealers that
make a market in the securities.
50
<PAGE>
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.
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.
Investment transactions are recorded on the date of purchase or sale.
Security gains or losses are determined on an identified cost basis. Interest
income, including amortization of premium and discount, is accrued daily.
Dividend income is recorded on the ex-dividend date.
All income, expenses (other than class-specific expenses) and realized and
unrealized gains or losses are allocated daily to each class of shares based
upon the relative value of shares of each class. Class-specific expenses, which
include distribution and service fees and any other items that are specifically
attributed to a particular class, are charged directly to such class. For the
year ended December 31, 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. Their 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 gains and losses on foreign currencies. Net currency
gains and losses from valuing other assets and liabilities denominated in
foreign currency as of December 31, 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 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.
51
<PAGE>
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 and distributions to 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.
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.
Withholding taxes on foreign interest, dividends and capital gains in
GBGIF and GBGEMF have been provided for in accordance with the applicable
country's tax rules and rates.
At December 31, 1999, for federal income tax purposes, the following Funds
have net capital losses carryforward of:
EXPIRATION
AMOUNT DATE
----------- ----------
GPASCF .................... $11,001,397 2006
GBGEMF .................... 5,363,075 2006
GIQBF ..................... 3,146,501 2007
GHYBF ..................... 3,924,007 2007
GTEF ...................... 1,462,615 2007
Expense Reductions
GTEF has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of the Fund's expenses. During the period, GTEF's custodian fees were reduced by
$57,704 under this arrangement.
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.
During the year ended December 31, 1999, certain Portfolio Funds
reclassified amounts to paid-in capital from undistributed/(overdistributed) net
investment income and net accumulated net realized gain/(loss) on investment and
foreign currency related transactions. Increases/(decreases) to the various
capital accounts were as follows:
UNDISTRIBUTED/ ACCUMULATED
(OVERDISTRIBUTED) NET REALIZED
PAID-IN NET INVESTMENT GAIN/(LOSS) ON
FUND CAPITAL INCOME INVESTMENTS
- ---- ---------- ----------------- --------------
GPAF -- $ (54) $ 54
GPASCF $(734,685) 720,677 14,008
GAAF -- 87,523 (87,523)
GBGIF -- 591,602 (591,602)
GBGEMF -- (60,325) 60,325
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, and GPASCF and GHYBF, which pay GISC at an
annual rate of .75% and .60%, respectively, of their average daily net assets.
GISC has
52
<PAGE>
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 exceed .80% of GIQBF and
GTEF, and .75% of GHYBF Class A average daily net assets; 1.00% of the average
daily net assets of GHYBF Class B shares and operating expenses that exceed .85%
of GCMF's average daily net assets. As it relates to the subsidy for GHYBF, GISC
subsidized .40% of the ordinary operating expenses for both the Class A & B
shares and .60% for 12b-1 fees of Class B shares. GISC subsidized .09% for Class
A shares and .18% for Class B shares of GCMF's administrative fees and .75% for
12b-1 fees of GCMF's Class B shares. For the year ended December 31, 1999 GISC
voluntarily assumed $178,375, $244,714, $127,084 and $398,419 of the ordinary
operating expenses of GIQBF, GHYBF, GTEF and GCMF, respectively.
There are no duplicative advisory and administrative service fees charged
to GAAF on assets invested in other Guardian Funds. Under an SEC exemptive
order, advisory and administrative fees are paid at the underlying Fund level.
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 these fees 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 is 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 $17,567,272 of dividends from other Guardian mutual funds.
The retail broker/dealer operation of GISC was assumed by Park Avenue
Securities LLC (PAS) on May 3, 1999. PAS is a wholly-owned subsidiary of GIAC
and an affiliate of GISC. PAS received $2,275,584 for brokerage commissions from
the Portfolio.
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 year ended December 31, 1999, GPAF Class A shares paid an annualized
rate of .18% 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 year ended December 31, 1999, aggregate front-end sales charges
for the sale of Class A shares paid to GISC were as follows:
FUND COMMISSIONS FUND COMMISSIONS
- ---- ----------- ---- -----------
GPAF $1,659,928 GBGEMF $ 6,056
GPASCF 62,778 GIQBF 71,462
GAAF 343,521 GHYBF 28,065
GBGIF 65,441 GTEF 115,956
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 year ended December 31, 1999, GISC received CDSL charges as
follows:
FUND CLASS B
- ---- -------
GPAF .............................................. $1,098,122
GPASCF ............................................ 111,945
GAAF .............................................. 63,942
GBGIF ............................................. 17,986
GBGEMF ............................................ 439
GHYBF ............................................. 5,929
GCMF .............................................. 90,103
53
<PAGE>
NOTE 4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) for the year ended December 31, 1999 were as follows:
- --------------------------------------------------------------------------------
GPAF GPASCF
- --------------------------------------------------------------------------------
Purchases $2,384,001,232 $102,399,828
Proceeds 2,791,470,629 150,430,940
- --------------------------------------------------------------------------------
GAAF GBGIF
- --------------------------------------------------------------------------------
Purchases $ 42,344,991 $ 77,943,715
Proceeds 24,767,041 64,618,089
- --------------------------------------------------------------------------------
GBGEMF GIQBF
- --------------------------------------------------------------------------------
Purchases $ 24,731,458 $383,224,602
Proceeds 20,072,171 374,703,005
- --------------------------------------------------------------------------------
GHYBF GTEF
- --------------------------------------------------------------------------------
Purchases $ 82,209,119 $159,749,219
Proceeds 78,279,481 128,780,860
The cost of investments owned at December 31, 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 December 31, 1999, were as follows:
GPAF GPASCF
---- ------
Appreciation $ 1,420,819,483 $ 51,141,395
(Depreciation) (36,525,576) (3,520,505)
--------------- ---------------
NET UNREALIZED
APPRECIATION $ 1,384,293,907 $ 47,620,890
=============== ===============
GAAF GBGIF
---- -----
Appreciation $ 21,007,481 $ 60,619,317
(Depreciation) (4,667,145) (2,531,498)
------------ ------------
NET UNREALIZED
APPRECIATION $ 16,340,336 $ 58,087,819
============ ============
GBGEMF GIQBF
------ -----
Appreciation $ 12,196,440 $ 25,953
(Depreciation) (1,634,851) (4,677,177)
------------ ------------
NET UNREALIZED
APPRECIATION/
(DEPRECIATION) $ 10,561,589 $ (4,651,224)
============ ============
GHYBF GTEF
----- ----
Appreciation $ 924,629 $ 85,099
(Depreciation) (1,470,967) (3,485,305)
------------ ------------
NET UNREALIZED
DEPRECIATION $ (546,338) $ (3,400,206)
============ ============
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.
Information regarding transactions by GIQBF under reverse repurchase
agreements is as follows:
Average amount outstanding during
the period .................................... $1,262,863
Weighted average interest rate during
the period .................................... 1.62%
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.
54
<PAGE>
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 December 31, 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 December 31, 1999, no
Institutional Class shares of the Funds were sold.
Transactions in shares of beneficial interest were as follows:
o THE GUARDIAN PARK AVENUE FUND
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 27,359,054 18,152,958 $ 1,374,220,548 $885,038,761
Shares issued in reinvestment of
dividends and distributions 6,674,168 4,072,601 378,300,756 209,800,362
Shares repurchased (35,553,998) (14,727,389) (1,831,479,707) (721,647,093)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (1,520,776) 7,498,170 $ (78,958,403) $373,192,030
===============================================================================================================================
CLASS B
Shares sold 1,278,710 3,603,391 $ 68,200,561 $176,030,617
Shares issued in reinvestment of
distributions 1,003,393 474,635 56,213,737 24,340,017
Shares repurchased (1,161,774) (912,470) (62,131,218) (44,237,210)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 1,120,329 3,165,556 $ 62,283,080 $156,133,424
===============================================================================================================================
</TABLE>
o THE GUARDIAN PARK AVENUE SMALL CAP FUND
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 9,334,822 8,955,435 $ 112,958,085 $113,720,444
Shares issued in reinvestment of
distributions -- 66,726 -- 962,201
Shares repurchased (12,484,685) (6,399,295) (150,938,419) (79,156,710)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (3,149,863) 2,622,866 $ (37,980,334) $ 35,525,935
===============================================================================================================================
CLASS B
Shares sold 245,785 947,722 $ 2,980,267 $ 13,042,662
Shares issued in reinvestment of
distributions -- 14,540 -- 207,322
Shares repurchased (684,909) (542,866) (8,257,826) (6,871,026)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (439,124) 419,396 $ (5,277,559) $ 6,378,958
===============================================================================================================================
</TABLE>
55
<PAGE>
o THE GUARDIAN ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 3,070,497 3,552,074 $ 45,774,621 $ 52,391,637
Shares issued in reinvestment of
dividends and distributions 1,758,874 1,528,532 25,604,469 22,611,939
Shares repurchased (2,645,945) (1,642,141) (39,623,504) (24,292,529)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 2,183,426 3,438,465 $ 31,755,586 $ 50,711,047
===============================================================================================================================
CLASS B
Shares sold 916,121 827,799 $ 13,578,716 $ 12,174,248
Shares issued in reinvestment of
dividends and distributions 284,971 197,429 4,133,852 2,908,672
Shares repurchased (292,746) (159,197) (4,334,124) (2,353,793)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 908,346 866,031 $ 13,378,444 $ 12,729,127
===============================================================================================================================
</TABLE>
o THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 10,792,462 5,077,189 $ 208,417,549 $ 88,983,605
Shares issued in reinvestment of
dividends and distributions 390,401 194,168 8,440,016 3,581,435
Shares repurchased (9,917,221) (4,337,226) (193,358,852) (75,707,177)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 1,265,642 934,131 $ 23,498,713 $ 16,857,863
===============================================================================================================================
CLASS B
Shares sold 144,386 207,081 $ 2,718,309 $ 3,615,723
Shares issued in reinvestment of
distributions 51,780 23,175 1,086,611 417,986
Shares repurchased (73,575) (56,683) (1,393,051) (980,749)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 122,591 173,573 $ 2,411,869 $ 3,052,960
===============================================================================================================================
</TABLE>
56
<PAGE>
o THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 622,404 307,937 $ 5,323,565 $ 2,438,788
Shares issued in reinvestment of
dividends and distributions 47,790 951 509,438 7,008
Shares repurchased (165,063) (142,603) (1,387,933) (1,047,780)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 505,131 166,285 $ 4,445,070 $ 1,398,016
===============================================================================================================================
CLASS B
Shares sold 21,447 36,991 $ 156,313 $ 284,221
Shares issued in reinvestment of
distributions -- 9 -- 66
Shares repurchased (15,854) (40,736) (112,362) (296,924)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 5,593 (3,736) $ 43,951 $ (12,637)
===============================================================================================================================
</TABLE>
o THE GUARDIAN INVESTMENT QUALITY BOND FUND
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,250,553 5,256,976 $ 41,150,209 $ 52,592,427
Shares issued in reinvestment of
dividends and distributions 829,339 838,248 7,947,256 8,403,203
Shares repurchased (4,344,851) (1,848,650) (41,922,820) (18,611,999)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 735,041 4,246,574 $ 7,174,645 $ 42,383,631
===============================================================================================================================
</TABLE>
57
<PAGE>
o THE GUARDIAN HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
Period from Period from
Year Ended July 7, 1998+ to Year Ended July 7, 1998+ to
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 489,330 5,073,898 $ 4,666,745 $ 49,633,346
Shares issued in reinvestment of
dividends and distributions 484,538 146,405 4,519,035 1,409,495
Shares repurchased (154,332) (6,493) (1,441,812) (60,633)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 819,536 5,213,810 $ 7,743,968 $ 50,982,208
===============================================================================================================================
CLASS B
Shares sold 174,457 261,298 $ 1,661,360 $ 2,413,483
Shares issued in reinvestment of
dividends and distributions 22,890 5,077 212,678 48,933
Shares repurchased (95,074) (13,845) (904,204) (45,673)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 102,273 252,530 $ 969,834 $ 2,416,743
===============================================================================================================================
</TABLE>
o THE GUARDIAN TAX-EXEMPT FUND
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,625,744 2,184,548 $ 36,147,415 $ 22,216,685
Shares issued in reinvestment of
dividends and distributions 377,574 230,604 3,676,668 2,320,394
Shares repurchased (562,267) (178,814) (5,585,524) (1,794,118)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 3,441,051 2,236,338 $ 34,238,559 $ 22,742,961
===============================================================================================================================
</TABLE>
+ Commencement of operations.
58
<PAGE>
o THE GUARDIAN CASH MANAGEMENT FUND
Year Ended December 31,
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
Shares @ $1 per share
- --------------------------------------------------------------------------------
CLASS A
Shares sold 1,842,678,716 754,062,229
Shares issued in reinvestment of
dividends 12,156,055 7,764,025
Shares repurchased (1,690,724,975) (668,353,118)
- --------------------------------------------------------------------------------
NET INCREASE 164,109,796 93,473,136
================================================================================
CLASS B
Shares sold 17,526,854 26,314,334
Shares issued in reinvestment of
dividends 495,525 331,516
Shares repurchased (16,670,421) (20,080,072)
- --------------------------------------------------------------------------------
NET INCREASE 1,351,958 6,565,778
================================================================================
NOTE 10. LINE OF CREDIT
A $100,000,000 line of credit available to all of the Funds and other
related Guardian Funds has been established with State Street Bank and Trust
Company and Bank of Montreal. The rate of interest charged on any borrowing is
based upon the prevailing Federal Funds rate at the time of the loan plus .50%
calculated on a 360 day basis per annum. For the year ended December 31, 1999,
none of the Funds borrowed against this line of credit.
59
<PAGE>
- --------------------
Financial Highlights
- --------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<TABLE>
<CAPTION>
NET REALIZED
& UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS INCREASE/
NET ASSET NET AND FOREIGN (DECREASE)
VALUE, INVESTMENT CURRENCY FROM
BEGINNING INCOME/ RELATED INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS OPERATIONS
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Year ended 12/31/99 $51.88 $0.13 $15.04 $15.17
Year ended 12/31/98 46.12 0.35 9.38 9.73
Year ended 12/31/97 37.91 0.40 12.61 13.01
Year ended 12/31/96 33.97 0.42 8.41 8.83
Year ended 12/31/95 26.89 0.33 8.87 9.20
CLASS B:
Year ended 12/31/99 51.59 (0.31) 14.84 14.53
Year ended 12/31/98 46.02 (0.08) 9.28 9.20
Year ended 12/31/97 37.90 0.00 12.54 12.54
Period from 5/1/96+ to 12/31/96 36.26 0.05 6.10 6.15
THE GUARDIAN PARK AVENUE SMALL CAP FUND
CLASS A:
Year ended 12/31/99 12.80 (0.07) 4.75 4.68
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:
Year ended 12/31/99 12.61 (0.19) 4.64 4.45
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:
Year ended 12/31/99 14.78 0.37 1.47 1.84
Year ended 12/31/98 14.05 0.39 2.31 2.70
Year ended 12/31/97 12.96 0.34 2.77 3.11
Year ended 12/31/96 12.19 0.23 1.96 2.19
Year ended 12/31/95 10.23 0.23 2.29 2.52
CLASS B:
Year ended 12/31/99 14.73 0.23 1.47 1.70
Year ended 12/31/98 14.00 0.24 2.31 2.55
Year ended 12/31/97 12.92 0.17 2.77 2.94
Period from 5/1/96+ to 12/31/96 12.61 0.04 1.50 1.54
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS A:
Year ended 12/31/99 18.41 0.01 6.68 6.69
Year ended 12/31/98 16.08 0.02 3.13 3.15
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
Year ended 12/31/95 13.01 0.04 1.40 1.44
<CAPTION>
DISTRIBUTIONS
FROM
NET REALIZED
DISTRIBUTIONS GAIN ON
DIVIDENDS IN EXCESS INVESTMENTS NET ASSET
FROM NET OF NET AND FOREIGN VALUE,
INVESTMENT INVESTMENT CURRENCY RELATED END OF TOTAL
INCOME INCOME TRANSACTIONS PERIOD RETURN*
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Year ended 12/31/99 $(0.08) -- $(7.55) $59.42 30.25%
Year ended 12/31/98 (0.34) -- (3.63) 51.88 21.30
Year ended 12/31/97 (0.39) -- (4.41) 46.12 34.85
Year ended 12/31/96 (0.42) $(0.01) (4.46) 37.91 26.49
Year ended 12/31/95 (0.33) -- (1.79) 33.97 34.28
CLASS B:
Year ended 12/31/99 -- -- (7.55) 58.57 29.13
Year ended 12/31/98 -- -- (3.63) 51.59 20.16
Year ended 12/31/97 (0.01) -- (4.41) 46.02 33.53
Period from 5/1/96+ to 12/31/96 (0.05) -- (4.46) 37.90 17.35
THE GUARDIAN PARK AVENUE SMALL CAP FUND
CLASS A:
Year ended 12/31/99 -- -- -- 17.48 36.56
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:
Year ended 12/31/99 -- -- -- 17.06 35.29
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:
Year ended 12/31/99 (0.37) -- (1.48) 14.77 12.99
Year ended 12/31/98 (0.43) -- (1.54) 14.78 19.41
Year ended 12/31/97 (0.34) -- (1.68) 14.05 24.44
Year ended 12/31/96 (0.23) -- (1.19) 12.96 18.74
Year ended 12/31/95 (0.23) -- (0.33) 12.19 24.51
CLASS B:
Year ended 12/31/99 (0.23) -- (1.48) 14.72 12.09
Year ended 12/31/98 (0.28) -- (1.54) 14.73 18.32
Year ended 12/31/97 (0.18) -- (1.68) 14.00 23.09
Period from 5/1/96+ to 12/31/96 (0.04) -- (1.19) 12.92 12.07
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS A:
Year ended 12/31/99 -- (0.03) (1.71) 23.36 37.21
Year ended 12/31/98 (0.01) -- (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) (0.05) (0.19) 15.22 14.33
Year ended 12/31/95 (0.04) (0.23) (0.61) 13.57 11.14
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------
NET
NET ASSETS, GAAF INVESTMENT
END OF EXPENSES EXPENSES GROSS INCOME/(LOSS) PORTFOLIO
PERIOD TO AVERAGE WAIVED EXPENSE TO AVERAGE TURNOVER
(000'S OMITTED) NET ASSETS(B) BY GISC RATIO (D) NET ASSETS RATE
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Year ended 12/31/99 $3,334,722 0.77% -- -- 0.24% 74%
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
CLASS B:
Year ended 12/31/99 507,764 1.67 -- -- (0.66) 74
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:
Year ended 12/31/99 119,032 1.34 -- -- (0.48) 92
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:
Year ended 12/31/99 22,430 2.23 -- -- (1.36) 92
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:
Year ended 12/31/99 227,031 0.48(c) 0.58% 1.08% 2.48 16
Year ended 12/31/98 194,827 0.60(c) 0.52 1.13 2.52 23
Year ended 12/31/97 136,948 0.95(c) 0.19 1.18 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
CLASS B:
Year ended 12/31/99 40,914 1.31(c) 0.58 1.91 1.66 16
Year ended 12/31/98 27,545 1.48(c) 0.52 2.02 1.70 23
Year ended 12/31/97 14,066 2.04(c) 0.19 2.21 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:
Year ended 12/31/99 148,727 1.44 -- -- (0.03) 54
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
</TABLE>
+ Commencement of operations.
* Excludes the effect of sales load.
(a) Annualized.
(b) After expenses waived by GISC.
(c) Amounts do not include the expenses of the underlying Funds.
(d) Amounts include the expenses of the underlying Funds.
60 & 61
<PAGE>
- --------------------
Financial Highlights
- --------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<TABLE>
<CAPTION>
NET REALIZED
& UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS INCREASE/
NET ASSET NET AND FOREIGN (DECREASE)
VALUE, INVESTMENT CURRENCY FROM
BEGINNING INCOME/ RELATED INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS OPERATIONS
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS B:
Year ended 12/31/99 $17.97 $(0.12) $6.47 $6.35
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
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
CLASS A:
Year ended 12/31/99 6.66 (0.07) 4.72 4.65
Year ended 12/31/98 9.38 0.01 (2.73) (2.72)
Period from 4/2/97+ to 12/31/97 10.00 0.04 (0.63) (0.59)
CLASS B:
Year ended 12/31/99 6.44 (0.27) 4.48 4.21
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:
Year ended 12/31/99 9.99 0.53 (0.63) (0.10)
Year ended 12/31/98 9.91 0.53 0.23 0.76
Year ended 12/31/97 9.70 0.58 0.21 0.79
Year ended 12/31/96 10.00 0.55 (0.30) 0.25
Year ended 12/31/95 9.12 0.59 0.88 1.47
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Year ended 12/31/99 9.84 0.78 (0.84) (0.06)
Period from 9/1/98+++ to 12/31/98 9.26 0.38 0.58 0.96
CLASS B:
Year ended 12/31/99 9.83 0.67 (0.84) (0.17)
Period from 9/1/98+++ to 12/31/98 9.26 0.31 0.57 0.88
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Year ended 12/31/99 10.13 0.40 (0.73) (0.33)
Year ended 12/31/98 9.99 0.43 0.17 0.60
Year ended 12/31/97 9.61 0.44 0.38 0.82
Year ended 12/31/96 9.69 0.42 (0.08) 0.34
Year ended 12/31/95 8.86 0.44 0.83 1.27
<CAPTION>
DISTRIBUTIONS
FROM
NET REALIZED
DISTRIBUTIONS GAIN ON
DIVIDENDS IN EXCESS INVESTMENTS NET ASSET
FROM NET OF NET AND FOREIGN VALUE,
INVESTMENT INVESTMENT CURRENCY RELATED END OF TOTAL
INCOME INCOME TRANSACTIONS PERIOD RETURN*
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS B:
Year ended 12/31/99 -- -- $(1.71) $22.61 36.16%
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 $(0.04) $(0.08) (0.19) 15.12 4.34
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
CLASS A:
Year ended 12/31/99 (0.18) -- -- 11.13 69.91
Year ended 12/31/98 (0.00)++ -- -- 6.66 (28.97)
Period from 4/2/97+ to 12/31/97 (0.03) -- -- 9.38 (5.86)
CLASS B:
Year ended 12/31/99 -- -- -- 10.65 65.37
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:
Year ended 12/31/99 (0.53) -- (0.03) 9.33 (1.02)
Year ended 12/31/98 (0.53) -- (0.15) 9.99 7.89
Year ended 12/31/97 (0.58) -- -- 9.91 8.43
Year ended 12/31/96 (0.55) -- -- 9.70 2.73
Year ended 12/31/95 (0.59) -- -- 10.00 16.64
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Year ended 12/31/99 (0.78) -- (0.02) 8.98 (0.63)
Period from 9/1/98+++ to 12/31/98 (0.38) -- -- 9.84 9.24
CLASS B:
Year ended 12/31/99 (0.67) -- (0.02) 8.97 (1.78)
Period from 9/1/98+++ to 12/31/98 (0.31) -- -- 9.83 8.61
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Year ended 12/31/99 (0.40) -- (0.00)++ 9.40 (3.29)
Year ended 12/31/98 (0.43) -- (0.03) 10.13 6.11
Year ended 12/31/97 (0.44) -- -- 9.99 8.74
Year ended 12/31/96 (0.42) -- -- 9.61 3.62
Year ended 12/31/95 (0.44) -- -- 9.69 14.59
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------
EXPENSES
NET ASSETS, (EXCLUDING
END OF EXPENSES INTEREST EXPENSE)
PERIOD TO AVERAGE TO AVERAGE
(000'S OMITTED) NET ASSETS(C) NET ASSETS (B)
----------------------------------------------------------------
<S> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS B:
Year ended 12/31/99 $ 15,623 2.45% --
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:
Year ended 12/31/99 32,940 2.43 --
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:
Year ended 12/31/99 2,320 5.07 --
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:
Year ended 12/31/99 139,661 0.81(b) 0.80%
Year ended 12/31/98 142,199 0.85(b) 0.75
Year ended 12/31/97 98,935 0.75(b) --
Year ended 12/31/96 50,794 0.75(b) --
Year ended 12/31/95 53,706 0.75(b) --
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Year ended 12/31/99 54,178 0.75(b) --
Period from 9/1/98+++ to 12/31/98 51,288 0.75(a)(b) --
CLASS B:
Year ended 12/31/99 3,184 1.87(b) --
Period from 9/1/98+++ to 12/31/98 2,482 2.33(a)(b) --
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Year ended 12/31/99 97,908 0.86(b)(d) --
Year ended 12/31/98 70,720 0.75(b)
Year ended 12/31/97 47,360 0.75(b) --
Year ended 12/31/96 39,185 0.75(b) --
Year ended 12/31/95 17,501 0.75(b) --
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------
NET
INVESTMENT
EXPENSES INCOME/(LOSS) PORTFOLIO
SUBSIDIZED TO AVERAGE TURNOVER
BY GISC NET ASSETS RATE
---------------------------------------------------
<S> <C> <C> <C>
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS B:
Year ended 12/31/99 -- (1.03)% 54%
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:
Year ended 12/31/99 -- (1.07) 96
Year ended 12/31/98 -- 0.18 83
Period from 4/2/97+ to 12/31/97 -- 0.61 (a) 36
CLASS B:
Year ended 12/31/99 -- (3.70) 96
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:
Year ended 12/31/99 0.13% 5.49 271
Year ended 12/31/98 0.21 5.24 309
Year ended 12/31/97 0.29 5.94 313
Year ended 12/31/96 0.37 5.73 257
Year ended 12/31/95 0.39 6.11 401
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Year ended 12/31/99 0.40 8.34 152
Period from 9/1/98+++ to 12/31/98 0.51(a) 8.31 (a) 11
CLASS B:
Year ended 12/31/99 1.00 7.22 152
Period from 9/1/98+++ to 12/31/98 0.51(a) 6.85 (a) 11
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Year ended 12/31/99 0.08 4.11 144
Year ended 12/31/98 0.26 4.29 111
Year ended 12/31/97 0.31 4.51 202
Year ended 12/31/96 0.60 4.96 240
Year ended 12/31/95 0.79 4.66 194
</TABLE>
+ Commencement of operations.
++ Rounds to less than $0.01.
+++ Date of initial public investment.
* 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 reverse repurchase
agreements.
(d) Before offset of custody credits. Including the custody credits, the
expense ratio is 0.80%.
62 & 63
<PAGE>
- --------------------
Financial Highlights
- --------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<TABLE>
<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:
Year ended 12/31/99 $1.000 $0.044 $(0.044) $1.000 4.45%
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
CLASS B:
Year ended 12/31/99 1.000 0.044 (0.044) 1.000 4.45
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)
<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:
Year ended 12/31/99 $390,106 0.85% 0.09% 4.41%
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
CLASS B:
Year ended 12/31/99 13,782 0.85 0.93 4.41
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>
+ Commencement of operations.
* Excludes the effect of sales load.
(a) Annualized.
(b) Not annualized.
(c) After expenses subsidized by GISC.
64 & 65
<PAGE>
- ---------------------------
Report of Ernst & Young LLP
Independent Auditors
- ---------------------------
BOARD OF TRUSTEES AND SHAREHOLDERS THE PARK AVENUE PORTFOLIO
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Park Avenue Portfolio
(comprising, respectively, The Guardian Park Avenue Fund, The Guardian 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 and The Guardian Cash Management Fund) as of
December 31, 1999, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective Funds constituting The Park Avenue Portfolio at December
31, 1999, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended and the
financial highlights for each of the indicated periods, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
New York, New York
February 11, 2000
66
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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
Nydia Morrison
John B. Murphy
Karen L. Olvany
Frank L. Pepe
Richard T. Potter, Jr.
Thomas G. Sorell
Donald Sullivan, Jr.
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
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.
[LOGO]
GUARDIAN(SM)
Guardian Investor Services Corporation(R)
7 Hanover Square
New York, New York 10004
<PAGE>
[LOGO]
GUARDIAN(SM)
Guardian Investor Services Corporation(R) BULK RATE MAIL
7 Hanover Square U.S. POSTAGE PAID
New York, New York 10004 PERMIT NO. 1104
CLIFTON, NJ
EB-011566 12/99
