N-CSRS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-03636

The Guardian Variable Contract Funds, Inc.

(Exact name of registrant as specified in charter)

7 Hanover Square New York, N.Y. 10004

(Address of principal executive offices) (Zip code)

John H. Walter	Thomas G. Sorell
The Guardian Variable Contract Funds, Inc.	The Guardian Variable Contract Funds, Inc.
7 Hanover Square	7 Hanover Square
New York, N.Y. 10004	New York, N.Y. 10004

(Name and address of agents for service)

Registrant’s telephone number, including area code: (800) 221-3253

Date of fiscal year end: December 31

Date of reporting period: June 30, 2006

ITEM 1. REPORTS TO STOCKHOLDERS.

The Semiannual Report to Shareholders follows.

ⁿ   The Guardian Stock Fund Semiannual Report To Contractowners

Manind V. Govil, CFA Portfolio Manager

Objective:

Long-term growth of capital

Portfolio:

At least 80% common stocks and securities convertible into common stocks

Inception Date:

April 13, 1983

Net Assets at June 30, 2006:

$972,448,202

Top Ten Holdings  (As of 6/30/2006)

Company	Percentage of Total Net Assets
Viacom, Inc. — Class B	3.24%
AT & T, Inc.	3.18%
Chevron Corp.	2.81%
Caterpillar, Inc.	2.67%
Wyeth	2.67%
MasterCard, Inc. — Class A	2.59%
Abbott Laboratories	2.57%
Pfizer, Inc.	2.54%
Apple Computer, Inc.	2.41%
Microsoft Corp.	2.34%

Sector Weightings vs. Index  (As of 6/30/2006)

Average Annual Total Returns  (For periods ended 6/30/2006)

	Year to Date	1 Yr	5 Yrs	10 Yrs	Since Inception 4/13/1983
The Guardian Stock Fund	2.25%	9.30%	–0.01%	5.45%	11.42%
S&P 500 Index	2.71%	8.63%	2.50%	8.32%	12.39%

About information in this report:

• All performance data quoted is historical and the results represent past performance and neither guarantee nor predict future investment results. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at (800) 221-3253 or visit our website at www.guardianinvestor.com. Current performance may be higher or lower than the performance quoted here. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.

• It is important to consider the Fund’s investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested.

• The S&P 500 Index is an index of 500 primarily large cap U.S. stocks that is generally considered to be representative of U.S. stock market activity. Index returns are provided for comparative purposes. Please note that the index is unmanaged and not available for direct investment and its returns do not reflect the fees and expenses that have been deducted from the Fund.

• Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. The return figures shown do not reflect the deduction of taxes that a contractowner may pay on distributions or redemption of units.

THE GUARDIAN STOCK FUND 1

ⁿ   The Guardian Stock Fund Semiannual Report
To Contractowners

Fund Expenses

By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including, as applicable, management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other underlying funds.

The example is based on an investment of $1,000 invested on January 1, 2006 and held for six months ended June 30, 2006.

Actual Expenses

The first line in the table provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value January 1, 2006		Ending Account Value June 30, 2006		Expenses Paid During the Period*		Annualized Expense Ratio
Actual	$	1,000	$	1,022.50	$	2.81	0.56%
Hypothetical (5% return before expenses)	$	1,000	$	1,022.02	$	2.81	0.56%

* Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the Fund’s most recent fiscal half-year).

2 THE GUARDIAN STOCK FUND

ⁿ The Guardian Stock Fund

Schedule of Investments

June 30, 2006 (Unaudited)

Shares		Value
Common Stocks — 98.8%
Aerospace and Defense — 2.7%
199,700	Boeing Co.	$	16,357,427
159,200	General Dynamics Corp.		10,421,232
			26,778,659
Beverages — 0.9%
146,800	PepsiCo., Inc.		8,813,872
Biotechnology — 1.1%
168,600	Genzyme Corp.*		10,293,030
Capital Markets — 5.1%
133,000	Goldman Sachs Group, Inc.		20,007,190
185,700	Legg Mason, Inc.		18,480,864
204,600	Northern Trust Corp.		11,314,380
			49,802,434
Chemicals — 1.6%
242,400	Dow Chemical Co.		9,460,872
122,400	Rohm & Haas Co.		6,134,688
			15,595,560
Commercial Banks — 3.0%
170,500	Compass Bancshares, Inc.		9,479,800
747,800	Synovus Financial Corp.		20,026,084
			29,505,884
Communications Equipment — 2.3%
1,098,000	Nokia Corp. ADR		22,245,480
Computers and Peripherals — 5.5%
410,900	Apple Computer, Inc.*		23,470,608
967,500	EMC Corp.*		10,613,475
621,400	Hewlett Packard Co.		19,685,952
			53,770,035
Consumer Finance — 5.2%
275,700	American Express Co.		14,672,754
373,700	Americredit Corp.*		10,433,704
523,900	MasterCard, Inc. – Class A*		25,147,200
			50,253,658
Diversified Telecommunication Services — 4.3%
1,107,936	AT & T, Inc.		30,900,335
299,000	BellSouth Corp.		10,823,800
			41,724,135
Electric Utilities — 1.5%
249,700	Exelon Corp.		14,190,451
Electrical Equipment — 0.7%
91,500	Rockwell Automation, Inc.		6,588,915
Electronic Equipment and Instruments — 1.0%
388,100	Jabil Circuit, Inc.		9,935,360
Energy Equipment and Services — 1.5%
179,800	Transocean, Inc.*		14,441,536
Food and Staples Retailing — 2.4%
246,600	Costco Wholesale Corp.		14,088,258
195,400	Wal-Mart Stores, Inc.		9,412,418
			23,500,676
Food Products — 3.3%
353,500	Dean Foods Co.*		13,146,665
358,100	General Mills, Inc.		18,499,446
			31,646,111

Shares		Value
Health Care Providers and Services — 1.7%
141,500	McKesson Corp.	$	6,690,120
218,700	UnitedHealth Group, Inc.		9,793,386
			16,483,506
Hotels, Restaurants and Leisure — 2.2%
626,900	McDonald’s Corp.		21,063,840
Household Durables — 1.1%
229,600	KB Home		10,527,160
Household Products — 1.6%
277,200	Procter & Gamble Co.		15,412,320
Independent Power Producers and Energy Traders — 1.6%
844,200	AES Corp.*		15,575,490
Industrial Conglomerates — 2.8%
594,000	General Electric Co.		19,578,240
294,000	Tyco Int’l. Ltd.		8,085,000
			27,663,240
Information Technology Services — 1.8%
619,200	Accenture Ltd. – Class A		17,535,744
Insurance — 6.9%
267,500	Allstate Corp.		14,640,275
644,900	Aon Corp.		22,455,418
276,700	Fidelity National Financial, Inc.		10,777,465
551,000	Genworth Financial, Inc. – Class A		19,196,840
			67,069,998
Internet Software and Services — 1.4%
330,200	eBay, Inc.*		9,671,558
126,400	Yahoo! Inc.*		4,171,200
			13,842,758
Machinery — 3.7%
349,200	Caterpillar, Inc.		26,008,416
243,400	Ingersoll-Rand Co. Ltd. – Class A		10,412,652
			36,421,068
Media — 3.2%
878,100	Viacom, Inc. – Class B*		31,471,104
Multiline Retail — 1.6%
415,800	Federated Department Stores, Inc.		15,218,280
Oil, Gas and Consumable Fuels — 8.4%
440,500	Chevron Corp.		27,337,430
613,700	Enterprise Products Partners LP		15,281,130
253,600	Exxon Mobil Corp.		15,558,360
315,000	Noble Energy, Inc.		14,760,900
83,900	Occidental Petroleum Corp.		8,603,945
			81,541,765
Pharmaceuticals — 8.7%
572,400	Abbott Laboratories		24,962,364
159,100	AstraZeneca PLC ADR		9,517,362
1,051,380	Pfizer, Inc.		24,675,889
583,600	Wyeth		25,917,676
			85,073,291
Road and Rail — 1.9%
230,300	Burlington Northern Santa Fe		18,251,275
Software — 3.0%
207,700	Adobe Systems, Inc.*		6,305,772
976,100	Microsoft Corp.		22,743,130
			29,048,902

See notes to financial statements.

3

ⁿ The Guardian Stock Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares			Value
	Specialty Retail — 1.5%
	276,700	Home Depot, Inc.	$	9,903,093
	141,100	Tiffany & Co.		4,659,122
				14,562,215
	Thrifts and Mortgage Finance — 1.4%
	246,500	Federal Home Loan Mortgage Corp.		14,052,965
	Tobacco — 1.7%
	219,200	Altria Group, Inc.		16,095,856
	Wireless Telecommunication Services — 0.5%
	160,700	American Tower Corp.*		5,000,984
		Total Common Stocks (Cost $917,496,415)		960,997,557
Principal Amount			Value
	Repurchase Agreement — 0.6%
$	5,283,000	State Street Bank and Trust Co. repurchase agreement, dated 6/30/2006, maturity value $5,285,179 at 4.95%, due 7/3/2006 (1) (Cost $5,283,000)	$	5,283,000
	Total Investments — 99.4% (Cost $922,779,415)			966,280,557
	Cash, Receivables, and Other Assets Less Liabilities — 0.6%			6,167,645
	Net Assets — 100%		$	972,448,202

* Non-income producing security.

(1) The repurchase agreement is fully collateralized by $5,390,000 in U.S. Government Agency, 5.50%, due 5/29/2009, with a value of $5,390,000.

Glossary:

ADR — American Depositary Receipt.

See notes to financial statements.

4

ⁿ The Guardian Stock Fund

Statement of Assets and Liabilities

June 30, 2006 (Unaudited)

ASSETS
Investments, at market (cost $922,779,415)	$	966,280,557
Cash		876
Receivable for securities sold		16,443,720
Dividends receivable		1,076,446
Receivable for fund shares sold		194,964
Interest receivable		726
Other assets		19,321
Total Assets		984,016,610
LIABILITIES
Payable for securities purchased		10,370,693
Payable for fund shares redeemed		758,165
Accrued expenses		43,436
Due to GIS		396,114
Total Liabilities		11,568,408
Net Assets	$	972,448,202
COMPONENTS OF NET ASSETS
Capital stock, at par	$	32,916
Additional paid-in capital		1,391,195,502
Undistributed net investment income		1,040,790
Accumulated net realized loss on investments		(463,322,148	)
Net unrealized appreciation of investments		43,501,142
Net Assets	$	972,448,202
Class I Shares Outstanding — $0.001 Par Value		32,916,501
Net Asset Value Per Share		$29.54

Statement of Operations

Six Months Ended

June 30, 2006 (Unaudited)

INVESTMENT INCOME
Dividends	$	8,545,246
Interest		202,830
Less: Foreign tax withheld		(70,583	)
Total Income		8,677,493
Expenses:
Investment advisory fees — Note B		2,534,926
Custodian fees		75,453
Directors’ fees — Note B		67,449
Printing expense		58,377
Insurance expense		37,452
Legal fees		25,408
Audit fees		15,102
Loan commitment fees — Note F		9,822
Registration fees		1,119
Other		2,327
Total Expenses		2,827,435
Net Investment Income		5,850,058
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments — Note A		66,487,934
Net change in unrealized appreciation of investments — Note C		(47,936,712	)
Net Realized and Unrealized Gain on Investments		18,551,222
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	24,401,280

See notes to financial statements.

5

ⁿ The Guardian Stock Fund

Statements of Changes in Net Assets

	Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income	$	5,850,058		$	18,438,411
Net realized gain on investments		66,487,934			82,377,554
Net change in unrealized appreciation of investments		(47,936,712	)		(61,998,935	)
Net Increase in Net Assets Resulting from Operations		24,401,280			38,817,030
Dividends to Shareholders from:
Net investment income		(12,809,398	)		(12,958,536	)
From Capital Share Transactions:
Net decrease in net assets from capital share transactions — Note E		(74,377,656	)		(251,827,836	)
Net Decrease in Net Assets		(62,785,774	)		(225,969,342	)
NET ASSETS:
Beginning of period		1,035,233,976			1,261,203,318
End of period*	$	972,448,202		$	1,035,233,976
*  Includes undistributed net investment income of:	$	1,040,790		$	8,000,130

See notes to financial statements.

6

ⁿ The Guardian Stock Fund

Financial Highlights

Selected data for a share of Class I shares outstanding throughout the periods indicated:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, (Audited)
			2005		2004		2003		2002		2001
Net asset value, beginning of period	$29.29		$28.42		$27.30		$22.71		$28.94		$37.21
Income from investment operations:
Net investment income	0.20		0.50		0.39		0.28		0.24		0.20
Net realized and unrealized gain/(loss) on investments	0.44		0.70		1.23		4.57		(6.25	)	(8.16	)
Net increase/(decrease) from investment operations	0.64		1.20		1.62		4.85		(6.01	)	(7.96	)
Dividends and distributions to shareholders from:
Net investment income	(0.39	)	(0.33	)	(0.50	)	(0.26	)	(0.22	)	(0.08	)
Net realized gain on investments	—		—		—		—		—		(0.23	)
Total dividends and distributions	(0.39	)	(0.33	)	(0.50	)	(0.26	)	(0.22	)	(0.31	)
Net asset value, end of period	$29.54		$29.29		$28.42		$27.30		$22.71		$28.94
Total return*	2.25	%(a)	4.30	%	6.00	%	21.45	%	(20.88	)%	(21.44	)%
Ratios/supplemental data:
Net assets, end of period (000’s omitted)	$972,448		$1,035,234		$1,261,203		$1,454,546		$1,365,328		$2,060,451
Ratio of expenses to average net assets	0.56	%(b)	0.56	%	0.54	%	0.54	%	0.54	%	0.53	%
Ratio of net investment income to average net assets	1.15	%(b)	1.67	%	1.29	%	1.06	%	0.85	%	0.59	%
Portfolio turnover rate	42	%	103	%	76	%	77	%	65	%	137	%

* Total returns do not reflect the effects of charges deducted pursuant to the terms of GIAC’s variable contracts.

Inclusion of such charges would reduce the total returns for all periods shown.

(a) Not annualized.

(b) Annualized.

See notes to financial statements.

7

ⁿ The Guardian Stock Fund

Notes to Financial Statements

June 30, 2006 (Unaudited)

Note A. Organization and Accounting Policies

The Guardian Stock Fund (the Fund or GSF) is a series of The Guardian Variable Contract Funds, Inc. (GVCF). GVCF is incorporated in the state of Maryland and is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The financial statements for the other remaining series of GVCF are presented in separate reports.

GSF offers two classes of shares: Class I and Class II. The Class I shares of GSF are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America. GSF’s Class II shares are available only through the ownership of annuity and insurance products offered by other insurance companies. The two classes of shares for GSF represent interests in the same portfolio of investments, have the same rights and are generally identical in all respects except that each class bears certain class expenses, and has exclusive voting rights with respect to any matter to which a separate vote of any class is required. As of June 30, 2006, no GSF Class II shares have been issued.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies of the Fund are as follows:

Investments

Securities listed on national securities exchanges are valued at the last sale price on such exchanges, or if no sale occurred, at the mean of the closing bid and asked prices. Securities that are traded on the NASDAQ National Securities Market are valued at the NASDAQ Official Closing Price.

Pursuant to valuation procedures approved by the Board of Directors, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgment of the Service, are valued at the bid price. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

Other securities, including securities for which market quotations are not readily available (such as restricted securities, illiquid securities and foreign securities subject to a “significant event”) are valued at fair value as determined in good faith by or under the direction of GVCF’s Board of Directors. A “significant event” is an event that will affect the value of a portfolio security that occurs after the close of trading in the security’s primary trading market or exchange but before the Fund’s NAV is calculated.

Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets.

Futures contracts are valued at the settlement prices established by the boards of trade or exchanges on which they are traded.

Repurchase agreements are carried at cost which approximates market value (see Note D).

Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/discount, is accrued daily. Dividend income is recorded on the ex-dividend date.

Foreign Currency Translation

GSF is permitted to buy international securities that are not U.S. dollar denominated. GSF’s books and records are maintained in U.S. dollars as follows:

(1)  The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange.

(2)  Security purchases and sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.

The resulting gains and losses are included in the Statement of Operations as follows:

Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses,

8

ⁿ The Guardian Stock Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

which result from changes in foreign exchange rates between the date on which GSF earns dividends and interest or pays foreign withholding taxes or other expenses and the date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized gains or losses on foreign currency related transactions. Realized foreign exchange gains and losses which result from changes in foreign exchange rates between the trade and settlement dates on security and currency transactions are also included in net realized gains and losses on foreign currency related transactions. Net currency gains and losses from valuing other assets and liabilities denominated in foreign currency at the period end exchange rate are reflected in net change in unrealized appreciation or depreciation from translation of other assets and liabilities denominated in foreign currencies.

Forward Foreign Currency Contracts

GSF may enter into forward foreign currency contracts in connection with planned purchases or sales of securities, or to hedge against changes in currency exchange rates affecting the values of its investments that are denominated in a particular currency. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Fluctuations in the value of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by GSF. When forward contracts are closed, GSF will record realized gains or losses equal to the difference between the values of such forward contracts at the time each was opened and the values at the time each was closed. Such amounts are recorded in net realized gains or losses on foreign currency related transactions. GSF will not enter into a forward foreign currency contract if such contract would obligate it to deliver an amount of foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency.

Futures Contracts

GSF may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, GSF is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by GSF each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by GSF. The daily changes in the variation margin are recognized as unrealized gains or losses by GSF. GSF’s investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GSF may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates, securities prices or prices of futures contracts move unexpectedly, GSF may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.

Dividend Distributions

Dividends from net investment income are declared and paid semi-annually for GSF. Net realized short-term and long-term capital gains for GSF will be distributed at least annually. All such dividends and distributions are credited in the form of additional shares of GSF at the net asset value on the ex-dividend date.

All dividends and distributions are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations. Differences between the recognition of income on an income tax basis and recognition of income based on GAAP may cause temporary overdistributions of net realized gains and net investment income on a GAAP basis.

Taxes

GSF has qualified and intends to remain qualified to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code (Code), and as such will not be subject to federal income tax on taxable income (including any realized capital gains) which is distributed in accordance with the provisions of the Code. Therefore, no federal income tax provision is required.

Withholding taxes on foreign interest, dividends and capital gains in GSF have been provided for in accordance with the applicable country’s tax rules and rates.

Reclassification of Capital Accounts

The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital gains, and the recharacterization of foreign exchange gains or losses to either ordinary income or realized capital gains for federal income tax purposes. Where such differences are

9

ⁿ The Guardian Stock Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

permanent in nature, they are reclassified in the components of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications would have no effect on net assets, results of operations, or net asset value per share of the Fund.

Note B. Investment Advisory Agreements and Payments to or from Related Parties

The Fund has an investment advisory agreement with Guardian Investor Services LLC (GIS), a wholly-owned subsidiary of GIAC. Fees for investment advisory are at an annual rate of 0.50% of the average daily net assets of the Fund.

The Guardian Fund Complex pays directors who are not “interested persons” (as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Board committee members also receive a fee of $2,000 per committee meeting, which also is allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain directors who are interested persons. Certain officers and directors of the Fund are affiliated with GIS.

Note C. Investment Transactions

Purchases and proceeds from sales of securities (excluding short-term securities) amounted to $425,885,727 and $503,512,989, respectively, during the six months ended June 30, 2006.

The cost of investments owned at June 30, 2006 for federal income tax purposes was substantially the same as the cost for financial reporting purposes. The gross unrealized appreciation and depreciation of investments at June 30, 2006 aggregated $80,615,669 and $37,114,527, respectively, resulting in net unrealized appreciation of $43,501,142.

Note D. Repurchase Agreements

The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, GSF will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, GSF maintains the right to sell the collateral and may claim any resulting loss against the seller.

Note E. Transactions in Capital Stock

There are 300,000,000 shares of $0.001 par value capital stock authorized for GSF, divided into two classes, designated Class I and Class II shares. GSF Class I consists of 250,000,000 shares and Class II consists of 50,000,000 shares. Through June 30, 2006 no Class II shares of GSF were sold. Transactions in capital stock were as follows:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
	Shares				Amount
Shares sold	661,147		919,355		$	19,889,617		$	25,782,156
Shares issued in reinvestment of dividends	452,309		468,155			12,809,398			12,958,536
Shares repurchased	(3,540,999	)	(10,428,273	)		(107,076,671	)		(290,568,528	)
Net decrease	(2,427,543	)	(9,040,763	)	$	(74,377,656	)	$	(251,827,836	)

Note F. Line of Credit

A $100,000,000 line of credit available to GSF and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus 0.50% calculated on a 360 day basis per annum. For the six months ended June 30, 2006, none of the funds borrowed against this line of credit.

The funds are obligated to pay State Street Bank and Trust Company and Bank of Montreal a commitment fee computed at a rate of 0.08% per annum on the average daily unused portion of the revolving credit.

10

ⁿ The Guardian Stock Fund

Board Approval of Investment Management Agreements (Unaudited)

The Boards of Directors of The Guardian Variable Contract Funds, Inc. (“GVCF”), GIAC Funds, Inc. (“GIAC”), The Guardian Bond Fund, Inc. (“GBF” and a “Fund”) and The Guardian Cash Fund, Inc. (“GCF” and a “Fund”) (together, the series of GVCF and GIAC, and GBF and GCF are referred to as the “Funds,”) approved the renewal of the management agreement for each Fund and, as applicable, the subadvisory agreement for each Fund on November 17, 2005. As a part of the renewal process, the Boards of Directors of GVCF, GIAC, GBF and GCF met independently of Fund management and of the interested Board Members to consider the renewal of: (1) the management agreement (“Management Agreement”) between each of the Funds and Guardian Investor Services LLC (“GIS”) or as applicable, Guardian Baillie Gifford Limited (“GBG” and together with GIS, each referred to as a “Manager”); (2) as applicable, the subadvisory agreements (each a “Subadvisory Agreement”) between GBG and Baillie Gifford Overseas Limited (“BGO”) and the subadvisory agreements between GIS and UBS Global Asset Management (Americas) Inc. (“UBS” and together with BGO, each referred to as a “Subadvisor”). (The Management Agreements and the Subadvisory Agreements are together referred to as the “Advisory Agreements.”) As part of the review process, the Independent Directors were represented by independent legal counsel. The Independent Directors reviewed comprehensive materials received from the Managers, Subadvisors and independent counsel in connection with contract review. The Independent Directors noted that each Board also received regular information throughout the year regarding performance and operating results of each Fund and that in evaluating the Advisory Agreements, they were taking into account their accumulated experience as Board members in working with the Managers on matters relating to the Funds.

In preparation for the review process, the Independent Directors met with independent legal counsel and discussed the type and nature of information to be provided and sent a formal request for information to Fund management. The Managers and Subadvisors provided extensive information to all Board members in response to the request. Among other information, the Independent Directors reviewed materials to assess the services provided by each Manager and Subadvisor, and, as applicable, information comparing the performance, advisory fees and expense ratios of each Fund to other mutual funds, information about the profitability from the Advisory Agreements to the Managers and to the Subadvisors, information about economies of scale and information about the other benefits to the Managers and Subadvisors and their affiliates resulting from their relationship with the Funds (“fall-out benefits”). The Independent Directors reviewed comparative performance and management fee and expense ratios of peer groups of funds selected by Morningstar, Inc. (“Morningstar”). The Independent Directors also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Advisory Agreements. In preparation for the November 17th meeting, the Independent Directors met on November 3, 2005, to review and discuss with independent legal counsel the information provided by Morningstar.

Based upon their review, the Independent Directors concluded that it was in the best interest of each Fund to renew each relevant Advisory Agreement and, accordingly, recommended to the full Board of each Fund the renewal of each applicable Advisory Agreement. In reaching this conclusion for each Fund, the Independent Directors did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Management Agreements

Nature, Quality and Extent of Services. In reviewing the nature, quality and extent of services provided by the Managers, the Independent Directors considered the services provided by each Manager under the Management Agreements, including administrative services. The Independent Directors considered the experience and skills of senior management responsible for fund operations, the experience and skills of the personnel performing the functions under each Management Agreement and the resources made available to such personnel, the ability of the Managers to attract and retain high-quality personnel, and the organizational depth of the Managers. The Independent Directors concluded that appropriate resources were provided under each Management Agreement. The Independent Directors also considered the delegation of day-to-day portfolio management responsibility to UBS with respect to the Guardian UBS VC Large Cap Value Fund and the Guardian UBS VC Small Cap Value Fund and to BGO with respect to the Baillie Gifford International Growth Fund and the Baillie Gifford Emerging Markets Fund and the Managers’ ability to supervise the activities of the Subadvisors. The Independent Directors concluded each Manager’s supervisory program was satisfactory. The Independent Directors also considered the compliance program established by the Managers and the level of compliance attained by the Managers. Further, the Independent Directors considered that each Manager has had a long-term relationship with the Funds and has demonstrated its past and future commitment to support the Funds. The Independent Directors concluded that a long-term relationship with a capable, conscientious adviser was in the best interest of each Fund. Based upon all relevant factors, the Independent Directors concluded that the nature, quality and extent of the services provided by the Managers to each applicable Fund were satisfactory.

11

ⁿ The Guardian Stock Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and longer-term (three year, five year and ten year) periods, as applicable, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. The Independent Directors received comparative performance information prepared by Morningstar. The Independent Directors also considered whether investment results were consistent with a Fund’s investment objective(s) and policies. For most Funds, the Independent Directors concluded that investment performance met acceptable levels of investment performance. For Funds that experienced underperformance, the Independent Directors reviewed the reasons for the underperformance and the remedial measures taken by the Manager to improve performance. The Independent Directors concluded that the Managers have in place an effective process to monitor performance and that reasonable steps had been implemented to address circumstances of underperformance where appropriate. Therefore, the Independent Directors concluded that it was in the best interests of the Funds to renew the Management Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s management fees and net expense ratios. The Independent Directors received information, based on data supplied by Morningstar, comparing each Fund’s management fee rates and total net expense ratio to advisory fees and total net expense ratios of the mutual funds in its peer group (as selected by Morningstar). The Independent Directors also received and considered information on fee waivers and/or reimbursements for each Fund compared to those of its peer group. The Independent Directors noted that a number of the Funds have received fee waivers for many years and that such fee waivers remained current through the time of the review process.

The Independent Directors also compared each Fund’s management fee rates to fees charged by the Manager for comparable mutual funds. For each Fund, the Independent Directors reviewed the fees charged by other advisors for mutual funds in the Fund’s peer group. GIS provided information on the advisory fees it charges its two institutional accounts and noted the information was not comparable with the Funds because the investment objectives and management style of the institutional accounts were very different than those of the Funds. GBG has no clients other than the Funds.

On the basis of all information provided, the Independent Directors concluded that the management fee schedules for each Fund were reasonable and appropriate in light of the nature, quality and extent of services provided by the Manager.

Profitability. The Independent Directors reviewed detailed information regarding revenues received by each Manager under each Management Agreement, including identification of the estimated direct and indirect costs of the Managers of providing those services to each Fund that are covered under the Management Agreements. The Independent Directors also received information regarding the enterprise-wide profitability of the Managers with respect to all fund services in totality.

For all Funds, based upon the profitability percentage provided, the Independent Directors concluded that the profitability to the applicable Manager from the management of each Fund was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the management of each Fund and whether the Funds benefit from any such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund and the Guardian Cash Fund had management fee schedules that each contained one breakpoint. The Independent Directors also considered whether the effective management fee rate for each Fund under the Management Agreement is reasonable in relation to the asset size of such Fund. The Independent Directors noted GIS’s representation that it did not anticipate that the Funds would experience any significant economies in the near future, given their asset size. The Independent Directors concluded that, in light of the Funds’ current asset levels, the fee schedule for each Fund reflects an appropriate level of sharing of any economies of scale.

Other Benefits to Manager. The Independent Directors also considered the character and amount of other incidental benefits received by the Managers and their affiliates as a result of their relationship with the Funds. The Independent Directors noted the Managers’ representation that each has the ability to obtain proprietary research as a result of the Funds’ brokerage business that may be used for the benefit of the Funds and other clients of the Managers. The Independent Directors concluded that management fees for each Fund were reasonable in light of these fall-out benefits.

12

ⁿ The Guardian Stock Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Specific Fund Findings

The Guardian Stock Fund

In determining to recommend renewal of the Fund’s Management Agreement, the Independent Directors noted the investment underperformance over the periods reviewed, but considered the steps taken by the Manager to remediate performance, including most recently the hiring of a new lead portfolio manager by the Manager in August 2005. The Independent Directors noted the favorable historical record of the new portfolio manager, his prior success in remediating a fund, his investment strategy for managing the Fund and the very recent relative improvement in performance following the beginning of the implementation of his investment strategy. The Independent Directors considered these remedial actions along with the long term support and effective administration of this Fund by the Manager, as well as the Fund’s low expense ratio and management fees as compared to its peer group, and concluded that it was appropriate to renew the Management Agreement and monitor the impact of the remedial actions.

Overall Conclusions

Based upon all of the information considered and the conclusions reached, the Independent Directors determined that the terms of each Advisory Agreement continue to be fair and reasonable and that the continuation of each Advisory Agreement is in the best interests of each Fund.

13

ⁿ The Guardian Stock Fund

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, is available free of charge upon request by logging on to www.guardianinvestor.com or the Securities and Exchange Commission’s (SEC) website at www.sec.gov.

Form N-Q

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each year on the Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov, and 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.

Code of Ethics

The Fund has adopted a code of ethics for its Principal Executive Officer and Principal Financial Officers (the “Code”). The purpose of the Code is to promote, among other things: honest and ethical conduct, including the handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in reports and documents filed with the SEC; and compliance with applicable laws and regulations. A copy of the Code has been filed with the SEC on Form N-CSR and can be obtained on the SEC’s website at www.sec.gov.

Copies for all of the above can be obtained free of charge by calling 1-800-221-3253 or by writing to Guardian Investor Services LLC at 7 Hanover Square, New York, New York 10004.

14

ⁿ  The Guardian VC 500 Index Fund Semiannual Report
To Contractowners

Jonathan C. Jankus, CFA Co-Portfolio Manager

Stewart Johnson,

Co-Portfolio Manager

Objective:

Seeks to track the investment performance of the Standard & Poor’s 500 Composite Stock Price Index (the “S&P 500 Index”) which emphasizes securities issued by large U.S. companies

Portfolio:

At least 95% of the Fund’s assets are invested in common stocks of companies included in the S&P 500 Index under normal circumstances

Inception Date:

August 25, 1999

Net Assets at

June 30, 2006:

$ 230,611,373

Top Ten Holdings  (As of 6/30/2006)

Company	Percentage of Total Net Assets
Exxon Mobil Corp.	3.13%
General Electric Co.	2.85%
Citigroup, Inc.	2.00%
Microsoft Corp.	1.88%
Bank of America Corp.	1.87%
Johnson & Johnson	1.58%
Procter & Gamble Co.	1.52%
Pfizer, Inc.	1.47%
American Int’l. Group, Inc.	1.29%
Altria Group, Inc.	1.28%

Sector Weightings vs. Index  (As of 6/30/2006)

Average Annual Total Returns  (For periods ended 6/30/2006)

	Year to Date	1 Yr	5 Yrs	10 Yrs	Since Inception 8/25/1999
The Guardian VC 500 Index Fund	2.66%	8.31%	2.19%	—	0.15%
S&P 500 Index	2.71%	8.63%	2.50%	—	0.36%

About information in this report:

• All performance data quoted is historical and the results represent past performance and neither guarantee nor predict future investment results. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at (800) 221-3253 or visit our website at www.guardianinvestor.com. Current performance may be higher or lower than the performance quoted here. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.

• It is important to consider the Fund’s investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested.

• “S&P,” “S&P 500^®,” “Standard & Poor’s 500” and “500” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Guardian Investor Services LLC. The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the Fund. The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S. stocks that is generally considered to be representative of U.S. stock market activity. Index returns are provided for comparative purposes. Please note that the index is unmanaged and not available for direct investment and its returns do not reflect the fees and expenses that have been deducted from the Fund.

• Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. The return figures shown do not reflect the deduction of taxes that a contractowner may pay on distributions or redemption of units. Since January 1, 2000 the investment adviser for the Fund has assumed certain ordinary operating expenses for the Fund. Without this assumption of expenses, returns would have been lower.

THE GUARDIAN VC 500 INDEX FUND 1

ⁿ  The Guardian VC 500 Index Fund Semiannual Report
To Contractowners

Fund Expenses

By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including, as applicable, management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other underlying funds.

The example is based on an investment of $1,000 invested on January 1, 2006 and held for six months ended June 30, 2006.

Actual Expenses

The first line in the table provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value January 1, 2006		Ending Account Value June 30, 2006		Expenses Paid During the Period*		Annualized Expense Ratio
Actual	$	1,000	$	1,026.60	$	1.41	0.28%
Hypothetical (5% return before expenses)	$	1,000	$	1,023.41	$	1.40	0.28%

* Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the Fund’s most recent fiscal half-year).

2 THE GUARDIAN VC 500 INDEX FUND

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments

June 30, 2006 (Unaudited)

Shares		Value
Common Stocks — 97.5%
Aerospace and Defense — 2.4%
15,041	Boeing Co.	$	1,232,008
7,296	General Dynamics Corp.		477,596
2,074	Goodrich Corp.		83,562
15,604	Honeywell Int’l., Inc.		628,841
2,900	L-3 Comm. Hldgs., Inc.		218,718
7,403	Lockheed Martin Corp.		531,091
8,930	Northrop Grumman Corp.		572,056
7,852	Raytheon Co.		349,964
2,736	Rockwell Collins, Inc.		152,860
19,100	United Technologies Corp.		1,211,322
			5,458,018
Air Freight and Logistics — 1.0%
5,794	FedEx Corp.		677,087
21,059	United Parcel Svc., Inc. – Class B		1,733,787
			2,410,874
Airlines — 0.1%
18,199	Southwest Airlines Co.		297,918
Auto Components — 0.2%
1,100	Cooper Tire & Rubber Co.		12,254
2,622	Goodyear Tire & Rubber Co.*		29,104
4,088	Johnson Controls, Inc.		336,116
			377,474
Automobiles — 0.4%
36,944	Ford Motor Co.		256,022
11,434	General Motors Corp.		340,619
5,221	Harley-Davidson, Inc.		286,580
			883,221
Beverages — 2.2%
14,362	Anheuser-Busch Cos., Inc.		654,763
2,046	Brown-Forman Corp. – Class B		146,187
42,764	Coca-Cola Co.		1,839,707
8,124	Coca-Cola Enterprises, Inc.		165,486
3,500	Constellation Brands, Inc. – Class A*		87,500
1,841	Molson Coors Brewing Co. – Class B		124,967
4,264	Pepsi Bottling Group, Inc.		137,088
30,171	PepsiCo., Inc.		1,811,467
			4,967,165
Biotechnology — 1.2%
23,617	Amgen, Inc.*		1,540,537
6,154	Biogen Idec, Inc.*		285,115
5,005	Genzyme Corp.*		305,555
9,200	Gilead Sciences, Inc.*		544,272
3,941	MedImmune, Inc.*		106,801
			2,782,280
Building Products — 0.2%
3,957	American Standard Cos., Inc.		171,219
7,420	Masco Corp.		219,929
			391,148
Capital Markets — 3.5%
4,567	Ameriprise Financial, Inc.		204,008
14,970	Bank of New York, Inc.		482,034
2,876	Bear Stearns Cos., Inc.		402,870
22,577	Charles Schwab Corp.		360,780
10,100	E*TRADE Financial Corp.*		230,482
1,739	Federated Investors, Inc. – Class B		54,779
3,987	Franklin Resources, Inc.		346,112
8,702	Goldman Sachs Group, Inc.		1,309,042

Shares		Value
6,726	Janus Capital Group, Inc.	$	120,395
2,500	Legg Mason, Inc.		248,800
10,848	Lehman Brothers Hldgs., Inc.		706,747
7,285	Mellon Financial Corp.		250,823
17,464	Merrill Lynch & Co., Inc.		1,214,796
20,283	Morgan Stanley		1,282,088
3,863	Northern Trust Corp.		213,624
6,370	State Street Corp.		370,033
4,316	T. Rowe Price Group, Inc.		163,188
			7,960,601
Chemicals — 1.5%
3,869	Air Products & Chemicals, Inc.		247,306
1,031	Ashland, Inc.		68,768
18,242	Dow Chemical Co.		711,985
18,905	E.I. Du Pont de Nemours & Co.		786,448
1,156	Eastman Chemical Co.		62,424
4,704	Ecolab, Inc.		190,888
1,633	Hercules, Inc.*		24,920
1,417	Int’l. Flavors & Fragrances, Inc.		49,935
5,007	Monsanto Co.		421,539
2,995	PPG Inds., Inc.		197,670
5,483	Praxair, Inc.		296,082
3,888	Rohm & Haas Co.		194,867
1,351	Sigma-Aldrich		98,137
			3,350,969
Commercial Banks — 4.1%
8,364	AmSouth Bancorporation		221,228
9,234	BB&T Corp.		384,042
3,064	Comerica, Inc.		159,297
3,500	Commerce Bancorp, Inc.		124,845
2,100	Compass Bancshares, Inc.		116,760
10,354	Fifth Third Bancorp		382,580
1,892	First Horizon Nat’l. Corp.		76,058
7,298	Huntington Bancshares, Inc.		172,087
7,242	KeyCorp		258,395
2,000	M & T Bank Corp.		235,840
3,796	Marshall & Ilsley Corp.		173,629
11,847	National City Corp.		428,743
10,066	North Fork Bancorporation, Inc.		303,691
6,005	PNC Financial Svcs. Group		421,371
7,258	Regions Financial Corp.		240,385
7,523	SunTrust Banks, Inc.		573,704
5,299	Synovus Financial Corp.		141,907
34,097	U.S. Bancorp		1,052,915
31,447	Wachovia Corp.		1,700,654
32,355	Wells Fargo & Co.		2,170,374
1,372	Zions Bancorporation		106,934
			9,445,439
Commercial Services and Supplies — 0.7%
4,913	Allied Waste Inds., Inc.*		55,812
2,079	Avery Dennison Corp.		120,707
18,985	Cendant Corp.		309,266
3,041	Cintas Corp.		120,910
2,150	Equifax, Inc.		73,831
2,470	Monster Worldwide, Inc.*		105,370
4,365	Pitney Bowes, Inc.		180,275
4,695	R.R. Donnelley & Sons Co.		150,005
2,619	Robert Half Int’l., Inc.		109,998
11,422	Waste Management, Inc.		409,821
			1,635,995

See notes to financial statements.

3

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
Communications Equipment — 2.7%
1,701	ADC Telecomm., Inc.*	$	28,679
3,629	Andrew Corp.*		32,153
6,957	Avaya, Inc.*		79,449
15,078	CIENA Corp.*		72,525
120,263	Cisco Systems, Inc.*		2,348,736
2,797	Comverse Technology, Inc.*		55,297
30,763	Corning, Inc.*		744,157
27,463	JDS Uniphase Corp.*		69,481
11,000	Juniper Networks, Inc.*		175,890
72,571	Lucent Technologies, Inc.*		175,622
48,505	Motorola, Inc.		977,376
31,468	QUALCOMM, Inc.		1,260,923
8,953	Tellabs, Inc.*		119,164
			6,139,452
Computers and Peripherals — 3.3%
16,633	Apple Computer, Inc.*		950,077
47,143	Dell, Inc.*		1,150,761
45,971	EMC Corp.*		504,302
4,846	Gateway, Inc.*		9,207
55,301	Hewlett Packard Co.		1,751,936
30,422	Int’l. Business Machines		2,337,018
2,204	Lexmark Int’l. Group, Inc. – Class A*		123,049
2,932	NCR Corp.*		107,428
6,233	Network Appliance, Inc.*		220,025
2,794	QLogic Corp.*		48,169
3,300	SanDisk Corp.*		168,234
55,932	Sun Microsystems, Inc.*		232,118
			7,602,324
Construction and Engineering — 0.1%
2,106	Fluor Corp.		195,711
Construction Materials — 0.1%
1,518	Vulcan Materials Co.		118,404
Consumer Finance — 0.9%
22,837	American Express Co.		1,215,385
4,624	Capital One Financial Corp.		395,121
7,586	SLM Corp.		401,451
			2,011,957
Containers and Packaging — 0.2%
1,698	Ball Corp.		62,894
2,984	Bemis Co., Inc.		91,370
2,370	Pactiv Corp.*		58,658
2,355	Sealed Air Corp.		122,648
1,604	Temple-Inland, Inc.		68,763
			404,333
Distributors — 0.0%
2,613	Genuine Parts Co.		108,858
Diversified Consumer Services — 0.1%
2,958	Apollo Group, Inc. – Class A*		152,840
6,318	H & R Block, Inc.		150,747
			303,587
Diversified Financial Services — 5.3%
89,881	Bank of America Corp.		4,323,276
4,000	CIT Group, Inc.		209,160
95,638	Citigroup, Inc.		4,613,577
67,108	J.P. Morgan Chase & Co.		2,818,536
4,648	Moody’s Corp.		253,130
			12,217,679

Shares		Value
Diversified Telecommunication Services — 2.6%
82,113	AT & T, Inc.	$	2,290,131
33,463	BellSouth Corp.		1,211,361
2,122	CenturyTel, Inc.		78,832
4,221	Citizens Comm. Co.		55,084
2,740	Embarq Corp.*		112,313
32,677	Qwest Comm. Int’l., Inc.*		264,357
58,236	Verizon Comm.		1,950,324
			5,962,402
Electric Utilities — 1.4%
3,880	Allegheny Energy, Inc.*		143,832
6,474	American Electric Power, Inc.		221,734
6,073	Edison Int’l.		236,847
3,852	Entergy Corp.		272,529
14,956	Exelon Corp.		849,949
7,451	FirstEnergy Corp.		403,919
7,412	FPL Group, Inc.		306,709
1,550	Pinnacle West Capital Corp.		61,860
5,616	PPL Corp.		181,397
4,078	Progress Energy, Inc.		174,824
13,384	Southern Co.		428,957
			3,282,557
Electrical Equipment — 0.5%
2,932	American Power Conversion Corp.		57,145
1,394	Cooper Inds. Ltd. – Class A		129,530
7,695	Emerson Electric Co.		644,918
3,531	Rockwell Automation, Inc.		254,267
			1,085,860
Electronic Equipment and Instruments — 0.3%
9,869	Agilent Technologies, Inc.*		311,466
2,956	Jabil Circuit, Inc.		75,674
2,894	Molex, Inc.		97,151
9,102	Sanmina-SCI Corp.*		41,869
24,921	Solectron Corp.*		85,230
3,432	Symbol Technologies, Inc.		37,031
1,335	Tektronix, Inc.		39,276
			687,697
Energy Equipment and Services — 2.0%
7,888	B.J. Svcs. Co.		293,907
6,815	Baker Hughes, Inc.		557,808
9,595	Halliburton Co.		712,045
6,320	Nabors Inds., Inc.*		213,553
3,000	National-Oilwell Varco, Inc.*		189,960
3,207	Noble Corp.		238,665
2,114	Rowan Cos., Inc.		75,237
22,958	Schlumberger Ltd.		1,494,795
6,670	Transocean, Inc.*		535,734
6,400	Weatherford Int’l. Ltd.*		317,568
			4,629,272
Food and Staples Retailing — 2.4%
7,957	Costco Wholesale Corp.		454,583
17,192	CVS Corp.		527,794
16,796	Kroger Co.		367,161
7,770	Safeway, Inc.		202,020
3,107	Supervalu, Inc.		95,385
10,594	Sysco Corp.		323,753
53,782	Wal-Mart Stores, Inc.		2,590,679
18,480	Walgreen Co.		828,643
2,600	Whole Foods Market, Inc.		168,064
			5,558,082

See notes to financial statements.

4

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
Food Products — 1.2%
12,488	Archer-Daniels-Midland Co.	$	515,505
7,064	Campbell Soup Co.		262,145
8,985	ConAgra Foods, Inc.		198,658
2,600	Dean Foods Co.*		96,694
6,325	General Mills, Inc.		326,749
5,712	H.J. Heinz Co.		235,449
5,575	Hershey Co.		307,015
6,792	Kellogg Co.		328,937
2,128	McCormick & Co., Inc.		71,394
12,896	Sara Lee Corp.		206,594
4,500	Tyson Foods, Inc. – Class A		66,870
5,402	W.M. Wrigley Jr. Co.		245,035
			2,861,045
Gas Utilities — 0.0%
938	NICOR, Inc.		38,927
605	Peoples Energy Corp.		21,726
			60,653
Health Care Equipment and Supplies — 1.5%
806	Bausch & Lomb, Inc.		39,526
12,386	Baxter Int’l., Inc.		455,309
4,439	Becton Dickinson & Co., Inc.		271,356
3,938	Biomet, Inc.		123,220
26,319	Boston Scientific Corp.*		443,212
1,891	C.R. Bard, Inc.		138,535
2,597	Hospira, Inc.*		111,515
23,240	Medtronic, Inc.		1,090,421
6,290	St. Jude Medical, Inc.*		203,922
8,212	Stryker Corp.		345,807
5,170	Zimmer Hldgs., Inc.*		293,243
			3,516,066
Health Care Providers and Services — 2.7%
10,492	Aetna, Inc.		418,946
4,226	AmerisourceBergen Corp.		177,154
8,368	Cardinal Health, Inc.		538,313
8,800	Caremark Rx, Inc.		438,856
2,296	Cigna Corp.		226,179
3,150	Coventry Health Care, Inc.*		173,061
3,538	Express Scripts, Inc.*		253,816
8,330	HCA, Inc.		359,439
4,134	Health Management Assoc., Inc. – Class A		81,481
3,135	Humana, Inc.*		168,349
2,400	Laboratory Corp. of America*		149,352
1,471	Manor Care, Inc.		69,019
5,759	McKesson Corp.		272,286
6,534	Medco Health Solutions, Inc.*		374,268
2,100	Patterson Cos., Inc.*		73,353
3,696	Quest Diagnostics, Inc.		221,464
7,310	Tenet Healthcare Corp.*		51,024
26,200	UnitedHealth Group, Inc.		1,173,236
12,606	WellPoint, Inc.*		917,339
			6,136,935
Health Care Technology — 0.0%
4,244	IMS Health, Inc.		113,951
Hotels, Restaurants and Leisure — 1.5%
10,827	Carnival Corp.		451,919
2,562	Darden Restaurants, Inc.		100,943
3,771	Harrah’s Entertainment, Inc.		268,420
5,624	Hilton Hotels Corp.		159,047
5,884	Int’l. Game Technology		223,239
7,232	Marriott Int’l., Inc. – Class A		275,684
23,261	McDonald’s Corp.		781,569

Shares		Value
15,064	Starbucks Corp.*	$	568,816
4,298	Starwood Hotels & Resorts Worldwide, Inc.		259,341
1,730	Wendy’s Int’l., Inc.		100,842
5,173	Yum! Brands, Inc.		260,047
			3,449,867
Household Durables — 0.6%
1,205	Black & Decker Corp.		101,774
2,442	Centex Corp.		122,833
5,000	D.R. Horton, Inc.		119,100
2,245	Fortune Brands, Inc.		159,417
1,300	Harman Int’l. Inds., Inc.		110,981
1,490	KB Home		68,317
2,928	Leggett & Platt, Inc.		73,141
1,900	Lennar Corp. – Class A		84,303
5,096	Newell Rubbermaid, Inc.		131,630
4,860	Pulte Homes, Inc.		139,919
873	Snap-On, Inc.		35,287
1,281	Stanley Works		60,489
1,159	Whirlpool Corp.		95,791
			1,302,982
Household Products — 2.1%
3,445	Clorox Co.		210,042
9,818	Colgate-Palmolive Co.		588,098
8,429	Kimberly-Clark Corp.		520,069
63,162	Procter & Gamble Co.		3,511,807
			4,830,016
Independent Power Producers and Energy Traders — 0.4%
13,081	AES Corp.*		241,345
3,844	Constellation Energy Group, Inc.		209,575
5,523	Dynegy, Inc. – Class A*		30,211
8,760	TXU Corp.		523,760
			1,004,891
Industrial Conglomerates — 3.9%
13,794	3M Co.		1,114,141
199,651	General Electric Co.		6,580,497
2,366	Textron, Inc.		218,098
38,378	Tyco Int’l. Ltd.		1,055,395
			8,968,131
Information Technology Services — 1.0%
2,300	Affiliated Computer Svcs., Inc. – Class A*		118,703
9,913	Automatic Data Processing, Inc.		449,555
3,266	Computer Sciences Corp.*		158,205
2,590	Convergys Corp.*		50,505
10,014	Electronic Data Systems Corp.		240,937
15,929	First Data Corp.		717,442
3,775	Fiserv, Inc.*		171,234
7,597	Paychex, Inc.		296,131
2,167	Sabre Hldgs. Corp. – Class A		47,674
4,833	Unisys Corp.*		30,351
			2,280,737
Insurance — 4.6%
6,224	ACE Ltd.		314,872
8,897	AFLAC, Inc.		412,376
11,699	Allstate Corp.		640,286
2,084	Ambac Financial Group, Inc.		169,012
50,203	American Int’l. Group, Inc.		2,964,487
5,608	Aon Corp.		195,271
7,936	Chubb Corp.		396,007
4,875	Cincinnati Financial Corp.		229,174
6,000	Genworth Financial, Inc. – Class A		209,040
5,690	Hartford Financial Svcs. Group, Inc.		481,374

See notes to financial statements.

5

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
6,446	Lincoln Nat’l. Corp.	$	363,812
9,663	Loews Corp.		342,553
9,751	Marsh & McLennan Cos., Inc.		262,204
2,700	MBIA, Inc.		158,085
15,772	MetLife, Inc.		807,684
5,188	Principal Financial Group, Inc.		288,712
14,224	Progressive Corp.		365,699
9,477	Prudential Financial, Inc.		736,363
2,047	SAFECO Corp.		115,349
13,898	St. Paul Travelers Cos., Inc.		619,573
1,782	Torchmark Corp.		108,203
9,310	UnumProvident Corp.		168,790
3,956	XL Capital Ltd. – Class A		242,503
			10,591,429
Internet and Catalog Retail — 0.1%
5,800	Amazon.com, Inc*		224,344
Internet Software and Services — 1.4%
22,834	eBay, Inc.*		668,808
4,000	Google, Inc. – Class A*		1,677,320
4,100	VeriSign, Inc.*		94,997
24,076	Yahoo! Inc.*		794,508
			3,235,633
Leisure Equipment and Products — 0.1%
1,348	Brunswick Corp.		44,821
4,363	Eastman Kodak Co.		103,752
2,589	Hasbro, Inc.		46,887
6,533	Mattel, Inc.		107,860
			303,320
Life Sciences Tools and Services — 0.2%
3,176	Applera Corp.-Applied Biosystems Group		102,743
1,900	Fisher Scientific Int’l., Inc.*		138,795
723	Millipore Corp.*		45,542
1,870	PerkinElmer, Inc.		39,083
2,490	Thermo Electron Corp.*		90,238
1,962	Waters Corp.*		87,113
			503,514
Machinery — 1.6%
12,694	Caterpillar, Inc.		945,449
618	Cummins, Inc.		75,551
5,066	Danaher Corp.		325,845
4,466	Deere & Co.		372,866
7,032	Dover Corp.		347,592
2,646	Eaton Corp.		199,508
11,408	Illinois Tool Works, Inc.		541,880
5,794	Ingersoll-Rand Co. Ltd. – Class A		247,867
4,742	ITT Inds., Inc.		234,729
1,251	Navistar Int’l. Corp.*		30,787
3,049	PACCAR, Inc.		251,177
2,232	Pall Corp.		62,496
1,765	Parker-Hannifin Corp.		136,964
			3,772,711
Media — 3.4%
15,737	CBS Corp. – Class B		425,686
9,954	Clear Channel Comm., Inc.		308,076
39,788	Comcast Corp. – Class A*		1,302,659
1,257	Dow Jones & Co., Inc.		44,008
5,313	Gannett Co., Inc.		297,156
7,803	Interpublic Group Cos., Inc.*		65,155
790	McClatchy Co. – Class A		31,704
6,524	McGraw-Hill Cos., Inc.		327,700
742	Meredith Corp.		36,759
3,273	New York Times Co. – Class A		80,319

Shares		Value
44,800	News Corp. – Class A	$	859,264
3,111	Omnicom Group, Inc.		277,159
1,600	E.W. Scripps Co. – Class A		69,024
86,724	Time Warner, Inc.		1,500,325
6,418	Tribune Co.		208,136
5,466	Univision Comm., Inc. – Class A*		183,111
15,737	Viacom, Inc. – Class B*		564,014
39,316	Walt Disney Co.		1,179,480
			7,759,735
Metals and Mining — 0.9%
16,825	Alcoa, Inc.		544,457
1,806	Allegheny Technologies, Inc.		125,047
3,191	Freeport-McMoran Copper & Gold, Inc. – Class B		176,813
8,404	Newmont Mining Corp.		444,824
5,922	Nucor Corp.		321,269
4,496	Phelps Dodge Corp.		369,391
2,788	United States Steel Corp.		195,495
			2,177,296
Multiline Retail — 1.1%
1,734	Big Lots, Inc.*		29,617
1,262	Dillards, Inc. – Class A		40,195
6,584	Dollar General Corp.		92,044
2,592	Family Dollar Stores, Inc.		63,323
9,394	Federated Department Stores, Inc.		343,820
5,398	J.C. Penney Co., Inc.		364,419
5,713	Kohl’s Corp.*		337,753
4,040	Nordstrom, Inc.		147,460
1,811	Sears Hldgs. Corp.*		280,415
17,546	Target Corp.		857,473
			2,556,519
Multi–Utilities — 1.3%
4,315	Ameren Corp.		217,907
4,548	CenterPoint Energy, Inc.		56,850
7,452	CMS Energy Corp.*		96,429
3,764	Consolidated Edison, Inc.		167,272
6,657	Dominion Resources, Inc.		497,877
4,105	DTE Energy Co.		167,238
21,802	Duke Energy Corp.		640,325
4,794	KeySpan Corp.		193,678
4,793	NiSource, Inc.		104,679
6,780	PG&E Corp.		266,318
5,184	Public Svc. Enterprise Group, Inc.		342,766
3,894	Sempra Energy		177,099
2,588	TECO Energy, Inc.		38,665
5,953	Xcel Energy, Inc.		114,179
			3,081,282
Office Electronics — 0.1%
20,891	Xerox Corp.*		290,594
Oil, Gas and Consumable Fuels — 7.9%
9,186	Anadarko Petroleum Corp.		438,080
7,096	Apache Corp.		484,302
6,700	Chesapeake Energy Corp.		202,675
42,819	Chevron Corp.		2,657,347
31,535	ConocoPhillips		2,066,489
8,698	Devon Energy Corp.		525,446
10,590	El Paso Corp.		158,850
4,845	EOG Resources, Inc.		335,952
117,802	Exxon Mobil Corp.		7,227,153
5,421	Hess Corp.		286,500
6,046	Kerr-McGee Corp.		419,290
2,245	Kinder Morgan, Inc.		224,253

See notes to financial statements.

6

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
6,748	Marathon Oil Corp.	$	562,109
3,000	Murphy Oil Corp.		167,580
8,729	Occidental Petroleum Corp.		895,159
2,532	Sunoco, Inc.		175,442
12,700	Valero Energy Corp.		844,804
10,715	Williams Cos., Inc.		250,302
6,133	XTO Energy, Inc.		271,508
			18,193,241
Paper and Forest Products — 0.3%
9,605	Int’l. Paper Co.		310,241
1,564	Louisiana-Pacific Corp.		34,252
2,990	MeadWestvaco Corp.		83,511
5,010	Weyerhaeuser Co.		311,872
			739,876
Personal Products — 0.2%
1,303	Alberto-Culver Co.		63,482
9,396	Avon Products, Inc.		291,276
2,300	Estee Lauder Cos., Inc. – Class A		88,941
			443,699
Pharmaceuticals — 6.4%
30,289	Abbott Laboratories		1,320,903
2,863	Allergan, Inc.		307,085
2,000	Barr Pharmaceuticals, Inc.*		95,380
38,537	Bristol-Myers Squibb Corp.		996,567
21,639	Eli Lilly & Co.		1,195,988
7,079	Forest Laboratories, Inc.*		273,886
60,954	Johnson & Johnson		3,652,364
3,645	King Pharmaceuticals, Inc.*		61,965
42,958	Merck & Co., Inc.		1,564,960
4,500	Mylan Laboratories, Inc.		90,000
144,003	Pfizer, Inc.		3,379,750
28,020	Schering-Plough Corp.		533,221
1,956	Watson Pharmaceuticals, Inc.*		45,536
26,069	Wyeth		1,157,724
			14,675,329
Real Estate Investment Trusts — 0.9%
3,463	Apartment Investment & Management Co. – Class A		150,468
3,300	Archstone-Smith Trust		167,871
1,500	Boston Properties, Inc.		135,600
8,963	Equity Office Pptys. Trust		327,239
5,321	Equity Residential		238,008
3,000	Kimco Realty Corp.		109,470
3,362	Plum Creek Timber Co., Inc.		119,351
5,292	ProLogis		275,819
1,500	Public Storage, Inc.		113,850
4,402	Simon Ppty. Group, Inc.		365,102
1,600	Vornado Realty Trust		156,080
			2,158,858
Road and Rail — 0.8%
7,561	Burlington Northern Santa Fe		599,209
4,484	CSX Corp.		315,853
8,129	Norfolk Southern Corp.		432,626
930	Ryder System, Inc.		54,340
5,442	Union Pacific Corp.		505,888
			1,907,916
Semiconductors and Semiconductor Equipment — 2.6%
9,502	Advanced Micro Devices, Inc.*		232,039
6,790	Altera Corp.*		119,165
6,027	Analog Devices, Inc.		193,708
29,509	Applied Materials, Inc.		480,407
9,144	Broadcom Corp. – Class A*		274,777

Shares		Value
8,971	Freescale Semiconductor, Inc. – Class B*	$	263,747
112,153	Intel Corp.		2,125,299
3,328	KLA-Tencor Corp.		138,345
5,347	Linear Technology Corp.		179,071
9,161	LSI Logic Corp.*		81,991
5,529	Maxim Integrated Products, Inc.		177,536
10,828	Micron Technology, Inc.*		163,070
6,658	National Semiconductor Corp.		158,793
2,370	Novellus Systems, Inc.*		58,539
6,574	NVIDIA Corp.*		139,960
3,328	PMC-Sierra, Inc.*		31,283
3,377	Teradyne, Inc.*		47,042
31,480	Texas Instruments, Inc.		953,529
5,730	Xilinx, Inc.		129,785
			5,948,086
Software — 3.1%
11,654	Adobe Systems, Inc.*		353,816
4,116	Autodesk, Inc.*		141,837
3,606	BMC Software, Inc.*		86,184
9,555	CA, Inc.		196,355
2,616	Citrix Systems, Inc.*		105,006
5,622	Compuware Corp.*		37,667
6,400	Electronic Arts, Inc.*		275,456
3,165	Intuit, Inc.*		191,134
186,465	Microsoft Corp.		4,344,635
7,029	Novell, Inc.*		46,602
75,811	Oracle Corp.*		1,098,501
1,562	Parametric Technology Corp.*		19,853
21,273	Symantec Corp.*		330,583
			7,227,629
Specialty Retail — 2.1%
4,700	AutoNation, Inc.*		100,768
1,474	AutoZone, Inc.*		130,007
5,064	Bed, Bath & Beyond, Inc.*		167,973
8,740	Best Buy Co., Inc.		479,301
3,140	Circuit City Stores, Inc.		85,471
14,914	Gap, Inc.		259,504
40,030	Home Depot, Inc.		1,432,674
9,195	Limited Brands		235,300
15,184	Lowe’s Cos., Inc.		921,213
6,624	Office Depot, Inc.*		251,712
2,141	OfficeMax, Inc.		87,246
2,565	RadioShack Corp.		35,910
2,251	Sherwin-Williams Co.		106,877
11,790	Staples, Inc.		286,733
2,179	Tiffany & Co.		71,950
8,072	TJX Cos., Inc.		184,526
			4,837,165
Textiles, Apparel and Luxury Goods — 0.3%
6,400	Coach, Inc.*		191,360
1,927	Jones Apparel Group, Inc.		61,259
1,595	Liz Claiborne, Inc.		59,111
4,408	NIKE, Inc. – Class B		357,048
1,636	V.F. Corp.		111,117
			779,895
Thrifts and Mortgage Finance — 1.6%
12,410	Countrywide Financial Corp.		472,573
13,087	Federal Home Loan Mortgage Corp.		746,090
19,513	Federal National Mortgage Assn.		938,576
5,106	Golden West Financial Corp.		378,865
1,536	MGIC Investment Corp.		99,840
9,765	Sovereign Bancorp, Inc.		198,327
18,321	Washington Mutual, Inc.		835,071
			3,669,342

See notes to financial statements.

7

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares			Value
	Tobacco — 1.4%
	40,095	Altria Group, Inc.	$	2,944,176
	2,339	Reynolds American, Inc.		269,686
	2,531	UST, Inc.		114,376
				3,328,238
	Trading Companies and Distributors — 0.1%
	2,192	W.W. Grainger, Inc.		164,904
	Wireless Telecommunication Services — 0.7%
	6,702	ALLTEL Corp.		427,788
	54,817	Sprint Nextel Corp.		1,095,792
				1,523,580
		Total Common Stocks (Cost $190,942,632)		224,888,686
Principal Amount			Value
	U.S. Government Security — 0.2%
	U.S. Treasury Bill — 0.2%
$	350,000	U.S. Treasury Bill 4.80% due 9/21/2006 (1) (Cost $346,217)	$	346,217
	Repurchase Agreement — 2.2%
$	5,148,000	State Street Bank and Trust Co. repurchase agreement, dated 6/30/2006, maturity value $5,150,124 at 4.95%, due 7/3/2006 (2) (Cost $5,148,000)	$	5,148,000
	Total Investments — 99.9% (Cost $196,436,849)			230,382,903
	Cash, Receivables, and Other Assets Less Liabilities — 0.1%			228,470
	Net Assets — 100%		$	230,611,373

* Non-income producing security.

(1) The U.S. Treasury Bill is segregated as collateral to cover margin requirements on open futures contracts.

(2) The repurchase agreement is fully collateralized by $5,255,000 in U.S. Government Agency, 5.50%, due 5/29/2009, with a value of $5,255,000.

Contracts	Description	Expiration	Unrealized Depreciation
Purchased Futures Contracts
17	S & P 500 Index	9/2006	$        (67,910	)

See notes to financial statements.

8

ⁿ The Guardian VC 500 Index Fund

Statement of Assets and Liabilities

June 30, 2006 (Unaudited)

ASSETS
Investments, at market (cost $196,436,849)	$	230,382,903
Cash		46,474
Dividends receivable		253,805
Receivable for fund shares sold		84,565
Interest receivable		708
Other assets		4,228
Total Assets		230,772,683
LIABILITIES
Payable for fund shares redeemed		70,151
Accrued expenses		30,896
Payable for variation margin – Note A		13,660
Due to GIS		46,603
Total Liabilities		161,310
Net Assets	$	230,611,373
COMPONENTS OF NET ASSETS
Capital stock, at par	$	24,800
Additional paid-in capital		328,354,251
Undistributed net investment income		509,110
Accumulated net realized loss on investments and futures contracts		(132,154,932	)
Net unrealized appreciation of investments and futures contracts		33,878,144
Net Assets	$	230,611,373
Shares Outstanding — $0.001 Par Value		24,800,080
Net Asset Value Per Share		$9.30

Statement of Operations

Six Months Ended

June 30, 2006 (Unaudited)

INVESTMENT INCOME
Dividends	$	2,106,711
Interest		106,835
Total Income		2,213,546
Expenses:
Investment advisory fees — Note B		283,612
Custodian fees		60,131
Directors’ fees — Note B		15,487
Audit fees		12,350
Registration fees		11,014
Printing expense		10,636
Insurance expense		6,780
Legal fees		3,802
Loan commitment fees — Note F		1,899
Other		226
Total Expenses before reimbursement		405,937
Less: Expenses assumed by investment adviser — Note B		(88,292	)
Net Expenses		317,645
Net Investment Income		1,895,901
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments — Note A		83,451
Net realized gain on futures contracts		64,233
Net change in unrealized appreciation of investments — Note C		3,717,904
Net change in unrealized depreciation of futures contracts — Note A		(20,012	)
Net Realized and Unrealized Gain on Investments		3,845,576
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	5,741,477

See notes to financial statements.

9

ⁿ The Guardian VC 500 Index Fund

Statements of Changes in Net Assets

	Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income	$	1,895,901		$	3,311,628
Net realized gain on investments and futures contracts		147,684			146,486
Net change in unrealized appreciation of investments and futures contracts		3,697,892			6,117,526
Net Increase in Net Assets Resulting from Operations		5,741,477			9,575,640
Dividends to Shareholders from:
Net investment income		(1,485,635	)		(3,289,364	)
From Capital Share Transactions:
Net increase in net assets from capital share transactions — Note E		6,826,852			10,424,376
Net Increase in Net Assets		11,082,694			16,710,652
NET ASSETS:
Beginning of period		219,528,679			202,818,027
End of period*	$	230,611,373		$	219,528,679
*  Includes undistributed net investment income of:	$	509,110		$	98,844

See notes to financial statements.

10

ⁿ The Guardian VC 500 Index Fund

Financial Highlights

Selected data for a share of capital stock outstanding throughout the periods indicated:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, (Audited)
			2005		2004		2003		2002		2001
Net asset value, beginning of period	$9.12		$8.86		$8.14		$6.44		$8.47		$9.72
Income from investment operations:
Net investment income	0.08		0.14		0.14		0.11		0.14		0.09
Net realized and unrealized gain/(loss) on investments	0.16		0.26		0.72		1.70		(2.03	)	(1.25	)
Net increase/(decrease) from investment operations	0.24		0.40		0.86		1.81		(1.89	)	(1.16	)
Dividends and distributions to shareholders from:
Net investment income	(0.06	)	(0.14	)	(0.14	)	(0.11	)	(0.14	)	(0.09	)
Net realized gain on investments	—		—		—		—		—		(0.00	)(a)
Total dividends and distributions	(0.06	)	(0.14	)	(0.14	)	(0.11	)	(0.14	)	(0.09	)
Net asset value, end of period	$9.30		$9.12		$8.86		$8.14		$6.44		$8.47
Total return*	2.66	%(b)	4.54	%	10.59	%	28.25	%	(22.42	)%	(11.92	)%
Ratios/supplemental data:
Net assets, end of period (000’s omitted)	$230,611		$219,529		$202,818		$170,825		$127,984		$366,544
Ratio of expenses to average net assets	0.28	%(c)	0.28	%	0.28	%	0.28	%	0.28	%	0.28	%
Ratio of expenses, excluding waivers, to average net assets	0.36	%(c)	0.37	%	0.36	%	0.40	%	0.34	%	0.33	%
Ratio of net investment income to average net assets	1.67	%(c)	1.61	%	1.75	%	1.51	%	1.29	%	1.14	%
Portfolio turnover rate	1	%	2	%	1	%	12	%	17	%	1	%

* Total returns do not reflect the effects of charges deducted pursuant to the terms of GIAC’s variable contracts.

Inclusion of such charges would reduce the total returns for all periods shown.

(a) Rounds to less than $0.01.

(b) Not annualized.

(c) Annualized.

See notes to financial statements.

11

ⁿ The Guardian VC 500 Index Fund

Notes to Financial Statements

June 30, 2006 (Unaudited)

Note A. Organization and Accounting Policies

The Guardian VC 500 Index Fund (the Fund or GVC500F) is a series of The Guardian Variable Contract Funds, Inc. (GVCF). GVCF is incorporated in the state of Maryland and is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The financial statements for the other remaining series of GVCF are presented in separate reports.

Shares of GVC500F are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies of the Fund are as follows:

Investments

Securities listed on national securities exchanges are valued at the last sale price on such exchanges, or if no sale occurred, at the mean of the closing bid and asked prices. Securities that are traded on the NASDAQ National Securities Market are valued at the NASDAQ Official Closing Price.

Pursuant to valuation procedures approved by the Board of Directors, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgment of the Service, are valued at the bid price. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

Other securities, including securities for which market quotations are not readily available (such as restricted securities, illiquid securities and foreign securities subject to a “significant event”) are valued at fair value as determined in good faith by or under the direction of GVCF’s Board of Directors. A “significant event” is an event that will affect the value of a portfolio security that occurs after the close of trading in the security’s primary trading market or exchange but before the Fund’s NAV is calculated.

Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets.

Futures contracts are valued at the settlement prices established by the boards of trade or exchanges on which they are traded.

Repurchase agreements are carried at cost which approximates market value (see Note D). Short-term debt securities with maturities of 60 days or less are valued on an amortized cost basis which approximates market value.

Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/discount, is accrued daily. Dividend income is recorded on the ex-dividend date.

Foreign Currency Translation

GVC500F is permitted to buy international securities that are not U.S. dollar denominated. GVC500F’s books and records are maintained in U.S. dollars as follows:

(1)  The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange.

(2)  Security purchases and sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.

The resulting gains and losses are included in the Statement of Operations as follows:

Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses, which result from changes in foreign exchange rates between the date on which GVC500F earns dividends and interest or pays foreign withholding taxes or other expenses and the

12

ⁿ The Guardian VC 500 Index Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized gains or losses on foreign currency related transactions. Realized foreign exchange gains and losses which result from changes in foreign exchange rates between the trade and settlement dates on security and currency transactions are also included in net realized gains and losses on foreign currency related transactions. Net currency gains and losses from valuing other assets and liabilities denominated in foreign currency at the period end exchange rate are reflected in net change in unrealized appreciation or depreciation from translation of other assets and liabilities denominated in foreign currencies.

Forward Foreign Currency Contracts

GVC500F may enter into forward foreign currency contracts in connection with planned purchases or sales of securities, or to hedge against changes in currency exchange rates affecting the values of its investments that are denominated in a particular currency. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Fluctuations in the value of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by GVC500F. When forward contracts are closed, GVC500F will record realized gains or losses equal to the difference between the values of such forward contracts at the time each was opened and the values at the time each was closed. Such amounts are recorded in net realized gains or losses on foreign currency related transactions. GVC500F will not enter into a forward foreign currency contract if such contract would obligate it to deliver an amount of foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency.

Futures Contracts

GVC500F may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, GVC500F is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by GVC500F each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by GVC500F. The daily changes in the variation margin are recognized as unrealized gains or losses by GVC500F. GVC500F’s investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GVC500F may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates, securities prices or prices of futures contracts move unexpectedly, GVC500F may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.

Dividend Distributions

Dividends from net investment income are declared and paid semi-annually for GVC500F. Net realized short-term and long-term capital gains for GVC500F will be distributed at least annually. All such dividends and distributions are credited in the form of additional shares of GVC500F at the net asset value on the ex-dividend date.

All dividends and distributions are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations. Differences between the recognition of income on an income tax basis and recognition of income based on GAAP may cause temporary overdistributions of net realized gains and net investment income on a GAAP basis.

Taxes

GVC500F has qualified and intends to remain qualified to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code (Code), and as such will not be subject to federal income tax on taxable income (including any realized capital gains) which is distributed in accordance with the provisions of the Code. Therefore, no federal income tax provision is required.

Reclassification of Capital Accounts

The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital gains, and the recharacterization of foreign exchange gains or losses to either ordinary income or realized capital gains for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications would have no effect on net assets, results of operations, or net asset value per share of the Fund.

13

ⁿ The Guardian VC 500 Index Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

Note B. Investment Advisory Agreements and Payments to or from Related Parties

The Fund has an investment advisory agreement with Guardian Investor Services LLC (GIS), a wholly-owned subsidiary of GIAC. Fees for investment advisory are at an annual rate of 0.25% of the average daily net assets of the Fund. GIS voluntarily assumes a portion of the ordinary operating expenses (excluding interest expense associated with securities lending) that exceeds 0.28% of the average daily net assets of GVC500F. GIS subsidized 0.08% of the ordinary operating expenses of GVC500F or $88,292 for the six months ended June 30, 2006.

The Guardian Fund Complex pays directors who are not “interested persons” (as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Board committee members also receive a fee of $2,000 per committee meeting, which also is allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain directors who are interested persons. Certain officers and directors of the Fund are affiliated with GIS.

Note C. Investment Transactions

Purchases and proceeds from sales of securities (excluding short-term securities) amounted to $10,635,128 and $2,872,279, respectively, during the six months ended June 30, 2006.

The cost of investments owned at June 30, 2006 for federal income tax purposes was substantially the same as the cost for financial reporting purposes. The gross unrealized appreciation and depreciation of investments excluding foreign currency and futures at June 30, 2006 aggregated $54,678,685 and $20,732,631, respectively, resulting in net unrealized appreciation of $33,946,054.

Note D. Repurchase Agreements

The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, GVC500F will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, GVC500F maintains the right to sell the collateral and may claim any resulting loss against the seller.

Note E. Transactions in Capital Stock

There are 200,000,000 shares of $0.001 par value capital stock authorized for GVC500F. Transactions in capital stock were as follows:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
	Shares				Amount
Shares sold	1,423,602		2,675,528		$	13,390,106		$	23,714,164
Shares issued in reinvestment of dividends	165,993		364,352			1,485,635			3,289,364
Shares repurchased	(854,876	)	(1,878,337	)		(8,048,889	)		(16,579,152	)
Net increase	734,719		1,161,543		$	6,826,852		$	10,424,376

Note F. Line of Credit

A $100,000,000 line of credit available to GVC500F and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus 0.50% calculated on a 360 day basis per annum. For the six months ended June 30, 2006, none of the funds borrowed against this line of credit.

The funds are obligated to pay State Street Bank and Trust Company and Bank of Montreal a commitment fee computed at a rate of 0.08% per annum on the average daily unused portion of the revolving credit.

14

ⁿ The Guardian VC 500 Index Fund

Board Approval of Investment Management Agreements (Unaudited)

The Boards of Directors of The Guardian Variable Contract Funds, Inc. (“GVCF”), GIAC Funds, Inc. (“GIAC”), The Guardian Bond Fund, Inc. (“GBF” and a “Fund”) and The Guardian Cash Fund, Inc. (“GCF” and a “Fund”) (together, the series of GVCF and GIAC, and GBF and GCF are referred to as the “Funds,”) approved the renewal of the management agreement for each Fund and, as applicable, the subadvisory agreement for each Fund on November 17, 2005. As a part of the renewal process, the Boards of Directors of GVCF, GIAC, GBF and GCF met independently of Fund management and of the interested Board Members to consider the renewal of: (1) the management agreement (“Management Agreement”) between each of the Funds and Guardian Investor Services LLC (“GIS”) or as applicable, Guardian Baillie Gifford Limited (“GBG” and together with GIS, each referred to as a “Manager”); (2) as applicable, the subadvisory agreements (each a “Subadvisory Agreement”) between GBG and Baillie Gifford Overseas Limited (“BGO”) and the subadvisory agreements between GIS and UBS Global Asset Management (Americas) Inc. (“UBS” and together with BGO, each referred to as a “Subadvisor”). (The Management Agreements and the Subadvisory Agreements are together referred to as the “Advisory Agreements.”) As part of the review process, the Independent Directors were represented by independent legal counsel. The Independent Directors reviewed comprehensive materials received from the Managers, Subadvisors and independent counsel in connection with contract review. The Independent Directors noted that each Board also received regular information throughout the year regarding performance and operating results of each Fund and that in evaluating the Advisory Agreements, they were taking into account their accumulated experience as Board members in working with the Managers on matters relating to the Funds.

In preparation for the review process, the Independent Directors met with independent legal counsel and discussed the type and nature of information to be provided and sent a formal request for information to Fund management. The Managers and Subadvisors provided extensive information to all Board members in response to the request. Among other information, the Independent Directors reviewed materials to assess the services provided by each Manager and Subadvisor, and, as applicable, information comparing the performance, advisory fees and expense ratios of each Fund to other mutual funds, information about the profitability from the Advisory Agreements to the Managers and to the Subadvisors, information about economies of scale and information about the other benefits to the Managers and Subadvisors and their affiliates resulting from their relationship with the Funds (“fall-out benefits”). The Independent Directors reviewed comparative performance and management fee and expense ratios of peer groups of funds selected by Morningstar, Inc. (“Morningstar”). The Independent Directors also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Advisory Agreements. In preparation for the November 17th meeting, the Independent Directors met on November 3, 2005, to review and discuss with independent legal counsel the information provided by Morningstar.

Based upon their review, the Independent Directors concluded that it was in the best interest of each Fund to renew each relevant Advisory Agreement and, accordingly, recommended to the full Board of each Fund the renewal of each applicable Advisory Agreement. In reaching this conclusion for each Fund, the Independent Directors did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Management Agreements

Nature, Quality and Extent of Services. In reviewing the nature, quality and extent of services provided by the Managers, the Independent Directors considered the services provided by each Manager under the Management Agreements, including administrative services. The Independent Directors considered the experience and skills of senior management responsible for fund operations, the experience and skills of the personnel performing the functions under each Management Agreement and the resources made available to such personnel, the ability of the Managers to attract and retain high-quality personnel, and the organizational depth of the Managers. The Independent Directors concluded that appropriate resources were provided under each Management Agreement. The Independent Directors also considered the delegation of day-to-day portfolio management responsibility to UBS with respect to the Guardian UBS VC Large Cap Value Fund and the Guardian UBS VC Small Cap Value Fund and to BGO with respect to the Baillie Gifford International Growth Fund and the Baillie Gifford Emerging Markets Fund and the Managers’ ability to supervise the activities of the Subadvisors. The Independent Directors concluded each Manager’s supervisory program was satisfactory. The Independent Directors also considered the compliance program established by the Managers and the level of compliance attained by the Managers. Further, the Independent Directors considered that each Manager has had a long-term relationship with the Funds and has demonstrated its past and future commitment to support the Funds. The Independent Directors concluded that a long-term relationship with a capable, conscientious adviser was in the best interest of each Fund. Based upon all relevant factors, the Independent Directors concluded that the nature, quality and extent of the services provided by the Managers to each applicable Fund were satisfactory.

15

ⁿ The Guardian VC 500 Index Fund

Board Approval of Investment Management Agreements (Unaudited)

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and longer-term (three year, five year and ten year) periods, as applicable, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. The Independent Directors received comparative performance information prepared by Morningstar. The Independent Directors also considered whether investment results were consistent with a Fund’s investment objective(s) and policies. For most Funds, the Independent Directors concluded that investment performance met acceptable levels of investment performance. For Funds that experienced underperformance, the Independent Directors reviewed the reasons for the underperformance and the remedial measures taken by the Manager to improve performance. The Independent Directors concluded that the Managers have in place an effective process to monitor performance and that reasonable steps had been implemented to address circumstances of underperformance where appropriate. Therefore, the Independent Directors concluded that it was in the best interests of the Funds to renew the Management Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s management fees and net expense ratios. The Independent Directors received information, based on data supplied by Morningstar, comparing each Fund’s management fee rates and total net expense ratio to advisory fees and total net expense ratios of the mutual funds in its peer group (as selected by Morningstar). The Independent Directors also received and considered information on fee waivers and/or reimbursements for each Fund compared to those of its peer group. The Independent Directors noted that a number of the Funds have received fee waivers for many years and that such fee waivers remained current through the time of the review process.

The Independent Directors also compared each Fund’s management fee rates to fees charged by the Manager for comparable mutual funds. For each Fund, the Independent Directors reviewed the fees charged by other advisors for mutual funds in the Fund’s peer group. GIS provided information on the advisory fees it charges its two institutional accounts and noted the information was not comparable with the Funds because the investment objectives and management style of the institutional accounts were very different than those of the Funds. GBG has no clients other than the Funds.

On the basis of all information provided, the Independent Directors concluded that the management fee schedules for each Fund were reasonable and appropriate in light of the nature, quality and extent of services provided by the Manager.

Profitability. The Independent Directors reviewed detailed information regarding revenues received by each Manager under each Management Agreement, including identification of the estimated direct and indirect costs of the Managers of providing those services to each Fund that are covered under the Management Agreements. The Independent Directors also received information regarding the enterprise-wide profitability of the Managers with respect to all fund services in totality.

For all Funds, based upon the profitability percentage provided, the Independent Directors concluded that the profitability to the applicable Manager from the management of each Fund was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the management of each Fund and whether the Funds benefit from any such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund and the Guardian Cash Fund had management fee schedules that each contained one breakpoint. The Independent Directors also considered whether the effective management fee rate for each Fund under the Management Agreement is reasonable in relation to the asset size of such Fund. The Independent Directors noted GIS’s representation that it did not anticipate that the Funds would experience any significant economies in the near future, given their asset size. The Independent Directors concluded that, in light of the Funds’ current asset levels, the fee schedule for each Fund reflects an appropriate level of sharing of any economies of scale.

Other Benefits to Manager. The Independent Directors also considered the character and amount of other incidental benefits received by the Managers and their affiliates as a result of their relationship with the Funds. The Independent Directors noted the Managers’ representation that each has the ability to obtain proprietary research as a result of the Funds’ brokerage business that may be used for the benefit of the Funds and other clients of the Managers. The Independent Directors concluded that management fees for each Fund were reasonable in light of these fall-out benefits.

Specific Fund Findings

The Guardian VC 500 Index Fund

In determining to recommend renewal of the Fund’s Management Agreement, the Independent Directors noted the favorable relative investment performance of the Fund, with performance above the median of its peer group, as well as the reasonableness of its management fee rate.

16

ⁿ The Guardian VC 500 Index Fund

Board Approval of Investment Management Agreements (Unaudited)

Overall Conclusions

Based upon all of the information considered and the conclusions reached, the Independent Directors determined that the terms of each Advisory Agreement continue to be fair and reasonable and that the continuation of each Advisory Agreement is in the best interests of each Fund.

17

ⁿ The Guardian VC 500 Index Fund

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, is available free of charge upon request by logging on to www.guardianinvestor.com or the Securities and Exchange Commission’s (SEC) website at www.sec.gov.

Form N-Q

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each year on the Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov, and 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.

Code of Ethics

The Fund has adopted a code of ethics for its Principal Executive Officer and Principal Financial Officers (the “Code”). The purpose of the Code is to promote, among other things: honest and ethical conduct, including the handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in reports and documents filed with the SEC; and compliance with applicable laws and regulations. A copy of the Code has been filed with the SEC on Form N-CSR and can be obtained on the SEC’s website at www.sec.gov.

Copies for all of the above can be obtained free of charge by calling 1-800-221-3253 or by writing to Guardian Investor Services LLC at 7 Hanover Square, New York, New York 10004.

18

ⁿ  The Guardian VC Asset Allocation Fund Semiannual Report
To Contractowners

Jonathan C. Jankus, CFA Co-Portfolio Manager

Stewart Johnson, Co-Portfolio Manager

Objective:

Long term total investment return consistent with moderate investment risk

Portfolio:

Generally purchases shares of The Guardian VC 500 Index, The Guardian Stock, The Guardian Bond and/or The Guardian Cash Funds. Also invests in individual securities and uses futures to manage allocations among the equity, debt and money market asset classes.

Inception Date:

September 15, 1999

Net Assets at June 30, 2006:

$45,571,843

Portfolio Composition by Asset Class  (As of 6/30/2006 and 12/31/2005)

Average Annual Total Returns  (For periods ended 6/30/2006)

	Year to Date	1 Yr	5 Yrs	10 Yrs	Since Inception 9/15/1999
The Guardian VC Asset Allocation Fund	2.76%	7.87%	3.27%	—	3.12%
Custom Index: 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index	1.35%	4.83%	3.78%	—	3.28%

About information in this report:

• All performance data quoted is historical and the results represent past performance and neither guarantee nor predict future investment results. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at (800) 221-3253 or visit our website at www.guardianinvestor.com. Current performance may be higher or lower than the performance quoted here. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.

• It is important to consider the Fund’s investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested.

• The composite benchmark total return data is comprised of 60% of the S&P 500 Index and 40% of the Lehman Aggregate Bond Index to reflect a 60/40 neutral weighting of the Fund. The S&P 500 Index is generally considered to be representative of U.S. stock market activity. The Lehman Brothers Aggregate Bond Index is generally considered to be representative of U.S. bond market activity. Index returns are provided for comparative purposes. Please note that the indices are unmanaged and not available for direct investment and their returns do not reflect the fees and expenses that have been deducted from the Fund.

• Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. The return figures shown do not reflect the deduction of taxes that a contractowner may pay on distributions or redemption of units.

THE GUARDIAN VC ASSET ALLOCATION FUND 1

ⁿ   The Guardian VC Asset Allocation Fund Semiannual Report
To Contractowners

Fund Expenses

By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including, as applicable, management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other underlying funds.

The example is based on an investment of $1,000 invested on January 1, 2006 and held for six months ended June 30, 2006.

Actual Expenses

The first line in the table provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value January 1, 2006		Ending Account Value June 30, 2006		Expenses Paid During the Period*		Annualized Expense Ratio
Actual	$	1,000	$	1,027.60	$	1.66	0.33%
Hypothetical (5% return before expenses)	$	1,000	$	1,023.16	$	1.66	0.33%

* Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the Fund’s most recent fiscal half-year).

2 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC Asset Allocation Fund

Schedule of Investments

June 30, 2006 (Unaudited)

Shares			Value
	Mutual Fund — 70.5%
	Equity — 70.5%
	3,456,876	The Guardian VC 500 Index Fund* (1) (Cost $31,315,956)	$	32,148,945
Principal Amount			Value
	U.S. Government Security — 0.9%
$	400,000	U.S. Treasury Bill 4.615% due 7/20/2006 (2) (Cost $399,026)	$	399,026
	Repurchase Agreements — 28.2%
$	7,000,000	Lehman Brothers repurchase agreement, dated 6/30/2006, maturity value $7,002,829 at 4.85%, due 7/3/2006 (3)	$	7,000,000
	5,843,000	State Street Bank and Trust Co. repurchase agreement, dated 6/30/2006, maturity value $5,845,410 at 4.95%, due 7/3/2006 (4)		5,843,000
		Total Repurchase Agreements (Cost $12,843,000)		12,843,000
	Total Investments — 99.6% (Cost $44,557,982)			45,390,971
	Cash, Receivables, and Other Assets Less Liabilities — 0.4%			180,872
	Net Assets — 100%		$	45,571,843

* The Guardian VC 500 Index Fund financial statements and financial highlights are included herein.

(1) Affiliated issuer, as defined under the Investment Company Act of 1940, which includes issuers in which the Fund held 5% or more of the outstanding voting securities.

(2) The U.S. Treasury Bill is segregated as collateral to cover margin requirements on open futures contracts.

(3) The repurchase agreement is fully collateralized by $7,090,000 in U.S. Government Agency, 5.125%, due 4/15/2011, with a value of $7,153,810.

(4) The repurchase agreement is fully collateralized by $5,960,000 in U.S. Government Agency, 5.50%, due 5/29/2009, with a value of $5,960,000.

Contracts	Description	Expiration	Unrealized Depreciation
Purchased Futures Contracts
14	S&P 500 Index	9/2006	$      (68,670)

See notes to financial statements.

THE GUARDIAN VC ASSET ALLOCATION FUND 3

ⁿ The Guardian VC Asset Allocation Fund

Statement of Assets and Liabilities

June 30, 2006 (Unaudited)

ASSETS
Unaffiliated issuers, at identified cost*	$	13,242,026
Affiliated issuers, at identified cost		31,315,956
Total Cost	$	44,557,982
Unaffiliated issuers, at market	$	399,026
Affiliated issuers, at market		32,148,945
Repurchase agreements		12,843,000
Total Investments		45,390,971
Cash		575
Receivable for fund shares sold		301,018
Interest receivable		1,746
Other assets		858
Total Assets		45,695,168
LIABILITIES
Payable for fund shares redeemed		93,054
Accrued expenses		13,604
Payable for variation margin — Note A		11,200
Due to GIS		5,467
Total Liabilities		123,325
Net Assets	$	45,571,843
COMPONENTS OF NET ASSETS
Capital stock, at par	$	4,768
Additional paid-in capital		47,394,981
Undistributed net investment income		277,270
Accumulated net realized loss on investments and futures contracts		(2,869,495	)
Net unrealized appreciation of investments and futures contracts		764,319
Net Assets	$	45,571,843
Shares Outstanding — $0.001 Par Value		4,768,523
Net Asset Value Per Share		$9.56

* Includes repurchase agreements.

Statement of Operations

Six Months Ended

June 30, 2006 (Unaudited)

INVESTMENT INCOME
Interest	$	326,842
Dividends (Received from affiliated issuer)		207,737
Total Income		534,579
Expenses:
Investment advisory fees — Note B		115,581
Custodian fees		16,598
Audit fees		11,910
Printing expense		6,421
Directors’ fees — Note B		3,015
Insurance expense		1,695
Legal fees		992
Loan commitment fees — Note H		454
Registration fees		33
Other		226
Total Expenses before reimbursement		156,925
Less: Expenses assumed by investment adviser (1)		(80,109	)
Net Expenses		76,816
Net Investment Income		457,763
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on futures contracts — Note A		174,107
Net change in unrealized appreciation of investments — Note C		626,183
Net change in unrealized depreciation of futures contracts — Note A		27,126
Net Realized and Unrealized Gain on Investments		827,416
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	1,285,179

(1) The Fund does not impose any advisory fees for the portion of the Fund’s assets invested in other Guardian Funds.

See notes to financial statements.

4 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC Asset Allocation Fund

Statements of Changes in Net Assets

	Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income	$	457,763		$	860,291
Net realized gain on investments and futures contracts		174,107			721,115
Net change in unrealized appreciation/(depreciation) of investments		653,309			68,362
Net Increase in Net Assets Resulting from Operations		1,285,179			1,649,768
Dividends to Shareholders from:
Net investment income		(868,306	)		(329,786	)
From Capital Share Transactions:
Net decrease in net assets from capital share transactions — Note G		(1,133,881	)		(10,958,548	)
Net Decrease in Net Assets		(717,008	)		(9,638,566	)
NET ASSETS:
Beginning of period		46,288,851			55,927,417
End of period*	$	45,571,843		$	46,288,851
*  Includes undistributed net investment income of:	$	277,270		$	687,813

See notes to financial statements.

THE GUARDIAN VC ASSET ALLOCATION FUND 5

ⁿ The Guardian VC Asset Allocation Fund

Financial Highlights

Selected data for a share of capital stock outstanding throughout the periods indicated:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, (Audited)
			2005		2004		2003		2002		2001
Net asset value, beginning of period	$9.49		$9.16		$8.40		$6.78		$8.62		$9.83
Income from investment operations:
Net investment income	0.10		0.19		0.13		0.10		0.14		0.24
Net realized and unrealized gain/(loss) on investments	0.16		0.21		0.74		1.76		(1.83	)	(1.12	)
Net increase/(decrease) from investment operations	0.26		0.40		0.87		1.86		(1.69	)	(0.88	)
Dividends and distributions to shareholders from:
Net investment income	(0.19	)	(0.07	)	(0.11	)	(0.24	)	(0.15	)	(0.10	)
Net realized gain on investments	—		—		—		—		—		(0.23	)
Total dividends and distributions	(0.19	)	(0.07	)	(0.11	)	(0.24	)	(0.15	)	(0.33	)
Net asset value, end of period	$9.56		$9.49		$9.16		$8.40		$6.78		$8.62
Total return*	2.76	%(a)	4.36	%	10.31	%	27.70	%	(19.88	)%	(9.03	)%
Ratios/supplemental data:
Net assets, end of period (000’s omitted)	$45,572		$46,289		$55,927		$48,980		$34,572		$44,768
Ratio of expenses to average net assets	0.33	%(b)(c)	0.38	%(c)	0.31	%(c)	0.29	%(c)	0.31	%(c)	0.39	%(c)
Gross expense ratio	0.53	%(b)(d)	0.51	%(d)	0.53	%(d)	0.54	%(d)	0.56	%(d)	0.56	%(d)
Ratio of net investment income to average net assets	1.98	%	1.75	%	1.52	%	1.51	%	1.89	%	2.87	%
Portfolio turnover rate	0	%	2	%	0	%	0	%	0	%	29	%

* Total returns do not reflect the effects of charges deducted pursuant to the terms of GIAC’s variable contracts.

Inclusion of such charges would reduce the total returns for all periods shown.

(a) Not annualized.

(b) Annualized.

(c) Amounts do not include expenses of the underlying funds.

(d) Amounts include expenses of the underlying funds.

See notes to financial statements.

6 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC Asset Allocation Fund

Notes to Financial Statements

June 30, 2006 (Unaudited)

Note A. Organization and Accounting Policies

The Guardian VC Asset Allocation Fund (the Fund or GVCAAF) is a series of The Guardian Variable Contract Funds, Inc. (GVCF). GVCF is incorporated in the state of Maryland and is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The financial statements for the other remaining series of GVCF are presented in separate reports.

Shares of GVCAAF are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies of the Fund are as follows:

Investments

Securities listed on national securities exchanges are valued at the last sale price on such exchanges, or if no sale occurred, at the mean of the closing bid and asked prices. Securities that are traded on the NASDAQ National Securities Market are valued at the NASDAQ Official Closing Price. Investments in an underlying fund are valued at the closing net asset value of each underlying fund on the day of valuation.

Pursuant to valuation procedures approved by the Board of Directors, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgment of the Service, are valued at the bid price. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

Other securities, including securities for which market quotations are not readily available (such as certain mortgage-backed securities, restricted securities, illiquid securities and foreign securities subject to a “significant event”) are valued at fair value as determined in good faith by or under the direction of GVCF’s Board of Directors. A “significant event” is an event that will affect the value of a portfolio security that occurs after the close of trading in the security’s primary trading market or exchange but before the Fund’s NAV is calculated.

Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets.

Futures contracts are valued at the settlement prices established by the boards of trade or exchanges on which they are traded.

Repurchase agreements are carried at cost which approximates market value (see Note D). Short-term debt securities with maturities of 60 days or less are valued on an amortized cost basis which approximates market value.

Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/discount, is accrued daily. Dividend income is recorded on the ex-dividend date.

Foreign Currency Translation

GVCAAF is permitted to buy international securities that are not U.S. dollar denominated. GVCAAF’s books and records are maintained in U.S. dollars as follows:

(1) The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange.

(2) Security purchases and sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.

The resulting gains and losses are included in the Statement of Operations as follows:

Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses,

THE GUARDIAN VC ASSET ALLOCATION FUND 7

ⁿ The Guardian VC Asset Allocation Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

which result from changes in foreign exchange rates between the date on which GVCAAF earns dividends and interest or pays foreign withholding taxes or other expenses and the date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized gains or losses on foreign currency related transactions. Realized foreign exchange gains and losses which result from changes in foreign exchange rates between the trade and settlement dates on security and currency transactions are also included in net realized gains and losses on foreign currency related transactions. Net currency gains and losses from valuing other assets and liabilities denominated in foreign currency at the period end exchange rate are reflected in net change in unrealized appreciation or depreciation from translation of other assets and liabilities denominated in foreign currencies.

Forward Foreign Currency Contracts

GVCAAF may enter into forward foreign currency contracts in connection with planned purchases or sales of securities, or to hedge against changes in currency exchange rates affecting the values of its investments that are denominated in a particular currency. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Fluctuations in the value of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by GVCAAF. When forward contracts are closed, GVCAAF will record realized gains or losses equal to the difference between the values of such forward contracts at the time each was opened and the values at the time each was closed. Such amounts are recorded in net realized gains or losses on foreign currency related transactions. GVCAAF will not enter into a forward foreign currency contract if such contract would obligate it to deliver an amount of foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency.

Futures Contracts

GVCAAF may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, GVCAAF is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by GVCAAF each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by GVCAAF. The daily changes in the variation margin are recognized as unrealized gains or losses by GVCAAF. GVCAAF’s investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GVCAAF may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates, securities prices or prices of futures contracts move unexpectedly, GVCAAF may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. GVCAAF’s portfolio holdings correspond to the custodian bank’s records and reflect accounting treatment for the futures contracts in the portfolio.

Dividend Distributions

Dividends from net investment income are declared and paid semi-annually for GVCAAF. Net realized short-term and long-term capital gains for GVCAAF will be distributed at least annually. All such dividends and distributions are credited in the form of additional shares of GVCAAF at the net asset value on the ex-dividend date.

All dividends and distributions are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations. Differences between the recognition of income on an income tax basis and recognition of income based on GAAP may cause temporary overdistributions of net realized gains and net investment income on a GAAP basis.

Taxes

GVCAAF has qualified and intends to remain qualified to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code (Code), and as such will not be subject to federal income tax on taxable income (including any realized capital gains) which is distributed in accordance with the provisions of the Code. Therefore, no federal income tax provision is required.

Reclassification of Capital Accounts

The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital

8 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC Asset Allocation Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

gains, and the recharacterization of foreign exchange gains or losses to either ordinary income or realized capital gains for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications would have no effect on net assets, results of operations, or net asset value per share of the Fund.

Note B. Investment Advisory Agreements and Payments to or from Related Parties

The Fund has an investment advisory agreement with Guardian Investor Services LLC (GIS), a wholly-owned subsidiary of GIAC. Fees for investment advisory are at an annual rate of 0.50% of the average daily net assets of the Fund. There are no duplicative advisory fees charged to GVCAAF on assets invested in other Guardian Funds. Under an SEC exemptive order, advisory fees are paid at the underlying Fund level.

The Guardian Fund Complex pays directors who are not “interested persons” (as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Board committee members also receive a fee of $2,000 per committee meeting, which also is allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain directors who are interested persons. Certain officers and directors of the Fund are affiliated with GIS.

Note C. Investment Transactions

Purchases and proceeds from sales of securities (excluding short-term securities) amounted to $207,737 and $0, respectively, during the six months ended June 30, 2006.

The cost of investments owned at June 30, 2006 for federal income tax purposes was substantially the same as the cost for financial reporting purposes. The gross unrealized appreciation and depreciation of investments excluding futures at June 30, 2006 aggregated $832,989 and $0, respectively, resulting in net unrealized appreciation of $832,989.

Note D. Repurchase Agreements

The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, GVCAAF will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, GVCAAF maintains the right to sell the collateral and may claim any resulting loss against the seller.

Note E. Reverse Repurchase Agreements

GVCAAF may enter into reverse repurchase agreements with banks or third party broker-dealers to borrow short-term funds. Interest on the value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time GVCAAF enters into a reverse repurchase agreement, GVCAAF establishes and segregates cash, U.S. government securities or liquid, unencumbered securities that are marked-to-market daily. The value of such segregated assets must be at least equal to the value of the repurchase obligation (principal plus accrued interest), as applicable. Reverse repurchase agreements involve the risk that the buyer of the securities sold by GVCAAF may be unable to deliver the securities when GVCAAF seeks to repurchase them.

Note F. Dollar Roll Transactions

GVCAAF may enter into dollar rolls (principally using TBA’s) in which GVCAAF sells mortgage securities for delivery in the current month and simultaneously contracts to repurchase similar securities at an agreed-upon price on a fixed date. The securities repurchased will bear the same interest as those sold, but generally will be collateralized at the time of delivery by different pools of mortgages with different prepayment histories than those securities sold. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on the securities sold. Dollar roll transactions involve the risk that the buyer of the securities sold by GVCAAF may be unable to deliver the securities when the GVCAAF seeks to repurchase them. GVCAAF is compensated by the difference between the current sales price and the forward price for the future purchase (often referred to as the “drop”), as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls may increase fluctuations in GVCAAF’s net asset value and may be viewed as a form of leverage.

THE GUARDIAN VC ASSET ALLOCATION FUND 9

ⁿ The Guardian VC Asset Allocation Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

Note G. Transactions in Capital Stock

There are 100,000,000 shares of $0.001 par value capital stock authorized for GVCAAF. Transactions in capital stock were as follows:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
	Shares				Amount
Shares sold	220,881		494,217		$	2,153,807		$	4,531,165
Shares issued in reinvestment of dividends	93,769		36,161			868,306			329,786
Shares repurchased	(426,005	)	(1,752,890	)		(4,155,994	)		(15,819,499	)
Net decrease	(111,355	)	(1,222,512	)	$	(1,133,881	)	$	(10,958,548	)

Note H. Line of Credit

A $100,000,000 line of credit available to GVCAAF and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus 0.50% calculated on a 360 day basis per annum. For the six months ended June 30, 2006, none of the funds borrowed against this line of credit.

The funds are obligated to pay State Street Bank and Trust Company and Bank of Montreal a commitment fee computed at a rate of 0.08% per annum on the average daily unused portion of the revolving credit.

Note I. Investments in Affiliates¹

A summary of GVCAAF transactions in affiliated issuers during the six months ended June 30, 2006 is set forth below:

Name of Issuer	Balance of Shares Held December 31, 2005	Gross Purchases and Additions	Gross Sales and Reductions	Balance of Shares Held June 30, 2006	Value June 30, 2006		Dividends Included in Dividend Income		Net Realized Gains from Underlying Funds		Net Realized Gain/(Loss) on Sales
Non-Controlled Affiliates
The Guardian VC 500 Index Fund	3,433,665	23,211	—	3,456,876	$	32,148,945	$	207,737	$	—	$	—

¹ Affiliated issuers, as defined in the 1940 Act, include issuers in which the Fund held 5% or more of the outstanding voting securities.

10 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC Asset Allocation Fund

Board Approval of Investment Management Agreements (Unaudited)

The Boards of Directors of The Guardian Variable Contract Funds, Inc. (“GVCF”), GIAC Funds, Inc. (“GIAC”), The Guardian Bond Fund, Inc. (“GBF” and a “Fund”) and The Guardian Cash Fund, Inc. (“GCF” and a “Fund”) (together, the series of GVCF and GIAC, and GBF and GCF are referred to as the “Funds,”) approved the renewal of the management agreement for each Fund and, as applicable, the subadvisory agreement for each Fund on November 17, 2005. As a part of the renewal process, the Boards of Directors of GVCF, GIAC, GBF and GCF met independently of Fund management and of the interested Board Members to consider the renewal of: (1) the management agreement (“Management Agreement”) between each of the Funds and Guardian Investor Services LLC (“GIS”) or as applicable, Guardian Baillie Gifford Limited (“GBG” and together with GIS, each referred to as a “Manager”); (2) as applicable, the subadvisory agreements (each a “Subadvisory Agreement”) between GBG and Baillie Gifford Overseas Limited (“BGO”) and the subadvisory agreements between GIS and UBS Global Asset Management (Americas) Inc. (“UBS” and together with BGO, each referred to as a “Subadvisor”). (The Management Agreements and the Subadvisory Agreements are together referred to as the “Advisory Agreements.”) As part of the review process, the Independent Directors were represented by independent legal counsel. The Independent Directors reviewed comprehensive materials received from the Managers, Subadvisors and independent counsel in connection with contract review. The Independent Directors noted that each Board also received regular information throughout the year regarding performance and operating results of each Fund and that in evaluating the Advisory Agreements, they were taking into account their accumulated experience as Board members in working with the Managers on matters relating to the Funds.

In preparation for the review process, the Independent Directors met with independent legal counsel and discussed the type and nature of information to be provided and sent a formal request for information to Fund management. The Managers and Subadvisors provided extensive information to all Board members in response to the request. Among other information, the Independent Directors reviewed materials to assess the services provided by each Manager and Subadvisor, and, as applicable, information comparing the performance, advisory fees and expense ratios of each Fund to other mutual funds, information about the profitability from the Advisory Agreements to the Managers and to the Subadvisors, information about economies of scale and information about the other benefits to the Managers and Subadvisors and their affiliates resulting from their relationship with the Funds (“fall-out benefits”). The Independent Directors reviewed comparative performance and management fee and expense ratios of peer groups of funds selected by Morningstar, Inc. (“Morningstar”). The Independent Directors also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Advisory Agreements. In preparation for the November 17th meeting, the Independent Directors met on November 3, 2005, to review and discuss with independent legal counsel the information provided by Morningstar.

Based upon their review, the Independent Directors concluded that it was in the best interest of each Fund to renew each relevant Advisory Agreement and, accordingly, recommended to the full Board of each Fund the renewal of each applicable Advisory Agreement. In reaching this conclusion for each Fund, the Independent Directors did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Management Agreements

Nature, Quality and Extent of Services. In reviewing the nature, quality and extent of services provided by the Managers, the Independent Directors considered the services provided by each Manager under the Management Agreements, including administrative services. The Independent Directors considered the experience and skills of senior management responsible for fund operations, the experience and skills of the personnel performing the functions under each Management Agreement and the resources made available to such personnel, the ability of the Managers to attract and retain high-quality personnel, and the organizational depth of the Managers. The Independent Directors concluded that appropriate resources were provided under each Management Agreement. The Independent Directors also considered the delegation of day-to-day portfolio management responsibility to UBS with respect to the Guardian UBS VC Large Cap Value Fund and the Guardian UBS VC Small Cap Value Fund and to BGO with respect to the Baillie Gifford International Growth Fund and the Baillie Gifford Emerging Markets Fund and the Managers’ ability to supervise the activities of the Subadvisors. The Independent Directors concluded each Manager’s supervisory program was satisfactory. The Independent Directors also considered the compliance program established by the Managers and the level of compliance attained by the Managers. Further, the Independent Directors considered that each Manager has had a long-term relationship with the Funds and has demonstrated its past and future commitment to support the Funds. The Independent Directors concluded that a long-term relationship with a capable, conscientious adviser was in the best interest of each Fund. Based upon all relevant factors, the Independent Directors concluded that the nature, quality and extent of the services provided by the Managers to each applicable Fund were satisfactory.

THE GUARDIAN VC ASSET ALLOCATION FUND 11

ⁿ The Guardian VC Asset Allocation Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and longer-term (three year, five year and ten year) periods, as applicable, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. The Independent Directors received comparative performance information prepared by Morningstar. The Independent Directors also considered whether investment results were consistent with a Fund’s investment objective(s) and policies. For most Funds, the Independent Directors concluded that investment performance met acceptable levels of investment performance. For Funds that experienced underperformance, the Independent Directors reviewed the reasons for the underperformance and the remedial measures taken by the Manager to improve performance. The Independent Directors concluded that the Managers have in place an effective process to monitor performance and that reasonable steps had been implemented to address circumstances of underperformance where appropriate. Therefore, the Independent Directors concluded that it was in the best interests of the Funds to renew the Management Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s management fees and net expense ratios. The Independent Directors received information, based on data supplied by Morningstar, comparing each Fund’s management fee rates and total net expense ratio to advisory fees and total net expense ratios of the mutual funds in its peer group (as selected by Morningstar). The Independent Directors also received and considered information on fee waivers and/or reimbursements for each Fund compared to those of its peer group. The Independent Directors noted that a number of the Funds have received fee waivers for many years and that such fee waivers remained current through the time of the review process.

The Independent Directors also compared each Fund’s management fee rates to fees charged by the Manager for comparable mutual funds. For each Fund, the Independent Directors reviewed the fees charged by other advisors for mutual funds in the Fund’s peer group. GIS provided information on the advisory fees it charges its two institutional accounts and noted the information was not comparable with the Funds because the investment objectives and management style of the institutional accounts were very different than those of the Funds. GBG has no clients other than the Funds.

On the basis of all information provided, the Independent Directors concluded that the management fee schedules for each Fund were reasonable and appropriate in light of the nature, quality and extent of services provided by the Manager.

Profitability. The Independent Directors reviewed detailed information regarding revenues received by each Manager under each Management Agreement, including identification of the estimated direct and indirect costs of the Managers of providing those services to each Fund that are covered under the Management Agreements. The Independent Directors also received information regarding the enterprise-wide profitability of the Managers with respect to all fund services in totality.

For all Funds, based upon the profitability percentage provided, the Independent Directors concluded that the profitability to the applicable Manager from the management of each Fund was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the management of each Fund and whether the Funds benefit from any such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund and the Guardian Cash Fund had management fee schedules that each contained one breakpoint. The Independent Directors also considered whether the effective management fee rate for each Fund under the Management Agreement is reasonable in relation to the asset size of such Fund. The Independent Directors noted GIS’s representation that it did not anticipate that the Funds would experience any significant economies in the near future, given their asset size. The Independent Directors concluded that, in light of the Funds’ current asset levels, the fee schedule for each Fund reflects an appropriate level of sharing of any economies of scale.

Other Benefits to Manager. The Independent Directors also considered the character and amount of other incidental benefits received by the Managers and their affiliates as a result of their relationship with the Funds. The Independent Directors noted the Managers’ representation that each has the ability to obtain proprietary research as a result of the Funds’ brokerage business that may be used for the benefit of the Funds and other clients of the Managers. The Independent Directors concluded that management fees for each Fund were reasonable in light of these fall-out benefits.

Specific Fund Findings

The Guardian VC Asset Allocation Fund

In determining to recommend renewal of the Fund’s Management Agreement, the Independent Directors noted the favorable relative investment performance of the Fund, with performance above the median of its peer group in all but one of the periods reviewed, and that the management fee rate was reasonable.

12 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC Asset Allocation Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Overall Conclusions

Based upon all of the information considered and the conclusions reached, the Independent Directors determined that the terms of each Advisory Agreement continue to be fair and reasonable and that the continuation of each Advisory Agreement is in the best interests of each Fund.

THE GUARDIAN VC ASSET ALLOCATION FUND 13

ⁿ The Guardian VC Asset Allocation Fund

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, is available free of charge upon request by logging on to www.guardianinvestor.com or the Securities and Exchange Commission’s (SEC) website at www.sec.gov.

Form N-Q

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each year on the Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov, and 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.

Code of Ethics

The Fund has adopted a code of ethics for its Principal Executive Officer and Principal Financial Officers (the “Code”). The purpose of the Code is to promote, among other things: honest and ethical conduct, including the handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in reports and documents filed with the SEC; and compliance with applicable laws and regulations. A copy of the Code has been filed with the SEC on Form N-CSR and can be obtained on the SEC’s website at www.sec.gov.

Copies for all of the above can be obtained free of charge by calling 1-800-221-3253 or by writing to Guardian Investor Services LLC at 7 Hanover Square, New York, New York 10004.

The Guardian VC Asset Allocation Fund currently invests in The Guardian VC 500 Index Fund; therefore, the financial statements for that Fund accompany the financial statements for the The Guardian VC Asset Allocation Fund on the following pages.

14 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments

June 30, 2006 (Unaudited)

Shares		Value
Common Stocks — 97.5%
Aerospace and Defense — 2.4%
15,041	Boeing Co.	$	1,232,008
7,296	General Dynamics Corp.		477,596
2,074	Goodrich Corp.		83,562
15,604	Honeywell Int’l., Inc.		628,841
2,900	L-3 Comm. Hldgs., Inc.		218,718
7,403	Lockheed Martin Corp.		531,091
8,930	Northrop Grumman Corp.		572,056
7,852	Raytheon Co.		349,964
2,736	Rockwell Collins, Inc.		152,860
19,100	United Technologies Corp.		1,211,322
			5,458,018
Air Freight and Logistics — 1.0%
5,794	FedEx Corp.		677,087
21,059	United Parcel Svc., Inc. – Class B		1,733,787
			2,410,874
Airlines — 0.1%
18,199	Southwest Airlines Co.		297,918
Auto Components — 0.2%
1,100	Cooper Tire & Rubber Co.		12,254
2,622	Goodyear Tire & Rubber Co.*		29,104
4,088	Johnson Controls, Inc.		336,116
			377,474
Automobiles — 0.4%
36,944	Ford Motor Co.		256,022
11,434	General Motors Corp.		340,619
5,221	Harley-Davidson, Inc.		286,580
			883,221
Beverages — 2.2%
14,362	Anheuser-Busch Cos., Inc.		654,763
2,046	Brown-Forman Corp. – Class B		146,187
42,764	Coca-Cola Co.		1,839,707
8,124	Coca-Cola Enterprises, Inc.		165,486
3,500	Constellation Brands, Inc. – Class A*		87,500
1,841	Molson Coors Brewing Co. – Class B		124,967
4,264	Pepsi Bottling Group, Inc.		137,088
30,171	PepsiCo., Inc.		1,811,467
			4,967,165
Biotechnology — 1.2%
23,617	Amgen, Inc.*		1,540,537
6,154	Biogen Idec, Inc.*		285,115
5,005	Genzyme Corp.*		305,555
9,200	Gilead Sciences, Inc.*		544,272
3,941	MedImmune, Inc.*		106,801
			2,782,280
Building Products — 0.2%
3,957	American Standard Cos., Inc.		171,219
7,420	Masco Corp.		219,929
			391,148
Capital Markets — 3.5%
4,567	Ameriprise Financial, Inc.		204,008
14,970	Bank of New York, Inc.		482,034
2,876	Bear Stearns Cos., Inc.		402,870
22,577	Charles Schwab Corp.		360,780
10,100	E*TRADE Financial Corp.*		230,482
1,739	Federated Investors, Inc. – Class B		54,779
3,987	Franklin Resources, Inc.		346,112
8,702	Goldman Sachs Group, Inc.		1,309,042

Shares		Value
6,726	Janus Capital Group, Inc.	$	120,395
2,500	Legg Mason, Inc.		248,800
10,848	Lehman Brothers Hldgs., Inc.		706,747
7,285	Mellon Financial Corp.		250,823
17,464	Merrill Lynch & Co., Inc.		1,214,796
20,283	Morgan Stanley		1,282,088
3,863	Northern Trust Corp.		213,624
6,370	State Street Corp.		370,033
4,316	T. Rowe Price Group, Inc.		163,188
			7,960,601
Chemicals — 1.5%
3,869	Air Products & Chemicals, Inc.		247,306
1,031	Ashland, Inc.		68,768
18,242	Dow Chemical Co.		711,985
18,905	E.I. Du Pont de Nemours & Co.		786,448
1,156	Eastman Chemical Co.		62,424
4,704	Ecolab, Inc.		190,888
1,633	Hercules, Inc.*		24,920
1,417	Int’l. Flavors & Fragrances, Inc.		49,935
5,007	Monsanto Co.		421,539
2,995	PPG Inds., Inc.		197,670
5,483	Praxair, Inc.		296,082
3,888	Rohm & Haas Co.		194,867
1,351	Sigma-Aldrich		98,137
			3,350,969
Commercial Banks — 4.1%
8,364	AmSouth Bancorporation		221,228
9,234	BB&T Corp.		384,042
3,064	Comerica, Inc.		159,297
3,500	Commerce Bancorp, Inc.		124,845
2,100	Compass Bancshares, Inc.		116,760
10,354	Fifth Third Bancorp		382,580
1,892	First Horizon Nat’l. Corp.		76,058
7,298	Huntington Bancshares, Inc.		172,087
7,242	KeyCorp		258,395
2,000	M & T Bank Corp.		235,840
3,796	Marshall & Ilsley Corp.		173,629
11,847	National City Corp.		428,743
10,066	North Fork Bancorporation, Inc.		303,691
6,005	PNC Financial Svcs. Group		421,371
7,258	Regions Financial Corp.		240,385
7,523	SunTrust Banks, Inc.		573,704
5,299	Synovus Financial Corp.		141,907
34,097	U.S. Bancorp		1,052,915
31,447	Wachovia Corp.		1,700,654
32,355	Wells Fargo & Co.		2,170,374
1,372	Zions Bancorporation		106,934
			9,445,439
Commercial Services and Supplies — 0.7%
4,913	Allied Waste Inds., Inc.*		55,812
2,079	Avery Dennison Corp.		120,707
18,985	Cendant Corp.		309,266
3,041	Cintas Corp.		120,910
2,150	Equifax, Inc.		73,831
2,470	Monster Worldwide, Inc.*		105,370
4,365	Pitney Bowes, Inc.		180,275
4,695	R.R. Donnelley & Sons Co.		150,005
2,619	Robert Half Int’l., Inc.		109,998
11,422	Waste Management, Inc.		409,821
			1,635,995

See notes to financial statements.

THE GUARDIAN VC ASSET ALLOCATION FUND 15

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
Communications Equipment — 2.7%
1,701	ADC Telecomm., Inc.*	$	28,679
3,629	Andrew Corp.*		32,153
6,957	Avaya, Inc.*		79,449
15,078	CIENA Corp.*		72,525
120,263	Cisco Systems, Inc.*		2,348,736
2,797	Comverse Technology, Inc.*		55,297
30,763	Corning, Inc.*		744,157
27,463	JDS Uniphase Corp.*		69,481
11,000	Juniper Networks, Inc.*		175,890
72,571	Lucent Technologies, Inc.*		175,622
48,505	Motorola, Inc.		977,376
31,468	QUALCOMM, Inc.		1,260,923
8,953	Tellabs, Inc.*		119,164
			6,139,452
Computers and Peripherals — 3.3%
16,633	Apple Computer, Inc.*		950,077
47,143	Dell, Inc.*		1,150,761
45,971	EMC Corp.*		504,302
4,846	Gateway, Inc.*		9,207
55,301	Hewlett Packard Co.		1,751,936
30,422	Int’l. Business Machines		2,337,018
2,204	Lexmark Int’l. Group, Inc. – Class A*		123,049
2,932	NCR Corp.*		107,428
6,233	Network Appliance, Inc.*		220,025
2,794	QLogic Corp.*		48,169
3,300	SanDisk Corp.*		168,234
55,932	Sun Microsystems, Inc.*		232,118
			7,602,324
Construction and Engineering — 0.1%
2,106	Fluor Corp.		195,711
Construction Materials — 0.1%
1,518	Vulcan Materials Co.		118,404
Consumer Finance — 0.9%
22,837	American Express Co.		1,215,385
4,624	Capital One Financial Corp.		395,121
7,586	SLM Corp.		401,451
			2,011,957
Containers and Packaging — 0.2%
1,698	Ball Corp.		62,894
2,984	Bemis Co., Inc.		91,370
2,370	Pactiv Corp.*		58,658
2,355	Sealed Air Corp.		122,648
1,604	Temple-Inland, Inc.		68,763
			404,333
Distributors — 0.0%
2,613	Genuine Parts Co.		108,858
Diversified Consumer Services — 0.1%
2,958	Apollo Group, Inc. – Class A*		152,840
6,318	H & R Block, Inc.		150,747
			303,587
Diversified Financial Services — 5.3%
89,881	Bank of America Corp.		4,323,276
4,000	CIT Group, Inc.		209,160
95,638	Citigroup, Inc.		4,613,577
67,108	J.P. Morgan Chase & Co.		2,818,536
4,648	Moody’s Corp.		253,130
			12,217,679

Shares		Value
Diversified Telecommunication Services — 2.6%
82,113	AT & T, Inc.	$	2,290,131
33,463	BellSouth Corp.		1,211,361
2,122	CenturyTel, Inc.		78,832
4,221	Citizens Comm. Co.		55,084
2,740	Embarq Corp.*		112,313
32,677	Qwest Comm. Int’l., Inc.*		264,357
58,236	Verizon Comm.		1,950,324
			5,962,402
Electric Utilities — 1.4%
3,880	Allegheny Energy, Inc.*		143,832
6,474	American Electric Power, Inc.		221,734
6,073	Edison Int’l.		236,847
3,852	Entergy Corp.		272,529
14,956	Exelon Corp.		849,949
7,451	FirstEnergy Corp.		403,919
7,412	FPL Group, Inc.		306,709
1,550	Pinnacle West Capital Corp.		61,860
5,616	PPL Corp.		181,397
4,078	Progress Energy, Inc.		174,824
13,384	Southern Co.		428,957
			3,282,557
Electrical Equipment — 0.5%
2,932	American Power Conversion Corp.		57,145
1,394	Cooper Inds. Ltd. – Class A		129,530
7,695	Emerson Electric Co.		644,918
3,531	Rockwell Automation, Inc.		254,267
			1,085,860
Electronic Equipment and Instruments — 0.3%
9,869	Agilent Technologies, Inc.*		311,466
2,956	Jabil Circuit, Inc.		75,674
2,894	Molex, Inc.		97,151
9,102	Sanmina-SCI Corp.*		41,869
24,921	Solectron Corp.*		85,230
3,432	Symbol Technologies, Inc.		37,031
1,335	Tektronix, Inc.		39,276
			687,697
Energy Equipment and Services — 2.0%
7,888	B.J. Svcs. Co.		293,907
6,815	Baker Hughes, Inc.		557,808
9,595	Halliburton Co.		712,045
6,320	Nabors Inds., Inc.*		213,553
3,000	National-Oilwell Varco, Inc.*		189,960
3,207	Noble Corp.		238,665
2,114	Rowan Cos., Inc.		75,237
22,958	Schlumberger Ltd.		1,494,795
6,670	Transocean, Inc.*		535,734
6,400	Weatherford Int’l. Ltd.*		317,568
			4,629,272
Food and Staples Retailing — 2.4%
7,957	Costco Wholesale Corp.		454,583
17,192	CVS Corp.		527,794
16,796	Kroger Co.		367,161
7,770	Safeway, Inc.		202,020
3,107	Supervalu, Inc.		95,385
10,594	Sysco Corp.		323,753
53,782	Wal-Mart Stores, Inc.		2,590,679
18,480	Walgreen Co.		828,643
2,600	Whole Foods Market, Inc.		168,064
			5,558,082

See notes to financial statements.

16 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
Food Products — 1.2%
12,488	Archer-Daniels-Midland Co.	$	515,505
7,064	Campbell Soup Co.		262,145
8,985	ConAgra Foods, Inc.		198,658
2,600	Dean Foods Co.*		96,694
6,325	General Mills, Inc.		326,749
5,712	H.J. Heinz Co.		235,449
5,575	Hershey Co.		307,015
6,792	Kellogg Co.		328,937
2,128	McCormick & Co., Inc.		71,394
12,896	Sara Lee Corp.		206,594
4,500	Tyson Foods, Inc. – Class A		66,870
5,402	W.M. Wrigley Jr. Co.		245,035
			2,861,045
Gas Utilities — 0.0%
938	NICOR, Inc.		38,927
605	Peoples Energy Corp.		21,726
			60,653
Health Care Equipment and Supplies — 1.5%
806	Bausch & Lomb, Inc.		39,526
12,386	Baxter Int’l., Inc.		455,309
4,439	Becton Dickinson & Co., Inc.		271,356
3,938	Biomet, Inc.		123,220
26,319	Boston Scientific Corp.*		443,212
1,891	C.R. Bard, Inc.		138,535
2,597	Hospira, Inc.*		111,515
23,240	Medtronic, Inc.		1,090,421
6,290	St. Jude Medical, Inc.*		203,922
8,212	Stryker Corp.		345,807
5,170	Zimmer Hldgs., Inc.*		293,243
			3,516,066
Health Care Providers and Services — 2.7%
10,492	Aetna, Inc.		418,946
4,226	AmerisourceBergen Corp.		177,154
8,368	Cardinal Health, Inc.		538,313
8,800	Caremark Rx, Inc.		438,856
2,296	Cigna Corp.		226,179
3,150	Coventry Health Care, Inc.*		173,061
3,538	Express Scripts, Inc.*		253,816
8,330	HCA, Inc.		359,439
4,134	Health Management Assoc., Inc. – Class A		81,481
3,135	Humana, Inc.*		168,349
2,400	Laboratory Corp. of America*		149,352
1,471	Manor Care, Inc.		69,019
5,759	McKesson Corp.		272,286
6,534	Medco Health Solutions, Inc.*		374,268
2,100	Patterson Cos., Inc.*		73,353
3,696	Quest Diagnostics, Inc.		221,464
7,310	Tenet Healthcare Corp.*		51,024
26,200	UnitedHealth Group, Inc.		1,173,236
12,606	WellPoint, Inc.*		917,339
			6,136,935
Health Care Technology — 0.0%
4,244	IMS Health, Inc.		113,951
Hotels, Restaurants and Leisure — 1.5%
10,827	Carnival Corp.		451,919
2,562	Darden Restaurants, Inc.		100,943
3,771	Harrah’s Entertainment, Inc.		268,420
5,624	Hilton Hotels Corp.		159,047
5,884	Int’l. Game Technology		223,239
7,232	Marriott Int’l., Inc. – Class A		275,684
23,261	McDonald’s Corp.		781,569

Shares		Value
15,064	Starbucks Corp.*	$	568,816
4,298	Starwood Hotels & Resorts Worldwide, Inc.		259,341
1,730	Wendy’s Int’l., Inc.		100,842
5,173	Yum! Brands, Inc.		260,047
			3,449,867
Household Durables — 0.6%
1,205	Black & Decker Corp.		101,774
2,442	Centex Corp.		122,833
5,000	D.R. Horton, Inc.		119,100
2,245	Fortune Brands, Inc.		159,417
1,300	Harman Int’l. Inds., Inc.		110,981
1,490	KB Home		68,317
2,928	Leggett & Platt, Inc.		73,141
1,900	Lennar Corp. – Class A		84,303
5,096	Newell Rubbermaid, Inc.		131,630
4,860	Pulte Homes, Inc.		139,919
873	Snap-On, Inc.		35,287
1,281	Stanley Works		60,489
1,159	Whirlpool Corp.		95,791
			1,302,982
Household Products — 2.1%
3,445	Clorox Co.		210,042
9,818	Colgate-Palmolive Co.		588,098
8,429	Kimberly-Clark Corp.		520,069
63,162	Procter & Gamble Co.		3,511,807
			4,830,016
Independent Power Producers and Energy Traders — 0.4%
13,081	AES Corp.*		241,345
3,844	Constellation Energy Group, Inc.		209,575
5,523	Dynegy, Inc. – Class A*		30,211
8,760	TXU Corp.		523,760
			1,004,891
Industrial Conglomerates — 3.9%
13,794	3M Co.		1,114,141
199,651	General Electric Co.		6,580,497
2,366	Textron, Inc.		218,098
38,378	Tyco Int’l. Ltd.		1,055,395
			8,968,131
Information Technology Services — 1.0%
2,300	Affiliated Computer Svcs., Inc. – Class A*		118,703
9,913	Automatic Data Processing, Inc.		449,555
3,266	Computer Sciences Corp.*		158,205
2,590	Convergys Corp.*		50,505
10,014	Electronic Data Systems Corp.		240,937
15,929	First Data Corp.		717,442
3,775	Fiserv, Inc.*		171,234
7,597	Paychex, Inc.		296,131
2,167	Sabre Hldgs. Corp. – Class A		47,674
4,833	Unisys Corp.*		30,351
			2,280,737
Insurance — 4.6%
6,224	ACE Ltd.		314,872
8,897	AFLAC, Inc.		412,376
11,699	Allstate Corp.		640,286
2,084	Ambac Financial Group, Inc.		169,012
50,203	American Int’l. Group, Inc.		2,964,487
5,608	Aon Corp.		195,271
7,936	Chubb Corp.		396,007
4,875	Cincinnati Financial Corp.		229,174
6,000	Genworth Financial, Inc. – Class A		209,040
5,690	Hartford Financial Svcs. Group, Inc.		481,374

See notes to financial statements.

THE GUARDIAN VC ASSET ALLOCATION FUND 17

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
6,446	Lincoln Nat’l. Corp.	$	363,812
9,663	Loews Corp.		342,553
9,751	Marsh & McLennan Cos., Inc.		262,204
2,700	MBIA, Inc.		158,085
15,772	MetLife, Inc.		807,684
5,188	Principal Financial Group, Inc.		288,712
14,224	Progressive Corp.		365,699
9,477	Prudential Financial, Inc.		736,363
2,047	SAFECO Corp.		115,349
13,898	St. Paul Travelers Cos., Inc.		619,573
1,782	Torchmark Corp.		108,203
9,310	UnumProvident Corp.		168,790
3,956	XL Capital Ltd. – Class A		242,503
			10,591,429
Internet and Catalog Retail — 0.1%
5,800	Amazon.com, Inc*		224,344
Internet Software and Services — 1.4%
22,834	eBay, Inc.*		668,808
4,000	Google, Inc. – Class A*		1,677,320
4,100	VeriSign, Inc.*		94,997
24,076	Yahoo! Inc.*		794,508
			3,235,633
Leisure Equipment and Products — 0.1%
1,348	Brunswick Corp.		44,821
4,363	Eastman Kodak Co.		103,752
2,589	Hasbro, Inc.		46,887
6,533	Mattel, Inc.		107,860
			303,320
Life Sciences Tools and Services — 0.2%
3,176	Applera Corp.-Applied Biosystems Group		102,743
1,900	Fisher Scientific Int’l., Inc.*		138,795
723	Millipore Corp.*		45,542
1,870	PerkinElmer, Inc.		39,083
2,490	Thermo Electron Corp.*		90,238
1,962	Waters Corp.*		87,113
			503,514
Machinery — 1.6%
12,694	Caterpillar, Inc.		945,449
618	Cummins, Inc.		75,551
5,066	Danaher Corp.		325,845
4,466	Deere & Co.		372,866
7,032	Dover Corp.		347,592
2,646	Eaton Corp.		199,508
11,408	Illinois Tool Works, Inc.		541,880
5,794	Ingersoll-Rand Co. Ltd. – Class A		247,867
4,742	ITT Inds., Inc.		234,729
1,251	Navistar Int’l. Corp.*		30,787
3,049	PACCAR, Inc.		251,177
2,232	Pall Corp.		62,496
1,765	Parker-Hannifin Corp.		136,964
			3,772,711
Media — 3.4%
15,737	CBS Corp. – Class B		425,686
9,954	Clear Channel Comm., Inc.		308,076
39,788	Comcast Corp. – Class A*		1,302,659
1,257	Dow Jones & Co., Inc.		44,008
5,313	Gannett Co., Inc.		297,156
7,803	Interpublic Group Cos., Inc.*		65,155
790	McClatchy Co. – Class A		31,704
6,524	McGraw-Hill Cos., Inc.		327,700
742	Meredith Corp.		36,759
3,273	New York Times Co. – Class A		80,319

Shares		Value
44,800	News Corp. – Class A	$	859,264
3,111	Omnicom Group, Inc.		277,159
1,600	E.W. Scripps Co. – Class A		69,024
86,724	Time Warner, Inc.		1,500,325
6,418	Tribune Co.		208,136
5,466	Univision Comm., Inc. – Class A*		183,111
15,737	Viacom, Inc. – Class B*		564,014
39,316	Walt Disney Co.		1,179,480
			7,759,735
Metals and Mining — 0.9%
16,825	Alcoa, Inc.		544,457
1,806	Allegheny Technologies, Inc.		125,047
3,191	Freeport-McMoran Copper & Gold, Inc. – Class B		176,813
8,404	Newmont Mining Corp.		444,824
5,922	Nucor Corp.		321,269
4,496	Phelps Dodge Corp.		369,391
2,788	United States Steel Corp.		195,495
			2,177,296
Multiline Retail — 1.1%
1,734	Big Lots, Inc.*		29,617
1,262	Dillards, Inc. – Class A		40,195
6,584	Dollar General Corp.		92,044
2,592	Family Dollar Stores, Inc.		63,323
9,394	Federated Department Stores, Inc.		343,820
5,398	J.C. Penney Co., Inc.		364,419
5,713	Kohl’s Corp.*		337,753
4,040	Nordstrom, Inc.		147,460
1,811	Sears Hldgs. Corp.*		280,415
17,546	Target Corp.		857,473
			2,556,519
Multi–Utilities — 1.3%
4,315	Ameren Corp.		217,907
4,548	CenterPoint Energy, Inc.		56,850
7,452	CMS Energy Corp.*		96,429
3,764	Consolidated Edison, Inc.		167,272
6,657	Dominion Resources, Inc.		497,877
4,105	DTE Energy Co.		167,238
21,802	Duke Energy Corp.		640,325
4,794	KeySpan Corp.		193,678
4,793	NiSource, Inc.		104,679
6,780	PG&E Corp.		266,318
5,184	Public Svc. Enterprise Group, Inc.		342,766
3,894	Sempra Energy		177,099
2,588	TECO Energy, Inc.		38,665
5,953	Xcel Energy, Inc.		114,179
			3,081,282
Office Electronics — 0.1%
20,891	Xerox Corp.*		290,594
Oil, Gas and Consumable Fuels — 7.9%
9,186	Anadarko Petroleum Corp.		438,080
7,096	Apache Corp.		484,302
6,700	Chesapeake Energy Corp.		202,675
42,819	Chevron Corp.		2,657,347
31,535	ConocoPhillips		2,066,489
8,698	Devon Energy Corp.		525,446
10,590	El Paso Corp.		158,850
4,845	EOG Resources, Inc.		335,952
117,802	Exxon Mobil Corp.		7,227,153
5,421	Hess Corp.		286,500
6,046	Kerr-McGee Corp.		419,290
2,245	Kinder Morgan, Inc.		224,253

See notes to financial statements.

18 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
6,748	Marathon Oil Corp.	$	562,109
3,000	Murphy Oil Corp.		167,580
8,729	Occidental Petroleum Corp.		895,159
2,532	Sunoco, Inc.		175,442
12,700	Valero Energy Corp.		844,804
10,715	Williams Cos., Inc.		250,302
6,133	XTO Energy, Inc.		271,508
			18,193,241
Paper and Forest Products — 0.3%
9,605	Int’l. Paper Co.		310,241
1,564	Louisiana-Pacific Corp.		34,252
2,990	MeadWestvaco Corp.		83,511
5,010	Weyerhaeuser Co.		311,872
			739,876
Personal Products — 0.2%
1,303	Alberto-Culver Co.		63,482
9,396	Avon Products, Inc.		291,276
2,300	Estee Lauder Cos., Inc. – Class A		88,941
			443,699
Pharmaceuticals — 6.4%
30,289	Abbott Laboratories		1,320,903
2,863	Allergan, Inc.		307,085
2,000	Barr Pharmaceuticals, Inc.*		95,380
38,537	Bristol-Myers Squibb Corp.		996,567
21,639	Eli Lilly & Co.		1,195,988
7,079	Forest Laboratories, Inc.*		273,886
60,954	Johnson & Johnson		3,652,364
3,645	King Pharmaceuticals, Inc.*		61,965
42,958	Merck & Co., Inc.		1,564,960
4,500	Mylan Laboratories, Inc.		90,000
144,003	Pfizer, Inc.		3,379,750
28,020	Schering-Plough Corp.		533,221
1,956	Watson Pharmaceuticals, Inc.*		45,536
26,069	Wyeth		1,157,724
			14,675,329
Real Estate Investment Trusts — 0.9%
3,463	Apartment Investment & Management Co. – Class A		150,468
3,300	Archstone-Smith Trust		167,871
1,500	Boston Properties, Inc.		135,600
8,963	Equity Office Pptys. Trust		327,239
5,321	Equity Residential		238,008
3,000	Kimco Realty Corp.		109,470
3,362	Plum Creek Timber Co., Inc.		119,351
5,292	ProLogis		275,819
1,500	Public Storage, Inc.		113,850
4,402	Simon Ppty. Group, Inc.		365,102
1,600	Vornado Realty Trust		156,080
			2,158,858
Road and Rail — 0.8%
7,561	Burlington Northern Santa Fe		599,209
4,484	CSX Corp.		315,853
8,129	Norfolk Southern Corp.		432,626
930	Ryder System, Inc.		54,340
5,442	Union Pacific Corp.		505,888
			1,907,916
Semiconductors and Semiconductor Equipment — 2.6%
9,502	Advanced Micro Devices, Inc.*		232,039
6,790	Altera Corp.*		119,165
6,027	Analog Devices, Inc.		193,708
29,509	Applied Materials, Inc.		480,407
9,144	Broadcom Corp. – Class A*		274,777

Shares		Value
8,971	Freescale Semiconductor, Inc. – Class B*	$	263,747
112,153	Intel Corp.		2,125,299
3,328	KLA-Tencor Corp.		138,345
5,347	Linear Technology Corp.		179,071
9,161	LSI Logic Corp.*		81,991
5,529	Maxim Integrated Products, Inc.		177,536
10,828	Micron Technology, Inc.*		163,070
6,658	National Semiconductor Corp.		158,793
2,370	Novellus Systems, Inc.*		58,539
6,574	NVIDIA Corp.*		139,960
3,328	PMC-Sierra, Inc.*		31,283
3,377	Teradyne, Inc.*		47,042
31,480	Texas Instruments, Inc.		953,529
5,730	Xilinx, Inc.		129,785
			5,948,086
Software — 3.1%
11,654	Adobe Systems, Inc.*		353,816
4,116	Autodesk, Inc.*		141,837
3,606	BMC Software, Inc.*		86,184
9,555	CA, Inc.		196,355
2,616	Citrix Systems, Inc.*		105,006
5,622	Compuware Corp.*		37,667
6,400	Electronic Arts, Inc.*		275,456
3,165	Intuit, Inc.*		191,134
186,465	Microsoft Corp.		4,344,635
7,029	Novell, Inc.*		46,602
75,811	Oracle Corp.*		1,098,501
1,562	Parametric Technology Corp.*		19,853
21,273	Symantec Corp.*		330,583
			7,227,629
Specialty Retail — 2.1%
4,700	AutoNation, Inc.*		100,768
1,474	AutoZone, Inc.*		130,007
5,064	Bed, Bath & Beyond, Inc.*		167,973
8,740	Best Buy Co., Inc.		479,301
3,140	Circuit City Stores, Inc.		85,471
14,914	Gap, Inc.		259,504
40,030	Home Depot, Inc.		1,432,674
9,195	Limited Brands		235,300
15,184	Lowe’s Cos., Inc.		921,213
6,624	Office Depot, Inc.*		251,712
2,141	OfficeMax, Inc.		87,246
2,565	RadioShack Corp.		35,910
2,251	Sherwin-Williams Co.		106,877
11,790	Staples, Inc.		286,733
2,179	Tiffany & Co.		71,950
8,072	TJX Cos., Inc.		184,526
			4,837,165
Textiles, Apparel and Luxury Goods — 0.3%
6,400	Coach, Inc.*		191,360
1,927	Jones Apparel Group, Inc.		61,259
1,595	Liz Claiborne, Inc.		59,111
4,408	NIKE, Inc. – Class B		357,048
1,636	V.F. Corp.		111,117
			779,895
Thrifts and Mortgage Finance — 1.6%
12,410	Countrywide Financial Corp.		472,573
13,087	Federal Home Loan Mortgage Corp.		746,090
19,513	Federal National Mortgage Assn.		938,576
5,106	Golden West Financial Corp.		378,865
1,536	MGIC Investment Corp.		99,840
9,765	Sovereign Bancorp, Inc.		198,327
18,321	Washington Mutual, Inc.		835,071
			3,669,342

See notes to financial statements.

THE GUARDIAN VC ASSET ALLOCATION FUND 19

ⁿ The Guardian VC 500 Index Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares			Value
	Tobacco — 1.4%
	40,095	Altria Group, Inc.	$	2,944,176
	2,339	Reynolds American, Inc.		269,686
	2,531	UST, Inc.		114,376
				3,328,238
	Trading Companies and Distributors — 0.1%
	2,192	W.W. Grainger, Inc.		164,904
	Wireless Telecommunication Services — 0.7%
	6,702	ALLTEL Corp.		427,788
	54,817	Sprint Nextel Corp.		1,095,792
				1,523,580
		Total Common Stocks (Cost $190,942,632)		224,888,686
Principal Amount			Value
	U.S. Government Security — 0.2%
	U.S. Treasury Bill — 0.2%
$	350,000	U.S. Treasury Bill 4.80% due 9/21/2006 (1) (Cost $346,217)	$	346,217
	Repurchase Agreement — 2.2%
$	5,148,000	State Street Bank and Trust Co. repurchase agreement, dated 6/30/2006, maturity value $5,150,124 at 4.95%, due 7/3/2006 (2) (Cost $5,148,000)	$	5,148,000
	Total Investments — 99.9% (Cost $196,436,849)			230,382,903
	Cash, Receivables, and Other Assets Less Liabilities — 0.1%			228,470
	Net Assets — 100%		$	230,611,373

* Non-income producing security.

(1) The U.S. Treasury Bill is segregated as collateral to cover margin requirements on open futures contracts.

(2) The repurchase agreement is fully collateralized by $5,255,000 in U.S. Government Agency, 5.50%, due 5/29/2009, with a value of $5,255,000.

Contracts	Description	Expiration	Unrealized Depreciation
Purchased Futures Contracts
17	S & P 500 Index	9/2006	$        (67,910	)

See notes to financial statements.

20 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC 500 Index Fund

Statement of Assets and Liabilities

June 30, 2006 (Unaudited)

ASSETS
Investments, at market (cost $196,436,849)	$	230,382,903
Cash		46,474
Dividends receivable		253,805
Receivable for fund shares sold		84,565
Interest receivable		708
Other assets		4,228
Total Assets		230,772,683
LIABILITIES
Payable for fund shares redeemed		70,151
Accrued expenses		30,896
Payable for variation margin – Note A		13,660
Due to GIS		46,603
Total Liabilities		161,310
Net Assets	$	230,611,373
COMPONENTS OF NET ASSETS
Capital stock, at par	$	24,800
Additional paid-in capital		328,354,251
Undistributed net investment income		509,110
Accumulated net realized loss on investments and futures contracts		(132,154,932	)
Net unrealized appreciation of investments and futures contracts		33,878,144
Net Assets	$	230,611,373
Shares Outstanding — $0.001 Par Value		24,800,080
Net Asset Value Per Share		$9.30

Statement of Operations

Six Months Ended

June 30, 2006 (Unaudited)

INVESTMENT INCOME
Dividends	$	2,106,711
Interest		106,835
Total Income		2,213,546
Expenses:
Investment advisory fees — Note B		283,612
Custodian fees		60,131
Directors’ fees — Note B		15,487
Audit fees		12,350
Registration fees		11,014
Printing expense		10,636
Insurance expense		6,780
Legal fees		3,802
Loan commitment fees — Note F		1,899
Other		226
Total Expenses before reimbursement		405,937
Less: Expenses assumed by investment adviser — Note B		(88,292	)
Net Expenses		317,645
Net Investment Income		1,895,901
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments — Note A		83,451
Net realized gain on futures contracts		64,233
Net change in unrealized appreciation of investments — Note C		3,717,904
Net change in unrealized depreciation of futures contracts — Note A		(20,012	)
Net Realized and Unrealized Gain on Investments		3,845,576
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	5,741,477

See notes to financial statements.

THE GUARDIAN VC ASSET ALLOCATION FUND 21

ⁿ The Guardian VC 500 Index Fund

Statements of Changes in Net Assets

	Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income	$	1,895,901		$	3,311,628
Net realized gain on investments and futures contracts		147,684			146,486
Net change in unrealized appreciation of investments and futures contracts		3,697,892			6,117,526
Net Increase in Net Assets Resulting from Operations		5,741,477			9,575,640
Dividends to Shareholders from:
Net investment income		(1,485,635	)		(3,289,364	)
From Capital Share Transactions:
Net increase in net assets from capital share transactions — Note E		6,826,852			10,424,376
Net Increase in Net Assets		11,082,694			16,710,652
NET ASSETS:
Beginning of period		219,528,679			202,818,027
End of period*	$	230,611,373		$	219,528,679
*  Includes undistributed net investment income of:	$	509,110		$	98,844

See notes to financial statements.

22 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC 500 Index Fund

Financial Highlights

Selected data for a share of capital stock outstanding throughout the periods indicated:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, (Audited)
			2005		2004		2003		2002		2001
Net asset value, beginning of period	$9.12		$8.86		$8.14		$6.44		$8.47		$9.72
Income from investment operations:
Net investment income	0.08		0.14		0.14		0.11		0.14		0.09
Net realized and unrealized gain/(loss) on investments	0.16		0.26		0.72		1.70		(2.03	)	(1.25	)
Net increase/(decrease) from investment operations	0.24		0.40		0.86		1.81		(1.89	)	(1.16	)
Dividends and distributions to shareholders from:
Net investment income	(0.06	)	(0.14	)	(0.14	)	(0.11	)	(0.14	)	(0.09	)
Net realized gain on investments	—		—		—		—		—		(0.00	)(a)
Total dividends and distributions	(0.06	)	(0.14	)	(0.14	)	(0.11	)	(0.14	)	(0.09	)
Net asset value, end of period	$9.30		$9.12		$8.86		$8.14		$6.44		$8.47
Total return*	2.66	%(b)	4.54	%	10.59	%	28.25	%	(22.42	)%	(11.92	)%
Ratios/supplemental data:
Net assets, end of period (000’s omitted)	$230,611		$219,529		$202,818		$170,825		$127,984		$366,544
Ratio of expenses to average net assets	0.28	%(c)	0.28	%	0.28	%	0.28	%	0.28	%	0.28	%
Ratio of expenses, excluding waivers, to average net assets	0.36	%(c)	0.37	%	0.36	%	0.40	%	0.34	%	0.33	%
Ratio of net investment income to average net assets	1.67	%(c)	1.61	%	1.75	%	1.51	%	1.29	%	1.14	%
Portfolio turnover rate	1	%	2	%	1	%	12	%	17	%	1	%

* Total returns do not reflect the effects of charges deducted pursuant to the terms of GIAC’s variable contracts.

Inclusion of such charges would reduce the total returns for all periods shown.

(a) Rounds to less than $0.01.

(b) Not annualized.

(c) Annualized.

See notes to financial statements.

THE GUARDIAN VC ASSET ALLOCATION FUND 23

ⁿ The Guardian VC 500 Index Fund

Notes to Financial Statements

June 30, 2006 (Unaudited)

Note A. Organization and Accounting Policies

The Guardian VC 500 Index Fund (the Fund or GVC500F) is a series of The Guardian Variable Contract Funds, Inc. (GVCF). GVCF is incorporated in the state of Maryland and is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The financial statements for the other remaining series of GVCF are presented in separate reports.

Shares of GVC500F are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies of the Fund are as follows:

Investments

Securities listed on national securities exchanges are valued at the last sale price on such exchanges, or if no sale occurred, at the mean of the closing bid and asked prices. Securities that are traded on the NASDAQ National Securities Market are valued at the NASDAQ Official Closing Price.

Pursuant to valuation procedures approved by the Board of Directors, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgment of the Service, are valued at the bid price. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

Other securities, including securities for which market quotations are not readily available (such as restricted securities, illiquid securities and foreign securities subject to a “significant event”) are valued at fair value as determined in good faith by or under the direction of GVCF’s Board of Directors. A “significant event” is an event that will affect the value of a portfolio security that occurs after the close of trading in the security’s primary trading market or exchange but before the Fund’s NAV is calculated.

Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets.

Futures contracts are valued at the settlement prices established by the boards of trade or exchanges on which they are traded.

Repurchase agreements are carried at cost which approximates market value (see Note D). Short-term debt securities with maturities of 60 days or less are valued on an amortized cost basis which approximates market value.

Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/discount, is accrued daily. Dividend income is recorded on the ex-dividend date.

Foreign Currency Translation

GVC500F is permitted to buy international securities that are not U.S. dollar denominated. GVC500F’s books and records are maintained in U.S. dollars as follows:

(1)  The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange.

(2)  Security purchases and sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.

The resulting gains and losses are included in the Statement of Operations as follows:

Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses, which result from changes in foreign exchange rates between the date on which GVC500F earns dividends and interest or pays foreign withholding taxes or other expenses and the

24 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ The Guardian VC 500 Index Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized gains or losses on foreign currency related transactions. Realized foreign exchange gains and losses which result from changes in foreign exchange rates between the trade and settlement dates on security and currency transactions are also included in net realized gains and losses on foreign currency related transactions. Net currency gains and losses from valuing other assets and liabilities denominated in foreign currency at the period end exchange rate are reflected in net change in unrealized appreciation or depreciation from translation of other assets and liabilities denominated in foreign currencies.

Forward Foreign Currency Contracts

GVC500F may enter into forward foreign currency contracts in connection with planned purchases or sales of securities, or to hedge against changes in currency exchange rates affecting the values of its investments that are denominated in a particular currency. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Fluctuations in the value of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by GVC500F. When forward contracts are closed, GVC500F will record realized gains or losses equal to the difference between the values of such forward contracts at the time each was opened and the values at the time each was closed. Such amounts are recorded in net realized gains or losses on foreign currency related transactions. GVC500F will not enter into a forward foreign currency contract if such contract would obligate it to deliver an amount of foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency.

Futures Contracts

GVC500F may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, GVC500F is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by GVC500F each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by GVC500F. The daily changes in the variation margin are recognized as unrealized gains or losses by GVC500F. GVC500F’s investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GVC500F may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates, securities prices or prices of futures contracts move unexpectedly, GVC500F may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.

Dividend Distributions

Dividends from net investment income are declared and paid semi-annually for GVC500F. Net realized short-term and long-term capital gains for GVC500F will be distributed at least annually. All such dividends and distributions are credited in the form of additional shares of GVC500F at the net asset value on the ex-dividend date.

All dividends and distributions are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations. Differences between the recognition of income on an income tax basis and recognition of income based on GAAP may cause temporary overdistributions of net realized gains and net investment income on a GAAP basis.

Taxes

GVC500F has qualified and intends to remain qualified to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code (Code), and as such will not be subject to federal income tax on taxable income (including any realized capital gains) which is distributed in accordance with the provisions of the Code. Therefore, no federal income tax provision is required.

Reclassification of Capital Accounts

The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital gains, and the recharacterization of foreign exchange gains or losses to either ordinary income or realized capital gains for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications would have no effect on net assets, results of operations, or net asset value per share of the Fund.

THE GUARDIAN VC ASSET ALLOCATION FUND 25

ⁿ The Guardian VC 500 Index Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

Note B. Investment Advisory Agreements and Payments to or from Related Parties

The Fund has an investment advisory agreement with Guardian Investor Services LLC (GIS), a wholly-owned subsidiary of GIAC. Fees for investment advisory are at an annual rate of 0.25% of the average daily net assets of the Fund. GIS voluntarily assumes a portion of the ordinary operating expenses (excluding interest expense associated with securities lending) that exceeds 0.28% of the average daily net assets of GVC500F. GIS subsidized 0.08% of the ordinary operating expenses of GVC500F or $88,292 for the six months ended June 30, 2006.

The Guardian Fund Complex pays directors who are not “interested persons” (as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Board committee members also receive a fee of $2,000 per committee meeting, which also is allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain directors who are interested persons. Certain officers and directors of the Fund are affiliated with GIS.

Note C. Investment Transactions

Purchases and proceeds from sales of securities (excluding short-term securities) amounted to $10,635,128 and $2,872,279, respectively, during the six months ended June 30, 2006.

The cost of investments owned at June 30, 2006 for federal income tax purposes was substantially the same as the cost for financial reporting purposes. The gross unrealized appreciation and depreciation of investments excluding foreign currency and futures at June 30, 2006 aggregated $54,678,685 and $20,732,631, respectively, resulting in net unrealized appreciation of $33,946,054.

Note D. Repurchase Agreements

The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, GVC500F will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, GVC500F maintains the right to sell the collateral and may claim any resulting loss against the seller.

Note E. Transactions in Capital Stock

There are 200,000,000 shares of $0.001 par value capital stock authorized for GVC500F. Transactions in capital stock were as follows:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
	Shares				Amount
Shares sold	1,423,602		2,675,528		$	13,390,106		$	23,714,164
Shares issued in reinvestment of dividends	165,993		364,352			1,485,635			3,289,364
Shares repurchased	(854,876	)	(1,878,337	)		(8,048,889	)		(16,579,152	)
Net increase	734,719		1,161,543		$	6,826,852		$	10,424,376

Note F. Line of Credit

A $100,000,000 line of credit available to GVC500F and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus 0.50% calculated on a 360 day basis per annum. For the six months ended June 30, 2006, none of the funds borrowed against this line of credit.

The funds are obligated to pay State Street Bank and Trust Company and Bank of Montreal a commitment fee computed at a rate of 0.08% per annum on the average daily unused portion of the revolving credit.

26 THE GUARDIAN VC ASSET ALLOCATION FUND

ⁿ   The Guardian VC High Yield Bond Fund Semiannual Report
To Contractowners

Ho Wang, Portfolio Manager

Objective:

Seeks current income. Capital appreciation is a secondary objective

Portfolio:

At least 80% is invested in corporate bonds and other debt securities that, at the time of purchase, are rated below investment grade or are unrated

Inception Date:

September 13, 1999

Net Assets at June 30, 2006:

$65,200,920

A Portfolio Management Update

Ho Wang was named Portfolio Manager of The Guardian VC High Yield Bond Fund in April 2006. Mr. Wang joins Guardian after serving as a Senior Portfolio Manager of High Yield Bonds at Muzinich & Co. Inc., where he was responsible for a $5 billion high yield total return portfolio. Prior to that he was a Portfolio Manager in the Fixed Income Group at Fortis Advisers, Inc., where he managed a high yield mutual fund. He has a Bachelor of Arts in Economics and Political Science from Queens College, City University of New York, and holds an M.B.A. in Finance from St. John’s University. Mr. Wang is a certified public accountant.

Bond Quality  (As of 6/30/2006 and 12/31/2005)

Average Annual Total Returns  (For periods ended 6/30/2006)

	Year to Date	1 Yr	5 Yrs	10 Yrs	Since Inception 9/13/1999
The Guardian VC High Yield Bond Fund	1.13%	3.35%	6.79%	—	4.66%
Lehman Brothers Corporate High Yield Bond Index	3.14%	4.80%	8.69%	—	6.14%

About information in this report:

• All performance data quoted is historical and the results represent past performance and neither guarantee nor predict future investment results. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at (800) 221-3253 or visit our website at www.guardianinvestor.com. Current performance may be higher or lower than the performance quoted here. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.

• It is important to consider the Fund’s investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested. Investing in bond funds exposes you to the general risk of investing in the debt markets. Duration is a measure of bond price sensitivity to a given change in interest rates. Generally, the higher a bond’s duration, the greater its price sensitivity to any given change in interest rates. Bond funds are subject to interest rate risk. When interest rates rise, bond prices generally fall, and when interest rates fall, bond prices generally rise. Currently, interest rates are at historically low levels. Please keep in mind that in this kind of environment, the risk that bond prices may fall when interest rates rise is potentially greater. Investing in high yield bonds involves special risks because investments in lower rated and unrated debt securities are subject to greater loss of principal and interest than higher rated securities.

• The Lehman Brothers Corporate High Yield Bond Index is generally considered to be representative of corporate high yield bond market activity. Index returns are provided for comparative purposes. Please note that the index is unmanaged and not available for direct investment and its returns do not reflect the fees and expenses that have been deducted from the Fund.

• Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. The return figures shown do not reflect the deduction of taxes that a contractowner may pay on distributions or redemption of units.

THE GUARDIAN VC HIGH YIELD BOND FUND 1

ⁿ   The Guardian VC High Yield Bond Fund Semiannual Report
To Contractowners

Top Ten Holdings  (As of 6/30/2006)

Company	Coupon		Maturity Date	Percentage of Total Net Assets
General Motors Acceptance Corp.	6.750	%	12/1/2014	3.50	%
Fisher Scientific Int’l., Inc.	6.125	%	7/1/2015	3.10	%
Lyondell Chemical Co.	10.875	%	5/1/2009	2.94	%
Nextel Comm., Inc.	7.375	%	8/1/2015	1.89	%
Sierra Pacific Resources	8.625	%	3/15/2014	1.82	%
Allegheny Energy Supply	7.800	%	3/15/2011	1.77	%
Dow Jones Credit Default Index	8.125	%	6/29/2011	1.69	%
Dow Jones Credit Default Index	7.375	%	6/29/2011	1.69	%
Ford Motor Credit Co.	7.250	%	10/25/2011	1.62	%
Mission Energy Hldg.	13.500	%	7/15/2008	1.51	%

Fund Expenses

By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including, as applicable, management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other underlying funds.

The example is based on an investment of $1,000 invested on January 1, 2006 and held for six months ended June 30, 2006.

Actual Expenses

The first line in the table provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value January 1, 2006		Ending Account Value June 30, 2006		Expenses Paid During the Period*		Annualized Expense Ratio
Actual	$	1,000	$	1,011.30	$	3.89	0.78%
Hypothetical (5% return before expenses)	$	1,000	$	1,020.93	$	3.91	0.78%

* Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the Fund’s most recent fiscal half-year).

2 THE GUARDIAN VC HIGH YIELD BOND FUND

ⁿ The Guardian VC High Yield Bond Fund

Schedule of Investments

June 30, 2006 (Unaudited)

Principal Amount			Rating Moody’s/ S&P*	Value
	Corporate Bonds — 92.7%
	Aerospace and Defense — 2.1%
		Comm. & Power Inds., Inc.
$	499,000	Sr. Sub. Nt. 8.00% due 2/1/2012	B3/B–	$	503,990
		DRS Technologies, Inc.
	272,000	Sr. Sub. Nt. 7.625% due 2/1/2018	B3/B		270,640
		L-3 Comms. Corp.
	290,000	Sr. Sub. Nt. 6.125% due 7/15/2013	Ba3/BB+		276,225
	150,000	Sr. Sub. Nt. 6.375% due 10/15/2015	Ba3/BB+		143,250
		Transdigm, Inc.
	170,000	Sr. Sub. Nt.† 7.75% due 7/15/2014	B3/B–		169,150
					1,363,255
	Automotive — 10.0%
		American Axle & Mfg., Inc.
	340,000	Sr. Nt. 5.25% due 2/11/2014	Ba3/BB		282,200
		Ford Motor Credit Co.
	700,000	Nt. 6.75% due 8/15/2008	Ba2/B+		655,222
	975,000	Nt. 7.00% due 10/1/2013	Ba2/B+		839,122
	1,190,000	Sr. Nt. 7.25% due 10/25/2011	Ba2/B+		1,055,619
	457,632	Sr. Nt.† 9.75% due 9/15/2010	Ba2/B+		445,910
		General Motors Acceptance Corp.
	340,000	Nt. 6.15% due 4/5/2007	Ba1/BB		338,012
	2,455,000	Nt. 6.75% due 12/1/2014	Ba1/BB		2,280,253
		Keystone Automotive Operations
	340,000	Sr. Sub. Nt. 9.75% due 11/1/2013	Caa1/B–		321,300
		United Components, Inc.
	280,000	Sr. Sub. Nt. 9.375% due 6/15/2013	Caa1/B–		275,800
					6,493,438
	Building Materials — 1.0%
		Norcraft Cos. Fin.
	375,000	Sr. Sub. Nt. 9.00% due 11/1/2011	B3/B–		381,563
		U.S. Concrete, Inc.
	255,000	Sr. Sub Nt.† 8.375% due 4/1/2014	B3/B–		257,550
					639,113
	Chemicals — 5.6%
		Equistar Chemicals LP
	845,000	Sr. Nt. 10.125% due 9/1/2008	B1/BB–		889,363
		Koppers, Inc.
	298,000	Sr. Nt. 9.875% due 10/15/2013	B1/B		319,605
		Lyondell Chemical Co.
	1,888,000	Sr. Sub. Nt. 10.875% due 5/1/2009	B2/B		1,916,320

Principal Amount			Rating Moody’s/ S&P*	Value
		Nell AF SARL
$	525,000	Sr. Nt.† 8.375% due 8/15/2015	B2/B–	$	504,656
					3,629,944
	Construction Machinery — 2.0%
		Nationsrent, Inc.
	300,000	Sr. Sub. Nt. 9.50% due 5/1/2015	Caa1/B–		317,250
		Terex Corp.
	155,000	Sr. Sub. Nt. 9.25% due 7/15/2011	B2/B+		164,688
	170,000	Sr. Sub. Nt. Ser. B 10.375% due 4/1/2011	B2/B+		179,775
		United Rentals NA, Inc.
	672,000	Sr. Sub. Nt. 7.75% due 11/15/2013	Caa1/B		638,400
					1,300,113
	Consumer Products — 1.8%
		Elizabeth Arden, Inc.
	555,000	Sr. Sub. Nt. 7.75% due 1/15/2014	B2/B–		545,287
		Jafra Cosmetics
	387,000	Sr. Sub. Nt. 10.75% due 5/15/2011	B3/B–		415,058
		Riddell Bell Hldgs., Inc.
	252,000	Sr. Sub. Nt. 8.375% due 10/1/2012	B3/B–		248,220
					1,208,565
	Electric — 9.6%
		Allegheny Energy Supply
	1,110,000	Nt. 7.80% due 3/15/2011	Ba3/BB–		1,151,625
		Mission Energy Hldg.
	885,000	Sr. Sec. Nt. 13.50% due 7/15/2008	B2/B–		986,775
		Nevada Power Co.
	368,000	Mtg. Nt. Ser. L 5.875% due 1/15/2015	Ba1/BB		348,994
	255,000	Mtg. Nt. Ser. N† 6.65% due 4/1/2036	Ba1/BB		240,861
		NRG Energy, Inc.
	425,000	Sr. Nt. 7.375% due 2/1/2016	B1/B–		414,375
		Reliant Resources, Inc.
	340,000	Sr. Sec. Nt. 9.50% due 7/15/2013	B2/B		341,700
		Sierra Pacific Resources
	1,120,000	Sr. Nt. 8.625% due 3/15/2014	B1/B–		1,186,468
		TECO Energy, Inc.
	145,000	Sr. Nt. 6.75% due 5/1/2015	Ba2/BB		141,012
	840,000	Nt. 7.00% due 5/1/2012	Ba2/BB		835,800
		UtiliCorp United, Inc.
	615,000	Sr. Nt. 7.75% due 6/15/2011	B2/B–		636,525
					6,284,135

See notes to financial statements.

3

ⁿ The Guardian VC High Yield Bond Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Principal Amount			Rating Moody’s/ S&P*	Value
	Energy — 5.3%
		Basic Energy Services, Inc.
$	170,000	Sr. Nt.† 7.125% due 4/15/2016	B1/B	$	158,100
		Belden & Blake Corp.
	170,000	Sr. Sec. Nt. 8.75% due 7/15/2012	NR/CCC+		172,550
		Chaparral Energy, Inc.
	170,000	Sr. Nt.† 8.50% due 12/1/2015	B3/B		169,150
		Chesapeake Energy Corp.
	228,000	Sr. Nt. 6.375% due 6/15/2015	Ba2/BB		211,470
	255,000	Sr. Nt. 7.625% due 7/15/2013	Ba2/BB		256,594
		Dresser, Inc.
	333,000	Sr. Nt. 10.125% due 4/15/2011	B2/CCC+		337,995
		Encore Acquisition Co.
	450,000	Sr. Sub. Nt. 7.25% due 12/1/2017	B2/B		432,000
		Hanover Compressor Co.
	85,000	Sr. Nt. 7.50% due 4/15/2013	B3/B		83,300
		Hilcorp Energy I LP
	170,000	Sr. Nt.† 9.00% due 6/1/2016	B3/B		171,275
		Newpark Resources, Inc.
	300,000	Sr. Sub. Nt. Ser. B 8.625% due 12/15/2007	B2/B		300,000
		Pioneer Natural Resource Co.
	510,000	Sr. Nt. 6.875% due 5/1/2018	Ba1/BB+		491,438
		Pride Int’l., Inc.
	168,000	Sr. Nt. 7.375% due 7/15/2014	Ba2/BB–		168,840
		Western Oil Sands, Inc.
	222,000	Sr. Sec. Nt. 8.375% due 5/1/2012	Ba2/BB+		235,875
		Whiting Petroleum Corp.
	300,000	Sr. Sub. Nt. 7.00% due 2/1/2014	B2/B		283,500
					3,472,087
	Entertainment — 0.4%
		Intrawest Corp.
	295,000	Sr. Nt. 7.50% due 10/15/2013	B1/B+		293,525
	Environmental — 0.4%
		Allied Waste NA, Inc.
	250,000	Sr. Nt. 7.875% due 4/15/2013	B2/BB–		250,000
	Food and Beverage — 2.8%
		ASG Consolidated LLC
	420,000	Sr. Disc. Nt. (1) 0/11.50% due 11/1/2011	Caa1/B–		353,850
		Dean Foods Co.
	510,000	Sr. Nt. 7.00% due 6/1/2016	Ba2/BB–		493,425
		Del Monte Corp.
	441,000	Sr. Sub. Nt. 6.75% due 2/15/2015	B2/B		409,028

Principal Amount			Rating Moody’s/ S&P*	Value
		Michael Foods, Inc.
$	580,000	Sr. Sub. Nt. 8.00% due 11/15/2013	B3/B–	$	569,850
					1,826,153
	Gaming — 3.1%
		Boyd Gaming Corp.
	510,000	Sr. Sub. Nt. 6.75% due 4/15/2014	B1/B+		483,862
	340,000	Sr. Sub. Nt. 7.125% due 2/1/2016	B1/B+		328,525
		MGM MIRAGE, Inc.
	425,000	Sr. Nt. 6.625% due 7/15/2015	Ba2/BB		396,312
	340,000	Sr. Nt. 8.50% due 9/15/2010	Ba2/BB		353,175
		Pokagon Gaming Authority
	170,000	Sr. Nt.† 10.375% due 6/15/2014	B3/B		175,738
		Station Casinos
	340,000	Sr. Sub. Nt. 6.875% due 3/1/2016	B1/B+		317,050
					2,054,662
	Health Care — 5.9%
		Coventry Health Care, Inc.
	441,000	Sr. Nt. 6.125% due 1/15/2015	Ba1/BBB–		419,264
		DaVita, Inc.
	320,000	Sr. Sub. Nt.† 7.25% due 3/15/2015	B3/B		307,200
		Fisher Scientific Int’l., Inc.
	2,100,000	Sr. Sub. Nt. 6.125% due 7/1/2015	Ba2/BB+		2,023,875
		Fresenius Medical Care
	310,000	Capital Tr. 7.875% due 6/15/2011	B1/B+		313,100
		HCA, Inc.
	510,000	Sr. Nt. 6.30% due 10/1/2012	Ba2/BB+		479,666
		HealthSouth Corp.
	340,000	Sr. Nt.† 10.75% due 6/15/2016	B3/CCC+		333,200
					3,876,305
	Home Construction — 1.3%
		K. Hovnanian Enterprises, Inc.
	300,000	Sr. Nt. 6.25% due 1/15/2016	Ba1/BB		260,250
	255,000	Sr. Nt. 8.625% due 1/15/2017	Ba1/BB		253,088
		WCI Communities, Inc.
	230,000	Sr. Sub. Nt. 6.625% due 3/15/2015	Ba3/B+		190,900
	170,000	Sr. Sub. Nt. 7.875% due 10/1/2013	Ba3/B+		149,175
					853,413
	Insurance — 0.4%
		UnumProvident Finance Co.
	300,000	Sr. Nt.† 6.85% due 11/15/2015	Ba1/BB+		294,919
	Lodging — 1.0%
		Host Marriott LP
	675,000	Sr. Nt. Ser. O 6.375% due 3/15/2015	Ba2/BB		634,500

See notes to financial statements.

4

ⁿ The Guardian VC High Yield Bond Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Principal Amount			Rating Moody’s/ S&P*	Value
	Media–Cable — 3.3%
		Charter Comm. Hldgs. II
$	912,000	Sr. Nt. 10.25% due 9/15/2010	Caa1/CCC–	$	914,280
		Charter Comm. Operating LLC
	278,000	Sr. Nt.† 8.00% due 4/30/2012	B2/B–		276,610
		CSC Hldgs., Inc.
	315,000	Sr. Nt. Ser. B 7.625% due 4/1/2011	B2/B+		315,000
		Insight Comm., Inc.
	368,000	Sr. Disc. Nt. 12.25% due 2/15/2011	Caa1/CCC+		389,160
		Insight Midwest LP
	278,000	Sr. Nt. 10.50% due 11/1/2010	B2/B		289,815
					2,184,865
	Media–NonCable — 5.2%
		Allbritton Comm. Co.
	125,000	Sr. Sub. Nt. 7.75% due 12/15/2012	B3/B–		123,750
		Block Comm., Inc.
	170,000	Sr. Nt.† 8.25% due 12/15/2015	B1/B–		163,200
		CMP Susquehanna Corp.
	170,000	Sr. Sub. Nt.† 9.875% due 5/15/2014	B3/CCC		158,100
		Dex Media East LLC
	269,000	Sr. Sub. Nt. 12.125% due 11/15/2012	B1/B		301,952
		DirecTV Hldgs. Fin.
	312,000	Sr. Nt. 6.375% due 6/15/2015	Ba2/BB–		287,820
	109,000	Sr. Nt. 8.375% due 3/15/2013	Ba2/BB–		114,178
		EchoStar DBS Corp.
	530,000	Sr. Nt. 6.375% due 10/1/2011	Ba3/BB–		507,475
		Houghton Mifflin Co.
	382,000	Sr. Sub. Nt. 9.875% due 2/1/2013	Caa1/CCC+		396,325
		Hughes Network Systems LLC/HNS Finance
	85,000	Sr. Nt.† 9.50% due 4/15/2014	B1/B–		83,300
		R.H. Donnelley Corp.
	119,000	Sr. Disc. Nt. Ser. A-1† 6.875% due 1/15/2013	Caa1/B		109,480
		R.H. Donnelley Fin. Corp. I
	285,000	Sr. Sub. Nt. 10.875% due 12/15/2012	B2/B		312,787
		R.H. Donnelley Fin. Corp. III
	221,000	Sr. Disc. Nt. Ser. A-2† 6.875% due 1/15/2013	Caa1/B		203,320
		Radio One, Inc.
	340,000	Sr. Sub. Nt. 6.375% due 2/15/2013	B2/B		311,100
		XM Satellite Radio, Inc.
	340,000	Sr. Nt.† 9.75% due 5/1/2014	Caa2/CCC		311,100
					3,383,887

Principal Amount			Rating Moody’s/ S&P*	Value
	Metals and Mining — 1.2%
		Oregon Steel Mills, Inc.
$	735,000	1st Mtg. Nt. 10.00% due 7/15/2009	Ba3/NR	$	771,750
	Natural Gas–Distributors — 1.0%
		Amerigas Partners LP
	340,000	Sr. Nt. 7.125% due 5/20/2016	B1/NR		318,750
		Suburban Propane Partners LP
	340,000	Sr. Nt. 6.875% due 12/15/2013	B1/B–		317,900
					636,650
	Natural Gas–Pipelines — 5.2%
		Atlas Pipeline Partners
	170,000	Sr. Nt.† 8.125% due 12/15/2015	B1/B+		169,363
		Colorado Interstate Gas Co.
	600,000	Sr. Nt. 6.80% due 11/15/2015	NR/B+		578,307
		El Paso Natural Gas
	600,000	Sr. Nt. Ser. A 7.625% due 8/1/2010	Ba2/B+		610,500
		Holly Energy Partners LP
	295,000	Sr. Nt. 6.25% due 3/1/2015	Ba3/B+		269,925
		Kinder Morgan Finance Corp.
	425,000	Sr. Nt. 5.70% due 1/5/2016	Baa2/BBB		369,016
		MarkWest Energy Partners LP
	510,000	Sr. Nt.† 8.50% due 7/15/2016	B2/B		501,585
		Southern Natural Gas Co.
	377,000	Nt. 7.35% due 2/15/2031	Ba2/B+		361,728
		Williams Cos., Inc.
	510,000	Sr. Nt. 7.75% due 6/15/2031	Ba2/BB–		502,350
					3,362,774
	Non Sovereign — 1.1%
		Gazprom OAO
	600,000	Nt.† 9.625% due 3/1/2013	NR/BB+		687,750
	Noncaptive Consumer — 1.2%
		Dollar Financial Group, Inc.
	416,000	Sr. Nt. 9.75% due 11/15/2011	B3/B+		447,200
		Residential Capital Corp.
	340,000	Sr. Nt. 6.375% due 6/30/2010	Baa3/BBB–		335,373
					782,573
	Packaging — 1.8%
		Crown Americas
	600,000	Sr. Nt.† 7.75% due 11/15/2015	B1/B		591,000
		Owens-Brockway Glass Container
	306,000	Sr. Sec. Nt. 7.75% due 5/15/2011	B1/BB–		308,295
	282,000	Sr. Sec. Nt. 8.875% due 2/15/2009	B1/BB–		290,460
					1,189,755

See notes to financial statements.

5

ⁿ The Guardian VC High Yield Bond Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Principal Amount			Rating Moody’s/ S&P*	Value
	Paper and Forest Products — 4.2%
		Abitibi-Consolidated, Inc.
$	850,000	Sr. Nt. 6.00% due 6/20/2013	B1/B+	$	688,500
		Caraustar Inds., Inc.
	510,000	Nt. 7.375% due 6/1/2009	B2/B+		481,950
		Domtar, Inc.
	340,000	Nt. 7.875% due 10/15/2011	B1/B+		319,600
		Graphic Packaging Int’l., Inc.
	764,000	Sr. Sub. Nt. 9.50% due 8/15/2013	B3/B–		756,360
		Jefferson Smurfit Corp.
	340,000	Sr. Nt. 7.50% due 6/1/2013	B2/CCC+		304,300
		Millar Western Forest
	222,000	Sr. Nt. 7.75% due 11/15/2013	B2/B–		168,720
					2,719,430
	Retailers — 1.0%
		Bon-Ton Dept.Stores, Inc.
	340,000	Sr. Nt.† 10.25% due 3/15/2014	B2/B–		315,350
		Rent-A-Center
	320,000	Sr. Sub. Nt. Ser. B 7.50% due 5/1/2010	Ba3/BB–		318,400
					633,750
	Services — 0.8%
		Autonation, Inc.
	85,000	Sr. Nt.† 7.00% due 4/15/2014	Ba2/BB+		83,725
	40,000	Sr. Nt.†(2) 7.045% due 4/15/2013	Ba2/BB+		39,800
		Education Management LLC
	425,000	Sr. Nt.† 8.75% due 6/1/2014	B3/CCC+		420,750
					544,275
	Supermarkets — 0.6%
		Delhaize America, Inc.
	340,000	Debt. 9.00% due 4/15/2031	Ba1/BB+		372,847
	Technology — 2.7%
		Activant Solutions, Inc.
	170,000	Sr. Sub. Nt.† 9.50% due 5/1/2016	Caa1/CCC+		164,475
		Iron Mountain, Inc.
	750,000	Sr. Sub. Nt. 8.625% due 4/1/2013	Caa1/B		750,000
		Nortel Networks Ltd.
	170,000	Sr. Nt.†(2) 9.73% due 7/15/2011	B3/B–		172,975
	170,000	Sr. Nt.† 10.75% due 7/15/2016	B3/B–		172,975
		Solectron Global Fin. Ltd.
	340,000	Sr. Sub. Nt.† 8.00% due 3/15/2016	B3/B–		334,900
		Xerox Corp.
	200,000	Sr. Nt. 6.40% due 3/15/2016	Ba2/BB+		188,750
					1,784,075

Principal Amount			Rating Moody’s/ S&P*	Value
	Textile — 1.3%
		Oxford Inds., Inc.
$	200,000	Sr. Nt. 8.875% due 6/1/2011	B1/B	$	200,000
		Russell Corp.
	605,000	Sr. Nt. 9.25% due 5/1/2010	B2/B		632,981
					832,981
	Tobacco — 0.8%
		Reynolds American, Inc.
	510,000	Sr. Sec. Nt.† 7.25% due 6/1/2013	Ba2/BB		498,525
	Transportation — 1.1%
		Avis Budget Car Rental LLC
	85,000	Sr. Nt.†(2) 7.576% due 5/15/2014	Ba3/BB–		84,787
	85,000	Sr. Nt.† 7.625% due 5/15/2014	Ba3/BB–		82,450
	85,000	Sr. Nt.† 7.75% due 5/15/2016	Ba3/BB–		81,813
		OMI Corp.
	450,000	Sr. Nt. 7.625% due 12/1/2013	B1/B+		448,875
					697,925
	Wireless Communications — 4.2%
		Centennial Cell Comm. Corp.
	215,000	Sr. Nt. 10.125% due 6/15/2013	B3/CCC		226,287
		Inmarsat Fin. PLC
	222,000	Sr. Nt. 7.625% due 6/30/2012	Ba3/B+		227,550
		Intelsat Bermuda Ltd.
	85,000	Sr. Nt.† 9.25% due 6/15/2016	B2/B+		87,763
		Nextel Comm., Inc.
	1,210,000	Sr. Nt. Ser. D 7.375% due 8/1/2015	Baa2/A–		1,231,632
		Nextel Partners, Inc.
	260,000	Sr. Nt. 8.125% due 7/1/2011	Ba3/A–		272,025
		Nordic Telephone Co. Hldgs.
	170,000	Sr. Nt.† 8.875% due 5/1/2016	B2/B		174,675
		Panamsat Corp.
	85,000	Sr. Nt.† 9.00% due 6/15/2016	B2/B		86,275
		Rogers Wireless, Inc.
	420,000	Sr. Sub. Nt. 8.00% due 12/15/2012	Ba3/B+		429,450
					2,735,657
	Wireline Communications — 3.3%
		Citizens Comm. Co.
	300,000	Sr. Nt. 9.25% due 5/15/2011	Ba3/BB+		322,500
		Qwest Corp.
	375,000	Sr. Nt. 7.625% due 6/15/2015	Ba3/BB		370,312
	840,000	Sr. Nt. 7.875% due 9/1/2011	Ba3/BB		850,500
		U.S. West Comm.
	336,000	Debt. 8.875% due 6/1/2031	Ba3/BB		350,280

See notes to financial statements.

6

ⁿ The Guardian VC High Yield Bond Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Principal Amount			Rating Moody’s/ S&P*	Value
		Windstream Corp.
$	255,000	Sr. Nt.† 8.625% due 8/1/2016	Ba3/BB–	$	260,738
					2,154,330
		Total Corporate Bonds (Cost $61,067,971)			60,447,926
	Indexed Securities — 3.4%
		Dow Jones Credit Default Index
$	1,124,000	Ser. HY-6-T2† 7.375% due 6/29/2011	Ba3/NR	$	1,100,115
	1,124,000	Ser. HY-6-T3† 8.125% due 6/29/2011	B3/NR		1,101,520
		Total Indexed Securities (Cost $2,235,924)			2,201,635
Shares				Value
	Warrant — 0.0%
	170	XM Satellite Radio, Inc. exp. 3/15/2010 (Cost $34,340)		$	1,275
Principal Amount				Value
	Repurchase Agreement — 5.4%
$	3,554,000	State Street Bank and Trust Co. repurchase agreement, dated 6/30/2006, maturity value $3,555,466 at 4.95%, due 7/3/2006 (3) (Cost $3,554,000)		$	3,554,000
	Total Investments — 101.5% (Cost $66,892,235)				66,204,836
	Liabilities in Excess of Cash, Receivables and Other Assets — (1.5)%				(1,003,916	)
	Net Assets — 100%			$	65,200,920

* Unaudited.

† Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to certain qualified buyers. At 6/30/2006, the aggregate market value of these securities amounted to $11,746,128 representing 18.0% of net assets which have been deemed liquid pursuant to the Fund’s liquidity procedures approved by the Board of Directors.

(1) Step-up bond.

(2) Floating rate note. The rate shown is the rate in effect at 6/30/2006.

(3) The repurchase agreement is fully collateralized by $3,630,000 in U.S. Government Agency, 5.50%, due 5/29/2009, with a value of $3,630,000.

See notes to financial statements.

7

ⁿ The Guardian VC High Yield Bond Fund

Statement of Assets and Liabilities

June 30, 2006 (Unaudited)

ASSETS
Investments, at market (cost $66,892,235)	$	66,204,836
Cash		427
Interest receivable		1,161,531
Receivable for securities sold		91,590
Receivable for fund shares sold		2,948
Other assets		1,177
Total Assets		67,462,509
LIABILITIES
Payable for securities purchased		2,183,505
Payable for fund shares redeemed		26,070
Accrued expenses		19,867
Due to GIS		32,147
Total Liabilities		2,261,589
Net Assets	$	65,200,920
COMPONENTS OF NET ASSETS
Capital stock, at par	$	7,933
Additional paid-in capital		70,925,236
Undistributed net investment income		611,544
Accumulated net realized loss on investments		(5,656,394	)
Net unrealized depreciation of investments		(687,399	)
Net Assets	$	65,200,920
Shares Outstanding — $0.001 Par Value		7,932,237
Net Asset Value Per Share		$8.22

Statement of Operations

Six Months Ended

June 30, 2006 (Unaudited)

INVESTMENT INCOME
Interest	$	2,442,542
Expenses:
Investment advisory fees — Note B		194,078
Custodian fees		29,781
Audit fees		15,155
Printing expense		6,772
Directors’ fees — Note B		3,982
Insurance expense		2,131
Legal fees		1,259
Loan commitment fees — Note H		561
Registration fees		34
Other		226
Total Expenses		253,979
Net Investment Income		2,188,563
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized loss on investments — Note A		(4,587	)
Net change in unrealized appreciation of investments — Note C		(1,463,892	)
Net Realized and Unrealized Loss on Investments		(1,468,479	)
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	720,084

See notes to financial statements.

8

ⁿ The Guardian VC High Yield Bond Fund

Statements of Changes in Net Assets

	Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income	$	2,188,563		$	4,014,966
Net realized gain/(loss) on investments		(4,587	)		894,500
Net change in unrealized appreciation of investments		(1,463,892	)		(2,815,587	)
Net Increase in Net Assets Resulting from Operations		720,084			2,093,879
Dividends to Shareholders from:
Net investment income		(1,588,582	)		(4,027,155	)
From Capital Share Transactions:
Net increase in net assets from capital share transactions — Note G		2,179,308			2,483,833
Net Increase in Net Assets		1,310,810			550,557
NET ASSETS:
Beginning of period		63,890,110			63,339,553
End of period*	$	65,200,920		$	63,890,110
*  Includes undistributed net investment income of:	$	611,544		$	11,563

See notes to financial statements.

9

ⁿ The Guardian VC High Yield Bond Fund

Financial Highlights

Selected data for a share of capital stock outstanding throughout the periods indicated:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, (Audited)
			2005		2004		2003		2002		2001
Net asset value, beginning of period	$8.33		$8.60		$8.43		$7.61		$8.13		$8.61
Income from investment operations:
Net investment income	0.28		0.55		0.58		0.53		0.63		0.77
Net realized and unrealized gain/(loss) on investments	(0.18	)	(0.27	)	0.17		0.82		(0.53	)	(0.47	)
Net increase from investment operations	0.10		0.28		0.75		1.35		0.10		0.30
Dividends to shareholders from:
Net investment income	(0.21	)	(0.55	)	(0.58	)	(0.53	)	(0.62	)	(0.78	)
Net asset value, end of period	$8.22		$8.33		$8.60		$8.43		$7.61		$8.13
Total return*	1.13	%(a)	3.30	%	9.22	%	17.95	%	1.29	%	3.56	%
Ratios/supplemental data:
Net assets, end of period (000’s omitted)	$65,201		$63,890		$63,340		$54,424		$35,683		$32,210
Ratio of expenses to average net assets	0.78	%(b)	0.80	%	0.79	%	0.81	%	0.87	%	0.90	%
Ratio of net investment income to average net assets	6.77	%(b)	6.35	%	6.97	%	7.17	%	7.88	%	8.96	%
Portfolio turnover rate	41	%	88	%	90	%	165	%	66	%	140	%

* Total returns do not reflect the effects of charges deducted pursuant to the terms of GIAC’s variable contracts.

Inclusion of such charges would reduce the total returns for all periods shown.

(a) Not annualized.

(b) Annualized.

See notes to financial statements.

10

ⁿ The Guardian VC High Yield Bond Fund

Notes to Financial Statements

June 30, 2006 (Unaudited)

Note A. Organization and Accounting Policies

The Guardian VC High Yield Bond Fund (the Fund or GVCHYBF) is a series of The Guardian Variable Contract Funds, Inc. (GVCF). GVCF is incorporated in the state of Maryland and is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The financial statements for the other remaining series of GVCF are presented in separate reports.

Shares of GVCHYBF are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies of the Fund are as follows:

Investments

Pursuant to valuation procedures approved by the Board of Directors, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgment of the Service, are valued at the bid price. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

Other securities, including securities for which market quotations are not readily available (such as certain mortgage-backed securities, restricted securities, illiquid securities and foreign securities subject to a “significant event”) are valued at fair value as determined in good faith by or under the direction of GVCF’s Board of Directors. A “significant event” is an event that will affect the value of a portfolio security that occurs after the close of trading in the security’s primary trading market or exchange but before the Fund’s NAV is calculated.

Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets.

The Fund invests primarily in below investment grade securities (i.e. lower-quality debt), which are subject to certain risks. Lower-quality debt is considered to be speculative because it’s less certain that the issuer will be able to pay interest or repay the principal. These securities are generally more volatile and less liquid than investment grade debt. Lower quality debt securities can also be more sensitive to adverse economic conditions, including the issuer’s financial condition or stresses in its industry.

Futures contracts are valued at the settlement prices established by the boards of trade or exchanges on which they are traded.

Repurchase agreements are carried at cost which approximates market value (see Note D). Short-term debt securities with maturities of 60 days or less are valued on an amortized cost basis which approximates market value.

Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/discount, is accrued daily.

Foreign Currency Translation

GVCHYBF is permitted to buy international securities that are not U.S. dollar denominated. GVCHYBF’s books and records are maintained in U.S. dollars as follows:

(1)  The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange.

(2)  Security purchases and sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.

The resulting gains and losses are included in the Statement of Operations as follows:

Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses,

11

ⁿ The Guardian VC High Yield Bond Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

which result from changes in foreign exchange rates between the date on which GVCHYBF earns dividends and interest or pays foreign withholding taxes or other expenses and the date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized gains or losses on foreign currency related transactions. Realized foreign exchange gains and losses which result from changes in foreign exchange rates between the trade and settlement dates on security and currency transactions are also included in net realized gains and losses on foreign currency related transactions. Net currency gains and losses from valuing other assets and liabilities denominated in foreign currency at the period end exchange rate are reflected in net change in unrealized appreciation or depreciation from translation of other assets and liabilities denominated in foreign currencies.

Forward Foreign Currency Contracts

GVCHYBF may enter into forward foreign currency contracts in connection with planned purchases or sales of securities, or to hedge against changes in currency exchange rates affecting the values of its investments that are denominated in a particular currency. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Fluctuations in the value of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by GVCHYBF. When forward contracts are closed, GVCHYBF will record realized gains or losses equal to the difference between the values of such forward contracts at the time each was opened and the values at the time each was closed. Such amounts are recorded in net realized gains or losses on foreign currency related transactions. GVCHYBF will not enter into a forward foreign currency contract if such contract would obligate it to deliver an amount of foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency.

Futures Contracts

GVCHYBF may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, GVCHYBF is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by GVCHYBF each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by GVCHYBF. The daily changes in the variation margin are recognized as unrealized gains or losses by GVCHYBF. GVCHYBF’s investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GVCHYBF may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates, securities prices or prices of futures contracts move unexpectedly, GVCHYBF may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.

Dividend Distributions

Dividends from net investment income are declared and paid semi-annually for GVCHYBF. Net realized short-term and long-term capital gains for GVCHYBF will be distributed at least annually. All such dividends and distributions are credited in the form of additional shares of GVCHYBF at the net asset value on the ex-dividend date.

All dividends and distributions are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations. Differences between the recognition of income on an income tax basis and recognition of income based on GAAP may cause temporary overdistributions of net realized gains and net investment income on a GAAP basis.

Taxes

GVCHYBF has qualified and intends to remain qualified to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code (Code), and as such will not be subject to federal income tax on taxable income (including any realized capital gains) which is distributed in accordance with the provisions of the Code. Therefore, no federal income tax provision is required.

Reclassification of Capital Accounts

The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital gains for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components

12

ⁿ The Guardian VC High Yield Bond Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications would have no effect on net assets, results of operations, or net asset value per share of the Fund.

Note B. Investment Advisory Agreements and Payments to or from Related Parties

The Fund has an investment advisory agreement with Guardian Investor Services LLC (GIS), a wholly-owned subsidiary of GIAC. Fees for investment advisory are at an annual rate of 0.60% of the average daily net assets of the Fund.

The Guardian Fund Complex pays directors who are not “interested persons” (as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Board committee members also receive a fee of $2,000 per committee meeting, which also is allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain directors who are interested persons. Certain officers and directors of the Fund are affiliated with GIS.

Note C. Investment Transactions

Purchases and proceeds from sales of securities (excluding short-term securities) amounted to $29,504,149 and $25,216,143, respectively, during the six months ended June 30, 2006.

The cost of investments owned at June 30, 2006 for federal income tax purposes was substantially the same as the cost for financial reporting purposes. The gross unrealized appreciation and depreciation of investments at June 30, 2006 aggregated $632,472 and $1,319,871, respectively, resulting in net unrealized depreciation of $687,399.

Note D. Repurchase Agreements

The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, GVCHYBF will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, GVCHYBF maintains the right to sell the collateral and may claim any resulting loss against the seller.

Note E. Reverse Repurchase Agreements

GVCHYBF may enter into reverse repurchase agreements with banks or third party broker-dealers to borrow short-term funds. Interest on the value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time GVCHYBF enters into a reverse repurchase agreement, GVCHYBF establishes and segregates cash, U.S. government securities or liquid, unencumbered securities that are marked-to-market daily. The value of such segregated assets must be at least equal to the value of the repurchase obligation (principal plus accrued interest), as applicable. Reverse repurchase agreements involve the risk that the buyer of the securities sold by GVCHYBF may be unable to deliver the securities when GVCHYBF seeks to repurchase them.

Note F. Dollar Roll Transactions

GVCHYBF may enter into dollar rolls (principally using TBA’s) in which GVCHYBF sells mortgage securities for delivery in the current month and simultaneously contracts to repurchase similar securities at an agreed-upon price on a fixed date. The securities repurchased will bear the same interest as those sold, but generally will be collateralized at the time of delivery by different pools of mortgages with different prepayment histories than those securities sold. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on the securities sold. Dollar roll transactions involve the risk that the buyer of the securities sold by GVCHYBF may be unable to deliver the securities when the GVCHYBF seeks to repurchase them. GVCHYBF is compensated by the difference between the current sales price and the forward price for the future purchase (often referred to as the “drop”), as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls may increase fluctuations in GVCHYBF’s net asset value and may be viewed as a form of leverage.

13

ⁿ The Guardian VC High Yield Bond Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

Note G. Transactions in Capital Stock

There are 100,000,000 shares of $0.001 par value capital stock authorized for GVCHYBF. Transactions in capital stock were as follows:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
	Shares				Amount
Shares sold	521,331		987,276		$	4,389,567		$	8,446,844
Shares issued in reinvestment of dividends	192,555		481,999			1,588,582			4,027,155
Shares repurchased	(451,204	)	(1,168,801	)		(3,798,841	)		(9,990,166	)
Net increase	262,682		300,474		$	2,179,308		$	2,483,833

Note H. Line of Credit

A $100,000,000 line of credit available to GVCHYBF and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus 0.50% calculated on a 360 day basis per annum. For the six months ended June 30, 2006, none of the funds borrowed against this line of credit.

The funds are obligated to pay State Street Bank and Trust Company and Bank of Montreal a commitment fee computed at a rate of 0.08% per annum on the average daily unused portion of the revolving credit.

14

ⁿ The Guardian VC High Yield Bond Fund

Board Approval of Investment Management Agreements (Unaudited)

The Boards of Directors of The Guardian Variable Contract Funds, Inc. (“GVCF”), GIAC Funds, Inc. (“GIAC”), The Guardian Bond Fund, Inc. (“GBF” and a “Fund”) and The Guardian Cash Fund, Inc. (“GCF” and a “Fund”) (together, the series of GVCF and GIAC, and GBF and GCF are referred to as the “Funds,”) approved the renewal of the management agreement for each Fund and, as applicable, the subadvisory agreement for each Fund on November 17, 2005. As a part of the renewal process, the Boards of Directors of GVCF, GIAC, GBF and GCF met independently of Fund management and of the interested Board Members to consider the renewal of: (1) the management agreement (“Management Agreement”) between each of the Funds and Guardian Investor Services LLC (“GIS”) or as applicable, Guardian Baillie Gifford Limited (“GBG” and together with GIS, each referred to as a “Manager”); (2) as applicable, the subadvisory agreements (each a “Subadvisory Agreement”) between GBG and Baillie Gifford Overseas Limited (“BGO”) and the subadvisory agreements between GIS and UBS Global Asset Management (Americas) Inc. (“UBS” and together with BGO, each referred to as a “Subadvisor”). (The Management Agreements and the Subadvisory Agreements are together referred to as the “Advisory Agreements.”) As part of the review process, the Independent Directors were represented by independent legal counsel. The Independent Directors reviewed comprehensive materials received from the Managers, Subadvisors and independent counsel in connection with contract review. The Independent Directors noted that each Board also received regular information throughout the year regarding performance and operating results of each Fund and that in evaluating the Advisory Agreements, they were taking into account their accumulated experience as Board members in working with the Managers on matters relating to the Funds.

In preparation for the review process, the Independent Directors met with independent legal counsel and discussed the type and nature of information to be provided and sent a formal request for information to Fund management. The Managers and Subadvisors provided extensive information to all Board members in response to the request. Among other information, the Independent Directors reviewed materials to assess the services provided by each Manager and Subadvisor, and, as applicable, information comparing the performance, advisory fees and expense ratios of each Fund to other mutual funds, information about the profitability from the Advisory Agreements to the Managers and to the Subadvisors, information about economies of scale and information about the other benefits to the Managers and Subadvisors and their affiliates resulting from their relationship with the Funds (“fall-out benefits”). The Independent Directors reviewed comparative performance and management fee and expense ratios of peer groups of funds selected by Morningstar, Inc. (“Morningstar”). The Independent Directors also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Advisory Agreements. In preparation for the November 17th meeting, the Independent Directors met on November 3, 2005, to review and discuss with independent legal counsel the information provided by Morningstar.

Based upon their review, the Independent Directors concluded that it was in the best interest of each Fund to renew each relevant Advisory Agreement and, accordingly, recommended to the full Board of each Fund the renewal of each applicable Advisory Agreement. In reaching this conclusion for each Fund, the Independent Directors did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Management Agreements

Nature, Quality and Extent of Services. In reviewing the nature, quality and extent of services provided by the Managers, the Independent Directors considered the services provided by each Manager under the Management Agreements, including administrative services. The Independent Directors considered the experience and skills of senior management responsible for fund operations, the experience and skills of the personnel performing the functions under each Management Agreement and the resources made available to such personnel, the ability of the Managers to attract and retain high-quality personnel, and the organizational depth of the Managers. The Independent Directors concluded that appropriate resources were provided under each Management Agreement. The Independent Directors also considered the delegation of day-to-day portfolio management responsibility to UBS with respect to the Guardian UBS VC Large Cap Value Fund and the Guardian UBS VC Small Cap Value Fund and to BGO with respect to the Baillie Gifford International Growth Fund and the Baillie Gifford Emerging Markets Fund and the Managers’ ability to supervise the activities of the Subadvisors. The Independent Directors concluded each Manager’s supervisory program was satisfactory. The Independent Directors also considered the compliance program established by the Managers and the level of compliance attained by the Managers. Further, the Independent Directors considered that each Manager has had a long-term relationship with the Funds and has demonstrated its past and future commitment to support the Funds. The Independent Directors concluded that a long-term relationship with a capable, conscientious adviser was in the best interest of each Fund. Based upon all relevant factors, the Independent Directors concluded that the nature, quality and extent of the services provided by the Managers to each applicable Fund were satisfactory.

15

ⁿ The Guardian VC High Yield Bond Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and longer-term (three year, five year and ten year) periods, as applicable, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. The Independent Directors received comparative performance information prepared by Morningstar. The Independent Directors also considered whether investment results were consistent with a Fund’s investment objective(s) and policies. For most Funds, the Independent Directors concluded that investment performance met acceptable levels of investment performance. For Funds that experienced underperformance, the Independent Directors reviewed the reasons for the underperformance and the remedial measures taken by the Manager to improve performance. The Independent Directors concluded that the Managers have in place an effective process to monitor performance and that reasonable steps had been implemented to address circumstances of underperformance where appropriate. Therefore, the Independent Directors concluded that it was in the best interests of the Funds to renew the Management Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s management fees and net expense ratios. The Independent Directors received information, based on data supplied by Morningstar, comparing each Fund’s management fee rates and total net expense ratio to advisory fees and total net expense ratios of the mutual funds in its peer group (as selected by Morningstar). The Independent Directors also received and considered information on fee waivers and/or reimbursements for each Fund compared to those of its peer group. The Independent Directors noted that a number of the Funds have received fee waivers for many years and that such fee waivers remained current through the time of the review process.

The Independent Directors also compared each Fund’s management fee rates to fees charged by the Manager for comparable mutual funds. For each Fund, the Independent Directors reviewed the fees charged by other advisors for mutual funds in the Fund’s peer group. GIS provided information on the advisory fees it charges its two institutional accounts and noted the information was not comparable with the Funds because the investment objectives and management style of the institutional accounts were very different than those of the Funds. GBG has no clients other than the Funds.

On the basis of all information provided, the Independent Directors concluded that the management fee schedules for each Fund were reasonable and appropriate in light of the nature, quality and extent of services provided by the Manager.

Profitability. The Independent Directors reviewed detailed information regarding revenues received by each Manager under each Management Agreement, including identification of the estimated direct and indirect costs of the Managers of providing those services to each Fund that are covered under the Management Agreements. The Independent Directors also received information regarding the enterprise-wide profitability of the Managers with respect to all fund services in totality.

For all Funds, based upon the profitability percentage provided, the Independent Directors concluded that the profitability to the applicable Manager from the management of each Fund was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the management of each Fund and whether the Funds benefit from any such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund and the Guardian Cash Fund had management fee schedules that each contained one breakpoint. The Independent Directors also considered whether the effective management fee rate for each Fund under the Management Agreement is reasonable in relation to the asset size of such Fund. The Independent Directors noted GIS’s representation that it did not anticipate that the Funds would experience any significant economies in the near future, given their asset size. The Independent Directors concluded that, in light of the Funds’ current asset levels, the fee schedule for each Fund reflects an appropriate level of sharing of any economies of scale.

Other Benefits to Manager. The Independent Directors also considered the character and amount of other incidental benefits received by the Managers and their affiliates as a result of their relationship with the Funds. The Independent Directors noted the Managers’ representation that each has the ability to obtain proprietary research as a result of the Funds’ brokerage business that may be used for the benefit of the Funds and other clients of the Managers. The Independent Directors concluded that management fees for each Fund were reasonable in light of these fall-out benefits.

Specific Fund Findings

The Guardian VC High Yield Bond Fund

In determining to recommend renewal of the Fund’s Management Agreement, the Independent Directors concluded that investment performance was satisfactory, with performance during more recent periods falling within a reasonable range of the median of its peer group, and that the management fee rate was reasonable.

16

ⁿ The Guardian VC High Yield Bond Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Overall Conclusions

Based upon all of the information considered and the conclusions reached, the Independent Directors determined that the terms of each Advisory Agreement continue to be fair and reasonable and that the continuation of each Advisory Agreement is in the best interests of each Fund.

17

ⁿ The Guardian VC High Yield Bond Fund

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, is available free of charge upon request by logging on to www.guardianinvestor.com or the Securities and Exchange Commission’s (SEC) website at www.sec.gov.

Form N-Q

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each year on the Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov, and 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.

Code of Ethics

The Fund has adopted a code of ethics for its Principal Executive Officer and Principal Financial Officers (the “Code”). The purpose of the Code is to promote, among other things: honest and ethical conduct, including the handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in reports and documents filed with the SEC; and compliance with applicable laws and regulations. A copy of the Code has been filed with the SEC on Form N-CSR and can be obtained on the SEC’s website at www.sec.gov.

Copies for all of the above can be obtained free of charge by calling 1-800-221-3253 or by writing to Guardian Investor Services LLC at 7 Hanover Square, New York, New York 10004.

18

ⁿ   The Guardian VC Low Duration Bond Fund Semiannual Report
To Contractowners

Howard W. Chin, Co-Portfolio Manager

Robert Crimmins, Co-Portfolio Manager

Objective:

Seeks a high level of current income, consistent with preservation of capital

Portfolio:

At least 80% in different kinds of investment grade bonds, such as corporate bonds, mortgage-backed and asset-backed securities, and obligations of the U.S. government and its agencies

Inception Date:

August 28, 2003

Net Assets at June 30, 2006:

$27,983,238

Top Ten Holdings  (As of 6/30/2006)

Company	Coupon	Maturity Date	Percentage of Total Net Assets
FNMA	5.125%	4/15/2011	3.80%
FNMA	4.500%	10/15/2008	2.98%
U.S. Treasury Notes	4.500%	11/15/2010	2.76%
U.S. Treasury Notes	4.375%	11/15/2008	2.62%
U.S. Treasury Notes	5.125%	6/30/2008	2.12%
Residential Asset Mtg. Prods., Inc.	5.670%	4/25/2033	1.60%
Chase Comm’l. Mtg. Secs. Corp.	6.390%	11/18/2030	1.55%
Chase Comm’l. Mtg. Secs. Corp.	7.370%	6/19/2029	1.55%
Ford Credit Auto Owner Tr.	4.380%	1/15/2010	1.52%
Morgan Stanley Capital I	7.205%	12/15/2031	1.45%

Sector Allocation  (As of 6/30/2006 and 12/31/2005)

Average Annual Total Returns  (For periods ended 6/30/2006)

	Year to Date	1 Yr	5 Yrs	10 Yrs	Since Inception 8/28/2003
The Guardian VC Low Duration Bond Fund	0.99%	1.59%	—	—	1.46%
Lehman Brothers U.S. Government 1-3 Year Bond Index	1.08%	1.87%	—	—	1.77%

About information in this report:

• All performance data quoted is historical and the results represent past performance and neither guarantee nor predict future investment results. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at (800) 221-3253 or visit our website at www.guardianinvestor.com. Current performance may be higher or lower than the performance quoted here. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.

• It is important to consider the Fund’s investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested. Investing in bond funds exposes you to the general risk of investing in the debt markets. Duration is a measure of bond price sensitivity to a given change in interest rates. Generally, the higher a bond’s duration, the greater its price sensitivity to a given change in interest rates. Bond funds are subject to interest rate risk. When interest rates rise, bond prices generally fall, and when interest rates fall, bond prices generally rise. Currently, interest rates are at historically low levels. Please keep in mind that in this kind of environment, the risk that bond prices may fall when interest rates rise is potentially greater.

• Low duration bond funds may not be a suitable alternative to money market funds because, unlike money market funds, low duration bond funds do not seek to maintain a stable net asset value and, as a result, are a riskier asset class.

• The Lehman Brothers U.S. Government 1-3 Year Bond Index is an unmanaged index that is generally considered to be representative of U.S. short duration bond market activity. Index returns are provided for comparative purposes. Please note that the index is unmanaged and not available for direct investment and its returns do not reflect the fees and expenses that have been deducted from the Fund.

• Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. The return figures shown do not reflect the deduction of taxes that a contractowner may pay on distributions or redemption of units.

THE GUARDIAN VC LOW DURATION BOND FUND 1

ⁿ   The Guardian VC Low Duration Bond Fund Semiannual Report
To Contractowners

Fund Expenses

By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including, as applicable, management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other underlying funds.

The example is based on an investment of $1,000 invested on January 1, 2006 and held for six months ended June 30, 2006.

Actual Expenses

The first line in the table provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value January 1, 2006		Ending Account Value June 30, 2006		Expenses Paid During the Period*		Annualized Expense Ratio
Actual	$	1,000	$	1,009.90	$	3.69	0.74%
Hypothetical (5% return before expenses)	$	1,000	$	1,021.12	$	3.71	0.74%

* Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the Fund’s most recent fiscal half-year).

2 THE GUARDIAN VC LOW DURATION BOND FUND

ⁿ The Guardian VC Low Duration Bond Fund

Schedule of Investments

June 30, 2006 (Unaudited)

Principal Amount			Value
	Asset Backed Securities — 23.0%
$	265,000	Ameriquest Mtg. Secs., Inc. 2003-5 A6 4.541% due 4/25/2033	$	257,133
	280,000	Bank One Issuance Tr. 2003-A7 A7 3.35% due 3/15/2011		267,520
	276,843	Capital Auto Receivables Asset Tr. 2006-1 A2B 5.229% due 9/15/2008 (1)		276,825
	270,000	Capital One Multi-Asset Execution Tr. 2003-A4 A4 3.65% due 7/15/2011		259,605
	410,000	Carmax Auto Owner Tr. 2005-1 A4 4.35% due 3/15/2010		400,496
	123,321	Caterpillar Financial Asset Tr. 2004-A A3 3.13% due 1/26/2009		121,459
	360,000	Chase Funding Mtg. Loan 2004-1 1A6 4.266% due 6/25/2015		342,693
	94,629	Chase Manhattan Auto Owner Tr. 2003-A A4 2.06% due 12/15/2009		92,005
		Countrywide Asset-Backed Certificates
	362,972	2004-10 AF3 3.842% due 10/25/2030		359,513
	275,000	2004-S1 A2 3.872% due 3/25/2020		269,940
	435,000	Ford Credit Auto Owner Tr. 2005-B A4 4.38% due 1/15/2010		425,735
	270,000	Hertz Vehicle Financing LLC 2005-2A A1 5.463% due 2/25/2010† (1)		269,996
	280,000	MBNA Credit Card Master Nt. Tr. 2003-A6 A6 2.75% due 10/15/2010		266,305
	87,635	Navistar Financial Corp. Owner Tr. 2004-A A3 2.01% due 8/15/2008		86,656
	278,570	New Century Home Equity Loan Tr. 2004-4 A4 5.603% due 2/25/2035 (1)		278,861
	63,223	PP&L Transition Bond Co. LLC 1999-1 A7 7.05% due 6/25/2009		63,768
	390,000	Renaissance Home Equity Loan Tr. 2005-2 AF3 4.499% due 8/25/2035 (1)		380,418
		Residential Asset Mtg. Prods., Inc.
	390,000	2003-RZ4 A5 4.66% due 2/25/2032		373,365
	270,000	2004-RS9 AII2 5.663% due 5/25/2034 (1)		270,730
	450,000	2003-RS3 AI4 5.67% due 4/25/2033 (2)		447,539
	106,304	Residential Funding Mtg. Secs. 2003-HS3 AI2 3.15% due 7/25/2018		104,303
		Volkswagen Auto Lease Tr.
	350,000	2004-A A4A 3.09% due 8/20/2010		345,002

Principal Amount			Value
		2005-A A2
$	89,162	3.52% due 4/20/2007	$	89,047
	413,000	World Omni Auto Receivables Tr. 2005-A A4 3.82% due 11/12/2011		399,250
		Total Asset Backed Securities (Cost $6,529,064)		6,448,164
	Collateralized Mortgage Obligations — 9.2%
$	138,944	Countrywide Home Loans 2002-19 1A1 6.25% due 11/25/2032	$	138,552
		FHLMC
	315,000	2598 QC 4.50% due 6/15/2027		306,637
	217,347	1534 Z 5.00% due 6/15/2023		210,662
	177,220	2500 TD 5.50% due 2/15/2016		176,661
	98,469	20 H 5.50% due 10/25/2023		97,142
	250,000	2470 VB 6.00% due 8/15/2018		250,678
	110,280	1650 J 6.50% due 6/15/2023		111,232
		FNMA
	254,522	2003-24 PU 3.50% due 11/25/2015		243,007
	260,000	2005-39 CL 5.00% due 12/25/2021		254,327
	307,000	2003-13 ME 5.00% due 2/25/2026		303,355
	36,769	2002-55 PC 5.50% due 4/25/2026		36,553
	20,816	GNMA 2002-93 NV 4.75% due 2/20/2032		20,120
	170,001	J.P. Morgan Mtg. Tr. 2005-S2 2A15 6.00% due 9/25/2035		166,017
	270,000	Wells Fargo Mtg.-Backed Secs. Tr. 2005-AR10 2A15 4.11% due 6/25/2035		259,430
		Total Collateralized Mortgage Obligations (Cost $2,638,627)		2,574,373
	Commercial Mortgage Backed Securities — 15.0%
		Chase Comm’l. Mtg. Secs. Corp.
$	429,121	1998-2 A2 6.39% due 11/18/2030	$	434,073
	430,000	1997-1 C 7.37% due 6/19/2029		432,626
	315,000	Comm’l. Mtg. Asset Tr. 1999-C1 A3 6.64% due 1/17/2032		322,173
	185,000	Crown Castle Towers LLC 2005-1A AFX 4.643% due 6/15/2035†		177,143
		GMAC Comm’l. Mtg. Secs., Inc.
	78,029	1997-C1 A3 6.869% due 7/15/2029		78,651

See notes to financial statements.

3

ⁿ The Guardian VC Low Duration Bond Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Principal Amount			Value
		1999-C2 A2
$	232,000	6.945% due 9/15/2033	$	238,643
		Greenwich Capital Comm’l. Funding Corp.
	164,850	2004-GG1 A2 3.835% due 6/10/2036		160,801
	274,000	2005-GG3 A2 4.305% due 8/10/2042		262,483
	412,451	J.P. Morgan Chase Comm’l. Mtg. 2004-C1 A1 3.053% due 1/15/2038		391,935
	250,000	J.P. Morgan Comm’l. Mtg. Fin. Corp. 1997-C5 B 7.159% due 9/15/2029		252,662
		LB UBS Comm’l. Mtg. Tr.
	250,000	2003-C1 A2 3.323% due 3/15/2027		240,768
	123,760	2001-C3 A1 6.058% due 6/15/2020		124,721
	302,802	2000-C5 A1 6.41% due 12/15/2019		304,953
	395,000	Morgan Stanley Capital I 1999-RM1 E 7.205% due 12/15/2031 (1)		406,504
	377,275	Salomon Brothers Mtg. Secs. VII, Inc. 2001-C2 A2 6.168% due 2/13/2010		378,795
		Total Commercial Mortgage Backed Securities (Cost $4,316,919)		4,206,931
	Corporate Bonds — 28.4%
	Aerospace and Defense — 0.3%
$	96,000	Raytheon Co. 4.50% due 11/15/2007	$	94,249
	Automotive — 2.7%
	300,000	Daimler Chrysler NA Hldg. 4.75% due 1/15/2008		295,095
	150,000	Ford Motor Credit Co. 6.50% due 1/25/2007		149,740
	300,000	General Motors Acceptance Corp. 6.125% due 9/15/2006		299,557
				744,392
	Chemicals — 1.4%
	150,000	Lyondell Chemical Co. 10.875% due 5/1/2009		152,250
	250,000	Praxair, Inc. 4.75% due 7/15/2007		247,617
				399,867
	Construction Machinery — 1.7%
		Caterpillar Financial Svcs.
	200,000	2.625% due 1/30/2007		196,754
	200,000	3.10% due 5/15/2007		195,752
	100,000	John Deere Capital Corp. 3.625% due 5/25/2007		98,188
				490,694
	Consumer Products — 0.7%
	200,000	Fortune Brands, Inc. 2.875% due 12/1/2006		197,582

Principal Amount			Value
	Energy — 1.6%
$	150,000	Devon Energy Corp. 2.75% due 8/1/2006	$	149,670
	200,000	Occidental Petroleum Corp. 4.00% due 11/30/2007		195,573
	98,700	RAS Laffan Liquefied Natural Gas 3.437% due 9/15/2009†		94,749
				439,992
	Entertainment — 1.0%
	275,000	AOL Time Warner, Inc. 6.15% due 5/1/2007		275,943
	Finance Companies — 3.7%
	200,000	Capital One Bank 4.25% due 12/1/2008		193,454
	300,000	General Electric Capital Corp. 3.50% due 8/15/2007		292,956
	250,000	Istar Financial, Inc. 7.00% due 3/15/2008		253,968
	300,000	Residential Capital Corp. 6.125% due 11/21/2008		296,523
				1,036,901
	Financial–Banks — 0.9%
	250,000	Popular NA, Inc. 3.875% due 10/1/2008		239,193
	Insurance — 1.7%
	250,000	UnitedHealth Group, Inc. 3.375% due 8/15/2007		243,586
	250,000	WellPoint, Inc. 3.75% due 12/14/2007		242,914
				486,500
	Media–Cable — 1.5%
	250,000	Comcast Corp. 7.625% due 4/15/2008		257,163
	150,000	Cox Comm., Inc. 7.75% due 8/15/2006		150,255
				407,418
	Media–NonCable — 0.4%
	100,000	Scholastic Corp. 5.75% due 1/15/2007		99,840
	Metals and Mining — 1.3%
	350,000	Steel Dynamics, Inc. 9.50% due 3/15/2009		360,500
	Natural Gas–Pipelines — 1.8%
	275,000	Enterprise Prod. Operating LP 4.00% due 10/15/2007		267,569
	250,000	Sempra Energy 4.621% due 5/17/2007		247,564
				515,133
	Paper and Forest Products — 0.9%
	250,000	Packaging Corp. of America 4.375% due 8/1/2008		242,784
	Real Estate Investment Trusts — 1.4%
	155,000	Avalon Bay Communities, Inc. 6.80% due 7/15/2006		155,045
	250,000	EOP Operating LP 6.763% due 6/15/2007		251,970
				407,015

See notes to financial statements.

4

ⁿ The Guardian VC Low Duration Bond Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Principal Amount			Value
	Retailers — 1.8%
$	250,000	CVS Corp. 3.875% due 11/1/2007	$	243,376
	255,000	Federated Dept. Stores 6.625% due 9/1/2008		259,074
				502,450
	Services — 1.0%
	275,000	Cendant Corp. 6.875% due 8/15/2006		275,270
	Utilities–Electric and Water — 1.7%
	230,000	American Electric Power 4.709% due 8/16/2007 (1)		227,185
	250,000	Tampa Electric 5.375% due 8/15/2007		248,508
				475,693
	Wireline Communications — 0.9%
	250,000	Sprint Capital Corp. 6.00% due 1/15/2007		250,335
		Total Corporate Bonds (Cost $8,056,242)		7,941,751
	Sovereign Debt Security — 0.9%
$	250,000	United Mexican States 4.625% due 10/8/2008 (Cost $246,501)	$	243,750
	U.S. Government Securities — 19.6%
	U.S. Government Agency Securities — 11.0%
		FHLMC
$	415,000	3.15% due 12/16/2008	$	393,324
		FNMA
	140,000	3.75% due 3/18/2010 (2)		133,577
	270,000	3.875% due 2/15/2010		256,091
	1,260,000	4.50% due 10/15/2008 – 12/1/2009		1,229,610
	1,080,000	5.125% due 4/15/2011		1,063,720
				3,076,322
	U.S. Treasury Notes — 8.6%
		U.S. Treasury Notes
	745,000	4.375% due 11/15/2008		732,254
	790,000	4.50% due 11/15/2010		771,670
	300,000	4.875% due 4/30/2011		296,941
	595,000	5.125% due 6/30/2008		594,628
				2,395,493
		Total U.S. Government Securities (Cost $5,539,777)		5,471,815

Principal Amount			Value
	Repurchase Agreement — 5.3%
$	1,487,000	State Street Bank and Trust Co. repurchase agreement, dated 6/30/2006, maturity value $1,487,613 at 4.95%, due 7/3/2006 (3) (Cost $1,487,000)	$	1,487,000
	Total Investments — 101.4% (Cost $28,814,130)			28,373,784
	Liabilities in Excess of Cash, Receivables and Other Assets — (1.4)%			(390,546	)
	Net Assets — 100%		$	27,983,238

† Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to certain qualified buyers. At 6/30/2006, the aggregate market value of these securities amounted to $541,888 representing 1.9% of net assets which have been deemed liquid pursuant to the Fund’s liquidity procedures approved by the Board of Directors.

(1) Floating rate note. The rate shown is the rate in effect at 6/30/2006.

(2) Step-up bond.

(3) The repurchase agreement is fully collateralized by $1,580,000 in U.S. Government Agency, 4.125%, due 11/18/2009, with a value of $1,518,775.

See notes to financial statements.

5

ⁿ The Guardian VC Low Duration Bond Fund

Statement of Assets and Liabilities

June 30, 2006 (Unaudited)

ASSETS
Investments, at market (cost $28,814,130)	$	28,373,784
Cash		356
Interest receivable		201,086
Receivable for fund shares sold		30,344
Other assets		496
Total Assets		28,606,066
LIABILITIES
Payable for securities purchased		594,923
Accrued expenses		13,321
Payable for fund shares redeemed		4,189
Due to GIS		10,395
Total Liabilities		622,828
Net Assets	$	27,983,238
COMPONENTS OF NET ASSETS
Capital stock, at par	$	2,862
Additional paid-in capital		28,648,206
Undistributed net investment income		147,298
Accumulated net realized loss on investments		(374,782	)
Net unrealized depreciation of investments		(440,346	)
Net Assets	$	27,983,238
Shares Outstanding — $0.001 Par Value		2,862,315
Net Asset Value Per Share		$9.78

Statement of Operations

Six Months Ended

June 30, 2006 (Unaudited)

INVESTMENT INCOME
Interest	$	608,215
Expenses:
Investment advisory fees — Note B		61,491
Custodian fees		19,459
Audit fees		12,794
Printing expense		4,777
Directors’ fees — Note B		1,685
Insurance expense		859
Legal fees		568
Loan commitment fees — Note H		225
Registration fees		13
Other		226
Total Expenses		102,097
Net Investment Income		506,118
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized loss on investments — Note A		(119,435	)
Net change in unrealized depreciation of investments — Note C		(109,957	)
Net Realized and Unrealized Loss on Investments		(229,392	)
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	276,726

See notes to financial statements.

6

ⁿ The Guardian VC Low Duration Bond Fund

Statements of Changes in Net Assets

	Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income	$	506,118		$	760,998
Net realized loss on investments		(119,435	)		(227,342	)
Net change in unrealized depreciation of investments		(109,957	)		(200,381	)
Net Increase in Net Assets Resulting from Operations		276,726			333,275
Dividends to Shareholders from:
Net investment income		(362,348	)		(760,325	)
From Capital Share Transactions:
Net increase in net assets from capital share transactions — Note G		690,854			4,147,737
Net Increase in Net Assets		605,232			3,720,687
NET ASSETS:
Beginning of period		27,378,006			23,657,319
End of period*	$	27,983,238		$	27,378,006
*  Includes undistributed net investment income of:	$	147,298		$	3,528

See notes to financial statements.

7

ⁿ The Guardian VC Low Duration Bond Fund

Financial Highlights

Selected data for a share of capital stock outstanding throughout the periods indicated:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, (Audited)				Period from August 28, 2003† to December 31, 2003 (Audited)
			2005		2004
Net asset value, beginning of period	$9.81		$9.97		$10.06		$10.00
Income from investment operations:
Net investment income	0.18		0.28		0.18		0.03
Net realized and unrealized gain/(loss) on investments	(0.08	)	(0.16	)	(0.09	)	0.07
Net increase from investment operations	0.10		0.12		0.09		0.10
Dividends and distributions to shareholders from:
Net investment income	(0.13	)	(0.28	)	(0.18	)	(0.03	)
Net realized gain on investments	—		—		—		(0.01	)
Total dividends and distributions	(0.13	)	(0.28	)	(0.18	)	(0.04	)
Net asset value, end of period	$9.78		$9.81		$9.97		$10.06
Total return*	0.99	%(a)	1.25	%	0.91	%	0.97	%(a)
Ratios/supplemental data:
Net assets, end of period (000’s omitted)	$27,983		$27,378		$23,657		$10,840
Ratio of expenses to average net assets	0.74	%(b)	0.79	%	0.81	%	1.74	%(b)
Ratio of net investment income to average net assets	3.70	%(b)	2.94	%	2.11	%	0.93	%(b)
Portfolio turnover rate	45	%	109	%	90	%	92	%

† Commencement of operations.

* Total returns do not reflect the effects of charges deducted pursuant to the terms of GIAC’s variable contracts.

Inclusion of such charges would reduce the total returns for all periods shown.

(a) Not annualized.

(b) Annualized.

See notes to financial statements.

8

ⁿ The Guardian VC Low Duration Bond Fund

Notes to Financial Statements

June 30, 2006 (Unaudited)

Note A. Organization and Accounting Policies

The Guardian VC Low Duration Bond Fund (the Fund or GVLDBF) is a series of The Guardian Variable Contract Funds, Inc. (GVCF). GVCF is incorporated in the state of Maryland and is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The financial statements for the other remaining series of GVCF are presented in separate reports.

Shares of GVLDBF are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies of the Fund are as follows:

Investments

Pursuant to valuation procedures approved by the Board of Directors, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgment of the Service, are valued at the bid price. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

Other securities, including securities for which market quotations are not readily available (such as certain mortgage-backed securities, restricted securities, illiquid securities and foreign securities subject to a “significant event”) are valued at fair value as determined in good faith by or under the direction of GVCF’s Board of Directors. A “significant event” is an event that will affect the value of a portfolio security that occurs after the close of trading in the security’s primary trading market or exchange but before the Fund’s NAV is calculated.

Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets.

Futures contracts are valued at the settlement prices established by the boards of trade or exchanges on which they are traded.

Repurchase agreements are carried at cost which approximates market value (see Note D). Short-term debt securities with maturities of 60 days or less are valued on an amortized cost basis which approximates market value.

Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/discount, is accrued daily.

Foreign Currency Translation

GVLDBF is permitted to buy international securities that are not U.S. dollar denominated. GVLDBF’s books and records are maintained in U.S. dollars as follows:

(1)  The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange.

(2)  Security purchases and sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.

The resulting gains and losses are included in the Statement of Operations as follows:

Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses, which result from changes in foreign exchange rates between the date on which GVLDBF earns dividends and interest or pays foreign withholding taxes or other expenses and the date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized gains or losses on foreign currency related transactions. Realized foreign exchange gains and losses which result from changes in foreign exchange rates between the trade and settlement dates on security and currency transactions are also included in net realized gains and losses on foreign currency related transactions. Net currency gains and losses from valuing other assets and liabilities denominated in foreign currency at the

9

ⁿ The Guardian VC Low Duration Bond Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

period end exchange rate are reflected in net change in unrealized appreciation or depreciation from translation of other assets and liabilities denominated in foreign currencies.

Futures Contracts

GVLDBF may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, GVLDBF is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by GVLDBF each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by GVLDBF. The daily changes in the variation margin are recognized as unrealized gains or losses by GVLDBF. GVLDBF’s investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GVLDBF may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates, securities prices or prices of futures contracts move unexpectedly, GVLDBF may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.

Dividend Distributions

Dividends from net investment income are declared and paid semi-annually for GVLDBF. Net realized short-term and long-term capital gains for GVLDBF will be distributed at least annually. All such dividends and distributions are credited in the form of additional shares of GVLDBF at the net asset value on the ex-dividend date.

All dividends and distributions are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations. Differences between the recognition of income on an income tax basis and recognition of income based on GAAP may cause temporary overdistributions of net realized gains and net investment income on a GAAP basis.

Taxes

GVLDBF has qualified and intends to remain qualified to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code (Code), and as such will not be subject to federal income tax on taxable income (including any realized capital gains) which is distributed in accordance with the provisions of the Code. Therefore, no federal income tax provision is required.

Reclassification of Capital Accounts

The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital gains, and the recharacterization of foreign exchange gains or losses to either ordinary income or realized capital gains for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications would have no effect on net assets, results of operations, or net asset value per share of the Fund.

Note B. Investment Advisory Agreements and Payments to or from Related Parties

The Fund has an investment advisory agreement with Guardian Investor Services LLC (GIS), a wholly-owned subsidiary of GIAC. Fees for investment advisory are at an annual rate of 0.45% of the average daily net assets of the Fund.

The Guardian Fund Complex pays directors who are not “interested persons” (as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Board committee members also receive a fee of $2,000 per committee meeting, which also is allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain directors who are interested persons. Certain officers and directors of the Fund are affiliated with GIS.

Note C. Investment Transactions

Purchases and proceeds from sales of securities (excluding short-term securities) amounted to $13,642,615 and $12,132,332, respectively, during the six months ended June 30, 2006.

The cost of investments owned at June 30, 2006 for federal income tax purposes was substantially the same as the cost for financial reporting purposes. The gross unrealized appreciation and depreciation of investments at June 30, 2006 aggregated $7,793 and $448,139, respectively, resulting in net unrealized depreciation of $440,346.

10

ⁿ The Guardian VC Low Duration Bond Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

Note D. Repurchase Agreements

The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, GVLDBF will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, GVLDBF maintains the right to sell the collateral and may claim any resulting loss against the seller.

Note E. Reverse Repurchase Agreements

GVLDBF may enter into reverse repurchase agreements with banks or third party broker-dealers to borrow short-term funds. Interest on the value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time GVLDBF enters into a reverse repurchase agreement, GVLDBF establishes and segregates cash, U.S. government securities or liquid, unencumbered securities that are marked-to-market daily. The value of such segregated assets must be at least equal to the value of the repurchase obligation (principal plus accrued interest), as applicable. Reverse repurchase agreements involve the risk that the buyer of the securities sold by GVLDBF may be unable to deliver the securities when GVLDBF seeks to repurchase them.

Note F. Dollar Roll Transactions

GVLDBF may enter into dollar rolls (principally using TBA’s) in which GVLDBF sells mortgage securities for delivery in the current month and simultaneously contracts to repurchase similar securities at an agreed-upon price on a fixed date. The securities repurchased will bear the same interest as those sold, but generally will be collateralized at the time of delivery by different pools of mortgages with different prepayment histories than those securities sold. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on the securities sold. Dollar roll transactions involve the risk that the buyer of the securities sold by GVLDBF may be unable to deliver the securities when the GVLDBF seeks to repurchase them. GVLDBF is compensated by the difference between the current sales price and the forward price for the future purchase (often referred to as the “drop”), as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls may increase fluctuations in GVLDBF’s net asset value and may be viewed as a form of leverage.

Note G. Transactions in Capital Stock

There are 100,000,000 shares of $0.001 par value capital stock authorized for GVLDBF. Transactions in capital stock were as follows:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
	Shares				Amount
Shares sold	446,284		960,622		$	4,396,390		$	9,549,032
Shares issued in reinvestment of dividends	37,049		77,224			362,348			760,325
Shares repurchased	(413,200	)	(619,309	)		(4,067,884	)		(6,161,620	)
Net increase	70,133		418,537		$	690,854		$	4,147,737

Note H. Line of Credit

A $100,000,000 line of credit available to GVLDBF and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus 0.50% calculated on a 360 day basis per annum. For the six months ended June 30, 2006, none of the funds borrowed against this line of credit.

The funds are obligated to pay State Street Bank and Trust Company and Bank of Montreal a commitment fee computed at a rate of 0.08% per annum on the average daily unused portion of the revolving credit.

11

ⁿ The Guardian VC Low Duration Bond Fund

Board Approval of Investment Management Agreements (Unaudited)

The Boards of Directors of The Guardian Variable Contract Funds, Inc. (“GVCF”), GIAC Funds, Inc. (“GIAC”), The Guardian Bond Fund, Inc. (“GBF” and a “Fund”) and The Guardian Cash Fund, Inc. (“GCF” and a “Fund”) (together, the series of GVCF and GIAC, and GBF and GCF are referred to as the “Funds,”) approved the renewal of the management agreement for each Fund and, as applicable, the subadvisory agreement for each Fund on November 17, 2005. As a part of the renewal process, the Boards of Directors of GVCF, GIAC, GBF and GCF met independently of Fund management and of the interested Board Members to consider the renewal of: (1) the management agreement (“Management Agreement”) between each of the Funds and Guardian Investor Services LLC (“GIS”) or as applicable, Guardian Baillie Gifford Limited (“GBG” and together with GIS, each referred to as a “Manager”); (2) as applicable, the subadvisory agreements (each a “Subadvisory Agreement”) between GBG and Baillie Gifford Overseas Limited (“BGO”) and the subadvisory agreements between GIS and UBS Global Asset Management (Americas) Inc. (“UBS” and together with BGO, each referred to as a “Subadvisor”). (The Management Agreements and the Subadvisory Agreements are together referred to as the “Advisory Agreements.”) As part of the review process, the Independent Directors were represented by independent legal counsel. The Independent Directors reviewed comprehensive materials received from the Managers, Subadvisors and independent counsel in connection with contract review. The Independent Directors noted that each Board also received regular information throughout the year regarding performance and operating results of each Fund and that in evaluating the Advisory Agreements, they were taking into account their accumulated experience as Board members in working with the Managers on matters relating to the Funds.

In preparation for the review process, the Independent Directors met with independent legal counsel and discussed the type and nature of information to be provided and sent a formal request for information to Fund management. The Managers and Subadvisors provided extensive information to all Board members in response to the request. Among other information, the Independent Directors reviewed materials to assess the services provided by each Manager and Subadvisor, and, as applicable, information comparing the performance, advisory fees and expense ratios of each Fund to other mutual funds, information about the profitability from the Advisory Agreements to the Managers and to the Subadvisors, information about economies of scale and information about the other benefits to the Managers and Subadvisors and their affiliates resulting from their relationship with the Funds (“fall-out benefits”). The Independent Directors reviewed comparative performance and management fee and expense ratios of peer groups of funds selected by Morningstar, Inc. (“Morningstar”). The Independent Directors also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Advisory Agreements. In preparation for the November 17th meeting, the Independent Directors met on November 3, 2005, to review and discuss with independent legal counsel the information provided by Morningstar.

Based upon their review, the Independent Directors concluded that it was in the best interest of each Fund to renew each relevant Advisory Agreement and, accordingly, recommended to the full Board of each Fund the renewal of each applicable Advisory Agreement. In reaching this conclusion for each Fund, the Independent Directors did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Management Agreements

Nature, Quality and Extent of Services. In reviewing the nature, quality and extent of services provided by the Managers, the Independent Directors considered the services provided by each Manager under the Management Agreements, including administrative services. The Independent Directors considered the experience and skills of senior management responsible for fund operations, the experience and skills of the personnel performing the functions under each Management Agreement and the resources made available to such personnel, the ability of the Managers to attract and retain high-quality personnel, and the organizational depth of the Managers. The Independent Directors concluded that appropriate resources were provided under each Management Agreement. The Independent Directors also considered the delegation of day-to-day portfolio management responsibility to UBS with respect to the Guardian UBS VC Large Cap Value Fund and the Guardian UBS VC Small Cap Value Fund and to BGO with respect to the Baillie Gifford International Growth Fund and the Baillie Gifford Emerging Markets Fund and the Managers’ ability to supervise the activities of the Subadvisors. The Independent Directors concluded each Manager’s supervisory program was satisfactory. The Independent Directors also considered the compliance program established by the Managers and the level of compliance attained by the Managers. Further, the Independent Directors considered that each Manager has had a long-term relationship with the Funds and has demonstrated its past and future commitment to support the Funds. The Independent Directors concluded that a long-term relationship with a capable, conscientious adviser was in the best interest of each Fund. Based upon all relevant factors, the Independent Directors concluded that the nature, quality and extent of the services provided by the Managers to each applicable Fund were satisfactory.

12

ⁿ The Guardian VC Low Duration Bond Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and longer-term (three year, five year and ten year) periods, as applicable, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. The Independent Directors received comparative performance information prepared by Morningstar. The Independent Directors also considered whether investment results were consistent with a Fund’s investment objective(s) and policies. For most Funds, the Independent Directors concluded that investment performance met acceptable levels of investment performance. For Funds that experienced underperformance, the Independent Directors reviewed the reasons for the underperformance and the remedial measures taken by the Manager to improve performance. The Independent Directors concluded that the Managers have in place an effective process to monitor performance and that reasonable steps had been implemented to address circumstances of underperformance where appropriate. Therefore, the Independent Directors concluded that it was in the best interests of the Funds to renew the Management Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s management fees and net expense ratios. The Independent Directors received information, based on data supplied by Morningstar, comparing each Fund’s management fee rates and total net expense ratio to advisory fees and total net expense ratios of the mutual funds in its peer group (as selected by Morningstar). The Independent Directors also received and considered information on fee waivers and/or reimbursements for each Fund compared to those of its peer group. The Independent Directors noted that a number of the Funds have received fee waivers for many years and that such fee waivers remained current through the time of the review process.

The Independent Directors also compared each Fund’s management fee rates to fees charged by the Manager for comparable mutual funds. For each Fund, the Independent Directors reviewed the fees charged by other advisors for mutual funds in the Fund’s peer group. GIS provided information on the advisory fees it charges its two institutional accounts and noted the information was not comparable with the Funds because the investment objectives and management style of the institutional accounts were very different than those of the Funds. GBG has no clients other than the Funds.

On the basis of all information provided, the Independent Directors concluded that the management fee schedules for each Fund were reasonable and appropriate in light of the nature, quality and extent of services provided by the Manager.

Profitability. The Independent Directors reviewed detailed information regarding revenues received by each Manager under each Management Agreement, including identification of the estimated direct and indirect costs of the Managers of providing those services to each Fund that are covered under the Management Agreements. The Independent Directors also received information regarding the enterprise-wide profitability of the Managers with respect to all fund services in totality.

For all Funds, based upon the profitability percentage provided, the Independent Directors concluded that the profitability to the applicable Manager from the management of each Fund was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the management of each Fund and whether the Funds benefit from any such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund and the Guardian Cash Fund had management fee schedules that each contained one breakpoint. The Independent Directors also considered whether the effective management fee rate for each Fund under the Management Agreement is reasonable in relation to the asset size of such Fund. The Independent Directors noted GIS’s representation that it did not anticipate that the Funds would experience any significant economies in the near future, given their asset size. The Independent Directors concluded that, in light of the Funds’ current asset levels, the fee schedule for each Fund reflects an appropriate level of sharing of any economies of scale.

Other Benefits to Manager. The Independent Directors also considered the character and amount of other incidental benefits received by the Managers and their affiliates as a result of their relationship with the Funds. The Independent Directors noted the Managers’ representation that each has the ability to obtain proprietary research as a result of the Funds’ brokerage business that may be used for the benefit of the Funds and other clients of the Managers. The Independent Directors concluded that management fees for each Fund were reasonable in light of these fall-out benefits.

Specific Fund Findings

The Guardian VC Low Duration Bond Fund

In determining to recommend renewal of the Management Agreement, the Independent Directors noted the underperformance of the Fund relative to its peer group during the one-year period reviewed, but concluded that a longer than one-year period was

13

ⁿ The Guardian VC Low Duration Bond Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

needed to assess performance. Given their conclusion that the management fee rate was within an acceptable range of the peer group’s median, the Independent Directors determined that it was appropriate to renew the Management Agreement.

Overall Conclusions

Based upon all of the information considered and the conclusions reached, the Independent Directors determined that the terms of each Advisory Agreement continue to be fair and reasonable and that the continuation of each Advisory Agreement is in the best interests of each Fund.

14

ⁿ The Guardian VC Low Duration Bond Fund

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, is available free of charge upon request by logging on to www.guardianinvestor.com or the Securities and Exchange Commission’s (SEC) website at www.sec.gov.

Form N-Q

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each year on the Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov, and 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.

Code of Ethics

The Fund has adopted a code of ethics for its Principal Executive Officer and Principal Financial Officers (the “Code”). The purpose of the Code is to promote, among other things: honest and ethical conduct, including the handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in reports and documents filed with the SEC; and compliance with applicable laws and regulations. A copy of the Code has been filed with the SEC on Form N-CSR and can be obtained on the SEC’s website at www.sec.gov.

Copies for all of the above can be obtained free of charge by calling 1-800-221-3253 or by writing to Guardian Investor Services LLC at 7 Hanover Square, New York, New York 10004.

15

ⁿ  The Guardian UBS VC Large Cap Value Fund Semiannual Report
To Contractowners

John Leonard,

Lead Portfolio Manager

Objective:

Seeks to maximize total return, consisting of capital appreciation and current income

Portfolio:

At least 80% in equity securities issued by companies with a large market capitalization at the time of purchase

Inception Date:

February 3, 2003

Net Assets at

June 30, 2006:

$57,511,171

Top Ten Holdings  (As of 6/30/2006)

Company	Percentage of Total Net Assets
Citigroup, Inc.	5.69	%
Wells Fargo & Co.	4.43	%
Marathon Oil Corp.	4.20	%
Morgan Stanley	4.04	%
Exxon Mobil Corp.	3.58	%
J.P. Morgan Chase & Co.	3.38	%
Wyeth	2.77	%
American Int’l. Group, Inc.	2.74	%
Exelon Corp.	2.48	%
Sprint Nextel Corp.	2.37	%

Sector Weightings vs. Index  (As of 6/30/2006)

Average Annual Total Returns  (For periods ended 6/30/2006)

	Year to Date	1 Yr	5 Yrs	10 Yrs	Since Inception 2/3/2003
The Guardian UBS VC Large Cap Value Fund	4.30%	12.04%	—	—	17.20%
Russell 1000 Value Index	6.56%	12.10%	—	—	18.06%

About information in this report:

• All performance data quoted is historical and the results represent past performance and neither guarantee nor predict future investment results. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at (800) 221-3253 or visit our website at www.guardianinvestor.com. Current performance may be higher or lower than the performance quoted here. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.

• It is important to consider the Fund’s investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested.

• The Russell 1000 Value Index offers investors access to the large-cap value segment of the U.S. equity universe. The Russell 1000 Value is constructed to provide a comprehensive and unbiased barometer of the large-cap value market. Based on ongoing empirical research of investment manager behavior, the methodology used to determine growth probability approximates the aggregate large-cap value manager’s opportunity set. Index returns are provided for comparative purposes. Please note that the index is unmanaged and not available for direct investment and its returns do not reflect the fees and expenses that have been deducted from the Fund.

• Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. The return figures shown do not reflect the deduction of taxes that a contractowner may pay on distributions or redemption of units.

THE GUARDIAN UBS VC LARGE CAP VALUE FUND 1

ⁿ   The Guardian UBS VC Large Cap Value Fund Semiannual Report
To Contractowners

Fund Expenses

By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including, as applicable, management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other underlying funds.

The example is based on an investment of $1,000 invested on January 1, 2006 and held for six months ended June 30, 2006.

Actual Expenses

The first line in the table provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value January 1, 2006		Ending Account Value June 30, 2006		Expenses Paid During the Period*		Annualized Expense Ratio
Actual	$	1,000	$	1,043.00	$	5.07	1.00%
Hypothetical (5% return before expenses)	$	1,000	$	1,019.84	$	5.01	1.00%

* Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the Fund’s most recent fiscal half-year).

2 THE GUARDIAN UBS VC LARGE CAP VALUE FUND

ⁿ The Guardian UBS VC Large Cap Value Fund

Schedule of Investments

June 30, 2006 (Unaudited)

Shares		Value
Common Stocks — 96.5%
Aerospace and Defense — 2.6%
10,400	Lockheed Martin Corp.	$	746,096
11,200	Northrop Grumman Corp.		717,472
			1,463,568
Air Freight and Logistics — 1.9%
9,100	FedEx Corp.		1,063,426
Auto Components — 3.2%
8,200	BorgWarner, Inc.		533,820
16,000	Johnson Controls, Inc.		1,315,520
			1,849,340
Automobiles — 0.8%
8,300	Harley-Davidson, Inc.		455,587
Beverages — 1.2%
14,900	Anheuser-Busch Cos., Inc.		679,291
Biotechnology — 0.7%
6,700	Cephalon, Inc.*		402,670
Building Products — 1.9%
36,100	Masco Corp.		1,070,004
Capital Markets — 7.5%
37,000	Mellon Financial Corp.		1,273,910
36,800	Morgan Stanley		2,326,128
13,300	Northern Trust Corp.		735,490
			4,335,528
Commercial Banks — 8.8%
36,700	Fifth Third Bancorp		1,356,065
16,700	PNC Financial Svcs. Group		1,171,839
38,000	Wells Fargo & Co.		2,549,040
			5,076,944
Commercial Services and Supplies — 0.8%
29,100	Cendant Corp.		474,039
Diversified Financial Services — 10.8%
20,358	Bank of America Corp.		979,220
67,800	Citigroup, Inc.		3,270,672
46,300	J.P. Morgan Chase & Co.		1,944,600
			6,194,492
Diversified Telecommunication Services — 2.2%
40,300	AT & T, Inc.		1,123,967
3,408	Embarq Corp.*		139,694
			1,263,661
Electric Utilities — 6.1%
27,600	American Electric Power, Inc.		945,300
25,100	Exelon Corp.		1,426,433
28,600	Northeast Utilities		591,162
22,000	Pepco Hldgs., Inc.		518,760
			3,481,655
Energy Equipment and Services — 2.5%
5,700	Baker Hughes, Inc.		466,545
5,800	ENSCO Int’l., Inc.		266,916
12,500	GlobalSantaFe Corp.		721,875
			1,455,336
Food and Staples Retailing — 3.4%
20,000	Costco Wholesale Corp.		1,142,600
37,200	Kroger Co.		813,192
			1,955,792

Shares		Value
Health Care Providers and Services — 3.6%
5,100	Caremark Rx, Inc.	$	254,337
14,100	Medco Health Solutions, Inc.*		807,648
23,000	UnitedHealth Group, Inc.		1,029,940
			2,091,925
Information Technology Services — 1.1%
22,200	Accenture Ltd. – Class A		628,704
Insurance — 5.8%
14,700	Allstate Corp.		804,531
26,700	American Int’l. Group, Inc.		1,576,635
11,500	Hartford Financial Svcs. Group, Inc.		972,900
			3,354,066
Internet and Catalog Retail — 0.4%
16,100	Expedia, Inc.*		241,017
Machinery — 2.2%
26,400	Illinois Tool Works, Inc.		1,254,000
Media — 4.9%
34,300	News Corp. – Class A		657,874
13,100	Omnicom Group, Inc.		1,167,079
48,400	The DIRECTV Group, Inc.*		798,600
6,100	Univision Comm., Inc. – Class A*		204,350
			2,827,903
Multi–Utilities — 1.8%
21,500	NiSource, Inc.		469,560
12,600	Sempra Energy		573,048
			1,042,608
Oil, Gas and Consumable Fuels — 7.8%
33,600	Exxon Mobil Corp.		2,061,360
29,000	Marathon Oil Corp.		2,415,700
			4,477,060
Pharmaceuticals — 4.8%
26,100	Bristol-Myers Squibb Corp.		674,946
8,400	Johnson & Johnson		503,328
35,900	Wyeth		1,594,319
			2,772,593
Road and Rail — 2.2%
16,000	Burlington Northern Santa Fe		1,268,000
Software — 3.4%
50,400	Microsoft Corp.		1,174,320
50,500	Symantec Corp.*		784,770
			1,959,090
Thrifts and Mortgage Finance — 1.7%
17,500	Federal Home Loan Mortgage Corp.		997,675
Wireless Telecommunication Services — 2.4%
68,174	Sprint Nextel Corp.		1,362,798
	Total Common Stocks (Cost $41,568,307)		55,498,772
Exchange-Traded Fund — 2.4%
10,600	S&P Depositary Receipts Trust Series I exp. 12/31/2099 (Cost $1,314,780)	$	1,349,168

See notes to financial statements.

3

ⁿ The Guardian UBS VC Large Cap Value Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Principal Amount			Value
	Repurchase Agreement — 1.1%
$	636,000	State Street Bank and Trust Co. repurchase agreement, dated 6/30/2006, maturity value $636,262 at 4.95%, due 7/3/2006 (1)     (Cost $636,000)	$	636,000
	Total Investments — 100.0% (Cost $43,519,087)			57,483,940
	Cash, Receivables, and Other Assets Less Liabilities — 0.0%			27,231
	Net Assets — 100%		$	57,511,171

* Non-income producing security.

(1) The repurchase agreement is fully collateralized by $715,000 in U.S. Government Agency, 5.50%, due 7/14/2028, with a value of $653,042.

See notes to financial statements.

4

ⁿ The Guardian UBS VC Large Cap Value Fund

Statement of Assets and Liabilities

June 30, 2006 (Unaudited)

ASSETS
Investments, at market (cost $43,519,087)	$	57,483,940
Cash		61
Receivable for fund shares sold		118,036
Dividends receivable		53,569
Receivable for securities sold		34,195
Interest receivable		87
Other assets		1,076
Total Assets		57,690,964
LIABILITIES
Payable for fund shares redeemed		70,517
Payable for securities purchased		53,577
Accrued expenses		17,275
Due to GIS		38,424
Total Liabilities		179,793
Net Assets	$	57,511,171
COMPONENTS OF NET ASSETS
Capital stock, at par	$	4,522
Additional paid-in capital		42,569,397
Undistributed net investment income		41,611
Accumulated net realized gain on investments		930,788
Net unrealized appreciation of investments		13,964,853
Net Assets	$	57,511,171
Shares Outstanding — $0.001 Par Value		4,522,415
Net Asset Value Per Share		$12.72

Statement of Operations

Six Months Ended

June 30, 2006 (Unaudited)

INVESTMENT INCOME
Dividends	$	611,811
Interest		16,385
Total Income		628,196
Expenses:
Investment advisory fees — Note B		241,514
Custodian fees		24,806
Audit fees		12,307
Printing expense		5,298
Directors’ fees — Note B		3,816
Insurance expense		2,113
Legal fees		1,428
Loan commitment fees — Note F		559
Registration fees		36
Other		226
Total Expenses		292,103
Net Investment Income		336,093
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments — Note A		1,005,182
Net change in unrealized appreciation of investments — Note C		1,189,227
Net Realized and Unrealized Gain on Investments		2,194,409
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	2,530,502

See notes to financial statements.

5

ⁿ The Guardian UBS VC Large Cap Value Fund

Statements of Changes in Net Assets

	Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income	$	336,093		$	722,784
Net realized gain on investments		1,005,182			7,969,413
Net change in unrealized appreciation of investments		1,189,227			(3,610,213	)
Net Increase in Net Assets Resulting from Operations		2,530,502			5,081,984
Dividends and Distributions to Shareholders from:
Net investment income		(297,996	)		(747,978	)
Net realized gain on investments		(917,319	)		(7,973,280	)
Total Dividends and Distributions to Shareholders		(1,215,315	)		(8,721,258	)
From Capital Share Transactions:
Net decrease in net assets from capital share transactions — Note E		(1,908,248	)		(12,151,920	)
Net Decrease in Net Assets		(593,061	)		(15,791,194	)
NET ASSETS:
Beginning of period		58,104,232			73,895,426
End of period*	$	57,511,171		$	58,104,232
*  Includes undistributed net investment income of:	$	41,611		$	3,514

See notes to financial statements.

6

ⁿ The Guardian UBS VC Large Cap Value Fund

Financial Highlights

Selected data for a share of capital stock outstanding throughout the periods indicated:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, (Audited)				Period from February 3, 2003† to December 31, 2003 (Audited)
			2005		2004
Net asset value, beginning of period	$12.47		$13.35		$12.82		$10.00
Income from investment operations:
Net investment income	0.08		0.19		0.14		0.14
Net realized and unrealized gain on investments	0.45		1.09		1.57		3.06
Net increase from investment operations	0.53		1.28		1.71		3.20
Dividends and distributions to shareholders from:
Net investment income	(0.07	)	(0.19	)	(0.14	)	(0.14	)
Net realized gain on investments	(0.21	)	(1.97	)	(1.04	)	(0.24	)
Total dividends and distributions	(0.28	)	(2.16	)	(1.18	)	(0.38	)
Net asset value, end of period	$12.72		$12.47		$13.35		$12.82
Total return*	4.30	%(a)	9.63	%	13.74	%	32.07	%(a)
Ratios/supplemental data:
Net assets, end of period (000’s omitted)	$57,511		$58,104		$73,895		$58,493
Ratio of expenses to average net assets	1.00	%(b)	1.02	%	0.97	%	1.08	%(b)
Ratio of net investment income to average net assets	1.16	%(b)	1.21	%	1.12	%	1.27	%(b)
Portfolio turnover rate	13	%	40	%	41	%	48	%

† Commencement of operations.

* Total returns do not reflect the effects of charges deducted pursuant to the terms of GIAC’s variable contracts.

Inclusion of such charges would reduce the total returns for all periods shown.

(a) Not annualized.

(b) Annualized.

See notes to financial statements.

7

ⁿ The Guardian UBS VC Large Cap Value Fund

Notes to Financial Statements

June 30, 2006 (Unaudited)

Note A. Organization and Accounting Policies

The Guardian UBS VC Large Cap Value Fund (the Fund or GLCVF) is a series of The Guardian Variable Contract Funds, Inc. (GVCF). GVCF is incorporated in the state of Maryland and is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The financial statements for the other remaining series of GVCF are presented in separate reports.

Shares of GLCVF are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies of the Fund are as follows:

Investments

Securities listed on national securities exchanges are valued at the last sale price on such exchanges, or if no sale occurred, at the mean of the closing bid and asked prices. Securities that are traded on the NASDAQ National Securities Market are valued at the NASDAQ Official Closing Price.

Pursuant to valuation procedures approved by the Board of Directors, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgment of the Service, are valued at the bid price. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

Other securities, including securities for which market quotations are not readily available (such as restricted securities, illiquid securities and foreign securities subject to a “significant event”) are valued at fair value as determined in good faith by or under the direction of GVCF’s Board of Directors. A “significant event” is an event that will affect the value of a portfolio security that occurs after the close of trading in the security’s primary trading market or exchange but before the Fund’s NAV is calculated.

Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets.

Futures contracts are valued at the settlement prices established by the boards of trade or exchanges on which they are traded.

Repurchase agreements are carried at cost which approximates market value (see Note D).

Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/discount, is accrued daily. Dividend income is recorded on the ex-dividend date.

Foreign Currency Translation

GLCVF is permitted to buy international securities that are not U.S. dollar denominated. GLCVF’s books and records are maintained in U.S. dollars as follows:

(1)  The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange.

(2)  Security purchases and sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.

The resulting gains and losses are included in the Statement of Operations as follows:

Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses, which result from changes in foreign exchange rates between the date on which GLCVF earns dividends and interest or pays foreign withholding taxes or other expenses and the date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized gains or losses

8

ⁿ The Guardian UBS VC Large Cap Value Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

on foreign currency related transactions. Realized foreign exchange gains and losses which result from changes in foreign exchange rates between the trade and settlement dates on security and currency transactions are also included in net realized gains and losses on foreign currency related transactions. Net currency gains and losses from valuing other assets and liabilities denominated in foreign currency at the period end exchange rate are reflected in net change in unrealized appreciation or depreciation from translation of other assets and liabilities denominated in foreign currencies.

Forward Foreign Currency Contracts

GLCVF may enter into forward foreign currency contracts in connection with planned purchases or sales of securities, or to hedge against changes in currency exchange rates affecting the values of its investments that are denominated in a particular currency. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Fluctuations in the value of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by GLCVF. When forward contracts are closed, GLCVF will record realized gains or losses equal to the difference between the values of such forward contracts at the time each was opened and the values at the time each was closed. Such amounts are recorded in net realized gains or losses on foreign currency related transactions. GLCVF will not enter into a forward foreign currency contract if such contract would obligate it to deliver an amount of foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency.

Futures Contracts

GLCVF may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, GLCVF is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by GLCVF each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by GLCVF. The daily changes in the variation margin are recognized as unrealized gains or losses by GLCVF. GLCVF’s investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GLCVF may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates, securities prices or prices of futures contracts move unexpectedly, GLCVF may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.

Dividend Distributions

Dividends from net investment income are declared and paid semi-annually for GLCVF. Net realized short-term and long-term capital gains for GLCVF will be distributed at least annually. All such dividends and distributions are credited in the form of additional shares of GLCVF at the net asset value on the ex-dividend date.

All dividends and distributions are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations. Differences between the recognition of income on an income tax basis and recognition of income based on GAAP may cause temporary overdistributions of net realized gains and net investment income on a GAAP basis.

Taxes

GLCVF has qualified and intends to remain qualified to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code (Code), and as such will not be subject to federal income tax on taxable income (including any realized capital gains) which is distributed in accordance with the provisions of the Code. Therefore, no federal income tax provision is required.

Reclassification of Capital Accounts

The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital gains, and the recharacterization of foreign exchange gains or losses to either ordinary income or realized capital gains for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications would have no effect on net assets, results of operations, or net asset value per share of the Fund.

9

ⁿ The Guardian UBS VC Large Cap Value Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

Note B. Investment Advisory Agreements and Payments to or from Related Parties

The Fund has an investment advisory agreement with Guardian Investor Services LLC (GIS), a wholly-owned subsidiary of GIAC. Fees for investment advisory are at an annual rate of 0.83% of the average daily net assets of the Fund. GIS has entered into a sub-investment advisory agreement with UBS Global Asset Management (Americas), Inc. (UBS Global AM). UBS Global AM is responsible for the day-to-day management of GLCVF. GIS continually monitors and evaluates the performance of UBS Global AM. As compensation for its services, GIS pays UBS Global AM at an annual rate of 0.43% of GLCVF’s average daily net assets. Payment of sub-investment advisory fees does not represent a separate or additional expense to GLCVF.

The Guardian Fund Complex pays directors who are not “interested persons” (as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Board committee members also receive a fee of $2,000 per committee meeting, which also is allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain directors who are interested persons. Certain officers and directors of the Fund are affiliated with GIS.

Note C. Investment Transactions

Purchases and proceeds from sales of securities (excluding short-term securities) amounted to $7,521,416 and $10,218,336, respectively, during the six months ended June 30, 2006.

The cost of investments owned at June 30, 2006 for federal income tax purposes was substantially the same as the cost for financial reporting purposes. The gross unrealized appreciation and depreciation of investments at June 30, 2006 aggregated $14,557,981 and $593,128, respectively, resulting in net unrealized appreciation of $13,964,853.

Note D. Repurchase Agreements

The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, GLCVF will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, GLCVF maintains the right to sell the collateral and may claim any resulting loss against the seller.

Note E. Transactions in Capital Stock

There are 100,000,000 shares of $0.001 par value capital stock authorized for GLCVF. Transactions in capital stock were as follows:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
	Shares				Amount
Shares sold	308,972		603,899		$	3,982,020		$	8,086,451
Shares issued in reinvestment of dividends and distributions	99,209		689,327			1,215,314			8,721,258
Shares repurchased	(543,494	)	(2,172,377	)		(7,105,582	)		(28,959,629	)
Net decrease	(135,313	)	(879,151	)	$	(1,908,248	)	$	(12,151,920	)

Note F. Line of Credit

A $100,000,000 line of credit available to GLCVF and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus 0.50% calculated on a 360 day basis per annum. For the six months ended June 30, 2006, none of the funds borrowed against this line of credit.

The funds are obligated to pay State Street Bank and Trust Company and Bank of Montreal a commitment fee computed at a rate of 0.08% per annum on the average daily unused portion of the revolving credit.

10

ⁿ Guardian UBS VC Large Cap Value Fund

Board Approval of Investment Management Agreements (Unaudited)

The Boards of Directors of The Guardian Variable Contract Funds, Inc. (“GVCF”), GIAC Funds, Inc. (“GIAC”), The Guardian Bond Fund, Inc. (“GBF” and a “Fund”) and The Guardian Cash Fund, Inc. (“GCF” and a “Fund”) (together, the series of GVCF and GIAC, and GBF and GCF are referred to as the “Funds,”) approved the renewal of the management agreement for each Fund and, as applicable, the subadvisory agreement for each Fund on November 17, 2005. As a part of the renewal process, the Boards of Directors of GVCF, GIAC, GBF and GCF met independently of Fund management and of the interested Board Members to consider the renewal of: (1) the management agreement (“Management Agreement”) between each of the Funds and Guardian Investor Services LLC (“GIS”) or as applicable, Guardian Baillie Gifford Limited (“GBG” and together with GIS, each referred to as a “Manager”); (2) as applicable, the subadvisory agreements (each a “Subadvisory Agreement”) between GBG and Baillie Gifford Overseas Limited (“BGO”) and the subadvisory agreements between GIS and UBS Global Asset Management (Americas) Inc. (“UBS” and together with BGO, each referred to as a “Subadvisor”). (The Management Agreements and the Subadvisory Agreements are together referred to as the “Advisory Agreements.”) As part of the review process, the Independent Directors were represented by independent legal counsel. The Independent Directors reviewed comprehensive materials received from the Managers, Subadvisors and independent counsel in connection with contract review. The Independent Directors noted that each Board also received regular information throughout the year regarding performance and operating results of each Fund and that in evaluating the Advisory Agreements, they were taking into account their accumulated experience as Board members in working with the Managers on matters relating to the Funds.

In preparation for the review process, the Independent Directors met with independent legal counsel and discussed the type and nature of information to be provided and sent a formal request for information to Fund management. The Managers and Subadvisors provided extensive information to all Board members in response to the request. Among other information, the Independent Directors reviewed materials to assess the services provided by each Manager and Subadvisor, and, as applicable, information comparing the performance, advisory fees and expense ratios of each Fund to other mutual funds, information about the profitability from the Advisory Agreements to the Managers and to the Subadvisors, information about economies of scale and information about the other benefits to the Managers and Subadvisors and their affiliates resulting from their relationship with the Funds (“fall-out benefits”). The Independent Directors reviewed comparative performance and management fee and expense ratios of peer groups of funds selected by Morningstar, Inc. (“Morningstar”). The Independent Directors also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Advisory Agreements. In preparation for the November 17th meeting, the Independent Directors met on November 3, 2005, to review and discuss with independent legal counsel the information provided by Morningstar.

Based upon their review, the Independent Directors concluded that it was in the best interest of each Fund to renew each relevant Advisory Agreement and, accordingly, recommended to the full Board of each Fund the renewal of each applicable Advisory Agreement. In reaching this conclusion for each Fund, the Independent Directors did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Management Agreements

Nature, Quality and Extent of Services. In reviewing the nature, quality and extent of services provided by the Managers, the Independent Directors considered the services provided by each Manager under the Management Agreements, including administrative services. The Independent Directors considered the experience and skills of senior management responsible for fund operations, the experience and skills of the personnel performing the functions under each Management Agreement and the resources made available to such personnel, the ability of the Managers to attract and retain high-quality personnel, and the organizational depth of the Managers. The Independent Directors concluded that appropriate resources were provided under each Management Agreement. The Independent Directors also considered the delegation of day-to-day portfolio management responsibility to UBS with respect to the Guardian UBS VC Large Cap Value Fund and the Guardian UBS VC Small Cap Value Fund and to BGO with respect to the Baillie Gifford International Growth Fund and the Baillie Gifford Emerging Markets Fund and the Managers’ ability to supervise the activities of the Subadvisors. The Independent Directors concluded each Manager’s supervisory program was satisfactory. The Independent Directors also considered the compliance program established by the Managers and the level of compliance attained by the Managers. Further, the Independent Directors considered that each Manager has had a long-term relationship with the Funds and has demonstrated its past and future commitment to support the Funds. The Independent Directors concluded that a long-term relationship with a capable, conscientious adviser was in the best interest of each Fund. Based upon all relevant factors, the Independent Directors concluded that the nature, quality and extent of the services provided by the Managers to each applicable Fund were satisfactory.

11

ⁿ Guardian UBS VC Large Cap Value Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and longer-term (three year, five year and ten year) periods, as applicable, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. The Independent Directors received comparative performance information prepared by Morningstar. The Independent Directors also considered whether investment results were consistent with a Fund’s investment objective(s) and policies. For most Funds, the Independent Directors concluded that investment performance met acceptable levels of investment performance. For Funds that experienced underperformance, the Independent Directors reviewed the reasons for the underperformance and the remedial measures taken by the Manager to improve performance. The Independent Directors concluded that the Managers have in place an effective process to monitor performance and that reasonable steps had been implemented to address circumstances of underperformance where appropriate. Therefore, the Independent Directors concluded that it was in the best interests of the Funds to renew the Management Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s management fees and net expense ratios. The Independent Directors received information, based on data supplied by Morningstar, comparing each Fund’s management fee rates and total net expense ratio to advisory fees and total net expense ratios of the mutual funds in its peer group (as selected by Morningstar). The Independent Directors also received and considered information on fee waivers and/or reimbursements for each Fund compared to those of its peer group. The Independent Directors noted that a number of the Funds have received fee waivers for many years and that such fee waivers remained current through the time of the review process.

The Independent Directors also compared each Fund’s management fee rates to fees charged by the Manager for comparable mutual funds. For each Fund, the Independent Directors reviewed the fees charged by other advisors for mutual funds in the Fund’s peer group. GIS provided information on the advisory fees it charges its two institutional accounts and noted the information was not comparable with the Funds because the investment objectives and management style of the institutional accounts were very different than those of the Funds. GBG has no clients other than the Funds.

On the basis of all information provided, the Independent Directors concluded that the management fee schedules for each Fund were reasonable and appropriate in light of the nature, quality and extent of services provided by the Manager.

Profitability. The Independent Directors reviewed detailed information regarding revenues received by each Manager under each Management Agreement, including identification of the estimated direct and indirect costs of the Managers of providing those services to each Fund that are covered under the Management Agreements. The Independent Directors also received information regarding the enterprise-wide profitability of the Managers with respect to all fund services in totality.

For all Funds, based upon the profitability percentage provided, the Independent Directors concluded that the profitability to the applicable Manager from the management of each Fund was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the management of each Fund and whether the Funds benefit from any such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund and the Guardian Cash Fund had management fee schedules that each contained one breakpoint. The Independent Directors also considered whether the effective management fee rate for each Fund under the Management Agreement is reasonable in relation to the asset size of such Fund. The Independent Directors noted GIS’s representation that it did not anticipate that the Funds would experience any significant economies in the near future, given their asset size. The Independent Directors concluded that, in light of the Funds’ current asset levels, the fee schedule for each Fund reflects an appropriate level of sharing of any economies of scale.

Other Benefits to Manager. The Independent Directors also considered the character and amount of other incidental benefits received by the Managers and their affiliates as a result of their relationship with the Funds. The Independent Directors noted the Managers’ representation that each has the ability to obtain proprietary research as a result of the Funds’ brokerage business that may be used for the benefit of the Funds and other clients of the Managers. The Independent Directors concluded that management fees for each Fund were reasonable in light of these fall-out benefits.

Subadvisory Agreements

Nature, Quality and Extent of Services. The Independent Directors considered the nature, extent and quality of services provided under each Subadvisory Agreement. The Independent Directors considered the reputation, qualifications and background

12

ⁿ Guardian UBS VC Large Cap Value Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

of the Subadvisors, the experience and skills of investment personnel responsible for the day-to-day management of each Fund, and the resources made available to such personnel. The Independent Directors also considered the Subadvisors’ compliance with investment policies and general legal compliance. The Independent Directors concluded that each Subadvisor was providing satisfactory services and recommended that the Subadvisory Agreement for each applicable Fund be continued.

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and, where applicable, longer-term periods, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. Based upon all relevant factors, the Independent Directors concluded that the investment performance of each subadvised Fund either met acceptable levels of investment performance or, in situations where there was underperformance, the underperformance was not over a long enough period of time to provide a meaningful measure of performance. Therefore, the Independent Directors concluded, based upon each Fund’s particular circumstances, that it was in the best interests of each Fund to renew the Subadvisory Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s subadvisory fees and how they related to the overall management fee structure of each Fund. The Independent Directors evaluated the competitiveness of the subadvisory fees based upon data supplied by Fund management, which showed each Subadvisor’s standard fee schedule for similarly managed institutional accounts. Based on the information provided by Fund management, the Independent Directors noted that the Subadvisors charged comparable or lower fees for the Funds than their standard fee schedules. The Independent Directors also considered that the Managers compensate the Subadvisors from their own management fees.

Based upon all of the above, the Independent Directors determined that the subadvisory fees for each Fund were reasonable.

Profitability. The Independent Directors received general information with respect to each Subadvisor’s profitability. The Independent Directors noted that the Managers compensate the Subadvisors from their own management fees and that the fees were competitive based on the information provided by the Subadvisors and the Managers. In addition, the Independent Directors noted that the Subadvisory Agreements with UBS were negotiated at arm’s length between GIS and UBS. The Independent Directors also noted the amount of revenue generated by each Subadvisor from its subadvisory fees. The Independent Directors reviewed data on the estimated range of profitability to UBS for the Funds it subadvised and concluded that its profitability was not unreasonable. The Independent Directors took into account the level of revenues and the profitability to the parent entity of BGO as a result of BGO’s subadvisory relationship with the Funds it subadvised and concluded that profitability was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the subadvisory services provided to each applicable Fund and whether the subadvisory fees reflect such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund contained one breakpoint in its subadvisory fee schedule. The Independent Directors also considered whether the effective subadvisory fee rate for each Fund under the Subadvisory Agreement is reasonable in relation to the asset size of the Fund. The Independent Directors concluded that the fee schedule for each Fund reflects an appropriate recognition of any economies of scale.

Other Benefits to Subadvisors. The Independent Directors also considered the character and amount of other incidental benefits received by each Subadvisor, including any benefit derived from their affiliation with the Funds. The Independent Directors considered that UBS may use an affiliate to execute portfolio transactions for the Funds it subadvises, subject to Rule 17e-1 procedures that have been approved by the Board. The Independent Directors also considered each Subadvisor’s soft dollar practices. The Independent Directors concluded that the fees charged under each Subadvisory Agreement were reasonable in light of these fall-out benefits.

Specific Fund Findings

The Guardian UBS VC Large Cap Value Fund

In determining to recommend renewal of the Fund’s Advisory Agreements, the Independent Directors noted the favorable relative investment performance, with performance above the median of its peer group. In addition, although the Fund’s management fee rate was above the median of the Fund’s peer group, the Independent Directors concluded that the management fee was within an acceptable range, particularly in light of the desire to retain an experienced value-style subadvisor and the Fund’s recent performance.

13

ⁿ Guardian UBS VC Large Cap Value Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Overall Conclusions

Based upon all of the information considered and the conclusions reached, the Independent Directors determined that the terms of each Advisory Agreement continue to be fair and reasonable and that the continuation of each Advisory Agreement is in the best interests of each Fund.

14

ⁿ The Guardian UBS VC Large Cap Value Fund

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, is available free of charge upon request by logging on to www.guardianinvestor.com or the Securities and Exchange Commission’s (SEC) website at www.sec.gov.

Form N-Q

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each year on the Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov, and 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.

Code of Ethics

The Fund has adopted a code of ethics for its Principal Executive Officer and Principal Financial Officers (the “Code”). The purpose of the Code is to promote, among other things: honest and ethical conduct, including the handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in reports and documents filed with the SEC; and compliance with applicable laws and regulations. A copy of the Code has been filed with the SEC on Form N-CSR and can be obtained on the SEC’s website at www.sec.gov.

Copies for all of the above can be obtained free of charge by calling 1-800-221-3253 or by writing to Guardian Investor Services LLC at 7 Hanover Square, New York, New York 10004.

15

ⁿ  The Guardian UBS VC Small Cap Value Fund Semiannual Report
To Contractowners

Wilfred Talbot,

Lead Portfolio Manager

Objective:

Seeks to maximize total return, consisting of capital appreciation and current income

Portfolio:

At least 80% in equity securities issued by companies with a small market capitalization at the time of purchase

Inception Date:

February 3, 2003

Net Assets at

June 30, 2006:

$20,669,723

Top Ten Holdings  (As of 6/30/2006)

Company	Percentage of Total Net Assets
Apollo Investment Corp.	2.43%
LaSalle Hotel Pptys.	2.13%
Nautilus, Inc.	1.99%
Colonial BancGroup, Inc.	1.94%
National Financial Partners Corp.	1.93%
Triumph Group, Inc.	1.93%
Jackson Hewitt Tax Svc., Inc.	1.93%
KMG America Corp.	1.84%
Equitable Resources, Inc.	1.82%
Boston Private Financial Hldgs., Inc.	1.77%

Sector Weightings vs. Index  (As of 6/30/2006)

Average Annual Total Returns  (For periods ended 6/30/2006)

	Year to Date	1 Yr	5 Yrs	10 Yrs	Since Inception 2/3/2003
The Guardian UBS VC Small Cap Value Fund	1.86%	6.97%	—	—	16.92%
Russell 2000 Value Index	10.44%	14.61%	—	—	24.88%

About information in this report:

• All performance data quoted is historical and the results represent past performance and neither guarantee nor predict future investment results. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at (800) 221-3253 or visit our website at www.guardianinvestor.com. Current performance may be higher or lower than the performance quoted here. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost.

• It is important to consider the Fund’s investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested. Small-cap investing entails special risks, as small-cap stocks have tended to be more volatile and to drop more in down markets than large-cap stocks. This may happen because small companies may be limited in terms of product lines, financial resources and management.

• The Russell 2000 Value Index offers investors access to the small-cap value segment of the U.S. equity universe. The Russell 2000 Value is constructed to provide a comprehensive and unbiased barometer of the small-cap value market. Based on ongoing empirical research of investment manager behavior, the methodology used to determine value probability approximates the aggregate small-cap value manager’s opportunity set. Index returns are provided for comparative purposes. Please note that the index is unmanaged and not available for direct investment and its returns do not reflect the fees and expenses that have been deducted from the Fund.

• Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. The return figures shown do not reflect the deduction of taxes that a contractowner may pay on distributions or redemption of units.

THE GUARDIAN UBS VC SMALL CAP VALUE FUND 1

ⁿ   The Guardian UBS VC Small Cap Value Fund Semiannual Report
To Contractowners

Fund Expenses

By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including, as applicable, management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other underlying funds.

The example is based on an investment of $1,000 invested on January 1, 2006 and held for six months ended June 30, 2006.

Actual Expenses

The first line in the table provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line in the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value January 1, 2006		Ending Account Value June 30, 2006		Expenses Paid During the Period*		Annualized Expense Ratio
Actual	$	1,000	$	1,018.60	$	6.96	1.39%
Hypothetical (5% return before expenses)	$	1,000	$	1,017.90	$	6.95	1.39%

* Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the Fund’s most recent fiscal half-year).

2 THE GUARDIAN UBS VC SMALL CAP VALUE FUND

ⁿ The Guardian UBS VC Small Cap Value Fund

Schedule of Investments

June 30, 2006 (Unaudited)

Shares		Value
Common Stocks — 94.8%
Aerospace and Defense — 3.8%
8,700	Esterline Technologies Corp.*	$	361,833
2,100	Hexcel Corp.*		32,991
8,300	Triumph Group, Inc.*		398,400
			793,224
Airlines — 1.5%
8,700	AMR Corp.*		221,154
11,500	Pinnacle Airlines Corp.*		80,960
			302,114
Auto Components — 1.5%
18,200	American Axle & Mfg. Hldgs., Inc.		311,402
Biotechnology — 1.3%
9,200	Alkermes, Inc.*		174,064
5,100	Keryx Biopharmaceuticals, Inc.*		72,420
1,400	Telik, Inc.*		23,100
			269,584
Building Products — 2.9%
6,900	American Woodmark Corp.		241,776
3,700	Elkcorp		102,749
10,000	Trex Co., Inc.*		258,900
			603,425
Capital Markets — 3.7%
27,200	Apollo Investment Corp.		502,656
6,300	Lazard Ltd.		254,520
			757,176
Chemicals — 1.0%
4,800	Airgas, Inc.		178,800
800	Lubrizol Corp.		31,880
			210,680
Commercial Banks — 7.2%
13,100	Boston Private Financial Hldgs., Inc.		365,490
15,600	Colonial BancGroup, Inc.		400,608
4,000	Cullen/Frost Bankers, Inc.		229,200
12,500	Placer Sierra Bancshares		289,875
7,600	South Financial Group, Inc.		200,716
			1,485,889
Commercial Services and Supplies — 4.0%
12,200	Coinstar, Inc.*		292,068
9,100	Heidrick & Struggles Int’l., Inc.*		307,944
8,300	McGrath Rentcorp		230,823
			830,835
Communications Equipment — 1.5%
5,900	Harris Corp.		244,909
3,200	Plantronics, Inc.		71,072
			315,981
Containers and Packaging — 1.0%
22,700	Caraustar Inds., Inc.*		204,300
Diversified Consumer Services — 1.9%
12,700	Jackson Hewitt Tax Svc., Inc.		398,145
Diversified Financial Services — 1.2%
22,200	Primus Guaranty Ltd.*		246,420
Electric Utilities — 1.5%
11,300	Hawaiian Electric Inds., Inc.		315,383

Shares		Value
Electrical Equipment — 1.2%
4,600	Regal-Beloit Corp.	$	203,090
4,200	Ultralife Batteries, Inc.*		42,546
			245,636
Electronic Equipment and Instruments — 1.7%
1,100	Methode Electronics, Inc.		11,561
14,400	Newport Corp.*		232,128
3,800	Park Electrochemical Corp.		97,850
			341,539
Energy Equipment and Services — 2.2%
7,600	Bristow Group, Inc.*		273,600
4,000	Oceaneering Int’l., Inc.*		183,400
			457,000
Food and Staples Retailing — 0.9%
8,200	Nash Finch Co.		174,578
Gas Utilities — 3.1%
7,200	AGL Resources, Inc.		274,464
11,200	Equitable Resources, Inc.		375,200
			649,664
Health Care Equipment and Supplies — 2.4%
7,400	Cooper Cos., Inc.		327,746
7,900	Syneron Medical Ltd.*		164,952
			492,698
Health Care Providers and Services — 5.8%
5,300	Amedisys, Inc.*		200,870
11,900	Centene Corp.*		280,007
6,900	LifePoint Hospitals, Inc.*		221,697
9,500	Molina Healthcare, Inc.*		361,475
11,400	Option Care, Inc.		136,572
			1,200,621
Hotels, Restaurants and Leisure — 1.8%
22,100	Caribou Coffee Co., Inc.*		164,866
5,600	Vail Resorts, Inc.*		207,760
			372,626
Household Durables — 5.4%
20,400	Comstock Homebuilding Cos., Inc.*		129,132
6,400	Jarden Corp.*		194,880
6,000	Lenox Group, Inc.*		42,540
3,100	Lifetime Brands, Inc.		67,177
4,200	Ryland Group, Inc.		182,994
21,300	Tempur-Pedic Int’l., Inc.*		287,763
8,000	The Yankee Candle Co., Inc.		200,080
			1,104,566
Information Technology Services — 0.9%
13,500	Bearingpoint, Inc.*		112,995
12,000	SM&A*		73,200
			186,195
Insurance — 6.0%
4,700	AmerUs Group Co.		275,185
42,800	KMG America Corp.*		379,636
9,000	National Financial Partners Corp.		398,790
12,100	Seabright Insurance Hldgs.*		194,931
			1,248,542
Internet Software and Services — 1.5%
41,100	Tumbleweed Comm. Corp.*		117,135
8,900	Websense, Inc.*		182,806
			299,941

See notes to financial statements.

3

ⁿ The Guardian UBS VC Small Cap Value Fund

Schedule of Investments (Continued)

June 30, 2006 (Unaudited)

Shares		Value
Leisure Equipment and Products — 2.0%
26,200	Nautilus, Inc.	$	411,602
Life Sciences Tools and Services — 0.4%
1,600	Dionex Corp.*		87,456
Machinery — 1.9%
5,700	Briggs & Stratton Corp.		177,327
2,700	Harsco Corp.		210,492
			387,819
Media — 2.9%
8,000	ADVO, Inc.		196,880
9,600	Carmike Cinemas, Inc.		202,368
14,900	Radio One, Inc.*		110,260
10,400	Saga Comm., Inc.*		94,224
			603,732
Multiline Retail — 0.5%
7,300	Tuesday Morning Corp.		95,995
Oil, Gas and Consumable Fuels — 2.5%
5,600	Cimarex Energy Co.		240,800
12,500	EXCO Resources, Inc.*		142,500
2,900	Foundation Coal Hldgs., Inc.		136,097
			519,397
Personal Products — 1.9%
6,800	Chattem, Inc.*		206,516
12,500	Nu Skin Enterprises, Inc.		185,625
			392,141
Pharmaceuticals — 0.6%
10,000	Connetics Corp.*		117,600
Real Estate Investment Trusts — 5.0%
27,900	Capital Lease Fdg., Inc.		318,339
9,500	LaSalle Hotel Pptys.		439,850
1,900	RAIT Investment Trust		55,480
7,900	Thornburg Mortgage, Inc.		220,173
			1,033,842
Road and Rail — 2.1%
7,125	Genesee & Wyoming, Inc.*		252,724
600	Landstar System, Inc.		28,338
3,700	YRC Worldwide, Inc.*		155,807
			436,869
Software — 0.5%
3,400	Reynolds & Reynolds Co.		104,278
Specialty Retail — 1.2%
12,400	PETCO Animal Supplies, Inc.*		253,332
Textiles, Apparel and Luxury Goods — 1.6%
5,500	Movado Group, Inc.		126,225
11,900	True Religion Apparel, Inc.*		210,630
			336,855
Thrifts and Mortgage Finance — 3.4%
2,100	Accredited Home Lenders Hldg. Co.*		100,401
7,000	IndyMac Bancorp, Inc.		320,950
22,400	Ocwen Financial Corp.*		284,704
			706,055
Trading Companies and Distributors — 0.7%
6,100	Interline Brands, Inc.*		142,618

Shares			Value
	Wireless Telecommunication Services — 0.7%
	21,900	InPhonic, Inc.*	$	137,970
		Total Common Stocks (Cost $18,094,570)		19,585,725
	Exchange-Traded Fund — 1.4%
	4,100	iShares Russell 2000 Value Index Fund (Cost $271,552)	$	296,717
Principal Amount			Value
	Repurchase Agreement — 3.2%
$	653,000	State Street Bank and Trust Co. repurchase agreement, dated 6/30/06, maturity value $653,269 at 4.95%, due 7/3/2006 (1)     (Cost $653,000)	$	653,000
	Total Investments — 99.4% (Cost $19,019,122)			20,535,442
	Cash, Receivables, and Other Assets Less Liabilities — 0.6%			134,281
	Net Assets — 100%		$	20,669,723

* Non-income producing security.

(1) The repurchase agreement is fully collateralized by $730,000 in U.S. Government Agency, 5.50%, due 7/14/2028, with a value of $666,743.

See notes to financial statements.

4

ⁿ The Guardian UBS VC Small Cap Value Fund

Statement of Assets and Liabilities

June 30, 2006 (Unaudited)

ASSETS
Investments, at market (cost $19,019,122)	$	20,535,442
Cash		163
Receivable for securities sold		613,557
Receivable for fund shares sold		95,901
Dividends receivable		12,898
Interest receivable		90
Other assets		450
Total Assets		21,258,501
LIABILITIES
Payable for securities purchased		558,088
Accrued expenses		13,967
Payable for fund shares redeemed		103
Due to GIS		16,620
Total Liabilities		588,778
Net Assets	$	20,669,723
COMPONENTS OF NET ASSETS
Capital stock, at par	$	1,616
Additional paid-in capital		17,423,571
Undistributed net investment income		5,761
Accumulated net realized gain on investments		1,722,455
Net unrealized appreciation of investments		1,516,320
Net Assets	$	20,669,723
Shares Outstanding — $0.001 Par Value		1,615,938
Net Asset Value Per Share		$12.79

Statement of Operations

Six Months Ended

June 30, 2006 (Unaudited)

INVESTMENT INCOME
Dividends	$	148,712
Interest		16,524
Total Income		165,236
Expenses:
Investment advisory fees — Note B		114,594
Custodian fees		23,862
Audit fees		12,307
Printing expense		4,986
Directors’ fees — Note B		1,548
Legal fees		904
Insurance expense		819
Loan commitment fees — Note F		216
Registration fees		13
Other		226
Total Expenses		159,475
Net Investment Income		5,761
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain on investments — Note A		1,945,934
Net change in unrealized appreciation of investments — Note C		(1,353,264	)
Net Realized and Unrealized Gain on Investments		592,670
NET INCREASE IN NET ASSETS FROM OPERATIONS	$	598,431

See notes to financial statements.

5

ⁿ The Guardian UBS VC Small Cap Value Fund

Statements of Changes in Net Assets

	Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income	$	5,761		$	24,117
Net realized gain on investments		1,945,934			2,850,638
Net change in unrealized appreciation of investments		(1,353,264	)		(1,917,299	)
Net Increase in Net Assets Resulting from Operations		598,431			957,456
Dividends and Distributions to Shareholders from:
Net investment income		—			(28,221	)
Net realized gain on investments		(683,059	)		(2,595,950	)
Total Dividends and Distributions to Shareholders		(683,059	)		(2,624,171	)
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital share transactions — Note E		(3,648,302	)		759,365
Net Decrease in Net Assets		(3,732,930	)		(907,350	)
NET ASSETS:
Beginning of period		24,402,653			25,310,003
End of period*	$	20,669,723		$	24,402,653
*  Includes undistributed net investment income of:	$	5,761		$	—

See notes to financial statements.

6

ⁿ The Guardian UBS VC Small Cap Value Fund

Financial Highlights

Selected data for a share of capital stock outstanding throughout the periods indicated:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, (Audited)				Period from February 3, 2003† to December 31, 2003 (Audited)
			2005		2004
Net asset value, beginning of period	$13.01		$13.97		$12.94		$10.00
Income from investment operations:
Net investment income	0.00	(a)	0.02		0.04		0.04
Net realized and unrealized gain on investments	0.22		0.57		2.32		3.50
Net increase from investment operations	0.22		0.59		2.36		3.54
Dividends and distributions to shareholders from:
Net investment income	—		(0.02	)	(0.04	)	(0.04	)
Net realized gain on investments	(0.44	)	(1.53	)	(1.29	)	(0.56	)
Total dividends and distributions	(0.44	)	(1.55	)	(1.33	)	(0.60	)
Net asset value, end of period	$12.79		$13.01		$13.97		$12.94
Total return*	1.86	%(b)	4.22	%	18.52	%	35.39	%(b)
Ratios/supplemental data:
Net assets, end of period (000’s omitted)	$20,670		$24,403		$25,310		$16,884
Ratio of expenses to average net assets	1.39	%(c)	1.41	%	1.36	%	1.68	%(c)
Ratio of net investment income to average net assets	0.05	%(c)	0.10	%	0.33	%	0.42	%(c)
Portfolio turnover rate	40	%	97	%	71	%	75	%

† Commencement of operations.

* Total returns do not reflect the effects of charges deducted pursuant to the terms of GIAC’s variable contracts.

Inclusion of such charges would reduce the total returns for all periods shown.

(a) Rounds to less than $0.01.

(b) Not annualized.

(c) Annualized.

See notes to financial statements.

7

ⁿ The Guardian UBS VC Small Cap Value Fund

Notes to Financial Statements

June 30, 2006 (Unaudited)

Note A. Organization and Accounting Policies

The Guardian UBS VC Small Cap Value Fund (the Fund or GSCVF) is a series of The Guardian Variable Contract Funds, Inc. (GVCF). GVCF is incorporated in the state of Maryland and is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act). The financial statements for the other remaining series of GVCF are presented in separate reports.

Shares of GSCVF are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies of the Fund are as follows:

Investments

Securities listed on national securities exchanges are valued at the last sale price on such exchanges, or if no sale occurred, at the mean of the closing bid and asked prices. Securities that are traded on the NASDAQ National Securities Market are valued at the NASDAQ Official Closing Price.

Pursuant to valuation procedures approved by the Board of Directors, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgment of the Service, are valued at the bid price. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

Other securities, including securities for which market quotations are not readily available (such as restricted securities, illiquid securities and foreign securities subject to a “significant event”) are valued at fair value as determined in good faith by or under the direction of GVCF’s Board of Directors. A “significant event” is an event that will affect the value of a portfolio security that occurs after the close of trading in the security’s primary trading market or exchange but before the Fund’s NAV is calculated.

Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets.

Futures contracts are valued at the settlement prices established by the boards of trade or exchanges on which they are traded.

Repurchase agreements are carried at cost which approximates market value (see Note D).

Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/discount, is accrued daily. Dividend income is recorded on the ex-dividend date.

Foreign Currency Translation

GSCVF is permitted to buy international securities that are not U.S. dollar denominated. GSCVF’s books and records are maintained in U.S. dollars as follows:

(1)  The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange.

(2)  Security purchases and sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions.

The resulting gains and losses are included in the Statement of Operations as follows:

Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses, which result from changes in foreign exchange rates between the date on which GSCVF earns dividends and interest or pays foreign withholding taxes or other expenses and the date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized gains or losses

8

ⁿ The Guardian UBS VC Small Cap Value Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

on foreign currency related transactions. Realized foreign exchange gains and losses which result from changes in foreign exchange rates between the trade and settlement dates on security and currency transactions are also included in net realized gains and losses on foreign currency related transactions. Net currency gains and losses from valuing other assets and liabilities denominated in foreign currency at the period end exchange rate are reflected in net change in unrealized appreciation or depreciation from translation of other assets and liabilities denominated in foreign currencies.

Forward Foreign Currency Contracts

GSCVF may enter into forward foreign currency contracts in connection with planned purchases or sales of securities, or to hedge against changes in currency exchange rates affecting the values of its investments that are denominated in a particular currency. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Fluctuations in the value of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by GSCVF. When forward contracts are closed, GSCVF will record realized gains or losses equal to the difference between the values of such forward contracts at the time each was opened and the values at the time each was closed. Such amounts are recorded in net realized gains or losses on foreign currency related transactions. GSCVF will not enter into a forward foreign currency contract if such contract would obligate it to deliver an amount of foreign currency in excess of the value of its portfolio securities or other assets denominated in that currency.

Futures Contracts

GSCVF may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, GSCVF is required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by GSCVF each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by GSCVF. The daily changes in the variation margin are recognized as unrealized gains or losses by GSCVF. GSCVF’s investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GSCVF may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates, securities prices or prices of futures contracts move unexpectedly, GSCVF may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.

Dividend Distributions

Dividends from net investment income are declared and paid semi-annually for GSCVF. Net realized short-term and long-term capital gains for GSCVF will be distributed at least annually. All such dividends and distributions are credited in the form of additional shares of GSCVF at the net asset value on the ex-dividend date.

All dividends and distributions are recorded on the ex-dividend date. Such distributions are determined in conformity with federal income tax regulations. Differences between the recognition of income on an income tax basis and recognition of income based on GAAP may cause temporary overdistributions of net realized gains and net investment income on a GAAP basis.

Taxes

GSCVF has qualified and intends to remain qualified to be taxed as a “regulated investment company” under the provisions of the U.S. Internal Revenue Code (Code), and as such will not be subject to federal income tax on taxable income (including any realized capital gains) which is distributed in accordance with the provisions of the Code. Therefore, no federal income tax provision is required.

Reclassification of Capital Accounts

The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital gains for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications would have no effect on net assets, results of operations, or net asset value per share of the Fund.

9

ⁿ The Guardian UBS VC Small Cap Value Fund

Notes to Financial Statements (Continued)

June 30, 2006 (Unaudited)

Note B. Investment Advisory Agreements and Payments to or from Related Parties

The Fund has an investment advisory agreement with Guardian Investor Services LLC (GIS), a wholly-owned subsidiary of GIAC. Fees for investment advisory are at an annual rate of 1.00% of the average daily net assets for the first $50 million and an annual rate of 0.95% of its average daily net assets in excess of $50 million. GIS has entered into a sub-investment advisory agreement with UBS Global Asset Management (Americas), Inc. (UBS Global AM). UBS Global AM is responsible for the day-to-day management of GSCVF. GIS continually monitors and evaluates the performance of UBS Global AM. As compensation for its services, GIS pays UBS Global AM at an annual rate of 0.60% for the first $50 million and at an annual rate of 0.55% of GSCVF’s average daily net assets in excess of $50 million. Payment of sub-investment advisory fees does not represent a separate or additional expense to GSCVF.

The Guardian Fund Complex pays directors who are not “interested persons” (as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Board committee members also receive a fee of $2,000 per committee meeting, which also is allocated among all funds in the Guardian Fund Complex based on their relative average daily net assets. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain directors who are interested persons. Certain officers and directors of the Fund are affiliated with GIS.

Note C. Investment Transactions

Purchases and proceeds from sales of securities (excluding short-term securities) amounted to $9,010,108 and $13,466,613, respectively, during the six months ended June 30, 2006.

The cost of investments owned at June 30, 2006 for federal income tax purposes was substantially the same as the cost for financial reporting purposes. The gross unrealized appreciation and depreciation of investments at June 30, 2006 aggregated $3,062,959 and $1,546,639, respectively, resulting in net unrealized appreciation of $1,516,320.

Note D. Repurchase Agreements

The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, GSCVF will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, GSCVF maintains the right to sell the collateral and may claim any resulting loss against the seller.

Note E. Transactions in Capital Stock

There are 100,000,000 shares of $0.001 par value capital stock authorized for GSCVF. Transactions in capital stock were as follows:

	Six Months Ended June 30, 2006 (Unaudited)		Year Ended December 31, 2005 (Audited)		Six Months Ended June 30, 2006 (Unaudited)			Year Ended December 31, 2005 (Audited)
	Shares				Amount
Shares sold	206,384		598,573		$	2,796,112		$	8,184,123
Shares issued in reinvestment of dividends and distributions	55,760		199,822			683,059			2,624,171
Shares repurchased	(522,127	)	(734,398	)		(7,127,473	)		(10,048,929	)
Net increase/(decrease)	(259,983	)	63,997		$	(3,648,302	)	$	759,365

Note F. Line of Credit

A $100,000,000 line of credit available to GSCVF and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus 0.50% calculated on a 360 day basis per annum. For the six months ended June 30, 2006, none of the funds borrowed against this line of credit.

The funds are obligated to pay State Street Bank and Trust Company and Bank of Montreal a commitment fee computed at a rate of 0.08% per annum on the average daily unused portion of the revolving credit.

10

ⁿ Guardian UBS VC Small Cap Value Fund

Board Approval of Investment Management Agreements (Unaudited)

The Boards of Directors of The Guardian Variable Contract Funds, Inc. (“GVCF”), GIAC Funds, Inc. (“GIAC”), The Guardian Bond Fund, Inc. (“GBF” and a “Fund”) and The Guardian Cash Fund, Inc. (“GCF” and a “Fund”) (together, the series of GVCF and GIAC, and GBF and GCF are referred to as the “Funds,”) approved the renewal of the management agreement for each Fund and, as applicable, the subadvisory agreement for each Fund on November 17, 2005. As a part of the renewal process, the Boards of Directors of GVCF, GIAC, GBF and GCF met independently of Fund management and of the interested Board Members to consider the renewal of: (1) the management agreement (“Management Agreement”) between each of the Funds and Guardian Investor Services LLC (“GIS”) or as applicable, Guardian Baillie Gifford Limited (“GBG” and together with GIS, each referred to as a “Manager”); (2) as applicable, the subadvisory agreements (each a “Subadvisory Agreement”) between GBG and Baillie Gifford Overseas Limited (“BGO”) and the subadvisory agreements between GIS and UBS Global Asset Management (Americas) Inc. (“UBS” and together with BGO, each referred to as a “Subadvisor”). (The Management Agreements and the Subadvisory Agreements are together referred to as the “Advisory Agreements.”) As part of the review process, the Independent Directors were represented by independent legal counsel. The Independent Directors reviewed comprehensive materials received from the Managers, Subadvisors and independent counsel in connection with contract review. The Independent Directors noted that each Board also received regular information throughout the year regarding performance and operating results of each Fund and that in evaluating the Advisory Agreements, they were taking into account their accumulated experience as Board members in working with the Managers on matters relating to the Funds.

In preparation for the review process, the Independent Directors met with independent legal counsel and discussed the type and nature of information to be provided and sent a formal request for information to Fund management. The Managers and Subadvisors provided extensive information to all Board members in response to the request. Among other information, the Independent Directors reviewed materials to assess the services provided by each Manager and Subadvisor, and, as applicable, information comparing the performance, advisory fees and expense ratios of each Fund to other mutual funds, information about the profitability from the Advisory Agreements to the Managers and to the Subadvisors, information about economies of scale and information about the other benefits to the Managers and Subadvisors and their affiliates resulting from their relationship with the Funds (“fall-out benefits”). The Independent Directors reviewed comparative performance and management fee and expense ratios of peer groups of funds selected by Morningstar, Inc. (“Morningstar”). The Independent Directors also received a memorandum from independent legal counsel advising them of their duties and responsibilities in connection with the review of the Advisory Agreements. In preparation for the November 17th meeting, the Independent Directors met on November 3, 2005, to review and discuss with independent legal counsel the information provided by Morningstar.

Based upon their review, the Independent Directors concluded that it was in the best interest of each Fund to renew each relevant Advisory Agreement and, accordingly, recommended to the full Board of each Fund the renewal of each applicable Advisory Agreement. In reaching this conclusion for each Fund, the Independent Directors did not identify any single factor or group of factors as all important or controlling and considered all factors together.

Management Agreements

Nature, Quality and Extent of Services. In reviewing the nature, quality and extent of services provided by the Managers, the Independent Directors considered the services provided by each Manager under the Management Agreements, including administrative services. The Independent Directors considered the experience and skills of senior management responsible for fund operations, the experience and skills of the personnel performing the functions under each Management Agreement and the resources made available to such personnel, the ability of the Managers to attract and retain high-quality personnel, and the organizational depth of the Managers. The Independent Directors concluded that appropriate resources were provided under each Management Agreement. The Independent Directors also considered the delegation of day-to-day portfolio management responsibility to UBS with respect to the Guardian UBS VC Large Cap Value Fund and the Guardian UBS VC Small Cap Value Fund and to BGO with respect to the Baillie Gifford International Growth Fund and the Baillie Gifford Emerging Markets Fund and the Managers’ ability to supervise the activities of the Subadvisors. The Independent Directors concluded each Manager’s supervisory program was satisfactory. The Independent Directors also considered the compliance program established by the Managers and the level of compliance attained by the Managers. Further, the Independent Directors considered that each Manager has had a long-term relationship with the Funds and has demonstrated its past and future commitment to support the Funds. The Independent Directors concluded that a long-term relationship with a capable, conscientious adviser was in the best interest of each Fund. Based upon all relevant factors, the Independent Directors concluded that the nature, quality and extent of the services provided by the Managers to each applicable Fund were satisfactory.

11

ⁿ Guardian UBS VC Small Cap Value Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and longer-term (three year, five year and ten year) periods, as applicable, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. The Independent Directors received comparative performance information prepared by Morningstar. The Independent Directors also considered whether investment results were consistent with a Fund’s investment objective(s) and policies. For most Funds, the Independent Directors concluded that investment performance met acceptable levels of investment performance. For Funds that experienced underperformance, the Independent Directors reviewed the reasons for the underperformance and the remedial measures taken by the Manager to improve performance. The Independent Directors concluded that the Managers have in place an effective process to monitor performance and that reasonable steps had been implemented to address circumstances of underperformance where appropriate. Therefore, the Independent Directors concluded that it was in the best interests of the Funds to renew the Management Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s management fees and net expense ratios. The Independent Directors received information, based on data supplied by Morningstar, comparing each Fund’s management fee rates and total net expense ratio to advisory fees and total net expense ratios of the mutual funds in its peer group (as selected by Morningstar). The Independent Directors also received and considered information on fee waivers and/or reimbursements for each Fund compared to those of its peer group. The Independent Directors noted that a number of the Funds have received fee waivers for many years and that such fee waivers remained current through the time of the review process.

The Independent Directors also compared each Fund’s management fee rates to fees charged by the Manager for comparable mutual funds. For each Fund, the Independent Directors reviewed the fees charged by other advisors for mutual funds in the Fund’s peer group. GIS provided information on the advisory fees it charges its two institutional accounts and noted the information was not comparable with the Funds because the investment objectives and management style of the institutional accounts were very different than those of the Funds. GBG has no clients other than the Funds.

On the basis of all information provided, the Independent Directors concluded that the management fee schedules for each Fund were reasonable and appropriate in light of the nature, quality and extent of services provided by the Manager.

Profitability. The Independent Directors reviewed detailed information regarding revenues received by each Manager under each Management Agreement, including identification of the estimated direct and indirect costs of the Managers of providing those services to each Fund that are covered under the Management Agreements. The Independent Directors also received information regarding the enterprise-wide profitability of the Managers with respect to all fund services in totality.

For all Funds, based upon the profitability percentage provided, the Independent Directors concluded that the profitability to the applicable Manager from the management of each Fund was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the management of each Fund and whether the Funds benefit from any such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund and the Guardian Cash Fund had management fee schedules that each contained one breakpoint. The Independent Directors also considered whether the effective management fee rate for each Fund under the Management Agreement is reasonable in relation to the asset size of such Fund. The Independent Directors noted GIS’s representation that it did not anticipate that the Funds would experience any significant economies in the near future, given their asset size. The Independent Directors concluded that, in light of the Funds’ current asset levels, the fee schedule for each Fund reflects an appropriate level of sharing of any economies of scale.

Other Benefits to Manager. The Independent Directors also considered the character and amount of other incidental benefits received by the Managers and their affiliates as a result of their relationship with the Funds. The Independent Directors noted the Managers’ representation that each has the ability to obtain proprietary research as a result of the Funds’ brokerage business that may be used for the benefit of the Funds and other clients of the Managers. The Independent Directors concluded that management fees for each Fund were reasonable in light of these fall-out benefits.

Subadvisory Agreements

Nature, Quality and Extent of Services. The Independent Directors considered the nature, extent and quality of services provided under each Subadvisory Agreement. The Independent Directors considered the reputation, qualifications and background

12

ⁿ Guardian UBS VC Small Cap Value Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

of the Subadvisors, the experience and skills of investment personnel responsible for the day-to-day management of each Fund, and the resources made available to such personnel. The Independent Directors also considered the Subadvisors’ compliance with investment policies and general legal compliance. The Independent Directors concluded that each Subadvisor was providing satisfactory services and recommended that the Subadvisory Agreement for each applicable Fund be continued.

Investment Performance. The Independent Directors reviewed each Fund’s investment performance over short-term (one-year) and, where applicable, longer-term periods, and compared those returns to various agreed-upon performance measures, including market indices and peer groups. Based upon all relevant factors, the Independent Directors concluded that the investment performance of each subadvised Fund either met acceptable levels of investment performance or, in situations where there was underperformance, the underperformance was not over a long enough period of time to provide a meaningful measure of performance. Therefore, the Independent Directors concluded, based upon each Fund’s particular circumstances, that it was in the best interests of each Fund to renew the Subadvisory Agreements and to continue to closely monitor performance with a particular emphasis on those Funds experiencing underperformance.

Fees and Expenses. The Independent Directors considered each Fund’s subadvisory fees and how they related to the overall management fee structure of each Fund. The Independent Directors evaluated the competitiveness of the subadvisory fees based upon data supplied by Fund management, which showed each Subadvisor’s standard fee schedule for similarly managed institutional accounts. Based on the information provided by Fund management, the Independent Directors noted that the Subadvisors charged comparable or lower fees for the Funds than their standard fee schedules. The Independent Directors also considered that the Managers compensate the Subadvisors from their own management fees.

Based upon all of the above, the Independent Directors determined that the subadvisory fees for each Fund were reasonable.

Profitability. The Independent Directors received general information with respect to each Subadvisor’s profitability. The Independent Directors noted that the Managers compensate the Subadvisors from their own management fees and that the fees were competitive based on the information provided by the Subadvisors and the Managers. In addition, the Independent Directors noted that the Subadvisory Agreements with UBS were negotiated at arm’s length between GIS and UBS. The Independent Directors also noted the amount of revenue generated by each Subadvisor from its subadvisory fees. The Independent Directors reviewed data on the estimated range of profitability to UBS for the Funds it subadvised and concluded that its profitability was not unreasonable. The Independent Directors took into account the level of revenues and the profitability to the parent entity of BGO as a result of BGO’s subadvisory relationship with the Funds it subadvised and concluded that profitability was not unreasonable.

Economies of Scale. The Independent Directors considered whether there are economies of scale with respect to the subadvisory services provided to each applicable Fund and whether the subadvisory fees reflect such economies of scale through breakpoints in fees or otherwise. The Independent Directors noted that the Guardian UBS VC Small Cap Value Fund contained one breakpoint in its subadvisory fee schedule. The Independent Directors also considered whether the effective subadvisory fee rate for each Fund under the Subadvisory Agreement is reasonable in relation to the asset size of the Fund. The Independent Directors concluded that the fee schedule for each Fund reflects an appropriate recognition of any economies of scale.

Other Benefits to Subadvisors. The Independent Directors also considered the character and amount of other incidental benefits received by each Subadvisor, including any benefit derived from their affiliation with the Funds. The Independent Directors considered that UBS may use an affiliate to execute portfolio transactions for the Funds it subadvises, subject to Rule 17e-1 procedures that have been approved by the Board. The Independent Directors also considered each Subadvisor’s soft dollar practices. The Independent Directors concluded that the fees charged under each Subadvisory Agreement were reasonable in light of these fall-out benefits.

Specific Fund Findings

The Guardian UBS VC Small Cap Value Fund

In determining to recommend renewal of the Fund’s Advisory Agreements, the Independent Directors concluded that although the Fund experienced slight underperformance relative to its peer group, such performance was within a reasonable range of the peer group average in light of the Fund’s satisfactory absolute performance. The Independent Directors also noted that although the Fund’s management fee rate was above the median of the Fund’s peer group, the management fee was within an acceptable range of the median, particularly in light of the desire to retain an experienced value-style subadvisor.

13

ⁿ Guardian UBS VC Small Cap Value Fund

Board Approval of Investment Management Agreements (Unaudited) (Continued)

Overall Conclusions

Based upon all of the information considered and the conclusions reached, the Independent Directors determined that the terms of each Advisory Agreement continue to be fair and reasonable and that the continuation of each Advisory Agreement is in the best interests of each Fund.

14

ⁿ The Guardian UBS VC Small Cap Value Fund

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, is available free of charge upon request by logging on to www.guardianinvestor.com or the Securities and Exchange Commission’s (SEC) website at www.sec.gov.

Form N-Q

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each year on the Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov, and 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.

Code of Ethics

The Fund has adopted a code of ethics for its Principal Executive Officer and Principal Financial Officers (the “Code”). The purpose of the Code is to promote, among other things: honest and ethical conduct, including the handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in reports and documents filed with the SEC; and compliance with applicable laws and regulations. A copy of the Code has been filed with the SEC on Form N-CSR and can be obtained on the SEC’s website at www.sec.gov.

Copies for all of the above can be obtained free of charge by calling 1-800-221-3253 or by writing to Guardian Investor Services LLC at 7 Hanover Square, New York, New York 10004.

15

ITEM 2. CODE OF ETHICS.

Not applicable for semiannual reports.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable for semiannual reports.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable for semiannual reports.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS

Included in response to Item 1.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASES.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 11. CONTROLS AND PROCEDURES.

(a) The registrant’s certifying officers have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.

(b) The registrant’s certifying officers are aware of no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 12. EXHIBITS.

(a)(1) Not applicable.

(a)(2) Separate certifications by the registrant’s certifying officers, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.

(a)(3) Not applicable.

(b) A certification by the registrant’s certifying officers, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The Guardian Variable Contract Funds, Inc.
By:	/s/ Thomas G. Sorell
	Thomas G. Sorell
	President of
	The Guardian Variable Contract Funds, Inc.

Date: September 6, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Thomas G. Sorell
	Thomas G. Sorell
	President of
	The Guardian Variable Contract Funds, Inc.

Date: September 6, 2006

By:	/s/ John H. Walter
	John H. Walter
	Vice President and Treasurer of
	The Guardian Variable Contract Funds, Inc.

Date: September 6, 2006

EX-99.CERT

CERTIFICATIONS PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas G. Sorell, certify that:

1. I have reviewed this report on Form N-CSR of The Guardian Variable Contract Funds, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 6, 2006

/s/ Thomas G. Sorell

Thomas G. Sorell

President of

The Guardian Variable Contract Funds, Inc.

CERTIFICATIONS PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, John H. Walter, certify that:

1. I have reviewed this report on Form N-CSR of The Guardian Variable Contract Funds, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 6, 2006

/s/ John H. Walter

John H. Walter

Vice President and Treasurer of

The Guardian Variable Contract Funds, Inc.

EX-99.906 CERT

CERTIFICATION UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002

Name of Issuer: The Guardian Variable Contract Funds, Inc.

In connection with the Report on Form N-CSR for the above named issuer, the undersigned hereby certifies, to the best of his knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Date: September 6, 2006

/s/ Thomas G. Sorell

Thomas G. Sorell

President of

The Guardian Variable Contract Funds, Inc.

Date: September 6, 2006

/s/ John H. Walter

John H. Walter

Vice President and Treasurer of

The Guardian Variable Contract Funds, Inc.