-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UGVu/W/888CpidmtPdZGunz+YAoea3UR0ZzoFArXazn8hJhcWvfc8JbAgecQFXXG RXrRFzGFB0nfkqSiJ56R/w== 0000950123-03-010094.txt : 20030904 0000950123-03-010094.hdr.sgml : 20030904 20030904145139 ACCESSION NUMBER: 0000950123-03-010094 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030904 EFFECTIVENESS DATE: 20030904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARK AVENUE PORTFOLIO CENTRAL INDEX KEY: 0000837910 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05641 FILM NUMBER: 03881310 BUSINESS ADDRESS: STREET 1: 7 HANOVER SQUARE 19-C CITY: NEW YORK STATE: NY ZIP: 10003 BUSINESS PHONE: 2125988818 MAIL ADDRESS: STREET 1: 7 HANOVER SQUARE 19-C CITY: NEW YORK STATE: NY ZIP: 10004 FORMER COMPANY: FORMER CONFORMED NAME: GUARDIAN U S GOVERNMENT TRUST DATE OF NAME CHANGE: 19920703 N-CSRS 1 y88374nvcsrs.txt PARK AVENUE PORTFOLIO UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES - -------------------------------------------------------------------------------- Investment Company Act file number 811-05641 The Park Avenue Portfolio - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 7 Hanover Square New York, N.Y. 10004 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Frank L. Pepe Thomas G. Sorell The Park Avenue Portfolio The Park Avenue Portfolio 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, 2003 - -------------------------------------------------------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. The Semiannual Report to Stockholders follows. Please turn the page to see the supplement dated January 7, 2002 to The Park Avenue Portfolio Prospectus dated May 1, 2001. THIS SUPPLEMENT SHOULD BE RETAINED WITH THE PROSPECTUS FOR FUTURE REFERENCE. [GUARDIAN(SM) LOGO] THE PARK AVENUE Portfolio Supplement dated January 7, 2002 to Prospectus dated May 1, 2001 This Supplement should be retained with the Prospectus for future reference. The following replaces the first paragraph under the heading "The Funds' Investment Advisers" on page 59 of the prospectus: Guardian Investor Services LLC (GIS) is the adviser for all of the Funds in The Park Avenue Portfolio, except for the two international funds. GIS is a Delaware limited liability company organized in 2001 as successor to Guardian Investor Services Corporation, a New York corporation organized in 1968. GIS is wholly owned by The Guardian Life Insurance Company of America (Guardian Life), a New York mutual insurance company. GIS is located at 7 Hanover Square, New York, New York 10004. GIS buys and sells securities, selects brokers to effect transactions, and negotiates brokerage fees. GIS is the adviser to several other mutual funds sponsored by Guardian Life, and it is the underwriter and distributor of the Fund's shares and of variable annuity and variable life insurance contracts issued by The Guardian Insurance & Annuity Company, Inc. (GIAC). Wherever the terms "Guardian Investor Services Corporation" and "GISC" appear in the prospectus, replace them with the terms "Guardian Investor Services LLC" and "GIS", respectively. The following replaces the paragraph below "Small Cap Fund" under the Section "Portfolio Managers" on page 61 of the prospectus: Matthew P. Ziehl, CFA, is the Fund's portfolio manager. He is a Managing Director of Guardian Life. Before joining Guardian Life in January 2002, Mr. Ziehl was a Team Leader within Salomon Brothers Asset Management, Inc. for small cap growth portfolios since January, 2001, and a Co-Portfolio Manager of the Salomon Brothers Small Cap Growth Fund since August, 1999. Prior to that, Mr. Ziehl served as an Analyst for the Salomon Brothers Small Cap Growth Fund from May, 1998 to July, 1999 and as an Analyst/Portfolio Manager for the U.S. Small Cap Equity Team at Citibank Global Asset Management from January, 1995 to May, 1998. EB-013869(2) (1/02) DEAR SHAREHOLDER: [PHOTO] CAUTIOUSLY OPTIMISTIC BUT ALWAYS WELL Thomas G. Sorell, C.F.A. DIVERSIFIED! Chief Investment Officer After three difficult years, we believe that both the economy and the stock market may finally be on the road to long term recovery and we are cautiously optimistic about the future. THE FIRST SIX MONTHS IN REVIEW
The U.S. financial markets experienced a difficult start in 2003 as investors focused on the potentially adverse economic impact of an imminent war with Iraq. Meanwhile, the Federal Reserve Board (Fed) remained confident that an economic recovery was underway and that it would strengthen when the hostilities ended. The financial markets, however, were unconvinced. As a result, the S&P 500 Index(1) declined 3% in the first quarter, and although interest rates were volatile, they ended the quarter with little change. In late March, as U.S. and British troops entered Iraq and it became apparent the military campaign to defeat Saddam Hussein would be swift, the equity markets rallied. We also saw a rise in U.S. Treasury rates, as they were no longer sought as a safe haven investment amid geopolitical uncertainty. Risk taking was once again in vogue during the second quarter, with the best performing markets representing the same speculative sectors that were the most beaten down during the past few years. The technology-laden NASDAQ Composite Index(2) returned over 21% during the second quarter, while the high yield debt market returned 10%. In fact, between this year's equity market lows and June 30, 2003, the S&P 500 Index had a return of almost 22% and the NASDAQ returned approximately 28%. Although these returns represent an upswing in equity markets that we have often seen following periods of stock market decline, we do not believe that past history is necessarily any indication of how the equity markets will behave in the future, and we think it is unlikely that these increases represent a long-term trend.
- --------------------------------------------------------- 2003 MARKET RETURNS - --------------------------------------------------------- 1ST 2ND 6 MONTHS QUARTER QUARTER ENDED INDEX 2003 2003 JUNE 30, 2003 - --------------------------------------------------------- S&P 500 Index -3.15% 15.39% 11.76% - --------------------------------------------------------- Russell 2000 Index(3) -4.49% 23.43% 17.89% - --------------------------------------------------------- Nasdaq Composite Index 0.58% 21.11% 21.82% - --------------------------------------------------------- The Lehman Aggregate Bond Index(4) 1.39% 2.50% 3.93% - --------------------------------------------------------- The Lehman High Yield Bond Index(4) 7.61% 10.11% 18.49% - ---------------------------------------------------------
While the Federal Reserve Board (Fed) was patient early in the first quarter, in expectation of a post-Iraq recovery, in March the Fed agreed to abandon temporarily its balanced policy assessment of economic risk and instead promised "heightened surveillance" of the economy. By May, when economic indicators did not turn sufficiently positive for the Fed, it adopted a significantly different approach to evaluating economic risk. The Fed decided to issue policy statements involving two assessments. The first deliberated prospects for economic growth over the next few quarters. The second reflected the Fed's view regarding whether inflation was likely to accelerate or decelerate. With this change in policy, the Fed indicated that while the risks to economic growth were balanced, "the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup in inflation from its already low level." Taken together, in our view the Fed's pronouncements represented a significant shift in policy. It became clear that the Fed was concerned about deflation, and would do everything it could to prevent its occurrence. In response, the financial markets concluded the Fed was prepared to ease further. More importantly, it appeared the Fed was willing to resort to unconventional tools if necessary (for example, purchasing long Treasury bonds for its own account), in order to lower interest rates, stimulate economic growth, and prevent deflation. Already low Treasury rates fell even further, to levels not seen in 45 years. The ten-year Treasury rate declined approximately 0.80%, reaching a low of 3.11% in mid-June. The decline in rates over this period led to another wave of mortgage refinancing that once again provided additional liquidity and support to consumers and further stimulated U.S. economic growth. In June, as interest rates were falling, equities were rising; the S&P 500 Index crossed the 1000 mark for the first time in a year. As the second quarter came to a close, the Fed's policy-making Federal Open Market Committee (FOMC) cut the Federal Funds rate 0.25%, lowering the target rate to 1%. This rate cut disappointed some market participants - -------------------- (1) 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. (2) The NASDAQ Composite Index is an unmanaged, broad-based capitalization- weighted index of all NASDAQ National Market stocks. (3) The Russell 2000 Index is an unmanaged index that is generally considered to be representative of small capitalization issues in the U.S. stock market. (4) The Lehman Aggregate Bond Index and The Lehman High Yield Bond Index are unmanaged indices that are generally considered to be representative of U.S. bond market activity and U.S. corporate high yield bond market activity. All of these Indices are not available for direct investment, and their returns do not reflect the fees and expenses that have been deducted from the Fund. - -------------------------------------------------------------------------------- expecting a greater reduction of 0.50%. Once again, this appeared to signal the Fed's confidence that an economic recovery was imminent and that deflation risks, while taken seriously, did not seem likely. ECONOMIC OUTLOOK When we consider all the shocks and impediments impacting U.S. economic growth, along with the mild recession experienced in the U.S. over the past two years, what becomes evident is the economy's underlying strength and resiliency. Our belief is that as those obstacles dissipate, economic growth will likely increase. The first and most significant shock was the burst of the technology bubble. During the 1992-2000 expansion, corporate America made tremendous capital investments. During this period business spending on structures, equipment and software increased 117%(5) while real GDP(6) grew about 38%. Many economists refer to this imbalance as a "capital overhang." The recession of 2001 was unusual in that it was not caused by rapid economic growth and inflationary pressures, but instead by the bursting of an asset bubble and a precipitous decline in capital spending and corporate profitability. In fact, the Fed's strategy throughout the "recovery" period has been to stimulate personal consumption to sustain the economy until the business sector recovered and again started contributing to economic growth. While business spending was negative in 2001 (-5.2%) and 2002 (-5.7%),(5) it appears that the decline is over, and it has stabilized at slightly positive levels. The latest Blue Chip Economic Consensus(7) forecasts business spending to grow at a 1.1% rate in 2003. The other obvious obstacle to growth has been the impact of geopolitical risk and its effect on consumer and business confidence. Between 9/11 and the wars in Afghanistan and Iraq, it's not surprising to us that economic growth has been weak. However, it now appears that while risks remain with respect to the Middle East and North Korea, we believe diplomacy will most likely be the focus of future engagements, not military action. For this reason we have recently witnessed a revival in both consumer and business confidence, both of which have also benefited from the recent recovery in equity markets. The Consumer Confidence Index(8) has climbed well off its March lows, and business sentiment has improved as evidenced by the Institute for Supply Management's Manufacturing and Service surveys. Also supporting a business expansion are the tentative signs that corporate profits are improving. According to research firm Thomson First Call, S&P 500 operating earnings per share during the first quarter rose to $12.55, an increase of 12% over the prior year. This earnings growth was achieved principally by cost-cutting rather than revenue growth, and these increases reflect the fact that last year's S&P 500 earnings were depressed due to goodwill write-offs and adoption of more conservative accounting practices. Future increases in profits will have to come from unit sales growth or price increases, both of which are dependent on an economic upswing. The appreciation of U.S. equity markets will soon be tested when second quarter earnings and third and fourth quarter earnings expectations are conveyed to the market over the next few months. First Call estimates S&P 500 operating earnings increased 4% year over year during the second quarter, and The Blue Chip Consensus forecasts year over year growth in corporate profits during 2003 of 9%. While this estimate would represent only a small improvement over the 7.6% gain in 2002, it would bring us a long way from the 7.2% and 2.2% declines experienced in 2001 and 2000, respectively. In addition to an improvement in consumer and business confidence, business fixed investment and corporate profits, we believe the U.S. economy is also benefiting from stimulative monetary and fiscal policy initiatives. The Federal Reserve has clearly indicated that it plans to leave the Fed Funds rate unchanged until economic growth is assured, given its belief that near term inflationary risks are small. Chairman Greenspan, testifying before the House Banking and Financial Services Committee, indicated that the Fed "stands prepared to maintain a highly accommodative stance of policy for as long as needed to promote satisfactory economic performance," and that the Fed could keep rates low "for a considerable period without ultimately stoking inflationary pressures." We believe that the underlying premise in these statements is that the Fed will leave policy highly accommodative and not even consider tightening monetary policy until the economy is well into a recovery. We believe that current fiscal policy, as evidenced by the recently passed $350 billion in tax cuts, will also provide economic stimulus. In spite of the fact that these tax cuts are scheduled to occur over ten years, most of the benefits, approximately $210 billion, will be distributed in 2003 and 2004. In addition to tax cuts, government spending has increased to support homeland security and the war and reconstruction in Iraq. - -------------------- (5) The Business Fixed Investment (BFI) Index measures business spending on structures, equipment, and software. (6) Gross Domestic Product (GDP) measures the value of goods and services produced in an economy. Real GDP is the gross domestic product adjusted for changes in price level. Real GDP growth is generally used as the basis to assess economic performance. (7) The Blue Chip Economic Consensus forecast is a forecast of economic variables published monthly based on the surveys of 55 leading economists and financial analysts. (8) The Consumer Confidence Index is derived from a survey conducted by The Conference Board, a New York-based business industry group. - -------------------------------------------------------------------------------- When we consider the reduction of past obstacles to growth, along with stimulative monetary and fiscal policy, we believe there is reason to be optimistic about further prospects for economic growth. GDP growth in the second quarter was 2.4%, and the current Blue Chip Consensus forecast for accelerating growth is 3.6% and 3.8% in the third and fourth quarters, respectively. GDP in 2004 is expected to grow at an annual rate of 3.7%, according to the Blue Chip Consensus forecast. The following are the Fed's forecasts:
- ----------------------------------------------------------- 2003 2004 - ----------------------------------------------------------- Real GDP 2.5%-2.75% 3.75%-4.75% - ----------------------------------------------------------- Unemployment 6%-6.25% 5.5%-6% - -----------------------------------------------------------
What are the risk factors that may affect this forecast? We believe that the remaining principal risk is that personal consumption may collapse before a recovery in business investment commences. This could conceivably be triggered by a fall in real estate prices, precipitated by rising interest rates which reduce home ownership affordability and the ability to borrow and spend the homeowner's embedded equity, or by continued high unemployment as job growth remains low due to increased labor productivity. We believe that declining real estate values would clearly have a negative wealth effect and most likely damage consumer confidence and reduce personal consumption expenditures. Other risks to U.S. economic growth include a weak global economy, and state and local government tax increases offsetting some of the Federal fiscal stimulus. While these factors present real risks, we believe there is a greater likelihood that the economy will continue to recover and that these situations will most likely not occur to the full extent feared, but rather exhibit themselves in a minor way that simply slows down the pace of an economic recovery rather than precluding one from occurring. OUTLOOK FOR FINANCIAL MARKETS What then should be expected of the financial markets? According to Ibbotson data, over the last 77 years stocks provided an average annual return of 10.2%, or a 4.7% risk premium per year over bonds, as shown in the table below.
- ------------------------------------------------------- AVERAGE ANNUAL RETURN - ------------------------------------------------------- Stocks 10.2% - ------------------------------------------------------- Bonds 5.5% - ------------------------------------------------------- Bills 3.8% - ------------------------------------------------------- Inflation 3.1% - -------------------------------------------------------
Is it likely that such a risk premium will exist going forward? In a provocative article last year, Robert Arnott and Peter Bernstein suggested that the expected risk premium for stocks over bonds is currently zero and that a sensible expectation for future real returns for both stocks and bonds is 2%-4%. Roger Ibbotson and Peng Chen countered this with a different analysis suggesting that the expectation for future stock return is 9.4% and the risk premium over bonds is 4%, implying an expected bond return of 5.4%. A survey of over 500 finance and economics professors shows a consensus academic forecast of stock returns of 9.1% per year over the next 30 years.(9) While we cannot predict future stock market returns, we believe that these long-term return forecasts are a more logical framework for constructing well-diversified portfolios that meet long-term financial objectives than the double digit expectations for equity returns that many investors became "accustomed" to in the late 1980's and 1990's, when returns were unusually favorable. Our outlook for interest rates is based on expectations of an economic recovery and the Fed's commitment to leave short-term rates low until there are clear signs of a recovery. To the extent long-term interest rates reflect inflationary expectations, we expect to see generally stable short-term rates, but increasingly higher long-term interest rates, as the Fed attempts to reflate the economy. Furthermore, increasingly large budget and trade deficits and a potentially weaker U.S. dollar are factors we believe should exert upward pressures on interest rates. According to a recent study by the Fed, a one percentage point increase in the projected deficit-to-GDP ratio is estimated to raise long-term interest rates by roughly 0.25%. Therefore, if the economy improves as forecasted by both economists and the Fed, we believe we can expect to see a gradual increase in interest rates. INVESTMENT STRATEGY What is the best investment strategy to pursue in this environment? As is the case most of the time, we believe it's important for you to remain committed to long-term investment objectives. We believe the best way for you to do this is to make sure you have a sound asset allocation based on the principles of diversification and one that is properly aligned with your financial goals, time horizon, and personal tolerance for risk. Given the uncertainty of any forecast, (including the one above!), how then should investors behave? A key variable in the investment decision process is evaluating an investor's tolerance for risk. In general, assets with higher long-term returns may also have a higher risk, which results in high short-term variability in their returns. Investors should judge their ability to ride out such variability and maintain an investment portfolio consistent with their toler- - -------------------- (9) Roger G. Ibbotson, Ph.D. and Peng Chen, Ph.D., CFA, "Stock Market Returns in the Long Run," Forthcoming Financial Analyst Journal, July 9, 2002. - -------------------------------------------------------------------------------- ance for risk. Research, based mainly on investor 401(k) selections, indicates that investors are not aware of their own risk tolerance. This lack of awareness results in inappropriate investment portfolios. The Park Avenue Portfolio(R) family of mutual funds includes the following thirteen funds, spanning a wide spectrum of risk-return possibilities: The Guardian Park Avenue Fund, The Guardian UBS Large Cap Value Fund, The Guardian Park Avenue Small Cap Fund, The Guardian UBS Small Cap Value Fund, The Guardian Asset Allocation Fund, The Guardian S&P 500 Index Fund, The Guardian Baillie Gifford International Fund, The Guardian Baillie Gifford Emerging Markets Fund, The Guardian Investment Quality Bond Fund, The Guardian Low Duration Bond Fund, The Guardian High Yield Bond Fund, The Guardian Tax-Exempt Fund, and The Guardian Cash Management Fund. While no single fund is intended to serve as a complete investment program, by using a combination of these funds, we believe it is possible for investors at every level of risk tolerance (conservative, moderate, aggressive, etc.), to construct appropriate portfolios. This diversification may protect investors from excessive exposure to "the worst" performing asset class, and at the same time offering participation in "the best" performing asset class during a given period. Such diversification forms the bedrock of successful investing. Therefore, we believe the best strategy is to consult with your financial advisor and construct an appropriately well diversified portfolio that will not only meet your long-term financial objectives, but also can survive short-term periods of volatility experienced in any single asset class. It's really quite simple; it's not just the economy, it's diversification, diversification and diversification. To quote noted investment analyst/philosopher Peter Bernstein: "Indeed, the passage of time has transformed me from a compulsive forecaster of everything in sight into a doubting Thomas. Thus, I have learned to view the investment task as more (but not yet totally) one of managing risk than of trying to outguess the markets or the economy. The only other conviction held with equal determination is a devotion to diversification, but one follows from the other." While impediments to economic growth appear to be receding, giving us reason to be optimistic about the future after three difficult years, it would be imprudent to abandon lessons learned and do anything less than construct very well diversified portfolios that will enable you achieve your financial objectives given appropriate risk tolerances. Past performance is no indication of future performance. The foregoing commentary reflects the outlook and views of Thomas G. Sorell, Chief Investment Officer of Guardian Investor Services LLC, as of June 30, 2003, and is subject to change. /s/THOMAS G. SORELL Thomas G. Sorell, CFA President, The Park Avenue Portfolio - -------------------------------------------------------------------------------- THE PARK AVENUE PORTFOLIO TABLE OF CONTENTS
PORTFOLIO SCHEDULE MANAGER OF INTERVIEW INVESTMENTS - ------------------------------------------------------------------------------------ THE GUARDIAN PARK AVENUE FUND 2 27 - ------------------------------------------------------------------------------------ THE GUARDIAN UBS LARGE CAP VALUE FUND 6 29 - ------------------------------------------------------------------------------------ THE GUARDIAN PARK AVENUE SMALL CAP FUND 8 30 - ------------------------------------------------------------------------------------ THE GUARDIAN UBS SMALL CAP VALUE FUND 10 32 - ------------------------------------------------------------------------------------ THE GUARDIAN ASSET ALLOCATION FUND 12 34 - ------------------------------------------------------------------------------------ THE GUARDIAN S&P 500 INDEX FUND 14 37 - ------------------------------------------------------------------------------------ THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND 16 43 - ------------------------------------------------------------------------------------ THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND 18 46 - ------------------------------------------------------------------------------------ THE GUARDIAN INVESTMENT QUALITY BOND FUND 20 48 - ------------------------------------------------------------------------------------ THE GUARDIAN HIGH YIELD BOND FUND 22 52 - ------------------------------------------------------------------------------------ THE GUARDIAN TAX-EXEMPT FUND 24 57 - ------------------------------------------------------------------------------------ THE GUARDIAN CASH MANAGEMENT FUND 26 59 - ------------------------------------------------------------------------------------ FINANCIAL STATEMENTS 62 - ------------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS 69 - ------------------------------------------------------------------------------------ FINANCIAL HIGHLIGHTS 82 - ------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- THE GUARDIAN PARK AVENUE FUND [PHOTO] OBJECTIVE: Long-term growth of Richard Goldman capital Portfolio Manager PORTFOLIO: At least 80% common stocks and convertible securities INCEPTION: June 1, 1972
NET ASSETS AT JUNE 30, 2003: $1,294,059,145 Q: WHAT TYPE OF INVESTORS SHOULD CONSIDER THE GUARDIAN PARK AVENUE FUND? A: The best way to answer that is to list the Fund's two distinct features, which certain types of investors may find attractive. - High Quality Companies: Our investment process is geared to finding companies that we believe have strong balance sheets, generate high cash flows, and that are profitable. This is based on our philosophy that investing in market leaders with strong fundamentals has the potential to produce an attractive long-term performance and risk profile. - Commitment to our core objective: The Guardian Park Avenue Fund is a core large cap fund, and we will use every effort to prevent the Fund from straying from its style. This is important for investors who are deploying asset allocation strategies and want a well-diversified large cap core equity portfolio. We believe too many mutual funds are willing to drift into areas outside their mandates in their efforts to outperform. We saw this happen in the late 1990s when many small cap and value funds were buying larger cap and growth stocks. Many investors thought their investments were diversified among different types of equity funds. Only after the bubble burst in 2000, when large cap and growth stocks had significantly declined, did they realize that these shifts had occurred. The result was an over concentration in large cap and growth stocks, causing a greater decline in portfolio values than otherwise expected. Q: WHAT HAPPENED IN THE EQUITY MARKETS DURING THE FIRST SIX MONTHS OF 2003? A: In A Tale of Two Cities, Charles Dickens captured the equity market environment during the first half of 2003: "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity..." The year began on a negative note as the equity market extended its 3-year slide, with the S&P 500 Index(1) down 3% in the first quarter. This was more than offset by the second quarter, in which the S&P 500 was up 15%, bringing its total return for the first half of 2003 to 11.76%. The nature of the rally (which began on March 11th and extended through the end of the second quarter) reveals a market environment somewhat reminiscent of the rally experienced in the late 1990s: the stocks that were up the most were companies with operating losses (including the internet and biotech sectors), companies with poor track records of earnings and dividend growth, and companies under federal investigation. We believe that the speculative nature of the rally is attributable to investors' increasing confidence that the economy will improve in the second half of 2003. While higher quality companies (those with positive earnings and strong balance sheets) were up during the first half of the year, they didn't rise as much as lower quality companies. We believe that higher quality companies should see their relative fortunes improve, as investors will eventually refocus on their fundamentals and attractive relative valuations. - -------------------------------------------------------------------------------- "We believe that higher quality companies should see their relative fortunes improve, as investors will eventually refocus on their fundamentals and attractive relative valuations." - -------------------------------------------------------------------------------- Q: HOW DID THE GUARDIAN PARK AVENUE FUND PERFORM DURING THE FIRST HALF OF 2003? A: The Guardian Park Avenue Fund was up 8.41%(2) during the first half of 2003. Since the Fund's investment strategy focuses on investing in high quality companies, it was a difficult environment for it to outperform its S&P 500 benchmark due to the speculative nature of the recent rally, as described above. The Fund's performance was helped by its semiconductor holdings, which outperformed as investors became increasingly confident in the earnings visibility for these companies. This was offset by the strong performance of highly cyclical companies in the consumer discretionary and industrial sectors, two areas that significantly outperformed and in which the Fund was underrepresented. - -------------------- (1) 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. The S&P 500 Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (2) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 2 THE GUARDIAN PARK AVENUE FUND Q: WHAT IS THE FUND'S INVESTMENT STRATEGY, AND WILL IT CHANGE GOING FORWARD? A: The Guardian Park Avenue Fund is a core fund that invests in mainly large cap, high quality companies and is designed for investors who are looking for a foundation upon which they can build their portfolio. The Fund's investment strategy focuses on identifying companies that we believe have solid balance sheets and are generating strong financial results. The Fund's bias towards seeking high quality companies is shown in the table below:
- ------------------------------------------------------------------- % LONG- RETURN EARNINGS REVENUE TERM ON 5 YEAR 5 YEAR DEBT/ EQUITY GROWTH GROWTH TOTAL 5 YEAR RATE(3) RATE(4) CAPITAL(5) AVERAGE(6) - ------------------------------------------------------------------- The Guardian Park Avenue Fund 13% 9% 23% 19% - ------------------------------------------------------------------- S&P 500 Index 6% 7% 35% 15% - ------------------------------------------------------------------- Note: Median data as of 06-30-03. Source: Baseline, Factset - -------------------------------------------------------------------
Although the recent market environment has not favored higher quality stocks, our investment strategy is based on our philosophy that investing in companies with strong fundamentals has the potential to produce attractive long-term performance. We are committed to adhering to this strategy and will not abandon our investment discipline to chase a short-term market phenomenon. We are taking advantage of the current market environment by opportunistically adding to the Fund's holdings that have become more attractively valued and trimming those positions that we believe have become too expensive. The Fund remains modestly overweight in the technology sector in which our sector specialist identified several high quality software and semiconductor companies. The Fund is underweight in cyclical consumer and industrial companies due to the lack of visibility in generating future revenue and earnings growth.
- -------------------------------------------------------------- TOP TEN HOLDINGS AS OF JUNE 30, 2003 Company Percent of Total Net Assets - -------------------------------------------------------------- 1. Pfizer, Inc. 5.57% - -------------------------------------------------------------- 2. Verizon Comm. 3.79% - -------------------------------------------------------------- 3. General Electric Co. 3.23% - -------------------------------------------------------------- 4. American Int'l. Group, Inc. 3.15% - -------------------------------------------------------------- 5. Microsoft Corp. 3.03% - -------------------------------------------------------------- 6. Wal-Mart Stores, Inc. 2.86% - -------------------------------------------------------------- 7. Cisco Systems, Inc. 2.66% - -------------------------------------------------------------- 8. AmerisourceBergen Corp. 2.61% - -------------------------------------------------------------- 9. Lockheed Martin Corp. 2.58% - -------------------------------------------------------------- 10. Adobe Systems, Inc. 2.44% - --------------------------------------------------------------
- -------------------- (3) Earnings 5-Year Growth Rate - The median earnings growth rate for the companies in the Fund and the S&P 500 Index for the past five years. A higher number indicates a greater rate of earnings growth. (4) Revenue 5-year Growth Rate - The median revenue growth rate for the companies in the Fund and the S&P 500 Index for the past five years. A higher number indicates a greater rate of revenue growth. (5) % Long Term Debt / Total Capital--The median long-term debt as a proportion of capital for the companies in the Fund and the S&P 500 Index as of 06/30/03. A lower number indicates a company's greater ability to pay off outstanding debt. (6) Return on Equity 5-Year Average - The median return on equity of the last five fiscal years for the companies in the Fund and the S&P 500 Index. Return on Equity is an indicator of profitability and a higher number indicates greater profitability. - -------------------------------------------------------------------------------- 3 THE GUARDIAN PARK AVENUE FUND SECTOR WEIGHTINGS HELD BY THE FUND AS OF JUNE 30, 2003 [PIE CHART] Information Technology 22.47% Financials 20.43% Health Care 16.91% Consumer Staples 10.64% Energy 7.32% Industrials 6.79% Consumer Discretionary 4.00% Telecommunication Services 3.79% Materials 3.31% Utilities 2.23% Cash 2.11%
- ------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Date 1 year 3 Years 5 Years 10 Years Since Inception - ------------------------------------------------------------------------------------------------------------ Class A Shares (without sales charge) 6/1/72 -2.32% -19.26% -5.54% 7.42% 13.10% - ------------------------------------------------------------------------------------------------------------ Class A Shares (with sales charge) 6/1/72 -6.72% -20.49% -6.41% 6.93% 12.93% - ------------------------------------------------------------------------------------------------------------ Class B Shares (without sales charge) 5/1/96 -3.29% -20.02% -6.41% NA 3.44% - ------------------------------------------------------------------------------------------------------------ Class B Shares (with sales charge) 5/1/96 -6.19% -20.56% -6.60% NA 3.44% - ------------------------------------------------------------------------------------------------------------ Class C Shares (without sales charge) 8/7/00 -3.58% NA NA NA -20.99% - ------------------------------------------------------------------------------------------------------------ Class C shares (with sales charge) 8/7/00 -4.54% NA NA NA -20.99% - ------------------------------------------------------------------------------------------------------------ Class K Shares (without sales charge) 5/15/01 -2.64% NA NA NA -12.92% - ------------------------------------------------------------------------------------------------------------ Class K Shares (with sales charge) 5/15/01 -3.61% NA NA NA -12.92% - ------------------------------------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Prior to August 25, 1988, Class A shares of the Fund were offered at a higher sales charge, so that actual returns would have been somewhat lower. - -------------------------------------------------------------------------------- 4 THE GUARDIAN PARK AVENUE FUND GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT [LINE GRAPH]
THE GUARDIAN PARK AVENUE FUND S&P 500 COST OF LIVING ------------------------ ------- -------------- 6/1/72 10000.00 10000.00 10000.00 9352.07 9790.85 10024.00 1972 9914.46 10935.50 10209.80 7753.41 9801.76 10616.50 1973 8349.32 9320.12 11105.80 8088.37 8376.16 11779.30 1974 7010.23 6860.77 12476.50 10193.90 9724.30 12885.20 1975 10301.80 9410.43 13341.90 12914.10 11077.20 13654.40 1976 14711.80 11628.00 13991.00 15531.70 11107.60 14592.00 1977 15877.50 10765.90 14928.50 17931.80 11100.90 15673.70 1978 18177.60 11454.10 16274.70 20437.50 12582.60 17380.50 1979 23464.90 13538.80 18438.30 24606.70 14721.40 19880.70 1980 28512.40 17907.00 20746.10 30517.80 17725.10 21779.80 1981 30159.70 17009.40 22597.10 28186.70 15681.50 23318.30 1982 37817.80 20656.20 23462.50 49542.70 25227.30 23919.30 1983 48638.80 25279.70 24352.00 47763.90 24026.80 24928.90 1984 54796.70 26822.10 25313.60 64932.50 31408.80 25866.50 1985 72870.60 35288.90 26275.20 93437.60 42589.10 26323.20 1986 86265.10 41837.40 26563.60 104493.00 53265.20 27284.80 1987 88817.70 43971.70 27741.60 107179.00 49508.40 28366.60 1988 107273.00 51153.70 28967.60 124125.00 59543.20 29833.00 1989 132839.00 67203.70 30313.80 131828.00 69207.30 31227.30 1990 116458.00 65040.90 32164.80 136676.00 74297.50 32693.70 1991 157405.00 84769.50 33150.40 159261.00 84210.30 33703.30 1992 189636.00 91213.70 34112.00 215388.00 95625.60 34713.00 1993 228090.00 100349.00 35049.60 218928.00 96957.00 35578.40 1994 224815.00 101655.00 35987.10 270965.00 122113.00 36660.20 1995 301881.00 139649.00 36900.60 334237.00 153694.00 37669.90 1996 399827.00 171525.00 38126.60 452077.00 206864.00 38535.30 1997 514907.00 228623.00 38775.70 585927.00 269200.00 39184.30 1998 624578.00 294369.00 39400.70 675279.00 330799.00 39953.60 1999 813487.00 356272.00 40459.40 836898.00 354761.00 41418.50 2000 662010.00 323862.00 41563.60 2001 565937.00 302233.00 42994.70 2002 406361.00 222359.00 43190.00 6/30/03 440524.00 248505.00 43597.00
PERFORMANCE FOR CLASS B, CLASS C, AND CLASS K SHARES, WHICH WERE FIRST OFFERED ON MAY 1, 1996, AUGUST 7, 2000, AND MAY 15, 2001, RESPECTIVELY, WILL VARY DUE TO DIFFERENCES IN SALES LOAD AND OTHER EXPENSES CHARGED TO EACH SHARE CLASS. A hypothetical $10,000 investment in Class A shares made at the inception of The Guardian Park Avenue Fund on June 1, 1972 has a starting point of $9,550, which reflects the current maximum sales charge for Class A shares of 4.5%. This investment would have grown to $440,524 on June 30, 2003. We compare our performance to that of the S&P 500 Index, an unmanaged index that is generally considered the performance benchmark of the U.S. stock market. While you cannot invest directly in the S&P 500 Index, a similar hypothetical investment would now be worth $248,505. The Cost of Living, as measured by the Consumer Price Index, is generally representative of the level of U.S. inflation and is provided to lend a more complete understanding of the investment's real worth. This performance does not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Returns represent past performance and are not indicative of future results. - -------------------------------------------------------------------------------- 5 THE GUARDIAN UBS LARGE CAP VALUE FUND The Guardian UBS Large Cap Value Fund is managed by a team of investment professionals from the Fund's sub-adviser, UBS Global Asset Management (Americas) Inc., with many years of experience in large cap value investment management. 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: February 3, 2003 NET ASSETS AT JUNE 30, 2003: $86,821,009 Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A: For the period from Fund inception on February 3, 2003 and ending June 30, 2003, The Guardian UBS Large Cap Value Fund had a total return of 13.76%(1) versus 13.71% for its benchmark, the Russell 1000 Value Index.(2) Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A: Our focus on finding stocks trading below our estimate of their intrinsic values served the Fund well amid the volatility that characterized the reporting period. Price to intrinsic value refers to the discrepancy between a stock's current price and its fair value. Our analysts thoroughly review a company's underlying fundamentals and employ forward-looking projections regarding its likely prospects in order to assess a company's intrinsic (fair) value. Our disciplined investment strategy led us to overweight select utilities, as well as the health care and pharmaceuticals and transportation sectors. Furthermore, our research concluded that underweighting utilities that had exposure to trading operations, in addition to underweighting media and insurance stocks, was warranted. - -------------------------------------------------------------------------------- "Heading into the second half of 2003, we will continue emphasizing our "bottom-up" investment process, which focuses on a company's cash flow to identify intrinsic value that may lead to favorable risk-adjusted returns over an entire market cycle." - -------------------------------------------------------------------------------- As we moved through the second quarter 2003, we enjoyed strong results from the Fund's core holdings in the pharmaceutical, banking and utility sectors. On the other hand, retailing, food and beverage and computer hardware companies did not typically meet our intrinsic value criteria, so we reduced our positions in those areas. In general, we were also cautious about the technology sector, and from our perspective the sharp gains it posted in the second quarter 2003 do not appear warranted from a fundamental perspective. Q: WHAT IS YOUR OUTLOOK GOING FORWARD? A: During the reporting period, market fundamentals were often not the driving forces behind stock prices. We have found that during periods of extreme optimism or pessimism, many investors lose sight of the critical factors that should dictate the fair value of a stock's price. It is during those times that our disciplined investment process can be especially valuable in helping us to identify compelling price to intrinsic value discrepancies in the marketplace. Heading into the second half of 2003, we will continue emphasizing our "bottom-up" investment process, which focuses on a company's cash flow to identify intrinsic value that may lead to favorable risk-adjusted returns over an entire market cycle. - -------------------- (1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. (2) The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index. The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Value Index and the Russell 1000 Index are unmanaged indices, they are not available for direct investment, and their returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the indices do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. - -------------------------------------------------------------------------------- 6 THE GUARDIAN UBS LARGE CAP VALUE FUND SECTOR WEIGHTINGS HELD BY THE FUND AS OF JUNE 30, 2003 [PIE CHART]
HEALTH TELECOMMUNICATION INFORMATION FINANCIALS CARE INDUSTRIALS UTILITIES SERVICES MATERIALS ENERGY TECHNOLOGY - ---------- ------ ----------- --------- ----------------- --------- ------ ----------- 33.49% 12.67% 10.22% 9.47% 9.00% 7.48% 6.02% 4.89% CONSUMER CONSUMER DISCRETIONARY STAPLES ------------- -------- 3.96% 2.80%
- ----------------------------------------------------- TOP TEN HOLDINGS AS OF JUNE 30, 2003 Company Percent of Total Net Assets - ----------------------------------------------------- 1. Citigroup, Inc. 5.91% - ----------------------------------------------------- 2. Nextel Comm., Inc. 5.04% - ----------------------------------------------------- 3. J.P. Morgan Chase & Co. 4.47% - ----------------------------------------------------- 4. Wells Fargo & Co. 4.26% - ----------------------------------------------------- 5. GreenPoint Financial Corp. 3.51% - ----------------------------------------------------- 6. UnitedHealth Group 3.19% - ----------------------------------------------------- 7. Exxon Mobil Corp. 2.95% - ----------------------------------------------------- 8. ConocoPhillips 2.90% - ----------------------------------------------------- 9. Morgan Stanley 2.86% - ----------------------------------------------------- 10. Illinois Tool Works, Inc. 2.57% - -----------------------------------------------------
- -------------------------------------------------------------- TOTAL RETURNS(1) FOR PERIOD ENDED JUNE 30, 2003 Inception Since Date Inception - -------------------------------------------------------------- Class A Shares (without sales charge) 2/3/03 13.76% - -------------------------------------------------------------- Class A Shares (with sales charge) 2/3/03 8.64% - -------------------------------------------------------------- Class B Shares (without sales charge) 2/3/03 13.43% - -------------------------------------------------------------- Class B Shares (with sales charge) 2/3/03 10.43% - -------------------------------------------------------------- Class C Shares (without sales charge) 2/3/03 13.43% - -------------------------------------------------------------- Class C shares (with sales charge) 2/3/03 12.43% - -------------------------------------------------------------- Class K Shares (without sales charge) 2/3/03 13.55% - -------------------------------------------------------------- Class K Shares (with sales charge) 2/3/03 12.55% - --------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum of 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 7 THE GUARDIAN PARK AVENUE SMALL CAP FUND [PHOTO] OBJECTIVE: Long-term growth of Matthew Ziehl capital Portfolio Manager PORTFOLIO: At least 85% in a diversified portfolio of common stocks and convertible securities issued by companies with small market capitalization at time of initial purchase INCEPTION: May 1, 1997
NET ASSETS AT JUNE 30, 2003: $154,328,239 Q: HOW DID THE FUND PERFORM DURING THE FIRST SIX MONTHS OF 2003? A: Refreshingly, the U.S. stock market posted a strong first half of 2003 (yes, indeed -- stocks actually went up, not down) after three years of a grinding bear market. Small caps led the way, as the Russell 2000 Index(1) gained 17.88% versus 11.76% for the S&P 500 Index.(2) The Park Avenue Small Cap Fund also posted strong gains, but performance trailed the benchmark by 3.59% during the first half of the year, with a return of 14.29%(3) versus 17.88% for the Russell 2000. Most of the underperformance came during the second quarter, as the stock market reversed early-year declines and experienced a sharp rally after the invasion of Iraq commenced in March. This rally was led by highly speculative companies; from early March through the end of June, the Russell 2000's strongest performers were companies with low fundamental quality. These companies typically have negative earnings, stocks priced below five dollars a share, and represent the smallest stocks in the Russell 2000 (less than $500 million market cap). These are the very same categories of stocks that had been severely beaten down since the bursting of the "dot-com" bubble in early 2000. This environment made it challenging for the Fund to keep pace during the run-up, because we tend to avoid these types of companies. The Park Avenue Small Cap Fund has lower representation than the benchmark in stocks with low fundamental quality. Such companies do not fit into our disciplined investment process, which focuses on companies with high fundamental quality -- those companies that we believe are demonstrably superior to their competitors in terms of financial strength, profitability, and management skill. Within this broader market context, relative performance was driven by stock selection rather than by sector allocations. This is consistent with our investment discipline, which emphasizes selecting individual stocks rather than placing large "bets" on one market sector versus another. Underperformance in financial, industrial and healthcare stocks more than offset good returns within the consumer, basic materials and technology sectors. Q: WHAT WAS YOUR INVESTMENT STRATEGY? A: As we entered 2003, the economy appeared to be stabilizing and the stock market began to settle down after a period of historically high volatility. However, by mid-January it became increasingly apparent that the U.S. would soon go to war with Iraq, and the stock market began to sell off on concerns that the economic recovery was at risk. Consistent with our investment discipline, we maintained a particular emphasis on high quality companies with strong competitive positions, management, and financial strength (balance sheet, cash flows, profit margins). We believe that such companies are better able to weather a business downturn than financially weaker competitors, and tend to emerge stronger and with higher market share when business conditions improve. We expected our investment discipline to result in outperformance in this uncertain environment, as it had during 2002. Throughout the first half of 2003, we moderately underweighted consumer cyclical stocks, as we believed consumers' high current level of spending was vulnerable to ongoing job losses and the high level of debt consumers were already shouldering. We also were neutral to slightly underweight in industrial companies (such as machinery, construction, etc.) as we saw little evidence of improving demand in the manufacturing economy. We did expect improved demand in several areas of technology spending at the corporate level, such as PC's, networking and storage, and therefore positioned the Fund with a moderate overweight in technology stocks. - -------------------------------------------------------------------------------- "We have built our investment process on the basic philosophy that investing in companies with high fundamental quality will lead to solid long-term Fund performance." - -------------------------------------------------------------------------------- On balance, we believed the Fund was well-positioned for current economic weakness as well as an eventual recovery, focused on stocks of quality companies that could survive and gain market share in the lean times, and then benefit strongly as customer demand improved. From a fundamental perspective, we believe we were largely correct. However, the market displayed a voracious appetite for the riskiest companies with the highest financial upside if the economy recovered strongly, even though many of these companies were in or near financial distress in the current period. - -------------------- (1) The Russell 2000 Index is an unmanaged index that is generally considered to be representative of small capitalization issues in the U.S. stock market. The Russell 2000 Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the Russell 2000 Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (2) 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. The S&P 500 Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (3) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 8 THE GUARDIAN PARK AVENUE SMALL CAP FUND Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE? A: We believe that the exuberant rally in stock prices since March suggests that investors have already priced in lofty expectations for economic growth -- and resulting earnings per share (EPS) acceleration -- in the back half of the year. We do expect some improvement in the economy, driven by low interest rates and fiscal stimulus such as tax cuts. But the rate of this improvement will likely fall short of market expectations. We do not see significant job growth on the near term horizon, which puts consumer spending (over 2/3rds of total U.S. economic output) at risk, and corporations are not yet confident enough about the demand outlook to significantly ramp up their investment spending at this time. This latter point suggests to us that companies are less optimistic than the investment community regarding their own profit growth. If EPS growth during the second half of 2003 is slower than the market seems to be expecting, we could see some retrenchment of the recent stock market gains, or at least very little additional upside for the balance of the year. In either scenario, we would expect the speculative activity to lose steam, and for higher-quality companies to reassert market leadership. After all, by definition these "quality" companies are the ones that have demonstrated the ability to deliver stronger financial results more consistently than speculative and distressed companies. If the economic environment continues to be challenging, this pattern should continue and should also be reflected in relative stock price performance. Put another way, this is no time to abandon our investment discipline in order to chase the recent strong stock price performance by lower-quality companies. Although the recent market environment has not favored stocks of high-quality companies, and we believe that this situation may recur at times in the future, we will not compromise our core principles to chase a fleeting trend. We have built our investment process on the basic philosophy that investing in companies with high fundamental quality will lead to solid long-term Fund performance. SECTOR WEIGHTINGS HELD BY THE FUND AS OF JUNE 30, 2003 [PIE CHART] Information Technology 24.97% Financials 20.89% Health Care 12.39% Consumer Staples 5.17% Energy 3.33% Industrials 11.14% Consumer Discretionary 11.44% Telecommunication Services 1.62% Materials 5.08% Utilities 2.33% Cash 1.64%
- ------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Date 1 year 3 Years 5 Years Since Inception - ------------------------------------------------------------------------------------------------- Class A Shares (without sales charge) 5/1/97 -1.55% -7.72% 0.99% 7.04% - ------------------------------------------------------------------------------------------------- Class A Shares (with sales charge) 5/1/97 -5.98% -9.13% 0.06% 6.24% - ------------------------------------------------------------------------------------------------- Class B Shares (without sales charge) 5/6/97 -2.51% -8.53% -0.10% 5.56% - ------------------------------------------------------------------------------------------------- Class B Shares (with sales charge) 5/6/97 -5.43% -9.14% -0.30% 5.56% - ------------------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 -2.65% NA NA -9.66% - ------------------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 -3.62% NA NA -9.66% - ------------------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 -1.83% NA NA -2.76% - ------------------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 -2.81% NA NA -2.76% - -------------------------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum of 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 9 THE GUARDIAN UBS SMALL CAP VALUE FUND The Guardian UBS Small Cap Value Fund is managed by a team of investment professionals from the Fund's sub-adviser, UBS Global Asset Management (Americas) Inc. with many years of experience in small cap value investment management. 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 initial purchase INCEPTION: February 3, 2003 NET ASSETS AT JUNE 30, 2003: $41,141,856 Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD? A: Since its inception on February 3, 2003 through June 30, 2003, The Guardian UBS Small Cap Value Fund had a total return of 15.10%(1) versus 20.34% for its benchmark, the Russell 2000 Value Index.(2) Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A: The equity markets were weak during the first quarter of 2003, as concerns regarding the war in Iraq caused investors to shun stocks in favor of less risky investments. However, during the second quarter of 2003 the equity markets rallied strongly, as investors were encouraged by the quick end to the conflict in Iraq and the possibility of a sustainable economic rebound as the year progressed. In particular, investors were drawn to the most volatile sectors of the market, including technology and health care stocks. Low price stocks and those with negative earnings were strong performers in the small cap market. The Fund underperformed its benchmark since its inception due largely to its conservative position in terms of volatility. Fund performance was also affected by negative earnings reports by several portfolio holdings. Fund stock selection was negative for health care (due to an underweight in biotechnology), business services and motor vehicles. On the other hand, the Fund's stock selection for retail and consumer discretionary stocks enhanced results. An overweight in medical services stocks also aided Fund performance. - -------------------------------------------------------------------------------- "The Fund continues to favor companies with high earnings yields (low P/E ratios), low earnings variation, and strong free cash flow generation." - -------------------------------------------------------------------------------- Q: WHAT IS YOUR STRATEGY GOING FORWARD? A: At the end of the reporting period, the Fund's largest sector overweights were in information technology and consumer discretionary, while its largest underweights were in financials and materials. The Fund continues to favor companies with high earnings yields (low P/E ratios), low earnings variation, and strong free cash flow generation. - -------------------- (1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. (2) The Russell 2000 Value Index measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000 Index. The Russell 2000 Index and the Russell 2000 Value Index are unmanaged indices, they are not available for direct investment, and their returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the Indices do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. - -------------------------------------------------------------------------------- 10 THE GUARDIAN UBS SMALL CAP VALUE FUND SECTOR WEIGHTINGS HELD BY THE FUND AS OF JUNE 30, 2003 [PIE CHART]
CONSUMER INFORMATION HEALTH CONSUMER FINANCIALS DISCRETIONARY TECHNOLOGY INDUSTRIALS CARE MATERIALS ENERGY STAPLES UTILITIES - ---------- ------------- ----------- ----------- ------ --------- ------ -------- --------- 24.73% 19.28% 14.43% 12.00% 9.32% 7.79% 4.45% 3.99% 3.97% TELECOMMUNICATION SERVICES ----------------- 0.04%
- ----------------------------------------------------- TOP TEN HOLDINGS AS OF JUNE 30, 2003 Company Percent of Total Net Assets - ----------------------------------------------------- 1. iShares Russell 2000 Value Index Fund 2.28% - ----------------------------------------------------- 2. AmerUs Group Co. 2.19% - ----------------------------------------------------- 3. IndyMac Bancorp, Inc. 2.17% - ----------------------------------------------------- 4. City National Corp. 2.16% - ----------------------------------------------------- 5. Renal Care Group, Inc. 2.11% - ----------------------------------------------------- 6. Parkway Pptys., Inc. 1.92% - ----------------------------------------------------- 7. Trustmark Corp. 1.90% - ----------------------------------------------------- 8. Department 56, Inc. 1.86% - ----------------------------------------------------- 9. Colonial BancGroup, Inc. 1.80% - ----------------------------------------------------- 10. Polaris Industries, Inc. 1.79% - -----------------------------------------------------
- -------------------------------------------------------------- TOTAL RETURNS(1) FOR PERIOD ENDED JUNE 30, 2003 Inception Since Date Inception - -------------------------------------------------------------- Class A Shares (without sales charge) 2/3/03 15.10% - -------------------------------------------------------------- Class A Shares (with sales charge) 2/3/03 9.92% - -------------------------------------------------------------- Class B Shares (without sales charge) 2/3/03 14.80% - -------------------------------------------------------------- Class B Shares (with sales charge) 2/3/03 11.80% - -------------------------------------------------------------- Class C Shares (without sales charge) 2/3/03 14.80% - -------------------------------------------------------------- Class C shares (with sales charge) 2/3/03 13.80% - -------------------------------------------------------------- Class K Shares (without sales charge) 2/3/03 15.00% - -------------------------------------------------------------- Class K Shares (with sales charge) 2/3/03 14.00% - --------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum of 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 11 THE GUARDIAN ASSET ALLOCATION FUND [PHOTO] OBJECTIVE: Long-term total Jonathan C. Jankus, investment return consistent with C.F.A. moderate investment risk Portfolio Manager PORTFOLIO: Generally purchases shares of The Guardian S&P 500 Index, The Guardian Park Avenue, The Guardian Investment Quality Bond, and/or The Guardian Cash Management Funds. Also invests in individual securities and uses futures to manage allocations among the equity, debt and money market asset classes INCEPTION: February 16, 1993
NET ASSETS AT JUNE 30, 2003: $153,559,450 Q: THIS HAS BEEN A VOLATILE PERIOD FOR THE FINANCIAL MARKETS. HOW HAS THE FUND PERFORMED? A: In the first half of this year, the total return on stocks, as measured by the S&P 500 Index,(1) was 11.76% and the total return on bonds, as measured by the Lehman Aggregate Bond Index(2) was 3.93%. Our theoretical benchmark, a model portfolio with 60% of its value in the S&P 500 Index and 40% in the Lehman Aggregate Bond Index (rebalanced monthly) would have returned 8.66%. We are pleased to report that, by comparison, the Fund's return over the period was 11.51%(3) with dividends reinvested. Q: WHAT STRATEGIES WERE USED BY THE FUND AND HOW DID THEY AFFECT PERFORMANCE? A: As always, the Fund is managed using proprietary quantitative models that attempt to judge the relative risk-adjusted attractiveness of the stock, bond and cash markets. While interest rates are the operative variables in the fixed income markets, corporate profitability and growth are added to the mix for the equity markets. - -------------------------------------------------------------------------------- "As always, the Fund is managed using proprietary quantitative models which attempt to judge the relative risk-adjusted attractiveness of the stock, bond and cash markets." - -------------------------------------------------------------------------------- In general, a benign interest rate environment and an economy which appears to be recovering from a recession led us to hold an aggressive equity exposure relative to cash and bonds. Specifically, at year-end 2002, the Fund's stock/bond/cash mix was approximately 100/0/0, and we have maintained that posture. These weightings should be compared to the completely neutral 60/40/0 mix that we would expect to own if the markets were all fairly valued relative to one another. Our models are driven by quantifiable economic variables dealing with corporate profitability and interest rates. For better or worse, over the past two years the markets have been driven by factors that are not amenable to quantification, such as corporate malfeasance, terrorism and war. These are important matters to be sure, but not captured in our models. Hopefully, as these concerns subside and are dealt with, our models will continue to deliver value to our investors. Q: WHAT ARE YOUR EXPECTATIONS FOR THE FUTURE AND HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THOSE EXPECTATIONS? A: We continue to be very aggressively positioned, and we will maintain this stance until either interest rates increase sufficiently or corporate profitability collapses in spite of an accommodative Federal Reserve combined with a stimulative fiscal stance. Historically, this monetary/fiscal combination has proved to be a powerful positive force for the markets. From a pure relative valuation perspective, equities continue to look extremely attractive. - -------------------- (1) 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. The S&P 500 Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (2) The Lehman Aggregate Bond Index is an unmanaged index that is generally considered to be representative of U.S. bond market activity. The Lehman Aggregate Bond Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the Lehman Aggregate Bond Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (3) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 12 THE GUARDIAN ASSET ALLOCATION FUND PORTFOLIO COMPOSITION BY ASSET CLASS AS OF JUNE 30, 2003 [PIE CHART]
CASH FIXED INCOME COMMON STOCKS - ---- ------------ ------------- 0.11% 0.13% 99.76%
- ------------------------------------------------------ TOP TEN HOLDINGS AS OF JUNE 30, 2003 Company Percent of Total Net Assets - ------------------------------------------------------ 1. The Guardian S&P 500 Index Fund 66.56% - ------------------------------------------------------ 2. The Guardian Investment Quality Bond 17.00% Fund - ------------------------------------------------------ 3. Pfizer, Inc. 0.48% - ------------------------------------------------------ 4. General Electric Co. 0.45% - ------------------------------------------------------ 5. Microsoft Corp. 0.44% - ------------------------------------------------------ 6. Exxon Mobil Corp. 0.39% - ------------------------------------------------------ 7. Wal-Mart Stores, Inc. 0.37% - ------------------------------------------------------ 8. Citigroup, Inc. 0.32% - ------------------------------------------------------ 9. Bank of America Corp. 0.24% - ------------------------------------------------------ 10. Johnson & Johnson 0.23% - ------------------------------------------------------
- ------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Since Date 1 year 3 Years 5 Years 10 Years Inception - ------------------------------------------------------------------------------------------------------ Class A Shares (without sales charge) 2/16/93 0.13% -8.46% -0.18% 7.45% 7.83% - ------------------------------------------------------------------------------------------------------ Class A Shares (with sales charge) 2/16/93 -4.38% -9.85% -1.10% 6.96% 7.35% - ------------------------------------------------------------------------------------------------------ Class B Shares (without sales charge) 5/1/96 -0.73% -9.24% -1.02% NA 5.15% - ------------------------------------------------------------------------------------------------------ Class B Shares (with sales charge) 5/1/96 -3.71% -9.85% -1.22% NA 5.15% - ------------------------------------------------------------------------------------------------------ Class C Shares (without sales charge) 8/7/00 -0.97% NA NA NA -10.53% - ------------------------------------------------------------------------------------------------------ Class C shares (with sales charge) 8/7/00 -1.96% NA NA NA -10.53% - ------------------------------------------------------------------------------------------------------ Class K Shares (without sales charge) 5/15/01 -0.24% NA NA NA -9.13% - ------------------------------------------------------------------------------------------------------ Class K Shares (with sales charge) 5/15/01 -1.24% NA NA NA -9.13% - ------------------------------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum of 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 13 THE GUARDIAN S&P 500 INDEX FUND [PHOTO] OBJECTIVE: Seeks to track the Jonathan C. Jankus, investment performance of the C.F.A. Standard & Poor's 500 Composite Portfolio Manager Stock Price Index (the "S&P 500 Index") PORTFOLIO: Common stocks of companies included in the S&P 500 Index, which emphasizes securities issued by large U.S. companies INCEPTION: August 7, 2000
NET ASSETS AT JUNE 30, 2003: $134,971,910 Q: THIS HAS BEEN A VOLATILE PERIOD FOR THE FINANCIAL MARKETS. HOW HAS THE FUND PERFORMED? A: In the first half of this year, the total return on stocks, as measured by the S&P 500 Index,(1) was 11.76%. The Fund's return over the period was 11.30%.(2) Q: WHAT STRATEGIES WERE USED BY THE FUND AND HOW DID THEY AFFECT PERFORMANCE? A: As an index fund, the Fund's goal is to mimic the returns of the theoretical S&P 500 Index portfolio. We attempt to do so by holding nearly all 500 of the stocks in the index in approximately the same weights as they are represented in the index. We attempt to minimize trading costs and trade only when rebalancings are required by capitalization changes in the index or when dividends need to be reinvested. - -------------------------------------------------------------------------------- "As an index fund, the Fund's goal is to mimic the returns of the theoretical S&P 500 Index portfolio. We attempt to do so by holding nearly all 500 of the stocks in the index in approximately the same weights as they are represented in the index." - -------------------------------------------------------------------------------- Q: WHAT ARE YOUR EXPECTATIONS FOR THE FUTURE AND HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THOSE EXPECTATIONS? A: As passive investors, we do not attempt to engage in either market timing or active security selection decisions. Our only goal is to match the returns of the broad equity market (as measured by the S&P 500 Index) in the most efficient way. - -------------------- (1) "S&P," "S&P 500(R)," "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. The S&P 500 Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (2) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Since inception, 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. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 14 THE GUARDIAN S&P 500 INDEX FUND SECTOR WEIGHTING COMPARISONS SECTOR WEIGHTINGS HELD BY THE GUARDIAN S&P 500 INDEX FUND AS OF JUNE 30, 2003 [PIE CHART]
INFORMATION HEALTH CONSUMER CONSUMER TELECOMMUNICATION FINANCIALS TECHNOLOGY CARE STAPLES DISCRETIONARY INDUSTRIALS ENERGY SERVICES - ---------- ----------- ------ -------- ------------- ----------- ------ ----------------- 20.47% 16.18% 14.80% 11.71% 11.14% 10.32% 5.81% 3.85% UTILITIES MATERIALS CASH --------- --------- ---- 2.95% 2.68% 0.09%
SECTOR WEIGHTINGS FOR THE S&P 500 INDEX AS OF JUNE 30, 2003 [PIE CHART]
INFORMATION HEALTH CONSUMER CONSUMER TELECOMMUNICATION FINANCIALS TECHNOLOGY CARE DISCRETIONARY INDUSTRIALS STAPLES ENERGY SERVICES - ---------- ----------- ------ ------------- ----------- -------- ------ ----------------- 20.46% 16.18% 14.83% 11.06% 10.44% 11.66% 5.79% 3.89% UTILITIES MATERIALS --------- --------- 3.03% 2.66%
- ----------------------------------------------------- TOP TEN HOLDINGS AS OF JUNE 30, 2003 Company Percent of Total Net Assets - ----------------------------------------------------- 1. General Electric Co. 3.11% - ----------------------------------------------------- 2. Microsoft Corp. 3.00% - ----------------------------------------------------- 3. Pfizer, Inc. 2.99% - ----------------------------------------------------- 4. Exxon Mobil Corp. 2.65% - ----------------------------------------------------- 5. Wal-Mart Stores, Inc. 2.60% - ----------------------------------------------------- 6. Citigroup, Inc. 2.37% - ----------------------------------------------------- 7. Johnson & Johnson 1.67% - ----------------------------------------------------- 8. American Int'l. Group, Inc. 1.55% - ----------------------------------------------------- 9. Intel Corp. 1.51% - ----------------------------------------------------- 10. Int'l. Business Machines 1.51% - -----------------------------------------------------
- ----------------------------------------------------------------------- AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Since Date 1 year Inception - ----------------------------------------------------------------------- Class A Shares (without sales charge) 8/7/00 -0.29% -12.40% - ----------------------------------------------------------------------- Class A Shares (with sales charge) 8/7/00 -4.78% -13.78% - ----------------------------------------------------------------------- Class B Shares (without sales charge) 8/7/00 -1.30% -13.16% - ----------------------------------------------------------------------- Class B Shares (with sales charge) 8/7/00 -4.26% -13.76% - ----------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 -1.44% -13.20% - ----------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 -2.43% -13.20% - ----------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 -0.95% -11.68% - ----------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 -1.94% -11.68% - -----------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum of 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Since inception, 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. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 15 THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND [PHOTO] OBJECTIVE: Long-term growth of R. Robin Menzies capital Portfolio Manager PORTFOLIO: At least 80% in a diversified portfolio of common stocks and convertible securities of companies domiciled outside of the United States INCEPTION: February 16, 1993
NET ASSETS AT JUNE 30, 2003: $62,904,510 Q: HOW DID THE FUND PERFORM FOR THE FIRST SIX MONTHS OF 2003? A: In the first six months of 2003, the total return for the Fund was 8.21%,(1) compared with the total return of 9.85% for the MSCI EAFE Index(2) during the same period. This welcome increase came as markets recovered strongly from their low levels of late March as the uncertainty over war dissipated. The weakness of the U.S. dollar boosted the return from investing internationally. In local currency terms, the MSCI EAFE Index had a total return of only 4.79%. Most markets performed well; MSCI Germany, for example, had a total return of 21.40%. Japan and Hong Kong were notable laggards, with total returns for their respective MSCI Indices of 3.06% and 3.48%.(3) MSCI Industry returns were even more widely varied than country returns. While in general consumer-related industries performed relatively poorly, those sectors originally viewed with a great uncertainty performed better than expected, as investor confidence returned. Software and services rose by over 30%, for example, while food, beverage and tobacco remained unchanged. Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A: The Fund performed slightly less well than the MSCI EAFE Index due to relatively poor stock selection in Continental Europe, and as a result of holding working cash balances as markets rose. Favorable factors included having a good stock selection in the UK and a small exposure to emerging markets. Despite the lackluster performance of the food, beverage and tobacco industry, the Fund's holdings in that industry performed well. - -------------------------------------------------------------------------------- "We will continue to concentrate on seeking well-run and fundamentally strong companies for the Fund." - -------------------------------------------------------------------------------- Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE? A: The end of the war in Iraq, very low interest rates, and continuing monetary stimulation are all factors that appear to provide a positive background for recovery, especially in the USA, which is important for economic activity in the rest of the world. However, we believe that consumer and business confidence may take time to recover from the uncertainties of the last few years. Companies are focusing more on improving their balance sheets than making new capital investments and consumers want to see evidence of improving employment prospects before they increase discretionary expenditure. In the short-term, our concern is that investor expectations have run ahead of underlying economic realities, but our long-term mood is optimistic. We will continue to concentrate on seeking well-run and fundamentally strong companies for the Fund. - -------------------- (1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. (2) The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index is an unmanaged index that is generally considered to be representative of international stock market activity. The MSCI EAFE Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund. (3) These indexes are all unmanaged indexes generally considered to be representative of their covered region. The MSCI Germany Index is generally considered to be representative of the stock market activity of Germany. The MSCI Japan Index is generally considered to be representative of Japanese stock market activity. The MSCI Hong Kong Index is generally considered to be representative of the stock market activity of Hong Kong. The returns for these indexes do not reflect the fees and expenses that have been deducted from the Fund. Likewise, return figures for the Indexes do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. - -------------------------------------------------------------------------------- 16 THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND PORTFOLIO COMPOSITION BY GEOGRAPHIC LOCATION AS OF JUNE 30, 2003 [PIE CHART]
CONTINENTAL UK JAPAN ASIA EX-JAPAN EUROPE AUSTRALASIA EMERGING MARKETS - -- ----- ------------- ----------- ----------- ---------------- 28.61% 19.36% 1.16% 42.61% 4.28% 3.98%
- -------------------------------------------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF JUNE 30, 2003 Company Percent of Total Net Assets Industry Sector Country - -------------------------------------------------------------------------------------------------------------------- 1. GlaxoSmithKline PLC 3.81% Pharmaceuticals United Kingdom - -------------------------------------------------------------------------------------------------------------------- 2. Vodafone Group 3.71% Wireless Telecommunication Services United Kingdom - -------------------------------------------------------------------------------------------------------------------- 3. Nokia OYJ 3.17% Communications Equipment Finland - -------------------------------------------------------------------------------------------------------------------- 4. Imperial Tobacco 2.76% Tobacco United Kingdom - -------------------------------------------------------------------------------------------------------------------- 5. Total S.A. 2.73% Oil and Gas France - -------------------------------------------------------------------------------------------------------------------- 6. Sanofi-Synthelabo S.A. 2.14% Pharmaceuticals France - -------------------------------------------------------------------------------------------------------------------- 7. Novartis AG 1.97% Pharmaceuticals Switzerland - -------------------------------------------------------------------------------------------------------------------- 8. ENI SPA 1.94% Oil and Gas Italy - -------------------------------------------------------------------------------------------------------------------- 9. Royal Bank of Scotland 1.79% Commercial Banks United Kingdom - -------------------------------------------------------------------------------------------------------------------- 10. HSBC Hldgs. 1.73% Commercial Banks United Kingdom - --------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Since Date 1 year 3 Years 5 Years 10 Years Inception - ------------------------------------------------------------------------------------------------------- Class A Shares (without sales charge) 2/16/93 -9.91% -17.13% -6.62% 3.48% 4.19% - ------------------------------------------------------------------------------------------------------- Class A Shares (with sales charge) 2/16/93 -13.96% -18.39% -7.48% 3.00% 3.73% - ------------------------------------------------------------------------------------------------------- Class B Shares (without sales charge) 5/1/96 -11.07% -18.14% -7.66% NA -1.37% - ------------------------------------------------------------------------------------------------------- Class B Shares (with sales charge) 5/1/96 -13.74% -18.69% -7.85% NA -1.37% - ------------------------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 -10.94% NA NA NA -17.24% - ------------------------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 -11.83% NA NA NA -17.24% - ------------------------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 -10.07% NA NA NA -13.66% - ------------------------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 -10.97% NA NA NA -13.66% - -------------------------------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum of 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 17 THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND [PHOTO] OBJECTIVE: Long-term capital Edward H. Hocknell appreciation Portfolio Manager PORTFOLIO: At least 80% in a portfolio of common stocks and convertible securities issued by companies in emerging markets INCEPTION: May 1, 1997
NET ASSETS AT JUNE 30, 2003: $53,198,696 Q: HOW DID THE FUND PERFORM IN THE FIRST SIX MONTHS OF 2003? A: Emerging markets were in the forefront of the equity rally this year, outperforming their developed peers. For the first six months of 2003, the Fund returned 14.13%(1) compared to an increase of 16.13% in the Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index.(2) The rise in the MSCI EMF Index compares with an 11.45% rise in the MSCI World Index(3) and an 11.76% increase in the S&P 500 Index.(4) Within the emerging markets, developing Europe was a notable performer, with Russia up 43.5%.(5) Latin America gave up some of its relative strength towards the end of the second quarter, although smaller markets, such as Argentina and Venezuela, continued their upward trend unabated. The diversity of returns was considerable over such a short period of time, with the star performer being Venezuela, up 61.1%, and Hungary, the laggard, down 2.5%.(5) The key driver was excess liquidity as interest rates continued to trend downwards and as investors seemed to have regained their appetite for risk. Foreign exchange rate movements have also been a feature of returns. The general weakness of the U.S. dollar was exacerbated by a growing perception of improving political and economic developments in Brazil, Turkey and South Africa, whose currencies have appreciated 19.8%, 14.6% and 12.7% respectively, over the last six months. Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A: The Fund slightly underperformed the MSCI EMF Index due to relatively poor stock selection in South Africa, Turkey and Chile, and an exposure to "defensive" industries such as food, beverage and tobacco. On a positive note, relative returns were good in Russia and Brazil, both helped by the strength of the energy and materials sectors. - -------------------------------------------------------------------------------- "We continue to believe that the emerging markets offer high quality investment opportunities at relatively low valuations." - -------------------------------------------------------------------------------- Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE? A: In our view, the good news is that abundant liquidity is likely to continue to support equity prices in emerging markets. A current challenge for stock selection is that the recent rally has led to a significant amount of indiscriminate buying of stocks, regardless of corporate fundamentals. We believe this trend may persevere for the time being. In response, we are marginally reducing exposure to stocks with a "defensive-bias', notably in Latin America and redeploying the cash in Asian stocks with greater sensitivity to the economic cycle. We continue to believe that the emerging markets offer high quality investment opportunities at relatively low valuations. - -------------------- (1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. (2) The Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index is an unmanaged index that is generally considered to be representative of the stock market activity of emerging markets. The MSCI EMF Index is a market capitalization weighted index composed of companies representative of the market structure of 22 emerging market countries in Europe, Latin America and the Pacific Basin. The MSCI EMF Index excludes closed markets and those shares in otherwise free markets that may not be purchased by foreigners. The MSCI EMF Index is not available for direct investment, and the returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, total return figures for the Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (3) The MSCI World Index is an unmanaged index that is generally considered to be representative of the global stock market activity of the developed markets. The MSCI World Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, total return figures for the Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (4) 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. The S&P 500 Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (5) As measured by the MSCI EMF Index. - -------------------------------------------------------------------------------- 18 THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND PORTFOLIO COMPOSITION BY GEOGRAPHICAL LOCATION AS OF JUNE 30, 2003 [PIE CHART]
MIDDLE EAST AND ASIA AFRICA LATIN AMERICA EUROPE CASH - ---- --------------- ------------- ------ ---- 51.01% 14.82% 21.95% 9.41% 2.81%
- ------------------------------------------------------------------------------------------------------------------------- TOP TEN HOLDINGS AS OF JUNE 30, 2003 Company Percent of Total Net Assets Industry Sector Country - ------------------------------------------------------------------------------------------------------------------------- 1. Samsung Electronics Co. Ltd. 4.93% Semiconductors and Semiconductor South Korea Equipment - ------------------------------------------------------------------------------------------------------------------------- 2. Teva Pharmaceutical Inds. Ltd. 3.10% Pharmaceuticals Israel - ------------------------------------------------------------------------------------------------------------------------- 3. PetroChina Co. Ltd. 2.36% Oil and Gas China - ------------------------------------------------------------------------------------------------------------------------- 4. SK Telecom Co. Ltd. 2.23% Wireless Telecommunication Services South Korea - ------------------------------------------------------------------------------------------------------------------------- 5. Kumba Resources Ltd. 2.21% Metals and Mining South Africa - ------------------------------------------------------------------------------------------------------------------------- 6. LUKOIL 2.20% Oil and Gas Russia - ------------------------------------------------------------------------------------------------------------------------- 7. Anglo American Platinum Corp. 2.20% Metals and Mining South Africa - ------------------------------------------------------------------------------------------------------------------------- 8. Taiwan Semiconductor Mfg. Co. Ltd. 2.12% Semiconductors and Semiconductor Taiwan Equipment - ------------------------------------------------------------------------------------------------------------------------- 9. YUKOS Corp. 2.09% Oil and Gas Russia - ------------------------------------------------------------------------------------------------------------------------- 10. Nedcor Ltd. 2.00% Commercial Banks South Africa - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Date 1 year 3 Years 5 Years Since Inception - ------------------------------------------------------------------------------------------------- Class A Shares (without sales charge) 5/1/97 1.99% -5.43% 5.08% -1.05% - ------------------------------------------------------------------------------------------------- Class A Shares (with sales charge) 5/1/97 -2.60% -6.87% 4.12% -1.79% - ------------------------------------------------------------------------------------------------- Class B Shares (without sales charge) 5/6/97 0.82% -6.64% 3.21% -2.96% - ------------------------------------------------------------------------------------------------- Class B Shares (with sales charge) 5/6/97 -2.18% -7.27% 3.03% -2.96% - ------------------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 0.94% NA NA -4.88% - ------------------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 -0.06% NA NA -4.88% - ------------------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 1.68% NA NA 3.73% - ------------------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 0.68% NA NA 3.73% - -------------------------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum of 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 19 THE GUARDIAN INVESTMENT QUALITY BOND FUND [PHOTO] OBJECTIVE: Seeks a high level of Howard W. Chin current income and capital Portfolio Manager appreciation without undue risk to principal PORTFOLIO: At least 80% in different kinds of investment grade bonds and obligations of the U.S. government and its agencies INCEPTION: February 16, 1993
NET ASSETS AT JUNE 30, 2003: $226,571,843 Q: HOW DID THE FUND PERFORM FOR THE FIRST SIX MONTHS OF 2003? A: The Fund had a total return of 4.35%(1) for the six months ended June 30, 2003, outperforming the Fund's benchmark, the Lehman Aggregate Bond Index,(2) by 0.42%. The Index, which measures the taxable fixed income market, had a return of 3.93%. In addition, the average fund in the Lipper Intermediate Investment Grade peer group(3) returned 4.31% for the same period (the peer group consists of 423 other mutual funds that invest in primarily investment grade debt with average maturities of 5-10 years). Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A: In many respects, the first half of 2003 was a continuation of the pattern first seen in 2002, where the long-awaited economic recovery saw several fits and starts without any real sustained forward momentum. With positive economic news frequently followed by offsetting signs of weakness, the recovery never quite gained the expected traction and the economy continued with its plodding ways. The economy grew at a 1.4% rate in the first quarter and the consensus forecast for the second quarter is only 2.0%. That said, however, there were some economic bright spots. Consumer spending and the housing market remained very strong, fueled by decade lows in mortgage rates and unprecedented refinancing activity. On the other hand, economic activity was dampened by concerns of geopolitical risk, the war in Iraq, and sharply escalating energy prices. Even though the war successfully concluded and energy prices stabilized, the anticipated post-war recovery did not occur. The economy remained sluggish, capital investment by businesses did not materialize, and the labor market continued to weaken. The Federal Reserve Board (Fed) also changed its strategic focus from the balance of risks between growth and inflation, to the balance between inflation and deflation. While it considered the risk of deflation to be minor, the Fed stated that deflation would be its predominant concern for the foreseeable future. As a result, most investors are now expecting that the Fed will keep rates low for an extended period of time, in order to prevent the onset of deflation, while retaining the flexibility to further cut rates if needed. In fact, we believe the market does not expect the Federal Funds rate to rise by 0.25% from current levels until summer, 2004. Against the positive interest rate backdrop, the fixed income market turned in another strong performance. The Treasury market rallied strongly during the first half of the year, and despite a late selloff in the second quarter, yields still fell by about 0.30% across the various maturities. The 2-year note finished at a 1.31% yield while the 10-year note finished at 3.52%. (At the height of the rally, the yield of the 10-year Treasury closed at a multi-decade low of 3.11%). - -------------------------------------------------------------------------------- "Our asset allocation strategy within structured products also helped the Fund to outperform the Fund's benchmark." - -------------------------------------------------------------------------------- The spread sectors performed even better as each sector outperformed comparable duration Treasuries. Most notably, corporate bonds turned in a stellar performance returning 7.32%, as measured by the Lehman Credit Index(2) during the first half and outperformed comparable duration Treasuries by 3.47%, easily besting the previous full-year record. Much of this outperformance was driven by strong investor demand and fueled by the expectation that corporate bonds would be well positioned to take advantage of the balance sheet improvement effort undertaken by corporate America and the anticipation of an impending economic recovery. The various structured products sectors also performed well, although not to the same extent as the corporate sector. Commercial mortgage-backed securities (CMBS)(4) fared the best, returning 5.33% and outpacing comparable duration Treasuries by 1.59%. The asset-backed securities (ABS)(4) market returned 3.39% and outpaced comparable duration Treasuries by 1.26%. Mortgage-backed securities (MBS)(4) lagged these two sectors, but in light of the interest - -------------------- (1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Since June 1, 1994, 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. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. (2) The Lehman Aggregate Bond Index and the Lehman Credit Index are unmanaged indices that are generally considered to be representative of U.S. bond market activity and U.S. investment grade corporate bond market activity, respectively. The Indices are not available for direct investment, and their returns do not reflect the fees and expenses that have been deducted from the Fund. Likewise, return figures for the Indices do not reflect any sales charges that an investor may have to pay when purchasing or redeeming shares of the Fund. (3) Lipper Analytical Services, Inc. is an independent mutual fund monitoring and rating service. Its database of performance information is based on historical returns, which assume the reinvestment of dividends and distributions and the deduction of all fund expenses. Lipper return figures do not reflect the deduction of any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (4) The respective indices are: the Lehman Commercial Mortgage-Backed Securities (CMBS) Index, the Lehman Asset-Backed Securities (ABS) Index, and the Lehman Mortgage-Backed Securities (MBS) Index. - -------------------------------------------------------------------------------- 20 THE GUARDIAN INVESTMENT QUALITY BOND FUND rate rally and the dramatic surge in refinancing risk, it was to be expected that they would perform the least well. Nonetheless, the sector still posted a positive return of 1.60% and outperformed comparable duration Treasuries by 0.46%. Despite their increased risk, MBS still enjoyed very strong investor demand as the MBS financing market provided attractive incremental returns, while the cash flows generated by the unprecedented refinancing activity created its own demand as investors needed to reinvest these funds within the MBS market. Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD? A: We believed that spread sectors were very attractive coming into 2003 and well positioned to take advantage of the expected economic recovery. As a result, we adopted overweighted exposures in both corporate bonds and structured products. Although the recovery was less robust than we had expected, both sectors still performed very well. As discussed above, corporates were far and away the best performing asset class in the first half of 2003 and our overweights served the Fund well. In fact, many of the specific subsectors where we chose to strongly overweight performed even better than the average sector in the Lehman Credit Index. Of particular note, the media-cable sector (8.13% of excess returns) and the wirelines sector (6.11%) made outsized contributions to the Fund's performance. Our asset allocation strategy within structured products also helped the Fund to outperform the Fund's benchmark. We were overweighted in all three subsectors, but we were much more strongly overweighted in CMBS and ABS relative to MBS and as noted above, these two sectors posted significantly greater excess returns. Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE? A: We remain cautiously optimistic that the recovery will gain some momentum but believe that sluggish growth is the most likely scenario in the near term. We also believe that interest rates will remain in a fairly narrow range near their current levels and may not significantly increase until 2004. We remain positive on the spread sectors. While we don't necessarily expect them to perform at the same strong pace seen in the first half--most notably the corporate sector--we believe the relatively benign interest rate environment and the steep yield curve will continue to favor these sectors. As a result, we will maintain our overweighted exposure in all the spread sectors in the near term. Finally, we still believe the key to the recovery is the resumption of capital investment by businesses. Low interest rates will continue to bolster the housing market and consumer spending is likely to continue its strong pace, aided by the $350 million fiscal stimulus program recently passed by Congress. However, it is unclear whether these factors will be sufficient to spark the needed capital expenditures. Businesses remain focused on cost cutting and debt reduction. Until revenues and profits demonstrate some greater permanence, businesses may be reluctant to invest, especially in light of the current surplus in manufacturing capacity. Similarly, the labor market is not likely to improve in the near term as earlier productivity gains are now allowing businesses to increase output without adding labor. As with capital expenditures, we will need to see a sharp and sustainable increase in demand before more resources are likely to be added.
- ------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Date 1 year 3 Years 5 Years 10 Years Since Inception - ------------------------------------------------------------------------------------------------------------ Class A Shares (without sales charge) 2/16/93 10.18% 9.48% 6.91% 6.27% 6.37% - ------------------------------------------------------------------------------------------------------------ Class A Shares (with sales charge) 2/16/93 5.22% 7.81% 5.93% 5.78% 5.90% - ------------------------------------------------------------------------------------------------------------ Class B Shares (without sales charge) 8/7/00 9.26% NA NA NA 8.54% - ------------------------------------------------------------------------------------------------------------ Class B Shares (with sales charge) 8/7/00 6.26% NA NA NA 7.95% - ------------------------------------------------------------------------------------------------------------ Class C Shares (without sales charge) 8/7/00 9.36% NA NA NA 8.57% - ------------------------------------------------------------------------------------------------------------ Class C shares (with sales charge) 8/7/00 8.36% NA NA NA 8.57% - ------------------------------------------------------------------------------------------------------------ Class K Shares (without sales charge) 5/15/01 9.74% NA NA NA 8.62% - ------------------------------------------------------------------------------------------------------------ Class K Shares (with sales charge) 5/15/01 8.74% NA NA NA 8.62% - ------------------------------------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum of 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Since June 1, 1994, 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. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 21 THE GUARDIAN HIGH YIELD BOND FUND [PHOTO] OBJECTIVE: Seeks current income. Peter J. Liebst Capital appreciation is a Portfolio Manager 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: September 1, 1998
NET ASSETS AT JUNE 30, 2003: $67,760,482 Q: HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 2003? A: The Guardian High Yield Bond Fund posted an 11.84%(1) return for the six months ended June 30, 2003. The Fund underperformed the overall high yield market by 6.65% as the Fund's benchmark, the Lehman Brothers Corporate High Yield Index,(2) posted an 18.49% return for the period. Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A: The first six months of 2003 was a remarkable start for the year with the high yield market posting an 18.49% return, its best six-month performance since 1991. During this period the market saw an increase in demand, liquidity, new issuance, and a dramatic recovery in the secondary market. The result, investors significantly reduced the risk premium demanded in the high yield market. With the underlying risk free Treasury rate dropping during the period to lows not seen in 45 years, both institutional and individual investors increased their appetite for risk in search for higher yields. This was seen in high yield mutual funds as over $21.6 billion of net inflows came into funds during the first two quarters of 2003, more than twice the inflows experienced over the whole of 2002. Responding to this demand, new issuance surged and prices for securities in the secondary market rose sharply. The risk premium in the high yield market, as measured by the average premium yield over comparable Treasuries, dropped from 9.10% at the beginning of 2003, to 6.22% as of June 30th. The crucial component to understanding the performance of the high yield market over the first half of the year is to examine where within the market returns originated. The answer for the first half of 2003 was predominantly in issuers of a lower, more speculative credit quality, and further concentrated in sectors which experienced significant credit and earnings deterioration over the last three years. Segmenting the high yield market along the lines of credit quality (as defined by Moody's Investor Services rating classifications), the lower quality Caa category generated a six month return of 40.50%, significantly outperforming the higher quality Ba and single B categories which produced a 12.41% and 16.79% returns, respectively. Further concentration of returns were seen within industry sectors, with the underlying theme being 2002's troubled sectors were 2003's best performers. As an example, both electric utilities and telecommunications, each representing a significant weight within the high yield market, produced sizable negative returns during 2002 only to rebound in the first half of 2003 posting returns of 43.41% and 32.36%, respectively. The above market dynamics were the principal reasons for The Guardian High Yield Bond Fund's underperformance over the first half of 2003. The Fund's investment management style focuses on selecting securities of companies that we believe have fundamental financial integrity and sufficient earnings capacity to sustain the capital structure. This approach typically limits the Fund's exposure to the lower credit quality levels, which was the case during the first half of 2003. Additionally, due to financial uncertainties facing most of the issuers within the electric utilities sector, the Fund maintained a significant underweight throughout the period which proved detrimental to performance as this sector has the largest weight within the market, and produced the highest return over the period. - -------------------------------------------------------------------------------- "The Fund's overall strategy was to maximize the total return of a diversified fixed-income portfolio principally composed of below investment grade securities." - -------------------------------------------------------------------------------- Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD AND WHAT IS YOUR OUTLOOK FOR THE FUTURE? A: The Fund's overall strategy was to maximize the total return of a diversified fixed-income portfolio principally composed of below investment grade securities. In pursuing this strategy, the Fund examines not only the macro economic and industry environment, but priority is placed on our identification of individual investment opportunities that we believe exhibit an appropriate capital structure and a predictable earnings outlook. The pursuit of this investment style limited the Fund's total exposure during the first half of the year to lower quality issuers as well as some industries, which we judged to have risks making the outlook too speculative. While signs of a slowly improving U.S. economy have been reported recently, the Fund remains cautious with regard to the timing of notable improvement. The Fund will continue to follow its disciplined investment style emphasizing financial strength and outlook when selecting investments. - -------------------- (1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Since inception, 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. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. (2) The Lehman Brothers Corporate High Yield Index is an unmanaged index that is generally considered to be representative of U.S. corporate high yield bond market activity. The Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund's returns. Likewise, return figures for the Index do not reflect any sales charges that an investor may have to pay when purchasing or redeeming shares of the Fund. - -------------------------------------------------------------------------------- 22 THE GUARDIAN HIGH YIELD BOND FUND CREDIT QUALITY AS OF JUNE 30, 2003 [PIE CHART]
SHORT TERM BBB BB B CCC - ---------- --- -- - --- 0.92% 5.64% 28.67% 59.43% 5.34%
- ----------------------------------------------------- TOP TEN HOLDINGS AS OF JUNE 30, 2003 Company Percent of Total Net Assets - ----------------------------------------------------- 1. Allied Waste NA, Inc. 3.94% - ----------------------------------------------------- 2. Nextel Comm., Inc. 2.77% - ----------------------------------------------------- 3. Qwest Corp. 2.61% - ----------------------------------------------------- 4. Iron Mountain, Inc. 1.36% - ----------------------------------------------------- 5 Intrawest Corp. 1.33% - ----------------------------------------------------- 6. Michael Foods, Inc. 1.27% - ----------------------------------------------------- 7. St. John Knits Int'l., Inc. 1.21% - ----------------------------------------------------- 8. J.C. Penney Co., Inc. 1.15% - ----------------------------------------------------- 9. Flextronics Int'l. Ltd. 1.13% - ----------------------------------------------------- 10 Playtex Products, Inc. 1.13% - -----------------------------------------------------
- --------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Since Date 1 year 3 Years Inception - --------------------------------------------------------------------------------- Class A Shares (without sales charge) 9/1/98 14.04% 3.05% 3.62% - --------------------------------------------------------------------------------- Class A Shares (with sales charge) 9/1/98 8.91% 1.48% 2.64% - --------------------------------------------------------------------------------- Class B Shares (without sales charge) 9/1/98 13.04% 2.22% 2.63% - --------------------------------------------------------------------------------- Class B Shares (with sales charge) 9/1/98 10.04% 1.58% 2.44% - --------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 13.21% NA 2.26% - --------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 12.21% NA 2.26% - --------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 13.59% NA 5.26% - --------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 12.59% NA 5.26% - ---------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on distributions or redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the contingent deferred sales charge applicable to such shares (maximum 3% for Class B shares and 1% for Class C and Class K shares), except where noted. Since inception, 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. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 23 THE GUARDIAN TAX-EXEMPT FUND [PHOTO] OBJECTIVE: Seeks to maximize Alexander M. Grant, Jr. current income exempt from Portfolio Manager federal income taxes, consistent with the preservation of capital PORTFOLIO: At least 80% in investment grade municipal debt obligations INCEPTION: February 16, 1993
NET ASSETS AT JUNE 30, 2003: $90,857,173 Q: HOW DID THE GUARDIAN TAX-EXEMPT FUND PERFORM IN THE FIRST HALF OF 2003? A: The Guardian Tax-Exempt Fund produced a total return of 4.40%(1) for the first half of 2003. The Lehman Municipal Bond Index(2) produced a total return of 3.81% for the same period. The latter reflects the different investment parameters of that Index, which includes all bonds and maturities. Even so, The Guardian Tax-Exempt Fund exceeded it by 0.59%. We believe that more meaningful peer group comparisons are from Lipper and Morningstar. The Lipper General Municipal Debt peer group(3) returned 3.38% for the first six months of the year. In Morningstar's(4) universe of municipal national long funds, the average return was 3.41%. The Guardian Tax-Exempt Fund outperformed Morningstar's universe of municipal national long funds by 0.99%. For the one-year period ending June 30, 2003, Lipper ranks the Fund 16 out of 290 funds in the average and in the 6th percentile. For the three-year period ended June 30, 2003, Lipper ranks the Fund 13 out of 251 funds and in the 6th percentile. For the five-year period ended June 30, 2003, the Fund ranks 7 out of 217 funds and in the 4th percentile. For the ten-year period ended June 30, 2003, the Fund ranks 46 out of 103 funds and in the 45th percentile. As of June 30, 2003, the Fund's 30-day yield was 3.70%, which compares up to a 5.69% taxable equivalent yield for a person in the highest federal income tax bracket in 2003. Q: WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND? A: Benefiting from historically low interest rates, municipal issuers continued to issue bonds at record levels. For the first six months of 2003, $200.47 billion in long-term bonds were issued, a 20% increase over the $166.55 billion issued in the first half of 2002. The high new issue six-month volume exceeded yearly volume for 1994, 1995, and 1996, which were $165.03 billion, $159.98 billion, and $185.01 billion, respectively. Investors poured money into municipal bonds, allowing the market to absorb this volume. Wealthy individuals and businesses were attracted to this asset class as a way to preserve capital, diversify risk, and generate tax-exempt income. - -------------------------------------------------------------------------------- "Our strategy continued to be to buy good quality, attractively structured national market names and stay away from "hot" deals or lower investment quality bonds." - -------------------------------------------------------------------------------- Our strategy continued to be to buy good quality, attractively structured national market names and stay away from "hot" deals or lower investment quality bonds. On the sell side, we selectively sold retail and institutional blocks when the prices were attractive in terms of the spread relative to our benchmarks. Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE? A: The increased volume in the first six months of 2003 was easily absorbed by traditional institutional and retail investors with investment capital made available by coupon and redemption payments as well as by crossovers and arbitrageurs (who usually buy taxable bonds) brought in by the attractive ratios to taxable bonds. As long as the lower interest rate environment continues, we would expect these issuance and investment patterns to continue. If interest rates do not decline any further and in fact increase, we would expect new issuance for refundings to decline in the second half of 2003. In 2002, new issuance for refundings was $92.0 billion, versus $64.7 billion in 2001. For the first six months of 2003 new issuance for refundings was $52.58 billion versus $41.60 billion for the first six months of 2002, a 26.4% increase. - -------------------- (1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%. Since June 1, 1994, 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. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. (2) The Lehman Municipal Bond Index is an unmanaged index that is generally considered to be representative of U.S. municipal bond activity. The Lehman Municipal Bond Index is not available for direct investment, and its return does not reflect the expenses that have been deducted from the Fund. Likewise, return figures for the Lehman Municipal Bond Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. (3) Lipper, Inc. is an independent mutual fund monitoring and rating service. Its database performance information is based on historical total returns, which assume the reinvestment of dividends and distributions and the deduction of all fund expenses. Lipper returns do not reflect the deduction of sales charges that an investor may pay when purchasing or redeeming shares of the Fund. There were 304 funds in the Lipper General Municipal Debt peer group (the peer group invests primarily in municipal debt issues rated in the top four credit ratings), for the six-month period ended June 30, 2003. (4) (R)2002 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an "expert" under the Securities Act of 1933. Returns represent past performance and are no guarantee of future results. Morningstar's database of performance information is based on historical total returns, which assumes the reinvestment of dividends and distributions, and the deduction of all fund expenses. There were 264 funds in Morningstar's universe of municipal national long funds for the six-month period ended June 30, 2003. - -------------------------------------------------------------------------------- 24 THE GUARDIAN TAX-EXEMPT FUND Insurance companies were one of the largest sources of funding for the tax-exempt market. Increasing profitability continued to fuel their demand for tax-exempt income. Also, the strength of the economic recovery, inflationary pressures and enacted tax law changes in Washington and the states will continue to be variables to monitor. They are critical influences on interest rates, new issuance volume, credit quality and investor demand. PORTFOLIO COMPOSITION BY SECTOR ALLOCATION AS OF JUNE 30, 2003 [PIE CHART]
STATE GENERAL LOCAL GENERAL SHORT-TERM OBLIGATION BONDS OBLIGATION BONDS REVENUE BONDS INSURED BONDS - ---------- ---------------- ---------------- ------------- ------------- 1.80% 7.65% 10.77% 19.84% 59.94%
CREDIT QUALITY AS OF JUNE 30, 2003 [PIE CHART]
AAA/US GOVT. & GOVT SHORT-TERM AGENCY AA A - ---------- ------------------- -- - 1.80% 74.71% 18.24% 5.25%
- ------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003 Inception Date 1 year 3 Years 5 Years 10 Years Since Inception - ------------------------------------------------------------------------------------------------------------ Class A Shares (without sales charge) 2/16/93 9.90% 8.92% 6.31% 5.44% 5.58% - ------------------------------------------------------------------------------------------------------------ Class A Shares (with sales charge) 2/16/93 4.95% 7.26% 5.34% 4.96% 5.11% - ------------------------------------------------------------------------------------------------------------ Class C Shares (without sales charge) 8/7/00 9.08% NA NA NA 7.73% - ------------------------------------------------------------------------------------------------------------ Class C shares (with sales charge) 8/7/00 8.08% NA NA NA 7.73% - ------------------------------------------------------------------------------------------------------------
(1) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. The return figures shown do not reflect the deduction of taxes that a shareholder may pay on redemption of shares. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class C shares do not take into account the contingent deferred sales charges applicable to such shares (maximum of 1%) except where noted. Since June 1, 1994, 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. Returns represent past performance and are not a guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 25 THE GUARDIAN CASH MANAGEMENT FUND [PHOTO] OBJECTIVE: Seeks as high a level of Alexander M. Grant, Jr. current income as is consistent Portfolio Manager with liquidity and preservation of capital PORTFOLIO: Short-term money market instruments INCEPTION: November 3, 1982
NET ASSETS AT JUNE 30, 2003: $647,381,905 Q: HOW DID THE GUARDIAN CASH MANAGEMENT FUND PERFORM FOR THE FIRST HALF OF 2003? A: As of June 30, 2003 the effective 7-day net annualized yield for The Guardian Cash Management Fund was 0.33%.(1) The Fund produced a total net annualized return of 0.49%(2) for the six months ended June 30, 2003. In comparison, the effective 7-day annualized yield of Tier One money market funds as measured by iMoneyNet, Inc. was 0.45%; total return for the same category was 0.58%. iMoneyNet, Inc. is a research firm that tracks money market funds. Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD? A: The Guardian Cash Management Fund is a place for many of our investors to put their money while they decide on their preferred long-term investment vehicle, be it stocks or bonds. Also, some of our investors prefer the relative stability of the money markets. To best accommodate all our investors, we will continue to try to provide a strong 7-day yield, while offering safety and liquidity. Our investment strategy was to create a diversified portfolio of money market instruments that presented minimal credit risks according to our criteria. As always, we only purchase securities for the Fund's portfolio from issuers that have received ratings in the two highest credit quality categories established by nationally recognized statistical ratings organizations like Moody's Investors Service, Inc. and Standard & Poor's Corporation. Most of the portfolio (74.06%) was invested in commercial paper and short maturity corporate bonds; the balance was invested in repurchase agreements (4.00%) and floating rate taxable municipal bonds (21.94%). Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A: Money market funds are directly affected by the actions of the Federal Reserve Board (Fed). With the Federal Open Market Committee (FOMC) rate cuts of Federal Funds totaling 4.25% in 2001, an additional 0.50% in 2002, and an additional 0.25% in the second quarter of 2003, the money markets will remain tight with issuers encouraged to alter their rate offerings in response to stock market expectations and monetary policy. The Federal Funds target is the rate at which banks can borrow from each other overnight. While the Fed does not set this rate, it can establish a target rate and, through open market operations, the Fed can move member banks in the direction of that target rate. The Discount Rate is the rate at which banks can borrow directly from the Federal Reserve. Another factor affecting performance was the portfolio's average maturity of 46 days as of June 30, 2003. The average Tier One money market fund as measured by iMoneyNet, Inc. had an average maturity of 52 days. - -------------------------------------------------------------------------------- "To best accommodate all our investors, we will continue to try to provide a strong 7-day yield, while offering safety and liquidity." - -------------------------------------------------------------------------------- Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE? A: Uncertainty regarding the direction of the stock market contributes to large daily inflows and outflows of money in the Fund. As the stock market rallies, our investors typically transfer cash to equity funds. During those times when the stock market stalls, we see cash inflows. With money market yields at historic lows, investors have been seeking alternative investment vehicles, such as ultra-short bond funds, for "parking" money between stock market fluctuations. Some investors have been focused less on the capital preservation feature of money market funds and have sought these alternate vehicles, which may generate higher yields, but with more risk. We believe that if the FOMC continues to cut rates, we may see more money market investments diverted to these alternate investments. AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. - -------------------- (1) Yields are annualized historical figures. Effective yield assumes reinvested income. Yields will vary as interest rates change. Past performance is not indicative of future results. (2) Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Since June 1, 1994, the investment adviser for the Fund has assumed certain ordinary operating expenses of the Fund. Without these expense assumptions, the returns would have been lower. The total return and yield figures cited represent total return and yield for Class A shares. Returns represent past performance and are not indicative of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. - -------------------------------------------------------------------------------- 26 SCHEDULE OF INVESTMENTS June 30, 2003 (Unaudited) / / The Guardian Park Avenue Fund
COMMON STOCKS -- 98.0% Shares Value - ------------------------------------------------------------------------------------ AEROSPACE AND DEFENSE -- 2.6% 702,000 Lockheed Martin Corp. $ 33,394,140 - ------------------------------------------------------------------------------------ BEVERAGES -- 3.0% 127,500 Anheuser-Busch Cos., Inc. 6,538,978 396,400 Coca-Cola Co. 18,396,924 295,500 PepsiCo., Inc. 13,149,750 --------------- 38,085,652 - ------------------------------------------------------------------------------------ BIOTECHNOLOGY -- 1.5% 300,200 Amgen, Inc.* 19,945,288 - ------------------------------------------------------------------------------------ CAPITAL MARKETS -- 3.8% 145,300 Goldman Sachs Group, Inc. 12,168,875 207,166 Legg Mason, Inc. 13,455,432 112,400 Lehman Brothers Hldgs., Inc. 7,472,352 159,100 Merrill Lynch & Co., Inc. 7,426,788 229,400 State Street Corp. 9,038,360 --------------- 49,561,807 - ------------------------------------------------------------------------------------ CHEMICALS -- 1.9% 598,200 E.I. Du Pont de Nemours & Co. 24,909,048 - ------------------------------------------------------------------------------------ COMMERCIAL BANKS -- 6.1% 322,700 Bank of America Corp. 25,502,981 153,125 Charter One Financial, Inc. 4,774,437 144,800 M & T Bank Corp. 12,195,056 406,700 North Fork Bancorporation, Inc. 13,852,202 443,900 Wells Fargo & Co. 22,372,560 --------------- 78,697,236 - ------------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT -- 2.7% 2,063,100 Cisco Systems, Inc.* 34,433,139 - ------------------------------------------------------------------------------------ COMPUTERS AND PERIPHERALS -- 3.6% 417,900 Dell Computer Corp.* 13,356,084 724,500 Hewlett Packard Co. 15,431,850 684,900 Storage Technology Corp.* 17,629,326 --------------- 46,417,260 - ------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- 2.4% 733,666 Citigroup, Inc. 31,400,905 - ------------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.8% 1,243,000 Verizon Comm. 49,036,350 - ------------------------------------------------------------------------------------ ELECTRIC UTILITIES -- 1.5% 288,300 FPL Group, Inc. 19,272,855 - ------------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.0% 313,200 CDW Corp.* 14,344,560 520,200 Jabil Circuit, Inc.* 11,496,420 --------------- 25,840,980 - ------------------------------------------------------------------------------------ ENERGY EQUIPMENT AND SERVICES -- 1.1% 161,200 Nabors Industries, Inc.* 6,375,460 233,100 Noble Corp.* 7,995,330 --------------- 14,370,790 - ------------------------------------------------------------------------------------ FOOD AND STAPLES RETAILING -- 2.9% 689,000 Wal-Mart Stores, Inc. 36,978,630 - ------------------------------------------------------------------------------------ FOOD PRODUCTS -- 1.6% 116,400 Hershey Foods Corp. 8,108,424 365,000 Kraft Foods, Inc. 11,880,750 --------------- 19,989,174 - ------------------------------------------------------------------------------------ GAS UTILITIES -- 0.7% 505,100 NiSource, Inc. 9,596,900 - ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.3% 143,500 Boston Scientific Corp.* $ 8,767,850 92,700 C.R. Bard, Inc. 6,610,437 301,700 Medtronic, Inc. 14,472,549 --------------- 29,850,836 - ------------------------------------------------------------------------------------ HEALTH CARE PROVIDERS AND SERVICES -- 4.1% 487,200 AmerisourceBergen Corp. 33,787,320 383,800 HCA, Inc. 12,296,952 226,100 Laboratory Corp. of America Hldgs.* 6,816,915 --------------- 52,901,187 - ------------------------------------------------------------------------------------ HOUSEHOLD DURABLES -- 1.0% 449,500 Newell Rubbermaid, Inc. 12,586,000 - ------------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS -- 2.0% 108,300 Colgate-Palmolive Co. 6,275,985 219,700 Procter & Gamble Co. 19,592,846 --------------- 25,868,831 - ------------------------------------------------------------------------------------ INDUSTRIAL CONGLOMERATES -- 3.2% 1,457,400 General Electric Co. 41,798,232 - ------------------------------------------------------------------------------------ INFORMATION TECHNOLOGY SERVICES -- 2.0% 684,600 Concord EFS, Inc.* 10,077,312 451,600 Fiserv, Inc.* 16,081,476 --------------- 26,158,788 - ------------------------------------------------------------------------------------ INSURANCE -- 7.3% 114,700 Ambac Financial Group, Inc. 7,598,875 739,100 American Int'l. Group, Inc. 40,783,538 430,500 Chubb Corp. 25,830,000 403,200 Marsh & McLennan Cos., Inc. 20,591,424 --------------- 94,803,837 - ------------------------------------------------------------------------------------ MEDIA -- 3.0% 202,100 New York Times Co. 9,195,550 687,400 Viacom, Inc.* 30,011,884 --------------- 39,207,434 - ------------------------------------------------------------------------------------ METALS AND MINING -- 1.4% 704,800 Alcoa, Inc. 17,972,400 - ------------------------------------------------------------------------------------ OIL AND GAS -- 6.2% 358,800 ChevronTexaco Corp. 25,905,360 704,000 Exxon Mobil Corp. 25,280,640 873,100 Occidental Petroleum Corp. 29,292,505 --------------- 80,478,505 - ------------------------------------------------------------------------------------ PERSONAL PRODUCTS -- 0.6% 130,900 Avon Products, Inc. 8,141,980 - ------------------------------------------------------------------------------------ PHARMACEUTICALS -- 9.0% 237,700 Abbott Laboratories 10,401,752 231,540 Johnson & Johnson 11,970,618 362,200 Merck & Co., Inc. 21,931,210 2,112,540 Pfizer, Inc. 72,143,241 --------------- 116,446,821 - ------------------------------------------------------------------------------------ SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 4.5% 392,500 Analog Devices, Inc.* 13,666,850 851,200 Applied Materials, Inc.* 13,500,032 1,037,600 Intel Corp. 21,565,478 211,000 KLA-Tencor Corp.* 9,809,390 --------------- 58,541,750 - ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------
See notes to financial statements. 27 THE GUARDIAN PARK AVENUE FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------------ SOFTWARE -- 7.7% 985,900 Adobe Systems, Inc. $ 31,617,813 1,529,000 Microsoft Corp. 39,157,690 1,554,800 Oracle Corp.* 18,688,696 570,100 PeopleSoft, Inc.* 10,028,059 --------------- 99,492,258 - ------------------------------------------------------------------------------------ THRIFTS AND MORTGAGE FINANCE -- 0.8% 151,600 Federal National Mortgage Assn. 10,223,904 - ------------------------------------------------------------------------------------ TOBACCO -- 0.7% 194,800 Altria Group, Inc. 8,851,712 - ------------------------------------------------------------------------------------ TRADING COMPANIES AND DISTRIBUTORS -- 1.0% 274,300 W.W. Grainger, Inc. 12,826,268 - ------------------------------------------------------------------------------------ TOTAL COMMON STOCKS (COST $1,227,939,560) 1,268,080,897 - ------------------------------------------------------------------------------------ REPURCHASE AGREEMENT -- 1.1% Principal Amount Value - ------------------------------------------------------------------------------------ $ 14,831,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $14,831,453 at 1.10%, due 7/1/2003 (1) (COST $14,831,000) $ 14,831,000 - ------------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 99.1% (COST $1,242,770,560) 1,282,911,897 CASH, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES -- 0.9% 11,147,248 - ------------------------------------------------------------------------------------ NET ASSETS -- 100% $ 1,294,059,145 - ------------------------------------------------------------------------------------ * Non-income producing security. (1) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. - ------------------------------------------------------------------------------------
See notes to financial statements. 28 / / The Guardian UBS Large Cap Value Fund
COMMON STOCKS -- 97.7% Shares Value - --------------------------------------------------------------------------- AEROSPACE AND DEFENSE -- 2.3% 27,900 United Technologies Corp. $ 1,976,157 - --------------------------------------------------------------------------- AUTO COMPONENTS -- 1.0% 10,500 Johnson Controls, Inc. 898,800 - --------------------------------------------------------------------------- BIOTECHNOLOGY -- 1.0% 22,100 Cephalon, Inc.* 909,636 - --------------------------------------------------------------------------- BUILDING PRODUCTS -- 2.1% 75,400 Masco Corp. 1,798,290 - --------------------------------------------------------------------------- CAPITAL MARKETS -- 8.7% 113,500 J.P. Morgan Chase & Co. 3,879,430 42,800 Mellon Financial Corp. 1,187,700 58,100 Morgan Stanley 2,483,775 ----------- 7,550,905 - --------------------------------------------------------------------------- CHEMICALS -- 2.3% 64,600 Dow Chemical Co. 2,000,016 - --------------------------------------------------------------------------- COMMERCIAL BANKS -- 9.0% 11,100 Bank of America Corp. 877,233 52,600 FleetBoston Financial Corp. 1,562,746 33,600 PNC Financial Svcs. Group 1,640,016 73,400 Wells Fargo & Co. 3,699,360 ----------- 7,779,355 - --------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.9% 84,600 Motorola, Inc. 797,778 - --------------------------------------------------------------------------- COMPUTERS AND PERIPHERALS -- 2.0% 80,900 Hewlett Packard Co. 1,723,170 - --------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 1.6% 42,100 Martin Marietta Materials, Inc. 1,414,981 - --------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 5.9% 119,900 Citigroup, Inc. 5,131,720 - --------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.1% 52,400 BellSouth Corp. 1,395,412 86,000 SBC Comm., Inc. 2,197,300 ----------- 3,592,712 - --------------------------------------------------------------------------- ELECTRIC UTILITIES -- 8.8% 54,600 CMS Energy Corp. 442,260 28,700 DTE Energy Co. 1,108,968 37,300 Exelon Corp. 2,230,913 55,700 FirstEnergy Corp. 2,141,665 38,300 Progress Energy, Inc. 1,681,370 ----------- 7,605,176 - --------------------------------------------------------------------------- GAS UTILITIES -- 1.6% 47,300 Sempra Energy 1,349,469 - --------------------------------------------------------------------------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 0.6% 20,800 Baxter Int'l., Inc. 540,800 - --------------------------------------------------------------------------- HEALTH CARE PROVIDERS AND SERVICES -- 4.2% 11,100 Anthem, Inc. 856,365 55,200 UnitedHealth Group 2,773,800 ----------- 3,630,165 - --------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 1.3% 41,800 Newell Rubbermaid, Inc. 1,170,400 - --------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 1.2% 19,900 Kimberly-Clark Corp. 1,037,586 - --------------------------------------------------------------------------- INFORMATION TECHNOLOGY SERVICES -- 1.7% 35,900 First Data Corp. 1,487,696 - ---------------------------------------------------------------------------
- --------------------------------------------------------------------------- Shares Value - --------------------------------------------------------------------------- INSURANCE -- 3.4% 29,100 American Int'l. Group, Inc. $ 1,605,738 26,500 Hartford Financial Svcs. Group, Inc. 1,334,540 ----------- 2,940,278 - --------------------------------------------------------------------------- MACHINERY -- 3.9% 33,900 Illinois Tool Works, Inc. 2,232,315 29,400 Pentair, Inc. 1,148,364 ----------- 3,380,679 - --------------------------------------------------------------------------- MEDIA -- 2.5% 30,000 Viacom, Inc. 1,309,800 43,000 Walt Disney Co. 849,250 ----------- 2,159,050 - --------------------------------------------------------------------------- OIL AND GAS -- 5.9% 46,000 ConocoPhillips 2,520,800 71,400 Exxon Mobil Corp. 2,563,974 ----------- 5,084,774 - --------------------------------------------------------------------------- PHARMACEUTICALS -- 7.1% 65,500 Bristol-Myers Squibb Corp. 1,778,325 32,900 Johnson & Johnson 1,700,930 36,500 SICOR, Inc.* 742,410 42,500 Wyeth 1,935,875 ----------- 6,157,540 - --------------------------------------------------------------------------- ROAD AND RAIL -- 3.8% 55,000 Burlington Northern Santa Fe 1,564,200 89,100 Norfolk Southern Corp. 1,710,720 ----------- 3,274,920 - --------------------------------------------------------------------------- THRIFTS AND MORTGAGE FINANCE -- 5.8% 39,400 Federal Home Loan Mortgage Corp. 2,000,338 59,900 GreenPoint Financial Corp. 3,051,306 ----------- 5,051,644 - --------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 5.0% 241,900 Nextel Comm., Inc. 4,373,552 - --------------------------------------------------------------------------- TOTAL COMMON STOCKS (COST $73,731,128) 84,817,249 - --------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 2.4% Principal Amount Value - --------------------------------------------------------------------------- $2,057,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $2,057,063 at 1.10%, due 7/1/2003 (1) (COST $2,057,000) $ 2,057,000 - --------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.1% (COST $75,788,128) 86,874,249 LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND OTHER ASSETS -- (0.1)% (53,240) - --------------------------------------------------------------------------- NET ASSETS -- 100% $86,821,009 - ---------------------------------------------------------------------------
* Non-income producing security. (1) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. - -------------------------------------------------------------------------------- See notes to financial statements. 29 / / The Guardian Park Avenue Small Cap Fund
COMMON STOCKS -- 99.7% Shares Value - ----------------------------------------------------------------------------- AEROSPACE AND DEFENSE -- 1.0% 86,500 EDO Corp. $ 1,531,050 - ----------------------------------------------------------------------------- AIRLINES -- 2.0% 101,400 Continental Airlines, Inc.* 1,517,958 82,200 Skywest, Inc. 1,566,732 ------------- 3,084,690 - ----------------------------------------------------------------------------- AUTO COMPONENTS -- 1.7% 112,500 American Axle & Mfg. Hldgs., Inc.* 2,688,750 - ----------------------------------------------------------------------------- BEVERAGES -- 1.0% 71,700 Cott Corp.* 1,483,473 - ----------------------------------------------------------------------------- BIOTECHNOLOGY -- 4.0% 51,000 Charles River Laboratories Int'l.* 1,641,180 74,200 Exact Sciences Corp.* 813,232 76,000 NPS Pharmaceuticals, Inc.* 1,849,840 73,800 Protein Design Labs., Inc.* 1,031,724 60,600 Vertex Pharmaceuticals, Inc.* 884,760 ------------- 6,220,736 - ----------------------------------------------------------------------------- CAPITAL MARKETS -- 2.3% 120,600 Investors Financial Svcs. Corp. 3,498,606 - ----------------------------------------------------------------------------- CHEMICALS -- 1.9% 74,300 Cabot Corp. 2,132,410 36,000 Spartech Corp. 763,560 ------------- 2,895,970 - ----------------------------------------------------------------------------- COMMERCIAL BANKS -- 6.9% 17,700 City National Corp. 788,712 30,200 Community Bank System, Inc. 1,147,600 62,800 East West Bancorp, Inc. 2,269,592 55,500 Southwest Bancorp. of Texas, Inc.* 1,804,305 58,800 UCBH Hldgs., Inc. 1,686,384 116,600 W Hldg. Co., Inc. 1,972,872 30,750 Wintrust Financial Corp. 910,200 ------------- 10,579,665 - ----------------------------------------------------------------------------- COMMERCIAL SERVICES AND SUPPLIES -- 2.0% 43,800 Banta Corp. 1,417,806 66,975 FTI Consulting, Inc.* 1,672,366 ------------- 3,090,172 - ----------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 3.9% 38,700 Avocent Corp.* 1,158,291 254,100 Extreme Networks, Inc.* 1,346,730 72,300 F5 Networks, Inc.* 1,218,255 55,000 McDATA Corp.* 797,500 108,700 Polycom, Inc.* 1,506,582 ------------- 6,027,358 - ----------------------------------------------------------------------------- COMPUTERS AND PERIPHERALS -- 1.4% 158,200 Synaptics, Inc.* 2,129,372 - ----------------------------------------------------------------------------- CONSTRUCTION AND ENGINEERING -- 2.5% 29,200 EMCOR Group, Inc.* 1,441,312 55,500 Jacobs Engineering Group, Inc.* 2,339,325 ------------- 3,780,637 - ----------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 1.8% 115,700 Financial Federal Corp.* 2,823,080 - ----------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.6% 57,700 Comwlth. Tel. Enterprises, Inc.* 2,537,069 - ----------------------------------------------------------------------------- ELECTRIC UTILITIES -- 0.5% 26,700 Great Plains Energy, Inc. 771,096 - ----------------------------------------------------------------------------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.0% 51,000 Benchmark Electronics, Inc.* 1,568,760 43,000 Varian, Inc.* 1,490,810 ------------- 3,059,570 - -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------- Shares Value - ----------------------------------------------------------------------------- ENERGY EQUIPMENT AND SERVICES -- 0.5% 24,100 Patterson-UTI Energy, Inc.* $ 780,840 - ----------------------------------------------------------------------------- FOOD AND STAPLES RETAILING -- 1.8% 101,300 United Natural Foods, Inc.* 2,850,582 - ----------------------------------------------------------------------------- FOOD PRODUCTS -- 1.6% 39,400 American Italian Pasta Co.* 1,641,010 38,500 Smithfield Foods, Inc.* 882,420 ------------- 2,523,430 - ----------------------------------------------------------------------------- GAS UTILITIES -- 1.0% 58,800 AGL Resources, Inc. 1,495,872 - ----------------------------------------------------------------------------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 3.3% 93,700 ALARIS Medical Systems, Inc.* 1,213,415 104,200 American Medical Systems Hldgs., Inc.* 1,757,854 103,700 Conceptus, Inc.* 1,456,985 29,600 Synovis Life Technologies, Inc.* 584,304 ------------- 5,012,558 - ----------------------------------------------------------------------------- HEALTH CARE PROVIDERS AND SERVICES -- 2.0% 39,800 Henry Schein, Inc.* 2,083,132 50,400 LifePoint Hospitals, Inc.* 1,055,376 ------------- 3,138,508 - ----------------------------------------------------------------------------- HOTELS, RESTAURANTS AND LEISURE -- 3.1% 61,500 California Pizza Kitchen, Inc.* 1,322,250 78,900 Penn National Gaming, Inc.* 1,621,395 76,500 Ruby Tuesday, Inc. 1,891,845 ------------- 4,835,490 - ----------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 0.9% 51,200 Toll Brothers, Inc.* 1,449,472 - ----------------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 0.8% 62,000 Dial Corp. 1,205,900 - ----------------------------------------------------------------------------- INFORMATION TECHNOLOGY SERVICES -- 2.5% 50,300 CACI Int'l., Inc.* 1,725,290 154,400 Keane, Inc.* 2,104,472 ------------- 3,829,762 - ----------------------------------------------------------------------------- INSURANCE -- 5.4% 44,700 Brown & Brown, Inc. 1,452,750 68,900 Harleysville Group, Inc. 1,586,078 44,700 Montpelier Re Hldgs. Ltd.* 1,412,520 38,400 Philadelphia Conso. Hldg. Corp.* 1,551,360 57,900 ProAssurance Corp.* 1,562,721 18,000 RenaissanceRe Hldgs. Ltd. 819,360 ------------- 8,384,789 - ----------------------------------------------------------------------------- INTERNET SOFTWARE AND SERVICES -- 0.9% 233,300 Netegrity, Inc.* 1,362,472 - ----------------------------------------------------------------------------- MACHINERY -- 2.1% 54,300 CLARCOR, Inc. 2,093,265 32,200 IDEX Corp. 1,166,928 ------------- 3,260,193 - ----------------------------------------------------------------------------- MEDIA -- 1.8% 43,100 Cumulus Media, Inc.* 815,883 34,500 Media General, Inc. 1,973,400 ------------- 2,789,283 - ----------------------------------------------------------------------------- METALS AND MINING -- 0.5% 190,400 Hecla Mining Co.* 805,392 - ----------------------------------------------------------------------------- OIL AND GAS -- 2.9% 88,800 Spinnaker Exploration Co.* 2,326,560 53,100 Western Gas Resources, Inc. 2,102,760 ------------- 4,429,320 - -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 30 THE GUARDIAN PARK AVENUE SMALL CAP FUND Schedule of Investments (Continued)
- ----------------------------------------------------------------------------- Shares Value - ----------------------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- 2.8% 81,700 Glatfelter $ 1,205,075 280,600 Louisiana-Pacific Corp.* 3,041,704 ------------- 4,246,779 - ----------------------------------------------------------------------------- PHARMACEUTICALS -- 3.2% 21,300 Angiotech Pharmaceuticals, Inc.* 867,762 25,500 Medicis Pharmaceutical Corp. 1,445,850 48,500 Taro Pharmaceutical Inds. Ltd.* 2,661,680 ------------- 4,975,292 - ----------------------------------------------------------------------------- REAL ESTATE -- 2.0% 61,400 Arden Realty, Inc. 1,593,330 41,600 Home Pptys. NY, Inc. 1,465,984 ------------- 3,059,314 - ----------------------------------------------------------------------------- ROAD AND RAIL -- 1.7% 43,100 P.A.M. Transportation Svcs., Inc.* 1,082,672 74,100 Werner Enterprises, Inc. 1,570,920 ------------- 2,653,592 - ----------------------------------------------------------------------------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 7.4% 171,400 Credence Systems Corp. 1,451,758 104,900 Entegris, Inc.* 1,409,856 96,400 Exar Corp.* 1,526,012 106,700 Micrel, Inc.* 1,108,613 69,100 MKS Instruments, Inc.* 1,248,637 168,100 Pericom Semiconductor Corp.* 1,563,330 275,200 RF Micro Devices, Inc.* 1,656,704 46,800 Varian Semiconductor Equipment Assoc., Inc.* 1,392,768 ------------- 11,357,678 - ----------------------------------------------------------------------------- SOFTWARE -- 7.3% 168,000 Borland Software Corp.* 1,641,360 22,400 Bottomline Technologies, Inc.* 180,768 66,100 FactSet Research Systems, Inc. 2,911,705 33,800 Hyperion Solutions Corp.* 1,141,088 208,300 Lawson Software, Inc.* 1,618,491 69,000 Manhattan Assoc., Inc.* 1,791,930 221,200 Novell, Inc.* 681,296 123,800 RSA Security, Inc.* 1,330,850 ------------- 11,297,488 - -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------- Shares Value - ----------------------------------------------------------------------------- SPECIALTY RETAIL -- 4.0% 78,100 Chico's FAS, Inc.* $ 1,644,005 66,300 Cost Plus, Inc.* 2,364,258 65,700 Group 1 Automotive, Inc.* 2,129,337 ------------- 6,137,600 - ----------------------------------------------------------------------------- THRIFTS AND MORTGAGE FINANCE -- 2.8% 67,800 BankUnited Financial Corp.* 1,366,170 133,500 Federal Agricultural Mortgage Corp.* 2,983,725 ------------- 4,349,895 - ----------------------------------------------------------------------------- WATER UTILITIES -- 0.9% 56,500 Philadelphia Subn. Corp. 1,377,470 - ----------------------------------------------------------------------------- TOTAL COMMON STOCKS (COST $130,238,983) 153,810,265 - ----------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 4.0% Principal Amount Value - ----------------------------------------------------------------------------- $6,231,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $6,231,190 at 1.10%, due 7/1/2003 (1) (COST $6,231,000) $ 6,231,000 - ----------------------------------------------------------------------------- TOTAL INVESTMENTS -- 103.7% (COST $136,469,983) 160,041,265 LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND OTHER ASSETS -- (3.7)% (5,713,026) - ----------------------------------------------------------------------------- NET ASSETS -- 100% $ 154,328,239 - -----------------------------------------------------------------------------
* Non-income producing security. (1) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. - -------------------------------------------------------------------------------- See notes to financial statements. 31 / / The Guardian UBS Small Cap Value Fund
COMMON STOCKS -- 95.7% Shares Value - -------------------------------------------------------------------------- AEROSPACE AND DEFENSE -- 2.2% 25,700 Esterline Technologies Corp.* $ 447,437 16,600 Triumph Group, Inc.* 467,622 ------------ 915,059 - -------------------------------------------------------------------------- AUTO COMPONENTS -- 0.8% 8,000 Superior Industries Int'l., Inc. 333,600 - -------------------------------------------------------------------------- BIOTECHNOLOGY -- 1.3% 39,500 Serologicals Corp.* 538,385 - -------------------------------------------------------------------------- BUILDING PRODUCTS -- 0.9% 42,900 Apogee Enterprises, Inc. 386,958 - -------------------------------------------------------------------------- CAPITAL MARKETS -- 1.2% 21,400 Allied Capital Corp. 494,340 - -------------------------------------------------------------------------- CHEMICALS -- 2.8% 31,900 A. Schulman, Inc. 512,314 20,100 Lubrizol Corp. 622,899 ------------ 1,135,213 - -------------------------------------------------------------------------- COMMERCIAL BANKS -- 8.3% 19,900 City National Corp. 886,744 53,300 Colonial BancGroup, Inc. 739,271 4,500 Cullen/Frost Bankers, Inc. 144,450 22,260 F. N. B. Corp. 673,588 9,300 Greater Bay Bancorp 189,906 30,700 Trustmark Corp. 781,929 ------------ 3,415,888 - -------------------------------------------------------------------------- COMMERCIAL SERVICES AND SUPPLIES -- 6.6% 27,000 John H. Harland Co. 706,320 23,900 McGrath Rentcorp 639,086 10,800 Mobile Mini, Inc.* 176,364 14,400 New England Business Svc., Inc. 432,000 27,800 Right Management Consultants, Inc.* 351,670 6,000 School Specialty, Inc. 170,760 13,600 Standard Register Co. 224,128 ------------ 2,700,328 - -------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 1.4% 26,600 3Com Corp.* 124,488 2,700 Black Box Corp. 97,740 11,400 Harris Corp. 342,570 ------------ 564,798 - -------------------------------------------------------------------------- COMPUTERS AND PERIPHERALS -- 1.0% 100,700 Quantum Corp.* 407,835 - -------------------------------------------------------------------------- CONSTRUCTION AND ENGINEERING -- 0.9% 7,500 EMCOR Group, Inc. 370,200 - -------------------------------------------------------------------------- ELECTRIC UTILITIES -- 3.4% 20,600 ALLETE, Inc. 546,930 23,200 DQE, Inc. 349,624 11,400 Hawaiian Electric Industries, Inc. 522,690 ------------ 1,419,244 - -------------------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 2.4% 33,500 Regal-Beloit Corp. 639,850 9,700 Roper Industries, Inc. 360,840 ------------ 1,000,690 - -------------------------------------------------------------------------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.1% 6,600 CTS Corp. 68,970 26,300 Methode Electronics, Inc. 282,725 25,100 Park Electrochemical Corp. 500,745 ------------ 852,440 - --------------------------------------------------------------------------
- -------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------- ENERGY EQUIPMENT AND SERVICES -- 2.7% 47,000 Newpark Resources, Inc.* $ 257,560 4,800 Oceaneering Int'l., Inc.* 122,640 33,600 Offshore Logistics, Inc. 730,800 ------------ 1,111,000 - -------------------------------------------------------------------------- FOOD PRODUCTS -- 3.3% 17,600 Int'l. Multifoods Corp.* 403,216 40,600 Interstate Bakeries Corp. 515,620 11,100 Lancaster Colony Corp. 429,126 ------------ 1,347,962 - -------------------------------------------------------------------------- GAS UTILITIES -- 1.9% 17,500 AGL Resources, Inc. 445,200 13,200 Atmos Energy Corp. 327,360 ------------ 772,560 - -------------------------------------------------------------------------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 3.1% 10,300 Cooper Cos., Inc. 358,131 17,000 ICU Medical, Inc.* 529,550 18,600 Ocular Sciences, Inc.* 369,210 ------------ 1,256,891 - -------------------------------------------------------------------------- HEALTH CARE PROVIDERS AND SERVICES -- 5.4% 8,400 Coventry Health Care, Inc.* 387,744 23,400 RehabCare Group, Inc.* 342,810 24,600 Renal Care Group, Inc.* 866,166 32,700 Stewart Enterprises, Inc.* 140,610 21,000 Sunrise Senior Living, Inc.* 469,980 ------------ 2,207,310 - -------------------------------------------------------------------------- HOTELS, RESTAURANTS AND LEISURE -- 0.9% 4,800 CBRL Group, Inc. 186,528 19,900 Dover Downs Gaming & Entertainment, Inc. 184,075 ------------ 370,603 - -------------------------------------------------------------------------- HOUSEHOLD DURABLES -- 4.2% 49,800 Department 56, Inc.* 763,434 10,900 Furniture Brands Int'l., Inc.* 284,490 10,500 Libbey, Inc. 238,350 16,000 Stanley Furniture Co., Inc. 438,560 ------------ 1,724,834 - -------------------------------------------------------------------------- INFORMATION TECHNOLOGY SERVICES -- 3.1% 33,500 American Management Systems, Inc.* 478,380 68,300 BearingPoint, Inc.* 659,095 56,000 Computer Task Group, Inc.* 159,040 ------------ 1,296,515 - -------------------------------------------------------------------------- INSURANCE -- 2.7% 31,900 AmerUs Group Co. 899,261 6,750 Fidelity National Financial, Inc. 207,630 ------------ 1,106,891 - -------------------------------------------------------------------------- LEISURE EQUIPMENT AND PRODUCTS -- 3.1% 28,900 JAKKS Pacific, Inc. 384,081 13,400 Nautilus Group, Inc. 166,160 12,000 Polaris Industries, Inc. 736,800 ------------ 1,287,041 - -------------------------------------------------------------------------- MACHINERY -- 2.5% 35,400 Federal Signal Corp. 621,978 11,900 Harsco Corp. 428,995 ------------ 1,050,973 - -------------------------------------------------------------------------- MEDIA -- 0.8% 17,900 Saga Comm., Inc.* 348,155 - -------------------------------------------------------------------------- METALS AND MINING -- 1.5% 20,800 Quanex Corp. 618,176 - --------------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 32 THE GUARDIAN UBS SMALL CAP VALUE FUND Schedule of Investments (Continued)
- -------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------- MULTI-UTILITIES AND UNREGULATED POWER -- 1.5% 14,700 Equitable Resources, Inc. $ 598,878 - -------------------------------------------------------------------------- OIL AND GAS -- 2.5% 21,100 Cimarex Energy Co.* 501,125 20,100 Spinnaker Exploration Co. 526,620 ------------ 1,027,745 - -------------------------------------------------------------------------- REAL ESTATE -- 8.5% 22,700 EastGroup Pptys., Inc. 612,900 62,400 Equity Inns, Inc. 430,560 49,300 Innkeepers USA Trust 335,240 21,800 Kilroy Realty Corp. 599,500 18,800 Parkway Pptys., Inc. 790,540 43,900 ResortQuest Int'l., Inc.* 193,599 15,900 SL Green Realty Corp. 554,751 ------------ 3,517,090 - -------------------------------------------------------------------------- ROAD AND RAIL -- 1.6% 31,700 Genesee & Wyoming, Inc.* 652,069 - -------------------------------------------------------------------------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 0.6% 34,300 Integrated Silicon Solution, Inc.* 238,042 - -------------------------------------------------------------------------- SOFTWARE -- 2.2% 19,700 Mentor Graphics Corp.* 285,256 22,100 Reynolds & Reynolds Co. 631,176 ------------ 916,432 - -------------------------------------------------------------------------- SPECIALTY RETAIL -- 5.0% 16,700 Genesco, Inc. 295,590 11,000 Linens 'n Things, Inc.* 259,710 17,200 Michaels Stores, Inc. 654,632 27,900 Party City Corp.* 286,533 7,200 Rent-A-Center, Inc.* 545,832 ------------ 2,042,297 - -------------------------------------------------------------------------- TEXTILES, APPAREL AND LUXURY GOODS -- 0.3% 5,500 Movado Group, Inc. 119,625 - --------------------------------------------------------------------------
- -------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------- THRIFTS AND MORTGAGE FINANCE -- 3.0% 35,100 IndyMac Bancorp, Inc. $ 892,242 16,600 Roslyn Bancorp, Inc. 356,734 ------------ 1,248,976 - -------------------------------------------------------------------------- TOTAL COMMON STOCKS (COST $34,445,745) 39,395,043 - -------------------------------------------------------------------------- EXCHANGE-TRADED FUND -- 2.3% - -------------------------------------------------------------------------- 7,300 iShares Russell 2000 Value Index Fund (COST $775,448) 938,780 - -------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 1.9% Principal Amount Value - -------------------------------------------------------------------------- $771,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $771,024 at 1.10%, due 7/1/2003 (1) (COST $771,000) $ 771,000 - -------------------------------------------------------------------------- TOTAL INVESTMENTS -- 99.9% (COST $35,992,193) 41,104,823 CASH, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES -- 0.1% 37,033 - -------------------------------------------------------------------------- NET ASSETS -- 100% $ 41,141,856 - --------------------------------------------------------------------------
* Non-income producing security. (1) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. - -------------------------------------------------------------------------------- See notes to financial statements. 33 / / The Guardian Asset Allocation Fund
COMMON STOCKS -- 13.5% Shares Value - ------------------------------------------------------------- AEROSPACE AND DEFENSE -- 0.2% 3,044 Boeing Co. $ 104,470 2,736 Honeywell Int'l., Inc. 73,462 1,046 Lockheed Martin Corp. 49,758 606 Northrop Grumman Corp. 52,292 1,924 Raytheon Co. 63,184 318 United Technologies Corp. 22,524 -------------- 365,690 - ------------------------------------------------------------- AIR FREIGHT AND LOGISTICS -- 0.1% 2,119 United Parcel Svcs., Inc. 134,980 - ------------------------------------------------------------- AIRLINES -- 0.0% 2,503 Southwest Airlines Co. 43,052 - ------------------------------------------------------------- AUTOMOBILES -- 0.1% 5,835 Ford Motor Co. 64,127 2,438 General Motors Corp. 87,768 1,219 Harley-Davidson, Inc. 48,589 -------------- 200,484 - ------------------------------------------------------------- BEVERAGES -- 0.4% 2,438 Anheuser-Busch Cos., Inc. 124,460 4,595 Coca-Cola Co. 213,254 3,197 Coca-Cola Enterprises, Inc. 58,026 4,642 PepsiCo., Inc. 206,569 2,305 The Pepsi Bottling Group, Inc. 46,146 -------------- 648,455 - ------------------------------------------------------------- BIOTECHNOLOGY -- 0.2% 2,242 Amgen, Inc.* 148,958 798 Biogen, Inc.* 30,324 1,035 Chiron Corp.* 45,250 1,726 MedImmune, Inc.* 62,775 -------------- 287,307 - ------------------------------------------------------------- BUILDING PRODUCTS -- 0.0% 2,608 Masco Corp. 62,201 - ------------------------------------------------------------- CAPITAL MARKETS -- 0.5% 2,547 Bank of New York, Inc. 73,226 8,048 Charles Schwab Corp. 81,204 1,000 Goldman Sachs Group, Inc. 83,750 7,435 J.P. Morgan Chase & Co. 254,128 980 Lehman Brothers Hldgs., Inc. 65,151 2,356 Mellon Financial Corp. 65,379 410 Merrill Lynch & Co., Inc. 19,139 3,352 Morgan Stanley 143,298 57 State Street Corp. 2,246 -------------- 787,521 - ------------------------------------------------------------- CHEMICALS -- 0.2% 567 Dow Chemical Co. 17,554 3,035 E.I. Du Pont de Nemours & Co. 126,378 1,085 Monsanto Co. 23,479 1,174 PPG Industries, Inc. 59,569 1,770 Rohm & Haas Co. 54,923 -------------- 281,903 - ------------------------------------------------------------- COMMERCIAL BANKS -- 0.8% 4,591 Bank of America Corp. 362,827 1,872 BB&T Corp. 64,209 2,217 Fifth Third Bancorp 127,123 4,514 FleetBoston Financial Corp. 134,111 1,410 KeyCorp 35,631 3,312 U.S. Bancorp 81,144 4,992 Wachovia Corp. 199,480 3,950 Wells Fargo & Co. 199,080 -------------- 1,203,605 - -------------------------------------------------------------
- ------------------------------------------------------------- Shares Value - ------------------------------------------------------------- COMMERCIAL SERVICES AND SUPPLIES -- 0.2% 5,396 Cendant Corp.* $ 98,855 1,807 Cintas Corp. 64,040 1,630 Pitney Bowes, Inc. 62,608 2,779 Waste Management, Inc. 66,946 -------------- 292,449 - ------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.3% 15,125 Cisco Systems, Inc.* 252,436 6,482 Corning, Inc.* 47,902 6,075 Motorola, Inc. 57,287 2,384 QUALCOMM, Inc. 85,228 -------------- 442,853 - ------------------------------------------------------------- COMPUTERS AND PERIPHERALS -- 0.5% 4,776 Dell Computer Corp.* 152,641 5,386 EMC Corp.* 56,391 8,215 Hewlett Packard Co. 174,980 4,066 Int'l. Business Machines 335,445 12,916 Sun Microsystems, Inc.* 59,414 -------------- 778,871 - ------------------------------------------------------------- CONSUMER FINANCE -- 0.2% 1,972 American Express Co. 82,449 1,586 Capital One Financial Corp. 78,000 4,750 MBNA Corp. 98,990 2,265 SLM Corp. 88,720 -------------- 348,159 - ------------------------------------------------------------- DISTRIBUTORS -- 0.1% 2,967 Genuine Parts Co. 94,974 - ------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES -- 0.3% 11,373 Citigroup, Inc. 486,764 - ------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4% 1,564 ALLTEL Corp. 75,416 1,989 AT & T Corp. 38,288 5,078 BellSouth Corp. 135,227 5,290 SBC Comm., Inc. 135,160 1,710 Sprint Corp. (FON Group) 24,624 4,971 Verizon Comm. 196,106 -------------- 604,821 - ------------------------------------------------------------- ELECTRIC UTILITIES -- 0.3% 1,705 Entergy Corp. 89,990 1,818 Exelon Corp. 108,735 1,214 FPL Group, Inc. 81,156 1,395 Progress Energy, Inc. 61,241 1,682 Public Svc. Enterprise Group, Inc. 71,064 2,650 Southern Co. 82,574 1,292 TXU Corp. 29,005 -------------- 523,765 - ------------------------------------------------------------- ELECTRICAL EQUIPMENT -- 0.1% 424 Cooper Industries Ltd. 17,511 1,106 Emerson Electric Co. 56,517 -------------- 74,028 - ------------------------------------------------------------- ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.1% 2,990 Agilent Technologies, Inc.* 58,455 4,723 Solectron Corp.* 17,664 -------------- 76,119 - ------------------------------------------------------------- ENERGY EQUIPMENT AND SERVICES -- 0.1% 2,205 Baker Hughes, Inc. 74,022 1,681 Schlumberger Ltd. 79,965 -------------- 153,987 - -------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 34 THE GUARDIAN ASSET ALLOCATION FUND Schedule of Investments (Continued)
- ------------------------------------------------------------- Shares Value - ------------------------------------------------------------- FOOD AND STAPLES RETAILING -- 0.5% 840 Albertson's, Inc. $ 16,128 2,620 CVS Corp. 73,439 2,409 Kroger Co.* 40,182 1,099 Safeway, Inc.* 22,485 10,695 Wal-Mart Stores, Inc. 574,001 -------------- 726,235 - ------------------------------------------------------------- FOOD PRODUCTS -- 0.3% 2,194 Archer-Daniels-Midland Co. 28,237 2,621 Campbell Soup Co. 64,215 2,662 ConAgra, Inc. 62,823 928 General Mills, Inc. 43,996 2,424 H.J. Heinz Co. 79,944 667 Hershey Foods Corp. 46,463 2,012 Kellogg Co. 69,152 1,269 W.M. Wrigley Jr. Co. 71,356 -------------- 466,186 - ------------------------------------------------------------- HEALTH CARE EQUIPMENT AND SUPPLIES -- 0.4% 2,128 Baxter Int'l., Inc. 55,328 2,122 Becton Dickinson & Co., Inc. 82,440 1,466 Boston Scientific Corp.* 89,573 1,285 C.R. Bard, Inc. 91,633 2,016 Guidant Corp. 89,490 1,756 Medtronic, Inc. 84,235 1,442 St. Jude Medical, Inc.* 82,915 594 Stryker Corp. 41,206 884 Zimmer Hldgs., Inc.* 39,824 -------------- 656,644 - ------------------------------------------------------------- HEALTH CARE PROVIDERS AND SERVICES -- 0.2% 998 AmerisourceBergen Corp. 69,211 746 Cigna Corp. 35,017 306 HCA, Inc. 9,804 3,629 Health Management Associates, Inc. 66,955 1,178 McKesson Corp. 42,102 1,512 Tenet Healthcare Corp.* 17,615 929 Wellpoint Health Networks, Inc.* 78,315 -------------- 319,019 - ------------------------------------------------------------- HOTELS, RESTAURANTS AND LEISURE -- 0.1% 2,190 Carnival Corp. 71,197 2,751 McDonald's Corp. 60,687 2,943 Starbucks Corp.* 72,162 -------------- 204,046 - ------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 0.3% 614 Clorox Co. 26,187 1,955 Kimberly-Clark Corp. 101,934 3,443 Procter & Gamble Co. 307,047 -------------- 435,168 - ------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 0.6% 1,118 3M Co. 144,200 23,903 General Electric Co. 685,538 6,224 Tyco Int'l. Ltd. 118,131 -------------- 947,869 - ------------------------------------------------------------- INFORMATION TECHNOLOGY SERVICES -- 0.2% 2,142 Automatic Data Processing, Inc. 72,528 3,414 Concord EFS, Inc.* 50,254 2,525 Electronic Data Systems Corp. 54,161 3,170 First Data Corp. 131,365 957 Paychex, Inc. 28,050 1,608 Sabre Hldgs. Corp. 39,637 -------------- 375,995 - ------------------------------------------------------------- INSURANCE -- 0.6% 2,353 AFLAC, Inc. 72,355 2,008 Allstate Corp. 71,585
- ------------------------------------------------------------- Shares Value - ------------------------------------------------------------- 5,515 American Int'l. Group, Inc. $ 304,318 1,281 Chubb Corp. 76,860 1,104 John Hancock Financial Svcs., Inc. 33,926 186 Loews Corp. 8,796 2,164 Marsh & McLennan Cos., Inc. 110,515 2,884 MetLife, Inc. 81,675 1,253 Progressive Corp. 91,594 1,586 Travelers Ppty. Casualty Corp. 25,011 -------------- 876,635 - ------------------------------------------------------------- INTERNET SOFTWARE AND SERVICES -- 0.1% 3,255 Yahoo! Inc.* 106,634 - ------------------------------------------------------------- LEISURE EQUIPMENT AND PRODUCTS -- 0.1% 1,149 Eastman Kodak Co. 31,425 3,448 Mattel, Inc. 65,236 -------------- 96,661 - ------------------------------------------------------------- MACHINERY -- 0.2% 1,626 Caterpillar, Inc. 90,503 1,491 Deere & Co. 68,139 2,138 Dover Corp. 64,054 -------------- 222,696 - ------------------------------------------------------------- MEDIA -- 0.5% 11,612 AOL Time Warner, Inc.* 186,837 2,046 Clear Channel Comm., Inc.* 86,730 3,217 Comcast Corp.-Class A* 97,089 216 Comcast Corp.-Class A Special* 6,227 629 Gannett Co., Inc. 48,314 1,395 New York Times Co. 63,473 77 Tribune Co. 3,719 4,849 Viacom, Inc.* 211,707 5,567 Walt Disney Co. 109,948 -------------- 814,044 - ------------------------------------------------------------- METALS AND MINING -- 0.0% 2,364 Alcoa, Inc. 60,282 - ------------------------------------------------------------- MULTILINE RETAIL -- 0.1% 1,602 Kohl's Corp.* 82,311 481 Target Corp. 18,201 -------------- 100,512 - ------------------------------------------------------------- MULTI-UTILITIES AND UNREGULATED POWER -- 0.1% 3,468 AES Corp.* 22,022 4,604 Duke Energy Corp. 91,850 3,136 El Paso Corp. 25,339 3,916 Williams Cos., Inc. 30,936 -------------- 170,147 - ------------------------------------------------------------- OIL AND GAS -- 0.7% 1,406 Anadarko Petroleum Corp. 62,525 147 Burlington Resources, Inc. 7,948 2,887 ChevronTexaco Corp. 208,442 1,233 ConocoPhillips 67,568 16,501 Exxon Mobil Corp. 592,551 2,571 Unocal Corp. 73,762 -------------- 1,012,796 - ------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- 0.0% 2,952 Georgia-Pacific Corp. 55,940 - ------------------------------------------------------------- PERSONAL PRODUCTS -- 0.1% 1,376 Avon Products, Inc. 85,587 2,784 Gillette Co. 88,698 -------------- 174,285 - -------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 35 THE GUARDIAN ASSET ALLOCATION FUND Schedule of Investments (Continued)
- ------------------------------------------------------------- Shares Value - ------------------------------------------------------------- PHARMACEUTICALS -- 1.2% 1,116 Allergan, Inc. $ 86,044 6,462 Bristol-Myers Squibb Corp. 175,443 3,549 Eli Lilly & Co. 244,775 1,774 Forest Laboratories, Inc.* 97,126 6,872 Johnson & Johnson 355,282 1,779 King Pharmaceuticals, Inc.* 26,258 21,478 Pfizer, Inc. 733,474 3,875 Schering-Plough Corp. 72,075 -------------- 1,790,477 - ------------------------------------------------------------- REAL ESTATE -- 0.1% 2,383 Plum Creek Timber Co., Inc. 61,839 1,972 Simon Ppty. Group, Inc. 76,967 -------------- 138,806 - ------------------------------------------------------------- ROAD AND RAIL -- 0.1% 2,352 Burlington Northern Santa Fe 66,891 1,674 Union Pacific Corp. 97,125 -------------- 164,016 - ------------------------------------------------------------- SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 0.5% 2,923 Altera Corp. 47,937 754 Analog Devices, Inc.* 26,254 4,648 Applied Materials, Inc.* 73,717 1,688 Broadcom Corp.* 42,048 13,630 Intel Corp. 283,286 1,448 KLA-Tencor Corp.* 67,318 549 Linear Technology Corp. 17,684 794 Maxim Integrated Products, Inc. 27,147 3,302 Micron Technology, Inc.* 38,402 5,091 Texas Instruments, Inc. 89,602 2,346 Xilinx, Inc.* 59,377 -------------- 772,772 - ------------------------------------------------------------- SOFTWARE -- 0.6% 1,802 Adobe Systems, Inc. 57,790 3,590 Computer Associates Int'l., Inc. 79,985 26,119 Microsoft Corp. 668,908 2,830 Siebel Systems, Inc.* 26,998 2,739 VERITAS Software Corp.* 78,527 -------------- 912,208 - ------------------------------------------------------------- SPECIALTY RETAIL -- 0.3% 1,416 Bed, Bath & Beyond, Inc.* 54,955 1,930 Best Buy Co., Inc.* 84,766 3,143 Home Depot, Inc. 104,096 2,415 Lowe's Cos., Inc. 103,724 3,749 Staples, Inc.* 68,794 5,047 The Gap, Inc. 94,682 -------------- 511,017 - ------------------------------------------------------------- TEXTILES, APPAREL AND LUXURY GOODS -- 0.0% 1,255 NIKE, Inc. 67,130 - ------------------------------------------------------------- THRIFTS AND MORTGAGE FINANCE -- 0.2% 1,850 Federal National Mortgage Assn. 124,764 4,145 Washington Mutual, Inc. 171,189 -------------- 295,953 - ------------------------------------------------------------- TOBACCO -- 0.2% 5,316 Altria Group, Inc. 241,559 509 UST, Inc. 17,830 -------------- 259,389 - ------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.1% 12,777 AT & T Wireless Svcs., Inc.* 104,899 - ------------------------------------------------------------- TOTAL COMMON STOCKS (COST $25,163,719) 20,730,449 - ------------------------------------------------------------- MUTUAL FUNDS -- 83.6% EQUITY -- 66.6% 15,277,311 The Guardian S&P 500 Index Fund, Class A (1) $ 102,205,208 - ------------------------------------------------------------- FIXED INCOME -- 17.0% 2,479,290 The Guardian Investment Quality Bond Fund, Class A (2) 26,106,921 - ------------------------------------------------------------- TOTAL MUTUAL FUNDS (COST $156,485,070) 128,312,129 - ------------------------------------------------------------- U.S. GOVERNMENT -- 1.9% Principal Amount Value - ------------------------------------------------------------- U.S. Treasury Bill $2,000,000 0.785%, 9/18/2003 (3) $ 1,996,554 1,000,000 1.10%, 7/10/2003 (3) 999,724 - ------------------------------------------------------------- TOTAL U.S. GOVERNMENT (COST $2,996,278) 2,996,278 - ------------------------------------------------------------- REPURCHASE AGREEMENT -- 1.3% Principal Amount Value - ------------------------------------------------------------- $1,980,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $1,980,061 at 1.10%, due 7/1/2003 (4) (COST $1,980,000) $ 1,980,000 - ------------------------------------------------------------- TOTAL INVESTMENTS -- 100.3% (COST $186,625,067) 154,018,856 LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND OTHER ASSETS -- (0.3)% (459,406) - ------------------------------------------------------------- NET ASSETS -- 100% $ 153,559,450 - -------------------------------------------------------------
* Non-income producing security. (1) Majority-owned subsidiary. (2) Affiliated issuer. (3) The U.S. Treasury Bills are segregated as collateral to cover margin requirements on open futures contracts. (4) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio.
PURCHASED (P)/SOLD (S) FUTURES CONTRACTS Unrealized Appreciation/ Contracts Type Description Expiration (Depreciation) - ----------------------------------------------------------------- 225 S U.S. Treasury Notes, 5 Year 9/2003 $ 57,850 126 P S&P 500 Index 9/2003 (615,262) ------------ $ (557,412) - -----------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 36 / / The Guardian S&P 500 Index Fund
COMMON STOCKS -- 97.7% Shares Value - ------------------------------------------------------------------------------ AEROSPACE AND DEFENSE -- 1.7% 12,039 Boeing Co. $ 413,178 2,868 General Dynamics Corp. 207,930 1,476 Goodrich Corp. 30,996 12,069 Honeywell Int'l., Inc. 324,053 7,259 Lockheed Martin Corp. 345,311 2,626 Northrop Grumman Corp. 226,598 5,860 Raytheon Co. 192,442 2,645 Rockwell Collins, Inc. 65,146 6,791 United Technologies Corp. 481,007 -------------- 2,286,661 - ------------------------------------------------------------------------------ AIR FREIGHT AND LOGISTICS -- 1.0% 4,237 FedEx Corp. 262,821 810 Ryder Systems, Inc. 20,752 16,167 United Parcel Svcs., Inc. 1,029,838 -------------- 1,313,411 - ------------------------------------------------------------------------------ AIRLINES -- 0.2% 1,785 Delta Airlines, Inc. 26,204 10,945 Southwest Airlines Co. 188,254 -------------- 214,458 - ------------------------------------------------------------------------------ AUTO COMPONENTS -- 0.2% 945 Cooper Tire & Rubber Co. 16,623 2,085 Dana Corp. 24,103 8,041 Delphi Automotive Systems Corp. 69,394 4,744 Goodyear Tire & Rubber Co. 24,906 1,229 Johnson Controls, Inc. 105,202 1,852 Visteon Corp. 12,723 -------------- 252,951 - ------------------------------------------------------------------------------ AUTOMOBILES -- 0.6% 26,733 Ford Motor Co. 293,796 7,915 General Motors Corp. 284,940 4,354 Harley-Davidson, Inc. 173,550 -------------- 752,286 - ------------------------------------------------------------------------------ BEVERAGES -- 2.7% 525 Adolph Coors Co. 25,715 12,007 Anheuser-Busch Cos., Inc. 612,957 995 Brown-Forman Corp. 78,227 35,477 Coca-Cola Co. 1,646,488 6,006 Coca-Cola Enterprises, Inc. 109,009 25,165 PepsiCo., Inc. 1,119,842 4,359 The Pepsi Bottling Group, Inc. 87,267 -------------- 3,679,505 - ------------------------------------------------------------------------------ BIOTECHNOLOGY -- 1.3% 19,000 Amgen, Inc.* 1,262,360 2,114 Biogen, Inc.* 80,332 2,723 Chiron Corp.* 119,049 3,379 Genzyme Corp.* 141,242 3,661 MedImmune, Inc.* 133,151 -------------- 1,736,134 - ------------------------------------------------------------------------------ BUILDING PRODUCTS -- 0.2% 1,062 American Standard Cos., Inc.* 78,514 7,483 Masco Corp. 178,469 -------------- 256,983 - ------------------------------------------------------------------------------ CAPITAL MARKETS -- 3.4% 10,676 Bank of New York, Inc. 306,935 1,537 Bear Stearns Cos., Inc. 111,310 19,889 Charles Schwab Corp. 200,680 1,600 Federated Investors, Inc. 43,872 3,801 Franklin Resources, Inc. 148,505 6,786 Goldman Sachs Group, Inc. 568,327 29,597 J.P. Morgan Chase & Co. 1,011,625
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ 3,184 Janus Capital Group, Inc. $ 52,218 3,599 Lehman Brothers Hldgs., Inc. 239,262 7,034 Mellon Financial Corp. 195,193 14,254 Merrill Lynch & Co., Inc. 665,377 16,092 Morgan Stanley 687,933 3,195 Northern Trust Corp. 133,519 4,655 State Street Corp. 183,407 1,728 T. Rowe Price Group, Inc. 65,232 -------------- 4,613,395 - ------------------------------------------------------------------------------ CHEMICALS -- 1.4% 3,281 Air Products & Chemicals, Inc. 136,489 12,885 Dow Chemical Co. 398,919 15,009 E.I. Du Pont de Nemours & Co. 624,975 1,083 Eastman Chemical Co. 34,299 3,608 Ecolab, Inc. 92,365 1,823 Engelhard Corp. 45,156 685 Great Lakes Chemical Corp. 13,974 1,497 Hercules, Inc.* 14,820 1,377 Int'l. Flavors & Fragrances, Inc. 43,968 3,328 Monsanto Co. 72,018 2,413 PPG Industries, Inc. 122,436 2,266 Praxair, Inc. 136,186 3,134 Rohm & Haas Co. 97,248 1,093 Sigma-Aldrich 59,219 -------------- 1,892,072 - ------------------------------------------------------------------------------ COMMERCIAL BANKS -- 6.2% 5,373 AmSouth Bancorporation 117,346 22,164 Bank of America Corp. 1,751,621 16,677 Bank One Corp. 620,051 6,636 BB&T Corp. 227,615 3,302 Charter One Financial, Inc. 102,956 2,548 Comerica, Inc. 118,482 8,186 Fifth Third Bancorp 469,385 1,845 First Tennessee Nat'l. Corp. 81,014 15,151 FleetBoston Financial Corp. 450,136 3,600 Huntington Bancshares, Inc. 70,272 6,165 KeyCorp 155,790 3,114 Marshall & Ilsley Corp. 95,226 8,809 National City Corp. 288,142 2,405 North Fork Bancorporation, Inc. 81,914 4,177 PNC Financial Svcs. Group 203,879 3,484 Regions Financial Corp. 117,690 4,873 SouthTrust Corp. 132,546 4,276 SunTrust Banks, Inc. 253,738 4,126 Synovus Financial Corp. 88,709 27,004 U.S. Bancorp 661,598 2,982 Union Planters Corp. 92,532 20,178 Wachovia Corp. 806,313 24,635 Wells Fargo & Co. 1,241,604 1,438 Zions Bancorporation 72,777 -------------- 8,301,336 - ------------------------------------------------------------------------------ COMMERCIAL SERVICES AND SUPPLIES -- 1.0% 2,838 Allied Waste Industries, Inc.* 28,522 2,507 Apollo Group, Inc.* 154,832 1,581 Avery Dennison Corp. 79,366 14,291 Cendant Corp.* 261,811 2,425 Cintas Corp. 85,942 997 Deluxe Corp. 44,666 2,052 Equifax, Inc. 53,352 2,604 H & R Block, Inc. 112,623 1,707 Monster Worldwide, Inc.* 33,679 3,634 Pitney Bowes, Inc. 139,582 1,723 R.R. Donnelley & Sons Co. 45,039
- -------------------------------------------------------------------------------- See notes to financial statements. 37 THE GUARDIAN S&P 500 INDEX FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ 2,547 Robert Half Int'l., Inc.* $ 48,240 8,974 Waste Management, Inc. 216,184 -------------- 1,303,838 - ------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT -- 2.3% 11,132 ADC Telecomm., Inc.* 25,915 1,131 Andrew Corp.* 10,405 4,030 Avaya, Inc.* 26,034 11,451 CIENA Corp.* 59,431 106,642 Cisco Systems, Inc.* 1,779,855 2,380 Comverse Technology, Inc.* 35,771 19,376 Corning, Inc.* 143,189 18,734 JDS Uniphase Corp.* 65,756 59,431 Lucent Technologies, Inc.* 120,645 32,778 Motorola, Inc. 309,097 12,102 QUALCOMM, Inc. 432,647 2,311 Scientific Atlanta, Inc. 55,094 5,897 Tellabs, Inc.* 38,743 -------------- 3,102,582 - ------------------------------------------------------------------------------ COMPUTERS AND PERIPHERALS -- 3.8% 4,953 Apple Computer, Inc.* 94,701 38,046 Dell Computer Corp.* 1,215,950 32,506 EMC Corp.* 340,338 4,621 Gateway, Inc.* 16,867 44,751 Hewlett Packard Co. 953,196 24,669 Int'l. Business Machines 2,035,193 1,823 Lexmark Int'l. Group, Inc.* 129,014 1,379 NCR Corp.* 35,330 4,602 Network Appliance, Inc.* 74,598 46,932 Sun Microsystems, Inc.* 215,887 -------------- 5,111,074 - ------------------------------------------------------------------------------ CONSTRUCTION AND ENGINEERING -- 0.0% 1,050 Fluor Corp. 35,322 784 McDermott Int'l., Inc.* 4,963 -------------- 40,285 - ------------------------------------------------------------------------------ CONSTRUCTION MATERIALS -- 0.0% 1,439 Vulcan Materials Co. 53,344 - ------------------------------------------------------------------------------ CONSUMER FINANCE -- 1.2% 19,169 American Express Co. 801,456 3,150 Capital One Financial Corp. 154,917 18,401 MBNA Corp. 383,477 4,111 Providian Financial Corp.* 38,068 7,101 SLM Corp. 278,146 -------------- 1,656,064 - ------------------------------------------------------------------------------ CONTAINERS AND PACKAGING -- 0.2% 813 Ball Corp. 37,000 752 Bemis Co., Inc. 35,194 2,261 Pactiv Corp.* 44,564 1,181 Sealed Air Corp.* 56,286 697 Temple-Inland, Inc. 29,908 -------------- 202,952 - ------------------------------------------------------------------------------ DISTRIBUTORS -- 0.1% 2,486 Genuine Parts Co. 79,577 - ------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES -- 2.6% 74,611 Citigroup, Inc. 3,193,351 2,359 Moody's Corp. 124,343 5,116 Principal Financial Group, Inc. 164,991 -------------- 3,482,685 - ------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.3% 4,514 ALLTEL Corp. 217,665 11,030 AT & T Corp. 212,327 28,012 BellSouth Corp. 745,960
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ 1,992 CenturyTel, Inc. $ 69,421 3,719 Citizens Comm. Co.* 47,938 23,823 Qwest Comm. Int'l., Inc.* 113,874 48,750 SBC Comm., Inc. 1,245,562 12,674 Sprint Corp. (FON Group) 182,506 39,396 Verizon Comm 1,554,172 -------------- 4,389,425 - ------------------------------------------------------------------------------ ELECTRIC UTILITIES -- 2.2% 1,753 Allegheny Energy, Inc. 14,813 1,971 Ameren Corp. 86,921 6,284 American Electric Power, Inc. 187,452 4,248 CenterPoint Energy, Inc. 34,621 2,286 CiNergy Corp. 84,102 1,896 CMS Energy Corp. 15,358 3,075 Consolidated Edison, Inc. 133,086 2,335 Constellation Energy Group, Inc. 80,091 5,170 Dominion Resources, Inc. 332,276 2,578 DTE Energy Co. 99,614 4,648 Edison Int'l.* 76,367 3,218 Entergy Corp. 169,846 4,598 Exelon Corp. 275,006 4,395 FirstEnergy Corp. 168,988 2,550 FPL Group, Inc. 170,467 5,509 PG&E Corp.* 116,515 1,212 Pinnacle West Capital Corp. 45,389 2,089 PPL Corp. 89,827 2,954 Progress Energy, Inc. 129,681 3,120 Public Svc. Enterprise Group, Inc. 131,820 9,746 Southern Co. 303,685 2,624 TECO Energy, Inc. 31,462 6,860 TXU Corp. 154,007 6,601 Xcel Energy, Inc. 99,279 -------------- 3,030,673 - ------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT -- 0.4% 2,786 American Power Conversion Corp.* 43,434 1,359 Cooper Industries Ltd. 56,127 6,202 Emerson Electric Co. 316,922 1,094 Power-One, Inc.* 7,822 2,645 Rockwell Automation, Inc. 63,057 767 Thomas & Betts Corp.* 11,083 -------------- 498,445 - ------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.4% 6,556 Agilent Technologies, Inc.* 128,170 2,726 Jabil Circuit, Inc.* 60,245 2,802 Molex, Inc. 75,626 2,010 PerkinElmer, Inc. 27,758 7,816 Sanmina-SCI Corp.* 49,319 12,349 Solectron Corp.* 46,185 3,132 Symbol Technologies, Inc. 40,747 1,336 Tektronix, Inc.* 28,858 2,568 Thermo Electron Corp.* 53,979 2,045 Waters Corp.* 59,571 -------------- 570,458 - ------------------------------------------------------------------------------ ENERGY EQUIPMENT AND SERVICES -- 0.8% 2,317 B.J. Svcs. Co.* 86,563 4,764 Baker Hughes, Inc. 159,927 6,355 Halliburton Co. 146,165 2,092 Nabors Industries, Inc.* 82,739 2,008 Noble Corp.* 68,874 1,317 Rowan Cos., Inc. 29,501 8,249 Schlumberger Ltd. 392,405 4,534 Transocean, Inc.* 99,612 -------------- 1,065,786 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 38 THE GUARDIAN S&P 500 INDEX FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ FOOD AND STAPLES RETAILING -- 3.8% 5,902 Albertson's, Inc. $ 113,319 6,425 Costco Wholesale Corp.* 235,155 5,636 CVS Corp. 157,977 11,800 Kroger Co.* 196,824 7,230 Safeway, Inc.* 147,926 1,885 Supervalu, Inc. 40,188 9,731 Sysco Corp. 292,319 65,296 Wal-Mart Stores, Inc. 3,504,436 14,630 Walgreen Co. 440,363 2,010 Winn-Dixie Stores, Inc. 24,743 -------------- 5,153,250 - ------------------------------------------------------------------------------ FOOD PRODUCTS -- 1.2% 9,568 Archer-Daniels-Midland Co. 123,140 6,069 Campbell Soup Co. 148,690 7,728 ConAgra, Inc. 182,381 5,346 General Mills, Inc. 253,454 5,023 H.J. Heinz Co. 165,658 1,960 Hershey Foods Corp. 136,534 5,844 Kellogg Co. 200,858 1,968 McCormick & Co., Inc. 53,530 11,107 Sara Lee Corp. 208,923 3,230 W.M. Wrigley Jr. Co. 181,623 -------------- 1,654,791 - ------------------------------------------------------------------------------ GAS UTILITIES -- 0.3% 1,989 KeySpan Corp. 70,510 1,648 Kinder Morgan, Inc. 90,063 674 NICOR, Inc. 25,012 2,931 NiSource, Inc. 55,689 527 Peoples Energy Corp. 22,603 2,954 Sempra Energy 84,278 -------------- 348,155 - ------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.9% 3,019 Applera Corp.-Applied Biosystems Group 57,452 755 Bausch & Lomb, Inc. 28,312 8,470 Baxter Int'l., Inc. 220,220 3,689 Becton Dickinson & Co., Inc. 143,318 3,846 Biomet, Inc. 110,226 5,826 Boston Scientific Corp.* 355,969 721 C.R. Bard, Inc. 51,414 4,422 Guidant Corp. 196,293 17,544 Medtronic, Inc. 841,586 653 Millipore Corp.* 28,974 2,433 St. Jude Medical, Inc.* 139,897 2,817 Stryker Corp. 195,415 2,817 Zimmer Hldgs., Inc.* 126,906 -------------- 2,495,982 - ------------------------------------------------------------------------------ HEALTH CARE PROVIDERS AND SERVICES -- 1.7% 2,062 Aetna, Inc. 124,132 1,527 AmerisourceBergen Corp. 105,897 2,046 Anthem, Inc.* 157,849 6,588 Cardinal Health, Inc. 423,608 2,221 Cigna Corp. 104,254 7,462 HCA, Inc. 239,082 3,671 Health Management Associates, Inc. 67,730 2,389 Humana, Inc.* 36,074 4,249 IMS Health, Inc. 76,440 1,456 Manor Care, Inc.* 36,415 4,085 McKesson Corp. 145,998 1,410 Quest Diagnostics, Inc.* 89,958 1,646 Quintiles Transnational Corp.* 23,357
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ 6,941 Tenet Healthcare Corp.* $ 80,863 9,220 UnitedHealth Group 463,305 2,138 Wellpoint Health Networks, Inc.* 180,233 -------------- 2,355,195 - ------------------------------------------------------------------------------ HOTELS, RESTAURANTS AND LEISURE -- 1.2% 10,732 Carnival Corp. 348,897 2,575 Darden Restaurants, Inc. 48,873 1,649 Harrah's Entertainment, Inc.* 66,356 5,226 Hilton Hotels Corp. 66,841 1,339 Int'l. Game Technology 137,020 3,443 Marriott Int'l., Inc. 132,280 18,921 McDonald's Corp. 417,397 5,426 Starbucks Corp.* 133,046 4,141 Starwood Hotels & Resorts Worldwide, Inc. 118,391 1,623 Wendy's Int'l., Inc. 47,018 4,234 Yum! Brands, Inc.* 125,157 -------------- 1,641,276 - ------------------------------------------------------------------------------ HOUSEHOLD DURABLES -- 0.5% 800 American Greetings Corp.* 15,712 1,127 Black & Decker Corp. 48,968 842 Centex Corp. 65,499 2,219 Fortune Brands, Inc. 115,832 618 KB Home 38,304 2,782 Leggett & Platt, Inc. 57,031 1,066 Maytag Corp. 26,032 3,827 Newell Rubbermaid, Inc. 107,156 1,023 Pulte Homes, Inc. 63,078 811 Snap-On, Inc. 23,543 1,228 Stanley Works 33,893 786 Tupperware Corp. 11,287 933 Whirlpool Corp. 59,432 -------------- 665,767 - ------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS -- 2.0% 3,390 Clorox Co. 144,583 8,248 Colgate-Palmolive Co. 477,972 7,704 Kimberly-Clark Corp. 401,687 18,742 Procter & Gamble Co. 1,671,411 -------------- 2,695,653 - ------------------------------------------------------------------------------ INDUSTRIAL CONGLOMERATES -- 4.1% 5,709 3M Co. 736,347 146,341 General Electric Co. 4,197,060 2,056 Textron, Inc. 80,225 28,991 Tyco Int'l. Ltd. 550,249 -------------- 5,563,881 - ------------------------------------------------------------------------------ INFORMATION TECHNOLOGY SERVICES -- 1.2% 9,179 Automatic Data Processing, Inc. 310,801 2,428 Computer Sciences Corp.* 92,555 7,400 Concord EFS, Inc.* 108,928 2,482 Convergys Corp.* 39,712 6,747 Electronic Data Systems Corp. 144,723 11,404 First Data Corp. 472,582 2,689 Fiserv, Inc.* 95,755 5,381 Paychex, Inc. 157,717 1,910 Sabre Hldgs. Corp. 47,082 3,991 SunGard Data Systems, Inc.* 103,407 4,516 Unisys Corp.* 55,456 -------------- 1,628,718 - ------------------------------------------------------------------------------ INSURANCE -- 4.4% 4,286 ACE Ltd. 146,967 7,659 AFLAC, Inc. 235,514 10,558 Allstate Corp. 376,393
- -------------------------------------------------------------------------------- See notes to financial statements. 39 THE GUARDIAN S&P 500 INDEX FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ 1,504 Ambac Financial Group, Inc. $ 99,640 37,976 American Int'l. Group, Inc. 2,095,516 5,649 Aon Corp. 136,028 2,514 Chubb Corp. 150,840 2,309 Cincinnati Financial Corp. 85,641 4,261 Hartford Financial Svcs. Group, Inc. 214,584 2,226 Jefferson-Pilot Corp. 92,290 4,288 John Hancock Financial Svcs., Inc. 131,770 2,766 Lincoln Nat'l. Corp. 98,552 2,851 Loews Corp. 134,824 7,934 Marsh & McLennan Cos., Inc. 405,189 2,115 MBIA, Inc. 103,106 10,421 MetLife, Inc. 295,123 3,156 Progressive Corp. 230,704 7,674 Prudential Financial, Inc. 258,230 1,823 SAFECO Corp. 64,315 3,133 St. Paul Cos., Inc. 114,386 1,831 Torchmark Corp. 68,205 15,308 Travelers Ppty. Casualty Corp. 241,407 3,475 UnumProvident Corp. 46,600 1,913 XL Capital Ltd. 158,779 -------------- 5,984,603 - ------------------------------------------------------------------------------ INTERNET AND CATALOG RETAIL -- 0.4% 4,746 eBay, Inc.* 494,438 - ------------------------------------------------------------------------------ INTERNET SOFTWARE AND SERVICES -- 0.2% 9,061 Yahoo! Inc.* 296,838 - ------------------------------------------------------------------------------ LEISURE EQUIPMENT AND PRODUCTS -- 0.2% 1,223 Brunswick Corp. 30,599 4,324 Eastman Kodak Co. 118,261 2,426 Hasbro, Inc. 42,431 6,117 Mattel, Inc. 115,734 -------------- 307,025 - ------------------------------------------------------------------------------ MACHINERY -- 1.1% 4,962 Caterpillar, Inc. 276,185 841 Crane Co. 19,032 571 Cummins, Inc. 20,493 2,085 Danaher Corp. 141,884 3,371 Deere & Co. 154,055 2,911 Dover Corp. 87,214 977 Eaton Corp. 76,802 4,354 Illinois Tool Works, Inc. 286,711 2,311 Ingersoll-Rand Co. 109,357 1,256 ITT Industries, Inc. 82,218 832 Navistar Int'l. Corp.* 27,148 1,645 PACCAR, Inc. 111,136 1,735 Pall Corp. 39,037 1,682 Parker-Hannifin Corp. 70,627 -------------- 1,501,899 - ------------------------------------------------------------------------------ MEDIA -- 4.1% 65,918 AOL Time Warner, Inc.* 1,060,621 8,760 Clear Channel Comm., Inc.* 371,336 33,774 Comcast Corp. -- Class A* 1,019,299 1,237 Dow Jones & Co., Inc. 53,228 3,802 Gannett Co., Inc. 292,032 5,651 Interpublic Group Cos., Inc. 75,610 1,337 Knight-Ridder, Inc. 92,160 2,816 McGraw-Hill Cos., Inc. 174,592 690 Meredith Corp. 30,360 2,319 New York Times Co. 105,515 2,732 Omnicom Group, Inc. 195,884 4,358 Tribune Co. 210,491 2,961 Univision Comm., Inc.* 90,014 25,862 Viacom, Inc.* 1,129,135 29,970 Walt Disney Co. 591,908 -------------- 5,492,185 - ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ METALS AND MINING -- 0.5% 12,481 Alcoa, Inc. $ 318,265 1,132 Allegheny Technologies, Inc. 7,471 2,172 Freeport-McMoran Copper & Gold, Inc. 53,214 6,958 Newmont Mining Corp. 225,857 1,128 Nucor Corp. 55,103 1,125 Phelps Dodge Corp.* 43,133 1,246 United States Steel Corp. 20,397 1,195 Worthington Industries, Inc. 16,013 -------------- 739,453 - ------------------------------------------------------------------------------ MULTILINE RETAIL -- 1.1% 1,561 Big Lots, Inc.* 23,477 1,201 Dillards, Inc. 16,177 4,737 Dollar General Corp. 86,498 2,900 Family Dollar Stores, Inc. 110,635 2,840 Federated Department Stores, Inc. 104,654 3,729 J.C. Penney Co., Inc. 62,834 4,756 Kohl's Corp.* 244,363 4,265 May Department Stores Co. 94,939 1,837 Nordstrom, Inc. 35,858 4,812 SearsRoebuck & Co. 161,876 13,845 Target Corp. 523,895 -------------- 1,465,206 - ------------------------------------------------------------------------------ MULTI-UTILITIES AND UNREGULATED POWER -- 0.4% 7,632 AES Corp.* 48,463 4,272 Calpine Corp.* 28,195 12,644 Duke Energy Corp. 252,248 4,647 Dynegy, Inc.* 19,517 10,252 El Paso Corp. 82,836 6,162 Mirant Corp.* 17,870 7,802 Williams Cos., Inc. 61,636 -------------- 510,765 - ------------------------------------------------------------------------------ OFFICE ELECTRONICS -- 0.1% 9,582 Xerox Corp.* 101,473 - ------------------------------------------------------------------------------ OIL AND GAS -- 4.9% 1,272 Amerada Hess Corp. 62,557 4,135 Anadarko Petroleum Corp. 183,884 2,956 Apache Corp. 192,317 966 Ashland, Inc. 29,637 3,106 Burlington Resources, Inc. 167,941 15,369 ChevronTexaco Corp. 1,109,642 9,620 ConocoPhillips 527,176 3,471 Devon Energy Corp. 185,351 1,669 EOG Resources, Inc. 69,831 99,745 Exxon Mobil Corp. 3,581,843 1,350 Kerr-McGee Corp. 60,480 4,449 Marathon Oil Corp. 117,231 5,341 Occidental Petroleum Corp. 179,191 1,169 Sunoco, Inc. 44,118 3,244 Unocal Corp. 93,070 -------------- 6,604,269 - ------------------------------------------------------------------------------ PAPER AND FOREST PRODUCTS -- 0.5% 811 Boise Cascade Corp. 19,383 4,933 Georgia-Pacific Corp. 93,480 7,547 Int'l. Paper Co. 269,654 1,413 Louisiana-Pacific Corp.* 15,317
- -------------------------------------------------------------------------------- See notes to financial statements. 40 THE GUARDIAN S&P 500 INDEX FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ 2,831 MeadWestvaco Corp. $ 69,926 3,142 Weyerhaeuser Co. 169,668 -------------- 637,428 - ------------------------------------------------------------------------------ PERSONAL PRODUCTS -- 0.5% 801 Alberto-Culver Co. 40,931 3,423 Avon Products, Inc. 212,911 15,165 Gillette Co. 483,157 -------------- 736,999 - ------------------------------------------------------------------------------ PHARMACEUTICALS -- 9.6% 23,002 Abbott Laboratories 1,006,568 1,885 Allergan, Inc. 145,334 28,177 Bristol-Myers Squibb Corp. 765,006 16,238 Eli Lilly & Co. 1,119,935 5,030 Forest Laboratories, Inc.* 275,392 43,650 Johnson & Johnson 2,256,705 3,608 King Pharmaceuticals, Inc.* 53,254 32,517 Merck & Co., Inc. 1,968,904 117,992 Pfizer, Inc. 4,029,427 21,060 Schering-Plough Corp. 391,716 1,463 Watson Pharmaceuticals, Inc.* 59,061 19,168 Wyeth 873,102 -------------- 12,944,404 - ------------------------------------------------------------------------------ REAL ESTATE -- 0.4% 1,354 Apartment Investment & Management Co. 46,849 6,439 Equity Office Pptys. Trust 173,917 4,460 Equity Residential 115,737 2,659 Plum Creek Timber Co., Inc. 69,001 2,660 Simon Ppty. Group, Inc. 103,820 -------------- 509,324 - ------------------------------------------------------------------------------ ROAD AND RAIL -- 0.4% 5,663 Burlington Northern Santa Fe 161,056 3,037 CSX Corp. 91,383 5,523 Norfolk Southern Corp. 106,042 3,564 Union Pacific Corp. 206,783 -------------- 565,264 - ------------------------------------------------------------------------------ SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 3.2% 4,499 Advanced Micro Devices, Inc.* 28,839 5,686 Altera Corp. 93,250 5,168 Analog Devices, Inc.* 179,950 24,158 Applied Materials, Inc.* 383,146 4,283 Applied Micro Circuits Corp.* 25,912 3,923 Broadcom Corp.* 97,722 98,131 Intel Corp. 2,039,555 2,641 KLA-Tencor Corp.* 122,780 4,550 Linear Technology Corp. 146,555 5,783 LSI Logic Corp.* 40,944 5,737 Maxim Integrated Products, Inc. 196,148 8,530 Micron Technology, Inc.* 99,204 2,484 National Semiconductor Corp.* 48,984 2,010 Novellus Systems, Inc.* 73,608 2,246 NVIDIA Corp.* 51,680 2,652 PMC-Sierra, Inc.* 31,108 1,314 QLogic Corp.* 63,506 2,493 Teradyne, Inc.* 43,154 24,963 Texas Instruments, Inc. 439,349 4,739 Xilinx, Inc.* 119,944 -------------- 4,325,338 - ------------------------------------------------------------------------------ SOFTWARE -- 4.6% 3,464 Adobe Systems, Inc. 111,091 1,611 Autodesk, Inc. 26,034 3,499 BMC Software, Inc.* 57,139 2,659 Citrix Systems, Inc.* 54,137
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ 8,300 Computer Associates Int'l., Inc. $ 184,924 5,272 Compuware Corp.* 30,419 1,900 Electronic Arts, Inc.* 140,581 2,776 Intuit, Inc.* 123,615 1,159 Mercury Interactive Corp.* 44,749 158,344 Microsoft Corp. 4,055,190 4,527 Novell, Inc.* 13,943 80,487 Oracle Corp.* 967,454 3,803 Parametric Technology Corp.* 11,599 4,507 PeopleSoft, Inc.* 79,278 6,843 Siebel Systems, Inc.* 65,282 2,100 Symantec Corp.* 92,106 5,883 VERITAS Software Corp.* 168,666 -------------- 6,226,207 - ------------------------------------------------------------------------------ SPECIALTY RETAIL -- 2.3% 4,489 AutoNation, Inc.* 70,567 1,633 AutoZone, Inc.* 124,059 4,093 Bed, Bath & Beyond, Inc.* 158,849 4,479 Best Buy Co., Inc.* 196,718 2,929 Circuit City Stores, Inc. 25,775 34,067 Home Depot, Inc. 1,128,299 12,053 Lowe's Cos., Inc. 517,676 4,230 Office Depot, Inc.* 61,377 2,665 RadioShack Corp. 70,116 2,265 Sherwin-Williams Co. 60,883 6,492 Staples, Inc.* 119,128 12,190 The Gap, Inc. 228,685 9,439 The Limited, Inc. 146,305 2,083 Tiffany & Co. 68,073 7,969 TJX Cos., Inc. 150,136 2,834 Toys R Us, Inc.* 34,348 -------------- 3,160,994 - ------------------------------------------------------------------------------ TEXTILES, APPAREL AND LUXURY GOODS -- 0.3% 2,039 Jones Apparel Group, Inc.* 59,661 1,864 Liz Claiborne, Inc. 65,706 3,766 NIKE, Inc. 201,443 649 Reebok Int'l. Ltd.* 21,826 1,473 V.F. Corp. 50,038 -------------- 398,674 - ------------------------------------------------------------------------------ THRIFTS AND MORTGAGE FINANCE -- 1.8% 2,164 Countrywide Financial Corp. 150,550 10,026 Federal Home Loan Mortgage Corp. 509,020 14,537 Federal National Mortgage Assn 980,375 2,276 Golden West Financial Corp. 182,103 1,532 MGIC Investment Corp. 71,452 13,818 Washington Mutual, Inc. 570,683 -------------- 2,464,183 - ------------------------------------------------------------------------------ TOBACCO -- 1.1% 30,851 Altria Group, Inc. 1,401,869 1,345 R.J. Reynolds Tobacco Hldgs., Inc. 50,048 2,362 UST, Inc. 82,741 -------------- 1,534,658 - ------------------------------------------------------------------------------ TRADING COMPANIES AND DISTRIBUTORS -- 0.0% 1,344 W.W. Grainger, Inc. 62,845 - ------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES -- 0.5% 38,322 AT & T Wireless Svcs., Inc.* 314,624 15,664 Nextel Comm., Inc.* 283,205 14,547 Sprint Corp. (PCS Group)* 83,645 -------------- 681,474 - ------------------------------------------------------------------------------ TOTAL COMMON STOCKS (COST $154,833,294) 131,834,994 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 41 THE GUARDIAN S&P 500 INDEX FUND Schedule of Investments (Continued)
U.S. GOVERNMENT -- 0.2% Principal Amount Value - ------------------------------------------------------------------------------ U.S. Treasury Bill $ 250,000 1.01% due 9/4/2003 (1) (COST $249,549) $ 249,549 - ------------------------------------------------------------------------------ REPURCHASE AGREEMENT -- 2.1% $2,831,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $2,831,087 at 1.10%, due 7/1/2003 (2) (COST $2,831,000) $ 2,831,000 - ------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 100.0% (COST $157,913,843) 134,915,543 CASH, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES -- 0.0% 56,367 - ------------------------------------------------------------------------------ NET ASSETS -- 100% $ 134,971,910 - ------------------------------------------------------------------------------
* 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 U.S. Government and/or agency obligations based on market prices at the date of the portfolio.
PURCHASED FUTURES CONTRACTS Unrealized Contracts Description Expiration Depreciation - -------------------------------------------------- 12 S&P 500 Index 9/2003 $ (58,622) - --------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 42 / / The Guardian Baillie Gifford International Fund
COMMON STOCKS -- 100.0% Shares Value - ------------------------------------------------------------------------------- AUSTRALIA -- 4.1% BEVERAGES -- 0.5% 108,300 Fosters Brewing Group $ 306,143 COMMERCIAL BANKS -- 1.7% 38,600 Australia and NZ Banking Group Ltd. 482,333 24,832 National Australia Bank 558,561 CONTAINERS AND PACKAGING -- 0.4% 52,066 Amcor Ltd. 283,873 FOOD AND STAPLES RETAILING -- 0.4% 28,906 Woolworths Ltd. 243,000 MEDIA -- 0.3% 22,700 News Corp. Ltd. 170,709 METALS AND MINING -- 0.6% 70,506 BHP Billiton Ltd. 409,028 OIL AND GAS -- 0.2% 12,000 Woodside Petroleum Ltd. 99,751 ------------ 2,553,398 - ------------------------------------------------------------------------------- DENMARK -- 1.5% COMMERCIAL BANKS -- 1.5% 48,045 Danske Bank AS 937,043 - ------------------------------------------------------------------------------- FINLAND -- 3.2% COMMUNICATIONS EQUIPMENT -- 3.2% 120,950 Nokia OYJ 1,995,021 - ------------------------------------------------------------------------------- FRANCE -- 11.5% BEVERAGES -- 1.3% 9,300 Pernod-Ricard S.A. 831,182 DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.5% 37,820 France Telecom S.A.* 929,213 HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.0% 14,800 Essilor Int'l. S.A. 597,192 OIL AND GAS -- 2.7% 11,330 Total S.A. 1,715,055 PERSONAL PRODUCTS -- 1.6% 14,580 L'Oreal S.A. 1,029,718 PHARMACEUTICALS -- 2.1% 22,910 Sanofi-Synthelabo S.A. 1,343,964 WIRELESS TELECOMMUNICATION SERVICES -- 1.3% 91,800 Orange S.A.* 816,234 ------------ 7,262,558 - ------------------------------------------------------------------------------- GERMANY -- 4.9% DIVERSIFIED FINANCIAL SERVICES -- 1.3% 14,980 Deutsche Boerse AG 794,854 DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.7% 27,330 Deutsche Telekom AG* 417,789 HEALTH CARE PROVIDERS AND SERVICES -- 0.6% 9,400 Celesio AG 369,999 SOFTWARE -- 1.5% 8,240 SAP AG 973,397 TEXTILES, APPAREL AND LUXURY GOODS -- 0.8% 5,980 Adidas-Salomon AG 512,242 ------------ 3,068,281 - ------------------------------------------------------------------------------- HONG KONG -- 0.8% COMPUTERS AND PERIPHERALS -- 0.1% 188,000 Legend Group Ltd. 62,682 REAL ESTATE -- 0.7% 72,000 Cheung Kong Hldgs. Ltd. 432,102 ------------ 494,784 - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- IRELAND -- 3.3% AIRLINES -- 0.9% 80,570 Ryanair Hldgs. PLC* $ 581,076 COMMERCIAL BANKS -- 1.2% 51,570 Allied Irish Banks 776,478 CONSTRUCTION MATERIALS -- 1.2% 47,400 CRH PLC 744,224 ------------ 2,101,778 - ------------------------------------------------------------------------------- ISRAEL -- 0.5% PHARMACEUTICALS -- 0.5% 5,500 Teva Pharmaceutical Inds. Ltd. ADR 313,115 - ------------------------------------------------------------------------------- ITALY -- 2.8% INSURANCE -- 0.9% 35,450 Riunione Adriatica di Sicurta SPA 538,656 OIL AND GAS -- 1.9% 80,540 ENI SPA 1,220,084 ------------ 1,758,740 - ------------------------------------------------------------------------------- JAPAN -- 19.4% AUTO COMPONENTS -- 1.2% 53,000 Bridgestone Corp. 720,788 AUTOMOBILES -- 0.9% 22,400 Toyota Motor Corp. 581,236 BUILDING PRODUCTS -- 1.7% 110,000 Asahi Glass Co. 683,743 25,000 Tostem Inax Hldg. Corp. 360,852 CHEMICALS -- 1.3% 14,600 Shin-Etsu Chemical Co. Ltd. 499,437 98,000 Sumitomo Chemical 308,256 COMMERCIAL BANKS -- 0.3% 140 UFJ Hldgs., Inc.* 205,582 DIVERSIFIED FINANCIAL SERVICES -- 1.3% 7,900 JAFCO Co. Ltd. 448,208 9,800 Promise Co. 367,127 DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.7% 106 Nippon Tele. & Tel. Corp. 416,553 ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.5% 2,800 Keyence Corp. 513,954 7,200 Kyocera Corp. 412,699 HOUSEHOLD PRODUCTS -- 1.0% 35,000 Kao Corp. 652,664 INSURANCE -- 0.6% 86,000 Mitsui Sumitomo Insurance Co. 399,666 LEISURE EQUIPMENT AND PRODUCTS -- 1.6% 90,000 Konica Corp. 1,026,490 OFFICE ELECTRONICS -- 2.1% 53,000 Brother Industries Ltd. 367,027 21,000 Canon, Inc. 965,416 PHARMACEUTICALS -- 1.1% 19,300 Takeda Chemical Industries Ltd. 713,354 ROAD AND RAIL -- 0.9% 123 East Japan Railway 548,012 SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 1.1% 6,300 Rohm Co. Ltd. 688,056 TRADING COMPANIES AND DISTRIBUTORS -- 0.9% 114,000 Mitsui & Co. Ltd. 572,592 WIRELESS TELECOMMUNICATION SERVICES -- 1.2% 360 NTT DoCoMo, Inc. 780,944 ------------ 12,232,656 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 43 THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- MEXICO -- 0.4% COMMERCIAL BANKS -- 0.4% 299,100 Grupo Fin. BBVA Bancomer S.A. de C.V.* $ 252,744 - ------------------------------------------------------------------------------- NETHERLANDS -- 1.6% MEDIA -- 1.6% 31,660 Ver Ned Uitgevers 977,066 - ------------------------------------------------------------------------------- NEW ZEALAND -- 0.3% DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3% 59,700 Telecom. Corp. of New Zealand 183,552 - ------------------------------------------------------------------------------- PEOPLE'S REPUBLIC OF CHINA -- 0.7% OIL AND GAS -- 0.7% 289,000 CNOOC Ltd. 422,485 - ------------------------------------------------------------------------------- PORTUGAL -- 1.6% DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3% 25,065 Portugal Telecom. SGPS S.A. 179,906 TRANSPORTATION INFRASTRUCTURE -- 1.3% 149,410 Brisa-Auto Estradas de Portugal S.A. 842,108 ------------ 1,022,014 - ------------------------------------------------------------------------------- RUSSIA -- 0.7% OIL AND GAS -- 0.7% 5,750 LUKOIL ADR 454,825 - ------------------------------------------------------------------------------- SINGAPORE -- 0.4% ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.4% 27,000 Venture Corp. Ltd. 246,883 - ------------------------------------------------------------------------------- SOUTH AFRICA -- 0.3% METALS AND MINING -- 0.3% 6,800 Anglo American Platinum Corp. 214,856 - ------------------------------------------------------------------------------- SOUTH KOREA -- 1.0% TOBACCO -- 0.4% 33,400 K T & G Corp. GDR+ 275,550 WIRELESS TELECOMMUNICATION SERVICES -- 0.6% 18,000 SK Telecom Co. Ltd. ADR 339,480 ------------ 615,030 - ------------------------------------------------------------------------------- SPAIN -- 2.5% COMMERCIAL BANKS -- 1.2% 14,900 Banco Popular Espanol S.A. 754,104 TOBACCO -- 1.3% 32,520 Altadis S.A. 834,905 ------------ 1,589,009 - ------------------------------------------------------------------------------- SWEDEN -- 2.7% COMMUNICATIONS EQUIPMENT -- 1.3% 739,880 LM Ericsson 795,848 MACHINERY -- 1.4% 37,610 Atlas Copco AB 884,366 ------------ 1,680,214 - ------------------------------------------------------------------------------- SWITZERLAND -- 6.7% COMMERCIAL BANKS -- 0.6% 7,066 UBS AG 393,920 COMMERCIAL SERVICES AND SUPPLIES -- 0.6% 9,630 Adecco S.A. 397,569 CONSTRUCTION MATERIALS -- 0.8% 13,080 Holcim Ltd. 484,355 FOOD PRODUCTS -- 1.2% 3,840 Nestle S.A. 794,081 INSURANCE -- 1.5% 16,697 Swiss Reinsurance 927,131 PHARMACEUTICALS -- 2.0% 31,270 Novartis AG 1,240,065 ------------ 4,237,121 - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------------------- UNITED KINGDOM -- 29.1% BEVERAGES -- 1.6% 92,000 Diageo PLC $ 983,873 COMMERCIAL BANKS -- 7.0% 128,800 Barclays PLC 958,021 41,325 HBOS PLC 535,862 92,000 HSBC Hldgs 1,088,799 95,000 Lloyds TSB Group PLC 675,602 40,064 Royal Bank of Scotland 1,125,771 CONSTRUCTION MATERIALS -- 0.4% 49,000 Hanson PLC 273,551 HOTELS, RESTAURANTS AND LEISURE -- 0.9% 13,900 Carnival PLC 422,975 28,678 Compass Group 154,886 INSURANCE -- 0.8% 45,000 Aviva PLC 312,956 28,000 Prudential Corp. 169,852 MEDIA -- 1.5% 45,000 British Sky Broadcasting Group* 499,465 40,400 Elsevier NV 477,248 MULTILINE RETAIL -- 0.7% 27,000 Next PLC 458,110 OIL AND GAS -- 3.2% 97,000 BG Group PLC 430,490 155,000 BP Amoco PLC 1,076,679 76,000 Shell Transport & Trading 502,482 PHARMACEUTICALS -- 5.0% 19,300 Astrazeneca 775,194 118,502 GlaxoSmithKline PLC 2,395,515 SOFTWARE -- 0.4% 85,000 Sage Group 227,604 TOBACCO -- 3.9% 61,000 British American Tobacco PLC 693,185 97,000 Imperial Tobacco 1,736,389 WIRELESS TELECOMMUNICATION SERVICES -- 3.7% 1,191,650 Vodafone Group 2,334,070 ------------ 18,308,579 - ------------------------------------------------------------------------------- TOTAL COMMON STOCKS (COST $61,962,439) 62,921,752 - ------------------------------------------------------------------------------- PREFERRED STOCKS -- 1.4% BRAZIL -- 0.4% OIL AND GAS -- 0.4% 14,800 Petroleo Brasileiro S.A. ADR $ 262,848 - ------------------------------------------------------------------------------- GERMANY -- 1.0% AUTOMOBILES -- 1.0% 1,503 Porsche AG 637,937 - ------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (COST $772,804) 900,785 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 44 THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND Schedule of Investments (Continued)
CONVERTIBLE BOND -- 0.3% Principal Amount Value - ------------------------------------------------------------------------------- JAPAN -- 0.3% COMMERCIAL BANKS -- 0.3% $ 21,000,000 SMFG Finance 2.25% due 7/11/2005 (COST $131,448) $ 162,947 - ------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 101.7% (COST $62,866,691) 63,985,484 LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND OTHER ASSETS -- (1.7)% (1,080,974) - ------------------------------------------------------------------------------- NET ASSETS -- 100% $ 62,904,510 - -------------------------------------------------------------------------------
* Non-income producing security. + Rule 144A restricted security. GLOSSARY OF TERMS: ADR -- American Depositary Receipt. GDR -- Global Depositary Receipt. - -------------------------------------------------------------------------------- See notes to financial statements. 45 / / The Guardian Baillie Gifford Emerging Markets Fund
COMMON STOCKS -- 92.4% Shares Value - ------------------------------------------------------------------------------ ARGENTINA -- 0.1% DISTRIBUTORS -- 0.1% 11,480 Imp. Y Exp. Patagonia* $ 40,854 - ------------------------------------------------------------------------------ BRAZIL -- 6.2% BEVERAGES -- 1.4% 37,000 Comp. de Bebidas das Americas ADR 752,950 DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.8% 79,500 Telecom. Norte Leste Participacoes ADR 928,560 METALS AND MINING -- 1.4% 20,600 Comp. Siderurgica Nacional S.A. ADR 511,086 8,300 Comp. Vale Do Rio Doce ADR 246,178 OIL AND GAS -- 0.9% 25,000 Petroleo Brasileiro S.A. ADR 494,000 PAPER AND FOREST PRODUCTS -- 0.7% 17,800 Votorantim Celulose e Papel S.A. ADR 344,252 ----------- 3,277,026 - ------------------------------------------------------------------------------ CHILE -- 1.2% COMMERCIAL BANKS -- 0.6% 14,296 Banco Santander Chile ADR 291,782 METALS AND MINING -- 0.6% 32,940 Antofagasta Hldgs. 334,846 ----------- 626,628 - ------------------------------------------------------------------------------ CROATIA -- 1.1% PHARMACEUTICALS -- 1.1% 42,215 Pliva d.d. GDR 584,678 - ------------------------------------------------------------------------------ ESTONIA -- 0.9% COMMERCIAL BANKS -- 0.9% 23,000 Hansabank Ltd. 472,235 - ------------------------------------------------------------------------------ HONG KONG -- 2.0% INTERNET SOFTWARE AND SERVICES -- 0.5% 900,000 Tom.Com Ltd.* 271,218 REAL ESTATE -- 0.6% 3,000,000 China Overseas Land & Invest. Ltd. 323,154 WIRELESS TELECOMMUNICATION SERVICES -- 0.9% 210,000 China Mobile (Hong Kong) Ltd. 495,502 ----------- 1,089,874 - ------------------------------------------------------------------------------ HUNGARY -- 0.2% DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.2% 38,050 Matav RT 130,255 - ------------------------------------------------------------------------------ INDIA -- 4.1% COMMERCIAL BANKS -- 3.0% 121,200 ICICI Bank Ltd. ADR 881,124 34,400 State Bank of India GDR 705,200 METALS AND MINING -- 1.1% 37,000 Hindalco Inds. Ltd. GDR+ 596,810 ----------- 2,183,134 - ------------------------------------------------------------------------------ INDONESIA -- 2.2% FOOD PRODUCTS -- 0.2% 599,000 Astra Agro Lestari 101,648 INDUSTRIAL CONGLOMERATES -- 1.0% 1,282,423 Astra Int'l.* 555,717 MULTILINE RETAIL -- 0.4% 600,000 Ramayana Lestari Sentosa 234,545 TOBACCO -- 0.6% 600,500 H M Sampoerna 302,070 ----------- 1,193,980 - ------------------------------------------------------------------------------ ISRAEL -- 5.3% COMMERCIAL BANKS -- 0.8% 215,000 Bank Hapoalim Ltd.* 456,347
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ INTERNET SOFTWARE AND SERVICES -- 1.4% 37,400 Check Point Software Technologies Ltd.* $ 731,170 PHARMACEUTICALS -- 3.1% 29,000 Teva Pharmaceutical Inds. Ltd. ADR 1,650,970 ----------- 2,838,487 - ------------------------------------------------------------------------------ MALAYSIA -- 4.1% AUTOMOBILES -- 0.9% 215,000 Perusahaan Otomobil Nasional Berhad 458,289 CONSTRUCTION AND ENGINEERING -- 0.5% 278,000 Road Builder (M) Hldgs. Berhad 257,516 HOTELS, RESTAURANTS AND LEISURE -- 1.8% 186,000 Genting Berhad 734,210 93,000 Tanjong PLC 244,737 TOBACCO -- 0.9% 48,000 British American Tobacco Malaysia Berhad 492,632 ----------- 2,187,384 - ------------------------------------------------------------------------------ MEXICO -- 9.6% BEVERAGES -- 0.8% 180,190 Grupo Modelo S.A. 410,405 COMMERCIAL BANKS -- 1.9% 98,200 Grupo Fin. Banorte S.A. de C.V. 277,229 874,200 Grupo Fin. BBVA Bancomer S.A. de C.V.* 738,713 CONSTRUCTION AND ENGINEERING -- 0.5% 150,000 Consorcio Ara S.A. de C.V.* 297,861 DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1% 271,000 Grupo Carso Global Telecom.* 344,407 25,000 Telefonos de Mexico S.A. ADR 785,500 MEDIA -- 0.9% 76,000 TV Azteca S.A. de C.V. ADR 494,000 MULTILINE RETAIL -- 1.4% 269,270 Wal-Mart de Mexico S.A. de C.V. 724,100 TRANSPORTATION INFRASTRUCTURE -- 0.4% 14,400 Grupo Aeroportuario del Sureste S.A. de C.V. ADR 210,672 WIRELESS TELECOMMUNICATION SERVICES -- 1.6% 35,800 America Movil S.A. de C.V. ADR 671,250 191,000 America Telecom S.A. de C.V.* 179,128 ----------- 5,133,265 - ------------------------------------------------------------------------------ PEOPLE'S REPUBLIC OF CHINA -- 7.3% AIRLINES -- 0.3% 668,000 China Southern Airlines Co. Ltd.* 175,606 METALS AND MINING -- 2.3% 2,060,000 Aluminum Corp. of China Ltd. 459,647 1,835,000 Jiangxi Copper Co. Ltd. 284,728 958,000 Yanzhou Coal Mining 445,330 OIL AND GAS -- 3.9% 568,000 CNOOC Ltd. 830,351 4,158,000 PetroChina Co. Ltd. 1,253,028 REAL ESTATE -- 0.3% 1,250,000 Beijing North Star Co. Ltd. 166,706 TRANSPORTATION INFRASTRUCTURE -- 0.5% 660,000 Zhejiang Expressway Co. Ltd 272,949 ----------- 3,888,345 - ------------------------------------------------------------------------------ PERU -- 0.5% METALS AND MINING -- 0.5% 8,400 Comp. de Minas Buenaventura S.A. ADR 252,756 - ------------------------------------------------------------------------------ RUSSIA -- 6.2% METALS AND MINING -- 1.2% 17,500 JSC MMC Norilsk Nickel ADR 609,000
- -------------------------------------------------------------------------------- See notes to financial statements. 46 THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ OIL AND GAS -- 5.0% 14,800 LUKOIL ADR $ 1,170,680 21,052 OAO Gazprom ADR 395,778 19,975 YUKOS Corp. ADR 1,111,609 ----------- 3,287,067 - ------------------------------------------------------------------------------ SOUTH AFRICA -- 9.5% COMMERCIAL BANKS -- 3.1% 88,900 Nedcor Ltd. 1,063,000 126,000 Standard Bank Group Ltd. 552,144 METALS AND MINING -- 4.6% 37,035 Anglo American Platinum Corp. 1,170,177 21,978 Anglovaal Mining Ltd.* 117,451 291,905 Kumba Resources Ltd. 1,173,860 OIL AND GAS -- 1.8% 87,100 Sasol Ltd. 972,238 ----------- 5,048,870 - ------------------------------------------------------------------------------ SOUTH KOREA -- 18.7% AUTO COMPONENTS -- 0.7% 240,000 Hyundai Autonet Co. Ltd. 384,763 CHEMICALS -- 1.7% 19,000 Cheil Industries, Inc. 262,453 59,739 Hyosung Corp. 645,151 CONSTRUCTION AND ENGINEERING -- 2.0% 28,100 Daelim Industrial Co. Ltd. 489,309 82,230 Hyundai Development Co. 547,971 MEDIA -- 1.0% 5,300 Cheil Comms., Inc. 521,348 METALS AND MINING -- 1.2% 142,200 Dongkuk Steel Mill Co. Ltd. 622,609 PHARMACEUTICALS -- 0.6% 14,000 Jeil Pharmaceutical Co. 293,010 SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 4.9% 13,850 Samsung Electronics Co. Ltd GDR+ 2,060,188 1,900 Samsung Electronics Co. Ltd. 564,671 TOBACCO -- 1.8% 117,400 K T & G Corp. GDR+ 968,550 TRADING COMPANIES AND DISTRIBUTORS -- 1.9% 170,200 Samsung Corp. 1,017,353 WIRELESS TELECOMMUNICATION SERVICES -- 2.9% 2,200 SK Telecom Co. Ltd. 375,722 63,000 SK Telecom Co. Ltd. ADR 1,188,180 ----------- 9,941,278 - ------------------------------------------------------------------------------ TAIWAN -- 9.4% AIRLINES -- 0.5% 650,000 China Airlines 252,600 CONSTRUCTION AND ENGINEERING -- 0.8% 667,000 CTCI Corp. 431,690 DIVERSIFIED FINANCIAL SERVICES -- 2.1% 1,280,000 China Development Financial Hldg. Corp.* 488,182 1,715,000 SinoPac Hldgs. 626,835 DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.2% 67,000 Chunghwa Telecom Co. Ltd. 98,729 ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.8% 68,300 Au Optronics Corp. ADR 472,636 63,040 Hon Hai Precision Inds. Co. Ltd. GDR 475,952 FOOD PRODUCTS -- 0.2% 275,000 Lian Hwa Foods Corp. 83,827 MULTILINE RETAIL -- 0.5% 1,261,000 Far Eastern Dept. Stores Ltd. 291,477 SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 2.1% 684,400 Taiwan Semiconductor Mfg. Co. Ltd.* 1,127,154 TRADING COMPANIES AND DISTRIBUTORS -- 0.5% 372,000 Test-Rite Int'l. Co. Ltd. 238,613
- ------------------------------------------------------------------------------ Shares Value - ------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES -- 0.7% 535,000 Taiwan Cellular Corp.* $ 387,995 ----------- 4,975,690 - ------------------------------------------------------------------------------ THAILAND -- 2.8% CONSTRUCTION MATERIALS -- 1.2% 167,000 The Siam Cement Public Co. Ltd. 666,889 MEDIA -- 0.5% 42,400 BEC World Public Co. Ltd. 241,883 REAL ESTATE -- 1.1% 2,575,000 Land & Houses Public Co. Ltd. 581,471 ----------- 1,490,243 - ------------------------------------------------------------------------------ TURKEY -- 1.0% INDUSTRIAL CONGLOMERATES -- 0.5% 28,368,000 Koc Hldg. A.S.* 247,982 WIRELESS TELECOMMUNICATION SERVICES -- 0.5% 41,000,000 Turkcell Iletisim Hizmetleri A.S.* 274,586 ----------- 522,568 - ------------------------------------------------------------------------------ TOTAL COMMON STOCKS (COST $44,021,737) 49,164,617 - ------------------------------------------------------------------------------ PREFERRED STOCKS -- 4.4% BRAZIL -- 4.4% COMMERCIAL BANKS -- 1.6% 1,080,568 Itausa-Investimentos Itau S.A. $ 850,246 DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4% 1,719,000 Celular CRT Participacoes S.A. 203,791 FOOD PRODUCTS -- 0.0% 4,700,000 Comp. Lorenz S.A.* 0 METALS AND MINING -- 0.7% 13,000 Comp. Vale Do Rio Doce 355,971 OIL AND GAS -- 1.7% 51,900 Petroleo Brasileiro S.A. ADR 921,744 - ------------------------------------------------------------------------------ TOTAL PREFERRED STOCKS (COST $2,214,534) 2,331,752 - ------------------------------------------------------------------------------ REPURCHASE AGREEMENT -- 1.8% Principal Amount Value - ------------------------------------------------------------------------------ $ 967,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $967,009 at 0.35%, due 7/1/2003 (1) (COST $967,000) $ 967,000 - ------------------------------------------------------------------------------ TOTAL INVESTMENTS -- 98.6% (COST $47,203,271) 52,463,369 CASH, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES -- 1.4% 735,327 - ------------------------------------------------------------------------------ NET ASSETS -- 100% $53,198,696 - ------------------------------------------------------------------------------
* Non-income producing security. + Rule 144A restricted security. (1) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. GLOSSARY OF TERMS: ADR -- American Depositary Receipt. GDR -- Global Depositary Receipt. - -------------------------------------------------------------------------------- See notes to financial statements. 47 / / The Guardian Investment Quality Bond Fund
ASSET BACKED -- 9.8% Principal Amount Value - ---------------------------------------------------------------------- Aesop Funding II LLC 2003-2A A3 $ 1,280,000 3.61% due 6/20/2009+ $ 1,306,402 2002-1A A1 900,000 3.85% due 10/20/2006+ 934,125 2,550,000 Ameriquest Mtg. Secs., Inc. 2003-5 A3 3.027% due 7/25/2033 2,583,384 132,909 Amresco 1997-1 MIF 7.42% due 3/25/2027 132,741 2,000,000 California Infrastructure SCE 1997-1 A7 6.42% due 12/26/2009 2,284,901 2,320,000 Centex Home Equity Loan Tr. 2003-A AF4 3.75% due 12/25/2031 2,358,677 2,542,000 Citibank Credit Card Issuance Tr. 2000-A1 A1 6.90% due 10/15/2007 2,827,987 1,700,000 CNH Equipment Tr. 2003-A A4B 2.57% due 9/15/2009 1,701,125 2,400,000 Navistar Financial Corp. Owner Tr. 2003-A A4 2.24% due 11/15/2009 2,397,066 1,700,000 Residential Asset Sec. Corp. 2000-KS5 AI5 7.615% due 12/25/2031 1,844,038 1,752,800 Residential Funding Mtg. Sec. II 2002-HS2 A3 4.44% due 3/25/2017 1,758,921 1,900,000 Vanderbilt Acquisition Loan Tr. 2002-1 A3 5.70% due 9/7/2023 2,014,270 - ---------------------------------------------------------------------- TOTAL ASSET BACKED (COST $21,647,186) 22,143,637 - ---------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATION -- 2.5% $ 2,150,000 FHLMC H006 A2 2.837% due 2/15/2010 $ 2,166,942 1,200,000 FNMA 2001-64 QG 6.00% due 3/25/2030 1,252,261 2,304,100 Washington Mutual 2002-AR4 A7 5.551% due 4/26/2032 2,341,622 - ---------------------------------------------------------------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATION (COST $5,745,917) 5,760,825 - ---------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED -- 3.4% Bear Stearns Comm'l. Mtg. Sec., Inc. 2003-Top10 A2 $ 2,400,000 4.74% due 3/13/2040 $ 2,508,224 2002-Top8 A1 962,135 4.06% due 8/15/2038 1,001,467
- ---------------------------------------------------------------------- Principal Amount Value - ---------------------------------------------------------------------- LB-UBS Comm'l. Mtg. Tr. 2004-C4 A2 $ 1,220,000 7.37% due 8/15/2026 $ 1,482,174 2001-C7 A5 2,431,000 6.133% due 12/15/2030 2,787,790 - ---------------------------------------------------------------------- TOTAL COMMERCIAL MORTGAGE BACKED (COST $7,313,594) 7,779,655 - ---------------------------------------------------------------------- CORPORATE BONDS -- 28.1% AEROSPACE AND DEFENSE -- 0.4% $ 300,000 Lockheed Martin Corp. 8.50% due 12/1/2029 $ 407,758 100,000 Northrop Grumman Corp. 7.125% due 2/15/2011 119,792 250,000 TRW, Inc. 7.75% due 6/1/2029 319,307 ------------ 846,857 - ---------------------------------------------------------------------- AIRLINES -- 0.4% 800,000 Delta Air Lines, Inc. 6.417% due 7/2/2012 865,524 - ---------------------------------------------------------------------- AUTOMOTIVE -- 0.4% 500,000 DaimlerChrysler NA Hldg. 4.05% due 6/4/2008 495,157 450,000 Ford Motor Co. 7.45% due 7/16/2031 412,229 ------------ 907,386 - ---------------------------------------------------------------------- BUILDING MATERIALS -- 0.1% 250,000 Masco Corp. 6.50% due 8/15/2032 277,471 - ---------------------------------------------------------------------- CHEMICALS -- 0.2% 400,000 Potash Corp. 4.875% due 3/1/2013 411,624 - ---------------------------------------------------------------------- ENERGY -- 1.7% 850,000 Devon Energy Corp. 7.95% due 4/15/2032 1,094,105 350,000 Husky Energy, Inc. 6.25% due 6/15/2012 393,334 500,000 Pride Int'l., Inc. 9.375% due 5/1/2007 516,250 400,000 Transocean, Inc. 7.50% due 4/15/2031 492,600 350,000 Western Oil Sands, Inc. 8.375% due 5/1/2012 390,250 1,000,000 XTO Energy, Inc. 6.25% due 4/15/2013+ 1,062,500 ------------ 3,949,039 - ---------------------------------------------------------------------- ENERGY-REFINING -- 0.5% 850,000 Tosco Corp. 8.125% due 2/15/2030 1,139,207 - ---------------------------------------------------------------------- ENTERTAINMENT -- 0.6% 1,200,000 Time Warner Cos., Inc. 7.57% due 2/1/2024 1,358,232 - ---------------------------------------------------------------------- ENVIRONMENTAL -- 0.6% 1,200,000 Waste Management, Inc. 7.375% due 8/1/2010 1,439,912 - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 48 THE GUARDIAN INVESTMENT QUALITY BOND FUND Schedule of Investments (Continued)
- ---------------------------------------------------------------------- Principal Amount Value - ---------------------------------------------------------------------- FINANCE COMPANIES -- 1.2% $ 700,000 Ford Motor Credit Co. 7.60% due 8/1/2005 $ 751,582 500,000 General Electric Capital Corp. 5.45% due 1/15/2013 541,571 General Motors Acceptance Corp. 500,000 6.125% due 9/15/2006 526,402 135,000 8.00% due 11/1/2031 132,457 Household Finance Corp. 400,000 6.375% due 11/27/2012 455,650 350,000 7.875% due 3/1/2007 412,517 ------------ 2,820,179 - ---------------------------------------------------------------------- FINANCIAL -- 1.1% 650,000 Bear Stearns Cos., Inc. 5.70% due 11/15/2014 720,440 800,000 Goldman Sachs Group, Inc. 5.70% due 9/1/2012 878,903 400,000 Lehman Brothers Hldgs., Inc. 6.625% due 1/18/2012 468,951 400,000 Morgan Stanley 6.60% due 4/1/2012 462,154 ------------ 2,530,448 - ---------------------------------------------------------------------- FINANCIAL-BANKS -- 1.9% 425,000 Bank America Corp. 4.875% due 9/15/2012 448,531 200,000 BB&T Corp. 6.50% due 8/1/2011 234,568 750,000 Citigroup, Inc. 5.625% due 8/27/2012 826,304 300,000 City National Corp. 5.125% due 2/15/2013 308,723 150,000 J.P. Morgan Chase & Co. 5.75% due 1/2/2013 163,992 250,000 MBNA America Bank Nat'l. 7.125% due 11/15/2012 292,878 200,000 Regions Financial Corp. 6.375% due 5/15/2012 231,271 500,000 Sovereign Bank 5.125% due 3/15/2013 516,366 150,000 Synovus Financial Corp. 4.875% due 2/15/2013+ 157,166 1,025,000 Wells Fargo Bank NA 6.45% due 2/1/2011 1,208,503 ------------ 4,388,302 - ---------------------------------------------------------------------- FOOD AND BEVERAGE -- 1.3% 650,000 Coca-Cola Bottling Co. 5.00% due 11/15/2012 678,118 300,000 General Mills, Inc. 6.00% due 2/15/2012 338,688 Kellogg Co. 1,000,000 2.875% due 6/1/2008 992,964 300,000 6.60% due 4/1/2011 351,819 500,000 Kraft Foods, Inc. 6.25% due 6/1/2012 565,590 ------------ 2,927,179 - ---------------------------------------------------------------------- GAMING -- 0.4% 750,000 Int'l. Game Technology 8.375% due 5/15/2009 920,105 - ---------------------------------------------------------------------- GAS DISTRIBUTORS -- 0.2% 500,000 Equitable Resources, Inc. 5.15% due 3/1/2018+ 531,440 - ----------------------------------------------------------------------
- ---------------------------------------------------------------------- Principal Amount Value - ---------------------------------------------------------------------- HEALTH CARE -- 0.3% $ 350,000 HCA, Inc. 6.25% due 2/15/2013 $ 356,805 200,000 Laboratory Corp. of America 5.50% due 2/1/2013 214,129 ------------ 570,934 - ---------------------------------------------------------------------- HOME CONSTRUCTION -- 0.5% 500,000 D.R. Horton, Inc. 5.875% due 7/1/2013 490,000 500,000 NVR, Inc. 5.00% due 6/15/2010 501,250 150,000 Ryland Group, Inc. 5.375% due 6/1/2008 154,875 ------------ 1,146,125 - ---------------------------------------------------------------------- INDUSTRIAL-OTHER -- 1.0% 2,000,000 Aramark Svcs., Inc. 7.10% due 12/1/2006 2,232,404 - ---------------------------------------------------------------------- MEDIA-CABLE -- 1.7% AT & T Broadband Corp. 400,000 8.375% due 3/15/2013 500,962 900,000 9.455% due 11/15/2022 1,226,662 1,200,000 Comcast Cable Comm., Inc. 6.20% due 11/15/2008 1,351,277 200,000 Cox Comm., Inc. 7.125% due 10/1/2012 238,827 500,000 CSC Hldgs., Inc. 7.625% due 4/1/2011 505,000 ------------ 3,822,728 - ---------------------------------------------------------------------- MEDIA-NONCABLE -- 0.9% 200,000 Clear Channel Comm. 5.75% due 1/15/2013 216,303 150,000 News America Hldgs. 8.00% due 10/17/2016 191,259 1,500,000 Scholastic Corp. 5.75% due 1/15/2007 1,640,121 ------------ 2,047,683 - ---------------------------------------------------------------------- MERCHANDISING-SUPERMARKETS -- 0.9% 500,000 Delhaize America, Inc. 7.375% due 4/15/2006 525,000 850,000 Kroger Co. 7.25% due 6/1/2009 992,698 500,000 Safeway, Inc. 6.15% due 3/1/2006 541,307 ------------ 2,059,005 - ---------------------------------------------------------------------- NATURAL GAS-PIPELINES -- 2.1% 1,700,000 Consolidated Natural Gas Co. 7.25% due 10/1/2004 1,808,506 250,000 Duke Energy Field Svcs. 8.125% due 8/16/2030 319,207 1,000,000 Enterprise Products Operating LP 6.875% due 3/1/2033+ 1,132,591 350,000 Gulfterra Energy Partners 8.50% due 6/1/2010+ 374,500 500,000 Kinder Morgan, Inc. 6.50% due 9/1/2012 573,149 400,000 Teppco Partners LP 6.125% due 2/1/2013 444,188 ------------ 4,652,141 - ----------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 49 THE GUARDIAN INVESTMENT QUALITY BOND FUND Schedule of Investments (Continued)
- ---------------------------------------------------------------------- Principal Amount Value - ---------------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- 0.8% $ 600,000 Abitibi-Consolidated, Inc. 7.875% due 8/1/2009 $ 666,000 250,000 Int'l. Paper Co. 5.85% due 10/30/2012 272,472 400,000 Packaging Corp. of America 9.625% due 4/1/2009 440,500 Weyerhaeuser Co. 150,000 6.00% due 8/1/2006 164,543 200,000 6.75% due 3/15/2012 227,040 ------------ 1,770,555 - ---------------------------------------------------------------------- RAILROADS -- 0.3% 200,000 CSX Corp. 4.875% due 11/1/2009 213,079 450,000 Norfolk Southern Corp. 6.75% due 2/15/2011 525,587 ------------ 738,666 - ---------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUST -- 0.5% 250,000 Duke Realty Corp. 5.875% due 8/15/2012 273,429 100,000 EOP Operating LP 7.00% due 7/15/2011 116,057 200,000 Liberty Ppty. LP 7.25% due 3/15/2011 236,065 200,000 Prologis 5.50% due 3/1/2013 213,467 100,000 Regency Centers LP 6.75% due 1/15/2012 113,657 125,000 Simon Ppty. Group LP 5.45% due 3/15/2013+ 130,473 ------------ 1,083,148 - ---------------------------------------------------------------------- RETAILERS -- 0.2% 300,000 Staples, Inc. 7.375% due 10/1/2012 355,127 - ---------------------------------------------------------------------- SERVICES -- 0.2% 500,000 PHH Corp. 7.125% due 3/1/2013 567,442 - ---------------------------------------------------------------------- UTILITIES-ELECTRIC AND WATER -- 2.6% 500,000 AEP Texas Central Co. 5.50% due 2/15/2013+ 533,427 100,000 Alabama Power Co. 5.50% due 10/15/2017 109,449 350,000 American Electric Power, Inc. 5.25% due 6/1/2015 352,760 350,000 Consumers Energy Co. 5.375% due 4/15/2013+ 367,453 200,000 Dominion Resources, Inc. 6.75% due 12/15/2032 223,697 650,000 DTE Energy Co. 6.375% due 4/15/2033 677,358 200,000 Florida Power Corp. 5.90% due 3/1/2033 213,961 250,000 Georgia Power Co. 5.125% due 11/15/2012 268,144 425,000 National Rural Utilities Coop. Fin. 8.00% due 3/1/2032 548,112 400,000 Oncor Electric Delivery Co. 7.25% due 1/15/2033+ 471,909 400,000 Pepco Hldgs., Inc. 6.45% due 8/15/2012 452,623 100,000 Progress Energy, Inc. 7.00% due 10/30/2031 110,359
- ---------------------------------------------------------------------- Principal Amount Value - ---------------------------------------------------------------------- $ 500,000 PSEG Energy Hldgs., Inc. 8.50% due 6/15/2011 $ 537,500 200,000 Public Service Electric Gas Co. 5.125% due 9/1/2012 213,541 350,000 TXU Energy Co. 7.00% due 3/15/2013+ 387,356 500,000 Xcel Energy, Inc. 3.40% due 7/1/2008+ 496,549 ------------ 5,964,198 - ---------------------------------------------------------------------- WIRELESS COMMUNICATIONS -- 0.8% 650,000 Tritel PCS, Inc. 10.375% due 1/15/2011 794,625 690,000 Verizon Wireless Capital LLC 5.375% due 12/15/2006 757,857 150,000 Vodafone Group PLC 6.25% due 11/30/2032 162,439 ------------ 1,714,921 - ---------------------------------------------------------------------- WIRELINE COMMUNICATIONS -- 3.7% 75,000 AT & T Corp. 8.50% due 11/15/2031 85,042 500,000 British Telecom. PLC 8.875% due 12/15/2030 682,283 200,000 Century Tel. Enterprises, Inc. 6.875% due 1/15/2028 228,233 Citizens Comm. Co. 200,000 7.625% due 8/15/2008 237,558 200,000 9.00% due 8/15/2031 269,476 500,000 Deutsche Telekom Int'l. Fin. 9.25% due 6/1/2032 691,079 France Telecom S.A. 625,000 9.25% due 3/1/2011 786,603 1,000,000 10.00% due 3/1/2031 1,383,735 200,000 Royal KPN NV 8.375% due 10/1/2030 259,497 850,000 Sprint Capital Corp. 8.375% due 3/15/2012 1,017,719 1,000,000 Telus Corp. 8.00% due 6/1/2011 1,155,000 825,000 Verizon New York, Inc. 7.375% due 4/1/2032 1,023,658 500,000 Verizon Pennsylvania, Inc. 5.65% due 11/15/2011 551,788 ------------ 8,371,671 - ---------------------------------------------------------------------- YANKEE -- 0.6% 1,200,000 Pemex Master Tr. 7.875% due 2/1/2009 1,371,000 - ---------------------------------------------------------------------- TOTAL CORPORATE BONDS (COST $58,746,621) 63,780,653 - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- MORTGAGE PASS-THROUGHS -- 32.7% Principal Amount Value - ---------------------------------------------------------------------- FHLMC $ 12,400,000 5.50%, (30 yr. TBA) $ 12,791,369 5,222,470 6.00%, 12/1/2032 5,414,866 3,598,077 6.50%, 12/1/2031 3,744,214 2,976,101 6.50%, 8/1/2032 3,097,074 32,397 7.00%, 8/1/2008 34,467
- -------------------------------------------------------------------------------- See notes to financial statements. 50 THE GUARDIAN INVESTMENT QUALITY BOND FUND Schedule of Investments (Continued)
- ---------------------------------------------------------------------- Principal Amount Value - ---------------------------------------------------------------------- FNMA $ 3,200,000 5.00%, (15 yr. TBA) $ 3,304,998 5,600,000 5.00%, (30 yr. TBA) 5,689,253 5,100,000 5.50%, (30 yr. TBA) 5,270,534 3,600,000 5.50%, 12/1/2014 3,757,749 1,526,685 6.00%, 10/1/2013 1,597,085 1,369,054 6.00%, 4/1/2016 1,428,929 2,477,154 6.50%, 2017 2,613,247 6,924,437 6.50%, 7/1/2029 7,228,604 7,077,742 6.50%, 2032 7,380,897 16,106 7.00%, 2/1/2009 17,160 120,108 7.00%, 2012 127,823 388,811 7.00%, 9/1/2014 413,691 7,438 7.00%, 8/1/2023 7,875 5,325 7.00%, 12/1/2027 5,620 53,130 7.00%, 12/1/2028 56,044 1,781,023 7.00%, 2032 1,875,590 593 7.50%, 5/1/2027 631 343,652 7.50%, 12/1/2029 365,281 1,280,204 7.50%, 2/1/2031 1,361,757 504,749 8.00%, 2030 544,297 GNMA 1,837,627 6.00%, 2033 1,927,212 2,872,331 6.50%, 5/15/2032 3,016,033 437,604 6.50%, 2/15/2033 459,484 436,568 8.00%, 2030 471,179 - ---------------------------------------------------------------------- TOTAL MORTGAGE PASS-THROUGHS (COST $73,185,772) 74,002,963 - ---------------------------------------------------------------------- SOVEREIGN DEBT -- 0.6% $ 150,000 Korea Development Bank 5.50% due 11/13/2012 $ 159,579 200,000 Malaysia 7.50% due 7/15/2011 243,360 800,000 United Mexican States 8.00% due 9/24/2022 896,000 - ---------------------------------------------------------------------- TOTAL SOVEREIGN DEBT (COST $1,178,956) 1,298,939 - ---------------------------------------------------------------------- U.S. GOVERNMENT -- 20.8% U.S. GOVERNMENT AGENCIES -- 6.5% FHLMC $ 500,000 4.50%, 1/15/2013 $ 525,244 FNMA 4,600,000 3.25%, 1/15/2008 4,754,275 3,550,000 4.375%, 10/15/2006 3,825,033 950,000 5.00%, 1/15/2007 1,045,621 2,690,000 6.00%, 5/15/2008 3,106,350 385,000 6.125%, 3/15/2012 454,047 875,000 6.375%, 6/15/2009 1,036,263 ------------ 14,746,833 - ---------------------------------------------------------------------- U.S. TREASURY BONDS AND NOTES -- 14.3% U.S. Treasury Bonds 140,000 5.375%, 2/15/2031 157,648
- ---------------------------------------------------------------------- Principal Amount Value - ---------------------------------------------------------------------- U.S. Treasury Notes $ 250,000 1.25%, 5/31/2005 $ 249,853 7,100,000 2.25%, 7/31/2004 7,191,803 100,000 2.625%, 5/15/2008 100,914 430,000 3.00%, 1/31/2004 435,022 5,280,000 3.00%, 11/15/2007 5,446,236 7,135,000 3.00%, 2/15/2008 7,342,079 2,685,000 3.625%, 5/15/2013 2,705,975 925,000 5.50%, 5/15/2009 1,065,412 150,000 5.625%, 2/15/2006 165,850 1,635,000 5.75%, 8/15/2010 1,913,781 2,250,000 6.00%, 8/15/2009 2,654,032 1,320,000 6.125%, 8/15/2007 1,526,921 1,250,000 6.75%, 5/15/2005 1,376,611 ------------ 32,332,137 - ---------------------------------------------------------------------- TOTAL U.S. GOVERNMENT (COST $45,356,297) 47,078,970 - ---------------------------------------------------------------------- COMMERCIAL PAPER -- 8.4% FINANCE COMPANIES -- 2.3% $ 5,200,000 KFW Int'l. Finance, Inc. 1.10% due 7/14/2003 (a) $ 5,197,935 - ---------------------------------------------------------------------- FINANCIAL-BANKS -- 4.6% 5,200,000 BNP Paribas Canada 1.11% due 7/14/2003 (a) 5,197,916 5,200,000 Oesterreichische 1.10% due 7/14/2003 (a) 5,197,934 ------------ 10,395,850 - ---------------------------------------------------------------------- TELECOMMUNICATIONS -- 1.5% 3,400,000 SBC Int'l., Inc. 1.05% due 7/17/2003 (a) 3,398,413 - ---------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (COST $18,992,198) 18,992,198 - ---------------------------------------------------------------------- REPURCHASE AGREEMENT -- 6.0% $ 8,400,000 Lehman Brothers repurchase agreement, dated 6/30/2003, maturity value $8,403,561 at 1.09%, due 7/14/2003 (1)(a) $ 8,400,000 5,120,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $5,120,156 at 1.10%, due 7/1/2003 (1)(a) 5,120,000 - ---------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENT (COST $13,520,000) 13,520,000 - ---------------------------------------------------------------------- TOTAL INVESTMENTS -- 112.3% (COST $245,686,541) 254,357,840 PAYABLES FOR MORTGAGE PASS-THROUGHS DELAYED DELIVERY SECURITIES (a) -- (11.8)% (26,768,988) LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND OTHER ASSETS -- (0.5)% (1,017,009) - ---------------------------------------------------------------------- NET ASSETS -- 100% $226,571,843 - ----------------------------------------------------------------------
+ Rule 144A restricted security. (1) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. (a) Commercial paper and repurchase agreement are segregated to cover forward mortgage purchases. - -------------------------------------------------------------------------------- See notes to financial statements. 51 / / The Guardian High Yield Bond Fund
CORPORATE BONDS -- 99.1% Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- AEROSPACE AND DEFENSE -- 3.2% Alliant Techsystems, Inc. $ 555,000 Sr. Sub. Nt. 8.50% due 5/15/2011 B2/B $ 616,050 BE Aerospace, Inc. 285,000 Sr. Sub. Nt. 9.50% due 11/1/2008 Caa2/B- 229,425 K & F Ind., Inc. 417,000 Sr. Sub. Nt. Ser. B 9.625% due 12/15/2010 B3/B 462,870 Sequa Corp. 360,000 Sr. Nt. 8.875% due 4/1/2008 B1/BB- 376,200 440,000 Sr. Nt.+ 8.875% due 4/1/2008 B1/BB- 459,800 ----------- 2,144,345 - ------------------------------------------------------------------------------- AUTOMOTIVE -- 2.0% Rexnord Corp. 35,000 Sr. Sub. Nt. 10.125% due 12/15/2012 B3/B- 38,500 Tenneco Automotive, Inc. 300,000 Sr. Sec. Nt.+ 10.25% due 7/15/2013 B2/CCC+ 303,750 TRW Automotive, Inc. 278,000 Sr. Nt.+ 9.375% due 2/15/2013 B1/B+ 301,630 United Components, Inc. 667,000 Sr. Sub. Nt.+ 9.375% due 6/15/2013 B3/B 692,013 ----------- 1,335,893 - ------------------------------------------------------------------------------- BANKING -- 0.6% Western Financial Bank 350,000 Sub. Cap. Debt. 9.625% due 5/15/2012 B1/BB- 378,000 - ------------------------------------------------------------------------------- BUILDING MATERIALS -- 0.6% Associated Materials, Inc. 280,000 Sr. Sub. Nt. 9.75% due 4/15/2012 B3/B 305,550 Collins & Aikman Floor Cover 71,000 Sr. Sub. Nt. 9.75% due 2/15/2010 B2/B 74,195 ----------- 379,745 - ------------------------------------------------------------------------------- CHEMICALS -- 2.1% Compass Minerals Group, Inc. 245,000 Sr. Sub. Nt. 10.00% due 8/15/2011 B3/B- 274,400 FMC Corp. 280,000 Sr. Sec. Nt. 10.25% due 11/1/2009 Ba2/BB+ 315,000 Huntsman Advanced Materials 300,000 Sr. Sec. Nt.+ 11.00% due 7/15/2010 B2/B 312,000 Huntsman Int'l. LLC 70,000 Sr. Nt. 9.875% due 3/1/2009 B3/B 72,800 Lyondell Chemical Co. 285,000 Nt. Ser. A 9.625% due 5/1/2007 Ba3/BB 279,300 Millennium America, Inc. 140,000 Sr. Nt. 7.00% due 11/15/2006 Ba1/BB+ 141,400 ----------- 1,394,900 - -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- CONSTRUCTION MACHINERY -- 2.2% Joy Global, Inc. $ 140,000 Sr. Sub. Nt. 8.75% due 3/15/2012 B2/B+ $ 153,300 NMHG Hldg. Co. 140,000 Sr. Nt. 10.00% due 5/15/2009 B3/B+ 154,000 Terex Corp. 285,000 Sr. Sub. Nt. 9.25% due 7/15/2011 B3/B 306,375 285,000 Sr. Sub. Nt. 10.375% due 4/1/2011 B3/B 314,925 United Rentals NA, Inc. 280,000 Sr. Nt. 10.75% due 4/15/2008 B1/BB 305,900 United Rentals, Inc. 280,000 Sr. Sub. Nt. Ser. B 8.80% due 8/15/2008 B2/B+ 271,600 ----------- 1,506,100 - ------------------------------------------------------------------------------- CONSUMER CYCLICAL SERVICES -- 1.9% Coinmach Corp. 350,000 Sr. Nt. 9.00% due 2/1/2010 B2/B 374,500 Iron Mountain, Inc. 860,000 Sr. Sub. Nt. 8.625% due 4/1/2013 B2/B 920,200 ----------- 1,294,700 - ------------------------------------------------------------------------------- CONSUMER PRODUCTS -- 4.7% Elizabeth Arden, Inc. 670,000 Sr. Sec. Nt. Ser. B 11.75% due 2/1/2011 B1/B 747,050 Playtex Products, Inc. 763,000 Sr. Sub. Nt. 9.375% due 6/1/2011 B3/B- 763,000 Sealy Mattress Co. 286,000 Sr. Sub. Nt. Ser. B 9.875% due 12/15/2007 B3/B- 284,570 Simmons Co. 562,000 Sr. Sub. Nt. Ser. B 10.25% due 3/15/2009 B2/B- 601,340 St. John Knits Int'l., Inc. 750,000 Sr. Sub. Nt. 12.50% due 7/1/2009 B3/B- 817,500 ----------- 3,213,460 - ------------------------------------------------------------------------------- DIVERSIFIED MANUFACTURING -- 1.4% Jacuzzi Brands, Inc. 300,000 Sr. Sec. Nt.+ 9.625% due 7/1/2010 B3/B 300,000 Resolution Performance Product 150,000 Sr. Sec. Nt. 9.50% due 4/15/2010 B2/B+ 156,000 Tyco Int'l. Group S.A. 500,000 Nt. 6.375% due 10/15/2011 Ba2/BBB- 527,500 ----------- 983,500 - ------------------------------------------------------------------------------- ELECTRIC -- 2.6% Calpine Canada Energy 560,000 Sr. Nt. 8.50% due 5/1/2008 B1/CCC+ 436,800 PSEG Energy Hldgs., Inc. 600,000 Sr. Nt. 8.50% due 6/15/2011 Baa3/BBB- 645,000
- -------------------------------------------------------------------------------- See notes to financial statements. 52 THE GUARDIAN HIGH YIELD BOND FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- Southern California Edison Co. $ 666,000 1st Ref. Mtg. Ser. 93C 7.25% due 3/1/2026 Ba2/BB $ 678,488 ----------- 1,760,288 - ------------------------------------------------------------------------------- ENERGY -- 6.3% Dresser, Inc. 280,000 Sr. Nt. 9.375% due 4/15/2011 B2/B 288,400 Newfield Exploration Co. 280,000 Sr. Sub. Nt. 8.375% due 8/15/2012 Ba3/BB- 315,350 Newpark Resources, Inc. 700,000 Sr. Sub. Nt. Ser. B 8.625% due 12/15/2007 B2/B+ 717,500 Offshore Logistics 600,000 Sr. Nt.+ 6.125% due 6/15/2013 Ba2/BB+ 601,500 Pride Int'l., Inc. 280,000 Sr. Nt. 10.00% due 6/1/2009 Ba2/BB 306,600 Tesoro Petroleum Corp. 300,000 Sec. Nt.+ 8.00% due 4/15/2008 Ba3/BB 307,500 Western Oil Sands, Inc. 560,000 Sr. Sec. Nt. 8.375% due 5/1/2012 Ba2/BB+ 624,400 Westport Resources Corp. 420,000 Sr. Sub. Nt. 8.25% due 11/1/2011 Ba3/B+ 459,900 XTO Energy, Inc. 600,000 Sr. Nt.+ 6.25% due 4/15/2013 Ba2/BB 637,500 ----------- 4,258,650 - ------------------------------------------------------------------------------- ENTERTAINMENT -- 3.4% Intrawest Corp. 670,000 Sr. Nt. 9.75% due 8/15/2008 B1/B+ 699,313 185,000 Sr. Nt. 10.50% due 2/1/2010 B1/B+ 198,875 Premier Parks, Inc. 500,000 Sr. Nt. 9.75% due 6/15/2007 B2/B 495,000 Regal Cinemas, Inc. 278,000 Sr. Sub. Nt. Ser. B 9.375% due 2/1/2012 B2/B 306,495 Speedway Motorsports, Inc. 600,000 Sr. Sub. Nt.+ 6.75% due 6/1/2013 Ba2/B+ 621,000 ----------- 2,320,683 - ------------------------------------------------------------------------------- ENVIRONMENTAL -- 3.9% Allied Waste NA, Inc. 1,500,000 Sr. Nt. 7.875% due 4/15/2013 Ba3/BB- 1,569,375 1,034,000 Sr. Sub. Nt. 10.00% due 8/1/2009 B2/B+ 1,098,625 ----------- 2,668,000 - ------------------------------------------------------------------------------- FOOD AND BEVERAGE -- 5.0% American Seafood Group LLC 560,000 Sr. Sub. Nt. 10.125% due 4/15/2010 B3/B 635,600 B & G Foods, Inc. 350,000 Sr. Sub. Nt. Ser. D 9.625% due 8/1/2007 B3/B- 360,500
- ------------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- Constellation Brands, Inc. $ 71,000 Sr. Sub. Nt. 8.125% due 1/15/2012 Ba3/B+ $ 76,680 190,000 Sr. Sub. Nt. 8.50% due 3/1/2009 Ba3/B+ 199,500 Del Monte Corp. 635,000 Sr. Sub. Nt. 9.25% due 5/15/2011 B2/B 679,450 Merisant Co. 300,000 Sr. Sub. Nt.+ 9.50% due 7/15/2013 B2/B 310,500 Michael Foods, Inc, 750,000 Sr. Sub. Nt. Ser. B 11.75% due 4/1/2011 B2/B- 862,500 Premium Standard Farms, Inc. 310,000 Sr. Nt. 9.25% due 6/15/2011 B1/BB 292,950 ----------- 3,417,680 - ------------------------------------------------------------------------------- GAMING -- 1.9% Mandalay Resort Group 280,000 Sr. Sub. Nt. Ser. B 10.25% due 8/1/2007 Ba3/BB- 316,400 MGM Mirage, Inc. 278,000 Sr. Sub. Nt. 8.375% due 2/1/2011 Ba2/BB+ 316,225 Park Place Entertainment Corp. 286,000 Sr. Nt. 7.50% due 9/1/2009 Ba1/BBB- 313,170 Sun Int'l. Hotels Ltd. 285,000 Sr. Sub. Nt. 8.875% due 8/15/2011 B2/B+ 308,513 ----------- 1,254,308 - ------------------------------------------------------------------------------- GAS DISTRIBUTORS -- 1.1% AmeriGas Partners LP 190,000 Sr. Nt. 8.875% due 5/20/2011 B2/BB- 207,100 190,000 Sr. Nt. 10.00% due 4/15/2006 B2/BB- 207,100 Gazprom OAO 328,000 Nt.+ 9.625% due 3/1/2013 NA/B+ 361,620 ----------- 775,820 - ------------------------------------------------------------------------------- HEALTH CARE -- 3.5% Fisher Scientific Int'l., Inc. 440,000 Sr. Sub. Nt.+ 8.125% due 5/1/2012 B2/B+ 470,800 Fresenius Medical Care 570,000 Capital Tr. 7.875% due 6/15/2011 Ba2/BB- 601,350 HCA, Inc. 278,000 Nt. 6.25% due 2/15/2013 Ba1/BBB- 283,405 Insight Health Svcs. Corp. 381,000 Sr. Sub. Nt. Ser. B 9.875% due 11/1/2011 B3/B- 400,050 Tenet Healthcare Corp. 300,000 Nt. 7.375% due 2/1/2013 Ba3/BBB- 289,500
- -------------------------------------------------------------------------------- See notes to financial statements. 53 THE GUARDIAN HIGH YIELD BOND FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- Triad Hospitals, Inc. $ 278,000 Sr. Nt. Ser. B 8.75% due 5/1/2009 B1/B- $ 295,722 ----------- 2,340,827 - ------------------------------------------------------------------------------- HOME CONSTRUCTION -- 1.8% Beazer Homes USA, Inc. 280,000 Sr. Nt. 8.375% due 4/15/2012 Ba2/BB 310,100 Meritage Corp. 286,000 Sr. Nt. 9.75% due 6/1/2011 Ba3/B 316,030 Standard Pacific Corp. 280,000 Sr. Sub. Nt. 9.25% due 4/15/2012 Ba3/B+ 314,300 WCI Communities, Inc. 280,000 Sr. Sub. Nt. 9.125% due 5/1/2012 Ba3/B 298,200 ----------- 1,238,630 - ------------------------------------------------------------------------------- INDUSTRIAL-OTHER -- 1.1% Briggs & Stratton Corp. 645,000 Sr. Nt. 8.875% due 3/15/2011 Ba1/BB+ 744,975 - ------------------------------------------------------------------------------- LODGING -- 1.8% Hilton Hotels Corp. 280,000 Nt. 7.625% due 12/1/2012 Ba1/BBB- 306,600 HMH Pptys., Inc. 280,000 Sr. Nt. Ser. C 8.45% due 12/1/2008 Ba3/B+ 289,100 John Q. Hammons Hotels LP 280,000 1st Mtg. Nt. Ser. B 8.875% due 5/15/2012 B2/B 294,000 Starwood Hotels & Resorts 280,000 Sr. Nt. 7.875% due 5/1/2012 Ba1/BB+ 306,600 ----------- 1,196,300 - ------------------------------------------------------------------------------- MEDIA-CABLE -- 3.2% Charter Comm. Hldgs. 280,000 Sr. Disc. Nt. (1) 0/11.75% due 1/15/2010 Ca/B+ 165,200 840,000 Sr. Disc. Nt. (1) 0/11.75% due 5/15/2011 Ca/CCC- 424,200 CSC Hldgs., Inc. 560,000 Sr. Debt. Ser. B 8.125% due 8/15/2009 B1/BB- 579,600 Insight Midwest LP 350,000 Sr. Nt. 10.50% due 11/1/2010 B2/B+ 384,125 Mediacom LLC 600,000 Sr. Nt. 9.50% due 1/15/2013 B2/B+ 634,500 ----------- 2,187,625 - ------------------------------------------------------------------------------- MEDIA-NONCABLE -- 6.5% Allbritton Comm. Co. 209,000 Sr. Sub. Nt.+ 7.75% due 12/15/2012 B3/B- 215,793 American Media Operations, Inc. 570,000 Sr. Sub. Nt. Ser. B 10.25% due 5/1/2009 B2/B- 615,600
- ------------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- Corus Entertainment, Inc. $ 285,000 Sr. Sub. Nt. 8.75% due 3/1/2012 B1/B+ $ 306,375 Dex Media East LLC 265,000 Sr. Nt. 9.875% due 11/15/2009 B2/B 295,475 265,000 Sr. Sub. Nt. 12.125% due 11/15/2012 B3/B 313,362 DirecTV Hldgs. 278,000 Sr. Nt.+ 8.375% due 3/15/2013 B1/B 309,970 Echostar DBS Corp. 280,000 Sr. Nt. 9.125% due 1/15/2009 Ba3/BB- 312,900 139,000 Sr. Nt. 10.375% due 10/1/2007 Ba3/BB- 153,942 Emmis Comm. Corp. 286,000 Sr. Sub. Nt. 8.125% due 3/15/2009 B2/B- 299,585 Entravision Comm. Corp. 280,000 Sr. Sub. Nt. 8.125% due 3/15/2009 B3/B- 291,200 Houghton Mifflin Co. 556,000 Sr. Nt.+ 9.875% due 2/1/2013 B3/B 603,260 R.H. Donnelley Fin. Corp. I 160,000 Sr. Nt.+ 8.875% due 12/15/2010 B1/B+ 176,800 465,000 Sr. Sub. Nt.+ 10.875% due 12/15/2012 B2/B+ 541,725 ----------- 4,435,987 - ------------------------------------------------------------------------------- METALS AND MINING -- 2.2% AK Steel Corp. 280,000 Sr. Nt. 7.75% due 6/15/2012 B1/BB- 232,400 Arch Western Finance LLC 600,000 Sr. Nt.+ 6.75% due 7/1/2013 Ba2/BB+ 615,000 Luscar Coal Ltd. 286,000 Sr. Nt. 9.75% due 10/15/2011 Ba3/BB 326,755 Oregon Steel Mills, Inc. 280,000 1st Mtg. Nt. 10.00% due 7/15/2009 B1/B+ 252,000 Steel Dynamics, Inc. 70,000 Sr. Nt. 9.50% due 3/15/2009 B2/B 73,325 ----------- 1,499,480 - ------------------------------------------------------------------------------- NATURAL GAS-PIPELINES -- 5.1% El Paso Partners 555,000 Sr. Sub. Nt. Ser. B 8.50% due 6/1/2011 B1/BB- 593,850 El Paso Production Hldg. Co. 667,000 Sr. Nt.+ 7.75% due 6/1/2013 B2/B+ 665,332 Gulfterra Energy Partners 45,000 Sr. Sub. Nt.+ 8.50% due 6/1/2010 B1/BB- 48,150 Northwest Pipeline Corp. 208,000 Sr. Nt. 8.125% due 3/1/2010 B1/B+ 223,600
- -------------------------------------------------------------------------------- See notes to financial statements. 54 THE GUARDIAN HIGH YIELD BOND FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- Southern Natural Gas Co. $ 623,000 Nt. 7.35% due 2/15/2031 B1/B+ $ 633,903 Transcontinental Gas Pipeline Corp. 630,000 Nt. Ser. B 7.00% due 8/15/2011 B1/B+ 645,750 Williams Cos., Inc. 240,000 Nt. 8.125% due 3/15/2012 B3/B+ 246,000 360,000 Sr. Nt. 8.625% due 6/1/2010 B3/B+ 376,200 ----------- 3,432,785 - ------------------------------------------------------------------------------- PACKAGING -- 3.1% Ball Corp. 560,000 Sr. Nt. 6.875% due 12/15/2012 Ba3/BB 593,600 Crown European Hldgs. S.A. 355,000 Sr. Sec.+ 9.50% due 3/1/2011 B1/B+ 383,400 Kappa Beheer BV 670,000 Sr. Sub. Nt. 10.625% due 7/15/2009 B2/B 717,737 Owens-Brockway Glass Container 133,000 Sr. Sec. Nt.+ 7.75% due 5/15/2011 B1/BB 140,648 133,000 Sr. Nt.+ 8.25% due 5/15/2013 B2/B+ 138,985 Silgan Hldgs., Inc. 140,000 Sr. Sub. Debt. 9.00% due 6/1/2009 B1/B+ 144,900 ----------- 2,119,270 - ------------------------------------------------------------------------------- PAPER AND FOREST PRODUCTS -- 3.8% Abitibi-Consolidated, Inc. 210,000 Nt. 6.00% due 6/20/2013 Ba1/BB+ 199,869 390,000 Debt. 8.85% due 8/1/2030 Ba1/BB+ 414,390 Cascades, Inc. 278,000 Sr. Nt.+ 7.25% due 2/15/2013 Ba1/BB+ 292,595 Jefferson Smurfit Corp. US 400,000 Sr. Nt.+ 7.50% due 6/1/2013 B2/B 408,000 Norske Skog Canada Ltd. 140,000 Sr. Nt. 8.625% due 6/15/2011 Ba2/BB 146,300 Packaging Corp. of America 335,000 Sr. Sub. Nt. 9.625% due 4/1/2009 Ba2/BB+ 368,919 Stone Container Corp. 670,000 Sr. Nt. 9.75% due 2/1/2011 B2/B 733,650 ----------- 2,563,723 - ------------------------------------------------------------------------------- RESTAURANTS -- 0.8% Jack in the Box, Inc. 555,000 Sr. Sub. Nt. 8.375% due 4/15/2008 Ba3/BB- 574,425 - ------------------------------------------------------------------------------- RETAILERS -- 4.6% Cole National Group, Inc. 280,000 Sr. Sub. Nt. 8.875% due 5/15/2012 B2/B 269,500
- ------------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- Hollywood Entertainment Corp. $ 420,000 Sr. Sub. Nt. 9.625% due 3/15/2011 B3/B- $ 459,375 J.C. Penney Co., Inc. 720,000 Nt. 9.00% due 8/1/2012 Ba3/BB+ 781,200 Jafra Cosmetics 300,000 Sr. Sub. Nt.+ 10.75% due 5/15/2011 B3/B- 313,500 Petco Animal Supplies, Inc. 285,000 Sr. Sub. Nt. 10.75% due 11/1/2011 B2/B 324,900 Rent-A-Center, Inc. 200,000 Sr. Sub. Nt.+ 7.50% due 5/1/2010 B1/B+ 210,000 142,000 Sr. Sub. Nt. Ser. D 11.00% due 8/15/2008 B1/B+ 151,052 Rite Aid Corp. 280,000 Sr. Nt. 11.25% due 7/1/2008 Caa2/B- 301,000 United Auto Group, Inc. 280,000 Sr. Sub. Nt. 9.625% due 3/15/2012 B3/B 299,600 ----------- 3,110,127 - ------------------------------------------------------------------------------- SUPERMARKETS -- 0.4% Pathmark Stores, Inc. 284,000 Sr. Sub. Nt. 8.75% due 2/1/2012 B2/B 293,940 - ------------------------------------------------------------------------------- TECHNOLOGY -- 3.9% AMI Semiconductor, Inc. 555,000 Sr. Sub. Nt.+ 10.75% due 2/1/2013 B3/B 627,150 Flextronics Int'l. Ltd. 700,000 Sr. Sub. Nt. 9.875% due 7/1/2010 Ba2/BB- 766,500 PerkinElmer, Inc. 560,000 Sr. Sub. Nt. 8.875% due 1/15/2013 Ba3/BB- 607,600 Seagate Technology 560,000 Sr. Nt. 8.00% due 5/15/2009 Ba2/BB+ 606,200 ----------- 2,607,450 - ------------------------------------------------------------------------------- TEXTILE -- 2.1% Oxford Industries, Inc. 300,000 Sr. Nt.+ 8.875% due 6/1/2011 B2/B 315,000 Russell Corp. 350,000 Sr. Nt. 9.25% due 5/1/2010 B1/BB 381,500 William Carter Co. 650,000 Sr. Sub. Nt. Ser. B 10.875% due 8/15/2011 B3/B 734,500 ----------- 1,431,000 - ------------------------------------------------------------------------------- TRANSPORTATION -- 0.5% Teekay Shipping Corp. 280,000 Sr. Nt. 8.875% due 7/15/2011 Ba2/BB- 306,950 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 55 THE GUARDIAN HIGH YIELD BOND FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------------- WIRELESS COMMUNICATIONS -- 6.6% Centennial Cell $ 700,000 Sr. Nt.+ 10.125% due 6/15/2013 Caa1/CCC $ 693,000 Crown Castle Int'l. Corp. 381,000 Sr. Nt. 10.75% due 8/1/2011 B3/CCC 415,290 Nextel Comm., Inc. 275,000 Sr. Disc. Nt. 9.75% due 10/31/2007 B3/B 284,625 1,204,000 Sr. Disc. Nt. 9.95% due 2/15/2008 B3/B 1,258,180 321,000 Sr. Disc. Nt. 10.65% due 9/15/2007 B3/B 331,432 Nextel Partners, Inc. 350,000 Sr. Nt.+ 8.125% due 7/1/2011 Caa1/CCC+ 349,125 Telecorp PCS, Inc. 555,000 Sr. Sub. Nt. 10.625% due 7/15/2010 Baa2/BBB 670,163 Triton PCS, Inc. 420,000 Sr. Sub. Disc. Nt. 11.00% due 5/1/2008 B3/B- 445,200 ----------- 4,447,015 - ------------------------------------------------------------------------------- WIRELINE COMMUNICATIONS -- 5.2% Qwest Capital Funding, Inc. 600,000 Nt. 5.875% due 8/3/2004 Caa2/CCC+ 574,500 Qwest Corp. 1,260,000 Debt. 7.20% due 11/10/2026 Ba3/B- 1,181,250 560,000 Debt. 8.875% due 6/1/2031 Ba3/B- 588,000 Qwest Services Corp. 355,600 Nt.+ 13.50% due 12/15/2010 NR/CCC+ 401,828 Sprint Capital Corp. 335,000 Nt. 8.375% due 3/15/2012 Baa3/BBB- 401,101 Telus Corp. 300,000 Nt. 8.00% due 6/1/2011 Ba1/BBB 346,500 ----------- 3,493,179 - ------------------------------------------------------------------------------- TOTAL CORPORATE BONDS (COST $62,691,908) 67,109,760 - ------------------------------------------------------------------------------- WARRANTS -- 0.0% Shares Value - ------------------------------------------------------------------------------- $ 2,100 GT Group Telecomm., Inc. exp. 2/1/2010+ $ 787 417 Hayes Lemmerz Int'l., Inc. exp. 6/3/2006 925 670 Horizon PCS, Inc. exp. 10/1/2010+ 34 Leap Wireless Int'l., Inc. 1,000 exp. 4/15/2010+ 250 670 exp. 4/15/2010+ 167 460 Ubiquitel Operating Co. exp. 4/15/2010+ 5 330 XM Satellite Radio, Inc. exp. 3/15/2010+ 1,815 - ------------------------------------------------------------------------------- TOTAL WARRANTS (COST $364,135) 3,983 - ------------------------------------------------------------------------------- REPURCHASE AGREEMENT -- 0.9% Principal Amount Value - ------------------------------------------------------------------------------- $ 629,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $629,019 at 1.10% due 7/1/2003 (2) (COST $629,000) $ 629,000 - ------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% (COST $63,685,043) 67,742,743 CASH, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES -- 0.0% 17,739 - ------------------------------------------------------------------------------- NET ASSETS -- 100% $67,760,482 - -------------------------------------------------------------------------------
+ Rule 144A restricted security. * Unaudited. (1) Step-up bond. (2) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. - -------------------------------------------------------------------------------- See notes to financial statements. 56 / / The Guardian Tax-Exempt Fund
MUNICIPAL BONDS -- 97.6% Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------------------- ARIZONA -- 5.3% $1,900,000 Arizona St. Trans. Brd. Hwy. Rev. Ser. B, 5.25% due 7/1/2022 Aa1/AAA $ 2,057,035 1,500,000 Phoenix, AZ Civic Impt. Corp. Wtr. Sys. Rev., 5.50% due 7/1/2020 Aaa/AAA 1,678,185 1,000,000 Phoenix, AZ G.O. Ser. B, 5.375% due 7/1/2020 Aa1/AA+ 1,107,790 ----------- 4,843,010 - -------------------------------------------------------------------------- ARKANSAS -- 1.3% 1,000,000 Arkansas St. G.O. Fed. Hwy. Grant Ser. A, 5.50% due 8/1/2011 Aa2/AA 1,145,520 - -------------------------------------------------------------------------- CALIFORNIA -- 3.2% California St. G.O., 1,300,000 5.125% due 6/1/2022 A2/A 1,332,643 1,500,000 5.375% due 10/1/2027 A2/A 1,548,435 ----------- 2,881,078 - -------------------------------------------------------------------------- COLORADO -- 2.6% 2,165,000 South Suburban Park & Rec. Dist., CO Rev., 5.50% due 9/15/2019 Aaa/AAA 2,409,212 - -------------------------------------------------------------------------- FLORIDA -- 4.4% 2,000,000 Florida St. Brd. of Ed. Lottery Rev. Ser. A, 5.50% due 7/1/2017 Aaa/AAA 2,294,120 1,500,000 Florida St. Brd. of Ed. Lottery Rev. Ser. C, 5.25% due 7/1/2016 Aaa/AAA 1,665,495 ----------- 3,959,615 - -------------------------------------------------------------------------- GEORGIA -- 4.5% 1,000,000 Fulton Cnty., GA Dev. Auth. Rev. Georgia Tech. Foundation Ser. A, 5.125% due 11/1/2021 Aa1/AA+ 1,078,230 Gainesville, GA Wtr. & Swg. Rev., 700,000 5.25% due 11/15/2018 Aaa/AAA 773,717 2,000,000 5.375% due 11/15/2020 Aaa/AAA 2,208,780 ----------- 4,060,727 - -------------------------------------------------------------------------- IDAHO -- 4.5% 1,625,000 Boise City, ID Urban Renewal Agy. Lease, 6.00% due 8/15/2023 Aaa/AAA 1,891,240 2,000,000 Univ. of ID Univ. Rev. Hsg., 5.375% due 4/1/2023 Aaa/AAA 2,162,100 ----------- 4,053,340 - -------------------------------------------------------------------------- ILLINOIS -- 1.2% 1,000,000 Chicago, IL Brd. of Ed. Ser. A, 5.25% due 12/1/2018 Aaa/AAA 1,107,950 - -------------------------------------------------------------------------- IOWA -- 1.2% 1,000,000 Cedar Rapids, IA G.O., 5.25% due 6/1/2019 Aaa/NR 1,077,730 - --------------------------------------------------------------------------
- -------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------------------- KANSAS -- 4.4% $2,000,000 Butler Cnty., KS Pub. Bldg. Comm. Rev., 5.55% due 10/1/2021 Aaa/NR $ 2,233,120 1,500,000 Kansas St. Dept. Trans. Hwy. Rev. Ser. A, 5.75% due 9/1/2013 Aa2/AA+ 1,761,870 ----------- 3,994,990 - -------------------------------------------------------------------------- KENTUCKY -- 4.2% 1,430,000 Kentucky St. Ppty. & Bldgs. Comm. Ser. A, 5.70% due 5/1/2018 Aaa/AAA 1,632,574 2,000,000 Kentucky St. Ppty. & Bldgs. Comm. Rev., 5.375% due 10/1/2019 Aaa/AAA 2,209,120 ----------- 3,841,694 - -------------------------------------------------------------------------- MARYLAND -- 2.7% 2,085,000 Prince Georges Cnty., MD Ref., 5.50% due 5/15/2011 Aaa/AAA 2,447,769 - -------------------------------------------------------------------------- MASSACHUSETTS -- 2.6% 1,000,000 Massachusetts Bay Trans. Auth. Gen. Trans. Ser. B Rev., 5.375% due 3/1/2025 Aaa/AAA 1,049,850 1,200,000 Massachusetts St. G.O. Ser. A, 5.125% due 1/1/2020 Aa2/AA- 1,285,200 ----------- 2,335,050 - -------------------------------------------------------------------------- MICHIGAN -- 3.7% 2,000,000 Detroit, MI City Sch. Dist. Ser. A, 5.50% due 5/1/2020 Aaa/AAA 2,235,360 1,000,000 Garden City, MI Sch. Dist., 5.50% due 5/1/2018 Aaa/AAA 1,115,550 ----------- 3,350,910 - -------------------------------------------------------------------------- MISSOURI -- 1.2% 1,000,000 Springfield, MO Sch. Dist. G.O., 5.125% due 3/1/2020 Aaa/AAA 1,096,930 - -------------------------------------------------------------------------- NEW JERSEY -- 0.6% 500,000 New Jersey St. Trans. Auth. Ser. A, 6.50% due 6/15/2005 Aaa/AAA 549,695 - -------------------------------------------------------------------------- NEW MEXICO -- 1.3% 1,000,000 New Mexico St. Hwy. Comm. Tax Rev., 6.00% due 6/15/2010 Aa2/AA+ 1,172,450 - -------------------------------------------------------------------------- NEW YORK -- 8.8% 1,255,000 New York City Industrial Dev. Agy., 5.25% due 3/1/2018 Aaa/AAA 1,397,719 1,200,000 New York St. Dorm. Auth. Rev. Ser. A, 5.125% due 7/1/2021 Aaa/AAA 1,303,104 1,500,000 New York St. Dorm. Auth. Lease Ser. A, 6.25% due 7/1/2020 A1/AA- 1,778,040 1,000,000 New York St. Ref. Ser. A G.O., 5.25% due 3/15/2015 A2/AA 1,116,930 1,250,000 New York St. Thruway Auth. Hwy. & Brdg. Tr. Fd. Ser. B, 5.375% due 4/1/2015 Aaa/AAA 1,424,162
- -------------------------------------------------------------------------------- See notes to financial statements. 57 THE GUARDIAN TAX-EXEMPT FUND Schedule of Investments (Continued)
- -------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------------------- $ 500,000 New York, NY G.O. Sub. Ser. E2, 0.95% due 8/1/2020 (1) Aa3/AA+ $ 500,000 500,000 New York, NY G.O. Sub. Ser. B2, 0.95% due 8/15/2019 (1) Aa3/AA+ 500,000 ----------- 8,019,955 - -------------------------------------------------------------------------- NORTH CAROLINA -- 0.7% 595,000 Univ. of NC Hosp. Chapel Hill Rev. Ser. A, 0.95% due 2/15/2031 (1) A1/AA 595,000 - -------------------------------------------------------------------------- NORTH DAKOTA -- 1.3% 1,000,000 North Dakota St. Wtr. Comm. Rev., 5.75% due 8/1/2020 Aaa/AAA 1,143,320 - -------------------------------------------------------------------------- OHIO -- 7.8% 500,000 Cleveland, OH Parking Facs. Rev., 5.50% due 9/15/2016 Aaa/AAA 562,850 750,000 Ohio St. Bldg. Auth. Disalle Gov't. Ctr. Ser. A, 6.00% due 10/1/2005 Aa2/AA 826,298 1,300,000 Ohio St. Higher Ed. Fac. Comm., 5.50% due 12/1/2020 Aaa/AAA 1,460,329 1,500,000 Ohio St. Wtr. Dev. Auth. Rev., 5.50% due 12/1/2020 Aaa/AAA 1,688,745 1,235,000 River Valley, OH Local Sch. Dist. Facs., 5.25% due 11/1/2020 Aaa/NR 1,353,436 1,050,000 Univ. of Cincinnati, OH General Rcpts. Ser. A, 5.50% due 6/1/2011 Aaa/AAA 1,228,773 ----------- 7,120,431 - -------------------------------------------------------------------------- OREGON -- 2.7% 1,105,000 McMinnville, OR Sch. Dist. Ref. G.O., 5.50% due 6/15/2016 Aaa/NR 1,323,304 1,000,000 Washington & Clackamas Cntys., OR Sch. Dist. G.O. Ref., 5.25% due 6/1/2016 Aaa/NR 1,171,410 ----------- 2,494,714 - -------------------------------------------------------------------------- PENNSYLVANIA -- 2.5% Delaware River Port Auth. PA & NJ, 1,000,000 5.10% due 1/1/2020 Aaa/AAA 1,092,110 1,000,000 6.00% due 1/1/2017 Aaa/AAA 1,168,770 ----------- 2,260,880 - -------------------------------------------------------------------------- PUERTO RICO -- 6.1% 2,500,000 Puerto Rico Comwlth. Hwy. & Trans. Auth. Rev. Ser. B, 6.00% due 7/1/2026 Aaa/AAA 2,730,475 1,750,000 Puerto Rico Comwlth. Hwy. & Trans. Auth. Rev. Ser. G, 5.00% due 7/1/2033 Baa1/A 1,781,692 1,000,000 Puerto Rico Elect. Power Auth. Ser. HH Rev., 5.375% due 7/1/2030 Aaa/AAA 1,063,900 ----------- 5,576,067 - --------------------------------------------------------------------------
- -------------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------------------- SOUTH CAROLINA -- 5.0% $ 350,000 Charleston Cnty., SC Sch. Dist. Ref. Ser. B, 5.00% due 2/1/2016 Aa1/AA+ $ 383,439 1,250,000 Charleston, SC Wtrwks. & Swr. Rev., 5.25% due 1/1/2018 Aa3/AA- 1,379,250 1,000,000 Mount Pleasant, SC Wtr. & Swr. Rev. Ref. & Impt., 5.25% due 12/1/2019 Aaa/AAA 1,111,280 1,500,000 South Carolina St. G.O., 5.65% due 7/1/2020 (2) Aaa/AAA 1,674,015 ----------- 4,547,984 - -------------------------------------------------------------------------- TENNESSEE -- 2.8% 1,000,000 Knox Cnty., TN Pub. Impt. G.O., 5.375% due 5/1/2020 Aa2/AA 1,080,380 1,340,000 Metro. Gov't. Nashville Davidson Cnty., TN Ser. A, 5.25% due 10/1/2022 Aaa/AAA 1,452,131 ----------- 2,532,511 - -------------------------------------------------------------------------- VIRGINIA -- 7.6% 2,000,000 Fairfax Cnty., VA Econ. Dev. Auth. Rev., 5.00% due 6/1/2023 Aa1/AA+ 2,113,420 1,370,000 Fairfax Cnty., VA Wtr. Auth. Rev. Ref., 5.375% due 4/1/2020 Aa1/AAA 1,523,796 1,500,000 Riverside, VA Regional Jail Auth. Rev., 5.00% due 7/1/2021 Aaa/AAA 1,618,500 1,500,000 Virginia St. Pub. Sch. Auth. Ser. A Rev., 5.50% due 8/1/2018 Aa1/AA+ 1,697,325 ----------- 6,953,041 - -------------------------------------------------------------------------- WASHINGTON -- 3.4% 1,500,000 Cowlitz Cnty., WA Sch. Dist. G.O., 5.50% due 12/1/2019 Aaa/NR 1,686,660 1,250,000 Snohomish Cnty., WA G.O., 5.375% due 12/1/2019 Aaa/AAA 1,385,813 ----------- 3,072,473 - -------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS (COST $82,492,677) 88,644,046 - -------------------------------------------------------------------------- TOTAL INVESTMENTS -- 97.6% (COST $82,492,677) 88,644,046 CASH, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES -- 2.4% 2,213,127 - -------------------------------------------------------------------------- NET ASSETS -- 100% $90,857,173 - --------------------------------------------------------------------------
* Unaudited. (1) Variable rate demand notes. (2) Pre-refunded. GLOSSARY: G.O. -- General Obligation. - -------------------------------------------------------------------------------- See notes to financial statements. 58 / / The Guardian Cash Management Fund
CORPORATE BONDS -- 10.3% Principal Maturity Amount Date Value - ------------------------------------------------------------------- FINANCIAL-BANKS -- 0.4% $ 2,500,000 Wells Fargo & Co. 4.25% 8/15/2003 $ 2,507,045 - ------------------------------------------------------------------- FINANCIAL-OTHER -- 2.0% 2,200,000 Bear Stearns Cos., Inc. 6.15% 3/2/2004 2,273,424 Lehman Brothers Hldgs., Inc. 1,000,000 6.625% 4/1/2004 1,039,156 900,000 7.36% 12/15/2003 924,864 Morgan Stanley 8,110,000 5.625% 1/20/2004 8,310,317 500,000 7.125% 8/15/2003 503,615 ------------ 13,051,376 - ------------------------------------------------------------------- FOOD AND BEVERAGE -- 2.1% 2,460,000 Pepsi Bottling Hldgs., Inc. 5.375% 2/17/2004+ 2,521,102 11,100,000 Unilever Capital Corp. 6.75% 11/1/2003 11,301,787 ------------ 13,822,889 - ------------------------------------------------------------------- FOOTWEAR -- 0.4% 2,791,000 Nike, Inc. 6.375% 12/1/2003 2,851,686 - ------------------------------------------------------------------- HOUSEHOLD PRODUCTS -- 0.0% 250,000 Procter & Gamble Co. 5.25% 9/15/2003 251,882 - ------------------------------------------------------------------- MERCHANDISING-MASS -- 1.4% Wal-Mart Stores, Inc. 1,000,000 4.375% 8/1/2003 1,002,159 7,500,000 5.199% 6/1/2004 7,778,243 ------------ 8,780,402 - ------------------------------------------------------------------- TELECOMMUNICATIONS -- 2.9% 3,750,000 Bell Atlantic-NJ 5.875% 2/1/2004 3,848,141 4,600,000 GTE California, Inc. 6.75% 3/15/2004 4,772,910 New York Telephone Co. 7,750,000 5.875% 9/1/2003 7,812,465 2,145,000 6.25% 2/15/2004 2,209,523 ------------ 18,643,039 - ------------------------------------------------------------------- UTILITIES-ELECTRIC AND WATER -- 1.1% 3,600,000 Alabama Power Co. 5.35% 11/15/2003 3,653,572 3,150,000 Gulf Power Co. 4.69% 8/1/2003 3,158,216 ------------ 6,811,788 - ------------------------------------------------------------------- TOTAL CORPORATE BONDS (COST $66,720,107) 66,720,107 - ------------------------------------------------------------------- U.S. GOVERNMENT -- 3.1% U.S. GOVERNMENT AGENCIES -- 3.1% FHLB $ 5,000,000 1.375% 5/12/2004 $ 5,000,000 15,000,000 1.40% 3/8/2004 15,000,000 - ------------------------------------------------------------------- TOTAL U.S. GOVERNMENT (COST $20,000,000) 20,000,000 - ------------------------------------------------------------------- COMMERCIAL PAPER -- 59.8% Principal Maturity Amount Date Value - ------------------------------------------------------------------- FINANCIAL -- 24.4% AUTOMOTIVE -- 3.1% $ 5,000,000 American Honda Fin. Corp. 1.20% 7/11/2003 $ 4,998,333 Toyota Motor Credit Corp. 10,000,000 0.94% 7/31/2003 9,992,167 5,000,000 1.03% 7/18/2003 4,997,568 ------------ 19,988,068 - ------------------------------------------------------------------- FINANCE COMPANIES -- 5.5% 8,000,000 Alaska St. Housing Fin. Corp. 1.27% 7/2/2003 7,999,718 10,000,000 Coca-Cola Financial Corp. 1.03% 8/6/2003 9,989,700 Private Export Funding Corp. 2,500,000 1.14% 11/6/2003 2,489,867 5,000,000 1.16% 9/22/2003 4,986,628 5,000,000 1.17% 11/17/2003 4,977,412 5,000,000 1.20% 10/9/2003 4,983,333 ------------ 35,426,658 - ------------------------------------------------------------------- FINANCIAL-BANKS -- 11.4% 12,500,000 Allied Irish Banks PLC 1.23% 7/7/2003 12,497,437 15,000,000 Dexia Delaware LLC 1.22% 7/15/2003 14,992,883 Dresdner Bank AG 10,000,000 1.24% 7/14/2003 9,995,522 6,000,000 1.27% 7/17/2003 5,996,614 Societe Generale NA 5,000,000 1.20% 7/21/2003 4,996,667 10,000,000 1.205% 8/7/2003 9,987,615 5,000,000 1.24% 7/7/2003 5,000,000 10,000,000 UBS Finance, Inc. 1.00% 9/10/2003 9,980,278 ------------ 73,447,016 - ------------------------------------------------------------------- FINANCIAL-OTHER -- 2.9% Barton Capital Corp. 540,000 1.05% 7/14/2003 539,795 6,000,000 1.08% 7/1/2003 6,000,000 5,000,000 Goldman Sachs Group, Inc. 1.18% 8/28/2003+ 4,990,494 7,500,000 Govco, Inc. 1.03% 8/13/2003 7,490,773 ------------ 19,021,062 - ------------------------------------------------------------------- INSURANCE -- 1.5% 10,000,000 American General Fin. Corp. 1.02% 7/8/2003 9,998,017 - ------------------------------------------------------------------- TOTAL FINANCIAL 157,880,821 - ------------------------------------------------------------------- INDUSTRIAL -- 35.4% AUTOMOTIVE -- 1.6% $10,000,000 Volkswagen of America, Inc. 1.04% 8/6/2003 $ 9,989,600 - ------------------------------------------------------------------- CHEMICALS -- 1.6% 10,000,000 Lubrizol Corp. 1.18% 7/10/2003 9,997,050 - ------------------------------------------------------------------- CONGLOMERATES -- 1.5% 10,000,000 General Electric Capital Corp. 1.17% 8/12/2003 9,986,350 - ------------------------------------------------------------------- COSMETICS AND TOILETRIES -- 1.6% 10,000,000 L'Oreal USA, Inc. 1.07% 8/5/2003 9,989,597 - -------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 59 THE GUARDIAN CASH MANAGEMENT FUND Schedule of Investments (Continued)
- ------------------------------------------------------------------- Principal Maturity Amount Date Value - ------------------------------------------------------------------- DRUGS AND HOSPITALS -- 2.6% Pfizer, Inc. $12,000,000 1.01% 8/18/2003 $ 11,983,840 5,000,000 1.04% 7/24/2003 4,996,678 ------------ 16,980,518 - ------------------------------------------------------------------- EDUCATION -- 8.2% 10,000,000 Columbia University 1.22% 7/21/2003 9,993,222 5,000,000 Massachusetts Coll. of Pharmacy 1.21% 7/9/2003 4,998,656 Northwestern University 2,500,000 1.00% 12/2/2003 2,489,305 5,000,000 1.15% 8/12/2003 4,993,292 5,000,000 1.20% 7/8/2003 4,998,833 2,500,000 1.20% 10/17/2003 2,491,000 5,000,000 1.23% 9/4/2003 4,988,896 University of California 5,000,000 1.19% 8/12/2003 4,993,059 7,997,000 1.195% 8/7/2003 7,987,178 5,000,000 1.20% 8/12/2003 4,993,000 ------------ 52,926,441 - ------------------------------------------------------------------- ELECTRONICS AND INSTRUMENTS -- 4.2% Johnson Controls, Inc. 10,000,000 1.19% 9/26/2003 9,971,242 7,500,000 1.20% 7/28/2003 7,493,250 10,000,000 Sharp Electronics 1.03% 8/14/2003 9,987,411 ------------ 27,451,903 - ------------------------------------------------------------------- FINANCIAL-OTHER -- 4.6% Chevron UK Invt. PLC 5,000,000 0.92% 8/22/2003+ 4,993,355 10,000,000 1.19% 8/21/2003+ 9,983,142 15,000,000 Shell Finance UK 1.22% 7/9/2003 14,995,933 ------------ 29,972,430 - ------------------------------------------------------------------- FOOD AND BEVERAGE -- 2.3% 4,875,000 Archer-Daniels-Midland Co. 1.22% 7/2/2003 4,874,835 5,000,000 Brown-Forman Corp. 1.19% 7/11/2003 4,998,347 5,000,000 Unilever Capital Corp. 1.05% 7/18/2003 4,997,521 ------------ 14,870,703 - ------------------------------------------------------------------- MACHINERY-INDUSTRIAL SPECIALTY -- 1.2% 8,040,000 Stanley Works 1.22% 7/23/2003+ 8,034,006 - ------------------------------------------------------------------- METALS-MISCELLANEOUS -- 1.5% 10,000,000 Rio Tinto America, Inc. 1.05% 9/5/2003 9,980,750 - ------------------------------------------------------------------- PHARMACEUTICALS -- 2.0% Johnson & Johnson 5,000,000 1.20% 8/1/2003 4,994,833 8,000,000 1.21% 7/15/2003 7,996,236 ------------ 12,991,069 - -------------------------------------------------------------------
- ------------------------------------------------------------------- Principal Maturity Amount Date Value - ------------------------------------------------------------------- TELECOMMUNICATIONS -- 0.9% $ 6,000,000 Verizon Network Funding 1.04% 7/3/2003 $ 5,999,653 - ------------------------------------------------------------------- UTILITIES-ELECTRIC AND WATER -- 1.6% 10,000,000 Alabama Power Co. 1.17% 7/8/2003 9,997,725 - ------------------------------------------------------------------- TOTAL INDUSTRIAL 229,167,795 - ------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (COST $387,048,616) 387,048,616 - ------------------------------------------------------------------- FLOATING RATE NOTES AND BONDS -- 22.1% Principal Reset Amount Date* Value - ------------------------------------------------------------------- MUNICIPAL BONDS -- 22.1% $ 3,710,000 Alaska St. Housing Fin. Corp. 1.04% 7/10/2003 $ 3,710,000 13,590,000 California Housing Fin. Agency 1.10% 7/9/2003 13,590,000 Colorado Housing & Fin. Auth 8,250,000 1.04% 7/9/2003 8,250,000 11,000,000 2.20% 7/25/2003 11,000,086 8,000,000 Connecticut St. Housing & Fin. Auth 1.02% 7/10/2003 8,000,000 11,000,000 Los Angeles, CA Wtr. & Power 1.02% 7/10/2003 11,000,000 8,000,000 Miami Dade Cnty. Florida Aviation 1.09% 7/9/2003 8,000,000 4,000,000 Michigan St. Housing Dev. Auth 1.04% 7/9/2003 4,000,000 22,530,000 New York City Trans. 1.04% 7/9/2003 22,530,000 Sacramento Cnty., CA 18,000,000 1.03% 7/9/2003 18,000,000 8,100,000 1.03% 7/9/2003 8,100,000 Utah Housing Corp. Single Family 4,840,000 1.04% 7/9/2003 4,840,000 4,850,000 1.04% 7/9/2003 4,850,000 1,700,000 1.04% 7/9/2003 1,700,000 6,290,000 1.04% 7/9/2003 6,290,000 Utah St. Housing Fin. Agency 3,550,000 1.04% 7/9/2003 3,550,000 5,480,000 1.04% 7/9/2003 5,480,000 - ------------------------------------------------------------------- TOTAL FLOATING RATE NOTES AND BONDS (COST $142,890,086) 142,890,086 - -------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 60 THE GUARDIAN CASH MANAGEMENT FUND Schedule of Investments (Continued)
REPURCHASE AGREEMENT -- 3.9% Principal Amount Value - ------------------------------------------------------------------- $25,665,000 State Street Bank and Trust Co. repurchase agreement, dated 6/30/2003, maturity value $25,665,784 at 1.10% due 7/1/2003 (1) (COST $25,665,000) $ 25,665,000 - ------------------------------------------------------------------- TOTAL INVESTMENTS -- 99.2% (COST $642,323,809) 642,323,809 CASH, RECEIVABLES AND OTHER ASSETS LESS LIABILITIES -- 0.8% 5,058,096 - ------------------------------------------------------------------- NET ASSETS -- 100% $647,381,905 - -------------------------------------------------------------------
+ Rule 144A restricted security. (1) The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. * Floating rate note. The rate shown is the rate in effect at June 30, 2003. - -------------------------------------------------------------------------------- See notes to financial statements. 61 / / The Park Avenue Portfolio STATEMENTS OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) - ---------------------------------------------------------------------
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN PARK AVENUE UBS LARGE PARK AVENUE UBS SMALL FUND CAP VALUE SMALL CAP CAP VALUE FUND FUND FUND ------------------------------------------------------------- ASSETS Investments, at identified cost (includes controlled affiliated issue of $132,417,999 and non controlled affiliated issue of $24,067,071 for GAAF)............. $ 1,242,770,560 $75,788,128 $136,469,983 $ 35,992,193 ============================================================= Investments, at market -- Note 1 (includes controlled affiliated issue of $102,205,208 and non controlled affiliated issue of $26,106,921 for GAAF)............. 1,282,911,897 86,874,249 160,041,265 41,104,823 Cash.................................................... 621 104 534 628 Foreign Currency (cost $52,328 GBGIF and $228,917 GBGEMF, respectively)................................. -- -- -- -- Receivable for securities sold.......................... 28,071,671 -- 4,946,991 375,675 Dividends receivable.................................... 1,305,436 105,548 67,706 45,618 Receivable for fund shares sold......................... 446,716 3,222 63,707 28,704 Interest receivable..................................... 453 63 190 24 Dividend reclaim receivable............................. -- -- -- -- Other assets............................................ 7,351 541 1,169 342 ------------------------------------------------------------- TOTAL ASSETS........................................ 1,312,744,145 86,983,727 165,121,562 41,555,814 ------------------------------------------------------------- LIABILITIES Payable for securities purchased........................ 15,489,988 -- 8,520,054 305,842 Payable for fund shares redeemed........................ 2,003,894 18 2,093,064 18 Accrued expenses........................................ 290,997 79,099 30,120 68,836 Payable for variation margin -- Note 1.................. -- -- -- -- Due to custodian........................................ -- -- -- -- Distributions payable................................... -- -- -- -- Accrued foreign capital gains tax....................... -- -- -- -- Payable for forward mortgage securities purchased -- Note 7................................... -- -- -- -- Due to affiliates....................................... 900,121 83,601 150,085 39,262 ------------------------------------------------------------- TOTAL LIABILITIES................................... 18,685,000 162,718 10,793,323 413,958 ------------------------------------------------------------- NET ASSETS.......................................... $ 1,294,059,145 $86,821,009 $154,328,239 $ 41,141,856 ============================================================= COMPONENTS OF NET ASSETS Shares of beneficial interest, at par................... $ 482,744 $ 76,627 $ 102,577 $ 35,802 Additional paid-in capital.............................. 2,001,556,682 75,514,864 149,687,867 35,218,560 Undistributed/(overdistributed) net investment income... 735,799 (54,816) (520,545) (43,982) Accumulated net realized gain/(loss) on investments and foreign currency related transactions................. (748,857,417) 198,213 (18,512,942) 818,846 Net unrealized appreciation/(depreciation) of investments and foreign currency related transactions.......................................... 40,141,337 11,086,121 23,571,282 5,112,630 ------------------------------------------------------------- NET ASSETS.......................................... $ 1,294,059,145 $86,821,009 $154,328,239 $ 41,141,856 ============================================================= NET ASSETS Class A................................................. $ 1,116,490,014 $21,857,557 $121,351,888 $ 10,399,120 Class B................................................. $ 165,055,265 $21,788,437 $ 18,608,031 $ 10,311,353 Class C................................................. $ 6,223,815 $21,568,516 $ 6,633,091 $ 10,204,306 Class K................................................. $ 6,290,051 $21,606,499 $ 7,735,229 $ 10,227,077 SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE Class A................................................. 41,419,493 1,928,107 7,984,620 903,488 Class B................................................. 6,378,084 1,923,815 1,294,316 898,471 Class C................................................. 243,269 1,904,392 463,647 889,135 Class K................................................. 233,575 1,906,381 515,092 889,101 NET ASSET VALUE PER SHARE Class A................................................. $26.96 $11.34 $15.20 $11.51 Class B................................................. $25.88 $11.33 $14.38 $11.48 Class C................................................. $25.58 $11.33 $14.31 $11.48 Class K................................................. $26.93 $11.33 $15.02 $11.50 MAXIMUM OFFERING PRICE PER SHARE Class A Only (Net Asset Value x 104.71%)*............... $28.23 $11.87 $15.92 $12.05
* Based on sale of less than $100,000. On sale of $100,000 or more, the offering price is reduced. ** No load is charged on Class A shares. See notes to financial statements. 62
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN ASSET S&P 500 BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT HIGH YIELD THE GUARDIAN CASH ALLOCATION INDEX INTERNATIONAL EMERGING QUALITY BOND TAX-EXEMPT MANAGEMENT FUND FUND FUND MARKETS FUND BOND FUND FUND FUND FUND - --------------------------------------------------------------------------------------------------------------------------- $186,625,067 $157,913,843 $ 62,866,691 $47,203,271 $245,686,541 $63,685,043 $82,492,677 $642,323,809 =========================================================================================================================== 154,018,856 134,915,543 63,985,484 52,463,369 254,357,840 67,742,743 88,644,046 642,323,809 742 95,484 -- 507 156,542 75,613 1,078,793 96,272 -- -- 52,039 229,253 -- -- -- -- -- -- 424,281 255,592 -- 4,484,759 -- 15,004,747 102,193 162,762 102,898 137,896 -- -- -- -- 91,692 124,366 1,278,394 613,814 32,893 20,087 77,706 1,139,249 61 86 1,205 9 1,932,558 1,364,342 1,176,316 1,513,579 -- -- 77,558 -- -- -- -- -- 1,255 1,212 753 554 1,110 545 837 3,139 - --------------------------------------------------------------------------------------------------------------------------- 154,214,799 135,299,453 65,922,612 53,700,994 256,480,943 73,688,089 90,977,698 660,080,795 - --------------------------------------------------------------------------------------------------------------------------- -- 200,817 491,240 261,639 1,253,252 4,593,918 -- 8,514,334 507,213 37,950 157,186 126,385 1,528,829 1,257,140 20,473 3,670,605 46,114 17,913 27,681 40,833 8,334 11,988 28,359 77,256 59,766 -- -- -- -- -- -- -- -- -- 2,317,858 -- -- -- -- -- -- -- 324 -- 179,627 -- 6,814 541 -- -- -- 50,488 -- -- -- -- -- -- -- -- 26,768,988 -- -- -- 42,256 70,863 23,813 22,953 170,070 64,561 64,879 436,154 - --------------------------------------------------------------------------------------------------------------------------- 655,349 327,543 3,018,102 502,298 29,909,100 5,927,607 120,525 12,698,890 - --------------------------------------------------------------------------------------------------------------------------- $153,559,450 $134,971,910 $ 62,904,510 $53,198,696 $226,571,843 $67,760,482 $90,857,173 $647,381,905 =========================================================================================================================== $ 165,680 $ 201,829 $ 66,415 $ 59,038 $ 215,197 $ 94,168 $ 84,416 $ 6,473,819 243,553,903 254,650,194 101,964,547 55,341,722 213,501,632 84,423,633 82,163,402 640,908,086 537,137 118,381 380,390 (5,937) -- -- -- -- ) (57,533,647 (96,941,572) (40,637,529) (7,453,303) 4,183,715 (20,815,019) 2,457,986 -- ) (33,163,623 (23,056,922) 1,130,687 5,257,176 8,671,299 4,057,700 6,151,369 -- - --------------------------------------------------------------------------------------------------------------------------- $153,559,450 $134,971,910 $ 62,904,510 $53,198,696 $226,571,843 $67,760,482 $90,857,173 $647,381,905 =========================================================================================================================== $110,675,334 $111,592,345 $ 46,577,766 $30,200,741 $184,477,225 $40,759,293 $80,531,153 $612,259,098 $28,965,720 $ 9,573,752 $ 5,764,431 $ 6,796,350 $21,091,395 $ 9,527,102 -- $ 17,056,667 $ 6,987,945 $ 7,327,580 $ 4,694,738 $ 7,402,427 $11,254,095 $ 8,600,022 $10,326,020 $ 9,139,572 $ 6,930,451 $ 6,478,233 $ 5,867,575 $ 8,799,178 $ 9,749,128 $ 8,874,065 -- $ 8,926,568 11,938,391 16,682,048 4,840,425 3,278,687 17,521,426 5,663,786 7,482,133 612,259,098 3,126,812 1,433,607 652,104 793,933 2,003,965 1,324,401 -- 17,056,667 754,372 1,098,402 529,531 862,606 1,069,233 1,195,862 959,435 9,139,572 748,404 968,804 619,474 968,540 925,035 1,232,711 -- 8,926,568 $9.27 $6.69 $9.62 $9.21 $10.53 $7.20 $10.76 $1.00 $9.26 $6.68 $8.84 $8.56 $10.52 $7.19 -- $1.00 $9.26 $6.67 $8.87 $8.58 $10.53 $7.19 $10.76 $1.00 $9.26 $6.69 $9.47 $9.08 $10.54 $7.20 -- $1.00 $9.71 $7.01 $10.07 $9.64 $11.03 $7.54 $11.27 N/A**
63 / / The Park Avenue Portfolio STATEMENTS OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - ---------------------------------------------------------------------
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN UBS LARGE PARK AVENUE UBS SMALL PARK AVENUE CAP VALUE SMALL CAP CAP VALUE FUND FUND FUND FUND --------------------------------------------------------- INVESTMENT INCOME Dividends (includes $504,328 from a controlled affiliate and $436,838 from a non controlled affiliate for GAAF)............................... $ 9,582,408 $ 730,192 $ 476,139 $ 320,607 Interest............................................. 166,820 13,350 19,632 9,646 Less: Foreign tax withheld........................... -- -- (890) -- --------------------------------------------------------- Total Income.................................... 9,749,228 743,542 494,881 330,253 --------------------------------------------------------- EXPENSES: Investment advisory fees -- Note 2................... 3,135,694 258,001 519,542 143,863 Administrative fees -- Class A -- Note 2............. 1,041,594 19,485 136,623 9,009 Administrative fees -- Class B -- Note 2............. 199,745 19,462 20,823 9,025 Administrative fees -- Class C -- Note 2............. 7,353 19,375 7,274 8,961 Administrative fees -- Class K -- Note 2............. 7,257 19,389 8,462 8,971 12b-1 fees -- Class B -- Note 3...................... 599,235 58,385 62,468 27,074 12b-1 fees -- Class C -- Note 3...................... 22,060 58,125 21,822 26,883 12b-1 fees -- Class K -- Note 3...................... 11,611 31,023 13,538 14,353 Transfer agent fees -- Class A....................... 775,796 9,360 70,936 9,546 Transfer agent fees -- Class B....................... 242,416 9,304 27,938 9,331 Transfer agent fees -- Class C....................... 17,747 9,193 15,174 9,176 Transfer agent fees -- Class K....................... -- 733 -- 733 Custodian fees....................................... 106,201 33,308 54,858 36,069 Trustees' fees -- Note 2............................. 41,804 1,715 3,981 877 Registration fees.................................... 31,080 30,421 29,238 30,421 Legal fees........................................... 19,836 32,642 496 15,322 Other................................................ 96,044 18,836 22,253 14,621 --------------------------------------------------------- Total Expenses before Reimbursement and Custody credits..................................... 6,355,473 628,757 1,015,426 374,235 Less: Expenses assumed by investment adviser -- Note 2................................................. -- -- -- -- Custody credits -- Note 1...................... -- -- -- -- --------------------------------------------------------- Expenses Net of Reimbursement and Custody credits.................................................. 6,355,473 628,757 1,015,426 374,235 --------------------------------------------------------- NET INVESTMENT INCOME/(LOSS)........................... 3,393,755 114,785 (520,545) (43,982) --------------------------------------------------------- REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4 Net realized gain/(loss) on investments -- Note 1.... (90,711,379) 198,213 (4,337,041) 818,846 Net realized loss on sale of affiliated underlying funds............................................. -- -- -- -- Net realized gains received from affiliated underlying funds.................................. -- -- -- -- Foreign capital gains tax............................ -- -- -- -- Net realized loss on foreign currency related transactions -- Note 1............................ -- -- -- -- Net change in unrealized appreciation/(depreciation) on investments -- Note 4.......................... 187,928,080 11,086,121 24,030,110 5,112,630 Net change in unrealized depreciation from translation of other assets and liabilities denominated in foreign currencies -- Note 1....... -- -- -- -- --------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES................................... 97,216,701 11,284,334 19,693,069 5,931,476 --------------------------------------------------------- NET INCREASE IN NET ASSETS FROM OPERATIONS........ $100,610,456 $11,399,119 $19,172,524 $5,887,494 =========================================================
See notes to financial statements. 64
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN ASSET S&P 500 BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT HIGH YIELD THE GUARDIAN CASH ALLOCATION INDEX INTERNATIONAL EMERGING QUALITY BOND TAX-EXEMPT MANAGEMENT FUND FUND FUND MARKETS FUND BOND FUND FUND FUND FUND - --------------------------------------------------------------------------------------------------------------------------- $ 1,135,476 $ 1,074,436 $ 1,177,942 $ 817,502 -- -- -- -- 32,308 13,451 9,396 3,476 $4,705,211 $2,722,434 $2,114,724 $4,568,935 -- -- (142,512) (86,215) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------- 1,167,784 1,087,887 1,044,826 734,763 4,705,211 2,722,434 2,114,724 4,568,935 - --------------------------------------------------------------------------------------------------------------------------- 475,726 152,522 255,906 238,626 551,041 188,887 233,795 1,686,265 132,453 126,442 60,990 34,442 225,049 47,261 104,614 799,353 34,602 10,716 6,800 7,537 25,221 11,002 -- 21,665 8,058 8,032 5,430 7,951 13,571 10,071 12,283 11,442 7,858 7,332 6,751 9,726 11,679 10,369 -- 10,673 103,806 32,148 20,401 22,610 75,664 33,006 -- 64,995 24,174 24,095 16,291 23,854 40,712 30,214 36,849 34,324 12,574 11,731 10,801 15,562 18,687 16,590 -- 17,076 86,851 21,228 52,069 19,738 48,051 18,130 18,893 237,094 34,902 18,890 21,819 17,406 21,323 17,621 -- 15,436 16,731 16,331 15,861 17,321 16,202 15,761 15,863 3,528 -- -- -- -- -- -- -- 1,583 53,182 73,986 132,559 150,877 73,053 47,469 33,534 79,966 5,224 3,804 2,063 1,367 6,981 1,908 3,270 22,160 29,779 45,831 33,796 30,082 42,248 29,366 11,315 31,701 1,642 4,134 1,552 783 2,480 826 826 9,706 19,973 28,661 21,219 18,268 23,811 18,520 18,191 46,267 - --------------------------------------------------------------------------------------------------------------------------- 1,047,535 585,883 664,308 616,150 1,195,773 497,001 489,433 3,093,234 (557,192) (194,562) -- -- (123,941) (149,601) (40,285) (110,188) -- -- -- -- -- -- (14,847) -- - --------------------------------------------------------------------------------------------------------------------------- 490,343 391,321 664,308 616,150 1,071,832 347,400 434,301 2,983,046 - --------------------------------------------------------------------------------------------------------------------------- 677,441 696,566 380,518 118,613 3,633,379 2,375,034 1,680,423 1,585,889 - --------------------------------------------------------------------------------------------------------------------------- (897,005) (338,882) (3,539,100) (1,724,639) 4,521,907 939,935 2,457,648 -- (652,564) -- -- -- -- -- -- -- 42,644 -- -- -- -- -- -- -- -- -- -- (45,193) -- -- -- -- -- -- (540) (48,684) -- -- -- -- 16,519,382 13,134,107 8,925,813 8,343,547 1,142,449 3,721,799 (477,511) -- -- -- (6,007) (309) -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------- 15,012,457 12,795,225 5,380,166 6,524,722 5,664,356 4,661,734 1,980,137 -- - --------------------------------------------------------------------------------------------------------------------------- $15,689,898 $13,491,791 $ 5,760,684 $ 6,643,335 $9,297,735 $7,036,768 $3,660,560 $1,585,889 ===========================================================================================================================
65 / / The Park Avenue Portfolio STATEMENTS OF CHANGES IN NET ASSETS
THE GUARDIAN THE GUARDIAN THE GUARDIAN UBS LARGE CAP PARK AVENUE PARK AVENUE FUND VALUE FUND SMALL CAP FUND ------------------------------- ------------------ --------------------------- PERIOD FROM SIX MONTHS FEBRUARY 3, 2003+ SIX MONTHS ENDED YEAR ENDED TO ENDED YEAR ENDED JUNE 30, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31, 2003 2002 2003 2003 2002 (UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) (AUDITED) ---------------------------------------------------------------------------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income/(loss)... $ 3,393,755 $ 6,268,512 $ 114,785 $ (520,545) $(1,034,582) Net realized gain/(loss) on investments and foreign currency related transactions.................. (90,711,379) (269,243,443) 198,213 (4,337,041) (7,577,860) Net change in unrealized appreciation/ (depreciation) of investments and foreign currency related transactions.................. 187,928,080 (151,728,126) 11,086,121 24,030,110 (21,018,611) ---------------------------------------------------------------------------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... 100,610,456 (414,703,057) 11,399,119 19,172,524 (29,631,053) ---------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A....................... (7,367,811) (4,310,369) (69,943) -- -- Class B....................... -- -- (25,664) -- -- Class C....................... -- -- (25,489) -- -- Class K....................... (20,780) -- (48,505) -- -- Net realized gain on investments and foreign currency related transactions Class A....................... -- -- -- -- -- Class B....................... -- -- -- -- -- Class C....................... -- -- -- -- -- Class K....................... -- -- -- -- -- ---------------------------------------------------------------------------------- TOTAL DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS................ (7,388,591) (4,310,369) (169,601) -- -- ---------------------------------------------------------------------------------- FROM CAPITAL SHARE TRANSACTIONS: Net increase/(decrease) in net assets from capital share transactions -- Note 8........ (98,620,667) (350,930,660) 75,591,491 (6,408,496) (4,165,700) ---------------------------------------------------------------------------------- NET INCREASE/(DECREASE) IN NET ASSETS........................ (5,398,802) (769,944,086) 86,821,009 12,764,028 (33,796,753) NET ASSETS: Beginning of period............... 1,299,457,947 2,069,402,033 -- 141,564,211 175,360,964 ---------------------------------------------------------------------------------- End of period*.................... $1,294,059,145 $1,299,457,947 $86,821,009 $154,328,239 $141,564,211 ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- * Includes undistributed/(distributions in excess) of net investment income of............................... $ 735,799 $ 4,730,635 $ (54,816) $ (520,545) $ -- + Commencement of operations. THE GUARDIAN UBS SMALL CAP THE GUARDIAN VALUE FUND ASSET ALLOCATION FUND ------------------- --------------------------- PERIOD FROM FEBRUARY 3, 2003+ SIX MONTHS TO ENDED YEAR ENDED JUNE 30, JUNE 30, DECEMBER 31, 2003 2003 2002 (UNAUDITED) (UNAUDITED) (AUDITED) ------------------------------------------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income/(loss)... $ (43,982) $ 677,441 $ 2,650,316 Net realized gain/(loss) on investments and foreign currency related transactions.................. 818,846 (1,506,925) (12,406,127) Net change in unrealized appreciation/ (depreciation) of investments and foreign currency related transactions.................. 5,112,630 16,519,382 (35,892,162) ------------------------------------------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... 5,887,494 15,689,898 (45,647,973) ------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A....................... -- (1,836,343) (2,611,441) Class B....................... -- (225,527) (296,792) Class C....................... -- (29,885) (39,379) Class K....................... -- (81,064) (92,412) Net realized gain on investments and foreign currency related transactions Class A....................... -- -- -- Class B....................... -- -- -- Class C....................... -- -- -- Class K....................... -- -- -- ------------------------------------------------- TOTAL DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS................ -- (2,172,819) (3,040,024) ------------------------------------------------- FROM CAPITAL SHARE TRANSACTIONS: Net increase/(decrease) in net assets from capital share transactions -- Note 8........ 35,254,362 (12,210,167) (28,957,348) ------------------------------------------------- NET INCREASE/(DECREASE) IN NET ASSETS........................ 41,141,856 1,306,912 (77,645,345) NET ASSETS: Beginning of period............... -- 152,252,538 229,897,883 ------------------------------------------------- End of period*.................... $41,141,856 $153,559,450 $152,252,538 ------------------------------------------------- ------------------------------------------------- * Includes undistributed/(distributions in excess) of net investment income of............................... $ (43,982) $ 537,137 $ 2,032,514 + Commencement of operations.
See notes to financial statements. 66
THE GUARDIAN THE GUARDIAN THE GUARDIAN BAILLIE GIFFORD THE GUARDIAN S&P 500 BAILLIE GIFFORD EMERGING INVESTMENT QUALITY INDEX FUND INTERNATIONAL FUND MARKETS FUND BOND FUND ---------------------------- -------------------------- -------------------------- --------------------------- SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2003 2002 2003 2002 2003 2002 2003 2002 (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) - --------------------------------------------------------------------------------------------------------------------------- $ 696,566 $ 2,264,690 $ 380,518 $ 89,833 $ 118,613 $ (188,253) $ 3,633,379 $ 7,971,762 (338,882) (95,822,692) (3,539,640) (22,615,441) (1,818,516) 2,907,671 4,521,907 962,427 13,134,107 18,959,704 8,919,806 5,673,231 8,343,238 (6,026,178) 1,142,449 7,351,497 - --------------------------------------------------------------------------------------------------------------------------- 13,491,791 (74,598,298) 5,760,684 (16,852,377) 6,643,335 (3,306,760) 9,297,735 16,285,686 - --------------------------------------------------------------------------------------------------------------------------- (548,715) (2,164,053) (63,805) -- -- -- (3,077,666) (6,694,956) (19,902) (28,553) -- -- -- -- (269,409) (572,072) (14,803) (22,264) -- -- -- -- (145,084) (354,303) (21,911) (43,052) -- -- -- -- (141,220) (350,431) -- -- -- -- -- -- (301,855) (465,319) -- -- -- -- -- -- (35,488) (52,987) -- -- -- -- -- -- (18,341) (29,434) -- -- -- -- -- -- (15,839) (25,176) - --------------------------------------------------------------------------------------------------------------------------- (605,331) (2,257,922) (63,805) -- -- -- (4,004,902) (8,544,678) - --------------------------------------------------------------------------------------------------------------------------- 1,587,363 (103,976,012) (6,126,152) (21,180,662) (757,787) 10,313,357 11,347,080 26,728,214 - --------------------------------------------------------------------------------------------------------------------------- 14,473,823 (180,832,232) (429,273) (38,033,039) 5,885,548 7,006,597 16,639,913 34,469,222 120,498,087 301,330,319 63,333,783 101,366,822 47,313,148 40,306,551 209,931,930 175,462,708 - --------------------------------------------------------------------------------------------------------------------------- $134,971,910 $120,498,087 $62,904,510 $63,333,783 $53,198,696 $47,313,148 $226,571,843 $209,931,930 - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- $ 118,381 $ 27,146 $ 380,390 $ 63,677 $ (5,937) $ (124,550) $ -- $ -- THE GUARDIAN THE GUARDIAN HIGH YIELD THE GUARDIAN CASH MANAGEMENT BOND FUND TAX-EXEMPT FUND FUND ------------------------------- -------------------------------- -------------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2003 2002 2003 2002 2003 2002 (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) - --------------------------------------------------------------------------------------------------------------------------- $ 2,375,034 $ 4,541,788 $ 1,680,423 $ 4,478,043 $ 1,585,889 $ 6,145,223 939,935 (5,394,424) 2,457,648 1,826,662 -- -- 3,721,799 1,260,183 (477,511) 5,144,825 -- -- - --------------------------------------------------------------------------------------------------------------------------- 7,036,768 407,547 3,660,560 11,449,530 1,585,889 6,145,223 - --------------------------------------------------------------------------------------------------------------------------- (1,472,811) (2,763,882) (1,536,355) (4,191,275) (1,554,609) (6,042,276) (310,720) (606,359) -- -- (15,278) (37,641) (284,204) (563,588) (144,068) (286,768) (7,961) (19,989) (307,299) (607,959) -- -- (8,041) (45,317) -- -- (115,361) (1,983,160) -- -- -- -- -- -- -- -- -- -- (14,828) (168,362) -- -- -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------- (2,375,034) (4,541,788) (1,810,612) (6,629,565) (1,585,889) (6,145,223) - --------------------------------------------------------------------------------------------------------------------------- 5,215,242 4,489,847 (34,585,569) 2,313,675 (47,092,866) 56,129,038 - --------------------------------------------------------------------------------------------------------------------------- 9,876,976 355,606 (32,735,621) 7,133,640 (47,092,866) 56,129,038 57,883,506 57,527,900 123,592,794 116,459,154 694,474,771 638,345,733 - --------------------------------------------------------------------------------------------------------------------------- $67,760,482 $57,883,506 $ 90,857,173 $123,592,794 $647,381,905 $694,474,771 - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- $ -- $ -- $ -- $ -- $ -- $ --
67 / / The Guardian Investment Quality Bond Fund STATEMENT OF CASH FLOWS Six Months Ended June 30, 2003 (Unaudited) - --------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net increase in net assets resulting from operations... $ 9,297,735 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Purchases of long-term securities............... (320,606,287) Proceeds from sales of long-term securities..... 292,761,133 Proceeds from mortgage paydown securities....... 13,526,503 Premium amortization/discount accretion, net.... 245,183 Purchases of short-term investments, net........ (9,857,682) Increase in receivables......................... (91,464) Decrease in payables............................ (24,655) Net realized gain on investments................ (4,521,907) Net change in unrealized appreciation of investments..................................... (1,142,449) ------------- Net cash provided by operating activities... (20,413,890) ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Fund shares sold.................... 32,976,160 Payments for Fund shares redeemed................. (23,369,907) Cash distributions paid........................... (602,271) Proceeds from the financing of dollar roll transactions, net.................................. 11,524,775 ------------- Net cash used in financing activities....... 20,528,757 ------------- INCREASE IN CASH....................................... 114,867 CASH Beginning of period.................................... 41,675 ------------- End of period.......................................... $ 156,542 ------------- ------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Non-cash financing activities not included above: Reinvestment of distributions..................... $ 3,402,631 ------------- -------------
See notes to financial statements. 68 NOTES TO FINANCIAL STATEMENTS June 30, 2003 (Unaudited) The Park Avenue Portfolio / / The Guardian Park Avenue Fund / / The Guardian UBS Large Cap Value Fund / / The Guardian Park Avenue Small Cap Fund / / The Guardian UBS Small Cap Value Fund / / The Guardian Asset Allocation Fund / / The Guardian S&P 500 Index Fund / / The Guardian Baillie Gifford International Fund / / The Guardian Baillie Gifford Emerging Markets Fund / / The Guardian Investment Quality Bond Fund / / The Guardian High Yield Bond Fund / / The Guardian Tax-Exempt Fund / / The Guardian Cash Management Fund NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES The Park Avenue Portfolio (the Portfolio) is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act), which is organized as a business trust under the laws of the Commonwealth of Massachusetts. The Portfolio consists of twelve series, namely: The Guardian Park Avenue Fund (GPAF); The Guardian UBS Large Cap Value Fund (GULCVF); The Guardian Park Avenue Small Cap Fund (GPASCF); The Guardian UBS Small Cap Value Fund (GUSCVF); The Guardian Asset Allocation Fund (GAAF); The Guardian S&P 500 Index Fund (GSP500F); The Guardian Baillie Gifford International Fund (GBGIF); The Guardian Baillie Gifford Emerging Markets Fund (GBGEMF); The Guardian Investment Quality Bond Fund (GIQBF); The Guardian High Yield Bond Fund (GHYBF); The Guardian Tax-Exempt Fund (GTEF); and The Guardian Cash Management Fund (GCMF). The series are collectively referred to herein as the "Funds". The Portfolio has added a new series, effective July 30, 2003: The Guardian Low Duration Bond Fund (GLDBF). GLDBF had not commenced operations as of June 30, 2003. On February 3, 2003, GULCVF and GUSCVF commenced operations. GULCVF sold 937,500 shares for each of Class A, Class B, Class C and Class K shares to The Guardian Life Insurance Company of America (Guardian Life) for $9,375,000 each. GUSCVF sold 437,500 shares for each of Class A, Class B, Class C and Class K shares to Guardian Life for $4,375,000 each. The Funds offer up to five classes of shares: Class A, Class B, Class C, Class K and the Institutional Class. Each of the Funds offers Class A shares. Class A shares are sold with an initial sales load of up to 4.50% and an administrative fee of up to .25% on an annual basis of the Funds' average daily net assets. Class B shares are offered by all of the Funds, except for GTEF. Class B shares are sold without an initial sales load but are subject to a 12b-1 fee of .75% and an administrative fee of .25% on an annual basis of the Funds' Class B average daily net assets, and a contingent deferred sales load (CDSL) of up to 3% imposed on certain redemptions. Each of the Funds offers Class C shares. Class C shares are sold without an initial sales load but are subject to a 12b-1 fee of .75% and an administrative fee of .25% on an annual basis of the Funds' Class C average daily net assets, and a CDSL of up to 1% imposed on certain redemptions. Class K shares are offered by all of the Funds, except for GTEF. Class K shares are sold without an initial sales load but are subject to a 12b-1 fee of .40% and an administrative fee of .25% on an annual basis of the Funds' Class K average daily net assets, and a CDSL of up to 1% imposed on certain redemptions. Institutional Class shares are offered by GPAF, GPASCF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF and GHYBF. As of June 30, 2003, none of the Funds had issued Institutional Class shares. Institutional Class shares are offered at net asset value, without an initial or contingent deferred sales load. All classes of shares for each Fund represent interests in the same portfolio of investments, have the same rights and are generally identical in all respects except that each class bears its separate distribution and certain class expenses, and has exclusive voting rights with respect to any matter to which a separate vote of any class is required. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (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 revenues and expenses during the reporting period. Actual results could differ from those estimates. 69 Significant accounting policies of the Funds are as follows: Investments Securities listed on domestic or foreign securities exchanges are valued at the last sales price of such exchanges, or if no sale occurred, at the mean of the bid and asked prices. Securities that are traded on the NASDAQ National Securities Market are valued at the NASDAQ Official Closing Price. Securities traded in the over-the-counter market are valued using the last sale price, when available. Otherwise, over-the-counter securities are valued at the mean between the bid and asked prices or yield equivalents as obtained from one or more dealers that make a market in the securities. In GAAF, investments in the underlying Funds 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 Trustees, certain debt securities may be valued each business day by an independent pricing service (Service). Debt securities for which quoted bid prices are readily available and representative of the bid side of the market, in the judgement of the Service, are valued at the bid price, except for GTEF. In GTEF, debt securities are valued at the mean between the bid and asked prices obtained by the Service. Other debt securities that are valued by the Service are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Other securities, including securities for which market quotations are not readily available (such as certain mortgage-backed securities and restricted securities) are valued at fair value as determined in good faith by or under the direction of the Funds' Board of Trustees. Repurchase agreements are carried at cost which approximates market value (see Note 5). Short-term securities held by the Funds are valued on an amortized cost basis which approximates market value but does not take into account unrealized gains and losses. GCMF values its investments based on amortized cost in accordance with Rule 2a-7 under the 1940 Act. Investing outside of the U.S. may involve certain considerations and risks not typically associated with domestic investments, including the possibility of political and economic unrest and different levels of governmental supervision and regulation of foreign securities markets. Investment transactions are recorded on the date of purchase or sale. Security gains or losses are determined on an identified cost basis. Interest income, including amortization/accretion of premium/ discount, is accrued daily. Dividend income is recorded on the ex-dividend date. All income, expenses (other than class-specific expenses) and realized and unrealized gains or losses are allocated daily to each class of shares based upon the relative value of shares of each class. Class-specific expenses, which include any items that are specifically attributed to a particular class, are charged directly to such class. For the six months ended June 30, 2003, distribution, administrative and transfer agent fees were the only class-specific expenses. Foreign Currency Translation GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GBGIF, GBGEMF and GHYBF are permitted to buy international securities that are not U.S. dollar denominated. Their books and records are maintained in U.S. dollars as follows: (1) The foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated into U.S. dollars at the current rate of exchange. (2) 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: Realized foreign exchange gains and losses, which result from changes in foreign exchange rates between the date on which a Fund earns dividends and interest or pays foreign withholding taxes or other expenses and the date on which U.S. dollar equivalent amounts are actually received or paid, are included in net realized 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 or 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 GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GBGIF, GBGEMF and GHYBF 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 70 purposes as unrealized gains or losses on foreign currency related transactions by the Fund. When forward contracts are closed, the Fund 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. The Funds will not enter into a forward foreign currency contract if such contract would obligate the applicable Fund to deliver an amount of foreign currency in excess of the value of the Funds' portfolio securities or other assets denominated in that currency. Futures Contracts GULCVF, GUSCVF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF, GHYBF and GTEF may enter into financial futures contracts for the delayed delivery of securities, currency or contracts based on financial indices at a fixed price on a future date. In entering into such contracts, the Funds are required to deposit either in cash or securities an amount equal to a certain percentage of the contract amount. Subsequent payments are made or received by the Funds each day, depending on the daily fluctuations in the value of the underlying security, and are recorded for financial statement purposes as variation margins by the Funds. The daily changes in the variation margin are recognized as unrealized gains or losses by the Funds. The Funds' investments in financial futures contracts are designed to hedge against anticipated future changes in interest or exchange rates or securities prices. In addition, GAAF may enter into financial futures contracts for non-hedging purposes. Should interest or exchange rates or securities prices or prices of futures contracts move unexpectedly, the Funds 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 accrued daily and are paid monthly for GIQBF, GHYBF and GTEF, and declared and paid semi-annually for GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GSP500F, GBGIF and GBGEMF. Net realized short-term and long-term capital gains for these Funds will be distributed at least annually. Dividends from GCMF's net investment income, which includes any net realized capital gains or losses, are declared and accrued daily and paid monthly on the last business day of each month. All dividends and distributions 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. Taxes Each Fund 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 GBGIF and GBGEMF have been provided for in accordance with the applicable country's tax rules and rates. Expense Reductions GTEF has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the Fund's expenses. During the period, GTEF's custodian fees were reduced by $14,847 under this arrangement. GTEF could have employed the uninvested assets to produce income if GTEF had not entered into such arrangement. Reclassification of Capital Accounts The treatment for financial statement purposes of distributions made during the year from net investment income and net realized gains may differ from their ultimate treatment for federal income tax purposes. These differences primarily are caused by differences in the timing of the recognition of certain components of income or capital 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 will have no effect on net assets, results of operations, or net asset value per share of the Fund. NOTE 2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO OR FROM RELATED PARTIES Guardian Investor Services LLC (GIS), an indirect wholly-owned subsidiary of Guardian Life, provides investment advisory services to each of the Funds (except GBGIF and GBGEMF). Fees for investment advisory services are at an annual rate of .50% of the average daily net assets of each Fund, except for GPASCF, GSP500F and GHYBF, which pay GIS an annual rate of .75%, .25% and .60%, respectively, of their average daily net assets. GAAF is subject to a contractual annual advisory fee of .65% of its average daily net assets. However, GIS has agreed to a waiver of .15% of GAAF's annual advisory fee when GAAF is operated as a "fund of funds" so that GAAF's effective advisory fee is .50% of its average daily net assets. There are no duplicative advisory and administrative service fees charged to GAAF on assets invested in other 71 Guardian Funds. Under an SEC exemptive order, advisory and administrative fees are paid at the underlying Fund level. GULCVF pays investment advisory fees to GIS at an annual rate of .83% of its average daily net assets. GUSCVF pays investment advisory fees to GIS at an annual rate of 1.00% of its average daily net assets for the first $50 million and an annual rate of .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 GULCVF and GUSCVF. 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 .43% of GULCVF's average daily net assets and at an annual rate of .60% for the first $50 million and at an annual rate of .55% in excess of $50 million of GUSCVF's average daily net assets. Payment of sub-investment advisory fees does not represent a separate or additional expense to GULCVF or GUSCVF. For the six months ended June 30, 2003, GIS voluntarily assumed a portion of the ordinary operating expenses (excluding interest expense associated with reverse repurchase agreements and securities lending) that exceeded a percentage of the average daily net assets of the respective Funds, by class, as follows:
FUND CLASS A CLASS B CLASS C CLASS K ---- ------- ------- ------- ------- GSP500F .53% 1.28% 1.28% 0.93% GIQBF .85% 1.60% 1.60% 1.25% GHYBF .85% 1.60% 1.60% 1.25% GTEF .85% N/A 1.60% N/A GCMF .85% 1.60% 1.60% 1.25%
For the six months ended June 30, 2003, GIS voluntarily assumed a portion of certain Funds' expenses based on their respective average daily net assets as follows:
- --------------------------------------------------------- GSP500F* - --------------------------------------------------------- CLASS A CLASS B CLASS C CLASS K ------- ------- ------- ------- Ordinary Operating Expenses .27% .27% .27% .23% 12b-1 Fees -- .40% .46% -- ---- ---- ---- ---- .27% .67% .73% .23% ==== ==== ==== ====
- --------------------------------------------------------- GIQBF* - --------------------------------------------------------- CLASS A CLASS B CLASS C CLASS K ------- ------- ------- ------- Ordinary Operating Expenses .09% .09% .09% .04% 12b-1 Fees -- .16% .24% -- ---- ---- ---- ---- .09% .25% .33% .04% ==== ==== ==== ====
- --------------------------------------------------------- GHYBF* - --------------------------------------------------------- CLASS A CLASS B CLASS C CLASS K ------- ------- ------- ------- Ordinary Operating Expenses .40% .40% .40% .31% 12b-1 Fees -- .31% .30% -- ---- ---- ---- ---- .40% .71% .70% .31% ==== ==== ==== ====
- --------------------------------------------------------- GTEF* - --------------------------------------------------------- CLASS A CLASS C ------- ------- Ordinary Operating Expenses .09% .09% 12b-1 Fees -- .27% ---- ---- .09% .36% ==== ====
- --------------------------------------------------------- GCMF* - --------------------------------------------------------- CLASS A CLASS B CLASS C ------- ------- ------- Administrative Fees .03% .14% .03% ==== ==== ==== * Annualized.
For the six months ended June 30, 2003 GIS voluntarily assumed $194,562, $123,941, $149,601, $40,285 and $110,188 of the ordinary operating expenses of GSP500F, GIQBF, GHYBF, GTEF and GCMF, respectively. The Portfolio, on behalf of GBGIF and GBGEMF, has an investment management agreement with Guardian Baillie Gifford Limited (GBG), a Scottish corporation owned by The Guardian Insurance & Annuity Company, Inc. (GIAC), a wholly-owned subsidiary of Guardian Life and Baillie Gifford Overseas Limited (BG Overseas). GBG is responsible for the overall investment management of GBGIF and GBGEMF's portfolios, subject to the supervision of the Portfolio's Board of Trustees. GBG has entered into a sub-investment management agreement with BG Overseas pursuant to which BG Overseas is responsible for the day-to-day management of GBGIF and GBGEMF. GBG continually monitors and evaluates the performance of BG Overseas. As compensation for its services, GBGIF and GBGEMF pay GBG annual investment management fees of .80% and 1.00%, respectively, of their respective average daily net assets. One half of these fees is payable by GBG to BG Overseas for its services. Payment of the sub-investment management fee does not represent a separate or additional expense to GBGIF or GBGEMF. The Guardian Fund Complex pays trustees who are not "interested persons" (as defined in the 1940 Act) fees consisting of a $5,000 per meeting and an annual retainer of $30,500, allocated among all funds in the Guardian Fund Complex based on 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 relative average daily net assets. GIS pays compensation to certain trustees who are interested persons. Certain officers and trustees of the Funds are affiliated with GIS. 72 Park Avenue Securities LLC (PAS), a wholly-owned subsidiary of GIAC and an affiliate of GIS distributes the Portfolio's shares as a retail broker-dealer. For the six months ended June 30, 2003, PAS received $168,991 for brokerage commissions from the Portfolio. Administrative Services Agreement Pursuant to the Administrative Services Agreement adopted by the Funds on behalf of the Class A, Class B, Class C and Class K shares, each of the Funds, except GPAF, pays GIS an administrative service fee at an annual rate of .25% of the Funds' average daily net assets. GPAF pays this fee to GIS at an annual rate of up to .25% of the average daily net assets for which a "dealer of record" has been designated. For the six months ended June 30, 2003, GPAF Class A shares paid GIS an annualized rate of .19% of its average daily net assets pursuant to the Administrative Services Agreement. NOTE 3. UNDERWRITING AGREEMENT AND DISTRIBUTION PLAN The Portfolio has entered into an Underwriting Agreement with GIS pursuant to which GIS serves as the principal underwriter for shares of the Funds. For the six months ended June 30, 2003, aggregate front-end sales charges for the sale of Class A shares paid to GIS were as follows:
FUND COMMISSIONS FUND COMMISSIONS ---- ----------- ---- ----------- GPAF $19,858 GBGEMF $ 166 GPASCF 1,503 GIQBF 2,356 GAAF 300 GHYBF 3,416 GSP500F 763 GTEF 1,917 GBGIF 648
Under Distribution Plans adopted by the Portfolio pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), each Fund is authorized to pay a monthly 12b-1 fee for certain classes of shares at an annual rate of .75% of average daily net assets of the Fund's Class B and Class C shares and .40% of average daily net assets of the Fund's Class K shares as compensation for distribution-related services provided to the Class B, Class C and Class K shares of those Funds. GIS is entitled to retain any CDSL imposed on certain Class B, Class C and Class K share redemptions. For the six months ended June 30, 2003, such charges on Class B, Class C and Class K were as follows:
FUND CLASS B CLASS C CLASS K ---- -------- ------- ------- GPAF.................... $135,849 $ 362 -- GPASCF.................. 10,757 118 -- GAAF.................... 26,654 1,009 -- GSP500F................. 3,896 181 $ 6 GBGIF................... 2,485 70 4 GBGEMF.................. 1,060 91 -- GIQBF................... 6,497 2,237 6 GHYBF................... 2,212 -- -- GTEF.................... -- 222 -- GCMF.................... 32,097 -- 2,378
NOTE 4. INVESTMENT TRANSACTIONS Purchases and proceeds from sales of securities (excluding short-term securities) for the six months ended June 30, 2003 were as follows: - ----------------------------------------------------- GPAF GULCVF - ----------------------------------------------------- Purchases $437,852,541 $77,613,970 Proceeds 537,633,834 4,081,054 - ----------------------------------------------------- GPASCF GUSCVF - ----------------------------------------------------- Purchases $ 71,033,780 $45,036,200 Proceeds 73,191,326 10,633,854 - ----------------------------------------------------- GAAF GSP500F - ----------------------------------------------------- Purchases $ 275,000 $ 3,003,055 Proceeds 9,809,701 1,609,549 - ----------------------------------------------------- GBGIF GBGEMF - ----------------------------------------------------- Purchases $ 11,914,836 $14,920,507 Proceeds 17,556,594 16,027,767 - ----------------------------------------------------- GIQBF GHYBF - ----------------------------------------------------- Purchases $320,847,269 $49,028,376 Proceeds 292,761,133 41,075,500 - ----------------------------------------------------- GTEF - ----------------------------------------------------- Purchases $ 21,097,788 Proceeds 52,870,742 - -----------------------------------------------------
The cost of investments owned at June 30, 2003 for federal income tax purposes was substantially the same as the cost for financial reporting purposes for the Funds. The gross unrealized appreciation and depreciation of investments excluding foreign currency and futures at June 30, 2003, were as follows: GPAF GULCVF ------------ ------------ Appreciation $103,538,222 $ 11,647,395 (Depreciation) (63,396,885) (561,274) ------------ ------------ NET UNREALIZED APPRECIATION $ 40,141,337 $ 11,086,121 ============ ============ GPASCF GUSCVF ------------ ------------ Appreciation $ 25,947,645 $ 5,343,545 (Depreciation) (2,376,363) (230,915) ------------ ------------ NET UNREALIZED APPRECIATION $ 23,571,282 $ 5,112,630 ============ ============ GAAF GSP500F ------------ ------------ Appreciation $ 2,933,491 $ 12,903,287 (Depreciation) (35,539,702) (35,901,587) ------------ ------------ NET UNREALIZED DEPRECIATION $(32,606,211) $(22,998,300) ============ ============ GBGIF GBGEMF ------------ ------------ Appreciation $ 6,760,952 $ 7,723,139 (Depreciation) (5,642,159) (2,463,041) ------------ ------------ NET UNREALIZED APPRECIATION $ 1,118,793 $ 5,260,098 ============ ============
73 GIQBF GHYBF ------------ ------------ Appreciation $ 8,793,972 $ 4,723,877 (Depreciation) (122,673) (666,177) ------------ ------------ NET UNREALIZED APPRECIATION $ 8,671,299 $ 4,057,700 ============ ============ GTEF ------------ Appreciation $ 6,193,428 (Depreciation) (42,059) ------------ NET UNREALIZED APPRECIATION $ 6,151,369 ============
NOTE 5. REPURCHASE AGREEMENTS The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities. Repurchase agreements are fully collateralized (including the interest earned thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the value of the repurchase price plus accrued interest, the applicable Fund will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the applicable Fund maintains the right to sell the collateral and may claim any resulting loss against the seller. NOTE 6. REVERSE REPURCHASE AGREEMENTS GAAF, GIQBF and GHYBF may enter into reverse repurchase agreements with banks or third party broker-dealers to borrow short-term funds. Interest on the value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time GAAF, GIQBF and GHYBF enter into a reverse repurchase agreement, the Funds establish and segregate 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 GAAF, GIQBF and GHYBF may be unable to deliver the securities when the Funds seek to repurchase them. NOTE 7. DOLLAR ROLL TRANSACTIONS GAAF, GIQBF and GHYBF may enter into dollar roll transactions with financial institutions to take advantage of opportunities in the mortgage market. A dollar roll transaction involves a sale by the Fund of securities that it holds with an agreement by the Fund to repurchase similar securities at an agreed upon price and date. The securities repurchased will bear the same interest as those sold, but generally will be collateralized at the time of delivery by different pools of mortgages 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 GAAF, GIQBF and GHYBF may be unable to deliver the securities when the Funds seek to repurchase them. NOTE 8. SHARES OF BENEFICIAL INTEREST There is an unlimited number of $0.01 par value shares of beneficial interest authorized, divided into five classes, designated as Class A, Class B, Class C, Class K and Institutional Class shares. As of June 30, 2003: (i) GPAF, GPASCF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF and GHYBF offered all five classes; (ii) GTEF offered Class A and Class C shares; and (iii) GULCVF, GUSCVF and GCMF offered Class A, Class B, Class C and Class K shares. Through June 30, 2003, no Institutional Class shares of the Funds were sold. 74 Transactions in shares of beneficial interest were as follows: / / THE GUARDIAN PARK AVENUE FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 1,188,685 3,071,277 $ 29,853,209 $ 87,019,350 Shares issued in reinvestment of dividends 259,157 144,059 7,134,249 4,193,466 Shares repurchased (4,793,941) (14,071,395) (121,188,910) (391,653,154) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (3,346,099) (10,856,059) $ (84,201,452) $ (300,440,338) - --------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold 136,368 316,116 $ 3,358,194 $ 8,756,755 Shares repurchased (739,644) (2,232,897) (17,754,657) (59,546,800) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (603,276) (1,916,781) $ (14,396,463) $ (50,790,045) - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 10,609 51,819 $ 252,288 $ 1,532,408 Shares repurchased (15,073) (51,896) (356,731) (1,335,406) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) (4,464) (77) $ (104,443) $ 197,002 - --------------------------------------------------------------------------------------------------------------------------------- CLASS K Shares sold 2,400 4,015 $ 61,086 $ 103,216 Shares issued in reinvestment of dividends 755 -- 20,781 -- Shares repurchased (7) (20) (176) (495) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 3,148 3,995 $ 81,691 $ 102,721 - ---------------------------------------------------------------------------------------------------------------------------------
/ / THE GUARDIAN UBS LARGE CAP VALUE FUND
Period from Period from February 3, 2003+ February 3, 2003+ to June 30,2003 to June 30,2003 (Unaudited) (Unaudited) - ---------------------------------------------------------------------------------------------------------- Shares Amount - ---------------------------------------------------------------------------------------------------------- CLASS A Shares sold 1,922,046 $ 18,966,116 Shares issued in reinvestment of dividends 6,061 69,880 - ---------------------------------------------------------------------------------------------------------- NET INCREASE 1,928,107 $ 19,035,996 - ---------------------------------------------------------------------------------------------------------- CLASS B Shares sold 1,921,589 $ 18,951,853 Shares issued in reinvestment of dividends 2,226 25,664 - ---------------------------------------------------------------------------------------------------------- NET INCREASE 1,923,815 $ 18,977,517 - ---------------------------------------------------------------------------------------------------------- CLASS C Shares sold 1,902,181 $ 18,752,050 Shares issued in reinvestment of dividends 2,211 25,489 - ---------------------------------------------------------------------------------------------------------- NET INCREASE 1,904,392 $ 18,777,539 - ---------------------------------------------------------------------------------------------------------- CLASS K Shares sold 1,902,174 $ 18,751,934 Shares issued in reinvestment of dividends 4,207 48,505 - ---------------------------------------------------------------------------------------------------------- NET INCREASE 1,906,381 $ 18,800,439 - ----------------------------------------------------------------------------------------------------------
+ Commencement of operations. 75 / / THE GUARDIAN PARK AVENUE SMALL CAP FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 633,483 2,782,741 $ 8,633,861 $ 42,101,323 Shares repurchased (1,057,650) (3,255,243) (14,290,133) (46,439,000) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (424,167) (472,502) $ (5,656,272) $ (4,337,677) - --------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold 33,934 217,932 $ 445,376 $ 3,217,947 Shares repurchased (99,822) (240,199) (1,238,090) (3,301,687) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (65,888) (22,267) $ (792,714) $ (83,740) - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 2,338 21,118 $ 29,727 $ 298,183 Shares repurchased (1,386) (6,407) (17,093) (87,676) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 952 14,711 $ 12,634 $ 210,507 - --------------------------------------------------------------------------------------------------------------------------------- CLASS K Shares sold 2,118 3,317 $ 27,899 $ 45,210 Shares repurchased (4) -- (43) -- - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 2,114 3,317 $ 27,856 $ 45,210 - ---------------------------------------------------------------------------------------------------------------------------------
/ / THE GUARDIAN UBS SMALL CAP VALUE FUND
Period from Period from February 3, 2003+ February 3, 2003+ to June 30,2003 to June 30,2003 (Unaudited) (Unaudited) - ------------------------------------------------------------------------------------------------------------ Shares Amount - ------------------------------------------------------------------------------------------------------------ CLASS A Shares sold 903,488 $ 8,911,126 - ------------------------------------------------------------------------------------------------------------ NET INCREASE 903,488 $ 8,911,126 - ------------------------------------------------------------------------------------------------------------ CLASS B Shares sold 898,471 $ 8,840,497 - ------------------------------------------------------------------------------------------------------------ NET INCREASE 898,471 $ 8,840,497 - ------------------------------------------------------------------------------------------------------------ CLASS C Shares sold 890,496 $ 8,767,328 Shares repurchased (1,361) (15,799) - ------------------------------------------------------------------------------------------------------------ NET INCREASE 889,135 $ 8,751,529 - ------------------------------------------------------------------------------------------------------------ CLASS K Shares sold 889,103 $ 8,751,228 Shares repurchased (2) (18) - ------------------------------------------------------------------------------------------------------------ NET INCREASE 889,101 $ 8,751,210 - ------------------------------------------------------------------------------------------------------------
+ Commencement of operations. 76 / / THE GUARDIAN ASSET ALLOCATION FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 438,902 1,524,801 $ 3,842,134 $ 14,387,848 Shares issued in reinvestment of dividends 186,848 257,058 1,767,587 2,516,751 Shares repurchased (1,776,067) (4,314,488) (15,127,758) (39,879,710) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (1,150,317) (2,532,629) $ (9,518,037) $ (22,975,111) - --------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold 72,668 239,318 $ 636,110 $ 2,266,828 Shares issued in reinvestment of dividends 22,771 29,270 215,405 286,492 Shares repurchased (425,500) (972,783) (3,600,141) (8,982,368) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (330,061) (704,195) $ (2,748,626) $ (6,429,048) - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 3,227 56,416 $ 29,021 $ 562,704 Shares issued in reinvestment of dividends 3,114 3,956 29,461 38,735 Shares repurchased (23,222) (39,534) (196,044) (359,141) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) (16,881) 20,838 $ (137,562) $ 242,298 - --------------------------------------------------------------------------------------------------------------------------------- CLASS K Shares sold 13,042 13,246 $ 113,071 $ 112,101 Shares issued in reinvestment of dividends 8,578 9,429 81,064 92,412 Shares repurchased (8) -- (77) -- - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 21,612 22,675 $ 194,058 $ 204,513 - ---------------------------------------------------------------------------------------------------------------------------------
/ / THE GUARDIAN S&P 500 INDEX FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 536,606 1,830,415 $ 3,380,589 $ 11,566,863 Shares issued in reinvestment of dividends 6,093 86,617 41,554 605,220 Shares repurchased (447,491) (20,356,324) (2,644,619) (118,000,511) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) 95,208 (18,439,292) $ 777,524 $ (105,828,428) - --------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold 120,725 342,017 $ 758,789 $ 2,343,329 Shares issued in reinvestment of dividends 2,821 4,430 19,223 27,713 Shares repurchased (94,380) (173,276) (560,883) (1,146,882) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 29,166 173,171 $ 217,129 $ 1,224,160 - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 81,609 187,627 $ 506,477 $ 1,400,528 Shares issued in reinvestment of dividends 2,161 3,553 14,716 22,207 Shares repurchased (10,173) (130,517) (60,536) (874,323) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 73,597 60,663 $ 460,657 $ 548,412 - --------------------------------------------------------------------------------------------------------------------------------- CLASS K Shares sold 17,893 6,165 $ 110,813 $ 36,792 Shares issued in reinvestment of dividends 3,213 6,734 21,911 43,052 Shares repurchased (106) -- (671) -- - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 21,000 12,899 $ 132,053 $ 79,844 - ---------------------------------------------------------------------------------------------------------------------------------
77 / / THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 7,011,157 26,379,926 $ 62,634,145 $ 268,688,195 Shares issued in reinvestment of dividends 5,545 -- 54,899 -- Shares repurchased (7,563,916) (28,286,267) (68,579,366) (288,753,391) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (547,214) (1,906,341) $ (5,890,322) $ (20,065,196) - --------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold 18,756 552,901 $ 151,676 $ 4,895,940 Shares repurchased (47,476) (664,735) (388,652) (6,002,347) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (28,720) (111,834) $ (236,976) $ (1,106,407) - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 1,002 94,458 $ 8,933 $ 753,032 Shares repurchased (3,089) (94,502) (24,844) (763,931) - --------------------------------------------------------------------------------------------------------------------------------- NET DECREASE (2,087) (44) $ (15,911) $ (10,899) - --------------------------------------------------------------------------------------------------------------------------------- CLASS K Shares sold 2,024 209 $ 17,509 $ 1,840 Shares repurchased (49) -- (452) -- - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 1,975 209 $ 17,057 $ 1,840 - ---------------------------------------------------------------------------------------------------------------------------------
/ / THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 1,359,451 2,084,844 $ 11,226,683 $ 19,196,380 Shares repurchased (1,469,367) (1,037,525) (12,298,507) (9,382,580) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) (109,916) 1,047,319 $ (1,071,824) $ 9,813,800 - --------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold 51,213 973,656 $ 420,903 $ 7,741,707 Shares repurchased (47,715) (937,516) (389,935) (7,477,413) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 3,498 36,140 $ 30,968 $ 264,294 - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 42,114 28,313 $ 350,725 $ 239,626 Shares repurchased (13,279) (5,667) (104,265) (44,448) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 28,835 22,646 $ 246,460 $ 195,178 - --------------------------------------------------------------------------------------------------------------------------------- CLASS K Shares sold 4,593 4,995 $ 36,609 $ 40,085 - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 4,593 4,995 $ 36,609 $ 40,085 - ---------------------------------------------------------------------------------------------------------------------------------
78 / / THE GUARDIAN INVESTMENT QUALITY BOND FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 2,820,005 11,341,936 $ 29,191,984 $ 113,553,764 Shares issued in reinvestment of dividends and distributions 268,055 517,494 2,796,905 5,207,398 Shares repurchased (2,160,726) (9,956,834) (22,502,338) (99,280,342) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 927,334 1,902,596 $ 9,486,551 $ 19,480,820 - --------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold 285,384 1,016,356 $ 2,974,387 $ 10,196,034 Shares issued in reinvestment of dividends and distributions 27,625 59,127 288,240 594,614 Shares repurchased (187,133) (519,717) (1,959,421) (5,196,692) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 125,876 555,766 $ 1,303,206 $ 5,593,956 - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 36,605 114,498 $ 379,474 $ 1,152,765 Shares issued in reinvestment of dividends and distributions 15,376 37,890 160,427 380,474 Shares repurchased (28,674) (28,439) (296,295) (286,467) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 23,307 123,949 $ 243,606 $ 1,246,772 - --------------------------------------------------------------------------------------------------------------------------------- CLASS K Shares sold 15,101 3,060 $ 157,378 $ 31,059 Shares issued in reinvestment of dividends and distributions 15,035 37,363 157,059 375,607 Shares repurchased (69) -- (720) -- - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 30,067 40,423 $ 313,717 $ 406,666 - ---------------------------------------------------------------------------------------------------------------------------------
/ / THE GUARDIAN HIGH YIELD BOND FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 1,067,520 1,022,945 $ 7,426,104 $ 7,149,700 Shares issued in reinvestment of dividends 205,563 398,176 1,432,912 2,727,625 Shares repurchased (674,747) (1,059,195) (4,805,292) (7,319,978) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 598,336 361,926 $ 4,053,724 $ 2,557,347 - --------------------------------------------------------------------------------------------------------------------------------- CLASS B Shares sold 72,751 141,649 $ 504,931 $ 961,254 Shares issued in reinvestment of dividends 42,231 85,305 293,758 584,043 Shares repurchased (37,011) (119,806) (255,476) (814,725) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 77,971 107,148 $ 543,213 $ 730,572 - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 36,782 4,786 $ 265,605 $ 32,953 Shares issued in reinvestment of dividends 40,768 82,282 283,519 563,430 Shares repurchased (34,744) (377) (250,158) (2,525) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 42,806 86,691 $ 298,966 $ 593,858 - --------------------------------------------------------------------------------------------------------------------------------- CLASS K Shares sold 1,712 17 $ 12,042 $ 113 Shares issued in reinvestment of dividends 44,132 88,726 307,297 607,957 - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 45,844 88,743 $ 319,339 $ 608,070 - ---------------------------------------------------------------------------------------------------------------------------------
79 / / THE GUARDIAN TAX-EXEMPT FUND
Six Months Six Months Ended Year Ended Ended Year Ended June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002 (Unaudited) (Audited) (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------------------------------- Shares Amount - --------------------------------------------------------------------------------------------------------------------------------- CLASS A Shares sold 462,010 2,805,928 $ 4,883,326 $ 29,029,828 Shares issued in reinvestment of dividends and distributions 150,731 580,929 1,603,578 6,051,465 Shares repurchased (3,964,605) (3,227,880) (41,420,765) (33,353,923) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) (3,351,864) 158,977 $ (34,933,861) $ 1,727,370 - --------------------------------------------------------------------------------------------------------------------------------- CLASS C Shares sold 29,090 39,077 $ 310,681 $ 417,830 Shares issued in reinvestment of dividends and distributions 14,861 43,565 158,364 453,798 Shares repurchased (11,494) (26,469) (120,753) (285,324) - --------------------------------------------------------------------------------------------------------------------------------- NET INCREASE 32,457 56,173 $ 348,292 $ 586,304 - ---------------------------------------------------------------------------------------------------------------------------------
/ / THE GUARDIAN CASH MANAGEMENT FUND
Six Months Ended Year Ended June 30, 2003 December 31, 2002 (Unaudited) (Audited) - --------------------------------------------------------------------------------------------------------- Shares @ $1 per share - --------------------------------------------------------------------------------------------------------- CLASS A Shares sold 109,410,975 537,843,107 Shares issued in reinvestment of dividends 1,548,012 5,976,666 Shares repurchased (156,859,105) (491,705,217) - --------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) (45,900,118) 52,114,556 - --------------------------------------------------------------------------------------------------------- CLASS B Shares sold 3,803,910 25,578,371 Shares issued in reinvestment of dividends 14,224 34,808 Shares repurchased (5,246,964) (22,812,305) - --------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) (1,428,830) 2,800,874 - --------------------------------------------------------------------------------------------------------- CLASS C Shares sold 144,984 942,599 Shares issued in reinvestment of dividends 7,863 19,777 Shares repurchased (343,701) (123,627) - --------------------------------------------------------------------------------------------------------- NET INCREASE/(DECREASE) (190,854) 838,749 - --------------------------------------------------------------------------------------------------------- CLASS K Shares sold 1,316,643 393,942 Shares issued in reinvestment of dividends 8,022 45,312 Shares repurchased (897,729) (64,395) - --------------------------------------------------------------------------------------------------------- NET INCREASE 426,936 374,859 - ---------------------------------------------------------------------------------------------------------
NOTE 9. LINE OF CREDIT A $100,000,000 line of credit available to all of the Funds and other related Guardian Funds has been established with State Street Bank and Trust Company and Bank of Montreal. The rate of interest charged on any borrowing is based upon the prevailing Federal Funds rate at the time of the loan plus .50% calculated on a 360 day basis per annum. For the six months ended June 30, 2003, 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 .08% per annum on the average daily unused portion of the revolving credit. 80 NOTE 10. INVESTMENTS IN AFFILIATES(1) A summary of GAAF transactions in affiliated securities during the six months ended June 30, 2003 is set forth below:
- ----------------------------------------------------------------------------------------------------------------------------- Balance of Balance of Dividends Shares Gross Shares Included Held Purchases Gross Held Value in December 31, and Sales and June 30, June 30, Dividend Name of Issuer 2002 Additions Reductions 2003 2003 Income - ----------------------------------------------------------------------------------------------------------------------------- Non-Controlled Affiliates The Guardian Investment Quality Bond Fund, Class A 2,479,290 -- -- 2,479,290 $ 26,106,921 $436,838 - ----------------------------------------------------------------------------------------------------------------------------- Majority-Owned Subsidiary The Guardian S&P 500 Index Fund, Class A 15,466,689 40,801 230,179 15,277,311 102,205,208 504,328 - ----------------------------------------------------------------------------------------------------------------------------- Net Realized Gains from Net Realized Underlying Loss Name of Issuer Funds on Sales - ---------------------------------------------- --------------------------- Non-Controlled Affiliates The Guardian Investment Quality Bond Fund, Class A $42,644 -- - --------------------------------------------------------------------------- Majority-Owned Subsidiary The Guardian S&P 500 Index Fund, Class A -- $(652,564) - ---------------------------------------------------------------------------
(1) Affiliated issuers, as defined in the 1940 Act, include issuers in which the Fund held 5% or more of the outstanding voting securities. Majority-owned subsidiaries include issuers on which the Fund held 50% or more of the outstanding voting securities. 81 FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
NET REALIZED & UNREALIZED GAIN/(LOSS) ON INVESTMENTS INCREASE/ NET ASSET NET AND FOREIGN (DECREASE) DIVIDENDS VALUE, INVESTMENT CURRENCY FROM FROM NET BEGINNING INCOME/ RELATED INVESTMENT INVESTMENT OF PERIOD (LOSS) TRANSACTIONS OPERATIONS INCOME ----------------------------------------------------------------- THE GUARDIAN PARK AVENUE FUND CLASS A: Six months ended 6/30/2003++........................ $25.03 $ 0.10 $ 2.01 $ 2.11 $(0.18) Year ended 12/31/2002............................... 32.00 0.17 (7.06) (6.89) (0.08) Year ended 12/31/2001............................... 41.18 0.12 (9.06) (8.94) (0.03) Year ended 12/31/2000............................... 59.42 (0.09) (10.57) (10.66) (0.00)+++ Year ended 12/31/1999............................... 51.88 0.13 15.04 15.17 (0.08) Year ended 12/31/1998............................... 46.12 0.35 9.38 9.73 (0.34) CLASS B: Six months ended 6/30/2003++........................ 23.99 (0.08) 1.97 1.89 -- Year ended 12/31/2002............................... 30.88 (0.20) (6.69) (6.89) -- Year ended 12/31/2001............................... 40.08 (0.23) (8.76) (8.99) -- Year ended 12/31/2000............................... 58.57 (0.43) (10.48) (10.91) -- Year ended 12/31/1999............................... 51.59 (0.31) 14.84 14.53 -- Year ended 12/31/1998............................... 46.02 (0.08) 9.28 9.20 -- CLASS C: Six months ended 6/30/2003++........................ 23.75 (0.08) 1.91 1.83 -- Year ended 12/31/2002............................... 30.64 (0.19) (6.70) (6.89) -- Year ended 12/31/2001............................... 39.85 (0.25) (8.75) (9.00) -- Period from 8/7/2000+ to 12/31/2000................. 58.01 (0.11) (12.59) (12.70) -- CLASS K: Six months ended 6/30/2003++........................ 24.96 0.04 2.02 2.06 (0.09) Year ended 12/31/2002............................... 31.93 0.05 (7.02) (6.97) -- Period from 5/15/2001+ to 12/31/2001................ 35.55 0.00 (3.41) (3.41) -- THE GUARDIAN UBS LARGE CAP VALUE FUND CLASS A: Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.03 1.35 1.38 (0.04) CLASS B: Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.00 1.34 1.34 (0.01) CLASS C: Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.00 1.34 1.34 (0.01) CLASS K: Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.02 1.34 1.36 (0.03) THE GUARDIAN PARK AVENUE SMALL CAP FUND CLASS A: Six months ended 6/30/2003++........................ 13.30 (0.04) 1.94 1.90 -- Year ended 12/31/2002............................... 15.74 (0.07) (2.37) (2.44) -- Year ended 12/31/2001............................... 16.93 (0.06) (1.13) (1.19) -- Year ended 12/31/2000............................... 17.48 (0.05) (0.37) (0.42) -- Year ended 12/31/1999............................... 12.80 (0.07) 4.75 4.68 -- Year ended 12/31/1998............................... 13.77 (0.03) (0.83) (0.86) -- CLASS B: Six months ended 6/30/2003++........................ 12.64 (0.10) 1.84 1.74 -- Year ended 12/31/2002............................... 15.10 (0.20) (2.26) (2.46) -- Year ended 12/31/2001............................... 16.39 (0.20) (1.09) (1.29) -- Year ended 12/31/2000............................... 17.06 (0.20) (0.34) (0.54) -- Year ended 12/31/1999............................... 12.61 (0.19) 4.64 4.45 -- Year ended 12/31/1998............................... 13.67 (0.15) (0.80) (0.95) -- CLASS C: Six months ended 6/30/2003++........................ 12.59 (0.11) 1.83 1.72 -- Year ended 12/31/2002............................... 15.07 (0.22) (2.26) (2.48) -- Year ended 12/31/2001............................... 16.39 (0.21) (1.11) (1.32) -- Period from 8/7/2000+ to 12/31/2000................. 19.37 (0.08) (2.77) (2.85) -- CLASS K: Six months ended 6/30/2003++........................ 13.15 (0.06) 1.93 1.87 -- Year ended 12/31/2002............................... 15.62 (0.11) (2.36) (2.47) -- Period from 5/15/2001+ to 12/31/2001................ 15.71 (0.07) (0.02) (0.09) --
+ Commencement of operations. ++ Unaudited. +++ Rounds to less than $0.01. 82
DISTRIBUTIONS FROM RATIOS/SUPPLEMENTAL DATA NET REALIZED ----------------------------------------------------------- GAIN ON NET INVESTMENTS NET ASSET NET ASSETS, INVESTMENT AND FOREIGN VALUE, END OF EXPENSES INCOME/(LOSS) PORTFOLIO CURRENCY RELATED END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER TRANSACTIONS PERIOD RETURN* (000'S OMITTED) NET ASSETS NET ASSETS RATE - -------------------------------------------------------------------------------------------------------- -- $26.96 8.41%(a) $1,116,490 0.88%(b) 0.67%(b) 36% -- 25.03 (21.56) 1,120,351 0.87 0.51 60 $(0.21) 32.00 (21.75) 1,779,818 0.83 0.31 143 (7.58) 41.18 (18.62) 2,589,059 0.79 (0.16) 108 (7.55) 59.42 30.25 3,334,722 0.77 0.24 74 (3.63) 51.88 21.30 2,990,767 0.78 0.72 55 -- 25.88 7.88(a) 165,055 1.85(b) (0.30)(b) 36 -- 23.99 (22.31) 167,471 1.83 (0.44) 60 (0.21) 30.88 (22.46) 274,761 1.75 (0.61) 143 (7.58) 40.08 (19.34) 431,206 1.67 (1.03) 108 (7.55) 58.57 29.13 507,764 1.67 (0.66) 74 (3.63) 51.59 20.16 389,489 1.70 (0.21) 55 -- 25.58 7.71(a) 6,224 2.15(b) (0.60)(b) 36 -- 23.75 (22.49) 5,884 2.07 (0.67) 60 (0.21) 30.64 (22.62) 7,594 1.96 (0.81) 143 (5.46) 39.85 (21.79)(a) 8,222 2.18(b) (1.29)(b) 108 -- 26.93 8.24(a) 6,290 1.20(b) 0.36(b) 36 -- 24.96 (21.83) 5,752 1.21 0.19 60 (0.21) 31.93 (9.63)(a) 7,229 1.22(b) 0.02(b) 143 -- 11.34 13.76(a) 21,858 1.58(b) 0.81(b) 6 -- 11.33 13.43(a) 21,788 2.33(b) 0.07(b) 6 -- 11.33 13.43(a) 21,569 2.33(b) 0.07(b) 6 -- 11.33 13.55(a) 21,606 1.87(b) 0.52(b) 6 -- 15.20 14.29(a) 121,352 1.29(b) (0.58)(b) 52 -- 13.30 (15.50) 111,803 1.25 (0.45) 108 -- 15.74 (7.03) 139,774 1.28 (0.37) 131 (0.13) 16.93 (2.35) 150,022 1.25 (0.31) 125 -- 17.48 36.56 119,032 1.34 (0.48) 92 (0.11) 12.80 (6.35) 127,525 1.32 (0.29) 63 -- 14.38 13.77(a) 18,608 2.25(b) (1.53)(b) 52 -- 12.64 (16.29) 17,189 2.19 (1.40) 108 -- 15.10 (7.87) 20,876 2.18 (1.27) 131 (0.13) 16.39 (3.11) 24,977 2.12 (1.18) 125 -- 17.06 35.29 22,430 2.23 (1.36) 92 (0.11) 12.61 (7.05) 22,122 2.17 (1.14) 63 -- 14.31 13.66(a) 6,633 2.43(b) (1.72)(b) 52 -- 12.59 (16.46) 5,824 2.40 (1.60) 108 -- 15.07 (8.05) 6,752 2.34 (1.43) 131 (0.13) 16.39 (14.67)(a) 7,033 2.22(b) (1.12)(b) 125 -- 15.02 14.22(a) 7,735 1.56(b) (0.84)(b) 52 -- 13.15 (15.81) 6,748 1.55 (0.75) 108 -- 15.62 (0.57)(a) 7,959 1.61(b) (0.77)(b) 131
* Excludes the effect of sales load. (a) Not annualized. (b) Annualized. 83 FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
NET REALIZED & UNREALIZED GAIN/(LOSS) ON INVESTMENTS INCREASE/ NET ASSET NET AND FOREIGN (DECREASE) DIVIDENDS VALUE, INVESTMENT CURRENCY FROM FROM NET BEGINNING INCOME/ RELATED INVESTMENT INVESTMENT OF PERIOD (LOSS) TRANSACTIONS OPERATIONS INCOME ----------------------------------------------------------------- THE GUARDIAN UBS SMALL CAP VALUE FUND CLASS A: Period from 2/3/2003+ to 6/30/2003++................ $10.00 $ 0.00 $ 1.51 $ 1.51 -- CLASS B: Period from 2/3/2003+ to 6/30/2003++................ 10.00 (0.03) 1.51 1.48 -- CLASS C: Period from 2/3/2003+ to 6/30/2003++................ 10.00 (0.03) 1.51 1.48 -- CLASS K: Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.00 1.50 1.50 -- THE GUARDIAN ASSET ALLOCATION FUND CLASS A: Six months ended 6/30/2003++........................ 8.45 0.06 0.92 0.98 $(0.16) Year ended 12/31/2002............................... 10.84 0.17 (2.38) (2.21) (0.18) Year ended 12/31/2001............................... 13.00 0.30 (1.61) (1.31) (0.18) Year ended 12/31/2000............................... 14.77 0.45 (0.29) 0.16 (0.44) Year ended 12/31/1999............................... 14.78 0.37 1.47 1.84 (0.37) Year ended 12/31/1998............................... 14.05 0.39 2.31 2.70 (0.43) CLASS B: Six months ended 6/30/2003++........................ 8.41 0.02 0.90 0.92 (0.07) Year ended 12/31/2002............................... 10.77 0.09 (2.37) (2.28) (0.08) Year ended 12/31/2001............................... 12.95 0.19 (1.59) (1.40) (0.11) Year ended 12/31/2000............................... 14.72 0.32 (0.27) 0.05 (0.33) Year ended 12/31/1999............................... 14.73 0.23 1.47 1.70 (0.23) Year ended 12/31/1998............................... 14.00 0.24 2.31 2.55 (0.28) CLASS C: Six months ended 6/30/2003++........................ 8.39 0.00 0.91 0.91 (0.04) Year ended 12/31/2002............................... 10.77 0.05 (2.38) (2.33) (0.05) Year ended 12/31/2001............................... 12.94 0.17 (1.64) (1.47) (0.03) Period from 8/7/2000+ to 12/31/2000................. 14.72 0.15 (0.78) (0.63) (0.23) CLASS K: Six months ended 6/30/2003++........................ 8.43 0.04 0.90 0.94 (0.11) Year ended 12/31/2002............................... 10.82 0.13 (2.39) (2.26) (0.13) Period from 5/15/2001+ to 12/31/2001................ 12.06 0.11 (0.68) (0.57) -- THE GUARDIAN S&P 500 INDEX FUND CLASS A: Six months ended 6/30/2003++........................ 6.04 0.04 0.64 0.68 (0.03) Year ended 12/31/2002............................... 7.90 0.10 (1.86) (1.76) (0.10) Year ended 12/31/2001............................... 9.07 0.06 (1.17) (1.11) (0.06) Period from 7/25/2000+ to 12/31/2000................ 10.06 0.03 (0.99) (0.96) (0.03) CLASS B: Six months ended 6/30/2003++........................ 6.03 0.01 0.65 0.66 (0.01) Year ended 12/31/2002............................... 7.88 0.02 (1.85) (1.83) (0.02) Year ended 12/31/2001............................... 9.05 0.01 (1.18) (1.17) (0.00)+++ Period from 7/25/2000+ to 12/31/2000................ 10.06 0.00 (1.01) (1.01) -- CLASS C: Six months ended 6/30/2003++........................ 6.03 0.01 0.64 0.65 (0.01) Year ended 12/31/2002............................... 7.88 0.02 (1.85) (1.83) (0.02) Year ended 12/31/2001............................... 9.05 0.01 (1.17) (1.16) (0.01) Period from 7/25/2000+ to 12/31/2000................ 10.06 0.00 (1.01) (1.01) -- CLASS K: Six months ended 6/30/2003++........................ 6.04 0.03 0.64 0.67 (0.02) Year ended 12/31/2002............................... 7.90 0.05 (1.86) (1.81) (0.05) Period from 5/15/2001+ to 12/31/2001................ 8.59 0.02 (0.69) (0.67) (0.02)
+ Commencement of operations. ++ Unaudited. +++ Rounds to less than $0.01. 84
DISTRIBUTIONS FROM RATIOS/SUPPLEMENTAL DATA NET REALIZED ----------------------------------------------------------------------------------- GAIN ON NET INVESTMENTS NET ASSET NET ASSETS, EXPENSES GAAF INVESTMENT AND FOREIGN VALUE, END OF EXPENSES WAIVED/ GROSS INCOME/(LOSS) PORTFOLIO CURRENCY RELATED END OF TOTAL PERIOD TO AVERAGE SUBSIDIZED EXPENSE TO AVERAGE TURNOVER TRANSACTIONS PERIOD RETURN* (000'S OMITTED) NET ASSETS(A) BY GIS RATIO(B) NET ASSETS RATE - ------------------------------------------------------------------------------------------------------------------------------ -- $11.51 15.10%(c) $ 10,399 2.19%(d) -- -- 0.10%(d) 32% -- 11.48 14.80(c) 10,311 2.93(d) -- -- (0.64)(d) 32 -- 11.48 14.80(c) 10,204 2.93(d) -- -- (0.63)(d) 32 -- 11.50 15.00(c) 10,227 2.35(d) -- -- (0.05)(d) 32 -- 9.27 11.51(c) 110,675 0.45(d) 0.76%(d) 1.09%(d) 1.12(d) 0 -- 8.45 (20.64) 110,593 0.42 0.73 1.04 1.60 4 $(0.67) 10.84 (10.23) 169,386 0.47 0.63 1.01 2.44 51 (1.49) 13.00 1.00 227,228 0.46 0.60 1.10 3.07 11 (1.48) 14.77 12.99 227,031 0.48 0.58 1.08 2.48 16 (1.54) 14.78 19.41 194,827 0.60 0.52 1.13 2.52 23 -- 9.26 10.95(c) 28,966 1.29(d) 0.76(d) 1.93(d) 0.30(d) 0 -- 8.41 (21.31) 29,064 1.25 0.73 1.87 0.78 4 (0.67) 10.77 (10.99) 44,813 1.28 0.63 1.82 1.62 51 (1.49) 12.95 0.26 51,024 1.28 0.60 1.91 2.29 11 (1.48) 14.72 12.09 40,914 1.31 0.58 1.91 1.66 16 (1.54) 14.73 18.32 27,545 1.48 0.52 2.02 1.70 23 -- 9.26 10.83(c) 6,988 1.56(d) 0.76(d) 2.20(d) 0.06(d) 0 -- 8.39 (21.70) 6,470 1.50 0.73 2.12 0.58 4 (0.67) 10.77 (11.48) 8,080 1.46 0.63 2.00 1.43 51 (0.92) 12.94 (4.18)(c) 8,544 1.49(d) 0.55(d) 2.07(d) 2.61(d) 11 -- 9.26 11.12(c) 6,930 0.69(d) 0.76(d) 1.33(d) 0.94(d) 0 -- 8.43 (21.05) 6,126 0.70 0.73 1.31 1.39 4 (0.67) 10.82 (4.85)(c) 7,619 0.75(d) 0.72(d) 1.37(d) 1.57(d) 51 -- 6.69 11.30(c) 111,592 0.53(d) 0.27(d) -- 1.25(d) 1 -- 6.04 (22.35) 100,129 0.53 0.13 -- 1.03 10 -- 7.90 (12.25) 276,645 0.53 0.10 -- 0.87 1 (0.00)(e) 9.07 (9.53)(c) 167,487 0.53(d) 0.21(d) -- 0.71(d) 4 -- 6.68 11.00(c) 9,574 1.28(d) 0.67(d) -- 0.50(d) 1 -- 6.03 (23.22) 8,472 1.28 0.52 -- 0.33 10 -- 7.88 (12.87) 9,705 1.28 0.47 -- 0.09 1 (0.00)(e) 9.05 (10.00)(c) 7,677 1.28(d) 0.47(d) -- (0.04)(d) 4 -- 6.67 10.83(c) 7,328 1.28(d) 0.73(d) -- 0.50(d) 1 -- 6.03 (23.21) 6,175 1.28 0.57 -- 0.33 10 -- 7.88 (12.87) 7,598 1.28 0.49 -- 0.09 1 (0.00)(e) 9.05 (10.00)(c) 7,296 1.28(d) 0.47(d) -- (0.04)(d) 4 -- 6.69 11.13(c) 6,478 0.93(d) 0.23(d) -- 0.85(d) 1 -- 6.04 (23.00) 5,722 0.93 0.10 -- 0.68 10 -- 7.90 (7.76)(c) 7,383 0.93(d) 0.15(d) -- 0.47(d) 1
* Excludes the effect of sales load. (a) After expenses subsidized by GIS and do not include the expenses of the underlying Funds. (b) Amounts include the expenses of the underlying Funds. (c) Not annualized. (d) Annualized. (e) Rounds to less than $0.01. 85 FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
NET REALIZED & UNREALIZED GAIN/(LOSS) ON INVESTMENTS INCREASE/ NET ASSET NET AND FOREIGN (DECREASE) DIVIDENDS VALUE, INVESTMENT CURRENCY FROM FROM NET BEGINNING INCOME/ RELATED INVESTMENT INVESTMENT OF PERIOD (LOSS) TRANSACTIONS OPERATIONS INCOME ----------------------------------------------------------------- THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND CLASS A: Six months ended 6/30/2003++........................ $ 8.90 $ 0.08 $ 0.65 $ 0.73 $(0.01) Year ended 12/31/2002............................... 11.09 0.06 (2.25) (2.19) -- Year ended 12/31/2001............................... 14.28 0.01 (3.20) (3.19) -- Year ended 12/31/2000............................... 23.36 (0.06) (5.52) (5.58) -- Year ended 12/31/1999............................... 18.41 0.01 6.68 6.69 -- Year ended 12/31/1998............................... 16.08 0.02 3.13 3.15 (0.01) CLASS B: Six months ended 6/30/2003++........................ 8.22 (0.03) 0.65 0.62 -- Year ended 12/31/2002............................... 10.38 (0.19) (1.97) (2.16) -- Year ended 12/31/2001............................... 13.54 (0.20) (2.96) (3.16) -- Year ended 12/31/2000............................... 22.61 (0.11) (5.46) (5.57) -- Year ended 12/31/1999............................... 17.97 (0.12) 6.47 6.35 -- Year ended 12/31/1998............................... 15.87 (0.09) 3.00 2.91 -- CLASS C: Six months ended 6/30/2003++........................ 8.24 0.00 0.63 0.63 -- Year ended 12/31/2002............................... 10.40 (0.09) (2.07) (2.16) -- Year ended 12/31/2001............................... 13.55 (0.12) (3.03) (3.15) -- Period from 8/7/2000+ to 12/31/2000................. 19.19 (0.09) (2.20) (2.29) -- CLASS K: Six months ended 6/30/2003++........................ 8.76 0.05 0.66 0.71 -- Year ended 12/31/2002............................... 10.94 (0.00) (2.18) (2.18) -- Period from 5/15/2001+ to 12/31/2001................ 12.96 (0.04) (1.98) (2.02) -- THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND CLASS A: Six months ended 6/30/2003++........................ 8.07 0.03 1.11 1.14 -- Year ended 12/31/2002............................... 8.45 0.01 (0.39) (0.38) -- Year ended 12/31/2001............................... 8.31 0.01 0.13 0.14 -- Year ended 12/31/2000............................... 11.13 (0.55) (2.05) (2.60) (0.22) Year ended 12/31/1999............................... 6.66 (0.07) 4.72 4.65 (0.18) Year ended 12/31/1998............................... 9.38 0.01 (2.73) (2.72) (0.00)+++ CLASS B: Six months ended 6/30/2003++........................ 7.55 (0.01) 1.02 1.01 -- Year ended 12/31/2002............................... 7.98 (0.10) (0.33) (0.43) -- Year ended 12/31/2001............................... 7.97 (0.10) 0.11 0.01 -- Year ended 12/31/2000............................... 10.65 0.08 (2.76) (2.68) -- Year ended 12/31/1999............................... 6.44 (0.27) 4.48 4.21 -- Year ended 12/31/1998............................... 9.30 (0.18) (2.68) (2.86) -- CLASS C: Six months ended 6/30/2003++........................ 7.56 (0.01) 1.03 1.02 -- Year ended 12/31/2002............................... 8.00 (0.09) (0.35) (0.44) -- Year ended 12/31/2001............................... 7.98 (0.09) 0.11 0.02 -- Period from 8/7/2000+ to 12/31/2000................. 9.92 (0.08) (1.86) (1.94) -- CLASS K: Six months ended 6/30/2003++........................ 7.97 0.02 1.09 1.11 -- Year ended 12/31/2002............................... 8.36 (0.03) (0.36) (0.39) -- Period from 5/15/2001+ to 12/31/2001................ 8.35 (0.06) 0.07 0.01 --
+ Commencement of operations. ++ Unaudited. +++ Rounds to less than $0.01. 86
DISTRIBUTIONS FROM RATIOS/SUPPLEMENTAL DATA NET REALIZED -------------------------------------------------------- DISTRIBUTIONS GAIN ON NET IN EXCESS INVESTMENTS NET ASSET NET ASSETS, INVESTMENT OF NET AND FOREIGN VALUE, END OF EXPENSES INCOME/(LOSS) PORTFOLIO INVESTMENT CURRENCY RELATED TAX RETURN END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER INCOME TRANSACTIONS OF CAPITAL PERIOD RETURN* (000'S OMITTED) NET ASSETS NET ASSETS RATE - ----------------------------------------------------------------------------------------------------------------------------------- -- -- -- $ 9.62 8.21%(a) $ 46,578 1.86%(b) 1.41%(b) 19% -- -- -- 8.90 (19.75) 47,948 1.62 0.29 45 -- -- -- 11.09 (22.34) 80,856 1.53 0.06 63 -- $(3.26) $(0.24) 14.28 (23.81) 94,482 1.45 (0.29) 78 $(0.03) (1.71) -- 23.36 37.21 148,727 1.44 (0.03) 54 -- (0.81) -- 18.41 19.61 93,871 1.56 (0.01) 44 -- -- -- 8.84 7.54(a) 5,764 3.20(b) (0.05)(b) 19 -- -- -- 8.22 (20.81) 5,598 2.87 (0.98) 45 -- -- -- 10.38 (23.34) 8,228 2.62 (1.05) 63 -- (3.26) (0.24) 13.54 (24.56) 12,747 2.43 (1.27) 78 -- (1.71) -- 22.61 36.16 15,623 2.45 (1.03) 54 -- (0.81) -- 17.97 18.36 10,216 2.67 (1.13) 44 -- -- -- 8.87 7.65(a) 4,695 3.13(b) 0.12(b) 19 -- -- -- 8.24 (20.77) 4,381 2.85 (0.99) 45 -- -- -- 10.40 (23.25) 5,530 2.60 (1.04) 63 -- (3.11) (0.24) 13.55 (11.72)(a) 7,208 2.51(b) (1.52)(b) 78 -- -- -- 9.47 8.11(a) 5,868 2.05(b) 1.21(b) 19 -- -- -- 8.76 (19.93) 5,407 1.86 0.01 45 -- -- -- 10.94 (15.59)(a) 6,753 1.84(b) (0.60)(b) 63 -- -- -- 9.21 14.13(a) 30,201 2.24(b) 0.85(b) 32 -- -- -- 8.07 (4.50) 27,356 2.10 (0.04) 81 -- -- -- 8.45 1.68 19,777 2.39 (0.19) 101 -- -- -- 8.31 (23.88) 18,439 2.18 (0.86) 101 -- -- -- 11.13 69.91 32,940 2.43 (1.07) 96 -- -- -- 6.66 (28.97) 16,342 2.55 0.18 83 -- -- -- 8.56 13.38(a) 6,796 3.42(b) (0.35)(b) 32 -- -- -- 7.55 (5.39) 5,965 3.21 (1.16) 81 -- -- -- 7.98 0.13 6,023 3.51 (1.28) 101 -- -- -- 7.97 (25.16) 6,105 3.79 (2.54) 101 -- -- -- 10.65 65.37 2,320 5.07 (3.70) 96 -- -- -- 6.44 (30.75) 1,367 5.04 (2.31) 83 -- -- -- 8.58 13.49(a) 7,402 3.39(b) (0.32)(b) 32 -- -- -- 7.56 (5.50) 6,306 3.12 (1.08) 81 -- -- -- 8.00 0.25 6,486 3.34 (1.12) 101 -- -- -- 7.98 (19.56)(a) 6,466 3.49(b) (2.31)(b) 101 -- -- -- 9.08 13.93(a) 8,799 2.50(b) 0.58(b) 32 -- -- -- 7.97 (4.67) 7,685 2.36 (0.32) 81 -- -- -- 8.36 0.12(a) 8,020 2.63(b) (1.23)(b) 101
* Excludes the effect of sales load. (a) Not annualized. (b) Annualized. 87 FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
NET REALIZED & UNREALIZED GAIN/(LOSS) ON INVESTMENTS INCREASE/ NET ASSET AND FOREIGN (DECREASE) DIVIDENDS VALUE, NET CURRENCY FROM FROM NET BEGINNING INVESTMENT RELATED INVESTMENT INVESTMENT OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME ----------------------------------------------------------------- THE GUARDIAN INVESTMENT QUALITY BOND FUND CLASS A: Six months ended 6/30/2003++........................ $10.28 $0.18 $ 0.27 $ 0.45 $(0.18) Year ended 12/31/2002............................... 9.86 0.44 0.45 0.89 (0.44) Year ended 12/31/2001............................... 9.61 0.50 0.30 0.80 (0.50) Year ended 12/31/2000............................... 9.33 0.60 0.28 0.88 (0.60) Year ended 12/31/1999............................... 9.99 0.53 (0.63) (0.10) (0.53) Year ended 12/31/1998............................... 9.91 0.53 0.23 0.76 (0.53) CLASS B: Six months ended 6/30/2003++........................ 10.28 0.14 0.26 0.40 (0.14) Year ended 12/31/2002............................... 9.86 0.37 0.45 0.82 (0.37) Year ended 12/31/2001............................... 9.60 0.43 0.31 0.74 (0.43) Period from 8/7/2000+ to 12/31/2000................. 9.41 0.22 0.19 0.41 (0.22) CLASS C: Six months ended 6/30/2003++........................ 10.28 0.14 0.27 0.41 (0.14) Year ended 12/31/2002............................... 9.86 0.37 0.45 0.82 (0.37) Year ended 12/31/2001............................... 9.60 0.43 0.31 0.74 (0.43) Period from 8/7/2000+ to 12/31/2000................. 9.41 0.22 0.19 0.41 (0.22) CLASS K: Six months ended 6/30/2003++........................ 10.29 0.16 0.27 0.43 (0.16) Year ended 12/31/2002............................... 9.87 0.40 0.45 0.85 (0.40) Period from 5/15/2001+ to 12/31/2001................ 9.68 0.28 0.24 0.52 (0.28) THE GUARDIAN HIGH YIELD BOND FUND CLASS A: Six months ended 6/30/2003++........................ 6.69 0.27 0.51 0.78 (0.27) Year ended 12/31/2002............................... 7.19 0.55 (0.50) 0.05 (0.55) Year ended 12/31/2001............................... 7.66 0.69 (0.47) 0.22 (0.69) Year ended 12/31/2000............................... 8.98 0.77 (1.32) (0.55) (0.77) Year ended 12/31/1999............................... 9.84 0.78 (0.84) (0.06) (0.78) Period from 9/1/1998+++ to 12/31/1998............... 9.26 0.38 0.58 0.96 (0.38) CLASS B: Six months ended 6/30/2003++........................ 6.69 0.24 0.50 0.74 (0.24) Year ended 12/31/2002............................... 7.18 0.50 (0.49) 0.01 (0.50) Year ended 12/31/2001............................... 7.66 0.64 (0.48) 0.16 (0.64) Year ended 12/31/2000............................... 8.97 0.68 (1.31) (0.63) (0.68) Year ended 12/31/1999............................... 9.83 0.67 (0.84) (0.17) (0.67) Period from 9/1/1998+++ to 12/31/1998............... 9.26 0.31 0.57 0.88 (0.31) CLASS C: Six months ended 6/30/2003++........................ 6.69 0.24 0.50 0.74 (0.24) Year ended 12/31/2002............................... 7.18 0.50 (0.49) 0.01 (0.50) Year ended 12/31/2001............................... 7.65 0.64 (0.47) 0.17 (0.64) Period from 8/7/2000+ to 12/31/2000................. 8.47 0.28 (0.82) (0.54) (0.28) CLASS K: Six months ended 6/30/2003++........................ 6.69 0.25 0.51 0.76 (0.25) Year ended 12/31/2002............................... 7.19 0.53 (0.50) 0.03 (0.53) Period from 5/15/2001+ to 12/31/2001................ 7.68 0.39 (0.49) (0.10) (0.39) THE GUARDIAN TAX-EXEMPT FUND CLASS A: Six months ended 6/30/2003++........................ 10.51 0.19 0.27 0.46 (0.19) Year ended 12/31/2002............................... 10.09 0.40 0.61 1.01 (0.40) Year ended 12/31/2001............................... 10.10 0.41 0.06 0.47 (0.41) Year ended 12/31/2000............................... 9.40 0.43 0.70 1.13 (0.43) Year ended 12/31/1999............................... 10.13 0.40 (0.73) (0.33) (0.40) Year ended 12/31/1998............................... 9.99 0.43 0.17 0.60 (0.43) CLASS C: Six months ended 6/30/2003++........................ 10.51 0.15 0.27 0.42 (0.15) Year ended 12/31/2002............................... 10.09 0.32 0.61 0.93 (0.32) Year ended 12/31/2001............................... 10.10 0.34 0.06 0.40 (0.34) Period from 8/7/2000+ to 12/31/2000................. 9.77 0.14 0.33 0.47 (0.14)
+ Commencement of operations. ++ Unaudited. +++ Date of initial public investment. 88
DISTRIBUTIONS FROM RATIOS/SUPPLEMENTAL DATA NET REALIZED ------------------------------------------------------------------- GAIN ON EXPENSES INVESTMENTS NET ASSET NET ASSETS, (EXCLUDING AND FOREIGN VALUE, END OF EXPENSES INTEREST EXPENSE) EXPENSES CURRENCY RELATED END OF TOTAL PERIOD TO AVERAGE TO AVERAGE SUBSIDIZED TRANSACTIONS PERIOD RETURN* (000'S OMITTED) NET ASSETS(a)(b) NET ASSETS(a) BY GIS - -------------------------------------------------------------------------------------------------------------- $(0.02) $10.53 4.35%(c) $184,477 0.85%(d) 0.85%(d) 0.09%(d) (0.03) 10.28 9.25 170,658 0.85 0.85 0.08 (0.05) 9.86 8.55 144,900 0.86 0.85 0.09 -- 9.61 9.81 124,805 0.85 0.85 0.09 (0.03) 9.33 (1.02) 139,661 0.81 0.80 0.13 (0.15) 9.99 7.89 142,199 0.85 0.75 0.21 (0.02) 10.52 3.86(c) 21,091 1.60(d) 1.60(d) 0.25(d) (0.03) 10.28 8.43 19,308 1.60 1.60 0.27 (0.05) 9.86 7.86 13,036 1.61 1.60 0.31 -- 9.60 4.40(c) 8,493 1.60(d) 1.60(d) 0.34(d) (0.02) 10.53 3.96(c) 11,254 1.60(d) 1.60(d) 0.33(d) (0.03) 10.28 8.44 10,753 1.60 1.60 0.36 (0.05) 9.86 7.85 9,090 1.61 1.60 0.36 -- 9.60 4.39(c) 8,356 1.60(d) 1.60(d) 0.34(d) (0.02) 10.54 4.14(c) 9,749 1.25(d) 1.25(d) 0.04(d) (0.03) 10.29 8.81 9,213 1.25 1.25 0.03 (0.05) 9.87 5.43(c) 8,436 1.26(d) 1.25(d) 0.08(d) -- 7.20 11.84(c) 40,759 0.85(d) -- 0.40(d) -- 6.69 0.96 33,894 0.85 -- 0.45 -- 7.19 2.87 33,797 0.85 -- 0.47 -- 7.66 (6.53) 38,646 0.85 -- 0.38 (0.02) 8.98 (0.63) 54,178 0.75 -- 0.40 -- 9.84 9.24(c) 51,288 0.75(d) -- 0.51(d) -- 7.19 11.28(c) 9,527 1.60(d) -- 0.71(d) -- 6.69 0.35 8,336 1.60 -- 0.77 -- 7.18 1.96 8,182 1.60 -- 0.78 -- 7.66 (7.32) 7,567 1.74 -- 0.77 (0.02) 8.97 (1.78) 3,184 1.87 -- 1.00 -- 9.83 8.61(c) 2,482 2.33(d) -- 0.51(d) -- 7.19 11.28(c) 8,600 1.60(d) -- 0.70(d) -- 6.69 0.35 7,710 1.60 -- 0.77 -- 7.18 2.09 7,657 1.60 -- 0.71 -- 7.65 (6.42)(c) 7,491 1.60(d) -- 0.63(d) -- 7.20 11.62(c) 8,874 1.25(d) -- 0.31(d) -- 6.69 0.55 7,944 1.25 -- 0.35 -- 7.19 (1.31)(c) 7,893 1.25(d) -- 0.41(d) (0.02) 10.76 4.40(c) 80,531 0.88(d)(e) -- 0.09(d) (0.19) 10.51 10.20 113,852 0.87(e) -- 0.06 (0.07) 10.09 4.78 107,676 0.91(e) -- 0.09 -- 10.10 12.29 97,185 0.88(e) -- 0.07 (0.00)(f) 9.40 (3.29) 97,908 0.86(e) -- 0.08 (0.03) 10.13 6.11 70,720 0.75 -- 0.26 (0.02) 10.76 4.02(c) 10,326 1.63(d)(e) -- 0.36(d) (0.19) 10.51 9.37 9,741 1.62(e) -- 0.37 (0.07) 10.09 3.99 8,783 1.66(e) -- 0.37 -- 10.10 4.87(c) 8,391 1.65(d)(e) -- 0.31(d) RATIOS/SUPPLEMENTAL DATA ------------------------- NET INVESTMENT INCOME PORTFOLIO TO AVERAGE TURNOVER NET ASSETS RATE - -------------------------- 3.42%(d) 137% 4.37 275 5.11 414 6.41 344 5.49 271 5.24 309 2.67(d) 137 3.58 275 4.31 414 5.78(d) 344 2.67(d) 137 3.64 275 4.36 414 5.78(d) 344 3.02(d) 137 4.00 275 4.48(d) 414 7.79(d) 68 8.17 69 9.21 141 9.03 163 8.34 152 8.31(d) 11 7.06(d) 68 7.42 69 8.42 141 8.37 163 7.22 152 6.85(d) 11 7.05(d) 68 7.42 69 8.43 141 8.74(d) 163 7.41(d) 68 7.77 69 8.36(d) 141 3.67(d) 23 3.85 99 4.03 181 4.43 124 4.11 144 4.29 111 2.93(d) 23 3.11 99 3.28 181 3.62(d) 124
* Excludes the effect of sales load. (a) After expenses subsidized by GIS. (b) Expense ratio includes interest expense associated with reverse repurchase agreements. (c) Not annualized. (d) Annualized. For GHYBF, ratios for 1998 are calculated from 7/7/1998 (commencement of operations). (e) Before offset of custody credits. Including the custody credits in Class A, the expense ratio is 0.80% for 1999 and 0.85% for 2000, 2001, 2002 and 6/30/2003; in Class C the expense ratio is 1.60% for 2000, 2001, 2002 and 6/30/2003. (f) Rounds to less than $0.01. 89 FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
NET ASSET DIVIDENDS NET ASSET VALUE, NET FROM NET VALUE, BEGINNING INVESTMENT INVESTMENT END OF TOTAL OF PERIOD INCOME INCOME PERIOD RETURN* ---------------------------------------------------------- THE GUARDIAN CASH MANAGEMENT FUND CLASS A: Six months ended 6/30/2003++........................ $1.000 $0.002 $(0.002) $1.000 0.24%+++ Year ended 12/31/2002............................... 1.000 0.009 (0.009) 1.000 0.95 Year ended 12/31/2001............................... 1.000 0.032 (0.032) 1.000 3.27 Year ended 12/31/2000............................... 1.000 0.056 (0.056) 1.000 5.69 Year ended 12/31/1999............................... 1.000 0.044 (0.044) 1.000 4.45 Year ended 12/31/1998............................... 1.000 0.047 (0.047) 1.000 4.76 CLASS B: Six months ended 6/30/2003++........................ 1.000 0.001 (0.001) 1.000 0.09+++ Year ended 12/31/2002............................... 1.000 0.002 (0.002) 1.000 0.23 Year ended 12/31/2001............................... 1.000 0.025 (0.025) 1.000 2.48 Year ended 12/31/2000............................... 1.000 0.052 (0.052) 1.000 5.34 Year ended 12/31/1999............................... 1.000 0.044 (0.044) 1.000 4.45 Year ended 12/31/1998............................... 1.000 0.047 (0.047) 1.000 4.76 CLASS C: Six months ended 6/30/2003++........................ 1.000 0.001 (0.001) 1.000 0.09+++ Year ended 12/31/2002............................... 1.000 0.002 (0.002) 1.000 0.22 Year ended 12/31/2001............................... 1.000 0.025 (0.025) 1.000 2.48 Period from 8/7/2000+ to 12/31/2000................. 1.000 0.020 (0.020) 1.000 2.03+++ CLASS K: Six months ended 6/30/2003++........................ 1.000 0.001 (0.001) 1.000 0.09+++ Year ended 12/31/2002............................... 1.000 0.005 (0.005) 1.000 0.55 Period from 5/15/2001+ to 12/31/2001................ 1.000 0.013 (0.013) 1.000 1.26+++
* Excludes the effect of sales load. + Commencement of operations. ++ Unaudited. +++ Not annualized. 90
RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------ NET NET ASSETS, INVESTMENT END OF EXPENSES EXPENSES INCOME PERIOD TO AVERAGE SUBSIDIZED TO AVERAGE (000'S OMITTED) NET ASSETS(a) BY GIS NET ASSETS - ------------------------------------------------------------ $612,259 0.85%(b) 0.03%(b) 0.49%(b) 658,159 0.85 0.02 0.94 606,045 0.85 0.04 3.13 462,183 0.85 0.07 5.57 390,106 0.85 0.09 4.41 225,997 0.85 0.19 4.65 17,057 1.60(b) 0.14(b) 0.18(b) 18,485 1.60 0.37 0.22 15,685 1.60 0.12 2.37 11,860 1.14 0.63 5.25 13,782 0.85 0.93 4.41 12,430 0.85 0.97 4.65 9,140 1.60(b) 0.03(b) 0.17(b) 9,330 1.60 0.25 0.22 8,492 1.60 0.04 2.47 8,193 1.60(b) 0.13(b) 5.06(b) 8,927 1.25(b) -- 0.19(b) 8,500 1.25 -- 0.54 8,125 1.25(b) 0.01(b) 1.99(b)
(a) After expenses subsidized by GIS. (b) Annualized. 91 (This page intentionally left blank) - - TRUSTEES Dennis J. Manning, CLU, ChFC -- Chair Frank J. Fabozzi, Ph.D. Arthur V. Ferrara, CLU Leo R. Futia, CLU William W. Hewitt, Jr. Sidney I. Lirtzman, Ph.D. Carl W. Schafer Robert G. Smith, Ph.D. - - OFFICERS Thomas G. Sorell -- President Joseph A. Caruso Howard W. Chin Robert J. Crimmins, Jr. Richard A. Cumiskey Richard A. Goldman Alexander M. Grant, Jr. Edward H. Hocknell Jonathan C. Jankus Stewart M. Johnson Ann T. Kearney Peter J. Liebst R. Robin Menzies Nydia Morrison John B. Murphy Karen L. Olvany Frank L. Pepe Richard T. Potter, Jr. Robert A. Reale Donald P. Sullivan, Jr. Mathew P. Ziehl - - INVESTMENT ADVISER & DISTRIBUTOR Guardian Investor Services LLC 7 Hanover Square New York, New York 10004 - - CUSTODIAN OF ASSETS State Street Bank and Trust Company Custody Division 1776 Heritage Drive North Quincy, Massachusetts 02171 - - SHAREHOLDER SERVICING AGENT, TRANSFER AGENT & DIVIDEND PAYING AGENT FOR STATE STREET BANK AND TRUST COMPANY National Financial Data Services Post Office Box 219611 Kansas City, Missouri 64121-9611 - - INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, New York 10036 Shares of the Funds are not deposits or obligations of, or guaranteed or endorsed by, any bank or depository institution, nor are they federally insured by the Federal Deposit Insurance Corporation, The Federal Reserve Board, the National Credit Union Association or any other agency. They involve investment risk, including possible loss of principal amount invested. This report is authorized for distribution to the public only when accompanied or preceded by a current prospectus for the funds which comprise The Park Avenue Portfolio. [GUARDIAN LOGO] Guardian Investor Services LLC 7 Hanover Square New York, New York 10004 [GUARDIAN LOGO] Guardian Investor Services LLC 7 Hanover Square New York, NY 10004 EB 011566 (6/03) PRSRT STANDARD U.S. POSTAGE PAID BOWNE FULFILLMENT SOLUTIONS ITEM 2. CODE OF ETHICS. Not required at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT Not required at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not required at this time. ITEM 5-6 [RESERVED] Not required at this time. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. 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 10. EXHIBITS. (a)(1) Not required at this time. (a)(2) Separate certifications by the registrant's certifying officers, pursuant to Section 302 of the Sarbanes-Oxley Act and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (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 Park Avenue Portfolio By: /s/ THOMAS G. SORELL ----------------------------------------- Thomas G. Sorell President of The Park Avenue Portfolio Date: September 4, 2003 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 Park Avenue Portfolio Date: September 4, 2003 By: /s/ FRANK L. PEPE --------------------------------------------- Frank L. Pepe Vice President and Treasurer of The Park Avenue Portfolio Date: September 4, 2003 EX-99.CERT 3 y88374exv99wcert.txt 302 CERTIFICATION 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 Park Avenue Portfolio; 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-2(c) 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) 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 (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual 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 4, 2003 /s/ THOMAS G. SORELL ---------------------------- Thomas G. Sorell President of The Park Avenue Portfolio CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATIONS I, Frank L. Pepe, certify that: 1. I have reviewed this report on Form N-CSR of The Park Avenue Portfolio; 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-2(c) 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) 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 (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual 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 4, 2003 /s/ FRANK L. PEPE ---------------------------------------- Frank L. Pepe, Vice President and Treasurer of The Park Avenue Portfolio EX-99.906CERT 4 y88374exv99w906cert.txt 906 CERTIFICATION CERTIFICATION UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002 Name of Issuer: The Park Avenue Portfolio 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 4, 2003 /s/ THOMAS G. SORELL -------------------------------------- Thomas G. Sorell President of The Park Avenue Portfolio Date: September 4, 2003 /s/ FRANK L. PEPE -------------------------------------- Frank L. Pepe Vice President and Treasurer of The Park Avenue Portfolio -----END PRIVACY-ENHANCED MESSAGE-----