BAILLIE GIFFORD INTERNATIONAL FUND INC, 485BPOS, 1999-04-30

BAILLIE GIFFORD INTERNATIONAL FUND INC
485BPOS, 1999-04-30

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Registration Nos. 33-37883
811-6231
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

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FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
POST-EFFECTIVE AMENDMENT No. 13 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
AMENDMENT No. 15 |X|
(Check appropriate box or boxes)

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GIAC FUNDS, INC.
Formerly
GBG FUNDS, INC.
formerly
BAILLIE GIFFORD INTERNATIONAL FUND, INC
(Exact Name of Registrant as Specified in Charter)

C/O THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
7 HANOVER SQUARE, NEW YORK, NEW YORK 10004
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (212) 598-8259

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Copy to:
Richard T. Potter, Jr., Esq. Cathy G. O'Kelly, Esq.
c/o The Guardian Insurance Vedder, Price, Kaufman & Kammholz
& Annuity Company, Inc 222 North LaSalle Street
201 Park Avenue South Chicago, Illinois 60601
New York, New York 10003
(Name and Address of Agent for Service)

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It is proposed that this filing will become effective (check appropriate
box):

|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 1, 1999 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|_| on May 1, 1999 pursuant to paragraph (a)(1) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(2) of Rule 485
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

|_| This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.

------------------------

The Registrant has registered an indefinite number of its securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. The notice required by such rule for the Registrant's most recent
fiscal year was filed on March 26, 1999.

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<PAGE>

BAILLIE GIFFORD INTERNATIONAL FUND
BAILLIE GIFFORD EMERGING MARKETS FUND
GUARDIAN SMALL CAP STOCK FUND

Cross Reference Sheet
(as required by Rule 495 under the Securities Act of 1933)

<TABLE>
<CAPTION>
Form N-1A Item No. Location in the Baillie Gifford International Fund
Prospectus
Part A

<S> <C> <C>
Item 1. Front and Back Cover Pages ..................................... Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments, Risks, and Performance ....... Investment Objective; The Fund's principal investment
strategies; The principal risks of investing in the
Fund; How the Fund has performed; Risks and special
investment techniques
Item 3. Risk/Return Summary: Fee Table ................................. Not Applicable
Item 4. Investment Objectives, Principal Investment Strategies, and The Fund's principal investment strategies; The
Related Risks ................................................ principal risks of investing in the Fund; Risks and
Special Investment Techniques
Item 5. Management's Discussion of Fund Performance .................... How the fund has performed
Item 6. Capital Structure .............................................. Fund Management
Item 7. Shareholder Information ........................................ Buying and Selling Fund shares; Dividends,
Distribution and taxes; share price
Item 8. Distribution Arrangements ...................................... Not Applicable
Item 9. Financial Highlights Information ............................... Financial Highlights

<CAPTION>
Location in the Guardian Small Cap Stock Fund
Prospectus
Part A

Item 1. Front and Back Cover Pages ..................................... Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments, Risks, and Performance ....... Investment Objective; The Fund's principal investment
strategies; The principal risks of investing in the
Fund; How the Fund has performed; Risks and special
investment techniques
Item 3. Risk/Return Summary: Fee Table ................................. Not Applicable
Item 4. Investment Objectives, Principal Investment Strategies, and The Fund's principal investment strategies; The
Related Risks ................................................ principal risks of investing in the Fund; Risks and
special investment techniques
Item 5. Management's Discussion of Fund Performance .................... How the Fund has performed
Item 6. Capital Structure .............................................. Fund Management
Item 7. Shareholder Information ........................................ Buying and Selling Fund shares; Dividends,
Distribution and taxes; share price
Item 8. Distribution Arrangements ...................................... Not Applicable
Item 9. Financial Highlights Information ............................... Financial Highlights

<CAPTION>
Location in the Baillie Gifford Emerging Markets Fund
Prospectus
Part A

Item 1. Front and Back Cover Pages ..................................... Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments, Risks, and Performance ....... Investment Objective; The Fund's principal investment
strategies; The principal risks of investing in the
Fund; How the Fund has performed; Risks and special
investment techniques
Item 3. Risk/Return Summary: Fee Table ................................. Not Applicable
Item 4. Investment Objectives, Principal Investment Strategies, and The Fund's principal investment strategies; The
Related Risks ................................................ principal risks of investing in the Fund; Risks and
special investment techniques
Item 5. Management's Discussion of Fund Performance ................ ... How the Fund has performed
Item 6. Capital Structure .............................................. Fund Management
Item 7. Shareholder Information ........................................ Buying and Selling Fund shares; Dividends,
Distribution and taxes; Share price
Item 8. Distribution Arrangements ...................................... Not Applicable
Item 9. Financial Highlights Information ............................... Financial Highlights

<CAPTION>
Location in the Statement of Additional Information
Part B

Item 10. Cover Page and Table of Contents ............................... Cover Page and Table of Contents
Item 11. Fund History ................................................... Not Applicable
Item 12. Description of the Fund and its Investments and Risks .......... Investment Restrictions; Special Investment
Techniques - International Fund and Emerging Markets
Fund; Special Investment Techniques-International
Fund, Emerging Markets Fund and Small Cap Stock
Fund; Special Investment Techniques - Small Cap
Stock Fund
Item 13. Management of the Fund ......................................... Company Management
Item 14. Control Persons and Principal Holders of Securities ............ GIAC and Other Fund Affiliates
Item 15. Investment Advisory and Other Services.......................... Investment Manager, Sub-Investment Manager and
` Distributor; Custodian and Transfer Agent;
Independent Auditors and Financial Statements
Item 16. Brokerage Allocation and Other Practices........................ Portfolio Transactions and Brokerage
Item 17. Capital Stock and Other Securities.............................. Fund Capitalization and Expenses
Item 18. Purchase, Redemption and Pricing of shares ..................... Purchase and redemption of shares
Item 19. Taxation of the Fund............................................ Taxes
Item 20. Underwriters.................................................... Investment Manager, Sub-Investment
Manager and Distributor
Item 21. Calculation of Performance Data................................. Performance Results
Item 22. Financial Statements............................................ Independent Auditors and Financial
Statements
</TABLE>

Part C

Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>

PROSPECTUS

May 1, 1999

BAILLIE GIFFORD
INTERNATIONAL
FUND

INVESTMENT OBJECTIVE

The Baillie Gifford International Fund seeks long-term capital appreciation.
Income is not a specific objective, although it is anticipated that long-term
capital appreciation will be accompanied by dividend income.

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Availability of the Fund

Shares of the Fund are offered to the public only through ownership of variable
annuity contracts and variable life insurance policies issued by The Guardian
Insurance & Annuity Company, Inc.

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As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's shares, nor has the Commission determined
that this prospectus is complete or accurate. It is a criminal offense to state
otherwise.

Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank or depository institution, are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency,
and involve investment risk, including possible loss of the principal amount
invested.

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THE BAILLIE GIFFORD INTERNATIONAL FUND PROSPECTUS 1
<PAGE>

The Fund's principal investment strategies

At least 80% of the value of the Fund's net assets is usually invested in a
diversified portfolio of common stocks and convertible securities issued by
companies domiciled outside of the United States. Convertible securities are
described in the section called Risks and special investment techniques.

The Fund does not usually focus its investments in a particular industry or
country. There are no limitations on how much money the Fund can invest in any
one country. Up to 10% of the Fund's total assets may be invested in countries
in emerging markets when the investment adviser believes it would be appropriate
to do so.

Principal countries
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A significant part of the Fund's assets will normally be divided among
Continental Europe, the United Kingdom, Japan and Asia (including Australia and
New Zealand).

To determine how to allocate its assets geographically, the Fund constantly
evaluates economic, market and political trends worldwide. Among the factors
considered are currency exchange rates, growth potential of economies and
securities markets, technological developments and political and social
conditions.

The adviser's investment philosophy is to add value through active management by
making long-term investments in well-researched and well-managed, quality
businesses that enjoy sustainable, competitive advantages in their marketplace.

The adviser's investment style primarily uses a bottom-up, stock driven approach
to country and asset allocation, with the objective to select stocks that can
sustain an above-average growth rate and trade at a reasonable price.

Companies are screened first for quality and then for value. The adviser looks
for companies with attractive industry backgrounds, strong competitive positions
within those industries, high quality earnings and a positive approach toward
shareholders. The main fundamental factors the adviser considers when analyzing
companies in this bottom-up analysis (in order of importance) are: earnings
growth, cash flow growth, profitability, debt and interest cover, and valuation.

The Fund invests its assets primarily in large, well-established companies, but
will also invest in smaller and newer companies.

The Fund may also invest in foreign issuers through American Depositary Receipts
(ADRs), European Depositary Receipts (EDRs), or similar investment vehicles. To
attempt to manage the risk of changes in currency exchange rates, the Fund may
use special investment techniques, such as forward foreign currency exchange
contracts. These securities are described in Risks and special investment
techniques.

2 PROSPECTUS THE BAILLIE GIFFORD INTERNATIONAL FUND
<PAGE>

As a temporary defensive measure, if the Fund's adviser believes investing in
foreign equity securities is too risky, the Fund may significantly alter its
portfolio by investing, without any percentage limit, in foreign or U.S.
investment grade, non-convertible preferred stocks, bonds, government
securities, or money market instruments. To the extent the Fund assumes a
temporary defensive position, it may not pursue its investment objective during
that time.

The principal risks of investing in the Fund

As with all mutual funds, the value of your investments could decline so you
could lose money. The Fund invests primarily in equity securities and therefore
exposes you to the general risks of investing in stock markets. These include
the risk that share prices of the securities in its portfolio can be driven up
or down gradually or sharply by general conditions in the stock markets, or by
the performance of an individual company or industry. Since most of the
securities in the Fund's portfolio are invested abroad, you face risks in
addition to those of investing in domestic equity markets. The Fund's
investments may be affected by political, social and economic developments
abroad, differences in auditing and other financial standards, and greater
volatility. When the Fund buys securities denominated in the currency of a
foreign country, you face special risks. There will be changes in currency
exchange rates, and foreign governments could regulate foreign exchange
transactions. To the extent that investments are made in a limited number of
countries, events in those countries will have a more significant impact on the
Fund. All of these factors can affect the value of securities and their
earnings.

Forward foreign currency contracts are intended to hedge against adverse changes
in the currency rates of securities purchased or sold by the Fund, and not for
speculative purposes. If the adviser's judgment about the direction of currency
exchange rates is incorrect, however, the Fund may lose money through use of
these contracts.

The Fund's investments in smaller, newer companies may involve additional risks
such as limited financial resources, product lines and markets, and greater
volatility.

To the limited extent that the Fund invests in emerging markets, there are
special risks in addition to the general risks of investing abroad. These risks
include greater political and economic instability, greater volatility in
currency exchange rates, less developed securities markets and possible trade
barriers.

For more information on stock market risks, foreign investment risk, and
emerging market risk see the section called Risks and special investment
techniques.

THE BAILLIE GIFFORD INTERNATIONAL FUND PROSPECTUS 3
<PAGE>

How the Fund has performed

The bar chart and table below provide some indication of the risks of investing
in the Fund by showing how its performance has varied from year to year since it
was launched on February 8, 1991. Past results do not necessarily indicate how
the Fund will perform in the future. The returns in the chart do not include the
effect of charges and expenses attributable to the variable products that offer
this fund as an investment option. If the effect of the charges and expenses
were reflected, returns would be lower than those shown.

Year-by-year returns

Total Returns (for years ended December 31)

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Highest and lowest quarters

During the period shown in the bar chart, the highest and lowest returns,
respectively, for a quarter were:

Best quarter

19.10% for the quarter ended December 31, 1998.

Worst quarter

(14.65)% for the quarter ended September 30, 1998.

[GRAPHIC OMITTED]

Please refer to the prospectus for the variable annuity contract or variable
life insurance policy that offers the Fund to learn about expenses that will
affect your return.

Average annual total returns

This table provides some indication of the risks of investing in the Fund by
showing the average annual total returns for the 1 and 5-year periods and since
inception through December 31, 1998. It compares the Fund's performance with the
Morgan Stanley Capital International (MSCI) Index for Europe, Australia, and Far
East (EAFE), an index that is generally considered to be representative of
international stock market activity.

Since
1 year 5 years inception
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Baillie Gifford International Fund 21.17% 11.90% 11.32%
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MSCI (EAFE) Index 20.33% 9.50% 9.23%
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4 PROSPECTUS THE BAILLIE GIFFORD INTERNATIONAL FUND
<PAGE>

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RISKS AND SPECIAL INVESTMENT TECHNIQUES
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WE'VE ALREADY BRIEFLY DESCRIBED the principal risks of investing in the Fund. In
this section of the prospectus, we also describe the risks in more detail, as
well as some of the special investment techniques the Fund's advisers expect to
use.

PRINCIPAL RISKS TO INVESTORS

Stock market risks

You could lose money in connection with the Fund's equity investments, or the
Fund's performance could fall below that of other possible investments, if any
of the following occurs:

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Euro Conversion

On January 1, 1999, the European Monetary Union (EMU) launched a new currency,
the Euro. It became the official currency of 11 European countries (Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands,
Portugal and Spain) and replaced individual currencies in those countries. Three
other EU member countries (Denmark, Greece and the United Kingdom) may convert
to the Euro at a later date. It is expected that 46% of the capitalization of
the entire European market will be reflected in Euros, and most participating
governments will issue their bonds in Euros. It is impossible to predict what
effect, if any, the conversion to Euros will have on the Fund. The Euro
conversion presents investors with unique risks and uncertainties, including:

1. the readiness of Euro payment, clearing and other operational systems;

2. the legal treatment of debt instruments and financial contracts
denominated in or referring to existing national currencies rather than
the Euro;

3. exchange-rate fluctuations between the Euro and non-Euro currencies during
the transition period of January 1, 1999 through December 31, 2001 and
beyond;

4. potential U.S. tax issues with respect to Fund securities; and

5. the ability to manage monetary policies among the participating countries.
These and other factors could adversely affect the value of or income from
Fund securities.

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o a stock market declines

o stocks are temporarily out of favor relative to bonds or cash

o an adverse event such as negative press reports about a company in the
Fund's portfolio depresses the value of the company's stock

o the investment adviser's judgment about the value or potential
appreciation of a particular stock proves to be incorrect

o companies pay lower stock dividends than expected, or pay no dividends at
all.

Foreign market risks

Investing in foreign securities, particularly those of emerging markets (see the
section called Emerging market risk below), involves additional risks. Foreign
securities may be affected by political, social and economic developments
abroad. Financial markets in foreign countries may be less liquid or more
volatile than U.S. markets. Less information may be available about foreign
company operations, and foreign countries may impose withholding taxes on
interest and dividend income. Government regulations and accounting standards
may be less stringent as well. Brokerage commissions and custodial fees for
foreign investments are often higher than those for investments in U.S.
securities. Exchange rates can adversely affect the value of foreign securities
and their dividends or earnings, irrespective of the underlying performance.

THE BAILLIE GIFFORD INTERNATIONAL FUND PROSPECTUS 5
<PAGE>

You could lose money on your investment, or the Fund in which you have invested
may not perform as well as other investments, if:

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Year 2000 considerations

Like other mutual fund companies and financial and business organizations around
the world, the Fund could be adversely affected if our computers or those of our
advisers or other service providers fail to process data properly as of January
1, 2000. Many computer systems cannot distinguish the year 2000 from the year
1900 when they are making date-related calculations, because of the way date
information is stored in these systems.

We are working to address this issue, and expect that all relevant systems will
be able to correctly interpret the year 2000 when that date arrives. As of the
date of this prospectus, we do not anticipate that shareholders will experience
negative effects on their investments or on the services provided in connection
with our Year 2000 conversion. However, we cannot guarantee that our
preparations will be successful.

Everyone involved is making substantial efforts to address their systems and the
systems with which they interface, but it is not possible to provide assurance
that operational problems will not occur. We believe that, with the modification
of existing computer systems, updates by vendors and conversion to new software
and hardware, shareholders will not experience negative effects on their
investments as a result of the year 2000 issue. However, the year 2000 issue, by
its very nature, contains inherent uncertainties, including the uncertainty of
year 2000 readiness of third parties. As a result, we are unable to determine at
this time whether the consequences of year 2000 failures will have a material
adverse effect on our results of operations, liquidity or financial position.

It is possible that the markets for securities in which the Fund invests may be
detrimentally affected by computer failures throughout the financial industry
beginning January 1, 2000 if systems should cease to function at that time. This
may result in trade settlement problems and liquidity issues. Corporate and
governmental data processing errors may result in production problems for
individual companies and overall economic uncertainties. Earnings of individual
issuers may be affected by remediation costs. In addition, it has been reported
that foreign institutions have made less progress in addressing the Year 2000
problem than major U.S. entities, which could make certain Fund investments more
sensitive to these risks.

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o in a changing market, the Fund is unable to sell securities at the desired
times, amounts or at prices it considers reasonable

o stock prices in countries selected by the Fund decline

o the government of a country selected by the Fund imposes restrictions on
currency conversion or trading

o relationships between countries selected by the Fund change and have a
negative impact on stock or currency values.

Many countries in which the Fund invests have markets that are less liquid, more
volatile, and less subject to governmental supervision than the U.S. markets.
Public information about a foreign security or issuer may be less available than
in the U.S. Unfavorable political, economic or regulatory factors, including
foreign taxation, may affect an issuer's ability to repay principal or interest.
In the event of a default on any foreign obligation, it may be difficult legally
to obtain or to enforce a judgment against the issuer.

Foreign securities (other than ADRs) typically are traded on the applicable
country's principal stock or bond exchange, but may also be traded on regional
exchanges or over-the-counter. Foreign markets, especially emerging markets, may
have different clearance and settlement procedures, and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.

6 PROSPECTUS THE BAILLIE GIFFORD INTERNATIONAL FUND
<PAGE>

A country that exports only a few commodities or depends on certain strategic
imports could be vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected.

Investing in foreign securities also is subject to currency risk, which is the
risk that fluctuations in the exchange rates between the U.S. dollar and foreign
currencies may negatively affect the value of an investment. Currency
fluctuations may negatively impact the Fund's portfolio even if the foreign
stock has not declined in value.

American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs) are also subject to currency risks.
Specifically, changes in the value of the currency in which the security
underlying a depositary receipt is denominated, relative to the U.S. dollar, may
adversely affect the value of the depositary receipt.

Emerging market risk

Emerging market countries may have higher relative rates of inflation than
developed countries, and may be more likely to experience political unrest and
economic instability. Many emerging market countries have experienced
substantial rates of inflation for many years, which may have adverse effects on
the economies and securities markets of those countries. The result could be
expropriation of assets, which could wipe out the entire value of the Fund's
investment in that market. Countries heavily dependent on trade face additional
threats from the imposition of trade barriers and other protectionist measures.
Emerging market countries have a greater risk of currency depreciation or
devaluation relative to the U.S. dollar, which could adversely affect any
investment made by the Fund.

The securities markets in emerging countries may be less developed than in other
countries, causing liquidity and settlement problems, such as delays, and making
it harder for the Fund to buy and sell securities. Emerging market debt
securities are often rated below investment grade, which increases the risk of
issuer default or bankruptcy. Political and economic turmoil could raise the
possibility that trading of securities will be halted. If this happens, the Fund
may ask the Securities and Exchange Commission for permission to suspend the
sale of the Fund's shares during the emergency. Prior to receipt of the SEC's
determination, portfolio securities in the affected markets would be priced at
fair value as determined in good faith by, or under the direction of, the
Directors.

THE BAILLIE GIFFORD INTERNATIONAL FUND PROSPECTUS 7
<PAGE>

Diversification risk

In order to meet the Fund's investment objectives, the investment adviser must
try to determine the proper mix of securities that will maximize the Fund's
return. It may not properly ascertain the appropriate mix of securities for any
particular economic cycle. Also, the timing of movements from one type of
security to another could have a negative effect on the Fund's overall
objective.

Temporary defensive position

The Fund may take a temporary defensive position in response to emergency or
extraordinary circumstances. The Fund may invest in debt obligations or cash
instruments and may borrow up to 20% of the value of its total assets. While
this strategy may avoid losses for the Fund, it may also result in lost
investment opportunities.

Portfolio turnover

Portfolio turnover refers to the rate at which the securities held by the Fund
are replaced. The higher the rate, the higher the transactional and brokerage
costs associated with the turnover, unless the securities traded can be bought
and sold without corresponding commission costs. Historically, the Fund has not
had a high portfolio turnover; however, the portfolio manager will buy and sell
securities as it deems necessary in an attempt to maximize returns.

SPECIAL INVESTMENT TECHNIQUES

American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs)

The Fund may invest in securities of U.S. or foreign companies which are issued
or settled overseas in the form of ADRs, EDRs, or other similar securities. An
ADR is a U.S. dollar-denominated security issued by a U.S. bank or trust company
which represents, and may be converted into, a foreign security. An EDR or GDR
is similar, but is issued by a European bank. Depositary receipts are subject to
the same risks as direct investment in foreign securities.

Borrowing

The Fund may borrow money for temporary emergency purposes. When the Fund
borrows for any purpose, it will maintain assets in a segregated account to
cover its repayment obligation. The Investment Company Act of 1940 limits
borrowings to 331/3% of a mutual fund's total assets. The Fund may commit up to
20% of its total assets to borrowings.

8 PROSPECTUS THE BAILLIE GIFFORD INTERNATIONAL FUND
<PAGE>

Convertible securities

The Fund may invest in convertible securities, which are securities such as debt
or preferred stock, that can be exchanged for a set number of another security
(usually common shares) at a predetermined price.

Financial futures contracts

The Fund may enter into financial futures contracts, in which the Fund agrees to
buy or sell certain financial instruments on a specified future date based on a
projected level of interest rates or the projected performance of a particular
security index. If the Fund's adviser misjudges the direction of interest rates
or markets, the Fund's overall performance could suffer. The risk of loss could
be far greater than the investment made since a futures contract requires only a
small deposit to take a large position. A small change in a financial futures
contract could have a substantial impact, favorable or unfavorable.

Forward foreign currency exchange contracts

The Fund may use forward foreign currency exchange contracts to try to manage
the risk of changes in currency exchange rates. A forward foreign currency
exchange contract is an agreement to exchange a specified amount of U.S. dollars
for a specified amount of a foreign currency on a specific date in the future.
The outcome of this transaction depends on the adviser's ability to predict how
the U.S. dollar will fare against the foreign currency. The Fund uses these
contracts to try to hedge against adverse exchange rate changes, and not for
speculative purposes, but there is no guarantee of success.

Illiquid securities and exempt commercial paper

Illiquid securities are either not readily marketable at their approximate value
within seven days, are not registered under the federal securities laws (unless
they are exempt from registration, as noted in the following paragraph), or are
otherwise viewed as illiquid by the Securities and Exchange Commission.
Repurchase agreements that mature in more than seven days, certain variable rate
master demand notes, and over-the-counter options are treated as illiquid
securities. The absence of trading can make it difficult to value or dispose of
illiquid securities. It can also adversely affect the Fund's ability to
calculate its net asset value or manage its portfolio. The Statement of
Additional Information sets out the upper limits for the Fund's investments in
illiquid securities. The Securities and Exchange Commission currently limits
investment in illiquid securities to 15% of net assets.

THE BAILLIE GIFFORD INTERNATIONAL FUND PROSPECTUS 9
<PAGE>

Securities which qualify under an exemption from registration under federal
securities laws for resales to institutional investors may be treated by the
Fund as liquid. If the Fund's adviser determines that these securities are
liquid under guidelines adopted by the Board of Directors, they may be purchased
without regard to the illiquidity limits in the Statement of Additional
Information. Similarly, the Fund typically treats commercial paper issued in
reliance on an exemption from registration under federal securities laws as
liquid.

Money market instruments

From time to time, the Fund may invest a portion of its assets in money market
instruments. These are short-term debt instruments, which are written promises
to repay debt within a year. They include Treasury bills and certificates of
deposit, and they are characterized by safety and liquidity, which means they
are easily convertible into cash. Money market instruments may be used by the
Fund for cash management or temporary defensive purposes.

Options

The Fund may purchase or sell options to buy or sell securities, indices of
securities or financial futures contracts within a specified future period. The
owner of an option has the right to buy or sell the underlying instrument at a
set price, by a specified date in the future. The Fund may, but is not required
to, use options to attempt to minimize the risk of the underlying investment and
to manage exposure to changes in foreign currencies. However, if the adviser
misjudges the direction of the market for a security, the Fund could lose money
by using options -- more money than it would have lost by investing directly in
the security.

Privatizations

Some foreign governments have begun programs to divest all or part of their
interests in government owned or controlled enterprises. These programs are
known as privatizations. Investing in these enterprises may offer significant
opportunities for capital appreciation. However, foreign investors such as the
Fund may be limited to terms less advantageous than those offered to local
investors. There is no assurance that foreign governments will continue to
privatize enterprises, or that these programs will be successful.

10 PROSPECTUS THE BAILLIE GIFFORD INTERNATIONAL FUND
<PAGE>

Repurchase agreements

In a repurchase agreement transaction, the Fund purchases a debt security and
obtains a simultaneous commitment from the selling bank or securities dealer to
repurchase that debt security at an agreed time and price, reflecting a market
rate of interest. Repurchase agreements are fully collateralized by U.S.
government securities, bank obligations and cash or cash equivalents. Costs,
delays or losses could result if the seller became bankrupt or was otherwise
unable to complete the repurchase agreement. To minimize this risk, the
investment adviser evaluates the creditworthiness of potential repurchase
agreement counterparties using guidelines adopted by the Board of Directors. The
Fund may use repurchase agreements for cash management or temporary defensive
purposes.

When-issued or delayed-delivery transactions

The Fund may commit to purchase or sell particular securities, with payment and
delivery to take place at a future date. These are known as when-issued or
delayed-delivery transactions. If the counterparty fails to deliver a security
the Fund has purchased on a when-issued or delayed-delivery basis, there could
be a loss as well as a missed opportunity to make an alternative investment. The
Fund engages in these transactions to acquire securities that are appropriate
for its portfolio at favorable prices or yields. It does not engage in these
transactions to speculate on interest rate changes.

Other

New financial products and risk management techniques continue to be developed.
The Fund may use these instruments and techniques to the extent and when
consistent with its investment objectives or regulatory and federal tax
considerations.

THE BAILLIE GIFFORD INTERNATIONAL FUND PROSPECTUS 11
<PAGE>

- --------------------------------------------------------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------

THE MANAGEMENT and affairs of the Fund are supervised by its Board of Directors.

The Fund's investment adviser

The adviser for the Fund is Guardian Baillie Gifford Limited (GBG), an
investment management company based in Edinburgh, Scotland. It is responsible
for the overall investment management of the Fund, which includes buying and
selling securities, choosing brokers and negotiating commissions. Guardian Life
owns 51% of GBG, and the remaining 49% is owned by Baillie Gifford Overseas
Limited (BG Overseas), which is wholly owned by a Scottish investment company,
Baillie Gifford & Co. Founded in 1908, Baillie Gifford & Co. manages money for
institutional clients primarily within the United Kingdom. It is one of the
largest independently owned investment management firms in the U.K. BG Overseas
is the sub-adviser for the Fund. GBG is a member of and regulated by IMRO, an
international regulator of investment advisory firms. GBG, BG Overseas and
Baillie Gifford & Co. are all located at 1 Rutland Court, Edinburgh, EH3 8EY.

The adviser is entitled to a management fee for its services. In the most recent
year, the Fund paid GBG a fee at the annual rate of 0.80% of average net assets.

Portfolio manager

R. Robin Menzies has been in charge of the geographical diversification of the
International Fund's assets since its inception in 1993. Investment teams at BG
Overseas make the securities selections for the International Fund. Mr. Menzies
is a director of BG Overseas and a partner of Baillie Gifford & Co.

12 PROSPECTUS THE BAILLIE GIFFORD INTERNATIONAL FUND
<PAGE>

- --------------------------------------------------------------------------------
BUYING AND SELLING FUND SHARES
- --------------------------------------------------------------------------------

YOU CAN BUY THIS FUND only if you're a contractowner of a GIAC variable annuity
contract or variable life insurance policy that offers the Fund as an investment
option. GIAC buys and sells Fund shares based on premium allocation, transfer,
withdrawal and surrender instructions made by GIAC contractowners.

The Fund will ordinarily make payment for redeemed shares within three business
days after it receives an order from GIAC. The redemption price will be the net
asset value next determined after GIAC receives the contractowner's instructions
or request in proper form. The Fund may refuse to redeem shares or postpone
payment of proceeds during any period when:

o trading on the New York Stock Exchange (NYSE) is restricted

o the NYSE is closed for other than weekends and holidays

o an emergency makes it not reasonably practicable for the Fund to dispose
of assets or calculate its net asset value (NAV); or

o as permitted by the Securities and Exchange Commission.

See the prospectus for your GIAC variable annuity contract or variable life
insurance policy for more details about the allocation, transfer and withdrawal
provisions of your annuity or policy.

Share price

The share price of the Fund is calculated each day that the NYSE is open. The
price is set at the close of trading on the NYSE or 4 p.m. Eastern time,
whichever is earlier. The price is based on the Fund's current NAV. Securities
traded on foreign exchanges may trade on weekends or other days when the Fund
does not price its shares. As a result, the net asset value of the Fund's shares
may change on days when GIAC will not be able to purchase or redeem the Fund's
shares on behalf of contractowners.

NAV is the value of everything a Fund owns, minus everything it owes, divided by
the number of shares investors hold.

The Fund values its assets at current market prices when market prices are
readily available. If market value cannot be established, assets are valued at
fair value as determined in good faith by, or under the direction of, the Board
of Directors. Short-term securities that mature in 60 days or less are valued by
using the amortized cost method, unless the Board determines that this does not
represent fair value.

THE BAILLIE GIFFORD INTERNATIONAL FUND PROSPECTUS 13
<PAGE>

Dividends, distributions and taxes

Net investment income and net capital gains that are distributed to GIAC's
separate account by the Fund are reinvested by GIAC in additional shares of the
Fund at NAV. The Fund typically distributes any net investment income twice each
year and any net capital gains once each year. The Fund's Board of Directors can
change this policy. GIAC contractowners will be notified when these
distributions are made.

Investment income received from sources within foreign countries may be subject
to foreign income taxes. Withholding tax rates in countries with which the U.S.
does not have a tax treaty are often as high as 30% or more. The U.S. has
entered into tax treaties with many foreign countries which entitle certain
investors (such as the Fund) to a reduced rate of tax (generally 10-15%) or to
certain exemptions from tax. The Fund will operate so as to qualify for such
reduced tax rates or tax exemptions whenever possible. While contractowners will
bear the cost of any foreign tax withholding, they will not be able to claim a
foreign tax credit or deduction for taxes paid by the Fund.

The prospectuses for GIAC's variable annuities and variable life insurance
policies contain a summary description of the federal income tax treatment of
distributions from such contracts. Anyone who is considering allocating,
transferring or withdrawing money held under a GIAC variable contract to or from
the Fund should consult a qualified tax adviser.

Other information about the Fund

The Fund does not currently foresee any disadvantages to contractowners arising
from the fact that it offers shares to both variable annuity and variable life
insurance policy separate accounts. The Board monitors events to ensure there
are no material irreconcilable differences between or among contractowners. If
such a conflict should arise, one or more GIAC separate accounts may withdraw
their investment in the Fund. This could possibly force the Fund to sell
portfolio securities at disadvantageous prices.

If circumstances make it necessary to create separate portfolios for variable
annuity and variable life insurance separate accounts, GIAC will bear the
expenses involved in setting up the new portfolios. However, the ongoing
expenses contractowners ultimately pay would likely increase because of the loss
of economies of scale provided by the current arrangement.

14 PROSPECTUS THE BAILLIE GIFFORD INTERNATIONAL FUND
<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

THE FINANCIAL HIGHLIGHTS table is intended to help you understand the financial
performance of the Fund over the past five years.

Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, are included in the
annual report, which is available upon request.

For the year ended December 31
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $18.27 $17.26 $15.37 $14.69 $14.69
-------- -------- -------- -------- --------
Income from investment operations

Net Investment Income 0.13 0.15 0.15 0.16 0.15

Net Gains or Losses on Securities
(both realized and unrealized) 3.73 1.91 2.21 1.49 (0.02)
-------- -------- -------- -------- --------
Total from Investment Operations 3.86 2.06 2.36 1.65 0.13

Less distributions

Dividends (from Net Investment
Income) (0.11) (0.15) (0.14) (0.15) (0.13)

Distributions in excess of
Net Investment Income (0.01) (0.15) (0.10) (0.12) --

Distributions (from Capital Gains) (1.09) (0.75) (0.23) (0.70) --
-------- -------- -------- -------- --------
Total Distributions (1.21) (1.05) (0.47) (0.97) (0.13)
-------- -------- -------- -------- --------
Net Asset Value, End of Period $20.92 $18.27 $17.26 $15.37 $14.69
-------- -------- -------- -------- --------
Total Return 21.17% 11.93% 15.41% 11.23% 0.87%

Ratios/Supplemental data

Net Assets, End of Period (000's omitted) $680,290 $534,711 $456,203 $317,287 $303,050

Ratio of Expenses to Average
Net Assets 0.98% 0.97% 0.98% 0.99% 1.03

Ratio of Net Investment Income (Loss)
to Average Net Assets 0.55% 0.74% 0.94% 0.97% 1.11%

Portfolio Turnover Rate 47% 51% 38% 52% 27%

</TABLE>

THE BAILLIE GIFFORD INTERNATIONAL FUND PROSPECTUS 15
<PAGE>

- --------------------------------------------------------------------------------
FOR MORE DETAILED INFORMATION
- --------------------------------------------------------------------------------

ADDITIONAL INFORMATION about the Fund is available in the annual and semi-annual
reports to shareholders. In the Fund's annual report, you will find a discussion
of the market conditions and investment strategies that significantly affected
the Fund's performance during the past fiscal year.

The Fund's Statement of Additional Information contains additional information
about the Fund. It has been filed with the SEC and is incorporated in this
prospectus by reference. A free copy of the Fund's Statement of Additional
Information and most recent annual report and semi-annual report may be
obtained, and further inquiries can be made, by calling 1-800-221-3253 or by
writing Guardian Investor Services Corporation at 7 Hanover Square, New York,
New York 10004.

Information about the Fund (including the Statement of Additional Information)
can be reviewed and copied at the SEC's Public Reference Room in Washington D.C.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund
are available on the SEC's Internet site at http://www.sec.gov and copies of
this information may be obtained, upon payment of a duplicating fee, by writing
the Public Reference Section of the SEC, Washington D.C. 20549-6009.

Custodian, Transfer Agent and Dividend Paying Agent

State Street Bank and Trust Company, Custody Division, 1776 Heritage Drive,
North Quincy, Massachusetts 02171, is the Fund's custodian, transfer agent and
dividend paying agent.

1940 Act File No. 811-6231

16 PROSPECTUS THE BAILLIE GIFFORD INTERNATIONAL FUND
<PAGE>

PROSPECTUS

May 1, 1999

BAILLIE GIFFORD
EMERGING MARKETS
FUND

INVESTMENT OBJECTIVE

THE BAILLIE GIFFORD EMERGING MARKETS FUND seeks long-term capital appreciation.

- --------------------------------------------------------------------------------

Availability of the Fund

Shares of the Fund are offered to the public only through ownership of variable
annuity contracts and variable life insurance policies issued by The Guardian
Insurance & Annuity Company, Inc.

- --------------------------------------------------------------------------------

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 1
<PAGE>

The Fund's principal investment strategies

At least 65% of the value of the Fund's total assets is invested in a
diversified portfolio of common stocks and convertible securities issued by
companies in emerging markets. Convertible securities are described in the
section called Risks and special investment techniques.

The Fund expects to invest in some or all of the following emerging market
countries: Argentina, Brazil, Chile, China, Colombia, the Czech Republic,
Greece, Hungary, India, Indonesia, Israel, Jordan, Malaysia, Mexico, Pakistan,
Peru, Philippines, Poland, Portugal, the Slovak Republic, South Africa, South
Korea, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela, and Zimbabwe. The Fund's
investment adviser determines the universe of emerging market countries, and
this list may change based on the adviser's assessment of a country's
suitability for investment.

Emerging markets
- --------------------------------------------------------------------------------
The Fund defines an emerging market country as one whose economy or markets are
considered by the International Finance Corporation and the World Bank to be
emerging or developing, as well as countries which are classified by the United
Nations as developing. An emerging market company is one that is organized under
the laws of, or has its principal office in, an emerging market country; derives
50% or more of its revenue from goods produced, services performed or sales made
in emerging market countries; or for which the principal securities market is
located in an emerging market country.

Companies are screened first for quality and then for value. The adviser looks
for companies with attractive industry backgrounds, strong competitive positions
within those industries, high quality earnings and a positive approach towards
shareholders. The main fundamental factors the adviser considers when analyzing
companies in this bottom-up analysis (in order of importance) are: earnings
growth, cash flow growth, profitability, debt and interest cover, and valuation.

In addition, up to 35% of the Fund's net assets may be invested in bonds and
other types of debt securities issued by governments in emerging market
countries; stocks and debt securities issued by companies or governments in
developed countries; and cash or money market instruments.

The Fund will invest in emerging market debt securities when the investment
adviser believes that debt is more attractive than an equity investment in the
same country, taking into account the risk and reward prospects of each type of
investment.

Investment rating agencies in the United States often consider bonds issued in
emerging market countries to be below investment grade (commonly referred to as
junk bonds). No more than 10% of the Fund's assets will be invested in below
investment grade securities.

2 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

Some emerging market countries do not allow foreign companies, such as the Fund,
to buy stocks and bonds in their countries. Purchases have to be made through
government-authorized investment companies, sometimes at a price that exceeds
the value of these securities. In these cases, you would bear higher expenses.
The Fund may invest up to 10% of its total assets in these kinds of companies.

The Fund may also hold cash in U.S. dollars or foreign currencies and may invest
in foreign issuers through American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), or similar
investment vehicles. To attempt to protect against adverse changes in currency
exchange rates, it may also use special investment techniques such as forward
foreign currency exchange contracts. For more information, see Risks and special
investment techniques.

Special risks
- --------------------------------------------------------------------------------
Emerging markets present special risks in addition to the general risks of
investing abroad. These risks include greater political and economic
instability, greater volatility in currency exchange rates, less developed
securities markets and possible trade barriers.

As a temporary defensive strategy, the Fund may significantly change its
portfolio if the adviser believes that political or economic conditions make
investing in emerging market countries too risky. In this case, the Fund may
acquire foreign or U.S. investment grade, non-convertible preferred stocks,
bonds, government securities, and money market instruments. To the extent the
Fund assumes a temporary defensive position, it may not pursue its investment
objective during that time.

The principal risks of investing in the Fund

As with all mutual funds, the value of your investments could decline so you
could lose money. An investment in this Fund must be considered speculative
because investing in emerging markets is riskier than investing in more
developed markets.

There are several risks associated with investing in the Emerging Markets Fund.
The Fund invests primarily in equity securities and is therefore subject to the
general risks of investing in stock markets. Since most of the securities in the
Fund's portfolio are invested abroad, you face risks in addition to those of
investing in domestic equity markets. The Fund's investments may be affected by
political, social and economic developments abroad, differences in auditing and
other financial standards, and greater volatility. When the Fund buys securities
denominated in the currency of a foreign country, you face special risks. There
will be changes in currency exchange rates, and foreign governments could
regulate foreign exchange transactions. To the extent that investments are made
in a limited number of countries, events in those countries will have a more
significant impact on the Fund. All of these factors can affect the value of
securities and their earnings.

Emerging markets present special risks in addition to the general risks of
investing abroad. These risks include greater political and economic
instability, greater volatility in currency exchange rates, less developed
securities markets and possible trade barriers.

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 3
<PAGE>

The Fund will invest in some companies with small market capitalization,
exposing you to the risks of investing in small companies, such as limited
financial resources, product lines and markets, and greater volatility. With
respect to the 35% of the Fund's net assets that may be invested in debt
securities, you face risks associated with the debt markets. Debt securities of
emerging market companies are particularly subject to credit risk (the risk that
the borrower will fail to repay principal and interest when due). Emerging
market debt is generally more volatile and less liquid than debt issued in more
developed countries. As with all debt securities, you will also be subject to
interest rate risk (the risk that a debt obligation's price will be adversely
affected by changes in interest rates). Finally, since debt securities issued in
emerging markets are often rated below investment grade, you will have exposure
to the risks of investing in junk bonds, including the risk that the bonds will
be more sensitive to adverse economic conditions.

More detailed information about the stock market risk, foreign investment risk,
including the particular risks of emerging markets, small company risk, and the
risks of investing in debt securities, including junk bonds, appears in the
section called Risks and special investment techniques.

How the Fund has performed

The bar chart and table below provide some indication of the risks of investing
in the Fund by showing how its performance has varied since it was launched on
October 17, 1994. This performance information does not reflect separate account
or variable insurance contract fees or charges. If these fees and charges were
reflected, the Fund's returns would be less than those shown. Past results do
not necessarily indicate how the Fund will perform in the future.

4 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

Year-by-year returns

Total returns

(for years ended December 31)

[GRAPHIC OMITTED]

- --------------------------------------------------------------------------------
Highest and lowest quarters

During the period shown in the bar chart, the highest and lowest returns,
respectively, for a quarter were:

Best quarter

15.65% for the quarter ended December 31, 1998.

Worst quarter

(22.64)% for the quarter ended September 30, 1998.

Please refer to the prospectus for the variable annuity contract or variable
life insurance policy that offers the Fund to learn about expenses that will
affect your return.

Average annual total returns

This table provides some indication of the risks of investing in the Fund by
showing the average annual total returns for one year and since inception on
October 17, 1994. It compares the Fund's performance with Morgan Stanley Capital
International (MSCI) Emerging Markets Free (EMF) Index, an index that is
generally considered to be representative of the stock market activity of
emerging markets.

Since
1 year inception
- --------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund (26.77)% (4.78)%
- --------------------------------------------------------------------------------
MSCI (EMF) Index (25.34)% (12.61)%
- --------------------------------------------------------------------------------

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 5
<PAGE>

PRINCIPAL RISKS TO INVESTORS

Stock market risks

You could lose money in connection with the Fund's equity investments, or the
Fund's performance could fall below that of other possible investments, if any
of the following occurs:

o a stock market declines

o stocks are temporarily out of favor relative to bonds or cash

o an adverse event such as negative press reports about a company in the
Fund's portfolio depresses the value of the company's stock

o the investment adviser's judgment about the value or potential
appreciation of a particular stock proves to be incorrect

o companies pay lower stock dividends than expected, or pay no dividends at
all.

Small company risks

An investment in the Fund exposes you to the risks of investing in small
companies. Small companies may have limited product lines, markets or financial
resources. They may depend on a small number of people to manage the company.
Buying and selling shares of small companies may be more difficult than it is
for larger companies because there are fewer shares available, and they tend to
trade less frequently. There may be less publicly available information about
these companies, which may prolong the time it takes for a company's share price
to match its underlying value. Share prices of small company stocks may
fluctuate more dramatically than those of larger companies.

Debt risks

You could lose money in connection with the Fund's debt investments, or the
Fund's performance could fall below that of other possible investments for the
following reasons.

Interest rate risk

The value of the debt obligations in the Fund may vary according to changes in
interest rates. When interest rates rise, bond prices generally fall, and when
interest rates fall, bond prices generally rise. Usually the price of bonds that
must be repaid over longer time periods fluctuate more than shorter-term bonds.
If an instrument has a variable rate of interest and a change in the market rate
occurs, there may be a delay before the coupon rate is affected, and this could
adversely affect the Fund's performance.

6 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

Credit risk

Investors face the risk that the issuer of debt cannot pay interest or principal
on the money owed. U.S. government securities are substantially protected from
financial or credit risk. However, certain agency obligations, while of the
highest credit quality, do not have this guarantee.

Prepayment and extension risk

There is also the possibility that a debt security is repaid before the money is
due, and that the proceeds could be invested at lower interest rates.
Intermediate-term and long-term bonds commonly provide protection against this
possibility, but mortgage-backed securities do not. Mortgage-backed securities
are more sensitive to the risks of prepayment because they can be prepaid
whenever their underlying collateral is prepaid. Conversely, extension risk is
the possibility that in an environment of rising interest rates, expected
prepayments will not be made, with the result that the security's life will
become longer than anticipated. Typically, the security's value will drop when
this occurs.

Manager's selection risk

The investment adviser's judgment about the value or potential appreciation of a
particular bond proves to be incorrect.

Junk bond risk

Junk bonds are below investment grade bonds rated as Ba or BB and lower, and are
also known as high-yield bonds. They may be issued by companies without a long
track record of sales and earnings, or those with questionable credit

- --------------------------------------------------------------------------------

Year 2000 considerations

- --------------------------------------------------------------------------------

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 7
<PAGE>

strength. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general or
regional economic difficulty. Lower-quality debt obligations are particularly
susceptible to the risk of default or price changes because of changes in the
issuer's creditworthiness. These securities may also be less liquid, making it
more difficult for the Fund to dispose of them. To the extent the Fund's
portfolio is more heavily weighted toward investment in investment grade
securities of lower quality, similar issues arise.

Lower-quality debt can be particularly sensitive to changes in the economy, the
financial situation of the issuer, or trouble in the issuer's industry. If the
issuer defaults on the loan, the investor could face the additional cost of the
effort to recover some or all of the money. When the economy is uncertain, the
price of these securities could fluctuate more dramatically than the price of
higher-rated debt. It may also be difficult for the Fund to sell these
securities at the time it sees fit.

Junk bonds usually pay a higher interest rate than investment grade bonds, but
also involve greater risks. You could lose money in connection with the Fund's
investments in junk bonds, or the Fund's performance could fall below that of
other possible investments, because junk bonds:

o are speculative and have a higher risk of default

o tend to react more to changes in interest rates than higher-rated
securities

o tend to be less liquid, and may be more difficult to value

o are issued by entities whose ability to make principal and interest
payments is more likely to be affected by changes in economic conditions
or other circumstances.

Foreign market risks

8 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

You could lose money on your investment, or the Fund in which you have invested
may not perform as well as other investments, if:

o in a changing market, the Fund is unable to sell securities at the desired
times, amounts or at prices it considers reasonable

o stock prices in countries selected by the Fund decline

o the government of a country selected by the Fund imposes restrictions on
currency conversion or trading

o relationships between countries selected by the Fund change and have a
negative impact on stock or currency values.

- --------------------------------------------------------------------------------

Euro Conversion

1. the readiness of Euro payment, clearing and other operational systems;

2. the legal treatment of debt instruments and financial contracts
denominated in or referring to existing national currencies rather than
the Euro;

3. exchange-rate fluctuations between the Euro and non-Euro currencies during
the transition period of January 1, 1999 through December 31, 2001 and
beyond;

4. potential U.S. tax issues with respect to Fund securities; and

5. the ability to manage monetary policies among the participating countries.
These and other factors could adversely affect the value of or income from
Fund securities.

- --------------------------------------------------------------------------------

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 9
<PAGE>

Emerging market risk

10 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

Diversification risk

Temporary defensive position

The Fund may take a temporary defensive position in order to try to respond to
emergency or extraordinary circumstances. The Fund may invest in debt
obligations or cash instruments, and may borrow up to 20% of the value of its
total assets. While this strategy may avoid losses for the Fund, it may also
result in lost investment opportunities.

Portfolio turnover

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 11
<PAGE>

SPECIAL INVESTMENT TECHNIQUES

American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs)

The Fund may invest in securities of U.S. or foreign companies which are issued
or settled overseas in the form of ADRs, EDRs, or other similar securities. An
ADR is a U.S. dollar-denominated security issued by a U.S. bank or trust company
which represents, and may be converted into, a foreign security. An EDR or GDR
is similar, but is issued by a European bank. Depositary receipts are subject to
some of the same risks as direct investment in foreign securities.

Borrowing

Convertible securities

Financial futures contracts

Forward foreign currency exchange contracts

12 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

Illiquid securities and exempt commercial paper

Money market instruments

Options

The Fund may, but is not required to, use options to attempt to minimize the
risk of the underlying investment and, for the International and Emerging
Markets Funds, to manage exposure to changes in foreign currencies. However, if
the adviser misjudges the direction of the market for a security, the Fund could
lose money by using options -- more money than it would have lost by investing
directly in the security.

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 13
<PAGE>

Privatizations

Repurchase agreements

When-issued or delayed-delivery transactions

Other

14 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

- --------------------------------------------------------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------

THE MANAGEMENT and affairs of the Fund are supervised by its Board of Directors.

The Fund's investment adviser

The adviser is entitled to a management fee for its services. In the most recent
year, the Fund paid GBG a fee at the annual rate of 1.00% of average net assets.

Portfolio manager

Edward Hocknell has been in charge of the geographical diversification of the
Emerging Markets Fund's assets since its inception. The decision to buy and sell
securities is made with help from several investment teams at BG Overseas. Mr.
Hocknell is a director of BG Overseas, and became partner of Baillie Gifford &
Co. in May 1998.

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 15
<PAGE>

- --------------------------------------------------------------------------------
BUYING AND SELLING FUND SHARES
- --------------------------------------------------------------------------------

o trading on the New York Stock Exchange (NYSE) is restricted

o the NYSE is closed for other than weekends and holidays

o an emergency makes it not reasonably practicable for the Fund to dispose
of assets or calculate its net asset value (NAV); or

o as permitted by the Securities and Exchange Commission.

See the prospectus for your GIAC variable annuity contract or variable life
insurance policy for more details about the allocation, transfer and withdrawal
provisions of your annuity or policy.

Share price

NAV is the value of everything a Fund owns, minus everything it owes, divided by
the number of shares investors hold.

16 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

Dividends, distributions and taxes

Other information about the Fund

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 17
<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

THE FINANCIAL HIGHLIGHTS table is intended to help you understand the financial
performance of the Fund over the past five years.

For the year ended December 31
------------------------------------------------------
1998 1997 1996 1995 1994*
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.17 $10.54 $8.46 $8.68 $9.87
------- ------- ------- ------- -------
Income from investment operations

Net Investment Income 0.09 0.09 0.07 0.07 (0.01)

Net Gains or Losses on Securities
(both realized and unrealized) (2.81) 0.12 2.01 (0.12) (1.17)
------- ------- ------- ------- -------
Total from Investment Operations (2.72) 0.21 2.08 (0.05) (1.18)

Less distributions

Dividends (from Net Investment
Income) -- (0.06) -- (0.07) (0.01)

Distributions in excess of
Net Investment Income -- -- -- (0.10) --

Distributions (from Capital Gains) -- (0.33) -- -- --
------- ------- ------- ------- -------
Distributions in excess of
Net Capital Gains -- (0.19) -- -- --

Tax return of capital (0.06) -- -- -- --

Total Distributions (0.06) (0.58) -- (0.17) (0.01)
------- ------- ------- ------- -------
Net Asset Value, End of Period $7.39 $10.17 $10.54 $8.46 $8.68
------- ------- ------- ------- -------
Total Return (26.77)% 1.97% 24.59% (0.60)% (11.97)%

Ratios/Supplemental data

Net Assets, End of Period (000's omitted) $50,664 $87,014 $67,062 $34,218 $24,069

Ratio of Expenses to Average
Net Assets 1.49% 1.40% 1.53% 1.67% 2.28%**

Ratio of Net Investment Income (Loss)
to Average Net Assets 1.16% 0.76% 0.85% 0.89% 0.94%**

Portfolio Turnover Rate 69% 64% 46% 52% --

</TABLE>

- ----------

* Fund commenced public offering of Fund's shares on 10/17/94.

** Annualized.

18 PROSPECTUS THE BAILLIE GIFFORD EMERGING MARKETS FUND
<PAGE>

- --------------------------------------------------------------------------------
FOR MORE DETAILED INFORMATION
- --------------------------------------------------------------------------------

ADDITIONAL INFORMATION ABOUT THE FUND is available in the annual and semi-annual
reports to shareholders. In the Fund's annual report, you will find a discussion
of the market conditions and investment strategies that significantly affected
the Fund's performance during the past fiscal year.

Custodian, Transfer Agent and Dividend Paying Agent

State Street Bank and Trust Company, Custody Division, 1776 Heritage Drive,
North Quincy, Massachusetts 02171, is the Fund's custodian, transfer agent and
dividend paying agent.

1940 Act File No. 811-6231

THE BAILLIE GIFFORD EMERGING MARKETS FUND PROSPECTUS 19
<PAGE>

Prospectus

May 1, 1999

THE GUARDIAN
SMALL CAP STOCK
FUND

INVESTMENT OBJECTIVE

THE GUARDIAN SMALL CAP STOCK FUND seeks long-term growth of capital. Current
income is not a specific objective, although it is anticipated that long-term
growth of capital will be accompanied by growth in income.

Availabilty of the Fund

Shares of the Fund are offered to the public only through ownership of variable
annuity contracts and variable life insurance policies issued by The Guardian
Insurance & Annuity Company, Inc.

- --------------------------------------------------------------------------------

THE GUARDIAN SMALL CAP STOCK FUND PROSPECTUS 1
<PAGE>

Small market capitalization
- --------------------------------------------------------------------------------
Companies with a small market capitalization or value refer to companies
included in the Russell 2000 Index. The index excludes the 1,000 largest U.S.
companies in market capitalization, but includes the next 2,000 largest
companies. As of December 31, 1998, the companies included in this index had
market values ranging from $4.4 million to $3.2 billion. A company's "market
capitalization" is determined by multiplying the current market price of a share
of the company's stock by the total number of shares outstanding.

The Fund's principal investment strategies

At least 85% of the value of the Fund's total assets is usually invested in a
diversified portfolio of common stocks and convertible securities issued by
companies with a small market capitalization. Convertible securities are
described in the section called Risks and special investment techniques.

The Fund's adviser, Guardian Investor Services Corporation (GISC), uses a stock
selection system to identify securities that represent good relative value and
have reasonable prospects of superior relative price gain. This system uses
several quantitative models that score each security considered for purchase or
sale. In making investment decisions, GISC will also take into account the
risk-reward prospects for each security and the portfolio manager's judgment
about the outlook for specific industries, companies and the economy.

GISC uses a flexible approach in managing the Fund's portfolio. GISC considers
factors in analyzing potential investments that vary over time and among
different issuers. In selecting the Fund's investments, GISC evaluates the
business fundamentals of small cap companies, including among other things each
company's operating history and product lines.

The Small Cap Stock Fund may invest up to 15% of its total assets in securities
issued by companies in operation for less than three years.

The Fund may also invest a total of 15% of its assets in foreign securities. Of
this amount, the Fund may invest up to 10% of its net assets in securities of
U.S. or foreign companies that are issued or traded overseas, primarily in the
form of American Depositary Receipts (ADRs) or European Depositary Receipts
(EDRs). All of the Fund's investments in these vehicles will be made in U.S.
dollars. In addition, the Fund may invest the remaining 5% of its net assets in
securities denominated in foreign currencies, and may use forward foreign
currency exchange contracts to try to manage changes in currency exchange rates.
For more information on ADRs, EDRs and forward foreign currency exchange
contracts, see Risks and special investment techniques.

As a temporary defensive strategy, the Fund may invest some or all of its assets
in debt obligations, including U.S. government securities, investment grade
corporate bonds, commercial paper, repurchase agreements and cash equivalents.
To the extent the Fund assumes a temporary defensive position, it may not pursue
its investment objective during that time.

2 PROSPECTUS THE GUARDIAN SMALL CAP STOCK FUND
<PAGE>

The principal risks of investing in the Fund

As with all mutual funds, the value of your investment could decline so you
could lose money. Because it invests in equity securities, the Fund is subject
to the general risks of investing in stock markets which include the risk that
share prices of the securities in its portfolio can be driven up or down
gradually or sharply by general conditions in the stock markets, or by the
performance of an individual company or industry. In addition, an investment in
the Fund exposes you to the risks of investing in small companies. Small
companies may expose you to greater risks than larger companies, such as
dependence on limited financial resources, limited product lines and markets and
a small number of individuals in company management. These securities also trade
less frequently and have more dramatic price fluctuations.

With respect to the 15% of net assets that the Fund may invest in foreign
securities, you face additional risks. Foreign investments may be affected by
political, social and economic developments abroad, differences in auditing and
other financial standards, and greater volatility. When the Fund buys securities
denominated in a foreign currency, there are special risks such as changes in
currency exchange rates, and the risk that a foreign government could regulate
foreign exchange transactions.

Equity risk, small company risk and foreign investment risk are all described in
detail in Risks and special investment techniques.

How the Fund has performed

The bar chart and table below provide some indication of the risks of investing
in the Fund by showing how its performance has varied since public offering
commenced on July 16, 1997. The returns in the chart do not include the effect
of charges and expenses attributable to the variable products that offer this
fund as an investment option. If the effect of the charges and expenses were
reflected, returns would be lower than those shown. Past results do not
necessarily indicate how the Fund will perform in the future.

THE GUARDIAN SMALL CAP STOCK FUND PROSPECTUS 3
<PAGE>

Year-by-year returns

Total Returns

(Years ended December 31)

- --------------------------------------------------------------------------------
Highest and lowest quarters

During the period shown in the bar chart, the highest and lowest returns,
respectively, for a quarter were:

Best quarter

17.93% for the quarter ended December 31, 1998.

Worst quarter

(25.70)% for the quarter ended September 30, 1998.

[GRAPHIC OMITTED]

Please refer to the prospectus for the variable annuity contract or variable
life insurance policy that offers the Fund to learn about expenses that will
affect your return.

Average annual total returns

This table provides some indication of the risks of investing in the Fund by
showing the average annual total returns for the one-year period and since
inception through December 31, 1998. It compares the Fund's performance with the
Russell 2000 Index, an index that is generally considered to be representative
of small capitalization issuers in the U.S. stock market.

Since inception
1 year (July 16, 1997)
- --------------------------------------------------------------------------------
The Guardian Small Cap Stock Fund (5.75)% 4.88%
- --------------------------------------------------------------------------------
Russell 2000 Index (2.55)% 3.74%
- --------------------------------------------------------------------------------

4 PROSPECTUS THE GUARDIAN SMALL CAP STOCK FUND
<PAGE>

- --------------------------------------------------------------------------------
RISK AND SPECIAL INVESTMENT TECHNIQUES
- --------------------------------------------------------------------------------

PRINCIPAL RISKS TO INVESTORS

Stock market risks

You could lose money in connection with the Fund's equity investments, or the
Fund's performance could fall below that of other possible investments, if any
of the following occurs:

o a stock market declines

o stocks are temporarily out of favor relative to bonds or cash

o an adverse event such as negative press reports about a company in the
Fund's portfolio depresses the value of the company's stock

o the investment adviser's judgment about the value or potential
appreciation of a particular stock proves to be incorrect

o companies pay lower stock dividends than expected, or pay no dividends at
all.

Small company risks

In addition, an investment in the Fund exposes you to the risks of investing in
small companies. Small companies may have limited product lines, markets or
financial resources. They may depend on a small number of people to manage the
company. Buying and selling shares of small companies may be more difficult than
it is for larger

- --------------------------------------------------------------------------------

Year 2000 considerations

- --------------------------------------------------------------------------------

THE GUARDIAN SMALL CAP STOCK FUND PROSPECTUS 5
<PAGE>

companies because there are fewer shares available, and they tend to trade less
frequently. There may be less publicly available information about these
companies, which may prolong the time it takes for a company's share price to
match its underlying value. Share prices of small company stocks may fluctuate
more dramatically than those of larger companies.

- --------------------------------------------------------------------------------

Euro Conversion

1. the readiness of Euro payment, clearing and other operational systems;

2. the legal treatment of debt instruments and financial contracts
denominated in or referring to existing national currencies rather than
the Euro;

3. exchange-rate fluctuations between the Euro and non-Euro currencies during
the transition period of January 1, 1999 through December 31, 2001 and
beyond;

4. potential U.S. tax issues with respect to Fund securities; and

5. the ability to manage monetary policies among the participating countries.
These and other factors could adversely affect the value of or income from
Fund securities.

- --------------------------------------------------------------------------------

Foreign market risks

Investing in foreign securities involves additional risks. Foreign securities
may be affected by political, social and economic developments abroad. Financial
markets in foreign countries may be less liquid or more volatile than U.S.
markets. Less information may be available about foreign company operations, and
foreign countries may impose withholding taxes on interest and dividend income.
Government regulations and accounting standards may be less stringent as well.
Brokerage commissions and custodial fees for foreign investments are often
higher than those for investments in U.S. securities. Exchange rates can
adversely affect the value of foreign securities and their dividends or
earnings, irrespective of the underlying performance.

You could lose money on your investment, or the Fund in which you have invested
may not perform as well as other investments, if:

o in a changing market, the Fund is unable to sell securities at the desired
times, amounts or prices it considers reasonable

o stock prices in countries selected by the Fund decline

o the government of a country selected by the Fund imposes restrictions on
currency conversion or trading

o relationships between countries selected by the Fund change and have a
negative impact on stock or currency values.

6 PROSPECTUS THE GUARDIAN SMALL CAP STOCK FUND
<PAGE>

Many countries in which the Fund invests have markets that are less liquid, more
volatile, and less subject to governmental supervision than the U.S. markets.
Public information about a foreign security or issuer may be less available than
in the United States. Unfavorable political, economic or regulatory factors,
including foreign taxation, may affect an issuer's ability to repay principal or
interest. In the event of a default on any foreign obligation, it may be
difficult legally to obtain or enforce a judgment against the issuer.

American Depositary Receipts (ADRs) and European Depositary Receipts (EDRs) are
also subject to currency risks. Specifically, changes in the value of the
currency in which the security underlying a depositary receipt is denominated,
relative to the U.S. dollar, may adversely affect the value of the depositary
receipt.

Diversification risk

THE GUARDIAN SMALL CAP STOCK FUND PROSPECTUS 7
<PAGE>

Temporary defensive position

The Fund may take a temporary defensive position in order to try to respond to
emergency or extraordinary circumstances. The Fund may invest in debt
obligations or cash instruments, and may borrow up to 331/3% of the value of its
total assets. While this strategy may avoid losses for the Fund, it may also
result in lost investment opportunities.

Portfolio turnover

SPECIAL INVESTMENT TECHNIQUES

American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs)

The Funds may invest in securities of U.S. or foreign companies which are issued
or settled overseas in the form of ADRs, EDRs, or other similar securities. An
ADR is a U.S. dollar-denominated security issued by a U.S. bank or trust company
which represents, and may be converted into, a foreign security. An EDR or GDR
is similar, but is issued by a European bank. Depositary receipts are subject to
the same risks as direct investment in foreign securities.

Borrowing

The Funds may borrow money for temporary emergency purposes, and some Funds may
borrow as part of their investment strategies. When a Fund borrows for any
purpose, it will maintain assets in a segregated account to cover its repayment
obligation. The Investment Company Act of 1940 limits borrowings to 33 1/3% of a
mutual fund's total assets. The Fund may commit up to this amount to borrowings.

Convertible securities

8 PROSPECTUS THE GUARDIAN SMALL CAP STOCK FUND
<PAGE>

Forward foreign currency exchange contracts

Illiquid securities and exempt commercial paper

Securities which qualify under an exemption from registration under federal
securities laws for resales to institutional investors may be treated by the
Fund as liquid. If the Fund's adviser determines that these securities are
liquid under guidelines adopted by the Board of Trustees, they may be purchased
without regard to the illiquidity limits in the Statement of Additional
Information. Similarly, the Fund typically treats commercial paper issued in
reliance on an exemption from registration under federal securities laws as
liquid.

Money market instruments

THE GUARDIAN SMALL CAP STOCK FUND PROSPECTUS 9
<PAGE>

Repurchase agreements

Securities lending

The Fund may lend its portfolio securities to securities dealers, banks and
other institutional investors to earn additional income. These transactions must
be continuously secured by collateral, and the securities loaned must be
marked-to-market daily. The Fund generally continues to receive all interest
earned or dividends paid on the loaned securities, although lending fees may be
paid to the borrower. The lending of portfolio securities is limited to 331/3%
of the value of the Fund's total net assets.

When-issued or delayed-delivery transactions

Other

10 PROSPECTUS THE GUARDIAN SMALL CAP STOCK FUND
<PAGE>

- --------------------------------------------------------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------

THE MANAGEMENT and affairs of the Fund are supervised by its Board of Directors.

THE FUND'S INVESTMENT ADVISER

Guardian Investor Services Corporation (GISC) is the adviser for the Fund. GISC
is wholly owned by The Guardian Life Insurance Company of America (Guardian
Life), a New York mutual insurance company. GISC is located at 7 Hanover Square,
New York, New York 10004. GISC buys and sells securities, selects brokers to
effect transactions, and negotiates brokerage fees. GISC is the adviser to
several other mutual funds sponsored by Guardian Life, and it is the underwriter
and distributor of the Fund's shares and of variable annuity contracts and
variable life insurance contracts issued by The Guardian Insurance & Annuity
Company, Inc. (GIAC).

The adviser is entitled to a management fee for its services. In the most recent
year, the Fund paid GISC a fee at the annual rate of 0.75% of average net
assets.

PORTFOLIO MANAGERS

Small Cap Stock Fund

Larry Luxenberg, CFA is the portfolio manager of The Guardian Small Cap Stock
Fund. Mr. Luxenberg, Vice President, Equity Securities, has been with Guardian
Life for the past 15 years. He has managed or co-managed this Fund since its
inception.

THE GUARDIAN SMALL CAP STOCK FUND PROSPECTUS 11
<PAGE>

- --------------------------------------------------------------------------------
BUYING AND SELLING FUND SHARES
- --------------------------------------------------------------------------------

o trading on the New York Stock Exchange (NYSE) is restricted

o the NYSE is closed for other than weekends and holidays

o an emergency makes it not reasonably practicable for the Fund to dispose
of assets or calculate its net asset value (NAV); or

o as permitted by the Securities and Exchange Commission.

See the prospectus for your GIAC variable annuity contract or variable life
insurance policy for more details about the allocation, transfer and withdrawal
provisions of your annuity or policy.

Share price

Securities traded on foreign exchanges may trade on weekends or other days when
the Fund does not price its shares. As a result, the net asset value of the
Fund's shares may change on days when GIAC will not be able to purchase or
redeem the Fund's shares on behalf of contractowners.

NAV is the value of everything a Fund owns, minus everything it owes, divided by
the number of shares investors hold.

12 PROSPECTUS THE GUARDIAN SMALL CAP STOCK FUND
<PAGE>

Dividends, distributions and taxes

Other information about the Fund

THE GUARDIAN SMALL CAP STOCK FUND PROSPECTUS 13
<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

THE FINANCIAL HIGHLIGHTS table is intended to help you understand the financial
performance of the Fund over the past five years.

For the year ended December 31
------------------------------
1998 1997*
----------- -----------

Net Asset Value, Beginning of Period $13.63 $10.00
----------- -----------

Income from investment operations

Net Investment Income 0.01 0.03

Net Gains or Losses on Securities
(both realized and unrealized) (0.79) 3.80
----------- -----------

Total from Investment Operations (0.78) 3.83

Less distributions

Dividends (from Net Investment
Income) (0.01) (0.03)

Distributions in excess of
Net Investment Income -- --

Distributions (from Capital Gains) (0.10) (0.17)
----------- -----------

Total Distributions (0.11) (0.20)
----------- -----------

Net Asset Value, End of Period $12.74 $13.63
----------- -----------

Total Return (5.75)% 38.32%

Ratios/Supplemental data

Net Assets, End of Period (000's omitted) $193,593 $87,749

Ratio of Expenses to Average
Net Assets 0.89% 0.96%**

Ratio of Net Investment Income (Loss)
to Average Net Assets 0.17% 0.48%**

Portfolio Turnover Rate 59% 22%

- ----------

* Fund commenced operations on 4/2/97.

** Annualized.

14 PROSPECTUS THE GUARDIAN SMALL CAP STOCK FUND
<PAGE>

- --------------------------------------------------------------------------------
FOR MORE DETAILED INFORMATION
- --------------------------------------------------------------------------------

Custodian, Transfer Agent and Dividend Paying Agent

State Street Bank and Trust Company, Custody Division, 1776 Heritage Drive,
North Quincy, Massachusetts 02171, is the Fund's custodian, transfer agent and
dividend paying agent.

1940 Act File No. 811-6231

THE GUARDIAN SMALL CAP STOCK FUND PROSPECTUS 15
<PAGE>

BAILLIE GIFFORD INTERNATIONAL FUND
BAILLIE GIFFORD EMERGING MARKETS FUND
THE GUARDIAN SMALL CAP STOCK FUND

------------

STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999

------------

This Statement of Additional Information is not a prospectus, but should
be read in conjunction with the Prospectus of Baillie Gifford International Fund
and Baillie Gifford Emerging Markets Fund and the Prospectus of The Guardian
Small Cap Stock Fund dated May 1, 1999. The Funds are diversified series funds
of GIAC Funds, Inc. (the "Company"). The series funds are referred to in this
Statement of Additional Information as the "Funds" and each separately as a
"Fund". The Company's financial statements appear in the Company's Annual
Report to Shareholders for the year ended December 31, 1998. The Annual Report
is incorporated by reference in this Statement of Additional Information. A free
copy of the Prospectus and Annual Report to Shareholders may be obtained by
writing to the Fund, c/o The Guardian Insurance & Annuity Company, Inc., 7
Hanover Square, New York, New York 10004 or by telephoning 1-800-221-3253.
Please retain this document for future reference.

TABLE OF CONTENTS

Page
----
Investment Restrictions .......................................... B-2
Investment Objective and Policies ................................ B-5
Special Investment Techniques - International Fund
and Emerging Markets Fund ...................................... B-5
Special Investment Techniques - International Fund,
Emerging Markets Fund and Small Cap Stock Fund ................. B-10
Special Investment Techniques - Small Cap Stock Fund .............
Portfolio Transactions and Brokerage ............................. B-10
Company Management. .............................................. B-12
Investment Advisers, Sub-Investment Adviser and Distributor ...... B-15
GIAC and Other Fund Affiliates ................................... B-18
Taxes ............................................................ B-18
Performance Results .............................................. B-19
Fund Capitalization and Expenses ................................. B-21
Purchase and Redemption of Shares ................................ B-21
Custodian and Transfer Agent ..................................... B-22
Legal Opinion .................................................... B-22
Independent Auditors and Financial Statements .................... B-22
<PAGE>

INVESTMENT RESTRICTIONS

The International Fund has adopted the following investment restrictions
which cannot be changed without the approval of the holders of a majority of the
outstanding shares of the Fund. As defined in the Investment Company Act of
1940, as amended (the "1940 Act"), the vote of a majority of the outstanding
voting securities of a Fund means the lesser of the vote of (a) 67% or more of
the shares of the Fund present at a meeting where more than 50% of the
outstanding voting shares are present in person or by proxy, or (b) more than
50% of the outstanding voting shares of the Fund. The investment restrictions of
the International Fund listed below have also been adopted by the Emerging
Markets Fund. Under the 1940 Act, certain investment restrictions for the
Emerging Markets Fund can only be changed with the approval of the holders of a
majority of the outstanding shares of the Fund. These restrictions are
designated by an asterisk. The other investment restrictions of the Emerging
Markets Fund are non-fundamental policies which can be changed with respect to
the Fund with the approval of a majority of the Board of Directors and without
shareholder approval. The Small Cap Stock Fund has also adopted certain
investment restrictions some of which can only be changed with the approval of
the holders of a majority of the outstanding shares of the Fund as indicated
below, and the remainder of which are non-fundamental. All percentage
restrictions on investments apply at the time of the making of the investment
and shall not be considered to violate the limitations unless, immediately after
or as a result of the investment, an excess or deficiency of the restrictions
occurs. A later increase or decrease beyond a specified limit that results from
a change in value or net assets shall not constitute a violation of the
applicable restriction.

The International Fund and the Emerging Markets Fund

The following investment restrictions provide that the International Fund
and the Emerging Markets Fund may not:

*1. Borrow money, except that the Fund may borrow from banks up to 20% of
the value of its total assets as a temporary measure for extraordinary or
emergency needs, for example, to enable the Fund to meet redemption requests or
to settle transactions on different stock markets where different settlement
dates apply which might otherwise require the sale of portfolio securities at a
time when it would not be in a Fund's best interests to do so. Up to 5% of the
Fund's total assets may be borrowed from non-banking institutions. The Fund may
not, however, borrow money for investment purposes.

*2. Mortgage, pledge or hypothecate more than 5% of the value of the
Fund's total assets, and then only to secure borrowings effected within the
above restriction. Neither the deposit in escrow of underlying securities in
connection with the writing of call options, nor the deposit in escrow of U.S.
Treasury bills in connection with the writing of put options, nor the deposit of
cash and cash equivalents in a segregated account with the Fund's custodian or
in a margin account with a broker in connection with futures transactions,
options transactions, nor the writing of call and put options in spread
transactions, is deemed to be a pledge.

*3. Make loans of money or portfolio securities, except through the
purchase of debt obligations and repurchase agreements in which the Fund may
invest consistent with its investment objective and policies.

*4. Purchase any securities if, immediately after such purchase, more than
25% of the value of a Fund's total assets would be invested in the securities of
issuers in the same industry. There is no limitation as to the Fund's
investments in obligations issued by U.S. branches of domestic banks or in
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. For purposes of this restriction, the obligations of each
foreign government are deemed to constitute an industry.

*5. Invest more than 5% of the value of its total assets in the securities
of any one issuer or purchase more than 10% of the outstanding voting
securities, or any class of securities, of any one issuer. For purposes of this
restriction, all outstanding debt securities of an issuer are considered as one
class, and all preferred stock of an issuer is considered as one class. (This
restriction does not apply to obligations issued or guaranteed by the U.S. or
foreign governments, or their respective agencies or instrumentalities.)

6. Invest more than 10% of the value of its total assets in warrants or
more than 2% of such value in warrants which are not listed on the New York
Stock Exchange, American Stock Exchange, or one of the major foreign stock
exchanges, except that warrants attached to other securities in which the Funds
invest are not subject to these limitations.

B-2
<PAGE>

7. Invest more than 10% of the value of the net assets of the
International Fund or 15% of the net assets of the Emerging Markets Fund in
securities that are not readily marketable or which are restricted as to
disposition under the U.S. securities laws or otherwise. This restriction shall
not apply to securities purchased or sold pursuant to Rule 144A under the
Securities Act of 1933. This restriction will apply to repurchase agreements
maturing in more than seven days. This restriction will also apply to securities
received as a result of a corporate reorganization or similar transaction
affecting readily marketable securities already held in a Fund's portfolio. To
the extent that securities received under these circumstances, together with
other securities considered illiquid by the staff of the Securities and Exchange
Commission ("SEC") or by the Company's Board, exceed the applicable percentage
of the value of the Fund's total assets, the Fund will attempt to dispose of
them in an orderly fashion in order to reduce its holdings in such securities to
less than the applicable threshold.

*8. Engage in the underwriting of the securities of other issuers, except
to the extent that the Fund may be deemed to be an underwriter under the
Securities Act of 1933 in selling its portfolio securities.

9. Purchase securities of other U.S. or foreign investment companies,
except that the Fund may make such a purchase (a) in the open market provided
that immediately thereafter (i) not more than 10% of the Fund's total assets
would be invested in such securities; (ii) not more than 5% of the Fund's total
assets would be invested in securities of any one investment company; and (iii)
not more than 3% of the total outstanding voting stock of any one investment
company would be owned by the Fund, or (b) as part of an offer of exchange,
reorganization or as a dividend.

10. Purchase securities on margin, sell securities short, maintain a short
position or participate on a joint or a joint and several basis in any trading
account in securities, except that the Funds may (i) obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities; (ii) purchase or sell futures contracts; and (iii) deposit or pay
initial or variation margin in connection with financial futures contracts or
related options transactions.

11. Purchase or sell put options, call options, or combinations thereof,
except that the Funds may (i) write covered call and secured put options and
enter into closing purchase transactions with respect to such options, (ii)
purchase put and call options, provided that the premiums on all outstanding
options do not exceed 5% of its total assets, and enter into closing sale
transactions with respect to such options; and (iii) engage in financial futures
contracts and related options transactions to seek to hedge against either a
decline in the value of securities included in the Fund's portfolio or an
increase in the price of securities which the Fund plans to purchase in the
future, or to increase the current return of its portfolio by writing covered
call or covered put options, as each is described under the "Special Investment
Techniques" sections of the Company's Prospectus and Statement of Additional
Information.

*12. Purchase or sell commodities or commodity contracts, except that the
Funds may enter into financial futures contracts, options contracts, options on
futures contracts and forward foreign currency exchange contracts as described
in the "Special Investment Techniques" sections of the Company's Prospectus and
Statement of Additional Information.

*13. Purchase or sell real estate (although it may purchase securities of
issuers that engage in real estate operations, securities that are secured by
interests in real estate, or securities that represent interests in real estate,
including real estate investment trusts).

14. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Funds may invest in the
securities of companies which invest in or sponsor such programs.

15. Purchase or retain the securities of any issuer if, to the knowledge
of the Company, the officers, directors and employees of the Company or of the
Company's investment manager or sub-investment manager who individually own more
than one half of 1% of the outstanding securities of such issuer together own
more than 5% of the securities of such issuer.

16. Purchase securities for the purpose of exercising control over another
company.

*17. Issue any "senior securities" as defined in the 1940 Act (except for
engaging in futures and options transactions as well as any other investment
techniques described in the Prospectus or Statement of Additional Information,
and except for borrowing subject to the restrictions set forth under Investment
Restriction 1, above).

B-3
<PAGE>

The Small Cap Stock Fund

The Fund has adopted the following investment restrictions which cannot be
changed without the approval of the holders of a majority of the outstanding
shares of the Fund. The following investment restrictions provide that the Small
Cap Stock Fund may not:

1. As to 75% of the Fund's total assets, purchase any security (other than
obligations of the U.S. Government, its agencies or instrumentalities and
investment companies) if as a result, more than 5% of the Fund's total assets
(taken at current value) would then be invested in the securities of a single
issuer.

2. Purchase more than 10% of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one class.

3. Borrow money, except that the Fund may (i) borrow up to 5% of the value
of its total assets (not including the amount borrowed) for temporary or
emergency needs; and (ii) engage in reverse repurchase agreements or other
transactions which may involve a borrowing from banks or other persons, provided
that the aggregate amount involved in all such transactions shall not exceed
33-1/3% of the value of the Fund's total assets (including the amount borrowed)
less liabilities (other than borrowings) or such other percentage permitted by
law;

4. Mortgage, pledge or hypothecate more than 5% of the value of its total
assets and then only to secure borrowings effected within the above restriction;

5. Make loans to other persons except for loans of portfolio securities
and except through the purchase of debt obligations and repurchase agreements in
which the Fund may invest, consistent with its investment objectives and
policies, provided that repurchase agreements maturing in more than seven days,
when taken together and at current value, may not exceed 15% of the Fund's net
assets;

6. Purchase any securities other than the obligations of the U.S.
Government, or its agencies or instrumentalities, if, immediately after such
purchase, more than 25% of the value of the Fund's total assets would be
invested in the securities of issuers in the same industry (there is no
limitation as to investments in obligations issued or guaranteed by the United
States Government or its agencies or instrumentalities);

7. Engage in the underwriting of the securities of other issuers, except
to the extent that the Fund may be deemed to be an underwriter under the
Securities Act of 1933 in connection with the sale of portfolio securities;

8. Purchase or sell real estate (although it may purchase securities of
issuers that engage in real estate operations as well as readily marketable
interests such as real estate investment trusts and readily marketable
securities of companies which invest in real estate);

9. Write, purchase or sell puts, calls, or combinations thereof;

10. Purchase or sell commodities or commodity contracts;

11. Issue any senior securities except as permitted under the Investment
Company Act of 1940.

The Fund has adopted the following non-fundamental restrictions, which may
be changed by the Board of Directors without shareholder approval. The Fund may
not:

12. Invest more than 5% of the value of its total assets in warrants or
more than 2% of such value in warrants which are not listed on the New York or
American Stock Exchanges, except that warrants attached to other securities are
not subject to these limitations;

13. Purchase securities restricted as to resale if, as a result, (i) more
than 10% of the Fund's total assets would be invested in such securities, or
(ii) more than 5% of the Fund's total assets (excluding any securities eligible
for resale under Rule 144A under the Securities Act of 1933) would be invested
in such securities;

14. Invest in (a) securities which at the time of such investment are not
readily marketable, (b) securities restricted as to resale, and (c) repurchase
agreements maturing in more than seven days, if, as a result, more than 15% of
the Fund's net assets (taken at current value) would then be invested in the
aggregate in securities described in (a), (b), and (c) above;

15. Invest in securities of other registered investment companies;

16. Purchase securities on margin or sell securities short, or participate
on a joint or a joint and several basis in any trading account in securities;

B-4
<PAGE>

17. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that the Fund may invest in the
securities of companies which invest in or sponsor such programs;

18. Purchase or retain the securities of any issuer, if, to the knowledge
of the Fund, the officers, directors and employees of the Fund or of the Adviser
who individually own more than 1/2 of 1% of the outstanding securities of such
issuer together own more than 5% of the securities of such issuer; and

19. Purchase securities for the purpose of exercising control over another
company.

INVESTMENT OBJECTIVE AND POLICIES

As described in the Prospectus, each Fund is permitted to invest in
convertible securities. Convertible securities are bonds or preferred stock
issues, which may be converted at a stated price within a specified period of
time into a specific number of shares of common stock of the same or a different
issuer. Convertible securities also have characteristics similar to
non-convertible debt securities in that they ordinarily provide income with
generally higher yields than those of common stock of the same or a similar
issuer. However, convertible securities are usually subordinated to
non-convertible debt securities. Convertible securities carry the potential for
capital appreciation should the value of the underlying common stock increase,
but they are subject to a lesser risk of a decline in value, relative to the
underlying common stock, due to their fixed-income nature. Due to the conversion
feature, however, the interest rate or dividend rate on convertible securities
is generally less than would be the case if the securities were not convertible.

In evaluating a convertible security for a Fund, Guardian Baillie Gifford
Limited, the investment adviser of the International Fund and the Emerging
Markets Fund, or BG Overseas Limited, the sub-investment adviser of the
International Fund and the Emerging Markets Fund ("BG Overseas"), or Guardian
Investor Services Corporation, the investment adviser of the Small Cap Stock
Fund, looks primarily at the attractiveness of the underlying common stock and
at the fundamental business strengths of the issuer. Other factors considered
include the yield of the convertible security in relation to the yield of the
underlying common stock, the premium over investment value and the degree of
call protection.

If the U.S. government restricts any type of foreign investment which may
be made by or through the International Fund or the Emerging Markets Fund, the
Fund's Board of Directors will promptly take steps to determine whether
significant changes in the Fund's portfolio are appropriate.

SPECIAL INVESTMENT TECHNIQUES - INTERNATIONAL FUND AND EMERGING MARKETS FUND

The Prospectus for the International Fund and the Emerging Markets Fund
describes the investment objective of each of the Funds, as well as certain
investment policies and investment techniques which the Funds may employ in an
effort to achieve their respective investment objectives. The following
discussion supplements the section entitled "Special Investment Techniques"
contained in the International Fund and Emerging Markets Fund Prospectus. There
can be no assurance that these techniques will enable the Funds to achieve their
investment objectives.

Forward Foreign Currency Transactions. The foreign securities held by the
Funds will usually be denominated in foreign currencies and the Funds may
temporarily hold foreign currency in connection with such investments. As a
result, the value of the assets held by a Fund may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations. The Funds may enter into forward foreign currency exchange
contracts ("forward currency contracts") in an effort to control some of the
uncertainties of foreign currency exchange rate fluctuations. A forward currency
contract is an agreement to purchase or sell a specific currency at a specified
future date and price agreed to by the parties at the time of entering into the
contract. The Funds will not engage in forward currency contracts for
speculation, but only as an attempt to hedge against changes in currency
exchange rates affecting the values of securities which a Fund holds or intends
to purchase. Thus, the Funds will not enter into a forward currency contract if
such contract would obligate that Fund to deliver an amount of foreign currency
in excess of the value of the Fund's portfolio securities or other assets
denominated in that currency.

A Fund will normally be expected to use forward currency contracts to fix
the value of certain securities it has agreed to buy or sell. For example, when
a Fund enters into a contract to purchase or sell securities denominated in a
particular foreign currency, a Fund could effectively fix the maximum cost of
those securities by purchasing or selling a foreign currency contract, for a
fixed value of another currency, in the amount of foreign currency involved in
the underlying transaction. In this way, the Funds can protect the value of
securities in the underlying transaction

B-5
<PAGE>

from an adverse change in the exchange rate between the currency of the
underlying securities in the transaction and the currency denominated in the
foreign currency contract, during the period between the date the security is
purchased or sold and the date on which payment is made or received.

The Funds may also use forward currency contracts to hedge the value, in
U.S. dollars, of securities it currently owns. For example, if a Fund held
securities denominated in a foreign currency and anticipated a substantial
decline (or increase) in the value of that currency against the U.S. dollar,
that Fund may enter into a foreign currency contract to sell (or purchase), for
a fixed amount of U.S. dollars, the amount of foreign currency approximating the
value of all or a portion of the securities held which are denominated in such
foreign currency.

Upon the maturity of a forward currency transaction, a Fund may either
accept or make delivery of the currency specified in the contract or, at any
time prior to maturity, enter into a closing transaction which involves the
purchase or sale of an offsetting contract. An offsetting contract terminates
the Fund's contractual obligation to deliver the foreign currency pursuant to
the terms of the forward currency contract by obligating the Fund to purchase
the same amount of the foreign currency, on the same maturity date and with the
same currency trader, as specified in the forward currency contract. The Fund
realizes gains or losses as a result of entering into such an offsetting
contract to the extent the exchange rate between the currencies involved changed
between the time of the execution of the original forward currency contract and
the offsetting contract.

The use of forward currency contracts to protect the value of securities
against the decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities a Fund owns or intends to acquire,
but it does fix a future rate of exchange. Although such contracts minimize the
risk of loss resulting from a decline in the value of the hedged currency, they
also limit the potential for gain resulting from an increase in the value of the
hedged currency. The benefits of forward currency contracts to the Funds will
depend on the ability of the Funds' investment manager to accurately predict
future currency exchange rates.

Options on Securities. The Funds may purchase or write (sell) options on
individual securities, securities indices and financial futures contracts to
attempt to: (1) reduce the overall risk of their investments; (2) manage foreign
currency exposure; (3) protect unrealized gains; or (4) facilitate the sale of
portfolio securities for investment purposes. The Funds use options as a
temporary substitute for purchasing or selling particular securities. A Fund may
write (sell) covered call options so long as it owns securities which are
acceptable for the purpose of covering the outstanding options in the
transaction, and may write secured put options, which means that so long as the
Funds are obligated as writers of a put option, they will invest an amount not
less than the exercise price of the put option in eligible securities (i.e.,
cash or cash equivalents). These obligations reduce the Funds' flexibility to
pursue other investment opportunities while options are outstanding. The Funds
may also purchase put and call options. A call option gives the purchaser the
right to buy, and the writer the obligation to sell, the underlying security at
the exercise price during the option period. A put option gives the purchaser
the right to sell, and the writer the obligation to buy, the underlying security
at the exercise price during or, in some cases at the end of, the option period.
Options are typically purchased subject to a premium, which can reduce the risks
retained by the option writer. The premium received for writing an option will
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to such market price, the price
volatility of the underlying security, the option period, supply and demand and
interest rates.

During the option period, the covered call writer gives up the potential
for capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the writer
having to deliver the underlying security to the holder of the option at the
exercise price, which will likely be lower than the security's value. For the
secured put writer, substantial depreciation in the value of the underlying
security would result in the exercise of the option by the holder, thereby
obligating the writer to purchase the underlying security at the exercise price,
which will likely exceed the security's value.

When a Fund writes a put option, it must segregate with the Fund's
custodian either cash or liquid, unencumbered debt securities that are
marked-to-market daily. The value of such segregated assets must at least equal
the exercise price of the put option. Segregating assets may limit the Fund's
ability to pursue other investment opportunities while options are outstanding.
The cover for a call option that is related to a foreign currency can be
short-term debt securities having a value equal to the option's face amount that
are denominated in the same currency as the call.

Options transactions can be voluntarily terminated before the exercise or
expiration of the options only by entering into closing transactions. The
ability to close out an option depends, in part, upon the liquidity of the
option market. If a Fund cannot close an option when it wants, it may miss
alternative investment opportunities.

If a covered call option expires unexercised, the writer realizes a gain
and the buyer a loss in the amount of the premium. If the covered call option
writer has to sell the underlying security because of the exercise of the call
option, the writer realizes a gain or loss from the sale of the underlying
security, with the proceeds being increased by the amount of the premium. If the
secured put option expires unexercised, the writer realizes a gain and the buyer
a loss in the amount of the premium. If the secured put writer has to buy the
underlying security because of the exercise of the put option, the secured put
writer incurs an unrealized loss to the extent that the current market value of
the underlying security is less than the exercise price of the put option.
However, this would be offset in whole or in part by gain from the premium
received and any interest income earned on the investment of the premium.

The Funds may write or purchase spread options, which are options for
which the exercise price may be a fixed monetary spread or yield spread between
the security underlying the option and another security that is used as a
benchmark. Spread options involve the same risks as are associated with
purchasing and selling options on

B-6
<PAGE>

securities generally, as described above. The writer (seller) of a spread option
which expires unexercised realizes a gain in the amount of the premium and any
interest earned on the investment of the premium. However, if the spread option
is exercised, the writer will forego the potential for capital appreciation or
incur an unrealized loss to the extent the market value of the underlying
security exceeds or is less than the exercise price of such spread option. The
purchaser of a spread option incurs costs equal to the amount of the premium
paid for such option if the spread option expires unexercised or the associated
transaction costs if the purchaser closes out the spread option position.

The Funds may also purchase options in combination with each other. For
example, a Fund may purchase a put option and a call option, each with the same
expiration date, on the same underlying security. A Fund will profit from the
combination position if an increase or decrease in the value of the underlying
security is sufficient for a Fund to profit from exercise of either the call
option or the put option. Combined option positions involve higher transaction
costs (because of the multiple positions taken) and may be more difficult to
open and close out than other option positions.

The exercise price of an option may be below, equal to, or above the
current market value of the underlying security at the time the option is
written. The buyer of a put who also owns the related security is protected by
ownership of a put option against any decline in that security's price below the
exercise price less the amount paid for the option. The ability to purchase put
options allows a Fund to protect capital gains in an appreciated security it
owns, without being required to actually sell that security. At times the Funds
may seek to establish a position in securities upon which call options are
available. By purchasing a call option the Funds are able to fix the cost of
acquiring the security, this being the cost of the call plus the exercise price
of the option. This procedure also provides some protection from an unexpected
downturn in the market, because a Fund is only at risk for the amount of the
premium paid for the call option which it can, if it chooses, permit to expire.

The Funds engage in options transactions as a hedging technique, and not
for speculative purposes. Using options as a successful hedge depends on the
ability of the Funds' investment advisers to predict pertinent market movements.

Options trade on U.S. or foreign securities exchanges and in the over the
counter ("OTC") market. Exchange listed options are three party contracts issued
by a clearing corporation. They generally have standardized prices, expiration
dates and performance mechanics. In contrast, all the terms of an OTC option,
including price and expiration date, are set by negotiation between the buyer
and seller (e.g., a Fund and a securities dealer or other financial
institution). A Fund could lose any premium it paid for an OTC option, as well
as any anticipated benefits of the transaction, if its counterparty fails to
perform under the option's terms. To minimize this risk, the Funds' investment
advisers consider the creditworthiness of any counterparties with whom the Funds
may engage in OTC options transactions. However, there can be no assurance that
a counterparty will remain financially stable while an OTC option is
outstanding.

Generally, the staff of the SEC currently requires OTC options and any
assets used to cover such options to be treated as illiquid assets because OTC
options may not be actively traded. Until the SEC staff revises this position,
no Fund will engage in OTC option transactions if, as a result, more than the
permitted portion of its net assets is invested in illiquid securities.

The Funds may write covered call options on up to 25% of net assets, may
write secured put options on up to 25% of net assets and may purchase put and
call options provided that no more than 5% of total assets may be invested in
premiums on such options.

Stock Index Options. As part of its options transactions, the Funds may
also use options on stock indices. Through the writing and purchase of stock
index options, the Funds can achieve many of the same objectives as through the
use of options on individual securities. Stock index options are similar to
options on a particular stock except that, rather than the right to take or make
delivery of a security at a specified price, an option on a stock index gives
the holder the right to receive, upon exercise of the option, an amount of cash
if the closing level of the stock index upon which the option is based is
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash (the "exercise settlement
amount") is equal to the difference between the closing price of the index and
the exercise price of the option. The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike stock
options, all settlements are in cash and gain or loss depends on price movements
in the market generally (or in a particular industry or segment of the market)
rather than price movements in individual securities. Because securities index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on a specific stock,
cannot provide in advance for, or cover, its potential settlement obligations by
acquiring and holding underlying securities. The Funds may, however, cover call
options written on a securities index by holding a mix of stocks which
substantially replicated the movement of the index or by holding a call option
on the securities index with an exercise price no higher than the call option
sold.

When a Fund writes an option on a stock index, it will be required to
cover the option or to segregate assets equal in value to 100% of the exercise
price in the case of a put, or the contract value in the case of a call. In
addition, where a Fund writes a call option on a stock index at a time when the
exercise price exceeds the contract value, the Fund will segregate, until the
option expires or is closed out, cash or cash equivalents equal in value to such
excess.

Options on stock indices involve risks similar to those risks relating to
transactions in financial futures contracts described below. Price movements in
securities which a Fund owns or intends to purchase probably will not correlate
perfectly with movements in the level of a securities index and, therefore, that
Fund bears the risk of a loss on a securities index option which is not
completely offset by movements in the price of such securities. Also, an option
purchased by a Fund may expire worthless, in which case that Fund would lose the
premium paid therefor.

Financial Futures Contracts. The Funds may enter into interest rate or
stock index futures contracts (collectively referred to as "financial futures
contracts") primarily to hedge (protect) against anticipated future changes in
interest rates or equity market conditions which otherwise might adversely
affect the value of securities which a Fund holds or intends to purchase. The
Funds may also invest in financial futures contracts when the purchase of these
instruments may provide more liquidity than the direct investment in the
underlying securities. The use of these instruments may permit a Fund to gain
rapid exposure to the markets following a large inflow of investable cash or in
response to changes in investment strategy. The purchase of a financial futures
contract may also provide a Fund with a price advantage over the direct purchase
of the underlying securities, either based on a differential between the
securities and the futures markets or because of the lower transactions costs
that are associated with these types of instruments. Neither of the Funds will
enter into financial futures contracts for speculative purposes. A "sale" of a
financial futures contract means the undertaking of a contractual obligation to
deliver the securities or the cash value called for by the contract at a
specified price during a specified delivery period. A "purchase" of a financial
futures contract means the undertaking of a contractual obligation to acquire
the securities at a specified price during a specified delivery period. When a
Fund enters into a financial futures contract, it is required to deposit with
its custodian on behalf of the broker a specified amount of cash or eligible
securities, called "initial margin." The initial margin required for a financial
futures contract is set by the exchange on which the contract is traded.
Subsequent payments, called "variation margin," to and from the broker, are made
on a daily basis as the market price of the financial futures contract
fluctuates. At the time of delivery, pursuant to the contract, adjustments are
made to recognize differences in value arising from the delivery of securities
with a different interest rate than that specified in the contract. With respect
to stock index futures contracts, settlement is made by means of a cash payment
based on any fluctuation in the contract value since the last adjustment in the
variation margin was made. Whenever a Fund engages in futures transactions, it
will have the Fund's custodian segregate either cash or liquid, unencumbered
debt securities that are marked-to-market daily to the extent required to comply
with the 1940 Act. Segregating assets may limit a Fund's ability to pursue other
investment opportunities.

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<PAGE>

If a Fund owned long-term bonds and expected interest rates to rise, it
could sell interest rate futures contracts. If interest rates did increase, the
value of the bond in that Fund would decline, but this decline should be offset
in whole or in part by an increase in the value of the Fund's interest rate
futures contracts. If, on the other hand, long-term interest rates were expected
to decline, a Fund could hold short-term debt securities and benefit from the
income earned by holding such securities, while at the same time purchasing
financial futures contracts on long-term bonds. Thus, a Fund could take
advantage of the anticipated rise in the value of long-term bonds without
actually buying them. The financial futures contracts and short-term debt
securities could then be liquidated and the cash proceeds used to buy long-term
bonds.

In some cases, securities called for by a financial futures contract may
not have been issued at the time the contract was written. There may also be an
imperfect correlation between the price movements of the financial futures
contracts and price movements of the securities which a Fund owns or intends to
purchase. The degree of difference in price movement between financial futures
contracts and the securities being hedged depends upon such things as
differences between the securities being hedged and the securities underlying
the financial futures contracts and variations in speculative market demand for
financial futures contracts and securities. A relatively small price movement in
a financial futures contract could have an immediate and substantial impact,
which may be favorable or unfavorable to a contractholder. It is possible for a
price-related loss to exceed the amount of a Fund's margin deposit. There is
also a risk that a Fund will be unable to close a futures position when desired
because there is no liquid secondary market for it. The skills needed to use
financial futures contracts effectively are different from those needed to
select a Fund's investments. If the Fund manager misjudges the general direction
of interest rates or markets, the Fund's overall performance may be poorer than
if no financial futures contract had been entered into. It is possible that a
Fund could lose money on a financial futures contract and also on the price of
related securities, adversely affecting the Fund's performance.

Although some financial futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the contractual
commitment is closed out before delivery of the security. The offsetting of a
contractual obligation is accomplished by purchasing (or selling as the case may
be) on a commodities or futures exchange an identical financial futures contract
calling for delivery in the same month. Such a transaction, if effected through
a member of an exchange, cancels the obligation to make or take delivery of the
securities. All transactions in the futures market are made, offset or fulfilled
through a clearing house associated with the exchange on which the contracts are
traded. The Funds will incur brokerage fees when it purchases or sells financial
futures contracts, and will be required to maintain margin deposits. The risk of
loss in trading financial futures contracts can be substantial due to the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. A relatively small price movement in a financial futures
contract could have an immediate and substantial impact, which may be favorable
or unfavorable to a contractholder. It is possible for a price-related loss to
exceed the amount of a Fund's margin deposit.

Options on Financial Futures Contracts. The Funds may purchase and write
put and call options on financial futures contracts. An option on a financial
futures contract gives the purchaser the right, in return for the premium paid,
to assume a position in a financial futures contract at a specified exercise
price at any time during the period of the option. Upon exercise, the writer of
the option delivers the financial futures contract to the holder at the exercise
price. The Funds would be required to deposit with the Company's custodian
initial margin and variation margin with respect to put and call options on
financial futures contracts it has written.

Foreign Currency Futures and Options on Foreign Currency Futures. The
Funds may purchase and sell futures contracts on foreign currencies, related
options thereon and options on foreign currencies as a hedge against possible
variation in foreign exchange rates. A futures contract on a foreign currency is
an agreement between two parties to buy and sell a specified amount of a
particular currency for a particular price on a future date. An option on a
foreign currency futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a foreign currency futures contract at
a specified price at any time during the period of the option. An option
transaction on a foreign currency provides the holder with ability to buy or
sell a particular currency at a fixed price on a future date, and is used to
hedge the currency exchange rate risk on non-U.S. dollar-denominated securities
owned by either or both of the Funds, anticipated to be purchased by a Fund, or
sold by a Fund but not yet delivered. Options on foreign currencies may be
traded on U.S. and foreign exchanges or in the over-the-counter market.

Foreign currency futures contracts and options on foreign currency futures
contracts are traded on boards of trade and futures exchanges. Buyers and
sellers of foreign currency futures contracts are subject to the same risks
which apply to the use of futures contracts generally. In addition, there are
risks associated with foreign currency futures contracts similar to those
associated with options on foreign currencies, described above. Moreover, the
ability to close out positions in options on foreign currency futures contracts
is subject to the continuing availability of a liquid secondary market. In order
to reduce this risk, the Funds will not purchase or sell options on foreign
currency options unless, in the opinion of the Funds' investment manager, a
sufficiently liquid secondary market exists so that the risks connected to such
options transactions are not greater than the risks associated with the
underlying foreign currency futures contract.

The Funds will only write covered options on foreign currency or foreign
currency futures contracts. A put on a foreign currency or foreign currency
futures contract written by a Fund will be considered covered if the Fund
segregates cash, U.S. government securities or other liquid high-grade debt
securities, equal to the average exercise price of the put. A call on a foreign
currency or on a foreign currency futures contract written by a Fund will be
considered covered if the Fund owns short-term debt securities with a value
equal to the face amount of the option contract denominated in the currency upon
which the call is written.

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The Funds will purchase options on foreign currencies in an attempt to
hedge against fluctuations in exchange rates. However, should exchange rates
move adversely to the Funds' position, the Funds may forfeit both the entire
price of the option plus the related transaction costs.

Special Considerations Relating to Futures Transactions. Financial futures
contracts entail certain risks. If the Manager's judgment about the general
direction of interest rates or markets is wrong, the Funds' overall performance
may be poorer than if no such contracts had been entered into.

There may also be an imperfect correlation between movements in prices of
financial futures contracts and portfolio securities being hedged. The degree of
difference in price movement between financial futures contracts and the
securities being hedged depends upon such things as differences between the
securities being hedged and the securities underlying the financial futures
contracts, and variations in speculative market demand for financial futures
contracts and securities. In addition, the market prices of futures contracts
may be affected by certain factors. If participants in the futures market elect
to close out their contracts through offsetting transactions rather than meet
margin requirements, distortions in the normal relationship between the
securities and futures markets could result. Price distortions could also result
if investors in futures contracts decide to make or take delivery of underlying
securities rather than engage in closing transactions, which would reduce the
liquidity of the futures market. In addition, because the margin requirements in
the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities and movements in the prices of futures contracts, a correct
forecast of market trends by the Funds' investment manager may still not result
in a successful hedging transaction. If this should occur, the Funds could lose
money on the financial futures contracts and also on the value of their
portfolio securities.

Engaging in foreign futures and foreign options transactions involves the
execution and clearing of trades on or subject to the rules of a foreign board
of trade. Neither the National Futures Association ("NFA") nor any domestic
(U.S.) exchange regulates activities of any foreign boards of trade, including
the execution, delivery and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable foreign
law. This is true even if the exchange is formally linked to a domestic market
so that a position taken on the exchange may be liquidated by a transaction on
the appropriate domestic market. Moreover, applicable laws or regulations will
vary depending on the foreign country in which the foreign futures or foreign
options transaction occurs. Therefore, entities (such as the Funds) which trade
foreign futures or foreign options contracts may not be afforded certain of the
protective measures provided by the Commodity Exchange Act, Commodity Futures
Trading Commission ("CFTC") regulations, the rules of the NFA or those of a
domestic (U.S.) exchange. In particular, monies received from customers for
foreign futures or foreign options transactions may not be provided the same
protections as monies received in connection with transactions on U.S. futures
exchanges. In addition, the price of any foreign futures or foreign options
contract and, therefore, the potential profit and loss thereon, may be affected
by any variance in the foreign exchange rate between the time the order for the
futures contract or option is placed and the time it is liquidated, offset or
exercised.

Applicable U.S. Regulatory Restrictions. To the extent required to comply
with the 1940 Act and the rules and interpretations thereunder, whenever one of
the Funds purchases a financial futures contract, writes a put option or enters
into a delayed-delivery purchase, that Fund will maintain in a segregated
account either cash or liquid high-grade securities equal to the value of the
contracts. This segregation of assets places a practical limit on the extent to
which the Funds may engage in financial futures contracts, write put options,
and enter into delayed-delivery transactions.

To the extent required to comply with CFTC Regulation 4.5 and thereby
avoid "commodity pool operator" status, the Funds will not enter into a
financial futures contract or purchase an option thereon if immediately
thereafter the aggregate initial margin deposits for financial futures contracts
held by a Fund plus premiums paid by it for open options on futures would exceed
5% of the liquidation value of the Fund's total assets, taking into account
unrealized profits and losses on such contracts. The Funds will not engage in
transactions in financial futures contracts or options thereon for speculation,
but only in an attempt to hedge against changes in interest rates or market
conditions affecting the value of securities which a Fund holds or intends to
purchase. When financial futures contracts or options thereon are purchased to
protect against a price increase on securities intended to be purchased later,
it is anticipated that at least 75% of such intended purchases will be
completed. Whenever financial futures contracts or options thereon are
purchased, the underlying value of such contracts will at all times not

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exceed the sum of: (1) accrued profit on such contract held by the broker; (2)
cash or high quality money market instruments set aside in an identifiable
manner plus funds deposited on margin on the contract; and (3) cash proceeds
from existing investments due in 30 days.

Miscellaneous. Several foreign governments permit investments by
non-residents only through participation in certain investment companies
specifically organized to participate in such markets. Subject to the provisions
of the 1940 Act, the Funds may invest in the shares of other investment
companies.

Pursuant to exemptive relief granted to the Funds under the 1940 Act, a
portion of the equity and convertible securities which may be acquired by a Fund
may be issued by foreign companies that, in each of their most recent fiscal
years, derived more than 15% of their gross revenues from their activities as a
broker, a dealer, an underwriter or an investment adviser.

The International Fund may also invest a portion of its assets in unit
trusts organized in the United Kingdom (which are analogous to U.S. mutual
funds) and which invest in smaller foreign markets than those which the
International Fund would ordinarily invest in directly. The International Fund
believes investments in such unit trusts will enhance the geographical
diversification of the International Fund's assets while reducing the risks
associated with investing in certain smaller foreign markets. Investments by the
International Fund in such unit trusts will provide increased liquidity and
lower transaction costs than are normally associated with direct investments in
such markets. At the present time, the International Fund intends to limit its
investments in unit trusts, together with its investments in other investment
companies, to no more than 5% of its total assets.

SPECIAL INVESTMENT TECHNIQUES - INTERNATIONAL FUND,
EMERGING MARKETS FUND AND SMALL CAP STOCK FUND

When-Issued or Delayed-Delivery Securities. The Funds may purchase or sell
the securities held in their portfolios on a when-issued or delayed-delivery
basis. When-issued or delayed-delivery transactions involve a commitment by a
Fund to purchase or sell particular securities, with payment and delivery to
take place at a future date, in order to secure what is considered to be an
advantageous price or yield to a Fund at the time of entering into the
transaction. When a Fund enters into a delayed-delivery transaction, it becomes
obligated to purchase securities and it has all of the rights and risks
attendant to ownership of a security, including the risk of price fluctuations,
although delivery and payment occur at a later date. The value of fixed income
securities to be delivered in the future will fluctuate as interest rates vary.
The Funds generally have the ability to close out a purchase obligation on or
before the settlement date rather than purchase the security.

To engage in such transactions, the Funds must set aside, in a segregated
account, cash or liquid high-grade securities at least equal in value to their
commitments to purchase when-issued or delayed-delivery securities. The value of
such segregated assets must at least equal the Fund's forward commitments. In
the case of a sale of securities on a delayed-delivery basis, a Fund must hold
the subject portfolio securities in a segregated account while the commitment is
outstanding. These obligations to segregate cash or securities will limit a
Fund's ability to pursue other investment opportunities.

To the extent a Fund engages in when-issued or delayed-delivery
transactions, it will do so for the purpose of acquiring portfolio securities in
a manner which is consistent with its investment objective and policies and not
for the purpose of either investment leverage or interest rate change
speculation. The Funds will only make commitments to purchase securities on a
when-issued or delayed-delivery basis with the intention of actually acquiring
the securities, but the Funds reserve the right to sell these securities before
the settlement date if deemed advisable. It is not expected that the Small Cap
Stock Fund will make extensive use of these techniques.

Repurchase Agreements. The Funds may invest available cash in repurchase
agreements. In a repurchase agreement transaction, a Fund purchases a debt
security and obtains a simultaneous commitment from the seller (i.e., a bank or
securities dealer) to repurchase that debt security at an agreed time and price,
reflecting a market rate of interest. The repurchase agreement's yield may be
unrelated to the coupon rate or maturity of the underlying security. Repurchase
agreements are fully collateralized and are marked-to-market daily during their
respective terms. Deposits of additional collateral may be required from the
seller if the market value of a security that is subject to a repurchase
agreement falls below the resale price set forth in the repurchase agreement.
The Board periodically receives and reviews information about the
creditworthiness of securities dealers and banks which enter into repurchase
agreements with the Funds.

No more than 10% of the International Fund's net assets, 15% of the
Emerging Markets Fund's net assets, or 15% of the Small Cap Fund's net assets
will be invested at any one time in repurchase agreements of more than seven
days' duration and in other investments which are considered not readily
marketable by the staff of the SEC or the Board.

SPECIAL INVESTMENT TECHNIQUES - SMALL CAP STOCK FUND

Lending Securities. The Fund can increase its income through securities
lending by investing the cash collateral deposited by the borrower in short-term
interest bearing obligations that meet the Fund's credit quality requirements
and investment policies. As with any extension of credit, however, there are
risks of delay in recovery of the loaned securities and collateral should a
borrower fail financially.

A significant portion of a Fund's loan transactions may be with only one
or a few institutions at any given time. This practice can increase the risk to
the Fund should a borrower fail.

Apart from lending its securities and acquiring debt securities, the Fund
will not make loans to other persons.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Guardian Baillie Gifford Limited ("GBG") serves as investment adviser of
the International Fund and Emerging Markets Fund in accordance with agreements
between the Company and GBG. Pursuant to sub-investment management agreements
with GBG, BG Overseas serves as the sub-investment adviser to the International
and Emerging Markets Funds. Guardian Investor Services Corporation ("GISC")
serves as investment adviser of the Small Cap Stock Fund. (GBG, BG Overseas and
GISC are collectively referred to as the "Advisers"). GISC and, subject to the
monitoring of GBG, BG Overseas, are responsible for decisions relating to the
purchase and sale of securities for the Funds, the timing of such purchases and
sales, the selection of brokers and dealers to effect transactions and the
negotiation of any brokerage commissions. GISC and BG

B-10
<PAGE>

Overseas intend to effect portfolio transactions for the Funds through dealers,
underwriters, or brokers through whom they believe they will obtain the best
price and execution available. In connection with over-the-counter transactions,
GISC and BG Overseas will attempt to deal with a primary market maker except
where they believe better prices and execution are available elsewhere.

In allocating portfolio transactions to different brokers, consideration
is given to brokers which GISC and BG Overseas believe can obtain the best price
and execution of orders, and to brokers who furnish statistical data, research
and other factual information. GISC and BG Overseas are authorized to pay a
commission in excess of that which another broker may charge for effecting the
same transaction if they consider that the commissions paid for brokerage,
research services and other statistical data are appropriate and reasonable for
the services rendered. Research services provided by brokers through whom the
Funds effect securities transactions may be used by GISC or BG Overseas in
servicing all of its accounts, and not all such services may be used by GISC or
BG Overseas in connection with the Funds.

For the years ended December 31, 1996, 1997 and 1998, the International
Fund paid brokerage commissions of $704,982, $1,044,872, and $446,482
respectively. For the years ended December 31, 1996, 1997, and 1998, the
Emerging Markets Fund paid brokerage commissions of $209,894, $474,638 and
$128,282, respectively. For the period from April 2, 1997 (commencement of
Fund operations) through December 31, 1997, and the year ended December 31,
1998, the Small Cap Stock Fund paid brokerage commissions of $120,152 and
$262,362, respectively. Neither GBG, BG Overseas nor GISC will participate in
commissions paid by the Funds to other brokers or dealers and neither party will
knowingly accept any reciprocal business directly or indirectly as a result of
paying commissions to other brokers or dealers.

Portfolio turnover rates for the International Fund for the years ended
December 31, 1997 and 1998 were 51% and 47%, respectively. For the Emerging
Markets Fund, the rates were 64% and 69%, respectively. For the Small Cap Stock
Fund, the rates were 22% and 59%, respectively.

B-11
<PAGE>

COMPANY MANAGEMENT

The directors and officers of the Company are listed below, together with
information about their principal occupations during the past five years and
certain other current affiliations. The business address of each director and
officer is 7 Hanover Square, New York, New York 10004 unless otherwise
noted below. The Guardian Fund Complex is comprised of (1) the Company, (2) The
Guardian Stock Fund, Inc., (3) The Guardian Bond Fund, Inc., (4) The Guardian
Cash Fund, Inc. and (5) The Park Avenue Portfolio (a series trust that issues
its shares in ten series).

Name, Address and Age Title Business History
- --------------------- ----- ----------------

Joseph D. Sargent* (61) Chairman of Chief Executive Officer, The
the Board Guardian Life Insurance
Company of America,
1/96-present. President and
Director 1/93-present.
Director (Trustee) of The
Guardian Insurance & Annuity
Company, Inc., Guardian
Investor Services
Corporation, Guardian Asset
Management Corporation,
Guardian Baillie Gifford,
Ltd. and various mutual funds
within the Guardian Fund
Complex.

John C. Angle* (75) Director Retired. Former Chairman of
3800 South 42nd Street the Board and Chief Executive
Lincoln, Nebraska 68506 Officer, The Guardian Life
Insurance Company of America;
Director 1/78-present.
Director (Trustee) of
Guardian Investor Services
Corporation from 2/82-2/96
and The Guardian Insurance &
Annuity Company, Inc.
Director (Trustee) of various
mutual funds within the
Guardian Fund Complex.

Frank J. Fabozzi, Ph.D. (50) Director Adjunct Professor of Finance,
858 Tower View Circle School of Management -- Yale
New Hope, Pennsylvania 18938 University 2/94-present;
Visiting Professor of Finance
and Accounting, Sloan School
of Management --
Massachusetts Institute of
Technology prior thereto.
Editor, Journal of Portfolio
Management. Director
(Trustee) of various mutual
funds within the Guardian
Fund Complex. Director
(Trustee) of various
closed-end investment
companies sponsored by
Blackstone Financial
Management.

Arthur V. Ferrara* (68) Director Retired. Chairman of the
Board of Directors and Chief
Executive Officer, The
Guardian Life Insurance
Company of America
1/93-12/95; Director
1/81-present. Director
(Trustee) of Guardian
Investor Services
Corporation, Guardian Asset
Management Corporation, The
Guardian Insurance & Annuity
Company, Inc., Gabelli
Capital Asset Fund and
various mutual funds within
the Guardian Fund Complex.

Leo R. Futia* (79) Director Retired. Former Chairman of
18 Interlaken Road the Board and Chief Executive
Greenwich, Connecticut 06830 Officer, The Guardian Life
Insurance Company of America;
Director 5/70-present.
Director (Trustee) of The
Guardian Insurance & Annuity
Company, Inc., Guardian
Investor Services
Corporation, and various
mutual funds within the
Guardian Fund Complex.
Director (Trustee) of various
mutual funds sponsored by
Value Line, Inc.

William W. Hewitt, Jr. (70) Director Retired. Former Executive
P.O. Box 2359 Vice President, Shearson
Princeton, New Jersey 08543 Lehman Brothers, Inc.
Director (Trustee) of various
mutual funds within the
Guardian Fund Complex and
various mutual funds
sponsored by Mitchell
Hutchins Asset Management,
Inc. and PaineWebber Inc.

- ----------
*"Interested person," as defined in the 1940 Act.

B-12
<PAGE>

Name, Address and Age Title Business History
- --------------------- ----- ----------------

Sidney I. Lirtzman, Ph.D. (67) Director Professor of Management
38 West 26th Street 9/67-present and Acting Dean,
New York, New York 10010 School of Business
2/95-present, City University
of New York -- Baruch
College. President, Fairfield
Consulting Associates, Inc.
Director (Trustee) of various
mutual funds within the
Guardian Fund Complex.

Carl W. Schafer (63) Director President, Atlantic
P.O. Box 1164 Foundation (charitable
Princeton, New Jersey 08542 foundation supporting mainly
oceanographic exploration and
research). Director of
Roadway Express (trucking),
Evans Systems, Inc. (a motor
fuels, convenience store and
diversified company), Hidden
Lake Gold Mines Ltd. (gold
mining), Electronic Clearing
House, Inc. (financial
transactions processing),
Wainoco Oil Corporation and
Nutraceutrix Inc.
(biotechnology). Chairman of
the Investment Advisory
Committee of the Howard
Hughes Medical Institute
1985-1992. Director (Trustee)
of various mutual funds
within the Guardian Fund
Complex. Director (Trustee)
of various mutual funds
sponsored by Mitchell
Hutchins Asset Management,
Inc. and PaineWebber, Inc.

Robert G. Smith, Ph.D. (66) Director President, Smith Affiliated
132 East 72nd Street Capital Corporation and
New York, New York 10021 Director (Trustee) of various
mutual funds within the
Guardian Fund Complex.

John M. Smith (62) President Executive Vice President,
Equity Products 1/95 to
present, The Guardian Life
Insurance Company of America;
Senior Vice President prior
thereto. Director, Guardian
Baillie Gifford Limited
11/90-present. Executive Vice
President and Director, The
Guardian Insurance & Annuity
Company, Inc. President and
Director, Guardian Investor
Services Corporation.
Director of Guardian Asset
Management Corporation.
President, GIAC Funds, Inc.
Officer of one mutual fund
within the Guardian Fund
Complex.

Frank J. Jones (60) Executive Executive Vice President and
Vice Chief Investment Officer, The
President Guardian Life Insurance
Company of America
1/94-present Director,
Guardian Investor Services
Corporation and Guardian
Baillie Gifford Limited.
Executive Vice President,
Chief Investment Officer and
Director, The Guardian
Insurance and Annuity
Company, Inc. Director and
President, Guardian Asset
Management Corporation.
Officer of various mutual
funds within the Guardian
Fund complex.

R. Robin Menzies (45) Vice Partner, Baillie Gifford &
c/o Baillie Gifford Overseas President Co. 4/81-present. Director,
Limited Baillie Gifford Overseas
1 Rutland Court Limited 11/90-present.
Edinburgh, EH3 8EY, Director, Guardian Baillie
Scotland Gifford Limited
11/90-present. Officer of
various mutual funds within
the Guardian Fund Complex.

B-13
<PAGE>

Name, Address and Age Title Business History
- --------------------- ----- ----------------

Edward H. Hocknell (38) Vice Director, Baillie Gifford
President Overseas Limited
10/92-present. Director,
Guardian Baillie Gifford
Limited 9/95-present.
Partner, Baille Gifford &
Co., 5/98-present. Officer of
one mutual fund within the
Guardian Fund Complex.

Frank L. Pepe (56) Treasurer Vice President and Equity
Controller, The Guardian Life
Insurance Company of America
1/96-present; Second Vice
President and Equity
Controller prior thereto.
Vice President and
Controller, The Guardian
Insurance & Annuity Company,
Inc. and Guardian Investor
Services Corporation. Officer
of various mutual funds
within the Guardian Fund
Complex.

Joseph A. Caruso (47) Secretary Vice President and Corporate
Secretary, The Guardian Life
Insurance Company of America
1/96-present; Second Vice
President and Corporate
Secretary, 1/95-1/96;
Corporate Secretary
10/92-12/94. Vice President
and Secretary, The Guardian
Insurance & Annuity Company,
Inc., and Guardian Investor
Services Corporation.
Secretary, Guardian Asset
Management Corporation and
various mutual funds within
the Guardian Fund Complex.

Richard T. Potter, Jr. (44) Counsel Vice President and Equity
Counsel, The Guardian Life
Insurance Company of America
1/96-present; Second Vice
President and Equity Counsel
1/93-12/95. Vice President
and Counsel, The Guardian
Insurance & Annuity Company,
Inc. and Guardian Investor
Services Corporation.
Counsel, Guardian Asset
Management Corporation and
various mutual funds within
the Guardian Fund Complex.

B-14
<PAGE>

The Company pays directors who are not "interested persons" of the Company
(as defined in the 1940 Act) directors' fees of $350 per meeting and an annual
retainer of $500. Directors who are "interested persons," except Mr. Sargent,
receive the same fees, but they are paid by GISC. Mr. Sargent receives no
compensation for his service as a Director of the Company. All officers for the
Company are employees of The Guardian Life Insurance Company of America
("Guardian Life") or Directors of BG Overseas; they receive no compensation from
the Company.

Each Company Director is also a director of The Guardian Stock Fund, Inc.,
The Guardian Bond Fund, Inc. and The Guardian Cash Fund, Inc., and a trustee of
The Park Avenue Portfolio, a series trust consisting of The Guardian Park Avenue
Fund, The Guardian Cash Management Fund, The Guardian Investment Quality Bond
Fund, The Guardian Tax-Exempt Fund, The Guardian Baillie Gifford International
Fund, The Guardian Baillie Gifford Emerging Markets Fund, The Guardian Park
Avenue Small Cap Fund, The Guardian Asset Allocation Fund, The Guardian High
Yield Bond Fund, and The Guardian Park Avenue Tax-Efficient Fund. The Company
and the other Funds named in this paragraph are a "Fund Complex" for purposes of
the federal securities laws. The following table provides information about the
compensation paid by the Company and the Fund Complex to the Company's Directors
for the year ended December 31, 1998.

Compensation Table*

<TABLE>
<CAPTION>
Total Compensation
From The Company
Aggregate Accrued Pension or Estimated Annual And Other Members
Compensation Retirement Benefits Benefits Of The
Name and Title From the Company*** Paid by the Company Upon Retirement Fund Complex**
- -------------- ------------------- ------------------- --------------- --------------
<S> <C> <C> <C> <C>

Frank J. Fabozzi
Director $8,200 N/A N/A $54,400
William W. Hewitt, Jr.
Director $8,200 N/A N/A $54,400
Sidney I. Lirtzman
Director $8,200 N/A N/A $54,400
Carl W. Schafer
Director $8,200 N/A N/A $54,400
Robert G. Smith
Director $8,200 N/A N/A $54,400

</TABLE>

* Directors who are "interested persons" of the Company are not compensated
by the Company.
** Includes compensation paid to attend meetings of the Board's Audit
Committee.

All issued and outstanding shares of the Funds are legally owned by The
Guardian Insurance & Annuity Company, Inc. ("GIAC"), a wholly owned subsidiary
of Guardian Life, and are held either directly or for the benefit of
contractowners of the variable annuity and variable life insurance contracts
issued by GIAC.

The Company's officers and directors had an aggregate interest of less
than 1% in the Funds' outstanding shares as of April 1, 1999.

INVESTMENT ADVISERS, SUB-INVESTMENT ADVISER AND DISTRIBUTOR

The Adviser - International Fund and Emerging Markets Fund: Guardian
Baillie Gifford Limited. The Adviser, an investment management company
registered as a corporation under the laws of Scotland, was formed in November
1990 through a joint venture between GIAC and BG Overseas, a company wholly
owned by Baillie Gifford & Co. GIAC owns 51% of the voting shares of the Adviser
and may be deemed to be in control of the Adviser. BG Overseas owns the
remaining 49% of such shares. The Adviser is registered in the United States
with the SEC as an investment adviser under the Investment Advisers Act of 1940
and in the United Kingdom is regulated by the Investment Management Regulatory
Organization ("IMRO"). BG Overseas also serves as sub-investment adviser to the
Funds (see below).

Pursuant to Investment Management Agreements ("Management Agreements")
between the Adviser and the Company, and subject to the continuous monitoring
and supervision of the Company's Board of Directors, the Adviser is responsible
for the overall investment management of the Funds' portfolios. Under the terms
of the Management Agreements, the Adviser is responsible for all decisions to
buy and sell securities for the Funds, furnishes the Board with recommendations
with respect to the Funds' investment policies, provides the Board with regular
reports pertaining to the implementation and performance of such policies, and
maintains certain books and records as required by the 1940 Act and by any other
applicable laws and regulations. The Adviser

B-15
<PAGE>

has, in turn, entered into sub-investment management agreements with BG Overseas
appointing the latter as sub-investment adviser and delegating to BG Overseas
much of the day-to-day management responsibilities for the portfolios of the
Funds (see "The Sub-Adviser: Baillie Gifford Overseas Limited" below).

The Management Agreements were approved by the Company's Board of
Directors (including a majority of the directors who are not parties to the
Management Agreements or "interested persons" of the Company or of the Adviser)
and will continue in full force and effect from year to year, provided their
continuance is specifically approved at least annually by vote of the Company's
Board of Directors, including a majority of the directors who are not parties to
the Management Agreements or "interested persons" of the Company or of the
Adviser, cast in person at a meeting called for the purpose of voting on such
continuance.

The Management Agreements provide that the Funds shall pay the Adviser a
monthly fee at an annual rate of 0.80% of the average daily net assets of the
International Fund and 1.00% of the average daily net assets of the Emerging
Markets Fund for the services rendered, the facilities furnished and the
expenses assumed by the Adviser. A portion of this fee is payable by the Adviser
to BG Overseas as compensation for the services of BG Overseas as sub-investment
adviser to the Funds as more fully described below. For the years ended December
31, 1996, 1997 and 1998, the International Fund paid the Manager a total of
$3,048,628, $4,111,020 and $4,891,710 in fees, respectively. For the years ended
December 31, 1996, 1997, and 1998 the Emerging Markets Fund paid the Adviser a
total of $513,410, $968,350 and $649,564, respectively, in fees.

The Management Agreements provide that neither the Adviser, nor any of its
officers, directors, or employees shall be liable for any error of judgment or
mistake of law or for any loss suffered by the Funds in connection with the
matters to which the Management Agreements relate, except for loss resulting
from willful misfeasance or misconduct, willful default, bad faith, or gross
negligence in the performance of its or his/her duties on behalf of the Funds or
from reckless disregard by the Adviser or any such person of the duties of the
Adviser under the Management Agreements.

The Management Agreements may be terminated, without penalty, at any time
by either party upon 60 days' written notice and will terminate automatically
upon their assignment. In addition, either party may terminate the Management
Agreements immediately in any of the following situations: (1) the other party
commits any material breach of its obligations under the Agreement which, if
curable, is not remedied within 30 days; (2) the dissolution of the other party;
or (3) the termination or expiration of the joint venture agreement between GIAC
and BG Overseas.

In the event that the Management Agreements are terminated and unless they
are replaced by other agreements between GIAC and BG Overseas or their
affiliates, the continued use of the names "Baillie Gifford International Fund,"
or "Baillie Gifford Emerging Markets Fund" by the Company is subject to the
approval of both GIAC and BG Overseas.

The Sub-Investment Adviser - International Fund and Emerging Markets Fund:
Baillie Gifford Overseas Limited. BG Overseas acts as the sub-investment adviser
to the Company pursuant to sub-investment management agreements ("Sub-Management
Agreement") with the Adviser. BG Overseas is registered in the United States
with the SEC as an investment adviser under the Investment Advisers Act of 1940
and in the United Kingdom is regulated by IMRO. Pursuant to the Sub-Management
Agreements, BG Overseas manages the day-to-day operations of the Funds'
portfolios. In so doing, BG Overseas has full discretion to purchase and sell
portfolio securities, to select brokers for the execution of such purchases,
sales, and to negotiate brokerage commissions, if any, subject to monitoring by
the Adviser. The Adviser continually monitors and evaluates the performance of
BG Overseas.

The Sub-Management Agreements were approved by the Company's Board of
Directors (including a majority of directors who are not parties to the
Sub-Management Agreements or "interested persons" of the Company or the Adviser)
and will continue in full force and effect from year to year, provided their
continuance is specifically approved at least annually (1) by the Board of
Directors of the Adviser and (2) by the Board of Directors of the Company,
including approval by a vote of the majority of the directors who are not
parties to the Sub-Management Agreements or "interested persons" of the Company
or of the Adviser, cast in person at a meeting called for the purpose of voting
on such continuance.

The Sub-Management Agreements provide that the Adviser shall pay BG
Overseas a monthly fee at an annual rate of 0.40% of the average daily net
assets of the International Fund and 0.50% of the average daily net assets of
the Emerging Markets Fund for the services rendered, the facilities furnished
and the expenses assumed

B-16
<PAGE>

by BG Overseas. This sub-investment management fee is paid to BG Overseas out of
the management fee paid by the Funds to the Adviser. For the years ended
December 31, 1996, 1997 and 1998, the Adviser paid BG Overseas a total of
$1,524,314, $2,055,510 and $2,445,855 in fees, respectively, for services
provided for the International Fund. For the years ended December 31, 1996, 1997
and 1998, the Adviser paid BG Overseas $256,705, $484,175, and $324,782,
respectively, in fees for services provided to the Emerging Markets Fund.

The Sub-Management Agreements provide that neither BG Overseas, nor any of
its officers, directors or employees shall be liable for any error of judgment
or mistake of law or for any loss suffered by the Adviser or the Company in
connection with the matters to which the Sub-Management Agreements relate,
except for loss resulting from willful misfeasance or misconduct, willful
default, bad faith, or gross negligence in the performance of its or his/her
duties on behalf of the Adviser or the Company or from reckless disregard by BG
Overseas or any such person of the duties of BG Overseas under the
Sub-Management Agreements.

The Sub-Management Agreements may be terminated, without penalty, at any
time by either party upon 60 days' written notice and will terminate
automatically upon their assignment. In addition, either party may terminate the
Sub-Management Agreements immediately in any of the following situations: (1)
the other party commits any material breach of its obligations under the
Agreements which, if curable, is not remedied within 30 days; (2) the
dissolution of the other party; or (3) the termination or expiration of the
joint venture agreement between GIAC and BG Overseas.

The Adviser - Small Cap Stock Fund: Guardian Investor Services Corporation
("GISC"). GISC is the investment adviser for the Small Cap Stock Fund. GISC is
registered as an investment adviser under the Investment Advisers Act of 1940.

Under the investment advisory agreement between the Fund and GISC, GISC
furnishes investment advice and provides or pays for certain of the Fund's
administrative costs. Among the services and facilities provided or paid for by
GISC are: office space; clerical staff and recordkeeping; and the services of
all Fund personnel, including any fees and expenses of the Trustees who are
affiliated with The Guardian Life Insurance Company of America ("Guardian
Life"). All other costs and expenses are to be paid by the Funds which GISC
advises. However, GISC has agreed to reduce its advisory fee and, if necessary,
reimburse any of the Funds which it advises if a Fund's operating expenses
exceed the expense limitations imposed by state law. Excluded from such
operating expenses are: interest; taxes; brokerage commissions; distribution
fees and extraordinary expenses. For these services the investment advisory
agreement between the Fund and GISC provides that the Fund shall pay GISC 0.75%
per annum. Although this management fee is greater than that paid by most mutual
funds, the Company's Board believes that the fee is reasonable in light of the
services to be provided and the fees charged by other mutual funds with similar
objectives and policies. All payments are due on a quarterly basis. The Fund
also assumes all expenses of its operations and business not specifically
assumed or agreed to be paid by GISC. Expenses paid by the fund will include,
for example, costs relating to: custody; the services of the Fund's transfer
agent and dividend disbursing agent; portfolio accounting services; shareholder
communications; shareholder meetings; calculation of net asset value; legal fees
and expenses; accounting and auditing fees and expenses; directors' fees and
expenses; U.S. federal and state registration fees; brokerage commissions;
taxes; and bonding and insurance. For the period from April 2, 1997
(commencement of operations) to December 31, 1997, and the year ended December
31, 1998, the Small Cap Stock Fund paid $257,202 and $819,606, respectively,
in fees.

The investment advisory agreement between the Fund and GISC will continue
in full force and effect for two years following the date of its execution, or
the date of execution of any written modification of this agreement in
connection with any other Funds established by the Company that are made subject
to the agreement and thereafter, if not terminated, from year to year so long as
its continuance is specifically approved at least annually by vote of a majority
of the Fund's outstanding voting shares, or by vote of the Fund's Board of
Directors, including a majority of the Fund's outstanding voting shares, or by
vote of the Fund's Board of Directors, including a majority of Directors who are
not parties to the agreement or "interested persons" of the Fund or of GISC,
cast in person at a meeting called for that purpose. The agreement will
terminate automatically upon its assignment, and may be terminated without
penalty at any time by either party upon 60 days' written notice.

If the investment advisory agreement is terminated and it is not replaced
by an agreement with another affiliate of Guardian Life, the Fund's continued
use of the name "The Guardian Small Cap Stock Fund" is subject to the approval
of Guardian Life, because Guardian Life maintains the exclusive ownership
interest of the service mark "The Guardian Small Cap Stock Fund".

A service agreement between GISC and Guardian Life provides that Guardian
Life will furnish the office space, clerical staff, services and facilities
which GISC needs to perform under the investment advisory agreement. GISC's
officers are salaried employees of Guardian Life; they receive no compensation
from GISC. GISC reimburses Guardian Life for its expenses under the service
agreement.

The investment advisory agreement provides that neither GISC nor any of
its personnel shall be liable for any error of judgment or mistake of law or for
any loss suffered by GISC or the Fund in connection with the matters to which
the investment advisory agreement relates, except for loss resulting from
willful misfeasance or misconduct, willful default, bad faith, or gross
negligence in the performance of its or his/her duties on behalf of GISC or the
Fund or from reckless disregard by GISC or any such person of the duties of GISC
under the investment advisory agreement.

B-17
<PAGE>

The Distributor: Guardian Investor Services Corporation. Guardian Investor
Services Corporation(R) ("GISC") serves as the distributor of shares of the
Funds. These shares are continuously offered at net asset value without any
sales charge. GISC is registered with the SEC as a broker-dealer under the
Securities Exchange Act of 1934 and acts as distributor of the variable annuity
and variable life insurance contracts issued by GIAC. GISC receives no
compensation from the Company or from purchasers of shares of the Funds for
acting as distributor.

GIAC AND OTHER FUND AFFILIATES

As of February 28, 1999, GIAC was the record owner of 24,918,610 shares of
the International Fund and 4,388,233 shares of the Emerging Markets Fund. The
Guardian Life Insurance Company of America ("Guardian Life") owned beneficially
7,667,716 shares of the International Fund and 2,174,433 shares of the Emerging
Markets Fund. Together, the aforementioned shares represent 100% of the
outstanding shares of each Fund. As described more fully in "Fund Capitalization
and Expenses" below, GIAC owns beneficially 1,075,060 (or 3.30%) of
International Fund shares and Guardian Life owns beneficially 7,667,716 shares
(or 23.50%) of the International Fund shares and 2,174,433 shares (or 33.10%) of
the Emerging Markets Fund shares. The balance of the Fund shares is owned on
behalf of the owners of variable annuity and variable life insurance contracts
issued by GIAC. Such shares have been allocated to one or more separate accounts
of GIAC which fund such contracts. As of February 28, 1999, GIAC was the record
owner of 10,347,579 shares of the Small Cap Stock Fund and beneficial owner of
2,046,394 (13.20%) of the Small Cap Stock Fund. Guardian Life owned beneficially
5,127,360 shares of the Small Cap Stock Fund. Together, the aforementioned
shares represent 100% of the outstanding shares of the Fund. GIAC is a wholly
owned subsidiary of Guardian Life and has executive offices located at 7 Hanover
Square, New York, New York 10004. In addition, GIAC owns 51% of the voting
shares of GBG, adviser to the International and Emerging Markets Funds (see
above) and may be deemed to be in control of GBG, and Guardian Life owns 100% of
the voting shares of GISC.

As of February 28, 1999, 6.1% and 8.5% of the International Fund's shares
were attributable to variable annuity policies owned, respectively, by the
Trustees of The Guardian Employee Incentive Savings Plan Trust and The Guardian
Pension Trust both of 7 Hanover Square, New York, New York. As of February 28,
1999, 14.9% of the Small Cap Stock fund's shares were attributable to variable
annuity policies owned by The Guardian Pension Trust.

TAXES

The International Fund, the Emerging Markets Fund and the Small Cap Stock
Fund qualify and intend to remain qualified to be taxed as regulated investment
companies under certain provisions of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"). So long as the Funds qualify as regulated investment
companies and comply with the provisions of the Code pertaining to regulated
investment companies which distribute substantially all of their net income
(both net ordinary income and net capital gains) to their shareholders, the
Funds will not incur a tax liability on that portion of their net ordinary
income and net realized capital gains which have been distributed to its
shareholders. Accordingly, the Funds intend to distribute all or substantially
all of their net investment income and net capital gains.

To qualify for treatment as a regulated investment company, a Fund must,
among other things, (i) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities or foreign
currencies or other income (including gains from options, futures, or forward
contracts) derived in connection with the pursuit of its investment objectives;
(ii) must distribute to its shareholders for each taxable year at least 90% of
its investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions); and (iii) must be diversified such that at the close of each
quarter of the Fund's taxable year (a) at least 50% of the value of its total
assets consists of cash and cash items, U.S. Government securities, securities
of other regulated investment companies, and other securities that, with respect
to any one issuer, do not exceed 5% of the value of the Fund's total assets and
that do not represent more than 10% of the outstanding voting securities of the
issuer and (b) not more than 25% of the value of the Fund's total assets are
invested in securities (other than U.S. Government securities or the securities
of other regulated investment companies) of any one issuer. The Code and its
related Treasury Department regulations require mutual funds that are offered
through insurance company separate accounts to meet certain diversification
requirements to preserve the tax-deferral benefits provided by the variable
contracts which are offered in connection with such separate accounts. GISC
intends to diversify the Fund's investments in accordance with those
requirements. The prospectuses for GIAC's variable annuities and variable life
insurance policies describe the federal income tax treatment of distributions
from such contracts.

Options, forward contracts, futures contracts and foreign currency
transactions entered into by the Funds will be subject to special tax rules.
These rules may accelerate income to the Funds, defer Fund losses, cause
adjustments in the holding periods of Fund securities, convert capital gain into
ordinary income and convert short-term capital losses into long-term capital
losses. As a result, these rules could affect the amount, timing and character
of Fund distributions.

B-18
<PAGE>

For U.S. federal income tax purposes, if the Company establishes
additional portfolios, each portfolio will be treated as a separate entity.

Income received by the Funds from sources within various foreign countries
will generally be subject to foreign income taxes withheld at the source. If the
United States has entered into a tax treaty with the country in which the payor
is a resident, foreign tax withholding from dividends and interest is typically
set at a rate between 10% and 15% and, if the United States has not entered into
a tax treaty with the country in which the payor is a resident, such withholding
may be as high as 30% to 35%. Taxes paid to foreign governments will reduce the
Funds' return on its investments. While contractowners will bear the cost of any
foreign tax withholding, they will not be able to claim a foreign tax credit or
deduction for taxes paid by the Funds.

The U.S. federal tax laws impose a four percent nondeductible excise tax
on each regulated investment company with respect to an amount, if any, by which
such company does not meet distribution requirements specified in such tax laws.
The Funds intend to comply with such distribution requirements and thus do not
expect to incur the four percent nondeductible excise tax.

Since the sole shareholder of the Funds will be GIAC, no discussion is set
forth herein as to the U.S. federal income tax consequences at the shareholder
level. For information concerning the U.S. federal income tax consequences to
purchasers of the GIAC contracts, see the Prospectus for such contract.

The discussion of "Taxes" in the Prospectuses, in conjunction with the
foregoing, is a general and abbreviated summary of the applicable provisions of
the Code and U.S. Treasury Regulations currently in effect as interpreted by
U.S. Courts and the Internal Revenue Service. These interpretations can change
at any time. The above discussion covers only U.S. federal income tax
considerations with respect to the Funds. No attempt has been made to describe
any U.S. state and local tax consequences.

Voting Rights. Through its separate accounts, GIAC is the sole shareholder
of record of the Funds, so, under the 1940 Act, GIAC is deemed to be in control
of the Funds. Nevertheless, when a Fund shareholders' meeting occurs, GIAC
solicits and accepts voting instructions from its contractowners who have
allocated or transferred monies for an investment in the Fund as of the record
date for the meeting. GIAC then votes the Fund's shares that are attributable to
its contractowners' interests in the Fund in accordance with their instructions.
GIAC will vote shares for which no instructions are received in the same
proportion as it votes shares for which it does receive instructions. GIAC will
vote any shares that it is entitled to vote directly due to amounts it has
contributed or accumulated in its separate accounts in the manner described in
the prospectuses for its variable annuities and variable life insurance
policies.

Each share of the Fund is entitled to one vote, and fractional shares are
entitled to fractional votes. Fund shares have non-cumulative voting rights, so
the vote of more than 50% of the shares can elect 100% of the directors.

The Company is not required to hold annual shareholder meetings, but
special meetings may be called to, among other things, elect or remove
directors, change fundamental policies or approve an investment advisory
agreement.

PERFORMANCE RESULTS

The Funds may, from time to time, provide performance information in
advertisements, sales literature or other materials furnished to existing or
prospective owners of GIAC's variable contracts. When performance information is
provided in advertisements, it will include the effect of all charges deducted
under the terms of the specified contract, as well as all recurring and
non-recurring charges incurred by the Funds. All performance results are
historical and are not representative of future results.

Total return and average annual total return reflect the change in value
of an investment in a Fund over a specified period assuming the reinvestment of
all capital gains distributions and income dividends. Average annual total
returns show the average change in value for each annual period within a
specified period. Total returns, which are not annualized, show the total
percentage or dollar change in value over a specified period.

A Fund may also compare its performance to other investment vehicles or
other mutual funds which have similar investment objectives or programs. Also, a
Fund may quote information from securities indices or financial and industry or
general interest publications in its promotional materials. Additionally, a
Fund's promotional materials may contain references to types and characteristics
of certain securities; features of their respective portfolios; financial
markets; or historical, current or prospective economic trends. Topics of
general interest, such as personal financial planning, may also be discussed.

A Fund's returns and net asset value will fluctuate. Shares are redeemed
in response to transfer instructions or surrender and withdrawal requests at the
then current net asset value per share which may be more or less than original
cost.

As described above, the Funds' performance results may be disclosed in the
form of "average annual total return" and "cumulative total return" figures.

The Funds use the following formula prescribed by the SEC to compute their
average annual total returns.

P(1+T)^n = ERV

Where: P = a hypothetical initial payment of $1,000 from which no sales
load is deducted

T = average annual total return

n = number of years

ERV = ending redeemable value of the hypothetical $1,000 payment at
the end of the period represented by "n."

The average annual total return and cumulative total return for a Fund for
a specific period is calculated by first taking a hypothetical investment amount
($1,000 for the average annual total return calculation) ("initial investment")
in the Fund's shares on the first day of the period and computing the
"redeemable value" of that investment at the end of the period. The average
annual total return is determined by dividing the redeemable value by the
initial investment and this quotient is taken to the "nth" root ("n"
representing the number of years in the period) and 1 is subtracted from the
result, which is then expressed as a percentage. Promotional materials relating
to the Funds' performance will always at least provide average annual total
returns for each of a short (one to four years), medium (five to nine years) and
long (ten years or more) period of time. The cumulative total return percentage
is determined by subtracting the initial investment from the redeemable value
and dividing the remainder by the initial investment and expressing the result
as a percentage. All average annual total return and cumulative total return
calculations will indicate the length of and the last day of the period used in
computing the return figures.

B-19
<PAGE>

The tables below show each Fund's returns for the periods noted. These
figures reflect the reinvestment of all capital gains distributions and income
dividends paid by each Fund, and the deduction of all Fund expenses. The actual
returns for owners of GIAC's variable contracts will be lower to reflect the
effects of charges deducted under the terms of the specific contracts.

Small Cap
International Fund Emerging Markets Fund Stock Fund
Year Ended December 31, Total Return Total Return Total Return
----------------------- ------------ ------------ ------------
<S> <C> <C> <C>
1991 ..................................... 8.56%*
1992 ..................................... (8.90)%
1993 ..................................... 34.04%
1994 ..................................... 0.87% (11.97%)%**
1995 ..................................... 11.23% (0.60)%
1996 ..................................... 15.41% 24.59%
1997 ..................................... 11.93% 1.97% 14.69%***
1998 ..................................... 21.17% (26.77)% (5.75)%
----- ------ -----

<CAPTION>
Cumulative and Average Annual Total Returns

International Emerging Small Cap
Period Ended December 31, 1998 Fund* Markets Fund** Stock Fund***
------------------------------ ----- -------------- -------------
<S> <C> <C> <C>
One-Year Total Return .................... 21.17% (26.77)% (5.75)%
Five-Year Average Annual Total Return .... 11.90% N/A N/A
Five Year Cumulative Total Return ........ 75.45% N/A N/A
Lifetime Cumulative Total Return ......... 132.80% (18.59)% 8.09%
Average Annual Lifetime Total Return ... 11.32% (4.78)% 5.48%

</TABLE>

- ----------
* Beginning February 8, 1991 (commencement of International Fund's
investment operations).
** Beginning October 17, 1994 (commencement of Emerging Markets Fund's
investment operations).
*** Beginning July 16, 1997 (commencement of public offering).

The following example shows the average annual total return performance of
each Fund for the periods indicated by showing the average annual percentage
change for each period and the ending redeemable value of a $1,000 investment.
The example takes into account all Fund expenses and assumes reinvestment of all
capital gains distributions and income dividends, but does not take into account
charges deducted under the terms of GIAC's variable contracts or federal income
taxes and tax penalties that may be incurred when distributions are made from
such variable contracts.

<TABLE>
<CAPTION>
Emerging Small Cap
International Fund Markets Fund Stock Fund
------------------ ------------ ----------
% Change ERV % Change ERV % Change ERV
-------- --- -------- --- -------- ---
<S> <C> <C> <C> <C> <C> <C>

For the year ended December 31, 1998 ............... 21.17% $1,212 (26.77)% $732 (5.75)% $ 942
For the life of the Fund through December 31, 1998 . 11.32% $2,328 (4.78)% $814 5.48% $1,081

</TABLE>

All figures quoted take into account all nonrecurring charges incurred by
the Funds and assume reinvestment of all capital gains distributions or
dividends paid by the Funds, but do not take into account income taxes due on
Fund distributions or dividends or the effect of any charges deducted from the
variable contracts or at the separate account level. Including the effects of
such charges would reduce the performance figures.

The Funds intend to use non-standardized cumulative total return figures
and will indicate the length of and the last day of the period used in computing
such figures as well as a description of the method by which such performance
figures were calculated. However, non-standardized cumulative total return
figures will be accompanied by the SEC mandated total return figures.

The Funds may also compare their performance to that of other mutual funds
with similar investment objectives or programs and may quote information from
financial and industry or general interest publications in its promotional
materials. Additionally, the Funds' promotional materials may contain references
to types and characteristics of certain securities; features of their
portfolios; financial markets; or historical, current or prospective economic
trends. Topics of general interest, such as personal financial planning, may
also be discussed.

Performance calculations contained in reports by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Morningstar, The WM Company,
Variable Annuity & Research Data Service or industry or financial publications
of general interest such as Business Week, Financial World, Forbes, Financial
Times, The Wall Street Journal, The New York Times, Barron's and Money which may
be quoted by the Funds are often based

B-20
<PAGE>

upon changes in net asset value with all dividends reinvested and may not
reflect the imposition of charges deducted under the terms of GIAC's variable
contracts.

The Funds' performance figures are based upon historical results and do
not project future performance. Factors affecting the Funds' performance include
general market conditions, rates of exchange, operating expenses, and investment
management fees. Shares of the Funds are redeemable at net asset value which may
be more or less than original cost.

FUND CAPITALIZATION AND EXPENSES

On January 22, 1991, GIAC purchased 10,000 shares of the International
Fund at a price of $10.00 per share for a total investment of $100,000. Over the
weeks following this initial investment, GIAC furnished an additional $9,900,000
in seed capital to the International Fund, purchasing 824,320 shares. On
September 13, 1994 Guardian Life purchased 2,000,000 shares of the Emerging
Markets Fund at a price of $10.00 per share for a total investment of
$20,000,000. Each of these investments were made to enable the Funds to commence
operations and to acquire a diversified portfolio of securities in accordance
with their respective investment objective and policies. The shares acquired by
GIAC and Guardian Life are being held for investment purposes and GIAC and
Guardian Life have no present intention of redeeming or selling such shares.

On April 2, 1997, GIAC purchased 2,000,000 shares of the Small Cap Fund at
a price of $10.00 per share for a total investment of $20,000,000. This
investment was made to enable the Small Cap Stock Fund to commence operations
and to acquire a diversified portfolio of securities in accordance with its
investment objective and policies. The shares acquired by GIAC are being held
for investment purposes and GIAC has no present intention of redeeming or
selling such shares.

The authorized stock of the Company consists of one billion
(1,000,000,000) shares having a par value of $0.10 each. Two hundred million
(200,000,000) of such shares have been designated as shares of the class which
are attributable to each of the Funds. To date a total of 600,000,000 shares
have been so designated. The Board may designate additional classes of Company
shares, and increase or decrease the number of shares in a class, provided that
the Board does not decrease the number of shares outstanding.

Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective class of stock and, upon
liquidation or dissolution, in the net assets of such class remaining after
satisfaction of outstanding liabilities.

The International Fund has incurred expenses in connection with its
organization in the amount of $39,110 which were advanced by GIAC and reimbursed
as of March 31, 1992. In connection with its organization and registration, the
Emerging Markets Fund incurred expenses in the amount of $2,536, which were
advanced by GIAC and which were repaid upon completion by the Fund of one year
of operations. These expenses included legal and auditing fees, registration
fees and preparation and printing costs of the registration statement and other
documents. These expenses are being amortized by the International Fund on a
straight-line basis over a five-year period which began in February 1991 for the
International Fund and in September 1994 for the Emerging Markets Fund, when
each of the Funds first became available to owners and prospective owners of
contracts issued by GIAC.

The Small Cap Stock Fund has incurred expenses in connection with its
organization in the amount of $984 which were advanced by GISC. These
organization expenses include, legal and auditing fees, registration fees and
preparation and printing costs of the registration statement and other
documents. These expenses will be amortized by the Small Cap Stock Fund on a
straight-line basis over a five-year period which began in April 2, 1997.

PURCHASE AND REDEMPTION OF SHARES

Shares of the Funds are continuously offered at the net asset value per
share next determined after a proper purchase request is deemed received by
GIAC. Shares of the Funds are only offered to GIAC in connection with the
variable annuity and variable life insurance contracts issued through its
separate accounts. GIAC submits purchase and redemption orders on behalf of its
contractowners to the Funds based on premium payments or transfer instructions
furnished to GIAC by such contractowners. Payment for shares redeemed will be
made within seven (7) days after the order for redemption is received by the
Funds from GIAC. The redemption price will be the net asset value per share next
determined following the time a proper request for redemption is deemed to have
been received. The right to redeem a Fund's shares may be suspended or the date
of payment postponed beyond seven (7) days during any period when (1) trading on
the New York Stock Exchange is restricted, as determined by

B-21
<PAGE>

the SEC, or the New York Stock Exchange is closed for other than weekends and
holidays; (2) an emergency exists, as determined by the SEC, as a result of
which disposal by a Fund of securities owned by it is not reasonably
practicable, or it is not reasonably practicable for a Fund fairly to determine
the value of its net assets; or (3) the SEC by order so permits for the
protection of contractowners.

See the accompanying Prospectus for the applicable GIAC contract for a
description of the procedures concerning allocations or transfers among
investment options of the separate account which supports the contract.

CUSTODIAN AND TRANSFER AGENT

The custodian for all securities and assets of the Company is State Street
Bank and Trust Company ("State Street Bank"), 1776 Heritage Drive, North Quincy,
Massachusetts 02171. Portfolio securities purchased for the Funds outside of the
U.S. are maintained in the custody of foreign banks and trust companies which
are members of State Street Bank's Global Custody Network and foreign
depositories (foreign sub-custodians). State Street Bank and each of the foreign
custodial institutions holding portfolio securities of the Funds has been
approved by the Board in accordance with regulations under the 1940 Act.

To the extent required by the 1940 Act and the regulations thereunder, the
Board reviews, at least annually, whether it is in the best interest of a Fund
and its shareholders to maintain Fund assets in each foreign custodial
institution used by a Fund. However, there can be no assurance that a Fund, and
the value of its shares, will not be adversely affected by acts of foreign
governments, financial or operational difficulties of the foreign
sub-custodians, difficulties and costs of obtaining jurisdiction over, or
enforcing judgments against, the foreign sub-custodians, or application of
foreign law to a Fund's foreign subcustodial arrangements. Accordingly, an
investor should recognize that the noninvestment risks associated with holding
assets abroad may be greater than those associated with investing in the U.S.

GIAC serves as the Company's transfer and dividend paying agent. In its
capacity as transfer agent and dividend paying agent, GIAC issues and redeems
shares of the Funds and distributes dividends to the GIAC separate accounts
which invest in the Funds' shares.

State Street Bank does not play a part in formulating the investment
policies of the Funds or in determining which portfolio securities are to be
purchased or sold by the Funds.

LEGAL OPINION

The legality of the shares described in the Prospectus has been passed
upon by Richard T. Potter, Jr., Vice President and Counsel of GIAC and Counsel
to the Company.

INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS

The independent auditors of the Company are Ernst & Young LLP, 787 Seventh
Avenue, New York, New York 10019. Ernst & Young LLP audits and reports on the
financial statements of the Company which appear in the Company's Annual Report
to Shareholders for the year ended December 31, 1998. That Annual Report is
incorporated by reference in this Statement of Additional Information.

B-22
<PAGE>

GIAC FUNDS, INC.

PART C. OTHER INFORMATION
Item 23. Exhibits

Number Description
------ -----------

(a) -- Registrant's Articles of Incorporation as amended through
March 31, 1998(1)

(b) -- Registrant's By-Laws(2)

(d)(i) -- Form of Investment Management Agreement between
Guardian Baillie Gifford Limited and Registrant for
Baillie Gifford International Fund(3)

(d)(ii) -- Form of Investment Management Agreement between
Guardian Baillie Gifford Limited and Registrant for
Baillie Gifford Emerging Markets Fund(4)

(d)(iii) -- Form of Sub-Investment Management Agreement between
Guardian Baillie Gifford Limited and Baillie Gifford
International Fund(5)

(d)(iv) -- Form of Supplemental Sub-Investment Management
Agreement between Guardian Baillie Gifford Limited and
Baillie Gifford Overseas Limited for Baillie Gifford
International Fund(6)

(d)(v) -- Form of Sub-Investment Management Agreement between
Guardian Baillie Gifford Limited and Baillie Gifford
Overseas Limited for Baillie Gifford Emerging Markets
Fund(7)

(d)(vi) -- Form of Investment Management Agreement between
Guardian Investor Services Corporation and Registrant
for Guardian Small-Cap Stock Fund(8)

(e) -- Not Applicable

(f) -- Not Applicable

(g)(i) -- Form of Custodian Agreement between State Street Bank
and Trust Company and Registrant(9)

C-1
<PAGE>

(g)(ii) -- Addendum to Custodian Agreement between State Street
Bank and Trust Company and Registrant(10)

(h) -- Form of Transfer Agency Agreement between State
Street Bank and Trust Company and Registrant(11)

(i)(a) -- Opinion and Consent of Counsel(12)

(j)(i) -- Consent of Counsel

(j)(ii) -- Consent of Ernst & Young LLP

(k) -- Not Applicable

(l) -- Letter from The Guardian Insurance & Annuity Company,
Inc. with respect to providing the initial capital for
the Registrant(13)

(m) -- Not Applicable

(n) -- Financial Data Schedules

(o) -- Not Applicable

(p) -- Miscellaneous

(p)(i) -- Powers of Attorney executed by the Board of Directors and
certain principal officers of the Registrant

- ----------

1. Incorporated by reference to Exhibit 1(a) of Post-Effective Amendment No.
11 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed
on April 27, 1998.

2. Incorporated by reference to Exhibit 2 of Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed on
April 27, 1998.

3. Incorporated by reference to Exhibit 5(a) of Post-Effective Amendment No.
11 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed
on April 27, 1998.

4. Incorporated by reference to Exhibit 5(b) of Post-Effective Amendment No.
11 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed
on April 27, 1998.

5. Incorporated by reference to Exhibit 5(c)(i) of Post-Effective Amendment
No. 11 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as
filed on April 27, 1998.

6. Incorporated by reference to Exhibit 5(c)(ii) of Post-Effective Amendment
No. 11 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as
filed on April 27, 1998.

7. Incorporated by reference to Exhibit 5(d) of Post-Effective Amendment No.
10 to the Registration Statement on Form N-1A (Reg. No. 33-23966) as filed
on April 30, 1997.

8. Incorporated by reference to Exhibit 5(e) of Post-Effective Amendment No.
10 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed
on April 30, 1997.

9. Incorporated by reference to Exhibit 8 of Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed on
April 27, 1998.

10. Incorporated by reference to Exhibit 8(b) of Post-Effective Amendment No.
11 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed
on April 27, 1998.

11. Incorporated by reference to Exhibit 9 of Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed on
April 27, 1998.

12. Incorporated by reference to Exhibit 10(a) of Post-Effective Amendment No.
11 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed
on April 27, 1998.

13. Incorporated by reference to Exhibit 13(a) of Post-Effective Amendment No.
11 to the Registration Statement on Form N-1A (Reg. No. 33-37883) as filed
on April 27, 1998.

Item 24. Persons Controlled by or under Common Control with Registrant

The following list sets forth the persons directly controlled by The
Guardian Life Insurance Company of America ("Guardian Life") as of February 28,
1999:

Percentage of
Voting Securities
State of Incorporation Owned
Name of Entity or Organization By Guardian Life
-------------- --------------- ----------------
The Guardian Insurance & Delaware 100%
Annuity Company, Inc.
Guardian Reinsurance Services,Inc. Connecticut 100%
Managed Dental Care California 100%
Physicians Health Services, Inc. Delaware 14%
Private Healthcare Systems, Inc. Delaware 48%
Guardian Asset Management Delaware 100%
Corporation
Park Avenue Life Insurance Company Delaware 100%
Managed Dental Guard of Missouri Missouri 100%
Managed Dental Guard of Texas, Inc. Texas 100%
Managed Dental Guard of Illinois, Inc. Illinois 100%
The Guardian Tax-Exempt Fund Massachusetts 89%
The Guardian Baillie Gifford
International Fund Massachusetts 22%
The Guardian Investment Quality
Bond Fund Massachusetts 34%
Baillie Gifford International Fund Maryland 24%
Baillie Gifford Emerging
Markets Fund Maryland 33%
The Guardian Asset
Allocation Fund Massachusetts 11%
Guardian Park Avenue Small Cap Fund Massachusetts 19%
Guardian Baillie Gifford Emerging
Markets Fund Massachusetts 76%
The Guradian High Yield Bond Fund Massachusetts 91%
The Guardian Small Cap Stock Fund Massachusetts 33%

C-2
<PAGE>

The following list sets forth the persons directly controlled by
affiliates of Guardian Life and thereby indirectly controlled by Guardian Life
as of February 28, 1999:

<TABLE>
<CAPTION>
Approximate
Percentage of Voting
Securities Owned
Place of Incorporation by Guardian Life
Name of Entity or Organization and its Affiliates
-------------- --------------- ------------------

Guardian Investor Services New York 100%
Corporation
Guardian Baillie Gifford Limited Scotland 51%
The Guardian Cash Fund, Inc. Maryland 100%
The Guardian Bond Fund, Inc. Maryland 100%
The Guardian Stock Fund, Inc. Maryland 100%
GIAC Funds, Inc. (fka GBG Funds, Inc.) Maryland 100%
The Guardian Park Avenue Fund Massachussetts 16%
Park Avenue Securities Delaware 100%

</TABLE>

Item 25. Indemnification

Reference is made to Article EIGHTH, Section 2 of Registrant's By-Laws,
filed as Exhibit 2 to the Registration Statement on Form N-1A on November 19,
1990 and incorporated herein by reference.

Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

Item 26. Business and Other Connections of Registrant's Investment Adviser and
Sub-Investment Adviser

At present, Guardian Baillie Gifford Limited ("GBG"), the Registrant's
investment manager, is exclusively engaged in the business of acting as the
investment manager to the Registrant and one other series fund of The Park
Avenue Portfolio, a registered investment company underwritten and distributed
by Guardian Investor Services Corporation. GBG's principal business address is 1
Rutland Court, Edinburgh EH3 8EY, Scotland. A list of GBG's executive officers
and directors is set forth below, indicating the business, profession, vocation
or employment of a substantial nature in which each person has been engaged
during the past two fiscal years for his or her own account or in the capacity
of director, officer, partner, or trustee, aside from any affiliation with the
Registrant.

C-3
<PAGE>

Other Substantial Business,
Name Position(s) with GBG Profession, Vocation or Employment
---- -------------------- ----------------------------------

ARTHUR VINCENT FERRARA Director Retired. Former Chairman of the
Board and Chief Executive
Officer, The Guardian Life
Insurance Company of America
1/93-12/95; Director 1/81-present.
Director (Trustee) of Guardian
Investor Services Corporation,
The Guardian Insurance & Annuity
Company, Inc.,* Gabelli Capital
Asset Fund and various mutual
funds within the Guardian Fund
Complex.

GAVIN JOHN NORMAN GEMMELL Director Senior Partner: Baillie Gifford &
Co.** Chairman: Baillie Gifford
Overseas Limited** and Baillie
Gifford & Co. Limited** Director:
Toyo Trust Baillie Gifford**

EDWARD H. HOCKNELL Director Partner: Baillie Gifford & Co.**
Director: Baillie Gifford Overseas
Limited** Officer of: The Park
Avenue Portfolio*

ROWAN ROBIN MENZIES Director Partner: Baillie Gifford & Co.**
Director: Baillie Gifford
Overseas Limited** Officer of:
The Park Avenue Portfolio*

JOSEPH DUDLEY SARGENT Director President and Chief Executive
Officer and Director: The
Guardian Life Insurance Company
of America since January 1996;
President, CEO and Director:
The Guardian Insurance & Annuity
Company, Inc.*
Director: Guardian Investor
Services Corporation and Guardian
Asset Management Corporation*
Director (Trustee) of various
Guardian-sponsored mutual funds

JOHN MATTHEW SMITH Director Executive Vice President, Equity
Products: The Guardian Life
Insurance Company of America
since January 1995;
Executive Vice President and
Director: The Guardian Insurance
& Annuity Company, Inc.*
President and Director: Guardian
Investor Services Corporation*
and Guardian Asset Management
Corporation*; President: GBG
Funds, Inc.

MAXWELL C. B. WARD Director Chairman: Baillie Gifford
Overseas Limited**; Director
Baillie Gifford Overseas Limited,
prior thereto.

- ----------
* Principal business address is 7 Hanover Square, New York, New York 10004.
** Principal business address is 1 Rutland Court, Edinburgh, EH3 8EY,
Scotland.

C-4
<PAGE>

Baillie Gifford Overseas Limited ("BGO") acts as the sub-investment manager
for the Registrant and one other Guardian-sponsored mutual fund and provides
investment management services to institutional clients outside of the United
Kingdom. BGO is wholly owned by Baillie Gifford & Co. which is an investment
management firm providing independent investment management services to
investment trusts, unit trusts, pension funds, charitable funds and other
institutional clients primarily located in the United Kingdom.

A list of BGO's directors is set forth below, indicating the business,
profession, vocation or employment of a substantial nature in which each person
has been engaged during the past two fiscal years for his or her own account or
in the capacity of director, officer, partner, or trustee, aside from any
affiliation with the Registrant. Except where otherwise noted, the principal
business address of each individual in his capacity as director of BGO is 1
Rutland Court, Edinburgh, EH3 8EY, Scotland.

Position Other Substantial
Name with BGO Business Affiliations*
---- -------- ----------------------

James K. Anderson Director Partner: Baillie Gifford & Co.
Director: Baillie Gifford & Co. Limited

Gavin J. N. Gemmell** Director Senior Partner: Baillie Gifford & Co.

Edward H. Hocknell** Director None

Gareth A. Howlett Director Director: Toyo Trust Baillie Gifford
Limited

J. Ross Lidstone Director Partner: Baillie Gifford & Co.

Gill E. Meekison Director Director: Baillie Gifford Savings
Management Limited

R. Robin Menzies** Director Partner: Baillie Gifford & Co.

Maxwell C. B. Ward** Chairman Partner: Baillie Gifford & Co.

- ----------
* Principal business address of each entity is 1 Rutland Court, Edinburgh,
EH3 8EY, Scotland.
** Director of GBG, the Registrant's investment manager.

Guardian Investor Services Corporation

Guardian Investor Services Corporation ("GISC") acts as the sole
investment adviser for The Guardian Small Cap Stock Fund. It also serves as
adviser to The Guardian Stock Fund, Inc., The Guardian Cash Fund, Inc., The
Guardian Bond Fund, Inc., and 7 of the 9 operational series funds which comprise
The Park Avenue Portfolio, namely: The Guardian Park Avenue Fund, The Guardian
Investment Quality Bond Fund, The Guardian Tax-Exempt Fund, The Guardian Cash
Management Fund, The Guardian Asset Allocation Fund, the Guardian High yield
Bond Fund, and the Guardian Park Avenue Tax-Efficient Fund. GISC serves as the
manager of The Gabelli Capital Asset Fund. GISC's principal business address is
7 Hanover Square, New York, New York 10004. In addition, GISC is the
distributor of variable annuities and variable life insurance policies offered
by The Guardian Insurance & Annuity Company, Inc. ("GIAC") through its separate
accounts. These separate accounts, The Guardian/Value Line Separate Account, The
Guardian Separate Account A, The Guardian Separate Account B, The Guardian
Separate Account C, The Guardian Separate Account D, The Guardian Separate
Account K and The Guardian Separate Account M, are all unit investment trusts
registered under the Investment Company Act of 1940, as amended.

A list of GISC's officers and directors is set forth below, indicating the
business, profession, vocation or employment of a substantial nature in which
each person has been engaged during the past two fiscal years for his or her own
account or in the capacity of director, officer, partner, or trustee, aside from
any affiliation with the Registrant. Except where otherwise noted, the principal
business address of each company is 7 Hanover Square, New York, New York 10004.

C-5
<PAGE>

Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------

Joseph A. Caruso Vice President Vice President and Secretary, The
and Secretary Guardian Life Insurance Company of
America 3/96 to present;
Vice President and Secretary: The
Guardian Insurance & Annuity
Company, Inc., Guardian Investor
Services Corporation; Secretary,
Guardian Asset Management
Corporation, various
Guardian-sponsored mutual funds.

- ----------
* Principal business address: 1 Rutland Court, Edinburgh EH3 8EY, Scotland.

C-6
<PAGE>

Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------

Philip H. Dutter Director Independent Consultant (self-
employed). Director: The Guardian
Life Insurance Company of America.
Director: The Guardian Insurance &
Annuity Company, Inc.

Arthur Vincent Ferrara Director Retired. Former Chairman of the
Board and Chief Executive Officer,
The Guardian Life Insurance Company
of America 1/93-12/95; Director
1/81-present. Director (Trustee) of
Guardian Investor Services
Corporation, The Guardian Insurance
& Annuity Company, Inc.,* Gabelli
Capital Asset Fund and various
mutual funds within the Guardian
Fund Complex.

Leo R. Futia Director Retired. Former Chairman of the
Board and Chief Executive Officer,
The Guardian Life Insurance Company
of America; Director 5/70 -
present. Director (Trustee) of The
Guardian Insurance & Annuity
Company, Inc., Guardian Investor
Services Corporation and various
mutual funds within the Guardian
Fund Complex. Director (Trustee) of
various mutual funds sponsored by
Value Line, Inc.

Earl C. Harry Treasurer Treasurer: The Guardian Life
Insurance Company of America
11/96 - present.
Treasurer: The Guardian Insurance
& Annuity Company, Inc., and
Guardian Asset Management
Corporation.

- ----------
* Principal business address: 711 Third Avenue, New York, New York 10017.

C-7
<PAGE>

Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------

Peter L. Hutchings Director Executive Vice President and Chief
Financial Officer: The Guardian
Life Insurance Company of America.
Director: Guardian Asset Management
Corporation. Director: The Guardian
Insurance & Annuity Company, Inc.

Ryan W. Johnson Senior Vice Vice President, Equity Sales and
President and Marketing: The Guardian Life
National Sales Insurance Company of America since
Director 3/98; Second Vice President, Equity
Sales: The Guardian Life Insurance
Company of America prior thereto;
Regional Sales Director, Western
Division, for Equity Products prior
thereto. Vice President, Equity
Sales, The Guardian Insurance &
Annuity Company, Inc.

Frank J. Jones Director Executive Vice President and Chief
Investment Officer: The Guardian
Life Insurance Company of America.
Director, Executive Vice President
and Chief Investment Officer: The
Guardian Insurance & Annuity
Company, Inc. Director: Guardian
Asset Management Corporation and
Guardian Baillie Gifford
Limited*.Officer of various
Guardian-sponsored mutual funds.

- ----------
*Principal business address: 1 Rutland Court, Edinburgh EH3 8EY, Scotland.

C-8
<PAGE>

Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------

Frank L. Pepe Vice President & Vice President and Controller,
Controller Equity Products: The Guardian Life
Insurance Company of America since
1/96. Vice President and
Controller: The Guardian
Insurance & Annuity Company, Inc.
Officer of various
Guardian-sponsored mutual funds.

C-9
<PAGE>

Other Substantial Business,
Name Position(s) with GISC Profession, Vocation or Employment
---- --------------------- ----------------------------------

Richard T. Potter, Jr. Vice President Vice President and Equity Counsel:
and Counsel The Guardian Life Insurance Company
of America since 1/96. Vice
President and Counsel: The Guardian
Insurance & Annuity Company, Inc.;
Counsel, Guardian Asset Management
Corporation and various
Guardian-sponsored mutual funds.

Joseph D. Sargent Director President, Chief Executive Officer
and Director: The Guardian Life
Insurance Company of America since
1/96. President and Director:
The Guardian Insurance & Annuity
Company, Inc. Director (Trustee)
Guardian Asset Management
Corporation, Guardian Baillie
Gifford, Ltd.*, various Guardian-
sponsored mutual funds.

John M. Smith President & Executive Vice President: The
Director Guardian Life Insurance Company of
America 1/95 to present. Executive
Vice President and Director: The
Guardian Insurance & Annuity
Company, Inc. Director: Guardian
Baillie Gifford Ltd.* and Guardian
Asset Management Corporation
President and Director: Guardian
Asset Management Corporation.
President: GIAC Funds, Inc.

William C. Warren Director Retired.
Director: The Guardian Life
Insurance Company of America.
Director: The Guardian Insurance &
Annuity Company, Inc.
Director: Guardian Investor
Services Corporation

- ----------
*Principal business address: 1 Rutland Court, Edinburgh EH3 8EY, Scotland.

C-10
<PAGE>

Item 27. Principal Underwriters

(a) Guardian Investor Services Corporation ("GISC") is the principal underwriter
and distributor of the Registrant's shares and is also the principal underwriter
and distributor of The Guardian Stock Fund, Inc., The Guardian Bond Fund, Inc.,
The Guardian Cash Fund, Inc., and The Park Avenue Portfolio, a series fund
consisting of the following portfolios: The Guardian Park Avenue Fund, The
Guardian Cash Management Fund, The Guardian Baillie Gifford International Fund,
The Guardian Investment Quality Bond Fund, The Guardian Tax-Exempt Fund, The
Guardian Asset Allocation Fund, The Guardian Baillie Gifford Emerging Markets
Fund, The Guardian Park Avenue Small Cap Fund, The Guardian High Yield Bond Fund
and The Guardian Park Avenue Tax-Efficient Fund. In addition, GISC is the
distributor of variable contracts offered by The Guardian Insurance & Annuity
Company, Inc. ("GIAC") through GIAC's separate accounts: The Guardian/Value Line
Separate Account, The Guardian Separate Account A, The Guardian Separate Account
B, The Guardian Separate Account C, The Guardian Separate Account D, The
Guardian Separate Account K, and The Guardian Separate Account M which are all
registered as unit investment trusts under the Investment Company Act of 1940,
as amended. These latter separate accounts buy and sell shares of The Guardian
Stock Fund, Inc., The Guardian Bond Fund, Inc., The Guardian Cash Fund, Inc. and
GIAC Funds, Inc. on behalf of GIAC's variable contractowners.

(b) The following is a list of the directors and officers of GISC and their
respective positions with the Registrant, if any. The principal business address
of each individual listed below is 7 Hanover Square, New York, New York 10004.

C-11
<PAGE>

Position(s) Position(s)
Name with GISC with Registrant
---- --------- ---------------

John M. Smith President & Director President
Philip H. Dutter Director None
Arthur V. Ferrara Director Director
Leo R. Futia Director Director
Peter L. Hutchings Director None
Frank J. Jones Director None
Joseph D. Sargent Director Chairman of the
Board of Directors
William C. Warren Director None
Ryan W. Johnson Senior Vice President & National None
Sales Director
Frank L. Pepe Vice President & Controller Treasurer
Donald P. Sullivan, Jr. Vice President Second Vice
President
Earl C. Harry Treasurer None
Richard T. Potter, Jr. Vice President and Counsel Counsel
Joseph A. Caruso Vice President and Secretary Secretary

Item 28. Location of Accounts and Records

Most of the accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained on behalf of the Registrant by the custodian and
transfer agent, State Street Bank and Trust Company, 1776 Heritage Drive, North
Quincy, Massachusetts 02171. Documents constituting the Registrant's corporate
records are maintained on behalf of the Registrant by The Guardian Insurance &
Annuity Company, Inc. at 7 Hanover Square, New York, New York 10004.

Item 29. Management Services

Pursuant to an administrative and secretarial agreement between GBG and
Baillie Gifford & Co., the latter will furnish office space, clerical staff,
services and facilities required by GBG in connection with its obligations under
the Investment Management Agreement between GBG and the Registrant for an annual
fee of 10,000 (British Pounds) (approximately $20,000).

Item 30. Undertakings

Not applicable.

C-12
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, GIAC Funds, Inc. (formerly GBG
Funds, Inc. and formerly Baillie Gifford International Fund, Inc.) certifies
that it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York and the State of New York on the 28th day of April, 1999.

GIAC FUNDS, INC.

By /s/JOHN M. SMITH
--------------------------------
John M. Smith
President

C-13
<PAGE>

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates reflected below.

s/JOHN M. SMITH President April 28, 1999
- ------------------------- (Principal Executive
John M. Smith Officer)

s/FRANK L. PEPE* Treasurer
- ------------------------- (Principal Financial
Frank L. Pepe and Accounting Officer)

- ------------------------- Chairman of the Board of
Joseph D. Sargent Directors

s/JOHN C. ANGLE* Director
- -------------------------
John C. Angle

s/FRANK J. FABOZZI* Director
- -------------------------
Frank J. Fabozzi

s/ARTHUR V. FERRARA* Director
- -------------------------
Arthur V. Ferrara

s/LEO R. FUTIA* Director
- -------------------------
Leo R. Futia

s/WILLIAM W. HEWITT, JR.* Director
- -------------------------
William W. Hewitt, Jr.

s/SIDNEY I. LIRTZMAN* Director
- -------------------------
Sidney I. Lirtzman

- ------------------------- Director
Carl W. Schafer

s/ROBERT G. SMITH* Director
- -------------------------
Robert G. Smith

*By s/JOHN M. SMITH Vice President April 28, 1999
-------------------------
John M. Smith
Pursuant to a Power of Attorney

C-14
<PAGE>

GIAC FUNDS, INC.
Exhibit Index

Exhibit Number Description
- -------------- -----------

(j)(i) Consent of Counsel

(j)(ii) Consent of Ernst & Young LLP

(n) Financial Data Schedules

(p)(i) Powers of Attorney

EX-99.(j)(i)
CONSENT OF COUNSEL

I hereby consent to the reference to my name under the caption
"Legal Opinion" included in the Statement of Additional Information constituting
part of this Post-Effective Amendment to the Registration Statement on Form N-1A
for GIAC Funds, Inc. and to the filing of this consent as an exhibit to said
Amendment.

By /s/ Richard T. Potter, Jr.
-----------------------------
Richard T. Potter, Jr.
Counsel

New York, New York
April 28, 1999

EX-99.(j)(ii)
CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Independent Auditors and Financial
Statements" in the Statement of Additional Information in this Registration
Statement (Form N-1A No. 33-37883), and to the incorporation by reference herein
of our report dated February 10, 1999 on the financial statements and financial
highlights of GIAC Funds, Inc.

By /s/ Ernst & Young LLP
----------------------------
Ernst & Young LLP

New York, New York
April 26, 1999

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that John M. Smith, whose signature
appears below, constitutes and appoints Frank J. Jones, Larry A. Luxenberg,
Joseph A. Caruso and Richard T. Potter, Jr., and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for GIAC FUNDS, INC. and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

/s/ John M. Smith
----------------------------------------
Signature

Dated: April 26, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that Frank L. Pepe, whose signature
appears below, constitutes and appoints John M. Smith, Larry A. Luxenberg,
Joseph A Caruso and Richard T. Potter, Jr., and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for GIAC FUNDS, INC. and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

/s/ Frank L. Pepe
----------------------------------------
Signature

Dated: April 26, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that John C. Angle, whose signature
appears below, constitutes and appoints John M. Smith, Frank L. Pepe, Joseph A.
Caruso and Richard T. Potter, Jr., and each of them, his attorney-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for GIAC
FUNDS, INC. and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.

/s/ John C. Angle
----------------------------------------
John C. Angle

Dated: March 31, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that Frank J. Fabozzi, whose
signature appears below, constitutes and appoints John M. Smith, Frank L. Pepe,
Joseph A. Caruso and Richard T. Potter, Jr., and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for GIAC FUNDS, INC. and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

/s/ Frank J. Fabozzi
----------------------------------------
Frank J. Fabozzi

Dated: April 26, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that Arthur V. Ferrara, whose
signature appears below, constitutes and appoints John M. Smith, Frank L. Pepe,
Joseph A. Caruso and Richard T. Potter, Jr., and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for GIAC FUNDS, INC. and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

/s/ Arthur V. Ferrara
----------------------------------------
Arthur V. Ferrara

Dated: April 1, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that Leo R. Futia, whose signature
appears below, constitutes and appoints John M. Smith, Frank L. Pepe, Joseph A.
Caruso and Richard T. Potter, Jr., and each of them, his attorney-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for GIAC
FUNDS, INC. and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.

/s/ Leo R. Futia
----------------------------------------
Leo R. Futia

Dated: March 31, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that William W. Hewitt, Jr., whose
signature appears below, constitutes and appoints John M. Smith, Frank L. Pepe,
Joseph A. Caruso and Richard T. Potter, Jr., and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for GIAC FUNDS, INC. and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

/s/ William W. Hewitt, Jr.
----------------------------------------
William W. Hewitt, Jr.

Dated: March 31, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that Sidney I. Lirtzman, whose
signature appears below, constitutes and appoints John M. Smith, Frank L. Pepe,
Joseph A. Caruso and Richard T. Potter, Jr., and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for GIAC FUNDS, INC. and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

/s/ Sidney I. Lirtzman
----------------------------------------
Sidney I. Lirtzman

Dated: April 1, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that Joseph D. Sargent, whose
signature appears below, constitutes and appoints John M. Smith, Frank L. Pepe,
Joseph A. Caruso and Richard T. Potter, Jr., and each of them, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any registration statements and amendments to registration
statements for GIAC FUNDS, INC. and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.

/s/ Joseph D. Sargent
----------------------------------------
Joseph D. Sargent

Dated: April 1, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that Carl W. Schafer, whose signature
appears below, constitutes and appoints John M. Smith, Frank L. Pepe, Joseph A.
Caruso and Richard T. Potter, Jr., and each of them, his attorney-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for GIAC
FUNDS, INC. and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.

/s/ Carl W. Schafer
----------------------------------------
Carl W. Schafer

Dated: April 3, 1999
<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that Robert G. Smith, whose signature
appears below, constitutes and appoints John M. Smith, Frank L. Pepe, Joseph A.
Caruso and Richard T. Potter, Jr., and each of them, his attorney-in-fact, each
with the power of substitution, for him in any and all capacities, to sign any
registration statements and amendments to registration statements for GIAC
FUNDS, INC. and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.

/s/ Robert G. Smith
----------------------------------------
Robert G. Smith

Dated: April 1, 1999

<ARTICLE> 6
<LEGEND>
BAILLIE GIFFORD INTERNATIONAL FUND
This schedule contains financial information extracted from the "Annual Report
to Shareholders" dated December 31, 1998, and is qualified in its entirety to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> BAILLIE GIFFORD INTERNATIONAL FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 504,258
<INVESTMENTS-AT-VALUE> 680,620
<RECEIVABLES> 2,214
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 682,834
<PAYABLE-FOR-SECURITIES> 82
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,462
<TOTAL-LIABILITIES> 2,544
<SENIOR-EQUITY> 3,251
<PAID-IN-CAPITAL-COMMON> 495,369
<SHARES-COMMON-STOCK> 32,512
<SHARES-COMMON-PRIOR> 29,269
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (2,559)
<ACCUMULATED-NET-GAINS> 7,981
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 176,247
<NET-ASSETS> 680,290
<DIVIDEND-INCOME> 8,549
<INTEREST-INCOME> 772
<OTHER-INCOME> 0
<EXPENSES-NET> 5,970
<NET-INVESTMENT-INCOME> 3,351
<REALIZED-GAINS-CURRENT> 40,488
<APPREC-INCREASE-CURRENT> 71,008
<NET-CHANGE-FROM-OPS> 114,847
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,351)
<DISTRIBUTIONS-OF-GAINS> (33,666)
<DISTRIBUTIONS-OTHER> (409,367)
<NUMBER-OF-SHARES-SOLD> 6,525
<NUMBER-OF-SHARES-REDEEMED> (5,068)
<SHARES-REINVESTED> 1,786
<NET-CHANGE-IN-ASSETS> 145,579
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,342
<OVERDISTRIB-NII-PRIOR> (4,372)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,892
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,970
<AVERAGE-NET-ASSETS> 611,464
<PER-SHARE-NAV-BEGIN> 18.27
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 3.73
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (1.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.92
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
BAILLIE GIFFORD EMERGING MARKETS FUND
This schedule contains financial information extracted from the "Annual Report
to Shareholders" dated December 31, 1998, and is qualified in its entirety to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> BAILLIE GIFFORD EMERGING MARKETS FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 53,601
<INVESTMENTS-AT-VALUE> 49,272
<RECEIVABLES> 1,733
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51,005
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 342
<TOTAL-LIABILITIES> 342
<SENIOR-EQUITY> 686
<PAID-IN-CAPITAL-COMMON> 69,201
<SHARES-COMMON-STOCK> 6,856
<SHARES-COMMON-PRIOR> 8,553
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (33)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (14,856)
<ACCUM-APPREC-OR-DEPREC> (4,334)
<NET-ASSETS> 50,664
<DIVIDEND-INCOME> 1,487
<INTEREST-INCOME> 238
<OTHER-INCOME> 0
<EXPENSES-NET> 970
<NET-INVESTMENT-INCOME> 755
<REALIZED-GAINS-CURRENT> (13,850)
<APPREC-INCREASE-CURRENT> (7,925)
<NET-CHANGE-FROM-OPS> (21,020)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (481)
<NUMBER-OF-SHARES-SOLD> 1,108
<NUMBER-OF-SHARES-REDEEMED> (2,863)
<SHARES-REINVESTED> 59
<NET-CHANGE-IN-ASSETS> (36,350)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (563)
<OVERDIST-NET-GAINS-PRIOR> (1,239)
<GROSS-ADVISORY-FEES> 650
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 970
<AVERAGE-NET-ASSETS> 64,956
<PER-SHARE-NAV-BEGIN> 10.17
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> (2.81)
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.39
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THE GUARDIAN SMALL CAP STOCK FUND
This schedule contains financial information extracted from the "Annual Report
to Shareholders" dated December 31, 1998, and is qualified in its entirety to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> BAILLIE GIFFORD SMALL CAP STOCK FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 173,939
<INVESTMENTS-AT-VALUE> 192,727
<RECEIVABLES> 1,418
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 194,145
<PAYABLE-FOR-SECURITIES> 270
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282
<TOTAL-LIABILITIES> 552
<SENIOR-EQUITY> 1,519
<PAID-IN-CAPITAL-COMMON> 185,369
<SHARES-COMMON-STOCK> 15,192
<SHARES-COMMON-PRIOR> 6,439
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (12,084)
<ACCUM-APPREC-OR-DEPREC> 18,789
<NET-ASSETS> 193,593
<DIVIDEND-INCOME> 811
<INTEREST-INCOME> 343
<OTHER-INCOME> 0
<EXPENSES-NET> 971
<NET-INVESTMENT-INCOME> 183
<REALIZED-GAINS-CURRENT> (12,129)
<APPREC-INCREASE-CURRENT> 11,583
<NET-CHANGE-FROM-OPS> (363)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (181)
<DISTRIBUTIONS-OF-GAINS> (848)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,667
<NUMBER-OF-SHARES-REDEEMED> (2,988)
<SHARES-REINVESTED> 73
<NET-CHANGE-IN-ASSETS> 105,843
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 861
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 820
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 971
<AVERAGE-NET-ASSETS> 109,281
<PER-SHARE-NAV-BEGIN> 13.63
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (0.79)
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.74
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>