UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
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Investment Company Act file number 811-05641
The Park Avenue Portfolio
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(Exact name of registrant as specified in charter)
7 Hanover Square New York, N.Y. 10004
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(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
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(Name and address of agents for service)
Registrant's telephone number, including area code: (800) 221-3253
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2003
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ITEM 1. REPORTS TO STOCKHOLDERS.
The Semiannual Report to Stockholders follows.
Please turn the page to see
the supplement dated January 7, 2002 to
The Park Avenue Portfolio Prospectus dated May 1, 2001.
THIS SUPPLEMENT SHOULD BE RETAINED WITH THE PROSPECTUS FOR FUTURE REFERENCE.
[GUARDIAN(SM) LOGO]
THE PARK AVENUE Portfolio
Supplement dated January 7, 2002
to Prospectus dated May 1, 2001
This Supplement should be retained with the Prospectus for future reference.
The following replaces the first paragraph under the heading "The Funds'
Investment Advisers" on page 59 of the prospectus:
Guardian Investor Services LLC (GIS) is the adviser for all of the Funds in The
Park Avenue Portfolio, except for the two international funds. GIS is a Delaware
limited liability company organized in 2001 as successor to Guardian Investor
Services Corporation, a New York corporation organized in 1968. GIS is wholly
owned by The Guardian Life Insurance Company of America (Guardian Life), a New
York mutual insurance company. GIS is located at 7 Hanover Square, New York, New
York 10004. GIS buys and sells securities, selects brokers to effect
transactions, and negotiates brokerage fees. GIS is the adviser to several other
mutual funds sponsored by Guardian Life, and it is the underwriter and
distributor of the Fund's shares and of variable annuity and variable life
insurance contracts issued by The Guardian Insurance & Annuity Company, Inc.
(GIAC).
Wherever the terms "Guardian Investor Services Corporation" and "GISC" appear in
the prospectus, replace them with the terms "Guardian Investor Services LLC" and
"GIS", respectively.
The following replaces the paragraph below "Small Cap Fund" under the Section
"Portfolio Managers" on page 61 of the prospectus:
Matthew P. Ziehl, CFA, is the Fund's portfolio manager. He is a Managing
Director of Guardian Life. Before joining Guardian Life in January 2002, Mr.
Ziehl was a Team Leader within Salomon Brothers Asset Management, Inc. for small
cap growth portfolios since January, 2001, and a Co-Portfolio Manager of the
Salomon Brothers Small Cap Growth Fund since August, 1999. Prior to that, Mr.
Ziehl served as an Analyst for the Salomon Brothers Small Cap Growth Fund from
May, 1998 to July, 1999 and as an Analyst/Portfolio Manager for the U.S. Small
Cap Equity Team at Citibank Global Asset Management from January, 1995 to May,
1998.
EB-013869(2) (1/02)
DEAR SHAREHOLDER:
<Table>
[PHOTO] CAUTIOUSLY OPTIMISTIC BUT ALWAYS WELL
Thomas G. Sorell, C.F.A. DIVERSIFIED!
Chief Investment Officer
After three difficult years, we believe that
both the economy and the stock market may
finally be on the road to long term recovery
and we are cautiously optimistic about the
future.
THE FIRST SIX MONTHS IN REVIEW
</Table>
The U.S. financial markets experienced a difficult start in 2003 as investors
focused on the potentially adverse economic impact of an imminent war with Iraq.
Meanwhile, the Federal Reserve Board (Fed) remained confident that an economic
recovery was underway and that it would strengthen when the hostilities ended.
The financial markets, however, were unconvinced. As a result, the S&P 500
Index(1) declined 3% in the first quarter, and although interest rates were
volatile, they ended the quarter with little change.
In late March, as U.S. and British troops entered Iraq and it became apparent
the military campaign to defeat Saddam Hussein would be swift, the equity
markets rallied. We also saw a rise in U.S. Treasury rates, as they were no
longer sought as a safe haven investment amid geopolitical uncertainty.
Risk taking was once again in vogue during the second quarter, with the best
performing markets representing the same speculative sectors that were the most
beaten down during the past few years. The technology-laden NASDAQ Composite
Index(2) returned over 21% during the second quarter, while the high yield debt
market returned 10%. In fact, between this year's equity market lows and June
30, 2003, the S&P 500 Index had a return of almost 22% and the NASDAQ returned
approximately 28%. Although these returns represent an upswing in equity markets
that we have often seen following periods of stock market decline, we do not
believe that past history is necessarily any indication of how the equity
markets will behave in the future, and we think it is unlikely that these
increases represent a long-term trend.
<Table>
<Caption>
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2003 MARKET RETURNS
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1ST 2ND 6 MONTHS
QUARTER QUARTER ENDED
INDEX 2003 2003 JUNE 30, 2003
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S&P 500 Index -3.15% 15.39% 11.76%
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Russell 2000 Index(3) -4.49% 23.43% 17.89%
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Nasdaq Composite
Index 0.58% 21.11% 21.82%
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The Lehman Aggregate
Bond Index(4) 1.39% 2.50% 3.93%
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The Lehman High Yield
Bond Index(4) 7.61% 10.11% 18.49%
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</Table>
While the Federal Reserve Board (Fed) was patient early in the first quarter,
in expectation of a post-Iraq recovery, in March the Fed agreed to abandon
temporarily its balanced policy assessment of economic risk and instead promised
"heightened surveillance" of the economy. By May, when economic indicators did
not turn sufficiently positive for the Fed, it adopted a significantly different
approach to evaluating economic risk. The Fed decided to issue policy statements
involving two assessments. The first deliberated prospects for economic growth
over the next few quarters. The second reflected the Fed's view regarding
whether inflation was likely to accelerate or decelerate. With this change in
policy, the Fed indicated that while the risks to economic growth were balanced,
"the probability of an unwelcome substantial fall in inflation, though minor,
exceeds that of a pickup in inflation from its already low level." Taken
together, in our view the Fed's pronouncements represented a significant shift
in policy. It became clear that the Fed was concerned about deflation, and would
do everything it could to prevent its occurrence.
In response, the financial markets concluded the Fed was prepared to ease
further. More importantly, it appeared the Fed was willing to resort to
unconventional tools if necessary (for example, purchasing long Treasury bonds
for its own account), in order to lower interest rates, stimulate economic
growth, and prevent deflation. Already low Treasury rates fell even further, to
levels not seen in 45 years. The ten-year Treasury rate declined approximately
0.80%, reaching a low of 3.11% in mid-June. The decline in rates over this
period led to another wave of mortgage refinancing that once again provided
additional liquidity and support to consumers and further stimulated U.S.
economic growth. In June, as interest rates were falling, equities were rising;
the S&P 500 Index crossed the 1000 mark for the first time in a year.
As the second quarter came to a close, the Fed's policy-making Federal Open
Market Committee (FOMC) cut the Federal Funds rate 0.25%, lowering the target
rate to 1%. This rate cut disappointed some market participants
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(1) The S&P 500 Index is an unmanaged index of 500 primarily large-cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity.
(2) The NASDAQ Composite Index is an unmanaged, broad-based capitalization-
weighted index of all NASDAQ National Market stocks.
(3) The Russell 2000 Index is an unmanaged index that is generally considered to
be representative of small capitalization issues in the U.S. stock market.
(4) The Lehman Aggregate Bond Index and The Lehman High Yield Bond Index are
unmanaged indices that are generally considered to be representative of U.S.
bond market activity and U.S. corporate high yield bond market activity.
All of these Indices are not available for direct investment, and their returns
do not reflect the fees and expenses that have been deducted from the Fund.
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expecting a greater reduction of 0.50%. Once again, this appeared to signal the
Fed's confidence that an economic recovery was imminent and that deflation
risks, while taken seriously, did not seem likely.
ECONOMIC OUTLOOK
When we consider all the shocks and impediments impacting U.S. economic
growth, along with the mild recession experienced in the U.S. over the past two
years, what becomes evident is the economy's underlying strength and resiliency.
Our belief is that as those obstacles dissipate, economic growth will likely
increase.
The first and most significant shock was the burst of the technology bubble.
During the 1992-2000 expansion, corporate America made tremendous capital
investments. During this period business spending on structures, equipment and
software increased 117%(5) while real GDP(6) grew about 38%. Many economists
refer to this imbalance as a "capital overhang." The recession of 2001 was
unusual in that it was not caused by rapid economic growth and inflationary
pressures, but instead by the bursting of an asset bubble and a precipitous
decline in capital spending and corporate profitability. In fact, the Fed's
strategy throughout the "recovery" period has been to stimulate personal
consumption to sustain the economy until the business sector recovered and again
started contributing to economic growth. While business spending was negative in
2001 (-5.2%) and 2002 (-5.7%),(5) it appears that the decline is over, and it
has stabilized at slightly positive levels. The latest Blue Chip Economic
Consensus(7) forecasts business spending to grow at a 1.1% rate in 2003.
The other obvious obstacle to growth has been the impact of geopolitical risk
and its effect on consumer and business confidence. Between 9/11 and the wars in
Afghanistan and Iraq, it's not surprising to us that economic growth has been
weak. However, it now appears that while risks remain with respect to the Middle
East and North Korea, we believe diplomacy will most likely be the focus of
future engagements, not military action. For this reason we have recently
witnessed a revival in both consumer and business confidence, both of which have
also benefited from the recent recovery in equity markets. The Consumer
Confidence Index(8) has climbed well off its March lows, and business sentiment
has improved as evidenced by the Institute for Supply Management's Manufacturing
and Service surveys.
Also supporting a business expansion are the tentative signs that corporate
profits are improving. According to research firm Thomson First Call, S&P 500
operating earnings per share during the first quarter rose to $12.55, an
increase of 12% over the prior year. This earnings growth was achieved
principally by cost-cutting rather than revenue growth, and these increases
reflect the fact that last year's S&P 500 earnings were depressed due to
goodwill write-offs and adoption of more conservative accounting practices.
Future increases in profits will have to come from unit sales growth or price
increases, both of which are dependent on an economic upswing.
The appreciation of U.S. equity markets will soon be tested when second
quarter earnings and third and fourth quarter earnings expectations are conveyed
to the market over the next few months. First Call estimates S&P 500 operating
earnings increased 4% year over year during the second quarter, and The Blue
Chip Consensus forecasts year over year growth in corporate profits during 2003
of 9%. While this estimate would represent only a small improvement over the
7.6% gain in 2002, it would bring us a long way from the 7.2% and 2.2% declines
experienced in 2001 and 2000, respectively.
In addition to an improvement in consumer and business confidence, business
fixed investment and corporate profits, we believe the U.S. economy is also
benefiting from stimulative monetary and fiscal policy initiatives.
The Federal Reserve has clearly indicated that it plans to leave the Fed Funds
rate unchanged until economic growth is assured, given its belief that near term
inflationary risks are small. Chairman Greenspan, testifying before the House
Banking and Financial Services Committee, indicated that the Fed "stands
prepared to maintain a highly accommodative stance of policy for as long as
needed to promote satisfactory economic performance," and that the Fed could
keep rates low "for a considerable period without ultimately stoking
inflationary pressures." We believe that the underlying premise in these
statements is that the Fed will leave policy highly accommodative and not even
consider tightening monetary policy until the economy is well into a recovery.
We believe that current fiscal policy, as evidenced by the recently passed
$350 billion in tax cuts, will also provide economic stimulus. In spite of the
fact that these tax cuts are scheduled to occur over ten years, most of the
benefits, approximately $210 billion, will be distributed in 2003 and 2004. In
addition to tax cuts, government spending has increased to support homeland
security and the war and reconstruction in Iraq.
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(5) The Business Fixed Investment (BFI) Index measures business spending on
structures, equipment, and software.
(6) Gross Domestic Product (GDP) measures the value of goods and services
produced in an economy. Real GDP is the gross domestic product adjusted for
changes in price level. Real GDP growth is generally used as the basis to assess
economic performance.
(7) The Blue Chip Economic Consensus forecast is a forecast of economic
variables published monthly based on the surveys of 55 leading economists and
financial analysts.
(8) The Consumer Confidence Index is derived from a survey conducted by The
Conference Board, a New York-based business industry group.
- --------------------------------------------------------------------------------
When we consider the reduction of past obstacles to growth, along with
stimulative monetary and fiscal policy, we believe there is reason to be
optimistic about further prospects for economic growth. GDP growth in the second
quarter was 2.4%, and the current Blue Chip Consensus forecast for accelerating
growth is 3.6% and 3.8% in the third and fourth quarters, respectively. GDP in
2004 is expected to grow at an annual rate of 3.7%, according to the Blue Chip
Consensus forecast.
The following are the Fed's forecasts:
<Table>
<Caption>
- -----------------------------------------------------------
2003 2004
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Real GDP 2.5%-2.75% 3.75%-4.75%
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Unemployment 6%-6.25% 5.5%-6%
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</Table>
What are the risk factors that may affect this forecast?
We believe that the remaining principal risk is that personal consumption may
collapse before a recovery in business investment commences. This could
conceivably be triggered by a fall in real estate prices, precipitated by rising
interest rates which reduce home ownership affordability and the ability to
borrow and spend the homeowner's embedded equity, or by continued high
unemployment as job growth remains low due to increased labor productivity. We
believe that declining real estate values would clearly have a negative wealth
effect and most likely damage consumer confidence and reduce personal
consumption expenditures. Other risks to U.S. economic growth include a weak
global economy, and state and local government tax increases offsetting some of
the Federal fiscal stimulus. While these factors present real risks, we believe
there is a greater likelihood that the economy will continue to recover and that
these situations will most likely not occur to the full extent feared, but
rather exhibit themselves in a minor way that simply slows down the pace of an
economic recovery rather than precluding one from occurring.
OUTLOOK FOR FINANCIAL MARKETS
What then should be expected of the financial markets?
According to Ibbotson data, over the last 77 years stocks provided an average
annual return of 10.2%, or a 4.7% risk premium per year over bonds, as shown in
the table below.
<Table>
<Caption>
- -------------------------------------------------------
AVERAGE ANNUAL RETURN
- -------------------------------------------------------
Stocks 10.2%
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Bonds 5.5%
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Bills 3.8%
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Inflation 3.1%
- -------------------------------------------------------
</Table>
Is it likely that such a risk premium will exist going forward? In a
provocative article last year, Robert Arnott and Peter Bernstein suggested that
the expected risk premium for stocks over bonds is currently zero and that a
sensible expectation for future real returns for both stocks and bonds is 2%-4%.
Roger Ibbotson and Peng Chen countered this with a different analysis suggesting
that the expectation for future stock return is 9.4% and the risk premium over
bonds is 4%, implying an expected bond return of 5.4%. A survey of over 500
finance and economics professors shows a consensus academic forecast of stock
returns of 9.1% per year over the next 30 years.(9)
While we cannot predict future stock market returns, we believe that these
long-term return forecasts are a more logical framework for constructing
well-diversified portfolios that meet long-term financial objectives than the
double digit expectations for equity returns that many investors became
"accustomed" to in the late 1980's and 1990's, when returns were unusually
favorable.
Our outlook for interest rates is based on expectations of an economic
recovery and the Fed's commitment to leave short-term rates low until there are
clear signs of a recovery. To the extent long-term interest rates reflect
inflationary expectations, we expect to see generally stable short-term rates,
but increasingly higher long-term interest rates, as the Fed attempts to reflate
the economy. Furthermore, increasingly large budget and trade deficits and a
potentially weaker U.S. dollar are factors we believe should exert upward
pressures on interest rates. According to a recent study by the Fed, a one
percentage point increase in the projected deficit-to-GDP ratio is estimated to
raise long-term interest rates by roughly 0.25%. Therefore, if the economy
improves as forecasted by both economists and the Fed, we believe we can expect
to see a gradual increase in interest rates.
INVESTMENT STRATEGY
What is the best investment strategy to pursue in this environment? As is the
case most of the time, we believe it's important for you to remain committed to
long-term investment objectives. We believe the best way for you to do this is
to make sure you have a sound asset allocation based on the principles of
diversification and one that is properly aligned with your financial goals, time
horizon, and personal tolerance for risk.
Given the uncertainty of any forecast, (including the one above!), how then
should investors behave? A key variable in the investment decision process is
evaluating an investor's tolerance for risk. In general, assets with higher
long-term returns may also have a higher risk, which results in high short-term
variability in their returns. Investors should judge their ability to ride out
such variability and maintain an investment portfolio consistent with their
toler-
- --------------------
(9) Roger G. Ibbotson, Ph.D. and Peng Chen, Ph.D., CFA, "Stock Market Returns in
the Long Run," Forthcoming Financial Analyst Journal, July 9, 2002.
- --------------------------------------------------------------------------------
ance for risk. Research, based mainly on investor 401(k) selections, indicates
that investors are not aware of their own risk tolerance. This lack of awareness
results in inappropriate investment portfolios.
The Park Avenue Portfolio(R) family of mutual funds includes the following
thirteen funds, spanning a wide spectrum of risk-return possibilities: The
Guardian Park Avenue Fund, The Guardian UBS Large Cap Value Fund, The Guardian
Park Avenue Small Cap Fund, The Guardian UBS Small Cap Value Fund, The Guardian
Asset Allocation Fund, The Guardian S&P 500 Index Fund, The Guardian Baillie
Gifford International Fund, The Guardian Baillie Gifford Emerging Markets Fund,
The Guardian Investment Quality Bond Fund, The Guardian Low Duration Bond Fund,
The Guardian High Yield Bond Fund, The Guardian Tax-Exempt Fund, and The
Guardian Cash Management Fund.
While no single fund is intended to serve as a complete investment program, by
using a combination of these funds, we believe it is possible for investors at
every level of risk tolerance (conservative, moderate, aggressive, etc.), to
construct appropriate portfolios. This diversification may protect investors
from excessive exposure to "the worst" performing asset class, and at the same
time offering participation in "the best" performing asset class during a given
period. Such diversification forms the bedrock of successful investing.
Therefore, we believe the best strategy is to consult with your financial
advisor and construct an appropriately well diversified portfolio that will not
only meet your long-term financial objectives, but also can survive short-term
periods of volatility experienced in any single asset class. It's really quite
simple; it's not just the economy, it's diversification, diversification and
diversification.
To quote noted investment analyst/philosopher Peter Bernstein:
"Indeed, the passage of time has transformed me from a compulsive forecaster
of everything in sight into a doubting Thomas. Thus, I have learned to view the
investment task as more (but not yet totally) one of managing risk than of
trying to outguess the markets or the economy. The only other conviction held
with equal determination is a devotion to diversification, but one follows from
the other."
While impediments to economic growth appear to be receding, giving us reason
to be optimistic about the future after three difficult years, it would be
imprudent to abandon lessons learned and do anything less than construct very
well diversified portfolios that will enable you achieve your financial
objectives given appropriate risk tolerances.
Past performance is no indication of future performance. The foregoing
commentary reflects the outlook and views of Thomas G. Sorell, Chief Investment
Officer of Guardian Investor Services LLC, as of June 30, 2003, and is subject
to change.
/s/THOMAS G. SORELL
Thomas G. Sorell, CFA
President, The Park Avenue Portfolio
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THE PARK AVENUE PORTFOLIO
TABLE OF CONTENTS
<Table>
<Caption>
PORTFOLIO SCHEDULE
MANAGER OF
INTERVIEW INVESTMENTS
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THE GUARDIAN PARK AVENUE FUND 2 27
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THE GUARDIAN UBS LARGE CAP VALUE FUND 6 29
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THE GUARDIAN PARK AVENUE SMALL CAP FUND 8 30
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THE GUARDIAN UBS SMALL CAP VALUE FUND 10 32
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THE GUARDIAN ASSET ALLOCATION FUND 12 34
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THE GUARDIAN S&P 500 INDEX FUND 14 37
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THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND 16 43
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THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND 18 46
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THE GUARDIAN INVESTMENT QUALITY BOND FUND 20 48
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THE GUARDIAN HIGH YIELD BOND FUND 22 52
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THE GUARDIAN TAX-EXEMPT FUND 24 57
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THE GUARDIAN CASH MANAGEMENT FUND 26 59
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FINANCIAL STATEMENTS 62
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NOTES TO FINANCIAL STATEMENTS 69
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FINANCIAL HIGHLIGHTS 82
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</Table>
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THE GUARDIAN PARK AVENUE FUND
<Table>
[PHOTO] OBJECTIVE: Long-term growth of
Richard Goldman capital
Portfolio Manager
PORTFOLIO: At least 80% common
stocks and convertible securities
INCEPTION: June 1, 1972
</Table>
NET ASSETS AT JUNE 30, 2003: $1,294,059,145
Q: WHAT TYPE OF INVESTORS SHOULD CONSIDER THE GUARDIAN PARK AVENUE FUND?
A: The best way to answer that is to list the Fund's two distinct features,
which certain types of investors may find attractive.
- High Quality Companies: Our investment process is geared to finding
companies that we believe have strong balance sheets, generate high cash
flows, and that are profitable. This is based on our philosophy that
investing in market leaders with strong fundamentals has the potential to
produce an attractive long-term performance and risk profile.
- Commitment to our core objective: The Guardian Park Avenue Fund is a core
large cap fund, and we will use every effort to prevent the Fund from
straying from its style. This is important for investors who are deploying
asset allocation strategies and want a well-diversified large cap core
equity portfolio. We believe too many mutual funds are willing to drift into
areas outside their mandates in their efforts to outperform. We saw this
happen in the late 1990s when many small cap and value funds were buying
larger cap and growth stocks. Many investors thought their investments were
diversified among different types of equity funds. Only after the bubble
burst in 2000, when large cap and growth stocks had significantly declined,
did they realize that these shifts had occurred. The result was an over
concentration in large cap and growth stocks, causing a greater decline in
portfolio values than otherwise expected.
Q: WHAT HAPPENED IN THE EQUITY MARKETS DURING THE FIRST SIX MONTHS OF 2003?
A: In A Tale of Two Cities, Charles Dickens captured the equity market
environment during the first half of 2003: "It was the best of times, it was the
worst of times, it was the age of wisdom, it was the age of foolishness, it was
the epoch of belief, it was the epoch of incredulity..." The year began on a
negative note as the equity market extended its 3-year slide, with the S&P 500
Index(1) down 3% in the first quarter. This was more than offset by the second
quarter, in which the S&P 500 was up 15%, bringing its total return for the
first half of 2003 to 11.76%. The nature of the rally (which began on March 11th
and extended through the end of the second quarter) reveals a market environment
somewhat reminiscent of the rally experienced in the late 1990s: the stocks that
were up the most were companies with operating losses (including the internet
and biotech sectors), companies with poor track records of earnings and dividend
growth, and companies under federal investigation. We believe that the
speculative nature of the rally is attributable to investors' increasing
confidence that the economy will improve in the second half of 2003. While
higher quality companies (those with positive earnings and strong balance
sheets) were up during the first half of the year, they didn't rise as much as
lower quality companies. We believe that higher quality companies should see
their relative fortunes improve, as investors will eventually refocus on their
fundamentals and attractive relative valuations.
- --------------------------------------------------------------------------------
"We believe that higher quality companies should see their relative fortunes
improve, as investors will eventually refocus on their fundamentals and
attractive relative valuations."
- --------------------------------------------------------------------------------
Q: HOW DID THE GUARDIAN PARK AVENUE FUND PERFORM DURING THE FIRST HALF OF
2003?
A: The Guardian Park Avenue Fund was up 8.41%(2) during the first half of
2003. Since the Fund's investment strategy focuses on investing in high quality
companies, it was a difficult environment for it to outperform its S&P 500
benchmark due to the speculative nature of the recent rally, as described above.
The Fund's performance was helped by its semiconductor holdings, which
outperformed as investors became increasingly confident in the earnings
visibility for these companies. This was offset by the strong performance of
highly cyclical companies in the consumer discretionary and industrial sectors,
two areas that significantly outperformed and in which the Fund was
underrepresented.
- --------------------
(1) The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect
any sales charges that an investor may pay when purchasing or redeeming shares
of the Fund.
(2) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Returns represent past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
- --------------------------------------------------------------------------------
2
THE GUARDIAN PARK AVENUE FUND
Q: WHAT IS THE FUND'S INVESTMENT STRATEGY, AND WILL IT CHANGE GOING FORWARD?
A: The Guardian Park Avenue Fund is a core fund that invests in mainly large
cap, high quality companies and is designed for investors who are looking for a
foundation upon which they can build their portfolio. The Fund's investment
strategy focuses on identifying companies that we believe have solid balance
sheets and are generating strong financial results. The Fund's bias towards
seeking high quality companies is shown in the table below:
<Table>
<Caption>
- -------------------------------------------------------------------
% LONG- RETURN
EARNINGS REVENUE TERM ON
5 YEAR 5 YEAR DEBT/ EQUITY
GROWTH GROWTH TOTAL 5 YEAR
RATE(3) RATE(4) CAPITAL(5) AVERAGE(6)
- -------------------------------------------------------------------
The Guardian Park
Avenue Fund 13% 9% 23% 19%
- -------------------------------------------------------------------
S&P 500 Index 6% 7% 35% 15%
- -------------------------------------------------------------------
Note: Median data as of 06-30-03. Source: Baseline, Factset
- -------------------------------------------------------------------
</Table>
Although the recent market environment has not favored higher quality stocks,
our investment strategy is based on our philosophy that investing in companies
with strong fundamentals has the potential to produce attractive long-term
performance. We are committed to adhering to this strategy and will not abandon
our investment discipline to chase a short-term market phenomenon. We are taking
advantage of the current market environment by opportunistically adding to the
Fund's holdings that have become more attractively valued and trimming those
positions that we believe have become too expensive.
The Fund remains modestly overweight in the technology sector in which our
sector specialist identified several high quality software and semiconductor
companies. The Fund is underweight in cyclical consumer and industrial companies
due to the lack of visibility in generating future revenue and earnings growth.
<Table>
<Caption>
- --------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Company Percent of Total Net Assets
- --------------------------------------------------------------
1. Pfizer, Inc. 5.57%
- --------------------------------------------------------------
2. Verizon Comm. 3.79%
- --------------------------------------------------------------
3. General Electric Co. 3.23%
- --------------------------------------------------------------
4. American Int'l. Group, Inc. 3.15%
- --------------------------------------------------------------
5. Microsoft Corp. 3.03%
- --------------------------------------------------------------
6. Wal-Mart Stores, Inc. 2.86%
- --------------------------------------------------------------
7. Cisco Systems, Inc. 2.66%
- --------------------------------------------------------------
8. AmerisourceBergen Corp. 2.61%
- --------------------------------------------------------------
9. Lockheed Martin Corp. 2.58%
- --------------------------------------------------------------
10. Adobe Systems, Inc. 2.44%
- --------------------------------------------------------------
</Table>
- --------------------
(3) Earnings 5-Year Growth Rate - The median earnings growth rate for the
companies in the Fund and the S&P 500 Index for the past five years. A higher
number indicates a greater rate of earnings growth.
(4) Revenue 5-year Growth Rate - The median revenue growth rate for the
companies in the Fund and the S&P 500 Index for the past five years. A higher
number indicates a greater rate of revenue growth.
(5) % Long Term Debt / Total Capital--The median long-term debt as a proportion
of capital for the companies in the Fund and the S&P 500 Index as of 06/30/03. A
lower number indicates a company's greater ability to pay off outstanding debt.
(6) Return on Equity 5-Year Average - The median return on equity of the last
five fiscal years for the companies in the Fund and the S&P 500 Index. Return on
Equity is an indicator of profitability and a higher number indicates greater
profitability.
- --------------------------------------------------------------------------------
3
THE GUARDIAN PARK AVENUE FUND
SECTOR WEIGHTINGS HELD BY
THE FUND AS OF JUNE 30, 2003
[PIE CHART]
<Table>
Information Technology 22.47%
Financials 20.43%
Health Care 16.91%
Consumer Staples 10.64%
Energy 7.32%
Industrials 6.79%
Consumer Discretionary 4.00%
Telecommunication Services 3.79%
Materials 3.31%
Utilities 2.23%
Cash 2.11%
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception
Date 1 year 3 Years 5 Years 10 Years Since Inception
- ------------------------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 6/1/72 -2.32% -19.26% -5.54% 7.42% 13.10%
- ------------------------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 6/1/72 -6.72% -20.49% -6.41% 6.93% 12.93%
- ------------------------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/1/96 -3.29% -20.02% -6.41% NA 3.44%
- ------------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 -6.19% -20.56% -6.60% NA 3.44%
- ------------------------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 -3.58% NA NA NA -20.99%
- ------------------------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 -4.54% NA NA NA -20.99%
- ------------------------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 -2.64% NA NA NA -12.92%
- ------------------------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 -3.61% NA NA NA -12.92%
- ------------------------------------------------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum 3% for Class B shares and
1% for Class C and Class K shares), except where noted. Returns represent
past performance and are not indicative of future results. Investment
return and principal value will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original cost. Prior to
August 25, 1988, Class A shares of the Fund were offered at a higher sales
charge, so that actual returns would have been somewhat lower.
- --------------------------------------------------------------------------------
4
THE GUARDIAN PARK AVENUE FUND
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[LINE GRAPH]
<Table>
<Caption>
THE GUARDIAN PARK AVENUE
FUND S&P 500 COST OF LIVING
------------------------ ------- --------------
6/1/72 10000.00 10000.00 10000.00
9352.07 9790.85 10024.00
1972 9914.46 10935.50 10209.80
7753.41 9801.76 10616.50
1973 8349.32 9320.12 11105.80
8088.37 8376.16 11779.30
1974 7010.23 6860.77 12476.50
10193.90 9724.30 12885.20
1975 10301.80 9410.43 13341.90
12914.10 11077.20 13654.40
1976 14711.80 11628.00 13991.00
15531.70 11107.60 14592.00
1977 15877.50 10765.90 14928.50
17931.80 11100.90 15673.70
1978 18177.60 11454.10 16274.70
20437.50 12582.60 17380.50
1979 23464.90 13538.80 18438.30
24606.70 14721.40 19880.70
1980 28512.40 17907.00 20746.10
30517.80 17725.10 21779.80
1981 30159.70 17009.40 22597.10
28186.70 15681.50 23318.30
1982 37817.80 20656.20 23462.50
49542.70 25227.30 23919.30
1983 48638.80 25279.70 24352.00
47763.90 24026.80 24928.90
1984 54796.70 26822.10 25313.60
64932.50 31408.80 25866.50
1985 72870.60 35288.90 26275.20
93437.60 42589.10 26323.20
1986 86265.10 41837.40 26563.60
104493.00 53265.20 27284.80
1987 88817.70 43971.70 27741.60
107179.00 49508.40 28366.60
1988 107273.00 51153.70 28967.60
124125.00 59543.20 29833.00
1989 132839.00 67203.70 30313.80
131828.00 69207.30 31227.30
1990 116458.00 65040.90 32164.80
136676.00 74297.50 32693.70
1991 157405.00 84769.50 33150.40
159261.00 84210.30 33703.30
1992 189636.00 91213.70 34112.00
215388.00 95625.60 34713.00
1993 228090.00 100349.00 35049.60
218928.00 96957.00 35578.40
1994 224815.00 101655.00 35987.10
270965.00 122113.00 36660.20
1995 301881.00 139649.00 36900.60
334237.00 153694.00 37669.90
1996 399827.00 171525.00 38126.60
452077.00 206864.00 38535.30
1997 514907.00 228623.00 38775.70
585927.00 269200.00 39184.30
1998 624578.00 294369.00 39400.70
675279.00 330799.00 39953.60
1999 813487.00 356272.00 40459.40
836898.00 354761.00 41418.50
2000 662010.00 323862.00 41563.60
2001 565937.00 302233.00 42994.70
2002 406361.00 222359.00 43190.00
6/30/03 440524.00 248505.00 43597.00
</Table>
PERFORMANCE FOR CLASS B, CLASS C, AND CLASS K SHARES, WHICH WERE FIRST OFFERED
ON MAY 1, 1996, AUGUST 7, 2000, AND MAY 15, 2001, RESPECTIVELY, WILL VARY DUE TO
DIFFERENCES IN SALES LOAD AND OTHER EXPENSES CHARGED TO EACH SHARE CLASS.
A hypothetical $10,000 investment in Class A shares made at the inception of
The Guardian Park Avenue Fund on June 1, 1972 has a starting point of $9,550,
which reflects the current maximum sales charge for Class A shares of 4.5%. This
investment would have grown to $440,524 on June 30, 2003. We compare our
performance to that of the S&P 500 Index, an unmanaged index that is generally
considered the performance benchmark of the U.S. stock market. While you cannot
invest directly in the S&P 500 Index, a similar hypothetical investment would
now be worth $248,505. The Cost of Living, as measured by the Consumer Price
Index, is generally representative of the level of U.S. inflation and is
provided to lend a more complete understanding of the investment's real worth.
This performance does not reflect the deduction of taxes that a shareholder may
pay on distributions or redemption of shares. Returns represent past performance
and are not indicative of future results.
- --------------------------------------------------------------------------------
5
THE GUARDIAN UBS LARGE CAP VALUE FUND
The Guardian UBS Large Cap Value Fund is managed by a team of investment
professionals from the Fund's sub-adviser, UBS Global Asset Management
(Americas) Inc., with many years of experience in large cap value investment
management.
OBJECTIVE: Seeks to maximize total return, consisting of capital appreciation
and current income
PORTFOLIO: At least 80% in equity securities issued by companies with a large
market capitalization at the time of purchase
INCEPTION: February 3, 2003
NET ASSETS AT JUNE 30, 2003: $86,821,009
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: For the period from Fund inception on February 3, 2003 and ending June 30,
2003, The Guardian UBS Large Cap Value Fund had a total return of 13.76%(1)
versus 13.71% for its benchmark, the Russell 1000 Value Index.(2)
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A: Our focus on finding stocks trading below our estimate of their intrinsic
values served the Fund well amid the volatility that characterized the reporting
period. Price to intrinsic value refers to the discrepancy between a stock's
current price and its fair value. Our analysts thoroughly review a company's
underlying fundamentals and employ forward-looking projections regarding its
likely prospects in order to assess a company's intrinsic (fair) value. Our
disciplined investment strategy led us to overweight select utilities, as well
as the health care and pharmaceuticals and transportation sectors. Furthermore,
our research concluded that underweighting utilities that had exposure to
trading operations, in addition to underweighting media and insurance stocks,
was warranted.
- --------------------------------------------------------------------------------
"Heading into the second half of 2003, we will continue emphasizing our
"bottom-up" investment process, which focuses on a company's cash flow to
identify intrinsic value that may lead to favorable risk-adjusted returns over
an entire market cycle."
- --------------------------------------------------------------------------------
As we moved through the second quarter 2003, we enjoyed strong results from
the Fund's core holdings in the pharmaceutical, banking and utility sectors. On
the other hand, retailing, food and beverage and computer hardware companies did
not typically meet our intrinsic value criteria, so we reduced our positions in
those areas. In general, we were also cautious about the technology sector, and
from our perspective the sharp gains it posted in the second quarter 2003 do not
appear warranted from a fundamental perspective.
Q: WHAT IS YOUR OUTLOOK GOING FORWARD?
A: During the reporting period, market fundamentals were often not the driving
forces behind stock prices. We have found that during periods of extreme
optimism or pessimism, many investors lose sight of the critical factors that
should dictate the fair value of a stock's price. It is during those times that
our disciplined investment process can be especially valuable in helping us to
identify compelling price to intrinsic value discrepancies in the marketplace.
Heading into the second half of 2003, we will continue emphasizing our
"bottom-up" investment process, which focuses on a company's cash flow to
identify intrinsic value that may lead to favorable risk-adjusted returns over
an entire market cycle.
- --------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Returns represent past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
(2) The Russell 1000 Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 1000 Index measures the performance of the 1,000 largest companies
in the Russell 3000 Index. The Russell 1000 Index represents approximately 92%
of the total market capitalization of the Russell 3000 Index. The Russell 1000
Value Index and the Russell 1000 Index are unmanaged indices, they are not
available for direct investment, and their returns do not reflect the fees and
expenses that have been deducted from the Fund's returns. Likewise, return
figures for the indices do not reflect any sales charges that an investor may
pay when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
6
THE GUARDIAN UBS LARGE CAP VALUE FUND
SECTOR WEIGHTINGS HELD BY
THE FUND AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
HEALTH TELECOMMUNICATION INFORMATION
FINANCIALS CARE INDUSTRIALS UTILITIES SERVICES MATERIALS ENERGY TECHNOLOGY
- ---------- ------ ----------- --------- ----------------- --------- ------ -----------
33.49% 12.67% 10.22% 9.47% 9.00% 7.48% 6.02% 4.89%
<Caption>
CONSUMER CONSUMER
DISCRETIONARY STAPLES
------------- --------
3.96% 2.80%
</Table>
<Table>
<Caption>
- -----------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Company Percent of Total Net Assets
- -----------------------------------------------------
1. Citigroup, Inc. 5.91%
- -----------------------------------------------------
2. Nextel Comm., Inc. 5.04%
- -----------------------------------------------------
3. J.P. Morgan Chase & Co. 4.47%
- -----------------------------------------------------
4. Wells Fargo & Co. 4.26%
- -----------------------------------------------------
5. GreenPoint Financial Corp. 3.51%
- -----------------------------------------------------
6. UnitedHealth Group 3.19%
- -----------------------------------------------------
7. Exxon Mobil Corp. 2.95%
- -----------------------------------------------------
8. ConocoPhillips 2.90%
- -----------------------------------------------------
9. Morgan Stanley 2.86%
- -----------------------------------------------------
10. Illinois Tool Works, Inc. 2.57%
- -----------------------------------------------------
</Table>
<Table>
<Caption>
- --------------------------------------------------------------
TOTAL RETURNS(1) FOR PERIOD ENDED JUNE 30, 2003
Inception Since
Date Inception
- --------------------------------------------------------------
Class A Shares (without sales charge) 2/3/03 13.76%
- --------------------------------------------------------------
Class A Shares (with sales charge) 2/3/03 8.64%
- --------------------------------------------------------------
Class B Shares (without sales charge) 2/3/03 13.43%
- --------------------------------------------------------------
Class B Shares (with sales charge) 2/3/03 10.43%
- --------------------------------------------------------------
Class C Shares (without sales charge) 2/3/03 13.43%
- --------------------------------------------------------------
Class C shares (with sales charge) 2/3/03 12.43%
- --------------------------------------------------------------
Class K Shares (without sales charge) 2/3/03 13.55%
- --------------------------------------------------------------
Class K Shares (with sales charge) 2/3/03 12.55%
- --------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum of 3% for Class B shares
and 1% for Class C and Class K shares), except where noted. Returns
represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
7
THE GUARDIAN PARK AVENUE SMALL CAP FUND
<Table>
[PHOTO] OBJECTIVE: Long-term growth of
Matthew Ziehl capital
Portfolio Manager
PORTFOLIO: At least 85% in a
diversified portfolio of common
stocks and convertible securities
issued by companies with small
market capitalization at time of
initial purchase
INCEPTION: May 1, 1997
</Table>
NET ASSETS AT JUNE 30, 2003: $154,328,239
Q: HOW DID THE FUND PERFORM DURING THE FIRST SIX MONTHS OF 2003?
A: Refreshingly, the U.S. stock market posted a strong first half of 2003
(yes, indeed -- stocks actually went up, not down) after three years of a
grinding bear market. Small caps led the way, as the Russell 2000 Index(1)
gained 17.88% versus 11.76% for the S&P 500 Index.(2) The Park Avenue Small Cap
Fund also posted strong gains, but performance trailed the benchmark by 3.59%
during the first half of the year, with a return of 14.29%(3) versus 17.88% for
the Russell 2000. Most of the underperformance came during the second quarter,
as the stock market reversed early-year declines and experienced a sharp rally
after the invasion of Iraq commenced in March.
This rally was led by highly speculative companies; from early March through
the end of June, the Russell 2000's strongest performers were companies with low
fundamental quality. These companies typically have negative earnings, stocks
priced below five dollars a share, and represent the smallest stocks in the
Russell 2000 (less than $500 million market cap). These are the very same
categories of stocks that had been severely beaten down since the bursting of
the "dot-com" bubble in early 2000. This environment made it challenging for the
Fund to keep pace during the run-up, because we tend to avoid these types of
companies. The Park Avenue Small Cap Fund has lower representation than the
benchmark in stocks with low fundamental quality. Such companies do not fit into
our disciplined investment process, which focuses on companies with high
fundamental quality -- those companies that we believe are demonstrably superior
to their competitors in terms of financial strength, profitability, and
management skill.
Within this broader market context, relative performance was driven by stock
selection rather than by sector allocations. This is consistent with our
investment discipline, which emphasizes selecting individual stocks rather than
placing large "bets" on one market sector versus another. Underperformance in
financial, industrial and healthcare stocks more than offset good returns within
the consumer, basic materials and technology sectors.
Q: WHAT WAS YOUR INVESTMENT STRATEGY?
A: As we entered 2003, the economy appeared to be stabilizing and the stock
market began to settle down after a period of historically high volatility.
However, by mid-January it became increasingly apparent that the U.S. would soon
go to war with Iraq, and the stock market began to sell off on concerns that the
economic recovery was at risk. Consistent with our investment discipline, we
maintained a particular emphasis on high quality companies with strong
competitive positions, management, and financial strength (balance sheet, cash
flows, profit margins). We believe that such companies are better able to
weather a business downturn than financially weaker competitors, and tend to
emerge stronger and with higher market share when business conditions improve.
We expected our investment discipline to result in outperformance in this
uncertain environment, as it had during 2002.
Throughout the first half of 2003, we moderately underweighted consumer
cyclical stocks, as we believed consumers' high current level of spending was
vulnerable to ongoing job losses and the high level of debt consumers were
already shouldering. We also were neutral to slightly underweight in industrial
companies (such as machinery, construction, etc.) as we saw little evidence of
improving demand in the manufacturing economy. We did expect improved demand in
several areas of technology spending at the corporate level, such as PC's,
networking and storage, and therefore positioned the Fund with a moderate
overweight in technology stocks.
- --------------------------------------------------------------------------------
"We have built our investment process on the basic philosophy that investing in
companies with high fundamental quality will lead to solid long-term Fund
performance."
- --------------------------------------------------------------------------------
On balance, we believed the Fund was well-positioned for current economic
weakness as well as an eventual recovery, focused on stocks of quality companies
that could survive and gain market share in the lean times, and then benefit
strongly as customer demand improved. From a fundamental perspective, we believe
we were largely correct. However, the market displayed a voracious appetite for
the riskiest companies with the highest financial upside if the economy
recovered strongly, even though many of these companies were in or near
financial distress in the current period.
- --------------------
(1) The Russell 2000 Index is an unmanaged index that is generally considered to
be representative of small capitalization issues in the U.S. stock market. The
Russell 2000 Index is not available for direct investment, and its returns do
not reflect the fees and expenses that have been deducted from the Fund's
returns. Likewise, return figures for the Russell 2000 Index do not reflect any
sales charges that an investor may pay when purchasing or redeeming shares of
the Fund.
(2) The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect
any sales charges that an investor may pay when purchasing or redeeming shares
of the Fund.
(3) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Returns represent past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
- --------------------------------------------------------------------------------
8
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A: We believe that the exuberant rally in stock prices since March suggests
that investors have already priced in lofty expectations for economic
growth -- and resulting earnings per share (EPS) acceleration -- in the back
half of the year. We do expect some improvement in the economy, driven by low
interest rates and fiscal stimulus such as tax cuts. But the rate of this
improvement will likely fall short of market expectations. We do not see
significant job growth on the near term horizon, which puts consumer spending
(over 2/3rds of total U.S. economic output) at risk, and corporations are not
yet confident enough about the demand outlook to significantly ramp up their
investment spending at this time. This latter point suggests to us that
companies are less optimistic than the investment community regarding their own
profit growth.
If EPS growth during the second half of 2003 is slower than the market seems
to be expecting, we could see some retrenchment of the recent stock market
gains, or at least very little additional upside for the balance of the year. In
either scenario, we would expect the speculative activity to lose steam, and for
higher-quality companies to reassert market leadership. After all, by definition
these "quality" companies are the ones that have demonstrated the ability to
deliver stronger financial results more consistently than speculative and
distressed companies. If the economic environment continues to be challenging,
this pattern should continue and should also be reflected in relative stock
price performance.
Put another way, this is no time to abandon our investment discipline in order
to chase the recent strong stock price performance by lower-quality companies.
Although the recent market environment has not favored stocks of high-quality
companies, and we believe that this situation may recur at times in the future,
we will not compromise our core principles to chase a fleeting trend. We have
built our investment process on the basic philosophy that investing in companies
with high fundamental quality will lead to solid long-term Fund performance.
SECTOR WEIGHTINGS HELD BY
THE FUND AS OF JUNE 30, 2003
[PIE CHART]
<Table>
Information Technology 24.97%
Financials 20.89%
Health Care 12.39%
Consumer Staples 5.17%
Energy 3.33%
Industrials 11.14%
Consumer Discretionary 11.44%
Telecommunication Services 1.62%
Materials 5.08%
Utilities 2.33%
Cash 1.64%
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception
Date 1 year 3 Years 5 Years Since Inception
- -------------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 5/1/97 -1.55% -7.72% 0.99% 7.04%
- -------------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 5/1/97 -5.98% -9.13% 0.06% 6.24%
- -------------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/6/97 -2.51% -8.53% -0.10% 5.56%
- -------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 -5.43% -9.14% -0.30% 5.56%
- -------------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 -2.65% NA NA -9.66%
- -------------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 -3.62% NA NA -9.66%
- -------------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 -1.83% NA NA -2.76%
- -------------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 -2.81% NA NA -2.76%
- -------------------------------------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum of 3% for Class B shares
and 1% for Class C and Class K shares), except where noted. Returns
represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
9
THE GUARDIAN UBS SMALL CAP VALUE FUND
The Guardian UBS Small Cap Value Fund is managed by a team of investment
professionals from the Fund's sub-adviser, UBS Global Asset Management
(Americas) Inc. with many years of experience in small cap value investment
management.
OBJECTIVE: Seeks to maximize total return, consisting of capital appreciation
and current income
PORTFOLIO: At least 80% in equity securities issued by companies with a small
market capitalization at the time of initial purchase
INCEPTION: February 3, 2003
NET ASSETS AT JUNE 30, 2003: $41,141,856
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: Since its inception on February 3, 2003 through June 30, 2003, The Guardian
UBS Small Cap Value Fund had a total return of 15.10%(1) versus 20.34% for its
benchmark, the Russell 2000 Value Index.(2)
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A: The equity markets were weak during the first quarter of 2003, as concerns
regarding the war in Iraq caused investors to shun stocks in favor of less risky
investments. However, during the second quarter of 2003 the equity markets
rallied strongly, as investors were encouraged by the quick end to the conflict
in Iraq and the possibility of a sustainable economic rebound as the year
progressed. In particular, investors were drawn to the most volatile sectors of
the market, including technology and health care stocks. Low price stocks and
those with negative earnings were strong performers in the small cap market. The
Fund underperformed its benchmark since its inception due largely to its
conservative position in terms of volatility. Fund performance was also affected
by negative earnings reports by several portfolio holdings. Fund stock selection
was negative for health care (due to an underweight in biotechnology), business
services and motor vehicles. On the other hand, the Fund's stock selection for
retail and consumer discretionary stocks enhanced results. An overweight in
medical services stocks also aided Fund performance.
- --------------------------------------------------------------------------------
"The Fund continues to favor companies with high earnings yields (low P/E
ratios), low earnings variation, and strong free cash flow generation."
- --------------------------------------------------------------------------------
Q: WHAT IS YOUR STRATEGY GOING FORWARD?
A: At the end of the reporting period, the Fund's largest sector overweights
were in information technology and consumer discretionary, while its largest
underweights were in financials and materials. The Fund continues to favor
companies with high earnings yields (low P/E ratios), low earnings variation,
and strong free cash flow generation.
- --------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Returns represent past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
(2) The Russell 2000 Value Index measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index measures the performance of the 2,000 smallest companies
in the Russell 3000 Index. The Russell 2000 Index represents approximately 8% of
the total market capitalization of the Russell 3000 Index. The Russell 2000
Index and the Russell 2000 Value Index are unmanaged indices, they are not
available for direct investment, and their returns do not reflect the fees and
expenses that have been deducted from the Fund's returns. Likewise, return
figures for the Indices do not reflect any sales charges that an investor may
pay when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
10
THE GUARDIAN UBS SMALL CAP VALUE FUND
SECTOR WEIGHTINGS HELD BY
THE FUND AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
CONSUMER INFORMATION HEALTH CONSUMER
FINANCIALS DISCRETIONARY TECHNOLOGY INDUSTRIALS CARE MATERIALS ENERGY STAPLES UTILITIES
- ---------- ------------- ----------- ----------- ------ --------- ------ -------- ---------
24.73% 19.28% 14.43% 12.00% 9.32% 7.79% 4.45% 3.99% 3.97%
<Caption>
TELECOMMUNICATION
SERVICES
-----------------
0.04%
</Table>
<Table>
<Caption>
- -----------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Company Percent of Total Net Assets
- -----------------------------------------------------
1. iShares Russell 2000 Value Index Fund 2.28%
- -----------------------------------------------------
2. AmerUs Group Co. 2.19%
- -----------------------------------------------------
3. IndyMac Bancorp, Inc. 2.17%
- -----------------------------------------------------
4. City National Corp. 2.16%
- -----------------------------------------------------
5. Renal Care Group, Inc. 2.11%
- -----------------------------------------------------
6. Parkway Pptys., Inc. 1.92%
- -----------------------------------------------------
7. Trustmark Corp. 1.90%
- -----------------------------------------------------
8. Department 56, Inc. 1.86%
- -----------------------------------------------------
9. Colonial BancGroup, Inc. 1.80%
- -----------------------------------------------------
10. Polaris Industries, Inc. 1.79%
- -----------------------------------------------------
</Table>
<Table>
<Caption>
- --------------------------------------------------------------
TOTAL RETURNS(1) FOR PERIOD ENDED JUNE 30, 2003
Inception Since
Date Inception
- --------------------------------------------------------------
Class A Shares (without sales charge) 2/3/03 15.10%
- --------------------------------------------------------------
Class A Shares (with sales charge) 2/3/03 9.92%
- --------------------------------------------------------------
Class B Shares (without sales charge) 2/3/03 14.80%
- --------------------------------------------------------------
Class B Shares (with sales charge) 2/3/03 11.80%
- --------------------------------------------------------------
Class C Shares (without sales charge) 2/3/03 14.80%
- --------------------------------------------------------------
Class C shares (with sales charge) 2/3/03 13.80%
- --------------------------------------------------------------
Class K Shares (without sales charge) 2/3/03 15.00%
- --------------------------------------------------------------
Class K Shares (with sales charge) 2/3/03 14.00%
- --------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum of 3% for Class B shares
and 1% for Class C and Class K shares), except where noted. Returns
represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
11
THE GUARDIAN ASSET ALLOCATION FUND
<Table>
[PHOTO] OBJECTIVE: Long-term total
Jonathan C. Jankus, investment return consistent with
C.F.A. moderate investment risk
Portfolio Manager
PORTFOLIO: Generally purchases
shares of The Guardian S&P 500
Index, The Guardian Park Avenue,
The Guardian Investment Quality
Bond, and/or The Guardian Cash
Management Funds. Also invests in
individual securities and uses
futures to manage allocations
among the equity, debt and money
market asset classes
INCEPTION: February 16, 1993
</Table>
NET ASSETS AT JUNE 30, 2003: $153,559,450
Q: THIS HAS BEEN A VOLATILE PERIOD FOR THE FINANCIAL MARKETS. HOW HAS THE FUND
PERFORMED?
A: In the first half of this year, the total return on stocks, as measured by
the S&P 500 Index,(1) was 11.76% and the total return on bonds, as measured by
the Lehman Aggregate Bond Index(2) was 3.93%. Our theoretical benchmark, a model
portfolio with 60% of its value in the S&P 500 Index and 40% in the Lehman
Aggregate Bond Index (rebalanced monthly) would have returned 8.66%. We are
pleased to report that, by comparison, the Fund's return over the period was
11.51%(3) with dividends reinvested.
Q: WHAT STRATEGIES WERE USED BY THE FUND AND HOW DID THEY AFFECT PERFORMANCE?
A: As always, the Fund is managed using proprietary quantitative models that
attempt to judge the relative risk-adjusted attractiveness of the stock, bond
and cash markets. While interest rates are the operative variables in the fixed
income markets, corporate profitability and growth are added to the mix for the
equity markets.
- --------------------------------------------------------------------------------
"As always, the Fund is managed using proprietary quantitative models which
attempt to judge the relative risk-adjusted attractiveness of the stock, bond
and cash markets."
- --------------------------------------------------------------------------------
In general, a benign interest rate environment and an economy which appears to
be recovering from a recession led us to hold an aggressive equity exposure
relative to cash and bonds. Specifically, at year-end 2002, the Fund's
stock/bond/cash mix was approximately 100/0/0, and we have maintained that
posture. These weightings should be compared to the completely neutral 60/40/0
mix that we would expect to own if the markets were all fairly valued relative
to one another.
Our models are driven by quantifiable economic variables dealing with
corporate profitability and interest rates. For better or worse, over the past
two years the markets have been driven by factors that are not amenable to
quantification, such as corporate malfeasance, terrorism and war. These are
important matters to be sure, but not captured in our models. Hopefully, as
these concerns subside and are dealt with, our models will continue to deliver
value to our investors.
Q: WHAT ARE YOUR EXPECTATIONS FOR THE FUTURE AND HOW ARE YOU POSITIONING THE
FUND TO TAKE ADVANTAGE OF THOSE EXPECTATIONS?
A: We continue to be very aggressively positioned, and we will maintain this
stance until either interest rates increase sufficiently or corporate
profitability collapses in spite of an accommodative Federal Reserve combined
with a stimulative fiscal stance. Historically, this monetary/fiscal combination
has proved to be a powerful positive force for the markets. From a pure relative
valuation perspective, equities continue to look extremely attractive.
- --------------------
(1) The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect
any sales charges that an investor may pay when purchasing or redeeming shares
of the Fund.
(2) The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The Lehman
Aggregate Bond Index is not available for direct investment, and its returns do
not reflect the fees and expenses that have been deducted from the Fund's
returns. Likewise, return figures for the Lehman Aggregate Bond Index do not
reflect any sales charges that an investor may pay when purchasing or redeeming
shares of the Fund.
(3) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return figures
for Class A shares do not take into account the current maximum sales charge of
4.5%. Returns represent past performance and are not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
- --------------------------------------------------------------------------------
12
THE GUARDIAN ASSET ALLOCATION FUND
PORTFOLIO COMPOSITION BY
ASSET CLASS AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
CASH FIXED INCOME COMMON STOCKS
- ---- ------------ -------------
0.11% 0.13% 99.76%
</Table>
<Table>
<Caption>
- ------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Company
Percent of Total Net Assets
- ------------------------------------------------------
1. The Guardian S&P 500 Index Fund 66.56%
- ------------------------------------------------------
2. The Guardian Investment Quality Bond 17.00%
Fund
- ------------------------------------------------------
3. Pfizer, Inc. 0.48%
- ------------------------------------------------------
4. General Electric Co. 0.45%
- ------------------------------------------------------
5. Microsoft Corp. 0.44%
- ------------------------------------------------------
6. Exxon Mobil Corp. 0.39%
- ------------------------------------------------------
7. Wal-Mart Stores, Inc. 0.37%
- ------------------------------------------------------
8. Citigroup, Inc. 0.32%
- ------------------------------------------------------
9. Bank of America Corp. 0.24%
- ------------------------------------------------------
10. Johnson & Johnson 0.23%
- ------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception Since
Date 1 year 3 Years 5 Years 10 Years Inception
- ------------------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 2/16/93 0.13% -8.46% -0.18% 7.45% 7.83%
- ------------------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 -4.38% -9.85% -1.10% 6.96% 7.35%
- ------------------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/1/96 -0.73% -9.24% -1.02% NA 5.15%
- ------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 -3.71% -9.85% -1.22% NA 5.15%
- ------------------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 -0.97% NA NA NA -10.53%
- ------------------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 -1.96% NA NA NA -10.53%
- ------------------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 -0.24% NA NA NA -9.13%
- ------------------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 -1.24% NA NA NA -9.13%
- ------------------------------------------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum of 3% for Class B shares
and 1% for Class C and Class K shares), except where noted. Returns
represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
13
THE GUARDIAN S&P 500 INDEX FUND
<Table>
[PHOTO] OBJECTIVE: Seeks to track the
Jonathan C. Jankus, investment performance of the
C.F.A. Standard & Poor's 500 Composite
Portfolio Manager Stock Price Index (the "S&P 500
Index")
PORTFOLIO: Common stocks of
companies included in the S&P 500
Index, which emphasizes
securities issued by large U.S.
companies
INCEPTION: August 7, 2000
</Table>
NET ASSETS AT JUNE 30, 2003: $134,971,910
Q: THIS HAS BEEN A VOLATILE PERIOD FOR THE FINANCIAL MARKETS. HOW HAS THE FUND
PERFORMED?
A: In the first half of this year, the total return on stocks, as measured by
the S&P 500 Index,(1) was 11.76%. The Fund's return over the period was
11.30%.(2)
Q: WHAT STRATEGIES WERE USED BY THE FUND AND HOW DID THEY AFFECT PERFORMANCE?
A: As an index fund, the Fund's goal is to mimic the returns of the
theoretical S&P 500 Index portfolio. We attempt to do so by holding nearly all
500 of the stocks in the index in approximately the same weights as they are
represented in the index. We attempt to minimize trading costs and trade only
when rebalancings are required by capitalization changes in the index or when
dividends need to be reinvested.
- --------------------------------------------------------------------------------
"As an index fund, the Fund's goal is to mimic the returns of the theoretical
S&P 500 Index portfolio. We attempt to do so by holding nearly all 500 of the
stocks in the index in approximately the same weights as they are represented in
the index."
- --------------------------------------------------------------------------------
Q: WHAT ARE YOUR EXPECTATIONS FOR THE FUTURE AND HOW ARE YOU POSITIONING THE
FUND TO TAKE ADVANTAGE OF THOSE EXPECTATIONS?
A: As passive investors, we do not attempt to engage in either market timing
or active security selection decisions. Our only goal is to match the returns of
the broad equity market (as measured by the S&P 500 Index) in the most efficient
way.
- --------------------
(1) "S&P," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by Guardian
Investor Services LLC. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Fund. The S&P 500 Index is an unmanaged index
of 500 primarily large cap U.S. stocks that is generally considered to be
representative of U.S. stock market activity. The S&P 500 Index is not available
for direct investment, and its returns do not reflect the fees and expenses that
have been deducted from the Fund's returns. Likewise, return figures for the
Index do not reflect any sales charges that an investor may pay when purchasing
or redeeming shares of the Fund.
(2) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Since inception, the investment adviser for the
Fund has assumed certain ordinary operating expenses for the Fund. Without this
assumption of expenses, returns would have been lower. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
- --------------------------------------------------------------------------------
14
THE GUARDIAN S&P 500 INDEX FUND
SECTOR WEIGHTING COMPARISONS
SECTOR WEIGHTINGS HELD BY
THE GUARDIAN S&P 500 INDEX FUND
AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
INFORMATION HEALTH CONSUMER CONSUMER TELECOMMUNICATION
FINANCIALS TECHNOLOGY CARE STAPLES DISCRETIONARY INDUSTRIALS ENERGY SERVICES
- ---------- ----------- ------ -------- ------------- ----------- ------ -----------------
20.47% 16.18% 14.80% 11.71% 11.14% 10.32% 5.81% 3.85%
<Caption>
UTILITIES MATERIALS CASH
--------- --------- ----
2.95% 2.68% 0.09%
</Table>
SECTOR WEIGHTINGS FOR THE S&P 500 INDEX
AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
INFORMATION HEALTH CONSUMER CONSUMER TELECOMMUNICATION
FINANCIALS TECHNOLOGY CARE DISCRETIONARY INDUSTRIALS STAPLES ENERGY SERVICES
- ---------- ----------- ------ ------------- ----------- -------- ------ -----------------
20.46% 16.18% 14.83% 11.06% 10.44% 11.66% 5.79% 3.89%
<Caption>
UTILITIES MATERIALS
--------- ---------
3.03% 2.66%
</Table>
<Table>
<Caption>
- -----------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Company Percent of Total Net Assets
- -----------------------------------------------------
1. General Electric Co. 3.11%
- -----------------------------------------------------
2. Microsoft Corp. 3.00%
- -----------------------------------------------------
3. Pfizer, Inc. 2.99%
- -----------------------------------------------------
4. Exxon Mobil Corp. 2.65%
- -----------------------------------------------------
5. Wal-Mart Stores, Inc. 2.60%
- -----------------------------------------------------
6. Citigroup, Inc. 2.37%
- -----------------------------------------------------
7. Johnson & Johnson 1.67%
- -----------------------------------------------------
8. American Int'l. Group, Inc. 1.55%
- -----------------------------------------------------
9. Intel Corp. 1.51%
- -----------------------------------------------------
10. Int'l. Business Machines 1.51%
- -----------------------------------------------------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------
AVERAGE ANNUAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception Since
Date 1 year Inception
- -----------------------------------------------------------------------
Class A Shares (without sales charge) 8/7/00 -0.29% -12.40%
- -----------------------------------------------------------------------
Class A Shares (with sales charge) 8/7/00 -4.78% -13.78%
- -----------------------------------------------------------------------
Class B Shares (without sales charge) 8/7/00 -1.30% -13.16%
- -----------------------------------------------------------------------
Class B Shares (with sales charge) 8/7/00 -4.26% -13.76%
- -----------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 -1.44% -13.20%
- -----------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 -2.43% -13.20%
- -----------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 -0.95% -11.68%
- -----------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 -1.94% -11.68%
- -----------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum of 3% for Class B shares
and 1% for Class C and Class K shares), except where noted. Since
inception, the investment adviser for the Fund has assumed certain ordinary
operating expenses for the Fund. Without this assumption of expenses,
returns would have been lower. Returns represent past performance and are
not indicative of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than the original cost.
- --------------------------------------------------------------------------------
15
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
<Table>
[PHOTO] OBJECTIVE: Long-term growth of
R. Robin Menzies capital
Portfolio Manager
PORTFOLIO: At least 80% in a
diversified portfolio of common
stocks and convertible securities
of companies domiciled outside of
the United States
INCEPTION: February 16, 1993
</Table>
NET ASSETS AT JUNE 30, 2003: $62,904,510
Q: HOW DID THE FUND PERFORM FOR THE FIRST SIX MONTHS OF 2003?
A: In the first six months of 2003, the total return for the Fund was
8.21%,(1) compared with the total return of 9.85% for the MSCI EAFE Index(2)
during the same period. This welcome increase came as markets recovered strongly
from their low levels of late March as the uncertainty over war dissipated. The
weakness of the U.S. dollar boosted the return from investing internationally.
In local currency terms, the MSCI EAFE Index had a total return of only 4.79%.
Most markets performed well; MSCI Germany, for example, had a total return of
21.40%. Japan and Hong Kong were notable laggards, with total returns for their
respective MSCI Indices of 3.06% and 3.48%.(3) MSCI Industry returns were even
more widely varied than country returns. While in general consumer-related
industries performed relatively poorly, those sectors originally viewed with a
great uncertainty performed better than expected, as investor confidence
returned. Software and services rose by over 30%, for example, while food,
beverage and tobacco remained unchanged.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A: The Fund performed slightly less well than the MSCI EAFE Index due to
relatively poor stock selection in Continental Europe, and as a result of
holding working cash balances as markets rose. Favorable factors included having
a good stock selection in the UK and a small exposure to emerging markets.
Despite the lackluster performance of the food, beverage and tobacco industry,
the Fund's holdings in that industry performed well.
- --------------------------------------------------------------------------------
"We will continue to concentrate on seeking well-run and fundamentally strong
companies for the Fund."
- --------------------------------------------------------------------------------
Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A: The end of the war in Iraq, very low interest rates, and continuing
monetary stimulation are all factors that appear to provide a positive
background for recovery, especially in the USA, which is important for economic
activity in the rest of the world. However, we believe that consumer and
business confidence may take time to recover from the uncertainties of the last
few years. Companies are focusing more on improving their balance sheets than
making new capital investments and consumers want to see evidence of improving
employment prospects before they increase discretionary expenditure. In the
short-term, our concern is that investor expectations have run ahead of
underlying economic realities, but our long-term mood is optimistic. We will
continue to concentrate on seeking well-run and fundamentally strong companies
for the Fund.
- --------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Returns represent past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
(2) The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far
East (EAFE) Index is an unmanaged index that is generally considered to be
representative of international stock market activity. The MSCI EAFE Index is
not available for direct investment, and its returns do not reflect the fees and
expenses that have been deducted from the Fund.
(3) These indexes are all unmanaged indexes generally considered to be
representative of their covered region. The MSCI Germany Index is generally
considered to be representative of the stock market activity of Germany. The
MSCI Japan Index is generally considered to be representative of Japanese stock
market activity. The MSCI Hong Kong Index is generally considered to be
representative of the stock market activity of Hong Kong. The returns for these
indexes do not reflect the fees and expenses that have been deducted from the
Fund. Likewise, return figures for the Indexes do not reflect any sales charges
that an investor may pay when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
16
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
PORTFOLIO COMPOSITION BY GEOGRAPHIC LOCATION
AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
CONTINENTAL
UK JAPAN ASIA EX-JAPAN EUROPE AUSTRALASIA EMERGING MARKETS
- -- ----- ------------- ----------- ----------- ----------------
28.61% 19.36% 1.16% 42.61% 4.28% 3.98%
</Table>
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Company Percent of Total Net Assets Industry Sector Country
- --------------------------------------------------------------------------------------------------------------------
1. GlaxoSmithKline PLC 3.81% Pharmaceuticals United Kingdom
- --------------------------------------------------------------------------------------------------------------------
2. Vodafone Group 3.71% Wireless Telecommunication Services United Kingdom
- --------------------------------------------------------------------------------------------------------------------
3. Nokia OYJ 3.17% Communications Equipment Finland
- --------------------------------------------------------------------------------------------------------------------
4. Imperial Tobacco 2.76% Tobacco United Kingdom
- --------------------------------------------------------------------------------------------------------------------
5. Total S.A. 2.73% Oil and Gas France
- --------------------------------------------------------------------------------------------------------------------
6. Sanofi-Synthelabo S.A. 2.14% Pharmaceuticals France
- --------------------------------------------------------------------------------------------------------------------
7. Novartis AG 1.97% Pharmaceuticals Switzerland
- --------------------------------------------------------------------------------------------------------------------
8. ENI SPA 1.94% Oil and Gas Italy
- --------------------------------------------------------------------------------------------------------------------
9. Royal Bank of Scotland 1.79% Commercial Banks United Kingdom
- --------------------------------------------------------------------------------------------------------------------
10. HSBC Hldgs. 1.73% Commercial Banks United Kingdom
- --------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception Since
Date 1 year 3 Years 5 Years 10 Years Inception
- -------------------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 2/16/93 -9.91% -17.13% -6.62% 3.48% 4.19%
- -------------------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 -13.96% -18.39% -7.48% 3.00% 3.73%
- -------------------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/1/96 -11.07% -18.14% -7.66% NA -1.37%
- -------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 -13.74% -18.69% -7.85% NA -1.37%
- -------------------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 -10.94% NA NA NA -17.24%
- -------------------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 -11.83% NA NA NA -17.24%
- -------------------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 -10.07% NA NA NA -13.66%
- -------------------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 -10.97% NA NA NA -13.66%
- -------------------------------------------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum of 3% for Class B shares
and 1% for Class C and Class K shares), except where noted. Returns
represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
17
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
<Table>
[PHOTO] OBJECTIVE: Long-term capital
Edward H. Hocknell appreciation
Portfolio Manager
PORTFOLIO: At least 80% in a
portfolio of common stocks and
convertible securities issued by
companies in emerging markets
INCEPTION: May 1, 1997
</Table>
NET ASSETS AT JUNE 30, 2003: $53,198,696
Q: HOW DID THE FUND PERFORM IN THE FIRST SIX MONTHS OF 2003?
A: Emerging markets were in the forefront of the equity rally this year,
outperforming their developed peers. For the first six months of 2003, the Fund
returned 14.13%(1) compared to an increase of 16.13% in the Morgan Stanley
Capital International (MSCI) Emerging Markets Free (EMF) Index.(2) The rise in
the MSCI EMF Index compares with an 11.45% rise in the MSCI World Index(3) and
an 11.76% increase in the S&P 500 Index.(4) Within the emerging markets,
developing Europe was a notable performer, with Russia up 43.5%.(5) Latin
America gave up some of its relative strength towards the end of the second
quarter, although smaller markets, such as Argentina and Venezuela, continued
their upward trend unabated. The diversity of returns was considerable over such
a short period of time, with the star performer being Venezuela, up 61.1%, and
Hungary, the laggard, down 2.5%.(5) The key driver was excess liquidity as
interest rates continued to trend downwards and as investors seemed to have
regained their appetite for risk. Foreign exchange rate movements have also been
a feature of returns. The general weakness of the U.S. dollar was exacerbated by
a growing perception of improving political and economic developments in Brazil,
Turkey and South Africa, whose currencies have appreciated 19.8%, 14.6% and
12.7% respectively, over the last six months.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A: The Fund slightly underperformed the MSCI EMF Index due to relatively poor
stock selection in South Africa, Turkey and Chile, and an exposure to
"defensive" industries such as food, beverage and tobacco. On a positive note,
relative returns were good in Russia and Brazil, both helped by the strength of
the energy and materials sectors.
- --------------------------------------------------------------------------------
"We continue to believe that the emerging markets offer high quality investment
opportunities at relatively low valuations."
- --------------------------------------------------------------------------------
Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A: In our view, the good news is that abundant liquidity is likely to continue
to support equity prices in emerging markets. A current challenge for stock
selection is that the recent rally has led to a significant amount of
indiscriminate buying of stocks, regardless of corporate fundamentals. We
believe this trend may persevere for the time being. In response, we are
marginally reducing exposure to stocks with a "defensive-bias', notably in Latin
America and redeploying the cash in Asian stocks with greater sensitivity to the
economic cycle. We continue to believe that the emerging markets offer high
quality investment opportunities at relatively low valuations.
- --------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Returns represent past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
(2) The Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index is an unmanaged index that is generally considered to be representative of
the stock market activity of emerging markets. The MSCI EMF Index is a market
capitalization weighted index composed of companies representative of the market
structure of 22 emerging market countries in Europe, Latin America and the
Pacific Basin. The MSCI EMF Index excludes closed markets and those shares in
otherwise free markets that may not be purchased by foreigners. The MSCI EMF
Index is not available for direct investment, and the returns do not reflect the
fees and expenses that have been deducted from the Fund's returns. Likewise,
total return figures for the Index do not reflect any sales charges that an
investor may pay when purchasing or redeeming shares of the Fund.
(3) The MSCI World Index is an unmanaged index that is generally considered to
be representative of the global stock market activity of the developed markets.
The MSCI World Index is not available for direct investment, and its returns do
not reflect the fees and expenses that have been deducted from the Fund's
returns. Likewise, total return figures for the Index do not reflect any sales
charges that an investor may pay when purchasing or redeeming shares of the
Fund.
(4) The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect
any sales charges that an investor may pay when purchasing or redeeming shares
of the Fund.
(5) As measured by the MSCI EMF Index.
- --------------------------------------------------------------------------------
18
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
PORTFOLIO COMPOSITION BY GEOGRAPHICAL LOCATION
AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
MIDDLE EAST AND
ASIA AFRICA LATIN AMERICA EUROPE CASH
- ---- --------------- ------------- ------ ----
51.01% 14.82% 21.95% 9.41% 2.81%
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Company Percent of Total Net Assets Industry Sector Country
- -------------------------------------------------------------------------------------------------------------------------
1. Samsung Electronics Co. Ltd. 4.93% Semiconductors and Semiconductor South Korea
Equipment
- -------------------------------------------------------------------------------------------------------------------------
2. Teva Pharmaceutical Inds. Ltd. 3.10% Pharmaceuticals Israel
- -------------------------------------------------------------------------------------------------------------------------
3. PetroChina Co. Ltd. 2.36% Oil and Gas China
- -------------------------------------------------------------------------------------------------------------------------
4. SK Telecom Co. Ltd. 2.23% Wireless Telecommunication Services South Korea
- -------------------------------------------------------------------------------------------------------------------------
5. Kumba Resources Ltd. 2.21% Metals and Mining South Africa
- -------------------------------------------------------------------------------------------------------------------------
6. LUKOIL 2.20% Oil and Gas Russia
- -------------------------------------------------------------------------------------------------------------------------
7. Anglo American Platinum Corp. 2.20% Metals and Mining South Africa
- -------------------------------------------------------------------------------------------------------------------------
8. Taiwan Semiconductor Mfg. Co. Ltd. 2.12% Semiconductors and Semiconductor Taiwan
Equipment
- -------------------------------------------------------------------------------------------------------------------------
9. YUKOS Corp. 2.09% Oil and Gas Russia
- -------------------------------------------------------------------------------------------------------------------------
10. Nedcor Ltd. 2.00% Commercial Banks South Africa
- -------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception
Date 1 year 3 Years 5 Years Since Inception
- -------------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 5/1/97 1.99% -5.43% 5.08% -1.05%
- -------------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 5/1/97 -2.60% -6.87% 4.12% -1.79%
- -------------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/6/97 0.82% -6.64% 3.21% -2.96%
- -------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 -2.18% -7.27% 3.03% -2.96%
- -------------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 0.94% NA NA -4.88%
- -------------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 -0.06% NA NA -4.88%
- -------------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 1.68% NA NA 3.73%
- -------------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 0.68% NA NA 3.73%
- -------------------------------------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum of 3% for Class B shares
and 1% for Class C and Class K shares), except where noted. Returns
represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
- --------------------------------------------------------------------------------
19
THE GUARDIAN INVESTMENT QUALITY BOND FUND
<Table>
[PHOTO] OBJECTIVE: Seeks a high level of
Howard W. Chin current income and capital
Portfolio Manager appreciation without undue risk
to principal
PORTFOLIO: At least 80% in
different kinds of investment
grade bonds and obligations of
the U.S. government and its
agencies
INCEPTION: February 16, 1993
</Table>
NET ASSETS AT JUNE 30, 2003: $226,571,843
Q: HOW DID THE FUND PERFORM FOR THE FIRST SIX MONTHS OF 2003?
A: The Fund had a total return of 4.35%(1) for the six months ended June 30,
2003, outperforming the Fund's benchmark, the Lehman Aggregate Bond Index,(2) by
0.42%. The Index, which measures the taxable fixed income market, had a return
of 3.93%. In addition, the average fund in the Lipper Intermediate Investment
Grade peer group(3) returned 4.31% for the same period (the peer group consists
of 423 other mutual funds that invest in primarily investment grade debt with
average maturities of 5-10 years).
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A: In many respects, the first half of 2003 was a continuation of the pattern
first seen in 2002, where the long-awaited economic recovery saw several fits
and starts without any real sustained forward momentum. With positive economic
news frequently followed by offsetting signs of weakness, the recovery never
quite gained the expected traction and the economy continued with its plodding
ways. The economy grew at a 1.4% rate in the first quarter and the consensus
forecast for the second quarter is only 2.0%.
That said, however, there were some economic bright spots. Consumer spending
and the housing market remained very strong, fueled by decade lows in mortgage
rates and unprecedented refinancing activity. On the other hand, economic
activity was dampened by concerns of geopolitical risk, the war in Iraq, and
sharply escalating energy prices. Even though the war successfully concluded and
energy prices stabilized, the anticipated post-war recovery did not occur. The
economy remained sluggish, capital investment by businesses did not materialize,
and the labor market continued to weaken.
The Federal Reserve Board (Fed) also changed its strategic focus from the
balance of risks between growth and inflation, to the balance between inflation
and deflation. While it considered the risk of deflation to be minor, the Fed
stated that deflation would be its predominant concern for the foreseeable
future. As a result, most investors are now expecting that the Fed will keep
rates low for an extended period of time, in order to prevent the onset of
deflation, while retaining the flexibility to further cut rates if needed. In
fact, we believe the market does not expect the Federal Funds rate to rise by
0.25% from current levels until summer, 2004.
Against the positive interest rate backdrop, the fixed income market turned in
another strong performance. The Treasury market rallied strongly during the
first half of the year, and despite a late selloff in the second quarter, yields
still fell by about 0.30% across the various maturities. The 2-year note
finished at a 1.31% yield while the 10-year note finished at 3.52%. (At the
height of the rally, the yield of the 10-year Treasury closed at a multi-decade
low of 3.11%).
- --------------------------------------------------------------------------------
"Our asset allocation strategy within structured products also helped the Fund
to outperform the Fund's benchmark."
- --------------------------------------------------------------------------------
The spread sectors performed even better as each sector outperformed
comparable duration Treasuries. Most notably, corporate bonds turned in a
stellar performance returning 7.32%, as measured by the Lehman Credit Index(2)
during the first half and outperformed comparable duration Treasuries by 3.47%,
easily besting the previous full-year record. Much of this outperformance was
driven by strong investor demand and fueled by the expectation that corporate
bonds would be well positioned to take advantage of the balance sheet
improvement effort undertaken by corporate America and the anticipation of an
impending economic recovery.
The various structured products sectors also performed well, although not to
the same extent as the corporate sector. Commercial mortgage-backed securities
(CMBS)(4) fared the best, returning 5.33% and outpacing comparable duration
Treasuries by 1.59%. The asset-backed securities (ABS)(4) market returned 3.39%
and outpaced comparable duration Treasuries by 1.26%. Mortgage-backed securities
(MBS)(4) lagged these two sectors, but in light of the interest
- --------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Since June 1, 1994, the investment adviser for the
Fund has assumed certain ordinary operating expenses for the Fund. Without this
assumption of expenses, returns would have been lower. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
(2) The Lehman Aggregate Bond Index and the Lehman Credit Index are unmanaged
indices that are generally considered to be representative of U.S. bond market
activity and U.S. investment grade corporate bond market activity, respectively.
The Indices are not available for direct investment, and their returns do not
reflect the fees and expenses that have been deducted from the Fund. Likewise,
return figures for the Indices do not reflect any sales charges that an investor
may have to pay when purchasing or redeeming shares of the Fund.
(3) Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service. Its database of performance information is based on
historical returns, which assume the reinvestment of dividends and distributions
and the deduction of all fund expenses. Lipper return figures do not reflect the
deduction of any sales charges that an investor may pay when purchasing or
redeeming shares of the Fund.
(4) The respective indices are: the Lehman Commercial Mortgage-Backed Securities
(CMBS) Index, the Lehman Asset-Backed Securities (ABS) Index, and the Lehman
Mortgage-Backed Securities (MBS) Index.
- --------------------------------------------------------------------------------
20
THE GUARDIAN INVESTMENT QUALITY BOND FUND
rate rally and the dramatic surge in refinancing risk, it was to be expected
that they would perform the least well. Nonetheless, the sector still posted a
positive return of 1.60% and outperformed comparable duration Treasuries by
0.46%. Despite their increased risk, MBS still enjoyed very strong investor
demand as the MBS financing market provided attractive incremental returns,
while the cash flows generated by the unprecedented refinancing activity created
its own demand as investors needed to reinvest these funds within the MBS
market.
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A: We believed that spread sectors were very attractive coming into 2003 and
well positioned to take advantage of the expected economic recovery. As a
result, we adopted overweighted exposures in both corporate bonds and structured
products. Although the recovery was less robust than we had expected, both
sectors still performed very well.
As discussed above, corporates were far and away the best performing asset
class in the first half of 2003 and our overweights served the Fund well. In
fact, many of the specific subsectors where we chose to strongly overweight
performed even better than the average sector in the Lehman Credit Index. Of
particular note, the media-cable sector (8.13% of excess returns) and the
wirelines sector (6.11%) made outsized contributions to the Fund's performance.
Our asset allocation strategy within structured products also helped the Fund
to outperform the Fund's benchmark. We were overweighted in all three
subsectors, but we were much more strongly overweighted in CMBS and ABS relative
to MBS and as noted above, these two sectors posted significantly greater excess
returns.
Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A: We remain cautiously optimistic that the recovery will gain some momentum
but believe that sluggish growth is the most likely scenario in the near term.
We also believe that interest rates will remain in a fairly narrow range near
their current levels and may not significantly increase until 2004.
We remain positive on the spread sectors. While we don't necessarily expect
them to perform at the same strong pace seen in the first half--most notably the
corporate sector--we believe the relatively benign interest rate environment and
the steep yield curve will continue to favor these sectors. As a result, we will
maintain our overweighted exposure in all the spread sectors in the near term.
Finally, we still believe the key to the recovery is the resumption of capital
investment by businesses. Low interest rates will continue to bolster the
housing market and consumer spending is likely to continue its strong pace,
aided by the $350 million fiscal stimulus program recently passed by Congress.
However, it is unclear whether these factors will be sufficient to spark the
needed capital expenditures. Businesses remain focused on cost cutting and debt
reduction. Until revenues and profits demonstrate some greater permanence,
businesses may be reluctant to invest, especially in light of the current
surplus in manufacturing capacity. Similarly, the labor market is not likely to
improve in the near term as earlier productivity gains are now allowing
businesses to increase output without adding labor. As with capital
expenditures, we will need to see a sharp and sustainable increase in demand
before more resources are likely to be added.
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception
Date 1 year 3 Years 5 Years 10 Years Since Inception
- ------------------------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 2/16/93 10.18% 9.48% 6.91% 6.27% 6.37%
- ------------------------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 5.22% 7.81% 5.93% 5.78% 5.90%
- ------------------------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 8/7/00 9.26% NA NA NA 8.54%
- ------------------------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 8/7/00 6.26% NA NA NA 7.95%
- ------------------------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 9.36% NA NA NA 8.57%
- ------------------------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 8.36% NA NA NA 8.57%
- ------------------------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 9.74% NA NA NA 8.62%
- ------------------------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 8.74% NA NA NA 8.62%
- ------------------------------------------------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum of 3% for Class B shares
and 1% for Class C and Class K shares), except where noted. Since June 1,
1994, the investment adviser for the Fund has assumed certain ordinary
operating expenses for the Fund. Without this assumption of expenses,
returns would have been lower. Returns represent past performance and are
not indicative of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than the original cost.
- --------------------------------------------------------------------------------
21
THE GUARDIAN HIGH YIELD BOND FUND
<Table>
[PHOTO] OBJECTIVE: Seeks current income.
Peter J. Liebst Capital appreciation is a
Portfolio Manager secondary objective
PORTFOLIO: At least 80% is invested
in corporate bonds and other debt
securities that, at the time of
purchase, are rated below
investment grade or are unrated
INCEPTION: September 1, 1998
</Table>
NET ASSETS AT JUNE 30, 2003: $67,760,482
Q: HOW DID THE FUND PERFORM DURING THE FIRST HALF OF 2003?
A: The Guardian High Yield Bond Fund posted an 11.84%(1) return for the six
months ended June 30, 2003. The Fund underperformed the overall high yield
market by 6.65% as the Fund's benchmark, the Lehman Brothers Corporate High
Yield Index,(2) posted an 18.49% return for the period.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A: The first six months of 2003 was a remarkable start for the year with the
high yield market posting an 18.49% return, its best six-month performance since
1991. During this period the market saw an increase in demand, liquidity, new
issuance, and a dramatic recovery in the secondary market. The result, investors
significantly reduced the risk premium demanded in the high yield market.
With the underlying risk free Treasury rate dropping during the period to lows
not seen in 45 years, both institutional and individual investors increased
their appetite for risk in search for higher yields. This was seen in high yield
mutual funds as over $21.6 billion of net inflows came into funds during the
first two quarters of 2003, more than twice the inflows experienced over the
whole of 2002. Responding to this demand, new issuance surged and prices for
securities in the secondary market rose sharply. The risk premium in the high
yield market, as measured by the average premium yield over comparable
Treasuries, dropped from 9.10% at the beginning of 2003, to 6.22% as of June
30th.
The crucial component to understanding the performance of the high yield
market over the first half of the year is to examine where within the market
returns originated. The answer for the first half of 2003 was predominantly in
issuers of a lower, more speculative credit quality, and further concentrated in
sectors which experienced significant credit and earnings deterioration over the
last three years. Segmenting the high yield market along the lines of credit
quality (as defined by Moody's Investor Services rating classifications), the
lower quality Caa category generated a six month return of 40.50%, significantly
outperforming the higher quality Ba and single B categories which produced a
12.41% and 16.79% returns, respectively. Further concentration of returns were
seen within industry sectors, with the underlying theme being 2002's troubled
sectors were 2003's best performers. As an example, both electric utilities and
telecommunications, each representing a significant weight within the high yield
market, produced sizable negative returns during 2002 only to rebound in the
first half of 2003 posting returns of 43.41% and 32.36%, respectively.
The above market dynamics were the principal reasons for The Guardian High
Yield Bond Fund's underperformance over the first half of 2003. The Fund's
investment management style focuses on selecting securities of companies that we
believe have fundamental financial integrity and sufficient earnings capacity to
sustain the capital structure. This approach typically limits the Fund's
exposure to the lower credit quality levels, which was the case during the first
half of 2003. Additionally, due to financial uncertainties facing most of the
issuers within the electric utilities sector, the Fund maintained a significant
underweight throughout the period which proved detrimental to performance as
this sector has the largest weight within the market, and produced the highest
return over the period.
- --------------------------------------------------------------------------------
"The Fund's overall strategy was to maximize the total return of a diversified
fixed-income portfolio principally composed of below investment grade
securities."
- --------------------------------------------------------------------------------
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD AND WHAT IS YOUR
OUTLOOK FOR THE FUTURE?
A: The Fund's overall strategy was to maximize the total return of a
diversified fixed-income portfolio principally composed of below investment
grade securities. In pursuing this strategy, the Fund examines not only the
macro economic and industry environment, but priority is placed on our
identification of individual investment opportunities that we believe exhibit an
appropriate capital structure and a predictable earnings outlook. The pursuit of
this investment style limited the Fund's total exposure during the first half of
the year to lower quality issuers as well as some industries, which we judged to
have risks making the outlook too speculative.
While signs of a slowly improving U.S. economy have been reported recently,
the Fund remains cautious with regard to the timing of notable improvement. The
Fund will continue to follow its disciplined investment style emphasizing
financial strength and outlook when selecting investments.
- --------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Since inception, the investment adviser for the
Fund has assumed certain ordinary operating expenses for the Fund. Without this
assumption of expenses, returns would have been lower. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
(2) The Lehman Brothers Corporate High Yield Index is an unmanaged index that is
generally considered to be representative of U.S. corporate high yield bond
market activity. The Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund's returns. Likewise, return figures for the Index do not reflect any sales
charges that an investor may have to pay when purchasing or redeeming shares of
the Fund.
- --------------------------------------------------------------------------------
22
THE GUARDIAN HIGH YIELD BOND FUND
CREDIT QUALITY
AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
SHORT TERM BBB BB B CCC
- ---------- --- -- - ---
0.92% 5.64% 28.67% 59.43% 5.34%
</Table>
<Table>
<Caption>
- -----------------------------------------------------
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Company Percent of Total Net Assets
- -----------------------------------------------------
1. Allied Waste NA, Inc. 3.94%
- -----------------------------------------------------
2. Nextel Comm., Inc. 2.77%
- -----------------------------------------------------
3. Qwest Corp. 2.61%
- -----------------------------------------------------
4. Iron Mountain, Inc. 1.36%
- -----------------------------------------------------
5 Intrawest Corp. 1.33%
- -----------------------------------------------------
6. Michael Foods, Inc. 1.27%
- -----------------------------------------------------
7. St. John Knits Int'l., Inc. 1.21%
- -----------------------------------------------------
8. J.C. Penney Co., Inc. 1.15%
- -----------------------------------------------------
9. Flextronics Int'l. Ltd. 1.13%
- -----------------------------------------------------
10 Playtex Products, Inc. 1.13%
- -----------------------------------------------------
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception Since
Date 1 year 3 Years Inception
- ---------------------------------------------------------------------------------
Class A Shares (without sales charge) 9/1/98 14.04% 3.05% 3.62%
- ---------------------------------------------------------------------------------
Class A Shares (with sales charge) 9/1/98 8.91% 1.48% 2.64%
- ---------------------------------------------------------------------------------
Class B Shares (without sales charge) 9/1/98 13.04% 2.22% 2.63%
- ---------------------------------------------------------------------------------
Class B Shares (with sales charge) 9/1/98 10.04% 1.58% 2.44%
- ---------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 13.21% NA 2.26%
- ---------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 12.21% NA 2.26%
- ---------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 13.59% NA 5.26%
- ---------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 12.59% NA 5.26%
- ---------------------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Total return
figures for Class A shares do not take into account the current maximum
sales charge of 4.5%, except where noted. Total return figures for Class B,
Class C and Class K shares do not take into account the contingent deferred
sales charge applicable to such shares (maximum 3% for Class B shares and
1% for Class C and Class K shares), except where noted. Since inception,
the investment adviser for the Fund has assumed certain ordinary operating
expenses for the Fund. Without this assumption of expenses, returns would
have been lower. Returns represent past performance and are not indicative
of future results. Investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
the original cost.
- --------------------------------------------------------------------------------
23
THE GUARDIAN TAX-EXEMPT FUND
<Table>
[PHOTO] OBJECTIVE: Seeks to maximize
Alexander M. Grant, Jr. current income exempt from
Portfolio Manager federal income taxes, consistent
with the preservation of capital
PORTFOLIO: At least 80% in
investment grade municipal debt
obligations
INCEPTION: February 16, 1993
</Table>
NET ASSETS AT JUNE 30, 2003: $90,857,173
Q: HOW DID THE GUARDIAN TAX-EXEMPT FUND PERFORM IN THE FIRST HALF OF 2003?
A: The Guardian Tax-Exempt Fund produced a total return of 4.40%(1) for the
first half of 2003. The Lehman Municipal Bond Index(2) produced a total return
of 3.81% for the same period. The latter reflects the different investment
parameters of that Index, which includes all bonds and maturities. Even so, The
Guardian Tax-Exempt Fund exceeded it by 0.59%.
We believe that more meaningful peer group comparisons are from Lipper and
Morningstar. The Lipper General Municipal Debt peer group(3) returned 3.38% for
the first six months of the year. In Morningstar's(4) universe of municipal
national long funds, the average return was 3.41%. The Guardian Tax-Exempt Fund
outperformed Morningstar's universe of municipal national long funds by 0.99%.
For the one-year period ending June 30, 2003, Lipper ranks the Fund 16 out of
290 funds in the average and in the 6th percentile. For the three-year period
ended June 30, 2003, Lipper ranks the Fund 13 out of 251 funds and in the 6th
percentile. For the five-year period ended June 30, 2003, the Fund ranks 7 out
of 217 funds and in the 4th percentile. For the ten-year period ended June 30,
2003, the Fund ranks 46 out of 103 funds and in the 45th percentile.
As of June 30, 2003, the Fund's 30-day yield was 3.70%, which compares up to a
5.69% taxable equivalent yield for a person in the highest federal income tax
bracket in 2003.
Q: WHAT STRATEGIES DID YOU USE TO MANAGE THE FUND?
A: Benefiting from historically low interest rates, municipal issuers
continued to issue bonds at record levels. For the first six months of 2003,
$200.47 billion in long-term bonds were issued, a 20% increase over the $166.55
billion issued in the first half of 2002. The high new issue six-month volume
exceeded yearly volume for 1994, 1995, and 1996, which were $165.03 billion,
$159.98 billion, and $185.01 billion, respectively.
Investors poured money into municipal bonds, allowing the market to absorb
this volume. Wealthy individuals and businesses were attracted to this asset
class as a way to preserve capital, diversify risk, and generate tax-exempt
income.
- --------------------------------------------------------------------------------
"Our strategy continued to be to buy good quality, attractively structured
national market names and stay away from "hot" deals or lower investment quality
bonds."
- --------------------------------------------------------------------------------
Our strategy continued to be to buy good quality, attractively structured
national market names and stay away from "hot" deals or lower investment quality
bonds. On the sell side, we selectively sold retail and institutional blocks
when the prices were attractive in terms of the spread relative to our
benchmarks.
Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A: The increased volume in the first six months of 2003 was easily absorbed by
traditional institutional and retail investors with investment capital made
available by coupon and redemption payments as well as by crossovers and
arbitrageurs (who usually buy taxable bonds) brought in by the attractive ratios
to taxable bonds. As long as the lower interest rate environment continues, we
would expect these issuance and investment patterns to continue. If interest
rates do not decline any further and in fact increase, we would expect new
issuance for refundings to decline in the second half of 2003. In 2002, new
issuance for refundings was $92.0 billion, versus $64.7 billion in 2001. For the
first six months of 2003 new issuance for refundings was $52.58 billion versus
$41.60 billion for the first six months of 2002, a 26.4% increase.
- --------------------
(1) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Total return
represents return for Class A shares and does not take into account the current
maximum sales charge of 4.5%. Since June 1, 1994, the investment adviser for the
Fund has assumed certain ordinary operating expenses for the Fund. Without this
assumption of expenses, returns would have been lower. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
(2) The Lehman Municipal Bond Index is an unmanaged index that is generally
considered to be representative of U.S. municipal bond activity. The Lehman
Municipal Bond Index is not available for direct investment, and its return does
not reflect the expenses that have been deducted from the Fund. Likewise, return
figures for the Lehman Municipal Bond Index do not reflect any sales charges
that an investor may pay when purchasing or redeeming shares of the Fund.
(3) Lipper, Inc. is an independent mutual fund monitoring and rating service.
Its database performance information is based on historical total returns, which
assume the reinvestment of dividends and distributions and the deduction of all
fund expenses. Lipper returns do not reflect the deduction of sales charges that
an investor may pay when purchasing or redeeming shares of the Fund. There were
304 funds in the Lipper General Municipal Debt peer group (the peer group
invests primarily in municipal debt issues rated in the top four credit
ratings), for the six-month period ended June 30, 2003.
(4) (R)2002 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed;
and (3) is not warranted to be accurate, complete or timely. Morningstar is not
responsible for any damages or losses arising from any use of this information
and has not granted its consent to be considered or deemed an "expert" under the
Securities Act of 1933. Returns represent past performance and are no guarantee
of future results. Morningstar's database of performance information is based on
historical total returns, which assumes the reinvestment of dividends and
distributions, and the deduction of all fund expenses. There were 264 funds in
Morningstar's universe of municipal national long funds for the six-month period
ended June 30, 2003.
- --------------------------------------------------------------------------------
24
THE GUARDIAN TAX-EXEMPT FUND
Insurance companies were one of the largest sources of funding for the
tax-exempt market. Increasing profitability continued to fuel their demand for
tax-exempt income. Also, the strength of the economic recovery, inflationary
pressures and enacted tax law changes in Washington and the states will continue
to be variables to monitor. They are critical influences on interest rates, new
issuance volume, credit quality and investor demand.
PORTFOLIO COMPOSITION BY SECTOR ALLOCATION
AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
STATE GENERAL LOCAL GENERAL
SHORT-TERM OBLIGATION BONDS OBLIGATION BONDS REVENUE BONDS INSURED BONDS
- ---------- ---------------- ---------------- ------------- -------------
1.80% 7.65% 10.77% 19.84% 59.94%
</Table>
CREDIT QUALITY
AS OF JUNE 30, 2003
[PIE CHART]
<Table>
<Caption>
AAA/US GOVT. & GOVT
SHORT-TERM AGENCY AA A
- ---------- ------------------- -- -
1.80% 74.71% 18.24% 5.25%
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1) FOR PERIODS ENDED JUNE 30, 2003
Inception
Date 1 year 3 Years 5 Years 10 Years Since Inception
- ------------------------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 2/16/93 9.90% 8.92% 6.31% 5.44% 5.58%
- ------------------------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 4.95% 7.26% 5.34% 4.96% 5.11%
- ------------------------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 9.08% NA NA NA 7.73%
- ------------------------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 8.08% NA NA NA 7.73%
- ------------------------------------------------------------------------------------------------------------
</Table>
(1) Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. The
return figures shown do not reflect the deduction of taxes that a
shareholder may pay on redemption of shares. Total return figures for Class
A shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class C shares do not take
into account the contingent deferred sales charges applicable to such
shares (maximum of 1%) except where noted. Since June 1, 1994, the
investment adviser for the Fund has assumed certain ordinary operating
expenses for the Fund. Without this assumption of expenses, returns would
have been lower. Returns represent past performance and are not a guarantee
of future results. Investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
the original cost.
- --------------------------------------------------------------------------------
25
THE GUARDIAN CASH MANAGEMENT FUND
<Table>
[PHOTO] OBJECTIVE: Seeks as high a level of
Alexander M. Grant, Jr. current income as is consistent
Portfolio Manager with liquidity and preservation
of capital
PORTFOLIO: Short-term money market
instruments
INCEPTION: November 3, 1982
</Table>
NET ASSETS AT JUNE 30, 2003: $647,381,905
Q: HOW DID THE GUARDIAN CASH MANAGEMENT FUND PERFORM FOR THE FIRST HALF OF
2003?
A: As of June 30, 2003 the effective 7-day net annualized yield for The
Guardian Cash Management Fund was 0.33%.(1) The Fund produced a total net
annualized return of 0.49%(2) for the six months ended June 30, 2003. In
comparison, the effective 7-day annualized yield of Tier One money market funds
as measured by iMoneyNet, Inc. was 0.45%; total return for the same category was
0.58%. iMoneyNet, Inc. is a research firm that tracks money market funds.
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD?
A: The Guardian Cash Management Fund is a place for many of our investors to
put their money while they decide on their preferred long-term investment
vehicle, be it stocks or bonds. Also, some of our investors prefer the relative
stability of the money markets. To best accommodate all our investors, we will
continue to try to provide a strong 7-day yield, while offering safety and
liquidity. Our investment strategy was to create a diversified portfolio of
money market instruments that presented minimal credit risks according to our
criteria. As always, we only purchase securities for the Fund's portfolio from
issuers that have received ratings in the two highest credit quality categories
established by nationally recognized statistical ratings organizations like
Moody's Investors Service, Inc. and Standard & Poor's Corporation. Most of the
portfolio (74.06%) was invested in commercial paper and short maturity corporate
bonds; the balance was invested in repurchase agreements (4.00%) and floating
rate taxable municipal bonds (21.94%).
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE?
A: Money market funds are directly affected by the actions of the Federal
Reserve Board (Fed). With the Federal Open Market Committee (FOMC) rate cuts of
Federal Funds totaling 4.25% in 2001, an additional 0.50% in 2002, and an
additional 0.25% in the second quarter of 2003, the money markets will remain
tight with issuers encouraged to alter their rate offerings in response to stock
market expectations and monetary policy. The Federal Funds target is the rate at
which banks can borrow from each other overnight. While the Fed does not set
this rate, it can establish a target rate and, through open market operations,
the Fed can move member banks in the direction of that target rate. The Discount
Rate is the rate at which banks can borrow directly from the Federal Reserve.
Another factor affecting performance was the portfolio's average maturity of 46
days as of June 30, 2003. The average Tier One money market fund as measured by
iMoneyNet, Inc. had an average maturity of 52 days.
- --------------------------------------------------------------------------------
"To best accommodate all our investors, we will continue to try to provide a
strong 7-day yield, while offering safety and liquidity."
- --------------------------------------------------------------------------------
Q: WHAT IS YOUR OUTLOOK FOR THE FUTURE?
A: Uncertainty regarding the direction of the stock market contributes to
large daily inflows and outflows of money in the Fund. As the stock market
rallies, our investors typically transfer cash to equity funds. During those
times when the stock market stalls, we see cash inflows. With money market
yields at historic lows, investors have been seeking alternative investment
vehicles, such as ultra-short bond funds, for "parking" money between stock
market fluctuations. Some investors have been focused less on the capital
preservation feature of money market funds and have sought these alternate
vehicles, which may generate higher yields, but with more risk. We believe that
if the FOMC continues to cut rates, we may see more money market investments
diverted to these alternate investments.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS
TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO
LOSE MONEY BY INVESTING IN THE FUND.
- --------------------
(1) Yields are annualized historical figures. Effective yield assumes reinvested
income. Yields will vary as interest rates change. Past performance is not
indicative of future results.
(2) Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. Since June 1, 1994,
the investment adviser for the Fund has assumed certain ordinary operating
expenses of the Fund. Without these expense assumptions, the returns would have
been lower. The total return and yield figures cited represent total return and
yield for Class A shares. Returns represent past performance and are not
indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than the original cost.
- --------------------------------------------------------------------------------
26
SCHEDULE OF INVESTMENTS
June 30, 2003 (Unaudited)
/ / The Guardian Park Avenue Fund
<Table>
<Caption>
COMMON STOCKS -- 98.0%
Shares Value
- ------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 2.6%
702,000 Lockheed Martin Corp. $ 33,394,140
- ------------------------------------------------------------------------------------
BEVERAGES -- 3.0%
127,500 Anheuser-Busch Cos., Inc. 6,538,978
396,400 Coca-Cola Co. 18,396,924
295,500 PepsiCo., Inc. 13,149,750
---------------
38,085,652
- ------------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.5%
300,200 Amgen, Inc.* 19,945,288
- ------------------------------------------------------------------------------------
CAPITAL MARKETS -- 3.8%
145,300 Goldman Sachs Group, Inc. 12,168,875
207,166 Legg Mason, Inc. 13,455,432
112,400 Lehman Brothers Hldgs., Inc. 7,472,352
159,100 Merrill Lynch & Co., Inc. 7,426,788
229,400 State Street Corp. 9,038,360
---------------
49,561,807
- ------------------------------------------------------------------------------------
CHEMICALS -- 1.9%
598,200 E.I. Du Pont de Nemours & Co. 24,909,048
- ------------------------------------------------------------------------------------
COMMERCIAL BANKS -- 6.1%
322,700 Bank of America Corp. 25,502,981
153,125 Charter One Financial, Inc. 4,774,437
144,800 M & T Bank Corp. 12,195,056
406,700 North Fork Bancorporation, Inc. 13,852,202
443,900 Wells Fargo & Co. 22,372,560
---------------
78,697,236
- ------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.7%
2,063,100 Cisco Systems, Inc.* 34,433,139
- ------------------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 3.6%
417,900 Dell Computer Corp.* 13,356,084
724,500 Hewlett Packard Co. 15,431,850
684,900 Storage Technology Corp.* 17,629,326
---------------
46,417,260
- ------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.4%
733,666 Citigroup, Inc. 31,400,905
- ------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.8%
1,243,000 Verizon Comm. 49,036,350
- ------------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.5%
288,300 FPL Group, Inc. 19,272,855
- ------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.0%
313,200 CDW Corp.* 14,344,560
520,200 Jabil Circuit, Inc.* 11,496,420
---------------
25,840,980
- ------------------------------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 1.1%
161,200 Nabors Industries, Inc.* 6,375,460
233,100 Noble Corp.* 7,995,330
---------------
14,370,790
- ------------------------------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 2.9%
689,000 Wal-Mart Stores, Inc. 36,978,630
- ------------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.6%
116,400 Hershey Foods Corp. 8,108,424
365,000 Kraft Foods, Inc. 11,880,750
---------------
19,989,174
- ------------------------------------------------------------------------------------
GAS UTILITIES -- 0.7%
505,100 NiSource, Inc. 9,596,900
- ------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.3%
143,500 Boston Scientific Corp.* $ 8,767,850
92,700 C.R. Bard, Inc. 6,610,437
301,700 Medtronic, Inc. 14,472,549
---------------
29,850,836
- ------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 4.1%
487,200 AmerisourceBergen Corp. 33,787,320
383,800 HCA, Inc. 12,296,952
226,100 Laboratory Corp. of America Hldgs.* 6,816,915
---------------
52,901,187
- ------------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.0%
449,500 Newell Rubbermaid, Inc. 12,586,000
- ------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.0%
108,300 Colgate-Palmolive Co. 6,275,985
219,700 Procter & Gamble Co. 19,592,846
---------------
25,868,831
- ------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 3.2%
1,457,400 General Electric Co. 41,798,232
- ------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 2.0%
684,600 Concord EFS, Inc.* 10,077,312
451,600 Fiserv, Inc.* 16,081,476
---------------
26,158,788
- ------------------------------------------------------------------------------------
INSURANCE -- 7.3%
114,700 Ambac Financial Group, Inc. 7,598,875
739,100 American Int'l. Group, Inc. 40,783,538
430,500 Chubb Corp. 25,830,000
403,200 Marsh & McLennan Cos., Inc. 20,591,424
---------------
94,803,837
- ------------------------------------------------------------------------------------
MEDIA -- 3.0%
202,100 New York Times Co. 9,195,550
687,400 Viacom, Inc.* 30,011,884
---------------
39,207,434
- ------------------------------------------------------------------------------------
METALS AND MINING -- 1.4%
704,800 Alcoa, Inc. 17,972,400
- ------------------------------------------------------------------------------------
OIL AND GAS -- 6.2%
358,800 ChevronTexaco Corp. 25,905,360
704,000 Exxon Mobil Corp. 25,280,640
873,100 Occidental Petroleum Corp. 29,292,505
---------------
80,478,505
- ------------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.6%
130,900 Avon Products, Inc. 8,141,980
- ------------------------------------------------------------------------------------
PHARMACEUTICALS -- 9.0%
237,700 Abbott Laboratories 10,401,752
231,540 Johnson & Johnson 11,970,618
362,200 Merck & Co., Inc. 21,931,210
2,112,540 Pfizer, Inc. 72,143,241
---------------
116,446,821
- ------------------------------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 4.5%
392,500 Analog Devices, Inc.* 13,666,850
851,200 Applied Materials, Inc.* 13,500,032
1,037,600 Intel Corp. 21,565,478
211,000 KLA-Tencor Corp.* 9,809,390
---------------
58,541,750
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</Table>
See notes to financial statements.
27
THE GUARDIAN PARK AVENUE FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ------------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------------
SOFTWARE -- 7.7%
985,900 Adobe Systems, Inc. $ 31,617,813
1,529,000 Microsoft Corp. 39,157,690
1,554,800 Oracle Corp.* 18,688,696
570,100 PeopleSoft, Inc.* 10,028,059
---------------
99,492,258
- ------------------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 0.8%
151,600 Federal National Mortgage Assn. 10,223,904
- ------------------------------------------------------------------------------------
TOBACCO -- 0.7%
194,800 Altria Group, Inc. 8,851,712
- ------------------------------------------------------------------------------------
TRADING COMPANIES AND DISTRIBUTORS -- 1.0%
274,300 W.W. Grainger, Inc. 12,826,268
- ------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,227,939,560) 1,268,080,897
- ------------------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 1.1%
Principal
Amount Value
- ------------------------------------------------------------------------------------
$ 14,831,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $14,831,453 at
1.10%, due 7/1/2003 (1)
(COST $14,831,000) $ 14,831,000
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.1%
(COST $1,242,770,560) 1,282,911,897
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.9% 11,147,248
- ------------------------------------------------------------------------------------
NET ASSETS -- 100% $ 1,294,059,145
- ------------------------------------------------------------------------------------
* Non-income producing security.
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- ------------------------------------------------------------------------------------
</Table>
See notes to financial statements.
28
/ / The Guardian UBS Large Cap Value Fund
<Table>
<Caption>
COMMON STOCKS -- 97.7%
Shares Value
- ---------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 2.3%
27,900 United Technologies Corp. $ 1,976,157
- ---------------------------------------------------------------------------
AUTO COMPONENTS -- 1.0%
10,500 Johnson Controls, Inc. 898,800
- ---------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.0%
22,100 Cephalon, Inc.* 909,636
- ---------------------------------------------------------------------------
BUILDING PRODUCTS -- 2.1%
75,400 Masco Corp. 1,798,290
- ---------------------------------------------------------------------------
CAPITAL MARKETS -- 8.7%
113,500 J.P. Morgan Chase & Co. 3,879,430
42,800 Mellon Financial Corp. 1,187,700
58,100 Morgan Stanley 2,483,775
-----------
7,550,905
- ---------------------------------------------------------------------------
CHEMICALS -- 2.3%
64,600 Dow Chemical Co. 2,000,016
- ---------------------------------------------------------------------------
COMMERCIAL BANKS -- 9.0%
11,100 Bank of America Corp. 877,233
52,600 FleetBoston Financial Corp. 1,562,746
33,600 PNC Financial Svcs. Group 1,640,016
73,400 Wells Fargo & Co. 3,699,360
-----------
7,779,355
- ---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.9%
84,600 Motorola, Inc. 797,778
- ---------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 2.0%
80,900 Hewlett Packard Co. 1,723,170
- ---------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 1.6%
42,100 Martin Marietta Materials, Inc. 1,414,981
- ---------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 5.9%
119,900 Citigroup, Inc. 5,131,720
- ---------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 4.1%
52,400 BellSouth Corp. 1,395,412
86,000 SBC Comm., Inc. 2,197,300
-----------
3,592,712
- ---------------------------------------------------------------------------
ELECTRIC UTILITIES -- 8.8%
54,600 CMS Energy Corp. 442,260
28,700 DTE Energy Co. 1,108,968
37,300 Exelon Corp. 2,230,913
55,700 FirstEnergy Corp. 2,141,665
38,300 Progress Energy, Inc. 1,681,370
-----------
7,605,176
- ---------------------------------------------------------------------------
GAS UTILITIES -- 1.6%
47,300 Sempra Energy 1,349,469
- ---------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 0.6%
20,800 Baxter Int'l., Inc. 540,800
- ---------------------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 4.2%
11,100 Anthem, Inc. 856,365
55,200 UnitedHealth Group 2,773,800
-----------
3,630,165
- ---------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.3%
41,800 Newell Rubbermaid, Inc. 1,170,400
- ---------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.2%
19,900 Kimberly-Clark Corp. 1,037,586
- ---------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 1.7%
35,900 First Data Corp. 1,487,696
- ---------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------
INSURANCE -- 3.4%
29,100 American Int'l. Group, Inc. $ 1,605,738
26,500 Hartford Financial Svcs. Group, Inc. 1,334,540
-----------
2,940,278
- ---------------------------------------------------------------------------
MACHINERY -- 3.9%
33,900 Illinois Tool Works, Inc. 2,232,315
29,400 Pentair, Inc. 1,148,364
-----------
3,380,679
- ---------------------------------------------------------------------------
MEDIA -- 2.5%
30,000 Viacom, Inc. 1,309,800
43,000 Walt Disney Co. 849,250
-----------
2,159,050
- ---------------------------------------------------------------------------
OIL AND GAS -- 5.9%
46,000 ConocoPhillips 2,520,800
71,400 Exxon Mobil Corp. 2,563,974
-----------
5,084,774
- ---------------------------------------------------------------------------
PHARMACEUTICALS -- 7.1%
65,500 Bristol-Myers Squibb Corp. 1,778,325
32,900 Johnson & Johnson 1,700,930
36,500 SICOR, Inc.* 742,410
42,500 Wyeth 1,935,875
-----------
6,157,540
- ---------------------------------------------------------------------------
ROAD AND RAIL -- 3.8%
55,000 Burlington Northern Santa Fe 1,564,200
89,100 Norfolk Southern Corp. 1,710,720
-----------
3,274,920
- ---------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 5.8%
39,400 Federal Home Loan Mortgage Corp. 2,000,338
59,900 GreenPoint Financial Corp. 3,051,306
-----------
5,051,644
- ---------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 5.0%
241,900 Nextel Comm., Inc. 4,373,552
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $73,731,128) 84,817,249
- ---------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 2.4%
Principal
Amount Value
- ---------------------------------------------------------------------------
$2,057,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $2,057,063 at
1.10%, due 7/1/2003 (1)
(COST $2,057,000) $ 2,057,000
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(COST $75,788,128) 86,874,249
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (0.1)% (53,240)
- ---------------------------------------------------------------------------
NET ASSETS -- 100% $86,821,009
- ---------------------------------------------------------------------------
</Table>
* Non-income producing security.
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
29
/ / The Guardian Park Avenue Small Cap Fund
<Table>
<Caption>
COMMON STOCKS -- 99.7%
Shares Value
- -----------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.0%
86,500 EDO Corp. $ 1,531,050
- -----------------------------------------------------------------------------
AIRLINES -- 2.0%
101,400 Continental Airlines, Inc.* 1,517,958
82,200 Skywest, Inc. 1,566,732
-------------
3,084,690
- -----------------------------------------------------------------------------
AUTO COMPONENTS -- 1.7%
112,500 American Axle & Mfg. Hldgs., Inc.* 2,688,750
- -----------------------------------------------------------------------------
BEVERAGES -- 1.0%
71,700 Cott Corp.* 1,483,473
- -----------------------------------------------------------------------------
BIOTECHNOLOGY -- 4.0%
51,000 Charles River Laboratories Int'l.* 1,641,180
74,200 Exact Sciences Corp.* 813,232
76,000 NPS Pharmaceuticals, Inc.* 1,849,840
73,800 Protein Design Labs., Inc.* 1,031,724
60,600 Vertex Pharmaceuticals, Inc.* 884,760
-------------
6,220,736
- -----------------------------------------------------------------------------
CAPITAL MARKETS -- 2.3%
120,600 Investors Financial Svcs. Corp. 3,498,606
- -----------------------------------------------------------------------------
CHEMICALS -- 1.9%
74,300 Cabot Corp. 2,132,410
36,000 Spartech Corp. 763,560
-------------
2,895,970
- -----------------------------------------------------------------------------
COMMERCIAL BANKS -- 6.9%
17,700 City National Corp. 788,712
30,200 Community Bank System, Inc. 1,147,600
62,800 East West Bancorp, Inc. 2,269,592
55,500 Southwest Bancorp. of Texas, Inc.* 1,804,305
58,800 UCBH Hldgs., Inc. 1,686,384
116,600 W Hldg. Co., Inc. 1,972,872
30,750 Wintrust Financial Corp. 910,200
-------------
10,579,665
- -----------------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 2.0%
43,800 Banta Corp. 1,417,806
66,975 FTI Consulting, Inc.* 1,672,366
-------------
3,090,172
- -----------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.9%
38,700 Avocent Corp.* 1,158,291
254,100 Extreme Networks, Inc.* 1,346,730
72,300 F5 Networks, Inc.* 1,218,255
55,000 McDATA Corp.* 797,500
108,700 Polycom, Inc.* 1,506,582
-------------
6,027,358
- -----------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 1.4%
158,200 Synaptics, Inc.* 2,129,372
- -----------------------------------------------------------------------------
CONSTRUCTION AND ENGINEERING -- 2.5%
29,200 EMCOR Group, Inc.* 1,441,312
55,500 Jacobs Engineering Group, Inc.* 2,339,325
-------------
3,780,637
- -----------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 1.8%
115,700 Financial Federal Corp.* 2,823,080
- -----------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.6%
57,700 Comwlth. Tel. Enterprises, Inc.* 2,537,069
- -----------------------------------------------------------------------------
ELECTRIC UTILITIES -- 0.5%
26,700 Great Plains Energy, Inc. 771,096
- -----------------------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.0%
51,000 Benchmark Electronics, Inc.* 1,568,760
43,000 Varian, Inc.* 1,490,810
-------------
3,059,570
- -----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 0.5%
24,100 Patterson-UTI Energy, Inc.* $ 780,840
- -----------------------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 1.8%
101,300 United Natural Foods, Inc.* 2,850,582
- -----------------------------------------------------------------------------
FOOD PRODUCTS -- 1.6%
39,400 American Italian Pasta Co.* 1,641,010
38,500 Smithfield Foods, Inc.* 882,420
-------------
2,523,430
- -----------------------------------------------------------------------------
GAS UTILITIES -- 1.0%
58,800 AGL Resources, Inc. 1,495,872
- -----------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 3.3%
93,700 ALARIS Medical Systems, Inc.* 1,213,415
104,200 American Medical Systems Hldgs., Inc.* 1,757,854
103,700 Conceptus, Inc.* 1,456,985
29,600 Synovis Life Technologies, Inc.* 584,304
-------------
5,012,558
- -----------------------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 2.0%
39,800 Henry Schein, Inc.* 2,083,132
50,400 LifePoint Hospitals, Inc.* 1,055,376
-------------
3,138,508
- -----------------------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 3.1%
61,500 California Pizza Kitchen, Inc.* 1,322,250
78,900 Penn National Gaming, Inc.* 1,621,395
76,500 Ruby Tuesday, Inc. 1,891,845
-------------
4,835,490
- -----------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.9%
51,200 Toll Brothers, Inc.* 1,449,472
- -----------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.8%
62,000 Dial Corp. 1,205,900
- -----------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 2.5%
50,300 CACI Int'l., Inc.* 1,725,290
154,400 Keane, Inc.* 2,104,472
-------------
3,829,762
- -----------------------------------------------------------------------------
INSURANCE -- 5.4%
44,700 Brown & Brown, Inc. 1,452,750
68,900 Harleysville Group, Inc. 1,586,078
44,700 Montpelier Re Hldgs. Ltd.* 1,412,520
38,400 Philadelphia Conso. Hldg. Corp.* 1,551,360
57,900 ProAssurance Corp.* 1,562,721
18,000 RenaissanceRe Hldgs. Ltd. 819,360
-------------
8,384,789
- -----------------------------------------------------------------------------
INTERNET SOFTWARE AND SERVICES -- 0.9%
233,300 Netegrity, Inc.* 1,362,472
- -----------------------------------------------------------------------------
MACHINERY -- 2.1%
54,300 CLARCOR, Inc. 2,093,265
32,200 IDEX Corp. 1,166,928
-------------
3,260,193
- -----------------------------------------------------------------------------
MEDIA -- 1.8%
43,100 Cumulus Media, Inc.* 815,883
34,500 Media General, Inc. 1,973,400
-------------
2,789,283
- -----------------------------------------------------------------------------
METALS AND MINING -- 0.5%
190,400 Hecla Mining Co.* 805,392
- -----------------------------------------------------------------------------
OIL AND GAS -- 2.9%
88,800 Spinnaker Exploration Co.* 2,326,560
53,100 Western Gas Resources, Inc. 2,102,760
-------------
4,429,320
- -----------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
30
THE GUARDIAN PARK AVENUE SMALL CAP FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -----------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 2.8%
81,700 Glatfelter $ 1,205,075
280,600 Louisiana-Pacific Corp.* 3,041,704
-------------
4,246,779
- -----------------------------------------------------------------------------
PHARMACEUTICALS -- 3.2%
21,300 Angiotech Pharmaceuticals, Inc.* 867,762
25,500 Medicis Pharmaceutical Corp. 1,445,850
48,500 Taro Pharmaceutical Inds. Ltd.* 2,661,680
-------------
4,975,292
- -----------------------------------------------------------------------------
REAL ESTATE -- 2.0%
61,400 Arden Realty, Inc. 1,593,330
41,600 Home Pptys. NY, Inc. 1,465,984
-------------
3,059,314
- -----------------------------------------------------------------------------
ROAD AND RAIL -- 1.7%
43,100 P.A.M. Transportation Svcs., Inc.* 1,082,672
74,100 Werner Enterprises, Inc. 1,570,920
-------------
2,653,592
- -----------------------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 7.4%
171,400 Credence Systems Corp. 1,451,758
104,900 Entegris, Inc.* 1,409,856
96,400 Exar Corp.* 1,526,012
106,700 Micrel, Inc.* 1,108,613
69,100 MKS Instruments, Inc.* 1,248,637
168,100 Pericom Semiconductor Corp.* 1,563,330
275,200 RF Micro Devices, Inc.* 1,656,704
46,800 Varian Semiconductor Equipment Assoc., Inc.* 1,392,768
-------------
11,357,678
- -----------------------------------------------------------------------------
SOFTWARE -- 7.3%
168,000 Borland Software Corp.* 1,641,360
22,400 Bottomline Technologies, Inc.* 180,768
66,100 FactSet Research Systems, Inc. 2,911,705
33,800 Hyperion Solutions Corp.* 1,141,088
208,300 Lawson Software, Inc.* 1,618,491
69,000 Manhattan Assoc., Inc.* 1,791,930
221,200 Novell, Inc.* 681,296
123,800 RSA Security, Inc.* 1,330,850
-------------
11,297,488
- -----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------
SPECIALTY RETAIL -- 4.0%
78,100 Chico's FAS, Inc.* $ 1,644,005
66,300 Cost Plus, Inc.* 2,364,258
65,700 Group 1 Automotive, Inc.* 2,129,337
-------------
6,137,600
- -----------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 2.8%
67,800 BankUnited Financial Corp.* 1,366,170
133,500 Federal Agricultural Mortgage Corp.* 2,983,725
-------------
4,349,895
- -----------------------------------------------------------------------------
WATER UTILITIES -- 0.9%
56,500 Philadelphia Subn. Corp. 1,377,470
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $130,238,983) 153,810,265
- -----------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 4.0%
Principal
Amount Value
- -----------------------------------------------------------------------------
$6,231,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $6,231,190 at
1.10%, due 7/1/2003 (1)
(COST $6,231,000) $ 6,231,000
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 103.7%
(COST $136,469,983) 160,041,265
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (3.7)% (5,713,026)
- -----------------------------------------------------------------------------
NET ASSETS -- 100% $ 154,328,239
- -----------------------------------------------------------------------------
</Table>
* Non-income producing security.
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
31
/ / The Guardian UBS Small Cap Value Fund
<Table>
<Caption>
COMMON STOCKS -- 95.7%
Shares Value
- --------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 2.2%
25,700 Esterline Technologies Corp.* $ 447,437
16,600 Triumph Group, Inc.* 467,622
------------
915,059
- --------------------------------------------------------------------------
AUTO COMPONENTS -- 0.8%
8,000 Superior Industries Int'l., Inc. 333,600
- --------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.3%
39,500 Serologicals Corp.* 538,385
- --------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.9%
42,900 Apogee Enterprises, Inc. 386,958
- --------------------------------------------------------------------------
CAPITAL MARKETS -- 1.2%
21,400 Allied Capital Corp. 494,340
- --------------------------------------------------------------------------
CHEMICALS -- 2.8%
31,900 A. Schulman, Inc. 512,314
20,100 Lubrizol Corp. 622,899
------------
1,135,213
- --------------------------------------------------------------------------
COMMERCIAL BANKS -- 8.3%
19,900 City National Corp. 886,744
53,300 Colonial BancGroup, Inc. 739,271
4,500 Cullen/Frost Bankers, Inc. 144,450
22,260 F. N. B. Corp. 673,588
9,300 Greater Bay Bancorp 189,906
30,700 Trustmark Corp. 781,929
------------
3,415,888
- --------------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 6.6%
27,000 John H. Harland Co. 706,320
23,900 McGrath Rentcorp 639,086
10,800 Mobile Mini, Inc.* 176,364
14,400 New England Business Svc., Inc. 432,000
27,800 Right Management Consultants, Inc.* 351,670
6,000 School Specialty, Inc. 170,760
13,600 Standard Register Co. 224,128
------------
2,700,328
- --------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.4%
26,600 3Com Corp.* 124,488
2,700 Black Box Corp. 97,740
11,400 Harris Corp. 342,570
------------
564,798
- --------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 1.0%
100,700 Quantum Corp.* 407,835
- --------------------------------------------------------------------------
CONSTRUCTION AND ENGINEERING -- 0.9%
7,500 EMCOR Group, Inc. 370,200
- --------------------------------------------------------------------------
ELECTRIC UTILITIES -- 3.4%
20,600 ALLETE, Inc. 546,930
23,200 DQE, Inc. 349,624
11,400 Hawaiian Electric Industries, Inc. 522,690
------------
1,419,244
- --------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.4%
33,500 Regal-Beloit Corp. 639,850
9,700 Roper Industries, Inc. 360,840
------------
1,000,690
- --------------------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.1%
6,600 CTS Corp. 68,970
26,300 Methode Electronics, Inc. 282,725
25,100 Park Electrochemical Corp. 500,745
------------
852,440
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- --------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 2.7%
47,000 Newpark Resources, Inc.* $ 257,560
4,800 Oceaneering Int'l., Inc.* 122,640
33,600 Offshore Logistics, Inc. 730,800
------------
1,111,000
- --------------------------------------------------------------------------
FOOD PRODUCTS -- 3.3%
17,600 Int'l. Multifoods Corp.* 403,216
40,600 Interstate Bakeries Corp. 515,620
11,100 Lancaster Colony Corp. 429,126
------------
1,347,962
- --------------------------------------------------------------------------
GAS UTILITIES -- 1.9%
17,500 AGL Resources, Inc. 445,200
13,200 Atmos Energy Corp. 327,360
------------
772,560
- --------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 3.1%
10,300 Cooper Cos., Inc. 358,131
17,000 ICU Medical, Inc.* 529,550
18,600 Ocular Sciences, Inc.* 369,210
------------
1,256,891
- --------------------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 5.4%
8,400 Coventry Health Care, Inc.* 387,744
23,400 RehabCare Group, Inc.* 342,810
24,600 Renal Care Group, Inc.* 866,166
32,700 Stewart Enterprises, Inc.* 140,610
21,000 Sunrise Senior Living, Inc.* 469,980
------------
2,207,310
- --------------------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 0.9%
4,800 CBRL Group, Inc. 186,528
19,900 Dover Downs Gaming & Entertainment, Inc. 184,075
------------
370,603
- --------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 4.2%
49,800 Department 56, Inc.* 763,434
10,900 Furniture Brands Int'l., Inc.* 284,490
10,500 Libbey, Inc. 238,350
16,000 Stanley Furniture Co., Inc. 438,560
------------
1,724,834
- --------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 3.1%
33,500 American Management Systems, Inc.* 478,380
68,300 BearingPoint, Inc.* 659,095
56,000 Computer Task Group, Inc.* 159,040
------------
1,296,515
- --------------------------------------------------------------------------
INSURANCE -- 2.7%
31,900 AmerUs Group Co. 899,261
6,750 Fidelity National Financial, Inc. 207,630
------------
1,106,891
- --------------------------------------------------------------------------
LEISURE EQUIPMENT AND PRODUCTS -- 3.1%
28,900 JAKKS Pacific, Inc. 384,081
13,400 Nautilus Group, Inc. 166,160
12,000 Polaris Industries, Inc. 736,800
------------
1,287,041
- --------------------------------------------------------------------------
MACHINERY -- 2.5%
35,400 Federal Signal Corp. 621,978
11,900 Harsco Corp. 428,995
------------
1,050,973
- --------------------------------------------------------------------------
MEDIA -- 0.8%
17,900 Saga Comm., Inc.* 348,155
- --------------------------------------------------------------------------
METALS AND MINING -- 1.5%
20,800 Quanex Corp. 618,176
- --------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
32
THE GUARDIAN UBS SMALL CAP VALUE FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- --------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 1.5%
14,700 Equitable Resources, Inc. $ 598,878
- --------------------------------------------------------------------------
OIL AND GAS -- 2.5%
21,100 Cimarex Energy Co.* 501,125
20,100 Spinnaker Exploration Co. 526,620
------------
1,027,745
- --------------------------------------------------------------------------
REAL ESTATE -- 8.5%
22,700 EastGroup Pptys., Inc. 612,900
62,400 Equity Inns, Inc. 430,560
49,300 Innkeepers USA Trust 335,240
21,800 Kilroy Realty Corp. 599,500
18,800 Parkway Pptys., Inc. 790,540
43,900 ResortQuest Int'l., Inc.* 193,599
15,900 SL Green Realty Corp. 554,751
------------
3,517,090
- --------------------------------------------------------------------------
ROAD AND RAIL -- 1.6%
31,700 Genesee & Wyoming, Inc.* 652,069
- --------------------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 0.6%
34,300 Integrated Silicon Solution, Inc.* 238,042
- --------------------------------------------------------------------------
SOFTWARE -- 2.2%
19,700 Mentor Graphics Corp.* 285,256
22,100 Reynolds & Reynolds Co. 631,176
------------
916,432
- --------------------------------------------------------------------------
SPECIALTY RETAIL -- 5.0%
16,700 Genesco, Inc. 295,590
11,000 Linens 'n Things, Inc.* 259,710
17,200 Michaels Stores, Inc. 654,632
27,900 Party City Corp.* 286,533
7,200 Rent-A-Center, Inc.* 545,832
------------
2,042,297
- --------------------------------------------------------------------------
TEXTILES, APPAREL AND LUXURY GOODS -- 0.3%
5,500 Movado Group, Inc. 119,625
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- --------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 3.0%
35,100 IndyMac Bancorp, Inc. $ 892,242
16,600 Roslyn Bancorp, Inc. 356,734
------------
1,248,976
- --------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $34,445,745) 39,395,043
- --------------------------------------------------------------------------
<Caption>
EXCHANGE-TRADED FUND -- 2.3%
- --------------------------------------------------------------------------
7,300 iShares Russell 2000
Value Index Fund
(COST $775,448) 938,780
- --------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 1.9%
Principal
Amount Value
- --------------------------------------------------------------------------
$771,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $771,024 at
1.10%, due 7/1/2003 (1)
(COST $771,000) $ 771,000
- --------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9%
(COST $35,992,193) 41,104,823
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.1% 37,033
- --------------------------------------------------------------------------
NET ASSETS -- 100% $ 41,141,856
- --------------------------------------------------------------------------
</Table>
* Non-income producing security.
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
33
/ / The Guardian Asset Allocation Fund
<Table>
<Caption>
COMMON STOCKS -- 13.5%
Shares Value
- -------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.2%
3,044 Boeing Co. $ 104,470
2,736 Honeywell Int'l., Inc. 73,462
1,046 Lockheed Martin Corp. 49,758
606 Northrop Grumman Corp. 52,292
1,924 Raytheon Co. 63,184
318 United Technologies Corp. 22,524
--------------
365,690
- -------------------------------------------------------------
AIR FREIGHT AND LOGISTICS -- 0.1%
2,119 United Parcel Svcs., Inc. 134,980
- -------------------------------------------------------------
AIRLINES -- 0.0%
2,503 Southwest Airlines Co. 43,052
- -------------------------------------------------------------
AUTOMOBILES -- 0.1%
5,835 Ford Motor Co. 64,127
2,438 General Motors Corp. 87,768
1,219 Harley-Davidson, Inc. 48,589
--------------
200,484
- -------------------------------------------------------------
BEVERAGES -- 0.4%
2,438 Anheuser-Busch Cos., Inc. 124,460
4,595 Coca-Cola Co. 213,254
3,197 Coca-Cola Enterprises, Inc. 58,026
4,642 PepsiCo., Inc. 206,569
2,305 The Pepsi Bottling Group, Inc. 46,146
--------------
648,455
- -------------------------------------------------------------
BIOTECHNOLOGY -- 0.2%
2,242 Amgen, Inc.* 148,958
798 Biogen, Inc.* 30,324
1,035 Chiron Corp.* 45,250
1,726 MedImmune, Inc.* 62,775
--------------
287,307
- -------------------------------------------------------------
BUILDING PRODUCTS -- 0.0%
2,608 Masco Corp. 62,201
- -------------------------------------------------------------
CAPITAL MARKETS -- 0.5%
2,547 Bank of New York, Inc. 73,226
8,048 Charles Schwab Corp. 81,204
1,000 Goldman Sachs Group, Inc. 83,750
7,435 J.P. Morgan Chase & Co. 254,128
980 Lehman Brothers Hldgs., Inc. 65,151
2,356 Mellon Financial Corp. 65,379
410 Merrill Lynch & Co., Inc. 19,139
3,352 Morgan Stanley 143,298
57 State Street Corp. 2,246
--------------
787,521
- -------------------------------------------------------------
CHEMICALS -- 0.2%
567 Dow Chemical Co. 17,554
3,035 E.I. Du Pont de Nemours & Co. 126,378
1,085 Monsanto Co. 23,479
1,174 PPG Industries, Inc. 59,569
1,770 Rohm & Haas Co. 54,923
--------------
281,903
- -------------------------------------------------------------
COMMERCIAL BANKS -- 0.8%
4,591 Bank of America Corp. 362,827
1,872 BB&T Corp. 64,209
2,217 Fifth Third Bancorp 127,123
4,514 FleetBoston Financial Corp. 134,111
1,410 KeyCorp 35,631
3,312 U.S. Bancorp 81,144
4,992 Wachovia Corp. 199,480
3,950 Wells Fargo & Co. 199,080
--------------
1,203,605
- -------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------
Shares Value
- -------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 0.2%
5,396 Cendant Corp.* $ 98,855
1,807 Cintas Corp. 64,040
1,630 Pitney Bowes, Inc. 62,608
2,779 Waste Management, Inc. 66,946
--------------
292,449
- -------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.3%
15,125 Cisco Systems, Inc.* 252,436
6,482 Corning, Inc.* 47,902
6,075 Motorola, Inc. 57,287
2,384 QUALCOMM, Inc. 85,228
--------------
442,853
- -------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 0.5%
4,776 Dell Computer Corp.* 152,641
5,386 EMC Corp.* 56,391
8,215 Hewlett Packard Co. 174,980
4,066 Int'l. Business Machines 335,445
12,916 Sun Microsystems, Inc.* 59,414
--------------
778,871
- -------------------------------------------------------------
CONSUMER FINANCE -- 0.2%
1,972 American Express Co. 82,449
1,586 Capital One Financial Corp. 78,000
4,750 MBNA Corp. 98,990
2,265 SLM Corp. 88,720
--------------
348,159
- -------------------------------------------------------------
DISTRIBUTORS -- 0.1%
2,967 Genuine Parts Co. 94,974
- -------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 0.3%
11,373 Citigroup, Inc. 486,764
- -------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4%
1,564 ALLTEL Corp. 75,416
1,989 AT & T Corp. 38,288
5,078 BellSouth Corp. 135,227
5,290 SBC Comm., Inc. 135,160
1,710 Sprint Corp. (FON Group) 24,624
4,971 Verizon Comm. 196,106
--------------
604,821
- -------------------------------------------------------------
ELECTRIC UTILITIES -- 0.3%
1,705 Entergy Corp. 89,990
1,818 Exelon Corp. 108,735
1,214 FPL Group, Inc. 81,156
1,395 Progress Energy, Inc. 61,241
1,682 Public Svc. Enterprise Group,
Inc. 71,064
2,650 Southern Co. 82,574
1,292 TXU Corp. 29,005
--------------
523,765
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.1%
424 Cooper Industries Ltd. 17,511
1,106 Emerson Electric Co. 56,517
--------------
74,028
- -------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.1%
2,990 Agilent Technologies, Inc.* 58,455
4,723 Solectron Corp.* 17,664
--------------
76,119
- -------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 0.1%
2,205 Baker Hughes, Inc. 74,022
1,681 Schlumberger Ltd. 79,965
--------------
153,987
- -------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
34
THE GUARDIAN ASSET ALLOCATION FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -------------------------------------------------------------
Shares Value
- -------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 0.5%
840 Albertson's, Inc. $ 16,128
2,620 CVS Corp. 73,439
2,409 Kroger Co.* 40,182
1,099 Safeway, Inc.* 22,485
10,695 Wal-Mart Stores, Inc. 574,001
--------------
726,235
- -------------------------------------------------------------
FOOD PRODUCTS -- 0.3%
2,194 Archer-Daniels-Midland Co. 28,237
2,621 Campbell Soup Co. 64,215
2,662 ConAgra, Inc. 62,823
928 General Mills, Inc. 43,996
2,424 H.J. Heinz Co. 79,944
667 Hershey Foods Corp. 46,463
2,012 Kellogg Co. 69,152
1,269 W.M. Wrigley Jr. Co. 71,356
--------------
466,186
- -------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 0.4%
2,128 Baxter Int'l., Inc. 55,328
2,122 Becton Dickinson & Co., Inc. 82,440
1,466 Boston Scientific Corp.* 89,573
1,285 C.R. Bard, Inc. 91,633
2,016 Guidant Corp. 89,490
1,756 Medtronic, Inc. 84,235
1,442 St. Jude Medical, Inc.* 82,915
594 Stryker Corp. 41,206
884 Zimmer Hldgs., Inc.* 39,824
--------------
656,644
- -------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 0.2%
998 AmerisourceBergen Corp. 69,211
746 Cigna Corp. 35,017
306 HCA, Inc. 9,804
3,629 Health Management Associates,
Inc. 66,955
1,178 McKesson Corp. 42,102
1,512 Tenet Healthcare Corp.* 17,615
929 Wellpoint Health Networks, Inc.* 78,315
--------------
319,019
- -------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 0.1%
2,190 Carnival Corp. 71,197
2,751 McDonald's Corp. 60,687
2,943 Starbucks Corp.* 72,162
--------------
204,046
- -------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.3%
614 Clorox Co. 26,187
1,955 Kimberly-Clark Corp. 101,934
3,443 Procter & Gamble Co. 307,047
--------------
435,168
- -------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.6%
1,118 3M Co. 144,200
23,903 General Electric Co. 685,538
6,224 Tyco Int'l. Ltd. 118,131
--------------
947,869
- -------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 0.2%
2,142 Automatic Data Processing, Inc. 72,528
3,414 Concord EFS, Inc.* 50,254
2,525 Electronic Data Systems Corp. 54,161
3,170 First Data Corp. 131,365
957 Paychex, Inc. 28,050
1,608 Sabre Hldgs. Corp. 39,637
--------------
375,995
- -------------------------------------------------------------
INSURANCE -- 0.6%
2,353 AFLAC, Inc. 72,355
2,008 Allstate Corp. 71,585
</Table>
<Table>
<Caption>
- -------------------------------------------------------------
Shares Value
- -------------------------------------------------------------
5,515 American Int'l. Group, Inc. $ 304,318
1,281 Chubb Corp. 76,860
1,104 John Hancock Financial Svcs.,
Inc. 33,926
186 Loews Corp. 8,796
2,164 Marsh & McLennan Cos., Inc. 110,515
2,884 MetLife, Inc. 81,675
1,253 Progressive Corp. 91,594
1,586 Travelers Ppty. Casualty Corp. 25,011
--------------
876,635
- -------------------------------------------------------------
INTERNET SOFTWARE AND SERVICES -- 0.1%
3,255 Yahoo! Inc.* 106,634
- -------------------------------------------------------------
LEISURE EQUIPMENT AND PRODUCTS -- 0.1%
1,149 Eastman Kodak Co. 31,425
3,448 Mattel, Inc. 65,236
--------------
96,661
- -------------------------------------------------------------
MACHINERY -- 0.2%
1,626 Caterpillar, Inc. 90,503
1,491 Deere & Co. 68,139
2,138 Dover Corp. 64,054
--------------
222,696
- -------------------------------------------------------------
MEDIA -- 0.5%
11,612 AOL Time Warner, Inc.* 186,837
2,046 Clear Channel Comm., Inc.* 86,730
3,217 Comcast Corp.-Class A* 97,089
216 Comcast Corp.-Class A Special* 6,227
629 Gannett Co., Inc. 48,314
1,395 New York Times Co. 63,473
77 Tribune Co. 3,719
4,849 Viacom, Inc.* 211,707
5,567 Walt Disney Co. 109,948
--------------
814,044
- -------------------------------------------------------------
METALS AND MINING -- 0.0%
2,364 Alcoa, Inc. 60,282
- -------------------------------------------------------------
MULTILINE RETAIL -- 0.1%
1,602 Kohl's Corp.* 82,311
481 Target Corp. 18,201
--------------
100,512
- -------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 0.1%
3,468 AES Corp.* 22,022
4,604 Duke Energy Corp. 91,850
3,136 El Paso Corp. 25,339
3,916 Williams Cos., Inc. 30,936
--------------
170,147
- -------------------------------------------------------------
OIL AND GAS -- 0.7%
1,406 Anadarko Petroleum Corp. 62,525
147 Burlington Resources, Inc. 7,948
2,887 ChevronTexaco Corp. 208,442
1,233 ConocoPhillips 67,568
16,501 Exxon Mobil Corp. 592,551
2,571 Unocal Corp. 73,762
--------------
1,012,796
- -------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.0%
2,952 Georgia-Pacific Corp. 55,940
- -------------------------------------------------------------
PERSONAL PRODUCTS -- 0.1%
1,376 Avon Products, Inc. 85,587
2,784 Gillette Co. 88,698
--------------
174,285
- -------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
35
THE GUARDIAN ASSET ALLOCATION FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -------------------------------------------------------------
Shares Value
- -------------------------------------------------------------
PHARMACEUTICALS -- 1.2%
1,116 Allergan, Inc. $ 86,044
6,462 Bristol-Myers Squibb Corp. 175,443
3,549 Eli Lilly & Co. 244,775
1,774 Forest Laboratories, Inc.* 97,126
6,872 Johnson & Johnson 355,282
1,779 King Pharmaceuticals, Inc.* 26,258
21,478 Pfizer, Inc. 733,474
3,875 Schering-Plough Corp. 72,075
--------------
1,790,477
- -------------------------------------------------------------
REAL ESTATE -- 0.1%
2,383 Plum Creek Timber Co., Inc. 61,839
1,972 Simon Ppty. Group, Inc. 76,967
--------------
138,806
- -------------------------------------------------------------
ROAD AND RAIL -- 0.1%
2,352 Burlington Northern Santa Fe 66,891
1,674 Union Pacific Corp. 97,125
--------------
164,016
- -------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 0.5%
2,923 Altera Corp. 47,937
754 Analog Devices, Inc.* 26,254
4,648 Applied Materials, Inc.* 73,717
1,688 Broadcom Corp.* 42,048
13,630 Intel Corp. 283,286
1,448 KLA-Tencor Corp.* 67,318
549 Linear Technology Corp. 17,684
794 Maxim Integrated Products, Inc. 27,147
3,302 Micron Technology, Inc.* 38,402
5,091 Texas Instruments, Inc. 89,602
2,346 Xilinx, Inc.* 59,377
--------------
772,772
- -------------------------------------------------------------
SOFTWARE -- 0.6%
1,802 Adobe Systems, Inc. 57,790
3,590 Computer Associates Int'l., Inc. 79,985
26,119 Microsoft Corp. 668,908
2,830 Siebel Systems, Inc.* 26,998
2,739 VERITAS Software Corp.* 78,527
--------------
912,208
- -------------------------------------------------------------
SPECIALTY RETAIL -- 0.3%
1,416 Bed, Bath & Beyond, Inc.* 54,955
1,930 Best Buy Co., Inc.* 84,766
3,143 Home Depot, Inc. 104,096
2,415 Lowe's Cos., Inc. 103,724
3,749 Staples, Inc.* 68,794
5,047 The Gap, Inc. 94,682
--------------
511,017
- -------------------------------------------------------------
TEXTILES, APPAREL AND LUXURY GOODS -- 0.0%
1,255 NIKE, Inc. 67,130
- -------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 0.2%
1,850 Federal National Mortgage Assn. 124,764
4,145 Washington Mutual, Inc. 171,189
--------------
295,953
- -------------------------------------------------------------
TOBACCO -- 0.2%
5,316 Altria Group, Inc. 241,559
509 UST, Inc. 17,830
--------------
259,389
- -------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.1%
12,777 AT & T Wireless Svcs., Inc.* 104,899
- -------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $25,163,719) 20,730,449
- -------------------------------------------------------------
<Caption>
MUTUAL FUNDS -- 83.6%
EQUITY -- 66.6%
15,277,311 The Guardian S&P 500 Index Fund,
Class A (1) $ 102,205,208
- -------------------------------------------------------------
FIXED INCOME -- 17.0%
2,479,290 The Guardian Investment Quality
Bond Fund, Class A (2) 26,106,921
- -------------------------------------------------------------
TOTAL MUTUAL FUNDS
(COST $156,485,070) 128,312,129
- -------------------------------------------------------------
<Caption>
U.S. GOVERNMENT -- 1.9%
Principal
Amount Value
- -------------------------------------------------------------
U.S. Treasury Bill
$2,000,000 0.785%, 9/18/2003 (3) $ 1,996,554
1,000,000 1.10%, 7/10/2003 (3) 999,724
- -------------------------------------------------------------
TOTAL U.S. GOVERNMENT
(COST $2,996,278) 2,996,278
- -------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 1.3%
Principal
Amount Value
- -------------------------------------------------------------
$1,980,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $1,980,061 at
1.10%, due 7/1/2003 (4)
(COST $1,980,000) $ 1,980,000
- -------------------------------------------------------------
TOTAL INVESTMENTS -- 100.3%
(COST $186,625,067) 154,018,856
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.3)%
(459,406)
- -------------------------------------------------------------
NET ASSETS -- 100% $ 153,559,450
- -------------------------------------------------------------
</Table>
* Non-income producing security.
(1) Majority-owned subsidiary.
(2) Affiliated issuer.
(3) The U.S. Treasury Bills are segregated as collateral to cover margin
requirements on open futures contracts.
(4) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
<Table>
<Caption>
PURCHASED (P)/SOLD (S) FUTURES CONTRACTS
Unrealized
Appreciation/
Contracts Type Description Expiration (Depreciation)
- -----------------------------------------------------------------
225 S U.S. Treasury Notes,
5 Year 9/2003 $ 57,850
126 P S&P 500 Index 9/2003 (615,262)
------------
$ (557,412)
- -----------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
36
/ / The Guardian S&P 500 Index Fund
<Table>
<Caption>
COMMON STOCKS -- 97.7%
Shares Value
- ------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.7%
12,039 Boeing Co. $ 413,178
2,868 General Dynamics Corp. 207,930
1,476 Goodrich Corp. 30,996
12,069 Honeywell Int'l., Inc. 324,053
7,259 Lockheed Martin Corp. 345,311
2,626 Northrop Grumman Corp. 226,598
5,860 Raytheon Co. 192,442
2,645 Rockwell Collins, Inc. 65,146
6,791 United Technologies Corp. 481,007
--------------
2,286,661
- ------------------------------------------------------------------------------
AIR FREIGHT AND LOGISTICS -- 1.0%
4,237 FedEx Corp. 262,821
810 Ryder Systems, Inc. 20,752
16,167 United Parcel Svcs., Inc. 1,029,838
--------------
1,313,411
- ------------------------------------------------------------------------------
AIRLINES -- 0.2%
1,785 Delta Airlines, Inc. 26,204
10,945 Southwest Airlines Co. 188,254
--------------
214,458
- ------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.2%
945 Cooper Tire & Rubber Co. 16,623
2,085 Dana Corp. 24,103
8,041 Delphi Automotive Systems Corp. 69,394
4,744 Goodyear Tire & Rubber Co. 24,906
1,229 Johnson Controls, Inc. 105,202
1,852 Visteon Corp. 12,723
--------------
252,951
- ------------------------------------------------------------------------------
AUTOMOBILES -- 0.6%
26,733 Ford Motor Co. 293,796
7,915 General Motors Corp. 284,940
4,354 Harley-Davidson, Inc. 173,550
--------------
752,286
- ------------------------------------------------------------------------------
BEVERAGES -- 2.7%
525 Adolph Coors Co. 25,715
12,007 Anheuser-Busch Cos., Inc. 612,957
995 Brown-Forman Corp. 78,227
35,477 Coca-Cola Co. 1,646,488
6,006 Coca-Cola Enterprises, Inc. 109,009
25,165 PepsiCo., Inc. 1,119,842
4,359 The Pepsi Bottling Group, Inc. 87,267
--------------
3,679,505
- ------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.3%
19,000 Amgen, Inc.* 1,262,360
2,114 Biogen, Inc.* 80,332
2,723 Chiron Corp.* 119,049
3,379 Genzyme Corp.* 141,242
3,661 MedImmune, Inc.* 133,151
--------------
1,736,134
- ------------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.2%
1,062 American Standard Cos., Inc.* 78,514
7,483 Masco Corp. 178,469
--------------
256,983
- ------------------------------------------------------------------------------
CAPITAL MARKETS -- 3.4%
10,676 Bank of New York, Inc. 306,935
1,537 Bear Stearns Cos., Inc. 111,310
19,889 Charles Schwab Corp. 200,680
1,600 Federated Investors, Inc. 43,872
3,801 Franklin Resources, Inc. 148,505
6,786 Goldman Sachs Group, Inc. 568,327
29,597 J.P. Morgan Chase & Co. 1,011,625
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
3,184 Janus Capital Group, Inc. $ 52,218
3,599 Lehman Brothers Hldgs., Inc. 239,262
7,034 Mellon Financial Corp. 195,193
14,254 Merrill Lynch & Co., Inc. 665,377
16,092 Morgan Stanley 687,933
3,195 Northern Trust Corp. 133,519
4,655 State Street Corp. 183,407
1,728 T. Rowe Price Group, Inc. 65,232
--------------
4,613,395
- ------------------------------------------------------------------------------
CHEMICALS -- 1.4%
3,281 Air Products & Chemicals, Inc. 136,489
12,885 Dow Chemical Co. 398,919
15,009 E.I. Du Pont de Nemours & Co. 624,975
1,083 Eastman Chemical Co. 34,299
3,608 Ecolab, Inc. 92,365
1,823 Engelhard Corp. 45,156
685 Great Lakes Chemical Corp. 13,974
1,497 Hercules, Inc.* 14,820
1,377 Int'l. Flavors & Fragrances, Inc. 43,968
3,328 Monsanto Co. 72,018
2,413 PPG Industries, Inc. 122,436
2,266 Praxair, Inc. 136,186
3,134 Rohm & Haas Co. 97,248
1,093 Sigma-Aldrich 59,219
--------------
1,892,072
- ------------------------------------------------------------------------------
COMMERCIAL BANKS -- 6.2%
5,373 AmSouth Bancorporation 117,346
22,164 Bank of America Corp. 1,751,621
16,677 Bank One Corp. 620,051
6,636 BB&T Corp. 227,615
3,302 Charter One Financial, Inc. 102,956
2,548 Comerica, Inc. 118,482
8,186 Fifth Third Bancorp 469,385
1,845 First Tennessee Nat'l. Corp. 81,014
15,151 FleetBoston Financial Corp. 450,136
3,600 Huntington Bancshares, Inc. 70,272
6,165 KeyCorp 155,790
3,114 Marshall & Ilsley Corp. 95,226
8,809 National City Corp. 288,142
2,405 North Fork Bancorporation, Inc. 81,914
4,177 PNC Financial Svcs. Group 203,879
3,484 Regions Financial Corp. 117,690
4,873 SouthTrust Corp. 132,546
4,276 SunTrust Banks, Inc. 253,738
4,126 Synovus Financial Corp. 88,709
27,004 U.S. Bancorp 661,598
2,982 Union Planters Corp. 92,532
20,178 Wachovia Corp. 806,313
24,635 Wells Fargo & Co. 1,241,604
1,438 Zions Bancorporation 72,777
--------------
8,301,336
- ------------------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 1.0%
2,838 Allied Waste Industries, Inc.* 28,522
2,507 Apollo Group, Inc.* 154,832
1,581 Avery Dennison Corp. 79,366
14,291 Cendant Corp.* 261,811
2,425 Cintas Corp. 85,942
997 Deluxe Corp. 44,666
2,052 Equifax, Inc. 53,352
2,604 H & R Block, Inc. 112,623
1,707 Monster Worldwide, Inc.* 33,679
3,634 Pitney Bowes, Inc. 139,582
1,723 R.R. Donnelley & Sons Co. 45,039
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
37
THE GUARDIAN S&P 500 INDEX FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
2,547 Robert Half Int'l., Inc.* $ 48,240
8,974 Waste Management, Inc. 216,184
--------------
1,303,838
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.3%
11,132 ADC Telecomm., Inc.* 25,915
1,131 Andrew Corp.* 10,405
4,030 Avaya, Inc.* 26,034
11,451 CIENA Corp.* 59,431
106,642 Cisco Systems, Inc.* 1,779,855
2,380 Comverse Technology, Inc.* 35,771
19,376 Corning, Inc.* 143,189
18,734 JDS Uniphase Corp.* 65,756
59,431 Lucent Technologies, Inc.* 120,645
32,778 Motorola, Inc. 309,097
12,102 QUALCOMM, Inc. 432,647
2,311 Scientific Atlanta, Inc. 55,094
5,897 Tellabs, Inc.* 38,743
--------------
3,102,582
- ------------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 3.8%
4,953 Apple Computer, Inc.* 94,701
38,046 Dell Computer Corp.* 1,215,950
32,506 EMC Corp.* 340,338
4,621 Gateway, Inc.* 16,867
44,751 Hewlett Packard Co. 953,196
24,669 Int'l. Business Machines 2,035,193
1,823 Lexmark Int'l. Group, Inc.* 129,014
1,379 NCR Corp.* 35,330
4,602 Network Appliance, Inc.* 74,598
46,932 Sun Microsystems, Inc.* 215,887
--------------
5,111,074
- ------------------------------------------------------------------------------
CONSTRUCTION AND ENGINEERING -- 0.0%
1,050 Fluor Corp. 35,322
784 McDermott Int'l., Inc.* 4,963
--------------
40,285
- ------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.0%
1,439 Vulcan Materials Co. 53,344
- ------------------------------------------------------------------------------
CONSUMER FINANCE -- 1.2%
19,169 American Express Co. 801,456
3,150 Capital One Financial Corp. 154,917
18,401 MBNA Corp. 383,477
4,111 Providian Financial Corp.* 38,068
7,101 SLM Corp. 278,146
--------------
1,656,064
- ------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 0.2%
813 Ball Corp. 37,000
752 Bemis Co., Inc. 35,194
2,261 Pactiv Corp.* 44,564
1,181 Sealed Air Corp.* 56,286
697 Temple-Inland, Inc. 29,908
--------------
202,952
- ------------------------------------------------------------------------------
DISTRIBUTORS -- 0.1%
2,486 Genuine Parts Co. 79,577
- ------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.6%
74,611 Citigroup, Inc. 3,193,351
2,359 Moody's Corp. 124,343
5,116 Principal Financial Group, Inc. 164,991
--------------
3,482,685
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.3%
4,514 ALLTEL Corp. 217,665
11,030 AT & T Corp. 212,327
28,012 BellSouth Corp. 745,960
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
1,992 CenturyTel, Inc. $ 69,421
3,719 Citizens Comm. Co.* 47,938
23,823 Qwest Comm. Int'l., Inc.* 113,874
48,750 SBC Comm., Inc. 1,245,562
12,674 Sprint Corp. (FON Group) 182,506
39,396 Verizon Comm 1,554,172
--------------
4,389,425
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.2%
1,753 Allegheny Energy, Inc. 14,813
1,971 Ameren Corp. 86,921
6,284 American Electric Power, Inc. 187,452
4,248 CenterPoint Energy, Inc. 34,621
2,286 CiNergy Corp. 84,102
1,896 CMS Energy Corp. 15,358
3,075 Consolidated Edison, Inc. 133,086
2,335 Constellation Energy Group, Inc. 80,091
5,170 Dominion Resources, Inc. 332,276
2,578 DTE Energy Co. 99,614
4,648 Edison Int'l.* 76,367
3,218 Entergy Corp. 169,846
4,598 Exelon Corp. 275,006
4,395 FirstEnergy Corp. 168,988
2,550 FPL Group, Inc. 170,467
5,509 PG&E Corp.* 116,515
1,212 Pinnacle West Capital Corp. 45,389
2,089 PPL Corp. 89,827
2,954 Progress Energy, Inc. 129,681
3,120 Public Svc. Enterprise Group, Inc. 131,820
9,746 Southern Co. 303,685
2,624 TECO Energy, Inc. 31,462
6,860 TXU Corp. 154,007
6,601 Xcel Energy, Inc. 99,279
--------------
3,030,673
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.4%
2,786 American Power Conversion Corp.* 43,434
1,359 Cooper Industries Ltd. 56,127
6,202 Emerson Electric Co. 316,922
1,094 Power-One, Inc.* 7,822
2,645 Rockwell Automation, Inc. 63,057
767 Thomas & Betts Corp.* 11,083
--------------
498,445
- ------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.4%
6,556 Agilent Technologies, Inc.* 128,170
2,726 Jabil Circuit, Inc.* 60,245
2,802 Molex, Inc. 75,626
2,010 PerkinElmer, Inc. 27,758
7,816 Sanmina-SCI Corp.* 49,319
12,349 Solectron Corp.* 46,185
3,132 Symbol Technologies, Inc. 40,747
1,336 Tektronix, Inc.* 28,858
2,568 Thermo Electron Corp.* 53,979
2,045 Waters Corp.* 59,571
--------------
570,458
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 0.8%
2,317 B.J. Svcs. Co.* 86,563
4,764 Baker Hughes, Inc. 159,927
6,355 Halliburton Co. 146,165
2,092 Nabors Industries, Inc.* 82,739
2,008 Noble Corp.* 68,874
1,317 Rowan Cos., Inc. 29,501
8,249 Schlumberger Ltd. 392,405
4,534 Transocean, Inc.* 99,612
--------------
1,065,786
- ------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
38
THE GUARDIAN S&P 500 INDEX FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 3.8%
5,902 Albertson's, Inc. $ 113,319
6,425 Costco Wholesale Corp.* 235,155
5,636 CVS Corp. 157,977
11,800 Kroger Co.* 196,824
7,230 Safeway, Inc.* 147,926
1,885 Supervalu, Inc. 40,188
9,731 Sysco Corp. 292,319
65,296 Wal-Mart Stores, Inc. 3,504,436
14,630 Walgreen Co. 440,363
2,010 Winn-Dixie Stores, Inc. 24,743
--------------
5,153,250
- ------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.2%
9,568 Archer-Daniels-Midland Co. 123,140
6,069 Campbell Soup Co. 148,690
7,728 ConAgra, Inc. 182,381
5,346 General Mills, Inc. 253,454
5,023 H.J. Heinz Co. 165,658
1,960 Hershey Foods Corp. 136,534
5,844 Kellogg Co. 200,858
1,968 McCormick & Co., Inc. 53,530
11,107 Sara Lee Corp. 208,923
3,230 W.M. Wrigley Jr. Co. 181,623
--------------
1,654,791
- ------------------------------------------------------------------------------
GAS UTILITIES -- 0.3%
1,989 KeySpan Corp. 70,510
1,648 Kinder Morgan, Inc. 90,063
674 NICOR, Inc. 25,012
2,931 NiSource, Inc. 55,689
527 Peoples Energy Corp. 22,603
2,954 Sempra Energy 84,278
--------------
348,155
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.9%
3,019 Applera Corp.-Applied Biosystems Group 57,452
755 Bausch & Lomb, Inc. 28,312
8,470 Baxter Int'l., Inc. 220,220
3,689 Becton Dickinson & Co., Inc. 143,318
3,846 Biomet, Inc. 110,226
5,826 Boston Scientific Corp.* 355,969
721 C.R. Bard, Inc. 51,414
4,422 Guidant Corp. 196,293
17,544 Medtronic, Inc. 841,586
653 Millipore Corp.* 28,974
2,433 St. Jude Medical, Inc.* 139,897
2,817 Stryker Corp. 195,415
2,817 Zimmer Hldgs., Inc.* 126,906
--------------
2,495,982
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 1.7%
2,062 Aetna, Inc. 124,132
1,527 AmerisourceBergen Corp. 105,897
2,046 Anthem, Inc.* 157,849
6,588 Cardinal Health, Inc. 423,608
2,221 Cigna Corp. 104,254
7,462 HCA, Inc. 239,082
3,671 Health Management Associates, Inc. 67,730
2,389 Humana, Inc.* 36,074
4,249 IMS Health, Inc. 76,440
1,456 Manor Care, Inc.* 36,415
4,085 McKesson Corp. 145,998
1,410 Quest Diagnostics, Inc.* 89,958
1,646 Quintiles Transnational Corp.* 23,357
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
6,941 Tenet Healthcare Corp.* $ 80,863
9,220 UnitedHealth Group 463,305
2,138 Wellpoint Health Networks, Inc.* 180,233
--------------
2,355,195
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 1.2%
10,732 Carnival Corp. 348,897
2,575 Darden Restaurants, Inc. 48,873
1,649 Harrah's Entertainment, Inc.* 66,356
5,226 Hilton Hotels Corp. 66,841
1,339 Int'l. Game Technology 137,020
3,443 Marriott Int'l., Inc. 132,280
18,921 McDonald's Corp. 417,397
5,426 Starbucks Corp.* 133,046
4,141 Starwood Hotels & Resorts Worldwide, Inc. 118,391
1,623 Wendy's Int'l., Inc. 47,018
4,234 Yum! Brands, Inc.* 125,157
--------------
1,641,276
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.5%
800 American Greetings Corp.* 15,712
1,127 Black & Decker Corp. 48,968
842 Centex Corp. 65,499
2,219 Fortune Brands, Inc. 115,832
618 KB Home 38,304
2,782 Leggett & Platt, Inc. 57,031
1,066 Maytag Corp. 26,032
3,827 Newell Rubbermaid, Inc. 107,156
1,023 Pulte Homes, Inc. 63,078
811 Snap-On, Inc. 23,543
1,228 Stanley Works 33,893
786 Tupperware Corp. 11,287
933 Whirlpool Corp. 59,432
--------------
665,767
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.0%
3,390 Clorox Co. 144,583
8,248 Colgate-Palmolive Co. 477,972
7,704 Kimberly-Clark Corp. 401,687
18,742 Procter & Gamble Co. 1,671,411
--------------
2,695,653
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 4.1%
5,709 3M Co. 736,347
146,341 General Electric Co. 4,197,060
2,056 Textron, Inc. 80,225
28,991 Tyco Int'l. Ltd. 550,249
--------------
5,563,881
- ------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 1.2%
9,179 Automatic Data Processing, Inc. 310,801
2,428 Computer Sciences Corp.* 92,555
7,400 Concord EFS, Inc.* 108,928
2,482 Convergys Corp.* 39,712
6,747 Electronic Data Systems Corp. 144,723
11,404 First Data Corp. 472,582
2,689 Fiserv, Inc.* 95,755
5,381 Paychex, Inc. 157,717
1,910 Sabre Hldgs. Corp. 47,082
3,991 SunGard Data Systems, Inc.* 103,407
4,516 Unisys Corp.* 55,456
--------------
1,628,718
- ------------------------------------------------------------------------------
INSURANCE -- 4.4%
4,286 ACE Ltd. 146,967
7,659 AFLAC, Inc. 235,514
10,558 Allstate Corp. 376,393
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
39
THE GUARDIAN S&P 500 INDEX FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
1,504 Ambac Financial Group, Inc. $ 99,640
37,976 American Int'l. Group, Inc. 2,095,516
5,649 Aon Corp. 136,028
2,514 Chubb Corp. 150,840
2,309 Cincinnati Financial Corp. 85,641
4,261 Hartford Financial Svcs. Group, Inc. 214,584
2,226 Jefferson-Pilot Corp. 92,290
4,288 John Hancock Financial Svcs., Inc. 131,770
2,766 Lincoln Nat'l. Corp. 98,552
2,851 Loews Corp. 134,824
7,934 Marsh & McLennan Cos., Inc. 405,189
2,115 MBIA, Inc. 103,106
10,421 MetLife, Inc. 295,123
3,156 Progressive Corp. 230,704
7,674 Prudential Financial, Inc. 258,230
1,823 SAFECO Corp. 64,315
3,133 St. Paul Cos., Inc. 114,386
1,831 Torchmark Corp. 68,205
15,308 Travelers Ppty. Casualty Corp. 241,407
3,475 UnumProvident Corp. 46,600
1,913 XL Capital Ltd. 158,779
--------------
5,984,603
- ------------------------------------------------------------------------------
INTERNET AND CATALOG RETAIL -- 0.4%
4,746 eBay, Inc.* 494,438
- ------------------------------------------------------------------------------
INTERNET SOFTWARE AND SERVICES -- 0.2%
9,061 Yahoo! Inc.* 296,838
- ------------------------------------------------------------------------------
LEISURE EQUIPMENT AND PRODUCTS -- 0.2%
1,223 Brunswick Corp. 30,599
4,324 Eastman Kodak Co. 118,261
2,426 Hasbro, Inc. 42,431
6,117 Mattel, Inc. 115,734
--------------
307,025
- ------------------------------------------------------------------------------
MACHINERY -- 1.1%
4,962 Caterpillar, Inc. 276,185
841 Crane Co. 19,032
571 Cummins, Inc. 20,493
2,085 Danaher Corp. 141,884
3,371 Deere & Co. 154,055
2,911 Dover Corp. 87,214
977 Eaton Corp. 76,802
4,354 Illinois Tool Works, Inc. 286,711
2,311 Ingersoll-Rand Co. 109,357
1,256 ITT Industries, Inc. 82,218
832 Navistar Int'l. Corp.* 27,148
1,645 PACCAR, Inc. 111,136
1,735 Pall Corp. 39,037
1,682 Parker-Hannifin Corp. 70,627
--------------
1,501,899
- ------------------------------------------------------------------------------
MEDIA -- 4.1%
65,918 AOL Time Warner, Inc.* 1,060,621
8,760 Clear Channel Comm., Inc.* 371,336
33,774 Comcast Corp. -- Class A* 1,019,299
1,237 Dow Jones & Co., Inc. 53,228
3,802 Gannett Co., Inc. 292,032
5,651 Interpublic Group Cos., Inc. 75,610
1,337 Knight-Ridder, Inc. 92,160
2,816 McGraw-Hill Cos., Inc. 174,592
690 Meredith Corp. 30,360
2,319 New York Times Co. 105,515
2,732 Omnicom Group, Inc. 195,884
4,358 Tribune Co. 210,491
2,961 Univision Comm., Inc.* 90,014
25,862 Viacom, Inc.* 1,129,135
29,970 Walt Disney Co. 591,908
--------------
5,492,185
- ------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
METALS AND MINING -- 0.5%
12,481 Alcoa, Inc. $ 318,265
1,132 Allegheny Technologies, Inc. 7,471
2,172 Freeport-McMoran Copper & Gold, Inc. 53,214
6,958 Newmont Mining Corp. 225,857
1,128 Nucor Corp. 55,103
1,125 Phelps Dodge Corp.* 43,133
1,246 United States Steel Corp. 20,397
1,195 Worthington Industries, Inc. 16,013
--------------
739,453
- ------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.1%
1,561 Big Lots, Inc.* 23,477
1,201 Dillards, Inc. 16,177
4,737 Dollar General Corp. 86,498
2,900 Family Dollar Stores, Inc. 110,635
2,840 Federated Department Stores, Inc. 104,654
3,729 J.C. Penney Co., Inc. 62,834
4,756 Kohl's Corp.* 244,363
4,265 May Department Stores Co. 94,939
1,837 Nordstrom, Inc. 35,858
4,812 SearsRoebuck & Co. 161,876
13,845 Target Corp. 523,895
--------------
1,465,206
- ------------------------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 0.4%
7,632 AES Corp.* 48,463
4,272 Calpine Corp.* 28,195
12,644 Duke Energy Corp. 252,248
4,647 Dynegy, Inc.* 19,517
10,252 El Paso Corp. 82,836
6,162 Mirant Corp.* 17,870
7,802 Williams Cos., Inc. 61,636
--------------
510,765
- ------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 0.1%
9,582 Xerox Corp.* 101,473
- ------------------------------------------------------------------------------
OIL AND GAS -- 4.9%
1,272 Amerada Hess Corp. 62,557
4,135 Anadarko Petroleum Corp. 183,884
2,956 Apache Corp. 192,317
966 Ashland, Inc. 29,637
3,106 Burlington Resources, Inc. 167,941
15,369 ChevronTexaco Corp. 1,109,642
9,620 ConocoPhillips 527,176
3,471 Devon Energy Corp. 185,351
1,669 EOG Resources, Inc. 69,831
99,745 Exxon Mobil Corp. 3,581,843
1,350 Kerr-McGee Corp. 60,480
4,449 Marathon Oil Corp. 117,231
5,341 Occidental Petroleum Corp. 179,191
1,169 Sunoco, Inc. 44,118
3,244 Unocal Corp. 93,070
--------------
6,604,269
- ------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.5%
811 Boise Cascade Corp. 19,383
4,933 Georgia-Pacific Corp. 93,480
7,547 Int'l. Paper Co. 269,654
1,413 Louisiana-Pacific Corp.* 15,317
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
40
THE GUARDIAN S&P 500 INDEX FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
2,831 MeadWestvaco Corp. $ 69,926
3,142 Weyerhaeuser Co. 169,668
--------------
637,428
- ------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.5%
801 Alberto-Culver Co. 40,931
3,423 Avon Products, Inc. 212,911
15,165 Gillette Co. 483,157
--------------
736,999
- ------------------------------------------------------------------------------
PHARMACEUTICALS -- 9.6%
23,002 Abbott Laboratories 1,006,568
1,885 Allergan, Inc. 145,334
28,177 Bristol-Myers Squibb Corp. 765,006
16,238 Eli Lilly & Co. 1,119,935
5,030 Forest Laboratories, Inc.* 275,392
43,650 Johnson & Johnson 2,256,705
3,608 King Pharmaceuticals, Inc.* 53,254
32,517 Merck & Co., Inc. 1,968,904
117,992 Pfizer, Inc. 4,029,427
21,060 Schering-Plough Corp. 391,716
1,463 Watson Pharmaceuticals, Inc.* 59,061
19,168 Wyeth 873,102
--------------
12,944,404
- ------------------------------------------------------------------------------
REAL ESTATE -- 0.4%
1,354 Apartment Investment & Management Co. 46,849
6,439 Equity Office Pptys. Trust 173,917
4,460 Equity Residential 115,737
2,659 Plum Creek Timber Co., Inc. 69,001
2,660 Simon Ppty. Group, Inc. 103,820
--------------
509,324
- ------------------------------------------------------------------------------
ROAD AND RAIL -- 0.4%
5,663 Burlington Northern Santa Fe 161,056
3,037 CSX Corp. 91,383
5,523 Norfolk Southern Corp. 106,042
3,564 Union Pacific Corp. 206,783
--------------
565,264
- ------------------------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 3.2%
4,499 Advanced Micro Devices, Inc.* 28,839
5,686 Altera Corp. 93,250
5,168 Analog Devices, Inc.* 179,950
24,158 Applied Materials, Inc.* 383,146
4,283 Applied Micro Circuits Corp.* 25,912
3,923 Broadcom Corp.* 97,722
98,131 Intel Corp. 2,039,555
2,641 KLA-Tencor Corp.* 122,780
4,550 Linear Technology Corp. 146,555
5,783 LSI Logic Corp.* 40,944
5,737 Maxim Integrated Products, Inc. 196,148
8,530 Micron Technology, Inc.* 99,204
2,484 National Semiconductor Corp.* 48,984
2,010 Novellus Systems, Inc.* 73,608
2,246 NVIDIA Corp.* 51,680
2,652 PMC-Sierra, Inc.* 31,108
1,314 QLogic Corp.* 63,506
2,493 Teradyne, Inc.* 43,154
24,963 Texas Instruments, Inc. 439,349
4,739 Xilinx, Inc.* 119,944
--------------
4,325,338
- ------------------------------------------------------------------------------
SOFTWARE -- 4.6%
3,464 Adobe Systems, Inc. 111,091
1,611 Autodesk, Inc. 26,034
3,499 BMC Software, Inc.* 57,139
2,659 Citrix Systems, Inc.* 54,137
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
8,300 Computer Associates Int'l., Inc. $ 184,924
5,272 Compuware Corp.* 30,419
1,900 Electronic Arts, Inc.* 140,581
2,776 Intuit, Inc.* 123,615
1,159 Mercury Interactive Corp.* 44,749
158,344 Microsoft Corp. 4,055,190
4,527 Novell, Inc.* 13,943
80,487 Oracle Corp.* 967,454
3,803 Parametric Technology Corp.* 11,599
4,507 PeopleSoft, Inc.* 79,278
6,843 Siebel Systems, Inc.* 65,282
2,100 Symantec Corp.* 92,106
5,883 VERITAS Software Corp.* 168,666
--------------
6,226,207
- ------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.3%
4,489 AutoNation, Inc.* 70,567
1,633 AutoZone, Inc.* 124,059
4,093 Bed, Bath & Beyond, Inc.* 158,849
4,479 Best Buy Co., Inc.* 196,718
2,929 Circuit City Stores, Inc. 25,775
34,067 Home Depot, Inc. 1,128,299
12,053 Lowe's Cos., Inc. 517,676
4,230 Office Depot, Inc.* 61,377
2,665 RadioShack Corp. 70,116
2,265 Sherwin-Williams Co. 60,883
6,492 Staples, Inc.* 119,128
12,190 The Gap, Inc. 228,685
9,439 The Limited, Inc. 146,305
2,083 Tiffany & Co. 68,073
7,969 TJX Cos., Inc. 150,136
2,834 Toys R Us, Inc.* 34,348
--------------
3,160,994
- ------------------------------------------------------------------------------
TEXTILES, APPAREL AND LUXURY GOODS -- 0.3%
2,039 Jones Apparel Group, Inc.* 59,661
1,864 Liz Claiborne, Inc. 65,706
3,766 NIKE, Inc. 201,443
649 Reebok Int'l. Ltd.* 21,826
1,473 V.F. Corp. 50,038
--------------
398,674
- ------------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 1.8%
2,164 Countrywide Financial Corp. 150,550
10,026 Federal Home Loan Mortgage Corp. 509,020
14,537 Federal National Mortgage Assn 980,375
2,276 Golden West Financial Corp. 182,103
1,532 MGIC Investment Corp. 71,452
13,818 Washington Mutual, Inc. 570,683
--------------
2,464,183
- ------------------------------------------------------------------------------
TOBACCO -- 1.1%
30,851 Altria Group, Inc. 1,401,869
1,345 R.J. Reynolds Tobacco Hldgs., Inc. 50,048
2,362 UST, Inc. 82,741
--------------
1,534,658
- ------------------------------------------------------------------------------
TRADING COMPANIES AND DISTRIBUTORS -- 0.0%
1,344 W.W. Grainger, Inc. 62,845
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.5%
38,322 AT & T Wireless Svcs., Inc.* 314,624
15,664 Nextel Comm., Inc.* 283,205
14,547 Sprint Corp. (PCS Group)* 83,645
--------------
681,474
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $154,833,294) 131,834,994
- ------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
41
THE GUARDIAN S&P 500 INDEX FUND
Schedule of Investments (Continued)
<Table>
<Caption>
U.S. GOVERNMENT -- 0.2%
Principal
Amount Value
- ------------------------------------------------------------------------------
U.S. Treasury Bill
$ 250,000 1.01% due 9/4/2003 (1)
(COST $249,549) $ 249,549
- ------------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 2.1%
$2,831,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $2,831,087 at
1.10%, due 7/1/2003 (2)
(COST $2,831,000) $ 2,831,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $157,913,843) 134,915,543
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.0% 56,367
- ------------------------------------------------------------------------------
NET ASSETS -- 100% $ 134,971,910
- ------------------------------------------------------------------------------
</Table>
* 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.
<Table>
<Caption>
PURCHASED FUTURES CONTRACTS
Unrealized
Contracts Description Expiration Depreciation
- --------------------------------------------------
12 S&P 500 Index 9/2003 $ (58,622)
- --------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
42
/ / The Guardian Baillie Gifford International Fund
<Table>
<Caption>
COMMON STOCKS -- 100.0%
Shares Value
- -------------------------------------------------------------------------------
AUSTRALIA -- 4.1%
BEVERAGES -- 0.5%
108,300 Fosters Brewing Group $ 306,143
COMMERCIAL BANKS -- 1.7%
38,600 Australia and NZ Banking Group Ltd. 482,333
24,832 National Australia Bank 558,561
CONTAINERS AND PACKAGING -- 0.4%
52,066 Amcor Ltd. 283,873
FOOD AND STAPLES RETAILING -- 0.4%
28,906 Woolworths Ltd. 243,000
MEDIA -- 0.3%
22,700 News Corp. Ltd. 170,709
METALS AND MINING -- 0.6%
70,506 BHP Billiton Ltd. 409,028
OIL AND GAS -- 0.2%
12,000 Woodside Petroleum Ltd. 99,751
------------
2,553,398
- -------------------------------------------------------------------------------
DENMARK -- 1.5%
COMMERCIAL BANKS -- 1.5%
48,045 Danske Bank AS 937,043
- -------------------------------------------------------------------------------
FINLAND -- 3.2%
COMMUNICATIONS EQUIPMENT -- 3.2%
120,950 Nokia OYJ 1,995,021
- -------------------------------------------------------------------------------
FRANCE -- 11.5%
BEVERAGES -- 1.3%
9,300 Pernod-Ricard S.A. 831,182
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.5%
37,820 France Telecom S.A.* 929,213
HEALTH CARE EQUIPMENT AND SUPPLIES -- 1.0%
14,800 Essilor Int'l. S.A. 597,192
OIL AND GAS -- 2.7%
11,330 Total S.A. 1,715,055
PERSONAL PRODUCTS -- 1.6%
14,580 L'Oreal S.A. 1,029,718
PHARMACEUTICALS -- 2.1%
22,910 Sanofi-Synthelabo S.A. 1,343,964
WIRELESS TELECOMMUNICATION SERVICES -- 1.3%
91,800 Orange S.A.* 816,234
------------
7,262,558
- -------------------------------------------------------------------------------
GERMANY -- 4.9%
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
14,980 Deutsche Boerse AG 794,854
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.7%
27,330 Deutsche Telekom AG* 417,789
HEALTH CARE PROVIDERS AND SERVICES -- 0.6%
9,400 Celesio AG 369,999
SOFTWARE -- 1.5%
8,240 SAP AG 973,397
TEXTILES, APPAREL AND LUXURY GOODS -- 0.8%
5,980 Adidas-Salomon AG 512,242
------------
3,068,281
- -------------------------------------------------------------------------------
HONG KONG -- 0.8%
COMPUTERS AND PERIPHERALS -- 0.1%
188,000 Legend Group Ltd. 62,682
REAL ESTATE -- 0.7%
72,000 Cheung Kong Hldgs. Ltd. 432,102
------------
494,784
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
IRELAND -- 3.3%
AIRLINES -- 0.9%
80,570 Ryanair Hldgs. PLC* $ 581,076
COMMERCIAL BANKS -- 1.2%
51,570 Allied Irish Banks 776,478
CONSTRUCTION MATERIALS -- 1.2%
47,400 CRH PLC 744,224
------------
2,101,778
- -------------------------------------------------------------------------------
ISRAEL -- 0.5%
PHARMACEUTICALS -- 0.5%
5,500 Teva Pharmaceutical Inds. Ltd. ADR 313,115
- -------------------------------------------------------------------------------
ITALY -- 2.8%
INSURANCE -- 0.9%
35,450 Riunione Adriatica di Sicurta SPA 538,656
OIL AND GAS -- 1.9%
80,540 ENI SPA 1,220,084
------------
1,758,740
- -------------------------------------------------------------------------------
JAPAN -- 19.4%
AUTO COMPONENTS -- 1.2%
53,000 Bridgestone Corp. 720,788
AUTOMOBILES -- 0.9%
22,400 Toyota Motor Corp. 581,236
BUILDING PRODUCTS -- 1.7%
110,000 Asahi Glass Co. 683,743
25,000 Tostem Inax Hldg. Corp. 360,852
CHEMICALS -- 1.3%
14,600 Shin-Etsu Chemical Co. Ltd. 499,437
98,000 Sumitomo Chemical 308,256
COMMERCIAL BANKS -- 0.3%
140 UFJ Hldgs., Inc.* 205,582
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
7,900 JAFCO Co. Ltd. 448,208
9,800 Promise Co. 367,127
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.7%
106 Nippon Tele. & Tel. Corp. 416,553
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.5%
2,800 Keyence Corp. 513,954
7,200 Kyocera Corp. 412,699
HOUSEHOLD PRODUCTS -- 1.0%
35,000 Kao Corp. 652,664
INSURANCE -- 0.6%
86,000 Mitsui Sumitomo Insurance Co. 399,666
LEISURE EQUIPMENT AND PRODUCTS -- 1.6%
90,000 Konica Corp. 1,026,490
OFFICE ELECTRONICS -- 2.1%
53,000 Brother Industries Ltd. 367,027
21,000 Canon, Inc. 965,416
PHARMACEUTICALS -- 1.1%
19,300 Takeda Chemical Industries Ltd. 713,354
ROAD AND RAIL -- 0.9%
123 East Japan Railway 548,012
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 1.1%
6,300 Rohm Co. Ltd. 688,056
TRADING COMPANIES AND DISTRIBUTORS -- 0.9%
114,000 Mitsui & Co. Ltd. 572,592
WIRELESS TELECOMMUNICATION SERVICES -- 1.2%
360 NTT DoCoMo, Inc. 780,944
------------
12,232,656
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
43
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
MEXICO -- 0.4%
COMMERCIAL BANKS -- 0.4%
299,100 Grupo Fin. BBVA Bancomer S.A. de C.V.* $ 252,744
- -------------------------------------------------------------------------------
NETHERLANDS -- 1.6%
MEDIA -- 1.6%
31,660 Ver Ned Uitgevers 977,066
- -------------------------------------------------------------------------------
NEW ZEALAND -- 0.3%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3%
59,700 Telecom. Corp. of New Zealand 183,552
- -------------------------------------------------------------------------------
PEOPLE'S REPUBLIC OF CHINA -- 0.7%
OIL AND GAS -- 0.7%
289,000 CNOOC Ltd. 422,485
- -------------------------------------------------------------------------------
PORTUGAL -- 1.6%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3%
25,065 Portugal Telecom. SGPS S.A. 179,906
TRANSPORTATION INFRASTRUCTURE -- 1.3%
149,410 Brisa-Auto Estradas de Portugal S.A. 842,108
------------
1,022,014
- -------------------------------------------------------------------------------
RUSSIA -- 0.7%
OIL AND GAS -- 0.7%
5,750 LUKOIL ADR 454,825
- -------------------------------------------------------------------------------
SINGAPORE -- 0.4%
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.4%
27,000 Venture Corp. Ltd. 246,883
- -------------------------------------------------------------------------------
SOUTH AFRICA -- 0.3%
METALS AND MINING -- 0.3%
6,800 Anglo American Platinum Corp. 214,856
- -------------------------------------------------------------------------------
SOUTH KOREA -- 1.0%
TOBACCO -- 0.4%
33,400 K T & G Corp. GDR+ 275,550
WIRELESS TELECOMMUNICATION SERVICES -- 0.6%
18,000 SK Telecom Co. Ltd. ADR 339,480
------------
615,030
- -------------------------------------------------------------------------------
SPAIN -- 2.5%
COMMERCIAL BANKS -- 1.2%
14,900 Banco Popular Espanol S.A. 754,104
TOBACCO -- 1.3%
32,520 Altadis S.A. 834,905
------------
1,589,009
- -------------------------------------------------------------------------------
SWEDEN -- 2.7%
COMMUNICATIONS EQUIPMENT -- 1.3%
739,880 LM Ericsson 795,848
MACHINERY -- 1.4%
37,610 Atlas Copco AB 884,366
------------
1,680,214
- -------------------------------------------------------------------------------
SWITZERLAND -- 6.7%
COMMERCIAL BANKS -- 0.6%
7,066 UBS AG 393,920
COMMERCIAL SERVICES AND SUPPLIES -- 0.6%
9,630 Adecco S.A. 397,569
CONSTRUCTION MATERIALS -- 0.8%
13,080 Holcim Ltd. 484,355
FOOD PRODUCTS -- 1.2%
3,840 Nestle S.A. 794,081
INSURANCE -- 1.5%
16,697 Swiss Reinsurance 927,131
PHARMACEUTICALS -- 2.0%
31,270 Novartis AG 1,240,065
------------
4,237,121
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
UNITED KINGDOM -- 29.1%
BEVERAGES -- 1.6%
92,000 Diageo PLC $ 983,873
COMMERCIAL BANKS -- 7.0%
128,800 Barclays PLC 958,021
41,325 HBOS PLC 535,862
92,000 HSBC Hldgs 1,088,799
95,000 Lloyds TSB Group PLC 675,602
40,064 Royal Bank of Scotland 1,125,771
CONSTRUCTION MATERIALS -- 0.4%
49,000 Hanson PLC 273,551
HOTELS, RESTAURANTS AND LEISURE -- 0.9%
13,900 Carnival PLC 422,975
28,678 Compass Group 154,886
INSURANCE -- 0.8%
45,000 Aviva PLC 312,956
28,000 Prudential Corp. 169,852
MEDIA -- 1.5%
45,000 British Sky Broadcasting Group* 499,465
40,400 Elsevier NV 477,248
MULTILINE RETAIL -- 0.7%
27,000 Next PLC 458,110
OIL AND GAS -- 3.2%
97,000 BG Group PLC 430,490
155,000 BP Amoco PLC 1,076,679
76,000 Shell Transport & Trading 502,482
PHARMACEUTICALS -- 5.0%
19,300 Astrazeneca 775,194
118,502 GlaxoSmithKline PLC 2,395,515
SOFTWARE -- 0.4%
85,000 Sage Group 227,604
TOBACCO -- 3.9%
61,000 British American Tobacco PLC 693,185
97,000 Imperial Tobacco 1,736,389
WIRELESS TELECOMMUNICATION SERVICES -- 3.7%
1,191,650 Vodafone Group 2,334,070
------------
18,308,579
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $61,962,439) 62,921,752
- -------------------------------------------------------------------------------
<Caption>
PREFERRED STOCKS -- 1.4%
BRAZIL -- 0.4%
OIL AND GAS -- 0.4%
14,800 Petroleo Brasileiro S.A. ADR $ 262,848
- -------------------------------------------------------------------------------
GERMANY -- 1.0%
AUTOMOBILES -- 1.0%
1,503 Porsche AG 637,937
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $772,804) 900,785
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
44
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
Schedule of Investments (Continued)
<Table>
<Caption>
CONVERTIBLE BOND -- 0.3%
Principal
Amount Value
- -------------------------------------------------------------------------------
JAPAN -- 0.3%
COMMERCIAL BANKS -- 0.3%
$ 21,000,000 SMFG Finance
2.25% due 7/11/2005
(COST $131,448) $ 162,947
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.7%
(COST $62,866,691) 63,985,484
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (1.7)% (1,080,974)
- -------------------------------------------------------------------------------
NET ASSETS -- 100% $ 62,904,510
- -------------------------------------------------------------------------------
</Table>
* Non-income producing security.
+ Rule 144A restricted security.
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
See notes to financial statements.
45
/ / The Guardian Baillie Gifford Emerging Markets Fund
<Table>
<Caption>
COMMON STOCKS -- 92.4%
Shares Value
- ------------------------------------------------------------------------------
ARGENTINA -- 0.1%
DISTRIBUTORS -- 0.1%
11,480 Imp. Y Exp. Patagonia* $ 40,854
- ------------------------------------------------------------------------------
BRAZIL -- 6.2%
BEVERAGES -- 1.4%
37,000 Comp. de Bebidas das Americas ADR 752,950
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.8%
79,500 Telecom. Norte Leste Participacoes ADR 928,560
METALS AND MINING -- 1.4%
20,600 Comp. Siderurgica Nacional S.A. ADR 511,086
8,300 Comp. Vale Do Rio Doce ADR 246,178
OIL AND GAS -- 0.9%
25,000 Petroleo Brasileiro S.A. ADR 494,000
PAPER AND FOREST PRODUCTS -- 0.7%
17,800 Votorantim Celulose e Papel S.A. ADR 344,252
-----------
3,277,026
- ------------------------------------------------------------------------------
CHILE -- 1.2%
COMMERCIAL BANKS -- 0.6%
14,296 Banco Santander Chile ADR 291,782
METALS AND MINING -- 0.6%
32,940 Antofagasta Hldgs. 334,846
-----------
626,628
- ------------------------------------------------------------------------------
CROATIA -- 1.1%
PHARMACEUTICALS -- 1.1%
42,215 Pliva d.d. GDR 584,678
- ------------------------------------------------------------------------------
ESTONIA -- 0.9%
COMMERCIAL BANKS -- 0.9%
23,000 Hansabank Ltd. 472,235
- ------------------------------------------------------------------------------
HONG KONG -- 2.0%
INTERNET SOFTWARE AND SERVICES -- 0.5%
900,000 Tom.Com Ltd.* 271,218
REAL ESTATE -- 0.6%
3,000,000 China Overseas Land & Invest. Ltd. 323,154
WIRELESS TELECOMMUNICATION SERVICES -- 0.9%
210,000 China Mobile (Hong Kong) Ltd. 495,502
-----------
1,089,874
- ------------------------------------------------------------------------------
HUNGARY -- 0.2%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.2%
38,050 Matav RT 130,255
- ------------------------------------------------------------------------------
INDIA -- 4.1%
COMMERCIAL BANKS -- 3.0%
121,200 ICICI Bank Ltd. ADR 881,124
34,400 State Bank of India GDR 705,200
METALS AND MINING -- 1.1%
37,000 Hindalco Inds. Ltd. GDR+ 596,810
-----------
2,183,134
- ------------------------------------------------------------------------------
INDONESIA -- 2.2%
FOOD PRODUCTS -- 0.2%
599,000 Astra Agro Lestari 101,648
INDUSTRIAL CONGLOMERATES -- 1.0%
1,282,423 Astra Int'l.* 555,717
MULTILINE RETAIL -- 0.4%
600,000 Ramayana Lestari Sentosa 234,545
TOBACCO -- 0.6%
600,500 H M Sampoerna 302,070
-----------
1,193,980
- ------------------------------------------------------------------------------
ISRAEL -- 5.3%
COMMERCIAL BANKS -- 0.8%
215,000 Bank Hapoalim Ltd.* 456,347
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
INTERNET SOFTWARE AND SERVICES -- 1.4%
37,400 Check Point Software Technologies Ltd.* $ 731,170
PHARMACEUTICALS -- 3.1%
29,000 Teva Pharmaceutical Inds. Ltd. ADR 1,650,970
-----------
2,838,487
- ------------------------------------------------------------------------------
MALAYSIA -- 4.1%
AUTOMOBILES -- 0.9%
215,000 Perusahaan Otomobil Nasional Berhad 458,289
CONSTRUCTION AND ENGINEERING -- 0.5%
278,000 Road Builder (M) Hldgs. Berhad 257,516
HOTELS, RESTAURANTS AND LEISURE -- 1.8%
186,000 Genting Berhad 734,210
93,000 Tanjong PLC 244,737
TOBACCO -- 0.9%
48,000 British American Tobacco Malaysia Berhad 492,632
-----------
2,187,384
- ------------------------------------------------------------------------------
MEXICO -- 9.6%
BEVERAGES -- 0.8%
180,190 Grupo Modelo S.A. 410,405
COMMERCIAL BANKS -- 1.9%
98,200 Grupo Fin. Banorte S.A. de C.V. 277,229
874,200 Grupo Fin. BBVA Bancomer S.A. de C.V.* 738,713
CONSTRUCTION AND ENGINEERING -- 0.5%
150,000 Consorcio Ara S.A. de C.V.* 297,861
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1%
271,000 Grupo Carso Global Telecom.* 344,407
25,000 Telefonos de Mexico S.A. ADR 785,500
MEDIA -- 0.9%
76,000 TV Azteca S.A. de C.V. ADR 494,000
MULTILINE RETAIL -- 1.4%
269,270 Wal-Mart de Mexico S.A. de C.V. 724,100
TRANSPORTATION INFRASTRUCTURE -- 0.4%
14,400 Grupo Aeroportuario del Sureste S.A. de C.V. ADR 210,672
WIRELESS TELECOMMUNICATION SERVICES -- 1.6%
35,800 America Movil S.A. de C.V. ADR 671,250
191,000 America Telecom S.A. de C.V.* 179,128
-----------
5,133,265
- ------------------------------------------------------------------------------
PEOPLE'S REPUBLIC OF CHINA -- 7.3%
AIRLINES -- 0.3%
668,000 China Southern Airlines Co. Ltd.* 175,606
METALS AND MINING -- 2.3%
2,060,000 Aluminum Corp. of China Ltd. 459,647
1,835,000 Jiangxi Copper Co. Ltd. 284,728
958,000 Yanzhou Coal Mining 445,330
OIL AND GAS -- 3.9%
568,000 CNOOC Ltd. 830,351
4,158,000 PetroChina Co. Ltd. 1,253,028
REAL ESTATE -- 0.3%
1,250,000 Beijing North Star Co. Ltd. 166,706
TRANSPORTATION INFRASTRUCTURE -- 0.5%
660,000 Zhejiang Expressway Co. Ltd 272,949
-----------
3,888,345
- ------------------------------------------------------------------------------
PERU -- 0.5%
METALS AND MINING -- 0.5%
8,400 Comp. de Minas Buenaventura S.A. ADR 252,756
- ------------------------------------------------------------------------------
RUSSIA -- 6.2%
METALS AND MINING -- 1.2%
17,500 JSC MMC Norilsk Nickel ADR 609,000
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
46
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
OIL AND GAS -- 5.0%
14,800 LUKOIL ADR $ 1,170,680
21,052 OAO Gazprom ADR 395,778
19,975 YUKOS Corp. ADR 1,111,609
-----------
3,287,067
- ------------------------------------------------------------------------------
SOUTH AFRICA -- 9.5%
COMMERCIAL BANKS -- 3.1%
88,900 Nedcor Ltd. 1,063,000
126,000 Standard Bank Group Ltd. 552,144
METALS AND MINING -- 4.6%
37,035 Anglo American Platinum Corp. 1,170,177
21,978 Anglovaal Mining Ltd.* 117,451
291,905 Kumba Resources Ltd. 1,173,860
OIL AND GAS -- 1.8%
87,100 Sasol Ltd. 972,238
-----------
5,048,870
- ------------------------------------------------------------------------------
SOUTH KOREA -- 18.7%
AUTO COMPONENTS -- 0.7%
240,000 Hyundai Autonet Co. Ltd. 384,763
CHEMICALS -- 1.7%
19,000 Cheil Industries, Inc. 262,453
59,739 Hyosung Corp. 645,151
CONSTRUCTION AND ENGINEERING -- 2.0%
28,100 Daelim Industrial Co. Ltd. 489,309
82,230 Hyundai Development Co. 547,971
MEDIA -- 1.0%
5,300 Cheil Comms., Inc. 521,348
METALS AND MINING -- 1.2%
142,200 Dongkuk Steel Mill Co. Ltd. 622,609
PHARMACEUTICALS -- 0.6%
14,000 Jeil Pharmaceutical Co. 293,010
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 4.9%
13,850 Samsung Electronics Co. Ltd GDR+ 2,060,188
1,900 Samsung Electronics Co. Ltd. 564,671
TOBACCO -- 1.8%
117,400 K T & G Corp. GDR+ 968,550
TRADING COMPANIES AND DISTRIBUTORS -- 1.9%
170,200 Samsung Corp. 1,017,353
WIRELESS TELECOMMUNICATION SERVICES -- 2.9%
2,200 SK Telecom Co. Ltd. 375,722
63,000 SK Telecom Co. Ltd. ADR 1,188,180
-----------
9,941,278
- ------------------------------------------------------------------------------
TAIWAN -- 9.4%
AIRLINES -- 0.5%
650,000 China Airlines 252,600
CONSTRUCTION AND ENGINEERING -- 0.8%
667,000 CTCI Corp. 431,690
DIVERSIFIED FINANCIAL SERVICES -- 2.1%
1,280,000 China Development Financial Hldg. Corp.* 488,182
1,715,000 SinoPac Hldgs. 626,835
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.2%
67,000 Chunghwa Telecom Co. Ltd. 98,729
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.8%
68,300 Au Optronics Corp. ADR 472,636
63,040 Hon Hai Precision Inds. Co. Ltd. GDR 475,952
FOOD PRODUCTS -- 0.2%
275,000 Lian Hwa Foods Corp. 83,827
MULTILINE RETAIL -- 0.5%
1,261,000 Far Eastern Dept. Stores Ltd. 291,477
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 2.1%
684,400 Taiwan Semiconductor Mfg. Co. Ltd.* 1,127,154
TRADING COMPANIES AND DISTRIBUTORS -- 0.5%
372,000 Test-Rite Int'l. Co. Ltd. 238,613
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.7%
535,000 Taiwan Cellular Corp.* $ 387,995
-----------
4,975,690
- ------------------------------------------------------------------------------
THAILAND -- 2.8%
CONSTRUCTION MATERIALS -- 1.2%
167,000 The Siam Cement Public Co. Ltd. 666,889
MEDIA -- 0.5%
42,400 BEC World Public Co. Ltd. 241,883
REAL ESTATE -- 1.1%
2,575,000 Land & Houses Public Co. Ltd. 581,471
-----------
1,490,243
- ------------------------------------------------------------------------------
TURKEY -- 1.0%
INDUSTRIAL CONGLOMERATES -- 0.5%
28,368,000 Koc Hldg. A.S.* 247,982
WIRELESS TELECOMMUNICATION SERVICES -- 0.5%
41,000,000 Turkcell Iletisim Hizmetleri A.S.* 274,586
-----------
522,568
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $44,021,737) 49,164,617
- ------------------------------------------------------------------------------
<Caption>
PREFERRED STOCKS -- 4.4%
BRAZIL -- 4.4%
COMMERCIAL BANKS -- 1.6%
1,080,568 Itausa-Investimentos Itau S.A. $ 850,246
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4%
1,719,000 Celular CRT Participacoes S.A. 203,791
FOOD PRODUCTS -- 0.0%
4,700,000 Comp. Lorenz S.A.* 0
METALS AND MINING -- 0.7%
13,000 Comp. Vale Do Rio Doce 355,971
OIL AND GAS -- 1.7%
51,900 Petroleo Brasileiro S.A. ADR 921,744
- ------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $2,214,534) 2,331,752
- ------------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 1.8%
Principal
Amount Value
- ------------------------------------------------------------------------------
$ 967,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $967,009 at
0.35%, due 7/1/2003 (1)
(COST $967,000) $ 967,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.6%
(COST $47,203,271) 52,463,369
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 1.4% 735,327
- ------------------------------------------------------------------------------
NET ASSETS -- 100% $53,198,696
- ------------------------------------------------------------------------------
</Table>
* Non-income producing security.
+ Rule 144A restricted security.
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
See notes to financial statements.
47
/ / The Guardian Investment Quality Bond Fund
<Table>
<Caption>
ASSET BACKED -- 9.8%
Principal
Amount Value
- ----------------------------------------------------------------------
Aesop Funding II LLC
2003-2A A3
$ 1,280,000 3.61% due 6/20/2009+ $ 1,306,402
2002-1A A1
900,000 3.85% due 10/20/2006+ 934,125
2,550,000 Ameriquest Mtg. Secs., Inc.
2003-5 A3
3.027% due 7/25/2033 2,583,384
132,909 Amresco
1997-1 MIF
7.42% due 3/25/2027 132,741
2,000,000 California Infrastructure SCE
1997-1 A7
6.42% due 12/26/2009 2,284,901
2,320,000 Centex Home Equity Loan Tr.
2003-A AF4
3.75% due 12/25/2031 2,358,677
2,542,000 Citibank Credit Card Issuance
Tr.
2000-A1 A1
6.90% due 10/15/2007 2,827,987
1,700,000 CNH Equipment Tr.
2003-A A4B
2.57% due 9/15/2009 1,701,125
2,400,000 Navistar Financial Corp. Owner
Tr.
2003-A A4
2.24% due 11/15/2009 2,397,066
1,700,000 Residential Asset Sec. Corp.
2000-KS5 AI5
7.615% due 12/25/2031 1,844,038
1,752,800 Residential Funding Mtg. Sec. II
2002-HS2 A3
4.44% due 3/25/2017 1,758,921
1,900,000 Vanderbilt Acquisition Loan Tr.
2002-1 A3
5.70% due 9/7/2023 2,014,270
- ----------------------------------------------------------------------
TOTAL ASSET BACKED
(COST $21,647,186) 22,143,637
- ----------------------------------------------------------------------
<Caption>
COLLATERALIZED MORTGAGE OBLIGATION -- 2.5%
$ 2,150,000 FHLMC
H006 A2
2.837% due 2/15/2010 $ 2,166,942
1,200,000 FNMA
2001-64 QG
6.00% due 3/25/2030 1,252,261
2,304,100 Washington Mutual
2002-AR4 A7
5.551% due 4/26/2032 2,341,622
- ----------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATION
(COST $5,745,917) 5,760,825
- ----------------------------------------------------------------------
<Caption>
COMMERCIAL MORTGAGE BACKED -- 3.4%
Bear Stearns Comm'l. Mtg. Sec.,
Inc.
2003-Top10 A2
$ 2,400,000 4.74% due 3/13/2040 $ 2,508,224
2002-Top8 A1
962,135 4.06% due 8/15/2038 1,001,467
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
LB-UBS Comm'l. Mtg. Tr.
2004-C4 A2
$ 1,220,000 7.37% due 8/15/2026 $ 1,482,174
2001-C7 A5
2,431,000 6.133% due 12/15/2030 2,787,790
- ----------------------------------------------------------------------
TOTAL COMMERCIAL MORTGAGE BACKED
(COST $7,313,594) 7,779,655
- ----------------------------------------------------------------------
<Caption>
CORPORATE BONDS -- 28.1%
AEROSPACE AND DEFENSE -- 0.4%
$ 300,000 Lockheed Martin Corp.
8.50% due 12/1/2029 $ 407,758
100,000 Northrop Grumman Corp.
7.125% due 2/15/2011 119,792
250,000 TRW, Inc.
7.75% due 6/1/2029 319,307
------------
846,857
- ----------------------------------------------------------------------
AIRLINES -- 0.4%
800,000 Delta Air Lines, Inc.
6.417% due 7/2/2012 865,524
- ----------------------------------------------------------------------
AUTOMOTIVE -- 0.4%
500,000 DaimlerChrysler NA Hldg.
4.05% due 6/4/2008 495,157
450,000 Ford Motor Co.
7.45% due 7/16/2031 412,229
------------
907,386
- ----------------------------------------------------------------------
BUILDING MATERIALS -- 0.1%
250,000 Masco Corp.
6.50% due 8/15/2032 277,471
- ----------------------------------------------------------------------
CHEMICALS -- 0.2%
400,000 Potash Corp.
4.875% due 3/1/2013 411,624
- ----------------------------------------------------------------------
ENERGY -- 1.7%
850,000 Devon Energy Corp.
7.95% due 4/15/2032 1,094,105
350,000 Husky Energy, Inc.
6.25% due 6/15/2012 393,334
500,000 Pride Int'l., Inc.
9.375% due 5/1/2007 516,250
400,000 Transocean, Inc.
7.50% due 4/15/2031 492,600
350,000 Western Oil Sands, Inc.
8.375% due 5/1/2012 390,250
1,000,000 XTO Energy, Inc.
6.25% due 4/15/2013+ 1,062,500
------------
3,949,039
- ----------------------------------------------------------------------
ENERGY-REFINING -- 0.5%
850,000 Tosco Corp.
8.125% due 2/15/2030 1,139,207
- ----------------------------------------------------------------------
ENTERTAINMENT -- 0.6%
1,200,000 Time Warner Cos., Inc.
7.57% due 2/1/2024 1,358,232
- ----------------------------------------------------------------------
ENVIRONMENTAL -- 0.6%
1,200,000 Waste Management, Inc.
7.375% due 8/1/2010 1,439,912
- ----------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
48
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
FINANCE COMPANIES -- 1.2%
$ 700,000 Ford Motor Credit Co.
7.60% due 8/1/2005 $ 751,582
500,000 General Electric Capital Corp.
5.45% due 1/15/2013 541,571
General Motors Acceptance Corp.
500,000 6.125% due 9/15/2006 526,402
135,000 8.00% due 11/1/2031 132,457
Household Finance Corp.
400,000 6.375% due 11/27/2012 455,650
350,000 7.875% due 3/1/2007 412,517
------------
2,820,179
- ----------------------------------------------------------------------
FINANCIAL -- 1.1%
650,000 Bear Stearns Cos., Inc.
5.70% due 11/15/2014 720,440
800,000 Goldman Sachs Group, Inc.
5.70% due 9/1/2012 878,903
400,000 Lehman Brothers Hldgs., Inc.
6.625% due 1/18/2012 468,951
400,000 Morgan Stanley
6.60% due 4/1/2012 462,154
------------
2,530,448
- ----------------------------------------------------------------------
FINANCIAL-BANKS -- 1.9%
425,000 Bank America Corp.
4.875% due 9/15/2012 448,531
200,000 BB&T Corp.
6.50% due 8/1/2011 234,568
750,000 Citigroup, Inc.
5.625% due 8/27/2012 826,304
300,000 City National Corp.
5.125% due 2/15/2013 308,723
150,000 J.P. Morgan Chase & Co.
5.75% due 1/2/2013 163,992
250,000 MBNA America Bank Nat'l.
7.125% due 11/15/2012 292,878
200,000 Regions Financial Corp.
6.375% due 5/15/2012 231,271
500,000 Sovereign Bank
5.125% due 3/15/2013 516,366
150,000 Synovus Financial Corp.
4.875% due 2/15/2013+ 157,166
1,025,000 Wells Fargo Bank NA
6.45% due 2/1/2011 1,208,503
------------
4,388,302
- ----------------------------------------------------------------------
FOOD AND BEVERAGE -- 1.3%
650,000 Coca-Cola Bottling Co.
5.00% due 11/15/2012 678,118
300,000 General Mills, Inc.
6.00% due 2/15/2012 338,688
Kellogg Co.
1,000,000 2.875% due 6/1/2008 992,964
300,000 6.60% due 4/1/2011 351,819
500,000 Kraft Foods, Inc.
6.25% due 6/1/2012 565,590
------------
2,927,179
- ----------------------------------------------------------------------
GAMING -- 0.4%
750,000 Int'l. Game Technology
8.375% due 5/15/2009 920,105
- ----------------------------------------------------------------------
GAS DISTRIBUTORS -- 0.2%
500,000 Equitable Resources, Inc.
5.15% due 3/1/2018+ 531,440
- ----------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
HEALTH CARE -- 0.3%
$ 350,000 HCA, Inc.
6.25% due 2/15/2013 $ 356,805
200,000 Laboratory Corp. of America
5.50% due 2/1/2013 214,129
------------
570,934
- ----------------------------------------------------------------------
HOME CONSTRUCTION -- 0.5%
500,000 D.R. Horton, Inc.
5.875% due 7/1/2013 490,000
500,000 NVR, Inc.
5.00% due 6/15/2010 501,250
150,000 Ryland Group, Inc.
5.375% due 6/1/2008 154,875
------------
1,146,125
- ----------------------------------------------------------------------
INDUSTRIAL-OTHER -- 1.0%
2,000,000 Aramark Svcs., Inc.
7.10% due 12/1/2006 2,232,404
- ----------------------------------------------------------------------
MEDIA-CABLE -- 1.7%
AT & T Broadband Corp.
400,000 8.375% due 3/15/2013 500,962
900,000 9.455% due 11/15/2022 1,226,662
1,200,000 Comcast Cable Comm., Inc.
6.20% due 11/15/2008 1,351,277
200,000 Cox Comm., Inc.
7.125% due 10/1/2012 238,827
500,000 CSC Hldgs., Inc.
7.625% due 4/1/2011 505,000
------------
3,822,728
- ----------------------------------------------------------------------
MEDIA-NONCABLE -- 0.9%
200,000 Clear Channel Comm.
5.75% due 1/15/2013 216,303
150,000 News America Hldgs.
8.00% due 10/17/2016 191,259
1,500,000 Scholastic Corp.
5.75% due 1/15/2007 1,640,121
------------
2,047,683
- ----------------------------------------------------------------------
MERCHANDISING-SUPERMARKETS -- 0.9%
500,000 Delhaize America, Inc.
7.375% due 4/15/2006 525,000
850,000 Kroger Co.
7.25% due 6/1/2009 992,698
500,000 Safeway, Inc.
6.15% due 3/1/2006 541,307
------------
2,059,005
- ----------------------------------------------------------------------
NATURAL GAS-PIPELINES -- 2.1%
1,700,000 Consolidated Natural Gas Co.
7.25% due 10/1/2004 1,808,506
250,000 Duke Energy Field Svcs.
8.125% due 8/16/2030 319,207
1,000,000 Enterprise Products Operating LP
6.875% due 3/1/2033+ 1,132,591
350,000 Gulfterra Energy Partners
8.50% due 6/1/2010+ 374,500
500,000 Kinder Morgan, Inc.
6.50% due 9/1/2012 573,149
400,000 Teppco Partners LP
6.125% due 2/1/2013 444,188
------------
4,652,141
- ----------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
49
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.8%
$ 600,000 Abitibi-Consolidated, Inc.
7.875% due 8/1/2009 $ 666,000
250,000 Int'l. Paper Co.
5.85% due 10/30/2012 272,472
400,000 Packaging Corp. of America
9.625% due 4/1/2009 440,500
Weyerhaeuser Co.
150,000 6.00% due 8/1/2006 164,543
200,000 6.75% due 3/15/2012 227,040
------------
1,770,555
- ----------------------------------------------------------------------
RAILROADS -- 0.3%
200,000 CSX Corp.
4.875% due 11/1/2009 213,079
450,000 Norfolk Southern Corp.
6.75% due 2/15/2011 525,587
------------
738,666
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.5%
250,000 Duke Realty Corp.
5.875% due 8/15/2012 273,429
100,000 EOP Operating LP
7.00% due 7/15/2011 116,057
200,000 Liberty Ppty. LP
7.25% due 3/15/2011 236,065
200,000 Prologis
5.50% due 3/1/2013 213,467
100,000 Regency Centers LP
6.75% due 1/15/2012 113,657
125,000 Simon Ppty. Group LP
5.45% due 3/15/2013+ 130,473
------------
1,083,148
- ----------------------------------------------------------------------
RETAILERS -- 0.2%
300,000 Staples, Inc.
7.375% due 10/1/2012 355,127
- ----------------------------------------------------------------------
SERVICES -- 0.2%
500,000 PHH Corp.
7.125% due 3/1/2013 567,442
- ----------------------------------------------------------------------
UTILITIES-ELECTRIC AND WATER -- 2.6%
500,000 AEP Texas Central Co.
5.50% due 2/15/2013+ 533,427
100,000 Alabama Power Co.
5.50% due 10/15/2017 109,449
350,000 American Electric Power, Inc.
5.25% due 6/1/2015 352,760
350,000 Consumers Energy Co.
5.375% due 4/15/2013+ 367,453
200,000 Dominion Resources, Inc.
6.75% due 12/15/2032 223,697
650,000 DTE Energy Co.
6.375% due 4/15/2033 677,358
200,000 Florida Power Corp.
5.90% due 3/1/2033 213,961
250,000 Georgia Power Co.
5.125% due 11/15/2012 268,144
425,000 National Rural Utilities Coop.
Fin.
8.00% due 3/1/2032 548,112
400,000 Oncor Electric Delivery Co.
7.25% due 1/15/2033+ 471,909
400,000 Pepco Hldgs., Inc.
6.45% due 8/15/2012 452,623
100,000 Progress Energy, Inc.
7.00% due 10/30/2031 110,359
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
$ 500,000 PSEG Energy Hldgs., Inc.
8.50% due 6/15/2011 $ 537,500
200,000 Public Service Electric Gas Co.
5.125% due 9/1/2012 213,541
350,000 TXU Energy Co.
7.00% due 3/15/2013+ 387,356
500,000 Xcel Energy, Inc.
3.40% due 7/1/2008+ 496,549
------------
5,964,198
- ----------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 0.8%
650,000 Tritel PCS, Inc.
10.375% due 1/15/2011 794,625
690,000 Verizon Wireless Capital LLC
5.375% due 12/15/2006 757,857
150,000 Vodafone Group PLC
6.25% due 11/30/2032 162,439
------------
1,714,921
- ----------------------------------------------------------------------
WIRELINE COMMUNICATIONS -- 3.7%
75,000 AT & T Corp.
8.50% due 11/15/2031 85,042
500,000 British Telecom. PLC
8.875% due 12/15/2030 682,283
200,000 Century Tel. Enterprises, Inc.
6.875% due 1/15/2028 228,233
Citizens Comm. Co.
200,000 7.625% due 8/15/2008 237,558
200,000 9.00% due 8/15/2031 269,476
500,000 Deutsche Telekom Int'l. Fin.
9.25% due 6/1/2032 691,079
France Telecom S.A.
625,000 9.25% due 3/1/2011 786,603
1,000,000 10.00% due 3/1/2031 1,383,735
200,000 Royal KPN NV
8.375% due 10/1/2030 259,497
850,000 Sprint Capital Corp.
8.375% due 3/15/2012 1,017,719
1,000,000 Telus Corp.
8.00% due 6/1/2011 1,155,000
825,000 Verizon New York, Inc.
7.375% due 4/1/2032 1,023,658
500,000 Verizon Pennsylvania, Inc.
5.65% due 11/15/2011 551,788
------------
8,371,671
- ----------------------------------------------------------------------
YANKEE -- 0.6%
1,200,000 Pemex Master Tr.
7.875% due 2/1/2009 1,371,000
- ----------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $58,746,621) 63,780,653
- ----------------------------------------------------------------------
<Caption>
- ----------------------------------------------------------------------
MORTGAGE PASS-THROUGHS -- 32.7%
Principal
Amount Value
- ----------------------------------------------------------------------
FHLMC
$ 12,400,000 5.50%, (30 yr. TBA) $ 12,791,369
5,222,470 6.00%, 12/1/2032 5,414,866
3,598,077 6.50%, 12/1/2031 3,744,214
2,976,101 6.50%, 8/1/2032 3,097,074
32,397 7.00%, 8/1/2008 34,467
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
50
THE GUARDIAN INVESTMENT QUALITY BOND FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
FNMA
$ 3,200,000 5.00%, (15 yr. TBA) $ 3,304,998
5,600,000 5.00%, (30 yr. TBA) 5,689,253
5,100,000 5.50%, (30 yr. TBA) 5,270,534
3,600,000 5.50%, 12/1/2014 3,757,749
1,526,685 6.00%, 10/1/2013 1,597,085
1,369,054 6.00%, 4/1/2016 1,428,929
2,477,154 6.50%, 2017 2,613,247
6,924,437 6.50%, 7/1/2029 7,228,604
7,077,742 6.50%, 2032 7,380,897
16,106 7.00%, 2/1/2009 17,160
120,108 7.00%, 2012 127,823
388,811 7.00%, 9/1/2014 413,691
7,438 7.00%, 8/1/2023 7,875
5,325 7.00%, 12/1/2027 5,620
53,130 7.00%, 12/1/2028 56,044
1,781,023 7.00%, 2032 1,875,590
593 7.50%, 5/1/2027 631
343,652 7.50%, 12/1/2029 365,281
1,280,204 7.50%, 2/1/2031 1,361,757
504,749 8.00%, 2030 544,297
GNMA
1,837,627 6.00%, 2033 1,927,212
2,872,331 6.50%, 5/15/2032 3,016,033
437,604 6.50%, 2/15/2033 459,484
436,568 8.00%, 2030 471,179
- ----------------------------------------------------------------------
TOTAL MORTGAGE PASS-THROUGHS
(COST $73,185,772) 74,002,963
- ----------------------------------------------------------------------
<Caption>
SOVEREIGN DEBT -- 0.6%
$ 150,000 Korea Development Bank
5.50% due 11/13/2012 $ 159,579
200,000 Malaysia
7.50% due 7/15/2011 243,360
800,000 United Mexican States
8.00% due 9/24/2022 896,000
- ----------------------------------------------------------------------
TOTAL SOVEREIGN DEBT
(COST $1,178,956) 1,298,939
- ----------------------------------------------------------------------
<Caption>
U.S. GOVERNMENT -- 20.8%
U.S. GOVERNMENT AGENCIES -- 6.5%
FHLMC
$ 500,000 4.50%, 1/15/2013 $ 525,244
FNMA
4,600,000 3.25%, 1/15/2008 4,754,275
3,550,000 4.375%, 10/15/2006 3,825,033
950,000 5.00%, 1/15/2007 1,045,621
2,690,000 6.00%, 5/15/2008 3,106,350
385,000 6.125%, 3/15/2012 454,047
875,000 6.375%, 6/15/2009 1,036,263
------------
14,746,833
- ----------------------------------------------------------------------
U.S. TREASURY BONDS AND NOTES -- 14.3%
U.S. Treasury Bonds
140,000 5.375%, 2/15/2031 157,648
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
U.S. Treasury Notes
$ 250,000 1.25%, 5/31/2005 $ 249,853
7,100,000 2.25%, 7/31/2004 7,191,803
100,000 2.625%, 5/15/2008 100,914
430,000 3.00%, 1/31/2004 435,022
5,280,000 3.00%, 11/15/2007 5,446,236
7,135,000 3.00%, 2/15/2008 7,342,079
2,685,000 3.625%, 5/15/2013 2,705,975
925,000 5.50%, 5/15/2009 1,065,412
150,000 5.625%, 2/15/2006 165,850
1,635,000 5.75%, 8/15/2010 1,913,781
2,250,000 6.00%, 8/15/2009 2,654,032
1,320,000 6.125%, 8/15/2007 1,526,921
1,250,000 6.75%, 5/15/2005 1,376,611
------------
32,332,137
- ----------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
(COST $45,356,297) 47,078,970
- ----------------------------------------------------------------------
<Caption>
COMMERCIAL PAPER -- 8.4%
FINANCE COMPANIES -- 2.3%
$ 5,200,000 KFW Int'l. Finance, Inc.
1.10% due 7/14/2003 (a) $ 5,197,935
- ----------------------------------------------------------------------
FINANCIAL-BANKS -- 4.6%
5,200,000 BNP Paribas Canada
1.11% due 7/14/2003 (a) 5,197,916
5,200,000 Oesterreichische
1.10% due 7/14/2003 (a) 5,197,934
------------
10,395,850
- ----------------------------------------------------------------------
TELECOMMUNICATIONS -- 1.5%
3,400,000 SBC Int'l., Inc.
1.05% due 7/17/2003 (a) 3,398,413
- ----------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $18,992,198) 18,992,198
- ----------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 6.0%
$ 8,400,000 Lehman Brothers
repurchase agreement,
dated 6/30/2003, maturity
value $8,403,561 at
1.09%, due 7/14/2003 (1)(a) $ 8,400,000
5,120,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $5,120,156 at
1.10%, due 7/1/2003 (1)(a) 5,120,000
- ----------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $13,520,000) 13,520,000
- ----------------------------------------------------------------------
TOTAL INVESTMENTS -- 112.3%
(COST $245,686,541) 254,357,840
PAYABLES FOR MORTGAGE PASS-THROUGHS
DELAYED DELIVERY SECURITIES (a) -- (11.8)% (26,768,988)
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (0.5)% (1,017,009)
- ----------------------------------------------------------------------
NET ASSETS -- 100% $226,571,843
- ----------------------------------------------------------------------
</Table>
+ Rule 144A restricted security.
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
(a) Commercial paper and repurchase agreement are segregated to cover forward
mortgage purchases.
- --------------------------------------------------------------------------------
See notes to financial statements.
51
/ / The Guardian High Yield Bond Fund
<Table>
<Caption>
CORPORATE BONDS -- 99.1%
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 3.2%
Alliant Techsystems, Inc.
$ 555,000 Sr. Sub. Nt.
8.50% due 5/15/2011 B2/B $ 616,050
BE Aerospace, Inc.
285,000 Sr. Sub. Nt.
9.50% due 11/1/2008 Caa2/B- 229,425
K & F Ind., Inc.
417,000 Sr. Sub. Nt. Ser. B
9.625% due 12/15/2010 B3/B 462,870
Sequa Corp.
360,000 Sr. Nt.
8.875% due 4/1/2008 B1/BB- 376,200
440,000 Sr. Nt.+
8.875% due 4/1/2008 B1/BB- 459,800
-----------
2,144,345
- -------------------------------------------------------------------------------
AUTOMOTIVE -- 2.0%
Rexnord Corp.
35,000 Sr. Sub. Nt.
10.125% due 12/15/2012 B3/B- 38,500
Tenneco Automotive, Inc.
300,000 Sr. Sec. Nt.+
10.25% due 7/15/2013 B2/CCC+ 303,750
TRW Automotive, Inc.
278,000 Sr. Nt.+
9.375% due 2/15/2013 B1/B+ 301,630
United Components, Inc.
667,000 Sr. Sub. Nt.+
9.375% due 6/15/2013 B3/B 692,013
-----------
1,335,893
- -------------------------------------------------------------------------------
BANKING -- 0.6%
Western Financial Bank
350,000 Sub. Cap. Debt.
9.625% due 5/15/2012 B1/BB- 378,000
- -------------------------------------------------------------------------------
BUILDING MATERIALS -- 0.6%
Associated Materials, Inc.
280,000 Sr. Sub. Nt.
9.75% due 4/15/2012 B3/B 305,550
Collins & Aikman Floor Cover
71,000 Sr. Sub. Nt.
9.75% due 2/15/2010 B2/B 74,195
-----------
379,745
- -------------------------------------------------------------------------------
CHEMICALS -- 2.1%
Compass Minerals Group, Inc.
245,000 Sr. Sub. Nt.
10.00% due 8/15/2011 B3/B- 274,400
FMC Corp.
280,000 Sr. Sec. Nt.
10.25% due 11/1/2009 Ba2/BB+ 315,000
Huntsman Advanced Materials
300,000 Sr. Sec. Nt.+
11.00% due 7/15/2010 B2/B 312,000
Huntsman Int'l. LLC
70,000 Sr. Nt.
9.875% due 3/1/2009 B3/B 72,800
Lyondell Chemical Co.
285,000 Nt. Ser. A
9.625% due 5/1/2007 Ba3/BB 279,300
Millennium America, Inc.
140,000 Sr. Nt.
7.00% due 11/15/2006 Ba1/BB+ 141,400
-----------
1,394,900
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
CONSTRUCTION MACHINERY -- 2.2%
Joy Global, Inc.
$ 140,000 Sr. Sub. Nt.
8.75% due 3/15/2012 B2/B+ $ 153,300
NMHG Hldg. Co.
140,000 Sr. Nt.
10.00% due 5/15/2009 B3/B+ 154,000
Terex Corp.
285,000 Sr. Sub. Nt.
9.25% due 7/15/2011 B3/B 306,375
285,000 Sr. Sub. Nt.
10.375% due 4/1/2011 B3/B 314,925
United Rentals NA, Inc.
280,000 Sr. Nt.
10.75% due 4/15/2008 B1/BB 305,900
United Rentals, Inc.
280,000 Sr. Sub. Nt. Ser. B
8.80% due 8/15/2008 B2/B+ 271,600
-----------
1,506,100
- -------------------------------------------------------------------------------
CONSUMER CYCLICAL SERVICES -- 1.9%
Coinmach Corp.
350,000 Sr. Nt.
9.00% due 2/1/2010 B2/B 374,500
Iron Mountain, Inc.
860,000 Sr. Sub. Nt.
8.625% due 4/1/2013 B2/B 920,200
-----------
1,294,700
- -------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 4.7%
Elizabeth Arden, Inc.
670,000 Sr. Sec. Nt. Ser. B
11.75% due 2/1/2011 B1/B 747,050
Playtex Products, Inc.
763,000 Sr. Sub. Nt.
9.375% due 6/1/2011 B3/B- 763,000
Sealy Mattress Co.
286,000 Sr. Sub. Nt. Ser. B
9.875% due 12/15/2007 B3/B- 284,570
Simmons Co.
562,000 Sr. Sub. Nt. Ser. B
10.25% due 3/15/2009 B2/B- 601,340
St. John Knits Int'l., Inc.
750,000 Sr. Sub. Nt.
12.50% due 7/1/2009 B3/B- 817,500
-----------
3,213,460
- -------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING -- 1.4%
Jacuzzi Brands, Inc.
300,000 Sr. Sec. Nt.+
9.625% due 7/1/2010 B3/B 300,000
Resolution Performance Product
150,000 Sr. Sec. Nt.
9.50% due 4/15/2010 B2/B+ 156,000
Tyco Int'l. Group S.A.
500,000 Nt.
6.375% due 10/15/2011 Ba2/BBB- 527,500
-----------
983,500
- -------------------------------------------------------------------------------
ELECTRIC -- 2.6%
Calpine Canada Energy
560,000 Sr. Nt.
8.50% due 5/1/2008 B1/CCC+ 436,800
PSEG Energy Hldgs., Inc.
600,000 Sr. Nt.
8.50% due 6/15/2011 Baa3/BBB- 645,000
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
52
THE GUARDIAN HIGH YIELD BOND FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
Southern California Edison Co.
$ 666,000 1st Ref. Mtg. Ser. 93C
7.25% due 3/1/2026 Ba2/BB $ 678,488
-----------
1,760,288
- -------------------------------------------------------------------------------
ENERGY -- 6.3%
Dresser, Inc.
280,000 Sr. Nt.
9.375% due 4/15/2011 B2/B 288,400
Newfield Exploration Co.
280,000 Sr. Sub. Nt.
8.375% due 8/15/2012 Ba3/BB- 315,350
Newpark Resources, Inc.
700,000 Sr. Sub. Nt. Ser. B
8.625% due 12/15/2007 B2/B+ 717,500
Offshore Logistics
600,000 Sr. Nt.+
6.125% due 6/15/2013 Ba2/BB+ 601,500
Pride Int'l., Inc.
280,000 Sr. Nt.
10.00% due 6/1/2009 Ba2/BB 306,600
Tesoro Petroleum Corp.
300,000 Sec. Nt.+
8.00% due 4/15/2008 Ba3/BB 307,500
Western Oil Sands, Inc.
560,000 Sr. Sec. Nt.
8.375% due 5/1/2012 Ba2/BB+ 624,400
Westport Resources Corp.
420,000 Sr. Sub. Nt.
8.25% due 11/1/2011 Ba3/B+ 459,900
XTO Energy, Inc.
600,000 Sr. Nt.+
6.25% due 4/15/2013 Ba2/BB 637,500
-----------
4,258,650
- -------------------------------------------------------------------------------
ENTERTAINMENT -- 3.4%
Intrawest Corp.
670,000 Sr. Nt.
9.75% due 8/15/2008 B1/B+ 699,313
185,000 Sr. Nt.
10.50% due 2/1/2010 B1/B+ 198,875
Premier Parks, Inc.
500,000 Sr. Nt.
9.75% due 6/15/2007 B2/B 495,000
Regal Cinemas, Inc.
278,000 Sr. Sub. Nt. Ser. B
9.375% due 2/1/2012 B2/B 306,495
Speedway Motorsports, Inc.
600,000 Sr. Sub. Nt.+
6.75% due 6/1/2013 Ba2/B+ 621,000
-----------
2,320,683
- -------------------------------------------------------------------------------
ENVIRONMENTAL -- 3.9%
Allied Waste NA, Inc.
1,500,000 Sr. Nt.
7.875% due 4/15/2013 Ba3/BB- 1,569,375
1,034,000 Sr. Sub. Nt.
10.00% due 8/1/2009 B2/B+ 1,098,625
-----------
2,668,000
- -------------------------------------------------------------------------------
FOOD AND BEVERAGE -- 5.0%
American Seafood Group LLC
560,000 Sr. Sub. Nt.
10.125% due 4/15/2010 B3/B 635,600
B & G Foods, Inc.
350,000 Sr. Sub. Nt. Ser. D
9.625% due 8/1/2007 B3/B- 360,500
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
Constellation Brands, Inc.
$ 71,000 Sr. Sub. Nt.
8.125% due 1/15/2012 Ba3/B+ $ 76,680
190,000 Sr. Sub. Nt.
8.50% due 3/1/2009 Ba3/B+ 199,500
Del Monte Corp.
635,000 Sr. Sub. Nt.
9.25% due 5/15/2011 B2/B 679,450
Merisant Co.
300,000 Sr. Sub. Nt.+
9.50% due 7/15/2013 B2/B 310,500
Michael Foods, Inc,
750,000 Sr. Sub. Nt. Ser. B
11.75% due 4/1/2011 B2/B- 862,500
Premium Standard Farms, Inc.
310,000 Sr. Nt.
9.25% due 6/15/2011 B1/BB 292,950
-----------
3,417,680
- -------------------------------------------------------------------------------
GAMING -- 1.9%
Mandalay Resort Group
280,000 Sr. Sub. Nt. Ser. B
10.25% due 8/1/2007 Ba3/BB- 316,400
MGM Mirage, Inc.
278,000 Sr. Sub. Nt.
8.375% due 2/1/2011 Ba2/BB+ 316,225
Park Place Entertainment Corp.
286,000 Sr. Nt.
7.50% due 9/1/2009 Ba1/BBB- 313,170
Sun Int'l. Hotels Ltd.
285,000 Sr. Sub. Nt.
8.875% due 8/15/2011 B2/B+ 308,513
-----------
1,254,308
- -------------------------------------------------------------------------------
GAS DISTRIBUTORS -- 1.1%
AmeriGas Partners LP
190,000 Sr. Nt.
8.875% due 5/20/2011 B2/BB- 207,100
190,000 Sr. Nt.
10.00% due 4/15/2006 B2/BB- 207,100
Gazprom OAO
328,000 Nt.+
9.625% due 3/1/2013 NA/B+ 361,620
-----------
775,820
- -------------------------------------------------------------------------------
HEALTH CARE -- 3.5%
Fisher Scientific Int'l., Inc.
440,000 Sr. Sub. Nt.+
8.125% due 5/1/2012 B2/B+ 470,800
Fresenius Medical Care
570,000 Capital Tr.
7.875% due 6/15/2011 Ba2/BB- 601,350
HCA, Inc.
278,000 Nt.
6.25% due 2/15/2013 Ba1/BBB- 283,405
Insight Health Svcs. Corp.
381,000 Sr. Sub. Nt. Ser. B
9.875% due 11/1/2011 B3/B- 400,050
Tenet Healthcare Corp.
300,000 Nt.
7.375% due 2/1/2013 Ba3/BBB- 289,500
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
53
THE GUARDIAN HIGH YIELD BOND FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
Triad Hospitals, Inc.
$ 278,000 Sr. Nt. Ser. B
8.75% due 5/1/2009 B1/B- $ 295,722
-----------
2,340,827
- -------------------------------------------------------------------------------
HOME CONSTRUCTION -- 1.8%
Beazer Homes USA, Inc.
280,000 Sr. Nt.
8.375% due 4/15/2012 Ba2/BB 310,100
Meritage Corp.
286,000 Sr. Nt.
9.75% due 6/1/2011 Ba3/B 316,030
Standard Pacific Corp.
280,000 Sr. Sub. Nt.
9.25% due 4/15/2012 Ba3/B+ 314,300
WCI Communities, Inc.
280,000 Sr. Sub. Nt.
9.125% due 5/1/2012 Ba3/B 298,200
-----------
1,238,630
- -------------------------------------------------------------------------------
INDUSTRIAL-OTHER -- 1.1%
Briggs & Stratton Corp.
645,000 Sr. Nt.
8.875% due 3/15/2011 Ba1/BB+ 744,975
- -------------------------------------------------------------------------------
LODGING -- 1.8%
Hilton Hotels Corp.
280,000 Nt.
7.625% due 12/1/2012 Ba1/BBB- 306,600
HMH Pptys., Inc.
280,000 Sr. Nt. Ser. C
8.45% due 12/1/2008 Ba3/B+ 289,100
John Q. Hammons Hotels LP
280,000 1st Mtg. Nt. Ser. B
8.875% due 5/15/2012 B2/B 294,000
Starwood Hotels & Resorts
280,000 Sr. Nt.
7.875% due 5/1/2012 Ba1/BB+ 306,600
-----------
1,196,300
- -------------------------------------------------------------------------------
MEDIA-CABLE -- 3.2%
Charter Comm. Hldgs.
280,000 Sr. Disc. Nt. (1)
0/11.75% due 1/15/2010 Ca/B+ 165,200
840,000 Sr. Disc. Nt. (1)
0/11.75% due 5/15/2011 Ca/CCC- 424,200
CSC Hldgs., Inc.
560,000 Sr. Debt. Ser. B
8.125% due 8/15/2009 B1/BB- 579,600
Insight Midwest LP
350,000 Sr. Nt.
10.50% due 11/1/2010 B2/B+ 384,125
Mediacom LLC
600,000 Sr. Nt.
9.50% due 1/15/2013 B2/B+ 634,500
-----------
2,187,625
- -------------------------------------------------------------------------------
MEDIA-NONCABLE -- 6.5%
Allbritton Comm. Co.
209,000 Sr. Sub. Nt.+
7.75% due 12/15/2012 B3/B- 215,793
American Media Operations, Inc.
570,000 Sr. Sub. Nt. Ser. B
10.25% due 5/1/2009 B2/B- 615,600
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
Corus Entertainment, Inc.
$ 285,000 Sr. Sub. Nt.
8.75% due 3/1/2012 B1/B+ $ 306,375
Dex Media East LLC
265,000 Sr. Nt.
9.875% due 11/15/2009 B2/B 295,475
265,000 Sr. Sub. Nt.
12.125% due 11/15/2012 B3/B 313,362
DirecTV Hldgs.
278,000 Sr. Nt.+
8.375% due 3/15/2013 B1/B 309,970
Echostar DBS Corp.
280,000 Sr. Nt.
9.125% due 1/15/2009 Ba3/BB- 312,900
139,000 Sr. Nt.
10.375% due 10/1/2007 Ba3/BB- 153,942
Emmis Comm. Corp.
286,000 Sr. Sub. Nt.
8.125% due 3/15/2009 B2/B- 299,585
Entravision Comm. Corp.
280,000 Sr. Sub. Nt.
8.125% due 3/15/2009 B3/B- 291,200
Houghton Mifflin Co.
556,000 Sr. Nt.+
9.875% due 2/1/2013 B3/B 603,260
R.H. Donnelley Fin. Corp. I
160,000 Sr. Nt.+
8.875% due 12/15/2010 B1/B+ 176,800
465,000 Sr. Sub. Nt.+
10.875% due 12/15/2012 B2/B+ 541,725
-----------
4,435,987
- -------------------------------------------------------------------------------
METALS AND MINING -- 2.2%
AK Steel Corp.
280,000 Sr. Nt.
7.75% due 6/15/2012 B1/BB- 232,400
Arch Western Finance LLC
600,000 Sr. Nt.+
6.75% due 7/1/2013 Ba2/BB+ 615,000
Luscar Coal Ltd.
286,000 Sr. Nt.
9.75% due 10/15/2011 Ba3/BB 326,755
Oregon Steel Mills, Inc.
280,000 1st Mtg. Nt.
10.00% due 7/15/2009 B1/B+ 252,000
Steel Dynamics, Inc.
70,000 Sr. Nt.
9.50% due 3/15/2009 B2/B 73,325
-----------
1,499,480
- -------------------------------------------------------------------------------
NATURAL GAS-PIPELINES -- 5.1%
El Paso Partners
555,000 Sr. Sub. Nt. Ser. B
8.50% due 6/1/2011 B1/BB- 593,850
El Paso Production Hldg. Co.
667,000 Sr. Nt.+
7.75% due 6/1/2013 B2/B+ 665,332
Gulfterra Energy Partners
45,000 Sr. Sub. Nt.+
8.50% due 6/1/2010 B1/BB- 48,150
Northwest Pipeline Corp.
208,000 Sr. Nt.
8.125% due 3/1/2010 B1/B+ 223,600
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
54
THE GUARDIAN HIGH YIELD BOND FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
Southern Natural Gas Co.
$ 623,000 Nt.
7.35% due 2/15/2031 B1/B+ $ 633,903
Transcontinental Gas Pipeline
Corp.
630,000 Nt. Ser. B
7.00% due 8/15/2011 B1/B+ 645,750
Williams Cos., Inc.
240,000 Nt.
8.125% due 3/15/2012 B3/B+ 246,000
360,000 Sr. Nt.
8.625% due 6/1/2010 B3/B+ 376,200
-----------
3,432,785
- -------------------------------------------------------------------------------
PACKAGING -- 3.1%
Ball Corp.
560,000 Sr. Nt.
6.875% due 12/15/2012 Ba3/BB 593,600
Crown European Hldgs. S.A.
355,000 Sr. Sec.+
9.50% due 3/1/2011 B1/B+ 383,400
Kappa Beheer BV
670,000 Sr. Sub. Nt.
10.625% due 7/15/2009 B2/B 717,737
Owens-Brockway Glass Container
133,000 Sr. Sec. Nt.+
7.75% due 5/15/2011 B1/BB 140,648
133,000 Sr. Nt.+
8.25% due 5/15/2013 B2/B+ 138,985
Silgan Hldgs., Inc.
140,000 Sr. Sub. Debt.
9.00% due 6/1/2009 B1/B+ 144,900
-----------
2,119,270
- -------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 3.8%
Abitibi-Consolidated, Inc.
210,000 Nt.
6.00% due 6/20/2013 Ba1/BB+ 199,869
390,000 Debt.
8.85% due 8/1/2030 Ba1/BB+ 414,390
Cascades, Inc.
278,000 Sr. Nt.+
7.25% due 2/15/2013 Ba1/BB+ 292,595
Jefferson Smurfit Corp. US
400,000 Sr. Nt.+
7.50% due 6/1/2013 B2/B 408,000
Norske Skog Canada Ltd.
140,000 Sr. Nt.
8.625% due 6/15/2011 Ba2/BB 146,300
Packaging Corp. of America
335,000 Sr. Sub. Nt.
9.625% due 4/1/2009 Ba2/BB+ 368,919
Stone Container Corp.
670,000 Sr. Nt.
9.75% due 2/1/2011 B2/B 733,650
-----------
2,563,723
- -------------------------------------------------------------------------------
RESTAURANTS -- 0.8%
Jack in the Box, Inc.
555,000 Sr. Sub. Nt.
8.375% due 4/15/2008 Ba3/BB- 574,425
- -------------------------------------------------------------------------------
RETAILERS -- 4.6%
Cole National Group, Inc.
280,000 Sr. Sub. Nt.
8.875% due 5/15/2012 B2/B 269,500
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
Hollywood Entertainment Corp.
$ 420,000 Sr. Sub. Nt.
9.625% due 3/15/2011 B3/B- $ 459,375
J.C. Penney Co., Inc.
720,000 Nt.
9.00% due 8/1/2012 Ba3/BB+ 781,200
Jafra Cosmetics
300,000 Sr. Sub. Nt.+
10.75% due 5/15/2011 B3/B- 313,500
Petco Animal Supplies, Inc.
285,000 Sr. Sub. Nt.
10.75% due 11/1/2011 B2/B 324,900
Rent-A-Center, Inc.
200,000 Sr. Sub. Nt.+
7.50% due 5/1/2010 B1/B+ 210,000
142,000 Sr. Sub. Nt. Ser. D
11.00% due 8/15/2008 B1/B+ 151,052
Rite Aid Corp.
280,000 Sr. Nt.
11.25% due 7/1/2008 Caa2/B- 301,000
United Auto Group, Inc.
280,000 Sr. Sub. Nt.
9.625% due 3/15/2012 B3/B 299,600
-----------
3,110,127
- -------------------------------------------------------------------------------
SUPERMARKETS -- 0.4%
Pathmark Stores, Inc.
284,000 Sr. Sub. Nt.
8.75% due 2/1/2012 B2/B 293,940
- -------------------------------------------------------------------------------
TECHNOLOGY -- 3.9%
AMI Semiconductor, Inc.
555,000 Sr. Sub. Nt.+
10.75% due 2/1/2013 B3/B 627,150
Flextronics Int'l. Ltd.
700,000 Sr. Sub. Nt.
9.875% due 7/1/2010 Ba2/BB- 766,500
PerkinElmer, Inc.
560,000 Sr. Sub. Nt.
8.875% due 1/15/2013 Ba3/BB- 607,600
Seagate Technology
560,000 Sr. Nt.
8.00% due 5/15/2009 Ba2/BB+ 606,200
-----------
2,607,450
- -------------------------------------------------------------------------------
TEXTILE -- 2.1%
Oxford Industries, Inc.
300,000 Sr. Nt.+
8.875% due 6/1/2011 B2/B 315,000
Russell Corp.
350,000 Sr. Nt.
9.25% due 5/1/2010 B1/BB 381,500
William Carter Co.
650,000 Sr. Sub. Nt. Ser. B
10.875% due 8/15/2011 B3/B 734,500
-----------
1,431,000
- -------------------------------------------------------------------------------
TRANSPORTATION -- 0.5%
Teekay Shipping Corp.
280,000 Sr. Nt.
8.875% due 7/15/2011 Ba2/BB- 306,950
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
55
THE GUARDIAN HIGH YIELD BOND FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -------------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 6.6%
Centennial Cell
$ 700,000 Sr. Nt.+
10.125% due 6/15/2013 Caa1/CCC $ 693,000
Crown Castle Int'l. Corp.
381,000 Sr. Nt.
10.75% due 8/1/2011 B3/CCC 415,290
Nextel Comm., Inc.
275,000 Sr. Disc. Nt.
9.75% due 10/31/2007 B3/B 284,625
1,204,000 Sr. Disc. Nt.
9.95% due 2/15/2008 B3/B 1,258,180
321,000 Sr. Disc. Nt.
10.65% due 9/15/2007 B3/B 331,432
Nextel Partners, Inc.
350,000 Sr. Nt.+
8.125% due 7/1/2011 Caa1/CCC+ 349,125
Telecorp PCS, Inc.
555,000 Sr. Sub. Nt.
10.625% due 7/15/2010 Baa2/BBB 670,163
Triton PCS, Inc.
420,000 Sr. Sub. Disc. Nt.
11.00% due 5/1/2008 B3/B- 445,200
-----------
4,447,015
- -------------------------------------------------------------------------------
WIRELINE COMMUNICATIONS -- 5.2%
Qwest Capital Funding, Inc.
600,000 Nt.
5.875% due 8/3/2004 Caa2/CCC+ 574,500
Qwest Corp.
1,260,000 Debt.
7.20% due 11/10/2026 Ba3/B- 1,181,250
560,000 Debt.
8.875% due 6/1/2031 Ba3/B- 588,000
Qwest Services Corp.
355,600 Nt.+
13.50% due 12/15/2010 NR/CCC+ 401,828
Sprint Capital Corp.
335,000 Nt.
8.375% due 3/15/2012 Baa3/BBB- 401,101
Telus Corp.
300,000 Nt.
8.00% due 6/1/2011 Ba1/BBB 346,500
-----------
3,493,179
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $62,691,908) 67,109,760
- -------------------------------------------------------------------------------
<Caption>
WARRANTS -- 0.0%
Shares Value
- -------------------------------------------------------------------------------
$ 2,100 GT Group Telecomm., Inc.
exp. 2/1/2010+ $ 787
417 Hayes Lemmerz Int'l., Inc.
exp. 6/3/2006 925
670 Horizon PCS, Inc.
exp. 10/1/2010+ 34
Leap Wireless Int'l., Inc.
1,000 exp. 4/15/2010+ 250
670 exp. 4/15/2010+ 167
460 Ubiquitel Operating Co.
exp. 4/15/2010+ 5
330 XM Satellite Radio, Inc.
exp. 3/15/2010+ 1,815
- -------------------------------------------------------------------------------
TOTAL WARRANTS
(COST $364,135) 3,983
- -------------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 0.9%
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 629,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $629,019 at
1.10% due 7/1/2003 (2)
(COST $629,000) $ 629,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $63,685,043) 67,742,743
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.0% 17,739
- -------------------------------------------------------------------------------
NET ASSETS -- 100% $67,760,482
- -------------------------------------------------------------------------------
</Table>
+ Rule 144A restricted security.
* Unaudited.
(1) Step-up bond.
(2) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
56
/ / The Guardian Tax-Exempt Fund
<Table>
<Caption>
MUNICIPAL BONDS -- 97.6%
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------
ARIZONA -- 5.3%
$1,900,000 Arizona St. Trans. Brd.
Hwy. Rev. Ser. B,
5.25% due 7/1/2022 Aa1/AAA $ 2,057,035
1,500,000 Phoenix, AZ Civic Impt.
Corp. Wtr. Sys. Rev.,
5.50% due 7/1/2020 Aaa/AAA 1,678,185
1,000,000 Phoenix, AZ G.O. Ser. B,
5.375% due 7/1/2020 Aa1/AA+ 1,107,790
-----------
4,843,010
- --------------------------------------------------------------------------
ARKANSAS -- 1.3%
1,000,000 Arkansas St. G.O. Fed. Hwy.
Grant Ser. A,
5.50% due 8/1/2011 Aa2/AA 1,145,520
- --------------------------------------------------------------------------
CALIFORNIA -- 3.2%
California St. G.O.,
1,300,000 5.125% due 6/1/2022 A2/A 1,332,643
1,500,000 5.375% due 10/1/2027 A2/A 1,548,435
-----------
2,881,078
- --------------------------------------------------------------------------
COLORADO -- 2.6%
2,165,000 South Suburban Park & Rec.
Dist., CO Rev.,
5.50% due 9/15/2019 Aaa/AAA 2,409,212
- --------------------------------------------------------------------------
FLORIDA -- 4.4%
2,000,000 Florida St. Brd. of Ed.
Lottery Rev. Ser. A,
5.50% due 7/1/2017 Aaa/AAA 2,294,120
1,500,000 Florida St. Brd. of Ed.
Lottery Rev. Ser. C,
5.25% due 7/1/2016 Aaa/AAA 1,665,495
-----------
3,959,615
- --------------------------------------------------------------------------
GEORGIA -- 4.5%
1,000,000 Fulton Cnty., GA Dev. Auth.
Rev. Georgia Tech.
Foundation Ser. A,
5.125% due 11/1/2021 Aa1/AA+ 1,078,230
Gainesville, GA Wtr. & Swg.
Rev.,
700,000 5.25% due 11/15/2018 Aaa/AAA 773,717
2,000,000 5.375% due 11/15/2020 Aaa/AAA 2,208,780
-----------
4,060,727
- --------------------------------------------------------------------------
IDAHO -- 4.5%
1,625,000 Boise City, ID Urban
Renewal Agy. Lease,
6.00% due 8/15/2023 Aaa/AAA 1,891,240
2,000,000 Univ. of ID Univ. Rev.
Hsg.,
5.375% due 4/1/2023 Aaa/AAA 2,162,100
-----------
4,053,340
- --------------------------------------------------------------------------
ILLINOIS -- 1.2%
1,000,000 Chicago, IL Brd. of Ed.
Ser. A,
5.25% due 12/1/2018 Aaa/AAA 1,107,950
- --------------------------------------------------------------------------
IOWA -- 1.2%
1,000,000 Cedar Rapids, IA G.O.,
5.25% due 6/1/2019 Aaa/NR 1,077,730
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- --------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------
KANSAS -- 4.4%
$2,000,000 Butler Cnty., KS Pub. Bldg.
Comm. Rev.,
5.55% due 10/1/2021 Aaa/NR $ 2,233,120
1,500,000 Kansas St. Dept. Trans.
Hwy. Rev. Ser. A,
5.75% due 9/1/2013 Aa2/AA+ 1,761,870
-----------
3,994,990
- --------------------------------------------------------------------------
KENTUCKY -- 4.2%
1,430,000 Kentucky St. Ppty. & Bldgs.
Comm. Ser. A,
5.70% due 5/1/2018 Aaa/AAA 1,632,574
2,000,000 Kentucky St. Ppty. & Bldgs.
Comm. Rev.,
5.375% due 10/1/2019 Aaa/AAA 2,209,120
-----------
3,841,694
- --------------------------------------------------------------------------
MARYLAND -- 2.7%
2,085,000 Prince Georges Cnty., MD
Ref.,
5.50% due 5/15/2011 Aaa/AAA 2,447,769
- --------------------------------------------------------------------------
MASSACHUSETTS -- 2.6%
1,000,000 Massachusetts Bay Trans.
Auth. Gen. Trans. Ser. B
Rev.,
5.375% due 3/1/2025 Aaa/AAA 1,049,850
1,200,000 Massachusetts St. G.O. Ser.
A,
5.125% due 1/1/2020 Aa2/AA- 1,285,200
-----------
2,335,050
- --------------------------------------------------------------------------
MICHIGAN -- 3.7%
2,000,000 Detroit, MI City Sch. Dist.
Ser. A,
5.50% due 5/1/2020 Aaa/AAA 2,235,360
1,000,000 Garden City, MI Sch. Dist.,
5.50% due 5/1/2018 Aaa/AAA 1,115,550
-----------
3,350,910
- --------------------------------------------------------------------------
MISSOURI -- 1.2%
1,000,000 Springfield, MO Sch. Dist.
G.O.,
5.125% due 3/1/2020 Aaa/AAA 1,096,930
- --------------------------------------------------------------------------
NEW JERSEY -- 0.6%
500,000 New Jersey St. Trans. Auth.
Ser. A,
6.50% due 6/15/2005 Aaa/AAA 549,695
- --------------------------------------------------------------------------
NEW MEXICO -- 1.3%
1,000,000 New Mexico St. Hwy. Comm.
Tax Rev.,
6.00% due 6/15/2010 Aa2/AA+ 1,172,450
- --------------------------------------------------------------------------
NEW YORK -- 8.8%
1,255,000 New York City Industrial
Dev. Agy.,
5.25% due 3/1/2018 Aaa/AAA 1,397,719
1,200,000 New York St. Dorm. Auth.
Rev. Ser. A,
5.125% due 7/1/2021 Aaa/AAA 1,303,104
1,500,000 New York St. Dorm. Auth.
Lease Ser. A,
6.25% due 7/1/2020 A1/AA- 1,778,040
1,000,000 New York St. Ref. Ser. A
G.O.,
5.25% due 3/15/2015 A2/AA 1,116,930
1,250,000 New York St. Thruway Auth.
Hwy. & Brdg. Tr. Fd. Ser.
B,
5.375% due 4/1/2015 Aaa/AAA 1,424,162
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
57
THE GUARDIAN TAX-EXEMPT FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- --------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------
$ 500,000 New York, NY G.O. Sub. Ser.
E2,
0.95% due 8/1/2020 (1) Aa3/AA+ $ 500,000
500,000 New York, NY G.O. Sub. Ser.
B2,
0.95% due 8/15/2019 (1) Aa3/AA+ 500,000
-----------
8,019,955
- --------------------------------------------------------------------------
NORTH CAROLINA -- 0.7%
595,000 Univ. of NC Hosp. Chapel
Hill Rev. Ser. A,
0.95% due 2/15/2031 (1) A1/AA 595,000
- --------------------------------------------------------------------------
NORTH DAKOTA -- 1.3%
1,000,000 North Dakota St. Wtr. Comm.
Rev.,
5.75% due 8/1/2020 Aaa/AAA 1,143,320
- --------------------------------------------------------------------------
OHIO -- 7.8%
500,000 Cleveland, OH Parking Facs.
Rev.,
5.50% due 9/15/2016 Aaa/AAA 562,850
750,000 Ohio St. Bldg. Auth.
Disalle Gov't. Ctr. Ser. A,
6.00% due 10/1/2005 Aa2/AA 826,298
1,300,000 Ohio St. Higher Ed. Fac.
Comm.,
5.50% due 12/1/2020 Aaa/AAA 1,460,329
1,500,000 Ohio St. Wtr. Dev. Auth.
Rev.,
5.50% due 12/1/2020 Aaa/AAA 1,688,745
1,235,000 River Valley, OH Local Sch.
Dist. Facs.,
5.25% due 11/1/2020 Aaa/NR 1,353,436
1,050,000 Univ. of Cincinnati, OH
General Rcpts. Ser. A,
5.50% due 6/1/2011 Aaa/AAA 1,228,773
-----------
7,120,431
- --------------------------------------------------------------------------
OREGON -- 2.7%
1,105,000 McMinnville, OR Sch. Dist.
Ref. G.O.,
5.50% due 6/15/2016 Aaa/NR 1,323,304
1,000,000 Washington & Clackamas
Cntys., OR Sch. Dist. G.O.
Ref.,
5.25% due 6/1/2016 Aaa/NR 1,171,410
-----------
2,494,714
- --------------------------------------------------------------------------
PENNSYLVANIA -- 2.5%
Delaware River Port Auth.
PA & NJ,
1,000,000 5.10% due 1/1/2020 Aaa/AAA 1,092,110
1,000,000 6.00% due 1/1/2017 Aaa/AAA 1,168,770
-----------
2,260,880
- --------------------------------------------------------------------------
PUERTO RICO -- 6.1%
2,500,000 Puerto Rico Comwlth. Hwy. &
Trans. Auth. Rev. Ser. B,
6.00% due 7/1/2026 Aaa/AAA 2,730,475
1,750,000 Puerto Rico Comwlth. Hwy. &
Trans. Auth. Rev. Ser. G,
5.00% due 7/1/2033 Baa1/A 1,781,692
1,000,000 Puerto Rico Elect. Power
Auth. Ser. HH Rev.,
5.375% due 7/1/2030 Aaa/AAA 1,063,900
-----------
5,576,067
- --------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- --------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------------
SOUTH CAROLINA -- 5.0%
$ 350,000 Charleston Cnty., SC Sch.
Dist. Ref. Ser. B,
5.00% due 2/1/2016 Aa1/AA+ $ 383,439
1,250,000 Charleston, SC Wtrwks. &
Swr. Rev.,
5.25% due 1/1/2018 Aa3/AA- 1,379,250
1,000,000 Mount Pleasant, SC Wtr. &
Swr. Rev. Ref. & Impt.,
5.25% due 12/1/2019 Aaa/AAA 1,111,280
1,500,000 South Carolina St. G.O.,
5.65% due 7/1/2020 (2) Aaa/AAA 1,674,015
-----------
4,547,984
- --------------------------------------------------------------------------
TENNESSEE -- 2.8%
1,000,000 Knox Cnty., TN Pub. Impt.
G.O.,
5.375% due 5/1/2020 Aa2/AA 1,080,380
1,340,000 Metro. Gov't. Nashville
Davidson Cnty., TN Ser. A,
5.25% due 10/1/2022 Aaa/AAA 1,452,131
-----------
2,532,511
- --------------------------------------------------------------------------
VIRGINIA -- 7.6%
2,000,000 Fairfax Cnty., VA Econ.
Dev. Auth. Rev.,
5.00% due 6/1/2023 Aa1/AA+ 2,113,420
1,370,000 Fairfax Cnty., VA Wtr.
Auth. Rev. Ref.,
5.375% due 4/1/2020 Aa1/AAA 1,523,796
1,500,000 Riverside, VA Regional Jail
Auth. Rev.,
5.00% due 7/1/2021 Aaa/AAA 1,618,500
1,500,000 Virginia St. Pub. Sch.
Auth. Ser. A Rev.,
5.50% due 8/1/2018 Aa1/AA+ 1,697,325
-----------
6,953,041
- --------------------------------------------------------------------------
WASHINGTON -- 3.4%
1,500,000 Cowlitz Cnty., WA Sch.
Dist. G.O.,
5.50% due 12/1/2019 Aaa/NR 1,686,660
1,250,000 Snohomish Cnty., WA G.O.,
5.375% due 12/1/2019 Aaa/AAA 1,385,813
-----------
3,072,473
- --------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $82,492,677) 88,644,046
- --------------------------------------------------------------------------
TOTAL INVESTMENTS -- 97.6%
(COST $82,492,677) 88,644,046
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 2.4% 2,213,127
- --------------------------------------------------------------------------
NET ASSETS -- 100% $90,857,173
- --------------------------------------------------------------------------
</Table>
* Unaudited.
(1) Variable rate demand notes.
(2) Pre-refunded.
GLOSSARY:
G.O. -- General Obligation.
- --------------------------------------------------------------------------------
See notes to financial statements.
58
/ / The Guardian Cash Management Fund
<Table>
<Caption>
CORPORATE BONDS -- 10.3%
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
FINANCIAL-BANKS -- 0.4%
$ 2,500,000 Wells Fargo & Co.
4.25% 8/15/2003 $ 2,507,045
- -------------------------------------------------------------------
FINANCIAL-OTHER -- 2.0%
2,200,000 Bear Stearns Cos., Inc.
6.15% 3/2/2004 2,273,424
Lehman Brothers Hldgs.,
Inc.
1,000,000 6.625% 4/1/2004 1,039,156
900,000 7.36% 12/15/2003 924,864
Morgan Stanley
8,110,000 5.625% 1/20/2004 8,310,317
500,000 7.125% 8/15/2003 503,615
------------
13,051,376
- -------------------------------------------------------------------
FOOD AND BEVERAGE -- 2.1%
2,460,000 Pepsi Bottling Hldgs.,
Inc.
5.375% 2/17/2004+ 2,521,102
11,100,000 Unilever Capital Corp.
6.75% 11/1/2003 11,301,787
------------
13,822,889
- -------------------------------------------------------------------
FOOTWEAR -- 0.4%
2,791,000 Nike, Inc.
6.375% 12/1/2003 2,851,686
- -------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.0%
250,000 Procter & Gamble Co.
5.25% 9/15/2003 251,882
- -------------------------------------------------------------------
MERCHANDISING-MASS -- 1.4%
Wal-Mart Stores, Inc.
1,000,000 4.375% 8/1/2003 1,002,159
7,500,000 5.199% 6/1/2004 7,778,243
------------
8,780,402
- -------------------------------------------------------------------
TELECOMMUNICATIONS -- 2.9%
3,750,000 Bell Atlantic-NJ
5.875% 2/1/2004 3,848,141
4,600,000 GTE California, Inc.
6.75% 3/15/2004 4,772,910
New York Telephone Co.
7,750,000 5.875% 9/1/2003 7,812,465
2,145,000 6.25% 2/15/2004 2,209,523
------------
18,643,039
- -------------------------------------------------------------------
UTILITIES-ELECTRIC AND WATER -- 1.1%
3,600,000 Alabama Power Co.
5.35% 11/15/2003 3,653,572
3,150,000 Gulf Power Co.
4.69% 8/1/2003 3,158,216
------------
6,811,788
- -------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $66,720,107) 66,720,107
- -------------------------------------------------------------------
<Caption>
U.S. GOVERNMENT -- 3.1%
U.S. GOVERNMENT AGENCIES -- 3.1%
FHLB
$ 5,000,000 1.375% 5/12/2004 $ 5,000,000
15,000,000 1.40% 3/8/2004 15,000,000
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
(COST $20,000,000) 20,000,000
- -------------------------------------------------------------------
<Caption>
COMMERCIAL PAPER -- 59.8%
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
FINANCIAL -- 24.4%
AUTOMOTIVE -- 3.1%
$ 5,000,000 American Honda Fin. Corp.
1.20% 7/11/2003 $ 4,998,333
Toyota Motor Credit Corp.
10,000,000 0.94% 7/31/2003 9,992,167
5,000,000 1.03% 7/18/2003 4,997,568
------------
19,988,068
- -------------------------------------------------------------------
FINANCE COMPANIES -- 5.5%
8,000,000 Alaska St. Housing Fin.
Corp.
1.27% 7/2/2003 7,999,718
10,000,000 Coca-Cola Financial Corp.
1.03% 8/6/2003 9,989,700
Private Export Funding
Corp.
2,500,000 1.14% 11/6/2003 2,489,867
5,000,000 1.16% 9/22/2003 4,986,628
5,000,000 1.17% 11/17/2003 4,977,412
5,000,000 1.20% 10/9/2003 4,983,333
------------
35,426,658
- -------------------------------------------------------------------
FINANCIAL-BANKS -- 11.4%
12,500,000 Allied Irish Banks PLC
1.23% 7/7/2003 12,497,437
15,000,000 Dexia Delaware LLC
1.22% 7/15/2003 14,992,883
Dresdner Bank AG
10,000,000 1.24% 7/14/2003 9,995,522
6,000,000 1.27% 7/17/2003 5,996,614
Societe Generale NA
5,000,000 1.20% 7/21/2003 4,996,667
10,000,000 1.205% 8/7/2003 9,987,615
5,000,000 1.24% 7/7/2003 5,000,000
10,000,000 UBS Finance, Inc.
1.00% 9/10/2003 9,980,278
------------
73,447,016
- -------------------------------------------------------------------
FINANCIAL-OTHER -- 2.9%
Barton Capital Corp.
540,000 1.05% 7/14/2003 539,795
6,000,000 1.08% 7/1/2003 6,000,000
5,000,000 Goldman Sachs Group, Inc.
1.18% 8/28/2003+ 4,990,494
7,500,000 Govco, Inc.
1.03% 8/13/2003 7,490,773
------------
19,021,062
- -------------------------------------------------------------------
INSURANCE -- 1.5%
10,000,000 American General Fin.
Corp.
1.02% 7/8/2003 9,998,017
- -------------------------------------------------------------------
TOTAL FINANCIAL 157,880,821
- -------------------------------------------------------------------
INDUSTRIAL -- 35.4%
AUTOMOTIVE -- 1.6%
$10,000,000 Volkswagen of America,
Inc.
1.04% 8/6/2003 $ 9,989,600
- -------------------------------------------------------------------
CHEMICALS -- 1.6%
10,000,000 Lubrizol Corp.
1.18% 7/10/2003 9,997,050
- -------------------------------------------------------------------
CONGLOMERATES -- 1.5%
10,000,000 General Electric Capital
Corp.
1.17% 8/12/2003 9,986,350
- -------------------------------------------------------------------
COSMETICS AND TOILETRIES -- 1.6%
10,000,000 L'Oreal USA, Inc.
1.07% 8/5/2003 9,989,597
- -------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
59
THE GUARDIAN CASH MANAGEMENT FUND
Schedule of Investments (Continued)
<Table>
<Caption>
- -------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
DRUGS AND HOSPITALS -- 2.6%
Pfizer, Inc.
$12,000,000 1.01% 8/18/2003 $ 11,983,840
5,000,000 1.04% 7/24/2003 4,996,678
------------
16,980,518
- -------------------------------------------------------------------
EDUCATION -- 8.2%
10,000,000 Columbia University
1.22% 7/21/2003 9,993,222
5,000,000 Massachusetts Coll. of
Pharmacy
1.21% 7/9/2003 4,998,656
Northwestern University
2,500,000 1.00% 12/2/2003 2,489,305
5,000,000 1.15% 8/12/2003 4,993,292
5,000,000 1.20% 7/8/2003 4,998,833
2,500,000 1.20% 10/17/2003 2,491,000
5,000,000 1.23% 9/4/2003 4,988,896
University of California
5,000,000 1.19% 8/12/2003 4,993,059
7,997,000 1.195% 8/7/2003 7,987,178
5,000,000 1.20% 8/12/2003 4,993,000
------------
52,926,441
- -------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 4.2%
Johnson Controls, Inc.
10,000,000 1.19% 9/26/2003 9,971,242
7,500,000 1.20% 7/28/2003 7,493,250
10,000,000 Sharp Electronics
1.03% 8/14/2003 9,987,411
------------
27,451,903
- -------------------------------------------------------------------
FINANCIAL-OTHER -- 4.6%
Chevron UK Invt. PLC
5,000,000 0.92% 8/22/2003+ 4,993,355
10,000,000 1.19% 8/21/2003+ 9,983,142
15,000,000 Shell Finance UK
1.22% 7/9/2003 14,995,933
------------
29,972,430
- -------------------------------------------------------------------
FOOD AND BEVERAGE -- 2.3%
4,875,000 Archer-Daniels-Midland Co.
1.22% 7/2/2003 4,874,835
5,000,000 Brown-Forman Corp.
1.19% 7/11/2003 4,998,347
5,000,000 Unilever Capital Corp.
1.05% 7/18/2003 4,997,521
------------
14,870,703
- -------------------------------------------------------------------
MACHINERY-INDUSTRIAL SPECIALTY -- 1.2%
8,040,000 Stanley Works
1.22% 7/23/2003+ 8,034,006
- -------------------------------------------------------------------
METALS-MISCELLANEOUS -- 1.5%
10,000,000 Rio Tinto America, Inc.
1.05% 9/5/2003 9,980,750
- -------------------------------------------------------------------
PHARMACEUTICALS -- 2.0%
Johnson & Johnson
5,000,000 1.20% 8/1/2003 4,994,833
8,000,000 1.21% 7/15/2003 7,996,236
------------
12,991,069
- -------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
TELECOMMUNICATIONS -- 0.9%
$ 6,000,000 Verizon Network Funding
1.04% 7/3/2003 $ 5,999,653
- -------------------------------------------------------------------
UTILITIES-ELECTRIC AND WATER -- 1.6%
10,000,000 Alabama Power Co.
1.17% 7/8/2003 9,997,725
- -------------------------------------------------------------------
TOTAL INDUSTRIAL 229,167,795
- -------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $387,048,616) 387,048,616
- -------------------------------------------------------------------
<Caption>
FLOATING RATE NOTES AND BONDS -- 22.1%
Principal Reset
Amount Date* Value
- -------------------------------------------------------------------
MUNICIPAL BONDS -- 22.1%
$ 3,710,000 Alaska St. Housing Fin.
Corp.
1.04% 7/10/2003 $ 3,710,000
13,590,000 California Housing Fin.
Agency
1.10% 7/9/2003 13,590,000
Colorado Housing & Fin.
Auth
8,250,000 1.04% 7/9/2003 8,250,000
11,000,000 2.20% 7/25/2003 11,000,086
8,000,000 Connecticut St. Housing &
Fin. Auth
1.02% 7/10/2003 8,000,000
11,000,000 Los Angeles, CA Wtr. &
Power
1.02% 7/10/2003 11,000,000
8,000,000 Miami Dade Cnty. Florida
Aviation
1.09% 7/9/2003 8,000,000
4,000,000 Michigan St. Housing Dev.
Auth
1.04% 7/9/2003 4,000,000
22,530,000 New York City Trans.
1.04% 7/9/2003 22,530,000
Sacramento Cnty., CA
18,000,000 1.03% 7/9/2003 18,000,000
8,100,000 1.03% 7/9/2003 8,100,000
Utah Housing Corp. Single
Family
4,840,000 1.04% 7/9/2003 4,840,000
4,850,000 1.04% 7/9/2003 4,850,000
1,700,000 1.04% 7/9/2003 1,700,000
6,290,000 1.04% 7/9/2003 6,290,000
Utah St. Housing Fin.
Agency
3,550,000 1.04% 7/9/2003 3,550,000
5,480,000 1.04% 7/9/2003 5,480,000
- -------------------------------------------------------------------
TOTAL FLOATING RATE NOTES
AND BONDS
(COST $142,890,086) 142,890,086
- -------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
60
THE GUARDIAN CASH MANAGEMENT FUND
Schedule of Investments (Continued)
<Table>
<Caption>
REPURCHASE AGREEMENT -- 3.9%
Principal
Amount Value
- -------------------------------------------------------------------
$25,665,000 State Street Bank and Trust Co.
repurchase agreement,
dated 6/30/2003, maturity
value $25,665,784 at
1.10% due 7/1/2003 (1)
(COST $25,665,000) $ 25,665,000
- -------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.2%
(COST $642,323,809) 642,323,809
CASH, RECEIVABLES AND OTHER ASSETS LESS
LIABILITIES -- 0.8% 5,058,096
- -------------------------------------------------------------------
NET ASSETS -- 100% $647,381,905
- -------------------------------------------------------------------
</Table>
+ Rule 144A restricted security.
(1) The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
* Floating rate note. The rate shown is the rate in effect at June 30, 2003.
- --------------------------------------------------------------------------------
See notes to financial statements.
61
/ / The Park Avenue Portfolio
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
- ---------------------------------------------------------------------
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE UBS LARGE PARK AVENUE UBS SMALL
FUND CAP VALUE SMALL CAP CAP VALUE
FUND FUND FUND
-------------------------------------------------------------
ASSETS
Investments, at identified cost (includes controlled
affiliated issue of $132,417,999 and non controlled
affiliated issue of $24,067,071 for GAAF)............. $ 1,242,770,560 $75,788,128 $136,469,983 $ 35,992,193
=============================================================
Investments, at market -- Note 1 (includes controlled
affiliated issue of $102,205,208 and non controlled
affiliated issue of $26,106,921 for GAAF)............. 1,282,911,897 86,874,249 160,041,265 41,104,823
Cash.................................................... 621 104 534 628
Foreign Currency (cost $52,328 GBGIF and $228,917
GBGEMF, respectively)................................. -- -- -- --
Receivable for securities sold.......................... 28,071,671 -- 4,946,991 375,675
Dividends receivable.................................... 1,305,436 105,548 67,706 45,618
Receivable for fund shares sold......................... 446,716 3,222 63,707 28,704
Interest receivable..................................... 453 63 190 24
Dividend reclaim receivable............................. -- -- -- --
Other assets............................................ 7,351 541 1,169 342
-------------------------------------------------------------
TOTAL ASSETS........................................ 1,312,744,145 86,983,727 165,121,562 41,555,814
-------------------------------------------------------------
LIABILITIES
Payable for securities purchased........................ 15,489,988 -- 8,520,054 305,842
Payable for fund shares redeemed........................ 2,003,894 18 2,093,064 18
Accrued expenses........................................ 290,997 79,099 30,120 68,836
Payable for variation margin -- Note 1.................. -- -- -- --
Due to custodian........................................ -- -- -- --
Distributions payable................................... -- -- -- --
Accrued foreign capital gains tax....................... -- -- -- --
Payable for forward mortgage securities
purchased -- Note 7................................... -- -- -- --
Due to affiliates....................................... 900,121 83,601 150,085 39,262
-------------------------------------------------------------
TOTAL LIABILITIES................................... 18,685,000 162,718 10,793,323 413,958
-------------------------------------------------------------
NET ASSETS.......................................... $ 1,294,059,145 $86,821,009 $154,328,239 $ 41,141,856
=============================================================
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par................... $ 482,744 $ 76,627 $ 102,577 $ 35,802
Additional paid-in capital.............................. 2,001,556,682 75,514,864 149,687,867 35,218,560
Undistributed/(overdistributed) net investment income... 735,799 (54,816) (520,545) (43,982)
Accumulated net realized gain/(loss) on investments and
foreign currency related transactions................. (748,857,417) 198,213 (18,512,942) 818,846
Net unrealized appreciation/(depreciation) of
investments and foreign currency related
transactions.......................................... 40,141,337 11,086,121 23,571,282 5,112,630
-------------------------------------------------------------
NET ASSETS.......................................... $ 1,294,059,145 $86,821,009 $154,328,239 $ 41,141,856
=============================================================
NET ASSETS
Class A................................................. $ 1,116,490,014 $21,857,557 $121,351,888 $ 10,399,120
Class B................................................. $ 165,055,265 $21,788,437 $ 18,608,031 $ 10,311,353
Class C................................................. $ 6,223,815 $21,568,516 $ 6,633,091 $ 10,204,306
Class K................................................. $ 6,290,051 $21,606,499 $ 7,735,229 $ 10,227,077
SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE
Class A................................................. 41,419,493 1,928,107 7,984,620 903,488
Class B................................................. 6,378,084 1,923,815 1,294,316 898,471
Class C................................................. 243,269 1,904,392 463,647 889,135
Class K................................................. 233,575 1,906,381 515,092 889,101
NET ASSET VALUE PER SHARE
Class A................................................. $26.96 $11.34 $15.20 $11.51
Class B................................................. $25.88 $11.33 $14.38 $11.48
Class C................................................. $25.58 $11.33 $14.31 $11.48
Class K................................................. $26.93 $11.33 $15.02 $11.50
MAXIMUM OFFERING PRICE PER SHARE
Class A Only (Net Asset Value x 104.71%)*............... $28.23 $11.87 $15.92 $12.05
</Table>
* Based on sale of less than $100,000. On sale of $100,000 or more, the
offering price is reduced.
** No load is charged on Class A shares.
See notes to financial statements.
62
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
ASSET S&P 500 BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT HIGH YIELD THE GUARDIAN CASH
ALLOCATION INDEX INTERNATIONAL EMERGING QUALITY BOND TAX-EXEMPT MANAGEMENT
FUND FUND FUND MARKETS FUND BOND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
$186,625,067 $157,913,843 $ 62,866,691 $47,203,271 $245,686,541 $63,685,043 $82,492,677 $642,323,809
===========================================================================================================================
154,018,856 134,915,543 63,985,484 52,463,369 254,357,840 67,742,743 88,644,046 642,323,809
742 95,484 -- 507 156,542 75,613 1,078,793 96,272
-- -- 52,039 229,253 -- -- -- --
-- -- 424,281 255,592 -- 4,484,759 -- 15,004,747
102,193 162,762 102,898 137,896 -- -- -- --
91,692 124,366 1,278,394 613,814 32,893 20,087 77,706 1,139,249
61 86 1,205 9 1,932,558 1,364,342 1,176,316 1,513,579
-- -- 77,558 -- -- -- -- --
1,255 1,212 753 554 1,110 545 837 3,139
- ---------------------------------------------------------------------------------------------------------------------------
154,214,799 135,299,453 65,922,612 53,700,994 256,480,943 73,688,089 90,977,698 660,080,795
- ---------------------------------------------------------------------------------------------------------------------------
-- 200,817 491,240 261,639 1,253,252 4,593,918 -- 8,514,334
507,213 37,950 157,186 126,385 1,528,829 1,257,140 20,473 3,670,605
46,114 17,913 27,681 40,833 8,334 11,988 28,359 77,256
59,766 -- -- -- -- -- -- --
-- -- 2,317,858 -- -- -- -- --
-- -- 324 -- 179,627 -- 6,814 541
-- -- -- 50,488 -- -- -- --
-- -- -- -- 26,768,988 -- -- --
42,256 70,863 23,813 22,953 170,070 64,561 64,879 436,154
- ---------------------------------------------------------------------------------------------------------------------------
655,349 327,543 3,018,102 502,298 29,909,100 5,927,607 120,525 12,698,890
- ---------------------------------------------------------------------------------------------------------------------------
$153,559,450 $134,971,910 $ 62,904,510 $53,198,696 $226,571,843 $67,760,482 $90,857,173 $647,381,905
===========================================================================================================================
$ 165,680 $ 201,829 $ 66,415 $ 59,038 $ 215,197 $ 94,168 $ 84,416 $ 6,473,819
243,553,903 254,650,194 101,964,547 55,341,722 213,501,632 84,423,633 82,163,402 640,908,086
537,137 118,381 380,390 (5,937) -- -- -- --
)
(57,533,647 (96,941,572) (40,637,529) (7,453,303) 4,183,715 (20,815,019) 2,457,986 --
)
(33,163,623 (23,056,922) 1,130,687 5,257,176 8,671,299 4,057,700 6,151,369 --
- ---------------------------------------------------------------------------------------------------------------------------
$153,559,450 $134,971,910 $ 62,904,510 $53,198,696 $226,571,843 $67,760,482 $90,857,173 $647,381,905
===========================================================================================================================
$110,675,334 $111,592,345 $ 46,577,766 $30,200,741 $184,477,225 $40,759,293 $80,531,153 $612,259,098
$28,965,720 $ 9,573,752 $ 5,764,431 $ 6,796,350 $21,091,395 $ 9,527,102 -- $ 17,056,667
$ 6,987,945 $ 7,327,580 $ 4,694,738 $ 7,402,427 $11,254,095 $ 8,600,022 $10,326,020 $ 9,139,572
$ 6,930,451 $ 6,478,233 $ 5,867,575 $ 8,799,178 $ 9,749,128 $ 8,874,065 -- $ 8,926,568
11,938,391 16,682,048 4,840,425 3,278,687 17,521,426 5,663,786 7,482,133 612,259,098
3,126,812 1,433,607 652,104 793,933 2,003,965 1,324,401 -- 17,056,667
754,372 1,098,402 529,531 862,606 1,069,233 1,195,862 959,435 9,139,572
748,404 968,804 619,474 968,540 925,035 1,232,711 -- 8,926,568
$9.27 $6.69 $9.62 $9.21 $10.53 $7.20 $10.76 $1.00
$9.26 $6.68 $8.84 $8.56 $10.52 $7.19 -- $1.00
$9.26 $6.67 $8.87 $8.58 $10.53 $7.19 $10.76 $1.00
$9.26 $6.69 $9.47 $9.08 $10.54 $7.20 -- $1.00
$9.71 $7.01 $10.07 $9.64 $11.03 $7.54 $11.27 N/A**
</Table>
63
/ / The Park Avenue Portfolio
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- ---------------------------------------------------------------------
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN
THE GUARDIAN UBS LARGE PARK AVENUE UBS SMALL
PARK AVENUE CAP VALUE SMALL CAP CAP VALUE
FUND FUND FUND FUND
---------------------------------------------------------
INVESTMENT INCOME
Dividends (includes $504,328 from a controlled
affiliate and $436,838 from a non controlled
affiliate for GAAF)............................... $ 9,582,408 $ 730,192 $ 476,139 $ 320,607
Interest............................................. 166,820 13,350 19,632 9,646
Less: Foreign tax withheld........................... -- -- (890) --
---------------------------------------------------------
Total Income.................................... 9,749,228 743,542 494,881 330,253
---------------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2................... 3,135,694 258,001 519,542 143,863
Administrative fees -- Class A -- Note 2............. 1,041,594 19,485 136,623 9,009
Administrative fees -- Class B -- Note 2............. 199,745 19,462 20,823 9,025
Administrative fees -- Class C -- Note 2............. 7,353 19,375 7,274 8,961
Administrative fees -- Class K -- Note 2............. 7,257 19,389 8,462 8,971
12b-1 fees -- Class B -- Note 3...................... 599,235 58,385 62,468 27,074
12b-1 fees -- Class C -- Note 3...................... 22,060 58,125 21,822 26,883
12b-1 fees -- Class K -- Note 3...................... 11,611 31,023 13,538 14,353
Transfer agent fees -- Class A....................... 775,796 9,360 70,936 9,546
Transfer agent fees -- Class B....................... 242,416 9,304 27,938 9,331
Transfer agent fees -- Class C....................... 17,747 9,193 15,174 9,176
Transfer agent fees -- Class K....................... -- 733 -- 733
Custodian fees....................................... 106,201 33,308 54,858 36,069
Trustees' fees -- Note 2............................. 41,804 1,715 3,981 877
Registration fees.................................... 31,080 30,421 29,238 30,421
Legal fees........................................... 19,836 32,642 496 15,322
Other................................................ 96,044 18,836 22,253 14,621
---------------------------------------------------------
Total Expenses before Reimbursement and Custody
credits..................................... 6,355,473 628,757 1,015,426 374,235
Less: Expenses assumed by investment adviser -- Note
2................................................. -- -- -- --
Custody credits -- Note 1...................... -- -- -- --
---------------------------------------------------------
Expenses Net of Reimbursement and Custody
credits.................................................. 6,355,473 628,757 1,015,426 374,235
---------------------------------------------------------
NET INVESTMENT INCOME/(LOSS)........................... 3,393,755 114,785 (520,545) (43,982)
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on investments -- Note 1.... (90,711,379) 198,213 (4,337,041) 818,846
Net realized loss on sale of affiliated underlying
funds............................................. -- -- -- --
Net realized gains received from affiliated
underlying funds.................................. -- -- -- --
Foreign capital gains tax............................ -- -- -- --
Net realized loss on foreign currency related
transactions -- Note 1............................ -- -- -- --
Net change in unrealized appreciation/(depreciation)
on investments -- Note 4.......................... 187,928,080 11,086,121 24,030,110 5,112,630
Net change in unrealized depreciation from
translation of other assets and liabilities
denominated in foreign currencies -- Note 1....... -- -- -- --
---------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCIES................................... 97,216,701 11,284,334 19,693,069 5,931,476
---------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS........ $100,610,456 $11,399,119 $19,172,524 $5,887,494
=========================================================
</Table>
See notes to financial statements.
64
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
ASSET S&P 500 BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT HIGH YIELD THE GUARDIAN CASH
ALLOCATION INDEX INTERNATIONAL EMERGING QUALITY BOND TAX-EXEMPT MANAGEMENT
FUND FUND FUND MARKETS FUND BOND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
$ 1,135,476 $ 1,074,436 $ 1,177,942 $ 817,502 -- -- -- --
32,308 13,451 9,396 3,476 $4,705,211 $2,722,434 $2,114,724 $4,568,935
-- -- (142,512) (86,215) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
1,167,784 1,087,887 1,044,826 734,763 4,705,211 2,722,434 2,114,724 4,568,935
- ---------------------------------------------------------------------------------------------------------------------------
475,726 152,522 255,906 238,626 551,041 188,887 233,795 1,686,265
132,453 126,442 60,990 34,442 225,049 47,261 104,614 799,353
34,602 10,716 6,800 7,537 25,221 11,002 -- 21,665
8,058 8,032 5,430 7,951 13,571 10,071 12,283 11,442
7,858 7,332 6,751 9,726 11,679 10,369 -- 10,673
103,806 32,148 20,401 22,610 75,664 33,006 -- 64,995
24,174 24,095 16,291 23,854 40,712 30,214 36,849 34,324
12,574 11,731 10,801 15,562 18,687 16,590 -- 17,076
86,851 21,228 52,069 19,738 48,051 18,130 18,893 237,094
34,902 18,890 21,819 17,406 21,323 17,621 -- 15,436
16,731 16,331 15,861 17,321 16,202 15,761 15,863 3,528
-- -- -- -- -- -- -- 1,583
53,182 73,986 132,559 150,877 73,053 47,469 33,534 79,966
5,224 3,804 2,063 1,367 6,981 1,908 3,270 22,160
29,779 45,831 33,796 30,082 42,248 29,366 11,315 31,701
1,642 4,134 1,552 783 2,480 826 826 9,706
19,973 28,661 21,219 18,268 23,811 18,520 18,191 46,267
- ---------------------------------------------------------------------------------------------------------------------------
1,047,535 585,883 664,308 616,150 1,195,773 497,001 489,433 3,093,234
(557,192) (194,562) -- -- (123,941) (149,601) (40,285) (110,188)
-- -- -- -- -- -- (14,847) --
- ---------------------------------------------------------------------------------------------------------------------------
490,343 391,321 664,308 616,150 1,071,832 347,400 434,301 2,983,046
- ---------------------------------------------------------------------------------------------------------------------------
677,441 696,566 380,518 118,613 3,633,379 2,375,034 1,680,423 1,585,889
- ---------------------------------------------------------------------------------------------------------------------------
(897,005) (338,882) (3,539,100) (1,724,639) 4,521,907 939,935 2,457,648 --
(652,564) -- -- -- -- -- -- --
42,644 -- -- -- -- -- -- --
-- -- -- (45,193) -- -- -- --
-- -- (540) (48,684) -- -- -- --
16,519,382 13,134,107 8,925,813 8,343,547 1,142,449 3,721,799 (477,511) --
-- -- (6,007) (309) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
15,012,457 12,795,225 5,380,166 6,524,722 5,664,356 4,661,734 1,980,137 --
- ---------------------------------------------------------------------------------------------------------------------------
$15,689,898 $13,491,791 $ 5,760,684 $ 6,643,335 $9,297,735 $7,036,768 $3,660,560 $1,585,889
===========================================================================================================================
</Table>
65
/ / The Park Avenue Portfolio
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN
THE GUARDIAN UBS LARGE CAP PARK AVENUE
PARK AVENUE FUND VALUE FUND SMALL CAP FUND
------------------------------- ------------------ ---------------------------
PERIOD FROM
SIX MONTHS FEBRUARY 3, 2003+ SIX MONTHS
ENDED YEAR ENDED TO ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31,
2003 2002 2003 2003 2002
(UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) (AUDITED)
----------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss)... $ 3,393,755 $ 6,268,512 $ 114,785 $ (520,545) $(1,034,582)
Net realized gain/(loss) on
investments and foreign
currency related
transactions.................. (90,711,379) (269,243,443) 198,213 (4,337,041) (7,577,860)
Net change in unrealized
appreciation/ (depreciation)
of investments and foreign
currency related
transactions.................. 187,928,080 (151,728,126) 11,086,121 24,030,110 (21,018,611)
----------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS...... 100,610,456 (414,703,057) 11,399,119 19,172,524 (29,631,053)
----------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A....................... (7,367,811) (4,310,369) (69,943) -- --
Class B....................... -- -- (25,664) -- --
Class C....................... -- -- (25,489) -- --
Class K....................... (20,780) -- (48,505) -- --
Net realized gain on
investments and foreign
currency related transactions
Class A....................... -- -- -- -- --
Class B....................... -- -- -- -- --
Class C....................... -- -- -- -- --
Class K....................... -- -- -- -- --
----------------------------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS................ (7,388,591) (4,310,369) (169,601) -- --
----------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net
assets from capital share
transactions -- Note 8........ (98,620,667) (350,930,660) 75,591,491 (6,408,496) (4,165,700)
----------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET
ASSETS........................ (5,398,802) (769,944,086) 86,821,009 12,764,028 (33,796,753)
NET ASSETS:
Beginning of period............... 1,299,457,947 2,069,402,033 -- 141,564,211 175,360,964
----------------------------------------------------------------------------------
End of period*.................... $1,294,059,145 $1,299,457,947 $86,821,009 $154,328,239 $141,564,211
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
* Includes
undistributed/(distributions in
excess) of net investment income
of............................... $ 735,799 $ 4,730,635 $ (54,816) $ (520,545) $ --
+ Commencement of operations.
<Caption>
THE GUARDIAN
UBS SMALL CAP THE GUARDIAN
VALUE FUND ASSET ALLOCATION FUND
------------------- ---------------------------
PERIOD FROM
FEBRUARY 3, 2003+ SIX MONTHS
TO ENDED YEAR ENDED
JUNE 30, JUNE 30, DECEMBER 31,
2003 2003 2002
(UNAUDITED) (UNAUDITED) (AUDITED)
-------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income/(loss)... $ (43,982) $ 677,441 $ 2,650,316
Net realized gain/(loss) on
investments and foreign
currency related
transactions.................. 818,846 (1,506,925) (12,406,127)
Net change in unrealized
appreciation/ (depreciation)
of investments and foreign
currency related
transactions.................. 5,112,630 16,519,382 (35,892,162)
-------------------------------------------------
NET INCREASE/(DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS...... 5,887,494 15,689,898 (45,647,973)
-------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A....................... -- (1,836,343) (2,611,441)
Class B....................... -- (225,527) (296,792)
Class C....................... -- (29,885) (39,379)
Class K....................... -- (81,064) (92,412)
Net realized gain on
investments and foreign
currency related transactions
Class A....................... -- -- --
Class B....................... -- -- --
Class C....................... -- -- --
Class K....................... -- -- --
-------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS................ -- (2,172,819) (3,040,024)
-------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net
assets from capital share
transactions -- Note 8........ 35,254,362 (12,210,167) (28,957,348)
-------------------------------------------------
NET INCREASE/(DECREASE) IN NET
ASSETS........................ 41,141,856 1,306,912 (77,645,345)
NET ASSETS:
Beginning of period............... -- 152,252,538 229,897,883
-------------------------------------------------
End of period*.................... $41,141,856 $153,559,450 $152,252,538
-------------------------------------------------
-------------------------------------------------
* Includes
undistributed/(distributions in
excess) of net investment income
of............................... $ (43,982) $ 537,137 $ 2,032,514
+ Commencement of operations.
</Table>
See notes to financial statements.
66
<Table>
<Caption>
THE GUARDIAN
THE GUARDIAN THE GUARDIAN BAILLIE GIFFORD THE GUARDIAN
S&P 500 BAILLIE GIFFORD EMERGING INVESTMENT QUALITY
INDEX FUND INTERNATIONAL FUND MARKETS FUND BOND FUND
---------------------------- -------------------------- -------------------------- ---------------------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2003 2002 2003 2002 2003 2002 2003 2002
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
$ 696,566 $ 2,264,690 $ 380,518 $ 89,833 $ 118,613 $ (188,253) $ 3,633,379 $ 7,971,762
(338,882) (95,822,692) (3,539,640) (22,615,441) (1,818,516) 2,907,671 4,521,907 962,427
13,134,107 18,959,704 8,919,806 5,673,231 8,343,238 (6,026,178) 1,142,449 7,351,497
- ---------------------------------------------------------------------------------------------------------------------------
13,491,791 (74,598,298) 5,760,684 (16,852,377) 6,643,335 (3,306,760) 9,297,735 16,285,686
- ---------------------------------------------------------------------------------------------------------------------------
(548,715) (2,164,053) (63,805) -- -- -- (3,077,666) (6,694,956)
(19,902) (28,553) -- -- -- -- (269,409) (572,072)
(14,803) (22,264) -- -- -- -- (145,084) (354,303)
(21,911) (43,052) -- -- -- -- (141,220) (350,431)
-- -- -- -- -- -- (301,855) (465,319)
-- -- -- -- -- -- (35,488) (52,987)
-- -- -- -- -- -- (18,341) (29,434)
-- -- -- -- -- -- (15,839) (25,176)
- ---------------------------------------------------------------------------------------------------------------------------
(605,331) (2,257,922) (63,805) -- -- -- (4,004,902) (8,544,678)
- ---------------------------------------------------------------------------------------------------------------------------
1,587,363 (103,976,012) (6,126,152) (21,180,662) (757,787) 10,313,357 11,347,080 26,728,214
- ---------------------------------------------------------------------------------------------------------------------------
14,473,823 (180,832,232) (429,273) (38,033,039) 5,885,548 7,006,597 16,639,913 34,469,222
120,498,087 301,330,319 63,333,783 101,366,822 47,313,148 40,306,551 209,931,930 175,462,708
- ---------------------------------------------------------------------------------------------------------------------------
$134,971,910 $120,498,087 $62,904,510 $63,333,783 $53,198,696 $47,313,148 $226,571,843 $209,931,930
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
$ 118,381 $ 27,146 $ 380,390 $ 63,677 $ (5,937) $ (124,550) $ -- $ --
<Caption>
THE GUARDIAN THE GUARDIAN
HIGH YIELD THE GUARDIAN CASH MANAGEMENT
BOND FUND TAX-EXEMPT FUND FUND
------------------------------- -------------------------------- --------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
2003 2002 2003 2002 2003 2002
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
$ 2,375,034 $ 4,541,788 $ 1,680,423 $ 4,478,043 $ 1,585,889 $ 6,145,223
939,935 (5,394,424) 2,457,648 1,826,662 -- --
3,721,799 1,260,183 (477,511) 5,144,825 -- --
- ---------------------------------------------------------------------------------------------------------------------------
7,036,768 407,547 3,660,560 11,449,530 1,585,889 6,145,223
- ---------------------------------------------------------------------------------------------------------------------------
(1,472,811) (2,763,882) (1,536,355) (4,191,275) (1,554,609) (6,042,276)
(310,720) (606,359) -- -- (15,278) (37,641)
(284,204) (563,588) (144,068) (286,768) (7,961) (19,989)
(307,299) (607,959) -- -- (8,041) (45,317)
-- -- (115,361) (1,983,160) -- --
-- -- -- -- -- --
-- -- (14,828) (168,362) -- --
-- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
(2,375,034) (4,541,788) (1,810,612) (6,629,565) (1,585,889) (6,145,223)
- ---------------------------------------------------------------------------------------------------------------------------
5,215,242 4,489,847 (34,585,569) 2,313,675 (47,092,866) 56,129,038
- ---------------------------------------------------------------------------------------------------------------------------
9,876,976 355,606 (32,735,621) 7,133,640 (47,092,866) 56,129,038
57,883,506 57,527,900 123,592,794 116,459,154 694,474,771 638,345,733
- ---------------------------------------------------------------------------------------------------------------------------
$67,760,482 $57,883,506 $ 90,857,173 $123,592,794 $647,381,905 $694,474,771
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
$ -- $ -- $ -- $ -- $ -- $ --
</Table>
67
/ / The Guardian Investment Quality Bond Fund
STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2003 (Unaudited)
- ---------------------------------------------------------------------
<Table>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations... $ 9,297,735
Adjustments to reconcile net increase in net assets
resulting from
operations to net cash provided by operating
activities:
Purchases of long-term securities............... (320,606,287)
Proceeds from sales of long-term securities..... 292,761,133
Proceeds from mortgage paydown securities....... 13,526,503
Premium amortization/discount accretion, net.... 245,183
Purchases of short-term investments, net........ (9,857,682)
Increase in receivables......................... (91,464)
Decrease in payables............................ (24,655)
Net realized gain on investments................ (4,521,907)
Net change in unrealized appreciation of
investments..................................... (1,142,449)
-------------
Net cash provided by operating activities... (20,413,890)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Fund shares sold.................... 32,976,160
Payments for Fund shares redeemed................. (23,369,907)
Cash distributions paid........................... (602,271)
Proceeds from the financing of dollar roll
transactions, net.................................. 11,524,775
-------------
Net cash used in financing activities....... 20,528,757
-------------
INCREASE IN CASH....................................... 114,867
CASH
Beginning of period.................................... 41,675
-------------
End of period.......................................... $ 156,542
-------------
-------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash financing activities not included above:
Reinvestment of distributions..................... $ 3,402,631
-------------
-------------
</Table>
See notes to financial statements.
68
NOTES TO
FINANCIAL STATEMENTS
June 30, 2003 (Unaudited)
The Park Avenue Portfolio
/ / The Guardian Park Avenue Fund
/ / The Guardian UBS Large Cap Value Fund
/ / The Guardian Park Avenue Small Cap Fund
/ / The Guardian UBS Small Cap Value Fund
/ / The Guardian Asset Allocation Fund
/ / The Guardian S&P 500 Index Fund
/ / The Guardian Baillie Gifford International Fund
/ / The Guardian Baillie Gifford Emerging Markets Fund
/ / The Guardian Investment Quality Bond Fund
/ / The Guardian High Yield Bond Fund
/ / The Guardian Tax-Exempt Fund
/ / The Guardian Cash Management Fund
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
The Park Avenue Portfolio (the Portfolio) is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the 1940 Act), which is organized as a business trust under
the laws of the Commonwealth of Massachusetts. The Portfolio consists of twelve
series, namely: The Guardian Park Avenue Fund (GPAF); The Guardian UBS Large Cap
Value Fund (GULCVF); The Guardian Park Avenue Small Cap Fund (GPASCF); The
Guardian UBS Small Cap Value Fund (GUSCVF); The Guardian Asset Allocation Fund
(GAAF); The Guardian S&P 500 Index Fund (GSP500F); The Guardian Baillie Gifford
International Fund (GBGIF); The Guardian Baillie Gifford Emerging Markets Fund
(GBGEMF); The Guardian Investment Quality Bond Fund (GIQBF); The Guardian High
Yield Bond Fund (GHYBF); The Guardian Tax-Exempt Fund (GTEF); and The Guardian
Cash Management Fund (GCMF). The series are collectively referred to herein as
the "Funds". The Portfolio has added a new series, effective July 30, 2003: The
Guardian Low Duration Bond Fund (GLDBF). GLDBF had not commenced operations as
of June 30, 2003.
On February 3, 2003, GULCVF and GUSCVF commenced operations. GULCVF sold
937,500 shares for each of Class A, Class B, Class C and Class K shares to The
Guardian Life Insurance Company of America (Guardian Life) for $9,375,000 each.
GUSCVF sold 437,500 shares for each of Class A, Class B, Class C and Class K
shares to Guardian Life for $4,375,000 each.
The Funds offer up to five classes of shares: Class A, Class B, Class C,
Class K and the Institutional Class. Each of the Funds offers Class A shares.
Class A shares are sold with an initial sales load of up to 4.50% and an
administrative fee of up to .25% on an annual basis of the Funds' average daily
net assets. Class B shares are offered by all of the Funds, except for GTEF.
Class B shares are sold without an initial sales load but are subject to a 12b-1
fee of .75% and an administrative fee of .25% on an annual basis of the Funds'
Class B average daily net assets, and a contingent deferred sales load (CDSL) of
up to 3% imposed on certain redemptions. Each of the Funds offers Class C
shares. Class C shares are sold without an initial sales load but are subject to
a 12b-1 fee of .75% and an administrative fee of .25% on an annual basis of the
Funds' Class C average daily net assets, and a CDSL of up to 1% imposed on
certain redemptions. Class K shares are offered by all of the Funds, except for
GTEF. Class K shares are sold without an initial sales load but are subject to a
12b-1 fee of .40% and an administrative fee of .25% on an annual basis of the
Funds' Class K average daily net assets, and a CDSL of up to 1% imposed on
certain redemptions. Institutional Class shares are offered by GPAF, GPASCF,
GAAF, GSP500F, GBGIF, GBGEMF, GIQBF and GHYBF. As of June 30, 2003, none of the
Funds had issued Institutional Class shares. Institutional Class shares are
offered at net asset value, without an initial or contingent deferred sales
load. All classes of shares for each Fund represent interests in the same
portfolio of investments, have the same rights and are generally identical in
all respects except that each class bears its separate distribution and certain
class expenses, and has exclusive voting rights with respect to any matter to
which a separate vote of any class is required.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States (GAAP) requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
69
Significant accounting policies of the Funds are as follows:
Investments
Securities listed on domestic or foreign securities exchanges are valued at
the last sales price of such exchanges, or if no sale occurred, at the mean of
the bid and asked prices. Securities that are traded on the NASDAQ National
Securities Market are valued at the NASDAQ Official Closing Price. Securities
traded in the over-the-counter market are valued using the last sale price, when
available. Otherwise, over-the-counter securities are valued at the mean between
the bid and asked prices or yield equivalents as obtained from one or more
dealers that make a market in the securities. In GAAF, investments in the
underlying Funds are valued at the closing net asset value of each underlying
Fund on the day of valuation.
Pursuant to valuation procedures approved by the Board of Trustees, certain
debt securities may be valued each business day by an independent pricing
service (Service). Debt securities for which quoted bid prices are readily
available and representative of the bid side of the market, in the judgement of
the Service, are valued at the bid price, except for GTEF. In GTEF, debt
securities are valued at the mean between the bid and asked prices obtained by
the Service. Other debt securities that are valued by the Service are carried at
fair value as determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions.
Other securities, including securities for which market quotations are not
readily available (such as certain mortgage-backed securities and restricted
securities) are valued at fair value as determined in good faith by or under the
direction of the Funds' Board of Trustees.
Repurchase agreements are carried at cost which approximates market value
(see Note 5). Short-term securities held by the Funds are valued on an amortized
cost basis which approximates market value but does not take into account
unrealized gains and losses. GCMF values its investments based on amortized cost
in accordance with Rule 2a-7 under the 1940 Act.
Investing outside of the U.S. may involve certain considerations and risks
not typically associated with domestic investments, including the possibility of
political and economic unrest and different levels of governmental supervision
and regulation of foreign securities markets.
Investment transactions are recorded on the date of purchase or sale.
Security gains or losses are determined on an identified cost basis. Interest
income, including amortization/accretion of premium/ discount, is accrued daily.
Dividend income is recorded on the ex-dividend date.
All income, expenses (other than class-specific expenses) and realized and
unrealized gains or losses are allocated daily to each class of shares based
upon the relative value of shares of each class. Class-specific expenses, which
include any items that are specifically attributed to a particular class, are
charged directly to such class. For the six months ended June 30, 2003,
distribution, administrative and transfer agent fees were the only
class-specific expenses.
Foreign Currency Translation
GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GBGIF, GBGEMF and GHYBF are permitted
to buy international securities that are not U.S. dollar denominated. Their
books and records are maintained in U.S. dollars as follows:
(1) The foreign currency market value of investment securities and other
assets and liabilities stated in foreign currencies are translated into U.S.
dollars at the current rate of exchange.
(2) Security purchases and sales, income and expenses are translated at the
rate of exchange prevailing on the respective dates of such transactions.
The resulting gains and losses are included in the Statement of Operations
as follows:
Realized foreign exchange gains and losses, which result from changes in
foreign exchange rates between the date on which a Fund earns dividends and
interest or pays foreign withholding taxes or other expenses and the date on
which U.S. dollar equivalent amounts are actually received or paid, are included
in net realized gains or losses on foreign currency related transactions.
Realized foreign exchange gains and losses which result from changes in foreign
exchange rates between the trade and settlement dates on security and currency
transactions are also included in net realized gains or losses on foreign
currency related transactions. Net currency gains and losses from valuing other
assets and liabilities denominated in foreign currency at the period end
exchange rate are reflected in net change in unrealized appreciation or
depreciation from translation of other assets and liabilities denominated in
foreign currencies.
Forward Foreign Currency Contracts
GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GBGIF, GBGEMF and GHYBF may enter into
forward foreign currency contracts in connection with planned purchases or sales
of securities, or to hedge against changes in currency exchange rates affecting
the values of its investments that are denominated in a particular currency. A
forward foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date at a negotiated forward exchange rate. Risks may arise
from the potential inability of a counterparty to meet the terms of a contract
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. Fluctuations in the value of forward foreign currency contracts
are recorded for book
70
purposes as unrealized gains or losses on foreign currency related transactions
by the Fund. When forward contracts are closed, the Fund will record realized
gains or losses equal to the difference between the values of such forward
contracts at the time each was opened and the values at the time each was
closed. Such amounts are recorded in net realized gains or losses on foreign
currency related transactions. The Funds will not enter into a forward foreign
currency contract if such contract would obligate the applicable Fund to deliver
an amount of foreign currency in excess of the value of the Funds' portfolio
securities or other assets denominated in that currency.
Futures Contracts
GULCVF, GUSCVF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF, GHYBF and GTEF may
enter into financial futures contracts for the delayed delivery of securities,
currency or contracts based on financial indices at a fixed price on a future
date. In entering into such contracts, the Funds are required to deposit either
in cash or securities an amount equal to a certain percentage of the contract
amount. Subsequent payments are made or received by the Funds each day,
depending on the daily fluctuations in the value of the underlying security, and
are recorded for financial statement purposes as variation margins by the Funds.
The daily changes in the variation margin are recognized as unrealized gains or
losses by the Funds. The Funds' investments in financial futures contracts are
designed to hedge against anticipated future changes in interest or exchange
rates or securities prices. In addition, GAAF may enter into financial futures
contracts for non-hedging purposes. Should interest or exchange rates or
securities prices or prices of futures contracts move unexpectedly, the Funds
may not achieve the anticipated benefits of the financial futures contracts and
may realize a loss.
Dividend Distributions
Dividends from net investment income are declared and accrued daily and are
paid monthly for GIQBF, GHYBF and GTEF, and declared and paid semi-annually for
GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GSP500F, GBGIF and GBGEMF. Net realized
short-term and long-term capital gains for these Funds will be distributed at
least annually. Dividends from GCMF's net investment income, which includes any
net realized capital gains or losses, are declared and accrued daily and paid
monthly on the last business day of each month.
All dividends and distributions are recorded on the ex-dividend date. Such
distributions are determined in conformity with federal income tax regulations.
Differences between the recognition of income on an income tax basis and
recognition of income based on GAAP may cause temporary overdistributions of net
realized gains and net investment income.
Taxes
Each Fund has qualified and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the U.S. Internal Revenue
Code (Code), and as such will not be subject to federal income tax on taxable
income (including any realized capital gains) which is distributed in accordance
with the provisions of the Code. Therefore, no federal income tax provision is
required.
Withholding taxes on foreign interest, dividends and capital gains in GBGIF
and GBGEMF have been provided for in accordance with the applicable country's
tax rules and rates.
Expense Reductions
GTEF has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of the Fund's expenses. During the period, GTEF's custodian fees were reduced by
$14,847 under this arrangement. GTEF could have employed the uninvested assets
to produce income if GTEF had not entered into such arrangement.
Reclassification of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gains, and the recharacterization of foreign exchange gains
or losses to either ordinary income or realized capital gains for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations, or net asset value per
share of the Fund.
NOTE 2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO OR FROM RELATED PARTIES
Guardian Investor Services LLC (GIS), an indirect wholly-owned subsidiary
of Guardian Life, provides investment advisory services to each of the Funds
(except GBGIF and GBGEMF). Fees for investment advisory services are at an
annual rate of .50% of the average daily net assets of each Fund, except for
GPASCF, GSP500F and GHYBF, which pay GIS an annual rate of .75%, .25% and .60%,
respectively, of their average daily net assets.
GAAF is subject to a contractual annual advisory fee of .65% of its average
daily net assets. However, GIS has agreed to a waiver of .15% of GAAF's annual
advisory fee when GAAF is operated as a "fund of funds" so that GAAF's effective
advisory fee is .50% of its average daily net assets. There are no duplicative
advisory and administrative service fees charged to GAAF on assets invested in
other
71
Guardian Funds. Under an SEC exemptive order, advisory and administrative fees
are paid at the underlying Fund level.
GULCVF pays investment advisory fees to GIS at an annual rate of .83% of
its average daily net assets. GUSCVF pays investment advisory fees to GIS at an
annual rate of 1.00% of its average daily net assets for the first $50 million
and an annual rate of .95% of its average daily net assets in excess of $50
million. GIS has entered into a sub-investment advisory agreement with UBS
Global Asset Management (Americas), Inc. (UBS Global AM). UBS Global AM is
responsible for the day-to-day management of GULCVF and GUSCVF. GIS continually
monitors and evaluates the performance of UBS Global AM. As compensation for its
services, GIS pays UBS Global AM at an annual rate of .43% of GULCVF's average
daily net assets and at an annual rate of .60% for the first $50 million and at
an annual rate of .55% in excess of $50 million of GUSCVF's average daily net
assets. Payment of sub-investment advisory fees does not represent a separate or
additional expense to GULCVF or GUSCVF.
For the six months ended June 30, 2003, GIS voluntarily assumed a portion
of the ordinary operating expenses (excluding interest expense associated with
reverse repurchase agreements and securities lending) that exceeded a percentage
of the average daily net assets of the respective Funds, by class, as follows:
<Table>
<Caption>
FUND CLASS A CLASS B CLASS C CLASS K
---- ------- ------- ------- -------
GSP500F .53% 1.28% 1.28% 0.93%
GIQBF .85% 1.60% 1.60% 1.25%
GHYBF .85% 1.60% 1.60% 1.25%
GTEF .85% N/A 1.60% N/A
GCMF .85% 1.60% 1.60% 1.25%
</Table>
For the six months ended June 30, 2003, GIS voluntarily assumed a portion
of certain Funds' expenses based on their respective average daily net assets as
follows:
<Table>
<Caption>
- ---------------------------------------------------------
GSP500F*
- ---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K
------- ------- ------- -------
Ordinary Operating
Expenses .27% .27% .27% .23%
12b-1 Fees -- .40% .46% --
---- ---- ---- ----
.27% .67% .73% .23%
==== ==== ==== ====
</Table>
<Table>
<Caption>
- ---------------------------------------------------------
GIQBF*
- ---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K
------- ------- ------- -------
Ordinary Operating
Expenses .09% .09% .09% .04%
12b-1 Fees -- .16% .24% --
---- ---- ---- ----
.09% .25% .33% .04%
==== ==== ==== ====
</Table>
<Table>
<Caption>
- ---------------------------------------------------------
GHYBF*
- ---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K
------- ------- ------- -------
Ordinary Operating
Expenses .40% .40% .40% .31%
12b-1 Fees -- .31% .30% --
---- ---- ---- ----
.40% .71% .70% .31%
==== ==== ==== ====
</Table>
<Table>
<Caption>
- ---------------------------------------------------------
GTEF*
- ---------------------------------------------------------
CLASS A CLASS C
------- -------
Ordinary Operating Expenses .09% .09%
12b-1 Fees -- .27%
---- ----
.09% .36%
==== ====
</Table>
<Table>
<Caption>
- ---------------------------------------------------------
GCMF*
- ---------------------------------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
Administrative Fees .03% .14% .03%
==== ==== ====
* Annualized.
</Table>
For the six months ended June 30, 2003 GIS voluntarily assumed $194,562,
$123,941, $149,601, $40,285 and $110,188 of the ordinary operating expenses of
GSP500F, GIQBF, GHYBF, GTEF and GCMF, respectively.
The Portfolio, on behalf of GBGIF and GBGEMF, has an investment management
agreement with Guardian Baillie Gifford Limited (GBG), a Scottish corporation
owned by The Guardian Insurance & Annuity Company, Inc. (GIAC), a wholly-owned
subsidiary of Guardian Life and Baillie Gifford Overseas Limited (BG Overseas).
GBG is responsible for the overall investment management of GBGIF and GBGEMF's
portfolios, subject to the supervision of the Portfolio's Board of Trustees. GBG
has entered into a sub-investment management agreement with BG Overseas pursuant
to which BG Overseas is responsible for the day-to-day management of GBGIF and
GBGEMF. GBG continually monitors and evaluates the performance of BG Overseas.
As compensation for its services, GBGIF and GBGEMF pay GBG annual investment
management fees of .80% and 1.00%, respectively, of their respective average
daily net assets. One half of these fees is payable by GBG to BG Overseas for
its services. Payment of the sub-investment management fee does not represent a
separate or additional expense to GBGIF or GBGEMF.
The Guardian Fund Complex pays trustees who are not "interested persons"
(as defined in the 1940 Act) fees consisting of a $5,000 per meeting and an
annual retainer of $30,500, allocated among all funds in the Guardian Fund
Complex based on relative average daily net assets. Board committee members also
receive a fee of $2,000 per committee meeting, which also is allocated among all
funds in the Guardian Fund Complex based on relative average daily net assets.
GIS pays compensation to certain trustees who are interested persons. Certain
officers and trustees of the Funds are affiliated with GIS.
72
Park Avenue Securities LLC (PAS), a wholly-owned subsidiary of GIAC and an
affiliate of GIS distributes the Portfolio's shares as a retail broker-dealer.
For the six months ended June 30, 2003, PAS received $168,991 for brokerage
commissions from the Portfolio.
Administrative Services Agreement
Pursuant to the Administrative Services Agreement adopted by the Funds on
behalf of the Class A, Class B, Class C and Class K shares, each of the Funds,
except GPAF, pays GIS an administrative service fee at an annual rate of .25% of
the Funds' average daily net assets. GPAF pays this fee to GIS at an annual rate
of up to .25% of the average daily net assets for which a "dealer of record" has
been designated. For the six months ended June 30, 2003, GPAF Class A shares
paid GIS an annualized rate of .19% of its average daily net assets pursuant to
the Administrative Services Agreement.
NOTE 3. UNDERWRITING AGREEMENT AND DISTRIBUTION PLAN
The Portfolio has entered into an Underwriting Agreement with GIS pursuant
to which GIS serves as the principal underwriter for shares of the Funds. For
the six months ended June 30, 2003, aggregate front-end sales charges for the
sale of Class A shares paid to GIS were as follows:
<Table>
<Caption>
FUND COMMISSIONS FUND COMMISSIONS
---- ----------- ---- -----------
GPAF $19,858 GBGEMF $ 166
GPASCF 1,503 GIQBF 2,356
GAAF 300 GHYBF 3,416
GSP500F 763 GTEF 1,917
GBGIF 648
</Table>
Under Distribution Plans adopted by the Portfolio pursuant to Rule 12b-1
under the 1940 Act (the "12b-1 Plans"), each Fund is authorized to pay a monthly
12b-1 fee for certain classes of shares at an annual rate of .75% of average
daily net assets of the Fund's Class B and Class C shares and .40% of average
daily net assets of the Fund's Class K shares as compensation for
distribution-related services provided to the Class B, Class C and Class K
shares of those Funds.
GIS is entitled to retain any CDSL imposed on certain Class B, Class C and
Class K share redemptions. For the six months ended June 30, 2003, such charges
on Class B, Class C and Class K were as follows:
<Table>
<Caption>
FUND CLASS B CLASS C CLASS K
---- -------- ------- -------
GPAF.................... $135,849 $ 362 --
GPASCF.................. 10,757 118 --
GAAF.................... 26,654 1,009 --
GSP500F................. 3,896 181 $ 6
GBGIF................... 2,485 70 4
GBGEMF.................. 1,060 91 --
GIQBF................... 6,497 2,237 6
GHYBF................... 2,212 -- --
GTEF.................... -- 222 --
GCMF.................... 32,097 -- 2,378
</Table>
NOTE 4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) for the six months ended June 30, 2003 were as follows:
<Table>
- -----------------------------------------------------
GPAF GULCVF
- -----------------------------------------------------
Purchases $437,852,541 $77,613,970
Proceeds 537,633,834 4,081,054
- -----------------------------------------------------
GPASCF GUSCVF
- -----------------------------------------------------
Purchases $ 71,033,780 $45,036,200
Proceeds 73,191,326 10,633,854
- -----------------------------------------------------
GAAF GSP500F
- -----------------------------------------------------
Purchases $ 275,000 $ 3,003,055
Proceeds 9,809,701 1,609,549
- -----------------------------------------------------
GBGIF GBGEMF
- -----------------------------------------------------
Purchases $ 11,914,836 $14,920,507
Proceeds 17,556,594 16,027,767
- -----------------------------------------------------
GIQBF GHYBF
- -----------------------------------------------------
Purchases $320,847,269 $49,028,376
Proceeds 292,761,133 41,075,500
- -----------------------------------------------------
GTEF
- -----------------------------------------------------
Purchases $ 21,097,788
Proceeds 52,870,742
- -----------------------------------------------------
</Table>
The cost of investments owned at June 30, 2003 for federal income tax
purposes was substantially the same as the cost for financial reporting purposes
for the Funds. The gross unrealized appreciation and depreciation of investments
excluding foreign currency and futures at June 30, 2003, were as follows:
<Table>
GPAF GULCVF
------------ ------------
Appreciation $103,538,222 $ 11,647,395
(Depreciation) (63,396,885) (561,274)
------------ ------------
NET UNREALIZED
APPRECIATION $ 40,141,337 $ 11,086,121
============ ============
GPASCF GUSCVF
------------ ------------
Appreciation $ 25,947,645 $ 5,343,545
(Depreciation) (2,376,363) (230,915)
------------ ------------
NET UNREALIZED
APPRECIATION $ 23,571,282 $ 5,112,630
============ ============
GAAF GSP500F
------------ ------------
Appreciation $ 2,933,491 $ 12,903,287
(Depreciation) (35,539,702) (35,901,587)
------------ ------------
NET UNREALIZED
DEPRECIATION $(32,606,211) $(22,998,300)
============ ============
GBGIF GBGEMF
------------ ------------
Appreciation $ 6,760,952 $ 7,723,139
(Depreciation) (5,642,159) (2,463,041)
------------ ------------
NET UNREALIZED
APPRECIATION $ 1,118,793 $ 5,260,098
============ ============
</Table>
73
<Table>
GIQBF GHYBF
------------ ------------
Appreciation $ 8,793,972 $ 4,723,877
(Depreciation) (122,673) (666,177)
------------ ------------
NET UNREALIZED
APPRECIATION $ 8,671,299 $ 4,057,700
============ ============
GTEF
------------
Appreciation $ 6,193,428
(Depreciation) (42,059)
------------
NET UNREALIZED
APPRECIATION $ 6,151,369
============
</Table>
NOTE 5. REPURCHASE AGREEMENTS
The collateral for repurchase agreements is either cash or fully negotiable
U.S. government securities. Repurchase agreements are fully collateralized
(including the interest earned thereon) and such collateral is marked-to-market
daily while the agreements remain in force. If the value of the collateral falls
below the value of the repurchase price plus accrued interest, the applicable
Fund will require the seller to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults, the applicable Fund maintains the right to sell the collateral and may
claim any resulting loss against the seller.
NOTE 6. REVERSE REPURCHASE AGREEMENTS
GAAF, GIQBF and GHYBF may enter into reverse repurchase agreements with
banks or third party broker-dealers to borrow short-term funds. Interest on the
value of reverse repurchase agreements issued and outstanding is based upon
competitive market rates at the time of issuance. At the time GAAF, GIQBF and
GHYBF enter into a reverse repurchase agreement, the Funds establish and
segregate cash, U.S. government securities or liquid, unencumbered securities
that are marked-to-market daily. The value of such segregated assets must be at
least equal to the value of the repurchase obligation (principal plus accrued
interest), as applicable. Reverse repurchase agreements involve the risk that
the buyer of the securities sold by GAAF, GIQBF and GHYBF may be unable to
deliver the securities when the Funds seek to repurchase them.
NOTE 7. DOLLAR ROLL TRANSACTIONS
GAAF, GIQBF and GHYBF may enter into dollar roll transactions with
financial institutions to take advantage of opportunities in the mortgage
market. A dollar roll transaction involves a sale by the Fund of securities that
it holds with an agreement by the Fund to repurchase similar securities at an
agreed upon price and date. The securities repurchased will bear the same
interest as those sold, but generally will be collateralized at the time of
delivery by different pools of mortgages with different prepayment histories
than those securities sold. During the period between the sale and repurchase,
the Fund will not be entitled to receive interest and principal payments on the
securities sold. Dollar roll transactions involve the risk that the buyer of the
securities sold by GAAF, GIQBF and GHYBF may be unable to deliver the securities
when the Funds seek to repurchase them.
NOTE 8. SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.01 par value shares of beneficial
interest authorized, divided into five classes, designated as Class A, Class B,
Class C, Class K and Institutional Class shares. As of June 30, 2003: (i) GPAF,
GPASCF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF and GHYBF offered all five classes;
(ii) GTEF offered Class A and Class C shares; and (iii) GULCVF, GUSCVF and GCMF
offered Class A, Class B, Class C and Class K shares. Through June 30, 2003, no
Institutional Class shares of the Funds were sold.
74
Transactions in shares of beneficial interest were as follows:
/ / THE GUARDIAN PARK AVENUE FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,188,685 3,071,277 $ 29,853,209 $ 87,019,350
Shares issued in reinvestment of
dividends 259,157 144,059 7,134,249 4,193,466
Shares repurchased (4,793,941) (14,071,395) (121,188,910) (391,653,154)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (3,346,099) (10,856,059) $ (84,201,452) $ (300,440,338)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 136,368 316,116 $ 3,358,194 $ 8,756,755
Shares repurchased (739,644) (2,232,897) (17,754,657) (59,546,800)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (603,276) (1,916,781) $ (14,396,463) $ (50,790,045)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 10,609 51,819 $ 252,288 $ 1,532,408
Shares repurchased (15,073) (51,896) (356,731) (1,335,406)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (4,464) (77) $ (104,443) $ 197,002
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 2,400 4,015 $ 61,086 $ 103,216
Shares issued in reinvestment of
dividends 755 -- 20,781 --
Shares repurchased (7) (20) (176) (495)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 3,148 3,995 $ 81,691 $ 102,721
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN UBS LARGE CAP VALUE FUND
<Table>
<Caption>
Period from Period from
February 3, 2003+ February 3, 2003+
to June 30,2003 to June 30,2003
(Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,922,046 $ 18,966,116
Shares issued in reinvestment of
dividends 6,061 69,880
- ----------------------------------------------------------------------------------------------------------
NET INCREASE 1,928,107 $ 19,035,996
- ----------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 1,921,589 $ 18,951,853
Shares issued in reinvestment of
dividends 2,226 25,664
- ----------------------------------------------------------------------------------------------------------
NET INCREASE 1,923,815 $ 18,977,517
- ----------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 1,902,181 $ 18,752,050
Shares issued in reinvestment of
dividends 2,211 25,489
- ----------------------------------------------------------------------------------------------------------
NET INCREASE 1,904,392 $ 18,777,539
- ----------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 1,902,174 $ 18,751,934
Shares issued in reinvestment of
dividends 4,207 48,505
- ----------------------------------------------------------------------------------------------------------
NET INCREASE 1,906,381 $ 18,800,439
- ----------------------------------------------------------------------------------------------------------
</Table>
+ Commencement of operations.
75
/ / THE GUARDIAN PARK AVENUE SMALL CAP FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 633,483 2,782,741 $ 8,633,861 $ 42,101,323
Shares repurchased (1,057,650) (3,255,243) (14,290,133) (46,439,000)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (424,167) (472,502) $ (5,656,272) $ (4,337,677)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 33,934 217,932 $ 445,376 $ 3,217,947
Shares repurchased (99,822) (240,199) (1,238,090) (3,301,687)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (65,888) (22,267) $ (792,714) $ (83,740)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 2,338 21,118 $ 29,727 $ 298,183
Shares repurchased (1,386) (6,407) (17,093) (87,676)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 952 14,711 $ 12,634 $ 210,507
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 2,118 3,317 $ 27,899 $ 45,210
Shares repurchased (4) -- (43) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 2,114 3,317 $ 27,856 $ 45,210
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN UBS SMALL CAP VALUE FUND
<Table>
<Caption>
Period from Period from
February 3, 2003+ February 3, 2003+
to June 30,2003 to June 30,2003
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 903,488 $ 8,911,126
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 903,488 $ 8,911,126
- ------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 898,471 $ 8,840,497
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 898,471 $ 8,840,497
- ------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 890,496 $ 8,767,328
Shares repurchased (1,361) (15,799)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 889,135 $ 8,751,529
- ------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 889,103 $ 8,751,228
Shares repurchased (2) (18)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE 889,101 $ 8,751,210
- ------------------------------------------------------------------------------------------------------------
</Table>
+ Commencement of operations.
76
/ / THE GUARDIAN ASSET ALLOCATION FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 438,902 1,524,801 $ 3,842,134 $ 14,387,848
Shares issued in reinvestment of
dividends 186,848 257,058 1,767,587 2,516,751
Shares repurchased (1,776,067) (4,314,488) (15,127,758) (39,879,710)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (1,150,317) (2,532,629) $ (9,518,037) $ (22,975,111)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 72,668 239,318 $ 636,110 $ 2,266,828
Shares issued in reinvestment of
dividends 22,771 29,270 215,405 286,492
Shares repurchased (425,500) (972,783) (3,600,141) (8,982,368)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (330,061) (704,195) $ (2,748,626) $ (6,429,048)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 3,227 56,416 $ 29,021 $ 562,704
Shares issued in reinvestment of
dividends 3,114 3,956 29,461 38,735
Shares repurchased (23,222) (39,534) (196,044) (359,141)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (16,881) 20,838 $ (137,562) $ 242,298
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 13,042 13,246 $ 113,071 $ 112,101
Shares issued in reinvestment of
dividends 8,578 9,429 81,064 92,412
Shares repurchased (8) -- (77) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 21,612 22,675 $ 194,058 $ 204,513
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN S&P 500 INDEX FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 536,606 1,830,415 $ 3,380,589 $ 11,566,863
Shares issued in reinvestment of
dividends 6,093 86,617 41,554 605,220
Shares repurchased (447,491) (20,356,324) (2,644,619) (118,000,511)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 95,208 (18,439,292) $ 777,524 $ (105,828,428)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 120,725 342,017 $ 758,789 $ 2,343,329
Shares issued in reinvestment of
dividends 2,821 4,430 19,223 27,713
Shares repurchased (94,380) (173,276) (560,883) (1,146,882)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 29,166 173,171 $ 217,129 $ 1,224,160
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 81,609 187,627 $ 506,477 $ 1,400,528
Shares issued in reinvestment of
dividends 2,161 3,553 14,716 22,207
Shares repurchased (10,173) (130,517) (60,536) (874,323)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 73,597 60,663 $ 460,657 $ 548,412
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 17,893 6,165 $ 110,813 $ 36,792
Shares issued in reinvestment of
dividends 3,213 6,734 21,911 43,052
Shares repurchased (106) -- (671) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 21,000 12,899 $ 132,053 $ 79,844
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
77
/ / THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 7,011,157 26,379,926 $ 62,634,145 $ 268,688,195
Shares issued in reinvestment of
dividends 5,545 -- 54,899 --
Shares repurchased (7,563,916) (28,286,267) (68,579,366) (288,753,391)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (547,214) (1,906,341) $ (5,890,322) $ (20,065,196)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 18,756 552,901 $ 151,676 $ 4,895,940
Shares repurchased (47,476) (664,735) (388,652) (6,002,347)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (28,720) (111,834) $ (236,976) $ (1,106,407)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 1,002 94,458 $ 8,933 $ 753,032
Shares repurchased (3,089) (94,502) (24,844) (763,931)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (2,087) (44) $ (15,911) $ (10,899)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 2,024 209 $ 17,509 $ 1,840
Shares repurchased (49) -- (452) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 1,975 209 $ 17,057 $ 1,840
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,359,451 2,084,844 $ 11,226,683 $ 19,196,380
Shares repurchased (1,469,367) (1,037,525) (12,298,507) (9,382,580)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (109,916) 1,047,319 $ (1,071,824) $ 9,813,800
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 51,213 973,656 $ 420,903 $ 7,741,707
Shares repurchased (47,715) (937,516) (389,935) (7,477,413)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 3,498 36,140 $ 30,968 $ 264,294
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 42,114 28,313 $ 350,725 $ 239,626
Shares repurchased (13,279) (5,667) (104,265) (44,448)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 28,835 22,646 $ 246,460 $ 195,178
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 4,593 4,995 $ 36,609 $ 40,085
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 4,593 4,995 $ 36,609 $ 40,085
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
78
/ / THE GUARDIAN INVESTMENT QUALITY BOND FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 2,820,005 11,341,936 $ 29,191,984 $ 113,553,764
Shares issued in reinvestment of
dividends and distributions 268,055 517,494 2,796,905 5,207,398
Shares repurchased (2,160,726) (9,956,834) (22,502,338) (99,280,342)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 927,334 1,902,596 $ 9,486,551 $ 19,480,820
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 285,384 1,016,356 $ 2,974,387 $ 10,196,034
Shares issued in reinvestment of
dividends and distributions 27,625 59,127 288,240 594,614
Shares repurchased (187,133) (519,717) (1,959,421) (5,196,692)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 125,876 555,766 $ 1,303,206 $ 5,593,956
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 36,605 114,498 $ 379,474 $ 1,152,765
Shares issued in reinvestment of
dividends and distributions 15,376 37,890 160,427 380,474
Shares repurchased (28,674) (28,439) (296,295) (286,467)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 23,307 123,949 $ 243,606 $ 1,246,772
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 15,101 3,060 $ 157,378 $ 31,059
Shares issued in reinvestment of
dividends and distributions 15,035 37,363 157,059 375,607
Shares repurchased (69) -- (720) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 30,067 40,423 $ 313,717 $ 406,666
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN HIGH YIELD BOND FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,067,520 1,022,945 $ 7,426,104 $ 7,149,700
Shares issued in reinvestment of
dividends 205,563 398,176 1,432,912 2,727,625
Shares repurchased (674,747) (1,059,195) (4,805,292) (7,319,978)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 598,336 361,926 $ 4,053,724 $ 2,557,347
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 72,751 141,649 $ 504,931 $ 961,254
Shares issued in reinvestment of
dividends 42,231 85,305 293,758 584,043
Shares repurchased (37,011) (119,806) (255,476) (814,725)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 77,971 107,148 $ 543,213 $ 730,572
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 36,782 4,786 $ 265,605 $ 32,953
Shares issued in reinvestment of
dividends 40,768 82,282 283,519 563,430
Shares repurchased (34,744) (377) (250,158) (2,525)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 42,806 86,691 $ 298,966 $ 593,858
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 1,712 17 $ 12,042 $ 113
Shares issued in reinvestment of
dividends 44,132 88,726 307,297 607,957
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 45,844 88,743 $ 319,339 $ 608,070
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
79
/ / THE GUARDIAN TAX-EXEMPT FUND
<Table>
<Caption>
Six Months Six Months
Ended Year Ended Ended Year Ended
June 30, 2003 December 31, 2002 June 30, 2003 December 31, 2002
(Unaudited) (Audited) (Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 462,010 2,805,928 $ 4,883,326 $ 29,029,828
Shares issued in reinvestment of
dividends and distributions 150,731 580,929 1,603,578 6,051,465
Shares repurchased (3,964,605) (3,227,880) (41,420,765) (33,353,923)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (3,351,864) 158,977 $ (34,933,861) $ 1,727,370
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 29,090 39,077 $ 310,681 $ 417,830
Shares issued in reinvestment of
dividends and distributions 14,861 43,565 158,364 453,798
Shares repurchased (11,494) (26,469) (120,753) (285,324)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 32,457 56,173 $ 348,292 $ 586,304
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN CASH MANAGEMENT FUND
<Table>
<Caption>
Six Months
Ended Year Ended
June 30, 2003 December 31, 2002
(Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------
Shares @ $1 per share
- ---------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 109,410,975 537,843,107
Shares issued in reinvestment of dividends 1,548,012 5,976,666
Shares repurchased (156,859,105) (491,705,217)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (45,900,118) 52,114,556
- ---------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 3,803,910 25,578,371
Shares issued in reinvestment of dividends 14,224 34,808
Shares repurchased (5,246,964) (22,812,305)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (1,428,830) 2,800,874
- ---------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 144,984 942,599
Shares issued in reinvestment of dividends 7,863 19,777
Shares repurchased (343,701) (123,627)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (190,854) 838,749
- ---------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 1,316,643 393,942
Shares issued in reinvestment of dividends 8,022 45,312
Shares repurchased (897,729) (64,395)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE 426,936 374,859
- ---------------------------------------------------------------------------------------------------------
</Table>
NOTE 9. LINE OF CREDIT
A $100,000,000 line of credit available to all of the Funds and other
related Guardian Funds has been established with State Street Bank and Trust
Company and Bank of Montreal. The rate of interest charged on any borrowing is
based upon the prevailing Federal Funds rate at the time of the loan plus .50%
calculated on a 360 day basis per annum. For the six months ended June 30, 2003,
none of the Funds borrowed against this line of credit.
The Funds are obligated to pay State Street Bank and Trust Company and Bank
of Montreal a commitment fee computed at a rate of .08% per annum on the average
daily unused portion of the revolving credit.
80
NOTE 10. INVESTMENTS IN AFFILIATES(1)
A summary of GAAF transactions in affiliated securities during the six
months ended June 30, 2003 is set forth below:
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
Balance of Balance of Dividends
Shares Gross Shares Included
Held Purchases Gross Held Value in
December 31, and Sales and June 30, June 30, Dividend
Name of Issuer 2002 Additions Reductions 2003 2003 Income
- -----------------------------------------------------------------------------------------------------------------------------
Non-Controlled Affiliates
The Guardian Investment Quality Bond Fund,
Class A 2,479,290 -- -- 2,479,290 $ 26,106,921 $436,838
- -----------------------------------------------------------------------------------------------------------------------------
Majority-Owned Subsidiary
The Guardian S&P 500 Index Fund, Class A 15,466,689 40,801 230,179 15,277,311 102,205,208 504,328
- -----------------------------------------------------------------------------------------------------------------------------
<Caption>
Net Realized
Gains from Net Realized
Underlying Loss
Name of Issuer Funds on Sales
- ---------------------------------------------- ---------------------------
Non-Controlled Affiliates
The Guardian Investment Quality Bond Fund,
Class A $42,644 --
- ---------------------------------------------------------------------------
Majority-Owned Subsidiary
The Guardian S&P 500 Index Fund, Class A -- $(652,564)
- ---------------------------------------------------------------------------
</Table>
(1) Affiliated issuers, as defined in the 1940 Act, include issuers in which the
Fund held 5% or more of the outstanding voting securities. Majority-owned
subsidiaries include issuers on which the Fund held 50% or more of the
outstanding voting securities.
81
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<Table>
<Caption>
NET REALIZED
& UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS INCREASE/
NET ASSET NET AND FOREIGN (DECREASE) DIVIDENDS
VALUE, INVESTMENT CURRENCY FROM FROM NET
BEGINNING INCOME/ RELATED INVESTMENT INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS OPERATIONS INCOME
-----------------------------------------------------------------
THE GUARDIAN PARK AVENUE FUND
CLASS A:
Six months ended 6/30/2003++........................ $25.03 $ 0.10 $ 2.01 $ 2.11 $(0.18)
Year ended 12/31/2002............................... 32.00 0.17 (7.06) (6.89) (0.08)
Year ended 12/31/2001............................... 41.18 0.12 (9.06) (8.94) (0.03)
Year ended 12/31/2000............................... 59.42 (0.09) (10.57) (10.66) (0.00)+++
Year ended 12/31/1999............................... 51.88 0.13 15.04 15.17 (0.08)
Year ended 12/31/1998............................... 46.12 0.35 9.38 9.73 (0.34)
CLASS B:
Six months ended 6/30/2003++........................ 23.99 (0.08) 1.97 1.89 --
Year ended 12/31/2002............................... 30.88 (0.20) (6.69) (6.89) --
Year ended 12/31/2001............................... 40.08 (0.23) (8.76) (8.99) --
Year ended 12/31/2000............................... 58.57 (0.43) (10.48) (10.91) --
Year ended 12/31/1999............................... 51.59 (0.31) 14.84 14.53 --
Year ended 12/31/1998............................... 46.02 (0.08) 9.28 9.20 --
CLASS C:
Six months ended 6/30/2003++........................ 23.75 (0.08) 1.91 1.83 --
Year ended 12/31/2002............................... 30.64 (0.19) (6.70) (6.89) --
Year ended 12/31/2001............................... 39.85 (0.25) (8.75) (9.00) --
Period from 8/7/2000+ to 12/31/2000................. 58.01 (0.11) (12.59) (12.70) --
CLASS K:
Six months ended 6/30/2003++........................ 24.96 0.04 2.02 2.06 (0.09)
Year ended 12/31/2002............................... 31.93 0.05 (7.02) (6.97) --
Period from 5/15/2001+ to 12/31/2001................ 35.55 0.00 (3.41) (3.41) --
THE GUARDIAN UBS LARGE CAP VALUE FUND
CLASS A:
Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.03 1.35 1.38 (0.04)
CLASS B:
Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.00 1.34 1.34 (0.01)
CLASS C:
Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.00 1.34 1.34 (0.01)
CLASS K:
Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.02 1.34 1.36 (0.03)
THE GUARDIAN PARK AVENUE SMALL CAP FUND
CLASS A:
Six months ended 6/30/2003++........................ 13.30 (0.04) 1.94 1.90 --
Year ended 12/31/2002............................... 15.74 (0.07) (2.37) (2.44) --
Year ended 12/31/2001............................... 16.93 (0.06) (1.13) (1.19) --
Year ended 12/31/2000............................... 17.48 (0.05) (0.37) (0.42) --
Year ended 12/31/1999............................... 12.80 (0.07) 4.75 4.68 --
Year ended 12/31/1998............................... 13.77 (0.03) (0.83) (0.86) --
CLASS B:
Six months ended 6/30/2003++........................ 12.64 (0.10) 1.84 1.74 --
Year ended 12/31/2002............................... 15.10 (0.20) (2.26) (2.46) --
Year ended 12/31/2001............................... 16.39 (0.20) (1.09) (1.29) --
Year ended 12/31/2000............................... 17.06 (0.20) (0.34) (0.54) --
Year ended 12/31/1999............................... 12.61 (0.19) 4.64 4.45 --
Year ended 12/31/1998............................... 13.67 (0.15) (0.80) (0.95) --
CLASS C:
Six months ended 6/30/2003++........................ 12.59 (0.11) 1.83 1.72 --
Year ended 12/31/2002............................... 15.07 (0.22) (2.26) (2.48) --
Year ended 12/31/2001............................... 16.39 (0.21) (1.11) (1.32) --
Period from 8/7/2000+ to 12/31/2000................. 19.37 (0.08) (2.77) (2.85) --
CLASS K:
Six months ended 6/30/2003++........................ 13.15 (0.06) 1.93 1.87 --
Year ended 12/31/2002............................... 15.62 (0.11) (2.36) (2.47) --
Period from 5/15/2001+ to 12/31/2001................ 15.71 (0.07) (0.02) (0.09) --
</Table>
+ Commencement of operations.
++ Unaudited.
+++ Rounds to less than $0.01.
82
<Table>
<Caption>
DISTRIBUTIONS
FROM RATIOS/SUPPLEMENTAL DATA
NET REALIZED -----------------------------------------------------------
GAIN ON NET
INVESTMENTS NET ASSET NET ASSETS, INVESTMENT
AND FOREIGN VALUE, END OF EXPENSES INCOME/(LOSS) PORTFOLIO
CURRENCY RELATED END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
TRANSACTIONS PERIOD RETURN* (000'S OMITTED) NET ASSETS NET ASSETS RATE
- --------------------------------------------------------------------------------------------------------
-- $26.96 8.41%(a) $1,116,490 0.88%(b) 0.67%(b) 36%
-- 25.03 (21.56) 1,120,351 0.87 0.51 60
$(0.21) 32.00 (21.75) 1,779,818 0.83 0.31 143
(7.58) 41.18 (18.62) 2,589,059 0.79 (0.16) 108
(7.55) 59.42 30.25 3,334,722 0.77 0.24 74
(3.63) 51.88 21.30 2,990,767 0.78 0.72 55
-- 25.88 7.88(a) 165,055 1.85(b) (0.30)(b) 36
-- 23.99 (22.31) 167,471 1.83 (0.44) 60
(0.21) 30.88 (22.46) 274,761 1.75 (0.61) 143
(7.58) 40.08 (19.34) 431,206 1.67 (1.03) 108
(7.55) 58.57 29.13 507,764 1.67 (0.66) 74
(3.63) 51.59 20.16 389,489 1.70 (0.21) 55
-- 25.58 7.71(a) 6,224 2.15(b) (0.60)(b) 36
-- 23.75 (22.49) 5,884 2.07 (0.67) 60
(0.21) 30.64 (22.62) 7,594 1.96 (0.81) 143
(5.46) 39.85 (21.79)(a) 8,222 2.18(b) (1.29)(b) 108
-- 26.93 8.24(a) 6,290 1.20(b) 0.36(b) 36
-- 24.96 (21.83) 5,752 1.21 0.19 60
(0.21) 31.93 (9.63)(a) 7,229 1.22(b) 0.02(b) 143
-- 11.34 13.76(a) 21,858 1.58(b) 0.81(b) 6
-- 11.33 13.43(a) 21,788 2.33(b) 0.07(b) 6
-- 11.33 13.43(a) 21,569 2.33(b) 0.07(b) 6
-- 11.33 13.55(a) 21,606 1.87(b) 0.52(b) 6
-- 15.20 14.29(a) 121,352 1.29(b) (0.58)(b) 52
-- 13.30 (15.50) 111,803 1.25 (0.45) 108
-- 15.74 (7.03) 139,774 1.28 (0.37) 131
(0.13) 16.93 (2.35) 150,022 1.25 (0.31) 125
-- 17.48 36.56 119,032 1.34 (0.48) 92
(0.11) 12.80 (6.35) 127,525 1.32 (0.29) 63
-- 14.38 13.77(a) 18,608 2.25(b) (1.53)(b) 52
-- 12.64 (16.29) 17,189 2.19 (1.40) 108
-- 15.10 (7.87) 20,876 2.18 (1.27) 131
(0.13) 16.39 (3.11) 24,977 2.12 (1.18) 125
-- 17.06 35.29 22,430 2.23 (1.36) 92
(0.11) 12.61 (7.05) 22,122 2.17 (1.14) 63
-- 14.31 13.66(a) 6,633 2.43(b) (1.72)(b) 52
-- 12.59 (16.46) 5,824 2.40 (1.60) 108
-- 15.07 (8.05) 6,752 2.34 (1.43) 131
(0.13) 16.39 (14.67)(a) 7,033 2.22(b) (1.12)(b) 125
-- 15.02 14.22(a) 7,735 1.56(b) (0.84)(b) 52
-- 13.15 (15.81) 6,748 1.55 (0.75) 108
-- 15.62 (0.57)(a) 7,959 1.61(b) (0.77)(b) 131
</Table>
* Excludes the effect of sales load.
(a) Not annualized.
(b) Annualized.
83
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<Table>
<Caption>
NET REALIZED
& UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS INCREASE/
NET ASSET NET AND FOREIGN (DECREASE) DIVIDENDS
VALUE, INVESTMENT CURRENCY FROM FROM NET
BEGINNING INCOME/ RELATED INVESTMENT INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS OPERATIONS INCOME
-----------------------------------------------------------------
THE GUARDIAN UBS SMALL CAP VALUE FUND
CLASS A:
Period from 2/3/2003+ to 6/30/2003++................ $10.00 $ 0.00 $ 1.51 $ 1.51 --
CLASS B:
Period from 2/3/2003+ to 6/30/2003++................ 10.00 (0.03) 1.51 1.48 --
CLASS C:
Period from 2/3/2003+ to 6/30/2003++................ 10.00 (0.03) 1.51 1.48 --
CLASS K:
Period from 2/3/2003+ to 6/30/2003++................ 10.00 0.00 1.50 1.50 --
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Six months ended 6/30/2003++........................ 8.45 0.06 0.92 0.98 $(0.16)
Year ended 12/31/2002............................... 10.84 0.17 (2.38) (2.21) (0.18)
Year ended 12/31/2001............................... 13.00 0.30 (1.61) (1.31) (0.18)
Year ended 12/31/2000............................... 14.77 0.45 (0.29) 0.16 (0.44)
Year ended 12/31/1999............................... 14.78 0.37 1.47 1.84 (0.37)
Year ended 12/31/1998............................... 14.05 0.39 2.31 2.70 (0.43)
CLASS B:
Six months ended 6/30/2003++........................ 8.41 0.02 0.90 0.92 (0.07)
Year ended 12/31/2002............................... 10.77 0.09 (2.37) (2.28) (0.08)
Year ended 12/31/2001............................... 12.95 0.19 (1.59) (1.40) (0.11)
Year ended 12/31/2000............................... 14.72 0.32 (0.27) 0.05 (0.33)
Year ended 12/31/1999............................... 14.73 0.23 1.47 1.70 (0.23)
Year ended 12/31/1998............................... 14.00 0.24 2.31 2.55 (0.28)
CLASS C:
Six months ended 6/30/2003++........................ 8.39 0.00 0.91 0.91 (0.04)
Year ended 12/31/2002............................... 10.77 0.05 (2.38) (2.33) (0.05)
Year ended 12/31/2001............................... 12.94 0.17 (1.64) (1.47) (0.03)
Period from 8/7/2000+ to 12/31/2000................. 14.72 0.15 (0.78) (0.63) (0.23)
CLASS K:
Six months ended 6/30/2003++........................ 8.43 0.04 0.90 0.94 (0.11)
Year ended 12/31/2002............................... 10.82 0.13 (2.39) (2.26) (0.13)
Period from 5/15/2001+ to 12/31/2001................ 12.06 0.11 (0.68) (0.57) --
THE GUARDIAN S&P 500 INDEX FUND
CLASS A:
Six months ended 6/30/2003++........................ 6.04 0.04 0.64 0.68 (0.03)
Year ended 12/31/2002............................... 7.90 0.10 (1.86) (1.76) (0.10)
Year ended 12/31/2001............................... 9.07 0.06 (1.17) (1.11) (0.06)
Period from 7/25/2000+ to 12/31/2000................ 10.06 0.03 (0.99) (0.96) (0.03)
CLASS B:
Six months ended 6/30/2003++........................ 6.03 0.01 0.65 0.66 (0.01)
Year ended 12/31/2002............................... 7.88 0.02 (1.85) (1.83) (0.02)
Year ended 12/31/2001............................... 9.05 0.01 (1.18) (1.17) (0.00)+++
Period from 7/25/2000+ to 12/31/2000................ 10.06 0.00 (1.01) (1.01) --
CLASS C:
Six months ended 6/30/2003++........................ 6.03 0.01 0.64 0.65 (0.01)
Year ended 12/31/2002............................... 7.88 0.02 (1.85) (1.83) (0.02)
Year ended 12/31/2001............................... 9.05 0.01 (1.17) (1.16) (0.01)
Period from 7/25/2000+ to 12/31/2000................ 10.06 0.00 (1.01) (1.01) --
CLASS K:
Six months ended 6/30/2003++........................ 6.04 0.03 0.64 0.67 (0.02)
Year ended 12/31/2002............................... 7.90 0.05 (1.86) (1.81) (0.05)
Period from 5/15/2001+ to 12/31/2001................ 8.59 0.02 (0.69) (0.67) (0.02)
</Table>
+ Commencement of operations.
++ Unaudited.
+++ Rounds to less than $0.01.
84
<Table>
<Caption>
DISTRIBUTIONS
FROM RATIOS/SUPPLEMENTAL DATA
NET REALIZED -----------------------------------------------------------------------------------
GAIN ON NET
INVESTMENTS NET ASSET NET ASSETS, EXPENSES GAAF INVESTMENT
AND FOREIGN VALUE, END OF EXPENSES WAIVED/ GROSS INCOME/(LOSS) PORTFOLIO
CURRENCY RELATED END OF TOTAL PERIOD TO AVERAGE SUBSIDIZED EXPENSE TO AVERAGE TURNOVER
TRANSACTIONS PERIOD RETURN* (000'S OMITTED) NET ASSETS(A) BY GIS RATIO(B) NET ASSETS RATE
- ------------------------------------------------------------------------------------------------------------------------------
-- $11.51 15.10%(c) $ 10,399 2.19%(d) -- -- 0.10%(d) 32%
-- 11.48 14.80(c) 10,311 2.93(d) -- -- (0.64)(d) 32
-- 11.48 14.80(c) 10,204 2.93(d) -- -- (0.63)(d) 32
-- 11.50 15.00(c) 10,227 2.35(d) -- -- (0.05)(d) 32
-- 9.27 11.51(c) 110,675 0.45(d) 0.76%(d) 1.09%(d) 1.12(d) 0
-- 8.45 (20.64) 110,593 0.42 0.73 1.04 1.60 4
$(0.67) 10.84 (10.23) 169,386 0.47 0.63 1.01 2.44 51
(1.49) 13.00 1.00 227,228 0.46 0.60 1.10 3.07 11
(1.48) 14.77 12.99 227,031 0.48 0.58 1.08 2.48 16
(1.54) 14.78 19.41 194,827 0.60 0.52 1.13 2.52 23
-- 9.26 10.95(c) 28,966 1.29(d) 0.76(d) 1.93(d) 0.30(d) 0
-- 8.41 (21.31) 29,064 1.25 0.73 1.87 0.78 4
(0.67) 10.77 (10.99) 44,813 1.28 0.63 1.82 1.62 51
(1.49) 12.95 0.26 51,024 1.28 0.60 1.91 2.29 11
(1.48) 14.72 12.09 40,914 1.31 0.58 1.91 1.66 16
(1.54) 14.73 18.32 27,545 1.48 0.52 2.02 1.70 23
-- 9.26 10.83(c) 6,988 1.56(d) 0.76(d) 2.20(d) 0.06(d) 0
-- 8.39 (21.70) 6,470 1.50 0.73 2.12 0.58 4
(0.67) 10.77 (11.48) 8,080 1.46 0.63 2.00 1.43 51
(0.92) 12.94 (4.18)(c) 8,544 1.49(d) 0.55(d) 2.07(d) 2.61(d) 11
-- 9.26 11.12(c) 6,930 0.69(d) 0.76(d) 1.33(d) 0.94(d) 0
-- 8.43 (21.05) 6,126 0.70 0.73 1.31 1.39 4
(0.67) 10.82 (4.85)(c) 7,619 0.75(d) 0.72(d) 1.37(d) 1.57(d) 51
-- 6.69 11.30(c) 111,592 0.53(d) 0.27(d) -- 1.25(d) 1
-- 6.04 (22.35) 100,129 0.53 0.13 -- 1.03 10
-- 7.90 (12.25) 276,645 0.53 0.10 -- 0.87 1
(0.00)(e) 9.07 (9.53)(c) 167,487 0.53(d) 0.21(d) -- 0.71(d) 4
-- 6.68 11.00(c) 9,574 1.28(d) 0.67(d) -- 0.50(d) 1
-- 6.03 (23.22) 8,472 1.28 0.52 -- 0.33 10
-- 7.88 (12.87) 9,705 1.28 0.47 -- 0.09 1
(0.00)(e) 9.05 (10.00)(c) 7,677 1.28(d) 0.47(d) -- (0.04)(d) 4
-- 6.67 10.83(c) 7,328 1.28(d) 0.73(d) -- 0.50(d) 1
-- 6.03 (23.21) 6,175 1.28 0.57 -- 0.33 10
-- 7.88 (12.87) 7,598 1.28 0.49 -- 0.09 1
(0.00)(e) 9.05 (10.00)(c) 7,296 1.28(d) 0.47(d) -- (0.04)(d) 4
-- 6.69 11.13(c) 6,478 0.93(d) 0.23(d) -- 0.85(d) 1
-- 6.04 (23.00) 5,722 0.93 0.10 -- 0.68 10
-- 7.90 (7.76)(c) 7,383 0.93(d) 0.15(d) -- 0.47(d) 1
</Table>
* Excludes the effect of sales load.
(a) After expenses subsidized by GIS and do not include the expenses of the
underlying Funds.
(b) Amounts include the expenses of the underlying Funds.
(c) Not annualized.
(d) Annualized.
(e) Rounds to less than $0.01.
85
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<Table>
<Caption>
NET REALIZED
& UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS INCREASE/
NET ASSET NET AND FOREIGN (DECREASE) DIVIDENDS
VALUE, INVESTMENT CURRENCY FROM FROM NET
BEGINNING INCOME/ RELATED INVESTMENT INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS OPERATIONS INCOME
-----------------------------------------------------------------
THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL FUND
CLASS A:
Six months ended 6/30/2003++........................ $ 8.90 $ 0.08 $ 0.65 $ 0.73 $(0.01)
Year ended 12/31/2002............................... 11.09 0.06 (2.25) (2.19) --
Year ended 12/31/2001............................... 14.28 0.01 (3.20) (3.19) --
Year ended 12/31/2000............................... 23.36 (0.06) (5.52) (5.58) --
Year ended 12/31/1999............................... 18.41 0.01 6.68 6.69 --
Year ended 12/31/1998............................... 16.08 0.02 3.13 3.15 (0.01)
CLASS B:
Six months ended 6/30/2003++........................ 8.22 (0.03) 0.65 0.62 --
Year ended 12/31/2002............................... 10.38 (0.19) (1.97) (2.16) --
Year ended 12/31/2001............................... 13.54 (0.20) (2.96) (3.16) --
Year ended 12/31/2000............................... 22.61 (0.11) (5.46) (5.57) --
Year ended 12/31/1999............................... 17.97 (0.12) 6.47 6.35 --
Year ended 12/31/1998............................... 15.87 (0.09) 3.00 2.91 --
CLASS C:
Six months ended 6/30/2003++........................ 8.24 0.00 0.63 0.63 --
Year ended 12/31/2002............................... 10.40 (0.09) (2.07) (2.16) --
Year ended 12/31/2001............................... 13.55 (0.12) (3.03) (3.15) --
Period from 8/7/2000+ to 12/31/2000................. 19.19 (0.09) (2.20) (2.29) --
CLASS K:
Six months ended 6/30/2003++........................ 8.76 0.05 0.66 0.71 --
Year ended 12/31/2002............................... 10.94 (0.00) (2.18) (2.18) --
Period from 5/15/2001+ to 12/31/2001................ 12.96 (0.04) (1.98) (2.02) --
THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
CLASS A:
Six months ended 6/30/2003++........................ 8.07 0.03 1.11 1.14 --
Year ended 12/31/2002............................... 8.45 0.01 (0.39) (0.38) --
Year ended 12/31/2001............................... 8.31 0.01 0.13 0.14 --
Year ended 12/31/2000............................... 11.13 (0.55) (2.05) (2.60) (0.22)
Year ended 12/31/1999............................... 6.66 (0.07) 4.72 4.65 (0.18)
Year ended 12/31/1998............................... 9.38 0.01 (2.73) (2.72) (0.00)+++
CLASS B:
Six months ended 6/30/2003++........................ 7.55 (0.01) 1.02 1.01 --
Year ended 12/31/2002............................... 7.98 (0.10) (0.33) (0.43) --
Year ended 12/31/2001............................... 7.97 (0.10) 0.11 0.01 --
Year ended 12/31/2000............................... 10.65 0.08 (2.76) (2.68) --
Year ended 12/31/1999............................... 6.44 (0.27) 4.48 4.21 --
Year ended 12/31/1998............................... 9.30 (0.18) (2.68) (2.86) --
CLASS C:
Six months ended 6/30/2003++........................ 7.56 (0.01) 1.03 1.02 --
Year ended 12/31/2002............................... 8.00 (0.09) (0.35) (0.44) --
Year ended 12/31/2001............................... 7.98 (0.09) 0.11 0.02 --
Period from 8/7/2000+ to 12/31/2000................. 9.92 (0.08) (1.86) (1.94) --
CLASS K:
Six months ended 6/30/2003++........................ 7.97 0.02 1.09 1.11 --
Year ended 12/31/2002............................... 8.36 (0.03) (0.36) (0.39) --
Period from 5/15/2001+ to 12/31/2001................ 8.35 (0.06) 0.07 0.01 --
</Table>
+ Commencement of operations.
++ Unaudited.
+++ Rounds to less than $0.01.
86
<Table>
<Caption>
DISTRIBUTIONS
FROM RATIOS/SUPPLEMENTAL DATA
NET REALIZED --------------------------------------------------------
DISTRIBUTIONS GAIN ON NET
IN EXCESS INVESTMENTS NET ASSET NET ASSETS, INVESTMENT
OF NET AND FOREIGN VALUE, END OF EXPENSES INCOME/(LOSS) PORTFOLIO
INVESTMENT CURRENCY RELATED TAX RETURN END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
INCOME TRANSACTIONS OF CAPITAL PERIOD RETURN* (000'S OMITTED) NET ASSETS NET ASSETS RATE
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- $ 9.62 8.21%(a) $ 46,578 1.86%(b) 1.41%(b) 19%
-- -- -- 8.90 (19.75) 47,948 1.62 0.29 45
-- -- -- 11.09 (22.34) 80,856 1.53 0.06 63
-- $(3.26) $(0.24) 14.28 (23.81) 94,482 1.45 (0.29) 78
$(0.03) (1.71) -- 23.36 37.21 148,727 1.44 (0.03) 54
-- (0.81) -- 18.41 19.61 93,871 1.56 (0.01) 44
-- -- -- 8.84 7.54(a) 5,764 3.20(b) (0.05)(b) 19
-- -- -- 8.22 (20.81) 5,598 2.87 (0.98) 45
-- -- -- 10.38 (23.34) 8,228 2.62 (1.05) 63
-- (3.26) (0.24) 13.54 (24.56) 12,747 2.43 (1.27) 78
-- (1.71) -- 22.61 36.16 15,623 2.45 (1.03) 54
-- (0.81) -- 17.97 18.36 10,216 2.67 (1.13) 44
-- -- -- 8.87 7.65(a) 4,695 3.13(b) 0.12(b) 19
-- -- -- 8.24 (20.77) 4,381 2.85 (0.99) 45
-- -- -- 10.40 (23.25) 5,530 2.60 (1.04) 63
-- (3.11) (0.24) 13.55 (11.72)(a) 7,208 2.51(b) (1.52)(b) 78
-- -- -- 9.47 8.11(a) 5,868 2.05(b) 1.21(b) 19
-- -- -- 8.76 (19.93) 5,407 1.86 0.01 45
-- -- -- 10.94 (15.59)(a) 6,753 1.84(b) (0.60)(b) 63
-- -- -- 9.21 14.13(a) 30,201 2.24(b) 0.85(b) 32
-- -- -- 8.07 (4.50) 27,356 2.10 (0.04) 81
-- -- -- 8.45 1.68 19,777 2.39 (0.19) 101
-- -- -- 8.31 (23.88) 18,439 2.18 (0.86) 101
-- -- -- 11.13 69.91 32,940 2.43 (1.07) 96
-- -- -- 6.66 (28.97) 16,342 2.55 0.18 83
-- -- -- 8.56 13.38(a) 6,796 3.42(b) (0.35)(b) 32
-- -- -- 7.55 (5.39) 5,965 3.21 (1.16) 81
-- -- -- 7.98 0.13 6,023 3.51 (1.28) 101
-- -- -- 7.97 (25.16) 6,105 3.79 (2.54) 101
-- -- -- 10.65 65.37 2,320 5.07 (3.70) 96
-- -- -- 6.44 (30.75) 1,367 5.04 (2.31) 83
-- -- -- 8.58 13.49(a) 7,402 3.39(b) (0.32)(b) 32
-- -- -- 7.56 (5.50) 6,306 3.12 (1.08) 81
-- -- -- 8.00 0.25 6,486 3.34 (1.12) 101
-- -- -- 7.98 (19.56)(a) 6,466 3.49(b) (2.31)(b) 101
-- -- -- 9.08 13.93(a) 8,799 2.50(b) 0.58(b) 32
-- -- -- 7.97 (4.67) 7,685 2.36 (0.32) 81
-- -- -- 8.36 0.12(a) 8,020 2.63(b) (1.23)(b) 101
</Table>
* Excludes the effect of sales load.
(a) Not annualized.
(b) Annualized.
87
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<Table>
<Caption>
NET REALIZED
& UNREALIZED
GAIN/(LOSS) ON
INVESTMENTS INCREASE/
NET ASSET AND FOREIGN (DECREASE) DIVIDENDS
VALUE, NET CURRENCY FROM FROM NET
BEGINNING INVESTMENT RELATED INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME
-----------------------------------------------------------------
THE GUARDIAN INVESTMENT QUALITY BOND FUND
CLASS A:
Six months ended 6/30/2003++........................ $10.28 $0.18 $ 0.27 $ 0.45 $(0.18)
Year ended 12/31/2002............................... 9.86 0.44 0.45 0.89 (0.44)
Year ended 12/31/2001............................... 9.61 0.50 0.30 0.80 (0.50)
Year ended 12/31/2000............................... 9.33 0.60 0.28 0.88 (0.60)
Year ended 12/31/1999............................... 9.99 0.53 (0.63) (0.10) (0.53)
Year ended 12/31/1998............................... 9.91 0.53 0.23 0.76 (0.53)
CLASS B:
Six months ended 6/30/2003++........................ 10.28 0.14 0.26 0.40 (0.14)
Year ended 12/31/2002............................... 9.86 0.37 0.45 0.82 (0.37)
Year ended 12/31/2001............................... 9.60 0.43 0.31 0.74 (0.43)
Period from 8/7/2000+ to 12/31/2000................. 9.41 0.22 0.19 0.41 (0.22)
CLASS C:
Six months ended 6/30/2003++........................ 10.28 0.14 0.27 0.41 (0.14)
Year ended 12/31/2002............................... 9.86 0.37 0.45 0.82 (0.37)
Year ended 12/31/2001............................... 9.60 0.43 0.31 0.74 (0.43)
Period from 8/7/2000+ to 12/31/2000................. 9.41 0.22 0.19 0.41 (0.22)
CLASS K:
Six months ended 6/30/2003++........................ 10.29 0.16 0.27 0.43 (0.16)
Year ended 12/31/2002............................... 9.87 0.40 0.45 0.85 (0.40)
Period from 5/15/2001+ to 12/31/2001................ 9.68 0.28 0.24 0.52 (0.28)
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Six months ended 6/30/2003++........................ 6.69 0.27 0.51 0.78 (0.27)
Year ended 12/31/2002............................... 7.19 0.55 (0.50) 0.05 (0.55)
Year ended 12/31/2001............................... 7.66 0.69 (0.47) 0.22 (0.69)
Year ended 12/31/2000............................... 8.98 0.77 (1.32) (0.55) (0.77)
Year ended 12/31/1999............................... 9.84 0.78 (0.84) (0.06) (0.78)
Period from 9/1/1998+++ to 12/31/1998............... 9.26 0.38 0.58 0.96 (0.38)
CLASS B:
Six months ended 6/30/2003++........................ 6.69 0.24 0.50 0.74 (0.24)
Year ended 12/31/2002............................... 7.18 0.50 (0.49) 0.01 (0.50)
Year ended 12/31/2001............................... 7.66 0.64 (0.48) 0.16 (0.64)
Year ended 12/31/2000............................... 8.97 0.68 (1.31) (0.63) (0.68)
Year ended 12/31/1999............................... 9.83 0.67 (0.84) (0.17) (0.67)
Period from 9/1/1998+++ to 12/31/1998............... 9.26 0.31 0.57 0.88 (0.31)
CLASS C:
Six months ended 6/30/2003++........................ 6.69 0.24 0.50 0.74 (0.24)
Year ended 12/31/2002............................... 7.18 0.50 (0.49) 0.01 (0.50)
Year ended 12/31/2001............................... 7.65 0.64 (0.47) 0.17 (0.64)
Period from 8/7/2000+ to 12/31/2000................. 8.47 0.28 (0.82) (0.54) (0.28)
CLASS K:
Six months ended 6/30/2003++........................ 6.69 0.25 0.51 0.76 (0.25)
Year ended 12/31/2002............................... 7.19 0.53 (0.50) 0.03 (0.53)
Period from 5/15/2001+ to 12/31/2001................ 7.68 0.39 (0.49) (0.10) (0.39)
THE GUARDIAN TAX-EXEMPT FUND
CLASS A:
Six months ended 6/30/2003++........................ 10.51 0.19 0.27 0.46 (0.19)
Year ended 12/31/2002............................... 10.09 0.40 0.61 1.01 (0.40)
Year ended 12/31/2001............................... 10.10 0.41 0.06 0.47 (0.41)
Year ended 12/31/2000............................... 9.40 0.43 0.70 1.13 (0.43)
Year ended 12/31/1999............................... 10.13 0.40 (0.73) (0.33) (0.40)
Year ended 12/31/1998............................... 9.99 0.43 0.17 0.60 (0.43)
CLASS C:
Six months ended 6/30/2003++........................ 10.51 0.15 0.27 0.42 (0.15)
Year ended 12/31/2002............................... 10.09 0.32 0.61 0.93 (0.32)
Year ended 12/31/2001............................... 10.10 0.34 0.06 0.40 (0.34)
Period from 8/7/2000+ to 12/31/2000................. 9.77 0.14 0.33 0.47 (0.14)
</Table>
+ Commencement of operations.
++ Unaudited.
+++ Date of initial public investment.
88
<Table>
<Caption>
DISTRIBUTIONS
FROM RATIOS/SUPPLEMENTAL DATA
NET REALIZED -------------------------------------------------------------------
GAIN ON EXPENSES
INVESTMENTS NET ASSET NET ASSETS, (EXCLUDING
AND FOREIGN VALUE, END OF EXPENSES INTEREST EXPENSE) EXPENSES
CURRENCY RELATED END OF TOTAL PERIOD TO AVERAGE TO AVERAGE SUBSIDIZED
TRANSACTIONS PERIOD RETURN* (000'S OMITTED) NET ASSETS(a)(b) NET ASSETS(a) BY GIS
- --------------------------------------------------------------------------------------------------------------
$(0.02) $10.53 4.35%(c) $184,477 0.85%(d) 0.85%(d) 0.09%(d)
(0.03) 10.28 9.25 170,658 0.85 0.85 0.08
(0.05) 9.86 8.55 144,900 0.86 0.85 0.09
-- 9.61 9.81 124,805 0.85 0.85 0.09
(0.03) 9.33 (1.02) 139,661 0.81 0.80 0.13
(0.15) 9.99 7.89 142,199 0.85 0.75 0.21
(0.02) 10.52 3.86(c) 21,091 1.60(d) 1.60(d) 0.25(d)
(0.03) 10.28 8.43 19,308 1.60 1.60 0.27
(0.05) 9.86 7.86 13,036 1.61 1.60 0.31
-- 9.60 4.40(c) 8,493 1.60(d) 1.60(d) 0.34(d)
(0.02) 10.53 3.96(c) 11,254 1.60(d) 1.60(d) 0.33(d)
(0.03) 10.28 8.44 10,753 1.60 1.60 0.36
(0.05) 9.86 7.85 9,090 1.61 1.60 0.36
-- 9.60 4.39(c) 8,356 1.60(d) 1.60(d) 0.34(d)
(0.02) 10.54 4.14(c) 9,749 1.25(d) 1.25(d) 0.04(d)
(0.03) 10.29 8.81 9,213 1.25 1.25 0.03
(0.05) 9.87 5.43(c) 8,436 1.26(d) 1.25(d) 0.08(d)
-- 7.20 11.84(c) 40,759 0.85(d) -- 0.40(d)
-- 6.69 0.96 33,894 0.85 -- 0.45
-- 7.19 2.87 33,797 0.85 -- 0.47
-- 7.66 (6.53) 38,646 0.85 -- 0.38
(0.02) 8.98 (0.63) 54,178 0.75 -- 0.40
-- 9.84 9.24(c) 51,288 0.75(d) -- 0.51(d)
-- 7.19 11.28(c) 9,527 1.60(d) -- 0.71(d)
-- 6.69 0.35 8,336 1.60 -- 0.77
-- 7.18 1.96 8,182 1.60 -- 0.78
-- 7.66 (7.32) 7,567 1.74 -- 0.77
(0.02) 8.97 (1.78) 3,184 1.87 -- 1.00
-- 9.83 8.61(c) 2,482 2.33(d) -- 0.51(d)
-- 7.19 11.28(c) 8,600 1.60(d) -- 0.70(d)
-- 6.69 0.35 7,710 1.60 -- 0.77
-- 7.18 2.09 7,657 1.60 -- 0.71
-- 7.65 (6.42)(c) 7,491 1.60(d) -- 0.63(d)
-- 7.20 11.62(c) 8,874 1.25(d) -- 0.31(d)
-- 6.69 0.55 7,944 1.25 -- 0.35
-- 7.19 (1.31)(c) 7,893 1.25(d) -- 0.41(d)
(0.02) 10.76 4.40(c) 80,531 0.88(d)(e) -- 0.09(d)
(0.19) 10.51 10.20 113,852 0.87(e) -- 0.06
(0.07) 10.09 4.78 107,676 0.91(e) -- 0.09
-- 10.10 12.29 97,185 0.88(e) -- 0.07
(0.00)(f) 9.40 (3.29) 97,908 0.86(e) -- 0.08
(0.03) 10.13 6.11 70,720 0.75 -- 0.26
(0.02) 10.76 4.02(c) 10,326 1.63(d)(e) -- 0.36(d)
(0.19) 10.51 9.37 9,741 1.62(e) -- 0.37
(0.07) 10.09 3.99 8,783 1.66(e) -- 0.37
-- 10.10 4.87(c) 8,391 1.65(d)(e) -- 0.31(d)
<Caption>
RATIOS/SUPPLEMENTAL DATA
-------------------------
NET
INVESTMENT
INCOME PORTFOLIO
TO AVERAGE TURNOVER
NET ASSETS RATE
- --------------------------
3.42%(d) 137%
4.37 275
5.11 414
6.41 344
5.49 271
5.24 309
2.67(d) 137
3.58 275
4.31 414
5.78(d) 344
2.67(d) 137
3.64 275
4.36 414
5.78(d) 344
3.02(d) 137
4.00 275
4.48(d) 414
7.79(d) 68
8.17 69
9.21 141
9.03 163
8.34 152
8.31(d) 11
7.06(d) 68
7.42 69
8.42 141
8.37 163
7.22 152
6.85(d) 11
7.05(d) 68
7.42 69
8.43 141
8.74(d) 163
7.41(d) 68
7.77 69
8.36(d) 141
3.67(d) 23
3.85 99
4.03 181
4.43 124
4.11 144
4.29 111
2.93(d) 23
3.11 99
3.28 181
3.62(d) 124
</Table>
* Excludes the effect of sales load.
(a) After expenses subsidized by GIS.
(b) Expense ratio includes interest expense associated with reverse repurchase
agreements.
(c) Not annualized.
(d) Annualized. For GHYBF, ratios for 1998 are calculated from 7/7/1998
(commencement of operations).
(e) Before offset of custody credits. Including the custody credits in Class A,
the expense ratio is 0.80% for 1999 and 0.85% for 2000, 2001, 2002 and
6/30/2003; in Class C the expense ratio is 1.60% for 2000, 2001, 2002 and
6/30/2003.
(f) Rounds to less than $0.01.
89
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIODS INDICATED:
<Table>
<Caption>
NET ASSET DIVIDENDS NET ASSET
VALUE, NET FROM NET VALUE,
BEGINNING INVESTMENT INVESTMENT END OF TOTAL
OF PERIOD INCOME INCOME PERIOD RETURN*
----------------------------------------------------------
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Six months ended 6/30/2003++........................ $1.000 $0.002 $(0.002) $1.000 0.24%+++
Year ended 12/31/2002............................... 1.000 0.009 (0.009) 1.000 0.95
Year ended 12/31/2001............................... 1.000 0.032 (0.032) 1.000 3.27
Year ended 12/31/2000............................... 1.000 0.056 (0.056) 1.000 5.69
Year ended 12/31/1999............................... 1.000 0.044 (0.044) 1.000 4.45
Year ended 12/31/1998............................... 1.000 0.047 (0.047) 1.000 4.76
CLASS B:
Six months ended 6/30/2003++........................ 1.000 0.001 (0.001) 1.000 0.09+++
Year ended 12/31/2002............................... 1.000 0.002 (0.002) 1.000 0.23
Year ended 12/31/2001............................... 1.000 0.025 (0.025) 1.000 2.48
Year ended 12/31/2000............................... 1.000 0.052 (0.052) 1.000 5.34
Year ended 12/31/1999............................... 1.000 0.044 (0.044) 1.000 4.45
Year ended 12/31/1998............................... 1.000 0.047 (0.047) 1.000 4.76
CLASS C:
Six months ended 6/30/2003++........................ 1.000 0.001 (0.001) 1.000 0.09+++
Year ended 12/31/2002............................... 1.000 0.002 (0.002) 1.000 0.22
Year ended 12/31/2001............................... 1.000 0.025 (0.025) 1.000 2.48
Period from 8/7/2000+ to 12/31/2000................. 1.000 0.020 (0.020) 1.000 2.03+++
CLASS K:
Six months ended 6/30/2003++........................ 1.000 0.001 (0.001) 1.000 0.09+++
Year ended 12/31/2002............................... 1.000 0.005 (0.005) 1.000 0.55
Period from 5/15/2001+ to 12/31/2001................ 1.000 0.013 (0.013) 1.000 1.26+++
</Table>
* Excludes the effect of sales load.
+ Commencement of operations.
++ Unaudited.
+++ Not annualized.
90
<Table>
<Caption>
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------
NET
NET ASSETS, INVESTMENT
END OF EXPENSES EXPENSES INCOME
PERIOD TO AVERAGE SUBSIDIZED TO AVERAGE
(000'S OMITTED) NET ASSETS(a) BY GIS NET ASSETS
- ------------------------------------------------------------
$612,259 0.85%(b) 0.03%(b) 0.49%(b)
658,159 0.85 0.02 0.94
606,045 0.85 0.04 3.13
462,183 0.85 0.07 5.57
390,106 0.85 0.09 4.41
225,997 0.85 0.19 4.65
17,057 1.60(b) 0.14(b) 0.18(b)
18,485 1.60 0.37 0.22
15,685 1.60 0.12 2.37
11,860 1.14 0.63 5.25
13,782 0.85 0.93 4.41
12,430 0.85 0.97 4.65
9,140 1.60(b) 0.03(b) 0.17(b)
9,330 1.60 0.25 0.22
8,492 1.60 0.04 2.47
8,193 1.60(b) 0.13(b) 5.06(b)
8,927 1.25(b) -- 0.19(b)
8,500 1.25 -- 0.54
8,125 1.25(b) 0.01(b) 1.99(b)
</Table>
(a) After expenses subsidized by GIS.
(b) Annualized.
91
(This page intentionally left blank)
- - TRUSTEES
Dennis J. Manning, CLU, ChFC -- Chair
Frank J. Fabozzi, Ph.D.
Arthur V. Ferrara, CLU
Leo R. Futia, CLU
William W. Hewitt, Jr.
Sidney I. Lirtzman, Ph.D.
Carl W. Schafer
Robert G. Smith, Ph.D.
- - OFFICERS
Thomas G. Sorell -- President
Joseph A. Caruso
Howard W. Chin
Robert J. Crimmins, Jr.
Richard A. Cumiskey
Richard A. Goldman
Alexander M. Grant, Jr.
Edward H. Hocknell
Jonathan C. Jankus
Stewart M. Johnson
Ann T. Kearney
Peter J. Liebst
R. Robin Menzies
Nydia Morrison
John B. Murphy
Karen L. Olvany
Frank L. Pepe
Richard T. Potter, Jr.
Robert A. Reale
Donald P. Sullivan, Jr.
Mathew P. Ziehl
- - INVESTMENT ADVISER & DISTRIBUTOR
Guardian Investor Services LLC
7 Hanover Square
New York, New York 10004
- - CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Custody Division
1776 Heritage Drive
North Quincy, Massachusetts 02171
- - SHAREHOLDER SERVICING AGENT, TRANSFER AGENT &
DIVIDEND PAYING AGENT FOR STATE STREET BANK
AND TRUST COMPANY
National Financial Data Services
Post Office Box 219611
Kansas City, Missouri 64121-9611
- - INDEPENDENT AUDITORS
Ernst & Young LLP
5 Times Square
New York, New York 10036
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank or depository institution, nor are they federally insured
by the Federal Deposit Insurance Corporation, The Federal Reserve Board, the
National Credit Union Association or any other agency. They involve investment
risk, including possible loss of principal amount invested.
This report is authorized for distribution to the public only when accompanied
or preceded by a current prospectus for the funds which comprise The Park Avenue
Portfolio.
[GUARDIAN LOGO]
Guardian Investor Services LLC
7 Hanover Square
New York, New York 10004
[GUARDIAN LOGO]
Guardian Investor Services LLC
7 Hanover Square
New York, NY 10004
EB 011566 (6/03)
PRSRT
STANDARD
U.S. POSTAGE PAID
BOWNE FULFILLMENT SOLUTIONS
ITEM 2. CODE OF ETHICS.
Not required at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not required at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required at this time.
ITEM 5-6 [RESERVED]
Not required at this time.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's certifying officers have evaluated the
registrant's disclosure controls and procedures within 90 days of this
filing and have concluded that the registrant's disclosure controls and
procedures were effective, as of that date, in ensuring that
information required to be disclosed by the registrant in this Form
N-CSR was recorded, processed, summarized, and reported timely.
(b) The registrant's certifying officers are aware of no
changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent
fiscal half-year that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Not required at this time.
(a)(2) Separate certifications by the registrant's certifying
officers, pursuant to Section 302 of the Sarbanes-Oxley Act
and required by Rule 30a-2(a) under the Investment Company Act
of 1940, are attached.
(b) A certification by the registrant's certifying officers,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and required by Rule 30a-2(b) under the Investment Company Act
of 1940, is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Park Avenue Portfolio
By: /s/ THOMAS G. SORELL
-----------------------------------------
Thomas G. Sorell
President of
The Park Avenue Portfolio
Date: September 4, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ THOMAS G. SORELL
--------------------------------------------
Thomas G. Sorell
President of
The Park Avenue Portfolio
Date: September 4, 2003
By: /s/ FRANK L. PEPE
---------------------------------------------
Frank L. Pepe
Vice President and Treasurer of
The Park Avenue Portfolio
Date: September 4, 2003