-----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, AgZdit7EF6Q/cOjAQ4HayKdHOBoEdnCeDSsmQINit3P+A9gCBr9widcT/L3CIknR wDfs57UjmxQ94x1nmgC4NA== 0001193125-04-035141.txt : 20040305 0001193125-04-035141.hdr.sgml : 20040305 20040305095828 ACCESSION NUMBER: 0001193125-04-035141 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040305 EFFECTIVENESS DATE: 20040305 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-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05641 FILM NUMBER: 04650454 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-CSR 1 dncsr.txt GUARDIAN PARK AVENUE PORTFOLIO UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05641 - -------------------------------------------------------------------------------- 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: December 31, 2003 - -------------------------------------------------------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. The Annual Report to Stockholders follows. [LOGO] GUARDIAN(R) The Park Avenue Portfolio(R) Annual Report to Shareholders December 31, 2003 The Guardian Park Avenue Fund(R) The Guardian UBS Large Cap Value Fund(SM) The Guardian Park Avenue Small Cap Fund(SM) The Guardian UBS Small Cap Value Fund(SM) The Guardian Asset Allocation Fund(SM) The Guardian S&P 500 Index Fund(SM) The Guardian Baillie Gifford International Fund(SM) The Guardian Baillie Gifford Emerging Markets Fund(SM) The Guardian Investment Quality Bond Fund(SM) The Guardian Low Duration Bond Fund(SM) The Guardian High Yield Bond Fund(SM) The Guardian Tax-Exempt Fund(SM) The Guardian Cash Management Fund(SM) [LOGO] Sign Up for E-Delivery To get future shareholder reports online and eliminate paper, go to www.guardianinvestor.com THE PARK AVENUE PORTFOLIO Table of Contents
Portfolio Schedule Manager of Interview Investments Letter to Shareholders - -------------------------------------------------- --------- ----------- The Guardian Park Avenue Fund 2 29 - ------------------------------------------------------------------------ The Guardian UBS Large Cap Value Fund 6 31 - ------------------------------------------------------------------------ The Guardian Park Avenue Small Cap Fund 8 33 - ------------------------------------------------------------------------ The Guardian UBS Small Cap Value Fund 10 35 - ------------------------------------------------------------------------ The Guardian Asset Allocation Fund 12 37 - ------------------------------------------------------------------------ The Guardian S&P 500 Index Fund 14 40 - ------------------------------------------------------------------------ The Guardian Baillie Gifford International Fund 16 46 - ------------------------------------------------------------------------ The Guardian Baillie Gifford Emerging Markets Fund 18 48 - ------------------------------------------------------------------------ The Guardian Investment Quality Bond Fund 20 50 - ------------------------------------------------------------------------ The Guardian Low Duration Bond Fund 22 54 - ------------------------------------------------------------------------ The Guardian High Yield Bond Fund 24 56 - ------------------------------------------------------------------------ The Guardian Tax-Exempt Fund 26 61 - ------------------------------------------------------------------------ The Guardian Cash Management Fund 28 63 - ------------------------------------------------------------------------ Financial Statements 66 - ------------------------------------------------------------------------ Notes to Financial Statements 74 - ------------------------------------------------------------------------ Financial Highlights 94 - ------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Dear Shareholder [PHOTO] Thomas G. Sorell, C.F.A. Thomas G. Sorell, C.F.A. Chief Investment Officer Past performance is no indication of future performance. The commentary reflects the outlook and views of Thomas G. Sorell, Chief Investment Officer of Guardian Investor Services LLC and President of The Park Avenue Portfolio as of December 31, 2003, and is subject to change. "The End of a Bear Market" The year 2003 will be remembered as the end of a three-year bear market in U.S. equities. At its lowest point, in October 2002, the market was down 47.4% from its March 2000 peak - the worst performance since the Great Depression. During the 2003 rebound, small cap stocks outperformed large cap stocks as the Russell 2000 Index/1/ returned 47.3%, the S&P 500 Index/2 /gained 28.7% and the Dow Jones Industrial Average/3/ returned 28.3%. These returns, while welcome and substantial by recent and long-term historical averages, pale in comparison to the market move of more speculative investments during 2003. Stocks with high betas, no earnings, no dividends and poor earnings quality outperformed more conservative higher quality equities. Many of the best performing stocks in 2003 were companies from which investors fled during 2002 due to concerns about solvency, accounting practices or regulatory investigations. The variance in returns during 2003 between high- and low-quality stocks is evident when comparing stocks with high S&P Quality Ratings of A+ with the returns of more speculative C and D rated stocks (S&P common stock Quality Ratings reflect the long-term growth and stability of a company's earnings and dividends during the trailing ten years and are unrelated to S&P debt ratings). A+ rated stocks rose 26% last year while the more speculative C and D rated stocks gained 81%. This 55% difference in performance was the second largest in the 18-year history of the stock quality indices as maintained by Merrill Lynch - surpassed only by the 73% spread observed in 1999./4/ Despite the cut in the dividend tax rate, investors shunned dividend-paying stocks in 2003. The 100 companies in the S&P 500 that pay no dividends outperformed the 100 highest yielding stocks by 35%. Risk taking was clearly back in vogue in 2003 while conservatism was out of favor. These same trends were evident in the fixed income market, where lower rated securities generated the most attractive returns. In spite of significant interest rate volatility, U.S. Treasury rates ended 2003 only slightly higher than at the beginning of the year. The ten-year rate rose less than 0.50% to 41/4% and still generated a positive, albeit small, 1.3% total return. The broad taxable investment grade market returned 4.1%, while the more speculative high yield and emerging market debt sectors were the best performing fixed income asset classes, with exceptional returns of 28.9% and 28.8%, respectively. While not generating double-digit returns, investment grade corporate bonds provided very strong returns as corporate yield spreads narrowed significantly in the wake of improving economic conditions and higher corporate profitability. Yield spreads tightened by 0.80%, more than offsetting the small increase in Treasury rates. In fact, the corporate sector posted a record-setting performance in 2003 relative to Treasuries: corporate bonds returned 7.7%, outperforming similar duration Treasuries by 5.2% and eclipsing the previous record by nearly 2.50%. Corporate bonds also outperformed the broad fixed income market by over 3.5%. Economic Recovery Investors remained risk averse as 2003 began, shaken from a series of corporate accounting scandals and concerned about the potential economic and geopolitical impact of an imminent war with Iraq. Business confidence remained weak as corporations continued to cut payrolls and capital spending while drawing down inventories. As the U.S. prepared to invade Iraq during the first quarter of 2003, the S&P 500 Index traded down to 800 on March 11th. This would mark the 2003 low in stocks, and the beginning of a recovery in consumer and business confidence that, along with a tremendous amount of fiscal and monetary stimulus, would support stronger economic growth and a recovery in corporate profitability. Although the Federal Reserve Board (Fed) expected economic conditions to improve as uncertainty regarding Iraq subsided, it became increasingly concerned that there was a greater likelihood of a continued decline in inflation. The fixed income markets immediately noted the Fed's deflationary concerns, and the possibility that the Fed might utilize unconventional tools (like purchasing Treasury debt) to drive interest rates lower in order to stimulate economic growth and prevent deflation. - -------------------------------------------------------------------------------- /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. This index is not available for direct investment. /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. This index is not available for direct investment. /3/ The Dow Jones Industrial Average (DJIA) is an unmanaged index of 30 industrial stocks listed on the New York Stock Exchange that is generally considered to be representative of U.S. stock market activity. This index is not available for direct investment. /4/ Bernstein, Richard, and Kirschner, Lisa. "Merrill Lynch Quantitative Strategy Update - Low Quality Dominated 2003 Quality Performance." Merrill Lynch Global Securities Research & Economics Group Quantitative Strategy Department January 6, 2004. Mr. Sorell's Shareholder Letter is not part of this shareholder report for legal purposes. - -------------------------------------------------------------------------------- By June, U.S. interest rates had declined to 45-year lows when the ten-year Treasury yield fell to 3.11%. As the second quarter came to a close, the Fed's policy making Federal Open Market Committee (FOMC) cut the Fed funds rate by 0.25%, lowering the target rate to 1%, where it would remain for the rest of the year. The Fed's strategy of keeping the economy afloat by supporting personal consumption as it awaited a recovery in business confidence, spending and hiring was about to prove successful. The decline in interest rates resulted in historically attractive mortgage rates that stimulated a surge in home purchases. Mortgage refinancing provided additional income, which in turn sustained high levels of personal consumption. While the Fed provided tremendous monetary stimulus, the Bush administration was not about to rely solely on monetary policy to achieve and sustain economic recovery. In May, President Bush received Congressional approval for a $350 billion economic stimulus package that represented the second tax cut of his term: one that reduced individual taxes retroactively to the first of the year, and cut the top tax rate on dividends and capital gains to 15%. The combination of aggressive monetary and fiscal policy stimulus increasingly benefited U.S. economic growth as the year progressed. Gross Domestic Product (GDP)/5/ growth gradually improved from 2.0% in the first quarter to 3.1% in the second quarter. GDP then surged to 8.2% in the third quarter, the fastest quarterly pace in two decades. By the third quarter, economic growth was becoming more balanced - benefiting from a revival in business investment and no longer dependent simply on personal consumption. Business investment in equipment and software grew by 17.6% during the third quarter of 2003, the largest increase in more than 5 years and a significant increase over the second quarter's 8.0% rate. Businesses' willingness to begin reinvesting after a two-year hiatus was not only driven by continued strength in consumption, but also by improving corporate profitability. While revenue growth was modest, earnings were rising due to continued cost cutting, enhancements in productivity and a weaker dollar. Although some improvement was to be expected in 2003 relative to 2002's poor results, the increase in S&P 500 operating profits proved to be impressive. According to First Call,/6/ S&P 500 operating earnings per share increased 12% during the first quarter 2003 on a year-over-year basis, 9% in the second quarter, and by almost 18% during the third quarter. Earnings are forecast to rise 21% during the forth quarter, and 14% for the full year 2003. On a reported basis (as opposed to operating basis), the growth is expected to be about 60-65% for the full year 2003. This would represent the strongest peak to trough increase in earnings growth in the post-war period./7/ By year-end 2003, evidence of broader and more sustainable economic growth alleviated deflationary fears. This trend convinced most fixed income investors that the Fed was likely to begin raising interest rates sometime in 2004 (even though it had indicated a willingness to leave monetary policy accommodative for "a considerable period" despite low inflation and excess capacity). GDP growth, which was not expected to remain at the elevated rate recorded in the third quarter, was 4.0% in the final quarter of 2003. For the full year, GDP gained 4.3% on a fourth quarter to fourth quarter basis, and 3.1% on a year-over-year basis. Clearly, a tremendous amount of monetary and fiscal policy stimulus had achieved the desired objective of reinvigorating economic growth. 2004 Economic Outlook As evidenced in 2003, the economy is becoming less dependent on continued growth in consumer spending as the corporate sector begins its long-awaited recovery from the 2001 "profits recession." As the effect of tax cuts and the initial benefit of low interest rates dissipate, we expect personal consumption expenditures (PCE) to moderate from the torrid 6.9% growth rate in the third quarter of 2003. The current consensus forecast for PCE calls for a 2004 growth of 3.7% on a year over year basis, up from 3.1% during 2003 and the best since the year 2000 rate of 4.7%. This expectation is dependent in large part on continued improvement in labor market conditions, which is currently evidenced by declining jobless claims, a small albeit disappointing increase in non-farm payroll growth, and a lower unemployment rate, which fell in December to 5.7%, well below its June 2003 peak of 6.3%. While personal consumption is expected to remain sufficiently strong to support moderate economic growth, it is critical that the corporate sector continues to rebound and make a larger contribution to GDP growth in order to ensure the sustainability and longevity of the recovery. The consumer has been on an auto and housing spending binge, supported by low interest rates and tax cuts, but as pent-up demand dissipates these sectors of the economy are less likely to contribute as strongly to GDP growth. The improvement in corporate profitability, along with the consumer's continued resiliency, has resulted in improved business confidence and management's willingness - -------------------------------------------------------------------------------- /5/ 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. /6/ Thompson Financial's First Call is a global research network used by money managers and brokers for real-time, commingled equity and fixed income research and data, corporate news, shareholdings data, sell-side workflow tools and internal research distribution. /7/ Bernstein, Richard, "Merrill Lynch U.S. Strategy Update - Text to Monthly Conference Call." Merrill Lynch Global Securities Research & Economics Group Quantitative Strategy Department December 8, 2003. - -------------------------------------------------------------------------------- to begin rebuilding depleted inventories, increase capital spending and to slowly begin hiring employees. Business confidence as measured by the Institute for Supply Management (ISM)/8/ survey has improved from a low of 46.2% at the beginning of 2003 to 63.4% in December. This increased confidence is evident in an improvement in the manufacturing sector as industrial production increased at a 6.2% annual rate in the fourth quarter, and toward the end of 2003 the ISM production Index rose to its highest level in 20 years. Industrial production is forecast to increase 5.0% on a year over year basis in 2004, the largest increase since 1999. Non-residential fixed investment grew by 12.8% (annualized) during the third quarter of 2003 and 6.9% in the fourth quarter. These increases came after nine consecutive quarters of shrinkage. Business spending on capital projects is likely to continue growing during 2004 due to rising profit margins, which are an inducement to invest. Thanks to rising labor productivity and low real wage growth, aggregate U.S. profit margins have risen to their highest level in postwar history. Also supporting the business recovery is the weaker dollar, which increases U.S. corporate competitiveness and is likely to boost exports as the global economy continues to improve in 2004. These factors, along with forecasts of real nonresidential fixed investment of 9.8% in 2004, result in a consensus 2004 GDP growth forecast of 4.6% on a year over year basis, which would represent the largest increase in 19 years. While the above forecasts would represent a significant recovery in U.S. economic growth in 2004, a reasonable expectation in our view, it is subject to several significant risks. The principal risks to these forecasts are deterioration in the consumer/household sector's ability to continue spending due to weaker than expected employment growth; further depreciation in the dollar, which could fuel inflation and force the Fed to aggressively tighten monetary policy; and the continued threat that terrorism may disrupt economic growth. The fundamental concern regarding the household sector has been the low savings rate and high debt levels, which, while manageable in a low interest rate environment, may prove to be disastrous should interest rates rise significantly in 2004. During the last decade, consumer debt has grown from 85% to 115% of annual income. A rise in interest rates could also adversely affect housing values, which have been a source of funding and liquidity for consumers as they have cashed out equity in their homes to sustain spending. Global labor outsourcing and growth in labor productivity have led to a shortfall in income growth. So far, this is a worrisome factor in the economic recovery. Fully 24 months into the current expansion (2001 third quarter through third quarter 2003), private wage and salary disbursements are up only 2.1% over the entire period, little more than the consumer price inflation. The 9.2% growth in disposable personal income over this two-year period was mostly due to tax cuts and a rise in government payments either as wages or social benefits. The 11% growth in personal consumption expenditure over this period outstrips income growth. This was also accompanied by a build-up in debt, mostly through mortgages and not due to consumer credit. Personal savings as a percentage of disposable income was 2.3% at the end of the third quarter of 2003, lower than the 2.8% recorded at the beginning of this recovery. The household debt service ratio and financial obligations ratio remain at elevated levels. Clearly, an improving labor market is critical to sustaining consumer spending - even at what we expect will be lower levels than recorded in third quarter 2003. A continued decline in the dollar, which fell 8.5% on a trade-weighted basis in 2003 - down 16.8% against the euro and 9.8% against the yen - poses the most significant upside risk to U.S. interest rates. Both the real economy and U.S. financial markets would likely suffer from rising rates. The principal concern regarding the dollar is the growing U.S. trade and budget deficits and U.S. dependence on foreign investment to fund these gaps. The current account deficit surpassed 5% of GDP in 2003, representing the largest imbalance since the 1980's when it was 31/2% of GDP. During that period, from peak to trough, the dollar declined 15.3% on a trade-weighted basis./9/ In addition to structural imbalances weakening the dollar, U.S. interest rates and equity valuations may appear to provide less attractive returns to foreign investors in 2004 than alternative investments in other global markets. Finally, 2004 is a Presidential election year, and debate and rhetoric concerning trade policy, tariffs and protectionism have the potential to further weaken the dollar. Both the potential inflationary effect of a weaker dollar and the difficulty associated with attracting capital to fund the current account deficit can cause upside pressure on U.S. interest rates. While these risks to economic growth are significant, the consumer has proved resilient for many years. At the same time, the Fed, along with others, believe that the U.S. is likely to experience a gradual and orderly decline in the - -------------------------------------------------------------------------------- /8/ The Institute for Supply Management (ISM) Index is a national manufacturing index based on a survey of purchasing executives at roughly 300 industrial companies. /9/ Current account is the sum of net exports [i.e., exports in excess of imports] of goods and services, income on foreign assets, and net transfer payments. - -------------------------------------------------------------------------------- dollar, which will not prove disruptive to economic growth or the financial markets. So, what should we expect of U.S. financial markets in 2004? Financial Market Outlook The most significant change in financial markets in 2004 is likely to be an increase in U.S. interest rates, the result of rising inflation expectations and the Federal Reserve's decision to tighten monetary policy. While the Blue Chip Consensus/10/ forecast for inflation currently anticipates little changes in 2004 and a small increase in 2005, the markets are likely to begin discounting higher inflation as economic conditions improve. As the economy recovers, we expect a gradual decline in the output gap as the unemployment rate declines and capacity utilization increases. We believe this decline in excess capacity will eventually raise unit labor costs and, along with already rising commodity prices and inflationary pressures from a weaker dollar, push interest rates higher. The Fed is likely to gradually begin tightening monetary policy sometime in the second half of the year, most likely in small 0.25% increments. As the Fed tightens monetary policy, we expect the Treasury yield curve to flatten as short rates rise faster than long rates. If in fact the Fed is correct in anticipating a gradual and orderly decline in the dollar, pressure on interest rates should be modest. The degree to which this interest rate increase is modest will be determined primarily by how rapidly the output gap is narrowed and the degree to which the dollar declines. If, however, the dollar collapses and foreign investors reduce their willingness to fund the U.S. current account deficit, our markets will have to depreciate more significantly to attract foreign capital. As interest rates rise, fixed income securities are likely to experience a decline in principal value, the degree of which will vary by maturity and duration. Whether fixed income securities are able to generate positive returns in 2004 will be determined by whether a particular security generates enough interest income to offset the anticipated decline in principal value in a rising rate environment. Shorter fixed income securities are less likely to be adversely affected in this environment than longer fixed income investments. Our outlook for the equity market is cautiously optimistic. U.S. corporations are now in better financial health than a year ago because earnings and cash flow generation have been strong and companies have taken advantage of low interest rates to reduce their debt burdens. Changes in accounting rules triggered by the accounting scandals of 2002 caused many companies to take large write-offs reflecting the overstatement of earnings and goodwill from prior years. This has improved the quality of reported earnings, an encouraging development for investors. The S&P 500 Index price return of 26.4% during 2003 was due in equal parts to earnings growth and P/E ratio expansion. At 18.5, its current forward operating P/E ratio is above the long-run average of 14.4. However, this can be justified by the current low inflation. Equity valuations are helped by a low inflation and low interest rate environment through their effect on the discount rate used in discounted cash flow models. During the last 50 years, S&P 500 P/E ratios have been greater when inflation was low than when inflation was high, and currently inflation is lower than the long-run average. Based on the Fed model, which compares the earnings yield of stocks to the 10-year Treasury bond yields, stocks are now less attractively priced than they were last year. Following the notable rise in stocks during 2003, and given current bond yields and inflation levels, stocks now seem fairly priced. If the P/E ratio remains unchanged, then stocks can be expected to grow at the same rate as earnings during 2004. The First Call analyst consensus calls for a 12% growth in S&P 500 earnings per share during 2004. If, however, valuations regress toward their long-run average due to an increase in interest rates or inflation, then stocks will be flat to down for the year. In any case, it does not seem likely that the stellar returns of 2003 will be repeated. In the post-war era, generally the second year of a bull market has not been as strong as the first year. Since 2004 is a presidential election year, it adds its own interesting dynamics to the economy. In the post-war era, on average, stocks have gained 9% in the President's 4th year in office versus 17% in the 3rd year. Some see this as evidence of priming the pump with fiscal policy. Although not predictive, the 4th year of a President's term has been positive for stocks almost 80% of the time. What should the intelligent investor do given these forecasts? Investment Strategy As always, we believe that the best way to manage market volatility and uncertainty is to remain committed to your long-term investment objectives and to construct a well-diversified portfolio that is properly aligned with your financial goals, time horizon and tolerance for risk. Portfolio diversification is the foundation of sound asset allocation. For example, while it might be tempting to reduce allocations to fixed income, given expectations of rising rates, to do so within the context of a long-term asset allocation plan may prove to be imprudent. Focus on the long-term and diversify. - -------------------------------------------------------------------------------- /10/ 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. - -------------------------------------------------------------------------------- Therefore, we believe that the best strategy by which to navigate the volatility and uncertainty of the markets is to consult your financial advisor and construct an appropriately well-diversified portfolio that will not only seek to meet your long-term financial objectives, but can survive short-term periods of volatility exhibited by any single asset class. In conclusion, we thank you for your business, confidence and trust to manage your investments and look forward to continued long-term success and prosperity in the years ahead. /s/ Thomas G. Sorell Thomas G. Sorell, CFA President, The Park Avenue Portfolio Chief Investment Officer, Guardian Investor Services LLC - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- About Your Annual Report In the interest of assisting you in understanding the information presented in this report and evaluating your investment, we have highlighted certain definitions and information included in this annual report. Total Returns Total return figures shown in the report are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Please refer to the Financial Statements and accompanying Notes to Financial Statements sections of this report for specific information about the fees and expenses borne by the Funds. 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. Index Returns Index returns are provided for comparative purposes. Please note that the indices are unmanaged and not available for direct investment and their returns do not reflect the fees and expenses that have been deducted from the Funds. In addition, the return figures for the indices do not reflect sales charges that an investor may pay when purchasing or redeeming shares of the Funds. A Few Words About Risk It is important to carefully consider the Funds' investment objectives, risks, fees and expenses before investing. All funds involve some risk, including possible loss of the principal amount invested. There are some additional risks to consider when investing in certain funds within The Park Avenue Portfolio family of mutual funds: . Small-cap investing entails special risks, as small-cap stocks have tended to be more volatile and to drop more in down markets than large-cap stocks. This may happen because small companies may be limited in terms of product lines, financial resources and management. . International investing has special risks related to changes in currency rates, foreign taxation, differences in auditing and other financial standards, political uncertainty and greater volatility. These risks are even greater when investing in emerging markets. . Investing in bond funds exposes you to the general risk of investing in the debt markets. Bond funds are subject to interest rate risk. When interest rates rise, bond prices generally fall, and when interest rates fall, bond prices generally rise. Currently, interest rates are at historically low levels. Please keep in mind that in this kind of environment, the risk that bond prices may fall when interest rates rise is potentially greater. . Investing in high yield bonds involves special risks because investments in lower rated and unrated debt securities are subject to greater loss of principal and interest than higher rated securities. . Low duration bond funds are not an alternative to money market funds since they, unlike money market funds, do not seek to maintain a stable net asset value and, as a result, are a riskier asset class. Updated Performance Information This annual report contains performance information for the year ending December 31, 2003. To obtain performance data current to the most recent month (available within 7 business days of the most recent month end), please call us at 1-800-221-3253 or visit our website at www.guardianinvestor.com. Current performance may be lower or higher than the performance quoted in this report. You should consider the Funds' investment objectives, risks, fees and expenses carefully before investing. For further information, please consult the prospectus. The prospectus should be read carefully before you invest or send money, and can be obtained from your investment professional or by calling 1-800-221-3253. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Guardian Park Avenue Fund [PHOTO] Goldman Richard Goldman Portfolio Manager Objective:Long-term growth of capital Portfolio:At least 80% common stocks and securities convertible into common stocks Inception:June 1, 1972 Net Assets at December 31, 2003: $1,312,508,366 Q: What are your observations about the stock market in 2003? A: Starting in March, the stock market experienced a dramatic reversal from the declines of the prior three years, resulting in double digit annual returns for most indices as shown in the table below.
2003 Stock Market Returns - ---------------------------------------------- Large Cap Stocks S&P 500 Index/1/ 28.68% - ---------------------------------------------- Small Cap Stocks Russell 2000 Index/2/ 47.25% - ---------------------------------------------- Technology NASDAQ Composite Index/3/ 50.77% - ---------------------------------------------- More Speculative Internet Stocks/4/ 103.04% Companies Biotech Stocks/5/ 60.06%
Broadly speaking, smaller companies and technology companies led the market. Looking deeper, there was dramatic out-performance by lower quality companies (those with no earnings, companies under regulatory investigation, or highly leveraged companies), very cyclical companies, and stocks trading at high P/E ratios. These were the stocks that were beaten down the most in the downturn. I believe this speculative environment was due to investors' belief that the economy and earnings were poised for a lasting recovery.
Comparison of Companies' Fundamental Strength The Guardian Park Avenue Fund vs. S&P 500 Index - -------------------------------------------------------------------- % Long- Return Earnings Revenue Term on 5 year 5 year Debt/ Equity Growth Growth Total 5 year Rate/6/ Rate/7/ Capital/8/ Average/9/ - -------------------------------------------------------------------- The Guardian Park Avenue Fund 10% 8% 27% 20% - -------------------------------------------------------------------- S&P 500 Index 6% 6% 34% 16% - -------------------------------------------------------------------- Notes: Source: Baseline. Median values and debt calculations are as of 12/31/03 and exclude financial companies.
- -------------------------------------------------------------------------------- "Our style of investing in superior companies faced a difficult challenge in 2003, as enthusiasm for more speculative stocks was high. Even so, the Fund achieved modestly lower daily volatility than the benchmark during the year." - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- /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. This index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund. Likewise, return figures for the Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. /2/ The Russell 2000 Index is an unmanaged index that is generally considered to be representative of small capitalization issues in the U.S. stock market. This index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund. Likewise, return figures for the Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. /3/ The NASDAQ Composite Index is an unmanaged, broad-based capitalization-weighted index of all NASDAQ National Market stocks. This index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund. Likewise, return figures for the Index do not reflect any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. /4/ As measured by Merrill Lynch Internet HOLDRS/SM/ (Holding Company Depositary Receipts/SM/), which is generally indicative of Internet stock performance. Merrill Lynch Internet HOLDRS/SM/ invests in common stock of a group of specified companies in the Internet industry. /5/ As measured by Merrill Lynch Biotech HOLDRS/SM/ (Holding Company Depositary Receipts/SM/), which is generally indicative of Biotechnology stock performance. Merrill Lynch Biotech HOLDRS/SM/ invests in common stock of a group of specified companies in the Biotechnology industry. /6/ 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. /7/ 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. /8/ % 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 12/31/03. A lower number indicates a company's greater ability to pay off outstanding debt. /9/ 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. - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- The Guardian Park Avenue Fund Q: What is The Guardian Park Avenue Fund's current investment profile? A: The Fund seeks to invest in superior companies with strong financials, as shown in the year-end snapshot below. Our experience and studies of historical results show that investing in companies with strong balance sheets, positive cash flows, high profitability, and consistent earnings - while out of favor in 1999 and 2002 - has the potential to deliver attractive returns over longer investment horizons. We believe this remains true today. Looking at the Fund's exposure to various sectors, while our investment process does not permit significant sector deviations, our focus on stock selection can lead to modest over- and under-weightings of sectors versus the S&P 500 Index. The snapshot below of the weightings relative to the S&P 500 Index at year end shows that the Fund is overweight in the energy sector and underweight in the cyclical consumer sector.
The Guardian Park Avenue Fund Sector Weighting Comparison as of 12/31/03 - --------------------------------------------------------------------------- % of % % of S&P 500 Over/ Fund Index Under - --------------------------------------------------------------------------- Energy 9.29 5.80 3.49 - --------------------------------------------------------------------------- Health Care 14.55 13.32 1.24 - --------------------------------------------------------------------------- Cash 0.95 0.00 0.95 - --------------------------------------------------------------------------- Utilities 3.41 2.84 0.57 - --------------------------------------------------------------------------- Consumer Staples 11.45 10.99 0.46 - --------------------------------------------------------------------------- Industrials 11.10 10.90 0.20 - --------------------------------------------------------------------------- Financials 20.51 20.66 -0.15 - --------------------------------------------------------------------------- Information Technology 17.32 17.71 -0.39 - --------------------------------------------------------------------------- Materials 1.78 3.04 -1.26 - --------------------------------------------------------------------------- Telecommunication Services 1.46 3.45 -2.00 - --------------------------------------------------------------------------- Consumer Discretionary 8.18 11.30 -3.11 - ---------------------------------------------------------------------------
Q: How did the Fund perform in 2003? A: The Fund's 2003 total return of 20.95%/10 /was impressive in absolute terms, but did not succeed in delivering higher returns and lower risk than our S&P 500 Index benchmark. Our style of investing in superior companies faced a difficult challenge in 2003, as enthusiasm for more speculative stocks was high. Even so, the Fund achieved modestly lower daily volatility than the benchmark during the year. While I'm clearly disappointed that the Fund did not beat its benchmark during the year, I remain committed to investing in superior companies even if their near-term relative returns have lagged those of lower quality companies. In fact, we believe that, while the speculative market rally has driven some sectors to bubble-era valuations, many higher quality companies are currently attractively valued. Investor interest in these companies has taken a back seat to riskier companies in recent months, but we believe at the end of the day that you get what you pay for. Q: Are there any other factors that investors should be aware of regarding the Fund? A: We believe the Fund is an attractive investment for investors seeking an actively managed portfolio of large- cap companies. Our focus on what we believe to be the highest quality companies in the U.S. may also appeal to investors who are wary of the market given the corporate scandals that have occurred in recent years. We remain committed to utilizing our disciplined investment approach, which calls for not chasing the latest fad or hottest performing sector, but rather constructing a highly diversified portfolio that has the potential to perform well in a variety of market cycles. The Fund did not generate taxable gains in 2003, despite its favorable return. In general, we seek to hold stocks for over two years, which causes the Fund to have less turnover than the average actively managed equity fund. In addition, the Fund has tax loss carry forwards of $634,179,788 to offset capital gains. This is approximately 48% of the Fund, and, on average, they have over 5 years before they expire. - -------------------------------------------------------------------------------- /10/ 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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- The Guardian Park Avenue Fund
Top Ten Holdings as of December 31, 2003 (holdings are subject to change) Company Percentage of Total Net Assets - --------------------------------------------------------------- 1. Pfizer, Inc. 5.48% - --------------------------------------------------------------- 2. General Electric Co. 3.31% - --------------------------------------------------------------- 3. Deere & Co. 3.27% - --------------------------------------------------------------- 4. Microsoft Corp. 3.08% - --------------------------------------------------------------- 5. American Int'l. Group, Inc. 2.99% - --------------------------------------------------------------- 6. Lehman Brothers Hldgs., Inc. 2.44% - --------------------------------------------------------------- 7. AmerisourceBergen Corp. 2.36% - --------------------------------------------------------------- 8. Viacom, Inc. 2.35% - --------------------------------------------------------------- 9. Procter & Gamble Co. 2.29% - --------------------------------------------------------------- 10. Exxon Mobil Corp. 2.28%
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Date 1 Year 3 Years 5 Years 10 Years Since Inception - ----------------------------------------------------------------------------------------------- Class A Shares (without sales charge) 6/1/72 20.95% -9.45% -4.68% 7.98% 13.27% - ----------------------------------------------------------------------------------------------- Class A Shares (with sales charge) 6/1/72 15.51% -10.83% -5.55% 7.48% 13.10% - ----------------------------------------------------------------------------------------------- Class B Shares (without sales charge) 5/1/96 19.72% -10.32% -5.56% -- 4.63% - ----------------------------------------------------------------------------------------------- Class B Shares (with sales charge) 5/1/96 16.72% -10.92% -5.75% -- 4.63% - ----------------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 19.45% -10.52% -- -- -15.67% - ----------------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 18.45% -10.52% -- -- -15.67% - ----------------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 20.58% -- -- -- -6.84% - ----------------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 19.58% -- -- -- -6.84%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- The Guardian Park Avenue Fund Growth of a Hypothetical $10,000 Investment [CHART] Guardian Park Avenue Fund (Class A) S&P 500 Index Cost of Living -------------- ------------- -------------- 06/01/72 $ 10,000 $ 10,000 $10,000 June-72 9,343 9,791 10,024 July-72 9,412 9,837 10,064 August-72 9,689 10,199 10,080 September-72 9,470 10,173 10,121 October-72 9,551 10,292 10,153 November-72 10,117 10,784 10,177 December-72 9,905 10,935 10,210 January-73 9,531 10,773 10,241 February-73 9,157 10,394 10,313 March-73 8,940 10,404 10,409 April-73 8,498 10,005 10,481 May-73 8,096 9,841 10,545 June-73 7,746 9,802 10,617 July-73 8,302 10,200 10,641 August-73 8,044 9,852 10,834 September-73 9,089 10,271 10,866 October-73 9,173 10,284 10,954 November-73 8,078 9,143 11,034 December-73 8,341 9,320 11,106 January-74 8,836 9,254 11,202 February-74 8,936 9,248 11,347 March-74 8,882 9,061 11,491 April-74 8,719 8,735 11,539 May-74 8,210 8,471 11,683 June-74 8,080 8,376 11,779 July-74 7,961 7,754 11,876 August-74 7,333 7,085 12,020 September-74 6,803 6,276 12,164 October-74 7,449 7,329 12,284 November-74 7,271 6,970 12,380 December-74 7,003 6,861 12,476 January-75 8,375 7,734 12,525 February-75 8,721 8,226 12,621 March-75 9,038 8,434 12,669 April-75 9,231 8,864 12,717 May-75 9,685 9,284 12,789 June-75 10,184 9,724 12,885 July-75 9,809 9,098 13,029 August-75 9,719 8,939 13,053 September-75 9,505 8,663 13,126 October-75 10,092 9,228 13,198 November-75 10,291 9,487 13,294 December-75 10,291 9,410 13,342 January-76 11,653 10,556 13,366 February-76 12,040 10,468 13,414 March-76 12,291 10,819 13,438 April-76 12,267 10,733 13,486 May-76 12,159 10,613 13,582 June-76 12,901 11,077 13,654 July-76 12,997 11,022 13,727 August-76 13,033 11,000 13,799 September-76 13,543 11,281 13,847 October-76 13,125 11,067 13,919 November-76 13,653 11,017 13,943 December-76 14,697 11,628 13,991 January-77 14,366 11,078 14,063 February-77 14,259 10,877 14,207 March-77 14,547 10,763 14,303 April-77 14,809 10,805 14,424 May-77 14,691 10,591 14,496 June-77 15,516 11,108 14,592 July-77 15,228 10,969 14,664 August-77 14,992 10,780 14,712 September-77 15,139 10,795 14,760 October-77 14,710 10,370 14,808 November-77 15,795 10,692 14,880 December-77 15,862 10,766 14,929 January-78 15,233 10,149 15,025 February-78 15,306 9,944 15,121 March-78 16,152 10,235 15,241 April-78 17,435 11,156 15,361 May-78 18,139 11,256 15,505 June-78 17,914 11,101 15,674 July-78 19,084 11,748 15,794 August-78 20,056 12,100 15,866 September-78 19,554 12,061 15,986 October-78 17,009 11,007 16,130 November-78 17,685 11,239 16,203 December-78 18,159 11,454 16,275 January-79 19,008 11,961 16,419 February-79 18,653 11,578 16,611 March-79 19,926 12,262 16,780 April-79 20,003 12,336 16,972 May-79 19,911 12,067 17,188 June-79 20,417 12,583 17,381 July-79 20,939 12,749 17,573 August-79 22,258 13,479 17,741 September-79 22,430 13,535 17,933 October-79 21,418 12,664 18,078 November-79 22,319 13,260 18,246 December-79 23,442 13,539 18,438 January-80 25,291 14,380 18,703 February-80 24,817 14,377 18,967 March-80 22,398 12,987 19,256 April-80 22,994 13,584 19,472 May-80 24,041 14,277 19,664 June-80 24,582 14,721 19,881 July-80 25,882 15,744 19,881 August-80 26,459 15,901 20,025 September-80 27,126 16,363 20,193 October-80 27,517 16,692 20,385 November-80 29,005 18,461 20,554 December-80 28,484 17,907 20,746 January-81 28,447 17,157 20,914 February-81 29,321 17,453 21,131 March-81 30,487 18,146 21,275 April-81 30,774 17,791 21,419 May-81 30,876 17,833 21,587 June-81 30,487 17,725 21,780 July-81 30,180 17,754 22,020 August-81 29,076 16,729 22,188 September-81 27,979 15,910 22,405 October-81 29,543 16,768 22,453 November-81 30,629 17,454 22,525 December-81 30,130 17,009 22,597 January-82 29,369 16,789 22,669 February-82 28,413 15,855 22,741 March-82 28,182 15,773 22,717 April-82 29,502 16,484 22,813 May-82 28,761 15,921 23,030 June-82 28,159 15,681 23,318 July-82 27,441 15,403 23,438 August-82 30,868 17,261 23,487 September-82 32,008 17,473 23,535 October-82 36,087 19,484 23,607 November-82 37,661 20,268 23,559 December-82 37,780 20,656 23,463 January-83 38,949 21,425 23,511 February-83 40,212 21,915 23,535 March-83 42,078 22,719 23,535 April-83 45,213 24,507 23,703 May-83 46,557 24,292 23,847 June-83 49,493 25,227 23,919 July-83 48,299 24,482 24,015 August-83 47,154 24,846 24,088 September-83 48,413 25,184 24,208 October-83 47,300 24,891 24,280 November-83 48,261 25,413 24,328 December-83 48,590 25,280 24,352 January-84 48,059 25,138 24,496 February-84 46,277 24,257 24,616 March-84 46,541 24,674 24,665 April-84 47,364 24,903 24,785 May-84 45,307 23,525 24,857 June-84 47,716 24,027 24,929 July-84 46,894 23,728 25,025 August-84 52,594 26,337 25,121 September-84 52,934 26,343 25,241 October-84 53,477 26,441 25,314 November-84 53,296 26,142 25,314 December-84 54,742 26,822 25,314 January-85 60,225 28,912 25,362 February-85 62,203 29,263 25,482 March-85 61,393 29,281 25,578 April-85 60,617 29,252 25,698 May-85 63,282 30,931 25,794 June-85 64,868 31,409 25,866 July-85 65,036 31,364 25,915 August-85 64,261 31,096 25,963 September-85 60,333 30,130 26,035 October-85 63,149 31,520 26,131 November-85 68,574 33,673 26,203 December-85 72,798 35,289 26,275 January-86 74,618 35,484 26,347 February-86 81,036 38,124 26,275 March-86 87,037 40,237 26,155 April-86 87,878 39,781 26,107 May-86 91,968 41,888 26,179 June-86 93,344 42,589 26,323 July-86 86,655 40,206 26,323 August-86 89,254 43,177 26,371 September-86 82,359 39,624 26,492 October-86 86,071 41,911 26,516 November-86 87,965 42,927 26,540 December-86 86,179 41,837 26,564 January-87 96,526 47,470 26,732 February-87 104,479 49,339 26,828 March-87 106,660 50,754 26,948 April-87 102,508 50,297 27,092 May-87 101,711 50,723 27,189 June-87 104,389 53,265 27,285 July-87 108,786 55,960 27,357 August-87 113,352 58,039 27,501 September-87 111,745 56,769 27,645 October-87 84,813 44,544 27,718 November-87 80,966 40,882 27,742 December-87 88,729 43,972 27,742 January-88 90,301 45,882 27,814 February-88 97,445 47,928 27,886 March-88 100,112 46,472 28,006 April-88 102,112 47,048 28,150 May-88 100,826 47,335 28,246 June-88 107,073 49,508 28,367 July-88 106,199 49,383 28,487 August-88 102,852 47,625 28,607 September-88 105,617 49,649 28,799 October-88 106,296 51,086 28,895 November-88 104,065 50,272 28,919 December-88 107,166 51,154 28,968 January-89 113,972 54,945 29,112 February-89 115,281 53,512 29,232 March-89 117,165 54,772 29,400 April-89 121,511 57,675 29,593 May-89 124,180 59,856 29,761 June-89 124,001 59,543 29,833 July-89 129,424 64,972 29,905 August-89 136,178 66,144 29,953 September-89 135,220 65,881 30,049 October-89 129,531 64,397 30,194 November-89 130,966 65,633 30,266 December-89 132,707 67,204 30,314 January-90 124,901 62,757 30,626 February-90 127,605 63,471 30,771 March-90 130,863 65,181 30,939 April-90 125,761 63,615 30,987 May-90 133,752 69,636 31,059 June-90 131,696 69,207 31,227 July-90 128,760 69,037 31,347 August-90 116,453 62,734 31,636 September-90 111,080 59,733 31,900 October-90 106,207 59,530 32,093 November-90 112,204 63,283 32,165 December-90 116,342 65,041 32,165 January-91 123,478 67,942 32,357 February-91 133,163 72,697 32,405 March-91 138,132 74,501 32,453 April-91 137,623 74,727 32,501 May-91 141,828 77,807 32,598 June-91 136,539 74,298 32,694 July-91 143,602 77,837 32,742 August-91 148,065 79,568 32,838 September-91 148,906 78,256 32,982 October-91 153,757 79,387 33,030 November-91 146,901 76,116 33,126 December-91 157,248 84,769 33,150 January-92 160,926 83,288 33,199 February-92 164,109 84,291 33,319 March-92 161,704 82,671 33,487 April-92 161,846 85,185 33,535 May-92 164,817 85,478 33,583 June-92 159,102 84,210 33,703 July-92 165,737 87,744 33,775 August-92 161,456 85,855 33,872 September-92 166,665 86,846 33,968 October-92 170,874 87,243 34,088 November-92 181,647 90,091 34,136 December-92 189,447 91,214 34,112 January-93 198,103 92,072 34,280 February-93 200,211 93,252 34,400 March-93 207,813 95,203 34,521 April-93 204,727 93,006 34,617 May-93 209,995 95,338 34,665 June-93 215,173 95,626 34,713 July-93 216,554 95,337 34,713 August-93 229,743 98,834 34,809 September-93 233,807 98,074 34,881 October-93 230,433 100,199 35,026 November-93 223,302 99,132 35,050 December-93 227,863 100,349 35,050 January-94 233,673 103,841 35,146 February-94 230,967 100,956 35,266 March-94 221,336 96,584 35,386 April-94 223,087 97,932 35,434 May-94 224,440 99,377 35,458 June-94 218,710 96,957 35,578 July-94 224,483 100,245 35,675 August-94 230,995 104,243 35,819 September-94 227,169 101,682 35,915 October-94 230,507 104,047 35,939 November-94 219,437 100,187 35,987 December-94 224,591 101,655 35,987 January-95 223,923 104,366 36,131 February-95 236,284 108,365 36,276 March-95 244,970 111,557 36,396 April-95 252,236 114,924 36,516 May-95 260,422 119,336 36,588 June-95 270,695 122,113 36,660 July-95 285,914 126,247 36,660 August-95 288,517 126,461 36,756 September-95 297,918 131,765 36,828 October-95 293,134 131,368 36,949 November-95 300,605 137,009 36,925 December-95 301,580 139,649 36,901 January-96 311,257 144,470 37,117 February-96 315,340 145,736 37,237 March-96 317,205 147,152 37,429 April-96 321,732 149,400 37,574 May-96 331,587 153,079 37,646 June-96 333,904 153,694 37,670 July-96 320,164 146,943 37,742 August-96 327,265 149,982 37,814 September-96 347,459 158,357 37,934 October-96 360,646 162,781 38,054 November-96 385,636 174,990 38,127 December-96 381,454 171,525 38,127 January-97 405,502 182,333 38,247 February-97 403,590 183,703 38,367 March-97 385,277 176,190 38,463 April-97 406,106 186,775 38,511 May-97 431,563 197,992 38,487 June-97 451,626 206,864 38,535 July-97 489,655 223,323 38,583 August-97 473,664 210,810 38,655 September-97 501,853 222,282 38,752 October-97 489,040 214,921 38,848 November-97 504,313 224,793 38,824 December-97 514,394 228,623 38,776 January-98 507,367 231,206 38,848 February-98 542,612 247,830 38,920 March-98 569,603 260,544 38,992 April-98 578,526 263,280 39,064 May-98 569,157 258,672 39,136 June-98 585,343 269,200 39,184 July-98 571,995 266,266 39,232 August-98 484,154 227,844 39,281 September-98 510,621 242,654 39,329 October-98 545,073 262,284 39,425 November-98 576,330 278,179 39,425 December-98 623,955 294,369 39,401 January-99 645,844 306,673 39,497 February-99 618,182 297,136 39,545 March-99 638,147 309,021 39,665 April-99 642,236 320,980 39,954 May-99 631,291 313,405 39,954 June-99 674,605 330,799 39,954 July-99 656,616 320,478 40,073 August-99 656,616 318,876 40,170 September-99 649,839 310,139 40,362 October-99 686,557 329,764 40,435 November-99 719,210 336,468 40,459 December-99 812,676 356,272 40,459 January-00 783,954 338,372 40,556 February-00 882,974 331,967 40,796 March-00 896,241 364,443 41,130 April-00 826,626 353,479 41,155 May-00 754,276 346,226 41,180 June-00 836,063 354,761 41,418 July-00 809,172 349,220 41,515 August-00 916,797 370,911 41,491 September-00 829,564 351,327 41,707 October-00 755,218 349,851 41,779 November-00 635,839 322,283 41,851 December-00 661,350 323,862 41,923 January-01 666,328 335,359 42,187 February-01 564,669 304,808 42,356 March-01 525,803 285,514 42,453 April-01 574,945 307,698 42,623 May-01 574,140 309,760 42,815 June-01 565,373 302,233 42,995 July-01 553,082 299,271 42,874 August-01 517,827 280,536 42,874 September-01 475,780 257,897 42,681 October-01 488,879 262,815 42,536 November-01 511,358 282,975 42,464 December-01 517,504 285,456 42,358 January-02 510,226 281,291 42,430 February-02 504,243 275,865 42,527 March-02 522,355 286,241 42,672 April-02 493,408 268,895 42,887 May-02 484,836 266,905 42,887 June-02 450,557 247,902 42,930 July-02 420,228 228,575 42,977 August-02 424,607 230,075 43,012 September-02 382,762 205,070 43,083 October-02 414,227 223,117 43,154 November-02 431,419 236,236 43,154 December-02 405,955 222,359 43,059 January-03 394,764 216,533 43,250 February-03 388,601 213,285 43,583 March-03 388,601 215,356 43,847 April-03 417,633 233,095 43,752 May-03 437,257 245,376 43,680 June-03 440,085 248,505 43,728 July-03 449,716 252,888 43,776 August-03 454,123 257,819 43,942 September-03 449,879 255,081 44,050 October-03 472,643 269,519 44,002 November-03 474,959 271,891 43,883 December-03 496,427 286,165 43,800 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 $496,427 on December 31, 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 $286,165. 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-advisor, 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 December 31, 2003: $84,827,055 Q: How did the Fund perform during 2003? A: Since its inception on February 3, 2003 through December 31, 2003, The Guardian UBS Large Cap Value Fund had a total return of 31.48,/1/ versus a return of 32.52% for its benchmark, the Russell 1000 Value Index./2/ Q: What factors affected the Fund's performance? A: Industry allocation and stock selection contributed most strongly to year-to-date performance, with overweightings in medical services and construction being the largest contributors by industry. The Fund's exposure to larger cap stocks detracted from its performance, as smaller, beaten-up stocks were the strongest performers in 2003. The strengthening economy and early 2003 successes in Iraq drove the U.S. equity market, as did strong earnings growth and investor perception of higher earnings quality. The U.S. economy also performed impressively, with a surprisingly strong 8.2% third quarter annualized growth in U.S. real GDP,/3/ and consensus expectations of 4.6% for 2004. Thanks to further tax cuts and anticipated continued fiscal stimuli, consumption is likely to remain an important contributor to economic growth in 2004. A continued strong economic recovery, however, now appears to be priced into the market, and our view is that the market as a whole is within a modest range of fair valuation. There remain some underlying concerns about the growing deficit, but investors' caution on that score has abated. Q: What is your strategy going forward? A: We are finding attractive opportunities in the banking and financial sectors. We also continue to see opportunities in healthcare, and believe we are well positioned in light of the effects of the new Medicare bill. We currently have exposure to the generic drug segment at reasonable valuations. We are also maintaining branded-drug exposure with unique, non-geriatric product concentrations (vaccines, anti-infectives, antidepressants). While we take advantage of those opportunities, we are avoiding new, broadly utilized, big-technology biologics, and large-dollar, commodity geriatric markets (cholesterol, hypertension, anti-inflammatory drug makers), which we believe will face a secular headwind. - -------------------------------------------------------------------------------- "We are finding attractive opportunities in the banking and financial sectors. We also continue to see opportunities in health care, and believe we are well positioned in light of the effects of the new Medicare bill." - -------------------------------------------------------------------------------- In contrast to the attractive health care and financial sectors, we continue to underweight computer hardware-- specifically the semiconductors market. While this area has seen an improvement in the underlying fundamentals, the price appreciation has far surpassed the improving fundamentals. Our underweight in this area is driven by the fact that the market is currently pricing in expected growth rates well above what these companies have historically been able to achieve. We do not believe these expectations will be met. - -------------------------------------------------------------------------------- /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. Current performance may be lower or higher than the data quoted. /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. /3/ 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. - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- The Guardian UBS Large Cap Value Fund Sector Weightings Held by the Fund as of December 31, 2003 [CHART] Energy 8.71% Health Care 11.54% Consumer Staples 2.55% Utilities 7.91% Industrials 10.50% Financials 33.62% Materials 6.51% Information Technology 3.59% Telecommunication Services 8.21% Consumer Discretionary 6.86%
Top Ten Holdings as of December 31, 2003 (holdings are subject to change) Company Percentage of Total Net Assets - ------------------------------------------ 1. Citigroup, Inc. 5.77% - ------------------------------------------ 2. Exxon Mobil Corp. 5.01% - ------------------------------------------ 3. Nextel Comm., Inc. 4.61% - ------------------------------------------ 4. Wells Fargo & Co. 4.30% - ------------------------------------------ 5. Morgan Stanley 4.16% - ------------------------------------------ 6. J.P. Morgan Chase & Co. 3.84% - ------------------------------------------ 7. UnitedHealth Group 3.20% - ------------------------------------------ 8. ConocoPhillips 3.00% - ------------------------------------------ 9. Federal Home Loan Mortgage Corp. 2.96% - ------------------------------------------ 10. Illinois Tool Works, Inc. 2.83%
Total Returns/1/ for Period Ending December 31, 2003 Inception Since Date Inception - --------------------------------------------------------- Class A Shares (without sales charge) 2/3/03 31.48% - --------------------------------------------------------- Class A Shares (with sales charge) 2/3/03 25.56% - --------------------------------------------------------- Class B Shares (without sales charge) 2/3/03 30.65% - --------------------------------------------------------- Class B Shares (with sales charge) 2/3/03 27.65% - --------------------------------------------------------- Class C Shares (without sales charge) 2/3/03 30.65% - --------------------------------------------------------- Class C Shares (with sales charge) 2/3/03 29.65% - --------------------------------------------------------- Class K Shares (without sales charge) 2/3/03 31.22% - --------------------------------------------------------- Class K Shares (with sales charge) 2/3/03 30.22% - ---------------------------------------------------------
/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 represents return for Class A shares and does not take into account the current maximum sales charge of 4.5%, except where noted. Total return figures for Class B, Class C and Class K shares do not take into account the current maximum sales charge of 4.5%, 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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 7 - -------------------------------------------------------------------------------- The Guardian Park Avenue Small Cap Fund [PHOTO] Matthew Ziehl Matthew Ziehl, C.F.A. Portfolio Manager Objective:Long-term growth of capital Portfolio:At least 85% in a diversified portfolio of common stocks issued by companies with a small market capitalization at the time of initial purchase Inception:May 1, 1997 Net Assets at December 31, 2003: $201,022,946 Q: How did the Fund perform during 2003? A: U.S. stocks rallied strongly in 2003, with small caps leading the way. The Russell 2000 Index/1/ returned an eye-popping 47.25%, setting a new calendar-year record return for the 25-year history of this benchmark, versus a "mere" 28.68% for the S&P 500 Index./2/ The Guardian Park Avenue Small Cap Fund participated in the rally, but performance trailed the benchmark by 4.02% with a 43.23%/3/ total return. 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. Highly speculative companies led this rally, as we discussed in our June 30th semiannual report letter to you. The Russell 2000's strongest performers during the first half of 2003 were companies that we consider to be of low fundamental quality, such as those with negative earnings, stocks priced below $5 per share, and stocks with under $500 million market cap in the Russell 2000. This environment made it challenging for the Fund to keep pace during the run-up, because we tend to avoid such companies. Instead, we seek to invest in companies with high fundamental quality--those we determine are demonstrably superior to their competitors in terms of financial strength, profitability and management skill. The stock market continued to rally strongly in the second half of 2003, and small cap stocks again led the charge. But the second-half rally was more broadly based, and encompassed higher quality companies as well as the more speculative fare. This environment was more favorable to our investment style, as reflected by stronger relative performance; The Guardian Park Avenue Small Cap Fund returned 25.33% versus 24.92% for the Russell 2000 Index during the second half of 2003. For the full year 2003, relative performance was driven primarily by stock selection rather than by sector allocations. This is consistent with our investment discipline that emphasizes selecting individual stocks rather than placing large "bets" on one market sector versus another. The Fund generated strong returns within the technology, consumer, and basic materials sectors, but these benefits were more than offset by underperformance in industrial, healthcare and telecom stocks. Performance did benefit somewhat from the Fund being overweight versus the index in technology stocks during 2003, as technology was the small cap market's strongest major sector. Q: What was your investment strategy? A: Throughout 2003 we remained true to our investment philosophy and process of maintaining a diversified, high-quality portfolio. As bottom-up stock pickers, the Fund's overweights and underweights to its benchmark (the Russell 2000 Index) were a function of the individual stocks in the Fund's portfolio. Having said that, for much of the year the Fund held an overweight in technology stocks because we identified a number of firms with solid fundamentals that we believed were poised to benefit from the improving economic environment. We recently neutralized our technology weighting by trimming or selling out of certain technology stocks that had performed well, but that appeared to have gotten expensive in terms of their valuations versus current- and near-term sales and earnings. - -------------------------------------------------------------------------------- ". . . the second-half rally was more broadly based, and encompassed higher quality companies as well as the more speculative fare. This environment was more favorable to our investment style, as reflected by stronger relative performance . . ." - -------------------------------------------------------------------------------- Late in the year, we added to our exposure in the energy sector, as we believe investors have not priced in the likelihood that oil and natural gas prices will remain high for an extended period of time due to strengthening global demands for energy (including the secular growth of China as an industrial power) and ongoing supply constraints-- especially with regard to the U.S. natural gas supply. Q: What is your outlook for the future? A: Despite their considerable outperformance in 2003, we believe small cap stocks can continue to outperform their larger-cap counterparts during 2004, albeit less significantly. We expect the economic recovery to continue. Although stock market performance is impossible to predict, historically, an improving economy has favored smaller companies because their earnings tended to rebound more quickly than those of larger companies as - -------------------------------------------------------------------------------- /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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- The Guardian Park Avenue Small Cap Fund Gross Domestic Product/4/ (GDP) accelerates. In addition, from a valuation standpoint, small caps remain attractive relative to larger-cap companies. As always, we'll emphasize high quality companies that have strong financial characteristics and market share positions. We believe our investment approach will be rewarded when the market is once again fundamentally driven, not speculatively driven. In early 2004 we are adding to positions in the consumer cyclical sector, mainly in retail stocks. We had trimmed our retail positions during the third quarter after these stocks ran up strongly and valuations became quite stretched, as the market anticipated a very strong holiday selling season. We viewed these stocks as vulnerable to price declines if their high sales expectations were not met. Holiday sales turned out to be solid but not spectacular, and this group lagged the market as the year drew to a close. In early 2004 we are selectively increasing our exposure to retailers at more reasonable valuations. Growth of a Hypothetical $10,000 Investment [CHART] Guardian Guardian Park Avenue Park Avenue Small Cap Small Cap Fund Fund Russell 2000 (Class A) (Class B) Index ---------- ---------- ---------- 5/1/97 $10,000 $10,000 $10,000 May-97 10,461 10,510 11,113 June-97 11,043 11,086 11,589 July-97 11,851 11,879 12,128 August-97 12,095 12,115 12,405 September-97 13,400 13,371 13,313 October-97 12,940 12,937 12,729 November-97 12,865 12,861 12,646 December-97 13,068 13,047 12,868 January-98 13,068 13,037 12,665 February-98 13,912 13,877 13,601 March-98 14,615 14,574 14,162 April-98 14,710 14,659 14,240 May-98 13,960 13,905 13,473 June-98 13,950 13,877 13,501 July-98 12,793 12,713 12,409 August-98 10,040 9,963 9,999 September-98 10,451 10,376 10,782 October-98 10,623 10,540 11,221 November-98 11,388 11,290 11,809 December-98 12,239 12,126 12,540 January-99 11,923 11,799 12,706 February-99 10,737 10,617 11,677 March-99 10,776 10,655 11,860 April-99 11,292 11,155 12,922 May-99 11,455 11,309 13,111 June-99 12,047 11,886 13,704 July-99 11,943 11,771 13,329 August-99 11,685 11,511 12,835 September-99 11,838 11,655 12,838 October-99 12,679 12,463 12,891 November-99 14,334 14,069 13,660 December-99 16,732 16,406 15,207 January-00 16,560 16,223 14,963 February-00 20,475 20,570 17,433 March-00 19,125 18,723 16,284 April-00 17,450 17,069 15,304 May-00 16,100 15,742 14,412 June-00 18,666 18,223 15,668 July-00 18,312 17,877 15,164 August-00 20,858 20,348 16,321 September-00 19,853 19,348 15,842 October-00 18,139 17,665 15,811 November-00 14,789 14,396 13,156 December-00 16,339 15,895 12,247 January-01 16,184 15,730 12,885 February-01 14,630 14,217 12,039 March-01 13,926 13,529 11,450 April-01 14,930 14,489 12,346 May-01 15,499 15,022 12,650 June-01 15,624 15,139 13,097 July-01 15,451 14,954 12,388 August-01 14,814 14,324 11,988 September-01 13,221 12,782 10,374 October-01 13,743 13,277 10,982 November-01 14,457 13,946 11,832 December-01 15,190 14,644 12,564 January-02 15,248 14,683 12,433 February-02 15,229 14,663 12,092 March-02 16,097 15,488 13,064 April-02 16,174 15,546 13,183 May-02 15,644 15,022 12,598 June-02 14,901 14,305 11,973 July-02 13,057 12,520 10,165 August-02 13,097 12,549 10,139 September-02 12,257 11,735 9,411 October-02 12,681 12,132 9,713 November-02 13,395 12,801 10,579 December-02 12,835 12,258 9,990 January-03 12,401 11,841 9,714 February-03 12,005 11,444 9,420 March-03 12,140 11,560 9,541 April-03 13,183 12,549 10,446 May-03 14,244 13,548 11,567 June-03 14,669 13,946 11,776 July-03 15,470 14,692 12,513 August-03 16,242 15,410 13,087 September-03 15,991 15,158 12,845 October-03 17,508 16,458 13,924 November-03 18,083 16,991 14,418 December-03 18,529 16,879 14,711 To give you a comparison, the chart above shows the performance of a hypothetical $10,000 investment made in Class A and Class B shares of The Guardian Park Avenue Small Cap Fund and the Russell 2000 Index. The starting point of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an investor may have to pay when purchasing Class A shares of the Fund. For Class B shares, the contingent deferred sales charge of 1% was imposed at the end of the period. The Index and Class B shares begin at $10,000. 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. Performance for Class C and Class K shares, which were first offered on August 7, 2000 and May 15, 2001, respectively, will vary due to differences in sales load and other expenses charged to each share class.
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Date 1 Year 3 Years 5 Years Since Inception - -------------------------------------------------------------------------------------- Class A Shares (without sales charge) 5/1/97 43.23% 4.01% 8.45% 10.16% - -------------------------------------------------------------------------------------- Class A Shares (with sales charge) 5/1/97 36.78% 2.43% 7.46% 9.40% - -------------------------------------------------------------------------------------- Class B Shares (without sales charge) 5/6/97 41.85% 3.04% 7.47% 8.67% - -------------------------------------------------------------------------------------- Class B Shares (with sales charge) 5/6/97 38.85% 2.41% 7.32% 8.67% - -------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 41.62% 2.85% -- -2.17% - -------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 40.62% 2.85% -- -2.17% - -------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 42.89% -- -- 6.46% - -------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 41.89% -- -- 6.46%
/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. Current performance may be lower or higher than data quoted. - -------------------------------------------------------------------------------- /4/ 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. - -------------------------------------------------------------------------------- 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-advisor, 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 December 31, 2003: $38,732,859 Q: How did the Fund perform during 2003? A: Since its inception on February 3, 2003 through December 31, 2003, The Guardian UBS Small Cap Value Fund had a total return of 35.76%/1/ versus a return of 50.85% for its benchmark, the Russell 2000 Value Index./2/ Q: What factors affected the Fund's performance? A: After a weak first quarter performance, the U.S. equity markets rallied strongly, reflecting a successful war effort in Iraq and an above average rebound for the U.S. economy. In particular, investors were attracted to the most volatile sectors of the market, including technology and biotechnology/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 the Fund's conservative position in terms of volatility, while investors were showing an increasing appetite for risk. Fund performance was also affected by negative stock selection due to the disappointing earnings reports of several portfolio holdings. The Fund's industry selection benefited from overweights in medical services, leisure and medical devices. - -------------------------------------------------------------------------------- "We continue to favor companies with high earnings yields (low P/E ratios), strong balance sheets, low earnings variation, strong free cash flow generation and attractive growth prospects." - -------------------------------------------------------------------------------- Q: What is your strategy going forward? A: We continue to favor companies with high earnings yields (low P/E ratios), strong balance sheets, low earnings variation, strong free cash flow generation and attractive growth prospects. We will continue to value companies based on traditional fundamental analysis, a strategy that has served us well over the long term. We are evaluating attractive expected return companies in the higher volatility segment of the market on an opportunistic basis. At the end of the reporting period, the Fund's largest sector overweights were in medical services, consumer durables and medical devices, while the largest underweights were in industrial parts and heavy machinery. - -------------------------------------------------------------------------------- /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. Current performance may be lower or higher than the data quoted. /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 December 31, 2003 [CHART] Energy 5.79% Health Care 8.73% Consumer Staples 2.24% Industrials 13.16% Utilities 3.09% Financials 30.36% Materials 6.32% Information Technology 13.08% Consumer Discretionary 17.23%
Top Ten Holdings as of December 31, 2003 (holdings are subject to change) Company Percentage of Total Net Assets..... - ----------------------------------------------------------------- 1. Equitable Resources, Inc. 2.67% - ----------------------------------------------------------------- 2. AmerUs Group Co. 2.46% - ----------------------------------------------------------------- 3. City National Corp. 2.41% - ----------------------------------------------------------------- 4. IndyMac Bancorp, Inc. 2.28% - ----------------------------------------------------------------- 5. Cullen/Frost Bankers, Inc. 2.12% - ----------------------------------------------------------------- 6. Colonial BancGroup, Inc. 2.05% - ----------------------------------------------------------------- 7. ALLETE, Inc. 1.98% - ----------------------------------------------------------------- 8. Reynolds & Reynolds Co. 1.97% - ----------------------------------------------------------------- 9. Park Electrochemical Corp. 1.94% - ----------------------------------------------------------------- 10. Renal Care Group, Inc. 1.91%
Total Returns/1/ for Period Ending December 31, 2003 Inception Since Date Inception - ----------------------------------------------------------------- Class A Shares (without sales charge) 2/3/03 35.76% - ----------------------------------------------------------------- Class A Shares (with sales charge) 2/3/03 29.65% - ----------------------------------------------------------------- Class B Shares (without sales charge) 2/3/03 34.76% - ----------------------------------------------------------------- Class B Shares (with sales charge) 2/3/03 31.76% - ----------------------------------------------------------------- Class C Shares (without sales charge) 2/3/03 34.76% - ----------------------------------------------------------------- Class C Shares (with sales charge) 2/3/03 33.76% - ----------------------------------------------------------------- Class K Shares (without sales charge) 2/3/03 35.46% - ----------------------------------------------------------------- Class K Shares (with sales charge) 2/3/03 34.46%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 11 - -------------------------------------------------------------------------------- The Guardian Asset Allocation Fund [PHOTO] Jonathan C. Jankus, C.F.A. Jonathan C. Jankus, C.F.A. Portfolio Manager Objective:Long-term total investment return consistent with moderate investment risk 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 December 31, 2003: $167,566,045 Q: How did the Fund perform this year? A: For the year ending December 31, 2003, the Fund's return was 27.87%,/1/ placing it above the average 21.20% return of 310 funds with similar objectives and policies in the Lipper/2/ universe. The Fund also outperformed the median return of 19.74% produced by Morningstar's/3/ universe of 850 asset allocation funds. During this period, the Fund's return also significantly surpassed the 18.48% return experienced by its passive composite benchmark, a model portfolio with 60% of its value in the S&P 500 Index/4/ and 40% in the Lehman Aggregate Bond Index,/5/ rebalanced monthly without expenses or trading costs. Since its inception on February 16, 1993 through December 31, 2003, the Fund's annualized return of 8.81% places it behind the annualized return of 9.79% experienced by its passive composite benchmark. Q: What factors affected Fund performance? A: Stock market returns were positive for the first year since 1999. Indeed, the market's returns for 2000, 2001 and 2002 were so poor that the cumulative return including dividends on the S&P 500 Index for the five-year period ending December 31, 2003 has actually been negative. In addition to a weak economy, the market had to deal with shocking levels of corporate malfeasance, the continuing threat of terrorist attacks and a Mid-East war. The Fund's performance was positively impacted by a correctly aggressive stance on the market. After the declines of 2000, 2001 and the first half of 2002, our models viewed the market as being extremely "cheap" relative to fixed-income alternatives. In addition, the turnaround in the economy led to a pronounced rebound in corporate profitability. Even in the face of increasing federal deficits and a rapidly expanding economy, bond yields and short-term interest rates continued to stay very low. - -------------------------------------------------------------------------------- "The Fund's performance was positively impacted by a correctly aggressive stance on the market." - -------------------------------------------------------------------------------- Q: What are your expectations for the coming year? A: Our investing will, of course, continue to be guided by our quantitative model, whose ideal mix would have us invested fully 100% in stocks, 0% in bonds and 0% in cash. This is the most aggressive position that the Fund can hold. Most signs indicate continuing economic growth that hopefully will continue to feed a rebound in corporate profits. A risk on the horizon is the extent to which interest rates will rise in the near term, especially given such exogenous factors as a weak dollar and expensive oil. Politically, especially during an election year, fiscal or monetary tightening seem unlikely at least until employment statistics begin to share the apparent strength of the overall economy. - -------------------------------------------------------------------------------- /1/ Total return figures are historical and assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Total return figures for Class A shares do not take into account the current maximum sales charge of 4.5%. Returns represent past performance and are not 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. Current performance may be lower or higher than the data quoted. /2/ 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. /3 (R)/2003 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. /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/ 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. - -------------------------------------------------------------------------------- 12 - -------------------------------------------------------------------------------- The Guardian Asset Allocation Fund Growth of a Hypothetical $10,000 Investment [CHART] Guardian Asset Lehman Allocation Fund S&P 500 Aggregate (Class A) Index Bond Index --------------- ------- ---------- 2/16/1993 $10,000 $10,000 $10,000 2/26/1993 9,680 9,988 10,129 3/31/1993 9,862 10,196 10,171 4/30/1993 9,804 9,961 10,242 5/31/1993 9,900 10,211 10,255 6/30/1993 10,186 10,241 10,441 7/30/1993 10,186 10,211 10,500 8/31/1993 10,760 10,585 10,684 9/30/1993 10,922 10,504 10,713 10/29/1993 10,884 10,732 10,753 11/30/1993 10,597 10,618 10,662 12/31/1993 10,718 10,749 10,720 1/31/1994 11,128 11,123 10,865 2/28/1994 10,864 10,814 10,676 3/31/1994 10,513 10,345 10,413 4/29/1994 10,435 10,490 10,329 5/31/1994 10,366 10,645 10,328 6/30/1994 10,191 10,386 10,305 7/29/1994 10,365 10,738 10,510 8/31/1994 10,679 11,166 10,523 9/30/1994 10,466 10,892 10,368 10/31/1994 10,668 11,145 10,359 11/30/1994 10,294 10,732 10,336 12/30/1994 10,490 10,888 10,407 1/31/1995 10,428 11,179 10,613 2/28/1995 11,023 11,607 10,865 3/31/1995 11,300 11,950 10,932 4/28/1995 11,371 12,311 11,085 5/31/1995 11,730 12,783 11,514 6/30/1995 11,997 13,081 11,598 7/31/1995 12,550 13,525 11,572 8/31/1995 12,560 13,548 11,712 9/29/1995 12,881 14,115 11,826 10/31/1995 12,767 14,073 11,980 11/30/1995 13,057 14,677 12,159 12/29/1995 13,061 14,960 12,330 1/31/1996 13,361 15,476 12,412 2/29/1996 13,351 15,612 12,196 3/29/1996 13,436 15,764 12,111 4/30/1996 13,522 16,005 12,043 5/31/1996 13,769 16,399 12,019 6/28/1996 13,934 16,464 12,180 7/31/1996 13,455 15,741 12,213 8/30/1996 13,615 16,067 12,193 9/30/1996 14,276 16,964 12,405 10/31/1996 14,788 17,437 12,680 11/29/1996 15,734 18,745 12,897 12/31/1996 15,510 18,374 12,777 1/31/1997 16,348 19,531 12,816 2/28/1997 16,312 19,678 12,848 3/31/1997 15,761 18,873 12,706 4/30/1997 16,432 20,007 12,896 5/30/1997 17,162 21,208 13,018 6/30/1997 17,722 22,158 13,173 7/31/1997 18,851 23,922 13,528 8/29/1997 18,323 22,582 13,412 9/30/1997 18,949 23,810 13,610 10/31/1997 18,826 23,022 13,808 11/28/1997 19,047 24,079 13,871 12/31/1997 19,300 24,488 14,011 1/30/1998 19,190 24,765 14,191 2/27/1998 20,001 26,546 14,180 3/31/1998 20,646 27,907 14,229 4/30/1998 20,825 28,201 14,303 5/29/1998 20,715 27,707 14,439 6/30/1998 21,084 28,835 14,561 7/31/1998 20,833 28,520 14,592 8/31/1998 18,949 24,405 14,830 9/30/1998 19,842 25,991 15,177 10/30/1998 20,972 28,094 15,097 11/30/1998 21,852 29,796 15,182 12/31/1998 23,046 31,531 15,228 1/29/1999 23,608 32,849 15,337 2/26/1999 22,843 31,827 15,069 3/31/1999 23,374 33,100 15,153 4/30/1999 23,623 34,381 15,201 5/31/1999 23,342 33,570 15,067 6/30/1999 23,972 35,433 15,019 7/31/1999 23,680 34,327 14,956 8/31/1999 23,745 34,156 14,948 9/30/1999 23,729 33,218 15,121 10/31/1999 24,200 35,320 15,177 11/30/1999 24,671 36,038 15,176 12/31/1999 26,039 38,159 15,103 1/31/2000 26,074 36,242 15,054 2/29/2000 27,978 35,556 15,236 3/31/2000 27,749 39,034 15,436 4/30/2000 26,867 37,860 15,392 5/31/2000 25,862 37,083 15,385 6/30/2000 27,238 37,997 15,705 7/31/2000 27,146 37,403 15,848 8/31/2000 28,312 39,727 16,077 9/30/2000 27,609 37,629 16,178 10/31/2000 26,998 37,471 16,285 11/30/2000 25,722 34,518 16,552 12/31/2000 26,300 34,688 16,859 1/31/2001 26,765 35,919 17,134 2/28/2001 24,459 32,647 17,284 3/31/2001 23,144 30,580 17,370 4/30/2001 24,742 32,956 17,298 5/31/2001 24,863 33,177 17,403 6/30/2001 24,349 32,371 17,468 7/31/2001 24,218 32,054 17,859 8/31/2001 22,955 30,047 18,064 9/30/2001 21,496 27,623 18,274 10/31/2001 21,866 28,150 18,656 11/30/2001 23,282 30,309 18,399 12/31/2001 23,609 30,576 18,282 1/31/2002 23,325 30,130 18,430 2/28/2002 22,955 29,549 18,609 3/31/2002 23,652 30,660 18,299 4/30/2002 22,389 28,802 18,654 5/31/2002 22,236 28,589 18,813 6/30/2002 20,865 26,553 18,975 7/31/2002 19,157 24,483 19,204 8/31/2002 19,446 24,644 19,529 9/30/2002 17,273 21,966 19,845 10/31/2002 18,803 23,899 19,754 11/30/2002 19,911 25,306 19,749 12/31/2002 18,736 23,819 20,157 1/31/2003 18,248 23,195 20,174 2/28/2003 17,960 22,847 20,453 3/31/2003 18,137 23,069 20,438 4/30/2003 19,623 24,969 20,607 5/31/2003 20,621 26,285 20,991 6/30/2003 20,892 26,620 20,990 7/31/2003 21,253 27,089 20,285 8/31/2003 21,659 27,618 20,419 9/30/2003 21,613 27,324 20,960 10/31/2003 22,820 28,870 20,764 11/30/2003 23,025 29,124 20,814 12/31/2003 24,208 30,652 21,026 To give you a comparison, the chart above shows the performance of a hypothetical $10,000 investment made in Class A shares of each The Guardian Asset Allocation Fund, the S&P 500 Index and the Lehman Aggregate Bond Index. The starting point of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an investor may pay when purchasing Class A shares of the Fund. Each Index begins at $10,000. 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. 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. Portfolio Composition by Asset Class as of December 31, 2003 [CHART] Cash 0.59% Common Stocks 99.41%
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Date 1 Year 3 Years 5 Years 10 Years Since Inception - ----------------------------------------------------------------------------------------------- Class A Shares (without sales charge) 2/16/93 27.87% -3.06% 0.78% 8.38% 8.81% - ----------------------------------------------------------------------------------------------- Class A Shares (with sales charge) 2/16/93 22.12% -4.54% -0.14% 7.88% 8.35% - ----------------------------------------------------------------------------------------------- Class B Shares (without sales charge) 5/1/96 26.65% -3.91% -0.06% -- 6.63% - ----------------------------------------------------------------------------------------------- Class B Shares (with sales charge) 5/1/96 23.65% -4.55% -0.26% -- 6.63% - ----------------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 26.39% -4.31% -- -- -5.02% - ----------------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 25.39% -4.31% -- -- -5.02% - ----------------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 27.20% -- -- -- -2.57% - ----------------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 26.20% -- -- -- -2.57%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 13 - -------------------------------------------------------------------------------- The Guardian S&P 500 Index Fund [PHOTO] Jonathan C. Jankus, C.F.A. Jonathan C. Jankus, C.F.A. Portfolio Manager Objective:Seeks to track the investment performance of the Standard & Poor's 500 Composite 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 December 31, 2003: $157,686,909 Q: How did the Fund perform this year? A: For the year ending December 31, 2003, the Fund's return was 27.78%./1/ The Fund's objective is to match the returns of the S&P 500 Index,/2 /a theoretical portfolio of 500 blue-chip stocks, which returned 28.68% over the same period. The portfolio index is theoretical in the sense that it is computed as though it was purchased and subsequently rebalanced without any trading costs or Fund expenses. For the period starting at the Fund's inception on August 7, 2000 and ending December 31, 2003, the Fund's annualized return was -6.97% compared to a total annualized return of -6.63% for the S&P 500 Index. Q: What factors affected Fund performance? A: Stock market returns were positive for the first year since 1999. Indeed, the market's returns for 2000, 2001 and 2002 were so poor that the cumulative return including dividends on the S&P 500 has actually been negative for the five-year period ending December 31, 2003. In addition to a weak economy, the market had to deal with shocking levels of corporate malfeasance, the continuing threat of terrorist attacks and a Mid-East war. The stock market rebound has been a product of the turnaround in the economy in general and corporate profits in particular. In spite of this strength, interest rates and bond yields remained low. Q: What are your expectations for the coming year? A: We will continue to manage the portfolio so as to be substantially invested in stocks, attempt to match the S&P 500 Index and keep trading costs to a minimum. If history is any indication, this has proven to be a difficult strategy to surpass. Of course, past performance is no indication of future performance. - -------------------------------------------------------------------------------- "We will continue to manage the portfolio so as to be substantially invested in stocks, attempt to match the S&P 500 Index and keep trading costs to a minimum. If history is any indication, this has proven to be a difficult strategy to surpass." - -------------------------------------------------------------------------------- Most signs indicate continuing economic growth that will hopefully continue to feed a rebound in corporate profits. A risk on the horizon is the extent to which interest rates will rise in the near term, especially given such exogenous factors as a weak dollar and expensive oil. Politically, especially during an election year, fiscal or monetary tightening seem unlikely at least until employment statistics begin to share the apparent strength of the overall economy. - -------------------------------------------------------------------------------- /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. Current performance may be lower or higher than the data quoted. /2/ "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. - -------------------------------------------------------------------------------- 14 - -------------------------------------------------------------------------------- The Guardian S&P 500 Index Fund Growth of a Hypothetical $10,000 Investment [CHART] The Guardian The Guardian The Guardian S&P 500 S&P 500 S&P 500 Index Fund Index Fund Index Fund (Class A) (Class B) (Class C) S&P 500 Index -------------- -------------- -------------- ------------- 8/7/2000 $10,000 $10,000 $10,000 $10,000 Aug 31, 2000 9,797 10,247 10,247 10,270 Sep 30, 2000 9,297 9,723 9,723 9,728 Oct 31, 2000 9,268 9,684 9,684 9,687 Nov 30, 2000 8,551 8,923 8,923 8,923 Dec 31, 2000 8,590 8,947 8,947 8,967 Jan 31, 2001 8,884 9,254 9,254 9,285 Feb 28, 2001 8,079 8,413 8,413 8,440 Mar 31, 2001 7,568 7,879 7,879 7,905 Apr 30, 2001 8,145 8,472 8,472 8,520 May 31, 2001 8,202 8,522 8,522 8,577 Jun 30, 2001 7,995 8,304 8,304 8,368 Jul 31, 2001 7,919 8,215 8,215 8,286 Aug 31, 2001 7,426 7,701 7,701 7,767 Sep 30, 2001 6,827 7,079 7,079 7,140 Oct 31, 2001 6,951 7,197 7,197 7,277 Nov 30, 2001 7,473 7,741 7,741 7,835 Dec 31, 2001 7,538 7,795 7,796 7,904 Jan 31, 2002 7,424 7,676 7,677 7,788 Feb 28, 2002 7,280 7,518 7,519 7,638 Mar 31, 2002 7,548 7,795 7,796 7,926 Apr 30, 2002 7,090 7,320 7,311 7,445 May 31, 2002 7,032 7,251 7,252 7,390 Jun 30, 2002 6,534 6,731 6,731 6,864 Jul 31, 2002 6,026 6,206 6,207 6,329 Aug 31, 2002 6,065 6,246 6,236 6,370 Sep 30, 2002 5,394 5,553 5,553 5,678 Oct 31, 2002 5,873 6,038 6,038 6,178 Nov 30, 2002 6,208 6,385 6,385 6,541 Dec 31, 2002 5,853 5,985 5,986 6,157 Jan 31, 2003 5,689 5,826 5,817 5,996 Feb 28, 2003 5,601 5,727 5,728 5,906 Mar 31, 2003 5,660 5,777 5,778 5,963 Apr 30, 2003 6,115 6,243 6,256 6,455 May 31, 2003 6,435 6,571 6,575 6,795 Jun 30, 2003 6,515 6,644 6,648 6,880 Jul 31, 2003 6,632 6,753 6,757 7,002 Aug 31, 2003 6,749 6,872 6,887 7,138 Sep 30, 2003 6,680 6,872 6,877 7,062 Oct 31, 2003 7,050 7,171 7,176 7,462 Nov 30, 2003 7,109 7,231 7,236 7,528 Dec 31, 2003 7,480 7,381 7,531 7,923 To give you a comparison, the chart above shows the performance of a hypothetical $10,000 investment made in Class A, Class B and Class C shares of The Guardian S&P 500 Index Fund and the S&P 500 Index Fund. The starting point of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an investor may have to pay when purchasing Class A shares of the Fund. For Class B shares, the contingent deferred sales charge of 2% was imposed at the end of the period. The S&P 500 Index, Class B and Class C shares begin at $10,000. 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. Performance for Class K shares, which were first offered on May 15, 2001, will vary due to differences in sales load and other expenses charged to such share class. Sector Weightings for The Guardian S&P 500 Index Fund as of Sector Weightings of the S&P 500 Index as December 31, 2003 of December 31, 2003 [CHART] [CHART] Financials Financials 20.63% 20.66% Information Technology Information Technology 17.69% 17.71% Health Care Health Care 13.30% 13.32% Consumer Discretionary Consumer Discretionary 11.25% 11.30% Consumer Staples Consumer Staples 11.00% 10.99% Industrials Industrials 10.80% 10.90% Energy Energy 5.78% 5.80% Telecommunication Telecommunication Services 3.41% Services 3.45% Materials Materials 3.03% 3.04% Utilities Utilities 2.84% 2.84% Cash 0.27%
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Date 1 Year 3 Years Since Inception - ------------------------------------------------------------------------------ Class A Shares (without sales charge) 8/7/00 27.78% -4.51% -6.97% - ------------------------------------------------------------------------------ Class A Shares (with sales charge) 8/7/00 22.03% -5.96% -8.22% - ------------------------------------------------------------------------------ Class B Shares (without sales charge) 8/7/00 26.94% -5.30% -7.77% - ------------------------------------------------------------------------------ Class B Shares (with sales charge) 8/7/00 23.94% -5.94% -8.32% - ------------------------------------------------------------------------------ Class C Shares (without sales charge) 8/7/00 26.77% -5.34% -7.80% - ------------------------------------------------------------------------------ Class C shares (with sales charge) 8/7/00 25.77% -5.34% -7.80% - ------------------------------------------------------------------------------ Class K Shares (without sales charge) 5/15/01 27.31% -- -4.76% - ------------------------------------------------------------------------------ Class K Shares (with sales charge) 5/15/01 26.31% -- -4.76%
/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. 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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 15 - -------------------------------------------------------------------------------- The Guardian Baillie Gifford International Fund [PHOTO] Menzies R. Robin Menzies Portfolio Manager Objective:Long-term growth of capital Portfolio:At least 80% in a diversified portfolio of common stocks and convertible securities of companies domiciled outside the United States Inception:February 16, 1993 Net Assets at December 31, 2003: $51,186,313 Q: How did the Fund perform? A: During 2003, the world's markets began to recover from the declines that began in 2000. The Fund returned 28.57%/1 /during 2003, compared to the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Growth Index,/2/ which rose 32.5% during the same period. As was the case in 2002, international returns benefited from the weakness of the dollar relative to the world's other major currencies. This was particularly evident in Continental Europe; the local currency return of the MSCI Europe ex-UK Growth Index/3/ was 16.2%, compared with a dollar-denominated return of 37.8%. Of the countries in the EAFE Growth Index, Germany performed best, rising by over 68%. Finland did least well, returning 11.5%. Q: What factors affected the Fund's performance? A: Although it achieved a strong positive return, the Fund underperformed the MSCI EAFE Growth Index. The main investment management reason for this was our choice of stocks in Continental Europe and in Japan. While we believe that the Fund's holdings in these regions are good quality companies that will grow their earnings faster than their peers over the longer term, the markets often neglected such stocks, preferring lower quality companies in many cases. On the positive side, the Fund benefited from its allocation to emerging markets: its investments in this area rose by 52% during the year. We have favored oil and gas companies in the emerging markets over their counterparts in the developed world; this is reflected also in the strong stock selection achieved in the energy industry. The Fund's relative performance was also helped by stock selection in the telecommunication services, and food, beverages, and tobacco industries, and by having no exposure to the utilities industry. Q: What is your outlook for the future? A: The task of an outlook is to try to estimate what will come next. The most convincing answer to that question in economic terms seems to be "more of the same." Productivity growth is high, and there is plenty of spare capacity in most areas (with commodities being the most obvious exception). The speed and vigor of the American recovery has thus far worked wonders for corporate profits in the U.S., and there is evidence of the long-awaited recovery in capital expenditure, which we believe should build up in 2004. For much of the world, we believe, the most important issue is what the dollar does next. On balance, in our view the dollar is likely to remain fairly weak, and this will be a painful experience for manufacturers in the euro and yen areas. - -------------------------------------------------------------------------------- ". . . the Fund benefited from its allocation to emerging markets: its investments in this area rose by 52% during the year." - -------------------------------------------------------------------------------- We expect that the pressure on Europe and Japan to stimulate demand at home will become irresistible. The United Kingdom has managed to steer a remarkably stable middle course, but stability may become an unfashionable virtue if current conditions persist. The emerging markets, which, in general, have depreciated with the dollar, find themselves in a happier position. They are more competitive compared to their old rivals in Europe and Japan, and their main customers (America and other emerging markets, especially China) are booming. Stock markets in general do not look particularly cheap to us at the moment, but the rate of profit increases in some may make such statements outdated fairly quickly. With the significant caveat that the dollar does not fall too sharply, we believe the background to equity investment looks quite good. - -------------------------------------------------------------------------------- /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%. A redemption fee of 2% applies to redemptions of shares purchased after August 22, 2003 and held for less than 60 days. This fee does not apply to omnibus accounts. 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. Current performance may be lower or higher than data quoted. /2/ The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Growth Index is an unmanaged index that is generally considered to be representative of international growth stock market activity. The MSCI EAFE Growth Index is not available for direct investment, and its returns do not reflect the fees and expenses that have been deducted from the Fund. Likewise, these 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 Europe ex-UK Growth Index is generally considered to be representative of the European growth stock market excluding the United Kingdom. The returns for these indexes do not reflect the fees and expenses that have been deducted from the Fund. Likewise, these return figures for the index 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 Growth of a Hypothetical $10,000 Investment [CHART] Guardian Baillie Gifford International Fund MSCI EAFE (Class A) Growth Index ------------------------ ------------ 02/16/1993 $10,000 $10,000 28-Feb-93 9,670 10,274 31-Mar-93 9,837 11,005 30-Apr-93 10,358 11,897 31-May-93 10,609 12,249 30-Jun-93 10,395 12,140 30-Jul-93 10,674 12,497 31-Aug-93 11,371 13,138 30-Sep-93 11,409 12,819 29-Oct-93 11,901 13,226 30-Nov-93 11,343 11,931 31-Dec-93 12,360 12,637 31-Jan-94 12,866 13,589 28-Feb-94 12,651 13,489 31-Mar-94 12,248 12,827 29-Apr-94 12,604 13,359 31-May-94 12,501 13,206 30-Jun-94 12,388 13,333 29-Jul-94 12,736 13,452 31-Aug-94 13,064 13,760 30-Sep-94 12,557 13,303 31-Oct-94 12,942 13,678 30-Nov-94 12,304 13,066 30-Dec-94 12,292 13,237 31-Jan-95 11,574 12,731 28-Feb-95 11,593 12,729 31-Mar-95 12,027 13,533 28-Apr-95 12,339 14,135 31-May-95 12,368 13,975 30-Jun-95 12,368 13,688 31-Jul-95 13,047 14,564 31-Aug-95 12,933 13,954 29-Sep-95 13,162 14,276 31-Oct-95 12,952 13,893 30-Nov-95 13,142 14,278 29-Dec-95 13,661 14,779 31-Jan-96 13,873 14,791 29-Feb-96 13,993 14,845 29-Mar-96 14,446 15,204 30-Apr-96 14,879 15,575 31-May-96 14,759 15,253 28-Jun-96 14,940 15,309 31-Jul-96 14,457 14,817 30-Aug-96 14,658 14,834 30-Sep-96 15,020 15,243 31-Oct-96 14,809 15,120 29-Nov-96 15,554 15,606 31-Dec-96 15,619 15,326 31-Jan-97 15,270 14,690 28-Feb-97 15,445 14,920 31-Mar-97 15,609 15,011 30-Apr-97 15,855 15,164 30-May-97 16,892 16,058 30-Jun-97 17,768 16,995 31-Jul-97 18,724 17,404 29-Aug-97 17,325 16,065 30-Sep-97 18,631 17,130 31-Oct-97 17,140 15,511 28-Nov-97 17,048 15,481 31-Dec-97 17,348 15,683 30-Jan-98 17,758 16,394 27-Feb-98 19,021 17,485 31-Mar-98 19,981 17,725 30-Apr-98 20,358 17,905 29-May-98 20,488 17,783 30-Jun-98 20,607 18,031 31-Jul-98 21,077 18,116 31-Aug-98 18,246 16,173 30-Sep-98 17,568 15,721 30-Oct-98 18,771 17,319 30-Nov-98 19,645 18,160 31-Dec-98 20,750 19,206 29-Jan-99 20,648 19,309 26-Feb-99 20,231 18,685 31-Mar-99 20,580 18,941 30-Apr-99 21,257 19,138 31-May-99 20,287 18,310 30-Jun-99 21,412 19,022 31-Jul-99 22,060 19,391 31-Aug-99 22,549 19,503 30-Sep-99 22,481 19,816 31-Oct-99 23,560 20,880 30-Nov-99 25,572 22,413 31-Dec-99 28,471 24,911 31-Jan-00 26,667 23,513 29-Feb-00 28,703 24,819 31-Mar-00 28,459 25,288 30-Apr-00 26,485 23,620 31-May-00 25,107 22,159 30-Jun-00 25,705 22,953 31-Jul-00 24,720 21,518 31-Aug-00 24,990 21,749 30-Sep-00 23,530 20,312 31-Oct-00 22,548 19,375 30-Nov-00 21,210 18,484 31-Dec-00 21,691 18,834 31-Jan-01 21,524 18,781 28-Feb-01 19,747 16,876 31-Mar-01 18,501 15,716 30-Apr-01 20,020 16,801 31-May-01 19,382 16,131 30-Jun-01 18,790 15,351 31-Jul-01 18,106 14,979 31-Aug-01 17,590 14,297 30-Sep-01 15,934 12,947 31-Oct-01 16,283 13,462 30-Nov-01 16,557 14,155 31-Dec-01 16,845 14,237 31-Jan-02 15,888 13,470 28-Feb-02 15,934 13,652 31-Mar-02 16,769 14,178 30-Apr-02 16,769 14,260 31-May-02 16,875 14,302 30-Jun-02 16,237 13,936 31-Jul-02 14,536 12,451 31-Aug-02 14,338 12,357 30-Sep-02 12,940 11,284 31-Oct-02 13,395 11,923 30-Nov-02 13,866 12,275 31-Dec-02 13,516 11,993 31-Jan-03 13,000 11,400 28-Feb-03 12,802 11,155 31-Mar-03 12,635 11,046 30-Apr-03 13,820 12,015 31-May-03 14,564 12,647 30-Jun-03 14,626 12,871 31-Jul-03 14,702 13,042 31-Aug-03 14,824 13,281 30-Sep-03 15,265 13,733 31-Oct-03 16,106 14,524 30-Nov-03 16,442 14,866 31-Dec-03 17,498 15,889 To give you a comparison, the chart at left shows the performance of a hypothetical $10,000 investment made in Class A shares of The Guardian Baillie Gifford International Fund and the MSCI EAFE Growth Index. The starting point of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an investor may pay when purchasing Class A shares of the Fund. The Index begins at $10,000. The Fund's performance was previously compared to the MSCI EAFE Index. This index was replaced by the MSCI EAFE Growth Index, which is more comparable to the Fund's investments. Total returns for the MSCI EAFE Index for the 1-, 5- and 10-year periods ended December 31, 2003 were 39.17%, 0.26% and 4.78%, respectively. 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. 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. Portfolio Composition by Geographical Location as of December 31, 2003 [CHART] Emerging Markets 4.6% Japan 22.6% Cash 0.9% Continental Europe 40.6% Asia Pacific 6.6% UK 24.7%
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Since Date 1 Year 3 Years 5 Years 10 Years Inception - ----------------------------------------------------------------------------------------- Class A Shares (without sales charge) 2/16/93 28.57% -7.12% -3.48% 3.47% 5.66% - ----------------------------------------------------------------------------------------- Class A Shares (with sales charge) 2/16/93 22.78% -8.53% -4.36% 2.99% 5.21% - ----------------------------------------------------------------------------------------- Class B Shares (without sales charge) 5/1/96 27.13% -8.27% -4.54% -- 0.90% - ----------------------------------------------------------------------------------------- Class B Shares (with sales charge) 5/1/96 24.13% -8.89% -4.73% -- 0.90% - ----------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 27.06% -8.24% -- -- -10.65% - ----------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 26.06% -8.24% -- -- -10.65% - ----------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 28.31% -- -- -- -5.22% - ----------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 27.31% -- -- -- -5.22%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 17 - -------------------------------------------------------------------------------- The Guardian Baillie Gifford Emerging Markets Fund [PHOTO] Edward H. Hocknell Edward H. Hocknell Portfolio Manager Objective:Long-term capital appreciation 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 December 31, 2003: $74,292,852 Q: How did the Fund perform? A: The Fund returned 53.53%/1/ in 2003, compared to a 56.28% return for the Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index/2/ during the same period. For the third consecutive year, returns from emerging markets have significantly exceeded those from their developed peers. As in 2002, the fourth quarter ended the year on a positive note: the MSCI EMF Index closed up 17.8%. However, regional, and particularly country, returns were characteristically volatile. Monetary easing continues to be the impetus behind the Brazilian market, and the Yukos debacle weighed heavily on the Russian market. Of the major countries, Taiwan was the most disappointing, barely in positive ground. Q: What factors affected the Fund's performance? A: Despite an underweight position in India, good stock selection meant that this market was a main positive contributor to performance. The Indian market performed strongly during the year, up over 78% and the Fund's holdings, especially in materials and banks, have outperformed. The Chinese and Russian markets also performed well, and an overweight in these countries, combined with good stock selection, helped the Fund's performance. High commodity prices ensured that materials stocks largely performed well, whether in aluminum, oil, nickel, gold or steel. South African holdings failed to benefit from these prices as much as elsewhere due to the strong rand, the main factor which led to South Africa underperforming as a whole. In terms of industries, the stocks in the materials and capital goods industries were the key contributors to performance, and given the improved global growth outlook and demand from China in particular, we see the pricing outlook for companies in these industries remaining strong. Q: What is your outlook for the future? A: We maintain a favorable view of emerging markets as we enter 2004. However, after three years of good relative (to its developed peers) performance, it is difficult to envisage another year of significantly higher returns. The developed economies are beginning to show tangible signs of recovery, and the interest rate cycle is set to reverse in an upward direction. That said, we remain enthusiastic on a stock-by-stock basis, and we do not think that attractive growth prospects throughout the regions are fully reflected in current share prices. We continue to believe that we can find "emerging" companies that are striving to match their developed peers, in terms of both business acumen and shareholder awareness. Typically, the medium term rewards will not come without some setbacks along the way. - -------------------------------------------------------------------------------- "High commodity prices ensured that materials stocks largely performed well, whether in aluminum, oil, nickel, gold or steel . . . stocks in the materials and capital goods industries were the key contributors to performance, and given the improved global growth outlook and demand from China in particular, we see the pricing outlook for companies in these industries remaining strong." - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- /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%. A redemption fee of 2% applies to redemptions of shares purchased after August 22, 2003 and held for less than 60 days. This fee does not apply to omnibus accounts. 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. Current performance may be lower or higher than data quoted. /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. - -------------------------------------------------------------------------------- 18 - -------------------------------------------------------------------------------- The Guardian Baillie Gifford Emerging Markets Fund Growth of a Hypothetical $10,000 Investment [CHART] Guardian Baillie Gifford Guardian Baillie Gifford Emerging Markets MSCI Emerging Markets Fund(Class A) EMF Index Fund(Class B) ------------------------ ----------- ------------------------ 5/1/97 $10,000 $10,000 $10,000.00 May-97 9,980 10,286 $10,349.51 June-97 10,419 10,837 $10,796.12 July-97 10,915 10,998 $11,291.26 August-97 10,129 9,599 $10,466.02 September-97 10,428 9,865 $10,776.70 October-97 8,670 8,246 $8,941.75 November-97 8,418 7,945 $8,679.61 December-97 8,805 8,137 $9,029.13 January-98 7,885 7,499 $8,077.67 February-98 8,635 8,281 $8,834.95 March-98 8,832 8,641 $9,000.00 April-98 8,794 8,547 $8,941.75 May-98 7,527 7,375 $7,650.49 June-98 6,995 6,602 $7,097.38 July-98 7,286 6,811 $7,378.95 August-98 5,408 4,842 $5,475.96 September-98 5,446 5,149 $5,485.66 October-98 5,821 5,691 $6,009.96 November-98 6,272 6,164 $6,291.52 December-98 6,253 6,075 $6,252.69 January-99 5,944 5,977 $5,932.28 February-99 5,840 6,035 $5,815.77 March-99 6,572 6,830 $6,524.54 April-99 7,126 7,675 $7,058.54 May-99 6,985 7,631 $6,912.91 June-99 7,812 8,497 $7,699.35 July-99 7,671 8,266 $7,544.00 August-99 7,775 8,341 $7,631.38 September-99 7,455 8,059 $7,301.27 October-99 7,812 8,231 $7,631.38 November-99 9,080 8,969 $8,854.74 December-99 10,626 10,109 $10,340.23 January-00 10,845 10,169 $10,534.42 February-00 12,058 10,304 $11,699.51 March-00 11,972 10,354 $11,592.71 April-00 10,683 9,373 $10,330.53 May-00 10,015 8,985 $9,660.59 June-00 10,597 9,302 $10,214.02 July-00 10,025 8,823 $9,641.18 August-00 10,326 8,867 $9,922.74 September-00 9,382 8,092 $9,010.08 October-00 8,652 7,506 $8,301.31 November-00 7,951 6,849 $7,621.68 December-00 8,088 7,015 $7,738.18 January-01 9,032 7,981 $8,641.13 February-01 8,438 7,356 $8,068.30 March-01 7,650 6,633 $7,272.15 April-01 8,146 6,961 $7,738.18 May-01 8,555 7,044 $8,126.55 June-01 8,448 6,900 $8,010.04 July-01 7,728 6,464 $7,320.69 August-01 7,475 6,400 $7,077.96 September-01 6,433 5,409 $6,087.63 October-01 6,784 5,745 $6,417.74 November-01 7,455 6,345 $7,039.13 December-01 8,224 6,848 $7,747.89 January-02 8,662 7,080 $8,165.39 February-02 9,110 7,197 $8,573.17 March-02 9,713 7,630 $9,136.30 April-02 9,567 7,679 $8,990.66 May-02 9,441 7,557 $8,864.44 June-02 8,789 6,991 $8,243.06 July-02 8,234 6,459 $7,718.77 August-02 8,263 6,558 $7,738.18 September-02 7,377 5,850 $6,903.20 October-02 7,738 6,230 $7,223.60 November-02 8,186 6,659 $7,641.09 December-02 7,855 6,437 $7,330.40 January-03 7,845 6,409 $7,301.27 February-03 7,621 6,236 $7,097.38 March-03 7,319 6,060 $6,806.11 April-03 7,566 6,599 $7,310.98 May-03 8,682 7,073 $8,058.59 June-03 8,964 7,476 $8,311.02 July-03 9,393 7,944 $8,699.39 August-03 9,977 8,478 $9,233.39 September-03 10,016 8,540 $9,252.81 October-03 10,927 9,266 $10,126.63 November-03 11,102 9,380 $10,272.27 31-Dec-03 12,013 10,060 $10,799.09 To give you a comparison, the chart at left shows the performance of a hypothetical $10,000 investment made in Class A and Class B shares of The Guardian Baillie Gifford Emerging Markets Fund and the MSCI EMF Index. The starting point of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an investor may have to pay when purchasing Class A shares of the Fund. For Class B shares the contingent deferred sales charge of 1% was imposed at the end of the period. The Index and Class B shares begin at $10,000. 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. Performance for Class C and Class K shares, which were first offered on August 7, 2000 and May 15, 2001, respectively, will vary due to differences in sales load and other expenses charged to each share class. Portfolio Composition by Geographical Location as of December 31, 2003 [CHART] Asia 56.08% Europe/Middle East 19.78% Latin America 20.34% Cash 3.80%
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Date 1 Year 3 Years 5 Years Since Inception - -------------------------------------------------------------------------------------- Class A Shares (without sales charge) 5/1/97 53.53% 14.24% 14.03% 3.53% - -------------------------------------------------------------------------------------- Class A Shares (with sales charge) 5/1/97 46.62% 12.50% 12.98% 2.82% - -------------------------------------------------------------------------------------- Class B Shares (without sales charge) 5/6/97 51.52% 12.80% 12.18% 1.59% - -------------------------------------------------------------------------------------- Class B Shares (with sales charge) 5/6/97 48.52% 12.27% 12.05% 1.59% - -------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 51.72% 12.85% -- 4.37% - -------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 50.72% 12.85% -- 4.37% - -------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 52.95% 15.23% - -------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 51.95% 15.23%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 19 - -------------------------------------------------------------------------------- The Guardian Investment Quality Bond Fund [PHOTO] Howard Chin Howard W. Chin Portfolio Manager Net Assets at December 31, 2003: $182,935,542 Q: How did the Fund perform in 2003? A: The Fund had a total return of 4.53%/1/ for the year ended December 31, 2003, outperforming its benchmark, the Lehman Aggregate Bond Index,/2/ which measures the taxable fixed income market and returned 4.10% in 2003. Additionally, the average fund in the Lipper Intermediate Investment Grade/3/ peer group returned 4.55% for the same period (the peer group consists of 426 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: After a disappointing 2002, and an anemic start in 2003, the long-awaited economic recovery finally gained some substantial ground in the second half of 2003, although not without some fits and starts along the way. Despite very low interest rates, the economy grew at only a 2.5% rate during the first half of 2003, but much of that was attributed to geopolitical concerns and the uncertainty surrounding the war in Iraq. With the war's successful conclusion, signs of a stronger economy unfolded as the year went on. Fueled by a very accommodative monetary policy and stimulative tax and fiscal policies, economic growth surged in the third quarter to 8.2%. Blue Chip Consensus/4/ expectations are for a more moderate 4.3% growth rate in the fourth quarter, and 4.6% for 2004. The Federal Reserve Board (Fed) remained an integral factor in the fixed income markets in 2003 as it cut the Fed Funds rate by another 0.25% in June to reach 1.0%, the lowest rate in over forty years. And after observing a sustained period of low inflation, the Fed also raised the possibility of unwelcome deflation and put the market on notice that they would take steps to prevent it, leading to a rally that resulted in the lowest interest rates in over forty years with the 10-year Treasury bottoming out at a 3.11% yield in June. Since then, however, the Fed has stated that the risk of deflation has subsided and is now roughly equal to that of inflation. On the other hand, the Fed reiterated its expectation of maintaining an accommodative stance on monetary policy for a considerable period. The 2- and 10-year Treasuries finished the year at 1.84% and 4.26% respectively, 0.25% and 0.44% higher than when the year started. Even though yields were higher for the year, the Treasury sector as measured by the Lehman Treasury Index/2/ posted a positive return of 2.24% in 2003 as coupon income more than offset the price declines. Furthermore, most portions of the fixed income market performed even better. The star performer within the Lehman Aggregate Bond Index was the investment grade corporate bond sector, which returned 7.70% in 2003 and, more impressively, outperformed comparable Treasuries by 5.27%, eclipsing the previous record by 2.50%. This spectacular performance was based on sharply better underlying fundamentals, where all the stars were aligned in the same positive direction. Most notably, we saw a much better economy and greater profitability among American businesses resulting from their earlier cost-cutting efforts. Accordingly, investors were much more comfortable taking on credit risk and increased their demand for corporate bonds just as the net supply for 2003 was shrinking compared to year-earlier levels. Lower-rated investment grade corporates fared the best in this environment, and led the recovery among corporates as the poorest performing sectors in 2002 recovered the most in 2003. In contrast, mortgage-backed securities (MBS) fared less well in 2003. Although the sector posted a positive return of 3.07%, it outperformed comparable Treasuries by only 0.11%, the weakest showing among the structured product sectors of the Lehman Aggregate Index. MBS underperformed by 1.53% in July - the poorest one-month showing in the history of the Lehman MBS index - when Treasury yields increased sharply. The other portions of the structured products market did much better. Asset- backed securities (ABS) returned 4.01% on a nominal basis and bested Treasuries by 1.81%. Commercial mortgage-backed securities (CMBS), benefiting from many of the same positive fundamentals as corporate bonds, performed even better, returning 4.66% and 2.01% respectively./5/ - -------------------------------------------------------------------------------- ". . . corporates were far and away the best performing asset class in 2003, and our overweights served the Fund very well." - -------------------------------------------------------------------------------- Q: What was your investment strategy during the period? A: Coming into 2003, we believed spread assets were very attractive and well positioned to take advantage of the expected economic recovery. Corporate bonds were especially attractive as the previous year's underperformance left them fundamentally undervalued. As a result, we adopted overweighted exposures in both corporate bonds and structured products (MBS, ABS and CMBS). Although the economic recovery was initially less robust and took longer to fully emerge than originally expected, corporates, ABS and CMBS still performed very well. As discussed above, corporates were far and away the best performing asset class in 2003, and our overweights served the Fund very well. Furthermore, many of the specific subsectors in which we chose to strongly overweight performed even better than the average corporate sector in the Lehman Credit Index, which outperformed Treasuries by 5.27%. Of particular note, the media-cable sector (10.96% of excess returns relative to Treasuries) and the wirelines sector (7.64%) made outsized contributions to the Fund's performance. In addition, our decision to overweight the automotive sector in the fourth quarter proved to be very timely as, after several volatile quarters, the sector recovered and outperformed Treasuries by 4.76% in the last quarter alone. Our asset allocation strategy within structured products also helped the Fund to outperform. We were overweighted in all three subsectors for much of the year, 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. In fact, we were overweighted in MBS during the first half of the year when the sector outperformed, and in July subsequently eliminated our overweight in MBS, thus avoiding most of the sector's historic underperformance. - -------------------------------------------------------------------------------- /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. Current performance may be lower or higher than the data quoted. /2/ The Lehman Aggregate Bond Index, the Lehman Credit Index and the Lehman Treasury Index are unmanaged indices that are generally considered to be representative of U.S. bond market activity, the U.S. investment grade corporate bond market activity, and U.S. treasury 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, 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 Blue Chip Economic Consensus is a forecast of economic variables published monthly based on the surveys of 55 leading economists and financial analysts. /5/ The respective indices are: the Lehman Mortgage-Backed Securities (MBS) Index, the Lehman Asset-Backed Securities (ABS) Index, and the Lehman Commercial Mortgage-Backed Securities (CMBS) Index. - -------------------------------------------------------------------------------- 20 - -------------------------------------------------------------------------------- The Guardian Investment Quality Bond Fund Q: What is your outlook for 2004? A: We remain optimistic for both the economic recovery and the prospects for the spread sectors in 2004. Corporate profitability has improved, and demand has increased such that businesses are now more comfortable in making greater commitments in capital investment and hiring. This was not the case just a year earlier. Capital expenditures are clearly on the upswing. We have also seen some positive job creation in the recent months, and while the hiring activity is not yet at levels indicative of a robust expansion, historically labor growth has been a lagging indicator of economic health. The trend is encouraging, and we remain watchful for additional supporting signs that the economic recovery has gained ground and is solidly on the road to sustainability. The impact of the growing economy on interest rates is less clear. The Fed has stated that it intends to be patient with its current accommodative monetary policy, so rates are likely to stay low for a while. In the longer term, rates are likely to increase as the economy heats up and the prospect of inflation grows, but we believe that inflation is still at the very low end of the Fed's desired range with no signs of upward inflation pressure on the horizon. More importantly, we think there is enough surplus capacity in the economy (manufacturing capacity and labor supply) such that it can grow steadily without creating any inflationary pressures on either front. As a result, a near-term rate rise seems unlikely, and depending on the rate at which the excess capacity is consumed, the Fed may not need to raise rates until 2005. That said, the market has priced in a .25% increase by the Fed by the middle of 2004. Whether this turns out to be the case is still uncertain, but until the market believes the Fed is poised to act, the yield curve is likely to remain very steep. With a continuing steep yield curve as the backdrop, investors will have plenty of incentive to extend maturities beyond the yield curve and earn incremental yield. We believe corporate bonds and structured product securities will be favored in this environment, and an improving economy further bolsters our outlook for these sectors. We will retain our overweighted exposures in spread assets, and although these sectors are unlikely to perform as spectacularly as they did in 2003, we still believe they have the potential to put in a very solid showing and to outperform Treasuries. Growth of a Hypothetical $10,000 Investment [CHART] Guardian Investment Lehman Aggregate Quality Bond Fund Bond Index ------------------- ---------------- 02/16/93 $10,000 $10,000 February-93 9,572 10,129 March-93 9,647 10,171 April-93 9,678 10,242 May-93 9,628 10,255 June-93 9,859 10,441 July-93 9,877 10,500 August-93 10,109 10,684 September-93 10,142 10,713 October-93 10,134 10,753 November-93 10,012 10,662 December-93 10,066 10,720 January-94 10,252 10,864 February-94 10,045 10,676 March-94 9,772 10,412 April-94 9,660 10,329 May-94 9,617 10,328 June-94 9,592 10,305 July-94 9,715 10,510 August-94 9,747 10,523 September-94 9,624 10,368 October-94 9,616 10,359 November-94 9,564 10,336 December-94 9,613 10,407 January-95 9,769 10,613 February-95 10,030 10,865 March-95 10,073 10,932 April-95 10,186 11,085 May-95 10,535 11,514 June-95 10,597 11,598 July-95 10,552 11,572 August-95 10,671 11,712 September-95 10,754 11,826 October-95 10,898 11,980 November-95 11,072 12,159 December-95 11,213 12,330 January-96 11,274 12,412 February-96 11,028 12,196 March-96 10,940 12,111 April-96 10,870 12,043 May-96 10,854 12,018 June-96 10,989 12,180 July-96 11,009 12,213 August-96 10,993 12,193 September-96 11,190 12,405 October-96 11,434 12,680 November-96 11,654 12,897 December-96 11,520 12,777 January-97 11,573 12,816 February-97 11,610 12,848 March-97 11,478 12,706 April-97 11,624 12,896 May-97 11,721 13,018 June-97 11,881 13,173 July-97 12,200 13,528 August-97 12,084 13,412 September-97 12,246 13,610 October-97 12,356 13,808 November-97 12,384 13,871 December-97 12,496 14,011 January-98 12,666 14,191 February-98 12,656 14,180 March-98 12,703 14,229 April-98 12,761 14,303 May-98 12,871 14,439 June-98 12,980 14,561 July-98 13,001 14,592 August-98 13,203 14,830 September-98 13,443 15,177 October-98 13,419 15,097 November-98 13,446 15,182 December-98 13,481 15,228 January-99 13,578 15,337 February-99 13,346 15,069 March-99 13,430 15,152 April-99 13,473 15,200 May-99 13,339 15,067 June-99 13,287 15,019 July-99 13,226 14,955 August-99 13,222 14,948 September-99 13,386 15,121 October-99 13,380 15,177 November-99 13,379 15,176 December-99 13,347 15,103 January-00 13,298 15,053 February-00 13,466 15,235 March-00 13,568 15,436 April-00 13,494 15,392 May-00 13,524 15,385 June-00 13,818 15,705 July-00 13,908 15,847 August-00 14,103 16,077 September-00 14,182 16,178 October-00 14,216 16,285 November-00 14,354 16,552 December-00 14,659 16,859 January-01 14,961 17,134 February-01 15,073 17,284 March-01 15,139 17,370 April-01 15,082 17,298 May-01 15,165 17,403 June-01 15,183 17,468 July-01 15,547 17,859 August-01 15,724 18,063 September-01 15,916 18,274 October-01 16,230 18,656 November-01 16,033 18,399 December-01 15,908 18,282 January-02 16,053 18,430 February-02 16,214 18,609 March-02 15,935 18,299 April-02 16,212 18,654 May-02 16,361 18,813 June-02 16,459 18,976 July-02 16,604 19,205 August-02 16,896 19,530 September-02 17,170 19,846 October-02 17,088 19,756 November-02 17,038 19,750 December-02 17,379 20,158 January-03 17,382 20,175 February-03 17,631 20,455 March-03 17,645 20,439 April-03 17,829 20,609 May-03 18,137 20,992 June-03 18,137 20,991 July-03 17,497 20,286 August-03 17,614 20,420 September-03 18,075 20,961 October-03 17,936 20,766 November-03 17,990 20,816 December-03 18,170 21,028 To give you a comparison, the chart above shows the performance of a hypothetical $10,000 investment made in Class A shares of The Guardian Investment Quality Bond Fund and the Lehman Aggregate Bond Index. The starting point of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an investor may pay when purchasing Class A shares of the Fund. The Index begins at $10,000. 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. Performance for Class B and C shares, which were first offered on August 7, 2000 and for Class K shares, which were first offered on May 15, 2001, will vary due to differences in sales load and other expenses charged to each share class.
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Date 1 Year 3 Years 5 Years 10 Years Since Inception - ----------------------------------------------------------------------------------------------- Class A Shares (without sales charge) 2/16/93 4.53% 7.42% 6.14% 6.07% 6.08% - ----------------------------------------------------------------------------------------------- Class A Shares (with sales charge) 2/16/93 -0.17% 5.78% 5.17% 5.58% 5.63% - ----------------------------------------------------------------------------------------------- Class B Shares (without sales charge) 8/7/00 3.75% 6.66% -- -- 7.20% - ----------------------------------------------------------------------------------------------- Class B Shares (with sales charge) 8/7/00 0.75% 6.07% -- -- 6.70% - ----------------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 3.75% 6.66% -- -- 7.20% - ----------------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 2.75% 6.66% -- -- 7.20% - ----------------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 4.11% -- -- -- 6.91% - ----------------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 3.11% -- -- -- 6.91%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 21 - -------------------------------------------------------------------------------- The Guardian Low Duration Bond Fund [PHOTO] Howard Chin Howard W. Chin Portfolio Manager Objective:Seeks a high level of current income, consistent with preservation of capital Portfolio:At least 80% in investment grade corporate and government bonds, and asset- and mortgage-backed securities Inception:July 30, 2003 Net assets at December 31, 2003: $31,375,457 Q: How did the Fund perform in 2003? A: The Fund was created on July 30, 2003 and had a total return of 0.99%/1/ for the year ended December 31, 2003, closely matching our benchmark, the Lehman U.S. Government 1-3 Year Bond Index,/2/ which returned 0.95% over the same time period. Q: What factors affected the Fund's performance? A: After a disappointing 2002, and an anemic start to 2003, the long-awaited economic recovery finally gained some substantial ground in the second half of 2003, although not without some fits and starts along the way. Despite very low interest rates, the economy grew at only a 2.5% rate during the first half of 2003, but much of that was attributed to geopolitical concerns and the uncertainty surrounding the war in Iraq. Fueled by a very accommodative monetary policy and stimulative tax and fiscal policies, economic growth surged in the third quarter to 8.2%. Blue Chip Consensus/3/ expectations are for a more moderate 4.3% growth rate in the fourth quarter, and 4.6% for 2004. The Federal Reserve Board (Fed) remained an integral factor in the fixed income markets in 2003 as it cut the Fed Funds rate by another 0.25% in June to reach 1.0%, the lowest rate in over forty years. And after a sustained period of low inflation, the Fed raised the possibility of unwelcome deflation and put the market on notice that they would take steps to prevent it, leading to a rally that resulted in the lowest interest rates in over forty years with the 2- and 10-year Treasury notes bottoming out at yields of 1.07% and 3.11%, respectively, in June. Since then, however, the Fed has stated that the risk of deflation has subsided and is now roughly equal to that of inflation. On the other hand, the Fed further reiterated its expectation of maintaining an accommodative stance on monetary policy for a considerable period. The 2- and 10-year Treasuries finished the year at 1.84% and 4.26% respectively, 0.25% and 0.44% higher than when the year started. Even though yields were higher for the year, the Treasury sector as measured by the Lehman Treasury Index/4/ posted a positive return of 2.24% in 2003 as coupon income more than offset the price declines. Furthermore, most portions of the fixed income market performed even better. The star performer within the Lehman Aggregate Bond Index/4/ was the investment grade corporate bond sector, which returned 7.70% in 2003 and more impressively, outperformed comparable Treasuries by 5.27%, eclipsing the previous record by 2.50%. This spectacular performance was based on sharply better underlying fundamentals where all the stars were aligned in the same positive direction. Most notably, we saw a much better economy and greater profitability among American businesses, which resulted from their earlier cost cutting efforts. Accordingly, investors were much more comfortable taking on credit risk and increased their demand for corporate bonds just as the net supply was shrinking in 2003 compared to year-earlier levels. Lower-rated investment grade corporates fared the best under this environment, and led the recovery among corporates as the poorest performing sectors in 2002 recovered the most in 2003. - -------------------------------------------------------------------------------- "Corporates were far and away the best performing asset class in 2003, and our decision to overweight corporates in lieu of Treasuries served the Fund very well." - -------------------------------------------------------------------------------- In contrast, mortgage-backed securities (MBS) fared less well in 2003. Although the sector posted a positive return of 3.07%, they outperformed comparable Treasuries by only 0.11%, the weakest showing among the structured product sectors of the Lehman Aggregate Bond Index. MBS underperformed by 1.53% in July when Treasury yields increased sharply, and performed just well enough in the rest of the year to overcome July's dramatic weakening. The other portions of the structured products market did much better. Asset-backed securities (ABS) returned 4.01% on a nominal basis and bested Treasuries by 1.81%. Commercial mortgage-backed securities (CMBS), benefiting from many of the same positive fundamentals as corporate bonds, were even better, returning 4.66% and 2.01% respectively./5/ - -------------------------------------------------------------------------------- /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. Current performance may be lower or higher than the data quoted. /2 /The Lehman U.S. Government 1-3 Year Bond Index is an unmanaged index that is generally considered to be representative of U.S. short duration bond market activity. 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. Likewise, return figures for the Index do not reflect any sales charges that an investor may have to pay when purchasing or redeeming shares in the Fund. /3 /The Blue Chip Economic Consensus is a forecast of economic variables published monthly based on the surveys of 55 leading economists and financial analysts. /4 /The Lehman Aggregate Bond Index and the Lehman Treasury Index are unmanaged indices that are generally considered to be representative of U.S. bond market activity and U.S. treasury 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 of redeeming shares of the Fund. /5/ The respective indices are: the Lehman Mortgage-Backed Securities (MBS) Index, the Lehman Asset-Backed Securities (ABS) Index, and the Lehman Commercial Mortgage-Backed Securities (CMBS) Index. - -------------------------------------------------------------------------------- 22 - -------------------------------------------------------------------------------- The Guardian Low Duration Bond Fund Q: What was your investment strategy during the period? A: Coming into 2003, we believed spread assets were very attractive and well positioned to take advantage of the expected economic recovery. Corporate bonds were especially attractive as the previous year's underperformance left them fundamentally undervalued. Corporates, in addition to looking attractive relative to other spread products, also provided the portfolio with a very stable duration. These factors were still in place when the Fund became effective in July 2003. As a result, we decided to purchase an initial portfolio of diversified corporate bonds with a small weighting in CMBS, collateralized mortgage obligations (CMO) and ABS for further diversification and incremental yield versus Treasuries. As it turns out, each decision proved to be beneficial as each sector outperformed comparable Treasuries. Corporates were far and away the best performing asset class in 2003, and our decision to overweight corporates in lieu of Treasuries served the Fund very well. In addition, our decision to buy selected structured product securities resulted in a further positive impact on the Fund's performance. Q: What is your outlook for 2004? A: We remain optimistic for both the economic recovery and the prospects for the spread sectors in 2004. Corporate profitability has improved, and demand has increased such that businesses are now more comfortable in making greater commitments in capital investment and hiring. This was not the case just a year earlier. Capital expenditures are clearly on the upswing. We have also seen some positive job creation in the recent months, and while the hiring activity is not yet at levels indicative of a robust expansion, historically labor growth has been a lagging indicator of economic health. The trend is encouraging, and we remain watchful for additional supporting signs that the economic recovery has gained ground and is solidly on the road to sustainability. The impact of the growing economy on interest rates is less clear. The Fed has stated that it intends to be patient with its current accommodative monetary policy, so rates are likely to stay low for a while. In the longer term, we believe that rates are likely to increase as the economy heats up and the prospect of inflation grows, but inflation is still at the very low end of the Fed's desired range with no signs of upward inflation pressure on the horizon. More importantly, we believe there is enough surplus capacity in the economy (manufacturing capacity and labor supply) such that it can grow steadily without creating any inflationary pressures on either front. As a result, a near-term rate rise seems unlikely, and depending on the rate at which the excess capacity is consumed, the Fed may not need to raise rates until 2005. We are still positive on the spread sectors, and believe outperformance during the first part of 2004 will be captured by rolling down the steep Treasury curve and by earning the spread sectors' additional yield spread over Treasuries. In our view, a recovering economy and increasing corporate profitability will provide even greater support for the investment grade market. While we are very positive on corporates, we will also continue to assess their value relative to Treasuries, MBS and other sector segments of the structured products market.
Total Returns/1/ for Period Ending December 31, 2003 Inception Date Since Inception - --------------------------------------------------------------- Class A Shares (without sales charge) 7/30/03 0.99% - --------------------------------------------------------------- Class A Shares (with sales charge) 7/30/03 -3.55% - --------------------------------------------------------------- Class B Shares (without sales charge) 7/30/03 0.67% - --------------------------------------------------------------- Class B Shares (with sales charge) 7/30/03 -2.33% - --------------------------------------------------------------- Class C Shares (without sales charge) 7/30/03 0.67% - --------------------------------------------------------------- Class C Shares (with sales charge) 7/30/03 -0.33% - --------------------------------------------------------------- Class K Shares (without sales charge) 7/30/03 0.82% - --------------------------------------------------------------- Class K Shares (with sales charge) 7/30/03 -0.18%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 23 - -------------------------------------------------------------------------------- The Guardian High Yield Bond Fund [PHOTO] Peter J. Liebst Peter J. Liebst Portfolio Manager Objective:Seeks current income. Capital appreciation is a secondary objective. Portfolio:At least 80% is invested in corporate bonds and other debt securities that, at the time of purchase, are rated below investment grade or are unrated Inception:September 1, 1998 Net Assets at December 31, 2003: $71,503,871 Q: How did the Fund perform during 2003? A: The Guardian High Yield Bond Fund posted a 20.11%/1/ return for calendar year 2003. The Fund underperformed the overall high yield market by 8.86% as the Fund's benchmark, the Lehman Corporate High Yield Index,/2/ posted a 28.97% return for the year 2003. Q: What factor's affected the Fund's performance? A: The high yield market entered 2003 in a highly distressed state. According to the Lehman Corporate High Yield Index, the average market yield on December 31, 2002 was 12.08%, which represented a near historically high-risk premium of 9.10% over comparable U.S. Treasuries. The market was acutely concerned over the impending war in Iraq, the economy did not appear to be responding to the substantial stimulus introduced by the Federal Reserve Board (Fed), and the capital structures of entire industries such as utilities, airlines and communications were being challenged. But from the start of 2003 to its close, the market appeared to overlook each obstacle and generally focused on the optimistic outlook that the economy and corporate fortunes were on the verge of rising from the ashes. This viewpoint was supported by a continued mortgage refinancing boom, federal tax cut stimulus from Washington, D.C. and accommodative capital markets, which ultimately rewarded the market for its leap of faith with a 28.97% return, the second largest one-year return in the history of the high yield market. Returns were positive in 2003 for all sectors of the market, but substantial outperformance was evident in certain areas. Specifically, the general theme for the year was that the more distressed segments of the market saw the greatest returns. Sectors such as media-cable, telecommunications, airlines and electric utilities, which were the worst performing areas of 2002, posted some of 2003's highest returns. Indeed, with returns ranging from 35% to 62%, the rebound of these sectors, which accounted for 22% of the market at the beginning of the year, were integral to the overall 2003 performance in the high yield market. Segmenting the market by credit quality, the year's returns were inversely related, with lower quality generating higher returns. The lowest quality components of the market, which fall into the "C" and "D" ratings categories by the major U.S. rating agencies, Moody's and Standard and Poor's, produced the highest returns, averaging 86.29%, while more core high yield categories rated "B" and "BB" produced average returns of 26% and 19% respectively. These returns were actually below the average for the overall market. - -------------------------------------------------------------------------------- "Emphasizing credit fundamentals, which include appropriate capital structures, adequate cash flow generation and earnings outlook, the Fund inherently minimizes its exposure to the most speculative segment of the market." - -------------------------------------------------------------------------------- While The Guardian High Yield Bond Fund captured a large portion of the high yield markets 2003 rally, it under-performed the overall market due to its limited exposure to distressed securities. Throughout the year, the Fund actively managed diversification, and adhered to its credit-based fundamental investment selection process. Emphasizing credit fundamentals, which include appropriate capital structures, adequate cash flow generation and earnings outlook, the Fund inherently minimizes its exposure to the most speculative segment of the market. Specifically, at the beginning of 2003, only 4.15% of the Fund's holdings were yielding what is typically deemed to be a "distressed yield" (typically a yield of 10% or more in excess of a comparable maturity Treasury), while according to the Lehman Corporate High Yield Index, over 22.5% of the overall market fell into this classification. We strongly believe that consistent observance of credit fundamentals, and the selection of securities possessing sustainable financial structures, is the most prudent way to approach investing in the high yield market and is in the best interest of the Fund's shareholders. - -------------------------------------------------------------------------------- /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%. A redemption fee of 2% applies to redemptions of shares purchased after August 22, 2003 and held for less than 60 days. This fee does not apply to omnibus accounts. 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. Current performance may be lower or higher than the data quoted. /2/ The Lehman 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. - -------------------------------------------------------------------------------- 24 - -------------------------------------------------------------------------------- The Guardian High Yield Bond Fund Q: What was your investment strategy during the year and what is your outlook for the future? A: The Fund's overall strategy was to maximize the total return of a diversified fixed-income portfolio principally composed of below investment grade securities. Specifically, we sought to identify attractive asset allocation weightings based on analysis of industry fundamentals, issuer creditworthiness and risk/return profile, and relative value. Throughout 2003, stable or improving credit quality of larger, more liquid issues was emphasized with a focus on the identification of fundamental total return opportunities. Entering 2004 with a 4.25% 10-year Treasury, we believe high yield will continue to be an asset class in demand as fixed income investors search for yield. With an average yield of 7.4% and much of the distressed yields now removed from the high yield market, we would expect returns to become less influenced by the recovery of distressed securities as experienced in 2003, and transition to a more evenly distributed contribution across risk categories. Growth of a Hypothetical Credit Quality as of $10,000 Investment December 31, 2003 [CHART] [CHART] B 70.85% Lehman Corporate BB 19.77% Historical Guardian BBB 0.98% High Yield Guardian CCC 6.32% High Yield High Short Term 2.08% Yield Performance Bond Fund (Class A) Bond Fund (Class B) Bond Index ------------- --------------------- --------------------- ----------------- 09/01/1998 $10,000 $10,000 $10,000 30-Sep-98 9,856 10,364 10,045 30-Oct-98 9,863 10,368 9,839 30-Nov-98 10,395 10,901 10,248 31-Dec-98 10,447 10,942 10,259 29-Jan-99 10,479 10,973 10,411 26-Feb-99 10,422 10,887 10,350 31-Mar-99 10,527 10,987 10,449 30-Apr-99 10,699 11,167 10,651 31-May-99 10,468 10,909 10,507 30-Jun-99 10,401 10,816 10,485 31-Jul-99 10,351 10,780 10,527 31-Aug-99 10,311 10,713 10,410 30-Sep-99 10,146 10,532 10,335 31-Oct-99 10,069 10,442 10,267 30-Nov-99 10,292 10,657 10,387 31-Dec-99 10,386 10,748 10,504 31-Jan-00 10,250 10,595 10,459 29-Feb-00 10,332 10,672 10,479 31-Mar-00 10,089 10,410 10,257 30-Apr-00 10,234 10,563 10,275 31-May-00 10,107 10,422 10,170 30-Jun-00 10,305 10,615 10,377 31-Jul-00 10,336 10,623 10,456 31-Aug-00 10,477 10,762 10,528 30-Sep-00 10,370 10,644 10,436 31-Oct-00 10,015 10,268 10,102 30-Nov-00 9,337 9,562 9,701 31-Dec-00 9,708 9,950 9,889 31-Jan-01 10,525 10,770 10,630 28-Feb-01 10,544 10,783 10,771 31-Mar-01 10,165 10,400 10,518 30-Apr-01 10,002 10,227 10,387 31-May-01 10,068 10,288 10,574 30-Jun-01 9,803 9,997 10,277 31-Jul-01 9,881 10,083 10,428 31-Aug-01 10,006 10,192 10,551 30-Sep-01 9,444 9,623 9,842 31-Oct-01 9,813 9,995 10,086 30-Nov-01 10,128 10,310 10,454 31-Dec-01 9,986 10,145 10,411 31-Jan-02 10,027 10,194 10,483 28-Feb-02 9,967 10,126 10,337 31-Mar-02 10,160 10,316 10,586 30-Apr-02 10,284 10,422 10,751 31-May-02 10,238 11,111 10,695 30-Jun-02 9,888 10,021 9,907 31-Jul-02 9,654 9,776 9,474 31-Aug-02 9,840 9,959 9,744 30-Sep-02 9,659 9,769 9,616 31-Oct-02 9,623 9,712 9,533 30-Nov-02 10,047 10,149 10,123 31-Dec-02 10,086 10,181 10,264 31-Jan-03 10,214 10,304 10,606 28-Feb-03 10,358 10,429 10,737 31-Mar-03 10,594 10,661 11,046 30-Apr-03 11,000 11,065 11,701 31-May-03 11,037 11,111 11,821 30-Jun-03 11,279 11,332 12,161 31-Jul-03 11,098 11,157 12,028 31-Aug-03 11,248 11,302 12,166 30-Sep-03 11,446 11,494 12,499 31-Oct-03 11,695 11,736 12,751 30-Nov-03 11,832 11,850 12,945 31-Dec-03 12,114 11,787 13,240 To give you a comparison, the chart above shows the performance of a hypothetical $10,000 investment made in Class A and Class B shares of The Guardian High Yield Bond Fund and the Lehman Brothers Corporate High Yield Index. The starting point of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an investor may pay when purchasing Class A shares of the Fund. For Class B shares, the contingent deferred sales charge of 1% was imposed at the end of the period. The Index and Class B shares begin at $10,000. 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. Performance for Class C and Class K shares, which were first offered on August 7, 2000 and May 15, 2001, respectively, will vary due to differences in sales load and other expenses charged to each share class.
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Date 1 Year 3 Years 5 Years Since Inception - -------------------------------------------------------------------------------------- Class A Shares (without sales charge) 9/1/98 20.11% 7.65% 2.99% 4.66% - -------------------------------------------------------------------------------------- Class A Shares (with sales charge) 9/1/98 14.71% 6.01% 2.05% 3.76% - -------------------------------------------------------------------------------------- Class B Shares (without sales charge) 9/1/98 19.22% 6.85% 2.11% 3.72% - -------------------------------------------------------------------------------------- Class B Shares (with sales charge) 9/1/98 16.22% 6.26% 1.93% 3.56% - -------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 19.22% 6.89% -- 4.01% - -------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 18.22% 6.89% -- 4.01% - -------------------------------------------------------------------------------------- Class K Shares (without sales charge) 5/15/01 19.63% -- -- 7.02% - -------------------------------------------------------------------------------------- Class K Shares (with sales charge) 5/15/01 18.63% -- -- 7.02%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 25 - -------------------------------------------------------------------------------- The Guardian Tax-Exempt Fund [PHOTO] Alexander M. Grant, Jr. Alexander M. Grant, Jr. Portfolio Manager Objective:Seeks to maximize current income exempt from 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 December 31, 2003: $90,577,818 Q: How did the Guardian Tax-Exempt Fund perform in 2003? A: The Guardian Tax-Exempt Fund produced a total return of 5.34%/1/ for 2003. The Lehman Municipal Bond Index/2/ produced a total return of 5.31% for the same period. The latter reflects the different investment parameters of that Index, which includes all bonds and maturities. Even so, the Fund exceeded it by 0.03%. Somewhat more meaningful peer group comparisons are from Lipper/3/ and Morningstar./4/ The Lipper General Municipal Average return for the year was 4.75%, ranking the Fund 72nd out of 296 for the one-year period ended December 31, 2003, placing it in Lipper's 25th percentile. The Lipper peer group invests primarily in municipal debt issues rated in the top four credit ratings. The Morningstar universe of municipal national long funds currently consists of 269 national funds with an average duration of more than seven years, or an average maturity of more than 12 years. The average return for this Morningstar group for the year ended December 31, 2003 was 4.87%. The Guardian Tax-Exempt Fund outperformed this Morningstar group by 0.47%. For the three-year period ended December 31, 2003, Lipper ranks the Fund 22nd out of 257 funds and in the 9th percentile. For the five-year period ended December 31, 2003, the Fund ranks 8th out of 219 funds and in the 4th percentile. For the 10-year period ended December 31, 2003, the Fund ranked 50th out of 116 funds and in the 43rd percentile. As of December 31, 2003, the Fund's 30-day yield was 3.42%, which compares to a 5.26% 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 all of 2003, new issue volume was $383.24 billion, a new high. Investors poured money into municipal bonds, allowing the market to absorb this volume. Wealthy individuals and businesses continued to be attracted to this asset class as a way to preserve capital, diversify risk and generate tax-exempt income. Looking at 2003 in terms of total return performance, a strategy of diversification and moderation by issuer, insurance, industry, sector and state proved to be best. In 2003, the performance hazards due to overly concentrating investments in one credit sector, industry or state were evident in tobacco securitization bonds, airlines, and State of California bonds. In 1999, the bonds to avoid were health care related; in 2000, it was high yield and non-investment grade bonds; in 2001 the underperformers were California utility bonds and airlines; and in 2002, airlines dropped over 20% during the course of the year. At year-end 2003, ongoing litigation against tobacco companies, weak profit margins for airlines and continued budgetary stress for California state government drove extreme volatility and poor performance for those investors with heavy concentrations in these sectors. - -------------------------------------------------------------------------------- "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 sold selectively retail and institutional blocks when the bids were right in terms of the spread relative to our benchmarks. - -------------------------------------------------------------------------------- /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. Current performance may be lower or higher than the data quoted. /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. /4 (R)/2003 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. - -------------------------------------------------------------------------------- 26 - -------------------------------------------------------------------------------- The Guardian Tax-Exempt Fund Q: What is your outlook for the future? A: According to Lehman Brothers 2004 Municipal Market Outlook,/5/ new issue volume in 2004 is expected to be substantially lower and down as much as 25%. Variables determining the decline will be absolute yields and the level of fiscal recovery of state budgets. Even with a 25% decline over 2003, issuance would still be higher than the average issuance over the past five years ($212 billion). We expect this volume to be easily absorbed by 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. Insurance companies continue to be some of the largest sources of funding for the tax-exempt market. Increasing profitability continued to fuel their demand for tax-exempt income. As an example, over the first three quarters of 2003, net income at the largest property and casualty insurers increased to $21.1 billion, a 400%-plus increase over a similar period in 2002. Also, the strength of the economic recovery, inflationary pressures and tax law changes in both Washington, D.C. and individual states will continue to be variables to monitor. They are critical influences on interest rates, new issuance volume and credit quality and investor demand. Growth of a Hypothetical $10,000 Investment Portfolio Composition by Sector Allocation as of December 31, 2003 [CHART] [CHART] Guardian Tax Exempt Lehman Municipal Insured Bonds 52.07% Fund (Class A) Bond Index Revenue Bonds 27.10% ------------------- ---------------- State General Obligation Bonds 4.72% 16-Feb-93 $10,000 $10,000 Local General Obligation Bonds 14.31% 26-Feb-93 9,689 10,245 Short-Term 1.80% 31-Mar-93 9,482 10,137 30-Apr-93 9,577 10,239 31-May-93 9,644 10,296 30-Jun-93 9,836 10,468 30-Jul-93 9,774 10,482 31-Aug-93 10,059 10,700 30-Sep-93 10,237 10,822 29-Oct-93 10,142 10,843 30-Nov-93 10,010 10,748 31-Dec-93 10,235 10,974 31-Jan-94 10,365 11,100 28-Feb-94 9,964 10,812 31-Mar-94 9,416 10,372 29-Apr-94 9,388 10,460 31-May-94 9,530 10,551 30-Jun-94 9,389 10,486 29-Jul-94 9,562 10,678 31-Aug-94 9,571 10,715 30-Sep-94 9,405 10,558 31-Oct-94 9,249 10,371 30-Nov-94 9,089 10,183 30-Dec-94 9,319 10,407 31-Jan-95 9,600 10,705 28-Feb-95 9,827 11,016 31-Mar-95 9,903 11,143 28-Apr-95 9,901 11,156 31-May-95 10,188 11,512 30-Jun-95 9,992 11,411 31-Jul-95 10,129 11,519 31-Aug-95 10,220 11,665 29-Sep-95 10,276 11,739 31-Oct-95 10,405 11,910 30-Nov-95 10,572 12,107 29-Dec-95 10,677 12,224 31-Jan-96 10,782 12,316 29-Feb-96 10,665 12,233 29-Mar-96 10,491 12,077 30-Apr-96 10,475 12,042 31-May-96 10,460 12,038 28-Jun-96 10,539 12,169 31-Jul-96 10,666 12,279 30-Aug-96 10,637 12,276 30-Sep-96 10,779 12,448 31-Oct-96 10,910 12,588 29-Nov-96 11,109 12,819 31-Dec-96 11,061 12,765 31-Jan-97 11,042 12,789 28-Feb-97 11,130 12,907 31-Mar-97 10,994 12,734 30-Apr-97 11,077 12,841 30-May-97 11,241 13,034 30-Jun-97 11,377 13,173 31-Jul-97 11,679 13,538 29-Aug-97 11,547 13,411 30-Sep-97 11,689 13,570 31-Oct-97 11,762 13,658 28-Nov-97 11,843 13,738 31-Dec-97 12,028 13,938 30-Jan-98 12,108 14,082 27-Feb-98 12,070 14,086 31-Mar-98 12,115 14,099 30-Apr-98 12,035 14,035 29-May-98 12,285 14,257 30-Jun-98 12,309 14,314 31-Jul-98 12,330 14,349 31-Aug-98 12,537 14,571 30-Sep-98 12,720 14,753 30-Oct-98 12,640 14,752 30-Nov-98 12,731 14,804 31-Dec-98 12,770 14,841 29-Jan-99 12,884 15,018 26-Feb-99 12,882 14,952 31-Mar-99 12,843 14,973 30-Apr-99 12,867 15,010 31-May-99 12,708 14,923 30-Jun-99 12,537 14,709 31-Jul-99 12,571 14,762 31-Aug-99 12,453 14,644 30-Sep-99 12,435 14,650 31-Oct-99 12,251 14,491 30-Nov-99 12,424 14,645 31-Dec-99 12,342 14,536 31-Jan-00 12,285 14,473 29-Feb-00 12,450 14,641 31-Mar-00 12,761 14,961 30-Apr-00 12,662 14,873 31-May-00 12,576 14,795 30-Jun-00 12,933 15,187 31-Jul-00 13,103 15,399 31-Aug-00 13,314 15,636 30-Sep-00 13,227 15,555 31-Oct-00 13,370 15,724 30-Nov-00 13,488 15,843 31-Dec-00 13,866 16,226 31-Jan-01 13,943 16,396 28-Feb-01 13,964 16,448 31-Mar-01 14,109 16,595 30-Apr-01 13,919 16,415 31-May-01 14,063 16,592 30-Jun-01 14,182 16,703 31-Jul-01 14,412 16,950 31-Aug-01 14,671 17,230 30-Sep-01 14,579 17,172 31-Oct-01 14,797 17,376 30-Nov-01 14,661 17,230 31-Dec-01 14,528 17,067 31-Jan-02 14,763 17,363 28-Feb-02 14,956 17,573 31-Mar-02 14,657 17,228 30-Apr-02 14,937 17,564 31-May-02 15,028 17,671 30-Jun-02 15,209 17,859 31-Jul-02 15,419 18,088 31-Aug-02 15,630 18,306 30-Sep-02 16,094 18,707 31-Oct-02 15,700 18,396 30-Nov-02 15,616 18,320 31-Dec-02 16,004 18,706 31-Jan-03 15,932 18,659 28-Feb-03 16,180 18,920 31-Mar-03 16,229 18,931 30-Apr-03 16,371 19,056 31-May-03 16,838 19,502 30-Jun-03 16,711 19,419 31-Jul-03 16,014 18,740 31-Aug-03 16,106 18,879 30-Sep-03 16,637 19,434 31-Oct-03 16,509 19,337 30-Nov-03 16,712 19,538 31-Dec-03 16,859 19,700
To give you a comparison, the chart above shows the performance of a hypothetical $10,000 investment made in Class A shares of The Guardian Tax-Exempt Fund and the Lehman Municipal Bond Index. The starting point of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an investor may pay when purchasing Class A shares of the Fund. The Index begins at $10,000. 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. Performance for Class C shares, which were first offered on August 7, 2000, will vary due to differences in sales load and other expenses charged to such share class.
Average Annual Returns/1/ for Periods Ended December 31, 2003 Inception Date 1 Year 3 Years 5 Years 10 Years Since Inception - ----------------------------------------------------------------------------------------------- Class A Shares (without sales charge) 2/16/93 5.34% 6.74% 5.72% 5.12% 5.40% - ----------------------------------------------------------------------------------------------- Class A Shares (with sales charge) 2/16/93 0.60% 5.11% 4.75% 4.64% 4.95% - ----------------------------------------------------------------------------------------------- Class C Shares (without sales charge) 8/7/00 4.54% 5.94% -- -- 6.71% - ----------------------------------------------------------------------------------------------- Class C shares (with sales charge) 8/7/00 3.54% 5.94% -- -- 6.71%
/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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- /5/ DeGroot, Peter, Lehman Brothers 2004 Municipal Market Outlook, p. 14, January 2004. - -------------------------------------------------------------------------------- 27 - -------------------------------------------------------------------------------- The Guardian Cash Management Fund [PHOTO] Alexander M. Grant, Jr. Alexander M. Grant, Jr. Portfolio Manager Objective:Seeks as high a level of current income as is consistent with liquidity and preservation of capital Portfolio:Short-term money market instruments Inception:November 3, 1982 Net Assets at December 31, 2003: $560,587,544 Q: How did the Fund perform for the year ended December 31, 2003? A: As of December 31, 2003 the effective 7-day net annualized yield for the Guardian Cash Management Fund was 0.52%,/1/ adjusted up from 0.28% to account for a one-time interest income correction. The Fund produced a total net annualized return of 0.37%, unaffected by the minor income correction mentioned earlier, for the year ended December 31, 2003. In contrast, the effective 7-day annualized yield of Tier One money market funds as measured by iMoneyNet, Inc. was 0.39%; total return for the same category was 0.49%. iMoneyNet, Inc. is a research firm that tracks money market funds. Q: What was your investment strategy during the year? A: The Fund is a place for our investors to put their money while they decide their preferred long-term investment vehicle, be it stocks or bonds. Also, some of our investors prefer the relative stability of the money markets. To best accommodate all our investors, we will continue to try to provide a strong 7-day yield, while offering safety and liquidity. Our investment strategy was to create a diversified portfolio of money market instruments that presents minimal credit risks according to our criteria. As always, we only purchased securities from issuers that had received ratings in the two highest credit quality categories established by nationally recognized statistical ratings organizations like Moody's Investors Service Inc. and Standard & Poor's Corporation for the Fund's portfolio. Most of the portfolio (65.31%) was invested in commercial paper and short maturity corporate bonds; the balance was invested in repurchase agreements (8.00%) and floating rate taxable municipal bonds (26.69%). 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 Fed's policy-making Federal Open Markets Committee (FOMC) rate cuts of Fed Funds totaling 4.75% in 2001, an additional 0.50% in 2002, and an additional 0.25% in the second quarter of 2003, the money markets remain tight with issuers encouraged to alter their rate offerings in response to stock market expectations and monetary policy. The Fed Funds target is the rate at which banks can borrow from each other overnight. While the Federal Reserve Board does not set this rate, it can establish a target rate, and, through open market operations, the Fed can move member banks in the direction of that target rate. The Discount Rate is the rate at which banks can borrow directly from the Federal Reserve. Another factor affecting performance was the portfolio's average maturity of 49 days as of December 31, 2003. The average Tier One money market fund as measured by iMoneyNet, Inc. had an average maturity of 51 days. - -------------------------------------------------------------------------------- "Our investment strategy was to create a diversified portfolio of money market instruments that presents minimal credit risks according to our criteria." - -------------------------------------------------------------------------------- Q: What is your outlook for the future? A: Uncertainty with 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. However, with money market yields at all time lows, investors have been seeking alternative investment vehicles for "parking" money between stock market fluctuations, such as ultra-short bond funds. They have begun giving up the "risk-free" component of money market funds for the slight return pick-up of these alternate vehicles. However, as the FOMC tightens money supply and raises rates, cash inflows may increase into money market funds. 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. Current performance may be lower or higher than the data quoted. - -------------------------------------------------------------------------------- 28 Schedule of Investments December 31, 2003 .. The Guardian Park Avenue Fund Common Stocks -- 99.2% Shares Value --------------------------------------------------------- Aerospace and Defense -- 2.2% 279,100 Lockheed Martin Corp. $ 14,345,740 158,400 United Technologies Corp. 15,011,568 --------------- 29,357,308 --------------------------------------------------------- Air Freight and Logistics -- 1.3% 223,700 United Parcel Svcs., Inc. 16,676,835 --------------------------------------------------------- Beverages -- 3.7% 170,400 Anheuser-Busch Cos., Inc. 8,976,672 359,800 Coca-Cola Co. 18,259,850 469,500 PepsiCo., Inc. 21,888,090 --------------- 49,124,612 --------------------------------------------------------- Biotechnology -- 1.2% 252,900 Amgen, Inc.* 15,629,220 --------------------------------------------------------- Capital Markets -- 9.2% 232,800 Goldman Sachs Group, Inc. 22,984,344 414,500 Lehman Brothers Hldgs., Inc. 32,007,690 430,000 Mellon Financial Corp. 13,807,300 497,900 Merrill Lynch & Co., Inc. 29,201,835 442,600 State Street Corp. 23,050,608 --------------- 121,051,777 --------------------------------------------------------- Chemicals -- 0.5% 150,100 E.I. Du Pont de Nemours & Co. 6,888,089 --------------------------------------------------------- Commercial Banks -- 4.7% 145,900 Bank of America Corp. 11,734,737 154,500 M & T Bank Corp. 15,187,350 227,600 North Fork Bancorporation, Inc. 9,210,972 429,400 Wells Fargo & Co. 25,287,366 --------------- 61,420,425 --------------------------------------------------------- Communications Equipment -- 2.0% 1,084,600 Cisco Systems, Inc.* 26,344,934 --------------------------------------------------------- Computers and Peripherals -- 3.6% 270,500 Dell, Inc.* 9,186,180 1,283,900 Hewlett Packard Co. 29,491,183 356,100 Storage Technology Corp.* 9,169,575 --------------- 47,846,938 --------------------------------------------------------- Diversified Financial Services -- 1.6% 426,066 Citigroup, Inc. 20,681,244 --------------------------------------------------------- Diversified Telecommunication Services -- 1.5% 545,600 Verizon Comm. 19,139,648 --------------------------------------------------------- Electric Utilities -- 2.3% 244,200 Consolidated Edison, Inc. 10,503,042 302,500 FPL Group, Inc. 19,789,550 --------------- 30,292,592 --------------------------------------------------------- Electronic Equipment and Instruments -- 0.8% 351,500 Jabil Circuit, Inc.* 9,947,450 --------------------------------------------------------- Energy Equipment and Services -- 3.5% 648,100 Nabors Industries, Inc.* 26,896,150 526,800 Noble Corp.* 18,848,904 --------------- 45,745,054 --------------------------------------------------------- Food and Staples Retailing -- 2.0% 209,900 Costco Wholesale Corp.* 7,804,082 339,200 Wal-Mart Stores, Inc. 17,994,560 --------------- 25,798,642 --------------------------------------------------------- Food Products -- 0.6% 105,600 Hershey Foods Corp. 8,130,144 ---------------------------------------------------------
---------------------------------------------------------- Shares Value ---------------------------------------------------------- Gas Utilities -- 1.1% 659,600 NiSource, Inc. $ 14,471,624 ---------------------------------------------------------- Health Care Equipment and Supplies -- 3.1% 438,600 Boston Scientific Corp. 16,122,936 135,800 C.R. Bard, Inc. 11,033,750 280,000 Medtronic, Inc. 13,610,800 --------------- 40,767,486 ---------------------------------------------------------- Health Care Providers and Services -- 2.4% 552,600 AmerisourceBergen Corp. 31,028,490 ---------------------------------------------------------- Hotels, Restaurants and Leisure -- 1.1% 353,100 Carnival Corp. 14,028,663 ---------------------------------------------------------- Household Products -- 4.0% 440,100 Colgate-Palmolive Co. 22,027,005 300,700 Procter & Gamble Co. 30,033,916 --------------- 52,060,921 ---------------------------------------------------------- Industrial Conglomerates -- 3.3% 1,402,500 General Electric Co. 43,449,450 ---------------------------------------------------------- Information Technology Services -- 1.5% 187,100 Affiliated Computer Svcs., Inc.* 10,189,466 246,400 Fiserv, Inc.* 9,735,264 --------------- 19,924,730 ---------------------------------------------------------- Insurance -- 5.1% 104,100 Ambac Financial Group, Inc. 7,223,499 592,200 American Int'l. Group, Inc. 39,251,016 292,100 Chubb Corp. 19,892,010 --------------- 66,366,525 ---------------------------------------------------------- Leisure Equipment and Products -- 1.4% 988,300 Mattel, Inc. 19,044,541 ---------------------------------------------------------- Machinery -- 4.3% 660,200 Deere & Co. 42,946,010 181,300 ITT Industries, Inc. 13,454,273 --------------- 56,400,283 ---------------------------------------------------------- Media -- 4.9% 553,200 EchoStar Comm. Corp.* 18,808,800 176,200 Lamar Advertising Co.* 6,575,784 183,400 New York Times Co. 8,764,686 695,000 Viacom, Inc. 30,844,100 --------------- 64,993,370 ---------------------------------------------------------- Metals and Mining -- 1.3% 433,000 Alcoa, Inc. 16,454,000 ---------------------------------------------------------- Oil and Gas -- 5.8% 221,700 ChevronTexaco Corp. 19,152,663 308,300 EOG Resources, Inc. 14,234,211 730,100 Exxon Mobil Corp. 29,934,100 307,700 Occidental Petroleum Corp. 12,997,248 --------------- 76,318,222 ---------------------------------------------------------- Personal Products -- 0.4% 84,000 Avon Products, Inc. 5,669,160 ---------------------------------------------------------- Pharmaceuticals -- 7.9% 228,900 Abbott Laboratories 10,666,740 411,940 Johnson & Johnson 21,280,820 2,034,540 Pfizer, Inc. 71,880,298 --------------- 103,827,858 ----------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 29 The Guardian Park Avenue Fund Schedule of Investments (Continued)
------------------------------------------------------ Shares Value ------------------------------------------------------ Semiconductors and Semiconductor Equipment -- 3.3% 182,500 Analog Devices, Inc. $ 8,331,125 352,400 Applied Materials, Inc.* 7,911,380 830,400 Intel Corp. 26,738,880 -------------- 42,981,385 ----------------------------------------------------- Software -- 6.2% 229,800 Adobe Systems, Inc. 9,031,140 879,000 BEA Systems, Inc.* 10,811,700 1,466,100 Microsoft Corp. 40,376,394 1,568,200 Oracle Corp. * 20,700,240 -------------- 80,919,474 ----------------------------------------------------- Specialty Retail -- 0.7% 309,200 RadioShack Corp. 9,486,256 ----------------------------------------------------- Tobacco -- 0.7% 176,700 Altria Group, Inc. 9,616,014 ----------------------------------------------------- Total Common Stocks (Cost $1,138,874,853) 1,301,883,364 ----------------------------------------------------- Total Investments -- 99.2% (Cost $1,138,874,853) 1,301,883,364 Cash, Receivables and Other Assets Less Liabilities -- 0.8% 10,625,002 ----------------------------------------------------- Net Assets -- 100% $1,312,508,366 -----------------------------------------------------
* Non-income producing security. - -------------------------------------------------------------------------------- See notes to financial statements. 30 .. The Guardian UBS Large Cap Value Fund Common Stocks -- 96.0% Shares Value ---------------------------------------------------------- Aerospace and Defense -- 1.8% 21,400 Boeing Co. $ 901,796 6,900 United Technologies Corp. 653,913 ----------- 1,555,709 --------------------------------------------------------- Airlines -- 0.4% 32,100 Delta Airlines, Inc. 379,101 --------------------------------------------------------- Auto Components -- 1.2% 8,800 Johnson Controls, Inc. 1,021,856 --------------------------------------------------------- Biotechnology -- 1.1% 18,600 Cephalon, Inc.* 900,426 --------------------------------------------------------- Building Products -- 2.0% 63,600 Masco Corp. 1,743,276 --------------------------------------------------------- Capital Markets -- 10.1% 88,700 J.P. Morgan Chase & Co. 3,257,951 55,800 Mellon Financial Corp. 1,791,738 61,000 Morgan Stanley 3,530,070 ----------- 8,579,759 --------------------------------------------------------- Commercial Banks -- 8.0% 9,100 Bank of America Corp. 731,913 19,500 FleetBoston Financial Corp. 851,175 28,300 PNC Financial Svcs. Group 1,548,859 61,900 Wells Fargo & Co. 3,645,291 ----------- 6,777,238 --------------------------------------------------------- Computers and Peripherals -- 0.9% 33,100 Hewlett Packard Co. 760,307 --------------------------------------------------------- Construction Materials -- 2.0% 35,500 Martin Marietta Materials, Inc. 1,667,435 --------------------------------------------------------- Diversified Financial Services -- 5.8% 100,900 Citigroup, Inc. 4,897,686 --------------------------------------------------------- Diversified Telecommunication Services -- 3.7% 44,100 BellSouth Corp. 1,248,030 72,600 SBC Comm., Inc. 1,892,682 ----------- 3,140,712 --------------------------------------------------------- Electric Utilities -- 6.3% 15,500 American Electric Power, Inc. 472,905 45,900 CMS Energy Corp.* 391,068 21,700 Exelon Corp. 1,440,012 47,000 FirstEnergy Corp. 1,654,400 19,400 Progress Energy, Inc. 878,044 21,500 TXU Corp. 509,980 ----------- 5,346,409 --------------------------------------------------------- Food and Staples Retailing -- 1.9% 32,300 Albertson's, Inc. 731,595 24,100 Costco Wholesale Corp.* 896,038 ----------- 1,627,633 --------------------------------------------------------- Gas Utilities -- 1.2% 35,000 Sempra Energy 1,052,100 --------------------------------------------------------- Health Care Equipment and Supplies -- 0.6% 17,500 Baxter Int'l., Inc. 534,100 --------------------------------------------------------- Health Care Providers and Services -- 4.5% 9,300 Anthem, Inc.* 697,500 5,400 Quest Diagnostics, Inc.* 394,794 46,600 UnitedHealth Group 2,711,188 ----------- 3,803,482 ---------------------------------------------------------
----------------------------------------------------------- Shares Value ----------------------------------------------------------- Household Durables -- 0.3% 11,200 Newell Rubbermaid, Inc. $ 255,024 ----------------------------------------------------------- Household Products -- 1.2% 16,700 Kimberly-Clark Corp. 986,803 ----------------------------------------------------------- Information Technology Services -- 1.5% 30,300 First Data Corp. 1,245,027 ----------------------------------------------------------- Insurance -- 4.3% 19,000 AFLAC, Inc. 687,420 24,400 American Int'l. Group, Inc. 1,617,232 22,400 Hartford Financial Svcs. Group, Inc. 1,322,272 ----------- 3,626,924 ----------------------------------------------------------- Machinery -- 4.2% 28,600 Illinois Tool Works, Inc. 2,399,826 24,800 Pentair, Inc. 1,133,360 ----------- 3,533,186 ----------------------------------------------------------- Media -- 4.9% 10,000 Gannett Co., Inc. 891,600 9,700 McGraw-Hill Cos., Inc. 678,224 94,300 Time Warner, Inc.* 1,696,457 20,300 Viacom, Inc. 900,914 ----------- 4,167,195 ----------------------------------------------------------- Oil and Gas -- 8.8% 13,600 Anadarko Petroleum Corp. 693,736 38,800 ConocoPhillips 2,544,116 103,600 Exxon Mobil Corp. 4,247,600 ----------- 7,485,452 ----------------------------------------------------------- Paper and Forest Products -- 1.0% 30,000 MeadWestvaco Corp. 892,500 ----------------------------------------------------------- Pharmaceuticals -- 5.2% 69,100 Bristol-Myers Squibb Corp. 1,976,260 6,000 Johnson & Johnson 309,960 49,700 Wyeth 2,109,765 ----------- 4,395,985 ----------------------------------------------------------- Road and Rail -- 3.9% 46,400 Burlington Northern Santa Fe 1,501,040 75,200 Norfolk Southern Corp. 1,778,480 ----------- 3,279,520 ----------------------------------------------------------- Thrifts and Mortgage Finance -- 4.6% 43,100 Federal Home Loan Mortgage Corp. 2,513,592 38,550 GreenPoint Financial Corp. 1,361,586 ----------- 3,875,178 ----------------------------------------------------------- Wireless Telecommunication Services -- 4.6% 139,500 Nextel Comm., Inc.* 3,914,370 ----------------------------------------------------------- Total Common Stocks (Cost $62,941,376) 81,444,393 ----------------------------------------------------------- Exchange-Traded Fund -- 1.5% 11,000 S&P Depositary Receipts Trust Series 1 exp. 12/31/2099 (Cost $1,157,650) $ 1,224,080 -----------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 31 The Guardian UBS Large Cap Value Fund Schedule of Investments (Continued) Repurchase Agreement -- 2.8% Principal Amount Value ----------------------------------------------------------- $ 2,408,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $1,408,123 at 0.92%, due 1/2/2004 (1) (Cost $2,408,000) $ 2,408,000 ---------------------------------------------------------- Total Investments -- 100.3% (Cost $66,507,026) 85,076,473 Liabilities in Excess of Cash, Receivables and Other Assets -- (0.3)% (249,418) ---------------------------------------------------------- Net Assets -- 100% $84,827,055 ----------------------------------------------------------
* 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. 32 .. The Guardian Park Avenue Small Cap Fund Common Stocks -- 99.1% Shares Value -------------------------------------------------------------- Aerospace and Defense -- 2.3% 187,600 EDO Corp. $ 4,624,340 -------------------------------------------------------------- Airlines -- 1.8% 198,100 Skywest, Inc. 3,589,572 -------------------------------------------------------------- Auto Components -- 2.5% 126,000 American Axle & Mfg. Hldgs., Inc.* 5,092,920 -------------------------------------------------------------- Beverages -- 0.7% 47,400 Cott Corp.* 1,327,674 -------------------------------------------------------------- Biotechnology -- 6.5% 41,200 Angiotech Pharmaceuticals, Inc.* 1,895,200 38,900 Charles River Laboratories Int'l.* 1,335,437 121,700 Exact Sciences Corp.* 1,231,604 74,400 ILEX Oncology, Inc.* 1,581,000 76,000 NPS Pharmaceuticals, Inc.* 2,336,240 128,800 Protein Design Labs., Inc.* 2,305,520 249,300 Repligen Corp.* 1,089,441 179,800 XOMA Ltd.* 1,186,680 ------------ 12,961,122 -------------------------------------------------------------- Capital Markets -- 2.3% 120,600 Investors Financial Svcs. Corp. 4,632,246 -------------------------------------------------------------- Chemicals -- 0.6% 40,200 Cabot Corp. 1,279,968 -------------------------------------------------------------- Commercial Banks -- 6.0% 161,800 Boston Private Financial Hldgs., Inc.* 4,019,112 30,200 Community Bank System, Inc. 1,479,800 28,600 East West Bancorp, Inc. 1,535,248 55,500 Southwest Bancorp. of Texas, Inc. 2,156,175 37,700 UCBH Hldgs., Inc. 1,469,169 30,750 Wintrust Financial Corp. 1,386,825 ------------ 12,046,329 -------------------------------------------------------------- Commercial Services and Supplies -- 1.8% 43,800 Banta Corp. 1,773,900 135,000 Labor Ready, Inc.* 1,768,500 ------------ 3,542,400 -------------------------------------------------------------- Communications Equipment -- 0.8% 209,500 Symmetricom, Inc.* 1,525,160 -------------------------------------------------------------- Computers and Peripherals -- 0.9% 120,800 Synaptics, Inc.* 1,809,584 -------------------------------------------------------------- Construction and Engineering -- 0.9% 38,100 Jacobs Engineering Group, Inc.* 1,829,181 -------------------------------------------------------------- Diversified Financial Services -- 2.1% 140,600 Financial Federal Corp.* 4,295,330 -------------------------------------------------------------- Diversified Telecommunication Services -- 1.6% 39,300 Comwlth. Tel. Enterprises, Inc.* 1,483,575 156,300 TALK America Hldgs., Inc.* 1,800,576 ------------ 3,284,151 -------------------------------------------------------------- Electronic Equipment and Instruments -- 2.7% 55,500 Benchmark Electronics, Inc.* 1,931,955 71,200 Merix Corp.* 1,746,536 43,000 Varian, Inc.* 1,794,390 ------------ 5,472,881 -------------------------------------------------------------- Energy Equipment and Services -- 4.1% 386,000 Grant Prideco, Inc.* 5,025,720 316,700 Key Energy Svcs., Inc.* 3,265,177 ------------ 8,290,897 --------------------------------------------------------------
-------------------------------------------------------------- Shares Value -------------------------------------------------------------- Food and Staples Retailing -- 1.1% 63,100 United Natural Foods, Inc.* $ 2,265,921 -------------------------------------------------------------- Food Products -- 1.3% 61,100 American Italian Pasta Co.* 2,560,090 -------------------------------------------------------------- Gas Utilities -- 0.7% 51,500 AGL Resources, Inc. 1,498,650 -------------------------------------------------------------- Health Care Equipment and Supplies -- 4.3% 93,700 ALARIS Medical Systems, Inc.* 1,425,177 150,000 American Medical Systems Hldgs., Inc.* 3,270,000 83,600 Immucor, Inc.* 1,704,604 42,100 Sola Int'l., Inc.* 791,480 75,300 Synovis Life Technologies, Inc. 1,531,602 ------------ 8,722,863 -------------------------------------------------------------- Hotels, Restaurants and Leisure -- 2.6% 130,600 Penn National Gaming, Inc.* 3,014,248 76,500 Ruby Tuesday, Inc. 2,179,485 ------------ 5,193,733 -------------------------------------------------------------- Information Technology Services -- 2.1% 40,400 CACI Int'l., Inc.* 1,964,248 147,500 Keane, Inc.* 2,159,400 ------------ 4,123,648 -------------------------------------------------------------- Insurance -- 2.7% 75,500 Direct General Corp. 2,499,050 25,500 Montpelier Re Hldgs. Ltd. 935,850 59,000 ProAssurance Corp.* 1,896,850 ------------ 5,331,750 -------------------------------------------------------------- Internet Software and Services -- 2.2% 114,400 Netegrity, Inc.* 1,179,464 85,100 PEC Solutions, Inc.* 1,442,445 217,300 S1 Corp.* 1,749,265 ------------ 4,371,174 -------------------------------------------------------------- Machinery -- 3.6% 139,800 AGCO Corp.* 2,815,572 70,000 CLARCOR, Inc. 3,087,000 33,100 IDEX Corp. 1,376,629 ------------ 7,279,201 -------------------------------------------------------------- Media -- 1.9% 165,800 Gray Television, Inc. 2,506,896 21,200 Media General, Inc. 1,380,120 ------------ 3,887,016 -------------------------------------------------------------- Metals and Mining -- 1.7% 158,000 Hecla Mining Co.* 1,309,820 96,200 Massey Energy Co. 2,000,960 ------------ 3,310,780 -------------------------------------------------------------- Multi-Utilities and Unregulated Power -- 1.9% 171,700 ONEOK, Inc. 3,791,136 -------------------------------------------------------------- Oil and Gas -- 4.9% 203,500 Energy Partners Ltd.* 2,828,650 152,200 Magnum Hunter Resources, Inc.* 1,447,422 263,800 Range Resources Corp.* 2,492,910 40,700 Western Gas Resources, Inc. 1,923,075 66,500 Whiting Petroleum Corp.* 1,223,600 ------------ 9,915,657 -------------------------------------------------------------- Paper and Forest Products -- 0.8% 94,700 Louisiana-Pacific Corp.* 1,693,236 --------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 33 The Guardian Park Avenue Small Cap Fund Schedule of Investments (Continued)
--------------------------------------------------------------- Shares Value --------------------------------------------------------------- Pharmaceuticals -- 4.8% 89,400 Atrix Laboratories, Inc.* $ 2,149,176 25,500 Medicis Pharmaceutical Corp. 1,818,150 190,200 Pain Therapeutics, Inc.* 1,321,890 75,400 Salix Pharmaceuticals Ltd.* 1,709,318 41,700 Taro Pharmaceutical Inds. Ltd.* 2,689,650 ------------ 9,688,184 -------------------------------------------------------------- Real Estate -- 1.8% 61,400 Arden Realty, Inc. 1,862,876 41,600 Home Pptys. NY, Inc. 1,680,224 ------------ 3,543,100 -------------------------------------------------------------- Road and Rail -- 2.1% 48,100 Arkansas Best Corp. 1,509,859 138,625 Werner Enterprises, Inc. 2,701,801 ------------ 4,211,660 -------------------------------------------------------------- Semiconductors and Semiconductor Equipment -- 5.1% 87,100 Credence Systems Corp.* 1,146,236 117,100 Entegris, Inc.* 1,504,735 83,200 Micrel, Inc.* 1,296,256 168,100 Pericom Semiconductor Corp.* 1,791,946 65,900 Sigmatel, Inc.* 1,626,412 145,200 Silicon Storage Technology, Inc.* 1,597,200 31,200 Varian Semiconductor Equipment Assoc., Inc.* 1,363,128 ------------ 10,325,913 -------------------------------------------------------------- Software -- 6.1% 204,100 Borland Software Corp.* 1,985,893 128,900 Bottomline Technologies, Inc.* 1,160,100 72,100 FactSet Research Systems, Inc. 2,754,941 263,300 Lawson Software, Inc.* 2,166,959 59,200 Manhattan Assoc., Inc.* 1,636,288 80,900 RSA Security, Inc.* 1,148,780 113,600 Verisity Ltd.* 1,448,400 ------------ 12,301,361 -------------------------------------------------------------- Specialty Retail -- 2.9% 43,300 Cost Plus, Inc.* 1,775,300 55,900 Group 1 Automotive, Inc.* 2,023,021 108,800 Movie Gallery, Inc.* 2,032,384 ------------ 5,830,705 -------------------------------------------------------------- Thrifts and Mortgage Finance -- 5.2% 67,800 BankUnited Financial Corp.* 1,748,562 166,800 Federal Agricultural Mortgage Corp.* 5,330,928 178,398 W Hldg. Co., Inc. 3,319,987 ------------ 10,399,477 -------------------------------------------------------------- Water Utilities -- 0.7% 60,625 Philadelphia Subn. Corp. 1,339,813 -------------------------------------------------------------- Wireless Telecommunication Services -- 1.0% 112,600 Western Wireless Corp.* 2,067,336 -------------------------------------------------------------- Total Common Stocks (Cost $155,682,958) 199,256,159 --------------------------------------------------------------
Repurchase Agreement -- 1.6% ------------------------------------------------------------ Principal Amount Value ------------------------------------------------------------ $ 3,200,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $3,200,164 at 0.92%, due 1/2/2004 (1) (Cost $3,200,000) $ 3,200,000 ----------------------------------------------------------- Total Investments -- 100.7% (Cost $158,882,958) 202,456,159 Liabilities in Excess of Cash, Receivables and Other Assets -- (0.7)% (1,433,213) ----------------------------------------------------------- Net Assets -- 100% $201,022,946 -----------------------------------------------------------
* 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. 34 .. The Guardian UBS Small Cap Value Fund Common Stocks -- 96.3% --------------------------------------------------------- Shares Value --------------------------------------------------------- Aerospace and Defense -- 2.5% 22,300 Esterline Technologies Corp.* $ 594,741 10,800 Triumph Group, Inc.* 393,120 ------------ 987,861 -------------------------------------------------------- Airlines -- 1.1% 20,300 Mesa Air Group, Inc.* 254,156 13,300 Pinnacle Airlines Corp.* 184,737 ------------ 438,893 -------------------------------------------------------- Auto Components -- 1.4% 12,500 Superior Industries Int'l., Inc. 544,000 -------------------------------------------------------- Building Products -- 0.4% 14,500 Apogee Enterprises, Inc. 164,575 -------------------------------------------------------- Capital Markets -- 1.4% 16,100 Allied Capital Corp. 448,868 3,600 National Financial Partners Corp. 99,180 ------------ 548,048 -------------------------------------------------------- Chemicals -- 2.2% 13,700 A. Schulman, Inc. 292,084 17,300 Lubrizol Corp. 562,596 ------------ 854,680 -------------------------------------------------------- Commercial Banks -- 11.7% 15,000 City National Corp. 931,800 45,800 Colonial BancGroup, Inc. 793,256 20,200 Cullen/Frost Bankers, Inc. 819,514 19,360 F. N. B. Corp. 686,312 6,300 First BanCorp. 249,165 12,600 Greater Bay Bancorp 358,848 23,500 Trustmark Corp. 687,845 ------------ 4,526,740 -------------------------------------------------------- Commercial Services and Supplies -- 5.1% 17,100 John H. Harland Co. 466,830 25,600 McGrath Rentcorp 697,600 12,200 Mobile Mini, Inc.* 240,584 18,700 New England Business Svc., Inc. 551,650 ------------ 1,956,664 -------------------------------------------------------- Communications Equipment -- 1.5% 15,000 Harris Corp. 569,250 -------------------------------------------------------- Computers and Peripherals -- 1.0% 130,500 Quantum Corp.* 407,160 -------------------------------------------------------- Construction and Engineering -- 0.7% 6,500 EMCOR Group, Inc.* 285,350 -------------------------------------------------------- Electric Utilities -- 1.5% 12,000 Hawaiian Electric Industries, Inc. 568,440 -------------------------------------------------------- Electrical Equipment -- 1.6% 28,800 Regal-Beloit Corp. 633,600 -------------------------------------------------------- Electronic Equipment and Instruments -- 3.8% 26,300 Methode Electronics, Inc. 321,649 23,400 Newport Corp.* 386,802 28,300 Park Electrochemical Corp. 749,667 ------------ 1,458,118 -------------------------------------------------------- Energy Equipment and Services -- 3.2% 19,400 Oceaneering Int'l., Inc.* 543,200 29,000 Offshore Logistics, Inc.* 711,080 ------------ 1,254,280 --------------------------------------------------------
-------------------------------------------------------------- Shares Value -------------------------------------------------------------- Food Products -- 1.6% 11,500 Lancaster Colony Corp. $ 519,340 5,800 Sensient Technologies Corp. 114,666 ------------ 634,006 -------------------------------------------------------------- Gas Utilities -- 1.1% 15,100 AGL Resources, Inc. 439,410 -------------------------------------------------------------- Health Care Equipment and Supplies -- 3.8% 12,500 Haemonetics Corp.* 298,625 3,600 ICU Medical, Inc.* 123,408 18,000 Mentor Corp. 433,080 15,800 Ocular Sciences, Inc.* 453,618 31,100 Theragenics Corp.* 170,117 ------------ 1,478,848 -------------------------------------------------------------- Health Care Providers and Services -- 4.2% 5,900 Apria Healthcare Group, Inc.* 167,973 5,700 Coventry Health Care, Inc.* 367,593 9,000 RehabCare Group, Inc.* 191,340 18,000 Renal Care Group, Inc.* 741,600 28,300 Stewart Enterprises, Inc.* 160,744 ------------ 1,629,250 -------------------------------------------------------------- Hotels, Restaurants and Leisure -- 2.0% 2,700 Bally Total Fitness Hldg. Corp.* 18,900 15,700 CBRL Group, Inc. 600,682 17,100 Dover Downs Gaming & Entertainment, Inc. 161,766 ------------ 781,348 -------------------------------------------------------------- Household Durables -- 4.7% 38,000 Department 56, Inc.* 497,800 24,600 Furniture Brands Int'l., Inc. 721,518 8,900 Libbey, Inc. 253,472 10,800 Stanley Furniture Co., Inc. 340,200 ------------ 1,812,990 -------------------------------------------------------------- Industrial Conglomerates -- 2.0% 25,000 ALLETE, Inc. 765,000 -------------------------------------------------------------- Information Technology Services -- 1.6% 28,900 American Management Systems, Inc.* 435,523 49,700 Computer Task Group, Inc.* 193,333 ------------ 628,856 -------------------------------------------------------------- Insurance -- 4.8% 27,200 AmerUs Group Co. 951,184 9,100 Donegal Group, Inc. 200,382 9,750 Fidelity National Financial, Inc. 378,105 9,900 Selective Insurance Group, Inc. 320,364 ------------ 1,850,035 -------------------------------------------------------------- Machinery -- 2.0% 18,100 Federal Signal Corp. 317,112 10,200 Harsco Corp. 446,964 ------------ 764,076 -------------------------------------------------------------- Media -- 1.9% 23,600 Radio One, Inc.* 455,480 16,100 Saga Comm., Inc.* 298,333 ------------ 753,813 -------------------------------------------------------------- Metals and Mining -- 1.7% 13,900 Quanex Corp. 640,790 -------------------------------------------------------------- Multi-Utilities and Unregulated Power -- 2.7% 24,100 Equitable Resources, Inc. 1,034,372 --------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 35 The Guardian UBS Small Cap Value Fund Schedule of Investments (Continued)
------------------------------------------------------- Shares Value ------------------------------------------------------- Oil and Gas -- 2.1% 22,700 Cimarex Energy Co.* $ 605,863 4,900 Stone Energy Corp.* 208,005 ----------- 813,868 ------------------------------------------------------- Personal Products -- 0.9% 18,800 Chattem, Inc.* 336,520 ------------------------------------------------------- Real Estate -- 7.5% 8,000 EastGroup Pptys., Inc. 259,040 43,700 Equity Inns, Inc. 395,485 31,900 Innkeepers USA Trust 267,003 13,000 Kilroy Realty Corp. 425,750 14,700 Parkway Pptys., Inc. 611,520 8,000 SL Green Realty Corp. 328,400 22,700 Thornburg Mortgage, Inc. 617,440 ----------- 2,904,638 ------------------------------------------------------- Road and Rail -- 2.8% 21,000 Genesee & Wyoming, Inc.* 661,500 11,600 Yellow Roadway Corp.* 419,572 ----------- 1,081,072 ------------------------------------------------------- Semiconductors and Semiconductor Equipment -- 0.8% 7,900 Dupont Photomasks, Inc.* 190,706 7,000 Integrated Silicon Solution, Inc.* 109,690 ----------- 300,396 ------------------------------------------------------- Software -- 2.0% 26,200 Reynolds & Reynolds Co. 761,110 ------------------------------------------------------- Specialty Retail -- 3.4% 16,100 Linens 'n Things, Inc.* 484,288 5,800 Michaels Stores, Inc. 256,360 16,700 Party City Corp.* 211,923 11,700 Rent-A-Center, Inc.* 349,596 ----------- 1,302,167 ------------------------------------------------------- Textiles, Apparel and Luxury Goods -- 0.3% 6,300 OshKosh B'Gosh, Inc. 135,198 ------------------------------------------------------- Thrifts and Mortgage Finance -- 3.3% 10,500 Independence Community Bank Corp. 377,685 29,700 IndyMac Bancorp, Inc. 884,763 ----------- 1,262,448 ------------------------------------------------------- Total Common Stocks (Cost $29,309,763) 37,307,870 ------------------------------------------------------- Exchange-Traded Fund -- 1.3% 3,100 iShares Russell 2000 Value Index Fund (Cost $334,252) $ 497,240 -------------------------------------------------------
Repurchase Agreement -- 2.6% ----------------------------------------------------------- Principal Amount Value ----------------------------------------------------------- $ 990,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $990,051 at 0.92%, due 1/2/2004 (1) (Cost $990,000) $ 990,000 ---------------------------------------------------------- Total Investments -- 100.2% (Cost $30,634,015) 38,795,110 Liabilities in Excess of Cash, Receivables and Other Assets -- (0.2)% (62,251) ---------------------------------------------------------- Net Assets -- 100% $38,732,859 ----------------------------------------------------------
* 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. 36 .. The Guardian Asset Allocation Fund Common Stocks -- 13.5% Shares Value ------------------------------------------------------ Aerospace and Defense -- 0.2% 3,044 Boeing Co. $ 128,274 2,736 Honeywell Int'l., Inc. 91,465 1,046 Lockheed Martin Corp. 53,764 606 Northrop Grumman Corp. 57,934 1,924 Raytheon Co. 57,797 318 United Technologies Corp. 30,137 ------------ 419,371 ------------------------------------------------------ Air Freight and Logistics -- 0.1% 2,119 United Parcel Svcs., Inc. 157,971 ------------------------------------------------------ Airlines -- 0.0% 2,503 Southwest Airlines Co. 40,398 ------------------------------------------------------ Automobiles -- 0.2% 5,835 Ford Motor Co. 93,360 2,438 General Motors Corp. 130,189 1,219 Harley-Davidson, Inc. 57,939 ------------ 281,488 ------------------------------------------------------ Beverages -- 0.4% 2,438 Anheuser-Busch Cos., Inc. 128,434 4,595 Coca-Cola Co. 233,196 3,197 Coca-Cola Enterprises, Inc. 69,918 2,867 PepsiCo., Inc. 133,660 2,305 The Pepsi Bottling Group, Inc. 55,735 ------------ 620,943 ------------------------------------------------------ Biotechnology -- 0.2% 2,242 Amgen, Inc.* 138,556 917 Biogen Idec, Inc.* 33,727 1,035 Chiron Corp.* 58,985 1,726 MedImmune, Inc.* 43,840 ------------ 275,108 ------------------------------------------------------ Building Products -- 0.0% 2,608 Masco Corp. 71,485 ------------------------------------------------------ Capital Markets -- 0.5% 2,547 Bank of New York, Inc. 84,357 8,048 Charles Schwab Corp. 95,288 1,000 Goldman Sachs Group, Inc. 98,730 5,066 J.P. Morgan Chase & Co. 186,074 980 Lehman Brothers Hldgs., Inc. 75,676 2,356 Mellon Financial Corp. 75,651 410 Merrill Lynch & Co., Inc. 24,046 3,352 Morgan Stanley 193,980 57 State Street Corp. 2,969 ------------ 836,771 ------------------------------------------------------ Chemicals -- 0.2% 567 Dow Chemical Co. 23,570 3,035 E.I. Du Pont de Nemours & Co. 139,276 1,085 Monsanto Co. 31,226 1,174 PPG Industries, Inc. 75,160 1,770 Rohm & Haas Co. 75,597 ------------ 344,829 ------------------------------------------------------ Commercial Banks -- 0.8% 4,591 Bank of America Corp. 369,254 1,872 BB&T Corp. 72,334 2,217 Fifth Third Bancorp 131,025 4,514 FleetBoston Financial Corp. 197,036 1,410 KeyCorp 41,341 3,312 U.S. Bancorp 98,631 4,992 Wachovia Corp. 232,577 3,950 Wells Fargo & Co. 232,616 ------------ 1,374,814 ------------------------------------------------------
----------------------------------------------------------- Shares Value ----------------------------------------------------------- Commercial Services and Supplies -- 0.2% 5,396 Cendant Corp.* $ 120,169 1,807 Cintas Corp. 90,585 1,630 Pitney Bowes, Inc. 66,211 2,779 Waste Management, Inc. 82,258 ------------ 359,223 ---------------------------------------------------------- Communications Equipment -- 0.4% 15,125 Cisco Systems, Inc.* 367,386 6,482 Corning, Inc.* 67,608 6,075 Motorola, Inc. 85,475 2,384 QUALCOMM, Inc. 128,569 ------------ 649,038 ---------------------------------------------------------- Computers and Peripherals -- 0.5% 4,776 Dell, Inc.* 162,193 5,386 EMC Corp.* 69,587 8,215 Hewlett Packard Co. 188,698 4,066 Int'l. Business Machines 376,837 12,916 Sun Microsystems, Inc.* 57,993 ------------ 855,308 ---------------------------------------------------------- Consumer Finance -- 0.2% 1,972 American Express Co. 95,110 146 Capital One Financial Corp. 8,948 4,750 MBNA Corp. 118,038 2,265 SLM Corp. 85,345 ------------ 307,441 ---------------------------------------------------------- Distributors -- 0.1% 2,967 Genuine Parts Co. 98,504 ---------------------------------------------------------- Diversified Financial Services -- 0.3% 11,373 Citigroup, Inc. 552,045 ---------------------------------------------------------- Diversified Telecommunication Services -- 0.4% 1,564 ALLTEL Corp. 72,851 1,989 AT & T Corp. 40,377 5,078 BellSouth Corp. 143,707 5,290 SBC Comm., Inc. 137,910 1,710 Sprint Corp. (FON Group) 28,078 4,971 Verizon Comm. 174,383 ------------ 597,306 ---------------------------------------------------------- Electric Utilities -- 0.2% 1,705 Entergy Corp. 97,407 525 Exelon Corp. 34,839 1,214 FPL Group, Inc. 79,420 1,395 Progress Energy, Inc. 63,138 2,650 Southern Co. 80,162 1,292 TXU Corp. 30,646 ------------ 385,612 ---------------------------------------------------------- Electrical Equipment -- 0.1% 424 Cooper Industries Ltd. 24,562 1,106 Emerson Electric Co. 71,614 ------------ 96,176 ---------------------------------------------------------- Electronic Equipment and Instruments -- 0.1% 2,990 Agilent Technologies, Inc.* 87,428 4,723 Solectron Corp.* 27,913 ------------ 115,341 ---------------------------------------------------------- Energy Equipment and Services -- 0.1% 2,205 Baker Hughes, Inc. 70,913 1,681 Schlumberger Ltd. 91,984 ------------ 162,897 ----------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 37 The Guardian Asset Allocation Fund Schedule of Investments (Continued)
----------------------------------------------------------- Shares Value ----------------------------------------------------------- Food and Staples Retailing -- 0.4% 840 Albertson's, Inc. $ 19,026 2,620 CVS Corp. 94,634 2,409 Kroger Co.* 44,591 1,099 Safeway, Inc.* 24,079 10,695 Wal-Mart Stores, Inc. 567,370 ------------ 749,700 ----------------------------------------------------------- Food Products -- 0.3% 2,194 Archer-Daniels-Midland Co. 33,393 2,621 Campbell Soup Co. 70,243 2,662 ConAgra Foods, Inc. 70,250 928 General Mills, Inc. 42,038 2,424 H.J. Heinz Co. 88,306 667 Hershey Foods Corp. 51,352 2,012 Kellogg Co. 76,617 1,269 W.M. Wrigley Jr. Co. 71,331 ------------ 503,530 ----------------------------------------------------------- Health Care Equipment and Supplies -- 0.4% 2,128 Baxter Int'l., Inc. 64,947 2,122 Becton Dickinson & Co., Inc. 87,299 2,932 Boston Scientific Corp. 107,780 136 C.R. Bard, Inc. 11,050 2,016 Guidant Corp. 121,363 1,756 Medtronic, Inc. 85,359 1,442 St. Jude Medical, Inc.* 88,467 594 Stryker Corp. 50,496 884 Zimmer Hldgs., Inc.* 62,234 ------------ 678,995 ----------------------------------------------------------- Health Care Providers and Services -- 0.2% 998 AmerisourceBergen Corp. 56,038 746 Cigna Corp. 42,895 306 HCA, Inc. 13,146 3,629 Health Management Associates, Inc. 87,096 1,178 McKesson Corp. 37,884 1,512 Tenet Healthcare Corp.* 24,267 929 Wellpoint Health Networks, Inc.* 90,104 ------------ 351,430 ----------------------------------------------------------- Hotels, Restaurants and Leisure -- 0.1% 2,190 Carnival Corp. 87,009 2,751 McDonald's Corp. 68,307 2,943 Starbucks Corp.* 97,296 ------------ 252,612 ----------------------------------------------------------- Household Products -- 0.2% 614 Clorox Co. 29,816 1,955 Kimberly-Clark Corp. 115,521 2,560 Procter & Gamble Co. 255,693 ------------ 401,030 ----------------------------------------------------------- Industrial Conglomerates -- 0.7% 2,236 3M Co. 190,127 23,903 General Electric Co. 740,515 6,224 Tyco Int'l. Ltd. 164,936 ------------ 1,095,578 ----------------------------------------------------------- Information Technology Services -- 0.2% 2,142 Automatic Data Processing, Inc. 84,845 3,414 Concord EFS, Inc.* 50,664 2,525 Electronic Data Systems Corp. 61,963 3,170 First Data Corp. 130,255 957 Paychex, Inc. 35,600 1,608 Sabre Hldgs. Corp. 34,717 ------------ 398,044 -----------------------------------------------------------
----------------------------------------------------------- Shares Value ----------------------------------------------------------- Insurance -- 0.6% 2,353 AFLAC, Inc. $ 85,132 2,008 Allstate Corp. 86,384 5,515 American Int'l. Group, Inc. 365,534 1,281 Chubb Corp. 87,236 1,104 John Hancock Financial Svcs., Inc. 41,400 186 Loews Corp. 9,198 2,164 Marsh & McLennan Cos., Inc. 103,634 2,884 MetLife, Inc. 97,104 1,253 Progressive Corp. 104,738 1,586 Travelers Ppty. Casualty Corp. 26,915 ------------ 1,007,275 ----------------------------------------------------------- Internet Software and Services -- 0.0% 942 Yahoo! Inc.* 42,550 ----------------------------------------------------------- Leisure Equipment and Products -- 0.1% 1,149 Eastman Kodak Co. 29,495 3,448 Mattel, Inc. 66,443 ------------ 95,938 ----------------------------------------------------------- Machinery -- 0.2% 1,626 Caterpillar, Inc. 134,991 1,491 Deere & Co. 96,990 2,138 Dover Corp. 84,985 ------------ 316,966 ----------------------------------------------------------- Media -- 0.5% 2,046 Clear Channel Comm., Inc. 95,814 3,217 Comcast Corp. - Class A* 105,743 216 Comcast Corp. - Class A Special* 6,756 629 Gannett Co., Inc. 56,082 1,395 New York Times Co. 66,667 11,612 Time Warner, Inc.* 208,900 77 Tribune Co. 3,973 4,849 Viacom, Inc. 215,199 5,567 Walt Disney Co. 129,878 ------------ 889,012 ----------------------------------------------------------- Metals and Mining -- 0.1% 2,364 Alcoa, Inc. 89,832 ----------------------------------------------------------- Multiline Retail -- 0.1% 1,602 Kohl's Corp.* 71,994 481 Target Corp. 18,470 ------------ 90,464 ----------------------------------------------------------- Multi-Utilities and Unregulated Power -- 0.2% 3,468 AES Corp.* 32,738 4,604 Duke Energy Corp. 94,152 3,136 El Paso Corp. 25,684 1,682 Public Svc. Enterprise Group, Inc. 73,671 3,916 Williams Cos., Inc. 38,455 ------------ 264,700 ----------------------------------------------------------- Oil and Gas -- 0.6% 1,406 Anadarko Petroleum Corp. 71,720 147 Burlington Resources, Inc. 8,141 2,887 ChevronTexaco Corp. 249,408 1,233 ConocoPhillips 80,848 14,298 Exxon Mobil Corp. 586,218 2,571 Unocal Corp. 94,690 ------------ 1,091,025 ----------------------------------------------------------- Paper and Forest Products -- 0.1% 2,952 Georgia-Pacific Corp. 90,538 -----------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 38 The Guardian Asset Allocation Fund Schedule of Investments (Continued)
--------------------------------------------------------- Shares Value --------------------------------------------------------- Personal Products -- 0.1% 1,376 Avon Products, Inc. $ 92,866 2,784 Gillette Co. 102,257 ------------ 195,123 --------------------------------------------------------- Pharmaceuticals -- 1.0% 1,116 Allergan, Inc. 85,720 6,462 Bristol-Myers Squibb Corp. 184,813 3,549 Eli Lilly & Co. 249,601 1,774 Forest Laboratories, Inc.* 109,633 6,872 Johnson & Johnson 355,008 1,779 King Pharmaceuticals, Inc.* 27,148 17,915 Pfizer, Inc. 632,937 3,875 Schering-Plough Corp. 67,386 ------------ 1,712,246 --------------------------------------------------------- Real Estate -- 0.1% 2,383 Plum Creek Timber Co., Inc. 72,562 1,972 Simon Ppty. Group, Inc. 91,383 ------------ 163,945 --------------------------------------------------------- Road and Rail -- 0.1% 2,352 Burlington Northern Santa Fe 76,087 1,674 Union Pacific Corp. 116,310 ------------ 192,397 --------------------------------------------------------- Semiconductors and Semiconductor Equipment -- 0.6% 2,923 Altera Corp.* 66,352 754 Analog Devices, Inc. 34,420 4,648 Applied Materials, Inc.* 104,348 1,688 Broadcom Corp.* 57,544 13,630 Intel Corp. 438,886 1,448 KLA-Tencor Corp.* 84,954 549 Linear Technology Corp. 23,097 794 Maxim Integrated Products, Inc. 39,541 3,302 Micron Technology, Inc.* 44,478 1,503 Texas Instruments, Inc. 44,158 2,346 Xilinx, Inc.* 90,884 ------------ 1,028,662 --------------------------------------------------------- Software -- 0.6% 1,802 Adobe Systems, Inc. 70,819 3,590 Computer Associates Int'l., Inc. 98,151 23,245 Microsoft Corp. 640,167 2,830 Siebel Systems, Inc.* 39,252 2,739 VERITAS Software Corp.* 101,781 ------------ 950,170 --------------------------------------------------------- Specialty Retail -- 0.3% 1,416 Bed, Bath & Beyond, Inc.* 61,383 1,930 Best Buy Co., Inc.* 100,823 3,143 Home Depot, Inc. 111,545 2,415 Lowe's Cos., Inc. 133,767 432 Staples, Inc.* 11,794 5,047 The Gap, Inc. 117,141 ------------ 536,453 --------------------------------------------------------- Textiles, Apparel and Luxury Goods -- 0.0% 1,255 NIKE, Inc. 85,917 --------------------------------------------------------- Thrifts and Mortgage Finance -- 0.2% 1,850 Federal National Mortgage Assn. 138,861 4,145 Washington Mutual, Inc. 166,297 ------------ 305,158 --------------------------------------------------------- Tobacco -- 0.2% 5,316 Altria Group, Inc. 289,297 509 UST, Inc. 18,166 ------------ 307,463 ---------------------------------------------------------
--------------------------------------------------------------- Shares Value --------------------------------------------------------------- Wireless Telecommunication Services -- 0.1% 12,777 AT & T Wireless Svcs., Inc.* $ 102,088 --------------------------------------------------------------- Total Common Stocks (Cost $24,129,149) 22,590,910 --------------------------------------------------------------- Mutual Funds -- 82.7% Equity -- 69.5% 15,277,311 The Guardian S&P 500 Index Fund, Class A (1)+ $116,565,880 --------------------------------------------------------------- Fixed Income -- 13.2% 2,190,079 The Guardian Investment Quality Bond Fund, Class A (2) 22,097,901 --------------------------------------------------------------- Total Mutual Funds (Cost $153,624,380) 138,663,781 --------------------------------------------------------------- U.S. Government -- 1.3% --------------------------------------------------------------- Principal Amount Value --------------------------------------------------------------- U.S. Treasury Bill $ 2,000,000 0.84%, 1/29/2004 (3) $ 1,998,693 200,000 0.88%, 1/8/2004 (3) 199,966 --------------------------------------------------------------- Total U.S. Government (Cost $2,198,659) 2,198,659 --------------------------------------------------------------- Repurchase Agreement -- 2.6% $ 4,355,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $4,355,223 at 0.92%, due 1/2/2004 (4) (Cost $4,355,000) $ 4,355,000 --------------------------------------------------------------- Total Investments -- 100.1% (Cost $184,307,188) 167,808,350 Liabilities in Excess of Cash, Receivables and Other Assets -- (0.1)% (242,305) --------------------------------------------------------------- Net Assets -- 100% $167,566,045 ---------------------------------------------------------------
* Non-income producing security. + The Guardian S&P 500 Index Fund financials are included herein. (1)Majority-owned subsidiary. (2)Affiliated issuer. (3)The U.S. Treasury Bill is 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) -------------------------------------------------------------- 198 S U.S. Treasury Notes, 5 Year 3/2004 $ (98,027) 100 P S&P 500 Index 3/2004 670,446 ------------ $ 572,419 --------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 39 .. The Guardian S&P 500 Index Fund Common Stocks -- 99.0% Shares Value --------------------------------------------------------- Aerospace and Defense -- 1.8% 12,788 Boeing Co. $ 538,886 3,125 General Dynamics Corp. 282,469 1,476 Goodrich Corp. 43,823 13,224 Honeywell Int'l., Inc. 442,078 6,804 Lockheed Martin Corp. 349,726 2,870 Northrop Grumman Corp. 274,372 6,629 Raytheon Co. 199,135 2,645 Rockwell Collins, Inc. 79,429 7,055 United Technologies Corp. 668,602 ------------- 2,878,520 --------------------------------------------------------- Air Freight and Logistics -- 1.0% 4,550 FedEx Corp. 307,125 810 Ryder Systems, Inc. 27,662 17,015 United Parcel Svcs., Inc. 1,268,468 ------------- 1,603,255 --------------------------------------------------------- Airlines -- 0.1% 1,785 Delta Airlines, Inc. 21,081 12,232 Southwest Airlines Co. 197,424 ------------- 218,505 --------------------------------------------------------- Auto Components -- 0.2% 945 Cooper Tire & Rubber Co. 20,204 2,085 Dana Corp. 38,260 8,041 Delphi Corp. 82,099 1,786 Goodyear Tire & Rubber Co.* 14,038 1,429 Johnson Controls, Inc. 165,935 1,852 Visteon Corp. 19,279 ------------- 339,815 --------------------------------------------------------- Automobiles -- 0.7% 28,159 Ford Motor Co. 450,544 8,879 General Motors Corp. 474,139 4,838 Harley-Davidson, Inc. 229,950 ------------- 1,154,633 --------------------------------------------------------- Beverages -- 2.6% 525 Adolph Coors Co. 29,452 11,891 Anheuser-Busch Cos., Inc. 626,418 995 Brown-Forman Corp. 92,983 37,132 Coca-Cola Co. 1,884,449 7,664 Coca-Cola Enterprises, Inc. 167,612 25,965 PepsiCo., Inc. 1,210,488 4,359 The Pepsi Bottling Group, Inc. 105,401 ------------- 4,116,803 --------------------------------------------------------- Biotechnology -- 1.2% 19,558 Amgen, Inc.* 1,208,685 5,022 Biogen Idec, Inc.* 184,709 2,723 Chiron Corp.* 155,184 3,379 Genzyme Corp.* 166,720 3,661 MedImmune, Inc.* 92,989 ------------- 1,808,287 --------------------------------------------------------- Building Products -- 0.2% 1,062 American Standard Cos., Inc.* 106,943 7,483 Masco Corp. 205,109 ------------- 312,052 --------------------------------------------------------- Capital Markets -- 3.6% 11,877 Bank of New York, Inc. 393,366 1,537 Bear Stearns Cos., Inc. 122,883 19,889 Charles Schwab Corp. 235,486 1,600 Federated Investors, Inc. 46,976 3,801 Franklin Resources, Inc. 197,880 7,166 Goldman Sachs Group, Inc. 707,499
------------------------------------------------------------ Shares Value ------------------------------------------------------------ 30,880 J.P. Morgan Chase & Co. $ 1,134,222 3,184 Janus Capital Group, Inc. 52,250 4,199 Lehman Brothers Hldgs., Inc. 324,247 6,309 Mellon Financial Corp. 202,582 14,254 Merrill Lynch & Co., Inc. 835,997 16,508 Morgan Stanley 955,318 3,195 Northern Trust Corp. 148,312 5,114 State Street Corp. 266,337 1,728 T. Rowe Price Group, Inc. 81,925 ------------- 5,705,280 ------------------------------------------------------------ Chemicals -- 1.6% 3,281 Air Products & Chemicals, Inc. 173,335 14,085 Dow Chemical Co. 585,514 15,009 E.I. Du Pont de Nemours & Co. 688,763 1,083 Eastman Chemical Co. 42,811 4,653 Ecolab, Inc. 127,353 1,823 Engelhard Corp. 54,599 685 Great Lakes Chemical Corp. 18,625 1,497 Hercules, Inc.* 18,263 1,377 Int'l. Flavors & Fragrances, Inc. 48,085 3,976 Monsanto Co. 114,429 2,774 PPG Industries, Inc. 177,592 5,132 Praxair, Inc. 196,042 3,134 Rohm & Haas Co. 133,853 1,093 Sigma-Aldrich 62,498 ------------- 2,441,762 ------------------------------------------------------------ Commercial Banks -- 6.3% 5,373 AmSouth Bancorporation 131,639 22,464 Bank of America Corp. 1,806,780 17,177 Bank One Corp. 783,099 8,563 BB&T Corp. 330,874 3,302 Charter One Financial, Inc. 114,084 2,548 Comerica, Inc. 142,841 8,646 Fifth Third Bancorp 510,979 1,845 First Tennessee Nat'l. Corp. 81,365 16,251 FleetBoston Financial Corp. 709,356 3,600 Huntington Bancshares, Inc. 81,000 6,165 KeyCorp 180,758 3,714 Marshall & Ilsley Corp. 142,060 9,265 National City Corp. 314,454 2,405 North Fork Bancorporation, Inc. 97,330 4,177 PNC Financial Svcs. Group 228,607 3,484 Regions Financial Corp. 129,605 4,873 SouthTrust Corp. 159,493 4,276 SunTrust Banks, Inc. 305,734 4,926 Synovus Financial Corp.* 142,460 29,004 U.S. Bancorp 863,739 2,982 Union Planters Corp. 93,903 20,178 Wachovia Corp. 940,093 25,187 Wells Fargo & Co. 1,483,262 1,438 Zions Bancorporation 88,193 ------------- 9,861,708 ------------------------------------------------------------ Commercial Services and Supplies -- 1.0% 2,838 Allied Waste Industries, Inc.* 39,391 2,845 Apollo Group, Inc.* 193,460 1,581 Avery Dennison Corp. 88,568 15,262 Cendant Corp.* 339,885 2,425 Cintas Corp. 121,565 997 Deluxe Corp. 41,206 2,052 Equifax, Inc. 50,274 2,604 H & R Block, Inc. 144,184 1,707 Monster Worldwide, Inc.* 37,486 3,634 Pitney Bowes, Inc. 147,613 1,723 R.R. Donnelley & Sons Co. 51,948
- -------------------------------------------------------------------------------- See notes to financial statements. 40 The Guardian S&P 500 Index Fund Schedule of Investments (Continued)
------------------------------------------------------------ Shares Value ------------------------------------------------------------ 2,547 Robert Half Int'l., Inc.* $ 59,447 8,974 Waste Management, Inc. 265,630 ------------- 1,580,657 ---------------------------------------------------------- Communications Equipment -- 2.9% 11,132 ADC Telecomm., Inc.* 33,062 2,400 Andrew Corp.* 27,624 6,102 Avaya, Inc.* 78,960 7,613 CIENA Corp.* 50,550 106,642 Cisco Systems, Inc.* 2,590,334 2,380 Comverse Technology, Inc.* 41,864 19,376 Corning, Inc.* 202,092 18,734 JDS Uniphase Corp.* 68,379 67,556 Lucent Technologies, Inc.* 191,859 35,440 Motorola, Inc. 498,641 1,349 QLogic Corp.* 69,609 12,102 QUALCOMM, Inc. 652,661 2,311 Scientific Atlanta, Inc. 63,090 5,897 Tellabs, Inc.* 49,712 ------------- 4,618,437 ---------------------------------------------------------- Computers and Peripherals -- 3.8% 6,053 Apple Computer, Inc.* 129,353 38,726 Dell, Inc.* 1,315,135 32,506 EMC Corp.* 419,977 4,621 Gateway, Inc.* 21,257 46,798 Hewlett Packard Co. 1,074,950 26,281 Int'l. Business Machines 2,435,723 1,823 Lexmark Int'l. Group, Inc.* 143,361 1,379 NCR Corp.* 53,505 5,702 Network Appliance, Inc.* 117,062 46,932 Sun Microsystems, Inc.* 210,725 ------------- 5,921,048 ---------------------------------------------------------- Construction and Engineering -- 0.0% 1,050 Fluor Corp. 41,622 ---------------------------------------------------------- Construction Materials -- 0.1% 1,439 Vulcan Materials Co. 68,453 ---------------------------------------------------------- Consumer Finance -- 1.2% 19,651 American Express Co. 947,768 3,450 Capital One Financial Corp. 211,450 19,217 MBNA Corp. 477,542 4,111 Providian Financial Corp.* 47,852 7,101 SLM Corp. 267,566 ------------- 1,952,178 ---------------------------------------------------------- Containers and Packaging -- 0.2% 813 Ball Corp. 48,431 752 Bemis Co., Inc. 37,600 2,261 Pactiv Corp.* 54,038 1,181 Sealed Air Corp.* 63,939 697 Temple-Inland, Inc. 43,681 ------------- 247,689 ---------------------------------------------------------- Distributors -- 0.1% 2,486 Genuine Parts Co. 82,535 ---------------------------------------------------------- Diversified Financial Services -- 2.6% 78,262 Citigroup, Inc. 3,798,838 2,359 Moody's Corp. 142,837 5,116 Principal Financial Group, Inc. 169,186 ------------- 4,110,861 ---------------------------------------------------------- Diversified Telecommunication Services -- 2.8% 4,514 ALLTEL Corp. 210,262 12,198 AT & T Corp. 247,620 28,012 BellSouth Corp. 792,740 1,992 CenturyTel, Inc. 64,979
---------------------------------------------------------- Shares Value ---------------------------------------------------------- 3,719 Citizens Comm. Co.* $ 46,190 23,823 Qwest Comm. Int'l., Inc.* 102,915 50,060 SBC Comm., Inc. 1,305,064 14,091 Sprint Corp. (FON Group) 231,374 41,885 Verizon Comm. 1,469,326 ------------- 4,470,470 ---------------------------------------------------------- Electric Utilities -- 2.0% 1,753 Allegheny Energy, Inc.* 22,368 2,471 Ameren Corp. 113,666 6,284 American Electric Power, Inc. 191,725 4,248 CenterPoint Energy, Inc. 41,163 2,886 CiNergy Corp. 112,006 1,896 CMS Energy Corp.* 16,154 3,075 Consolidated Edison, Inc. 132,256 4,770 Dominion Resources, Inc. 304,469 2,578 DTE Energy Co. 101,573 4,648 Edison Int'l.* 101,931 3,618 Entergy Corp. 206,696 4,952 Exelon Corp. 328,615 5,049 FirstEnergy Corp. 177,725 2,907 FPL Group, Inc. 190,176 6,344 PG&E Corp.* 176,173 1,212 Pinnacle West Capital Corp. 48,504 2,692 PPL Corp. 117,775 3,469 Progress Energy, Inc. 157,007 11,246 Southern Co. 340,191 2,624 TECO Energy, Inc. 37,812 4,937 TXU Corp. 117,105 6,601 Xcel Energy, Inc. 112,085 ------------- 3,147,175 ---------------------------------------------------------- Electrical Equipment -- 0.5% 2,786 American Power Conversion Corp. 68,118 1,359 Cooper Industries Ltd. 78,727 6,564 Emerson Electric Co. 425,019 1,094 Power-One, Inc.* 11,848 2,645 Rockwell Automation, Inc. 94,162 767 Thomas & Betts Corp. 17,556 ------------- 695,430 ---------------------------------------------------------- Electronic Equipment and Instruments -- 0.5% 7,382 Agilent Technologies, Inc.* 215,850 2,726 Jabil Circuit, Inc.* 77,146 2,802 Molex, Inc. 97,762 2,010 PerkinElmer, Inc. 34,311 7,816 Sanmina-SCI Corp.* 98,560 12,349 Solectron Corp.* 72,982 3,132 Symbol Technologies, Inc. 52,899 1,336 Tektronix, Inc. 42,218 2,568 Thermo Electron Corp.* 64,713 2,045 Waters Corp.* 67,812 ------------- 824,253 ---------------------------------------------------------- Energy Equipment and Services -- 0.8% 2,317 B.J. Svcs. Co.* 83,181 4,764 Baker Hughes, Inc. 153,210 6,355 Halliburton Co. 165,230 2,092 Nabors Industries, Inc.* 86,818 2,008 Noble Corp.* 71,846 1,317 Rowan Cos., Inc.* 30,515 9,003 Schlumberger Ltd. 492,644 5,572 Transocean, Inc.* 133,784 ------------- 1,217,228 ---------------------------------------------------------- Food and Staples Retailing -- 3.5% 5,902 Albertson's, Inc. 133,680 7,059 Costco Wholesale Corp.* 262,454
- -------------------------------------------------------------------------------- See notes to financial statements. 41 The Guardian S&P 500 Index Fund Schedule of Investments (Continued)
------------------------------------------------------------- Shares Value ------------------------------------------------------------- 6,301 CVS Corp. $ 227,592 11,800 Kroger Co.* 218,418 7,230 Safeway, Inc.* 158,409 1,885 Supervalu, Inc. 53,892 9,731 Sysco Corp. 362,285 66,196 Wal-Mart Stores, Inc. 3,511,698 15,872 Walgreen Co. 577,423 2,010 Winn-Dixie Stores, Inc. 20,000 ------------- 5,525,851 ------------------------------------------------------------- Food Products -- 1.2% 9,568 Archer-Daniels-Midland Co. 145,625 6,069 Campbell Soup Co. 162,649 8,628 ConAgra Foods, Inc. 227,693 5,846 General Mills, Inc. 264,824 5,023 H.J. Heinz Co. 182,988 1,960 Hershey Foods Corp. 150,900 6,444 Kellogg Co. 245,388 1,968 McCormick & Co., Inc. 59,237 12,269 Sara Lee Corp. 266,360 3,230 W.M. Wrigley Jr. Co. 181,558 ------------- 1,887,222 ------------------------------------------------------------- Gas Utilities -- 0.3% 2,616 KeySpan Corp. 96,269 2,048 Kinder Morgan, Inc. 121,037 674 NICOR, Inc. 22,943 4,276 NiSource, Inc. 93,815 527 Peoples Energy Corp. 22,155 3,727 Sempra Energy 112,034 ------------- 468,253 ------------------------------------------------------------- Health Care Equipment and Supplies -- 2.0% 3,019 Applera Corp.-Applied Biosystems Group 62,524 755 Bausch & Lomb, Inc. 39,185 9,370 Baxter Int'l., Inc. 285,972 3,689 Becton Dickinson & Co., Inc. 151,765 3,846 Biomet, Inc. 140,033 12,482 Boston Scientific Corp. 458,838 721 C.R. Bard, Inc. 58,581 4,822 Guidant Corp. 290,284 18,280 Medtronic, Inc. 888,591 653 Millipore Corp.* 28,112 2,817 St. Jude Medical, Inc.* 172,823 3,097 Stryker Corp. 263,276 3,437 Zimmer Hldgs., Inc.* 241,965 ------------- 3,081,949 ------------------------------------------------------------- Health Care Providers and Services -- 1.8% 2,336 Aetna, Inc. 157,867 1,854 AmerisourceBergen Corp. 104,102 2,046 Anthem, Inc.* 153,450 6,958 Cardinal Health, Inc. 425,551 2,221 Cigna Corp. 127,707 1,165 Express Scripts, Inc.* 77,391 7,462 HCA, Inc. 320,567 3,671 Health Management Associates, Inc. 88,104 2,389 Humana, Inc.* 54,589 3,317 IMS Health, Inc. 82,461 1,456 Manor Care, Inc. 50,334 4,085 McKesson Corp. 131,374 4,011 Medco Health Solutions, Inc.* 136,334 1,738 Quest Diagnostics, Inc.* 127,065 6,941 Tenet Healthcare Corp.* 111,403 9,220 UnitedHealth Group 536,419 2,138 Wellpoint Health Networks, Inc.* 207,365 ------------- 2,892,083 -------------------------------------------------------------
--------------------------------------------------------------- Shares Value --------------------------------------------------------------- Hotels, Restaurants and Leisure -- 1.2% 9,614 Carnival Corp. $ 381,964 2,575 Darden Restaurants, Inc. 54,178 1,649 Harrah's Entertainment, Inc. 82,071 5,226 Hilton Hotels Corp. 89,521 5,356 Int'l. Game Technology 191,209 3,443 Marriott Int'l., Inc. 159,067 18,921 McDonald's Corp. 469,808 6,148 Starbucks Corp.* 203,253 3,141 Starwood Hotels & Resorts Worldwide, Inc. 112,982 1,623 Wendy's Int'l., Inc. 63,686 4,234 Yum! Brands, Inc.* 145,650 ------------- 1,953,389 --------------------------------------------------------------- Household Durables -- 0.5% 800 American Greetings Corp.* 17,496 1,127 Black & Decker Corp. 55,584 1,042 Centex Corp. 112,171 2,219 Fortune Brands, Inc. 158,636 618 KB Home 44,817 2,782 Leggett & Platt, Inc. 60,175 1,066 Maytag Corp. 29,688 3,827 Newell Rubbermaid, Inc. 87,141 1,023 Pulte Homes, Inc. 95,773 811 Snap-On, Inc. 26,147 1,228 Stanley Works 46,504 786 Tupperware Corp. 13,629 933 Whirlpool Corp. 67,783 ------------- 815,544 --------------------------------------------------------------- Household Products -- 1.9% 3,390 Clorox Co. 164,618 8,248 Colgate-Palmolive Co. 412,813 7,704 Kimberly-Clark Corp. 455,229 19,708 Procter & Gamble Co. 1,968,435 ------------- 3,001,095 --------------------------------------------------------------- Industrial Conglomerates -- 4.2% 11,794 3M Co. 1,002,844 152,011 General Electric Co. 4,709,301 2,056 Textron, Inc. 117,315 30,110 Tyco Int'l. Ltd. 797,915 ------------- 6,627,375 --------------------------------------------------------------- Information Technology Services -- 1.2% 9,179 Automatic Data Processing, Inc. 363,580 2,951 Computer Sciences Corp.* 130,523 7,400 Concord EFS, Inc.* 109,816 2,482 Convergys Corp.* 43,336 7,704 Electronic Data Systems Corp. 189,056 11,404 First Data Corp. 468,590 2,689 Fiserv, Inc.* 106,242 6,010 Paychex, Inc. 223,572 1,910 Sabre Hldgs. Corp. 41,237 3,991 SunGard Data Systems, Inc.* 110,591 4,516 Unisys Corp.* 67,063 ------------- 1,853,606 --------------------------------------------------------------- Insurance -- 4.5% 4,286 ACE Ltd. 177,526 7,659 AFLAC, Inc. 277,103 10,558 Allstate Corp. 454,205 1,504 Ambac Financial Group, Inc. 104,363 39,606 American Int'l. Group, Inc. 2,625,086 4,649 Aon Corp. 111,297 2,889 Chubb Corp. 196,741 2,309 Cincinnati Financial Corp. 96,701 4,261 Hartford Financial Svcs. Group, Inc. 251,527
- -------------------------------------------------------------------------------- See notes to financial statements. 42 The Guardian S&P 500 Index Fund Schedule of Investments (Continued)
--------------------------------------------------------------- Shares Value --------------------------------------------------------------- 2,226 Jefferson-Pilot Corp. $ 112,747 4,288 John Hancock Financial Svcs., Inc. 160,800 2,766 Lincoln Nat'l. Corp. 111,663 2,851 Loews Corp. 140,982 7,934 Marsh & McLennan Cos., Inc. 379,959 2,115 MBIA, Inc. 125,271 11,297 MetLife, Inc. 380,370 3,436 Progressive Corp. 287,215 8,227 Prudential Financial, Inc. 343,642 1,823 SAFECO Corp. 70,969 3,733 St. Paul Cos., Inc. 148,013 1,831 Torchmark Corp. 83,384 15,308 Travelers Ppty. Casualty Corp. 259,777 4,975 UnumProvident Corp. 78,456 2,213 XL Capital Ltd. 171,618 ------------- 7,149,415 --------------------------------------------------------------- Internet and Catalog Retail -- 0.4% 9,856 eBay, Inc.* 636,599 --------------------------------------------------------------- Internet Software and Services -- 0.3% 10,061 Yahoo! Inc.* 454,455 --------------------------------------------------------------- Leisure Equipment and Products -- 0.2% 1,223 Brunswick Corp. 38,928 4,324 Eastman Kodak Co. 110,997 2,426 Hasbro, Inc. 51,625 6,117 Mattel, Inc. 117,875 ------------- 319,425 --------------------------------------------------------------- Machinery -- 1.4% 5,238 Caterpillar, Inc. 434,859 841 Crane Co. 25,852 571 Cummins, Inc. 27,945 2,338 Danaher Corp. 214,512 3,730 Deere & Co. 242,637 2,911 Dover Corp. 115,712 1,177 Eaton Corp. 127,092 4,671 Illinois Tool Works, Inc. 391,944 2,653 Ingersoll-Rand Co. 180,086 1,256 ITT Industries, Inc. 93,208 832 Navistar Int'l. Corp.* 39,844 1,645 PACCAR, Inc. 140,022 1,735 Pall Corp. 46,550 1,682 Parker-Hannifin Corp. 100,079 ------------- 2,180,342 --------------------------------------------------------------- Media -- 4.0% 9,260 Clear Channel Comm., Inc. 433,646 34,494 Comcast Corp. -- Class A* 1,133,818 1,237 Dow Jones & Co., Inc. 61,664 4,065 Gannett Co., Inc. 362,435 5,651 Interpublic Group Cos., Inc.* 88,155 1,337 Knight-Ridder, Inc. 103,444 2,816 McGraw-Hill Cos., Inc. 196,895 690 Meredith Corp. 33,679 2,319 New York Times Co. 110,825 2,999 Omnicom Group, Inc. 261,903 67,918 Time Warner, Inc.* 1,221,845 5,202 Tribune Co. 268,423 4,887 Univision Comm., Inc.* 193,965 26,391 Viacom, Inc. 1,171,232 31,096 Walt Disney Co. 725,470 ------------- 6,367,399 --------------------------------------------------------------- Metals and Mining -- 0.8% 13,096 Alcoa, Inc. 497,648 1,132 Allegheny Technologies, Inc. 14,965 2,726 Freeport-McMoran Copper & Gold, Inc. 114,846 6,419 Newmont Mining Corp. 312,028
------------------------------------------------------------- Shares Value ------------------------------------------------------------- 1,128 Nucor Corp. $ 63,168 1,425 Phelps Dodge Corp.* 108,428 1,892 United States Steel Corp. 66,258 1,195 Worthington Industries, Inc. 21,546 ------------- 1,198,887 ------------------------------------------------------------- Multiline Retail -- 1.0% 1,561 Big Lots, Inc.* 22,182 1,201 Dillards, Inc. 19,768 4,737 Dollar General Corp. 99,430 2,900 Family Dollar Stores, Inc. 104,052 2,840 Federated Department Stores, Inc. 133,849 4,629 J.C. Penney Co., Inc. 121,650 5,280 Kohl's Corp.* 237,283 4,265 May Department Stores Co. 123,984 1,837 Nordstrom, Inc. 63,009 3,694 SearsRoebuck & Co. 168,040 13,845 Target Corp. 531,648 ------------- 1,624,895 ------------------------------------------------------------- Multi-Utilities and Unregulated Power -- 0.5% 10,232 AES Corp.* 96,590 4,272 Calpine Corp.* 20,548 2,335 Constellation Energy Group, Inc. 91,439 13,778 Duke Energy Corp. 281,760 4,647 Dynegy, Inc.* 19,889 10,252 El Paso Corp. 83,964 3,650 Public Svc. Enterprise Group, Inc. 159,870 7,802 Williams Cos., Inc. 76,616 ------------- 830,676 ------------------------------------------------------------- Office Electronics -- 0.1% 11,648 Xerox Corp.* 160,742 ------------------------------------------------------------- Oil and Gas -- 5.0% 1,272 Amerada Hess Corp. 67,632 3,676 Anadarko Petroleum Corp. 187,513 2,456 Apache Corp. 199,182 966 Ashland, Inc. 42,562 3,106 Burlington Resources, Inc. 172,010 16,244 ChevronTexaco Corp. 1,403,319 10,367 ConocoPhillips 679,764 3,471 Devon Energy Corp. 198,750 1,669 EOG Resources, Inc. 77,058 100,880 Exxon Mobil Corp. 4,136,080 1,350 Kerr-McGee Corp. 62,762 4,449 Marathon Oil Corp. 147,217 5,890 Occidental Petroleum Corp. 248,794 1,169 Sunoco, Inc. 59,794 3,975 Unocal Corp. 146,399 ------------- 7,828,836 ------------------------------------------------------------- Paper and Forest Products -- 0.5% 3,965 Georgia-Pacific Corp. 121,607 7,547 Int'l. Paper Co. 325,351 1,413 Louisiana-Pacific Corp.* 25,264 2,831 MeadWestvaco Corp. 84,222 3,511 Weyerhaeuser Co. 224,704 ------------- 781,148 ------------------------------------------------------------- Personal Products -- 0.5% 801 Alberto-Culver Co. 50,527 3,423 Avon Products, Inc. 231,018 15,165 Gillette Co. 557,011 ------------- 838,556 ------------------------------------------------------------- Pharmaceuticals -- 8.3% 23,802 Abbott Laboratories 1,109,173 1,885 Allergan, Inc. 144,787
- -------------------------------------------------------------------------------- See notes to financial statements. 43 The Guardian S&P 500 Index Fund Schedule of Investments (Continued)
----------------------------------------------------------- Shares Value ----------------------------------------------------------- 29,523 Bristol-Myers Squibb Corp. $ 844,358 17,027 Eli Lilly & Co. 1,197,509 5,593 Forest Laboratories, Inc.* 345,647 44,593 Johnson & Johnson 2,303,674 3,608 King Pharmaceuticals, Inc.* 55,058 33,762 Merck & Co., Inc. 1,559,805 117,992 Pfizer, Inc. 4,168,657 22,681 Schering-Plough Corp. 394,423 1,463 Watson Pharmaceuticals, Inc.* 67,298 20,017 Wyeth 849,722 ------------- 13,040,111 ----------------------------------------------------------- Real Estate -- 0.4% 1,513 Apartment Investment & Management Co. 52,198 6,439 Equity Office Pptys. Trust 184,477 4,460 Equity Residential 131,615 2,659 Plum Creek Timber Co., Inc. 80,967 2,678 ProLogis 85,937 3,160 Simon Ppty. Group, Inc. 146,434 ------------- 681,628 ----------------------------------------------------------- Road and Rail -- 0.4% 5,663 Burlington Northern Santa Fe 183,198 3,037 CSX Corp. 109,150 5,523 Norfolk Southern Corp. 130,619 3,900 Union Pacific Corp. 270,972 ------------- 693,939 ----------------------------------------------------------- Semiconductors and Semiconductor Equipment -- 4.2% 6,069 Advanced Micro Devices, Inc.* 90,428 5,686 Altera Corp.* 129,072 5,668 Analog Devices, Inc. 258,744 25,199 Applied Materials, Inc.* 565,718 4,283 Applied Micro Circuits Corp.* 25,612 4,595 Broadcom Corp.* 156,644 98,714 Intel Corp. 3,178,591 3,041 KLA-Tencor Corp.* 178,415 4,550 Linear Technology Corp. 191,418 5,783 LSI Logic Corp.* 51,295 4,899 Maxim Integrated Products, Inc. 243,970 8,530 Micron Technology, Inc.* 114,899 3,068 National Semiconductor Corp.* 120,910 2,577 Novellus Systems, Inc.* 108,363 2,246 NVIDIA Corp.* 52,220 2,652 PMC-Sierra, Inc.* 53,438 2,493 Teradyne, Inc.* 63,447 26,280 Texas Instruments, Inc. 772,106 5,339 Xilinx, Inc.* 206,833 ------------- 6,562,123 ----------------------------------------------------------- Software -- 4.6% 3,464 Adobe Systems, Inc. 136,135 1,611 Autodesk, Inc. 39,598 3,499 BMC Software, Inc.* 65,256 2,659 Citrix Systems, Inc.* 56,397 9,148 Computer Associates Int'l., Inc. 250,106 5,272 Compuware Corp.* 31,843 4,446 Electronic Arts, Inc.* 212,430 3,242 Intuit, Inc.* 171,534 1,159 Mercury Interactive Corp.* 56,374 163,576 Microsoft Corp. 4,504,883 6,727 Novell, Inc.* 70,768 80,487 Oracle Corp.* 1,062,429 3,803 Parametric Technology Corp.* 14,984 5,561 PeopleSoft, Inc.* 126,791 6,843 Siebel Systems, Inc.* 94,913
------------------------------------------------------------- Shares Value ------------------------------------------------------------- 4,500 Symantec Corp.* $ 155,925 6,433 VERITAS Software Corp.* 239,050 ------------- 7,289,416 ------------------------------------------------------------- Specialty Retail -- 2.4% 4,489 AutoNation, Inc.* 82,463 1,333 AutoZone, Inc.* 113,585 4,634 Bed, Bath & Beyond, Inc.* 200,884 4,823 Best Buy Co., Inc.* 251,953 811 Boise Cascade Corp. 26,649 2,929 Circuit City Stores, Inc. 29,671 34,767 Home Depot, Inc. 1,233,881 12,053 Lowe's Cos., Inc. 667,616 4,230 Office Depot, Inc.* 70,683 2,665 RadioShack Corp. 81,762 2,265 Sherwin-Williams Co. 78,686 7,453 Staples, Inc.* 203,467 13,490 The Gap, Inc. 313,103 8,155 The Limited, Inc. 147,035 2,083 Tiffany & Co. 94,152 7,969 TJX Cos., Inc. 175,716 2,834 Toys R Us, Inc.* 35,822 ------------- 3,807,128 ------------------------------------------------------------- Textiles, Apparel and Luxury Goods -- 0.3% 2,039 Jones Apparel Group, Inc. 71,834 1,864 Liz Claiborne, Inc. 66,097 4,106 NIKE, Inc. 281,097 649 Reebok Int'l. Ltd. 25,519 1,473 V.F. Corp. 63,692 ------------- 508,239 ------------------------------------------------------------- Thrifts and Mortgage Finance -- 1.8% 2,885 Countrywide Financial Corp. 218,853 10,495 Federal Home Loan Mortgage Corp. 612,068 14,854 Federal National Mortgage Assn. 1,114,941 2,276 Golden West Financial Corp. 234,861 1,532 MGIC Investment Corp. 87,232 13,818 Washington Mutual, Inc. 554,378 ------------- 2,822,333 ------------------------------------------------------------- Tobacco -- 1.2% 30,851 Altria Group, Inc. 1,678,911 1,345 R.J. Reynolds Tobacco Hldgs., Inc. 78,212 2,362 UST, Inc. 84,300 ------------- 1,841,423 ------------------------------------------------------------- Trading Companies and Distributors -- 0.0% 1,344 W.W. Grainger, Inc. 63,692 ------------------------------------------------------------- Wireless Telecommunication Services -- 0.6% 40,498 AT & T Wireless Svcs., Inc.* 323,579 16,542 Nextel Comm., Inc.* 464,169 14,547 Sprint Corp. (PCS Group)* 81,754 ------------- 869,502 ------------------------------------------------------------- Total Common Stocks (Cost $159,835,589) 156,075,932 ------------------------------------------------------------- U.S. Government -- 0.1% ------------------------------------------------------------- Principal Amount Value ------------------------------------------------------------- $ 200,000 U.S. Treasury Bill 0.86% due 3/18/2004 (1) (Cost $199,628) $ 199,628 -------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 44 The Guardian S&P 500 Index Fund Schedule of Investments (Continued) Repurchase Agreement -- 0.7% -------------------------------------------------------- Principal Amount Value -------------------------------------------------------- $ 1,078,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $1,078,055 at 0.92%, due 1/2/2004 (2) (Cost $1,078,000) $ 1,078,000 -------------------------------------------------------- Total Investments -- 99.8% (Cost $161,113,217) 157,353,560 Cash, Receivables and Other Assets Less Liabilities -- 0.2% 333,349 -------------------------------------------------------- Net Assets -- 100% $157,686,909 --------------------------------------------------------
* 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 Contracts Description Expiration Unrealized Appreciation - ----------------------------------------------------------------------------------------------------------- 4 S&P 500 Index 3/2004 $ 26,818 - -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 45 .. The Guardian Baillie Gifford International Fund Common Stocks -- 94.8% Shares Value ---------------------------------------------------------------- Australia -- 3.2% Beverages -- 0.3% 53,400 Fosters Group Ltd. $ 180,934 Commercial Banks -- 0.8% 13,354 Australia and NZ Banking Group Ltd. 177,770 9,732 National Australia Bank 219,465 Containers and Packaging -- 0.4% 32,066 Amcor Ltd. 199,430 Food and Staples Retailing -- 0.2% 11,306 Woolworths Ltd. 100,452 Media -- 0.3% 15,700 News Corp. Ltd. 141,738 Metals and Mining -- 0.9% 48,106 BHP Billiton Ltd. 441,539 Oil and Gas -- 0.3% 15,200 Woodside Petroleum Ltd. 169,384 ------------ 1,630,712 ---------------------------------------------------------------- Brazil -- 0.5% Diversified Telecommunication Services -- 0.5% 15,400 Telecom. Norte Leste Participacoes ADR 237,622 ---------------------------------------------------------------- Denmark -- 1.0% Commercial Banks -- 1.0% 21,990 Danske Bank AS 515,315 ---------------------------------------------------------------- Finland -- 3.2% Communications Equipment -- 3.2% 93,390 Nokia OYJ 1,613,211 ---------------------------------------------------------------- France -- 9.5% Beverages -- 1.4% 6,320 Pernod-Ricard S.A. 701,928 Diversified Telecommunication Services -- 0.9% 15,740 France Telecom S.A.* 449,385 Health Care Equipment and Supplies -- 1.5% 14,540 Essilor Int'l. S.A. 751,107 Media -- 1.4% 30,860 Vivendi Universal S.A.* 749,257 Personal Products -- 2.1% 13,091 L'Oreal S.A. 1,072,111 Pharmaceuticals -- 2.2% 15,120 Sanofi-Synthelabo S.A. 1,137,312 ------------ 4,861,100 ---------------------------------------------------------------- Germany -- 6.4% Automobiles -- 0.8% 9,210 Bayerische Motoren Werke AG* 426,452 Commercial Banks -- 1.9% 11,717 Deutsche Bank AG 969,919 Diversified Financial Services -- 1.1% 9,890 Deutsche Boerse AG 540,180 Software -- 1.8% 5,460 SAP AG 915,983 Textiles, Apparel and Luxury Goods -- 0.8% 3,770 Adidas-Salomon AG 428,926 ------------ 3,281,460 ---------------------------------------------------------------- Hong Kong -- 2.8% Commercial Banks -- 0.8% 123,500 BOC Hong Kong Hldgs. Ltd 232,246 13,000 Hang Seng Bank Ltd. 170,794 Computers and Peripherals -- 0.1% 116,000 Legend Group Ltd. 49,680 Distributors -- 0.2% 56,000 Li & Fung Ltd. 95,933 Real Estate -- 1.7% 59,000 Cheung Kong Hldgs. Ltd. 467,364 48,000 Sun Hung Kai Properties Ltd. 395,685 ------------ 1,411,702 ----------------------------------------------------------------
-------------------------------------------------------------- Shares Value -------------------------------------------------------------- Ireland -- 3.3% Airlines -- 0.9% 53,280 Ryanair Hldgs. PLC* $ 442,388 Commercial Banks -- 1.1% 34,010 Allied Irish Banks PLC 544,207 Construction Materials -- 1.3% 33,360 CRH PLC 684,280 ------------ 1,670,875 -------------------------------------------------------------- Israel -- 0.5% Pharmaceuticals -- 0.5% 4,200 Teva Pharmaceutical Inds. Ltd. ADR 238,182 -------------------------------------------------------------- Italy -- 2.2% Insurance -- 0.9% 27,170 Riunione Adriatica di Sicurta SPA 462,144 Oil and Gas -- 1.3% 35,990 ENI SPA 678,370 ------------ 1,140,514 -------------------------------------------------------------- Japan -- 22.2% Auto Components -- 0.9% 33,000 Bridgestone Corp. 443,861 Automobiles -- 1.4% 21,900 Toyota Motor Corp. 739,982 Building Products -- 1.6% 102,000 Asahi Glass Co. 837,821 Chemicals -- 0.7% 9,100 Shin-Etsu Chemical Co. Ltd. 372,035 Commercial Banks -- 1.0% 104 UFJ Hldgs., Inc.* 499,930 Diversified Financial Services -- 0.5% 6,200 Promise Co. 270,257 Diversified Telecommunication Services -- 0.6% 67 Nippon Tele. & Tel. Corp. 323,321 Electronic Equipment and Instruments -- 2.7% 26,000 Alps Electric Co. Ltd. 380,529 2,400 Keyence Corp. 506,053 7,100 Kyocera Corp. 473,179 Household Products -- 0.9% 22,000 Kao Corp. 447,659 Insurance -- 0.8% 52,000 Mitsui Sumitomo Insurance Co. 427,125 Leisure Equipment and Products -- 1.6% 62,000 Konica Corp. 833,920 Machinery -- 1.4% 31,000 Daikin Inds. Ltd. 716,153 Office Electronics -- 1.8% 32,000 Brother Inds. Ltd. 293,611 13,000 Canon, Inc. 605,498 Road and Rail -- 1.2% 120,000 Tokyu Corp. 616,045 Semiconductors and Semiconductor Equipment -- 0.9% 3,900 Rohm Co. Ltd. 457,218 Specialty Retail -- 0.8% 11,900 Yamada Denki Co., Ltd. 399,869 Tobacco -- 1.7% 118 Japan Tobacco, Inc. 864,610 Trading Companies and Distributors -- 1.1% 72,000 Mitsui & Co. Ltd. 579,979 Wireless Telecommunication Services -- 0.6% 128 NTT DoCoMo, Inc. 290,325 ------------ 11,378,980 -------------------------------------------------------------- Netherlands -- 3.5% Household Durables - 0.8% 13,650 Philips Electronics (KON) 398,141 Insurance -- 1.4% 47,865 Aegon NV 707,407
- -------------------------------------------------------------------------------- See notes to financial statements. 46 The Guardian Baillie Gifford International Fund Schedule of Investments (Continued)
-------------------------------------------------------------- Shares Value -------------------------------------------------------------- Media -- 1.3% 20,950 Ver Ned Uitgevers $ 661,219 ------------ 1,766,767 -------------------------------------------------------------- New Zealand -- 0.2% Diversified Telecommunication Services -- 0.2% 35,400 Telecom. Corp. of New Zealand 124,552 -------------------------------------------------------------- People's Republic of China -- 0.6% Oil and Gas -- 0.6% 161,500 CNOOC Ltd. 317,228 -------------------------------------------------------------- Portugal -- 0.1% Transportation Infrastructure -- 0.1% 7,742 Brisa-Auto Estradas de Portugal S.A. 51,699 -------------------------------------------------------------- Russia -- 0.7% Oil and Gas -- 0.7% 3,740 LUKOIL ADR 348,194 -------------------------------------------------------------- Singapore -- 0.4% Electronic Equipment and Instruments -- 0.4% 19,000 Venture Corp. Ltd. 223,753 -------------------------------------------------------------- South Africa -- 0.6% Metals and Mining -- 0.6% 7,200 Anglo American Platinum Corp. 313,717 -------------------------------------------------------------- South Korea -- 0.5% Semiconductors and Semiconductor Equipment -- 0.5% 1,400 Samsung Electronics Co. Ltd. GDR 263,200 -------------------------------------------------------------- Spain -- 1.9% Commercial Banks -- 1.2% 9,830 Banco Popular Espanol S.A. 585,825 Tobacco -- 0.7% 13,140 Altadis S.A. 372,505 ------------ 958,330 -------------------------------------------------------------- Sweden -- 3.4% Communications Equipment -- 1.0% 302,580 LM Ericsson* 542,665 Machinery -- 2.4% 24,860 Atlas Copco AB 810,487 10,600 SKF AB 409,688 ------------ 1,762,840 -------------------------------------------------------------- Switzerland -- 3.4% Commercial Banks -- 1.3% 9,680 UBS AG 662,649 Commercial Services and Supplies -- 0.8% 6,310 Adecco S.A. 405,435 Electrical Equipment -- 1.3% 134,300 ABB Ltd.* 680,564 ------------ 1,748,648 -------------------------------------------------------------- United Kingdom -- 24.7% Beverages -- 1.3% 52,000 Diageo PLC 682,247 Commercial Banks -- 5.1% 69,800 Barclays PLC 620,802 25,325 HBOS PLC 327,069 55,000 HSBC Hldgs. 862,001 27,764 Royal Bank of Scotland 815,760 Hotels, Restaurants and Leisure -- 1.1% 8,500 Carnival PLC 341,543 28,678 Compass Group 194,528 Insurance -- 0.8% 31,000 Aviva PLC 271,288 17,000 Prudential Corp. 143,308 Multiline Retail -- 0.5% 13,000 Next PLC 260,600
--------------------------------------------------------------- Shares Value --------------------------------------------------------------- Oil and Gas -- 3.7% 58,000 BG Group PLC $ 296,881 155,000 BP PLC 1,253,374 48,000 Shell Transport & Trading 356,010 Pharmaceuticals -- 4.4% 10,000 Astrazeneca 478,394 76,902 GlaxoSmithKline PLC 1,757,107 Software -- 0.3% 41,000 Sage Group 128,626 Tobacco -- 3.2% 33,000 British American Tobacco PLC 453,582 61,000 Imperial Tobacco 1,197,769 Wireless Telecommunication Services -- 4.3% 195,000 mmO2* 268,026 778,650 Vodafone Group 1,925,053 ------------ 12,633,968 --------------------------------------------------------------- Total Common Stocks (Cost $38,406,883) 48,492,569 --------------------------------------------------------------- Preferred Stocks -- 4.1% Brazil -- 1.3% Metals and Mining -- 0.5% 4,900 Comp. Vale Do Rio Doce ADR $ 252,399 Oil and Gas -- 0.8% 14,800 Petroleo Brasileiro S.A. ADR 394,568 ------------ 646,967 --------------------------------------------------------------- Germany -- 2.8% Automobiles -- 2.8% 2,470 Porsche AG 1,464,295 --------------------------------------------------------------- Total Preferred Stocks (Cost $1,379,679) 2,111,262 --------------------------------------------------------------- Convertible Bond -- 0.4% --------------------------------------------------------------- Principal Amount Value --------------------------------------------------------------- Japan -- 0.4% Commercial Banks -- 0.4% (Yen) 12,000,000 SMFG Finance 2.25% due 7/11/2005 (Cost $81,182) $ 210,295 --------------------------------------------------------------- Repurchase Agreement -- 0.8% $ 416,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $416,008 at 0.35%, due 1/2/2004 (1) (Cost $416,000) $ 416,000 --------------------------------------------------------------- Total Investments -- 100.1% (Cost $40,283,744) 51,230,126 Liabilities in Excess of Cash, Receivables and Other Assets -- (0.1)% (43,813) --------------------------------------------------------------- Net Assets -- 100% $ 51,186,313 ---------------------------------------------------------------
* 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. Glossary of Terms: ADR -- American Depositary Receipt. GDR -- Global Depositary Receipt. - -------------------------------------------------------------------------------- See notes to financial statements. 47 .. The Guardian Baillie Gifford Emerging Markets Fund Common Stocks -- 91.9% Shares Value --------------------------------------------------------------- Argentina -- 0.1% Distributors -- 0.1% 11,480 Imp. Y Exp. Patagonia* $ 44,824 --------------------------------------------------------------- Brazil -- 7.9% Beverages -- 1.3% 37,000 Comp. de Bebidas das Americas ADR 943,870 Commercial Banks -- 0.5% 15,500 Unibanco GDR 386,725 Diversified Telecommunication Services -- 1.6% 79,500 Telecom. Norte Leste Participacoes ADR 1,226,685 Metals and Mining -- 2.5% 20,600 Comp. Siderurgica Nacional S.A. ADR 1,104,160 12,300 Comp. Vale Do Rio Doce ADR 719,550 Oil and Gas -- 1.3% 33,000 Petroleo Brasileiro S.A. ADR 964,920 Paper and Forest Products -- 0.7% 17,800 Votorantim Celulose e Papel S.A. ADR 558,030 ------------ 5,903,940 --------------------------------------------------------------- Chile -- 0.9% Commercial Banks -- 0.1% 1,256 Banco Santander Chile ADR 29,868 Metals and Mining -- 0.8% 32,940 Antofagasta Hldgs. 620,335 ------------ 650,203 --------------------------------------------------------------- Croatia -- 0.4% Pharmaceuticals -- 0.4% 20,215 Pliva d.d. GDR 329,504 --------------------------------------------------------------- Hong Kong -- 1.9% Industrial Conglomerates -- 1.2% 385,000 Shanghai Industrial Hldgs. Ltd. 875,254 Internet Software and Services -- 0.7% 1,600,000 Tom.Com Ltd.* 499,758 ------------ 1,375,012 --------------------------------------------------------------- Hungary -- 0.6% Pharmaceuticals -- 0.6% 4,000 Richter Gedeon VEG 470,740 --------------------------------------------------------------- India -- 5.4% Commercial Banks -- 2.2% 60,200 ICICI Bank Ltd. ADR 1,034,236 18,500 State Bank of India GDR 617,530 Metals and Mining -- 3.2% 40,000 Hindalco Inds. Ltd. GDR+ 1,241,200 170,000 Vedanta Resources PLC* 1,116,728 ------------ 4,009,694 --------------------------------------------------------------- Indonesia -- 2.0% Diversified Telecommunication Services -- 1.1% 985,000 Telekomunikasi Indonesia 789,403 Metals and Mining -- 0.9% 11,200,000 PT Bumi Resources Tbk 664,886 ------------ 1,454,289 --------------------------------------------------------------- Israel -- 3.5% Commercial Banks -- 0.7% 215,000 Bank Hapoalim Ltd. 528,568 Information Technology Services -- 0.1% 3,100 Radware Ltd.* 84,475 Internet Software and Services -- 0.9% 37,400 Check Point Software Technologies Ltd.* 629,068
------------------------------------------------------------- Shares Value ------------------------------------------------------------- Pharmaceuticals -- 1.8% 11,300 Taro Pharmaceutical Inds. Ltd.* $ 728,850 11,200 Teva Pharmaceutical Inds. Ltd. ADR 635,152 ------------ 2,606,113 ------------------------------------------------------------- Malaysia -- 2.7% Automobiles -- 0.6% 215,000 Perusahaan Otomobil Nasional Berhad 478,092 Food Products -- 1.0% 338,000 IOI Oleochemical Inds. Berhad 738,263 Hotels, Restaurants and Leisure -- 1.1% 186,000 Genting Berhad 812,527 ------------ 2,028,882 ------------------------------------------------------------- Mexico -- 6.7% Commercial Banks -- 1.5% 98,200 Grupo Fin. Banorte S.A. de C.V. 340,821 874,200 Grupo Fin. BBVA Bancomer S.A. de C.V.* 746,847 Construction and Engineering -- 0.5% 150,000 Consorcio Ara S.A. de C.V.* 372,430 Diversified Telecommunication Services -- 0.5% 271,000 Grupo Carso Global Telecom.* 379,598 Media -- 0.9% 76,000 TV Azteca S.A. de C.V. ADR 691,600 Multiline Retail -- 0.8% 212,670 Wal-Mart de Mexico S.A. de C.V. 568,722 Transportation Infrastructure -- 0.4% 14,400 Grupo Aeroportuario del Sureste S.A. de C.V. ADR 253,440 Wireless Telecommunication Services -- 2.1% 48,900 America Movil S.A. de C.V. ADR 1,336,926 191,000 America Telecom S.A. de C.V.* 248,162 ------------ 4,938,546 ------------------------------------------------------------- People's Republic of China -- 6.6% Metals and Mining -- 0.9% 838,000 Aluminum Corp. of China Ltd. 636,832 Oil and Gas -- 5.1% 708,000 CNOOC Ltd. 1,390,694 4,158,000 PetroChina Co. Ltd. 2,383,268 Transportation Infrastructure -- 0.6% 660,000 Zhejiang Expressway Co. Ltd. 463,307 ------------ 4,874,101 ------------------------------------------------------------- Russia -- 7.0% Metals and Mining -- 2.2% 17,500 JSC MMC Norilsk Nickel ADR 1,163,750 64,000 Peter Hambro Mining PLC* 468,397 Oil and Gas -- 3.8% 19,300 LUKOIL ADR 1,796,830 40,952 OAO Gazprom ADR 1,060,657 Wireless Telecommunication Services -- 1.0% 4,200 Mobile Telesystems ADR 347,760 5,100 VimpelCom ADR* 374,850 ------------ 5,212,244 ------------------------------------------------------------- South Africa -- 6.6% Commercial Banks -- 1.1% 88,900 Nedcor Ltd. 824,273 Metals and Mining -- 2.7% 42,435 Anglo American Platinum Corp. 1,848,971 22,718 Anglovaal Mining Ltd.* 146,527 Oil and Gas -- 1.7% 87,100 Sasol Ltd. 1,236,828
- -------------------------------------------------------------------------------- See notes to financial statements. 48 The Guardian Baillie Gifford Emerging Markets Fund Schedule of Investments (Continued)
-------------------------------------------------------------- Shares Value -------------------------------------------------------------- Paper and Forest Products -- 1.1% 63,000 Sappi Ltd. $ 856,938 ------------ 4,913,537 ----------------------------------------------------------- South Korea -- 20.3% Automobiles -- 2.2% 38,900 Hyundai Motor Co. Ltd.* 1,648,720 Chemicals -- 0.8% 43,000 Cheil Inds., Inc. 624,339 Commercial Banks -- 1.2% 163,000 Korea Exchange Bank* 864,591 Commercial Services and Supplies -- 0.9% 35,500 S1 Corp.* 700,168 Construction and Engineering -- 2.4% 22,900 Daelim Industrial Co. Ltd.* 807,218 97,230 Hyundai Development Co. 1,007,797 Media -- 1.0% 5,300 Cheil Comms., Inc. 769,534 Metals and Mining -- 3.2% 142,200 Dongkuk Steel Mill Co. Ltd. 1,169,584 8,800 POSCO 1,203,861 Pharmaceuticals -- 1.3% 119,000 LG Corp. 827,956 2,100 Yuhan Corp. 119,497 Semiconductors and Semiconductor Equipment -- 4.5% 13,850 Samsung Electronics Co. Ltd. GDR+ 2,603,800 1,900 Samsung Electronics Co. Ltd. 719,178 Tobacco -- 0.9% 71,400 K T & G Corp. GDR+ 626,892 Trading Companies and Distributors -- 1.9% 170,200 Samsung Corp. 1,414,167 ------------ 15,107,302 ----------------------------------------------------------- Taiwan -- 16.1% Airlines -- 0.4% 715,000 China Airlines* 309,588 Building Products -- 2.1% 1,550,000 Asia Cement Corp. 826,362 1,520,000 Taiwan Cement Corp. 747,688 Construction and Engineering -- 0.7% 667,000 CTCI Corp. 540,280 Distributors -- 0.4% 355,000 National Petroleum Co. Ltd. 269,779 Diversified Financial Services -- 0.8% 1,085,000 SinoPac Hldgs. 549,691 Electronic Equipment and Instruments -- 2.2% 117,168 Hon Hai Precision Inds. Co. Ltd. GDR 931,486 639,000 Sampo Corp.* 278,562 300,000 Synnex Technology Int'l. Corp. 406,480 Health Care Equipment and Supplies -- 0.7% 146,800 Pihsiang Machinery Mfg. Co. Ltd. 510,233 Machinery -- 0.4% 506,000 Yungtay Engineering Co. Ltd. 312,990 Multiline Retail -- 1.1% 2,200,000 Far Eastern Dept. Stores Ltd.* 813,255 Paper and Forest Products -- 0.8% 1,200,000 Chung Hwa Pulp Corp. 622,091 Semiconductors and Semiconductor Equipment -- 4.7% 1,320,000 Nanya Technology Corp.* 828,159 346,000 Realtek Semiconductor Corp. 591,105 404,152 Taiwan Semiconductor Mfg. Co. Ltd. 755,925 800,000 United Microelectronics Corp. 685,714 131,000 United Microelectronics Corp. ADR 648,450 Wireless Telecommunication Services -- 1.8% 1,526,800 Taiwan Cellular Corp. 1,326,674 ------------ 11,954,512 -----------------------------------------------------------
----------------------------------------------------------- Shares Value ----------------------------------------------------------- Thailand -- 1.6% Construction Materials -- 1.6% 167,000 The Siam Cement Public Co. Ltd. $ 1,163,278 ---------------------------------------------------------- Turkey -- 1.6% Commercial Banks -- 1.0% 250,000,000 Turkiye Garanti Bankasi AS* 729,797 Industrial Conglomerates -- 0.6% 28,368,000 Koc Hldg. A.S.* 482,731 ----------- 1,212,528 ---------------------------------------------------------- Total Common Stocks (Cost $49,956,167) 68,249,249 ---------------------------------------------------------- Preferred Stocks -- 4.9% Brazil -- 4.9% Commercial Banks -- 1.7% 1,080,568 Itausa-Investimentos Itau S.A. $ 1,274,996 Diversified Telecommunication Services -- 0.5% 1,719,000 Celular CRT Participacoes S.A. 359,265 Food Products -- 0.0% 4,700,000 Comp. Lorenz S.A.* 0 Metals and Mining -- 0.9% 13,000 Comp. Vale Do Rio Doce 662,145 Oil and Gas -- 1.8% 51,900 Petroleo Brasileiro S.A. ADR 1,383,654 ---------------------------------------------------------- Total Preferred Stocks (Cost $2,214,534) 3,680,060 ---------------------------------------------------------- Repurchase Agreement -- 3.7% Principal Amount Value ----------------------------------------------------------- $ 2,740,000. State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $2,740,053 at 0.35%, due 1/2/2004 (1) (Cost $2,740,000) $ 2,740,000 ---------------------------------------------------------- Total Investments -- 100.5% (Cost $54,910,701) 74,669,309 Liabilities in Excess of Cash, Receivables and Other Assets -- (0.5)% (376,457) ---------------------------------------------------------- Net Assets -- 100% $74,292,852 ----------------------------------------------------------
* 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. 49 .. The Guardian Investment Quality Bond Fund Asset Backed -- 6.0% Principal Amount Value --------------------------------------------------------------- $ 1,280,000 Aesop Funding II LLC 2003-2A A3 3.61% due 6/20/2009+ $ 1,272,455 123,768 Amresco 1997-1 MIF 7.42% due 3/25/2027 123,571 2,000,000 California Infrastructure SCE 1997-1 A7 6.42% due 12/26/2009 2,213,485 1,700,000 CNH Equipment Tr. 2003-A A4B 2.57% due 9/15/2009 1,668,270 2,000,000 Hyundai Auto Receivables Tr. 2003-A A4 3.02% due 10/15/2010 1,997,838 1,700,000 Residential Asset Sec. Corp. 2000-KS5 AI5 7.615% due 12/25/2031 1,783,760 1,900,000 Vanderbilt Acquisition Loan Tr. 2002-1 A3 5.70% due 9/7/2023 1,958,913 --------------------------------------------------------------- Total Asset Backed (Cost $11,053,310) 11,018,292 --------------------------------------------------------------- Collateralized Mortgage Obligation -- 4.4% FHLMC H006 A2 $ 2,150,000 2.837% due 2/15/2010 $ 2,144,454 2693 QE 3,000,000 5.50% due 9/15/2028 (a) 3,078,523 2430 GD 1,554,110 6.50% due 11/15/2030 1,598,599 1,200,000 FNMA 2001-64 QG 6.00% due 3/25/2030 1,235,458 --------------------------------------------------------------- Total Collateralized Mortgage Obligation (Cost $8,071,540) 8,057,034 --------------------------------------------------------------- Commercial Mortgage Backed -- 9.3% $ 1,900,000 Banc of America Comm'l. Mtg., Inc. 2003-2 A3 4.873% due 3/11/2041 $ 1,926,640 2,400,000 Bear Stearns Comm'l. Mtg. Sec., Inc. 2003-Top10 A2 4.74% due 3/13/2040 2,398,634 1,000,000 Chase Comm'l. Mtg. Sec. Corp. 2000-3 A2 7.319% due 10/15/2032 1,158,843 920,551 First Union National Bank Comm'l. Mtg. Tr. 2000-C2 A1 6.94% due 10/15/2032 1,007,161 960,000 GMAC Comm'l. Mtg. Sec., Inc. 1997-C1 A3 6.869% due 7/15/2029 1,061,753 2,000,000 Greenwich Capital Comm'l. Funding Corp. 2003-C1 A3 3.858% due 7/5/2035 1,909,080
----------------------------------------------------------- Principal Amount Value ----------------------------------------------------------- LB-UBS Comm'l. Mtg. Tr. 2001-C7 A5 $ 2,431,000 6.133% due 12/15/2030 $ 2,674,306 2004-C4 A2 1,220,000 7.37% due 8/15/2026 1,419,795 1,000,000 Morgan Stanley Capital I 1998-WF1 A2 6.55% due 3/15/2030 1,108,479 2,105,747 Mortgage Capital Funding, Inc. 1997-MC1 A3 7.288% due 2/20/2027 2,238,752 ----------------------------------------------------------- Total Commercial Mortgage Backed (Cost $16,840,100) 16,903,443 ----------------------------------------------------------- Corporate Bonds -- 34.7% Aerospace and Defense -- 0.4% $ 300,000 Lockheed Martin Corp. 8.50% due 12/1/2029 $ 393,112 100,000 Northrop Grumman Corp. 7.125% due 2/15/2011 115,659 250,000 TRW, Inc. 7.75% due 6/1/2029 299,743 ------------- 808,514 ----------------------------------------------------------- Airlines -- 0.5% 800,000 Delta Air Lines, Inc. 6.417% due 7/2/2012 857,482 ----------------------------------------------------------- Automotive -- 2.3% 500,000 DaimlerChrysler NA Hldg. 4.05% due 6/4/2008 496,596 800,000 Ford Motor Co. 7.45% due 7/16/2031 808,417 Ford Motor Credit Co. 900,000 7.00% due 10/1/2013 949,211 400,000 7.375% due 10/28/2009 439,264 General Motors Corp. 650,000 7.125% due 7/15/2013 712,835 500,000 8.375% due 7/15/2033 580,407 250,000 Lear Corp. 8.11% due 5/15/2009 294,063 ------------- 4,280,793 ----------------------------------------------------------- Chemicals -- 0.2% 400,000 Potash Corp. 4.875% due 3/1/2013 390,800 ----------------------------------------------------------- Diversified Manufacturing -- 0.3% 500,000 Hutchison Whampoa Int'l. Ltd. 5.45% due 11/24/2010+ 507,153 ----------------------------------------------------------- Energy -- 2.1% 350,000 Canadian Oil Sands Ltd. 5.80% due 8/15/2013+ 359,758 1,000,000 Pioneer Natural Resources Co. 7.20% due 1/15/2028 1,070,519 269,000 Pride Int'l., Inc. 9.375% due 5/1/2007 277,070 200,000 Transocean, Inc. 7.50% due 4/15/2031 229,035 350,000 Western Oil Sands, Inc. 8.375% due 5/1/2012 398,562 1,500,000 XTO Energy, Inc. 6.25% due 4/15/2013 1,578,750 ------------- 3,913,694 -----------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 50 The Guardian Investment Quality Bond Fund Schedule of Investments (Continued)
---------------------------------------------------------- Principal Amount Value ---------------------------------------------------------- Energy-Refining -- 0.6% $ 850,000 Tosco Corp. 8.125% due 2/15/2030 $ 1,083,954 ---------------------------------------------------------- Entertainment -- 0.7% 1,200,000 Time Warner, Inc. 7.57% due 2/1/2024 1,357,037 ---------------------------------------------------------- Environmental -- 0.5% 800,000 Waste Management, Inc. 7.375% due 8/1/2010 924,424 ---------------------------------------------------------- Finance Companies -- 1.6% 500,000 Capital One Bank 5.75% due 9/15/2010 528,915 General Motors Acceptance Corp. 500,000 6.125% due 9/15/2006 535,125 495,000 6.875% due 9/15/2011 533,178 Household Finance Corp. 400,000 6.375% due 11/27/2012 438,822 350,000 7.875% due 3/1/2007 399,972 375,000 MBNA America Bank Nat'l. 7.125% due 11/15/2012 428,839 ------------- 2,864,851 ---------------------------------------------------------- Financial -- 1.3% 650,000 Bear Stearns Cos., Inc. 5.70% due 11/15/2014 677,550 800,000 Goldman Sachs Group, Inc. 5.70% due 9/1/2012 840,762 400,000 Lehman Brothers Hldgs., Inc. 6.625% due 1/18/2012 451,406 400,000 Morgan Stanley 6.60% due 4/1/2012 446,736 ------------- 2,416,454 ---------------------------------------------------------- Financial-Banks -- 1.6% 425,000 Bank America Corp. 4.875% due 9/15/2012 427,176 750,000 Citigroup, Inc. 5.625% due 8/27/2012 791,731 300,000 City National Corp. 5.125% due 2/15/2013 296,677 150,000 J.P. Morgan Chase & Co. 5.75% due 1/2/2013 158,173 200,000 Regions Financial Corp. 6.375% due 5/15/2012 220,022 250,000 Sovereign Bank 5.125% due 3/15/2013 248,210 300,000 Wells Fargo Bank NA 6.45% due 2/1/2011 336,852 500,000 Zions Bancorp 6.00% due 9/15/2015 524,252 ------------- 3,003,093 ---------------------------------------------------------- Food and Beverage -- 0.5% 850,000 Kellogg Co. 2.875% due 6/1/2008 820,724 ---------------------------------------------------------- Gaming -- 0.3% 500,000 Int'l. Game Technology 8.375% due 5/15/2009 598,529 ---------------------------------------------------------- Gas Distributors -- 0.3% 500,000 Equitable Resources, Inc. 5.15% due 3/1/2018 489,560 ----------------------------------------------------------
------------------------------------------------------------- Principal Amount Value ------------------------------------------------------------- Home Construction -- 1.0% $ 500,000 D.R. Horton, Inc. 5.875% due 7/1/2013 $ 500,000 500,000 Lennar Corp. 9.95% due 5/1/2010 574,375 500,000 NVR, Inc. 5.00% due 6/15/2010 490,000 300,000 Ryland Group, Inc. 5.375% due 6/1/2008 309,000 ------------- 1,873,375 ------------------------------------------------------------- Industrial-Other -- 1.2% 2,000,000 Aramark Svcs., Inc. 7.10% due 12/1/2006 2,192,880 ------------------------------------------------------------- Media-Cable -- 2.0% AT & T Broadband Corp. 400,000 8.375% due 3/15/2013 489,420 900,000 9.455% due 11/15/2022 1,219,015 1,200,000 Comcast Cable Comm., Inc. 6.875% due 6/15/2009 1,352,804 500,000 CSC Hldgs., Inc. 7.625% due 4/1/2011 526,250 ------------- 3,587,489 ------------------------------------------------------------- Media-NonCable -- 1.6% 250,000 Echostar DBS Corp. 9.375% due 2/1/2009 262,813 750,000 Intelsat Ltd. 6.50% due 11/1/2013+ 782,545 150,000 News America Hldgs. 8.00% due 10/17/2016 182,223 1,500,000 Scholastic Corp. 5.75% due 1/15/2007 1,607,194 ------------- 2,834,775 ------------------------------------------------------------- Merchandising-Supermarkets -- 1.1% 500,000 Delhaize America, Inc. 7.375% due 4/15/2006 537,500 850,000 Kroger Co. 7.25% due 6/1/2009 968,333 500,000 Safeway, Inc. 6.15% due 3/1/2006 534,995 ------------- 2,040,828 ------------------------------------------------------------- Natural Gas-Pipelines -- 1.6% 1,700,000 Consolidated Natural Gas Co. 7.25% due 10/1/2004 1,767,345 250,000 Duke Energy Field Svcs. 8.125% due 8/16/2030 305,420 500,000 Kaneb Pipe Line Operating Partners 5.875% due 6/1/2013 512,743 400,000 Teppco Partners LP 6.125% due 2/1/2013 423,797 ------------- 3,009,305 ------------------------------------------------------------- Paper and Forest Products -- 1.1% 600,000 Abitibi-Consolidated, Inc. 7.875% due 8/1/2009 648,851 250,000 Int'l. Paper Co. 5.85% due 10/30/2012 260,457 750,000 Packaging Corp. of America 5.75% due 8/1/2013 757,654
- -------------------------------------------------------------------------------- See notes to financial statements. 51 The Guardian Investment Quality Bond Fund Schedule of Investments (Continued)
-------------------------------------------------------------- Principal Amount Value -------------------------------------------------------------- Weyerhaeuser Co. $ 150,000 6.00% due 8/1/2006 $ 160,619 200,000 6.75% due 3/15/2012 218,188 ------------- 2,045,769 -------------------------------------------------------------- Railroads -- 0.4% 200,000 CSX Corp. 4.875% due 11/1/2009 206,766 450,000 Norfolk Southern Corp. 6.75% due 2/15/2011 512,471 ------------- 719,237 -------------------------------------------------------------- Real Estate Investment Trust -- 0.6% 250,000 Duke Realty Corp. 5.875% due 8/15/2012 265,654 100,000 EOP Operating LP 7.00% due 7/15/2011 112,841 200,000 Liberty Ppty. LP 7.25% due 3/15/2011 228,121 200,000 Prologis 5.50% due 3/1/2013 205,680 100,000 Regency Centers LP 6.75% due 1/15/2012 110,189 125,000 Simon Ppty. Group LP 5.45% due 3/15/2013 127,834 ------------- 1,050,319 -------------------------------------------------------------- Retailers -- 0.5% 500,000 Office Depot, Inc. 6.25% due 8/15/2013 524,997 300,000 Staples, Inc. 7.375% due 10/1/2012 345,313 ------------- 870,310 -------------------------------------------------------------- Services -- 0.5% 775,000 PHH Corp. 7.125% due 3/1/2013 867,918 -------------------------------------------------------------- Technology -- 0.6% 1,000,000 Jabil Circuit, Inc. 5.875% due 7/15/2010 1,043,071 -------------------------------------------------------------- Utilities-Electric and Water -- 2.9% 500,000 Aep Texas Central Co. 5.50% due 2/15/2013 512,201 100,000 Alabama Power Co. 5.50% due 10/15/2017 103,382 350,000 American Electric Power, Inc. 5.25% due 6/1/2015 343,715 350,000 Consumers Energy Co. 5.375% due 4/15/2013+ 351,619 200,000 Dominion Resources, Inc. 6.75% due 12/15/2032 213,799 325,000 DTE Energy Co. 6.375% due 4/15/2033 318,337 250,000 FirstEnergy Corp. 6.45% due 11/15/2011 259,112 200,000 Florida Power Corp. 5.90% due 3/1/2033 200,722 250,000 Georgia Power Co. 5.125% due 11/15/2012 255,046 425,000 National Rural Utilities Coop. Fin. 8.00% due 3/1/2032 529,334 400,000 Oncor Electric Delivery Co. 7.25% due 1/15/2033 455,033 100,000 Progress Energy, Inc. 7.00% due 10/30/2031 107,029 200,000 Public Service Electric Gas Co. 5.125% due 9/1/2012 204,355
------------------------------------------------------------- Principal Amount Value ------------------------------------------------------------- $ 500,000 Sierra Pacific Resources 6.20% due 4/15/2004 $ 503,125 350,000 TXU Energy Co. 7.00% due 3/15/2013 387,099 500,000 Xcel Energy, Inc. 3.40% due 7/1/2008 488,288 ------------- 5,232,196 ------------------------------------------------------------- Wireless Communications -- 1.0% 250,000 AT & T Wireless Svcs., Inc. 8.125% due 5/1/2012 293,988 650,000 Tritel PCS, Inc. 10.375% due 1/15/2011 777,693 690,000 Verizon Wireless Capital LLC 5.375% due 12/15/2006 736,300 ------------- 1,807,981 ------------------------------------------------------------- Wireline Communications -- 4.7% 75,000 AT & T Corp. 8.50% due 11/15/2031 87,642 500,000 British Telecom. PLC 8.625% due 12/15/2030 653,802 200,000 Century Tel. Enterprises, Inc. 6.875% due 1/15/2028 210,810 Citizens Comm. Co. 200,000 7.625% due 8/15/2008 218,990 200,000 9.00% due 8/15/2031 233,366 500,000 Deutsche Telekom Int'l. Finance BV 8.75% due 6/15/2030 638,714 France Telecom S.A. 625,000 9.00% due 3/1/2011 750,676 1,000,000 9.75% due 3/1/2031 1,328,675 200,000 Royal KPN NV 8.375% due 10/1/2030 253,543 850,000 Sprint Capital Corp. 8.375% due 3/15/2012 992,630 500,000 Telecom Italia Capital 5.25% due 11/15/2013+ 500,996 1,000,000 Telus Corp. 8.00% due 6/1/2011 1,169,287 825,000 Verizon Global Funding Corp. 7.75% due 12/1/2030 969,136 500,000 Verizon Pennsylvania, Inc. 5.65% due 11/15/2011 524,414 ------------- 8,532,681 ------------------------------------------------------------- Yankee -- 0.7% 1,200,000 Pemex Master Tr. 7.875% due 2/1/2009 1,354,800 ------------------------------------------------------------- Total Corporate Bonds (Cost $60,329,330) 63,379,996 ------------------------------------------------------------- Mortgage Pass-Throughs -- 38.3% FHLMC $ 2,097,223 5.00%, 10/1/2033 $ 2,071,200 13,699,919 5.50%, 2033 13,872,428 3,153,513 6.00%, 12/1/2032 3,260,136 1,740,507 6.50%, 8/1/2032 1,823,205 26,284 7.00%, 8/1/2008 28,053 FNMA 4,250,000 5.00%, (15 yr. TBA) 4,333,674 11,600,000 6.00%, (30 yr. TBA) 11,987,881 2,924,106 5.00%, 6/1/2018 2,986,139 2,541,864 5.50%, 12/1/2014 2,646,493 316,587 5.50%, 3/1/2018 328,419 12,699,864 5.50%, 2033 12,871,803
- -------------------------------------------------------------------------------- See notes to financial statements. 52 The Guardian Investment Quality Bond Fund Schedule of Investments (Continued)
------------------------------------------------------- Principal Amount Value ------------------------------------------------------- $ 995,754 6.00%, 10/1/2013 $ 1,046,847 781,314 6.00%, 4/1/2016 820,400 412,806 6.50%, 8/1/2016 437,997 1,275,519 6.50%, 11/1/2017 1,353,355 3,090,051 6.50%, 2032 3,232,160 11,705 7.00%, 2/1/2009 12,521 81,487 7.00%, 2012 87,085 262,654 7.00%, 9/1/2014 280,894 4,580 7.00%, 8/1/2023 4,876 3,243 7.00%, 12/1/2027 3,439 52,738 7.00%, 12/1/2028 55,903 1,097,657 7.00%, 2032 1,162,271 246 7.50%, 5/1/2027 263 213,136 7.50%, 12/1/2029 227,831 874,841 7.50%, 2/1/2031 935,648 363,549 8.00%, 2030 393,056 GNMA 1,519,863 6.00%, 2033 1,580,768 1,575,860 6.50%, 5/15/2032 1,661,419 275,545 6.50%, 2/15/2033 290,510 283,137 8.00%, 2030 308,024 ------------------------------------------------------- Total Mortgage Pass-Throughs (Cost $69,595,850) 70,104,698 ------------------------------------------------------- Sovereign Debt -- 0.7% $ 200,000 Malaysia 7.50% due 7/15/2011 $ 236,592 1,000,000 United Mexican States 8.00% due 9/24/2022 1,094,000 ------------------------------------------------------- Total Sovereign Debt (Cost $1,242,324) 1,330,592 ------------------------------------------------------- U.S. Government -- 8.7% U.S. Government Agencies -- 6.8% FNMA $ 5,000,000 1.01%, 1/14/2004++(a) $ 4,998,350 3,600,000 3.25%, 1/15/2008 3,609,594 3,550,000 4.375%, 10/15/2006 3,729,055 ------------- 12,336,999 ------------------------------------------------------- U.S. Treasury Bonds and Notes -- 1.9% U.S. Treasury Bonds 300,000 5.375%, 2/15/2031 312,856 U.S. Treasury Notes 1,300,000 3.00%, 11/15/2007 1,311,172 1,520,000 3.00%, 2/15/2008 1,527,065 250,000 3.125%, 10/15/2008 249,521 140,000 4.25%, 11/15/2013 139,847 ------------- 3,540,461 ------------------------------------------------------- Total U.S. Government (Cost $15,824,296) 15,877,460 -------------------------------------------------------
Commercial Paper -- 6.2% Principal Amount Value --------------------------------------------------------------- Food and Beverage -- 1.1% $ 2,000,000 Coca-Cola Enterprises, Inc. 0.99% due 1/14/2004 (a) $ 1,999,285 --------------------------------------------------------------- Utilities-Electric and Water -- 2.4% 4,400,000 National Rural Utilities Coop. Fin. 1.07% due 1/20/2004 (a) 4,397,515 --------------------------------------------------------------- Wireline Communications -- 2.7% 5,000,000 Verizon Network Funding 1.01% due 1/14/2004 (a) 4,998,177 --------------------------------------------------------------- Total Commercial Paper (Cost $11,394,977) 11,394,977 --------------------------------------------------------------- Repurchase Agreement -- 0.4% $ 785,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $785,040 at 0.92%, due 1/2/2004 (1)(a) (Cost $785,000) $ 785,000 --------------------------------------------------------------- Total Investments -- 108.7% (Cost $195,136,727) 198,851,492 Payables for Mortgage Pass-Throughs Delayed Delivery Securities (a) -- (8.8)% (16,185,531) Cash, Receivables and Other Assets Less Liabilities -- 0.1% 269,581 --------------------------------------------------------------- Net Assets -- 100% $ 182,935,542 ---------------------------------------------------------------
+ Rule 144A restricted security. ++Discount note. The rate shown is the effective yield at date of purchase. (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)Securities are segregated to cover forward mortgage purchases. - -------------------------------------------------------------------------------- See notes to financial statements. 53 .. The Guardian Low Duration Bond Fund Asset Backed -- 8.2% Principal Amount Value ------------------------------------------------------------- $ 500,000 Chase Manhattan Auto Owner Tr. 2003-A A4 2.06% due 12/15/2009 $ 489,902 254,000 GMAC Mtg. Corp. Loan Tr. 2003-GH1 A4 4.59% due 4/25/2026 260,071 308,000 Hyundai Auto Receivables Tr. 2003-A A4 3.02% due 10/15/2010 307,667 400,000 PP & L Transition Bond Co. LLC 1999-1 A7 7.05% due 6/25/2009 447,062 Residential Asset Mtg. Prods., Inc. 2003-RZ3 A3 600,000 2.14% due 2/25/2030 586,170 2002-RS5 AI4 495,000 4.428% due 9/25/2030 499,999 ------------------------------------------------------------- Total Asset Backed (Cost $2,594,257) 2,590,871 ------------------------------------------------------------- Collateralized Mortgage Obligation -- 4.4% $ 396,298 FHLMC 2430 GD 6.50% due 11/15/2030 $ 407,643 FNMA 2002-91 QB 310,000 5.00% due 3/25/2010 318,241 2002-55 PC 360,000 5.50% due 4/25/2026 369,678 296,769 GNMA 2002-93 NV 4.75% due 2/20/2032 297,402 ------------------------------------------------------------- Total Collateralized Mortgage Obligation (Cost $1,387,667) 1,392,964 ------------------------------------------------------------- Commercial Mortgage Backed -- 1.8% $ 366,000 GMAC Comm'l. Mtg. Sec., Inc. 1997-C1 A3 6.869% due 7/15/2029 $ 404,793 146,825 Morgan Stanley Capital I 1999-WF1 A1 5.91% due 11/15/2031 156,158 ------------------------------------------------------------- Total Commercial Mortgage Backed (Cost $563,073) 560,951 ------------------------------------------------------------- Corporate Bonds -- 70.0% Aerospace and Defense -- 1.8% $ 500,000 Northrop Grumman Corp. 7.00% due 3/1/2006 $ 547,694 ------------------------------------------------------------- Automotive -- 6.7% 500,000 DaimlerChrysler NA Hldg. 7.40% due 1/20/2005 527,062 500,000 Delphi Corp. 6.55% due 6/15/2006 536,520 500,000 Ford Motor Credit Co. 7.50% due 3/15/2005 527,706 500,000 General Motors Acceptance Corp. 5.25% due 5/16/2005 518,063 ------------ 2,109,351 -------------------------------------------------------------
-------------------------------------------------------- Principal Amount Value -------------------------------------------------------- Energy -- 3.4% $ 500,000 Anadarko Petroleum Corp. 6.50% due 5/15/2005 $ 530,176 500,000 Repsol Int'l. Fin. BV 7.45% due 7/15/2005 537,576 ------------ 1,067,752 -------------------------------------------------------- Entertainment -- 3.3% 1,000,000 Time Warner, Inc. 5.625% due 5/1/2005 1,046,793 -------------------------------------------------------- Finance Companies -- 10.3% 500,000 American General Fin. Corp. 5.875% due 12/15/2005 535,053 500,000 Capital One Bank 6.875% due 2/1/2006 540,899 500,000 CIT Group, Inc. 6.625% due 6/15/2005 534,093 500,000 General Electric Capital Corp. 6.80% due 11/1/2005 542,944 500,000 Household Fin. Corp. 6.50% due 1/24/2006 540,738 500,000 MBNA America Bank NA 6.50% due 6/20/2006 544,393 ------------ 3,238,120 -------------------------------------------------------- Financial -- 2.5% 500,000 Bear Stearns Cos., Inc. 3.00% due 3/30/2006 507,528 250,000 Lehman Brothers Hldgs., Inc. 6.25% due 5/15/2006 271,600 ------------ 779,128 -------------------------------------------------------- Financial-Banks -- 0.8% 250,000 KeyCorp 4.625% due 5/16/2005 259,749 -------------------------------------------------------- Food and Beverage -- 3.4% 500,000 Kellogg Co. 6.00% due 4/1/2006 535,770 500,000 Kraft Foods, Inc. 4.625% due 11/1/2006 521,764 ------------ 1,057,534 -------------------------------------------------------- Gaming -- 0.8% 250,000 Int'l. Game Technology 7.875% due 5/15/2004 255,208 -------------------------------------------------------- Home Construction -- 0.9% 250,000 Lennar Corp. 9.95% due 5/1/2010 287,188 -------------------------------------------------------- Lodging -- 0.9% 250,000 Marriott Int'l., Inc. 6.875% due 11/15/2005 269,739 -------------------------------------------------------- Media-Cable -- 1.8% 500,000 Cox Comm., Inc. 7.75% due 8/15/2006 560,826 -------------------------------------------------------- Media-NonCable -- 0.8% 250,000 Echostar DBS Corp. 9.375% due 2/1/2009 262,813 -------------------------------------------------------- Natural Gas-Pipelines -- 1.7% 500,000 Duke Energy Field Svcs. 7.50% due 8/16/2005 537,231 --------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 54 The Guardian Low Duration Bond Fund Schedule of Investments (Continued)
------------------------------------------------------------- Principal Amount Value ------------------------------------------------------------- Paper and Forest Products -- 0.8% $ 250,000 Abitibi-Consolidated, Inc. 8.30% due 8/1/2005 $ 264,535 ------------------------------------------------------------- Real Estate Investment Trust -- 7.5% 505,000 Avalon Bay Communities, Inc. 6.80% due 7/15/2006 554,579 EOP Operating LP 500,000 6.625% due 2/15/2005 525,311 500,000 6.63% due 4/13/2005 529,863 300,000 Gables Realty LP 6.80% due 3/15/2005 314,522 400,000 Simon Ppty. Group LP 6.875% due 10/27/2005 430,647 ------------ 2,354,922 ------------------------------------------------------------- Restaurants -- 1.7% 500,000 YUM! Brands, Inc. 7.45% due 5/15/2005 533,125 ------------------------------------------------------------- Services -- 0.9% 250,000 Cendant Corp. 6.875% due 8/15/2006 274,286 ------------------------------------------------------------- Supermarkets -- 2.5% 250,000 Kroger Co. 7.375% due 3/1/2005 264,863 500,000 Safeway, Inc. 3.80% due 8/15/2005 510,522 ------------ 775,385 ------------------------------------------------------------- Utilities-Electric and Water -- 8.1% 500,000 Dominion Resources, Inc. 2.80% due 2/15/2005 505,155 500,000 National Rural Utilities Coop. Fin. 3.00% due 2/15/2006 506,244 250,000 Niagara Mohawk Power Corp. 6.625% due 7/1/2005 267,341 500,000 Nisource Fin. Corp. 7.625% due 11/15/2005 546,248 425,000 PSEG Power LLC 6.875% due 4/15/2006 463,332 250,000 Sierra Pacific Resources 6.20% due 4/15/2004 251,563 ------------ 2,539,883 ------------------------------------------------------------- Wireless Communications -- 1.7% 498,000 AT & T Wireless Svcs., Inc. 6.875% due 4/18/2005 526,554 ------------------------------------------------------------- Wireline Communications -- 7.7% 500,000 British Telecom. PLC 7.875% due 12/15/2005 551,006 500,000 Deutsche Telekom Int'l. Fin. BV 8.25% due 6/15/2005 542,378 250,000 Qwest Corp. 7.20% due 11/1/2004 255,625
---------------------------------------------------------------- Principal Amount Value ---------------------------------------------------------------- $ 500,000 Sprint Capital Corp. 7.90% due 3/15/2005 $ 532,634 500,000 Telefonica Europe BV 7.35% due 9/15/2005 542,585 ------------ 2,424,228 ---------------------------------------------------------------- Total Corporate Bonds (Cost $21,895,749) 21,972,044 ---------------------------------------------------------------- Municipal Bonds -- 1.6% $ 500,000 Beaver Cnty., PA Industrial Dev. Auth. Poll. Control Rev. 4.85% due 6/1/2030 (Cost $510,087) $ 504,660 ---------------------------------------------------------------- Sovereign Debt -- 1.7% $ 500,000 Petroleos Mexicanos 6.50% due 2/1/2005 (Cost $519,915) $ 523,125 ---------------------------------------------------------------- U.S. Government -- 10.9% U.S. Treasury Notes -- 10.9% U.S. Treasury Notes $ 130,000 2.375%, 8/15/2006 $ 130,701 2,950,000 2.625%, 11/15/2006 2,976,043 300,000 3.375%, 12/15/2008 302,074 ---------------------------------------------------------------- Total U.S. Government (Cost $3,391,020) 3,408,818 ---------------------------------------------------------------- Repurchase Agreement -- 0.2% $ 52,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $52,003 at 0.92%, due 1/2/2004(1) (Cost $52,000) $ 52,000 ---------------------------------------------------------------- Total Investments -- 98.8% (Cost $30,913,768) 31,005,433 Cash, Receivables and Other Assets Less Liabilities -- 1.2% 370,024 ---------------------------------------------------------------- Net Assets -- 100% $ 31,375,457 ----------------------------------------------------------------
(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. 55 .. The Guardian High Yield Bond Fund Corporate Bonds -- 95.0% Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------ Aerospace and Defense -- 1.9% $ 417,000 K & F Ind., Inc. Sr. Sub. Nt. Ser. B 9.625% due 12/15/2010 B3/B $ 467,561 800,000 Sequa Corp. Sr. Nt. 8.875% due 4/1/2008 B1/BB- 868,000 ------------ 1,335,561 - --------------------------------------------------------------- Automotive -- 3.6% Keystone Automotive Operations 522,000 Sr. Sub. Nt. + 9.75% due 11/1/2013 B3/B- 561,150 Tenneco Automotive, Inc. 298,000 Sr. Sec. Nt. Ser. B 10.25% due 7/15/2013 B2/CCC+ 338,975 596,000 Sr. Sub. Nt. Ser. B 11.625% due 10/15/2009 B2/CCC+ 643,680 278,000 TRW Automotive, Inc. Sr. Nt. 9.375% due 2/15/2013 B1/B+ 317,615 667,000 United Components, Inc. Sr. Sub. Nt. 9.375% due 6/15/2013 B3/B 728,697 ------------ 2,590,117 - --------------------------------------------------------------- Banking -- 0.5% 350,000 Western Financial Bank Sub. Cap. Debt. 9.625% due 5/15/2012 B1/BB- 390,250 - --------------------------------------------------------------- Building Materials -- 2.0% 280,000 Associated Materials, Inc. Sr. Sub. Nt. 9.75% due 4/15/2012 B3/B- 306,600 71,000 Collins & Aikman Floor Cover Sr. Sub. Nt. 9.75% due 2/15/2010 B2/B 75,970 584,000 Koppers, Inc. Sr. Sec. Nt.+ 9.875% due 10/15/2013 B2/B 643,860 343,000 Norcraft Cos. Fin. Sr. Sub. Nt.+ 9.00% due 11/1/2011 B3/B- 370,440 ------------ 1,396,870 - --------------------------------------------------------------- Chemicals -- 6.4% 245,000 Compass Minerals Group, Inc. Sr. Sub. Nt. 10.00% due 8/15/2011 B3/B- 274,400 670,000 Equistar Chemicals LP Sr. Nt. 10.125% due 9/1/2008 B2/BB- 733,650 280,000 FMC Corp. Sr. Sec. Nt. 10.25% due 11/1/2009 Ba2/BB+ 327,600 300,000 Huntsman Advanced Materials Sr. Sec. Nt.+ 11.00% due 7/15/2010 B2/B 331,500 295,000 Huntsman Int'l. LLC Sr. Nt. 9.875% due 3/1/2009 B3/B- 323,025 Lyondell Chemical Co. 372,000 Nt. Ser. A 9.625% due 5/1/2007 B1/BB- 394,320
- -------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------------- $ 372,000 Sr. Sub. Nt. 10.875% due 5/1/2009 B3/B $ 381,300 670,000 Millennium America, Inc. Sr. Nt. 7.00% due 11/15/2006 B1/BB- 686,750 Nalco Co. 298,000 Sr. Nt.+ 7.75% due 11/15/2011 B2/B 318,860 298,000 Sr. Sub. Nt.+ 8.875% due 11/15/2013 Caa1/B 315,880 Resolution Performance Product 298,000 Sec. Nt.+ 8.00% due 12/15/2009 B2/B+ 308,430 150,000 Sr. Sec. Nt. 9.50% due 4/15/2010 B3/B- 152,250 ------------ 4,547,965 - ----------------------------------------------------------------- Construction Machinery -- 2.8% 140,000 Joy Global, Inc. Sr. Sub. Nt. 8.75% due 3/15/2012 B2/B+ 156,100 140,000 NMHG Hldg. Co. Sr. Nt. 10.00% due 5/15/2009 B3/B+ 154,700 Terex Corp. 285,000 Sr. Sub. Nt. 9.25% due 7/15/2011 B3/B 313,500 285,000 Sr. Sub. Nt. 10.375% due 4/1/2011 B3/B 319,200 1,043,000 United Rentals NA, Inc. Sr. Sub. Nt.+ 7.75% due 11/15/2013 B2/B+ 1,065,164 ------------ 2,008,664 - ----------------------------------------------------------------- Consumer Cyclical Services -- 1.8% 350,000 Coinmach Corp. Sr. Nt. 9.00% due 2/1/2010 B2/B 379,750 860,000 Iron Mountain, Inc. Sr. Sub. Nt. 8.625% due 4/1/2013 B2/B 928,800 ------------ 1,308,550 - ----------------------------------------------------------------- Consumer Products -- 2.2% 435,000 Elizabeth Arden, Inc. Sr. Sec. Nt. Ser. B 11.75% due 2/1/2011 B1/B+ 517,650 745,000 Rayovac Corp. Sr. Sub. Nt. 8.50% due 10/1/2013 B3/B- 789,700 286,000 Sealy Mattress Co. Sr. Sub. Nt. Ser. B 9.875% due 12/15/2007 B3/B- 296,010 ------------ 1,603,360 - ----------------------------------------------------------------- Electric -- 7.1% Calpine Corp. 894,000 Sr. Sec. Nt.+ 8.50% due 7/15/2010 NR/B 871,650 745,000 Sr. Sec. Nt.+ 8.75% due 7/15/2013 NR/B 726,375 596,000 Sr. Sec. Nt.+ 9.875% due 12/1/2011 B/B 612,390 745,000 Dynegy Hldgs., Inc. Sr. Sec. Nt.+ 10.125% due 7/15/2013 B3/B- 856,750
- -------------------------------------------------------------------------------- See notes to financial statements. 56 The Guardian High Yield Bond Fund Schedule of Investments (Continued)
- -------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------------- $ 745,000 Nevada Power Co. 2nd Mtg. Nt.+ 9.00% due 8/15/2013 Ba2/BB $ 824,156 447,000 NRG Energy, Inc. Sec. Nt.+ 8.00% due 12/15/2013 B2/B+ 469,909 666,000 Southern California Edison Co. 1st Ref. Mtg. Ser. 93C 7.25% due 3/1/2026 Baa2/BBB 682,650 ------------ 5,043,880 - ----------------------------------------------------------------- Energy -- 4.2% 447,000 Dresser, Inc. Sr. Nt. 9.375% due 4/15/2011 B2/B 486,112 280,000 Newfield Exploration Co. Sr. Sub. Nt. 8.375% due 8/15/2012 Ba3/BB- 313,600 700,000 Newpark Resources, Inc. Sr. Sub. Nt. Ser. B 8.625% due 12/15/2007 B2/B+ 724,500 335,000 Pioneer Natural Resources Co. Sr. Nt. 7.20% due 1/15/2028 Ba1/BB+ 358,624 280,000 Pride Int'l., Inc. Sr. Nt. 10.00% due 6/1/2009 Ba2/BB 300,300 298,000 Western Oil Sands, Inc. Sr. Sec. Nt. 8.375% due 5/1/2012 Ba2/BB+ 339,348 420,000 Westport Resources Corp. Sr. Sub. Nt. 8.25% due 11/1/2011 Ba3/B+ 462,000 ------------ 2,984,484 - ----------------------------------------------------------------- Entertainment -- 2.8% Intrawest Corp. 447,000 Sr. Nt.+ 7.50% due 10/15/2013 B1/B+ 464,880 185,000 Sr. Nt. 10.50% due 2/1/2010 B1/B+ 204,425 287,000 Premier Parks, Inc. Sr. Nt. 9.75% due 6/15/2007 B2/B- 300,991 1,005,000 Six Flags, Inc. Sr. Nt.+ 9.625% due 6/1/2014 B2/B- 1,050,225 ------------ 2,020,521 - ----------------------------------------------------------------- Environmental -- 0.5% 335,000 Allied Waste NA, Inc. Sr. Nt. 7.875% due 4/15/2013 Ba3/BB- 362,638 - ----------------------------------------------------------------- Finance Companies -- 0.4% 298,000 Dollar Financial Group, Inc. Sr. Nt.+ 9.75% due 11/15/2011 B3/B 308,430 - ----------------------------------------------------------------- Food and Beverage -- 6.7% 560,000 American Seafood Group LLC Sr. Sub. Nt. 10.125% due 4/15/2010 B3/B 668,500 350,000 B & G Foods, Inc. Sr. Sub. Nt. Ser. D 9.625% due 8/1/2007 B3/B- 360,938
- -------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------------- $ 224,000 Constellation Brands, Inc. Sr. Sub. Nt. 8.125% due 1/15/2012 Ba3/B+ $ 245,280 635,000 Del Monte Corp. Sr. Sub. Nt. 9.25% due 5/15/2011 B2/B 701,675 968,000 Merisant Co. Sr. Sub. Nt.+ 9.50% due 7/15/2013 B3/B- 1,030,920 373,000 Michael Foods, Inc. Sr. Sub. Nt.+ 8.00% due 11/15/2013 B3/B- 388,852 288,000 Pinnacle Foods Hldgs. Corp. Sr. Sub. Nt.+ 8.25% due 12/1/2013 B3/B 298,080 670,000 Premium Standard Farms, Inc. Sr. Nt. 9.25% due 6/15/2011 B1/BB 676,700 372,000 Seminis Vegetable Seeds, Inc. Sr. Sub. Nt.+ 10.25% due 10/1/2013 B3/B- 399,900 ------------ 4,770,845 - ----------------------------------------------------------------- Gaming -- 0.4% 285,000 Sun Int'l. Hotels Ltd. Sr. Sub. Nt. 8.875% due 8/15/2011 B2/B+ 311,363 - ----------------------------------------------------------------- Gas Distributors -- 1.2% 190,000 AmeriGas Partners LP Sr. Nt. 8.875% due 5/20/2011 B2/BB- 209,000 328,000 Gazprom OAO Nt.+ 9.625% due 3/1/2013 NR/BB- 361,620 298,000 Suburban Propane Partners Sr. Nt.+ 6.875% due 12/15/2013 B1/B 300,980 ------------ 871,600 - ----------------------------------------------------------------- Health Care -- 3.3% 382,000 Fisher Scientific Int'l., Inc. Sr. Sub. Nt. 8.125% due 5/1/2012 B2/B+ 409,695 570,000 Fresenius Medical Care Capital Tr. 7.875% due 6/15/2011 Ba2/BB- 615,600 381,000 Insight Health Svcs. Corp. Sr. Sub. Nt. Ser. B 9.875% due 11/1/2011 B3/B- 403,860 National Nephrology Assocs., Inc. 288,000 Sr. Sub. Nt.+ 9.00% due 11/1/2011 B3/B- 301,680 560,000 PerkinElmer, Inc. Sr. Sub. Nt. 8.875% due 1/15/2013 Ba3/BB- 641,200 ------------ 2,372,035 - ----------------------------------------------------------------- Home Construction -- 1.7% 280,000 Beazer Homes USA, Inc. Sr. Nt. 8.375% due 4/15/2012 Ba2/BB 308,700 286,000 Meritage Corp. Sr. Nt. 9.75% due 6/1/2011 Ba3/B+ 319,605
- -------------------------------------------------------------------------------- See notes to financial statements. 57 The Guardian High Yield Bond Fund Schedule of Investments (Continued)
- -------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------- $ 280,000 Standard Pacific Corp. Sr. Sub. Nt. 9.25% due 4/15/2012 Ba3/B+ $ 312,200 280,000 WCI Communities, Inc. Sr. Sub. Nt. 9.125% due 5/1/2012 Ba3/B 308,000 ------------ 1,248,505 - -------------------------------------------------------------- Industrial-Other -- 2.3% Bombardier Recreational Products 286,000 Sr. Sub. Nt.+ 8.375% due 12/15/2013 B3/B- 298,870 645,000 Briggs & Stratton Corp. Sr. Nt. 8.875% due 3/15/2011 Ba1/BB+ 757,875 575,000 General Cable Corp. Sr. Nt.+ 9.50% due 11/15/2010 B2/B 615,250 ------------ 1,671,995 - -------------------------------------------------------------- Lodging -- 0.6% 122,000 HMH Pptys., Inc. Sr. Nt. Ser. C 8.45% due 12/1/2008 Ba3/B+ 127,185 John Q. Hammons Hotels LP 280,000 1st Mtg. Nt. Ser. B 8.875% due 5/15/2012 B2/B 308,700 ------------ 435,885 - -------------------------------------------------------------- Media-Cable -- 4.1% 744,000 Charter Comm. Hldgs. II Sr. Nt.+ 10.25% due 9/15/2010 Caa1/CCC- 781,200 670,000 CSC Hldgs., Inc. Sr. Debt. Ser. B 8.125% due 8/15/2009 B1/BB- 720,250 Insight Midwest LP 52,000 Sr. Nt. 10.50% due 11/1/2010 B2/B+ 56,550 618,000 Sr. Nt.+ 10.50% due 11/1/2010 B2/B+ 672,075 596,000 Mediacom Broadband LLC Sr. Nt. 11.00% due 7/15/2013 B2/B+ 669,010 ------------ 2,899,085 - -------------------------------------------------------------- Media-NonCable -- 7.9% 209,000 Allbritton Comm. Co. Sr. Sub. Nt. 7.75% due 12/15/2012 B3/B- 216,838 American Media Operations, Inc. 596,000 Sr. Sub. Nt. 8.875% due 1/15/2011 B2/B- 646,660 570,000 Sr. Sub. Nt. Ser. B 10.25% due 5/1/2009 B2/B- 607,762 285,000 Corus Entertainment, Inc. Sr. Sub. Nt. 8.75% due 3/1/2012 B1/B+ 313,500 Dex Media East LLC 223,000 Nt.+ 8.00% due 11/15/2013 Caa1/B 234,150 265,000 Sr. Nt. 9.875% due 11/15/2009 B2/B 303,425
- --------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - --------------------------------------------------------------- $ 265,000 Sr. Sub. Nt. 12.125% due 11/15/2012 B3/B $ 325,950 Dex Media West Fin. 75,000 Sr. Nt.+ 8.50% due 8/15/2010 B2/B 83,531 75,000 Sr. Sub. Nt.+ 9.875% due 8/15/2013 B3/B 87,188 278,000 DirecTV Hldgs. Finance Sr. Nt. 8.375% due 3/15/2013 B1/BB- 322,480 286,000 Emmis Comm. Corp. Sr. Sub. Nt. 8.125% due 3/15/2009 B2/B- 299,942 280,000 Entravision Comm. Corp. Sr. Sub. Nt. 8.125% due 3/15/2009 B3/B- 299,600 1,043,000 Houghton Mifflin Co. Sr. Sub. Nt. 9.875% due 2/1/2013 B3/B 1,147,300 R.H. Donnelley Fin. Corp. I 160,000 Sr. Nt.+ 8.875% due 12/15/2010 B1/B+ 180,000 465,000 Sr. Sub. Nt.+ 10.875% due 12/15/2012 B2/B+ 551,606 ------------ 5,619,932 - --------------------------------------------------------------- Metals and Mining -- 1.5% 745,000 AK Steel Corp. Sr. Nt. 7.75% due 6/15/2012 B3/B+ 636,975 286,000 Luscar Coal Ltd. Sr. Nt. 9.75% due 10/15/2011 Ba3/BB 323,895 70,000 Steel Dynamics, Inc. Sr. Nt. 9.50% due 3/15/2009 B1/B+ 77,700 ------------ 1,038,570 - --------------------------------------------------------------- Natural Gas-Pipelines -- 4.6% 372,000 El Paso Partners Sr. Sub. Nt. Ser. B 8.50% due 6/1/2011 B1/BB- 418,500 667,000 El Paso Production Hldg. Co. Sr. Nt.+ 7.75% due 6/1/2013 B2/B 656,995 38,000 Gulfterra Energy Partners Sr. Sub. Nt. Ser. B 8.50% due 6/1/2010 B1/BB- 43,130 208,000 Northwest Pipeline Corp. Sr. Nt.+ 8.125% due 3/1/2010 B1/B+ 230,880 623,000 Southern Natural Gas Co. Nt. 7.35% due 2/15/2031 B1/B 615,212 Transcontinental Gas Pipeline Corp. 630,000 Nt. Ser. B 7.00% due 8/15/2011 B1/B+ 670,950 Williams Cos., Inc. 240,000 Nt. 8.125% due 3/15/2012 B3/B+ 266,400 360,000 Sr. Nt. 8.625% due 6/1/2010 B3/B+ 404,100 ------------ 3,306,167 - ---------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 58 The Guardian High Yield Bond Fund Schedule of Investments (Continued)
- -------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - -------------------------------------------------------------------- Packaging -- 2.2% $ 355,000 Crown European Hldgs. S.A. Sec. Nt. 9.50% due 3/1/2011 B1/B+ $ 402,037 522,000 Graphic Packaging Int'l., Inc. Sr. Sub. Nt.+ 9.50% due 8/15/2013 B3/B- 576,810 Owens-Brockway Glass Container 133,000 Sr. Sec. Nt. 7.75% due 5/15/2011 B1/BB 142,809 133,000 Sr. Nt. 8.25% due 5/15/2013 B2/B+ 142,809 298,000 Silgan Hldgs., Inc. Sr. Sub. Nt.+ 6.75% due 11/15/2013 B1/B+ 298,745 ------------ 1,563,210 - ----------------------------------------------------------------- Paper and Forest Products -- 4.0% Abitibi-Consolidated, Inc. 210,000 Nt. 6.00% due 6/20/2013 Ba1/BB+ 201,475 125,000 Debt. 8.85% due 8/1/2030 Ba1/BB+ 135,128 75,000 Cascades, Inc. Sr. Nt. 7.25% due 2/15/2013 Ba1/BB+ 79,125 400,000 Jefferson Smurfit Corp. US Sr. Sec. Nt. 7.50% due 6/1/2013 B2/B 418,000 670,000 Kappa Beheer BV Sr. Sub. Nt. 10.625% due 7/15/2009 B2/B 716,900 150,000 Millar Western Forest Products Ltd. Sr. Nt.+ 7.75% due 11/15/2013 B3/B+ 155,625 670,000 Stone Container Corp. Sr. Nt. 9.75% due 2/1/2011 B2/B 740,350 447,000 Tembec Inds., Inc. Sr. Nt. 7.75% due 3/15/2012 Ba3/BB 444,765 ------------ 2,891,368 - ----------------------------------------------------------------- Restaurants -- 0.4% 298,000 Jack in the Box, Inc. Sr. Sub. Nt. 8.375% due 4/15/2008 Ba3/B+ 311,470 - ----------------------------------------------------------------- Retailers -- 5.4% 280,000 Cole National Group, Inc. Sr. Sub. Nt. 8.875% due 5/15/2012 B3/B 299,600 420,000 Hollywood Entertainment Corp. Sr. Sub. Nt. 9.625% due 3/15/2011 B3/B- 451,500 720,000 J.C. Penney Co., Inc. Nt. 9.00% due 8/1/2012 Ba3/BB+ 861,300 828,000 Jafra Cosmetics Sr. Sub. Nt. 10.75% due 5/15/2011 B3/B- 908,730 285,000 Petco Animal Supplies, Inc. Sr. Sub. Nt. 10.75% due 11/1/2011 B2/B 333,450
- ------------------------------------------------------------------ Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------ $ 280,000 Rite Aid Corp. Sr. Nt. 11.25% due 7/1/2008 Caa2/B- $ 312,200 373,000 Sonic Automotive, Inc. Sr. Sub. Nt. 8.625% due 8/15/2013 B2/B+ 393,515 280,000 United Auto Group, Inc. Sr. Sub. Nt. 9.625% due 3/15/2012 B3/B 313,600 ------------ 3,873,895 - --------------------------------------------------------------- Supermarkets -- 0.4% 284,000 Pathmark Stores, Inc. Sr. Sub. Nt. 8.75% due 2/1/2012 B2/B 296,780 - --------------------------------------------------------------- Technology -- 0.6% 361,000 AMI Semiconductor, Inc. Sr. Sub. Nt. 10.75% due 2/1/2013 B3/B 430,493 - --------------------------------------------------------------- Textile -- 2.8% 300,000 Oxford Inds., Inc. Sr. Nt.+ 8.875% due 6/1/2011 B2/B 328,125 350,000 Russell Corp. Sr. Nt. 9.25% due 5/1/2010 B1/BB 362,687 750,000 St. John Knits Int'l., Inc. Sr. Sub. Nt. 12.50% due 7/1/2009 B3/B- 802,500 422,000 William Carter Co. Sr. Sub. Nt. Ser. B 10.875% due 8/15/2011 B3/B 487,410 ------------ 1,980,722 - --------------------------------------------------------------- Transportation -- 0.8% 220,000 Omi Corp. Sr. Nt.+ 7.625% due 12/1/2013 B1/B+ 221,925 280,000 Teekay Shipping Corp. Sr. Nt. 8.875% due 7/15/2011 Ba2/BB- 317,800 ------------ 539,725 - --------------------------------------------------------------- Wireless Communications -- 4.3% 700,000 Centennial Cell Comm. Corp. Sr. Nt. 10.125% due 6/15/2013 Caa1/CCC 768,250 Crown Castle Int'l. Corp. 364,000 Sr. Nt.+ 7.50% due 12/1/2013 B3/CCC 365,820 381,000 Sr. Nt. 10.75% due 8/1/2011 B3/CCC 428,625 1,043,000 Nextel Comm., Inc. Sr. Nt. 7.375% due 8/1/2015 B2/B+ 1,121,225 350,000 Nextel Partners, Inc. Sr. Nt. 8.125% due 7/1/2011 Caa1/CCC+ 372,750 ------------ 3,056,670 - --------------------------------------------------------------- Wireline Communications -- 3.6% 300,000 Qwest Capital Funding, Inc. Nt. 5.875% due 8/3/2004 Caa2/CCC+ 300,750
- -------------------------------------------------------------------------------- See notes to financial statements. 59 The Guardian High Yield Bond Fund Schedule of Investments (Continued)
- ------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------- Qwest Corp. $ 1,260,000 Debt. 7.20% due 11/10/2026 Ba3/B- $ 1,241,100 560,000 Debt. 8.875% due 6/1/2031 Ba3/B- 588,000 355,000 Qwest Svcs. Corp. Nt.+ 13.50% due 12/15/2010 NR/CCC+ 431,325 ------------ 2,561,175 - ---------------------------------------------------------------- Total Corporate Bonds (Cost $62,938,774) 67,952,780 - ---------------------------------------------------------------- Sovereign Debt -- 0.9% $ 575,000 Federative Republic of Brazil Nt. 9.25% due 10/22/2010 B2/B+ (Cost $569,321) $ 618,125 - ---------------------------------------------------------------- Warrants -- 0.0% - ------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------- 417 Hayes Lemmerz Int'l., Inc. exp. 6/3/2006 $ 605 330 XM Satellite Radio, Inc. exp. 3/15/2010+ 6,847 - ---------------------------------------------------------------- Total Warrants (Cost $358,885) 7,452 - ----------------------------------------------------------------
Repurchase Agreement -- 2.1% Principal Amount Value - -------------------------------------------------------------------- $ 1,486,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $1,486,076 at 0.92% due 1/2/2004 (1) (Cost $1,486,000) $ 1,486,000 - ----------------------------------------------------------------- Total Investments -- 98.0% (Cost $65,352,980) 70,064,357 Cash, Receivables and Other Assets Less Liabilities -- 2.0% 1,439,514 - ----------------------------------------------------------------- Net Assets -- 100% $ 71,503,871 - -----------------------------------------------------------------
* Unaudited. + Rule 144A restricted security. (1)The repurchase agreement is fully collateralized by U.S. Government and/or agency obligations based on market prices at the date of the portfolio. - -------------------------------------------------------------------------------- See notes to financial statements. 60 .. The Guardian Tax-Exempt Fund Municipal Bonds -- 98.1% Rating Principal Moody's/ Amount S&P* Value - ---------------------------------------------------------------------- Alabama -- 2.4% $ 2,205,000 Alabama Pub. Housing Auth. Ser. B, 2.50% due 1/1/2007 Aaa/AAA $ 2,219,553 - ------------------------------------------------------------------- Arizona -- 3.1% 1,500,000 Phoenix, AZ Civic Impt. Corp. Wtr. Sys. Rev., 5.50% due 7/1/2020 Aaa/AAA 1,663,965 1,000,000 Phoenix, AZ G.O. Ser. B, 5.375% due 7/1/2020 Aa1/AA+ 1,104,930 ------------ 2,768,895 - ------------------------------------------------------------------- Arkansas -- 1.3% 1,000,000 Arkansas St. G.O. Fed. Hwy. Grant Ser. A, 5.50% due 8/1/2011 Aa2/AA 1,139,810 - ------------------------------------------------------------------- California -- 1.6% 1,500,000 California St. Pub. Wks. Brd. Ser. C, 5.00% due 6/1/2025 Baa2/BBB- 1,450,185 - ------------------------------------------------------------------- Colorado -- 2.7% 2,165,000 South Suburban Park & Rec. Dist., CO Rev., 5.50% due 9/15/2019 Aaa/AAA 2,406,203 - ------------------------------------------------------------------- Connecticut -- 2.0% 1,750,000 Connecticut St. Housing Fin. Auth. Sub. Ser. E1, 5.05% due 11/15/2027 Aaa/AAA 1,786,978 - ------------------------------------------------------------------- Florida -- 4.3% 2,000,000 Florida St. Brd. of Ed. Lottery Rev. Ser. A, 5.50% due 7/1/2017 Aaa/AAA 2,258,700 1,500,000 Florida St. Brd. of Ed. Lottery Rev. Ser. C, 5.25% due 7/1/2016 Aaa/AAA 1,642,080 ------------ 3,900,780 - ------------------------------------------------------------------- Georgia -- 4.4% 1,000,000 Fulton Cnty., GA Dev. Auth. Rev. Georgia Tech. Foundation Ser. A, 5.125% due 11/1/2021 Aa1/AA+ 1,063,110 Gainesville, GA Wtr. & Swg. Rev., 700,000 5.25% due 11/15/2018 Aaa/AAA 762,412 2,000,000 5.375% due 11/15/2020 Aaa/AAA 2,168,340 ------------ 3,993,862 - ------------------------------------------------------------------- Idaho -- 2.0% 1,625,000 Boise City, ID Urban Renewal Agy. Lease, 6.00% due 8/15/2023 Aaa/AAA 1,857,830 - ------------------------------------------------------------------- Illinois -- 1.2% 1,000,000 Chicago, IL Brd. of Ed. Ser. A, 5.25% due 12/1/2018 Aaa/AAA 1,094,380 - ------------------------------------------------------------------- Iowa -- 1.2% 1,000,000 Cedar Rapids, IA G.O., 5.25% due 6/1/2019 Aaa/NR 1,076,250 - -------------------------------------------------------------------
- ----------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ----------------------------------------------------------------------- Kansas -- 7.1% $ 2,000,000 Butler Cnty., KS Pub. Bldg. Comm. Rev., 5.55% due 10/1/2021 Aaa/NR $ 2,201,180 1,500,000 Kansas St. Dept. Trans. Hwy. Rev. Ser. A Preref., 5.75% due 9/1/2013 Aa2/AA+ 1,762,860 2,370,000 Topeka, KS Ref. Ser. B, 3.00% due 8/15/2006 Aaa/NR 2,445,793 ------------ 6,409,833 - ----------------------------------------------------------------- Kentucky -- 1.8% 1,430,000 Kentucky St. Ppty. & Bldgs. Comm. Ser. A, Preref., 5.70% due 5/1/2018 Aaa/AAA 1,669,496 - ----------------------------------------------------------------- Maryland -- 1.8% 1,500,000 Prince Georges Cnty., MD Industrial Dev. Auth. Ref., 5.00% due 6/30/2019 Aaa/AAA 1,602,750 - ----------------------------------------------------------------- Michigan -- 3.7% 2,000,000 Detroit, MI City Sch. Dist. Ser. A, 5.50% due 5/1/2020 Aaa/AAA 2,213,400 1,000,000 Garden City, MI Sch. Dist., 5.50% due 5/1/2018 Aa1/AAA 1,113,760 ------------ 3,327,160 - ----------------------------------------------------------------- Minnesota -- 1.7% 1,500,000 St. Paul, MN Port Auth. Lease Rev., 5.125% due 12/1/2027 Aa2/AA+ 1,559,580 - ----------------------------------------------------------------- Missouri -- 1.2% 1,000,000 Springfield, MO Sch. Dist. G.O., 5.125% due 3/1/2020 Aaa/AAA 1,079,100 - ----------------------------------------------------------------- New Jersey -- 0.6% 500,000 New Jersey St. Trans. Auth. Ser. A, 6.50% due 6/15/2005 Aaa/AAA 536,115 - ----------------------------------------------------------------- New Mexico -- 1.3% 1,000,000 New Mexico St. Hwy. Comm. Tax Rev., 6.00% due 6/15/2010 Aa2/AA+ 1,158,270 - ----------------------------------------------------------------- New York -- 7.4% 1,255,000 New York City Industrial Dev. Agy., 5.25% due 3/1/2018 Aaa/AAA 1,373,171 1,500,000 New York St. Dorm. Auth. Lease Ser. A, Preref., 6.25% due 7/1/2020 A1/AA- 1,828,485 1,000,000 New York St. Ref. Ser. A G.O., 5.25% due 3/15/2015 A2/AA 1,104,050 1,250,000 New York St. Thruway Auth. Hwy. & Brdg. Tr. Fd. Ser. B, 5.375% due 4/1/2015 Aaa/AAA 1,399,287 500,000 New York, NY G.O. Sub. Ser. E2, 1.17% due 8/1/2020 (1) Aa3/AAA 500,000 500,000 New York, NY G.O. Sub. Ser. B2, 1.17% due 8/15/2019 (1) Aa3/AAA 500,000 ------------ 6,704,993 - -----------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 61 The Guardian Tax-Exempt Fund Schedule of Investments (Continued)
- ------------------------------------------------------------------------ Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------------ North Carolina - 0.7% $ 595,000 Univ. of NC Hosp. Chapel Hill Rev. Ser. A, 1.16% due 2/15/2031 (1) A1/AA $ 595,000 - ------------------------------------------------------------------ North Dakota - 1.2% 1,000,000 North Dakota St. Wtr. Comm. Rev., 5.75% due 8/1/2020 Aaa/AAA 1,132,880 - ------------------------------------------------------------------ Ohio - 10.4% 500,000 Cleveland, OH Parking Facs. Rev., 5.50% due 9/15/2016 Aaa/AAA 554,960 3,000,000 Dayton, OH City Sch. Dist. Ser. D, 2.00% due 12/1/2006 Aaa/AAA 3,023,670 1,000,000 Franklin Cnty., OH Hosp. Rev. Ref. Ser. C, 5.25% due 5/15/2024 A1/A+ 1,016,200 750,000 Ohio St. Bldg. Auth. Disalle Gov't. Ctr. Ser. A, 6.00% due 10/1/2005 Aa2/AA 808,545 1,300,000 Ohio St. Higher Ed. Fac. Comm., 5.50% due 12/1/2020 Aaa/AAA 1,443,897 1,235,000 River Valley, OH Local Sch. Dist. Facs., 5.25% due 11/1/2020 Aaa/NR 1,330,836 1,050,000 Univ. of Cincinnati, OH General Rcpts. Ser. A, 5.50% due 6/1/2011 Aaa/AAA 1,222,305 ------------ 9,400,413 - ------------------------------------------------------------------ Oregon - 1.4% 1,105,000 McMinnville, OR Sch. Dist. Ref. G.O., 5.50% due 6/15/2016 Aaa/NR 1,299,447 - ------------------------------------------------------------------ Pennsylvania - 2.5% Delaware River Port Auth. PA & NJ, 1,000,000 5.10% due 1/1/2020 Aaa/AAA 1,068,920 1,000,000 6.00% due 1/1/2017 Aaa/AAA 1,162,670 ------------ 2,231,590 - ------------------------------------------------------------------ Puerto Rico - 7.4% 1,500,000 Puerto Rico Comwlth. Hwy. & Trans. Auth. Rev. Ser. G, 5.00% due 7/1/2033 Baa1/A 1,521,495 2,200,000 Puerto Rico Elec. Power Auth. Ser. NN Rev., 5.125% due 7/1/2029 A3/A- 2,265,780 1,750,000 Puerto Rico Housing Finance Authority, 5.00% due 12/1/2020 Aa3/AA 1,852,217 1,000,000 Puerto Rico Muni. Fin. Agency Ser. A, 5.25% due 8/1/2021 Aaa/AAA 1,088,390 ------------ 6,727,882 - ------------------------------------------------------------------ South Carolina - 4.8% 350,000 Charleston Cnty., SC Sch. Dist. Ref. Ser. B, 5.00% due 2/1/2016 Aa1/AA+ 377,934 1,250,000 Charleston, SC Wtrwks. & Swr. Rev., 5.25% due 1/1/2018 Aa3/AA- 1,359,462
- ------------------------------------------------------------------- Rating Principal Moody's/ Amount S&P* Value - ------------------------------------------------------------------- $ 1,500,000 Charleston, SC Wtrwks. & Swr. Rev. Ser. B, 5.00% due 1/1/2028 Aa3/AA- $ 1,541,520 1,000,000 Mount Pleasant, SC Wtr. & Swr. Rev. Ref. & Impt., 5.25% due 12/1/2019 Aaa/AAA 1,096,740 ------------ 4,375,656 - ---------------------------------------------------------------- Tennessee - 3.1% 1,000,000 Knox Cnty., TN Pub. Impt. G.O., 5.375% due 5/1/2020 Aa2/AA 1,078,940 1,700,000 Tennessee Housing Dev. Agency Mtg. Fin. Ser. A, 5.20% due 7/1/2023 Aa2/AA 1,771,043 ------------ 2,849,983 - ---------------------------------------------------------------- Virginia - 10.4% 3,000,000 Fairfax Cnty., VA Ref. Pub. Impt. Ser. A, 4.25% due 6/1/2008 Aaa/AAA 3,248,790 1,500,000 Riverside, VA Regional Jail Auth. Rev., 5.00% due 7/1/2021 Aaa/AAA 1,588,695 1,000,000 Stafford Cnty., VA Wtr. & Swg. Rev. Ref., 4.00% due 6/1/2005 Aaa/AAA 1,037,970 1,500,000 Virginia St. Pub. Sch. Auth. Ser. A Rev., 5.50% due 8/1/2018 Aa1/AA+ 1,680,975 1,790,000 Virginia St. Pub. Sch. Auth. Ser. A, 5.00% due 8/1/2019 Aa1/AA+ 1,908,247 ------------ 9,464,677 - ---------------------------------------------------------------- Washington -- 3.4% 1,500,000 Cowlitz Cnty., WA Sch. Dist. G.O., 5.50% due 12/1/2019 Aaa/NR 1,666,125 1,250,000 Snohomish Cnty., WA G.O., 5.375% due 12/1/2019 Aaa/AAA 1,369,863 ------------ 3,035,988 - ---------------------------------------------------------------- Total Municipal Bonds (Cost $84,081,123) 88,855,539 - ---------------------------------------------------------------- Total Investments -- 98.1% (Cost $84,081,123) 88,855,539 Cash, Receivables and Other Assets Less Liabilities -- 1.9% 1,722,279 - ---------------------------------------------------------------- Net Assets -- 100% $ 90,577,818 - ----------------------------------------------------------------
* Unaudited. (1)Variable rate demand notes. Glossary: G.O. -- General Obligation. - -------------------------------------------------------------------------------- See notes to financial statements. 62 .. The Guardian Cash Management Fund Asset Backed -- 0.5% Principal Maturity Amount Date Value - -------------------------------------------------------------------------- $ 3,111,274 First Franklin Mtg. Loan 2002-FF1 1A2 3.79% 5/1/2004 (Cost $3,129,447) $ 3,129,447 - -------------------------------------------------------------------- Corporate Bonds -- 6.2% Building Materials -- 0.1% $ 250,000 Vulcan Materials 5.75% 4/1/2004 $ 252,792 - -------------------------------------------------------------------- Financial-Banks -- 0.1% 500,000 National City Corp. 6.625% 3/1/2004 504,398 - -------------------------------------------------------------------- Financial-Other -- 2.0% 2,200,000 Bear Stearns Cos., Inc. 6.15% 3/2/2004 2,218,281 1,000,000 Lehman Brothers Hldgs., Inc. 6.625% 4/1/2004 1,012,957 8,110,000 Morgan Stanley 5.625% 1/20/2004 8,128,749 ------------- 11,359,987 - -------------------------------------------------------------------- Food and Beverage -- 0.4% 2,460,000 Pepsi Bottling Hldgs., Inc. 5.375% 2/17/2004+ 2,472,432 - -------------------------------------------------------------------- Machinery-Industrial Specialty -- 0.3% 1,750,000 Stanley Works 5.75% 3/1/2004 1,763,132 - -------------------------------------------------------------------- Merchandising-Mass -- 1.4% 7,500,000 Wal-Mart Stores, Inc. 5.199% 6/1/2004 7,625,872 - -------------------------------------------------------------------- Telecommunications -- 1.9% 3,750,000 Bell Atlantic-NJ 5.875% 2/1/2004 3,764,151 4,600,000 GTE California, Inc. 6.75% 3/15/2004 4,649,594 2,145,000 New York Telephone Co. 6.25% 2/15/2004 2,157,679 ------------- 10,571,424 - -------------------------------------------------------------------- Total Corporate Bonds (Cost $34,550,037) 34,550,037 - -------------------------------------------------------------------- Municipal Bonds -- 4.7% $ 20,000,000 California St. Rev. Antic Ser. A 2.00% 6/16/2004 $ 20,056,322 6,000,000 Connecticut St. Ref. Ser. B 5.97% 8/1/2004 6,160,372 - -------------------------------------------------------------------- Total Municipal Bonds (Cost $26,216,694) 26,216,694 - -------------------------------------------------------------------- U.S. Government -- 7.8% U.S. Government Agencies -- 7.8% FHLB $ 4,000,000 1.125% 10/1/2004 $ 3,997,155 5,000,000 1.52% 11/26/2004 5,000,000 FHLMC 10,000,000 1.40% 9/21/2004 10,000,000 5,000,000 1.40% 11/12/2004 5,000,000
- ------------------------------------------------------------------- Principal Maturity Amount Date Value - ------------------------------------------------------------------- FNMA $ 5,000,000 1.20% 8/16/2004 $ 5,000,000 5,000,000 1.20% 8/17/2004 5,000,000 5,000,000 1.30% 8/30/2004 5,000,000 5,000,000 1.30% 8/31/2004 5,000,000 - ---------------------------------------------------------------- Total U.S. Government (Cost $43,997,155) 43,997,155 - ---------------------------------------------------------------- Commercial Paper -- 48.3% ASSET BACKED -- 1.3% $ 7,500,000 Galleon Capital Corp. 1.10% 1/20/2004 $ 7,495,646 - ---------------------------------------------------------------- FINANCIAL -- 25.5% Automotive -- 2.3% $ 13,155,000 American Honda Fin. Corp. 1.06% 1/7/2004 $ 13,152,676 - ---------------------------------------------------------------- Financial-Banks -- 9.8% 10,000,000 Credit Suisse First Boston 1.08% 1/22/2004 9,993,700 10,000,000 Dexia Delaware LLC 1.05% 1/8/2004 9,997,958 Dresdner Bank AG 10,000,000 1.05% 1/22/2004 9,993,875 5,000,000 1.07% 1/5/2004 4,999,406 5,000,000 Societe Generale NA 1.055% 1/15/2004 4,997,949 State Street Corp. 5,000,000 1.04% 1/15/2004 4,997,978 10,000,000 1.05% 1/12/2004 9,996,791 ------------- 54,977,657 - ---------------------------------------------------------------- Financial-Other -- 11.6% 10,000,000 Barton Capital Corp. 1.08% 1/7/2004 9,998,200 10,000,000 CBA Delaware Fin., Inc. 1.07% 1/12/2004 9,996,731 Citigroup Global Markets 10,000,000 1.05% 1/9/2004 9,997,667 5,000,000 1.08% 1/13/2004 4,998,200 10,000,000 Countrywide Home Loan 1.13% 1/5/2004 9,998,744 Household Financial Corp. 10,000,000 1.08% 1/8/2004 9,997,900 5,000,000 1.08% 1/12/2004 4,998,350 5,000,000 Systems United Corp. 1.09% 1/13/2004 4,998,183 ------------- 64,983,975 - ---------------------------------------------------------------- Insurance -- 1.8% 10,000,000 American General Fin. Corp. 1.06% 1/12/2004 9,996,761 - ---------------------------------------------------------------- TOTAL FINANCIAL 143,111,069 - ---------------------------------------------------------------- INDUSTRIAL -- 21.5% Commercial Services -- 1.8% $ 10,000,000 Deluxe Corp. 1.07% 1/15/2004 $ 9,995,839 - ---------------------------------------------------------------- Education -- 4.7% 6,110,000 Massachusetts Coll. of Pharmacy 1.09% 1/8/2004 6,108,705
- -------------------------------------------------------------------------------- See notes to financial statements. 63 The Guardian Cash Management Fund Schedule of Investments (Continued) - ------------------------------------------------------------------- Principal Maturity Amount Date Value - ------------------------------------------------------------------- Northwestern University $ 5,000,000 1.08% 2/17/2004 $ 4,992,950 5,000,000 1.08% 3/25/2004 4,987,400 10,000,000 University of California 1.06% 1/7/2004 9,998,233 ------------- 26,087,288 - ------------------------------------------------------------------- Electronics and Instruments -- 0.9% 5,000,000 Sharp Electronics 1.10% 1/20/2004 4,997,097 - ------------------------------------------------------------------- Metals-Miscellaneous -- 4.1% Rio Tinto America, Inc. 3,006,000 1.07% 1/6/2004 3,005,553 10,000,000 1.07% 1/12/2004 9,996,731 10,000,000 1.10% 1/8/2004 9,997,861 ------------- 23,000,145 - ------------------------------------------------------------------- Oil and Gas Services -- 4.1% Koch Industries 10,000,000 1.06% 1/8/2004 9,997,939 5,800,000 1.10% 1/6/2004 5,799,114 7,000,000 Motiva Enterprises 1.01% 1/13/2004 6,997,643 ------------- 22,794,696 - ------------------------------------------------------------------- Telecommunications -- 2.2% SBC Int'l., Inc. 5,000,000 1.05% 1/12/2004 4,998,396 7,500,000 1.05% 1/22/2004 7,495,406 ------------- 12,493,802 - ------------------------------------------------------------------- Utilities-Electric and Water -- 2.8% Southern Co. 8,000,000 1.05% 1/27/2004 7,993,934 8,000,000 1.09% 1/5/2004 7,999,031 ------------- 15,992,965 - ------------------------------------------------------------------- Wireline Communications -- 0.9% 5,000,000 Verizon Network Funding 1.03% 1/26/2004 4,996,424 - ------------------------------------------------------------------- TOTAL INDUSTRIAL 120,358,256 - ------------------------------------------------------------------- Total Commercial Paper (Cost $270,964,971) 270,964,971 - ------------------------------------------------------------------- Floating Rate Notes and Bonds -- 25.6% Principal Reset Amount Date* Value - ------------------------------------------------------------------- Alaska -- 2.0% $ 11,345,000 Alaska St. Housing Fin. Corp. 1.25% 1/8/2004 $ 11,345,000 - ------------------------------------------------------------------- California -- 5.8% 13,590,000 California Housing Fin. Agency 1.26% 1/7/2004 13,590,000 11,000,000 Los Angeles, CA Wtr. & Power 1.10% 1/8/2004 11,000,000 8,100,000 Sacramento Cnty., CA 1.24% 1/7/2004 8,100,000 ------------- 32,690,000 - -------------------------------------------------------------------
- ------------------------------------------------------------------ Principal Reset Amount Date* Value - ------------------------------------------------------------------ Colorado -- 2.6% $ 14,250,000 Colorado Housing & Fin. Auth. 1.25% 1/7/2004 $ 14,250,000 - ------------------------------------------------------------------ Connecticut -- 1.4% 8,000,000 Connecticut St. Housing & Fin. Auth. 1.10% 1/8/2004 8,000,000 - ------------------------------------------------------------------ Financial-Other -- 1.8% 10,000,000 Countrywide Home Loan 1.295% 3/24/2004 10,001,991 - ------------------------------------------------------------------ Florida -- 1.4% 8,000,000 Miami Dade Cnty. Florida Aviation 1.21% 1/7/2004 8,000,000 - ------------------------------------------------------------------ Michigan -- 1.1% 4,000,000 Michigan St. Housing Dev. Auth. 1.25% 1/7/2004 4,000,000 1,905,000 Michigan St. Housing Dev. Rental Revenue 1.13% 1/8/2004 1,905,000 ------------- 5,905,000 - ------------------------------------------------------------------ New York -- 4.0% 22,530,000 New York City Trans. 1.25% 1/7/2004 22,530,000 - ------------------------------------------------------------------ Utah -- 4.5% 16,540,000 Utah Housing Corp. Single Family 1.25% 1/7/2004 16,540,000 8,450,000 Utah St. Housing Fin. Agency 1.25% 1/7/2004 8,450,000 ------------- 24,990,000 - ------------------------------------------------------------------ Washington -- 1.0% 5,595,000 Seattle, WA 1.55% 9/1/2004 5,595,000 - ------------------------------------------------------------------ Total Floating Rate Notes and Bonds (Cost $143,306,991) 143,306,991 - ------------------------------------------------------------------
- -------------------------------------------------------------------------------- See notes to financial statements. 64 The Guardian Cash Management Fund Schedule of Investments (Continued) Repurchase Agreement -- 8.1% Principal Amount Value - -------------------------------------------------------------------- $45,411,000 State Street Bank and Trust Co. repurchase agreement, dated 12/31/2003, maturity value $45,413,321 at 0.92% due 1/2/2004(1) (Cost $45,411,000) $ 45,411,000 - ------------------------------------------------------------------- Total Investments -- 101.2% (Cost $567,576,295) 567,576,295 Liabilities in Excess of Cash, Receivables and Other Assets -- (1.2)% (6,988,751) - ------------------------------------------------------------------- Net Assets -- 100% $560,587,544 - -------------------------------------------------------------------
+ Rule 144A restricted security. * Floating rate note. The rate shown is the rate in effect at December 31, 2003. (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. 65 .. The Park Avenue Portfolio Statements of Assets and Liabilities December 31, 2003 - --------------------------------------
The Guardian The Guardian The Guardian The Guardian The Guardian Park Avenue UBS Large Park Avenue UBS Small Asset Fund Cap Value Small Cap Cap Value Allocation -------------- Fund Fund Fund Fund ------------ ------------ ------------ ------------ ASSETS Investments, at identified cost (includes majority- owned subsidiary of $132,417,998 and non controlled affiliated issue of $21,206,382 for GAAF)................................................ $1,138,874,853 $66,507,026 $158,882,958 $30,634,015 $184,307,188 ============== ============ ============ ============ ============ Investments, at market -- Note 1 (includes majority- owned subsidiary of $116,565,880 and non controlled affiliated issue of $22,097,901 for GAAF)................................................ 1,301,883,364 85,076,473 202,456,159 38,795,110 167,808,350 Cash.................................................. -- 608 789 28 829 Foreign Currency (cost $15,057 GBGIF and $80,133 GBGEMF, respectively)........................ -- -- -- -- -- Receivable for securities sold........................ 15,613,086 419,238 -- 92,559 -- Dividends receivable.................................. 1,306,500 92,384 68,494 46,795 112,648 Receivable for fund shares sold....................... 362,180 541 390,695 25,670 62,625 Interest receivable................................... -- 62 82 25 111 Dividend reclaim receivable........................... -- -- -- -- -- Receivable for variation margin -- Note 1............. -- -- -- -- 72,500 Other assets.......................................... 25,349 641 2,955 144 2,980 -------------- ------------ ------------ ------------ ------------ Total Assets....................................... 1,319,190,479 85,589,947 202,919,174 38,960,331 168,060,043 -------------- ------------ ------------ ------------ ------------ LIABILITIES Payable for fund shares redeemed...................... 2,806,835 -- 1,628,137 -- 354,879 Due to custodian...................................... 2,614,044 -- -- -- -- Accrued expenses...................................... 296,161 166,131 64,018 131,494 66,200 Payable for securities purchased...................... -- 513,881 -- 57,660 -- Payable for variation margin -- Note 1................ -- -- -- -- 25,493 Distributions payable................................. -- -- -- -- -- Accrued foreign capital gains tax..................... -- -- -- -- -- Payable for forward mortgage securities purchased -- Note 7............................................... -- -- -- -- -- Due to GIS............................................ 965,073 82,880 204,073 38,318 47,426 -------------- ------------ ------------ ------------ ------------ Total Liabilities.................................. 6,682,113 762,892 1,896,228 227,472 493,998 -------------- ------------ ------------ ------------ ------------ Net Assets......................................... $1,312,508,366 $84,827,055 $201,022,946 $38,732,859 $167,566,045 ============== ============ ============ ============ ============ COMPONENTS OF NET ASSETS Shares of beneficial interest, at par................. $ 439,116 $ 66,208 $ 106,652 $ 30,603 $ 157,859 Additional paid-in capital............................ 1,878,623,946 63,203,836 155,265,892 28,565,896 235,842,261 Undistributed/(distributions in excess) of net investment income.................................... 4,863,135 729 -- -- 1,448,759 Accumulated net realized gain/(loss) on investments and foreign currency related transactions............ (734,426,342) 2,986,835 2,077,201 1,975,265 (53,956,415) Net unrealized appreciation/(depreciation) of investment and foreign currency related transactions......................................... 163,008,511 18,569,447 43,573,201 8,161,095 (15,926,419) -------------- ------------ ------------ ------------ ------------ Net Assets......................................... $1,312,508,366 $84,827,055 $201,022,946 $38,732,859 $167,566,045 ============== ============ ============ ============ ============ NET ASSETS Class A............................................... $1,133,468,121 $21,704,583 $160,049,396 $10,081,305 $118,987,792 Class B............................................... $ 165,273,929 $21,377,595 $ 22,988,650 $ 9,736,920 $ 32,862,609 Class C............................................... $ 6,621,625 $20,800,596 $ 8,092,015 $ 9,422,407 $ 7,856,553 Class K............................................... $ 7,144,691 $20,944,281 $ 9,892,885 $ 9,492,227 $ 7,859,091 Shares of Beneficial Interest Outstanding -- $0.01 Par Value Class A............................................... 37,685,792 1,692,528 8,403,057 792,947 11,190,976 Class B............................................... 5,754,278 1,670,165 1,281,985 771,918 3,110,076 Class C............................................... 233,402 1,625,063 453,798 746,978 743,669 Class K............................................... 238,164 1,633,031 526,381 748,434 741,147 Net Asset Value Per Share Class A............................................... $30.08 $12.82 $19.05 $12.71 $10.63 Class B............................................... $28.72 $12.80 $17.93 $12.61 $10.57 Class C............................................... $28.37 $12.80 $17.83 $12.61 $10.56 Class K............................................... $30.00 $12.83 $18.79 $12.68 $10.60 Maximum Offering Price Per Share Class A Only (Net Asset Value x 104.71%)*............. $31.50 $13.42 $19.95 $13.31 $11.13
* 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. 66
The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian S&P 500 Baillie Gifford Baillie Gifford Investment Low Duration High Yield Tax-Exempt Cash Index International Emerging Quality Bond Fund Bond Fund Management Fund Fund Markets Fund Bond Fund Fund Fund - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ $161,113,217 $ 40,283,744 $54,910,701 $195,136,727 $30,913,768 $ 65,352,980 $84,081,123 $567,576,295 ============ =============== =============== ============ ============ ============ ============ ============ 157,353,560 51,230,126 74,669,309 198,851,492 31,005,433 70,064,357 88,855,539 567,576,295 106,766 -- -- 96,291 90,947 95,702 693,327 178,643 -- 15,130 80,108 -- -- -- -- -- 2,849,271 16,822 551,900 -- 314,436 -- -- -- 222,918 70,046 216,407 -- -- -- -- -- 289,392 3,214 119,660 64,633 14,934 43,775 45,547 495,186 27 1,901 27 1,614,702 371,339 1,442,481 1,105,730 1,713,332 -- 36,275 -- -- -- -- -- -- 4,601 -- -- -- -- -- -- -- 2,550 1,222 1,015 4,329 596 1,283 1,829 13,175 - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 160,829,085 51,374,736 75,638,426 200,631,447 31,797,685 71,647,598 90,701,972 569,976,631 - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 149,615 96,717 681,548 1,048,085 -- 30,842 10,000 8,849,511 -- 10,058 7,192 -- -- -- -- -- 63,791 60,123 70,873 63,152 86,626 42,349 39,594 127,056 2,843,220 -- 450,989 67,736 302,572 -- -- -- -- -- -- -- -- -- -- -- -- -- -- 180,371 138 -- 6,499 1,021 -- -- 102,492 -- -- -- -- -- -- -- -- 16,185,531 -- -- -- -- 85,550 21,525 32,480 151,030 32,892 70,536 68,061 411,499 - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 3,142,176 188,423 1,345,574 17,695,905 422,228 143,727 124,154 9,389,087 - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ $157,686,909 $ 51,186,313 $74,292,852 $182,935,542 $31,375,457 $ 71,503,871 $90,577,818 $560,587,544 ============ =============== =============== ============ ============ ============ ============ ============ $ 206,784 $ 45,877 $ 61,379 $ 181,271 $ 31,298 $ 95,982 $ 87,850 $ 5,605,876 258,122,176 81,755,005 57,777,513 178,576,633 31,266,241 85,790,892 85,690,490 554,981,668 10,951 81,893 (4,769) -- -- -- -- -- (96,920,163) (41,648,669) (3,300,556) 462,873 (13,747) (19,094,380) 25,062 -- (3,732,839) 10,952,207 19,759,285 3,714,765 91,665 4,711,377 4,774,416 -- - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ $157,686,909 $ 51,186,313 $74,292,852 $182,935,542 $31,375,457 $ 71,503,871 $90,577,818 $560,587,544 ============ =============== =============== ============ ============ ============ ============ ============ $129,227,788 $ 32,126,160 $43,560,552 $143,536,104 $ 8,456,923 $ 42,588,602 $80,024,939 $529,321,075 $ 12,069,644 $ 6,534,712 $ 9,388,923 $ 18,373,504 $ 7,742,807 $ 10,017,780 -- $ 12,498,476 $ 8,795,756 $ 5,546,359 $ 9,540,000 $ 11,206,219 $ 7,610,810 $ 9,316,259 $10,552,879 $ 9,085,531 $ 7,593,721 $ 6,979,082 $11,803,377 $ 9,819,715 $ 7,564,917 $ 9,581,230 -- $ 9,682,462 16,941,910 2,811,432 3,516,865 14,223,120 843,621 5,716,240 7,761,503 529,321,075 1,584,773 625,382 820,702 1,821,176 772,375 1,345,134 -- 12,498,476 1,155,906 529,721 831,783 1,110,750 759,207 1,251,297 1,023,538 9,085,531 995,772 621,118 968,514 972,020 754,630 1,285,557 -- 9,682,462 $7.63 $11.43 $12.39 $10.09 $10.02 $7.45 $10.31 $1.00 $7.62 $10.45 $11.44 $10.09 $10.02 $7.45 -- $1.00 $7.61 $10.47 $11.47 $10.09 $10.02 $7.45 $10.31 $1.00 $7.63 $11.24 $12.19 $10.10 $10.02 $7.45 -- $1.00 $7.99 $11.97 $12.97 $10.57 $10.49 $7.80 $10.80 N/A**
67 .. The Park Avenue Portfolio Statements of Operations Year Ended December 31, 2003 - -------------------------------------
The The Guardian The Guardian The Guardian The Guardian Guardian UBS Large Park Avenue UBS Small Asset Park Avenue Cap Value Small Cap Cap Value Allocation Fund Fund* Fund Fund* Fund ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME Dividends (includes $1,277,360 from a majority-owned subsidiary and $1,516,814 from a non controlled affiliate for GAAF)..................................... $ 20,320,166 $ 1,757,373 $ 910,225 $ 735,254 $ 2,535,340 Interest................................................. 224,544 24,332 39,450 15,517 51,089 Less: Foreign tax withheld................................ -- -- (2,471) (69) -- ------------ ------------ ------------ ------------ ------------ Total Income.......................................... 20,544,710 1,781,705 947,204 750,702 2,586,429 ------------ ------------ ------------ ------------ ------------ Expenses: Investment advisory fees -- Note 2....................... 6,410,892 625,113 1,198,953 357,381 995,215 Administrative fees -- Class A -- Note 2................. 2,198,474 47,505 316,193 22,714 275,158 Administrative fees -- Class B -- Note 2................. 407,455 47,250 46,978 22,393 73,210 Administrative fees -- Class C -- Note 2................. 15,406 46,706 16,799 22,088 17,297 Administrative fees -- Class K -- Note 2................. 15,633 46,826 19,681 22,150 17,110 12b-1 fees -- Class B -- Note 3.......................... 1,222,363 141,749 140,933 67,178 219,629 12b-1 fees -- Class C -- Note 3.......................... 46,218 140,119 50,398 66,265 51,892 12b-1 fees -- Class K -- Note 3.......................... 25,013 74,921 31,490 35,440 27,377 Transfer agent fees -- Class A........................... 1,548,776 21,483 145,707 21,415 165,293 Transfer agent fees -- Class B........................... 483,166 21,105 58,015 21,041 68,749 Transfer agent fees -- Class C........................... 35,425 20,700 32,672 20,726 33,402 Transfer agent fees -- Class K........................... -- 1,660 -- 1,661 -- Custodian fees........................................... 218,143 79,855 112,333 81,098 101,230 Printing expense......................................... 92,744 13,805 13,413 9,078 11,055 Registration fees........................................ 91,596 92,014 73,530 92,057 76,063 Trustees' fees -- Note 2................................. 88,614 5,035 9,717 2,331 10,345 Legal fees............................................... 50,532 74,273 4,733 34,386 6,027 Audit fees............................................... 26,664 26,665 22,125 22,125 22,125 Insurance expense........................................ 26,247 1,355 3,548 798 3,808 Loan commitment fees -- Note 9........................... 20,455 1,253 2,063 585 2,606 Other.................................................... 336 457 457 457 456 ------------ ------------ ------------ ------------ ------------ Total Expenses before Reimbursement and Custody credits...................................... 13,024,152 1,529,849 2,299,738 923,367 2,178,047 Less: Expenses assumed by investment adviser -- Note 2.................................... -- -- -- -- (1,180,646) Custody credits -- Note 1............................. -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Expenses Net of Reimbursement and Custody credits.............................................. 13,024,152 1,529,849 2,299,738 923,367 997,401 ------------ ------------ ------------ ------------ ------------ Net Investment Income/(Loss)............................... 7,520,558 251,856 (1,352,534) (172,665) 1,589,028 ------------ ------------ ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES -- NOTE 4 Net realized gain/(loss) on investments -- Note 1........ (76,280,304) 4,603,444 16,253,102 4,660,235 1,931,418 Net realized loss on sale of affiliated underlying funds................................................... -- -- -- -- (513,254) Net realized gains received from affiliated underlying funds................................................... -- -- -- -- 652,143 Foreign capital gains tax................................ -- -- -- -- -- Net realized loss on foreign currency related transactions -- Note 1.................................. -- -- -- -- -- Net change in unrealized appreciation/(depreciation) on investments -- Note 4................................... 310,795,254 18,569,447 44,032,029 8,161,095 31,908,656 Net change in unrealized depreciation of futures contracts -- Note 1..................................... -- -- -- -- 1,847,930 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........................................ 234,514,950 23,172,891 60,285,131 12,821,330 35,826,893 ------------ ------------ ------------ ------------ ------------ NET INCREASE IN NET ASSETS FROM OPERATIONS.............................................. $242,035,508 $23,424,747 $58,932,597 $12,648,665 $37,415,921 ============ ============ ============ ============ ============
*Period from February 3, 2003 to December 31, 2003. **Period from July 30, 2003 to December 31, 2003. See notes to financial statements. 68
The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian S&P 500 Baillie Gifford Baillie Gifford Investment Low Duration High Yield Tax-Exempt Cash Index International Emerging Quality Bond Fund** Bond Fund Fund Management Fund Fund Markets Fund Bond Fund Fund - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ $ 2,365,483 $ 1,529,340 $ 1,639,750 -- -- -- -- -- 27,452 19,849 6,238 $ 9,009,847 $ 343,288 $ 5,566,537 $ 4,000,777 $8,103,902 -- (172,932) (164,409) -- -- -- -- -- - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 2,392,935 1,376,257 1,481,579 9,009,847 343,288 5,566,537 4,000,777 8,103,902 - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 334,817 466,684 555,220 1,060,329 58,007 395,372 457,919 3,230,632 276,788 105,165 80,254 429,324 8,330 98,837 203,769 1,529,984 24,166 14,339 17,619 49,553 8,019 22,932 -- 40,439 17,818 11,710 18,350 27,483 7,953 21,207 25,191 22,950 16,045 14,625 22,583 23,804 7,923 21,762 -- 21,943 72,497 43,019 52,855 148,660 24,058 68,797 -- 121,319 53,455 35,130 55,051 82,450 23,860 63,622 75,572 68,848 25,672 23,400 36,132 38,087 12,677 34,819 -- 35,109 44,179 97,460 37,590 95,438 9,764 36,988 37,939 460,544 38,696 41,417 33,019 43,178 9,264 35,434 -- 30,775 33,183 29,252 32,467 32,929 9,273 32,169 32,073 7,088 -- -- -- -- 1,650 -- -- 2,200 149,831 248,456 289,921 146,135 30,388 101,278 72,663 166,989 23,046 11,862 8,459 24,318 3,308 10,529 9,759 62,003 101,214 84,444 72,355 106,828 65,006 69,941 36,182 108,225 8,503 4,279 3,384 15,332 457 4,313 6,838 48,074 12,119 2,410 1,702 9,991 7,626 2,230 1,312 31,874 22,125 26,985 26,851 22,125 23,400 26,665 22,124 21,200 3,655 2,063 1,482 3,695 141 1,509 2,369 11,392 2,098 1,084 829 3,632 144 1,059 1,565 2,374 455 456 456 455 455 455 456 455 - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 1,260,362 1,264,240 1,346,579 2,363,746 311,703 1,049,918 985,731 6,024,417 (398,926) -- -- (291,989) (147,985) (322,570) (99,461) (307,067) -- -- -- -- -- -- (32,236) -- - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 861,436 1,264,240 1,346,579 2,071,757 163,718 727,348 854,034 5,717,350 - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 1,531,499 112,017 135,000 6,938,090 179,570 4,839,189 3,146,743 2,386,552 - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ (317,473) (4,550,780) 2,479,760 5,743,920 (14,521) 2,660,574 3,094,286 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (150,898) -- -- -- -- -- -- (29,996) (80,548) -- -- -- -- -- 32,396,692 18,753,402 22,842,057 (3,814,085) 91,665 4,375,476 (1,854,464) -- 61,498 -- -- -- -- -- -- -- -- (12,076) 3,290 -- -- -- -- -- - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ 32,140,717 14,160,550 25,093,661 1,929,835 77,144 7,036,050 1,239,822 -- - ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------ $33,672,216 $14,272,567 $25,228,661 $ 8,867,925 $ 256,714 $11,875,239 $ 4,386,565 $2,386,552 ============ =============== =============== ============ ============ ============ ============ ============
69 .. The Park Avenue Portfolio Statements of Changes in Net Assets
The Guardian UBS Large The Guardian Cap Value Park Avenue Fund Fund ------------------------------ ------------ Period from February 3, 2003+ to Year Ended December 31, December 31, 2003 2002 2003 -------------- -------------- ------------ INCREASE/(DECREASE) IN NET ASSETS From Operations: Net investment income/(loss)........................... $ 7,520,558 $ 6,268,512 $ 251,856 Net realized gain/(loss) on investments and foreign currency related transactions......................... (76,280,304) (269,243,443) 4,603,444 Net change in unrealized appreciation/ (depreciation) of investments and foreign currency related transactions.......................................... 310,795,254 (151,728,126) 18,569,447 -------------- -------------- ------------ Net Increase/(Decrease) in Net Assets Resulting from Operations....................................... 242,035,508 (414,703,057) 23,424,747 -------------- -------------- ------------ Dividends and Distributions to Shareholders from: Net investment income Class A............................................... (7,367,278) (4,310,369) (130,506) Class B............................................... -- -- (25,664) Class C............................................... -- -- (25,489) Class K............................................... (20,780) -- (69,468) Net realized gain on investments and foreign currency related transactions Class A............................................... -- -- (412,361) Class B............................................... -- -- (408,262) Class C............................................... -- -- (397,214) Class K............................................... -- -- (398,772) -------------- -------------- ------------ Total Dividends and Distributions to Shareholders......................................... (7,388,058) (4,310,369) (1,867,736) -------------- -------------- ------------ From Capital Share Transactions: Net increase/(decrease) in net assets from capital share transactions -- Note 8.......................... (221,597,031) (350,930,660) 63,270,044 Redemption fees........................................ -- -- -- -------------- -------------- ------------ (221,597,031) (350,930,660) 63,270,044 -------------- -------------- ------------ Net Increase/(Decrease) in Net Assets.................. 13,050,419 (769,944,086) 84,827,055 NET ASSETS: Beginning of period....................................... 1,299,457,947 2,069,402,033 -- -------------- -------------- ------------ End of period*............................................ $1,312,508,366 $1,299,457,947 $84,827,055 ============== ============== ============ * Includes undistributed/(distributions in excess) of net investment income of.............................. $ 4,863,135 $ 4,730,635 $ 729
The Guardian The Guardian UBS Small Park Avenue Cap Value Small Cap Fund Fund -------------------------- ------------ Period from February 3, 2003+ to Year Ended December 31, December 31, 2003 2002 2003 ------------ ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS From Operations: Net investment income/(loss)........................... $ (1,352,534) $ (1,034,582) $ (172,665) Net realized gain/(loss) on investments and foreign currency related transactions......................... 16,253,102 (7,577,860) 4,660,235 Net change in unrealized appreciation/ (depreciation) of investments and foreign currency related transactions.......................................... 44,032,029 (21,018,611) 8,161,095 ------------ ------------ ------------ Net Increase/(Decrease) in Net Assets Resulting from Operations....................................... 58,932,597 (29,631,053) 12,648,665 ------------ ------------ ------------ Dividends and Distributions to Shareholders from: Net investment income Class A............................................... -- -- -- Class B............................................... -- -- -- Class C............................................... -- -- -- Class K............................................... -- -- -- Net realized gain on investments and foreign currency related transactions Class A............................................... -- -- (651,609) Class B............................................... -- -- (632,339) Class C............................................... -- -- (613,490) Class K............................................... -- -- (614,867) ------------ ------------ ------------ Total Dividends and Distributions to Shareholders......................................... -- -- (2,512,305) ------------ ------------ ------------ From Capital Share Transactions: Net increase/(decrease) in net assets from capital share transactions -- Note 8.......................... 526,138 (4,165,700) 28,596,499 Redemption fees........................................ -- -- -- ------------ ------------ ------------ 526,138 (4,165,700) 28,596,499 ------------ ------------ ------------ Net Increase/(Decrease) in Net Assets.................. 59,458,735 (33,796,753) 38,732,859 NET ASSETS: Beginning of period....................................... 141,564,211 175,360,964 -- ------------ ------------ ------------ End of period*............................................ $201,022,946 $141,564,211 $38,732,859 ============ ============ ============ * Includes undistributed/(distributions in excess) of net investment income of.............................. $ -- $ -- $ --
+ Commencementof operations. See notes to financial statements. 70
The Guardian The Guardian The Guardian Baillie Gifford The Guardian S&P 500 Baillie Gifford Emerging Asset Allocation Fund Index Fund International Fund Markets Fund - -------------------------- --------------------------- -------------------------- ------------------------ Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 2003 2002 2003 2002 - ------------ ------------ ------------ ------------- ------------ ------------ ----------- ----------- $ 1,589,028 $ 2,650,316 $ 1,531,499 $ 2,264,690 $ 112,017 $ 89,833 $ 135,000 $ (188,253) 2,070,307 (12,406,127) (317,473) (95,822,692) (4,580,776) (22,615,441) 2,248,314 2,907,671 33,756,586 (35,892,162) 32,458,190 18,959,704 18,741,326 5,673,231 22,845,347 (6,026,178) - ------------ ------------ ------------ ------------- ------------ ------------ ----------- ----------- 37,415,921 (45,647,973) 33,672,216 (74,598,298) 14,272,567 (16,852,377) 25,228,661 (3,306,760) - ------------ ------------ ------------ ------------- ------------ ------------ ----------- ----------- (1,836,307) (2,611,441) (1,405,045) (2,164,053) (63,805) -- -- -- (225,527) (296,792) (50,103) (28,553) -- -- -- -- (29,885) (39,379) (36,942) (22,264) -- -- -- -- (81,064) (92,412) (55,604) (43,052) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ------------ ------------ ------------ ------------- ------------ ------------ ----------- ----------- (2,172,783) (3,040,024) (1,547,694) (2,257,922) (63,805) -- -- -- - ------------ ------------ ------------ ------------- ------------ ------------ ----------- ----------- (19,929,631) (28,957,348) 5,064,300 (103,976,012) (26,483,377) (21,180,662) 1,751,043 10,313,357 -- -- -- -- 127,145 -- -- -- - ------------ ------------ ------------ ------------- ------------ ------------ ----------- ----------- (19,929,631) (28,957,348) 5,064,300 (103,976,012) (26,356,232) (21,180,662) 1,751,043 10,313,357 - ------------ ------------ ------------ ------------- ------------ ------------ ----------- ----------- 15,313,507 (77,645,345) 37,188,822 (180,832,232) (12,147,470) (38,033,039) 26,979,704 7,006,597 152,252,538 229,897,883 120,498,087 301,330,319 63,333,783 101,366,822 47,313,148 40,306,551 - ------------ ------------ ------------ ------------- ------------ ------------ ----------- ----------- $167,566,045 $152,252,538 $157,686,909 $ 120,498,087 $ 51,186,313 $ 63,333,783 $74,292,852 $47,313,148 ============ ============ ============ ============= ============ ============ =========== =========== $ 1,448,759 $ 2,032,514 $ 10,951 $ 27,146 $ 81,893 $ 63,677 $ (4,769) $ (124,550)
The Guardian Investment Quality Bond Fund - -------------------------- Year Ended December 31, 2003 2002 - ------------ ------------ $ 6,938,090 $ 7,971,762 5,743,920 962,427 (3,814,085) 7,351,497 - ------------ ------------ 8,867,925 16,285,686 - ------------ ------------ (5,833,151) (6,694,956) (526,000) (572,072) (292,345) (354,303) (286,594) (350,431) (4,189,420) (465,319) (528,307) (52,987) (318,457) (29,434) (278,194) (25,176) - ------------ ------------ (12,252,468) (8,544,678) - ------------ ------------ (23,611,845) 26,728,214 -- -- - ------------ ------------ (23,611,845) 26,728,214 - ------------ ------------ (26,996,388) 34,469,222 209,931,930 175,462,708 - ------------ ------------ $182,935,542 $209,931,930 ============ ============ $ -- $ --
71 .. The Park Avenue Portfolio Statements of Changes in Net Assets (Continued)
The Guardian The Guardian Low Duration High Yield The Guardian Bond Fund Bond Fund Tax-Exempt Fund -------------- ------------------------ -------------------------- Period from July 30, 2003+ to December 31, Year Ended December 31, Year Ended December 31, 2003 2003 2002 2003 2002 -------------- ----------- ----------- ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS From Operations: Net investment income........................ $ 179,570 $ 4,839,189 $ 4,541,788 $ 3,146,743 $ 4,478,043 Net realized gain/(loss) on investments and foreign currency related transactions....... (14,521) 2,660,574 (5,394,424) 3,094,286 1,826,662 Net change in unrealized appreciation/ (depreciation) of investments and foreign currency related transactions....... 91,665 4,375,476 1,260,183 (1,854,464) 5,144,825 -------------- ----------- ----------- ------------ ------------ Net Increase/(Decrease) in Net Assets Resulting from Operations................... 256,714 11,875,239 407,547 4,386,565 11,449,530 -------------- ----------- ----------- ------------ ------------ Dividends and Distributions to Shareholders from: Net investment income Class A..................................... (62,296) (3,002,350) (2,763,882) (2,868,086) (4,191,275) Class B..................................... (35,675) (628,715) (606,359) -- -- Class C..................................... (35,327) (581,123) (563,588) (278,657) (286,768) Class K..................................... (46,272) (627,001) (607,959) -- -- Net realized gain on investments and foreign currency related transactions Class A..................................... -- -- -- (2,827,113) (1,983,160) Class C..................................... -- -- -- (372,638) (168,362) -------------- ----------- ----------- ------------ ------------ Total Dividends and Distributions to Shareholders (179,570) (4,839,189) (4,541,788) (6,346,494) (6,629,565) -------------- ----------- ----------- ------------ ------------ From Capital Share Transactions: Net increase/(decrease) in net assets from capital share transactions -- Note 8........ 31,298,313 6,584,315 4,489,847 (31,055,047) 2,313,675 -------------- ----------- ----------- ------------ ------------ Net Increase/(Decrease) in Net Assets........ 31,375,457 13,620,365 355,606 (33,014,976) 7,133,640 NET ASSETS: Beginning of period............................. -- 57,883,506 57,527,900 123,592,794 116,459,154 -------------- ----------- ----------- ------------ ------------ End of period................................... $31,375,457 $71,503,871 $57,883,506 $ 90,577,818 $123,592,794 ============== =========== =========== ============ ============
The Guardian Cash Management Fund --------------------------- Year Ended December 31, 2003 2002 ------------- ------------ INCREASE/(DECREASE) IN NET ASSETS From Operations: Net investment income........................ $ 2,386,552 $ 6,145,223 Net realized gain/(loss) on investments and foreign currency related transactions....... -- -- Net change in unrealized appreciation/ (depreciation) of investments and foreign currency related transactions....... -- -- ------------- ------------ Net Increase/(Decrease) in Net Assets Resulting from Operations................... 2,386,552 6,145,223 ------------- ------------ Dividends and Distributions to Shareholders from: Net investment income Class A..................................... (2,318,884) (6,042,276) Class B..................................... (33,161) (37,641) Class C..................................... (19,118) (19,989) Class K..................................... (15,389) (45,317) Net realized gain on investments and foreign currency related transactions Class A..................................... -- -- Class C..................................... -- -- ------------- ------------ Total Dividends and Distributions to Shareholders (2,386,552) (6,145,223) ------------- ------------ From Capital Share Transactions: Net increase/(decrease) in net assets from capital share transactions -- Note 8........ (133,887,227) 56,129,038 ------------- ------------ Net Increase/(Decrease) in Net Assets........ (133,887,227) 56,129,038 NET ASSETS: Beginning of period............................. 694,474,771 638,345,733 ------------- ------------ End of period................................... $ 560,587,544 $694,474,771 ============= ============
+ Commencementof operations. See notes to financial statements. 72 .. The Guardian Investment Quality Bond Fund Statement of Cash Flows Year Ended December 31, 2003 - ------------------------------------------------ Cash flows from operating activities: Net increase in net assets resulting from operations...................................................... $ 8,867,925 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: Purchases of long-term securities.................................................................... (547,468,428) Proceeds from sales of long-term securities.......................................................... 529,854,769 Proceeds from mortgage securities' paydown........................................................... 26,637,308 Gain on proceeds from mortgage securities' paydown................................................... 6,665,063 Premium amortization/discount accretion, net......................................................... 491,910 Purchases of short-term investments, net............................................................. 10,474,539 Decrease in receivables.............................................................................. 225,942 Increase in other assets............................................................................. (2,769) Increase in accrued expenses......................................................................... 25,667 Decrease in distributions payable.................................................................... (6,039) Decrease in due to GIS............................................................................... (7,761) Net realized gain on investments..................................................................... (5,743,920) Net change in unrealized appreciation of investments................................................. 3,814,085 ------------- Net cash provided by operating activities.......................................................... 33,828,291 ------------- Cash flows from financing activities: Proceeds from fund shares sold........................................................................ 38,780,492 Payments for fund shares redeemed..................................................................... (71,633,087) Cash distributions paid............................................................................... (1,862,398) Proceeds from the financing of dollar roll transactions, net.......................................... 941,318 ------------- Net cash used in financing activities.............................................................. (33,773,675) ------------- Increase in Cash.......................................................................................... 54,616 Cash Beginning of year......................................................................................... 41,675 ------------- End of year............................................................................................... $ 96,291 ============= Supplemental disclosure of cash flow information Non-cash financing activities not included above: Reinvestment of dividends and distributions........................................................... $ 10,390,070 =============
See notes to financial statements. 73 Notes to Financial Statements December 31, 2003 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 Low Duration 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 thirteen 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 Low Duration Bond Fund (GLDBF); The Guardian High Yield Bond Fund (GHYBF); The Guardian Tax-Exempt Fund (GTEF); and The Guardian Cash Management Fund (GCMF). The series are collectively referred to herein as the "Funds". On 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. On July 30, 2003, GLDBF commenced operations. GLDBF sold 750,000 shares for each of Class A, Class B, Class C and Class K shares to Guardian Life for $7,500,000 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. A redemption fee of 2% is imposed on purchases of Class A shares of GBGIF, GBGEMF and GHYBF if redeemed within 60 days of purchase. 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 December 31, 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. 74 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 income, gains (losses) and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting policies of the Funds are as follows: Investments Securities listed on domestic or foreign securities exchanges are valued at the last sale price on 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. 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 judgment 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. Futures contracts are valued at the settlement prices established by the exchanges on which they are traded. Other securities, including securities for which market quotations are not readily available (such as certain mortgage-backed securities, restricted securities and foreign securities subject to "significant event") are valued at fair value as determined in good faith by or under the direction of the Funds' Board of Trustees. A "significant event" is an event that will affect the value of a portfolio security that occurs after the close of trading in the security's primary trading market or exchange but before the Fund's NAV is calculated. 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 year ended December 31, 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: Gains and losses attributable to foreign currency exchange rates on sales of securities are recorded for financial statement purposes as net realized gains and losses on investments. Realized foreign exchange gains and losses, which result from changes in foreign exchange rates between the date on which 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. 75 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 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, GLDBF, 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, GLDBF, 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. The tax character of distributions paid to shareholders during the years ended December 31, 2003 and 2002 were as follows:
Tax Ordinary Long-Term Exempt Income Capital Gain Total ---------- ---------- ------------ ----------- ---------------------------------------------- 2003 ---------------------------------------------- GPAF... $ -- $7,388,058 $ -- $ 7,388,058 GULCVF. -- 1,867,736 -- 1,867,736 GUSCVF. -- 2,512,305 -- 2,512,305 GAAF... -- 2,172,784 -- 2,172,784 GSP500F -- 1,547,694 -- 1,547,694 GBGIF.. -- 63,805 -- 63,805 GIQBF.. -- 9,989,588 2,262,880 12,252,468 GLDBF.. -- 179,570 -- 179,570 GHYBF.. -- 4,839,189 -- 4,839,189 GTEF... 3,146,743 1,003,278 2,196,473 6,346,494 GCMF... -- 2,386,552 -- 2,386,552 ---------------------------------------------- 2002 ---------------------------------------------- GPAF... $ -- $4,310,369 $ -- $ 4,310,369 GAAF... -- 3,040,024 -- 3,040,024 GSP500F -- 2,257,922 -- 2,257,922 GIQBF.. -- 7,981,745 562,933 8,544,678 GHYBF.. -- 4,541,788 -- 4,541,788 GTEF... 4,478,043 880,639 1,270,883 6,629,565 GCMF... -- 6,145,223 -- 6,145,223
For the year ended December 31, 2003, the components of distributable earnings on a tax basis were as follows:
Long-Term Gain/(Post- Undistributed October Loss)/ Unrealized Ordinary (Capital Loss Appreciation Income Carryforward) (Depreciation) ------------- -------------- -------------- GPAF... $4,863,134 $(719,693,464) $148,275,633 GULCVF. 3,032,170 -- 18,524,841 GPASCF. -- 2,580,584 43,069,817 GUSCVF. 1,995,430 -- 8,140,930 GAAF... 1,448,758 (53,383,946) (16,498,888) GSP500F 10,952 (96,581,166) (4,071,838) GBGIF.. 89,358 (40,554,148) 9,850,223 GBGEMF. 128,596 (3,310,720) 19,636,084 GIQBF.. 99,020 504,707 3,573,912 GLDBF.. -- (11,668) 89,586 GHYBF.. -- (19,020,569) 4,637,566 GTEF... 27,300 8,826 4,763,353 GCMF... 8,211 (8,090) --
76 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. For the year ended December 31, 2003, for federal income tax purposes, the following Funds have post-October capital losses and capital losses carryforward of:
Post-October Capital Loss Expiration Capital Loss Carryforward Date ------------ ------------ ---------- GPAF... $85,513,676 $367,844,523 2009 GPAF... -- 255,258,468 2010 GPAF... -- 11,076,797 2011 GAAF... -- 38,930,441 2009 GAAF... -- 14,453,505 2010 GSP500F -- 509,976 2009 GSP500F -- 95,906,657 2010 GSP500F -- 164,533 2011 GBGIF.. 212,471 9,713,036 2009 GBGIF.. -- 22,118,121 2010 GBGIF.. -- 8,510,520 2011 GBGEMF. 10,164 3,300,556 2009 GLDBF.. 9,011 2,657 2011 GHYBF.. -- 2,997,484 2007 GHYBF.. -- 3,128,645 2008 GHYBF.. -- 7,587,223 2009 GHYBF.. -- 5,307,217 2010 GCMF... -- 195 2007 GCMF... 2,822 5,073 2011
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 $32,326 under this arrangement. GTEF could have employed the uninvested assets to produce income if GTEF has 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. During the year ended December 31, 2003, certain Funds reclassified amounts to paid-in capital from undistributed/(distributions in excess) of net investment income and accumulated net realized gain/(loss) on investment and foreign currency related transactions. Increases/(decreases) to the various capital accounts were as follows:
Accumulated net realized gain/(loss) on Undistributed/ investments (distributions and foreign in excess) of currency Paid-in net investment related capital income transactions ----------- -------------- -------------- GPASCF $(1,352,534) $1,352,524 $ -- GUSCVF -- 172,665 (172,665) GBGIF. -- (29,996) 29,996 GBGEMF (70,698) (15,219) 85,917 GLDBF. (774) -- 774
Note 2. Investment Advisory Agreements and Payments to or from Related Parties Guardian Investor Services LLC (GIS), 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, GHYBF and GLDBF, which pay GIS an annual rate of .75%, .25%, 60% and .45%, 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 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 per- 77 formance 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 year ended December 31, 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% GLDBF .80% 1.55% 1.55% 1.20% 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 year ended December 31, 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 .25% .25% .25% .21% 12b-1 Fees -- .36% .42% -- ----- ----- ----- ---- .25% .61% .67% .21% ===== ===== ===== ==== - -------------------------------------------------- GIQBF - -------------------------------------------------- Class A Class B Class C Class K ------- ------- ------- ------- Ordinary Operating Expenses .11% .11% .11% .05% 12b-1 Fees -- .16% .24% -- ----- ----- ----- ---- .11% .27% .35% .05% ===== ===== ===== ==== - -------------------------------------------------- GLDBF* - -------------------------------------------------- Class A Class B Class C Class K ------- ------- ------- ------- Ordinary Operating Expenses 1.20% 1.20% 1.20% .97% 12b-1 Fees -- -- .01% -- ----- ----- ----- ---- 1.20% 1.20% 1.21% .97% ===== ===== ===== ==== - -------------------------------------------------- GHYBF - -------------------------------------------------- Class A Class B Class C Class K ------- ------- ------- ------- Ordinary Operating Expenses .42% .42% .42% .33% 12b-1 Fees -- .30% .29% -- ----- ----- ----- ---- .42% .72% .71% .33% ===== ===== ===== ====
- --------------------------------------------- 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 .05% .16% .05% ==== ==== ====
* Annualized. For the year ended December 31, 2003 GIS voluntarily assumed $398,926, $291,989, $147,985, $322,570, $99,461 and $307,067 of the ordinary operating expenses of GSP500F, GIQBF, GLDBF, 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 fee 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. Additional compensation is paid to the Chairmen of the Nominating and Governance Committee and the Audit Committee, respectively. GIS pays compensation to certain trustees who are interested persons. Certain officers and trustees of the Funds are affiliated with GIS. GAAF received $2,794,174 in dividends from other Guardian mutual funds. Park Avenue Securities LLC (PAS), a wholly-owned subsidiary of GIAC and an affiliate of GIS distributes the 78 Portfolio's shares as a retail broker-dealer. For the year ended December 31, 2003, PAS received $537,497 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 year ended December 31, 2003, GPAF Class A shares paid an annualized rate of .20% 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 year ended December 31, 2003, aggregate front-end sales charges for the sale of Class A shares paid to GIS were as follows:
Fund Commissions Fund Commissions ---- ----------- ------ ----------- GPAF $31,630 GBGEMF $ 304 GPASCF 2,739 GIQBF 5,595 GAAF 854 GLDBF 210 GSP500F 3,175 GHYBF 3,681 GBGIF 773 GTEF 2,506
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 year ended December 31, 2003, GIS received CDSL charges on Class B, Class C and Class K as follows:
Fund Class B Class C Class K - ---- -------- ------- ------- GPAF... $253,634 $ 874 -- GPASCF. 24,236 118 -- GAAF... 40,752 1,009 $ 4 GSP500F 7,219 586 6 GBGIF.. 4,307 70 4 GBGEMF. 17,299 94 -- GIQBF.. 11,547 2,733 6 GHYBF.. 5,013 777 -- GTEF... -- 279 -- GCMF... 74,587 2,509 2,378
Note 4. Investment Transactions Purchases and proceeds from sales of securities (excluding short-term securities) for the year ended December 31, 2003 were as follows:
- ------------------------------------ GPAF GULCVF - ------------------------------------ Purchases $ 933,822,552 $95,030,207 Proceeds 1,137,099,626 35,534,648 - ------------------------------------ GPASCF GUSCVF - ------------------------------------ Purchases $ 167,132,224 $59,503,121 Proceeds 164,435,939 34,519,344 - ------------------------------------ GAAF GSP500F - ------------------------------------ Purchases $ 275,000 $11,337,501 Proceeds 13,821,648 4,719,890 - ------------------------------------ GBGIF GBGEMF - ------------------------------------ Purchases $ 24,720,717 $40,342,394 Proceeds 52,356,654 39,729,132 - ------------------------------------ GIQBF GLDBF - ------------------------------------ Purchases $ 546,523,894 $60,377,313 Proceeds 529,854,769 29,068,541 - ------------------------------------ GHYBF GTEF - ------------------------------------ Purchases $ 103,266,095 $60,156,556 Proceeds 96,250,197 90,891,008 - ------------------------------------
The gross unrealized appreciation and depreciation of investments, on a tax basis, excluding foreign currency and futures at December 31, 2003, were as follows:
GPAF GULCVF ---- ------ Appreciation $ 178,093,082 $ 18,580,035 (Depreciation) (29,817,449) (55,194) -------------- ------------ Net Unrealized Appreciation $ 148,275,633 $ 18,524,841 ============== ============ Cost of investments for tax purposes $1,153,607,731 $ 66,551,632 ============== ============ GPASCF GUSCVF ------ ------ Appreciation $ 44,966,950 $ 8,280,265 (Depreciation) (1,897,133) (139,335) -------------- ------------ Net Unrealized Appreciation $ 43,069,817 $ 8,140,930 ============== ============ Cost of investments for tax purposes $ 159,386,342 $ 30,654,180 ============== ============ GAAF GSP500F ---- ------- Appreciation $ 2,803,995 $ 22,323,561 (Depreciation) (19,302,883) (26,395,399) -------------- ------------ Net Unrealized Depreciation $ (16,498,888) $ (4,071,838) ============== ============ Cost of investments for tax purposes $ 184,307,237 $161,425,398 ============== ============
79
GBGIF GBGEMF ----- ------ Appreciation $ 11,622,828 $21,127,098 (Depreciation) (1,778,430) (1,491,691) ------------ ----------- Net Unrealized Appreciation $ 9,844,398 $19,635,407 ============ =========== Cost of investments for tax purposes $ 41,385,728 $55,033,902 ============ =========== GIQBF GLDBF ----- ----- Appreciation $ 4,196,981 $ 117,349 (Depreciation) (623,069) (27,763) ------------ ----------- Net Unrealized Appreciation $ 3,573,912 $ 89,586 ============ =========== Cost of investments for tax purposes $195,277,580 $30,915,847 ============ =========== GHYBF GTEF ----- ---- Appreciation $ 5,108,233 $ 4,776,355 (Depreciation) (470,667) (13,002) ------------ ----------- Net Unrealized Appreciation $ 4,637,566 $ 4,763,353 ============ =========== Cost of investments for tax purposes $ 65,426,791 $84,092,186 ============ ===========
Note 5. Repurchase Agreements The collateral received 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, GLDBF 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, GLDBF 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, GLDBF and GHYBF may be unable to deliver the securities when the Funds seek to repurchase them. Note 7. Dollar Roll Transactions GAAF, GIQBF, GLDBF 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, GLDBF 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 December 31, 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, GLDBF and GCMF offered Class A, Class B, Class C and Class K shares. Through December 31, 2003, no Institutional Class shares of the Funds were sold. 80 Transactions in shares of beneficial interest were as follows: [_] The Guardian Park Avenue Fund Year Ended December 31, 2003 2002 - ----------------------------------------------------------------------------------------------- Shares - ----------------------------------------------------------------------------------------------- Class A Shares sold 2,688,100 3,071,277 Shares issued in reinvestment of dividends 259,185 144,059 Shares repurchased (10,027,084) (14,071,395) - ---------------------------------------------------------------------------------------------------------------------------------- Net decrease (7,079,799) (10,856,059) - ---------------------------------------------------------------------------------------------------------------------------------- Class B Shares sold 236,579 316,116 Shares repurchased (1,463,661) (2,232,897) - ---------------------------------------------------------------------------------------------------------------------------------- Net decrease (1,227,082) (1,916,781) - ---------------------------------------------------------------------------------------------------------------------------------- Class C Shares sold 15,063 51,819 Shares repurchased (29,394) (51,896) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) (14,331) (77) - ---------------------------------------------------------------------------------------------------------------------------------- Class K Shares sold 7,291 4,015 Shares issued in reinvestment of dividends 756 -- Shares repurchased (310) (20) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase 7,737 3,995 - ---------------------------------------------------------------------------------------------------------------------------------- [_] The Guardian UBS Large Cap Value Fund Period from February 3, 2003+ to December 31, 2003 - ----------------------------------------------------------------------------------------------- Shares - ----------------------------------------------------------------------------------------------- Class A Shares sold 1,959,608 Shares issued in reinvestment of dividends and distributions 42,951 Shares repurchased (310,031) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase 1,692,528 - ---------------------------------------------------------------------------------------------------------------------------------- Class B Shares sold 1,946,976 Shares issued in reinvestment of dividends and distributions 34,101 Shares repurchased (310,912) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase 1,670,165 - ---------------------------------------------------------------------------------------------------------------------------------- Class C Shares sold 1,902,265 Shares issued in reinvestment of dividends and distributions 33,316 Shares repurchased (310,518) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase 1,625,063 - ---------------------------------------------------------------------------------------------------------------------------------- Class K Shares sold 1,905,775 Shares issued in reinvestment of dividends and distributions 36,999 Shares repurchased (309,743) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase 1,633,031 - ----------------------------------------------------------------------------------------------------------------------------------
[_] The Guardian Park Avenue Fund Year Ended December 31, 2003 2002 - ------------------------------------------------------------------------------------------------ Amount - ------------------------------------------------------------------------------------------------ Class A Shares sold $ 71,466,076 $ 87,019,350 Shares issued in reinvestment of dividends 7,135,022 4,193,466 Shares repurchased (268,695,546) (391,653,154) - ---------------------------------------------------------------------------------------------------------------------------------- Net decrease $(190,094,448) $(300,440,338) - ---------------------------------------------------------------------------------------------------------------------------------- Class B Shares sold $ 6,081,629 $ 8,756,755 Shares repurchased (37,424,241) (59,546,800) - ---------------------------------------------------------------------------------------------------------------------------------- Net decrease $ (31,342,612) $ (50,790,045) - ---------------------------------------------------------------------------------------------------------------------------------- Class C Shares sold $ 370,651 $ 1,532,408 Shares repurchased (741,440) (1,335,406) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) $ (370,789) $ 197,002 - ---------------------------------------------------------------------------------------------------------------------------------- Class K Shares sold $ 198,820 $ 103,216 Shares issued in reinvestment of dividends 20,780 -- Shares repurchased (8,782) (495) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase $ 210,818 $ 102,721 - ---------------------------------------------------------------------------------------------------------------------------------- [_] The Guardian UBS Large Cap Value Fund Period from February 3, 2003+ to December 31, 2003 - ------------------------------------------------------------------------------------------------ Amount - ------------------------------------------------------------------------------------------------ Class A Shares sold $ 19,415,494 Shares issued in reinvestment of dividends and distributions 542,073 Shares repurchased (3,709,638) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase $ 16,247,929 - ---------------------------------------------------------------------------------------------------------------------------------- Class B Shares sold $ 19,255,790 Shares issued in reinvestment of dividends and distributions 432,709 Shares repurchased (3,705,050) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase $ 15,983,449 - ---------------------------------------------------------------------------------------------------------------------------------- Class C Shares sold $ 18,753,050 Shares issued in reinvestment of dividends and distributions 422,703 Shares repurchased (3,700,000) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase $ 15,475,753 - ---------------------------------------------------------------------------------------------------------------------------------- Class K Shares sold $ 18,794,718 Shares issued in reinvestment of dividends and distributions 468,239 Shares repurchased (3,700,044) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase $ 15,562,913 - ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations. 81 [_] The Guardian Park Avenue Small Cap Fund Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------------------------- Shares Amount - ---------------------------------------------------------------------------------------------------------------- Class A Shares sold 1,813,369 2,782,741 $ 28,850,596 $ 42,101,323 Shares repurchased (1,819,099) (3,255,243) (27,392,677) (46,439,000) - ---------------------------------------------------------------------------------------------------------------- Net increase/(decrease) (5,730) (472,502) $ 1,457,919 $ (4,337,677) - ---------------------------------------------------------------------------------------------------------------- Class B Shares sold 125,391 217,932 $ 1,962,819 $ 3,217,947 Shares repurchased (203,610) (240,199) (2,928,195) (3,301,687) - ---------------------------------------------------------------------------------------------------------------- Net decrease (78,219) (22,267) $ (965,376) $ (83,740) - ---------------------------------------------------------------------------------------------------------------- Class C Shares sold 9,592 21,118 $ 145,248 $ 298,183 Shares repurchased (18,489) (6,407) (322,464) (87,676) - ---------------------------------------------------------------------------------------------------------------- Net increase/(decrease) (8,897) 14,711 $ (177,216) $ 210,507 - ---------------------------------------------------------------------------------------------------------------- Class K Shares sold 13,855 3,317 $ 218,871 $ 45,210 Shares repurchased (452) -- (8,060) -- - ---------------------------------------------------------------------------------------------------------------- Net increase 13,403 3,317 $ 210,811 $ 45,210 - ---------------------------------------------------------------------------------------------------------------- [_] The Guardian UBS Small Cap Value Fund Period from Period from February 3, 2003+ February 3, 2003+ to December 31,2003 to December 31,2003 - ---------------------------------------------------------------------------------------------------------------- Shares Amount - ---------------------------------------------------------------------------------------------------------------- Class A Shares sold 932,267 $ 9,277,024 Shares issued in reinvestment of distributions 50,375 648,829 Shares repurchased (189,695) (2,437,582) - ---------------------------------------------------------------------------------------------------------------- Net increase 792,947 $ 7,488,271 - ---------------------------------------------------------------------------------------------------------------- Class B Shares sold 921,249 $ 9,123,598 Shares issued in reinvestment of distributions 49,148 628,105 Shares repurchased (198,479) (2,529,505) - ---------------------------------------------------------------------------------------------------------------- Net increase 771,918 $ 7,222,198 - ---------------------------------------------------------------------------------------------------------------- Class C Shares sold 891,366 $ 8,777,985 Shares issued in reinvestment of distributions 48,004 613,488 Shares repurchased (192,392) (2,454,478) - ---------------------------------------------------------------------------------------------------------------- Net increase 746,978 $ 6,936,995 - ---------------------------------------------------------------------------------------------------------------- Class K Shares sold 890,722 $ 8,771,733 Shares issued in reinvestment of distributions 47,849 614,865 Shares repurchased (190,137) (2,437,563) - ---------------------------------------------------------------------------------------------------------------- Net increase 748,434 $ 6,949,035 - ----------------------------------------------------------------------------------------------------------------
+ Commencement of operations. 82 [_] The Guardian Asset Allocation Fund Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------ Shares Amount - ------------------------------------------------------------------------------------------------ Class A Shares sold 1,015,158 1,524,801 $ 9,497,451 $ 14,387,848 Shares issued in reinvestment of dividends 186,765 257,058 1,766,807 2,516,751 Shares repurchased (3,099,656) (4,314,488) (28,129,262) (39,879,710) - ------------------------------------------------------------------------------------------------ Net decrease (1,897,733) (2,532,629) $(16,865,004) $ (22,975,111) - ------------------------------------------------------------------------------------------------ Class B Shares sold 249,644 239,318 $ 2,356,152 $ 2,266,828 Shares issued in reinvestment of dividends 22,830 29,270 215,963 286,492 Shares repurchased (619,271) (972,783) (5,507,970) (8,982,368) - ------------------------------------------------------------------------------------------------ Net decrease (346,797) (704,195) $ (2,935,855) $ (6,429,048) - ------------------------------------------------------------------------------------------------ Class C Shares sold 10,197 56,416 $ 95,189 $ 562,704 Shares issued in reinvestment of dividends 3,114 3,956 29,460 38,735 Shares repurchased (40,895) (39,534) (367,270) (359,141) - ------------------------------------------------------------------------------------------------ Net increase/(decrease) (27,584) 20,838 $ (242,621) $ 242,298 - ------------------------------------------------------------------------------------------------ Class K Shares sold 20,906 13,246 $ 191,338 $ 112,101 Shares issued in reinvestment of dividends 8,578 9,429 81,064 92,412 Shares repurchased (15,129) -- (158,553) -- - ------------------------------------------------------------------------------------------------ Net increase 14,355 22,675 $ 113,849 $ 204,513 - ------------------------------------------------------------------------------------------------ [_] The Guardian S&P 500 Index Fund Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------ Shares Amount - ------------------------------------------------------------------------------------------------ Class A Shares sold 1,236,886 1,830,415 $ 8,356,406 $ 11,566,863 Shares issued in reinvestment of dividends 16,294 86,617 119,186 605,220 Shares repurchased (898,109) (20,356,324) (5,898,251) (118,000,511) - ------------------------------------------------------------------------------------------------ Net increase/(decrease) 355,071 (18,439,292) $ 2,577,341 $(105,828,428) - ------------------------------------------------------------------------------------------------ Class B Shares sold 335,881 342,017 $ 2,276,274 $ 2,343,329 Shares issued in reinvestment of dividends 6,681 4,430 48,558 27,713 Shares repurchased (162,230) (173,276) (1,045,467) (1,146,882) - ------------------------------------------------------------------------------------------------ Net increase 180,332 173,171 $ 1,279,365 $ 1,224,160 - ------------------------------------------------------------------------------------------------ Class C Shares sold 216,791 187,627 $ 1,471,332 $ 1,400,528 Shares issued in reinvestment of dividends 5,016 3,553 36,385 22,207 Shares repurchased (90,706) (130,517) (626,275) (874,323) - ------------------------------------------------------------------------------------------------ Net increase 131,101 60,663 $ 881,442 $ 548,412 - ------------------------------------------------------------------------------------------------ Class K Shares sold 42,861 6,165 $ 288,767 $ 36,792 Shares issued in reinvestment of dividends 7,640 6,734 55,604 43,052 Shares repurchased (2,533) -- (18,219) -- - ------------------------------------------------------------------------------------------------ Net increase 47,968 12,899 $ 326,152 $ 79,844 - ------------------------------------------------------------------------------------------------
83 [_] The Guardian Baillie Gifford International Fund Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 - ----------------------------------------------------------------------------------------------------------- Shares Amount - ----------------------------------------------------------------------------------------------------------- Class A Shares sold 10,537,973 26,379,926 $ 97,112,928 $ 268,688,195 Shares issued in reinvestment of dividends 5,562 -- 55,072 -- Shares repurchased (13,119,742) (28,286,267) (123,103,708) (288,753,391) - ----------------------------------------------------------------------------------------------------------- Net decrease (2,576,207) (1,906,341) $ (25,935,708) $ (20,065,196) - ----------------------------------------------------------------------------------------------------------- Class B Shares sold 37,373 552,901 $ 344,699 $ 4,895,940 Shares repurchased (92,815) (664,735) (815,798) (6,002,347) - ----------------------------------------------------------------------------------------------------------- Net decrease (55,442) (111,834) $ (471,099) $ (1,106,407) - ----------------------------------------------------------------------------------------------------------- Class C Shares sold 1,537 94,458 $ 27,531 $ 753,032 Shares repurchased (3,434) (94,502) (28,063) (763,931) - ----------------------------------------------------------------------------------------------------------- Net decrease (1,897) (44) $ (532) $ (10,899) - ----------------------------------------------------------------------------------------------------------- Class K Shares sold 3,672 209 $ 51,596 $ 1,840 Shares repurchased (53) -- (489) -- - ----------------------------------------------------------------------------------------------------------- Net increase 3,619 209 $ 51,107 $ 1,840 - ----------------------------------------------------------------------------------------------------------- [_] The Guardian Baillie Gifford Emerging Markets Fund Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 - ----------------------------------------------------------------------------------------------------------- Shares Amount - ----------------------------------------------------------------------------------------------------------- Class A Shares sold 2,873,147 2,084,844 $ 26,734,981 $ 19,196,380 Shares repurchased (2,744,885) (1,037,525) (25,296,414) (9,382,580) - ----------------------------------------------------------------------------------------------------------- Net increase 128,262 1,047,319 $ 1,438,567 $ 9,813,800 - ----------------------------------------------------------------------------------------------------------- Class B Shares sold 150,218 973,656 $ 1,342,915 $ 7,741,707 Shares repurchased (119,951) (937,516) (1,037,985) (7,477,413) - ----------------------------------------------------------------------------------------------------------- Net increase 30,267 36,140 $ 304,930 $ 264,294 - ----------------------------------------------------------------------------------------------------------- Class C Shares sold 44,398 28,313 $ 373,501 $ 239,626 Shares repurchased (46,386) (5,667) (397,512) (44,448) - ----------------------------------------------------------------------------------------------------------- Net increase/(decrease) (1,988) 22,646 $ (24,011) $ 195,178 - ----------------------------------------------------------------------------------------------------------- Class K Shares sold 9,274 4,995 $ 86,943 $ 40,085 Shares repurchased (4,707) -- (55,386) -- - ----------------------------------------------------------------------------------------------------------- Net increase 4,567 4,995 $ 31,557 $ 40,085 - -----------------------------------------------------------------------------------------------------------
84 [_] The Guardian Investment Quality Bond Fund Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------------------------------- Shares Amount - ---------------------------------------------------------------------------------------------------------------------- Class A Shares sold 3,296,812 11,341,936 $ 34,079,857 $113,553,764 Shares issued in reinvestment of dividends and distributions 802,794 517,494 8,219,350 5,207,398 Shares repurchased (6,470,579) (9,956,834) (66,786,391) (99,280,342) - ---------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) (2,370,973) 1,902,596 $(24,487,184) $ 19,480,820 - ---------------------------------------------------------------------------------------------------------------------- Class B Shares sold 350,698 1,016,356 $ 3,646,670 $ 10,196,034 Shares issued in reinvestment of dividends and distributions 98,401 59,127 1,005,080 594,614 Shares repurchased (506,012) (519,717) (5,234,314) (5,196,692) - ---------------------------------------------------------------------------------------------------------------------- Net increase/(decrease) (56,913) 555,766 $ (582,564) $ 5,593,956 - ---------------------------------------------------------------------------------------------------------------------- Class C Shares sold 51,395 114,498 $ 533,062 $ 1,152,765 Shares issued in reinvestment of dividends and distributions 58,874 37,890 600,919 380,474 Shares repurchased (45,445) (28,439) (467,508) (286,467) - ---------------------------------------------------------------------------------------------------------------------- Net increase 64,824 123,949 $ 666,473 $ 1,246,772 - ---------------------------------------------------------------------------------------------------------------------- Class K Shares sold 26,977 3,060 $ 279,706 $ 31,059 Shares issued in reinvestment of dividends and distributions 55,230 37,363 564,721 375,607 Shares repurchased (5,155) -- (52,997) -- - ---------------------------------------------------------------------------------------------------------------------- Net increase 77,052 40,423 $ 791,430 $ 406,666 - ---------------------------------------------------------------------------------------------------------------------- [_] The Guardian Low Duration Bond Fund Period from Period from July 30, 2003+ July 30, 2003+ to December 31, to December 31, 2003 2003 - ---------------------------------------------------------------------------------------------------------------------- Shares Amount - ---------------------------------------------------------------------------------------------------------------------- Class A Shares sold 844,512 $ 8,444,850 Shares issued in reinvestment of dividends 6,175 61,772 Shares repurchased (7,066) (70,762) - ---------------------------------------------------------------------------------------------------------------------- Net increase 843,621 $ 8,435,860 - ---------------------------------------------------------------------------------------------------------------------- Class B Shares sold 768,810 $ 7,688,450 Shares issued in reinvestment of dividends 3,565 35,669 - ---------------------------------------------------------------------------------------------------------------------- Net increase 772,375 $ 7,724,119 - ---------------------------------------------------------------------------------------------------------------------- Class C Shares sold 755,679 $ 7,556,708 Shares issued in reinvestment of dividends 3,529 35,314 Shares repurchased (1) (10) - ---------------------------------------------------------------------------------------------------------------------- Net increase 759,207 $ 7,592,012 - ---------------------------------------------------------------------------------------------------------------------- Class K Shares sold 750,005 $ 7,500,050 Shares issued in reinvestment of dividends 4,625 46,272 - ---------------------------------------------------------------------------------------------------------------------- Net increase 754,630 $ 7,546,322 - ----------------------------------------------------------------------------------------------------------------------
+ Commencement of operations. 85 [_] The Guardian High Yield Bond Fund Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------------------------- Shares Amount - ---------------------------------------------------------------------------------------------------------------- Class A Shares sold 1,700,337 1,022,945 $ 11,968,468 $ 7,149,700 Shares issued in reinvestment of dividends 413,138 398,176 2,932,687 2,727,625 Shares repurchased (1,462,685) (1,059,195) (10,413,890) (7,319,978) - ---------------------------------------------------------------------------------------------------------------- Net increase 650,790 361,926 $ 4,487,265 $ 2,557,347 - ---------------------------------------------------------------------------------------------------------------- Class B Shares sold 112,748 141,649 $ 794,370 $ 961,254 Shares issued in reinvestment of dividends 83,788 85,305 593,996 584,043 Shares repurchased (97,832) (119,806) (688,181) (814,725) - ---------------------------------------------------------------------------------------------------------------- Net increase 98,704 107,148 $ 700,185 $ 730,572 - ---------------------------------------------------------------------------------------------------------------- Class C Shares sold 63,604 4,786 $ 454,494 $ 32,953 Shares issued in reinvestment of dividends 81,823 82,282 580,074 563,430 Shares repurchased (47,186) (377) (339,768) (2,525) - ---------------------------------------------------------------------------------------------------------------- Net increase 98,241 86,691 $ 694,800 $ 593,858 - ---------------------------------------------------------------------------------------------------------------- Class K Shares sold 10,354 17 $ 75,093 $ 113 Shares issued in reinvestment of dividends 88,340 88,726 627,000 607,957 Shares repurchased (4) -- (28) -- - ---------------------------------------------------------------------------------------------------------------- Net increase 98,690 88,743 $ 702,065 $ 608,070 - ---------------------------------------------------------------------------------------------------------------- [_] The Guardian Tax-Exempt Fund Year Ended December 31, Year Ended December 31, 2003 2002 2003 2002 - ---------------------------------------------------------------------------------------------------------------- Shares Amount - ---------------------------------------------------------------------------------------------------------------- Class A Shares sold 746,166 2,805,928 $ 7,845,141 $ 29,029,829 Shares issued in reinvestment of dividends and distributions 531,383 580,929 5,543,478 6,051,465 Shares repurchased (4,350,043) (3,227,880) (45,456,417) (33,353,923) - ---------------------------------------------------------------------------------------------------------------- Net increase/(decrease) (3,072,494) 158,977 $(32,067,798) $ 1,727,371 - ---------------------------------------------------------------------------------------------------------------- Class C Shares sold 49,048 39,077 $ 518,954 $ 417,830 Shares issued in reinvestment of dividends and distributions 62,083 43,565 646,799 453,798 Shares repurchased (14,571) (26,469) (153,002) (285,324) - ---------------------------------------------------------------------------------------------------------------- Net increase 96,560 56,173 $ 1,012,751 $ 586,304 - ----------------------------------------------------------------------------------------------------------------
86 [_] The Guardian Cash Management Fund Year Ended December 31, 2003 2002 - ---------------------------------------------------------------------- Shares @ $1 per share - ---------------------------------------------------------------------- Class A Shares sold 234,972,577 537,843,107 Shares issued in reinvestment of dividends 2,306,769 5,976,666 Shares repurchased (366,117,487) (491,705,217) - ---------------------------------------------------------------------- Net increase/(decrease) (128,838,141) 52,114,556 - ---------------------------------------------------------------------- Class B Shares sold 5,150,561 25,578,371 Shares issued in reinvestment of dividends 30,959 34,808 Shares repurchased (11,168,541) (22,812,305) - ---------------------------------------------------------------------- Net increase/(decrease) (5,987,021) 2,800,874 - ---------------------------------------------------------------------- Class C Shares sold 436,733 942,599 Shares issued in reinvestment of dividends 19,006 19,777 Shares repurchased (700,634) (123,627) - ---------------------------------------------------------------------- Net increase/(decrease) (244,895) 838,749 - ---------------------------------------------------------------------- Class K Shares sold 3,114,743 393,942 Shares issued in reinvestment of dividends 15,352 45,312 Shares repurchased (1,947,265) (64,395) - ---------------------------------------------------------------------- Net increase 1,182,830 374,859 - ----------------------------------------------------------------------
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 year ended December 31, 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. Note 10. Investments in Affiliates/1/ A summary of GAAF transactions in affiliated securities during the year ended December 31, 2003 is set forth below:
Net Balance of Gross Balances of Dividends Realized Shares Held Purchases Gross Shares Held Value Included Gains from Net Realized December 31, and Sales and December 31, December 31, in Dividend Underlying Gain/(Loss) Name of Issuer 2002 Additions Reductions 2003 2003 Income Funds on Sales - ------------------------------------------------------------------------------------------------------------------------------ Non-Controlled Affiliates The Guardian Investment Quality Bond Fund, Class A 2,479,290 -- 289,211 2,190,079 $ 22,097,901 $1,516,814 $652,143 $ 139,311 - ------------------------------------------------------------------------------------------------------------------------------ Majority-Owned Subsidiary The Guardian S&P 500 Index Fund, Class A 15,466,689 40,801 230,179 15,277,311 116,565,880 1,277,360 -- (652,565)
/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. 87 Note 11. Management Information (Unaudited) The trustees and officers of the Portfolio are named below. Information about their principal occupations and certain other affiliations during the past five years is also provided. The business address of each trustee and officer is 7 Hanover Square, New York, New York 10004, unless otherwise noted. The "Guardian Fund Complex" referred to in this biographical information is composed of (1) the Portfolio/2/, (2) The Guardian Variable Contract Funds, Inc./3/ (a series fund that issues its shares in seven series), (3) The Guardian Bond Fund, Inc., (4) The Guardian Cash Fund, Inc. and (5) GIAC Funds, Inc. (a series fund that issues its shares in three series).
Number of Funds in the Guardian Fund Complex Position Term of Office Overseen With and Length of Principal Occupations by Other Name, Address and Age Portfolio Time Served+ During Past 5 Years Trustee Directorships - -------------------------------------------------------------------------------------------------------------------------- Interested Trustees* Arthur V. Ferrara (73) Trustee Since 1987 Retired. Former Chairman of the 25 Director of various Box 902 Board and Chief Executive Officer, mutual funds East Orleans, Massachusetts The Guardian Life Insurance sponsored by Gabelli 02463 Company of America. Director Asset Management. (Trustee) of all of the mutual funds within the Guardian Fund Complex. Leo R. Futia (84) Trustee Since 1982 Retired. Former Chairman of the 25 None 18 Interlaken Road Board and Chief Executive Officer, Greenwich, Connecticut The Guardian Life Insurance 06830 Company of America. Director (Trustee) of all of the mutual funds within the Guardian Fund Complex. Dennis J. Manning (56) Trustee Since 2003 Chairman of The Board and Chief 25 Director of The 81 Graenest Ridge Road Executive Officer, The Guardian Life Guardian Insurance & Wilton, Connecticut Insurance Company of America, since Annuity Company, 06897 1/03. President and Chief Operating Inc. Manager, Officer, 1/02 to 12/02; Director since Guardian Investor 1/02; Executive Vice President and Services LLC and Park Chief Operating Officer, 1/01 to Avenue Securities 12/01; Executive Vice President, LLC. Director of Individual Markets and Group various Guardian Life Pensions, 1/99 to 12/00. Director subsidiaries. (Trustee) of all of the mutual funds within the Guardian Fund Complex.
/2/During the year, the Portfolio included three new series: The Guardian UBS Large Cap Value Fund, The Guardian UBS Small Cap Value Fund and The Guardian Low Duration Bond Fund. /3/During the year, The Guardian Variable Contract Funds, Inc. included three new series: The Guardian UBS VC Large Cap Value Fund, The Guardian UBS VC Small Cap Value Fund and The Guardian VC Low Duration Bond Fund. *"Interested" Trustee means one who is an "interested person" under the Investment Company Act of 1940 by virtue of a current or past position with The Guardian Life Insurance Company of America, the indirect parent company of Guardian Investor Services LLC, the investment adviser of certain Funds in the Guardian Fund Complex. +There is no set term of office for Trustees and Officers. The table reflects the year from which each person has served as Trustee and/or Officer. 88
Number of Funds in the Guardian Fund Complex Position Term of Office Overseen With and Length of Principal Occupations by Name, Address and Age Portfolio Time Served+ During Past 5 Years Trustee - -------------------------------------------------------------------------------------------------------------- Disinterested Trustees Frank J. Fabozzi, Ph.D. (55) Trustee Since 1992 Adjunct Professor of Finance, School 25 858 Tower View Circle of Management -- Yale University, New Hope, Pennsylvania 2/94 to present; Editor, Journal of 18938 Portfolio Management. Director (Trustee) of all of the mutual funds within the Guardian Fund Complex William W. Hewitt, Jr. (75) Trustee Since 1989 Retired. Former Executive Vice 25 c/o Guardian Investor Services LLC President, Shearson Lehman Brothers, 7 Hanover Square Inc. Director (Trustee) of all of the New York, New York mutual funds within the Guardian 10004 Fund Complex. Dr. Sidney I. Lirtzman (73) Trustee Since 1987 Emanuel Saxe Professor of 25 38 West 26th Street Management 9/96 to present, City New York, New York University of New York -- Baruch 10010 College; Dean of the Zicklin School of Business 10/95 to 9/02; Interim President 9/99 to 9/00. President, Fairfield Consulting Associates, Inc. Director (Trustee) of all of the mutual funds within the Guardian Fund Complex. Carl W. Schafer (67) Trustee Since 1996 President, Atlantic Foundation (a 25 66 Witherspoon Street, #1100 private charitable foundation). Princeton, New Jersey Director of Labor Ready, Inc. 08542 (provider of temporary manual labor) and Frontier Oil Corporation. Director (Trustee) of all of the mutual funds within the Guardian Fund Complex. Robert G. Smith, Ph.D. (71) Trustee Since 1982 Chairman and Chief Executive 25 132 East 72nd Street Officer, Smith Affiliated Capital Corp. New York, New York since 4/82. Director (Trustee) of all of 10021 the mutual funds within the Guardian Fund Complex.
Other Name, Address and Age Directorships - ------------------------------------------------------------- Disinterested Trustees Frank J. Fabozzi, Ph.D. (55) Director (Trustee) of 858 Tower View Circle various closed-end New Hope, Pennsylvania investment companies 18938 sponsored by BlackRock Financial Management. Director of BlackRock Funds. William W. Hewitt, Jr. (75) None. c/o Guardian Investor Services LLC 7 Hanover Square New York, New York 10004 Dr. Sidney I. Lirtzman (73) None. 38 West 26th Street New York, New York 10010 Carl W. Schafer (67) Director (Trustee) of 66 Witherspoon Street, #1100 various mutual funds Princeton, New Jersey sponsored by UBS Global 08542 Asset Management (US) Inc. (f/k/a Mitchell Hutchins Asset Management, Inc.) and UBS PaineWebber, Inc., Harding Loevner (3 funds) and Ell Realty Securities Trust. Robert G. Smith, Ph.D. (71) Governor appointments as 132 East 72nd Street Director of New York New York, New York Health Care Reform Act 10021 Charitable Organization and Nassau County Interim Finance Authority. Senior private member of the New York State Financial Control Board for New York City. Senior Director for the New York State Comptroller's Investment Advisory Committee for State Pension Funds (Common Fund).
+There is no set term of office for Trustees and Officers. The table reflects the year from which each person has served as Trustee and/or Officer. 89
Number of Funds in the Position Term of Office Guardian Fund With and Length of Principal Occupations Complex for which Name, Address and Age Portfolio Time Served+ During Past 5 Years Officer Serves - ---------------------------------------------------------------------------------------------------------------- Officers Joseph A. Caruso (51) Senior Vice Since 1992 Senior Vice President and Corporate 25 President and Secretary, The Guardian Life Secretary Insurance Company of America since 1/01; Vice President and Corporate Secretary prior thereto. Director, Senior Vice President and Secretary, The Guardian Insurance & Annuity Company, Inc. Manager, Senior Vice President and Corporate Secretary, Guardian Investor Services LLC. Senior Vice President and Secretary, Park Avenue Life Insurance Company, Park Avenue Securities LLC, Guardian Baillie Gifford Limited, and all of the mutual funds within the Guardian Fund Complex. Howard W. Chin (51) Managing Since 1997 Managing Director, The Guardian 15 Director Life Insurance Company of America since 9/97. Officer of various mutual funds within the Guardian Fund Complex. Richard A. Cumiskey (43) Compliance Since 2002 Second Vice President, Equity 25 Officer Administration and Oversight, The Guardian Life Insurance Company of America since 1/01; Assistant Vice President, Equity Administration and Oversight, 6/99 to 12/00; Director Compliance Officer, 10/97 to 5/99; Manager prior thereto. Second Vice President and Compliance Officer of The Guardian Insurance & Annuity Company, Inc. and Guardian Investor Services LLC. Officer of all of the mutual funds within the Guardian Fund Complex. Richard A. Goldman (41) Managing Since 2001 Managing Director, The Guardian 23 Director Life Insurance Company of America since 7/01. Director, Citigroup Asset Management prior thereto. Officer of various mutual funds within the Guardian Fund Complex. Alexander M. Grant, Jr. (54) Managing Since 1993 Managing Director, The Guardian 15 Director Life Insurance Company of America since 3/99; Second Vice President, prior thereto. Officer of various mutual funds within the Guardian Fund Complex.
+There is no set term of office for Trustees and Officers. The table reflects the year from which each person has served as Trustee and/or Officer. 90
Number of Funds in the Position Term of Office Guardian Fund With and Length of Principal Occupations Complex for which Name, Address and Age Portfolio Time Served+ During Past 5 Years Officer Serves - -------------------------------------------------------------------------------------------------------------------- Edward H. Hocknell (43) Vice President Since 1997 Partner, Baillie Gifford & Co., since 16 c/o Baillie Gifford Overseas, 5/98. Director, Baillie Gifford Limited Overseas Limited since 10/92. Calton Square Officer of various mutual funds 1 Greenside Row within the Guardian Fund Complex. Edinburgh, EH1 3AN, Scotland Jonathan C. Jankus (56) Managing Since 1993 Managing Director, The Guardian 20 Director Life Insurance Company of America since 3/98. Officer of various mutual funds within the Guardian Fund Complex. Peter J. Liebst (47) Managing Since 1999 Managing Director, The Guardian 20 Director Life Insurance Company of America, since 8/98. Officer of various mutual funds within the Guardian Fund Complex. R. Robin Menzies (51) Vice President Since 1991 Partner, Baillie Gifford & Co. 4/81 to 16 c/o Baillie Gifford Overseas, present. Director, Baillie Gifford Limited Overseas Limited 11/90 to present. Calton Square Director, Guardian Baillie Gifford 1 Greenside Row Limited 11/90 to present. Trustee, Edinburgh, EH1 3AN, Baillie Gifford Funds, Inc. (2 funds). Scotland Officer of various mutual funds within the Guardian Fund Complex. Nydia Morrison (45) Controller Since 2003 Manager, The Guardian Life 25 Insurance Company of America since 9/99; Supervisor prior thereto. Officer of all of the mutual funds within the Guardian Fund Complex. John B. Murphy (56) Managing Since 1991 Managing Director, The Guardian 23 Director Life Insurance Company of America since 3/98. Officer of various mutual funds within the Guardian Fund Complex. Frank L. Pepe (61) Vice President Since 1995 Vice President and Equity 25 and Treasurer Controller, The Guardian Life Insurance Company of America. Vice President and Controller, The Guardian Insurance & Annuity Company, Inc. Senior Vice President and Controller, Guardian Investor Services LLC. Officer of all of the mutual funds within the Guardian Fund Complex.
+There is no set term of office for Trustees and Officers. The table reflects the year from which each person has served as Trustee and/or Officer. 91
Number of Funds in the Position Term of Office Guardian Fund With and Length of Principal Occupations Complex for which Name, Address and Age Portfolio Time Served+ During Past 5 Years Officer Serves - ------------------------------------------------------------------------------------------------------------------ Richard T. Potter, Jr. (49) Vice President Since 1992 Vice President and Equity Counsel, 25 and Counsel The Guardian Life Insurance Company of America. Vice President and Counsel, The Guardian Insurance & Annuity Company, Inc., Guardian Investor Services LLC, Park Avenue Securities LLC and all of the mutual funds within the Guardian Fund Complex. Robert A. Reale (43) Managing Since 2001 Managing Director, The Guardian 25 Director Life Insurance Company of America, The Guardian Insurance & Annuity Company, Inc. and Guardian Investor Services LLC since 3/01; Second Vice President, 10/99 to 2/01. Assistant Vice President, Metropolitan Life prior thereto. Officer of all of the mutual funds within the Guardian Fund Complex. Thomas G. Sorell (48) President Since 2003 Executive Vice President and Chief 25 Investment Officer, The Guardian Life Insurance Company of America since 1/03; Senior Managing Director, Fixed Income Securities since 3/00; Vice President, Fixed Income Securities prior thereto. Managing Director, Investments: Park Avenue Life Insurance Company. Officer of all of the mutual funds within the Guardian Fund Complex. Donald P. Sullivan, Jr. (49) Vice President Since 1995 Vice President, Equity 25 Administration, The Guardian Life Insurance Company of America since 3/99; Second Vice President, Equity Administration prior thereto. Vice President, The Guardian Insurance & Annuity Company, Inc., and Guardian Investor Services LLC. Officer of all of the mutual funds within the Guardian Fund Complex. Matthew Ziehl (36) Managing Since 2002 Managing Director, The Guardian 16 Director Life Insurance Company of America since 1/02; prior thereto, Team Leader, Salomon Brothers Asset Management, Inc. from 1/01 to 12/01; Co-Portfolio Manager, 8/99 to 12/00; Analyst, Small Cap Equity, 1/95 to 7/99. Officer of various mutual funds within the Guardian Fund Complex.
The Statement of Additional Information includes additional information about fund trustees and is available upon request, without charge, by calling (800) 221-3253. +There is no set term of office for Trustees and Officers. The table reflects the year from which each person has served as Trustee and/or Officer. 92 (This page intentionally left blank) Financial Highlights Selected data for a share of beneficial interest outstanding throughout the periods indicated:
Net Realized & Unrealized Gain/(Loss) on Increase/ Net Asset Net Investments and (Decrease) Dividends Value, Investment Foreign from from Net Beginning Income/ Currency Related Investment Investment of Period (Loss) Transactions Operations Income --------- ---------- ---------------- ---------- ---------- The Guardian Park Avenue Fund Class A: Year ended 12/31/2003.................... $25.03 $ 0.23 $ 5.00 $ 5.23 $(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) Class B: Year ended 12/31/2003.................... 23.99 (0.16) 4.89 4.73 -- 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 -- Class C: Year ended 12/31/2003.................... 23.75 (0.16) 4.78 4.62 -- 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: Year ended 12/31/2003.................... 24.96 0.11 5.02 5.13 (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 12/31/2003...... 10.00 0.08 3.06 3.14 (0.07) Class B: Period from 2/3/2003+ to 12/31/2003...... 10.00 0.00++ 3.06 3.06 (0.01) Class C: Period from 2/3/2003+ to 12/31/2003...... 10.00 0.00++ 3.06 3.06 (0.01) Class K: Period from 2/3/2003+ to 12/31/2003...... 10.00 0.05 3.07 3.12 (0.04) The Guardian Park Avenue Small Cap Fund Class A: Year ended 12/31/2003.................... 13.30 (0.10) 5.85 5.75 -- 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 -- Class B: Year ended 12/31/2003.................... 12.64 (0.24) 5.53 5.29 -- 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 -- Class C: Year ended 12/31/2003.................... 12.59 (0.27) 5.51 5.24 -- 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: Year ended 12/31/2003.................... 13.15 (0.14) 5.78 5.64 -- 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. ++Rounds to less than $0.01. 94
Distributions Ratios/Supplemental Data from Net -------------------------------------------------- Realized Gain on Net Investments and Net Asset Net Assets, Investment 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 - ---------------- --------- ------- --------------- ---------- ------------- --------- -- $30.08 20.95% $1,133,468 0.89% 0.72% 74% -- 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 -- 28.72 19.72 165,274 1.84 (0.24) 74 -- 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 -- 28.37 19.45 6,622 2.12 (0.52) 74 -- 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 -- 30.00 20.58 7,145 1.20 0.41 74 -- 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 (0.25) 12.82 31.48 (a) 21,705 1.59 (b) 0.78 (b) 45 (0.25) 12.80 30.65 (a) 21,378 2.33 (b) 0.03 (b) 45 (0.25) 12.80 30.65 (a) 20,801 2.33 (b) 0.04 (b) 45 (0.25) 12.83 31.22 (a) 20,944 1.88 (b) 0.49 (b) 45 -- 19.05 43.23 160,049 1.27 (0.67) 105 -- 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 -- 17.93 41.85 22,989 2.21 (1.61) 105 -- 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 -- 17.83 41.62 8,092 2.39 (1.79) 105 -- 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 -- 18.79 42.89 9,893 1.55 (0.96) 105 -- 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. 95 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 12/31/2003...... $10.00 $(0.01) $ 3.60 $ 3.59 -- Class B: Period from 2/3/2003+ to 12/31/2003...... 10.00 (0.09) 3.58 3.49 -- Class C: Period from 2/3/2003+ to 12/31/2003...... 10.00 (0.10) 3.59 3.49 -- Class K: Period from 2/3/2003+ to 12/31/2003...... 10.00 (0.03) 3.59 3.56 -- The Guardian Asset Allocation Fund Class A: Year ended 12/31/2003.................... 8.45 0.14 2.20 2.34 $(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) Class B: Year ended 12/31/2003.................... 8.41 0.05 2.18 2.23 (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) Class C: Year ended 12/31/2003.................... 8.39 0.02 2.19 2.21 (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: Year ended 12/31/2003.................... 8.43 0.09 2.19 2.28 (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: Year ended 12/31/2003.................... 6.04 0.08 1.59 1.67 (0.08) 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: Year ended 12/31/2003.................... 6.03 0.03 1.59 1.62 (0.03) 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: Year ended 12/31/2003.................... 6.03 0.03 1.58 1.61 (0.03) 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: Year ended 12/31/2003.................... 6.04 0.06 1.59 1.65 (0.06) 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. ++Rounds to less than $0.01. 96
Distributions from Ratios/Supplemental Data Net Realized -------------------------------------------------------------------------- Gain on Net Investments and Net Asset Net Assets, Expenses GAAF Investment 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 - ---------------- --------- ------- --------------- ------------- ---------- -------- ------------- --------- $(0.88) $12.71 35.76%(c) $ 10,081 2.17%(d) -- -- (0.07)%(d) 94% (0.88) 12.61 34.76 (c) 9,737 2.91(d) -- -- (0.81)(d) 94 (0.88) 12.61 34.76 (c) 9,422 2.91(d) -- -- (0.81)(d) 94 (0.88) 12.68 35.46 (c) 9,492 2.35(d) -- -- (0.25)(d) 94 -- 10.63 27.87 118,988 0.43 0.77% 0.97% 1.25 0 -- 8.45 (20.64) 110,593 0.42 0.73 0.95 1.60 4 (0.67) 10.84 (10.23) 169,386 0.47 0.63 0.93 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 -- 10.57 26.65 32,863 1.27 0.77 1.81 0.43 0 -- 8.41 (21.31) 29,064 1.25 0.73 1.78 0.78 4 (0.67) 10.77 (10.99) 44,813 1.28 0.63 1.74 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 -- 10.56 26.39 7,857 1.51 0.77 2.06 0.19 0 -- 8.39 (21.70) 6,470 1.50 0.73 2.03 0.58 4 (0.67) 10.77 (11.48) 8,080 1.46 0.63 1.92 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 -- 10.60 27.20 7,859 0.68 0.77 1.22 1.04 0 -- 8.43 (21.05) 6,126 0.70 0.73 1.22 1.39 4 (0.67) 10.82 (4.85)(c) 7,619 0.75(d) 0.72(d) 1.29(d) 1.57 (d) 51 -- 7.63 27.78 129,228 0.53 0.25 -- 1.26 4 -- 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 -- 7.62 26.94 12,070 1.28 0.61 -- 0.51 4 -- 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 -- 7.61 26.77 8,796 1.28 0.67 -- 0.51 4 -- 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 -- 7.63 27.31 7,594 0.93 0.21 -- 0.86 4 -- 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. 97 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: Year ended 12/31/2003....................... $ 8.90 $ 0.18 $ 2.33 $ 2.51 $(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 -- Class B: Year ended 12/31/2003....................... 8.22 (0.16) 2.36 2.20 -- 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 -- Class C: Year ended 12/31/2003....................... 8.24 (0.08) 2.28 2.20 -- 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: Year ended 12/31/2003....................... 8.76 0.00(a) 2.45 2.45 -- Year ended 12/31/2002....................... 10.94 0.00(a) (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: Year ended 12/31/2003....................... 8.07 0.05 4.27 4.32 -- 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) Class B: Year ended 12/31/2003....................... 7.55 (0.04) 3.93 3.89 -- 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 -- Class C: Year ended 12/31/2003....................... 7.56 (0.04) 3.95 3.91 -- 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: Year ended 12/31/2003....................... 7.97 0.03 4.19 4.22 -- 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. (a)Rounds to less than $0.01. 98
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 Redemption Tax Return End of Total Period to Average to Average Turnover Income Transactions Fees of Capital Period Return* (000's Omitted) Net Assets Net Assets Rate - ------------- ---------------- ---------- ---------- --------- ------- --------------- ---------- ------------- --------- -- -- $0.03 -- $11.43 28.57% $ 32,126 1.93% 0.50% 44% -- -- -- -- 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 -- -- 0.03 -- 10.45 27.13 6,535 3.19 (1.00) 44 -- -- -- -- 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 -- -- 0.03 -- 10.47 27.06 5,546 3.10 (0.93) 44 -- -- -- -- 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 -- -- 0.03 -- 11.24 28.31 6,979 2.13 0.04 44 -- -- -- -- 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 -- -- -- -- 12.39 53.53 43,561 2.10 0.57 74 -- -- -- -- 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 -- -- -- -- 11.44 51.52 9,389 3.20 (0.54) 74 -- -- -- -- 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 -- -- -- -- 11.47 51.72 9,540 3.17 (0.51) 74 -- -- -- -- 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 -- -- -- -- 12.19 52.95 11,803 2.38 0.29 74 -- -- -- -- 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. 99 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: Year ended 12/31/2003.................... $10.28 $0.35 $ 0.11 $ 0.46 $(0.35) 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) Class B: Year ended 12/31/2003.................... 10.28 0.27 0.11 0.38 (0.27) 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: Year ended 12/31/2003.................... 10.28 0.27 0.11 0.38 (0.27) 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: Year ended 12/31/2003.................... 10.29 0.31 0.11 0.42 (0.31) 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 Low Duration Bond Fund Class A: Period from 7/30/2003+ to 12/31/2003..... 10.00 0.08 0.02 0.10 (0.08) Class B: Period from 7/30/2003+ to 12/31/2003..... 10.00 0.05 0.02 0.07 (0.05) Class C: Period from 7/30/2003+ to 12/31/2003..... 10.00 0.05 0.02 0.07 (0.05) Class K: Period from 7/30/2003+ to 12/31/2003..... 10.00 0.06 0.02 0.08 (0.06) The Guardian High Yield Bond Fund Class A: Year ended 12/31/2003.................... 6.69 0.54 0.76 1.30 (0.54) 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) Class B: Year ended 12/31/2003.................... 6.69 0.48 0.76 1.24 (0.48) 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) Class C: Year ended 12/31/2003.................... 6.69 0.48 0.76 1.24 (0.48) 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: Year ended 12/31/2003.................... 6.69 0.51 0.76 1.27 (0.51) 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)
+Commencement of operations. 100
Distributions from Ratios/Supplemental Data Net Realized ---------------------------------------------------------------------------------- Gain on Expenses Net Investments and Net Asset Net Assets, (excluding Investment Foreign Value, End of Expenses interest expense) Expenses Income Portfolio Currency Related End of Total Period to Average to average Subsidized to Average Turnover Transactions Period Return* (000's Omitted) Net Assets(a)(b) Net Assets(a) by GIS Net Assets Rate - ---------------- --------- ------- --------------- ---------------- ----------------- ---------- ---------- --------- $(0.30) $10.09 4.53% $143,536 0.85% 0.85% 0.11% 3.40% 257% (0.03) 10.28 9.25 170,658 0.85 0.85 0.08 4.37 275 (0.05) 9.86 8.55 144,900 0.86 0.85 0.09 5.11 414 -- 9.61 9.81 124,805 0.85 0.85 0.09 6.41 344 (0.03) 9.33 (1.02) 139,661 0.81 0.80 0.13 5.49 271 (0.30) 10.09 3.75 18,374 1.60 1.60 0.27 2.65 257 (0.03) 10.28 8.43 19,308 1.60 1.60 0.27 3.58 275 (0.05) 9.86 7.86 13,036 1.61 1.60 0.31 4.31 414 -- 9.60 4.40 (c) 8,493 1.60(d) 1.60(d) 0.34(d) 5.78(d) 344 (0.30) 10.09 3.75 11,206 1.60 1.60 0.35 2.66 257 (0.03) 10.28 8.44 10,753 1.60 1.60 0.36 3.64 275 (0.05) 9.86 7.85 9,090 1.61 1.60 0.36 4.36 414 -- 9.60 4.39 (c) 8,356 1.60(d) 1.60(d) 0.34(d) 5.78(d) 344 (0.30) 10.10 4.11 9,820 1.25 1.25 0.05 3.00 257 (0.03) 10.29 8.81 9,213 1.25 1.25 0.03 4.00 275 (0.05) 9.87 5.43 (c) 8,436 1.26(d) 1.25(d) 0.08(d) 4.48(d) 414 -- 10.02 0.99 (c) 8,457 0.80(d) -- 1.20(d) 1.87(d) 97 -- 10.02 0.67 (c) 7,743 1.55(d) -- 1.20(d) 1.11(d) 97 -- 10.02 0.67 (c) 7,611 1.55(d) -- 1.21(d) 1.11(d) 97 -- 10.02 0.82 (c) 7,565 1.20(d) -- 0.97(d) 1.46(d) 97 -- 7.45 20.11 42,589 0.85 -- 0.42 7.59 153 -- 6.69 0.96 33,894 0.85 -- 0.45 8.17 69 -- 7.19 2.87 33,797 0.85 -- 0.47 9.21 141 -- 7.66 (6.53) 38,646 0.85 -- 0.38 9.03 163 (0.02) 8.98 (0.63) 54,178 0.75 -- 0.40 8.34 152 -- 7.45 19.22 10,018 1.60 -- 0.72 6.85 153 -- 6.69 0.35 8,336 1.60 -- 0.77 7.42 69 -- 7.18 1.96 8,182 1.60 -- 0.78 8.42 141 -- 7.66 (7.32) 7,567 1.74 -- 0.77 8.37 163 (0.02) 8.97 (1.78) 3,184 1.87 -- 1.00 7.22 152 -- 7.45 19.22 9,316 1.60 -- 0.71 6.85 153 -- 6.69 0.35 7,710 1.60 -- 0.77 7.42 69 -- 7.18 2.09 7,657 1.60 -- 0.71 8.43 141 -- 7.65 (6.42)(c) 7,491 1.60(d) -- 0.63(d) 8.74(d) 163 -- 7.45 19.63 9,581 1.25 -- 0.33 7.20 153 -- 6.69 0.55 7,944 1.25 -- 0.35 7.77 69 -- 7.19 (1.31)(c) 7,893 1.25(d) -- 0.41(d) 8.36(d) 141
* 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. 101 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 Tax-Exempt Fund Class A: Year ended 12/31/2003.................... $10.51 $ 0.37 $ 0.18 $ 0.55 $ (0.37) 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) Class C: Year ended 12/31/2003.................... 10.51 0.29 0.18 0.47 (0.29) 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) The Guardian Cash Management Fund Class A: Year ended 12/31/2003.................... 1.000 0.004 -- -- (0.004) Year ended 12/31/2002.................... 1.000 0.009 -- -- (0.009) Year ended 12/31/2001.................... 1.000 0.032 -- -- (0.032) Year ended 12/31/2000.................... 1.000 0.056 -- -- (0.056) Year ended 12/31/1999.................... 1.000 0.044 -- -- (0.044) Class B: Year ended 12/31/2003.................... 1.000 0.002 -- -- (0.002) Year ended 12/31/2002.................... 1.000 0.002 -- -- (0.002) Year ended 12/31/2001.................... 1.000 0.025 -- -- (0.025) Year ended 12/31/2000.................... 1.000 0.052 -- -- (0.052) Year ended 12/31/1999.................... 1.000 0.044 -- -- (0.044) Class C: Year ended 12/31/2003.................... 1.000 0.002 -- -- (0.002) Year ended 12/31/2002.................... 1.000 0.002 -- -- (0.002) Year ended 12/31/2001.................... 1.000 0.025 -- -- (0.025) Period from 8/7/2000+ to 12/31/2000...... 1.000 0.020 -- -- (0.020) Class K: Year ended 12/31/2003.................... 1.000 0.002 -- -- (0.002) Year ended 12/31/2002.................... 1.000 0.005 -- -- (0.005) Period from 5/15/2001+ to 12/31/2001..... 1.000 0.013 -- -- (0.013)
+ Commencement of operations. 102
Distributions from Ratios/Supplemental Data Net Realized ---------------------------------------------------- --------- Gain on Net Investments and Net Asset Net Assets, Investment Foreign Value, End of Expenses Expenses Income Portfolio Currency Related End of Total Period to Average Subsidized to Average Turnover Transactions Period Return* (000's Omitted) Net Assets(a) by GIS Net Assets Rate - ---------------- --------- ------- --------------- ------------- ---------- ---------- --------- $(0.38) $10.31 5.34% $ 80,025 0.89%(b) 0.09% 3.52% 68% (0.19) 10.51 10.20 113,852 0.87(b) 0.06 3.85 99 (0.07) 10.09 4.78 107,676 0.91(b) 0.09 4.03 181 -- 10.10 12.29 97,185 0.88(b) 0.07 4.43 124 (0.00)(c) 9.40 (3.29) 97,908 0.86(b) 0.08 4.11 144 (0.38) 10.31 4.54 10,553 1.64(b) 0.36 2.77 68 (0.19) 10.51 9.37 9,741 1.62(b) 0.37 3.11 99 (0.07) 10.09 3.99 8,783 1.66(b) 0.37 3.28 181 -- 10.10 4.87(d) 8,391 1.65(b)(e) 0.31(e) 3.62(e) 124 -- 1.000 0.37 529,321 0.85 0.05 0.38 -- -- 1.000 0.95 658,159 0.85 0.02 0.94 -- -- 1.000 3.27 606,045 0.85 0.04 3.13 -- -- 1.000 5.69 462,183 0.85 0.07 5.57 -- -- 1.000 4.45 390,106 0.85 0.09 4.41 -- -- 1.000 0.21 12,498 1.60 0.16 0.21 -- -- 1.000 0.23 18,485 1.60 0.37 0.22 -- -- 1.000 2.48 15,685 1.60 0.12 2.37 -- -- 1.000 5.34 11,860 1.14 0.63 5.25 -- -- 1.000 4.45 13,782 0.85 0.93 4.41 -- -- 1.000 0.21 9,086 1.60 0.05 0.21 -- -- 1.000 0.22 9,330 1.60 0.25 0.22 -- -- 1.000 2.48 8,492 1.60 0.04 2.47 -- -- 1.000 2.03(d) 8,193 1.60(e) 0.13(e) 5.06(e) -- -- 1.000 0.18 9,682 1.25 -- 0.18 -- -- 1.000 0.55 8,500 1.25 -- 0.54 -- -- 1.000 1.26(d) 8,125 1.25(e) 0.01(e) 1.99(e) --
* Excludes the effect of sales load. (a)After expenses subsidized by GIS. (b)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 2003; in Class C the expense ratio is 1.60% for 2000, 2001, 2002 and 2003. (c)Rounds to less than $0.01. (d)Not annualized. (e)Annualized. 103 Report of Ernst & Young LLP, Independent Auditors Board of Trustees and Shareholders The Park Avenue Portfolio We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Park Avenue Portfolio (comprising, respectively, The Guardian Park Avenue Fund, The Guardian 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) as of December 31, 2003, and the related statements of operations (and cash flows for The Guardian Investment Quality Bond Fund), the statements of changes in net assets, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective Funds constituting The Park Avenue Portfolio at December 31, 2003, the results of their operations (and cash flows for The Guardian Investment Quality Bond Fund), the changes in their net assets, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Boston, Massachusetts February 6, 2004 104 .. 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 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 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. .. 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 Boston Financial Data Services Post Office Box 219611 Kansas City, Missouri 64121-9611 .. Independent Auditors Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 [LOGO] Guardian Guardian Investor Services LLC 7 Hanover Square New York, New York 10004 PRSRT STANDARD U.S. POSTAGE PAID [LOGO] Guardian BOWNE FULFILLMENT SOLUTIONS Guardian Investor Services LLC 7 Hanover Square New York, NY 10004
EB 011566 (12/03) ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (the "Code"). A copy of the Code is filed as an exhibit to this Form N-CSR. There were no substantive amendments made to the Code, nor were there any waivers granted under the Code, during the period covered by this report. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The registrant's Board of Directors/Trustees has determined that Robert G. Smith qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Dr. Smith serves as Chairman of the registrant's audit committee and is considered "independent" for purposes of Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) - (d) Aggregate fees billed to the registrant for the last two fiscal years for professional services rendered by the registrant's principal accountant were as follows: 2003 - (a) Audit Fees $239,315; (c) Tax Fees $72,000; 2002 - (a) Audit Fees $172,531; (c) Tax Fees $42,469. Audit Fees include amounts related to the audit and report on the registrant's annual financial statements. Tax fees include amounts related to tax compliance services. (e)(1) Pursuant to the Audit Committee charter, the Audit Committee of the Board is responsible for pre- approving any engagement of the Registrant's accountant to provide any non-prohibited services to the Registrant, including the fees and other compensation to be paid to the accountant. The Chairman of the Audit Committee may grant the pre-approval of services to the Registrant for non-prohibited services. All such delegated pre-approvals shall be presented to the Audit Committee no later than the next Audit Committee meeting. The Audit Committee of the Board is responsible for pre-approving any engagement of the Registrant's accountant, including the fees and other compensation to be paid to the accountant, to provide any non- audit services to the Registrant's investment adviser (or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant), if the engagement relates directly to the operations and financial reporting of the Registrant. The Chairman of the Audit Committee may pre-approve non-audit services, which are not prohibited, to the adviser (or any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant). All such delegated pre-approvals shall be presented to the Audit Committee no later than the next Audit Committee meeting. (2) No services described in paragraph (b) - (d) of Item 4, were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not Applicable. (g) Not Applicable. (h) Not Applicable. ITEM 5. AUDIT COMMITTE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED.] 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) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is attached. (a)(2) Separate certifications by the registrant's certifying officers, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (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: March 4, 2004 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: March 4, 2004 By: /s/ Frank L. Pepe ----------------------------- Frank L. Pepe Vice President and Treasurer of The Park Avenue Portfolio Date: March 4, 2004 EX-99.CERT 3 dex99cert.txt SECTIONS 302 & 906 CERTIFICATIONS FOR THE SARBANES-OXLEY 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: March 4, 2004 /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 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: March 4, 2004 /s/ Frank L. Pepe ------------------------------------- Frank L. Pepe Vice President and Treasurer of The Park Avenue Portfolio 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: March 4, 2004 /s/ Thomas G. Sorell ------------------------------------- Thomas G. Sorell President of The Park Avenue Portfolio Date: March 4, 2004 /s/ Frank L. Pepe ------------------------------------- Frank L. Pepe Vice President and Treasurer of The Park Avenue Portfolio EX-99.CODE 4 dex99code.txt CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF GUARDIAN CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF THE GUARDIAN-SPONSORED MUTUAL FUNDS Adopted November 13, 2003 I. Covered Officers/Purpose of the Code This code of ethics ("Code") for the Guardian-Sponsored Mutual Funds (each, a "Fund," and collectively, the "Funds") applies to the Funds' Principal Executive Officer, Principal Financial Officer and Controller (each, a "Covered Officer") set forth on Exhibit A. The purpose of the Code is to promote: . honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; . full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; . compliance with applicable laws and governmental rules and regulations; . the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and . accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to apparent as well as actual conflicts of interest. II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Funds because of their status as "affiliated persons" of the Funds. The Funds' and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of the securities laws, including the Investment Company Act and the Investment Advisers Act. This Code does not, and is not intended to, repeat or replace those programs and procedures. Although typically not presenting an opportunity for improper personal benefit, conflicts of interest usually arise from, or as a result of, the contractual relationship between the Funds and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Funds or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Board of Directors/Trustees ("Board") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides some examples of conflicts of interest under the Code. Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. Each Covered Officer must not: . use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds; . cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Funds; or . use material non-public knowledge of portfolio transactions made or contemplated for the Funds to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; There are some conflict of interest situations that should be discussed with the senior legal officer of the Funds (the "Chief Legal Officer"). Examples of these include: . service as a director on the board of any company; . the receipt of any gifts in excess of $100; . the receipt of any entertainment from any company with which the Funds have current or prospective business dealings unless such entertainment is business-related, or is reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; . any ownership interest in, or any consulting or employment relationship with, any of the Funds' service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; and . a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. Disclosure and Compliance Each Covered Officer should: . be familiar with the disclosure requirements generally applicable to the Funds and, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; . not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including to the Funds' directors and auditors, and to governmental regulators and self-regulatory organizations; and . promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Officer must: . upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he or she has received, read, and understands the Code and will comply with it; . annually thereafter affirm to the Board that he or she has complied with the requirements of the Code; . report at least annually to the Board any direct or indirect interest arising out of any transaction, contract, arrangement or understanding between the Covered Officer or any of his or her immediate family members and: a Fund, Guardian Investor Services LLC, Guardian Baillie Gifford Limited, UBS Global Asset Management - Americas, any of their officers or affiliates, or any person controlling, controlled by or under common control of any of the above entities, the value of which exceeds $60,000; . notify the Chief Legal Officer promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code; and . not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith. The Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in a particular situation. However, any approvals or waivers sought by a Covered Officer must be considered by the Nominating and Governance Committee of the Board (the "Committee"), which will, in its discretion, make a recommendation to the Board. The Funds will follow these procedures in investigating and enforcing this Code: . the Chief Legal Officer will take all appropriate actions to investigate any reported potential violations; . if, after such investigation, the Chief Legal Officer believes that no violation has occurred, no further action is required to be taken; . any matter that the Chief Legal Officer believes is a violation will be reported to the Committee; . if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; . the Board will be responsible for granting waivers, as appropriate; and . any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment adviser's, sub-advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Investment Company Act, and the more detailed policies and procedures of those codes, are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. Amendments Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board. VII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Chief Legal Officer, the Board and counsel to the independent Directors/Trustees of the Funds. VIII. Internal Use The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Funds, as to any fact, circumstance, or legal conclusion. EXHIBIT A Thomas G. Sorell Principal Executive Officer Frank L. Pepe Principal Financial Officer Nydia Morrison Controller -----END PRIVACY-ENHANCED MESSAGE-----